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TMI Blog2024 (11) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. 4. That the ld. CIT(A)/AO failed to appreciate that the assessee is a genuine customer and the transactions made through proper D Mat account and the purchase and sale of shares were never doubted by the AO. 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. 5. That the CIT(A) simply based the decisions on judgments which were not relevant to the appellant's case and at the same time failed to give any weightage to decisions cited during the appellate level. 2.1 Apropos Ground No. 1 to 5 of the assessee, brief facts of the case are that the assessee is an individual and during the year under consideration has derived Income from Salary, Rent, Share trading and Income from other sources. ITR for the year was filed on 25.07.2012 declaring total income at Rs. 3,94,648/-. The case was reopened and notice u/s 148 was issued on 29.09.2016. Details and information sought by AO were furnished and the assessment was finalized u/s 143(3) r.w.s. 147, on 22.12.2017 assessing an income of Rs. 13,50,560/-, thereby creating a demand of Rs. 4,13,070 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the arguments raised by the appellant are found to be not acceptable and the addition made by AO with regard to disallowance of bogus long term capital gain (LTCG) and unexplained expenditure on commission paid for procuring these entries of LTCG is found to be justified. Therefore, the order of the AO is confirmed. This ground of appeal is treated as dismissed.'' 'Page 25' In view of the discussion while deciding the ground no. 1, the arguments raised by the appellant are found to be not acceptable and the addition made by AO with regard to disallowance of bogus long term capital gain (LTCG) is confirmed. The AO held that the assessee has to incur expenditure by way of commission for getting such accommodation entry. The source of such expenditure is not explained. Therefore, such unexplained expenditure on commission paid for procuring these entries of LTCG is found to be justified. The appellant has not furnished any evidence to prove that the findings of the AO are not correct with regard to expenditure made on commission for getting the accommodation entry. The appellant only argued that the capital gain claim was genuine and no such expenditure was incurred. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase and sale of shares of the Company, the assessee filed the following documents before the Assessing officer - (a) Copy of invoice of the broker dated 09.09.2010 showing the details of shares purchased (b) Copy of relevant Bank statement evidencing amount paid for acquiring the shares (c) Copy of Transaction statement with DP evidencing purchase and dematerialization of shares (d) Statement of holding issued by DP reflecting shares of Dhanlabh Merchandise as on 31.03.2011 (e) Copy of Balance sheet of the assessee reflecting the investment made in shares of Dhanlabh Merchandise Ltd. (f) Copy of Calcutta High Court approving the merger of Dhanlabh Merchandise Ltd. with Bakra Pratisthan Ltd. (g) Copy of Demat account evidencing merger and subsequent sale (g) Copy of sale bill issued by broker (h) Copy of cheque received from the broker (i) Relevant Bank Statement showing deposit of the above cheque. 1.3 It may be noted that that all evidences of purchase and sales were submitted by the assessee, as were called for by the AO. The Assessing officer has not found any fault in these documents. The payments were received from the broker through cheque and transaction was done thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly adopted by the courts are: a. The person who alleges should prove b. All adverse material is required to be supplied to the person against whom the allegation is made c. No findings can be recorded on surmises and conjectures d. Adverse action can be initiated only based on evidence 1.6 As against the aforesaid principles of law, in the present case, the transaction of the assessee is held bogus only and only on the basis of general report of the Investigation Wing. The report was prepared only on the basis of statements of various persons without referring to any underlying documents. From the extract of report, as appearing in the assessment order, it can be seen that the name of the assessee or his broker or his transaction has not been discussed. Thus, no link with the case of the assessee has been established, no direct evidence is found against the assessee. Chain of flow of cash has also not be established. Except oral testimony, which also remains uncorroborated, as there is no reference of any material found, nothing was brought on record by ld. AO. The evidences submitted by the assessee have not been found to be false or forged. Documentary evidences shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he operators, entry providers or stock brokers. So, these statements could not implicate the assessee. Moreover, these statements were never made available to the assessee and even their existence is dubious. It would not be out of place to mention here that apart from the so called information received from Investigation Wing, Calcutta, stated to be containing statements of operators, entry providers and stock brokers, there was no corroborative material available with the Ld. AO or referred to by him in the assessment order found as a result or gathered during the course of assessment proceedings in support of the impugned addition made by him. 1.9 The AO after holding that the transactions of