TaxTMI 
TaxTMI 
2025 (8) TMI 679
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....nt facts are that during the year under consideration, the appellant sold certain shares and declared long term capital gains income of Rs.84,79,100/- and claimed the same as exempt u/s 10(38) of the act. The details are as under: 2. During the course of assessment proceedings before the A.O., in compliance to the various queries raised regarding the Long term capital gain income, the following details were furnished. Bank passbook. Details of Short term capital gain/loss. Details of Long Term Capital Gains. Application for transfer of physical shares to Dmat Account. Dmat Account statement from BOI shareholding Ltd. from 01.04.2013 to 31.03.2014. Invoices, reager account etc., ior sale of snares/ponas. (Application for transfer of physical shares to Dmat,) A sworn affidavit of the share broker. From the above and the chart referred to in para no.1, it would be clear that the shares were purchased in physical form during the previous year 2011-12, demated and sold through registered Broker M/s. UPS Investments during the previous year relevant to A.Y. 2014-15. Further, it would also be clear that the a....
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....same for a period of more than a year. A perusal of the assessment order would make it clear that the A.O. has not disputed the nature of assets, cost of acquisition, duration of holding of shares, the fact of sale of shares through the Bombay Stock Exchange, etc. However, the A.O. holds the transactions as non-genuine only for the reason that the price of the scrip has moved up phenomenally and this could not happen unless the movement was meticulously planned and created Needless to mention that the appellant has not and could not have played any part/role to move the price of the scrip. 6. In addition, it may also have to be submitted that the provisions of section 68 are deeming provisions and are applicable only in the circumstances where a sum is found credited in the books maintained by the assessee for any previous year and assessee offers no explanation about the nature and the source thereof or the explanation offered by him is not, in the opinion of the A.Ο., satisfactory, the sum so credited may be charged to income tax. In the instant case, the assessee has explained that the sum was credited in her bank account and was on account of sale of shares on ....
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....No.51 to 82 & 83 to 98, respectively of the case law paper book. CIT V. Shyam R. Pawar (54 taxmann.com 108) (Bom) In this case, it has been held that where DMAT account and contract note showed details of share transaction and assessing officer had not proved the said transaction as bogus, capital gains earned on said transaction could not be treated as unaccounted income u/s 68 of the act. A copy of the decision is available at page no.99 to 104 of the case law paper book. iv. The Pr. C.I.T. V. Prem Pal Gandhi 94 taxmann.com156 (P & H) In this case, it was held that though the appreciation of value share sold by assessee was very high, in view of the fact that the same was traded in NSE and the receipt of sales routed through Bank and the company whose shares were sold was not a closely held company, no addition could be made as undisclosed income. A copy of the decision is available at page no. 105 to 108 of the case law paper book. V. Andaman Timber Industries (2015) 281 CTR (SC) 241 Held that not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witnesses were made the basis of the....
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....s purchased on 09.10.2012 and sold in February and March 2014 and that the purchase of both the shares was in cash which was not fool proof. However, the AO has pointed out that the demat request for the scrip Turbotech Engineering Ltd. and the scrip Kappac Pharma Ltd. was sent on 27.05.2013 and 27.12.2013 respectively and that the requisition of demat only on these dates defeat the fact that the shares were purchased way back on 12.12.2011 and 09.10.2012 particularly when the shares were purchased in cash. The AO had made further enquiries and concluded that the price movements and sale, purchase transactions made by the assessee were not genuine and were the result of meticulously planned circular trading and the entities involved in these were part of this exercise in an effort to create documentary evidences for a pre- planned scheme for converting unaccounted money into tax exempt income and therefore passed his assessment order u/s 143(3) assessing the amount of Rs.84,79,100/- which was introduced/credited by the assessee out of the above mentioned purported share sale receipts during the FY 2013-14 (AY 2014-15) in his Capital Account as her income being the unexplained cash ....
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....inancials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. but that does not help the r....
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....Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned mann....
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....nt view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, fol....
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....fically against the appellant has been made in the Investigation team the report whereof is available before us and this cannot be any ground for holding the appellant guilty or linked to the wrong facts of the persons investigated. 16. In the instant case, the appellant is not connected with M/s Turbo Tech Engineering Ltd. or their promoters, directors or any other person who exercised any control over M/s Turbo tech Engineering Ltd or any so-called entry operator. As a matter of fact, no element is available showing that the appellant has indulged in any such questionable activity or has been part of the modus operandi as alleged by the Ld. A.O. 17. It is further apparent from Page 36 of the Paper Book filed before us that the appellant earned Long Term Capital Gain in ICI CI Bank, transactions whereof has not been doubted. 18. No independent Enquiry from concerned parties to transaction has also been made by the Ld. A.O as it appears from the records. 19. We find that this scrips of M/s Turbo Tech Engineering Pvt. Ltd has been held to be any penny stock scrips and particularly on the basis of that scrips the revenue has proceeded against the a....
