TaxTMI 
TaxTMI 
2025 (6) TMI 1052
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....d the assessee being fully aware of it is also a part of this manipulation. 2. The Ld. Commissioner of Income Tax (Appeals)-1, Kanpur has erred in law and on facts without appreciating the facts that the issue involved pertains to organized scam/tax evasion activity and unique modus operandi of this embezzlement for which CBDT's Circular No. 23 of 2019 dated 06.09.2019 and subsequent O.M. dated 16.09.2019 mandate that the appeals may be filed on merits in case of the assessee claiming bogus LTCG/STCL through Penny Stocks. 3. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, unjust and bad in law be vacated and order dated 26.12.2017 passed u/s 143(3) of I.T. Act of the Assessing Officer be restored. 4. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so." 2. It is observed that the appeal is delayed. From the Form 36 filed, it is observed that the said order was received in the office of the ld. PCIT-1, Kanpur on 11.12.2018 and the last date of filing of Departmental appeal was therefore, 9.02.2019. However, the tax effect involved in the matt....
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....egal heir on record. 4. We have duly considered the said condonation petition and the objections filed by the ld. AR. We are of the view that the period upto 16.09.2019 ought to be excluded in view of the fact that the Departmental authorities could not have proceeded with the appeal in the absence of express authorization from the CBDT. Thus, the period of limitation would have to count from the date of which the CBDT lifted the embargo on filing of such appeals even they were below the taxable limits as specified in the earlier Circular. It is further observed that as per the statute, both Department and assessee are usually given a period of two months in which to file an appeal before the ITAT after the copy of the order of the ld. CIT(A) is received in the office of the ld. PCIT. Thus, in normal circumstances, considering that the details of the Board's decision would take some time to be communicated to the ld. AO, the Department could explain a delay of uptil end of November, 2019 for the filing of the said appeal. The ld. AO has submitted that the appeal could not be filed at that time because the ld. AO and the Department was at that time involved in time barring assessme....
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....ecorded by the Directorate of Investigation, Kolkata wherein he had admitted to be an accommodation entry provider and stated that bogus LTCG/ STCG/STCL was provided through the scrips of Kailash Auto Finance which were controlled and managed by him. Sh. Dokaniya also discussed the modus operandi in how this was facilitated and this statement was reproduced in the orders of the ld. AO. The ld. AO also reproduced an analysis of the books of accounts of M/s Kailash Auto Finance, the details of which were recorded in his order,which seem to confirm the statement given by Sh. Sunil Dokaniya. In view of these two pieces of evidence, the ld. AO came to the conclusion that the assessee had failed to prove the genuineness and veracity of the long term capital gain arising out of trading in penny stocks of M/s Kailash Auto Finance. The ld. AO also observed that the Securities and Exchange Board of India had recently passed some orders on the issue of manipulation of share prices for providing accommodation entries of bogus LTCG/STCG after considering the inputs from the Income Tax Department as well as its own surveillance system. The Stock Exchanges had also taken appropriate action in the....
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....ssessee. The purchase and sale of shares had not been questioned and it had not been proved by the ld. AO to be false. It was further submitted that the assessee's case for exemption under section 10(38)stood supported by a large number of case laws which were squarely applicable to the facts of the assessee's case. Some of the decisions which were cited in support of the assessee's claim were the decisions of the Hon'ble Allahabad High Court in the cases of CIT, Muzaffarnagar vs. Neeraj Kumar Jain [order dt 2.01.2013], CIT vs. Udit Narayan Agarwal (order dt 12.12.2012) and CIT vs. Shyam Sundar Agarwal (order dt. 29.11.2012) The assessee also cited the judgment of the ITAT in the case of Smt. Manju Bansal, wherein it has been held that the evidences brought on record by the assessee in support of the prices on which the shares had been sold could not be ignored when the realizations were through cheques issued by buyers / share brokers and it was submitted that the assessee's case was on even better footing as the transactions were done for demat account. It was further submitted that the judgment of the Hon'ble ITAT Lucknow Bench in the case of Manju Bansal had been accepted by th....
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....to the scrip of M/s Kailash Auto Finance Limited but there was no evidence available against the assessee to come to the conclusion that the assessee had been involved in the manipulation of share prices of the concerned company. He also noted that there was no general or specific statement either by M/s Infoline Limited or M/s Kailash Auto Finance Limited against the assessee or with relation to the transactions made by the assessee. Thus, the ld. AO had quoted facts pertaining to various unrelated persons and made additions in the hands of the assessee. One of the materials that had been used by the ld. AO was the suspension order in the trading of scrips of M/s Kailash Auto Finance. However, the ld. CIT(A) pointed out that the said interim order dated 29.03.2016 had been revoked by the SEBI on 21.09.2017 vide Order No. SEBI/WTN/NPB/EFD-DRA-I/31/2017. He quoted from the order and concluded that the SEBI prima facie not found involvement of the concerned company in any unfair trade practices and had allowed trading of the said scrip on the public portal once again. Hence, the only material that existed with the ld. AO had now ceased to exist. Therefore, only because the same scrip....
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.... CIT DR, representing the Revenue placed reliance on the orders of the ld. AO and submitted that the ld. CIT(A) was unjustified in seeking specific investigation of and evidence in respect of the assessee by the Investigation Wing and the SEBI, as a tool for determining whether the transaction was manipulated or not. It was submitted that the investigation wing of the Dept. had brought sufficient material on record to show that the Capital gains arising on account of the appreciation in the price of Ms Kailash Auto was due to the result of rigging of the price of Ms Kailash Auto and submitted that once the fact of scrip being manipulated was brought on record and it had been established that the volatility in the price of the scrip happened not due to any intrinsic market forces but due to circular trading by some brokers and accommodation entry providers, then the capital gain generated from the said scrip could not be treated to be genuine, as it was the result of price manipulation. The ld. Addl CIT DR also argued that the ld. CIT(A) was completely unjustified in relying upon the revocation order of the SEBI against various entities. Therefore, the ld. CIT(A) was unjustified in ....
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....h evidence has been brought on record to show that the assessee was a beneficiary of a scheme to artificially create capital gains, then the assessee has to discharge a far greater burden than what would be required in a normal case, where such evidence was not there on record. In view of the scheme of manipulation that had been spelt out by the ld. AO in his assessment order, we do not feel that the mere filing of purchase bills, demat account, contract notes and details of share consideration and STT paid are sufficient to explain the genuineness of the transaction. The Hon Kolkata High Court in dealing with a similar case in PCIT vs Swati Bajaj (2022) 139 taxmann.com 352 (Calcutta)held, that it was very rare and difficult to get direct information or evidence with regard to meeting of minds of persons involved in the manipulative activities of price rigging and insider trading. Therefore, a wholistic approach is needed and the test of preponderance of probabilities has to be applied. The High Court further held that even if the assessee's were not named in the report of the investigation wing, once they made a claim for exemption, they had to prove the genuineness of the transac....