TMI Blog2021 (1) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out by the assessee, based on suspicion only has drawn adverse inference/finding against the assessee which action of both AO as well as Ld CIT(A) cannot be countenanced. AO himself has admitted that the statement of Shri Harshavardhan Kayan as well as that of Shri Mukesh Agarwal has been recorded during survey u/s. 133A and it is noted that the statement is not incriminating against the assessee since its name or the transaction of F O has not been negatively commented upon by them. Further, it is trite that the statement recorded during survey u/s. 133A cannot be the sole basis on which adverse inference can be drawn against the assessee. The assessee has been kept in the dark and has not been given the entire copy of the statement of Shri Harshavardhan Kayan as well as that of Shri Mukesh Agarwal; and no opportunity has been granted to the assessee to cross examine Shri Harshavardhan Kayan as well as that of Shri Mukesh Agarwal. The statement of Shri Harshavardhan Kayan as well as that of Shri Mukesh Agarwal cannot be looked into for drawing an adverse inference against the assessee. And though their statements are not incriminating against the assessee, any way if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shok Kumar Kayan. Ans. The main business activity is that of buying and selling of share and securities commissioned earned by the through various jamakharchee companies registered with us as client 4. Thereafter according to the AO from the aforesaid admission of Shri Harshvardhan Kayan it is clear that M/s. KSPL is engaged in providing accommodation entries and since the assessee has also transacted with this broker at the fag end of the financial year which resulted in loss, so, the AO asked the assessee to explain as to why this loss claimed by assessee should not be treated as bogus. Thereafter, in the assessment order he also referred to the statement of Shri Mukesh Agarwal recorded u/s. 133A of the Act who was looking after the share trading activity and accounting of M/s. KSPL. According to the AO, Shri Mukesh Agarwal has also admitted that the main business of M/s. KSPL was buying and selling of shares and securities for commission through jama-kharchee companies registered with them as client and he reproduced certain portion of the statement of Shri Mukesh Agarwal as under: Q.7. Please explain the business activity of M/s. Ashok Kumar Kayan and M/s. Kay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 39,91,078/- through one broker M/s. KSPL and according to AO, one of the directors of M/s. KSPL Shri Harshavardhan Kayan has admitted during survey u/s. 133A of the Act on 28.01.2015 that this broking company M/s. KSPL has indulged in providing bogus LTCG. The AO after reproducing certain portions of Shri Harshvardhan Kayan as well as the statement of Shri Mukesh Agarwal, the director and Accountant of M/s. KSPL (supra) respectively, had treated the claim of the loss on F O transaction of assessee as bogus and made the addition. On appeal, the ld. CIT(A) has confirmed the same by noting that assessee could not prove any past or future record of such transactions; and that there is no proof that assessee was aware of the share trading or mechanism pertaining to the trading of F O; and further observed that the assessee has entered into this transaction at the later part of the year in order to mitigate the tax liability and so it was intended to defraud the revenue. Thus, according to the Ld. CIT(A), the assessee s case falls into the realm of suspicion and dubious transaction and, therefore, he confirmed the order of the AO. 7. Assailing the action of the Ld. CIT(A) as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relied upon because the assessee was not given an opportunity to cross examine these two persons, and since their statements have not been tested on the touch-stone of cross-examination, the veracity of their allegation/statements against the assessee if any cannot be acted upon. For that proposition he relied on the order of the Hon ble Supreme Court in M/s. Andaman timber Industries Vs. Commissioner Central Excise, Civil Appeal No. 4228 of 2006. Thus according to Ld AR, looking from any angle, the statement of these two persons cannot be relied upon to draw adverse finding against assessee s the claim of loss in F O and therefore he pleaded for allowing this claim. Per contra, the Ld. DR , Shri Arup Chatterjee vehemently opposed the contentions of Ld. AR and submitted that assessee in order to reduce the tax liability had ventured into this F O transactions for the first time and that too at the fag end of the AY; and without any experience in this field goes on to show that assessee had colluded with the broker who had bad track record in facilitating bogus LTCG and so, the AO Ld. CIT(A) took a plausible view disallowing the claim of loss which need not be interfered. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... producing the corroborating evidence before the AO/Ld. CIT(A). Both the authorities could not find any infirmity on these documents. However, the AO discarded the primary documents produced by the assessee to establish the veracity of the transaction in F O, by bringing in the statement of director and accountant of M/s KSPL which was the broker of the assessee in the transaction of F O. The statement of both Shri Harshvardhan Kayan and Shri Mukesh Agarwal extracted by the AO neither bring out any wrong doings on the part of assessee nor say anything about F O transactions. It only says about facilitation of bogus LTCG through jamakharchi companies which were their clients. However, if the AO had any doubts lingering in his mind, then he should have summoned these persons and questioned them and un-earthed the truth. Rather than doing so, he simply relied upon the statements of both these persons during survey of a third party and without any incriminating oral statements/documentary evidence or material against the assessee or the F O transactions carried out by the assessee, based on suspicion only has drawn adverse inference/finding against the assessee which action of bot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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