TaxTMI 
TaxTMI 
2006 (1) TMI 181
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....any was a member of the Delhi Stock Exchange. It was carrying on the business of share broking and as such, it was engaged in the sale and purchase of shares on behalf of various clients. One such client on whose behalf shares were purchased and sold was M/s Friends Portfolio (P) Ltd. 4.1 On 3rd Aug., 2000, a search was carried out on one Mr. Manoj Aggarwal, director of M/s Friends Portfolio (P) Ltd. During the course of search, inter alia, various documents and books of account, etc., pertaining to M/s Friends Portfolio (P) Ltd. were found. Consequent upon the search, block assessment of Mr. Manoj Aggarwal and that of M/s Friends Portfolio (P) Ltd. were completed. These assessments were made under s. 158BC on 29th Aug., 2002. 4.2 On the basis of documents found during the course of search, statement of Mr. Manoj Aggarwal and other persons were recorded during the search and subsequent proceedings and on the basis of this evidence, the AO of M/s Friends Portfolio (P) Ltd. and Mr. Manoj Aggarwal found that Mr. Manoj Aggarwal was doing the business of providing book entries to various parties and one of such beneficiary of accommodation of entries given by Mr. Manoj Aggarwal wa....
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.... were undertaken by it as a broker on behalf of M/s Friends Portfolio (P) Ltd. On account of these bogus accommodation book entries, the assessee has reduced its profit on trading in shares by Rs. 3,26,48,898.84 in financial year 1999-2000 relevant for the asst. yr. 2000-01 Further. the assessee has transferred brokerage income of Rs. 6,76,067 by showing bogus accommodation entries of payment of brokerage incentive to M/s Friends Portfolio (P) Ltd. in the financial year 1999-2000 relevant for the asst. yr. 2000-01. Therefore, these amounts constitute the undisclosed income of the assessee during the block period." He thus completed the assessment on 29th Nov., 2004 by working out the undisclosed income of Rs. 3,33,24,965.84 as under: 1. Undisclosed income from suppression of profit by accommodation entries of share transactions (for the financial year 1999-2000) (as discussed in para 14) 3,26,48,898.84 2. Undisclosed income from suppression of profit by accommodation entries of payment of brokerage incentive (for the financial year 1999-2000) (as discussed in para 14) 6,76,067.00 Total undisclosed income for the block period 3,33,24,965.84 4.....
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....(Del); (vi) Rushil Industries Ltd. vs. Harsh Prakash (2001) 166 CTR (Guj) 300 : (2001) 251 ITR 608 (Guj); (vii) Aditanar Educational Institution vs. Addl. CIT (1997) 139 CTR (SC) 7 : (1997) 224 ITR 310 (SC); and (viii) Dayal Industries vs. CCT 100 STC 215. 10. Learned CIT-Departmental Representative, on the other hand, strongly opposed these arguments and placed reliance on the orders of the AO and that of the learned CIT(A). 11. We have carefully considered the facts and circumstances of this matter and the rival submissions. The legal issues relating to validity of notice issued under s. 158BD and validity of the assessment proceedings were also raised before the learned CIT(A). Before him, reliance was placed on behalf of the assessee on the decisions reported in (2004) 192 CTR (Del) 607 : (2005) 272 ITR 75 (Del), Dr. Nand Lal Tahiliani vs. CIT (1988) 69 CTR (All) 91 : (1988) 170 ITR 592 (All), Union of India vs. Ajit Jain & Anr. (2003) 181 CTR (SC) 22 : (2003) 260 ITR 80 (SC), CIT vs. P. Jaiswal (2002) 175 CTR (Del) 28 : (2001) 121 Taxman 272 (Del),S. Sundaramvs. Dy. Inspector of Police (Crimes) (1992) 197 ITR 696 (Mad), Kularanjan Pathak vs. IT....
