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TMI Blog2019 (8) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... rrated therein being identical and they have been taken in to consideration for deciding all these appeals. We are taking the appeal of the appellant in I.T.A. No. 1828/Kol/2017 in the case of Smt. Bhagwati Devi Patwari as the lead case and the result of which will be followed for other seven appeals also. 2. The solitary issue involved in the appeal relates to the action of the Ld. CIT(A) in confirming addition of Rs. 2,01,67,214/- made by the AO out of the total proceeds of Rs. 14,36,04,042/- received by the appellant on sale of shares. Briefly stated the facts of the case are that the appellant is an individual who had filed her return of income for AY 2014- 15 declaring total income of Rs. 23,29,684/-. In the return of income, the appellant had declared long term capital gain of Rs. 13,03,49,090/- derived on sale of various listed shares which was claimed exempt u/s 10(38) of the Act. Survey operation u/s 133A was conducted upon Rashmi Group on 22.01.2016 to which the appellant belongs. Thereafter, the case of the appellant was selected for scrutiny. In the course of assessment the appellant furnished scrip wise break-up of the long term capital gain earned during the year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deriving unscrupulous gains from rigged transactions in penny stocks had substance; but he held that the cash trail of February 2014 showed that the appellant had managed to bring back unaccounted monies to the tune of Rs. 2,01,67,214/- through her broker, M/s Eureka Stock and Share Broking Services Limited. The AO therefore held that no adverse view was being taken regarding the appellant's transactions in listed shares (which yielded capital gain of Rs. 13,03,49,090/-) but the cash trail unearthed in course of survey showed that during the period 08.02.2014 to 28.02.2014 the appellant had brought back her unaccounted monies to the tune of Rs. 2,01,67,214/- through banking channels and hence added the same u/s 68 of the Act. On appeal the ld. CIT(A) confirmed the order of the AO. Being aggrieved by the appellate order of ld. CIT(A), the appellant is now in appeal before us. 3. Assailing the action of the ld. CIT(A), the ld. AR of the appellant submitted that the appellant was a regular investor in shares & securities of different companies. He invited our attention to her balance sheet for the three years which appeared at pages 219 to 228 of paperbook to show that she consisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in the facts of the appellant's case. He further contended that such statements collected at the back of the appellant without providing her opportunity of cross examination rendered the impugned assessment bad in law. 4. Per contra the ld. DR appearing on behalf of the Revenue supported the order of the lower authorities. He placed on our record a copy of the statement recorded at the time of survey conducted on the appellant's stock broker, M/s Eureka Stock and Share Broking Services Limited on 30.03.2015 and contended that even the broker had admitted to providing accommodation entries in form of bogus LTCG to various assessees which proved beyond doubt that the proceeds of Rs. 2,01,67,214/- received by the appellant on sale of shares was in-genuine. He thus contended that there was no need to interfere with the order of lower authorities. He further submitted that the chart of cash trail reproduced by the AO was sufficient evidence to establish that the proceeds to the extent of Rs. 2,01,67,214/- received by the appellant from her broker, M/s Eureka Stock and Share Broking Services Limited was actually her own unaccounted money. According to ld. DR, the AO was under no obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-Feb-14 25,71,223 21-Feb-14 9,44,151 22-Feb-14 19,63,151 25-Feb-14 7,57,330 26-Feb-14 25,63,835 27-Feb-14 9,46,664 201,67,214 Thus, giving the benefit of doubt to the assessee, no adverse view is taken regarding involvement of the assessee in the racket of penny stock transactions. However, the cash trail unearthed after the post-survey Operations in case of own group of the assessee is relied upon. Thus based on the chart of cash trail as discussed in foregoing paragraph the amount of Rs. 47,73,056/- received by the assessee from Eureka Stock & Share Broking Services Ltd during the period from 08.02.14 to 28.02.14 is treated as his own unaccounted cash brought into books through banking channels. As such, this amount is added to his total income as unexplained credit u/s 68. (emphasis supplied) 7. It is relevant to note from above that having examined the appellant's share transactions throughout the year the AO did not find any infirmity or falsity in any transactions except the ones against which the proceeds were received during the period 08.02.2014 to 28.02.2014. Before us, the ld. DR justified the orders of the lower authorities by placing relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing accommodation entries to the appellant or to 'Rashmi Group'. He further pointed out that in answer to Q No. 30 of his statement requiring him to provide the details of scrips, prices of which were manipulated for providing alleged bogus long term capital gain, Mr. Rakesh Somani had specifically named four scrips only viz.,(i) Esteem Bio, (ii) GBL Infra, (iii) Mishka Finance&(iv) Parag Shipping. It is noted that the appellant did not transact in any of the aforesaid four scrips and therefore we find merit in the ld. AR's contention that there was neither any direct or indirect evidence which would in any manner establish that M/s Eureka Stock and Share Broking Services Limited being the broker through which all share transactions of the appellant in listed shares had taken place, was engaged in routing alleged unaccounted income of the appellant as claimed by the AO. The mere fact that Mr. Rakesh Somani in his statement recorded in course of survey, which was independently conducted and did not have any connection with the enquiry against the appellant, had admitted of granting accommodation entries in some instances, by itself was not clinching evidence to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We however are conscious of the fact that the issue to be adjudicated in the present appeal is whether the amounts deposited in the appellant's bank account by way of proceeds realized from sale of investments was assessable as her undisclosed income u/s 68 of the Act. On perusal of the impugned assessment order it is noted that the sole basis of the AO for justifying the impugned addition was the cash trail prepared and extracted by him in the order. We however note that in response to show cause issued by the AO, the appellant had furnished all the transactional documents substantiating that the proceeds in question were the payments received on sale of listed shares through registered broker on the open platform of Bombay Stock Exchange. It is noted that the appellant had furnished various documents during the course of assessment proceedings i.e. copies of purchase bills, copy of Bank statements showing payments made for purchase of shares, demat account statement, transaction statement from BSE, copies of contract notes in respect of sale of shares, copy of bank statements showing receipts against sale of shares etc. From the documents as were furnished before the lower author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt group's unaccounted income to the extent of Rs. 10 crores yet the AO was able to identify the alleged cash trail of Rs. 3,58,90,000/- only. The foregoing facts therefore goes on to prove that the AO's hypothesis that the appellant group resorted to availing accommodation entries in the form of sale proceeds of shares is not supported by the material which he himself gathered. 10. We further note that the AO assessed the sale proceeds realized by the appellant only in the month of February 2014. From the transactional data on record we find that during the month of February 2014 the appellant had sold 1,60,000 shares of Kailash Auto Finance Limited for Rs. 60,57,453/- and 1,47,000 shares of M/s Lifeline Drugs Ltd for Rs. 2,69,28,185/-. It is only in respect of the shares sold in the month of February 2014, the AO has alleged the same to be sham. We however note that during the FY 2013-14 the appellant sold 6,50,000 shares of Kailash Auto Finance Ltd and realized Rs. 2,53,35,910/-. These shares were sold during the period November 2013 to March 2014 Similarly during FY 2013-14, the appellant sold 1,99,000 shares of M/s Lifeline Drugs Ltd for Rs. 3,49,26,010/- during the period J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner & mode in which share purchasers arranged requisite funds to meet cost of purchase was not determinative in deciding whether the appellant's share transactions were genuine. From what sources and on what terms the purchasers arranged the requisite funds for purchase of shares was entirely at the discretion of the purchasers and over which the appellant did not have any say. 12. Even if one accepts that the AO's proposition at face value and assume that in some instances he had found that there were deposits in cash in the few accounts at the end of transactions' trail; in our considered view such fact by itself did not conclusively prove the AO's finding that the monies deposited in these accounts represented unaccounted income of the appellant or that the cash deposits were arranged by the appellant or that money received by the appellant was in fact the same cash as was deposited in some account which did not have direct nexus with appellant's transactions. Even though in the flow charts extracted at Pages 6 to 12 of assessment order, the AO listed out names of few proprietary concerns in whose accounts the cash was allegedly deposited; we find that nowhere in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the source of source was M/s HCPL, the counter party broker. The transaction between the appellant and M/s Eureka Stock and Share Broking Services Limited and the transaction between M/s Eureka Stock and Share Broking Services Limited and HCPL was admittedly through banking channel. HCPL received the monies from RDPL who in turn had received it through proper banking channel from several entities. All fund flow charts considered together, we find that the aggregate sum of cash deposits totaled only Rs. 3,58,90,000/- as opposed to Rs. 10,00,00,000/- as claimed in the assessment order. We also find that no credible or tangible material was gathered which showed that such cash deposits of Rs. 3,58,90,000/- constituted the sole and the only source for the amounts received by the appellant which may raise a suspicion. No date-wise or beneficiary-wise link between the payments received and paid by successive parties has been set out in the so-called cash trail charts. We also find that the figures of cash deposits found in the accounts of proprietorship concerns found by the AO and transferred to the bodies corporate do not correlate in the facts of the given case. In the foregoing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the aggregate of the additions made u/s 68 in these group of cases is Rs. 6,46,63,639/-, the alleged cash deposits as per the trail found was only Rs. 3,58,90,000/- which in itself shows that the said deposits were not sufficient to lead to conclusion that sale proceeds represented appellant's undisclosed income introduced in the form of sale proceeds. 14. We find the entire assessment substantially proceeded on the AO's suspicion that the appellant had indulged in laundering her unaccounted income during the month of February 2014. The Supreme Court in the case of Uma Charan Shaw & Bros Vs CIT (37 ITR 271) has held that, howsoever grave the suspicion the AO may entertain, the suspicion cannot take place proof. The suspicion on the AO's part can certainly prompt him to conduct enquiry & investigation but ultimate finding of the authority must be based on the material & evidences gathered and which have live & direct nexus with the finding recorded by the authority after objective consideration of facts & evidences gathered. If the material or evidence gathered does not have any proximate cause with the finding ultimately reached then the finding of the authority has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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