TMI Blog2018 (10) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. We accept the evidence filed by the assessee and allow the claim that the income in question is a bonafide Long Term Capital Gain arising from the sale of shares and hence exempt from income tax. - Decided in favour of assessee. - ITA No.1089/Kol/2018 - - - Dated:- 28-9-2018 - Shri S.S.Godara, Judicial Member And Shri, M. Balaganesh, Accountant Member For the Appellant : Shri Saumitra Chowdhury, Advocate, Shri Avikesh Banerjee Advocate And Smt. S. Dutta, Advocate For the Respondent : Shri S. Dasgupt, Addl. CIT-DR ORDER PER S.S.GODARA, JUDICIAL MEMBER:- This assessee s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-10- Kolkata s order dated 15.03.2018, passed in case No.761/CIT(A)-10/C-36/2014-15/2017-18/Kol, affirming the Assessing Officer s action treating his long term capital gains (LTCG for short) arising from sale of shares M/s Unno Industries Ltd. Sharp Trading Finance Ltd. amounting to ₹93,19,895/- to be bogus followed by 5% commission disallowance thereupon of ₹4,65,995/- involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in view of all these facts that the assessee s LTCG arising from shares of his penny stock was controlled by a group of entity operators. The impugned LTCG stood treated as bogus therefore by invoking sec. 68 of the Act. The Assessing Officer added impugned sum of ₹93,19,895/- as well as 5% commission thereupon of ₹4,65,995/- as unexplained cash credits / investments respectively in assessment order. 4. The CIT(A) confirms Assessing Officer s action as follows:- 09. FINDINGS DECISION: [Grounds 4 to 9 ] 1. I have carefully considered the action of the Ld. AO in making an addition of ₹ 93,19,895/- as unexplained credit u/s 68 of the Income Tax Act, 1961. After an exhaustive discussion and elaborating the factual and legal matrix, I find that the Ld. AO has held that the claim of Long Term Capital Gain u/s 10(38) was to be denied to the assessee-individual, and was to be assessed as unexplained cash credit u/s 68 Act. The Ld. AO has placed on record the entire gamut of findings, and there is, in my considered view no further requirement for elaboration from this forum. In my view of the facts there are elaborate and direct evidence to cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Therefore all these papers are mere documents and not any evidence. The whole gamut of transactions are unnatural and highly suspicious, and therefore the rules of SUSPICIOUS TRANSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains. In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the Hon'ble apex Court. In the case of CIT vs P.Mohankala 291 ITR 278, the Hon'ble Supreme Court held that the money came by way of bank cheque and was paid through the process of banking transactions was not' by itself of any consequences. The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: in a case where a party reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held The Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when in doubt or when the assertion is debatable. Normally a factual assertion made should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee in such circumstances should cooperate and furnish papers, details and particulars. This may entail issue of notices to third parties to furnish and supply information or confirm facts or even attend as witnesses. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word ' evidence ' as used in sec.143 (3) obviously could not be confined to direct evidence. The word ' evidence ' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the word ' evidence ' had much wider connotations. While the word ' evidence ' might recall the oral and documentary evidence as may be admissible under the Indian Evidence Act the use of word 'material' in Sec.143(3) showed that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 5. The Hon'ble Supreme Court in CIT v. Durga Prasad More[19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to circumstances that satisfies its conditions and was applicable to taxing proceedings. 7. I am in agreement with the Ld. AO that the transactions relating to the claim of LTCG made by the Ld. AO come within the ambit of suspicious transactions , and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of offload and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of suspicious and dubious transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence. CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13 It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are - (1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter like this, even a single clue or revelation can be of great importance. To reverse the order of the AD on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, ORI, EO whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AD, are devoid of any merit and are rejected outright.. 