TaxTMI 
TaxTMI 
2019 (5) TMI 1376
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.... as under:- The CIT(A)'s findings: 5. Decision :- The only ground of appeal relates to the disallowance of loss in shares transaction amounting to Rs. 93,41,510/- which was claimed as short Term Capital Loss. This STCL was set off against the compensation of Rs. 1 ,22, 12,055compensation the AO rejected the Short Term Capital Loss of Rs. 93,41,510/- arising from shares transactions and thereafter added back the same to the total income. Perusal of fact shows that in the return of income, the appellant has claimed to have received compensation of Rs. 1 ,22,12,0551- from the Land Acquisition Officer, Haryana Govt against acquisition of her land. She had declared the said amount as short term capital gain which had been set off with the Short Term Capital Loss of Rs. 93,41 ,510/- from share dealings. As per the details filed by the assessee, she dealt with the shares of Seven (7) different companies and claimed to have incurred above said loss. The details of the shares dealings are given as under:- Sl. No. Name of the Company Nos of Shares Purchase Sales Gain/Loss Rs. Date Amount all values excl....
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....ffice and residential premises of various Share Brokers, Entry Operators and Promoters across the country including at Mumbai and Kolkata on 12/04/2015 reveal that the above stated scripts viz. FIRST FIN and RUTRON INT. are penny stock companies which are bogus. The statement on oath given by one of the Entry Operator Shri Anil Agarwal the Promoter/Operator u/s.132(4) of the I. T: Act, 1961 on 12/04/2015 in answer to Q.7, Q.8, Q.9, Q.10 stated that trading were done on behalf of client/beneficiary to book bogus L.T.C;G or S.T.C loss as per their requirement. (In the course of a Search operation u/s 132 of IT Act 1961 on 12/04/2015 in the office and residence of one the Entry Operator Shri Anil Agarwal, who was the promoter. of companies viz. M/s First Financial Services Ltd. and Rutron International, in his statement recorded u/s 132(4), has! accepted such dubious and unscrupulous entries were done through the accounts of the companies managed or promoted by him. The modus operandi of how the Capital Gains or Losses are created as per the requirement of the beneficiaries through entry operations by layering of funds under the various penny stock companies ~are well describ....
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....s when the prices fall. 09. Please explain in detail about yow role in providing bogus LTCG to the beneficiaries of the scripts Redford Global Limited, Fist Financial Services Limited and Rutron International Limited. Ans:- Sir, I knew three persons, namely, Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Join, of Mumbai, who are primarily involved in the business of providing entry of LTCG. I knew the directors of Mls Rutron International Limited and M/s First Financial Services limited and introduced them to Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. I also came to know that Mls Redford Global Limited is also one such penny stock company which was operated by Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. Some clients contacted me tot availing the entry of LTCG and I introduced them to Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. Thereafter. as per the modus operandi the beneficiaries inverted in the penny stock of Mls Redford Global Limited, M/s Rutron International Limited and M/s First Financial Services Limited. The shares of these companies were rigged and the price was increased to desired level over a desired per....
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....y lady spends such a huge compensation money in the unknown shares of the unknown companies to incur huge losses. This was nothing but a willful intention to evade the tax by setting off such bogus loss with the capital gain made from Compensation amount received from Haryana Govt. Perusal of aforesaid observations of the AO and finding of investigation wing shows that the Entry Operator Shri Anil Agarwal, who was the promoter of companies viz. M/s First Financial Services Ltd. and Rutron International, in his statement recorded u/s 132(4), has accepted such dubious and unscrupulous entries were done through the accounts of the companies managed or promoted by him. In his 'statement Sh. Anil Agarwal stated that Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain, of Mumbai, who are primarily involved .in the business of providing entry of LTCG were known to him. He also knew the directors of M/s Rutron International limited and Mls First Financial Services limited and introduced them to Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. He also came to know that M/s Redford Global limited is also one such penny stock company which was operated by Shri Paras....
