TMI Blog2019 (10) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... ICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER Appellant by: None Respondent by: Shri Guru Bashyam, JCIT ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER : The above assessees filed these appeals against the orders of the Commissioner of Income Tax (Appeals)-10, Chennai in ITA No.117 123/17-18/CIT(A)-10/2017-18 dated 31.12.2018 for the assessment years 2012-13 2015-16, respectively. 2. Shri Ashok Batuklal Makwana , the assessee, an individual M/s. Ashok Makwana, the assessee, a HUF are doing business in share trading. The Assessing Officer received a report from the investigation wing of Kolkata, in which, inter alia, each of the assessee was specified as one of the parties who indulged in bogus / non-genuine long term capital gain from the transactions of alleged purchase and sale of shares of Essar India Ltd. Further, the shares of Essar India Ltd were found by them as penny stock company which has been used for generating bogus LTCG and the investigations revealed that a scheme was hatched by various players to obtain / provide accommodation of entry of bogus LTCG thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that once the genuineness of the transactions in the form of DEMAT statements, Contract Notes and Bank statements are proved then the AO is not justified in disallowing the claim. 5.3.6 In this regard, it is seen that the initial purchase of shares of EIL were not made through BSE or NSE but were effected through off market route in paper form. No satisfactory explanation has been furnished with regard to the identity of the persons / broker / operators from whom the appellant has purchased these shares. The appellant is not in a position to substantiate that he has made any other purchases through this route and from these parties/broker in a regular manner. That is to say that except for the purchase of these shares, the appellant is unable to prove that he has made similar such purchases through the same preferential route. The appellant was also unable to provide convincing reasons as to how it has identified a company/shareholder based at Kolkata for purchasing these shares when the appellant is based at Chennai. The appellant had also not substantiated as to how and why the shares of these particular companies were selected at random for investing off mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... floaded such shares with such abnormal hike in price within a reasonably short span of time which the appellant was unable to prove/ establish. This clearly establishes that the probability of the appellant trading in these shares without colluding with any of the persons involved in the operations of jacking up the share price is either Nil or very remote. 5.3.11 Further, as regards the offloading of the same on the stock exchange is concerned also it is inexplicable as to how a rational person would buy these shares at an average rate of ₹ 227/- per share whose face value was only Re. 1/-, without the comfort of good published and researched financials of the companies unless the sale as well as the buyers are predetermined. These companies have not been established by the appellant to have a good financial standing in the market at the time of investment by the appellant. It is also noticed that the key financial figures/ratios of the companies were unfavourable and well below the industry standards. 5.3.12 It is to state m this regard that the Operating Revenue and Operating Expenditure of EIL depicts very poor operations being carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions were not confined to the appellant alone but has also been implemented by his other family members too who have also booked exempt profits of similar nature through the very same manipulative penny stocks modus operandi and interestingly for similar amounts. 5.3.17 Attention is drawn to the decision of the Hon'ble Madras High Court in the case of CIT vs. Krishnaveni Ammal reported in [1986] 158 ITR 826 (MAD.), wherein it was held that: when, there are other documentary evidence of corroborative value .... judicial body cannot act on such interested testimony of assessee alone ... 5.3.18 Based on the discussion as above, these facts when viewed against the whole background of events as unfolded, apparently reinforce the modus operandi detailed by the AO that the appellant had made investment in these shares only with an intention to off load them at a later date for a substantial predetermined gain to be introduced into his books in the form of exempt LTCG. The modus operandi involved clearly proves that the penny stocks traded in by the appellant are manipulated to convert unexplained money into tax free profits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gain in their respective return and claimed it as an exempt income U/s.10(38). The Assessing Officer examined the entire set of transactions and held, inter alia, that the respective assessee has deliberately entered in to a sham transaction of purchase and sale of bogus shares with full knowledge of such transactions in view of the substantial gains shown on the sale of such penny stocks, within reasonably a short period so as to convert the unaccounted money into accounted money in the guise of exempt capital gains. Therefore, the Assessing Officer treated the entire sale at ₹ 9,08,000/- ₹ 14,45,400/- as an unexplained credit U/s.68 and completed the respective assessment. Aggrieved, the respective assessees filed appeals before the CIT(A). Since, the right to exemption must be established by those who seek it , the onus therefore lies on the respective assessee . In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. (35 ITR 312 (SC)). However, in these cases, it is seen from the orders of the Ld.CIT(A), supra, that the respective assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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