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2023 (1) TMI 31
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....re, decide to hear these appeals with the assistance of ld. D/R, and the available records. 3. The assessees are in appeal before this Tribunal raising the following grounds: I.T.A. No.: 49/Gty/2020 "1. That the order of the CIT-Appeals in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law. 2. The AO erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 3. That learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in confirming the addition of Rs. 71,39,620/-being sale consideration on sale of shares listed on recognized stock exchange as unexplained credit u/s 68 of the Act. 4. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 5. That the Learned Assessing Officer erred in relying on sworn statements of various persons namely Shri Akash Agarwal, Shri Soum....
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....nd justice be rendered." I.T.A. No.: 51/Gty/2020 "1. That the order of the CIT-Appeals in so far as it is against the assessee is opposed to law, facts, circumstances, natural justice, equity all other known principles of law. 2. The AO erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 3. That learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in confirming the addition of Rs. 50,40,340/- being sale consideration on sale of shares listed on recognized stock exchange as unexplained credit u/s 68 of the Act. 4. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 5. That the Learned Assessing Officer erred in relying on material/information without furnishing the same to the assessee before passing the assessment order. 6. That the Authorities erred in relying on sworn statements of persons namely Sri Anuj Agarwal dt.31.03.2015 without ....
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....are. Similar was the case of another assessee i.e. Saroj Devi Sand wherein 4,000 equity shares of M/s. Jackson Investments Ltd. and 57,500 shares of M/s. Pine Animations Ltd. were sold during the year @ Rs. 31.10/- & Rs. 73.68/- respectively and the same were purchased @ Rs. 10/- & Rs. 4.05 respectively. Exemption u/s 10(38) of the Act has been claimed on the long term capital gain arising from the said share transactions. The said claim of the assessees was rejected by ld. AO on the ground that M/s. Jackson Investments Ltd. and M/s. Pine Animations Ltd. are penny stock companies, the prices of which are artificially inflated with the help of entry operators, brokers as well as the promoters of these companies for providing bogus capital gain to the beneficiaries. 6. Aggrieved, the assessee preferred appeal before ld. CIT(A) but failed to get relief. 7. Aggrieved, the assessee is now in appeal before this Tribunal. 8. Ld. D/R supported the orders of both the lower authorities. 9. We have heard ld. D/R and perused the records placed before us. We find that the issue in the instant appeal is that of the genuineness of long term capital gain u/s 10(38) of the Act. The facts noted ....
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....nch in the case of Sri kailash Prasad Agarwal & Others vs. ITO in ITA Nos. 509 & 1365/Kol/2019 dated 31.10.2022. Relevant finding of this decision is reproduced below: "3.1. ITA No. 509/KOL/2019 (AY 2013-14): Brief facts of the case are that the assessee is an individual and filed e-return of income on 01.10.2013 declaring total income of Rs.11,93,400/-. The assessee has claimed exempt income under section 10(38) of the Income Tax Act at Rs.2,26,86,516/- from sale of equity shares of CCL International Limited. The case of the assessee was selected for scrutiny assessment under CASS. Thereafter, the ld. Assessing Officer based on the information received from the Directorate of Income Tax (Investigation), Kolkata, which has submitted a report on 27.04.2015, wherein after undertaking the investigation, 84 listed companies were found to be the penny stock companies through which bogus long-term capital gain entries were taken in large numbers by the beneficiaries, issued notices under section 148 of the Act, which were duly served upon the assessees and reassessment proceeding was carried out. During the course of assessment proceedings, ld. Assessing Officer found that the assessee....
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....of the list of 84 listed companies, which were found to be the penny stock companies and are managed as dummy companies involved in the price rigging by the promoters and entry operators for providing bogus long-term capital gain to various beneficiaries. The assessee primarily purchased 10,000 equity shares of M/s. Swift IT Infrastructure & Services Pvt. Limited from off-market, which was subsequently merged with M/s. Parag Shilpa Investments Limited. The market prices of the scrip and market capitalization of the company in the month of May, 2012 were Rs.0.20/- and Rs.1.20 lakhs respectively. Thereafter within three years, the market price of the scrip and the market capitalization of the company had been rallied to Rs.90.50 and Rs.4865.28 crores respectively on 17.12.2014. Therefore, within twenty months, the price jumped nearly 381 times. The assessee failed to satisfy the ld. Assessing Officer that M/s. Parag Shilpa Investment is not a penny stock company by placing any credible information. The ld. Assessing Officer accordingly added the alleged long-term capital gain of Rs.52,83,100/- as unexplained cash credit under section 68 of the Act and also made an addition of commiss....
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....ded in the total income by treating it as unexplained cash credit u/s. 68 of the Act. Ld. AO based his decision of treating the impugned transaction of sale of shares as bogus transaction by relying on the report of Investigation Wing of the Department wherein the Investigation Wing of the Department had studied the modus operandi of rigging the prices of penny stocks and generation of capital gain /trading loss there from. On appeal, ld. CIT(A) confirmed the action of the ld. AO. Aggrieved, assessees are in appeal before the Tribunal. 5. Recently on 14.06.2022, the Hon'ble jurisdictional High Court of Calcutta passed a judgment in the case of Swati Bajaj and others [2022] 139 taxmann.com 352 (Cal) dealing with set of cases with similar fact patterns as narrated above for the present appeals under consideration before us. Hon'ble jurisdictional High Court by taking the report of the Directorate of Investigation of the Department as the basis, gave its observations and findings, which are summarized hereunder. 5.1. There are two category of cases dealt with by the Hon'ble High Court, viz. first category being those arising out of the order of Tribunal dated 26.06.2019 in which 9....
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....f is on the assessee to prove the genuinity. [para 73] f) It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. [para 73] g) The assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time. [para 75] h) The exercise that was required to be done by the Tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the 'players' can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the Tribunal which exercise has not been done. [para 99] i) The assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. T....