SANTOSH KANWAR,JAIPUR vs. ITO 6(4 ) JAIPUR, JAIPUR
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR
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BEFORE: SHRI GAGAN GOYAL, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 937/JPR/2024
fu/kZkj.k o"kZ@Assessment Year : 2015-16
Smt.Santosh Kanwar
10-11 Chand Bihari Nagar, Khatipura,
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:ALOPK3658F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : None.
jktLo dh vksjls@Revenue by: Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing
:16/07/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 17/07/2025
vkns'k@ORDER
Per: NARINDER KUMAR, JUDICIAL MEMBER .
Assessee-appellant, an individual, has challenged order dated
06.05.2024 passed by Learned CIT(A), National Faceless Appeal Centre,
Delhi, whereby appeal filed by her challenging assessment order dated
29.12.2017, relating to the assessment year 2015-16, has been dismissed, thereby upholding the assessment order.
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Santosh Kanwar, Jaipur.
None appears or argues for the Assessee-appellant-despite opportunities
2. It may be mentioned here that this appeal was instituted on 05.07.2024. Since then it was listed various times for hearing, but, none came forward to argue the appeal on behalf of the appellant.
As per record, earlier too there was non appearance on behalf of the appellant. Court notices issued to the appellant for various dates, including for today, were delivered to the appellant on the given email address, but the fact remains that none has appeared on behalf of the appellant.
On the previous date i.e. 09.07.2025, when the matter was taken up, none appeared behalf of the assessee. Accordingly, last opportunity was granted for hearing and appeal was listed today, but, none has appeared to argue the appeal.
Having regard to all this, the request for adjournment sent for today has been rejected.
Consequently, arguments have been advanced by Ld. DR for the department.
Learned DR has referred to the assessment order and the impugned order and submitted that both the orders are well reasoned orders, based on the information received by the Investigation Wing, statements
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Santosh Kanwar, Jaipur.
recorded, report submitted by SIT, report submitted by SEBI and the material available, and that the assessee having failed to establish her claim as regards the three additions, the appeal deserves to be dismissed.
Computation of Income of assesssee by the Assessing Officer
3. As is available from the assessment order dated 29.12.2017, the Assessing Officer computed the income of the assessee as under:-
“07. In view of the above discussion and after considering all the facts, replies submitted by the assessee and after deliberation on the various issues, income of the assessee is computed as below:-
Business income (para 6.2)
Rs. 10,92,414/-
Capital gain (LTCG & STCG) para6) (considered under head business & profession)
Rs. Nil/-
Income from other sources as declared
Rs. 10,11,828/-
Additions
Bogus LTCGclaimed u/s 10(38) held to be income from other sources as discussed above (para5) u/s 68
Rs.19,10,972/-
Commission paid for acquiring such accommodation entry as discussed above u/s 69C
Rs. 1,14,658/-
Gross total income
Rs. 41,29,872/-
Less: deduction under chapter VIA
Rs. 1,16,591/-
Total assessed income of the assessee
Rs. 40,13,281/-
R/o u/s 288
Rs. 40,13,280/-
Assessed at total income of Rs. 40,13,280/- u/s 143(3) of the I.T. Act, 1961
calculate tax on additions u/s 68 & 69C as per provisions of section 115BBE of the Income Tax Act, 1961. Charge interest u/s 234A, 234B, 234C, 234D &
244A(3) if applicable as per rules. ITNS-150 issued, which is forming part of this order. Issue demand notice & challan accordingly. Penalty notice u/s 274 r.w.s.
271(1)(c) is issued separately for furnishing inaccurate particulars.”
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Santosh Kanwar, Jaipur.
Assessee-appellant, an individual, used to draw salary as director of Singla Buildcom Pvt. Ltd. She also used to derive income from capital gains and other sources.
As per return of income for the assessment year 2015-16, she declared her total income as Rs. 14,45,860/-.
The case was selected for scrutiny under CASS. Thereupon, notices u/s 143(3) and 142(1) of the Act were issued, but neither anyone appeared nor submitted any written submissions thereto.
