AI Drafter 
TaxTMI 
TaxTMI 
2019 (11) TMI 402
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.... 2. The grounds raised in ITA No. 1704/Del/2019 in the case of Shri Satish Kishore are reproduced as under: 1. On the facts and circumstances of the case and in law Learned AO has erred in making subject addition of Rs. 66,85,928 merely on the basis of suspicion, conjecture surmises and modus operandi without correlating the same in the Context of the appellant. 2. On the facts and circumstances of the case and in law Learned AO has made subject addition without bringing incriminating material on record solely on hearsay borrowed satisfaction of investigating wing on a hypotheses of modus operandi at the macro level. 3. On the facts and circumstances of the case and in law learned AO has erred in law by disallowing the exemption of capital gains on the sale of STT paid equity share on the recognized stock exchange exempt U/s 10(38) of the Income Tax Act, 1961 being duly supported with documentary evidence in a systematic manner, more specifically encompassed in Section 43(5) of the Income Tax Act. 4. On the facts and circumstances of the case and in law, Learned AO has erred in law in making subject addition u/s 68 and 69C by invoking discretion....
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.....04.2009 24,300.00 1,922,735.21 1,875,035.21 260 15.04.2009 23,400.00 Total 27380 199,200.00 6,566,751.88 6,367,551.88 3.1 The Assessing Officer was in possession of information from the Investigation Wing of Income Tax Department, Kolkata related to providing accommodation entry of exempted long-term capital gain on 'Penny Stocks' by a cartel of share brokers, entry operators, beneficiaries and proprietors in the scrip "Suchak Trading", which was appearing in the list of shares sold by the assessee during the year under consideration. The report of Investigation Wing explained entire modus operandi as how the companies in collusion with a set of brokers, accommodation entry operators, first sold the share in offline market (not on the stock exchange) either in cash or cheque by private placement, or preference shares etc. In some cases after private sales, bonus shares had also been issued. Thereafter, companies were listed on stock exchange with small number of shares available for trading. The share price were then artificially jacked up by trading (sale and purchase) in small number of shares ....
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....he location of the companies and their directors. According to the Assessing Officer, the transactions were carried out to give the shares a colour of longterm asset and the transactions were made beyond any human probabilities. The Assessing Officer, relying on the decision of the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT 214 ITR 801, wherein the Hon'ble Court held that in view of the material available on record, surrounding circumstances, the transaction of the assessee failed the test of human probabilities. Accordingly, the amount of Rs. 63,67,552/- received by the assessee, was held by the Assessing Officer as unexplained cash credit under section 68 of the Act and also made addition at the rate of 5% of the amount of the sale consideration treating the same as commission expenses for obtaining the accommodation entry. 3.5 Before the Ld. CIT(A), the assessee submitted that the transactions have been routed through the channels controlled by the statutory authorities like, Banks, SEBI, and Stock Exchange leaving no access to or interference by either purchaser or seller of the shares. According to him, the transaction of purchase and sale of the shares were ....
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....The purchase of the shares in cash has been shown from brokers and not from the respective companies. In the case of scrip "Riya International Ltd", even no evidence of the purchase were submitted before either Assessing Officer or before the Ld. CIT(A). The Ld. CIT(A) also referred to the statement of the assessee recorded on oath where he explained that he was a casual investor in shares. The assessee could not explain the name of the directors or location of the entities, in which he claimed to have invested. In view of the observations, the Ld. CIT(A) upheld the addition made by the Assessing Officer relying on various decisions cited in the impugned order. 4. Before us, the Ld. counsel of the assessee filed a paper-book containing pages 1-44 and supported the grounds raised. He assailed mainly the preponderance of human probability for sustaining addition in the case of the assessee. The Ld. counsel submitted that the theory of preponderance of human probability, the apparent not being real, have to be applied in a nuanced, subtle and calibrated manner and not on a blanket basis. According to him, it has to be applied with utmost care and diligence and keeping in view the m....
