TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 77
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....perty and at the same time, the assessee has claimed set-off of short term capital loss of Rs. 23,54,71, 343/- on sale of shares during the present assessment year. In order to verify the same assessing officer issued notice calling for information on purchase and sale of shares of following scripts: Scrip code Scrip name Short term loss in Rs. 501945 Dhenubuild 3,95,17,635/- 512105 Shreenath Commercial 10,94,32,186/- 530561 Rad Global 4,14,88,123/- 531441 Tuni Textile 2,19,43,210/- 530561 Rad Global (buy) 4,85,67,264/- 3. The assessee filed the response before the assessing officer along with required details. The assessing officer observed in his assessment order that assessee has furnished purchase bill of shares, bank account statement and other broker note in claim of short term capital loss. The assessing officer fully relying on the investigations carried out by the Directorate of Investigation, Kolkata to unearth the organised racket of generating bogus entries of longterm capital gains which is exempt from tax. The assessing officer discussed elaborately in his order and he confronted the assessee why the short term capital loss should not be....
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....ice rigging the shares were not in demand by the general investors of the market and saw very low volume on most of the trading days and hence could not have commanded the price as observed. In any market, a sudden supply, if not matched by similar demand, leads to price fall. Considering the same, any rational investor would not have dumped a large number of shares without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. in the present case, the exit providers discussed above created the demand against the supply from the sellers (beneficiaries of bogus LTCG/STCG). In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the exit providers provided a hugely profitable exit to the sellers. This could be only possible if the sellers and exit providers were hand in glove with each other. 9. Judicial Support for the conclusions drawn: Several Judicial pronouncements support this view that when there is no commercial purpose involved in a transaction and the transaction is for primary purpose of tax avoidance. Few such cases are d....
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....e consideration of Rs. 73,45,284/-, thereby incurring a total loss of Rs. 4,14,88,123/-. b) DhenuBuildcon India: assessee had purchased 2,67,000 shares during the month of February 2013 @ Rs.150.82/- per share average price for a purchase consideration of Rs.4,02,67,735/- and sold these shares during the month of November 2013 (@ Rs, 2.81 per shares average price for a total consideration of R$. 7,50,100/-, thereby incurring a total loss of Rs. 3,95,17,635/-. C) Shri NathCommereial; assessee had purchased 13,35,000 shares during the month of January 2013 @ Rs. 80.61 /- per share average price for a purchase consideration of Rs. 11,16,46,177/- and sold these shares during the month of September 2013 @Rs. 1.60/- per shares average price for a total consideration of Rs. 22,13,91/-, thereby incurring a total loss of Rs. 10,94,32,186/- d) Tuni Textiles Mills; assessce had purchased 4,00,000 shares during the month of January 2013 @Rs. 75.05/- per share for a purchase consideration of Rs. 3,00,18,583/- and sold these shares during the month of May 2013 @ Rs. 20,19/- per shares for a total consideration of R$. 80,75,273/- thereby incurring a total loss of Rs. 2,19,43,210/-. 10. As....
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....urchased and sold on the floor of the stock exchange and not from any of the brokers or parties named in the investigation proceedings. Payment had been made through banking channel for the purchases so made and the delivery was received and thus the purchase contract was completed. Similarly, in case of sale, delivery had been given and payment had been received through banking channels while selling the shares through the stock exchange system and completing the sale contract. 4. The funds that were raised through preferential allotment have not been used for any business expansion and have been further advanced as loans and investments. 5. The whole process preferential allotment was a prearranged and a managed process so as to allot preferential shares to beneficiaries of bogus LTCG which could later be sold by them for booking accommodation entry of bogus LTCG/ STCG in the garb 6. The shares were rigged on the stock exchange through manipulation of the stock market. The AO's observation as to the price rigging cannot be the reason for treating genuine LTCG as bogus, in genuine and/or accommodative in nature. This is a free market where the investor does not have any....
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....mpanies. So it proves that one will invest to buy bogus short term capital gain or loss. This is what the appellant has done by purchasing and selling the shares of these companies. The appellant cannot take the plea that he is not involved in the contract between the buyer and the seller. The recent judgment of Nagpur Branch of Bombay High Court in the case of Sanjay Bimal Chand Jain L/H Shatidevi Bimal Chand Jain vs The Pr. Commissioner of Income Tax-1 Nagpur & Another (Income Tax Appeal No. 18/2017]. "Though the above case is of S'TCG their Lordship held that the authorities have recorded a clear finding of fact that the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the grab of long term capital gain. While so observing, the authoritie sheld that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs. 5/- had jumped to Rs. 485/- in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs. 5/- of a little known company would jump from Rs. 5/-to Rs. 485/-....
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....ellant. 4. On the facts and in the circumstances of the case the AO has erred in making this addition based on notional and imaginary situation and totally unsubstantiated. 8. Before us Ld. AR submitted that assessee is regularly dealing in purchase and sale of shares and this assessment year, assessee has incurred short term capital loss due to steep fall in share prices and she submitted that assessee has purchased and sold the scripts online platform based on the prevailing market rate. The assessee has purchased shares directly from reputed share brokers and is no involvement of any preferred allotment or has not dealt in any off-line transactions. She submitted that all the relevant information relating to claim of actual loss was submitted before Assessing Officer and Ld. CIT(A). She submitted that Assessing Officer has relied on investigation carried on by the investigation wing, Kolkata. However, assessee has only bought through portfolio manager and it has no control over management of the scripts. The assessee has incurred actual loss however revenue authorities treated the same under penny stock category and rejected the contention of the assessee. She brought to our ....
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....thorities have referred to investigation carried out by the Directorates of Investigation on Radford Global to come to a conclusion that entities that have purchased shares of Radford Global are bogus/paper entities. Further, based on the findings in the Investigation Reports, the lower authorities have observed that a common pattern is seen in respect of all the impugned companies in that the financial health of all such impugned entities are poor, there is sudden rise of prices in their shares followed by a steep fall, statements recorded of key persons confirms manipulation in prices of stock to provide capital gains/loss to interested parties. Borrowing from the findings of the Investigation Reports, the lower authorities have held the claim as non-genuine, rejecting the submission of the assessee that the investments were made through reputed portfolio manager who takes the call on the basis of market price, future perception of the company and that assessee is thus not directly involved in any transaction of purchase/sale between buyer and seller. The assessee had also placed documentary evidence before the AO in support of the impugned transaction. It is the finding of the ....
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....int that the assessee has entered into an unholy nexus with entry providers so as to stage manage accommodation entry of STCL. The statements relied on by the AO in the nature of admissions are bereft of corroborative material to implicate the assessee herein in such scam. At the same time the material furnished by assessee to substantiate its claim remains unchallenged and uncontroverted. The purchases were neither off-market nor through preferential allotment. Besides, no copy of any report of information received was supplied to the assessee. The assessee was not confronted with any statement or material allegedly detrimental to the assessee arising or culled out of the Investigation report. Thus, the fact remains that the findings of the lower authorities are not based on evidence but on generalizations and probabilities. The AO could not place anything on record, maybe through a process of his own enquiry, to decisively prove that assessee has obtained bogus STCL through his connivance with entry operators / exit providers. No such enquiry or investigation is seen carried by the AO other than borrowing information to be used against the assessee from the general report of Inve....