TMI Blog2018 (12) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... Godara, Judicial Member:- This Revenue s appeal for assessment year 2014-15 arises from the Commissioner of Income Tax (Appeals)-12, Kolkata s order dated 20.04.2017, passed in case No.10190/CIT(A)-12/Kol/Ward-40(2)/2016-17, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. The Revenue s sole substantive ground raised in the instant appeal pleads that the CIT(A) has erred in law and on facts in reversing the Assessing Officer s action treating assessee s alleged Long Term Capital Gains (LTCG) of ₹3,84,74,960/- to be bogus in the nature of unexplained cash credits u/s 68 of the Act. The CIT(A) s detailed discussion qua the impugned sole issue reads as under:- 3.2 I have perused the observations and findings contained in the assessment order. I have also considered the submission of the appellant along with paper book filed by Ld. A/R which contained, inter-alia, the following documents:- Copy of capital gain calculation sheet for A.Y 2014-15 -- 37 -- Copy of Allotment advice and share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the various allegations made in the show cause notice and opposed the addition in his reply to show cause letter dated 14.12.2016. The A.O. has not accepted the explanation relating to sale of shares of said script and has proceeded to treat such sale consideration relating to share scripts of NCL as unexplained cash credit Vis 68. However, such addition having been made for ₹ 3,84,74,9601 instead of actual figure of ₹ 3,58,81,1321-. I find that AO besides relying upon the general report of the Investigation wing, Kolkata has not brought on record, any cogent, relevant evidences which can prove that in reality there was no purchase sale of' shares by the appellant. Examination of appellant's bank statement and demat statement reveals that the appellant sold shares through online trading system and through registered share broker which were duly debited from his Demat A/c. The shares were duly deposited! credited in the demat account maintained with the third party in due course and at the same time the sold shares were also debited from demat account in due course. The transactions of sale were made through online trading system. The contract notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt's audited accounts and Income Tax Return. Thus from the materials placed in the paper book, it can safely be concluded that the transactions were complete in terms of documentation and there was no defect in the papers submitted by the appellant in support of the transactions. The appellant has proved the transaction on the basis of documents. No investigation has been carried out by the AO or by the investigation wing to bring on record any material to disbelieve the claim of the appellant. AO has only made academic discussion regarding the probability of the appellant having entered into transaction in collusion with operator of script with a view to claim bogus capital gains and get tax free income. In fact the AO has not doubted the purchase or sale price prevailing at the material point of time. There is no allegation by the AO that the transactions were between related parties. In absence of any material brought on record to show that the long term gain of the appellant is a bogus gain, the entire general discussion in the assessment order should fade into insignificance. It is a settled position of law that no addition or disallowance should be made or sustained on co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce rigging etc. is without bringing on record any cogent material and corroborative evidences is not sustainable. There is nothing on record to suggest that the prices were rigged by the appellant and/ or any other person on behalf of the appellant. The AO has also alleged that some unscrupulous operators were running a scheme of providing entries of long term capital gain for a commission. The AO also alleged that in the statement recorded of the broker/operator/directors of paper/shell companies they have admitted to such scheme with detailed data. However the AO has failed to bring any evidence on record to suggest involvement of the appellant in such alleged manipulations. The aforesaid allegation clearly show that these are suspicion, surmises and conjectures and far from truth more so when the appellant has discharged its onus completely by producing necessary details and evidences. Ld. AR has placed reliance upon number of decisions of jurisdictional High Court as well as jurisdictional Tribunal and has also relied upon non-jurisdictional High court decisions in support of various contentions raised by him. I find that these decisions are relating to trading losses as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee through bank. In these circumstances the information from stock exchange cannot be used to deny exemption of LTCG claimed by Assessee. Similarly in the case of Classic Growers Ltd Vs CIT (ITA No. 129 of 2012) vide order dated 28.02.2013 has held Therefore, it cannot be said by any stretch of imagination that any loss was generated The opinion