MANVI KHANDELWAL, NEW DELHI V. ITO, WARD- 46(4), NEW DELHI

ITA 3212/DEL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3277 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 04-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K SAMPATH SHRI V RAJA KUMAR
• Keywords: Unexplained cash credit; Earning of tax free income; Question of law; Cost of acquisition; Sham transactions; Capital Gains
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.3212/DEL/2018 ASSESSMENT YEAR: 2014-15 MS MANVI KHANDELWAL, VS INCOME-TAX OFFICER, 3408, GALI BAJRANG BALI, WARTD 46(4), NEW DELHI . CHAWARI BAZAR, NEW DELHI. PAN: AFYPG5452R (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K. SAMPATH, ADVOCATE SHRI V. RAJAKUMAR, ADVOCATE DEPARTMENT BY: SMT. RINKU SINGH, SR.DR DATE OF HEARING: 29.08.2019 DATE OF PRONOUNCEMENT: 26.11.2019 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 26.3.2018 PASSED BY TH E COMMISSIONER OF INCOME-TAX (APPEALS)-16, NEW DELHI (CIT(A) FOR THE ASSESSMENT YEAR 2014-15, MS MANVI KHANDELWAL (THE ASSESSEE) PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE, AS COULD BE CULLED OUT FROM THE RECORD, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAS BEEN DER IVING INCOME FROM BUSINESS OF TRADING AND COMMISSION AND FROM OTHER S OURCES. FOR THE ASSESSMENT YEAR 2014-15, HE HAD FILED HIS RETURN OF INCOME ON 8/1/2015 DECLARING AN INCOME OF RS.3,26,210/-. THE CASE WAS PICKED UP FOR SCRUTINY 2 UNDER CASS FOR THE REASON OF SUSPICIOUS LONG TERM CAPITAL GAIN (LTCG) ON SALE OF SHARES (INPUTS FROM INVESTIGATION WING) . 3. DURING THE COURSE OF ASSESSMENT, LEARNED ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAI N EXEMPT UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961 (THE AC T) ON SALE OF THE SHARES OF M/S KAPPAC PHARMA LTD AT RS.84,38,907/-, LESS THE COST OF ACQUISITION AT RS.1,32,000/-AND THEREBY DERIVING LO NG TERM CAPITAL GAIN (LTCG) AT RS.83,06,907/-. LEARNED ASSESSING OFFICER CALLED FOR AND PERUSED THE SHARE TRANSFER FORM, DEBIT NOTE, DEMAT ACCOUNT STATEMENT FROM THE DEPOSITARY PARTICIPANT ETC SUBMITTED BY TH E ASSESSEE IN SUPPORT OF THEIR CLAIM FOR EXEMPTION UNDER SECTION 10(38) O F THE ACT AND OBSERVED THAT THE ASSESSEE HAD EARNED A RETURN OF A PPROXIMATELY 6300% OVER A VERY SHORT PERIOD OF JUST OVER 12 MONTHS AND THE FACTS REQUIRED A DEEPER STUDY OF THE PRICE MOVEMENTS AND SHARE MARKE T BEHAVIOUR OF THE ENTITIES INVOLVED IN THE TRADE. OF THE SCRIP AS THE SHARE PRICE MOVEMENT AND THE PROFIT EARNED BY THE BENEFICIARIES WERE BEY OND HUMAN PROBABILITIES. 4. TAKING CLUE FROM THIS ASTRONOMICAL PROPORTION IN THE EARNINGS OF THE ASSESSEE FROM THE SCRIP M/S KAPPAC PHARMA LTD, LEARNED ASSESSING OFFICER VERIFIED THE TRADING HISTORY OF THE ASSESSE E AND THE FINANCIALS OF M/S KAPPAC PHARMA LTD AND ALSO TOOK INTO CONSIDERAT ION THE ATTENDANT CIRCUMSTANCES LIKE THE REPORT FROM THE INVESTIGATIO N WING, KOLKATA, SEBIS SURVEILLANCE MEASURES, THE DETAILS OF TRADE DATA OF EXIT PROVIDERS ETC AND REACHED A CONCLUSION THAT THE SHARE PRICE MOVEMENT AND THE SALE PURCHASE TRANSACTIONS WERE NOT GENUINE, WERE THE RE SULT OF METICULOUSLY PLANNED CIRCULAR TRADING AND THE ENTITIES INVOLVED IN THESE WERE PART OF 3 THIS EXERCISE IN AN EFFORT TO CREATE A DOCUMENTARY EVIDENCE FOR A PRE- PLANNED SCHEME FOR CONVERTING UNACCOUNTED MONEY INT O TAX-EXEMPT INCOME, AS HAS BEEN CORROBORATED BY THE CONFESSION BY THE BROKERS, OPERATORS AND EXIT PROVIDERS. 