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TMI Blog2022 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... s a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical. The ld. DR did not raise any specific objection against taking the case of M/s. Marverick Commodity Brokers Private Limited as a lead case. Therefore, for the purpose of the present discussions, the case of M/s. Marverick Commodity Brokers Private Limited is taken as a lead case. 3. Based on the above arguments we have also seen that for all these appeals grounds are similar, facts are similar and arguments were similar and were heard together we consider the facts and ground taken in ITA No. 27/JPR/2020 for A. Y. 2014-15 and considering the said case as lead case. 4. The revenue has marched the appeal in ITA NO. 27/JPR/2020 on the following grounds : 1.Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition on account of unexplained credit u/s 68 of IT Act of Rs. 6,25,76,221/- made by the AO. 2. Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital Loss through trading of shares of Penny Stocks. The modus operandi found is that the investors/beneficiaries hold these shares for one year or so and then sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operators/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the. I.T. Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) are a penny stock listed company. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) is also available at ITD Data/AIR. Further on examination of the financials of the company for last few years it is noticed that the very nature of the business of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on these findings the ld. AO issued a detailed show cause notice to the assessee on the points mentioned from page 28 to 38 asking the assessee that it is proposed to treat amount of Rs. 6,25,76,221/- as unexplained credit found in the books of the assessee u/s. 68 of the act. He also propose to add 6 % as of the gain as an unexplained expenditure u/s. 69C of the Act. In response the assessee submitted their reply stating that short term capital gain of Rs. 3,05,14,396/- on sale of share of M/s. Midland Poly and Rs. 3,20,61,825/- on sale of shares of M/s. Sulabh Engineering. Both these scrips were purchased on line and sold online through registered share broker by various contract notes. Due STT was also paid by at purchase and sale transactions. The consideration has routed through the normal banking account through RTGS. The assessee has furnished copy of bank statement showing payment so received, assessee's ledger account in the books of account placed on record, related contract notes through which the purchase and sales were made showing unique settlement code and transaction executed along with date of transactions. The ld AR of the assessee contended various allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on pages 27-28. 4. That the a further extracted the audited accounts of the companies shares of which were purchased by the appellant and arrived at the conclusion that the company has weak financial and such weak financial does not merits the substantial share prices rise. 5.2 The AO, thus, has disallowed claim of STCG on the basis of statement made u/s 132(4) and subsequent affidavits. The AO referred & relied on the statements the entry operators. The AO also referred to the report of SEBI, and the report of expert committee. In the detailed submission made by the assessee it has vehemently argued that the settled position of law is that addition cannot be made simply on the basis of statement of the assessee alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statement of the assessee. 5.3 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purposes of making addition for assessment completed u/s 153A / 143(3). It has been held in many judgments that mere statement u/s 132(4) or u/s 131 is not sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB (1) read with Section 1588 (b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence should not be treated as conclusive evidence against the maker of the statement..." Naresh Kumar Agarwal [2015] 53 taxmann.com 306 (Andhra Pradesh) "...it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under Section 132(4) of the Act, does not have any evidentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information is as under I. No such material found seized or impounded. II. The assessee in his statement dated 22/07/2015 has admitted that he had managed LTCG out of the sale of penny stock and surrendered the same for taxation, copy of admission statement of Sh. Mukut Bihari Agarwal dated 22.7.2015 and dt. 23.7.2015 and dt. 27.7.2015 is being enclosed herewith. III. Copy of the statement, of Sh. Harshvardhan Kayan dt. 28.1.2015 enclosed herewith wherein he has stated that the price of script sold by the assessee was managed by him in stock market. IV. Any enquiry report of SEBI or other government agency is not available on record. V. No such information found on record. In the above context it is submitted that the all the above statement have been made as part of assessment order by the Assessing Officer (Emphasis added) 6. Coming to the statement of entry operators, I have called for copy of statement from the AO & have gone through the entire statement. I agree that entry operator has stated that certain accommodation entries was provided in the form of bogus LTCG etc through certain listed penny stick companies. But nowhere in the statement the entry operator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut to the Anuj Agarwal regarding transaction through the companied, through which alleged cash of appellant was routed. On one hand the AO has oral statements made by appellant & entry operator, the appellant has retracted the statement by filing documentary evidences listed above. It is a settled law that documentary evidences will always carry more weight than the oral statements. After the oral statement were available to the AO the appellant proved the oral statement to be incorrect by filing documentary evidences. Thereafter the AO did not prove the documentary evidence to be untrue/ bogus/ non genuine. The AO never confronted the documentary evidence to the person whose oral statement was recorded in this case the Shri Anuj Agarwal, the entry operator. Therefore, the oral statement losses their evidentiary value in light of the documentary evidence placed by appellant. Even the oral statement is general and does not pin point or mention appellant name anywhere. Nor does it mention anywhere that cash from appellant was received & it was same cash which was routed back to the appellant bank account. Considering the above documentary evidences clearly out weight the oral evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he as 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. 