Facts of the case:
- The assessee has filed Return of Income for the AY 2014-15 on 31.07.2014 declaring total income of Rs. 16,01,720.
- The income declared also included income from investing in shares.
- The assessee claimed exempt income u/s 10 (38) of the Act in respect of long term capital gain (STT paid) derived from sale of listed company’s shares are as follows:
(a) M/s Turbo Tech Engineering Ltd. Rs. 20,55,146 and
(b) M/s M/s Esteem Bio Organic Food Processing Ltd. Rs. 23,00, 616.
- During the assessment, assessee had submitted all the relevant evidences for purchase of shares made in cash along with sale contract notes, bank statements and Demat statements.
Issue involved: The Assessing Officer raised an objection regarding the cash purchase of shares and that shares were dematerialized a few days back only from the date of sale.
Provisions and Interpretation of the Law:
- Tribunal observed that “there is no law which prohibits the purchase of shares in cash” and no adverse conclusion could be drawn only because the shares were purchased in cash.”
- The assessee had also filed copies of bills of purchase, copy of share certificates and transfer forms etc. which specifically prove the purchase and sale of shares made by assessee genuinely.
- In context of the Demat of shares, “it is the choice of the buyer of shares to keep the shares either in Demat form or in paper form. Merely because the shares were dematted later, no adverse conclusion could be drawn”.
- Besides all, the report of the SEBI was not adverse in nature against the assessee because the name of the assessee did not appear therein for conducting the doubtful transaction.
Hence, there is no doubt on the transactions occurred by the assessee regarding sale and purchase of shares and Long term capital gain.
Conclusion: The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the law does not prohibit to purchase Shares in cash.