TaxTMI 
TaxTMI 
2019 (7) TMI 1604
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is by cheque, completely ignoring the fact that this is the basic guise to provide accommodation entry, only to layer the sham transaction as genuine? 3. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) was justified in deleting the addition of Rs. 1,51,869/- being commission to acquire such accommodation entry ? 4. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) was justified in deleting the 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 ? 5. The appellant craves the right to amend alter or add to any of the grounds of appeal given above. 2. The relevant facts leading to the controversy of treating the long term capital gain on sale of shares as sham/bogus transaction and addition under section 68 of the IT Act which was deleted by the ld. CIT (A) is that the assessee purchased 2,00,000 shares of face value of Re. 1/- each of M/s. Careful Projects Advisory Ltd on 24.11.2011 fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Department, Kolkata, Shri Sunil Dokania admitted that he is aware of suspicious transactions done by some companies in the script of M/s. Kailash Auto Finance Ltd. through the broker houses. The ld. D/R has referred to the statement of Shri Sunil Dokania recorded under section 131 on 12.06.2015 as well as the statement recorded on 06.03.2013. The assessee has shown huge capital gain earned from purchase and sale of the shares of M/s. Kailash Auto Finance Ltd. within a very short period of time. Thus it is a case of investment in penny stock of a company whose shares were used for the purpose of providing accommodation entries by the persons involved in such activity. The ld. D/R has referred to the assessment order and submitted that the AO has discussed the modus operandi of such transactions of accommodation entries in the script of paper/bogus companies and thus the unaccounted money of the beneficiary is routed back in the shape of Long Term Capital Gain claimed as exempt under section 10(38) of the IT Act. Though the assessee has purported to have received the sale consideration on sale of shares, however, in reality it was his own cash which he received back through some ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roker of SEBI. The ld. A/R has referred the Contract Note for sale of shares at pages 35 to 43 of the paper book as well as the ledger account of the assessee in the books of M/s. Anand Rathi Share & Stock Brokers Ltd. at page 44 of the paper book. He has also referred the bank statement showing the sale consideration received in the bank account of the assessee. Thus when the assessee was holding the shares since 24th November, 2011 and sold between 13.08.2013 to 31.01.2014 then holding period of these shares is about 2 years and in some cases more than 2 years. Hence, the ld. A/R has submitted that when the assessee has purchased the shares of M/s. Careful Projects Advisory Ltd. then the statement of Shri Sunil Dokania recorded by the Income Tax Department, Kolkata cannot be a relevant material to hold the transaction of purchase as bogus. Further, in the said statement he has not mentioned the name of the assessee or the company from whom the assessee purchased the shares. Therefore, a general statement made by Shri Sunil Dokania cannot be used against the assessee. He has supported the order of the ld. CIT (A) and submitted that the ld. CIT (A) has discussed all the relevant fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee as reflected in the demat account. Therefore, the purchase of shares by the assessee of M/s. Careful Projects Advisory Ltd cannot be disputed due to the reason that certain persons were indulged in providing accommodation entries in the shares of M/s. Kailash Auto Finance Ltd. It is not the case of purchase of shares of M/s. Kailash Auto Finance Ltd. but the assessee was allotted the shares of the said company by virtue of merger and in lieu of the shares of M/s. Careful Projects Advisory Ltd. Further, the AO has given much emphasis to the statement of Shri Sunil Dokania recorded by the Investigation Wing Kolkata on 06.03.2013 and 12.06.2015 whereas the shares of M/s. Careful Projects Advisory Ltd. were purchased on 24.11.2011. Therefore, even if Shri Sunil Dokania has accepted the activity of providing accommodation entries in the shares of M/s. Kailash Auto Finance Ltd., but when the assessee has not purchased the shares of the said company, then the transaction of the assessee cannot be doubted on the basis of the said statement. Even otherwise, when the assessee has produced documentary evidence which is neither found to be bogus or the correctness of the same is doubte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, getting them dematerialized-86 then overpriced sale through these companies to obtain bogus capital gain/loss. In most of such cases where the department has initiated proceedings u/s 148 8s made additions by disallowing capital gains benefit claimed u/s 10(38) t3s treating it as unexplained credit u/s 68, the higher judicial authorities have not agreed 8s taken. a view adverse to the department, based on facts in such cases. The main finding in such decisions is that if the transaction is supported by documents like contract notes, demat statements etc. and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone hack to or from the assessee's or recipient's account, it has to be treated as a genuine transaction and cannot be treated as unexplained credit. In the case of DCIT vs. Rakesh Saraogi & Sons (HUF), ITAT, Raipur clarified that even assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in demat accounts with Government depository and traded on the stock exchange. N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urchase of shares initially, off-market transaction for purchase of shares is not illegal. The transactions were all through account payee cheque and the sale of shares suffered STT, brokerages, etc. The allegedly Penny stock company Kailash Auto Finance Limited, shares of which were traded on BSE, however the operations of the company have been suspended after the order of SEBI, though later on vide orders dt.21.09.2017 SEBI after making necessary investigation concluded that no adverse findings were there against the 244 entities which were alleged to be involved in manipulation of the scrip of company M/s Kailash Auto (as alleged by the department). These parties included the names of Sh. Anand Rathi who was the broker in appellant's case also. There are certain points on which the A.O. needed to do independent verifications to drive home his theory- (i) Whether any cash entries were there in the broker's account or routed through another account to his account which could be related to the appellant, thus confirming it to be a bogus claim. (iii) Whether SEBI had confirmed a 'price rigging' finding in the case of the company whose share....
