TMI Blog2019 (8) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... addition - Decided in favour of assessee. Bogus LTCG - Unexplained cash credits - sale proceeds derived from sale of shares in M/s GCM Securities Pvt. Ltd and Kappac Pharma Ltd. as unexplained - HELD THAT:- There can hardly be any dispute that assessee has placed on record his supportive documentary evidence comprising of relevant purchase bills of shares allotment, certified copies, contract notes, brokerage details etc. We put up a specific query as to whether any of entry operators searched or survey has quoted these assessees names or not before the departmental authorities. There is no such material in the case file indicating such as statement. In Smt. Sangita Jhunjhunwala vs. ITO [ 2019 (1) TMI 298 - ITAT KOLKATA] has deleted similar bogus LTCG coming to Revenue s arguments that department had searched / surveyed various entry operators alleged to have engaged in giving bogus LTCG regarding very scrip, as put a specific question to Mr. Bhattacherjee as to whether any of the said entry operators had ever quoted assessee s name or not. The replies is received in negative. Coupled with this, there is no substance in Revenue s argument that similar addition(s) stand aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the appellant offered during the course of the appellate proceedings, I find that the AO has duly show-caused the assessee in the matter, and also supplied him with the reasons for reopening, and allowed the appellant to file the necessary objections in the matter. Thereafter, the AO has countered point by point the various objections raised by the appellant, and they have been recorded in the order. During the appeal proceedings also, the appellant has raised several points, inter- alia challenging the reassessment proceedings on grounds that the AO had not acted in the belief , but on mere satisfaction , and that there had been no application of mind by the AO, and that the reassessment proceedings were void ab initio. I find to be without any substance, as I find that the AO had observed each and every guideline relating to the procedure for reopening of the case at hand. In this matter, the following judicial precedents elucidate the principle involved. As regards, the much debate expression has reason to believe , the same has been held to have much larger and wider than is satisfied . The Hon'ble Courts have held that these reasons as recorder by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs ITO (SC) 191 ITR 662 5. Hon'ble Courts have also held that what is necessary to re-open an assessment is not the final verdict but a prima facie reason - Once such a reason is recorded by the Assessing Authority, he assumes jurisdiction to issue notice u/s148 - Mere fact that for earlier assessment years issue in dispute has been decided by CIT(A) in assessee's favour cannot be a fetter in exercising his jurisdiction u/s 147. This ratio emerges from the judgments in ACIT Vs Tube Investments of India Ltd. (ITAT, Chennai-TM) 133 ITD 79 Rajat Export Import India Pvt. Ltd. Vs ITO (Del) 341 ITR 135. 6. I also find that in the case at hand the earlier assessment was completed without the AO recording any specific opinion or finding about the matters which led to the subsequent reopening, namely the issue relating to deduction of TDS by the appellant. Therefore, I find that it cannot be said that there would not be a different method possible which the AO is precluded from adapting for arriving at the correct income, in a situation where he takes a second look on account of what appears to him a better or legally sound underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In such matter, the relevant extract of SEBI Circular dated February 06, 2003, relating to the Modification of Client Code is being reproduced hereunder for convenience: The stock exchanges shall not normally permit changes in the Client ID and would keep a strict vigil on cases of client code modification and would implement a monetary penalty structure that would escalate with the number of such incidences. Besides, the exchange may take necessary action against members repeated changes. However, genuine mistakes may be allowed to be rectified. 8. Thus, a careful reading of the above extract suggests that the change in generally not allowed except where there is some genuine mistake. The SEBI also mandates the Stock Exchanges to keep strict vigil on the Instances of all modification and implementation of a penalty structure. In the light of the and submission of NSE, it Is to be observed that the practice adopted by 'scrutiny of client code modifications on a post-facto basis', with monetary penalties in direct proportion to the quantum of Incidence In compliance with the SEBI circular Regarding the requirement of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the relevant Assessment Year i.e. from 18.03.2009 to 26.03.2009. All the transactions were carried out through a broker namely M/s Ratnabali Capital Markets Ltd. (RCML for short) a member of National Stock Exchange (NSE for short). The director in the assessee-company and RCML were common and the name of RCML was appearing in the list of specified person