TaxTMI 
TaxTMI 
2018 (4) TMI 701
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....come of '7,63,350/-. Assessee had admitted long term capital gains of '9,40,273/- on sale of shares of one M/s.Kailash Auto Finance Ltd., but claimed it as exempt u/s.10(38) of the Act. ld. Assessing Officer relying on certain information received from the Investigation Wing of the Department was prima facie of an opinion that the said M/s.Kailash Auto Finance Ltd., was a Penny Stock Company, and required the assessee to explain why the exemption claimed by it u/s.10(38) of the Act, should not be disallowed, and considered as undisclosed income. Reply of assessee was that he had acquired one lakh number of equity shares of one M/s.Panchshul Marketing Ltd.,(in short 'M/s.PML' ) on 17.10.2012 for which payment was made by cheque drawn on Andhara Bank, Sowcarpet branch, Chennai. As per the assessee, such equity shares were dematerialized (in short dematted) on 03.11.2012. Contention of the assessee was that M/s.PML subsequently merged with M/s.Kailash Auto Finance Ltd., through a scheme of amalgamation sanctioned by Hon'ble Allahabad High Court vide its order dated 09.05.2013. As per the assessee, equity shares of M/s.Kailash Auto Finance Ltd., was received in lieu of the shares held ....
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....skriti Vincom Pvt Ltd. Further, as per ld. Assessing Officer M/s.Kailash Auto Finance Ltd., in which PML got merged was not having any office nor did it have any officials to man its business in its given address. According to the ld. Assessing Officer, the management and control of M/s.Kailash Auto Finance Ltd., was later acquired by one M/s.Careful Projects Advisory Ltd. ( hereinafter referred to as 'CPAL') and M/s.PML through a share Purchase Agreement dated 02.05.2012. Thereafter, as per the ld. Assessing Officer, there was a reduction in the share capital of M/s.Kailash Auto Finance Ltd., and a merger of CPAL & PMC with M/s.Kailash Auto Finance Ltd. On such merger of CPAL & PMC with M/s.Kailash Auto Finance Ltd., holder of each equity share of Rs. 1/- in CPAL and M/s.PMC received one equity share of '1/- of M/s.Kailash Auto Finance Ltd. As per the ld. A.O, acquisition of shares of M/s.Kailash Auto Finance Ltd., by M/s.PMC & M/s.CPAL through the share purchase agreement was at a huge premium. Coupled with this, as per the ld. Assessing Officer, there was considerable reduction in the share capital of M/s.Kailash Auto Finance Ltd., which resulted in an unjustified increase in th....
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....the promoter group of Kailash Auto from Padma Impex Pvt Ltd. to PML and CPAL., within a short span of time the price of the scrip increased significantly which continued till July 22, 2013 when new category share (after amalgamation) of Kailash Auto was listed and permitted for trading on SSE. (w) The above findings indicate that CPAL and PML were incorporated with a dubious plan and premeditated arrangement and artifice to Increase number of shares therein through sham and non- genuine transactions with regard to issuance of their shares which resulted in fetching exorbitant and unrealistic consideration in the scheme of amalgamation. 7.3 In order to analyse the price volume pattern, the trading in the scrip of Kailash Auto was analysed in the aforesaid three patches with a focus on the following: (a). trading frequency, (b). trading volume generated; (C). contribution to price rise 7.4 During the analysis it was 'noticed that certain entities related/connected to Kailash Auto were found to be the net buyers to the beneficiaries and thereby created artificial demand for the supply of shares from beneficiaries From the Know Your....
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....ishesh Plastics Pvt Ltd. 2. M/s UP & UP Traders Pvt Ltd. 3. M/s SNR Trading Co. Pvt Ltd. 4. M/s Key Dealers Pvt Ltd. 5. M/s Gopalka Savings & Investment Pvt Ltd. 6. M/s Rima lmpexPvt Ltd. 7. Balasaria Holdings Pvt Ltd. 8. Kailash Auto Finance Ltd. Sir, I will submit the details of rest of the companies within 7 days. Q. 10. Please furnish names of other Directors being appointed by you for various paper companies. Ans. Sir. Ashok Kumar Singh (DIN 01078674). GanguliYadav (DIN 06696943). Basarit Agarwal (DIN 03559991). Manisha Dokania (01077857) and Mr.Sumit Kumar Dokania (DIN 00725225) are dummy directors. They use to sign cheques/papers on my instructions. Q.11. Please furnish the details of addresses being used by you for various paper companies controlled and managed by you. Ans. Sir. I use the following addresses: 1. 16, G. C. Avenue. Kolkata. 2. 7/1 A. Grant Lane. 2/ui floor. Room No. 205. Kolkata-700012. 3. 13 No.. Mall Road. Dum Dum. Kolkata-700080. Q. 12. As you stated above, you are engaged in providing accommodation entry in form o....
