Shripal Roopchand Jain Vs ITO (ITAT Mumbai)
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2014-15. The only substantive issue concerned the denial of exemption under Section 10(38) of the Income-tax Act in respect of long-term capital gain arising from the sale of shares of Shree Shaleen Textile Limited and the consequential addition made under Section 68.
The Assessing Officer denied the exemption on the ground that Shree Shaleen Textile Limited lacked strong financials, was not engaged in genuine business activities and functioned as a shell company providing accommodation entries. The Revenue also relied upon statements recorded under oath of alleged entry providers Akash Agarwal and Sawan Jajoo and submitted that action had been initiated against the company by BSE and SEBI.
The assessee contended that the transactions were genuine. It was submitted that the shares had been purchased through account payee cheques, held for a substantial period, and sold through the Bombay Stock Exchange after payment of Securities Transaction Tax (STT). The sale consideration was received through banking channels and the delivery of shares took place through the demat account. It was further submitted that there was no pre-arrangement regarding the sale of shares and that a rise in the market price of the scrip did not by itself establish that the company was a shell company.
