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TMI Blog2019 (6) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... ment assessment order u/s 144 of the Act on 29/12/2016, determining the total income of the assessee at Rs. 27,11,020/- interalia making a disallowance of Rs. 18,97,566/- claimed as short term capital loss. He further disallowed an amount of Rs. 3,75,898/- u/s 57(iii) of the Act. The facts of the issue are brought out at para 4.3. and 4.4. of the order of the Assessing Officer, which is extracted for ready reference:- "4.3. On perusal of the books of accounts and details filed by the assessee it was observed that the assessee had claimed Short term capital gain on sale of shares of COMFORT FINCAP LTD. for the sum of Rs. 18,97,566/-. The said capital gain on sale of shares was claimed to be exempt income. The said long term capital gain of shares was claimed on the sale of shares of Rs. 11,00,610/- received through the share broker Global Capital Market. The said sale proceeds were claimed to have been received on the following dates:- SI. No. Date Amount(Rs.) 1 19/03/2014 159500 2 19/03/2014 507500 3 19/03/2014 406000 4 19/03/2014 29000 4.4. The assessee was requested to furnish the following evidences in support of the transaction in shares on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey conducted on certain brokers, investigation said to have been conducted by SEBI, wherein the transactions of the scrip COMFORT FINCAP Ltd. was said to have been suspended. He referred to the SIT report as well as statements of broker and entry operators. As the assessee failed to appear before the Assessing Officer, the assessment was made u/144 of the Act. The Assessing Officer further disallowed an amount of Rs. 3,75,898/-, claimed u/s 57(iii) of the Act, on the ground that there is no income earned by the assessee so as to allow the expenditure in question. 4. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority confirmed both the additions. On the issue of disallowance of short term capital loss, the ld. CIT(A) relied on circumstantial evidence. The ld. CIT(A) at page 29 para 6.1. and 6.2. concluded as follows:- "1. I have carefully considered the action of the Ld. AO in making an addition of Rs. 18,97,566/-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 Short Term Capital Loss was to be denied to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the broker by way of proof that all these transactions were genuine. However, in my considered view of the matter, it is precisely this elaborate paperwork that strengthens the matter relating to the bogus benefit of the LTCG, which clearly has been schemed, preplanned and executed with malafide intelligence and precision. 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 assesseeappellant 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 itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified, Reliance on such matters is placed on the case of Smt Phoolwati Devi 314 ITR (AT) 1 (Del.)." 4.1. Thereafter he relied on a number of case-law and at para 7 onwards and held that the so-called Rules of suspicion transactions will apply in the case. He relied on circumstantial evidence and confirmed the addition. 5. On the issue of interest deduction u/s 57(iii) of the Act, he held that the assessee has a good case and had the transactions leading to short term capital loss were genuine, then he would have allowed this claim. He held that, as he had taken a view that the claim of short term capital loss is not genuine, the disallowance was upheld. 6. Aggrieved the assessee is before me. 7. The ld. Counsel for the assessee submits that, the assessee has produced all the evidence within its command in support of the genuineness and correctness of the transactions. He submitted that the share transactions were done through recognized share broker firms on the stock exchange and that STT was paid on all transactions. He pointed out that the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He relied on a number of case-law, which we would be discussing as and when required. 8. I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:- 9. There is no dispute that the assessee has furnished all the evidences as sought for by the Assessing Officer. The Assessing Officer has also at para 4.4. of his order acknowledged that all evidences as desired by him were furnished. The Assessing Officer has relied on the report of the investigation wing of the department. As held by us, in various other decisions, the report of the investigation wing of the Income tax Department can be a starting point for investigation into the affairs of the assessee but cannot be the whole and sole basis on which an addition can be made. Copy of the report is neither furnished to the assessee nor is placed before us for my consideration. When a copy of the report is not brought on record, the question of relying on the same to make an addition to the income, does not arise. 9.1. The assessee has purchased and sold shares through brokers. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gain from sale of shares of one, CSL and claimed same as exempt - In investigation carried out by DIT (Investigation), it was found that CSL was a scrip which was identified to be involved in scheme of bogus LTCG/STCG to more than 60,000 beneficiaries and that assessee was also part of list of such beneficiaries - On basis of said information, sale consideration received by assessee on sale of shares was added to his income as unexplained cash credit - It was noted that observations of Investigation wing were general in nature and were applied across board to all 60,000 assessees who fell in this category - There was no specific evidences produced against assessee - Submission of assessee that she was not party to scam etc., was not controverted by revenue authorities - Nothing was brought on record to show that persons investigated, including entry operators or stock brokers, had named that assessee was in collusion with them - Whether in absence of any finding specifically against assessee in investigation wing report, impugned addition made under section 68 to income of assessee was unjustified." 10. Applying the propositions of law laid does in this case-law to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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