purchase and sale of shares by the assessee are sham, made the addition of the LTCG u/s 68. Section 68 of the Act places the burden of proof on the tax payer, to explain the nature of source of any credit but not the source of the source. Hence, when an assessee gives evidences of identity of the payer (M/s Fix Fit Securities Pvt. Ltd.), source of the credit (Sale proceeds of shares), evidences of the transactions to prove the genuineness (Contract note, Bill of the broker & Demat account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition which is not (during assessment) brought on record by the AO nor is it put before the assessee. The submission of the assessee is that he is just an investor and as he received some suggestion for investment and he chose to invest based on these market tips/suggestions and had taken a calculated risk and had gained in the process and that he is not party to any alleged scam or illegal trades etc. has to be controverted by the revenue with evidence when a person claims that he has done these transactions in a bona fide manner, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are many beneficiaries of LTCG. Each case has to be assessed based on principles of legal import laid down by the courts of law. 1.10 At this stage, it is pertinent to discuss the Investigation report, which has been made a part of his assessment order by the AO. This report had been prepared by Nivedita Prasad, DDIT(Inv.) Admn. Kolkata, which runs into 48 pages. Only 36 pages of this report was annexed with the aAssessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions of sale-purchase of shares were not made with an intention of investment. This was an adjustment made to generate bogus LTCG. - The assessee has produced all relevant documents [(a) Copy of invoice of the broker dated 09.09.2010 showing the details of shares purchased (b) Copy of relevant Bank statement evidencing amount paid for acquiring the shares (c) Copy of Transaction statement with DP evidencing purchase and dematerialization of shares (d) Statement of holding issued by DP reflecting shares of Dhanlabh Merchandise as on 31.03.2011 (e) Copy of Balance sheet of the assessee reflecting the investment made in shares of Dhanlabh Merchandise Ltd. (f) Copy of Calcutta High Court approving the merger of Dhanlabh Merchandise Ltd. with Bakra Pratisthan Ltd. (g) Copy of Demat account evidencing merger and subsequent sale (g) Copy of sale bill issued by broker (h) Copy of cheque received from the broker (i) Relevant Bank Statement showing deposit of the above cheque] in support of purchase and sale of the shares, as there can be. The AO has not mentioned as to which relevant document he needed for establishing the genuineness of the claim of having had exempt income u/s 10(38). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. has been covered by the Investigation Directorate and it has been held that the broker was involved in this dubious scheme. The name of these brokers have been given in the report in the following manner...................................................... Again, the observation and the comment of the Ld.AO are baseless and false. There is no requirement in law that the broker and the Depository participant should be the same person. An investor can open multiple Demat Accounts with different brokers with a valid PAN card. The Securities and Exchange Board of India (SEBI) does not levy any limitation on opening more than one Demat account in India. As Fix Fit Securities Pvt. Ltd. is not a Depository Participant, the demat account was opened with Zuari Investments Ltd. There is no evidence of Fix Fit Securities Pvt. Ltd. having been covered by the Investigation Directorate. In the report of the Investigation Directorate running into 36 pages, which was attached with the assessment order, there is no mention of the name of M/s Fix Fit Securities Pvt. Ltd., what to talk of their involvement in the dubious scheme. v) The assessee has purchased and sold the shares in the same pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of shares of both the companies was done by the assessee through broker Globle Stock and Securities Ltd. and the address of the said broker was incidentally the address of the two companies / where as here the address of the company whose shares have been purchased and the broker are distinct and different. * The AO made extensive inquiries in the case / whereas no inquiries at all were made by the AO in the instant case. * The broker, viz. Ashish Stock Broking Pvt. Ltd. did not respond to AO's letter seeking information about the purchasers of the shares of the two companies / whereas no such letters were sent to the broker by the AO in this case. Based on these crucial facts and since no substantial question of law was involved, the appeal of the assessee was dismissed by the Hon'ble High Court. The said decision is not applicable to the assessee, as the assessee has successfully demonstrated with help of evidences on record to have made the transaction of purchase and sale of alleged shares. No enquiry, whatsoever, was made by the AO in this case. No single material was brought on record indicating name of any of the entry provider taking assessee's name or the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short span of six to seven months' time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods (No such exercise was undertaken by the AO) and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewelry only. The AO also recorded the finding that transactions were done at Ludhiana where also the share price of the company is quoted but maximum value of the share quoted was Rs. 17/- (Shares were traded at prevailing market rates on the stock exchange) and that too in July, 1997, i.e. long before the shares were sold by the assessee to M/s S.K. Sharma & Co. in the months of February and March, 1998. The shares have been sold at Ludhiana when actually stock exchange was not functional (Shares sold at Calcutta Stock Exchange which was fully functional) - a fact which is also recorded by the AO. The AO also recorded the finding that although the shares were transferred, they were still lying in the name of assessee much after the sale to M/s S.K. Sharma & Co. (The impugned shares ceased to exist in the demat account of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. Just the modus operandi, generalization, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the AO. 1.15 In the present case, the Assessing officer has been guided by the report of the Investigation wing, Kolkata, prepared with respect to bogus capital gains transactions. He has believed the report to be a gospel truth. The assessing officer has not brought out any part of the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT 37 ITR 288 SC). The suspicion or presumption, however strong it may appear to be true, needs to be corroborated by some evidence to establish a link that the assessee has brought back his unaccounted income in form of LTCG. In this connection, reference can be made to the judgment of Special Bench of Mumbai, ITAT in case of GTC Industries vs. ACIT 164 ITD 1, wherein it has been held that conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of 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. Further, reliance is placed on the following decisions: 1. Vijayrattan Balkrishan Mittal Vs. DCIT (2019) 33 NYPTTJ 740 (Mum.) (Trib.) 2. Smt. Karuna Garg Vs. ITO (2019) 178 ITD 823 (Delhi) (Trib.) 3. Chandra Prakash Jhunjhunwala Vs. DCIT (2019) 201 TTJ 831 (Kol.) (Trib.) 4. Smt. Madhu Killa Vs. ACIT (2019) 178 DTR 236 (Kol.) (Trib.) 5. Ramprasad Agarwal Vs. ITO (2019) 174 ITD 286 (Mum.)(Trib.) 6. DCIT Vs. Saurabh Mittal (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. There is nothing on record to show that the trading by the broker/company was ever suspended by the SEBI nor is there anything on record to show that the broker of the appellant mentioned here in above was involved in the alleged scam. The Assessing Officer has not even considered examining the broker of the appellant. It is a matter of fact that SEBI looks into irregular movements in share prices on range and warns investors against any such unusual increase in shares prices. No such warnings were issued by the SEBI. 1.18 The evidence with regard to source and purpose for which amount had been received and credited in the books has been submitted by the assessee, that has not been found to be false, forged or fabricated by the AO. The identity of the party is established from the contract note itself wherein it has been prominently stated that name of the Share Broker is M/s Fix Fit Securities Pvt. Ltd. and that they are member of the Calcut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 corresponding movement in demat account; g) The price on which sale consideration had been realized was in full conformity with the rates prevalent in the stock exchange at the relevant time; h) The transactions were Security Transaction Tax (STT) paid and thus, requirement of condition for exemption as contained in section 10(38) had been fully complied with; i) In addition to payment of brokerage, service tax had also been paid by the assessee through bills issued by the brokers; j) The sale consideration has been received from the broker through cheques; k) The amount received, being properly explained, can neither be considered as unexplained nor as undisclosed; 1.22 The Ld.CIT(A) has turned a blind eye to all the evidences put forth by the appellant and has miserably failed to distinguish any of the direct case laws cited by the appellant on the subject. In his entire order running into 39 odd pages, he has not addressed as to why the direct evidence put forth by the appellant in respect of purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and sale purchase transactions are not genuine but planned to provide entries of fictitious gains and losses to the beneficiaries by these operators. The appellant failed to justify purchase and sale of these shares. The appellant has not given name of the person who recommended purchase of these shares to the appellant. The appellant failed to prove that there was no such scheme as identified by the Income Tax Department. The appellant failed to prove that no benefit derived by it from such scheme. In fact as per return of Income there is profit of Rs. 9,37,172/-. It is also important to note that similar type of transaction in the same scrip was made by related person Mr. Madan Mohan Gupta, Mr. Pawan Gupta and Mr. Shailendra Gupta. This also supports the view of the AO that these shares were transacted as per the scheme of getting accommodation entry of bogus LTCG. This clearly establishes that the appellant got the entry of bogus long term capital gain. The CIT(A) has discussed every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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'ble bench mostly relied on the investigation report of DIT(Inv), Kolkata wherein entire modus operandi of penny stock is dealt with including the gullible method of price rigging by a well organized syndicate of brokers and shell companies. In the opinion of the Hon'ble bench, while