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TMI Blog2024 (2) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... through the stock exchange and has filed a statement explaining the purchase details that the assessee has purchased 30,000 shares on 04.03.2011 as per the contract note issued and similarly purchased in small lots of 6,000 shares on 29-03-2011, 500 shares on 1704-2011 as per contract note issued - Further the Ld. AR mentioned that 3,500 shares were purchased but no evidence of contract note was furnished. The assessee has sold 70,000 shares in the financial year 1213, in particular November 2012 to January 2013. Whereas on considering the share holding discussed above it works out to only 40,000 shares. When a query was raised to explain the difference in the holding of shares, the Ld. AR submitted that the company has issued the bonus Shares and the shares of 30,000 purchased on 4-03-2011 have become 60,000 shares. AR could not support the issue of bonus shares with any allotment letter or evidence issued by the company. AR referred to the demat account which discloses credit of 60,000 shares on 30-03-2011. Whereas the assessee has purchased 30,000 shares on 4-03-2011 and the credit for the shares in the demat account is higher, the explanations of the Ld.AR are not satisfactory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NV) Kolkata without any verification/enquiry being carried by Ld. AO. Ground No. 3: 3. The Ld. CIT (A) erred in confirming addition of Rs. 51, 48,580/- u/s. 68 in spite of the fact that purchase well as sale of shares is supported by documentary evidences in the form of bill cum contract notes issued on Recognized Stock Exchange platform, and shares being de-materialized at regular way and all transactions of purchase and sales effected through banking channel and evidence are not rejected as in-genuine. 3.1 The Ld. CIT(A) erred in confirming addition without considering the fact that LD AO has merely relied on Investigation Report without carrying out any investigation himself in these judicial proceedings. 3.2 The Ld. CIT(A) erred in confirming addition based on suspicion and surmises , increased share prices , not justified based on financial of the company without appreciating the facts that appellant has no control over fluctuation of share prices and no involvement of the assessee being found. 3.3 The Ld. CIT(A) erred in confirming addition without considering the fact that assessee discharged its onus by producing documentary evidences and Ld. AO erred in rejecting documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of M/s. SCFL of Rs. 51, 48,450/- u/s. 68 of Act. ● Added commission paid @ 3% to tune of Rs. 1, 54,457/- to obtain this bogus entry of LTCG u/s. 69C of Act. Aggrieved by the order of the AO assessee preferred an appeal before the Ld. CIT (A)-40 Mumbai. Against the Appeal of the assessee Ld.CIT (A) dismissed the appeal and upheld the addition of AO. Not being satisfied with the outcome of the order of the Ld.CIT (A) assessee preferred the appeal before us. 4. We have gone through the order of AO, the order of Ld. CIT (A) and submissions of the assessee alongwith grounds raised. Before us, assessee raised total of 6 substantive grounds with sub grounds. 5. Ground No.1 with its sub-grounds pertains to the wrong issuance of notice u/s. 148 of the Act by the AO to the assessee. Originally appellant sold 70,000 shares of M/s. Shreenath Commercial and Finance Ltd. during the period 15/11/2012 to 08/01/2013 for an amt of Rs. 51,32,046/-in 12 different slots. then in this case return was filed for A.Y. 2013-14 on 19.07.2013 declaring income of Rs. 1, 23,774/- In this matter the AO after receiving the information from the O/o DGIT (Inv.) Kolkata (uploaded on ITD) regarding bogus LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contacts the entities who wish to take entry of bogus LTCG/STCL in their books and arranges the same through the scrips of penny stock companies. The Operator manages many paper/bogus companies and uses them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on an exchange, are always closely held and are controlled by the promoter of the Penny Stock Company and the Operator who is arranging for the bogus LTCG/Loss. This is due to the fact that the general public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares. 8.5 Once the period of 1 year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at inflated prices on the Stock Exchange. A point worth noticing here is that the purchase of the shares is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator which are referred to as Exit Providers . The unaccounted money of the beneficiaries is routed to these bogus entities Exit Providers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial Finance Ltd. has been managed by them and their associates and used this company to give accommodation entries to interested beneficiaries seeking long term capital gain and losses. No prudent businessman and particularly trader or investor in stock will invest in such penny scrip which is defunct and inoperative. As such your move