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TMI Blog2023 (12) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... ng taken on the ground that Higher Appellate Authority may concur or not with the view of the ITAT on the legal ground and in that situation, adjudication of the issue on merit would be required. But now the Hon ble Supreme Court has silenced the controversy in the case of PCIT vs. Abhisar Buildwell Pvt. Limited [ 2023 (4) TMI 1056 - SUPREME COURT] and there is no scope of disagreement on the scope of section 153A in further appeal unless Hon ble Supreme Court took a different view later on. In five scrutiny cases of the sale of shares, i.e. TFCIL, gain earned by the assessee was accepted as a genuine by the Department itself. Out of these five cases, two are in the re-assessment u/s 147 and these assessment orders have been framed after more than one year of the search. Therefore, Department was not doubting the genuineness of the transactions. It is also obsesrved that apart from Hon ble Calcutta High Court in the case of Swati Bajaj [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT] the other Hon ble High Courts have accepted the claim of these alleged bogus long-term capital gains and assessee drew our attention towards the decision of Smt. Pushpa Malpani [ 2010 (11) TMI 799 - RAJA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity vide its order dated 23.03.2023. On receipt of notices in these Revenue s appeals, the assessees have filed Cross Objections in all these appeals respectively. 2. A perusal of the record would suggest that in some of the cases, Department has not filed copy of the assessment order and the Registry has issued defect memo. However, during the course of hearing, it was submitted before us that the assessments in verbatim has been reproduced by the ld. CIT(Appeals) in the impugned order of each appeal, which is running roughly in 565 pages. For example, in the case of Bajrang Lal Bamalwa for A.Y. 2012-13, ITA No. 51/GAU/2023, i.e. the first appeal on the Board. The assessment order is available from pages no. 6 to 21 of the impugned order of the ld. CIT(Appeals). Similarly it is available in all these impugned orders. Apart from the above, ld. Counsel for the assessee has placed on record the copy of the assessment order in the paper book filed by the assessees in each appeal, therefore, record for the purpose of deciding the appeals is construed as complete. 3. The grounds of appeal taken by the Revenue are verbatim except variation of the quantum. Therefore, for the facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139(1) and in response to the notice received under section 153A. Such details read as under:- Copies of original returns filed u/s 139, notices issued u/s 153A and returns filed in response to notices issued u/s 153A of the above Assessees are enclosed at in respective cases. 8. There is no dispute that all these assessees have filed returns before the search carried out upon them. Therefore, we deem it appropriate to take note of the details compiled by the assessees demonstrating the status of original returns filed under section 139(1), which could show whether any notice under section 143(2) was issued for selecting them for scrutiny assessments or not. Such details have been put by the assessees on page no. 25 of written submissions, which read as under:- Thus, as on the date of the search (i.e. on 20.11.2017), the time limit to issue a notice u/s 143(2) of the Act for and in respect of 15 cases tabulated above had already expired and in the case of Sri Bajarang Lal Bamalwa for A.Y. 2012-13, the assessment had already been completed u/s 143(3). Thus, the assessment proceedings for the impugned assessment years in all the 16 cases herein were non-pending/co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,74,95,786 PB-10 11. VINAY BAMALWA 2012-13 Twenty First Century India Ltd. 3,94,75,511 PB-11 12. RAVI BAMALWA 2012-13 Twenty First Century India Ltd. 3,91,91,171 PB-12 13. MADAN LAL BAMALWA 2012-13 Twenty First Century India Ltd. 2,38,20,516 PB-13 14. SHEETAL BAMALWA 2013-14 Twenty First Century India Ltd. 75,89,343 PB-14 15. PRAMOD KUMAR BAMALWA 2013-14 Twenty First Century India Ltd. 3,93,36,039 PB-15 16. VINOD BAMALWA 2013-14 Twenty First Century India Ltd. 2,39,89,732 PB-16 TOTAL ADDITION 64,48,50,444 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. He observed that DIT, Kolkata had investigated transactions in 84 penny stock companies quoted on BSE and examined a large number of brokers, directors of companies, promoters of penny stock companies, entry operators etc. and carried out a country-wide investigation to unearth the organised racket or any operators, who generate bogus entries of long-term capital gains, which is exempt