TMI Blog2022 (6) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. The assessee cannot take shelter under the opinion given by the experts as it is not the expert who has indulged in the transaction but it is the assessee. Therefore by following such experts advice if the assessee gets into an web it is for him to extricate himself from the tangle and he cannot reach out to the expert to bail him out. The assessees cannot be heard to say that they had blindly followed advice of a third party and made the investment. Selection of shares to be purchased is a very complex issue, it requires personal knowledge and expertise as the investment is not in a mutual fund. None of the assessees before us have shown to have to made any risk analysis before making their investment in a penny stock . If according to them they have blindly taken a decision to invest in insignificant companies they having done so at their own peril have to face the consequences. Thus, the conduct of the assessees before us probabilities the stand taken by the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under Section 68 . Benefit of the Vivad Se Viswas Scheme - As there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on time, the assessee may have availed the benefit under the V.S.V. Scheme. In fact, we find that the Comptroller and Auditor General has also severely commented upon the action taken by the Income Tax Department on such issues and that no uniform procedure had been followed by the various Income Tax Officers and in certain cases the assessments were not even reopened. Therefore, merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal committed a serious error both on law and fact in interfering with the assumption of jurisdiction by the Commissioner under Section 263 - Decided in favour of revenue. - IA NO. GA/2/2022 IN ITAT/6/2022 - - - Dated:- 14-6-2022 - IA NO. GA/2/2020 (OLD NO: GA/1044/2020) IN ITAT/31/2020 IA NO. GA/2/2020 IN ITAT/41/2020 ITAT/42/2020 IA NO. GA/2/2020 IA NO. GA/2/2020 IN ITAT/43/2020 ITAT/64/2020 IA NO: GA/2/2020 IA NO. GA/2/2020 IN ITAT/44/2020 IA NO. GA/2/2021 IN ITAT/3/2021 IA NO. GA/2/2021 IN ITAT/22/2021 IA NO. GA/2/2021 IN ITAT/26/2021 IA NO. GA/2/2021 IN ITAT/27/2021 ITAT/28/2021 IA NO: GA/2/2021 IA NO. GA/2/2021 IN ITAT/34/2021 IA NO. GA/2/2021 IN ITAT/36/2021 ITAT/57/2021 IA NO: GA/2/2021 IA NO. GA/2/2021 IN ITAT/58/2021 IA NO. GA/2/2021 IN ITAT/60/2021 IA NO. GA/2/2021 IN ITAT/76/2021 IA NO. GA/2/2021 IN ITAT/78/2021 IA NO. GA/2/2021 IN ITAT/80/2021 ITAT/85/2021 IA NO: GA/2/2021 IA NO. GA/2/2021 IN ITAT/152/2021 IA NO. GA/2/2021 IN ITAT/153/2021 IA NO. GA/2/2021 IN ITAT/154/2021 IA NO. GA/2/2021 IN ITAT/155/2021 IA NO. GA/2/2021 IN ITAT/156/2021 IA NO. GA/2/2021 IN ITAT/157/2021 IA NO. GA/2/2021 IN ITAT/168/2021 ITAT/87/2021 IA NO: GA/2/2021 IA NO. GA/2/2021 IN ITAT/88/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L COMMISSIONER OF INCOME TAX, SILIGURI Vs SRI SATYA NARAYAN SARIA PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS POOJA JHUNJHUNWALA PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS AAYUSH JHUNJHUNWALA PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA Vs AAYUSH JHUNJHUNWALA HUF PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS SMT. SHILPA DAULAT PRINCIPAL COMMISSIONER OF INCOME TAX-18, KOLKATA VERSUS M/S.PREM BALA PUROHIT PRINCIPAL COMMISSIONER OF INCOME TAX, BURDWAN VERSUS BIJAYA TAH PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS SUMAN KUMAR PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS SAJJADBHAI NURUDDIN NANDARBARWAL PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA VERSUS KRISHNA KUMAR PARSURAMKA PRINCIPAL COMMISSIONER OF INCOME TAX-5, KOLKATA VERSUS SHRI MAHENDRA KUMAR PERIWAL PRINCIPAL COMMISSIONER OF INCOME TAX, SILIGURI Vs PRAKASHO DEVI SARIA PRINCIPAL COMMISSIONER OF INCOME TAX-SILIGURI VERSUS SHEKHAR AGARWAL PRINCIPAL COMMISSIONER OF INCOME TAX 9, KOLKATA VERSUS PUSPA DEVI TIKMANI THE HON BLE MR. JUSTICE T.S. SIVAGNANAM AND THE HON BLE MR. JUSTICE HIRANMAY BHATTACHARYYA Mr. Vipul Kund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r side ITAT No. 06 of 2022 is taken as the lead case where the assessee is Mrs. Swati Bajaj. Therefore, we propose to note the facts in the lead case and then proceed to discuss the issues canvassed before us and take a common decision in all the appeals. 2. The revenue in ITAT No. 6/2022 has raised the following substantial questions of law for consideration:- (i) Whether on the facts and circumstances of the case and in law the Learned Income Tax Appellate Tribunal erred in ignoring the direct and circumstantial evidence brought on record by the Assessing Officer to establish that the assessee had indulged in manipulation of the share prices of Surabhi Chemicals and Investment Limited with a view to record fictitious Long Term Capital Gains of Rs. 28,23,500/- claiming these as exempt from taxation. (ii) Whether on the facts and circumstances of the case and in law the order of the Learned Income Tax Appellate Tribunal suffers from perversity as it ignores the facts brought on record establishing manipulation of share prices Surabhi Chemicals and Investment Limited as part of colourable device to generate fictitious LTCG with the aim to evade taxes due. (iii) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of exempt income. The assessee filed copy of contract notes in support of purchase and sale of shares of Surabhi Chemicals on which the long-term capital gains was claimed. From the details furnished by the assessee, it was seen that the assessee had purchased 50,000 shares of the company for Rs. 1,00,000/- on 16.03.2012 and 14.08.2012. Soon after the expiry of the period to become eligible for long term capital gains, the assessee sold those shares for Rs. 29,23,500/- and such sales were effected during the period from 04.12.2013 to 07.12.2013 and the long term capital gains (LTCG) was computed for the Rs. 28,23,500/-. The assessing officer noted that within a short span to time of 17 to 21 months, the assessee managed to sell the shares with increased value of about 2823% that to when the general market trend was recessive. It appears that there were several such transactions which led to an investigation being commenced by the Directorate of Income Tax Investigation, Kolkata. A report in this regard was submitted by the Deputy Director of Income Tax Investigation, Unit II (3), Kolkata dated 27.04.2015 which report was furnished to the Director General of Income Tax Invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding bogus accommodation of various kinds. Statements from most of the Directors of the Companies have been recorded and were appended to the Report. The report also states that the massive cash trail of Rs. 1,570 crores has been traced from the point it is being deposited to an undisclosed proprietorship bank accounts to the accounts of share brokers. This led to recording statements from the share brokers who have accepted that the said cash has been used for providing accommodation entries of bogus LTCG. The report further states that it is not full and final as they intend to update the data base on regular basis with new actions against entry operators. In Chapter 2 of the report, a detailed comment on the modus operandi has been set out. In Chapter 3, there is a brief discussion on all listed penny stocks scripts used in bogus LTCG scam. Chapter 4 furnishes the details of share brokers involved in the syndicate and their modus operandi. Chapter 5 furnishes the details of entry operators involved in the syndicate and their modus operandi. Chapter 6 furnishes the details of the penny stock companies/bogus clients used for purchasing shares of listed penny stocks for providing L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the assessee requested to give specific details of manipulations or connivance carried out by either of the concerned persons directly related to the equity shares of the company in which the assessee had traded. Thus, the assessee s case was, based on suspicion the transaction cannot be termed as in-genuine. The assessee further stated LTCG arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiated an enquiry with regard to the company as well as the brokers as the shares have been purchased by her from the stock exchange and payment was made by cheque and delivery of shares have also been taken. Further it was stated that merely because a small amount was invested in penny stocks and it gave rise to huge capital gains in a short period does not mean that the transaction is bogus. Further it was stated that the assessee s share broker is M/s Horizon Financial Consultant Private Limited who are a very reputed equity brokerage house and by making a general allegation the transaction done by the assessee cannot be termed to be a sham transaction. Further the assessee stated that in case there was any specific incident of any admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred to D-Mat account. Further it was stated that the equity shares of the company were sub-divided i.e for every one share having nominal value of Rs. 10, the equity holders got 10 shares of Rs. 1 and the assessee got 45,000 equity shares thus, totally holding 50,000 equity shares in the said company. The assessee placed reliance on the various decisions of the tribunal as well as the High Courts for the proposition that when purchase of shares was found to be genuine and were sold through proper banking channel no adverse inference can be drawn against the assessee and the addition made under Section 68 of the Act was to be deleted. With the above submissions, the assessee stated that since there is no specific or material findings against her so as to alleged the gain as an unexplained cash credit and that the assessee has fully and truly disclosed all facts with all supporting evidence and the entire transaction having been done through proper banking channel and supported by proper bills and contract notes, it stand fully explained and the entire transaction is verifiable with agencies to prove that assessee has transacted and therefore the question of invoking Section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of M/s. Surabhi Chemicals to convert unaccounted cash under the guise of LTCG amounting to Rs. 28,23,500/- and therefore, the said amount is considered as income from undisclosed sources denying the claim of exemption as LTCG. Further, the assessing Officer stated that the share brokers/ entry operators charged Rs. 10/- to Rs. 540/- per Rs. 100/- of cheque amount and calculated the unexplained expenditure trade commission charged by the operators and worked out the sum of Rs. 14,118/- and the total addition was computed at Rs. 28,37,618/-. The assessee was informed that penalty proceedings under Section 271(1)(c) of the Act is to be initiated separately. With the above finding, the assessment was completed by Order dated 22.12.2016. 