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TMI Blog2022 (2) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... r produced in the course of filing return of income / original assessment and any undisclosed income or property discovered during search. But in the given case, we observe that no such material or income was found during search but AO relied completely on the information forwarded by the investigation wing post search. Therefore, the assessments made in A.Y. 2011-12 in the case of Shripal Raj Lodha and in A.Y. 2010-11 in the case of Smt Sarita Lodha , being unabated assesments, and hence no addition towards denial of exemption u/s 10(38) could be done. Accordingly, the additions made thereon are hereby deleted. Allowability of long term capital gain and claimed the exemption u/s. 10(38) - In the given case , it clearly shows that no such opportunity was given to the assessee and further we observe that the Assessing Officer decided to proceed by relying on information contained in the SEBI report without establishing the connection of direct or indirect involvement of the assessee in the tainted transactions and proceed to apply concept of preponderance of human probability. Therefore, in our considered view, assessee has submitted all the information relating to buying an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, which was the gains arising from sale of shares by the Assessee of Sunrise Asian Ltd., and these shares were held by the Assessee as investments. The Assessing Officer passed the assessment order dated 30.12.2016 u/s. 143(3) r.w.s. 153A of the Act for AY 2014-15. The Assessing Officer disallowed the claim of exemption claimed under section 10(38) of the Act, treating the same as a non-genuine gain. The Assessing Officer further added an amount of ₹ 14,39,370/- as commission at the rate of 6% on the amount of capital gains claimed as exempt by the Assessee. The Assessing Officer inter alia held as under a) The Directorate of Investigation, Kolkata had carried out some investigation, and as per the said investigation 84 companies were designated as Penny stock Companies. It is further stated by the Assessing Officer that Sunrise Asian Ltd is one such Penny stock company. b) Based on above findings of investigation wing and after considering the assessee s submissions, the Assessing Officer held that the Assessee has never submitted any supporting documents like copy of the bill in support of purchase of shares of STL (Santoshima Tradelinks Ltd.). Further, ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee and added the same under section 69C of the Act. 5. Aggrieved assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) vide order dated 13.12.2019, sustained the addition made by the Assessing Officer and dismissed the appeal filed by the Assessee. The Ld.CIT(A) inter alia held as under a) The Assessing Officer has analysed the price movement of the script of Sunrise Asian Ltd and has also referred to the investigation carried out by the Investigation Wing, Kolkata. The Commissioner of Income-tax (Appeals) also referred to the statements as referred to by the Assessing Officer to hold the script of Sunrise Asian Ltd as a penny stock. Ld.CIT(A) further held that merely because the Assessee has submitted all the relevant documentary evidence with respect to the transaction of purchase and sale of shares of Sunrise Asian Ltd, it cannot be concluded that the capital gain earned by the Assessee is genuine. Further, in any case, the Assessee has not been able to establish with documentary evidence that the shares of Sunrise Asian Ltd were allotted to the Assessee in view of the shareholding in M/s Conart Traders Ltd. Therefore, the Assessee has failed to prove wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary and in contradiction to the facts of the case and provisions of law. 4. The learned CIT (A) has grossly erred in upholding the impugned addition of ₹ 2,39,89,525/- under section 68 of the Act, even though there was no finding about examination of books of account by the Assessing Officer. 5. The learned CIT (A) has grossly erred in confirming the impugned addition, of ₹ 2,39,89,525/- even though, no material or evidence was brought on record to discard the explanation of the appellant. The impugned addition is merely a work of fiction. 6. The learned lower authorities have grossly erred in relying on certain data / informations and proceedings in the case of different unrelated assessees and testimony of third parties without showing even the remotest link of the appellant with the alleged hawala operators. 7. The learned tower authorities have grossly erred in making impugned addition of ₹ 2,39,89,575/- on account of alleged bogus capital gain even though there was no order or proceedings initiated by the stock market regulator SEBI implicating the appellant for resorting to unfair means to reap the alleged bogus gain. 8. The or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant financial year and he made the following submissions:- Ld. Counsel for the assessee submitted that the Assessee had submitted complete documentary evidence with respect to the transaction of purchase and sale of shares of Sunrise Asian Ltd (page 7 39 of paper book) . The documents submitted and the details are: (i). Purchase bill dt 25.01.2011 from Conart Traders (P) Ltd (PAN AACC1299O), for purchase of 100000 Equity Shares of Sunrise Asian Ltd showing full identity of selling party (Page No 08 of Paper Book). (ii). Bank statement showing payment of ₹ 10,00,000/- plus bank commission of ₹ 56/- by RTGS made through cheque No. 657509 of State Bank of Bikaner Jaipur, City Branch, Jodhpur against purchase consideration (Page 09 of Paper Book) . (iii). Demat account maintained with Stock Holdings Corporation of India Limited showing credit of above shares on 23/02/2011 as per DP statement submitted at page No 37 to 39 of Paper Book . (iv). Contract notes of SEBI registered share broker M/S Mehta Equities Limited, Mumbai for sale of shares on recognised Bombay stock exchange (Page No. 26 to 29 of Paper Book). (v). Bank statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Commissioner of income tax appeals. Therefore, the Ld AR submitted that such documents cannot be relied upon by the lower authorities to make an addition against the Assessee. 10. Ld AR submitted the Assessee had only been given statements of certain brokers / entry operators on 27th of December 2016 at 7 PM being the statements recorded by the Investigation Wing, Kolkata. In the letter dated 28 December 2016 (Pg. 40 of paper book), the Ld. AR has submitted that from the perusal of the statement it appears that these people have dealt with stock exchange at Kolkata whereas the Assessee has entered into transaction in the script of Sunrise Asian Ltd in Bombay stock exchange. Further, from the perusal of the statement as recorded by the Investigation Wing, it is clear that none of the people have mentioned the name of the Assessee or even stating that they have carried out any transaction for and on behalf of the Assessee. Therefore, there is no question of the statement being relevant for the purpose of making an addition or doubting the genuineness of the long term capital gain earned by the Assessee. 11. Ld AR submitted it has been alleged by the Ld.CIT(A) that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of these people, before their statement would have been relied upon to disallow the claim of exemption. The Ld. AR submitted that as cross examination is clearly not been granted to the Assessee, the alleged statement should be completely disregarded. 13. Ld. AR relied on the following decisions for the proposition that without granting a cross examination, statement of a person cannot be relied upon to make an addition in the case of an assessee- (i). Dhakeshwari Cotton Mills Ltd (26 ITR 775) (ii). Andaman Timber Industries Ltd (281 CTR 241) and (iii). CIT v H.R Mehta (ITA No. 58/2001) 14. Without prejudice, the Ld. AR submitted that from the perusal of the statement as extracted in the assessment order, it is clear that none of these people have made any statement about the transaction of the Assessee or transaction with the Assessee therefore the statements are not incriminating insofar as the transaction of the Assessee are concerned. The statement of the broker through whom the Assessee has traded has certainly not been recorded and no fault has been found with the transaction of the Assessee. Therefore, the Ld AR submitted that revenue has not been able to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges which are known for their transparent working. Even during the course of search operation, the gravest mode of investigation, carried out in group cases of the assessee, nothing adverse material was found which could give rise to any sort of suspicion on the transactions so entered in Assessee s case. 17. Ld. AR submitted that the question therefore arises is whether in such cases, the legal evidence produced by the assessee has to guide decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG. The Ld AR submitted that an alleged scam might have taken place on LTCG etc. but it has to be established in each case, by the party alleging so, that a particular assessee in question was part of this scam. The Ld. AR further submitted that chain of events and the live link of the assessee's action giving his involvement in the scam should be established. The allegation implies that cash was paid by the assessee and in return the assessee received LTCG, which is exempt from income tax, by way of cheque through banking channels. This allegation that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Suman Poddar s case, as relied by the Revenue, the Ld. AR submitted that the Apex Court had simply dismissed the SLP of the assessee and, therefore, the same cannot be said to be a decision of the Apex Court. In so far as the decision of the High court, the Ld AR submitted that the said decision has been considered subsequently by the same court i.e. Delhi High Court in the case of Principle CIT-12, Vs Krishna Devi (ITA No. 125/2020)(Delhi HC)(page 28-37 of Legal Paper book) and even after reliance by the department of the Suman Poddar s case of Delhi High Court, the appeal was decided in favour of the assessee stating that the above decision is based upon the finding of the ITAT framed on the basis of the peculiar facts of that case and it cannot be applied to the facts of the present case in hand. Further, the Ld. AR submitted that the financials of Sunrise Asian Ltd are quite different than Cressanda Solutions Ltd case as was considered by the ITAT in the case of Suman Poddar. 