TMI Blog2021 (3) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ant had connived with any entry operator for executing the share transaction. What adverse information was received from the wing of Calcutta/investigation wing Mumbai against the assessee is not apparent on record. The evidence adduced by the assessee was not rebutted by the AO. AO also took the contradictory stand by taxing the profit on the penny stock but disallowed the loss. No proper opportunity was given to the assessee to cross-examination of the witness as well as to rebut the other evidence on record. Taking into account of all the facts and circumstances mentioned above, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. - I.T.A. Nos. 4286 And 4474/Mum/2019 - - - Dated:- 25-2-2021 - Shri Rajesh Kumar, AM And Shri Amarjit Singh, JM For the Assessee : Shri Suchek Anchaliya (AR) For the Revenue : Shri Rahul Raman (DR) ORDER PER AMARJIT SINGH, JM: The above mentioned appeals have been filed by the revenue against the different order passed by the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in providing the accommodation entry but the CIT(A) has wrongly allowed the claim of the assessee, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record: - 13.0 I have considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order and the other materials available on record on this issue. 13.1 I have noted that this is not a new issue in the case of the Appellant and for the subsequent assessment years in the Appellant's own case, the matter relating to the loan entries from the Bhanwarlal Jain Group of entities had travelled up-to the Hon ble ITAT, Mumbai based on the same facts and circumstances. 13.2 I have gone through the assessment order passed by the AO and noted sat the AO had relied upon the same material and advanced similar was sent as had been in the latter assessment years. The AO had not brought on record any new material, argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us persons. The Revenue carried out search and seizure operations in the case of Mr. Bhanwarlal Jain and his group concerns on 3.10.2013 and the said search revealed that they are engaged in providing accommodation entries in the form of unsecured loans, bogus sale bills etc., to the interested parties. It was noticed that the assessee has taken the above said loan of ₹ 24.75 crores from the following persons belonging to Mr. Bhanwarlal Jain group. Sr.No. Name of the hawala parties Bill amount 1. Aastha Impex 30000000 2. Balaji Impex 10000000 3. Impex Gems 5000000 4, Mayur Exports 15000000 5. Malhar Exports 5000000 6. Marvin Enterprises 10000000 7. Mehul Gems Pvt Ltd 20000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO, as held by Hon'ble Delhi High Court in the case of jansampark Advertising @ Marketing (P) Lid (ITA 525/2014 dated 11-03-2015). He further submitted that the Hon'ble Delht High Court has highlighted in the case of Pr. CIT Vs. Bikram Singh (ITA 55/2017 dated 25-08.2017) there is constant use of deception of loan entries to bring unaccounted money into banking channels and the device of loan entries continues to plague the legitimate economy of our Country. The Hon'ble Delhi High Court found in the above said case that the loan transactions did not inspire confidence as being genuine and are shrouded in mystery and accordingly confirmed the addition made by the AO u/s 68 of the Act. 7, The Ld D.R further submitted that the discharge of initial onus by the assessee alone will not disentitle the AO to make additions u/s 68 of the Act. He can make further verification to satisfy himself that the transactions are genuine. For this proposition, the Ld DR placed reliance on the decision rendered by Hon'ble Punjab Haryana High Court in the case of CIT vs. Bhan and sons (2005) 273 ITR 206). The Ld DR submitted that the findings of search officials conclusiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors. All the transactions have been routed through the banking channels ana hence genuineness of the creditors is also proved. The ld A.R submitted the revenue did not find any incriminating material during the real of survey operations conducted in the hands of the assessee that the assessee, vide its letter dated 03-03-2015, has all the documents relating to the loan creditors, viz., copy of their ITR, their financial statements and bank statements, loan confirmation letters obtained from them and thus the assessee has discharged the initial onus placed upon it u/s 68 of the Act. He submitted that the onus to disprove the claim of the assessee was accordingly shifted to the assessing officer in view of furnishing of all the details. However, the assessing officer has failed to conduct any further enquiries to disprove the claim of the assessee. 11. He submitted that the legal principles settled by various Courts have been reiterated in the decisions rendered in the case of Bhan sons (supra) and Precision Finance Company (supra), which were relied upon by the Ld CIT-DR. However the facts prevailing in those cases are different and hence those decisions are not appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als. The assessee has also specifically asked for an opportunity to confront and cross examine the parties who gave the Statements. The assessee again made similar request in its letter dated 19-03-2015. The Ld A.R submitted that the AO, however, did not furnish the copies of documents and also did not allow the opportunity to cross examine the parties who gave adverse statements. 13. The La A.R submitted that the assessing officer is not entitled to rely upon the documents collected behind the back of the assessee. In this regard, the Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980 125 ITR 713). He further submitted that the assessing officer has not provided opportunity to cross examine the parties who gave adverse statements. He submitted that the Hon'ble Supreme Court has held in the case of Andaman Timber Industries vs. CIT (Civil Appeal No.4228 of 2006 dated 02-09-2015) that, not allowing cross examination of witnesses by the adjudicating authority will result in violation of natural justice, when the said authority is placing reliance on those statement of the witnesses. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them subsequently. The co-ordinate bench has further held that the purchases could not be treated as bogus simply relying on the statements given in the case of Bhanwarlal Group. Accordingly the La | A.R submitted that the AO could not have placed reliance on the statements given by Shri Bhanwarlal Jain and others. 16. We have heard rival contentions and perused the record. We also notice that the Ld CIT(A) has deleted the additions by making detailed observations. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A): he ty have carefully considered the issues brought out by the AO in the impugned assessment order and also the submissions made by the AR of the appellant. From the material, the AO has brought out in the body of the assessment order, his case against the appellant, which is summarized as under: a. Shri Bhanwarlal Jain, in whose case a search action was conducteq in 2013 by the Investigation Wing, had been found to be running q hawala racket through a clutch of benami concerns, run with the help of dummy Directors / Partners /Proprietors, who were simply employees of the said Shri Jain and were paid no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order, the Assessing Officer claims that in their respective statements, recorded u/s 132(4) all Directors/ Proprietors/Partners of the alleged benami entities run by Shri Bhanwarlal Jain have admitted to being dummies, business in whose names was actually being run by Shri Bhanwarlal Jain. b. In the very next sub-paragraph 4.19, the Assessing Officer goes on to name 13 individuals (LunkaranParasmal Kothari, Anil Khicha, Rajesh Chopra, RiteshSiroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Bharat Omprakash Jain, Mahavir Mangalchand Jain, RamnivasChoyal, Gautam Kumot, Rajesh Chopra and Atul Ladda). - According to the Assessing Officer, these. persons were dummy Directors/Partners/Proprietors, used by Shri Bhanwarlal Jain in running his hawala racket. However, no details of the evidence, if any collected from these persons regarding their role in the alleged hawala racket, has been mentioned. c. When it comes to detailing the adverse material, if any, the Assessing Officer, in sub-paragraph 4.23 of the impugned assessment order, refers to statements made by only three individuals (LunkaranParasmal Kothari, Anil Khicha and RiteshSiroya), who had reportedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned loans of * 24.75 crore from the aforesaid 17 entities were incorporated in the Pare 6 of account of the appellant. Statement on oath of Shri Hemal Jhaveri, Key Person, was recorded on the 16th, the 17th and the 18th of October, 2014. Shri Hemal Jhaveri maintained that these loans were genuine and were not part of any hawala. He claimed that no commission whatsoever had been paid to Shri Bhanwarlal Jain; that interest had been paid to the creditors; and, that TDS had regularly been deducted and paid into the Government Treasury. The officers conducting the survey showed Shri Jhaveri an alleged confessional statement of 09-10-2013 made by Shri Bhanwartal Jain, admitting hawala operations through benami entities. Shri Hemal Jhaveri did not dispute the said statement of a third party but he asserted that the statement in question had been retracted by Shri Bhanwarlal Jain; and, the same could not be used against him. Relevant portions from the statement of Shri Hemal Jhaveri are reproduced as below: Q. No. 28 In answer to Q No. 16 Shri. Bhanwar Lal Jain has accepted and reaffirmed the modus operandi of activities of all the concerns managed and controlled by him. From his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 29 to 34 of Shri. Bhanwar Lal Jain. In this statement Shri. Bhanwar Lal Jain has admitted that concerns operated by him has certain transactions which are not recorded in regular books of accounts. These transactions had not been routed through banks but through angdiya account in cash. Shri. Bhanwar Lal Jain had also admitted that he used to record these transactions in separate parallel books in electric form as well as and in physical form. During the course of search u/s 132 on 03.10.2013 these parallel books of accounts were seized and Shri Bhanwar Lal Jain has also explained in detail the codes under which these accounts were maintained. In post search investigation, these accounts were deciphered wherein your name against transactions through angadiya channel were also recorded. During the course of survey in your premise in the books of accounts of M/s Jainam Investments same entries have been found. In view of above, please, explain as to why transaction between M/ s Jainam Investments and these Ans. I have gone through the content. I reaffirm that my loan transactions with various entities of Shri Bhanwar Lal Jain are not accommodation entries. Q.32 Please fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the impugned loans were incorporated in the books of account of the appellant. Also, there was no material to show that any commission for arranging the hawala had been paid by the appellant to the said Shri Bhanwarlal Jain. The situation retrained unaltered in the course of the assessment proceedings and the Assessing Officer did not in any manner improve upon what had been done by the investigation Wing. 6.3.7 Non-observance of Principle of Natural Justice: Not making available material used against the appellant denying opportunity to cross-examine witnesses: In the grounds of appeal, first six grounds raised by the appellant are dealing with the issue of AO not observing the principles of natural justice and the material relied upon is not made available to the appellant and denying the opportunity of cross examination of witnesses. The record shows that through various letters filed before the Assessing Officer in the course of assessment proceedings, the appellant had on more than one occasion specifically asked the Assessing Officer to make available to it the adverse material, if there was any in the possession of the Assessing Officer (The letters addressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the A CIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conduct that the loan was a bogus transaction. 17. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CTT(A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against apart from being permitting him to cross examine the deponents. {ya FS, Be vide the request dated 15th February, 1996 seeking an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isuse of power. The maxim pattern has many facets. Two of there are (a) notice of met and (b) opportunity to explain. In facts and 6% genuineness of a particular case when non-alliance with the implied requirements of the audialterm partem, rule of natural justice at decisional stage, the impugned order can be struck down as invalid on that score atone 6.3.13 It has also been held by the Apex Court in the case of Delhi Transport Corporation vs DTC Mazdoor Congress, in 1991 AIR 101, that the audialterm partem rule which in essence enforces the equality clause of Article 14 of the Constitution and is applicable not only to quasi-judicial orders but to administrative orders -affecting prejudicially the party in question. 