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 could not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was no for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealer and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross -examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted by DRI of by the department that Assessee-company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. NirmlalaSundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 18.08.2017 (Cal. Trib.) * Ramprasad Aggarwal vs. ITO 2(3)(2), Mumbai (2018) 100 taxmann.com 172 * Smt. Madhu Killa vs. Asst. CIT (2018) 100 taxmann.com 264 * Neeraj Gupta vs. ITO (2018) 54 CCH 0238 * Jignesh Desai vs. ITO (2018) 54 CCH 0045 * Navneet Agarwal vs. ITO (2018) 97 taxmann.com 76 * Arun Kumar and Ors. vs. Asst CIT (2018) 54 CCH 0183 * Anubhav Jain vs. ITO (2018) 54 CCH 0273 * DCIT vs. Saurabh Mittal ITA No. 16/JP/2018 dated 29.08.2018 * Amar Nath Goenka & Ors. vs. Assistant Commissioner of Income Tax & Ors. (2018) 54 CCH 0344 * UDIT Agarwal vs. Dy. CIT (IT) (2018) 54 CCH 0424. Summation 6.7.1 To sum up in the present case the appellant as subjected to search and seizure action u/s 132(1) of the Act and during the course of search no incriminating material was found which may indicate that the appellant has taken LTCG on penny stock which is alleged bogus. A statement was recorded u/s 132(4) of the Act which was later retracted by the appellant. 6.7.2 The Ld. AO had information in the form of statements recorded during search and survey action on various entry operators. This information inter alia contains statements of entry operators record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima fade discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted. 6.8 Thus, considering the above factual & legal position especially by the Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur, I am of the view that the AO action of denying the claim of STCG is not tenable. The Ld. AO is directed to allow the claim of STCG and tax it as per the law. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of all the assessees were completed u/s 153A as a result of search conducted on 22.07.2015. On the date of search, due date of issuing notice u/s 143(2) had expired in respect of A.Y. 2010-11 to 2013-14 and notice could be issued only in respect of A.Y. 2014-15 and onwards. In other words, assessment proceedings upto A.Y. 2013-14 were completed and therefore scope of additions to be made in such assessment years was restricted to incriminating documents only which were found/seized during the course of search. A detailed submission in this regard was made before the ld. CIT(A), who sought remand repost from assessing officer as to whether any incriminating document was found during the course of search in respect of addition made. Ld.AO vide remand report[reproduced in CIT(A) order itself]admitted that no incriminating document was found in this regard. After appreciating such facts, ld.CIT(A) accepted the contention of the assessee and held that no addition could be made as no incriminating material was found with respect to the Long Term capital gain/ Short Term capital loss by alleging the same as non genuine.Details of such appeals, detailed submission furnished in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears that the department has not challenged the findings of ld. CIT(A) given on the legal issue raised by the assessee that, no addition could be made solely on the basis of confessional statements recorded during the course of search unless the same are corroborated with documentary evidences/material more particularly when statements were retracted. It is submitted that very recently Hon'ble Rajasthan High Court in the case of PCIT vs Shri Sanjay Chhabra in Income Tax Appeal No. 22/2021 has held that addition based solely on statement later on retracted, without anything more, could not be justified in law and thus had not admitted the appeal filed by the department. It is thus submitted that on legal aspect department has accepted the order of ld. CIT(A) and accordingly undisputedly no addition could be made solely on the basis of statements recorded during the course of search when the same are not corroborated with any incriminating material/documents suggesting Long Term Capital gain/ Short term capital loss being non genuine. Details of such appeals, detailed submission furnished in this regard before ld.CIT(A), relevant page numbers where Retraction affidavits are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "entry operators"), who have been alleged to have accepted to be involved in providing accommodation entries in the shape of Long Term Capital Gain/Short Term capital loss/ unsecured loans etc. for commission, through a racket of various paper companies. As per ld. AO the long term capital gain / short term capital loss declared by these appellants also include the transactions from these companies and thus concluded that LTCG/STCL earned by all these assessee on shares of such companies was not genuine. In this regard, it is submitted that in none of the case, name of any of the assessee as beneficiary of bogus LTCG/STCL was mentioned as alleged by the ld. AO. Thus the modus