TaxTMI 
TaxTMI 
2019 (8) TMI 890
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to latter issue of the assessee's bogus loss. The CIT(A)'s detailed discussion under challenge reads as under:- "07. FINDINGS & DECISION 1. I have carefully examined the action of the Ld AO in reopening the case and disallowing the claim of loss, by treating the same as bogus. I have carefully examined the reasons recorded by the Ld AO for reopening the case, wherein he has recorded all the submissions made by the appellant during the impugned reassessment proceedings. I have also perused the submissions of the appellant offered during the course of the appellate proceedings, I find that the AO has duly show-caused the assessee in the matter, and also supplied him with the reasons for reopening, and allowed the appellant to file the necessary objections in the matter. Thereafter, the AO has countered point by point the various objections raised by the appellant, and they have been recorded in the order. During the appeal proceedings also, the appellant has raised several points, inter- alia challenging the reassessment proceedings on grounds that the AO had not acted in the "belief", but on mere "satisfaction", and that there had been no application of mind by the AO, and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cided by Hon'ble Courts that to judge the validity of reassessment on the basis of final outcome of reassessment proceedings on that item will not be "Information" for re-opening. The matter has been elucidated and explained in detail as - Information proper - At the time of reopening, assessing officer is not required to establish escapement of income. Sri Krishna (P) Ltd. Vs CIT (SC) 221 ITR 538 & Central Provinces Manganese Ore Co. Ltd. Vs ITO (SC) 191 ITR 662 5. Hon'ble Courts have also held that what is necessary to re-open an assessment is not the final verdict but a prima facie reason - Once such a reason is recorded by the Assessing Authority, he assumes jurisdiction to issue notice u/s148 - Mere fact that for earlier assessment years issue in dispute has been decided by CIT(A) in assessee's favour cannot be a fetter in exercising his jurisdiction u/s 147. This ratio emerges from the judgments in ACIT Vs Tube Investments of India Ltd. (ITAT, Chennai-TM) 133 ITD 79 & Rajat Export Import India Pvt. Ltd. Vs ITO (Del) 341 ITR 135. 6. I also find that in the case at hand the earlier assessment was completed without the AO recording any" specific opinion" or fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant has not been able to bring anything on record to prove the rationale, need and justification for client code modifications. While it may be true that such client code modification may not per se be illegal, it has to be brought on record by the appellant, as he is the beneficiary that the modifications were on an acceptable level, and the clients were KYC complaint. In such matter, the relevant extract of SEBI Circular dated February 06, 2003, relating to the Modification of Client Code is being reproduced hereunder for convenience: "The stock exchanges shall not normally permit changes in the Client ID and would keep a strict vigil on cases of client code modification and would implement a monetary penalty structure that would escalate with the number of such incidences. Besides, the exchange may take necessary action against members repeated changes. However, genuine mistakes may be allowed to be rectified." 8. Thus, a careful reading of the above extract suggests that the change in generally not allowed except where there is some genuine mistake. The SEBI also mandates the Stock Exchanges to keep strict vigil on the Instances of all modification and implementation of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngaged in the business of dealing in commodities. The assessee in the year under consideration has incurred loss of Rs.45,23,943/- in derivatives transactions of shares. The above loss was incurred by the assessee at the fag-end of the relevant Assessment Year i.e. from 18.03.2009 to 26.03.2009. All the transactions were carried out through a broker namely M/s Ratnabali Capital Markets Ltd. (RCML for short) a member of National Stock Exchange (NSE for short). The director in the assessee-company and RCML were common and the name of RCML was appearing in the list of specified person as envisaged u/s.40(A)(2)(b) of the Act. The assessee has also paid brokerage to RCML for Rs.92,566/- only for the above stated transactions. The Assessing Officer during the course of assessment proceedings to verify the veracity of the loss claimed by assessee has confirmed from NSE by issuing a notice u/s.133(6) of the Act. As per the confirmation received from NSE, the AO observed that the name of the client and code has been modified during the process of said transactions. Therefore, the AO had a doubt about the genuineness of the impugned loss and therefore has sought the explanation from the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been made to accommodate the appellant as the broker of the appellant was a sister concern. Even though apparently it has not been established that the such modification had been done in violation of rules and regulations prescribed by SEBI and the AO had proceeded on suspicion, however at the same time it also cannot be concluded either that the loss would not be attributable to these "modifications". Thus, I find merit in the contention of the AO. Therefore, the appellant's contention in respect of the claim of loss cannot be acceptable as the same pertained to the modified transactions being entered into by the appellant's sister concern who was the Broker and helped in manipulation for the benefit of the Appellant. I also find that similar addition was made by the AO on the same ground in the previous AY 2008-09 and the CIT(A)-XXX, Kolkata has partly confirmed the addition so made by the AO vide Appeal Order dated 23.11.2012. Hence disallowance made by the AO for the loss of Rs. 19,76,538/- claimed to be incurred by the appellant company is confirmed as it was done with the intention of reducing appellant company's taxable income manipulation of transactions entere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f his guess-work as evident from his appellate order which is reproduced below:- "there is a possibility that the modifications might have been made to accommodate the appellant as the broker of the appellant was a sister concern." Further the ld. CIT-A has observed in his order as under:- "Even though apparently it has not been established that the such modification had been done in violation of rules and regulations prescribed by SEBI and the AO had proceeded on suspicion, however at the same time it also cannot be concluded either that the loss would not be attributable to these "modifications" On perusal of the order, we find that Ld. CIT(A) has confirmed the order of AO on his own surmise and conjecture which is not permissible in the eyes of law. Ld. DR has also not brought anything on record contrary to the advance arguments placed by Ld. AR for the assessee as well as no defects of whatsoever has been pointed out in the documents produced by assessee in support of its impugned loss. We also find whatever modifications were carried out by the broker they were carried out within the time permitted by the NSE for the purpose of modification. Thus, we are of the vie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose. Having regard to the facts and circumstances of the case, the view taken by the Tribunal allowing share loss cannot be said to be erroneous or perverse.-CIT vs. Emerald Commercial Ltd. & Anr. (2001) 171 CTR (Cal) 193: (2001) 250 ITR 539 (Cal), CIT vs. Dhawan Investment & Trading Co. Ltd. (1999) 238 ITR 486 (Cal) and CIT vs. Currency Investment Co. Ltd. (2000) 158 CTR (Cal) 361 : (2000) 241 ITR 494 (Cal) relied on." Respectfully following the same, we hold that the impugned loss claimed by assessee is genuine loss in the above facts and circumstances of the case and therefore eligible for deduction. Accordingly, AO is directed. This ground of assessee's appeal is allowed ". 4. I put up a specific query to the department as to whether assessee's broker carried out the relevant client code modification as per prescribed rules or not. There is no such violation pointed out during the course of hearing before me. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urchased / sold by the assessee-individual. The economic parameters of the said company over the impugned period has 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 artificial and not commensurate with the normal market, as the Company has no business at all. The Ld. AO has also brought forth information that the Regulatory Authority SEBI has also after investigating such abnormal price increases of certain stocks investigated the matter and suspended trading in certain scripts. It is very clear that the prices of these scripts fell sharply after the offloading of these scripts by pre-arranged and manipulated transactions. The entire transactions were carried out on the Stock Exchange to give it a color of real transactions. 2. I also find that the submissions made by the appellant during the course of the appeal point towards the elaborate documentation, meaning thereby that the appellant has produced papers relating to application for the shares, the allotment of the shares, the share certificates payments by cheque and the necessary papers filed before the Registrar of companies, where the n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e nature and source thereof is, in the opinion of the Assessing Officer not satisfactory. In such a case, there is prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature."In the case of Sajjan Das & Sons vs. CIT (2003) 264 ITR 435 (Delhi), their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and done in determination of genuineness of gift held as under: "That a mere identification of the donor and showing the movement of the gift amount through banking channels was not sufficient to prove the genuineness of the gift. Since the claim of the gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the door."In my considered view wherever documents are relied upon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se should not be ignored but they cannot become the bedrock or substratum of conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the cannons of equity, fairness and justice. The evidence should be impartially and objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge in appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied advantage of the contention or factual assertion by the assessee before him. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....him or executed in his favour then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality9 of the recitals made in those documents.... 