TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 843
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....traded in shares and has earned long term capital gain on such transactions, which has been claimed to be taxable @ 10%. The assessee submitted details of scrips traded during the year. From the same, it was seen that it included script of M/s. Mahavir Advanced Remedies Ltd (hereinafter referred to as "Mahavir‟) which have been identified by the Investigation Wing of the Income-tax Department as tainted script utilised for the purpose of providing LTCG accommodation entries. Brief details of the transactions are as under: i) The assessee had purchased number of 50,000 shares of M/s. Indo American Advanced Pharmaceuticals Ltd. for consideration of Rs. 2,50,000/-. The name of M/s. Indo American Advanced Pharmaceuticals Ltd. was subsequently changed to M/s. Mahavir Advanced Remedies Ltd. Out of these, she had sold part shares of both companies during F.Y. 2014-15 for consideration of Rs. 1,32,48,347/- on which he had earned long term capital gain of Rs. 1,30,13,347/-. The assessee has earned LTCG gain of Rs. 1,30,13,347/- on these transactions which are claimed to be taxable @ 10%. ii) Subsequently, during the course of assessment proceedings, the assessee has made a fresh c....
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....ers and the nature of transaction entered into by the assessee the LTCG of Rs. 1,30,13,347/- claimed exempt us 10(38) of the Act by the assessee cannot be allowed and the amount of Rs. 1,30,13,347/- received back as sales proceeds on sale of shares is required to be added back towards her taxable income under section 68 of the Act. 16.2 The section 68 of the Income-tax Act reads as under: "68. Cash credits - 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 ITO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." This section contemplates fulfilment of three conditions namely identity of the creditor, genuineness of the transaction and the creditworthiness, before considering the explanation of assessee and with regard to source of any money found credited in the books of the assessee. A plain reading of section 68 would indicate that when any money is found to be credited in the books of the assessee it is for the assessee to prove....
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.... appellant was under strain and pressure and therefore agreed to withdraw the claim of exemption U/s 10(38) of the Income Tax Act. It has been alleged that the appellant in order to avoid further litigation had filed her return of income declaring long term capital gain as taxable though it was exempt U'/s 10(38) of the Income Tax Act but this allegation has remained unsubstantiated. During the course of assessment proceedings, the appellant requested the AO to allow exemption u/s 10(38) to her. However the AO did not pay any heed to the request of the appellant. The AO found out that the appellant had purchased 50,000 shares of M/s. Indo American Advance Pharmaceuticals Ltd. on 21.06.2012 from M/s. Virendra Distributors for a purchase consideration of Rs.2,50,OOO/-. The said shares were also dematerialized in the Demat account of the appellant in February & March, 2013. Later on, there was a change in the name of the existing company viz. Indo American Advance Pharmaceuticals Ltd. to Mahavir Advanced Remedies Ltd. w.e.f. 07.06.2013. During the year under reference, the appellant had sold 47,000 shares of Mahavir Advanced Remedies Ltd. between 17.06.2014 and 11.12.2014 for a sa....
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.... Directorate of Investigation, Kolkata had carried out investigation in 84 penny stock shares coated on BSE. During the investigation, it also recorded statements of concerned persons/directors of said companies U/s 131 of the Act whereby it was established that the shares of said companies were rigged up/manipulated for generating huge profit or losses, as per the requirements of the clients. The operator also controlled numerous paper/bogus companies which were utilized for rotation of cash given by the beneficiaries who desired bogus long term capital gain. Keeping this nexus in mind and proving the same, the Directorate of Income Tax (Inv.) , Kolkata prepared a cash trail for showing that how the mechanism worked for the syndicate of providing long term capital gain/short term capital loss. For preparing this cash trail, the Investigation Wing, Kolkata followed the money movement from undisclosed proprietorship accounts where cash was being deposited mostly to the Iamakharchi companies who were registered as clients with the share brokers. Undisclosed and unaccounted cash got deposited into the bank accounts of proprietorship concerns and from there; it got transferred to clien....
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....howing payment and receipts were very much available with the assessee at the time of recording of the statement of her husband before DDIT (Inv), Aurangabad. The assessee has thus miserably failed to show that such offer of withdrawal of claim of exemption u/s 10 clause (38) of the Act was given by her husband under threat/coercion and mistaken belief of facts. Thus, retraction of the assessee is in nature of an after-thought only just to evade taxes. 7. Furthermore, in the order of the ld. CIT(A) he had held that increase in the share price of Mahavir Advanced Remedies Ltd. was not backed up by any fundamentals and these were merely rigged. The movement of the price was abrupt and unrealistic and same was not based on any parameters. In fact, the Bangalore Tribunal in ITA No. 1723/Bang/2018 dated 12-10-2018 for A.Y. 2015-16 in a case involving long term capital gain in the scrip of Mahavir Advance Remedies Ltd., has decided in favour of the revenue on the ground that the said company was a penny stock and its trading volume/share prices had been rigged by the entry providers. The ld. CIT(A) also relied on the decision of Hon'ble Supreme Court in the case of Lachminarayan Madan L....
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....hares of the listed penny stock in exchange of the shares of private limited company. The modus operandi of conversion of unaccounted money in long-term capital gain was examined by the AO before coming to the conclusion. The AO has also examined the balance sheets of Mahavir Advanced Remedies Ltd., and the balance sheet and profit and loss account for the last 3 years was extracted in the assessment order. 7. The AO has also examined the price value statements quoted on the stock exchange and noticed that there was abnormal price rise by the overall percentage increase in sensex during the period when the shares stock phenomenal price rise and has made the following observation: "(v) This abnormal price rise is also highlighted by the overall percentage increase in the Sensex during the period when the shares saw phenomenal price rise. Normally, the Sensex is a benchmark of the of the average price movement in any share. Most of the stocks which have good market capitalization and are majorly held by public tend to follow the price movement of the Sensex. The deviation in price movement vis-a-vis Sensex is usually guided by the fundamentals of the company and the behavior of *....
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....Mahavir Advanced Remedies Ltd. were rigged in a pre-planned systematic manner by conducting limited trades and with miniscule volume." 9. That as it is evident from the findings of the ld. CIT(A) in view of information provided by Investigation Wing, Calcutta, the recommendations of Special Investigation Team (SIT) on black money etc., the Assessee was required to prove her claim of exemption. After considering her reply, the ld. CIT(A) held that it is clear that the assessee has manipulated the sale of shares within a short span time in collusion with brokers in order to earn tax free exempt long term capital gain on the sale of shares u/s 10 clause (38) of the Act. The assessee has also not placed on record any material to prove that the claim of exemption u/s 10(38) was genuine. 10. Further, we find the Hon'ble Calcutta High Court in a recent judgment delivered on 14-06-2022 in the case of Pr. CIT Vs. Swati Bajaj and others in ITAT No. 06 of 2022 came heavily upon fraudulent transactions being carried out in the form of shell companies and has strongly held against the assessee and in favour of the revenue observing that this modus operandi in taking undue advantage of the leg....