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TMI Blog2022 (6) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... Investigation carried out by Department had brought facts on record that share prices had been manipulated artificially, purchased by a set of accommodation entry provider companies controlled by cartel of brokers, entry operator, etc. Moreover, fact that prices of all shares purchased by assessee went up, that too without any corresponding profit or prospects of company, and not even in single case price of share came down, was against human probabilities and impugned year was an isolated year of such profits with no such profits made in earlier or subsequent years. In such circumstances, the Tribunal held that assessee failed to prove genuineness of transaction and long-term capital gain on sale of shares by assessee was an arranged affair to convert its own unaccounted money and thus, exemption claimed under section 10(38) on sale of shares had rightly been disallowed. Thus we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and in law in confirming the addition made in respect of LTCG claimed as exempt in the instant facts. - Decided against assessee. - ITA No. 70/Ahd/2019 - - - Dated:- 24-6-2022 - Shri Waseem Ahmed, Accountant Member And S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey in the guise of capital gains. Accordingly, the AO held that the purchase and sale of shares of Kailash Auto Finance Ltd which is a penny stock company was a sham transaction and accordingly he disallowed the assessee s LTCG exemption claim of ₹ 48, 62, 206/- as bogus. 4. In appeal, despite several opportunities and notices issued to the assessee, none appeared on behalf of the assessee to present the case before Ld. CIT(Appeals). The below chart tabulates the opportunities given to the assessee and that he did not cause appearance before first appellate authority despite several opportunities: Sr. No Date of Notice Date of service of notice Date of hearing fixed Remarks 1 11/07/2018 By RPAD 19/07/2018 Nobody attended or filed any written submission. 2 18.07.2018 By RPAD Adjournment letter dated 16.07.2018. Adjourned to 23.08.2018 3 23.08.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares by the promoters also indicates that the shares of the Kailash Auto Finance Ltd. were not worth for the price at which the shares were sold. The whole transactions of purchasing the shares at very meager price of Rs. 1/- and then rising the market value of the shares by creating the syndicate and by rigging the price at very high level is arranged to accommodation entry of bogus profit in the form of long term capital gain. 3.7. It can be seen from financial data of the company which is available at public domain; no prudent person will invest in such companies. When there are large number of fundamental companies are available in the market, why appellant has chosen to invest in these types of shares clearly prove that appellant wishes to obtain exempt capital gain by obtaining accommodative entries. It is an established law that Income Tax proceedings fall in the domain of preponderance of probabilities, meaning that the action of assessee is considered to be rational and well inform falling in the domain where probable choice are exercised. In Sumati Dayal Case Hon'ble Supreme Court has held that a man is considered as making rational decisions and the choices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim bogus LTCG. Since the assessee remains un-cooperative, we are constrained to pass the order on merits on the basis of information available on record and the case put forth before us by the Ld. DR. In the present case, we are of the considered view, that the assessee has entered into a sham transaction so as to avail bogus LTCG on sale of penny stock company. Several circumstances point to this fact. Firstly, the company Kailash auto Finance Ltd has no credentials and despite that shares of the company rose by 41 times more than the original investment within a very short period of time. Secondly, the assessee has no past history of investment in shares and this is the only share in which he had invested i.e. in the company which has no credentials (in fact in 2016, the share transactions of this company have been suspended as a surveillance measure) and surprisingly, on investment of rupees three lakhs, the assessee has made a phenomenal gain of ₹ 48,62,206/-within a period of 18 months. Thirdly, the financial analysis of the company s share clearly proves that the decision of investment in this share is highly unlikely for a prudent investor and on preponderance of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the Assessing Officers were bound to make addition under section 68 of the Act. 6.1 In the case of Smt. M.K. Rajeshwari v. ITO [2018] 99 taxmann.com 339 (Bangalore - Trib.) , the Tribunal held that where assessee claimed exemption under section 10(38) in respect of capital gain arising from sale of shares, in view of fact that financial worth of said company was meagre and, moreover, there was abnormal rise in price of shares, it could be concluded that assessee introduced her own unaccounted money in garb of long term capital gain and, thus, claim raised by her was to be rejected. The Bombay High Court in the case of Sanjay Bimalchand Jain v. PCIT [2018] 89 taxmann.com 196 (Bombay) held that where assessee had purchased shares of penny stocks companies at lesser amount and within a year sold such shares at much higher amount and assessee had not tendered cogent evidence to explain as to how shares in an unknown company had jumped to such higher amount in no time and also failed to provide details of person who purchased said shares, said transactions were attempt to hedge undisclosed income as Long term Capital gain. In the case of Satish Kishore v. ITO (2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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