6. It is well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. IT needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the investigation report. Further, the Hon'ble Supreme Court, in the case of Chuhar Mal Vs CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....' has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious Circumstances, by following observations: ",,,,. It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that It is within the taxing provision and if a receipt is in the nature of income; the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee, But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to incometax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie eYid~l1ce against the assessee, vtz., the receipt of money, and if he falls to rebut the same, the said evidence being un- rebutted, can be used against him by holding that il' is a receipt of an income nature. While considering the expla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, be restored to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth." 6.14 It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstances in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AO's record are in the nature of cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e certificates or copies of Share transfer forms. The , broker M/s Khandelwal & Co., has expressed its inability to furnish copies of contract notes available with it and also failed to furnish its books of account to substantiate the transactions of purchase of shares by the assessee. Since the impugned transaction was an off market transaction, the purchase transaction could not be confirmed by the Kolkata Stock exchange. The seta shares were earlier held by M/s Brightsun Merchants (P) Ltd .and the assessee had purchased the shares from them. The notice issued to M/s Brightsun Merchants (P) Ltd was returned unserved by the postal authorities with the remark "unknown". In this regard the assessee had replied that the name of the company was wrongly mentioned by the AO as M/s Brightsuns (P)Ltd and hence the notice got returned. But there is not comment about the address, meaning thereby, the AO had issued notice to the correct address only and hence the slight variation in the name of the company would not normally make any difference. Hence the fact that the notice was returned back only shows that the seller of the shares could not be identified. All these discussions would show ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Haresh Win Chaddha Vs. DDIT, wherein the Tribunal has expressed the view that there is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. Further It was held that: the AO can assess on consideration of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of Incriminating information / evidence available on record. 13. In the case of Smt. Jamnadevi Agrawal (supra), the Hon'ble Bombay High Court has upheld the order of Tribunal on the reasoning that no fault can be found with the findings recorded by the Tribunal. A perusal of the above said order would Show that the revenue in the above said* case had contended that the assessees in the group have purchased and sold shares of similar compat1ieS through the same broker. Further the purchase prices and sale prices were supported by producing the evidence to show that the said transactions were undertaken at the rates prevailing on the respective dates. Under these set of facts, the High Court held that the findings gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e foregoing discussions, we are of the view that the decisions relied upon by the assessee cannot be taken support of by the assessee for the reasons discussed supra. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the order of the assessing officer by applying the test of human probabilities. 17. In the result, the appeal filed by the assessee is dismissed. [Unquote] 9. Reliance is also placed In the case of Somnath Maini Vs ITO (226) 100 TTJ 917 wherein the Hon'ble Chandigarh bench of ITAT held that if facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have to be held to be non genuine. 3. The relevant facts briefly stated are that during the course of assessment proceedings, the AO observed that assessee had incurred a long term capital loss on account of sale of gold jewellery declared under the VDIS, 1997, amounting to Rs. 19,87,705 and also there was a short-term capital gain near to this amount of long-term capital loss amounting to Rs. 20,36,700 resulting into net capital gain of Rs. 48,995. The AO on perusal of record further observed that in the case of a family membe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O was not discussed by the CIT(A) in his order. 