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TMI Blog2023 (3) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and that of the Co-ordinate Benches of the Tribunal, we have no hesitation in confirming the order passed by ld. CIT(A) and deleting the additions made by the Assessing Officer u/s. 68 and u/s. 69C of the Act. Thus the grounds raised by the Revenue are devoid of merits and the same are liable to be rejected. Unexplained cash credit u/s. 68 - A.Y. 2012-13 - As addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation letter from the lenders, Bank statements, Income Tax Return and statement of total income of the various lenders. Thus the assessee has discharged its initial onus namely identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Further the Assessing Officer has disbelieved the same, but has no occasion about the repayment of loans by the assessee in subsequent assessment years. Thus the creditworthiness of the lender is proved. It is not the case of the Assessing Officer that cash was deposited prior to giving loans to the assessee by the lender companies. It is a fact both the lender companies filed their respective Income Tax Return and assessed to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata; (c) Concept Securities Ltd., Surat and (d) Arya Equity (I) Pvt. Ltd., Mumbai. The assessee received gross sale consider ation of Rs.63,30,91,656/- from the above said four brokers by cheques. The sale contracts are made through stock exchange and are subject to Securities Transaction Tax [STT]. The assessee was not promoter of the company of which shares have been purchased. Thus the assessee had shown Long Term Capital Gain [LTCG] of Rs.60,87,74,856/= after claiming proportionate cost of shares as under: Name of the company Sale Price Purchase Price LTCG Sunrise Asian Ltd. (1215840) 63,30,91,656 2,43,16,800 60,87,74,856 2.2. The assessee filed its Return of Income for the Asst year 2015- 16 claiming the above LTCG as exempt under section 10[38] of the Act. The Return was selected for complete scrutiny assessment on the ground of suspicious sale transactions in shares [penny stocks] and claim of exemption of LTCG under section 10[38] of the Act. Therefore the Assessing Officer issued show cause notice based on the report of the Investigation Wing, Kolkata and statement of Shri Vipul Vidhur Bhatt, Director of Sunrise Asian Ltd, why not to deny the benefit of LTCG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.7,92,25,400/- 5 Payment made for purchase Date Cheque No. Amount 01/10/2011 JV 1,64,75,400/- 31/03/2012 657808 Ap 1,35,00,000/- 31/03/2012 657810 1,18,00,000/- 31/03/2012 657811 1,17,00,000/- 31/03/2012 657812 52,00,000/- 31/03/2012 657816 80,50,000/- 31/03/2012 657809 1,25,00,000/- Total 7,92,25,400/- 6 Broker & Address for purchase Direct purchase 7 Date of entry in demat account 31/12/2013 (A/c. No.00075678 with DJS Stock & Shares Ltd.) (As per page 4 of the assessment order) 8 Sale quantity 12,15,840 shares 9 Date of sales Direct dates in A.Y.2015-16 10 Amount of sales Rs.63,30,91,656/- 11 Amount received through By cheques 12 Broker and address for sale As per submission on record The perusal of information in table above indicates that the shares were purchased in the year 2011 & 2012 for an amount of Rs.7,92,25,400/- through cheque and the assessment year is 2012- 13 & 2013-14. Thereafter, the shares were dematerialized and credited to the account of appellant on 31/12/2013 for few months before they are sold on November 14 to March 15 through BOLT of recognized stock market. As per rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny stands proved by the order of amalgamation of Hon'ble Mumbai High Court as discussed hereinabove." Secondly, only 12,15,840/- shares have been sold out of the total 39,61,270 shares. The major portion of investment is still standing in balance sheet as on 31/03/2015. The investment of the appellant in the impugned shares is proved beyond doubt. Therefore, no question can be raised on the timeline of the transaction. 5.2. It is also noticed that the Assessing Officer has not brought on record to prove that any of the evidences of share transactions filed by the Appellant are false or untrue. The AO has basically gone on the contents of Investigation report. However, the appellant was not made available the copy of statement or the witness of department for cross-examination earlier and the relevant gist of the facts about cross-examination are reproduced here in below from appellate order dtd. 24/09/2020 for A.Y.2012-13 in the case of assessee, as under. "The appellant also submitted that the statement of Vipul Vidur Bhatt ought not to be relied unless the copy of statement is confronted and an opportunity to cross examine him was allowed. The appellant relies on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the department against the said decision has been dismissed by the Apex Court - CIT vs. Mukesh R. Marolia in SLP (Civil) No.20146/2012 (SC) dated 27.01.2014. When share purchase transactions were off-market transactions, the same cannot be held to be bogus even if any attempt is made to get details from stock exchanges. I hold that any evidence collected behind the back of appellant without considering the facts emerging during cross examination, the same cannot be used as evidence against the Appellant to make the impugned addition. Even in absence of the statement of cross examination, I find that the AO has not brought on record any other material collected through independent inquiries to show that the amount in question should be treated as undisclosed income of the Appellant when the Appellant furnished all the documents which were available to establish that the LTCG claimed by the Appellant was genuine. On the other hand, the shares are in the appellant's demat account from 31/12/2013 onwards which is credible and independent evidence, therefore, shares are held by the appellant for a period of more than 12 months from the date of cheque debited in its bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ria and Shri G.C. Patel for the purpose of taxing the amount in the hands of the assessee, despite specific request being made by the assessee for cross-examining both the said persons, the AO has not permitted the assessee to cross-examine them. In the circumstances, no reliance could be placed upon the statements of the said persons as the respondent assessee had no opportunity to cross-examine them. The statements made by the aforesaid persons would have no evidentiary value and as such, would not be admissible in evidence." (d) Decision of the Hon'ble Gujarat High Court in the case of CIT Vs. KantibhaiRevidas Patel Tax Appeal No. 910 of 2013 wherein it was held as under: "The Ld. A.O. had used this statement without allowing cross examinationof Vikas A. Shah which is against the principle of natural justice." (e) Hon'ble Supreme Court judgment in the case No. Civil appeal No.4228 of 2006 in the case of M/s. Andaman Timber Industries Vs. CCE, Kolkata dated 02.09.2015 has clear ratio to be followed by subordinate judicial officers. The operative portion of this un- published judgment is reproduced as under:- "As mentioned above, the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant findings of the Hon'ble Tribunal is as under: "17. We find that in the instant case, the addition is made us. 68 of the Act on the ground of unexplained cash credit. As per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account. We find that this initial onus was discharged in the instant case by the assessee by furnishing documents like MOA, AOA, share application & board resolution, Certificate of Incorporation, Certificate of Commencement, acknowledgements of ITRs, audited accounts etc. of concerned companies. Thereafter, in our view, the onus shifted upon the Department and it was for the Department to bring on record relevant material to show that why in spite of the above stated documents, the addition is still to be made in the hands of the assessee. In the instant case, the Department has endeavoured to discharge its burden on the basis of statements recorded by it of the persons mentioned above. 18. We find that the assessee requested for cross-objection of the maker of the statement. Further, we find that the Assessing Officer also made an attempt to allow the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court and the relevant findings is as under: "As recorded by the Tribunal, the Tribunal found that the initial burden was discharged by the assessee. In our view, once the Tribunal upon the appreciation of the material found and recorded the finding of the fact that the assessee had discharged initial burden, such a finding of fact would be outside the judicial scrutiny in the appeal before this Court unless the finding of fact is perverse to the record. It is an undisputed position that the statement of the person concerned which were recorded by the department, those persons were not made available for cross examination, may be for one reason or another inspite of the attempts made by the department. Therefore the Tribunal has rightly found that the statement of those person cannot be read against the assessee." In view of legal position as held by the Hon'ble ITAT and subsequently confirmed by the Hon'ble Gujarat High Court, it is a settled position that the Appellant should have been provided the opportunity to cross-examine the witness of the department. In instant case, the facts coming out of cross examination are not considered by the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Ld. CIT(A) may be set aside and that of the order of the Assessing Officer be restored to the above extent. (6) It is further prayed that the present appeal comprises the issue of organized tax evasion scam involving claim of bogus long term capital gain through penny stocks for which the CBDT vide Circular No. 23 of 2019 dated 06.09.2019 read with O.M. dated 16 September 2019 exempted such cases from monetary limit for filing appeal, hence, the appeal be decided on merits. Though the tax effect in this case is above the monetary limits prescribed by the Board. 