ANIL KUMAR AGGARWAL,NEW DELHI vs. ITO, WARD-57(3), NEW DELHI

Perusal of the assessment order shows that the AO made addition u/s 68 of the Act in respect of the claim made by the assessee on long term capital gains in respect of sale of 5,000 shares of Kappac Pharma Ltd. The long term capital gains claimed by the assessee u/s 10(38) of the Act was denied and addition u/s 68 of the Act was made by the AO with detailed observations in the assessment order.

The same was sustained by the Ld.CIT(A) observing as under:

“4.4 I have considered the facts of the case, the assessment order and the written submission of the appellant. Prima facie it appears that copies of all the documents have been submitted to substantiate the genuineness of transactions related to purchase and subsequent sale of shares leading to the business loss claim by the appellant. I find that these documents, which were placed before the AO who, after detailed examination and discussion and going beyond these documents, has established that these documents are mere masks to hide the real nature of transactions. By analyzing the balance sheet, Profit & loss account and the trade pattern of M/s Kappac Pharma Ltd. the AO has pointed out that the share price of this company was neither affected by the movement of sensex nor the financials of the company could justify such extraordinary jump in the price of its shares. It is noticed that apart from being based on evidences gathered during search and survey operations, analysis of the materials on record and analysis of information from various sources, the findings of the AG are also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the modus operandi adopted by brokers and operators engaged in the business of providing entries of long term capital gains/business losses to the interested beneficiaries which has come to surface as a result of deep and wide investigation. Initial purchase of shares of companies of unknown credentials at high rates and subsequent sale within a short span after drastic fall in the share price cannot be an accident or windfall but as has been clearly brought on record by the AO, was possible because of manipulations in the price of shares in a pre-planned manner by the interested broker and entry operators. 4.5 The insistence of the appellant that the transactions in the two shares leading to business loss are supported by documents such as sale and purchase invoices, bank statements, brokers notes etc. cannot be accepted in view of the fact and circumstances of the case brought on record by the AO after proper examination of the material facts and after taking into 4 account the findings of SEBI and corroborating evidences gathered by the Directorate of Investigation, Kolkata against a network of brokers and operators engaged in manipulation of market price of shares of certain companies controlled and managed by such persons with a purpose to provide accommodation entries in the form of business losses to those who want to reduce their tax liability. Further, the appellant's contention that the business losses cannot be treated as bogus merely because some investigation with regard to certain company and broker or investigation has been carried out by the Directorate of Investigation, Kolkata only proves that the appellant wants to take shelter under such documentary evidences which themselves have been created as masks to cover up the true nature of transaction. A genuine transaction must be proved to be genuine in all respect. The onus was on the appellant to prove that the transactions leading to claim of business loss was distinctly genuine transaction and not bogus, premeditated transaction arranged with a view to evade taxes. The onus was on the appellant to contradict the findings that M/s Kappac Pharma Ltd. is a company whose scrip were capable of being traded at high price as it was the appellant who had traded in the shares of the this company which resulted into business loss. This is more so in view of the fact that these were the only one scrip traded try the appellant company is in the business of dealing in sale/purchase of shares. Once the appellant was made aware of the result of investigation which proved that trading of shares leading to business loss was not genuine, as noted by the AO also, the onus was on the assessee to prove that the business loss was genuine under section 101 of the Indian Evidence Act, 1972 as it in the assessee who is asserting a claim that it was engaged in genuine share transactions. It is relevant to note here that Hon'ble Supreme Court in the case of Shri Charan Singh versus Chandra Bhan Singh (AIR 1988 SC 637) have clarified that the burden of proof relies on the party who substantially asserts the affirmative of the issue and not upon the party who denies it. It has been further held that the party cannot on failure to establish a prima facie case, take advantage of the weakness of his adversary's case. The party must succeed by the strength of his own right and the clearness of his own proof. He cannot be heard to say that it was too difficult or virtually impossible to prove the matter in question. Since in this case the appellant had made the claim that he had incurred genuine business loss while transacting in the shares, all the facts were especially within its knowledge. Section 102 of Indian Evidence Act makes it clear that initial onus is on person who substantially asserts a claim. If the onus is discharged by him and a case is made out, the onus shifts on to deponent. It is pertinent to mention here that the phrase "burden of proof” is used in two distinct meanings in the law of evidence viz, ‘the burden of establishing a case', and 'the burden of introducing evidence’. The burden of establishing a case remains throughout trial where it was originally placed, it never shifts. The burden of evidence may shift constantly as evidence is introduced by one side or the others. In this case, once the evidence that assessee has claimed bogus business loss was introduced by the AO, the burden of evidence shifted to the assessee. During the assessment proceeding and even during the appellate proceeding, the assessee has failed to produce any evidence to prove that the business loss claimed by it was genuine. 4.6 In the present case, it is seen that the appellant has failed to discharge its burden of proof and the AO, on the other hand, has proved that the claim of the appellant was incorrect. The enquiry conducted by SEBI was further corroborated by the investigation carried out by the Directorate of Investigation which has been thoroughly analysed by the AO to prove that the assessee had introduced fictitious business loss in its books of account by routing its unaccounted income through a tax evasion scheme. The statement of brokers engaged in providing bogus LTCG/business losses clearly proves M/s Kappac Pharma Ltd. is a company whose scrip have been manipulated to provide bogus LTCG/business losses.”

The assessee also did not furnish any evidence before us to rebut the findings of the authorities below. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the assessee.

Order pronounced in the open court on 27.05.2024