{"id":20980,"date":"2019-08-14T09:29:22","date_gmt":"2019-08-14T03:59:22","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=20980"},"modified":"2019-08-14T09:29:22","modified_gmt":"2019-08-14T03:59:22","slug":"sanat-kumar-vs-acit-itat-delhi-s-1038-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","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/sanat-kumar-vs-acit-itat-delhi-s-1038-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\/","title":{"rendered":"Sanat Kumar vs. ACIT (ITAT Delhi)"},"content":{"rendered":"

IN THE INCOME TAX APPELLATE TRIBUNAL
\n(DELHI BENCH \u2018E\u2019 : NEW DELHI)
\nBEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
\nand
\nSHRI KULDIP SINGH, JUDICIAL MEMBER
\nITA No.1881\/Del.\/2018
\n(ASSESSMENT YEAR : 2014-15)
\nAND
\nStay No.233\/Del\/2019
\n(in ITA No.1881\/Del.\/2018)
\n(ASSESSMENT YEAR : 2014-15)
\nShri Sanat Kumar, vs. ACIT, Circle 36 (1),
\n210, Amber Tower, New Delhi.
\nCommercial Complex, Azadpur,
\nDelhi \u2013 110 033.
\n(PAN : AAQPJ3291A)
\n(APPELLANT) (RESPONDENT)
\nASSESSEE BY : Shri S.K. Gupta, Advocate
\nREVENUE BY : Shri N.K. Bansal, Senior DR
\nDate of Hearing : 06.06.2019
\nDate of Order : 14.06.2019
\nO R D E R
\nPER KULDIP SINGH, JUDICIAL MEMBER :
\nAppellant, Shri Sanat Kumar (hereinafter referred to as the
\n\u2018assessee\u2019) by filing the present appeal sought to set aside the
\nimpugned order dated 01.11.2017 passed by the Commissioner of
\nITA No.1881\/Del.\/2018
\n2
\nIncome-tax (Appeals)-12, New Delhi qua the assessment year
\n2014-15 on the grounds inter alia that :-
\n\u201c1. The order of Ld. Commissioner of Income tax (Appeals),
\nXII (\u2018Ld. CIT (A)\/Ld.AO had grossly erred in facts and in law by
\nholding that the Long term capital gains earned by the assessee
\nand claimed as exempt u\/s 10(38) of the Act, is an undisclosed
\nincome which has been taxed u\/s 68 read with section
\n115BBE(1) of the Act @30%.
\n2. That the Ld. CIT(A) \/ Ld. AO had grossly erred in facts
\nand in law by holding that the LTCG earned by the assessee is
\nbogus, by totally ignoring the robust documentation submitted by
\nthe assessee during the course of assessment and appellate
\nproceedings.
\n3. That the Ld. CIT(A) \/ Ld. AO had grossly erred in facts
\nand in law by extrapolating the statements of third parties in the
\npresent case without providing an opportunity for cross objection
\nby the assessee and also had grossly erred in not making any
\nindividual efforts by issuing summons to record the statements of
\nany SEBI officer and any director of the company.
\n4. That the Ld. CIT(A) \/ Ld. AO had grossly erred in simply
\ntaxing an exempt transaction of the assessee on the basis of a
\n‘borrowed satisfaction’.
\n5. That neither the Ld. CIT(A) nor the Ld. AO had been able
\nto prove by bringing any document on record in order to
\nestablish their allegation that the assessee had purchased the
\nexempt LTCG from the share broker in question.
\n6. Without prejudice, the provisions of section 68 are not
\napplicable in the present case which has been applied by the Ld.
\nCIT(A) \/ Ld. AO.\u201d
\n2. Briefly stated the facts necessary for adjudication of the
\ncontroversy at hand are : Assessee filed return of income declaring
\ntotal income of Rs.24,29,600\/- after declaring deductions under
\nsection 6A (vi) of the Income-tax Act, 1961 (for short \u2018the Act\u2019)
\nRs.1,00,000\/-. Assessee has also shown Long Term Capital Gain
\nITA No.1881\/Del.\/2018
\n3
\n(LTCG) of Rs.1,21,69,408\/- and claimed the same as exempt
\nincome u\/s 10(38) of the Act on account of sales of shares of M\/s.
\nCressanda Solution Ltd..
\n3. The Directorate of Investigation, Calcutta unearthed an
\norganized racket of generating bogus entries for LTCG which is
\nexempt from tax. The modus operandi of the operators was to
\nmake the beneficiary to purchase some shares of pre-determined
\npenny stock company controlled by them, then these shares are
\ntransferred to the beneficiary at a nominal price mostly off-line
\nthrough preferential allotment or off-line sale to save STT,
\nbeneficiary used to hold the shares for one year and then claimed
\nthe LTCG u\/s 10(38) of the Act. The operators used to rig the
\nprices of the stock and gradually enhanced its price many times,
\noftenly 500 to 1000 times.
