TMI Blog2019 (7) TMI 1604X X X X Extracts X X X X X X X X Extracts X X X X ..... (Addl. CIT) ORDER Vijay Pal Rao, JM : This appeal by the revenue is directed against the order dated 3rd January, 2019 of ld. CIT (A), Kota for the assessment year 2014-15. The revenue has raised the following grounds :- 1. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) was justified in deleting the addition of ₹ 75,93,444/- made on account of unexplained credit u/s 68 of the Act when the assessee was unable to justify equity trading by nitpicking the shares of specific companies with poor net worth. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) was justified in deleting the addition of ₹ 75,93,444/- by holding the transaction as genuine because transaction is through stock exchange and payment is by cheque, completely ignoring the fact that this is the basic guise to provide accommodation entry, only to layer the sham transaction as genuine? 3. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) was justified in deleting the addition of ₹ 1,51,869/- being commission to acquire such accommodation entry ? 4. Whether on the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and referred to the documentary evidence of purchasing of shares against the payment through banking channel. The shares were duly dematerialized in the demat account of the assessee and thereafter the erstwhile company M/s. Careful Projects Advisory Ltd. was merged with M/s. Kailash Auto Finance Ltd. by virtue of a judgment of Hon ble Allahabad High Court and consequently the shares of M/s. Kailash Auto Finance Ltd. were allotted to the assessee in lieu of the shares of M/s. Careful Projects Advisory Ltd. On considering all these facts and evidences, the ld. CIT (A) has deleted the addition made by the AO. Aggrieved by the order of ld. CIT (A), the revenue has filed this appeal. 3. Before us, the ld. D/R has submitted that during the survey operations carried out by the Investigation Wing of the Department, Kolkata, Shri Sunil Dokania admitted that he is aware of suspicious transactions done by some companies in the script of M/s. Kailash Auto Finance Ltd. through the broker houses. The ld. D/R has referred to the statement of Shri Sunil Dokania recorded under section 131 on 12.06.2015 as well as the statement recorded on 06.03.2013. The assessee has shown huge capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 55 of the paper book and submitted that the shares of M/s. Careful Projects Advisory Ltd were dematerialized and credited in the demat account on 24th January, 2012. Subsequently the said company merged with M/s. Kailash Auto Finance Ltd. as per the judgment of Hon ble Allahabad High Court dated 09.05.2013. The assessee was allotted 2,00,000 shares of M/s. Kailash Auto Finance Ltd. in lieu of the shares of M/s. Careful Projects Advisory Ltd. which were also credited in the demat account of the assessee on 22nd July, 2013. Thus the genuineness of the purchase of shares is establish by producing all the relevant evidences. The sale of the shares is also not in dispute as these were sold in the Stock Exchange on which STT was paid through M/s. Anand Rathi Share Stock Brokers Ltd., a registered share broker of SEBI. The ld. A/R has referred the Contract Note for sale of shares at pages 35 to 43 of the paper book as well as the ledger account of the assessee in the books of M/s. Anand Rathi Share Stock Brokers Ltd. at page 44 of the paper book. He has also referred the bank statement showing the sale consideration received in the bank account of the assessee. Thus when the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Careful Projects Advisory Ltd by the assessee as credited in the demat account of the assessee cannot be disputed as the demat account is also an evidence which can be verified independently. It is also not in dispute that the said company M/s. Careful Projects Advisory Ltd was subsequently merged with M/s. Kailash Auto Finance Ltd. and the scheme of the merger/amalgamation was approved by Hon ble Allahabad High Court vide Judgment dated 9th May, 2013 with effect from 01.04.2012. In pursuance to the merger of M/s. Careful Projects Advisory Ltd. with M/s. Kailash Auto Finance Ltd., the assessee was allotted 2,00,000 shares of M/s. Kailash Auto Finance Ltd. in lieu of the equal number of shares of M/s. Careful Projects Advisory Ltd. These shares were also credited to the demat account of the assessee as reflected in the demat account. Therefore, the purchase of shares by the assessee of M/s. Careful Projects Advisory Ltd cannot be disputed due to the reason that certain persons were indulged in providing accommodation entries in the shares of M/s. Kailash Auto Finance Ltd. It is not the case of purchase of shares of M/s. Kailash Auto Finance Ltd. but the assessee was allotted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings in certain cases referred by the Investigation Wing, The SEBI enquiry and the recommendations of SIT on black money, the A.0 has held the transaction of sale of shares as accommodation entry taken by the assessee showing unusual gains in Penny Stocks and has disallowed the claim of deduction u/s 10 (38) and added the Capital Gains amount u/s 68 of the I.T. Act. In several similar cases, the issue of 'Penny Stock' trading was taken up by the department relying on action carried out on certain entities by the Investigation Directorates at Kolkata, Mumbai 86 Delhi etc. and SEBI enquiry into the genuineness of such companies who have allegedly provided route for 'accommodation' entries by the methodology of buying 'Penny' shares 'off' market, getting them dematerialized-86 then overpriced sale through these companies to obtain bogus capital gain/loss. In most of