5. LEARNED ASSESSING OFFICER ALSO CONSIDERED THE ST ATEMENT OF THE ASSESSEE ON BOTH AND RECORDED ON 16/12/2016 AND OPI NED THAT THE HUGE CAPITAL GAINS EARNED BY THE ASSESSEE WITHIN A SHORT PERIOD OF TIME BY INVESTING IN A PENNY STOCK WHOSE FUNDAMENTALS HAD N O SUPPORT FOR THE PREMIUM IT COMMANDED WAS NEITHER THE RESULT OF A CO INCIDENCE NOR OF GENUINE INVESTMENT ACTIVITY, BUT WERE CREATED THROU GH A WELL PLANNED AND EXECUTED SCHEME IN WHICH THE COMPANY, THE BROKE RS AND THE BUYERS AND SELLERS OF THE SCRIPS WORKED IN TANDEM TO ACHIE VE THE PREDETERMINED OBJECTIVES. LEARNED ASSESSING OFFICER REFERRED TO A CATENA OF CASE LAW AND FINALLY BY ORDER DATED 29/12/2016 HELD THAT THE AMO UNT OF RS.84,38,907/- CREDITED BY THE ASSESSEE OUT OF THE PURPORTED RECEI PTS ON ACCOUNT OF SALE OF M/S KAPPAC PHARMA LTD DURING THE FINANCIAL YEAR 2013-14, NAMELY, ASSESSMENT YEAR 2014-15 WAS HIS INCOME AND REMAINED UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HE ACCORDINGLY BROUGHT A SUM OF RS.89,92,852/-TO TAX AND ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.93,19,062/-. 6. AGGRIEVED BY THE SAID ADDITION OF RS.89,92,852/- , ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND CONTE NDED THAT THE ASSESSEE IS AN HONEST TAXPAYER FOR THE PAST SEVERAL YEARS AND HAS NEVER INDULGED IN ANY TYPE OF MALPRACTICE AND WHEN SHE PU RCHASED THE SHARES THERE WAS NO INVESTIGATION ON THIS COMPANY, EVEN WH EN THE SHARES WERE SOLD THERE WAS NO SUCH INVESTIGATION ON THE COMPANY OR THE BROKERS AND, 4 THEREFORE, THE PURCHASE OF SHARES BY THE ASSESSEE W AS IN GOOD FAITH. IT IS ALSO HER CASE THAT WHEN THE SHARE PRICE WAS INCREAS ED SHE SOLD THEM AWAY IN OPEN MARKET ON RECOGNISED MUMBAI STOCK EXCH ANGE TO BOOK THE PROFITS, AND THE PAYMENT WAS RECEIVED THROUGH BROKE RS ONLY. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT THE STATEMEN TS OF THE PERSONS, RECORDED BY THE INVESTIGATION WING OF KOLKATA WAS A DMITTED WITHOUT AFFORDING AN OPPORTUNITY OF CROSS-EXAMINATION TO TH E ASSESSEE AND THEREFORE IT CANNOT BE SAID THAT THE M/S KAPPAC PHA RMA LTD IS A PENNY STOCK COMPANY AND HAS BEEN USED TO PROVIDE BOGUS LT CG. 7. ASSESSEES FURTHER CONTENTION BEFORE THE LD. CIT (A) WAS THAT COPIES OF ALL THE DOCUMENTS TO SUBSTANTIATE THE GEN UINENESS OF THE TRANSACTION RELATING TO THE PURCHASE AND SUBSEQUENT SALE OF SHARES LEADING TO LTCG WERE SUBMITTED AND THERE WAS NO REA SON FOR THE LEARNED ASSESSING OFFICER NOT TO BELIEVE THE SAME. FURTHER, CONTENTION OF THE ASSESSEE WAS THAT THE LONG TERM CAPITAL GAINS CANNO T BE TREATED AS BOGUS MERELY BECAUSE SOME INVESTIGATION WITH REGARD TO CE RTAIN COMPANY AND BROKER OR INVESTIGATION WAS CARRIED OUT BY THE DIRE CTORATE OF INVESTIGATION, KOLKATA. 8. LD. CIT(A) CONSIDERED ALL THE CONTENTIONS OF THE ASSESSEE IN A VERY DETAILED WAY AND BY WAY OF THE IMPUGNED ORDER REACH ED THE CONCLUSION THAT THE ASSESSEE HAD FAILED TO DISCHARGE HIS BURDE N TO PROVE HIS CASE; WHEREAS THE LEARNED ASSESSING OFFICER HAD PROVED TH AT THE CLAIM OF THE ASSESSEE WAS INCORRECT AS IS CORROBORATED BY THE EN QUIRY CONDUCTED BY SEBI AND FURTHER INVESTIGATION CARRIED OUT BY THE D IRECTORATE OF INVESTIGATION WHICH WAS THOROUGHLY ANALYSED BY THE LEARNED ASSESSING OFFICER TO REACH A CONCLUSION THAT THE ASSESSEE HAD INTRODUCED BOGUS 5 LTCG IN ITS BOOKS OF ACCOUNTS BY ROUTING HIS OWN UN ACCOUNTED INCOME THROUGH TAX EVASION SCHEME. LD. CIT(A) ALSO REFERRE D TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE (1972) 82 ITR 540, SUMATIDAYAL VS. CIT 214 ITR 801 (SC). O N AN