X X X X Extracts X X X X
X X X X Extracts X X X X
....milar such cases which are as under : THE ITAT AHMEDABAD BENCH 'B' in Pratik Suryakant Shah v. Income-tax Officer Ward- 10 (3), Ahmedabad, 77 taxmann.com 260 (Ahmedabad - Trib.) in IT APPEAL NOS, 810 TO 815 86 922 TO 926 (AHD.) OF 2015 & others - Tula! 11 Appeals ror A Ys 2006-07 & 2008-09 Date of Hearing : 20/10/2016 / Date of Pronouncement: 21/10/2016 held as under: Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term securities (Bogus transactions) - Assessment year 200607 - Assessee purchased 3000 shares of company 'T through a stock broker - These shares were transferred to assessee's demat account - However, said stock broker submitted before authorities that 1w was providing accomodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assessee was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assessee - Whether since shares of said company was listed in BSE/ NSE and these were also transferred to demat account of assessee, assessee'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing action of the Tribunal:-- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious fate which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, the assessment order has to be quashed. 17. For the sake of the completeness of the adjudication, even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/ National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....count of undisclosed income and denial of exemption under section 10(38) could not be sustained Held, yes THE ITAT JODHPUR BENCH in Deputy Commissioner of Income-tax v. Smt. Hansa Choudhary 23 taxmann.com 302 (Jodhpur - Trib.) (referred in the above case law also), held- Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment years 2002-03 and 2004-05 - Where purchase of shares in question was not in dispute and evidence on record showed that said shares were sold through a broker and consideration for transfer was received through cheque, sale consideration could not be treated as assessee's own undisclosed funds. ITO vs. Indravadan Jain (HUF) (ITAT Mumbai) (Date of pronouncement May 27, 2016) held as under- S. 68: Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company & the broker if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken & given. This view has also been confirmed by the jurisdictional Rajasthan High Court in the case of Pooja Agarwal in D.B. Income Tax Appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima fade the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at. a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Puruhit arid Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention 'of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....018 where the tribunal confirmed the order of CIT (A) Alwar deleting the addition made by the A.O on account of Capital Gain earned by that assessee from sale of shares of Kailash Auto Finance Limited . Thus in the light of the plethora of judgements highlighted above including those of the jurisdictional High Court folldwed by ITAT, Jaipur bench, it is seen from the facts involved in the present case is that the appellant has made payment for the purchase of shares vide cheque which the A.O. has not disputed. He has shares allotment on merger of the company by court's order with the Kailash Group and scheme of merger is showing the details of share allotment. Shares were sold through the broker's contract note on stock exchange and sales consideration was received entirely in cheques. The STT has also been duly deducted on all the sales transactions. No adverse finding has been sent by the Investigation Unit regarding the Broker indulging in manipulations and how he could rig the trades in which sale prices were market and exchange based to give undue advantage to the assessee. The A.O. has thus ignored the documentary evidences and relied upon &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsaction amounting to Rs. 1,51,869/-also cannot sustain and the addition made u/s 115BBE of the I.T.Act,1961 is directed to be deleted. This ground of appeal is treated as allowed." Thus the ld. CIT (A) has discussed all the relevant facts as well as documentary evidence filed by the assessee in support of the claim. We further note that in case of Manish Kumar Baid vs. ACIT (supra), the Kolkata Bench of the Tribunal while considering an identical issue of Long Term Capital Gain on sale of shares of M/s. Kailash Auto Finance Ltd. has held in para 6 as under :- "6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the ld AR that the ld AO was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the ld AR supra, with regard to impleading the assessee f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shita Stock Broking Ltd's name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI's order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o established to the extent that the assessee made payment of purchase consideration of Rs. 4.00 lacs through his bank account with ICICI bank and the payment is duly reflected in the bank account statement. Therefore, the payment of purchase consideration has been established beyond any doubt. The only question which can be raised for this transaction of purchase of shares of these two companies is the suppression of purchase price so as to create an artificial capital gain of maximum amount. However, the Assessing Officer has not given any finding that the purchase price was artificial suppressed by the parties with intention to maximize the capital gain through the modus operandi of bringing the assessee unaccounted income in the shape of long term capital gain exempt U/s 10(38) of the Act. The Assessing Officer has given much emphasis on the report of DDIT(inv.), Kolkata and some statements were recorded during the investigation proceedings by Kolkata wing wherein three persons who were brokers namely Shri Anil Khemka, Shri Devesh Upadhyay and Shri Pankaj Agarwal were examined by the DDIT(Inv.), Kolkata and in their statements recorded U/s 131(1) and 