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TMI Blog2022 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred for arranging bogus LTCG and dismiss the appeals of the assesses. - I.T.A. No. 2175/KOL/2019 And I.T.A. No. 2467/KOL/2019 And I.T.A. No. 2468/KOL/2019 And I.T.A. No. 362/KOL/2019 And I.T.A. No. 2593/KOL/2018 And I.T.A. No. 2456/KOL/2018 And I.T.A. No. 2553/KOL/2018 And I.T.A. No. 2606/KOL/2018 - - - Dated:- 3-8-2022 - Dr. Manish Borad, Accountant Member And Shri Sonjoy Sarma, Judicial Member For the Assessee : None For the Revenue : Smt. Ranu Biswas, Addl . CIT(DR) ORDER PER BENCH: - These captioned eight appeals filed by different assessees are against the separate orders of ld. CIT(Appeals) passed against respective separate assessment orders by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Since common issue is involved in both the appeals relating to the disallowance of claim of exemption u/s. 10(38) of the Act in respect of long-term capital gains (LTCG) arising from sale of shares and in some cases challenging the additions for commission expenditure for arranging such LTCG, we dispose of both the captioned appeals by this consolidated order for the sake of convenie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143(2) of the Act was issued on 03.08.2016 and further notice under section 142(1) along with questionnaire was issued and duly served upon the assessee. During the course of assessment procedings, ld. Assessing Officer based on the information received from the Directorate of Income Tax (Investigation), Kolkata observed that the long-term capital gain claimed exempt at Rs.46,30,805/- is suspicious and seems to be an accommodation entries since both the companies i.e. GCM Securities and Kailash Auto Finance were found to be penny stock companies by DDIT. The assessee failed to file any satisfactory reply before the ld. Assessing Officer to explain the said transactions. The addition made by the ld. Assessing Officer was challenged by the assessee before the ld. CIT(Appeals), but no relief was granted by the ld. CIT(Appeals) to the assessee. The ld. CIT(Appeals) placing reliance on various decisions came to the conclusion that the alleged transaction is obviously made for tax evasion, therefore, such transactions are not genuine but pre-conceived resulting in creation of bogus claim and, therefore, are sham transactions. Being aggrieved, the assessee is now in appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the ld. CIT(Appeals), but no relief was granted by the ld. CIT(Appeals) to the assessee. Being aggrieved, the assessee is now in appeal before the Tribunal. 3.5. ITA No. 2593/KOL/2018 (A.Y. 2014-15): Brief facts of the case are that the assessee is an individual and filed e-return of income on 23.07.2014 declaring total income of Rs.11,32,370/-. The assessee has claimed exempt income under section 10(38) of the Income Tax Act at Rs.42,90,468/- from sale of equity shares of M/s. Nikky Global Finance Limited, Alembic Pharma Limited, Satyam Computer Limited. The case of the assessee was selected for scrutiny assessment under CASS and statutory notices under section 143(2) of the Act was issued and further notice under section 142(1) along with questionnaire was issued and duly served upon the assessee. Thereafter, the ld. Assessing Officer based on the information received from the Directorate of Income Tax (Investigation), Kolkata observed that the prices of shares of certain companies including M/s. Nikki Global Finance Limited were rigged artificially to provide bogus long term capital gain. All the features of the companies which were used for providing bogus LTCG are clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a penny stock company as the price of shares increased from Rs.20/- to Rs.571/- during the period 04.03.2013 to 25.06.2014 and long-term capital gain claimed exempt at Rs.43,05,625/- is suspicious and unrealistic and seems to be an accommodation entries and the assessee with the help of broker and other entry operators has arranged bogus long-term capital gain so as to convert the unaccounted income into the exempt income since the company. The assessee failed to file any satisfactory reply before the ld. Assessing Officer to explain the said transactions. The ld. Assessing Officer after examining the issue in detail placing reliance on the various judicial pronouncements held that longterm capital gain is bogus and made the addition of Rs.43,05,625/- as unexplained cash credit alongwith other additions. The ld. Assessing Officer finally assessed income under section 143(3) of the Act at Rs.1,24,00,703/- vide orde dated 29.12.2017. The addition made by the ld. Assessing Officer was challenged by the assessee before the ld. CIT(Appeals), but part relief was granted by the ld. CIT(Appeals) to the assessee. The ld. CIT(Appeals) placing reliance on various decisions came to the concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, the ld. Assessing Officer based on the information received from the Directorate of Income Tax (Investigation), Kolkata observed that the prices of shares of certain companies including M/s. Nikki Global Finance Limited were rigged artificially to provide bogus long term capital gain. All the features of the companies which were used for providing bogus LTCG are clearly matching with the trend of the shares of M/s. Nikki Global Finance Limited. Ld. Assessing Officer considering the surrounding circumstances and applying the test of human probabilities coupled with the report of the Directorate of Investigation held that the assessee had entered into pre-designed modes of transactions and invested in the shares of M/s. Nikki Global Finance Limited just to convert his unaccounted cash in the guise of long-term capital gain. Ld. Assessing Officer also mentioned that the share brokers/entry operators charging @.10 to .50 per 100 rupees of cheque amount. The ld. Assessing Officer also observed that these companies have no regular business and share prices of the company are not supported by any fundamental of the company or any other genuine factor. The ld. Assessing Officer poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Swati Bajaj Others (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022, observed as under:- 4. All the present cases were selected for scrutiny u/s. 143(3) through CASS and the issue in all of them for selection relates to suspicious long term capital gain on shares . In all the above appeals, according to the ld. AO, LTCG reported by the assessee in respective return was bogus and the entire transactions were done with the objective to introduce unaccounted money of the assessee in the books by using the route of LTCG which was exempt from tax u/s 10(38) of the Act, except in one case, where the assessee has booked trading loss on transaction of shares of two Companies, which have been treated as penny stock. Thus, ld. AO held that the said LTCG/loss are fabricated/engineered transactions by the respective assessees, sale of which falls under the category of penny stocks and the same were treated as bogus which were added in the total income by treating it as unexplained cash credit u/s. 68 of the Act. Ld. AO based his decision of treating the impugned transaction of sale of shares as bogus transaction by relying on the report of Investigation Wing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de out any case. [para 65] c) The test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, the methodology adopted by the revenue cannot be faulted. [para 69] d) Test of preponderance of probabilities have to be applied and while doing so, the court cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. [para 73] e) The assessee was not named in the report and when the assessee makes the claim for exemption, the onus of proof is on the assessee to prove the genuinity. [para 73] f) It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper conclusion. [para 99] l) For all the above reasons, we hold that the Tribunal committed a serious error in setting aside the orders of the CIT(A) who had affirmed the orders of the Assessing Officer. [para 101] m) In the result, these appeals are allowed and the substantial questions of law framed/suggested are answered in favour of the revenue and against the assessee restoring the orders passed by the respective Assessing Orders as affirmed by the CIT(A). [para 102] 6. In the context of factual matrix of the present appeals before us narrated above, the position of law as enunciated by the Hon ble jurisdictional High Court of Calcutta in Swati Bajaj (supra) carrying force of binding nature on the issue under consideration for us, was confronted to the respective ld. Counsels of the assessee who appeared before us. Ld. Counsels were fair enough to state that issue involved in these appeals is squarely covered against the assessee by the said decision as the fact involved are identical to that which were before the Hon ble High Court. For cases where none appeared before us on behalf of the assessee, the relevant factual matrix was captured with the assistanc ..... 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