TMI Blog2011 (12) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... nd purchase of the shares stand proved and should be assessed under the head capital gains. Disallowance of 5% commission on the bogus transfer of purchase and sale of shares - Held that:- Firstly, there is no evidence on record to show that any amount or premium was paid for entering into in this transaction. Secondly, since we have already accepted the transactions to be genuine, therefore, this issue becomes infructuous and no addition can be made on account of 5% premium. In these circumstances, we set aside the order of the ld. CIT(A) and hold that the assessee has entered into genuine transaction of purchase and sale of shares. - 787-M-2010, 788-M-2010, 789-M-2010, 790-M-2010, 791-M-2010 - - - Dated:- 30-12-2011 - SHRI T.R.SOOD AND SHRI VIJAY PAL RAO, JJ. For the Appellants by : Shri B.V.Jhaveri For the Respondent : Shri Pavan Ved ORDER Per T.R.SOOD, AM: In this group of cases identical issues are raised. Both the parties agreed that since facts and issues involved are identical, therefore, the case of Shri Arvind M. Karia in I.T.A.No.787-Mum2 010 may be taken up for detailed hearing. In this case the grounds raised by the assessee are as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It was further admitted that speculation transactions were not shown in their books of account. Thereafter, assessee was given specific opportunity for cross examination of Shri Pratik C. Shah. The assessee availed this opportunity and his representative Shri Ketan Mehta examined Shri Pratik C. Shah. Even during the course of cross examination Shri Pratik C. Shah stated that purchase transactions of M/s Robinson Worldwide Trade Ltd. were bogus. It was stated that though physical delivery was given but such physical shares were given by Shri Naresh Sahu and Shri Shirish C. Shah. It was ultimately submitted before the AO that shares were actually purchased for which bills were there and the source of the purchase was the speculation profit earned by the assessee. If the broker has not shown those transactions in his books, then it was not assessee s fault. The AO after examining the submissions observed that purchase of shares of M/s Robinson Worldwide Trade Ltd. were either sourced by supposed speculative gains or by paying cash, which means the assessee in this group bas back dated this supposed purchases and such speculative transactions were also proved to be bogus. On the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to fabricate the capital gains on account of shares including the arrangement of bills for such transactions. The beneficiary is a person who purchases artificial/bogus capital gains from the operator by paying the gross amount of sale price of such shares in cash. The Operator gives physical shares to the beneficiary, whose market value is roughly equivalent to the money, the beneficiary intends to launder. Such shares would be accompanied by a backdated contract note showing the sale of shares to the beneficiary at less than a rupee or just a few rupees per share, as they were quoted earlier (about an year. or so). The consideration from beneficiary is mostly shown in cash so that the backdating of the bogus purchase transaction is camouflaged. Sometimes, bogus speculation profit generated by hawala bills is also used for this purpose. In some rare cases, cheque payments are shown wherein the payments are seen to e at a later date for obvious reasons. Since the shares cannot be sold in physical Format, the beneficiary sends the shares to depositary to be dematerialized and converted into electronic form. The beneficiary sells such dematerialized shares on secondary market at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2004-05 which has been accepted and even purchases were reflected in the balance sheet which have been accepted by the department. Originally the shares were issued in physical format which got transferred in assessee s name and only one share certificate was issued by that company which was later on split into 150 share certificates and thereafter same were dematerialised to de-mat account with the depository known as Action Financial Services Ltd. Such de-MAT shares were sold through Anugrah Stock Broking Ltd. on 9-12-04 to 6-1-05 and the payments have been received through cheques. He argued that once a client goes to the brokers office he cannot go behind the scene to find out whether the transaction has been carried out through the stock exchange or it is a off market transaction. In any case, even under the regulation off market transactions are permitted by the brokers. He then referred to the cross examination of Shri Pratik C. Shah in which in reply to question no.22 it was agreed by him that such bogus bills were issued at the instance of Shri Naresh Sahu and physically shares were given to Ms. Jigna A. Kariya [i.e. one of the assessee before us]. However, the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were later on issued by M/s Robinson Worldwide Trade Ltd by splitting one certificate in to 155 certificates which proves ownership of the shares. He also pointed out that it is not correct statement by the DCIT that M/s Robinson Worldwide Trade Ltd is not in existence and in this regard he filed copies of list containing the