operandi narrated by the ld.AO based on the statements of various entry operators (third parties) is merely borrowed from the answers given in reply to specific questions put forth in case of some other scripts and not the scripts involved in the case of the assessee. Moreover, apart from the so called information received from Investigation Wing, Kolkatta containing statements of entry operators, there was no material available with the Ld. AO or referred to by him in the assessment order found as a resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as genuine. Further in the statement, Shri Kedia has given complete list of beneficiaries who had taken accommodation entries through him which does not contain the name of the assessee or the broker through whom the assessee had transacted in these shares. Also all the other names mentioned by Shri Raj Kumar Kedia, who had allegedly assisted him in carrying out the entire transaction has no mention of either any of the assessee or the broking house through which they had transacted the genuine sale of shares. Moreover no any reference of any of the assessee was made in any manner in any of the statements, that any of them has approached him for providing accommodation entry. Further none of the broker had stated the name of the broker M/s MSBPL as allegedly involved in providing bogus LTCG through whom they sold shares. It is a matter of fact that the broking firm MSBPL is never found involved in any such type of activity by any authority like SEBI etc. However, relying upon the uncorroborated statements of third parties, that too recorded in some other case, by some other authority and behind the back of all theseassessees, Ld. AO incorrectly presumed that long term capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries; - All the decision of Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur on LTCG earned on Penny stock are in favour of assessee's; - The judgment given in the case of Suma Poddar423 ITR 480, has already been distinguish by hon'ble Delhi high court in the case of PCT Vs. Krishna Devi in ITA No. 125/2020 by the hon'ble Delhi court itself and the same decision is followed by the hon'ble bench in case of ACIT Vs. SarojPorwal in ITA No. 753/JP/2019 vide orders dt. 24.02.2021. In view of above, it is prayed that transactions of assessee in shares are completely genuine, therefore CIT(A) has rightly deleted the addition so made, which order may please be upheld. 10. In addition to the above written submission the ld. AR of the assessee reiterated the contentions of the affidavits stating the circumstances under which the alleged disclosure was obtained. The assessee and its associates are dealing in shares and securities and it is not only these scripts where in the they have earned the capital gain but various other shares and securities are hold by the members of the group. The allegation is merely on the investigation done by the investigation wing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire record and availed the bogus transaction of long term capital gain to convert his unaccounted income to avoid tax through long term capital gain. The ld. DR further submitted that the observations of the CIT(A) in the impugned order that there was no incriminating material "in respect of the LTCG" but a statement of the assessee recorded during the proceeding u/s. 132(4) is piece of evidence recorded at the time of search although the same has been retracted will not make the fact corrected that there was no incriminating material. Therefore, the addition was justified and supported the order of the ld. AO on this issue. As regards the contention of the ld. AR of the assessee that the report of the Investigation wing of Kolkatta were sent to all directorate and in that AO being the central charges not possible to have the copy he may have missed while reporting in the remand proceedings. The ld. DR challenged the various finding of the ld. CIT(A). He has submitted that even though the SLP is admitted in the Supreme Court challenged by the department in the case of Continental Warehousing and Best Infrastructure. He has further relied on the recent decision of Calcutta Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h jamakharchi companies who's creditworthiness, identity and transactions are not genuine. The assessing officer has discussed the issues in great length in the assessment order. I hereby rely on the reasons mentioned an assessment order for such additions. Further, I would like to submit following as under: 1.1 The language of section 153A makes it very clear that there is no explicit or intended requirement of seizure of any incriminating material during the search under section 132(1) before issuing the notice under section 153A. The jurisdiction of section 153A is automatic from the moment a search is initiated. There is no requirement of examination of seized material or recording any satisfaction with respect to availability of seized material before issue of notice under section 153A. The intention of legislature in allowing so could be that the initiation of search itself is subject to recording of satisfaction under section 132(1) by the PDIT(Inv.) on grounds that: (i) upon issue of summons under section 131(1) the assessee has failed to produce or would not produce the books of accounts or other documents so requisitioned or (ii) the assessee is in possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it may be counterproductive to conclude that the power of AO is restricted to assessment based only on incriminating material found in search, irrespective of any other item of income which might have remained fully or partly undisclosed for the purposes of the Act, based upon the entries already appearing in such books, if any. 1.2 It is the 'assessment of total income' which is required to be made under section 153A. The total income is defined under section 2(45) would be the total income computed as per section 5 of the act. The word 'assessment' cannot have a different meaning for different purposes