In the ITAT Pune Bench ‘B’
Income-tax Officer
V/s.
Ajay Shantilal Lalwani
IT Appeal No. 163 (Pune) of 2010
[Assessment Year 2006-07]
NOVEMBER 18, 2011
ORDER
I.C. Sudhir, Judicial Member
The Revenue has questioned first appellate order on the following grounds :
“1. On the facts and circumstances of the case, the CIT(A) erred in treating the income by the assessee from undisclosed sources as capital gains.
2. On the facts and in the circumstances of the case the CIT(A) erred by accepting the cost of purchase/acquisition of the shares as stated by assessee, contradicting his own findings in the appellate order that the purchase contract notes are not genuine and that the shares were not purchased by the assessee in financial year 2003-04.
3. On the facts and in the circumstance of the case, the CIT(A) ignored the fact that once the documents/evidences produced by the assessee have been proved to be fabricated, the only logical conclusion that can be drawn is that the whole transaction is a sham transaction and assessee has tried to introduce his undisclosed income in the guise of long-term capital gain.
4. On the facts and in the circumstances of the case, the CIT(A) erred by applying the decision of Hon’ble High Court of Punjab & Haryana delivered in the case of CIT v. Anupam Kapoor [2007] 212 CTR (P&H) 491:[2008] 299 ITR 179 (P&H) when the facts of the cases are distinguishable.”
2. The assessee, on the other hand, has impugned the first appellate order on the following grounds :
“(1) The learned CIT(A) erred in holding that the appellant had failed to prove that the delivery of the shares was taken in financial year 2003-04 and therefore, the gain arising on sale of shares was to be taxed as short-term capital gain by assuming the date on which the shares were transferred to the D-mat account as the date of purchase of shares.
(2) The learned CIT(A) failed to appreciate that the appellant had purchased the shares of Oasis Cine Communication Ltd. on 4th April, 2003 and had also purchased the shares of Shiv Om Investment & Consultancy Ltd. on 24th Nov., 2003 and accordingly, the gain arising on sale of shares was a long-term capital gain exempt under s. 10(38).
(3) The learned CIT(A) erred in holding that the assessee could not satisfactorily explain the genuineness of the contract notes issued by the brokers and therefore, the assessee had failed to prove that the shares were purchased by him in financial year 2003-04.
(4) The learned CIT(A) ought to have appreciated that :
(a) The assessee had purchased the shares of Oasis Cine Communication Ltd. and Shiv Om Investment & Consultancy Ltd. in financial year 2003-04.
(b) The name of the assessee was endorsed on the share certificate of the said companies in financial year 2003-04 only and thus, the assessee’s ownership of these shares was established in financial year 2003-04.
(c) When the assessee had established that the shares were transferred in his name in financial year 2003-04 only, there was no justification for holding that the assessee became the owner of the shares when they were credited to his D-mat account.
(d) The sharebrokers through whom the shares were purchased had also accepted receipt of the amount from the assessee and also the fact that the transaction of purchase of shares was a genuine transaction.
(e) The shares were purchased by the assessee through off-market trade and therefore, there was no such transaction on the Kolkata Stock Exchange.
(f) The assessee had filed the return for asst. yr. 2004-05 on 31st Oct., 2004 and had duly shown the purchase of shares of above-referred companies in the balance sheet filed along with the return.”
3. We have heard and considered the arguments advanced by the parties. In view of the orders of the authorities below, material available on record and the decisions relied upon.
4. The relevant facts are that the AO denied exemption under s. 10(38) of the Act in respect of long-term capital gain mainly on the basis that there was a substantial delay in transferring the shares into D-mat account from the date of purchase, transactions stated to have been mentioned on the contract notes were not routed through the Calcutta Stock Exchange, the assessee was unable to give any satisfactory explanation about the genuineness of the contract notes issued by the sharebroker and acquisition or delivery of shares, and sufficient proof regarding the possession of shares as on the date of purchase was not there. The details of these transactions are being reproduced hereunder :