names of the companies by the Ministry of Corporate Affairs, which clearly shows that M/s Robinson Worldwide Trade Ltd is existing at Sr.No.2 and the name of the company has been changed to Sun Sine Worldwide Ltd. and under column GLM it is shown to be the active company. He also filed a copy taken from BSE India site which shows that the name of the company was changed by extra ordinary general meeting from M/s Robinson Worldwide Trade Ltd to Sun Sine Worldwide Ltd. He also filed another copy from BSE which shows that shares were quoted on 6th September, 2011 and price at that moment was ₹ 36.75 per share. All these documents clearly show that the company is very much in existence under the new name Sun Sine Worldwide Ltd. 8. We have considered the rival submissions carefully and find force in the submissions of the Ld. Counsel of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o debits either for expenses and purchase of tickets or for losses. (v) In view of the exceptional luck claimed to have been enjoyed by the appellant, her loss of interest in races from 1972 assumes significance. Winnings in racing became liable to income-tax from April 1, 1972, but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources. On the above facts it was held as under: Held, dismissing the appeal, the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. From the above decision it is clear that human probabilities or circumstantial evidences can be taken into account for deciding an issue. However, in that case the circumstances were so strong against that the documentary evidence was ignored by the Hon'ble apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd taken from www.bseindia.com. This extract shows the following information: Outcome of EGM 02-05-2011 18:36 M/s Robinson Worldwide Trade Ltd has informed that the shareholders at the Extra Ordinary General Meeting (EGM) of the company held on May 02,2011, inter alia, have taken the following decisions: 1) To chance to the name of the company from M/s RPBINSON WORLDWIDE TRADE LTD. TO SUN AND SHINE WORLDWIDE LTD. This confirms that the name of the company was changed in the Extra Ordinary General Meeting held on 2-5-2011. Perhaps because of the change of name, the AO has not been able to confirm the existence of the company. The third document is also taken from the BSE site shows that shares were traded on 6-9-2011 at ₹ 36.75. This clearly shows that shares of the company are still being traded but under the new name. In the light of these documents, we find no merit in the objection raised in the letter of the DCIT -12, addressed to the CIT DR, which was placed before us. 10. The second important issue on the basis of which the claim of the assessee for capital gain was held to be bogus was the statement of director of M/s. DPS Shares Securities Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been included in the return of income under the head income from other sources for A.Y 2004-05, a copy of the computation is on pages 22 23 of the paper book and this has been accepted by the department. The assessee has also filed the balance sheet in which investment in shares has been shown at ₹ 1,45,06,054/- and in the annexure showing the details of investment in M/s Robinson Worldwide Trade Ltd shares have been included at 15500 shares amounting to ₹ 28810.54. This purchase has to be treated as accepted because this balance sheet was filed in A.Y 2004-05 and no adverse inference has been taken in that year. These documents are available at pages 24 to 26 of the paper book. The assessee had also filed the contract note for sale and purchase of shares generating speculating profit filed at pages 36 37 of the paper book. The contract note for purchase of 15500 shares of M/s Robinson Worldwide Trade Ltd from M/s. DPS Shares Securities Pvt. Ltd has been filed at page-38 of the paper book and the particulars read as under: Order No. Trade No. Trade Time Quantity Kind of Security ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been reflected in the later demat account with Action Financial Services (India) Ltd., copy of which is at pages 57 and 58 of the paper book. From the above it is clear that assessee has proved the purchases as well as the sales transactions. The shares have been sold through BSE and it is not alleged that these transactions are also off market. All these facts clearly prove that the transactions are genuine and the same cannot be doubted unless and untill the other participants like depository known as Action Financial Services (India) Ltd. is also proved to be bogus or in connivance with the Penny Stock scam and even the sale conducted through Anugrah Stock and Broking Pvt. Ltd. is proved to be bogus. In our opinion, when overwhelming documentary evidence is available to prove the purchase and sale transactions part of which has already been accepted by the revenue in A.Y 2004-05, then a mere statement by the broker who has sold the shares to the assessee that this was an accommodation entry cannot lead to a conclusion that the whole transaction was bogus. In these circumstances, we are of the view that the sale and purchase of the shares stand proved and should be assessed un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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