TaxTMI 
TaxTMI 
2019 (8) TMI 740
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.... of Rs. 3,19,560/- in second case derived from sale of shares respectively to be bogus and non-genuine in nature. The Assessing Officer as well as the CIT(A)'s unanimous view is that these share transactions receipts are bogus accommodation entries as per the department's investigation wing report. We therefore treating assessee's case in ITA No.1224/Kol/2016 as the lead appeal containing the CIT(A)'s following detailed discussion: "3. Challenging the decision of the AO, Ld. AR has filed a written submission of the assessee, relevant portion of which is reproduced below: '' " The ld. Income Tax Officer added Long Term Capital Gain amounting to Rs. 28,65,192.00 u/s 68 of the Income Tax Act. Actually, there was a sale of 8800 Shares for Rs. 28,61,463.97 and cost of the same shares were Rs. 1 lakh; hence there was Capital Gain of Rs. 27,61,463.00 as per return filed. The Ld. Income Tax Officer issued letter u/s 133(6) of the Income Tax Act to my share broker, M/s Sajendra Mookim; in response to which M/s Sajendra Mookim sent copy of contract notes and my ledger A/c to the Income Tax Officer. The officer did not find any irregularities in the....
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....ue at Kolkata into my bank a/c. Before passing this order the Ld. Officer had no findings that there was anything adverse and/or wrong in the above share dealings. The Ld. I.T.O had also stated in his order that "The assessee is residing in Sirsa as evident from the reply received in response to notice u/s 131 and there was no occasion to make purchase or sale from a broker in Kolkata. The assessee is dealing in the business of manufacturing, purchasing and selling Rice. The assessee was unable to explain the reasons for multifold increase in the rate of shares. It may be mentioned here that the scrip of M/s Oasis Cine Communication very heavily used for giving the bogus long term Capital Gab entries to many people residing all over the country and M/s. Sajendra Mookim are highly tainted concerns who had given this kind of entries to many people earlier and still he is doing so." In this connection please note that the shares are purchased/sold over Telephone. Purchase of share from Kolkata broker should not be an issue and a person dealing in Rice may also purchase shares. There is no restriction under any act that a rice dealer can't purchase share. If price of a sha....
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..../2010 and sold the converted shares of Oasis Cine Communication Limited (OCCL) [after merger of Gravity Barter with OCCLI for Rs. 28,65,192/- on 12/03/2012, after a gap of fifteen months from the date of purchase of original shares. So far as purchases of shares are concerned, the assessee miserably failed to answer when and how he had taken the delivery of shares of Gravity Barter Pvt. Ltd. and from whom; why those shares were not purchased through his demat account and how and to whom he had delivered the shares after merger of Gravity Barter Pvt. Ltd with Oasis Cine Communication Limited (OCCL) to get fresh equity shares. Those shares were purportedly sold on 12/03/2012. The assessee failed again to explain to whom the shares were sold for such a high price and why there was no entry of sale of such shares in his demat account. These facts, combined with the findings of two regulatory authorizes [Investigation Directorate of Income Tax and SEBI] that - (i) the scripts of OCCL have been heavily used for giving LTCG hawala entries to many people residing all over the country [findings of the income tax investigation directorate after survey action], (ii) Shri Sajendra Mookim, shar....
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....urrounding circumstances has established beyond doubt that 'the apparent was not real'. The story made by the assessee that he made gains over 28 times of his investments in the scripts of a penny share company within a span of 15 months is fantastic to hear but does not accord with market intelligence and human probabilities. It was indeed assessee's own unaccounted money brought into business through hawala transactions for the sole purpose of evasion of tax. The addition of Rs. 28,65,192/- is therefore, confirmed." 3. We have given our thoughtful consideration to the rival pleadings. The assessee's detailed paper book comprising of relevant share bills of M/s. Gravity Barter Pvt. Ltd issued by M/s. Signet Vinimay Private Limited, corresponding letter issued to the former and the Share Transfer Deed, letter of M/s Gravity Barter Pvt. Ltd. along with the share certificate, allotment advice issued by Oasis Cine Communication Ltd., contract notes, copy of market value, quotation of M/s Oasis Cine Communication Ltd, demat statement from 01.04.2012 to 31.03.2013, expires capital account as on 31.03.2012, bank statement in support of the genuineness of impugned share tra....
