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TMI Blog2019 (8) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act treating the same as unexplained cash credit and confirming the addition of Rs. 89,596/- on account of payment of commission u/s. 69 of the Act. 3. The brief facts of the issue are that the assessee claimed long term capital gains of Rs. 17,91,918/- . The AO found that the assessee has claimed LTCG of Rs. 17,91,918/- and claimed exemption u/s. 10(38) of the Act. According to AO, the assessee has bought 6000 shares of M/s. JIL on 12.10.2011 @ Rs. 10/- each for a total consideration of Rs. 60,000/-. And later, the assessee sold the shares in this assessment year (AY) as under: Date No. of shares Rate per share Total sale consideration 23.06.2014 1500 Rs. 311/- Rs. 4,66,500 03.07.2014 2000 Rs. 309/- Rs. 6,18,000 07.07.2014 2500 Rs. 312/- Rs. 7,80,000 Rs. 18,64,500 The assessee had sold these shares through M/s. Guiness Securities Ltd. which is a registered broker at the BSE and claimed LTCG of Rs. 17,91,918/-. According to AO, the scrip of M/s. JIL is amongst the 84 penny stocks which were engaged in artificial rigging of prices and was meant for the desired pre-planned purpose. The AO on perusal of the financial results of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee after purchasing the scrips of M/s. JIL waited till the completion of 1 (one) year for qualifying the gain (LTCG) as exempted income. According to AO, on reaching the optimum level, assessee sold these shares to the pre-arranged buyers at pre-settled price. Thus, AO concluded that assessee had sold these scripts at predetermined price, pre-determined time and to pre-determined buyer with the help of accommodation entry' providers under the shell of director, share broker etc. to bring his unaccounted income into the regular books of accounts in the form of claim of exemption u/s 10(38) of the Act on LTCG as per provision of Act. Therefore, according to AO, it is a fact that assesee had taken accommodation entry of Rs. 17,91,918/ - by selling listed penny stock of M/s. JIL through the pre-settled transactions under the carpet. In view of the above discussion, according to AO, the claim of LTCG of Rs. 17,91,918/ - having been proved to be bogus, and pre-arranged. Under these circumstances assessee was requested to explain as to why the said sum of Rs. 17,91,918/-should not be treated as credit in her accounts and added in the total income for the Asstt Year 2015-16 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. According to Ld. AR, as a matter of fact, the assessee has never indulged in any such activity nor has been part of any modus operandi as stated by the A.O. The assessee has transacted in the shares of M/s. JIL in the normal course of investment like millions of investors do in the stock market. Therefore, according to Ld. AR, the question of alleged conversion of unaccounted money in the form of alleged bogus long term capital gains with the help of many alleged connected parties through price rigging and price manipulations does not arise. According to him, there is no material evidence for the A.O. to conclude what is apparent is not real. In the absence of any link between the assessee and the alleged adverse admissions of the directors and brokers, human probability has been used as a vague and convenient medium for the Department to draw adverse view/conjectures against the assessee. According to Ld. AR, blaming the assessee by vague observations and drawing an adverse inference without any admissible evidence on record, on the part of the lower authorities is not justified in the eyes of law. In this connection, he placed reliance on the following decisions: i) Lalchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate bench of this Tribunal has already accept the scrip of M/s. JIL vide its order dated 28.02.2019 in the case of Omprakash Mundhra & Ors Vs. ITO in ITA No. 2235/Kol/2018. Therefore, he prayed that the appeal both of the assessee's may be allowed. 6. Per contra, the Ld. DR vehemently supported the orders of the lower authorities and urged before the bench to confirm the orders of the lower authorities and explained the modus operandi resorted by the beneficiaries like assessee who launder their unaccounted money through this colourable device and wanted us to uphold the action of Ld. CIT(A) and AO. He also referred to certain case laws which we will refer to infra . 7. I have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing it was brought to my notice by the Ld. AR that this Tribunal in the case of Omprakash Mundhra & Ors Vs. ITO in ITA No. 2235/Kol/2018 (supra) have decided that the scrips of M/s. JIL are not bogus and held that the LTCG claim of the assessee needs to be allowed. In the said order, the Tribunal has held as under: "3. I find in this lead case ITA No.2235/Kol/2018 that the assessee had declared his LTCG of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cash. v. Most of these companies have no business at all. Few of the companies which have some business do not have the credentials to justify the sharp rise in Market Price of their shares. vi. The sharp rise in market price of the shares of these entities is not supported by fundamentals of the company or any other genuine factors. vii. An analysis in respect of persons involved in transactions apparently carried out in order to jack up the share prices has been done in respect of 84 companies. It has been noted that many common persons/entities were involved in trading in more than 1 LTCG companies during the period when the shares were made to rise which implies that they had contributed to such price rise. viii. Names of most of the LTCG companies are changed during the period of the scam. ix. Most of the companies split the face value of shares [this is probably done to avoid the eyes of market analysts]. x. The volume of trade jumps manifold immediately when the market prices of shares reach at optimum level so as to result in LTCG assured to the beneficiaries. This maximum is reached around the time when the initial allottees have held the shares for one year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human probabilities and upheld the addition made by the Assessing Officer by relying on what he calls rules of "Suspicious transactions". 