\n4. AO noticed that the assessee is one of such beneficiaries
\nwho has taken entry of Rs.1,21,69,408\/- during the year under
\nassessment. Initially, assessee purchased 25,000 shares for an
\namount of Rs.2,50,000\/- on 31.10.2011 and sold the same during
\nthe period 27.06.2013 to 23.09.2013 for sale consideration of
\nRs.1,21,69,408\/-. AO from the details supplied by the assessee
\nnoticed that the assessee indulged in bogus LTCG and claimed the
\namount of Rs.1,21,69,408\/- as exempt u\/s 10(38) of the Act by way
\nITA No.1881\/Del.\/2018
\n4
\nof purchase and sale of shares of Cressanda Solution Ltd. through
\nits broker, Indo Jatalia Securities Pvt. Ltd. After issuing the notice
\nto the assessee, AO investigated the matter and called necessary
\ninformation u\/s 133 (6) of the Act from Principal Officer, Bombay
\nStock Exchange. AO examined the genuineness of the transaction
\nand reached the conclusion that though the transaction qua the
\nLTCG claimed by the assessee appears real but in fact are sham
\ntransactions as the assessee has adopted a colourable device to
\nevade the tax and found the transaction bogus, sham and nothing
\nbut a racket of accommodation entry and thereby made an addition
\nof Rs.1,21,69,408\/-, and thereby assessed the total income of the
\nassessee at Rs.1,45,99,000\/-.
\n5. Assessee carried the matter by way of an appeal before the
\nld. CIT (A) who has confirmed the addition by dismissing the
\nappeal. Feeling aggrieved, the assessee has come up before the
\nTribunal by way of filing the present appeal.
\n6. We have heard the ld. Authorized Representatives of the
\nparties to the appeal, gone through the documents relied upon and
\norders passed by the revenue authorities below in the light of the
\nfacts and circumstances of the case.
\n7. Ld. AR for the assessee challenging the impugned order
\ncontended inter alia that the AO as well as CIT (A) have
\nITA No.1881\/Del.\/2018
\n5
\nmade\/confirmed the addition without verifying the purchase and
\nsale of the transaction of shares without verifying from the third
\nparty; that none of the statement recorded by the Investigating
\nWing of the Department contains name of the assessee as
\nbeneficiary of the transaction entered in the documents and its
\nbrokers through whom the assessee had sold the shares in question;
\nthat the assessee has not been provided with opportunity to cross
\nexamine various individuals whose statements have been relied
\nupon; that the entire allegation made by the AO are based upon his
\n(AO) imagination; that the AO has wrongly made the addition u\/s
\n68 of the Act which is not attracted; that when the purchase of
\nshares is genuine then sale cannot be questioned; that the addition
\nhas been made by the AO\/CIT (A) on the basis of wild allegation
\nwithout any evidence; that movement in prices of shares is based
\non supply and demand factor of a particular script and relied upon
\nthe decisions of CIT vs. Vishal Holding & Capital Pvt. Ltd. in ITA
\n1031\/2010 and CIT vs. Med Shave Health Care Ltd..
\n8. However, on the other hand, ld. DR for the Revenue to repel
\nthe arguments addressed by the ld. AR for the assessee contended
\nthat Cressanda Solution Ltd. has been duly investigated by
\nDepartment of Revenue Intelligence (DRI) and found that the same
\nis a bogus company engaged in arranging for bogus LTCG; that
\nITA No.1881\/Del.\/2018
\n6
\nsince certain amounts out of sale of shares is credited in the books
\nof account by the assessee, section 68 is applicable and relied upon
\ndecisions of Pooja Ajamni vs. ITO<\/a> \u2013 ITA No.5714\/Del\/2018 order
\ndated 25.04.2019 and Udit Kalra vs. ITO<\/a> \u2013 ITA No.6717\/Del\/2017
\norder dated 08.01.2019.
\n9. Undisputedly, assessee has purchased 25,000 shares on
\n24.11.2011 by way of allotment for Rs.2,50,000\/-, which were
\ndematerialized on 12.06.2013 and thereafter assessee sold the
\nshares on 25.06.2013 to 19.09.2013 for Rs.1,24,61,944\/- after
\ndeducting STT of Rs.12,461\/- and other charges of Rs.17,426\/- and
\nthereby claimed the same as exempt u\/s 10(38) of the Act.
\n10. From the undisputed facts, arguments addressed by the ld.
