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Income Tax Appellate Tribunal, DELHI
Before: SH. SHAMIM YAHYA & SH. ANUBHAV SHARMA
The appeal has been preferred by the Assessee against the order dated 31.01.2019 of CIT(A)-14, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 95/17-18/CIT(A)-14, New Delhi arising out of an appeal before it against the order dated 05.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the I.T.O., Ward 41(1), New Delhi (hereinafter referred as the Ld. AO). 2. Heard and perused the record.
Ruhani Wadhwa 3. At the time of hearing, none has appeared for the assessee. Record shows, notices have been issued earlier on five occasions to the assessee. No more opportunity is justified. Arguments of Ld. DR were heard who supported the findings of Ld. Tax Authorities below.
A perusal of the record shows that the Ground raised by the assessee are argumentative in nature, however, the substantive ground arises from the fact that Ld. Tax Authorities below have made an addition of Rs. 77,40,656/- with the break up of Rs. 75,02,222/- u/s 68 of the Act as alleged bogus LTCG and Rs. 238,434/- as commission u/s 69C of the Act. It can be appreciated from the record and the order of ld. Tax Authorities below that in regard to script KAPPAC Pharma Ltd. there was an investigation wing of Kolkata report for which the capital gain of assessee on sale of shares of M/s. KAPPAC Pharma was analysed. Genuineness of transaction claimed by the assessee where doubted. Ld. Tax Authorities had examined the investment of assessee in stock exchange of various parameters including the fact that share were purchased of the market whereas a script was listed in the stock exchange. It will be appropriate to reproduce the factual findings available at page no. 20-22 of the order of the Ld. AO reproduced as under :- “The onus to prove the genuineness of share transactions was on the assessee which she failed to discharge with regard to claim of exemption u/s 10(38) for the following reasons:- Assessee purchased shares of a company/script which is devoid of any basic fundamentals and was suspended by the BSE for trading previously as well as afterward. A regular and genuine investor would hardly know that such a company is even listed on BSE. From the Audited financials filed by the company with BSE, It is a matter of fact that the Listed company does not have any significant/real business as seen from its last many P&L accounts and do not have any significant fixed assets or plant and machinery (most of assets are either investment or loans.). Even the Basic & Diluted EPS Ruhani Wadhwa of the share was constant downwards being of (-)0.02 to (-)0.03 during March,2011 to March,2014 in the case of M/s Kappac Pharma Limited. The price movement of Script is unrealistic and typically Bell shaped, that means huge rise over a short span, staying at peak over a short span of time and then sharp decline in price of share. And not matching with overall movement of share market in general and movement of other scripts in same line of business. Price movement of scrip upward and down word done mainly through thin volume and all/most entities involved in the same are related in some way and are mainly operated by some entry operator and are bogus. There is hardly any history of dividend pay-outs. The Trading in the scrip was suspended by the BSE pursuant to SEBI’s directions vide Notice no. 20150101-24 dated 01.01.2015 and currently under suspension. There existed circumstantial factors such as splitting of shares, change in name and address of the listed company, which is generally done in cases of pre-arranged manipulation of scrip prices to avoid SEBI’s eyes. From the Investigation Report On Manipulation of Penny Stocks and the statements of various Scrip operators, Managers and Brokers, it is self-evident that the scrip price movement was mainly on account of manipulation in a pre-arranged synchronized fashion to book accommodation entries in form of Bogus LTCG as well as provide Shortterm Capital loss to a huge no. of beneficiaries. As per records, the assessee never traded in any shares before or after the purchase and sale of the shares in question. Reply of the assessee during personal deposition also evident that the assessee has no fair idea about the scrip. The assessee only invested in this share for the reasons best known to her. Non appearance of the assessee in response to Summon U/s 131 to complete her statement which was left half way also evident that the assessee has no fair idea about the securities’ market. In such circumstances, given the facts of the case, the onus was on the assessee to explain satisfactorily and establish that claimed LTCG was genuine which she failed to discharge for the following reasons:- The shares were purchased off-market from a Private i) Party and not through exchange, whereas the scrip was listed in stock exchange.
ii) As per bank statement provided by the assessee payment of Rs.6,50,000/- was made to Mata Shree Suppliers on 26.04.2012. During the course of statement on oath on 02.11.2017, the assessee stated that she exchanged shares of Mata Shree Suppliers with Kappac Pharma Ltd. and got 51,000 shares of Kappac Pharma Ltd. whereas as per purchase bill submitted by A.R., along with letter dated 11.07.2017, the assessee purchased 51,000 shares of Kappac Pharma Ltd., from Natraj Capital & Credit Pvt. Ltd., for a consideration of Rs.6,37,500/- on 29.07.2012. No proof of payment to M/s. Natraj Capital & Credit Pvt. Ltd., has been furnished by the assessee. It is hard to accept when the assessee got shares of Kappac Pharma Ltd., in exchange of shares of Mata Shree Suppliers why purchase bill of Rs.6,37,500/- was raised by Natraj Capital & Credit Pvt. Ltd., in the'name of the assessee. Moreover, vide show cause dated 20.11.2017, the assessee was categorically asked to prove the purchase of shares of Kappac Pharma Ltd. which she failed. Non appearance of the assessee on oath, also leads to conclusion iii) that the assessee had deliberately avoiding the proceedings, so that the department could not unearth the real transactions held by her which has been given to color the genuine business transaction. The A.R’s submission that assessee was under pressure to surrender is not at all acceptable. All the facts mentioned above leads to the belief that the transaction made by the assessee was a sham transaction. The contention of the assessee was examined. It is not the case of this office whether shares were sold on the exchange at the prevalent market rates after paying STT or not. What this office has come to conclude on the basis of above analysis, documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities is that what is apparent in this case is not real, that these financial transactions were sham ones and that this entire edifice was only a colourable device used to evade tax. Further the denial of the broker through whom shares were sold although give strength to this office conclusion that the transactions declared by the assessee are not genuine. According to Oxford English dictionary SHAM means “A thing that is not what it is purported to be”. In this instant case even though prima Ruhani Wadhwa facie it appears that the assessee received the aforementioned proceeds out of sale of shares of the scrip, in reality it was his own cash which he received back through some clandestine deals. The detailed analysis and the modus operandi discussed above firmly establishes the events in the instant case. Now the question is whether to prove some transaction as sham, does the assessing authority needs to expose all the four corners of the scheme and establish its findings through foolproof documentary evidences only at par as required in a criminal proceeding and further, whether the surrounding circumstances, human conduct and preponderance of probabilities along with related documentary evidences are not sufficient to establish a transaction as such. Further No confirmation of M/s Kappac Pharma Limited, and Natraj Capital & credit Private Limited also reflects that the transactions declared by the assessee are not genuine. It is also important to note that the bill of purchase .from M/s Natraj Capital & Credit Private Limited dated 29.07.2012 regarding physical purchase of 51000 shares of M/s Kappac Pharma Limited proves that the shares were bought in physical form and no proof of payment has been submitted by the assessee.
As there is no matter before the bench to form a different opinion. There is no reason to differ from the findings of ld. Tax Authorities. The Grounds have no substance. The appeal is dismissed.