8. When the impossible is projected as possible through a plethora of well arranged documents, it would be very reasonable to reject the documents outright as make believe and self serving. In the Case of Usha Chandresh Shah Vs ITO, Ward- 19(1)(2), Mumbai, the Hon'ble ITAT- F -Bench Mumbai by their Order for A.Y 2006-07 dated 26th September, 2014 have, in the operational portion adjudicated as under: [Quote] 9. We have heard the rival contentions and perused the record. The pertinent points ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on transactions remains unanswered both by the assessee as well as by the Share broker cited above. Further the speculation transaction is also claimed to be an off market transaction, which further casts shadow of doubt over the claim put forth by the assessee. 11. Though the assessee has claimed to have purchased the shares in physical format in May, 2004, she chose to D-Mat the same only in June 2005, just two months prior to its sale. The shares were sold through a share broker named Sanju Kabra, who is indicted by SEBI for rigging the prices of penny stock shares. It is pertinent to note that the share prices of M/s Prime Capital Markets Ltd went from ₹ 5.17 (May, 2004) to ₹ 279.50 (Sep., 2005). The assessee could not furnish any reasons or at-least stock market news to support the abnormal increase in the prices of the above said shares. The financial statements of the above said company were also not produced. Though M/s Prime Capital Markets Ltd has confirmed the entries in its books of account with regard to the purchases made by the assessee, it could not identify the name of purchaser to whom the shares were sold by the assessee. 12. We have alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulated. 14. However, in the instant case, the assessee could not produce the copies of share certificates and copies of share transfer forms. The transaction of purchase of shares could not be cross verified. The shares of M/s Prime Capital Markets Ltd was declared as Penny Stock by SEBI and the broker Sanju Kabra, through whom the shares were sold by the assessee was indicted for manipulating the prices of penny stock shares. Hence, in our view, the tax authorities have rightly applied the test of human probabilities to examine the claim of purchase and sale of shares made by the assessee. 15. We notice that the Mumbai 0 bench has considered an identical issue in the case of Shri Ramesh Kumar D Jain in ITA No.3192/Mum/2010 relating to assessment year 2006-07. The Tribunal, vide its order dated 15-06-2011, rejected the claim of making speculation gains on the reasoning that speculation transactions could not have been entered into by the assessee therein without paying margin money to the broker. Accordingly, the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected. It is pertinent to note that, in the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had purchased 45,000 shares of M/s Ankur International Ltd. At varying rates from ₹ 2.06 to ₹ 3.1 per share and sold them within a short span of six-seven months at the rate varying from ₹ 47.75 to ₹ 55. These shares were purchased through a broker Munish Arora Co. and sold through another broker M/s S.K. Sharma Co. The AO took by surprise the astronomical rise in share price of a company from ₹ 3 to ₹ 55 and started further inquiry. The AO issued notice under Section 131 to both the brokers from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of M/s Ankur International Ltd. To justify as to how the share price of a company can go up from a mere ₹ 3 to ₹ 55 in a short span of six to seven months' time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewellery only. The AO also recorded the finding that transactions were done at Ludhiana where also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been purchased and sold. However, in this case, S.K. Sharma Co. failed to provide the names of purchasers of the shares and identity of the purchasers. 5. On the other hand, the learned Authorised Representative contended that in the share market, share price does not move according to the fundamentals of a company. They go up and down as per sentiments prevailing at that time. To controvert, the argument of the learned Departmental Representative, he argued that share prices are quoted at Jaipur Stock Exchange and were quoted on the relevant date of sale at the same price on which shares were sold to M/s S.K. Sharma Co. However, the learned Departmental Representative controverted his argument by saying that volume of transactions on the relevant dates is only 600 shares on 9th Feb., 1998 and 1000 shares on 23rd March, 1998 whereas number of shares involved in the transactions with S.K, Sharma Co. are 45000 shares. 6. After hearing the rival submissions, going through the orders of authorities below and paper book, we find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange at, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares. Payments have been received from the brokers only in instalments over a period of 6-7 months. It is true that when transactions are through cheques, it looks like real transaction but authorities are permitted to look behind the transactions and find out the motive behind transactions. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine, it is highly improbable that share price of a worthless company can go from ₹ 3 to ₹ 55 in a short span of time. Mere payment by cheque and receipt by cheque does not. Render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to off set the loss incurred on the sale of jewellery declared under VDIS. In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to the queries raised by the assessing officer on the issue of the fact that the assessee received ₹ 31,62,372/- from sale of once scrips i.e. Unno Industries Ltd. the assessee submitted the following facts: Details of Purchase of share for Long Term capital Gain F.Y.2013-14 (A.Y.2014-15): 1. I state that I had purchased 100 equity shares of Pinnacle Vintrade Ltd. on 20.01.2012 from Uniglory Developers Pvt. Ltd. Pinnacle Vintrade Ltd. was merged with Unno Industries Ltd. and there was change of management and control of Unno Industries ltd. pursuant to scheme of arrangement sanctioned by the Hon ble High Court at Bombay. 2. Payment for the purchase of aforesaid 100 equity of Pinnacle Vintrade Ltd. was made by Account Payee Tamilnad Mercantile Ltd. Bank Cheque no. 736027. 3. Bank statement of Tamilnad Mercantile Ltd. Bank reflecting payment (cheque no. 736027) for purchase of the said investment in equity shares of Pinnacle Vintrade Ltd. is enclosed (highlighting the said entry). Annexure-I. 4. The equity shares of Unno Industries Ltd. were allotted pursuant upon merger of Pinnacle Vintrade Ltd. with Unno Industries Ltd. pursuant to sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13-14(A.Y.2014-15): 1. The equity shares of M/s Unno Industries Ltd. are listed at Bombay Stock Exchange (BSE), a recognized Stock Exchange of India since last so many years and even during the time of sale by me. The security code of the said equity shares at BSE is 519273 and ISIN No. is INE 142N01023. 2. Equity shares of Unno Industries Ltd. were sold on Bombay Stock Exchange through SEBI registered stock broker Ashika Stock Broking Ltd. and Guiness Securities Ltd. whose details are as under: a) Name: Ashika Stock Broking Ltd. Address: Trinity, 7th Floor, 226/1, A.J.C. Bose Road, Kolkata-700020. Contact No. 033 22839952. b) Name: Guiness Securities Ltd. Address: Guiness House, 18, Deshpriya Park Road, Kolkata-700026 Contact No. 033 30015555. 3. Contract Notes issued regarding sale of equity shares of Unno Industries Ltd. on Bombay Stock Exchange by SEBI registered brokers- Ashika Stock Broking Ltd. and Guiness Securities ltd. are enclosed. Annexure V. 4. The relevant Demat Account statements of Ashika Stock Broking Ltd. and Guiness Securities Ltd. reflecting the debit of shares of Unno Industries Ltd. upon sale are enclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou had availed is also under this syndicate. Hence, it is crystal clear that Sharp Trading Company is one of the main manipulated company (Penny listed) to convert unaccounted cash of beneficiary through long term capital gain with claim a certain percentage of commission. 7. Thereafter the AO made an addition under 68 of the Act. Aggrieved the assessee carried the matter an appeal. The ld. First appellate authority confirmed the action of the AO on the ground that, the transaction in question comes within the ambit of Suspicious Transaction and therefore, the rules of Suspicious Transaction would apply to the case. He further stated that the payments through bank of processing of transaction through stock exchange and other such features are only apparent features and that the real feature are the manipulation and abnormal price raise and the sudden dip thereafter. Based on surrounding circumstances and circumstantial evidence and the order of the Tribunal in the case of Bhag Chand Chabra (HUF) vs. ITO , in I.T.A. No. 3088 3107/2007 dated 31.12.2010, the addition made by the AO was confirmed. Aggrieved the assessee is in appeal before us. 8. A perusal of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hearing came to a fact finding which is as follows: The Assessing Officer has doubted the transaction since the selling broker was subjected to SEBI s action. However, the demat account given the statement of transactions from 01.04.2004 to 31.03.2005 i.e. relevant for the assessment year under appeal (2005-06) are before us. There cannot be any doubt about the transaction as has been observed by the assessing officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the ld. Commissioner of Income Tax (Appeals) in accepting the transactions as genuine too. In view of the fact findings we cannot reappreciate, recording is such, cannot be said to be perverse as it is not fact finding of the ld. Tribunal alone. The commissioner of Income Tax came to the same fact finding. Concurrent fact finding itself makes the story of perversity, unbelievable. The D Bench of the Kolkata Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. The Tribunal held that the AO s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) In this case the Hon ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 8.5. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition. 