TMI Blog2019 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... not carry any substance since the relevant order dated 12.04.2010 involves times between 17.08.2004 to 31.03.2005 whereas we are concerned with the assessee s allotment of shares much later i.e. on 04.02.2012 (pages 65 to 77). There is further no issue about the correctness of the corresponding amalgamation details. We conclude in these peculiar facts that the assessee has sufficiently discharged his onus of proving genuineness of the impugned share transactions in the lead assessment years. Coming to the later assessment years, both the lower authorities alleged that the assessee was involved in artificial rigging of share prices in collusion with entries. We repeat herein as well as that there is no such nexus proved with the help of cogent details which could be lead us to the conclusion of the assessee having derived non-genuine share profits. This tribunal s coordinate bench decision in Navneet Agarwal vs. ITO [ 2018 (8) TMI 509 - ITAT KOLKATA] has analyzed the entire factual/legal position to decide the very issue against the revenue. We adopt the above detailed reasoning mutatis mutandis to delete the impugned bogus long-term capital gain addition in both these assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Officer. The officer did not find any irregularities in the above share transactions. The main point of doubt by the officer was the appreciation in share value by more than 28 times. The officer had stated that survey operation u/s l33A of the Income Tax Act, 1961 was conducted in the case of M/s. Sikaria Shares Stock Broking Services (P) Ltd. and M/s. Hira Commodities and Derivatives (P) Ltd. and it was revealed there that shares of M/s. Oasis Cine Communication Ltd. has been used by different share brokers for proving bogus Long Term Capital Gain entries. In this connection, kindly note I had no transaction/dealings with the above brokers. Even I have never heard the name of above brokers. My shares were sold through M/s. Sajendra Mookim. If some brokers are doing illegal bogus transactions, it does not mean that all other brokers are also doing in the same line. How the findings of survey operation of few brokers can be co-related with all other brokers. The Ld. Officer had stated in his order that The assessee was required to answer the following question which emerged during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection please note that the shares are purchased/sold over Telephone. Purchase of share from Kolkata broker should not be an issue and a person dealing in Rice may also purchase shares. There is no restriction under any act that a rice dealer can't purchase share. If price of a share increases heavily, the assessee/investor have nothing to do with it. The Officer had stated in his order that unaccounted cash of the assessee was channelized as long Term Capital Gains through hawala operation from Kolkata route. The above allegations made by the A.O was without any basis. The Officer had no such findings that unaccounted cash was transferred to Kolkata broker. The shares were actually sold on 12lB/2An through broker M/s. Sajendra Mookisr, bearing PA No. ADMPM0204D, SEBI Registration No. INB030967419, vide settlement No. CSE/ROLLING/2012526/12/03/2012, settlement period 12/03/2012 to 12/03/2012, Contract Note No. 0426. STT amounting to ₹ 3,583.00 was also charged against above share transactions. Please also note that as per section 68, where any sum is found credited in the book of an assessee, maintained for any previous year, and the assessee offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no entry of sale of such shares in his demat account. These facts, combined with the findings of two regulatory authorizes [Investigation Directorate of Income Tax and SEBI] that (i) the scripts of OCCL have been heavily used for giving LTCG hawala entries to many people residing all over the country [findings of the income tax investigation directorate after survey action], (ii) Shri Sajendra Mookim, share-broker, through whom assessee allegedly sold the shares, is a highly tainted person and penalized by SEBI for indulging in creation of artificial market and price manipulation through synchronized transactions in the scripts of OCCL and four other companies and (iii) OCCL was also penalized by SEBI for the same reason, established without any doubt that the assessee had channelized his own unaccounted money in the guise of LTCG in penny shares through hawala transactions from an recognized Kolkata-based tainted company ,arranged through an black-listed tainted share-broker. 3.2. Contrary to the claim of the assessee, he had not cleared the test of provisions of section 68 of the Act. He failed to answer how and when he had taken physical delivery of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity Barter Pvt. Ltd issued by M/s. Signet Vinimay Private Limited, corresponding letter issued to the former and the Share Transfer Deed, letter of M/s Gravity Barter Pvt. Ltd. along with the share certificate, allotment advice issued by Oasis Cine Communication Ltd., contract notes, copy of market value, quotation of M/s Oasis Cine Communication Ltd, demat statement from 01.04.2012 to 31.03.2013, expires capital account as on 31.03.2012, bank statement in support of the genuineness of impugned share transaction, the A.O s scrutiny notices, replies thereto, income-tax return, computation, balance sheet and Profit Loss A/c respectively, stands perused. This lead case file suggests that the earlier entity M/s. Gravity Barter Pvt. Ltd. was incorporated on 13.06.2009. The assessee purchased 200 shares from market for ₹ 1,00,000/- from M/s Signet Vinimay P. Ltd. on 15.12.2010. Relevant assessment framed in the said earlier assessment u/s 143(3) of the Act on 26.03.2014, nowhere doubted the corresponding purchase transactions. All this followed the M/s Gravity Barter Pvt. Ltd s amalgamation with M/s Oasis Cine Communication Ltd. (a registered entity with the Calcutta Stock Exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the correctness of the corresponding amalgamation details. We conclude in these peculiar facts that the assessee has sufficiently discharged his onus of proving genuineness of the impugned share transactions in the lead assessment years. 