TaxTMI 
TaxTMI 
2020 (1) TMI 771
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....missioner of Income-Tax (Appeals) is against law as well as facts. The action of the CIT (A) in dismissing the appeal is unjustified, arbitrary and against law. 2. The learned Commissioner of Income Tax (Appeals) has erred to notice or adjudicate the issue that the Assessing Officer (A.O) had made the additions without even stating under which provisions of the Income Tax Act, 1961 he made those additions. Such non-mentioning the section invoked renders the assessment order bad in law. 3. The Ld. CIT (A) has completely erred against facts when she held that there is no violation of Natural justice as according to CIT (A) giving a show cause notice is sufficient compliance of "Natural Justice". The fact is that the A.O has neither furnished the copy of the statement recorded from a third party implicating the Appellant herein and nor the appellant was given an opportunity to cross examine the person who is purported to have given a statement implicating the appellant. This is a clear violation of Principle of Natural justice and this ground was never considered by the Ld. CIT (A) while passing the order on Appeal. 4. The Appellant submits that she was not ....
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....hrough a recognized stock exchange and the sale proceeds were received through proper banning(sic. banking) channels. Such chain of transactions cannot be held as "Bogus" or "sham" merely on suspicion or surmises by the AO. 8. The appellant submits that the recording of the statement from any person which is used as evidence in any proceedings under this act is not a conclusive proof of evidence by itself. The appellant has the right to cross-examine the person who has given this statement. This injustice has been ignored by not allowing cross-examining the person whose statement has been relied before dismissing the appeal by the Hon. CIT (A). 9. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of AO in charging interest u/s.234B, 234C and 234D of the Act. 10.That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. The appellant prays that on the above grounds, the Hon. Income-tax Appellate tribunal may kindly delete the additions and pass such as they....
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....d in the order passed by the Bench on 13.09.2019 disposing of stay petition are blatantly infringed/violated , the Bench decided to proceed to adjudicate this appeal filed by assessee in ITA no. 2342/Chny/2019 for ay: 2014-15 after hearing learned DR and in the absence of the assessee. 4. The brief facts of the case are that assessee is an individual and partner in partnership firms. The assessee filed her return of income for impugned ay: 2014-15 on 29.07.2014 declaring total income of Rs. 4,99,910/-. The assessee's case was selected by Revenue under CASS for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act. The statutory notices u/s 143(2) as well notices u/s 142(1) of the 1961 Act were duly issued by AO and served on assessee. During the course of aforesaid scrutiny proceedings conducted by AO, it was observed by AO that assessee has claimed an exempt income to the tune of Rs. 39,77,886/- u/s.10(38) of the 1961 Act. The said exemption was claimed by assessee on sale of long term capital asset, being shares of M/s. Turbotech Engineering Ltd. . The AO observed that investigations were conducted by various regulatory and enforcement agencies of Gov....
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....e same place at the same time when share transfer deed stood executed by all the three aforesaid persons. The AO further observed that assessee has not furnished travel details to indicate that all three persons were in-fact present at the same place at the same time. The AO observed that assessee has opened a DMAT account with ICICI securities on 26.10.2010 and another DMAT account with Integrated Enterprises India Limited on 24.09.2013. The AO observed that aforesaid shares which were allegedly purchased on 22.11.2011 were dematerialized with ICICI Securities on 12.03.2013 i.e. nearly one and half years from the purchase of shares. The AO observed that subsequently these shares were sold on 23.09.2013 and 22.11.2013 and assessee claimed exemption u/s 10(38) of the 1961 Act on long term capital gains arising on sale of said shares. The AO observed that the above sequence of events clearly reveals that assessee has manipulated entire sequence of events related to alleged purchase of aforesaid shares to introduce unaccounted income as an exempt income. The AO called for information u/s.133(6) of the Act from Bombay Stock Exchange (in short "BSE") regarding transactions carried out b....
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.... -0.03 -0.03 Exceptional items - - - - - P/L Before tax -0.09 -0.13 -0.04 -0.03 -0.03 Tax - - - - - P/L after tax from ordinary activities -0.09 -0.13 -0.04 -0.03 -0.03 Prior year adjustments - - - - - Extra ordinary items - - - - - Net profit/(Loss) for the period -0.09 -0.13 -0.04 -0.03 -0.03 The AO also brought on record movement of price of the share of M/s.Turbotech Engineering Ltd. on BSE for last one year which has varied from Rs. 19.65 to Rs. 518/- during the financial year, which as per AO clearly defy economic rationale as financials of the said company Turbotech Engineering Limited reveals no revenue earned by company for last year which has not changed during last four years and these significant price variation reveals a pattern in the manipulation of the share price of the said company namely M/s Turbotech Engineering Limited, which is re-produced hereunder: "4.1 The movement of the price of the company on BSE is also detailed below, that clearly reveals a pattern in the manipulation of the share price of the company: Tu....