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.... of M/s Esteem Bio and M/s Trubotech again lead to a conclusion that prices of the shares were artificially hiked to create non-genuine LTCG to the beneficiaries. The Assessing Officer also observed that statements were also recorded by the investigation Wing in other cases of various brokers, operators and entry providers, who accepted that both M/s Esteem Bio and M/s Turbotech are Penny Stock companies and the scrips have been used to provide bogus LTCG to various 8 beneficiaries. Reliance was placed on various statements, like of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar, which were all recorded before DDIT (Inv), Kolkata, wherein, the aforesaid persons had admitted that the scrip of M/s Esteem Bio and M/s Turbotech were used to provide bogus LTCG to various beneficiaries. Thereafter, the Assessing Officer after explaining the modus operandi of bogus LTCG held that the transactions of the assessee were sham transactions and the LTCG so declared of a sum of Rs. 41,85,762/- was nothing but unexplained Cash Credit under section 68 of the Act to be taxed @ 30% under section 115BBE of the Income Tax Act, 1961 in the hands of the....
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....acking of the Financial Results is immaterial as the assessee had sold the shares on recognized stock exchange through a recognized stock broker and the prices of shares duly listed on stock exchange are not in control of assessee and nor any such allegation has surfaced on record that the assessee is involved in price manipulation of aforesaid scrips. He further submitted that reliance placed by AO on the interim order of SEBI, wherein, trading in securities of M/s Esteem Bio and M/s Turbotech were suspended temporarily is misconceived, as vide Adjudication Orders dated 06.09.2017 in the case of M/s Esteem Bio and 25.11.2014 in the case of M/s Turbotech, SEBI has found no irregularities in the trading of such scrips nor it has found its directors involved in any price rigging (said orders were placed in the paper book at pages 3 to 13 and 14 to 18 of PB-II) and thus, the reliance placed by AO on interim order of SEBI is uncalled for and unjustified. It was further argued that the AO has relied on various statements of alleged entry operators which have surfaced directly in the order of assessment and were never confronted by ld AO during the course of assessment 11 proceedings. Fu....
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.....01.2013. Copy of order of Hon'ble ITAT Raipur in the case of DCIT vs Rakesh Saraogi & Sons (HUF) in ITA No. 93 to 99/RPR/2014 dated 16.04.2018. Copy of order of Hon'ble ITAT Mumbai in the case of ITO vs M/s Arvind Kumar Jain (HUF) in ITA No. 4862/Mum/2014 dated 18.09.2017. Copy of order of Hon'ble ITAT Jaipur in the case of Sh. Pramod Jain vs ITO in ITA No. 368/Jp/2017 dated 31.01.2018. Copy of order of Hon'ble ITAT Delhi in the case of Shobhit Goel (HUF) in ITA No. 2021/Del/2018 dated 13 25.09.2018. Copy of order of Hon'ble ITAT Delhi in the case of Smt. Sunita Khemka vs ACIT in ITA No. 389/Del/2018 dated 02.08.2018. Copy of order of Hon'ble ITAT Delhi in the case of Chander Prakash vs ITO in ITA No. 6880/Del/2017 dated 12.03.2018. Copy of order of Hon'ble ITAT Kolkata in the case of Prakash Chand Bhutoria vs ITO in ITA No. 2394/Kol/2017 dated 27.06.2018. Copy of order of Hon'ble ITAT Delhi in the case of Mukta Gupta vs ITOin ITA No. 2766/Del/2018 dated 26.11.2018. Copy of order of Hon'ble ITAT Kolkata in the case of Mahavir Jhanwar vs ITO in ITA No. 2474/Kol/2018 dated 01.....
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....rders of SEBI. Thus, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Rather the case laws so relied by assessee are directly applicable to the facts of assessee which have not been rebutted by ld DR. 12. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We find that the transactions of the assessee of purchase of shares of M/s Esteem Bio and M/s Turbotech., holding of the shares for more than one year and the sale of shares through a registered share broker in a recognized Stock Exchange and payment of Securities Transaction Tax thereon, all were supported by documentary evidences which were placed before the lower authorities. The Revenue could not point out any specific defect with regards to the documents so submitted by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect therein. 13. In the instant case, the Assessing Officer himself observed that the movement in price of share....
