9911796707
TMI Blog2019 (12) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has claimed Long Term Capital Gain exempt under section 10(38) of the Income Tax Act, 1961 ("the Act") on sale of the shares of M/s Kappac Pharma Ltd at Rs. 84,38,907/-, less the cost of acquisition at Rs. 1,32,000/-and thereby deriving Long Term Capital Gain (LTCG) at Rs. 83,06,907/-. Learned Assessing Officer called for and perused the share transfer form, debit note, demat account statement from the depositary participant etc submitted by the assessee in support of their claim for exemption under section 10(38) of the Act and observed that the assessee had earned a return of approximately 6300% over a very short period of just over 12 months and the facts required a deeper study of the price movements and share market behaviour of the entities involved in the trade. of the scrip as the share price movement and the profit earned by the beneficiaries were beyond human probabilities. 4. Taking clue from this astronomical proportion in the earnings of the assessee from the scrip M/s Kappac Pharma Ltd, learned Assessing Officer verified the trading history of the assessee and the financials of M/s Kappac Pharma Ltd and also took into consideration the attendant circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the persons, recorded by the Investigation Wing of Kolkata was admitted without affording an opportunity of cross-examination to the assessee and therefore it cannot be said that the M/s Kappac Pharma Ltd is a penny stock company and has been used to provide bogus LTCG. 7. Assessee's further contention before the Ld. CIT(A) was that copies of all the documents to substantiate the genuineness of the transaction relating to the purchase and subsequent sale of shares leading to LTCG were submitted and there was no reason for the learned Assessing Officer not to believe the same. Further, contention of the assessee was that the long term capital gains cannot be treated as bogus merely because some investigation with regard to certain company and broker or investigation was carried out by the Directorate of Investigation, Kolkata. 8. Ld. CIT(A) considered all the contentions of the assessee in a very detailed way and by way of the impugned order reached the conclusion that the assessee had failed to discharge his burden to prove his case; whereas the learned Assessing Officer had proved that the claim of the assessee was incorrect as is corroborated by the enquiry conducted by SEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o documentary proof was gathered by the investigating agencies against the assessee nor any documentary evidence, phone calls, witnesses or any material was discovered by the Revenue to suggest that the impugned transaction is a bogus transaction and the conclusions reached by the authorities below would only amount to punishing the innocent people leaving the entry operators, accommodation entry providers, share brokers etc and none of these people did say anything against the assessee that the assessee had taken LTCG as an accommodation entry and that the transaction made by her is not a genuine one. 11. According to the Ld. AR, the assessee had been investing in shares quite for a long time and has been duly declaring all her profits in the return of income, and the assessee had been taking the decisions on the advice of her father in law, who was regularly dealing in sharemarket and not as a professional share trader who would understand the nitty-gritty of the sharemarket. Ld. AR placed reliance on the decision of the Tribunal in Smt. Karuna Garg vs. ITO in ITA No. 1069/del/2018 and batch of appeals disposed of by a common order dated 06/08/2019 wherein it was held that no q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019, Udit Kalra vs. ITO in ITA No. 6717/del/2017 by order dated 8/1/2019 and upheld by the Hon'ble jurisdictional High Court in ITA No. 220/2019 by order dated 8/3/2019, Sanat Kumar vs. ACIT in ITA No. 1881/Del/2018 by order dated 14/6/2019 and submitted that under similar circumstances this Tribunal held that since M/s Kappac Pharma Ltd has no sound financial status to inspire confidence in the mind of an honest investor to put their hard earned money with an intention to earn any profits, such a transaction cannot be inferred to be a genuine one. 14. We have gone through the record in the light of the submissions made on either side. It is an undisputed fact that the assessee purchased the shares of M/s Kappac Pharma Ltd on 25.6.2012 off-line and by making cash payment at the rate of Rs. 11 per-share through one M/s Vishal Reality Management Ltd by making a total payment of Rs. 1,32,000/-for acquiring 12,000 equity shares. It is also not in dispute that the assessee sold these 12,000 shares of M/s Kappac Pharma Ltd at Rs. 750/-for a consideration of Rs. 83,06,907/-through Bombay stock exchange within a period just over 12 months to realise a return of approximately 6300%. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the organised racket of generating bogus entries of Long Term Capital Gain (LTCG) which is exempt from tax. 17. Assessment order clearly shows that the learned Assessing Officer examined the return of income and found that it does not show substantial trading activity or investment in shares of listed shares and the purchase of shares in a huge quantity was made when the company had no proven financial results which were an indicator to the future events. As a matter of fact, learned Assessing Officer found that the assessee, though a novice in share market without any substantial trade transaction in the earlier years or in the subsequent years, that too without finding the financial results of M/s Kappac Pharma Ltd are so splendid to inspire the assessee to believe that there is a chance of lucrative gains at the stage of purchase of such shares, invested the money to the tune of Rs. 1,32,000/-. Naturally this fact triggered suspicion in the mind of the learned Assessing Officer, causing him to enquire into the financials of M/s Kappac Pharma Ltd. 18. Assessment order further clearly indicates that the learned Assessing Officer delved deeper into the financials of M/s Kap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the operators was to make the beneficiary buy some shares of predetermined penny stock company shares controlled by them with the initial transfer of shares in the name of the beneficiary on off market transaction basis or online transaction basis and thereafter, issue preferential shares at a nominal rates or issue of bonus shares even though there is hardly any profit or business activity in these companies; that the beneficiary, usually an individual, holds the shares for one year, the statutory period after which LTCG is exempt under section 10(38) of the Act; in the meantime, the operator register the prices of the stock and gradually rise its prise many times, offered 500 to 1000 times; that this is done through low-volume transaction indulged in by the dummies of the operator at a predetermined price; that when the price reaches the desired level the beneficiary who bought the shares at a nominal price, is made to sell it to a dummy Company of the operator; and that for this, unaccounted cash is provided by the beneficiary which is routed through in a few layers of paper companies by the operator and finally is parked with the dummy paper company that will buy the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible burden which the assessee seeks to put on the learned Assessing Officer. 22. On a careful scrutiny of the assessment order and the impugned order passed by the Ld. CIT(A), as a matter of fact, we find that the share transaction done by the assessee is surrounded by a thick cloud of suspicion which the assessee failed to dispel. Since the learned Assessing Officer did not rely on the investigation report of the Kolkata wing of income tax Department to reach the conclusion as to the nature of transaction, and on the other hand, his findings are firmly entrenched into the facts he culled out during the assessment proceedings and derived from the analysis of the financials of M/s Kappac Pharma Ltd and also other circumstances, we are of the considered opinion that the assessee cannot place reliance on the decision of the Hon'ble Apex Court in the case of Andaman Timber Industries (supra). 23. It is pertinent to note that the facts in the case of Udit Kalra (supra) are similar to the facts of the case on hand. The Tribunal held that when there was a specific information that the assessee had indulged in nongenuine and bogus capital gain obtained from the transactions of purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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