APPRAISAL OF THE MATERIAL AVAILABLE ON RECORD AND IN THE LIGHT OF TH E CONTENTIONS RAISED BY THE ASSESSEE AND ALSO THE SETTLED CASE LAW, LD. CIT (A) REACHED A CONCLUSION THAT THE OBJECTIVE FACTS, EVIDENCE ADDUC ED, PRESUMPTIONS OF FACT BASED ON THE COMMON HUMAN EXPERIENCE IN LIFE A ND SURROUNDING CIRCUMSTANCES WOULD ESTABLISH THAT THE SHARE TRANSA CTIONS LEADING TO LTCG BY THE ASSESSEE ARE SHAM TRANSACTIONS ENTERED INTO FOR THE PURPOSE OF EVADING TAX AND THE LEARNED ASSESSING OFFICER HA D RIGHTLY ADDED THE SUM OF RS.84,38,907/-AS UNDISCLOSED INCOME OF THE A SSESSEE. 9. FELT AGGRIEVED BY THE FINDINGS OF THE AUTHORITIE S BELOW, ASSESSEE PREFERRED THIS APPEAL CONTENDING THAT THE ASSESSEE IS AN INNOCENT INVESTOR IN M/S KAPPAC PHARMA LTD AND NEVER HAS IT BEEN SAID BY THE DEPARTMENT AGAINST THE ASSESSEE THAT SHE INDULGED I N ANY TYPE OF MALPRACTICE IN ANY OF THE PAST SEVERAL YEARS. LD. A R ALSO RAISED SO MANY QUESTIONS BEFORE US WHICH WERE WISE BEFORE THE ASSE SSING OFFICER IN THE LETTER DATED 22/12/2016 AND SUBMITTED THAT THE REVE NUE DOES NOT POSSESS ANY MATERIAL EVIDENCE ON RECORD TO DISPROVE THE EVIDENCE PRODUCED BY THE ASSESSEE, IN THE ABSENCE OF WHICH I T IS NOT OPEN FOR THE REVENUE TO CONSIDER THE INTENT OF THE ASSESSEE IS M ALA FIDE ACTING UNDER SURMISES AND CONJECTURES OR ON PRESUMPTIONS NOT SUP PORTED BY EVIDENCE. IT IS ALSO FURTHER CONTENDED THAT WHEN THE ASSESSEE HAD DULY PAID THE CONSIDERATION ON PURCHASE OF SHARES AGAINST THE VAL ID RECEIPTS, SHARES WERE DULY TRANSFERRED TO THE ASSESSEES NAME, SHARE S DULY DEPOSITED TO 6 DEMAT ACCOUNT, SHARES WERE DULY AND LEGALLY TRANSFE RRED TO THE BUYER THROUGH VALID TRANSFER DATES, CONSIDERATION RECEIVE D THROUGH ACCOUNT PAYEE CHEQUE AND STT PAID, IS NOT UNDERSTANDABLE HO W THE LEARNED ASSESSING OFFICER TREATED THE TRANSACTION AS A BOGU S ONE. 10. IT IS FURTHER CONTENDED THAT THE M/S KAPPAC PHA RMA LTD NEVER DENIED THE ASSESSEE IS A GENUINE SHAREHOLDER OF THE COMPANY AND NO DOCUMENTARY PROOF WAS GATHERED BY THE INVESTIGATING AGENCIES AGAINST THE ASSESSEE NOR ANY DOCUMENTARY EVIDENCE, PHONE CA LLS, WITNESSES OR ANY MATERIAL WAS DISCOVERED BY THE REVENUE TO SUGGE ST THAT THE IMPUGNED TRANSACTION IS A BOGUS TRANSACTION AND THE CONCLUSIONS REACHED BY THE AUTHORITIES BELOW WOULD ONLY AMOUNT TO PUNIS HING THE INNOCENT PEOPLE LEAVING THE ENTRY OPERATORS, ACCOMMODATION E NTRY PROVIDERS, SHARE BROKERS ETC AND NONE OF THESE PEOPLE DID SAY ANYTHING AGAINST THE ASSESSEE THAT THE ASSESSEE HAD TAKEN LTCG AS AN ACC OMMODATION ENTRY AND THAT THE TRANSACTION MADE BY HER IS NOT A GENUI NE ONE. 11. ACCORDING TO THE LD. AR, THE ASSESSEE HAD BEEN INVESTING IN SHARES QUITE FOR A LONG TIME AND HAS BEEN DULY DECLARING A LL HER PROFITS IN THE RETURN OF INCOME, AND THE ASSESSEE HAD BEEN TAKING THE DECISIONS ON THE ADVICE OF HER FATHER IN LAW, WHO WAS REGULARLY DEAL ING IN SHAREMARKET AND NOT AS A PROFESSIONAL SHARE TRADER WHO WOULD UNDERS TAND THE NITTY-GRITTY OF THE SHAREMARKET. LD. AR PLACED RELIANCE ON THE D ECISION OF THE TRIBUNAL IN SMT. KARUNA GARG VS. ITO IN ITA NO. 1069/DEL/201 8 AND BATCH OF APPEALS DISPOSED OF BY A COMMON ORDER DATED 06/08/2 019 WHEREIN IT WAS HELD THAT NO QUESTION OF LAW WAS PERMITTED BY T HE HONBLE HIGH COURT OF DELHI IN THE SAID CASE AND THERE IS ONLY D ISMISSAL OF APPEAL IN LIMINE AS THE HONBLE HIGH COURT FOUND THAT THE ISS UE INVOLVED IS A 7 QUESTION OF FACT. HE ALSO PLACED RELIANCE ON THE DE CISION OF THE TRIBUNAL IN THE CASE OF HIMANSHU CHAUDHARY VS. ITO IN ITA NO.77 72/DEL/2017 DISPOSED OF BY ORDER DATED 27/11/2018. HE ALSO PLAC ED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ANDAMAN TIMBER INDUSTRIES VS. CIT IN CIVIL APPEAL NO.4228 OF 2006 IN SUPPORT OF HIS ARGUMENT THAT THE ASSESSMENT PROCEEDINGS ARE VITIAT ED FOR NOT GIVING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PE RSONS WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION TEAM AND REFERRED TO BY THE ASSESSING OFFICER IN HIS ORDER. 