TMI Blog2021 (3) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... the return itself is a rebuttal of statement. Hence, we are of the considered view that the AO as well as the CIT(A) were completely erred in making additions towards undisclosed income on the basis of statements recorded during the course of search, even though, there is no evidence collected during the course of search which suggest undisclosed income for the relevant assessment year. Hence, we direct the AO to delete additions made towards undisclosed income. - Decided in favour of assessee. Deemed dividend u/s.2(22)(e) - Addition credit balance - HELD THAT:- In the present case, there is no personal benefit at all to the assessee. The AO himself accepts the fact that the funds were utilized during the course of business and therefore, this transaction at any point did not get out of the business circle at all. The provisions of section 2(22)(e) of the Act, is a deeming provision and should be construed strictly. It is an established fact that the said transaction took place during the course of business and there being no personal/individual benefit accrued to the assessee and hence section 2(22)(e) of the Act cannot be invoked. Had it been the case of the AO that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislature stands complied in toto, the AO cannot proceed to treat the same as bogus and disallow the same solely based on the fact that the shares prices went up substantially. More importantly, said company Mahavir Remedies haven t been termed as SHELL Company which involved in unlawful trading of scripts. AO as well as the ld.CIT(A) were erred in holding that long term capital gain derived from transfer of equity shares of M/s. Mahavir Advanced Remedies Ltd., is bogus in nature, which is assessable as unexplained credit under the head income from other sources . Hence, we direct the AO to delete additions made towards long term capital gain derived from transfer of shares.- Decided in favour of assessee. Addition towards unexplained jewellery u/s.69 - HELD THAT:- It is an admitted fact that there was a difference in diamond jewellery found during the course of search, for which no proper explanation was offered by the assessee. Although, the assessee explained that his wife has brought some diamonds at their wedding but failed to substantiate his claim with necessary evidences. Therefore, we are of the considered view that there is no error in the findings recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls which cannot be either applied to the facts of the present case or even to any proceedings under the Income Tax Act. 8. The Commissioner of Income Tax (Appeals) has erred in upholding the addition of the sum of ₹ 76,19,00,000/- as deemed dividend u/s.2(22)(e) in the hands of the appellant. 9. The Commissioner of Income Tax (Appeals) has failed to appreciate that the provisions of section 2(22)(e) are not invocable in the facts and circumstances of the case. 10.The Commissioner of Income Tax (Appeals) has erred in upholding that, the conclusion of the Assessing Officer erred in concluding that the appellant had indirectly borrowed the funds of MIs. Lalithaa Jewellery Mart Pvt. Ltd. through the books of M/s. Infinity Jewellers and MIs. Mariyam Creations. 11 .The Commissioner of Income Tax (Appeals) has erred in upholding addition made by, the Assessing Officer made the addition u/s.2(22)(e) on mere conjectures and surmises. 12.The Commissioner of Income Tax (Appeals) has failed to appreciate that the funds were transferred for normal business transaction and hence cannot be treated as deemed dividend in the hands of the appellant u/s.2(22)(e). 13.The Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from M/s. Lalithaa Jewellery Mart Pvt. Ltd., (hereinafter LJM ). A survey operation u/s.132 of the Income Tax Act, 1961 (hereinafter the Act ) was conducted in the case of M/s. BB Jewellers Manufacturers on 12.03.2014, wherein certain loose sheets were found and impounded, which contains items of gold for which Shri M. Kiran Kumar had given acknowledgement. During the course of survey, a sworn statement from Shri D. Padmanabhan, a partner of the firm was recorded. In reply, to a specific question, he has stated that these items were gold bars and the weights were recorded in grams. Subsequently, a search operation u/s.132 of the Act, was conducted in the business premises of LJM on 02.09.2014, as a part of which, the residential premises of the assessee was also searched. Simultaneously, search was also conducted in the residence of Shri D.Padmanabhan, where certain loose sheets were found and seized, which contains certain payments made in cash to the tune of ₹ 2,80,00,000/- during the financial year 2012-13. During the course of search, another issue, huge receipt of share application money, share premium by LJM from various investors / companies was noticed. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose sheets found during the course of search which contains cash payments made to various persons, but did not admit undisclosed income in the return of income. The AO have also made additions towards a sum of ₹ 76,19,00,000/- as deemed dividend u/s.2(22)(e) of the Act, being the cumulative credit balance in the book of M/s. A.K. Exports and due to M/s. Infinity Jewellers and M/s. Mariyam Creations in the hands of the assessee, for the reasons that the assessee had indirectly borrowed funds from LJM through the books of M/s. Infinity Jewellers and M/s. Mariyam Creations, which are paper concerns. The AO had also made additions towards long term capital gains derived from sale of shares and claimed as exempt u/s.10(38) of the Act, to the tune of ₹ 16.24 crores for the reason that the gains computed from sale of shares were unrealistic and the script was rigged in the market to derive undue benefit to the assessee. Similarly, the AO has made additions towards excess jewellery at ₹ 10,17,000/- found during the course of search for the reason that no explanation was offered by the assessee. 5. Being aggrieved by the assessment order, the assessee preferred an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Madras in the case of Shri B. Kishore Kumar vs. CIT, 52 taxmann.com 449 and held that when there is a clear and categorical admission of undisclosed income by the assessee himself, then there is no necessity to scrutinize the documents. The ld.CIT(A) has also confirmed additions made by the AO towards deemed dividend u/s.2(22)(e) of the Act, that the assessee had drawn money indirectly from LJM in the guise of sales but infact, those payments are indirect advances to the assessee and hence, assessee being substantial share holder in the company, advances are liable to be treated as deemed dividend u/s.2(22)(e) of the Act. The ld.CIT(A) had also confirmed additions made towards disallowance of long term capital gain on the ground that on perusal of financial statements of M/s. Mahavir Advanced Remedies Ltd., it clearly reveals that the company whose script the assessee has claimed to have dealt in, does not have any financial fundamentals. Although, the company is not performing well in its business, the assessee has earned 303% profit on investments that do not have any correlation with sensex movement and gold market. Therefore, he opined that the sudden increase in share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection in his individual capacity. Similarly, the issue of deemed dividend in respect of payments due to two partnership firms is also in connection with LJM. Therefore, based on those evidences no liability can be fastened on the assessee in his individual capacity. 7.2 The ld.AR for the assessee referring to various documents including statements recorded from Shri M. Kiran Kumar, the assessee during the course of search and postsearch investigation, submitted that even during the course of search, the assessee has taken a stand that wastage claimed in the books of LJM was in accordance with trade practices. The ld.AR further submitted that the assessee further explained all discrepancies noticed during the course of search including loose sheets found during the course of search. Therefore, merely on the basis of statements recorded during the course of search u/s.132(4) of the Act, no additions can be made towards undisclosed income. In this regard, he relied upon the decision of the Hon ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd., vs. State of Kerala, 91 ITR 18. 7.3 The ld. Senior Standing Counsel for the Revenue on the other hand st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is admissible against its makers, but the fact remains is that the statement recorded during the course of search or survey is important piece of evidence if it is supported by corroborative evidence. In case, the contents recorded in the statement is not supported by corroborative evidences, solely on the basis of statement recorded during the course of search no adverse inference can be drawn against the assessee. It is a well settled principle of law that admission is an extremely important piece of evidence, but it cannot be said that is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account did not correctly disclose the correct state of facts. It is a well settled principle of law, as per various decisions of Hon ble Supreme Court and High Court that it is open for the assessee who made the admission to show that it was incorrect. In fact, the CBDT has time and again clarified to the field officers that there should be focus and concentration on collection of evidences of income, which leads to information on what has not been disclosed or not lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in his individual capacity. Although, the AO has claimed that there is difference in wastage percentage of claim regarding melting of gold, when compared to industrial practice but such finding was not based on corroborative evidence. Further, the assessee has explained wastage claimed in the books of accounts LJM and claimed that whatever wastage recorded in the books is supported by necessary documents. In so far as, discrepancies noticed during the course of survey in the case of M/s. BB Jewellers Manufacturers, it is to be noted that for the assessment year 2014-15, the assessee has filed return of income admitting additional income of ₹ 2,42,73,722/-. The income was offered based on the elements of undisclosed income, which were discovered during the course of search. But, at the time of search, several issues were raised but due to the complicate nature of the business, the assessee found it difficult to offer adequate explanation to the queries raised and hence, offered an adhoc amount as undisclosed income. But, subsequently the issues raised during the course of search were analyzed and an amount was arrived at in respect of undisclosed income for the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. Padmanabhan. It is here that there is discrepancy of gold jewellery of 483.5 grams and also discrepancy of an amount of ₹ 2,33,38,552/- and these two transactions refer to the assessee in his individual capacity. Thus, the statement recorded and the declaration given by the assessee can only relate to the transactions of LJM and not the assessee in his individual capacity. It is relevant to note that the assessee is deposing not only in his individual capacity but also the MD of LJM. The discrepancies pointed out in Question No.20 of sworn statement was already been quantified and offered to tax by the assessee in his return of income for assessment year 2014-15. Apart from sworn statement, there is no other corroborative evidence to prove said sum of ₹ 20 crores as undisclosed income of the assessee. Therefore, in our considered view, the AO has misplaced his reliance on the statement recorded during the course of search to conclude that admission of undisclosed income is based on incriminating material founds during the course of search. 7.7 Further, it is a settled position of law that statement recorded U/s.132(4) of the Act is an important piece of evidence b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in that case on hand, loose sheets found during the search are not the sole basis for determining the tax liability but the printout statements of undisclosed income are not disputed by the assessee and in his sworn statement it is accepted. Under those facts, the Hon ble Court held that the undisclosed income was quantified on the basis of admission of the assessee coupled with evidences collected during the course of search. In this case, as explained by the assessee, the disclosure is only on adhoc offer without any specific reference to any material found at the time of search. Wherever, it is with reference to specific material that does not relate to this year. The declaration by the assessee itself being incorrect, therefore we are of the considered view that the additions made by the AO towards undisclosed income offered in the statement recorded during the course of search was neither based on any evidence collected during the course of search nor relates to the assessee. In fact, the assessee had agreed to offer additional income only to buy peace and from the fact that nondisclosure of income was not admitted in the return itself is a rebuttal of statement. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, the two concerns M/s. Infinity Jewellers and M/s. Mariyam Creations lack storage capacity to store expensive goods like gold and they do not have necessary manpower to carry out huge amount of turnover. The AO further was of the opinion that although, M/s. Infinity Jewellers and M/s. Mariyam Creations are engaged in the business of purchase and sale of gold and bullion but in fact, both are only paper concerns created for the purpose of circuitous transactions to divert the funds of LJM to the assessee, to explain sources for investment made in share application money of the company. In this background, the AO has concluded that all the aforementioned concerns are undertaken circuitous transactions with the motive of diverting funds of LJM to M/s. AK Exports, which in turn are ploughed back into the company in the form of share application money. Therefore, he opined that the assessee has indirectly borrowed funds of LJM through the books of M/s. Infinity Jewellers and M/s. Mariyam Creations and further, the assessee being a shareholder in LJM having shareholding of more than 10% must be held to have received deemed dividend as per the provisions of section 2(22)(e) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. AK Exports has propounded the theory that the amounts withdrawn are ploughed as share application money only on conjectures and surmises. Moreover, without appreciating the fact that the provisions of section 2(22)(e) of the Act, can be invoked only in case, where the director / shareholder of the company draws profit in the form of loans and advances to avoid