under the same act unless restricted by specific provisions. The process of assessment for the purposes of the act is wide enough to include every kind of enquiry/ examination for discovery, quantification and assessment of the income wholly or partly for the purposes of the act. Hence, the process of' assessment of total income' u/s 153A can neither be restrictive nor have a different connotation for assessment under section 153Avisa-vis143(3) or 147. As per the scheme under the Act, the satisfaction recorded u/s132(1) and the results of search are int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income for the purposes of the Act. Thus, if it were to be held that no addition can be made without any incriminating material in respect of the years covered by section 153A, then it would lead to an absurd consequence whereby the powers granted to issue notices u/s 153A would be rendered otiose in cases which got abated for any particular AY. In the absence of any seized material, AO may not be able to proceed to make any assessment of any other item of total income implying that the process of making assessment of total income as envisaged in section153A fails in abated cases. However, a statute can never be interpreted in a manner to make it redundant. 1.4 Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of search, or on the basis of any other post-search material or information available with the AO though such assessment cannot be arbitrary. The provisions of section 147 and section 153A, though have different conditions to assume jurisdiction but both operate to make the assessment of total income only. The Memorandum explaining the provisions of Finance(No.2) Bill of 2009 while inserting explanation 3 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Vs CIT 390 ITR 496(Del) in para16 has observed that: "Section 153A, which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 with effect from 1-6-2003, does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier section 158BB which is not applicable in case of a search conducted after 31-5-2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are related to the materials found. Section 153A(1)(b) requires assessment or reassessment of total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under section153A can be arbitrary or made without any relevance or nexus with the seized material.....". Filatex India Ltd Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the revenue in Meeta Gutgutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continental warehousing, Best Infrastructure(supra). Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there was incriminating material is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prior to1/4/2005. 1.6 The sum and substance of all the decisions above could only indicate that the question of whether the AO has powers u/s 153A to assess total income as defined u/s2(45) dehors the incriminating material also, has not at all become final and the same is yet pending final adjudication before the SC in SLPs admitted. 2. Incriminating material: (i) The incriminating material for the purpose of making an assessment of total income u/s153A? (ii)Whether the mere fact that an entry has been considered in any earlier proceedings or that the entry/ income is recorded in accounts in the manner which is later found to be different from its true nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he invocation of proceedings u/s153C if any document, an entry or an asset is found in relation or pertaining to a person other than the searched person, which has a bearing on the assessment of total income as per the provisions of the I T Act. Hence the word "incriminating", as used by the courts in context of section 153C, needs to be applied in the context of section 153A also which has to be seen as something which can have a bearing on the assessment of correct total income u/s2(45) as per provisions of the Act. 2.3 The expression 'have a bearing on determination' as used u/s 153C also has a wide connotation which implies that the nexus of the seized documents/ assets to income should only be a logical nexus to the ultimate process of determination of total income and that such evidence need not be in the nature of direct hard evidence. Applying the same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not a hard evidence. The use of the expression 'books of accounts' u/s 153C again suggests that even the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries /earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Hence applying the Hayden's rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest other wise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppression or misrepresentation of facts, which were subsequently found to be doubtful based on evidences gathered? 3.1 There is a distinction between a mere change of opinion and a change of opinion based on fresh facts. The later would imply that the earlier conclusions of the AO were misled by placing evidence on suppression or misrepresentation of material facts. An order passed by the AO relying upon such make belief documents, suppressed or misrepresented facts, which were later found to be not true, shall become void or voidable, as the case may be. Under such circumstances, the acceptance of any claim, relief etc in any earlier order shall also have no binding force in any subsequent proceedings and the change of opinion would be permissible. The Courts have accepted the principle that any fraud practice is always a ground for vacating the judgment, as where the court is deceived or misled as to material circumstances, or its process is abused, resulting in the rendition of a judgment, which would not have been given if the whole conduct of the case had been fair". The Madras High Court in case of L. Mohanamvs Mohamed Idris on 24 June,2011 in O.S.A.No.310 of 2010 has o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y suppression or misrepresentation of material factsor by producing only make belief documents, which were not found to be genuine subsequently based on emergence of new facts during enquiries. Hence the view that the AO cannot rescind from accepting the documents admitted earlier is not a gospel truth which can be applied in each and every circumstance. 