12. PER CONTRA, IT IS THE SUBMISSION OF THE LD. DR THAT THE VERY BASIS FOR PICKING UP THIS CASE FOR SCRUTINY WAS SUSPICIOUS L ONG TERM CAPITAL GAIN ON SALE OF SHARES (INPUTS FROM INVESTIGATION WING) AND DURING THE VERIFICATION OF FACTS IT WAS FOUND THAT THE ASSESSE E HAS EARNED A RETURN OF APPROXIMATELY 6300% OVER A VERY SHORT PERIOD OF JUS T OVER 12 MONTHS, WHICH IGNITED THE CURIOSITY OF THE ASSESSING OFFICE R TO DELVE DEEPER INTO THE FACTS OF THE CASE BY EXAMINING THE FINANCIALS O F M/S KAPPAC PHARMA LTD IN THE LIGHT OF SEBI SURVEILLANCE MEASURES AND ALSO THE TRADING DATA OF THE EXIT PROVIDERS. SHE SUBMITTED THAT THE STATEMEN TS RECORDED BY THE INVESTIGATION WING KOLKATA ARE NOT THE SOLE BASIS F OR THE ASSESSING OFFICER TO REACH ANY DEFINITE CONCLUSION TO HOLD THAT THE S HARE TRADER TRANSACTION BY THE ASSESSEE IS A BOGUS ONE. IT IS THE INDEPENDE NT INVESTIGATION DONE BY THE LEARNED ASSESSING OFFICER AS IS REVEALED IN THE ASSESSMENT ORDER THAT LED TO THE CONCLUSIONS REACHED BY THE ASSESSIN G OFFICER AND, THEREFORE, NO PREJUDICE IS CAUSED TO THE ASSESSEE B Y NOT AFFORDING AN OPPORTUNITY TO HER TO CROSS EXAMINE THE PERSONS WHO SE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING, KOLKATA. SHE SU BMITTED THAT THE 8 ASSESSING OFFICER DID THE BEST HE CAN DO AND HIS CO NCLUSIONS ARE FIRMLY ENTRENCHED INTO THE RECORD AND THEREFORE THERE IS N O INFIRMITY THAT COULD BE CULLED OUT FROM THE ORDERS OF THE AUTHORITIES BE LOW SO AS TO INVITE ANY INTERFERENCE BY THIS TRIBUNAL. 13. LD. DR PLACED RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF POOJA AJMANI VS. ITO IN ITA NO. 5714 /DEL/ 2018 BY ORDER DATED 25/04/2019, UDIT KALRA VS. ITO IN ITA NO. 6717/DEL/ 2017 BY ORDER DATED 8/1/2019 AND UPHELD BY THE HONBLE JURISDICTIONAL H IGH COURT IN ITA NO. 220/2019 BY ORDER DATED 8/3/2019, SANAT KUMAR VS. A CIT IN ITA NO. 1881/DEL/2018 BY ORDER DATED 14/6/2019 AND SUBMITTE D THAT UNDER SIMILAR CIRCUMSTANCES THIS TRIBUNAL HELD THAT SINCE M/S KAPPAC PHARMA LTD HAS NO SOUND FINANCIAL STATUS TO INSPIRE CONFID ENCE IN THE MIND OF AN HONEST INVESTOR TO PUT THEIR HARD EARNED MONEY WITH AN INTENTION TO EARN ANY PROFITS, SUCH A TRANSACTION CANNOT BE INFERRED TO BE A GENUINE ONE. 14. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE PURCHASED THE SHARES OF M/S KAPPAC PHARMA LTD ON 25.6.2012 OF F-LINE AND BY MAKING CASH PAYMENT AT THE RATE OF RS. 11 PER-SHARE THROUGH ONE M/S VISHAL REALITY MANAGEMENT LTD BY MAKING A TOTAL PAY MENT OF RS.1,32,000/-FOR ACQUIRING 12,000 EQUITY SHARES. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE SOLD THESE 12,000 SHARES OF M/S K APPAC PHARMA LTD AT RS.750/-FOR A CONSIDERATION OF RS.83,06,907/-THROUG H BOMBAY STOCK EXCHANGE WITHIN A PERIOD JUST OVER 12 MONTHS TO REA LISE A RETURN OF APPROXIMATELY 6300%. IT IS ONLY THIS TRANSACTION OF REALISING LONG TERM CAPITAL GAINS THAT TRIGGERED THE SELECTION OF CASE FOR SCRUTINY UNDER CASS FOR THE REASON OF, SUSPICIOUS LONG TERM CAPITAL GAI N (LTCG) ON SALE OF 9 SHARES (INPUTS FROM INVESTIGATION WING). ON THIS E VENT, BEING TRIGGERED, LEARNED ASSESSING OFFICER LOOKED INTO THE FACTS INV OLVED IN THIS MATTER. 