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2023 (3) TMI 1457
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.... as Long-Term Capital Gain and thereby confirming the addition made by the Deputy Commissioner of Income Tax, Central Circle 1(1) ('the AO) amounting to Rs. 57,57,900/- u/s 68 of the Income Tax Act, 1961 (the Act). 1.2 The Hon'ble CIT(A) further erred in: • neither giving an opportunity to cross examine nor giving the details on the basis of the addition; • solely relying on the findings of the investigation team and not considering the factual and legal submission filed by the appellant. • concluding that the entire transaction was a sham. 1.3 In the aforesaid legal and factual matrix, the appellant prays that the AO be directed to allow the exemption u/s 10(38) of the Act of Long-Term Capital Gain amounting to Rs. 57,57,900/-. Ground No. 2: 2.1 On the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in rejecting the explanation and evidences of the appellant regarding the acquisition of 400 gms. of seized bullion and diamond Rs. 3,40,630/- respectively and thereby confirming the addition of Rs. 14,72,630/- u/s 68 of the Act. 2.2 The appellant prays that the ....
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....e u/s 10(38) on sale of penny stocks. In this matter originally the assessee had purchased 8,500/- equity shares of M/s Swift I.T & Services Pvt Ltd through Bhushit trading Pvt Ltd for a consideration of Rs 85,000/- on 14-02-2013. Assessee submitted a trail of purchase of share from JMD Soinds Ltd to Ruchi Global on 10-03-2012, Ruchi Global to Hitendra Ghadia on 18-02- 2013(vide page no. 72 and 73 of factual paper-book no.1). For these shares assessee made payment through Abhyudaya Co-op bank vide cheque no. 100085 dated 05-03-2013. Thereafter this company M/s Swift I.T & Services Pvt Ltd merged with M/s Parag Shilpa Investment Ltd. on 10-05-2013. Order of honourable High Court was submitted before the authorities below and before us also vide page no. 38-43 of factual paper-book no.1. this new entity M/s Parag Shilpa Investment Ltd. is a listed company. Thereafter the assessee was allotted 8500/- equity shares of M/s Parag Shilpa Investment Ltd. consequent to the said merger on 02-08-2013 vide page no. 37 of the paper -book. 6. Thereafter assessee got these shares dematerialise (DMAT) with Bonanza Portfolio Ltd (depository) on 29-03-2014 vide page no. 66 of paper-book. The comp....
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....rchase and then merger of 3 or 4 companies of the same nature in one listed company (In this case M/s Parag Shilpa Investment Ltd.). Nowhere in the submissions of the assessee it is transpired that why initially assessee purchased shares of M/s Swift I.T & Services Pvt Ltd and then its merger, split of shares and then rocketing in the price of shares. All these are abnormal phenomena not to be seen in case of genuine investment activities. 8. In all the investments made by various so-called investors this pattern of family involvement in large nos. is very common. The revenue has received a report from DGIT (Inv.), Kolkata and a report against the script and assessee from SEBI as under from the order of Ld. CIT (A): "7.0 I have considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order and the other materials on record on this issue. Ground nos. 1 to 5 deal with addition of Rs. 57,57,900/- made by the AO as unexplained capital gains on sale of shares of PS IT Infrastructure & Services Ltd. as under:- AY Name of Scrip No. Of Shares Purchased Purchase Cost Date of Purchase No. Of Shares So....
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....h ample opportunities to make all the relevant submissions and the assessment order has been passed after considering the submissions made by the assessee. Hence, the additional grounds raised by the assessee are not maintainable. The assessee was provided with an opportunity to present its comments vide letter dated 10.12.2020 on the additional documents submitted, but the assessee did not submit any reply. 4. Without prejudice to the above, the issues raised in additional ground and the comments thereon are as mentioned hereunder. 5. during the previous year, the assessee had claimed Long Term Capital Gain of Rs. 57, 57,900/ in respect of sale of one scrip viz. M/s PS IT & Infrastructure Services. The AO had added back the same in the scrutiny, treating it non-genuine. 5.1 The assessee has submitted the contract note cum tax invoice received from Zen Securities Ltd and details of volume of total trading on days on which the appellant sold the said shares. The same has been perused but not found tenable to prove genuineness of transaction. As already discussed in details in para 7 of assessment order, Investigation Directorate, Kolkata had undertaken inv....
