TMI Blog2021 (2) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. No effective investigation is shown to have been carried out by Ld. AO to dislodge the assessee s claim by bringing on record cogent evidences as well as confronting the same. However, except for general allegations as narrated in the investigation wing report, there is no evidence which would link assessee s involvement in jacking up the prices of the shares with a view to earn artificial gains. Onus casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said parties. As against this, the assessee s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. Finally, going by the factual matrix and respectfully following the earlier view of coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny contrary decision to rebut the submissions made by the Ld. AR. No distinction in facts could be pointed out. Proceedings before Ld. AO 4.1 To reiterate, an assessment was framed in the case of the assessee for the year under consideration u/s 143(3) on 29/12/2016. While framing the assessment, the assessee was denied exemption u/s 10(38) on certain Long-term capital gains (LTCG) earned on sale of shares of an entity namely M/s Sunrise Asia Limited (SAL). The said gains were ultimately added to the assessee s income as unexplained cash credit u/s 68 of the Act. The assessee has also been saddled with addition u/s 69 for ₹ 8.97 Lacs on account of estimated commission income which is consequential to the main addition. 4.2 The aforesaid gains arose on sale of 45000 shares of an entity namely M/s Sunrise Asia Limited (SAL). Since the gains so earned fulfilled the conditions of Sec. 10(38), the same were claimed to be exempt while filing the return of income. The shares were stated to be purchased by the assessee on 16/09/2011 for a sum of ₹ 9 Lacs and the same were sold between the periods July to September 2013 thereby yielding Long-Term Capital gains (LTCG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the shares of M/s Sunrise Asia Limited (SAL) besides various other concerns. In the statement, he explained the modus operandi adopted by him with a view to provide bogus LTCG / STCL. Similar statements were recorded from various sub-brokers of Kolkata who admitted to be indulging in similar activity of providing accommodation entries in lieu of commission. 4.5 Upon perusal of financial statements of M/s SAL, it was noted that its net worth was not significant and it incurred losses in few years. The price movement of shares reflected phenomenal increase over a short period of time. The number of trades done in the scrip between 17/08/2011 to 08/03/2013 was found to be 2481 trades and the shares was traded for 200 trading days. In assessee s case shares were found to be sold between July to September, 2013 at average rate of ₹ 500/- per share to various entities / persons. Notices u/s 133(6) were issued to all purchasers, the outcome of which is noted in para 10.3 of the order. In few cases no replies were received and in few cases the notices remained un-served by postal authorities whereas replies were received in few cases. As per the investigation findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4% which led to another addition u/s 69C for ₹ 8.97 Lacs. Proceedings before Ld. CIT(A) 5.1 Before Ld CIT(A), the assessee maintained that the findings of investigation wing and the observations of Ld. AO were general observation without any specific reference to the transactions of the assessee. These findings had no connection or relation with assessee s case and do not have direct evidentiary value. The adverse statements being relied upon by Ld. AO were never confronted to the assessee nor any opportunity of cross-examine the person making those statements was ever provided to the assessee. The opinion formed by Ld. AO was without any basis. The stock prices fluctuate widely in the secondary stock market and the prices would be determined by market forces. There was no reference to assessee in the statement made by Shri Anil Agarwal u/s 132(4). The assessee never entered into transactions with any of these parties making the adverse statement. Further, the statement would have no value unless the cross examination of persons making those statements was provided to the assessee. The attention was drawn to the fact that the shares were sold in online mechanism i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record. The investment so made by the assessee was duly reflected in her Balance Sheet As on 31/03/2012. The purchase of shares is evidenced by Allotment Advice dated 11/11/2011 which establish that the assessee has been allotted 45000 shares. M/s Santoshima Tradelinks Limited ultimately got amalgamated with M/s Sunrise Asia Limited (SAL) with the approval of Hon ble Bombay High Court vide order dated 22/03/2013 and accordingly, the existing shares got exchanged with the shares of the new entities. These shares were duly credited in assessee s demat account which is supported by demat statement as placed on record. All these shares have ultimately been sold in online mechanism of recognized stock exchange in various trenches between the periods 17/07/2013 to 13/09/2013 and the sale has taken place through registered brokers of the stock exchange. The sale transactions are evidenced by broker s contract notes. The sale consideration has duly been received through banking channels and the shares have moved out of assessee s demat account. Undisputedly, the assessee has held the shares for more than one year and the gain so earned were, indeed, long term capital gains in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that the shares of M/s SAL were used to provided bogus LTCG / STCL. More so, all these statements are not backed up any cogent corroborative material on record to establish the assessee s involvement in price rigging of shares of M/s SAL. Similar is the statement of Shri Vipul Bhatt which is general in nature without naming the assessee or establishing her involvement in obtaining bogus LTCG. The Ld. AO has nowhere established the involvement of the assessee in price rigging or price manipulation. No collusion between the assessee and alleged entry providers or operators is shown to have existed. Another noteworthy point is that no opportunity to cross-examine the persons making adverse statement was provided to the assessee despite being specifically pointed out before lower authorities. There is no admission or evidence based finding that any cash got exchanged between the assessee and any of the alleged bogus entities. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmise. The addition thus made purely on the basis of third-party statement recorded at the back of the assessee could not be sustained in the eyes of law unless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, similar addition made by revenue was deleted by coordinate bench of this Tribunal in the case of Dipesh Ramesh Vardhan ors. V/s DCIT (ITA Nos.7648/Mum/2019 ors. dated 11/08/2020; authored by one of us) by observing as under:- 6. We have carefully heard the rival submissions and perused relevant material on record. So far as the factual matrix is concerned, there is no substantial dispute regarding the same. The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee s account during the month of March, 2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009-10 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon ble Bombay High Court vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected. The whole basis of making the addition is third party statement without there being any tangible material. It is trite law that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law as held by Hon ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151). The suspicion however strong could not partake the character of legal evidence as held by Hon ble Supreme Court in Umacharan Shaw Bros. V/s CIT (1959 37 ITR 271). Therefore, we find that onus as caste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 391 to 394. The scheme of amalgamation was duly been approved by Hon ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. 10. The above conclusion is further fortified by the fact that in share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the adverse conclusion drawn by Ld. AO merely on the basis of the fact that the buyer of the shares were group entities of Shri Vipul Bhat, could not be sustained. The fact that there were independent buyers also would rebut the same and weaken the conclusion drawn by Ld. AO. 11. The Ld. AR has relied on plethora of judicial pronouncements in support of various submissions, which we have duly considered. These decisions would only support the conclusions drawn by us that once the assessee has discharged the onus of proving the genuineness of the transactions, the onus would shift on the revenue to dislodge assessee s claim and bring on record contrary evidences to rebut the same. Until and unless this exercise is carried out, the additions could not be sustained in the eyes of law. 12. To enumerate the few, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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