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....19th June, 2002 which cannot be treated to be material disclosing undisclosed income of the assessee. It was also pointed out by him that although as per the assessment order, the books of account of the persons searched, i.e., Mr. Manoj Aggarwal and M/s Friends Portfolio (P) Ltd. and the alleged diary containing entries regarding cheques and cash have been made the basis for making the additions of undisclosed income in the case of the assessee in the assessment order passed under s. 158BC/158BD but the satisfaction note does not make any reference to these documents. According to him, therefore, there is no nexus between the satisfaction note and the assessment made. The learned counsel also pointed out that even vide letter dt. 5th Nov., 2004, the AO informed the assessee as under: "Regarding the copy of seized material, the same shall be provided to you when it will be used against you in any proceedings of IT Act." On the basis of the above letter, his emphatic submission was that the seized material was not considered and used by the AO for recording his satisfaction and for issuing notice under s. 158BD against the assessee and, therefore, the assessment order pa....
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....ould have been no necessity to further record the satisfaction again on 26th Nov., 2002. He also pointed out that from the contents and language of the alleged satisfaction note dt. 29th Aug., 2002, it is evident that this note is subsequently prepared. He submitted that if the satisfaction was recorded on 29th Aug., 2002, the notice should also have been issued on that date itself or just thereafter. 14.4 The learned Departmental Representative, on the other hand, maintained that the AO had made this note on 29th Aug., 2002. 15. We have carefully considered the entire material on record and the rival submissions. With this note, a list of beneficiaries has beep appended. The name of assessee appears at item No. 69, which is as under: 69 SMC Share- brokers Ltd. 17, Netaji Subhash Marg, Daryaganj, New Delhi-02. Friends Portfolio (P) Ltd. 30000000 The assessee has taken bogus accommodation entry through M/s Friends Portfolio (P) Ltd. and hence Satisfaction note in this regard has been recorded in the case of this company and proposal for centralization of this case in this circle has been approved for taking up proceedings u/s 158 BD. The last sentenc....
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....c-note) is antedated. (iv) There is a detailed note by the AO, a copy of which has been filed at p. 33 of the paper book. The concluding observations of the AO in this note are as under: "In view of the facts mentioned above and the block assessment orders of Sh. Manoj Aggarwal and M/s Friends Portfolio (P) Ltd., undisclosed income has arisen in the hands of M/s SMC Share Brokers Ltd. which has been found during the course of search and seizure operations in the case of Shri Manoj Aggarwal and his associate concerns. Thus, proceedings under s. 158BD are applicable in this case." The date below the signatures of the AO is not legible in this copy. Therefore, the learned Departmental Representative was asked during the course of hearing of the case to verify the date of this note. On verification from the record, she informed that the note is dt. 26th Nov., 2002. This fact has been recorded by the Bench on p. 33 itself. 17. In view of the above, it is clear that on or before 29th Aug., 2002, the AO of M/s Friends Portfolio (P) Limited and that of Shri Manoj Aggarwal did not record any satisfaction. The note dt. 29th Aug., 2002 is, therefore, not to be ta....
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....itation provided for recording for satisfaction. The only period prescribed is for completing the assessment under s. 158BD, which is two years from the end of the month in which the notice under s. 158BD has been issued in the cases where search is initiated after 1st Jan., 1997. 20.1 The next plea of the assessee is that the satisfaction note makes no reference to the seized material and thus the proceedings under s. 158BD judged from the satisfaction note cannot be justified. We do not find force in this submission also. The satisfaction note dt.26th Nov., 2002, referred to above, is a detailed one. We have also reproduced the concluding observations of the AO, which indicate that he applied his mind before recording the satisfaction. It may be pointed out that the satisfaction note is not required to contain each and every minute detail and to refer to each and every material relevant for making assessment under s. 158BD. Thus, the argument that since, in the satisfaction note, there is no reference to seized material, the assessment made on the basis of such satisfaction note cannot be legally sustained, is not acceptable. 21. The next legal objection of the assessee aga....
