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2019 (11) TMI 402

..... , bank statement etc., cannot be accepted keeping in view of the facts and circumstances of the case brought on record by the AO after proper examination of the material facts and taking into account the corroborating evidences. The onus was on the assessee to prove the transaction leading to claim of long-term capital gain was a genuine transaction. The assessee failed to justify manifold increase in the prices of the shares despite weak financials of the companies. Initial investment in the company of unknown credential and subsequent jump in the share prices of such a company, cannot be an accident or windfall but could be possible, because of manipulation in the share prices in a pre-planned manner, as brought on record by the Assessing Officer. In view of the failure on the part of the assessee to discharge his burden of proof and explain nature and source of the transaction and huge profit in all shares traded by the assessee against the human probability, in our opinion, the Ld. CIT(A) has rightly confirmed the addition in dispute, which does not require any interference on our part - Decided against assessee - ITA No.1704/Del/2019 And ITA No.1705/Del/2019 - 6-9-2019 - SHRI .....

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..... U/s 143(2) on the basis of CASS without independent evaluation of the information. 7. On the facts circumstances of the case and in law Learned CIT(A) has erred in sustaining the order of the Learned AO making disallowance of capital gain exempt u/s 10(38) on the basis of unrelated precedents leaving aside good law thereby confirming the addition u/s 68 and 69C. 8. On the facts circumstances of the case, the order of the Learned AO and sustenance thereof by the Learned CIT (A) is bad in law and is against the tenants of natural justice. 9. The appellant carves to add, alter, modify, or delete any ground of appeal during the pendency of the appeal. 3. Briefly stated facts of the case are that the assessee, an individual, filed return of income on 24/01/2015, declaring total income of ₹ 14,83,715/-, which constituted income declared under the head salary , income from house property , profit in case of the business of profession , capital gain and income from other sources . The long-term capital gain on sale of the shares amounting to ₹ 63,67,551/- was shown by the assessee as exempted under section 10(38) of the Income-tax Act, 1961 (in short the Act ). The case of the .....

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..... nd the accommodation entry providers, then will sale their shares at low prices and avail long term capital loss, which would be available for setting off against any Long Term Capital gain. 3.2 In view of report of investigation in the shares traded by the assessee and price fluctuation in the Scrips sold by the assessee not commensurate with their financial result, the Ld. AO asked the assessee to substantiate the claim of LTCG by the Assessee. In support of the claim of exempted long-term capital gain, the assessee filed following documentary evidences: a. Details of purchase of shares. b. Broker s debit note and receipt for purchase of shares. c. Statement of Holding in Demat Account. d. Broker s transaction summary statement and statement of account. e. Contract note for sale of securities indicating levy of security transaction tax. f. The statement of banks through which sale proceeds have been realized. 3.3 The contention of the assessee that assessee fulfils all the requirement of section 10(38) as shares was purchased in cash and converted from physical to de-mat prior to sale and sales have been made through stock exchange by paying STT. According to the assessee, the al .....

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..... 63.67 lakhs on five scrips within a short period of almost more than one year, cannot be a coincidence unless the assessee add a 6th sense about making profit in shares or it can be laundering of black money through accommodation entry. The Ld. CIT(A) also analyzed unprecedented share price increase in the five scrips, sold by the assessee and found that the price rise was not supported by the financials of those companies. She observed that the scrip Pawansut Holding Private Limited was not traded during the financial year 2012-13 and earnings per share (EPS) for the year ended 31/03/2012 was 0.15 and for the year ended 31/03/2013 was 0.23. Similarly, she observed profits not commensurate with the price rise in case of other scrips sold by the assessee. She also observed that trading in the scrips traded by the assessee, were suspended by the Bombay stock exchange from time to time. The Ld. CIT(A) also pointed out that as a part of surveillance measure, the Bombay stock exchange has categorized Pawansut Holding as an XT category, where a cross trade occurred when a broker executed an order to buy and sell the same security at the same time, in which both the buyer and the seller a .....

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..... ding to him, no linear equations can resolve the behavior of the capital market movement and such a complex tracing is inevitable for human perception. He submitted that capital market transactions render either profit to someone or loss to somebody, aggregating to a zero-sum game and price movement in share prices not correlated always with their fundamentals. 4.2 The Ld. counsel submitted that the capital market transactions are based on demand and supply of certain scrips. According to him, the share prices and indices are governed by the two factors, the quantity of tradable shares and the number of buyers and sellers in the market. The Ld. counsel is of the view that price of the scrip has nothing to do with the company or its fundamentals. He submitted that it does many a time but essentially the correlation does not exist. He submitted that the graphical representation by the Ld. Assessing Officer is a postmortem analysis, which does not validate the hypothesis. He referred to News reported in financial express dated 24/07/2019 about loss suffered by the investors in share trading and submitted that no human preponderance or perception can explain the said loss. 4.3 The Ld. .....

