TaxTMI 
TaxTMI 
2024 (12) TMI 637
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....sessment order is as under:- LTCG amount Name of penny stock Quantity of penny stock sold Sale consideration Rs. 1,49,14,984/- HPC Bioscience Ltd. 36100 Rs. 1,52,76,467/- 3. Against the aforesaid action of the AO, Assessee appealed before the Ld. CIT(A). 4. Upon assessee's appeal, Ld. CIT(A) by passing an elaborate order, confirmed the addition, by holding as under:- "Notwithstanding the above reasons for confirming the addition made by the AO, in this case, I note that the Appellant has claimed LTCG which the AO has found to have been earned/arisen from transactions in penny stocks. I have carefully considered the facts of the case and decisions of the Hon'ble Courts. The Assessing Officer has shown the involvement of all the persons in the rigging of the price of the shares in which the appellant had invested. The relevant question is not on the legal formalities related to purchase and sale of the shares but its motive and design. The shares from whose investments, the Appellant has claimed the purported income are penny stocks and there was phenomenal increase in the price of these shares. Even more, the AO has held that the financials of these company do n....
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.... garb of legal forms. No investigation is required to prove such a conspicuous fraudulent activity. The case was so glaring that even a lay man could easily judge the real facts of the case. There are no comprehensible market forces or international trends responsible for huge fluctuation in the price of the shares of this company. Even the sensex was not so volatile during this period. There are no sentimental, national or international factors responsible for the so called growth. Arguments of the Appellant do not help because there are no apparent reasons of any kind which can give an iota of substance to the phenomenal rise of the value of the aforesaid penny stocks. There may be absence of direct evidence that cash was introduced for obtaining the accommodation entry but circumstantial evidence is the evidence of various facts and if taken together, they may form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the clandestine operations and transactions it is impossible to have direct evidence or demonstrative proof of every move. So the Assessing Officer cannot be expected to produce such evidences. The Hon'....
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....ital subscribed by Sh. Tarun Goyal as documentary proof of the same was lacking. v. During the course of search, all the passbooks, cheque books, PAN Cards etc. were always in possession of Sh. Tarun Goyal. On his directions all the employees signed all the documents. vi. All the bank account opening forms appear to be in the handwriting of Sh. Tarun Goyal. vii. All the books of accounts of all the companies have been retrieved from the computers/laptop of Sh. Tarun Goyal. viii. Sh. Tarun Goyal has given letters for the release of bank accounts of companies put under restraints after search. No such application was rece/ved from so called directors of the companies. ix. Sh. Tarun Goyal appears in all the scrutiny assessments as well as appeals of his companies himself before various income' tax authorities. From verification carried out in respective wards/ circles where the above mentioned companies are assessed, it is' evident that Sh. Tarun Goyal is appearing in all the income tax proceedings on behalf of all the companies. He is not charging any fees for appearing in these cases. x. During the post search investigation it was revealed that besides, aiding an....
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....39;s statement must be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-serving recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look Into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds, may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law." The above ratio laid down by the Hon'ble Supreme Court has been reiterated and applied by the Hon'ble Apex Court in the case of Sumati Dayal vs. CIT 214 ITR 801 (S.C). It is essential on the part of the Assessing Officer to look into the real nature of transaction and what happens in the real world and contextualize the same to such transactions in the real market situation. It is pertin....
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....ect to tax is on the Revenue but on the facts, to show that the transaction is genuine, burden is primarily on the assessee. The AO is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of evidence that the transaction was genuine, cannot be conclusive. Such evidence is required to be assessed by the AO in a reasonable way. Genuineness of the transaction can be rejected even if the assessee leads evidence which is not trustworthy, even if the Department does not lead any evidence on such an issue. In view of the above, we are of the view that the finding recorded by the Tribunal is a finding of fact and cannot be held to be perverse. No substantial question of law arises. The appeal is dismissed." In the above case, the relevant decision of Hon'ble ITAT Chandigarh in ACIT vs. Som Nath Maini [(2006) 100 TTJ Chd 917] is as under: "6. After hearing the rival submissions, going through the orders of authorities below and paper book, we, find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange at, the relevant time. Shares have bee....
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....m the brokers only in instalments over a period of 6-7 months. It is true that when transactions are through cheques, It looks like real transaction but authorities are permitted to look behind the transactions and find out the motive behind transactions. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be nongenuine, it is highly improbable that share price of a worthless company can go from Rs. 3 to Rs. 55 In a short span of time. Mere payment by cheque and receipt by cheque does not, render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to offset the loss incurred on the sale of jewellery declared under VDIS, In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set aside the order of the CIT(A) and restore that of the AO.....
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....orders of the Income tax authorities, it appears that there is no scope for interference with the said orders in this appeal. By referring to the aforesaid facts, which are narrated in the earlier part of this order, the authorities found that the assessee had made investment in two unknown companies of which the details were not known to her. It was held that the transaction of sale and purchase of shares of two penny stock companies, the merger of the two companies with another company, viz. Khoobsurat Limited did not qualify an Investment and rather it was an adventure in the nature of trade. It was held by all the authorities that the motive of the investment made by the assessee was not to derive income but to earn profit. Both the brokers, le, the broker through whom the assessee purchased the shares and the broker through whom the shares were sold, were located at Kolkata and the assessee did not have an inkling as to what was going on in the whole transaction except paying a sum of Rs. 65,000/in cash-for the purchase of shares of the two penny stock companies. The authorities found that though the shares were purchased by the assessee at Rs. 5.50 Ps. Per share and Rs. 4/per....
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....that the assessee was not granted fair opportunity. Mr. Rajesh Mahna, learned counsel appearing for the assessee relied upon the orders of the co-ordinate Bench of the tribunal, in respect of the same company i.e. M/s Kappac Pharma Ltd., and pointed out that the tax authority's approach in this case was entirely erroneous and inconsistent. The main thrust of the assessee's argument is that he was denied the right to cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact thát the findings in this case are entirely concurrent - A.O., CIT(A) and the ITAT have all consistently rendered adverse findings - what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meager resources and in fact reported consistent losses. In these circumstances the astronomical growth of the value of company's shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard ....