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2024 (2) TMI 1414
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....losing any process of reasoning how income is escaped income and how transaction were 'bogus'. 1.2 That 'reasons' are based on Ld. AO's finding that assessee not having declared any income or loss attributable to the sale of Shares of Shreenath Commercial and Finance Ltd. , an incorrect fact, as capital gain earned, was disclosed in return of income and claimed exemption u/s. 10(38) of the Act. 1.3 That 'reasons' are based on 'general information' without establishing any connection with assessee and without reflecting any wrong doing by assessee. Ground No. 2: 2. Ld. CIT (A) ought to have considered: 2.1 that 'reasons' were vague without disclosing any finding of DGIT(INV)Kolkata, nature of investigation carried, statements recoded etc. in the 'reasons' and no material was disclosed/made available to the assessee. 2.2 That 'reasons 'were just recoded based on DGIT (INV) Kolkata without any verification/enquiry being carried by Ld. AO. Ground No. 3: 3. The Ld. CIT (A) erred in confirming addition of Rs. 51, 48,580/- u/s. 68 in spite of the fact that pu....
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....lete lack of any spending by the assessee not recorded in books of accounts and fact of incurring expense was to be proved by Ld. AO. The appellant crave your honour's leave to add, alter or amend any grounds of appeal at the time of hearing or before. Appellant pray that additions made be deleted and notice u/s. 148 be cancelled. 2. Brief facts of the case are that information was received from O/o DGIT (Inv.) Kolkata (uploaded on ITD) that the appellant received accommodation entry of bogus LTCG of Rs. 42, 04,345/- in F.Y. 2012-13 of a Penny Stock. In the ITR filed on 19.07.2013 for the A.Y. 2013-14, assessee declaring a total income of Rs. 1,23,774/-, the Appellant claimed LTCG of Rs. 42,04,345/- exempted u/s. 10(38) of Act. The penny stock traded in was as under:- F.Y. 2012-13- Shreenath Commercial & Finance Ltd (M/s. SCFL)--Sold- Rs. 51, 48,580/- 3. In the assessment proceedings the AO made a total addition of Rs. 54, 26,811/- which is as follows ● Disallowed the claim of Appellant of LTCG u/s. 10(38) of act of Rs. 42,04,345/- ● Added the sale proceeds, received on sale of shares of M/s. SCFL of Rs. 51, 48,450/- u/s.....
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....es were used. The same modus is adopted for providing accommodation entry of bogus LOSS. 8.3 in this scheme, the shares of the penny stock companies are acquired by the beneficiaries of LTCG at very low prices through the route of preferential allotment (private placement) and off market transaction. These shares have a lock-in period of 1 year as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Another route to acquire the shares is through Amalgamation or merger. In this route, the beneficiaries of LTCG are allotted shares of a private limited company which is subsequently amalgamated with a listed penny stock and the beneficiaries receive shares of the listed penny stock in exchange of the shares of private limited company. The shares in some cases were acquired through stock exchange. These shares were then split and bonus shares were issued to increase the volume. 8.4 Thereafter, the prices of the shares of the penny stock companies are rigged and are raised through circular trading. This is managed by the "operator" of the scrip. An "Operator" is a person who is managing the overall affairs of the s....
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....tial / direct evidences gathered against the claim of the assessee of LTCG from the sale of the shares of M/s. Shreenath Commercial and Finance Ltd. 9.3 Under this shadowed background following are the circumstantial / direct evidences against your claim of LTCG. It is further seen from your case records that your main source of income is income from salary from company and income from other source. On perusal of your computation of income statement it is noticed that you had claimed exemption on total LTCG of Rs. 42, 04,345/-. It is pertinent to mention here that M/s. Shreenath Commercial & Finance Ltd is the only script in which you had booked significant Long term Capital Gain i.e. 42,04,345/-. During the F.Y.2010-11 & 11-12 you had purchased shares of M/s. Shreenath Commercial and Finance Ltd of Rs. 9,27,702/- Such huge investment made in one script with some knowledge of share market and advice of third person is suspicious and hence the transaction are seems to be doubtful. The statement of Shri Sanjay Vora, Jaikishan Poddar, Rakesh Somani, Soumen Choudhury, Shri Suresh Kumar Saraf, Shree Kumar Toshniwal, all belongs to Kolkata, recorded u/s. 131/13....
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....ined LTCG under section 68 of the Act and held that suspicious transactions in shares could not be exempted under section 10(38) of the Act. Since assessee had failed to prove genuineness of his share dealing transactions and in view of the 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) of the Act and treating such bogus LTCG in penny stock under purview of unexplained cash under section 68 of the Act. 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 ....
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....d by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defense. 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 leveled 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 t....
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....hese 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 of the Act. 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 hear....
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....the purposes of bonus shares was Rs. 5.98 Crores. Whereas as per Schedule II (Reserve & Surplus), the position of financials emerged as under:- SCHEDULE-II: RESERVE & SURPLUS Particulars As on 31.03.2011 As on 31.03.2010 (a) Profit & Loss Account As per Last Balance sheet 33,91,481 79,42,493 Add/(less): Profit (Loss) for the year 74,19,371 27,75,987 1,08,10,852 1,07,18,480 Less: Capitalisation for issue of Bonus shares 1,01,57,350 73,27,000 6,53,502 33,91,480 (b) General Reserves - 23,000 Less: Capitalisation for issue of Bonus shares - 23,000 - - (c) Share Premium A/c. 4,96,42,650 4,96,42,650 4,96,42,650 - 4,96,42,650 TOTAL RS. 6,53,502 5,30,34,130 16. As per Schedule II reproduced (supra), the total amount capitalized by the company for issuance of bonus shares amounting to Rs. 6, 71, 50,000/- whereas in balance sheet under Schedule I amount shown is Rs. 5.98 Crores. It reflects a difference of Rs. 73.5 lakhs. This working is here to demonstrate an overall camouflaged state of aff....
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....ions in the finance fields where the company's activities are centred in, the overall margins are under pressure but maintainable with constant effort and good services. 18. In view of above facts of the matter, all the relevant material relied upon by the revenue and assessee has been thoroughly analyzed and in our observation transaction entered into by the assessee are not looks to be clear. As investee is showing in Schedule IV-Fixed Assets, computers only whereas as mentioned (supra) its main activities are of financing and real estate. There is no indication in the financials of the investee company about its indulgence in the area of finance and real estate. Investee Company's EPS only 0.06. With such a low/negligible EPS, how the price of shares can be so high? Simply by producing contract note, bank statement, sale note, assessee cannot absolve himself from a duty caste upon him to prove his genuineness. 19. Further to the observations on the Audited Financial statements, in the course of hearing, the Ld.AR was called to explain the reasons and basis for acquisition/ purchases of the shares, it was submitted that the shares are purchased through the stock exchang....