TMI Blog2021 (8) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... movements of the shares. Once the period of 1 year has been passed and the shares prices have been sufficiently rigged, the beneficiary sell their share at the inflated prices through the stock exchange. Here the purchase is not mode by public but by the bogus entities managed and controlled by the promoters of the penny stock company or the operators who are to be referred to as exit providers. All these are sham transactions. It is therefore, revealed that large scale rigging of prices of the above scrip has taken place and it is on the watch list of the SEBI trade data. In this regard, summons was also issued to Sri Bharath M Jain, director of the assessee company on 14.12.2016, to appear before the undersigned and a sworn statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be quashed. 2. In any case and without prejudice the order having been passed in total disregard of and in violation of the principles or natural justice, makes the order bad in law and liable to be quashed. 3. In any case and without further prejudice, the learned CIT (Appeals), Bengaluru - 5 has erred in; a) Confirming addition of ₹ 60,96,500/- being loss on sale of shares of M/s. Shreenath commercials Financials Ltd. b) Holding without basis that the transactions in shares are fictitious. On proper appreciation of facts and circumstances of the case and the law applicable, the transactions are duly recorded in the books of accounts and the additions as done being totally on erroneous premise is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard both the parties and perused the material on record. In this case, the assessee purchased shares of Shreenath commercials Financials Ltd. along with other shares and the loss was of ₹ 60,96,500 on this count. According to the AR, the transaction was through normal banking channel and Demat account. It was submitted that since the AO had not doubted the genuineness of transaction and has questioned the timing of the transaction and the value at which the transaction was undertaken and the same cannot lead to the conclusion that the loss claimed by the assessee is fictitious. The assessee has taken a business decision in buying the shares and selling the shares due to fall in price of the shares. According to the ld. AR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient to discharge the burden to prove that the purchase and sale transaction of assessee was genuine. The onus was on the assessee to explain the astronomical fall in the price of this scrip purchased by the assessee and that too without any financial rationale. The assessee failed to discharge the onus in this regard. Even if we take into account the argument of the ld. AR that in the capital market the movement in the price of shares is not always connected with the financials, it was not possible that price of these shares purchased by the assessee could go to fall every time. It may be possible that the scrip price may go down, but it is not possible that the price of these shares always go down continuously. This feature of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. M/s. Shreenath Commercials and Financials Ltd. is one such Penny Stock. In view of the Investigation on done by the Investigation wing regarding the penny stocks syndicate and the assessee indulging in trading in penny stocks, the modus operandi is that the share of this penny stock companies although listed on exchange was always closely held and controlled by the promoters of penny stock companies and the operators syndicate arrange these bogus Gain/Loss. This is due to the fact that the general public is not interested in the shares as these companies have no credentials and this helps the operator to keep a control on the price movements of the shares. Once the period of 1 year has been passed and the shares prices have been sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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