TMI Blog2020 (4) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... And Dr. A.L. Saini, AM For the Assessee : Shri M. D. Shah, AR For the Respondent : Shri Robin Chowdhury, Addl. CIT Sr. DR ORDER PER DR. A. L. SAINI: The captioned appeal filed by the assessee, pertaining to assessment year 2014-15, is directed against an order passed by the learned Commissioner of Income Tax (Appeals)-8, Kolkata (in short the ld. CIT(A) ], which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 ( in short the Act ), dated 23/12/2016. 2. However, in this appeal, the assessee has raised multiple grounds of appeal, but at the time of hearing, the main grievance of the assessee has been confined to the issue of addition to the tune of ₹ 38,02,285/- made u/s 68 of the Act on account of bogus long term capital gain. 3. Brief facts qua the issue are that the assessee filed its return of income on 28/07/2014,declaring total income to the tune of ₹ 22,36,510/-. Later on, the assessee s case was selected for scrutiny u/s 143(2) of the Act. During the scrutiny proceedings, the Assessing Officer noticed from the computation sheet and details filed by the assessee that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained cash credits u/s 68 of the Act. 4. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by AO. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 5. The ld. Counsel for the assessee submitted that the price at which shares were traded are dependent on so many factors, financial factors are one of them and not the only one on which the prices of shares depends. Also, the assessee does not have any control on the rise or fall of the share prices and why it has risen is not known to the assessee. At any given scenario some share prices increase and other share prices decreases. Even if on the day of biggest fall of sensex on 24th August 2015 when the BSE Sensex has fallen by 1624 points, there were many scripts which have been appreciated. Hence contention of the Assessing Officer that sharp rise in value of shares when general trend in the market is negative does not hold good. Further, there are many shares which are trading in market, prices of which do not correspond with its financials. Merely on the ground that few brokers were investigated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-2). (ii). Purchase bills for 125 shares in PannacleVintrade Pvt. Ltd. (PB-3). (iii) Bank statement and payment by account payee cheques. (iv) Share certificate in the name of the assessee (PB 6-7). That is, share certificate for issue of 11,250 bonus shares of Pinnacle Vintrade Ltd. (vide PB8). (v).Computation, balance sheet and profit and loss account along with investment schedule for the year ended 2012 showing investment in Pinnacle vintrade Pvt. Ltd. along with bonus shares (vide PB 9-11). (vi).Scheme of arrangement approved from Bombay High Court with Unno Industries Ltd. That is, merger order of Hon`ble Bombay High Court (vide PB 12- 49). (vii).Documents showing allotment of 1,13,750 shares in Unno Industries Ltd. (PB 50-51). (viii).Share certificate showing 1,13,750 shares in the name of the assessee (PB 52). (ix).Demat statement showing 1,13,750 shares of Unno Industries Ltd, allotted to the assessee after scheme of arrangement (vide PB 53-55). (x). Balance sheet and profit and loss account along with investment schedule for the year ended 2013 showing investment in Unno Industries Ltd, along with bonus shares vide PB 56-58. (xi)Contract no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including assesee from accessing the securities market. However, SEBI in its final order did not give adverse comment.The same was revoked by SEB1, vide its final order, SEB1/WTM/MPB/EFD-DRA- 1/31/2017 dated 21.09.2017, (page nos. 69-84). Assessee's name is at S.N. 154 (at page no. 80) read with para 7 of Page no. 83. The AO has made some other general allegations including the statement of an alleged entry operator Sri Sunil Dokania at page no. 22 of the assessment order. However, no copy of such statement was given to the assessee nor any opportunity of cross examination of the party was allowed to the assessee. Further, the AO did not brought any corroborative evidence on record to substantiate the contents of the statement relied on.We note that not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witness were made the basis of the impugned order is a serious flaw which makes the order nullity. We note that same view expressed by the Hon`ble Calcutta High Court in the case of Eastern Commercial Enterprises 210 ITR 103 (Cal), wherein it was held that it is a trite law that cross examination is the sine qua non of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its interim order dated 29.03.2016 restrained 246 entities from accessing the securities market and from dealing and buying selling in securities, directly or indirectly in any manner whatsoever till any further directions (Page No. 69) and included Kailash Auto Finance Ltd. and assessee at Serial No. 1 and Serial No. 156 (Page Nos. 70 74 respectively) . x) The same was revoked by SEB1 vide its order SEB1/WTM/MPB/EFD-DRA- 1/31/2017 dated 21.09.2017 (page nos. 69-84). Assessee's name is at S.N. 154 (at page no. 80) read with para 7 of Page no. 83. (2) LIFELINE DRUG PHARMA LTD. i) Copy of Allotment Advice dated 05.10.2012 reflecting the purchase of 20,000 shares of Lifeline Drugs Pharma Ltd. (Paper Book Page No. 6) (Later, 20,000 shares of ₹ 10 each were split to 2,00,000 shares of ₹ 1 each) ii) Copy of Bank Statement reflecting the debit transaction of the amount of ₹ 12,00,000/- paid for the purchase of shares,by cheque no. 037632 on 01.10.2012 (Paper Book Page No. 8) iii) Copy of statement of DEMAT account evidencing the debit of shares of Lifeline Drugs Pharma Ltd. on 01.07.2014, 08.07.2014, 11.07.2014, 15.07.2014, 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer in notice u/s 142(1) was filed before him. The assessee has submitted the details of LTCG, copy of contract notes, bank statements, allotment advise, copy of bills, DEMAT account and other necessary details before AO and the AO failed to bring any cogent evidence on record to show that these documents and evidences were false and untrue. 