9911796707
TMI Blog2024 (11) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned authorities. The amount of purchase consideration stood debited in the bank account of assessee. These facts and evidences more particularly the shares being reflected in D-MAT account of the assessee, maintained by independent third party, clearly lead to infer the holding of the share and consequently also the purchase of these shares by assessee cannot be disputed. Now coming to the sale of share, it is seen that assessee has sold these shares (shares of Bakra Pratisthan Ltd.) through online transaction via recognized stock broker M/s Fix Fit Securities Pvt. Ltd. Transaction of sale is supported by contract note and as per the contract note, these shares were sold on 30.03.2012. The contract note is having time stamped, trade number, order time and trade time etc. As the sale of shares have been made through online system on stock exchange, obviously same has been made at the prevailing market rate of the shares. Accordingly, the sale rate so shown by the assessee cannot be doubted. Once the assessee has produced all the supporting evidences not only of sales but also of the purchase of the shares which include purchase bill, bank account showing payment of the purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of assessee. Addition u/s 69C - As the transaction of purchase and sale of shares and consequent long term capital gain so earned has been held to be not bogus, therefore, addition made by the AO on account of notional commission allegedly paid, is not sustainable too. - Hon ble Shri Sandeep Gosain, Judicial Member For the Assessee : Shri Rajendra Sisodia Adv. For the Revenue : Shri Rajesh Kumar Meena, Addl. CIT-DR ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A), Udaipur-2 dated 17.01.2024 for the assessment year 2012-13 wherein the assessee has raised the following grounds of appeal. 1. The learned CIT(A) erred in law as well as facts in confirming the addition of Rs. 9,37,172/- and Rs. 18,743/- made u/s 68 and 69C, which is contrary to law, facts and circumstances of the case. 2. That the learned CIT(A) erred in denial of exemption u/s 10(38) basing his observations upon presumption and surmises simply concluding that the case was within the ambit of 'Penny Stocks' not having any place under the provisions of tax laws. 3. That the learned CIT(A) failed to appreciate that the transaction of purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The commission is approximately 2%. Thus, the amount of Rs. 18,743/-(2% of Rs. 9,37,172/-) is unexplained expenditure of the assessee incurred towards payment of commission to obtain accommodation entries. Hence, an addition of Rs. 18,743/- is made u/s 69C to the returned income of the assessee. 2.2 Aggrieved by the addition so made, assessee preferred appeal to the ld.CIT(A), who dismissed the appeal primarily relying upon observation of AO and on the decision rendered by the Calcutta High Court in the case of Swati Bajaj. Present appeal has been filed against the order so passed by ld. CIT(A). The relevant observation as to the additions of Rs. 9,37,172 plus Rs. 18,743 = 9,55,915/- mentioned at page-24 25 is reproduced as under:- Page 24 It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstances in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Bank of India. The shares were thereafter credited to the Demat account of the assessee with the Depository Zuari Investments Ltd. on 19.10.2010. Dhanlabh Merchandise Ltd. later got amalgamated with Bakra Pratisthan Ltd. Post demerger, 10 shares of Bakra Pratishan were allotted against 1 share of Dhanlabh Merchandise Ltd. As a result, the assessee got 2650 shares of Bakra Pratisthan Ltd. After holding the shares for a period of more than one year, when the assessee felt to book the profits since the investment yielded good returns, assessee sold the shares in March, 2012, through online trading at CSE portal through a registered broker M/s Fix Fit Securities Pvt. Ltd. as per sale bill dated 04.04.2012. STT was duly paid on the sale transaction. The assessee received the consideration through cheque, which was credited in her saving bank account with Central Bank of India. The shares were sold through broker, viz. M/s Fix Fit Securities Pvt. Ltd. who was never alleged as part of the racket involved in providing accommodation entry. Having fulfilled all the conditions for claiming exemption u/s 10(38) of the Income Tax Act, the assessee rightly claimed the exemption. 1.2 For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts like authentic supporting documents like bank statements and sales through stock exchange platform, and the same have been proved by the assessee. 