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2019 (6) TMI 162 - AT - Income TaxAddition u/s 68 - Bogus LTCG - penny stock purchases - exemption u/s 10(38) was denied - HELD THAT:- In the assessment order, the Assessing Officer explained the entire working of the flow of conversion of black money into white using long term capital gains tax exemption and penny stock from the assessee in a circular pattern and back to him. Moreover, out of the list of beneficiaries submitted by the brokers/entry providers received from share brokers/directors/dummy directors of bogus companies before the investigation wing substantiates that the assessee is one of the beneficiary. the decision in the case of ITO v. Shamim M. Bharwani [2015 (4) TMI 257 - ITAT MUMBAI] is squarely applicable against the assessee. In this case, the assessee had purchased the shares of penny stocks companies purchased at lesser amount and within a year sold such shares at much higher amount and the assessee had not tendered cogent evidence to explain as to how shares in an unknown company had jumped on higher amount in no time and also failed to provide details of persons who purchased the said shares, as the said transactions were attempt to hedge undisclosed income as long term capital gains. In the case of Sanjay Bimalchand Jain v. PCIT, [2017 (5) TMI 983 - BOMBAY HIGH COURT] has laid down the law that if the assessee has not tendered cogent evidence to explain as to how the shares in an unknown company had jumped to such an higher amount in no time when the fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise and if the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain, such gain has to be assessed as undisclosed credit u/s 68 We find that the AO has rightly withdrawn the amount which has been claimed by the assessee as exempt u/s 10(38) and assessed the entire sale consideration u/s 68 - Decided against assessee.
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