TaxTMI 
TaxTMI 
2022 (11) TMI 468
X X X X Extracts X X X X
X X X X Extracts X X X X
....s erred in confirming the impugned assessment order based completely on presumptions, surmises and conjectures for declaring bogus transactions in declared penny stock companies equity share (c) That the learned commissioner of Income Tax Appeals) confirmed the impugned order based completely on third persons statements recorded during investigation proceedings without providing copy of complete set of proceedings and statements which were recorded against principle of natural justice. (d) That the learned commissioner of Income Tax (Appeals) confirmed the order for addition in income on the basis of report prepared on the basis of third persons statements recorded behind the appellant without providing opportunity to cross examine them while specifically demanded by the appellant. (e) That the learned commissioner of Income Tax (Appeals) erred the confirming the impugned assessment order due to heavy gain in short period without considering the speculatary nature of the stock market. (f) That the learned Commissioner of Income Tax (Appeals) confirmed the impugned assessment order by non speaking order referring irrelevant judgement, which were n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- and claimed exemption u/s 10(38) of the Act during the year under consideration whose details are narrated as under:- Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains Sunrise Asian Ltd. 1.04.2012 1,00,000 2.08.2013 24,23,696 23,23,696 While examining the issue of Long Term Capital Gains, the AO noticed the following facts. ''2.1 The assessee has shown to have invested in shares of M/s. Santoshimaa Tradelinks Limited, an unlisted company on 01-04-2012. Later on, it was merged with Sunrise Asian Limited. Detaill with respect to this transaction was filed by the assessee during the courseof assessment proceedings. Following observations have been made in relation to alleged purchase of 5000 shares of M/s. Sunrise Asian Limited. (i) The assessee has shown purchase of 5000 shares on 01-04-2012 (ii) The Bill for this transaction was raised by one Santoshima Tradelinks Ltd. on 01-04-2012 (there is an overwriting / cutting) i.e. actual date of purchase is not ascertained i.e. actual date of purchase is not ascertained. (iii) The Santoshima Tradelinks Ltd. was merge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Term Capital Gains. It is therefore proposed to treat the said amount of Rs.23,23,696/- as unexplained credit found in your books of account and proposed to be added u/s 68 to your total income for assessment year under reference. 7. During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the beneficiaries in lieu of providing bogus entries. In fact, one of the beneficiaries Shri Ajit Gupta of Delhi have categorically admitted in his statements recorded u/s 132(4) that he paid commission of 6% in cash in lieu of bogus entry of Long Term Capital Gains shown from artificial trading in penny stock bogus company M/s. Sunrise Asian Limited. Looking to such credible evidence on this issue, I estimate an amount equivalent to 6% of the bogus Long Term Capital Gains entry which comes to Rs.1,45,421/- (calculated on sale proceeds of Rs.24,23,696/-) as commission paid by you in lieu of entry of bogus Long Term Capital Gain of Rs.23,23,696/-. Therefore, an addition of Rs.1,45,421/- on this count, is proposed to be added to your total income for the year under consideration. 8. In view of above, you are requested....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on record 1. Copy of 5000 of Sunrise Asian Ltd (old name santoshimaa TradlinkLtd) @ 20/ per share purchased voucher M/S Silverice Mutti Trading Pvt Ltd 2. Copy of Shares transferred in the name of assessee 3 Copy of demat A/c in SMC Global Securities Ltd 4.Copy of balance sheet for the financial year 2012-13 The shares Satishimanto Tradelinks Ltd. Changed name Sunrise Asian Ltd 2012-13 holding was more than 18 months therefore is correct and acceptable as such long term capital gain exemption claimed U/s 10(38) of IT Act 3. That the Para 3rd of notice stated in detail about seam of long term capital gain short term capital gain is running by the operators based on Delhi, Kolkata & Mumbai etc. They proved facility to convert black money in exempted income u/s 10(38) of the IT. Act on commission of 6% by bogus long term capital gain entry. The syndicate of scam operators managed all documents as legally required and managed the market price of shares astronomical proportions