TaxTMI 
TaxTMI 
2026 (4) TMI 734
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....e fact that AO has failed to prove the transactions as non-genuine as well as any evidence as bogus or fabricated. 2. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld AO's addition u/s 68 of the act for Rs. 70,33,182/- on factually incorrect assumption that the appellant has credited her capital account by share sale receipts in F.Y. 2014-15. 3. Ld. CIT(A), NFAC, Delhi has erred in and on fact to upheld AO's action of levy of Income-Tax@ 30% u/s 115BBE of the Act." 3. The assessee has also raised following additional grounds of appeal:- "Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld AO's action of levy of income-Tax @ 30% u/s 115 BBE of the Act." 4. The brief facts of the case are that the assessee is an individual, filed return of income for AY 2015-16 declaring total income of Rs.6,78,620/-. The case was selected for scrutiny under CASS on the issue of 'suspicious sale transaction in shares and exempt Long Term Capital Gains (penny stock) shown in return. During the year under consideration, the assessee earned Long Term Capital Gain of Rs.70,33,182/- on sale of 15,000 equity shares of Sunrise Asian Ltd. (SUNASIAN....
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....the prices of the shares. The appellant cannot escape from the burden cast upon him and unfortunately in this case the burden is heavy as the facts establish that the shares which were traded by the appellant had phenomenal and fanciful time in price in a short span of time. Despite availing adequate opportunity the appellant is unable to establish and prove that there was no manipulation in the other end and whatever gains the appellant has reaped was not tainted I find during the course of assessment the Assessing Officer (AO) has culled out proximate facts in each of the case took into consideration the surrounding circumstances which came to light after the investigation assessed the conduct of the appellant by recording statement issuing summon took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion. On this issue Hon'ble High Court of Calcutta has held: [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax INCO....
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....is justified in absence of satisfactory explanation on the part of the appellant Accordingly I hold alleged LTCG for sale of share of M/s Sunrise Asian Limited as bogus and not eligible to exemption u/s 10(38) of the IT Act and the addition of Rs.70,33,182/-by invoking provision of section 68 of the I.T Act stand confirmed. This ground of the appellant is dismissed. I have considered the submission of the appellant in respect of ground relating to commission paid and gone through the AO's observation & decision in assessment order. I find merit in the contention of the appellant on this ground in as much as the AO is unable either to establish any basis of estimation how he estimated the said 0.5% commission and not 5% or 6 оr 10% commission of unexplained expenditure for the said transaction or the AO is unable to bring any cogent materials of 0.5% expenditure incurred by the appellant before invoking provision of section 69C of the I.T. Act. Accordingly the estimated addition made of Rs.35,166/-[0.5% of 70,33,182/-] by the AC invoking provision of section 69C of the I.T Act stand deleted. Thus this ground is allowed." 6. Aggrieved by the order of the Ld. CIT....
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....rise Asian Ltd has informed BSE that the Company has received the Certified Copy of the Order dated March 22, 2013 passed by the Hon'ble High Court of judicature at Bombay sanctioning the Scheme of Amalgamation of Santoshima Tradelinks Limited (the First Transferor Company) and Conart Trader's Limited (the Second Transferor Company) with Sunrise Asian Limited, (Transferee Company) "Scheme" under section 391 to 394 of the Companies Act, 1956. The appointed date under the Scheme was April 01, 2012. With respect to the amalgamation of the transferor companies, Santoshima Tradelinks Limited and Conart Traders Limited, the Company shall issue and allot 2,55,57,730 shares of Rs. 10/-each to computed in the ratio of 1 equity shares of Rs.10/- each of the Company for every 1 equity Shares of Rs.10/- each in the transferor company Santoshima Tradelinks Limited held by each shareholder of the transferor Company on the record date and 1,58,23,770 shares of Rs. 10/- each to computed in the ratio of 1 equity share of Rs. 10/- each of the Company for every 1 equity share of Rs. 10/-each in the transferor company Conart Traders Limited held by each shareholder of the transferor Company on....
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.... of October, 2012. Therefore, the stock market data are provided from the month of October, 2012. Month BSE. High (Rs.) Low (Rs.) October 2012 80.30 63.00 November 2012 118.40 84.30 December 2012 183.45 124.30 January 2013 345.50 192.60 February 2013 459.70 346.50 March 2013 456.00 435.00 9.5 The above data further show that the share price of SAL during the FY 2012-13 raised from Rs.53 to 456 within 6 months. Further, the following facts have also been duly considered:- * During the period between 09.09.2011 till the end of January 2013 the trade volume remained very thin. In fact, on most of the days the trade volume was only 5 to 50 shares except 250 and 300 shares on two trading days. * From 09.09.2011 to 30.01.2013 the share price of the scrip increased from Rs.50 to Rs.329.05 i.e. a 559 percent increase in 17 months (total 36 trade days). * During this period of 17 months the shares of the company remained suspended for more than 12 months. (Sept., 2011 to Oct., 2012). During this period of 4 months of trading the trading volume was noticed for 36 days and it was ZERO for the rest ....