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.... accommodation entry nexus between assessee, his brokerage firm and the two other firms such namely M/s. Sikaria Shares and Stock Broking Services and M/s Hira Commodities and Derivatives Pvt. Ltd. There is not even a single transaction between the assessee and the other two brokerage firms. The relevant assertion that the SEBI has also penalized the brokerages firms for price, does not carry any substance since the relevant order dated 12.04.2010 involves times between 17.08.2004 to 31.03.2005 whereas we are concerned with the assessee's allotment of shares much later i.e. on 04.02.2012 (pages 65 to 77). There is further no issue about the correctness of the corresponding amalgamation details. We conclude in these peculiar facts that the assessee has sufficiently discharged his onus of proving genuineness of the impugned share transactions in the lead assessment years. 6. Coming to the later assessment years, both the lower authorities alleged that the assessee was involved in artificial rigging of share prices in collusion with entries. We repeat herein as well as that there is no such nexus proved with the help of cogent details which could be lead us to the conclusion of the....
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....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 paper book at page no 44 to 65). 7. Copy of Form No. 10DB issued by the broker, in support of charging of S.T.T. in respect of the transactions appearing in the ledger is placed in the paper book at page no. 66. 8. The holding period of the said scrip is more than one year (above 500 days) through in order to get the benefit of claim of Long Term Capital Gain the holding period is required to be 365 days. 12. The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to "Modus Operandi" of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences prod....
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....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 that she has done these transactions in a bona fide and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal importlaid down by the Courts of law. 15. In our view, just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary 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 ....
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....ss 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 investigation. The report only informed the assessing officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. We, however, find that the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 17. The Hon'ble 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 ....
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....f 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 view, the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee. 18. We now consider the various propositions of law laid down 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) ....
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.... the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross-examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009SC 1100, this Court held: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review. 30. The aforesaid discussion makes it evident that, not only ....
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....ority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the crossexamination 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 passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. 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." 19. On similar facts where the revenue has alleged that the assess....
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....he Hon'ble Punjab and Haryana High Court in the case of PREMPAL GANDHI[ITA-95-2017(O&M)] dated18.01.2018 at vide Page 3 Para 4 held as under: "..... The Assessing Officer in both the cases added the appreciation to the assessee's' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee's' income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the 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 p....
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....ng the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition." e) The BENCH "D" OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: "........ We find that there is absolutely no adverse material to implicate the assessee to the entire 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 which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently 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 te....
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.... were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee's claim of exemption under section 10(38) ofthe Act." g) The BENCH "H"OF MUMBAIITAT in the caseof 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 broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of t....
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....: " It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises." 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 Gain arising from the sale of shares and hence exempt from income ta....
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....e of Sanjay Bimalchand Jain vs. Principal Commissioner of Income-tax-1, Nagpur; [2018] 89 taxmann.com 196 (Bombay) and the decision of the Smt. M.K. Rajeshwari vs. ITO; ITA No.1723/Bng/2018; Assessment Year 2015-16, order dt. 12/10/2018. 5. After hearing both sides, I find that in a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalization, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. Some of the cases were, detailed finding have been given on this issue, are listed below:- Sl. No ITA Nos. Name of the Assessee Date of order /Judgment 1. ITA No.714 to 718/Kol/2011 ITAT, Kolkata DICT vs. Sunita Khemka 28.10.2015 2 214 ITR 244 Calcutta High Court CIT vs. Carbo Industrial Holdings Ltd. - 3. 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4. ITA No.1236- 1237/KOl/2017 Manish Kumar Baid vs. ACIT 18.08.2017 5. ITA No.569/Kol/2017 Gautam Pincha 15.11.2017 6 ITA No.443/KOl/2017 Kiran Kothari HUF 15.11....