TaxTMI 
TaxTMI 
2024 (7) TMI 124
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....ed for adjudication. 3. Briefly stated the assessee is a portfolio investor registered with Securities and Exchange Board of India (SEBI) and is a tax resident of Mauritius. The assessee had filed its return of income declaring total income at Rs. 6,59,33,460/-. The assessee's case was selected for scrutiny for the reason that the ld. A.O. observed that the assessee has shown long term capital gain by trading in stock of M/s. International Conveyors Ltd. (ICL for short) where the assessee had sold 22,41,929 shares for a sale consideration of Rs. 6,64,96,351/- and had claimed Rs. 79,37,345/- as 'exempt income' as per the DTAA between India and Mauritius. The ld. A.O. held the same to be a penny stock script and had made an addition of the impugned amount and had determined the total income at Rs. 13,24,29,811/-. The ld. A.O. had passed the draft assessment order dated 26.09.2022 and subsequent to which the assessee had filed its objection before the Hon'ble DRP which was then disposed off and pursuant to the direction of the Hon'ble DRP , the ld. A.O. passed the final assessment order dated 05.07.2023. 4. The assessee is in appeal before us, challenging the final assessment or....
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....hich has been claimed as 'exempt' as per the DTAA between India and Mauritius. The assessee in its reply to the ld. A.O. has stated that it had directly subscribed to 3,25,000 warrants of M/s. International Conveyors Ltd. at the issue price of Rs. 238/- in the year 2008 directly from the company for which a total consideration of Rs. 7,73,50,000/- was paid where the assessee had paid 10% of the said consideration amounting to Rs. 77,35,000/- immediately and the balance was payable after the conversion of the warrants and had subsequently converted the same into shares in 2009 which was sold only during A.Y. 2020-21. The assessee is said to have furnished the bank details of the said payment along with FIRC copy issued to M/s. International Conveyors Ltd. for receipt of funds against preferential allotment of warrants. The assessee further stated that the said script was listed on Bombay Stock Exchange (BSE) and also subsequently got listed on NSE also. The assessee contended that the assessee has invested/transacted in several other scrips during the year under consideration which aggregates to Rs. 293,08,21,323/- in which only 2.27% of the total sale value is that of the alleged s....
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....e same for almost 10 years from the date of acquisition which was during the year under consideration was purchased by M/s. Team India Managers Ltd. The contention of the ld. A.O. that the movement of the price of shares is abrupt and unrealistic, is not acceptable for the reason that the price per share was Rs. 11.90 at the time of acquisition and has increased to Rs. 29.66 over a period of 10 years, is according to us a reasonable increase in the price of the share unlike in most of the penny stock cases where the price of the shares sky rockets manifolds within a short span of time. We also have noticed that the assessee has substantiated the financials of M/s. ICL where it is inferred that the said company is merely not a bogus entity having dummy directors. Pertinently, the ld. A.O. has merely relied on the fact that inspite of increase in the debt, the sales of the said company has not increased proportionately. The assessee being a SEBI registered FPI is engaged in the investment in various companies out of which the assessee earns income and is also the only source of income for the assessee. The ld. A.O. has failed to substantiate how the assessee is involved with Shri Nar....
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....transaction and on the other hand he's allowing the benefit of the cost of acquisition for the shares while determining the bogus long term capital gain.... 11.2 It was alleged by the AO that the price of the share of M/s Shree Nath Commercial & Finance Ltd., increased in a short period of time which is not in commensurate to the financial performance of the company. The rise in the price of the scripts of a company, having no financial base/business activity/profatibility certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be a sole criteria for reaching to the conclusion that the bogus long-term capital gain was generated which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. But in the case on hand, there was no finding that the enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s Shree Nath Commercial & Finance Ltd. Similarly, there was no finding with subsequent market price of the impugned scipt. We also ....