NO is the answer.
Facts of the case
The assessee is an individual. Upon
verfication of returns filed by him, the AO observed that the Directors of a
company namely Bolton Properties Ltd. had manipulated its share price.
Thereafter it was revealed in an investigation report that there were two
operators namely Mr.Sushil Purohit and Shri Jagdish Purohit and one of them was
the Director of Bolton. Mr.Jagdish reportedly floated several investment
companies which were aggressively used in the entire deal with the broker
M/s.Prakash Nahata & Co. The shares offloaded by the beneficiaries through
M/s.Prakash Nahata & Co. were ultimately purchased by the investment
companies controlled by Shri Purohit, and some of such companies have been
enlisted. It was noted that the assessee was purchasing and selling the shares
through a broker in Mumbai. It was also noted that the assessee however
transacted through the broker at Calcutta, which itself raised doubt about the
genuineness of the transaction. The companies, whose shares were traded on
exchange namely Bolton Properties, Prime Capital and Mantra were not having
sufficient business activities justifying the increase in their shares prices.
The AO, therefore, concluded that certain operators and brokers devised a
scheme to convert the unaccounted money of the assessee to accounted income and
the assessee utilized this scheme. Therefore, assessee's claim regarding
capital gain was disallowed and addition of Rs.25,93,150/- was made u/s 68. On
appeal, the CIT(A) upheld the order of AO. On further appeal, the Tribunal
reversed the order of the CIT(A).
Having heard the
parties, the High Court held that,
++ the question that
ought to be answered by the CIT was whether the transactions in shares were
genuine or sham and bogus. If the purchase and sale of shares are reflected in
assessee's DMAT account, yet they are termed as arranged transactions and
projected to be real, then, such conclusion which has been reached by the CIT
and the AO required a deeper scrutiny. It was also revealed during the course
of inquiry by the AO that the Calcutta Stock Exchange records showed that the
shares were purchased for code numbers of Sagar Trade Pvt Ltd. and Rockey
Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing is
listed in the appraisal report and it is stated to be involved in the
modus-operandi. It is on this material that he holds that the transactions in
sale and purchase of shares are doubtful and not genuine. In relation to
assessee's role in all this, all that the CIT observed is that the assessee
transacted through brokers at Calcutta, which itself raises doubt about the
genuineness of the transactions and the financial result and performance of the
Company was not such as would justify the increase in the share prices.
Therefore, he reached the conclusion that certain operators and brokers devised
the scheme to convert the unaccounted money of the assessee to the accounted
income and the assessee utilized the scheme;
++ the Tribunal
concluded that there was something more which was required, which would connect
the assessee to the transactions and which are attributed to the
Promoters/Directors of the two companies. The Tribunal referred to the entire
material and found that the investigation stopped at a particular point and was
not carried forward by the Revenue. There are 1,30,000 shares of Bolton
Properties Ltd. purchased by the assessee during the month of Jan, 2003 and he
continued to hold them till 31st Mar, 2003. The present case related to 20,000
shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-.
These shares were sold and how they were sold, on what dates and for what
consideration and the sums received by cheques have been referred extensively
by the Tribunal. A copy of the DMAT account also showed the credit of share
transaction. The contract notes in Form-A with two brokers were available and
which gave details of the transactions. The contract note is a system generated
and prescribed by the Stock Exchange. From this material, it is seen that the
Tribunal has concluded that this was not mere accommodation of cash and
enabling it to be converted into accounted or regular payment. The discrepancy
pointed out by the Calcutta Stock Exchange regarding client Code has been
referred to. But the Tribunal concluded that itself is not enough to prove that
the transactions in the impugned shares were bogus/sham. The details received
from Stock Exchange have been relied upon and for the purposes of faulting the
Revenue in failing to discharge the basic onus. If the Tribunal proceeds on
this line and concluded that inquiry was not carried forward and with a view to
discharge the initial or basic onus, then such conclusion of the Tribunal
cannot be termed as perverse.
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