Waseem Ahmed ORDER
Waseem Ahmed, Member (A)
1. The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-5, Ahmedabad dated 04/09/2020 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-2013.
2. The issue raised by the Revenue is that the ld. CIT-A erred in deleting the addition of Rs. 19,310/- on account of bogus transaction in the scrip of M/s. Aarya Global Share & Securities Ltd.
3. The facts in brief are that the assessee is an individual and deriving income from business/profession and from investment in shares and from other sources. The assessee for the year under consideration declared taxable income of Rs. 11,25,300/- only and also claimed carry forward of loss of Rs. 43,54,574/- from the activity of sale and purchase of shares & securities.
3.1. The AO received information from the DDIT(Inv.), unit-6(2) Mumbai that the assessee entered into the trading in penny stock namely the scrip of M/s. Arya Global Shares & Securities Ltd. (formerly known as Kuvam International Fashion Ltd.) and Vax Housing Finance Corp. Ltd. Thus, income escapement proceedings under section 147 of the Act were initiated by the AO.
3.2. The assessee during the re-assessment proceedings submitted that he has entered into the transaction of purchase and sale of scrip of M/s. Arya Global Shares & Securities Ltd. through stock exchange and in the process earned net profit of Rs. 19,310/- only. All the transaction of purchase and sale are duly supported by the bill on which STT has been paid. The profit earned for Rs. 19,310/- was also not claimed as exempted under section 10(32) of the Act.
3.3. The assessee with regard to transaction carried in the scrip of Vax Housing Finance Corp. Ltd. submitted that he incurred loss of Rs. 43,54,574/- only. The assessee claimed that such loss is genuine loss incurred in the ordinary course of business of trading in the scrip of Vax Housing Finance Corp. Ltd. The assessee in support following documentary evidences:
i) Chart of purchases and sales of shares.
ii) Bills of purchases and sales of shares.
iii) Copy of Demat account of JM financial showing opening balance of 340084 shares of Vax Housing.
iv) Payment was done through banking channel.
v) All the bills contain STT and all govt. taxes are duly paid on purchases and sales.
4. However, the AO disagreed with the contention of the assessee and held that the DDIT in the investigation, found that the impugned scrip of M/s. Arya Global Shares & Securities Ltd. and Vax Housing Finance Corporation Ltd. are penny stocks and managed by the entry operators. The impugned scrip was utilised for providing accommodation entry to several beneficiaries. Therefore, the AO was of the view that income of Rs. 19,310/- made on the sale of scrip of M/s. Arya Global Shares & Securities Ltd. was not genuine. Hence, the AO added the same to the total income of the assessee.
4.1. Likewise, according to AO, the loss incurred by the assessee on the scrip of Vax Housing Finance Corporation Ltd. is also not genuine for the reason that such scrip found to be penny stock utilised for accommodation entry. Thus the AO disallowed the carry forward of the loss of Rs. 43,54,574/- only.
5. On appeal by the assessee the learned CIT-A deleted the disallowances made by the AO by observing as under:
As regards ground no. 2 it is relating to the disallowance of carried forward loss of Rs. 43,54,547/- in the script of Vax Housing Corporation Ltd. I find that AO has disallowed the carried forward loss stating that this was a penny stock. The appellant has filed documents before A.O. vide letter dtd. 05/12/2019 as under
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