10. The assessee in this case has filed the following evidence before the Assessing Officer in support of his contentions:- a) Copies of bills, evidencing purchase of shares b) Copies of contract notes of sale of shares c) Bank statement copies d) Copy of Ledger A/c of broker e) Demat Statement etc. The Assessing Officer has just relied on general observations. No evidence was controverted by the Assessing Officer. 11. The Kolkata Bench of the ITAT in a number of decisions have, on similar facts and circumstances of the case, decided the issue in favour of the assessee. We list some of these decisions:- * Shri Gautam Kumar Pincha vs. ITO, ITA No. 569/Kol/2017, dt. 15/11/2017 * ITO vs. Shri Shaleen khemani, ITA No. 1945/Kol/2014, dt. 18/10/2017 * Mahendra Kumar Baid vs. ACIT, Circle-35; ITA No. 1237/Kol/2017; order dt. 18/08/2017 * Kiran Kothari HUF vs. ITO, ITA No. 443/kol/2017, order dt. 15/11/2017 The Hon'ble Jurisdictional High Court on similar facts, had in the following cases, upheld the claim of the assessee:- * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered 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 concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 cross-examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 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 admitted or the witnesses are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir 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 crossexamination. 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 delete the addition made by the AO on this account." c) The Hon'ble Punjab and Haryana High Court in the case of PREM PAL GANDHI [ITA-95- 2017 (O&M)] dated 18.01.2018 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 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 instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT (A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT (A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition." e) The BENCH "D" OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: "........ We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 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 bonafide 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 ARVIND KUMAR JAIN HUF [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 concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails 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 Rohitkumar 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 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 laid down in the above 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th M/s. Jackson Investments Ltd. or their promoters, directors and any other person who exercises any control over M/s. Jackson Investments Ltd. or any so called entry operator. Other than adverse assumptions there is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker. The assessee had produced all evidences to explain the source of the amounts received by the assessee from the brokers and to corroborate the transaction in question. Thus I am of the opinion in the facts discussed supra, the AO was not justified in assessing the sale proceeds of shares as undisclosed income. I, therefore, respectfully following the order of coordinate bench in Om Prakash Mundhra (supra) and the finding of facts as stated in (supra) am inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital on sale of shares of M/s JIL and also the commission expenses as bogus and delete the consequential additions. Therefore, the appeal of assessee is allowed. 9. Coming to the ITA No. 1892/Kol/2018, I note the facts and grounds are identical and the Ld. DR failed to bring to my notice any change in facts or law so o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equivalent amount and received back by cheque and bogus contract notes and bills for the transactions not actually rooted through stock exchange. It is noted that the ITAT, Mumbai had relied upon and followed the judgment of Hon'ble Bombay High Court in Sanjay Bimalchand Jain v. PCIT, Order dated 10.04.2017 (Bom.), being judgment of Jurisdictional High Court. However, in this case, the AO observed that the assessee had taken entries and paid cash of equivalent amount and received back by cheque. And on the basis of such adverse inference, the Tribunal confirmed the addition made by the AO. However, in the present case in hand, there is no such finding made by the AO. Further. It is noted that the abovementioned judgment of ITAT, Mumbai Bench has been considered and distinguished by the ITAT, Kolkata Benches and other Benches of the Tribunal, inter-alia, in the following cases: a. Satyanarayan Saria vs. ITO [ITA No.1224/KoIl2016, Order dt. 28.06.2019 (Kol ITAT)] b. Kaushalya Agarwal vs. ITO [ITA No.194/KoIl2018, Order dt. 03.06.2019 (Kol, ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) Reference is also made to the recent judgment dated 01.07.