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....e and despite repeated requests, the assessee was not allowed opportunity to cross-examine him. In this regard, the learned counsel made reference to the letter dt. 19th Nov., 2004 and 25th Nov., 2004 which are available at pp. 36 and 72 of the paper book. According to him, this plea was taken even before the learned CIT(A) but he did not consider it proper to offer any further opportunity of giving right to cross-examination of Shri Manoj Aggarwal to the assessee. In support of his submission, the learned counsel placed reliance on the following decisions: (i) M.K. Thomas vs. State of Kerala 40 STC 278; (ii) State of Keralavs. Shaduli 39 STC 478; and (iii) Vasanji Ghela & Co. vs. CST 40 STC 544. He also placed reliance on the following decisions: (i) CIT vs. Eastern Commercial Enterprises (1995) 123 CTR (Cal) 217 : (1994) 210 ITR 103 (Cal); (ii) Gargi Din Jwala Prasad vs. CIT (1974) 96 ITR 97 (All); and (iii) Paharch and and Sons vs. State of Punjab 30 STC 211 26. The learned Departmental Representative, on the other hand, supported the observations of the AO and that of the learned CIT(A) and submitted that the assessmen....
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....during the course of assessment proceedings in the case of M/s Friends Portfolio (P) Limited. During the assessment proceedings of these persons, the present assessee was never examined nor summoned to confront or cross-examine Shri Manoj Aggarwal. 27.2 During assessment proceedings of the present assessee, the AO issued notice dt. 3rd Feb., 2003. The assessee filed detailed reply on 15th Sept., 2004 and 29th Sept., 2004. The statement of Shri Manoj Aggarwal was further recorded during the course of assessment proceedings of the present assessee on 9th Nov., 2004 and thereafter a show-cause notice dt. 17th Nov., 2004 was issued. The assessee filed reply to this show-cause notice on 25th Nov., 2004and the assessment order was made just after four days, i.e., on 29th Nov., 2004. During the assessment proceedings of the present assessee also, the present assessee was never called to cross-examine Shri Manoj Aggarwal. 27.3 Thus, on going through the copies of the statements of Shri Manoj Aggarwal, as referred to above, it is found that all the statements were recorded behind the back of the assessee and the assessee was not afforded any opportunity to cross-examine him. In the le....
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....of "Agg...." The signatures show "Ag.." Statement dated 14th Dec., 2000 The signatures on page 4-7 do not tally with each other. Statement dt. 19th June, 2002 All the pages have been signed in Hindi except page No. 2 which has been signed in English. even the Hindi signatures appearing differently on different pages. Statement dated 9th Nov., 2004 The signature on this statement do not tally or even resemble with any of the signatures in earlier statements. The signatures even tend to differ from page to page 7 Other errors in the statements of Mr. Manoj Aggarwal In this connection we respectfully invite your kind attention to declaration made by Mr. Manoj Aggarwal on last page of following statements: • Statement dt. 11th Sept., 2000 • Statement dt. 14th Dec., 2000 It has been categorically declared by Mr. Manoj Aggarwal that the contents of the statements written in English have been conveyed to him in Hindi. This declaration shows that Mr. Manoj Aggarwal either could not understand the contents as written in English so in order to understand ....
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....s on the Revenue to prove the contrary as well as to provide the assessee an opportunity to cross-examine witness, which is being denied. • In this connection we respectfully place reliance on the following cases supporting legitimate right of the assessee to cross-examine. • CIT vs. Eastern Commercial Enterprises, Gargi Din Jawala Prasad vs. CIT, Pahar Chand & Sons vs. State of Punjab (1972) 30 STC 211 (Pun), Banwarilal Sitaram vs. State of Orissa (1974) Tax LR 1960 (Ori), State of Kerala vs. K.T. Shaduli Yusuff (1977) 39 STC 478 (SC) and Prarthana Construction (P) Ltd. vs. Dy. CIT (2001) 118 Taxman 112 (Ahd) (Mag). In the last the assessee made following prayer: "In view of the above, it is thus evident that any other inference other than genuineness of transactions incurred during normal course is incapable of being drawn. However, in case, your goods elf still forms an adverse view, it is requested that the factual and legal position as well as reliance on the cases as reported above may please be rebutted and an opportunity of being heard may kindly be provided to us." 27.5 It may be pointed out that the statement of S....
