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TMI Blog2022 (7) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2019, the case of the assessee was centralized to Central Circle 1(2). The assessee is a partner in M/s Nanesh Finance Corporation and had purchased 30, 000 shares of M/s. Jackson Investments Ltd at Rs.10/- each per share through M/s. Badri Prasad & Sons (Stock Exchange Broker) on 23.04.2014. Thereafter, the face value of the shares was brought down to Rs.1/- per share from Rs.10/- and the assessee sold 70,000 shares through M/s. Axis Securities Ltd and received an amount of Rs.8,38,953/-on sale of such shares. The assessee treated the receipts as Long Term Capital Gains (LTCG) which is exempt from tax u/s section 10(38) of the I.T. Act. During the course of search proceedings, the assessee voluntarily submitted a letter to withdraw the LTCG claimed u/s 10(38) of the Ac and to offer the same to income returned. 3. Subsequently, the case was reopened by recording reasons and notice u/s 148 of the Act was issued on 12.02.2021. In response to the same the assessee filed return of income on 10.3.2021 declaring total income at Rs.33,39,003/-. Thereafter, the Assessing Officer issued a notice u/s 143(2) of the Act on 10.06.2021 which was duly served on the assessee. The reasons for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney of the assessee by using scrip of the company M/s. Jacksop Investment Ltd and claimed bogus L TCG u/s.1 0(38) of the I T Act. It was found that the assessee has claimed L TCG exemption u/s.10(38) of the Act of Rs.8,38,953/- for the A.Y.2016-17. It was also noticed that M/s. Jackson Investment Ltd is penny stock company. Thus, it is clearly evident that the manner in which L TCG exemption claimed is bogus in nature. 2. During the course of search proceedings, the assessee voluntarily submitted a letter stating that the assessee will withdraw the L TCG claimed u/s. 10(38) of the Act and to offer the same as income. The letter is attached to this order as an attachment. 3. The transactions involving buying and selling of shares have been affected through the authorised channels, involving registered brokers, stock exchanges and the banks. Though the transactions showing exempt LTCG u/s 10(38) appears to be real, but as a fact are sham transactions as the surrounding circumstances prove the facts. 4. Though the assessee has produced the documents to substantiate the transaction, going beyond the documents establishes that the documents were a smoke screen to hide the real nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the assessee treating the same as "income from other sources" and applied the provisions of section 115BBE of the Act. 7. In appeal, the learned CIT (A) upheld the action of the Assessing Officer by observing as under: "6. Decision: In the instant case, the assessment was completed by holding the appellant's investment in shares of M/ s Jackson Investments Ltd (JIL) as bogus and thereby treating the amount of Rs.8,38,953/- as 'Income from Other Sources' as against appellant's claim of LTCG in response to notice u/s 148, which was earlier claimed as exempt u/s 10(38) and taxed the same as per provisions of Section 115BBE at 30% without giving benefit of slabs. Going into facts of the case, it is seen that the appellant has purchased shares of M/s Jackson Investments Ltd and had claimed an exemption u/s 10(38) on account of sale of shares of M/s Jackson Investments Ltd during the year under consideration. It is further observed that the appellant along with other entities of the family also had claimed similar exemption. The appellant and the other related entities purchased the shares of MI s .Jackson Investments Ltd at a face value of Rs.10 1- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.52 70,000 15,76,502 2252 7 Sajjan Raj Jain & Wife (HUF) 70,000 11,48,322 16.40 70,000 10,78,322 1540 8 Prakash Chand Jain (HUF) 70,000 13,28,342 18.97 70,000 12,58,342 1797 It is worthwhile to note that all the above persons of the family including the appellant have been bestowed with abnormally high profits in the present year under consideration. The cumulative claim u/s. 10(38) of the appellant and the related parties cumulates to Rs. 86.58 lakhs (approx.] on an investment of Rs.5.60 lakhs, thus getting almost 1446% returns in approximately a period of two years. These persons have shown no prior investments in the share market or have any activity. From the above, it can be concluded that the appellant and the other family members are effectively acting together considering the timing of purchase and sale of these shares. All the family members investing almost at the same time and exiting also implies that these are people acting together in concert with an entry operator with regard to these transactions and it will be not be unfair to conclude that this appears to be an organised manufactured effort, to have exempt income among the family members. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarged the burden of proving the transactions of sale and purchase of the shares to be genuine, burden of proving that the said transactions were not genuine, was on the Department and in the absence of any material on record, holding the transactions to be not genuine, was not permissible. We are unable to accept the submission made. The burden of proving that income is subject to tax is on the Revenue but on the facts, to show that the transaction is genuine, burden is primarily on the assessee. The AD is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of evidence that the transaction was genuine, cannot be conclusive. Such evidence is required to be assessed by the AO in a reasonable way. ~ Genuineness of the transaction can be rejected even if the assessee leads evidence which is not trustworthy, even if the Department does not lead any evidence on such an issue. In view of the above, we are of the view that the finding recorded by the Tribunal is a finding of fact and cannot be held to be perverse. No substantial question of law arises. The appeal is dismissed" As stated by the Hon'ble P&H High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified the transactions indulged along with other related parties of this particular scrip and the justification of such a rise as such defying the probability and financials of the scrip. Further, in a recent decision, the Hon'ble ITAT, D Bench, Chennai, {in ITA No. 2016/Chny/2017 dated 15.05.2018 (Mrs.Vidya Reddy VsITO(IT)},held as under:- "6. We heard the rival submissions and gone through relevant