9911796707
TMI Blog2021 (10) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. interest income from bank, house property, capital gains & income from other sources. Assessee filed return of income declaring total income of Rs. 50,36,026/-. During scrutiny proceedings, Assessing Officer (AO) noticed that the assessee has claimed "capital gains" of Rs. 2,72,85,500/- as exempt under section 10(38) of the Income-tax Act, 1961 (for short 'the Act') from the sale of scrip of M/s. Kappac Pharma Limited. 3. Apart from the investigation conducted by the AO, he has taken note of country-wide investigation carried out by the Directorate of Investigation, Income-tax, Kolkata to unearth the organized racket for generating bogus entries of Long Term Capital Gains (LTCG) to be claimed as exempt from tax. Numerous cases have been unearthed and individuals have been identified who were beneficiaries of such bogus entries of LTCG amounting to several crores from 2010 to 2014. 4. AO noticed that assessee being the beneficiary of such bogus entries purchased and sold the shares of M/s. Kappac Pharma Limited, detailed as under :- Scrip Purchased M/s. Kappac Pharma Ltd. No. of shares purchased 40000 Date of purchase At various dates Amount paid Rs. 20,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed sources for a total consideration of Rs. 4,52,000/-. It is also not in dispute that aforesaid 40,000 shares were credited to the DEMAT account of assessee on 30.12.2013. It is also not in dispute that assessee has declared said amount of Rs. 4,52,000/- under Income-tax Disclosure Scheme (IDS), 2016, which was accepted by the Principal Commissioner of Income-tax. It is also not in dispute that the assesses sold aforesaid shares in AY 2014-15 during the period 09.01.2014 to 23.03.2014 for a total sale consideration of Rs. 2,77,37,500/- and claimed to have earned Long Term Capital Gain (LTCG) of Rs. 2,72,85,500/-. It is also not in dispute that aforesaid shares were sold through stock exchange by way of contract note. It is also not in dispute that SEBI has temporarily suspended dealings in M/s. Kappac Pharma Limited shares and has taken action against its promoters and stock brokers. It is also not in dispute that Directorate of Investigation, Income-tax, Kolkata conducted thorough investigation and found that shares of M/s. Kappac Pharma Limited are nothing but penny stocks which are traded to provide fictitious LTCG exemption from tax u/s 10(38) of the Act. 9. On the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 26.11.2019, Pooja Ajmani vs. ITO in ITA No.5714/Del/2018 order dated 25.04.2019 & Shri Abhimanyu Soin vs. ACIT in ITA No.951/Chd/2016 order dated 18.04.2018. 12. However, on the other hand, ld. AR for the assessee to repel the arguments addressed by the ld. DR for the Revenue relied upon the impugned order passed by the ld. CIT (A) and contended inter alia that AO made addition merely on the basis of suspicion by relying upon borrowed investigation collected by the Directorate of Investigation, Income-tax, Kolkata; that assessee has entered into purchase and sale of shares at prevailing market price and mildness in the business for a particular period cannot be viewed adversely; that AO has recorded incorrect fact in the assessment order that assessee has not availed of the opportunity of cross examination to cross examine the persons who have confirmed on oath that they have provided bogus LTCG rather assessee has been supplied with the copy of statement of 4 persons but not the 5th person, namely, Anil Kedia recorded by the Directorate of Investigation, Income-tax, Kolkata; that temporary suspension of dealings in shares of M/s. Kappac Pharma Limited by SEBI was restored s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -0.02 -0.08 -0.08 -0.08 -0.06 Tax - - - - - Net Profit -0.02 -0.08 -0.08 -0.08 -0.06 Equity 30.27 30.27 30.27 23.77 23.77 EPS -0.01 -0.03 -0.03 -0.04 -0.03 CEPS - - - - - OPM% - - - - - NPM% - - - - - 15. When we examine the arguments addressed by ld. DR for the Revenue challenging the impugned order passed by the ld. CIT (A) in the light of the financials of M/s. Kappac Pharma Limited, it leads to the irresistible conclusion that no man of ordinary prudence would ever invest in its share except for dubious reasons to convert the unaccounted money into white money. 16. Coordinate Bench of the Tribunal examined the penny stock business of M/s. Kappac Pharma Limited in numerous cases and found the same to be an instrumentality to legalize the unaccounted money through dubious method into white money. Three such cases are Puja Ajmani, Udit Kalra and Manvi Khandelwal (supra). 17. Coordinate Bench of the Tribunal in case cited as Pooja Ajmani (supra) in the identical facts of cases where assessee had purchased 4,000 shares of M/s. Kappac Pharma Limited at the price of Rs. 13.09 per share in physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transactions. By analysing the Balance Sheet, Profit &Loss account and the trade pattern of Kappac Pharma Ltd. during the period March, 2010 to March 2014, the Assessing Officer has pointed out that the share price of this company was neither affected by the movement of sensex nor the financials of the company justified such extraordinary jump in the price of its shares. It is noticed that apart from being based on evidences gathered during search and survey operations, analysis of the material on record and analysis of information from various sources, the findings of the Assessing Officer are also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the modus operandi adopted by brokers and operators engaged in the business of providing entries of long term capital gains to the interested beneficiaries which has come to surface as a result of deep and wide investigation. Initial investment in a company of unknown credentials and subsequent jump in the share price of such a company cannot be an accident or windfall but was possible, as clearly brought on record by the Assessing Officer, because of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty who substantially asserts the affirmative of the issue and not upon the party who denies it. It has been further held that the party cannot, on failure to establish a prima facie case, take advantage of the weakness of his adversary's case. The