to acquire the shares of M/s. Shreenath Commercial Finance Ltd is a predetermined move which had sole aim to bring back unaccounted money. This company was having market price of share at around Rs. 140/- in September, 2011. Therefore, the price was jacked up to Rs. 800/- from Rs. 140/- in 15 months in January, 2013. Thus, within in 15 months the price was jacked up nearly 6 times. After that the price was maintained in the range of Rs. 700/- to Rs. 800/- for reaping of bogus LTCG. After the bogus LTCG had been reaped the price was made to fall freely so that interested beneficiaries who had booked at high market price can avail bogus short Term Capital Loss. Thereafter, between January, 2014 to January, 2016, the price of the share remained in the range of Rs. 2/- to Rs. 10/- only. It had gathered that such activity of providing bogus LTCG i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of such report/statement mere mentioning that nonfurnishing of the report or non-availability of the person for cross examination cannot vitiate the proceedings. The assessee has miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. In all the cases, the assessee have been issued notices under sections 143(2) and 142(1) of the Act they have been directed to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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. 12. 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 in-significant business and net worth had a steep rise in the share prices within 17 months, the period of little over a year. The revenue was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assessee made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. The assessee has 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 the 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 period. 13. Following case laws were relied upon 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 upon by the revenue are acceptable on the given facts of the case: Case laws relied on by the assessee are as follows: ● JAINAM INVESTMENTS 439 ITR 154 (BOM) ● RITA KUMAR SINGH 139 TAXMAN .COM 245 (BOM) ● SOUTH YARRA HOLDINGS 263 Taxman 594(BOM) Case laws relied on by the revenue are as follows: ● The Hon'ble Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers Ltd. in 291 ITR 500 (SC) ● The Hon'ble Punjab and Haryana High Court in case of Rakesh Gupta Vs. CIT (2018) 93 taxmann.com 271 (P H), ● The Hon'ble Gujarat High Court in case of Jayant Security Finance Ltd. (2018) 91 taxmann.com 187 (Guj) 14. After hearing and examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies have come into existence with various finance products and there has been tremendous finance growth due to foreign collaboration, foreign equity participation etc, under Finance Division, dealing in equity shares and stock is the main activity of the company. Corning to Real Estate, especially in the past few decades, there has been tremendous growth in Real Estate business in India. The Company has been dealing in Real Estate business since inception but there has been stiff competition from other Real Estate Companies. OPPORTUNITIES AND THEREATS: Some of the key trends of the industry that are favourable to the company to exploit these emerging opportunities are: 1. Clients are more comfortable with uniform high quality and quick services and security process across the enterprise. 2. The company since involved in the Information Technology enabled services for a very long time there are good prospects for expanding further activities in this direction. 3. The company is also facing server competition from other Information Technology companies and software companies. Some of the key changes in the industry unfavourable to the company are: 1. Heightened competition 2. Increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen a query was raised to explain the difference in the holding of shares, the Ld. AR submitted that the company has issued the bonus Shares and the shares of 30,000 purchased on 4-03-2011 have become 60,000 shares. The Ld.AR could not support the issue of bonus shares with any allotment letter or evidence issued by the company. The Ld.AR referred to the demat account placed at page 8 of the paper book, which discloses credit of 60,000 shares on 30-03-2011. Whereas the assessee has purchased 30,000 shares on 4-03-2011 and the credit for the shares in the demat account is higher, the explanations of the Ld.AR are not satisfactory and are without any supporting evidences on credit of additional shares for the first time in the demat account. Therefore, we considering the facts, circumstances and to meet the ends of justice shall provide with one more opportunity of hearing to the assessee to explain and produce the evidences in support of allotment of shares and also the assessing officer to consider the financial aspects of the investee company as discussed above and adjudicate afresh. The assessee should be provided adequate opportunity of hearing and shall cooperate in submitting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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