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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 ..... ction was also done through a SEBI register broker, and in support of his claim, the assessee furnished contract notes, broker notes, and Demat account before lower authorities. 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ursuant to information received from the DGIT (Investigation), Kolkata, after search carried out at the premises of penny stock operators, reassessment proceedings under section 147 of the Act were initiated in the case of the assessee and notice dated 17/10/2016 under section 148 of the Act was issued. In response to the aforesaid notice, the assessee submitted that the original return of income filed for the year under consideration be considered as a return of income filed in pursuance of the notice under section 148 of the Act. The AO provided the copy of reasons recorded for reopening the assessment as well as the statement/information on the basis of which the reassessment proceedings were initiated to the assessee. During the reassessment proceedings, it was observed that the assessee has purchased shares of NCL Research for Rs.74,82,700/- and sold the shares for Rs.15,37,500/- in the year under consideration. Accordingly, the assessee booked loss of Rs.59,45,200/- from the aforesaid transaction. Similarly, the assessee has purchased shares of M/s Shreenath for Rs.2,54,03,590/- and sold the shares for Rs.94,25,954/- in the year under consideration. Accordingly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has furnished all records which substantiate the losses and did not raise any suspicious or malafide intentions. The Hon'ble Bombay High Court in the case of CIT-13 vs Shyam R. Pawar 54 taxmann.com 108 held as under: It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of STPL and RMPL respectively Out of these two, only RMPL is listed in the appraisal report and it is stated to be involved in the modus operandi. It is on this material that the Assessing Officer holds that the transactionsof sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transaction through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the authorities below, e. AO/CIT(A) have made the addition under section 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks, disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sales of the 'said shares' of M/s. Shukun Constructions Ltd., copies of the physical share certificates and her D-MAT account statement establishing the holding of the shares in her name prior to the sale thereof; confirmation of the transactions of buying and selling of the 'said shares' by the respective stock brokers, receipt of sale proceeds through banking channels, etc. As observed earlier in this order, we are of the view that the statement recorded from Shri NirajSanghvi on 31 12 2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee's back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross-exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal loss entry to its beneficiaries by way of transactions in penny stocks. The learned DR further submitted that various stock brokers have also accepted in the statement recorded during the aforesaid investigation that the scrips of aforesaid companies were used for providing accommodation entries of bogus long-term capital gains/short-term capital loss, which were taken into consideration by the AO in the assessment order. 8. On the contrary, the learned Authorised Representative (the learned AR ) submitted that the assessee is a trader in shares since the past two decades. It was further submitted that the transaction in shares of the aforesaid companies was made through the broker who is registered under SEBI. The learned AR further submitted that the copy of contract notes, broker notes, and Demat account was provided by the assessee in support of the aforesaid transactions before the lower authorities. The learned AR also submitted that during the year the assessee has earned a speculation gain of Rs.99,42,164/-, which has been duly recorded in his books of account and the loss arising from the transaction in shares of aforesaid companies is on account of regular share t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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