TMI Blog2023 (7) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment is dismissed. Bogus LTCG - information as received that racket of generating bogus entries in LTCG in penny stocks had been unearthed - HELD THAT:- In the present case, the entire addition has been made by the AO on the basis of report of investigation wing and report of certain persons. No opportunity of cross verification was provided to the assessee. Under such circumstances, no addition can be made to the income of assessee, specifically when entire basis of addition is investigation report, which was never confronted to assessee, and statement of persons, who were neither examined by the AO nor opportunity of cross examination provided to assessee. Taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Pooja Agarwal [ 2017 (9) TMI 1104 - RAJASTHAN HIGH COURT] as well as in case of PCIT vs. Pramod Jain Others [ 2018 (7) TMI 2161 - RAJASTHAN HIGH COURT] we allow the claim of exemption under section 10(38) of the Act and accordingly delete the addition made by the AO. Hence, the order of ld. CIT (A) is upheld. Commission p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship firms, capital gains, dividend and income from other sources. From the documents /paper submitted by the assessee, the AO found that the assessee during the year under consideration has shown Long Term Capital Gains of Rs. 4,65,83,342/- and claimed exemption u/s 10(38) of the Act. The transaction of purchase/sale of shares leading to LTCG, exempted u/s 10(38) is tabulated by the AO in his order whose details are as under:- Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains MID-POLY LTD 6.07.2011 to 21.08.2011 10,49,267 10.05.2013 to 07.01.2014 2,36,71,642 2,26,22,375 Centron Industrial Alliance Ltd. 12.11.2012 22,00,000 06.02.2014 to 26.03.2014 2,61,60,966 2,39,60,966 While examining the issue of Long Term Capital Gains, the AO noticed the following facts. 2.1 The assessee has shown to have invested in shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land Polymers Ltd is found to be one of such penny stock companies. In view of the above information and credible evidences, a show cause letter dated 18-11-2016 was issued by the AO to the assessee giving detailed discussions at para 3.1( sub-para (2) to(8). For the sake of convenience and brevity of the issue, the sub-para 6 to 8 of AO s order is reproduced as under:- 6. In view of the above detailed discussion in the light of credible evidences gathered during the course of survey actions on different entities, it has been conclusively established that the alleged long term capital gains shown by you on account of purchase/sale of shares of Midland Polylmers Limited is a bogus one and actually represents your unaccounted money routed back to you in the garb of Long Term Capital Gains. It is therefore proposed to treat the said amount of Rs. 4,65,83,341/- as unexplained credit found in your books of account and proposed to be added u/s 68 to your total income for assessment year under reference. 7. During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the beneficiaries in lieu of providing bogus entries. I es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and why it should not be added u/s 68 to the total income. Further, explain as to why an amount of Rs. 29,89,956/- be added u/s 69C to your total income being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains. In response to the show cause letter and also the note sheet entry dated 30-11-2016, the assessee has submitted written reply before the AO which are mentioned at para 4.1 in the assessment order. 4.1 .Please find the reply of show cause notice in respect of Long Term Capital Gain in MIDLAND Polymers and Centron Industrial Alliance shares; the assessee submits as follows:- 1. The assessee has purchased the shares from Bombay Stock Exchange through authorized broker B. Lodha Securities Limited, Jaipur having SEBI Registration No. INB 011074730. 2. Assessee has paid to the Broker through its Bank and the shares are transferred to Demat Account after purchasing from it (Contract Note already submitted. 3. The shares are sold through the Registered Share Broker M/s. B. Lodha Securities Limite4d, Jaipur in the Bombay Stock Exchange (Contract note already submitted). 4. Assessessee has paid the Securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Manoj Kumar Agarwal Kolkatta 02. Shri Pawan Kumar Kayan Kolkatta 03. Shri Harshvardhan Kayan Kolkatta Which admitted that shares of Midland Polymers are rigged and show cause notice also mentioned that SEBI, passed some orders on the issue of manipulation of shares pursuing LTCG/STCG. The statement of above named person on which show cause notice is heavily relied, never mentioned the name of assessee. Further the assessee has sold the entire shares in Jaipur and not in Kolkatta. The Assessee did not know the identity of any of these above named people. Further, even the SEBI in its investigation report on MIDLAND Polymers never made any comment/observations on assessee or even bothered to enquire on assessee; whether the LTCG occurred to assessee is Bogus one. It is always possible for parties to gain from stock market if there is movement in share price due to any reason. The Show cause notice is merely a Guess work. The statement made by the person is on their personal capacity and know where linked to the Assessee. The generalized p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- 5.2 Moreover, following observations have also been made which prove that the transaction was just a cover to launder assessee's money, to give it a colour of genuineness. (i) the assessee has shown purchase of just 38000 shares of M/s Midland Polymers Limited and there were sub division in 1:10 ratio and bonus in 1:1 ratio. It has also shown purchase of 80000 shares of Centron Industrial Alliance Limited which were also sub-divided in 1:10 ratio. (ii) The assessee has pleaded that the share