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2019 (8) TMI 700

..... bogus since derived from rigging of the scrip prices in issue and involving accommodation entry in collusion with the concerned entry operators. Hon'ble apex court’s decisions in Sumati Dayal vs. CIT [1995 (3) TMI 3 - SUPREME COURT] and CIT vs. Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT] are quoted during the course of hearing at the Revenue’s behest. It strongly argues that the department has disallowed/added the impugned STCL based on circumstantial evidence unearthed after a series of search actions / investigations undertaken by the DDIT(Inv). Find no merit in Revenue’s instant arguments. The fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc., The Revenue’s only case as per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries. I find that there is not even a single case which could pin-point any making against t .....

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..... /s 68, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . 2. I have heard these appeal(s) together of the fact that the sole identical issue raised in the instant entire batch is that of genuineness of assessees LTCG/LTCL, as the case may be, derived from sale of shares held in various scrips. It is in this identical backdrop that I am treating ITA No.2662/Kol/2018 in case of Mrs.Manju Agarwal vs. ITO Wd-61(4), Kolkata for assessment year 2014-15 as the lead case. 3. Both the learned representative(s) take me to CIT(A) s detailed discussion whilst treating the impugned STCL pre-arranged bogus loss in the instant lead case vide the following lower appellate discussion:- 3. Grounds No. 1 to 5 of the appeal are directed against the action of the A.O. to disallow appellant's claim of Long Term Capital Gain/ Short Term Capital Gain u/s 10(38) and hold it as bogus Long/Short Term Capital Gain for ₹ 36,48,564/ -. The A.O. has discussed the facts of the case of his assessment order. In nut shell, the appellant on 09.90.2011 privately purchased 100,000 shares @ ₹ 1/- per share of M/s Careful Projects Advisory Ltd. from M/s Sanskriti Vincom Pvt. .....

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..... ome supporting documents. 3.1 I have carefully considered the assessment order wherein the addition of ₹ 36,48,564/- has been made by the A.O. on account of bogus Long Term Capital Gain. I find that the A.O. at the time of completion of the assessment proceedings has framed the assessment after analyzing various information received from the Investigation Wing. Some of the observations which come to light upon examination of the records of the appellant are as below:- a. There is a common pattern in the trading of such scripts and the pattern is that they represent a bell shape in their trading. (Page no.8 of the assessment order) b. From Balance Sheet of the listed penny stocks it is found that they have no actual financial credentials to support their share movement pattern. Almost all the companies have no fixed assets, no turnover, no profitability,(Pages no. 8-10 of the assessment order). a. No such event of growth happened for which investment in shares could have jumped around 37 times in a very short span of time of 18 months. b. In the whole project total 84 listed penny stock companies were identified and worked upon. After that, number of search and surveys were co .....

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..... orting evidences in the form of bank statement, contract notes, delivery instruction proves the genuineness of the transactions. In my view, all these documents as referred to by the appellant are mere documents and not any evidence. The whole transactions are not natural at all. In my opinion, payment made through banking channel does not constitute the transactions to be genuine transaction since the banking documents are merely self serving recitals. None of the material produced by the appellant is enough to justify the huge gains as claimed under the head LTCG. 3.4 In a penny stock which has no business activity or any plan or initiative or any prospect for growth, investors normally sell off such stock whenever price has appreciated to some extent and there is total uncertainty to hold such stock for fabulous appreciation when the investment is not backed by any fundamental of the company, its business policy and future prospect. In absence of any such fact the person who is sure for huge appreciation in value of such stock is probably the person who knows beforehand that its price is being manipulated in a concerted way and he is part of such system. Price movement and volum .....

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..... ified in confirming the order of the AO by applying the test of human probabilities. ITAT Bangalore, SMC-C Bench. ITA No. 1723/Bang/2018, AY 2015-16, Smt. M.K. Rajeshwari Vs. Income Tax Office, Ward-3, Raichur, date 12.10.2018, in para no. 8 & 9 of the order as under:- The AO has also examined the SEBI s findings about the accommodation entry providers obtained on the basis of various investigations and has brought out sufficient material on record to demonstrate that the transactions are not genuine and he accordingly concluded that the on term capital gain booked by the assessee in the books were pre-arranged method to evade taxes and laundered money. The findings and observations of the AO were not controverted by the assessee by placing any evidence. He placed reliance upon the various judicial pronouncements in support of his contention that once the assessee has placed the evidences with regard to payments and the identity of the persons and the credit worthiness of the creditors, no addition under section 68 is called for. Since the as has placed the contract note, payment through cheques denying the company whose shares were transacted, the genuineness of claim of long .....

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..... investigations undertaken by the DDIT(Inv). I find no merit in Revenue s instant arguments. The fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc., The Revenue s only case as per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries. I find that there is not even a single case which could pin-point any making against these assessees which could be taken as a revenue nexus. I make it clear that the CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight. I notice that this tribunal s coordinate bench s decision in ITA No. 2474/Kol/2018 in Mahavir Jhanwar vs. ITO decided on 01.02.2019 has taken into consideration identical facts and circumstances as well as latest developments on legal side whilst deleting the similar bogus LTCG addition as foll .....

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..... 15-16, order dt. 12/10/2018. 5. After hearing both sides, I find that in a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. Some of the cases were, detailed finding have been given on this issue, are listed below:- Sl.No. ITA No.s Name of the Assessee Date of order/judgment 1 ITA No.714 to 718/Kol/2011 ITAT, Kolkata DICT vs. Sunita Khemka 28.10.2015 2 214 ITR 244 Calcutta High Court CIT vs. Carbo Industrial Holdings Ltd. 3 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4 ITA No.1236-1237/Kol/2017 5 ITA No.569/Kol/2017 Gautam Pincha 15.11.2017 6 ITA No.443/Kol/2017 Kiran Kothari HUF 15.11.2017 7 ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO 20.07.2018 8 ITA No.456 of 2007 Bombay High Court CIT vs. Shri Mukesh Ratilal Marolia 18.01.2018 9. ITA No.95 of 2017 (O&M) PCIT vs. Prem Pal Gandhi 18.01.2018 10 ITA No.1089/Kol/2018 Sanjay Mehta 28.09.2018 6. Regarding the case laws relied upon by the ld. Departmental Representative, I find that, in .....

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