8. The assessee preferred appeal before the CIT(A) reiterating the stand taken before the Assessing Officer. Before the CIT(A) it was contended that the Assessing Officer never pointed out any discrepancy in any of the documents submitted and nothing adverse was mentioned about the assessee. Further, it was contended that the assessee has discharged the burden of proving the genuinity of the transaction and the burden of proving the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Industries Pvt. Ltd., ITA No. 614/Bom/87 A.Y. 1983-84 wherein the Tribunal held that the word evidence as used under Section 143(3) covered circumstantial evidence also and cannot be confined to direct evidence and in tax jurisprudence the word evidence had much wider connotations. Further, the use of the word material in Section 143(3) showed that the Assessing Officer not being a Court could rely upon material which might not strictly be evidence admissible under the Indian Evidence Act, for the purpose of making an order of assessment. Further, the CIT(A) held that the payment through bank, performance through the stock exchange and other features are apparent features and the real features are the manipulated and abnormal price of offload and a sudden peak thereafter and therefore, the CIT(A) concludes that the transactions fall in the realm of suspicious and dubious transactions. The CIT(A) referred to the decision of the High Court of Bombay in Sanjay Bimalchand Jain Versus Pr.CIT dated 10th April, 2017 upholding the order of Nagpur Bench of the Tribunal holding that on the facts emergent in the case and the preponderance of probabilities, the entire capital gains cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s preferred this appeal before this Court. 11. Mr. Aryak Dutta, learned Senior Standing Counsel appearing for the revenue in the lead case submitted that the learned Tribunal ignored the direct and circumstantial evidence brought on record by the Assessing Officer to establish that the share price of Surabhi Chemicals have been manipulated leading to fictitious LTCG of Rs. 28,23,500/- which the assessee has claimed to be exempt from taxation. It is submitted that the order passed by the learned Tribunal suffers from perversity as it ignored the facts brought on record establishing manipulation of share prices of Surabhi Chemicals as part of device to generate fictitious LTCG. Further, the learned Tribunal overlooked the fact that the entire transaction was stage-managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious LTCG. The learned Standing Counsel has referred to the findings recorded by the Assessing Officer, CIT(A) and pointed out that the learned Tribunal without even noting the intricate factual details allowed the appeal filed by the assessee. The learned Tribunal has not rendered any finding on the modus operan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfactory discharge of the onus on the assessee to prove the genuineness of the transaction. To explain as to how the expression when the assessee offers no explanation occurring in Section 68 has to be interpreted, reliance was placed on the decision in CIT Versus P. Mohanakala 2007 6 SCC 21 With regard to the burden of proof/ onus of proof reliance was placed and decision of the Hon ble Supreme Court in Roshan Di Hatti Versus CIT 1977 2 SCC 378 . For the same proposition reliance was placed on the decision of the Hon ble Supreme Court in Kale Khan Mohammad Hanif Versus Commissioner of Income Tax 1963 50 ITR 1 SC . Reliance was placed on the decision of the High Court at Bombay in Sanjay Bimalchand Jain L/H/Shantidevi Bimalchand Jain Versus the Principal Commissioner of Income Tax, Nagpur Anr., Income Tax Appeal No. 18 of 2017 dated 10.4.2017 wherein the Court upheld the order passed by the learned Tribunal which had held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs. 5 of a little known company would jump from Rs. 5 to Rs. 485. The learned Senior Standing Counsel distinguished the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal erroneously reversed the order passed by the Assessing Officer as confirmed by the CIT(A). Reliance was placed on the decision in Sanjay Kaul Versus Principal Commissioner of Income Tax, Delhi-8 MANU/DE/1506/2020 wherein an identical test was considered, a view taken by the Assessing Officer while referring to the surrounding circumstances, the human conduct and preponderance probabilities and lack of financial logic coupled with the modus operandi was approved by the Court by dismissing the appeal filed by the assessee. In the said decision, the decision of the Hon ble Supreme Court in Suman Poddar Versus ITO (2019) 112 Taxmann.com 330 (SC) has been extensively relied upon. Reliance was placed on the decision in the Udit Kalra Versus ITO MANU/DE/1507/2019 where the Court affirmed the order passed by the learned Tribunal which rejected the case of the assessee in more or less similar factual circumstances after noting the decision of the Hon ble Supreme Court in McDowell and Co. Ltd. Versus CTO (1985) 154 ITR 148 wherein it was held that the tax planning should be legitimate, provided, it is within the framework of law and any colourable device cannot be part of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the decision in Mahavir Jhanwar, the correctness of which decision has been canvassed in the other appeals before this Court. It is further submitted that none of the findings recorded by the Assessing Officer or the CIT(A) had been controverted by the learned Tribunal. In support of this contention, the learned Standing Counsel referred to the decision of the High Court of Delhi in CIT Versus Nipun Buliders Developers Pvt. Ltd. ITA NO. 120 of 2012 dated 07.01.2013. This decision was pressed into service to explain the concept of burden of proof and upon whom the burden lay qua Section 68 of the Act. In the cases on hand, the assessee has not discharged the burden which has been cast upon them which was rightly noted by the Assessing Officer as well as the CIT(A) but erroneously reversed by the Tribunal. Reliance was placed on the decision of the Hon ble Supreme Court in CIT, Bihar Versus S.P. Jain AIR 1973 SC 977 for the proposition that if no cogent reasons has been given by the Tribunal, for rejecting the findings of the Assessing Officer and if the Tribunal failed to take into account the relevant materials on record and has based its findings on mere conjecture and sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department and there is nothing specific relatable to the assessee. Secondly, it was contended that copy of such investigation report was not furnished to the assessee. Learned Counsel submitted that circumstantial evidence can be the sole basis for taking the decision in the matter. In this regard, reliance was placed on the decision of the Hon ble Supreme Court in SEBI Versus Kishore R. Ajmera (2016) 6 SCC 368 wherein the Court has pointed out as to the important aspect with regard to the proximity of time between the buy and sell orders, prior meeting of minds, unnatural rise in the prices of the scripts and how the conclusion can be gathered from the various circumstances coupled with preponderance of probabilities. Therefore, it is submitted that absence of direct evidence is immaterial. Reliance was placed on the decision of the Hon ble Supreme Court in Commissioner of Customs Versus Dilip Kumar and Company (2018) 9 SCC 1 for the proposition that exemption notification should be interpreted strictly, as the burden of proof, admittedly would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. It is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance of each case and must also depend on the statute under which the allegations are being enquired into. Thus, by referring to the above decisions, it is submitted when the statements recorded during the investigation were not against the assessee, they are not entitled to claim any right of cross examination. The next submission of Mr. Rai is on the powers of the Appellate Tribunal under Section 254 of the Act. It is submitted that the nature of the powers were interpreted by the Hon ble Supreme Court in Hukum Chand Mills Limited Versus CIT AIR 1967 (SC) 455 wherein the Court held that the tribunal had jurisdiction to frame the question raised for the first time. It is submitted that on a reading of Section 254 (1) and Section 255 (6) of the Act clearly shows the power exercisable by the Tribunal and they are akin and equal to that of the power exercisable by the assessing authority and in the case on hand the tribunal ought to have exercised such power and or its failure renders the order as perverse. For the same proposition, reliance was placed on the decision of the High Court of Bombay in New India Assurance Limited Versus CIT AIR 1958 Bombay 143 . It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the same set of people who want to convert black-money into white. Therefore, it was stated that there is an urgent need for an effective, preventive and punitive action in such matters to prevent recurrence of such instances. Several recommendations were made by the SIT after noting the relevant facts. It is submitted that in terms of Section 114 of the Evidence Act, the Court may presume existence of certain facts and if read along with Section 4 of the Evidence Act which explains the words may presume , and the facts of the cases on hand being examined will clearly show the circumstances under which the Assessing Officers have acted and the facts were considered and also the normal human conduct of an investor, preponderance of probabilities and the surrounding circumstances and finding has been rendered. It is reiterated that the Tribunal clearly abdicated its powers, did not examine any of the facts which it is required to do in terms of the power conferred on the Tribunal under the Act. With the above submission, the learned Standing Counsel prayed for allowing the appeals. 17. Mr. Tilak Mitra, learned Senior Standing Counsel for the appellant while adopting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals arising out of orders passed by the CIT under Section 263 of the Act. The Hon ble Supreme Court held that the CIT has observed that the Assessing Officer did not make any proper enquiry while making the assessment and accepting the explanation of the assessee insofar as receipt of share application money is concerned and on that basis the CIT had, after setting aside the order of the Assessing Officer, directed the Assessing Officer to carry a thorough and detailed enquiry and this order which had been upheld by the High Court was not interfered. With the above submissions, the learned Standing Counsel adopted the argument made by the other Standing Counsels. 19. Mr. Subhash Agarwal, Learned Advocate leading the arguments on behalf of the assessees, submitted by the department and that the copy of the investigation report was not furnished to the assessee and the stand taken by the revenue that the report is not required to be furnished is not tenable. The learned Advocate referred to the decision of the Hon ble Supreme Court in T. Takano Versus SEBI in Civil Appeal No. 487-488 of 2022, dated February 18, 2022 and submitted that the revenue has no right to withhold the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of April-May, 2022. It is submitted that the percentage of fluctuation is calculated with the formula, viz, price divided by earnings per share and referring to the figures therein, by way of illustration, it is explained that the percentage of fluctuations between 200 to 600 is realistic. 20. It is submitted that the four basic principles of law as has been consistently adopted by courts are: (i) The person who alleges should prove, (ii) All adverse material is required to be supplied to the person against whom the allegations is made, (iii) No findings can be recorded on surmises and conjectures, (iv) Adverse action can be initiated only based on evidence. It is submitted that these four cardinal principles have been ignored by the department. It is submitted that the assessee Smt. Swati Bajaj had invested in robust companies and there is absolutely no reason to doubt the genuinity of the transaction. Further it is submitted that if the addition made by the respective assessment officers on account of alleged bogus, LTCG/STCG at best it can be, a sum of Rs. 9822 crores and not the astronomical figure, (Rs. 38,000 crores), mentioned by the revenue before this Court. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y distribution of stocks past returns to make assumptions regarding expected future returns. 21. Mr. Agarwal next referred to compilation of decisions and firstly took us through the decision in Sumati Dayal and referred to the facts as mentioned in paragraphs 8 and 12 of the judgment and submitted that the facts in the said case was entirely different and could not have been applied to the assessees case. Nextly, the learned counsel sought to distinguish the decision in Durga Prasad More and submitted that in the said decision the Hon ble Supreme Court held that the case of the assessee was based on self-serving documents which is not the case of the assessee Smt. Swati Bajaj. The decision relied on by Mr. Rai Standing Counsel in the case Kishore R. Ajmera was referred to and it was submitted that the matter pertain to stocks brokers and the decision can have no application to the facts of the case of Smt. Swati Bajaj. With regard to the decisions in the case of Manish D. Jain, it is submitted that on facts the Madras High Court recorded that SEBI and the assessing officer found that the assessee Manish D. Jain played a role in inflating price which is not so in the assessees c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore this Court. Reference was made to the decision of the High Court of Bombay in ITA No. 456 of 2007 in CIT Versus Mukesh Ratilal Morolia dated 07.09.2011 wherein the Court refused to interfere with the decision of the Tribunal holding that the purchase and sale of shares are genuine. The appeal filed by the revenue before the Hon ble Supreme Court in Special Leave to Appeal (Civil Appeal No. 20146 of 2012) was dismissed by the order dated 27.01.2014. For similar proposition as to how the assessee has discharged the burden of proof, reliance was placed on the decision of the High Court of Punjab and Haryana in ITA No. 18 of 2017 in PCIT Versus Hitesh Gandhi dated 16.02.2017 and also the decision in PCIT Versus Prem Pal Gandhi in ITA No. 95 of 2017 dated 18.01.2018. Reliance was placed on the decision of the High Court of Gujarat in PCIT Versus Parasben Kasturchand Kochar in Tax Appeal No. 204 of 2020 dated 17.09.2020 wherein the revenue was unable to prove that the transaction was pre-arranged as well as sham and was carried out through penny scripts companies/paper companies and the appeal filed by the revenue was dismissed. Reliance was placed on the decision of the High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, it is submitted that the statements has been relied upon but the copy of the statement was not given to the assessee in spite of specific request that apart in the statement there is nothing alleged against the assessee, despite which, the addition was made. It is submitted that the assessee in the return of income had also mentioned about the short term capital gains on account of receipt of compensation received from the Government of Haryana for the land acquired from the assessee and this portion of the return has not been doubted. Further it is submitted that specific request was made by the assessee not only before the assessing officer but also before the First Appellate Authority to make available the persons from whom statements were recorded for being cross examined by the assessee. Furthermore, the details and documents produced by the assessee were never doubted either by the assessing officer or by the First Appellate Authority. Yet the appeal filed by the assessee was dismissed based on surmises and conjectures. Before the tribunal, the assessee had placed the facts and the learned tribunal in paragraph 4 of the impugned order notes the submissions made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us CIT (1980) Supplementary SCC 660 , Arya Abhushan Bandhar Versus Union of India (2002) (143) ELT 25 (SC) and the judgment of this Court in CIT (E), Kolkata Versus Mayapur Dham Pilgrim and Visitors Trust in ITAT NO. 312 of 2017 dated 16.02.2022. 24. To explain the concept of commercial expediency as to how the assessing officer cannot sit in the chair of the assessee, reliance was placed on the decision of the Hon ble Supreme Court in S.A. Builders Versus CIT (Appeals) (2007) 1 SCC 781 . Reliance was also placed on the decision of the High Court of Delhi in Jain Manufacturing (India) Private Limited Versus The Commissioner (2016) 93 VST 326 wherein the Court set aside the order cancelling the registration of a dealer under the Central Sales Tax Act with retrospective effect and held that retrospective cancellation should not prejudicially affect the party who acted on the basis of the valid registration. This judgment is pressed into service to support the contention that on the date when the assessee had purchased the shares there was no allegation against the company or the stock broker or any other person and therefore any investigation done subsequently cannot work pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the revenue. 26. Mr. S.M. Surana, Learned Senior advocate appearing for the appellants in ITAT No. 156 of 2021, 157 of 2021 submitted that there is a small distinction in the case of the assessees than the other cases which were argued before this Court as the orders impugned in these appeals, passed by the Learned Tribunal arise out of an order passed by the Commissioner of Income Tax under Section 263 of the Act. Therefore, it is submitted that in the course of his argument he would seek to sustain the order of the tribunal not only on the grounds which were canvassed by the other learned advocates for the assessees but more importantly on the ground that the Commissioner could not have exercised his power under Section 263 of the Act. The Learned Senior Counsel referred to the facts in ITAT No. 156 of 2021 wherein the assessee is Mr. Girish Tikmani, it is submitted that the assessing officer examined the return of income filed by the assessee in declaring the total income of Rs. 6,76,490/- and the return which was processed under Section 143(1) of the Act, was selected for scrutiny and subsequently the assessing officer issued notices under Section 143(2) and 142(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous LTCG based on inputs from investigation done. Further it was stated that an error was detected in the assessment order and proposal was received by the Commissioner for review of the assessment order under Section 263 of the Act. Further the Commissioner would state that prima facie it appears the assessing officer had failed to take a logical action on the information available with him and accordingly the assessment order is erroneous in so far as it was prejudicial to interest of revenue. It is submitted that this was the basis on which the show cause notice date 06.11.2018 was issued and in the said show cause notice reference was made to an investigation done by the Directorate of Income Tax (Investigation), Kolkata regarding the accommodation entry of LTCG and number of beneficiaries who have taken huge amount of bogus LTCG were identified and this led to the identification of penny stocks which have been used for generating bogus LTCG. The Commissioner referred to the scripts of Unno Industries Limited which were traded by the assessee and without mentioning any details, the assessee was called upon to show cause as to why the assessment order should not be rendered as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich cannot be a ground to invoke Section 263 of the Act. Furthermore, the copy of the report which has been referred to, was not furnished to the assessee. That apart the report is not a report and it has been submitted by an authority who is lowest in the hierarchy of authorities in the Income Tax Investigation department. It is submitted that in the Income Tax department more particularly in the investigation wing, the top most authority is the CBDT through its Member Investigation, followed by the Principal Director General of Income Tax (Investigation), Director General of Income Tax (Investigation), Director of Income Tax (Investigation), Additional Director of Income Tax, (Investigation) and lastly the Deputy Director of Income Tax (Investigation)/Additional Director of Income Tax (Investigation). It is submitted that the copy of the so-called investigation report was relied on by the senior standing counsel for the department during the course of argument and stated that it can be downloaded from www.taxguru.im. It is submitted that the report is not available in the official website of the CBDT or the Income Tax Investigation department. It is further submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various provisions of the Securities Contract (Regulation) Act 1956, (SCR). More particularly Section 2(a) which defines contract, 2(ac) which defines derivatives to include securities, Section 2(h) which defines securities to include shares, scripts, stocks, bonds etc. Section 2(j) which defines stock exchange. It is submitted that the contract entered into in terms of the provisions of the Securities Contract Act cannot be treated to be bogus. A stock exchange has to be recognized by the Central Government in terms of Section 9 of the said Act and in terms of Sub-Section (2) of Section 9, any recognized stock exchange with the previous approval of SEBI may make by-laws for the regulation and control of the contract and in terms of clause (k), by-law can be framed for regulating the contract between members or between a member and its constituent or between a member and the person who is not a member etc. Further the by-laws of the stock exchange in terms of clause (r) also provides for making, comparing,, settling and closing of bargains. Further there is an obligation on the member of a stock exchange to supply information or explanation and to produce documents relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax Versus Odeon Builders Private Limited (2019) 418 ITR 315 (SC) . 28. The next argument of the learned senior counsel is that on the grounds mentioned by the Commissioner in the show cause notice, power under Section 263 could not have been exercised and such power could have been exercised only when the assessing officer failed to conduct an enquiry which is not the case of the assessee before this Court. With regard to under what circumstances the power under Section 263 could be invoked and the parameters to be fulfilled, reliance was placed on the decision in Commissioner of Income Tax Versus JN Morison India 366 ITR which was referred to by the learned tribunal. For the same proposition reference was made to the decision in PCIT Versus M/s. Kesoram Industries Limited 423 ITR 180 (Kolkata) . Nextly, the learned senior counsel elaborately referred to the order passed by the tribunal, impugned before us and submitted that elaborate discussion on the facts has been done, the learned tribunal rightly held that there is no material quoted against the assessee and the power under Section 263 could not have been invoked on a mere suspicion. To support th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To support such contention, reliance was placed on the decision in the case of Commissioner of Income Tax vs. Kanda Rice Mills 1989 178 ITR 446 (P H). For the same proposition reliance was placed on the decision in Uma Charan Shaw Bros. Versus CIT 37 ITR 271 SC . Further, the learned Senior Counsel reiterated that suspicion can never take the place of proof. To support such argument, reliance was placed on the decision of CIT, Central-II, Calcutta Versus 67 Lakshmangarh Estate Trading Co. Ltd. ITA No. 270 of 1999 dated 7th October, 2017. Reliance was placed on the decision in CIT Versus Smt. Jamna Devi Agarwala 328 ITR 656 (Bom) , wherein the Court had distinguished the decision in Sumati Dayal. In support of his contention that the transactions were genuine as documents were produced by the assessee, reliance was placed on the decision in CIT Versus Anupam Kapoor 299 ITR 179 (P H) and the decision in PCIT Versus Parasben Kasturchand Kochar, in Tax Appeal No. 204 of 2020 dated 17.09.2020 (Gujarat). Learned Senior Counsel submitted that the word consider finds place in Section 263 of the Act and this term was explained by the Hon ble Supreme Court in Bhikhubhai Vihlabh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had given a detailed explanation on 15.11.2017 which has been completely ignored by the Assessing Officer. The contention raised by the assessee before the Assessing Officer was reiterated before the CIT(A), which has been noted in paragraph 4.2 of his order. That apart in paragraph 4.3, the CIT(A) notes that documents were produced by the assessee. However, in paragraph 4.24 the CIT(A) erroneously came to a conclusion that there was no documentary evidence. That apart, the assessee had invested in the purchase of shares of M/s. Jackson Investment Ltd. during October, 2012 and the shares were sold only in the assessment year 2015-16 and not immediately after the expiry of one year. It is pointed out that similar investment made by the other assessees in Jackson Investment was subject matter of consideration in appeals filed by the assessees before the Delhi Tribunal in ITO Versus Anupama Garg Ors. 2018 SCC Online ITAT 2923 and the said decision would clearly apply to the case of the assessee herein. Further it is submitted that the assessee had produced sufficient documents to prove the genuineness of the share transaction done by him and the investigation which has been refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the revenue in the memorandum of appeal does not relate to the assessee s case as the assessee s case is not one of LTCG, the assessee did not trade in the shares of M/s. Blue Print but had purchased shares of Sulav Engineering and the facts are entirely wrong. Further, the assessee had purchased the shares through online mode and not through offline mode and availed the services of a reputed broker, the assessee is a regular trader and the assessee had effected the transaction through disclosed source and to the said effect, materials were produced. However, the assessing officer erroneously brushed aside all these by holding that human conduct raises a presumption of bogus claim. Therefore, it is submitted that considering these factors, the learned Tribunal had rightly allowed the appeal. 32. Mr. Aryak Dutta, learned Senior Standing Counsel by way of reply had referred to paragraph 14 of the assessment order in the case of Swati Bajaj and submitted that the company has paid only Rs. 38 lakhs as income tax during the relevant year and it is incorrect on the part of the assessee to state that the company is a robust company. Further, it is submitted that there are three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in R. Ajmera was referred to and therefore the decision in R. Ajmera has not been overruled. Hence the test laid down in R. Ajmera more particularly in paragraph 26 has to be fulfilled. Referring to paragraph 13.2 of Chintalapati S. Raju, it is submitted that in the said case the onus was on SEBI whereas under Section 68, the onus is on the assessee and the requirements under the SEBI Act were totally different from that of the requirements to be complied with under the Income Tax Act. It is reiterated that the credit worthiness of the company has not been proved and therefore one of the crucial tests has not been fulfilled and the assessing officer was justified in making the addition. In support of such contention, reliance was placed on the decision in PCIT Versus NRA Iron and Steel Private Limited (2019) 15 SCC 529.This decision is pressed into service to emphasis that the credit worthiness of the buyer has to be established. With regard to the arguments of Mr. Surana that the investigation report is only a write up, it is submitted that may a write up from pages 4 to 28 and the report and the details based on which the report has been brought out from pages 29 to 401. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we shall deal with them separately in the course of this judgment. Reverting back to the case of the assessee Smt. Swati Bajaj, it is seen that she had filed her return of income declaring a total income of Rs. 6,57,300/-. The return was selected for scrutiny, notices under Section 143(2) and 142(1) of the Act were issued, served on the assessee pursuant to which she was represented by her authorized representatives and produced the documents in compliance with the notice issued under Section 142(1) of the Act. The assessing officer states that during the course of assessment proceedings, the assessee Smt. Swati Bajaj was asked to produce the details of shares purchased and sold during the assessment year under consideration and immediate three preceding years in respect of STT paid in LTCG/LTCL and called upon to explain with supporting evidence that the genuineness of the earned LTCG. In response to such notice the assessee stated that the assessing officer has mentioned that specific information has been received from the Director of Income Tax (Investigation), Kolkata that the company Surabhi Chemicals and Investment Limited in which the assessee had purchased and sold shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange (NSE) and she has been earning capital gains and they have been accordingly taxed as per the provisions of the Act. Further the investment made by the assessee is based upon feedback/tips of the peers of the investment industry and also based on research reports published in business newspapers/journals/analyst report. Further the assessee stated that in that process she had made investment in the equity share of Surabhi Chemicals quoted on the BSE. Further it was mentioned that the assessee fails to understand as to on what basis they had classified the shares of Surabhi Chemicals as a penny stock though the assessee received bonus from the said company, dividend from the said company and the prominent share analyst and research company Abhron Consultancy Services Private Limited issued a buy-call on the shares of the Surabhi Chemicals and since the assessee is a regular investor, she made such investment. The assessee stated that the payment was made by account payee cheque from the regular bank account, produced copies of the purchase bill and other documents. Further the assessee stated about the investment, how the bonus shares were declared and how the assessee had s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which were used for providing bogus LTCG are clearly matching with the trend of the shares of M/s. Surabhi Chemicals and the trade pattern of the shares follow a bell shape . The company Surabhi Chemicals had hardly any business activity, splitting of shares had taken place and after splitting of shares the prices of the shares on the exchange goes down automatically in proportion with the ratio of split and one does not seem anything adverse happening in the scrip. This according to the assessing officer was adopted by the company to avoid any hype on such rise in the prices of the shares. Further the shares of Surabhi Chemicals were very thinly traded and gradually jacked to a desired level in a period of one year so as to provide desired amount to selected beneficiary. Further the movement in the price of the shares were not backed by any fundamentals of the company, the company did not make any announcement nor does it have any history of declaring dividends from the financial year 2009-2010 up the financial year 2013-2014. Further the assessing officer noted that from December 2011 to August 2013, the share market was almost flat and even the investment in peers have not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments relied on by the assessee should pass the test of normal behaviour of the assessee in the course of business, namely human conduct, preponderance of probability and surrounding circumstances and if they do not then the addition is justified. The CIT (A) referred to the decision in N.R. Portfolio to explain the role of the assessing officer, he being both an investigator and adjudicator. Further the CIT(A) holds that in Section 143 (3) the word used is evidence which will include circumstantial evidence also and in tax jurisprudence the word evidence has much wider connotation and further the word material used in Section 143(3) of the Act, showed that the assessing officer not being a court could rely upon material which might not be strictly admissible under the Indian Evidence Act and therefore the assessing officer is not fettered by the technical rules of evidence and would be entitled to act on the material . Further the CIT (A) holds that as per the principle laid down in Sumati Dayal the true nature of transaction can be ascertained from surrounding circumstances and proof beyond reasonable doubt has no applicability in determination of matters under taxing statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82 ITR 540 (SC) are quoted before me during the course of hearing at the Revenue s behest. It strongly argues that the department has disallowed/added the impugned STCL based on circumstantial evidence unearthed after a serious of search actions/investigations undertaken by the DDIT (Inv). I find no merit in Revenue s instant arguments. The fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase/sale of shares through registered brokers by banking channel, demat statements etc. The Revenue s only case as per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries. I find that there is a not even a single case which could pin-point any making against these assesses which could be taken as a revenue nexus. I make it clear that the CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight. I notice that this tribunal s coordinate bench s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is not a single case which could pin-point against the assessee and therefore was of the view that the decision in Mahavir Jhanwar could be applied to the assessees case as well. We note that in the decision in Mahavir Jhanwar four decisions of the High Court have been referred to, two of which are of this Court namely Carbo Industrial Holdings Limited and Emarald Commercial Limited, the other two decisions are of the Bombay High Court in Shri Mukesh Ratilal Marolia and that of the Punjab and Haryana High Court in Prempal Garg. Thus, the predominant issue which falls for consideration is to ascertain whether the claim of LTCG would be considered as genuine. The assessee pleads absolute innocence, a regular trader in shares and stocks, payments effected and received through banking channels, her stock broker is a reputed person, the financial advisor is a reputed organization, the regulatory authorities namely SEBI or The Stock Exchange have not taken any action against the trading of the shares of the said company, the materials which appear to be the basis for the assessment were not furnished to the assessee, the person who is stated to have given statements were no mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a report and can the assessing officer or the CIT (A) can proceed on the basis of such report . The above submission is sought to be buttressed by placing reliance on the decision in Sesa Sterlite and Odeon Builders. 44. In Sesa Sterilite, all the assessees were traders and exporters of iron ore and some of them were also miners and processors of the ore. Allegations of large-scale illegal mining and trading necessitated the Government of India to appoint a Commission of Inquiry under Section 3 of the Commission of Inquiry Act, 1952. The Commission so appointed by the Union of India submitted three reports wherein finding was rendered with regard to the violation of various statutes and other infirmities and that there were illegal exports particularly by means of under-invoicing on the part of the mining lessees and exporters. In the said case this report was the basis for the Income Tax Officer to issue notice under Section 148 of the Act proposing to re-open the assessments under Section 147 of the Act for the assessment year 2008-2009.The reason for re-opening were: (a) Under-invoicing of exports by the assessee, (b) Illegal mining activity and income arising fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced for the first time before this Court during the course of the arguments of these appeals. It is submitted in Smt. Kavita Gupta, it was held that a mere report of the DDIT suggesting that some of the gifts received by the assessee therein may be non-genuine and that to when not confronted to the assessee was not sufficient to conclude that the gifts obtained by the assessee were not genuine. It was further argued that the report of the DDIT is a third-party information which has not been independently subjected to further verification by the assessing officer who has not provided the copy of the statements to the appellants. Thus, the appellant thereby denying opportunity of cross examination to the assessee therein who had in the said case discharged the initial burden of substantiating the purchases through various documents is in violation of principle of natural justice. In support of such contention, reliance was placed on the decision of the Hon ble Supreme Court in Odeon Builders. 47. We are required to test the correctness of the objection raised by Mr. Surana the learned senior counsel with the aid of the aforementioned three decisions. The decision in Sesa Sterili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Director (Intelligence) suggesting that some of the gifts obtained by the assessee therein were not genuine and such report having been not confronted to the asessee therein was not sufficient to conclude the gifts were not genuine. The said decision is distinguishable for several reasons. Firstly, the Court considered as to whether the assumption of jurisdiction under Section 263 of the Act by the CIT (A) was justified and on facts the Court was satisfied that when the scrutiny assessment was completed under Section 143(3) the assessing officer had conducted a proper inquiry. Therefore, the Court found that there was no cause for invoking power under Section 263 of the Act by merely relying upon the report of the Deputy Director (Investigation) which was not furnished to the assessee therein. These distinguishing factors will clearly show that the decision is inapplicable to the facts and circumstances of the cases on hand. In Odeon Builders the appeal filed by the revenue was dismissed by the Hon ble Supreme Court as no substantial questions of law arise from the order passed by the tribunal. The CIT (A) and the learned Tribunal concurrently held in favour of the assessee ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted for monies, as alleged by the Government of India itself is massive. The show-cause notices were issued a substantial length of time ago. The named individuals were very much present in the country. Yet, for unknown, and possible unknowable, though easily surmisable, reasons the investigations into the matter proceeded at a laggardly pace. Even the named individuals had not yet been questioned with any degree of seriousness. These are serious lapses, especially when viewed from the perspective of larger issues of security, both internal and external, of the country. 