TMI Blog2019 (6) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... Act ), dated 20.12.2017. 2. Grounds of appeal raised by the assessee are as follows: 1. For that the order passed by the ld. CIT(A) is in violation of the principles of natural justice and, as such, is not sustainable in law. 2. For that on the facts and in circumstances of the case, the ld. CIT(A) grossly erred in confirming the addition of ₹ 42,06,250/- made by the A.O. u/s 68, on account of alleged Long Term Capital Gain claimed as exempt income u/s 10(38) in the relevant year by wrongly treating the same as bogus and suspicious nature of transaction. 3. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. 3. The brief facts qua the issue are that the assessee has filed its return of income for assessment year 2015-16 on 15.10.2015 declaring total income to the tune of ₹ 7,50,830/-. The assessee s return was processed u/s 143(1) of the Act. Later on, the assessee s case was selected for scrutiny u/s 143(2) of the Act on account of suspicion sale transaction in shares and exempt long term capital gain. The assessing officer, during the scrutiny assessment, noticed that assessee earned long term capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer failed to point out any discrepancies in the documents produced before him during the course of assessment proceedings. The assessee acquired the shares in earlier assessment years and the fact is corroborative from the statement of accounts submitted by the assessee, during the assessment proceeding completed u/s 143(3) of the Income Tax Act, 1961. The assessee has proved beyond the doubt during the assessment proceeding by examining the broker namely Vedika Securities Pvt. Ltd, and the alleged broker duly confirmed the transactions with collaborative evidence before the ld. Assessing Officer. The ld. Assessing Officer added the LTCG amount of ₹ 42,06,250/- to the total income of the assessee u/s 68 without recognizing the above fact that the transactions were made through bank on the platform of a recognized stock exchange and transactions are duly supported by a valid contract notes. We note that the ld. Assessing Officer had added back ₹ 42,06,250/- to the total income of the assessee, just by forming the generalized view and not considering the submission made by the assessee. 7. We note that before us the assessee submitted income tax return a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies below. 10. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in the case of Sanjib Kumar Patwari (HUF) in I.T.A. No.205/Kol/2018, for assessment year 2014-15, order dated 08.05.2019. In this order, the Tribunal has inter alia observed as follows: 12. We have heard both the parties and perused the material available on record. We note that the assessee is a regular investor in shares and has been investing in shares since past several years. The said fact is evident from the details given below: IMAGES 1 Thus, from the above table, it is abundantly clear that the assessee is a regular investor in shares and is having a substantial amount of investments. During the year under consideration, the assessee has sold the impugned three scrips and earned capital gains on the same which is claimed year after year consistently. The details of long term capital gain earned by the assessee is given below: IMAGES 2 We note that the assessee claimed exemption of LTCG of ₹ 7,12,89,467/- u/s 10(38) of the Act, since the shares purchased and sold were listed shares and were purchased and sold through sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which the long term capital gain(LTCG) arose to the assessee. These all documents and evidences were available before the ld CIT(A) as well as before the ld AO. The Assessee submitted before us following documents and evidences in respect of Kailash Auto Finance Ltd. (1) KAILASH AUTO FINANCE LTD. i) Copy of purchase bill dated 12.02.2012, reflecting the purchase of 3,20,000 shares of Careful Projects Advisory Ltd. from Trump Traders Pvt. Ltd. (Paper Book Page No. 4) ii) Copy of purchase bill dated 09.10.2012 reflecting the purchase of 9,00,000 shares of Careful Projects Advisory Ltd. from Trump Traders Pvt. Ltd. (Paper Book Page No. 5) iii) Copy of Bank Statement reflecting the debit transaction of the amount of ₹ 3,20,000/- paid for the purchase of shares by cheque no. 729958 on 10.02.2012 (Paper Book Page No. 9) iv) Copy of Bank Statement reflecting the debit transaction of the amount of ₹ 9,00,000/- paid for the purchase of shares by cheque no. 037633 on 09.10.2012 (Paper Book Page No. 8) v) Copy of statement of DEMAT account evidencing the debit of shares of Kailash Auto Finance Ltd. on 07.04.2014, 09.04.2014, 10,04,2014, 11.04.2014, 15.04.