TaxTMI 
TaxTMI 
2019 (6) TMI 1385
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..../-. The Assessing Officer passed a best judgment assessment order u/s 144 of the Act on 29/12/2016, determining the total income of the assessee at Rs. 27,11,020/- interalia making a disallowance of Rs. 18,97,566/- claimed as short term capital loss. He further disallowed an amount of Rs. 3,75,898/- u/s 57(iii) of the Act. The facts of the issue are brought out at para 4.3. and 4.4. of the order of the Assessing Officer, which is extracted for ready reference:- "4.3. On perusal of the books of accounts and details filed by the assessee it was observed that the assessee had claimed Short term capital gain on sale of shares of COMFORT FINCAP LTD. for the sum of Rs. 18,97,566/-. The said capital gain on sale of shares was claimed to be exempt income. The said long term capital gain of shares was claimed on the sale of shares of Rs. 11,00,610/- received through the share broker Global Capital Market. The said sale proceeds were claimed to have been received on the following dates:- SI. No. Date Amount(Rs.) 1 19/03/2014 159500 2 19/03/2014 507500 3 19/03/2014 406000 4 19/03/2014 29000 4.4. The assessee was requested to fu....
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....e loss within such short time." 3.2. Thereafter, the Assessing Officer relied on the order of the investigation wing of the Income Tax Department, statement stated to be taken on oath during the course of survey conducted on certain brokers, investigation said to have been conducted by SEBI, wherein the transactions of the scrip COMFORT FINCAP Ltd. was said to have been suspended. He referred to the SIT report as well as statements of broker and entry operators. As the assessee failed to appear before the Assessing Officer, the assessment was made u/144 of the Act. The Assessing Officer further disallowed an amount of Rs. 3,75,898/-, claimed u/s 57(iii) of the Act, on the ground that there is no income earned by the assessee so as to allow the expenditure in question. 4. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority confirmed both the additions. On the issue of disallowance of short term capital loss, the ld. CIT(A) relied on circumstantial evidence. The ld. CIT(A) at page 29 para 6.1. and 6.2. concluded as follows:- "1. I have carefully considered the action of the Ld. AO in making an addition of Rs. 18,97,566/-as unexplained....
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....proof of amalgamation of the companies wherein the shareholding has changed hands. It is also the contention of the appellant that it has provided copies of the bank statement, bank contract notes and delivery instructions to the broker by way of proof that all these transactions were genuine. However, in my considered view of the matter, it is precisely this elaborate paperwork that strengthens the matter relating to the bogus benefit of the LTCG, which clearly has been schemed, preplanned and executed with malafide intelligence and precision. Therefore all these papers are mere documents and not any evidence. The whole gamut of transactions are unnatural and highly suspicious, and therefore the rules - of SUSPICIOUS TRANSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assesseeappellant are 'enough to justify the humongous gains accruing to the assessee by way of Capital Gains.' In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the....
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....hey should pass the test of normal behavior of the assessee in the course of business viz., human conduct, preponderance of probability and surrounding circumstances. In my considered view, even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified, Reliance on such matters is placed on the case of Smt Phoolwati Devi 314 ITR (AT) 1 (Del.)." 4.1. Thereafter he relied on a number of case-law and at para 7 onwards and held that the so-called Rules of suspicion transactions will apply in the case. He relied on circumstantial evidence and confirmed the addition. 5. On the issue of interest deduction u/s 57(iii) of the Act, he held that the assessee has a good case and had the transactions leading to short term capital loss were genuine, then he would have allowed this claim. He held that, as he had taken a view that the claim of short term capital loss is not genuine, the disallowance was upheld. 6. Aggrieved the assessee is before me. 7. The ld. Counsel for the assessee submits that, the assessee has produced all the evidence within its command in support of the genuinene....
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....me at page 35 & 36 of his paper book. He further submitted that the Assessing Officer has not rejected or controverted any of the evidences filed by the assessee nor has he come out with any evidence in support of his conclusions. He relied on a number of case-law, which we would be discussing as and when required. 8. I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:- 9. There is no dispute that the assessee has furnished all the evidences as sought for by the Assessing Officer. The Assessing Officer has also at para 4.4. of his order acknowledged that all evidences as desired by him were furnished. The Assessing Officer has relied on the report of the investigation wing of the department. As held by us, in various other decisions, the report of the investigation wing of the Income tax Department can be a starting point for investigation into the affairs of the assessee but cannot be the whole and sole basis on which an addition can be made. Copy of the report is neither furnished to the assessee nor is placed before....