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....the Hon'ble Delhi High Court in the case of CIT Vs Gangeshwari Metals Private Limited (2013) 30 taxmann.com 328 ( Delhi). 4.4 The Ld. counsel further submitted that assessee has discharged its burden of providing documentary evidence to support the long-term capital gain by submitting contract notes from brokers, de-mat account, broker statement of the account, proof of STT payment and transaction through banking channel, which has not been discarded by the Assessing Officer. 4.5 He further submitted that it is settled law that suspicion, however, strong cannot take place of the proof and no addition can be made on the basis of mere suspicion. In support, he relied on following decisions: • Lalchand Bhagat Ambica Ram v CIT [(1959) 37ITR 288 (SC)]; • CIT v. Paras Cotton Co[(2007) 288 ITR 211 (Raj.)]; • Faqir Chand Chaman Lai v. ACIT [(2004) 1 SOT 914 (Asr.)] [Appeal dismissed by P&H • High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR 215 (St)]; • Assam Tea Co. v. ITO [(2005) 92ITD 85 (Asr.) (SB)]; • Jhantala Investments Limited v ACIT [(2000) 73 ITD 123 (Mum.)] 4.6 The Ld. counsel also ....
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....an Kumar Kayan under section 132(4) of the Act during search and seizure action at his premises and submitted that he admitted of having engaged in providing accommodation entry in the form of LTCG through his concern including PKC Commodities Ltd., a sub-broker of SMC Global Securities Ltd. 6. We have heard the rival submissions and perused the relevant material on record, including the judicial decisions relied upon by both the parties. We find that in the instant case the issue in dispute is whether the long-term capital gain on sale of shares by the assessee is an arranged affair to convert its own unaccounted money or it is a genuine transaction of purchase of shares and sale. The assessee has submitted documents to support purchase as well as sale of the shares and contended that sale transactions have been done on the platform of stock exchange, where the seller is having no control to choose the buyers, and thus according to the assessee, he has simply sold the shares on the stock exchange and received the profit, which according to him, is exempt under section 10(38) of the Act. According to the assessee, he is an innocent investor and windfall gain has been received du....
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....ompany has issued a debit note to the assessee for sale of 18,000 shares of Pawansut Holding Ltd., but in this debit note the serial numbers of the shares transferred to the assessee is not mentioned. Similarly, on page 5 of the paper book a copy of the debit note issued by Fair Finwiz is available, according to which assessee was sold 450 shares of Tarang Projects and Consultant Limited. Similar, debit notes have been filed by the assessee in the paper book to substantiate the purchase as genuine transaction. But the assessee has not filed any receipt of cash paid either to the brokers or to the companies. 6.4 When the documentary evidence containing contract notes of purchase, demat account, contract note of the sale and receipt of sale proceeds in bank account are seen vis-à-vis the observations of the AO on transactions, in our opinion, the documents are not sufficient to discharge the burden of proof that the purchase and sale transactions of the assessee were genuine. The onus was on the assessee to explain astronomical rise in prices of all the scrips purchased by him, that too without any financial rational. The assessee has failed to discharge his onus in this....
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....olled manner on the stock exchange, we note that the investigation carried out by the Department has brought the facts on record that the shares prices have been manipulated artificially, which purchased by a set of accommodation entry provider companies controlled by cartel of brokers, entry operator etc., thus, in such circumstances, to say that sale transactions on the stock exchange were made in uncontrolled manner, will be on only an idealistic view and away from the reality of the market. The Ld. Counsel has himself accepted this fact that such types of dubious practices were rampant during relevant period. The contention of the Ld. counsel that sale transaction of assessee is uncontrolled, cannot be accepted in the circumstances of the case where all share purchases have been made in physical form from off market and all such shares have been sold at astronomical prices without commensurate financials of the companies in the background of the fact the purchases of these shares have been made at high prices by accommodation entry operator and not genuine buyers. 6.7 The case laws relied upon by the assessee distinguishable on facts. In the case of Deepak Nagar (supra) noth....
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....inancials of the company whose shares were inflated within a short period and after the sharp rise in the price of shares, it again comes down. 6.11 The coordinate bench of the Tribunal in the case of Shamim M. Bharwani (supra) held that, where the assessee claimed income earned from sale of shares is exempt under section 10(38), in view of the fact that purchase transaction of said shares was not recorded in the stock exchange and moreover, selling rates were artificially high later on with no real buyers, Assessing Officer rightly rejected assesses claim and added amount in question to his taxable income under section 68 of the Act. 6.12 As far as contention of the learned counsel that no opportunity of cross-examination of the statement of share brokers relied upon by the Assessing Officer is concerned, we find that the authorities have not merely relied on the statement of the relevant brokers, but also has taken into account other circumstantial evidences and the assessee was asked to justify the genuineness of the transactions, which the assessee has failed. In our opinion, the ratio in the case of M/s Andman Timber Industries (supra) is not applicable over the facts of....