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TMI Blog2021 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ch proceedings is an admissible evidence but not conclusive one. It is true that admission being declaration against an interest are good evidence, but they are not conclusive, and a party is always at liberty to withdraw the admission by demonstrating that they are either mistaken or untrue. In law, the retracted confession even may form the legal basis of addition, if the AO is satisfied that it was true and was voluntarily made. But the basing the addition on a retracted declaration solely would not be safe. It is not a strict rule of law, but only rule of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT has issued Circular No.286/2/2003 prohibiting the departmental officials from taking confession in the search. The CBDT is of the view that often the officials used to obtain confessions from the assessee and stop further recovery of the material. Such confessions have been retracted and then the addition could not withstand the scrutiny of the higher appellate authority, because no material was found supporting such addition. It is pertinent to observe that in a large number of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs referred to in this section i.e. section 153A(1) pending on the date of initiation of search under section 132 or making of requisition under section 132A as the case may be, shall abate. It is further observed that apart from present nine appeals, eight more appeals i.e. ITA Nos.706, 707, 709/Chd/2018 filed by Shri sanjay Singhal for the Asstt.Year 2008-09, 2010-11, 2012-13; and ITA No.712, 713 715/Chd/2018 also filed by Smt.Aarti Singhal for the Asstt.Year 2008-09, 2010-11, 2012-13. Similarly, the assessee, Shri Sanjay Singhal HUF has also filed appeals against reopening of the assessment in the Asstt.Year 2011-12 and 2013-14. 4. These appeals pertain to unabated years i.e. in these years assessment/reassessment were not pending on the date of search. Similarly, in the case of Shri Sanjay Singhal HUF assessments were reopened. Therefore, for the facility of adjudication, the Tribunal has segregated these appeals from the present-one, and decided the appeals of Shri Sanjay Singhal and Smt.Aarti Snghal vide order dated 7.2.2020. Similarly, in the case of Shri Sanjay Singhal HUF were decided on 19.6.2020. The Department had filed Misc.Application in all these appeals, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s)-3, Gurgaon further gravely erred in upholding the action of the id. Assessing Officer in making an addition of ₹ 3,53,37,680/- on account of alleged commission expenses paid by the Appellant for arranging the alleged entries in respect of Long Term Capital Gains by invoking the provisions of Sec. 69C of the Act on sheer presumptive basis. 5. That the Ld. Commissioner of income Tax (Appeals)-3, Gurgaon while adjudicating the appeal, has dismissed various grounds of appeal raised by the Appellant by relying on statements of various persons and data without affording any opportunity to cross examine such persons thereby ignoring the basic principles of natural justice despite the fact that a specific ground was raised to this effect. ADDITIONS: Sanjay Singal Particulars A.Y. 2011-12 A.Y. 2013-14 A.Y. 2014-15 Total Total Sale proceeds u/s 68 (on a/c of alleged bogus LTCG) 561,210,020 92,916,613 598,599,451 1,252,726,084 6.5% of LTCG u/s 69C towards alleged commission expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department has filed an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 under the signature of Shri G.C. Srivastava, Special Counsel for the Revenue. The application read as under: May it please your Honours, Based on certain information received from CBT, the Directorate of Enforcement (ED) has conducted detailed enquiries, in the cases of the assesses whose appeals are pending before Hon'ble ITAT as mentioned above, under Prevention of Money Laundering Act, and has filed criminal charges against members of the group. During such investigations, statements of all those agencies/entities who were involved in providing bogus Long Term Capital Gains to the assesses, including the statement of Sri Sanjay Singhal, were recorded. The copies of such statements are made available to the Assessing Officer now, I have been instructed to file copies of these statements and other documents before your Honours as additional evidence with a prayer for the admission of the same. A brief submission on the reasons for filing the additional evidence and their relevance to the present case is as under: 1. Crucial documents have been rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the statement of Sh. R.K.Kedia (broker) dt. 17.09,2019 (Pages 21-23 oftheAnnexure) wherein he had explained in detail the modus operandi adopted by Singals to avail bogus LTCG. vii. The statements of other co-conspirators like Sh Irish Chandra Shah, Praveen Kumar Jain (Pintu), J.P.Purohit, Praveen Kumar Agrawal, Alkesh Shin ma and others were also recorded by ED who not only reiterate what was stated by them earlier but also throw a great deal of light on the bogus nature of these transactions. (Pages 31-68 of the Annexure) 5. These pieces of evidence could not be filed earlier as either these did not exist at the relevant time, or it was not in possession of the Income tax Department. 6. Nonetheless, these pieces of evidence have a direct bearing on the merits of the case as these relate to those very issues which are the subject matter of present appeals. 7. The list of documents prayed for admission as additional evidence is contained in a separate Annexure/Paper-book (68 Pages). It is, therefore prayed that these documents may kindly be admitted as additional evidence in the aforesaid cases, and these may be considered at the time of hearing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered case as well as the ED has recorded statement of Shri RK Kedia under section 50 of the Prevention of Money Laundering Act, 2002 ( PMLA ). Therefore, it is necessary to take on record disclosure made by the persons before the ED and other prosecuting agencies. With regard to the position whether the Revenue can produce additional evidence at the second appellate stage, more so, in the capacity of a respondent, he relied upon the decision of Special Bench in the case of LG Electronics India P.Ltd. in ITA No.5140/Del/2011. He also relied upon the decision of Hon ble Supreme Court in the case of Jyotsna Suri Vs. ITAT Ors., 9 SCC 211. He further relied upon judgment of Hon ble Delhi High Court in the case of HL Malhotra Vs. DCIT, ITA No.211/2020 dated 22.12.2020. He placed on record copies of these decisions. 8. Since interlocutory application was pressed after conclusion of the arguments of the ld.cousnel for the assessee, therefore, at the time of hearing we permitted both the parties to give their submissions in writing on the admission of additional evidence as well as consideration of them on merit after admitting, if taken on record. In other words, we have invited the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso object to the admittance of such material on the ground that the Special Counsel for the Respondents had not disclosed the date of receipt of the said information from the ED in his Application. The same thus casts further doubt on the intent of the Department that is seemingly trying to stall/delay the hearing of this case on merits by creating hurdle after hurdle, first with the application for the constitution of the Special Bench, and now with the application for the filing of additional evidence. 5. The Appellants submit that the application of the Department u/s 255(3) for the constitution of a Special Bench in the aforesaid matters had been heard by this Hon'ble Bench in the month of May 2021, upon which, this Hon'ble Bench posted the matter before the Hon'ble President of the ITAT with their comments. The Hon'ble President, ITAT then posted the matter for hearing on the 8th of June 2021. All of a sudden on 7th June 2021, the Special Counsel of the Department files the present Application for admittance of additional evidence, just one day before the date of hearing. No such mention of this Application is even made before the Hon'ble President d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence it can only do so under the situation No.l prescribed above since situation No.2 pertains to the assessee only. Situation No.l is specifically worded to mean that it is the ITAT that must 'require' such additional evidence that could be in the nature of a document to be produced or a witness to be examined or an affidavit to be filed - in order to enable the ITAT to pass orders or for any other substantial cause. Here, this Hon'ble Bench, never sought the present additional evidence (that has been recorded by the ED under a different Statue altogether) to be caused to be produced by the Department. Therefore a suo moto filing of additional evidence by the Department when the matter has been listed for final adjudication and disposal is bereft of jurisdiction since the same has not occurred pursuant to a direction of this Hon'ble Bench on the grounds that such additional evidence is required to enable the passing of the orders in the present Appeals or for any other substantial cause. 