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.... income and has shown it as legitimate income. The AO observed that the assessee did not invested in shares before or after her trading in Turbotech Engineering Limited. It was further observed by AO that information was called from BSE which revealed that during the financial year 2013-14 , the Kolkata based companies having little or no worth called jamakharchi companies bought the entire shares of M/s Turbotech Engineering Limited. The AO observed that these Kolkatta based companies have acted in concert with entry operators and share brokers to rig share prices of M/s Turbotech Engineering Limited as given in the order of the SEBI, referred above. . The AO observed that assessee is also part of the same transactions and claimed bogus long term capital gain on her own unaccounted money. The AO relied upon decision of Hon'ble Supreme Court in the case of CIT v. Durga Prasad More(1971) 82 ITR 540(SC) and in the case of Sumati Dayal v. CIT(1995) 214 ITR 801(SC) to come to conclusion that long term capital gain declared by assessee is bogus and it is the unaccounted money of the assessee which is routed through investment in this company and has now been shown as legitimate by claim....
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.... banking channels and hence learned CIT(A) refused to interfere with assessment order passed by the AO and the appeal filed by assessee stood dismissed by learned CIT(A), vide appellate order dated 28.06.2019. 6. Being aggrieved by an appellate order dated 28.06.2019 passed by learned CIT(A), the assessee has come in appeal before Tribunal and none appeared on behalf of the assessee when this appeal was called for hearing on 09.10.2019 nor any application for adjournment was filed. We have elaborately discussed entire background in para 3 of this order as to grant of early hearing in this case at the behest of assessee and the same is not repeated. The Ld.DR, on the other hand, supported the orders of the authorities below. It was submitted by Ld.DR that assessee has no case on merits and it is only after detailed investigations conducted by authorities below , the claim of exemption filed by assessee u/s 10(38) of the 1961 Act was disallowed by the authorities below by holding the same to be bogus claim filed by assessee for seeking exemption u/s 10(38) of the 1961 Act and it is infact assessee's own unaccounted money which is brought back as legitimate money through circuitous....
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....ed that assessee has claimed exemption to the tune of Rs. 39,77,886/- u/s.10(38) of the 1961 Act being long term capital gains on sale of shares of M/s.Turbotech Engineering Ltd. . We have observed that assessee has claimed to have allegedly purchased 15000 shares of M/s.Turbotech Engineering Ltd. vide share bill dated 22.11.2011 for Rs. 2 per share from one M/s.Shivani Tradecom Pvt. Ltd. which entity is based in Mumbai. The payment for acquisition of said shares were claimed by assessee to have been made in cash as is emerging from receipt dated 24.11.2011 issued by said Shivani Tradecom Private Limited. The assessee has got these shares of M/s Turbotech Engineering Limited Dematted into her DMAT Account on 12.03.2013 which is almost one and half year after purchase of the said shares by assessee, which is against the normal human behavior more so when payments for these shares were claimed to be made in cash in an off market transaction which was not routed through stock exchanges . Under normal circumstances, the person who buys shares will get the shares transferred and Dematted to his/her DMAT account immediately on purchase of shares. These shares were then sold by assessee o....
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....it or even post to these alleged transactions in Turbotech Engineering Ltd. . The assessee could not rebut this assertion of the authorities below. These are the only transactions in shares made by assessee in which she has claimed to have earned an exempt income of Rs. 39,77,886/- on a meager investment of Rs. 15,800/- in a short period of 2 years giving astronomical return of more than 12500% per annum , in dealing in shares of M/s Turbotech Engineering Ltd. . We have also observed that SEBI has also debarred/suspended this company namely M/s Turbotech Engineering Ltd. effective from 07.01.2015 until further orders from trading/dealings of its shares in stock exchanges. It has also emerged from inquiries conducted by AO that certain Kolkatta based companies having little or no means have bought entire shares of M/s Turbotech Engineering Ltd. and these companies acted in concert with entry operators and share brokers to rig/manipulate share price of Turbotech Engineering Ltd. with an intent to defraud Revenue. The AO has deeply analyzed Balance Sheet and Profit and Loss account of this company M/s Turbotech Engineering Ltd. for five years from year ended 31.03.2012 till year ended....