as envisaged u/s.40(A)(2)(b) of the Act. The assessee has also paid brokerage to RCML for ₹92,566/- only for the above stated transactions. The Assessing Officer during the course of assessment proceedings to verify the veracity of the loss claimed by assessee has confirmed from NSE by issuing a notice u/s.133(6) of the Act. As per the confirmation received from NSE, the AO observed that the name of the client and code has been modified during the process of said transactions. Therefore, the AO had a doubt about the genuineness of the impugned loss and therefore has sought the explanation from the assessee. In compliance thereto the Director of the assessee- company and RCML namely, Shri Vikash Somani in his statement recorded dated 22.12.2010 submitted that the name of the client and code was modified due to punching ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sister concern. Even though apparently it has not been established that the such modification had been done in violation of rules and regulations prescribed by SEBI and the AO had proceeded on suspicion, however at the same time it also cannot be concluded either that the loss would not be attributable to these modifications . Thus, I find merit in the contention of the AO. Therefore, the appellant's contention in respect of the claim of loss cannot be acceptable as the same pertained to the modified transactions being entered into by the appellant's sister concern who was the Broker and helped in manipulation for the benefit of the Appellant. I also find that similar addition was made by the AO on the same ground in the previous AY 2008-09 and the CIT(A)-XXX, Kolkata has partly confirmed the addition so made by the AO vide Appeal Order dated 23.11.2012. Hence disallowance made by the AO for the loss of ₹ 19,76,538/- claimed to be incurred by the appellant company is confirmed as it was done with the intention of reducing appellant company's taxable income manipulation of transactions entered into by the Appellant's sister ITA No.191/Kol/2015 A.Y. 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of AO on the basis of his guess-work as evident from his appellate order which is reproduced below:- there is a possibility that the modifications might have been made to accommodate the appellant as the broker of the appellant was a sister concern. Further the ld. CIT-A has observed in his order as under: - Even though apparently it has not been established that the such modification had been done in violation of rules and regulations prescribed by SEBI and the AO had proceeded on suspicion, however at the same time it also cannot be concluded either that the loss would not be attributable to these modifications On perusal of the order, we find that Ld. CIT(A) has confirmed the order of AO on his own surmise and conjecture which is not permissible in the eyes of law. Ld. DR has also not brought anything on record contrary to the advance arguments placed by Ld. AR for the assessee as well as no defects of whatsoever has been pointed out in the documents produced by assessee in support of its impugned loss. We also find whatever modifications were carried out by the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject-matter of decision in such a case. In order to find out whether the transaction is genuine or ingenuine, it is neither the expedience or correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose. Having regard to the facts and circumstances of the case, the view taken by the Tribunal allowing share loss cannot be said to be erroneous or perverse.-CIT vs. Emerald Commercial Ltd. Anr. (2001) 171 CTR (Cal) 193: (2001) 250 ITR 539 (Cal), CIT vs. Dhawan Investment Trading Co. Ltd. (1999) 238 ITR 486 (Cal) and CIT vs. Currency Investment Co. Ltd. (2000) 158 CTR (Cal) 361 : (2000) 241 ITR 494 (Cal) relied on. Respectfully following the same, we hold that the impugned loss claimed by assessee is genuine loss in the above facts and circumstances of the case and therefore eligible for deduction. Accordingly, AO is directed. This ground of assessee's appeal is allowed . 4. I put up a specific query to the department as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee earned exempt income of ₹ 34,62,689/- and huge amount brought into the books without paying a single rupee of tax. The Ld.AO has very carefully analyzed the information received from the Investigation Wing, and has recorded the noteworthy features of the Company whose shares were purchased / sold by the assessee-individual. The economic parameters of the said company over the impugned period has also been brought on record, in the analysis. The rise and fall of the prices as recorded had been brought out by the Ld. AO to be artificial and not commensurate with the normal market, as the Company has no business at all. The Ld. AO has also brought forth information that the Regulatory Authority SEBI has also after investigating such abnormal price increases of certain stocks investigated the matter and suspended trading in certain scripts. It is very clear that the prices of these scripts fell sharply after the offloading of these scripts by pre-arranged and manipulated transactions. The entire transactions were carried out on the Stock Exchange to give it a color of real transactions. 