8. Thus the present Application is bound to be dismissed on the grounds of jurisdiction alone since the Special Counsel has been unable to substantiate how the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . may make such enquiry as he considers necessary. In other words, Sec.142(2) empowers the A.O. to make such enquiry to obtain on record such oral and/or documentary evidence as he/she considers necessary for the purpose of such assessment. Sec. 142(3) mandates that the information/evidence collected pursuant to the enquiry conducted u/s 142(2) which is proposed to be utilized during the assessment, shall first be put to the assessee to provide him/her with an opportunity of being heard before the same is utilized by the A.O. to make an addition/disallowance u/s 143(3). Sec.l42(3) utilizes the word 'shall' therefore rendering the same to be by no means discretionary. Thus the mandatory intermediary step prescribed u/s 142(2) cannot be given a go past, in order to utilise such information/evidences adversely against the assessee without the latter's rebuttal. The same if done, is a direct violation of the procedure of enquiry prescribed u/s 142 that inherently encompasses the Principle(s) of Natural Justice. Thus, in the case at hand, the present Application towards admitting such additional evidence that has been recorded under the PMLA, 2002 has been preferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to make the impugned assessment orders u/s 153A/143(3)-has not been subject to the procedure of enquiry prescribed u/s 142 of the Act, since the A.O. has sought to utilise those solely on 'borrowed satisfaction' to make the assessment us/ I43(3)/l 53A. Now, in a further attempt at deviating the procedural fetters prescribed u/s 142, the Special Counsel has filed such additional evidence, by completely ignoring that the very same rigours of Sec. 142 will also apply to such additional evidence that has been recorded by a separate governmental department (the ED) under a separate Statute (the PMLA). 13. The Appellants thus submit that without fulfilling the mandate of Sec. 142, the evidence cannot be considered as admissible evidence on record, in order to fasten liability unto the assessee u/s 143(3). This is more so because the additional evidence seeking to be admitted vide the present Applications are statements that have all be recorded u/s 50 of the PMLA, 2002 post the completion/finalisation of the search assessments u/s 153A/143(3) in the case of all the Appellants, that were assessed to tax vide the impugned assessment orders (all) dated 28.03.2016. Thus when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R to admit such additional evidence at this stage of the proceedings can be distinguished (as done in the paragraphs below) and thus do not support the case of the Department: A. In the case of Text Hundred India Pvt. Ltd., ITA 2077, 2061 2065/2010 (Delhi H.C., decision dated 14.01.2011) the application for the filing of additional evidence had been moved by the assessee on the ground that the assessee could not produce these records before the lower authorities due to non- retrievability of e-mail on the date because of technological difficulties. See Para 15. B. In the said case the Hon'ble Bench has clearly held that the question of admitting additional evidence arises when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent to the Appellate Court coming in its way to pronounce judgment, and only then can the expression to enable it to pronounce judgment be invoked. The provision does not apply where with existing evidence on record the Appellate Court can pronounce a satisfactory judgment. See Para 14. C. Per the Hon'ble Bench, the Tribunal looked into the entire matter and arrived at a conclusion that the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing the mandate of Sec.142 that encompasses the Principles of Natural Justice. 16. It is also submitted that Sec.65 of the PMLA, 2002 states that the provisions of the Criminal Procedure Code, 1973 (CrPC) shall apply in so far as they are not inconsistent with the provisions of the PMLA vis-a-vis arrest, search and seizure, attachment, confiscation, investigation and prosecution and all other proceedings under the Act. 17. Thus even if a statement recorded u/s 50 of the PMLA is not equated to a statement recorded under Sec. 161 r/w 162 of the CrPC, it is obvious that in order to sustain a conviction under the PMLA a criminal trial ensues to prosecute the accused. This is in line with the protection awarded to an individual under Art.20 in respect of the conviction of offences, where Art.20(3) specifies that no person accused of any offence shall be compelled to be a witness against himself. Thus a mere statement recorded u/s 50(2) of the PMLA is not 'evidence* in itself even for the purpose of prosecuting the accused under the PMLA, let alone under the Income Tax Act, that has its own separate procedure in place for collecting and admitting evidence u/s 142 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the nature of the repudiation and then act upon the earlier inculpatory one. If on the other hand, the officer concerned bisect the two statements and make use of the inculpatory statement alone conveniently bypassing the other such a stand cannot be a legally permissible because admissibility, reliability and the evidentiary value of the statement of the inculpatory statement depend on the benchmark of the provisions of the Evidence Act and the general criminal law. [Emphasis Supplied] 19. The Appellants submit that the case of KTMS Mohamed Ors. (supra) has direct applicability to the case at hand, more so because the statement of Sanjay Singhal that had been recorded by the E.D. has been retracted by him, vide Retraction Letter dated 20.12.2019 from Tihar Jail. In the said statement, Sh. Sanjay Singhal has emphasised that he was pressurised by the ED officers, and was given no such opportunity to read and/or understand the papers signed and/or statements recorded and signed, all of which was taken under the threat and pressure of arrest. In fact, Sh. Sanjay Singhal also states that when he refused to sign any further documents/statements, they arrested him on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to produce additional evidence either oral or documentary before the Tribunal. However, in case any evidence is required by the Tribunal, in the interest of justice, then such opportunity could be given to the parties. In other words, for just decision of any appeal, if some material is required by the Tribunal, then that material could be taken up on the record. As observed by the Special Bench of ITAT in the case of LG Electronics (supra) additional evidence can be permitted if the evidence does not raise any new area of dispute, if the evidence has relevance to the issue. A perusal of the application filed by the Revenue would reveal that the Revenue intends to place on record copies of the statement recorded by the ED i.e. including the statement of the assessee as well as Shri R.K. Kedia, Praveen Kumar Jain and Shri Sirish Chandrakant Shah. We have taken into consideration the material sought to be placed on record by the Revenue vis- -vis scope of Rule 29 of the ITAT Rules. It is pertinent to observe that the Income Tax Act provides a complete frame work for scrutinising the return and passing assessment order. The Act itself contemplates certain safeguards for protecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Investigating agencies. Their reliability or admissibility has to be determined by judicial adjudicating body. The process has not been completed with regard to the statement sought to be placed on record. Therefore, the Tribunal does not feel, in any manner that these are the materials, which should have been placed on record for just decision of the appeals, rather we are of firm view that permitting to place on record such material would cause prejudice to the assessee. As far as case law relied upon by the ld.counsel for the Revenue is concerned, they only postulate that ITAT has the power to permit Revenue to produce additional evidence in the capacity of respondent also. There is no dispute with regard to the above proposition. In given case Tribunal can feel that certain details possessed by the Revenue are necessary for just decision of the appeal then, it can direct the Revenue for production of those details. Thus, these cases are not applicable on the facts of the present appeals. It is also pertinent to mention that the assessee has duly demonstrated in the reply extracted above as to why these evidences should not be taken on record. We have gone through the repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r share having face value of ₹ 1 per share and premium of ₹ 1.25 per share. These shares were sold in the year 2010-11 and 2011-12 at an average price of ₹ 65 per share. Thus it was alleged that Shri SCS has converted the unaccounted money of various parties/beneficiaries by providing long-term capital gain to them which was exempted under section 10(38) of the Act by manipulating in the price of the shares of PIL. All these facts narrated above were duly admitted by Shri SCS in the statement furnished under section 132(4)/131-IA of the Act which was recorded at different point of time. 14. The statement of Shri Om Prakash Anandilal Khandewal (OPK), the director of PIL, was also recorded under section 132(4) of the Act wherein he had admitted that PIL was a paper company, having no business and was used by Shri SCS for generating bogus long-term capital gain to extend the benefit to the parties. The statement of Shri OPK was also confirmed by Shri SCS. 15. In the course of search at the premise of SCS, among other documents, two documents in the form of MS Excel file namely CASH CHEQUE SHEET and KEDIA-2 were found. CASH CHEQUE SHEET 16. The cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain. Shri SCS for this transaction has charged a commission of ₹ 3.81 crores along with Aangadia charges of ₹ 9,02,250/- only. When confronted, Shri SCS also admitted that he has provided accommodation entries in the name of long-term capital gain to the group of the assessee through the broker, Shri RK Kedia. 20. Further, receipts of cash recorded in kedia-2 sheet were also matching with the books/ records maintained by Shri Parveen Kumar Jain alias Pintu which were impounded by the Directorate of investigation of Mumbai as mentioned in previous paragraph. 21. Similarly, a search and seizure operation under section 132 of the Act subsequently and simultaneously was carried out at the premises of the assessee group and Shri RK Kedia dated 21st February 2014 by the Directorate of Chandigarh. In the search proceedings at the premises of the assessee, various loose papers were found and impounded which were incriminating in nature. The assessee was also confronted with the statements of various persons recorded under section 132(4)/131-1A of the Act along with the documents found during the search in the case of Shri SCS and Praveen Kumar Jain. The statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri RK Kedia, the post search enquiries also revealed the fact that such companies highlighted by Shri RK Kedia, were paper companies which were engaged in providing accommodation entries. 24. It was noticed by the AO that the assessee, through Shri RK Kedia, has taken long-term capital gain on the sale of the shares with respect to 10 companies which were included in such 31 companies, as discussed in preceding paragraph. Regarding such companies, the details were found and impounded from the premises of Shri RK Kedia, containing the transactions of sale/ purchase of shares and dealing of cash. This fact was admitted by him that these companies were engaged in providing accommodation entries. The list of 10 companies from which assessee earned long term capital stand as under: SI. No. Name of the company 1. DB (International) Stock Brokers Ltd. 2 Blue Circle Services Ltd. 3 Unisys Software Holding Indust. Ltd. 4 Nouveau Multimedia Ltd. 5 Action Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch accommodation entry. The entries under this reconciliation statement were admitted by Shri RK Kedia and his employee Shri Manish Arora in the statement furnished under section 132(4) of the Act dated 13th June 2014. The counterparties who have purchased the shares of M/s Blue Circle Services Ltd from the group of the assessee were identified which were managed by Shri Praveen Aggarwal, Shri Natwar Lal Daga and Shri Krishan Khadaria etc. The fact that Shri Praveen Aggarwal was engaged in providing the accommodation entries gets established as he has admitted in the statement furnished under section 132(4) of the Act at the time of search under section 132 of the Act dated 13th September 2012. 26. It was further observed by the AO that similar modus operandi was used in respect of the remaining 9 companies with respect of which the assessee has shown bogus long-term capital gain. The list of such companies has already been discussed in the preceding paragraph. The necessary documents in connection with such bogus long-term capital gain which were seized from the premises of RK Kedia were provided to the assessee. 27. The AO also found that there was an investigation carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly the assessee requested for the cross-examination of the parties as discussed above. Similarly the assessee has not paid any cash to the parties for carrying out any transaction of bogus long-term capital gain. The purpose of maintaining documents by the third parties were not known to him and the name of the assessee or his family members were not appearing in those seized documents. Therefore, no adverse inference can be drawn and even the records match with the data maintained by the respective parties. 32. The assessee also submitted that the statement of Shri RK Kedia was not reliable as he was changing his stand frequently. The assessee further contended that the statement furnished by him under section 132(4) of the Act admitting an income of ₹ 250 crores dated 21st February 2014 cannot be relied upon as it was given under the pressure of the search team. 33. The shares were sold to the unknown parties. Likewise all the counterparties/purchasers of the shares were not among the list of 212 companies which were allegedly engaged in providing accommodation entries and controlled by Shri SCS. There cannot be any adverse inference on the observation that the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee failed to do so. The contention of the assessee that he does not know Shri SCS does not appear to be true for the reasons as detailed below: i. The group companies of the assessee have issued shares at a huge premium to the companies which were controlled and managed by Shri SCS. ii. It was admitted by the assessee in the submission dated 3rd February 2016 that its group company namely M/s Bhushan Power and Steel Limited has given advances for the purchase of capital assets in the course of its business to the companies which were managed and controlled by SCS. 36. There were many operators who were involved in jacking up the price of certain companies and providing accommodation entries to the beneficiaries. This fact of involving various brokers in the activity of accommodation entries has already been elaborated in the preceding paragraph. Therefore, contention of the assessee that the shares of PIL were also sold to other companies which were not managed and controlled by SCS does not make the transaction genuine. It is for the reason that there was a syndicate which was operating in tandem for generating the bogus long-term capital gain. It is very unusual t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Had there been any activity, the same would have been reflected from the financial statements of the relevant companies. Similarly, these companies have issued shares at a huge premium which was immediately utilised for making the investment in the shares of other companies. Thus, considering all these facts, the amount of capital gain generated on the sale purchase of these companies is against the human probability. Therefore, the preponderance of the probability suggests that the transactions carried out by the assessee group in the name of longterm capital gain are a sham transaction. 39. There were various direct and circumstantial evidence available on record indicating that the prices of the shares of the impugned companies were rigged up in an organised manner by the network of the various entry-operators. All the transactions of purchase and sale of the shares of these companies on the stock exchange were carried out in synchronised manner. Most of the time transaction gets completed immediately after putting the bid on the stock exchange. 40. There were various search and seizure operations as well as survey operations on various companies, brokers, sub-brokers, emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore it was not feasible to provide the opportunity of the cross-examination of the alleged person to the assessee. However, nobody appeared in response to the summons issued to various parties under section 133(6)/131 of the Act. Furthermore, the sham transactions generally carried out in an organised manner by the group/network of syndicate and therefore member of such syndicate did not come forward for the cross-examination. 43. The proceedings under the income tax Act being the civil proceedings does not requires absolute evidence. Therefore the aspect of preponderance of probability cannot be ignored in the given facts and circumstances, especially on the basis of the documents and the statement recorded of various persons during various search proceedings as discussed above. All the companies which have been used for the purpose of generating the long-term capital gain on the sale purchase of the shares were financially weak and having no business transaction. Thus, no prudent businessman will take the risk by making the investment in the shares of such companies. Therefore, the preponderance of probability suggest that the assessee has entered into such transaction wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled law that no adverse inference can be drawn against the assessee until and unless the assessee is afforded the opportunity of cross verification. 47. It was also contended that the conditions as specified under section 10(38) of the Act for treating the particular long-term capital gain as exempted from tax have been duly satisfied. As such the assessee has generated the long-term capital gain on the sale of listed securities and after making the payment of security transaction tax. Therefore, the AO should have viewed the transactions of impugned long-term capital gain within the parameters of the provisions specified under section 10(38) of the Act. 48. The sale and purchase of the scripts listed on the stock exchange are regulated by SEBI, internal control/guidelines of the stock exchange. Furthermore, a company before listing shares in a stock exchange has to face various hurdles for compliance of the conditions specified by the stock exchange as well as SEBI. Therefore, treating the impugned longterm capital gain as bogus in nature would be a disgrace of such authorities which came into existence through the Parliament of India. Further in such a highly regularise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of normal business. As such it was not known that such companies belong to Shri SCS. 52. Regarding the sheet marked as Kedia-2, it was submitted that assessee has not prepared such sheet. The sheet was prepared by SCS for the reasons best known to him. As such, the assessee does not know any reason for the sheet Kedia 2 being maintained by Shri SCS. The bank payment was made through RK Kedia for the acquisition of the capital assets by BPSL. Why the details of bank payment were recorded in the sheet found from the premises of Shri SCS, this question can only be answered by Shri RK Kedia. There can be some internal dealing between them which can be clarified by them only. It has already been submitted that it has not provided any cash of whatsoever to any party. Therefore the cash transactions recorded in the documents found from the premises of the 3rd party namely Shri SCS , RK Kedia and Praveen Kumar Jain which were also matching/correlating with the respective records maintained by them are not known by him. For what purpose they were recording the transactions, they can only clarify. Furthermore, in none of the document the name of the assessee group was shown. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s Blue Circle Services Ltd, it was submitted that it was treated as bogus on the basis of statements recorded of various persons such as Shri RK Kedia, Manish Arora, Praveen Agrawal and Jagdish Purohit besides the document marked as annexure 2 and backup data found from the premises of RK Kedia. But the fact is this that he does not know to Shri Jagdish Purohit and Parveen Aggarwal. Moreover, the assessee has not carried out any transaction either directly or indirectly with these persons. Similarly, the name of assessee group was not appearing in the statements furnished by Shri Jadish Purohit and Praveen Agrawal. Similarly, these two persons did not even admitted in the statement that they have helped each other in generating the bogus longterm capital gain. Likewise, the allegation of the AO that Shri Jagdish Purohit was controlling the affairs of the company namely M/s Blue Circle Services Ltd was not correct as his name was not appearing in the list of Board of Directors of the company. The assessee further contended that his name is not appearing on the documents seized from the premises of Shri RK Kedia which were marked as annexure 2 and the backup data. The transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e based on the principle of preponderance of probability. 61. However, the learned CIT (A) disagreed with the contention of the assessee by observing that the assessee group has shown long-term capital gain of ₹ 694 crores over the period of time against the investment made for ₹ 21 crores only. The entire investment was made by the assessee group in the penny stock companies having weak financials and no major business activities. Besides this, the assessee has not made any other investment in any other company. Thus, it is humanly impossible for generating such huge capital gain in such short period of time without any manipulation. 61.1 The assessee himself has admitted to have generated long-term capital gain for ₹ 250 crores in the statement furnished under section 132(4) of the Act after confronting various documents of incriminating nature and the statement recorded of various persons. Thus, the admission by the assessee in itself is a vital piece of evidence that the group of the assessee has generated huge bogus long-term capital gain. The admission for disclosing the income was made by the assessee based on the incremental documents found during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice. However, in the case on hand, there were various vital piece of evidences which were gathered after conducting various searches at different locations and on different persons by the Directorate of Investigation wing of Mumbai, Kolkata, Ahmedabad, Delhi and Chandigarh. Therefore, in such a situation it is not compulsory to afford the opportunity of crossexamination, especially in fact that the assessee failed to discharge the onus cast upon him. 65. In view of the above the learned CIT (A) confirmed the order of the AO by observing as under: ........ In view of the facts and circumstances borne out of the assessment order and Legal precedents as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt LTCG by well-organized network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITSC, dt.30.06.2013 the Assessment Order for the AY 2010-2011 stood revised - income declared in the hands of SS ARS partly shifted to the hands of BPSL and excluded from their individual hands vide order of the ITSC 29.03.2012 Search at Himanush Verma on 29.03.12 by DIT(Inv), Delhi - Group concerns of the Assessee had made a further disclosure of 89.4 Crs for the AY 2011-2012 and 2012-13 on account of alleged bogus share capital/premium - No issue relating to LTCG 13.09.2012 S S at residential cum office premises of Praveen Agarwal by DIT(Inv) Kolkata- statements recorded - documents relied upon mainly four excel sheets from hard disk ID mark PAL/HD/1 - allegedly shows datewise detail's of cheques/RTGS received and paid from/to various parties including BPSL group - statements dt. 12.11.2012, 05.02.2014, 30.04.2014, 18.11.2014 11.02.2015 recorded - Assessee(s) not named in any of the seized documents or statements. 27.12.2012 Survey at premises of BPSL Group by DIT(Inv), Chandigarh - BPSL Group Concerns made another voluntary disclosure of ₹ 70.36 Crs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire group and submitted a disclosure letter - specifically stated that the disclosure was made to avoid litigation and purchase peace of mind Simultaneous search operation in the case of R.K Kedia by DIT(Inv), Delhi - nothing incriminating wrt the Assesseee(s) found - in course of statement recorded u/s 132(4) on 21/22.02.2014 stated that investments in shares were made by the Singals on his advice - that the LTCG earned by Singals was genuine- contents of Kedia 2 Sheet seized from SCS was categorically denied by RKK (reply to Q 75). 06.03.2014 Sanjay Singal filed letter dt. 06.03.2014 giving breakup of Rs, 250 crores, i.e. ₹ 159.61 crores in the hands of SS, ARS SS(HUF) for A.Y. 201 1-12 2012-13 - allegedly on account of exempt LTCG on sale of shares of Prraneta Industries Ltd.(PIL) solely for the purpose of buying peace of mind and avoiding protracted litigation- bifurcation w.r.t the balance offer was undertaken to be submitted in a few days after examining seized materials. 13.06.2014 S S operation u/s 132(1) carried out once again by DIT(Inv), Delhi at the premises of RKK at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014-15) issued 13.01.2016 Proceedings u/s 1 53 A dropped in the case of SS(HUF) 03.02.2016 Assessee(s)' submissions in response to SCN dt. 20/21.10.2016 - also requested for opportunity of cross examination 05.02.2016 Letter of AO seeking list of persons sought to be cross-examined by the Assessee(s). 10.02.2016 Notice u/s 142(1) dt. 10.02.2016 17.02.2016 Letter filed before AO requesting for cross examination 26.03.2016 Notice u/s 148 issued to SS(HUF) 28.03.2016 Assessment order u/s 153A passed in the cases of SS, ARS, ANS 05.04.2016 SS(HUF) filed return of income in response to notice u/s 148 and requested for supply of reasons recorded u/s 147 15.09.2016 Reasons recorded u/s.147 supplied to SS (HUF) 15.09.2016 Notice u/s.143(2) issued served on SS(HUF) 10.05.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d years, the assessees earned Long Term Capital Gains (LTCG) in various scrips on which Securities Transaction Tax (STT) had been duly paid and having complied with all the requisite conditions, they claimed the LTCG as exempt u/s 10(38) of the Act. The ld. A.O, proceeded to add back the entire proceeds arising on sale of shares u/s 68 and alleged unaccounted commission expenses u/s 69C to the income of the Assessee(s) for the relevant years relying on various arguments/so-called evidences as discussed in the body of the assessment orders. It is clearly evident from the discussions made in the assessment order that the so-called evidences used by the A.O in making the impugned additions have no evidentiary value vis-a-vis the present assessees, are highly unreliable and do not conclusively prove that the impugned LTCG were not genuine or sham. ii) It is submitted that most of the shares of the companies on which LTCG has been earned were allotted to the Assessees by way of preferential allotment. One of the grounds taken by the A.O in doubting the transactions carried out by the assessee and alleging personal connection between the Assessee(s) and the promoters of the said compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective DEMAT Accounts of the Assessee(s) herein. After being held by the Assessee(s) for a period of more than 12 months, their sales were affected through registered brokers on the NSE/BSE in accordance with prescribed regulatory procedures, rules and applicable laws whereby both the limbs of the transaction viz. purchase and sale of shares got duly authenticated. The sale proceeds for the sale of shares were received through normal and regular banking channels from the stock broker through whom the shares had been sold, who, in turn received the same from the Stock Exchange through its designated payout mechanism and stood duly credited to the respective Assessee(s)' bank accounts. v) The shares in question were of listed companies and were sold at prevailing market rates through the Bombay Stock Exchange Online Trading (BOLT) platform of the Bombay Stock Exchange and all the payments against the same were received through account payee cheques/RTGS from the stock broker. It may be mentioned that under the online web-based trading platforms of the relevant exchanges as per the prevalent procedures, the broker only acts as the intermediary. There is no physical interact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipts against sale of shares etc. were duly filed before the Revenue Authorities. The same are also placed in Paper Book No. 3 filed separately in the case of each Assessee for each year under consideration before the Hon'ble Bench. vii) In the aforesaid backdrop, the ld.counsel for the assessee countered various arguments both legal and factual put forth by the Revenue Authorities in making the impugned additions as under: 69. RELIANCE ON THIRD PARTY STATEMENTS RECORDED U/S 133A/132(4) WITHOUT ALLOWING OPPORTUNITY OF CROSSEXAMINATION GROUND NO. 5 i) In making the impugned additions u/s 68 69C of the Act, the A.O, in the assessment order has predominantly relied upon the statements of the following persons recorded by the Investigation Wing in course of separate search/survey actions in their cases: Name of the Person/ deponent Status Sirish Chandrakant Shah (SCS) Person allegedly managing controlling affairs of M/s. P1L Ranjan Kachaiia, Chandan Kumar Singh, Damodar Attal Devang D. Master, Devang Jhaveri, Prakash Dave, Naresh Parmar Employees/ Associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es