6.3.14 A similar matter came up before the Hon'ble Supreme Court in the case of M/s Gira Enterprises Another (Civil Appeal Nos. 433-434 of 2006); Dated: 21-08-2014. In that case, it was alleged that prices declared for import purposes had been suppressed. The case was based on evidence contained in a computer printout, reportedly prepared on the basis of import data, allegedly collected from Mumbai Port. This print out showed import prices, higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition No. 167 of 2015 is not applicable to the present case as in that case the assessee filed petition against the reopening u/s 148 of the Act and in present the assessment is made u/s 143(3) of the Act. 6.3.17 Absence of material to show that the Loan Entries are Unexplained: From the forgoing, it is obvious that there is no scope for arriving at a conclusion that the appellant had taken hawala entries to incorporate the impugned loans in its books of account. Hence, the only issue that remains to be seen is whether on the basis of facts brought on record the impugned loans could be treated as unexplained within the fore corners of section 68 of the Act. At the outset, it will necessary to look at some legal precedents with regard to the intent and application of section 68. It needs no elaboration that through a catena of decisions the Courts have laid down the following three fundamental tests which have to be established to discharge the burden under section 68 of the Act: Identity of the creditor - Creditworthiness of the creditor, and Genuineness of the transaction, 6.3.18 The Hon'ble Supreme Court in case of CIT y. P. Mohanakala [2007] 291 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Smt. Sushiladevi Khadaria [2009] 319 ITR (Bom), Hon. Bombay HC held that when loans were taken by account payee cheques and the record indicated that there was no cash payment in the account of the borrower prior to the issuance of such cheques, the loans and interest paid on such loans were not includible in the total income of the assessee u/s.68 of the Act. 6.3.24 In the case of IT O v. Anant Shelters (P) Ltd, [2012] 051 SOT 0234, the Hon'ble TTAT (Mumbai) held that in matters regarding cash credit the onus of proof was not a static one. As per the provisions of the section 68, the initial burden of proof lies on assessee. Amount appearing in books of accounts of the assessee was considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of transaction could be proved by showing that money was received by an account payee cheque or by draft. Credit worthiness of the lender could be established by attending circumstances. Once assessee produces evidences about identity, genuineness and credit worthiness of the lender, onus of proof shifts to revenue. Therefore, it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 17,27,250 under section 68 was not justified. 6.3.27 In the case of CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del), it was held by the Delhi High Court that the assessee had discharged that initial onus. The assessee was not required thereafter to prove the genuineness of the transactions as between its creditors and the creditors' source of income, i.e. the sub creditors. 6.3.28 In a recent decision given by the Delhi High Court in case of CIT v. Samtel Color Ltd. 64 DTR 46, it was held that by bringing on record every possible information regarding the depositors included in the application form which included particulars of applicant/depositor, telephone No., particulars of demand draft/cheque through which the deposit was made, tax status of applicant and other deposits with the assessee, if any, assessee had discharged the initial onus laid on it under section 68 and addition could not be made merely for the reason that no confirmation letters were filed in respect of some of the depositors. 6.3.29 The question whether an assessee is required to prove the source of source also has been answered by the Hon'ble Gauhati High (in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MPEX 02-06-2011 RTGS 50,00,000 AASTHA IMPEX 27-06-2011 RTGS 50,00,000 AASTHA IMPEX 20-03-2012 RTGS 1,00,00,000 AASTHA IMPEX 20-03-2012. RTGS 1,00,00,000 AASTHA IMPEX 05-03-2012 RTGS 50,00,000 AASTHA IMPEX 24-08-2012 RTGS - 40,00,000 AASTHA IMPEX 12-10-2012 RTGS 10,00,000 AASTHA IMPEX --:16-10-2012_ RTGS. 1,00,00,000 AASTHA IMPEX 16-10-2012 RTGS 50,00,000 AASTHA IMPEX 24-11-2012 RTGS -50,00,000 BALAJI IMPEX 04-05-2011 RTGS. 1,00,00,000 BALAJIIMPEX 13-06-2012 RTGS --_1,00,00,000 IMPEX GEMS 23-06-2011 RTGS _ 50,00,000 IMPEX GEMS 17-03-2012 RIGS 50,00,000 MAYUR EXPORTS --16-05-2011 | RTGS 50,00,060 MAYUR EXPORTS 25-06-2011 RTGS 1,00,00,000 22-11-2012 RTGS 1,50,00,000 22-07-2011 RTGS 50,00,000 MALHAR EXPORTS 06-02-2012 RTGS 50,00,000 MARVIN ENTERPRISES 20-03-2012 RTGS 1,00,00, 000 MARVIN ENTERPRISES 09-10-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000. MEHUL GEMS. PVT. LTD. 1307-2012 RTGS 1,50,00,000 MEHUL GEMS PVI. LTD. 08-11-2012 RTGS 50,00,000 MINAL GEMS 23-06-2011 RTGS 50,00,000 MINAL GEMS 1703-2012 RTGS 50,00,000 MANAS GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MANAS GEMS PVT. LTD. 08-11-2012 RTGS 1,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were unexplained. Therefore, the impugned addition of ₹ 24,75,00,000/-, made in the Assessment Order, fails on several counts - (1) reliance on evidence that is totally inadequate; (2) failure to make available incriminating material (reports, statements etc.) forming basis for action by the Assessing Officer; (3) failure to give due opportunity to the appellant to cross-examine witnesses, whose statement might have been relied upon; and, (4) failure to recognize the satisfactory nature of the explanation/evidence tendered by the appellant to explain identity of creditors, creditworthiness of the creditors and the genuineness of the loan transactions. Hence, the impugned addition of ₹ 24.75 crore is hereby deleted. 17. There should not be any dispute that the initial burden to prove the cash credits is placed upon the shoulders of the assessee. It has been held by Honourable Courts that the initial burden shall be discharged, if the assessee proves three main ingredients, viz. the identity of the creditor, the creditworthiness of the creditor and genuineness of the transactions. If the assessee has discharged the initial onus, then the onus to disprove the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Bhanwarlal Jain and others have been retracted. The question whether the revenue is entitled to place reliance on the retracted statements remains unanswered. Further, the assessing officer has placed reliance on the various observations made by the search officials like, sharing of common address by various concerns, inducting employees as directors etc., to come to the conclusion that these transactions are bogus in nature. We notice that the search officials have only drawn adverse inferences on the basis of information gathered by them and it is the duty of the assessing officer to substantiate those inferences by bringing corroborative materials. The Ld CIT-DR has reiterated these inferences as surrounding circumstances. However, the moot point that remains is by the assessee to prove the cash credits? The various furnished by the assessee, in fact, disprove the inferences drawn by the search officials. When the assessing officer could not disprove the material evidences furnished by the assessee, in our view, he is not entitled to place full reliance on the inferences drawn by the search officials, particularly the assessee could rebut those presumptions drawn by the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Jain and others. The assessee also asked for an opportunity to cross examine them. However, the AO has failed to furnish copies of sworn statements and also did not afford opportunity, to cross examine the deponents. Hence the decision rendered by Hon'ble Supreme Court in the case of Andaman Timer Industries (supra) goes in favour of the assessee and accordingly the Ld CIT(A) was justified in placing reliance on the same and holding that the impugned additions are not justified. 