payment of dividend distribution tax. But, normal commercial transactions undertaken by two different parties cannot be at any stretch of imagination considered as loans and advances, which comes under the ambit of deemed dividend as defined u/s.2(22)(e) of the Act. 8.5 The learned senior standing counsel appeared for the Revenue submitted that the ld.AO as well as the ld.CIT(A) have brought out clear facts that M/s. Infinity Jewellers and M/s. Mariyam Creations are belonging to one person Shri Syed Aafaq Khurram and the transactions in gold and bullion is carried out with M/s. AK Exports, which is highly suspicious. The ld. senior standing counsel further submitted that from the facts brought out by the authorities, it is very clear that the assessee has indirectly borrowed funds of LJM through the books of M/s. Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.2(22)(e) of the Act. As, we have already noted in previous paragraphs, M/s. AK Exports is an independent proprietorship concern of the assessee and engaged in purchase and sale of gold and bullion from various parties and sells to LJM as a captive jewellery unit, for which it had received payments for sale of gold and gold ornaments. Similarly, M/s. Infinity Jewellers and M/s. Mariyam Creations are two third parties from whom M/s. AK Exports purchases gold and gold ornaments for which it has pending payments against purchase of goods. Based on the above transactions, the Assessing Officer has propounded the theory of circuitous transactions among the concerns for diverting profit of LJM in the guise of payment for purchase and sales and ultimately the same has been rerouted to the company as share application money. The AO, to arrive at such conclusion has given his own reasons including the capacity of two partnership firms and their business model including the places from where they operate their business. 8.8 We have given our thoughtful considerations to the reasons given by the AO to reach to a conclusion that cumulative credit balance in the books of M/s. AK Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee or the two concerns M/s. Infinity Jewellers and M/s. Mariyam Creations. 8.10 The other reasons given by the AO to arrive at a conclusion that amount due in the books of M/s. AK Exports to two concerns is diverting of funds from LJM are that the company has funded a sum of ₹ 36 crores to M/s. Infinity Jewellers and M/s. Mariyam Creations. The assessee has placed account copies of the concerns M/s. Infinity Jewellers and M/s. Mariyam Creations in the books of LJM. From the above, it could be seen that it is a continuing account, where huge purchase and sales inter se these concerns. Thus, it is very clear that it has a commercial transaction and account is running accounts. Further, the account copy of M/s. Mariyam Creations in the books of LJM for the period 01.04.2014 to 31.03.2015 is placed on record as per which the closing balance is only a sum of ₹ 26.11 crores, whereas the AO has considered deemed dividend from this concern at ₹ 46.18 crores. Thus, from the above, it is very clear that the AO's action is founded on suspicions and surmises and without reference to actual facts and figures. We further noted that the account copy of LJM in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO that the assessee had directly borrowed loans and advances from the company to his proprietorship concern, then the AO could have invoked the provisions of section 2(22)(e) of the Act. In this case, as rightly observed by the AO, the assessee has indirectly borrowed the funds of M/s. Infinity Jewellers and M/s. Mariyam Creations and that allegation of indirect benefit is only a formulative theory of circuitous transactions without there being any evidence to prove that these transactions are loans and advances giving benefit to the shareholder. Therefore, we are of the considered view that the AO as well as the CIT(A) were completely erred in coming to the conclusion that amount due in the books of M/s. AK Exports to M/s. Infinity Jewellers and M/s. Mariyam Creations is diversion of funds from LJM to the assessee and such transactions comes under the purview of deemed dividend u/s.2(22)(e) of the Act. 8.12 The assessee has relied upon plethora of judicial judgments in support of his arguments. The case law relied upon by the assessee are discussed as under:- a) The Calcutta High Court in the case of Pradip Kumar Maihotra Vs CIT - 15 Taxmann.com 66 laid down fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd - 405 ITR 595, at Para 25 held; 25. From the above discussion, it is quite evident that the amounts under the disputed heads were being received by the Assessee from its Subsidiary Company only as part of regular business transactions, which was being accounted properly. The change in circumstance, as to the distribution of dailies/publications in the Gulf, causing the same to be transported through the Agent directly from Trivandrum to the Gulf, [instead of forwarding the same to Bombay, where the registered office of the Subsidiary Company is situated and then to have it transported from Mumbai to the Gulf, for distribution in the Gulf] was resulted because of the starting of direct flights from Trivandrum to Gulf, as pointed out by the Assessee. It was in this regard, that advance deposits were also effected by the Subsidiary Company and payments were being effected directly by the Assessee to the clearing and forwarding agent of the Subsidiary Company at Trivandrum, as per their instructions, which were being properly accounted. The payments effected by the Subsidiary Company and received by the Assessee, were as part of the regular business transactions and applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplicitor or as such per se without any further application, receiving such advance may be treated as deemed dividend but if it is otherwise, the amount given cannot be branded as advance within the meaning of deemed dividend u/s. 2(22)(e). By granting advance if the business purpose of the company is served and which is not the sum, which it otherwise would have distributed as dividend, cannot be brought within the deeming provision of treating such Advance as deemed dividend . 37. Hon ble Kolkata High Court in the case of Gayatri Chakraborty (supra) has held that law on this point is clear in the event transaction between a shareholder and a company in which the public were not substantially interested and the former had substantial stake, create mutual benefits and obligations, then the provision of treating any sum received by the shareholder out of accumulated profits as deemed dividend would not apply . 39. In the light of the above judicial proceedings we observe that the revenue authorities should invoke provisions of Section 2(22)(e) of the Act only in case when loans ana advances are given to substantial shareholder in the garb of avoiding dividend distribution t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be considered as indirect borrowing from LJM to treat the same as deemed dividend u/s.2(22)(e) of the Act. Hence, we direct the ld.AO to delete the addition made towards deemed dividend u/s.2(22)(e) of the Act. 9. The next issue that came up for our consideration from ground Nos.13 to 18 of assessee appeal is addition towards disallowance of exemption claimed u/s.10(38) of the Act towards long term capital gain derived from transfer of equity shares of M/s. Mahavir Advanced Remedies Limited. 9.1 The fact with regard to the impugned dispute are that the assessee has acquired 6 lakhs equity shares of M/s. Indo American Advanced Pharmaceutical Limited [subsequently name changed to Mahavir Advanced Remedies Limited] at ₹ 11/- per share in a private placement and on 04.03.2013 paid total consideration of ₹ 66 lakhs through banking channel. The company has allotted shares on 23.04.2013. The shares has been subsequently converted in to demat account and sold in the financial year relevant to assessment year 2015-16. The assessee has computed long term capital gain of ₹ 16,24,68,072/- and claimed exempt u/s.10(38) of the Act. The AO was not convinced with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating the fact that the AO has never linked transactions of the assessee to any scam related to bogus long term capital gain, as alleged in the light of the investigation carried out by the Directorate of Investigation, Kolkata. The ld.AR further submitted that the ld.CIT(A) has failed to appreciate that all the conditions required for claiming exemption u/s.10(38) of the Act, had been met by the assessee. The AO has made addition based on the theory of preponderance of probability, purely on guess work, conjectures and surmises, but the findings recorded by the AO is neither supported by any evidence collected during the course of investigation by the Directorate of Investigation, Kolkata nor the details collected during the course of investigation was provided to the assessee for his comments. The AR further submitted that the assessee is a genuine investor in shares and securities, purchased the shares by making payment through proper banking channels through recognized stock exchange and the said shares had been sold through demat account. Therefore, exemption claimed u/s.10(38) of the Act, cannot be denied on mere suspicion in the absence of any proof. 9.4 The ld. s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has dealt. No doubt, there should be an organized rocket of bogus long term capital gain but whether the assessee is a part of that organized rocket or not is relevant to decide the nature of income admitted by the assessee. If the AO is able to link the transactions of the assessee to the organized rocket with necessary evidences then the conclusion arrived at by the AO to hold the transaction as bogus is correct. In case, the AO gone on the basis of the theory of human probabilities or preponderance of probabilities without reference to any material then it is difficult to accept the reason given by the AO to hold that the transactions of long term capital gain is bogus. 9.6 In this case, on perusal of facts available on record, we find that all allegations made by the AO was successfully countered by the assessee with necessary evidence. Although the AO has stated that the assessee is not a regular investor in shares and stocks, but evidences filed before us clearly indicate that the assessee is a regular investor in shares which is evident from the fact that the assessee has made investments in shares of various companies including Global Capital Investment Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try would be good and therefore invested in the company. Another important point to be considered is that the company was listed in the BSE on 26.06.2013 at ₹ 7.77 per share. Unlike other companies as mentioned by the AO in the assessment order, this company was not previously listed as on the date of purchase of shares. The shares were purchased through private placement before the list and on the basis of optimism of the assessee with respect to the growth of pharmaceutical industry. The assessee had purchased the shares at a fair rate and not an unexplainable differential rate as alleged by the AO. In the assessment order, the AO has referred to the shares being sold at an average price of ₹ 298 and in two tranches and further observed that the share price of the company went up to ₹ 350/- in the stock market. Had it been a planned transaction in which the assessee was also a part, the shares would not have been sold at ₹ 298/- rather, he would have waited for the peak to be reached. Therefore, we are of the considered view that the conclusion arrived at by the AO as well as the ld.CIT(A) is not based on any facts and figures but purely on conjectur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y have taken place. But, it has to be seen whether the assessee is part of an alleged scam and he had any direct or indirect role in alleged scam. Unless, the evidences in the possession of the AO directly or indirectly linked to the assessee, it is difficult to implicate the assessee in the alleged scam. This is because, suspicion however strong, cannot take place of evidence as held by the Hon ble Supreme Court in the case of Umacharan Shaw Bros vs. CIT(1959) 37 ITR 271(SC). In our considered view, on the basis suspicion, modus operandi, preponderance of human probabilities, the claim of assessee cannot be discarded, unless specific evidences are brought on record to controvert voluminous evidences filed by the assessee. This view is fortified by the decision of Hon ble Supreme Court in the case of Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151(SC) where it was held that no addition can be made on the basis of suspicion and conjectures. In the case of CIT vs. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) it was held that the onus to prove that apparent is not real is on the person who claims it to be so. 9.9 The assessee has submitted some additional documents before the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-requisite conditions imposed by the legislature stands complied in toto, the AO cannot proceed to treat the same as bogus and disallow the same solely based on the fact that the shares prices went up substantially. More importantly, said company Mahavir Remedies haven t been termed as SHELL Company which involved in unlawful trading of scripts. 9.11 The assessee placed reliance on the following decisions; a) The Delhi Tribunal in the case of Vidhi Maihotra Vs ITO- 101 Taxmann.com 361 at Para 8 held; 8. On perusal of the material placed on record, we find that in so far as purchase of shares is concerned the same has not been doubted, because AO while adding the long term capital gain has given the benefit of price paid for acquisition of shares. Shares were also purchased through account payee cheque duly reflected in the books and shown by the assessee in the earlier year. In fact assessee has purchased shares of Capital Projects Advisory Limited in the financial year 2011-12 and the said company was merged with MIs. Kailaish Auto Finance Ltd. vide amalgamation order dated 9.5.2013 passed by Hon ble Allahabad High Court. Reliance has been placed by the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..It is clarified that off market transaction has not been prohibited and if carried out legally cannot be held to be bogus only on this count 10. The fact of holding the shares in the D-mat account cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed, then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of report of Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee. C) The Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. and she was allotted the share on 3rd December 2011 (copy of Application form, intimation of allotment and share certificate Paper Book at page 8 to 10). 