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.... 360 : (1980) 125 ITR 713 (SC). The learned CIT(A) has reproduced the reply of the assessee and also the decisions on which reliance has been placed by it. However, no finding on ground No. 2, as taken before him by the assessee, was recorded. The learned CIT(A) has simply rejected ground Nos. 1, 2 and 9. Thus, he too did not consider it proper to allow the opportunity to the assessee to cross-examine Shri Manoj Aggarwal which was the main basis for making addition against the assessee. In view of the above facts, it is clear that neither the AO nor the learned CIT(A) gave any opportunity to the assessee to cross-examine Shri Manoj Aggarwal despite repeated requests made in this regard in writing before them. 31. On going through the assessment order and the order of the learned CIT(A), it is found that the statement of Shri Manoj Aggarwal has been mainly used for making addition in the hands of the assessee. The AO has repeatedly made use of the statement of Shri Manoj Aggarwal in the assessment order and, in fact, has based his conclusion on the basis of this statement for holding that the transactions carried out by the assessee were not genuine. In this regard, we may make r....
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....by 19th Nov., 2002. The assessee filed letter dt. 19th Nov., 2004 and demanded opportunity to cross-examine Shri Manoj Aggarwal. Further, vide letter dt. 19th Nov., 2004, the assessee again demanded this opportunity. 32.1 Vide another letter dt. 25th Nov., 2004 available on p. 72, the assessee made reference to various statements of Shri Manoj Aggarwal and after pointing out discrepancies in para 6 of this letter, reproduced above, made a request to the AO to examine him and other person. In para (i) on p. 93, the following allegation was made by the assessee: "(i) The proceedings are being concluded without giving proper and sufficient opportunity of being heard to the assessee and denying it its legitimate right to cross-examine other parties (Mr. Manoj Aggarwal and Mr. Neeraj Gupta)." 33. The assessee also gave a petition to the Addl. CIT for issuance of direction under s. 144A of IT Act. On this petition, the comments of the AO/Dy. CIT were obtained. In these comments also, nothing is stated about the request of the assessee for cross-examination of Shri Manoj Aggarwal. 34. As pointed out above, the assessee took the specific ground before the learned CIT(A) a....
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....the AO has not collected any evidence and finding himself cornered in the appellate proceedings, request the appellate authorities to assume the role of AO and carry out the investigation on his behalf. Thus, we strongly object to this request of the AO. Acceding to such request shall also be against the law as a decision after cross-examination shall be in appellate proceedings as against assessment proceedings. However, without prejudice to the above, we are ready to have the cross-examination of Mr. Manoj Aggarwal as and when it is arranged." However, even the learned CIT(A) did not consider it proper to grant opportunity to cross-examination to the assessee. Thus, the Departmental authorities, for reasons best known to them, avoided cross-examination of Shri Manoj Aggarwal though the assessee kept on demanding the right of cross-examination to meet out the allegations levelled against him. 35. On closer scrutiny of various documents and on consideration of the entire relevant material, this case presents peculiar facts and circumstances. On the one hand, the Department was eliciting entire information from Shri Manoj Aggarwal by recording his statement again and again and....
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....iously as it is fatal to the entire proceedings. 36. If we go to the background of the entire matter and in particular of various statements of Shri Manoj Aggarwal, then it becomes all the more clear that he was trying to exculpate himself by involving the assessee and others. Thus, he was not an independent witness but an interested witness and the testimony of such interested witness cannot be viewed without caution. As the AO has violated the rules of natural justice in denying the opportunity of cross-examination to the assessee, the statements recorded behind the back of the assessee of such witness cannot be utilized against him. 37. The AO has considered the submissions of the assessee on this issue and rejected the request for cross-examination by placing reliance on the decision of Hon'ble Kerala High Court in the case of M.K. Thomas vs. State of Kerala 1977 CTR (Ker)(FB) 267 : 40 STC 278 (FB), decision in the case of Manindra Nath Chatterjee vs. CCE 1977 Tax LR 1754 and the decision of Madras High Court in the case of T. Devasahaya Nadar vs. CIT (1964) 51 ITR 20 (Mad) and has held that it could not be stated as a general proposition of law that 'any evidence....
