Case Law Details
Shri Sanjay Kaul Vs ITO (ITAT Delhi)
Whether the transaction carried out by the assessee and the claim of the short Term Capital Loss is in the normal course of the investment activity of the assessee. We find that the Assessing Officer has referred to investigation done by the Directorate of Investigation, Kolkata, to highlight the General modus operandi of providing bogus long-term or short-term capital gain/loss. The said report highlights that long-term capital gain is booked while the share prices are artificially jacked up and while downward journey is used by the operator for booking bogus losses. The people who have huge profit but does not wish to pay due taxes thereon, they choose the mode of short-term capital loss to set off their profit. The loss seeking beneficiary pays cheques to the beneficiary of long-term capital gain and cash provided by the beneficiary of long-term capital gain is returned to the beneficiary of seeking loss. These are also terms as “Exit Providers” as they facilitate exist to the long terms gain beneficiary. The operator who arranged wedding of both the beneficiary of capital gain and Exit Providers, deduct his commission before payment by cash. As the prices of shares crash and the Exist Providers sells the shares for a small value, which were bought at high-value, result in generation of artificial loss.
After describing the general modus operandi of accommodation entry by way of bogus capital gain/loss, the Assessing Officer has highlighted the statement of the persons who claimed to have provided bogus capital gain/loss entries. The assessee was then asked to justify the investment in the relevant shares. The Assessing Officer has pointed out that these companies are not having any significant/real business as seen from the financial statement of those companies. The price movement of the shares was also found to be unrealistic by him. The Assessing Officer has particularly pointed out that price movement of the relevant shares transacted by the assessee, were not matching with movement of the share market in general and movement of the other scrips in the same line of the business. The Assessing Officer also pointed out that volume transacted in those script was also very low. There was no history of dividend payout by those companies. The ld. Assessing Officer has pointed out that the assessee could not explain, why it invested in such script without knowing the financial performance of the company. The relevant analysis has been reproduced by the Assessing Officer in Para 3.4 (Page-11) of the assessment order. The conclusion of AO has already been reproduced by us in brief facts of the case.
It was claimed by the assessee that said transactions were arranged through tax consultants. The assessee neither before the ld. CIT(A) not before us has rebutted these adverse finding by the Assessing Officer. The contention of the assessee is that the transactions have been done on recognized stock exchange through registered stock broker and through bank account and thus, it should be treated as genuine. However, the report of the Investigation Wing clearly shows that transaction on the stock exchange can also be manipulated and thus, in such circumstances, the onus was on the assessee to justify the rational of entering into the transactions, which the assessee has failed to do so.
Held by High Court
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