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2019 (8) TMI 700

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..... hat 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. 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 Mahavir Jhanwar vs. ITO [2019 (3) TMI 210 - ITAT KOLKATA] has taken into consideration identical facts and circumstances as well as latest developments on legal side whilst deleting the similar bogus LTCG addition Coupled with this, hon'ble jurisdictional high court’s other decisions in CIT vs. Rungta Properties Pvt. Ltd. [2017 (6) T .....

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..... e 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. Ltd. for a total consideration of ₹ 1,00,000/-. Later M/s Carful Projects Advisory Ltd merged with Kailash Auto Finance Ltd. Subsequently, on different dates during F.Y 2013-14, the appellant sold shares @ ₹ 37.20 per shares for consideration of ₹ 37,48,564/- and thereby had a capital gain of ₹ 36,48,564/- which he has claimed to be totally exempt under the provisions of section 10(38) of the Act. The sale was made through broker M/s Guiness Securities Ltd. The A.O. in the meanwhile had received information from DIT(Inv.), Kolkata that: they have investigated and identified 84 Penny Stock Companies. Search an .....

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..... der) 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 conducted in the Office premises of more than 32 share broking entities who have accepted that they were involved in the bogus LTCG / STCL scam. Surveys were also conducted in the office premises of many accommodation entry providers and their statements recorded. All have accepted their role in the seam. c. Out of 84 listed penny stocks which have been used for generating bogus LTCG/STCL, M/s Kailash Auto Finance Ltd., which had been sold by the present assessee, is one of them. 3.2 A deeper examination of the Paper Book filed by the appellant gives a much clear picture of the entire process being staged managed. The most vital aspec .....

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..... 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 volume movement of this stock indicates such fact. This defies all logic of human probability. In this context the Hon'ble Supreme court in the case of CIT vs. Durga Prasad More (82 ITR 540) has held that the surrounding circumstances must be seen to find out the reality of the recitals made in the document. This principle was reaffirmed by the Hon'ble Supreme court in 214 ITR 801 where in it was held that the apparent can be rejected where there are reasons to believe that the apparent is not the real fact. 3.5 I am of the opinion that the AO has rightly held that the transactions relating to Long Term Capital Gain fall in the r .....

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..... axes 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 term capital gain should not have been doubted. We do not find merit in these contentions of the assessee in the light of the facts that there is prevalent practice in the country through which unaccounted money is converted into long term capital gain by circuitous means. While dealing with the issue of long term capital gain accrued to the assessee in sort span, one has to examine the financials of the company whose shares were inflated within a short period and after the sharp rise in the price of shares it again comes down. In the instant case, financials were examined by us and we find that the financial worth of the company is .....

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..... 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 follows:- 2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s Unno Industries. The AO based on a general report and modus operandi adopted generally and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transaction was r .....

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..... dustrial 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 the case of M/s. Pankaj Agarwal & Sons (HUF)(supra), the issue was decided against the assessee for the reason that, the assessee could not justify his claim as genuine by producing evidence and was only arguing for the matter to be set aside to the lower authorities on the ground of natural justice. As similar arguments were not raised before the lower authorities by the assessee, the ITAT rejected these arguments. In the case on hand, all evidences were produced by the assessee. In the case of Sanjay Bimalchand Jain, legal heir of Santi Devi Bimalchand Jain, the Hon ble High Court upheld the stand of the Revenue that the trans .....

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