\nAuthorized Representatives of the parties to the appeal, order
\npassed by the lower Revenue authorities and case laws relied upon,
\nthe sole question arises for determination in this case is :-
\n\u201cas to whether ld. CIT (A) has erred in facts and law in
\nconfirming the disallowance of long term capital gains
\nmade by the AO, claimed by the assessee u\/s 10(38) of
\nthe Act on the ground that shares were purchased by
\nthe assessee by making payment through banking
\nchannel?
\n11. Perusal of the assessment order framed by the AO apparently
\nshows that a thorough investigation has been made by calling
\nITA No.1881\/Del.\/2018
\n7
\ninformation u\/s 133(6) of the Act from Bombay Stock Exchange as
\nto whether company, namely, Cressanda Solution Ltd. whose
\nshares have been purchased and sold by the assessee to claim the
\nLTCG was suspended for trade within last three years. AO
\nreceived specific reply from Bombay Stock Exchange that \u201cas per
\nrecord available with the exchange, trading in the securities of the
\ncompany, Cressanda Solution Ltd. was suspended w.e.f. February
\n18, 2013 on account of reduction of capital and revoked w.e.f.
\nMarch 14, 2013\u201d. When we examine this fact in the light of the
\ndate of shares of sale by the assessee i.e. 25.06.2013 to 19.09.2013,
\nit becomes clear that working of the company was not above board
\nand it was merely providing accommodation entries in the form of
\nbogus LTCG and STCG in order to evade the taxes.
\n12. The contention of the assessee that he has purchased the
\nshares through banking channel and as such, when the purchase is
\ngenuine then sale cannot be questioned, is not tenable because the
\nentire transaction of sale and purchase is to be seen in entirety in the
\nlight of the attending circumstances particularly when share of Rs.10 is
\nsold after a period of one year at 282 times which is otherwise
\nimprobable in the ordinary course of business. More particularly
\nwhen trading of the company was suspended by Bombay Stock
\nExchange in February 2013 and revoked w.e.f. March 2013.
\nITA No.1881\/Del.\/2018
\n8
\n13. Furthermore, when during the course of argument, ld. AR
\nfor the assessee was asked to explain the business of Cressanda
\nSolution Ltd., he feigns ignorance by stating that assessee is neither
\npromoter nor Director of the said company and he is unable to
\ndisclose these facts. We are of the considered view that when
\nassessee is the beneficiary to the maximum extent, he cannot be
\nallowed to step aside the questions because in the ordinary course
\nof business, no one can be expected to invest the amount in a
\ncompany having no profile in public domain. First of all, anybody
\nwho makes an investment in the company by way of purchase of
\nshares, he used to peruse the profile and go through the balance
\nsheet of the company.
\n14. But ld. AR for the assessee has also shown his helplessness
\nto bring on record the balance sheet of the company which further
\nstrengthens the findings returned by the AO as well as ld. CIT (A)
\nthat Cressanda Solution Ltd. was just providing accommodation
\nentries in form of fictitious LTCG claim to evade the taxes.
\n15. When we examine para 9.1 of the ld. CIT (A) he has given
\nfactual matrix of the sale of the shares by recording the finding that
\nthe prices of the shares of Cressanda Solution Ltd. were below Rs.1
\nper share till January 2013 but suddenly rose to Rs.45 per share in
\nMay 2013 onwards. Assessee purchased the shares @ Rs.10 which
\nITA No.1881\/Del.\/2018
\n9
\nshot upto Rs.476\/- to Rs.503.90 per share in June and July 2013.
\nThis improbable appreciation in the price of the share when
\nexamined in the light of the fact that the assessee was not aware of
\nprofile of Cressanda Solution Ltd., its financial performance,
\ngrowth, risk factor, etc. and it makes the entire transaction bogus
\nand ingenuine.
\n16. The contention of the ld. AR for the assessee that he was not
\nprovided an opportunity of cross examining the witnesses
\nexamined by the DRI is not tenable because on the basis of
\ninvestigation, AO has further conducted the investigation and he
\nhas confronted assessee with all the evidence collected by him
\n(AO).
\n17. Moreover, DRI, Calcutta has thoroughly investigated 84
\npenny stock shares quoted on BSE and examined on oath large
\nnumber of brokers, Directors of the Companies, promoters of
\npenny stock companies, the entry operators who managed the
\ndummy companies involving in price rigging. Investigation
\nconducted by DRI was further shared with SEBI who has
\ninvestigated 11 cases and found the allegations to be correct. So,
\nin these circumstances, merely because of the fact that the initial
\npurchase has been made through banking channel by the assessee,
\nthe entire transactions which are apparently appeared to be bogus
\nITA No.1881\/Del.\/2018
\n10
\nproviding 282 times of appreciation to the assessee by the company
\nwhose balance sheet and profile is not available, cannot be held to
\nbe valid one.
