At the time of falling market price a person can take the benefit and can adjust his Loss and sec 42 of SEBI Regulation 1996 is only applicable on broker operating in the stock

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Above issue arises as Assessing Officer considered the sale of shares by the assessee to the firm in which he is a Partner as a non genuine transaction. Consequently he re-worked out the P&L account as stated in page 8 of the assessment order and determined the loss from the business at a lesser figure of Rs.52,56,153/- as against Rs.1,95,98,779/- incurred by the assessee in the business of purchase and sale of shares and securities. The reasons for Assessing Officer’s action in disallowing the amount is that (a) the shares were not transferred out of the Demat account (b) The assessee has not obtained the real price of Rs.55/- as per the book value as against Rs.26/- stated to be the market price (c) That when the assessee decided to sell the shares he was aware that there is a fall in the market price and in his capacity as Managing Director of the company, he sold shares to the partnership firm. That decision is not prudent decision and (d) the partnership firm is a related entity so the off market transactions cannot be accepted as genuine transactions. The CIT (A) however, after considering the assessee’s submissions disapproved the action of the Assessing Officer and directed the Assessing Officer to allow the loss as claimed. The only remaining argument of Assessing Officer is the technical requirement mentioned by him that a separate and independent Demat account of the partnership firm should have been opened. Assessing Officer has relied upon Para No.42 of SEBI (Depositories and Participants) Regulations requiring separate Demat account to be opened by every participant in the name of each of the beneficial owners and prohibiting mixing up ofsecurities owned by various beneficial owners. In the same flow or arguments, Assessing Officer has put the onus of opening separate Demat account upon the assessee when he observes as under: “---- ---- Section 42 of the SEBI (Depository and Participants) Regulations, 1996 leaves it for the assessee no other option other than to have a separate Demat account separately for the purpose of having the holdings of the partnership firm”.

Citation :
Asstt. Commissioner of Income Tax-1(3) Room No.540/564 5th Floor Aayakar Bhavan MK Road, Mumbai Appellant Vs Chetan Durgadas Mehra 20, Moti Mahal, Dinshaw Wachha Road,Churchgate Mumbai 400 020 PAN No. AABPM 4010 H Respondent