TMI Blog2023 (1) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus. Thus hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus? - AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of mine is further fortified by the decision of PCIT vs Laxman Industrial Resources Ltd [ 2017 (3) TMI 1521 - DELHI HIGH COURT] It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of shares of Lifeline Drugs and Pharma Ltd. The said return was duly processed u/s 143(1) of the Act. The claim of exemption u/s 10(38) of the Act on sale of shares of Lifeline Drugs and Pharma Ltd was sought to be examined by the ld. AO in the course of assessment proceedings. The assessee submitted that he was allotted 6000 shares of Lifeline Drugs Pharma Ltd by way of private placement of face value of Rs 10 per share at a premium of Rs 133 per share on 25/10/2013 as per the allotment advice issued by the company. Subsequently these shares have been split into Re 1 on 19/11/2013 and hence the number of shares got converted to 60000 shares. It is not in dispute that the purchase of these shares were met out of accounted sources of the assessee and shares were duly dematted in the demat account maintained by the assessee. The said shares were held by the assessee for a period of one year by the assessee. Out of 60000 shares held by the assessee, the assessee sold 15200 shares in November and December 2014 in 5 tranches relevant to Asst Year 2015-16 at various rates for total amount of Rs 41,08,445/-. The assessee retained the remaining 44800 shares with him as on date. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/09.2010 to 31/07/2015 in graphical form and drawn an inference that this could be only possible if the sellers and exit providers were hand in glove with each other and claimed that shares of Shree Shaleen Textiles Ltd have been used for providing entry of bogus LTCG / STCG. The assessee had objected to this as to how the name of Shree Shaleen Textiles Ltd is observed by the ld. AO which is not at all connected with the assessee herein and more so when the assessee had not even dealt with the shares of Shree Shaleen Textiles Ltd. The assessee also submitted that the ld. AO issued a show cause notice dated 12/12/2017 to the assessee as to why the sale proceeds of shares be not treated as unexplained cash credit u/s 68 of the Act. The assessee was given time to reply to the said show cause notice on or before 20/12/2017, whereas the assessment order was passed by the ld. AO on 18/12/2017 itself. This goes to prove that the ld. AO had made up his mind to frame the addition in one way or other completely ignoring the various factual and legal contentions of the assessee. Yet another factual mistake committed by the ld. AO which was pointed out by the assessee before the ld. CIT(A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is as to whether the shares that were allotted to an assessee by way of preferential allotment could be taken as a ground to declare the entire transaction as sham. In my considered opinion, the transactions could not be treated as sham merely because they are allotted to an assessee by way of preferential allotment, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price of shares. The sale price of shares is determined by the market forces as the shares are sold in the open market through a registered stock broker in the recognized stock exchange after suffering STT. Our view is further fortified by the decision of Hon ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom). 6.4. I find that independent enquiries were conducted by Securities and Exchange Board of India (SEBI in short) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SEBI order, there is a categorical finding that 5 persons were involved in price manipulation. The operative portion of the findings of SEBI order in paragraphs 27 to 29 are reproduced hereunder:- 27. In view of the above, I note that by indulging in trades that resulted in manipulation of the price of the scrip and by indulging in a trading pattern which created misleading appearance of trading in the scrip, Noticee no. 1 to 5 namely, 1) Mr.Anil Vishnu Bharti, 2) Mr. Pratik Jain, 3) Mr.Rajesh Jayantilal Savadia, 4) Ms. Akshata Majgoankar and 5) Mr.Narendra Kripashankar Mishra have violated Regulation 3 (a), (b),(c ), (d) and Regulation 4(1), 4(2)(a), (e) of SEBI (PFUTP) Regulations, 2003 and , hence, in view of the above, I find the Noticees to be guilty of violating 3(a),(b),(c ),(d) and Regulation 4(1), 4(2)(a) 4(2)(e) of SEBI (PFUTP) Regulations, 2003. ORDER DIRECTIONS 28. I, in exercise of the powers conferred upon me under section 19 read with section 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, hereby restrain the following Noticees from accessing the securities market and further prohibit them from buying, selling or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this tribunal decision was approved by the Hon ble Jurisdictional High Court in ITA No. 456 of 2007 dated 07/09/2011. It is pertinent to note that the Special Leave Petition preferred by the Revenue against this decision before the Hon ble Supreme Court has been dismissed vide SLP No. 20146 of 2012 dated 27/01/2014. 6.11. Further I find that the Hon ble Jurisdictional High Court in the case of CIT vs Shyam S Pawar reported in 54 taxmann.com 108 (Bom), it was held that where Demat account and contract note showed details of share transaction and the ld.AO had not proved the said transaction as bogus, the long term capital gain earned on said transaction could not be treated as unaccounted income u/s 68 of the Act. The relevant operative portion of the said judgement is reproduced below:- 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkuma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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