LALITA GUPTA,NEW DELHI vs. ITO, WARD-59(3), NEW DELHI

These 04 appeals have been filed by the different assessees against the respective orders of the Ld. Commissioner of Income Tax [Appeals], New Delhi. Since the issue involved in these appeals is one and common which is relating to disallowance of exemption claimed by the Assessee u/s. 10(38) of the Income Tax Act, 1961 (in short ”Act”) for the purchase and sale of the shares of M/s Kappac Pharma Ltd on account of Long Term Capital Gain. Hence, all the 04 appeals were heard together and are being disposed of by this common order by first dealing with (AY 2014-15) and the decision of the same will apply mutatis mutandis to other ITA Nos. 7910, 7911 (AY 2015-16) & ITA No. 7317/Del/2018 (AY 2014-15) filed by the different assesses.

TRIBUNAL’S FINDING “5. I have heard both the parties and perused the records especially the impugned order. I find that the assessee is an individual and the amount of cash credit Rs. 27,68,457/-. However, on perusing the assessment order, I find that there was a specific information that assessee has indulged in non-genuine and bogus capital gain obtained from the transactions of purchase and sale of shares of M/s Kappac Pharma Ltd., a Mumbai based company. It is noticed that the purchase transaction has been done off market in physical form by paying cash. The assessee has purchased the share M/s Kappac Pharma Ltd. in physical form and thereafter, the same have been converted into electronic mode. The purchase payments were made in cash and not through the normal banking channel therefore the same were non-verifiable from the authentic supporting details such as bank account/ documents. Assessee is not a regular investor in shares. The assessee has failed to furnish the proof of source for the purchase transactions. Thus, the entire transactions are against human probability. Also considering the findings of the Investigation Wing, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the LTCG of Rs. 27,20,457/- claimed exempt u/s. 10(38) of the Act by the assessee cannot be allowed and the amount of Rs. 27,68,457/- received back as sales proceeds on sale of shares was required to be added back towards his taxable income under section 68 of the Act. The above amount of Rs. 27,68,457/- was deemed as income of the assessee u/s. 68 of the Act, over and above, the income already declared in ITR during AY 2014-15. In view of above discussions, the landmark decision of the Hon’ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. However, the case laws cited by the Ld. counsel for the assessee are on distinguished facts, hence, not applicable in the instant case. The assessee has not raised any legal ground and argued only on merit for which assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. In view of above discussions, I am of the considered opinion that Ld. CIT(A) has rightly confirmed the addition in dispute, which does not need any interference on my part, therefore, I uphold the action of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Assessee.

6. In the result, the Appeal of the Assessee is dismissed.” HON’BLE DELHI HIGH COURT’S FINDING "The assessee is aggrieved by the concurrent findings of the tax authorities - including the lower appellate authorities rejecting its claim for a long term capital gain reported by it, to the tune of Rs.13,33,956/- and RS.14,34,501/- in respect of 4,000 shares of M/s Kappac Pharma Ltd. The assessee held those shares for approximately 19 months; the acquisition price was RS.12/- per share whereas the market price of the shares at the time of their sale, was Rs.720/-. It is contended that the assessee was not granted fair opportunity. Mr. Rajesh Mahna, learned counsel appearing for the assessee relied upon the orders of the co-ordinate Bench of the tribunal, in respect of the same company i.e. M/s Kappac Pharma Ltd., and pointed out that the tax authority's approach in this case was entirely erroneous and inconsistent. The main thrust of the assessee's argument is that he was denied the right to cross-examination of the individuals whose statements led to the inquiries and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent - AO., CIT(A) and the ITAT have all consistently rendered adverse findings - what is intriguing is that the company (Mis Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company's shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed." 4.1 After perusing the aforesaid decision, I find that no contrary decision has been given by the Ld. Counsel for the assessee to the decision of the Hon’ble Delhi High Court in the case of Udit Kalra vs. ITO (Sura) in which the shares of M/s Kappac Pharma has been declared bogus and the Hon’ble High Court has passed a detailed order, which I have reproduced as aforesaid. Therefore, I have no other option except to respectfully follow the decision of the Hon’ble Delhi High Court in the case of Udit Kalra vs. ITO (Supra), hence, I respectfully follow the same by upholding the well reasoned order of the Ld. CIT(A) and decide the issue in dispute against the Assessee by dismissing the appeal of the assessee.