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TMI Blog2021 (6) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... ided u/s 10(38) of the Act prima facie seems to have been fulfilled by the assessee. Assessee was not provided opportunity of cross examination - A.O has referred to some investigation reports carried out in the case of some brokers and other assessee(s) 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 of 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. See DIPESH RAMESH VARDHAN, RAMESH BABULAL VARDHAN, MANJU RAMESH VARDHAN, VISHAL RAMESH VARDHAN, RAJESH BABULAL VARDHAN [ 2020 (8) TMI 405 - ITAT MUMBAI] As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 115BBE of the Act even when the source of amount as found credited was duly explained. 4. That, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in maintaining the interest as charged by the assessing officer under section 234A and 234B of the Act. 5. The appellant reserves her right to add, alter and modify the grounds of appeal as taken by her. (ii) M/s Sanjay Onkarmal Agrawal (HUF) ITA No.279/Ind/2019 Assessment Year 2015-16 1.That, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in maintaining the addition as made by the assessing officer of ₹ 22,88,883/- to the total income of the appellant on account of long term capital gain as earned on sale of shares under section 68 of the Act by treating it as income from undisclosed source without properly appreciating the facts of the case and submissions made before him more so when the appellant had filed ample documents so as to justify the genuineness of long term capital gain which are never disproved by the assessing Officer. 2. That, on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in maintaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain of ₹ 18,65,616/-. Assessee filed relevant details of purchase of 10000 shares of M/s Conart Traders Limited purchased on 16.01.2012 at ₹ 2,50,000/- and paid through banking channel. M/s Conart Traders Limited was subsequently merged with M/s Sunrise Asian Limited (In short SAL ). Assessee opened Demat account with Union Bank of India. 10,000 equity shares of M/s SAL were received in lieu of the shares in M/s Conart Traders Limited. Subsequently assessee sold the shares of SAL on the recognised stock exchange through a registered broker and against the sale consideration received, the cost of purchase was debited giving rise of LTCG at ₹ 18,65,616/-. However, Ld. A.O was not satisfied since in his view the extent of growth and financials of the company were not sufficient to justify the abnormal increase in the share price within a short span of time, which were very low in December, 2012 and then increased continuously up to April and May, 2015 and felled thereafter. Ld. A.O has also gave reference to various searches conducted u/s 132 and survey u/s 133A of the Act carried out by the department on various brokers of stock exchange and other companies wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Reliance was also placed on the judgment of Hon ble Supreme Court in the case of M/s Andaman Timber Industries V/s CCE contending that no opportunity of cross examination was provided which thus violates the principles of natural justice rendering the proceedings as null and void. 9. Per contra Ld. Departmental Representative vehemently argued supporting the orders of both the lower authorities and decisions referred and relied by Ld. CIT(A). Reliance was also placed on the judgment of Hon ble High Court in the case of Suman Poddar V/s ITO, ITA No.841/2019 dated 17.09.2019. 10. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions placed and relied by both the parties. The first common issue relates to addition made u/s 68 of the Act for the sale consideration received from sale of equity shares of M/s SAL by treating the LTCG as bogus. We observe that the assessee purchased 10000 equity shares of M/s Conart Traders Limited on 16.1.2012 from M/s P. Saji Textiles, Mumbai for a price of ₹ 2,50,000/- paid by cheque and purchased in physical form. There is no restriction under the law to purchase equity shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Dipesh Ramesh Vardhan V/s DCIT (supra) and the same is squarely applicable on the instant appeals. The relevant extract of the decision of Co-ordinate Bench, Mumbai is reproduced below:- 6. We have carefully heard the rival submissions and perused relevant material on record. So far as the factual matrix is concerned, there is no substantial dispute regarding the same. The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee s account during the month of March, 2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009-10 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon ble Bombay High Court vide order dated 22/03/2013, a copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to crossexamine 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 whole basis of making the addition is third party statement without there being any tangible material. It is trite law that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law as held by Hon ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151). The suspicion however strong could not partake the character of legal evidence as held by Hon ble Supreme Court in Umacharan Shaw Bros. V/s CIT (1959 37 ITR 271). Therefore, we find that onus as caster upon revenue to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of amalgamation was duly been approved by Hon ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. 10. The above conclusion is further fortified by the fact that in share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the adverse conclusion drawn by Ld. AO merely on the basis of the fact that the buyer of the shares were group entities of Shri Vipul Bhat, could not be sustained. The fact that there were independent buyers also would rebut the same and weaken the conclusion drawn by Ld. AO. 11. The Ld. AR has relied on plethora of judicial pronouncements in support of various submissions, which we have duly considered. These decisions would only support the conclusions drawn by us that once the assessee has discharged the onus of proving the genuineness of the transactions, the onus would shift on the revenue to dislodge assessee s claim and bring on record contrary evidences to rebut the same. Until and unless this exercise is carried out, the additions could not be sustained in the eyes of law. 12. To enumerate the few, the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id decision, it has been held that it is SESI who monitors and regulates the stock exchanges stock market and when their investigation did not reveal any price or volume manipulation by the assessee and these transactions are in the normal course through proper legal channels. Then the allegations of the IT Department fall flat and denial of deduction u/s 10(38) of the Act is arbitrary and addition of sale proceeds of shares of PAL u/s 68 is against the provisions of Act. In the case in hand, the Id. AO has referred to SEBI enquiry against M/s Sunrise Asian Ltd. However, we note that the said enquiry was regarding failure to comply with certain disclosure requirements and therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain and has no bearing in judging the genuineness of the transaction undertaken by the assessee or for that matter, the price and realization on sale of shares so undertaken by the assessee through the stock exchange. Further, it has been held in the aforesaid case that the findings of investigation modus operandi in other cases narrated by the AO and also CIT(A) nowhere prove any connection with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has earned speculation profit in the immediately preceding year through M/s Eden Financial Services also and the said profit has been used to purchase the shares of M/s Sunrise Asian Ltd. The assessee has offered the speculation profit for income tax purposes in the immediately preceding year and It has been accepted. Further the assessee has shown the purchase of impugned shares as investment in the Balance Sheet. Hence the purchase of shares has been accepted. Further the shares have been received in the D-mat account of the assessee and they have been sold through the Dmat account only. Hence the delivery of shares a/so stand proved. The AO has not brought any material on record to show that the assessee was part of fraudulent price rigging. Accordingly, in the absence of any evidence to implicate the assessee or to prove that the transactions are bogus/ 'r am of the view that the capital gains declared by the assessee cannot be doubted with. In that View of the metier; the addition made towards expenses is not also sustainable. 25. In light of above discussions and in the entirety of facts and circumstances pf the case and following the decisions of the Hon'ble ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the 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 pre-planned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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