9911796707
TMI Blog2025 (3) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of section 68. We also hold that the addition made by the Assessing Officer is incorrect, factually and legally, and disallowance of exemption under section 10(38) and addition made under section 68 has rightly deleted by the CIT(A).
Disallowance u/s 14A - Under the specific circumstances when the Assessing Officer has failed to establish the nexus that investment was made out on interest bearing funds, disallowance towards administrative expenditure is not permissible. We also find that the fact of the present case is similarly situated and in the absence of any changed facts of the case, We are unable to support the estimated disallowance as made by the Assessing Officer. Hence, disallowance made u/s 14A in the instant case is hereby directed to be deleted. Revenue fails on this issue also. X X X X Extracts X X X X X X X X Extracts X X X X ..... lly having no business operations. viii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that M/s. Parag Shilp Infrastructure & Services ltd., a penny stock company, does not have any worthwhile asset, creditworthy business, strong financials or any other indicator in justify its soaring share prices which has been manipulated to give accommodation entries in the form of bogus long term capital gains to beneficiaries. ix) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate the role of entry operators in artificially hiking the share price of M/s. Parag Shilp Infrastructure & Services Ltd. to enable to assessee to legitimize his unaccounted fund. x) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that the entire gamut of direct & circumstantial evidence placed on record shows that claim of Long Term Capital Gain is Bogus in nature. xi) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that the onus was on the assessee produce the parties to prove the bonafide of the sale of the share and sale proceeds received. xii) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "material" in section 143(3) shows that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. xx) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate the plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him and the word "material/ clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may no strictly speaking be accepted evidence in court of law. xxi) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate the decision of the Hon'ble ITAT Bombay Bench "B" (ITA No. 614/Bom/87 A.Y. 1983-84) in the case of M/s. Mont Blanc Properties and Industries Pvt. Ltd. which was upheld by the Hon'ble Supreme Court where what constitute evidence under tax jurisprudence is clearly explained. xxii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that the assessee never asked for cross- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court sanctioned the amalgamation and new name was Parag Shilpa IT Infrastructure & Services Ltd. (PSIT Infrastructure & Services Ltd). The physical shares were dematerialized with Karvy Stock Broking Ltd. on 11/03/2013. Later on the aforesaid shares were transferred to MPSE Securities Ltd. from where the sales of shares were affected during the assessment year 2014-15 onwards. Thereafter, the assessee sold a part shares during the assessment year 2014-15. Since the period of holding of the shares were more than one year, the capital gain transaction were long term capital of the assessee and the assessee claimed exemption under section 10(38) of the Act. The assessee submitted all the details of sale purchase of shares i.e., name of company, amalgamation of company, details of sanction of amalgamation by virtue of the directions of the Hon'ble Bombay High Court. New name of company, details of dematerialization, details of transfer of shares were submitted along with each and every details as and when desired by the Assessing Officer during the course of assessment proceedings. The Assessing Officer did not accept the contention of the assessee and relied on the report o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee encloses herewith copies of share certificates, which is on Page-9 To 98 of the Paper Book. Thereafter, Later on the aforesaid shares were transferred to MPSE Securities Limited from where the sales of shares were affected on 06/03/2014 onwards. The assessee has submitted the letter regarding deliver slip for share transfer to "Mittal Share Brokers Pvt. Ltd." alongwith statement of accounts of Karvy Stock Broking Ltd and transaction statement of MPSE Securities Ltd. during the course of assessment proceeding before the assessing officer. The assessee submitted herewith details of the same which is on Page-101 To 110 of the Paper Book. The assessee is having Client ID issued by MPSE Securities Limited, which is clearly showing the name, address, bank details. The assessee has also submitted details of Client ID during the course of assessment