TaxTMI 
TaxTMI 
2020 (4) TMI 290
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.... basis of assumption & presumption without bringing any concrete evidence. 3. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in not considering the fact that the appellant purchased shares and made payment by account payee cheque, received the delivery of shares, sold these shares thorough DMAT account, gave the delivery and received the payment in banking mode. Hence the genuine transaction wherein necessary evidence has been duly submitted cannot and should not be treated as ingenuine merely on arbitrary view or suspicion. 4. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in not considering the fact that no opportunity of cross examination was provided and hence the order passed u/s 143(3) is bad in law and hence need to be quashed. 5. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming additions made by the Ld. AO of 7% of commission income on the basis of assumption and presumption and without bringing any concrete evidence and without providing....
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.... other company after investing in this company. He only holds the shares of Indian bank. He was also not sure that why this company issued bonus shares within a short span of time. He was also not aware of the reasons or performance of company resulting in to steep rise in prices of that shares. He accordingly treated the LTCG as a sham and the sale proceeds as unexplained credit entry in the hands of the assessee and made an addition on this account after invoking the provisions of Section 68. He also made an addition of Rs. 1,84,090/-, being 5% of commission paid to an accommodation entry broker by invoking the provisions of Section 69C of the Income Tax Act. AO passed order u/s 143 (3) of the act on 26/12/2017 determining total income of the assessee at Rs. 3488844/-. 4. Aggrieved by the order of the AO, the assessee is in appeal. Before the ld CIT (A) it was submitted that appellant sold shares of listed company, which were held more than 12 months, through recognized stock exchange and claimed long term capital gain. Since the said transaction was made from BSE being a recognized stock exchange, the appellant duly paid Security Transaction Tax and Claimed the same as exe....
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....nce which suggests that apparent is not the real in this case. He held that this requires an examination where one needs to delve deep into the evidences stacked up against the assessee vis-a-vis evidences filed by the assessee in an attempt to prove the genuineness of the LTCG. A thorough examination was made of the order of the AO, the submissions of the Appellant, the information and evidences available on record, as information accessible and available in the public realm. A prima facie examination of the evidences and information on record reveals certain in-the-face indicators of dubious share transactions resulting in LTCG. He noted that following aspects emerged from such an examination: i. Prima-Facie Indicators of Dubious Share transaction resulting in LTCG being One-Off Transaction by Appellant & members of his family laundering Rs. 50 lakhs or more of black money holding that appellant does not transact in shares on a regular basis. In fact, in the year under consideration, strange as it may seem, the shares of M/s HPC Bio Sciences (P) Ltd were the only shares the appellant transacted in that yielded a huge tax-free LTCG. (other than transaction in a small lot ....
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....46 0.13 0.00 Net Block 6.74 8.12 9.53 10.57 1.10 0.00 Investments 0.30 0.30 2.79 2.49 0.00 0.03 Inventories 1.26 0.67 0.82 1.04 0.78 0.00 Sundry Debtors 3.26 1.98 0.00 1.09 0.35 0.00 Cash and Bank Balance 0.85 0.86 0.45 0.70 0.11 0.01 Total current assets 5.37 3.51 1.27 2.83 1.24 0.01 Loans and Advances 17.78 17.77 15.81 11.94 2.46 0.04 Total CA, Loans & Advances. 23.15 21.28 17.08 14.77 3.70 0.05 Current Liabilities 0.08 0.05 0.09 0.04 0.00 0.00 Provisions 0.02 0.03 0.01 0.00 0.00 0.00 Total CL & Provisions 0.10 0.08 0.10 0.04 0.00 0.00 Net Currents Assets 23.05 21.20 16.98 14.73 3.70 0.05 Total Assets 30.09 29.62 29.30 27.79 4.80 0.08 Book Value (Rs.) 1.89 0.86 18.12 17.35 27.41 9.80 An analysis of the above shows that share capital in March 2012 was a small 1.75 crore and jumped more than 9 times to 15.96 crore in March 2013 (post-IPO). Similarly, in March 2012 there were no ....
