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2019 (8) TMI 696

..... eticulously completed the paper work by routing his entire investment through banking channel but the results thereof are altogether beyond human probabilities. Because neither in the past nor in the subsequent years, assessee has indulged into any such investment having huge windfall. Had the assessee been so intelligent qua the intricacies of the share market, he would have definitely undertaken such risk taking activities in the past or future by making such investment in the unknown stock. So, we are of the considered view that what appears to be apparent in making investment by the assessee in unknown stock is not real when examined the whole transaction of sale and purchase of the stock with huge windfall to the assessee. So, the irresistible conclusion in this case is meticulous paper work by the assessee in making investment in unknown stock by the assessee and then selling the same as per convenience of the broker and entry operator by rigging prices at astronomical rate shows that the tax authorities have been compelled to examine the entire transactions in the light of the surrounding circumstances and has unearthed the bogus transaction of purchase and sale of shares wh .....

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..... se of assessment and appellate proceedings. 3. That the Ld. CIT(A) / Ld. AO had grossly erred in facts and in law by extrapolating the statements of third parties in the present case without providing an opportunity for cross objection by the assessee and also had grossly erred in not making any individual efforts by issuing summons to record the statements of any SEBI officer and any director of the company. 4. That the Ld. CIT(A) / Ld. AO had grossly erred in simply taxing an exempt transaction of the assessee on the basis of a 'borrowed satisfaction'. 5. That neither the Ld. CIT(A) nor the Ld. AO had been able to prove by bringing any document on record in order to establish their allegation that the assessee had purchased the exempt LTCG from the share broker in question. 6. Without prejudice, the provisions of section 68 are not applicable in the present case which has been applied by the Ld. CIT(A) / Ld. AO. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee filed return of income declaring total income of ₹ 24,29,600/- after declaring deductions under section 6A (vi) of the Income-tax Act, 1961 (for short the Act ) .....

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..... heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. 7. Ld. AR for the assessee challenging the impugned order contended inter alia that the AO as well as CIT (A) have made/confirmed the addition without verifying the purchase and sale of the transaction of shares without verifying from the third party; that none of the statement recorded by the Investigating Wing of the Department contains name of the assessee as beneficiary of the transaction entered in the documents and its brokers through whom the assessee had sold the shares in question; that the assessee has not been provided with opportunity to cross examine various individuals whose statements have been relied upon; that the entire allegation made by the AO are based upon his (AO) imagination; that the AO has wrongly made the addition u/s 68 of the Act which is not attracted; that when the purchase of shares is genuine then sale cannot be questioned; that the addition has been made by the AO/CIT (A) on the basis of wild allegation without any evidence; that move .....

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..... fact in the light of the date of shares of sale by the assessee i.e. 25.06.2013 to 19.09.2013, it becomes clear that working of the company was not above board and it was merely providing accommodation entries in the form of bogus LTCG and STCG in order to evade the taxes. 12. The contention of the assessee that he has purchased the shares through banking channel and as such, when the purchase is genuine then sale cannot be questioned, is not tenable because the entire transaction of sale and purchase is to be seen in entirety in the light of the attending circumstances particularly when share of ₹ 10 is sold after a period of one year at 282 times which is otherwise improbable in the ordinary course of business. More particularly when trading of the company was suspended by Bombay Stock Exchange in February 2013 and revoked w.e.f. March 2013. 13. Furthermore, when during the course of argument, ld. AR for the assessee was asked to explain the business of Cressanda Solution Ltd., he feigns ignorance by stating that assessee is neither promoter nor Director of the said company and he is unable to disclose these facts. We are of the considered view that when assessee is the be .....

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..... y whose balance sheet and profile is not available, cannot be held to be valid one. 18. No doubt, shares of these penny stock companies are listed on exchange but they are controlled by its promoters who used to arrange for bogus LTCG by indulging into price rigging etc. Meteoric rise in the prices of an unknown company whose trading in securities was suspended on 18.02.2013 and subsequently revoked on 14.03.2013 by the Bombay Stock Exchange shows that the transaction itself is bogus having been purchased through the brokers who are dealing in such dummy purchases. In the given circumstances, the assessee has failed to prove that his transaction was genuine and he has not indulged into any such bogus purchases. Moreover, when some of the amount out of the sale of shares is found to be credited in the books of account of the assessee, section 68 is applicable. 19. Furthermore, investigation conducted by the DRI found that one of the Directors of Cressanda Solution Ltd., namely, Shri Ajit Kumar Tulsiyan confessed that scrip of Cressanda Solution Ltd. has been controlled and managed by Deepak Patwari which fact was duly brought to the notice of the assessee and he has not tried to dis .....

