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TMI Blog2022 (3) TMI 1418X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of the assessment. Bogus LTCG/STCG - Each case has to be decided on facts and circumstances of that case. In our considered opinion, relevant factors to be considered are surrounding circumstances, objective facts, evidence adduced, presumption of facts based on common human experience in life and reasonable conclusions. Assessee was liable to discharge its onus regarding purchase of shares by way of cogent documentary evidences. We note that assessee has not placed anything on record regarding the source of investments and capacity to invest such huge monies during the year in which the investments were made - The assessee having invested huge monies in these alleged companies, has not been able to provide any documents to establish sound financial of these companies and that, the fluctuation in price was market driven. Assessee is therefore directed to provide all relevant documents to establish source of investment and capacity to invest in the alleged companies in the year of investment. Ld.AO shall take all evidences into consideration and then decide the issue as per law. Statements recorded are secondary and subordinate evidence, and therefore cross examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1/- each share and the assessee was holding 39,30,000 shares as on 31.03.2012 in his demat account. Thus the purchase price of one share of Blue Circle Services Ltd of Rs.1/- each was Rs.0.15 per share. The price of the scrip kept rising from April 2011 and touched a high of Rs.80/- during Financial Year 2012-13. The assessee offloaded 4,61,500 shares of Blue Circle Services during Fin Year 2012-13 at an average price of Rs.65.37, the purchase value of which was 15 paise per share." For assessment Year 2014-15: For Asst Yr 2014-15 the LTCG was earned by assessee on sale of shares held in following alleged companies: Blue Circles Services Pvt.Ltd Parag Shilpa investment "3. In the year under consideration, the assessee had income from business, income from house property, other sources, and long term capital gains. It is seen that the assessee has claimed exemption of long term capital gains amounting to Rs.3,69,27,069/- (after setting off long term capital loss) on sale of shares. Amongst the shares traded by the assessee during the year are two shares which have been identified as stocks which are used to generate bogus long term capital gains. The details of the long te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e & Services, formerly known as Parag Shilpa investment "2. The assessee, an individual has declared income from house property, profits 86 gains from business, capital gains and income from other sources. The long term capital gains of Rs. 2,58,45,625 is on account of gains earned on the sale of shares of PS IT Infrastructure Services Ltd. Investments. 3. Long term capital gains on account of PS IT Infrastructure Services Ltd is as under: Sale Value of 2,08,000 shares 2,62,15,625 Less: Purchase value 3,70,000 Long Term Capital Gains 2,58,45,625 4. The assessee purchased 18000 shares of PS IT Infrastructure Services Ltd for Rs. 1,80,000 on 18.07.2012. She also purchased 1,90,000 shares for Rs.1,90,000 on 18.07.2012. It is also seen that the price of the scrip kept rising throughout the period and touched a high of Rs. on 09.03.2015 i.e the last day on which the assessee sold the scrip. It is therefore necessary to ascertain whether the transactions were genuine investment transactions or sham ones and colourable device only to convert the unaccounted cash into tax exempt income. In short, it has to be ascertained whether the apparent was real." The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d vide letter dt.18.07.2018. The assessee vide reply dt.16.11.2018 objected to the reassessment proceedings and sought for the material relied on to reopen the assessment proceedings. Disregarding the assessee's request, the AO issued a notice dt.16.11.2018 proposing to make addition of Long term capital gains earned from sale of M/s. Blue Circle Services Ltd of Rs.2,94,77,114/- as Cash credit u/s 68 of the Act. The" AO disposed off the assessee's objections on 20.11.2018. The assessee vide reply dt.10.12.2018 objected to the AO's proposal and sought for complete details and thereafter provide ,opportunity for cross examination in case the assessee's explanation is not reckoned favourably. The Ld.AR submitted that the Revenue has also failed to give copies of the materials based on which the assessment was reopened. The Ld.AR submitted that non of the materials had any reference of assessee and therefore reopening of assessment violates the established principles of natural justice. On merits, it was vehemently argued by the Ld.AR that no opportunity to cross examination was given to assessee. Placing reliance on the paperbook, he submitted that the shares were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract notes, payments made through proper banking channels etc. However these alone cannot lead to establish genuineness of purchase and value ascertained for sale of shares of alleged companies, though they might have been through stock exchange and brokers registered with SEBI, NSE/BSE, as observed by various Hon'ble High Court. 