TaxTMI 
TaxTMI 
2023 (7) TMI 645
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.... ex-parte order is quite unjustified, excessive and bad in law. 3. The Ld. CIT(A) has erred both on facts and in law in holding that the entire capital gain of Rs. 69,78,526/- arising to the appellant from sale of shares as his income from undisclosed sources, merely on guess work, surmises and conjectures, without hearing and passing an ex-parte order. 4. The Ld. CIT(A) has erred both on facts and in law in confirming the addition of Rs. 1,39,568/- in the appellant's income merely on guess work, surmises and conjectures, without hearing and passing an ex-parte order." 2. None appeared on behalf of assessee despite several hearings afforded from time to time. Ld. DR representing the Revenue was ready to argue the case. On perusal of Grounds of Appeal, it was observed that the present appeal can be heard on the basis of material held on record and after hearing Ld. DR. Accordingly, the appeal was heard and being disposed of by this order. 3. Briefly stated the facts are such that the assessee-individual filed his return of income on 27.07.2014 declaring a total income of Rs. 9,57,130/- from salary and interest. In the return, the assessee also declared a long....
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....ty of hearing. Hence, in absence of any written reply, this case is being decided on merit basis." 6. On a careful consideration, we note that the Ld. CIT(A) has issued given several opportunities to the assessee but, however, the assessee has not availed those opportunities. We further note that the Ld. CIT(A) has passed a detailed order on merits of the case through Para No. 4 / Page No. 16 to 20 and adjudicated the assessee's grounds with a due consideration. Hence the order passed by Ld. CIT(A) is a detailed order on merits and not a summary-order. Being so, we do not find any merit in the claim of assessee that the Ld. CIT(A) has passed order without giving opportunities of hearing. Therefore, we are inclined to dismiss Ground No. 1 of assessee which is devoid of any merit. Ground No. 2 to 4: 7. By means of these Grounds, the assessee has challenged the twin-additions made by Ld. AO, viz. (i) addition of Rs. 69,78,526/- in respect of bogus capital gain, and (ii) addition of Rs. 1,39,568/- on account of estimated brokerage cost incurred by assessee out of unexplained sources. 8. Before proceeding further, we would like to narrate the details of the transactions done....
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.... that the market price of the share was artificially and intentionally rigged by about 15507% when there was no related-growth in the company with an objective to provide accommodation entry. (v) Ld. AO issued a summon u/s 131, followed by reminders, to the assessee to afford an opportunity to the assessee as also to ascertain the truth of the transactions undertaken by assessee. But the assessee did not appear. Ld. AO, therefore, concluded that the assessee did not have knowledge of the financials and credentials of Turbotech Engineering Ltd., whose prices have registered a whopping increase of 15507% in just one year. (vi) Ld. AO also gathered data of the persons who purchased shares from assessee through stock-exchange and issued notices u/s 133(6) to those persons. In the notices, Ld. AO called upon those persons to submit the relevant details. However, none of them responded. 10. Based on above observations, the Ld. AO inferred that the capital gain declared by the assessee is not genuine and the same has been arranged by the assessee so as to claim benefit of section 10(38). Therefore, the Ld. AO assessee issued show-cause notice dated 02.12.2016 to the a....
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.... shares of any company whose financial status was very low from the last 4 to 5 years. In the instant case, the appellant did not have any knowledge about M/ s Turbo Tech Engineering Ltd and he had purchased the shares of that company on the advice of his friend. Further, in its statement, the appellant had failed to explain the entire transaction so done by him. What is at dispute is that whether this was really the Long-Term Capital Gain earn from such scrip? As laid down by the Hon'ble Apex Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. This abnormal gain can't be explained by applying the test of human probability. The reliance in this regard is being placed on Commissioner of Income Tax v. Durga Prasad More, (1971) 82 ITR 540 and Sumati Dayal Vs. CIT 1995 AIR 2109, 1995 SCC Sup1.(2) 453. 4.3 In this scheme, the shares of t....