transaction was done through registered broker M/s Bhargava Lodha Securities Limited. It is worthwhile to mention here that this concern is assessee's group concern and it was an easy job for the assessee to mould the things as per his desire in respect of such type of transaction. (iii) The assessee in his reply dated 11.11.2016 (received on 15.11.2016) has submitted that the assessee purchased the shares on Midland Polymers Limited's offer of fully paid equity shares for 29.25 per share. Then in his reply in response to notices dated 18.11.2016 28.11.2016, he claimed that he purchased the shares on BSE and on different rates ranging, between 25 to 27 per shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers/directors of such penny stock company are paid cash commission and in return they allow the operator to manage the affairs of the company. The operator then shows issue of shares of these penny stock companies to the beneficiaries through the route of preferential allotment (Private Placement). Exactly it has happened in the case of Centron Industrial Alliance Limited. More analysis on its financial affairs is made in Para-7 below. The AO at para 5.3 of his order observed that SEBI vide its order dated 27-022015 had suspended trading in Midland Polymers Ltd. and relevant para is reproduced as under - 5.3 The irregularities committed by such penny stock companies and their apparent involvement in the Long Term Capital Gains/STCG/Loss scam, were not remained unnoticed, for long, by the SEBI. The SEBI vide its order dated 27.02.2015 has suspended trading in Midland Polymers Limited. The order is reproduced hereunder. To All Trading Members of the Exchange Sub: Suspension in trading of securities Trading members are hereby informed that based on the parameters provided by SEBI and under provisions of Rules, Bye-laws and Regulation of the Exchange, as an interim pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The AO noted that the assessee had debited interest amounting to Rs. 83,81,772/- and cost of managerial/ administrative expenses for making the above investment cannot be denied. Therefore ,the assessee is liable for disallowance u/s 14A of the Act in the light of the provisions of Rule 8D of the I.T. Rules and CBDT s clarificatory Circular No.5 dated 11-02-2014. Hence the disallowance worked out as per the provisions of Rule 8D(2) of the I.T. Rules amounting to Rs. 9,12,493/- is treated das expenditure incurred in relation to exempt income which has been disallowed u/s 14A of the Act by the AO by adding to the t5otal income of the assessee. 2. Rs. 29,89,956/-. The Reply of the assessee on the issue of commission paid in lieu of bogus entry of LTCG had been considered by the AO but did not find tenable. According to the AO, the syndicate members which include promoters/directors of penny stock company, share brokers etc. have admitted that they have provided bogus LTCG entry in lieu of commission. According to the AO, the gist of the statement beneficiaries namely Shri Sanjeev Kumar Agarwal, Manish Upttal, Ajit Gupta, Sjri Charchit Gupta and others who categorically admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of ACIT Vs Dhampur Sugar Mill Pvt Ltd ITA 220 of 2014 Hon'ble Allahabad High Court has ruled that once it was duly established that no borrowed funds of which interest was paid had been invested for earning tax free income, no disallowance was permissible u/s 14A. In the case of CIT Vs HDFC Bank ITA No.330 of 2012 Hon'ble Bombay High Court has held that no disallowance u/s 14A can be made in respect of interest paid on borrowing if assessee's own funds and non interest bearing funds exceeds investment in tax free securities. Further if there are no exempt income during the year, no disallowance can be made as held in the case of CIT vs Holcim India Pvt Ltd 90CCH 081 (2014). Further the disallowance u/s 14A cannot exceed the amount of exempt income as held by the Delhi High Court in Joint Investment PV LR. Vs CIT, vide its judgment dated 25.2.2015 If there is no income, there cannot be any disallowance. In view of these facts it is seen that the investment had been made out of funds and no disallowance is warranted in the present case since assessee has earned dividend of Rs. 60,134/-, the disallowance is restricted to this figure Relief : 8,52,359/-. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of his choosing and sell it when he wishes. It is not that while buying or selling the assessee has been found colluding with any of operators in the share M/s Midland. It is also not that the assessee has been found to be exchanging cash to transfer the commission to be paid to operators. In online share trading, funds move from bank account to bank account. Unless direct evidence is found to link the assessee with M/s Midland or some of the operator controlling the share price, the transactions made by the assessee cannot be doubted and the capital gains cannot be treated as unexplained. Statement of Pawan Kumar Kayan was recorded during investigation and he has accepted having executed LTCG entries through his firms. Similar statement has also been given by Harshawardhan Kayan. Another person Manoj Kumar Agrawal has stated involvement of his company Destiny securities Ltd and also Midland Polymers Ltd. There is no doubt that financial of M/s Midland suggest that it is a company having no worth and if its price has rised In stock market the rise is not due to genuine increase in the worth of the company. To the show cause issue by the AO, the appellant has replied that he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not allowed opportunity to cross examine. On similar facts, in the case of Manish Kumar Baid vs ACIT, Cir-35, Kolkata ITA No.1236/Kol/2017 honouable ITAT held that the enquiry by the Investigation Wing and / or the statements of several persons recorded by the Investigation Wing in connection with the alleged trasnsactions in the shares of KAFL also did not implicate the assessee and/or his bnroker. It is also a matter of record that the assessee fu9rnished all the evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchse and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidence in support of the assessee s case clearly support the claim of the assesee and the transactions of the assessee were bona fide and genuine and therefore the ld. AO was not justified in rejecting the assessee s claim of exemption under section 10(38) of the Act. Various courts have held the above view. The addition has been made without bringing on record assessee s involvement in earning the capital gains by the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesse. 19-27 h. Copy of Sale Bills issued byB.Lodha Securities Ltd evidencing sale of 8,00,000 shares of CentronIndustrial Alliance Limited made between 07.02.14 to 26.0314. 