Search Results For: Penny Stocks


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DATE: October 1, 2019 (Date of pronouncement)
DATE: October 19, 2019 (Date of publication)
AY: 2012-13
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S. 10(38)/ 68: Bogus LTCG from penny stocks: The fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee's involvement in the scam including that he paid cash and in return received exempt LTCG gains (Sanjay Bimalchand Jain 89 TM 196 (Bom) distinguished)

An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the parry alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee’s action giving his involvement in the scam should be established. The allegation implies that cash was paid by the assessee and in return the assessee received LTCG, which is exempt from income tax, by way of cheque through banking channels. This allegation that cash had changed hands has to be proved with evidence, by the revenue.

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DATE: August 9, 2019 (Date of pronouncement)
DATE: August 17, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 50C + S. 10(38) Bogus Penny Stocks Capital Gains: (i) Though the 3rd Proviso to s. 50C, which provides a safe harbour of 5%, applies w.e.f. 01.04.2019, it must be interpreted to apply since the insertion of s. 50C (01.04.2003) because it is curative and removes an incongruity and avoids undue hardship to assesseess (ii) LTCG from penny stocks cannot be treated as bogus if the documentation is in order and no fault is found by the AO

The insertion of third proviso (noted above) to Section 50C of the Act is declaratory and curative in nature. That is, the third provisoto Section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective.Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to Section50C should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced.

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DATE: June 14, 2019 (Date of pronouncement)
DATE: August 14, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 10(38) Bogus Capital Gains from Penny Stocks (282x gain in 12 months): The meticulous paper work of routing the transaction through banking channel is futile because the results are altogether beyond human probabilities. Neither in the past nor in the subsequent years, assessee has indulged into any such investment having huge windfall. Had the assessee been so intelligent qua the intricacies of the share market, he would have definitely undertaken such risk taking activities in the past or future by making such investment in unknown stock. It is a sham transaction to convert undisclosed income into disclosed by evading tax under the garb of LTCG in connivance with entry providers (Pooja Ajmani & Udit Kalra 176 DTR 249 (Del) followed

The contention of the assessee that he has purchased the shares through banking channel and as such, when the purchase is genuine then sale cannot be questioned, is not tenable because the entire transaction of sale and purchase is to be seen in entirety in the light of the attending circumstances particularly when share of Rs.10 is sold after a period of one year at 282 times which is otherwise improbable in the ordinary course of business.

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DATE: June 12, 2019 (Date of pronouncement)
DATE: June 22, 2019 (Date of publication)
AY: 2015-16
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S. 68 Bogus Capital Gains from Penny Stocks: The allegation that the Co is a penny stock co whose share price has been artificially rigged by promoters/brokers/operators to create non-genuine LTCG is not sufficient. The AO has failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that the documents were not authentic. No specific enquiry or investigation was conducted in the case of the assessee and/or his broker either by the INV Wing or by the AO during the course of assessment proceedings. The penny stock was also not subject to any action from SEBI (Udit Kalra 176 DTR 249 (Del) distinguished, Fair Invest Ltd 357 ITR 146 (Del) followed)

These facts clearly demonstrate that the assessee is a habitual investor and being a qualified professional [Chartered Accountant], is well aware of market trends of shares in the stock market. The entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the INV Wing as well as information received from the INV Wing. It is apparent from the assessment order that the Assessing Officer has not conducted any independent and separate enquiry in this case of the assessee. Even the statement recorded by the INV Wing has not been got confirmed or corroborated by the person during the assessment proceedings

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DATE: April 25, 2019 (Date of pronouncement)
DATE: May 11, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 10(38) Bogus Capital Gains From Penny Stocks: U/s 101 of Evidence Act, 1972, the onus is on the assessee to prove that the LTCG is genuine. The assessee cannot, on failure to establish a prima facie case, take advantage of the weakness in the AO's case. The jump in the share price of a company of unknown credentials cannot be an accident or windfall but is possible because of manipulations in a pre-planned manner by interested broker and entry operators. The LTCG transactions are a sham

Documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long terra capital gain by well organised network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. I further find that the share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax.

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DATE: March 8, 2019 (Date of pronouncement)
DATE: April 3, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 10(38) Bogus Capital Gains from Penny Stocks: It is intriguing is that the company had meagre resources and reported consistent losses. The astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. The assessee’s argument that he was denied the right to cross-examine the individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim is not relevant in the wake of findings of fact

There was a specific information that assessee has indulged in non-genuine and bogus capital gain obtained from the transactions of purchase and sale of shares of M/s Kappac Pharma Ltd., a Mumbai based company. It is noticed that the purchase transaction has been done off market in physical form by paying cash. The assessee has purchased the share M/s Kappac Pharma Ltd. in physical form and thereafter, the same have been converted into electronic mode. The purchase payments were made in cash and not through the normal banking channel therefore the same were non verifiable from the authentic supporting details such as bank account/ documents. Assessee is not a regular investor in shares. The assessee has failed to furnish the proof of source for the purchase transactions. Thus, the entire transactions are against human probability

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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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CITATION:
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

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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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CITATION:
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

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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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CITATION:
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

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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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CITATION:
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