1.4 The case of the assessee is supported by the purchase bill, payment by cheque and sale by assessee on recognized stock exchange through a registered broker receiving the sale consideration through the settlement mechanism of the exchange by cheque. There is no doubt on the broker who sold the shares. In the present case, the AO did not raise any question to the broker who sold the shares. It is in fact, the broker who sold the shares, logged in to his terminal and sold the shares on electronic online platform of the exchange. It is not the case of the assessee that the shares have not been sold by the assessee on the stock exchange. Here, the learned Assessing officer is challenging the whole cycle of the transaction, starting from purchase of the shares by the assessee and subsequently holding it and selling it on stock exchange at prevailing prices as sham transaction as an attempt to convert the unaccounted money of the assessee in the form of non-taxable long-term capital gain. 1.5 It is submitted that the basic principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse as stated by the AO in his order, he abandoned the inquiry. He has merely relied upon the information received from the Investigation Wing and the statements recorded by them. 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. 1.8 Regarding the statements of operators, entry providers and stock brokers recorded by the investigation wing, referred to by the AO in his Assessment Order at Page 10, wherein they have admitted providing accommodation entries of LTCG and M/s Bakra Pratisthan has been held as a penny stock company, the same is irrelevant because the assessee has no connection with the said operators, entry providers or stock brokers. Their statements can only be used against those assessee s who have carried out the transactions through them. Moreover, these statements were never provided to the assessee. Even no Show cause notice of the proposed additions was issued in the case. The assessee does not have any connection wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AO under section 68 of the Act, by treating the sale consideration as unexplained, sham and non-genuine is baseless. The addition under section 68 of the Act made merely of the basis of suspicion, presumptions and probability of preponderance without any direct evidence to prove the transactions as non-genuine or sham or demonstrating appellant s involvement in any kind of manipulation is illegal and should not be sustained. The findings of investigation modus operandi in other cases narrated by the AO nowhere prove any connection with the assessee nor the assessee s involvement or connection or collusion with the brokers, exit providers, accommodation providers or companies or directors etc. For making the addition, it is necessary to bring on record evidence to establish ingenuity in transactions or any connection of the assessee or its transaction with any of the alleged parties. The assessee has discharged its onus by establishing the identity of the payer, source of the credit and genuineness of the transactions. 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 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 10 share brokers of CSE covered by the Investigation Directorate. The name of the broker of the assessee-M/s Fix Fit Securities Pvt. Ltd. nowhere figures in this table. Thus, the findings of the AO, on the basis of the said report are baseless. It may be added that this report, which has been made the basis for making the additions, was neither provided along with the reasons for reopening nor during the course of assessment proceedings. 1.11 The AO has given the reasons for rejecting the claim of the assessee in Para-10 (Page-10 11 of his order). The rebuttal of the reasons given by him is stated against the reason itself. Para-10. The claim of the assessee of having genuinely sold 2650 shares of M/s Bakra Pratishthan Ltd. is rejected in view of the following:- i) The husband of the assessee of the assessee could not produce relevant documents in support of his statements. The assessee is not a regular investor in shares. The assessee could not reply that why the shares were purchased and sold through brokers of Calcutta when the assessee had demat account in Kota. The shares were purchased on the recommendation of a friend. These facts make it clear that the above transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction are determined by mutual agreement between them. The payment against bill at a later date does not make it bogus. As a matter of fact, the payment was made when the shares were dematerialized. In the bill itself, against the Distinctive number, it was mentioned-As per Demat Form. So as and when above shares got dematerialized, the payment was made through cheque which was encashed by the broker, as is evident from the bank statement of the assessee. iii) The assessee purchased shares of M/s Dhanlabh Merchandise Ltd. which was amalgamated with M/s Bakra Pratishthan ltd. In his investigation, Investigation Directorate, Kolkata has concluded that M/s Bakra Pratishthan Ltd. (Scrip code 12133) is a penny stock company. The conclusion drawn by Investigation Directorate, Kolkata in no way implicates the assessee. It is a finding of the Directorate qua the company, M/s Bakra Pratishthan Ltd. It does not prove that every one who has dealt with the shares of