| The Tax Publishers2019 TaxPub(DT) 6695 (Del-HC) : (2020) 423 ITR 0480 : (2020) 315 CTR 0563 INCOME TAX ACT, 1961
Section 10(38)
Where CS Ltd. was, in fact, identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus long-term capital gain as such, astronomical increase in sale price of said company which led to return of 491% for assessee was completedly arranged to earn bogus LTCG, hence, exemption was rightly denied by lower authorities, no substantial question of law was therefore, arose.
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Capital gains - Exemption under section 10(38) - Bogus LTCG earned artificially on penny stock -
Assessee had booked long-term capital gain (LTCG) and sought exemption under section 10(38). AO on consideration of replies and responses of the assessee in pursuance of the notices issued to the assessee, computed the net taxable income. The AO added the amount of Rs. 73,77,806 by denying the exemption claimed under section 10(38) on account of LTCG. The AO found the transaction pertaining to purchase of shares by Appellant/Assessee of M/s S IT and I Ltd., which was merged with M/s CS Ltd., to be a bogus transaction by holding that M/s CS Ltd. share was a penny stock. The appeal preferred before the CIT(A) met the same fate. The further appeal preferred before the ITAT had been dismissed and the ITAT had once again found the said transaction to be bogus.Held: The Tribunal had in depth analyzed the balance sheets and the profit and loss accounts of CS Ltd. which shows that the astronomical increase in the share price of the said company which led to returns of 491% for the assessee, was completely unjustified. Pertinently, the EPS of the said company was Rs. 0.01 as in March 2016, it was Rs. 0.01 as in March 2015 and -0.48 as in March 2014. Similarly, the other financials parameters of the said company cannot justify the price in excess of Rs. 500 at which the assessee claims to have sold the said shares to obtain the long-terms capital gains. It was not explained as to why anyone would purchase the said shares at such high price. CS Ltd. was, in fact, identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus long-term capital gain. No evidence of actual sale, except the contract notes issued by the share broker were produced by the assessee. No question of law, therefore, arose in the present case and the consistent finding of fact returned against the assessee were based on evidence on record.
REFERRED :
FAVOUR : Against the assesse.
A.Y. : 2014-15
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