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TMI Blog2020 (5) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... nt : Mr.A. Sundararajan , Addl .C.I.T D.R ORDER PER S. JAYARAMAN , ACCOUNTANT MEMBER The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-13, Chennai in ITA No.99/CIT(A)-13/2014-15, dated 27.07.2018 for the assessment year 2014-15. 2. Shri Aravind Modi, the assessee, an individual is doing business in Hardware Spares and in share trading,etc. The Assessing Officer received a report from the investigation wing of Kolkata, in which, inter alia, the assessee was specified as one of the parties who indulged in bogus/non-genuine long term capital gain from the transactions of alleged purchase and sale of shares of Kailash Auto Finance Limited. Further, the shares of Kailash Auto Finance Limited were found by them as penny stock company which has been used for generating bogus LTCG and the investigations revealed that a scheme was hatched by various players to obtain/provide accommodation of entry of bogus LTCG through manipulation of stock market. Therefore, the Assessing Officer re-opened and scrutinized the assessment and found that the assessee purchased 1,00,000 shares of Kailash Auto Finance Limited @ ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls or bank transactions where sale consideration received from sale of such shares were deposited. The assessee had admitted before the AO that 1,00,000 shares of Kailash Auto Finance Limited at a price of Re.1/- per share were purchased by the assessee through promoters quota in FY 2011-12. On the date of purchase of these shares the same were found listed as M/s. Panchsheel Marketing Limited and it got amalgamated and called as Kailash Auto Finance as it got merged. The assessee has then sold shares on various dates for sale consideration of ₹ 39,17,760/- through a broker B. Lodha Securities Limited. The AO has got it confirmed from the Globe Capital Market Limited. In response to letter issued u/s.133(6) of the Act. The AO has narrated detailed modus operandi adopted in the assessment order for accommodation of entry of long term capital gain. In explaining the modus operandi the AO has explained the importance of accommodation entries, penny stock companies, the presence of entry operators, the importance of Jamakharchi companies, the role of beneficiary who will be provided accommodation entries to bring in his unaccounted m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie , evidence against the assessee , viz ., the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. Moreover SIT on black money has also given his observations and recommendations on black money by observing misuse of claim of exemption of LTCG for money laundering. In a report submitted it is observed as under: Investments are made in the secondary share markets with a view to capturing gains. In this market, out of nearly 8,000 listed companies, several scrips are not traded regularly. With the collusion of promoters, some brokers arrange for price(s) with purchase of such scrips at nominal costs, and sales at exorbitant prices, with a view to receiving money on sale as capital gain when the long term gain is subjected to a nil or nominal rate of tax. The advantage for manipulative taxpayer is that he can launder such sale receipts through payment of no tax. SEBI has barred about 250 such entities. SEBI has found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the notices were able to offload their shares at high price, continuously for a period of around 15-16 months. In any normal market, a sudden supply if not matched by similar demand leads to price fall. However, in this case, the beneficiaries were able to offload shares at higher price because of the presence of Kailash Auto Group I and Kailash Auto Group II who had acted as buyers when the beneficiaries were selling their shares. The circumstances prima facie shows that in the whole process, artificial demand was created by the entities of the Kailash Auto Group I and Kailsh Auto Group II so as to absorb the supply from the beneficiaries. Thus as a result of the trading between beneficiaries and entities of Kailash Auto Group I and Kailash Auto Group II in Patch - 2, the average trading volume in the scrip had increased by 5,57,752. 10%, i.e., (5577 times) as compared to Patch-I. Such increase in volume was mainly on account of matched trading amongst Kailash Auto Group I and Kailash Auto Group II entities and beneficiaries. This artificial volume in the scrip created by the beneficiaries including the Notices and the entities of Kailash Auto Group I and Kailash Auto Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons working in tandem to provide arranged capital gain by receiving cash in lieu of it. It is seen that some exit providers/cross purchasers have helped for sale of shares of the beneficiaries. M/s Camellia Vinimay Pvt. Ltd. is one of such party. A sample cash trial of this concern with other party is also mentioned above. Several brokers/operators/promoters who were indulged in this malpractice were searched/surveyed and their statement was recorded. Persons interrogated were also found mentioned in the assessment order who have admitted on oath u/s. 131 of the IT Act that bogus entry for LTCG was given for various penny stocks by way of arranged purchases and sales through the entities/persons under their control. The modus operandi of the tiansaction was to accept cash and arrange for issuing cheques after charging certain commission. The confession given on oath u/s 131 by the brokers/promoters/ operators is also a circumstantial evidence against the assessee that the so called LTCG is arranged one. Together such evidences form a chain of circumstances leading to an inference or presumption of the principal fact for which the AO has relied on the decision of ITAT N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the appellant has entered into an engineered transaction to generate non-genuine long term capital gain thereby rightly held sale consideration received on account of sale of penny stocks for Rs,39,04,542/- as unexplained cash credit under section 68 of the Act and rightly rejected the claim of exemption under section 10(38) of the Act for ₹ 37,84,924/-. In light of this discussion, commission of ₹ 1,17,136/- being charged @ 3% of ₹ 37,84,924/-. For providing arranged LTCG is also held as unexplained expenditure u/s.69C of the Act. Accordingly, the additi9n made by the AO for sum of ₹ 39,04,542/- u/s.68 of the Act and for sum of ₹ 1,17,136/- u/s.69C of the Act is confirmed and the appellant ground of appeal on the issue is therefore dismissed. In result, the appeal of the assessee is dismissed. Thereafter, the Ld. DR submitted that the assessee filed the impugned appeal before this Tribunal. Since the findings recorded by the lower authorities are not challenged with relevant material by the assessee, the Ld. DR pleaded to dismiss the appeal. 5. We heard the Ld.DR and gone through the relevant material. The Assessing Officer receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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