TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 440
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....nd disposed of by this common order. For sake of reference and facility, facts in case of Nitasha Gupta vs. ITO, Ward 3(1) Gurgaon in ITA 2826/Del/2018 (AY 2014-15) are taken up to adjudicate the principal issue of allowability of exemption u/s 10(38) of the Act vis. a vis. unexplained cash credit u/s 68 of the Act and only Grounds of appeal raised by assessee i.e in the case of Nitasha Gupta case in ITA 2826/Delhi/2018 (AY 2014-2015) (Supra) are reproduced hereunder:- 1. That order passed by Ld AO dated 26/12/2016 and further order passed by ld CIT A dated 23/03/2018 are bad in law in as much as notice u/s 143(2) on basis of CASS is not in accordance with jurisdictional conditions stipulated under the Act. 1.1 That order passed by Ld AO dated 26/12/2016 and further order passed by ld CIT A dated 23/03/2018 are bad in law in as much as assessment is framed on basis of invalid notice u/s 143(2) dated 30.09.2015 which is apparently not served on same day by speed post before time barring date as stipulated under the Act. 1.2 That order passed by Ld AO dated 26/12/2016 and further order passed by ld CIT A dated 23/03/2018 are bad in law in as much as assessment is framed on basi....
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....by Ld AO in present case is not discernible ; viii) eighthly assessee never made the transaction through persons whose statements are recorded and relied (also denied categorically before Ld AO in reply dated 28/11/2016); ix) lastly it is no body's case that these general statements talk about assessee's particular transaction ; 3. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in making addition of Rs. 28,66,148 without appreciating that burden to prove that transaction is bogus/sham has remained un-discharged from side of revenue. 4. That on the facts and in the circumstances of the case and in law, both ld CIT-A and ld AO erred in making subject additions without appreciating that the modus operandi relied extensively in impugned orders is never co-related even remotely to the facts of the present case as there is no iota of evidence brought on record which can display that assessee herein has inducted certain cash at the time of sale to certain indentified broker/middleman/syndicate member who has in turn introduced certain identified artificial paper company for alleged parking of said cash to buy the....
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....addition of Rs. 28,66,148 without appreciating spirit of law contained in section 10(38) and section 43(5)(d) where statutory status is provided to evidences generated from stock exchange system treating the same to be impeccable and only from finance act 2017 with prospective effective from AY 2018-2019, amendment is made in section 10(38), prior to which such gains would remain exempt. 11. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in applying section 115BBE which is out rightly bad in law. 12. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in not deciding the ground of addition of Rs. 34,406 on a/c of 26AS mismatch and Rs. 95,000 on a/c of HRA deduction u/s 10(13A)." 3. Similar grounds are taken in other two appeals, except the difference in figure. Before me , the Ld AR Shri Kapil Goel, Advocate has only pressed for arguments ground no 3 to 6 and 12 and accordingly the same are only taken up for adjudication in this order. Paper book and common written submissions and Paper Book containing pages 1 t 104 are filed/placed before me on ....
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....been decided in favour of the assessee by the plethora of decisions and produced the copies thereof passed by the Hon'ble Supreme Court & Hon'ble High Courts and ITAT wherein, similar views of lower authorities on basis of probabilities and stated investigation wing information, have been consistently overruled and exemption claimed u/s 10(38) of the Act has been restored once basic documents relating to transaction are put in place and same remained thoroughly undoubted by any direct enquiry on part of AO/Ld CIT-A. Ld. counsel for the assessee also filed the Written submissions and pleaded that similar view may be applied here also on basis of principle of uniformity and consistency and additions made u/s 68 may please be deleted. 6. On the other hand, Ld DR has strongly relied on the orders of lower authorities and vehemently prayed for confirming the additions made, but could not produce any contrary order passed by the Hon'ble High Courts as well as Tribunal on the issue in dispute. 7. I have heard both the parties and perused the records, especially the written submissions filed by the Assessee's counsel alongwith the various orders of the Hon'ble High Court and the Tribunal....
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....the integrity of the broker and the broker firm and also AO observed that the assessee had not furnished any explanation in respect of any discussion of trading of shares. The AO relied the loss of Rs. 25,30,396/- only on the basis of information submitted by stock as fictitious. The AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO's observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CiT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed." We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substantial question of law." 3. The Hon'ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows : "It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker....
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....s no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO....
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.... that Assessee Company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee company or the assessee company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corr....
