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TMI Blog2024 (11) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... iples of natural justice. The assessee is aggrieved from above stands taken by the CIT(A) as the orders relied upon in support thereof are not applicable to the case as the sole evidence against assessee is the statement of the Managing Director of the broker entity. It is a primary evidence used against the assessee and in view of the decision of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT ] the assessment framed without providing opportunity to cross examine the witness whose statement the AO is relied on is bad in law. In the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT ] the Hon ble Supreme Court held that failure to give the assessee the right to cross examine witnesses whose statements are relied upon results in breach of principles of natural justice and it is a serious flaw which renders the order in nullity. We further observe that the assessment for AY 2015-16 was also framed without providing cross examination of the broker whose statement was relied on and even the CIT(A) also did not provide for cross examination for AY 2015-16 and 2016-17 in spite of the assessee s request. We, therefore, observe that the ratio of the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of public limited company complying with all the requirements laid down in the above section to claim the exemption and action of the AO is based on conjectures and surmises. 3. The Ld. CIT(A) has erred both in law and in facts in circumstances of the case in upholding addition of Rs. 11,26,32,075/- by relying on the perception based on the generalized material without applying the same on the appellant with the corroborative facts and in the absence of which the order under appeal Is not in conformity with principle of natural justice. 4. The Ld. CIT(A) has erred both in law and in facts in circumstances of the case in upholding addition of Rs. 11,26.32,075/- by relying on the statement of one Sh.Subhash Chandra Khaneja, Managing Director of Integrated Master Securities Pvt Ltd recorded in survey action u/s 133 A of IT Act which has no evidentiary value and therefore, such addition need be deleted. 5. The Ld, CIT(A) has erred in upholding addition of Rs. 11,26,32,075/- which are bad in law as the same has been made without the appellant being provided with the incriminating material and cross examination of the material and statements on the basis of which the Investment of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gains (LTCG) of Rs. 11,26,32,075/- on sale of listed equity shares of Gracious Software Ltd. During the assessment proceedings the appellant was required to submit supporting evidence of the above exemption claimed in the return. The assessee submitted demat statement through which the equities acquired and sold were transferred. The equity shares numbering 50,000 shares were allotted by the Company for Rs. 50 lakhs on 08.01.2014 and the same were credited in the demat account on the same date. Cost was paid through bank account. The whole of shares have been sold on line during assessment years 2015-16 and 2016-17 through a registered broker on the Bombay Stock Exchange on which STT has been paid as is evident from the contract notes submitted. These shares remained parked in demat account for more than 365 days. The Assessing Officer (AO) during assessment proceedings based on information from the survey u/s 133A of the Act dated 24.06.2015 on the broker M/s Integrated Master Securities Pvt. Ltd. whereby activities of Client Code Modification in F O segment was noticed through profit and loss of the clients were manipulated according to their requirements. To support the above al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of bogus LTCG. 2. The case of the appellant is not that of the transactions in F O segment where client code modification might have done by the broker to benefit other beneficiaries. It is also stated in above reply that the copy of the statement has not been provided by the Ld AO and as a matter of fact this issue has been raised by the Ld AO during AY 2016-17 only and the appellant was able to procure the statement from his own sources after completion of assessment for AY 2015-16 during appeal proceedings before the Ld CIT(A) but before completion of assessment proceedings for AY 2016-17 (Para 5.3 page 14 of the CIT(A) Order AY 2015-16) 3. From the above facts, it is evident that the statement, relied on by the authorities below to take the adverse view of the transactions relating to LTCG, does not support the conclusion that the above noted broker has provided accommodation entries through bogus LTCG. The Ld CIT(A) has acted on the premise as noted in para 4 at page 17 placing heavy reliance on Q No.16, 17 18 of above statement to support his finding that there is admission by the above deponent of the accommodation entries in form of LTCG provided by the above broker. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted facts pertaining to various completely unrelated transactions/persons and the statement recorded on which inferences have been drawn on unfounded presumptions. In support of adverse view taken by the authorities below qua the transaction of appellant, there is no information of investigation or penal action under taken by the regulated authority of the stock market i.e. SEBI regarding the objectionable activities attributed to the investee company, the broker or the appellant. In the survey report itself, there is mere mention of code modification of F O transactions done by the above broker but there is no mention of accommodation entries of LTCG done by the broker in general and with appellant in particular. The name of the appellants was neither quoted by any of such persons nor was any material relating to the assessee found at any place where investigation was done by the investigation Wing. 6. There is a detailed general discussion of modus operandi done by the intermediaries with the assistance of exit providers as per the discussion in page 4 to 8 of the assessment order. The general discussion on role of exit providers but the Department has not identified the exit pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not supported by the financials, does not justify the AO's conclusion that the assessee converted unaccounted money into fictitious exempt LTCG to evade taxes. The finding is unsupported by material on record is purely an assumption based on conjecture. The Hon'ble Court further held that the theory of human behavior and preponderance of probabilities, based on Sumati Dayal v. CIT 214 ITR 801 (SC), cannot be cited as a basis to turn a blind eye to the evidence. 