proceedings, which is on Page-111 of the Paper Book. The assessee has sold the aforesaid shares for total consideration of Rs. 2,84,34,115/- during the previous year relevant to Asstt. Year 2014-2015 and shown book profit at Rs. 2,79,05,115/-. Since the period of holding of the shares is more than one year the capital gain transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax vide PAN AATPH2594R. The assessee regularly files return of Income. The assessee encloses herewith copy of Acknowledgment Return of Income, Computation of Income, Balance Sheet and Profit and loss account alongwith group Summary of Investment in securities for A.Y. 2010-11 to A.Y. 2014-15, which is on Page-1 To 42 of Paper Book Part-II. The assessee has given sum of Rs. 1,00,00,000/- (Rs. One Crores) to MPSC Securities Limited, who is a member of Madhya Pradesh Stock exchange Ltd. through RTGS on 15/03/2010 by Oriental Bank of Commerce, Kingsway A/c No. 01342010034880. The assessee encloses herewith bank statement reflecting the transfer of funds to MPSC Securities Ltd. alongwith bank book, which is on Page-43 To 48 of Paper Book Part-II. The assessee instructed for purchase of share of Well Pack Papers And Containers Ltd. through Bombay Stock Exchange Trading Terminal. The assessee purchased 3,50,000 shares of Well Pack Papers and Containers Ltd. The amount paid for purchase of shares was Rs. 1,00,07,295.84/-. The assessee encloses herewith Copy of account of MPSC Securities Ltd. alongwith contract-note of purchase and sale of shares, which is on Page-48 To 69 of Pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having physical delivery of shares on 16/03/2012 there is no dought that the assessee is owner of shares on 16/03/2012. The learned assessing officer has not considered the contention of the assessee as well as documents submitted by the assessee and on the basis of a massive investigation was carried out by Pr. Director of Income Tax (Investigation), Kolkatta. The learned assessing officer has not provided the details forwarded by Investigation Wing, Kolkatta as well as statement of persons, whose statement were recorded during the course of investigation made by the Pr. Director of Income Tax (Investigation), Kolkatta. The learned assessing officer has not granted opportunity to being cross examine to the persons, whose statement were recorded during the course of investigation. The investments made in shares were also accepted by the assessing officer during the previous year relevant to Asstt. Year 2013-2014 in the scrutiny proceedings u/s. 143(3). The assessee encloses herewith copy of assessment order which is on Page-171 To 173 of the Paper Book. The learned assessing officer has relied on the judgments which were not related to the fact of case of the assessee and additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentity of the company will not in dispute; xiv. Burden of proof was on the department to prove that the amount belongs to the assessee. The assessee has already submitted copies of shares transfer in the name of assessee on 16/03/2012 (PB Part-I, Page-9 To 98); xv. The transaction is delivery based transaction and physical shares were delivered and transferred in the name of assessee on 16/03/2012; (PB Part-I, Page-9 To 98); xvi. Purchase and sale of shares having been regularly accounted in the books of account of assessee. This fact has been confronted by the assessing officer; xvii. Documents furnished by assessee proves beyond any doubt that the transaction of purchase and sale of shares is a genuine on following a. The assessee has purchased of shares by cheque; b. The purchase of shares were through registered stock broker; c. The assessee transferred the shares and same were duly recorded in the name of assessee; d. The shares were appearing in demat account of the assessee; e. The period of holding of shares were more than 1 year; f. Assessee is having Client ID of MPSE Security Limited. g. Delivery of shares from demat account h. Sale proceeds rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnel-Identity of companies was not disputed-It would not be appropriate to required the assessee to go through the entire gamut of reassessment proceedings-Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind by AO-Notice under S. 148 quashed. 7. (1980) 125 ITR 713 (Supreme Court of India) Kishinchand Chellaram -Vs.