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....he assessee disputed the correctness of the statements and wanted to cross examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross- examine those dealers and what As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and 18 wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon t....
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.... 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 that 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 meagre 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 to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed." 15. On going through the aforesaid judgment, we find that no question of law was formulated by Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon'ble High Court found that the issue involved....
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....verse inference could be drawn. The Learned Counsel for the Assessee has taken us through various documents filed in the paper book as referred to above which specifically prove the purchase of shares made by assessee genuinely which were also sold genuinely. The transactions were carried through Demat account and banking channel on which STT has been paid by assessee. The report of the SEBI was not adverse in nature against the assessee because name of the assessee did not appear therein for conducting dubious transaction. The report of the Investigation Wing and other material was neither confronted to assessee nor there was any inquiry from where it transpired that assessee was beneficiary of any bogus longterm capital gain; therefore, the same cannot be read in evidence against the assessee. A specific material against 22 the assessee should have been brought on record to put assessee under liability. However, in the present case, the entire documentary evidence on record has not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No other adverse materials have been brought on record against the assessee. Further, no proper enquiry h....
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....the shares were dematted at a later stage no adverse inference could be drawn against the assessee. In fact there is hardly any chance to doubt or suspect that the transactions in purchase or sale are not genuine. These identical facts were also available in the case of Swati Luthra (Supra). In the instant case the entire transaction was carried out through the Demat account and banking channel upon which STT has been paid by the assessee before us. In order to hold the transaction is bogus and / or ingenuine, the Assessing Officer is required to bring in cogent/clinching evidence to prove the same. It is pertinent to mention that no observation is forthcoming from the orders passed by the revenue pointing out any material defect in the procedure followed by the assessee in such purchase and sale of the shares in question. Neither any cogent/corroborative evidence is brought on record by the revenue to hold otherwise and therefore, there is no doubt that the Assessing Officer has merely proceeded to arrive at his conclusion that the transaction being bogus based only on mere surmise and conjecture. 22. Thus, taking into consideration the entire aspect of the matter in the ....
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.... establish the genuinity of the transaction. The transactions are unnatural, suspicious and the banking documents are self-serving. Besides, nearly because the transactions were done through the banking channels cannot validate the same and the burden of the proof is with the assessee to prove the genuinity of the claim. The documents relied on by the assessee should pass the test of normal behaviour of the assessee in the course of business, preponderance of probability and surrounding circumstances and if they do not, then the addition is justified. Further, as per the principle laid down in the Sumati Dayal vs. CIT 1995, 80 taxmann 89 (SC), the true nature of the transaction can be ascertained from the surrounding circumstances and proof beyond reasonable doubt has no applicability in determination of matters under taxing statues. Further, the payment through banks, transactions through stock exchanges and other features are only apparent features and the real factors are manipulated. Hence, the transactions form under the realm of suspicious and dubious transactions, more particularly, when the assessee has not furnished cogent evidences to explain how the shares in an unknown ....
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....i of bogus LTCG shares as is indicated by the Director of Investigations, Kolkata who carried out a countrywide investigation to under the organised racket of generating bogus entries of Long Term Capital Gain (LTCG) which is exempt from tax. On a comparison of the facts and circumstances involved in these matters, learned Assessing Officer reached the conclusion that the modus operandi adopted by the operators was to make the beneficiaries by some shares of predetermined penny stock company controlled by them and the modus operandi adopted by the assessee is fitting in the order of the things. Learned Assessing Officer therefore reached a conclusion that the transaction of deriving Long Term Capital Gain (LTCG)'s by the assessee is a bogus one. 16. It is pertinent to note that the assessee does not dispute any of the facts stated in the immediately preceding paragraph. It remains an admitted fact that having purchased 12,000 shares of M/s Kappac Pharma Ltd at Rs. 11/-share, the assessee sold the same at Rs.750/-per 10 share within a span of 12 months and realised the capital gains to the tune of Rs.83,06,907/-and precisely this event triggered the suspicion to the Revenue....