from tax. The modus operandi by the operators was to make the beneficiary by shares of a pre-determined penny stock company controlled by them or their group. These shares are transferred to the beneficiary at a very marginal price mostly online by way of preferential allotment or off-line sales. The beneficiaries hold the shares for one year or more, the statutory period for claiming long-term capital gain, which is exempt under section 10(38) of the Income Tax Act. In the meantime, the operators regulate the price of the stock and gradually rise its price many times than its actual price. Often it rigged to as many as 500 to 1000 times of the purchase price. Thereafter ld. Assessing Officer has observed that how DIT Investigation was required to share the information of such companies between di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, trail from cash deposit account to the beneficiaries account had been unearthed. (iv) That several individuals who had taken bogus entries of LTCG between 2010-2014 had been identified. The results of the enquiry had also been shared with SEBI, which after investigation, had found the allegations to be correct in several cases. Top 25 groups had been investigated and many of them had accepted having taken entries for a commission and surrendered substantial amounts voluntarily. SEBI had taken appropriate actions by passing of interim direction, suspension of trading, reducing price band etc. in certain cases. (v) That an 11-member Special Investigation Team (SIT) had also pointed out the above-mentioned modus operandi in the Third SIT report on Black Money and had issued recommendations on Misuse of exemption of Long-Term Capital Gains tax for money laundering . (vi) That the impugned scrip, Twenty First Century India Ltd. (TFCIL) was listed at CSE. The said company was controlled managed by entry operators - Sri Anil Kumar Khemka Rajendra Bubna. Four companies, also managed by the said persons were amalgamated into M/s. TFCIL for the purpose of booking pre- arrang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4000 shares of the company Highland Dealcom Pvt. Ltd. (HDPL) at Rs. 400/- per share by account payee cheque on 30.07.2009. Face value of shares was Rs. 100/- per share. The shares were sent to the said company for transfer in his name. After the transfer, the shares were sent to his demat a/c for credit. HDPL was amalgamated with TFCIL by order of the Hon ble Calcutta High Court dated 23.10.2010. By virtue of the scheme of amalgamation, the Assessee was allotted on 23.12.2010, 38 shares of TFCIL against 1 share of HDPL and credited to his demat a/c. (ii) The Assessee laid special emphasis on the fact that the price of shares of TFCIL as quoted on the stock exchange was around Rs. 245/- per share in 2005. The movement of quoted price of TFCIL as per the quotation of CSE was enclosed. (iii) That the shares of TFCIL were held by the Assessee for more than one year. During F.Y 2011-12 relevant to A.Y. 2012-13, the shares were sold through SEBI registered share broker over the CSE at the market rates prevailing on the exchange on respective dates. Securities Transaction Tax was paid on the sale of shares. The net consideration of Rs. 4,92,18,448.41 for sale of shares was received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors of TFCIL. He had invested in shares of many companies but did not know their directors. He was not required to know them. The Assessee requested for an opportunity of cross examination of the persons who had provided any evidence or given any statements against him. (c) That he had regularly transacted in shares in recognized stock exchange. The transactions of sale and purchase of shares had been carried out through terminals where nobody was aware of who was purchasing or selling shares. Thus, the A.O s evidence that the companies who had purchased the shares of TFCIL were paper companies was not sustainable. The Assessee had no connection/control over the purchaser of shares once the order was placed. (d) That he did not know any person by the name of Devesh Upadhyay or Anil Khemka. He requested for an opportunity of cross examining them if they had provided any evidence or given any statement against him. (e) The Assessee emphasized on the fact that in course of search u/s 132 of the Act at his business and residential premises on 20.11.2017, no incriminating document relating to share transactions had been found/seized, which strongly indicated that he was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or scrutinising their returns. Therefore, in their case, the assessments would be construed as completed it. Those completed assessments could be tinkered with for assessing the income under section 153A only, if during the course of search, some