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..... e further of the view that price rigging of the shares can only be determine from the circumstances in which shares have been purchased in physical form and then get dematerialized just before the sale at astronomical price because direct evidence in such circumstances is usually not available. 26. Coordinate Bench of the Tribunal in case cited as Pooja Ajmani vs. ITO (supra) in the identical set of facts dismissed the appeal of the assessee by returning following findings :- 5. I have heard both the parties and perused the records especially the impugned order. I find that AO after a detailed analysis of the investigation report with the materials available on record in the case of the assessee and on further examination of the financials of Kappac Pharma Ltd., price & volume of the scrip of Kappac Pharma Ltd., concluded that the modus operandi adopted by the assessee followed the pattern discovered by the Investigation wing during various search and survey operations. It was held that that the transactions showing long term capital gain, which had been claimed by the assessee as exempt under section 10(38), were sham transactions. It was held that it was a case of bogus long- .....

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..... unknown credentials and subsequent jump in the share price of such a company cannot be an accident or windfall but was possible, as clearly brought on record by the Assessing Officer, because of the manipulations in the price of shares in a pre-planned manner by the interested broker and entry operators. The insistence of the assessee that the transactions leading to long-term capital gains are supported by documents such as sale and purchase invoices, bank statements etc. cannot be accepted in view of the fact and circumstances of the case brought on record by the Assessing Officer after proper examination of the material facts and after taking into account the findings of SEBI and corroborating evidences gathered by the Directorate of Investigation, Kolkata against a network of brokers and operators engaged in manipulation of market price of shares of certain companies controlled and managed by such persons with a purpose to provide accommodation entries in the form of long term capital gains. Further, the contention of the assessee that long term capital gains cannot be treated as bogus merely because some investigation with regard to certain company and broker or investigation .....

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..... establishing a case', and 'the burden of introducing evidence'. The burden of establishing a case remains throughout trial where it was originally placed, it never shifts. The burden of evidence may shift constantly as evidence is introduced by one side or the others. In this case, once the evidence that assessee has claimed bogus long term capital gain was introduced by the Assessing Officer, the burden of evidence shifted to the assessee. During the assessment proceeding and even during the assessee proceeding, the assessee has failed to produce any evidence to prove that the long term capital gain claimed by her was genuine. In the present case, it is seen that the assessee has failed to discharge her burden of proof and the Assessing Officer, on the other hand, has proved that the claim of the appellant was incorrect. The enquiry conducted by SEBI was further corroborated by the investigation carried out by the Directorate of Investigation, has been thoroughly analysed by the Assessing Officer to prove that the assessee has introduced bogus long term capital gains in her books of account by routing her unaccounted income through a tax evasion scheme. The statement o .....

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..... in the case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have observed as under: "...that though an appellant s statement must be considered real until it zvas shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-sewing recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law. 5.2 I further find that the above ratio as laid down by the Hon'ble Supreme Court has been reiterated and applied by the Hon'ble Apex Court in the case of Sumati Dayal vs. CIT (214 ITR 801). It is essential on the part of the Assessing Officer to look into the real nature of t .....

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..... (A) has rightly confirmed the addition in dispute, which does not need any interference on my part, therefore, I uphold the action of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Assessee. 27. Similarly, coordinate Bench of the Tribunal in case cited as Udit Kalra vs. ITO (supra) dismissed the appeal filed by the assessee who has claimed deduction u/s 10(38) of the Act for ₹ 27,20,457/- in the identical facts which has been confirmed by the Hon ble Delhi High Court in ITA 220/2019 order dated 08.03.2019 by returning following findings :- This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent - A.O., CIT(A) and the ITAT have all consistently rendered adverse findings - what is intriguing is that the company (Mis Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company's shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the fin .....

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..... he irresistible conclusion in this case is meticulous paper work by the assessee in making investment in unknown stock by the assessee and then selling the same as per convenience of the broker and entry operator by rigging prices at astronomical rate shows that the tax authorities have been compelled to examine the entire transactions in the light of the surrounding circumstances and has unearthed the bogus transaction of purchase and sale of shares which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities. 31. In view of what has been discussed above and following the decision rendered by the coordinate Bench of the Tribunal in cases cited as Pooja Ajmani vs. ITO (supra) and Udit Kalra (supra) subsequently affirmed by the Hon ble jurisdictional High Court, we are of the considered view that purchase and sale of shares of unknown company, Cressanda Solution Ltd., having no profile, financial growth, risk factor etc. available with the assessee, whose shares were purchased @ ₹ 10 per share by the assessee and sold @ ₹ 476 to ₹ 503.90 per share, is .....

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