TaxTMI 
TaxTMI 
2009 (9) TMI 972
X X X X Extracts X X X X
X X X X Extracts X X X X
....view of correspondence made with Addl. Director of IT (Inv.), Kolkata and subsequent information rendered by the Addl. Director of IT (Inv.), Kolkata in respect of so-called tainted broker, M/s Prakash Nahata & Co. (2) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating the fact that the assessee earned capital gain by transacting in single scrip of M/s Prime Capital Market Ltd. (3) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the issue that the assessee has taken interest-free loan of Rs. 30,00,000 from M/s Prime Capital Market Ltd. with whom assessee has no business dealings and the same is outstanding as on 30th March, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of computation of long-term capital gains i.e., details of shares purchased and sold with date of purchase and sale, copies of contract notes and copy of demat account. The assessee furnished the details vide letter dt. 24th Aug., 2006. Considering the details filed, AO observed that assessee has purchased 25,000 shares of Prime Capital Market Ltd. on 2nd July, 2001 for Rs. 55,000 and had sold these 25,000 shares on 20th Feb., 2003 for Rs. 28,22,500 and had offered net capital gains of Rs. 27,67,000 for tax in the year under consideration. On going through the details of the capital gains, AO observed that the cost price of the 25,000 shares was a meager Rs. 55,000 i.e., Rs. 2.20 per share and the sale price was a phenomenally large amount....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was no compliance and nor was there any compliance from Prime Capital Market Ltd. It was also mentioned that the scrips of Prime Capital Market Ltd. were heavily used for giving bogus long-term capital gains entries to many people residing all over the country and M/s Prakash Nahata & Co. is a highly tainted concern who had given this kind of entry to many people earlier and still they are doing so. It was also mentioned that the case of longterm capital gains entries in penny stock by Ajay Nawandar (assessee herein) is the case of unaccounted cash being channelised as long-term capital gains through hawala operation from Kolkotta route by paying commission varying between 3 per cent to 5 per cent. On receipt of the said reply, AO issued a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction seal of stock exchange would not have been of the year 2001. He also observed that the payment is made by the assessee in the year 2001 out of profit received on sale of shares of Ranbaxy which had been offered as the income of the relevant year and out of the purchase of 50,000 shares, the assessee sold 25,000 shares in the period relevant to asst. yr. 2003-04 and balance 25,000 shares in the relevant asst. yr. 2004-05 and the Department has accepted the sale of shares as genuine transactions during the period relevant to asst. yr. 2003-04. He observed that there is no change in the circumstances in asst. yr. 2004-05 and asst. yr. 200304 and there is no material with the Department in Calcutta or with the AO in Mumbai to show that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egards the AO's observation that there is exorbitant rise in the sale price of the shares which created a doubt about the genuineness of the transaction, the assessee has placed reliance upon the decision of the Agra Bench of the Tribunal in the case of Smt. Memo Devi vs. Asstt. CIT (2008) 7 DTR (Agra)(Trib) 158, wherein it has been held that increase in share price by more than 25 times cannot be the basis to assume that the transaction was bogus as abnormal increase in the share price is a normal phenomena. The learned counsel for the assessee placed reliance upon the decision of the Jodhpur Bench in the case of ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265, wherein it has been held that for making an addition under s. 69, the Department....