party must succeed by the strength of his own right and the clearness of his own proof. He cannot be heard to say that it was too difficult or virtually impossible to prove the matter in question. In the case under consideration, since it is the appellant who had made the claim that she had earned genuine long term capital gain, all the facts were especially within her knowledge. Section 102 of Indian Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. If the onus is discharged by him and a case is made out, the onus shifts on to deponent. It is pertinent to mention here that the phrase "burden of proof" is used in two distinct meanings in the law of evidence viz, 'the burden of establishing a case', and 'the burden of introducing evidence'. The burden of establishing a case remains throughout trial where it was originally placed, it never shifts. The burden of evidence may s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances to find out the realities and the matter has to be considered by applying test of human probabilities as enunciated by the Hon'ble Supreme Court. The fact that inspite of earning 3072% of profits, the assessee never ventured to involve himself in any other transactions with the broker which gave him even much lower profits during the period which cannot be a mere coincidence or lack of interest or absence of advice from the financial institutions as done earlier. 15. In view of the detailed discussion above, and keeping in view the entirety of the facts and circumstances and specific peculiarity of the instant case and the judgments quoted above, we decline to interfere in the order of the Ld. CIT (A). 16. In the result, appeal of the Assessee is dismissed." 5.1 On the issue of circumstantial evidence and in the matters related to the discharge of 'onus of proof' and the relevance of surrounding circumstances of the case, the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have observed as under: "...that though an appellant's statement must be considered real until it was shown that there were reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. However, the case laws cited by the Ld. counsel for the assessee are on distinguished facts, hence, not applicable in the instant case. The assessee has not raised any legal ground and argued only on merit for which assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. In view of above discussions, I am of the considered opinion that Ld. CIT(A) has rightly confirmed the addition in dispute, which does not need any interference on my part, therefore, I uphold the action of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently declared unaccounted in IDS, 2016 scheme and got the same legalized from Principal CIT. Thereafter, assessee took back the cash of Rs. 4,52,000/- from the seller and paid him cheque of the aforesaid amount on 31.12.2013 after getting the scrips dematerialized. 22. During investigation when statement of assessee was recorded as to how he had paid the amount of Rs. 4,52,000/- and as to what is the name of the seller of the shares of M/s. Kappac Pharma Limited, he has given evasive reply making the entire transaction doubtful. Questions put to assessee during investigation and answers given thereto during his recording of statement u/s 131 of the Act, available at page 154 of the paper book, are extracted for ready perusal as under :- "28) How had you paid the amount of Rs. 4.52 lakhs? Ans. I had purchased these shares with cash of Rs. 4.52 lakhs that was lying with me during FY 2012-13 because the person wanted cash before handing over physical papers. I have declared this cash under IDS Scheme 2016. I also want to mention that I had attempted to receive back my cash and replace it with a cheque immediately thereafter but it was only several months later that I could s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Krishna Devi & Ors. (supra) relied upon by the ld. AR for the assessee held that, "in case of a capital gain from penny stock merely because of the fact that there was astronomical 4849.2% jump in the share price within 2 years, which is not supported by the financials does not justify the AO's conclusion that assessee converted unaccounted money into fictitious exempt LTCG to evade taxes", but the facts of the case at hand are distinguishable because in the case at hand from the very outset coloruable device has been put into operation by the assessee by purchasing shares with unaccounted cash from unknown person, evidently anti-dated, then got the unaccounted money legalized by making declaration under IDS, 2016 scheme, then getting the same dematerialized and claimed the bogus capital gains by selling the shares of a consistently loss making company at the whopping sale consideration of Rs. 2,77,37,500/- purchased a year before for Rs. 4,52,000/-. 26. Next contention raised by the ld. AR for the assessee that he has furnished all the documents viz. DEMAT account, bank statements, etc. during the assessment proceedings from which no adverse inference can be drawn and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered view that the entire transaction as to purchasing and selling of 40,000 shares of M/s. Kappac Pharma Limited is a colourable device to convert unaccounted money into fictitious exempt LTCG to evade taxes for the following reasons :- (i) that right from the purchase of 40,000 shares of M/s. Kappac Pharma Limited by the assessee with undisclosed money of Rs. 4,52,000/- from unknown persons; then subsequently declaring the said unaccounted money of Rs. 4,52,000/- under IDS, 2016 scheme; then getting the same legalized from Principal CIT; then getting the unaccounted cash refunded and making payment of Rs. 4,52,000/- by way of cheque on 31.12.2013; then got the shares dematerialized and sold the same in the market at the whopping price of Rs. 2,77,37,500/- purchased a year before for Rs. 4,52,000/- makes the entire transaction appears antedated and colourable; (ii) that the transaction in question at the very outset fails to satisfy the test of human probabilities lay down by Hon'ble Supreme Court in case of Sumati Dayal vs. CIT 214 ITR 801 (SC) that, in such a circumstances, tax authorities are entitled to look into the surrounding circumstances to find out ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