15. LEARNED ASSESSING OFFICER VERIFIED THE TRADING ACTIVITY OR INVESTMENT IN SHARES OF THE ASSESSEE IN THE SHARES OF LISTED COMPANIES AND ALSO THE FINANCIALS OF M/S KAPPAC PHARMA LTD AN D ALSO THE TRADING HISTORY OF THE SHARES OF M/S KAPPAC PHARMA LTD. LEA RNED ASSESSING OFFICER ALSO VERIFIED THE TRADE DATA PERTAINING TO THE EXIT PROVIDERS IN RESPECT OF THE M/S KAPPAC PHARMA LTD TO THE ASSESSE E. ON A CAREFUL ANALYSIS OF ALL THIS MATERIAL, THEN THE ASSESSING O FFICER PROCEEDED TO CALL OUT THE MODUS OPERANDI ADOPTED BY THE ASSESSEE WHIC H IS AKIN TO THE MODUS OPERANDI OF BOGUS LTCG SHARES AS IS INDICATED BY THE DIRECTOR OF INVESTIGATIONS, KOLKATA WHO CARRIED OUT A COUNTRYWI DE INVESTIGATION TO UNDER THE ORGANISED RACKET OF GENERATING BOGUS ENTR IES OF LONG TERM CAPITAL GAIN (LTCG) WHICH IS EXEMPT FROM TAX. ON A COMPARISON OF THE FACTS AND CIRCUMSTANCES INVOLVED IN THESE MATTERS, LEARNED ASSESSING OFFICER REACHED THE CONCLUSION THAT THE MODUS OPERA NDI ADOPTED BY THE OPERATORS WAS TO MAKE THE BENEFICIARIES BY SOME SHA RES OF PREDETERMINED PENNY STOCK COMPANY CONTROLLED BY THE M AND THE MODUS OPERANDI ADOPTED BY THE ASSESSEE IS FITTING IN THE ORDER OF THE THINGS. LEARNED ASSESSING OFFICER THEREFORE REACHED A CONCL USION THAT THE TRANSACTION OF DERIVING LONG TERM CAPITAL GAIN (LTC G)S BY THE ASSESSEE IS A BOGUS ONE. 16. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DOES NOT DISPUTE ANY OF THE FACTS STATED IN THE IMMEDIATELY PRECEDING PARAG RAPH. IT REMAINS AN ADMITTED FACT THAT HAVING PURCHASED 12,000 SHARES O F M/S KAPPAC PHARMA LTD AT RS. 11/-SHARE, THE ASSESSEE SOLD THE SAME AT RS.750/-PER 10 SHARE WITHIN A SPAN OF 12 MONTHS AND REALISED THE C APITAL GAINS TO THE TUNE OF RS.83,06,907/-AND PRECISELY THIS EVENT TRIG GERED THE SUSPICION TO THE REVENUE AUTHORITIES PROMPTING THEM TO CONDUCT A DEEPER SCRUTINY OF THE TRANSACTION. IT IS NOT AS THOUGH THE LEARNED AS SESSING OFFICER JUMPED TO ANY CONCLUSION MERELY BY REFERRING TO SOME REPOR T OF THE INVESTIGATION WING OF INCOME TAX DEPARTMENT AT KOLKATA WHICH CARR IED OUT A COUNTRYWIDE INVESTIGATION TO UNDER THE ORGANISED RA CKET OF GENERATING BOGUS ENTRIES OF LONG TERM CAPITAL GAIN (LTCG) WHIC H IS EXEMPT FROM TAX. 17. ASSESSMENT ORDER CLEARLY SHOWS THAT THE LEARNED ASSESSING OFFICER EXAMINED THE RETURN OF INCOME AND FOUND THAT IT DOE S NOT SHOW SUBSTANTIAL TRADING ACTIVITY OR INVESTMENT IN SHARE S OF LISTED SHARES AND THE PURCHASE OF SHARES IN A HUGE QUANTITY WAS MADE WHEN THE COMPANY HAD NO PROVEN FINANCIAL RESULTS WHICH WERE AN INDIC ATOR TO THE FUTURE EVENTS. AS A MATTER OF FACT, LEARNED ASSESSING OFFI CER FOUND THAT THE ASSESSEE, THOUGH A NOVICE IN SHARE MARKET WITHOUT A NY SUBSTANTIAL TRADE TRANSACTION IN THE EARLIER YEARS OR IN THE SUBSEQUE NT YEARS, THAT TOO WITHOUT FINDING THE FINANCIAL RESULTS OF M/S KAPPAC PHARMA LTD ARE SO SPLENDID TO INSPIRE THE ASSESSEE TO BELIEVE THAT TH ERE IS A CHANCE OF LUCRATIVE GAINS AT THE STAGE OF PURCHASE OF SUCH SH ARES, INVESTED THE MONEY TO THE TUNE OF RS.1,32,000/-. NATURALLY THIS FACT TRIGGERED SUSPICION IN THE MIND OF THE LEARNED ASSESSING OFFICER, CAUSI NG HIM TO ENQUIRE INTO THE FINANCIALS OF M/S KAPPAC PHARMA LTD. 18. ASSESSMENT ORDER FURTHER CLEARLY INDICATES THAT THE LEARNED ASSESSING OFFICER DELVED DEEPER INTO THE FINANCIALS OF M/S KAPPAC PHARMA LTD FOR THE