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03-06-2019, Yogesh Kumar Dalmia, Section 68, 10(38), Tribunal Kolkata

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3 months 2 weeks ago #9647 by amit
Section - 68, 10(38), 4(1)
Order Date - 03-06-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Yogesh Kumar Dalmia
Respondent - ACIT
Justice - A. T. Varkey, JM & Dr. A. L. Saini, AM
Citation - 619Taxpundit63
Appeal No. - I.T.A. No. 113/Kol/2018
Asstt. Year - 2014-15

Order

PER : A.T.Varkey, JM

This appeal preferred by the assessee is against the order of the Ld. CIT(A) –10, Kolkata dated 03.10.2017 for AY 2014-15.

2. Ground no. 1 of assessee’s appeal is as to whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in upholding the addition made by the AO u/s 68 of the Act in respect of sale proceeds of shares of M/s Kailash Auto Finance Limited (KAFL) and M/s. Essar India Ltd. (EIL) treating the same as income from undisclosed sources after rejecting the assessee’s claim of Long Term Capital Gains (LTCG) on sale of those shares u/s. 10(38) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

3. The brief facts as has been recorded by the AO in the Assessment Order are that the assessee claimed long term capital gains from sale of shares of M/s. KAFL and M/s. EIL. The AO noted that the assessee had purchased 2,00,000 shares of M/s. Careful Projects Advisory Limited (CPAL) at a face value of Rs.1 each for a total consideration of Rs.2,00,000/- which company (CPAL) later got amalgamated with M/s. KAFL by virtue of an order of Hon’ble Allahabad High Court and in pursuance to such amalgamation, the assessee was allotted 2,00,000 shares of KAFL of the face value of Rs.1 each. The said shares were later sold on Bombay Stock Exchange [BSE] through a broker named M/s. Sykes & Ray Equities (I) Ltd. on different dates falling within the previous year 2013-14 corresponding to the Asst Year 2014-15 at a price of Rs.74,65,600/-., which according to assessee, resulted in Long Term Capital Gains and so the assessee claimed exemption u/s 10(38) of the Act of Rs.72,65,600/-. Likewise, the assessee had purchased 1,00,000 shares of M/s. EIL at a face value of Rs.11/- each for a total consideration of Rs.11,00,000/- through the seller Delight Dealmark Pvt. Ltd.

The said shares were later sold on Bombay Stock Exchange [BSE] on different dates through the same broker named M/s. Sykes & Ray Equities (I) Ltd. falling within the previous year 2013-14 corresponding to the Asst Year 2014-15 at a price of Rs.45,14,430/-., which according to as essee, resulted in Long Term Capital Gains and so the assessee claimed exemption u/s 10(38) of the Act of Rs.34,14,430/-.

4. However, the AO did not agree with the assessee’s claim of LTCG and exemption thereof claimed by the assessee. According to AO, it is unbelievable that the assessee can make a fantastic gain in a span of 17 to 21 months of these scrips. According to AO, the price movement of the scrip in the span of 17 to 21 months raised doubts in his mind and that profit earned by the assessee were beyond human probabilities. The AO noticed that the company, M/s. CPAL, was incorporated on 18.09.2010 with authorized and paid up share capital of Rs.1 lakh. The company increased its authorized share capital to Rs.34.50 lakhs and thereafter issued 330155 shares of the face value of Rs.10 each at the premium of Rs.590 to different entities.

The AO also observed that during the FY 2011-12, M/s. CPAL increased its authorized share capital to Rs.29 crores and then the shares of Rs.10 each were split into 1:10 i.e. each shares of Rs.10 into shares of Re.1 each. The said company CPAL thereafter issued bonus shares to the existing equity shareholders in the ratio of 1:55. The AO suspected the issue of bonus shares in the unrealistic ratio of 1:55. He was of the opinion that the probable reasons were with a view to provide large amount of LTCG in the hands of beneficiaries after amalgamating the said company with KAFL. The AO concluded that CPAL was incorporated with a dubious plan and premeditated arrangement and artifice to increase number of shares therein through sham and non genuine transactions of its shares which resulted in fetching exorbitant and unrealistic considerations in the scheme of amalgamation. The AO referred to the statement of Shri Sunil Dokania recorded u/s 131 of the Act by the Investigation wing on 12.06.2015, wherein, Shri Dokania has explained the modus operandi of providing of LTCG in the scrip of KAFL. He stated that by way of amalgamation of CPAL with KAFL, the beneficiaries of LTCG got higher number of shares of KAFL as against shares of CPAL. Mr. Dokania, in the aforesaid statement, stated before the investigation wing that he had got equal amount of cash from the beneficiaries, deposited the same to various undisclosed proprietorship concerns, and finally transferred the same to bogus/shell companies, by layering through various accounts, which had ultimately purchased the shares sold by the beneficiaries. The AO has also relied upon statement of Shri Sunil Dokania recorded u/s 131 by the Investigation wing, in the case of Rashmi Group of Kolkata ; Statement of Shri Dipan Jesingbhai Patel recorded on 20.5.2015; Statement of some beneficiaries who had corroborated the modus operandi as revealed by Shri Dokania. The aforesaid statements were referred to in the Assessment Order to come to a conclusion that the assessee was one of the beneficiaries of the transactions in shares of KAFL which resulted in bogus claim of exempt LTCG.

5. The AO, on the basis of movement of price of KAFL quoted in Bombay Stock Exchange during the period of September, 2013 to January, 2014 (the period of sale of shares of KAFL by the assessee), found that the price of shares had increased by 267%. The AO concluded that while Sensex showed almost no progress, price of shares of KAFL moved phenomenally. The AO also referred to the financials of KAFL during the Financial years 2011-12 to 2015-16 and concluded that Earnings per share (EPS) during that period was either nil or negative but the value of shares was highly inflated.

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