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2016 (10) TMI 316
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....y the order passed by the learned Commissioner of Income-tax (Appeals) the Appellant prefers the Appeal on the following amongst other grounds which are without prejudice to one another; 1. On the facts and circumstances of the case and in law, Hon. Commissioner of Income-tax(Appeals) has erred in confirming the re-opening the assessment based on the information from Addl. CIT(Inv), which was relevant to AY-2007-08 and not for the AY-2006- 07. 2. On the facts and circumstances of the case and in law, Hon. Commissioner of Income-tax (Appeals) has erred in confirming the computation of Appellant's Taxable Income at Rs. 5,59,360/- as against Appellant's returned income of Rs. 66,610/-. 3. On the facts and circumstances of the case and in law, Hon. Commissioner of Income-tax (Appeals) has erred in treating the amount realized from the sale of shares of a listed company as unexplained cash credit. 4. On the facts and circumstances of the case and in law, Hon. Commissioner of Income-tax (Appeals) has erred in not appreciating the fact that the shares of a listed company have been sold through a recognized stock exchange and the transaction has ....
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....the AO u/s 143(3) r.w.s. 147 of the Act for the assessment year 2005-06 is reproduced below:- "BOGUS PURCHASE OF SHARES: As mentioned earlier, in this case specific information was received from Addl.DIT (Inv.), Unit-V, Mumbai that assessee is indulged in bogus/non-genuine long term capital gain from the transactions of alleged purchase and sale of shares of M/s Shiv Om Investments. Further, in the said information it was also mentioned that assessee has purchased 4000 shares of M/s Shiv Om Investments on 11.05.2004 for a consideration of Rs. 4,080/- and out of the same, 1000 shares were sold on 16.05.2006 and 2500 shares were sold on 27.1.2006 for a total consideration of Rs. 6,89,750/-. From this, it is quite apparent that assessee has purchased the alleged share for Rs. 4 per share in May'2004 and sold the same for Rs. 197 per share in January'2006 (i.e. 2500 shares were sold on 27.01.2006 for Rs. 197/- per share) which means that the value of the scrip has gone to 49 times of its purchase within a short period time which is quite unusual and unbelievable. 5.1 In view of the above specific and concrete information received, vide this office notice u/s 1....
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....No., Trade No. & Trade Time were left blank. 5.7 Further, before proceeding into the case, one has to look into the general modus operandi adopted by the assessees who indulge in converting their unaccounted "cash to accounted form through the route of capital gains. With the exemption/ reduction in tax on capital gains on shares, there is rampant practice of routing the unaccounted cash in the form of long term capital gains and claiming the same as exempt / concessional tax rate. The general modus operandi adopted by such type of assesses is as under: (i) With the collusion of broker, shares are purchased of an unknown company with dubious background for miniscule consideration. For this purpose, the broker issues a fake brokerage note. (ii) The counter party is/are usually not traceable and related to the broker and the broker undertakes off-market transactions to accommodate the assessee. (iii) After a year, the shares are sold back by the assessee, in the meantime, the shares prices are rigged by the concerned broker to an abnormally high level. (iv) The shares are now sold by the assessee and sale consideration is received. The sal....
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....e not routed through stock exchange and such transactions are off market transactions. SEBI had vide Circular No. SMDRP/Policy/CIT-21/99, dated 14th September'1999 banned all negotiated deals including cross deals and all such deals are required to be executed only on the screens of exchanges in the price and order matching mechanism of the exchange just like any other normal trade. Thus from the above, it can be seen that such transactions are illegal, and are not in conformity with regulatory guidelines. C) PAYMENT FOR PURCHASE MADE IN CASH: The purchase payments were made in cash and not through the normal banking channel therefore the same were non-verifiable from the authentic supporting details such as bank accounts/documents. On one side, assessee is claiming that money is received through banking channel and so transaction is genuine, but what the assessee is not considering that, the starting point, i.e. payments for shares purchased is made through cash and any other mode which is not banking channel, even though assessee was having bank account why the purchases were not made by making payment through bank. Hence when the starting point itself is no....
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....ited were fabricated transaction as held in the assessee's own case for assessment year 2005-06. The A.O. observed that the payments for shares purchased were made through cash and not through banking channel. Thus, the A.O. came to the conclusion that the assessee's claim of receipt of Rs. 4,92,750/- on alleged sale of shares purchased from M/s Shiv Om Investment and Consultancy Limited was not genuine and a fabricated transaction through which the unaccounted money has been converted into accounted money and the same has been treated as unexplained cash credits and brought to tax, vide assessment order dated 29.12.2009 passed u/s 143(3) read with Section 147 of the Act. 5.Aggrieved by the assessment order dated 29.12.2009 passed u/s 143(3) read with Section 147 of the Act passed by the A.O., the assesse filed its first appeal before the learned CIT(A). 6. Before the learned CIT(A), the assessee submitted its submission which are reproduced as under:- "(i) We are enclosing the copies or the contract notes of purchase and sale of shares and the copy or ledger or Badri Prasad & sons (share broker through whom the shares were purchased), The copies of the computation o....
