TMI Blog2019 (8) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... d appellant s undisclosed income which was routed through several accounts. Therefore, the so-called evidences in the form of cash trail of transactions did not conclusively prove the AO s alleged findings that the proceeds realized by the appellant from sale of shares could be considered as appellant s undisclosed income. This finding is further fortified from the fact that even through the aggregate of the additions made u/s 68 in these group of cases is ₹ 6,46,63,639/-, the alleged cash deposits as per the trail found was only ₹ 3,58,90,000/- which in itself shows that the said deposits were not sufficient to lead to conclusion that sale proceeds represented appellant s undisclosed income introduced in the form of sale proceeds. We find the entire assessment substantially proceeded on the AO s suspicion that the appellant had indulged in laundering her unaccounted income during the month of February 2014. All the payments received during the month of February 2014 against the sale of shares was received through banking channel from registered stock broker and even as per the AO s own observation the source as well as source of source for receipt of sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 2014- 15 declaring total income of ₹ 23,29,684/-. In the return of income, the appellant had declared long term capital gain of ₹ 13,03,49,090/- derived on sale of various listed shares which was claimed exempt u/s 10(38) of the Act. Survey operation u/s 133A was conducted upon Rashmi Group on 22.01.2016 to which the appellant belongs. Thereafter, the case of the appellant was selected for scrutiny. In the course of assessment the appellant furnished scrip wise break-up of the long term capital gain earned during the year and which was claimed exempt u/s 10(38). Vide SCN dated 14.03.2016, the AO set out the general background of investigation conducted by the Investigation Wing at Kolkata in 84 scrips which led to suspicion that long term capital gain derived by assessees in such scrips was pre-arranged and/or bogus. He therefore required the appellant to explain as to why the long term capital gain derived on sale of various listed shares should not be treated to be bogus in nature. In response the appellant furnished her explanation on 22.03.2016 wherein she furnished all the relevant documentary evidences to substantiate her transactions conducted in these list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to the tune of ₹ 2,01,67,214/- through banking channels and hence added the same u/s 68 of the Act. On appeal the ld. CIT(A) confirmed the order of the AO. Being aggrieved by the appellate order of ld. CIT(A), the appellant is now in appeal before us. 3. Assailing the action of the ld. CIT(A), the ld. AR of the appellant submitted that the appellant was a regular investor in shares securities of different companies. He invited our attention to her balance sheet for the three years which appeared at pages 219 to 228 of paperbook to show that she consistently held substantial investments in shares of different companies. He further submitted that appellant had sold several listed scrips during the relevant years from which she derived proceeds of ₹ 14,36,04,042/- yielding capital gain of ₹ 13,03,49,090/-. It was the ld. AR s contention that the AO had nowhere disputed the genuineness of the capital gains or for that matter the genuineness of the transactions in the shares of listed securities. He brought to our notice that all the listed shares were sold through the same stock broker on several dates on the electronic platform of the stock exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation entries in form of bogus LTCG to various assessees which proved beyond doubt that the proceeds of ₹ 2,01,67,214/- received by the appellant on sale of shares was in-genuine. He thus contended that there was no need to interfere with the order of lower authorities. He further submitted that the chart of cash trail reproduced by the AO was sufficient evidence to establish that the proceeds to the extent of ₹ 2,01,67,214/- received by the appellant from her broker, M/s Eureka Stock and Share Broking Services Limited was actually her own unaccounted money. According to ld. DR, the AO was under no obligation to share the details of the cash trail. He further submitted that the statements u/s 131 had been provided to the appellant and that it was the appellant who did not avail the opportunity to cross examine the third parties. Referring to the judgment of the Hon ble Supreme Court in the case of ITO Vs M.PiraiChoodi (334 ITR 262), the ld. DR contended that in case the appellant desired to know the basis of cash trail, supporting bank statements etc. and also avail the opportunity to cross examine, then the matters be restored to the file of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22-Feb-14 19,63,151 25-Feb-14 7,57,330 26-Feb-14 25,63,835 27-Feb-14 9,46,664 201,67,214 Thus, giving the benefit of doubt to the assessee, no adverse view is taken regarding involvement of the assessee in the racket of penny stock transactions. However, the cash trail unearthed after the post-survey Operations in case of own group of the assessee is relied upon. Thus based on the chart of cash trail as discussed in foregoing paragraph the amount of ₹ 47,73,056/- received by the assessee from Eureka Stock Share Broking Services Ltd during the period from 08.02.14 to 28.02.14 is treated as his own unaccounted cash brought into books through banking channels. As such, this amount is added to his total income as unexplained credit u/s 68. (emphasis supplied) 7. It is relevant to note from above that having examined the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sir, there are some genuine corporate clients also. I met some persons as directors of genuine clients. 8. The ld. AR thereafter took us through the entire statement of Mr. Somanito show that neither did Mr. Somani at any time identified the appellant or any members of the Rashmi Group as beneficiaries of alleged bogus long term capital gain nor he admitted of providing accommodation entries to the appellant or to Rashmi Group . He further pointed out that in answer to Q No. 30 of his statement requiring him to provide the details of scrips, prices of which were manipulated for providing alleged bogus long term capital gain, Mr. Rakesh Somani had specifically named four scrips only viz.,(i) Esteem Bio, (ii) GBL Infra, (iii) Mishka Finance (iv) Parag Shipping. It is noted that the appellant did not transact in any of the aforesaid four scrips and therefore we find merit in the ld. AR s contention that there was neither any direct or indirect evidence which would in any manner establish that M/s Eureka Stock and Share Broking Services Limited being the broker through which all share transactions of the appellant in listed shares had taken place, was engaged in ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is completely silent bereft of any specific data or tangible material correlating any particular sale of share or investment by