incriminating material was discovered and seized. In other words, the addition in an assessment under section 153A could be made with the help of incriminating material found during the course of search and in case, there is no incriminating material, then, no addition can be made. Certain individual cases namely Vishal Bamalwa, it was contended that no search was conducted upon the assessee. The assessee has filed written submission, which has been reproduced in the impugned order. The ld. CIT(Appeals) has called for a remand report and ld. Assessing Officer has also submitted the remand report. The ld. CIT(Appeals) devoted little extra energy in deleting all these additions. His order is running into 565 pages in ITA No. 51/GAU/2023, which is not an advisable step at his end because the ld. 1 st Appellate Authority has reproduced the complete judgments instead of ratio laid down in them and unnecessarily made his order extra-bulky from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of decisions propounded the scope of section 153A and how an assessment is to be made in a search case. He observed that since there was no incriminating material and in host of judgments at the end of the Hon ble High Courts, which held that in case, no incriminating material was found and seized, then assessment which are unabated, no addition can be made under section 153A of the Income Tax Act. Accordingly ld. CIT(Appeals) has deleted the additions. The ld. 1 st Appellate Authority has reproduced in details all the evidences possessed by the ld. Assessing Officer as well as important case laws relied upon before him. 18. Before us, ld. D.R. was unable to controvert the finding of the ld. CIT(Appeals). He simply relied upon the assessment orders in all these years. 19. On the other hand, ld. Counsel for the assessee has filed a detailed written submission. Similar submission was filed before the ld. CIT(Appeals), which has been reproduced therein. He divided his arguments between different compartments. In his first fold of submission, he apprised the Bench about the scope of section 153A and submitted that after the decision of the Hon ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproach at the end of the ld. Assessing Officer to take a decision on the basis of pick and choose. He should have taken a consistent approach in the case of assessee for treating these shares as genuine. 23. In his next fold of submission, he pointed out that ld. Assessing Officer has made reference to the statement of Shri Pramod Kumar Bamalwa recorded under section 132(4) of the Income Tax Act. The questions and tabulated details confronted to Shri Pramod Kumar Bamalwa has been reproduced by the ld. 1 st Appellate Authority on page no. 129 of the impugned order. In this table, ld. 1 st Appellate Authority has observed that aggregate long-term capital gain earned by Shri Pramod Kumar Bamalwa and others belonging to the Nemichand Bamalwa Sons Group were quantified to Rs. 97,66,74,038/-, whereas during the course of assessment, bogus capital gain claim has been quantified to Rs. 64,48,50,444/-. Thus the Department was not having complete list even for confronting any of the assessees. He pointed out that though no specific disclosure was made even in the statement under section 132, but whatever has been taken under a misconception by confronting huge details tabulated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or under mistaken impression of facts or of law. The assessees, whose statement was taken under section 132(4) of the Income Tax Act by the Department, have retracted their statements by bringing the correct fact to the notice of the Revenue. For buttressing this proposition, he relied upon the judgment of the Hon ble Supreme Court in the case of Sri Krishna Vs. Kurukshetra University, AIR 1976 SC 376, Vinod Solanki Vs. UOI Civil Appeal No. 7407 of 2008, S. Khadar Khan (2008) 300 ITR 157, Ratan Corporation 196 CTR 536 (Guj). 26. The statement of the alleged entry operators were recorded from the back of the assessee. These are the persons namely Ashok Kayan Bikash Sureka. They have also retracted their statements and filed their affidavits. On the strength of such details compiled in his written submission, he submitted that the order of the ld. CIT(Appeals) on the first fold is to be upheld. 27. We have duly considered the rival contentions and gone through the record carefully. Section 153A including the amendment effected by Finance Act, 2017 whereby 4 th proviso has been included in the Statute Book has a direct bearing on the controversies. Therefore, we take note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1 st day of April, 2017. EXPLANATION 1.-For the purposes of this sub-section, the expression relevant assessment year shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. EXPLANATION 2.