28-36 i. Copy of Contract Notes issued by B.Lodha Securities Ltd evidencing sale of 8,00,000 shares of Centron Industrial Alliance Limited made between 07.02.14 to 26.0314. 37-60 j. Copy of Bank Statement of Oriental Bank of Commerce for the period 01.04.13 to 31.03.14 evidencing receipt of sale proceeds of shares of Centron Industrial Alliance Limited through banking channel. 62-66 For transaction in the scrip of MPL: a . Copy of Purchase Bills issued by B.Lodha Securities Ltdevidencing purchase of 39,000 shares of M/s Midland Polymers Limited between 06.07.11 and 22.08.11. 67-73 Copy of Contract Notes issued of B.Lodha Securities Ltd evidencing purchase of 39,000 shares of M/S Midland Polymers Limited between 06.07.11 and 22.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained to the Parliament that working of stock exchanges has become transparent and reliable. Therefore, consequential amendments were proposed in IT Act, 1961 (CIT(A) Page 16). ii. The faceless functioning of stock exchanges do not leave any scope for any pre-arranged transactions (CIT(A) Page 16). iii. Ld. AO has not made any enquiry which he was duty bound to do in the present case (CIT(A) Page 17). iv. The allegation of rigging of prices is made yet there is no finding of involvement of the assessee in alleged rigging (CIT(A) Page 18). v. Allegation of brokers issuing fake contract notes remained unsubstantiated(CIT(A) Page 18). vi. AO admitted assessee being regular investor of shares (CIT(A) Page 19). vii. At the time of transactions undertaken by the assessee appellant, no enquiry was undertaken against these companies nor any report was available in public domain (CIT(A) Page 19). viii. The entire action of ld. AO is based on statements of certain persons without any reference to any documentary evidence or material. Under these circumstances such statements cannot be used against the assessee unless opportunity of cross examination is provided. Relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncorroborated, as there is no reference of any material found, nothing was brought on record by ld. AO. The evidences submitted by the assessee have not been found to be false or forged. Documentary evidences shall prevail when weighed against the oral evidences. 3.10 Reports of Investigation Wings have not been confronted to the assessee. The assessee has not been provided with the opportunity to cross examine the persons whose statements have been relied upon.The assessee has also not been provided opportunity to cross examine the persons who have prepared the said report. It is submitted that if the information is gathered behind the back of the assessee and the same is acted upon then, as per the principles of natural justice,the assessee should be provided with such information and should be allowed opportunity of cross examination. 3.11 In the following decisions, under identical circumstances, various courts decided the matter in the favour of the assessee: Hon ble Supreme Court a. PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) [CLC 166-169] SLP filed against the decision of Hon ble Gujarat High Court in the case of PCIT vs Parasben K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee] Hon ble Jurisdictional Rajasthan High Court a. PCIT vs Sanjay Chhabra D.B. ITA No. 22/2021 [CLC 142-145] It was submitted before the Hon ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Rajasthan High Court has held that in the said there were several suspicious circumstances as indicated by AO, however, the findings of AO were more on presumption rather than on cogent proof. Further, AO failed to show that documents placed on record by the assessee were false, fabricated or fictitious. e. CIT vs Pushpa Malpani [2012] 20 taxmann.com 597 (Rajasthan) [CLC 164-165] 3. Upon hearing learned counsel for Revenue and perusing impugned order, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata, the addition was held to be not sustainable as the same was based merely on suspicion. Hon ble ITAT observed the following: There was no direct allegation or admission of the person, whose statements were recorded, of providing accommodation entry to the assessee. The chain of transaction and flow of money from one entity to another entity and finally to the assessee was not established. Assessee produced all relevant evidences. No link was found in the documents produced by the assessee and paper companies. Except statements of persons AO has not brought on record any other material to controvert or disprove the evidences produced by the assessee. No documentary evidence was either gathered or referred in these reports. Even if the reports are taken into consideration then they are nothing but narration of the statements of various persons during investigation. CBDT issued Circular and directed the department to concentrate and focus on collecting documentary evidences disclosing undisclosed income instead of obtaining the statement and then support their claim merely on the basis of statement. Statement recorded by Investigation W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d factual reasons: 1. The assessee is based in Rajasthan. All the Courts/Tribunals within the jurisdiction of Hon ble Rajasthan High Court are bound by the decision of Hon ble Rajasthan High Court. 