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2018 (5) TMI 1915

..... ew of the information provided by the Investigation Wing, Kolkatta, the recommendations of SIT on Black money etc, the AO required the assessee to prove her claim of exemption. After considering her reply etc held, inter alia, that it is clear that the assessee has manipulated the sale of shares within a short span of time in collusion with the brokers in order to earn tax free exempt long term capital gains on sale of shares u/s. 10(38) etc. It is clear from the orders of the Lower authorities that the assessee has not placed any material to prove that her transactions are genuine. She has also not placed any material to prove that her claim of exemption u/s 10 (38) is genuine and valid. Since, the right to exemption must be established by those who seek it, the onus therefore, lies on them. Assessee has not established her case. Though it did cross in our minds, that the assessee could be granted another opportunity to produce evidences in the form of producing the books involved in the transactions, their contemporary records, share transfer forms, the records of the company whose shares has been dealt with etc., for examination before the A.O, we are not inclined to restore thi .....

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..... the assessee is not entitled for claiming the exemption u/s.10(38) and treated the entire sale consideration as an unexplained credit u/s.68. 3. Aggrieved, the assessee filed an appeal before the Ld.CIT(A) basically challenging the addition on two aspects, one stating that the AO has erred in not granting exemption u/s. 10(38) and, the second, that the AO has erred in treating the entire sale consideration of shares as an unexplained cash credit u/s.68. The Ld.CIT (A) after analyzing the facts and circumstances and relying on the observation made by the Hon ble High Court, Calcutta in the case of Mriganka Mohan Sur Vs. CIT, 120 ITR 529 held, inter alia, that the assessee failed to prove the genuineness and bonafide discharge of transactions in shares for penny stock companies. She had failed to discharge subsequent Onus cast on her. She had failed to substantiate as to how penny stock companies would fetch huge return at such a short interval. Therefore, there are no infirmities in the findings of the AO that the share transactions were sham in nature and not genuine etc., and accordingly dismissed the appeal. Aggrieved against the order of the Ld. CIT (A), the assessee filed this .....

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..... ny stock companies, although listed on exchange, are always closely held and are controlled by the promoter of the penny Stock company and the operator who is arranging for the bogus LTCG/loss. This is due to the fact that the general public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares. Various syndicates have arranged accommodation entry of bogus Long TermCapital Gain, bogus Short Term Capital Gains and bogus Short Term Capital Loss/bogus business loss through trading of shares of penny stocks. 7. Accommodation entry is a financial transaction between the two parties where one party enters the financial transaction. in its books to accommodate the other party. These transactions are accommodated entries mostly in lieu of cash of equal amount and commission charged over and above at certain fixed percentage for providing such accommodation entry. These accommodation entries are taken by various beneficiaries for introducing their unaccounted cash into their books of accounts without paying the due taxes. (ii) Penny stocks are those stocks which trade at very low price and w .....

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..... rgin, EPS bonus, dividend etc. None of the parameters, which are essential for increase of price of share was present. In spite of this, if the share price is increased multi folded, then it is definitely due to artificial increase. The table in the assessment order clearly indicates that there is manipulation in trading of M/s. Surabhi Chemicals & Investments Limited, which clearly establishes that the share of the said company is a penny stock only. Further, the assessee had sold 60,000 shares of M/s. Surabhi Chemicals &. Investments Limited. The trades have been executed with mutual understanding by placing simultaneous synchronized orders. This is also evident from the chart extracted in the assessment order. Successive bidding of order placed for large volume of shares like 18000 on 28-01-2014, 18000 on 03-02- 2014, 7000 on 10-02-2014 & 9000 in Feb., 2014 indicate that buyers are in collusion. Otherwise, execution of order placed is not possible particularly when trade price is static for various trades executed. All the trades have been executed at fraction of second. All these trading patterns show that LTCG admitted by the assessee is an arranged one. The paymen .....

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..... there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (See : CIT v. Durga Prasad More [1971] 82 ITR 540 SC (at pages 545, 547). Further, the Hon ble Apex Court in Kale Khan Mohammad Hanif. Vs Commissioner of Income-Tax, M. P. And Bhopal in 50 ITR 1 (SC) held that it is well established that the Onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income see A. Govindarajulu Mudaliar v. Commissioner of Income-tax 34 ITR 807 SC. On the above facts and circumstances, it is clear that the assessee has not established her case. Though it did cross in our minds, that the assessee could be granted another opportunity to produce evidences in the form of producing the books involved in th .....

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