TaxTMI 
TaxTMI 
2023 (9) TMI 1454
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion under section 10(38) of I.T. Act 1961 for long term capital gain of Rs. 68,87,029/-earned by your appellant on sale of 26000 shares of NCL Research & Financial Services Ltd. (3) Ld. Income Tax Officer has erred in law as well in fact in denying conclusion on transaction of so called penny stocks without providing to your appellant any material evidence to the contrary on which he relied upon. (4) Ld. Income Tax Officer has failed to appreciate that prices of equity shares in stock exchange is guided by market forces without any direct of indirect involvement of anybody. (5) Ld. Income Tax Officer has failed to appreciate that when purchase and sale of shares were supported by proper contract notes, deliveries of shares were made through demat accounts maintained with various agencies, the shares were purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. (6) Ld. Income Tax Officer has failed to appreciate that your appellant has produced and submitted all possible documents, information in connection with her purchase ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of (i) DCIT C.C.I Vs Sunita Khemka ITA no.714 to 718/kol/2011 (ii) Hon'ble I.T.A.T. 'D; bench Kolkata in the case of Shri Dolarrai vs ITO Wd. 34(3) Kolkata, ITA no 19/kol/2014 dtd. 02.12.2016. (iii) Hon'ble ITAT 'A' Bench Kolkata in the case of Surya Prakash Toshniwal (HUF) Ward 41(3) Kolkata. The above judgement is squarely effaceable in the present case of your appellant. (13) Ld I.T O. has erred in law as well as in fact in addition a sum of Rs. 34,695/-for unexplained expenditure towards commission changed by the operators for L.T.C.G. without furnishing any material or evidence. (14) Ld. I.T.O. has erred in law as well as in fact in disallowing under section 14A read with Rule 8D entire expenses claimed Rs. 1,32,294/-incurred for earring taxable income. (15) Ld. I.T.O. has erred in law as well as in fact in adding back interest received Rs. 10,782/-from Indusind Bank as income from undisclosed source. Whereas your appellant has shown bank interest of Rs, 5,962/-in her Profit & Loss accounts for the year ending 31st March 2013. However Ld. C.I.T.(Appeals) has erred in totally denying the request of your appellant to restrict the addition for interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Ld AO u/s. 14A read with rule 8D of the Act. 3. The facts in brief for A.Y. 2013-14 are that the assessee is an individual, who filed her return of income on 27.07.2013 declaring income of Rs. 7,50,440/-. In the said return, the assessee has claimed exemption under section 10(38) of the Act for long-term capital gain of Rs. 69,42,776/-from sale of equity shares of NCL Research and Financial Services Limited. The case selected for scrutiny through CASS in AST module by valid serving of notices under section 143(2) and 142(1) of the Act. During the course of assessment proceedings, the ld. Assessing Officer observed that during F.Y. 2008-09 the assessee purchased 33800 equity shares of NCL Research and Financial Services Limited @ Rs. 2/-per share and total purchase price was at Rs. 67,600/-. During the year under consideration, the assessee sold 26,000 shares of NCL Research and Financial Services Limited for a consideration of Rs. 69,39,029/-thereby earning long-term capital gain of Rs. 68,87,029/-. Price increase was almost 13700%. The ld. Assessing Officer called for the details of financial statements of NCL Research and Financial Services Limited which indicated poor r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Hon'ble jurisdictional High Court in the case of Swati Bajaj (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022. 7. We have heard the rival contentions and perused the relevant material placed before us. We notice that the issue with regard to unexplained cash credit for alleged bogus long-term capital gain under section 10(38) of the Act is in dispute before us. We notice that the alleged long-term capital gain has been earned by the assessee during the year under appeal from sale of equity shares of NCL Research and Financial Services Limited. This company is in the list of 84 companies, which has been found to be penny stock company. The assessee had made huge gain due to price increase, which was almost 13700% in comparison to the purchase price, but the increase in price of shares is not commensurate to the financials of the company as observed by the lower authorities. 8. It is also pertinent to observe that recently Hon'ble Jurisdictional High Court has examined the issue of bogus capital gain claim made by a large number of assessees in Kolkata. This issue has been examined in the case of Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.) pronounce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale of shares as bogus transaction by relying on the report of Investigation Wing of the Department wherein the Investigation Wing of the Department had studied the modus operandi of rigging the prices of penny stocks and generation of capital gain/trading loss there from. On appeal, ld. CIT(A) confirmed the action of the ld. AO. Aggrieved, assessees are in appeal before the Tribunal. 5. Recently on 14.06.2022, the Hon'ble jurisdictional High Court of Calcutta passed a judgment in the case of Swati Bajaj and others [2022] 139 taxmann.com 352 (Cal) dealing with set of cases with similar fact patterns as narrated above for the present appeals under consideration before us. Hon'ble jurisdictional High Court by taking the report of the Directorate of Investigation of the Department as the basis, gave its observations and findings, which are summarized hereunder. 5.1. There are two category of cases dealt with by the Hon'ble High Court, viz. first category being those arising out of the order of Tribunal dated 26.06.2019 in which 90 appeals filed by the assessees were allowed and second category is of those cases where assessee has challenged the assumption of jurisdic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. [para 73] g) 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. [para 75] h) The exercise that was required to be done by the Tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the 'players' can never be established by direct evidence and therefore the surrounding circumstances was required to be taken note of by the Tribunal which exercise has not been done. [para 99] i) The assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee. [para 99] j) The tribunal being the last fact finding authority was requi....