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TMI Blog2014 (10) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... horities have rightly applied the test of human probabilities to examine the claim of purchase and sale of shares made by the assessee - The claim of making speculation gains on the reasoning that speculation transactions could not have been entered into by the assessee therein without paying margin money to the broker - the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected - CIT(A) was justified in confirming the order of the AO by applying the test of human probabilities – Decided against assessee. - I.T.A. No. 6858/Mum/2011 - - - Dated:- 26-9-2014 - Shri D. Manmohan And B. R. Baskaran (AM),JJ. For the Appellant : Shri Mandar Vaidya For the Respondent : Shri Sambit Mishra ORDER Per B. R. Baskaran, Accountant Member: The appeal filed by the assessee is directed against the order dated 23.08.2011 passed by Ld CIT(A)-22, Mumbai and it relates to the assessment year 2006-07. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the assessment of sale value of shares of ₹ 7,53,061/- as Cash Credits u/s 68 of the Act instead of treating the same as Long term Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from whom the assessee had purchased the impugned shares, but the said notice was returned unserved with the remark Not Known . 5. The AO made further enquiries with the assessee. The AO further noticed that the scrips of M/s Prime Capital Markets Ltd was declared as Penny Stock by SEBI and the SEBI has indicted the broker Sanju Kabra for manipulating the share prices of penny stocks. It is pertinent to note that the assessee had sold the shares through Sanju Kabra only. After discussing elaborately on the modus operandi adopted by the brokers for manipulating the share prices of penny stock and also the report given by SEBI in this matter, the AO concluded that the assessee has adopted the methodology of acquiring the Long Term Capital Gains in order to convert her black money into white. The AO also placed reliance on the decision rendered by Chandigarh bench of Tribunal in the case of Somnath Mani reported in 100 TTJ 917, the decision rendered by Hon ble Supreme Court in the case of McDowell Co.Ltd reported in 154 ITR 148, the decision rendered Mumbai bench of Tribunal in the case of Housing Development and Finance Corpn Ltd (ITA No.2913/Mum/1995 dated 12.9.2005). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 801) was wholly misplaced. The Ld A.R also placed reliance on the decision rendered by the Hon ble Bombay High Court in the case of CIT Vs. Shri Mukesh Ratilal Marolia in Income Tax Appeal No.456 of 2007 dated 07-09-2011. He also placed reliance on some more decisions rendered on similar lines. 8. On the contrary, the Ld D.R submitted that the assessee has failed to show that the purchase of shares was a genuine transaction. The Ld D.R submitted that the assessee could not produce copies of Share certificates or the copies of Share transfer forms. The transaction of purchase was claimed to have been paid through the speculation profit, meaning thereby, the purchase of shares were not routed through bank. The Ld D.R pointed out that the purchase was not routed through Stock Exchange, when the off market transaction had lost significance after the year 2000. The Ld D.R submitted that the reasons for appreciation of prices of shares of M/s Prime Capital Markets Ltd at an astronomical level were also not explained. In fact, the shares of the above said company was named as Penny Stock and the broker through whom the assessee has claimed to have sold the shares has been indicted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he seller of the shares could not be identified. All these discussions would show that the purchase transaction could not be cross verified by the assessing officer. 10. One more point to be noted here is that the speculation transactions can be entered only on payment of margin money. But the details of said payment are not available. With regard to the query raised by the AO relating to Margin money, the broker M/s D.K. Khandelwal Co has replied in the context of purchase of shares of M/s Prime Capital markets Ltd and not in the context of speculation transactions. Thus, it is seen that the question of keeping margin money for speculation transactions remains unanswered both by the assessee as well as by the Share broker cited above. Further the speculation transaction is also claimed to be an off market transaction, which further casts shadow of doubt over the claim put forth by the assessee. 11. Though the assessee has claimed to have purchased the shares in physical format in May, 2004, she chose to D-Mat the same only in June 2005, just two months prior to its sale. The shares were sold through a share broker named Sanju Kabra, who is indicted by SEBI for rigging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective dates. Under these set of facts, the High Court held that the findings given by the Tribunal cannot be found fault with and further held that the decision rendered by Hon ble Supreme Court in the case of Sumati Dayal (supra) was not applicable. In the case of Shri Mukesh Ratilal Marolia (Supra), the Hon ble Bombay high Court has observed that the assessee has furnished copies of Share certificates to show that the shares were in fact transferred to the name of the assessee before it. Further there was no allegation that the prices of shares purchased by the assessee in the case before High Court were manipulated. 14. However, in the instant case, the assessee could not produce the copies of share certificates and copies of share transfer forms. The transaction of purchase of shares could not be cross verified. The shares of M/s Prime Capital Markets Ltd was declared as Penny Stock by SEBI and the broker Sanju Kabra, through whom the shares were sold by the assessee was indicted for manipulating the prices of penny stock shares. Hence, in our view, the tax authorities have rightly applied the test of human probabilities to examine the claim of purchase and sale of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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