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TMI Blog2022 (12) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... been made on presumptions only and therefore, ground of assessee are allowed. - I.T.A. No.61 to 65/Lkw/2021 - - - Dated:- 6-7-2022 - Shri A. D. Jain, Vice President And Shri T. S. Kapoor, Accountant Member For the Appellant : Shri Ashish Jaiswal, Advocate For the Respondent : Shri Pankaj Sachan, D.R. ORDER PER T. S. KAPOOR, A.M. These appeals have been filed by different assessees against separate orders of learned CIT(A) all dated 01/07/2021. The assessees have taken similar grounds of appeal in these appeals and all the appeals were heard together therefore, for the sake of convenience, a common and consolidated order is being passed. For the sake of completeness, the grounds of appeal in I.T.A. No.61/Lkw/2019 are reproduced below: 1. That the ld. Assessing Officer has erred in reopening assessment u/s 147 of the IT Act, 1961. 2. That the ld. Assessing Officer has erred in reopening assessment on the basis of borrowed information without independent application of mind. 3. That the ld. Assessing Officer has erred in passing reassessment order without lawful jurisdiction u/s 148 of the IT Act, 1961. 4. That the ld. Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atural justice. 14. That the assessment completed by ld. Assessing Officer and confirmed by the ld. CIT(A) is arbitrary, prejudicial and unlawful. 2. Learned counsel for the assessee, at the outset, submitted that he will not be pressing the grounds of appeal on legal issues as contained in the ground number 1 to 4 but will be arguing only the grounds number 5 to 13 which are on merits of the cases and which are already covered in favour of the assessee by the orders of I.T.A.T. Kolkata Benches in I.T.(SS)A. No.45/Kol/2019 in the case of Anita Singhania and I.T.A. No.256/Kol/2019 in the case of Soumitra Chaudhary. Explaining the facts of the cases, Learned counsel for the assessees submitted that the cases of the assessees were reopened u/s 147 of the Act on the basis of some information received from the Dy. Director of Income Tax (Inv.), Kolkata wherein it was mentioned that assessees were beneficiaries of the accommodation entries of Long Term Capital Gain on the scrip Twenty First Century (India) Ltd. The assessees had claimed in their returns of income Long Term Capital Gain on the scrip Twenty First Century (India) Ltd. as exempt u/s 10(38) of the Act. It was submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making additions and has relied on the evidences filed by the assessees and has allowed relief to the assessees under similar facts and circumstances. 2.2 Further reliance was placed on an order of Hon'ble Allahabad High Court which is a jurisdictional High Court in the case of CIT vs. Sudeep Goenka [2013] 29 Taxmann.com 402 where, under similar facts and circumstances, Hon'ble High Court had dismissed the appeal of the Revenue. 2.3 Learned counsel for the assessee further submitted that coupled with the fact, that the assessee had filed all the documents, evidencing purchase and sale of shares, the authorities below have relied on the statement of certain persons. It was submitted that in the statements recorded, nowhere the persons examined have taken the names of assessees. It was submitted that statement recorded of some persons, alleged to be providing accommodation entry to some other person, cannot be used against the assessees for making additions. It was submitted that in the case of Anita Singhania where name was taken by the persons examined, the Hon'ble Calcutta Bench of the Tribunal has already deleted the additions. Above all it was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce placed by learned CIT(A), while confirming the addition on the case law of NDR Promotors Ltd. (Delhi High Court) and NRA Steel (P) Ltd. (SC), is also not justified as the facts and circumstances of these case laws are distinguishable from the facts and circumstances of the present cases. It was submitted that in the case of NRA Iron Steel, the issue involved was regarding onus u/s 68 to be proved by the assessee. In that case, the assessee had received share capital and share premium from certain paper companies. In response to the notice, issued by Assessing Officer, the investor companies did not appear and also, the income levels of such companies was quite low. Similarly, in the case of NDR Promoters (P) Ltd., the Hon'ble court had held the investor companies to be paper companies and there was material found regarding bogus transactions during a search. It was submitted that in the present cases the assessees have discharged their onus of proving credits u/s 68 of the Act where credits were supported by sales of shares and there is ample evidence of sale of