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TMI Blog2022 (7) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... me in my opinion has to be treated as income from other sources . If the contention of the learned Counsel for the assessee that the same is to be allowed as LTCG is accepted, then the natural corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. Arguments of assessee that the AO cannot change the head of income is concerned, the same also is without any force especially when the assessee withdrew her claim of exemption u/s 10(38) and offered the same as income of the assessee. So far as the various decisions relied upon by the learned Counsel for the assessee are concerned, the same in my opinion are distinguishable and not applicable to the facts of the present case especially when the assessee in the instant case has herself withdrew the claim and accepted the income from sale of shares of the penny stock company as her income. Alternate argument of the assessee that the same should be added u/s 68 of the Act and the provisions of section 115BBE should not be attracted the same in my opinion, is without any force. The Assessing Officer as well as the learned CIT (A) in this case has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s 143(2) of the Act. Further, notice u/s 142(1) of the Act was issued on 11.10.2021 seeking specific information. During the course of assessment proceedings, the Assessing Officer issued a show cause letter to the assessee on 12.11.2021, which reads as under: During the course of search and seizure proceeding in the case of M/s. Nanesh Finance Corporation, it was noticed that the assessee had used stock exchange mechanism to route her unaccounted money by using scrip of the company M/s. Jackson Investment Ltd and claimed bogus L TCG u/s. 10(38) of the I T Act. It was found that the assessee has claimed L TCG exemption u/s. 10(38) of the Act of Rs. 8,38,953/- for the A. Y.2016- 17. It was noticed that M/s. Jackson Investment Ltd is penny stock company. The manner in which L TCG claimed are bogus in nature. During the course of search proceedings, the assessee voluntarily submitted letter stating to withdraw the L TCG claimed u/s. 10(38) of the Act and to offer the same to income. The ass s bogus claim of exemption u/s 10(38) of the Act has come to light during the course of search. The assessee has not disclosed true affairs thereby there is failure on the part of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee that the transactions leading to L TCG are supported by documents and bank statements cannot be accepted in view of the facts and circumstances. 6. Also the case laws relied by the assessee cannot be accepted, as the same are not relevant to the issue under question in the instant case. 7. Further the assessee cannot take shelter under the documentary evidences furnished, which themselves have been created as masks to cover up the true nature of transactions and are only self-serving documents. A genuine transaction must be proved to be genuine in all respect. Thus, onus was on assessee to prove that the transaction leading to claim of L TCG was distinctly genuine transaction and not sham, premeditated transaction arranged with view to evade taxes. 8. In the case of Rajkumar B. Agarwal vs DCIT, ITAT Pune held that the assessee completed the paper trail by producing contract notes for purchase and sale of shares of PIL. Mere furnishing of contract notes does not inspire any confidence in the light of facts. Test of Human Probability should be applied and apparent should be ignored to unearth the harsh reality ... ... in our considered opinion m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently the face value was reduced to Re.l/- per share, thus resulting 10 times more number of shares received by the appellant than what were originally purchased. The shares were sold at prices varying between Rs. 11.981- to Rs.23.52/- per share, expect for the present appellant wherein the shares were sold at RsA.59j- per share during AY 2017-18. During the course of Search proceedings u] s 132 when enquired about the transactions, the appellant along with other related entities agreed to withdraw the claim u/s 10(38) and to offer the same to income. In the return of income filed subsequently in response to notice u/s 148, the appellant offered the same to tax as long term capital gains and withdrew the exemption u/s 10(38). The details of purchase of shares made by the appellant and others of M/s. Jackson Investment Ltd and allotment of shares subsequent to reduction in face value are brought out as under: S.No Name Date of purchase of shares of JIL Cost price per share (in Rs.) No. of shares purchased Cost of purchase (a) No. of shares of JIL recd. red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Sunita Devi (A.Y)2017-18 70,000 3,21,500 4.59 70,000 2,51,500 359 4 Anita Jain 70,000 13,91,000 19.87 70,000 13,21,000 1887 5 Vishan Raj Jain (HUF) 70,000 14,82,635 21.18 70,000 14,12,635 2018 6 Sajjan Raj Jain (HUF) 70,000 16,46,502 23.52 70,000 15,76,502 2252 7 Sajjan Raj Jain Wife (HUF) 70,000 11,48,322 16.40 70,000 10,78,322 1540 8 Prakash Chand Jain (HUF) 70,000 13,28,342 18.97 70,000 12,58,342 1797 It is worthwhile to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transactions to be considered while assessing an income as under- The assessee incurred capital loss on account of sale of gold jewellery and also had short-term capital gain of almost equal amount. The AD observed that short-term gain was not genuine inasmuch as the assessee had purchased 45,000 shares of M/ s Ankur International Ltd. at varying rates from Rs. 2.06 to Rs, 3.1 per share and sold them within a short span of six-seven months at the rate varying from Rs. 47.75 poise to Rs. 55. These shares were purchased through a broker, Munish Arora Co. and sold through another broker, M/ s SK Shanna Co. The AD was taken by surprise by the astronomical rise in share price of a company from Rs. 3 to Rs. 55 and started further enquiry. The AD after enquiry made addition to the income of the assessee, which was upheld by the err (A) as well as by the Tribunal. 4. Learned counsel for the assessee submitted that the view taken by the Tribunal is perverse. The assessee having discharged the burden of proving the transactions of sale and purchase of the shares to be genuine, burden of proving that the said transactions were not genuine, was on the Department and in the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t previous year. The expression the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as, regards the sums found credited in the books maintained by the assessee. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. In this case the Hon'ble Supreme Court has reversed the decision of the Hon'ble Madras High Court and upheld the findings of the lower authorities regarding the transactions of gift received by assessee even though these were done through banking channels, to be though apparent but not be real one. In the present case also, the appellant has not justified the transactions indulged along with other related parties of this particular scrip and the justification of such a rise as such defying the probability and financials of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove her claim of exemption. After considering her reply etc., held, inter alia, that it is clear that the assessee has manipulated the sale of shares within a short span of time In collusion with the brokers in order to earn tax free exempt long term capital gains on sale of shares u/ s. 10(38) etc. It is clear from the orders of the Lower authorities that the assessee has not placed any material to prove that her transactions are genuine. She has also not placed any material to prove that her claim of exemption u/ s 10 (38) is genuine and valid. Since, the right to exemption must be established by those who seek it, the onus therefore, lies on them. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to came to a conclusion. (35 IT'R 312 (SC)). No part of the concurrent findings recorded by the AO and the Ld. CIT'(A), is disputed by the assessee. Further, she has not placed any material before us to dislodge the findings recorded by the Lower authorities. Thus, the above actions of the assessee are nothing, but a premeditated, contumacious conduct, surreptitious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has not produced any convincing evidence to justify such re-adjudication by the A O. In the circumstances, the assessment made by the AO and confirmed by the Ld. CIT(A) is in accordance with the ratios of the Hon'ble Apex Court (supra) and hence we dismiss all the grounds of the assessee's appeal. The above cases are applicable to the facts and circumstances of the present case in which the various judicial authorities have decided the cases in favour of revenue after going through the entirety of the circumstances and not getting influenced by the picture shown by the appellant which is colored by the use of sham devices. The apparatus of brokers and the shares of the company were a tool for tax evasion. The company M/ s JIL is only part of the network and not the network. The appellant resorted to a readymade scheme for purchase and sale of shares which was floated by some Entry Operators. Such transactions are not genuine and natural transactions, but preconceived transactions, resulting in creation of bogus profits which are tax exempt. Such transactions are mutually self-serving to the parties to the transactions. Thus, conclusion is drawn on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head 'Income from other sources at the higher rate is confirmed accordingly and in agreement with the analysis and findings of the Assessing Officer in the assessment order, the addition mace by the Aa in the assessment order is confirmed and accordingly the ground no.2, 3 and 5 are dismissed. The ground no. 4 pertains to taxation as per Section 115BBE, as per which the said tax applicable is 30% in that year and as the same being unaccounted money brought into the bank as share profit, therefore the action of the Assessing Officer is upheld accordingly and the ground no. 4 is dismissed. The ground no. 1 and 6 are general in nature and need no separate adjudication. To sum up the appeal is dismissed . 8. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal: 1. The Hon'ble Commissioner of Income Tax (Appeals) has erred both on facts of the case and in law involved in so far as it is prejudicial to the interest of the Appellant. 2. The Hon'ble CIT(A) without taking into consideration the information filed before him proceeded to complete the appeal u/s.250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the Assessing Officer is very clear. It is a clear case of penny stock. He submitted that if the assessee gets the benefit of LTCG, then there will be no other option left to the Assessing Officer but to allow the benefit of section 10(38) of the Act. He submitted the assessee during the course of search has not voluntarily withdrew the claim but upon noticing that the assessee had used the Stock Exchange Mechanism to route unaccounted money by using scrips of the company M/s. Jackson Investment Co Ltd, which is a Penny Stock company, submitting a letter stating to withdraw the LTCG claim u/s 10(38) of the I. T. Act and to offer the same to income. 11. So far as the arguments of the learned Counsel for the assessee that the Assessing Officer cannot change the head of income is concerned, he submitted that only if the computational machinery fails, the submission of the learned Counsel may be accepted. However, in the instant case, there is no failure of computational machinery. The assessee has withdrawn the exemption claim u/s 10(38) of the Act. Therefore, the argument of the learned Counsel for the assessee is self-contradictory. Referring to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, if any, can be made u/s 68 of the I.T. Act but the provisions of section 115BBE cannot be applied to the facts of the present case. 14. I do not find any force in the above arguments of the learned Counsel for the assessee. It is an admitted fact that the assessee in the original return of income had claimed the exemption u/s 10(38) of the I.T. Act on account of sale of 70000 shares of Jackson Investment Ltd. I find during the course of search when it was noticed that the assessee had used the stock exchange mechanism for routing unaccounted money by using scrips of the company, which is a penny stock company, the assessee submitted a letter withdrawing the LTCG claim u/s 10(38) of the I.T. Act and offered the same as income. Therefore, once the assessee had withdrawn her claim, now the assessee cannot claim the same as long term capital gain and the income in my opinion has to be treated as income from other sources . If the contention of the learned Counsel for the assessee that the same is to be allowed as LTCG is accepted, then the natural corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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