TaxTMI 
TaxTMI 
2019 (7) TMI 858
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....ecords reveal that during the year under consideration return, of income was filed on 31.10.2015, declaring income at Rs. 37,73,650/-. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee. The assessee is a Chartered Accountant providing professional services and was also working as a Director in few companies. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has shown exempt income of Rs. 11,93,55,564/- on account of LTCG from transactions on which Securities Transaction Tax was paid. The assessee was asked to give details of capital gains alongwith complete details of shares sold/purchased by him in respect of each company. 4. In his reply, the assessee explained that he was allotted 2,50,000 equity shares of Malti Textile Mills Ltd at a price of Rs. 12/- per share on 13.02.2013. In the meanwhile, the name of the company Malti Textile Mills Ltd was changed to Effingo Textiles & Trading Ltd [ETTL] and one share of the face value of Rs. 10/- of the company was sub divided into 10 shares of Re. 1/- each on 27.09.2013. Accordingly, 2,50,000 shares of Malti Te....
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.... 2. During the year under review, after holding the shares for more than a year, part of the share holding was sold on various dates though normal banking channels on Recognized Stock Exchange and long term capital gain of Rs. 11,90,79,561/- was earned after payment of Securities Transaction Tax ("STT"). This gain was claimed as exempt under section 10(38) of the Act. 3. It is respectfully submitted that the Assessee has submitted following documents for substantiating the claim for the afore-said exemption vide its reply dated -. a. Copy of application to the Investee Company for allotment of shares. b. Copy of board resolution passed by the investee company approving allotment of shares. c. Copy of share certificate. d. Copy of Demat Account Statements. e. Copy of application dated 5th January, 2013 by the investee company seeking approval for allotment of shares to the Assessee from the Bombay Stock Exchange ("BSE") and letter dated 7th February, 2013 of the BSE granting the approval for the same, f Details regarding the computation of gain on the sale of shares and the proof of receipts of the sales consideration in....
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....s under: "The above reply of the assessee was considered but not found in the light of the facts narrated in the report received from the DIT(Inv.), Kolkata and other information as available on records. The exhaustive report forwarded by the Directorate of Income Tax (Inv.), Kolkata clearly mentions that the prices of shares of certain companies including Effingo Textiles & Trading Limited were rigged artificially to provide bogus long term capital gain. All the features of the companies which were used for providing bogus long term capital gain as illustrated above, are clearly matching with the trend of the shares of Effingo Textiles & Trading also i.e. the trade pattern of the shares following bell shape, the company having hardly any business activity, splitting of shares taken place, the company does not having any history of dividend payouts etc. Actually, splitting of shares is proved to be the most effective way to camouflage the price of shares. After split of shares, the price of shares on the exchange goes down automatically in proportion with the ratio of split and one doesn't see anything adverse happening in the script. So, this practice wa....
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....He has further argued that material had been collected at his back & no cross examination has been allowed to rebut the same. Another argument given by appellant is that no addition can be made on the basis of investigation report and mere statement without corroborative evidence cannot be the basis of addition. He has relied on many judicial pronouncements to justify his transactions & claim. 7.5 Let us set the context before moving towards the final decision on the issue. * The appellant had effectively returned sizable exemption on account of Long Term Capital Gain on sale of shares of such unimaginable gains running into crores out of scrips of no presence or financials. * There is no prior experience in share market and these are only isolated transaction in shares. The invested companies had no activity or assets as such to even merit any investments per se. * The investment made in the said companies was strange, as it was not related to the principle business of the appellant and its related entities to be called strategic investment and there was nothing in the books of this company to be considered valuable for investment. * Th....
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....de scheme for purchase and sale of shares which was floated by some Entry Operators. Such transactions are not genuine and natural transactions, but preconceived transactions, resulting in creation of bogus profits which are tax exempt. Such transactions are mutually self-serving to the parties to the transactions. I have come to conclude on the basis of above analysis, documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities that what is apparent in this case is not real, that these financial transactions were sham ones and that this entire edifice was only a colourable device used to evade tax. Moreover, the impugned transactions of shares are preordained one, not for legitimate purpose in view but for the purpose of creating non- genuine and artificial profits, with a view to reduce valid tax liability. Therefore, I agree in toto with the view of the AO as stated in the assessment order that the said transactions are sham transactions and accordingly, the addition and the findings made by the AO in detail in the assessment order are confirmed." 11. In our considered opinion, whether the assessee has discharged the onus cast up....
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....t wherein the name of the appellant or his broker has even been named or implicated. The lower authorities have failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that the said documents furnished in support thereof were not authentic. It would not be out of place to mention here that no specific enquiry or investigation was conducted in the case of the assessee and/or his broker either by the INV Wing or by the Assessing Officer during the course of assessment proceedings. 17. It is a matter of fact that SEBI looks into irregular movements in share prices and range and warns investors against any such unusual increase in share price. No such warning was issued by SEBI nor there is any evidence that the company ETTL was ever delisted by SEBI or that the transactions in the shares of ETTL were ever suspended by SEBI. The Assessing Officer, by making the impugned addition, has acted merely on suspicions and surmises and failed to produce any evidence whatsoever to prove that the proceeds received against the sale of shares represented the assessee's undisclosed income. The Assessing Officer has also failed to produ....
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....e Power Limited 6,800 Sainilc Finance & Industries Limited 1,515 Galaxy Gems jewels & handicraft Pvt Ltd 1,50,90,000 Sky bird Infotech Pvt Ltd 11,50,000 Transcedent Advisory Services Pvt Ltd 90,000 21. These facts clearly demonstrate that the assessee is a habitual investor and being a qualified professional [Chartered Accountant], is well aware of market trends of shares in the stock market. 22. For the sake of repetition, the entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the INV Wing as well as information received from the INV Wing. It is apparent from the assessment order that the Assessing Officer has not conducted any independent and separate enquiry in this case of the assessee. Even the statement recorded by the INV Wing has not been got confirmed or corroborated by the person during the assessment proceedings. The Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the INV Wing is required to be corroborated and reasserted/reaf....