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TMI Blog2021 (1) TMI 839X X X X Extracts X X X X X X X X Extracts X X X X ..... , perused orders of lower authorities and gone through documents and written submissions as placed in the paper-book. The judicial precedents as cited during the course of hearing have duly been deliberated upon. Our adjudication to the appeal would be as given in succeeding paragraphs. Assessment Proceedings 3.1 An assessment has been framed against assessee for the year under consideration u/s 143(3) on 22/03/2016 wherein the assessee has been saddled with certain addition u/s 68 in view of the fact that Long-Term Capital Gain (LTCG) earned on sale of certain shares of an entity namely M/s Quest Financial Services Limited (QFSL) was declared as bogus and the same was added to the income of the assessee as unexplained cash credit u/s 68. 3.2 The allegation of Ld. AO would stem from the fact that pursuant to enquiry conducted by investigation wing, Kolkata in the case of a person namely Shri Prakash Jajodia, it transpired that Shri Prakash Jajodia, with the help of number of dummy entities, provided bogus LTCG to various beneficiaries against commission. The shares were stated to be sold by the assessee through an entity namely M/s Anumati Stock Broking Private Limited (ASBPL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of statement of any unknown person without giving any opportunity of cross examination. At the same time, the assessee demanded cross-examination of persons making adverse statement against the assessee. Another plea was that since sale transactions took place through recognized stock exchange in online mechanism and proceeds were received through normal banking channels, the source of credit was fully explained and no addition could be made as unexplained cash credit u/s 68 since assessee had established the identity of the payer as well as genuineness of the transactions. 3.6 However, primarily going by the findings of investigation wing, Ld. AO rejected the submissions thus made by the assessee by alleging that the entire transaction was camouflaged in the guise of LTCG. The shares of a non-descript dummy company was purchased without verifying the financial strength, nature of business, its profitability & credentials etc. Finally, the sale consideration thus received was treated as assessee's undisclosed income and added as unexplained cash credit u/s 68 while computing the total income. Proceedings before Ld. CIT(A) 4.1 Aggrieved as aforesaid, the assessee conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. No adverse inference could be draw with respect to the genuineness of the transactions merely because the addresses of several entities were common. 4.5 Another observation was that the statement made by Shri Prakash Jajodia u/s 133A during the course of survey proceedings would have no evidentiary value unless corroborated with cogent material and the same could not form the basis of addition in case of third-parties as held by Hon'ble Apex Court in CIT V/s S.Khader Khan 300 ITR 157 as well as Hon'ble Bombay High Court in CIT Vs Ashish International (ITA No. 4299 of 2009 dated 22/02/2011). No opportunity of cross-examination of persons making adverse statement against the assessee was ever provided to the assessee. Further, the statement made by Shri Prakash Jajodia did not refer to any exchange of cash between the assessee and any of his entities. Therefore, the said transactions could not be treated as bogus transactions in terms of decision of Mumbai Tribunal in Shyam R.Pawar V/s DCIT (ITA No. 5585/Mum2011 dated 04/05/2012). The appeal filed by the department against the said order stood dismissed by Hon'ble Bombay High Court which is reported at 54 Taxmann.com 108. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alleged bogus entities of Shri Prakash Jajodia. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmise. The addition thus made purely on the basis of third-party statement recorded at the back of the assessee could not be sustained in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. The Hon'ble Apex Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected. The proposition that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law stem from the decision of Hon'ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151) wherein it was held that the suspicion however strong could not partake the character of legal evidence as held by Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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