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TMI Blog2021 (4) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... enience and brevity. The former assessee's in appeal ITA No.456/Hyd/2020 challenges correctness of both the lower authorities' action treating his long term capital gain claim of Rs. 73,89,650/- as bogus alongwith 30% alleged commission charges thereupon to the tune of Rs. 2,21,690/-; respectively. The CIT(A)'s detailed discussion confirming the Assessing Officer's action to this effect reads as under: "5.2 I have considered the assessment order and submissions of the appellant. It is seen from the assessment order that the addition made is on estimate basis @1% on total purchases made during the year w.r.t the transactions in commodity trading. The addition made is based, on assumptions and presumptions of the AO and is not backed by any material evidence. Further, the addition in search assessment based on estimation without being backed by material evidence do not stand the test of law. In view of the factual and legal position as discussed above, the addition made is not warranted and the same is deleted. 6. Ground Nos. 10 to 21 are against the addition of Rs. 73,89,650f - on account of capital gains claimed u/s.l0(38) of the I.T Act. The AO made addition of Rs. 2,21,690/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be submitted that the documents relating to purchase and sale of commodities have neither been controverter nor disproved by the assessing officer. The A.O. merely on the basis of information from investigation wing and without any corroborative evidence nor making any enquiry further for the justification of additions. The report of Investigation wing could not be sole ground to implicate assessee and justify additions especially when, nowhere assessee had been found to be beneficiary of any kind of accommodation entry in. any inquiry by Investigation Wing or any such material had been unearthed by department in the course of search operation. It would be the responsibility of the broker to ensure that the transaction is properly routed and CTT was paid as per stock exchange norms. It was also stated that in the secondary market transactions, no one knows who the buyer is and who the seller of the commodities is. When the assessee sold his commodities, several other persons also transacted in these commodities on MCX/NCDEX at prices similar to the price at which the assessee sold his holding. 7.A. The assessee has submitted the following information in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the direction of the CIT(A) to tax the said amounts as 'income from other sources'. For the reasons stated above, we are not in agreement with the action of the A.O. either for reopening of assessment or for treating the transactions as bogus, since the very basis for reopening the assessment 'was not provided to the assessee nor an opportunity was given to cross-examine the so called Mr. Chokshi. There is no basis for treating the said transactions as not genuine. Considering tile documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by Smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head "Capital Gains" only. The grounds are accordingly allowed." * Decision of Hon'ble Calcutta ITAT in the case of Vidhi Malhotra Vs ITO [2019] 101 taxmann.cont 361 (Delhi - Trib.) where in it was held that- "Assessee had purchased and sold shares of a company which amalgamated into another company (Kailash) by order of High Court - Assessing Officer noticed that scrips of Kailash were used by entry providers for providing bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition u/s 69 of act if the assessee proves: Identity Creditworthiness and Genuineness of transaction, In the present case, AO has made an addition of Rs. 28,48,439/- and Rs. 2,21,690/towards unexplained investment u/e 69 of the act, even though all the above mentioned conditions are satisfied. 7.7. We would like to place our reliance on the following case laws :- * KLR Industries Limited vs DCIT 1480/Hyd/2014, judgment of Hon'ble Supreme Court of India:- "wherein the Hon'ble jurisdictional ITAT has held. that once the assessee has provide the identity, genuineness and creditworthiness of the creditor, no addition u/s 68 of the Act can be made in the hands of the assessee. * Commissioner Of Income Tax Vs Lovely Exports (P) LTD (2008) 216 CTR (SC) 195, where in the Supreme Court held that "if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company". 7.8. Therefore, in view of the above details and submissions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had been found to be beneficiary of any kind of accommodation entry in any inquiry by Investigation Wing or any such material had been unearthed by department in the course of search operation. It would be the responsibility of the broker to ensure that the transaction is properly routed and SIT was paid as per stock exchange norms. It was also stated that in the secondary market transactions, no one knows who the buyer is and who the seller of the shares is. When the assessee sold his shares, several other persons also transacted in these shares on stock exchange at prices similar to the price at which the assessee sold his holding. 