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TMI Blog2021 (1) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to deduct TDS to which he agreed but upheld the addition by holding that no evidence was produced in support of commission paid. In this respect that assessee had furnished the information relating to persons to whom commission was paid where the name of one person including his address is mentioned and in respect of second person only name of the person is mentioned. Therefore, we accept the request of Learned AR for another opportunity to file the evidence of commission before A.O. and in view of that the second grievance of assessee is allowed for statistical purposes. - ITA No. 511/Lkw/2018 - - - Dated:- 1-1-2021 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Shri P. K. Kapoor, C. A. For the Respondent : Shri Harish Gijwani, D.R. ORDER PER T. S. KAPOOR, A.M. This is an appeal filed by the assessee against the order of learned CIT(A)-I, Lucknow dated 20/03/2018 pertaining to assessment year 20142015. 2. The assessee has taken various grounds of appeal both on legal aspects as well as on merits of the case. Learned counsel for the assessee, at the outset, invited our attention to the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) while upholding the action of the Assessing Officer has further relied on the judgment of Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain vs. Principal CIT which in fact do not apply to the facts and circumstances of the present case as in that case the assessee had purchased the shares in cash and therein the broker, through whom the shares were sold, did not respond and that is why the Hon'ble court had held the income from such shares to be business income. 3.1. Learned counsel submitted that the above case law has been distinguished by Hon'ble Tribunal in a number of cases and specifically the case law of Pawan Kumar Todi and that of Geeta Khare were referred. Learned counsel for the assessee submitted that there is no dispute about the fact that the assessee had purchased shares through banking channels and had received the payment through banking channels and the shares were sold through SEBI registered stock brokers. He submitted that the detailed submissions were filed before learned CIT(A) in which the pointwise objections of the Assessing Officer were replied and in this respect our attention was invited to pages 1 to 33 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made the sole basis of addition) to the assessee and not providing to the assessee the opportunity of cross examining the person on whose information the addition has been made is in complete violation of principles of natural justice and consequently the addition of Rs. 78,57,721/- is liable to be deleted . In view of the above facts and the additional grounds taken it is submitted that the following case laws relied upon by the Department may be kindly given due consideration before finalizing the case. Madhu V Jhaver, Chennai Vs. DCIT, Non-Corporate Circle 91 (ITA No. 2966/Chny/2018). Smt.Reshma Gulab Jain, Bengaluru Vs. ITO, Ward- 5 (3)(2) Bengaluru (ITA No. 1057/Bang/2018). It is submitted that in both the above cases, the Ld. Benches of Tribunal have restored back the issue of exemption in this appeal back to the file of AO for re-adjudication holding that the assessee has not been provided the opportunity for cross examination to substantiate its case which is also the ground taken by Ld. AR in the present case. It is respectfully submitted that the above case may also be restored back to the file of the AO for re-adjudication after granting the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries was thoroughly examined by investigation wing of Department and treated it as bogus. The A.O. also examined volume transactions but could not find any of the- scrip in the.name of M/s SRK Industries in the portfolio of any of the recognized mutual fund in the country , After study of almost all the shares with Mutual, funds as well in stock exchange prove and show that the scrips under name Style as SRK Industries is termed as penny stock only which are not listed at all at recognized stock exchange of the country. SEBI has also investigated and- analyzed the price and volume in these scrips. SEBI noted that none of 'these bogus companies or corporate action which could result into such sharp rise in price of these scrips i.e. the price rise was not supported by fundamental or any other genuine factors. Calcutta stock Exchange Ltd. as a broker had traded in penny stock named SRK Industries Ltd. A.O. considered alleged capital gain of Rs. 78,57/721/- claimed as exempt u/s 10(38) an accommodation entry and disallowed- capital gain of Rs. 78,57,721/- as unexplained investment u/s 69B of the I.T Act. 1.2 During appellate proceedings, appellant submitted that she purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le consideration was fully supported with contact notes. He did not raise any objections to all such evidences. The only reason to uphold the addition was that the investigation wing of the Department had held the script SRK Industries as bogus. In this respect we find that Hon'ble I.T.A.T. Kolkata Bench in the case of Aditya Vikram Sureka HUF (supra) has considered gain from scrip SRK Industries Ltd. and have allowed relief to the assessee. Similarly, we find that SMC Kolkata Bench in the case of Shreyans Chopra (supra) has allowed relief to the assessee on the same scrip. Similarly the capital gain earned from this scrip of SRK Industries Ltd. has been held to be genuine in the following cases: 1. I.T.A.T. Kolkata B bench in the case of Pawan Kumar Todi in I.T.A. No. 2243/Kol/2017. 2. I.T.A.T. Kolkata SMC Bench in the case of Vikram Sureka HUF in ITA No. 303. 