\n18. No doubt, shares of these penny stock companies are listed
\non exchange but they are controlled by its promoters who used to
\narrange for bogus LTCG by indulging into price rigging etc.
\nMeteoric rise in the prices of an unknown company whose trading
\nin securities was suspended on 18.02.2013 and subsequently
\nrevoked on 14.03.2013 by the Bombay Stock Exchange shows that
\nthe transaction itself is bogus having been purchased through the
\nbrokers who are dealing in such dummy purchases. In the given
\ncircumstances, the assessee has failed to prove that his transaction
\nwas genuine and he has not indulged into any such bogus
\npurchases. Moreover, when some of the amount out of the sale of
\nshares is found to be credited in the books of account of the
\nassessee, section 68 is applicable.
\n19. Furthermore, investigation conducted by the DRI found that
\none of the Directors of Cressanda Solution Ltd., namely, Shri Ajit
\nKumar Tulsiyan confessed that scrip of Cressanda Solution Ltd.
\nhas been controlled and managed by Deepak Patwari which fact
\nwas duly brought to the notice of the assessee and he has not tried
\nto discredit that statement by producing Shri Ajit Kumar Tulsiyan
\nITA No.1881\/Del.\/2018
\n11
\nbefore the AO during assessment proceedings particularly when
\nthe said statement was made part of the show-cause notice issued
\nto the assessee.
\n20. For argument sake, even if the purchase of the assessee is
\nassumed to be genuine, the sale of shares at astronomical price
\nwith no real buyer in the market itself shows that the transaction
\nwas bogus, sham and ingenuine one.
\n21. The contention of the ld. AR for the assessee that it has duly
\nsatisfied the conditions laid down u\/s 10(38) of the Act to claim the
\nLTCG of Rs.1,21,69,408\/- from the sale of shares of Cressanda
\nSolution Ltd. is not tenable when this company, Cressanda
\nSolution Ltd., is proved to be in the air and assessee is not aware of
\nits profile, growth, risk, etc. Even meteoric rise in the prices of the
\nshare in the given circumstances itself proves that it was merely a
\nbogus transaction to convert the black money into white money.
\n22. The contention of the ld. AR for the assessee that risk
\nappetite determines the profit in sale and purchase of shares and
\nwhen he has invested the money by purchasing the shares of
\nCressanda Solution Ltd. through banking channel its sale cannot be
\nquestioned, is not tenable because it is not a case of risk appetite to
\ndetermine the profit rather entire transaction is in the papers only
\nITA No.1881\/Del.\/2018
\n12
\nand Cressanda Solution Ltd. has no legs to stand to make 282 times
\nof return to its investors.
\n23. The contention of the ld. AR for the assessee that suspension
\nof trading activities of Cressanda Solution Ltd. by BSE is because
\nof reduction in capital and not on the allegation of price rigging is
\nalso not tenable because the transaction has to be examined as a
\nwhole and not on the basis of one or two single facts.
\n24. The contention of the ld. AR for the assessee that hike in the
\nprices of shares of Cressanda Solution Ltd. was because of the
\namalgamation of M\/s. Smartchamp IT and Infra Ltd. is also not
\ntenable because this is the common modus operandi of penny stock
\ncompanies in order to provide improbable capital gain to the
\ninvestors. Moreover, in the absence of profile and balance sheet of
\nCressanda Solution Ltd., its financial performance cannot be
\ngauged. Assessee preferred not to throw any light on the profile
\nand financial performance of Cressanda Solution Ltd. to prove the
\ngenuineness of the transactions.
\n25. We are further of the view that price rigging of the shares
\ncan only be determine from the circumstances in which shares have
\nbeen purchased in physical form and then get dematerialized just
\nbefore the sale at astronomical price because direct evidence in
\nsuch circumstances is usually not available.
\nITA No.1881\/Del.\/2018
\n13
\n26. Coordinate Bench of the Tribunal in case cited as Pooja
\nAjmani vs. ITO (supra) in the identical set of facts dismissed the
\nappeal of the assessee by returning following findings :-
\n\u201c5. I have heard both the parties and perused the records
\nespecially the impugned order. I find that AO after a detailed analysis
\nof the investigation report with the materials available on record in the
\ncase of the assessee and on further examination of the financials of
\nKappac Pharma Ltd., price & volume of the scrip of Kappac Pharma
\nLtd., concluded that the modus operandi adopted by the assessee
\nfollowed the pattern discovered by the Investigation wing during
\nvarious search and survey operations. It was held that that the
\ntransactions showing long term capital gain, which had been claimed
\nby the assessee as exempt under section 10(38), were sham
\ntransactions. It was held that it was a case of bogus long-term capital
\ngain obtained through brokers and that the assessee had used
\ncolourable device for avoidance of tax. The receipt of Rs.23,68,313\/-
\nwas deemed to be income under section 69A. The assessee has
\ncontended that 4,000 shares of Kappac Pharma Ltd. purchased from
\nCorporate Stock Broking (P) Ltd. at a price of Rs.13.09 per share in
\nphysical form. It has also been submitted that out of the 4,000 shares,
\n3000 shared were sold on 04\/02\/2014 for @Rs.677 per share and
\nanother 500 were sold on 18\/02\/2014 for a sum of @Rs.691 per share.
