TMI Blog2023 (3) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... irming the order passed by ld. CIT(A) and deleting the additions made by the Assessing Officer u/s. 68 and u/s. 69C of the Act. Thus the grounds raised by the Revenue are devoid of merits and the same are liable to be rejected. Unexplained cash credit u/s. 68 - A.Y. 2012-13 - As addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation letter from the lenders, Bank statements, Income Tax Return and statement of total income of the various lenders. Thus the assessee has discharged its initial onus namely identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Further the Assessing Officer has disbelieved the same, but has no occasion about the repayment of loans by the assessee in subsequent assessment years. Thus the creditworthiness of the lender is proved. It is not the case of the Assessing Officer that cash was deposited prior to giving loans to the assessee by the lender companies. It is a fact both the lender companies filed their respective Income Tax Return and assessed to tax, just because of the non-compliance of the notice and u/s. 133(6) does not make wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Ltd., Kolkata; (c) Concept Securities Ltd., Surat and (d) Arya Equity (I) Pvt. Ltd., Mumbai. The assessee received gross sale consider ation of Rs.63,30,91,656/- from the above said four brokers by cheques. The sale contracts are made through stock exchange and are subject to Securities Transaction Tax [STT]. The assessee was not promoter of the company of which shares have been purchased. Thus the assessee had shown Long Term Capital Gain [LTCG] of Rs.60,87,74,856/= after claiming proportionate cost of shares as under: Name of the company Sale Price Purchase Price LTCG Sunrise Asian Ltd. (1215840) 63,30,91,656 2,43,16,800 60,87,74,856 2.2. The assessee filed its Return of Income for the Asst year 2015- 16 claiming the above LTCG as exempt under section 10[38] of the Act. The Return was selected for complete scrutiny assessment on the ground of suspicious sale transactions in shares [penny stocks] and claim of exemption of LTCG under section 10[38] of the Act. Therefore the Assessing Officer issued show cause notice based on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Originally shares of Conart Traders (P) Ltd were purchased and the same was converted into Sunrise Asian Ltd. on account of amalgamation. 2 Purchase quantity 3961 270 shares 3 Date of purchase 05/10/2011 25/04/2012 4. Amount Paid Rs.7,92,25,400/- 5 Payment made for purchase Date Cheque No. Amount 01/10/2011 JV 1,64,75,400/- 31/03/2012 657808 Ap 1,35,00,000/- 31/03/2012 657810 1,18,00,000/- 31/03/2012 657811 1,17,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares as per record. This record is forming part of evidences before Hon'ble Bombay High Court. Therefore, the appellant was definitely shareholder before 22/03/2013. A note regarding amalgamation of Conart Traders Ltd, Santoshima Tradelink (P) Ltd and Sunrise Asian Ltd. is reproduced as under: The appellant urges that the abovesaid companies had filed a petition for amalgamation dated 15/12/2012 thereof as per provisions of companies act and the same was filed on 17/01/2013. Copy of the same is filed herewith. The appellant strongly urges that there is list of shareholders on Exhibit - B (page 127) and at the relevant time, the Iceworth Reality (P) Ltd. was shareholder holding shares of 3961270. The appellant urges that there is again reference of shareholder on page no.132 of the petition. The appellant further urges that there is also copy of audit report of Conart Traders Ltd. on page no. 253 265 of part-II of the petition wherein there is reference of shareholders in F.Y. 2011-12. The appellant urges that the amalgamation scheme petition was approved by the Hon'ble Mumbai High Court and the copy of the same lied in page no. 1.18 to 1.24 of paper book-1. The Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, the same statement was used while making assessment in the A. Y. 2015-16 in the case of appellant company and an opportunity to cross examine him was allowed during the appeal proceedings and the same Vipul Vidur Bhatt categorically stated that he had not done any transactions for the appellant company. The appellant explained that there is no evidential value of any statement recorded u/s. 131 of the Act. The appellant further explained that there is no evidential value of any statement u/s. 132 (4) of the Act if the same is retracted by the person concerned. The appellant further explained that the AO relied upon the statement of Vipul Vidur Bhatt who had retracted his statement and later on it is found that there is no reference of any transactions with Iceworth Reality (P) Ltd in his statement. This issue has cropped up through the judgments relied by the appellant. So the addition made was based merely on the self-serving contention in the form of statement without any further corroborative evidences which do not have any evidentiary value in the eyes of law. The facts emanating from the cross examination of Vipul Vidur Bhatt have not been considered by the A.O. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be assessed as unexplained credit. In view of above, the contention of LTCG is proved beyond doubt, hence accepted. 5.3. The second limb of the controversy is relating to technical ground such as the evidences have been collected behind back and not considering the facts of cross examination. For this proposition, reliance is placed on the following decisions of Hon'ble Gujarat High Court: (a) Decision of Hon'ble Gujarat High Court in the case of Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. CIT (2008) 174 taxman 206 (Guj.) wherein it was held as under: In the instant case, the finding was arrived at by the authorities below while denying an opportunity of cross-examining the important witness, namely 'R' and the legal effect of that finding was certainly a question of law which required to be reviewed by the Court. The legal effect of the statement recorded behind the back of the assesses and without furnishing the copy thereof to the assessee or without giving him an opportunity of cross examination, if the addition was made, the same was required to be delete on the ground of violation of the principles of natural ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No.2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view of the above, we are 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 the only basis of issuing the show cause notices. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. Further Departmental SLP was rejected by Hon'ble Supreme Court vide order dated 31.07.2017 in the case of CIT, Central Jaipur vs. Sunita Dhadda wherein the addition based on third party was deleted for want of cross-examination by the appellant. It is clarified that in a case of appellant, cross examination actually has gone in its favour but has not been considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement at the back of the assessee. In our considered view, in the circumstances, the statement of those persons cannot be read against the assessee. Our above view finds support from the decision of the Hon'ble Jurisdictional High Court in the case of . (i) Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax (supra) (ii) CIT Vs. Indrajit Singh Suri (supra) (iii) DCIT Vs. Mahendra Ambalal Patel (supra) (iv) CIT Vs. KantibhaiRevidas Patel (supra) In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissible evidence against the assessee. In absence of these statements, we find that no other material has been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it us. 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact and the ratio laid down by various courts. In the circumstances the conditions to invoke provisions u/s.68 are not prevailing in this case. The addition of Rs.60,87,74,856/- made u/s.68 is hereby deleted. The ground no.4 is allowed. 5.4 The next issue (ground no.5) is addition of Rs.3,04,38,743/- under section 69C of the Act on account of commission treated as unexplained expenditure. As the findings of A.O. for making addition u/s.68 have not been confirmed and the transaction has been considered as genuine, no addition on account of notional commission can be made. The ratio for the issue of cross verification as discussed while dealing with addition u/s.68 are applicable in this case. In view of findings for applicability of section 68 in this order, the addition of Rs.3,04,38,743/- made u/s.69C is hereby deleted. The ground no.5 is allowed. 4. Aggrieved against the appellate order, the Revenue is in appeal raising the following Grounds of Appeal: (1) The Ld. CIT(A) has erred in law and on facts in deleting the addition u/s.68 of the 1.T. Act amounting to Rs.60,87,74,856/- on account of unexplained cash credits. (2) The Ld. CIT(A) has erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also brought on record, the statement recorded of Shri Vipul Vidhur Bhatt, Director of Sunrise Asian Ltd., which shares were being sold by the assessee. Thus the A.O. held that the script was a penny stock purchased at a very low price and then sold at superficial hike in price. Thus the Assessing Officer rightly made additions u/s. 68 of the Act and the same is liable to be upheld. Similarly, commission charges at 5% of Rs. 3,04,38,743/- added as unexplained expenditure u/s. 69C of the Act is also liable to be upheld and the Revenue appeal on these grounds are to be allowed in favour of the Department. 