9911796707
TMI Blog2019 (9) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... y, capital gains and income from other sources, filed her return of income for AY 2014-15 on 04-10-2014 declaring total income at Rs. 6, 03,320, after claiming exemption u/s 10(38) of the Act, in respect of long term capital gain derived from sale of shares of NCL Research & Financial Services Ltd amounting to Rs. 2,10,99,063. The case was selected for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has declared long term capital gain from sale of shares and hence, called upon the assessee to file necessary evidence to justify long term capital gain declared from sale of shares. The AO further observed that investigation carried out by the department at Kolkatta and consequent statement taken on oath from certain persons including Shri Gautam Bose, one of the directors, promoter of NCL Research & Financial Services Ltd indicated that NCL Research & Financial Services Ltd was a pennystock company, whose aim was to provide entry of bogus long term capital gain by various means. The AO further observed that the broker and other directors have also accepted that under the guise of long term capital gain, they have provided accommodation entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no evidence to the contrary in the case of the assessee to certify the transaction to be a genuine sale of asset the income wherefrom would fall under the head "Long Term Capital Gain". Accordingly the receipt shown by the assessee purportedly from sale of shares of M/s. NCL Research & Financial Services Ltd is treated as Unexplained Credits u/s. 68 and the said amount of Rs. 2,29,80188/- {including Commission of 8% of transaction value} is brought to tax under the head "Income from Other sources. Penalty proceeding u/s 271(1)(c) read with explanation 1 thereto is separately initiated for furnishing the inaccurate particulars of income." 3. Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has filed elaborate written submissions on the issue alongwith certain judicial precedents which has been reproduced at para 6 on pages 5 to 18 of the order of CIT(A). The sum and substance of arguments of the assessee before the Ld.CIT(A) are that long term capital gain declared from sale of shares of NCL Research & Financial Services Ltd is a genuine transaction which is supported by necessary evidences including contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case, in which the appellant has claimed to have made a deal, have been identified as penny shares by the Investigation Wing of the Department because rates of these shares are not based on business results of the companies but same are fluctuated by insider's trading from zero value (negligible price) to very high price and vice versa without any reason or basis to accommodate or generate bogus capital gain or loss. In the instant case, all the above features are present in the transaction of shares made by the appellant. As discussed above, M/s NCL Research & Financial Services Ltd. was caught by the Investigation Wing, Kolkatta in providing accommodation entries. In this respect, it is also pertinent to mention that even appellant has failed to adduce any plausible reason for unexpected escalation in the price of this scrip and the - ' unnatural gain occurred to her through these transactions. As noted by the AO, this was an off market deal. There could be no real value attached to this scrip. In the case of Ratnakar M. Pujari Vs. ITO (ITAT Mumbai) Appeal Number : I.T.A. No.995/Mum/2012, Date of Judgement/Order : 03.08.2016, Assessment Year 2006-07 the issue of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from and leased back to Gujarat Electricity Board (GEB) and therefore the same was also referred to the Special Bench and the ICICI Ltd., was added as an appellant.while discussing the judgment of the Supreme Court, in the case of McDowell and Co. Ltd. (supra), the Tribunal (SB) had, inter alia, noted that the Courts and Tribunals had to expose subterfuges, colourable device, and dubious methods in tax cases, that the lawful dues to the State cannot be withheld through schemes of subterfuge, a colourable device, and a dubious method, that the approach in such cases must be to take the entire arrangement as a whole and see if it makes any attaching weight to the steps4hat go to make-up the arrangement or the scheme, each of which may be legally valid, that the genuineness of the arrangement has to be viewed not in relation to every step taken to achieve the result but in relation to the final result, that one has to look at the truth of the transaction (and if permissible) by going behind the facade of documentation or the series of steps taken, that the Courts (and Tribunals) always have the freedom to 'go behind1 the documents to find out the real intention of the party, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed." 5. The Ld.AR for the assessee referring to ground No.1 of appeal, insofar as the issue of principles of natural justice submitted that the AO has passed assessment order by heavily relying upon statement recorded from third party without confronting those statements to the assessee for her comments and also cross examination of the person, who gave the statement despite repeated requests have been made during assessment proceedings by filing a specific letter on 14-12-2016. The Ld.AR further submitted that the AO has not even once mentioned / putforth questions about those statements when the assessee appeared before him in response to summons issued u/s 131 of the Act. Further, even in his show cause notice dated 05-12-2016, there is no mention of those statements on which he heavily relied upon in the assessment order. In absence of specific statements in her possession or non furnishing of such statements to the assessee when the same was specifically requested, it is the duty of the AO to furnish such statements and also provide the opportunity of cross examinations to the assessee. Unless, the AO complied with the requirement of furnishing of statements and also pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are brought out in the assessment order, the assessee, instead of arguing its case on merits, raised a technical issue of violation of natural justice in the light of certain judicial precedents including the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs Commissioner of Central Excise (supra). Although there is no dispute with regard to the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries vs Commissioner of Central Excise (supra), but when it comes to facts of this case, it is abundantly clear that the assessee, in order to escape from taxability of unexplained cash credit on account of amount received from sale of shares of NCL Research & Financial Services Ltd, taken shelter under the principles of natural justice, which cannot be allowed. 7. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. We have also carefully considered the case laws relied upon by the Ld.AR for the assessee. It is an undisputed fact that the AO has heavily relied upon information received from investigation wing of Kolkata, where the investigation carried out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine legal position of law, no doubt, there is a statement recorded from the director of NCL Research & Financial Services Ltd, as per which, the director of the company had admitted in the statement that the company is a penny stock company which is involved in providing accommodation entries of long term capital gain. But, when the assessee has requested for copies of statement, which were being used against her and also to provide opportunity of cross examination of the person, who gave such statement, the AO, neither furnished copies of statement nor allowed cross examination to the assessee. It is a trite law that when information received from third party information has been relied upon to draw an adverse inference against the assessee, the person, who relied upon that information is duty bound to provide the information to the assessee and also to allow him to cross examine the person, who gave such statement or to rebut the information available with the AO. Unless the AO do so, then it is a gross violation of principles of natural justice, and hence, the whole proceedings including assessment proceedings becomes null and void. This legal principle has been laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . All these are part of paper book filed by the assessee. When the assessee has specifically asked for statements, which are used against the assessee to draw an adverse inference and also requested for cross examination of the person, who gave the statement, it is the duty of the AO to provide such statements to the assessee and also to provide the opportunity of cross examination. In this case, inspite of repeated requests, the AO has failed to do so. Therefore, we are of the considered view that the assessment order passed by the AO suffers from jurisdiction and is in violation of principles of natural justice, consequently, liable to be quashed. Hence, considering the facts and circumstances of this case and also by following the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs Commissioner of Central Excise (supra) and other decisions, we quash the assessment order passed by the AO and deleted addition towards unexplained credit u/s 68 of the Act. 10. The assessee has challenged additions on merits. Since, we have quashed assessment order on legal ground, the ground taken on merits become academic in nature and does not require specific adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