8.4. The assessee has submitted the following information in support of the genuineness of transactions: Contract note for the sale of commodities through a registered- stock broker with BSE. STT had been dilly suffered on the sale transactions. 8.5. In this regards, reliance is to be placed on the following case laws :- * Smt. Sarita Devi vs ITO, ITA.No.1228/Hyd/2016, wherein it was held that: "10.1 Assessees have furnished the necessary information of purchase bills, sale bills, ledger accounts, De-mat account copies in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t genuine. Considering the documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head "Capital Gains" only. The grounds are accordingly allowed." * Decision of Hon'ble Calcutta IT AT in the case of Vidhi Malhotra Vs ITO [2019] 101 taxmann.com 361 (Delhi - Trib.) where in it was held that- "Assessee had purchased and sold share, of a company which amalgamated into another company (Kailash) by order of High Court - Assessing Officer noticed that scrips of Kailash were used by entry providers for providing bogus accommodation entries and that in some other matter in course of proceedings before Investigation Wing, one Chartered Accountant had confirmed that he had provided accommodation entry in scrip of Kailash and, consequently, he treated long-term capital gain under section 69 Assessee had duly shown transaction in cheques right from purchase to sale of shares and all transactions had been routed through DMAT account in Bombay Stock Exchange as per quoted price as on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional ITAT has held 'that once the assessee has provide the identity, genuineness and creditworthiness of the creditor, no addition u/s 68 of the Act can be made in the hands of the assessee. * Commissioner Of Income Tax Vs Lovely Exports (P) LTD (2008) 216 CTR (SC) 195, where in the Supreme Court held that "if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company". 8.8. Further it is to submit that, when the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long-term capital gain. 8.9. It is also brought on record for your kind reference that SEBI vide its order dated 21st September 2017 has revoked the ban on Kailash Auto Finance Ltd. Para 5 of the said order reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of assessee as unexplained investments u/s 68 of the Act and the assessee has proved all the required field u/s 68 of the Act. Hence addition made by the AO is required to be deleted. Ground No.20: 9. Non-Opportunity for Cross Examination of Witness : The AO erred in not affording proper opportunity of cross examining the person as mentioned in assessment order, on which the AO relied upon for making addition of accommodation entries for commodities and shares which is against to the principles of Natural Justice and thus the assessment deserves to be annulled, which view is supported by the case law in the case of Sunitha Daddaa vs. DCIT, Central Circle-(2), Jaipur, Vide SLP of the Hon'ble Supreme Court. In view of the facts submitted above, it is therefore requested the Ld. Commissioner of Income Tax (Appeals), to annul the assessment and to delete the addition made. 6.2) I have considered the assessment order, submissions of the appellant and the material placed before me. The addition made refers to seized material which is the basis for the addition made by the Assessing Officer. The modus operandi as brought out and statements recorded during the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acy Securities Pvt. Ltd. This company was also warned by SEBI vide orders dated 02-05-2011 and 02-06-2011 for manipulating the prices of different shares. All such details have been incorporated in the impugned order, which have not been controverted on behalf of the assessee. It is further relevant to note that the AO required the assessee to furnish certain details including Demat account for the shares of PIL. The assessee miserably failed to place such details except for transactions from 29-06-2005 to 30-06-2005 and 04-07- 2005 to 07-07-2005. The entire position which thus emerges is that PIL is a penny stock company, which fact got established from enquiries conducted by BSE and SEBI. Not only the DSP shares and Securities Ltd. and Galaxy Braking Ltd. were fined for manipulating the prices of shares of PILI even the broker from whom the assessee allegedly purchased the shares was suspended and debarred from acting as a broker by SEBI and further the broker to whom such shares were sold, was also warned by SEBI for manipulating the prices of different shares during the relevant period. There is doubt that the assessee completed paper-trail by producing contract notes for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In deciding the issue against the issue, their Lordships held that: 'Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities'. This shows that a decision based on the attending circumstances and human probabilities does not get vitiated if there are compelling reasons to reject the frontage of a transaction based on the so-called evidence, which is nothing more than a mere paper work. 6.6) The Hon'ble Delhi High Court in ITA No.220/2019 in the case of Mr. Udit Kalra Vs. ITO in their order dt. 08.03.2019 held as under: "The main thrust of the assessee's argument is that he was denied the right to cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -01-2021 in PCIT Vs. Smt. Krihna Devi has declined Revenue's identical arguments as follows: "5. It is not in dispute, as noted in the Impugned Order, that the factual background in all the three appeals is quite similar. However, for the sake of convenience, the facts in respect of ITA 125/2020 are being noted and discussed elaborately. Briefly stated, the Respondent-Assessee is an individual who has derived income from interest on loan, FDR, NSC and bank interest under the head of 'income from other sources' in respect of A.Y. 2015-16. She filed her return of income, declaring total income of Rs. 13,96,116/-. After claiming deduction of Rs. 1,60,000/- under Chapter VI-A, the total taxable income of Respondent was declared to be Rs. 12,36,120/-. The return was processed under Section 143(1) of the Act and thereafter the case was selected for scrutiny. During the scrutiny proceedings, the AO noticed that for the relevant year under consideration, the Respondent had claimed exempted income of Rs. 96,75,939/- as receipts from Long Term Capital Gain [hereinafter referred to as 'LTCG'] under Section 10(38) of the Act. He inter alia concluded that the assessee had adopted a colorable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the appellants do not find any place in the said list. At pages 58 and 59 the names of pre IPO transferee in the scrip of M/s. Esteem Bio Organic Food Processing Ltd is given and in the said list also the names of the appellants do not find any place. At page 63 of the SEBI order-trading by trading in M/s. Esteem Bio Qrganic food Processing Ltd - a further list of 25 persons is mentioned and once again the names of the appellants do not find place in this list also. 25. As mentioned elsewhere the brokers of the assessee namely ISG Securities Limited and SMC Global Securities Limited are stationed at New Delhi and their names also do not find place in the list mentioned here in above in the SEBI order. There is nothing on record to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior standing counsel for the revenue (Appellant herein), contends that the learned ITAT has completely erred in law in deleting the addition, and thus the Impugned Order suffers from perversity. He submits that there are certain germane factual errors, inasmuch as the learned ITAT has wrongly recorded that there was no independent enquiry conducted by the AO, when in fact the AO had issued notices to the companies in question under Section 133(6) of the Act. He points out that the observations recorded in para 25 of the Impugned Order are factually incorrect, and in conflict with para 4 of the order of the CIT(A) dated 24th December, 2018 which reads as follows: "4. Even the broker through whom the shares were dematerialized and sold i.e. SMC Global Securities Ltd. was also a part of the scam. This is a Delhi based broker whose regional office was also surveyed. The sub brokers were also surveyed and also statements recorded which confirmed the payment of cash commission by the beneficiaries for being part of the syndicate." 8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, inter alia, 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the statement given under the oath. The appellant clearly identified the entries gave explanation accepting certain entries and certain other entries were not accepted. This clearly shows that there was no such coercion or pressure as alleged. The retraction of the statement given is not on sound logical basis but only to evade the tax payable on the amount admitted as income. v) The statement of Mr. Sivarama Raju is only secondary. The basis of addition is the documents found and the explanation of the contents of such documents by the appellant and his family members during the course of Search individually. vi) The legal contentions raised are not applicable as the facts of the case are completely different as discussed above. This is not a case where addition is made on the basis of document found and based on third party statement. Here, the document was confronted to the appellant during the Search itself, the contents of such papers were explained by the appellant and the appellant also denied of certain entries. The basis of addition is not third party statement but the appellant's own statement explaining the entries in the material seized which was confronted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit dt.03-01-2017 that there was no incriminating document found or seized regarding the impugned cash sum and therefore, they did not know anything about the incriminating material found/seized from M/s.Western Constructions partners' premises. And that Mr.Raju's statement had also not been made available to them. He thus rejected all these contentions and made the impugned identical addition on money payment of Rs. 6.40 Crores each in both of their hands as under: "4.3 Apparently, assessee's above contentions are neither acceptable nor reconcilable considering the fact that the stated, property is registered in the names of both the assesses by duly referring the cheque payments and extent of SFT and rate per SFT etc. These details are reconcilable as it is comparable to the reconcilable totals of all credits of the workings as put across to both the assessees during the search proceedings