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TMI Blog2019 (4) TMI 1665X X X X Extracts X X X X X X X X Extracts X X X X ..... law, CIT(A)-40, New Delhi was not justified in confirming the addition of Rs. 23,68,313/- specially when the same was done by copy pasting the information received from different wings of IT department and without making any enquiry in the matter. 4. That the appellant craves, leaves to add, to amend any of the grounds mentioned above any time before or in the course of hearing of appeal before ITAT." 2. The brief facts of the case are that assessee filed return of income was filed on 19/12/2014 declaring total income at Rs. 1,21,740/-. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (in short "Act") was issued on 18/09/2015. During the year under consideration, the assessee has received remuneration from Rahat Latex India Pvt. Ltd. income under the head salary. The assessee had also disclosed longterm capital gain of Rs. 23,22,498/- which was earned by sale of equity shares of Kappac Pharma Ltd. AO observed that according assessee she had acquired 4000 equity shares of M/s Kappac Pharma Ltd (Registered office 13/2014, Rerni Bizcourt Veera Desai Road, Andheri West Mumbai Mumbai City' MH 400053), from M/s Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per answer/justification was given by the assessee with regard to question relating to allotment of share, prove of purchase of shares justification for purchase of the particular shares, justification for dematerialization of share just before sale of information regards how the assessee knew promoter of Kappac Pharma Ltd., mode of allotment etc. It was also noted that the assessee did not have a demat account at the time of buying the 4000 shares of Kappac Pharma Ltd. from Corporate Stock Broking Pvt. Ltd. The Assessing Officer also called for the demat account statement of the assessee from the broker Shri Parasram Holdings Pvt. Ltd. under section 133(6) of the Act and it was noted that the assessee had never made investment in the shares since opening of her demat account and only the transactions which were done were the sale of the shares of Kappac Pharma Ltd. It was also noted that even after making windfall profit, the assessee had not made any further investment in any other slock, which as per the Assessing Officer was against human probability. It was further, noted that the assessee opened her demat account on 15/01/2014 with Shri Parasram Holdings Pvt. Ltd. and demater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 23.7.2018 has dismissed the appeal of the assessee. Against the impugned order, assessee is in appeal before the Tribunal. 3. Ld. Counsel for the assessee has stated that Ld. CIT(A) was not justified in confirming the addition of Rs. 23,68,313/- as income of the assessee due to the amount received from Kappac Pharma Limited. He further submitted that Ld. CIT(A) has failed to appreciate that the Assessing Officer made the addition mentioned above without confronting the assessee with the statement to Shri Gupta given by him before the income tax authorities and also denying the appellant an opportunity to cross examine Shri S.K. Gupta. It was further submitted that Ld. CIT(A), New Delhi was not justified in confirming the addition of Rs. 23,68,313/- specially when the same was done by copy pasting the information received from different wings of IT department and without making any enquiry in the matter. In support of his contention he filed 02 Paper Book one is containing pages 1-13 having details of purchases of 4000 equity shares of M/s Kappac Pharma Ltd. from M/s Corporate Stock Broking (P) Ltd.; details of sales of 3500 share and another 500 shares through his broken M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad used colourable device for avoidance of tax. The receipt of Rs. 23,68,313/- was deemed to be income under section 69A. The assessee has contended that 4,000 shares of Kappac Pharma Ltd. purchased from Corporate Stock Broking (P) Ltd. at a price of Rs. 13.09 per share in physical form. It has also been submitted that out of the 4,000 shares, 3000 shared were sold on 04/02/2014 for @Rs.677 per share and another 500 were sold on 18/02/2014 for a sum of @Rs.691 per share. It has also been submitted that the assessee did not indulge in any manipulation which may have been done by some broker and that the appellant was not given opportunity for cross examination. It has also been submitted that the Assessing Officer has made the addition without considering the facts of the case and only on the basis of presumption and presuppositions. It is noticed that prima facie, copies of all documents have been submitted to substantiate the genuineness of transactions related to purchase and subsequent sale of shares leading to long-term capital gain claim by the appellant. I find that these documents were also placed before the Assessing Officer who, after detailed examination and discussion an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant wants to take shelter under such documentary evidences which themselves have been created as masks to cover up the true nature of transaction. A genuine transaction must be proved to be genuine in all respect. The onus was on the appellant to prove that the transaction leading to claim of long term capital gains was distinctly genuine transaction and not bogus, premeditated transaction arranged with a view to evade taxes. The onus was on the assessee to contradict the findings that Kappac Pharma Ltd. was a company whose scrip was capable of being traded at high price as it was the appellant who had traded in the shares of the this company which resulted into claim of long term capital gains which is exempt under section 10(38). Once the assessee was made aware of the result of the investigation which proved that trading of shares leading to long term capital gains was not genuine, as per section 101 of the Indian Evidence Act, 1972, the onus was on the assessee to prove that she had earned genuine long term capital gains as it was the assessee who has made a claim that she was engaged in genuine share transactions. I find that in the case of Shri Charan Singh vs. Chandr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. is one of such companies whose scrips have been manipulated to provide bogus long term capital gains. It is noted that on similar facts and circumstances, Hon'ble ITAT A-Bench, Chandigarh in the case of Shri Abhimanyu Soin vs ACIT, Circle-7, Ludhiana in ITA No.951/Chd./2016 vide order dated 18/04/2018, have expressed the view that the undisclosed income in the garb of long term capital gain has to be assessed as unexplained. The Hon'ble ITAT have held as under:- "14. The ratio laid down by the Hon'ble Supreme Court in the case of SumatiDayal Vs. CIT [1995] 214 1TR 801 = 2002-TIOL-885-SC-IT-LB is squarely applicable in this case. Though the assessee has received the amounts by the way of account payee cheques, the assessee could nowhere prove the purchase of shares as claimed to have been made on 02/72/2008 in cash and it urns also not proved about the availability of the funds with the assessee as on the date of purchase of shares. The assessee was not in India as per the passport details available as per the record. This, coupled with the fact that the transfer of money in cash from Ludhiana to Delhi and a person representing the broker operating at Kolkata has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions in the real market situation. Further, in the case of McDowell &: Co. Ltd.[(1985) 154 ITR 148 (SC)],the Hon'ble Supreme Court have observed as under: "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges." 5.3 Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement- must be real and genuine and not a sham or make believe. 5.4 Keeping in view of the aforesaid discussions, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long terra capital gain by well organised network of entry providers with the sole motive to sell such entries ..... 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