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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI S.S.GODARA
आदेश / ORDER PER S.S. GODARA, JM :
This assessee’s appeal for AY 2015-16 arises against the CIT(A)-1, Aurangabad’s order dated 26-11-2018 passed in case No.ABD/CIT(A)-1/212/2017-18 dated 10-01-2018 involving proceedings under Section 143(3) of the Income Tax Act, 1961 in short the Act.
Case called twice. None appears at assessee’s behest. She is accordingly proceeded ex parte.
The assessee’s sole substantive grievance raised in the instant appeal challenges correctness of both the authorities action disallowing her Section 10(38) exemption claim to the tune of Rs.10,27,825/- alleged to have been derived from sale of equity shares in the course of assessment dated 22-12-2017 as upheld in the CIT(A)’s order.
I notice with the able assistance coming from the revenue’s side that the Assessing Officer has duly considered the assessee’s scrip M/s. Pine Animation Limited’s movement having serious abnormalities in the stock exchange. This is coupled with the fact that the learned lower authorities have indeed discussed the entire gamut of such entries availed in connivance with entry operators manipulating market price of such scrips. The CIT(A)’s inturn takes note of the department’s investigation wing report whilst affirming the assessment findings. Faced with this situation, I note that this tribunal’s coordinate bench’s order in Ravi Bhaskar Wattamwar Vs. ITO in dated 16-01-2020 has upheld similar ‘penny stock’ addition as under :
“4. I have heard the rival submissions and gone through the relevant material on record. It is found as an admitted position that the assessee purchased 2500 shares of PS IT I&SL at Rs.40/- per share on 24-07-2013 and after conversion in the ratio of 1:10, sold such shares in the year under consideration at an average sale price of more than Rs.83/- per share. In other words, the converted share of this company purchased at mere Rs.4/- was sold after a year and few months at close to Rs.83/- per share, giving phenomenal increase in price of more than 20 times. The AO extracted the summary of the Profit and loss account and Balance sheet of PS IT I&SL for the relevant years, which fairly indicates that there was no foundation for such a magical increase in the price of its shares. The AO has also referred to the statements of various persons, all of whom admitted to be providing accommodation entries with the help of shares of companies including PS IT I&SL. The Ministry of Corporate Affairs has identified this as a shell company and further the SEBI has initiated enquiry in the matter. All these factors cumulatively take me to the irresistible conclusion of the non-genuineness of the transaction of long term capital gain of Rs.19.32 lakh as declared by the assessee.
At this juncture, it will not be out of place to refer to the judgment of the Hon'ble Supreme Court in CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), in which the assessee claimed before the ITO that income of certain property should not be taxed in his hands as it was a trust property. The ITO rejected the claim and included the income in the hands of the assessee. The Tribunal affirmed the decision of the ITO, which was reversed by the Hon'ble High Court. Reversing the verdict of the Hon’ble High Court, their Lordships noticed that though the assessee made a claim that income of the property was not his and produced conveyance executed in his favour and the deed of settlement executed by his wife, nearly about a year after the conveyance, however, when the ITO asked the assessee about the source from which his wife got the amount, apart from saying that it was ‘sthridhan’ property, he failed to disclose any source from which his wife could have got the amount for purchasing the premises. In this backdrop of facts, the Hon'ble Supreme Court held that although the apparent must be considered as real, but, if there are reasons to believe that the apparent is not real, as is the case under consideration as well, then the apparent should be ignored to unearth the harsh reality.
Similar view has been canvassed in Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC). The question for consideration in that case was whether the assessee purchased winning tickets after the event. It was observed that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of section 68, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In deciding the issue against the issue, their Lordships held that : `Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities’. This shows that a decision based on the attending circumstances and human probabilities does not get vitiated if there are compelling reasons to reject the frontage of a transaction based on the so-called evidence, which is nothing more than a mere paper work.
In view of the factual and legal position discussed above, it is crystal clear that PS IT I&SL is a penny stock company and the assessee obtained only accommodation entries in the garb of long term capital gain from transfer of its shares, for which an appropriate addition has rightly been made and upheld by the authorities below. My view is fortified by the judgment dated 10.4.2017 of the Hon’ble jurisdictional Bombay High Court in Sanjay Bimalchand Jain vs. Pr. CIT in ITA 18/2017, which has been briefly referred to by the AO. The Hon’ble High Court in that case has held that the assessee did not tender cogent evidence to explain how the shares in an unknown company worth Rs.5 had jumped to Rs.485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. It was held that the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain was accordingly held to be rightly assessed as undisclosed income. Similar view has been taken by the Hon’ble Delhi High Court in Suman Poddar vs. ITO in ITA 841/2019 vide its judgment dated 17.09.2019. In view of the foregoing discussion, I accord my imprimatur to the view adopted by the ld. first appellate authority on this score and accordingly countenance the impugned order.”
I adopt the above detailed discussion mutatis mutandis to hold that the assessee has failed to prove genuineness of her impugned exemption claimed u/s.10(38) of the Act. Both the learned lower authorities’ action rejecting her stand is confirmed.
5. This assessee’s appeal is dismissed. Order pronounced in the Open Court on 30th May, 2022.