that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the Assessing Officer, but he miserably failed to substantiate that Loss might have been suffered if the loss was suffered, then appropriate deduction has to be made and there is no reason why the Assessing Officer should have refused to do so. The learned Tribunal restored the order of the Assessing Officer and set aside the order passed by the CIT (Appeal) without application of mind The learned Tribunal ignored the fact that the transaction was carried out at the prevailing price. Therefore, the question of generating loss could not have arisen. The suspicion entertained by the Assessing Officer was misplaced or in any event not substantiated I further f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / creditworthiness of its explanation. He quotes hon'ble apex court s landmark decisions in Sumati Dayal vs. CIT (1995) 80 Taxmann 89/214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) that any explanation submitted in income tax proceedings has to be appreciated in the light of human probabilities than on mechanical aspects. His further case is that assessee has availed entries from entry operators regarding the impugned LTCG. These entry operators are stated to have deposed in their search statements that they had rigged prices of M/s NCL Research and Financial Services Ltd. followed by impugned entries on sale of shares therein. We find no merit in Revenue s instant arguments. This tribunal s decision in ITA No.1551/Kol/2018 in D.D. Agarwal (HUF) vs. ITO decided on 16.11.2018 has already declined the Revenue s similar arguments qua the very scrip quoting a catena of case law as follows:- 2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s NCL Research Financial Services Ltd. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 4 456 of 2007 Bombay High Court CIT vs Shri Mukhesh Ratilal Marolia 07.09.2011 5 18 of 2017 Punjab and Haryana High Court Pr. CIT(Central) Ludhiana vs Sh. Hitesh Gandhi 16.02.2017 6 95 of 2017 Punjab and Haryana High Court Pr. CIT vs. Prem Pal Gandhi 18.01.2018 7 2281/Kol/2017 ITAT-Kolkata Navneet Agarwal, Legal Heir of Late Kiran Agarwala vs ITO, Ward-35(3), Calcutta 20.07.2018 5. We are bound by the proposition of law laid down in these case law by the jurisdictional High Court as well as by the ITAT Kolkata. They are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon'ble High Courts and the ITAT. This tribunal s yet another de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surmises. We have in all cases deleted such additions. Some of the cases were detailed finding which are listed below:- Sl. No. ITA Nos. Name of the Assessee Date of order / judgment 1. 1236-1237/K/17 Manish Kumar Baid Others vs. ACIT 18.08.2017 2. ITA Kolkata 2443/Kol/2017 Kiran Kothari (HUF) vs. ITO 15.11.2017 3. 22 of 2009 CIT, Kolkata-III vs Bhagwati Prasad Agarwal Calcutta High Court 4. 456 of 2007 CIT vs. Shri Mukesh Ratilal Marolia 07.09.2011 Bombay High Court 5. 18 of 2017 Punjab PR. CIT (Central) Ludhiana vs Sh. Hitesh 16.02.2017 and Haryana High Gandhi, Court 6. 95 of 2017 Pr. CIT vs. Prem Pal Gandhi 18.01.2018 Punjab and Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation s office by way of statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own that judicial notice of such notorious facts cannot be taken based on generalisations. Courts of law are bound to go by evidence. 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However, we do not find that the assessing officer as well as the Ld. CIT(A), have brought out any part of the investigation wing report in which the assessee has been investigated and /or found 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 allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,--- this also was a pure conjecture or surmise on the part of the Income-tax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches the Income-tax Officer indulged in speculation when he talked of the possibility 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944,considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been 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 a denial 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 witn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of assessee s appeal. [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal s finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in 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 JAIPUR ITAT in the case of VIVEK AGARWAL[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 AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT (A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore direct the AO to delete the addition. f) The BENCH A OF KOLKATA ITAT in the case of SHALEEN KHEMANI[ITA No.1945/Kol/2014]order dated 18.10.2017 held as under vide Page 24 Para 9.3: We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments 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 transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed. i) The Hon ble Jurisdictional Calcutta High Court in the case 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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