TaxTMI 
TaxTMI 
2022 (7) TMI 174
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....e of M/s. Nanesh Finance Corporation on 30.01.2019, the case of the assessee was centralized to Central Circle 1(2). The assessee is a partner in M/s Nanesh Finance Corporation and had purchased 30, 000 shares of M/s. Jackson Investments Ltd at Rs.10/- each per share through M/s. Badri Prasad & Sons (Stock Exchange Broker) on 23.04.2014. Thereafter, the face value of the shares was brought down to Rs.1/- per share from Rs.10/- and the assessee sold 70,000 shares through M/s. Axis Securities Ltd and received an amount of Rs.8,38,953/-on sale of such shares. The assessee treated the receipts as Long Term Capital Gains (LTCG) which is exempt from tax u/s section 10(38) of the I.T. Act. During the course of search proceedings, the assessee voluntarily submitted a letter to withdraw the LTCG claimed u/s 10(38) of the Ac and to offer the same to income returned. 3. Subsequently, the case was reopened by recording reasons and notice u/s 148 of the Act was issued on 12.02.2021. In response to the same the assessee filed return of income on 10.3.2021 declaring total income at Rs.33,39,003/-. Thereafter, the Assessing Officer issued a notice u/s 143(2) of the Act on 10.06.2021 which was d....
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....ssee had used stock exchange mechanism by routing unaccounted money of the assessee by using scrip of the company M/s. Jacksop Investment Ltd and claimed bogus L TCG u/s.1 0(38) of the I T Act. It was found that the assessee has claimed L TCG exemption u/s.10(38) of the Act of Rs.8,38,953/- for the A.Y.2016-17. It was also noticed that M/s. Jackson Investment Ltd is penny stock company. Thus, it is clearly evident that the manner in which L TCG exemption claimed is bogus in nature. 2. During the course of search proceedings, the assessee voluntarily submitted a letter stating that the assessee will withdraw the L TCG claimed u/s. 10(38) of the Act and to offer the same as income. The letter is attached to this order as an attachment. 3. The transactions involving buying and selling of shares have been affected through the authorised channels, involving registered brokers, stock exchanges and the banks. Though the transactions showing exempt LTCG u/s 10(38) appears to be real, but as a fact are sham transactions as the surrounding circumstances prove the facts. 4. Though the assessee has produced the documents to substantiate the transaction, going beyond ....
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....sidered applying the test of human probabilities. The Assessing Officer accordingly made addition of Rs.8,38,953/- to the total income of the assessee treating the same as "income from other sources" and applied the provisions of section 115BBE of the Act. 7. In appeal, the learned CIT (A) upheld the action of the Assessing Officer by observing as under: "6. Decision: In the instant case, the assessment was completed by holding the appellant's investment in shares of M/ s Jackson Investments Ltd (JIL) as bogus and thereby treating the amount of Rs.8,38,953/- as 'Income from Other Sources' as against appellant's claim of LTCG in response to notice u/s 148, which was earlier claimed as exempt u/s 10(38) and taxed the same as per provisions of Section 115BBE at 30% without giving benefit of slabs. Going into facts of the case, it is seen that the appellant has purchased shares of M/s Jackson Investments Ltd and had claimed an exemption u/s 10(38) on account of sale of shares of M/s Jackson Investments Ltd during the year under consideration. It is further observed that the appellant along with other entities of the family also had claimed ....
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.... 2 Sunita Devi A.Y 2016-17 70,000 8,38,953 11.98 70,000 7,68,853 1098 3 Sunita Devi (A.Y)2017-18 70,000 3,21,500 4.59 70,000 2,51,500 359 4 Anita Jain 70,000 13,91,000 19.87 70,000 13,21,000 1887 5 Vishan Raj Jain (HUF) 70,000 14,82,635 21.18 70,000 14,12,635 2018 6 Sajjan Raj Jain (HUF) 70,000 16,46,502 23.52 70,000 15,76,502 2252 7 Sajjan Raj Jain & Wife (HUF) 70,000 11,48,322 16.40 70,000 10,78,322 1540 8 Prakash Chand Jain (HUF) 70,000 13,28,342 18.97 70,000 12,58,342 1797 It is worthwhile to note that all the above persons of the family including the appellant have been bestowed with abnormally high profits in the present year under consideration. The cumulative claim u/s. 10(38) of the appellant and the related parties cumulates to Rs. 86.58 lakhs (approx.] on an investment of Rs.5.60 lakhs, thus getting almost 1446% returns in approximately a period of two years. These persons have shown no prior investments in the share market or have any activity. From the above, it can be concluded that the appella....
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....Rs. 55. These shares were purchased through a broker, Munish Arora & Co. and sold through another broker, M/ s SK Shanna & Co. The AD was taken by surprise by the astronomical rise in share price of a company from Rs. 3 to Rs. 55 and started further enquiry. The AD after enquiry made addition to the income of the assessee, which was upheld by the err (A) as well as by the Tribunal. 4. Learned counsel for the assessee submitted that the view taken by the Tribunal is perverse. The assessee having discharged the burden of proving the transactions of sale and purchase of the shares to be genuine, burden of proving that the said transactions were not genuine, was on the Department and in the absence of any material on record, holding the transactions to be not genuine, was not permissible. We are unable to accept the submission made. The burden of proving that income is subject to tax is on the Revenue but on the facts, to show that the transaction is genuine, burden is primarily on the assessee. The AD is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of evidence that the transaction was genuine, cannot ....
