TaxTMI 
TaxTMI 
2022 (1) TMI 91
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....lding the validity of reopening of assessment in the instant case; 2. The Ld. CIT(A) failed to appreciate that detailed enquiries on the issue of transactions in shares entered into by the Appellant were made by the Ld. AO during the course of original assessment proceedings under S. 143(3) read with S. 153A of the Income-tax Act, 1961, and as such the reopening of assessment was based merely on a change of opinion; 3. The Ld. CIT(A) failed to appreciate that the reopening of assessment was not initiated on the basis of any fresh, tangible material inasmuch as the report of the Kolkata Investigation Wing was dated April 27, 2015, whereas the original assessment under S. 143(3) read with S.153A of the Income-tax Act, 1961 was completed on March 30, 2016. Therefore, the reopening notice dated September 14,2016 was without jurisdiction and bad in law. II. Additions under section 68 and 69C 1. The Ld. CIT(A) erred in sustaining the additions made by the Ld. AO under Sections 68 and 69C of the Income-tax Act, 1961; 2. The Ld. CIT(A) failed to appreciate that detailed evidence and documents in support of the Appellant's claim of long-term ....
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....mpugned order. The assessee has also challenged the validity of assessment proceedings. 1.2 The registry has noted a delay of 22 days in the appeals, the condonation of which has been sought by legal heir of the assessee on the strength of sworn affidavit. It has been submitted that delay occurred due to the fact that the case records were voluminous. Keeping in view the period of delay, the bench formed an opinion that the delay was to be condoned. Accordingly, we proceed for adjudication of the appeals on merits. 1.3 The Ld. AR, drawing our attention to the documents as placed in the paper-book, assailed the additions on the ground that the additions are arbitrary and made on mere suspicion & conjectures. It was submitted that there is no corroborative material on record to disprove the genuineness of the transactions as carried out by the assessee during the year. Reliance has been placed on various judicial pronouncements, the copies of which have been placed on record. The Ld. DR, on the other hand, supported the conclusion of lower authorities by submitting that the assessee dealt in penny-stock scrip which was evident from the statements made by various entry operators....
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....tock Exchange through registered stock brokers. The investments were made for the purpose of capital appreciation since the assessee was a regular investor in shares. The investments so made were duly reflected in the books of account. It was further submitted that during earlier assessment proceedings u/s 153A, the assessee was called upon to produce the details of long-term capital gains. The complete details of the gains were submitted along with copy of broker notes and ledger copy of the assessee in the books of the broker. The gains so earned by the assessee were accepted by Ld. AO during those proceedings. Therefore, reopening was nothing but mere change of opinion. 2.5 On merits, the assessee submitted that the transactions were carried out through recognized stock exchange. The price of the shares on stock exchange would depend on demand and supply and determined by market forces on which the assessee would have no control. The assessee submitted that adverse statements given by brokers, director of companies and promoters of penny stock companies were not provided and no opportunity to cross-examine them was ever given to the assessee. Therefore, the said material coul....
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....d. AO treated the sale consideration as undisclosed income u/s 68. The assessee must have paid certain commission to obtain the same which was estimated @6% and further added to the income of the assessee u/s 69C. Appellate Proceedings 3.1 During appellate proceedings, the assessee challenged the validity of assessment proceedings on the ground that reopening was based merely on change of opinion. However, the same could not convince Ld. CIT(A) who opined that subsequent to completion of assessment proceedings, certain information was received by Ld. AO through departmental channels and the information was credible and actionable. The said material was sufficient to invoke the provisions of Sec.147 and no infirmity could be found in the action of Ld. AO to reopen the case of the assessee. The legal grounds, thus raised by the assessee, were dismissed. 3.2 On merits, the assessee reiterated its submissions that the transactions were well substantiated with documentary evidences and the view taken by Ld. AO was arbitrary and contrary to settled legal position. The assessee, drawing attention to the documentary evidences, reiterated that copies of adverse statements given by ....
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....ntry providers. The assessee knowingly participated in the bogus LTCG scam. 3.6 The assessee' documentation was to be rejected in terms of the decision of Hon'ble Supreme Court in the case of Durgaprasad More (82 ITR 540) and Sumati Dayal (214 ITR 801) wherein it was held that the evidences were to be adjudged by applying the test of human probabilities and if something unusual was being claimed, the same was to be rejected. The other contentions of the assessee were also rejected. Finally, it was held that the assessee was not able to justify the investment decision and could not explain the spike in the prices of the scrip. Therefore, in the light of various judicial pronouncements, the action of Ld.AO in making additions u/s 68 & 69C was upheld. Aggrieved, the assessee is in further appeal before us. 4. Our findings and Adjudication 4.1 So far as the material facts are concerned, we find the assessee has sold certain shares of a scrip namely Unisys during the year. These shares were purchased during March, 2010. The shares were purchased in online mechanism at recognized stock exchange through registered share broker and the shares were duly credited in assessee's demat....
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....e assessee's claim and establish with cogent evidences that the transactions were non-genuine transactions through which assessee's unaccounted money has flown back to assessee in the garb of bogus capital gains. However, we find that except for general findings of investigation wing and third-party statements on the basis of which it has been alleged that the scrip of Unisys was penny stock, there is nothing in the kitty of the revenue to prove the assessee's involvement in manipulating the prices of the scrip. No exchange of cash between the assessee and the various exit providers could be proved. Therefore, the onus as casted upon revenue to dislodge the assessee's claim, remain un-discharged. 4.5 So far as the observations of Ld. AO as to financial and profitability of Unisys is concerned, we find that the sales transactions have taken place in online mechanism through recognized stock exchange wherein the identity of the buyer would not be known and there would be no privity of contract between the assessee and prospective buyers of shares. In online mode of trade, the prices would be guided by the buyer willing to buy the shares at certain prices and the seller willing to ....
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....y bringing on record cogent evidences as well as confronting the same. We find that except for general allegations as narrated in the investigation wing report, there is no evidence which would link assessee's involvement in jacking up the prices of the shares with a view to earn artificial gains. The additions so made could not be sustained in the eyes of law as per the decision of Hon'ble Apex Court in Kishanchand Chellaram V/s CIT (125 ITR 713) and also in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006 dated 02/09/2015) wherein it has been held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of natural justice because of which the assessee was adversely affected. Similar is the ratio of decision of Hon'ble Bombay High Court in H.R.Mehta V/s ACIT (387 ITR 561). 4.7 The proposition that additions made purely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law stem from the decision of Hon'ble Supreme Cou....
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....isions is equally applicable to the fact of the present case before us. 4.10 Finally, keeping in the facts and circumstances of the case, we are inclined to hold that impugned additions are not sustainable in the eyes of law. The assessee had discharged the primary onus of establishing the genuineness of the transactions whereas the onus as casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The whole basis of making additions is third-party statement and no opportunity of cross-examination has been provided to the assessee to confront these parties. As against this, the assessee's position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. Hence, going by the factual matrix and respectfully following the binding judicial precedents as enumerated in the order, the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable in the eyes of law. Therefore, we are inclined to delete the same. We order s....