as the stated property is registered in their name as extracted in the above statements. With reference to this, assessee firm partner has admitted the relevant receipts as part of gross receipts of the firm on account of sale of this commercial space etc. including additional cash rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 11,61,00,000/- from M/s. Western Construction and my share of investment was Rs. 5,80,50,000/-. The source of the above investment was out of my advances received back from my companies and also loan obtained from HDFC Bank Limited. * During the course of search proceedings, I was shown a statement extracted from the laptop of Mr.Shivram Raju, partner of M/s.Western Constructions containing some alleged receipts of Rs. 30,89,47,001/-. As I was under lot of pressure and confusion due to long search proceedins, I had gfiven a statement stating tha the same represents my payments to M/s.Western Constructions against the purchase of property. * However, immediately, I had reconciled my books and I had withdrawn the statement recorded on 02.11.2016 vide my letter dated 28.12.2016 filed with Deputy Director of Income Tax (Inv), I am herewith enclosing a copy of same for your kind consideration. * I wish to submit that I am not aware of any statement prepared by Sri Shivram Raju. Neither I am owner of such document nor is the document in my wiring or from my electronic records. * I once again submit that the property was purchased by me for a total agreed consideration of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utable to additional investment made in purchase of commercial space and additional income of Rs. 17,73,995/- each is admitted by both the assessee to cover up further discrepancies involving balance payments of Rs. 3,15,47,990/- subject to final reconciliation of relevant cash/fund flow statements of each assessee. This entire fact is evident as in at answer to Q. No (35) and (19) of relevant statements of both the assessee as extracted supra read with Q.No. (36) of Sri Arun Kumar Goyal statement wherein the seized annexure sheet was categorically put across to the assessee for necessary reconciliation and reconfirmation of the admissions made. Further, it is noticeable that at Q.No. (37) of Sri Arun Kumar Goyal statement dated 02.11.2016 in the same sequence of questions, it has been categorically admitted further additional income of Rs. 17,73,995/- to cover up any other discrepancies and reconciliation of above totals involving additional payments made in purchase of commercial space as total cash paid involved is Rs. 12.8Crores as against reconciled of Rs. 9.64 Crores. Hence, it is sine-qua-non that assessee has to reconcile all the totals as put across to him during search an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia reiterating the assessees' stand before the CIT(A)'s qua the impugned money payment addition that the same has been wrongly made on the basis of a mere 'dumb' document. He has also referred to catena of case law, which will be discussed; if any need arises in succeeding paragraphs. Learned departmental representative has strongly supported both the lower authorities' action making the impugned addition of money payment in cash in both assessees' hands based on the seized document (supra). 10. We have given our thoughtful consideration to rival arguments. We find no reason to sustain the impugned identical addition of money payment in cash addition in these assessees' hands. It is an admitted fact that learned lower authorities have gone by the alleged loose sheet only allegedly revealing the impugned payments made out at assessees' behest over and above the sale price involving M/s.Western Pearl Project sold by M/s.Western Constructions/vendees. Learned departmental authorities have treated the latter's partner's statement and the alleged 'Excel' sheet as the basis of the impugned additions. Learned CIT-DR also quoted Section 132(4) r.w.s.292C of the Act that such an incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very process only. 13. Lastly comes the crucial issue as to whether the impugned seized material / 'Excel' sheet (not mentioning the assessees' names) forms a dumb document or not. We make it clear that the department has failed to corroborate the impugned seized document indicating assessee's alleged on money payment over and above the sale price itself. All it has done is to rely on their father's name only. It is nowhere clear as to whether it is an alleged document forming part of the books of account maintained in the regular course of business either by the vendor or vendee side. All it contains therefore is rough notings and jottings only. This tribunal co-ordinate bench's decision Nishan Constructions Vs. ACIT ITA No.1502/Ahd/2015; after considering the hon'ble apex court's landmark decision in Common Cause, Vs. Union of India (2017) 77 taxmann.com 245 (SC) and CBI Vs. V.C.Shukla (1998) 3 SCC 410 (SC) holds that such loose sheets deserves to be treated as a dumb documents only since not revealing full details about the dates containing lack of further particulars and therefore, ought not to be made basis of an addition. Similar other judicial precedents ACIT Vs. Layer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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