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract note in cash and, there was no trail. This fact is not applicable in the present case. Further, it is noted that the abovementioned judgment of Tribunal, Mumbai Bench was considered/distinguished by the Mumbai ITAT in its following judgments while allowing similar issue in favour of the Assessee: a. DCIT vs. Anil Kainya [ ITA Nos.4077 & 4078/MUM/2013, Order dt. 22.03.16 Mum ITAT)] b. Anjali Pandit vs. ACIT [2017] 88 taxmann.com 657 (Mumbai - Trib.) Further, it is noted that lthe said judgment has been considered/distinguished by the Kolkata and other Benches of the Tribunal, inter-alia, in the following cases while allowing similar issue in favour of the assessee. a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol ITAT)] b. Anupama Garg vs. ITO [ITA NO.5971/0el/2018, Order dt. 12.12.2018 (Del, ITAT)] c. Radhika Garg. vs. ITO [ITA No.4738/0el/2018, Order dt. 01.01.2019 (Del-Trib) 4. Coming to the case of Vidya Reddy - ITA No.126/Chny/2017 -Chennai ITAT had disallowed the claim of exempt LTCG and had confirmed the addition made on the ground that the assessee has not placed any material before the lower authorities to prove that her tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered/distinguished by this Tribunal, inter-alia, in the following cases while allowing similar issue in favour of the Assessee: a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (KoI ITAT)] b. Yogesh Dalmia vs. ACIT [ITA No.113/Kol/2018, Order dt. 03.06.2019 (KoI ITAT)] c. Navin Kumar Kajaria vs. ACIT [ITA No.1254-55/Kol/2018, Order dt. 03.04.2019 (Kol- Trib) d. Soumitra Choudhury vs. ACIT [ITA No.256/Kol/2019, Order dt. 15.03.2019 (Kol ITAT)] 6. Coming to the case of Abhimanyu Soin [2018-TIOL-733-ITAT-CHD - The Chandigarh Bench of Tribunal had confirmed the addition made by AO after observing that "11. The assessee has failed to prove that the purchase and sale transactions are genuine and could not even furnish and iota of evidence regarding the sale of shares .............". However, in the case of the Assessee Company all relevant documents were furnished to support, and prove beyond all doubts, purchases and as well as sale of shares, which was evidently absent in that case, so is not applicable to case in hand. 7. Coming to the case of Balbir Chand Maini Vs. CIT (2011) 12 taxmann.com 276 (P&H) - The Hon'ble Punjab & Haryana High Court had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in favour of the Assessee: a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol, ITAT)] b. Kamal Singh Kundalia vs. ITO [ITA No.2359/Kol/2017, Order dt. 08.05.2019 (Kol ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 9. Coming to the case of CIT vs. Sunita Dhadda (Hon'ble Supreme Court judgment dated 06.06.2018), it is noted that this judgment relied upon by the department has no application in the facts of the instant case. The contention of Ld. DR that matter should be set aside to AO for supplying the Assessee with Investigation Wing Report and statements of parties relied upon cannot be applied in each and every case. The assessee company had in the case in hand discharged the onus casted upon it to prove the claim of LTCG/STCL, then it was the bounden duty of the AO to bring out the falsity/fabrication/wrong doing if any on the part of assessee or confront the assessee with any material which is adverse against the assessee and to proceed in accordance to law i.e. in confronting with principle of Natural Justice without doing so, and when assessee placed all documentary evidences before the AO/Ld. CIT(A), the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order dt. 22.03.2018] Sanjay Bimalchand Jain vs. PCIT [2018] 89 taxmann.com 196 (Bom) The decisions of these cases had been relied upon by D/R to contend that gains from sale of shares should be assessed as "Business income" and not under the head "Capital Gains". It is noted that the Learned D/R is trying to put forward a completely new argument which do not emanate out of the orders of the lower authorities and also from the records of the case and thus is not permissible to be raised as this stage. Even otherwise, the ITAT, Delhi Bench in Prem Jain (supra) had held when the facts of the case was that the Assessee had claimed the income from sale of shares to be assessed at business profits and not capital gains where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares. In such facts of the case, it was held that profits from sale of shares would amount to business income and not short term capital gain. However, no such case had been made out by the Assessing Officer in the instant cases. The aforesaid order has been considered by this Tribunal while deciding similar issue in favour of an assessee in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to bring on record any evidence whatsoever to show that the Assessee was involved in any price manipulations. Thus the judgment of the Hon'ble Supreme Court is clearly distinguishable on facts. The said judgment had been held to be distinguishable by the ITAT, Kolkata Benches in the following judgments:- i. Suman Saraf v. ITO in ITA No.1395/KoI/2018, Order dated 05.10.2018. ii. Jignesh Desai v. ITO in ITA No.1394/KoI/2018, Order dated 05.10.2018. iii. Rishab Jain v. ITO in ITA No.1392/KoI/2018, Order dated 05.10.2018. iv. Rekha Devi v. ITO in ITA NO.1269/KoI/2018, Order dated 05.10.2018. v. Sunita Devi v. ITO in ITA No. 1268/Ko1/2018, Order dated 05.10.2018. vi. Jagat Lal Jain v.ITO in ITA No.1226/KoI/2018, Order dated 05.10.2018. vii. Sneha Choudhary v. ITO in ITA NO.1218/KoI/2018, Order dated 05.10.2018. viii. U.C.Choudhary & Ors (HUF) v. ITO in ITA No.1217/KoI/2018, Order dated 05.10.2018. ix. Virendara Barmecha v. ITO in ITA No.1201/KoI/2018, Order dated 05.10.2018. x. Taruna Devi Barmecha v. ITO in ITA No.1199/KoI/2018, Order dt. 05.10.2018. xi. Premlata Agarwal vs. ITO in ITA No.874/KoI/2018, Order dt. 05.10.2018. xii. Sunil Kumar Ladha vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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