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....to as exit providers. So firstly the unaccounted money of the beneficiaries is routed to the bogus entities normally exit providers and the shares held by the beneficiaries are bought by these bogus entities and thus long term capital gain are earned which are substantially claimed as tax exempted. 7.4 It is further seen that assessee is not engaged in substantial share trading activities or investment in shares his main sources of income is income from his construction business etc. Therefore the intention of the assessee to acquire the shares of PS IT Infrastructure and Services Ltd. is the pre determined move with the sole aim to earn bogus long term capital gains which are tax exempted. In the instant case the shares were acquired by the assessee at Rs. 10 and a year later split into shares of Rs. 5.70 each in February 2013 and thereafter the prices of these shares were raised from Rs. 5.70 to Rs. 910 in a short span of about 22 months. After all the beneficiaries had exited there was free fall in the price of these shares by August 2015 its prices again came down to Rs. 77. 7.5 It is further gathered that even SEBI has carried out detailed investigation in re....
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....no trading till May 21, 2012. Investigation revealed that on May 21, 2012, only one trade took place. Subsequently, after a gap of almost 8 months, the trading started from January 2013 onwards when 59 trades took place till May 2013 and 123 trades took place from September 10, 013. ""To February 11, 2014. 6. there were a total of 185 trades for 17,431 shares on 162 trading days in PSIT scrip during this price rise period on 155 days, there was only one trade in the scrip. Further, 45 entities bought and 35 entities sold during the period. 7. Investigation observed that the trades by the sellers contributed to increase in the Last Traded Price (LTP) by a total of Rs. 462.65 during this price rise period (positive LTP). Further, 22 out of 35 sellers were connected to each other on the basis of off-market transfers and common addresses. 8. It was observed that the 22 seller entities received shares in the off market from 4 entities namely, Rajendra Kothari, Saroj Devi Kothari Nishant Sharma... Kothari and Raj Kumar Sharma......................................................................... "59 In light of the foregoing, the above discussed trad....
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....o 26 transferred the shares of PSIT in off-market to the other 22 Noticees and then they said 22 Noticees sold those shares in the market in miniscule quantities in a coordinated manner with an aim to increase the price of the scrip, not only the investors were defrauded and misled but it also impaired the integrity of the securities market. In view of the same and considering the violations committed by the Noticees, it becomes necessary for SEBI to issue appropriate directions against them for debarring them from the securities market for an appropriate period of time. Order: 61. Considering the findings recorded in this order pertaining to the violations committed by the Noticees, I, in exercise of the powers conferred upon me under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with section 19 thereof, hereby restrain the Noticees from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner for a period of six (6) months from the date of this order. Needless to say that in view of the prohibition on sale of securities, during the period of restraint, the exist....
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.... claimed long term capital gain arising on sale of shares as exempted. Assessing Officer made additions on account of unexplained LTCG under section 68 and held that suspicious transactions in shares could not be exempted under section 10(38). Since assessee had failed to prove genuineness of his share dealing transactions and in view of fact that entire transactions were stage managed with object to plough back his unaccounted income in form of fictitious long term capital gain (LTCG) and claim bogus exemption, Assessing Officer was justified in denying exemption under section 10(38) and treating such bogus LTCG in penny stock under purview of unexplained cash under section 68. 10. The report submitted by the Investigation department could not be thrown out on the grounds urged on behalf of the assessee. The assessee have not been shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue; the statements do not indict the assessee. That apart, the investigation has commenced targe....
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....nue, nothing prevented the assessee who are ably defended by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessee have not made out any case. 11. 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 AO/ CIT (A) and ITAT to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrip of very little known companies. Furthermore, in all the cases, there....
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....easonable rise in the price of the shares of these penny stock companies over a short period of time of little more than one year, the genuineness of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in section 68. Thus, the assessee cannot be permitted to contend that the assessments were based on surmises 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 assessee have been called upon to prove the negative in fact, it is the assessee's 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 genuineness and id....
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....the assessee are ante dated and even 3rd parties tax invoices are also involved in documentation part. The reasons assigned by the authorities below do not seem to be cogent and reasonable and requires re-examination of the same. In the light of these facts matter is re-stored to the file of jurisdictional AO for re-examination and verification is to be done in a way that some sustainable cogent reason can be there on record. 15. On ground No. 3 with their respective sub-grounds, we have gone through the paper book submitted by the assessee. We have examined documents attached by the assessee vide page nos. 191 To 193 of Factual Paper Book No. I We found all the documents produced by the assessee are ante dated and even 3rd parties tax invoices are also involved in documentation part. The reasons assigned by the authorities below do not seem to be cogent and reasonable and requires re-examination of the same. In the light of these facts matter is re-stored to the file of jurisdictional AO for re-examination and verification is to be done in a way that some sustainable cogent reason can be there on record. 16. In the result, appeal of the assessee is partly allowed for statist....