\nIt has also been submitted that the assessee did not indulge in any
\nmanipulation which may have been done by some broker and that the
\nappellant was not given opportunity for cross examination. It has also
\nbeen submitted that the Assessing Officer has made the addition
\nwithout considering the facts of the case and only on the basis of
\npresumption and presuppositions. It is noticed that prima facie, copies
\nof all documents have been submitted to substantiate the genuineness
\nof transactions related to purchase and subsequent sale of shares
\nleading to long-term capital gain claim by the appellant. I find that
\nthese documents were also placed before the Assessing Officer who,
\nafter detailed examination and discussion and going beyond the said
\ndocuments has established that the said documents were a mere mask
\nto hide the real nature of transactions. By analysing the Balance Sheet,
\nProfit &Loss account and the trade pattern of Kappac Pharma Ltd.
\nduring the period March, 2010 to March 2014, the Assessing Officer
\nhas pointed out that the share price of this company was neither
\naffected by the movement of sensex nor the financials of the company
\njustified such extraordinary jump in the price of its shares. It is noticed
\nthat apart from being based on evidences gathered during search and
\nsurvey operations, analysis of the material on record and analysis of
\ninformation from various sources, the findings of the Assessing Officer
\nare also based on strong surrounding circumstances, preponderance of
\nprobability and human conduct in the light of detailed analysis of the
\nmodus operandi adopted by brokers and operators engaged in the
\nbusiness of providing entries of long term capital gains to the interested
\nbeneficiaries which has come to surface as a result of deep and wide
\ninvestigation. Initial investment in a company of unknown credentials
\nand subsequent jump in the share price of such a company cannot be
\nITA No.1881\/Del.\/2018
\n14
\nan accident or windfall but was possible, as clearly brought on record
\nby the Assessing Officer, because of the manipulations in the price of
\nshares in a pre-planned manner by the interested broker and entry
\noperators. The insistence of the assessee that the transactions leading
\nto long-term capital gains are supported by documents such as sale and
\npurchase invoices, bank statements etc. cannot be accepted in view of
\nthe fact and circumstances of the case brought on record by the
\nAssessing Officer after proper examination of the material facts and
\nafter taking into account the findings of SEBI and corroborating
\nevidences gathered by the Directorate of Investigation, Kolkata against
\na network of brokers and operators engaged in manipulation of market
\nprice of shares of certain companies controlled and managed by such
\npersons with a purpose to provide accommodation entries in the form
\nof long term capital gains. Further, the contention of the assessee that
\nlong term capital gains cannot be treated as bogus merely because
\nsome investigation with regard to certain company and broker or
\ninvestigation has been carried out by the Directorate of Investigation,
\nKolkata only proves that the appellant wants to take shelter under such
\ndocumentary evidences which themselves have been created as masks
\nto cover up the true nature of transaction. A genuine transaction must
\nbe proved to be genuine in all respect. The onus was on the appellant to
\nprove that the transaction leading to claim of long term capital gains
\nwas distinctly genuine transaction and not bogus, premeditated
\ntransaction arranged with a view to evade taxes. The onus was on the
\nassessee to contradict the findings that Kappac Pharma Ltd. was a
\ncompany whose scrip was capable of being traded at high price as it
\nwas the appellant who had traded in the shares of the this company
\nwhich resulted into claim of long term capital gains which is exempt
\nunder section 10(38). Once the assessee was made aware of the result
\nof the investigation which proved that trading of shares leading to long
\nterm capital gains was not genuine, as per section 101 of the Indian
\nEvidence Act, 1972, the onus was on the assessee to prove that she had
\nearned genuine long term capital gains as it was the assessee who has
\nmade a claim that she was engaged in genuine share transactions. I
\nfind that in the case of Shri Charan Singh vs. Chandra Bhan Singh
\n(AIR 1988 SC 6370), the Hon’ble Supreme Court have clarified that
\nthe burden of proof lies on the party who substantially asserts the
\naffirmative of the issue and not upon the party who denies it. It has
\nbeen further held that the party cannot, on failure to establish a prima
\nfacie case, take advantage of the weakness of his adversary’s case. The
\nparty must succeed by the strength of his own right and the clearness
\nof his own proof. He cannot be heard to say that it was too difficult or
\nvirtually impossible to prove the matter in question. In the case under
\nconsideration, since it is the appellant who had made the claim that she
\nhad earned genuine long term capital gain, all the facts were especially
\nwithin her knowledge. Section 102 of Indian Evidence Act makes it
\nclear that initial onus is on person who substantially asserts a claim. If
\nthe onus is discharged by him and a case is made out, the onus shifts
\non to deponent. It is pertinent to mention here that the phrase “burden
\nof proof” is used in two distinct meanings in the law of evidence viz,
\n‘the burden of establishing a case’, and ‘the burden of introducing
\nevidence’. The burden of establishing a case remains throughout trial
\nwhere it was originally placed, it never shifts. The burden of evidence
\nmay shift constantly as evidence is introduced by one side or the others.