material. The facts found by the AO are that the assessee, an Individual settled in USA, has purchased 6000 shares of face value of Rs.1 01- each @ Rs.25/ - per share of MI s. Surabhi Chemicals & Investments Limited, offline , on 04.09.2012 from M/s. Akriti Advisory Services Private Limited, Mumbai when they were traded in the market @ Rs.0.26 poise. Further, as mentioned in detail in the assessment order, the financial results of the company from F. Y. 2011-12 to F. Y. 2015-16 do not show any prospective growth in the net- worth of the company to purchase share at Rs.251-. The price of share of M/ s. Surabhi Chemicals & Investments Limited was sky rocketed without having any awesome profit, EBIDTA margin, EPS bonus, dividend etc. None of the parameters, which are esse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us to dislodge the findings recorded by the Lower authorities. Thus, the above actions of the assessee are nothing, but a premeditated, contumacious conduct, surreptitiously done for specific reasons for converting unaccounted money of the assessee under the guise of long term. share transactions, that too without paying the requisite tax on the same. This is clearly in the realm of tax evasion. Hence, we do not find any reason to interfere with the order of the Ld. CIT'(A). On the other hand, from the above facts and surrounding circumstances, human conduct , preponderance of probabilities etc, the AO has clearly established that the impugned transaction is not made for an investment, le the motive is not to derive income but to earn a profit that too by an arrangement one and it is manipulated transaction in collusion with the brokers to paint creditworthiness to the transaction and claim exemption u/». 10(38). This is in accordance with the ratio laid by the Hon'ble Apex Court in Sumati DayalVs Commissioner Of Income-Tax, 214 ITR 801 (SC), that" the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esulting in creation of bogus profits which are tax exempt. Such transactions are mutually self-serving to the parties to the transactions. Thus, conclusion is drawn on the basis of above discussion that what is apparent in this case is not real, that these financial transactions were not genuine and that this entire edifice was only a colourable device used to evade tax. Moreover, the impugned transactions of shares are preordained one, not for legitimate purpose in view but for the purpose of creating nongenuine and artificial profits, with a view to reduce valid tax liability. Therefore, the action of the AO as stated in the assessment order that the said transactions are nongenuine/ fictitious transactions. It is important to note that the appellant has withdrawn the claim u/s 10(38) and offered it as long term capital gains. The transaction as per the appellant happened through banking channels and the stock market network with SIT being paid. These are all ingredients for claiming exemption u] s 10(38), but when confronted, the appellant realised and withdrew its claim, but rather than offering the same as income from other sources, the appellant chose to still take a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellant. 2. The Hon'ble CIT(A) without taking into consideration the information filed before him proceeded to complete the appeal u/s.250 of the IT Act and the same is not sustainable. 3. The Hon'ble CIT(A) ignored the explanations given by the appellant and proceeded to confirm the income arbitrarily and such action of the Hon'ble CIT(A) has no basis and therefore the same is liable to be deleted. 4. The Hon'ble CIT(A) ought to have observed that the assessing officer computed income from other sources, which actually accrued in respect of sale of shares, which ought to have charged as long term capital gain as per the provisions of the IT Act and not as income from other sources u/s 115BBE and therefore the addition made was not sustainable. 5. To modify the Grounds raised or to raise any other Ground(s) not raised with the permission of the Honorable Members of the Income Tax Appellate Tribunal." 9. The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in upholding the action of the Assessing Officer in treating the long term capital gain as "income from other sources" and applying the provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(38) of the Act. Therefore, the argument of the learned Counsel for the assessee is self-contradictory. Referring to the provisions of section 68 of the I.T. Act, he submitted that it has two components i.e. source/receipt and nature. Here the nature is bringing of unaccounted money. Therefore, character of the receipt is no longer capital gain because the claim has already been withdrawn. He accordingly submitted that the order of the learned CIT (A) be upheld and the grounds raised by the assessee be dismissed. 12. The learned Counsel for the assessee in his rejoinder, submitted that the addition, if any, can be made u/s 68 of the I.T. Act but the provisions of section 115BBE cannot be made. 13. I have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT (A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the assessee, in the instant case had filed the original return of income declaring total income of Rs.25,00,050/- on 15.10.2016 and had claimed exemption of Rs.8,38,953/- u/s10(38) of the I.T. Act on account of sale of 70,000 shares of M/s. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. 14.1 So far as the arguments of the learned Counsel for the assessee that the Assessing Officer cannot change the head of income is concerned, the same also is without any force especially when the assessee withdrew her claim of exemption u/s 10(38) of the Act and offered the same as income of the assessee. So far as the various decisions relied upon by the learned Counsel for the assessee are concerned, the same in my opinion are distinguishable and not applicable to the facts of the present case especially when the assessee in the instant case has herself withdrew the claim and accepted the income from sale of shares of the penny stock company as her income. 14.2 So far as the alternate argument of the learned Counsel for the assessee that the same should be added u/s 68 of the Act and the provisions of section 115BBE should not be attracted is concerned, the same in my opinion, is without any force. The Assessing Officer as well as the learned CIT (A) in this case has correctly applied the provisions of section 115BBE of the I.T. Act. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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