2. Hon ble Rajasthan High Court in the case of PCIT vs Sanjay Chhabra D.B. ITA No. 22/2021 [CLC 142-145] noted that prejudice is caused to the assessee when material used against him is not provided and opportunity of cross examination is not provided: It was submitted before the Hon ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee were false, fabricated or fictitious. 3.4 CIT vs Pushpa Malpani [2012] 20 taxmann.com 597 (Rajasthan) [CLC 164-165] 3. Upon hearing learned counsel for Revenue and perusing impugned order, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law 4. Hon ble Calcutta High Court has mainly decided the case against the assessees for the reason that factual position in any of the 89 appeals forming part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. 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. 6.2 CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) [CLC 170171] Hon ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided moreso when assessee placed on record all the evidences. The relevant findings are as under: Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected 7. It is submitted that the court cannot turn blind eye to the evidences unless proved wrong and decide on the basis of assumptions and presumptions. Reliance is placed on the decision of Hon ble Delhi High Court in the case of PCIT vs Krishna Devi [2021] 126 taxmann.com 80 (Delhi) [CLC 172-181] wherein Hon ble Delhi High Court categorically noted that the Court has to decide the issue on the basis of evidence and proof and not 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 assessee. If the revenue has failed to bring evidence on record that money changed hands and there was agreement to convert unaccounted money mere reliance on the report of investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: 11 The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 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. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 14A by invoking Rule 8D. It is noted by us that assessee had sufficient owned fund, as at the start and end of relevant previous year, for making investment for earning exempt income. Moreover, assessee, during the year under consideration, received dividend income only to the extent of Rs. 60,134 . Considering the factual position, the ld. CIT(A), NFAC restricted disallowance to the extent of dividend income of Rs. 60,134 earned by the assessee. The ld. CIT(A), NFAC has relied on number of decisions for the proposition that no disallowed under Section 14A can be made if the own fund of assessee are more than the investment made to earn exempt income. Also, ld. CIT(A), NFAC has relied on the decisions for the proposition that disallowance under Section 14A cannot be more than the exempt income earned by assessee. After going through the factual and legal position put forth before us, we feel that ld. CIT(A), NFAC has correctly restricted disallowance of Rs. 60,134/- to the extent of exempt income earned by assessee. Accordingly, we do not find any reason to interfere with the decision of ld. CIT(A), NFAC. Hence, ground of appeal taken by department is dismissed. 2.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus, is solely dependent on the report of the Investigation Wing, with no specific reference of the assessee's transactions in such report. The observation of AO, in the assessment order, cannot be substituted of any tangible material or evidence to show that, transaction of assessee is bogus being an accommodation entry. It is also noted by us that the investigation wing report, which has been made sole basis for making additions by AO, was not made available to the assessee at any point of time during the assessment proceedings. The AO, in the Show Cause Notice, referred to statement of directors/ entry providers who have operated as entry provider brokers. However, neither any documentary reference is made in the Show Cause Notice nor any such references are made in findings of AO while holding transaction as bogus by availing accommodation entries of LTCG. The AO in entire order has either discussed modus operandi of entry provider or judgement on the issues but has not made reference of material or documentary evidences specifically in relation to assessee which could reveal that the assessee was engaged in availing of accommodation entry of bogus LTCG. The AO has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under identical legal position was decided against the assessee. Controverting the submissions, in this regard, Ld.AR before us placed on record a distinguishing note to distinguish legal and factual position of the present case with that of Swati Bajaj before on Hon'ble Calcutta High Court (supra). In the present case, the entire addition has been made by the AO on the basis of report of investigation wing and report of certain persons. No opportunity of cross verification was provided to the assessee. Under such circumstances, no addition can be made to the income of assessee, specifically when entire basis of addition is investigation report, which was never confronted to assessee, and statement of persons, who were neither examined by the AO nor opportunity of cross examination provided to assessee. It is a settled proposition laid down by different High Courts and by the Hon'ble Apex Court, as set out in the distinguishing note placed on record by the Ld.AR of assessee, as also set out hereinbefore. Hon'ble Calcutta High Court, in case of Swati Bajaj, served that the assessee did not mention regarding report to be furnished or statement to be provided during asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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