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TMI Blog2022 (8) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... hares of Bakra Pratisthan Ltd. 2) The assessee reserves right to add, alter and withdraw of any grounds of appeal." 3. Succinct facts are that during the course of assessment proceedings, it was noticed by the assessing officer that return of income filed by the assessee shown Exempted income to the tune of Rs.2,49,54,750/- on account of exempted long term capital gain on listed securities u/s 10(38) of the Act. Details of the same are as under: Name of the Company Sales Price/year Purchase Cost/year Transfer Expenses Exempt u/s.10(38) Bakra Pratisth an Limited 26454750 1500000 0 24954750 The assessing officer observed that trading done by the assessee in the scripts of Bakra Pratisthan Limited who has poor fundamentals and is not doing any significant business activities since its inception. Moreover, trading in the above mentioned scripts has been done by the assessee through a broker namely, Shri Ashok Kumar Kayan who has been found to be engaged in giving bogus LTCG entries by rigging of shares of scripts. Therefore, the assessing officer was of the view that transactions in these scripts have been proved bogus. Therefore, assessing officer issued a show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Investigation Wing wherein they accepted the same facts and thus, proved as Entry Providers. A survey action u/s.133A of the I.T. Act, 1961 was carried in the case of broker of the assessee, Shri Ashok Kumar Kayan, at Kolkata in his office. During survey proceedings Shri Ashok Kumar Kayan has accepted that he and his business concerns are engaged in providing bogus LTCG entries to a large no of clients through a syndicate of brokers and entry operators. Statement of Shri Harshvardhan Kayan son of Shri Ashok Kumar Kayan was also recorded under section 133A for the Act on 27.1.2015 wherein he had also accepted that they provided bogus LTCG entries through Bakra Prathisthan listed at Kolkata Stock Exchange with the help of Shri Sunil Dokania, controller/manager of scripts. The assessing officer noted that said shares of Bakra Prathisthan were heavily used in providing bogus LTCG entries through market price manipulation mainly by Mr Ashok Kayan and his various allies. The said person was detected by the investigation wing Kolkata as a bogus entry provider and his statement has been recorded at various times whereby he has himself admitted to be involved in giving bogus LTCG throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is reproduced below: "1) The learned DCIT had made additions of Rs. 2,49,54,750/- disallowing the claim of exemption in respect of sale of shares of the listed company viz. Bakra Pratisthan Ltd merely because Shri Ashokkumar Kayan, the approved broker of Calcutta Stock Exchange had given statement u/s 131 of the Act on 27.01.2015 during the proceedings u/s. 133A of the Act admitting having involved in providing long term capital gain on shares of the said company. 2) The learned DCIT also observed that the said Ashokkumar Kayan, approved broker and member of Calcutta Stock Exchange was involved in providing long term capital gain with the help of one Shri Sunil Dokani and in response to notice u/s. 133 (6) of the Act which was issued in the assessment proceedings, the Ashokkumar Kayan had reiterated his statement which was given by him before the Investigation Wing, Kolkata. Regarding purchase of shares 3) The assessee strongly urges that he had originally purchased shares of Dhanlabh Merchandise Ltd and Twinkle Merchants Ltd from other parties wherein Ashokkumar Kayan was not involved. 4) The assessee also urges that notice u/s. 133 (6) of the Act were issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Sunil Dokani. 12) The assessee strongly urges that, Shri Ashokumar Kayan also gave details in the form of annexure "A" which contains details of alleged beneficiary to whom long term capital gain was provided and in that list, the name of Mr. Naresh Shah is not included. Cross examination not allowed 13) The assessee strongly urges that he had requested to cross examine the said Ashokkumar Kayan and no cross examination was allowed and, therefore, his statement has no evidential value in this case as held by the Apex Court in the case of Kishanchand Chelaram V/s. CIT(125 ITR 713)(SC). Reliance on statement of Mr. Harshvardhan Kavan recorded U/s. 133A of the Act on 28-01-2015 14) The learned ACIT, grossly erred in relying upon the statement of Mr. Harshvardhan Kayan, S/O Ashokumar Kayan recorded on 28-01-2015 u/s. 133A of the Act. The assessee strongly urges that he had not done any transactions through Harshvardhan Kayan. The assessee also urges that there is no evidential value of any statement recorded u/s. 133A of the Act. The assessee also urges that no statements were confronted in the assessment proceedings and no opportunity was made available for cross examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earning of undisclosed income and giving unaccounted cash to Ashokkumar Kayan in lieu of selling shares of Bakra Pratisthan Ltd through him. 19) The assessee had also purchased shares of several other listed companies and he was in the habit of investing monies in the shares. 20) The assessee strongly relies on the decision of Hon'ble Gujarat High Court in the case of Pankaj Enca V/s. CIT (Tax Appeal No. 976 of 2015). The assessee strongly urges that, even if the entry operator or any third party admitted in the business of providing entries, no addition is justified merely on the base of such statement unless an opportunity to cross examine is available. 