TMI Blog2019 (9) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... Rabin Choudhury, DR ORDER Per S.S. Godara, Judicial Member:- This assessee s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-6 Kolkata s order dated 10.04.2019 passed in case No. CIT(A), Kolkata-6/10080/2018-19, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. It emerges at the outset that both the lower authorities have adopted identical line of reasoning in treating the assessees LTCG amounting to ₹ 112,12,338/- derived from transfer of shares to be bogus unexplained cash credits u/s 68 of the Act. 3. We find that the assessee had declared his LTCG of ₹ 112,12,338/- derived from transfer of shares held in Sulabh Engineering and Service Ltd. Learned Departmental Representative invites our attention to a voluminous exercise undertaken by the Assessing Officer involving a long drawn process of stock market prices rigging in collusion with various entry operators. He takes us to CIT(A) s detailed discussion whilst treating the impugned LTCG in the instant case as under:- 5.3 In a penny stock which has no business activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits credited in his bank accounts, then sale proceeds had to be added as income under section 68. 2. Balbir Chand Maini vs. CIT (2012) 340 ITR 161 (P H) Section 69 of the Income-tax Act,. 1961 - Unexplained investments - Assessment year 1998-99 - During assessment proceedings, Assessing Officer found that assessee had purchased certain shares of a company at rate between ₹ 2,50 and ₹ 3.40 per share in month of April, 7997 and part of those shares were sold through a broker at ₹ 55 per share - He came to opinion that value of said shares could not be as high as ₹ 55 per share. He recorded statement of broker who admitted to have purchased shares in question but failed to produce books of account and other relevant documents. He also found that alleged sale of shares had not taken place through any stock exchange - On scrutiny of books of account of broker, it was found that there were cash deposits in its hank account preceding issue of cheques in name of assessee for purchase of shares claimed to be sale proceeds. of same shares received in advance - Broker could not give details of purchaser of shares - Moreover, shares claimed to have been sold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooked by the assessee in the books were prearranged method to evade taxes and laundered money. The findings and observations of the AO were not controverted by assessee by placing any evidence. He placed reliance upon the various judicial pronouncements in support of his contention that once the assessee has placed the evidences with regard to payments and the identity of the persons and the creditworthiness of the creditors, no addition under section 68 is called for. Since the assessee has placed the contract note, payment through cheques identifying the company whose shares were transacted, the genuineness of claim of long- term capital gain should not have been doubted. We do not find merit in these contentions of the assessee in the light of the facts that there is prevalent practice in the country through which unaccounted money is converted into long-term capital gain by circuitous means. While dealing with the issue of long-term capital gain accrued to the assessee in short span, one has to examine the financials of the company whose shares were inflated within a short period and after the sharp rise in the price of shares it again comes down. In the instant case, financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Ld. Revenue Authorities when the matter was before them. In this situation we do not have any other option but to confirm the orders of the Ld. Revenue Authorities in the case of all the assessees because the Ld. AO as well as the Ld. CIT(A) have arrived at their respective decisions after considering the issues in the appeal in detail and there is nothing before us to disturb their findings. Accordingly we hereby confirm the Order of the Ld. Revenue Authorities on this issue. Thus the first ground raised by the assessees herein above in all the appeals are held against the assessees. 8. The Order dated 04.01.2019 passed by the ITAT Pune 'B' Bench; Pune, ITA No. 1648 1649/PUN/15, A.Y. 2005-06 2006-07 in Rajkumar B Agarwal vs. DCIT, Central Circle 1(2), Pune dated 04.01.2019 has held at para 15 17 15. It is further pertinent to note that it was not only the assessee who booked short term capital gain on the sale of shares of PIL to the above extent, but his family members were also not left behind. They also indulged in the similar paper transactions by allegedly purchasing and selling shares of PIL from the same brokers and showing huge amounts of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque, the transactions should be treated as genuine. Further, regarding the statement of Sh. Jai Kishan Poddar the assessee has only stated that in the statement there is no specific link with the claim of exemption in respect of Long Term Capital Gain of ₹ 22,78,172/- u/s.10(38) by him. He has not stated a thing with respect to the statement of Sh. Jai Kishari Poddar in which he has accepted that facilitation of accommodation entries of long term capital gain / long term capital loss through his share banking firm has been done to few beneficiaries with the help of different accommodation entry operators} promoters of the scripts of various penny stocks other brokers etc. Sh. Jai Kishari Poddar also gave details of different bogus scripts/ penny stocks which have been used for providing the accommodation. entries of LTCG and LTCL to different beneficiaries using his brokerage company Consortium Capital Pvt. Ltd. and the name of CCL International Limited having scrip name CCL Inter appears in the list whose shares were sold by the assessee and exemption on LTCG amounting to ₹ 22,28,172/- claimed u/ s. 10(38) of the Act. After perusing the records, I find that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the grounds of appeal, but only argued on merit for which assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. In view of above discussions, I am of the considered opinion that Ld. CIT(A) has rightly confirmed the addition in dispute, which does not need any interference on my part) therefore, I uphold the action of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Assessee. In the result, the appeal of the assessee is dismissed. 8. Since in other appeal i.e. in the case of Anju Rastogi, ITA No. 38101 Dell 20 18 (A Y 2015-16), similar facts are permeating and same finding has been given, therefore) my finding given above will apply mutatis mutandis in this appeal also, because the nature of transactions, evidences and documents are exactly the same. Thus, both the appeals are treated as dismissed. 10. In the result, both the Appeals of the different Assessees are dismissed. 