20. Ld. AR submitted that it is well established that in the screen based transaction on share stock exchanges, purchaser and seller parties are totally unknown to each other and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i). Sarita Lodha AY 2014-15 (ii). Sarita Lodha AY 2016-17 (iii). Shruti Lodha AY 2013-14 (iv). Shruti Lodha AY 2014-15 25. The Ld AR submitted that in the following two cases, the original assessments have not been abated as on the date of the search. The Ld. AR submitted that A.Y. 2011-12 and A.Y. 2010-11 in the case of Shripal Raj Lodha and Sarita Lodha respectively are not abated at the time of search. 26. The Ld AR submitted that for A.Y. 2010-11 and A.Y. 2011-12, in view of the proviso to section 153A of the Act, the assessment proceedings had not abated at the time of the search. He further submitted that in case where the assessment proceedings have not abated, the jurisdiction of the Assessing Officer to make any addition is restricted only to issues where any incriminating material has been found during the course of the search, as held by the Special Bench in the case of All Cargo Logistics Ltd. v ACIT 137 ITD 287 (Mum) (SB) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by lower authorities in this regard. 29. In the rejoinder Ld. AR submitted that assessee was never given opportunity to cross verify Shri Vipul Vidhur Bhatt and further he submitted that Shri Vipul Vidhur Bhatt never named the assessee as the persons neither involved or taken direct advantage and he submitted that the case of Sumati Dayal is distinguishable to the facts of the present case. 30. Considered the rival submissions and material placed on record, we noticed that there was a search operation carried in the group concerns of Uma Polymers and the assessee also searched along with other members of the family i.e., Smt Sarita Lodha and Smt Shruti Lodha in search operation. With regard to case of the assesse and Smt Sarita Lodha for the Assessment Year 2010-11 and 2011-12 which are not abated. We observed from the record that there was no incriminating material found during the search in relation to addition made in these two appeals. It is fact on record that whatever addition made by the Assessing Officer relating to share capital and share premium which are already available on record and assessee has already disclosed the same while filing the return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no incriminating material found by the Assessing Officer against the assessee during the search or afterwards. The Assessing Officer carried on the investigations in Kolkata and observed that assessee is one of the direct beneficiary and by relying on the concept of preponderance of human probability and theory of human behavior, he proceeded to make the addition. However, the assessee made a written request for cross-examination and the same was denied by the Assessing Officer and further we observe that even Ld. CIT(A) had rejected the grounds raised by the assessee on cross examination. We observe that Ld. CIT(A) held that the exemption has been claimed by the assessee, therefore, the onus to prove the same is on the assessee and the assessee is free to produce the said persons as part of its defence and since the assessee failed to produce any such persons involved in these transactions, it clearly shows that it has no bonafide case in the matter. We find that it is difficult to comprehend that Ld.CIT(A) merely confirmed the addition without considering the issue seriously. We observe that Hon ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd [26 ITR 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of ₹ 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer, Narayanganj. We think that both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under Article 136. 32. From the above decision, it is clear that any evidences which is collected behind the back of the assessee and any such statement sought to be relied by the revenue against the assessee, then proper opportunity of cross examination of the witnesses need to be given to the assessee in the manner known to law. The law is very well settled on this issue that assessee should be given proper opportunity to cross examine the witnesses who had furnished some statement against the assessee, failing which the entire assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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