with in stipulated period of one year. The SEBI has also passed order for suspending trading by the document of such 26 scrips out of these penny stock compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompany (B) Statement of ShriSarnjayvora S/o Late ShriDhirajLalVord was recorded on 08.04.2015 (i) That the copy of pages regarding Q.No.3 to 24.28.to 58 and 61 onwards were not provided, therefore this in complete statement cannot be read against the assessee in quasi-judicial the preceding nor suppose to reply by the assessee. (ii) That the statement of shri Sanjay Vora was recorded in what capacity during survey operation of office premise of M/s AnandRathi shares and stock broker Ltd, Hemar Bharwada and other at Kolkata, 20 is not mentioned, therefore his statement is neither considerable nor reliable. (iii) That the Sanjay vora accepted in his answer of Q.No.60 the list of companies and quantity of shares traded but not accepted the trading was bogus nor accepted involvement in bogus long term capital gain syndicate and told that he derived only brokerage income from trading of those share as reflected in books of account. (C) Statement of ShriAnuj Agarwal S/oshriArarwal was recorded on 05.03.2016. (i) That the copy of pages regarding Q. No. 6 to 10 and 20 to 26 were not provided. therefore this incomplete statement cannot b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of sunrise Asian limited is also indulged in providing accommodation entries or not the assesse cannot decide mere book results which were controlled the prices in stock market. The stock market is completely based on probabilities sentiments of market political scenario, trend of market fiscal policy stability of govt. speculation, global trade of market etc. If study the scripts then may find that 50% scripts prices does not based on their worth Therefore the high prices of any script in market cannot be deemed as involved in scam of penny stock scripts. 6. That the assessee does regular working in share market for last 10 years and one of company script Sunrise Asian Ltd were traded cannot be deemed that the assessee is also involved in scam. There is no conclusive evidence of record to prove that the assessee was also did the transaction in such a manner merited in notice and paid return black money to the operator of the scam Therefore proposal to make addition is ab initio illegal and without any goods reason and bias for the same on record. 7. That the para 7 of notice is regarding commission paid to broker@ 6% in cash in lieu of bogus en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cording to the AO, following observations have also been made which prove that the transaction was just a cover to launder assessee's money to give it a colour of genuineness. (i) The assesse has shown purchase of shares on 1-4-2012 through M/s. Santoshima Tradelink Ltd. (ii) The shares got dematerialized on 16-04-2013 i.e. after 12 months from the date of purchase. The assessee has not offered any explanation. (iii) The assesee has failed to tell the name and address of the person on whose recommendation he invested in an unknown unlisted company. (iv) The assessee purchased the shares of M/s. Santoshima Tradelink Ltd. Interestingly this company i.e. M/s. Santoshima Tradelink Ltd. also merged with the Sunrise Asian Limited with the same order of merger. It shows that M/s. M/s. Santoshima Tradelink Ltd. was also a part & parcel of the entire arrangement. (v) The assesee has vehemently argued that the persons whose statements were recorded on oath by the investigation wing of the department were not related to the assessee. However, it may be pointed out that the all these persons whose statements were recorded have categorically admitted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or that transaction was by cheque, is not sufficient. Addition u/s 68 was justified. Thus taking into consideration the above facts and circumstances of the case came to the conclusion that it has been established beyond doubt that the unaccounted income of Rs.7,23,257/- routed back to the assessee during the year under consideration, camouflaged as Long Term Capital Gains which has been proved as bogus entry. According to the AO, the assessee was in receipt of cash credit of Rs.23,23,696/- for which she failed to offer any satisfactory explanation especially in the light of credible evidences gathered by the Department. Thus the AO added a sum of Rs.23,23,696/- u/s 68 of the Act to the total income of the assesee as unexplained cash credit. As regards the issue of commission paid in lieu of bogus entry of LTCG, the AO noted that the assesee has failed to controvert his observations as these syndicate members which include promoters/directors of penny stock company, share brokers etc. had admitted that they provided bogus LTCG entry in lieu of commission. The AO noted that the gist of statements of beneficiaries namely Shri Sanjeev Kumar Agarwal, Manish Uppal, Ajit Gupta, Shri Char....