TaxTMI 
TaxTMI 
2019 (5) TMI 1694
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....ons & findings are as under :- 4.1. The present appeal emanates after disallowing Rs. 11,92,320/- arising out of shares transaction and treated the same as bogus. In this case the assessee purchased 32000 shares of Global Infratech & Finance Ltd. through Eureka Stock and Shares Broking Services Limited @ Rs. 77.37 per share aggregating to Rs. 24,79,714/- on 11.02.2014 and further sold the 32000 shares of Global Infratech & Finance Ltd. through the same broking house @ Rs. 40.11 per share to the tune of Rs. 12,83,520/- on 27.03.2014. Thereby, claiming Short Term Capital Loss ofRs. 11,92,320/-. The A/R on behalf of the assessee, during the appellate proceedings, has stated that since the shares were held for less than 12 months, therefore, as per Sec 2(42A), these shares were Short Term Capital Asset. Moreover the selling price (Le. 12,83,520) being less than the purchase price (Le. 24,75,840) giving rise to Short Term Capital Loss amounting to Rs. 11,92,320/-. The Ld. A/R has further stated that It was claimed by the Ld.. AO that the amount claimed as capital loss is bogus in nature since the shares are penny stock which were used for accommodation of bogus Short Term Capital ....
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....so received through a/c payee cheques. 4.3 After accumulating all the facts and circumstances of the case, the A.O, believed that the sale and purchase of the shares of "Global Infratech & Finance Ltd. made by the appellant is nothing but a sham transaction, From the various statements recorded and the facts on record, the A.O. has pointed out the following abnormalities: "It is observed that the plea of the assessee is that all the payments for purchase and sale of shares were made through a/c payee cheques. But, the fact that these share were purchased from a paper company has not been explained. It is pertinent to mention here that the statement of Shri Mahendra Sethia recorded on oath u/s 131 of the I. T. Act, 1961 confessing at Question No. 19 at SI. No. 7 that M/s. Global Infratech and Finance Limited is a paper company managed by him before the DDIT(Inv.J, Unit-1I(3), Kolkata cannot be overlooked and denied. Further, the statement of oath recorded u/s. 133A of the 1. T. Act, 1961 of Shri Rakesh Somani, Director of M/s. Eureka Stock and Shares Broking Services Limited confessing before the DDIT(Inv.J, Kolkata that the company provided transactions in bogus scrips/penny st....
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....ave been used by different share brokers for providing bogus LTCG by creating artificial market and price manipulation. It was also revealed that the method followed for providing entry of LTCG was the same in the Assessee's case. It is therefore clear that the said entries of LTCG in the Assessee's case are nothing but payments made in cash out of the Assessee's own undisclosed income to bring back income in genuine form under the guise of LTCG. 4.6 With respect to the circumstantial evidence and in the matter related to the discharge of 'onus of proof' and the relevance of surrounding circumstances of the case, the relevant observations and findings of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More, 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....
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.... or basis to accommodate or generate bogus capital gain or loss. 5.9 In the instant case, all the above features are present in the transaction of shares made by the assessee. Moreover, there is also a specific information that assessee is indulged in nongenuine & bogus capital gain obtained from the transactions of purchase and sale of shares of M/s Shiv Om Investments & Consultancy Ltd., a Kolkata based company. In this respect, it is also pertinent to mention that even assessee has failed to furnish the proof of payment for these transactions. Subject to the above discussion, it is held that the so called purchase of shares is a fabricated transaction and hence the same are held as bogus. The said purchases have been treated as bogus and sham transactions by the Revenue as it is alleged that certain brokers have manipulated and issued pre-dated contract notes which even did not have details such as time of contract, trade number, transaction details etc and payments were also made in cash by the assessee against such sham and bogus purchase with the objective of introducing by manipulating tax free exempt long term capital gains u/s 10(38) of the Act leading to escapement ....
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....the decision that sale and purchase was genuine even though purchase was off-market transaction which was routed not through stock exchange but backed by physical delivery of shares which was later de-mated and under the circumstances the ITAT held the transactions as genuine in nature and the assessee claim was found to be in order, but in the instant case there is a conclusive and final finding of fact that purchases of shares were bogus and sham as was held by the Revenue) in the assessment year 2005-06 which has not been dislodged so far as the assessee accepted the said findings which became conclusive, thus the facts in the instant case are distinguishable as against the relied upon case of the assessee in Smt Aarti Mitital (supra) on that ground itself Similarly, contentions of the assessee that the Revenue has accepted the gains on sale of 1500 shares of M/s Shiv Om Investment and Consultancy Limited in the succeeding assessment year 2007-08 as long term capital gains while processing of return u/s 143(1) of the Act is not help the assessee as every assessment year is separate assessment year and merely because the Revenue has not selected the case under scrutiny by issuing....
