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2019 (4) TMI 1665 - AT - Income TaxBogus Long term capital gain - ingenuity of purchase and sale of shares - test of human probability - HELD THAT - Evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long term capital gain by well organised network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. The share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. Landmark decision in the case of McDowell and Company Limited 1985 (4) TMI 64 - SUPREME COURT 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. 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. - Appeal of the Assessee is dismissed.
Issues Involved:
1. Justification of confirming the addition of ?23,68,313/- as income of the assessee. 2. Failure to confront the appellant with the statement of Shri S.K. Gupta and denying cross-examination. 3. Addition based on information from different IT department wings without proper enquiry. 4. General grounds for amending or adding grounds before or during the appeal hearing. Issue-wise Detailed Analysis: 1. Justification of Confirming the Addition of ?23,68,313/-: The Assessing Officer (AO) received information from the Principal DIT, Investigation, Kolkata, about an organized racket generating bogus Long Term Capital Gains (LTCG) through circular trading. The AO concluded that the transactions showing LTCG claimed as exempt under section 10(38) were sham. The AO’s detailed analysis showed that the financials and trading patterns of Kappac Pharma Ltd. did not justify the extraordinary jump in share prices. The AO relied on the decisions of the Hon'ble Supreme Court in CIT Vs. Durgaprasad More and Sumati Dayal Vs. CIT, concluding that the transactions were colorable devices to avoid tax. The addition of ?23,68,313/- was made to the assessee's income under section 69A, taxed at 30% under section 115BBE. 2. Failure to Confront the Appellant with the Statement of Shri S.K. Gupta and Denying Cross-Examination: The assessee argued that the AO made the addition without confronting her with the statement of Shri S.K. Gupta and denying the opportunity for cross-examination. However, the Tribunal found that the AO had established the transactions as sham through detailed analysis and surrounding circumstances, which did not solely rely on Shri S.K. Gupta’s statement. 3. Addition Based on Information from Different IT Department Wings Without Proper Enquiry: The assessee contended that the addition was made by copy-pasting information from different IT department wings without proper enquiry. The Tribunal noted that the AO's findings were based on a thorough examination of the financials, trading patterns, and corroborating evidence from the Directorate of Investigation, Kolkata. The AO’s analysis showed that the share price manipulation was pre-planned by brokers and operators, and the transactions were not genuine. 4. General Grounds for Amending or Adding Grounds Before or During the Appeal Hearing: The assessee reserved the right to add or amend grounds before or during the appeal hearing. However, the Tribunal focused on the substantive issues raised and found that the assessee failed to prove the genuineness of the LTCG transactions. Conclusion: The Tribunal upheld the AO's decision, confirming the addition of ?23,68,313/- as income under section 69A. The Tribunal found that the documents provided by the assessee were a mask to hide the true nature of the transactions, which were sham and aimed at tax evasion. The Tribunal relied on the principles laid down in the cases of CIT Vs. Durgaprasad More, Sumati Dayal Vs. CIT, and McDowell & Co. Ltd., emphasizing that the burden of proof was on the assessee to prove the genuineness of the transactions. The appeal was dismissed, and the addition was confirmed.
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