TaxTMI 
TaxTMI 
2023 (2) TMI 805
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.... into 84 penny stocks (Effingo Textile & Trading Ltd. being one of it) and has given detailed findings indicating bogus LTCG/STCL entries claimed by large number of beneficiaries". 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the SEBI has suspended the activity of Malti Textile Mills Limited before 2012, the suspension has been revoked Vide BSE notice dated 12.10.2012. Further, SEBI has passed an order vide dated 01 January, 2015 whereby SEBI suspended the trading of 22 securities including Effingo Textile & Trading Ltd (earlier known as Malti Textile Mills Limited)". 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators". 5. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in share transactions not supported by market factors". 6. The appel....
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....on in a clandestine manner. The Assessing Officer thus rejected the claim of exempt income earned by way of Long Term Capital Gains disclosed by the assessee in relation to the scrip namely ETTL (previously known as Malti Textiles Ltd.) and invoked Section 68 of the Act to assess the sale consideration arising from sale of shares of ETTL as unexplained income. The income was thus assessed at Rs.3,86,68,780/- as against the returned income of Rs.34,61,310/-. 4. Aggrieved, the assessee preferred appeal before the CIT(A). 5. Before the CIT(A), the assessee reiterated and pointed out certain sequential facts namely; that the assessee had originally acquired 2,39,040 equity shares of erstwhile Malti Textiles of face value of Rs.10/- each on 16.03.2000 for a total consideration of Rs.1,20,121/-. The name of the company was subsequently changed to ETTL w.e.f. 01.07.2013. The assessee dematerialized the holding of ETTL shares with the depositor participant (DP) namely Abhipra Capital Ltd. on 31.12.2012; that the assessee thereafter sold 2,35,000 equity shares of ETTL on 14.03.2013 out of total Demat share sholding of 239040 and thus left with holding of 4040 (239040 minus 235000) equity ....
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.... of transactions cannot be doubted merely because of a report of investigation wing which hinges on modus operandi and recording of statement of various unidentified promoters, brokers, associated persons, exit providers or intermediaries who are neither shown to be linked to the assessee nor has any allegation made qua the assessee or the transactions carried out by Assessee. Even the SEBI/Exchanges has not found any wrong doing or guilty or violation of any rule or guidelines / SEBI Exchanges by selling shares of promoter quota by the assessee in the year under consideration and no order has been passed against the assessee on the issue of selling of shares in question. Also, the transactions have been carried out on the platform of Exchange through VFFL whereas the modus operandi identified some brokers but not VFFL. The assessee also reiterated the documents to clinch the factual position narrated hereinabove. 5.3 The CIT(A) recorded the detailed written submission made on behalf of the assessee and the judicial precedence extensively relied upon in its appellate order and found palpable merit in the plea of the assessee. 6. The relevant operative paragraphs of the first appe....
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....2014, cost of these shares to him was Rs. 17,675/- and Rs. 45,900/- and the same cost has been considered u/s 49 (2) of the Act for arriving Capital gain in the hand of the appellant. The donor son was holding 1195200 equity shares since 12.06.1989 with total cost of Rs. 1,82,865/-. It is submitted that such investment was reflected in the details of investment of Sh. Manish Jain, son of the appellant, in hisaudited accounts with Schedules as at 31.03.2001 wherein the date of investment in the shares of Malti Textiles Ltd has duly been certified as 12.06.1989. The said facts are also 'mentioned in the assessment order. On perusal of details, it is noted that the holding period of the shares of Malti Textiles Ltd./Effingo Textile & Trading Ltd. is more than fifteen and twenty years based on acquisition of the aforesaid shares by the appellant or by her son, who gifted the shares to appellant. It does not appear to be a case in which the investor will wait for more than fifteen and twenty years to get her black money converted through the price rigging. It is a common knowledge that in cases generally coming to the scanner of the department, the holding period of the shares in so....
