TaxTMI 
TaxTMI 
2023 (1) TMI 119
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....ption claimed u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of Lifeline Drugs and Pharma Ltd, in the facts and circumstances of the case. 3. I have heard the rival submissions and perused the materials available on record. The assessee is an individual deriving income from business, income from capital gains and income from other sources. The assessee is engaged in the business of Ferrous and Non-Ferrous metals under the trade name of M/s Champak Steel & Engineering as proprietor. The assessee is a regular investor in shares and had during the year made investment in shares of various companies during the year. He had filed his return of income for the Asst Year 2015-16 on 28/09/2015 declaring total income of Rs 6,85,440/-. In the said return, the assessee claimed exemption u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of Lifeline Drugs and Pharma Ltd. The said return was duly processed u/s 143(1) of the Act. The claim of exemption u/s 10(38) of the Act on sale of shares of Lifeline Drugs and Pharma Ltd was sought to be examined by the ld. AO in the course of assessment proceedings. The assessee su....
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....commercial principle or market factors ; that transactions are based on mutual connivance on part of assessee and operators ; that various exit providers had confirmed that they had purchased the shares of the above company for claiming bogus capital gains ; that SEBI also passed an order holding that share prices were determined artificially by manipulations ; that assessee had failed to discharge his onus cast on him ; that net worth of Lifeline Drugs and Pharma Ltd is negligible and that its share prices were artificially rigged ; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the sale proceeds of the shares as unexplained cash credit u/s 68 of the Act. 5. The assessee also submitted before the ld. CIT(A) that the ld. AO had given price and volume movement of shares from 01/09.2010 to 31/07/2015 in graphical form and drawn an inference that this could be only possible if the sellers and exit providers were hand in glove with each other and claimed that shares of Shree Shaleen Textiles Ltd have been used for providing entry of bogus LTCG / S....
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....ations leveled in the said investigation report. 6.2. I find that the revenue had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators, promoters of Lifeline Drugs and Pharma Ltd and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators. 6.3. It is not in dispute that the assessee had made purchase of shares by way of preferential allotment by the company for Rs 143 per share comprising of face value of Rs 10 and premium of Rs 133 per share. The entire allotment advice issued by the company to the assessee for allotment of shares proves the fact. Now the next issue that arises for my consideration is as to whether the shares that were allotted to an assessee by way of preferential allotment could be taken as a ground to declare the entire transaction as sham. In my considered opinion, the transactions could not be treated as sham merely because they ar....
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....sessee chose to sell the shares at an average price of Rs 270 per share. Since the price at one point in time reached the peak of Rs 584.35 per share, the assessee chose to retain 44800 shares with him with an aim to achieve greater profits in future. The demat statement of the assessee maintained with FRR Shares and Securities Ltd was filed by the ld. AR for the period 14/09/2013 to 19/07/2022 as directed by me during the course of hearing. From the said demat statement, I find that the assessee is holding 44800 shares of Lifeline Drugs & Pharma Ltd even as on 19/07/2022. This is a very crucial evidence to prove the intention of the assessee that he had entered this scrip only as a gullible investor and had eventually made huge profits due to market factors and had also retained substantial portion of the shares still with him in order to make profits in future. 6.6. I further find that from page 9 to 11 of the SEBI order, there is a categorical finding that 5 persons were involved in price manipulation. The operative portion of the findings of SEBI order in paragraphs 27 to 29 are reproduced hereunder:- 27. In view of the above, I note that by indulging in trades that....
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....id shares were sold. In secondary market transactions, the buyer and seller are not supposed to know each other unless it is a case of 'block deals'. Same is the case of the assessee herein. Admittedly, the assessee's case does not fall under the category of 'block deals'. 6.8. Hence the entire addition has been made merely by placing reliance on the Kolkata Investigation Wing report which are more general in nature and does not implicate the assessee herein in any manner whatsoever. I am unable to persuade myself to accept to the contentions of the ld. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) b....
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....ibunal in the case of Mukesh Ratilal Marolia vs Additional CIT reported in 6 SOT 247 (Mum ITAT) dated 15/12/2005 had held that personal knowledge and excitement on events should not lead the ld. AO to a state of affairs where salient evidences are overlooked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. I find that this tribunal decision was approved by the Hon'ble Jurisdictional High Court in ITA No. 456 of 2007 dated 07/09/2011. It is pertinent to note that the Special Leave Petition preferred by the Revenue against this decision before the Hon'ble Supreme Court has been dismissed vide SLP No. 20146 of 2012 dated 27/01/2014. 6.11. Further I find that the Hon'ble Jurisdictional High Court in the case of CIT vs Shyam S Pawar reported in 54 taxmann.com 108 (Bom), it was held that where Demat account and contract note showed details of share transaction and the ld.AO had not proved the ....
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....as not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sh....