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TMI Blog2024 (12) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... ent but they were not provided to the Assessee neither an opportunity of cross examination was afforded to the Assessee - It is a matter of record that the A.O. accepted that the relevant material was not provided to the Assessee during the Assessment and then the A.O. in his remand report has mentioned that he sent all the statement by post to the Assessee on the Address mentioned in the ITR for AY 2018-19. In this regard, it is submitted by the ld. AR that the address of the Assessee was changed and the same was updated in PAN records. Same is certainly established by copy of return available on Page 60-61 of the Paperbook and the said documents should have been sent on the address as per PAN records with NSDL. Then we find that AO forwarded these documents to CIT(A) along with Remand Report with the observations that these documents relied by AO could not be provided to the assessee yet CIT (A) failed to share these documents with the Assessee during appellate proccedings. Thus no doubt certain principle of natural law are violated but we have to examine the issue on merits and then consider that how far absence of this opportunity cross examination of witness or non provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,89,108/- and Rs. 1,81,75,146/- respectively totaling to Rs. 6,98,64,254/- which was claimed as exempt income u/s 10(38) of the Act. The AO examined the transactions in the light of the investigation conducted by the Directorate of Investigation, Kolkata and taking into consideration certain orders of the Security and Exchange Board of India (SEBI). Statement of the assessee was also recorded u/s 131 of the Act wherein she had explained the reasons for investment as ordinary investor. The AO, on the basis of surrounding circumstances, human conduct and preponderance of probabilities surrounding the transaction and after taking into consideration the general principles of tainted transactions in penny stocks and scheme of LTCG, made the addition u/s 68 of the Act in regard to the returns holding that the LTCG transaction was not genuine and was a sham transaction. The AO held that the transaction is bogus and sham and by way of accommodation entries. An addition was also made on account of commission paid for getting the accommodation entry to the extent of 2% of the total receipts u/s 69C of the Act. 2.1 The assessee went in appeal and amongst other grounds on merits had also rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus gains of Rs. 7,17,57,254/- is held to be reasonable and I do not find any infirmity with the findings of the AO. Therefore, the order of the AO is accordingly upheld. 3. The assessee is in appeal raising the following grounds:- 1. That on the facts and circumstances of the case the learned A.O. and CIT(A) erred in:- 2 (a) Issuing the assessment order after the expiry of limitation period i.e., after 21 months from the end of the assessment year in which the income was first assessable, which, as per the provisions of section 153 of the Act makes it invalid? The assessment order with notice of demand was dispatched on 01.01.2018 vide speed post number ED671492976IN by the office of ld. Assessing Officer. Since, the last date for issuing the assessment order was 31.12.2017, but it was dispatched on 01.01.2018 therefore the Assessment Order is barred by limitation and is invalid. (b) Changing the section under which addition was made by the ITO under section 68 to section 69A of the Income Tax Act 1961. No formal notice has been issued by the CIT(A) for the purpose. (c) Making an addition of Rs. 7,17,57,254/- under Sec. 68 which was returned as LTCG U/s 10 (38) of the Act. 3 (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a very transparent manner under the control and monitoring of regulator and also Appellant was acting in ordinary course of Investment which is clear from her records and the fact that the shares were sold by him through the stock exchange and through recognized brokers. (j) Relying on the statement of brokers, Script operators and intermediaries and treating the transactions as non-of the same and neither allowed to cross examine the said parties despite request made by the appellant in its letter to the ITO dated 22.12.2017. This is a clear case of violation of the principle of natural justice. 8 (k) Making an addition of Rs. 14,35,145/-, calculated on presumption basis that 2% commission paid to arrange colourable LTCG, as unexplained expenditure U/s 69C while ignoring the factual matrix and genuineness of LTCG 9. II. Without Prejudice to above stated Grounds, the addition of Rs. 14,35,145/- is also bad in law as this addition was made without taking into consideration the concept of Source and Application of Funds. III. The Appellant craves leave to add, alter or amend the grounds of appeal at or before the hearing. 