TaxTMI 
TaxTMI 
2022 (8) TMI 1223
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....x act, 1961 as unexplained cash credit u/s.68 of the Income tax Act, 1961 and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, the provisions of the Act and the Rules made thereunder. 2. On the facts and in the circumstances of the case and in law, once the appellant has duly discharged the primary onus in terms of Section 68 of the Income Tax Act, 1961 and both the lower authorities failed to bring-out any contrary / adverse evidences there against, addition made by the Learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) is required to be deleted." 3. The assessee is an individual and claimed to be working as sub-broker and also drawing salary. The assessee also declared exempted capital gain under section 10(38) of the Act for Rs. 1,15,49,320/- on account of sale of shares of M/s Compfort Fincap Ltd. 3.1 The AO found that the company M/s Comfort Fincap Ltd was previously known as Parasnath Textile Limited and changed its name w.e.f. 4th June 2011. The assessee purchased 55000 share of M/s Comfort Fincap Ltd as on 27th June 2011 in preferential allotment @ 18 per share. Subse....
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....egation, that the share were purchased offline, is again of no adverse inference as there is no prohibition to purchase shares in off market and that does not mean that the transaction is not real. 3.4 The rise in market price of the share especially on stock exchange is not governed by the financial fundamental of the company. As such, the same is affected by several other factors. Further, the listing of shares at stock exchange and their transaction at exchange is strictly monitored by the stock exchange authority as well by the SEBI. Therefore no adverse inference can be drawn for rise in price of share which is allegedly not supported by the financial of the company. Similarly, no adverse inference can be drawn for the fact that price of share sharply increased in the year under consideration and sharply decreased in subsequent year as the stock market is free market where investor does not have any control over the price as the same is governed by market equilibrium. Further, the book value of share of the company for the related parties was of Rs. 220 per share in March 2013 which increased to 246 in March 2014 which can be verified from the annual report of company avail....
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.... besides reiterating its submission made before the AO contended that the purchase of share in the year of acquisition has been accepted by the Revenue. Therefore, the sale of the same should also be accepted. Likewise, the entry operators or stock broker who provided accommodation entry in the scrip of the impugned company nowhere in their statement stated that they have provided accommodation entry to the assessee on hand. Further their statements were not provided for rebuttal and cross examination. 5. The learned CIT(A) after considering the facts in totality confirmed the order of the AO by observing as under: "It is a settled position of taw that section 68 of the Act puts onus of proof on the taxpayer. If an amount has been credited in the books of the appellant, the onus is on the taxpayer to prove the nature and source of the same to the satisfaction of the AO, Section 68 reads as follows : 6.8 Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfacto....
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....ellant invest a huge amount in such a company. (ii) The timing of the transaction is perfect. The scrip is purchased on 15,03,2011 and sold in October,13 to March, 14 just outside of twelve (12) months to make the appellant eligible to claim the profit on this transaction as exempt u/s 10(38} of the Act. Also when the share is bought, it is not listed on stock exchange. The scrip is listed only in March,2013. (iii) During the period of holding of share by the appellant, the price of the share rises very high. So much so that it reaches Rs.448/- per share on 2,05,2013. Once the shares have been sold, the price starts falling and reaches the price of Rs.14/- per share in F.Y. 2014-15. After this there is practically no movement in the share price. Ail this is mentioned by the AO in the assessment order. It is clear that both the rise and fall in share price are sudden and abnormal. (iv) Financials of the company as detailed by the AO in Para 3 of the assessment order were not such that It would attract any investor to invest in the company. In previous years ending from March 20.11 to March 2014, the company had turnover of 2.6 crores, 39.50 crores, 9.99 cr....
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....e assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of any income nature. While considering the explanation of the assessee the department cannot, however, act unreasonably - Sreelekha Banerjee's case (supra) at p. 120. 12. The matter has to be considered in the light of human probabilities.... An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appoint as disclosed in her sworn stament as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected u....
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....actions of purchase of" two penny stock shares for Rs.60,000/. the merger of the companies with a new company and the sale of the shares for Rs.11,58,930/- fell within the ambit of adventure in the nature of trade and the assessee had profited by Rs. 13,98,930/-. The assessing officer, therefore, brought the aforesaid amount to tax under the head 'business income'. Being aggrieved by the order of the assessing officer;, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The appeal filed by the assessee was dismissed and so was the subsequent appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) before the income Tax Appellate Tribunal. On hearing the learned counsel for the assessee and on a perusal of the orders of the income tax authorities, it appears that there is no scope for interference with the said orders in this appeal. By referring to the aforesaid facts, which are narrated in the earlier part of this order, the authorities found that the assessee had made investment in two unknown companies of which the details were not known to her. It was held that the transaction of sale and purchase of shares of....
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....mt.Datta M. Shah) and relied on by the learned counsel for the assessee are distinguishable on facts and cannot be applied to the case in hand. Since no substantial question of law arises in this appeal, the appeal is dismissed with no order as to costs. Facts in the present case are identical to the facts of the above case. Hence ratio of decision in the above case is squarely applicable to the present case. Further, hon'ble ITAT, Mumbai in CIT vs Shamim M, Bharwani m ITA No. 4906/Mum/2011(A.Y.2006-07) in order dated 27.03.2015 has held identical transactions as bogus and confirmed action of the AO in treating these as unexplained and adding the same u/s 68 of the Act. Ratio of the above judgment is fully applicable to the present case. Further, hon'ble Guwahati High Court in CIT vs. Sanghamitra Bharati (361 UR 481) has held similar transactions to be bogus and sham. Case laws relied on by the appellant are not applicable to the present case as the same are distinguished on facts. In view of discussion above and relying on the above cited judgments, I uphold the action of the AO In holding the transaction in shares of Comfort Fincap Ltd.....
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....od of time which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. However, in the given case, the impugned company was engaged in the business activity and likewise, it was regularly showing income from operation and also declaring dividend and having registered in RBI as NBFC. Further, in our considered view, the sharp rise in the price of scrip cannot be a sole criteria for reaching to the conclusion that the price were rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. But in the case on hand, there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s Comfort Fincap Ltd. either by the assessee or his broker. Similarly, there was no complaint filed by any of....
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....ndi as highlighted by the investigation wing of Kolkata. To our understanding, the mere modus of operandi cannot the basis of making the addition or treating the capital gain as bogus until and unless it is supported by other corroborative material documents. 7.5 On further analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, sale is not possible without having the purchases. Thus, once purchases has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he's allowing the benefit of the cost of acquisition for the shares while determining the bogus long-term capital gain. 7.6 The alleged scam might have taken place....
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....rom the present facts of the case in so far there was SEBI enquiry conducted and found guilty of wrong practices but it is not so in the case on hand. 7.9 In our view, the income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. 7.10 Now the controversy also arises whether a person who genuinely purchases the shares at a low price and sold at high p....
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.... Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore....
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....ITO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under: "7. We have gone through the relevant record and impugned order and heard both the parties. Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities. 8. Ld. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles. 9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. ....
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....as not provided opportunity of cross examination, we observe that Ld. A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee. 18. We observe that all the above stated facts and the issue of genuineness of LTCG and failure of the Ld. A.O to provide opportunity to cross examination by the assessee wi....