this company has generated bogus LTCG. iv) The assessee has sold the shares through Fix Fit Securities Pvt. Ltd. though the demat account was opened with Zuari Investments Ltd. M/s Fix Fit Securities Pvt. Ltd. has been cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur Bench, in the case of Sanjay Bimalchand Jain. The decision is distinguishable, being based on its own peculiar set of facts, which are stated below- The assessee invested in the shares of two companies for the first time on the advice of an Income tax consultant / whereas here the assessee was a regular investor in shares from last five years. The issue involved was whether the profit on sale of alleged shares constituted long term capital gains or business income. The AO held the profits to be Business income / where as here the AO has held it to be income from unexplained sources u/s 68 and undisclosed expenditure u/s 69C. At the time of acquisition of shares of both the companies, the payments were made in cash / whereas in the instant case the payment for purchase of shares has been made through banking channel and it s source is fully verifiable. The address of both the companies whose shares were purchased were interestingly the same / which is not the case here. The authorized signatory of both the companies were also the same person/ which is not the case here. The purchase of shares of both the companies was done by the assessee through broker Globle Stock and Securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he genuineness of the short-term capital gain in the case of the assessee and he made further inquiry (in the case of the assessee no enquiries were made) that during the year assessee had purchased 45,000 shares of M/s Ankur International Ltd. at varying rates from Rs. 2.06 to Rs. 3.10 per share and sold them within a short span of six-seven months at the rate varying from Rs. 47.75 to Rs. 55. These shares were purchased through a broker Munish Arora Co. and sold through another broker M/s S.K. Sharma Co. The AO took by surprise the astronomical rise in share price of a company from Rs. 3 to Rs. 55 and started further inquiry. The AO issued notices under Section 131 to both the brokers (No notices u/s 131 were issued to the broker) from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of M/s Ankur International Ltd. (The balance sheet of Bakra Pratisthan was not available before the AO, what to talk of its analysis) to justify as to how the share price of a company can go up from a mere Rs. 3 to Rs. 55 in a short span of six to seven months' time. The AO made detailed and extraneous exercise of finding the fundamental of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut even going through those statements and the same were never made available to the assessee. On the other hand the assessee has filed various documents duly evidencing purchase of shares, copy of D- mat Account, payments being made by account payees cheque and similarly also the evidence related to sale, which was made online on the Calcutta Stock Exchange and through recognized stock exchange broker namely M/s Fix Fit Securities Pvt. Ltd. However all these evidences were just ignored and not rebutted by the AO before making addition. In view of these facts, it is submitted that the impugned addition being solely based upon such uncorroborated statements of third parties is clearly bad in law. Once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. Reference in this regard may be made to the judgment of Hon ble Supreme Court in the case of Krishnan and Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investigation. The report only informed the AO that some persons may have misused the scrip, for the purpose of collusive transactions. The AO was duty bound to make inquiry from all concerned parties relating to the transactions and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. However, the AO has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. The documentary evidence put forth by the assessee ought to have been given preference over oral evidences of the operators/share brokers (if any) alleging the company Bakra Pratisthan facilitating generation of bogus long term capital gain. 1.13 It is further submitted that the various observations and the conclusions drawn by the AO in the assessment are based on suspicion, surmises and hearsay. It is trite law that suspicion however strong cannot partake the character of legal evidence (Lal Chand Bhagat Ambika Ram vs. CIT 37 ITR 288 SC). The suspicion or presumption, however strong it may appear to be true, needs to be corroborated by some evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpression is that cash would have changed hands. The courts have laid down that judicial notice of such notorious facts cannot be taken based on generalization. Courts of law are bound to go by evidence. 