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....pany is even today listed and as on 11-01-2009 its rate was Rs. 197.34 in the Calcutta Stock Exchange. xi) The Assessing Officer has failed to appreciate the fact that the shares have been sold through a recognized stock exchange and the transaction has been charged to security transaction tax and is thus eligible for exemption u/s 10(38)." The ld. CIT (A) after considering the submissions, rejected the contention of the assessee after discussing the assessment order for the assessment year 2005-06 passed u/s 143(3) r.w.s. 147 of the Act. He has also relied on the following case laws to support his finding: 1. Mc Dowell and Company Limited v. CTO (1985) 154 ITR 148(SC) 2. Phoolchand Bajrang Lal v. ITO (1992) 203 ITR 456 (SC) 3. Consolidated Photo and Finvest Ltd. v. ACIT (Delhi HC) (2006) 151 Taxmann 41 (Delhi) 4. Indo Aden Salt Mfg. & Trading Co. Pvt. Ltd. V. CIT, 159 ITR 624 (SC) 5. Ram Prasad v. ITO (1995) 82 Taxman 199 (All) 6. Consolidated Photo & Finvest Ltd. ACIT (2006) 151 Taxmann 41 (Delhi) 7. Keventer (P.) Ltd. v. DCIT (2004) 89 ITD 347 (Kol.) Appeal Nos. 344 and 345 (Cal.) of 2001. 8. Bri....
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....ases of shares made from Shiv Om Investment and Consultancy Limited as bogus. He submitted that the company is active and the details from the Registrar of Companies , ROC Kolkatta has been filed and placed at paper book page 24 to show that M/s Shiv Om investment and Consultancy Ltd. is an existing company and an active company. The ld. Counsel submitted that the shares were traded through stock exchange. The list of directors are also placed on record. The ld. Counsel drew our attention to paper book page No. 16 to show that the share were purchased from Badri Prasad & Sons by the assessee and similarly the details of which are placed at paper book page 16 to 19 and contended that these are off market purchases form registered brokers. Similarly, it was submitted that the sale has been made in the month of January, 2006 and the amount has been received on 6th February, 2006 in the bank account of the assessee. The said bank account details were placed at paper book page 37 of paper book . The ld counsel submitted that in the case of his brother Mr. Nagesh M Pujari , the learned CIT(A) has dismissed the appeal of the assessee confirming the action of the AO in assessing the said g....
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....ncy Limited which was penny stock company and pre-dated contract notes were issued by the Brokers to manipulate and introduce long term capital gains in favour of the assessee which are exempt from tax u/s 10(38) of the Act leading to escapement of income from taxation , which led to issue of notice dated 07-04- 2008 u/s 148 of the Act which is within four years from the end of the relevant assessment year , the receipt of afore-stated information from Addl. CIT(Inv) in our considered view is fresh and tangible material which has live link and nexus with the formation of belief that the income of the assessee has escaped assessment , and keeping in view that the original assessment was not framed u/s 143(3) of the Act and no opinion was ever formed by the AO and hence there is no change of opinion keeping in view the ratio of decision of Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 291 ITR 500(SC), we uphold the re-opening of the assessment u/s 147/148 of the Act. We have observed that the assessee has made purchases of 4000 shares of M/s Shiv Om Investment and Consultancy Limited for Rs. 4,080/- on 11th May, 2004 in the previous ....
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....re manipulated by the assessee in collusion with the brokers in order to earn tax free exempt long term capital gains on sales of shares u/s 10(38) of the Act whereby unaccounted cash of the assessee has been introduced in disguise in lieu of sale proceeds of shares. Keeping in view facts and circumstances of the case and as per our discussions and reasoning as set out above, we find no infirmity in the orders of the learned CIT(A) which we uphold and sustain. The assessee relied upon the decision of the ITAT , Hyderabad in the case of ITO v. Smt Aarti Mittal (2014) 41 taxmann.com 118(Hyd.-Trib) whereby the Tribunal has arrived at the decision that sale and purchase was genuine even though purchase was off-market transaction which was routed not through stock exchange but backed by physical delivery of shares which was later de-mated and under the circumstances the ITAT held the transactions as genuine in nature and the assessee claim was found to be in order , but in the instant case there is a conclusive and final finding of fact that purchases of shares were bogus and sham as was held by the Revenue in the assessment year 2005-06 which has not been dislodged so far as the assess....