2023 (6) TMI 87

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....r the assessment year 2014-15. 2. In this appeal, the assessee has raised the following grounds:- "1. The learned CIT(A) erred in upholding the action of the assessing officer in treating the long-term capital gains accruing to the appellant as non-genuine only on the basis of general finding of Directorate of Investigation and various statements recorded by it without any cogent material on record and no nexus / connection with the appellant being established to prove the impugned transaction as bogus. 2. The learned CIT(A) failed to take cognizance of documentary evidence provided by the appellant such as bank statements, brokers' contract notes and ledger accounts, demat accounts, etc. to substantiate the transac....

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....ves income from business, capital gains, and income from other sources. For the year under consideration, the assessee filed its return of income on 30/09/2014 declaring a total income of Rs.82,60,580. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was noticed that the assessee has shown long-term capital gains of Rs.1,85,47,659 on the sale of shares of M/s Parag Shilpa Investments Ltd, which was claimed as exempt under section 10(38) of the Act. It was further observed that the assessee has also earned short-term capital gains in respect of shares of M/s Ashika Credit and ....

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....AO also took note of the statement of the assessee recorded on oath regarding the share transaction in the aforesaid companies, wherein he denied having any knowledge of the penny stock company and submitted that he purchased the shares on the basis of the tip from his friend. The AO also noted that the stockbroker from whom the shares of M/s Parag Shilpa Investments Ltd were purchased by the assessee was penalised and restrained from the trading/adding clients by the SEBI due to its involvement in rigging the share price of certain companies. Accordingly, the AO vide assessment order dated 28/12/2016 passed under section 143(3) of the Act came to the conclusion that the aforesaid companies are penny stock companies and transaction of share....

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....it and Capital Ltd. The shares of M/s Parag Shilpa Investments Ltd were purchased via a preferential allotment basis, while the assessee has placed on record the contract notes for the purchase of shares of M/s Ashika Credit and Capital Ltd. From the sale of shares of M/s Parag Shilpa Investments Ltd, the assessee earned long-term capital gains, which was claimed as exempt under section 10(38) of the Act. While from the sale of shares of M/s Ashika Credit and Capital Ltd, the assessee earned short-term capital gains. On the basis that the aforesaid companies were part of the investigation by the Directorate of Income Tax (Investigation), Kolkata, Mumbai, and Ahmedabad, and certain investors as well as entry operators have earned bogus long-....

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.... on record to show that such rigging of price was for the benefit of the assessee or has any nexus with the assessee. This is also not a case wherein either the directors/promoters of the aforesaid Companies, in which the assessee had invested, has accepted that the company is merely a paper company and provides the benefit of bogus long-term capital gains to its shareholders. Further, despite the Revenue having the information regarding the stockbrokers through whom the shares were sold, there is no evidence on record that even these shareholders were named in the investigation conducted by the Investigation Wing of the Department. It is also pertinent to note that the AO has not given any adverse comments or drawn adverse inferences on th....