FINANCIAL YEARS 2009-10 TO 2013-14 AND FOUND THAT THIS COMPANY HAD CONSTANTLY BEEN INCURRING LOSSES. FROM THE ANNUAL REPORTS 11 OF THIS COMPANY, LEARNED ASSESSING OFFICER DEDUCED THAT THE ASSESSEE HAD PURCHASED THE SHARES OF M/S KAPPAC PHARMA LTD, EVEN THOUGH M/S KAPPAC PHARMA LTD HAD INCURRED LOSSES CONSISTENTLY, AND, THEREFORE, STRONGLY INDICATING THAT THE PURCHASE OF THESE SHAR ES IS A PREDETERMINED ACTION LEADING TO SUBSEQUENT PAT TO ACQUIRE BOGUS L TCG. THE FINDINGS OF THE LEARNED ASSESSING OFFICER ARE AMPLY CORROBORATE D BY THE FIGURES IN RESPECT OF THE INCREASE OF SHARE AND TRADING VOLUME S OF M/S KAPPAC PHARMA LTD ALSO BALANCE SHEET FIGURES FOR ALL THESE YEARS. 19. LEARNED ASSESSING OFFICER FURTHER TAKE NOTE OF THE FACT THAT THE TRADING IN THE SHARES OF M/S KAPPAC PHARMA LTD WAS SUSPENDED W.E.F. 07/01/2015 BY BSE AS A SURVEILLANCE MEASURE PURSUAN T TO THE DIRECTIONS ISSUED BY SEBI. IT IS ALSO IMPORTANT TO NOTE THAT T HE LEARNED ASSESSING OFFICER VERIFIED THE TRADE DATA PERTAINING TO THE S ELLERS OF SHARES OF M/S KAPPAC PHARMA LTD AND FOUND THAT THERE WERE THREE P ARTIES, NAMELY, ABHINNA VYAPAR PRIVATE LIMITED, EASH VYAPAAR PRIVAT E LIMITED, AND PRERNA VYAPAAR PRIVATE LIMITED WHO PURCHASED THE SHARES FR OM THE ASSESSEE AND PROVIDED HER THE EXIT ENTRIES. FURTHER, ON VERIFICA TION OF THE ANNUAL INCOME AND RETURN FILING DETAILS OF THESE THREE ENT ITIES, BY OBTAINING THE INPUTS FROM THE INVESTIGATION WING OF THE INCOME TA X DEPARTMENT, IT WAS FOUND THAT THESE THREE ENTITIES WERE NON-TAXPAYERS WITH THE INCOME BELOW THE TAXABLE LIMITS; THAT THE FINANCIAL CAPACI TY OF THESE THREE ENTITIES IS NOT AT ALL COMMENSURATE WITH THE HUGE INVESTMENT MADE BY THEM IN PURCHASE OF THIS PARTICULAR SCRIP; AND, THEREFORE, BASED ON THE INPUTS FROM THE INVESTIGATION WING, IT WAS EVIDENT THAT THESE B UYERS WERE MERE ACCOMMODATION ENTRY PROVIDERS WHO INDULGED IN THESE TRANSACTIONS ON BEHALF OF THE SCHEME OPERATORS FOR EXCHANGE OF COMM ISSION. 12 20. IT IS AT THIS JUNCTURE, LEARNED ASSESSING OFFIC ER REFERRED TO THE DETAILS OF THE MODUS OPERANDI OF BOGUS LTCG SCHEMES , IN THE BACKGROUND OF INVESTIGATION CARRIED OUT BY THE INVESTIGATION W ING OF THE INCOME TAX DEPARTMENT, KOLKATA WHO CARRIED OUT A COUNTRYWIDE I NVESTIGATION TO UNDER THE ORGANISED RACKET OF GENERATING BOGUS ENTR IES OF LONG TERM CAPITAL GAIN (LTCG), WHICH IS EXEMPT FROM TAX, AND FOUND THAT THE MODUS OPERANDI ADOPTED BY THE OPERATORS WAS TO MAKE THE B ENEFICIARY BUY SOME SHARES OF PREDETERMINED PENNY STOCK COMPANY SH ARES CONTROLLED BY THEM WITH THE INITIAL TRANSFER OF SHARES IN THE NAME OF THE BENEFICIARY ON OFF MARKET TRANSACTION BASIS OR ONLINE TRANSACTI ON BASIS AND THEREAFTER, ISSUE PREFERENTIAL SHARES AT A NOMINAL RATES OR ISS UE OF BONUS SHARES EVEN THOUGH THERE IS HARDLY ANY PROFIT OR BUSINESS ACTIV ITY IN THESE COMPANIES; THAT THE BENEFICIARY, USUALLY AN INDIVIDUAL, HOLDS THE SHARES FOR ONE YEAR, THE STATUTORY PERIOD AFTER WHICH LTCG IS EXEMPT UND ER SECTION 10(38) OF THE ACT; IN THE MEANTIME, THE OPERATOR REGISTER THE PRICES OF THE STOCK AND GRADUALLY RISE ITS PRISE MANY TIMES, OFFERED 50 0 TO 1000 TIMES; THAT THIS IS DONE THROUGH LOW-VOLUME TRANSACTION INDULGE D IN BY THE DUMMIES OF THE OPERATOR AT A PREDETERMINED PRICE; THAT WHEN THE PRICE REACHES THE DESIRED LEVEL THE BENEFICIARY WHO BOUGHT THE SH ARES AT A NOMINAL PRICE, IS MADE TO SELL IT TO A DUMMY COMPANY OF THE OPERATOR; AND THAT FOR THIS, UNACCOUNTED CASH IS PROVIDED BY THE BENEF ICIARY WHICH IS ROUTED THROUGH IN A FEW LAYERS OF PAPER COMPANIES BY THE O PERATOR AND FINALLY IS PARKED WITH THE DUMMY PAPER COMPANY THAT WILL BUY T HE SHARES. HAVING GONE THROUGH THIS, LEARNED ASSESSING OFFICER THOUGH T THAT HIS FINDINGS ON THE VERIFICATION OF THE ASSESSEES TRANSACTION ARE WELL CORROBORATED AND, THEREFORE, REACHED A DIFFERENT CONCLUSION AS TO THE NATURE OF THE TRANSACTION DONE BY THE ASSESSEE. 