6. Per contra, Shri Devendra Jain Ld. Counsel for the assessee submitted before us the Assessing Officer made the additions without giving proper cross-examination of Shri Vipul Vidhur Bhatt Director of Sunrise Asian Ltd. The ld. A.O. blindly followed the Investigation Report of the Department had failed to consider that the purchase of shares were being done through banking channels, the shares were being dematerialized and sold at different rates on different dates through four registered brokers namely namely (a) Tradebulls Securities (P.) Ltd. Ahmedabad; (b) BMA Wealth Creato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Muktaben Nishantbhai Patel [R/TAX APPEAL NO. 294 of 2021 order dated 12.04.2022, PCIT Vs. Parasben Kasturchand Kochar [R/TAX APPEAL NO. 204 of 2020 order dated 17.09.2020] wherein the Hon ble Jurisdictional High Court dismissed the Revenue appeals, wherein the assessee has proved that the transactions to be genuine and were being done through banking channels and suffered STT Tax thereon. 6.3. The Ld. Counsel drawn our attention to a very recent decision of the Mumbai Bench Tribunal dated 29.11.2022 in ITA No. 2349/Mum/2021 and Others in the case of DCIT vs. Shri Dilip B. Jiwrajka wherein the co-ordinate Bench has considered the Calcutta High Court Judgment in the case of Pr.CIT vs. Swati Bajaj [288 taxmann.com 403] and clearly distinguished the Calcutta High Court Judgment and justified in deleting the addition made by the A.O. u/s. 68 and u/s. 69C of the Act. 6.4. The Ld. Counsel further submitted the very same Sunrise Asian Ltd. shares were being held by Canara Bank, New Delhi, 6% of SAL shares during September 2015 and 11.26% shares SAL during March 2016 and June 2016 respectively. Thus the sale transaction of SAL Shares cannot be doubted as bogus and denying the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AL Shares at such high prices in nothing but a Penny stock. If the assessee would have indulged the sale of SAL shares as a Penny stock, then it would not have retained 27,45,430 shares which is more than 2/3rd of its holding of the SAL shares. Thus the findings of the Ld AO are found to be baseless with cogent materials on record, therefore the same is not sustainable in law. 7.3. This view of ours is supported by the Jurisdictional High Court in the case of PCIT Vs. Muktaben Nishantbhai Patel (cited supra) held as follows: In order to prove the Sale of shares of Sun Shine Worldwide Ltd., assessee filed the following documents before the assessing officer, viz: Ledger Account of Tradebulls Securities Pvt. Ltd, Contract Notes of Tradebulls Securities Pvt Ltd and Bank Statement. In order to prove purchases of shares, assessee filed the following documents, viz: Contra confirmation of broker M/s. Corporate Commodity Broker Private Ltd, Share Certificate, Share Transfer Form, Debit Note and Cash Receipt. The payments were received through account payee cheque and transaction was done through recognized stock exchange. The inflow of shares is reflected by way of physical share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee. 3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant. 4. We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble High Court is as under: Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the enquiry which is being conducted by the assessing officer in scrutiny assessment under Section 143(3) of the Act. 53. In the instant case, a specific request was made for a copy of investigation report as well as copies of statements recorded of different persons. The assessee is noted to have rebutted whatever details were provided by the AO and had sought cross-examination as well. Hence, the facts involved in the present case are noted to be distinguishable from the above case. Further, in respect of the circumstantial evidences the Hon ble Calcutta High Court has not disturbed the settled position of law that circumstantial evidences can be looked into only when direct evidences are not available (Para 69). In the instant case, direct irrefutable evidences were made available to the AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even if one refers to the decision of Hon ble Calcutta High Court. Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d money into fictitious exempt LTCG to evade taxes. The finding is unsupported by material on record is purely an assumption based on conjecture. The relevant extract of the judgment is reproduced for ready reference: 12. Mr. Hossain s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. . 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. (ii) The Lucknow ITAT in the case of Achal Gupta vs. ITO (ITAT Lucknow) I.T.A. No.501/Lkw/2019 held that the documents demonstrates that the assessee had purchased shares through Brokers for which the payment was made through banking channels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt LTCG gains. 7.1 . Notably in the case of Anjana Sandeep Rathi Vs ACIT (ITAT Mumbai) in ITA. No. 4369/MUM/2018, the ITAT Mumbai held that LTCG on sale of shares of M/s Sunrise Asian Limited was not bogus/ sham transaction. While adjudicating in favour of the assessee, observed as under: 5. We have heard the submissions made by rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the findings of CIT (A) in disallowing benefit of section 10(38) of the Act on long term capital gain arising from sale of shares. The assessee during the relevant period had sold shares of M/s. Sunrise Asian Ltd. for a consideration of Rs.14,99,917/-. The authorities below held the sale transaction in aforementioned scripts as bogus and thus, made addition under section 68 of the Act. We find that similar disallowance was made in the case of Narayan R. Rathi (father-in-law of the present assesse/appellant) for the assessment year 2014-15. Narayan R. Rathi had also sold the shares of same company i.e. M/s. Sunrise Asian Ltd. The issue travelled to the Tribunal. The Co-ordinate Bench of the Tribunal in ITA No. 4811/Mum/2018 (supra) deleted the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee is allowed. 7.2 In light of the above decisions, we are of the considered view that Ld. CIT(A) has not erred in law and in facts in allowing the assessee s appeal. 8. It is appropriate to place on record the Hon'ble Supreme Court decisions in the case of Omar Salav Mohamed Sait reported in (1989) [37 ITR 151] (SC) where it is held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in [87 ITR 349], the Hon'ble Apex Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah Bros. Vs. CIT [37 ITR 271] held that suspicion however strong, cannot take the place of evidence. 8.1. Respectfully following the above judgments of the Jurisdictional High Court and that of the Co-ordinate Benches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasized following details on record: 1. Loan creditors confirmation. 2. Bank statements reflecting the loan amount received in cheques and other documentary evidences such as debit note etc. 3. Balance sheet, profit and loss account and schedule thereof the lender parties to prove their capacity. 4. Copy of income tax returns acknowledgement of the lenders. 5. Copy of confirmation and bank statement as and when the payments were made in the subsequent year. It is seen that the return of for Dolex Commercial (P) Ltd for A.Y.2012-13 has been filled on 28/09/2012 u/s.139(1) of I.T. Act, 1961. However, for --Acute Consultancy Ltd it has been claimed that it was trade advance which was paid through banking channel as per details below: DATE Cheque No. Amount Page No 1 .44 04/03/2015 RTGS 11,75,400/- 1.44 04/03/2015 RTGS 53.00.000/- 1.44 05/03/2015 RTGS 56.00.000/- 1.44 09/03/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry conducted by the Investigation wing in some other cases unless material evidence is found in those cases or having paid undisclosed cash and obtained accommodation entries. The appellant strongly urges that, neither at the time of recording reasons nor at the time of assessment, any seized records is brought proving receipt of accommodation entries in lieu of cash. The appellant also submitted that the statement of Vipul Vidur Bhatt ought not to be relied unless the copy of statement is confronted and an opportunity to cross examine him was allowed. The appellant relies on following decisions of Hon'ble Supreme Court wherein addition was made without giving an opportunity to cross examine to the party concerned are deleted. The appellant relied on the decision of Hon'ble Supreme Court in the case of Kishanchand Chelaram Vis. CIT (125 ITR 713) (SC). I am aware about the ratio laid down by jurisdictional High Court in the case of CIT -Vs- RANCHHOD JIVABHAI NAKHAVA reported at 208 Taxmann 35; DCIT v. Rohini Builders (2002) 256 ITR 360; CIT vs. Dharamdev Finance Pvt. Ltd. 43 Taxmann 395 and other case laws supporting the case of the appellant as under: i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in deleted the addition made u/s. 68 being loan received from Dolex Commercial (P) Ltd, and Acute Consultancy (P) Ltd. despite the creditworthiness of the creditors were not proved. The Ld. CIT(A) also failed to appreciate the fact that the assessee had taken bogus accommodation entries in the form of unsecured loans, however duly entered in the books of account so as to evade or reduce the tax liability. In the above circumstances, the order passed by the Assessing Officer is required to be upheld and the additions made thereon is to be sustained. 