TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 610
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....additions made on the basis of corroborative information received from Investigation Wing, Kolkata which is a law enforcement agency under the Ministry of Finance and accordingly the case falls under exception clause 10(e) of Circular 03 of 2018 dated 20.08.2018 ? 3. Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A) was justified in deleting the additions of Rs. 9,00,340/- being commission in acquiring cash accommodation entry ? The appellant craves the right to amend alter or add to any of the grounds of appeal given above. " 2. Since the tax effect in the appeal of the revenue is more than Rs. 20,00,000/-, therefore, the ground no. 2 of the revenue's appeal is irrelevant and non est and, therefore, the same is dismissed as not arising from the facts of the present case and impugned order. Ground No. 1 is regarding the addition made by the AO in respect of long term capital gain declared by the assessee on sale of shares of M/s. Trinity Tradelink Limited treating the same as bogus transaction which was deleted by the ld. CIT (Appeals). 3. The assessee is an Individual and partner in firm M/s. Totaram Banwari Lal as well as Hotel Rajdoot. ....
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.... sale transaction is genuine. The purchase consideration was paid as acknowledged by the broker and the transaction also suffered STT, therefore, the assessee discharged the initial burden of prove by producing the document which was not found to be false or fabricated by the AO. The assessee also relied on a series of decisions on this point. The ld. CIT (A) accepted the claim of the assessee and deleted the addition made by the AO. 4. Before us, the ld. D/R has pointed out that the assessee has claimed to have purchased 20,000 shares of M/s. Trinity Tradelink Ltd. on 07.10.2012 @ Rs. 10/- each and stated to have sold the shares between 25th February, 2014 to 14th March, 2014 for a total consideration of Rs. 1,50,05,672/- resulting long term capital gain of Rs. 1,48,50,672/-. Thus there is an unbelievable spurt in the sale price within a short period of one year which clearly shows that it is not a normal genuine transaction of purchase and sale of shares but the assessee has availed the bogus entries of long term capital gain from the persons who were involved in providing these bogus entries against cash. Therefore, the assessee's own unaccounted income has been routed back in....
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..../R has submitted that the assessee is regularly investing in the shares of various companies as evident from the Demat Account of the assessee. He has pointed out that the assessee purchased the shares of M/s. Trinity Tradelink Ltd. from M/s. Amarkantak Procon Pvt. Ltd. @ Rs. 10/- per share against the purchase consideration paid vide account payee cheque no. 788408 on 31st October, 2012. The ld. A/R has referred to the share certificate transferred in the name of the assessee as well as the application for Demat. He has referred the Demat account of the assessee and submitted that the shares were reflected in the Demat account and sold through Stock Exchange from the Demat account of the assessee after paying STT. Therefore, the holding of the shares in the Demat Account of the assessee cannot be disputed. Similarly, the sale of shares from Demat Account through Stock Exchange is also not in dispute. The AO has doubted the transaction only on the basis of the information received from the Investigation Wing Kolkata. However, there is nothing in the said report against the assessee. Thus the finding of the AO is based only on suspicion without bringing any evidence to show that th....
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....rading & Finance Ltd. name of which was changed to M/s. Omnitech Petroleum Ltd. but after amalgamation the name was again changed to M/s. Trinity Tradelink Ltd. Therefore, the database in the stock exchange as well as ISIN are available only in the name of M/s. Trinity Tradelink Ltd. Once the assessee has produced all the supporting documents to prove the genuineness of the purchase transaction, payment of purchase consideration through banking channel, dematerialization of the shares in the Demat Account and sale of the shares from the Demat Account through Stock Exchange without establishing the documentary evidence brought by the assessee as bogus treating the transaction by the AO as accommodation based on suspicion is not justified. He has relied upon the decision of Mumbai Special Bench in case of GTC Industries vs. ACIT, 164 ITD 1 and submitted that the Special Bench has held that suspicion how so ever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his sid....
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....n the assessee has established the purchase of the shares and holding in the Demat Account since 31st October, 2012. The assessee is having Demat Account with IDBI Bank and on perusal of the Demat Account it revealed that the assessee has been a regular trader/investor in the shares of various companies including various public sector undertakings. Thus it is not an isolated transaction but it is one of the hundreds of transactions in the Demat Account of the assessee. Out of these 20,000 shares, the assessee has sold 15,500 shares after one year whereas the balance 4500 shares were sold prior to one year and offered short term capital gain to tax which has not been disputed by the AO. Thus out of a lot of 20,000 shares of M/s. Trinity Tradelink Ltd., the shares sold by the assessee prior to one year were not disputed by the AO as the short term capital gain was offered to tax by the assessee. The AO has disputed the transaction of purchase and sale only to the extent of the shares which were sold after one year and thereby the assessee claimed long term capital gain as exempt under section 10(38) of the IT Act. We further note that the AO has given the details of the prevailing p....