23. We notice that the assessee has specifically asked the AO to issue summons to the loan creditors, but the assessing officer has failed to do the same. It is pertinent to note that the assessee has so requested the AO, even after discharging the initial burden of proof by furnishing all the relevant details available with it. In the case of Orissa Corporation P Ltd (supra), the assessee furnished available details and then requested the AO to issue summons to the creditors, since it could not collect further details from them. The AO failed to do so and hence the Hon'ble Supreme Court held that the addition made u/s 68 is not justified. The assessee herein, in our view, stand on a stronger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that the Ld CIT(A) has passed a reasoned order by considering the facts of the case, applicable case lawsand has taken a justifiable view in this matter. Hence we do not find any infirmity in the order passed by Ld CIT(A). Accordingly we confirm the order passed by Ld CIT(A) in deleting the addition of ₹ 24.75 crores made u/s 68 of the Act. 25. Since we have confirmed the order of Ld CIT(A) in deleting the addition made u/s 68 of the Act, the interest disallowance is also liable to be deleted. Accordingly, we confirm the order passed by Ld CIT(A) in respect of interest disallowance also. 26. The addition made towards commission expenses is also offshoot of the addition made u/s 68 of the Act. For the reasons stated in the preceding paragraph, we confirm the order passed by Ld CIT(A) on this issue also. In the result, the appeal filed by the revenue is dismissed. 7. After having heard the counsels at length and after having 90 A through the facts of the present case as well as considering the order passed by revenue authorities, we find that in the present case, the AO had made the additions by treating the unsecured loans' receive by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocured by the assessee from various entities of Shri Bhanwarlal Jain Group. But the AO did not supply the same. 9. Apart from that the AO had also failed to provide copy of partywise ledger account of the assessee containing details of corresponding cash received against loans on vartous dates and commission charged by Bhanwarlal Jain thereon. Therefore, in such circumstances, the AO had no valid basis for treating the unsecured loans as accommodation entries . There is nothing on the record to show that the assessee admitted at any point of time to have procured accommodation entries of loans. 10. We also found that the Hon'ble ITAT as mentioned above in assessee's own case, we find that the identical issue has already been decided by the Hon'ble ITAT in ITA No. 6099/Mum/16 for AY 2012-13 in assessee's own case. Therefore, on the basis of our above findings and also respectfully following the decision of the Coordinate Bench of Hon'ble ITAT and in order to maintain judicial consistency, we apply the same findings which are applicable mutatis mutandis in the present case. Resultantly, these grounds raised by the revenue stands dismissed. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department - in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws. 13.7 In the case of Kamlakshi Finance, referred supra, the Hon'ble Apex Court has also brushed aside the plea of the department that it would lose revenue and would also have no remedy to have the matter rectified. The Hon'ble Apex Court has emphasized that the orders of the higher authorities shall be followed and if the Department is correct, finally it will get its due A aikes, though after some procedural delay. The relevant portion of the da t in this regard, is reproduced below:| 7. The impression or anxiety of the Assistant Collector that, if he accepted the assessee's contention, the department would lose revenue and would also have no remedy to have the matter rectified is also incorrect. Section 35-E confers adequate powers on the department in ' this regard. Under Sub-section (1), where the Central Board of Direct Taxes com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operation of the appellate orders * passed by the Hon'ble ITAT and hence, the same are binding on the undersigned. 13.9 The law on Judicial Precedents Contempt of Court has been elucidated upon by the Hon'ble Supreme Court in the case of CIT vs. Ralson Industries Ltd. - (2007) 288 ITR 322(SC), wherein it has been held that when an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline. This aspect of the matter has been highlighted by the Hon ble Apex Court in the case of Bhopal Sugar Industries vs. Income Tax Officer, Bhopal [AIR 1961 SC 182] in the following terms: We think that the learned Judicial Commissioner was clearly in error in holding that no manifest injustice resulted from the order of the respondent conveyed in his letter dated March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court above. The relevant excerpts of the judgment referred supra, are reproduced below:- 7. It may be mentioned that some Benches of the Tribunal have either taken independent view on the issue in this appeal or have later on followed Hon'ble Gauhati High Court, referred to above. However, with the latest judgment of Hon'ble Karnataka High Court in Kwality Biscuits Ltd.'s case (supra) the situation is materially different. In the hierarchical judicial system that we have, better wisdom of the court below has to yield to higher wisdom of the court above and, therefore, once an authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position as laid down by Hon'ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf (1978) 113 ITR 589 (Bom). Therefore, we do not consider permissible to rely upon the earlier decisions of this Tribunal even if them is by a Special Bench. It will be wholly inappropriate for us views of one of the High Courts based on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary. 9. The brief facts of the case are that the assessee filed its return of income on 27.08.2016 declaring total income to the tune of ₹ 189,05,300/- for the A.Y.2016-17. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Act dated 07.07.2017 was issued and served upon the assessee. Assessment order u/s 143(3) of the Act was passed by the AO on 12.12.2018 determining total income of the assessee to the tune of ₹ 6,60,25,090/- after making certain additions/disallowance. Aggrieved by the said order, the assessee has filed the appeal before CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us. ISSUE NO.1 10. Under this issue the revenue has challenged the deletion of disallowance of ₹ 4,71,19,785/- on of sale shares of M/s. Mahavir Advanced Remedies. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Findings of the Investigation Wing , Findings in the case of Assessee , Investigations in the case of Operators , Analysis of cash trail etc. in the assessment order talks only of the general modus-operandi of the penny stock transaction. The AO had failed to bring any material on record, to show as to how the Appellant is connected to this general discussion made in the assessment order. Thus, the AO had failed to bring on record any specific evidence to corroborate it s finding that the impugned share loss was bogus. 10.2 I have noted that the AO had stated in the assessment order that information was received from the Investigation Wing that M/s. Mahavir Advanced Remedies DM is a penny stock and it has been used for booking bogus LTCG/STCL and business loss. But the AO had failed to bring on record, as to what information was received from the Investigation Wing in relation to the Appellant on the basis of which it is held that the share loss was bogus. The Appellant had specifically stated that there is no specific mention of the name of the Appellant in the information of Kolkata Inv. Wing. Further, the Appellant had stated that the material on record shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all the case of the Appellant, who is genuinely into the business of share trading. It is pertinent to note here that the Appellant had provided the complete details of the source of funding in the impugned scrip, during the course of the assessment proceedings. The investment in the impugned scrip had been made through own funds and funds raised from Religare Finvest. Thus, the AO had imputed a grave charge of Exit Provider on the Appellant, without adducing any evidence to substantiate the same. No Enquiries conducted by the AO 11.0 It is pertinent to note that the Assessing Officer had wide powers to issue summons to parties u/s 131 of the Act or could have called for information u/s 133(6) of the Act. The AO should have enquired the details of purchase and sale, if there was any doubt in his mind about the authenticity of the plethora of documents filed by the Appellant to support the genuineness of his claim. Instead of doing these exercises, the AO had passed the order with a pre-determined mind set and disallowed the loss without making any enquiries. 11.1 The Hon. Supreme Court in the case of CIT v. Orissa Corporation P. Ltd. 159 ITR 78 had held, as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant had contended that before he could book profit by selling the shares, the scrip got suspended by SEBI in Jan 2015. I have note that the scrip got suspended abruptly, as even at the time of suspension on 06.01.2015, it was being traded at a price of ₹ 150.65 per share. The Appellant had contended that he had waited for re-listing of the stock for more than 10 months and in the end due to requirement of funds, he had to per-force sell the scrip off-line. I have noted that in view of the suspension of the on-line trading of the stock, there was no option left with the Appellant but to sell the scrip off-line. Purchase Sale of Shares is well documented 13.0 I have noted that the Appellant had filed all he possible documentation in relation to the purchase and sale of the impugned scrip, which had been challenged by the AO he document copies of the contract notes, broker ledger, bank statements, source of payment for purchase, demat account, confirmations etc. 13.1 At the outset, it is clarified that the basic facts narrated by the AO in Para 5.1 of his assessment order viz. ... the scrip was purchased and sold is an incorrect statement. It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO relevant to the A.Y. 2015-16 and noted that the adverse finding on the issue of penny stock. Tt is pertinent to note that the entire purchase of the shares of M/s Mahavir Advanced Remedies Ltd. amounting to ₹ 4,86,51,534.50 was made in the previous ear relevant to the A.Y. 2015-16. 13.5 Thus, if as per the AO the said purchase of shares of M/s Mahavir Advanced Remedies Ltd. was just an accommodation entry, then the amount of ₹ 4,86,51,534.50 should have been taxed in the A.Y. 2015-16. However, I have noted that the AO had after examination of the impugned penny stock transactions, accepted them and no adverse observation was made in the assessment order for A.Y. 2015-16. 13.6 I have noted that the sale of shares is also evidenced by bank Statement showing receipt of consideration, Demat Statement showing delivery of shares and confirmation letter duly signed by buyer. None of these evidences were controverted by the AO in the assessment order. During the course of the Appellate proceeding, it has been contended that the Appellant had fulfilled all the requirements necessary for discharging its onus. 13.7 It is brought on record that where the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions and the Income-tax Authority is estopped from stepping into the shoes of any assessee so as to question its rationality, prudence or acceptability from a common sense point of view [S.A. Builders Ltd. v. CIT [2007] 288 ITR 1 (S.C); CIT Vs. Dhanraj Girji Raja Narasingherji (1973) 91 ITR 544 (SC); CIT Vs. Walchand and Co. (1967) 65 ITR 381 (SC)]}. 14.1 So long as the transaction meets the specific conditions laid down in the Act, an attempt to negate it or interpret it by applying the yardsticks of rationality, prudence etc., which in any case is highly subjective, would not meet the ends of justice and basic tenets of judicial interpretation or tax administration. Neither Sale nor Purchase linked with Entry Operators. 