-For the purposes of the fourth proviso, asset shall include im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 132A shall stand abate. It was further submitted that the second proviso also provides that if on the date of initiation of search or requisition under section 132 or under section 132A of the Act, any assessment/reassessment proceedings relating any assessment year falling within the period of six assessment years is pending, then the pending proceeding shall stand abated and fresh assessment of the same can be done under section 153A of the Act. It is also emphasized that if no proceeding was pending on the date of the search, then, the proceeding for that year stand concluded and such search shall have no impact on the concluded proceeding. Thus this proviso was enacted specifically to avoid two parallel proceeding of assessment of a particular year of the same person, i.e. one regular assessment proceeding under section 143(3) /147 of the Income Tax Act, vis-a-vis another assessment proceeding under section 153A of the Act. The ld. Counsel for the assessee further explained the meaning of expression abatement . This expression would mean that something is to be eliminated or suspended, defeat, nullify of pending action. Thus a plain reading of second proviso would suggest t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under Section 153 A(l) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such A.Y.s will have to be computed by the AOs as afresh exercise. (iii) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . (iv) Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the finding of the Delhi High Court in Filatex India Ltd. v. CIT- IV (2015) 229 Taxman 555 wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search? 32. Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed. 33. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006-07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon ble Delhi Court as completion of assessments and as acceptance of return, according to the Hon ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. 34. The Hon ble Supreme Court in the case of PCIT vs. Abhisar Buildw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfillment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No Costs . 35. In the light of above, let s examine the facts available on the record. A perusal of the assessment order would reveal that the ld. Assessing Officer himself has not referred to any specific material, which was discovered during the course of search. His reference was with regard to the general philosophy enumerated in the discussion of the Revenue Department at National Level and how on execution of that philosophy by the DIT, Kolkata has carried out the searches and compiled the report to us. It appears that instead of examining analytically, he pasted that report as it is in the assessment order. The ld. Assessing Officer was also aware. He has not possessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gamation. No objection was raised by the Revenue Department. 37. A cumulative setting of all these factors demonstrated before us would goad that the ld. Assessing Officer was not possessing any incriminating material against these assessees and, therefore, ld. CIT(Appeals) has rightly deleted the additions in a well reasoned order. 38. Shri Bachh Raj Bamalwa has made investment in the shares of Jacson Investment Limited and he sold those shares. We find that there is no difference qua this entity also. As far as the discovery of any material during the course of search is concerned, therefore, ld. CIT(Appeals) has rightly deleted this addition. 39. As far as the case of Shri Vishal Bamalwa is concerned, it has been submitted by the ld. Counsel for the assessee that under Ground No. 11, the assessee has submitted that no search was carried out under section 132(1). The Panchnama of the Bamalwa Group are available at pages no. 1 to 39 of the paper book No. 17 filed in the case of Vishal Bamalwa and, therefore, no order under section 153A ought to have been passed. The cognizance under section 153A could only be taken if a valid search has been carried out upon the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before this Hon ble Tribunal: 1. That on the facts and circumstances of the case, the Ld. CIT(A), while correctly deleting the impugned addition of Rs. . (i.e., the impugned addition in each case) made by the Ld. A.O in assessments framed u/s 153A of the Income-tax Act, 1961 ( the Act ) on jurisdictional/legal grounds, erred in not adjudicating the remaining grounds challenging the merits of the impugned addition made u/s 68 of the Act on account of alleged bogus LTCG claimed as exempt u/s 10(38) of the Act. 3.1 As discussed earlier, the Ld. CIT(A), while allowing the Assessee s Appeals on jurisdictional/legal grounds, has chosen not to adjudicate the grounds of appeal raised by the Assessees challenging the merits of additions made u/s 68 of the Act under the particular facts and circumstances of the Assessee s case(s). Hence the present Cross- Objections. 