the appellant with accommodation entries alleged to be provided by Mr. Rakesh Somani. We therefore hold that the reliance placed by the ld. DR on the alleged statement of Mr. Rakesh Somani recorded u/s 133A was misplaced and untenable on facts as well as in law. 9. We however are conscious of the fact that the issue to be adjudicated in the present appeal is whether the amounts deposited in the appellant s bank account by way of proceeds realized from sale of investments was assessable as her undisclosed income u/s 68 of the Act. On perusal of the impugned assessment order it is noted that the sole basis of the AO for justifying the impugned addition was the cash trail prepared and extracted by him in the order. We however note that in response to show cause issued by the AO, the appellant had furnished all the transactional documents substantiating that the proceeds in question were the payments received on sale of listed shares through registered broker on the open platform of Bombay Stock Exchange. It is noted that the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts received as per AO s charts were within the banking circle only. It is noted that the AO was able to extend the payment trail upto four to six layers. .At the end of transaction trail he allegedly found cash deposits totaling only ₹ 3,58,90,000/- (Pages 6 to 12 of assessment order) as opposed to ₹ 10 crores as claimed in the assessment order. We thus find that even though the AO has made allegation of laundering appellant group s unaccounted income to the extent of ₹ 10 crores yet the AO was able to identify the alleged cash trail of ₹ 3,58,90,000/- only. The foregoing facts therefore goes on to prove that the AO s hypothesis that the appellant group resorted to availing accommodation entries in the form of sale proceeds of shares is not supported by the material which he himself gathered. 10. We further note that the AO assessed the sale proceeds realized by the appellant only in the month of February 2014. From the transactional data on record we find that during the month of February 2014 the appellant had sold 1,60,000 shares of Kailash Auto Finance Limited for ₹ 60,57,453/- and 1,47,000 shares of M/s Lifeline Drugs Ltd for S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred during the relevant year, the appellant had received its monetary value which was paid by unrelated parties. As noted earlier, in the impugned order the AO himself agreed with the explanation furnished by the appellant substantiating the genuineness of the appellant s transactions involving purchase sale of various listed shares and stated that the appellant was not involved in the alleged racket of penny stock transactions. In view of the foregoing therefore we are of the considered view that the manner mode in which share purchasers arranged requisite funds to meet cost of purchase was not determinative in deciding whether the appellant s share transactions were genuine. From what sources and on what terms the purchasers arranged the requisite funds for purchase of shares was entirely at the discretion of the purchasers and over which the appellant did not have any say. 12. Even if one accepts that the AO s proposition at face value and assume that in some instances he had found that there were deposits in cash in the few accounts at the end of transactions trail; in our considered view such fact by itself did not conclusively prove the AO s finding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Horizon Consultants Pvt Ltd ( HCPL ). Thereafter M/s Horizon Consultants Pvt Ltd had utilized the sum of ₹ 10 crores to purchase the several listed shares which were sold by the persons belonging to the Rashmi Group from the floor of the stock exchange. Similar flow charts have been prepared on other Pages 6 to 10 12 of the assessment order. If one analyzes all the flow charts together, then it is apparent that in each case the immediate source of receipt of monies in the appellant s hand was M/s Eureka Stock and Share Broking Services Limited who was the broker and the source of source was M/s HCPL, the counter party broker. The transaction between the appellant and M/s Eureka Stock and Share Broking Services Limited and the transaction between M/s Eureka Stock and Share Broking Services Limited and HCPL was admittedly through banking channel. HCPL received the monies from RDPL who in turn had received it through proper banking channel from several entities. All fund flow charts considered together, we find that the aggregate sum of cash deposits totaled only ₹ 3,58,90,000/- as opposed to ₹ 10,00,00,000/- as claimed in the assessment order. We also find that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO found some cash deposits in the accounts of unrelated parties; in our considered view, on such fact alone the AO could not record a conclusive finding that the cash so deposited represented appellant s undisclosed income which was routed through several accounts. In our considered opinion therefore, the so-called evidences in the form of cash trail of transactions did not conclusively prove the AO s alleged findings that the proceeds realized by the appellant from sale of shares could be considered as appellant s undisclosed income. This finding is further fortified from the fact that even through the aggregate of the additions made u/s 68 in these group of cases is ₹ 6,46,63,639/-, the alleged cash deposits as per the trail found was only ₹ 3,58,90,000/- which in itself shows that the said deposits were not sufficient to lead to conclusion that sale proceeds represented appellant s undisclosed income introduced in the form of sale proceeds. 14. We find the entire assessment substantially proceeded on the AO s suspicion that the appellant had indulged in laundering her unaccounted income during the month of February 2014. The Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the AO s own observation the source as well as source of source for receipt of sale consideration were found through proper banking channel. In fact the appellant s transactions in the same shares conducted through the same broker, in months other than February 2014, has been accepted to be genuine by the AO and no adverse inference has been drawn. It is relevant to reiterate at this juncture that the AO has recorded a finding of fact accepting the explanation furnished by the appellant substantiating the genuineness of the appellant s transactions involving purchase sale of various listed shares and that the appellant was not involved in the alleged racket of penny stock transactions. 15. For the reasons discussed in the foregoing, we therefore do not find that the conclusions drawn by the AO making the impugned addition of ₹ 2,01,67,214/- to be factually as well as legally sustainable. We therefore direct the AO to delete the addition of ₹ 2,01,67,214/- made on the ground of being unexplained income of the appellant. 16. In ITA Nos. 1829 to 1834/Kol/2017 and ITA No. 2118/Kol/2017, we note that the facts and the grounds raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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