such cases where the department has initiated proceedings u/s 148 8s made additions by disallowing capital gains benefit claimed u/s 10(38) t3s treating it as unexplained credit u/s 68, the higher judicial authorities have not agreed 8s taken. a view adverse to the department, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot brought any evidence which indicates that assessee has given cash in lieu of the capital gain or that there was a direct nexus with the broker or Company in whose shares the assessee showed trading. No enquiry report of the SEBI/any broker/ investigation wing were confronted to the assessee which contains name of the assessee. In the extract of statement of Sh. Sunil Dokania recorded by the Investigation Directorate, Kolkatta provided to him, there is no name of the assessee but of the Company Kailash Auto Finance Ltd. who is alleged to have traded in such shares which are Penny Stock . The assessee has clarified that he neither purchased nor sold the shares in question through these persons. As regards the off market purchase of shares initially, off-market transaction for purchase of shares is not illegal. The transactions were all through account payee cheque and the sale of shares suffered STT, brokerages, etc. The allegedly Penny stock company Kailash Auto Finance Limited, shares of which were traded on BSE, however the operations of the company have been suspended after the order of SEBI, though later on vide orders dt.21.09.2017 SEBI after making necessary investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed receipt of 'cash' back through clandestine deals which once unproved cannot be a basis for burdening the assessee with an adverse finding on the share dealings denial of benefits u/s 10(38) when all the conditions for the claim are otherwise satisfactorily met. In fact, the A.O. has not on his part, brought out by proactive enquiry, anything to disprove the contentions of the appellant. He has not established any cash payments being routed for regularization through the Share Gains route; he has not denied the transactions being through regular banking channels or the broker being in connivance anywhere etc. Various case laws are discussed as relevant in similar such cases which are as under : THE ITAT AHMEDABAD BENCH 'B' in Pratik Suryakant Shah v. Income-tax Officer Ward- 10 (3), Ahmedabad, 77 taxmann.com 260 (Ahmedabad - Trib.) in IT APPEAL NOS, 810 TO 815 86 922 TO 926 (AHD.) OF 2015 others - Tula! 11 Appeals ror A Ys 2006-07 2008-09 Date of Hearing : 20/10/2016 / Date of Pronouncement: 21/10/2016 held as under: Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term secu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back in cash. It is also not the case of the Revenue that the shares in question are still lying with the assessee, nor it is the case of the Revenue that the amounts received by the assessee on sale of the shares is more than what is declared by the assessee. 14. The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee nor any opportunity of cross-examination was given by the Assessing Officer/ CIT(A). The Hon'ble Supreme Court in the case of Andaman Timber Industries [Civil Appeal No. 4228 of 20061 was seized with the following action of the Tribunal:-- 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. 15. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 16. On the strength of the aforementioned decision of the Hon'ble Supreme Court, the assessment order has to be quashed. 17. For the sake of the completeness of the adjudication, even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain from sale of shares of two companies and such capital gains was claimed as exempt under section 10(38) - Assessing Officer having found that alleged purchaser of shares from assessee- was engaged in fraudulent billing activities, treated transaction of shares as bogus and accordingly denied exemption under section 10(38) - Whether since entire proof of purchase and sale of these shares were found in books of account of assessee and sale of shares was found genuine when Assessing Officer made enquiries from stock exchange directly, addition on account of undisclosed income and denial of exemption under section 10(38) could not be sustained Held, yes THE ITAT JODHPUR BENCH in Deputy Commissioner of Income-tax v. Smt. Hansa Choudhary 23 taxmann.com 302 (Jodhpur - Trib.) (referred in the above case law also), held- Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment years 2002-03 and 2004-05 - Where purchase of shares in question was not in dispute and evidence on record showed that said shares were sold through a broker and consideration for transfer was received through cheque, sale consideration could not be treated as assessee's own undisclosed fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima fade the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at. a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the addition made by the AO on this account. In the recently cited case by the appellant of Om Prakash Modi and others, ITAT Jaipur vide its order dated 25/ 05/ 2018 has held that in the absence of cogent material to show that the assessee has introduced his own unaccounted income in the shape of Long term Capital Gain, the addition made u/s 68 cannot be sustained. The A/R also cited the case of DCIT v. Saurabh Mittal (ITA No. 16/JP/2018 in its order dated 29/08/2018 where the tribunal confirmed the order of CIT (A) Alwar deleting the addition made by the A.O on account of Capital Gain earned by that assessee from sale of shares of Kailash Auto Finance Limited . Thus in the light of the plethora of judgements highlighted above including those of the jurisdictional High Court folldwed by ITAT, Jaipur