Search Results For: Penny Stocks


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

Arun Kumar vs. ACIT (ITAT Delhi)

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DATE: November 5, 2018 (Date of pronouncement)
DATE: November 9, 2018 (Date of publication)
AY: 2014-15
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S. 10(38)/68 Bogus long-term capital gains from penny stocks: It cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply. The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares. The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc to prove the genuineness of the transactions are false or fictitious or bogus (All judgements considered)

We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38)

CIT vs. Alpine Investments (Calcutta High Court)

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DATE: August 26, 2008 (Date of pronouncement)
DATE: September 15, 2018 (Date of publication)
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S. 68 Bogus Capital Gains From Penny Stocks: The share transaction is genuine because it is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments. A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises

It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment

DCIT vs. Saurabh Mittal (ITAT Jaipur)

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DATE: August 29, 2018 (Date of pronouncement)
DATE: September 13, 2018 (Date of publication)
AY: 2014-15
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S. 68 Bogus capital gains from penny stocks: Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE Vs Andaman Timber Industries 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc

The Assessing Officer has not brought any material on record to controvert the fact duly established by the supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in the DEMAT account, allotment of the shares amalgamated new entity in lieu of the earlier two companies of equal number of shares. Sale of shares from the DEMAT account through stock exchange and at the prevailing price as on the date of sale and further payment of STT on the transaction of sale has been duly established. In absence of any contrary fact, the mere reliance by the Assessing Officer on the report of Investigation Wing, Kolkata is not sufficient to establish the fact that the transaction is bogus.

CIT vs. Pooja Agarwal (Rajasthan High Court)

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DATE: September 11, 2017 (Date of pronouncement)
DATE: September 8, 2018 (Date of publication)
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Bogus Capital Gains from Penny Stocks: If the transaction is supported by documents like contract notes, demat statements etc and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee's account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit

When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants’s account. Prima facie the transaction which are supported by documents appear to be genuine transactions

Pramod Kumar Lodha vs. ITO (ITAT Jaipur)

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DATE: July 16, 2018 (Date of pronouncement)
DATE: August 2, 2018 (Date of publication)
AY: 2010-11
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S. 10(38) Bogus long-term gains from penny stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee

The decision of the AO holding the transaction as bogus and denying the claim of long term capital gain under section 10(38) of the Act is based on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. The enquiry conducted by the ITO Investigation Indore is not a conclusive finding of fact that the transaction of purchase of shares by the assessee is bogus particularly in view of admitted fact that these shares were held by the assessee and were duly materialized in the d-mat account. Therefore, until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee, the mere suspicion how so ever strong may be, cannot be a basis of addition or disallowance of claim

Navneet Agarwal vs. ITO (ITAT Kolkata)

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DATE: July 20, 2018 (Date of pronouncement)
DATE: July 28, 2018 (Date of publication)
AY: 2014-15
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CITATION:
Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee's action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee . All imp judgements referred

The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established

Prakash Chand Bhutoria vs. ITO (ITAT Kolkata)

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DATE: June 27, 2018 (Date of pronouncement)
DATE: June 30, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 68 Bogus Capital Gains from Penny Stocks: 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalizations. Evidence collected from third parties cannot be used against the assessee without giving him a copy & an opportunity to rebut the same

The AO further relies on the shop increase of 31000% of the value of shares over the period of 2 years. Though this is highly suspicious, it cannot take the place of evidence. The Hon’ble Supreme Court has stated that suspicion however strong cannot be the basis for making an addition. The evidence produced by the assessee listed above proves his case and the AO could not controvert the same by bringing on record any evidence. The evidence said to have been collected by the DIT (INV.), Kolkata and the report is not produced before this Bench

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