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....pursuant to the directions issued by SEBI. It is also important to note that the learned Assessing Officer verified the trade data pertaining to the sellers of shares of M/s Kappac Pharma Ltd and found that there were three parties, namely, Abhinna Vyapar Private limited, Eash Vyapaar Private limited, and Prerna Vyapaar Private limited who purchased the shares from the assessee and provided her the exit entries. Further, on verification of the annual income and return filing details of these three entities, by obtaining the inputs from the investigation wing of the income tax Department, it was found that these three entities were non-taxpayers with the income below the taxable limits; that the financial capacity of these three entities is not at all commensurate with the huge investment made by them in purchase of this particular scrip; and, therefore, based on the inputs from the investigation wing, it was evident that these buyers were mere accommodation entry providers who indulged in these transactions on behalf of the scheme operators for exchange of commission. 20. It is at this juncture, learned Assessing Officer referred to the details of the modus operandi of bog....
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....obable for novice investor without any substantial share transaction in earlier subsequent years. Generally the investment takes place with the motive of profit earning, and what was the hope of the assessee is exclusively known to her and to none else. When the transaction created a reasonable doubt, it is for the assessee to clarify the circumstances which prompted her to make such an investment. The satisfaction of the assessee in respect of the prospects of earning profits by such an investment is a psychological fact and within her exclusive and personal knowledge. Unless and until, the assessee comes out with an explanation that there was reason for her to make such an investment and the circumstances under which such an investment was made, out of her personal knowledge, learned Assessing Officer has no reason not to pursue the reasonable doubt he had in respect of the transaction which he analysed in the light of the attendant circumstances like the financials of the company and the transaction data of the exit providers. Without doing so, she cannot shift the burden to the learned Assessing Officer. As rightly observed by the learned Assessing Officer, law does not put the....
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.... law and a colourable device, which cannot be part of tax planning and it would be wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. 24. The findings of the Tribunal are favoured by the Hon'ble jurisdictional and are confirmed in ITA No.220/2019 on the file of the Hon'ble Delhi High Court by order dated 8/3/2019, wherein the Hon'ble High Court held that the company (M/s Kappac Pharma Ltd, which was even directed to be delisted from the stock exchange) had meagre resources and in fact reported consistent losses and in the circumstances, the astronomical growth of the value of company's share naturally excited the suspicion of the Revenue. Hon'ble High Court declined to interfere with the findings of the Tribunal and dismissed the appeal. 25. In the case of Sanat Kumar (supra), a coordinate Bench of this Tribunal dealt with a similar situation, and made an observation that though the assessee meticulously completed the paperwork by routing his entire investments through banking channel, when the result of an altogether beyond human properties, what is apparent in making 16 investment is not really and th....
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.... PBT -0.02 -0.08 -0.08 -0.08 -0.06 Tax - - - - - NetProfit -0.02 -0.08 -0.08 -0.08 -0.06 Equity 30.2 7 30.27 30.2 7 23.77 23.77 EPS -0.01 -0.03 -0.03 -0.04 -0.03 CEPS - - - - - OPM% - - - - - NPM% - - - - - 15. When we examine the arguments addressed by ld. DR for the Revenue challenging the impugned order passed by the ld. CIT (A) in the light of the financials of M/s. Kappac Pharma Limited, it leads to the irresistible conclusion that no man of ordinary prudence would ever invest in its share except for dubious reasons to convert the unaccounted money into white money. 16. Coordinate Bench of the Tribunal examined the penny stock business of M/s. Kappac Pharma Limited in numerous cases and found the same to be an instrumentality to legalize the unaccounted money through dubious method into white money. Three such cases are Puja Ajmani, Udit Kalra and Manvi Khandelwal (supra). 17. Coordinate Bench of the Tribunal in case cited as Pooja Ajmani (supra) in the identical facts of cases where assessee had purchased 4,00....
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....ents has established that the said documents were a mere mask to hide the real nature of transactions. By analysing the Balance Sheet, Profit &Loss account and the trade pattern of Kappac Pharma Ltd. during the period March, 2010 to March 2014, the Assessing Officer has pointed out that the share price of this company was neither affected by the movement of sensex nor the financials of the company justified such extraordinary jump in the price of its shares. It is noticed that apart from being based on evidences gathered during search and survey operations, analysis of the material on record and analysis of information from various sources, the findings of the Assessing Officer are also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the modus operandi adopted by brokers and operators engaged in the business of providing entries of long term capital gains to the interested beneficiaries which has come to surface as a result of deep and wide investigation. Initial investment in a company of unknown credentials and subsequent jump in the share price of such a company cannot be an accident or windfall but w....