15.0 It is pertinent to note that there is no evidence on record, which directly links the Appellant with any of operators/intermediaries or proves that the Appellant was involved in any price rigging of the shares, or that they received any cash for getting the bogus loss. A perusal of the assessment order reveals that there is not even an tota of evidence had been brought on record to show that the counter parties in relation to the purchase and sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the purchase of shares made by the Appellant. In the case of sale of shares, the counter party was made available by the Appellant, but the AO failed to make relevant enquiries. If there was any suspicion in the mind of the AO regarding the purchase / sale transactions, he was duty bound to conduct necessary enquiries by issuing summons u/s 131 or by calling for information u/s 133(6) of the Act. 15.2 Be that may, it is to be noted that there is nothing on record to hold that that the counter parties to the purchase and sale are entry operators / exit providers. I am of the considered opinion that the AO can t hold the transactions of purchase and sale as bogus, without carrying out any enquiry and without bringing on record any adverse material. Profit on Penn Stock scrips offered for taxation: 16.0 It is an undisputed fact that the Appellant had been regularly trading in the equity market with high volumes of trades and the same is duly corroborated by the profit and loss account and Balance Sheet of the Appellant placed on record. It can be seen from the details on record that the Appellant had in the earlier years also earned profit by trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er side and draw a conclusion in favour of party which has more favourable factors in his side. The conclusion have to be drawn on the basis of certain admitted facts and material and not on the basis of presumption of facts that might go against the assessee. Once nothing has been proved against the assessee with the aid of any direct material especially when various round of investigation have been carried out, then nothing can be implicated against the assessee . 17.4 Reliance is also placed on the decision of Hon ble Calcutta High Court in the case of M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012(Cal)]. In this case, the Assessing Officer found that the evidences produced by the Appellant to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon ble High Court held that the opinion of the Assessing Officer that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the Assessing Officer but he miserably failed to substantiate the same. The High Court held that the transactions were at the prevailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make a pure guess and make an assessment without reference to any evidence or any material at all There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab. 17.9 The Punjab Haryana High Court in CIT v. Anupam Kapoor [2008] 299 ITR 179did not believe on the allegation and held as under: A cheque had been taken by the beneficiary ie. by paying cash equivalent to the cheque amount and the premium thereon . [he Hon'ble Court at page 182 observed: There wus no matenai before the Assessing Officer, which could have led to conclusion that the transaction was, simpliciter a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the Assessing Officer, merely on surmises and conjectures . 17.10 The Hon'ble Supreme Court in Parimisetti Seetharamamma v. CIT [1965] 57-ITR-532 at 536-537 observed, as under: By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The case itself does not bear this out. If it does, then, it is to the right view. Claim based on Document. Evidences can t be denied unless Proved - Judicial View 19.0 It is a settled legal position that a claim which is supported by proper evidences cannot be denied by an Assessing Authority, unless and until some contrary evidence is brought on record. The claim made by the Appellant can be rejected by the AO, only after proving that the evidences filed by an assessee are false or fabricated or bogus. Reliance is placed on the following judgment of the Hon ble High Court Tribunal s, in which similar disallowance made on identical facts have deleted: a) CIT vs. Shri Mukesh Ratilal Marolia (Income Tax Appeal No.456 of 2007, order dtd. 07/09/2011, Bom HC) b) shyam R. Pawar (54 Taxmann.com 108, Bom HC) Manishkumar Baid and Mahendra kumar Baid vs. ACIT, Cir.35, Kolkata (ITA No.1236 1237/Kol/2017, order dt. 18/08/2017, ITAT Kolkata) a) A.C.I.T., Circle-7, Ahmedabad vs. Vineet Sureschandra Agarwal (ILT.A. no.1442/Ahd/2013, order dt. 6/1/2017, ITAT Kolkata) e) A.C.LT. Circle Pali vs. Shri Pankaj Raj Shah (I.T.A. no.330/odh/2011, order dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial capital gain by selling shares of Ingersoll Rand (I) Ltd. and ABB Ltd. He submitted that from the chart appearing at Pge-51 of the paper book which forms the judgment of the Assessing Officer, it would appear that all the companies who profited from the sale of the shares of Ingersoll Rand (I) Ltd. and ABB Ltd. resorted to the same practice of entering into the transaction of buying and selling of shares of Hindustan Development Corporation Ltd. and, therefore, this is a pointer to show according to him that these transactions were deliberately entered into for the purpose of reducing the liability to pay capital gain tax. 6. On the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact, suspicion can never take the place of proof. What were the individual facts and circumstances in the case of other investors indicated in the chart appearing at Page-51 of the paper book are not known to us. In so far as the assessee is concerned, the facts and circumstances are before us which we have also tabulated. The finding arrived at by the Tribunal indicated above was not even alleged by Mr. Dutta to have not been based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 ITR 0706 which to a very large extent had watarad down the ratio laid down by the Apex Court in erstwhile case of Dowell and Co, Ltd. V. Commercial Tax Officer [1985] 154 ITR 148, In the said case of UOI Vs. Azadi Bachao Andolan, the Hon'ble Supreme Court observed asunder: In our judgment, from Westminster's case [1936] AC 1? (HL); 19 TC 490 to Bank of Chettinad s case [1940] 8 [TR 522 (PC) to Mathura s case [1999] 8 SCC 667, despite the hiccups of McDowell's case [1985] 154 ITR 148 (SC), the law has remained the same. We are unable to agree with the submission that an act which Is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents. 20.1 In Banyan and Berry v. Commissioner of Income-tax [1996] 222 ITR8 31 (Guj), it was held as under: The Court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015. One needs to understand that the transactions of purchase and sale for booking a business loss, they are pre-arranged, then the same are closed in a few days and doesn t linger on for more than a year. 21.3 Needless to emphasize here that if the transactions were premeditated with the entry operators, then the AO should have brought on record, the details of the entry operators linked with the said transactions of the Appellant. The very fact that the AO had failed to link the transactions of the Appellant with even a single entry operator shows that the transactions of the Appellant are not pre-meditated or pre-arranged. Genuine Share Transactions Judicial View 22.0 The Hon ble Bombay High Court in the case of CIT v. Shyam R. Pawar 54 taxman.com 108 (Bom) had held that where DMAT account and contract note showed details of share transaction, assessing Officer were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the said case, the long term capital gains claimed by the assessee was denied by the AO and treated as unexplained cash credit u/s.68 of the Act on the basis of action taken by SEBI against the broker through whom the assessee had sold shares. The Hon ble Tribunal after taking into consideration the facts involved held that action taken against broker by SEBI cannot be a ground to treat the transaction of the assessee as non-genuine and upheld the action of Ld. CIT(A) in deleting the addition made by the AO. The relevant extract of the order is reproduced as under: 8. We have considered rival contentions and carefully gone through the orders of authorities before and found from the record that the AO has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of Ramkrishna Exports Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s. Basant Perival and Co. on the floor of stock exchange was more than 83%. We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchase of the share and sale thereof is not genuine and is a sham transaction. The Hon ble Jharkhand High Court, while dismissing the appeal of Revenue held as under: Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering an rising of , ~ share price, and any person, who himself is not involved in that type of transaction, if purchased the share from the broker innocently and bonafidely and if he shows his bona fide in the transaction by showing relevant material, facts and circumstances documents, then merely on the basis of the reasons that share broker was involved in dealing in share of a particular company in collusion with other or in the manner of unfair trade practice against the norms of SEBI and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such a transaction cannot be held to be a sham transaction. 22.4 The Hon'ble Jharkhand High Court had further held, as under It is not disputed by the revenue before us that the share of these already shown in the balance sheet su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed earlier in this order, we are of the view that the statement recorded from Shri Niraj Sanghvi on 31/12/2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee s back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross examine the said person. We are also the view that the ratio and the factual matrix of the decision in the cited case, ie. Jatin Chandra (supra), Harkhchand K. Gada (HUF) Others (supra) and Andaman Timber Industries (supra) would be applicable and support the case of the assessee since no adverse finding has been rendered in respect of the direct material evidence placed on record in respect of here transaction of purchase and sale of the said shares of M/s. Shukun Constructions Ltd. Which stand duly disclosed in her audited Balance Sheet filed with the return of income of assessment years 2004-05 and the current year under consideration. In this factual and legal matrix of the case, as discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.3 Two main principles of natural justice are firstly nemo judex in causa sua or nemo debet esse judex in propria causa that is no man shall be a judge in his own cause . The second rule is audi alteram partem , that is, hear the other side . A corollary has been deduced from the above two rules and particularly the audi alteram partem rule, namely gui aliquidstatuerit, partein audita alteraacquumiicetdixerit, haudacquumfecerit' i.e. he who shall decide anything without the other side having been heard, although he may have said what is right will to have done what is right' or in other words, as it is now expressed, justice should not only be done but should manifestly be seen to be done . 23.4 Till the beginning of 20th Century, the applicability of these principles was restricted to the judicial and quasi-judicial authorities. However, with the obscuring of the demarcation between the quasi-judicial and administrative functions, these principles were equally applied to the administrative functions. 23.5 In the case of State of Orissa v. Dr. (Mrs) Binapani Dei (AIR 1967 SC 1269), the Apex Court observed that even an administrative order which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence. But before the income tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him . 23.9 The Hon'ble Supreme Court in Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 set aside the order of the Tribunal as well as order in revision of High Court on the ground that the statements of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations. 23.10 The Hon'ble Rajasthan High Court in CTO v. Haryana Dal Mill [1993] 90 STC 519 dismissed the departmental revision petitions on the ground that the respondent not having been given opportunity to discredit the entries or cross examine the agent and the entries not having been proved nor the agent examined, the order of the Board of Revenue was not justified. 23.11 The Hon'ble Kerala High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002] 82 ITD 1 held that additions to income could not have been made by the AO without confronting the assessee with the statements of witness, which were adverse to assessee. 23.15 In Mahesh Gulab Raj Joshi v CIT (A) [2205] 95 ITR 300 (Mum.) on the basis of statement recorded of one V during Survey conducted of his proprietary concern, the AO treated sale of diamonds by assessee to 'D' as fictitious and made addition u/s. 68 in hands of assessee. No opportunity of cross examining V having been allowed to the assessee, statement of V could not be relied upon or made basis of addition. 23.16 The Hon'ble Apex Court in the case of Rajesh Kumar v. DCIT 287 ITR 91 held that principle of natural justice should be followed in the case where a person suffers civil consequences though the principle of natural justice is not impliedly mentioned. By passing of assessment order and creating a demand, there are civil consequences and the AO should have provided an opportunity. 23.17 A Constitution Bench of the Supreme Court in State of MP. y. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not made available for cross examination - Though statement had evidentiary value, weight could not be given to it in proceedings against the assessee without testing it under cross-examination - Therefore, in the absence of M being made available for cross examination, his statement could not be relied upon to the detriment of the assessee - Tribunal was justified in setting aside block assessment - No substantial question of law arises. 23.21 In Prakash Chand Nahta Vs. CIT, (2008) 301 ITR 134 (MP), it was held as under: ...1t was obligatory on the part of the A.O to allow the prayer of the assessee for cross-examination of M - A.O having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee - Therefore, the assessment is vitiated. 23.22 In the case of Smt. Sunita Dhadda Vs. Deputy Commissioner of Income-tax [2013] 33 taxmann.com 639 (Jaipur Trib, the Hon'ble ITAT Jaipur has held that where A.O. made addition on account of 'on money received by assessee on sale of land, relied upon statement director group and did not allow assessee to cross-examine, there was violation of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding opportunity to assessee to cross-examine R was liable to be set aside for violation of principles of natural justice. 