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TMI Blog2016 (10) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(1) of the Act without scrutiny will not entitle the assessee to get the well reasoned assessment orders and appellate orders of the learned CIT(A) dislodged in the absence of the cogent material and evidences to demolish the findings of the authorities below. The Revenue in the case of the assessee’s brother has also declared the purchase and sale of shares as bogus but brought to tax , gains arising from sale of shares as short term capital gains . This in our considered view, is also not of help as the Revenue in the instant case has come to the conclusive finding which attained finality that the transactions of purchase of shares are sham and bogus transactions camouflaged with an intention to evade taxes - Decided against assessee - I .T.A. No.995/Mum/2012 - - - Dated:- 3-8-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Vishwas V. Mehendale For The Assessee : Shri B.S. Bist (D.R.) ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 995/Mum/2012, is directed against the appellate order dated 25th November, 2011 passed by learned Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Exchange was only a penny stock company and for the purpose of showing the holding period of more than 12 months, M/s Badri Prasad Sons and other Kolkatta based brokers have issued pre-dated contract notes on the dates prior to July, 2004 for the sale of shares of this company at the rate of ₹ 4/- to ₹ 4.50 per share to the various persons. It was also mentioned that assessee has purchased 4000 shares of M/s Shiv Om Investments on 11th May, 2004 for a consideration of ₹ 4,080/- and out of the same, 1000 shares were sold on 16th May, 2006 and 2500 shares were sold on 27th January, 2006 for a total consideration of ₹ 6,89,750/-. Thus, the Revenue has reason to believe that income chargeable to tax has escaped assessment in the case of the assessee and the assessment was re-opened by issue of notice u/s 148 of the Act dated 7th April, 2008 was issued and served upon the assessee on 1st May, 2008 , i.e. within a period of 4 years from the end of assessment year. In reply, the assessee vide letter dated 27th October, 2009 has submitted that original return filed on 5th June, 2006 may be treated as a return filed in response to the notice u/s 148 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails, this bill cannot be held as genuine. This clearly fortifies information received in the case of the assessee that said bill issued M/s Badri Prasad Sons is nothing but a bogus bill. 5.2 In view of the same, vide this office letter dated 19.11.2009, assessee was requested to show cause as to why the purchase of these shares shall not be treated as non-genuine. Further, in the said letter, he was specifically required to furnish the following details: (i) Your entire business activity is at Mumbai, why and through whom you have approached the Kolkatta share broker, M/s Badri Prasad Sons through whom you have claimed to have purchased 4000 shares of Shiv Om (ii) Details of payment made to purchase the above shares along with mode/proof of payment. 5.3 In reply to the above, assessee's AR has submitted that investment in the shares of Shiv Om Investments and Consultancy Ltd. was made by the assessee in 2004 on the basis of advice given by his well-wisher. Further with regard to mode of payment, he has submitted that the purchase of these shares have been made in cash. However, no proof of such cash payment was substantiate with any kind of documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whatsoever. (b) The assessee himself will be unaware of the financial performance of the company in which he is invested. (c) The shares are purchased at lower levels and sold at higher rates through the series of off-market transactions created by the broker with vested interest. The share prices are artificially rigged through off market transactions. This hike is not supported by the fundamentals of the company. (d) The assessee uses the services of the broker only for these particular transactions. Also, the assessee otherwise is passive investor or does not invest in other scrips. (e) The assessee has never met the broker and usually claims that the transactions are arranged through a different person. 5.8 Having seen the above modus operandi and the method in which these types of transactions are structured, the following facts emerges in the case of the assessee which are discussed in detail as under: (A) PURCHASE OF SHARES IS AN OFF MARKET TRANACTION: From the modus operandi adopted by the assessee, it is seen that the purchase transaction has been done off market in physical form by paying cash. This has been carried out in a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n itself looks suspicious from the manner it has been conducted i.e. the abnormal appreciation in the value of shares, the mode of payment for purchase of shares not doing the transaction through the normal share dealing procedures. The assessee has shown to have received sale proceeds through cheque whereas purchases were consciously made in cash in the aforesaid manner to facilitate manipulation of the purchase for assessee's benefit. F) PENNY SHARE: The shares in which the assessee has claimed to have made a deal, are identified as Penny Shares by the investigation wing of the department because rates of these shares are not based on