\nIn this case, once the evidence that assessee has claimed bogus long
\nITA No.1881\/Del.\/2018
\n15
\nterm capital gain was introduced by the Assessing Officer, the burden
\nof evidence shifted to the assessee. During the assessment proceeding
\nand even during the assessee proceeding, the assessee has failed to
\nproduce any evidence to prove that the long term capital gain claimed
\nby her was genuine. In the present case, it is seen that the assessee has
\nfailed to discharge her burden of proof and the Assessing Officer, on
\nthe other hand, has proved that the claim of the appellant was
\nincorrect. The enquiry conducted by SEBI was further corroborated by
\nthe investigation carried out by the Directorate of Investigation, has
\nbeen thoroughly analysed by the Assessing Officer to prove that the
\nassessee has introduced bogus long term capital gains in her books of
\naccount by routing her unaccounted income through a tax evasion
\nscheme. The statement of brokers engaged in providing bogus long
\nterm capital gains clearly proves that Kappac Pharma Ltd. is one of
\nsuch companies whose scrips have been manipulated to provide bogus
\nlong term capital gains. It is noted that on similar facts and
\ncircumstances, Hon’ble ITAT A-Bench, Chandigarh in the case of Shri
\nAbhimanyu Soin vs ACIT, Circle-7, Ludhiana in ITA
\nNo.951\/Chd.\/2016 vide order dated 18\/04\/2018, have expressed the
\nview that the undisclosed income in the garb of long term capital gain
\nhas to be assessed as unexplained. The Hon’ble ITAT have held as
\nunder:-
\n“14. The ratio laid down by the Hon’ble Supreme Court in the
\ncase of SumatiDayal Vs. CIT [1995] 214 1TR 801 = 2002-
\nTIOL-885-SC-IT-LB is squarely applicable in this case.
\nThough the assessee has received the amounts by the way of
\naccount payee cheques, the assessee could nowhere prove the
\npurchase of shares as claimed to have been made on
\n02\/72\/2008 in cash and it urns also not proved about the
\navailability of the funds with the assessee as on the date of
\npurchase of shares. The assessee was not in India as per the
\npassport details available as per the record. This, coupled with
\nthe fact that the transfer of money in cash from Ludhiana to
\nDelhi and a person representing the broker operating at
\nKolkata has collected the money at Delhi cannot be accepted.
\nThe tax authorities are entitled to look into the surrounding
\ncircumstances to find out the realities and the matter has to be
\nconsidered by applying test of human probabilities as
\nenunciated by the Hon’ble Supreme Court. The fact that inspite
\nof earning 3072% of profits, the assessee never ventured to
\ninvolve himself in any other transactions with the broker which
\ngave him even much lower profits during the period which
\ncannot be a mere coincidence or lack of interest or absence of
\nadvice from the financial institutions as done earlier.
\n15. In view of the detailed discussion above, and keeping in
\nview the entirety of the facts and circumstances and specific
\npeculiarity of the instant case and the judgments quoted above,
\nwe decline to interfere in the order of the Ld. CIT (A).