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stock entities whose share price was manipulated. The modus operandi had been dealt with in great detail by the AO. They need not be repeated here. The company whose shares were purchased and sold by assessee had practically no business at all. It has no meaningful asset which would arouse interest of bona fide investors to invest in its shares. It has no business worth-mentioning. The climb in the prices of its shares and the fall thereafter is tell-tale sign of the price being manipulated. The statements of Rakesh Somani, Sanjay Vora and Anuj Agarwal, were taken in course of survey u/s 133A and they had stated that the share price of Sunrise Asian Ltd was manipulated. The statements of those three persons were confirmed circumstantially by the unnatural movements in the price of the shares of Sunrise Asian Ltd. Assessee's investment had multiplied manifold within a short span of only sixteen months. The investment in shares of a non-descript company without any business worth mentioning but yielding manifold increase in value simply defies logic. It is beyond of realm of human possibility. It is not a case of the company striking a gold mine or oil field. Human probability h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1% over a period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assesse. Even the brokers who coordinated the transactions were also unknown to the assessee. All these facts give credence to the unreliability of the entire transaction of shares giving rise to such capital gains. The ratio laid down by the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT. 214 ITR 801 is squarely applicable to the case. Though the assessee has received the amounts by way of account payee cheques the transactions cannot be treated as genuine in the presence of the overwhelming evidences put forward by the Revenue. The fact that in spite of earning such steep profits, the assessee never ventured to involve himself in any other transaction with the broker cannot be a mere coincidence of lack of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee arid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals listed below. > M.K. Rajeshwari vs. ITO in ITA No. 1723/Bang/2018, order dated 12. 10.2018. >Abhimanyu Soin vs. ACIT in ITA No. 951/Chd/2016, order dated 18.04.2018. > Sanjay Bimalchand Jain vs. ITO 89 taxmann, com 196 > Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 59/Nag/2015, order dated 24.08.2016 > Ratnakar M. Pujari vs. ITO in ITA No. 995/Mum/2012, order dated 03. 08. 2016 > Disha N. Lalwani vs. ITO in ITA No. 6398/Mum/2012, order dated 22.03.2017. >ITO vs Shamim M. Bharwoni [2016] 69 taxmann. com 65. > Usha Chandresh Shah Vs ITO in ITA No. 6858/Mum/2011, order dated 26. 09. 2014. > CIT vs. Smt. Jasvinder Kaur 357 ITR 638 12. The facts as well as rationale given by the Hon'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....invoice. (ii) Page-5- last three lines before the point No.4 In a large number of penny stocks, the price band had been reduced to the lowest bond of 2 percent. Out of these scrips, interim orders have also been passed by SEBI in the case of 11 scrips, giving a finding that price in the scrips was rigged. Details of such order are available on the website of SEBI. Moreover, the SEBI has suspended trading in 26 scrips out of these penny stock companies" But the learned Respondent has not established that an action against penny script of sunrise Asain Ltd was taken by SEBI. Therefore the said fact mentioned in assessment order is not relevant in the matter of the assessee. (b) In order of CIT Appeals: (i) on Page 17 para 5.3 stated that cross examination of more then 100 persons involved in the scam which appears to be an attempt to delay or halt the proceedings by instrument of cross examination While in impugned assessment order only three persons statements on oath (partly referred) which were general and vague in nature and nobody told specifically about involvement with the assessee in transaction. (ii) On Page 23 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....discharged burden. 