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04-01-2019, Sangita Jhunjhunwala, Section 68, 10(38), 393, Tribunal Kolkata

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1 week 1 day ago #8290 by amit
Section - 68, 10(38), 393, 147, 49, 260A
Order Date - 04-01-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Sangita Jhunjhunwala
Respondent - ITO
Justice - S.S, Godara JM
Citation - 119Taxpundit87
Appeal No. - ITA No.1918/Kol/2018
Asstt. Year - 2014-15

Order

PER : S.S, Godara

These five assessees have filed their respective appeals for assessment year 2014-15 against the Commissioner of Income-tax (Appeals)-14-10, Kolkata’s separate order(s) dated 21.06.2018, 29.06.2018 & 12.07.2018 passed in case No(s) 104/CIT(A)/14/Ward-47(2)/2016-17,105/CIT(A)-14/Ward-47(2)/2016-17/171/CIT(A) -14/Ward-48(4)/2016-17, 408/CIT(A)-10/Ward-36(3)/14-15 & 398/CIT(A)-10/Ward34(2) 2014-15/2016-17/Kol affirming the Assessing Officer’s identical action treating their Long Term Capital Gains of ₹9,40,715/-, ₹9,37,290/-, ₹9,12,979/-, ₹9,89,150/- & ₹9,15,209/-; respectively to be unexplained cash credit u/s 68; involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’.

Heard all the assessees as well as the department reiterating their respective stands against and in support of the impugned unexplained cash credits addition(s).

2. It emerges at the outset that all these assessees have claimed to have derived LTCG from sale of shares held in M/s Unno Industries Ltd. (after amalgamation) in the relevant previous year to be exempt u/s 10(38) of the Act. The CIT(A)’s identical discussion in all these cases affirms Assessing Officer’s action treating the same to be unexplained cash credits u/s 68 of the Act as follows:-

5. #नणय/ Decision:

5.1. Grounds I. 2 and 4: As all the grounds relate to the lone effective issue of addition of Rs 9,40,715 made by the AO under section 68 of the IT Act, they are considered together. During the assessment proceedings, the AO noted that the appellant carried out sale transactions for an amount of rupees 9,95,200 in respect of 32,000 shares of Unno Industries Ltd. in the relevant financial year. The learned AD looked into the various details of the said transaction.

The appellant submitted that the resultant LTCG (Long Term Capital Gains) flowing out of the impugned transaction was exempt under section 10(38) of the IT Act. The AD observes that the appellant does not show substantial trading activity or investment in shares of listed companies. The appellant has earned income- under the head other sources' only during the relevant year besides impugned long-term capital gains. The AO further notes that in the absence of such expertise and experience, the move to acquire the shares of M/s Baviscon Vincom Pvt. Ltd.(since merged with M/s Unno Industries Ltd.) was a predetermined move which had the sole aim to bring back unaccounted money. He further observes that the purchase of shares, made when the company had no proven financ al results, was an indicator to the events to be occurring in the future. He infers that in spite of being a novice in share market and there being no substantial transactions in the earlier years and subsequent years, the appellant's decision to purchase the shares, when the financial results of M/s Baviscon Vincom Ltd. were not splendid with no chance of any lucrative gains at the stage of purchase of its shares, was a predetermined action on the part of the appellant leading to the objective to acquire LTCG by way of dubious methods He further infers that this predetermined action with specific intention was one of the circumstantial evidence leading to the conclusion that LTCG was not a genuine one.

5.1.1. Considering the financials and fundamentals of the company M/s Unno Industries Ltd., in the context of no significant corporate announcements or any big orders of purchase, the AO found the price movements of the scrip M/s Unno Industries Ltd. quite abnormal compared to the rise of the index i.e. BSE Sensex during the corresponding period. Add to this, the learned AO analysed the information received from the investigation wing of the Department.

5.1.2. The AO fur her analysed the statement of one Shrl Anil Kumar Khemka deposed before the Authorised Officer in which the former gave details of the Penny Stocks which were used for facilitating pre-arranged bogus LTCG/STCL (Short Term Capital Loss) along with 'jamakharchi' clients. He notes that M/s Unno Industries Ltd. was one such Penny stock which was used for such purposes as admitted by the above referred deponent.

5 1.3. Thus, considering all the facts and circumstances, the AO reached the conclusion that everything I.e., from purchase of stock to receiving of cheque for its sale was done in a systematic and organised manner to give it a real and legal colour by a group of persons (being the operators) on receipt of cash from the appellant. He, therefore, on consideration of the circumstantial evidences, natural human conduct and preponderance of probabilities reached a conclusion that the apparent in this case was not real and that these financial transactions were no real but sham ones and the entire edifice was a colourable device used to evade tax. In view the fact that the appellant failed to prove the source of the credit, and genuineness of the credit of the entire sum received in the garb of alleged capital gains, the AO proceeded to add the entire-sum received of rupees 9,40,715 as unexplained cash credit under section 68 of the IT Act.

5.1.4. During the appellate proceedings, the appellant submitted written submissions dated 22.02.2018 and 07.05.2018. The appellant primarily contends that as the purchase of the impugned shares have been effected by payment of cheque .through banking transaction and as the sales are corroborated by contract notes, the AO was legally not justified in treating the transaction as a sham transaction. It is therefore, contended that the impugned LTCG flowing out from the transaction should be treated as exempt under section 10(38) of the IT Act. Appellant's contentions were carefully considered and submissions were meticulously gone through.

5.1.5. I observe that the appellant has submitted copy of a bank statement of SB Account Number 072001000011216 in the name of the appellant as the evidence towards alleged purchase of the shares of M/s Baviscon Vincom Ltd. The entry reads as follows-

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