ITL18 17 FARAD CONTINUATION SHEET No. IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH AT NAGPUR INCOME TAX APPEAL NO. 18/2017 (SANJAY BIMALCHAND JAIN L/H SHANTIDEVI BIMALCHAND JAIN VERSUS PR. COMMISSIONER OF INCOME TAX I, NAGPUR & ANOTHER) Office Notes, Office Memoranda of Coram, Court's or Judge's orders appearances, Court's orders of directions and Registrar's orders Shri A.B. Patil, counsel for appellant. CORAM : SMT. VASANTI NAIK AND MRS. SWAPNA JOSHI, JJ. DATE : APRIL 10 , 2017. By this income tax appeal, appellant assessee challenges orders of Assessing Officer, Commissioner of Income Tax as also Income Tax Appellate Tribunal holding that assessee had traded in shares and income was liable to be taxed as 'business' income. assessee had on advice of income tax consultant purchased shares of two penny stock Kolkata based companies i.e., 8000 shares at rate of Rs.5.50 per share on 08.08.2003 and 4000 shares at rate of Rs.4/ per share on 05.08.2003 from Syncom Marketing Pvt. Ltd. and of Skyzoom Distributors Pvt. Ltd. payments were made by assessee in cash for acquisition of shares of both companies. address of both companies was interestingly, same. authorized signatory of both companies was also same person. purchase of shares of both companies was done by assessee through Global Stock and Securities Ltd and address of said broker was incidently address of two companies. Both companies intimated assessee on 07.04.2004 ::: Uploaded on - 13/04/2017 ::: Downloaded on - 25/04/2017 09:42:01 ::: 2 ITL18 17 regarding merger of companies with another company, viz. Khoobsurat Limited, Kolkata and assessee received shares of new company in ratio of 1:4 of number of shares of previous two companies held by assessee. assessee sold 2200 shares at exorbitant rate of Rs.486.55 per share on 07.06.2005 and 800 shares on 20.06.2005 at rate of Rs.485.65. shares were sold through another broker, viz. Ashish Stock Broking Private Limited. proceeds from aforesaid sale transaction were directly credited by broker in Savings Bank Account of assessee in Union Bank of India. assessing officer did not accept case of assessee that she was entitled to exemption under Section 10(38) of Income Tax Act. assessing officer held that aforesaid transactions of purchase of two penny stock shares for Rs.60,000/ , merger of companies with new company and sale of shares for Rs.11,58,930/ fell within ambit of adventure in nature of trade and assessee had profited by Rs.13,98,930/ . assessing officer, therefore, brought aforesaid amount to tax under head 'business income'. Being aggrieved by order of assessing officer, assessee filed appeal before Commissioner of Income Tax (Appeals). appeal filed by assessee was dismissed and so was subsequent appeal filed by assessee against order of Commissioner of Income Tax (Appeals) before Income Tax Appellate Tribunal. On hearing learned counsel for assessee and on perusal of orders of income tax authorities, it appears that there is no scope for interference with said ::: Uploaded on - 13/04/2017 ::: Downloaded on - 25/04/2017 09:42:01 ::: 3 ITL18 17 orders in this appeal. By referring to aforesaid facts, which are narrated in earlier part of this order, authorities found that assessee had made investment in two unknown companies of which details were not known to her. It was held that transaction of sale and purchase of shares of two penny stock companies, merger of two companies with another company, viz. Khoobsurat Limited did not qualify investment and rather it was adventure in nature of trade. It was held by all authorities that motive of investment made by assessee was not to derive income but to earn profit. Both brokers, i.e. broker through whom assessee purchased shares and broker through whom shares were sold, were located at Kolkata and assessee did not have inkling as to what was going on in whole transaction except paying sum of Rs.65,000/ in cash for purchase of shares of two penny stock companies. authorities found that though shares were purchased by assessee at Rs.5.50 Ps. Per share and Rs.4/ per share from two companies in year 2003, assessee was able to sell shares just within years time at Rs.486.55 Ps and Rs.485.65 Ps per share. broker through whom shares were sold by assessee did not respond to assessing officer's letter seeking names, addresses and bank accounts of persons that had purchased shares sold by assessee. authorities have recorded clear finding of fact that assessee had indulged in dubious share transaction meant to account for undisclosed income in garb of long term capital gain. While so observing, authorities held that assessee had not tendered cogent evidence to explain as to ::: Uploaded on - 13/04/2017 ::: Downloaded on - 25/04/2017 09:42:01 ::: 4 ITL18 17 how shares in unknown company worth Rs.5/ had jumped to Rs.485/ in no time. Income Tax Appellate Tribunal held that fantastic sale price was not at all possible as there was no economic or financial basis as to how share worth Rs.5/ of little known company would jump from Rs.5/ to Rs.485/ . findings recorded by authorities are pure findings of facts based on proper appreciation of material on record. While recording said findings, authorities have followed tests laid down by Hon'ble Supreme Court and this Court in several decisions. findings do not give rise to any substantial question of law. judgments reported in (2012) 20 Taxman.com 529 (Bombay) (CIT Versus Jamnadevi Agrawal), (1957) 31 ITR 294 (Bombay) (Puranmal Radhakishan Versus CIT), (1970) 77 ITR 253 (SC) (Raja Bahadur Versus CIT) and (2015) 235 Taxman 1 (Bom) (CIT Versus Smt.Datta M. Shah) and relied on by learned counsel for assessee are distinguishable on facts and cannot be applied to case in hand. Since no substantial question of law arises in this appeal, appeal is dismissed with no order as to costs. JUDGE JUDGE APTE ::: Uploaded on - 13/04/2017 ::: Downloaded on - 25/04/2017 09:42:01 ::: SanjayBimalchandJain v. Pr. Commissioner of Income-tax-I, Nagpur & Another