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TMI Blog2022 (12) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... respective separate assessment orders by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). 2. Since common issue is involved in both the appeals relating to the disallowance of claim of exemption u/s. 10(38) of the Act in respect of long-term capital gains (LTCG) arising from sale of shares and in some cases challenging the additions for commission expenditure for arranging such LTCG, we dispose of both the captioned appeals by this consolidated order for the sake of convenience and brevity. 3. Briefly stated, facts are narrated hereunder for each of the ITA No. Captioned above, in seriatim: 3.1. ITA No. 2175/KOL/2019 (AY 2015-16): Brief facts of the case are that the assessee is an individual and filed e-return of income on 16.03.2016 declaring total income of Rs.13,95,870/-. The assessee has claimed exempt income under section 10(38) of the Income Tax Act at Rs.37,96,000/- from sale of equity shares of CCL International Limited. The case of the assessee was selected for scrutiny assessment under CASS. During the course of assessment proceeding, the ld. Assessing Officer based on the information received from the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain the said transactions. The addition made by the ld. Assessing Officer was challenged by the assessee before the ld. CIT(Appeals), but no relief was granted by the ld. CIT(Appeals) to the assessee. The ld. CIT(Appeals) placing reliance on various decisions came to the conclusion that the alleged transaction is obviously made for tax evasion, therefore, such transactions are not genuine but pre-conceived resulting in creation of bogus claim and, therefore, are sham transactions. Being aggrieved, the assessee is now in appeal before the Tribunal. 3.3. ITA No. 2468/KOL/2019 (A.Y. 2015-16): Brief facts of the case are that the assessee is an individual and filed e-return of income on 14.01.2016 declaring total income of Rs.5,04,140/-. The case of the assessee was selected for scrutiny assessment under CASS followed by serving of statutory notices. While through the details filed by the assessee, the ld Assessing Officer noticed that the assessee has claimed long-term capital gain from sale of equity shares of GCM Securities Limited. After examining the details, the ld. Assessing Officer came to the conclusion that M/s. GCM Securities Limited is a penny stock company and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 143(2) of the Act was issued and further notice under section 142(1) along with questionnaire was issued and duly served upon the assessee. Thereafter, the ld. Assessing Officer based on the information received from the Directorate of Income Tax (Investigation), Kolkata observed that the prices of shares of certain companies including M/s. Nikki Global Finance Limited were rigged artificially to provide bogus long term capital gain. All the features of the companies which were used for providing bogus LTCG are clearly matching with the trend of the shares of M/s. Nikki Global Finance Limited. Ld. Assessing Officer considering the surrounding circumstances and applying the test of human probabilities coupled with the report of the Directorate of Investigation held that the assessee had entered into pre-designed modes of transactions and invested in the shares of M/s. Nikki Global Finance Limited just to convert his unaccounted cash in the guise of long-term capital gain. Ld. Assessing Officer also mentioned that the share brokers/entry operators charging @.10 to .50 per 100 ruppes of cheque amount. The ld. Assessing Officer also observed that these companies have no busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nouncements held that longterm capital gain is bogus and made the addition of Rs.43,05,625/- as unexplained cash credit alongwith other additions. The ld. Assessing Officer finally assessed income under section 143(3) of the Act at Rs.1,24,00,703/- vide orde dated 29.12.2017. The addition made by the ld. Assessing Officer was challenged by the assessee before the ld. CIT(Appeals), but part relief was granted by the ld. CIT(Appeals) to the assessee. The ld. CIT(Appeals) placing reliance on various decisions came to the conclusion that the alleged transaction of LTCG is obviously made for tax evasion, therefore, such transactions are not genuine but preconceived resulting in creation of bogus claim and, therefore, are sham transactions. Being aggrieved, the assessee is now in appeal before the Tribunal. 3.7. ITA No. 2553/KOL/2018 (A.Y. 2014-15): Brief facts of the case are that the assessee is an individual and filed e-return of income on 28.07.2014 declaring total income of Rs.10,69,110/-. The assessee has claimed exempt income under section 10(38) of the Income Tax Act at Rs.55,86,964/- from sale of equity shares of Surabhi Chemical and Investment Limited. The prices of shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed modes of transactions and invested in the shares of M/s. Nikki Global Finance Limited just to convert his unaccounted cash in the guise of long-term capital gain. Ld. Assessing Officer also mentioned that the share brokers/entry operators charging @.10 to .50 per 100 rupees of cheque amount. The ld. Assessing Officer also observed that these companies have no regular business and share prices of the company are not supported by any fundamental of the company or any other genuine factor. The ld. Assessing Officer possessed the information from the Directorate of Income Tax (Investigation), Sikkim and NER mentioning the details of various penny stock companies. Details and information filed by the assessee could not satisfy the ld. Assessing Officer and he assessed the income considering the long-term capital gain at Rs.42,96,534/- as unexplained cash credit being an unaccounted money converted by the assessee into LTCG and further added the unexplained commission expenditure at Rs.21,483/- and finally assessed the income of the assessee at Rs.53,83,750/-. The addition made by the ld. Assessing Officer was challenged by the assessee before the ld. CIT(Appeals), but no relief was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of two Companies, which have been treated as penny stock. Thus, ld. AO held that the said LTCG/loss are fabricated/engineered transactions by the respective assessees, sale of which falls under the category of penny stocks and the same were treated as bogus which were added in the total income by treating it as unexplained cash credit u/s. 68 of the Act. Ld. AO based his decision of treating the impugned transaction of sale of shares as bogus transaction by relying on the report of Investigation Wing of the Department wherein the Investigation Wing of the Department had studied the modus operandi of rigging the prices of penny stocks and generation of capital gain /trading loss there from. On appeal, ld. CIT(A) confirmed the action of the ld. AO. Aggrieved, assessees are in appeal before the Tribunal. 5. Recently on 14.06.2022, the Hon'ble jurisdictional High Court of Calcutta passed a judgment in the case of Swati Bajaj and others [2022] 139 taxmann.com 352 (Cal) dealing with set of cases with similar fact patterns as narrated above for the present appeals under consideration before us. Hon'ble jurisdictional High Court by taking the report of the Directorate of Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. [para 73] e) The assessee was not named in the report and when the assessee makes the claim for exemption, the onus of proof is on the assessee to prove the genuinity. [para 73] f) It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. [para 73] g) The assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time. [para 75] h) The exercise that was required to be done by the Tribunal is to consider the totality of the circumstances because the transactions are shown to be very complex, the meeting of minds of the 'players' can never be established by direct evidence and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue under consideration for us, was confronted to the respective ld. Counsels of the assessee who appeared before us. Ld. Counsels were fair enough to state that issue involved in these appeals is squarely covered against the assessee by the said decision as the fact involved are identical to that which were before the Hon'ble High Court. For cases where none appeared before us on behalf of the assessee, the relevant factual matrix was captured with the assistance of Ld. Sr. DR / CIT DR (already narrated above). Since the matter is squarely covered by the decision of Hon'ble jurisdictional High Court of Calcutta in the case of Swati Bajaj & others (supra), we have taken up these also for adjudication ex parte, qua the assessee. 7. After hearing both the sides and taking into consideration the factual matrix of the cases before us vis-à-vis the decision of Hon'ble jurisdictional High Court of Calcutta in Swati Bajaj & others (supra), we respectfully following the said decision carrying the force of binding nature, being the jurisdictional High Court, dismiss the appeals of the assessee and restore the order of the respective ld. AO as affirmed by the respective ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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