Ultimately, show cause notice dated 16.11.2017 was issued u/s 142(1) of the Act. Only thereupon, the assessee came to be repeated by her authorized representative.
Investment by the Assessee is noticed by the department
5. The Assessing Officer noticed during the assessment proceedings that the assessee had invested in shares of M/s Kailash Finance
Limited and earned long term capital gain of Rs. 19,10,972/-. Said amount was credited to the capital accounts of claim as exempt income under the provisions of section 10(38) of the Act.
6. Case of the department is that its Investigation Wing conducted search at various places throughout the country. SEBI also made certain information public. The information from the Investigation Wing and SEBI
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led to discovery of the fact that various syndicates had arranged accommodation entries as regards bogus LTCS, bogus STCG, bogus long
/short capital loss through trading of shares of penny stocks; that the modus operandi was that investors/beneficiaries held shares of penny stock for one year or so , and then the same used to be sold to one of the shell private limited companies of operators.
7. Further, it is case of the department is that the above facts were confirmed by stake holders i.e. operators/syndicate members/brokers who use to provide accommodation entries.
In this regard, statements are stated to have been recorded u/s 133A of the Act, wherein the said stake holders accepted that such penny stock companies were conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income.
It also transpired that M/s Kailash Auto Finance Limited (Scrip Code -
511357) is a penny stock listed company having very small capital base , but its market capitalization was multifold to its capital base. Furthermore , information in respect of trading in this company was also available at ITS Data/AIR.
8. On examining the share sale transactions made by the assessee during the year under consideration, it was found that the entire sale
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Santosh Kanwar, Jaipur.
proceeds, claimed as exempt income, were received from sale transactions i.e. sale of one scrip i.e. of M/s Kailash Auto finance Ltd. Following facts also emerged on further examination:
“3.2. On examination of the share sale transactions made by the assessee during the Year, it was found that the entire sale proceeds, that have been claimed as exempt income, were received from sale of one scrip i.e. M/s Kailash Auto
Finance Limited only. The assessee was asked to give details regarding when and how the shares were purchased and evidence in this respect. From the details submitted by the assessee, it was gathered that the assessee has sold
65,000 shares during the year under consideration. Initially, the assessee purchased 65,000 shares of M/s Careful Projects Advisory Ltd. having face value of Rs. 1/- each on 01.04.2012 in physical form by Ritudhara Vincom Pvt. Ltd., a Kolkata based Broker in BSE. Further, the company got merged with M/s Kailash
Auto Finance Limited, so the assessee held 65,000 shares of the scrip.
3. The details of purchase and sale of this particular scrip i.e. M/s Kailash Auto Finance Limited (hereinafter referred as The Scrip) were examined. The assessee bought 65,000 shares of M/s Careful Projects Advisory Ltd. @ Rs. 1 per share. Later on, as per the scheme of stake holders viz. Operators/Syndicate members/Brokers, M/s Careful Projects Advisory Ltd. got merged with M/s Kailash Auto Finance Limited. The assessee retained the shares with himself for almost one year. It was also found that the price of the scrip kept rising throughout the period when the shares were held by the assessee and its prices reached at level of around Rs. 31/-, i.e. a humongous rise of almost over 3000% over a very short period of just 14-15 months. These facts demanded a deeper study of the price movements and share market behavior of the entities involved in trade, of the scrip as the share price movements and the profit earned by the beneficiaries were beyond human probabilities. Thus a deeper study was needed to ascertain whether the 7 Santosh Kanwar, Jaipur.
transactions were genuine investment transactions or sham ones and colourable device only to convert the unaccounted cash into tax exempt income. In short, it was to be ascertained whether the apparent was real.
4. The scrip was thoroughly examined and following facts were noted:
4.1. The company history as culled from money control's site is given below: Kailash Auto Finance Limited was incorporated as a Public Limited Company on 14th November 1984, in the name of SHIVAM COMMERCIAL SERVICES LIMITED. contained the Certificate of Commencement of Business on 10.12.1984. It The Company commenced its operations during the year 1986, in the business of Hire-purchase and Lease financing, and has specifically focussed on and specialised in extending finance on hire purchase basis for the commercial transport vehicle industry (mainly TELCOLCVs and HCVs) and to a lesser extent for 2/3 wheelers, jeeps/cars and consumer durables.