1.17 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. Therefore, the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing was required to be corroborated and affirmed 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 whatsoever and the entire assessment order is devoid of any such enquiry. Even the CIT(A) on Page-16 of his appellate order has observed - After careful perusal of facts of the case it is noted that the addition made by the AO is based on the findings of search and survey proceedings conducted by investigation wing where syndicate op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disprove the evidences produced by the assessee. Nowhere SEBI has declared the transaction transacted at earlier dates as void. Considering the vortex of evidences, it can be said that the assessee has successfully discharged the onus cast upon it by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the AO would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand. 1.20 Now coming on to the decision of the Ld.CIT(A) confirming the action of the AO, the CIT(A) has erred in overlooking the facts which are as under: a) The assessee had purchased 265 shares of Dhanlabh Merchandise Ltd. through broker in the FY 2010-11; b) Payment for purchase of shares had been made through banking channel; c) Investment so made was reflected in the Balance sheet of the assessee in the earlier year for which return had duly been filed; d) The shares so acquired were held in demat account; e) The shares were sold through registered broker on CSE; f) The sale of shares was supported by the bills issued by the brokers and further supported by correspondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble court has confirmed the order passed by the Hon'ble Jaipur bench of ITAT. 1.24 Interestingly, in last para of his order at Page-17, the CIT(A) has observed After careful perusal of facts of the case it is noted that the addition made by the AO is based on the findings of search and survey proceedings conducted by investigation wing where syndicate operating to provide accommodation entry of bogus gain and Bogus loss is detected. Such entry providers confirmed that they were involved in providing accommodation entries before the Investigation wing during search and survey proceedings. There is astronomical rise and fall in prices of these shares which are not related to the fundamentals or any projections made by these companies. The rise and fall were disproportionate to real financial position of the companies. Steep rise in the shares purchased by the appellant was also not related to financials of the companies. The pattern of chart of share price of these companies is bell shaped typical to these types of manipulated stocks where the price rises without any reason and falls without any reason. The prices were clearly manipulated by the operators. The share prices an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Pr. CIT Vs Swati Bajaj others, the department had challenged 90 orders passed by the Hon ble ITAT Kolkata in assessee s favor from time to time and the Hon ble divison bench of HC, after hearing was pleased to pass a lengthy order in favor of the department, thus nullifying all ITAT orders including the pending cases. On going through the entire judgement, wherein it appeared that the central spirit which has driven the Hon ble bench to pass the order in favor of the department, is the non consideration of principle of preponderance of probabilities or what is apparent is not real, the principal laid down by the Apex court in Sumati Dayal vs CIT and P. Mohonkala vs CIT, wherein the Hon ble Apex court had pronounced a new rule of law that in taxation matters department is not bound by only documentary evidences furnished by the assessee before the A.O. The A.O as an investigator is empowered to look at the surrounding circumstances, including the circumstantial evidences, apart from documentary evidences. It means that what is apparent in documentary evidences furnished by the assessee is not real, if the department goes for further investigation on these matters. Therefore, Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample powers to look in to the circumstantial evidences apart from documentary evidences, which he did not. Therefore, Tribunal most correctly concluded that where A.O has failed to prove the involvement of the assessee in the price rigging process and where the name of the assessee has nowhere figured out in investigation report, then the assessee can not be crucified by the department in penny stock cases, as being bogus and colorable. But alas, Hon ble HC has totally overlapped this most crucial legal and factual point in its adjudication. Hon ble bench was duty bound either to establish the involvement of assesses in the racket which was actually department s job or to set aside all files to A.O for fresh investigation. But instead of doing so, the Hon ble bench appeared too earnest and anxious to establish the guilt of assesses, relying upon the case laws which are in a different context and such a serious issue like country wide investigation by the government was not issue in those cases. The Hon ble bench totally misread the said judgements of Apex court contextually. One basic question can fall flat the impugned order of HC and that is can any body be held guilty for an of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption based on conjecture. 