bench, it is seen from the facts involved in the present case is that the appellant has made payment for the purchase of shares vide cheque which the A.O. has not disputed. He has shares allotment on merger of the company by court's order with the Kailash Group and scheme of merger is showing the details of share allotment. Shares were sold through the broker's co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broker would also not hold. The Assessing Officer was not able to bring anything on record that it was the assessee's own money, therefore holding that the assessee would have paid commission which he did not record in his books and making the subsequent addition is based on presumption and also since I have held the Capital gains to be allowable, consequently the A.O's addition on account of commission payment for such transaction amounting to ₹ 1,51,869/-also cannot sustain and the addition made u/s 115BBE of the I.T.Act,1961 is directed to be deleted. This ground of appeal is treated as allowed. Thus the ld. CIT (A) has discussed all the relevant facts as well as documentary evidence filed by the assessee in support of the claim. We further note that in case of Manish Kumar Baid vs. ACIT (supra), the Kolkata Bench of the Tribunal while considering an identical issue of Long Term Capital Gain on sale of shares of M/s. Kailash Auto Finance Ltd. has held in para 6 as under :- 6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the ld AR that the ld AO was not justified in reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the most opportune moment by making good profits in roder to have a good return on his investment. We find that the assessee and / or the broker Ashita Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI s order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd s name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI s order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs on n14/3/2012. Thus, the payment of consideration through bank account for purchase of shares is not in dispute as the same has been proved by the evidence which can be verified independently without even any scope of manipulation or control by the assessee. Similarly, the purchase transaction of four lacs shares of M/s Panchshul Marketing Ltd. vide invoice dated 12/7/2012 issued by M/s Sanskriti Vincom Pvt. Ltd. is also established to the extent that the assessee made payment of purchase consideration of ₹ 4.00 lacs through his bank account with ICICI bank and the payment is duly reflected in the bank account statement. Therefore, the payment of purchase consideration has been established beyond any doubt. The only question which can be raised for this transaction of purchase of shares of these two companies is the suppression of purchase price so as to create an artificial capital gain of maximum amount. However, the Assessing Officer has not given any finding that the purchase price was artificial suppressed by the parties with intention to maximize the capital gain through the modus operandi of bringing the assessee unaccounted income in the shape of long term capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, the holding of the shares by the assessee after the dematerialization cannot be questioned from any angle. During the financial year relevant to the assessment year under consideration, the assessee sold these shares through stock exchange and from his DEMAT account. The sale transaction of shares through stock exchange is not in doubt and the shares were sold from the DEMAT account of the assessee is also cannot be doubted. The sale price as on the date of transaction is also the prevailing price in the stock exchange. Hence it is not a case of the Assessing Officer that the assessee has shown an inflated sale price which is not as per the prevailing market price of the shares of M/s Kailash Auto Finance Ltd.. It is pertinent to note that the shares of M/s Kailash Auto Finance Ltd. were issued to the assessee only in lieu of the shares of erstwhile two companies M/s Careful Projects Advisory Ltd. and M/s Panchshul Marketing Ltd. and it is not a transaction of acquiring the shares of M/s Kailash Auto Finance Ltd against the consideration. Thus, the allotment of shares by M/s Kailash Auto Finance Ltd. in pursuant to the scheme of amalgamation established the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the investee company and kinds of analysis assessee did. How did assessee place the purchase orders with broker? To whom did he speak / instruct for placing the orders? How was the payment made/received to/from broker? What is the status of that demat account? Justification in case of delay in dematerialization of shares, since it is one of the main ingredients to prove backdated purchase of shares. So far as the basic documents are concerned, they have been filed before the A.O and also during the appellate proceedings. Additional informations as stated above have also been provided by the appellant. In this regard I have taken note of the fact that the appellant is himself a founder and promoter of Raghunandan group and is a management graduate having experience of more than 19 years in financial market and financial products. In this regards, the appellant has submitted as under; 1. He has an in depth knowledge and strong understanding of various intricacies of financial market. The Appellant has been investing in the share market based on various reports, analysis and studies made by experts in the field, which are published in newspapers, trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Kailash Auto Finance Ltd. held by him on the stock exchange mechanism I have also taken note of the fact that the appellant has sold the