5. The Ld. CIT-DR Shri A.P. Singh appearing for the Revenue submitted that the Directorate of Investigation, Kolkata carried out a countrywide investigation to unearth the bogus operators, who used to provide bogus entries to facilitate beneficiaries in claiming bogus capital gains. These operators used to transfer shares to the beneficiaries at a very nominal price through preferential allotment or offline sale to save Securities Transaction Tax (STT). The beneficiaries after holding the share for one year or more used to sell the same and claim LTCG u/s. 10(38) of the Act. The Ld. D.R. further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third party statements without providing cross-examination of third person were liable to be deleted. The ld. CIT(A) also followed the Hon'ble Supreme Court Judgment in the case of M/s. Andaman Timber Industries to delete the above additions. Further the ld. A.R. submitted a list of 13 cases of Co-ordinate Benches of the Tribunal namely Ahmedabad Bench, Jaipur Bench, Mumbai Bench and Indore Bench on sale of very same Sunrise Asian Ltd. shares wherein the Co-ordinate Bench have consistently deleted the additions made the Assessing Officer u/s. 68 of the Act as follows: 1) ITO Vs. Devyani Dharmendra Shah [ITA No. 576/ Ahd/2020] (Ahd Trib.) 2) Sita Devi Agarwal Vs. ITO [ITA No. 56/JP/2022] (Jaipur Trib.) 3) Ashok Agarwal Vs. ACIT [ITA no. 124/JP/2020] (Jaipur Trib.) 4) ITO VS. Liberal Realtors LLP [ITA no.449, 450/Mum/2021] (Mumbai Trib.) 5) Shri Shripal Raj Lodha Vs. DCIT [ITA no. 619/Mum/2020] (Mumbai Trib.) 6) Narayan Ramchandra Rathi V. ITO [ITA No. 4811/MUM/2018] (Mumbai Trib.) 7) Arun S. Tripathi v. PCIT [ITA No. 2560/MUM/2018] (Mumbai Trib.) 8) Anraj H. Shah (HUF) V. ITO [ITA No. 4514/MUM/2018] (Mumbai Trib.) 9) Anjana Sandeep Rathi V. ACIT [ITA No. 4369/MUM/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 to 364 of the Paper Book]. Similarly, the assessee also filed documentary evidences submitted before the Assessing Officer in respect of SAL of shares by producing the copy of the ledger account of the four share brokers, copy of the bank statement reflecting the amount received on sale of shares after making Securities Transaction Tax [at page no. 65 to 113 of the Paper Book]. The assessee also produced contract notes/bills issued by approved share brokers in respect of sale of shares [at Page nos. 114 to 216 of the Paper Book]. Thus the genuineness of investment in the shares of the assessee was substantiated by producing the above details by the assessee. Therefore the investment cannot be doubted as bogus investments made in penny stock. 7.1. In order to prove the purchase of shares, the assessee filed copy of the allotment letter, ledger account of Conart Tarders Ltd. physical share certificate, copy of the bank statement reflecting payments made for purchase of SAL shares. Similarly, for Sale of shares, the sale were being routed through demat account. Copy of the ledger account of four share brokers through whom sales were made. Copy of the bank statement reflecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged, admissions of the directors and brokers, human probability is being used as a vague and convenient medium for the department's conjectures. To draw an adverse inference without any admissible evidence on record, is bad in law. In the light of the discussions that have preceded and for the reasons alluded we are of the view that the addition made by the assessing officer and confirmed by the Ld. CIT(A) needs to be deleted. Accordingly, we delete the additions made by assessing officer in case of Smt. Muktaben N. Patel and Shri Nishant K. Patel in the assessment year 2014-15." 7.4. Similarly, the Jurisdictional High Court in the case of PCIT Vs. Parasben Kasturchand Kochar (cited supra) held as follows: ".. 2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:- "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 Taxman 403). Having carefully perused the same, it is noted that peculiar facts were involved before the Hon'ble Court wherein eighty-nine different appeals of different assessee's were disposed off by the Tribunal in a single consolidated order without taking cognizance of the specific facts involved in each case (appeals preferred by different assessee's). The relevant observations made by the Hon'ble High Court is as follows: "40. Before we examine the contentions, we are tempted to point out that the exercise done by the tribunal was a bit perfunctory. There is absolutely no discussion of the factual position in any of the 89 appeals, the exception is in paragraph 4 with regard to the certain facts of the assessees case (SwatiBajaj). We are not very appreciative of the manner in