Itxa/454/2018 Of Principal Commissioner Of Income Tax 31, Mumbai v. Indravadan Jain, Huf

Digitally IN THE HIGH COURT OF JUDICATURE AT BOMBAYsigned byPURTIPURTIPRASADPRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONPARABDate:2023.07.1512:34:25+0530INCOME TAX APPEAL NO. 454 OF 2018 signed byPURTIPURTIPRASADPRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONPARABDate:2023.07.1512:34:25+0530INCOME TAX APPEAL NO. 454 OF 2018 Principal Commissioner of IncomeTax – 31, Mumbai V/s.Indravadan Jain, HUF ….Appellant …Respondent ---- ---- Ms. Sushma Nagraj a/w Ms. Sakshi Kapadia for Appellant.None for Respondent. CORAM : K.R. SHRIRAM & FIRDOSH P. POONIWALLA, JJ. DATED : 12[th] JULY 2023 P.C. : 1.This appeal is impugning an order dated 27[th] May 2016 passedby the Income Tax Appellate Tribunal (ITAT) rejecting two appeals thatRevenue had filed against the order of Commissioner of Income Tax(Appeals) (CIT[A]) for Assessment Year 2005-06 in the matter of orderpassed under Section 143(3) read with Section 147 of the Income Tax Act,1961 (the Act) against Respondent. Respondent though served is notpresent before us. Affidavit of service is also filed. 2.It was the case of Revenue before the ITAT that the CIT[A] waswrong in deleting the addition made by the Assessing Officer (A.O.) inrespect of long term capital gain treated by A.O. as unexplained cash creditunder Section 68 of the Act. 3.Respondent had shown sale proceeds of shares in scripRamkrishna Fincap Ltd. (RFL) as long term capital gain and claimedexemption under the Act. Respondent had claimed to have purchased thisscrip at Rs.3.12/- per share in the year 2003 and sold the same in the year2005 for Rs.155.04/- per share. It was A.O.’s case that investigation hasrevealed that the scrip was a penny stock and the capital gain declared washeld to be accommodation entries. A broker Basant Periwal & Co. (the saidbroker) through whom these transactions have been effected had appearedand it was evident that the broker had indulged in price manipulationthrough synchronized and cross deal in scrip of RFL. SEBI had also passedan order regarding irregularities and synchronized trades carried out in thescrip of RFL by the said broker. In view thereof, respondent’s case was re-opened under Section 148 of the Act. 4.The A.O. did not accept respondent’s claim of long term capitalgain and added the same in respondent’s income under Section 68 of theAct. While allowing the appeal filed by respondent, the CIT[A] deleted theaddition made under Section 68 of the Act. The CIT[A] has observed thatthe A.O. himself has stated that SEBI had conducted independent enquiry inthe case of the said broker and in the scrip of RFL through whomrespondent had made the said transaction and it was conclusively provedthat it was the said broker who had inflated the price of the said scrip inRFL. The CIT[A] also did not find anything wrong in respondent doing only 4.The A.O. did not accept respondent’s claim of long term capitalgain and added the same in respondent’s income under Section 68 of theAct. While allowing the appeal filed by respondent, the CIT[A] deleted theaddition made under Section 68 of the Act. The CIT[A] has observed thatthe A.O. himself has stated that SEBI had conducted independent enquiry inthe case of the said broker and in the scrip of RFL through whomrespondent had made the said transaction and it was conclusively provedthat it was the said broker who had inflated the price of the said scrip inRFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] cameto the conclusion that respondent brought 3000 shares of RFL, on the floorof Kolkata Stock Exchange through registered share broker. In pursuance ofpurchase of shares the said broker had raised invoice and purchase pricewas paid by cheque and respondent’s bank account has been debited. Theshares were also transferred into respondent’s Demat account where itremained for more than one year. After a period of one year the shareswere sold by the said broker on various dates in the Kolkata StockExchange. Pursuant to sale of shares the said broker had also issuedcontract notes cum bill for sale and these contract notes and bills were madeavailable during the course of appellate proceedings. On the sale of sharesrespondent effected delivery of shares by way of Demat instructions slip andalso received payment from Kolkata Stock Exchange. The cheque receivedwas deposited in respondent’s bank account. In view thereof, the CIT[A]found there was no reason to add the capital gains as unexplained cashcredit under Section 68 of the Act. The tribunal while dismissing theappeals filed by the Revenue also observed on facts that these shares werepurchased by respondent on the floor of Stock Exchange and not from thesaid broker, deliveries were taken, contract notes were issued and shareswere also sold on the floor of Stock Exchange. The ITAT therefore, in ourview, rightly concluded that there was no merit in the appeal. 5.We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises. 6.Appeal dismissed. (FIRDOSH P. POONIWALLA, J.) (K.R. SHRIRAM, J.)