TaxTMI 
TaxTMI 
2018 (5) TMI 1915
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....s an organized racket of generating bogus entries of Long Term Capital Gains (LTCG) which is exempt from tax, the modus operandi, the pattern etc. Bringing those facts and by furnishing the other details like financials, reports etc, to show that the LTCG claimed by the assessee is a rigged one, the AO issued a show-cause to the assessee, as to why the LTCG claimed as an exempt income u/s 10(38) should not be disallowed. After considering the reply, and analyzing the assessee's transactions in detail in the light of the modus operandi, pattern etc., detected by the Revenue and on the Report of the 11 member Special Investigation Team (SIT) headed by the Judges of the Hon'ble Supreme Court of India on Misuse of exemption on Long Term Capital gains tax for money laundering and applying the ratio of the Hon'ble ITAT Delhi in the case of Harsh Win Chadha Vs. DCIT (ITA Nos.3088 to 3098 & 3107/Del/2005) to the facts and circumstances of this case, the AO found, inter alia, that the assessee has nothing to place on record to show that the transaction is genuine, the trading patterns show that the assessee has manipulated the sale of shares within a short span of time in collusion with the....
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.... individual) holds the shares for one year, the statutory period after which LTCG is exempt u/s.10(38) of the Income Tax Act, 1961. In the meantime the operators rig the price of the stock and gradually raise its price may times, often 500 to 1000 times. This is done through low volume transaction indulged in by the dummies of the operator at predetermined price. When the price reaches the desired level the beneficiary who bought the shares at nominal price, is made to sell it to a dummy paper company of the operator. For this, unaccounted cash is provided by the beneficiary, which is routed through a few layers of paper companies by the operator and finally is parked with the dummy paper company that will buy the shares. Further, it may be mentioned here that the price of the shares of penny stock companies are rigged and raised through circular trading. This is managed by the "operator" of the scrip. An "Operator" is a person who is managing the overall affairs of the scheme and he is the one who contacts the entities who wish to take entry of bogus LTCG/STCG in their books and arranges the same through the scrip of penny stock companies. The operator manages many paper/bogus com....
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....ificially inflated price are offloaded through companies whose funding is provided by the same set of people who want to convert black money into white." 5.1 Thereafter, the DR taking us through various portions of the orders of the Lower authorities in respect of the facts and circumstances supported their orders. Further, she relied on the decision of the High Court of Judicature at Bombay, Nagpur Bench in the case of Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain Versus. The PR. CIT-1, Nagpur & Another in ITA No.18/2017 dated 10.04.2017. 6. We heard the rival submissions and gone through relevant material. The facts found by the AO are that the assessee, an Individual settled in USA, has purchased 6000 shares of face value of Rs. 10/- each @ Rs. 25/- per share of M/s. Surabhi Chemicals & Investments Limited, offline, on 04.09.2012 from M/s. Akriti Advisory Services Private Limited, Mumbai when they were traded in the market @ Rs. 0.26 paise. Further, as mentioned in detail in the assessment order, the financial results of the company from F.Y. 2011-12 to F.Y. 2015-16 do not show any prospective growth in the net- worth of the company to purchase share at Rs. 25/-. T....
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....me to a conclusion. (35 ITR 312 (SC)). No part of the concurrent findings recorded by the AO and the Ld. CIT(A), is disputed by the assessee. Further, she has not placed any material before us to dislodge the findings recorded by the Lower authorities. Thus, the above actions of the assessee are nothing, but a premeditated, contumacious conduct, surreptitiously done for specific reasons for converting unaccounted money of the assessee under the guise of long term share transactions, that too without paying the requisite tax on the same. This is clearly in the realm of tax evasion. Hence, we do not find any reason to interfere with the order of the Ld. CIT(A). On the other hand, from the above facts and surrounding circumstances, human conduct, preponderance of probabilities etc, the AO has clearly established that the impugned transaction is not made for an investment, ie the motive is not to derive income but to earn a profit that too by an arrangement one and it is manipulated transaction in collusion with the brokers to paint creditworthiness to the transaction and claim exemption u/s. 10(38). This is in accordance with the ratio laid by the Hon'ble Apex Court in Sumati Dayal Vs....