133A of the Act, they admit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e doubted. The sale price as on the date of transaction is also the prevailing price in the stock exchange. Hence it is not a case of the Assessing Officer that the assessee has shown an inflated sale price which is not as per the prevailing market price of the shares of M/s Kailash Auto Finance Ltd.. It is pertinent to note that the shares of M/s Kailash Auto Finance Ltd. were issued to the assessee only in lieu of the shares of erstwhile two companies M/s Careful Projects Advisory Ltd. and M/s Panchshul Marketing Ltd. and it is not a transaction of acquiring the shares of M/s Kailash Auto Finance Ltd against the consideration. Thus, the allotment of shares by M/s Kailash Auto Finance Ltd. in pursuant to the scheme of amalgamation established the fact that the assessee was already holding the equal number of shares in the erstwhile companies namely M/s Careful Projects Advisory Ltd. and M/s Panchshul Marketing Ltd. Thus the holding of shares by the assessee and allotment of shares of M/s Kailash Auto Finance Ltd. are the material facts emerging from the records, which cannot be disputed. The allotment of shares of M/s Kailash Auto Finance Ltd. itself is a proof of holding of share....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount? * Justification in case of delay in dematerialization of shares, since it is one of the main ingredients to prove backdated purchase of shares. So far as the basic documents are concerned, they have been filed before the A.O and also during the appellate proceedings. Additional informations as stated above have also been provided by the appellant. In this regard I have taken note of the fact that the appellant is himself a founder and promoter of Raghunandan group and is a management graduate having experience of more than 19 years in financial market and financial products. In this regards, the appellant has submitted as under; 1. He has an in depth knowledge and strong understanding of various intricacies of financial market. The Appellant has been investing in the share market based on various reports, analysis and studies made by experts in the field, which are published in newspapers, trade magazines etc. as also on the basis of knowledge gained through acquaintances. 2. During the period April 2013 to April 2016, the Appellant had traded in several other securities as well through the stock exchange mechanism. In or about Feb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h registered stock broker. When sale of the shares have been recognized as genuine then corresponding purchase of such shares in the demat form is also recognised. The A.O has particularly raised the issue of exorbitant price of the share at which they are sold as compared to very low purchase price. If there any manipulation is done to rig the price of the shares then the SEBI is the competent body to investigate it. SEBI in its order dated 21/09/2017 has stated that no adverse finding against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto. Accordingly SEBI has revoked the suspension of the said entities including KAFL. Merely sharp increase in share price cannot be the reason for treating sale/purchase of such shares as dubious in nature. I have also considered various reasons given by the A.O to treat the share transaction as sham transaction. Merely, basing the judgment on the basis of statement given by 3rd parties without corroborating it with evidences on record is neither tenable nor reasonable inference. The A.O has not brought on record any evidence that any cash amount were transferred , from the appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....then, for these facts alone, the transaction could not be rejected altogether, particularly in absence of any cogent evidence to the contrary. In a recent judgment, Jurisdictional Rajasthan High Court has dismissed the revenue case in the case of CIT-1 Vrs Smt. Pooja Agarwal and Jitendra Kumar Agarwal in the Appeal No.385/2011. Hon'ble High Court in its order dated 11/09/2017 has upheld the decision of CIT(A) and Hon'ble ITAT, Jaipur Bench, in giving relief to the assessee. Hon'ble Court has recorded as under; 8. the assessee submitted reply to the show cause notice contending that the share transactions are genuine and the short term capital gain of Rs. 98,56,872/- has been earned from purchases and sales of shares of Konark Commercial limited and Limtux Investment Ltd. Investigation revealed that the entire share transactions were bogus and mere accommodation entries obtained from an entry provider Sh P K Agarwal from Kolkata. The said facts were revealed during search carried out by the Investigation wins, Jaipur in the case o f B C Purohit Group. Therefore, in the above mentioned judgments by the jurisdictional Rajasthan High Court, the Hon'ble Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 10/- each without any premium. The assessee has also produced the bank statement showing the payment of consideration of the acquisition of shares on 29.02.2012. It appears that the said payment was made by the assessee at the time of applying for allotment of shares and subsequently the shares were allotted by the company on 01.03.2012. Thus, it is clear that the shares acquired by the assessee is not a trading transaction but these were allotted directly by the company under the preferential issue and hence, the role of intermediate is ruled out. Once, the shares were directly allotted by the company M/s Rutron International Ltd. against the consideration paid by the assessee through cheque. Then the role of any intermediately particular of Shri Anil Agrawal is said allotment does not appear from any of the record. Even as per the statement as reproduced by the Assessing Officer in the assessment order Shri Anil Agrawal has stated that he is having business nexus with the companies including M/s Rutron International Ltd. The department put a question about the association with as many as 13 companies and in response to