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....s LTCG in scripts of Kailash Auto Finance. Ans. Sir. In this scrips of Kailash Auto Finance we have followed amalgamation method. Initially beneficiaries were allotted shares of Panchshul Marketing Pvt Ltd and Careful Projects Advisory Ltd. on high premium. Later, on these two companies got amalgamated vide Hihh court order into Kailash Auto Finance Ltd., By the virtue of amalgamation shareholders of Panchshul Marketing Pvt Ltd and Careful Projects Advisory Limited got shares of Kailash auto Finace. Valuation of shares are so arranged that beneficiaries of LTCG get higher number of shares of Kailash Auto Finance in place of Panchshul Marketing Pvt Ltd and Careful Projects Advisory Limited. After holding the shares of Kailash Auto for one years, we direct our clients to sell the shares of KALFIN on abnormally higher rate. At this stage we get equal amount of cash from the beneficiaries and get it deposited to various undisclosed proprietorship concerns and get it layered through various accounts and finally transfer it to bogus/shell companies who purchases shares from our beneficiaries." Thus, he concluded that there were considerable circumstantial evidence, w....
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....ng his submissions, the ld.A.R urged that undue reliance was placed by the lower authorities on the statement given by Mr.Sunil Dokania. As per the ld.A.R, assessee had never purchased any share from Mr.Sunil Dokania and statement of Mr.Sunil Dokania was never given to the assessee, nor the assessee given an opportunity to cross-examine the said person. Further, as per the ld.A.R, Bangalore Bench of the Tribunal in the case of Vimala Devi Chhajer and Others Vs. DCIT (ITA No.513 to 518/Bang/2010, 519 to 526/Bang/2010, 946 to 949, 955, 956, 970/Bang/2010, 1000 to 1005 /Bang/2010 and 1071/Bang/2010, vide order dated 23.03.2011), had held capital gains arising on similar transactions as not bogus. Reliance was also placed on a decision of Kolkata Bench of the Tribunal in the case of Manish Kumar Baid and Mahendra Kumar Baid Vs. aCIT (ITA No.1236 & 1237/Kol/2017 dated 18.08.2017) and that of Mumbai Bench of the Tribunal in the case of I.T.O Vs. Arvind Kumar Jain (ITA No.4862/Mum/2014, dated 18.09.2017). 10. Further continuing his submissions, ld.A.R submitted that lower authorities fell in error in relying on SEBI order dated 29.03.2016. According to him what was relied was an interi....
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....ogus LTCG amounting to several crores have been identified. The result of the investigation in brief is as under: i. Individuals throughout the country identified who have taken such bogus entries of LTCG amounting to several crores from 2010 to 2014. ii. The result of the enquiry was also shared with the Securities and Exchange Board of India (SEBI) and the SEBI after investigating 11 cases have found the allegation to be correct. The balance cases are still being investigated by SEBI. iii. The TPO 25 groups under each investigation directorate of the country were confronted in course of further investigation. Almost all of them, barring a few, have accepted having taken the entires for a commission. iv. Several assessees have filed revised returns since the enquiry and have taken back their claim of exemption." As per ld.A.R, assessee had filed an application under the Right to Information Act, 2005, to get information regarding the search and documents seized during the search, based on which the impugned assessment was done on the assessee. According to him, any assessment proceedings based on materials coming out of a search had to be don....
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....l justice require that assessee is given an opportunity to explain what was mentioned in such statement and if necessary, an opportunity to examine Mr.Sunil Dokania. I also find that the AO had not enquired how the assessee had become aware of the availability of the equity shares of M/s.Panchshul Marketing Ltd., when the said company was not listed and entitled. The finding of the ld. Assessing Officer that the financials of M/s.Kailash Auto Finance Ltd., were not strong enough for justifying the high value of its share is also not supported by sufficient empirical data. 14. Now, coming to the argument of the ld.A.R that assessment having been done pursuant to a search, ought have been u/s.153A to 153D of the Act and not u/s.143(3), I am afraid I cannot toe this line of reasoning. Relevant para in the assessment order relied by the ld.A.R, for buttressing this argument reproduced at para eleven above, hardly suggest that the assessment done on the assessee was pursuant to a search. Just because an investigation was done by the investigation Department of the Department, based on some leads they might have had, reports of which were used against the assessee, would not ipso fact....