23.28 In CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del), it was held that initiation of reassessment proceedings on the basis of deposition of a third party without affording opportunity of cross-examination of the said party to the assessee despite specific demand was not valid. 23.29 In CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del, it was held that the A.O not having given an opportunity to assessee to cross-examine the analyst on whose report the assessment was based despite several requests, assessment was rightly set aside by the CIT(A) and Tribunal for violation of principles of natural justice and no substantial question of law arose. 23.30 In CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad), it was held as under: In the absence of any corroborative evidence, statement obtained from 23 mining licensees out of 994 licensees could not be relied upon by the A.O to come to the conclusion that the assessee has received illegal money from all the applicants for granting mining licenses, further the assessee was not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on be made available, but it should be one of active cross examination, so as to meet the requirement of the principles natural justice. In the absence of such an opportunity, it cannot be held. the matter has been decided in accordance with law, across nation is an integral part and parcel of the principles of natural justice. No Presumptions can be drawn in -e case of Third Part deny 24.0 The various Courts have time and again held that presumption u/s 132(4A)/292C of the Act is available only inrespect of the person from whose possession the documents/ papers are seized. It cannot be applied against a third party and hence, no addition can be made on the basis of the evidence found with a third party. 24.1 In Straptex India (P) Ltd. v. DCIT, [2003] 84 ITD 320 (Mum), there was a search at the premises of Shri Niranjan Shah, in which a computer floppy was found. On the basis of the contents of the above floppy, the Revenue held that the assessee had borrowed the money in cash which was denied by the assessee. In support of its contention, the Revenue has relied upon. 132(4A). Under the given facts, the Hon'ble Mumbai ITAT held asunder- 7. Coming to the mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee that the presumption under Section 132(4A)is intended by the legislature to be made applicable to order under Section 132(5) only is untenable. (ii) Whether presumption under Section 132(4A)is only against the person from whom the document is found and not against third party - As per Section 132(4A), where any book of account or document is found in the possession and control of any person in the course of search, it is presumed that they belong to such persons. Thus, clearly, the presumption is in respect of the person from whom they were found. The use of the words to such person in the said section mean the person from whom the books of account of documents were found. Clause (ii) of Section 132(4A) provides that the contents of such books of account or documents are true. In our opinion, this presumption can also be applied only against the person from whose possession the books of account or the documents were found. Therefore, so far as the case of Mr. Niranjan J. Shah is concerned, the Revenue authorities may presume that the books of account or documents found from his possession are correct. However, while utilizing those documents in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound and not against any other person. (iii) Whether the presumption under Section 132(4A) is conclusive In our opinion, the presumption under Section 132{4A) is a rebuttable presumption and not a conclusive one. Certainly, the burden to rebut the presumption is upon the person against whom the presumption is applicable. While taking the above view, we derive support from the decision of Hon'ble Kerala High Court in the case of ITO y. T. Abdul Majid (1988) 169 ITR 440 (Ker), wherein at p 444, Their Lordships held as under: It is true that Section 132(4A) of the Act enables the Court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the Court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is may be presumed as is used in Section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the Court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the Court from d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 282 (Calcutta), the relevant excerpts of which are reproduced hereunder: 2. In pursuance of our direction the Tribunal has referred the above said questions for our opinion. The assessee during the assessment year 1985-86 suffered loss of ₹ 1,31,735 and ₹ 2,03,405, respectively, in share dealings in respect of shares in investment companies. The loss was disallowed by the ITO on account of failure of the assessee to produce the share brokers for. verification of the transaction. The ITO disallowed the loss claimed in the share transaction. The Commissioner (Appeals) has also confirmed the above. In appeal before the Tribunal, the Tribunal has allowed the claim of loss of both the assessee and concluded its judgment in para 6 of his order which reads as under: I have examined the assessment orders as well as the order of the Commissioner of Income-tax (Appeals). The loss incurred in share dealings is disallowed by the Income-tax Officer and confirmed by the Commissioner of Income-tax (Appeals) on the presumption that no prudent businessman would undergo loss and investments are always made to earn income by banks and (sic). This concept does not appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had connived with any entry operator r for executing the share transaction. 27.2 On the other hand, the Appellant had furnished all the necessary documents relating to the share transaction and the AO had failed to disprove them. It had also been noted stand by taxing the profit on the penny stock but had disallowed the loss on similar penny stock transactions. 27.3 It is also obvious that the inference drawn by the AO against the Appellant is also not sustainable in law for the simple reason that the principles of natural justice have been followed. First and foremost, the appellant had not been given any access to the adverse material (reports, statements etc.), if any. Secondly, by withholding the said material, the AO denied the Appellant an opportunity to rebut the evidence by cross-examining the witnesses, statements etc. have noted that on both counts, impugned assessment order fails, squarely. 27.8 In view of the above facts and circumstances, as also the binging decisions of the Hon ble Courts, I am of the considered opinion that the disallowance of loss amounting to ₹ 4,71,19,785/- made by the AO is unsustainable in law and is therefore, deleted. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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