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TMI Blog2019 (6) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... single case which could pin-point any making against these assessees which could be taken as a revenue nexus - we make it clear that the CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight - we notice that this tribunal s coordinate bench s decision in Mahavir Jhanwar vs. ITO [ 2019 (3) TMI 210 - ITAT KOLKATA ] has taken into consideration identical facts and circumstances as well as latest developments on legal side whilst deleting the similar bogus LTCG addition. Coupled with this, hon'ble jurisdictional high court s other decisions in CIT vs. Rungta Properties Pvt. Ltd. [ 2017 (6) TMI 521 - CALCUTTA HIGH COURT ], CIT vs. Shreyahi Ganguly [ 2012 (9) TMI 1113 - CALCUTTA HIGH COURT ], M/s Classic Growers Ltd [ 2013 (2) TMI 825 - CALCUTTA HIGH COURT ] also hold such transactions in scrips supported by the corresponding relevant evidence to be genuine. We adopt the above extracted reasoning mutatis mutandis therefore to delete the impugned STCL disallowance / addition. Unexplained commission expenditure disallowance, if any shall automatically follow s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3Kol/2018 in case of Swati Bajaj vs. ITO Wd-36(2), Kolkata for assessment year 2014-15 as the lead case. 3. Both the learned representative(s) take me to CIT(A) s detailed discussion whilst treating the impugned STCL pre-arranged bogus loss in the instant lead case vide the following lower appellate discussion:- 06. FINDINGS DECISION: 1. I have carefully considered in making an addition of ₹ 28,23,500/- as unexplained credit u/s 68 of the Income Tax Act, 1961. After an exhaustive discussion and elaborating the factual and legal matrix, has held that the claim of Long Term Capital Gain u/s. 10(38) was to be denied to the assessee-individual, and was to be assessed as unexplained cash credit u/s 68 has placed on record the entire gamut of findings, and there is, in my considered view no further requirement for elaboration from this forum. In my view of the facts there are elaborate and direct evidence to clearly indicate that the entire transactions undertaken by the appellant were merely accommodation entries taken for the purpose of such bogus Long Term Capital Gain made by the assessee during the previous year. It is apparent that, in the grab of alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropounded by the assessee before the authorities below, None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains,. In my considered view banking documents are mere self serving recitals. The lawit1 the matter of self-serving recitals has been long established by the Hon'ble apex Court. In the case of CIT vs P Mohankala 291 ITR 278, the Hon'ble Supreme Court held that the money came by way of bank cheque and was paid through the process of banking transactions Was not by itself Of any consequences. 1/ The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature, In the case of CIT Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to Find out the reality such recitals. Similarly in the case of Sumati Dayal vs. CIT (1995) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee in such circumstances should cooperate and furnish papers, details and particulars. This may entail issue of notices to third parties to furnish and supply information or confirm facts or even attend as witness. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts in required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons from whom confirmation or verification is required. The verification and investigation should be one with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have enter3ed into transactions with the assessee. The u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;evidence' might recall the oral and documentary evidence as may be admissible under the Indian evidence Act the use of word 'material' in Sec.143(3) Snowed that the assessing officer, not being a court could rely upon material, which might not be evidence admissible under the Indian Evidence Act for the purpose of making an order' of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' dearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 5. The Hon'bte Supreme Court in CIT v, Durga Prasad More[1971] 82 ITR 540 at pages 545- 547 made a reference to the test of human probabilities in the following fact situation :. ... ... It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the re4al. In a case of the present kind a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 7. I am in agreement with the Ld. AO that the transactions relating to the claim of LTCG as made by the Ld. AO come within the ambit of suspicious transactions , and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of suspicious and dubious transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win Chadha Vs CIT (International Taxation) in ITA No.3088 : 3107/Del/200S the Hon'ble Delhi ITAT B -Bench has observed, on 31.12.2010 as under: SUSPICIOUS AND DIBI0US TRASANCTI0N HOW TO BE DEALT WITH: 6.11, The tax liability in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.13 It would, at this stages, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the truth of the principle fact. It is evidence of various are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are (1) the circumstances alleged must be established by such evidence, as in the case of other evidence. (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that every one of the links mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Reports of investigation agencies like CBI DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee s pleas in this behalf. The Assessee s contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright..... 8. When the impossible is projected as possible through a plethora of well arranged documents, It would be very reasonable to reject the documents outright as make believe and self serving. In the Case of Usha Chandresh Shah Vs ITO, Ward-19(1)(2), Mumbai, the Hon'ble ITAT- F - Bench Mumbai by their Order for A.Y 2006-07 dated 26th September, 2014 have, in the operational portion adjudicated as under: [Quote] 9. We have heard the rival contentions and perused the record. The pertinent points are that me assessee has claimed to have purchased the impugned shares through Off market transaction. The purchase price was not paid by Cheque, but it was claimed to have been adjusted against the speculation profit claimed to have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put forth by the assessee. 11. Though the assessee has claimed to have purchased the shares in physical formation May, 2004, she chose to D-Mat the same only in June 2005, just two months prior to its sale, The shares were sold through a share broker named Sanju Kabra, who is indicted SEBI for rigging the prices of penny stock shares. It is pertinent to note that the share prices of M/s Prime Capital Markets Ltd went from ₹ 5.17 (May, 2004) to ₹ 279.50 (Sep., 2005). The assessee could not furnish any reasons or at-least stock market news to support: the abnormal increase In the prices of the above said shares. The financial statements of the above said company were also not produced. Though M/s Prime Capital Markets Led has confirmed the entries in its books of account with regard to the purchases made by the assessee, it could not identify the name of purchaser to whom the shares were sold by the assessee. 12. We have already seen the the tax authorities have applied the test of human probabilities explained by the Hon'ble Supreme Court in the cases of Sumati Dayal and Durga Prased More (supra) to disbelieve the claim of Long term Capital gains put fort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Markets Ltd was declared as Penny Stock by SEBI and the broker Sanaju Kabra, through whom the shares were sold by the assessee was indicated for manipulating the prices of penny stock shares. Hence, in our view, the tax authorities have rightly applied the test of human probabilities to examine the claim of purchase and sale of shares made by the assessee. 15. We notice that the M9umbai D bench has considered an identical issue in the case of Shri Ramesh Kumar D Jain in ITA No.3192/Mum/2010 relating to assessment year 2006-07. The Tribunal vide its order dated 15-06-2011, rejected the claim of making speculation gains on the reasoning that speculation transactions could not haves been entered into by the assessee therein without paying margin money to the broker. Accordingly, the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected. It is pertinent to note that, in the decisions relied upon by the assessee, the claim of speculation profits was not considered by the Tribunal. In yet another case of Shri Araving M Kariya considered by A bench of Mumbai ITAT, the test of human probabilities was appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 55. These shares were purchased through a broker Munish Arora Co. And sold through another broker M/s S.K. Sharma Co. The AO took by surprise the astronomical rise in shares price of a company from ₹ 3 to ₹ 55 and started further inquiry. The AO issued notice under Section 131 to both the brokers from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of M/s Ankur International Ltd. To justify as to how the share price of a company can go up from a mere ₹ 3 to ₹ 55 in a short span of six to seven months time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewellery only. the AO also recorded the finding that transactions were done at Ludhiana where also the share price of the company is quoted but maximum value of the share quoted was ₹ 17 but that was only in July, 1997, i.e. long before the shares were sold by the assessee to M/s S/.K. Sharma Co. In the months of February and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the share market, share price does not move according to the fundamentals of a company. They go up and down as per sentiments prevailing at that time. To controvert, the argument of the learned Departmental Representative, he argued that share prices are quoted at Jaipur Stock Exchange and were quoted on the relevant date of sale at the same price on which shares were sold to M/s S.K. Sharma Co. However, the learned Departmental Representative controverted his argument by saying that volume of transactions on the relevant dates is only 600 shares on 9th Feb., 1998 and 1000 shares on 23rd March, 1998 whereas number of shares involved in the transactions with S.K. Sharma Co. are 45000 shares. 6. After hearing the rival submissions, going through the orders of authorities below and paper book, we find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange ate, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s S.K. Sharma Co. Factual matrix of the case from start of the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind the transactions and find out the motive behind transactions. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine, it is highly improbable that share price of a worthless company can go from ₹ 3 to ₹ 55 in a short span of time. Mere payment by cheque and receipt by cheque does not. Render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to offset the loss incurred on the sale of jewellery declared under VDIS. In considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set aside order of the CIT(A) and restore that of the AO. 8. In the result, the appeal of the Revenue is allowed. [Unquote] 10. Moreover, all the judgements relied upon by the appellant fall flat in the face of the facts of the case, and the preponderance of probability against the assessee. In a decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries. I find that there is not even a single case which could pin-point any making against these assessees which could be taken as a revenue nexus. I make it clear that the CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight. I notice that this tribunal s coordinate bench s decision in ITA No. 2474/Kol/2018 in Mahavir Jhanwar vs. ITO decided on 01.02.2019 has taken into consideration identical facts and circumstances as well as latest developments on legal side whilst deleting the similar bogus LTCG addition as follows:- 2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s Unno Industries. The AO based on a general report and modus operandi adopted generally and on general observations has concluded that the assessee has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted. Some of the cases were, detailed finding have been given on this issue, are listed below:- Sl. No. ITA No.s Name of the Assessee Date of order/judgment 1 ITA No.714 to 718/Kol/2011 ITAT, Kolkata DICT vs. Sunita Khemka 28.10.2015 2 214 ITR 244 Calcutta High Court CIT vs. Carbo Industrial Holdings Ltd. 3 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4 ITA No.1236-1237/Kol/2017 5 ITA No.569/Kol/2017 Gautam Pincha 15.11.2017 6 ITA No.443/Kol/2017 Kiran Kothari HUF 15.11.2017 7 ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO 20.07.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon ble Jurisdictional Calcutta High Court and the ITAT. I am bound to follow the same. 8. In view of the above discussion I delete the addition made u/s 68 of the Act, on account of Long Term Capital Gains. 5. Coupled with this, hon'ble jurisdictional high court s other decisions in CIT vs. Rungta Properties Pvt. Ltd. ITA No.105 of 2016, CIT vs. Shreyahi Ganguly ITA No. 196 of 2012, M/s Classic Growers Ltd vs. CIT ITA No. 129 of 2012 also hold such transactions in scrips supported by the corresponding relevant evidence to be genuinene. I adopt the above extracted reasoning mutatis mutandis therefore to delete the impugned STCL disallowance / addition of ₹ 28,23,500/-. Unexplained commission expenditure disallowance, if any shall automatically follow suit as a necessary corollary. No other argument or ground has been agitated before me during the course of hearing. This lead case ITA No.2623/Kol/2018 is allowed in above terms. [Same order to follow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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