Search Results For: bogus capital gains


Shamim Imtiaz Hingora vs. ITO (ITAT Pune)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: 2015-16
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S. 10(38) Bogus Capital Gains from Penny Stocks: Though the AO did not find any mistake in the documentation furnished by the assessee, there is need for finding of fact on (i) the nature of the shares transactions; (ii) make-believe nature of paper work; (iii) Camouflage the bogus nature; and, (iv) the relevance of human probabilities etc (NDR Promoters 410 ITR 379 (Del) referred)

In the present case, it is beyond preponderance of probability that the fantastic sale price of a little known share i.e. Mishka Finance & Trading Ltd. without economic or financial basis, would increase from Rs.0.37/- to Rs.45/- per share. If one considers the fact that the assessee got 24,000/- shares against original 300 shares, the price increase is 120 times within 24 months which is evident from the fact that by investing Rs.9000/-, the assessee has got Rs.10,19,050/- (in respect of 22,500/- shares only) in a span of 24 months. There is no doubt that the capital gain was manipulated and bogus and was done only to claim exemption U/s 10(38). Once the entire transaction is viewed from the perspective of human probabilities, it definitely fails on all counts

PCIT vs. BLB Cables And Conductors Pvt. Ltd (Calcutta High Court)

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DATE: June 19, 2018 (Date of pronouncement)
DATE: February 23, 2019 (Date of publication)
AY: 2009-10
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S. 68 Bogus transactions: The AO cannot treat losses from off market commodity transactions as bogus and inadmissible in the eyes of the law if the transactions through the broker are duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. The fact that the broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

Mukta Gupta vs. ITO (ITAT Delhi)

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DATE: November 26, 2018 (Date of pronouncement)
DATE: February 22, 2019 (Date of publication)
AY: 2014-15
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S. 10(38) Bogus LTCG from Penny Stocks: Capital gains cannot be treated as bogus solely on the basis that the price of the shares has risen manifold and the reason for astronomical rise is not related to any fundamentals of market. If the transactions are duly proved by trading from stock exchange and the documentation is proper, the gains cannot be assessed as unexplained credit or as unexplained money

Nowhere it has been found that assessee was in any manner found to be beneficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld

Mahavir Jhanwar vs. ITO (ITAT Kolkata)

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DATE: February 1, 2019 (Date of pronouncement)
DATE: February 16, 2019 (Date of publication)
AY: 2014-15
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S. 10(38) Bogus long-term capital gains from penny stocks: If the assessee has filed evidences for (a) purchase of shares, (b) payment by account payee cheque, (c) balance sheet disclosing investments, (d) demat statement (e) evidence of sale of shares through stock exchange, (e) bank statement reflecting sale receipts, (f) brokers ledger, (g) Contract Notes etc, the gains cannot be treated as bogus on human probabilities, suspicion, conjectures and surmises (All contra judgements distinguished)

The proposition of law laid down in these case laws by the Jurisdictional High Court as well as by the ITAT Kolkata on these issues are in favour of the assessee. These are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon’ble Jurisdictional Calcutta High Court and the ITAT. I am bound to follow the same

Rajkumar B. Agarwal vs. DCIT (ITAT Pune)

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DATE: February 4, 2019 (Date of pronouncement)
DATE: February 2, 2019 (Date of publication)
AY: 2004-05, 2005-06 & 2006-07
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Bogus Capital Gains From Penny Stocks: The assessee completed paper-trail by producing contract notes for purchase and sale of shares. of PIL. Mere furnishing of contract notes etc does not inspire any confidence in the light of facts. Test of human probability should be applied and apparent should be ignored to unearth the harsh reality (Sumati Dayal 214 ITR 801 (SC) & Durga Prasad More 82 ITR 540 (SC) applied)



The entire position which thus emerges is that PIL is a penny stock company, which fact got established from enquiries conducted by BSE and SEBI. Not only the DSP shares and Securities Ltd. and Galaxy Broking Ltd. were fined for manipulating the prices of shares of PIL, even the broker from whom the assessee allegedly purchased the shares was suspended and debarred from acting as a broker by SEBI and further the broker to whom such shares were sold, was also warned by SEBI for manipulating the prices of different shares during the relevant period. There is doubt that the assessee completed paper-trail by producing contract notes for the purchase and sale of shares of PIL. In our considered opinion, mere furnishing of contract notes etc. and more specifically when seen in the background of the above noted facts, does not inspire any confidence and cannot be a ground to delete an addition, which is otherwise made on the solid bedrock of detailed enquiries

Pankaj Agarwal & Sons (HUF) vs. ITO (ITAT Chennai)

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DATE: December 6, 2018 (Date of pronouncement)
DATE: February 2, 2019 (Date of publication)
AY: 2014-15
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Bogus Capital Gains From Penny Stocks: Plea that opportunity to cross-examine the witness was not given & investigation report was not furnished is not relevant if assessee unable to successfully controvert findings of the AO and such argument was never made before the lower authorities

The company in which the assessees had purchased the equity shares had no creditability and no prudent investor would make such investment. The motive of the price manipulation is only to bring out their black money as legitimately earned Long Term Capital Gain for which exemption U/s.10(38) of the Act is available

Purviben Snehalbhai Panchhigar vs. ACIT (Gujarat High Court)

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DATE: December 20, 2018 (Date of publication)
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S. 147 Reopening of s. 143(1) assessment: Law on whether reopening to assess alleged Bogus Capital gains from penny stocks is permissible explained in the context of Rajesh Jhaveri 291 ITR 500 (SC) & Zuari Estate 373 ITR 661 (SC)

In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of Rs.1.33 crores by way of sale of share of such company

DCIT vs. Rakesh Saraogi & Sons (HUF) (ITAT Raipur)

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DATE: April 16, 2018 (Date of pronouncement)
DATE: December 8, 2018 (Date of publication)
AY: 2004-05
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S. 10(38) Bogus Capital Gains Penny Stocks: Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker (Sanjay Bimalchand Jain (Bom HC) distinguished)

There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account

Ramprasad Agarwal vs. ITO (ITAT Mumbai)

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DATE: November 30, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2013-14, 2014-15
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S. 10(38) Bogus capital gains from penny stocks: If the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has also not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee. Once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee

The assessee has produced the D-mat account and therefore, as on 18.06.2012 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee

Anubhav Jain vs. ITO (ITAT Delhi)

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DATE: November 26, 2018 (Date of pronouncement)
DATE: November 28, 2018 (Date of publication)
AY: 2014-15
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Bogus Capital gains: Reliance by the AO on statements of third parties without giving the assessee an opportunity of cross-examination is a gross failure of the principles of natural justice and renders the assessment order a nullity

Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected

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