\n16. In the result, appeal of the Assessee is dismissed.\u201d
\n5.1 On the issue of circumstantial evidence and in the matters
\nrelated to the discharge of ‘onus of proof’ and the relevance of
\nITA No.1881\/Del.\/2018
\n16
\nsurrounding circumstances of the case, the Hon’ble Supreme Court in
\nthe case of CIT Vs. Durga Prasad More [(1972) 82 ITR540], have
\nobserved as under:
\n“…that though an appellant\u2019s statement must be considered
\nreal until it zvas shown that there were reasons to believe that
\nthe appellant was not the real, in a case where the party relied
\non self-sewing recitals in the documents, it was for the party to
\nestablish the transfer of those recitals, the taxing authorities
\nwere entitled to look into the surrounding circumstances to
\nfind out the reality of such recitals. Science has not yet
\ninvented any instrument to test the reliability of the evidence
\nplaced before a Court or Tribunal. Therefore, the Courts and
\nthe Tribunals have to judge the evidence before them by
\napplying the test of human probability. Human minds may
\ndiffer as to the reliability of piece of evidence, but, in the
\nsphere, the decision of the final fact finding authority is made
\nconclusive by law.\u201d
\n5.2 I further find that the above ratio as laid down by the Hon’ble
\nSupreme Court has been reiterated and applied by the Hon’ble Apex
\nCourt in the case of Sumati Dayal vs. CIT (214 ITR 801). It is essential
\non the part of the Assessing Officer to look into the real nature of
\ntransaction and what happens in the real word and contextualize the
\nsame to such transactions in the real market situation. Further, in the
\ncase of McDowell &: Co. Ltd.[(1985) 154 ITR 148 (SC)],the Hon’ble
\nSupreme Court have observed as under:
\n“Tax planning may be legitimate provided it is within the
\nframework of law. Colourable devices cannot be part of tax
\nplanning and it is wrong to encourage or entertain the belief
\nthat it is honourable to avoid the payment of tax by resorting to
\ndubious methods. It is the obligation of every citizen to pay the
\ntaxes honestly without resorting to subterfuges.”
\n5.3 Every person is entitled to so arrange his affairs as to avoid
\ntaxation but the arrangement must be real and genuine and not a sham
\nor make believe.
\n5.4 Keeping in view of the aforesaid discussions, I am of the view
\nthat documents submitted as evidences to prove the genuineness of
\ntransaction are themselves found to serve as smoke screen to cover up
\nthe true nature of the transactions in the facts and circumstances of the
\ncase as it is revealed that purchase and sale of shares are arranged
\ntransactions to create bogus profit in the garb of tax exempt long terra
\ncapital gain by well organised network of entry providers with the sole
\nmotive to sell such entries to enable the beneficiary to account for the
\nundisclosed income for a consideration or commission. I further find
\nthat the share transactions leading to long term capital gains by the
\nassessee are sham transaction entered into for the purpose of evading
\ntax. I note that the landmark decision of the Hon\u2019ble Supreme Court in
\nthe case of McDowell and Company Limited, 154 ITR 148 is squarely
\napplicable in this case wherein it has been held that tax planning may
\nbe legitimate provided it is within the framework of the law and any
\ncolourable devices cannot be part of tax planning and it is wrong to
\nITA No.1881\/Del.\/2018
\n17
\nencourage or entertain the belief that it is honourable to avoid the
\npayment of tax by dubious methods. However, the case laws cited by
\nthe Ld. counsel for the assessee are on distinguished facts, hence, not
\napplicable in the instant case. The assessee has not raised any legal
\nground and argued only on merit for which assessee has failed to
\nsubstantiate his claim before the lower revenue authorities as well as
\nbefore this Bench. In view of above discussions, I am of the considered
\nopinion that Ld. CIT(A) has rightly confirmed the addition in dispute,
\nwhich does not need any interference on my part, therefore, I uphold
\nthe action of the Ld. CIT(A) on the issue in dispute and reject the
\ngrounds raised by the Assessee.\u201d
\n27. Similarly, coordinate Bench of the Tribunal in case cited as
\nUdit Kalra vs. ITO (supra) dismissed the appeal filed by the
\nassessee who has claimed deduction u\/s 10(38) of the Act for
\nRs.27,20,457\/- in the identical facts which has been confirmed by
\nthe Hon\u2019ble Delhi High Court in ITA 220\/2019 order dated
\n08.03.2019 by returning following findings :-
\n\u201cThis court has considered the submissions of the parties. Aside from
\nthe fact that the findings in this case are entirely concurrent – A.O.,
\nCIT(A) and the ITAT have all consistently rendered adverse findings –
\nwhat is intriguing is that the company (Mis Kappac Pharma Ltd.) had
\nmeagre resources and in fact reported consistent losses. In these
\ncircumstances, the astronomical growth of the value of company’s
\nshares naturally excited the suspicions of the Revenue. The company
\nwas even directed to be delisted from the stock exchange. Having
\nregard to these circumstances and principally on the ground that the
\nfindings are entirely of fact, this court is of the opinion that no
\nsubstantial question of law arises in the present appeal.\u201d
\n28. When we examine facts and circumstances of this case in the
\nlight of the order passed by the coordinate Bench of the Tribunal,
\naffirmed by Hon\u2019ble High Court discussed in the preceding para,
\nno doubt assessee has meticulously completed the paper work by
\nrouting his entire investment through banking channel but the
\nresults thereof are altogether beyond human probabilities. Because
\nITA No.1881\/Del.\/2018
\n18
\nneither in the past nor in the subsequent years, assessee has
\nindulged into any such investment having huge windfall. Had the
\nassessee been so intelligent qua the intricacies of the share market,
\nhe would have definitely undertaken such risk taking activities in
\nthe past or future by making such investment in the unknown
\nstock. So, we are of the considered view that what appears to be
\napparent in making investment by the assessee in unknown stock is
\nnot real when examined the whole transaction of sale and purchase
\nof the stock with huge windfall to the assessee.