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...., in the complexity of this matter and the importance attached to the statement of Shri Manoj Aggarwal and various discrepancies in his statement, the requirement of opportunity of cross-examination was most essential and fundamental. 39. The other cases on which the AO has placed reliance are also distinguishable on facts. 40. The issue has been considered by various authorities and the right of cross-examination has been considered an essential ingredient of reasonable opportunity to be afforded to an assessee. In the case of K.T. Shaduli vs. State of Kerala, the view of the Hon'ble Kerala High Court was upheld by the Hon'ble Supreme Court. This decision is reported in 39 STC 478. 41. In the case of Vasanji Ghela & Co. vs. CST 40 STC 544, the Hon'ble Bombay High Court has considered various authorities and has held as under: "Held, that, on the facts and circumstances of the case, the order of the Dy. CIT was bad on the ground of non-compliance with the principles of natural justice and the order of the Tribunal which upheld the order of the Dy. CIT was also bad on the same ground. The rules of natural justice do require that normally speaki....
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....ab & Haryana High Court in the case of Pahar Chand & Sons vs. State of Punjab 30 STC 211 and after making reference to other decisions, the Hon'ble Court held that it was the duty of the Dy. CIT to have given an opportunity to the assessee to cross-examine Keshavji Hirji and his failure amounts to violation of principles of natural justice. On this basis, the order of the learned CIT was held bad in law and the order of the Tribunal was also held bad in law for the same reason. 42. The assessee has also placed reliance on the decision of Delhi Bench of Tribunal in the case of Satish Gupta vs. ITO rendered by Tribunal, Delhi Bench SMC-IV in ITA No. 57 and 100/2004 (asst. yr. 1995-96). In this case also, the issue involved was as to whether the AO was required to afford an opportunity of cross-examination of Shri Anand Prakash. This statement was made by the AO in addition to other evidence. The assessee was not given opportunity to cross-examine despite having asked. The Tribunal, after considering the decision of Hon'ble Supreme Court in the case of Kishanchand Chellaram vs. CIT, deleted the addition by holding that the AO's failure to allow cross-examination vitiate....
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....ized the statement of Shri Neeraj Gupta against the assessee although this witness has not made any statement against the assessee. Again, no opportunity was given to the assessee to cross-examine even this witness, which further strengthened the allegation of the assessee that the denial of cross-examination of this witness was also to the disadvantage of the assessee. On examination of the entire material, therefore, we are unable to appreciate the approach of the AO who was expected to be fair to the assessee also in the quasi-judicial proceedings conducted by him. In the case of CIT vs. Simon Carves Ltd. 1976 CTR (SC) 418 : (1976) 105 ITR 212 (SC), the Hon'ble Supreme Court of India has observed as under: "The taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that scales are weighed against the assessee." 44. At the time of hearing, learned CIT-Departmental Representative submitted that if any prejudice ....
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....of Revenue to restore the issue to the file of the AO and to delete the impugned addition of Rs. 4.83 lacs could not be accepted." Since, in the present case, the repeated requests of the assessee were turned down by the AO as well as by the learned CIT(A) for cross-examining Shri Manoj Aggarwal and Shri Neeraj Gupta, it will not be proper to restore the matter back to the AO for this purpose. 46. In view of the above, the statement of Shri Manoj Aggarwal, which has been used against the assessee, cannot be utilized against it because in denying the right of cross-examination, the AO and the learned CIT(A) have flouted the settled canons of natural justice. On the basis of above observations, we allow ground No. 3 in favour of the assessee. 47. Ground Nos. 4 and 5 challenge the sustenance of addition of Rs. 3,26,48,898.84. 48. The AO has made addition of Rs. 3,33,24,965.84 on account of bogus accommodation book entries in the form of share profits. For this purpose, he has mainly placed reliance on the entries in the diaries seized (Annex. A-18) during the search under s. 132 from the premises of Shri Manoj Aggarwal and Annex. A-13 copy of account of M/s Friends Portfol....
