TaxTMI 
TaxTMI 
2018 (4) TMI 1620
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....eds of shares) by denying the exemption under the long term capital gain and further assessing the income under section 68 of Income Tax Act 1961 is against the facts against law and circumstances of the case. 3. The assessee had claimed long term capital gain amounting to Rs. 80,25.291/- as exempt u/s 10(38) of the Act from the total sale proceeds amounting to Rs. 83,57,578/- with respect to the said share transaction. 4. The assessee submitted that he had purchased 800 shares of M/s Sharp Transport Limited(STL), a company base at Kolkata in December 2008. Subsequently, STL along with another company M/s Sakshi Vayapar Ltd. (SVL) merged into M/s Oasis Cine Communication Ltd.(OCL). Pursuant to the said merger, the assessee was allotted 27,200 shares of OCL in the ratio of 1:34, in Oct 2009 which were sold at CSE in May 2010 for Rs. 83 lakh (approx) The assessee claimed to have paid securities transaction tax (STT) on the transfer and returned LTCG as claimed exempt u/s 10(38) of the Act. 5. On considering the assessees contention regarding the long term capital gain, the AO was of the view that it cannot be normal in tune with the regular business transactions to have long....
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.... mode and nature of payment. The excerpts of the statement recorded are as under: i. It was found that the assessee is drawing salary income from Saber Paper Books Pvt. Ltd. and income from investments. ii. The investment had taken care by his father Mr. Dinesh Soin . iii. The assessee has purchased 800 shares of M/s Sharp Transport Pvt. Ltd.(M/s STP Ltd.) on 02/12/2008 and received 27,000 shares of M/s Oasis Cini Communication Ltd.(OCC Ltd.) on amalgamation of M/s STP Ltd. which were sold. iv. The assessee has taken advice of consultants like Edelweiss consultants for investment in shares. v. No formal consultancy charges were paid by the assessee to the Edelweiss. vi. The assessee could not throw any light on the rationale given by the consultancy firm in respect of the investment in M/s STP Ltd. which is situated in Kolkata. vii. Net worth position of the company has not been examined by the assessee before investment. viii. The shares were purchased through the broker S.K. Khemka. ix. The shares were purchased in cash @ Rs. 10/- per share and Rs. 328/- as share premium. x. No details / dat....
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.... question No. 9 & 12 shows that no convincing reply was given by the assessee with respect to the rationale of purchase of the shares after paying huge premium, of a relatively small and non-descript company i.e. STL based in Kolkata. (v) The replies to question no. 20 & 40 makes it clear that the amount of Rs. 2,72,000/- was paid to one of the representative sent by the broker Sh. S.K. Khemka at the Delhi office of the company. As per the ledger account sent by Sh. S.K. Khemka it is seen that the said amount was received by Sh. S.K. Khemka on three different dates(01.12.08,03.12.08 AND 04.12.08) and it is beyond common logic as to why the broker from Kolkata would sent the representative on three different dates to collect money from Delhi for comparatively small amounts. The gist of the replies to question no. 20 & 40 also indicate that the representative was sent by the broker only once to the Delhi office. Therefore, this discrepancy adds to the claim of the undersigned that the purchase was bogus. (vi) The fact that it was first transaction with the share broker Sh. S.K. Khemka, and still the assessee favoured the transactions in cash even as in subsequent ye....
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....Rs. 80,85,577/-) is not found satisfactory and therefore this whole amount i.e. Rs. 83,57,578/- is held to be the deemed income of the assessee as per section 68 of l.T. Act 7. The addition has been confirmed by the Ld. CIT(A). 8. Before us, the Ld. AR has reiterated the submissions made before the lower authorities. It was argued that, I. The evidence of purchase of shares of M/s Sharp transport Pvt. Ltd. In the form of contract note and copy of account of assessee in the books of broker namely S K Khemka, which are enclosed at Page No. 1 and 2 of the Paper Book. II. The allotment advice allotment of shares of M/s Oasis Cine Communication Ltd. Pursuant to scheme of amalgamation in lieu of the shares of M/s Sharp transport Pvt. Ltd. enclosed at Page No. 3 of the Paper Book. III. The copies of share certificate of M/s Oasis Cine Communication Ltd. in the name of the assessee enclosed at Page No.4 to 5 of the Paper Book. IV. Demat account statement of the assessee enclosed at Page No. 7 to 9 of the paper book. V. Contract notes of sale of shares of M/s Oasis Cine Communication Ltd. through Calcutta Stock Exchange enclosed at Page No.....