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....ransaction for purchase and sale of the shares were genuine .The assesse is claiming exemption by way of long term capital gains claimed by it to be earned on sale and purchase of Turbotech Engineering Ltd. by invoking provisions of Section 10(38) of the 1961 Act and onus is on the assessee to prove that these gains are genuine and assessee is entitled for exemption. The AO has not only relied upon investigations carried by other government agencies but has also conducted independent inquiries with BSE which also revealed that the prices of the shares of Turbotech Engineering Ltd. were rigged / manipulated with an intent to defraud revenue. The financials of said company M/s Turbotech Engineering Limited wherein there is no turnover/income earned and no expenses incurred by said company for last five years also does not support price variation of Rs. 19.65 per share to Rs. 518 per share within previous year 2013-14 relevant to ay: 2014-15, which clearly points to manipulation and rigging in share price of Turbotech Engineering Ltd. with malafide intention to defraud revenue. It is unbelievable that assessee having never dealt in share market will earn a yield / return of 12500% per....
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....ITA no. 841/2019, judgment dated 17.09.2019, under similar circumstances of penny stock case, has disallowed the exemption claimed by tax-payer u/s 10(38) of the 1961 Act. The decision of Hon'ble Delhi High Court in the case of Suman Poddar is reproduced hereunder:- "9. We have gone through the rationale given by both the parties pertaining to their arguments. In this case, it is an uncontroverted fact that the assessee has failed to prove the genuineness of the transaction. The AO has worked out the glaring facts, which cannot be ignored and which are clear indicative of the non-genuine nature of the transactions. The assessee could not satisfactorily explain how the investments in the absence of any evidence as to the financials, growth and operations of the company could earn profit of 4910% over a short period of 5 months from the date of allotment of shares (21.02.2013-date of allotment and 18.07.2013 to 12.09.2013 -date of sale) of Cressanda Solutions Ltd. against the purchase of 15,000 shares of Smarchamps IT and Infra Ltd. on 22.09.2011. Most importantly, in spite of earning so much of profit, the assessee has never embarked upon any transactions for investments wi....
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.... ASSETS NON-CURRENT ASSETS Tangible Assets 0.03 0.04 0.05 0.06 0.00 Fixed Assets 0.03 0.04 0.05 0.06 0.00 Non-Current Investments 0.00 0.00 0.00 1.09 1.09 Long Term Loans and Advances 18.96 18.87 24.11 25.11 0.00 Other Non- Current Assets 10.21 10.60 0.15 0.77 0.65 Total Non- Current Assets 29.20 29.50 24.31 27.03 1.74 Current Assets Inventories 0.00 0.00 0.00 0.70 0.00 Trade 0.00 0.00 29.13 26.01 0.00 Receivables Cash and Cash Equivalents 0.10 0.23 0.18 0.18 0.04 Short Term Loans and Advances 0.00 0.00 0.00 0.00 0.01 Other Current Assets 0.00 0.08 0.05 0.05 0.00 Total Current Asses 0.10 0.31 29.37 26.95 0.05 Total Assets 29.30 29.81 53.68 53.98 1.79 Profit & Loss account of Cressanda Solution ---- in Rs. Cr. -------------- Mar 16 Mar 15 Mar 14 Mar 13 Mar 12 12 mths 12 mths 12 mths 12 mths 12 mth....
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....ry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of longterm capital gains. assessee has failed to prove that share transactions are genuine and could not furnish evidences regarding sale of shares except copies of Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of longterm capital gains. earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. net worth of company is not known to assessee. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains. ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal vs. CIT, 214 ITR 801 is squarely applicable to case. Though assessee has received amounts by way of account payee cheques, transactions cannot be treated as genume in presence o....
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....t that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this case. Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK. Rajeshwari vs. ITO in ITA No.17231Bangl2018, order dated 12.10.2018. Abhimanyu Soin vs. ACIT in ITA No. 9511Chdl2016, order dated 18.04.2018. Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 591Nagl2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT No. 9951Muml2012, order dated 03.08.2016. ITA 841/2019 Page 9 of 10 Disha N. Lalwani vs. ITO in ITA No. 6398 I Mum I 2012, order dated 22.03.2017. ITO vs. Shamim. M Bharwoni [20 16] 69 taxmann.com 65. Usha Chandresh Shah Vs ITO in ITA No. 6858 I Mum I 2011, order dated 26.09.2014. CIT vs. Smt. Jasvinder Kaur 357 ITR 638. 12. facts as well as rationale given by Hon 'ble High Court are squarely applic....