TMI Blog2021 (6) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... able in the eyes of law. Therefore, we are inclined to delete the same. Addition of estimated commission also stands deleted. - Decided in favour of assessee. - I.T.A. No.548/Mum/2019 - - - Dated:- 17-6-2021 - Hon ble Shri C.N. Prasad, JM And Hon ble Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Neelkanth Khandelwal-Ld. AR For the Revenue : Ms. Usha Gaikwad Ld. Sr. DR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 contest the order of Ld. Commissioner of Income Tax (Appeals)-36, Mumbai [CIT(A)], Appeal No.CIT(A)-36/IT-471/ACIT-24(2)/2016-17 dated 25/11/2018. The assessment was framed by learned Assessing Officer u/s 143(3) vide order dated 27/12/2016. 2. Though the assessee has raised multiple grounds of appeal, however, in sum and substance, the assessee is aggrieved by confirmation of certain additions u/s 68 in view of the fact that the exemption claimed u/s 10(38) with respect to Long-Term Capital Gains (LTCG) earned on sale of certain shares was denied to the assessee and sale proceeds of shares was brought to tax as unexplained cash credit u/s 68. Consequently, another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments issued by the broker, bank statement evidencing inflow of funds through banking channels. Upon perusal of contract notes, it could be noted that the shares have been sold by the assessee at stock exchange in online mode of transaction. On the basis of these documentary evidences, the assessee substantiated the stated transactions. 4.4 However, in the background of investigation carried out by Kolkata investigation wing in the matter of penny stocks, it was alleged by Ld. AO that gains were arranged, premeditated and bogus. The aim of the scheme was to route the unaccounted money of beneficiaries as exempt income in the garb of LTCG by showing sale of shares of premeditated scrips on recognized stock exchanges. After making preferential allotment, the price of the shares would be rigged up / jacked up through circular trading by cartel of brokers acting in concert. This would be managed by the operator of the scrip who would manage overall affairs of the scheme. During the investigation, statements of various operators, entry providers and stock brokers were recorded wherein the said facts of their engagement in providing accommodation entries in the form of Long-Term Capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. 4.9 The assessee, vide reply dated 22/12/2016, submitted that he was a regular investor in shares since last couple of years as evidenced by its financial statements. Similar gains were earned in earlier years which were offered to tax and accepted by the revenue. The assessee also demanded cross-examination of persons whose statements were being relied upon by Ld. AO. In the absence of such cross-examination, those statements could not be used against the assessee. The assessee also submitted that these statements did not name the assessee specifically. The allegations of Ld. AO were termed as based on mere presumption and surmises. Rather attention was drawn to the documentary evidences furnished by the assessee in support of the stated transactions. Regarding allegation that M/s MIL was penny stock company, it was submitted that the conclusion was not based on any direct evidence. The assessee also submitted that the findings of investigation wing were general in nature without implicating the assessee specifically. Similarly, SEBI report did not hold the assessee as beneficiary of price rigging scam. Mere holding of shares could not implicate the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards purchase of shares was made through banking channels and the shares were duly received in the demat account. The purchase of shares is further evidenced by the Share Allotment Advice dated 29/01/2013 wherein the assessee has been allotted the said shares. 7.2 The shares so purchased by the assessee have ultimately been sold in online mechanism of stock exchange through registered stockbroker. The sale transactions are duly evidenced by the contract notes issued by the broker. The sale proceeds have been received through banking channels and the shares have been delivered by the assessee from assessee s demat account. These transactions have been subjected to Securities Transaction Tax (STT). All these documents were furnished by the assessee before Ld. AO. The same has also been placed before us in the paper-book (Page nos. 24 to 77 of assessee s paper-book). The perusal of all these documents would show that the shares have been sold through registered stock brokers in online mechanism wherein the identity of the buyer would not be known. Upon perusal of all these documents, it is quite discernible that the assessee had furnished all the requisite documentary evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness of assessee s transactions is findings of investigation wing which was based on general statement of various stock-brokers / operators including Shri Pravin Agarwal, Shri Sanjay Vora, Shri Soumen Chaudhary Shri Suresh Kumar Saraf wherein these persons, without naming the assessee specifically, made an admission that the scrip of M/s MIL was a penny stock scrip. However, despite specific request of the assessee, the adverse material which form the very basis of Ld. AO s conclusion, no opportunity to crossexamine these persons was ever provided to the assessee. The failure to do so would make the additions unsustainable as per settled legal position. Further, the adverse statements made by these persons are not backed by any cogent corroborative material on record to establish the assessee s involvement in price rigging of shares of MIL. No collusion between the assessee and alleged entry providers or operators or exit providers is shown to have existed. There is no admission or evidence based finding that any cash got exchanged between the assessee and any of the bogus purchasers of the scrip. It is trite law that no additions could be made merely on the basis of suspicion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Limited thereby restricting 98 entities including the assessee, M/s MIL and its promoters directors from accessing the securities market and prohibiting them from dealing in shares. Pursuant to the interim order, SEBI conducted a detailed investigation of the entire scheme employed, connection amongst debarred entities, funds used for the price manipulation of the scrip of M/s MIL and other companies so as to ascertain the violation of the securities law. Upon completion of investigation by SEBI, it was noted that there was no adverse evidence / findings against 85 entities including assessee or their role in price manipulation of the scrip of M/s MIL warranting continuation of action u/s 11B 11(4) of the SEBI Act. Accordingly, an order was passed on 21/09/2017 revoking all previously confirmed interim order. Therefore, the reliance of Ld.AO in SEBI order would not be of much help to the revenue. 7.7 The last aspect of the matter is that the additions have been made by Ld. AO invoking the provisions of Section 68. The addition u/s 68, in our considered opinion, is not sustainable in view of the fact that credit in assessee s bank account represents sale proceeds o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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