Grounds of Appeal

The AO has grossing erred in adding of sale proceeds of shares U/S 68 of the act Rs. 442996.

Statement of Facts

On Perusal of Assessment order can summarize that the reliance is placed on mainly two matters

1. Search in the case of third party where there was penny stock dealing.
2. Observation in case of ([1995] 80 taxman 89(SC).

I earnestly submit that my case has nothing to do with both this matters at all.

I further submit that AO has failed to connect facts of my case with general observation made in
someone else’s case and repeated the same again and again.

I am trader in stock exchange for more than a decade and regularly pay taxes and file return without
single default with tax authorities and honestly and regularly.

Without any knowledge whatsoever, I purchased shares of Diamant Infrastructure Ltd at the cost of Rs.
373812 and sold the same on Rs. 442996 with business profit of Rs. 68924 which is offered for tax.

The Payment and Receipt entry in bank, Demat account and broker ledger was submitted in detail to AO
as per notices issued and no further query, inquiry or details were asked for.

I now take up various observation made in order to prove the same, how the same are irrelevant,
arbitrary and unwarranted and incapable of any addition under Income Tax Act.

The search action covered the syndicate of persons who were acting in collusion and executing managed
transactions on the stock exchange thus generating bogus long term capital gains/ bogus short term
capital loss/ bogus business loss entries for various beneficiaries.

Submission

No capital gain/ short term capital loss/ business loss is resulted what is resulted on the currency is
business profit and the same is properly taxed.

We may add that normal modus operandi of penny stock transaction is totally thus absent.

I being the trader the transaction was closed within _______ days only.

As per the information received the assessee is one of the beneficiaries of such transactions classified as
non- genuine shares sale/ purchase transactions. The assessee has made total sale of Rs. 4,42,996/- in
the scrip M/s. Diamant Infrastructure Ltd., ( Script Code:- 508860) during the FY. 2011-12

The investigation conducted by the Mumbai Investigation Directorate reveals that this company has
been used by beneficiaries (sellers of shares) to launder money in the garb of Long Term capital
gains(LTCG) while claiming tax exemption u/s.10(38 ) of the Income Tax Act, 1961
Therefore, it is clear that all the transactions made in its accounts remained unexplained. Therefore, I
have reason to believe that income for AY 2012-13 has resulted in escapement of income within the
meaning of section 147 of the Act to that extent of Rs. 442996/-

Submission

I again repeat that I have not been beneficiary in terms of observation being launder of money in grab of
Long Term Capital Gain U/s 10(38). Since I have not earned Long Term Capital Gain, the whole premises
of beneficiary become in applicable. Thus mention in Para 3 that therefore I have reason to believe
escapement of income becomes jumping to conclusion.

I may further state that AO has made no efforts to connect facts of the case with someone else’s case
observation and in order to make addition have jumped to wrong conclusion in case of genuine trader.

For consideration of Rs. 373812/- and sold 26000 shares of M/s. Diamant Infrastructure Ltd for
consideration of Rs. 442736/- making capital gain of Rs. 68924/-.

The assessee is in the business of sharing trading. During the year the assessee has derived income from
Business & Profession and other sources.

Submission

AO has admitted that

a) Consideration was Rs. 373812. Amount earned is Rs. 68924.

b) Making Capital Gain of Rs. 68924 is wrong statement to the extent that business profit Rs. 68924/-
i.e. earned and not capital gain. This has not been disputed anywhere.
c) The assessee is business of share trading and during the year has derived income from business and
profession.

Thus the trader cannot earn capital gain is accepted by AO himself

Prices were rigged to gain huge profit / loss through manipulated affairs.

Submission

The rigging of price was irrelevant as I hold the shares for _____ days between price of ______ & _____
only.

Thus the whole rationale of AO is not relevant.

It may be added that any trader trading for any listed share is permitted and in 99% of case is not aware
that it is penny stock.

Note:
Page 3, 4 and 5 gives details of the stock and is irrelevant and it only diverts focus to the matter and
relevant facts.

The assessee has not tendered cogent evidence to explain how the shares in an unknown company
worth Rs. 6 had jumped to Rs.60 in no time. The fantastic sale price was not at all possible as there was
no economic or financial basis to justify the price rise. The assessee had indulged in a dubious share
transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain
has accordingly to be assessed as undisclosed credit u/s. 68. The findings recorded by the authorities are
pure findings of facts based on a proper appreciation of the material on record. While recording the said
findings, the authorities have followed the tests laid down by the Honorable Supreme Court and this
court in several decisions.

The Honorable Supreme Court in the case of Sumati Dayal v. Commissioner of Income Tax ([1995] 80
Taxman 89(SC)) has held that relying simply on the evidence of the cash credit as provided by the
assessee like bank payments and other documentary evidence, is a superficial approach to the problem.
The matter has to be considered in the light of human probabilities. It was also held that the onus on the
Revenue to prove beyond reasonable doubt that fraudulent means have been adopted, ignores the
reality. The fraudulent transactions take place in secret and direct evidence about such would be rarely
available. An inference about such a bogus transaction has to be drawn on the basis of the
circumstances available on the record. The Apex Court held that after considering surrounding
circumstances and applying the test of human probabilities, the inference of whether the transaction
was genuine or not, could be drawn, based on preponderance of probability.

Submission

I have provided all the details asked for and there is nothing that is not provided including the Payment
and Receipt entry in bank, Demat account and broker ledger

If there was still more cogent was required then attention should have been drawn or show cause notice
should have been issued asking for the same.

I was also not asked to provide & explain how shares in an unknown company jumped to 60 in no time. I
may also add that I am not concerned with price jump to Rs. 60 as I dealt between price ______ &
______ in a short period of _____ days. I am a trader and there is no kind of restriction to deal in listed
shares.

The matter has to be considered in the light of human probabilities. It was also held that the onus on the
Revenue to prove beyond reasonable doubt that fraudulent means have been adopted, ignores the
reality. The fraudulent transactions take place in secret and direct evidence about such would be rarely
available. An inference about such a bogus transaction has to be drawn on the basis of the
circumstances available on the record. The Apex Court held that after considering surrounding
circumstances and applying the test of human probabilities, the inference of whether the transaction
was genuine or not, could be drawn, based on preponderance of probability.
Submission

Thus there is observation that

a. Onus on the Revenue to prove beyond reasonable doubt that fraudulent means have been adopted.
b. Inference about such a bogus transaction has to be drawn on the basis of the circumstances
available on record.

In my case revenue has proved nothing; forget about proving beyond reasonable doubt that fraudulent
means have been adopted.

Also no circumstantial substantiation is made whatsoever.

Conclusion

a. I am a genuine trader and have made small profit of Rs. 68924 in ____ days only. No Long Term
Capital Gain or share issues have been made as is the base of addition. Thus I am not the beneficiary
in the transaction as is conceived in the order.
b. The facts of some search have been taken in some assessee is totally irrelevant on one side and the
AO has failed to connect the same to my facts and circumstances.
c. All the details asked for by AO are proving and nothing was discussed by the AO. Then to
__________that cogent proof not made available is arbitrary. AO could have asked for the same if
something more required was in his mind.
d. All the circumstances prove that I have entered into a genuine transaction. It was co-incidence that
it happened to be penny stock not known to me. The profit earned is as small as Rs. 68924. The
same was not long term capital gain or short term loss.
To tax further & arbitrarily tax at Rs. 442996 when genuine profit is Rs. 68924 only and is already
taxed will amount to gross injustice to the assessee filing truthful return for last about two decades.
The government allowed declaration of honoring genuine tax payer will be without thinking if search
high pitched assessments are allowed.