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TMI Blog2022 (9) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt that the capital gain was manipulated and bogus and was done to claim exemption u/s 10(38) of the Act. We therefore, do not find any reason to interfere with the findings of the ld. CIT(A) and the same is upheld. - Decided against assessee. - ITA No. 77/PUN/2019 - - - Dated:- 16-8-2022 - SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For the Appellant : None For the Respondent : Shri M.G. Jasnani ORDER PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the assessee emanates from order of the ld. Commissioner of Income Tax (Appeals)- 2, Aurangabad dated 13-11-2018 for A.Y. 2015-16 as per the grounds of appeal on record. 2. At the time of hearing, none appeared for the assessee nor any adjournment petition was filed on record. On perusal of order sheet, it is found that this case has been adjourned many times for non-appearance of the assessee and the assessee cannot be allowed to take advantage of the process of law for his own wilful default. Therefore, the submissions of the ld. D.R recorded and the orders of the subordinate authorities perused and considered and the case is heard on merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been well explained by the A.O. At para 12.5 of his order, the A.O categorically mentioned that it is evident that the assessee earned huge long term capital gains from the transactions which she claimed as exempt from taxation u/s 10 clause (38) of the Act. This entire edifice was absolutely a colourable device to give the colour of genuineness of these transactions to which she was successful in bringing back her own unaccounted cash into her books without the need to pay any taxes. Hon ble Supreme Court in the case of McDowell Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC) has given a strong verdict against any such arrangements by stating that Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. In view of Hon ble Apex Court verdict, this entire arrangement was held as a mere colourable device devised with the aforementioned objectives. Finally, at para 16.1 the A.O held as follows: 16.1 Considering the findings of the Investigation wing of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of long term capital gain and interest income. In the return of income, the appellant had paid tax @10% in respect of long term capital gain of Rs.l,30,13,347/- on sale of quoted securities on which STT was duly paid. Prior to filing of return of income, the DDIT (Inv.), Aurangabad had issued summons U/s 131 of the Income Tax Act to the husband of the appellant and his statement was recorded on oath on 02.09.2015. The appellant had originally claimed the long term capital gain of Rs.1,30,13,347/- as exempt U/s 10(38) of the Income Tax Act in respect of sale of shares of M/s. Mahavir Advanced Remedies Ltd. However during the course of interrogation before the DDIT (Inv.), Aurangabad, the husband of the appellant agreed to withdraw the claim of exemption U/s 10(38) of the Income Tax Act in reply to question no.13 of his statement. On going through the statement of the husband of the appellant, it is seen that there was no mention of payment of taxes U/s 112 of the Income Tax Act. The allegation of the appellant that her husband was advised by the DDIT (Inv.), Aurangabad that there was not much difference if the income on account of sale of shares was offered to tax U/s 112 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volume in the case of Mahavir Advanced Remedies Ltd. The share price of Mahavir Advanced Remedies Ltd. was rigged/manipulated from Rs.7 per share in June, 2013 to Rs.365/- in August, 2014. Thus the share price of Mahavir Advanced Remedies Ltd. was jacked up by 52 times within 3 months in spite of the fact that such price movement was not backed up by fundamentals of Mahavir Advanced Remedies Ltd. and its financial credibility. The financials of said company were tabulated by the AO on page 8 of the assessment order. In this case, the suspected entities linked up to Mahavir Advanced Remedies Ltd. artificially created artificial demand against the supplies from the shareholders. Thus the shareholders, directors/promoters of Mahavir Advanced Remedies Ltd. and suspected entities were hand in glove with each other. The entire modus operandi of selling shares then bringing the connected entities to provide exit was a scheme devised to deceive the authorities by laundering black money and raking in tax-free profits. In light of above facts, the Investigation Wing of Income Tax Department, Kolkata, keeping in mind various information/details gathered, carried out a countrywide investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist at their given registered address. In many cases, it was found that such client companies were missing or existing nowhere. Even the person of share broker could not find its clients. When share brokers were confronted with this, they either accepted that such clients were bogus or they failed to give any reasonable explanation. 6. Thereafter at para 15.1, the ld. CIT(A) gave a specific finding after examination of the facts in this case. That it was not in dispute that during the course of interrogation before DDIT (Inv), Aurangabad on 02-09-2015, the husband of the assessee had admitted on oath on behalf of his wife in reply to question No. 13 that he was withdrawing her claim of exemption u/s 10(38) in respect of sale of shares of Mahavir Advanced Remedies Ltd. and was ready to pay taxes on the same. However, in the return of income for A.Y. 2015-16 filed on 25-09-2015 the assessee paid the taxes u/s 112 @ 10% only. Notwithstanding the above events, the assessee also sought exemption u/s 10 clause (38) in respect of sale of shares during the course of assessment proceedings. Inspite of any change in the facts and circumstances and without any fresh evidence/material, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is a beneficiary of bogus LTCG on penny stock, the ld. CIT(A) further examined as follows: The AO carefully examined the findings of the investigation wing who has investigated the scam of penny stock and the dubious schemes through which unaccounted money of the beneficiaries moves into the books of accounts in the garb of long term capital gain. This entry of long term capital gain is taken by selling the shares on the exchange and registering the proceeds arising out of sale of shares into books as long term capital gain (LTCG). For implementing this scheme, shares of penny stock companies were used. The same modus is adopted for providing accommodation entries of being bogus logs. It was further observed that in this scheme, shares of penny stock exchange are acquired by the beneficiaries of the LTCG at very low price through the root of preferential allotment (private placement) and off market transactions. These shares have a lock-in-period of one year as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Another route to acquire the shares is through Amalgamation or merger. In this route, the beneficiaries of LTCG are allotted s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of T type scrips. On some trading days, the percentage increase in price is in the range of 1.90% to 1.99% which again was just short of percentage increase of 2% which was the circuit limit for price rise as per the exchange guidelines in respect of T type scrips. On some trading days, the percentage increase in price is in the range of 1.90% to 1.99% which again was just short of percentage increase of 2% which was the circuit limit for price rise as per the exchange guidelines on those trading days. Thus, it is seen that the price of these shares have seen phenomenal rise and have been constantly traded near the circuit limit so as to avail maximum price rise without hitting and triggering the circuit limit and thereby avoid surveillance by the Stock Exchange Regulator. This continuous price rise has been achieved over a very thin volume and almost a single trade per day. During this period of price rise, no corporate announcement has been made by M/s. Mahavir Advanced Remedies Ltd. which would have made a positive impact on the shares and which could support this phenomenal increase in price. Thus, the sharp rise in the price of the scrip was not supported by its f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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