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....phenomenal price rise. Normally, the SENSEX is a benchmark of the average price movement in any share. Most of the stocks which have good market capitalization and are majorly held by public tend to follow the price movement of the SENSEX. The deviation in price movement vis-àvis SENSEX is usually guided by the fundamentals of the company and the behavior of individual investors. When the price increase in the shares of the scrip was compared with the movement in the SENSEX it was seen that there was no correlation. While SENSEX had shown almost no progress, the price of the scrip moved phenomenally. The following chart shows increase in the price of Sunrise Asian and Sensex from 3. 10.2012 to 31.03.2015. DATE SUNRISE ASIAN SENSEX 3.10.2012 60(0%) 19869.69 (0%) 30.11. 2O12 118.4 (97.33%) 19339.9 (+2.49%) 28.12. 2012 174.75 (191.25%) 19444.84 (+3.05%) 28.01. 2013 298.5 (397.5%) 20103.3S(+6.54%) 1.2.2013 357.7 (496.17%) 19781.19(4.83%) 7.2.2013 419.75(599.58%) 19580(3.77%) 19.6.2013 476.9(694.83%) 19245.7(1.99%) 19.9.2013 509.5(749.17%) 20646.64(9.42%) 7.11.2013 494.4(724%) 20822(10.35%) ....
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....uch individuals have voluntarily, without any enquiry by any authority, withdrawn their claim and filed revised return. (vii) statements of brokers, operators, director of paper companies that has bought these shares, directors of Penny stock companies al confess to such a scheme with detailed modus operandi which allies with actual transactions. (viii) The assessee is one such beneficiary who has taken entry of LTCG (ix) Exactly similar entries have been taken by other family members of the assessee, the total amounting to Rs. 1.94 crores. (x) Neither the assessee nor his family members have either before or after this year have dealt in shares. (xi) As the trading in these shares are at a pre-determined time between predetermined brokers at a pre-determined price, there is virtually no scope of any genuine trader in share to buy or sell these shares. (xii) Thus whoever has benefitted from transaction in these shares have transacted in accordance with the scheme and has admittedly converted his unaccounted cash equal to the sale proceeds of share in to white in the guise of exemption under section 10(38) of the Income Tax Act, ....
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....e mode of receipt and no mention of receipt of sale consideration and the assessee has not made available the details subsequent to the purchase of share such as copy of share certificates of Conart Traders Ltd or SAL, transfer deed, application form for getting shares of SAL in lieu of Conart Traders Ltd. (vii)That even assuming the purchase as genuine, the sales, given the high rates for such penny stocks, with no real buyers, are bogus. The evidentiary value of payment of STT and receiving the sale consideration through a share broker through banking channel after selling the share on screen cannot make a non-genuine transaction, a genuine one. (viii)The scrip is a penny stock, purchased at a low price, which is over a period of time ramped up by operators acting in benami names or name lenders. The purchases are off market purchases, and not reported on the exchange. (ix) The purchases are in the physical form, and dematerialized only subsequently; generally long after the purchase date and close to the date of sale. (x) The SEBI clearly held that the company Sunrise Asian Pvt Ltd and its Directors, had devised an arrangement whereby 83 conne....
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....y inflating share prices and facilitating exit to beneficiaries. Though the assessee has raised an objection regarding lack of cross-examination, it is noted that the addition in the present case is not based solely on such statements but is supported by independent analysis of trading patterns, financial data and surrounding circumstances which collectively establish the non-genuineness of the transaction. 9.10 It is a settled legal position that in matters of this nature, the apparent must be considered in the light of surrounding circumstances and the test of human probabilities must be applied, as laid down by the Hon'ble Supreme Court in Sumati Dayal v. CIT. Further, under Section 68 of Income-tax Act, the burden is on the assessee to satisfactorily explain the nature and source of the credit. Mere production of documentary evidence such as contract notes, demat statements and bank entries cannot be regarded as conclusive proof of genuineness when the surrounding circumstances clearly indicate that the transaction is a sham. In the present case, the cumulative effect of the facts on record leads to a clear inference that the transaction entered into by the assessee is not g....
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.... 36(1), Hon'ble ITAT Delhi Bench has held that the so-called sale proceeds of shares received and claimed as exempt u/s. 10(38) was held to be sham transaction because of huge price rise of shares at the time of sale despite the fact that company's profits are negligible and did not support such price rise. 9.16 In the case of Abhimanyu Soin Vs. Asst, CIT, Circle VII, Ludhiana, ITAT, Chandigarh, Bench A, in ITA No. 951/CHD/2016, the Tribunal held as under:- "On consideration of the facts of the case as a whole it cannot be accepted that the assessee can have long term capital gains of Rs. 80,25,291/- within 17 months of buying of shares at Rs.2,72,000/- a non- descript company incorporated in 2007 which got merged in 2009. This cannot be a case of intelligent investment or a simple tax planning to gain benefit of long term capital gains". 9.17 In the case of Somnath Maini Vs. CIT 306 ITR 414, the Hon'ble Punjab & Haryana High Court, held that claim of genuineness of transactions can be rejected even if the assessee backs the same with evidence which is not trustworthy. Hon'ble Income Tax Appellate Tribunal - Chandigarh, in the case of Assistant Commis....