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....r to the said question, Shri Vikrant Kayan has stated as reproduced by the AO at page 8 of the assessment order as under :- " Q.8. Please tell the name of the parties to whom you have provided bogus billing ? Ans. Sir, I have provided accommodation entry in the form of bogus billing to many companies, some of them are Binani Cement Ltd., Binani Zinc Ltd., Merit Plaza Pvt. Ltd., Vansudhara Infra Developers Pvt. Ltd., Swis Mercantile Pvt. Ltd., Consumer Marketing India Pvt. Ltd., PAESS Industrial Engineers Ltd., Darashaw & Co. Pvt. Ltd. and Voltas Ltd." Thus in response to the question to tell the names of the parties to whom he provided bogus billing, he replied the names of various parties and, therefore, there is no allegation against the assessee or the assessee's partnership firm by Shri Vikrant Kayan. The AO based on the report of investigation and the statement has treated the transaction as bogus whereas the assessee produced all the relevant direct evidences to establish the purchase of shares by paying the purchase consideration through banking channel. The evidence produced by the assessee is independently verifiable as the bank account wherein the payment is reflecte....
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....tical issue as under :- "6. We have considered the rival submissions as well as relevant material on record. The assessee purchases 800 equity shares M/s Gravity Barter Ltd. for a consideration of Rs. 4 lacs the assessee has produced the purchase bill of the shares purchase from M/s Winall Vinimay Pvt. Ltd. which shows that the assessee purchase 800 equity shares having face value of Rs. 10/- each M/s Gravity Barter Pvt. Ltd. in allots of 400 each for a consideration of Rs. 2 lacs each total amount to Rs. 4 lacs @ Rs. 500 per shares. The purchase price of Rs. 500 per share itself shows that it was not a transaction of purchase of penny stock. These shares were duly reflected in the balance sheet as 31.03.2011. The payment of the purchase consideration was made by the assessee vide cheque on 17.05.2011 which is evident from the bank account of the assessee at page 40 of the paper book. In the mean time the said M/s Gravity Barter Pvt. Ltd. changed its status from private limited to a public limited and fresh certificate was issued by the Registrar of company on 05.02.2011 which is placed at page 43 of the paper book. Therefore, there is no reason to disbelief the fact of fresh cer....
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....essee in the Demat account, therefore, on the date of allotment of share of M/s Oasis Cine Communication Ltd the assessee was holding these shares and prior to that the assessee was holding the shares of M/s Gravity Barter Ltd. on exchange of the same the shares of M/s Oasis Cine Communication Ltd. were issued to the assessee. The Assessing Officer has doubted the genuineness of the transactions however, once the holding of shares of the assessee at the time of the same were issued by M/s Oasis Cine Communication Ltd. is not in dispute then the holding of shares of M/s Gravity Barter Ltd. also cannot be dispute because of the fact that without holding of the same the shares of M/s Oasis Cine Communication Ltd. could not be issued to the assessee. Once, the shares were held by the assessee then, the question of genuineness of the transaction does not arise however, the purchase consideration can be doubted by the AO if the shares were claimed to have been purchased against consideration paid in cash which is not in case of the assessee. The assessee has paid purchase consideration through cheque and therefore, even if the said consideration is found to be very less in comparison to ....
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....ount without acquiring or allotment through due process hence, except the purchase consideration paid by the assessee holding of shares cannot be doubted when the assessee has produced all the relevant record of issuing of allotment of shares, payment of share application money through bank, share certificate and demat account showing the shares credited in the demat account of the assessee on dematerialization. The said company M/s Paridhi Properties Ltd. was subsequently merged with M/s Luminaire Technologies Ltd. vide scheme approved by the Hon'ble Bombay High Court order dated 27.07.2012. Hence, the assessee got allotted the equity shares of M/s Luminaire Technologies Ltd. as per swap ratio approved in the scheme and consequently the assessee was allotted 5 lacs share of Rs. 1/- each on M/s Luminaire Technologies Ltd. The evidence produced by the assessee leave no scope of any doubt about the holding of the shares by the assessee. 8. As regards the purchase consideration when the assessee has shown the share application money paid through his bank account and the AO has not brought on record any material to show that apart from the share application money paid through bank ac....
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....xamination of Shri Deepak Patwari however, the Assessing Officer did not offer the opportunity to the assessee to cross examine Shri Deepak Patwari. Further, the AO asked the assessee to produce the Principal Officers of the M/s Gravity Barter Ltd. and M/s Paridhi Properties Ltd. However, in our view if the Assessing Officer wanted to examine the principal Officers of those companies he was having the authority to summon them and record their statements instead of shifting burden on the assessee. It is not expected from the assessee individual to produce the principal Officers of the companies rather the AO ought to have summoned them if the examination of the officers were considered as necessary by the AO. Hence, it was improper and unjustified on the part of the AO to asked the assessee to produce the principal Officers of those companies. As regards the non grant of opportunity to cross examine, the Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held in para 5 to 8 as under: "5. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who app....
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.... back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice." Therefore, the statement of witness cannot be sole basis of the assessment without given an opportunity of cross examination and consequently it is a serious flaw which renders the order a nullity. The Mumbai Special of the Tribunal in case of GTC Industries vs. ACIT (supra) had the occasion to consider the addition made by the AO on the basis of suspicion and surmises and observed in par 46 as under:- "46. In situations like this case, 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. But the probable factors have to be weighed on material facts so collected. Here in this case the material facts strongly indicate a probabilit....
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.... 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." Therefore, when the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. The Hon'ble Jurisdiction High Court in case of CIT vs. Smt. Pooja Agrawal (supra) has upheld the finding of the Tribunal on this issue in para 12 as under:- "12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:- "Contention of th....
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....e order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all thematerial facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain a....