6. Coming to the later assessment years, both the lower authorities alleged that the assessee was involved in artificial rigging of share prices in collusion with entries. We repeat herein as well as that there is no such nexus proved with the help of cogent details which could be lead us to the conclusion of the assessee having derived non-genuine share profits. This tribunal s coordinate bench decision in Navneet Agarwal vs. ITO; ITA No.2281/Kol/2017 decided on 20.7.18 has analyzed the entire factual/legal position to decide the very issue against the revenue as follows: 10. After careful consideration of the rival submissions, perusal of the papers on record and order of the lowers authorities below, as well as case law cited, we hold as follows. 11. The assessee in this case has stated the following facts and produced the following documents as evidences: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the transactions appearing in the ledger is placed in the paper book at page no. 66. 8. The holding period of the said scrip is more than one year (above 500 days) through in order to get the benefit of claim of Long Term Capital Gain the holding period is required to be 365 days. 12. The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to Modus Operandi of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence collected from third parties is confronted to the assesses. No opportunity of cross-examination of persons, on whose statements the revenue relies to make the addition, is provided to the assessee. The addition is made based on a report from the investigation wing. 13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal importlaid down by the Courts of law. 15. In our view, just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only informed the assessing officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. We, however, find that the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 17. The Hon ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon ble Court held: Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a backgro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Court are equally applicable to the case of the assessee. In our view, the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee. 18. We now consider the various propositions of law laid down by the Courts of law.That cross-examination is one part of the principles of natural justice has been laid down in the following judgments: a) AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors. 23. A Constitution Bench of this Court in State of M.P .v. Chintaman Sadashiva Vaishampayan AIR 1961 SC1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review. 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective crossexamination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf 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 the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005[2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice. 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTAHIGH COURT in the case of BLB CABLES CONDUCTORS[ITA No. 78 of2017] dated19.06.2018. The High Court held vide Para 4.1: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. 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 held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. The Court also held the following vide Page 3 Para 5 the following: Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. 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. Neithe ..... 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 bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee s claim of exemption under section 10(38) ofthe Act. g) The BENCH H OF MUMBAIITAT in the caseof 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) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accepted by the Revenue, no question of law arises. 20. Applying the proposition of law as laid down in the above-mentioned judgments to the facts of this case we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons (HUF) vs. ITO in ITA No. 1413 to 1420/CHNY/2018; order dt. 06/12/2018, for the proposition that such capital gains have to be brought to tax. He also relied on the judgment of the Hon ble Bombay High Court in the case of Sanjay Bimalchand Jain vs. Principal Commissioner of Income-tax-1, Nagpur; [2018] 89 taxmann.com 196 (Bombay) and the decision of the Smt. M.K. Rajeshwari vs. ITO; ITA No.1723/Bng/2018; Assessment Year 2015-16, order dt. 12/10/2018. 5. After hearing both sides, I find that in a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalization, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. Some of the cases were, detailed finding have been given on this issue, are listed below:- Sl. No ITA Nos. Name of the Assessee Date of order /Judgment 1. ITA No.714 to 718/Kol/2011 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l evidences were produced by the assessee. In the case of Sanjay Bimalchand Jain, legal heir of Santi Devi Bimalchand Jain, the Hon ble High Court upheld the stand of the Revenue that the transaction in question is an adventure in nature of trade and the profit of the transactions is assessable under the head of Business Income . In the case on hand, the ld. Assessing Officer has not assessed this amount as Business Income . In any event, I am bound to follow the judgment of the Jurisdictional High Court in this matter. I find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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