TaxTMI 
TaxTMI 
2023 (12) TMI 502
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....the case, the learned CIT(A) has erred in confirming the action of the AO in disallowing the claim of short term capital loss of Rs 1,78,23,848/- in respect of sale of shares of "Looks Health Services Ltd", treating the transaction as in- genuine without appreciating the fact that during the course of Assessment Proceedings and appellate proceeding, the Appellant has already submitted contract note, purchase and sale bills, brokers account, demat account and the Bank statement to prove the genuineness of the transactions. 3. On the facts and in the circumstance of the case, the learned CIT(A) has erred in confirming the action of the A.O and thereby treating the entire loss as not genuine by ignoring all the material evidences furnished, and has erred in treating the said transaction as a "penny stock" transaction simply on presumption and on probabilities and thereby incorrect observations. 4. On the facts and in the circumstance of the case, the learned CIT(A) has erred in confirming the alleged action of A.O which is purely based on suspicion and presumptions that the difference in purchase and sale price of share is unusually high though the revenue did not bring any materi....
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....nd for purchases of impugned shares were transferred from assessee's father account to ACML-BSE client account and not from the bank account of the assessee. - The assessee during the year has entered into share trading activity in various scrip (47 scrip excluding the scrip of Look Health services) through Parbhudas Lilladhar Pvt or through Citigroup Global Market India Ltd whereas transaction in scrip of M/s Look Health Services Ltd only entered through the broker M/s Shaswat Brokers Pvt Ltd whose key person, Shri Rajesh Jhaveri is friend of assessee's father. - The company M/s Looks Health Services Ltd is not a financially viable company whose script may attract the public at large. As such the company is constantly making loss. - The trade data of the script of the company clearly shows that the price has been rigged up through synchronized trading at the stock exchange and the price reached its peak during the year under consideration. During the peak period bulk transactions were carried out in the impugned script and the persons who were involved in the bulk transaction are mainly from Ahmedabad only. - The share purchased by the assessee on 18th March 2014 was not f....
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....t. Ltd., which is authorized person of ACML. During assessment proceedings statement on oath of Shri Varun N. Patel was recorded on 19.12.2016. In reply to Q.No.6 he stated that he has no knowledge of bulk deals of the share. Whatever loss incurred is genuine loss and should be allowed. The reply of the assessee cannot be accepted by the AO in view of the details furnished by the assessee as well as data received from BSE, Moneycontrol etc and the input received from Investigation Wing. The shares of Looks Health Services Ltd. is not a healthy and worthy scrip in terms of value in which public at large picks for investment purpose in relation to quoted price but as per the data available in the public domain i.e. BSE, Moneycontrol etc. price rigging/abnormal fluctuation in the scrip price is noted which is not relatable and justifiable in terms of the performance of the company. The details of such fluctuation can easily be seen from the price graphic representation available on public domain and has been discussed by AO in the assessment order. The extract of the grap from Moneycontrol is as under:- ........ 2.4. From the above graph, it can be easily noted that the scrip unde....
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....f shares clearly prove that appellant wishes to obtain exempt capital gain by obtaining accommodative entries. It is an established law that Income Tax proceedings fall in the domain of preponderance of probabilities, meaning that the action of assessee is considered to be rational and well inform falling in the domain where probable choice are exercised. In Sumati Dayal Case Hon'ble Supreme Court has held that a man is considered as making rational decisions and the choices exercised by him falls under probable alternatives available before him. The financial analysis made herein above clearly prove that the decision of investment in nondescript penny stock is highly unlikely for a prudent investor and also that the quantum jump in stock prices of Looks Health Services Ltd. The scrip in which Appellant has made the transaction is listed in penny stock by SEBI and no prudent person would invest in such type of shares. As discussed herein above, transactions of shares were not governed by market practices and initial payment was made in cash which prove that transactions are non-genuine and Appellant has resorted to preconceived scheme to procure long term capital gain by way of....
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....age 23 of this order, it can be easily noted that the scrip undergone price rigging and the peak for such rigging during the period in which assessee entered into the transaction of purchase/sale of shares of the said company. In the given situation, the assessee booked short term capital loss l.e. assessee allegedly made purchase and sale of share at pre-decided level as per the amount of accommodation entry required/decided/allegedly agreed upon. In view of the facts and discussed supra and circumstantial evidence available on record, it is concluded that the transactions were sham transactions and aimed only to bring unaccounted money in the guise of exempted long term capital gains and paper work has been got up and done merely to give a colour of authenticity to the transaction and by creating a facade of legitimate transactions. In view of the aforesaid, I am satisfied that the transaction of the assessee is wholly concocted just for the purpose of setting off his LTCG of Rs. 2,46,90,000/- and to reduce the taxable LTCG. Accordingly, the alleged claim of short term capital loss on account of purchase/sale of shares of Looks Health Services Limited is not found genuine and acc....
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....ral observations, the AO concluded that the price of shares M/s Looks Health Services Ltd rigged up to provide bogus LTCG/ STCL to beneficiaries. The AO in its order has stated nowhere that any enquiry or investigation was carried out with any concerned authority or income tax department regarding rigging up of the price of M/s Looks Health Services Ltd or by the assessee's broker. The AO predominantly proceeded to hold the price of the shares was rigged up merely on analysis of trade data of impugned script and financial strength of the company. Thus, the AO based on sweeping observation held that the assessee entered a prearranged transaction to set off the long-term capital gain earned by him during the year. As such, there is no information or finding based on corroborative material available with the AO that the price of impugned script was rigged up or the assessee along with his broker have rigged up the price or prearranged the transaction. The AO and learned CIT(A) also emphasizes the principles of surrounding circumstantial evidence. In this regard we are of the considered opinion the principle of surrounding circumstantial evidence is also not as strong to draw adverse i....
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.... AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conc....