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.... 8. When the matter was called for hearing, the ld. DR for the Revenue broadly reiterated the observations made in the assessment order. It was submitted in furtherance that AO has discussed the report of the Income Tax Investigation Wing Kolkata in the assessment order and such report has unearthed the clandestine character of transactions recorded in the books of the beneficiaries including the assessee in the garb of Long Term Capital Gain. The ld. DR accordingly submitted that the AO has rightly denied the claim of exemption under Section 10(38) of the Act and treated the alleged sale consideration of ETTL shares of Rs.3,52,07,470/- as bogus and held the said amount as unexplained credit under Section 68 of the Act correctly. The Ld. DR asserted that the prices of the scrip ETTL were artificially inflated and manipulated which is supported by order of SEBI resulting in suspension of many scrips including ETTL. As further contended, the transactions were not governed by market factors but such unlawful gain was product of a design and mutual connivance under a preconceived scheme to procure the contrived capital gains. 9. The ld. AR for the assessee, on the other hand, strident....
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....e CIT(A). 10. The ld. counsel for the assessee thereafter adverted to an application placed before the Tribunal under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 with a prayer which reads as under: "The impugned addition of Rs.3,52,07,470/- treating the sale realization from sale of shares as unexplained cash credit u/s 68 of IT Act is unsustainable in law as such unexplained credits are outside the ambit of sec 68 of IT Act. Such illegality in invoking wrong section for making addition to income is a jurisdictional error which is incurable u/s 292BB of IT Act." 10.1 It was contended that the above ground is a legal ground and its adjudication does not require any intense investigation and relevant facts are explicitly available on records. It was insisted that the assessee was entitled to support the outcome of the order of the CIT(A) on all grounds including the ground taken in the impugned application notwithstanding that such ground was not raised before the CIT(A). The ld. counsel for the assessee contended that impugned addition of Rs.3,52,07,470/- treating the sales realization from sales of shares as unexplained cash credit under Section 68 is outside the....
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....r. As noted extensively in the preceding paragraphs, the Assessing Officer also noted that the Kolkata Investigation Wing identified brokers namely 'SMC Global Securities Ltd', and 'Anand Rathi Share and Stock Brokers P. Ltd.' and also 'The Calcutta Stock Exchange Ltd.' (paragraph 9.4.2 of the assessment order) as allegedly involved in manipulations of price and providing accommodation entries in LTCG in several penny stock shares. It was further alleged that unlawful operations have been carried out to artificially increase the price and volume of the penny stock scrips to provide illegitimate gains to the beneficiaries. Based on such findings of the investigation report as reproduced in the assessment order, the Assessing Officer held that the entire sale consideration received on sale of ETTL shares by the assessee represents undisclosed income of the assessee and thus susciptible to tax under Section 68 of the Act. It was concluded that the Long Term Capital Gain so declared in ETTL and claimed as exempt income under section 10(38) is outcome of fabricated and pre-arranged method of purchase and sales of share and the true nature of such share transactions lacked commercial jus....
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.... be part of dubious racketing of price rigging and wait for eternity [ranging between 15-25 years] to convert his / her black money through some in-genuine price rigging in a very distant future. The genuineness of transaction has been doubted in the instant case merely because of the report of investigation wing and recording of statement of various unidentified promoters/brokers/associated person/ intermediaries etc. who are neither shown to be linked to the assessee herein nor any allegation has been shown to be made qua the assessee or the transactions under consideration. No SEBI report or exchange report is available to implicate the assessee per se with any wrong doing or guilty or violation of any Rules. No cross examination of these operators/intermediaries has been carried out. The Assessing Officer has taken drastic action against the assessee based on the generalized inputs received by him without taking cognizance of such overwhelming fact of staggering holding period and without showing any nexus or live link with the assessee. Coupled with this, the assessee has reportedly entered into transaction through a registered broker who is not named in the investigation repo....