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....70), the Hon'ble Supreme Court have clarified that the burden of proof lies on the party who substantially asserts the affirmative of the issue and not upon the party who denies it. It has been further held that the party cannot, on failure to establish a prima facie case, take advantage of the weakness of his adversary's case. The party must succeed by the strength of his own right and the clearness of his own proof. He cannot be heard to say that it was too difficult or virtually impossible to prove the matter in question. In the case under consideration, since it is the appellant who had made the claim that she had earned genuine long term capital gain, all the facts were especially within her knowledge. Section 102 of Indian Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. If the onus is discharged by him and a case is made out, the onus shifts on to deponent. It is pertinent to mention here that the phrase "burden of proof" is used in two distinct meanings in the law of evidence viz, 'the burden of establishing a case', and 'the burden of introducing evidence'. The burden of establishing a case remains throug....
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....t Delhi cannot be accepted. The tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities as enunciated by the Hon'ble Supreme Court. The fact that inspite of earning 3072% of profits, the assessee never ventured to involve himself in any other transactions with the broker which gave him even much lower profits during the period which cannot be a mere coincidence or lack of interest or absence of advice from the financial institutions as done earlier. 15. In view of the detailed discussion above, and keeping in view the entirety of the facts and circumstances and specific peculiarity of the instant case and the judgments quoted above, we decline to interfere in the order of the Ld. CIT (A). 16. In the result, appeal of the Assessee is dismissed." 5.1 On the issue of circumstantial evidence and in the matters related to the discharge of 'onus of proof' and the relevance of surrounding circumstances of the case, the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have observed as under: ....
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....sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. I further find that the share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. However, the case laws cited by the Ld. counsel for the assessee are on distinguished facts, hence, not applicable in the instant case. The assessee has not raised any legal ground and argued only on merit for which assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. In view of above discussions, I am of the considered opinion that Ld. CIT(A) has rightly confirmed the addition in dispute, which ....
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....n undertaken by the assessee for purchasing 40,000 shares were dubious from the very outset as assessee has purchased the shares with undisclosed money of Rs.4,52,000/- by way of cash payment which he subsequently declared unaccounted in IDS, 2016 scheme and got the same legalized from Principal CIT. Thereafter, assessee took back the cash of Rs.4,52,000/- from the seller and paid him cheque of the aforesaid amount on 31.12.2013 after getting the scrips dematerialized. 22. During investigation when statement of assessee was recorded as to how he had paid the amount of Rs.4,52,000/- and as to what is the name of the seller of the shares of M/s. Kаррас Pharma Limited, he has given evasive reply making the entire transaction doubtful. Questions put to assessee during investigation and answers given thereto during his recording of statement u/s 131 of the Act, available at page 154 of the paper book, are extracted for ready perusal as under :- "28) How had you paid the amount of Rs.4.52 lakhs? Ans. I had purchased these shares with cash of Rs.4.52 lakhs that was lying with me during FY 2012-13 because the person wanted cash befor....
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....ted facts brought on record by the assessee himself. And moreover assessee has failed to discharge the onus that the entire transaction was genuine even by suppressing the correct facts during recording of his statement u/s 131 of the Act. 25. No doubt, Hon'ble Delhi High Court in case of Krishna Devi & Ors. (supra) relied upon by the Id. AR for the assessee held that, "in case of a capital gain from penny stock merely because of the fact that there was astronomical 4849.2% jump in the share price within 2 years, which is not supported by the financials does not justify the AO's conclusion that assessee converted unaccounted money into fictitious exempt LTCG to evade taxes", but the facts of the case at hand are distinguishable because in the case at hand from the very outset coloruable device has been put into operation by the assessee by purchasing shares with unaccounted cash from unknown person, evidently anti-dated, then got the unaccounted money legalized by making declaration under IDS, 2016 scheme, then getting the same dematerialized and claimed the bogus capital gains by selling the shares of a consistently loss making company at the whopping sale conside....