4. In appeal before us, the learned Departmental Representative contended that it is highly improbable that shares of a company go up so high in few months' time. The learned Departmental Representative took us through various pages of the assessment order and the paper book wherein sale bill of the shares with the said M/s S.K. Sharma & Co. were also filed. The learned Departmental Representative pointed out that shares have been sold at Ludhiana when actually stock exchange was not functional - a fact which is also recorded by the AO. The learned Departmental Representative also pointed out that shares have been sold to M/s S.K. Sharma & Co. On 9th Feb., 1998 and 23rd March, 1998, whereas from the statement of account of M/s S.K. Sharma & Co. Payments have been received by the assessee from 31st March, 1988 to 27th July, 1998, meaning thereby that had the transactions been genuine, payment could have been received in one go by S./K. Sharma & Co. The learned Departmental Representative pointed out that any such type of transactions relating to these types of company operating on stock exchanges payments are received in piecemeal w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f companies function in the capital market whose sale price is manipulated to astronomical height only to create the artificial transaction in the form of capital gain. Surrounding circumstances differ from the normal share market transactions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More held as under: It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. It is surprising that the High Court has found fault with the ITO for not examining the wife and the father-in-law of the assessee for proving the Department's case. All that we can say is that the High Court has ignored the facts of life. It is unfortunate that, the High Court has taken a superficial view of the onus that lay on the Dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow the shares in an unknown company worth Rs. 5 had jumped to Rs. 485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. The assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit u/s. 68. In view of the above discussion, I find no infirmity in the orders of the Ld. AO, and I confirm the same, holding the claim of LTCG of Rs. 34,62,689/- to be bogus. As a natural corollary, I also hold that the Ld. AO was also correct in adding back an amount of Rs. 1,81,009/- under Sec. 69C of the Income Tax act. The same also stands confirmed. Therefore these grounds are dismissed." 7. We have given our thoughtful consideration to rival contentions. There can hardly be any dispute that assessee has placed on record his supportive documentary evidence comprising of relevant purchase bills of shares allotment, certified copies, contract notes, brokerage details etc. We put up a specific query as to whether any of entry operators searched or survey has quoted these assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... manipulation of share prices in both M/s Unno Industries Ltd. & Sharp Trading Finance Ltd. We find no force in Revenue's instant argument. This tribunal co-ordinate bench's decision in ITA 2394/Kol/2017 Prakash Chand Bhutoria vs. ITO decided on 27.06.2018 for AY 2014-15 itself upholds such a share prices increase to be genuine qua the above former entity as under:- 5. In response to the queries raised by the assessing officer on the issue of the fact that the assessee received Rs. 31,62,372/- from sale of once scrips i.e. 'Unno Industries Ltd.' the assessee submitted the following facts: "Details of Purchase of share for Long Term capital Gain F.Y.2013-14 (A.Y.2014- 15): 1. I state that I had purchased 100 equity shares of Pinnacle Vintrade Ltd. on 20.01.2012 from Uniglory Developers Pvt. Ltd. Pinnacle Vintrade Ltd. was merged with Unno Industries Ltd. and there was change of management and control of Unno Industries ltd. pursuant to scheme of arrangement sanctioned by the Hon'ble High Court at Bombay. 2. Payment for the purchase of aforesaid 100 equity of Pinnacle Vintrade Ltd. was made by Account Payee Tamilnad Mercantile Ltd. Bank Cheque no. 736027. 3. Bank statemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stries Ltd. were submitted for dematerialization on 01.04.2013 and credited to my Demat A/c No. 1203450000003128 with M/s Ashika Stock Broking Ltd. (DP ID No. 12034500) on 12.04.2013 (91000 shares). Details of Sale of Share for Long Term Capital Gain financial year 2013- 14(A.Y.2014-15): 1. The equity shares of M/s Unno Industries Ltd. are listed at Bombay Stock Exchange (BSE), a recognized Stock Exchange of India since last so many years and even during the time of sale by me. The security code of the said equity shares at BSE is 519273 and ISIN No. is INE 142N0 1023. 2. Equity shares of Unno Industries Ltd. were sold on Bombay Stock Exchange through SEBI registered stock broker Ashika Stock Broking Ltd. and Guiness Securities Ltd. whose details are as under: a) Name: Ashika Stock Broking Ltd. Address: Trinity, 7th Floor, 226/1, A.J.C. Bose Road, Kolkata-700020. Contact No. 033 22839952. b) Name: Guiness Securities Ltd. Address: Guiness House, 18, Deshpriya Park Road, Kolkata-700026 Contact No. 033 30015555. 3. Contract Notes issued regarding sale of equity shares of Unno Industries Ltd. on Bombay Stock Exchange by SEBI registered brokers- Ashika Stock Broking Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd whose shares price have been apparently manipulated by the syndicate of operators. Out of the above enquiry made by DIT(Inv.), Kolkata has established that one of the main manipulated company which you had availed is also under this syndicate. Hence, it is crystal clear that Sharp Trading Company is one of the main manipulated company (Penny listed) to convert unaccounted cash of beneficiary through long term capital gain with claim a certain percentage of commission." 