TMI Blog2015 (3) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... closed in his statement u/s. 132(4) of the Act as well as other material on record , inference could be reasonably drawn that the shares purchased by the assessee have been backdated to give it a colour of Long term capital gain by showing the period of holding for more than 12 months. Needless to say that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities, therefore applying the test of preponderance of probabilities and considering the entire sequence of events, the revenue authorities have rightly concluded that the assessee’s claim about the long term capital gains from the sale of shares is not genuine.Therefore, it cannot be said that the explanation offered by the assessee in respect of the sale consideration has been rejected unreasonably and that the findings that the said amounts are income of the assessee from other sources is not based on evidence. Accordingly, findings of the Ld. CIT(A) are confirmed. - Decided against assessee. Estimation of expenditure at the rate of 5% of the sale consideration as unexplained expenditure u/s. 69C - Held that:- As we have decided ground No. 1 on preponderance of proba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee explained that he has purchased 1,06,500 shares of Shalimar Agro Products on 24.4.2002 at a cost of ₹ 1,09,500/- as per contract note exhibited at page-11 of the Paper Book. The said transaction was done through broker M/s. Shreenidhi Stock Broking Pvt. Ltd., with whom assessee had a credit balance from which the purchase cost of shares was adjusted as per copy of ledger account exhibited at page-12 of the Paper book. 4.1. It was further explained that the assessee purchased 40,000 shares of M/s. G.Tech Info. on 13.5.2002. The transaction was done through Sanjay R. Shah as the assessee had earned speculation profit by transacting through the same broker Shri Sanjay R. Shah. The purchase cost of 40,000 shares was adjusted against the amount due from Shri Sanjay R. Shah. Both these transactions were done off line i.e. not on the floor of BSE/NSE and in both these transactions, physical delivery of shares were taken. The shares of M/s. Shalimar Agro Product were sent to Action Financial Services (I) Ltd. , which is registered with NSDL , for dematerialization of 5.5.2003. Similarly, shares of M/s. G.Tec. Info were sent for dematerialization with the same depository ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions have been done, the AO gave an opportunity to the assessee to explain as to why should the aforesaid long term capital gain not be treated as bogus and the entire sales realization be treated as unexplained money. The assessee was further told that prima facie, the purchase remains unsubstantiated and the LTCG i.e. Long term capital gain appears to be bogus , therefore, the assessee must have paid certain fees for obtaining these bogus long term capital gain. The AO asked the assessee to explain as to why a sum of 5% of the total sale consideration not be added to his income as unexplained expenditure. The assessee filed a detailed reply reiterating the nature of transaction which is exhibited at para 6.7 of the assessment order. 7. After considering the submissions of the assessee, the AO was of the firm opinion that the assessee has backdated the supposed purchases which have been shown to having been paid for either in cash or through speculative capital gains. The AO further observed that on the supposed date of purchases, the market price of these shares have been shown to be very nominal. The AO finally concluded that the transaction entered into by the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) drew support from Section 115 of the Evidence Act. Thereafter, the Ld. CIT(A) relied upon the various judicial pronouncements and finally held as under: Having regard to the facts and circumstances of the case and in law, it is held that the appellant has not been able to conclusively prove the purchases of penny stock shares of M/s. Shalimar Agro Ltd and M/s. G. Tech Info Training ltd. and the enquiry made by the Investigation Wing as well as by the Ld. AO have established that the appellant had arranged purchases of artificial Long Term Capital Gain and purchases of artificial speculation gain by obtaining bogus purchases and sales bills showing share transactions. As a beneficiary, the appellant was given physical shares alongwith backdated bogus purchase bills reflecting purchases of penny stock shares at a very low price almost one year back for facilitating booking of artificial Long term capital gain. Having regard to the aforesaid facts and in the circumstances of the case and in law, it is held that Sec. 68 is squarely applicable in this case and since the appellant neither satisfactorily explained the purchases of penny stock nor the sales thereof, the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 pages. 14. It is a settled law that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee. But in view of section 68 of the I.T. Act 1961, where any sum is found credited in the books of an assessee for any previous year, it may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the AO, not satisfactory. In such a case, there is prima facie evidence against the assessee, vis- -vis the receipt of money and if he fails to rebut the said evidence, it can be used against him by holding that it was a receipt of income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably. 15. All that we have to examine is whether the explanation given by the assessee is a reasonable explanation on the facts of the case and in the eyes of the law. It is not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: In case of share of M/s. G-Tech Info, Shri Sanjay R. Shah through whom you have purchased the share of M/s. G.Tech have filed his reply stating that he has not made any share transaction either with you or any of your family member. Copy of his reply is enclosed herewith for your perusal. 17. This clearly contradicts the statement of the assessee that he was never given any opportunity so far as denial of broker Shri Sanjay R. Shah is concerned. It appears that the assessee has backdated the purchase of shares so that it can be given a colour of Long Term Capital gains by showing the holding period by more than 12 months. Therefore, when caught on the wrong foot at the time of search and seizure proceedings u/s. 132, the assessee admitted the wrong doing and offered capital gain as his income which has never been denied at any stage by the assessee. However, while filing the return of income, the assessee has offered Long term capital gains clearly retracting from his stand taken at the time of the statement u/s. 132(4) of the Act. It appears that the assessee offered income to get rid of the search party who believed in his statement and withdrew without making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat any person would transact in shares by taking physical delivery of the shares. When many instances have been surfaced relating to bad delivery or bogus scrips, the regulatory authorities have made it compulsory to transact through Demat account. 19. Having regard to the circumstances and the conduct of the assessee as disclosed in his statement u/s. 132(4) of the Act as well as other material on record , inference could be reasonably drawn that the shares purchased by the assessee have been backdated to give it a colour of Long term capital gain by showing the period of holding for more than 12 months. 20. Needless to say that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities, therefore applying the test of preponderance of probabilities and considering the entire sequence of events, the revenue authorities have rightly concluded that the assessee s claim about the long term capital gains from the sale of shares is not genuine. 21. Therefore, it cannot be said that the explanation offered by the assessee in respect of the sale consideration has been rejected unreasonably and that the findings that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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