TaxTMI 
TaxTMI 
2020 (12) TMI 1276
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....ies. 2. Without prejudice to the above, the learned CIT(A) erred in upholding the action of the assessing officer in treating the long-term capital gains accruing to the appellant as non-genuine only on the basis of general finding of Directorate of Investigation and admission by operators, entry providers and stock brokers in general of having provided the accommodation entries and when there was no cogent material on record and no direct nexus / connection with the appellant was established to prove the impugned transaction as bogus. 3. The learned CIT(A) failed to take cognizance of documentary evidence provided by the appellant such as bank statements, brokers' contract notes and ledger accounts, demat accounts, etc. to substantiate the transactions of purchase and sale of shares. The addition made u/s 68 is merely on presumptions, suspicion, surmises and conjectures disregarding the direct evidence placed on record. 4. The learned CIT(A) erred in denying the benefit of sec. 10(38) of the Act to the appellant when all the conditions for claiming exemption are satisfied by the appellant. 5. The learned CIT(A) erred in treating the transaction of the appellant as nong....
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....r reopening the assessment. The assessee was provided reasons recorded under section 148(2) on 31.05.2017 and thereafter objections to the reopening of assessment were filed vide letter dated 06.10.2017 by the assessee. The assessee had purchased 28 lakh shares of M/s. Shrinath Commercial and Finance Ltd. during a span commencing from 04.03.2011 to 15.03.2011. Thereafter a bonus issue in the ratio of 1:1 was brought out by the company on 22.03.2011. Consequently the total holding of the assessee became 56 lakh shares which were sold by the assessee during the period beginning from 23.08.2012 to 08.02.2013 for aggregate consideration of Rs. 41,48,39,241/- thereby making a long term capital gain of Rs. 35,43,35,716/- which was claimed as exempt under section 10(38) of the Act. During the assessment proceedings the AO has narrated detailed modus operandi adopted by various operators and the manner in which the purchase and sale of shares were rigged to spiral the prices and accommodation provided by various brokers, related entities and exit providers. The statement of the assessee was also recorded under section 131 of the Act. According to the AO the financial strength of M/s. Shrin....
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....er the Ld. CIT(A) dismissed the appeal of the assessee on both counts. The Ld. CIT(A) while dismissing the appeal on jurisdictional issue observed and held as under: "5.1.3 In view of these facts, AO had reason to believe that income to the extent of Rs. 41,48,39,241/- had escaped assessment. The facts taken on face value by Assessing Officer at the time of original assessment were found to be false presentation of facts. THUS facts themselves got changed on receipt of information from Investigation wing. Thus, it is not case of change of opinion. 5 1.4 in view of above detailed and satisfaction note of AO on the basis of new facts unearthed by Investigation Wing and made available to AO, it is held that AO was correct in assuming jurisdiction u/s 147 and has correctly issued notice u/s 148. The appeal of assessee therefore, does not succeed on this account. Following case laws where law is expounded in this regard, support the action of AO:- (i) McDowell's 154 ITR 148(SC) - in so far the 'corporate veil' needed to be lifted in such cases to distinguish "apparent" from "real". All documents placed at the time of 143(3) assessment are farce and principle of Essen....
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....apital gain and is part of several thousands of crores scam and assessee is a beneficiary of the said organized scam. Thereafter, the AO after analyzing the information received from the Directorate of Investigation recorded reasons under section 148(2) by referring to the return of income filed by the assessee and information furnished by the assessee qua the sale of shares and long term capital gain and came to conclusion that assessee's income has escaped assessment accordingly. In our view, the reopening of assessment is based on specific information as the director of investigation has specifically provided information to the AO that assessee is beneficiary of bogus long term capital gain which is a part of big racket. In view of these facts ,we do not find any merit in the contentions of the assessee that there is no linkage between the report of the investigation wing, statement of various individual recorded during the search with the facts of the appellant. Though the statement of various persons/brokers/exit provider did not name the assessee, however, during overall investigation of the entire scam the assessee's name came to light that he is beneficiary of these bogus l....
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....notes. Similarly, the purchase consideration was paid through banking channels and sale consideration too was also received through banking channel, STT duly paid and all the transactions were duly reflected in the return of income of the assessee. These shares were held for a period of more than one year and then sold yielding long term capital gain of Rs. 35,44,38,501/- which was claimed as exempt under section 10(38) of the Act. The Ld. A.R. submitted that assessee has even given the details of brokers through whom these transactions were made and these brokers were not the parties whose statements were recorded by the investigation wing or who had admitted that this particular script was used to provide bogus entries of long term capital gain. The Ld. A.R. submitted that there is no specific mention of assessee or his family member in any of the recorded statements which could establish the nexus with the whole arrangement of providing and accepting accommodation entries by these operators/exit providers. The Ld. A.R. submitted that the assessee has carried out these transactions through a recognised stock exchange and operated through a mechanism which is lawful platform for d....
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....l thousands of crores of rupees. This was an organized racket carried by the stock brokers/operators and exit provider to benefit the parties in the form of accommodation of long term capital gain which was claimed as exempt under section 10(38) and assessee was none of the beneficiaries. The Ld. D.R. submitted that during the said investigation the assessee was found to be the beneficiary of the bogus long term capital gain and his name cropped up during the investigation itself. It is only thereafter the investigation wing passed on the information to the AO about the huge transaction of purchase and sale of shares and the consequent long term capital gain which was claimed as exempt under section 10(38) of the Act. The Ld. D.R. referred to the financial position of M/s. Shrinath Commercial and Finance Ltd. and submitted that the financials were poor during the period when the shares were held by the assessee and did not justify the phenomena increase in the share prices which proved beyond doubt that the prices of these shares were manipulated and rigged through an organized racket in order to yield the bogus long term capital gain to various beneficiaries including assessee. Th....
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....ares in the said company. We note that these shares were purchased through recognised stock exchange through registered broker and were credited in the D-mat account of the assessee. Similarly the bonus shares were also credited in the said D-mat account held by the assessee. All these purchase of shares were supported by the contract notes issued by the authorised brokers of the stock exchange and the payments were made through banking channels. Thereafter, the assessee sold these shares during the period commencing on 23.08.2012 to 08.02.2013 for a total consideration of Rs. 41,48,39,241/- and was received through banking channel thereby making a long term capital gain of Rs. 35,44,38,501/- which was claimed as exempt under section 10(38) of the Act as long term capital gain on sale of shares. We notice that all these transactions were carried out on a recognised stock exchange by the assessee through registered brokers duly evidenced by the contract notes and entries in the D-mat account and the sale and purchase consideration reached through banking channels. The AO has also only relied on the investigation carried out by the Investigation wing, Kolkata and Mumbai that assessee....
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....ased for code numbers S003 and R121 of Sagar Trade Pvt. Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, al! that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two compani....