RAMESHKUMAR KARSANBHAI PATEL,SURAT vs. ITO, WARD 2(3)(5), SURAT

The assessee has also raised following additional grounds of appeal:-

“Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld AO's action of levy of income-Tax @ 30% u/s 115 BBE of the Act.”

credit u/s 68 of the Act. Further, an amount of Rs.35,166/- was added u/s 69C towards the commission paid for obtaining accommodation entries.

“I have considered the submission of the appellant and gone through the AD's observation & decision in assessment order and find that the appellant have claimed to have established the genuineness of transaction [purchase and Sales of shares of M/s Sunrise Asian Limited undoubtedly But I find from the assessment order that the AO has doubted genuineness of said transactions not only in assessment order but also he has established how the price of shares of the penny stock companies are rigged and are raised through circular trading. It is observed that the appellant is unable to file any satisfactory reply to justify the logic behind genuine purchase & sale of the above shares vis-a-vis failed to justify the genuineness of sudden increase and decrease of the prices of the shares. The appellant cannot escape from the burden cast upon him and unfortunately in this case the burden is heavy as the facts establish that the shares which were traded by the appellant had phenomenal and fanciful time in price in a short span of time. Despite availing adequate opportunity the appellant is unable to establish and prove that there was no manipulation in the other end and whatever gains the appellant has reaped was not tainted I find during the course of assessment the Assessing Officer (AO) has culled out proximate facts in each of the case took into consideration the surrounding circumstances which came to light after the investigation assessed the conduct of the appellant by recording statement issuing summon took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion. On this issue Hon'ble High Court of Calcutta has held: [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax Asst. Year : 2015-16 - 4–

INCOME TAX DEPARTMENT Swati Bajaj T.S. SIVAGNANAM AND HIRANMAY BHATTACHARYYA, JJ. IA NO. GA/2/2022 AND OTHERST ITAT/6/2022 & OTHRS JUNE 14 2022 Section 68, read with section 10(38), of the Income-tax Act, 1961- Cash credit (Share dealings) Assessment year 2014-15 Whether if there is information and data available of unreasonable rise in price of shares of penny stock companies over a short period of time of little more than one year, genuinity of such steep rise in prices of shares needs to be established and onus is on assessee to do so as mandated in section 68 Held, yes Assessee made investments in shares of company, 'S' During relevant assessment year, assessee sold said shares and claimed exemption on long term capital gains Assessing Officer received information from Investigation Wing that prices of some shares of penny stock companies which included company, 'S' were artificially rigged to benefit shareholders through bogus claim of LTCG Consequently, notices were issued by Assessing Officer for scrutiny and on analyzing documents submitted by assessee it was observed that assessee purchased shares of 'S' for Rs. 1 lakh and when investments in shares became eligible for LTCG it was sold for Rs. 29 lakhs during period when general market trend was recessive -He thus, opined that shares of 'S' matched all features of companies which were providing bogus LTCG and made additions under section 68 by treating LTCG as unaccounted income- Whether since assessee failed to establish credit worthiness of companies and that rise of price of shares within a short period of time that too when market trend was recessive was genuine, genuineness could not be established merely on basis of documents like bank details, purchase/sell documents and detail of d-mat account Held, yes Asst. Year : 2015-16 - 5–

For all the above reasons, I hold that the alleged transaction is obviously made for tax evasion, therefore, such transactions are not genuine but pre- conceived resulting in creation of bogus claim and, therefore, are sham transactions. Accordingly I find no infirmity in the order of the AO and I am of opinion that AO's decision of invoking provision of section 68 of the I.T. Act is justified in absence of satisfactory explanation on the part of the appellant

Accordingly I hold alleged LTCG for sale of share of M/s Sunrise Asian Limited as bogus and not eligible to exemption u/s 10(38) of the IT Act and the addition of Rs.70,33,182/-by invoking provision of section 68 of the I.T Act stand confirmed. This ground of the appellant is dismissed.

I have considered the submission of the appellant in respect of ground relating to commission paid and gone through the AO's observation & decision in assessment order. I find merit in the contention of the appellant on this ground in as much as the AO is unable either to establish any basis of estimation how he estimated the said 0.5% commission and not 5% or 6 оr 10% commission of unexplained expenditure for the said transaction or the AO is unable to bring any cogent materials of 0.5% expenditure incurred by the appellant before invoking provision of section 69C of the I.T. Act. Accordingly the estimated addition made of Rs.35,166/-[0.5% of 70,33,182/-] by the AC invoking provision of section 69C of the I.T Act stand deleted. Thus this ground is allowed.”

iv. All documentary evidences such as contract notes, demat statements, and bank statements were furnished before the Revenue Authorities.