TaxTMI 
TaxTMI 
2018 (10) TMI 1913
X X X X Extracts X X X X
X X X X Extracts X X X X
....be decided in all these appeals is as to whether the ld CITA was justified in upholding the addition made towards long term capital gains on sale of shares in the facts and circumstances of the case. The facts of Shri Biswanath Agarwal in ITA No. 2280/Kol/2017 for Asst Year 2014-15 as per the consent of both the parties before us and the decision rendered thereon would apply with equal force to other two assessees also herein in view of identical facts except with variance in figures. 3. The brief facts of this issue is that the assessee ( Shri Biswanath Agarwal) filed his return of income for the Asst Year 2014-15 on 27.11.2014 declaring total income of Rs. 17,79,571/- after claiming exempt long term capital gains (LTCG in short) of Rs. 2,19,33,154/- on sale of listed equity shares of Cressenda Solutions Ltd which was also subjected to Securities Transaction Tax (STT) and transactions routed through recognized stock exchange. The assesee also derived exempt interest on deposit from Public Provident Fund of Rs. 2,20,497/- ; exempt share of profit from partnership firm of Rs. 1,74,00,326/- and exempt dividend on equity shares of Rs. 3,60,59,771/-. The assessee claimed deduction o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sale of shares as unexplained cash credit u/s 68 of the Act and added the same to the total income of the assessee. The ld AO also added commission component thereon to the tune of Rs. 43,866/- as income of the assessee in the assessment. This action was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us. 5. The ld AR placed reliance on the primary documents evidencing the purchase and sale of equity shares of Smart Champs IT & Infra Ltd (pre-merger) and Cressanda Solutions ltd (post merger) . He argued that the shares were sold by the assessee based on the prevailing market prices in the stock exchange in the open market on which the assessee does not have any control. He argued that there is no evidence brought on record by the revenue to prove that the concerned scrip was involved in artificial price rigging at the behest and connivance of assessee, his broker and the stock exchange and some entry operators. The broker of the assessee who is registered with SEBI and member of BSE was not found faulty by SEBI or by any other investigating agency. He argued that assessee is an investor of various private and public limited companies which is evident from the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he case of CIT vs Mukesh R Marolia in ITA No. 456 of 2007 dated 7.9.2011 wherein it was held as under:- 6. Similarly, the sale of the said shares for Rs. 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt Ltd and M/s Scorpio Management Consultants Pvt Ltd cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assessee nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s Richmond Securities Pvt Ltd, regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s Richmond Securities Pvt Ltd held that the sale transaction was genuine. 7. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs. 1,41,08,484/- represented unexplained investment under section 69 of the Income Tax Act, 1961 cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,500 Buildmat Developers Pvt Ltd - 21,54,500 CCL International Ltd - 50,79,138 Global Trust Bank Ltd - 25,000 Parline Leasing Pvt Ltd - 40,000 Praxis Suppliers Pvt Ltd - 4,59,094 RBA Castings Pvt Ltd - 59,58,000 RBA Exports Pvt Ltd - 5,87,20,600 Shree Uma Foundries Pvt Ltd - 87,99,500 Valencia Leasing Pvt Ltd - 40,000 ___________ 8,49,80,332 __________ 7.1. We find that the assessee had dematted the shares of Smart Champs IT & Infra Ltd on 11.2.2012 with M/s Eureka Stock & Share Broking Services Ltd (Depository Participant - DP in short). Pursuant to the merger of Smart Champs IT & Infra Ltd with Cressanda Solutions Ltd, the assessee got 50000 shares in Cressanda Solutions Ltd and the same were dematted with the same DP on 7.3.2013. 7.2. We find that the assessee had sold these 50000 shares of Cressanda Solutions Ltd, through the share broker (M/s SKP Stock Broking Pvt Ltd) who is registered with SEBI and member of Bombay Stock Exchange, on various dates in Asst Year 2014....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e by mere surmise and conjecture and without bringing any evidence on record. Moreover, it is for the assessee to chose whether to buy a particular scrip and the department cannot step into the shoes of the assessee in this regard and participate in the business and investment decisions of the assessee. Reliance in this regard is placed on the decision of Hon'ble Apex Court in the case of CIT vs Dhanrajgirji Raja Narasingirji reported in 91 ITR 544 (SC). The next argument of the ld DR that the contract notes and demat statements are only evidences to prove that the transactions happened and got recorded in the stock exchange and that it does not give credence to the transaction per se. In this regard, we find that the transactions of purchase and sale of shares happen in the secondary market based on the prevailing market prices through the registered stock brokers in the concerned stock exchange. This is how the transactions happen across the world. For these events, the documents are furnished by the stock brokers in the form of contract notes , delivery instructions submitted by the parties for effecting the sale through the recognized stock exchange and transactions of move....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plication for allotment of 50000 equity shares of "Smart champs IT and Infra Ltd." and she was allotted the share on 3rd December 2011 (copy of Application form, intimation of allotment and share certificate Paper Book at page 8 to 10). 2. The payment for the allotment of shares was made through an account payee cheque (copy of the bank statement evidencing the source of money and payment made to "Smart Champs IT & Infra Ltd." for such sharesallotted is placed in the Paper Book at page no. 11). 3. Annual return no. 20B was filed with Registrar of companies by "Smart Champs IT & Infra Ltd" showing the assessee's name as shareholder (copy of annual return no. 20B filed with Registrar of companies by "Smart Champs IT & Infra Ltd. "is placed in the Paper Book at page no. 12 to 18.) 4. Theassessee 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee's action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation's office by way of statements recorded etc. has to also be brought on record in 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 assesee, 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITR 271 held that suspicion however strong, cannot take the place of evidence. In this connection we refer to the general view on the topic of conveyance of immovable properties. The rates/sale price are at variance with the circle rates fixed by the Registration authorities of the Government in most cases and the general impression is that cash would have changed hands. The courts have laid down that judicial notice of such notorious facts cannot be taken based on generalizations. Courts of law are bound to go by evidence. 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However, we do not find that the assessing officer as well as the Ld. CIT(A), have brought out any part of the investigation 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 findi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored. The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,---this also was a pure conjecture or surmise on the part of the Income-tax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches 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 h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC708; New India Assurance Co. Ltd. v. Nusli NevilleWadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448;Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944,considered a similar issue i.e. permission with respect to the cross- examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their 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 alteram partem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw 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 Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee's appeal." [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal's finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set off acts in coming to its finding, we do not think there is any scope of interference 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 VIVEK AGARWAL [ITA No.292/JP/2017]order dated 06.04.2018 held ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT (A). We note that in the absence of material/evidence the allegations that the assessee /brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT (A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support 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 bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duly considered 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." f) The BENCH "A"OF KOLKATAITAT in the case of SHALEEN KHEMANI [ITA No.1945/Kol/2014]order dated 18.10.2017 held as under vide Page 24 Para 9.3: "We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not 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, co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0] order dated 14.11.2011 vide Page 2 Para 3 held as under: "On the basis of the documents produced by the assessee in appeal, the Commissioner of Income Tax (Appeal) recorded a finding of fact that there was a genuine transaction of purchase of shares by the assessee on 16.3.2001 and sale thereof on 21.3.2002. The transactions of sale and purchase were as per the valuation prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed." i) The Hon'ble Jurisdictional Calcutta 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 Commission....