10.The Hon ble Jurisdictional Allahabad High Court in the case of Pr CIT vs Smt Renu Aggarwal 2022 (7) TMI 1340 (All) approved by Hon'ble Apex Court in 456 ITR 249 (SC) upholds the decision of Hon'ble ITAT, Lucknow Bench that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts in the present case, still the revenue has not brought on record any materials linking the assessee in any dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as unsuspecting investor, who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. The Hon ble ITAT relying on the decision of Hon ble Bombay High Court in the case of Pr CIT vs Ziauddin A Siddique ITA No.2012 of 2017 dated 04.03.2022 and decision of Hon ble Delhi High Court in the case of Pr CIT vs Krishna Devi (supra). Similarly reliance is placed in the decision of Chirag Tejprakash Dangivs ITO ITA No.3256/Mum/2022 13. No Opportunity of Cross Examination and denial the statement relied upon. From the foregoing facts, it is evident that only evidence against the appellant used by the department is the statement of the MD of the broker company i.e. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on account of alleged commission @0.2% paid on the sale consideration in the scrip in question and such addition is based on mere surmises and conjectures and is not supported by any evidences/material on record. There is no material with the AO on the basis of which incurring of such expenditure is proved. Only when such burden is discharged by the revenue, the onus shift on the assessee to prove that there is no such so-called expenditure. Primary burden of proof to prove understatement or concealment of income is on the revenue and it is only when such burden is discharged. Similar views have been taken by the authorities cited below: a) Sargam Cinema vs. CIT (2010) 328 iTR 513 (SC) b) CIT vs. Pratap Singh Amro Singh Rajendera Singh (1993) 200 ITR 788 (Raj) c) CIT vs. Sadhna Gupta (2013) 352 ITR 595 (Guj.) In the present case also, the AO has failed to establish that any payment on account of commission expenses has been made by the appellant and in the absence of any material to support the allegation of commission, no such addition can be made. It is respectfully submitted that it is a settled law that suspicion, howsoever strong, cannot take place of proof and there can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 103-129. It is therefore beyond dispute that all the approvals have been granted through a common approval for at least 7 cases in one go were provided by the Ld JCIT through a common communication. The approval provided through communication has been found to be mechanical and without application of mind by the jurisdictional Hon ble Allahabad High Court in the case of PCIT vs Sapna Gupta 2022 SCC Online ALL 1294. The above decision has been duly considered in the latest decision of Hon'ble Delhi High Court in the case of Pr CIT vs Shiv Kumar Nayyar ITA No.285/2024 dated 15.05.2024 in which various decision on this issue including Pr CIT vs Anuj Bansal ITA 368/2023 (Del) dated 13.07.2023, Sapna Gupta (Supra) and ACIT vs Serajuddin Co 223 SCC Online Ori 992 have been cited/followed. Incidentally, it needs be appreciated that decision in the case of Serajuddin (supra) has been approved by Hon ble Apex Court in the order dated 28.11.2023 whereby the department appeal was dismissed. 6. On the other hand, the Ld. DR strongly supported the orders of the authorities below. 7. Heard rival submissions, perused the orders of the authorities below. 8. Coming to the additional ground ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A on the additional and legal ground raised by the assessee, we are not inclined to go into the merits of the additions made in the assessment as it would be of only academic in nature at this stage. The additional ground raised by the assessee is allowed. 10. We further observed that in the appeals of the assessee for the AY 2015-16 in ITA No.1091/Del/2024 and for AY 2016-17 in ITA No.1092/Del/2024 the assessee apart from making arguments on merits also argued that the assessment is bad in law since no opportunity of cross examination and the denial of statement relied upon by the AO the assessment framed is in violation of principle of natural justice and, therefore, is bad in law. We observe that this argument was also made for the assessment year 2015-16 by the Ld. Counsel for the assessee. 11. On going through the facts it is observed that the only evidence used against the assessee by the Revenue is the statement of the Managing Director of the Broker Company M/s IMSPL. During the assessment proceedings for the AY 2015-16 the statement of the witness was not provided to the assessee and the same was provided only during first appeal proceedings on the direction of the Ld.CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2015-16 was also framed without providing cross examination of the broker whose statement was relied on and even the Ld.CIT(A) also did not provide for cross examination for AY 2015-16 and 2016-17 in spite of the assessee s request. 12. We, therefore, observe that the ratio of the decision of the Hon ble Supreme Court in the case of Andaman Timber Industries (supra) squarely applies. Thus, respectfully following the said decision we hold that the addition made by the AO based on the statement of the Managing Director of the Broker Company which was relied on without providing cross examination despite the request of the assessee is certainly in violation of principles of natural justice and consequently the addition based on such statement cannot be sustained. Therefore, the AO is directed to delete the addition made u/s 10(38) of the Act for the assessment years 2015-16 and 2016-17. 13. The consequential addition made on account of commission at 0.2% is also directed to be deleted. 14. The assessee has raised ground no.7 8 for the AY 2016-17 in respect of disallowance of expenses incurred on account of business promotion expenses which have been disallowed by the AO for failure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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