shares through electronic stock exchange and on which necessary taxes were paid. It was submitted that Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of unaccounted money belonging to the assessee. The assessees also submitted to the Assessing Officer that before making additions, the Department has to establish the involvement of the assessee and collusion with the people involved in the accommodation entries. It was also submitted that the statements recorded of third parties, recorded at the back of assessees, cannot be used against the assessees unless these persons, whose statements are relied, are made available to assessee for cross examination. The assessees filed various evidences in support of purchase and sale of shares and in support of payments made for purchase of shares and also copies of bank account wherein the payments for sale of shares were credited, were submitted and copy of DEMAT account evidencing the purchase and sale of shares through DEMAT account was also submitted. For the sake of completeness, the nature of such evidences along with paper book pages, where copies of such evidences (submitted to Assessing Officer), are placed has been reproduced herein under in the form of a table: I.T.A. No. 61 I.T.A. No. 62 I.T.A. No. 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonstrate that assessee in I.T.A. No.61 did purchase shares of Sarathi Dealers (P) Ltd. and assessees in I.T.A. No. 62 to 65 did purchase shares of Highland Dealcom (P) Ltd. from brokers through offline transactions and made payments for these shares through their bank accounts. The copies of purchase bills and copies of bank accounts are placed in the respective paper books as mentioned in the above chart. The said shares were converted into shares of Twenty First Century India Ltd. on the basis of a scheme of amalgamation approved by Hon'ble Calcutta High Court, a copy of order of Hon'ble Court is placed in paper book pages 196 to 223. As per the scheme of amalgamation, the assessees were allotted equity shares of Twenty First Century India Ltd. in lieu of shares of other companies held by them and which were credited into the DEMAT accounts of the assessees, a copy of DEMAT accounts is placed in paper books mentioned in the above chart. Then such shares were sold electronically through a common broker H. M. Fetepuria, Member Calcutta Stock Exchange. The copies of contact notes, issued by broker evidencing the sale, are placed in respective paper book as mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to make additions in the case of the assessee. In this case, the statement and reports of investigation wing of the Department used by the Revenue for making the additions in the assessment was never confronted to the assessee. The law on this issue has been laid down by the Hon ble Supreme Court in the case of Kishinchand Chellaram vs. CIT 125 ITR 713 (SC) where it has held that an opportunity of cross examination must be provided to the assessee. 6.8. The Jurisdictional High Court in the case of CIT vs. Eastern Commercial Enterprises (1994) 210 ITR 103 (Kol HC) held as follows: As a matter of fact, the right to cross-examination a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice . 6.9. The Hon ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 (2015 (324) E.LT. 641 (SC) held: 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 6.10. Thus it is well settled that the Assessing Officer has to confront the assessee with the material collected behind the back of the assessee, if he chooses to use the material against the assessee and that he should provide the assessee an opportunity of cross examination. Not having done so makes the evidence in question bad in law. 6.11. In this case, the assessee has furnished all the bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. The claim of loss should not be disallowed on conjectures and surmises such as that there is a practice in Calcutta to claim bogus loss in share dealings. The Tribunal being the final fact-finding body had found the fact on the basis of the materials on record that the assessee has suffered the loss in share dealing to the tune of Rs. 49,210. These findings cannot be said to be perverse on the basis of the materials considered and discussed in the order of the Tribunal. 