that he has accepted that he is having business nexus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt of statement of Shri Anil Agrawal as reproduced by the AO that he has stated having business nexus with these companies and nature of business being consultancy services. Hence, he has not stated anything about providing bogus long term capital gain in respect of the equity shares of M/s Rutron International Ltd. A business nexus with any company will not automatically lead to the conclusion that the shares allotted by the other company is bogus transaction. As per question no. 5 and answer thereto it is clear that Shri Anil Agrawal was not the Director of M/s Rutron International Ltd. but he has stated to know some of the directors of these companies including M/s Rutron International Ltd. Hence, from this relevant part of the statement of Shri Anil Agrawal it cannot be inferred that he has provided the bogus long term capital gain from purchase and shares of equity shares of M/s Rutron International Ltd. much less the specific transaction of preferential issue allotment of shares by the company itself to the assessee. Further, though he has explained the modus oprendi of providing bogus long term capital gain entries in the equity shares however, when the transaction was not r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in law. We further note that the assessee produced copy of affidavit of Shri Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Anil Agrawal. The Coordinate Bench of this Tribunal in case of Pramod Jain and Others vs. DCIT (supra) whole dealing with an identical issue as held in para 6 to 8 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 ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Gravity Barter Ltd. and the allotment of shares M/s Oasis Cine Communication Ltd. are directly interconnected. In the absence of holding of shares M/s Gravity Barter Ltd. the shares of the M/s Oasis Cine Communication Ltd. could not be issued or allotted to the assessee. Therefore, holding of the shares by the assessee at least at time of amalgamation took place and shares of the M/s Oasis Cine Communication Ltd. on 04.02.2012 cannot be doubted. Moreover, these shares were dematerialized by the assessee 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 C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....share then merely because of a short period of time will not be a sufficient reason to hold that the transaction is bogus. The shares allotted to the assessee vide share certificate dated 31.03.2011 were dematerialized on 21.10.2011, therefore, on the date of dematerialization of the shares the holding of the shares of the assessee cannot be doubted and hence the acquisition of the shares of the assessee cannot be treated as a bogus transaction. Nobody can have the shares in his own name in demant account 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 s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....your good self. Since your good self has got the authority, we humbly request youto kindly issue the notice u/s 131 of the income Tax act 1961 to him also for cross examination. We also request your good self to kingly provide us the copy of statements of Shri Deepak Patwari along with the other relevant documents. Please note that the assessee is ready to bear the cost of his travelling in this regard." It is manifest from the assessee's reply to show cause notice that the assessee had specifically demanded the cross examination 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rpose 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 cross-examination 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 17.03.2005 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. 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 nulli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owever, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever 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 side. The conclusions have to be 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 int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment of consideration by in cash. But the transaction is established from the evidence and record which cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. Therefore, the holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. We find that the ld. CIT(A) has also referred to SEBI enquiry against the M/s Anand Rathi Share and Stock Brokers Ltd. However, we note that the said enquiry was regarding financial irregularities and use of fund belonging to the clients for the purpose other than, the purchase of shares on behalf of the clients. Therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain. The decisions replied upon the ld. DR in case of Sanjay Bimalchand Jain vs. Pr. CIT (supra) is not applicable in the facts of the present case as the said decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as introduced his own unaccounted money by way of bogus long term capital gain. Accordingly, in view of above facts and circumstances, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, this ground of revenue's appeal is dismissed." The same facts were considered in the above cited cases regarding purchase of shares of M/s. Careful Projects Advisory Ltd which was subsequently merged with M/s. Kailash Auto Finance Ltd. and after analyzing the relevant documentary evidence which includes purchase bill, payment consideration through bank, dematerialization of shares, allotment of the shares amalgamated new entity in lieu of earlier company, the Tribunal has held that in the absence of any contrary evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus Long Term Capital Gain. The Tribunal has also followed the decision of Hon'ble Jurisdictional High Court in case of CIT vs. Smt. Pooja Agarwal (supra) wherein the Hon'ble High Court has also upheld the finding of the ld. CIT (A) and this Tribunal when the assessee produced all the relevant details and evidence in support of the transaction o....