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.... February, 2012. The said shares were dematerialized on 31st March, 2012 (copy of demat request slip along with the transaction statement is placed in the paper book at page no. 19 to 21). 5. On 24.01.2013, the Hon'ble Bombay High Court approved the scheme of amalgamation of "Smart Champs IT and Infra Ltd." with "Cressanda Solutions Ltd." In accordance with the said scheme of amalgamation, the assessee was allotted 50000 equity shares of "M/s. Cressanda Solutions Ltd." The demat shares are reflected in the transaction statement of the period from 1st November 2011 to 31st December, 2013 (A copy of the scheme of amalgamation alongwith copy of order of the Hon'ble Bombay High Court and a copy of the letter to this effect submitted by "Cressanda Solutions Ltd". to Bombay Stock Exchange is placed in the Paper Book at page no 22 to 43.) 6. The assessee sold 50000 shares costing Rs. 500000/- through her broker "SKP Stock Broking Pvt. Ltd" which was a SEBI registered broker and earned a Long Term Capital Gain of Rs. 2,18,13,072/-. (Copy of the bank statement, brokers contract note together with the delivery instructions given to the DP and broker's confirmation is also placed in the p....
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....Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is well settled that evidence collected from third parties cannotbe used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis forthe addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not partyto the scam etc., has to be controverted by the revenue with evidence. When a person claims t....
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....g bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered the investigation report as a starting point of investigat....
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....t which it showed a net loss of about Rs. 45,000. The Income-tax Officer indicated the probable source or sources from which the appellant could have earned a large amount in the sum of Rs. 2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was e result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each". The observations of the Hon'ble Apex Court are equally applicable to the case of the assessee. In our....
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....4.05.2018 upheld the following proposition of law laid down by the Hon'ble Gujrat High Court as under: 20. Applying the proposition of law as laid down in the above-mentioned judgments to the facts of this case we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question is a bona fide Long Term Capital Gaina rising from the sale of shares and hence exempt from income tax. 21.Under the circumstances and in view of the above discussion, we uphold the contentions of the assessee and delete the addition in question. 22. In the result, the appeal of the assessee is allowed." 8. IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH: KOLKATA I.T.A. No. 604/Kol/2018 Assessment Year: 2014-15 Jagmohan Agarwal [Before Shri A. T. Varkey, JM & Shri M. Balaganesh, AM] Date of Pronouncement 05.09.2018 "29. We have heard the rival submissions ....
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....s for drawing adverse inference against the assessee. Thus the action of AO to refer to certain purported statements of the three individuals without establishing any nexus with the assessee can at best mislead or create suspicion and reference to irrelevant material itself makes the order bad. Not only that the AO has not even bothered to give a copy of the same to the assessee and did not give an opportunity to the assessee to cross examine those persons itself vitiates the action of the AO and the order passed by him is therefore fragile for violation of natural justice and null in the eyes of law as held by the Hon'ble Supreme Court in Andaman Timber Industries Vs. Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 dated 16.11.2015. These purported statement though the contents of which neither we are aware nor the appellant assessee, cannot be the basis for drawing adverse inference against the assessee in the light of documents produced before AO/CIT(A) and this Tribunal. 33. We find force in the contentions of the ld. AR that the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of suspicious transactions surroundi....
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....te the addition. 37. Coming to the next addition of Rs. 43,934/-, i.e., 5% of Rs. 11,49,425/-, as undisclosed expenditure u/s 69C of the Act in respect of purported payments made to Share Brokers/Entry Operators. On this issue since we have found the purchase and sale of shares are genuine no addition can be made in this regard, so it is ordered to be deleted. 38. In the result, the appeal of assessee is allowed." 9. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "SMC" NEW DELHI I.T.As. No.2128/Del/2018 Assessment Years: 2015-16 M/s. Amit Rastogi HUF Date of pronouncement: 24.10.2018 "..9. Another important fact which is to be noted here is that purchase made in the earlier year has not been disturbed and once the entire transaction is through DEMAT account with the reputed broker without having any link with any such entities pointed out by the learned Assessing Officer then no adverse inference at all can be drawn against the assessee. If the sales are evidenced through proper contract notes by HDFC Security Ltd., sold on BSE after paying STT and duly credited in the DEMAT account, then source of the credit has to be accepted that it is from transaction of sale of share....
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....account of sham share transactions, whereas the CIT(A) himself had held that the assessee had not been able to substantiate the source of investment of Rs. 11,00,000/- in the said shares purchased during the financial year 2005-06 and the AO was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue? (iii) Whether the Hon'ble ITAT has erred in ignoring an important aspect that in such cases of sham transactions of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the AO is justified to even draw an inference from the attendant circumstances? (iv) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of Rs. 12,59,000/- made by the AO on the basis of seized document on the grounds that the Assessing Officer has not pointed out as to how the figure of Rs. 12.59 lacs has been worked out ignoring the fact that the assessee himself in his reply to the AO had tried to explain the source of the receipts of Rs. 12,59,000/- instead of challenging the working out of the said figure by the A....