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....ansactions amounting to Rs. 100 crores approximately were done by him on commission basis which shows that the remaining transactions done by him with the assessee and other companies were genuine. It was pointed out by him that in the statement recorded on11th Sept., 2000, Shri Manoj Aggarwal gave names of various persons with whom his transactions were not genuine but, in the last, the name of the assessee did not appear. It was further pointed out by him that even in the statement dt.19th June, 2002, Shri Manoj Aggarwal confirmed his statement dt.11th Feb., 2000wherein name of the assessee did not appear. It was also submitted by the learned counsel for the assessee that the statement of Shri Manoj Aggarwal has not been accepted by the AO in its entirety and although the AO has held the transactions carried out by him as bogus but no addition even on substantive or protective basis has been made in his case. The learned counsel also placed reliance on following judgements: (i) CIT vs. Eastern Commercial Enterprises (ii) Gargi Din Jwala Prasad vs. CIT (iii) Paharchand and Sons vs. State of Punjab 5.2 The submission of the assessee was that the assess....
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..... have not been denied by the assessee. The case of the assessee is that the transactions done by it with M/s Friends Portfolio (P) Ltd. were on the basis of client agreement and all these transactions were carried out through banking channel. Thus, the contents of pp. 83 to 85 of Annex. A-13 showing the figures of profit of M/s Friends Portfolio (P) Ltd. cannot be taken to be incriminating evidence against the assessee and on the basis of these contents, it cannot be said that the profit shown to have been earned by M/s Friends Portfolio (P) Ltd. was the income of the assessee. 54.1 The other document found and seized. during the course of search is Annex. A-18 on p. 110 of this diary two cheques bearing Nos. 005357 and 005356 of Rs. 50 lacs each have been mentioned on 25th March, 2000. These cheques have been received from M/s SMC. Again, since the payments were made by M/s SMC, i.e., the present assessee through cheques and further since the assessee has not denied the issuance of these cheques to M/s Friends Portfolio (P) Ltd., the cheques cannot be treated to be a material relevant for making the addition of Rs. 3,26,48,898.84. 55. The entry of cheques of Rs. 50 lacs eac....
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....s from Shri Manoj Aggarwal. The author of the entries has also not been produced to prove that the entry was made on the basis of some actual transactions. Thus, the document i.e. p. 1 of diary is only a dumb document and its contents cannot be proved against the assessee in absence of further material or evidence to corroborate this document and to connect the same with the assessee. The assessee, on the other hand, has denied the allegations levelled against it. 58. Shri S.C. Aggarwal, director of the assessee company was examined by the AO on21st Oct., 2004. Against the above entries, he has categorically submitted that the transactions undertaken by M/s SMC with M/s Friends Portfolio (P) Ltd. were genuine transactions. It has been specifically stated by him that Shri Manoj Aggarwal had taken the profit through account payee cheques. He has also categorically stated that he had never taken any cash from Shri Manoj Aggarwal. In support of this version, the assessee has filed the detailed accounts including the contract notes, bank accounts, sale bills, etc., copies of which have been filed in the paper book also. Thus, on the one hand, there is documentary evidence fully corro....
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....aintained by the firm known as Vasu Films of Madras. In this ledger, there were certain entries and on the basis of these entries, the AO held that the assessee had concealed her real income by not showing certain payments for which no receipts were issued by her. In this regard, reliance was made on the entries, which were as under: "20-9-1962 16/8 To Lata Mangeshkar 800 W plus L.F. Rs. 700 B 102 1,500 11-6-1963 16/5 To Lata 123 2000 123 2000" Shri N. Vasudev Menon, the managing partner of Vasu Films and one C.S. Kuma r, the firm's Bombay manger also explained that the letter 'W' put against the figures mentioned in the entries represented payment in White while the letter 'B' to be against some items indicated payments in Black. The assessee was given an opportunity to cross-examine these persons. The AO accepted the entries as showing payments made to the assessee and as the assessee had not shown these payments, these were treated to be the payments made outside the books of account. The AAC confirmed the additions. Before the Tr....