10. In the result so far as the question relates as to whether the finding of the Tribunal is based on materials on record we answer it in the affirmative, that is, in favour of the assessee and against the Revenue. So far as the question raised as to whether the finding is perverse, we answer it in the negative, that is in favour of the assessee and against the Revenue. Similarly, we answer question No. 2 relating to share loss of Rs. 49,210 in the affirmative, that is, in favour of the assessee and against the Revenue. B) The Calcutta High Court in the case of CIT vs. Currency Investment Ltd. (2000) 241 ITR 494 (Cal.) it was held as under: The learned Tribunal has concluded that in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the purchase and sale are on the same date. It is true that the transactions are with some brokers, but in the share transactions, the purchase and sale are normally through some broker. Payment by account payee cheque has not been disputed. Payment on purchase and sale and payment received by account payee cheque was on two different dates. If the share broker, even after issue of summons, does not appear, for that reason, the claim of the assessee should not be denied, specially in cases when the existence of the broker is not in dispute nor the payment is in dispute. Merely because some broker failed to appear, the assessee should not be punished for the default of a broker and we are in full agreement with the Tribunal that on mere suspicion the claim of the assessee should not be denied. D) The Calcutta High Court in the case of Commissioner of Income Tax Versus Emerald Commercial Ltd. and Another 250 ITR 539 the Court held: The admitted facts in this case are that the details of purchase and sale of shares are furnished. The payment and receipt arc by account payee cheque. The identity of seller and purchaser is not in dispute. The disallowance is basically m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. In order to find out whether the transaction is genuine or ingenuine, it is neither the expedience or correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose. Mr. Khaitan had relied on the decisions in CIT v. Emerald Commercial Ltd. and Anr. where a Division Bench of this Court has held that non-production of share broker by the assessee did not disentitle the assessee from claiming loss in genuine transaction of shares. In this case the learned Tribunal having come to a finding on the basis of the materials that the transaction was genuine, sitting in reference, unless it is found perverse, this Court cannot intervene. In the said decision, it was further found that the findings of the ITO and the CIT(A) were based on presumption and not warranted by facts of the case as in the present case. Mr. Khaitan then relied on the decision in CIT v. Dhawan Investment Trading Co. Ltd. . In the said case the shares were transacted through noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced below: 3. The present appeals under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as the Act ] are directed against the common order dated 6th August, 2019 [hereinafter referred to as the Impugned Order ] passed in ITA No. 1069/DEL/2019 (for AY 2014-15), 2772/DEL/2019 (for AY 2015-16) and other appeals for the same AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the ITAT ]. However, the Impugned Order records the factual position only in respect of ITA No. 1069/DEL/2019. 4. The Revenue urges identical questions of law in all the afore-noted appeals with the only difference being the figures relating to the additions made under Section 68 read with Section 115BBE of the Act. Accordingly, the same are being decided by way of this common order. 5. It is not in dispute, as noted in the Impugned Order, that the factual background in all the three appeals is quite similar. However, for the sake of convenience, the facts in respect of ITA 125/2020 are being noted and discussed elaborately. Briefly stated, the Respondent-Assessee is an individual who has derived income from interest on loan, FDR, NSC and bank interest und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry. 24. The report from the Directorate Income Tax Investigation Wing, Kolkata is dated 27.04.2015 whereas the impugned sales transactions took place in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand. 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies that the monetary limits prescribed in the aforementioned circular shall not apply where an assessee is claiming bogus LTCG through penny stocks, and the appeals be heard on merits. 7. Mr. Zoheb Hossain, learned senior standing counsel for the revenue (Appellant herein), contends that the learned ITAT has completely erred in law in deleting the addition, and thus the Impugned Order suffers from perversity. He submits that there are certain germane factual errors, inasmuch as the learned ITAT has wrongly recorded that there was no independent enquiry conducted by the AO, when in fact the AO had issued notices to the companies in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Lkw/2019 dated 05.04.2022 2. Meenakshi Agarwal Others, ITA 234-235/Lkw/2020 dated 11/08/2021 3. Sabreen, ITA 298/Lkw/2019 dated 20/07/2021 4. Uma Shanker Dhandhania, ITA 475 681/ Lkw/2019 dated 16/02/2021 5. Sarita Gupta, ITA 503/Lkw/2019 