3.2 Further the Apex court in ITO Vs. Techspan India (P.) Ltd. 92 taxmann.com 361(SC) observed as under: Whether before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion no matter which is basis of alleged escapement of income that was taxable; if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings- Held, yes -Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where order of assessment doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irs of business, the purchase of share of face value Rs. 10/- at the rate of Rs.491/- by any person and the assessee's contention that such transaction is genuine and credible and arguing to accept such contention would only make the decision of the judicial authorities a fallacy. 11. The evidences put forth by the Revenue regarding the entry operation fairly leads to a conclusion that the assessee is one of the beneficiaries of the accommodation entry receipts in the form of long-term capital gains. The assessee has failed to prove that the share transactions are genuine and could not furnish evidences regarding the sale of shares except the copies of the contract notes, cheques received against the overwhelming evidences collected by the Revenue regarding the operation of the entire affairs of the assessee. This cannot be a case of intelligent investment or a simple and straight case of tax planning to gain benefit of long-term capital gains. The earnings @ 491% over a period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assessee. Even the brokers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g used for generating bogus LTCG. On the facts of the case and judicial pronouncements will give rise to only conclusion that the entire activities of the assesseeis a colourable device to obtain bogus capital gains. The Hon'ble High Court of Delhi in the case of Udit Kalra, ITA No. 220/2009 held that the company had meager resources and astronomical growth of the value of the company's shares only excited the suspicion of the Revenue and hence, treated the receipts of the sale of shares to be bogus. Hon'ble High Court has also dealt with the arguments of the assessee that he was denied the right of cross examination of the individuals whose statements led to the enquiry. The ld. AR argument that no question of law has been framed in the case of Udit Kalra also does not make any tangible difference to the decision of this case. Since the additions have been confirmed based on the enquiries by the Revenue, taking into consideration ratio laid down by the various High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. In the case of Bannalal Jat Construction (P.) Ltd vs ACIT (2019) 106 Taxmann.com 128 (SC) where high court upheld addition made by authorities below relying uppn statement made in course of search proceedings by director of assessee company, since assessee failed to discharge its burdon that admission made by director in his statement was wrong and said statement was recorded under duress and coercion, SLP filed against of High Court was to be dismissed. In the present group cases admission made by assessee's under 132(4) of the Act are squarely covered with the judgement. 6. In the appellant cases the penny stock script for accommodation entry traded was "SPLASH MEDIA" MIDLAND POLYMERS LIMITED, SULABH ENGINEERING, FIRST FINANCIAL SERVICES LIMITED, EINS EDUTEC LIMITED FACT ENTERPRISE for LTCG is the main script which has been identified as penny stock by the Investigation Report prepared by Directorate of Investigation, Kolkata dated 27.4.2015. In the recent judgement of Kolkata High Court in the case of PCIT vs. Swati Bajaj & others, Hon'ble High Court has accepted the Investigation report and based on which the bogus LTCG claimed by various persons have been rejected and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court are bound by the decision of Hon'ble Rajasthan High Court. 3. Hon'ble Rajasthan High Court in the case of PCIT vs Sanjay Chhabra D.B. ITA No. 22/2021 noted that prejudice is caused to the assessee when material used against him is not provided and opportunity of cross examination is not provided: It was submitted before the Hon'ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon'ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon'ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: "..The Tribunal by impugned order has categorically held that the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law..." 5. Hon'ble Calcutta High Court has mainly decided the case against the assessees for the reason that factual position in any of the 89 appeals forming part of the bunch was not discussed by the Hon'ble ITAT (para 40, Page 80). In the instant case it is submitted that assessee's case was not part of any bunch of cases and, therefore, there cannot be any situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 7.2 CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) Hon'ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided moreso when assessee placed on record all the evidences. The relevant findings are as under: Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and presumptions. Reliance is placed on the decision of Hon'ble Supreme Court in case of PCIT vs Krishna Devi [2022] 138 taxmann.com 150 (SC) wherein SLP filed against the decision of Hon'ble Delhi High Court in the case of PCIT vs Krishna Devi [2021] 126 taxmann.com 80 (Delhi) was dismissed. Hon'ble Delhi High Court categorically noted that the Court has to decide the issue on the basis of evidence and proof and not suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the assessee. If the revenue has failed to bring evidence on record that money changed hands and there was agreement to convert unaccounted money mere reliance on the report of investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: "11. .........The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has offered short term capital gain of Rs. 3,05,14,396/- on sale of share of M/s. Midland Poly and Rs. 3,20,61,825/- on sale of shares of M/s. Sulabh Engineering. Both these scrips were purchased on line and sold online through registered share broker by various contract notes. Due security transaction tax(STT) was also paid by the assessee at the time of purchase and sale transactions. The consideration routed through normal banking account through RTGS. The assessee has furnished copy of bank statement showing payment so received, assessee's ledger account in the books of account placed on record, related contract notes through which the purchase and sales were made showing unique settlement code and transaction executed along with date of transactions. All these transactions were very well placed on record before the assessing officer. He remains silent on the evidence filed and not uttered a single statement as to why the same are not correct or reliable. All these transactions were real time transaction entered into the portal and there are no efforts to see the correctness of these documents by any of the authority i.e. BSE/NSE. The ld. AO merely reiterated the inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accommodative entries. We found from the evidence placed by the assessee that the department has taken the benefit of the pressure under which the assessee was passing, as department did not allow to do stock exchange operations and banking transaction too. This circumstance forced the assessee to sign the statement as per will and wishes of the department and ultimately the statements made were retracted by filling a detailed affidavit. 14.3 The ld. AO has not applied his mind independently to check the veracity of these documents and has, merely on the third-party statement made the addition. The statement of the person relied upon has also retracted their statement, so the reliability of these evidence without allowing the cross examination cannot be used against the assessee. Even the assessee has submitted the copy of the affidavit of the person whose statement relied upon has retracted from his statement. The ld. AO has not raised single questions on the evidences and its correctness. Even the assessee has submitted that Shri Anil Agarwal whose statement is heavily relied upon has retracted his statement. Further, the purchase transaction has been done with the recognised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law which renders the order a nullity. Being consistent we also feel that when the additions were purely based on the statement of a person and said person has filed a retraction affidavit and before using the said statement against the assessee the AO cannot put a side such request of the assessee for cross examination and the addition made purely on the statement is not valid and is against the principles of nature justice. 14.5 We have seen from the records that the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long/short term capital gain. Not only that he has not verified the records related the transaction on hand with that of the agencies under the power vested upon him to cross verify the evidence filed by the assesse. Thus, now on both the side ld. AO cannot act against the assessee the he did not verify the documents and did not allow cross examination and even though he make the addition. There is not single evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the entry operators given specifically name of the appellant nor he deal with the fact that in the case of appellant equal and amount of cash was given which was routed through the capital gain in the form of LTCG. He further recorded his finding that after the oral statements were available by the AO the appellant proved the oral statement to be incorrect by filling documentary evidence. The ld. CIT(A) further observed that after the filling of this information the ld. AO did not prove the documentary evidence to be untrue / bogus / non genuine. Therefore, the oral statement losses their evidentiary value in the light of the documentary evidence placed by the appellant. Even the oral statement is general and does not pin point or mention appellant name anywhere. Neither does it mention anywhere that cash from assessee was received & it was same cash which was routed back to the assessee. Based on these finding he vacated the reliance of AO on these statements. The ld. AO relied on the findings of the SIT report and SEBI report for that the ld. CIT(A) observed that these reports are pieces of information and the AO was expected to convert it into evidence by further inquiry which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd reasoned finding of the ld. CIT(A) and thus we dismiss the ground no 1 of the revenue. 15. Ground No. 2 raised in the revenue appeal is regarding the addition made by the AO on account of notional commission of Rs. 37,57,573/- u/s 69C of the Act which is consequential to the issue of treatment of long/short term capital gain as bogus. Once, we have confirmed the finding of the CIT(A) on the issue of treatment of long/short term capital gain as not bogus then, the consequent addition made by the AO rightly deleted by the CIT(A) and accordingly ground no. 2 raised by the revenue is also dismissed. 16. The issues as raised by the Department in its appeal for the assessment year 2014-15 in the case of M/s. Maverick Commodity Brokers Private Limited are similar to the issues in the case of Shri Mukut Bihari Agarwal for Assessment Year 2015-16, in the case of Anshul Jain, Assessment Year 2014-15, and in the case of Smt. Sunita Agarwal for assessment year 2014-15 & 2015-16 also wherein the order of the ld. CIT(A) has been sustained. Therefore, the decision taken by this bench in the appeal of the Department for the assessment year 2014-15 in the case of M/s. Maverick Commodity Broker ..... X X X X Extracts X X X X X X X X Extracts X X X X
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