3.2 Since the impugned addition has been made u/s 68, it shall be relevant to quote the provisions of section 68 of the Act: 68. Cash credits.--Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that in spite of identity of the creditor and its creditworthiness being proved the transaction is still not genuine. Where the Assesses places on record sufficient evidence to discharge his initial onus u/s 68, the Revenue is required to place on record cogent and adequate material to prove that despite the entry being in the name of a third party, the same still represents the income of the Assessee from a suppressed source before making an addition u/s 68. 3.5 In the instant case, admittedly, the impugned share transactions were carried out via regular banking channels over recognized stock exchange. It is a matter of common knowledge that Stock exchange trading is screen based where the identities of the buyers and sellers are not known. Only prices offered along with quantity are shown. Anybody who bids for purchase or sale of those shares can enter into trading. In an electronic trading platform, whenever a person buys or sells shares, neither the identity of the other party nor the timing at which the shares are purchased or sold by the other party are known beforehand unless it is a synchronized trading. The Ld. A.O, in the instant case(s), has failed to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources or that the transactions as claimed by the Assessees were sham. 3.7 Thus, the Assessees discharged the primary onus cast upon them u/s 68 of explaining the nature and source of sums found credited in their respective bank accounts viz. sale proceeds of shares of TFCIL/JIL (as the case may be) by furnishing detailed documentary evidences in support thereof. The onus thereafter shifted to the Revenue to dislodge the authenticity of evidences filed by the Assessees by bringing on record cogent materials/ evidences. The A.O in the instant case failed to produce any material/ evidence to dislodge or controvert the genuineness of the conclusive documentary evidences produced by the Assessees in support of their claim. The additions made by the A.O u/s 68 therefore are heavily guided by surmises, conjecture and presumptions and have no legs to stand on and hence deserve to be quashed. 3.8 On a bare perusal of the Assessment Order, it is explicit that in making the impugned addition, the Ld. A.O has predominantly relied upon alleged report of the Investigation Wing and also the brief result of such investigation carried out by the Directorate of Investigation, Kolka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse, the Ld. DDIT(Inv), Kolkata vide Letter No. 5264 Dated 11.11.2019 returned back the Commission issued to him by the Ld. A.O u/s 131(1)(d) of the Act and rather informed the Ld. A.O to conduct the necessary cross-examination. The Ld. A.O, however, did not take any further steps to comply with his own commission. Thus, the Assessees were not provided any cross- examination of the concerned Directors, Entry Operators and the Brokers. As discussed earlier, statements recorded behind the back of the Assessee could not unilaterally be used by the A.O. without testing the same on the anvil of cross examination as is now the settled law per the judgment in Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (supra). 3.10 It will not be out of place to reiterate here that the brokers, Sri Bikash Sureka and Sri Ashok Kayan vide their respective Affidavits dated 28.11.2017 and 30.11.2017 retracted from their earlier statements claiming them to be false. However, the said fact does not find a mention in the Assessment Order. Under the given circumstances, such retracted statements cannot be used in evidence against the Assessees. Moreover, the said brokers also confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld higher returns than normal. The A.O. raised inferences about rigging of prices of shares through alleged circular trading between connected parties without bringing any credible legal evidence in respect of assessee s transaction. Further, the A.O. failed to appreciate that there is considerable changes both upwards and downwards in prices of various scripts in short span of time. The Appellant submits the following chart, by way of example, to say and submit that the steep rise or fall in the price of each script cannot be held to be the result of