14. We would like to mention some important salient features of the LTCG transaction entered into by the assessee, which is given below: (i) The assessee is a regular investor in shares and securities as evident from past assessment records. (ii) The shares were purchased and sold through a Registered Broker named Eureka Stock Share Broking Services Ltd . in the Stock Exchange. (iii) The shares were purchased and sold based on the prevailing market condition. (iv) The purchase and sale of shares are supported by contract notes. The payments were received through proper banking channel. (v) The purchase and sale transactions were subjected to Security Transaction Tax, Service Tax, Brokerage charges and Stamp duty. (vi) The share purchase and sale transactions are reflected in the D-mat account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nized stock exchange through his broker i.e. Eureka Stock Share Broking Services Ltd. on various dates. The assessee submitted Contract Notes. This transaction is not through any preferential allotment or offline sale. All the transactions are made through proper banking channels. The shares were sold through registered share broker, M/s Eureka Stock Share Broking Services Ltd. In the course of assessment proceedings, the assessee has submitted all the details and documents that were necessary for allowing the claim of the assessee. In the assessment order u/s. 143(3), Ld. AO has stated that there was inflow of some information from the Investigation wing alleging that the assessee was involved in selling of so called penny stock . In this regard it was submitted by the assessee before the assessing officer as follows: i) The assessee is a regular investor in shares and securities as evident from past assessment records. ii) The shares were purchased and sold through a Registered Broker named Eureka Stock Share Broking Services Ltd. in the Stock Exchange. iii) The shares were purchased and sold based on the prevailing market condition. iv) The purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborative evidence on record to substantiate the contents of the statement relied on. We note that not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witness were made the basis of the impugned order is a serious flaw which makes the order nullity. We note that same view expressed by the Hon`ble Calcutta High Court in the case of Eastern Commercial Enterprises 210 ITR 103 (Cal), wherein it was held that it is a trite law that cross examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against the party unless the party is put on notice of the case made out against him. We note that the fact that neither the statement relied on bythe authorities below were provided to the assessee nor any cross examination was allowed to prove the veracity of the statement. We note that the fact that in the statement of third party, the name of the assessee was not implicated. Even otherwise, according to Learned Counsel, no adverse inference could be drawn against the assessee on the basis of untested statements without allowing opportunity of cross-examination. For that we r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions issued against them vide interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016 and July 13, 2017 are liable to be revoked. In view of the foregoing, in exercise of the powers conferred upon us under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30,2016, October 21,2016, October 27,2016 and July 13, 2017 qua aforesaid 244 entities (paragraph 5 above) with immediate effect. The revocation of the directions issued vide the above mentioned orders (at paragraph 7) is only in respect of the entities mentioned at paragraph 5 of this order in the matter of Kailash Auto. As regards remaining entities in the scrip of Kailash Auto, violations under SEBI Act, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide confirmatory order dated June 15, 2016 against the remaining 2 entities shall continue. This revocation order is without prejudice to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh was transferred from one side to another, addition cannot be sustained. 19. We note that all the observations, conclusions and findings of the lower authorities are based on suspicion, surmises and rumor. It is trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference was made to the judgement of Hon ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37ITR 288 (SC, Umacharan Shaw 37 ITR 271 and Omar Salay Mohamed Sait 37ITR 151. We note that the entire case of the revenue is based upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion howsoever strong it may appear to be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. 