13 21. THOUGH THE ASSESSEE RAISED SO MANY QUESTIONS IN THE LETTER DATED 22/12/2016, IT REMAINS UNANSWERED AS TO WHAT INSPIR ED THE ASSESSEE TO INVEST SO MUCH AMOUNT IN A COMPANY WHOSE FINANCIAL RESULTS ARE NOT SO SPLENDID AWE-INSPIRING AND THERE ARE NO CHANCES OF LUCRATIVE GAINS AT THE TIME WHEN SUCH SHARES WERE PURCHASED. IT IS NOT OPE N FOR THE ASSESSEE TO RAISE SUCH QUESTIONS WHICH ARE EXCLUSIVELY IN HER P ERSONAL KNOWLEDGE, AND IT IS NOT POSSIBLE FOR THE LEARNED ASSESSING OF FICER TO KNOW WHAT TRANSPIRED IN THE MIND OF THE ASSESSEE TO MAKE SUCH AN INVESTMENT. WHAT THE ASSESSEE DID WAS SOMETHING IMPROBABLE FOR NOVIC E INVESTOR WITHOUT ANY SUBSTANTIAL SHARE TRANSACTION IN EARLIER SUBSEQ UENT YEARS. GENERALLY THE INVESTMENT TAKES PLACE WITH THE MOTIVE OF PROFI T EARNING, AND WHAT WAS THE HOPE OF THE ASSESSEE IS EXCLUSIVELY KNOWN T O HER AND TO NONE ELSE. WHEN THE TRANSACTION CREATED A REASONABLE DOU BT, IT IS FOR THE ASSESSEE TO CLARIFY THE CIRCUMSTANCES WHICH PROMPTE D HER TO MAKE SUCH AN INVESTMENT. THE SATISFACTION OF THE ASSESSEE IN RESPECT OF THE PROSPECTS OF EARNING PROFITS BY SUCH AN INVESTMENT IS A PSYCHOLOGICAL FACT AND WITHIN HER EXCLUSIVE AND PERSONAL KNOWLEDGE. UN LESS AND UNTIL, THE ASSESSEE COMES OUT WITH AN EXPLANATION THAT THERE W AS REASON FOR HER TO MAKE SUCH AN INVESTMENT AND THE CIRCUMSTANCES UNDER WHICH SUCH AN INVESTMENT WAS MADE, OUT OF HER PERSONAL KNOWLEDGE, LEARNED ASSESSING OFFICER HAS NO REASON NOT TO PURSUE THE REASONABLE DOUBT HE HAD IN RESPECT OF THE TRANSACTION WHICH HE ANALYSED IN THE LIGHT OF THE ATTENDANT CIRCUMSTANCES LIKE THE FINANCIALS OF THE COMPANY AN D THE TRANSACTION DATA OF THE EXIT PROVIDERS. WITHOUT DOING SO, SHE CANNOT SHIFT THE BURDEN TO THE LEARNED ASSESSING OFFICER. AS RIGHTLY OBSERVED BY THE LEARNED ASSESSING OFFICER, LAW DOES NOT PUT THE ONUS OF COL LECTING THE REASONS WHICH ARE IN THE PERSONAL KNOWLEDGE OF THE ASSESSEE , FOR THE INVESTMENT 14 OF THE ASSESSEE WITHOUT MUCH EXPERIENCE IN INVESTME NT IN SUCH COMPANIES AS THAT OF M/S KAPPAC PHARMA LTD, THAT TO O IN THE CIRCUMSTANCES WHICH DO NOT INSPIRE HER CONFIDENCE O F DERIVING ANY BENEFITS FROM SUCH INVESTMENT. IT IS AN IMPOSSIBLE BURDEN WHICH THE ASSESSEE SEEKS TO PUT ON THE LEARNED ASSESSING OFFI CER. 22. ON A CAREFUL SCRUTINY OF THE ASSESSMENT ORDER A ND THE IMPUGNED ORDER PASSED BY THE LD. CIT(A), AS A MATTER OF FACT , WE FIND THAT THE SHARE TRANSACTION DONE BY THE ASSESSEE IS SURROUNDED BY A THICK CLOUD OF SUSPICION WHICH THE ASSESSEE FAILED TO DISPEL. SINC E THE LEARNED ASSESSING OFFICER DID NOT RELY ON THE INVESTIGATION REPORT OF THE KOLKATA WING OF INCOME TAX DEPARTMENT TO REACH THE CONCLUSION AS TO THE NATURE OF TRANSACTION, AND ON THE OTHER HAND, HIS FINDINGS AR E FIRMLY ENTRENCHED INTO THE FACTS HE CULLED OUT DURING THE ASSESSMENT PROCEEDINGS AND DERIVED FROM THE ANALYSIS OF THE FINANCIALS OF M/S KAPPAC PHARMA LTD AND ALSO OTHER CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE CANNOT PLACE RELIANCE ON THE DECISION OF T HE HONBLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA). 