TMI Blog2019 (12) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... e supportive evidence on record whereas hon ble Bombay high court has gone by circumstantial evidence. We quote hon ble apex court s judgment in CIT vs. Vegetable Products [ 1973 (1) TMI 1 - SUPREME COURT] in these peculiar facts and adopt the view of hon ble Calcutta high court in taxpayer s favour. We further make it clear that hon ble jurisdictional high court has not decided the issue till date. The impugned additions are deleted therefore. - Decided in favour of assessee. - ITA No.223 And 224/Gau/2017 - - - Dated:- 12-7-2019 - Shri S.S.Godara, Judicial Member And Dr. A.L. Saini, Accountant Member For the Appellant : None For the Respondent : Shri M. Haokip, JCIT-DR ORDER PER BENCH:- These two assessees appeals for assessment year 2014-15 arise against the Commissioner of Income Tax (Appeals)-Dibrugarh s separate orders; both dated 10.10.2017 passed in case Nos. CIT(A), Dibrugarh/10079, 10076/2016-17, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Case(s) called twice. None appear at the assessee s behest. The registry has already sent RPAD notice(s) for today s hearing. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al allotment. ii. The market price of shares of these companies rise to very high level within a span of one year. iii. The trading volume of shares during the period, in which manipulations are done to raise the market price, is extremely thin. iv. Most of the purported investors are returned their initial investment amount in cash. Only small amount is retained by the operator as security. Thus, an enquiry would reveal that most of the capital receipts through preferential allotment or other means would have found their way out of system as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar of Companies. vi) Proof of amalagamation of companies. vii) Copies of bank statement, viii) Bank contract notes. ix) Delivery instruction to the broker etc. d) The elaborate paper book is filed to strengthen the matter relevant to bogus claim of LTCG, and this is clearly been schemed and pre-planned with mala fide intention. Therefore, all these documents are not evidence. e) The transactions are unnatural and highly suspicious. There are grave doubts in the story propounded by the assessee before the authorities below. Banking documents are mere self-serving recitals. 9. Thereafter he referred to a number of judgments relating to human behavior and preponderance of 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 Ledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee s action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly 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 of Umacharan Shah Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However we do not find that, the assessing officer as well as the Ld. CIT(A), have brought out any part of the investigation wing report in which the assessee has been investigated and/or found to be a part of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,-- -this also was a pure conjecture or surmise on the part of the Income-tax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches the Income-tax Officer indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against which it showed a net loss of about ₹ 45,000. The Income-tax Officer indicated the probable source or sources from which the appellant could have earned a large amount in the sum of ₹ 2,91,000 but the conclusion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chpal 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 SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to crossexamine, would amount to a denial of the right to be heard i.e. audi alteram partem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken 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 ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious 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 Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to crossexamine thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard 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 the common grounds of assessee s appeal. [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal s finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed. b) The JAIPUR ITAT in the case of VIVEK AGARWAL [ITA No. 292/JP/2017] order dated 06.04.2018 held as under vide Page 9 Para 3: We hold that the addition made by the AO is merely based on susp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither 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 that income from LTCG is exempted u/s 10(38) of the Act. Further in Page 15 Para 8.5 of the judgment, it held: 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 alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. f) The BENCH A OF KOLKATA ITAT in the case of SHALEEN KHEMANI [ITA No. 1945/Kol/2014] order dated 18.10.2017 held as under vide Page 24 Para 9.3: We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of sale and purchase were as per the valuation prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed. i) The Hon ble Jurisdictional Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the genuineness of the transaction was rejected. 3. The assessee carried the matter in appeal and the ld. CIT(A), Kolkata, had upheld the addition. The ld. CIT(A) has in his order relied upon circumstantial evidence and human probabilities to uphold the findings of the AO. He also relied on the so called rules of suspicious transaction . No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon ble Jurisdictional Calcutta High Court and the ITAT. I am bound to follow the same. 8. In view of the above discussion I delete the addition made u/s 68 of the Act, on account of Long Term Capital Gains. It has thus come on record that hon ble high court s have adopted varying opinions qua correctness of identical long term capital gains. In other words, hon ble Calcutta high court is of the view that such an addition on involving an assessee s profits derived from sale of shares can be declined only in absence of the supportive evidence on record whereas hon ble Bombay high court has gone by circumstantial evidence. We quote hon ble apex court s judgment in CIT vs. Vegetable Products (1973) 88 ITR 192 (SC) in these peculiar facts and adopt the view of hon ble Calcutta high court in taxpayer s favour. We further make it clear that hon ble jurisdictional high court has not decided the issue till date. The impugned additions are deleted therefore. 6. These two assessees appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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