TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1201
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.... examined and held that the events are not simple or lucid as explained by the assessee. The AO noted that the Directorate of Investigation, Kolkata carried out a county wide investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gain which is exempt from tax. The modus operandi adopted by the operators was to make the beneficiary buy some shares of a pre-determined Penny stock company controlled by them. These shares are transferred to the beneficiary at a very nominal price mostly off-line through preferential allotment or off-line sale. The beneficiary (an individual) holds the shares for one year, the statutory period after which LTCG is exempt u/s 10(38) of the Income tax Act, 1961. In the meantime the operators rig the price of the stock and gradually raise its price many time, often 500 to 1000 times. This is done through low volume transaction indulged in by the dummies of the operator at a pre-determined price. When the price reaches the desired level the beneficiary who bought the shares at a nominal price, is made to sell it to a dummy paper company of the operator. For this, unaccounted cash is provided by the beneficiary which is....
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....ces against the claim of LTCG. 3.3. He noted that the assessee has acquired shares of Esteem Bio (in Physical form) on 16.10.2012 by making payment through Avish Credit Capital Ltd. 25.06.2012 for 5000 shares. Assessee has furnished copy of bank statement showing debit entry on 18.10.2012 to this effect. This company was having market price of share at around Rs. 1.62 for the share having face value of Re 1 in February, 2013. Thereafter, the price was jacked up to Rs. 52.49 from Rs. 1.62 in 22 months that is till December, 2014. Thus, within 22 months the price was jacked up nearly 32 times. After that the price was maintained in the range of Rs. 36 to Rs. 52 so that the interested beneficiaries were able to book the long term gains. After that the price was made to fall freely so that interested beneficiaries who had booked at high market price can avail bogus short Term Capital Loss. Thereafter the prices have gone down to merely Rs. 22. 3.4. The AO further noted that while LTCG is booked while the share price is going up, the downward journey is used by the operators for booking bogus losses. The LTCG beneficiary pays cash to exit entry provider or a person who wants to book a....
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....ale of shares of Esteem Bio Organic Food Processing will not be treated as LTCG. a) The initial shares were purchased through off line trading and the assessee has invested his hard earned money in the shares of the company net worth was negligible and it was done solely on the suggestion of his uncle in anticipation of huge profits. This was also stated by the assessee during his statement recorded u / s 131 that the intention at the time of purchase was to earn huge profit. b) The assessee had made investment m M/s Esteem Bio whose details were not known to the assessee. Considering the above, the transaction of sale and purchase of penny stock shares does not qualify to be called as a capital investment rather, these transactions are an adventure in the nature of trade. c) This also come to conclude that the motive of the assessee's investment in the penny stock companies was not to derive income by way dividend etc. rather, to earn huge profit. d) The entry providers (as mentioned in para 6.2 above) in their statements have admitted that M/s Salasar Trading; M/s. Ganpati Enterprises; and M/s. Mahadev Traders; are the companies involved in providing accommodation entries....
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....n nature information accessible and available in the public realm by dismissing the Appeal even without considering the Facts and contention in respect of Admittedly being accepted the investment of Rs. 50,000/- as part of Assets in the past and those investment have also been added. 4. Whether the Ld. CIT (A) was justified to uphold the Ld. AO order which was based on the arbitrary and on surmises, by denying claimed LTCG on mechanical and irrelevant factors and moreover no adverse material on record to disapprove the evidence on record 5. Whether the Ld. CIT (A) was justified to uphold the Ld. AO order by way of not only denial of LTCG of Rs. 46,41,079/- was claimed u/s 10(38) ,on transfer of shares ,but also added the purchase costs, on the suo-motto observations without establishing the full prove case or pointing out the entire chains of the transactions to justify bogus transactions. 6. Whether the Ld. CIT (A) was justified to uphold the Ld. AO order by way of denial of entire LTCG of Rs. 46,41,079/- ,and also cost of purchases , which was claimed u/s 10(38) on Transfer of shares and added under the Garb of section 69Aread with seetionll5BBE as well as suo-motto treated....
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....nies were purchased by the assessee in the month of February 2013 and November, 2012 which were sold in the month of February/March 2014 and these transactions took place much before the report of the Investigation Wing and also before the order of the SEBI. The Tribunal had allowed the claim of the assessee of Long Term Capital Gain. 6.2. Referring to the decision of the Hon'ble Delhi High Court in the case of Smt. Krishna Devi & Ors. Vs ITO in ITA No.125/2020 & Ors, order dated 15.01.2021 and batch of other appeals, he submitted that the Hon'ble Delhi High Court in the said decision has upheld the order of the Tribunal and dismissed the appeal of the Revenue under identical circumstances. He submitted that identical decision has been rendered by the Co-ordinate Bench of the Tribunal in the case of Swati Luthra & Ors. in ITA No.6480/Del/2017 for AY 2014-15. 6.3. He submitted that despite opportunities granted by the Tribunal to substantiate as to in what manner investigations carried out by the Directorate of Investigations, Kolkata or the SEBI investigations have a link with the instant transactions entered into by the assessee, the Revenue has miserably failed till today to su....
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.... ground that the share transactions are not genuine and that the assessee is not a regular investor in the share market and has not done many transaction in the share market. The assessee has also very limited information about Esteem Bio Organic Food Processing Ltd. and the company is having poor financial record. The assessee has purchased 5000 shares of Esteem Bio Organic Food Processing Ltd. when the company has no proven financial results which are an indicator of events to be occurring in the future. He also relied upon the report of the Investigation Wing and the order of SEBI, which has suspended the trading of above shares. 8.1. We find the assessment in the instant case, apart from other things, is based on report of the Directorate of Investigation, Kolkata and SEBI as mentioned by the AO at page 2 and 3 of the assessment order. We find when the case was fixed for hearing on 09.09.2021, the Bench vide order-sheet entry dated 09.09.2021 has passed the following order:- "BENCH-A ITA NO. 1547/Del/2019 (AY 2015 -16) AMIT JINDAL VS. ITO WARD 59(3), NEW DELHI 09-09-2021 Present for the Assessee : Mr. V.K. Tulsian, Adv. Present for the Department: Mr. V.K. Kataria, Sr....
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....SIDENT 9. However, despite lapse of almost four months from the date of direction given by the Bench, the Revenue could not file any document to substantiate that the Investigation carried out by the Directorate of Investigation of Kolkata or SEBI has any link with the instant transactions of the assessee. We further find the report of the SEBI is of 2015, whereas, in the instant case the assessee has purchased the shares in off market dealing in 2012 and sold the same in 2014 through stock exchange, meaning thereby that the transactions are of a date prior to the date of SEBI Report. 9.1. We find, identical issue had come before the Coordinate Bench of the Tribunal in the case of Smt. Karunga Garg & Ors. Vs ITO (supra) where the Tribunal while deciding the issue has allowed the claim of Long Term Capital Gain on sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the claim of exemption u/s 10(38) of the Act. The relevant observation of the order of the Tribunal from para 19 onwards reads as under:- "19. We have carefully considered the orders of the authorities below and the relevant documentary evidences brought on record in the form of paper book i....
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....ce in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the appellants do not find place in the said list. At pages 58 and 59 the names of pre IPO transferee in the scrip of M/s. Esteem Bio Organic Food Processing Ltd is given and in the said list also the names of the appellants do not find any place. At page 63 of the SEBI order-trading by trading in M/s. Esteem Bio Organic Food Processing Ltd - a further list of 25 persons is mentioned and once again the names of the appellants do not find place in this list also. 25. As mentioned elsewhere the brokers of the assessee namely ISG Securities Limited and SMC Global Securities Limited are stationed at New Delhi and their names also do not find place in the list mentioned here in above in the SEBI order. There is nothing on record to show that the bro....
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....wers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68." 28. The DR heavily relied upon the judgment of Hon'ble High Court of Delhi in the case of Udit Kalra Vs. ITO in ITA No.220/2019. We have carefully perused the order of the Hon'ble High Court and on going through the said judgment we find that no question of law was formulated by the Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine as the Hon'ble High Court found that the issue involved is a question of fact. 29. As mentioned elsewhere the shares of M/s. Esteem Bio Organic Food Processing Ltd were suspended from trading in the stock exchange but that was from 29.06.2015 which is date of the order of the SEBI. The shares of two companies were purchased by the assessee in the month of February 2013 and November, 2012 whic....