through the companies allegedly controlled managed by him. Further, as elaborated subsequently, the Hon'ble Delhi ITAT in the case of Sri Brij Bhushan Singal Ors Vs. ACIT (supra) has given a specific finding wherein Shri RK Kedia has been categorically held to be unreliable person and his statements and the documents seized from his premises have been held to have no evidentiary value considering the inconsistencies displayed by him. iii) The impugned additions w.r.t the transactions resulting in exempt LTCG have been made by the A.O u/s 68 of the Act. Section 68 of the Income-tax Act, 1961 is attracted where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory. Under the provisions of section 68 of the Act, the primary onus to explain the nature and source of the amount so found credited is on the assessee. However, once the assessee proves the identity of credits by either furnishing Permanent Account Numbers or copies of bank accounts and shows the genuineness of the transaction by showing that money in the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the case made out against him. The Assessee must be supplied the contents of all such evidences, both oral and documentary, so that he can prepare the case against him. This necessarily also postulates that he should cross examine the witness on whose statement the AO relies to hold the sale or purchase of shares as sham or not genuine. vi) It is trite that if an Authority is relying on the testimony of a witness, the assessee is required to be afforded an opportunity to cross-examine him failing which the testimony cannot be utilized against the assessee. If this procedure is not followed, then there would be a case of denial of natural justice to the assessee and the addition on the basis of such statements/ material cannot stand. Addition on account of accommodation entry cannot be made on basis of unconfronted oral statement(s) of third party(ies). The ld.counsel for the assessees in support of his contentions relied upon the following judicial authorities: (i) Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) (ii) Kishinchand Chellaram (AIR 1980 SC 2117) (iii) State of M.P. v. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of providing accommodation entries in certain cases. Thus, mere acceptance by third parties of their involvement in providing accommodation entries of various natures to different persons wherein the name(s) of the Assessee(s) has/have not been implicated cannot form the basis for making additions u/s 68 69C of the Act in the Assessee(s) case unless a definite case is proved against the Assessee(s) after providing him/them due opportunity of cross-examination of the alleged deponents. viii) It is pertinent to note that the third party statements which were relied upon by the A.Os were not recorded by the A.O in course of the assessment proceedings in the case of the Assessee(s) herein but were pre-existing statements recorded by the Investigation Wing. Such statements, as judicially opined (infra), cannot form the basis of assessment in the case of the Assesses u/s 153A without conducting a proper enquiry and examination during the assessment proceeding itself. To support his contentions, the following decisions are relied upon: i) ITO Vs. M/s. Softline Creations (P) Ltd. (in ITA No. 744/DeI/2012) ii) CIT Vs. Gangeshwari Metal Pvt. Ltd. (2014) 264 CTR 277 (Del HC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 132(1) against the Assessee(s) herein. The A.O has categorized the various alleged documentary evidences seized in course of search in the case of the third parties under the following broad sub-heads: W.R.T the shares of M/s. Prraneta Industries Ltd: The A.O has mainly relied upon the alleged documentary evidences seized from the premises of Sri Sirish Chandrakant Shah (SCS) (mainly 'Kedia 2 sheet', 'cheque sheets' 'cash sheets'), Sri Praveen Kumar Jain (Pintu) (mainly 'SHIR Ledger') and Sri R.K. Kedia (Annexure A- 27, Extract E-14 comprising mainly of 'Deepu Ledger') in course of independent search actions in their cases. It may be noted that the names of the Assessee(s) herein do not feature in any of the said seized documents. The said documents apparently indicate some transactions interse between the various alleged entry/exit operators. Further, some of these documents allegedly contain few cheque/RTGS entries to and from BPSL group companies which stand duly disclosed in the regular books of account of BPSL group companies and hence cannot be considered as incriminating against the Assessee(s) herein. Thus, in the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed to the Assessee(s) despite categorical request), nothing has been implicated against the Assessee(s) herein or with respect to the LTCG transactions carried out by the Assessee(s). Thus, what has been essentially relied upon by the A.O is third party documentation in respect of which no opportunity of cross examination of the person controlling/owning such documents was allowed to the Assessee(s). As such, nothing adverse can be implicated against the Assessee(s) herein on the basis thereof. Coming to the legal validity and evidentiary value of third party documents, at the outset, it is clarified that these hard/soft data were not seized from the possession and control of the Assessee(s) and have not been shown to belong to the Assessee(s) herein. Accordingly, presumption u/s.132(4A/292C w.r.t. these seized material is not applicable to the assessees herein. 71. As observed earlier, the ld.counsel for the assessee has placed on record, the detailed combined discussion with respect to present assessee, and the main submissions made by him are as under: i) At the outset, the ld.counsel for the assessee submitted that complete documentary evidences establishing g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count payee cheques/RTGS from the stock broker. It is pertinent to note that there is no human interaction between the parties, in respect of impugned transactions, as the same were done through web-based on line application. All the transactions are carried out by the assessee were fully documented in the form of contract notes/bills of relevant brokers. Copies of these contract notes/bills of brokers are annexed in the paper book. vi) The assessee has no control over or aware of the parties/entities who buy and sell the shares. The transactions are entered into by the assessee on the basis of information and feedback received from various professionals, market gossips and looking to the general market conditions. The ld.AO has no room for doubt the transactions entered into by the assessee, because the assessee has filed all supporting evidences in the form of DEMAT accounts, share certificates, contract notes, bank statements. vii) It is further submitted that while framing the assessment, the AO has strongly relied on the statement of alleged third parties recorded under section 132(4)/133A in the course of search/survey action. The assessee has consistently denied any li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that the facts/ particulars of the case of Shri Brij Bhushan Singal, the father of the assessee, bearing ITA Nos. 1415 to 1417/Del/2018 for the AYs 2013-14 to 2015-16 order dated 7-12-2018, relied by the learned AR for the assessee in support of his claim, are different in terms of law and facts from the specifics of the present cases. For this purpose, the learned DR has highlighted certain factual differences as detailed under: i. In the assessment of Shri Brij Bhushan Singal, there was no disclosure made by him in the statement furnished under section 132(4) of the Act with respect to any undisclosed income whereas in the present case there was a disclosure of ₹ 250 crores on account of bogus long-term capital gain in the statement furnished under section 132(4) of the Act which was subsequently affirmed in a statement posts search dated 6 March 2014 detailing the breakup of the undisclosed income of ₹ 250 cores. Such statement was never retracted but the impugned income was not offered to tax in the returns of income. Such non-disclosure of income cannot be equated with the retraction of the statement. As such there is no concept under the law for deemed/ impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng available at the time of passing the order in the case of Shri Brij Bhushan Singal before the Delhi bench, the outcome would certainly have been different. ii. The predominant reason for allowing the appeal in the case of Shri Brij Bhushan Singal by Delhi bench of ITAT was that the opportunity of cross examination was not provided. Thus, the evidence relied upon by the Revenue for holding the long-term capital gain as bogus, were discarded. But at the same time it is important to note that the Hon ble Supreme Court in many cases has held that the opportunity of cross examination is not necessary where the addition has been made based on the documentary evidence. However, such decisions of the Hon ble Courts were not made available to the co-ordinate bench (Delhi) at the time of hearing. Otherwise, the fate of the case of Shri BrijBhushanSingal would have been different. iii. It was also submitted that the Hon ble Punjab and Haryana High Court in the case of Smt. KusumLataThakral Vs. Commissioner of income tax in ITA No. 253 of 2009 dated 24th of July 2019 has stated in unequivocal terms that the necessity of giving the cross examination depends on the facts of each case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement/admission of income under stress or coercion is not believable/ acceptable. There were various statements of brokers, entryoperators and other players who accepted to have been involved in providing accommodation entries by way of dubious techniques with the purpose of avoiding the tax liability. These statements were not retracted rather these were reaffirmed and restated before the authorities under PMLA. Likewise Shri RK Kedia the broker of the assessee indeed made a retraction but soon thereafter filed an affidavit to by re-affirming with this original statement. Furthermore, all the statement furnished by Shri RK Kedia or other witnesses like Sirish C Shah, JagdishPurohit were backed by the documents and other materials recovered during the search proceedings. All these documents were duly cross checked, cross tallied which establishes the complete chain depicting the flow of transaction. Thus the statements were duly supported by the incriminating documents. The learned DR further submitted that once the assessee admitted to the unexplained income, it can be disputed at higher forum without retracting such statement before appropriate authority. At the same time, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the given facts and circumstances after evaluating the surrounding circumstances. The learned DR further contended that the assessee has not brought anything against the concurrent finding of the authorities below that these companies were managed and controlled by the entry-operators to provide the accommodation entries in the market. These concurrent findings were based on various statements and the documents found during the search proceedings. Therefore such concurrent findings should not be hampered based on finding given in the case of Shri Brij Bhushan Singal. In a situation where there were several differences in fact and circumstances of both the cases as discussed, the decision given in case of other assessee earlier assessment year in own case of assessee cannot be relied for the reason that decision in those batches of appeal were pronounced on the question of jurisdiction and not on the basis of merits. It is settled law that decision of a court is precedent only for the issue which has been decided in such order. The learned DR in support of his contention relied upon the judgment of Hon ble Supreme Court in case of Sun Engineering Limited reported in 198 ITR 297 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at most of these orders have also been noticed by the Tribunal viz. Bhagirath Aggarwal Vs. CIT, CIT Vs. Nova Promoters Finlease P.Ltd. and CIT Vs. N.R. Portfolio P.Ltd. (supra) and most of these decisions have been considered by the Tribunal which are part of this order. The Tribunal thereafter did its own research and tabulated some sixty two judgments which will be discernible in the finding of the Tribunal, which we are going to take note on this point. Therefore, we are fully convinced that there is no disparity on facts though some artificial attempts have been made at the end of the ld.counsel for the Revenue because of novelty of eloquence possessed by Shri G.C. Srivastava for persuading us to believe that facts are distinguishable, but we fail to persuade ourselves to concur with him. Therefore, at this stage, we deem it appropriate first to take note of question framed by the Co-ordinate Bench in the cases of father of appellant no.1 and others which reads as under: 25. It is not in dispute that assessee has furnished all the details such as purchase bills, allotment details, demat accounts, bank statements , details of payments by cheques and sale on BSE electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 once again requested that if any adverse inference against the assessee is drawn on the basis of the statement of these persons, an opportunity to cross-examine them may kindly be provided. The learned AO issued summons to 15 other parties under section 131 of the act to appear on 26/12/2016, however, none appeared on the appointed date. Therefore, the learned assessing officer stated that finding in this case is not merely based on the oral statements given by these entry operators, but it is also based on documentary evidences recovered during the course of search in form of electronic data. It was further held by him that these statements corroborate the evidences found. Then he stated that the main person of the group Mr. Neeraj singal during the course of his statement recorded on 24/4/2015 was asked to cross-examine Shri Raj Kumar Kedia however, in answer to question number 25 he stated that he does not want to crossexamine Mr. Rajkumar Kedia, Shri Manish Arora or Shri Ankur Agarwal. The learned assessing officer further stated that cross-examination cannot be right and it is not required by law. For this proposition, he relied upon the decision of the Hon ble Allahabad Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate Bench are of the confirmed view that the assessment for the assessment year 2012-13 although was not framed u/s 143(3) of the Act, however, the time to issue the notice u/s 143(2) of the Act had already expired before the search took place on 13.06.2014. Therefore, for the purpose of Section 153A of the Act, processing of the return of income u/s 143(1) of the Act was also an assessment. As such the assessment for the assessment year 2012-13 was also unabated. It is well settled that the addition u/s 153A of the Act can only be made on the basis of incriminating material found during the course of search. In the present case, no incriminating material/document was found during the course of search. The AO made the additions on the basis of the statement of the third parties recorded u/s 132(4) of the Act on the basis of alleged entry in hard/soft data seized from premises of third parties in the course of search action in their cases. In the present case, copies of the Panchanama are placed at page nos. 1 to 58 of the assessee s compilation. From a bare perusal of the Panchanama of the assessee, it may be seen that nothing incriminating was found in the course of search. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of search, later on retracted from their statements and one person, namely, Sh. Raj Kumar Kedia first retracted on 14.10.2014 and thereafter withdrew the retraction vide letter dated 31.03.2015. Therefore, no reliance can be placed on the testimony of the said person who was indulging in double speaking and taking contrary stands. In the above paragraph, the coordinate bench has already given a finding that the persons whose statements were recorded at the times of search, later on retracted from the statement and thereafter further withdrew the retraction. Therefore, no Reliance can be placed on the testimony of the said persons who are taking contrary stands. It was further held that on the appointed date, it could not be said that the opportunity to cross-examination was provided to the assessee although; the statements of third parties were used against the assessee. The coordinate bench thereafter referred the decision of Hon ble Calcutta High Court in the case of CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 and circular issued by the central board of direct taxes and further held in para number 117 of the decision as under:- 117. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material, which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessing officer. We are also conscious of the decision of the Hon ble Supreme Court in case of M. Pirai Choodi vs. ITO 334 ITR 262, wherein the Hon ble Supreme Court while considering the decision of the Hon ble MP High Court in 302 ITR 40 has held that not granting an opportunity of cross-examination to the assessee is merely an regularity and therefore the High Court was not correct in cancelling the order of the adjudicating authority. Therefore, Hon ble Supreme Court thought it fit to set aside the matter to the adjudicating authority with a direction to grant opportunity of cross-examination to the assessee. Before us, an issue arises that whether the matter should be set aside to the file of the learned assessing officer to grant assessee an opportunity of cross-examination of all the witnesses whose statements have been used by the learned assessing officer in the assessment order for the purpose of making the addition under section 68 of the act or to annul the assessment order itself. On careful perusal of the decision of the Hon ble Supreme Court, it is noted that such direction were given by the Hon ble Supreme Court in the case of writ petition filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough a broker, Mr. Rajkumar kedia naturally he might have also maintained such records for purchase of shares. Therefore, there is no infirmity in these two statements. Further, another two excel sheets found from Mr. Agarwal by the name of Job.xls and Comm.xls does not show the name of the assessee. Therefore, there is no linkage available with those documents with the assessee. Further, the argument of the assessee also find support that it was found from Mr. Agarwal therefore, it is owned by him and belongs to him. Therefore, it is for him to explain who owns this Pen drive. Further, those documents do not show any unaccounted income flowing from the assessee to anybody. In the second file Comm. xls, the learned assessing officer has noted that names of the person such as R. K. Kedia HUF and others are mentioned. According to the AO All, these persons are accommodation entry providers as stated by Shri Raj Kumar Kedia in his statement. Based on these findings, the learned AO reached at the conclusion that Bush and steels Ltd family has taken accommodation entry of long-term capital gain from Raj Kumar Kedia and other entry operators. Firstly, in that particular file, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment later on. In the instant case, the AO also failed to establish any link/nexus of the alleged cash trail. We, therefore, by considering the totality of the facts and the various judicial pronouncement discussed in the former part of this order are of the view that the additions made by the AO and sustained by the ld. CIT (A) u/s 153A of the Act in the absence of any incriminating material found during the course of search u/s 132(1) of the Act in respect of unabated assessment years i.e. the assessment years 2010-11 to 2012-13 were not justified. Accordingly, the same are deleted. 