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.... to a device to divert the income before it accrues to him, the effectiveness of advice depends upon its genuineness. The substance of the transaction has to be assessed by applying the taxing Statute so as to ascertain whether it is a sham or make-believe transaction or one which is genuine. Ld. 'DR' placed reliance on the decision of the jurisdictional High Court in the case of Somnath Maini V CIT (2008) 3061TR 414 (P&H) and Balbir Chand Maini V CIT & another (2012) 340 ITR 161 (P&H) and contended that the issue in question is covered by these decisions. We have carefully perused and considered the facts and the ratio of the decisions of the jurisdictional High Court, in the case of Balbir Chand Maini (supra) and Somnath Maini V CIT (supra) and found that the facts of the present case are squarely covered by this decision. The relevant and operative part of the decision in the case of Balbir Chand Maini (supra) is reproduced hereunder "The return for the assessment year 1998-99, filed by the assessee at an income of Rs. 7,93,140 was processed under section 143(1) of the Income-tax Act, 1961. Subsequently, in response to a notice under section 148, the es....
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....have to be exposed." In the present case, there is an obvious and plain transaction of lax evasion which has been clothed with the smoke-screen of subterfuges, by the assessee appellants. The facts of the present case clearly reveals that such trading transactions of purchase and sale of shares, had not been effected, for commercial purpose but to create artificial loss, with a view to reducing tax liability. The appellant resorted to readymade scheme for purchase and sale of shares which ultimately found their last destination, to the original seller i.e. the said unlisted company. Such transaction are not genuine and natural transactions but preconceived transactions, demonstrating creation of such short term capital loss. Such transactions are mutually self-serving. It is mentioned that earning profit is a natural instinct ingrained in human beings, particularly m the businessman unless of course, earning of loss is also a profitable proposition, as is discernible from the fact- situation of the present appeals. The appellants restored to a preconceived scheme, to procure short term capital loss, for the purpose of neutralizing the short term capital gains, by way of pr....
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....mechanism, therefore, by booking losses. (The order of SEBI is made as annexure-A.). The Hon'ble Suprr .ne Court, in the case of CIT V Durga Prasad More (1971) 82 ITR 540 (S.C) has categorically held that the revenue is entitled to look into the surrounding circumstances, to find out the reality of the recitals made in the documents. The relevant observations and findings of Hon'ble Supreme Court, in the matter of discharge of 'onus of proof' and the relevance of surrounding circumstances of the case are; "that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-serving recitals in the documents, it was for the party to establish the transfer of those recitals. the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds....
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....n dubious methods of scrips prices rigging alongwith entry operators. It refers to search statement of Shri Anil Agarwal, (supra) made before the Investigation Authorities that he had engaged in artificial price rigging of M/s. First Financial Services Ltd and M/s. Rutron International Ltd (supra). Learned department representative's case is that the assesse has failed to explain/prove the genuineness of her share transactions on both purchase and sale aspects. And also even lack of cross examination to assessee in such circumstances does not vitiate the entire proceedings. Mr. Singh lastly quotes hon'ble Supreme Court's decisions in (1995) 214 ITR 801(Sc) Sumati Dayal V/s. CIT V/s. Durga Prasad More 82 ITR 540(Sc) that assessee's explanation has to be considered in the light of human probabilities by removing all blinkers. 8. We have given our thoughtful consideration to rival contentions. The question that arises for our consideration/adjudication is about the genuineness of assessee's impugned short term capital gain treated as bogus by both the lower authorities. She has filed all the requisite details on record in support of her share transactions. The Revenue's case questi....
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.... for the reason that, the assessee could not justify his claim as genuine by producing evidence and was only arguing for the matter to be set aside to the lower authorities on the ground of natural justice. As similar arguments were not raised before the lower authorities by the assessee, the ITAT rejected these arguments. In the case on hand, all evidences were produced by the assessee. In the case of Sanjay Bimalchand Jain, legal heir of Santi Devi Bimalchand Jain, the Hon'ble High Court upheld the stand of the Revenue that the transaction in question is an adventure in nature of trade and the profit of the transactions is assessable under the head of 'Business Income'. In the case on hand, the Id. Assessing Officer has not assessed this amount as 'Business Income'. In any event, I am bound to follow the judgment of the Jurisdictional High Court in this matter. I find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, ( c) copy of balance sheet disclosing in....