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 10) iii) Copy of statement of DEMAT account evidencing the debit of shares of EINS Edutech Ltd. on 01.12.2014, 02.12.2014, 06.12.2014, 11.12.2014 and so on; (Paper Book Page No. 63) iv) Copy of Contract Notes evidencing the sale of shares of E1NS Edutech Ltd.; v).Copy of bank statement reflecting the transactions of sale of shares of EINS Edutech Ltd. (Paper Book page No. 59-61) . Therefore, by submitting these plethora documents and evidences, the ld Counsel for the assessee claimed that long term capital gain (LTCG) earned in respect of the scrips, namely: Kailash Auto Finance Ltd., Lifeline Drug Pharma Ltd, and EinsEdutceh Ltd. (Now Aplaya Creations Ltd.) are genuine. We also note that the Securities Exchange Board of India (SEBI) also declared these scrips and shares as genuine and the interim order passed by the SEBI was revoked by SEB1 itself, vide its order SEB1/WTM/MPB/EFD-DRA- 1/31/2017 dated 21.09.2017 (page nos. 69-84). Assessee's name is at S.N. 154 (at page no. 80) read with para 7 of Page no. 83. Hence, we note that since these shares/scrips were traded on the platform of recognized stock exchange and the Securities Exchange Board of India (SEBI) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order, the ld. Assessing Officer has mentioned the story that the list of 84 scrips identified by the investigation wing where price rigging have been found which includes the name of the scrips in which the assessee has earned Long Term Capital Gain. The Assessing Officer alleged that the transactions were prearranged to book such gain in the hands of the pre-fixed beneficiaries. The above allegations are generalized and not specific to the case of the assessee. The assessee was asked to show cause, vide letter dated 14.12.2017, as to why the Long Term Capital Gain booked by way of transaction in the aforesaid scrips would not be considered bogus, and consequently, be added to his total income. The assessee duly replied to the show cause notice vide his letter dated 22.12.2017 thereby giving all the details and reasons as required by the AO to prove that the LTCG incurred by the assessee on sale of above mentioned shares are genuine and cannot be considered as bogus. However, the Ld. AO did not consider the submission of the assessee and made the addition of LTCG in the hands of the assessee treating the same to be unexplained. We note that it appears from the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the SEBI has cleared the assessee from the allegation of Market Rigging. Therefore, so far first allegation of the assessing officer is concerned, the assessee has proved beyond any doubt that assessee is a regular investor in shares and securities. The shares were purchased and sold through a Registered Broker named Eureka Stock Share Broking Services Ltd. in the Stock Exchange. The shares were purchased and sold based on the prevailing market condition. The payments were received through proper banking channel. The purchase and sale transactions were subjected to Security Transaction Tax, Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the d-mat account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange. Therefore, we do not agree with the assessing officer and hence the addition made by assessing officer needs to be deleted. So far second allegation of the assessing officer is concerned, we note thatas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged entry operator Sri Sunil Dokania is not sustainable in law, as the assessing officer did not provide an opportunity to the assessee to cross examine the statement of Sri Sunil Dokania. Coupled with this, the CBDT s circular dated 10.03.2003 itself made it clear that such admissions or statements without any tangible evidence found during search carry no significance. 16. We note that Securities Exchange Board of India (SEBI) is an authority which regulates the listed companies. The SEBI controls listed companies and makes rules and regulations and the listed companies are supposed to follow the rules, regulations and directions given by SEBI. We note that SEB1 by its interim order dated 29.03.2016 restrained 246 entities from accessing the securities market and from dealing and buying selling in securities, directly or indirectly in any manner whatsoever till any further directions (Page No. 69) and included Kailash Auto Finance Ltd. and assessee at Serial No. 1 and Serial No. 156 (Page Nos. 70 74 respectively) . However, the same was revoked by SEB1 vide its order SEB1/WTM/MPB/EFD-DRA1/31/2017 dated 21.09.2017 (page nos. 69-84). Assessee's name is at S.N. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee directly. The statement talks about the entries provided by him to preferential allottees and the modus operandi adopted by him for providing the bogus LTCG. The assessee being a genuine investor was unaware of the fact that any such activity was undertaken in the scrips purchased by him. He was nowhere, associated with the person alleged to provide the entries as alleged by the AO. We also note that SEBI has given a clean chit to the company and has freed it from the allegation of market rigging. Therefore, the allegation of the AO itself becomes infructuous. Further, the assessee had also requested for an opportunity to cross examine Sri Sunil Dokania, whose statement has been relied on by the AO for making the addition. However, the Ld. AO did not provide any opportunity for cross examine the so-called operators. It is well established law that no adverse view can be taken against an assessee on the basis of statement recorded by department of any person without providing copy of the statement to the assessee and also without providing opportunity for cross examination of the said person. 18. We note that Hon ble Bombay High Court in the case of CIT vs. Lavanya Land Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal vs. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT vs. Sudeep Goenka [2013] 29 taxmann.com 402 (Allahabad HC) (xi) CIT vs. Udit Narain Agarwal [2013] 29 taxmann.com 76 (Allahabad HC) (xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xiii) CIT vs. Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat HC) (xiv) CIT vs. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) GaneshmullBijay Singh Baid HUF vs. DCIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta Others vs. ACIT ITA Nos. 4512 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 21. The ld Counsel also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 24. We note that when the transactions were as per norms prescribed by SEBI and concerned stock exchange and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. AO did not doubt the genuineness of the documents submitted by assessee. The ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. The assessee produced the contract notes, details of demat accounts and produced documents showing all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. (v).The Hon ble High Court of Calcutta in the case of ALPINE INVESTMENTS ITA 620 of 2008, dated 26thAugust 2008, held as follows: It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managed. The Hon ble High Court held that the opinion of the AO 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 ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (viii)CIT V. Lakshmangarh Estate Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) In this case the Hon ble Calcutta High Court held that 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. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. We note that above mentioned judgments of Hon`ble Calcutta High Court, by and large held that where the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (xx) Baijnath Agarwal vs. ACIT [2010] 40 SOT 475 (Agra (TM) (xxi) ITO vs. Bibi Rani Bansal [2011] 44 SOT 500 (Agra) (TM) (xxii) ITO vs. Ashok Kumar Bansal ITA No. 289/Agra/2009 (Agra ITAT) (xxiii) ACIT vs. Amita Agarwal Others ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (xxiv) Rita Devi Others vs. DCIT IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (xxv) Surya Prakash Toshniwal vs. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (xxvi) Sunita Jain vs. ITO ITA No. 201 502/Ahd/2016 (Ahmedabad ITAT) (xxvii)Ms. Farrah Marker vs. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (xxviii) Anil Nandkishore Goyal vs. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (xxix) CIT vs. Sudeep Goenka [2013] 29 taxmann.com 402 (Allahabad HC) (xxx) CIT vs. Udit Narain Agarwal [2013] 29 taxmann.com 76 (Allahabad HC) (xxxi) CIT vs. Jamnadevi A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (v) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (vi) ACIT vs.Amita Agarwal Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (vii) Lalit Mohan Jalan (HUF) vs. ACIT ITA No. 693/Kol/2009 (Kol ITAT) (viii) Mukesh R. Marolia vs. Addl. CIT [2006] 6 SOT 247 (Mum) 31. We note that the ld. D.R. had heavily relied upon the decision of the Hon ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note that in the case relied upon by the ld. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acter of legal evidence. In the aforesaid facts and circumstance, for allowing the appeal we rely on the decision of the Hon ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows : It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 36. We note that the ld. AR cited plethora of the case laws to bolster his claim which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were not controverted by the revenue authorities. No evidence collected from third parties was confronted to the assessees. No opportunity of cross-examination of persons, on whose statements the revenue relied to make the addition, was provided to the assessee. The addition is made based on a report from the investigation wing. The issue for consideration is whether, in such cases, the legal evidence produced by the assessee has to guide decision in the matter or the general observations based on statements, probabilities, human behaviour and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim is genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee's action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Assessing officer as well as the Commissioner (Appeals) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However, the Assessing Officer as well as the Commissioner (Appeals), have brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fructuous. Further, the assessee had also requested for an opportunity to cross examine Sri Sunil Dokania, whose statement has been relied on by the AO for making the addition. However, the Ld. AO did not provide any opportunity for cross examine, the so-called operators. It is well established law that no adverse view can be taken against an assessee, on the basis of statement recorded by department of any person without providing copy of the statement to the assessee and also without providing opportunity for cross examination of the said person.We note that the assessee had never entered into any transaction with Sri Sunil Dokania, against whom investigation wing had allegedly made inquiry. We also note that in the extracts of the statement of Sri Sunil Dokania given in the Show Cause notice, it is nowhere mentioned that the alleged person has provided any entry to the assessee directly. We note that the ld Counsel has provedthatassessee is a regular investor in shares and securities. The shares were purchased and sold through a Registered Broker named Eureka Stock Share Broking Services Ltd. in the Stock Exchange. The shares were purchased and sold based on the prevailin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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