10. The latest order dated 08-03-209 passed by the Delhi High Court, New Delhi, ITA No.220/2019 CM No. 10774/2019, in Udit Karla Vs. ITO, Ward 50(1), dated 08-03-2019. The assessee is aggrieved by the concurren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s. 234B has been raised in Ground No. 6. I find this issue is a consequential matter. The A.O. is directed to recalculate the amount of interest on finally assessed tax as per the provisions of the Act after giving effect to the appellate order In the appeal is 'dismissed' 4. We have given our thoughtful consideration to rival contentions. There is no dispute above assessees having derived the impugned LTCG on transfer of shares held in Sulabh Engineering and Services Ltd. Learned Departmental Representative fails to dispute that very issue stands adjudicated in assessee s favour in co-ordinate bench s decision in ITA No.354Kol/2018 in Sanjeev Goel (HUF) vs. ITO decided dated 24.08.2018 as follows:- 4. We 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, we hold as follows:- 5. In identical cases, the submission of the assessee, findings of the Assessing Officer, findings of the ld. CIT(A) and the conclusion of the Tribunal have been brought out as under:- 6. The addition was made by the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/portal to the Short Term Loss seekers or dummy paper entities. xiii. The shares of these companies are not available for buy/sell to any person outside the syndicate. This is generally ensured by way of synchronized trading by the operators amongst themselves and/or by utilizing the mechanism of upper/lower circuit of the Exchange. 7. Aggrieved the assessee carried the matter in appeal. 8. The First Appellate Authority upheld the order of the Assessing Officer by giving his findings as follows:- a) The AO had placed on record the entire gamut of finding and there is no further requirement for elaboration. b) There is direct evidence to clearly indicate that the entire transaction undertaken by the assessee was merely an accommodation taken for the purpose of bogus long term capital gains to claim exempt income. The authorities such as SEBI have after investigating such abnormal price increase of certain stocks, suspended certain scrips. c) The submissions of the assessee pointed out towards elaborate documentation such as : i) Application of shares. ii) Allotment of shares. iii) Share Certificates iv) Payment by cheques v) Filings before Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith identical issue of sale of shares of M/s. Cressenda Solutions Pvt. Ltd., decided the issue in favour of the assessee by relying upon a plethora of judgments of various Courts. It held as follows:- 12. The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to Modus Operandi of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence collected from third parties is confronted to the assessees. No opportunity of crossexamination of persons, on whose statements the revenue relies to make the addition, is provided to the assessee. The addition is made based on a report from the investigation wing. 13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon ble Court held: Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. The cancellation of the food grain licence at Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored. The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss-examination is one part of the principles of natural justice has been laid down in the following judgments: a) Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors. 23. A Constitution Bench of this Court in State of M.P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercised its jurisdiction of judicial review. 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross-examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice. b) Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II wherein it was held that: 4. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the Assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 5. According to us, not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the order of the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the show cause notice. 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTA HIGH COURT in the case of BLB CABLES CONDUCTORS [ ITA No. 78 of 2017 ] dated 19.06.2018. The High Court held vide Para 4.1: we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises. d) The BENCH D OF KOLKATA ITAT in the case of GAUTAM PINCHA [ ITA No.569/Kol/2017 ] order dated 15.11.2017 held as under vide Page 12 Para 8.1: 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 share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the 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 exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. It further held as follows: 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 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transactions in M/s Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT (A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT (A) at para 3 to 5 has not been controverted by the department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT (A). h) The Hon ble Punjab and Haryana High Court in the case of VIVEK MEHTA [ ITA No. 894 OF 2010 ] order dated 14.11.2011 vide Page 2 Para 3 held as under: On the basis of the documents produced by the assessee in appeal, the Commissioner of Income Tax (Appeal) recorded a finding of fact that there was a genuine transaction of purchase of shares by the assessee on 16.3.2001 and sale thereof on 21.3.2002. The transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Consistent with the view taken therein, as the facts and circumstances of this case are same as the facts and circumstances of the cases of Navneet Agarwal (supra), we delete the addition made u/s 68 of the Act, on account of sale of shares in the case of both the assessees. The consequential addition u/s 69C is also deleted. Accordingly both the appeals of the assessee are allowed. 5. This tribunal s yet another recent direction in Mahavir Jhanwar vs. also summaries latest legal developments. More particularly hon ble Bombay high court s decision in Revenue s favour as follows:- 2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s Unno Industries. The AO based on a general report and modus operandi adopted generally and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. ITA No.714 to 718/Kol/2011 ITAT, Kolkata DICT vs. Sunita Khemka 28.10.2015 2. 214 ITR 244 Calcutta High Court CIT vs. Carbo Industrial Holdings Ltd. - 3. 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4. ITA No.1236-1237/KOl/2017 Manish Kumar Baid vs. ACIT 18.08.2017 5. ITA No.569/Kol/2017 Gautam Pincha 15.11.2017 6. ITA No.443/KOl/2017 Kiran Kothari HUF 15.11.2017 7. ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO 20.07.2018 8. ITA No.456 of 2007 Bombay High Court CIT vs. Shri Mukesh Ratilal Marolia 07.09.2011 9. ITA No.95 of 2017 (O M) PCIT vs. Prem Pal Gandhi 18.01.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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