2. I also find that the submissions mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) , their Lordships held as under: In view of section 68 of the Act, where any sum is found credited in the books of the assessee tor any previous veer, the same may be charged to income tax as the income of the assesses of' that previous veer if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer not satisfactory. In such a case, there is prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. In the case of Sajjan Das Sons vs. CIT (2003) 264 ITR 435 (Delhi) , their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and done in determination of genuineness of gift held as under: That a mere identification of the donor and showing the movement of the gift amount through banking channels was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored but they cannot become the bedrock or substratum of conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the cannons of equity, fairness and justice. The evidence should be impartially and objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge in appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real until it is shown that there are reasons to believe that the apparent is not the re4al. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality9 of the recitals made in those documents.... 6. It is well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. IT needs to be emphasized that standard of proof beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Delhi ITAT B -Bench has observed, on 31.12.2010 as under: SUSPICIOUS AND DIBI0US TRASANCTI0N HOW TO BE DEALT WITH: 6.11, The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court' has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious Circumstances, by following observations: ,,,,. It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that It is within the taxing provision and if a receipt is in the nature of income; the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee, But in view of section 68, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as in the case of other evidence. ( 2) the circumstances proved m9uste be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. ( 3) although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced; some of these links may have to inferred from the proved facts; ( 4) in drawing those inferences or presumptions, the Authorities must have regarded to the common course of natural events, to human conduct and their relation to the facts of the particular case. ( 5) The circumstantial evidence can, with equal facility, be restored to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are that me assessee has claimed to have purchased the impugned shares through Off market transaction. The purchase price was not paid by Cheque, but it was claimed to have been adjusted against the speculation profit claimed to have been made by the assessee. The small difference of ₹ 324/- was claimed to have been paid by way of cash. It is also pertinent to note that the alleged Speculation transaction carried out earlier to the purchase of shares of Prime Capital Markets Ltd was also claimed to have been carried in off market transaction. Another important point is that the assessee did not possess copies of Share certificates or copies of Share transfer forms. The , broker M/s Khandelwal Co., has expressed its inability to furnish copies of contract notes available with it and also failed to furnish its books of account to substantiate the transactions of purchase of shares by the assessee. Since the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove said company were also not produced. Though M/s Prime Capital Markets Led 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 already seen the the tax authorities have applied the test of human probabilities explained by the Hon'ble Supreme Court in the cases of Sumati Dayal and Durga Prased More (supra) to disbelieve the claim of Long term Capital gains put forth by the assessee. We notice that the test of human probabilities was not applied by the co-ordinate benches of Tribunal In the case of Shri Avinosh Kantilal Jain (supra) and Mr. Shyam R Pawar (supra). Hence, in our view) the assessee cannot take support from the above said decisions, We further notice that the ld CIT(A) has placed reliance on the decision dated 04.1.2011 rendered by ITAT Delhi In the case of Haresh Win Chaddha Vs. DDIT, wherein the Tribunal has expressed the view that there is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of making speculation gains on the reasoning that speculation transactions could not haves 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 decisions relied upon by the assessee, the claim of speculation profits was not considered by the Tribunal. In yet another case of Shri Araving M Kariya considered by A bench of Mumbai ITAT, the test of human probabilities was applied to reject the claim of profit realized on sale of penny stocks. There should not be any dispute that the onus to produce necessary evidences to convincingly show that the shares were purchased and sold at the prices claimed always lies upon the assessee. Our view finds support from the decision rendered by Hon'ble Guwahati High Court in the case of CIT vs. Smt. Jasvinder Kaur (357 ITR 638) 16. In view of the foregoing discussions, we are of the view that the decisions relied upon by the assessee cannot be taken support of by the assessee for the reasons discussed supra. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 the share price of the company is quoted but maximum value of the share quoted was ₹ 17 but that was only in July, 1997, i.e. long before the shares were sold by the assessee to M/s S/.K. Sharma Co. In the months of February and March, 1998. The AO also recorded the finding that although the shares were transferred in the name of the assessee, they were still lying in the name of assessee much after the sale to M/s S.K. Sharma Co. The learned CIT(A) deleted the addition on the ground that both the brokers from whom the shares have been purchased and sold were called under Section 31 by the AO. Both have confirmed the sale and purchase of said shares. Other aspect of the facts and circumstances raised by the AO was not discussed by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ate, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s S.K. Sharma Co. Factual matrix of the case from start of the purchase of shares at the rate of ₹ 3 to the sale of shares at ₹ 55 in a short span of time and shares being not, quoted at Ludhiana Stock Exchange and the way in which different, installment payments have been received from the brokers and non-availability of the records of the brokers and the shares remaining in the name of assessee even long after the sale of the shares does not stand the test of probabilities. As rightly pointed out by the learned Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 offset the loss incurred on the sale of jewellery declared under VDIS. In considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set aside order of the CIT(A) and restore that of the AO. 8. In the result, the appeal of the Revenue is allowed. [ Unquote ] 10. Moreover, all the judgements relied upon by the appellant fall flat in the face of the facts of the case, and the preponderance of probability against the assessee. In a decision of the Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain Vs. Pr. CIT by their order dated 10th April, 2017 have upheld the orders of the Hon'ble ITGAT, Nagpur Bench dated 18.07.2016 in ITA No.61/Nag/2013 in Sanjay Bimalchand Jain Vs ITO, Ward-4(2), Nagpur, wherein it was held that on the facts emergent in the case, and the preponderance of probabilities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed capital gains more particularly as analysized in assessment order as per scrip price movement in stock exchange, profit and loss account, balance-sheet and business activities. Mr. Bhattacherjya s case is that the impugned LTCG derived from sale of contract scrip which has not seen any profitable business activity during the relevant holding period which defies all commercial prudence which has been rightly treated as non-genuine both in assessment as well as lower appellate proceedings. He quotes case law of Sumati Dayal vs. CIT (1995) 80 Taxmann. 89/214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) various tribunal decisions as well as hon'ble high court s judgments adding similar sums to be unexplained cash credits are also cited in support. 4. I find no merit in either of the Revenue s above stated submissions. It emerges that this tribunal s co-ordinate bench s decision in Sanjay Mehta vs. ACIT ITA No.1089/Kol/2018 decided on 28.09.2018 has deleted identical addition of LTCG treated as unexplained cash credits regarding the very scrip as follows:- 5. We have given our thoughtful consideration to ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aded from BSE website is enclosed for your ready reference. I also enclose Unno Industries Ltd. letter dated 12th February, 2013 and 7th March, 2013 communicating the issuance of shares in lieu shares of Pinnacle Vintrade Ltd. upon sanction of scheme of arrangement by the Hon ble Court. Annexure II 5. As the equity shares of Pinnacle Vintrade ltd. purchased were not listed, hence no Contract Notes were issued. However, copy of bill indicating purchase of said equity shares is enclosed. Annexure III 6. Equity shares of Pinnacle Vintrade Ltd., were directly purchased from Uniglory Developers Pvt. Ltd. 209, Vireshwar Chambers, M.G. Road, Nera Shan Talkies Vile Parle (E), Mumbai, Maharashtra-400057. 7. Equity shares of Pinnacle Vintrade Ltd. were purchased in Physical Form. 8. I have three Demat Accounts as follows- a) Name of DP- Ashika Stock Broking Ltd. (DP ID No. 12034500) Demat account No. 1203450000003128 Address of DP-Trinity, 7th Floor, 226/1, A.J.C. Bose Road, Kolkata-700020. DP Account opened on-31.08.2004 b) Name of DP- Guiness Securities Ltd. (DP ID ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Tamilnad Mercantile Ltd. bank Statement reflecting the receipts of sale consideration from the SEBI registered stock brokers (highlighting the said entries) is enclosed. Annexure VIII. 7. Out of sale consideration money of ₹ 3151423.00 from Unno Industries Ltd. a sum of ₹ 3150000.00 has been invested in equity shares of Glow Diam Designs Pvt. Ltd. All the evidences were attached as annexures as stated above. 