TaxTMI 
TaxTMI 
2019 (6) TMI 702
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....cording to AO, the assessee purchased 50000 shares @ Rs. 1/- per share for a sum of Rs. 50,000/- on 17-01-2012 of M/s Careful Projects Advisory Limited from M/s Jatadhari Marketing Pvt. Ltd. Subsequently, M/s. Careful Projects Advisory Limited was merged with M/s KAFL. Thereafter, the AO issued notice u/s 133(6) of the Act to the party from whom the shares were claimed to have been purchased but the said letter was returned unserved and, therefore, according to AO, the genuinity of purchase of share was not proved. In this case the AO had received information from the office of the DGIT (Inv.), WB, Sikkim & NER, Kolkata in respect of 'Dissemination of intelligence regarding tax evasion by showing long term capital gains perpetrated through accommodation entry operators'. The said information was prepared after detail and thorough investigation and it contains (i) the BSE listed penny stock which have been used for generating bogus LTCG, (ii) list of share brokers, (iii) Modus Operandi and (iv) LTCG Summary in soft form containing total amount of sale by individual beneficiaries along with the PAN and address as given to the broker under KYC. On perusal of the aforesaid informat....
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....ssessee is in appeal before this Tribunal. 4. After having heard rival submissions and gone through the facts and circumstances of the case, it is noted by me that the assessee had purchased 50000 shares of M/s. Careful Projects Advisory Limited @ Rs. 1/- per share for a sum of Rs. 50,000/- on 17-01-2012 from M/s. Jatadhari Marketing Pvt. Ltd. This transaction was done through off market and payment was made through banking channel. (Copy of purchase bill and copy of bank statement evidencing payment are placed at page 8 and 10 of the paper book respectively.) M/s. Careful Projects Advisory Limited later on merged with M/s. KAFL by order of Hon'ble High Court at Allahabad. Thereafter 50000 shares were allotted to assessee of M/s. KAFL in place of 50000 shares of M/s. Careful Projects Advisory Ltd. through a scheme of arrangement vide letter dated 06.08.2013 which is found placed at paper book page 11. My attention was drawn by Ld. DR to the show cause notice issued by the AO, wherein the AO stated that many brokers have confessed that the assessee's own money has been used in the shape of LTCG and the modus operandi has been explained by one Shri Sunil Dokania. At this juncture, i....
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....such transaction was entered into with a pre-planned and pre-arranged manner where assessee was over confident about making huge gain for certain reason which assessee never disclosed. The fantastic rate of return from such transaction within the shortest period of time to ensure the gain as LTCG was just unbelievable, and same thing hardly happens in reality on a single attempt. So that was beyond of any human logic and possibility and for the. In the instant case, the behaviour of the assessee regarding purchase of this stock found to be a dubious. It appears that the decision of such purchase was triggered by certain information in the possession of the assessee, or some arrangement and assessee just exploited such situation for making huge gain. So, the income arising out of such action should be considered as profit out of "an adventure in the nature of trade" and not from an investment. Therefore, it is submitted that, if the appeal of the assessee is upheld by the Hon'ble Bench for any reason, this alternative ground is put up for favour of your consideration. The AO considered the transaction as bogus and added the entire LTCG income u/s 68, so there was no occasion....
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....tion. The various facets of the arguments of the ld AR supra, with regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon'ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon'ble High Court in May 2013 merely based on a statement given by a third party which has not been subject to cross -examination. Moroever, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has n....
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.... the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon'ble Jurisdictional High Court relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee." 7. I also note that the SEBI's revocation order in the case of M/s. KAFL dated 21.09.2017 placed at pages 49 to 64 of paper book and only on the reason that the notice u/s. 133(6) was returned un-served on the seller i.e. M/s. Jatadhari Marketing Services Ltd.[entity which sold M/s Careful Projects Advisory Ltd] cannot be the sole ground to brush aside all the evidences/docume....