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TMI Blog2016 (7) TMI 1476X X X X Extracts X X X X X X X X Extracts X X X X ..... ped to ₹ 485/- in no time has been totally rejected by the authorities below. The assessee has not at all been able to adduce cogent evidences in this regard. There is no economic or financial justification for the sale price of these shares. The so called purchaser of these shares has not been identified despite efforts of the AO. The broker company through which shares were sold did not respond to queries in this regard. Hence the fantastic sale price realisation is not at all humanly probably, as there is no economic or financial basis, that a share of little known company would jump from ₹ 5/- to 485/- - Decided against assessee. - I.T.A. No. 61/Nag/2013 - - - Dated:- 18-7-2016 - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER For the Appellant : Shri C.J. Thakar/Shri S.C. Thakar. For the Respondent : Shri A.R., Ninawe. ORDER This appeal by the assessee is directed against the order of learned CIT(Appeals) dated 08-11-2012 and pertains to assessment year 2006-07. The grounds of appeal read as under : 1. On the facts and circumstances of the case and material on record learned A.O. and C.I.T.(A) erred in holding that the assessee was a trader in shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,410/- and 800 shares on 20-06-2005 @ ₹ 485.65 amounting to ₹ 3,88,520/-. The shares were sold through another broker namely Ashish Stock Broking Pvt. Ltd. (ix) Sale proceeds of the first sale transaction (07-06-2005) and the second sale transaction (20-06-2005) were credited directly by the above broker in the S.B. Account No. 10473 of Union Bank of India, Gandhibagh, Nagpur of the assessee on 15-06-2005 and 07- 07-2005 respectively. (x) In the whole transactions the assessee made Long Term Capital Gain of ₹ 13,99,648/- and claimed exemption from tax u/s 10(38) of the Income Tax Act. 3. After further elaboration, examination, investigation and query enquiring the AO held as under : 9. On the basis of material on record and enquiries and investigation done in this case, I am not inclined to accept the contentions of the assessee that income arising from shares of the company Khoobsurat Limited should be treated as Capital Gain for the following reasons : (i) The initial purchased shares were non-trading shares and the assessee has invested her hard earned money in the shares of the company whose address and any other details of the company were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.9 As regards the intention of the assessee, it has been held by various Hon'ble Courts that the intention of the assessee at the time of purchase of asset is the most important criteria to decide whether the same were purchases as trading assets or were bought as an investment. Only because the shares have been disclosed in the Balance Sheet as an investment would not determine or prove. . that the shares were purchased as a capital asset, since it is well settled law that entries in the books of accounts are not determinative of the true nature of the transactions. Further, -c assessee's contention, that he has taken delivery of shares and, hence, the profits should be assessed as capital gains cannot be accepted since this cannot be, and is not the criteria for determining the nature of income. To determine the nature of the transactions or whether the assessee has acted as a trader or investor, what will have to be examined is as to how he has dealt overall with his assets after the purchases and how he has acquired the said assets. A trader buys for the purpose of reselling at a profit. He does not wait for capital appreciation. He tends to sell the shares , immedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not as investments. 4.16 In view of the aforesaid reasons, I am of the opinion that the assessee was a trader and not an investor in the shares in ;-~'-' respect of which he has claimed short term capital gains and which is the subject matter of the appeal. Hence, the profits are to be assessed under the head Profits Gains of Business Profession and not under the head Capital Gains . Therefore, the action of the A.O. of treating the profit of ₹ 43,96,794/- as business income is upheld. 5. Against the above order, the assessee is in appeal before the ITAT. 6. I have heard both the counsel and perused the records. The facts of the case clearly indicate that the assessee has indulged in penny stock transaction. The assessee is a senior citizen. On purported advice of an Income-tax Consultant, she purchased shares of two penny stock Calcutta based companies at ₹ 5.50 per share and ₹ 4/- per share respectively in 2003. Both the companies had no standing and the AO found their existence of dubious characters. Both purportedly merged with other company, namely, Khoobsurat Ltd. and the assessee received shares in Khoobsurat Ltd. in lieu of her s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were from a jackpot. These receipts were tested on the touch stone of human probability and it was found that apparent was not real. That it was contrary to statistic al theory and experience of the frequencies and probabilities. The exceptional luck enjoyed by the assessee was held to be beyond preponderance of probability. Hence the Hon ble Apex Court has affirmed the view that it would not be unreasonable to infer that the appellant had not really participated in any of the races except to the extent of purchasing the winning tickets after the events presumably with unaccounted funds. 8. When the present case is examined on the touch stone of above case law, it is clear that these transactions of the assessee can by no stretch of imagination be considered as investment transactions. They are only make believe transaction. Hence I do not find any infirmity in the revenue taxing the receipt in this regard. 9. The entire amount of the so called receipt of share sales could well also be treated as unexplained credit u/s 68 of the I.T. Act as it has all the ingredients of attracting the rigours of the said section. Section 68 of the I.T. Act provides that where any sum is foun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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