dated 18/01/2021 6. Achal Gupta Others, ITA 501, 502, 505/Lkw/2019 dated 16/12/2020 4.9 We further find that Hon'ble Gujarat High Court in the case of Principal Commissioner of Income Tax vs. Parasben Kasturichand Kochar (Supra) dated 17.09.2020 in ITA No.204 has dismissed an appeal filed by the Revenue wherein under similar facts and circumstances the Assessing Officer and ld. CIT(A) had made the additions for scrip Mohan Poly Fiber Ltd. and which was deleted by the Tribunal and such deletion was confirmed by the Hon'ble High Court of Gujarat. The findings of Hon'ble Gujarat High Court are reproduced below: This appeal under section 260A of the Income-tax Act, 1961 (for short 'the Act 1961 ) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2- 2020 in the ITA No. 549/Ahd/2018 for the A.Y. 2014-15. The Revenue has p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under section 260- A of the Act, 1961. 5. In the result, this appeal fails and is hereby dismissed. 4.10 We further find that the SLP filed by the Revenue has also been dismissed by Hon'ble Supreme Court vide order dated 02.08.2021. 4.11 In the present cases, on the one hand the evidences filed by the assessees have not been rejected nor any adverse comments have been made, and rather the Assessing Officer, ignoring these evidences, relied on the statements of third party which has not been made available to the assessees for cross examination despite of the fact that assessees made specific requests to the Assessing Officer and learned CIT(A). The right to cross examination of the witnesses is an important right available to a party, the importance of which can never be underestimated specifically in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee for making addition without confronting the same to assessee and providing cross examination to the assessee. In view of the above facts and circumstances, the denial of Long Term Capital Gain in the hands of assessee is not justified. 4.14 The reliance placed by learned CIT(A) on certain case laws is also of no help to the Revenue as the case law of NDR Promoters (P) Ltd. and the NRA Iron Steel Pvt. Ltd., the issue was the addition u/s 68 of the Act where the Hon'ble courts have held that assessees had not discharged their onus u/s 68 whereas in the present cases the credits were on account of sale of shares which were credited to the bank account of assessees by a SEBI registered stock broker who had sold the shares on behalf of the assessees on electronic stock exchange which is supported by contact notes. 4.15 As regards the reliance placed by Learned CIT(A) on the case of Sanjay Bimalchand Jain decided by Hon'ble Bombay High Court is concerned, we find that the above said case law has been distinguished by Hon'ble I.T.A.T. Kolkata Bench in ITA No. 2243/Kol/2017 where the Hon'ble Tribunal vide para 31 held as under: 31. We note that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be safely concluded that the decision of Hon'ble Bombay High Court supra is factually distinguishable. 4.17 Similarly, as regards the reliance placed by learned CIT(A) on the order of Udit Kalra, we find that the above case law has been held to be distinguishable by Delhi Tribunal in the case of Karuna Garg in I.T.A. No.1069/Del/2019 vide order dated 06/08/2019 and further in the case of Swati Luthra vs. Income Tax Officer in I.T.A. No.6480/Del/2019 vide order dated 28/06/2019. The findings of the Tribunal in the case of Karuna Garg and Swati Luthra has been discussed by the Lucknow Bench of the Tribunal in the case of Meenakshi Agarwal Others in I.T.A. No.234 235/Lkw/2020 and for the sake of completeness, such findings are reproduced below: 7.2 As regards the reliance placed by Learned CIT(A) on the order of Udit Kalra (supra), we find that the above case law has been held to be distinguishable by Hon'ble Delhi Tribunal in the case of Karuna Garg in I.T.A. No.1069/Lkw/2019 vide order dated 06/08/2019 and further in the case of Swati Luthra vs. Income Tax Officer in I.T.A. No.6480/Lkw/2019 vide order dated 28/06/2019. In these two cases the Hon'ble T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent - A.O., CIT(A) and the ITAT have all consistently rendered adverse findings - what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meager resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company's shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed. 4.18 Thus the judgments relied on by learned CIT(A) are distinguishable on facts and rather the cases of the assessees are directly covered by the decision of Hon'ble Delhi High Court in the case of Smt. Krishna Devi Ors. in I.T.A. No.125 vide order dated 15/01/2021 which has been followed by Lucknow Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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