THE INCOME TAX APPELLATE TRIBUNAL D Bench, Mumbai Before Shri Shamim Yahya (AM) & Shri Ravish Sood (JM) I.T.A. No. 3300/Mum/2019 (Assessment Year 2005-06) Shri Ravikumar Nath (HUF) ITO-29(3)-1 204/C-3, Veena Nagar Vs. 305, C-10 Mulund West Pratykshkar Bhavan Mumbai-400 080. Bandra Krula Complex, Bandra-E PAN :AAGHR0075L Mumbai-400 051. (Appellant) (Respondent) Assessee by Shri Aswin S. Chhag Department by Shri D.G. Pansari Date of Hearing 18.6.2019 Date of Pronouncement 12.9.2019 ORDER Per Shamim Yahya (AM) :- This appeal by assessee is directed against order of learned CIT(A) dated 6.3.2019 and pertains to A.Y. 2005-06. 2. In grounds of appeal assessee is challenging validity of reopening as well as confirmation of disallowance of claim of long term capital gain of Rs. 3,19,288/- u/s. 10(38) of Act. 3. Brief facts of case are as under :- In this case information was received from DDIT(Inv) Unit 1(4), Mumbai that search action in case of Mahasagar Securities Pvt. Ltd. (now Alag Securities Pvt Ltd) was conducted on 25.11.2009, During course of search it was revealed that Mahasagar Securities Pvt. Ltd. and its related group of 34 odd companies (the prominent on includes M/s Goldstar Finvest Pvt. Ltd. Run by Mukesh Chokshi were engaged in fraudulent billing activities and in business of providing bogus speculation profit. assessee had procured such bill from Mahasagar Securities Pvt. Ltd. It was 2 Sh r i R av i k u m r N th ( H U F ) also revealed during search operation that Sri Mukesh Chokshi, chartered accountant by profession had floated some 34 companies from his office at Shree Sadashiv CHS, Santacruz, East, Mumbai. Two of these companies were M/s Talent Infoway Ltd and M/s Buniyad Chemicals listed on Ahmedabad and Pune exchange respectively. There was no genuine business being carried on by any of these concerns and they were engaged hi business of issuing bogus bills for providing Long Term Capital Gains/Loss etc. These companies run by Shri Mukesh Choksi were receiving commission through their agents. 4. After elaborately dwelling upon modus operandi Assessing Officer made addition of Rs.3,19,288/- on account of unexplained cash credit u/s. 68. appellant had shown alleged purchase and sale of Talent Infoway Ltd. by making investment of Rs.8,342/- in cash on 29/30.4.2003 through Goldstar Finvest Pvt. Ltd and sold these shares on 23.11.2004 for Rs.3,19,288/- through Mahasagar Securities Pvt. Ltd. Income derived from these shares was claimed as exempted LTCG u/s. 10(38) on sale of shares. 5. Upon assessee s appeal learned CIT(A) confirmed addition and also rejected assessee s challenge to validity of jurisdiction for reopening. 6. Against above order assessee is in appeal before us. 7. We have heard both counsel and perused records. As regards reopening we note that earlier there was processing under section 143(1). subsequently information was received regarding assessee engaging into bogus entries for long-term capital gain. In these circumstances assessment was reopened. We find that Hon'ble Apex Court in case of Rajesh Jhaveri Stock Brokers Private Ltd. (2007) 161 taxman 316 (SC) has held that intimation under section 143(1) is not assessment order. Hence it cannot be said that there was any application of mind by assessing officer in original assessment. Moreover, at time of reopening escapement of income need not be conclusively proved. In this view of matter in our considered opinion reopening is valid. In this regard we also support from 3 Sh r i R av i k u m r N th ( H U F ) honourable jurisdictional High Court decision in case of Export Credit Guarantee Corporation of India Ltd.(350 ITR 655). 