TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1457
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....he 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 explanations and evidences be considered and that the AO be directed to delete the aforesaid additions made u/s....
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....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 company M/s Parag Shilpa Investment Ltd. splited its shares in the ratio of 1:10 on 05-09-2014 by virtue of split now assessee has total 85,000/- shares of face value of Rs 1 each. Th....
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.... 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 Sold Sale Value Date of Sale Long Term Capital Gain 2015- 16 PSIT 7500 75000 05/02/2013 1000 63360 11.09.2014 20000 1280200 12.09.2014  ....
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....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 investigation into 84 penny stocks including one M/s PS IT & Infrastructure Services, in which assessee was involved, and given detailed findings including bogus LTCG/STCL entries claimed by large number of beneficiaries. In view of the above, it may be inferred that the amount of Rs. 57.57, 900/ was correctly added to the income of assessee as bogus Long Term Capital Gain." ....
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....g 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 respect of suspicious transactions in the scrip PS IT Infrastructure & Services Ltd. and they passed a detailed order not only banning in the trading in this scrip but also prohibiting relevant stock brokers from doing any market transactions. The SEBI has clearly held that movement in the scrip was unusual and rigged. For clarity the relevant portion of SEBI's order is reproduced as under....
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....riod 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 trading behaviour and the conduct of the Noticees, the preponderance of probability leads to the conclusion that the tradings / transactions of the Noticees are not genuine and are contrary to their claim that is the same are in the ordinary course of their business. To reiterate, in this present case, the transferors (Noticees No. 23 to 26) transferred the shares through off market transactions in a distributed manner, and within a few weeks of th....
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.... 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 existing holding, including units of mutual funds, of the Notices shall remain frozen. 62. It is made clear that if the Noticees have any open positions in any exchange traded derivative contracts, they can close out/ square off such open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier. It is also clarified that these Notices can settle the pay-in and pay out obligations in respect of transactions, if....
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....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 targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submitted recommending the same to be placed before the DGIT (Investigation) of all the States of the country. It is thereafter the concerned Assessing Officers have been informed to consider as to the bonafideness and genuineness of the claims of LTCG/LTCL of the respective assessee qua the findings which emanated during the investigation conducted on the ind....
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....nding 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 were minimum two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from....
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....f 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 identity. The assessee 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 assessee 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 the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming....