Zany Share Trading Pvt. Ltd. vs. Income Tax Officer, Ward-8(3)(4)

Parties Involved

Facts Summary

Assessee filed its return of income for the year under consideration on 02/03/2011 declaring total income of Rs. 657/-. The return was processed u/s 143(1) of the Act. Subsequently, the assessment was reopened u/s. 147 by issuing notice u/s 148 of the Act dated 18/08/2014. Notice was issued based on information received from Investigation Wing of the Department, Vidarbha, Nagpur, that during the course of enquiries in the case of Purti Power and Sugar Ltd., Nagpur (PPSL) on 30/11/2009 it was noticed that 12 companies of Mehta Group, Nagpur, transferred 4.73 Cr. Shares of PPSL to 14 companies. It was further noticed that these transfers did not take place directly but through five layers of companies and that, layers – 2, 3 & 4 had booked huge losses. The investigation wing further observed that at layer-3, other three companies of Mehta Group, Nagpur were involved and it was found that the losses booked by them were set off against the profit on sale of lands/properties in the same year and to a large extent, these included the assessee. Accordingly, notice u/s 148 of the Act was issued to assessee. From the details furnished in response to the notice, it was observed by the Ld.AO that assessee computed short-term capital gain of Rs. 70,84,000/- on sale of shares of Sperm Tracom Pvt Ltd., which was adjusted against the short term capital loss of equal amount on sale of shares of Purti Sugar Karkhana Ltd. Upon analysis of the entire transactions, Ld.AO was of the view that ass…

Legal Issues

• 1. Validity of notice u/s.148 issued in absence of tangible material.
• 2. Whether Ld. CIT(A) erred in confirming the addition u/s.68 of Short term capital loss on shares of Purti Sakhar Karkhana Ltd and Short term Capital gain on shares of Sperm Tracom Pvt Ltd.
• 3. Whether Ld. CIT(A) erred in not considering the vital facts regarding the short-term capital loss in shares of Purti Sakhar Karkhana Ltd.
• 4. Whether Ld. CIT(A) erred in sustaining the addition u/s.68 of short term capital loss and gain and ought to have estimated the income @ 2% on non-genuine short term capital gain/loss.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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