21) The assessee relies on decision of Hon'ble CIT (A), Central Circle in his own case in the A. Y. 2012-13, Appeal No. CAS-4/631/2015-16 dated 20.06.2016 wherein the identical issue was involved and the additions were deleted. The relevant part of the assessment order is as under. "To sum up fhe departments case is based on just statements of Kayan Group, who as discussed above have never stated that all the transactions are bogus nor the case of the assessee is alleged to be appearing in the list of bogus tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xchange through whom the shares have been transacted have been suspended by CSE and SEBI for share manipulation. Consequently, the assessing officer had treated the gains disclosed by the assesee as LTCG as unexplained cash credit. It was the submission that on appeal, the Ld. CIT(A) had directed the assessing officer to treat the profit out of the sale proceeds in the share transactions as LTCG by following the decision of the Coordinate Bench of this Tribunal in the case of DCIT Vs. Jagdish Prasad Goel (HUF) in ITA Nos. 541 & 542/K/2010 for AY 2005-06 as also the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Bhagwati Prasad Agarwal in ITA No. 22 of 2009 dated 29.04.2009. It was the submission that the transactions were fraudulent and the order of the CIT(A) was liable to be reversed. 6. In reply, the Ld. AR submitted that the order of the Ld. CIT(A) was liable to be upheld. It was the submission that the assessee had purchased 14000 shares on 14.02.2003 through M/s. Mukesh Dokania & Co. It was the submission that out of the same 7000 shares were sold on 12.03.2004 and the balance 7000 shares were sold on 25.03.2004 at Rs.184/- and Rs.314/- respectively through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. was considered as a genuine scrip and therefore the Tribunal has deleted the addition. Hence, Ld. Counsel contended that addition made by the Assessing Officer is not justified and may be deleted. 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that solitary grievance of the assessee is the addition of Rs.2,49,54,750/- made by the assessing officer considering long term capital gain (LTCG) as non-genuine. The assessee has declared long term capital gain (LTCG) of Rs.2,49,54,750/-on sale of shares of Bakra Pratisthan Ltd. (BPL). The assessee originally purchased shares of Dhaslabh Mercrendise Ltd and Twinkle Merchants Ltd. Later on, both these companies were merged with Bakra Pratisthan Ltd. The assessing officer stated that BPL was found controlled by one Shri Ashok kumar Kayan, who admitted before the authorities of Inv. Wing Kolkota that he is into providing accommodation entries of various types through several companies contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first of which is the entry operator who is said to have managed the overall scam as the entry operator controls several paper companies which have been utilized for routing the cash. The operator is also in control of some penny stock companies whose shares are listed on recognized stock exchanges. It is true that "penny stock" is not an offensive word or comes with a stigma. Penny stock is a stock which trades at a relatively low prices and market capitals. These stocks are highly speculative and they are categorized as high risk stocks largely due to lack of liquidity. Furthermore, the shares of the penny stock are closely held as the general public is not interested in these stocks due to the poor financials of the listed companies. It is for such reasons the entry operators are said to have chosen these penny stocks. In certain cases before us it has been established that the promoters/ Directors of the penny stock companies are also involved and they allowed the entry operators to manage the affairs of the company in return of a commission paid to them. The third set of persons involved, are the share brokers. As submitted by Mr. S.N. Surana, learned Senior Counsel, the brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Justice. More often we have stated that due care and caution has to be taken when appeals are drafted and filed before this Court and this is not the first case which has come up before us where the pleadings were irrelevant to the facts of the case. However, the substantial questions of law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 of the Act. Furthermore, we have to note that more than 90 appeals were allowed by the Tribunal in a single order and the facts of the 89 assessees were not noted by the Tribunal. In any event, the assessee, Mr.Gupta was quite happy with the result and he made no attempt to request the Tribunal to note his facts which according to him may have been unique as was submitted before us. If the assessees could take shelter under an order passed by the Tribunal which has not discussed even the basic facts of the assessees' case, we are not inclined to non-suit the revenue on the ground that some of the questions suggested in ITAT No. 44 of 2020 may not be relatable to the assessee- Gup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 14. In the result, Cross Objection filed by the assessee in CO.No.16/SRT/2021, are dismissed. 15. Now, we shall take Revenue's appeal in ITA No.197/SRT//2020 for AY.2012-13 wherein grounds of appeal raised by the Revenue are as follows: "1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.12,14,13,015/- (after rectification u/s 154 of the Act, which originally was of Rs.13,75,13,015/-) made on account of unexplained cash credits u/s 68 of the I.T. Act without appreciating the fact that one of the directors of the company M/s GCSL had admitted on oath in the statement recorded u/s 131 of the I.T. Act that he had provided accommodation entries for loans and advances by providing cheques in lieu of cash received from Shri Naresh Nemchand Shah. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that the genuineness of loan transactions was proved without considering the surrounding circumstances of the transactions and the fact that even during the assessment proceedings, the said Director of M/s GCSL has submitted in writing on 07.10.2017, that he stood by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the year should not be treated as unexplained cash credit u/s.68 of the Income Tax Act, 1961 and be added to your total income for A.Y.2012- 13." 