20. We note that since the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks. (i) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF ITA No. 32/Agr/2007 (Agra ITAT) 22. Moreover it was submitted before us by ld Counsel that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in BSE/CSE. The ld AR referred to the following judgments in support of this contention wherein und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this case the Hon ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI saction. However, the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (ii) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal- HC) In this case the Hon ble Calcutta High Court affirmed the decision of this tribunal, wherein, the tribunal allowed the appeal of the assessee where the ld AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the ld AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the ld AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the ld AO s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (iii) CIT V. Andaman Timbers Industries Ltd [ITA No. 721o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the Tribunal by observing as follows:- 4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO and PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deleted. We note that unless and until the order of Jurisdictional Hon`ble High Court is reversed by Hon`ble Supreme Court, the same has to be given due effect. Judicial discipline demands that once an order has been passed in the assessee s own case, by the Jurisdictional High court, the Tribunal is duty bound to act in accordance with the same. We note that in the case of Union of India v. Raghubir Singh (1989) 178 ITR 548 (SC), the Supreme Court held that the doctrine of binding precedent has merit of promoting certainty and consistency in judicial decisions. As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court within whose territorial jurisdiction these Courts, Tribunals authorities functions. Therefore, respectfully following the judgments of the Jurisdictional, Hon`ble High Court of Calcutta, on similar and identical facts, the addition made by assessing officer should be deleted. 25. We note that when the transactions were as per norms prescribed by SEBI and concerned stock exchange and suffered STT, brokerage, service tax, and cess. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xxxv) GaneshmullBijay Singh Baid HUF vs. DCIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xxxvi) Meena Devi Gupta Others vs. ACIT ITA Nos. 4512 4513/Ahd/2007 (Ahmedabad ITAT) (xxxvii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xxxviii) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 29. The ld AR also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon ble Apex Court further held that it is not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 32.It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG on sale of shares of M/s KAFL. We, therefore, respectfully following the same, and set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and delete the consequential addition. (ii) Jagmohan Agarwal Vs. ACIT, ITA No.604/Kol/2018, order dated 05.09.2018. 35.In the light of the documents stated in para 30 at Page14(supra) 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 orde ..... 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. (iii).Navneet Agarwal, ITA No.2281/Kol/ 2017, order dated 05.09.2018 The assessee in this case had stated that the assessee was allotted of 50000 equity shares of SCITIL. The payment for the allotment of shares was made through an account payee cheque (copy of the bank statement evidencing the source of money). Annual return no. 20B was filed with Registrar of companies by SCITIL showing the assessee's name as shareholder. The assessee lodged the said shares with the Depository ESSBSL with a Demat request. The said shares were dematerialized and copy of demat request slip along with the transaction statement is placed on record. Later on, the High Court approved the scheme of amalgamation of SCITIL with CSL. In accordance with the said scheme of amalgamation, the assessee was allotted 50000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer relies on any statements or third party as evidence to make an addition. If any material or evidence was sought to be relied upon by the Assessing Officer, 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 behaviour by the department. 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 Assessing Officer relied only on a report as the basis for the addition. The evidence based on which the DDIT report was prepared is not brought on record by the Assessing Officer nor is it put before the assessee. The submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment wing to assess the income as per law. 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, 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 concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. However, the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 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 evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity Transaction Tax (STT), Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the DMAT account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange.It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate benches of this Tribunal has deleted the addition and allowed the claim of LTCG. The assessee`s case is also covered by the various judgments of Jurisdictional High Court of Calcutta, as noted (Supra). We, therefore, respectfully following the same, set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and hence we delete the addition of ₹ 7,12,89,467/-. 27. The next issue in ITA No.205/Kol/2018, for A.Y. 2014-15 is in relation to confirming the addition of ₹ 57,02,785/- as unexplained expenditure towards commission charges of sale of such shares by the operator. We have already held th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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