TaxTMI 
TaxTMI 
2018 (11) TMI 870
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.... "07. DECISION: 1. I have carefully examined the action of the Ld. AO in treating an amount of Rs. 34,25,766/- , claimed by the appellant as LTCG as bogus. The Ld. AO has very by the assessee-individual. The economic parameters of the said company over the period March 2010 to March 2014 have also been brought on record, in the analysis. The rise and fall of the prices as recorded had been brought out by the Ld. AO to be business at all. 2. The Ld. AO has also brought forth information that the Regulatory Authority SEBI investigated the matter and suspended trading in certain scripts. It is very clear that and manipulated transactions. The entire transactions were carried out on the Stock Exchange to give it a color of real transactions. 3. The Ld. AO has confronted the assessee-appellant with the facts as available in the statement of one Shri Anuj Agarwal of M/s Korp Securities Ltd, who represented the Broker which has facilitated the trading of the impugned shares. During the assessment stage, the assessee-individual has after receipt of the final show cause the scrutiny stage. 4. I am in agreement with the Ld. AO that the transactions relati....
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....purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence. " CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or pr....
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....the Hon'ble Supreme Court In the case of S.S. Gadgll (supra) no 'lis' is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AO after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, even a Single clue or revelation can be of great Importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that It cannot be relied on by the AO, are devoid of any merit and are rejected outright." In view of the above discussion, I find no infirmity in the orders of the Ld. AO, and I confirm the same. Grounds 4,5,6,& 7 taken by the appellant stand dism....
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....dustries Limited and M/s NCL Research & Financial Services Ltd. The AO based on a general report and modus operandi adopted generally in these cases and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transactions was rejected. 3.The assessee carried the matter in appeal and the ld. CIT(A), had upheld the addition. The ld. CIT(A) has in his order relied upon "circumstantial evidence" and "human probabilities" to uphold the findings of the AO. He also relied on the so called "rules of suspicious transaction". No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entre conclusions drawn by the revenue authorities, are based on a common report of the Director o Investigation, Kolkata, which was general in nature and not specific to any as....
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.... the assessee, the judgment of the Hon'ble Supreme Court cannot be applied to the facts of this case. 7. In view of the above discussion the addition in question is deleted and the appeal of the assessee is allowed." It also emerges that this tribunal's yet another co-ordinate bench's decision in Navneet Agarwal vs. ITO in ITA No.2281/Kol/2017 decided on 20.07.2018 has rejected Revenue's similar arguments going by suspicious circumstances than based on evidence as follows:- "13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee's action....
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....umentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. In this connection we refer to the general view on the topic of conveyance of immovable properties. The rates/sale price are at variance with the circle rates fixed by the Registration authorities of the Government in most cases and the general impression is that cash would have changed hands. The courts....
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....e Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon'ble Court held: "Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. The cancellation of the food grain licence at Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored. The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Inco....
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....own by the Courts of law. That cross-examination is one part of the principles of natural justice has been laid down in the following judgments: a) AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors. "23. A Constitution Bench of this Court in State of M.P .v. Chintaman opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas TeaEstate v. Workmen, AIR 1963 SC 1719; M/s. KesoramCotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448;Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v.Saroj Kumar Sinha AIR 2010 SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 1944,considered a similar issue i.e. permission with respect to the crossexamination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-ex....
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....that in mentioned that such an opportunity was sought by the Assessee. However, no the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them. 6. As mentioned above, the Appellant had contested the truthfulness of the which purpose it wanted to avail the opportunity of cross-examination. That duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005[2005 (187) E.L.T. A33 (S.C.)] was appeal on merits giving its reasons for accepting o....
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....IT (Appeals) and the Tribunal support of the suspicion. On the other hand, although the appreciation is very payments and receipts were routed through the bank. There was no evidence trading on the National Stock Exchange was manipulated in any manner." The Court also held the following vide Page 3 Para 5 the following: "Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises." d) The BENCH "D"OF KOLKATAITAT in the case of GAUTAM PINCHA[ITA No.569/Kol/2017]order dated 15.11.2017 held as under vide Page 12 Para 8.1: "In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find entered gamut of unfounded/unwarranted allegations leveled by the AO ther....
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....ot justified in the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition." f) The BENCH "A"OF KOLKATA ITAT in the case of SHALEEN KHEMANI[ITA No.1945/Kol/2014]order dated 18.10.2017 held as under vide Page 24 Para 9.3: "We therefore hold that there is absolutely no adverse material to implicate in the eyes of law. We find that the ld DR could not controvert the arguments 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 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 justified in rejecting the assessee's claim of exemption under section 10(38) of the Act." g) The BENCH "H"OF MUMBAIITAT in the case of ARVINDKUMAR JAINHUF[ITA No.4682/Mum/2014]order dated 18.09.2017 held as under vide Page 6 Para 8: "......We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the ....