\n29. Hon\u2019ble Apex Court in CIT vs. Durga Prasad More 82 ITR
\n540 while deciding the identical issue whether apparent was not
\nreal and in those circumstances, taxing authorities were held
\nentitled to look into the surrounding circumstances to find out the
\nreality of such recitals\/transactions by returning following
\nfindings:-
\n\u201c Held, reversing the decision of the High Court, (i) that it could
\nnot be said that the finding of the Tribunal as to the unreality of the
\ntrust put forward was not based on evidence or was otherwise vitiated;
\n(ii) that the Tribunal did not interpret the two deeds but merely
\nfound itself unable to accept the correctness of the recitals in those
\ndocuments: to accept those recitals or not was within the province of
\nthe Tribunal and the High Court could not interfere with its conclusion
\nunless it was perverse or not supported by evidence or was based on
\nirrelevant evidence;
\n(iii) that though an apparent statement mast be considered real
\nuntil it was shown that there were reasons to believe that the apparent
\nwas not the real, in a case where a party relied on self-serving recitals
\nin documents, it was for that party to establish the truth of those
\nrecitals: the taxing authorities were entitled to look into the
\nsurrounding circumstances to find out the reality of such recitals.\u201d
\nITA No.1881\/Del.\/2018
\n19
\n30. So, the irresistible conclusion in this case is meticulous
\npaper work by the assessee in making investment in unknown
\nstock by the assessee and then selling the same as per convenience
\nof the broker and entry operator by rigging prices at astronomical
\nrate shows that the tax authorities have been compelled to examine
\nthe entire transactions in the light of the surrounding circumstances
\nand has unearthed the bogus transaction of purchase and sale of
\nshares which was not real and assessee has failed to dispel all the
\nquarries raised by the AO to establish that the transaction in
\nquestion was real and not beyond human probabilities.
\n31. In view of what has been discussed above and following the
\ndecision rendered by the coordinate Bench of the Tribunal in cases
\ncited as Pooja Ajmani vs. ITO (supra) and Udit Kalra (supra)
\nsubsequently affirmed by the Hon\u2019ble jurisdictional High Court,
\nwe are of the considered view that purchase and sale of shares of
\nunknown company, Cressanda Solution Ltd., having no profile,
\nfinancial growth, risk factor etc. available with the assessee, whose
\nshares were purchased @ Rs.10 per share by the assessee and sold
\n@ Rs.476 to Rs.503.90 per share, is merely a sham transaction
\ncredited to get the bogus profit at astronomical rate under the garb
\nITA No.1881\/Del.\/2018
\n20
\nof LTCG in connivance with the entry providers to make
\nundisclosed income as disclosed one by evading the tax.
\n32. So, we are of the considered view that the ld. CIT (A) has
\npassed a valid and reasoned order on the basis of law applicable to
\nthe facts and circumstances of the case. Case laws relied upon by
\nthe ld. AR for the assessee are not applicable to the facts and
\ncircumstances of the case. Consequently, the question framed is
\nanswered in the negative, hence the appeal filed by the assessee is
\nhereby dismissed.
\n33. In view of the fact that appeal bearing ITA
\nNo.1881\/Del\/2018, in which the present stay application was filed,
\nhas since been disposed off vide this composite order, the present
\nstay application is hereby dismissed having been become
\ninfructuous.
\nOrder pronounced in open court on this 14th day of June, 2019.
\nSd\/- sd\/-
\n(R.K. PANDA) (KULDIP SINGH)
\nACCOUNTANT MEMBER JUDICIAL MEMBER
\nDated the 14th day of June, 2019\/TS
\nCopy forwarded to:
\n1.Appellant
\n2.Respondent
\n3.CIT
\n4.CIT(A)-12, New Delhi.
\n5.CIT(ITAT), New Delhi. AR, ITAT
\nNEW DELHI.<\/p>\n","protected":false},"excerpt":{"rendered":"

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.<\/p>\n

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