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....ased dramatically to 3.45 in March 2013 and as dramatically reduced to 0.77, 0.04 and 0.03 in March 2014, March 2015 and March 2016. There is also no purchase of stock in any of the years. The above analysis shows that the entire growth of the company is limited to the period from March 2013 and March 2014.The financials before and after this period are extremely weak. iv. Manipulation in the run-up to the IPO The above analysis also indicates an apparent manipulation in the run up to the IPO. Other indicators of manipulation in the run up to IPO are: It was observed that during the period when the pre -IPO shares were under lock-in, the volume in the scrips was very low, but the price of all the scrips increased manifold. It was also observed that after the release of lock-in, there was substantial increase in traded volume and price of the scrips. Prior to release of share from lock in Period 03.04.2013 - 14.03.2014 Average Volume 5628 Post release of share from lock in Period 18.03.2014 - 13.12.2014 Average Volume 49,495 Price rise in the scrip Period 03.04.2013 - 31.12.2014 ....
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....as prima facie observed that same funds were circulated by the Funding Group to finance these IPOs. These prima facie parameters are strong indicators of manipulation of share price in the period March 2013 to March 2014. However, now they can be regarded only as indicators. They cannot by themselves be treated as proof of manipulation. Therefore, the next step is to examine if evidences and reports support and corroborate the prima facie indication of manipulation of shares to create a conduit for Tax- free LTCG. vii. He further referred to investigation carried out in this Penny Stock scam, one by the Investigation wing of the Income Tax department and one by Securities & Exchange Regulator SEBI. viii. He also considered the summons issued to the assessee u/s 131 of the Income tax act was issued to record the statement of the assessee. The statement was recorded on 18.12.2017 wherein the appellant submitted that he had-purchased the shares on a tip from a maternal uncle, who by was not produced to substantiate claim. ix. He thereafter proceeded to conclude his order holding that it is clear that based on certain prima facie indicators that the LTCG from....
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....AO as recorded on page 16 of the order of the AO, The submissions of the assessee made vide letter dated 22.12.2017 and was specifically addressed as is clear from Page 16-17 of order of AO, All evidences were confronted during course of statement recorded on 18.12.2017 and Opportunity was given to the assessee to respond to show cause notice issued. Therefore he held that From the above enumeration of facts, it is clear that all evidences used against the appellant were disclosed to the appellant and he was allowed more than adequate opportunity to rebut such evidences. Assessee has raised the bogey of violation of natural justice to divert attention of the appellate forums from the facts /evidences that are strongly stacked against the assessee. He found that assessee's ground on the issue of violation of natural justice has no legal legs to stand on. xii. On the issue of cross-examination, The ld CIT (A) held that claim of the appellant is that the AO did not allow cross examination of the persons whose statements were used against him. He referred to several judicial precedents and held that the reference to those judgments and principles enunciated therein clearly....
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.... 220/2019 & CM No. 10774/2019 and Suman Poddar ITA 841/2019, therefore the issue is squarely covered against the assessee. 9. We have carefully considered the rival contentions and perused the orders of the lower authorities. Facts of the case clearly shows that the assessee, an HUF, Karta is merely 12 standard pass, did not trade or invested in any other noticeable securities, or earned noticeable gain or loss on transaction of shares, has purchased 2500 shares on preferential allotment basis on 3/1/2013 of a non-descript company M/s HPS Bio science Limited at Rs. 10 per share, on advice of his uncle, without knowing anything about the company or its business or its financials. Subsequently that company allotted bonus shares in the ratio of 1:1 . Thus the holding of the assessee got doubled to 5000 shares having cost per share of Rs. 5 each. Assessee sold 4800 shares on 4/4/2014 for Rs. 2654863/- and average sales realisation per share is Rs. 5 53.10. Thus, the assessee got an astronomical return of 1800 percentage within one year and three months. From the statement recorded of the assessee, the original allotment was in preferential allotment. Assessee does not know any of th....