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TMI Blog2023 (4) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... rutiny and notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 4. Assessee is a firm engaged in the business of trading in Shares, F&O, Commodity and Derivatives. During the assessment proceedings Assessing Officer observed that assessee has purchased various scrips which are suspected scrips as penny stock and he has listed the details at Page Nos. 2 to 5 of the Assessment Order. He observed that assessee has claimed long term capital loss in the current year and will setoff short term capital loss against some long term capital gain or set off losses with business profit. This quantum of huge long term capital loss was found suspicious and in this regard detailed investigation was undertaken by the investigation wing, Kolkata into 84 penny stocks and has given detailed findings indicating bogus LTCG/STCL entries claimed by large number of beneficiaries. The Assessing Officer heavily relied on the modus operandi involving operators, intermediaries and the beneficiaries has been detailed in the investigation report prepared and dissemin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of the assessment before discharging the order in a very routine manner. 7. Ld.CIT(A) observed in his order that Assessing Officer has heavily relied on the investigation reports of Kolkata wing during their investigations of penny stock. He proceeded to disallow the loss claimed by the assessee merely relying on the above said report and Assessing Officer has not provided any information or any statement based on which he is disallowing the claim of the assessee which in-fact is against the principles of natural justice and further, he observed that assessee has submitted all the relevant information with regard to purchases and sale of the suspected scrips. He observed that assessee has purchased all the shares through regulated market i.e., Bombay Stock Exchange (BSE) and paid all the payments through banking channels only and assessee has submitted all the relevant information in support of the above transaction and further, assessee has sold all the scrips only through recognized stock exchange after complying Indian Contract Act, 1872. All the transactions are duly reflected in DMAT statements and are through authorised brokers who are duly registered with SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re purchased by the parties through off market and he brought to our notice Page No. 5 of the Assessment Order in which Assessing Officer has analysed the same in detail. Further, she brought to our notice Page No. 32 of the Ld.CIT(A) order and he submitted that Ld.CIT(A) has merely accepted the various submissions made by the assessee and relied on the various decisions of the Hon'ble ITAT Mumbai bench and other ITAT benches and came to the conclusion that the loss claimed by the assessee from sale of these scrips as genuine transaction. She submitted that it is fact on record that assessee has dealt with penny stock. Therefore, assessee is one of the beneficiaries and taken advantages, in this regard she relied on the decision of the Hon'ble Calcutta High Court in the case of Pr.CIT v. Swati Bajaj dated 14.06.2022, Hon'ble Bombay High Court order in the case of Sanjay Bimalchang Jain L/H of Shantidevi Bimalchand Jain v. Pr.CIT dated 10.04.2017. Ld.DR also submitted a SEBI report on the various scrips dealt by the assessee, copy of the same are placed on record. 10. On the other hand, Ld. AR submitted as under: - "1. The Respondent is a partnership firm, carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t each and every share transaction is supported by a contract note. Each contract cum bill has a unique contract number, settlement number, trade date, pay in date and pay out date. Further each trade of the Assessee has a unique order number, order time, trade number, and trade time. STT, Stamp Duty, Service Tax and other charges in respect of each transaction is paid and is reflected in all the contracts cum bills. 9. All these details prove that no pre dated contract notes were issued by the brokers to the Assessee and there were no manipulations in the share transactions entered into by the Assessee. 10. The Ld. A.O. alleged that the assessee has earned LTCG from sale of the alleged shares and proceeded to make the assessment on that very assumption itself. However, as mentioned above, assessee being a trader does not have any capital gains income during the year. In the Return of Income of the assessee, there is no capital gains taxation. The assessee only has income from business and profession. All profits and losses from sale of shares are offered for taxes under the head business and profession. Therefore, the primary contention of the Ld. AO that assessee has earned L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO & CIT(A). a) Copies of contract notes for sale and purchase of the all the above scripts evidencing that all buying & selling transactions in the all the scripts are carried out on a recognised stock exchange through authorised brokers who are duly registered with SEBI & BSE b) Details of Sales & Purchase of the above script with source of payments made for purchase of the above script. c) Copies of Ledger A/c of the Assessee in the books of the share broker wherein entries for purchase and sales of the above scripts are duly reflected. d) Copies of Demat transaction statement reflecting trades in the above scripts. e) Copies of Bank Statements duly marking payment made and received from the brokers for purchase and sales of the above scripts respectively. The same were neither considered nor controverted by the Ld. AO. The assessee had duly discharged its onus by submitting overwhelming evidences to substantiate the genuineness of its transactions, but the Ld. A.O. conveniently chose to ignore the same. 16. Further, various courts, on similar facts as that of the present case, deciding on the alleged scrips in which the assessee has traded, have held the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the appeal of the appellant." 11. Considered the rival submissions and material placed on record, we observe that assessee has dealt with various scrips particularly, Global Infratech Limited (GBL), Luminaire Technologies Limited, UNNO Industries Limited and Shree Shalin Textiles Ltd which are suspected to be penny stock and it is also fact on record that these scrips are categorized as penny stock as per the investigation wing, Kolkata reports and Assessing Officer has heavily relied on these reports and report of SEBI to come to the conclusion that the various scrips dealt with by the assessee are penny stock and he discussed various analysis made by the investigation wing of Kolkata and other agencies and relied on various submissions of various dealers in these scrips and proceeded to disallow the claim made by the assessee on the long term capital loss. We also notice from the record that assessee has submitted all the relevant documents of purchase and sale of these scrips in the recognized stock exchange and all the details were submitted before the Assessing Officer including the payments were made through banking channels only. The Assessing Officer completely overlooke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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