17. In response to the show cause notice, the assessee has furnished his reply to the Assessing Officer. The relevant portion of the reply is reproduced below: "4.1 Your Goodself has proposed to make an addition of Rs.13,75,13,015/- u/s. 68 of the Act being the amount of loans received from Gujarat Computer & Software ltd. the addition is proposed merely because one of the Director Tamaal Roy admitted in his statement u/s 131 of the Act during the survey action u/s 133A of the Act, the transactions as accommodation entries. 4.2 It is submitted that various documents relating to the loan from said company were filed vide letter dated 10.10.2017. The copy of the same is gain filed for ready reference. 4.3 It is submitted that Shri Tamaal Roy, Director of Gujarat Computer & Software Ltd. had given two statements during the survey proceedings u/s 133A of the Act one on 03.03.2016 and the other on 11.03.2016. In the first statement dated 03.03.2016. It is apparent that the investigation was going on in respect of huge payment of Rs.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. On the basis of the statement of the Shri Tammal Roy during survey u/s 133A and his confirming the statement vide letter dated 07.10.2017, the assessing officer, made the additions to the tune of Rs. 12,14,13,015/- considering the loan obtained from GCSL as non-genuine. 19. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 20. Shri H. P. Meena, Learned CIT(DR) for the Revenue, argues that as per statements investigation was going on in respect of huge payment of Rs.119/- crores to M/s HAH Global Enterprise & Services and when confronted by the Investigation Officer regarding genuineness of the payments, Shri Tamal Roy diverted the issue towards the story of accommodation entries. On perusal of the Question/Answer No.20 of the statement, it is very much clear that Shri Tamaal Roy had not diverted the issue though he had expressed modus operandi adopted by him wherein he used to pay cash to the Angadiya who in turn arranged foreign remittances to his company M/s GCSL. He was required to pay Angadiya in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness and creditworthiness of the loan, the assessee filed confirmation signed by the director of the company, copy of bank statement of creditor, copy of return of income of creditor, PAN number, Name and address and copy of audit report of creditor. All these documents were also filed by Shri Tammal Roy, director of the company before the assessing officer along with letter dated 07.10.2017, which confirm the contention of the assessees. The ld Counsel contended that Rs.l.61Crore is the opening balance and Rs.12,14,13,015/- is the correct amount of loan taken during the year. The assessing officer passed the order u/s 154 of the Act on bringing this mistake to notice. The ld Counsel argued that the survey upon GCSL was conducted for the transactions entered into with HAH Global Enterprise & Services. Most of the statement was recorded during the survey on this issue only, therefore, the transaction related to the assessee was not the subject matter of survey and Shri Tammal Roy raised story of providing accommodation entry to the assessee to divert the attention of the survey team. The ld Counsel stated that Shri Tammal Roy's statement that 'angadias' was used to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if the transaction is through regular banking channels and creditor has confirmed the transactions, such transactions are genuine and therefore, addition made by the assessing officer are not sustainable. 25. The assessee also stated that complete amount of loan has been repaid in subsequent years through regular banking channel. There have been no adverse findings by the assessing officer in this respect. Hon'ble Gujarat High Court in the case of CIT Vs. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj.), has held as under: "...it has also come on record that the said loan amounts been repaid by the assessee in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the /TAT has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by the ITAT." Therefore, such transactions have been allowed by the Hon'ble High court of Gujarat. The assessee stated further that his premises have been covered u/s 132 of the Act on 19.10.2011 and u/s 133A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducting the survey u/s 133A of the Act. The assessee provided bank account of the creditor with audited accounts. 27. The ld CIT(A) noted that assessee paid interest through regular banking channels to the creditor. The TDS was deducted upon such interest payments and deposited in the government account. Moreover, the full loan amount was repaid through regular banking channels to the creditor in subsequent years. These facts further prove the genuineness of transactions beyond doubt. The ld Counsel submitted that statement recorded during the course of survey do not have evidentiary value, if these are not supported by some corroborative evidence. In the assessees case, additions have been made solely on the basis of statement recorded during the course of survey. One side Shri Tammal Roy, stated that he provided accommodation entries to the assessee, other side, he signed confirmation twice i.e. first was given to the assessee and second was directly filed before the assessing officer, along with the letter dated 07.10.2017. These facts prove that Shri Tammal Roy gave statement in contradiction of the documents signed by him even after post survey proceedings. Therefore, the st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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