15. Per contra the Ld. Counsel Shri Devendra Jain appearing for the assessee brought to our notice to the confirmation of accounts on sale of 8,23,770 equity shares of Conart Traders Ltd. at Rs. 20 per equity share, ledger account and allotment of equity shares by Conart Traders Ltd. and Income Tax Returns filed by Acute Consultancy (P) Ltd. for the Assessment Year 2012-13 along with Annual Reports at Page Nos. 30 to 53 of the Paper Book. Further confirmation of accounts, bank statements of the assessee is also placed on record at Page Nos. 54 to 56 of the Paper Book. Similarly, in the case of Dolex Commercial (P) Ltd. loan confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmann.com 370 (Surat-Trib.); order dated 14.03.2022] 7. CIT Vs. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.); order dated 20.03.2012 8. DCIT Vs. Rohini Builders [2003] 127 Taxman 523 (Gujarat); order dated 19.03.2001 16. We have given our thoughtful consideration and perused the materials available on record. The addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation letter from the lenders, Bank statements, Income Tax Return and statement of total income of the various lenders. Thus the assessee has discharged its initial onus namely identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Further the Assessing Officer has disbelieved the same, but has no occasion about the repayment of loans by the assessee in subsequent assessment years. Thus the creditworthiness of the lender is proved. It is not the case of the Assessing Officer that cash was deposited prior to giving loans to the assessee by the lender companies. It is a fact both the lender companies filed their respective Income Tax Return and assessed to tax, just because of the non-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the assessee has been having regular loan transactions with the said entity. We notice in this backdrop that Hon'ble Jurisdictional high court's decision in DCIT v. Rohini Builders, (2002) 256 ITR 360 (Guj) upholding tribunal's conclusion deleting Section 68 addition in view of identical details; squarely applies here. So in their lordships' latter decision in CIT v. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj) confirming this tribunal's another decision reversing Section 68 addition wherein the department head accepted repayment of loan in subsequent year to be correct. We take into account all these facts and judicial precedents to affirm CIT(A)'s findings under challenge deleting the impugned addition. This first substantive ground is accordingly declined. 16.3. In the case of CIT VIS RANCHHOD JIVABHAI NAKHAVA reported at 208 Taxmann.com 35 wherein it has been held as follows: Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 256 ITR 360 (Guj.) wherein it has been held as follows: Once primary documents are given, onus shifts from assessee to revenue. In absence of anything contradictory brought on the table, it wouldn't be fair to confirm addition u/s 68 of the Act. Gujarat High Court went on to the extent of confirming that even if creditors didn't turn up on issue of summons, even then, the transaction can't be termed as bogus because preliminary documents have been put forth by the assessee and nothing contradictory is observed by the revenue. It was contended by revenue that creditworthiness continues to remain unproved because a few alleged parties were i having a meagre income as against hefty deposits made. To this argument, the court held that assessee's duty is discharged once it shows the bank statement of the depositor. It is not assessee's look out to find out source to source, and get into the subject of how the creditor could afford that money. Source is what is required to be proved by the assessee, and the onus immediately gets discharged on submission of preliminary documents like a bank statement of the depositor. Also, if the revenue seriously felt that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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