Purchase and sale of shares are Not “Bogus”: ITAT deletes Penalty u/s 271(1)(c) of Income Tax Act [Read Order]

The Jaipur bench of the Income Tax Appellate Tribunal deleted addition on grounds of purchase and sale of shares not being bogus in nature. The assessee, an individual earns income from profession, income from house property and certain capital gain etc. The assessee had filed his return of income 16.01.2015 by declaring total income at Rs. 2,35,160/-. The case of the assessee was selected for scrutiny through CASS and notice under section 143(2) of Income Tax Act 1961 dated 18.09.2015 was issued. Further, notices under Section 142(1) along with query letter were issued on 24-05-2016 and duly served upon the assessee fixing the date for hearing on02-06-2016. The assessee furnished the requisite details as desired by the Assessing Officer (AO). It was noted from the assessment order that the AO on the basis of the information received from Investigation Wing, formed an opinion that the short term capital loss declared by the assessee on shares of Luminaire Technologies for Rs. 3,41,083/- was bogus and hence a show cause notice was issued to the assessee. An explanation was furnished by the assessee but the AO was not convinced and he disallowed such declared short term capital loss and he has also considered a sum of Rs. 6,821/- being assumed commission paid by the assessee for such accommodation, as unexplained expenditure of the assessee. Aggrieved, the assessee filed an appeal before the CIT(A). However, the CIT(A) upheld the findings of the AO, the assessee appealed before the tribunal. After hearing both the parties, it was verified from the records of the case that as per ledger account of the assessee in the books of the broker namely Hem Securities Ltd. cheques were given by the assessee against purchase of shares of Luminnaire Technologies Ltd. It was also noted that same details along with bank statements were submitted by the assessee before the AO as mentioned in the assessment order and this fact has not been disputed by the AO. The tribunal also noted that the broker had paid a sum of Rs.5,13,940/- to the assessee on18-03-2014 through online bank transfer against sale consideration of shares of Luminnaire Technologies Ltd. Hence, it was undisputed fact that the transaction of purchase and sale of shares of Luminnaire Technologies Ltd. were undertaken through banking channel. It was noted from the assessment order that the assessee had purchased 25000 shares of Luminnaire Technologies and sold the same after a month for which the assessee had to incurred a short term capital loss of Rs.3,41,083/-. The AO based on information about transactions in this company to be bogus determined such claim of Short Term Capital Loss as bogus and thus a show cause notice was issued to the assessee. The AO but he was not convinced with the submissions of the assessee and disallowed such declared short capital loss and he has also considered a sum of Rs.6,821/-. The two-member bench consisting of Rathod Kamlesh Jayantbha (Accountant member) and Dr. S. Seethalakshmi (Judicial member) held that there was no ambiguity in the sale and purchase of shares through the SEBI brokers Hem Securities and all the transactions took place through banking channel and on the transactions of purchase and sale of Shares, STT had been paid having time and date stamp. Hence, taking into consideration of the above facts and circumstances of the case. While allowing the appeal, the tribunal stated that it was consequential ground as the tribunal had not considered the purchase and sale of shares as bogus transactions then there was no question as to making addition by the AO amounting to Rs.6,821/- on account of commission paid by the assessee. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates