TMI Blog2022 (7) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at to be exempt u/s.10(38) of the Act, cannot be brought to tax under the head adventure in the nature of trade . In regard to the plea of ld.Sr. DR that two terms of Short Term Capital Gains has to be assessed also no hold merger insofar as the assessee has not sold the shares or transferred the shares of AAR Infrastructure. In far, the AAR Infrastructure merged with CCL International Ltd. When such merger itself has not considered as transferred to treat that the assessee s shareholding in AAR Infrastructure has got extinguished or has been transferred for the purpose of computing Short Term Capital Gains, will not arise. The assessee has been issued 1.25 lakhs shares of CCL International Ltd. in lieu of 50000 shares in AAR Infrastructure held by the assessee. There is no transfer as a consequence of the merger to treat the same as Short Term Capital Gains. - Decided against revenue. - ITA No.212/CTK/2019 And ITA No.213/CTK/2019 - - - Dated:- 6-7-2022 - Shri George Mathan, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri Mohit Sheth, Advocate For the Revenue : Shri S.C.Mohanty, Sr.DR ORDER PER BENCH : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had made an investment of Rs.5 lakhs and the share value of CCL International Ltd. increases 32 times which clearly showed that this was a case of bogus long term capital gain claim. 5. It was the submission by the ld. Sr. DR that the ld. CIT(A) had deleted the addition on the ground that the transaction is a genuine transaction and it had complied with all the requirement for the claim of exemption u/s.10(38) of the Act. It was the submission of ld. Sr.DR that in respect of shares of CCL International Ltd. the SMC Delhi Bench of the Tribunal had in the case of Anif Rastogi and Anju Rastogi in ITA No.3809/Del/2018 vide an order dated 08.01.2019 had held that the claim of long term capital gains u/s.10(38) of the Act was not genuine. Ld.Sr. DR also placed before us a written submission, which is extracted hereinbelow :- Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence and is the creation of Court. It is part of legal and statutory justice and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the Revenue cannot rely on any evidence which has not been subjected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test the veracity of the version given in examination-in chief. It was held that even if cross-examination was allowed and the donors who had disowned the making of gifts, were confronted and shown to be factually wrong, the same would have made no difference, as there was no natural love and affection and in its absence, the gifts were not genuine. The appeal of the assessee was accordingly dismissed. Reverting back to the present case, the assessee firm never made any request to the AO to cross-examine the witnesses or for that matter also before the CIT(A) to cross-examine such witnesses. It is an argument just for the sake of the argument. 3. The Hon'ble Kolkata High Court in the case of Swati Bajaj others in lA No.GA/2/2022 In ITAT/6/2022 dated 14.06.2022 has held as under: 55. The first argument on behalf of the assessee is that the copy of the investigation report was not furnished to them despite specific written request made on behalf of the assesses to furnish the copy of the report, the statements recorded and provide those persons from whom statements were recorded to be cross examined on behalf of the assessee. There is no dispute to the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering 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 requirements of natural justice and arrive at an appropriate decision. 57. In a very recent decision of the Hon'ble Supreme Court in M.]. lames after referring to a catena of decisions on the point the Hon'ble Supreme Court pointed out that natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injusti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector of the penny stock company or the stock broker, entry operator despite which those asses sees 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 right of hearing cannot include the right of cross examination and the right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. 65. Thus, the report submitted by the investigation department cannot be thrown out on the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment 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 68. It is equally not in dispute that whatever information which was required to be made known to the assessee has been informed to the assessee by the assessing officer by issuance of a notice to each of the assesses to which they have responded by submitting their replies. Therefore, in the absence of any prejudice caused to the assessee on account of non-furnishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch illiquid scrips is not impermissible yet voluminous trading over a period of time in such scrips is a fact that should attract the attention of a vigilant trader engaged in such trades. It was further pointed out that though proximity of time between the buy and sell orders may not be conclusive in an isolated case such an event in a situation where there is a huge volume and trading can reasonable point to some kind of a fraudulent/manipulative exercise with prior meeting of minds. Such meeting of minds so as to attract the liability of the brokers / sub-broker and may be between the brokers/sub-broker and the client or it could be between two brokers/sub brokers engaged in the buy and sell transactions. Further it was pointed out that when over a period of time such transactions have been made between the same set of brokers or a group of brokers a conclusion can be a reasonable reached that there is a concerted effort on the part of the brokers concerned to indulge in synchronized trade the consequences of which is large volumes of fictitious trading resulting in unnatural rise in hiking the price/value of the scrips. In the said case, it was argued that on a screen based tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted. 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. 6. Without prejudice to the above, reliance is placed on the decision of the Hon'ble Supreme Court in the case of ITO vs. M. Pirai Choodi (63 DTR 187) wherein in the absence of an opportunity to cross-examine the witness, the matter was restored to the A.O. The Hon'ble Delhi High Court in the case of CIT vs. P C Chemicals (27 taxmann.com 9) held that where assessment was reopened and additions under section 69A were made without providing statements and materials, on basis of which such additions were made, to assessee, matter should be remitted back without quashing said order. The Hon'ble M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astructure merged with M/s CCL International Ltd. on 20.06.2012 and consequently in lieu of 50000 shares of AAR Infrastructure held by the assessee, the assessee was given 1.25 lakhs shares of CCL International Ltd. It was the submission that all these shares were in demat form. The shares of CCL International Ltd. were sold by the assessee through a Government Broker namely Stock Holding Corporation of India Ltd. and ISE Security Services Ltd., the first sale being on 15.10.2012 and the last sale being on 22.1.2012. It was the submission that the assessee had no control over the merger nor the assessee had any association with M/s CCL International Ltd. it was the submission that when the assessee found the share value of CCL International ltd. to be high, the assessee had sold the same and it booked its profits. The assessee has paid the STT on the transaction. It was the submission that the sale of the shares were done through ISE Security and Services Ltd., a SEBI authorised broker and a member of Bombay Stock Exchange. It was the submission that the transaction of the purchase and sale of the shares were genuine and the assessee was entitled to the claim exemption u/s.10(38) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the assessee clearly is not available to the assessee and the denial of providing these evidences to the assessee along with the opportunity of cross objection becomes a very foundation against the assessee in the course of assessment. It would be worthwhile referred to the decision of the Hon ble Supreme Court in the case of M/s Andaman Timber Industries, Civil Appeal No.4228 of 2006, wherein the Hon ble Supreme Court has categorically held that, As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. The Hon ble supreme Court further went to hold that, Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. In that case, the Hon ble Supreme Court when on to hold that they were of the opinion that if the testimony of these two witnesses is discredited, there was no material with the department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded from him wherein he has repeatedly stated that he has done the transaction through proper channels and has claimed the exemption u/s.10(38) of the Act, but he is willing to pay the tax on the income thereon. When filing his returns the assessee did not disclose the said income as income from other sources nor paid tax on it. But he claimed the exemption u/s.10(38) of the Act. The AO relied upon the statement of Radheshyam Singhania taken in the course of survey and applying the principle of preponderance of probabilities, denied assessee s claim of exemption u/s.10(38) of the Act and brought to tax the entire sale receipts. It should be mentioned here the AO did not give the benefit of even the cost of purchase to the assessee. Here we are faced with the situation that what is the validity of the statement recorded in the course of the survey. The statement of Shri Radheshyam Singhania admittedly has been recorded u/s.131(1A) of the Act. The statement admittedly has evidentiary value but it is still open to the assessee to prove that his claim of exemption u/s.10(38) of the Act is valid and once it is proved with substantial evidence, the statement recorded u/s.131(1A) will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claim of exemption u/s.10(38) of the Act as it was supported by proper and adequate evidence cannot be found fault with. 18. A perusal of the order of the ld. CIT(A) also shows that he has considered the fact that the transaction conducted by the assessee fell within the four corners of the requirements for claiming exemption u/s.10(38) of the Act. 19. The ld. Sr. DR had taken serious objection to the finding of the ld.CIT(A) that he has considered the statement of the assessee that the statement was recorded in the course of survey under duress. That issue no more survives, insofar as the statement recorded in the course of survey admittedly is not conclusive of evidence as has been held earlier. 20. This being so, as the statement recorded from the brokers, who have agreed to penny stock manipulation and the investigation report based thereon having not been relied upon by the ld. AO for the purpose of assessment, the decision relied on by the revenue in the case of Anip Rastogi Anju Rastogi (supra) as also the decision of Hon ble Kolkata High Court in the case of Swati Bajaj (supra), does not apply to the facts of the present case. In these circumstances, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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