scrip of KAFL through recognized stock exchange on various dates from 29/07/2013 to 23/10/2013 and through registered stock broker. When sale of the shares have been recognized as genuine then corresponding purchase of such shares in the demat form is also recognised. The A.O has particularly raised the issue of exorbitant price of the share at which they are sold as compared to very low purchase price. If there any manipulation is done to rig the price of the shares then the SEBI is the competent body to investigate it. SEBI in its order dated 21/09/2017 has stated that no adverse finding against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto. Accordingly SEBI has revoked the suspension of the said entities including KAFL. Merely sharp increase in share price cannot be the reason for treating sale/purchase of such shares as dubious in nature. I have also considered various reasons given by the A.O to treat the share transaction as sham transaction. Merely, basing the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company having been returned unserved; delayed payment to the brokers; and dematerialisation of shares just before the sale would lead to suspicion and call for detailed examination and verification but then, for these facts alone, the transaction could not be rejected altogether, particularly in absence of any cogent evidence to the contrary. In a recent judgment, Jurisdictional Rajasthan High Court has dismissed the revenue case in the case of CIT-1 Vrs Smt. Pooja Agarwal and Jitendra Kumar Agarwal in the Appeal No.385/2011. Hon ble High Court in its order dated 11/09/2017 has upheld the decision of CIT(A) and Hon ble ITAT, Jaipur Bench, in giving relief to the assessee. Hon ble Court has recorded as under; 8. the assessee submitted reply to the show cause notice contending that the share transactions are genuine and the short term capital gain of ₹ 98,56,872/- has been earned from purchases and sales of shares of Konark Commercial limited and Limtux Investment Ltd. Investigation revealed that the entire share transactions were bogus and mere accommodation entries obtained from an entry provider Sh P K Agarwal from Kolkata. The said facts were revealed during sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been communicated that the assessee has been allotted 3,50,000 equity shares vide allotment letter dated 08.03.2012 against the application of the assessee at par of face value of ₹ 10/- each without any premium. The assessee has also produced the bank statement showing the payment of consideration of the acquisition of shares on 29.02.2012. It appears that the said payment was made by the assessee at the time of applying for allotment of shares and subsequently the shares were allotted by the company on 01.03.2012. Thus, it is clear that the shares acquired by the assessee is not a trading transaction but these were allotted directly by the company under the preferential issue and hence, the role of intermediate is ruled out. Once, the shares were directly allotted by the company M/s Rutron International Ltd. against the consideration paid by the assessee through cheque. Then the role of any intermediately particular of Shri Anil Agrawal is said allotment does not appear from any of the record. Even as per the statement as reproduced by the Assessing Officer in the assessment order Shri Anil Agrawal has stated that he is having business nexus with the compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above said companies. Ans. Sir, I know some of the directors of the First Financial Services Limited, Splash Media Infra Services Ltd, Rutron International Limited and FACT enterprise Ltd. Regarding other companies I am not aware who are the directors of these companies. Thus, it is clear from the relevant part of statement of Shri Anil Agrawal as reproduced by the AO that he has stated having business nexus with these companies and nature of business being consultancy services. Hence, he has not stated anything about providing bogus long term capital gain in respect of the equity shares of M/s Rutron International Ltd. A business nexus with any company will not automatically lead to the conclusion that the shares allotted by the other company is bogus transaction. As per question no. 5 and answer thereto it is clear that Shri Anil Agrawal was not the Director of M/s Rutron International Ltd. but he has stated to know some of the directors of these companies including M/s Rutron International Ltd. Hence, from this relevant part of the statement of Shri Anil Agrawal it cannot be inferred that he has provided the bogus long term capital gain from purchase and shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law of evidence. It is open to him to collect material to facilitate assessment even by Private enquiry. Thus, in view of the decision of Hon ble Supreme Court in case of CCE vs. Andaman Timber Industries (supra) the assessment based on statement without giving an opportunity is not sustainable in law. We further note that the assessee produced copy of affidavit of Shri Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Anil Agrawal. The Coordinate Bench of this Tribunal in case of Pramod Jain and Others vs. DCIT (supra) whole dealing with an identical issue as held in para 6 to 8 as under:- 6. We have considered the rival submissions as well as relevant material on record. The assessee purchases 800 equity shares M/s Gravity Barter Ltd. for a consideration of ₹ 4 lacs the assessee has produced the purchase bill of the shares purchase from M/s Winall Vinimay Pvt. Ltd. which shows that the assessee purchase 800 equity shares having face value of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munication Ltd. cannot be doubted then the