7. Thereafter the AO made an addition under 68 of the Act. Aggrieved the assessee carried the matter an appeal. The ld. First appellate authority confirmed the action of the AO on the ground that, the transaction in question comes within the ambit of 'Suspicious Transaction' and therefore, the rules of 'Suspicious Transaction' would apply to the case. He further stated that the payments through bank of processing of transaction through stock exchange and other such features are only apparent features and that the real feature are the manipulation and abnormal price raise and the sudden dip thereafter. Based on surrounding circumstances and circumstantial evidence and the order of the Tribunal in the case of "Bh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by the Assessing Officer as unexplained cash credit under section 68 of the Income Tax Act, 1961, by ignoring the facts on record. The ld. Tribunal after considering the material and hearing came to a fact finding which is as follows: The Assessing Officer has doubted the transaction since the selling broker was subjected to SEBI's action. However, the demat account given the statement of transactions from 01.04.2004 to 31.03.2005 i.e. relevant for the assessment year under appeal (2005-06) are before us. There cannot be any doubt about the transaction as has been observed by the assessing officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the ld. Commissioner of Income Tax (Appeals) in accepting the transactions as genuine too. In view of the fact findings we cannot reappreciate, recording is such, cannot be said to be perverse as it is not fact finding of the ld. Tribuna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] - In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon'ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed." 8.5. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding 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. 9. In the result the appeal of the assessee is allowed." The "A" bench of the Kolkata Tribunal in the case of ITO vs. Shaleen Khemani in I.T.A. No. 1945/Kol/2014 dated 18.10.2017 at para 9.1. to 9.4 held as f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee's contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held - "As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs. 25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed." 9.4. We also find that the various other case laws of Hon'ble Jurisdictional High Court and other case laws also relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of SOICL as undisclosed income of the assessee u/s 68 of the Act and therefore we uphold the order of the ld CITA and dismiss the appeal of the revenue. Accordingly the grounds raised by the revenue are dismissed." Applying the proposition of law laid down in all the above referred cases, the facts of this case, I find force in the submission of the assessee and there are backed by evidence. I also find that the revenue has not based its finding on in any evidence. In view of the above discussion the addition made u/s 68 of the Act is hereby deleted." 6. Learned Departmental Representative vehemently con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lodged the said shares with the Depository M/s. Eureka Stock & Share Broking Services Ltd. with a Demat request on 11th 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, broke....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o be brought on recording each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. 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 cannot be 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 for the 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the Income-tax Officer indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against 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 the 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 deno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alterampartem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to 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 crossexamination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009SC 1100, this Court held: Effective cross-examination could have bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is not even dealt with by 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 which would not be in possession of the Appellant themselves to explain as to 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 statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority 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 wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed." b) The JAIPURITAT in the case of VIVEKAGARWAL [ITA No.292/JP/2017]order dated 06.04.2018 held as under vide Page 9 Para 3: "We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the Assessing Officer has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account." c) The 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act." Further in Page 15 Para 8.5 of the judgment, it held: "We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding 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/unwarrant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 bona fide 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." g) The BENCH "H" OF MUMBAI ITAT 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 broker. Detailed finding ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: "The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax (Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank." j) The Hon'ble Supreme Court in the case of PCIT vs. Teju Rohit kumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon'ble Gujarat High Court as under: " 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 whi....