TMI Blog2021 (10) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... he form of documentary material or statement of any 3rd party then before making addition in the hands of assessee proper opportunity of cross examining and opportunity to reply to such material gathered behind the assessee is mandatory before taking any adverse view or making any addition in the hands of assessee - additions for the alleged bogus LTCG and unexplained expenditure are unjustified and liable to be deleted. Bogus LTCG - Whether no incriminating material pertaining to these additions were found during the course of search and the additions are based purely on the statement given during the course of search which was subsequently retracted? - HELD THAT:- No merit in the contention of ssessee that the alleged addition is purely based on the statement recorded during the course of search. Ld. AO has extensively dealt with the issue by referring to various material gathered before the search, though not specifically related to the assessee but related to such type of transaction carried out in some other cases and in the statement during the course of search assessee has clearly spelt out to have accepted the accommodation entry and further ld. AO made enquiries about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout appreciating/considering judiciously the submissions made and evidences produced in the course of assessment proceedings by the assessee. The assessee submits that the statement in the search was made due to coercion, pressure tactics and undue influence adopted by the search officials in the search and, therefore, the addition made in the assessment of the income is neither justified nor lawful and also contrary to the CBDT Instructions dated 10.03.2003 and 18.12.2014. Hence, the additions made at ₹ 28512276 ₹ 800000 are bad in law and, therefore, be kindly deleted. (4) That on the facts and in the circumstances of the case and in law, the addition has been made/sustained by the learned lower authorities solely on the basis of retracted statement of the assessee and without finding any falsity in the evidences submitted before them in support of the claim that the income earned from the long term capital gain is a genuine income. Therefore, the addition made/sustained at ₹ 28512276 ₹ 800000 are unlawful and unjustified and bad in law, hence be kindly deleted. (5) That on the facts and in the circumstances of the case and in law, the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,39,750/-, Ld. AO served the assessee with notices u/s 143(2) 142(1) of the Act along with the detailed questionnaire. During the course of assessment proceedings Ld. AO confronted the assessee with the statement given during the course of search wherein the assessee stated to have taken accommodation entry in the form of bogus Long Term Capital Gain of ₹ 2,85,12,276/-. The assessee did not offered the alleged Long Term Capital Gain (LTCG), to tax in the income tax return. Ld. AO observed that the assessee retracted the statement within five months of the date of search stating that no such accommodation entry was taken by him and the transaction of purchase and sale of Long Term Capital Gain falls under the provision of u/s 10(38) of the Act and the income is exempt. During the course of assessment proceedings Ld. AO referred the reports of Investigation Wing, Kolkata alleging that various stock brokers and paper companies are involved in providing Accommodation entry in the form of bogus LTCG. Ld. AO linked these reports to the statements given by the assessee during the course of search wherein the assessee categorically admitted to have taken accommodation entry in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt PB 6-9, 231-232 2. Shares sold out of 2,00,000 shares only 96,256 shares sold i.e. unsold quantity is 1,03,744 which is 51.8% PB 11 3. Assessee invested in the shares of other companies PB 10-12 4. Addition made without reference to any incriminating material PB 42 5. Addition made merely on the basis of statement order PB 44-56, CIT(A) pg 8 6. Statement retracted within 5 months , before issue of notice u/s 153A PB 35-41 275 AO pg 33 para 7.36 7. Copy of the statements of alleged operators not provided CIT(A) PB 35, pg 11 para 16-21 8. No evidence on record to establish if there is any element of cash (Hon ble Apex Court - Lalchand Bhagat Ambica Ram) PB 05 9. No credibility of list of 20 persons as it is a stock market transaction AO pg 23-31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Demat Account for more than a year, sale of part of the equity shares carried out through recognized stock exchange, security transaction tax paid on the sale of shares and the sale consideration directly credited to the assessee s bank account through stock exchange. Ld. counsel for the assessee submitted that all these documents relating to purchase and sale of equity shares have not been found to be untrue/incorrect by both the lower authorities which in itself prove that the alleged transaction is genuine. It was also submitted that all the conditions enumerated in section 10(38) of the Act are duly complied. Placing reliance on the judgment of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education (2017) 84 Taxmann.com 290 (Hon'ble Supreme Court) it was submitted that the additions cannot be made without referring to any incriminating material as in the instant case assessee was subjected to search. Further referring to the decision of this Tribunal in the case of Ultimate Builders ITANo.134/Ind/2019 dated 09.08.2019 it was submitted that the addition made in the instant case are merely based on statements recorded but there is no reference to any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTCG of ₹ 2,85,12,276/- and unexplained expenditure of ₹ 8,00,000/- liable to be taxed and no exemption u/s 10(38) of the Act should be allowed to the assessee on the alleged transaction of capital gain. 7. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by the Ld. counsel for the assessee as well as referred by both lower authorities. Assessee has raised nine (9) grounds. Ground No.9 is general in nature which needs no adjudication and the remaining eight grounds raises three issues which are dealt as follows: 8. Ground No. 1,2 5, through which assessee has contended that the principles of natural justice were violated in the case of assessee as the material referred to by the ld. AO used to make addition in the hands of assessee were not supplied to the assessee nor any opportunity was provided to cross verify the persons whose statement were utilized against the assessee. 8a. We find that the assessee was subjected to search u/s 132 of the Act wherein it was found that the assessee has transacted in the purchase and sale of equity shares namely M/s Premier Capital Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the assessee has contended that the addition for alleged LTCG of ₹ 2,85,12,276/- alleged commission paid for acquiring such bogus LTCG of ₹ 8,00,000/- should not have been made as no incriminating material pertaining to these additions were found during the course of search and the additions are based purely on the statement given during the course of search which was subsequently retracted. 