passing orders in penny stock cases, ITAT should have given weightage to this well established legal principle of Apex court and should have looked into the surrounding circumstances, which they did not. Therefore, these bunch of orders of ITAT are vitiated with injustice to the department. That now, in this factual back drop my humble contention is that as per income tax law, ITAT is the highest fact finding quasi judicial forum. Neither High court nor the Supreme Court has any power to interfere with the factual findings of tribunal. Only they have the power to admit and adjudicate the question of law, if involved in any appellate matter. Now in this context, can Hon'ble bench deal with factual mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue 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 offence when his or her name has nowhere figured out in the investigation report? If the reasoning of the Hon'ble bench is accepted, then it means that any person can be hanged in the country, although the investigation or enquiry report, which is basis of charging a person for any offence, has not spared a word or evidence about the involvement of that hanged person in any offence. Will it not be travesty of justice or a judgement by a kangaroo court of law? Further, 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. 1.26 The Ld.CIT(A) has heavily relied on the tests of human probability in confirming the addition, referring to the decisions in the case of Sumati Dayal vs. CIT (214 ITR 801) Reliance placed by him on the decision of the Apex Court in the case of Sumati Dayal (supra) is wholly misplaced. In that case, the assessee therein had clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference 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 the case of Sanjay Singhal vs. DCIT, in ITA Nos.708, 710, 711/Chd/2018 decided on 20/09/2021, wherein the Chandigarh ITAT has rebutted the issue and held - 34.The next issue discussed by the learned assessing officer was with respect to the preponderance of the probabilities in para number 4.12 of the assessment order. The learned assessing officer noted that in the instant case, there are many statements duly supported by the evidences that the individuals of Bhushan Steel Ltd. group has received bogus long-term capital gain entries from various companies managed and controlled by entry operators. Further, the assessee has invested in shares of various penny stock companies, which were not doing any meaningful business, and even the earning was minimal. No prudent investor will ever invest huge sums in a company, which does not have history of declaring dividends and sound financial conditions. All the transactions of the sale of shares have resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 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, we proceed to consider the taxability of the long-term capital gain earned by the assessee under section 68 of the income tax act whether in situations like this, one may fall into realm of "preponderance of probability" where there are many probable factors, some in favour of the assessee and some may go against the assessee. However, the probable factors have to be weighed on material facts so collected. Here, in this case, material facts strongly indicate a probability supported by the evidences produced by the assessee that assessee has earned long-term capital gain on sale of the shares. The another very strong probability arises is that assessee has introduced its unaccounted money in the guise of profit on sale of shares holding it is a long term capital gain and showing it is a tax exempt income. The probable factors could have gone against the assessee, only if - i. there would have been some evidence found from searches conducted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly 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 any losses, it was confessed before the settlement commission that the expenditure incurred or the losses suffered by the assessee have been adjusted against the unaccounted income of the assessee, books of the assessee did not show in that particular case any drawings for purchase of tickets and incurring travel expenditure to 3 different cities prior to the date of winning of the jackpot races. The assessee has given up the winning from the jackpots immediately on same becoming taxable due to the amendment in the income tax act. Contradistinction to the above facts in the present case, assessee is consistently an investor in the shares. The holding period of the shares is also quite long. The assessee is also a shareholder in various companies of the Bhushan steel group limited. The assessee has shown purchase consideration paid by the cheque and recorded in its books of accounts and accepted by the revenue in earlier years under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital 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 the Hon'ble Bombay High Court has also been dismissed by Hon'ble Supreme Court. Many of the decision of the coordinate benches have also discussed the facts similar to the issue in the present case and decided in favour of the assessee. Some of such recent cases are listed here as under:- S.No Title of the case Appeal number/date of decision Authority rendering that decision 1. CIT vs. Shreyashi Ganguli ITA 196 of 2012 Cal. High Court 2. Classic Growers Ltd vs. CIT ITA 129 of 2012 Cal. High Court 3. PCIT vs. Pramod Jain ITA No.209/2018 Rajasthan High Court 4. CIT vs. Rungta Properties Limited ITA No. 105 of 2016 Cal. High court 5. CIT vs. Sumitra Devi ITA No.54/2012 