which the bunch of appeals have been disposed of. The cardinal principles which courts and tribunal have followed consistently is that each assessment year is an individual unit and unless and until it is shown that there are distinguishing feature in a particular assessment year, the decision taken for the earlier years are to be followed to ensure consistency. While doing so the Courts/Tribunals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were through banking channels. While making the additions, the ld. Assessing Officer has not brought any material how the assessee has brought its own unaccounted money for the acquisition of the shares specially when the purchase of shares was not doubted and shares have been sold on Stock Exchange. Further, the ld. Assessing Officer has not brought on record statement of any persons through whom assessee's own unaccounted money has been brought in. As stated above, the appellant has held the shares for over 3 years and it would be incorrect to treat sale of shares as bogus merely on the basis of suspicion and on account of fact that a substantial quantum of capital gains has been made by the assessee. In the present case, no material has been brought on record to suggest that purchase and sale of shares were bogus. The ld. Assessing Officer has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. In the present case, despite the assessee's specific request, no opportunity of cross examination was provided to the assessee on the basis of whose statements r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. (iv) The Delhi ITAT in the case of Suresh Kumar Agarwal vs. ACIT, ITA No 8703/Del/2019 held that the assessee has produced contract notes, demat statements etc & discharged the onus of proving that he bought & sold the shares. The AO has only relied upon the report of the investigation wing alleging the transaction to be bogus. The ITAT held that the AO ought to have examined a number of issues (which are enumerated in the order) and shown that the transaction is bogus. The capital gains are genuine and exempt from tax. (v) The Mumbai ITAT in the case of Vijayrattan Balkrishan Mittal vs. DCIT, ITA No.3311/Mum/2019 held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im bogus LTCG. As pointed out by the Ld. counsel, the assessee was not given an opportunity to cross examine the witnesses whose statements were relied upon and on the basis of their statements it was concluded that the transaction in question was a part of penny stock scam. So, in view of the cases discussed in the foregoing paras, particularly the ratio laid down by the Hon'ble Supreme Court in the case of M/s Andaman Timber Industries (supra), we are of the considered view that the Ld. CIT (A) has wrongly confirmed the assessment order passed by the AO in violation of the principles of natural justice. Hence, the impugned order passed by the Ld CIT (A) suffers from legal infirmity. We, therefore, allow the sole ground of appeal of the assessee and set aside the impugned order passed by the Ld. CIT (A). Accordingly, we direct the AO to allow the claim of the assessee." 6. The ld. Departmental Representative has failed to controvert the findings of Tribunal in the case of Shri Narayan R. Rathi whose case is on the same pedestal with identical set of facts. In fact a perusal of the assessment order in the case of assesse reveal that the Assessing Officer in para 8.3 has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - received from M/s. Dolex Commercial Pvt. Ltd. and Accute Consultancy Pvt. Ltd. based on certain information received from Investigation Wing. During the reassessment proceedings, the assessee filed confirmation from loan creditors, bank statement reflecting the loan amount received in cheque and debit note, balance sheet, Profit and Loss account of the lenders, Income Tax Returns of the lenders, copy of the confirmation and bank statement as and when the payments were made in subsequent years were furnished by the assessee before the Assessing Officer. 10.1. During the reassessment proceedings, the Assessing Officer issued summons u/s. 133(6) to Dolex Commercial Pvt. Ltd. and Accute Consultancy Ltd. As per AO's version, they have not replied to the notices. Therefore the Assessing Officer held that the assessee was not able to prove the genuineness, creditworthiness of the unsecured loans and added as unexplained cash credit u/s. 68 of the Act and demanded tax thereon. 