50. The Hon ble Supreme Court proceeded to frame two issues the first of which was the appointment of a Special Investigation Team (SIT) and the justification for appointing a Special Investigation Team was made by the Hon ble Supreme Court in the following terms: In the light of the fact that the issues are complex, requiring expertise and knowledge of different departments, and the necessity of coordination of efforts across various agencies and departments, it was submitted to us that the Union of India has recently formed a High Level Committee, under the aegis of the Department of Revenue in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... International Tax, Mumbai. The report prepared by the DDIT is on behalf of the Directorate of Investigation, Kolkata, and this is evident from the report dated 27.04.2015. Therefore, to discredit the report as if to be initiated by the DDIT on his own accord is in an incorrect submission. The learned senior counsel referred to the penultimate paragraph of the report and submitted that the officer who prepared the report himself mentions it to be a write up and therefore it is not a report in the strict sense. We are unable to agree with the said submission as substance over form has to be looked into and preferred. Therefore, to pick up the words write up and to brand the report to be a personal opinion of the DDIT is not tenable. Therefore, on the grounds raised by the learned senior counsel, we are not persuaded to hold that the report has to be discarded in its entirety and accordingly this objection raised on behalf of the assessee is decided against them. 52. Having steered clear of the objection raised regarding the report, we shall briefly deal with the contents of the report which states that the DIT, Kolkata had under taken the accommodation entries LTCG investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. The report further states that the figure of the total transaction of the brokers is only above Rs. 15,970 crores as against the total trade in the script which is more than Rs. 38,000 crores. The reason being that there are other brokers from other cities including some leading names who have traded in these scripts but they could not be covered in the investigation. Further the report states that the department was able to establish full cash trail starting from cash deposit account to the accounts of the beneficiary for nearly a sum of more than Rs. 1575 crores and the broker wise split up was provided in a tabular form. The report explains the modus operandi in the following terms:- Modus Operandi The whole business of providing entries of bogus LTCG over the years have become much more organised and with economy of scale in full operation the stake involved have become huge. Before the actual transaction start taking place there are brokers in different towns who contact prospective clients and take paper booking for entries. The Commission to be paid to the operators is decided at this stage however, no money is paid. Once the booking is complete the operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnitude. The approach of the department cannot therefore be faulted. Therefore, a different approach is required to be taken on the effect and efficacy of the report according to the department is in the nature of a project. The Court sit in judgment over the methodology adopted by the department as no taxpayer is entitled to any benefit which shall not accrue to him under the provisions of the Act. If any dubious methodology has been adopted for the purpose of availing certain benefits not admissible under law, the same will not come within the ambit of tax planning but shall be a case of tax avoidance by adopting illegal methods. Therefore, we are of the view that the department was justified in proceeding to take up the cases, not only within the jurisdiction of the state of West Bengal but other states as well. Thus, the moot question would be if the report is the starting point for considering as to how the claim of LTCG/LTCL by the respective assessees were genuine, we should consider as to whether the assessing officers have committed any error of law, error of jurisdiction or error on facts, leading to the assessments being held to be not sustainable. 55. The first argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sciplinary authority except in cases falling under no notice, no opportunity and no hearing categories. Further it was held that if no prejudice is established to have resulted from such violation of procedural provisions no interference is called for, against the ultimate orders. The test laid down was whether the person has received a fair hearing considering all things as the ultimate test is always the test of prejudice or the test of fair hearing as. Further the Hon ble Supreme Court pointed out a distinction between a case of no opportunity and a case of no adequate opportunity and while examining the latter case, it was held that the violation has to be examined from the stand point of prejudice, in other words the Court or the tribunal has to see whether in the totality of the circumstances, the delinquent officer/employee did or did not have a fair hearing and the orders to be made shall depend upon the answers to the said query. Further it was held that there may be a situation where interest of the state or public interest may call for curtailing of rule of audi alteram partem and in such a situation the Court may have to balance public/state interest with the requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically indicted by those persons from whom statements have been recorded. 59. We are conscious of the fact that there may be exceptions however nothing has been brought before us to show that there was an exception in any of these appeals heard by us. In a few cases the assessee has been made known of the statement of the Director of the penny stock company or the stock broker, entry operator despite which those assessees could not make any headway. While on this issue, we need to consider as to whether and under what circumstances the right of cross examination can be demanded as a vested right. In Kishanlal Agarwalla, the Hon ble Division Bench of this Court pointed out that no natural justice requires that there should be a kind of formal cross examination as it is a procedural justice, governed by the rules and regulations. Further it was held that so long as the party charged has a fair and reasonable opportunity would receive, comment and criticize the evidence, statements or records on which the charges is being against him, the demand and tests of natural justice are satisfied. 60. In Bakshi Ghulam Mohammad AIR (1967) SC 122 the Hon ble Supreme Court held that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urns and any other indicators SEBI may develop. We believe that with effective and timely monitoring by SEBI a significant number of such instances can be checked in time. Once such instances are detected, SEBI should invariably share this information with CBDT and FIU. Barring such entities from securities market would not be of strong deterrence in itself. In case it is established, the stock platforms have been misused for taking LTCG benefits, prosecution should invariably be launched and relevant sections of SEBI Act. Section 12A read with section 24 of the Securities Exchange Board of India Act 1992 are predicate offences. Enforcement Directorate should then be informed to take action under Prevention of Money Laundering Act for the predicate offences. 64. From the above it is seen that there is a discussion about the modus operandi adopted and the SIT opines that there is an urgent need for having an effective, preventive and punitive action in such matters to prevent recurrence of such instances. This is a relevant aspect to be borne in mind. 65. Thus, the report submitted by the investigation department cannot be thrown out on the grounds urged on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment under Section 143(3) of the Act. The assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non-furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced before us by the learned standing counsel for the revenue, nothing prevented the assesses who are ably defended by Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case. 66. While on this issue, it is important to take note of the decision in T. Takano. In the said case, the SEBI took a stand that the investigation report under Regulation 9 of the SEBI Regulations could also include sensitive information about the business affairs of various entities and persons concerned and if disclosed it would affect their privacy and the competitive position of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the stock broker is required to maintain in the conduct of his business. It was further pointed out that it is a fundamental principle of law that prove of an allegation levelled against a person may be in the form of direct substantive evidence or as in many cases such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/ charges made and levelled. It was further held that direct evidence is a more certain basis to come to a conclusion yet in the absence thereof the courts cannot be helpless. It was further pointed out that it is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion. The above tests laid down by the Hon ble Supreme Court were applied to the facts of the case in K.R. Ajmera and it was noted that the scrips in which trading had been done wherefore illiquid scrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we hold that the law laid down in K.R. Ajmera continues to be good law. 72. In the light of the above discussion, the only conclusion that can be arrived at is that the opinion can be formed and the decision can be taken by taking note of the surrounding circumstances which had been elaborated upon in K.R. Ajmera. 73. It is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the manipulative activities of price rigging and insider trading. We can draw a parallel in cases of adulteration of food stuff, more than often action is initiated under the relevant Act after the adulteration takes place, the users of adulterated products get affected etc. Therefore, a holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, we cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The Income Tax department was not privy to such peculiar trading activities as they appear to have been done through the various sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness and coupled with genuinity and identity. The assesses cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assesses have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time. The revenue had placed heavy reliance on the decision in McDowell to show that the claim of the assessee is not case of tax planning to be one of the tax avoidance by indulging in dubious methods. Mr. Bagaria had argued the rule in McDowell was considered in Azadi Bachao Andolan and Vodafone International and it is in the manner explained in these decisions the rule in McDowell needs to be applied. From paragraph 138 onwards the Hon ble Supreme Court considered in detail as to why McDowell and what it says and what it does not say. The argument of Mr. Bagaria would primarily rests on as to what would mean by a sham transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time and more importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the assessing officer cannot be faulted. 76. It was argued that unless there are foundational facts, circumstantial evidence cannot be relied on. This argument does not merit acceptance as wealth of information and facts were on record which is the outcome of the investigation on the companies, stock brokers, entry operators etc. Based on those foundational facts the department has adopted the concept of working backward leading to the assessees. While at that relevant stage the sounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over, were all taken into consideration to negative the claim for exception made by the assessee. Therefore, the department was fully justified in taking note of the prevailing circumstances to decide against the assessees. 77. While on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said evidence being unrebuted, can be used against him by holding that it was a receipt of an income nature. The Hon ble Supreme Court proceeds to discuss the facts of the case where the dispute was whether the winnings of the assessee therein were from horse races. Pointing out as to how this matter has to be examined, it was held that the matter has to be considered in the light of human probabilities and by applying the said test it was held that the assessee s claim therein about the amount being her winnings from horse races was not genuine. 79. It was argued on behalf of the assessees that the decision in Durga Prasad More and Sumati Dayal cannot be relied upon by referring to the factual scenario in those cases. The question would be as to whether the interpretation sought to be given by the learned Advocates for the assessees as regards the principle laid down by the Hon ble Supreme Court in the aforementioned decisions is justified or not. In Salmond On Jurisprudence, 12th Edition, the concept of ratio decidendi was explained by stating that what it decides generally, is the ratio decidendi or rule of law for which it is authority; what it decides between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee is on him, if he disputes, it is not liable to tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation and in the absence of such proof the revenue is entitled to treat it as taxable income. Further, it was held that where the nature of and source of a receipt whether it be of money or of the property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. 82. In Kale Khan Mohammad Hanif, one of the questions referred was whether the burden of proof, source of cash credit is on the assessee. It was held that the answer to question must be in the affirmative and that is how it was answered by the High Court therein. It was held that the onus of proving the source of the sum of money found to have been received by the assessee is on him, if he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provision of the Act. 83. In Tharakumari, the appeal by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the nature of cash received during the accounting year and it is not necessary for the revenue to locate the exact source. Further, it was observed that the Court was conscious of the doctrine of source of source or origin of origin and pointed out as follows: We are conscious of the doctrine of source of source or origin of origin and also possible difficulty which an assessee may be faced with when asked to establish unimpeachable creditworthiness of the share subscribers. But this aspect has to be decided on factual matrix of each case and strict or stringent test may not be applied to arms length angel investors or normal public issues. Doctrine of source of source or origin of origin cannot be applied universally, without reference to the factual matrix and facts of each case. The said test in case of normal business transactions may be light and not vigorous. The said doctrine is applied when there is evidence to show that assessee may riot be aware, could not have knowledge or was unconcerned as to the source of money paid or belonging to the third party. This may be due to the nature and character of the commercial/business transaction relationship betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge the onus under Section 68 of the Act. Further it was held that credit worthiness cannot be proved by mere issue of a cheque or by furnishing a copy of the bank account and circumstances might require that there may be some evidence of positive nature to show that the said subscribers had made a genuine, investment as well as angel investor after due diligence or for personal reasons and the findings or a conclusion must be practicable, pragmatic and might in a given case take into account that the assessee might find it difficult to unequigibly established credit worthiness of the shareholders. After noting the several decisions, it was held that the Court or the Tribunal should be convinced about the identity, credit worthiness and the genuineness of the transactions and the onus to prove the three factoms is on the assessee as the facts are within the assessee s acknowledge. Mere production of incorporation details, PANs or the fact that the third persons or the companies had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. Further it was held that the facts in the case reflect prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares in unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased the said shares and the transaction was held to be an attempt to hedge the undisclosed income as LTCG. In Suman Poddar Versus ITO (2019) 112 Taxmann.com 330 (SC) it was held that the share transactions were bogus because the company whose shares were allegedly purchased was a penny stock and this decision was affirmed by the Hon ble Supreme Court in (2019) 112 Taxman.com 330. In CIT Versus Oasis Hospitality Private Limited (2011) 333 ITR 119 (Del) it was held that the initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68 and those are: (i) identity of the investors; (ii) their credit worthiness/investments and (iii) genuineness of the transactions and only when these three ingredients are established prima facie, the department is required to undertake further exercise. The Court after noting the legal position had examined the facts of the case, the modus operandi and allowed the appeal filed by the revenue. This decision was followed in PCIT Versus Prabha Jain (2021) 439 ITR 304 (Mad). 88. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the AO made in the assessment order on the issue. The appellant has stated that it has not been allowed cross-examination of parties on the basis of whose statement, the addition has been made. On this issue it is observed from the assessment record that the AO has made the addition on the strength of independent analysis of the documents to arrive at the conclusion that the appellant has failed to prove genuineness of the transaction in respect of STCL as discussed above. Statements and other material found in the course of investigation has been used by him as a corroborative material to strengthen his findings. As per the requirements of Section 68 of the Act, the AO has shifted the onus back on the appellant by confronting the adverse findings. Therefore, the appellant has failed to discharge the onus cast upon it u/s. 68 of the Act to explain the transaction. The Investigation Wing has conducted detailed enquiries, made analysis of the seized/impounded documents and made analysis of beneficiaries. The report prepared contains details of complete modus operandi, commission charge against accommodation entries, list of conduit companies, list of their bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as why the investment in the shares transacted by the assessee was not justified in view of the comparison of the other shares available. The Assessing Officer also pointed out the price fluctuation in the shares of the companies over a period, dividend history and other financial parameters to substantiate that there was no term capital loss against receipt of cash money. The Ld. Assessing Officer accordingly concluded that the addition was made on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. In view of the above facts and circumstances and in law, we find that in instant case addition in dispute is not solely on the basis of the statement of persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surround circumstances and preponderance of probability. We accordingly uphold the finding of the CIT(A) on that issue in dispute. The relevant grounds of the appeal of the assessee are accordingly rejected. After describing the general modus operan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of business, purchase of share of face value Rs. 10/- at rate of Rs. 491/- by any person and assessee s contention that such transaction is genuine and credible and arguing to accept such contention would only make decision of judicial authorities fallacy. Evidences put forth by Revenue regarding entry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of long term capital gains assessee has failed to prove that share transactions are genuine and http://itatonlin.org could not furnish evidences regarding sale of shares except copies of ITA 841/2019 Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprises dealing with share transactions net worth of company is not known to assesses. Even brokers who coordinated transactions were also unknown to assessee. All these fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court has also dealt with arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. Ld. AR arguments that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this Case, Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK Rajeshwari vs. ITO in ITA No. 17231Bang/2018, order dated 12.10.2018. Abhimanyu Soin vs. Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 591 Nag/2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT no. 995/Mum/2012, order dated 03.08.2016. ITA 841/2019 page 9 of 10 Disha N. Lalwani vs. ITO in ITA No. 6389/Mum/2012, order dated 22.03.2017. ITO vs. Shamin M. Bharwani MANU/IU/0493/2015: [2016] 69 taxmann.com 65. Usha Chandresh Shah vs. ITO in ITA No. 6858/Mum/2011, order dated 26.09.2014, CIT vs. Smt. Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht that questions 2 and 3 or which it directed the Tribunal to state a case would cover the scope and ambit of question 3 on which the revenue had asked for reference. We think that the two questions on which the reference has been made impugn the findings and the validity of the Tribunal s conclusion that Rs. 10,80,000 was not an income from undisclosed sources, but the, product of a genuine sale by the vendor companies. Though this question, in what circumstances will this Court interfere with the finding given by the Tribunal or arrive at different conclusion to that arrived by it. In our view, the High Court and this Court have always the jurisdiction to intervene if it appears that either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory of it, or it has acted on material partly irrelevant or where the tribunal draws upon its own imagination imports facts and circumstances not apparent from the record of bases its conclusions or mere conjectures or surmises or where no per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source thereof or the explanation offered was, in the opinion of the ITO, not satisfactory, the sums so credited could be charged to income-tax as income of the assessee of a relevant previous year. Section 68 was inserted in the I.T. Act 1961 only to provide statutory recognition to a principle which had been clearly adumbrated in judicial decisions . Section 68 thus only codified the law as it existed before 1.4.1962 and did not introduce any new principle or rule. Therefore the ratio laid down in the three Supreme Court Judgments is equally applicable to the interpretation of Section 68 of the 1961 Act. We may also state that the learned counsel for the assessee vaguely referred to some decision taking the view that it was necessary for the AO, before making the addition under Section 68, to prove that the share application monies actually emanated from the assessee and represented undisclosed income of the assessee. He, however, did not cite any of those decisions. In any case the law having been laid down by the Supreme Court in the judgments cited above, we do not think that there is any merit in his submission. A perusal of the order of the Tribunal shows that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l No. 23976 of 2017 dated 10.04.2017 wherein the judgment of this Court was confirmed wherein the CIT had passed orders under Section 263 of the Act. It is submitted that in cases where the order impugned before the tribunal where orders passed by the Commissioner under Section 263, independent reasons have been given by the Commissioner as to how the order passed by the assessing officer was erroneous in so far as it is prejudicial to the interest of revenue. In this regard, Mr. Prithu Dhudhoria learned standing counsel has taken us through the order passed by the Commissioner which are subject matter of ITAT No. 122 of 2021 and ITAT No. 156 of 2021. 98. In a few appeals, the order of the Tribunal has been passed in appeals filed by the assessees against the orders passed by the Commissioner invoking the power under Section 263 of the Act. The Learned Senior Counsel for the assessee submitted that the assumption of jurisdiction by the Commissioner under Section 263 is thoroughly flawed that there has been violation of principles of natural justice in as much as the Commissioner has pre-decided the issue even at the stage of issuance of show cause notice. 99. While proposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly the name of the assessee did not feature in the investigation report. Therefore the assessing officer was bound to cause an enquiry by calling upon the assessee to explain and justify the genuineness of the claim for exemption made by them. If the assesses has not established the genuinity at the other end the assessing officer would have no other operation except making the addition under Section 68 of the Act. We find that in these cases the assessing officers missed an important point as to what is the nature of enquiry which he is required to do. The assessing officer merely went by the submission that the stock broker is a public sector company. Unfortunately this is not the manner in which the enquiry should have been conducted. The entire case before the department was the genuinity of the claim for LTCG/STCL and the basis was unhealthy and steep rise of the price of the shares of mostly the paper companies though listed before the stock exchanges their shares were very rarely traded and in the background of these facts the enquiry should have been conducted by the assessing officer. Therefore we are of the clear view that the assumption of jurisdiction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the tangle and he cannot reach out to the expert to bail him out. The assessees cannot be heard to say that they had blindly followed advice of a third party and made the investment. Selection of shares to be purchased is a very complex issue, it requires personal knowledge and expertise as the investment is not in a mutual fund. None of the assessees before us have shown to have to made any risk analysis before making their investment in a penny stock . If according to them they have blindly taken a decision to invest in insignificant companies they having done so at their own peril have to face the consequences. Thus, the conduct of the assessees before us probabilities the stand taken by the revenue, rightly the mind of the assessee as an investor was taken note to deny the claim for exemption. It is in this background that the human probabilities would assume significance. As observed earlier the doctrine of preponderance of probabilities could very well be applied in cases like the present one. We say human probabilities to be the relevant factor as on account of the fact that the assessees are of individuals or Hindu Undivided Families and the trading has been done in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officers were bound to make addition under Section 68 of the Act. 100. It was argued by the learned Advocates for the assessees that their clients are ordinary people who have made meagre investments and they cannot be branded as scamsters when big players in the market have been left scot free and in certain other cases, the big players who were also branded as scammers were allowed to avail the benefit of the Vivad Se Viswas Scheme. In fact, similar argument was advanced when we heard the applications filed by the revenue to condone the delay in filing in some of the present appeals. The argument on behalf of the assessee was that on account of not filing the appeals by the revenue within the period of limitation, their vested right to avail the benefit of the Vivad Se Viswas Scheme was taken away. We have rejected such an argument firstly by holding that there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also stated to be performing the trading activity themselves on behalf of the paper companies. The report states as to why the department has taken an investigation as a project, largely due to huge syndicate of the entry operators, share brokers and money launderers. The report states that Kolkata is a very distinctive place among the cities of India, so far as the accommodation entry is concerned and action has been initiated against more than thirty share broking entities and more than twenty entry operators working in Kolkata. The report states that almost everyone has accepted its activity, participation in providing accommodation entry of LTCG. The investigation has also indicated as to how the scheme of merger is being misused. Though the scheme of merger is approved by the Company Court, in the event it is found that such merger was done/ obtained by playing fraud, the Company Court is empowered to revoke the order and it appears that the Income Tax Department has not taken any steps in this regard to approach the Company Court or the Tribunal with such a prayer. Thus, we have no hesitation to hold that the orders passed by the CIT(A) affirming the orders passed by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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