Rajasthan High Court 6. Commissioner of Income Tax vs. Kesar A. Gada ITA No. 300 OF 2013 Bombay High Court 7. CIT vs. Prempal Gandhi ITA No. 95 of 2017; 401 ITR 253 Punjab & Haryana High Court 8. PCIT vs. Hitesh Gandhi ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.1267/Kol/2018 Dt. 26/09/2018 Kolkatta ITAT 43. Shobhit Goel vs. ITO ITA No.2022/Del/2018 Dt. 25/09/2018 Delhi ITAT 44. Kaushlaya Devi vs. ITO ITA No.1496/Hyd/2018 dt. 19/09/2018 Hyderabad ITAT 45. Amit Shah vs. ITO ITA No.519/Kol/2018 Dt. 26/09/2018 Kolkatta ITAT 46. Deepak Bhattad HUF vs. ITO ITA No.1287/CHNY/2018 Dt. 19/09/2018 Chennai ITAT 47. Arun Kumar Bhaiyya vs. ITO ITA No.2701/Del/2018 Dt. 30/08/2018 Delhi ITAT 48. ITO vs. Kapil Mittal ITA No.17/JP/2018 dated 28/09/2018 Jaipur ITAT 50. Shikha Dhawan vs. ITO ITA No.3035/Del/2018 Dt. 27/06/2018 Delhi ITAT 51. Meghraj Singh Shekhawat vs. DCIT ITA No.443 & 444/JP/2018 dated 07/03/2018 Jaipur ITAT 52. DCIT vs. Vimlesh Kumar Singh ITA No.21/BIL/2013 Dated 15/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neficiaries 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 in the cases of Yogeshwar Prasad (16-TTJ-175) Naren Singh Bhatti (40-TTJ-381) and Pradip C. Patel (58-TTJ-409). In the instant case, this burden has not been discharged. The entire addition being made on surmises and conjectures deserves to be deleted. 1.34 The appellant finally relies on recent decisions rendered by the jurisdictional Jaipur Bench, on exactly identical facts, in which the additions made u/s 68 and 69C, have been deleted, in the following cases- * Pramod Jain vs. DCIT ITA No.368/JP/2017 decided on 31.01.2018 * Meghraj Singh Shekhawat vs. DCIT ITA No. 443 & 444/JP/2017 decided on 07.03.2018 * Vivek Agarwal vs. ITO ITA No.292/JP/2017 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, referred to by the Hon'ble Court in the case of Swati Bajaj is dated 27.04.2015 (scrip - Surabhi Chemicals and Investment Limited ) was available in public domain at https://taxguru.in/wp-content/uploads/2017/12/Investigation-Report-5.pdf However, in the instant case, the Investigation report running into 48 pages prepared by Nivedita Prasad, DDIT, was not in public domain and was available only with the department. The findings of CIT(A) are as follows - In this case also the appellant has not specifically indicated as to how he was prejudiced by not providing of cross examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cannot be made on basis of unconfronted oral statement(s) of third party(ies). The assessment based on statement without giving an opportunity is not sustainable in law. 2.4The above view is supported by the decision of Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) wherein the Hon'ble Court observed - 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons (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 evidence in the form of contract notes, bank statements, STT payments, etc. prove genuine purchase and sale of penny stock. Failure to provide cross-examination is a fatal error. Apart from the above written submission, the ld.AR during the course of hearing, invited the attention of the Bench to a very recent decision of Hon'ble Supreme Court in the case of PCIT vs. Kuntala Mohapatra delivered on 04.03.2024. The Court delivered a significant judgement in this case, addressing the eligibility of Long Term Capital Gains (LTCG) fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 received, before the ld. AO. However, ld. AO has not controverted any of these evidences furnished before him in support of the long term capital gain so claimed exempted. The ld. AO has narrated the modus operandi of the various entry providers which is a general statement and also referred to the statement of certain persons recorded by Investigation wing (no name of any such person is mentioned by him). These statements have not been made a part of the order or were either made available to the assessee. There is no allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 received the net sale consideration through banking channels. These evidences leave no doubt about the sale of shares made by the assessee at the prevailing market rate. 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 purchase consideration, DMAT account reflecting holding of the shares in the D-MAT account of the assessee, sale of shares through online on stock exchange which are also reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. Copy of Balance sheet of assessee as on 31st March, 2011 showing the shares of Dhanlabh Merchandise as investment 46-47 6. Copy of order of Calcutta High Court in respect of amalgamation of Dhanlabh Merchadse Ltd. with Bakra Pratisthan Ltd. 48-50 7. Copy of Transaction statement with DP for the period 01.04.2011 to 31.03.2012 evidencing receipt of shares of Bakra Pratisthan on merger 51 8. Copy of bill of Broker showing sale of shares of Bakra Pratisthan in different lots on various dates enclosing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case of CIT vs. Pooja Agarwal, and PCIT vs. Pramod Jain & Ors. Considering the above facts and circumstances and taking into consideration, the various documentary evidences furnished by the assessee in support of his claim and further relying upon the decisions of this tribunal as well as decision of Hon'ble Jurisdictional High Court including the decision in the case of CIT Vs. Pooja Agarwal (supra) and in the case of PCIT Vs. Pramod Jain & Ors. (supra), it is held that claim of long term c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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