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TMI Blog2023 (4) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... see during the financial year. Thus the grounds raised by the Revenue is devoid of merits and liable to be dismissed. Losses booked under penny stocks on sale of shares - HELD THAT:- A.O. made the disallowance without documentary proof whereas the assessee proved the genuineness of the transactions and established on online trading platforms and it had no control whatsoever on share prices and thus incurred losses in shares The assessee is a retaining Kappac Pharma shares as stock-in-trade and the closing stock is valued at the market rate. Since the market rate is lower it has incurred a business loss though the shares are not sold. The difference is only because of valuation of shares which is as per the Accounting Standard and the share of Kappac Pharma are still forming part of closing stock of the assessee company as on 31.03.2019. Thus, we have no hesitation in deleting the disallowance made by the A.O. which was correctly deleted by the Ld. CIT(A). Thus the grounds raised by the Revenue is without any basis and the same is liable to be rejected. Appeal filed by the Revenue is hereby dismissed. - ITA No. 593/Ahd/2020 - - - Dated:- 24-4-2023 - Shri Waseem Ahmed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as explained and remaining cash of Rs 1,10,989/- as unexplained which was added to the total income of the appellant u/s.69A. 5.2 It is submitted by the appellant that the status of balance of cash as per cash books as on 17.12.2014 in both the companies were of Rs. 5,59,524/-, that thus the cash found of Rs.3,93,090/- against cash balance as on 17.12.2014 in both the companies of Rs. 5,59,524, stood explained and since cash found is as per books of accounts, the addition of Rs.1,10,989/- requires to be deleted. The veracity of the cash books of the appellant and its sister concern, M/s. Affluence Shares and Stock Brokers Pvt. Ltd. have not been doubted by the AO and that without any stated reason the cash balance of M/s. Affluence Shares and Stock Brokers Pvt. Ltd. has been ignored by the AO This approach of the AO is un-tenable because no plausible explanation of tax payer can be rejected by the revenue without bringing on record cogent material to refute the same. Under the circumstances the addition of Rs.1,10,989/- cannot be upheld. The AO is directed to delete the addition. The related ground succeeds. Losses booked under penny stocks: 5.5 It is submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat C which have laid down that the disallowance u/s.14A cannot exceed the amount of Income Tax exempt income earned. The contention of the appellant that provisions of Section 14A would not be attracted in the case of traders in shares and securities where the dividend earned is incidental to the trade does not appears to be tenable. In Doubledot Finance Ltd. V. CIT 65 SOT 324, the Mumbai ITAT has held that Sec. 14A is attracted even in case of dividend income arising from shares held as stock in trade. The appellant has also challenged the addition on the ground that the AO did not record any satisfaction for invoking Section 14A which is prerequisite of applying Rule 8D. This argument of the appellant cannot be conceded to as it is the case of the AO that no computation of such disallowance was furnished by the appellant when it was specifically asked for by the AO. However the AO was required to examine whether disallowance u/s 14A could have been made without establishing direct nexus between interest bearing fund applied for share trading/investment activities. In this regard it has been submitted by the appellant that though the shares were classified as investments, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.51,12,885/- made on account of disallowance u/s. 14A rwr 8D of the Act. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred deleting the addition of Rs.73,12,905/- made by the A.O. on account of disallowance of losses booked in penny stock of Rs.73,12,905/- , namely Alang Industries Gases Ltd. and 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 6. This case is covered exception as per CBDT's Circular No.23 of 2019 dated 06/09/2019 read with off Office Memorandum date 16/09/2019 vide F.No.279/Misc./M-93/2018-ITJ(Pt). 4. The Ld. CIT-DR Shri A.P. Singh appearing for the Revenue supported the order passed by the Assessing Officer and requested to uphold the same and allowed the assessee s appeal. 5. Per contra, Shri Dhinal Shah appearing for the assessee filed before us three volumes of Paper Book in support of its claim wherein Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us relied upon Hon ble Supreme Court Judgment in the case of Maxopp Investment Pvt. Ltd. and Hon ble Gujarat High Court judgment in the case of CIT Vs. Gujarat State Fertilizers Chemicals Ltd. reported in 358 ITR 323 (Guj.). Thus submitted the disallowance made by the A.O. is unjustifiable. 8. We have given our thoughtful consideration and perused the materials available on record. It is now settled principle of law the disallowance made u/s. 14A is restricted to the exempt (dividend) income received by the assessee. 8.1. Respectfully following the Judgment of the Jurisdictional High Court, we have no hesitation in sustaining the order passed by the Ld. CIT(A), restricting the disallowance to the exempt income of Rs. 10,56,851/- received by the assessee during the financial year. Thus the grounds raised by the Revenue is devoid of merits and liable to be dismissed. 9. The 3rd ground namely losses booked under penny stocks of Rs. 73,12,905/- on sale of Alang Industrial Gases Ltd. shares. The assessee has proved the genuineness of the transactions beyond doubt by furnishing contract notes, ledger accounts, bank transactions from books of brokers whereas the A.O. without a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares, as also abstract of transactions furnished by CSE - accordingly, addition made by Assessing Officer was deleted - Whether since finding recorded by Tribunal was based on appreciation of material on record, no substantial question of law arose therefrom. 10.1. In the case of Ramniwas Ramjivan Kasat (cited supra) held as follows: Assessment year 2006-07- During relevant year, assessee sold certain shares owned by him - Assessing Officer opined that purchase of shares in question itself was bogus and, thus, there was no question of sale of same He thus added amount of sale proceeds of shares to assessee's taxable income Tribunal noted that shares had been purchased in previous assessment year - It was further found that assessment for previous assessment year had been taken in scrutiny and in assessment order purchase of shares had been accepted as genuine - Tribunal thus concluded that no addition could be made with aid of section 68 when such shares were sold in relevant assessment year - Whether on facts, impugned order passed by Tribunal did not require any interference. 10.2. In the case of Maheshchandra G. Vakil (cited supra) held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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