4. Heard and perused the record. The main issues involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was changed and the same was updated in PAN records. Same is certainly established by copy of return available on Page 60-61 of the Paperbook and the said documents should have been sent on the address as per PAN records with NSDL. Then we find that AO forwarded these documents to CIT(A) along with Remand Report with the observations that these documents relied by AO could not be provided to the assessee yet CIT (A) failed to share these documents with the Assessee during appellate proccedings. Thus no doubt certain principle of natural law are violated but we have to examine the issue on merits and then consider that how far absence of this opportunity cross examination of witness or non provision of documents was prejudicial to the assessee. 7. As with regard to the merits of case ld. AR submitted that the Assessee was not a part of any sham transaction which is also evident by the investigations conducted by the Securities and Exchange Board of India. According to ld. AR, the Assessee was specifically given a clean chit in that investigation. 8. Now as matter of fact the Assessee acquired 100000 (One Lakh) Pre-IPO Equity Shares of HPC Biosciences Limited @10/- per share for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was duly recorded which is there on page number 6 to 11 of the Assessment Order. Ld. AR refered to relevant questions to suggest that due explanation was given about reasons for investment. 10. Now we find that most vital piece of material on record are the SEBI orders as the same have substantial bearing on the issue about transaction in a share being suspicious or otherwise tainted. What is established is that by SEBI order 29.06.2015, Para 50 page 401, direction were passed against the assessee restraining her from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions, name of the Assessee is at point 64 page number 404. Then by SEBI Order dated 17.02.2016 [Page No. 208 to 217 of PB], directions passed in Order dated 29.06.2015 were confirmed and the name of the Assessee is at Serial Number 40 at Page 215 of the Paperbook. It is pertinent to note that this Order was passed as the Assessee failed to file its objections before the SEBI. Then by SEBI Order dated 25.08.2016 [Page No. 261-367 of PB], is the confirmatory order against the remaining 107 entities. However, vide SEBI Order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record by the Ld. A.O against the Assessee rendering the trades placed as sham. Ld. CIT (A) in para 11.1 of his Order at Page 22 recorded that the AO has delved deep and findings of the SEBI in the cases of HPC Biosciences and Sunstar Realty Development Limited have been elaborately discussed in the Assessment Order. However, there was no SEBI investigation Order in the matter of Sunstar Realty Development Limited at the time of Assessment. SEBI passed an order dated 19.03.2021 [Page No. 448-494 of the Paperbook] wherein it has found price manipulations in this scrip. It is pertinent to mention that the said investigation was for the period of 26.11.2013 to 03.06.2015 [Refer Page 449 Para 1]. In Para 2 of the same, this period is divided into 5 patches, and in this investigation only Patch 3 [23.10.2014 to 15.12.2014] and Patch 5 [01.01.2015 to 03.06.2015] were examined wherein it was, inter alia, noticed that the price of the scrip of the Company was manipulated. It is pertinent to note that the Assessee sold its shares of Sunstar Realty Development Limited from 10.04.2014 to 08.07.2014 [Refer Page Number 18 of the Paperbook], Therefore, virtually there is no finding, direct or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi Jhunjhunwala vs. ITO in ITA No.747/Del/2022 relied by the ld.CIT(A) in the case of HPC Biosciences Ltd. scrip. In that case, that assessee was preferential allottee who was allowed bonus shares on the same date. Furthermore, we also find that the coordinate Bench while dealing with the case of Sangeeta Devi Jhunjhunwala (supra) did not have benefit of the fact that of SEBI proceedings and directions wherein the assessee was exonerated from any alleged act of manipulation of the prices for achieving LTCG, like the assessee before us. In that case, even after issuing notices u/s 131 of the Act, that assessee had failed to appear while in the case before us the assessee appeared and deposed on oath the reasons and circumstances for making the investments. We are of the considered view that when an assessee deposes on oath giving explanation of the reasons and circumstances for investment, the same cannot be brushed aside on the basis of general principles of the modus operandi of bogus LTCG claims. 15. In the light of the aforesaid, we are inclined to accept the grounds of appeal of the assessee holding that ld. tax authorities below have fallen in error in considering the LTCG cla ..... 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