TaxTMI 
TaxTMI 
2021 (11) TMI 77
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....,65,021/- on sale of shares and immovable property 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 h....
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....Exit Providers have confirmed that they have purchased the shares of companies to provide entry of bogus LTCG/STCG/loss. From the trade analysis it is observed that during the phase of price 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 draw....
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....ed 11,03,920 shares during the month of August 2013 @Rs. 44.24/- per share average price for a purchase consideration of Rs. 4,88,34,407/- and sold these shares during the month of January 2014 @ Rs. 6.65 per shares average price for a total sale 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 Ja....
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...., the Appellant was no way connected with the investigation on various persons. Neither he had dealt with these persons nor he and-/ or his dealing have been named in any of the statements or other proceeding papers related to these persons. The Appellant had made the investment in shares which were purchased 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....
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....runching. 4) This is the most clinching issue. If the portfolio manager takes a call on future perception of the company, the portfolio manager does some research of the financial of the company. From the perusal of the history of the above companies one can very well see that it is bad. So why will any prudent man will invest in the shares of such companies. 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 assesse....
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....ces of the case the Ld. AO has erred in disallowing short capital loss of Rs.21,23,81,154/-. 3. On the facts and in the circumstances of the case the Ld. AO have erroneously relied on some of the stock transactions of sale of shares of companies considered as dealing in penny stock and having absolutely no relevance direct or indirect to the genuine transactions of the sale of shares by the Appellant. 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 a....
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.... apparent that the disallowance as made by the AO and sustained by the Ld.CIT (A) is based on the enquiries conducted by Investigation Directorates of Kolkata & Ahmedabad on certain stock-brokers and entry providers and the statements recorded from them during the course of search. The analysis made by the Investigation Directorates on the financials/business profile of the impugned companies forms the base for rejecting the claim of loss. The lower authorities 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 hel....
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....ce placed on record by the assessee to support the genuineness of the impugned transactions such as contract notes, share certificates, corroborative evidence indicating purchase/ sale through registered broker as juxtaposed against the findings of the AO based on the general report from Investigation and the modus operandi adopted by unscrupulous entry providers. There is no denying that there is no assessee-specific material on record of the AO to pin-point 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 find....