TaxTMI 
TaxTMI 
2025 (1) TMI 388
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....d that during the financial year, the assessee has claimed exemption u/s 10(38) of the Act, long-term capital gain of Rs. 92,01,732/- in respect of sale of shares of M/s. Kailesh Auto Finance Limited. The assessee claimed that 3,00,000 shares of M/s. Careful Projects Advisory Ltd. had been purchased on 13.03.2013 @1/-per share. Subsequently, M/s. Careful Projects Advisory Ltd. was merged with M/s. Kailesh Auto Finance Ltd. in a scheme of amalgamation. 2.2. The AO referred to the investigation carried out by the DIT(Inv) Kolkatta regarding bogus LTCG/STCL/trading loss through dealings in shares of 'penny stocks' and 84 companies listed in the Bombay Stock Exchange were identified as penny stock companies, one of which is M/s. Kailash Auto Finance Ltd. The AO referred to the sworn statement of Shri Sanjay Dhirajlal Vora, Regional Director (East Zone) of M/s Anand Rathi Shares & Brokers Ltd., recorded on 8.4.2015, wherein Shri Vora confirmed that M/s. Kailash Auto Finance Ltd. is a penny stock company. Statement of Shri Sunil Dokania, accommodation entry provider, recorded on 12.06.2015 was also relied upon, wherein Shri Dokania lists M/s. Kailash Auto Finance Ltd. as one o....
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....hares of Careful Projects Advisory Ltd. had been purchased in March 2013 @ Rs. 1/- per share. Subsequently, Careful Projects Advisory Ltd. was merged with Kailesh Auto Finance Ltd. In a scheme of amalgamation. 7.3 Kailash Auto Finance Company Ltd. has been identified as a 'penny stock' company. The modus operandi of penny stock companies and the entire process of obtaining bogus Long Term Capital Gain/Short Term Capital loss entries through price manipulation of the shares of the 'penny stock companies' has been discussed by the AO in the assessment order. Kailash Auto Finance Ltd. has been listed amongst the 84 'penny stock companies identified by the Investigation Wing Kolkatta, after a prolonged investigation. Trading in the shares of Kailash Auto Finance Ltd. was suspended by the Exchange after directions from SEBI vide notice No. 20160804-24 dated 04.08.2016. The financials and the trading pattern of the scrip have been independently examined by the AO and it is seen that they fall within the general framework of the financials and scrip trading patterns of 'penny stock companies'. The share prices have fluctuated in a bell shape curve, irr....
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....of Income-tax Investigation, Unit II (3), Kolkata dated 27-4-2015 which report was furnished to the Director General of Income-tax Investigation in Mumbai, Delhi, Ahmedabad, Bengaluru, Bhopal, Chandigarh, Chennai, Delhi, Hyderabad, Jaipur, Kochi, Kolkata, Lucknow, Patna, Pune and Director General (International Taxation) Mumbai. The investigation report dated 27-4- 2015, which is available in the public domain narrates the modus operandi adopted for the purpose of claiming bogus LTCG. The stocks which were the subject matter of transaction were referred to as "penny stocks" and the companies whose shares were traded in the various stocks exchanges. The report further states that in the whole project total 84 BSE listed penny stocks have been identified after which several search and survey operations were conducted in office premises of more than 32 share broking entities who have accepted that they were actively involved in bogus LTCL/STCL scam. Surveys were also conducted in the office premises of many accommodation entry providers and their statements were recorded in which they have admitted their role in the scam. The beneficiaries of more than Rs. 38,000 crores have been iden....
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....68 of the Act. Therefore, 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 and more importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the assessing officer cannot be faulted. 76. It was argued that unless there are foundational facts, circumstantial evidence cannot be relied on. This argument does not merit acceptance as wealth of information and facts were on record which is the outcome of the investigation on the companies, stock brokers, entry operators etc. Based on those foundational facts the department has adopted the concept of "working backward" leading to the assessees. While at that relevant stage the sounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over, were all taken into consideration to negative the claim for exception made by the assessee. Ther....