3. I.T.A.T. Kolkata SMC Bench in the case of Sudarshan Jalon HUF in ITA No. 1664/Kok/2018. 6.2 We further find that Hon'ble Mumbai Bench in the case of Geeta Khare (supra)has allowed relief to the assessee in the same scrip. The findings of the Hon'ble Tribunal in the case of Geeta Khare are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned from entry operators were even put to the assessee by the ld AO. 7.1. On analysis of price movements of shares of SRK Industries Ltd , we find that as per the data relied upon by the ld AO in his assessment order, the total number of shares traded in respect of this scrip in the entire market from Feb 2012 ( i.e the time of purchase of shares by the assessee herein) to Jan 2014 (i.e the time of sale of shares by the assessee herein) was 40254365 shares. Whereas the same transactions from Feb 2014 to Dec 2015 were 82818409 shares. This will be clear from the following table:- Upto January 2014 Jan 14 to Dec 15 No. of shares traded No. of shares traded 100 4778156 500 20544716 200 1200905 100 2982153 300 558044 100 48031 35 25842 62156 188670 528 1755017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 31st December 2018 in the format prescribed by SEBI listing norms and the stock exchange. From the said quarterly financials, we find that SRK Industries Ltd revenue from operations for the quarter ended Dec 2018 was Rs 30.61 crores which clearly shows that it is an operational company and not merely a company having no value as alleged by the revenue before us to make it fall under the category of penny stock . Moreover, the status of this company M/s SRK Industries Ltd in the website of Ministry of Corporate Affairs as on 26.2.2019 is still shown under the category of Active . In the said status report of website of ministry of corporate affairs, we find that the fixed assets and current assets of SRK Industries Ltd were subjected to some charge or encumbrance with certain loan creditors and the said charge on assets were also duly cleared by SRK Industries Ltd subsequently. This is evident from the status report mentioned therein as closed . These facts go to prove beyond doubt that SRK Industries Ltd is an operational company even as on 26.2.2019. 7.3 We find that the ld AO sought to identify the alleged purchasers of shares from the assessee and issued notices u/s 133( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iends. The assessee had also categorically replied in response to Question No. 13 that the investment in shares of SRK Industries Ltd (Transcend Commerce Ltd prior to merger) was made based on the advice of her friend Shri Shivajirao Jondhale. The assessee in reply to Question No. 17 had also stated that she did not make any enquiry about the financial condition of the shares of SRK Industries Ltd but she was told by Shri Shivajirao Jondhale that the value of the shares would get appreciated. This was the sole basis of the assessee making the investment in shares of Transcend Commerce Ltd (Later merged with SRK Industries Ltd) which cannot be doubted at all. In our considered opinion, it cannot be said that all the investment decisions of the assessee would be prudent and would be done only after analyzing the entire fundamentals and financials of the investee company. It is in everybody s knowledge, that an investor would try to take calculated risks by investing his money on an unknown scrip based on certain information from friends, relatives, or in some stock market related websites and take a chance. Since the scrip purchased by the assessee was showing considerable growth fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ...... .. Appellant 3A, Mangoe Lane Kolkata 700 001 [PAN : AAAFZ 1337 P] Assistant Commissioner of Income Tax, Circle-36, Kolkata.........................................................Respondent Appearances by: Shri Miraj D. Shah A/R, appeared on behalf of the assessee. Shri Satyajit Mandal, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : June 28th, 2018 Date of pronouncing the order : July 25th, 2018 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-10, Kolkata, (hereinafter the Ld. CIT(A)‟), dt. 15/02/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the Act‟), relating to Assessment Year 2014-15. 2. The assessee is an individual and derives income from business, professional capital gains and other sources. The facts of the case and the issues involved in this appeal are brought out by the Assessing Officer at paragraphs 3 4 of the assessment order, which is extracted for ready reference:- 3. Brief facts of the case: The assessee has filed his/her return showing income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. In course of the assessment, the assessee was asked to furnish the details of such share transactions. 3. The Assessing Officer in his detailed order discussed the modus operandi as well as the other evidences available with him and, thereafter, at para 6 7, concluded as follows:- 6. Thus in view of the elaborate discussion made above, I hereby hold the amount of Rs.5,57,658/- introduced/credited by the assessee out of these purported share sale receipts during the Financial Year 2013-14 (AY 2014- 15) in his capital account as his income being unexplained cash credit u/s 68 of the Income Tax Act (taxable at the rate of 30% as provided u/s 115BBE). Therefore, an amount of Rs.5,57,658/- is added back with the total income of the assessee u/s 68 of the I.T. Act as unexplained cash credit during the relevant year. [Addition: Rs.5,57,658/-] 7. Under the circumstances, Rs.5,50,158/- is treated as bogus and also a sum of Rs.27,508/- being 5% of Rs.5,50,158/- is added as undisclosed expenditure within the meaning of section 69C of the Income-tax Act, 1961. [Addition of Rs.27,508/-] 4. On appeal, the ld. First Appellate Authority, has classified these transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation‟s office by way of statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the assessing officer that some persons may have misused the script for the purpose of collusive transaction. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt could have earned a large amount in the sum of Rs.2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each . The observations of the Hon'ble Apex Court are equally applicable to the case of the assessee. In our view the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful crossexamination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich would not be in possession of the Appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to crossexamine those dealers and what extraction the Appellant wanted from them. 6. 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. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to 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 17-3-2005 [2005 (187) E.L.T. A33 (S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JAIPUR ITAT in the case of VIVEK AGARWAL [ITA No. 292/JP/2017] order dated 06.04.2018 held as under vide Page 9 Para 3: We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account. c) The Hon'ble Punjab and Haryana High Court in the case of PREM PAL GANDHI [ITA95-2017 (O M)] dated 18.01.2018 at vide Page 3 Para 4 held as under: .. The Assessing Officer in both the cases added the appreciation to the assessee‟s‟ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee‟s‟ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment, it held: We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT (A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT (A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition. e) The BENCH D OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: .. We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee‟s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee‟s claim of exemption under section 10(38) of the Act. g) The BENCH H OF MUMBAI ITAT in the case of ARVIND KUMAR JAIN HUF [ITA No.4682/Mum/2014] order dated 18.09.2017 held as under vide Page 6 Para 8: We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank. j) The Hon‟ble Supreme Court in the case of PCIT vs. Teju Rohitkumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon‟ble Gujrat High Court as under: It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises. 20. Applying the proposition of law laid down in the above judgments to the facts of this case we are bound to consider and rely on the evidence produced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares were sold did not respond to AO s letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee ; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash ; (iii) The address of both the companies were interestingly the same ; (iv) The authorized signatory of both the companies were also the same person ; (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the decision of Hon ble Bombay High Court supra is factually distinguishable. 7.9. We find that the Hon ble Jurisdictional High Court in the case of CIT vs Mukesh Ratilal Marolia in ITA No. 456 of 2007 dated 7.9.2011 had held as under:- 5. On further appeal, the ITAT by the impugned order allowed the claim of the assessee by recording that the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground raised by the assessee is allowed. 8. Both the parties before us agreed that the facts in ITA No. 694/Mum/2018 in the case of Shri Shashikant B Mhatre (HUF) are identical to that of Smt Geeta Khare supra except with variance in figures and name of the scrip that was dealt with. Both the parties before us stated that identical reasoning was given by both the lower authorities for denying the claim of exemption u/s 10(38) of the Act to the assessee. The decision rendered in the case of Smt Geeta Khare would apply with equal force for this assessee also and accordingly, the ground raised by the assessee in ITA No. 694/Mum/2018 is allowed. 9. In the result, both the appeals of the assessee are allowed. 8. Similar are the findings in other case laws relied upon by the assessee. Here it is important to reproduce the findings of Hon'ble Tribunal in the case of pawan Kumar Todi vs. Income Tax Officer in ITA No. 2243/Kol/2017 wherein the Hon'ble Tribunal while allowing appeal of the assessee in the same script M/s SRK Industries Ltd. has further relied on the case law in ITA No. 2477/Kol/2007 in the case of Amrita Baid wherein again the capital gain on the script S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalization, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. Some of the cases were detailed finding which are listed below :- SI. No. ITA Nos. Name of the Assessee Date of order /judgment I 1236-1237/K/17 ITAT-Kolkata Manish Kumar Bald Ors Vs. ACIT 18.08.2017 2 443/Kol/2017 Kiran Kothari (HUF) vs ITO 15. 11.2017 3 22 of 2009 Calcutta High Court CIT, Kolkata-III vs Bhagwati Prasad Agarwal 29.04.2009 4 456 of 2007 Bombay High Court CIT vs Shri Mukhesh Ratilal Marolia 07.09.2011 5 18 of 2017 Punjab and Haryana High Court Pr. C.I.T. (Central) Ludhiana vs Sh.Hitesh Gandhi, 16.02.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the Id. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 8.1 The above case law of Hon'ble Bombay High Court has further been distinguished by Mumbai Bench of the Tribunal in the case of Geeta Khare in ITA No. 2243/Kol/2017 where the Hon'ble Tribunal has held as under: 7.8 It would be pertinent to address the case law relied upon by the ld DR before us on the decision of Hon'ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr. CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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