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TMI Blog2012 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... e not conducted through regular channels. The burden of proof shifts on the department, which the revenue authorities have failed. Making an addition on conjectures cannot be expected to be sustained. Therefore, additions by AO are to be deleted. Sale Proceeds of Shares - Credits u/s 68 or Not? - AO disallowed the claim of loss incurred on sale of shares - HELD THAT:- As the sales of shares are not bogus, sale proceeds of the shares are not to be treated as credits u/s 68. Thus, the loss on the sale of shares is allowed. Decision in favour of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years 2004-05, 2005-06 and 2006-07 the AO made additions of ₹ 1,44,71,300/-, ₹ 1,64,15,471/- and ₹ 1,10,889/-, respectively and denied STCG/LTCG, as claimed by the assessee in his returns. 5. Being aggrieved, assessee went in appeal before the CIT(A). The CIT(A) allowed the assessee's appeal on the addition of ₹ 18,16,500/- u/s 69 (for which the department is not in appeal) holding that since the purchases were made from the amounts reflected in the books, the source stands explained. On the other hand, the CIT(A) accepted the view taken by the AO on the basis of enquiries made from CSE. He, therefore, rejected the claim of capital gains on the sale of shares and added back the entire sale proceeds of ₹ 25,93,150/- u/s 68 of the Act. 6. Aggrieved, assessee is in appeal before us and has raised the following grounds of appeal in I.T.A. No. 5585/Mum/2011, before us: (1) The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in taxing ₹ 25,93,150 as unexplained cash credit under section 68 of the Act. The action is illegal, unjustified and unwarranted. (2) Without prejudice to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redits in the assessee's books u/s 68. We have examined the fact that the assessee sold the shares in first lot of 7,500 shares on 19-02-2003 for a total consideration of ₹ 9,10,025/-. Similarly, the assessee sold the second lot of 12,500 shares of Mantra Online Ltd. on 25-02-2003, for which assessee received the payment on 05-03-2003 and 06-03-2003 for cheque amounts of ₹ 10,00,000/- and ₹ 6,83,125/-. Besides this, the AR pointed out that the copy of DMAT account, placed at pages 36 and 37 of the APB, which shows the transactions of credit of 20,000 shares of Mantra Online Ltd. on 31-01-2003 and sale of these shares on 20-02-2003 of 7,500 shares and on 22-02-2003 of 12,500 shares. We have also seen that at pages 16 to 24 and 28 to 35 of the APB, bills along with contract notes in Form A from the two brokers, i.e. Bubna and Prakash Nahata are available, which give details of transactions with the exact time of transaction depicting "trade time". This Contract Note, is a system generated form, as prescribed by the stock exchange. 11. From the evidence placed before us it is seen that the credits appearing in the books pertain to sale (in the present case-shares), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence. I was true that some of the transactions were off market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as was seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off market transactions could not be a ground to treat the transactions as sham transactions. On perusal of the documentary evidence the Tribunal had arrived at a finding of fact that the transactions were genuine". 12. On going through the facts available from the orders of the revenue authorities and the evidence placed before us, we are unable to sustain he additions primarily on the point that the credits in the books of the assessee are on account of sale of a commodity (shares), which is duly reflected in the DMAT account, both of which cannot be challenged. We are in full agreement with the argument of the AR that even if the sale by any chance could not be effected through broker, even then the sale would remain sale, till the time it is not proved otherwise that these were not conducted through regular channels. Once regular c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The action is unjustified and unwarranted as the purchase cost from the sale consideration should have been allowed as deduction. (3) The Ed. CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in disallowing claim of loss of ₹ 5,95,720 incurred on sale of shares of Prime Capital Markets Ltd. 18. As regards grounds Nos. 1 and 2 arising out of I.T.A. No. 5620/M/11 covering assessment year 2004-05 are concerned, for the detailed reasons given paras 13 & 14 in I.T.A. No. 5585/Mum/2005, we hold accordingly. 19. In I.T.A. No. 5620/Mum/2011 covering assessment year 2004- 05 assessee has raised one more ground against the order of the CIT(A) in confirming the action of the AO in disallowing claim of loss of ₹ 5,95,720/- incurred on sale of shares of Prime Capital Markets Ltd. Since we have already held that the sale proceeds of the shares are not to be treated as credits under section 68, following in line we hold that the loss of ₹ 5,95,720/- is a loss on the sale of shares and hence we allow this ground. 20. The assessee's appeals are allowed. In the result, the appeals filed by the assessee in I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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