- Commissioner of Income Tax Income from undisclosed sources-Chargeability-T, an employee of Madras office of assessee making a telegraphic transfer of an amount of Rs. 107350 to N, an employee of assessee Bombay Office-On enquiry made by ITO from Madras bank, manager of bank informing ITO that telegraphic transfer of Rs. 107350 sent by assessee from Madras was receive by bank at Bombay and the amount was paid to N-ITO treating the amount as undisclosed income of assessee-Not justified-Burden of proof was on the Department to prove that the amount belonged to assessee-Letters of manager, in the absence of same being supplied to the assessee, could not be used against assessee-Manager also not examined by the Department-There was no evidence for the conclusion that the amount belonged to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions-Assessee holding large number of shares as investments and transactions in shares all along treated in part under the head "Capital Gains", assessee could not be treated as trader in shares for the year under consideration-Assessee was eligible for set off of long-term capital loss against short-term capital gains. 14. I.T.A. No. 79/Nag/2010 (ITAT, Nagpur) Plastic Surge Industries Pvt Ltd -Vs- Asstt Commissioner of Income Tax 15. I.T.A. No. 6429/Mum/2009 (ITAT, Mumbai) Assistant Commissioner Of Income Tax -Vs- Naishadh V. Vachharajani 16. I.T.A. No. 961/Mum/2010 (ITAT, Mumbai) Nagindas P. Sheth (HUF) -Vs- ACIT 17. (2006) 6 SOT 0247 (ITAT, Mumbai) Mukesh R. Marolia -Vs- Additional Commissioner Of Income Tax Purchase and sale of shares having been regularly accounted for by the assessee in its books and this fact having been confirmed in survey conducted by the Department, addition of sale proceeds of share under s. 69 could not be made solely on the basis of fact that transactions were not routed through stock exchange; assessee is consequently entitled to benefit of s. 54F 18. I.T.A. No. 1442/Ahd/2013 (ITAT, Ahmedabad)P-II ACIT -Vs.- Vineet Sureshchandra Agraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and made addition u/s. 14A disallowing claim of the assessee. In the circumstances assessee humbly request that expenditure disallowed by the assessing officer may kindly be allowed. On the above mentioned preposition assessee placed reliance on: 1. (2014) 41 CCH 0286 (Mum. Trib) P-II HDFC Bank Ltd. -Vs.- Deputy Commissioner of Income Tax. Expenditure incurred in relation to income not includible in total income-Applicability of Rule 8D-Assessee a Scheduled bank carrying on banking business made investment-AO made disallowance u/s. 14A on account of investment made-Assessee submitted tht disallowance u/s. 14A was not warranted since investments was made out of its own funds and reliance was placed on assessee"s own case and there is no requirement to make any disallowance, if the investment made are strategic in nature-That securities were held as stock in trade-That quantum of disallowance should be scaled down in between 2% to 20% of exempt income-Revenue submitted that provisions of Rule 8D were applicable from AY 2008-09 onwards and hence disallowance to be made u/s. 14A was required to be examined in terms of Rule 8D-Held, provisions of Rule 8D are applicable from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which much have been incurred by assessee, which in present case was missing-AO had not brought on record any expenses having been incurred by assessee to earn non-exempt or exempt income-In absence of same, it could not be said that assessee had actually incurred any expenditure-In view of above, no substantial question of law arose for adjudication 5. (2013) 361 ITR 0131 (P&H HC) P-II Commissioner of Income Tax -Vs.- Deepak Mittal Business expenditure-Disallowance under s. 14A-Apportionment of expendi-ture-Disallowance under s. 14A required finding of incurring of expenditure-Where it is found that for earning exempted income no expenditure has been incurred, disallowance under s. 14A cannot stand-In view of finding of the Tribunal, it is clear that the expenditure on interest was set off against he income from interest and the investment in the share and funds was out of the dividend proceeds-In view of this finding of fact, disallowance under s. 14A was not sustainable. In view of the fact claim made by the assessee is true and correct and same may kindly be allowed." 7. The learned CIT(A), while considering the submissions of the assessee emphatically, held that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness of the transactions which are as under 1. The assessee had purchased 422500 share of Swift IT Infrastructure & Services Limited (SITIT) at the rate of Rs. 10 each, the physical delivery of which were received on 16/03/2012. 2. Later on the company, Swift IT Infrastructure Pvt. Ltd was amalgamated with Parag Shilpa Infrastructure and Services LTD. (PSIT) on the basis of sanction by Hon'ble Bombay High Court and the company was renamed as Parag Shilpa IT Infrastructure & Services Ltd (PSIT Infrastructure & Services Ltd). The physical shares of SITIT were sent for dematerialization with Karvey Stock Broking Limited on 11/03//2013. 3. Thereafter, the foresaid shares were transferred to MPSE Securities Limited from where the sales of share were affected during the previous year relevant to Asstt. Year 2014-15 onwards. The assessee sold part of the share held during the previous year relevant to A.Y. 2014-15. 