Search Results For: 10(38)


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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CITATION:
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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CITATION:
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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CITATION:
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

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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CITATION:
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)

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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CITATION:
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.

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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CITATION:
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

ITO vs. Dilip B. Desai HUF (ITAT Kolkata)

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DATE: January 27, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2006-07, 2009-10
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CITATION:
S. 10(38): If the AO has accepted the claim for exemption for long-term capital gains and conceded that the assessee is an "investor", he cannot change his stand and treat the assessee as a "trader" in respect of the claim of short-term capital gains alone

The AO having accepted the claim of exemption u/s 10(38) of the Act for long term capital gains of the assessee had conceded the claim of assessee to be an investor and the AO cannot take a different stand by treating the assessee as a trader in respect of short term capital gains alone

ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad)

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DATE: January 6, 2017 (Date of pronouncement)
DATE: January 16, 2017 (Date of publication)
AY: 2005-06
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CITATION:
Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus

Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions. When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee

Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata)

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DATE: January 11, 2017 (Date of pronouncement)
DATE: January 14, 2017 (Date of publication)
AY: 2005-06
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CITATION:
Bogus capital gains from penny stocks: Long-term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault

The lower authorities have not brought on record any concrete evidence for disallowing the long term capital gain of the assessee. The AO should have issued notices and summons to M/s RFL and ACPL under section 133(6) and 131 of the Act for the production of the necessary financial information before rejecting the claim of the assessee. We find that all the necessary information which were available with the assessee had been brought on record by the assessee before the lower authorities. In case ACPL has not filed the financial statements with the stock exchange then the assessee for the fault of ACPL cannot be held guilty under the income tax proceedings. The assessee in the instant case has made the transactions for the sale and purchase of the shares through a valid stock broker who was in existence at the relevant time with the stock exchange and this fact has not been doubted by the lower authorities. In view of the above we hold that the lower authorities had not brought on record sufficient reasons for disallowing the claim of the assessee

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