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....nt documentary evidences before the AO which are copy of the shares certificates with transfer form, copy of debit note issued by Shreeji Broking (P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy of the account statement of the assessee in the books of the broker, copy of ledger account of Indus Portfolio (P) Ltd., copy of evidence for payment of securities transaction tax and copy of the bank statement of the assessee to show that the assessee had entered into genuine transaction of purchase of share which were later on sold through the broker on recognized stock exchange after payment of STT. The claim of the assessee for sale of shares has been supported by the documentary evidences which have not been rebutted by the authorities below. Whatever inquiry was conducted in the cases of other parties and statement recorded of several persons namely Sh. Anil Khemka, Sh. Sanjay Vohra and Sh. Bidyoot Sarkar as referred in the assessment order and the report of the Investigation Wing were not confronted to the assessee and above statements were also not subject to crossexamination on behalf of the assessee. Therefore, such evidences cannot be read in evidence against ....
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....to some 'Sharp Trading Compnay' as one of the main ,manipulated company and whereas the assessee sold scrips in Unno Industries Ltd. The AO refers to various enquiries made by "The Directors of Income Tax" , Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so-called project and the evidence collected by the DIT (Inv.), Kolkata etc have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AO and the addition is made based on such generalizations. The assessee has not been confronted with any of the evidence collected in the investigation done by the DIT(Inv.), Kolkata. Evidence collected from third parties cannot be used against the assessee without giving a copy of the same to the assessee and thereafter giving him an opportunity to rebut the same. 9. The AO further relies on the shop increase....
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..... CIT [ITA No. 129 of 2012] (Cal HC) - In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon'ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) - In this case the Hon'ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. ....
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....d by High Court. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the tran....
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....en sold on the online platform of the Stock Exchange and each trade of sale of shares were having unique trade no. and trade time. It is not the case that the shares which were sold on the date mentioned in the contract note were not traded price on that particular date. The ld AO doubted the transactions due to the high rise in the stock price but for that, the assessee could not be blamed and there was no evidence to prove that the assessee or any one on his behalf was manipulating the stock prices. The stock exchange and SEBI are the authorities appointed by the Government of India to ensure that there is no stock rigging or manipulation. The ld AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation against the assessee and or the brokers and or the Company. In absence of any evidences it cannot be said that merely because the stock price moved sharply, the assessee was to be blamed for bogus transactions. It is also to be seen that in this case, the shares were held by the Donors from 2003 and sold in 2010 thus there was a holding period of 7 years as per Section 49 of the Act and it cannot be said that the assessee and the D....
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....tely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the ld CITA rightly relied on the decision of t....
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.... the I.T. Act. So far as the decisions relied on by ld. DR are concerned, they are distinguishable and not applicable to the facts of the present case. The grounds raised by the assessee in the impugned appeal are accordingly allowed. 23. The grounds raised by the assessees in other appeals i.e. in ITA No.2022 to 2028/Del/2018 are identical to the facts of the present case. I have already decided the issue in favour of the assessee. Following similar reasoning, the grounds raised by the assessees in the above appeals are also allowed." 11. The Hon'ble Delhi Bench of the Tribunal in the case of ITO vs Jatin Investment Pvt. Ltd. In ITA No.4325 & 4326/Del/2009 order dated 27.05.2015 held as follows :- "11. In his rival submissions, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee was having investment in shares etc. which were duly shown on the asset aside of the balance sheet, out of those investments some were sold and few new were purchased and if there was any gain on the sale the same was offered for taxation. It was further submitted that in earlier year 13 4325 & 4326/ Del/2009 under simi....
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....also not on account of share application money, the said amount was on account of sale of investment therefore the provisions of Section 68 of the Act were not applicable and the AO was not justified in making the addition. In our opinion, the Ld. CIT(A) rightly deleted the addition made by the AO. 13. On a similar issue the Hon'ble Jurisdictional High Court in the case of CIT vs. Vishal Holding and Capital Pvt. Ltd. vide order dated 9th August, 2010 upheld the order dated 30.7.2009 of the ITAT in ITA no. 1788/Del/2007 for the assessment year 2000-2001 wherein the order of the Ld. CIT(A) making the similar deletion was upheld by observing in para 6 as under :- "We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet's. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best....
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....appreciated the law and its application by the first appellate authority, i.e., CIT (A). Having regard to the facts and the nature of the analysis based upon the decisions of this Court, as well as the reliance on various decisions with respect to the true nature of Section 68, we are of the opinion that no question of law arises; the appeals are accordingly dismissed" 13. Hon'ble Jurisdictional High Court in the case cited as CIT Vs Vishal Holding and Capital Pvt. Ltd. vide order dated 9th August, 2010 upheld the order dated 30.07.2009 of the ITAT in I.T.A. No. 1788/Del/2007 for the Assessment Year 2000-2001 wherein the order of the Ld. CIT(A) making the deletion was upheld by observing in para 6 as under:- "We are of the view that the assessee had produced copies ) of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by th....