4. The assessee has submitted all the details of sale purchase of shares i.e. name of company, amalgamation of company, details of sanction order of amalgamation from the Hon'ble Bombay High Court, new name of company, details of dematerialization, details of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has invested in the share of M/s. Swift IT Infrastructure Limited. The said company is not a new company. The assessee respectfully submitted that the said company was a listed company on stock exchange and after amalgamation through High Court order dated 3rd May 2013 and at present also not a new company as stated in the report that the said was floated for the purpose of giving LTCG entries. The entire allegations made in the report were totally denied. The assessee respectfully submits that the assessing officer has committed gross error by making addition in the assessee's case on the basis of the modus operandi mentioned in the report. The assessee respectfully submits that the said modus operandi were not applicable in assessee's case as assessee merely an individual who has invested the said amount as an investment only. The assessee is neither having any knowledge of accommodation entries nor about any pre-arranged organized racket of generating bogus entries of long term capital gains. The assessee has invested the amount as an investment and sold the share through Bombay Stock Exchange and paid STT. The assessee has made all the transaction through proper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction. As per Para-3.3.3 "the learned assessing officer mentioned that the beneficiary provides the required amount of cash which is routed through some of the paper companies of the entry operator and is finally parked in one company which will buy the share from beneficiary. The paper company issues cheque to the beneficiary". The assessee denies all such allegations and entire allegations were incorrect. The assessee has made whole transaction through proper banking channel and same were duly reflected in the books of account of the assessee. There is no movement of cash in the assessee transaction. The assessee has made whole transaction through Bombay Stock Exchange and on entire sale and purchase STT was paid on entire transaction, which was deposited in government account through stock exchange and entire transaction was duly reflected in the Bombay Stock Exchange. The assessee has already submitted all the details with respect to share transaction during the course of assessment proceedings before the assessing officer and thus proved the genuineness of the transaction beyond doubts. On the contrary the assessing officer has neither pointed out any defect in books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact that the entire transaction was through banking channel and the rejection by the AO as well as the CIT(A) treating the transaction as bogus long-term capital gain was without any basis. ITAT further noted that the AO and the CIT(A) relied upon the statement recorded by the Investigation Wine, Kolkata, which had no nexus with the case of assessee. Therefore, relying upon the recent judgment of Hon'ble High Court of Punjab & Haryana in the case of Pr. CIT v. Prem Pal Gandhi in ITa No. 95 of 2017 dated 18.01.2018, the Tribunal concluded that considering the fact and circumstances in the case of assessee the ratio laid down by the said judgment, the addition made by the AO and sustained by the CIT(A) was to be deleted. The assessee has purchased 422500 shares of Swift IT Infrastructure and Services Ltd. by cheque on 16/03/2012 during the previous year relevant to Asstt. Year 2013-2014 and the same were shown in the balance sheet of the assessee as investment and entire investment were duly accepted by the assessing officer during the previous yer relevant to Asstt. Year 2013-2014 in the scrutiny assessment and assessment were completed u/s. 143(3). The assessee has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in the books of account of the assessee. 5. "In Para-4.1 the A.O. referred that the assessee has indulged in merger method." The assessee respectfully submitted that in the case of assessee on line trading for sale is through Bombay Stock Exchange and not through any paper company. There is no involvement of any paper companies in the case of assessee. Entire trading was made through Bombay Stock Exchange. In the report Assessing Officer has mentioned, that "Purchasing/loss booking companies in the Script PS IT infrastructure & Services Ltd./Parag Shilpa Investments Ltd, the most purchases were at abnormally higher rates done by paper companies". The assessing officer has mentioned the names and details of paper companies in the report. But the same were not the assessee company and not the companies in which assessee has invested. Even the assessee do not know the companies and have not entered into any transactions with such paper companies as mentioned by the assessing officer. The assessee has nothing to do with such paper companies and there was no name of the assessee and no name of company "Parag Shilpa Infrastructure Ltd." in the details of companies. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gestion of Sanjay Jalani who is family friend of assessee. Now in this situation it is baseless to say that shares transaction are aimed only to bring unaccounted money in the guise of exempted long term capital gain and paper work has been got up and done merely to give the colour of authenticity to the transactions and creating façade of legitimate transactions and so allegation made against the assessee is denied in toto. It is pertinent to note that the assessee has purchased the shares of Unlisted Company named Swift IT Infrastructure & Services Limited about 14 months before amalgamation. The assessee has received the share of Parag Shilpa Investments Limited by virtue of amalgamation of two companies by approved order of Hon'ble Bombay High Court. Relevant Case law : * Hon'bles ITAT, Jodhpur in the case of DCIT vs. Smt. Hansa Choudhary [2012] 23 taxmann.com 302 (Jodhpur-Trib) was clearly seen that assessee purchased shares in earlier year. They were shown in the balance sheet which was filed alongwith the return of income. The payments were made through books of account which had not been doubted. The shares belonged to a listed company which was also not in dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier dated". The entire story stated above were denied by the assessee. As there was actually physical delivery of share of Swift IT Infrastructure Ltd. on 16/03/2012 and same were also dematerialized with Karvey Stock Exchange Pvt. Ltd. "Assessing officer mentioned that some minor balance lying the ledger account is transferred to the discount account" but in the case of assessee there is no such minor balance and there is no such discount account maintained by the assessee. "The Assessing Officer mentioned in the report that shares were transferred to the demat account of the client (Off Market) generally around a few days before the date when the client wished to avail the gain". But in the case of assessee the shares of Swift IT Infrastructure Ltd. were dematerialized with Karvey Stock exchange Pvt Ltd. on 11/03/2013 itself which is more than one year before the share were sold. The Assessing Officer have further mentioned in the report that "Many Clients ask for Holding letters, which re basically letters issued from the entry providers that they have purchased "X" amount of shares on behalf of such clients on a particular date and these companies are holding them in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Ltd., Ganesh Spinners and even Parag Shilpa Infrastructure Ltd. during the course of assessment proceedings. The assessee draw attention that entire loss were accepted by the department in the order passed u/s. 143(3). The assessee has already submitted copy of the assessment order with its earlier reply. 8. As to Para-7.1 : Share Swapping The assessee has purchased 422500 share of Swift IT Infrastructure and Services Ltd. physically on 16/03/2012 during the previous year relevant to Asstt. Year 2013-2014 and the same were shown in the balance sheet of the assessee as investment and entire transaction as investment were duly accepted by the assessing officer in the scrutiny proceedings u/s. 143(3). The assessee has received physical delivery of the share of Swift IT Infrastructure & Services Limited on 16/03/2012 at the rate of Rs. 10 each. The assessee has submitted the copies of share certificate during the course of assessment proceedings before the assessing officer. In support of its contention the assessee has submitted copies of share certificates. The assessing officer wrongly mentioned in the report that in Para 7.3 that, "these shares were never materialized and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same to the assessee and not providing opportunity to submit explanation in this regard, without pointing any specific discrepancy in the assessee transaction and without providing assessee opportunity to cross examine the parties on whose statement department were relying and passing the order is against the principle of nature justice. The ld. AO while framing assessment order and making additions, has not shared any information with the assessee. Non-sharing of complete information on the basis of which additions were made and additional tax liability was imposed on the assessee is against the principles of natural justice. The assessee respectfully submitted that no liability can be imposed on any assessee with respect of certain information received from third party until and unless the assessee were confronted with the same and offered an opportunity to rebut the same as the same amounts to violation of principles of natural justice. The assessment order was passed and additions were made merely on the basis of certain information received