23. IT IS PERTINENT TO NOTE THAT THE FACTS IN THE C ASE OF UDIT KALRA (SUPRA) ARE SIMILAR TO THE FACTS OF THE CASE ON HAN D. THE TRIBUNAL HELD THAT WHEN THERE WAS A SPECIFIC INFORMATION THAT THE ASSE SSEE HAD INDULGED IN NONGENUINE AND BOGUS CAPITAL GAIN OBTAINED FROM THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF M/S KAPPAC PHARMA LT D, A MUMBAI-BASED COMPANY, IT WAS NOTICED THAT THE PURCHASE TRANSACTI ON WAS DONE OFF- MARKET IN PHYSICAL FORM OR PAYING CASH, THE ASSESSE E PURCHASED THE SHARES OF M/S KAPPAC PHARMA LTD IN PHYSICAL FORM AN D THEREAFTER THE SAME WERE CONVERTED INTO ELECTRONIC FORM, THE PURCH ASE PAYMENT WAS 15 MADE IN CASH AND NOT THROUGH THE NORMAL BANKING CHA NNEL, THEREFORE, THE SAME WERE NOT VERIFIABLE FROM THE AUTHENTIC SUPPORT ING DETAILS SUCH AS BANK ACCOUNT/DOCUMENTS, AND THE ASSESSEE FAILED TO FURNISH THE SOURCE FOR THE PURCHASE TRANSACTIONS - SUCH A TRANSACTION IS AGAINST HUMAN POSSIBILITY. THE TRIBUNAL APPLIED THE RATIO OF HON BLE SUPREME COURT IN THE CASE OF MCDOWELL & CO LTD., 154 ITR 148 OF THE ACT TO REACH A CONCLUSION THAT THE TRANSACTION, METICULOUSLY PLANN ED AND FRAMED, IS WITHOUT THE FRAMEWORK OF LAW AND A COLOURABLE DEVIC E, WHICH CANNOT BE PART OF TAX PLANNING AND IT WOULD BE WRONG TO ENCOU RAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOURABLE TO AVOID THE PAYMENT O F TAX BY DUBIOUS METHODS. 24. THE FINDINGS OF THE TRIBUNAL ARE FAVOURED BY TH E HONBLE JURISDICTIONAL AND ARE CONFIRMED IN ITA NO.220/2019 ON THE FILE OF THE HONBLE DELHI HIGH COURT BY ORDER DATED 8/3/2019, W HEREIN THE HONBLE HIGH COURT HELD THAT THE COMPANY (M/S KAPPAC PHARMA LTD, WHICH WAS EVEN DIRECTED TO BE DELISTED FROM THE STOCK EXCHANG E) HAD MEAGRE RESOURCES AND IN FACT REPORTED CONSISTENT LOSSES AN D IN THE CIRCUMSTANCES, THE ASTRONOMICAL GROWTH OF THE VALUE OF COMPANYS S HARE NATURALLY EXCITED THE SUSPICION OF THE REVENUE. HONBLE HIGH COURT DECLINED TO INTERFERE WITH THE FINDINGS OF THE TRIBUNAL AND DIS MISSED THE APPEAL. 25. IN THE CASE OF SANAT KUMAR (SUPRA), A COORDINAT E BENCH OF THIS TRIBUNAL DEALT WITH A SIMILAR SITUATION, AND MADE A N OBSERVATION THAT THOUGH THE ASSESSEE METICULOUSLY COMPLETED THE PAPE RWORK BY ROUTING HIS ENTIRE INVESTMENTS THROUGH BANKING CHANNEL, WHE N THE RESULT OF AN ALTOGETHER BEYOND HUMAN PROPERTIES, WHAT IS APPAREN T IN MAKING 16 INVESTMENT IS NOT REALLY AND THE EXAMINATION OF THE ENTIRE TRANSACTION FALSIFIES THE SAME. 26. HAVING REGARD TO ALL THESE FACTS AND CIRCUMSTAN CES OF THE CASE IN THIS MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE CONDUCT OF THE ASSESSEE WHO IS A NOVICE, IN INVESTING IN THE STOCK S OF A COMPANY WHOSE FINANCIAL RESULTS ARE NOT BRILLIANT AND WHERE THERE IS NO APPARENT CHANCE OF LUCRATIVE GAINS AT THE TIME WHEN SUCH AN INVESTM ENT WAS MADE - RAISES REASONABLE DOUBT TO SUSPECT THE BONA FIDES OF THE T RANSACTION AND IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION OFFERED BY THE ASSESSEE ON THE VITAL POINTS RAISED BY THE LEARNED ASSESSING OFFICE R, IT IS NOT POSSIBLE TO BRUSH ASIDE THE ORDERS OF THE AUTHORITIES BELOW. BO TH THE AUTHORITIES BELOW HAVE THE COGENT REASONS FOR REACHING THE CONC LUSIONS AND WE FIND IT DIFFICULT TO INTERFERE WITH THE SAME. WITH THIS VIEW OF THE MATTER, WE DISMISS THE GROUNDS OF. 27. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (K.NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH NOVEMBER, 2019. VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI