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TMI Blog2022 (8) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... llegation of the AO that Transactions were accommodation entries . This statement is totally unfounded and not based on any cogent evidence to back such high-voltage statement apparently based on conjectures and surmises. Based on these facts and circumstances, we are of the view that there is no any infirmity in the order passed by ld CIT(A). That being so, we decline to interfere in the order passed by ld CIT(A), his order on this issue is upheld and grounds of appeal raised by the Revenue is dismissed. - ITA No.197/SRT/2020 And Cross Objection No.16/SRT/2021 [Arising out of ITA No.197/SRT/2020] - - - Dated:- 29-7-2022 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Kiran K. Shah, AR For the Respondent : Shri H. P. Meena, CIT(DR) ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue and Cross Objection filed by the Assessee, pertaining to Assessment Year (AYs) 2012-13, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-4, Surat (in short ld. CIT(A) ], in Appeal No. CIT(A)-4/10174/2017-18 dated 13.02.2020 which in turn arises out of an assessment order passed by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two amalgamated with Bakra Pratisthan Ltd. Sale of shares was through registered and approved broker with Calcutta Stock Exchange. Sale of shares was subject to payment of STT and routed thorough payee cheques. Confirmation regarding transaction were filed by the parties in response to the notices u/s 133(6) of the Act in A.Y. 2013-14. Proof regarding trade verification from Calcutta Exchange Ltd on the relevant date by the registered broker Ashokkumar Kayan filed by the assessee. The assessee stated that Mr. Ashok kumar Kayan is an approved and registered broker. The assessee also contested that no reference in his statement with reference to him to whom he had given long term capital gain. 5. However, assessing officer rejected the contention of the assessee and observed that assessee had purchased and subsequently sold shares of Bakra Pratisthan Ltd. Accordingly, LTCG claimed was to be earned from the sale of scripts of M/s Bakra Pratisthan Ltd. Further on the perusal of the contract notes submitted by the Assessee, it was noticed that broker who has transacted on assessee`s behalf is Mr. Ashok Kumar Kayan, who is based in Kolkata and a member of Calcutta Stock Exchange. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spikes in share script. Apart from the investigation wing and the income tax department, the same fact has been corroborated by findings of SEBI. During the year under consideration Shri Ashok Kayan along with other brokers were issued warning by SEBI vide SEBI's order No.WTM/RKA/ERO/68/2012 dated 31.12.2012 for rigging of shares of BakraPratisthan Ltd and who has at various times debarred (Shri Ashok Kaynan) from trading. Moreover, during the course of assessment proceedings for A.Y. 2013-14, a notice u/s.133(6) of the Act was issued to Shri Ashok Kayan to ascertain mode of transaction between N.N. Shah Bakra Pratisthan. In response to the same, Shri Ashok Kayan replied that all that he had to state regarding nature and intention of transactions has been noted by Inv. Wing Kolkata. Hence, even he did not state clearly about genuineness of his transactions with the assessee and reiterated on the fact that it must be treated as the way it had been stated before Investigation wing Kolkata. Hence, the crux of his reply is that even this transaction with the assessee is in the nature of providing bogus LTCG. Therefore, in view of the above facts, assessing office made addition R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd copy of order of amalgamation of Hon'ble Calcutta High Court was also filed. The assessee was allotted shares of Bakra Pratisthan Ltd on amalgamation in the ratio as approved by the Court and that is how he had acquired the shares of Bakra Pratisthan Ltd. Purchase was not at throw away price 7) The assessee strongly urges that the shares of Dhanlabh Merchandise Ltd and Twinkle Merchants Ltd were acquired at Rs. 200/- per share (face value of Rs. 10/-) and, therefore, it was not purchase of penny scripts. Sales of Bakra Pratisthan Ltd 8) No sale through Ashok kumar Kavan group cases - The assessee strongly urges that the shares of Bakra Pratisthan Ltd were sold by DB Co. of Kolkata and the transactions are supported by contract of sales which were subject to payment of STT. The assessee strongly urges that there is no sale through Ashokkumar Kayan and, therefore, by no stretch of imagination, the addition is justified on the base of his statement. 9) The assessee therefore, urges that the sales transactions are through approved and registered share broker, the contracts are subject to STT payment, the trade of transactions was duly registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V/s. S. Khader Khan Sons (2013) 352 ITR 480 (SC). The Hon'ble Madras High Court had observed as under in this particular case (CIT V/s. S. Khader Khan Sons (2008) 300 ITR 157 (Mad.). In contradistinction to the power under section 133A, section 132 (4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement is recorded u/s. 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Held, dismissing the appeal that in view of the scope and ambit of the materials collected during the course of survey action u/s. 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the partners of the assessee firm that the disclosed income was assessable as lawful income of the assessee . 16) The assessee further urges that there was a case by SEBI in the year 2010 (Adjudication order No. BM/assessing officer-40/2010) again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at form with reputed concern, acquisition of shares of M/S. Bakra Pratishthan Ltd. through order of amalgamation passed by Hon'ble Calcutta High Court, holding of converted shares in Demat form and consequent sales through the stock exchange after payment of SIT and receipt of payment through banking channels. None of the evidences submitted by the assessee have been proved bogus or concocted. It is not the case that the earning of unaccounted money or routing it to Shri Ashok Kayan has been evidenced or established. In these circumstances, the addition made by the department treating the entire transactions shown, as bogus is totally unjustified. The addition made by the assessing officer is therefore, directed to be deleted. The first two grounds of appeal are therefore, allowed. Financials of Bakra Pratisthan Ltd 22) The assessee urges that the said company i.e. Bakra Pratisthan Ltd had huge gross revenue from operation of Rs. 303 lacs in F.Y.2010-11 and Rs.82.90 lacs in F.Y. 2011-12 and, therefore, it was not a paper company. 9. The Ld. Counsel also submits before us the decision of Coordinate Bench Kolkata in the case of ACIT Vs Swati S. Ghuwalewala (In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note and consequential transfer from the assessee s demat account as also at page 12 the bank account extract of the assessee. It was the submission that the brokers were registered brokers. It was further submitted that the assessing officer has recognised that Bakra Pratisthan Ltd. was a Z category share traded in the stock exchange. It was the submission that as the transactions are bonafide and supported by documents just because the assessee has made substantial profits, the transaction should not be treated as bogus. He also relied on the decision of the Hon ble jurisdictional High Court at Calcuttta in the case of Bhagwati Prasad Agarwal, supra which have been extracted in the order of CIT(A). He vehemently supported the order of the Ld. CIT(A). 7. We have considered the rival submissions. A perusal of the assessment order clearly shows that the Assessing Officer has treated the sale consideration of the shares in the hands of the assessee as unexplained cash credit only on the basis of presumptions. There is no evidence contrary to the evidence of the purchase and sale of shares and the transactions as disclosed by the assesee. Assessments cannot be done on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2022, wherein the Hon`ble Court held as follows: It was argued by the learned Advocates for the assessees that their clients are ordinary people who have made meagre investments and they cannot be branded as scamsters when big players in the market have been left scot free and in certain other cases, the big players who were also branded as scammers were allowed to avail the benefit of the Vivad Se Viswas Scheme. In fact, similar argument was advanced when we heard the applications filed by the revenue to condone the delay in filing in some of the present appeals. The argument on behalf of the assessee was that on account of not filing the appeals by the revenue within the period of limitation, their vested right to avail the benefit of the Vivad Se Viswas Scheme was taken away. We have rejected such an argument firstly by holding that there is no vested right for an assessee to come under the Scheme and this finding was rendered by us after examining the provisions of the V.S.V. Act, secondly we have held that cases cannot be decided based on hypothesis nor can the Court read the mind of the assessee that in the event, the revenue had filed appeal on time, the assessee may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erforming the trading activity themselves on behalf of the paper companies. The report states as to why the department has taken an investigation as a project, largely due to huge syndicate of the entry operators, share