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TMI Blog2022 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... annels and the shares had been allotted to the assessee subsequently under an order of amalgamation/merger by the judgment of Hon ble High Court of Kolkata and, therefore, mere reliance on the report of Investigation Wing and statement of Shri Harshvardhan Kayan which do not even mention the name of the assessee, in our considered opinion cannot be upheld. Lower authorities have failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that these documents furnished in support of the claim of the assessee were not authenticate. It would also not out of place to mention that no specific enquiry or investigation was conducted by the Department in the case of Shri Ashok Kumar Kayan which would lend some credence to the theory which has been advanced by the Department. Therefore, in our considered opinion, the lower authorities had merely acted on surmises and conjectures and had delved on the theory of preponderance of probability even in the face of documentary evidences which were not negated as being false. Therefore, considering the evidences furnished by the assessee, which the AO did not negate with any counter ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary value. It was also submitted by the assessee that in the said statement of Shri Harshvardhan Kayan the assessee s name did not appear as one of the beneficiaries. The assessee also gave evidences of the transactions relating to shares and also sought to explain the modus operandi along with the fact of amalgamation/merger of the company. The assessee also requested the AO that an opportunity may be provided to him to cross examine Shri Harshvardhan Kayan. The assessee also submitted that the company M/s. Access Global Limited was listed with the Kolkata Stock Exchange and that the AO could verify the various contentions of the assessee under the Powers granted to him by the Income Tax Act, 1961 (the Act) from Kolkata Stock Exchange itself. It was further submitted that the assessee was a bonafide holder of 79,900 shares of M/s. Access Global Limited which was apparent from the list of shareholders submitted by the company M/s. Access Global Limited in Form No. 2 (Return of Allotment) filed with the Registrar of Companies. The assessee also submitted that the assessee had not sold any shares through Shri Harshvardhan Kayan or through any of the companies in which he was holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imber Industries as reported in 127 DTR 0241 and, thus, the sustaining of addition, is against the facts and circumstances of the case. 5. That the confirmation of addition by the CIT (A) on human probabilities is not proper and is against the documentary evidences furnished before the authorities below, which has not been doubted at all. 6. That the confirmation of addition is against the judgment of Hon ble Punjab Haryana High Court on the similar issue as delivered in that case of Shri Hitesh Gandhi. 7. That the addition has been made against the facts and circumstances of the case. 8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 3.0 The Ld. A/R submitted that the assessee had purchased 1700 shares of M/s. Maple Goods Limited and subsequently there was an amalgamation of three companies viz. M/s. Maple Goods Limited, M/s. Seaview Supplier Limited and M/s. Matrix Barter Private Limited as per the direction of the Hon ble High Court of Kolkata and, thereafter, 7900 shares of M/s. Access Global Limited were allotted to the assessee. It was submitted that it were these shares which were sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... watmull reported in 87 ITR 349 (SC) wherein the Hon ble Court had held that in the face of documentary evidences, the test of human probability cannot be held to be good and that the bonafides of the assessee cannot be doubted only on mere suspicion and surmises. 3.2 The Ld. A/R further submitted that there was no independent statement of Shri Ashok Kumar Kayan and the reliance only on the statement of Shri Harshvardhan Kayan was not proper in as much as the assessee had only dealt with Shri Ashok Kumar Kayan. Referring to the other statements, which had been relied upon by the AO viz. Shri Nand Jain of M/s. Access Global Limited and Shri Suresh Khemka, it was submitted that in these statements there is only a passing reference of the company M/s. Access Global Limited but there is no specific mention of assessee s name. 3.3 It was further submitted by the Ld. A/R that the statement of Shri Harshvardhan Kayan had been recorded under section 133A of the Act and, therefore, no evidentiary value could be attached to such statement in view of the judgment of the Hon ble Apex Court in the case of S. Kadhar Khan Sons reported in 352 ITR 480 (SC). 3.4 Taking the submissions forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts relating to sales and purchases of shares and all transactions are by way of normal banking channels. 2. The CIT(A) further relied upon the Judgment of the Cal HC in the case of CIT vs. United Commercial Industrial Company Pvt. Ltd. 187 ITR 596. The facts of the said case are as under : He also filed copies of accounts to show that the receipts and repayments were made by cheques. The Incometax Officer, however, called upon the assessee to produce the parties, but the assessee did not do that. He (Income-tax Officer, accordingly issued notices under Section 131 of the Act to the hundi creditors but the same were received back unserved. Even those on whom notices would be served did not appear in response to the said notices. The Incometax Officer, accordingly, held that no reliance could be placed on the confirmatory letters It was also held by him that the enquiries revealed all those parties being bogus hundi-wallas, the said loans were, therefore, not genuine. i) The facts of the case as relied upon by the CIT (A) are not at all applicable in the case of the Assessee as summons in the case of the Assessee as issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot at all applicable in the case of the Assessee as summons in the case of the Assessee as issued to the Brokers were duly served and reply was received from them. v) The brokers showed their inability to visit the Income Tax Department at Ludhiana. 4. The CIT (A) in para 11 has held that the ground reality is that the appellant has been a beneficiary of an organized racket of providing bogus entries of long term capital gains on exchange of an equivalent amount of unaccounted and untaxed money or along with a mark up for commission or brokerage. i) The CIT (A) has only assumed that the Assesee is involved in getting entry from those Companies who are engaged in providing dummy gains. ii) There is no adverse statement specifically in the case of Assessee. iii) The Long Term capital gains as claimed by the Assessee is properly backed by documents. iv) The CIT (A) cannot assume that the every entry relating to the specific scrip or through specific broker will be bogus. 5. The Hon ble SC in the case of Rakhi Trading Pvt. Ltd. Civil Appeal No. 1969 of 2011, penalized th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Though the CIT (A) has referred t the fact that effort was made by the AO to write to the broker asking for his visit to Ludhiana but the fact is that the cross examination was never allowed to the Assessee. ii) On the other hand the Assessee has duly discharged his onus by submitting the documents relating to sales and purchase. 10. The CIT (A) from para 19 onwards has referred to the theory of human probability. i) In this regard it is submitted that the case laws as relied upon by the CIT (A) with regard to the human probabilities has duly been relied upon by various Hon ble Courts (supra) and it has been duly held that assumptions and probabilities cannot supercede the documents. 3.7 The Ld. A/R also placed reliance on the judgment of the Hon ble Apex Court in the case of PCIT vs. Parasben Kasturchand Kochar reported in (2021) 130 taxmann.com 177 (SC) wherein the AO s addition on account of alleged bogus penny stock transaction had been deleted on the basis of documentary evidences furnished by the assessee before the Hon ble High Court of Gujarat and on appeal by the Department before the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the order of the Ld. CIT (A) confirming the addition be upheld. 5.0 In the re-joinder, the Ld. A/R relied upon the order of the ITAT Chandigarh Bench in the case of Shri Sanjay Singla and Others vide order dated 28.09.2021 in ITA No. 708/Chd/2018 and eight other cases having identical grounds and issues wherein the issue of Long Term Capital Gain and the related issue of opportunity of cross examination was discussed at length and, thereafter, the appeals of the assessees were allowed following the judgment of the Hon ble Apex Court in the case of Andaman Timber Industries (supra) by holding that without cross examination no reliance can be placed on the statement of a third party. With regard to the various judgments being relied upon by the Ld. Senior D/R, the Ld. A/R submitted that each judgment has to be considered on the peculiar facts of that case and that all of the cases relied upon by the Ld. Senior D/R were distinguishable on facts. 6.0 We have heard the rival submissions and have also perused the material on record. We have also gone through the assessment order as well as the order passed by the Ld. CIT (A) and the various judgments which have been relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of the assessee. It is also noteworthy that the statement of Shri Harshvardhan Kayan was recorded at the back of the assessee and only a copy of the statement was supplied to the assessee along with show cause notice issued by the AO but even after the assessee had made repeated requests for opportunity to cross examine Shri Harshvardhan Kayan, this request could not be acceded to. It is also a case in point that nowhere any statement of Shri Ashok Kumar Kayan has been recorded, with whom the assessee was having the dealings and instead the statement of Shri Harshvardhan Kayan has been relied upon by the lower authorities even when it was the assessee s submission before them that he had no dealings whatsoever with Shri Harshvardhan Kayan. The Ld. A/R has also rightly pointed out that the statement of Shri Harshvardhan Kayan was recorded under section 133A of the Act and not under section 131 and as such it was a statement which was not administered under oath and, therefore, the same did not have any evidentiary value in the face of the assessee denying any dealings with Shri Harshvardhan Kayan and also in the face of assessee providing voluminous evidences in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee does not appear anywhere and the AO has simply proceeded to assume that since Shri Ashok Kumar Kayan s name was in the list of entry operators providing entries relating to Long Term Capital Gain/Loss and, further, since the name of M/s. Access Global Limited figured in the list of scrips traded on platform C-Star of Kolkata Stock Exchange and, further, since the assessee had dealings with Shri Ashok Kumar Kayan and the assessee had sold shares of M/s. Access Global Limited, it was indicative that the assessee had earned bogus Long Term Capital Gains. However, in our considered view, suspicion howsoever strong cannot take substitute of facts. 6.5 The assessee has demonstrated with substantial evidences before the AO that the actual purchase and sale of the shares took place, such shares had distinctive numbers, the transactions were routed through the normal banking channels and the shares had been allotted to the assessee subsequently under an order of amalgamation/merger by the judgment of Hon ble High Court of Kolkata and, therefore, mere reliance on the report of Investigation Wing and statement of Shri Harshvardhan Kayan which do not even mention the name of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been artificially rigged to create non genuine Long Term Capital Gain. However, the AO failed to bring on record any part of the said report wherein the name of the assessee has ever been named or implicated. At the cost of repetition, we once again reiterate that the lower authorities have failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that these documents furnished in support of the claim of the assessee were not authenticate. It would also not out of place to mention that no specific enquiry or investigation was conducted by the Department in the case of Shri Ashok Kumar Kayan which would lend some credence to the theory which has been advanced by the Department. Therefore, in our considered opinion, the lower authorities had merely acted on surmises and conjectures and had delved on the theory of preponderance of probability even in the face of documentary evidences which were not negated as being false. 6.8 The Hon ble Jurisdictional High Court i.e. High Court of Punjab and Haryana in the case of Daulat Ram Rawatmull (supra) had held that documentary evidences cannot be brushed aside merely on suspicio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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