4. That the learned CIT Appeals decided the issues with observations at page 50 or in Para 6.3.1 that investment in shares of the sunrise Asian Ltd Yield manifold increased in value which is beyond human probability. further said the these so called paper companies shares transaction is I done with systematic collusion between broker, operators and beneficiaries. Although the decision in several cases given by the jurisdictional Tribunal and Hon'ble High court. But the Hon'ble Supreme Court has already held in similar type of i.e. Suman Poddar Vs I.T.O. 112 Tax man Page 330 (S.C.) cases in favour of the department has held that "When there was specific confirmation with the revenue that the assessee has indulged in non genuine and bogus capital gains obtained from the transactions of purchase and sale of shares, It can be good reason to treat the transactions as bogus." Further the CIT Appeal relied on under mentioned cited cases of the various Hon'ble High courts and Tribunals. 5. That the learned Commissioner (Appeals) has erred in applying the suman Poddar's cases and other referred cases on Page 53 & 54 of the impugn....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court Bombay decided limine that no substantial question of law arises therefore appeal dismissed (Not binding under Article 141) (iii) Dinesh Kumar Khandelwal HUF Vs Income Tax officer (ITAN 539/Nag/2015 order dated 24.08.2016 The said order dated 24.08.2016 has been recalled by order dated 06.01.2017 in M.A. Nos 23 & 24/Nag/2016 in ITA No. 58 & 59/Nag/2015. Therefore not created any precedent (iv) Diesh N Lalwani Vs I.T.O. (ITANO. 6398/mum/2012 order date 22.03.2017. The matter/ issue in appeal was proceeding initiated U/S 147/148 of the I.T.Act In that case accepted on oath Shri Mukesh Choksi(CA) Managed the bogus long term gain in lieu of cash and the assessee duly cross examined (Page 18 of the order) "If the material available on record and the judicial pronouncements discussed hereinabove are kept in juxtaposition with the facts of the present appeal, we find that there was admission by Shri Mukesh Chokshi that he was engaged in providing bogus long term gains claim in lieu of cash and he was duly examined by the assessee Totality of facts clearly indicates that there was reasonable belief with the Assessing officer that income has escape....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ural justice because of which the assessee was adversely affected" (b) Para 5.3.2 Rajendra Kumar Sahu Vs Utkal University (AIR 1969 Orisa 206) (H.C. Orisa) based on the case of the state of Jammu & Kashmir Vs Bakshi Ghulam Mohammed (1967 S.C. 122). But in case of the appellant it is not applicable as referred the following order of our jurisdictional High Court and ITAT Rajasthan in submission before the CIT Appeal: Cases of Rajasthan High Court, Jaipur Bench: (i) CIT Central Jaipur v. M/s Maverick Share Brokers Pvt. Ltd.. Income Tax Appeal No. 14/2016 decided on 23/03/2017 (ii) Commissioner of Income Tax-1, Jaipur v. Pooja Agarwal, Income Tax Appeal No. 385/2011 decided on 11/09/2017 (iii) Principal Commissioner of Income Tax-1, Jaipur v. Pramod Jain, Income Tax Appeal No. 212/2018 decided on 24/07/2018 Case of Income Tax Appellate Tribunal, Jaipur Bench: (iv) Sandeep Sharma v. The Income Tax Officer, Ward-6 (3). Jaipur Appeal No. 233/JP/2019 decided on 21/05/2019 (v) Deputy Commissioner of Income Tax, Circle Bharatpur v Saurabh Mittal Appeal No. 16/JP/2018 decided on 29/08/2018 (vi) Pramod Kumar Lodh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITR 801 (S.C.) Facts in Para 9 and reasons in para 10 are showing that the horse racing income during exemption from tax and considered as under: ''Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonable 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 claim about the amount being her winning from reces is not genuine." (i) Durga Prasad More Vs CIT (1971) 829 ITR 542 of AIR 1971 S.C. 2439. "In that case the dispute was facts that investment in immovable property was made by the assessee for herself or for the Trust where saying that the Trust was created orally and other evidence on record, ITO. no Commissioner (Appeal) and Tribunal held that is personal property. High court directed to decide with evidence of the facts. That the question of law raised that The HC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ract of supporting document produced by the ld. DR is as under:- '' Sebi slaps Rs 1 crore fine on 86 entities for fraudulent trading Sebi, the capital markets regulator, fined 86 entities Rs 