9a. We find that the search authorities were having information that the assessee had dealt into purchase and sale of equity shares of M/s Premier Capital Services Limited. and also possessed the information that this company is being used as a conduit for providing bogus LTCG to various persons. Assessee in his statement u/s 132(4) of the Act stated to have taken such accommodation entries which was subsequently retracted. During the assessment proceedings Ld. AO further made independent enquiries by calling details of the purchasers who purchased the shares from the assessee. Inspector report was also taken about the where about of the purchaser of such equity shares which were not found satisfactory. 9b. Under these given facts, we do not find any merit in the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Demat Account. 96256 equity shares of PCSL were sold on the recognized stock Exchange through a registered broker. Provision of section 10(38) of the Act requires that for claiming exemption of the capital gain earned from sale of equity shares, they should be held for more than one year, the assets transferred should be Long Term Capital Asset which may be either equity shares or unit of an equity oriented fund or a unit of a business trust and the transaction should be chargeable to securities transaction tax. Examining facts of the instant case we find that all the condition provided u/s 10(38) of the Act are duly fulfilled as the shares purchased during the F.Y. 2012-13 were held by assessee for more than a year in the Demat Account and sale has been carried out on a recognized Stock Exchange after paying security transactions tax. 10b. So far as the revenue s claim that the M/s Premier Capital Services Limited is a bogus company engaged in the providing accommodation entry in the shape of LTCG, we find that the Coordinate Bench Mumbai in the case of Amit Mafatlal Shah ITA No. 5793/MUM/2019 dated 20th April 2020 has dealt with the very same issue of the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulation and connivance with the brokers. The assessee s name was found to be in the list of beneficiary and accordingly the AO inquired upon these transactions by the assessee during the year. Needless to mention that assessee has duly disclosed these long term capital gains in his return of income filed for the year. We note that the AO has not supplied any material to the assessee before finalizing the assessment and has merely relied upon the investigation report received by the assessee that assessee is a beneficiary of this racket. The AO merely reproduced the report of the investigation wing in the assessment order and discussed the financial of Premier Capital Services Ltd. However, it was never confronted to the assessee or any cross examination was allowed to find out the truth behind it. We note that assessee has purchased the shares and subsequently sold on the stock exchange through online trading portal and where it is very difficult to note about the subsequent buyer. The assessee also filed the following documentary evidences. 1. Profile of Premier Capital Services ltd., 2. Copy of Board Rsolution dated 2307.2012 of Premier Capital Services ltd.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by allowing the appeal of the assessee by holding that the purchase of shares were duly recorded in the books of accounts and the source of funds is also explained and the shares were in fact transferred in the name of the assessee and thus the purchases of the assesseecan not be fault with. Similarly, the sale of shares was effected can not be disputed ecause the amount received by the assessee is not in dispute and it is not the case of the Revenue that shares are still lying with the assessee or amount received by the assessee on sale of shares is more than the declared value by the assessee. Under these circumstances, the Hon ble High Court has held that AO is not justified in holding that sale proceeds of ₹ 1,41,08,484/- represented unexplained investment under section 69 of the Act and thus the order of the Tribunal was upheld by the Hon ble High Court. The Hon ble Supreme Court also dismissed the appeal of the Revenue filed against the Hon ble Bombay High Court order. - Similarly, in the case of CIT vs. Mrs. Kesar A. Gada (supra) the ITAT deleted the addition by holding that the transaction of purchase and sale of shares made by the assessee were genuine and no additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the facts of the case and are of the considered view that the assessee had placed on record substantial documentary evidence to substantiate the genuineness and veracity of the purchase and sale of 10,200 shares of M/s Talent Infoways Ltd., viz. copy of the Contract note, dated. 15.04.2004 evidencing the purchase of shares; Copy of the contract note, dated. 06.04.2004 as regards the speculation income, and the copy of the cash receipt for ₹ 168/-; Copy of her account in the books of account of M/s MSPL; Copy of the letter from M/s Talent Infoways Ltd., dated.29.05.2004, therein confirming the transfer of shares; Copy of the contract notes for sale of shares in the months of September and October, 2005; Copy of the bank statement evidencing receipt of payment for sale of shares; Copy of STT paid statements on the hares of M/s Talent Infoways Ltd ; Copy of its account as appearing in the books of account of M/s Alliance Intermediateries Network Pvt. Ltd. evidencing the sale of the shares of M/s Talent Infoways Ltd.; Copy of delivery instructions of shares to the depository for dematerialization of the shares; and Copy of the return of income alongwith the computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., which we find had been duly substantiated by the assessee on the basis of material made available on record, which we find had not been dislodged by the lower authorities. We thus in the backdrop of the totality of the facts of the case are unable to find ourselves to be in agreement with the view arrived at by the lower authorities. We thus set aside the order of the CIT(A), and delete both of the additions of ₹ 9,36,164/- and ₹ 46,808/- made by the A.O, which thereafter were sustained by the CIT(A). The appeal of the assessee is allowed. 13. We have also gone through other decisions cited by the Ld. A.R. and observed that the case of the assessee is squarely covered by the various decisions. We therefore respectfully following the same set aside the order of CIT(A) and direct the AO to delete the addition of ₹ 3,43,62,880/- under section 68 of the Act. 10c. From perusal of the above finding of the Coordinate Bench of Mumbai in the case of Amit Mafatlal Shah (supra), we find that this decision is squarely applicable on the facts of the instant appeal and we thus have no hesitation to hold that the assessee has rightly claimed the exemption u/s 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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