122. A similar view has been taken by the Hon ble Jurisdictional High Court in the case of CIT Vs Rajesh Kumar (2008) 306 ITR 27 (Del.) (supra) wherein it has been held as under: That the material collected by the Department behind the back of the assessee was used against him without disclosing the material or giving an opportunity to cross-examine the person whose statement had been used by the Department against the interest of the assessee. There was violation of the principles of natural justice. 123. Similarly, the Hon ble Delhi High Court in the case of CIT Vs Dharam Pal Prem Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by The Securities and Exchange Board Of India in various companies in which the assessee has earned the long-term capital gain as well as in case of the assessee. First Such order relied upon is interim ex parte orders dated 19/12/2014 passed in case of M/s First financial services Ltd and M/s Redford global Ltd. The learned CIT-A was also heavily harping upon the orders of the SEBI for confirming the addition. In interim order in Redford global Ltd, dated 19/12/2014 assessee was restricted to access the securities market till further directions. Subsequently, on 20/09/2017, SEBI passed an order in that company holding that there are no adverse findings against the aforementioned 82 entities, which included the family of the assessee, and the assessee himself with respect to their role in the manipulations in prices of the script of the company. Therefore, it revoked the original order passed on 19/12/2014. Similarly, in case of first, financial services Ltd; the learned assessing officer took note of interim order passed on 19/12/2014. SEBI passed t final order on 02/04/2018. Vide para number 74 and 90 of that order[WTM/GM/EFD/ 1 /2018-19], SEBI has given a clean chit to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the one side and Sanjay Singal (elder son) and his family members on the other side. In this connection litigations before various courts were filed in the years 2006 and 2007. These disputes were finally settled by way of a compromise in November 14, 2011 and terms of settlement were fully implemented by February 2012. Appropriate disclosures in this regard were also made to the exchanges at that time. Post settlement, the complaints and litigations filed before various forums were withdrawn. It has been also stated that owing to the family dispute, Brij Bhushan Singal, Uma Singal, Niraj Singal and Ritu Singal had no role to play in the affairs of Marsh Steel Trading Ltd. and Vision Steel Ltd. in which Aarti Singal (wife of Sanjay Singal) was a director. It has been submitted that since material disputes existed during the relevant period, it can not be alleged that the funds received from FFSL by Marsh Steel Trading Limited and Vision Steel Limited, which are controlled by Mr. Sanjay Singal and his family members, came to Brij Bhushan Singal group. 73. With regard to the fund transaction between Neeraj Singal and Pine Animation Ltd., it has been submitted that ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the huge price rise that was prevailing then and made gains. The investigation was done at the behest of letters received from Director General of Income Tax (Inv.), as the background of this order states. 90. In the ultimate analysis, I am driven to the conclusion that such fraudulent schemes are conceived and executed by a set of core entities which are connected and which are bound by the common objective of making wrongful gains by manipulating the market and undermining its integrity. In this process, certain entities are lured into the artifice with the promise of quick returns but their roles do not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. The whole scenario covering various entities with different motives makes it imperative for the regulator to step in and secure the market place by weeding out those entities which have misused the securities market and meting out deterrent penalties on such entities. 91. The limitations in an investigation of this magnitude was realized and the SEBI Board had decided in December 2016 to restrict its scope of actions to those entities that ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rim order of securities exchange control Board of India by the revenue authorities is misplaced as in each of these companies in which the income tax department requested SEBI to investigate has given a clean chit to the assessee and his family. Therefore, reliance on SEBI interim order was misplaced and even otherwise now do not survive in view of subsequent final orders of SEBI. 32. The learned AO also heavily relied upon the cash trail of the bank accounts of the purchaser companies. He stated that cash was deposited in several bank accounts and after 3- 7 layers same reaches the bank account of the companies. From such cash coming through several bank accounts to the bank account of purchaser companies was used for buying the shares held by assessee. Stock exchange trading is screen based, it is not possible to know who the buyer, and seller is. Only prices offered along with quantity is shown. Anybody who bids for purchase or sale of those shares can enter in to trading. It is an electronic trading platform whenever an assessee buys or sales the share, in either case identity of the other party, i.e. buyer or seller nor the timing at which the shares are purchased or sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold the PAN, AO should have enquired with the AO of those companies. There is no finding that what happened to the shares purchased by those companies, no inquiry of their demat holding is also made. Further, there is no finding that prior to purchases of those shares whether throe companies have deposited margins also as per Stock exchange and SEBI Norms. There is nothing placed on record to show that those companies are debarred from trading in securities or not. All these investigations / finding of ld AO have many loopholes, which remains unanswered. In the statement of the director of the penny stock company stated that the preferential allottees are involved in market manipulation of the prices of the script, however, it is contrary to the order of the securities and exchange board of India. Such references available in the statement of Director of Rander Corporation at Q No. 13. Further, the claim of the ld AO is that the companies whose shares are purchased are not carrying on any business whereas, in answer to Q No. 32 Shri Kushal Praveen Shah Director of Anukaran Commercial Enterprise Ltd has given the detailed description of the business been carried out by that compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese are the dummy companies, especially when they are having PAN, KYC with stock exchanges, DEMAT Accounts, assessed by income tax Departments etc . For receipt of money through various layers, they should have been responsible in their own cases to show the genuineness of those funds. Assessee cannot be compelled to show the same. In view of this, the allegation of the cash trail of the buyers of those shares remains unproved and merely an allegation. 33. Next, claim of the assessing officer that many beneficiaries of the bogus long-term capital gains have disclosed the above sum as their undisclosed income. According to us, If some other parties have obtained the bogus long-term capital gain in their own case, in some of the case even the SEBI, while exonerated the assessee and his family, has implicated some of the parties who obtained the bogus long-term capital gain, but it does not lead that assessee is also sailing into the same boat. Even otherwise, there are thousands of entities who have earned the long-term capital gain in those scripts, which are challenged by the ld AO who are also exonerated by the SEBI by various orders, along with the orders passed in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conclusion that long-term capital gain received from these penny stock company is bogus and taxable. The learned assessing officer relied upon the decision of the Hon ble Supreme Court in case of some of Sumati Dayal vs. CIT, 125 CTR 124. The learned authorized representative vehemently opposed the same and stated that long-term capital gain were originally disclosed by the assessee in his return of income for earlier assessment years for assessment year 2010 11 and 2011 12, which were assessed under section 143 (3) of the income tax act. Therefore, it is not the case of the revenue that there are no positive evidences produced by the assessee. Even in those cases, the assessee has produced the complete details of the purchase, share applications, payment by cheque, sale on a stock exchange, receipt of sale consideration and most importantly the holding period of those shares in the balance sheet of the assessee s which were accepted by the revenue for all those years. He therefore submitted that the theory of preponderance of probabilities invoked by the learned assessing officer is merely a conjecture and surmises. He further stated that when the originally the assessees a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the parties iii. Cross examination of those parties afforded to the assessee iv. Opportunity to the assessee to confront and rebut the materials gathered. Firstly, No such evidences were found during the course of search and all those evidences which are relied upon by the learned revenue authorities have been held by the coordinate bench in assessee s own case to not to be an incriminating material which can impact the taxable income of the assessee and his family members. Even the investigation made by the Securities and Exchange Commission of India has also held that assessee is not at all involved in the manipulation of the prices of those scripts. The revenue has also not shown us any security and exchange Board of India s order which even implicated the share broker, which is alleged to have arranged these long-term capital gains fraudulently for the assessee. At least something would have been unearthed from such highlevel investigation by two Central Government authorities. Further whatever evidences were found by the revenue; they were not confronted to the assessee for rebutting the same. Statements recorded of several persons by revenue were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has also paid securities transaction tax on the sale of shares and the sale consideration has been received from the SEBI registered broker against which there is no allegation. In view of this, it is apparent that assessee has produced overwhelming evidences that were not found to be false. In view of this, the reliance by the learned AO on the decision of the honourable Supreme Court is misplaced. Therefore In view of this we do not subscribe to the opinion of the learned assessing officer that on the preponderance of the probabilities the income should have been taxed in the hands of the assessee. 35. The ld AR has submitted the plethora of judicial precedents where in it has been held that in such circumstances, addition u/s 68 of the act cannot be made and such income is chargeable to tax as a long-term capital gain only. He submitted that all these decisions are also rendered on similar facts where the broker was tainted; cross-examination was not afforded, changing statements of broker, Allegation of accommodation entry provider etc. He further submitted that almost all the authorities have held that either the assessment is invalid on account of violation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab hryana High court 9 CIT V Pooja Agarwal Ita No 385 of 2011 Rajasthan High court 10 CIT V sudeep Goenka 29 taxmann.com 402 dated 3/1/2013 Allahabad high court 11 CT V Anupam Kapoor 299 ITR 0179 Punjab Haryana High court 12 CIT V arunkumar Agrwal HUF 26 taxmann.com 113 Jharkhand High court 13 CIT V Shyam R Pawar 54 taxmann.com 108 229 TAXMAN 0256 Bombay High court 14 PRINCIPAL COMMISSIONER OF INCOME TAX- 5 VERSUS DIPALI MAHENDRA SHAH 2018 (3) TMI 1084 - GUJ GUJARAT HIGH COURT 15 THE COMMISSIONER OF INCOME TAX VERSUS SHRI MUKESH RATILAL MAROLIA. 2011 (9) TMI 919 Bombay High court SLP Dismissed by Hon SC on 27/1/2015 Special Leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata ITAT 33 Kanthilal Kamla Bai V ITO 29/10/2018 Chennai ITAT 34 K Praveenkumar HUF V ITO 29/10/218 Chennai ITAT 35 RukmaniDevi Manpuria V DCIT 24/10/2108 Kolkatta ITAT 36 Bishwanath AGarwal V ITO 16/10/2018 Kolkata ITAT 37 Bhanshali Finacom P Ltd V DCIT 10/10/2018 Kolkatta ITAT 38 Sanjay Mehta V ACIT 28/9/2018 Kolkatta ITAT 39 Mina Mehta V ITO 28/9/2018 Kolkatta ITAT 40 Vikas Jhawar V ITO 26/9/2018 Kolkatta ITAT 41 Neelam Agarwal V ITO 26/9/2018 Kolkatta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 Malti Ghanshyambhai V ITO 6/2/2017 Ahmedabad ITAT 61 Rajendrkumar ratilal Jariwala V ITO 1753/ahd/2012 29/2/2016 Ahmedabad ITAT 62 ITO V Arvindkumar Jain HUF 51 CCH 281 Mumbai ITAT 37. The Revenue has also relied up on some decisions we also deal with them. The learned departmental representative has vehemently relied upon the decision of honourable Bombay High Court in case of Sanjay Bimalchand Jain vs. Principal Commissioner Of Income Tax reported at 89 taxman.com 196. We have also perused the decision of the coordinate bench dated 18/07/2016 in that case, which was upheld by the honourable High Court. Issue before the coordinate bench was that whether, on sale of shares profit earned by the assessee can be charged to tax as capital gain or business income. In that particular case, the payments were made in cash for purchase of shares. The addresses of the companies who shares are purchased and address of brokers are also the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a detailed enquiry and has held that assessee is not involved in manipulation of prices of any scripts. Therefore, it was held by the SEBI that the transaction, as far as purchase and sale of the shares on Bombay stock exchange is concerned, was untainted. Therefore, the facts of the case before the honourable Bombay High Court and facts before us are clearly distinguishable. 38. The 2nd decision relied upon by the learned CIT DR is in case of Shri Abhimanyu Soin vs. Assistant Commissioner of Income Tax [2018 TIOL 733 ITAT CHD]. In that particular case, there was a specific allegation which was proved that there is a circular transactions entered into by the assessee s brokers for the scrip and further there was no evidence that how a Calcutta-based broker from Ludhiana-based assessee has received in cash for purchase of the shares on three different dates. Apparently, the fact of payment of cash to purchase of shares to the broker situated at Kolkata became Primordial. Further, the assessee was in United States from 2009 2012 and the case was pertaining to assessment year 2011 12, where the assessee has made a payment to one of the representative, whose name could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es claimed to be the sale proceeds of the shares is received in advance. The broker also could not give the details of the name of the purchase of the shares. Further, it was also found by the AO that the shares sold by the assessee were not quoted on the stock exchange and there was no trading of those shares on the exchange. The AO further noted that it was a closed circuit transaction between some persons. The AO further found that the shares claimed to have been sold through the broker had not been transferred even at the time of making the enquiry by the assessing officer and such sales continued to be registered in the name of the assessee. Therefore, there was no transfer of share at all in that particular case. On these facts, the addition under section 69 was confirmed. On comparison of facts of that, case with the facts of the present case clearly shows that such facts do not exist before us. 42. The learned CIT DR also relied upon several other decisions where for several reasons, the addition on sale of shares shown as a long-term capital gain is confirmed in the hands of the assessee. However, in most of the decisions cited before us, There was an off market purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf the ld AO alleged that assessee has entered into a scam and they by walked into the trap of section 110 of the evidence act on him to prove that the long-term capital gain earned by the assessee is bogus. The ld AO after that could not substantiate his allegations by granting cross-examination to the assessee of various persons. It is fatal to the case, as the assessment strategy adopted by the ld AO could not prove his allegation. 80. After perusal of the above order, we are of the view that there is no disparity on the facts. All relevant case laws have been considered in this order. However, during the course of hearing, Shri G.C.Srivastava has emphasised that in the case of Sanjay Singal, he has voluntarily disclosed ₹ 250 crores on account of bogus long term capital gain in the statement made under section 132(4) of the Act for the search carried out on 21 27-2-2014. He pointed out that not such voluntary disclosure was available in the case of Shri Brij Bhushan Singal. According to the ld.authorised representative, this disclosure was made by Shri Sanjay Singal on his behalf as well as on behalf of entire family. Therefore, he is bound with his disclosure whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be made. The alleged declaration should be supported with unexplained expenditure or assets discernible in the seized material during the course of search. No such things was unearthed by the Revenue, therefore, decision relied upon by the ld.CIT-DR in the case of Bhagirath Aggarwal Vs. CIT(Supra) is distinguishable on facts. This decision has already been considered by the Coordinate Bench while dealing with the case of father of the assessee. 81. In his next fold of contentions, he submitted that there was no necessity to provide opportunity to cross-examine the persons whose statements were recorded by the Revenue during the course of search. In other words, Revenue can rely upon third party statement recorded from the back without giving opportunity to the assessee to crossexamine them. This aspect has been dealt with by the ITAT in the finding reproduced above, and the Coordinate Bench put reliance upon the judgment of Hon ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Custom Excise, 281 CTR 241 (SC). The Tribunal has reproduced the finding of Hon ble Supreme Court while rejecting all the contentions of the Revenue, and held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld.counsel for the Revenue that there is no need to provide opportunity to cross examine all those persons whose statements have been recorded by the Investigating Agency during the course of search at their residential premises, and more so these judgments cannot be given preference over the judgment of Hon ble Supreme Court in the case of Andaman Timber Industries (supra) which has been considered by the Co-ordinate Bench. Similarly, other large numbers of order have been placed on record. They are distinguishable on facts; they have their own facts which are not applicable in the instant cases. By referring each order, we will be unnecessarily making this order more lengthy and bulky, because Co-ordinate Bench has considered more than hundred of decisions cited by both the sides, and thereafter the Bench has researched and referred sixty two orders on this point of law. Bench thereafter decided the appeals. After going through well reasoned order in the light of material brought to our notice, we are of the view that issue in dispute in all these appeals is squarely covered by order of the Co-ordinate Bench in the case of Shri Brij Bhusan Singal and others (supra), and hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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