business results of the companies but same are fluctuated by insider's trading from zero value (negligible price) to very high price and vice versa without any reason or basis to accommodate or generate bogus capital gain or loss. 5.9 In the instant case, all the above features are present in the transaction of shares made by the assessee. Moreover, there is also a specific information that assessee is indulged in nongenuine bogus capital gain obtained from the transactions of purchase and sale of shares of M/s Shiv Om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h SEBI guidelines (c) Payment for purchase made in cash (d) Assessee not a regular investor in shares (e) Nature of transaction looks suspicious (f) Shares or company identified as Penny shares iv) The Assessing Officer appears to have preconceived notions and has twisted and distorted all the facts according to his convenience and in order to prove the same. v) The Assessing Officer has failed to appreciate the fact that the absence of order No. Trade No. and trade time on the contract note/broker bill does not make the transaction an off-market transaction. vi) The Assessing Officer has failed to prove as to how this particular transaction is not in conformity with the SEBI guidelines. vii) The Assessing Officer has erroneously concluded that since payment is made in cash, the transaction is bogus. viii) The Assessing Officer has erred in concluding that since assessee is not regular investor in shares, he should not be able to earn a return of 49 times within a short span of period. ix) The Assessing Officer has erred in concluding that the nature of transaction looks suspicious. This statement proves the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as unexplained cash credits in the hands of the assessee. The ld. Counsel for the assessee drew our attention to the assessment order and submitted that in the assessment year 2007-08 the Revenue has accepted the gain earned on the sale of shares as long term capital gain u/s 143(1) of the Act. He submitted that the Revenue has reopened the assessment for the assessment year 2005-06 and treated the purchase of shares as bogus although no additions were made in monetary terms. The said assessment order has been placed in paper book page No. 42-52 filed with the Tribunal. The appellate order passed by the learned CIT(A) for assessment year 2005-06 has also been placed vide paper book page 53 to 55 and submitted that no additions were made for purchase although the same were treated as bogus and hence the assessee did not contested the findings of AO by treating the purchase of 4000 shares of Shiv Om Investment and Consultancy Limited as bogus and sham transaction. The ld. Counsel submitted that the assessee has not challenged the said findings as no addition was made by Revenue in the assessment year for 2005-06 on monetary terms and the assessee was not saddled with any liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 2007- 08, it was submitted by learned DR that no scrutiny assessment has been made u/s 143(3) of the Act. 10. In the rejoinder, the ld. Counsel for the assessee relied upon the decision of the Hyderabad Bench of this Tribunal in the case of ITO v. Smt. Aarti Mittal reported in [2014] 41 taxmann.com 118 (Hyderabad Trib).It is the submission of the assessee s counsel that no enquiry has been made by the Revenue with stock exchange. It was submitted that the assessee filed balance sheet of Bhagvati Juice Centre along with the return of income filed with the Revenue for the assessment year 2005-06 which is at page 40 of the paper book and there is no requirement to disclose the purchase made on 11- 05-2004 in this balance sheet of business as personal balance sheet was not filed as there is no requirement to file the personal balance sheet with the Revenue along with return of income(page 38-41 /PB). But, it was submitted that capital gains was duly declared in return of income filed with the Revenue for the impugned assessment year . 11. We have considered the rival contentions and also perused the material available on record including the case laws cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the learned AO made in the assessment order dated 24.12.2009 passed by the AO u/s 143(3) read with Section 147 of the Act in the first appeal filed with learned CIT(A) for the assessment year 2005-06 and hence the finding of the AO has attained finality. Since the said findings of the AO with respect to purchases of 4000 shares of M/s Shiv Om Investment and Consultancy Limited in assessment year 2005-06 have become conclusive having attained finality, the sales in consequence thereof the sham and bogus purchases cannot be accepted as genuine. The assessee has explained that the purchases were backed with contract notes of the brokers and payments were made in cash will not be of any help at this stage as the said finding of the AO treating the purchase of shares as sham and bogus in the assessment year 2005-06 has attained finality. Since, purchases are held to be bogus and sham which has attained finality, the sale in consequence thereof whereby payments are received through cheque or shares being sold through stock exchange are not of any help to the assessee for claiming the exemption as long term capital gains as the allegation of the Revenue is that the assessee has in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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