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....e assessee is not applicable to the facts and circumstances of the case. 29. Following the decisions rendered by the coordinate Benches of the Tribunal in case of Puja Ajmani, Udit Kalra and Manvi Khandelwal (supra) and the decision rendered by Hon'ble Delhi High Court in case of Udit Kalra and in view of what has been discussed above, we are of the considered view that the entire transaction as to purchasing and selling of 40,000 shares of M/s. Kappac Pharma Limited is a colourable device to convert unaccounted money into fictitious exempt LTCG to evade taxes for the following reasons:- (i) that right from the purchase of 40,000 shares of M/s. Kappac Pharma Limited by the assessee with undisclosed money of Rs.4,52,000/- from unknown persons; then subsequently declaring the said unaccounted money of Rs.4,52,000/- under IDS, 2016 scheme; then getting the same legalized from Principal CIT; then getting the unaccounted cash refunded and making payment of Rs.4,52,000/- by way of cheque on 31.12.2013; then got the shares dematerialized and sold the same in the market at the whopping price of Rs.2,77,37,500/- purchased a year before for Rs.4,52,000/- makes the entir....
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....ription companies. Even AO had verified the trade data and proceeded to call out the modus operandi adopted by the assessee, which is akin to the modus operandi of bogus LTCG shares. 15. It is an undisputed fact that the shares were purchased by the assessee in cash and in physical form and the part shares were sold when the price trend was increasing and had not sold when the downward trend started. 16. The price movement of share market behavior of the entities involved in the trade of the script as the share price movement and the profit earned by the beneficiaries were beyond human probabilities, which has already been discussed in detail in the order of assessment 17. And thus it is a clear case of huge capital gain earned by the assessee within a very short period of time by investing in a penny stock whose fundamentals had no support for the premium. It commanded was neither the result of a coincidence nor of a genuine investment activity, but was created through well-planned and executed scheme in which company, brokers and the buyers and sellers of the script worked in tandem to achieve the predetermined objectives 18. Therefore, keeping in view the facts and c....
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....rofits. All the financial details of company for the relevant period were verified. Balance sheet, profit and loss account, trading pattern of thisscrip in share market and financial analysis of this scrip was undertaken. The analysis is discussed herewith M/s. KappacPharma (Scrip code-506938) 1.1 This company was having market price of share at around Rs. 13 in June, 2012. Thereafter, the price was jacked up to Rs. 720 from Rs. 13 in 21 months in March, 2014. Thus, within in 21 months the price was jacked up nearly 55 times. After that the price was maintained in the range of Rs. 650 to Rs. 700, so that the LTCG beneficiaries could book the profits. After that the price was made to fall freely so that interested beneficiaries who had booked at high market price can avail bogus short Term Capital Loss. Thereafter between April, 2014 to January, 2015, the price of the share reduced to 120 from 700.The last trade in the shares of this company in BSE was registered on 06.01.2015 which too only for 76 shures @ Rs. 112.85 per share. 1.2 In the case of M/s Kailash Auto Finance Ltd. the SEBI has conducted a detailed investigation and there it was found that 38,41,700 shares of M/....
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....he company is negative and it cannot be justified with any stretch of imagination that this company's shares can trade even at par value what to justify the premium. 0 Notices u/s 133(6) of the IT Act, 1961, dated 06/12/2016 were issued to the purchasers of the shares, calling for details of share sale/ purchase with the assessee during the year, demat account details, period of holding of these shares, source of funds and return of income. No reply is received till date. As per BSE data, the share prices of the scrip fell sharply thereafter and today its worth is Rs 6 per share. The volume of the transaction was also at the high during fall period. From the above facts and analysis it can be said that parties involved in purchasing from the assessee at the other end had no intention of a genuine investor and failed to act as per market sentiments All these are indications that the LTCG earned is not genuine and this is also a circumstantial evidence Further in the case of M/s Turbo Tech Engineering Ltd. the details are as below: Turbotech Engineering Ltd. (Scrip ID:INE764M01018, Scrip Code:504358) This company was having market price of share at around Rs. 35.85 for....
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....hing worthwhile to mention on the front of assets and net worth of the company as well, to conclude that it could command such high premiums. It was also found that during the period of astronomical rise of shares price of the scrip there was no corporate announcement or big order or any such news which could result into such frenzy in the scrip price. The price of a scrip in the secondary market mainly depends upon the EPS, the business health of a company or some new development in the company which promises bright future for the shareholders. In the instant case there were no such factors. Conclusion: Therefore the reasons of this astronomical price rise were located somewhere else and certainly could not be related to the fundamentals Document 2 or any hypothetical promising future of the company by any stretch of imagination. 9.3 The physical placement of shares and price volume trends of the shares of the company had strong correlation. In the case of. Kappac Pharma till May 2013 the volume remained very low but share price increased by from Rs. 14.71 to Rs. 116.40 As soon as the lock in period was over and the price had been sufficiently jacked up i.e. by first wee....