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TMI Blog2024 (1) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... used as a colourable device and generation of documentary evidences were part of the Hawala deal for converting unaccounted money into tax exempt income. 2. Deleting both additions without appreciating the fact that the assessee made bogus claim of LTCG by availing accommodation entries in listed companies and also failed to adduce cogent evidence to substantiate the unexplained spurt in the value of shares of penny stock companies. 3. The appellant craves to add, amend, alter delete or modify the above ground of appeal before or at the time of hearing." 2. Briefly facts as per record are that the appellant had claimed long term capital gains on sale of shares of Sunrise Asian Limited during the year under consideration. The AO noticed that the assessee has purchased 24000 Shares of Conart Traders Limited through M/s P. Saji Textiles Limited that later on amalgamated with Sunrise Asian Limited and consequently, against the shares of Conart Traders Limited, new shares were allotted in multiple of the original shares. The assessee filed details of the demat account, brokers note and bank details to justify genuineness of the purchase and sale of the shares, but the AO being not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant period for the purpose of obtaining bogus Long Term Capital Gain. (v) Any other information received by the AO from any government agency of any other organization person in response to enquiries conducted u/s 131,133(6) or otherwise, which shows that the appellant had received accommodation entry in the form of Long Term Capital Gain by making cash payment to the person or his agent/ associate involved in providing such accommodation entry. The above information copies of statement/ documents/ loose paper may be submitted to this office latest by 30.08.2017 4.4 As the AO did not furnish the requisitioned information/ copy of impounded seized documents or loose papers as mentioned in the letter dated 02.08.2017, therefore a reminder dated 05.09.2017 was issued to the AO, stating as under: -Vide this officer letter dated 02.08.2017, the information copy of impounded seized documents! loose papers as mentioned in the letter were requisitioned. The information/ copy of impounded / seized documents/louse papers were required to be submitted to this office latest by 30.08.2017. However, till date, the requisitioned information/ copy of impounded/ seized documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 carefully and furnish the information! evidence/ documents specifically requisitioned by this office letter dated 02.08.2017. You are advised to give your comment reply in respect of each of the five points on which the information document has been requisitioned vide letter dated 02.08.2017 of this office by 23.10.2017." 4.7 Therefore, letter dated 08.02.2018 were issued requesting as under: "In your report dated 21.09.201 you are silent in respect of 5 points on which the information documents was requisitioned vide letter dared 02.08.2017 of this office. Once again you are requested to send your comment reply in respect of each of the five points on which the information documents was requisitioned vide letter dated 02.08.2017 by 26.02.2018. The same letter was sent to the AO on 05.03.2018 calling for the requisitioned information by 12.03.2018. The AO submitted the report dated 16.07.2018 as under:- "Kindly refer to your office letter No. CIT(A)/AJM/2017-18/2864 dated 02 08 2017 on the subject mentioned above. In this connection, the requisite information on five points in the above referred case, is submitted as under (1) The Search Action was conducted by D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant were also forwarded to the AO on 06.06.2017 calling for the remand report on 16.06.2017. He has sent the Remand Report dated 15.07.2017 on the written submissions of the appellant forwarded to him, as under:- "Kindly refer to your office letter No. CIT(A)/AJM/2017-18/1369 dated 06.06.2017. In this connection, an opportunity of being heard was provided to the assesses. In response to this, A.R. of the assesses replied that he had already submitted all the documents in appellate proceedings. The remand report/comments on each of the issue are submitted as under Facts of the case are that the assessment in this case was completed /s 143 (3) of the IT. Act on 27.12.2016 on total income of Rs. 1.29.12.030/- In the assessment. assesses claim of LTCG of Rs. 1.13.66.376- was disallowed and added to the total income u/s 68 of the I.T. Act, 1961 as unexplained cash credit for the reasons discussed at length in the impugned assessment order. Also addition of R. 2,27,328/- on account of commission paid was made to the total income The Directorate of Investigation, Kolkata has undertaken discrete enquiries regarding accommodation entry of Long Tenn Capital Gain and the Department coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were discussed in detail in the assessment order itself. In respect of providing an opportunity to the assesses to cross examine Sire Ang Agarwal, reliance is placed on the decision of Hon'ble Rajasthan High Court in the case of Rameshwar Lal Mali Vs CIT (256 ITR 536), wherein it has been held that "there is no provision for permitting a crass examination of the person, whose statement is recorded during the survey". Hence, assesses request for cross examination is not essential and valid. As far as statement of Shri Anuj Agarwal is concerned, the same was provided to the assessee during the assessment proceedings. In view of the aforesaid, additions made in the assessments may kindle be upheld. The remand report along with case records is submitted for your kind perusal and consideration. "4.15. After going through the entire facts of the case and evidences submitted by the appellant, I am of the considered view that the appellant has furnished each and every document required to prove the genuineness of both purchase and sales of the shares of the Sunrise Asian Ltd., whereas the AO has not brought on record any evidence to show that the appellant has introduced his unac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus claim of LTCG by availing accommodation entries in listed companies and failed to adduce cogent evidence to substantiate the unexplained spurt in the value of shares of penny stock companies. He prayed that the assessment order may be restored and the order of ld. CIT(A) be reversed. 