ITO vs. Shamim M. Bharwani (ITAT Mumbai)

DATE: March 27, 2015 (Date of pronouncement)
DATE: April 15, 2015 (Date of publication)
AY: 2006-07
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S. 68: Despite documentary evidence and broker’s confirmation, genuineness of penny stock transactions has to be determined on the basis of ‘preponderance of human probabilities’. If assessee is unable to explain ‘intriguing’ facts and circumstances, genuineness of transaction cannot be accepted

(i) The issue before us is whether the documents furnished by the assessee, including averments made by him, or even his broker, satisfy the test of preponderance of human probabilities. In our view if the assessee has reasonably explained the ‘intriguing’ facts and circumstances as pointed by the AO, and on the strength of which the genuineness is assailed by him, and which further agree with that observed in the case of a penny stock company, no case for treating the transaction as not genuine shall arise. The onus u/s.68 though is on the assessee, so that his explanation would, however, require being substantiated or proved.

(ii) Firstly, documentary evidences, in the face of unusual events, as prevailing in the instant case, and without any corroborative or circumstantial evidence/s, cannot be regarded as conclusive. Two, the preponderance of probabilities only denotes the simultaneous existence of several ‘facts’, each probable in itself, albeit low, so as to cast a serious doubt on the truth of the reported ‘facts’, which together make up for a bizarre statement, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible and independent evidences. For a scrip to trade at nearly 50 times its’ face value, only a few months after its issue, only implies, if not price manipulation, trail blazing performance and/or great business prospects (with of course proven management record, so as to be able to translate that into reality), while even as much as the company’s business or industry or future program (all of which would be in public domain), is conspicuous by its absence, i.e., even years after the transaction/s. The company is, by all counts, a paper company, and its share transactions, managed. We, accordingly, reversing the findings of the first appellate authority, confirm the assessment of the impugned sum u/s.68 of the Act. We decide accordingly.

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