2. The payment for the allotment of shares was made through an account payee cheque (copy of the bank statement evidencing the source of money and payment made to Smart Champs IT Infra Ltd. for such shares allotted is placed in the Paper Book at page no. 11). 14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the revenue with evidence. When a person claims that she has done these transactions in a bona fid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 connection with the transaction of bogus long term capital gain. 10. It is clear from the above that the facts of the case of the assessee are identical with the facts in the above case wherein the co-ordinate bench of the Tribunal has deleted the addition. We, therefore, respectfully following the same set aside the order of Ld. CIT(A) and direct the AO to not to treat the long term capital as bogus and delete the consequential addition. g) The Delhi Bench of the Tribunal in the case of Smt. Karuna Garg Vs ITO - 109 Taxmann.com 403 at Para 20 held; 20. There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. 26. There is no dispute that the statements which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in Punjab National Bank wherein we note that assessee had received sale consideration through bank transaction and we verified the contract note of sale placed at. pages 7 to 17 and tallied the entries of sale consideration received by the assessee in her bank account and find it to be correct. 19. .. We take note that the Id. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the Id. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees, and the justification for the assessing officer to making the impugned additions, treating such transactions as not genuine. The CIT(A) has passed elaborate orders and the ClT(A), as noted above, considering the absence of any positive corroborative evidence brought on record by the assessing officer to substantiate his allegation of the assessing officer as to the non-genuine nature of the transactions, concluded that the conclusions of the assessing officer are based on mere suspicion, surmises and conjectures and consequently, his orders cannot be sustained. We are in agreement with the detailed reasons discussed by the CIT(A) in the impugned order in support of his conclusions. The prescribed procedure, having been followed by the assessees from the stage of purchase till the shares are D-MA TTED there is hardly any room to doubt or suspect that the transactions in purchase are not genuine. In order to hold so, as observed by the CIT(A), the A.O. is required to bring in cogent evidence to prove that the purchases were not genuine. No such cogent evidence has been brought on record, but merely proceeded to arrive at his conclusions basing on mere surmise and suspicion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person . I) The Hon ble Rajasthan High Court in the case of CIT Vs Sumitra Devi - 268 CTR 0351 at Paras 6 to 8 held; 6. Having given thoughtful consideration to the submissions made and having examined the record, we are clearly of the view that no substantial question of law is involved; and this appeal does not merit admission. 7. True it is that several suspicious circumstances were indicated by the AO but then, the findings as ultimately recorded by him had been based more on presumptions rather than on cogent proof. As found concurrently by the CIT(A) and the Tribunal, the AO had failed to show that the material documents placed on record by the assessee like broker s note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious. The appellate authorities have rightly observed that the facts as noticed by the AO, like the notice under s, 133(6) to 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 transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete additions made towards long term capital gain derived from transfer of shares. 10. The next issue that came up for our consideration from ground Nos. 19 to 22 of assessee appeal is addition towards unexplained jewellery of ₹ 10,17,000/- u/s.69 of the Act. 10.1 The fact with regard to the impugned dispute is that during the course of search in the residential premises of the assessee, the jewellery found was inventoried and verified by an assessor. There was no discrepancy found with regard to the gold jewellery declared and found. The quantity of diamond found was 39.85 carats. The search team noticed that since the diamond declared in the wealth tax return was 18.5 carats, there is difference and accordingly the assessee was questioned on this and a statement was recorded on 10.10.2014. It was explained that the assessee s wife brought some jewellery at the time of marriage, which was never verified by him. The AO, however was not convinced with the explanation of the assessee and accordingly treated the value of difference in diamond found during the course of search amounting to ₹ 10,17,000/- and brought to tax u/s.69 of the Act. 10.2 The ld.AR for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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