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2021 (8) TMI 418 - AT - Income TaxBogus LTCG - penny stock purchases - HELD THAT:- In view of the Investigation on done by the Investigation wing regarding the penny stocks syndicate and the assessee indulging in trading in penny stocks, the modus operandi is that the share of this penny stock companies although listed on exchange was always closely held and controlled by the promoters of penny stock companies and the operators syndicate arrange these bogus Gain/Loss. This is due to the fact that the general public is not interested in the shares as these companies have no credentials and this helps the operator to keep a control on the price movements of the shares. Once the period of 1 year has been passed and the shares prices have been sufficiently rigged, the beneficiary sell their share at the inflated prices through the stock exchange. Here the purchase is not mode by public but by the bogus entities managed and controlled by the promoters of the penny stock company or the operators who are to be referred to as exit providers. All these are sham transactions. It is therefore, revealed that large scale rigging of prices of the above scrip has taken place and it is on the watch list of the SEBI trade data. In this regard, summons was also issued to Sri Bharath M Jain, director of the assessee company on 14.12.2016, to appear before the undersigned and a sworn statement of Sri Bharath M. Jain was recorded u/s. 131 of the Income Tax Act, 1961 on 16/12/2016. AR admission that the above fact that such dubious tradings were rampant during the assessment year. However, it cannot lead to the conclusion that that the transactions of the assessee are not genuine. It cannot be accepted in the circumstances of the case that all scrips purchased by the assessee sold at astronomical loss were commensurate to the financials of the company. Thus it shows that it was only accommodation entries which is in operation in the market and the assessee is not a genuine buyer and seller of the shares - assessee has not justified the genuineness of the transaction. It is appropriate to come to the conclusion that the transactions undertaken by the assessee is fictitious transactions so as to take advantage of the sale. Appeal of the assessee is dismissed.
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