8. In this case honourable jurisdictional High Court has expounded that even tangible material for reopening need not come from outside and if assessing officer had not applied his mind on issue in original assessment reopening will be justified. In present case we note that there were reasonable cogent materials for reopening. Hence on touchstone of honourable Apex Court and jurisdictional High Court decision cited above uphold reopening in this case. 9. As regards merits of case we find that it is claim of assessee that he has earned gain in this case where share price of little-known company has jumped many times in no time and that all documentary records are available. It is noted that assessee purchased shares at cost of Rs. 8,342/- on 29/30.4.2003. They were sold at Rs. 3,19,288/- on 23.11.2004, registering astonishing jump in share price. But there is no economic or financial justification for such astonishing jump. In identical situation wherein enormous jump in share price in very little time without any economic or financial justification was confirmed by ITAT, same was duly confirmed by Hon'ble jurisdictional High Court in case of Sanjay Bimalchand Jain Vs. Pr. CIT (ITA No. 18/2017 dated 10.4.2017). jurisdictional High Court had observed that ITAT has rightly applied tests provided by Hon'ble jurisdictional High Court and Hon'ble Supreme Court in this regard. We find that ratio from this case law is fully applicable on facts of this case which undisputedly show that there is enormous jump in no time of share price of little-known company. departmental examination and investigation in case of Mukesh Choksi duly corroborate transaction as sham transaction. This is classic case of penny stock transaction. Such conversion of unaccounted money through dubious method is not permitted on touchstone of Hon'ble Supreme Court decision in case of CIT Vs. Durga Prasad More 82 ITR 540, and Sumati Dayal Vs. CIT (1995 4 Sh r i R av i k u m r N th ( H U F ) SCC Supl. (2) 453 vide order dated 28.3.1995). Hon'ble Apex Court had occasion to dwell upon such dubious transaction through manipulation of stock prices in case of Securities and Exchange Board of India Vs. Rakhi Trading Pvt. Ltd. (Civil Appeal Nos. 3174-3177 of 2011, Civil Appeal No. 3180 of 2011 and Civil Appeal No. 1969 of 2011 vide order dated 8.2.2018). Hon'ble Supreme Court observed as under :- 42. In this case it was also held that in absence of direct proof of meeting of minds elsewhere in synchronised transactions, test should be one of preponderance of (2016) 6 SCC 368 probabilities as far as adjudication of civil liability arising out of violation of Act or provision of Regulations is concerned. 46. Considering reversal transactions, quantity, price and time and sale, parties being persistent in number of such trade transactions with huge price variations, it will be too na ve to hold that transactions are through screen-based trading and hence anonymous. Such conclusion would be over- looking prior meeting of minds involving synchronization of buy and sell order and not negotiated deals as per board's circular. impugned transactions are manipulative/deceptive device to create desired loss and/or profit. Such synchronized trading is violative of transparent norms of trading in securities. If findings of SAT are to be sustained, it would have serious repercussions undermining integrity of market and impugned order of SAT is liable to be set aside. On above additional reasoning also, I agree with conclusion allowing appeal preferred by SEBI against traders. I also agree with conclusion dismissing appeal preferred by SEBI against brokers. 10. In our considered opinion ratio emanating from above case law is also applicable on facts of this case. In this view of matter considering entire conspectus of case and relying upon precedents as above. We do not find any infirmity in order of learned CIT(A). Accordingly we confirm same. 11. We note that since we have decided issues raised on basis of decisions from honourable Supreme Court and honourable jurisdictional High Court directly applicable on issues, other case laws referred by learned counsel of assessee are not found applicable. 5 Sh r i R av i k u m r N th ( H U F ) 12. In result this appeal filed by assessee stands dismissed. Order has been pronounced in Court on 12.9.2019. Sd/- Sd/- (RAVISH SOOD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai Dated 12/9/2019 Copy of Order forwarded to 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, (Assistant Registrar) PS ITAT, Mumbai Ravikumar Nath (HUF) v. ITO-29(3)-1, Mumbai