9. In the result the appeal of the assessee is allowed. The A bench of the Kolkata Tribunal in the case of ITO vs. Shaleen Khemani in I.T.A. No. 1945/Kol/2014 dated 18.10.2017 at para 9.1. to 9.4 held as follows: 9.1 We further find that the transaction of sale of shares by the assessee was duly backed by all evidences including Contract Notes, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny was executed by a broker through cross deals and the broker was suspended for some time. It is assessee s contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of ₹ 25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO s observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed. We agree with the reasoning of the Tribunal on this point also. We do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed. 9.4. We also find that the various other case laws of Hon ble Jurisdictional High Court and other case laws also relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of SOICL as undisclosed income of the assessee u/s 68 of the Act and therefore we uphold the order of the ld CITA and dismiss the appeal of the revenue. Accordingly the grounds raised by the revenue are dismissed. Applying the proposition of law laid down in all the above referred cases, the facts of this case, I find force in the submission of the assessee and there are backed by evidence. I also find that the revenue has not based its finding on in any evidence. In view of the above discussion the addition made u/s 68 of the Act is hereby deleted. 6. Learned Departmental Representative vehemently contends at this stage that the DIT(Inv) has carried out a detailed investigation in various entry operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Demat request on 11th February, 2012. The said shares were dematerialized on 31st March, 2012 (copy of demat request slip along with the transaction statement is placed in the paper book at page no. 19 to 21). 5. On 24.01.2013, the Hon ble Bombay High Court approved the scheme of amalgamation of Smart Champs IT and Infra Ltd. with Cressanda Solutions Ltd. In accordance with the said scheme of amalgamation, the assessee was allotted 50000 equity shares of M/s. Cressanda Solutions Ltd. The demat shares are reflected in the transaction statement of the period from 1st November 2011 to 31st December, 2013 (A copy of the scheme of amalgamation alongwith copy of order of the Hon ble Bombay High Court and a copy of the letter to this effect submitted by Cressanda Solutions Ltd . to Bombay Stock Exchange is placed in the Paper Book at page no 22 to 43.) 6. The assessee sold 50000 shares costing ₹ 500000/- through her broker SKP Stock Broking Pvt. Ltd which was a SEBI registered broker and earned a Long Term Capital Gain of ₹ 2,18,13,072/-. (Copy of the bank statement, brokers contract note together with the delivery instructions given to the DP and broker s confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be a part of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sibility of the appellant earning a considerable sum as against which it showed a net loss of about ₹ 45,000. The Income-tax Officer indicated the probable source or sources from which the appellant could have earned a large amount in the sum of ₹ 2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of ₹ 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of ₹ 1,000 each . The observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to adenial of the right to be heard i.e. audi alterampartem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful crossexamination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009SC 1100, this Court held: Effective cross-examination could have been done as regards the correctness or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them. 6. As mentioned above, the Appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed. b) The JAIPURITAT in the case of VIVEKAGARWAL[ITA No.292/JP/2017]order dated 06.04.2018 held as under vide Page 9 Para 3: We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the Assessing Officer has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account. c) The Hon ble Punjab and Haryana High Court in the case of PREMPAL GANDHI[ITA-95-2017(O M)] dated18.01.2018 at vide Page 3 Para 4 held as under: .. The Assessing Officer in both the cases added the appreciation to the assessee s income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee s income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act. Further in Page 15 Para 8.5 of the judgment, it held: We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition. e) The BENCH D OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: .. We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee s case clearly support the claim of the assessee that the transactions of the assessee were bona fide and genuine and therefore the ld AO was not justified in rejecting the assessee s claim of exemption under section 10(38) of the Act. g) The BENCH H OF MUMBAI ITAT in the case of ARVINDKUMAR JAINHUF[ITA No.4682/Mum/2014]order dated 18.09.2017 held as under vide Page 6 Para 8: We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax (Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank. j) The Hon ble Supreme Court in the case of PCIT vs. Teju Rohit kumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon ble Gujrat High Court as under: It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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