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TMI Blog2014 (5) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... l modus operandi and the order of the SEBI without carrying out any independent enquiry to prove that the assessee has not made any sales or any unaccounted money has been routed through this channel - What is apparent has to be taken as real, unless any material or evidence has been brought on the record to prove the contrary - the short term capital gain shown by the assessee cannot be held to be non-genuine so as to be taxed under the head “income from other sources” - Decided in favour of Assessee. - ITA No. 960/Mum./2011 - - - Dated:- 30-4-2014 - Shri N. K. Billaiya And Shri Amit Shukla,JJ. For the Petitioner : Mr. Neelkanth Khandelwal For the Respondent : Mr. R. K. Sahu ORDER Per Amit Shukla, J.M. The present appeal has been preferred by the assessee challenging the impugned order dated 12th November 2012, passed by the learned Commissioner (Appeals)-XXIX, Mumbai, for the quantum of assessment passed under section 143(3) of the Income Tax Act, 1961 (for short the Act ) for the assessment year 2006-07, vide which, following grounds have been raised:- 1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrip named as Karuna Cables Ltd. . The Assessing Officer noted that the scrip of Karuna Cables is a penny stock which is either delisted or not listed in the recognised Stock Exchange. Thereafter, the Assessing Officer has given a general description and modus operandi of the fabricated share transactions undertaken particularly in penny stock. This has been discussed by him in detail from Pages-5 to 7 of the assessment order. What is the source of such modus operandi, has not been discussed by the Assessing Officer nor any enquiry on the transaction carried on by the assessee through the broker or stock exchange has been conducted. Thereafter, he has also tried to analyse the scrip of Karuna Cables whether it is a penny stock or not by comparing its financial results of 31st March 2005 and 31st March 2004, which has been incorporated by him at Page-8 and 9 of the order. From such analysis, he concluded that; firstly, the floating share capital in the market was too less; secondly, total sales of the products of the company was too low; thirdly, for the year ending 31st March 2004 and 31st March 2005, the assessee has not done any substantial business share holding of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rise in value of shares cannot be accepted. The relevant observations and findings of the learned Commissioner (Appeals) against which the assessee is in appeal, is as under:- 4.3 I have carefully considered the facts of the case, arguments of the Assessing Officer and the written submissions of the authorized representative of the appellant. The appellant has filed working of capital gains which indicates that the shares of Karuna Cables were purchased on 5.4.2005 for a consideration of Rs. 8,10,589. They have been sold on 13.9.2005 for a consideration nof Rs. 52,77,500. As per the details submitted the shares have been purchased on various dates from 5.4.2005. There is no evidence of any purchase consideration paid on purchase of these shares. It can be seen that the appellant has not successfully proved the acquisition of shares particularly in the face of adverse finding given by the SEBI order that broker shri Vijay Bhagwandas Shah was engaged in questionable transactions in the very scrips. The SEBI order has also stated that there was a process of dematerialization and rematerialisation undertaken in the very scrips. The transactions with Shri Vijay Bhagwandas Shah a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been done online and rooted through demat account, then the same cannot be held to be non-genuine. He further submitted that the final order of the SEBI came in July 2006, whereby the SEBI has prohibited the trading of shares of Karuna Cable and during the period in which the assessee has purchased and sold the said scrip, there was no such prohibition. Moreover, the assessee has purchased these shares in the open market through Stock Exchange, then no adverse inference should be drawn. He further pointed out that the prohibition by the SEBI to Vijay Bhagwandas Co., was not as a broker but as a trader and that too for Karuna Cables Ltd. In the present case, when the assessee bought and sold the share, then it was a bonafide transaction. He also referred to the SEBI order in support of his contention that most of the observations do not have any bearing insofar as the assessee s case is concerned. Lastly, he submitted that the Assessing Officer had not carried out any enquiry either from Vijay Bhagwandas Co. i.e., the broker or from the Stock Exchange whether such transactions have been undertaken or not. In the absence of any such enquiry, no adverse inference can be drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. Therefore, the findings given by the Assessing Officer and confirmed by the learned Commissioner (Appeals) should not be disturbed at all. 8. We have carefully considered the rival contentions, perused the relevant findings of the authorities below and the material available on record. In the present case, the assessee had shown net short term capital gain at Rs. 1,12,44,403, out of which the net short term capital gain of Rs. 44,66,911 on the transactions made in the shares of Karuna Cables, has been held to be bogus and the same has been added under the head income from other sources . From the records, it appears that the assessee has purchased 40,000 shares of Karuna Cables on various dates ranging between 5th April to 7th May 2005, for sums aggregating to Rs. 8,10,589. These purchases have been booked through broker M/s. Vijay Bhagwandas Co. who is a registered stock broker in the BSE. In support of this purchase, the assessee has filed contract notes and bills which have been placed in the paper book from Page-16 to 22. The shares have been credited to the Demat account of the assessee on 31st August 2005. The payment of the purchase of shares have been made throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI dated 25th July 2006, wherein the SEBI has analysed and investigated the credibility and the reliability of Karuna Cables Ltd. and also the possible fraudulent practice of hiking the share value in the stock exchange by leaps and bounds. Such SEBI order, first of all, is only a credible information which can only go to create a doubt, but after having received such information, it was incumbent upon the Assessing Officer to carry out necessary enquiry in the case of the assessee, as to whether the shares have been purchased and the amount which has been received in the bank account of the assessee is also fictitious. Secondly, the SEBI order has, in fact, recognised that Karuna Cables Ltd. was a listed company in BSE and NSE and it has also accepted that its share price has arisen from Rs. 22.40 per share to Rs. 159 per share during the period from 10th February 2005 and 16th September 2005. If under such period, any transaction has been undertaken by any person in the open market, then it cannot be held that such person was in connivance with the said company. Lastly, the final order of the SEBI, is much after the transaction undertaken by the assessee, hence, no adverse in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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