2019 (11) TMI 1048

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....the extent of Rs. 1,80,34,450/-. Based on the information received from the Directorate of Investigation of Bangalore and Kolkata, the Assessing Officer reopened the assessment and after considering the assessee's explanation, material etc., on the basis of investigations done by the Revenue and after analyzing these transactions concluded that the Long Term Capital Gains booked by the assessee in his books are pre-arranged method to evade taxes and launder money. The impugned transactions of purchase and sale of shares have not been effected, for commercial purpose but to create artificial gains with a view to evade taxes. The cumulative events of transactions of shares revealed that they were devoid of any commercial nature and fell in realm of not being bonafide and hence impugned Long Term Capital Gains is not allowable. The assessee was not able to prove the unusual rise and fall of share prices to be natural and based on the market forces. Therefore the ld.AO held that the assessee entered in to make-believe transactions, as presented by a pre-mediated series of steps, with a view to imparting a colour of genuineness and character of commercial nature, to such share transacti....

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....n the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. The relevant portion of the order of this Tribunal in the case of Mr. Sunil Kumar Lalwani Vs ITO & others, Non Corporate Circle 9(4), Chennai in ITA No 659 & 660/ CHNY/2018 dt. 09.01.2019 is extracted as under: "5. Per contra, Id. A.R submitted that the Hon'ble Delhi High Court in the case of Pr.CIT Vs. M/s.Laxman Industrial Resources Ltd., in ITA N'o.169/2017, C.M.APPL.7385/2017 vide order dated 14.03.2017 has held the issue in favour of the assessee. The Id. A.R also placed before us the decision of the Co-ordinate Bench of this Tribunal in the case of Shri Aravind Nandlal. Khatri Vs. Income Tax Officer, in ITA No.2035/Chny/2038 for assessment year 2011-12 vide order dated 03.12.2018 wherein the Co-ordinate Bench of this Tribunal has held as follows:- "5. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the A.O received informat....

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....in foundation of the assessment in the present case is the statement of one Shri Ashok Kumar Kayan who has admitted to have provided bogus Long Term Capital Gains to his clients. The said Shri Ashok Kumar Kayan also allegedly seems to have provided the assessee's name and PAN as one of the beneficiaries. However, this statement given by Shri Ashok Kumar Kayan cannot be the foundation for the purpose of assessment in so far as Shri Ashok Kumar Kayan has not been provided to the assessee for cross-examination. In the absence of opportunity of cross-examination, the statement remains mere information and such information cannot be foundation for assessment. 10. Admittedly, the assessee has claimed to have purchased 15000 shares from M/s.BPL @ Rs. 20/- per share totaling into Rs. 3,00,000/-. The assessee claims to have paid cash for the purchase of these shares. The primary question would be as to where the purchase was done? If the purchase has been done in Kolkata, how was the cash transferred? When did the assessee received the share certificates and the share transfer forms? How did the assessee overcome the provisions of Sec.40A(3)? Was there adequate ca....

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....ny was hitting the circuit breaker of the stock exchange on a daily basis and obviously it would have drawn attention. This being so, as the facts are not coming out of the Assessment Order nor the order of the Ld.CIT(A) nor from the side of the assessee, we are of the view that the issues in this appeal must be restored to the file of the AO for readjudication after granting the assessee adequate opportunity to substantiate its case and we do so. 12. The statement recorded by the Revenue from Shri Ashok Kumar Kayan cannot be used as an evidence against the assessee in so far as the statement has not been given to the assessee nor has Shri Ashok Kumar Kayan been provided to the assessee for cross-examination. However, the assessee shall prove the transaction of the Long Term Capital Gains in respect of which the assessee has claimed the exemption u/s.10(38) by providing all such evidences as required by the AO to substantiate the claim as also by producing the persons through whom the assessee has undertaken the transaction of the purchase and sale of the shares which would include the sub-broker, friend and the broker through whom the transaction has been done, before the....