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. The above decision (Pr. CIT vs. Smt. Krishna Devi) has been applied and followed extensively by various ITAT benches across India, a list of which is given below for ready reference- 1) Delhi ITAT Shivani Gupta G bench order dated 06.04.2021 in ITA 5204/Del/2019 Para 7 7.1 2) Delhi ITAT Mukesh Mittal E bench order dated 26.03.2021 in ITA 761/Del/2020 Para 5.6 5.7, 5.11 3) Delhi ITAT G bench order dated 19.03.2021 in Tapas Kumar Mullick case para 16 to 21 4) Hyderabad A bench of ITAT in Tarun Kumar Goyal ITA 456/Hyd/20 order dated 20.04.2021 5) Surat bench of ITAT in case of Mukesh Nanubhai Desai ITA 781/SRT/2018 order dated 06.05.2021 6) Lucknow bench of ITAT in case of Uma Shanker Dhandhania ITA 475 681/LKW/2019 (order dated 16.02.2021) Further reference may be made to Gujarat High court order in case of Parasben Kochar (dated 17.09.2020 approving Ahmedabad ITAT s order dated 20.02.2020 in ITA No.549/Ahd./2018). 1.27 In this regard, reference may also be made to decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eory of preponderance of probabilities invoked by the learned assessing officer is merely a conjecture and surmise. He further stated that when originally the assessee s are assessed under section 143 (3) of the act, long-term capital gain were accepted after detailed enquiries, now it cannot be said that the capital gain earned by the assessee is to be taxed u/s 68 of the act on the principles of preponderance of the probabilities. He further submitted that it was argued before the bench in appeal from earlier years that no incriminating evidences were found during the course of search. The order is awaited. He further stated that the preponderance of probabilities would come into play only when the basic test of direct and factual evidences fails. He stated that in the present case the complete evidences have been placed by the assessee before the revenue authorities, they are not found to be false but only allegation has been made that transactions are sham. He further stated that the decision relied upon by the learned AO of honorable Supreme Court is quite distinct on its fact. On careful analysis of the evidences placed before us, findings rendered by the lower authorities, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er evidences were found by the revenue; they were not confronted to the assessee for rebutting the same. Statements recorded of several persons by revenue were not allowed to be cross-examined by the assessee. In this situations, only on the theory of preponderance of probabilities addition cannot be sustained. The theory of preponderance of probability‟ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn based on certain admitted facts and materials and not based on presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. The reliance placed by the learned AO on the decision of the hon ble Supreme Court is clearly distinguishable. So far as the facts of that case with the case on hand before us are compared, in that particular situation before the hon ble Supreme Court where the assessee was constantly earning money from the jackpot, further was not having an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no stretch of imagination, it can be regarded as bogus and therefore addition made by ld.AO is not in accordance with law. 1.29 In the case of DCIT vs. Rakesh Saraogi Sons (HUF), ITAT, Raipur clarified that even assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in demat accounts with Government depository and traded on the stock exchange. There is nothing on record to suggest that assessee gave cash and purchased cheque from broker. 1.30 In the case of CIT vs. Shyam R. Pawar, 54 taxmann.com 108 (Bom) ITAT, Bombay concluded that where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68. 1.31 As the issue involved is of chargeability of long term capital gain as undisclosed income of the assessee u/s 68 of the Act, it may be mentioned that many High courts and ITAT benches have held in favour of the assessee. In one of the cases (CIT vs. Mukesh Ratilal Marolia) SLP filed by the Revenue against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maheshwari vs. ITO ITA No. 4424/DEL/2018 dt. 28/11/2018 Delhi ITAT 28. Mohanlal Agarwal HUF vs. ITO ITA No. 2766/DEL/2018 dt. 26/11/2018 Delhi ITAT 29. Jaishree Bamboly vs. ITO ITANo. 