TMI Blog2023 (12) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis 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 principle of surrounding circumstantial evidence is also not as strong to draw adverse inference against the assessee especially considering the fact that the transaction of purchases and sales were made on the BSE platform where seller and buyer do not know each other, and transaction entered on the basis of current market scenario. Assessee during the year under consideration has earned LTCG of Rs. 2,46,90,000/- whereas claimed setoff of STCL of Rs. 1,78,23,848/- only, had the assessee prearranged the transaction to set off the gain then he might have setoff entire capital gain. It is also pertinent to mention that the assessee during the year entered into share trading on short term basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48/- 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 material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off against the long-term capital gain of ₹ 2,46,90,000/- earned on sale of shares of closely held company namely M/s Gallops Motors Pvt Ltd dated 21st May 2013. 6. The AO in the impugned transaction of sale and purchase of shares of M/s Looks Health Services Limited observed certain deficiency which are detailed as under: - Fund 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk shows that sufficient credit balance available for investment in shares on the date of transaction. The funds for making such investments were directly paid by appellant's father Shri Naginbhai G. Patel to the brokers account. The sale and purchase of shares in the case of Looks Health Services Ltd. was carried out through Shaswat Stock Brokers Pvt. 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 justifia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s STCL by paying commission to set off his LTCG and avoid payment of tax thereon. 2.5. It can be seen from financial data of the company which is available at public domain; no prudent person will invest in such companies. When there are large number of fundamental companies are available in the market, why appellant has chosen to invest in these types of 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 transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.9. The Hon'ble Gujarat High Court in Tax Appeal No. 1037 of 2017 dated 12/02/2018 has confirmed the view taken (supra) by the Hon'ble ITAT, Ahmedabad. In present case Appellant has dealt in penny stock, which is similar to shell companies for which various investigations were already carried out by Calcutta Investigation Wing. From the above graph on page 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s like the company M/s Looks Health Services Ltd was not finically viable in which general public should show interest. The price of the scrip was unusually skyrocketed without any financial or economic basis and unusually decreased. The script in that period were traded in bulk and most people who indulged in bulk trading were from Ahmedabad city only. Based on these general 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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