4.2.2. It is submitted by the Ld.Sr.DR that the shares of alleged companies were transferred to assessee, through off market transaction, and that the assessee could not satisfactorily explain, as to how, she was informed regarding shares of these companies available for purchase. She failed to establish business connection with such company personnel. It has been alleged by Ld.AO that these companies were hardly having any profit or business activity so as to attract purchasers. 4.2.3. The Ld.Sr.DR submitted that the revenue has provided all details that was received from the investigation wing to establish that the alleged companies in which assessee invested huge amounts were bogus and were used for converting the unaccounted monies. He submitted that in the present facts assessee did not establish the source of monies invested in the alleged compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment. The expression cannot be read to mean that the Ld.AO should have finally ascertained the fact by legal evidence or conclusion. The function of the Ld.AO is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayer. Hon'ble Delhi High Court in case of Central Manganese Ore Co.Ltd. Vs.ITO reported in (1991) 191 ITR 662, observed that, for initiation of action under section 147(a){as it stood at the relevant time}, fulfillment of two requisite conditions in that regard is essential as at that stage the final outcome of the proceedings is not relevant. 5.4. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. We also rely on the decisions of Hon'ble Supreme Court in case of ITO vs. Selected Dalutband Co.Pvt.Ltd., reported in (1996) 217 ITR 597 and Raymond Wollen Mills Ltd. vs. ITO reported in (1999) 236 ITR 34. Hon'ble Supreme Court in these cases held that, so long as the ingredients of section 147 are fulfilled, the Ld.AO is free to initiate proceeding under section 147 and failure to take steps under 143(3) will not render the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing bogus LTCG/STCG or LTCL/STCL and provide accommodation entries by beneficiaries. We note that the Ld.AO in para 7.11 for AY 2013-14 raised serious doubts on capacity of assessee to purchase shares of these companies in such huge volumes, which has not been satisfactorily/reasonably established by assessee to be genuine. Assessee thus did not establish genuineness of purchase and source of investment of this company during the relevant period. 6.5. Ld.AO upon verifying credentials of these companies and other attending circumstances, observed that alleged companies were included in list of penny stock companies, in enquiries conducted by SEBI/BSE, as well as in Investigation Report issued by Investigation Wing, Kolkata. The Assessee having purchased shares of this company in huge volumes, should have possessed all required documents, as a prudent investor. The Assessee thus did not establish activities/business of companies, financial statements, annual income tax returns etc., in respect of alleged companies. 6.6. In the above list of decisions, relied by the Ld.AR, we note that the Hon'ble Mumbai Tribunal deleted the addition on the basis that the assessee therein esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any evidence upon which the department might rely should have been subjected to cross-examination. The procedure for assessment is indicated in section 23 (3) of the Act." 6.11. Further Hon'ble Mumbai Tribunal in case of GTC Industries Ltd. V. Asstt. CIT reported in (1998) 60 TTJ 308 , held that, where statement and report of third parties are only secondary and subordinate material which were used to buttress the main matter connected with the quantum of addition, denial of opportunity to cross examine third parties did not amount to violation of natural justice. 6.12. Therefore, each case has to be decided on facts and circumstances of that case. In our considered opinion, relevant factors to be considered are surrounding circumstances, objective facts, evidence adduced, presumption of facts based on common human experience in life and reasonable conclusions. 6.13. Under such circumstances, the assessee was liable to discharge its onus regarding purchase of shares by way of cogent documentary evidences. We note that assessee has not placed anything on record regarding the source of investments and capacity to invest such huge monies during the year in which the investments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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