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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 ..... e derived long term capital gain of Rs. 13,99,648/- and has claimed exemption u/s 10(38) on sale of shares of Khoobsurat Ltd. The AO summarised the facts of long term capital gain derived by the assessee as under : (i) The assessee is a senior citizen lady who had been deriving income from other sources mostly interest income from parties bond etc. (ii) On advice of her Income Tax Counsel Late Shri Hemant Surjan, Advocate, she purchased shares of two penny stock Kolkata based companies - 8000 shares of Syncom Marketing Pvt. Ltd. (SMPL) @ Rs. 5.50 per share on 08-08-2003 and 4000 shares of Skyzoom Distributors P. Ltd. (SZDPL) @ Rs. 4/- per share on 05-08-2003. Payments were made in cash for acquisition of shares of both the companies. (iii) Interestingly, address of both the companies was the same i.e. 8, Ganesh Chandra Avenue, Calcutta-200 013. (iv) Authorized signatory of both the companies was also the same person. (v) Purchase of shares of both the companies was done through Globle Stock and Securities Ltd., 8, Ganesh Chandra Avenue, Calcutta. Here again, the address of the broker was also the same as that of the address of the two companies. (vi) Both the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited does not qualify to be called as a capital investment rather, these transactions are an adventure in the nature of trade. (iii) This also come to conclude that the motive of the assessee's investment in the two penny stock companies was not to derive income by way dividend etc. rather, to earn profit. (iv) Both the brokers, the one through whom the shares were purchased and the other through whom it were sold were located at Calcutta and the assessee had absolutely not any knowledge what was going on in the whole transaction except paying Rs. 65,000/- in cash to her legal advisor. Also the cash purchases are not to be relied upon. (v) The company in question whose shares wee sold was not having healthy financial position. And despite not being a dividend paying company and suffering huge losses its shares were quoted at around Rs. 500/- per share. (vi) The broker company through which the shares were sold did not respond to my letter and name and address, bank account of the person who had purchased the shares sold by the assessee was not furnished and further verification and investigation could not be made. 10. U/s. 2(13) of the Income Tax Act the word 'Business' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of transaction can be regarded as business and even multiple transactions sometime are deemed as investments. So, the criteria, for deciding whether it is investment or business is that the intention of the assessee, viz. whether assessee's real intention is to invest or the intention was in the nature of trade." 4.10 An examination of the details of transaction filed by the assessee in respect of the shares on which he has claimed capital gains reveals that the overall impression that can be gathered is that the assessee has dealt with the shares as a trader and not as an Investor. 4.12 The assessee's reliance on a large number of judicial decisions would not come to his rescue since these were rendered in light of the facts present in these individual cases and it is settled position of law that whether a person is a trader or an investor is a mixed question of facts and law. Hence, it is the facts present in the case of the assessee which would be relevant for deciding whether he is to be treated as an investor or a trader in respect of the activity in question. In the case of Mahendra C. Shah ITA No. 6239/Mum/2008 and 4932/Mumj2009 also, it has been held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee. In these circumstances it is a clear case where the assessee had indulged in bogus and dubious share transaction meant to account for the bogus and undisclosed income in the garb of long term capital gain. 7. In this regard I may gainfully refer to the decision of Hon'ble jurisdictional High Court in the case of Major Metals Ltd. vs. Union of India and others in Writ Petition No. 397 of 2011 vide order dated 22nd February, 2012. The Hon'ble jurisdictional High Court in this case has held that a company cannot command disproportionate and huge share premium and such receipt of bogus share application money even though through banking channel can be held to be assessee's undisclosed income received in the garb of unjustified share application money. In the present case I find that there is no justification whatsoever that the shares of an unknown company of Rs. 5/- can be sold within two years time at Rs. 485/- without there being any reason on record. This unexplained spurt in the value of unknown company shares is beyond preponderance of probability. It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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