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TMI Blog2023 (4) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... mises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. It is incorrect to argue that the assessee have been called upon to prove the negative in fact, it is the assessee s duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuineness and identity. The assessee cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assessee have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picion. 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Assessing Officer of treating the transaction of sale of shares of M/s Sunrise Asian Ltd. as income from undisclosed sources and making addition under section 68 of the Act for the amount credited in bank account. 5. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other. 2. Brief facts of the case are that assessee filed its return of income on 30.03.2015 declaring total income at Rs. 1,72,10,358/-, thereafter case was selected for scrutiny under CASS. AO was in possession of certain information from Investigation Wing and findings of SEBI in the matter of Sunrise Asian Ltd. Based on these reports, LTCG claimed exempt u/s. 10(38) amounting to Rs. 22,58,796/- was disallowed by the AO and treated the same as income from other sources applying the provisions of section 68 of the Act. Assessee being aggrieved with this order of AO preferred an appeal before the Ld. CIT (A). Who in turn, confirmed the order of AO. 3. Assessee being further a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther pertinent to mention that its EPS was almost negligible during the relevant period. There is an established market practice of splitting the shares/ preferential allotment, in those cases where the demand of shares is very high. Company has tremendous brand value with strong financial credentials and floor price of shares is almost sky touched. In these cases, to make share available to every interested investor and to unleash the maximum possible value of shares, giant companies of respective industries carry such type of practice. A company with negligible investor base, negligible net worth, negligible net profits and almost 0 EPS, adopting such type of practice of preferential allotment of shares is not digestible from a lay man point of view. As there is no stamp duty involved such type of modus operandi, but operator get higher nos. of shares to operate with. This observation is against such type of transactions notwithstanding the further facts as we will discuss in this order later on. A bare reading of list of investors also demonstrates a specific pattern of buying the shares by lead investor and then his/her family members also in huge quantity . Assessee purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue; the statements do not indict the assessee. That apart, the investigation has commenced targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submitted recommending the same to be placed before the DGIT (Investigation) of all the States of the country. It is thereafter the concerned Assessing Officers have been informed to consider as to the bonafideness and genuineness of the claims of LTCG/LTCL of the respective assessee qua the findings which emanated during the investigation conducted on the individuals who dealt with the penny stocks. Therefore, the assessments have commenced by the Assessing Officers calling upon the assessee to explain the genuineness of the claim of LTCG/LTCL made by them. In all the assessment orders, substantial portion of the investigation report has been noted in full. A careful reading of the same would show that the assessee has not been named in the report. If such be the case, unless and until the assessee shows and proves that she/he was prejudiced on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrip of very little known companies. Furthermore, in all the cases, there were minimum two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, 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 scrip, 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. 11. A holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, the authorities below cannot lose sight of the fact that the shares of very little known companies with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuineness and identity. The assessee cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assessee have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time. 12. Following case laws were relied up on by the assessee and revenue, in which citations relied upon by the assessee, we found not tenable on the facts of the case and applicable law, whereas case laws relied up on by the revenue are acceptable on the given facts of the case: Decisions of Hon ble ITAT, Mumbai:- 1. Dipesh Ramesh Vardhan vs. DCIT [ITA 7648/Mum/2019] [Copy enclosed] 2. ITO-32(2) (1) v. M/s. Liberal Realtors LLP [ITA 449 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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