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....t the rate of Rs. 5.50 per share on 08.08.2003 and 4000 shares at the rate of Rs. 4/ per share on 05. 08.2003. The assessee sold 2200 shares at an exorbitant rate of Rs. 486.55 per share on 07.06.2005 and 800 shares on 20.06.2005 at the rate of Rs. 485. 65. the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an known company worth Rs. 5/had jumped to Rs. 485/- in to time addition confirmed 2. Chandan Gupta Vs CIT [2015] 54 taxmann.com 10 (Punjab & Haryana)/[2015] 229 Taxman 173 "Hon'ble Punjab & Haruana High Court held that where assessee could not explain receipt of alleged share transactions profits credited in his bank accounts, then sale proceeds had to be added as income of assessee under section 68" 3. Balbir Chand Maini Vs CIT [2011] 12 taxmann.com 276 (Punjab & Haryana)/[2011] 201 Taxman 94 (Punjab & Hal"yana){MAG.)/ [2012] 340 ITR 161 (Punjab & Haryana) [2012] 247 CTR 468 (Punjab & Haryana) "Section 69 of the Income-tax Act, 1961 - Unexplained investments _ Assessment year 1998-99 - During assessment proceedings, Assessing Officer found that assessee had purchased certain shares ....
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.... receipts" 4.7 Hence, it is clear from the above facts, judicial decisions so discussed above and circumstances that it was a sham transaction which cannot stand the test of human probability and therefore, the addition so made-by the AO is hereby confirmed and accordingly, these grounds of appeal are dismissed." 13. Before us, Ld. DR made a crystal-clear and pointed submission. He submitted that the assessee has declared exempted capital-gain from shares of Turbotech Engineering Ltd., which is a company identified by Income-tax Department as "Penny-stock" and even the operations in the shares of company were also suspended by SEBI. Ld. DR submitted that these facts are clearly evident from "Investigation Report in the case of Project Bogus LTCG / STCL Through BSE Listed Penny Stocks" dated 27.04.2015 released by Directorate of Income-tax (Investigation), Kolkata, the relevant paragraphs of the report being reproduced below: Page No. 2 of the Forwarding-Letter embodied in the Report: "We identified the following BSE listed penny stocks which have been used for generating bogus LTCG: SL No Script Code Script Name Full Name of Penny Stock ....
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....Penny Stock Amount of Total Value SEBI Action 62 504358 Turbo Tech Turbotech Engineering Ltd. 8319513048 Suspended 14. Then, Ld. DR placed reliance on the decision of Hon'ble High Court of Kolkata in PCIT Vs. Swati Bajaj, ITA No. 06/2022, dated 14.06.2022 decided recently in favour of Revenue. The decision is much detailed; has considered various legal precedents of the Hon'ble Supreme Court and other Courts; has taken into account the Investigation-Report dated 28.04.2015 prepared by Investigation-Wing of Income-tax Department; and considered the issues of cross-examination, human probability etc. Some relevant paragraphs of the decision are extracted below: "69. Thus, the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are....
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....ased on reasonable inference drawn from foundational facts." It has further been held that merely because a person was related to the connected person cannot be itself be a foundational fact to draw an inference." 71. On a careful reading of the above paragraph will show that the argument by placing reliance on the case of K.R. Ajmera to show that presumption can be drawn on the basis of immediate and relevant facts was contrary to the law already settled by the Hon'ble Supreme Court in Chintalapati S. Raju. Therefore, it would be incorrect to submit that the decision in K.R. Ajmera has been overruled. This position becomes clearer as the decision in K.R. Ajmera was referred to in Chintalapati S. Raju as could be seen in paragraph 30 of the said judgment. Therefore, we hold that the law laid down in K.R. Ajmera continues to be good law. 72. In the light of the above discussion, the only conclusion that can be arrived at is that the opinion can be formed and the decision can be taken by taking note of the surrounding circumstances which had been elaborated upon in K.R. Ajmera. 73. It is very rare and difficult to get direct information or evidence with....
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....rmises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. 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. The assesses cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assesses have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of....
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....o the assessee. Therefore, we need not labour much to examine as to how rule in McDowell needs to be applied as we are required to examine the factual scenario from the cases on hand which appear to be quite unique not probably drawn the attention of the courts and the tribunal earlier. 75. While it may be true that M/s. Swati Bajaj, Mr. Girish Tigwani or other assessees who are before us could have been regular investors, investors could or could not have been privy to the information or modus adopted. In our considered view, what is important is that it is the assessee who has to prove the claim to be genuine in terms of Section 68 of the Act. Therefore, 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 and more importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the assessing officer cannot be faulted. 76. ....
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