brokers and money launderers. The report states that Kolkata is a very distinctive place among the cities of India, so far as the accommodation entry is concerned and action has been initiated against more than thirty share broking entities and more than twenty entry operators working in Kolkata. The report states that almost everyone has accepted its activity, participation in providing accommodation entry of LTCG. The investigation has also indicated as to how the scheme of merger is being misused. Though the scheme of merger is approved by the Company Court, in the event it is found that such merger was done/ obtained by playing fraud, the Company Court is empowered to revoke the order and it appears that the Income Tax Department has not taken any steps in this regard to approach the Company Court or the Tribunal with such a prayer. Thus, we have no hesitation to hold that the orders passed by the CIT(A) affirming the orders passed by the Assessing Officers as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of jurisdiction by the Commissioner under Section 263 of the Act. In the result, these appeals are allowed and the substantial questions of law framed/suggested are answered in favour of the revenue and against the assessee restoring the orders passed by the respective Assessing Orders as affirmed by the CIT(A) as well as the orders passed by the CIT under Section 263 of the Act. No costs. 12. We note that issue is squarely covered against the assessee by judgment of the Hon`ble Calcutta High Court in the case of Swati Bajaj and Others(supra). We also note that during the appellate proceedings, the ld CIT(A) relied on the decision of Hon`ble Supreme Court of India in the case of Suman Poddar u/s ITO in SPR No.26684 of 2019 dated 22.11.2019. The head note of the said order is reproduced below: Section 10(38) of the Income tax Act 1961- Capital gains Income arising from transfer of long term securities (shares)- Assessment year 2014-15- For relevant year, assessee filed her return claiming exemption under section 10(38) in respect of capital gain arising from sale of shares - Assessing Officer took a view that share transactions were bogus because company 'C' whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite shortly are as follows: The assessee before us in an individual and filed its return of income u/s 139 of the Income-Tax Act, 1961 for A.Y.2012-13 on 27.09.2012, declaring total income of Rs.2,38,60,560/-. During the course of survey u/s 133A of the Act on Gujarat Computer Software Ltd, (GCSL) at G-5, Ashray building, opp. Govindji Parle, Umra, Surat, Shri Tammal Roy, director of the company admitted during the course of recording of statement, that he had provided accommodation entries for loans and advances by providing cheques and received back cash from the beneficiaries. The assessee received loan of Rs. 12,14,13,015/- from Gujarat Computer Software Ltd, ( in brief GCSL ) and therefore, the assessing officer issued show cause notice starting that why this loan amount should not be considered as non-genuine. The contents of the show cause notice are reproduced below: ..during the course of survey action u/s. 133A of the act in the case of M/s. Gujarat Computer and Software Limited at G-5, Aashray Building, Opp. Govindji Park-a, Umra, Surat, the director of the company Shri Tammal Roy admitted on oath in his statement u/s. 131 of the Act that he has provided accommod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of accommodation entries. He finally, submitted that he had given cash to angadias who had arranged foreign exchange for him. 4.4 It is strongly submitted that the said Shri Tamaal Roy had simply diverted the burning issue of huge payment of bogus expenditure for Rs.119/- crores to HAGH Global Enterprise Service. It is therefore submitted that the issue of loan is wrongly accepted as alleged accommodation entries in his statement recorded u/s. 131 of the Act during the survey action. 4.5 It is further submitted that the said company has been doing business for development export of software of last several years. It is further submitted that he entire loan was given by account payee cheques, the huge interest was charged, tax was deducted of source and the monies were returned by account payee cheques. It is therefore, submitted that the identity, genuineness and creditworthiness was proved. 4.6 It is strongly submitted that there is no legal status of statement recorded u/s. 131 of the Act and therefore, no addition is justified merely on the base of such statement. 4.7 It is further submitted that the said company had recently confirmed transactions is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such parties either from the account of his company M/s GCSL or from the account of M/s Logic-House. Thus, he had not diverted the issue but explained and distinguished his way into giving accommodation entries. Same facts are corroborated from the statement recorded on oath u/s 131 of the Act dated 03.03.2016. Further, in reply to Question no.33 of the statement. Shri Tamaal Roy has clearly stated that Shri Naresh Nemchand Shah was one of the parties to whom he had given cheques and received back the cash. Further, this office has also issued summon u/s 131 of the Act to Shri Tamal Roy to furnish explanation in respect of the transactions made with the assessee i.e. Shri Naresh Nemchand Shah. In response to the summon, Shri Tamaal Roy stated that he would not be able to attend personally on the date fixed for hearing and stated that he stayed with his statement provided to Income Tax authorities during survey proceedings on 03.03.2016. Thus in view of the above facts, it is crystal clear that the assessee has taken accommodation entries amounting to Rs. 12,14,13,015/-in the form of unsecured loan from Shri Tamal Roy's company i.e. M/s Gujarat Computer and Software Limited. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort the statement of Shri Tammal Roy. The ld Counsel also contended that statement recorded during the course of survey does not have an evidentiary value even in the case of the assessee upon whom survey has been conducted in absence of any corroborative evidence. Therefore, relying upon third party statement without any corroborative evidence is against the settled principle of law on this issue. We note that there is no written evidence, against the assessee except statement of Shri Tammal Roy. The statement of third party cannot be used against the assessee without giving opportunities of cross examination. The ld Counsel stated that during the course of assessment proceedings, cross examination of Shri Tammal Roy was sought by the assessee by making specific request in this regard. Shri Tamal Roy was summoned by the assessing officer, but instead of appearing for cross examination, he sent reply in writing on 07.10.2017.These facts clearly prove that in spite of specific request made by the assessee, opportunity of cross examination was not provided to the assessee, hence addition made by the assessing officer relying upon such statement is clearly in violation of the principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the amendment, hence amended provisions of section 68 are not applicable in the assessee's case. Therefore, we note that additions made by the assessing officer are not valid. 26. We note that actual loan amount taken from GCSL by the assessee during the year is Rs.12,14,13,015/-. The assessing officer made the additions considering this loan amount as non-genuine only on the basis of statement of Shri Tammal Roy, director of GCSL recorded during the course of survey and post survey enquiries. There was no documentary evidence found during the course of survey which remotely indicates that this transaction with GCSL is not genuine. The assessee filed confirmation from the creditor, audited accounts of bank account of the creditor to prove the identity, genuineness creditworthiness of the creditor, as required to prove in the case covered u/s 68 of the Act. The assessee received the loan amount through various account payee cheques throughout year and by 12 cheques, which show that the transaction is through regular banking channel. The creditor was covered u/s 133A of the Act by the department and statement of director of GCSL was recorded. These facts clearly prove the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Tammal Roy but he did not appear for cross-examination. These facts prove that the assessee was not provided opportunity of cross examination of Shri Tammal Roy. It is legally settled principal as held by the Hon'ble Apex court in the case of Kishanchand Chelarama vs. CIT (125 ITR 713) (SC) and in the case of Andaman Timber Pvt. Ltd, vs. Commissioner of Central Excise that in absence of providing opportunity of cross examination of the person, whose statement is relied upon for making the additions, the addition made are against the principle of natural justice and cannot be made. 28. The ld CIT(A) noted that there is no cash deposit found in the bank account of the creditor prior to the date on which cheques were issued to the assessee. Even, no cash withdrawal was found from the bank account of the creditor repaid. The assessee was subjected to search survey on 19.02.2011 03.09.2015 i.e. before after the date of survey on GCSL, no document indicating any cash payment for obtaining accommodation entries or receiving of cash on repayment of loan was found. It is undisputed fact that no documentary evidence was found anywhere (at the premises of third party i.e. G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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