11. Aggrieved against the reassessment order, the assessee filed an appeal before Ld. CIT(A) The ld. CIT(A) deleted the additions made by the Assessing Officer vide his detailed appellate order which reads as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding non-compliance of the said notice u/s. 133 (6) of the Act is incorrect. The appellant explained that, both the companies had replied to the notice of 133 (6) of the Act and filed the details called for and had confirmed the transactions. Assuming but not admitting, in cases where the notice u/s. 133 (6) of the Act was served but the parties concerned had not replied, that is not a default of the assessee company and, therefore, no addition ought to be made merely because the lender companies did not reply to the notice u/s. 133 (6) of the Act. The appellant further explained that, in the old provisions of section 68 of the Act, they were not required to be proved the source of source. The appellant relied on the decision of Hon'ble Gujarat High Court in the case of DCIT Vis. Rohini Builders (2002) 256 ITR 360 (Guj.).The appellant further explained that the Assessing Officer did not make any inquiry with the Assessing Officer of the depositor companies. The appellant explained that, in such circumstances, the AO ought to have verified with the file of depositor companies as held by the Hon'ble Supreme Court in the case of CIT Vis. Orissa Corporation (P) Ltd (1986) 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record cannot be ignored. In view of facts of the case and the ratio laid down by case laws (Supra), the addition made by the AO of Rs. 7,92,25,400/- u/s. 68 of the I. T. Act, 1961 is hereby deleted. The concerned ground of appeal is accordingly allowed." 13. Aggrieved against this appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: (1) The Ld.CIT(A) has erred in law and on facts in deleting the addition u/s.68 of the I.T. Act amounting to Rs.7,92,25,400/- being loan received from Dolex Commercial (P) Ltd, and Acute Consultancy (P) Ltd. as unexplained cash credits despite the fact that the creditworthiness of the creditor was not proved. (2) The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the assessee had taken bogus accommodation entries in the form of unsecured loans duly entered in the books of account so as to evade or reduce the tax liability. (3) On the facts and circumstances, the Ld. CIT(A) ought to have upheld the order u/s. l43(3) of the I.T. Act passed by the Assessing Officer. (4) It is therefore prayed that the order of the Ld. CIT(A) may be set aside and that of the order of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the very same day on 15.12.2017 has not taken note of the reply filed by Acute Consultancy (P) Ltd. and treated the transactions as bogus and made addition u/s. 68 of the Act. 15.2. Similarly, the Dolex Commercial (P) Ltd. vide its reply dated 15.12.2017 replied to the Assessing Officer enclosed the loan confirmation, copy of the ledger account, copy of the bank statements and copy of the Income Tax Returns for A.Y. 2012-13. Therefore the above additions made by the Assessing Officer is not sustainable in law and Ld. CIT(A) after going through the entire records deleted the above additions which does not require any interference. 15.3. In support of the same, the assessee relied upon the following case laws: 1. PCIT Vs. Ambe Tradecorp (P.) Ltd. [2022] 145 taxmann.com 27 (Gujarat); order dated 05.07.2022 2. CIT, Rajkot-1 Vs. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat); order dated 02.12.2013 3. JCIT(OSD) Vs. M/s. Shal Imar Housing & Finance Ltd. [I.T.A. No. 4079/Mum/2019; Order dated 01.06.2021] 4. Manibhadra Securities Services P. Ltd. Vs. ITO [ITA No.2507 and 1302/Ahd/2018; order dated 24.08.2022] 5. Shree Samruddhi Overseas Trading Co. Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee, out of which Rs.15 lakh was repaid - Therefore, an amount of Rs.1.45 crore remained outstanding to be paid to 'IA' - Balance loan amount was repaid by assessee in immediately next financial year - Whether when Department had accepted same, addition made by Assessing Officer was to be deleted - Held, yes [Para 6] [In favour of assessee] 16.2. In the case of CIT Vs. Shri Mahavir Crimpers, [2018] 95 taxmann.com 323 (Guj.) wherein it has been held as follows: "5. We have heard both the parties. There is no dispute so far as identity of the creditor party M/s. Raj Capital & Finance Pvt. Ltd. is concerned. There is further no quarrel that the Assessing Officer does not dispute the fact that the assessee has not availed any cash loan from the said entity. His only case is that the assessee has not been able to prove source along with genuineness and creditworthiness of the above stated entity. It emanates from above extracted portion that the assessee has filed all relevant details along with assessment records of the said entity explaining source of the loans to the above entity's balance sheet indicating sufficient reserves, surplus and share premium as followed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing Officer is satisfied with the transaction. We, thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors. The position, however, would have been different if those creditors were not income tax assessees or if they had not disclosed those transactions in their income tax returns or if s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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