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..... ITO 2019-TIQL-751-HC-DEL-IT (Copy Enclosed) 2. Sh. Sanat Kumar Vs ACIT -Hon Delhi ITAT G Bench in ITA No. 1881/D/2018 order dated 14.06.2019. (copy enclosed) 3. Pooja Ajmani Vs ITO -Hon Delhi ITAT in ITA No. 5714/D/2018 order dated 25.04.2019. (copy enclosed) 4. Sanjav Bimalchand Jain L/H Shantidevi Bimalchand Jain Vs PCIT (ITA No.18/2017 Bombay High Court (Nagpur Bench)(Copy Enclosed) 5. Anip Rastoqi Vs ITO (ITA No. 3809/DEL/2018)(Copy Enclosed) 6. Abhimanvu Soin Vs ACIT 2018-TIQL-733-ITAT-CHD (Copy Enclosed) 7. Smt. M.K.Rajeshwari Vs ITO (ITA No.1723/Bang/2018 )(Copy Enclosed) 8. Chandan Gupta Vs CIT [2015] 54 taxmann.com 10 (Punjab & Haryana)/[2015] 229 Taxman 173 (Copy Enclosed) 9. Balbir Chand Maini Vs CIT [2011] 12 taxmann.com 276 (Punjab & Harvana)/[2011] 201 Taxman 94 (Punjab & Harvana)(MAG.)/[2012] 340 ITR 161 (Punjab & Harvana)/[2012] 247 CTR 468 (Punjab & Haryana) (Copy Enclosed) 10. Usha Chandresh Shah Vs ITO [2014]-TIQL-1459-ITAT-MUM1 (Copy Enclosed) 11. Ratnakar M Puiari Vs ITO [2016-TIQL-1746-ITAT-MUM] (Copy Enclosed) 12. Arvind M Kariva Vs ACIT (ITA No. 7024/Mum/2010 13. Hon ble ITAT Mumbai in the case of ITO Vs Shamim M Bharwani (2016) (69 Taxm .....

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..... shares. The assessee himself claimed to be not a regular investor in shares and securities. (ii) The purchase of all the shares have been shown to be made in cash, without any supporting cash receipts from sellers of those shares. (iii) The shares claimed to have been purchased in physical form had been dematerialized only immediately prior to their sale on the stock exchanges. (iv) At the time of the purchase the value of the shares was very low and after purchase by the assessee, the prices of the shares have gone astronomically, without any commensurate financial results of those companies. (v) The shares have been sold within a small period as soon as after attaining peak value and thereafter share prices have come down again at their original level around purchase price. (vi) The shares have been sold through SMS Global Securities and VP Consultant Ltd. One of the entry operators, Sh Pwan Kayan from Kolkata in his statement on oath, has admitted that M/s. SMC Global Securities was part of accommodation entry syndicate providing accommodation entries. (vii) The trading in most of the shares dealt by the assessee was suspended by the stock exchange due to abnormal behaviour of .....

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..... d that too without any expert knowledge of horse races. During her statement to the Settlement Commission, the taxpayer had stated that she first started going to the races in 1969 and she won her first jackpot on 12/12/1969, the first day on which she went to the races. She also stated that she worked out the combination of winning horses on the basis of what her husband advised her but she used to add some horses on her own, she, however, knew nothing about the performance of those horses. Further, she suddenly lost interest in horse racing in 1972, when the race winning became taxable and given her exceptional winning streak in the earlier years. The Hon ble Supreme Court in case held that income from winning horse races was against the human probability and inferred that the taxpayer had not really participated in any of the races except to the extent of purchasing the winning ticket after the event presumably with unaccounted funds. The facts and circumstances in the instant case are also identical and in normal circumstances it was not possible to earn a huge profit from investment in all the scrips purchased by the assessee, unless obtaining long-term capital gain through ac .....

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..... d.) 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 findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal. 6.9 In the case of Sanjay Bimal Chand Jain, L/H of Shantidevi Bimal Chand Jain (supra), the assessee had purchased shares of two penny stocks of Calcutta-based companies i.e. 8000 shares at the rate of ₹ 5.50 per shares on 08/08/2003 and 4000 shares at the rate of ₹ 4 per share on 05/08/2003. The assessee sold 2200 shares at an exorbitant rate of ₹ 486.55 per shares on 07/06/2005 and 800 shares on 20/06/2005 at the rate of 485.65. The authorities held that the assessee had not tendered cogent evidence to explain as how the shares in an unknown company with worth ₹ 5 had jumped to ₹ 485 in no time. In view of the facts, the Hon ble Bombay High Court confirmed the addition. 6.10 In the case of MK .....

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