TaxTMI 
TaxTMI 
2023 (4) TMI 1300
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.... Honourable Supreme Court in case of Andaman Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006) and Kishanchand Chellaram v. CIT AIR 1980 SC 2117. 2. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Assessing Officer of holding that the transaction of the sale of shares of M/s Sunrise Asian Ltd. is bogus and sham and making addition of Rs. 23,52,796/- u/s. 68. 3. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Assessing Officer of not granting the exemption of long terms capital gain under section 10(38) of the Act on sale of listed equity shares sold through recognized stock exchange which has duly been subjected to security transaction tax (S.T.T.) on surmises, conjecture and suspicion. 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Assessing Officer of treating the transaction of sale of shares of M/s Sunrise Asian Ltd. as income from undisclosed sources and making addition under section 68 of the Act for the amount credited in bank ac....
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....elevant financial year was of 4,700/- equity shares. These shares were sold by assessee between starting from 8th of August 2013 to 4th September 2013 vide page no. 15 to 19 of the paper book. 6. It is observed by us that the profitability of the company is quite meagre since A.Y. 2008-09 to 2014-15 was reproduced at page 10 of the assessment order. Price of the share very much dependent on the earnings of the share as, price always reflects future prospects of the company in terms of its profitability, consequential dividend distribution and wealth creation for the share holders. Here in this case price of the script jumped from Rs 50 in 2011 to Rs. 615 in 2015 i.e., in a short span of almost 4 years. The investee company declared a net profit of Rs 1, 02, 01,950/- during A.Y. 2014-15 and Rs 40, 13,664/- during A.Y. 2013-14. It is further pertinent to mention that its EPS was almost negligible during the relevant period. There is an established market practice of splitting the shares/ preferential allotment, in those cases where the demand of shares is very high. Company has tremendous brand value with strong financial credentials and floor price of shares is almost sky touched. ....
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....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. 9. 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 ....
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.... 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. 10. 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 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 ....
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.... 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 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 pu....