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....ctions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More held as under: "It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. if that story is found to be unbelievable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. It is surprising that the High Court has found fault with the ITO for not examining the wife and the father-in-law of the assessee for proving the Department's case. All that we can say is that the High Court has ignored the facts of life. It is unfortunate that, the High Court has taken a superficial view of the onus that lay on the Department ." 6. The learned CIT(A) only got swayed by the issuance of notice by the AO under Section 131 to both the brokers from whom shares were purchased and sold and came to the conclusion that share transactions were genuine over....
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....earned counsel for the assessee submitted that the view taken by the Tribunal is perverse. The assessee having discharged the burden of proving the transactions of sale and purchase of the shares to be genuine, burden of proving that the said transactions were not genuine, was on the Department and in the absence of any material on record, holding the transactions to be not genuine, was not permissible. We are unable to accept the submission made. The burden of proving that income is subject to tax is on the Revenue but on the facts, to show that the transaction is genuine, burden is primarily on the assessee. The A 0 is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of evidence that the transaction was genuine, cannot be conclusive. Such evidence is required to be assessed by the AO in a reasonable way. Genuineness of the transaction can be rejected even if the assessee leads evidence which is not trustworthy, even if the Department does not lead any evidence on such an issue. In view of the above, we are of the view that the finding recorded by the Tribunal is a finding of fact and cannot be held to be perv....
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....hese were done through banking channels, to be though apparent but not be real one. 4.14 In this connection, I would also like to refer to the decision of the Hon'ble ITAT Bombay Bench 'B' (ITA No.614/Bom/87 A.Y. 1983-84) in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., which was upheld by the Hon'ble Supreme Court. The Hon'ble Tribunal had held that the word 'evidence' as used in sec. 143(3) covered circumstantial evidence also. The word 'evidence' as used in sec. 143 (3) obviously could not be confined to direct evidence. The word 'evidence' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the evidence' had much wider connotations. While the word 'evidence' might recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, the use of word 'material' in Sec. 143(3) showed that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Court often took judicial notice of certain facts w....
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....bstratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the canons of equity, fairness and justice. The evidence should be impartially and objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge in appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied advantage of the contention or factual assertion by the assessee before him. In case an assessee deliberately and intentionally fails to prod....
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....n sold through broker had not been transferred even at time of making enquiry by Assessing Officer and same continued to be registered in name of assessee - in those circumstances, Assessing Officer held that transaction of sale of shares was an ingenuine transaction and made addition of alleged sale consideration to assessee's income as income from undisclosed sources- Whether on facts, addition made by Assessing Officer was justified-Held, Yes. In case of Usha Chandresh Shah Vs ITO [I.T.A. No. 6858/Mum/2011] Hori'ble ITAT .Mumbai held that in this case the assessee could not produce the copies of share certificates and copies of share transfer forms. The transaction of purchase of shares could not be cross verified. The shares of the company was declares as "Penny Stock" by SEBI and the broker Sanju Kabra, through whom the shares were sold by the assessee was indicated for manipulating the prices of penny stock shares. The tax authorities have rightly applied the test of human probabilities to examine the claim of purchase and sale of shares made by the assessee. The CIT(A) was justified in confirming the order of the AO by applying the test of human probabilities. 4.....
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....rces available on internet. 4.19 In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke-screen of subterfuges, by the appellant. The facts of the present case clearly reveal that the transactions of purchase and sale of shares had been effected to create bogus loss under the head STCG. Such transactions are not genuine and natural transactions, but preconceived transactions, resulting in creation of bogus loss. 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 nongenuine and artificial profits, with a view to reduce valid tax liability. Keeping in view of various decisions, fact of the case and observations made by undersigned, the addi....
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....2018 6. Regarding the case laws relied upon by the ld. Departmental Representative, I find that, in the case of M/s. Pankaj Agarwal & Sons (HUF)(supra), the issue was decided against the assessee 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 ld. 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) evid....