holding of the shares of the M/s Gravity Barter Ltd. by the assessee correspondingly cannot be doubted because of the reasons that the shares of M/s Oasis Cine Communication Ltd. could be allotted only in exchange of shares of M/s Gravity Barter Ltd. The holding the shares of M/s Gravity Barter Ltd. and the allotment of shares M/s Oasis Cine Communication Ltd. are directly interconnected. In the absence of holding of shares M/s Gravity Barter Ltd. the shares of the M/s Oasis Cine Communication Ltd. could not be issued or allotted to the assessee. Therefore, holding of the shares by the assessee at least at time of amalgamation took place and shares of the M/s Oasis Cine Communication Ltd. on 04.02.2012 cannot be doubted. Moreover, these shares were dematerialized by the assessee in the Demat account, therefore, on the date of allotment of share of M/s Oasis Cine Communication Ltd the assessee was holding these shares and prior to that the assessee was holding the shares of M/s Gravity Barter Ltd. on exchange of the same the shares of M/s Oasis Cine Communication Ltd. were issued to the assessee. The Assessing Officer has doubted the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the entire process of application and allotment of shares as it have been completed within a short duration of 5 days, which in the opinion of the AO is not possible in ordinary course. However, when the assessee has produced the record including the share application, payment of share application money, allotment of share then merely because of a short period of time will not be a sufficient reason to hold that the transaction is bogus. The shares allotted to the assessee vide share certificate dated 31.03.2011 were dematerialized on 21.10.2011, therefore, on the date of dematerialization of the shares the holding of the shares of the assessee cannot be doubted and hence the acquisition of the shares of the assessee cannot be treated as a bogus transaction. Nobody can have the shares in his own name in demant account without acquiring or allotment through due process hence, except the purchase consideration paid by the assessee holding of shares cannot be doubted when the assessee has produced all the relevant record of issuing of allotment of shares, payment of share application money through bank, share certificate and demat account showing the shares credited in the dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf, we have to submit that from the reading of the statements of Shri Deepak Patwari it is clear that he has never taken the name of the assessee, nor the assessee is aware of any Shri Deepak Patwari neither he has made any transaction with him, so in what capacity he can call him for cross examination before your good self. Since your good self has got the authority, we humbly request youto kindly issue the notice u/s 131 of the income Tax act 1961 to him also for cross examination. We also request your good self to kingly provide us the copy of statements of Shri Deepak Patwari along with the other relevant documents. Please note that the assessee is ready to bear the cost of his travelling in this regard. It is manifest from the assessee s reply to show cause notice that the assessee had specifically demanded the cross examination of Shri Deepak Patwari however, the Assessing Officer did not offer the opportunity to the assessee to cross examine Shri Deepak Patwari. Further, the AO asked the assessee to produce the Principal Officers of the M/s Gravity Barter Ltd. and M/s Paridhi Properties Ltd. However, in our view if the Assessing Officer wanted to examine the principal O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. Therefore, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all thematerial facts available on record does not help much. The AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus long term capital gain. Similar in the case in hand the assessee has produced the relevant record to show the allotment of shares by the company on payment of consideration by cheque and therefore, it is not a case of payment of consideration by in cash. But the transaction is established from the evidence and record which cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. Therefore, the holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. We find that the ld. CIT(A) has also referred to SEBI enquiry against the M/s Anand Rathi Share and Stock Brokers Ltd. However, we note that the said enquiry was regarding financial irregularities and use of fund belonging to the clients for the purpose other than, the purchase of shares on behalf of the clients. Therefore, the subject matter of the enquiry has no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account. Therefore, in absence of any evidence, it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. Accordingly, in view of above facts and circumstances, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, this ground of revenue s appeal is dismissed. The same facts were considered in the above cited cases regarding purchase of shares of M/s. Careful Projects Advisory Ltd which was subsequently merged with M/s. Kailash Auto Finance Ltd. and after analyzing the relevant documentary evidence which includes purchase bill, payment consideration through bank, dematerialization of shares, allotment of the shares amalgamated new entity in lieu of earlier company, the Tribunal has held that in the absence of any contrary evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus Long Term Capital Gain. The Tribunal has also followed the decision of Hon ble Jurisdictional High Court in case of CIT vs. Smt. Pooja ..... X X X X Extracts X X X X X X X X Extracts X X X X
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