6. The Assessing Officer in his order did not refer to any of these evidences. Instead at para 6 and 7 he concluded held as follows: 6. The details of purchase and sale of this particular scrip i.e. Unno Industries Ltd. (hereinafter referred as The Scrip) were examined in which shares were sold in June/August, 2013 at the price of ₹ 31,62,379/- and purchased ₹ 1,00,000/- i.e. a humongous rise of over 3100% over a very short period of just 24 months. These facts demanded a deeper study of the price movements and share market behavior of the entities involved in trade, of the scrip as the share price movements and the profit earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on suspicion and in a routine and mechanical manner. This is clear from the fact that the AO refers to some Sharp Trading Company as one of the main ,manipulated company and whereas the assessee sold scrips in Unno Industries Ltd. The AO refers to various enquiries made by The Directors of Income Tax , Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so-called project and the evidence collected by the DIT (Inv.), Kolkata etc have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AO and the addition is made based on such generalizations. The assessee has not been confronted with any of the evidence collected in the investigation done by the DIT(Inv.), Kolkata. Evidence collected from third parties cannot be used against the assessee without giving a copy of the same to the assessee and thereafter g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The D Bench of the Kolkata Tribunal in the case of Gautam Kumar Pincha vs. ITO, in I.T.A. No. 569/Kol/2017 dated 15.11.2017 at para 19 onwards held as follows: ( i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon ble High Court held that the opinion of the AO 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 ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. ( ii) CIT V. Lakshmangarh Estate Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) In this case the Hon ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered 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 supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Demat Statement, Bank Account reflecting the transactions, the Stock Brokers have confirmed the transactions, the Stock Exchange has confirmed the transactions, the Shares have been sold on the online platform of the Stock Exchange and each trade of sale of shares were having unique trade no. and trade time. It is not the case that the shares which were sold on the date mentioned in the contract note were not traded price on that particular date. The ld AO doubted the transactions due to the high rise in the stock price but for that, the assessee could not be blamed and there was no evidence to prove that the assessee or any one on his behalf was manipulating the stock prices. The stock exchange and SEBI are the authorities appointed by the Government of India to ensure that there is no stock rigging or manipulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying 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 operators cases. They have been found to have rigged such kind scrip s prices rise. There is not even a single material during the course of hearing which could suggest the assessee to have engaged in any kind of foul play. This tribunal s another co-ordinate bench decision in ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO decided on 20.07.2018 has rejected Revenue s all these arguments as follows: 9. The ld. DR on the other hand, relied on the order of the assessing officer and reiterated the findings made therein and submitted that the same be upheld. He vehemently argued that merely because the assessee has produced all the evidences required to prove his clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement 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 confirmation is also placed in the paper book at page no 44 to 65). 7. Copy of Form No. 10DB issued by the broker, in support of charging of S.T.T. in respect 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 revenue with evidence. When a person claims that she has done these transactions in a bona fide 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 import laid down by the Courts of law. 15. In our view, just the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 the investigation report as a starting point of investigation. The report 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, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Hon ble Apex 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 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 admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the cross-examination 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, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought 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 Gujarat High Court as under: It can thus be seen that the appellate authority as well as the Tribunal came to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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