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TMI Blog2023 (1) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the first grounds of appeal, on the facts and circumstances of the case, the Ld. CIT(A) erred in not disallowing the bogus loss of Rs.2,19,22,836, incurred by the assessee in trading of penny stocks, even if held as business loss by Ld. CIT(A)? 4. The brief facts of the case emanating from the record are: The assessee is engaged in the business of share and stock broking. For the year under consideration, the assessee e-filed its return of income on 24/09/2011 declaring a total income of Rs.1,47,561/-. The return of income was initially processed under section 143(1) of the Act and the total income of the assessee was determined at Rs.32,19,675/-. Subsequently, rectification under section 154 of the Act was completed and the total income of the assessee was determined at Rs.8,19,953/-. In the appeal against the rectification order, the learned CIT(A) directed the Assessing Officer ('AO') to verify the claim of apparent from the record and allow the claim as per the provisions of the Act. Thereafter, the AO passed an order giving effect determining the total income of the assessee at Rs.1,47,561/-. 5. Pursuant to information received from the DGIT (Investigation), Kolkata, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is itself shows that the assessee does not have any investment in shares which can lead to long term/short term capital gain/capital loss. Further the Assessing Officer has relied on the statements of Mr Nawal Kishore Jalan, promoter of M/s Shreenath and Mr Pankaj Agrawal, promoter of M/s. NCL Research. No cross examination has been provided to the assesseeinspite of his request. It is also his claim that Mr. Pankaj Agrawal and Mr Nawal Kishore Jalan are not associated with these companies in any way and they have not mentioned the appellant's name. The appellant has produced the contract notes, broker notes and D-mat account to the Assessing Officer. It is seen that the assessee has done all that he can to provide the necessary documentary evidences. Moreover the loss incurred by him is not on account of capital loss but a regular trading loss The Assessing Officer has merely relied upon the information received from Kolkata Investigation Wing and did not do any investigation nor did he bring any adverse information on record to show that the assessee has contrived the losses On the contrary the assessee has furnished all records which substantiate the losses and did not raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in the Tribunal's order are not vitiated by any error of law apparent on the face of the records either [Para 6] The appeals do not raise any substantial question of law. They are accordingly dismissed. [Para7]" 7.4. The case of the assessee is much stronger in the sense that he has not traded through the Kolkata based broker but had done the trading himself as he is a share broker. All the transactions have been done through stock exchange. The assessee has not declared any capital loss. The loss incurred is on account of regular share trading Further, the Hon'ble ITAT Bombay in the case of M/s. Farrah Marker vs ITO ITA No. 3801/Mum/2011 held as under: "3.4.8 From the appreciation of the facts of the case, the material evidence placed on record by the assessee and in the light of the discussion of the factual and legal matrix of the case as discussed from para 3.1 to 34.7 of this order (supra), we are of the opinion that the authorities below, e. AO/CIT(A) have made the addition under section 68 of the Act me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the course of business and not a manipulated share capital loss. The addition made by the Assessing Officer to the tune of Rs.2,19,22,836/- is deleted. These grounds of appeal are Allowed." Being aggrieved, the Revenue is in appeal before us. 7. During the hearing, the learned Departmental Representative (the "learned DR") vehemently relied upon the assessment order and submitted that the assessment in the present case was reopened on the basis of the information received from the Investigation Wing, Kolkata. The learned DR further submitted that the Investigation Wing, Kolkata carried out a detailed investigation regarding the modus operandi of companies engaged in providing bogus long-term capital gain/short-term capital loss through the transaction in penny stocks. During the said investigation, statements of various persons including stock brokers, operators, and promoters of such companies were recorded. During such investigation, the promoter of NCL Research and promoter of M/s Shreenath in their statements admitted that the aforesaid companies provide bogus short-term capital loss entry to its beneficiaries by way of transactions in penny stocks. The learned DR further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord that the AO made the impugned addition merely on the basis of information received from the Investigation Wing, Kolkata without conducting any independent inquiry or doubting the evidence furnished by the assessee in support of its claim. It is also evident that the AO has not examined or issued summons or notice under section 133(6) of the Act to the broker through whom the assessee has traded in shares of aforesaid companies. From the perusal of statements of persons, who are alleged to be the promoter of NCL Research and M/s Shreenath, forming part of the paper book on pages no. 6-25, we find no mention of the name of the aforesaid companies or the assessee. Further, there is no evidence on record that the assessee has engaged in any manipulative activities with respect to the purchase and sale of shares of aforesaid two companies. The lack of enquiry on the part of the AO and non-appreciation of facts on record is also evident from the fact that the loss incurred by the assessee as a trader of shares has been considered to be the short-term capital loss when such shares were not even held as an investment by the assessee. Therefore, in view of the above, we find no infirm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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