AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 132
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.... as 'the said shares') are nothing but penny stock and that the assessee has back dated the purchase of the said shares in transactions to generate artificial gain. He required the assessee to substantiate her claim of exemption on the capital gain arising on the sale of the said shares. After considering the details, documents and submissions filed by the assessee in support of the claim of exemption from LTCG on sale of the said shares and discussion of available data on penny stocks, modus operandi generally adopted by interested persons to avail the arranged exemption of LTCG/STCG/ speculation profit/loss, stock price movement of the said company and on the basis of the statement recorded from one Shri Niraj Sanghvi, the AO concluded that the LTCG shown by the assessee on sale of the said shares of Shukun Constructions Ltd. is not a genuine transaction but a fabricated one. In that view of the matter, the AO, while concluding the assessment, treated the entire sale proceeds of the said shares amounting to Rs. 95,12,812/- as unexplained cash credit under section 68 of the Act and brought the same to tax in the assessee's hand. The assessment was accordingly completed under secti....
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....id capital gain income of Rs. 31,96,507/-as short-term capital gain income u/s.111A on evidential strength of dematerialization of the said sold shares in the name of appellant assessee almost before 3 months prior to its sale, which has been confirmed by the respective share broker as well as Stock Exchange in cross verification carried out and no irregularity or any allegation for the same has been found or made. 4- That the all the appeal grounds raised hereinabove are independent grounds and without prejudice to each other." 3.2.1 On a perusal of the grounds raised (supra), it is seen that all of these are interlinked and pertain to the addition of Rs. 32,94,827/- of unexplained cash credit under section 68 of the Act. At the outset, the learned A.R. for the assessee submitted that all the grounds raised challenge the addition made and upheld under section 68 of the Act and also with regard to the assessee's claim for exemption under section 10(38) of the Act in respect of the LTCG arising on sale of the said shares of M/s. Shukun Constructions Ltd. The learned A.R. for the assessee vehemently argued that the order of the assessment has been made by the AO only on presump....
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....learned A.R. for the assessee submitted that enquiry by the AO revealed that the sale transaction of the said shares is at the prevailing market rate as confirmed by the BSE on which it was listed and traded. It was also submitted that the transaction of sale of the said shares was confirmed by the concerned stock broker, M/s. Khambatta Securities Ltd. registered with SEBI and BSE and the sale proceeds were remitted by them to the assessee through banking channels after receiving it from the exchange. The learned A.R. for the assessee assailed the assumption of the AO about the modus operandi generally adopted by interested persons through tainted stock brokers for arranged back dated purchase of penny stocks/shares, late filing of return, etc. is contrary to all the facts of the case and the evidence brought on record and filed by the assessee to establish that in the case on hand, the assessee had filed her return of income for A.Y. 2004-05 (i.e. the year in which the said shares were purchased) within the extended date as per the provisions of section 139(1) of the Act. It is submitted that the purchases of the said shares has been shown by the assessee in her balance sheet as o....
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....e of (i) Jatin Chhadwa (ITA No. 8573/Mum/2010 dated 24.08.2012) and (ii) Harkhchand K. Gada HUF (ITA Nos. 1772, 1773, 1775, 1778 & 1779/Mum/2010 and others dated 08.08.2012. 3.3 Per contra, the learned D.R. for Revenue placed strong reliance on the orders of the authorities below. The learned D.R. submitted that the addition under section 68 of the Act made by the AO was after detailed analysis of the facts of the case and the learned CIT(A) has correctly confirmed the same. It was prayed that the impugned order of the learned CIT(A) be upheld. 3.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record, including the judicial pronouncements cited. From a perusal of the Paper Book (pages i to viii and pages 1 to 42) containing copies of written submissions, copies of documents placed before the authorities below, we find that documents pertaining to the purchase and sale of shares of M/s Shukun Constructions Ltd. such as contract notes of brokers, copies of physical share certificates, transfer of physical shares to the name of the assessee and consolidation by the company, the D-MAT account statement of the assess....
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....ted and an arranged transaction, and not because there was any irregularity in the sale of the said shares. We find from the material on record that the purchases of the said shares were duly disclosed under the head investment in the audited Balance Sheet as on 31.03.2004 relevant to A.Y. 2004-05. In this context we concur with the averments of the learned A.R. for the assessee that if there was any adverse material in respect of the purchases of the 'said shares', the AO ought to have or would have proceeded to initiate proceedings for reopening the assessment for A.Y. 2004-05 while concluding the assessment for A.Y. 2005-06, the year under consideration, on 31.12.2007 or thereafter till 31.03.2011, which he has not done. 3.4.4 We also find that the decision of the ITAT, Chandigarh Bench, in the case of Somnath Mani (100 TTJ 917) relied on by the AO is factually different and not applicable to the facts of the assessee's case. In that case, the facts were that the sale proceeds of the shares sold were not reported on the transaction date at the concerned Stock Exchange. Further, the said shares continued to appear in the name of that assessee for quite a long period after the ....
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....financial statements and relevant returns of income and it was held by the Bench that in these circumstances, the sale of shares could not be held to be non-genuine. 3.4.7 From the appreciation of the facts of the case, the material evidence placed on record by the assessee and in the light of the discussion of the factual and legal matrix of the case as discussed from para 3.1 to 3.4.6 of this order (supra), we are of the considered opinion that the authorities below, i.e. AO/CIT(A) have made the addition under section 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks; disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sales of the 'said shares' of M/s. Shukun Constructions Ltd., copies of the physical share certificates and her D-MAT account statement establishing the holding of the shares in her name prior to the sale thereof; confirmation of the transactions of buying and selling of the 'said shares' by the respective stock brokers, receipt of sale proceeds through banking channels, etc. We are also of the view that the ratio and the factual matrix of ....