AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 43
X X X X Extracts X X X X
X X X X Extracts X X X X
....tal gain has been claimed on sale of shares of M/s.Tanu Health Care Ltd. and M/s. Comfort Intech Ltd. The Assessing Officer observed that the assessee has purchased the shares for very nominal prices and has sold the same at very high price to claim the long term capital gain. From the various details furnished by the assessee, the Assessing Officer observed that the assessee has acquired the shares in March 2004 and the payment towards the same has been made only after one year, i.e., April 2005. When confronted about this, the assessee stated that he had asked his broker to buy the said stock for him and the payment was made by him later on. The Assessing Officer thoroughly discussed the modus operandi adopted by the assessee and came to the conclusion that the transactions in purchase and sale is a sham transaction and a colourful device to channelize the unaccounted income earned in the course of regular business. The Assessing Officer, therefore, asked the assessee to show cause as to why this capital gain of Rs.93,48,858/- should not be considered as income from other sources. 2.2 In response to the same the assessee filed a letter dated 24-12-2009 (a copy of which is placed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....1 A perusal of assessee's return of income shows that the assessee has disclosed long term capital gain of Rs. 65,97,975/- and has claimed Rs. 27,50,883/- as exempt capital gain. This LTCG has been claimed on shares of M/s Tanu Healthcare Ltd and M/s Comfort Intech Ltd (earlier known as comfort finvest Ltd). The assessee has purchased these shares for very nominal price and has sold at a very high price to claim a LTCG. 6.2 The modus operandi adopted by the assessee is typical of getting accommodation entries of LTCG from purchase and sale of penny stocks unearthed in other cases of Fast Track Finace Ltd and Data finance Ltd. Though the scrip of Tanu Health and Comfort Intech have been found to be listed in BSE but these appear to be dormant shares without any trading in these shares for a long time as seen from List of shares traded at NSE/BSE appearing in The Economic times suggesting that the trading in shares is restricted only for small periods and not distributed throughout the year. When gone through the history and pattern of share holding in respect of these companies, one gets stumbled at the startling fact as to how the pattern of share holding moves in a typical m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iciary) oil purchases/sales of some known shares and then against such accumulated profits, he debits the cost of penny stock shares as if the shares are purchased in back date in off market at a very nominal rate which is met by the profits already generated by the broker in client's account. Thereafter, the broker immediately transfers the penny stocks for Demoting and after a series of manipulative transactions the prices of these shares are increased by internal trading in the cartel and then these shares are sold at high prices through same or different broker of the cartel and the sale consideration is paid through cheque/DD in lieu of the cash taken which is equivalent to the sale price plus the amount of commission charged for giving the accommodation entries. The time of purchase of shares is back dated in the manner so as to ensure that they are held for more than 12 months to claim the profits as LTCG. Since the actual transactions are done only when the beneficiary approaches these brokers for the accommodation entry, practically the shares are held only from the date of Demoting them till date of sale but by showing the purchase in off market in back date, they are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the dealings in shares of M/s. Tanu Healthcare Ltd. As such to buy the mental peace and to concentrate on my business affairs uninterruptedly I submit to your suggestions. 6.6 In light of the above discussion and the assessee's own acceptance, the income of Rs.93,48,858/- claimed as capital gain by the assessee is treated as income from other source. Since the assessee has concealed particulars of this income, separate penalty proceedings u/s 271(1)(c) of the I.T. Act, are being initiated. 5. The AO, in view of the acceptance of the exact nature of the transaction by the appellant, finalized the assessment without making further investigation. The appellant, instead of honouring his statement given vide letter dt.24/12/2009 filed appeal against the order of the AO objecting to his action in treating long term capital gain as income from other sources, even though, this treatment was done in pursuance of his statement given vide letter dt.24/12/2009. In his appeal, the appellant has stated that the AO assumed that he agreed to get his capital gain assessed as income from other sources. He further stated that the assessment order should be cancelled as it does not have legs to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e retracted only if it was made involuntarily i.e. obtained under coercion, threat, duress, undue influence etc. The relevant portion of the judgment is reproduced below :- "8. However, there are exceptions to such admission where the assessee can retract from such admission. The first exception exists where such statement is made involuntarily i.e. obtained under coercion, threat, duress, undue influence etc. But the burden lies on the person making such allegations to prove that statement was obtained by the aforesaid means. The second exception is where the statement has been given under some mistaken belief either of fact or law. It is well settled that there cannot be estoppel against the law. If a person is not liable to tax in respect of any receipt, he cannot be made liable to pay tax merely because he has agreed to pay the tax in the statement under s. 132. He can always retract in such situation. For example, the assessee might have sold his agricultural land and not declared its sale proceeds in his income-tax return. If such agricultural land does not fall within the ambit of the words "capital asset" then no tax is payable. If the assessee had offered to pay tax on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on made by the Assessing Officer treating the long term capital gain as income from other sources merely on the basis of the letter filed by the appellant surrendering the long term capital gain arose on sale of shares of M/s Tanu Health Care Ltd., which letter was given under constant pressure from the Assessing Officer as specifically so mentioned in the said letter itself and without examining and considering the factual evidences and submission proving the genuineness of long term capital gain. 2. On the facts and in the circumstances of the case both the learned CIT(A) and Assessing Officer have erroneously relied on some of the objectionable transactions of sale of shares of some other companies considered as dealing in penny stock and having absolutely no relevance direct or indirect to the genuine transactions of sale of shares by the appellant. 