1 crore on Friday for manipulating the shares of Sunrise Asian Ltd. Sunrise Asian Ltd (SAL), its five former directors, and 80 related organisations were fined Rs 1 crore by the regulator. PTI JUNE 17, 2022 / 16:42 PM IST (Representative Image) Capital markets regulator Sebi on Friday imposed a fine of Rs 1 crore on 86 entities for manipulation in the shares of Sunrise Asian Ltd. In its order, the regulator levied a fine of Rs 1 crore on Sunrise Asian Ltd (SAL), its five former directors and 80 connected entities. The amount has to be paid jointly and severally by the entities. Sebi had conducted an investigation into the scrip of Sunrise Asian for the period October 2012 to September 2015, based on a reference received from the Principal Director of Income Tax (Investigation), Kolkata, Under a scheme of amalgamation, Sunrise Asian and its then directors had devised a fraudulent mechanism whereby 80 connected entities had manipulate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ls available on record as well as the case laws cited above. In this case, it is noted that the assessee had filed her e-return of income on 27-07-2014 declaring total income at Rs.520/-. The case of the assessee was selected for scrutiny on the basis of CASS. The notices u/s 143(2), 142(1) and questionnaire were issued to the assessee on 15-06- 2015. In compliance of the notice issued to the assessee, the ld. AR of the assessee attended the hearing from time to time before the AO and submitted relevant details as asked for by the AO. The AO during the year under consideration noted that the assessee has shown interest income of Rs.82,209/-. Apart from it, the assessee has claimed exemption of Rs.23,23,696/- u/s 10(38) of the Act as to Long Term Capital Gains, for which the AO mentioned the details of transaction of purchase/ sale of shares leading to LTCG, exempted u/s 10(38) of the Act as under:- Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains Sunrise Asian Ltd. 1.04.2012 1,00,000 2.08.2013 24,23,696 23,23,696 While examining the issue of Long Term Capital Gains, the AO noticed the following....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Sunrise Asian Limited is found to be one of such penny stock companies. In view of the above information and credible evidences, a show cause letter dated 13-12-2016 was issued by the AO to the assessee giving detailed discussions at para 3.1( sub-para (2) to(8) which was rebutted by the AO vide para 5.1 to his assessment order. Thus the AO conclusively made addition of Rs.23,23,696/- us 68 of the Act and also made an addition of Rs.1,45,421/- holding that the assessee has paid commission @ 6% of sale value of shares of M/s. Sunrise Asian Limited and thus treated the amount of Rs.1,45,421/- as unexplained expenditure u/s 69C of the Act. In first appeal, the ld. CIT(A) has confirmed the action of the AO. In this case, it is noted that the assessee invested Rs.1.00 lac in 5000 equity shares of Santoshima Tradelinks Ltd on 01-04-2012. As per amalgamation order, the equity shares were converted in the name of Sunrise Asian Ltd. These 5000 equity shares sold on 02-08-2013 through Registered broker at Bombay Stock Exchange in Rs.24,23,696/- and in the income tax return claim of Rs.23,23,696/- was made u/s 10(38) of the Act as exempted income. It was noticed that DCIT, Investigation Kolka....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the witness due to specific provision in the relevant which restrained the cross examination. Another judgemnet dated 8- 03-2019 of Hon'ble Delhi High Court in case of Udit Kalara (Appeal No. 220/2019 ) referred by the ld. CIT(A) in his order is not binding precedent as statements were recorded in presence of the assessee. Thus, the Hon'ble Court held that no question of law arises. It is also noted that the ld. CIT(A) dismissed the appeal of the assessee on the basis of Hon'ble Delhi High Court Judgement in the case of Suman Poddar (supra) as precedence of Hon'ble Apex Court. To this effect, the ld. AR submitted that SLP preferred against Delhi High Court Judgement in Suman Poddar case before the Hon'ble Apex Court and the petition dismissed at the admission stage i.e. limine saying that Counsel could not raise any question of law. As per Article 141, the order of Hon'ble Supreme Court in the case of Suman Poddar is not binding precedent for which the ld. AR relied on following case laws. (i) State of Manipur & Other vs Thingujam Bregam (AIR 1996 SC 224 Para 9). (ii) Collector of Customs, Bombay vs Elephanta Oil Industries (AIR 2003 SC 1455, Para 15) (i....