The Company obtained dealerships of 2/3 wheelers from M/s. Bajaj Auto Limited and Maharashtra Scooters Limited during August 1989. However, these dealerships have been parcelled out to a partnership firm constituted specifically for this purpose with effect from 1.9.92. The name of the Company was also simultaneously changed to the present one
(viz., KAILASH AUTO FINANCE LIMITED), effective from 8.4.92. The Company does not have any subsidiary at present.
2012
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Santosh Kanwar, Jaipur.
……Registered office of the company has been shifted from 84/105 G.T.Road,
Kanpur Uttar Predesh to 19, Tottant Complex, 37/17, The Mall, Kanpur, Uttar
Pradesh-208001
2014
- Appointment of Mr. Deepak Kunjbihari Dave as Non-executive Independent
Director.
4.2. The very nature of the business of the company is dubious. It was incorporated in 1984 and formerly known as SHIVAM COMMERCIAL SERVICES LIMITED and changed its name to Kailash Auto Finance Limited in 1992. However what is astonishing in this case is that a company running since 1985 has not earned any income from operations ever and still commanded such premium valuations. The financials of the company for a few years are given as below:
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It is pertinent to mention here that the company's share prices were on the higher side during the period from December-2012 to March -2015 whereas on examination, it is detected that no such fundamentals had been existed which can act as a catalyst to boost the prices of shares. In such a high time, the 18
Santosh Kanwar, Jaipur.
revenue from operations was minimal as so the expenditure on Consumption of Raw Materials, purchase of traded goods, Stocks, Power & Fuel, Employee Cost.
Even the company did not claim any depreciation. It only substantiate that the company was merely a paper company and the rise in share price were due to human intervention only.
Conclusion: Therefore the reasons of this astronomical price rise were located somewhere else and certainly could not be related to the fundamentals or any hypothetical promising future of the company by any stretch of imagination.”
Investigation by SEBI
As regards investigation conducted by SEBI relating to the scrip M/s Kailash Auto Finance Limited, relevant portion from the assessment order is extracted herein below, for ready reference:-
“3.4.3. Investigation by SEBI
Sudden unusual price movement and volume was noticed during the period from November
07, 2014 to December 31, 2015 in the scrip of Kailash Auto
Finance Ltd. (hereinafter referred to as "Kailash Auto"), a company having its shares listed on the Bombay Stock Exchange Ltd. (BSE'). It was observed that during November 07, 2014 to December 31, 2015, price of the scrip fell from 28.05/- per share to a low of 2.01/-per share and daily average trading volume in the scrip was 7 lakh shares. Prior to this period, during July 22, 2013 to November 05, 2014, the price of the scrip ranged between 36.85/- and 28.45/-, with daily average trading volume of 15 lakh shares with daily average number of trades of 685. Thus, substantial fall in price and average traded volume was noted during November 07, 2014 to December 31, 2015. On further scrutiny it was observed that earlier, during January 17, 2013 to June 04, 2013, the price of the scrip had increased from 11/- to 36.25/ in 36 trading days and average trading volume during this period was merely 280 shares per day with average number of trade as low as 3 per day. For the purposes of preliminary examination of facts and circumstances prevailing during these periods these periods were taken in three patches i.e., (a) January 17, 2013 to June 04, 2013
(Patch-1), (b) July 22, 2013 to November 05, 2014 (Patch-2) and (c) November
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07, 2014 to December 31, 2015 (Patch -3). The price movement vis-a-vis traded volume in the scrip during this period is illustrated below:-
These activities needed examination of several aspects of interconnected transactions These activities needed examination of several aspects of interconnected transactions amongst the large number of entities. As a part of preliminary examination by SEBI, the bank statement of the concerned suspected entities for the relevant period were analysed. The data and information available in public domain such as Ministry of Corporate Affairs
("MCA") website, BSE website and other databases had to gathered and examined. During the course of examination, Kailash Auto,