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....ny. Then the broker himself has confirmed that he has received the cash from assessee which is similar to what the assessee has said in a statement before the A.O., then there should not be not any doubt left in the mind with regard to this Point. 8.4 It was argued that the Assessing Officer held that it is difficult that the person can have capital gain of Rs. 80 lakh on purchase of shares worth Rs. 2,72,000/- of a non descript, small and unknown company within one and half years cannot be accepted as the Assessing Officer has no evidence and is repeatedly giving thrust on the point that the whole transaction is a series of preplanned steps without any finding on record. In this regard, it was submitted that the transactions were carried out with the Registered Share Broker and in this regard, copy of contract notes, Demat A/c and copies of Bank Passbook evidencing the transactions taken place has been provided. The assessee has proved that the transactions are accounted for, STT has been charged, documented and supported by evidence then the same cannot be held to be bogus or colorful. The said evidences have not been rejected by the AO and rather the AO himself verified such ....
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.... as income from undisclosed source where the assessee has proved genuineness of share transaction "COMMISSIONER OF INCOME TAX vs. KUNDAN INVESTMENTS LTD.(2003) ITR 626 (CAL) Tribunal having found that all the relevant documents relating to contract notes, bills, quotations and other materials were produced and the transactions were made through cheques at the prevailing quoted market rates which was verified from the statements of the stock exchange, findings of the Tribunal that the loss in the share transactions was genuine was not perverse and the claim for loss was allowable. The Ld. AR further argued that, the A.O. did not bring in record any material to show any specific infirmity or falsity in the documents produced by the assessee in support of purchase and sale of shares. The AO could not assess the income without supporting evidences and simply could not assume the transaction to be bogus. The addition has been made by the AO. on the basis of the surmises and conjectures ignoring the evidence produced before him. Thus, the addition made on the doubt, surmises and conjectures have no legs to stand. 9. On the other hand Ld. DR vehemently argued that the assessee....
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....ssessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. '...Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But, in that sphere, the decision of the final fact-finding authority is made conclusive by law." 9.3 The Ld. DR has also relied on the test of human probabilities has been emphasized in yet another decision of the Hon. Supreme Court in the case of Sumati Dayal v. Commissioner Of Income Tax, Bangalore. [1995] 80 Taxman 89/214 ITR 801 (SC). It was held in this ca....
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....shed the cases quoted by the assessee as under: (i) ITO Vs. Haran Chanda Sarkar ITA No. 1740/Kol/2011:- In this case, the assessee has made payment through account payee cheques for purchase of shares. In the case of the assessee, the assessee has purchased shares in cash of which the assessee has failed to prove the source as well as payment to the Kolkata based broker from Ludhiana. (ii) Commissioner of Income Tax Vs. Anirudh Narayan Aggarwal (2013) 84 CCH028 All. HC:- In this case the assessee has made payment of share application money through account payee Demand Draft for purchase of shares. In the case of the assessee, the assessee has purchased shares in cash of which the assessee has failed to prove the source as well as payment to the Kolkata based broker from Ludhiana. (iii) Commissioner of Income Tax Vs. Udit Aggarvsal ITA No. 560 of 2009:- In this case, the assessee has made payment of share application money through account payee Demand Draft for purchase of Shares. In The case of the assessee, the assessee has purchased shares in cash of which the assessee has failed to prove the source as well as payment to the Kolkata based broker from Lu....
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....s that the transaction has been managed after a later date. The appellant has failed to satisfactorily explain the reason of investment of shares of the company whose net worth was not to him. Apparently, the shares were not transacted, through any recognized exchange, as apparently it is a petty private limited company having very meager net worth. It is claimed that the purchase of shares have been made through a Calcutta- based broker by way of making cash payments in four different The broker is also based at Calcutta, therefore the theory of making transaction of a company the net worth of which is not known at all as it is not listed in any recognized exchange, the appellant was not at all experienced to know these kinds of investment. Most importantly, the appellant was out when these transactions took place. The assessing officer has also worked but with regard to a major fact that the appellant did not have the requisite source of investment during the relevant period of investment. 10.1 we observe, in CIT Vs. Frostair Pvt. Ltd. 26 Taxmann 11 (Del) it was held that the assessee has to establish the share holders identity and genuineness of the transaction. In t....
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....in 17 months of buying of shares at Rs. 2,72,000/- of a non descript company incorporated in 2017 which got merged in 2009. This cannot be a case of intelligent investment or a simple case of tax planning to gain benefit of long term capital gains. The issue that it deals with and the facts are however, quite interesting. The in-congruencies found out by the Revenue that the investments were made on the advice of renowned investment advising company like Edelweiss for which the assessee has not paid any consultation fee leads to a conclusion that the entire transaction is synchronized and carefully planned only to defeat the purpose of revenue. The earnings @ 3072% over a period of 17 months breaks the ceiling of any record of return on investment which is beyond the human probability and beyond the business logics of any enterprise. 13. The fact of purchase of shares of the company with such a higher premium of Rs. 328 per share, whose net worth was not known by the assessee and the company is not listed with any Exchange cuts no ice . Another important factor considered is that the assessee has made transaction with share broker Sh. S.M. Khemka banking channels and subsequent ....