Case Law Details
Manish Goel Vs ITO (ITAT Kolkata)
ITAT find that in the case of Swati Bajaj (supra), the facts before the Hon’ble Jurisdictional High Court, were that the assessee has claimed exempt income under section 10(38) of the Act at Rs.28,23,500/- from sale of equity shares of a listed company namely Surabhi Chemicals & Investment Limited. Suraj Gujarat In a short span of 17 to 20 months, there was growth of 2823% in the share price even when general market trend was recessive. The Director of the Income Tax (Investigation), Kolkata initiated the investigation after coming across various such transactions. Hon’ble Jurisdictional High Court thereafter examined the facts of the case and came to a conclusion that the Company, i.e. Surabhi Chemicals & Investment Limited is a Penny Stock Company as there is an abnormal growth in the prices of its equity shares, which are not commensurate with the financial strength of the company and thus the assessee has taken the accommodation entries in the form of Long-term capital gain and thus the exemption claimed by the assesese under section 10(38) of the Act was denied and addition under section 68 of the Act made by the ld. Assessing Officer was confirmed.
In the case of Manish Goel in ITA No. 513/KOL/2019, similar type of transactions has taken place and long-term capital gain of Rs.15,79,676/- is claimed to have been earned from sale of equity shares of M/s. Quest Financial Services Limited and benefit under section 10(38) of the Act has been claimed in the sale of equity shares of this company. This particular scrip finds mention in the list of “bogus capital gain claims” information data provided by the Directorate of Investigation Wing, Kolkata. In this case also, there is abnormal increase in the prices from Rs.5 to 84.10 in a short span of 20 months and company has poor financials.
As regards in the case of assessee M/s. Enkay Trafin Pvt. Limited in ITA No. 384/KOL/2022 is concerned, there is a claim of bogus loss at Rs.39,00,270/- and as stated by the ld. Assessing Officer in this case that the assessee company purchased the shares when the prices of the alleged penny stock companies are almost at its peak and brokers were going to start its downward cycle to provide bogus short-term capital loss/trading loss/loss in valuation of closing stock adopting market price as on the last day of the financial year and the assessee-company has prearranged the bogus loss.
After going through the facts of the instant appeals as discussed above, I find that they are similar to the facts dealt by the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra) and the submissions made by the ld. Counsel for the assessees that the alleged claim of long-term capital gain under section 10(38) in the case of Manish Goel and Modhu Goel and loss claimed in the case of Enkay Trafin Pvt. Limited are accommodation/bogus entries through penny stock companies is found to be correct. I, therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra) confirm the additions made by the ld. Assessing Officer in respect of bogus long-term capital gain/bogus loss.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These appeals at the instance of different assessees for assessment years 2013-14, 2013-14 & 2014-15 are directed against the orders of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 14.02.2019, 14.02.2019 & 12.05.2022 respectively.
2. Identical issue involved in ITA Nos. 513/KOL/2019 and 514/KOL/2019 is relating to the disallowance of assessees’ claim of exemption under section 10(38) of the Act in respect of long-term capital gain arising from sale of equity shares and ITA No. 384/KOL/2 022 relates to the disallowance of bogus loss from sale of equity shares.
3. At the outset, ld. Counsel Shri Siddharth Agarwal for all the three assessees’ has been fair enough to state that since the issue involved in these appeals relates to the penny stocks and procuring of accommodation entry in the form of bogus long-term capital gain from sale of equity shares and bogus loss from sale of equity shares, the same is squarely covered against the assessee by the recent judgment of the Hon’ble Calcutta High Court vide common order dated 14.06.2022 in a batch of 90 appeals with a lead case titled as PCIT –vs.- Swati Bajaj in IA No. GA/2/2022 and others. The ld. Counsel for the assessees also submitted that the facts and issues involved in the instant appeals are identical to that before the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra).
4. On the other hand, ld. D.R. also confirmed that the issues raised in the instant three appeals are squarely covered against the assessee by the judgment of the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra).
5. I have heard the rival contentions and perused the relevant material available on record. After hearing the ld. Counsel for the assessees fairly accepting that the issues raised in the instant three appeals are squarely covered against the assessees by the judgment of the Hon’ble Jurisdictional High Court vide common order dated 14.06.2022 in the case of Swati Bajaj (supra). I find that in the case of Swati Bajaj (supra), the facts before the Hon’ble Jurisdictional High Court, were that the assessee has claimed exempt income under section 10(38) of the Act at Rs.28,23,500/- from sale of equity shares of a listed company namely Surabhi Chemicals & Investment Limited. Suraj Gujarat In a short span of 17 to 20 months, there was growth of 2823% in the share price even when general market trend was recessive. The Director of the Income Tax (Investigation), Kolkata initiated the investigation after coming across various such transactions. Hon’ble Jurisdictional High Court thereafter examined the facts of the case and came to a conclusion that the Company, i.e. Surabhi Chemicals & Investment Limited is a Penny Stock Company as there is an abnormal growth in the prices of its equity shares, which are not commensurate with the financial strength of the company and thus the assessee has taken the accommodation entries in the form of Long-term capital gain and thus the exemption claimed by the assesese under section 10(38) of the Act was denied and addition under section 68 of the Act made by the ld. Assessing Officer was confirmed.
6. Now on examining the facts of the instant appeals in light of this judgment, I find that in the case of Manish Goel in ITA No. 513/KOL/2019, similar type of transactions has taken place and long-term capital gain of Rs.15,79,676/- is claimed to have been earned from sale of equity shares of M/s. Quest Financial Services Limited and benefit under section 10(38) of the Act has been claimed in the sale of equity shares of this company. This particular scrip finds mention in the list of “bogus capital gain claims” information data provided by the Directorate of Investigation Wing, Kolkata. In this case also, there is abnormal increase in the prices from Rs.5 to 84.10 in a short span of 20 months and company has poor financials.
7. Similar is the fact in the case of Madhu Goel, where exempt income under section 10(38) has been claimed at Rs.16,92,658/- from sale of equity shares of M/s. Quest Finance Service Limited.
8. As regards in the case of assessee M/s. Enkay Trafin Pvt. Limited in ITA No. 384/KOL/2022 is concerned, there is a claim of bogus loss at Rs.39,00,270/- and as stated by the ld. Assessing Officer in this case that the assessee company purchased the shares when the prices of the alleged penny stock companies are almost at its peak and brokers were going to start its downward cycle to provide bogus short-term capital loss/trading loss/loss in valuation of closing stock adopting market price as on the last day of the financial year and the assessee-company has prearranged the bogus loss.
9. After going through the facts of the instant appeals as discussed above, I find that they are similar to the facts dealt by the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra) and the submissions made by the ld. Counsel for the assessees that the alleged claim of long-term capital gain under section 10(38) in the case of Manish Goel and Modhu Goel and loss claimed in the case of Enkay Trafin Pvt. Limited are accommodation/bogus entries through penny stock companies is found to be correct. I, therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra) confirm the additions made by the ld. Assessing Officer in respect of bogus long-term capital gain/bogus loss. Thus no infirmity is called for in the finding of ld. CIT(Appeals) in the instant appeals. All the grounds of appeal raised by respective three assessees are dismissed
10. In view of the above, all the three appeals filed by the different assessees are dismissed.
Order pronounced in the open Court on September 19th, 2022.