from the investigation wing of IT Department without application of mind by the ld. A.O. and without establishing a link between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding him opportunity to cross examine the deponents whose statements were relied upon * Hon'ble Delhi High Court in the case of CIT v. SMC Share Brokers Ltd. [2007] 159 Taxman 306 held that in absence of Manoj Agarwal being made available for cross examination, his statements cannot be relied upon to assessee's detriment. The relevant extract is reproduced as under "There is no doubt that the statement of Manoj Agarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross examination. In the absence of the statement being tested, it cannot be said that it should be believed completely to the prejudice of the assessee." * Hon'ble Agra ITAT in the case of ITO v. Mayur Agarwal (2011) (128 ITD 55) held that no addition can be made merely on the basis of evidence procured from the party unless and until that party was put to the assessee for cross examination. The relevant extract is reproduced here as under: "From the copy of the assessee's account in the books of the third party, namely. "N", it was clear that against all the transactions relating to the assessee, the bill numbers were duly mentioned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant returns of income and it was held by the Bench that in these circumstances, the sale of shares could not be held to be non-genuine. Thus in view of the above fact and submission and supported case laws, it can be held that the assessment was completed without following the principles of natural justice and entire addition was made without any basis and same my kindly be deleted. 7.5 The above submissions make for strong argument against the assessment made by the AO. Having considered these arguments, and the assessment order, the issues raised were considered and the assessee's arguments were verified by examining the documentary evidences produced before me. In the assessment order, the AO has raised certain issues which are dealt with as under 1. Issue : According to the AO, in the report sent by the Office of Pr. Director of Income Tax (Investigation), Kolkata to the Pr. Director of Income Tax (Investigaion), Nagpur vide letter dated 27/04/2015, name of the assessee features in the list of the persons who have availed bogus LTCG and claimed exemption u/s 10(38) of the Act. The details of transactions entered into by the assessee were also forwarded to the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 have been recorded by the Kolkata Directorate and in the statement they have admitted that they had indulged in providing accommodation entry of LTGC through the above companies controlled by them. The observations made by the Assessing Officer in Para-7.4 is that "there is a strong, non -rebuttable evidence that the company was a paper company and was used for giving bogus entries to the assessee". The A.O. in Para-9.1 has stated that the assessee purchased 226000 shares of M/s. Shree Ganesh Spinners Ltd. during 2011-12 for S. 42,46,550/- through MPSE Securities Ltd. but no details provided. The assessing officer mentioned that assessee furnished copies of physical share certificate of Swift IT Infrastructure Limited which got transferred on 16/03/2012. The A.O. further observed that through it was swap of shares but these shares of "Swift" were not immediately handed over to the assessee. The A.O. alleged in Para-9.2 that on 05/09/2014, the balance sheet were further split into 26,35,000/- shares. In Para-9.4, the AO alleged there is cash transaction. In Para-9.9, the AO has held that the gains arising from sale of shares was short term in nature and not LTGC. The assessee pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l share were got dematerialized with Karvey Stock broking Limited on 11/03/2013. As evidence for the same, the assessee has submitted letter requesting demat of physical shares certificates alongwith acknowledge-ment of receipt of shares from Karvy Stock Broking Ltd. However, the company Swift IT Infrastructure was amalgamated with Parag Shilpa IT Infrastructure & Services Limited. Thereafter, the aforesaid share were transferred to MPSE Securities Limited from where the sales of shares were affected on 06/03/2014 onwards. The assessee has submitted the letter confirming deliver slip for shares transfer to "Mittal Share Brokers Pvt. Ltd." alongwith statement of accounts of Karvey Stock Broking Ltd and transaction statement f MPSE Securities Ltd. These evidence were before the AO, during the course of assessment proceedings. The assessee had Client ID issued by MPSE Securities Limited, which clearly shows the assessee's name, address and bank details. The assessee has also submitted details of Client ID during the course of assessment proceedings. I find that these evidence have not been controverted and neither has the AO falsified these documents, or proved them non-genuine. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to the assessee and as such no credence can be given to such statements. I find that the name of assessee does not appeal in these statements and also in the case of assessee, as all the sale transactions are done online through BSE. Therefore, even if the AO has blindly relied on statements given by third parties, these statements do not implicate the assessee, nor do they show or even indicate the assessee"s involvement in the said alleged scheme, and hence the allegations against the assessee is misguided and presumptive. 6. The A.O. has stated that the assessee purchased 226000 shares of M/s. Shree Ganesh Spinners Ltd. during A.Y. 2011-12 for Rs. 42,46,550/- through MPSE Securities Ltd. but no details provided. This allegation is incorrect as all details had been provided during the assessment proceedings as well during the remand proceedings. The assessee has furnished all documents to show the transactions. The assessee has furnished all documents to show the transaction through MPSE Securities Ltd. and the details of purchase of shares of M/s. Shree Ganesh Spinners-such as quantity, rates and these were furnished before the AO. The AO has alleged that the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased 3,50,000 shares of Well Pack Papers and Containers Ltd. The amount paid for purchase of shares was Rs. 1,00,07,295.84/-. The assessee has submitted copy of account of MPSE Securities Ltd. alongwith contract-note of purchase and sale of shares, which is part of Paper book and also sent on remand. On 18.03.2011, the aforesaid share were sold for the Rs. 42,53,735/-. Demat account and Sale Note were produced. The loss incurred at Rs. 57,46,180/- was reflected in the ITR for A.Y. 2011-12. At the same time, the assessee further invested sum of Rs. 42,46,550/- for purchase of 2,26,000 shares of Shree Ganesh Spinners Limited through Bombay Stock Exchange Trading Terminal, which is also reflected in the Balance Sheet of A.Y. 2011-12. These shares were sold on 19.09.211. The assessee has submitted Demat Share account for the period from 01/04/2009 To 31/03/2015 and the credit not issued by Scan Infrastructure Limited. The sale of share were duly reflected in the books of account of assessee, and the assesse has submitted copies of Balance Sheet alongwith investment A/c. in securities ledger account. The assessee thereafter placed on order for purchase of shares of Swift IT Infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family members of Shri Praveen Kumar Agarwal and Shri Devesh Upadhyaya as mentioned in the statement recorded on various dates. The assessee also had no dealing with the companies in which Shri Praveen Agarwal and Shri Devesh Upadhyaya were the Directors. During the course of statement recorded by DDIT (Investigation) Kolkata, Shri Praveen Kumar Agarwal and Shri Devesh Upadhyaya had accepted the list of companies formed by them for providing accommodation entry. The assessee has categorically stated that in the aforesaid list of companies there is neither the name of assesse nor the name of company "Parag Shilpa Infrastructure Ltd." in which assessee had invested in shares. Similarly, the assesse had no connection with Shri Jagdish Prasad Purohit and was unaware of his business operations. The assessee also drew attention to the fact that Shri Praveen Kumar Agarwal and the other two named persons had themselves stated during the course of investigation that few of their listed companies were genuine companies. Since in these listed o companies as mentioned in their statements, there is neither the mention of the name of the assessee nor the name of company "Parag Shilpa Infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order passed by the learned CIT(A) and prayed that the assessment order passed by the Assessing Officer be upheld. 9. The learned Counsel for the assessee while reiterating the submissions made before the authorities below, strongly relied on the impugned order passed by the learned CIT(A). 10. We have heard the argument of the both the side and considered the fact and circumstances of the case and also gone through case laws relied by the learned Counsel for the assessee It is admitted fact that the assessee had purchased 4,22,500 share of Swift IT Infrastructure & Services Ltd., (SITIT) @₹ 10 per share, the physical delivery of which were received on 16/03/2012. We further note that later on the company, Swift IT Infrastructure Pvt. Ltd., was amalgamated with Parag Shilpa Infrastructure and Services Ltd. on the basis of sanction by Hon'ble Bombay High Court and the company was renamed as "Parag Shilpa IT Infrastructure & Services Ltd.". The physical shares of SITIT were sent for dematerialization with Karvey Stock Broking Ltd.,d on 11/03//2013. Thereafter, the foresaid shares were transferred to MPSE Securities Ltd., from where the sale of share was affected du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angi v/s ITO, ITA no.3256/Mum./2022, order darted 22/02/2024 (Mum.Trib.). 11. The assessee also placed reliance on various case laws of the Hon'ble High Court and the decision of the Co-ordinate of the Tribunal, which also support the case of assessee. These case laws are referred to as under:- "i) Commissioner of Income Tax -Vs.- Kishore Kumar Mohapatra, judgment dated 05/04/2024 (SC); ii) Principal Commissioner of Income Tax -Vs.- Shilpaben Harshil Deliwala, ITA no.967 of 2024, judgment dated 14/10/2024; iii) Tejash Ramesh Shah HUF -Vs.- Income Tax Officer, ITA no.5813-5814/Mum./2024, order dated 06/01/2025; iv) Gateway Leasing (P) Ltd. -Vs.- Assistant Commissioner of Income Tax & Ors., ITA No. 2518 of 2019, dated 11/03/2020; v) Vikram N. Chandan -Vs.- Income Tax Officer, ITA No. 70/Mum/2024 order dated 30/07/2024; vi) Archit Gupta -Vs.- Assistant Commissioner of Income Tax, ITA No. 2624-2625/Del/2022, order dated 30/09/2024; vii) Ahmed P. Surani -Vs.- Assistant Commissioner of Income Tax, ITA no.361/Mum./2024, order dated 30/09/2024; viii) Principal Commissioner of Income Tax -Vs.- Ziauddin A Siddique, IT no.2012 of 2017, judgment dated 04/03/2022 (Bom.); ix) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to ₹ 48,899 which was claimed exempt under section 10(34) of the Act and also claimed expenditure at ₹ 15,75,789 in the return of income. The Assessing Officer has made disallowances under section 14A at ₹ 15,75,789, through, according to the assessee, is incorrect and unjustified. 16. After examination of Balance Sheet, it is admitted fact that the assessee has made investment in shares amount to ₹ 20.61 crore and same were duly reflected in the books of account and also shown in the Balance Sheet as investment. It is admitted fact that the assessee had own capital is at ₹ 30.84 crore, as well as loans at ₹ 12.89 crore out of which loan amount of ₹ 11.70 crore was interest free loan. Thus the assessee had available with him a total sum of ₹ 42.54 crore as interest-free fund which is more than the investment made in tax free securities i.e., ₹ 20.61 crore. It is fact that the assessee also possessed excess interest free fund at ₹ 21.93 crore which was sufficient to make such investments. Hence, the assessee has claimed interest expenses at ₹ 17,07,743 only. Further examination of the interest paid show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had own capital is at Rs. 30.84 crore, as well as loans at Rs. 12.89 crore out of which loan amount of Rs. 11.70 crore was interest free loan. Thus the assesse had available with him a total sum of Rs. 42.54 crores as interest-free fund which is more than the investment made in tax free securities i.e. Rs. 20.61 crore. The assessee also possessed excess interest free fund at Rs. 21.93 crore which was sufficient to make such investments. Hence, the assessee has claimed interest expenses at Rs. 17,07,743/- only. Further examination of the interest paid show that the assessee paid interest to LIC at Rs. 14,86,720/-, interest on vehicle loan at Rs. 2,19,536/- and bank commission and charges at Rs. 1,486/- and same were duly reflected in the books of account of the assessee and also shown in the Profit & Loss Account of the assessee. It is clear therefore, that the interest expenses claimed were not related to funds that were invested in shares and securities. It is also obvious that since his own funds/capital available was Rs. 30.84 crore, these were utilized in making investment in tax free securities. Any disallowance under section 14A required finding of incurring of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 276/214 Taxman 548 (Bom. HC); ii) CIT v. HDFC Bank Ltd. [2014] 49 taxmann.com 335/226 Taxman 132 (Mag.)366 ITR 505; iii) Dhampur Sugar Mills Ltd. v. CIT [2014] 51 taxmann.com 508/ [2015] 228 Taxman 326/370 ITR 187 (All. HC); iv) CIT v. SBI DHFL Ltd. [2015] 63 taxmann.com 345/376 ITR 296 (Bom. HC); v) CIT v. Karnataka State Industrial & Infrastructure Development Corpn. Ltd. [2016] 65 taxmann.com 295/237 Taxman 240 (Kar HC); vi) Yes Bank Ltd. v. Dy. CIT [2015] 57 taxmann.com 14/68 SOT 291 (Mum. ITAT); and vii) Asstt. CIT v. Bandekar Brothers (p.) Ltd. [2015] 63 taxmann.com 198/155 ITD 1174 (Panji ITAT). 20. The ratio laid down in the above judgments is in favour of the assessee to the effect that under the specific circumstances when the Assessing Officer has failed to establish the nexus that investment was made out on interest bearing funds, disallowance towards administrative expenditure is not permissible. We also find that the fact of the present case is similarly situated and in the absence of any changed facts of the case, We are unable to support the estimated disallowance to the tune of ₹ 15,75,789, as made by the Assessing Officer. Hence, re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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