1679/CHNY/2018 dt. 08/11/2018 Chennai ITAT 30. Simi Verma vs. ITO ITA No.3387/DEL/2018 dt. 06/11/2018 Delhi ITAT 31. Manoj Kumar Gupta vs. ITO ITA No. 457/Del/2018 dt. 05/11/2018 Delhi ITAT 32. Madhu Killa vs. ACIT ITA No. 834/Kol/2018 Dt. 2/11/2018 Kolkata ITAT 33. Kanthilal Kamla Bai vs. ITO ITA No.1538/CHNY/2018 Dt. 29/10/2018 Chennai ITAT 34. K Praveen Kumar HUF vs. ITO ITA No.1539/CHNY/2018 Dt. 29/10/2018 Chennai ITAT 35. Rukmani Devi Manpuria vs. DCIT ITA No. 1724/Kol/2017 Dt. 24/10/2018 Kolkata ITAT 36. Bishwanath Agarwal vs. ITO ITA No. 2280/Kol/2017 Dt. 16/10/2018 Kolkata ITAT 37. Bhanshali Fincom Pvt. Ltd vs. DCIT ITA Nos. 59 60/Kol/2018 Dt. 10/10/2018 Kolkata ITAT 38. Sanjay Mehta vs. ITAT ITA No.1089/Kol/2018 Dt. 28/09/2018 Kolkata ITAT 39. Mina Mehta vs. ITO ITA No.918/Kol/2018 Dt. 28/09/2018 Kolkatta ITAT 40. Vikas Jhawar vs. ITO ITA No.1051/Kol/2018 Dt. 26/09/2018 Kolkatta ITAT 41. Neelam Agarwal vs. ITO ITA No.844/Kol/2018 Dt. 26/09/2018 Kolkatta ITAT 42. Rajkumar Goenka vs. ITO ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies paid 2% commission on acquiring accommodation entries for bogus LTCG. No such percentage has been specified in the report of the Investigation wing. The AO did not conduct any independent inquiry in this regard. He did not even deem it proper to at least name the persons who had said that the beneficiaries have paid 2% commission. It may be mentioned that no statements of any beneficiaries admitting payment of commission @ 2% was available with the AO. Even otherwise, if there existed any such statements, the confessions have been made by the beneficiaries in their own cases. These confessions cannot be generalized and used against the assessee. These beneficiaries never said that the assessee has also paid such commission. The assessee had emphatically denied having paid any such commission. The AO had absolutely no evidence to prove that the assessee had paid commission to manage bogus LTCG and make addition as unexplained expenditure u/s 69C. The ratio laid down in S.F.Wadia vs. ITO (19 ITD 306) that the burden of proving that the assessee has incurred any unexplained expenditure which is assessable u/s.69C of the I.T. Act is on the Department. Similar views have been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is a straight denial of a reasonable and sufficient opportunity viz. absence of cross examination of witnesses, a right the appellant legally deserves under the provisions of law. Submission of the assessee is as under: 2.1 The Ld.CIT(A) on the point of not providing the material used against the assessee and further in not providing an opportunity to cross examine the witness has solely relied on the decision of Calcutta High Court rendered in the case of Swati Bajaj, in which the Court observed - Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced by the revenue, nothing prevented the assessee s who are ably defended by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, based on such general statements of violation of principles of natural justice, the assessee s have not made out any case. [Para 65] It would be pertinent to mention that report of the Investigation wing running into 401 pages prepared by Dhruva Purari Singh, DDIT, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the principles of natural justice and therefore, is bad in law. 2.3 It is further submitted that the one of the main principles of Natural Justice is 'audi alteram partem', that is, 'hear the other side.' This principle makes cross examination as a sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. The assessee must be supplied the contents of all such evidences, both oral and documentary, so that he can prepare the case against him. This necessarily also postulates that he should cross examine the witness on whose statement the AO relies to hold the sale or purchase of shares as sham or not genuine. It is trite that if an Authority is relying on the testimony of a witness, the assessee is required to be afforded an opportunity to cross-examine him failing which the testimony cannot be utilized against the assessee. If this procedure is not followed, then there would be a case of denial of natural justice to the assessee and the addition on the basis of such statements/ material cannot stand. Addition on account of accommodation entry cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jeev Kumar Jain (2009) 310 ITR 178 (P H) ( (ix) CIT Anr. Vs. Land Development Corporation (2009) 316 ITR 328 (Kar) (x) CIT Vs. Rajesh Kumar (2008) 306 ITR 27 (Del) (xi) Heirs LRs of Late Laxmanbhai S. Patel Vs. CIT (2009) 222 CTR (Guj) 138 (xii) CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del) (xiii) CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del) (xiv) CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad) (xv) CIT Vs. S.M Aggarwal 292 ITR 43 (xvi) Straptex India (P) Ltd. Vs. DCIT [2003] 84 ITD 320 (Mum) (xvii) R.W. Promotions (P.) Ltd. v. Asstt. CIT [2015] 61 taxmann.com 54 (Bom.) (xviii) Obulapuram Mining Co, (P.) Ltd. v. Dy. CIT 160 ITD 224 (Bang. - Trib.) (xix) CIT v. Indrajit Singh Suri [2013] 33 taxmann.com 281/215 Taxman 581 (Guj.) (xx) Smt. Sunita Dhadda v. Dy. CIT [2013] 33 taxmann.com 639 (JP.