TaxTMI 
TaxTMI 
2023 (12) TMI 1422
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.... the three appeals. For the sake of convenience, the substantial questions of law proposed in Tax Appeal No.793 of 2023 are as under: "(i) Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in deleting the addition on account of bogus Long Term Capital Gain amounting to Rs. 3,47,564/- made by the Assessing Officer arising out of sale of shares of Global Capital Markets Ltd., a penny stock and without appreciating the findings of the Assessing Officer that the price movement of the company were not supporting by financial fundamentals of the company? (ii) "Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in ignoring the facts that the transactions in the guise of Long Term Capital Gain, as claimed by the Assessee was arranged through brokers, operators and exit providers for generation of bogus Long Term Capital Gain? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in allowing the appeal of the Assessee by holding that the investment in shares was genuine, simply placing reliance upon the decision ....
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....3] Similar questions are also proposed in Tax Appeal Nos.794 of 2023 and 795 of 2023 except change of amount of additions made by the Assessing Officer for Capital Gain arising out sale of shares of Global Capital Markets Limited. [4] The brief facts of the case in Tax Appeal No.793 of 2023 are as under: [4.1] The respondent - assessee filed return of income for Assessment Year 2011-12 declaring total income at Rs. 7,14,500/- on 4th February 2012. [4.2] During the year consideration, the respondent - assessee earned income from house property, income from capital gain and income from other sources. During the scrutiny assessment, the Assessing Officer received information from the Kolkata Investigation Directorate who had undertaken investigation into 84 penny stocks and given detailed findings indicating bonus LTCG / STCL and bogus loss entries claimed by large number of beneficiaries through circular dated 16th March 2016. [4.3] As per the information received by the Assessing Officer, it was revealed that the respondent assessee made transaction in penny stocks in the script Global Capital Markets Limited (hereinafter referred to as "penny stocks company") for total ....
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....s of penny stock company, which is subject matter of challenge in Tax Appeal No.794 of 2023. Similar transactions are also carried out by the assessee Jasodadevi Rajaram Jajoo for the Assessment Year 2012-13 in which the additions of Rs. 3,99,267/- were made towards Long Term Capital Gain by the Assessing Officer on account of sale of the penny stocks company, which is a subject matter of challenge in Tax Appeal No.795 of 2023. [6] Being aggrieved, the assessee preferred appeal before the CIT(A) who confirmed the action of the Assessing Officer observing as under: "CONCLUSION : In view of the above, I have no hesitation in confirming the order of the Ld. Assessing Officer since in this case sham transactions have beers undertaken by the Appellant in the penny stocks of Company/Companies with no tangible/intangible assets. These transactions in penny stocks for appropriating unreasonable gains and/or losses, at the cost of the Revenue, for unjust enrichment of tax evaders are the biggest tax fraud scam in the history of independent India. The latin maxim minaturinnocentibus qui parcitnocentibus", meaning "he who spares the guilty threatens the innocent" is squar....
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.... considering the facts of the case of the respondent assessee, arrived at the following findings: "Our analysis in respect of assessee's facts: In the assessee's case under, the assessee has done risk analysis before making investments. The assessee has not taken blind decision to invest in the shares. After purchasing the shares, the assessee holds these shares for the period of seven years. Hence, the assessee under consideration is an investor. Thus, for such assessee it cannot be said that he has engaged in taking accommodation entry to evade the taxes. Thus, assessee before us is a big time Investor, as he was holding the shares for a period of seven years (ii) Observation of Hon'ble Calcutta High Court: "...It has been established by the department that the rise of the prices of the shares seas artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, 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 h....
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....s to book bogus LTCG or loss, to defraud the Revenue. The assessee, as on Investor, held the share for long time. Hence the assessee is an Investor and therefore should not be treated to engage in fraudulent activities/manipulation activities. We note that assessee had sold shares of M/s Global Capital Markets Limited during FY 2010-11 on 29.07.2010 after holding the shares for more than 7 years and claimed just Rs. 3,47,564/- an Long Term Capital Gain(LTCG). We also note that the amount of Rs. 3,47,564/- is not a significant amount. Therefore considering these facts, we are of the view that assessee under consideration, has not taken accommodation entry. Therefore, we note that findings of Hon'ble Calcutta High Court in the case of Swati Bajaj and others(supra) is not entirely applicable to the assessee's facts under consideration. By way of this above analysis, we are not stating that entire findings of Hon'ble Calcutta High Court in the case of Swati Bajaj and others(supra) distinguishable on facts, of Course some of the findings are applicable to the assessee's facts. In our above analysis, we have pointed out that some of the major facts of the assesse....
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.... 3.2 In appeal by the assessee before the Commissioner of Income Tax (Appeals), the issue was re-examined. According to the appellate authority the appellant assessee had furnished evidence to show that the shares were brought as genuine investment which was long back in the year 2000-01. As the shares were in the nature of old investment, they could not be treated as penny stock by any stretch of imagination. 4. The Income Tax Appellate Tribunal further examined the question in appeal preferred by the revenue and confirmed the view of the appellate authority noticing that the shares were purchased in the year 2001 and they were sold after long time in the year 2010-11. 5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income....