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.... the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion." In this case the Hon'ble Supreme Court has reversed the decision of the Hon'ble Madras High Court and upheld the findings of the lower authorities regarding the transactions of gift received by assessee even though these were done through banking channels, to be though apparent but not be real one. In the present case also, the appellant has not justified the transactions indulged along with other related parties of this particular scrip and the justification of such a rise as such defying the probability and financials of the scrip. Further, in a recent decision, the Hon'ble ITAT, D Bench, Chennai, {in ITA No. 2016/Chny/2017 dated 15.05.2018 (Mrs.Vidya Reddy VsITO(IT)},held as under:- "6. We heard the rival submissions and gone through relevant material. The facts found by the AO are that the assessee, an Individual settled in USA, has purchased 6000 shares of face value of Rs.1 01- each @ Rs.25/ - per share of MI s. Surabhi Chemicals & Investments Limited, offline , ....
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....aced any material to prove that her claim of exemption u/ s 10 (38) is genuine and valid. Since, the right to exemption must be established by those who seek it, the onus therefore, lies on them. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to came to a conclusion. (35 IT'R 312 (SC)). No part of the concurrent findings recorded by the AO and the Ld. CIT'(A), is disputed by the assessee. Further, she has not placed any material before us to dislodge the findings recorded by the Lower authorities. Thus, the above actions of the assessee are nothing, but a premeditated, contumacious conduct, surreptitiously done for specific reasons for converting unaccounted money of the assessee under the guise of long term. share transactions, that too without paying the requisite tax on the same. This is clearly in the realm of tax evasion. Hence, we do not find any reason to interfere with the order of the Ld. CIT'(A). On the other hand, from the above facts and surrounding circumstances, human conduct , preponderance of probabilities etc, the AO has clearly established th....
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....cases in favour of revenue after going through the entirety of the circumstances and not getting influenced by the picture shown by the appellant which is colored by the use of sham devices. The apparatus of brokers and the shares of the company were a tool for tax evasion. The company M/ s JIL is only part of the network and not the network. The appellant resorted to a readymade scheme for purchase and sale of shares which was floated by some Entry Operators. Such transactions are not genuine and natural transactions, but preconceived transactions, resulting in creation of bogus profits which are tax exempt. Such transactions are mutually self-serving to the parties to the transactions. Thus, conclusion is drawn on the basis of above discussion that what is apparent in this case is not real, that these financial transactions were not genuine and that this entire edifice was only a colourable device used to evade tax. Moreover, the impugned transactions of shares are preordained one, not for legitimate purpose in view but for the purpose of creating nongenuine and artificial profits, with a view to reduce valid tax liability. Therefore, the action of the AO as sta....
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.... being unaccounted money brought into the bank as share profit, therefore the action of the Assessing Officer is upheld accordingly and the ground no. 4 is dismissed. The ground no. 1 and 6 are general in nature and need no separate adjudication. To sum up the appeal is dismissed". 8. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: "1. The Hon'ble Commissioner of Income Tax (Appeals) has erred both on facts of the case and in law involved in so far as it is prejudicial to the interest of the Appellant. 2. The Hon'ble CIT(A) without taking into consideration the information filed before him proceeded to complete the appeal u/s.250 of the IT Act and the same is not sustainable. 3. The Hon'ble CIT(A) ignored the explanations given by the appellant and proceeded to confirm the income arbitrarily and such action of the Hon'ble CIT(A) has no basis and therefore the same is liable to be deleted. 4. The Hon'ble CIT(A) ought to have observed that the assessing officer computed income from other sources, which actually accrue....
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....ock Exchange Mechanism to route unaccounted money by using scrips of the company M/s. Jackson Investment Co Ltd, which is a Penny Stock company, submitting a letter stating to withdraw the LTCG claim u/s 10(38) of the I. T. Act and to offer the same to income. 11. So far as the arguments of the learned Counsel for the assessee that the Assessing Officer cannot change the head of income is concerned, he submitted that only if the computational machinery fails, the submission of the learned Counsel may be accepted. However, in the instant case, there is no failure of computational machinery. The assessee has withdrawn the exemption claim u/s 10(38) of the Act. Therefore, the argument of the learned Counsel for the assessee is self-contradictory. Referring to the provisions of section 68 of the I.T. Act, he submitted that it has two components i.e. source/receipt and nature. Here the nature is bringing of unaccounted money. Therefore, character of the receipt is no longer capital gain because the claim has already been withdrawn. He accordingly submitted that the order of the learned CIT (A) be upheld and the grounds raised by the assessee be dismissed. 12. The learned Counsel f....
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....tment Ltd. I find during the course of search when it was noticed that the assessee had used the stock exchange mechanism for routing unaccounted money by using scrips of the company, which is a penny stock company, the assessee submitted a letter withdrawing the LTCG claim u/s 10(38) of the I.T. Act and offered the same as income. Therefore, once the assessee had withdrawn her claim, now the assessee cannot claim the same as long term capital gain and the income in my opinion has to be treated as "income from other sources". If the contention of the learned Counsel for the assessee that the same is to be allowed as LTCG is accepted, then the natural corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. 14.1 So far as the arguments of the learned Counsel for the assessee that the Assessing Officer cannot change the head of income is concerned, the same also is without any force especially when the assessee withdrew her claim of exemption u/s 10(38) of the Act and offered the same as income of the assessee. So far as the various decisions relied upon by the learned Counsel for the assessee are concerned, ....