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....d out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, has been provided for in s. 34 by incorporating the words "such statements shall not alone be sufficient to charge any person with liability". After considering various decisions, the Hon'ble Court has observed in para 39 that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability on a person. (iii) Rira Lal Mahabir Pershad The Hon'ble Punjab and Haryana High Court has observed that such entries though relevant were only a corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries. (iv) Prarthana Construction (P) Ltd. vs. Dy. CIT Certain documents were found during the course of search operations at the residence of one Shri Sureshbhai Patel which contained details of payment made to one Shri Arunbhai. On these pages, there were number of entries with dates giving the name of the appellant and the purpose for which the same were gi....
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....ny. Sureshbhai Patel and Deepak Mehta are the brokers and the transaction involving the receipt of loan money have been, according to the Revenue, arranged through these persons. The mere testimony of these brokers tendered at the back of the assessee would not be sufficient to establish that the loan money has been received by the assessee." 61. The above judgement, which is on similar facts, fully supports the argument of the learned counsel for the assessee that the addition cannot be sustained in the hands of the assessee on the basis of entry in the diary and the statement of Shri Manoj Aggarwal. 62. So far as the statement of Shri Manoj Aggarwal is concerned, it is not proved that the entire amount of profit paid to M/s Friends Portfolio (P) Ltd. was the income of the assessee. Firstly, the earlier statements did not relate to the assessee and secondly the statements are general and vague in nature. The statement cannot be used against the assessee in absence of opportunity to confront that witness and in absence of his cross-examination as has been held by us while deciding ground No. 3 of this appeal. Shri Manoj Aggarwal did not refer to any transaction relating to th....
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....d any loss. Even if any requirement of taking margin money under circular letter then also the transactions cannot be held to be bogus merely on the ground that no margin money was taken before doing business on behalf of the client. (C) Acceptance by some of the beneficiaries: The AO has also observed that some of the beneficiaries who transacted with M/s Friends Portfolio (P) Ltd. and Shri Manoj Aggarwal accepted the entries and accepted the transactions as bogus and also got their matter settled by the Settlement Commission. On this basis, the AO has concluded that all the transactions entered into by Shri Manoj Aggarwal were bogus transactions. In fact, even Shri Manoj Aggarwal, in the first instant, did not accept that all the transactions entered into by him were bogus. Otherwise also, merely because some of the beneficiaries, for any reason, approached the Settlement Commission that by itself cannot be used against the assessee. (D) Abnormality of transactions in shares: The AO has also pointed out certain abnormalities in the transaction of shares carried out by assessee for M/s Friends Portfolio (P) Ltd. One of such abnormality as pointe....
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.... others. His statements are, therefore, self-serving. The Department has also favoured him because even protective assessment has not been made in his hands regarding alleged bogus transactions found during the course of search. Neither the AO nor the CIT(A) made any enquiry or carried out any investigation at the time of completion of assessment of Shri Manoj Aggarwal and M/s Friends Portfolio (P) Ltd. by independently examining the genuineness and the correctness of his statements. His statement has been accepted on its face value without any verification and cross-verification from any other person with whom he carried out the transactions and received cheques etc. Since the cheques were deposited in his account and in the account of M/s Friends Portfolio (P) Ltd., it was to be examined as to whether such transactions were benami in nature. The learned CIT(A) has supported the view taken by the AO without going into the documentary evidence filed by the assessee on record and without assigning reasons for discarding the same. The evidentiary value of Shri Manoj Aggarwal was required to have been examined in the context of the facts stated above but the learned CIT(A) upheld the ....