5. The defendant counsel for the appellant vehemently relied on the impugned order contending that the CIT(A) has deleted the addition considering various judicial decision and various documentary evidence submitted before him in the form Balance Sheet, Share certificates, Bank Statements, demat account, broker notes, master data of Sunrise Asian Limited, etc. The Ld. AR for the appellant submitted documents related to the purchase of shares (APB, pages 20 to 23), demat account statement (APB, pages 24 to 26), bank statements (APB, pages 27 to 34), Brokers note (APB, pages 35 to 59), statements of Anuj Agarwal (APB, page 60), revocation of suspension order of SEBI against Sunrise Asian Limited etc. The details and submissions were made by both the parties were duly considered. The appellant referred to certain judicial decisions which reads as under: 1. The Indore Bench in the case of Shiv Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 10(38) of the Act seems to have been fulfilled by the assessee. 17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However, it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee. 18. We observe that all the above stated facts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the stock exchange and sale consideration evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume at and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs. 360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. 7. As against the assessee's position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhat is not backed by any independent material. Firstly, there is nothing on record which establishes the fact that the assessee was acquainted with Shri Vipul Bhat or any of his entities and secondly, the onus casted upon assessee to prove the genuineness of The transactions was already discharged by the assessee. Shri Vipul Bhat, in his statement, stated that one Shri Sandeep Maroo acted as intermediary who introduced Vardhan family to him. However, no further investigations have been carried out to establish this vital link between the assessee and Shri Vipul Bhat. We do not find any independent investigations by Ld. AO To bring on record any tangible material to corroborate the same. There are no evident or even allegation of any cash exchange between the assessee and group entities of Shri Vipul Bhat. This is further evidenced by the fact that no substantial incriminating material / wealth of that magnitude has been found during the course of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 on 07/09/2011 and there after, special leave petition against the said decision has been dismissed by Hon'ble Supreme Court vide SLP No. 20146 of 2012 dated 27/01/2014 which is reported as 88CCH0027SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) V/s ITO (ITANo. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to prove that the transactions were bogus, the Long Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by the assessee on sale of same scrapie. M/s Sunrise Asian Ltd. 13. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld. CIT(A) in sustaining the impugned additions in the hand soft he assessee. Resultantly, the addition on account to fall eged Long Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed 2. The Co-ordinate Bench of Jaipur in the case of Ashok Agrawal V/s ACIT in TA No. 124/JP/2020 dated 18.11.2020 has followed the decision of Hon'ble Mumbai Tribunal in the case of Dipesh Ramesh Vardhan (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the claim is genuine or not has been discussed at length. and referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidence held that the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee unless specific evidence is brought on record to Controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected. We are in complete agreement with the said view and in the instant case, we find that evidence produced by the assessee in support of his claim of purchase and sale of shares on the stock exchange have not been refuted by any adverse findings or material which could demonstrate involvement of the assessee or collusion with so called accommodation entry providers to obtain bogus LTCGas so alleged by the authorities below. 24. We also find that while analysing sale of shares of similar scrip of M/s Sunrise Asian Ltd and claim of exemption of long term capital gains u/s 10(38), the Mumbai Benches of the Tribunal in case of Anr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial precedents cited before us. Admittedly, the appellant assessee has purchased 24000 Shares of Conart Traders Limited thorough M/s P. Saji Textiles Limited that later on amalgamated with Sunrise Asian Limited and consequently, against the shares of Conart Traders Limited, new shares were allotted in multiple of the original shares. The assessee filed details of the demat account, brokers note and bank details to justify genuineness of the purchase and sale of the shares. The Ld. CIT(A) has observed that the appellant has furnished each and every document required to prove the genuineness of both purchase and sales of the shares of the Sunrise Asian Ltd., whereas the AO has not brought on record any evidence to show that the appellant has introduced his unaccounted money in the form of LTCG by giving cash to any broker, sub- broker or entry provider and that the additions made merely on the basis of suspicion or doubt cannot be sustained. He further observed that as the shares of Sunrise Asian Ltd were held by the appellant for a period of not less than 12 months and STT has also been paid on the transaction of sale of the shares, therefore the LTCG earned by the appellant on sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities without pointing out any defect there in. 13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s Esteem Bio and M/s Turbo tech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for which purpose it wanted to avail the opportunity of cross examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to pre suppose as to what could be the subject matter of the cross examination and make there marks 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 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 Notice We, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets outthemodusoperandiadoptedinthebusinessofprovidingentriesofbogusLTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar(supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, interalia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the cases ought to be canvassed by the Revenue. 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 14. In this view of the matter, no question of law, much less substantial questi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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