9911796707
TMI Blog2024 (12) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... rn arising out of alleged penny stocks. The AO examined the transactions of the assessee in two groups: the first being HPC Bioscience Ltd. (HPC) and the second M/s Sunstar Realty Development Ltd. (SRDL) from which the assessee had earned long-term capital gain (LTCG) of Rs. 5,16,89,108/- and Rs. 1,81,75,146/- respectively totaling to Rs. 6,98,64,254/- which was claimed as exempt income u/s 10(38) of the Act. The AO examined the transactions in the light of the investigation conducted by the Directorate of Investigation, Kolkata and taking into consideration certain orders of the Security and Exchange Board of India (SEBI). Statement of the assessee was also recorded u/s 131 of the Act wherein she had explained the reasons for investment as ordinary investor. The AO, on the basis of surrounding circumstances, human conduct and preponderance of probabilities surrounding the transaction and after taking into consideration the general principles of tainted transactions in penny stocks and scheme of LTCG, made the addition u/s 68 of the Act in regard to the returns holding that the LTCG transaction was not genuine and was a sham transaction. The AO held that the transaction is bogus an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee and for all these activities the broker is making all the negotiations and arrangements and, therefore, there is no doubt that such transactions involve money to be paid to entry provider for such fraudulent capital gains. Hence, addition of Rs. 14,35,145/- @ 2% of bogus gains of Rs. 7,17,57,254/- is held to be reasonable and I do not find any infirmity with the findings of the AO. Therefore, the order of the AO is accordingly upheld." 3. The assessee is in appeal raising the following grounds:- "1. That on the facts and circumstances of the case the learned A.O. and CIT(A) erred in:- 2 (a) Issuing the assessment order after the expiry of limitation period i.e., after 21 months from the end of the assessment year in which the income was first assessable, which, as per the provisions of section 153 of the Act makes it invalid? The assessment order with notice of demand was dispatched on 01.01.2018 vide speed post number ED671492976IN by the office of ld. Assessing Officer. Since, the last date for issuing the assessment order was 31.12.2017, but it was dispatched on 01.01.2018 therefore the Assessment Order is barred by limitation and is invalid. (b) Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rim orders need not be continued and hence need to be revoked. The name of the appellant is appearing at serial no. 31 in the list of aforesaid 216 entities. 7 (i) Ignoring the contention of the Appellant that the prices of securities traded on recognized stock exchanges are always market driven and move on in a very transparent manner under the control and monitoring of regulator and also Appellant was acting in ordinary course of Investment which is clear from her records and the fact that the shares were sold by him through the stock exchange and through recognized brokers. (j) Relying on the statement of brokers, Script operators and intermediaries and treating the transactions as non-of the same and neither allowed to cross examine the said parties despite request made by the appellant in its letter to the ITO dated 22.12.2017. This is a clear case of violation of the principle of natural justice. 8 (k) Making an addition of Rs. 14,35,145/-, calculated on presumption basis that 2% commission paid to arrange colourable LTCG, as unexplained expenditure U/s 69C while ignoring the factual matrix and genuineness of LTCG 9. II. Without Prejudice to above stated Grounds, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. accepted that the relevant material was not provided to the Assessee during the Assessment and then the A.O. in his remand report has mentioned that he sent all the statement by post to the Assessee on the Address mentioned in the ITR for AY 2018-19. In this regard, it is submitted by the ld. AR that the address of the Assessee was changed and the same was updated in PAN records. Same is certainly established by copy of return available on Page 60-61 of the Paperbook and the said documents should have been sent on the address as per PAN records with NSDL. Then we find that AO forwarded these documents to CIT(A) along with Remand Report with the observations that these documents relied by AO could not be provided to the assessee yet CIT (A) failed to share these documents with the Assessee during appellate proccedings. Thus no doubt certain principle of natural law are violated but we have to examine the issue on merits and then consider that how far absence of this opportunity cross examination of witness or non provision of documents was prejudicial to the assessee. 7. As with regard to the merits of case ld. AR submitted that the Assessee was not a part of any sham transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 9.1 Ld. AR has submitted that non-compliance by any third party over which the Assessee is not having any control, cannot be used against the Assessee. It is pertinent to mention herein that the Assessee was also served with notice under section 131 of the Act, to which proper compliance was made, and the statement of the Assessee was duly recorded which is there on page number 6 to 11 of the Assessment Order. Ld. AR refered to relevant questions to suggest that due explanation was given about reasons for investment. 10. Now we find that most vital piece of material on record are the SEBI orders as the same have substantial bearing on the issue about transaction in a share being suspicious or otherwise tainted. What is established is that by SEBI order 29.06.2015, Para 50 page 401, direction were passed against the assessee restraining her from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions, name of the Assessee is at point 64 page number 404. Then by SEBI Order dated 17.02.2016 [Page No. 208 to 217 of PB], directions passed in Order dated 29.06.2015 were confirmed and the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and LTCG in Sunstar Reality Development Ltd. The Assessing Officer made the addition for the reason that the company was not having healthy financials. However, AO himself has noted that this company was having a positive book value and is a profit making company. There is substance in the contention of ld. AR that nothing conclusive was brought on record by the Ld. A.O against the Assessee rendering the trades placed as sham. Ld. CIT (A) in para 11.1 of his Order at Page 22 recorded that the AO has delved deep and findings of the SEBI in the cases of HPC Biosciences and Sunstar Realty Development Limited have been elaborately discussed in the Assessment Order. However, there was no SEBI investigation Order in the matter of Sunstar Realty Development Limited at the time of Assessment. SEBI passed an order dated 19.03.2021 [Page No. 448-494 of the Paperbook] wherein it has found price manipulations in this scrip. It is pertinent to mention that the said investigation was for the period of 26.11.2013 to 03.06.2015 [Refer Page 449 Para 1]. In Para 2 of the same, this period is divided into 5 patches, and in this investigation only Patch 3 [23.10.2014 to 15.12.2014] and Patch 5 [01.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 in case of another assessee Jagat Singh, proceedings u/s 148A(d) of the Act were initiated for making inquiry arising out of investments in Sunstar Realty Development Ltd. scrip and the assessment was completed by order dated 11.01.2023 without any variation. The ld. counsel has also sufficiently distinguished the facts of the case of Sangeeta Devi Jhunjhunwala vs. ITO in ITA No.747/Del/2022 relied by the ld.CIT(A) in the case of HPC Biosciences Ltd. scrip. In that case, that assessee was preferential allottee who was allowed bonus shares on the same date. Furthermore, we also find that the coordinate Bench while dealing with the case of Sangeeta Devi Jhunjhunwala (supra) did not have benefit of the fact that of SEBI proceedings and directions wherein the assessee was exonerated from any alleged act of manipulation of the prices for achieving LTCG, like the assessee before us. In that case, even after issuing notices u/s 131 of the Act, that assessee had failed to appear while in the case before us the assessee appeared and deposed on oath the reasons and circumstances for making the investments. We are of the considered view that when an assessee deposes on oath giving explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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