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2019 (9) TMI 1089 - HC - Income TaxBogus LTCG - exemption claimed u/s 10 (38) denied - No evidence of actual sale - HELD THAT - Tribunal has in depth analyzed the balance sheets and the profit and loss accounts of Cressanda Solutions Ltd. which shows that the astronomical increase in the share price of the said company which led to returns of 491% for the Appellant, was completely unjustified. Pertinently, the EPS of the said company was ₹ 0.01/- as in March 2016, it was ₹ 0.01/- as in March 2015 and -0.48/- as in March 2014. Similarly, the other financials parameters of the said company cannot justify the price in excess of ₹ 500/- at which the Appellant claims to have sold the said shares to obtain the Long Terms Capital Gains. It is not explained as to why anyone would purchase the said shares at such high price. Cressanda Solutions Ltd. was in fact identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus Long Term Capital Gain. No evidence of actual sale except the contract notes issued by the share broker were produced by the assessee. No question of law, therefore arises in the present case and the consistent finding of fact returned against the Appellant are based on evidence on record. - Decided against assessee.
Issues Involved:
1. Denial of exemption under Section 10(38) of the Income Tax Act, 1961. 2. Allegation of bogus transaction in purchase and sale of shares. 3. Consistency and sufficiency of evidence supporting the findings of the Assessing Officer (AO), CIT (Appeals), and ITAT. 4. Question of law arising from the factual findings. Detailed Analysis: 1. Denial of Exemption under Section 10(38) of the Income Tax Act, 1961: The Appellant filed a return of income for the assessment year 2014-15, declaring an income of ?4,96,650/-. The return was selected for scrutiny, and the Appellant booked Long Term Capital Gain (LTCG) of ?73,77,806/- and sought exemption under Section 10(38) of the Income Tax Act, 1961. However, the Assessing Officer (AO) denied the exemption, adding the amount of ?73,77,806/- to the net taxable income, concluding that the transaction was bogus. 2. Allegation of Bogus Transaction in Purchase and Sale of Shares: The AO found the transaction involving the purchase of shares of M/s Smartchamps IT and Infra Ltd., which later merged with M/s Cressanda Solutions Ltd., to be bogus. The AO held that M/s Cressanda Solutions Ltd. was a penny stock, and the transaction was not genuine. This finding was upheld by the CIT (Appeals) and the ITAT, which dismissed the Appellant's appeals, consistently finding the transaction to be bogus. 3. Consistency and Sufficiency of Evidence Supporting the Findings: The court noted that there were consistent findings of fact by the AO, CIT (Appeals), and ITAT. The ITAT extensively discussed the evidence and materials, concluding that the Appellant failed to prove the genuineness of the transaction. The ITAT highlighted the improbability of earning a 4910% profit over five months and the lack of any other transactions by the Appellant with the broker, indicating the non-genuine nature of the transactions. The financials of Cressanda Solutions Ltd. showed it was a penny stock, with negligible operations and revenues, making the high share price unjustifiable. 4. Question of Law Arising from the Factual Findings: The court concluded that no question of law arose for determination as the entire dispute was factual. The findings were based on the appreciation of evidence, and there was ample justification for them. The court emphasized that the findings were not perverse and were supported by substantial evidence. Conclusion: The court dismissed the appeal, finding no merit in the Appellant's arguments. The consistent findings of fact by the AO, CIT (Appeals), and ITAT were upheld. The court emphasized that the astronomical increase in the share price of Cressanda Solutions Ltd. was unjustified, and the transaction was identified as part of a scheme for obtaining bogus LTCG. The court relied on various judicial pronouncements and the overwhelming evidence presented by the Revenue, concluding that the entire transaction was a colorable device to obtain bogus capital gains.
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