- Trib.) 2.6 Reliance is place on the judgement of ITAT, Mumbai, in the case of Kamla Devi S. Doshi in ITA No.1957/Mum/2015 reported on 22.05.2017. The headnote of the said judgement is to the effect - Bogus penny stocks capital gains: Section 131 statement implicating the assessee is not sufficient to draw an adverse inference against the assessee when the documentary evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax Act, 1961. These shares were purchased after making payment through account payee s cheque which stood debited in the bank account of the assessee. These shares were credited in the D-mat account of the assessee maintained with independent third party, viz. Zuari Investments Ltd. on 22.01.2011. Subsequently, these shares were sold online through registered share broker and sale proceeds were received through banking channels. However, the AO, based on some information received from Investigation Wing, Calcutta that statement of various operators, entry providers and stock brokers were recorded, wherein they have admitted to be engaged in providing accommodation entries in the guise of LTCG/STCL, has considered the transaction of sale of shares of M/s Bakra Pratisthan Ltd. made by assessee, as bogus. It is uncontroverted fact that assessee has furnished copy of bank statement showing payment so made for purchase of shares, copy of statement of holding of shares reflecting the impugned equity shares, copy of contract notes regarding sale of shares, copy of D-MAT account reflecting shares as sold, copy of bank passbook of the assessee reflecting sale consideration receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAT account of the assessee maintained by independent third party, duly recognized by the concerned authorities. The amount of purchase consideration stood debited in the bank account of assessee. These facts and evidences more particularly the shares being reflected in D-MAT account of the assessee, maintained by independent third party, clearly lead to infer the holding of the share and consequently also the purchase of these shares by assessee cannot be disputed. 2.6 Now coming to the sale of share, it is seen that assessee has sold these shares (shares of Bakra Pratisthan Ltd.) through online transaction via recognized stock broker M/s Fix Fit Securities Pvt. Ltd. Transaction of sale is supported by contract note and as per the contract note, these shares were sold on 30.03.2012. The contract note is having time stamped, trade number, order time and trade time etc. As the sale of shares have been made through online system on stock exchange, obviously same has been made at the prevailing market rate of the shares. Accordingly, the sale rate so shown by the assessee cannot be doubted. Moreover, security transaction tax has also been deducted and paid and the assessee has receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence produced by the assessee is otherwise independently verifiable being the document in the shape of bank account, D-MAT account maintained by independent third party, bills of purchase and also of the sales on which assessee has no control or say and therefore said evidences cannot be manipulated by assessee. Once the evidences produced by assessee is neither prepared by it nor is any scope of manipulation by him, then transaction of purchase and sale of shares and consequent capital gain shown by the assessee cannot be doubted. It is reiterated that all the various evidences were filed by the assessee before the ld. AO and are now also filed before us in paper book in support of long term capital gain shown on sale of shares, which are as under: S.No. Particulars Page No. 1. Copy of invoice for purchase of shares of Dhanlabh Merchandise Ltd. dated 09.09.2010 42 2. Copy of Bank A/c evidencing payment through cheque made for purchase of shares 43 3. Copy of Transaction statement with DP for the period 01.04.2010 to 31.03.2011 evidencing purchase and dematerialization of shares 44 4. Statement of Holding issued by DP showing shares of Dhanlabh Merchandise as on 31.03.2011 45 5. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Rajasthan High Court in the case of PCIT vs. Sanjay Chhabra D.B. ITA No. 22/2021 noted that prejudice is caused to the assessee when material used against him is not provided and opportunity of cross examination is not provided. The assessee is based in Rajasthan. All the Courts/Tribunals within the jurisdiction of Hon ble Rajasthan High Court are bound by the decision of Hon ble Rajasthan High Court, and therefore, reliance by the CIT(A) on the decision in the case of Swati Bajaj is of no help to the revenue. The ld. AR has also brought to my notice through his written submission that judgment in the case of Suman Poddar 423 ITR 480 has already been distinguished by Hon ble Delhi High Court itself in the case of PCIT vs. Krishna Devi in ITA No. 125/2020 and issue was decided in favour of assessee. In confirming the addition made by the AO holding the transactions to be bogus, the Ld. CIT(A) has once again relied on the decision of Calcutta High Court in the case of Swati Bajaj. The ld.AR elaborately differentiated the facts of the case with that of the assessee in point 1.25 of his submission. He has placed reliance on the decisions of jurisdictional High Courts in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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