price rigging or other manipulations and the inference drawn by the A.O. against the assessee is preserve, arbitrary and therefore inadmissible. From the aforesaid two charts of different period it could be seen that, super normal returns have been delivered by not only fundamentally strong companies such as MRF Ltd., Page Industries Ltd., Eicher Motors Ltd. and La OpalaRg Ltd. but also by companies with unexplainedly weak fundamentals such as SRK Industries Ltd and Surabhi Chemicals. On the other hand, it must also be noted that some of the otherwise fundamentally strong companies have underperformed the index by a huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following further submissions are made in addition to the above: (i) That, the Ld. A.O, in making the impugned addition, has relied upon the purported statements of promoters, alleged dummy directors etc. of TFCIL. The same are not relevant to the case of the above Assessee. The Ld. A.O has not brought on record any statement pertaining to Jackson Investments Ltd. Further, the impugned shares were sold through HDFC Securities Ltd. and not through the brokers - Sri Ashok Kayan or Sri Bikash Sureka. Therefore, the statements of Sri AskhokKayan and Sri Bikash Sureka are not relevant to the case of Sri Bachh Raj Bamalwa for A.Y. 2015-16. The broker in the said case, i.e., HDFC Securities was never examined either by the Investigation Wing or by the Ld. A.O. No investigation was carried out in the case of the said broker or in the case of Jackson Investments Ltd. Thus, insofar as the case of Sri Bachh Raj Bamalwa for A.Y. 2015-16 is concerned, the Ld. A.O has not brought on record any evidence whatsoever against the impugned transactions in the scrip of Jackson Investment Ltd. (ii) That the transactions in the shares of Jackson Investment Ltd. have been considered as bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees and accordingly, the question of relying upon circumstantial evidence and theory of preponderance of probability does not arise. The so-called evidences relied upon by the Ld. A.O viz. uncorroborated statements of third parties which were not made available for cross examination to the Assessees (and thus have no evidentiary/referral value to the Assessees case) are not admissible as evidence for the purpose of making assessments u/s 153A of the Act. 3.14 Reference in this connection is craved to the judgment of the Hon ble Delhi High Court in the case of PCIT-12 Vs. Smt. Krishna Devi [2021] 126 taxmann.com 80 (Delhi), wherein the Hon ble Court under closely similar facts dismissed the reliance placed by the Revenue on the theory of preponderance of probabilities and differentiated the judgments rendered by the Hon ble Apex Court in the cases of Suman Poddar Sumati Dayal in the following words: 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 chie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not 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. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. 23. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessees. In the entire assessment order, the Ld. A.O has only spoken about the general modus operandi and the general reports/ order of the S.E.B.I without carrying out any independent enquiry to prove that the Assessees herein had not made any actual sales or any unaccounted money had been routed through this channel by the Assessees. The reports of the S.E.B.I do not prove anything adverse, whatsoever, in the case of the Assessees. Therefore, no addition can be made in the case of the Assessees merely by resorting to such reports/ orders of the S.E.B.I. wherein the names of the Assessees have not even been implicated. Reliance in this connection is placed on the following cases: (i) CIT Vs. Smt. PushpaMalpani (2012) 20 taxmann.com 597 (Raj HC) (ii) CIT v. Shreyashi Ganguli, (ITAT No.196/2012, dt.05.09.2012, Calcutta H.C.) (iii) Noorjaahan T. Mujahid Vs. ACIT (2014) 40 CCH 165 (Mum ITAT) (iv) Arun Kumar Agarwal (HUF) Ors (order dt. 13.07.2012 in Tax Appeal No. 4 of 2011 of Jharkhand HC) (v) ITO, Ward-15(2)(1), Mumbai v.Iraisaa Hotels (P.) Ltd. ([2018] 97 taxmann.com 623 (Mumbai - Trib.) (vi) ITO Vs. Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of UOI Vs. Azadi Bachao Andolan (supra) has held in explicit terms that a valid act cannot be treated as non-est simply because it results in loss of Revenue to the State or some tax advantage to the assessee. An assessee is entitled to arrange his affairs in a manner that it would attract lower taxes provided he can do the same within the four corners of law. Such valid acts, although attracting lower taxes are not always required to be viewed with suspicion or to be treated as a device for avoidance of tax. In the instant case also, the impugned transactions were carried out by the Assessees within the four corners of law. The Ld. A.O, apart from relying on suspicion, surmises and conjectures, has nothing concrete whatsoever to establish a case against the Assessees. He has desperately failed to prove, by bringing on record some cogent evidence that the impugned transactions were sham or make-believe. The Assessees, on the other hand have submitted conclusive documentary evidences in support of their claim which the Ld. A.O has failed to controvert. Thus, the reliance placed by the Ld. A.O on the judgment of the Hon ble Apex Court in the case of Mc. Dowell Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 wherein apart from seizure of documents forming part of official/regular records, no incriminating material was found. Similar to the case(s) at hand, the Ld. A.O in the said case also relied upon the Investigation Wing Report and statements of alleged entry operators such as Sri Anil Kumar Khemka to allege that that assessee therein had resorted to the scheme of booking bogus LTCG and added the same u/s 68 in assessment completed u/s 153A of the Act. However, copies of the Investigation Wing Report or the purported statements were not provided to the assessee and no opportunity of cross examination was afforded to her. On the said facts, the Hon ble Tribunal has deleted the impugned addition made u/s 68 based on the following reasoning: (i) That no addition is warranted in respect of unabated assessment year in the absence of incriminating material being found in course of search in the assessee s case; statements recorded during post search operation do not constitute incriminating material: The relevant excerpts from the judgment are reproduced below: 6.4. An examination of this document demonstrates that they are not incriminating material. These are official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (iii) That no addition u/s 68 in respect of the impugned LTCG is warranted where the impugned transactions have taken place on the platform of a recognized stock exchange and the assessee has furnished documentary evidences which has remained uncontroverted by the Department the relevant observations of the Hon ble Tribunal read as under: 6.11. In this case, the assessee has furnished all the bills evidencing the purchase of shares, copies of contract notes of the brokers, copies of the bank accounts disclosing the transaction etc. The transactions that they have taken place through banking channels. Demat statements demonstrate that the transactions had taken place on the platform of NSE. STT has been paid on these transactions. This proves the genuineness of its transactions. The Assessing Officer has no evidence or adverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I also rely upon the decision of the Hon'ble Supreme Court in the case of Kishan Chand Chelaram 125 ITR 713 (SC). Learned Counsel for the Assessee also pointed-out from the assessment order that A.O. recorded balance-sheet and P L A/c of M/s. Jackson Investment Ltd., and their figures of income and net worth for several years to show that the said Company was declaring the profit as well as having net worth. Considering the above discussion, the decisions relied upon by the Ld. D.R. would not support the case of the Revenue. The issue is therefore, covered by the Order of ITAT, Delhi SMC Bench in the case of Shri Amar Nath Goenka, New Delhi Others vs. The ACIT, Circle-20(1), New Delhi (supra). I, accordingly, set aside the Orders of the authorities below and delete the addition of Rs. 6,14,000/- under section 68 of the I.T. Act and addition of Rs. 18,420/- under section 69C of the I.T. Act towards commission. Accordingly, appeal of assessee is allowed. 3.24 Also relevant in this regard is the recent judgment dated 12.07.2023 rendered by the Hon ble Bombay High Court in the case of PCIT-31, Mumbai Vs. Indravadan Jain, H.U.F. in ITA No. 454 of 2018 (enclosed at pages 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denteffected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent s bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal. 3.25 Further, reference is once again craved to the judgments cited at para 2.55 supra wherein under closely similar facts as in the case at hand, the Hon ble Courts Tribunals have deleted additions made u/s 68 in respect of LTCG earned on alleged penny stocks in assessments framed u/s 153A in respect of unabated assessment years on the ground that no incriminating material on the issue of LTCG was found in the course of search in the case of the concerned assessee. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la Devi S. Doshi Ors Vs. ITO Ors (2017) 50 CCH 53 Mum Trib (xv) Smt. Smita P. Patil Ors. Vs. ACIT (2014) 159 TTJ 182 (Pune) (xvi) ACIT Vs. Kamal Kumar S. Agarwal (Indl) Ors: (2010) 113 TTJ 818 (Nag Trib) (xvii) CIT v. ShreevashiGanguli (ITA No. 196 of 2012) (Cal HC) (xviii) CIT v. Bhagwati Prasad Agarwal in (No. 22 of 2009, dt. 29-4- 2009) (Cal HC) (xix) CIT v. Lakshmangarh Estate Trading Co. Limited in (ITA No. 270 of 1999, dt. 7-10-2013) (xx) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) (xxi) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) 3.27 Kind attention is also sought to the judgment rendered by the Hon ble Jurisdictional Tribunal, Guwahati Bench, Guwahati in ITA No 223 224/Gau/2017, A Y 2014-15 in the case of M/s Sandhya Mittal M/s Saurabh Mittal (HUF), Makum Road, Tinsukia vs. ACIT, Tinsukia(order dated 12.07.2019 copy enclosed at pages 86-104 of PB-18)wherein the Hon ble Tribunal had an occasion to consider an identical issue. The A.O in the said case made addition in respect of LTCG claimed by the assessees therein on alleged penny stock relying general observations base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has not decided the issue till date. The impugned additions are deleted therefore. The above two cases were decided ex-parte by the Hon ble Guwahati Bench after hearing theDepartmental representative as the assessees therein failed to represent their case when called upfor hearing. 3.28 Finally, it is urged most respectfully that the Assessees, in the instant case, have completely and effectively discharged the primary onus cast u/s 68 by placing on record cogent documentary evidences duly establishing the essential ingredients of section 68 viz. the identity, creditworthiness and the genuineness of the impugned transactions, thus shifting the onus to disprove the same on the Department. The A.O, on the other hand, has failed to discharge the secondary onus of rebutting the documentary evidences filed by the Assessees. Apart from relying on suspicion, surmises, conjecture and general reports of S.E.B.I/ Investigation Wing regarding general modus operandi adopted by few promoters/ operators/ beneficiaries to create bogus LTCG (which asdiscussed above are insufficient to fasten liability on the Assessees), the Ld. A.O has nothing concrete whatsoever to conclusively establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r capital gain earned by the assessee is to be treated as a genuine or not It is such a subject which would always remained in a grey area inspite of availability of a large number of decisions by the Hon ble High Court as well as by the Tribunal. The assessees in response to the show-cause notice have submitted detailed evidences, as noticed by us in the earlier part of the order. They have submitted computation of income, balance-sheet, computation of long-term capital gain, copies of bank statements, etc. We have noticed in the earlier part of this order while taking note of written submissions of ld. Counsel for the assessee comprised in the paragraph no. 1.13 on pages 6 to 8 of the submission. According to the assessee, a perusal of the above would indicate that the assessee has fulfilled all the conditions for claiming this claim as a genuine. The Department did not choose to scrutinise the returns of all the respondents but in different assessment years, same transaction has been scrutinised by the Department that facts we have noticed in the earlier part of the order. The ld. Counsel for the assessee has drew our attention on those details on page no. 32 of his submissions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysis of supporting documents furnished by the Assessee and enquiry conducted by him. Detailed assessment records including details of enquiries conducted by the Ld. A.O and copy of assessment order u/s 143(3) in the above case have been reproduced by the Ld. CIT(A) at pages 85 to 101of the appellate order passed in the case of Sri Bajrang Lal Bamalwa for A.Y. 2012-13. Copy of the above assessment order is enclosed at pages 73-79 of PB-17 (iv) Assessment Order dated 24.12.2018 passed u/s 147 r.w.s 143(3) in the case of Smt. MeenakshiBamalwa(also one of the Assessees herein) for A.Y. 2011-12. In the said case, reassessment proceedings were initiated by the A.O on the basis of the same purported materials/information as in the case of the Assessees herein viz. the purported information received from the DDIT(Inv), Kolkata relating to the alleged racket of availing bogus LTCG, the statements of promoters, brokers, directors etc. recorded by the Investigation Wing u/s 131 etc. The A.O after considering the purported information and evidences in his possession and the detailed documentary evidences furnished by the assessee therein, found the LTCG of Rs. 1,54,21,323/- claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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