3. On the facts and in the circumstances of the case the lower authorities have erred in making this addition based on notional and imaginary situation and totally unsubstantiated. 4. The above grounds of appeal may kindly be allowed to be amended, altered modified etc., in the interest of natural justice." 4. The Ld. Counsel fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in an involuntary manner by use of intimidation or threats or some other form of pressure or force, and describes a set of various different similar types of forceful actions that violate the free will of an individual to induce a desired response. These actions can include, but are not limited to, extortion, blackmail, torture, and threats to induce favors. In law, coercion is codified as a duress crime. Such actions are used as leverage, to force the victim to act in a way contrary to their own interests. Coercion may involve the actual infliction of physical pain/injury or psychological harm in order to enhance the credibility of a threat. The threat of further harm may lead to the cooperation or obedience of the person being coerced." 5.2 He submitted that coercion may be either physical or psychological. However, in the instant case, the assessee never appeared before the Assessing Officer, therefore, the question of physical or psychological coercion does not arise at all. He submitted that the assessee in the instant case does not know the broker who purchased the shares for him. It is quite unbelievable that the broker at the instance of the friend of the assessee purchase....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e evidence. Referring to the decision of the Hon'ble Madras High Court in the case of CIT Vs. K. Bhuvanendran reported in 303 ITR 235 he submitted that when there was no evidence or material found during the course of search operation and the statement recorded from the assessee was subsequently retracted and rebutted and when the sale deed disclosed the sale consideration, it is for the revenue to show that what was disclosed in the sale deed is not the correct sale consideration. The statement could not be the basis for making any addition. He accordingly submitted that even though the assessee has surrendered the amount due to coercion by the Department the same cannot be the basis for an addition in absence of any contrary material at the possession of the Revenue. 6. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the assessee declared long term capital gain of Rs.93,48,858/- on account of sale of shares of M/s. Tanu Health Care Ltd. and Comfort Intech Ltd. and c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t appears the transaction appears to be a colourable transaction wherein the payment for acquiring shares was made after a lapse of more than one year from the date on which the shares were actually acquired by you. Do you have to offer your comment about this? Ans : As stated earlier, I have entered into this transaction with a genuine belief to earn some profit. Accordingly, I have made cheque payment for this investment and have recd. back some handsome returns through cheques only. As stated earlier, this was done as per advice of my friend Shri Anan Jaju from Pune who hold expertise in share market investment. To the best of my knowledge, the entire transaction is genuine and accounted for." 6.4 From the submission of the Ld. Counsel for the assessee we find the assessee is not known to the broker and made the transaction of purchase of shares on the advice of his friend and the cost of purchase of shares was not given to the broker. Only a few days before the sale of shares the payment has been made and the assessee after selling the shares got huge amount of profit. It is strange to believe that a person not known to the assessee will invest in the purchase of shares on be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t from various race clubs on the basis of winning tickets presented by her. What is disputed is that were they really the winnings of the appellant from the races. This raises the question whether the apparent can be considered as the real. As laid down by this court the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (See : CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), at pages 545, 547)." 6.6 We find the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More reported in 82 ITR 540 has held as under : "though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self serving recitals in document, it was for that party to establish the truth of those recitals. The taxing authorities are entitled to look into the surrounding circumstances to find out the reality of such recitals." 6.7 We furt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld as a matter of law that the remedy of appeal under the Act could not be availed of by the assessee without having filed a rectification application before the Income tax Officer in a case where the order of the Income tax Officer showed that the assessee had agreed to the addition to the income. There was no provision in the Act wherein the remedy of appeal against the order of the Income tax Officer or of the Appellate Assistant Commissioner was barred if the impugned order mentioned that the order had been passed on the agreement of the assessee. the provisions of the Act entitled an assessee to file an appeal against the order of the Income tax Officer before the Appellate Assistant Commissioner where the assessee denied his liability to be assessed under the Act. It was a different matter if the Appellate Assistant Commissioner came to the conclusion that the order was passed on the admission of the assessee and the assessee was unable to explain that the admission was wrongly recorded under some mistaken belief of fact and law. In that case, the Appellate Assistant Commissioner could dismiss the appeal on merits but it could not be held as matter of law that no appeal was ....