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TMI Blog2024 (12) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... legitimacy and innocence/ ignorance and look behind the charade woven to evade taxes. On the other hand, after due consideration of arguments put forth by the appellant, it is held that the Ld. AR has not been able to controvert/ successfully distinguish the judicial pronouncements quoted by the AO. Accordingly, the addition u/s 68 of the IT Act by the AO, is confirmed. Decided against assessee. - Shri M. Balaganesh, Accountant Member And Shri Anubhav Sharma, Judicial Member For the Assessee : None For the Department : Shri Dharm Veer Singh, CIT(DR) ORDER PER M. BALAGANESH, AM: This appeal, by the assessee, arises out of the order passed by the learned Commissioner of Income-tax (Appeals)-13, New Delhi [hereinafter referred to as the learned CIT(A) ], in appeal no. 201/17-18, dated 21.01.2019, against the assessment order dated 17.11.2017, passed under section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as the Act ], passed by the ITO, Ward-38(2), New Delhi [hereinafter referred to as learned AO ], for assessment year 2015-16. 2. None appeared on behalf of the assessee. In fact this case was listed for hearing from 25.04.2022 onwards and only on one occasion i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treat as unexplained cash credit u/s 68 read with Section 115BBE of the Act. This action of the learned AO was upheld by the learned CIT(Appeals) by observing as under:- 4.3 During the appellate proceedings, the AR gave his written submission. The gist of objections raised are that: 1. The AO made additions solely based on the report of the Investigation Wing Kolkata. 2. The AO did not confirm that the material in the report was relatable to the transaction entered by the assessee. 3. That the copy of the investigation report and statement of persons recorded during survey and opportunity of cross examination was not provided by the AO. 4. That the transaction was genuine since, all the documentation was done in which no infirmity was found. 5. That the assessee held only 10,000 shares of the company which is a very small proportion of the total share capital. 6. That the amalgamation of M/s Smart Champ with M/s Cressanda Solution was passed by Hon'ble Bombay High Court which was found to be in order. 7. The assessee has cited several case laws in his favour and tried to distinguish the judgments relied upon by the AO. 4.4 As regards point 1 2 above, it shall be addressed later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is given below: In this method the operators first forms a Private Limited Company [in this case M/s Smart Champs IT Infra Pvt. Ltd.] and the shares at par are allotted to beneficiary individuals [including the Assessee). This private limited company [M/s Smart Champ) is then amalgamated/merged with a listed penny stock company [M/s Cressanda Solution] by a High Court order. Depending on the capital of the amalgamating and amalgamated companies, the investors are allotted stock of the listed companies in the same proportion. [1:1] The capital of the Penny Stock listed company and the private limited company are so arranged that the beneficiaries post-merger, get shares of listed company in the ratio 1:1, thus the investor gets equal number stocks of the listed company. The promoters of the listed penny stock companies run the syndicate, the brokers and the entry-operator through whose paper/shell companies cash are routed are merely commission agents. The penny stock listed company is such that though its capital base is small its market capitalization is many times its capital base. This is managed again through small volume predetermined transaction amongst members of the synd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiaries was routed through to convert black money into LTCG/STCG. IMPORTANT OBSERVATIONS OF NSE/SEBI/SIT 11 member Special Investigation Team (SIT) of Hon'ble Supreme Court_on Black Money has also pointed out the Misuse of exemption on Long Term Capital Gains tax for money laundering in the Third SIT report on Black Money. Order of BSE of January, 2015 showing the list of 22 banned penny stock companies for trading. The Ld. AR, on behalf of the appellant has reiterated, that the various searches and investigations conducted by the IT Dept, Inv Wing Kolkata found no material against the Appellant, hence he has no role and is thus an innocent investor. Prima facie, it may appear to be so but, Income tax Act follows the juridical principle of 'preponderance of probability' and not 'beyond reasonable doubt'. More so in a scam of such a massive scale, with so many players involved, the laws of evidence have to be accordingly applied. Even the AO has drawn strength from judicial pronouncements which specially address such peculiar circumstances and facts. All the circumstantial evidences point to the active or passive connivance of one and all who were part of it an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty was imposed under 151 of the SEBI Act. (vide its order at 12.11.2018). This further goes to prove that all the connected parties were hand in glove in violating rules, laws of the land and thereby defrauding the exchequer. Since, the assessee is also a beneficiary, even though of a smaller amount, his connivance in the larger scheme of things, in view of surrounding circumstances cannot be wished away behind the garb of meticulous documentation. The Supreme Court observation in the McDowell case befittingly supports the AO's view which stated that colourable devices cannot be part of tax planning .. . 5.4 As can be seen from the magnitude, volume and surgical precision of the entire operation, it was an exercise which was targeted to introduce unaccounted money into the books, that too without paying taxes, by abusing the exemption provisions (u/s 10(38) of the statute, to circumvent the law of the land, evade taxes and deprive the exchequer of its rightful due. The plethora of cases quoted by the AO all lend support to his decision, especially in such scam ridden cases, wherein it is essential to pierce the veil of legitimacy and innocence/ ignorance and look behind the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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