TaxTMI 
TaxTMI 
2022 (8) TMI 21
X X X X Extracts X X X X
X X X X Extracts X X X X
....sons including statement of Shri Harshvardhan Kayan, the Assessing Officer (AO) came to the conclusion that Shri Ashok Kumar Kayan had provided bogus Long Term Capital Gain entry to the assessee as well as to some other beneficiaries. The AO proceeded to issue show cause notice to the assessee along with a copy of the statement of Shri Harshvardhan Kayan which had been recorded under section 133A of the Income Tax Act, 1961 (hereinafter called "the Act") and the assessee was asked to explain and establish the genuineness of the Long Term Capital Gain. The assessee was also directed to produce Shri Harshvardhan Kayan. 2.1 In response to the said show cause notice, the assessee submitted before the AO that the statement of Shri Harshvardhan Kayan had been recorded under section 133A and not under any oath and, therefore, the same did not have any evidentiary value. It was also submitted by the assessee that in the said statement of Shri Harshvardhan Kayan the assessee's name did not appear as one of the beneficiaries. The assessee also gave evidences of the transactions relating to shares and also sought to explain the modus operandi along with the fact of amalgamation/merger of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making the addition u/s 68 to the tune of Rs 2,00,10,326/-, which is against the facts and circumstances of the case. 2. That the ld. CIT (A) has also erred in disallowing the exemption u/s 10(38) of the Income Tax Act, 1961 disregarding the long term capital gain as claimed in the computation of income. 3. That the ld. CIT (A) has also erred in confirming the addition, specially when no cross examination of Shri Ashok Kumar Kayan or Harshvardhan Kayan was allowed to the assessee and, thus, the statement recorded at the back of the assessee has no evidentiary value. 4. That the confirmation of addition without allowing the cross examination to the assessee is against the principles laid down by the Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries as reported in 127 DTR 0241 and, thus, the sustaining of addition, is against the facts and circumstances of the case. 5. That the confirmation of addition by the CIT (A) on human probabilities is not proper and is against the documentary evidences furnished before the authorities ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... these shares have been purchased has not been doubted. Referring to the Contract Note, it was submitted that this Contract Note contained all the relevant information such as Trade number, Trade time, Contract Note number, Settlement number, details of Service Tax payment, details of brokerage and details of Securities Transaction Tax. It was further submitted that all these transactions were made On-Line and he also sought to demonstrate that the Client Code with the name of the assessee has been duly mentioned in the said Contract Note. It was submitted that inspite of these documentary evidences establishing the credentials and genuineness of the transaction, the AO doubted the sale and proceeded to act on mere surmises and conjectures. He referred to the judgment of the Hon'ble Punjab and Haryana High Court in the case of Hitesh Gandhi in ITA No. 18/2017 and another judgment of the Hon'ble Apex Court in the case of Shri Daulat Ram Rawatmull reported in 87 ITR 349 (SC) wherein the Hon'ble Court had held that in the face of documentary evidences, the test of human probability cannot be held to be good and that the bonafides of the assessee cannot be doubted only on mere suspicio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s reported in 281 CTR 241 (SC) for the proposition that in absence of cross examination no reliance could be placed on any statement which had been recorded at the back of the assessee. 3.6 The Ld. A/R also placed on record a tabulated chart refuting the observations of the Ld. CIT (A) in the impugned order. The said chart is being reproduced hereunder for ready reference :- Relevant part of CIT(A) order Our comments 1. In para no. 10 of the CIT (A) order, the CIT (A) held that the impugned addition has been occasioned on account of appellant's inability to satisfy the Assessing Officer about the genuineness of the purchase and sale transaction of shares of a Company. i) The Assessee has duly discharged his onus by satisfying all the ingredients of section 68 of the Act. ii) The Assessee has duly filed all the relevant documents relating to sales and purchases of shares and all transactions are by way of normal banking channels. 2. The CIT(A) further relied upon the Judgment of the Cal HC in the case of CIT vs. United Commercial & Industrial Company Pvt. Ltd. 187 ITR 596. The facts of the said case are as under : He also filed copies of accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the Revenue. i) In the case of the Assessee, the identity of the broker is not in doubt at all. ii) The department itself is relying upon the statement of the brokers. iii) It is not only the bank transfer in the case of the Assessee but other documents as submitted by the Assessee are also not doubted at all. iv) The facts of the case as relied upon by the CIT (A) are not at all applicable in the case of the Assessee as summons in the case of the Assessee as issued to the Brokers were duly served and reply was received from them. v) The brokers showed their inability to visit the Income Tax Department at Ludhiana. 4. The CIT (A) in para 11 has held that the "ground reality is that the appellant has been a beneficiary of an organized racket of providing bogus entries of long term capital gains on excha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iding entries, it cannot be said that the said broker is not involved in genuine business also. iv) Even-otherwise the reply for relying upon the said statements has already been given n our submissions before the CIT (A). 9. The CIT (A) in para 18 has referred to the attempt made by the department in affording opportunity to the Assessee in the form of giving direction to the AO to write to Ashok Kumar Kayan to come to Ludhiana. i) Though the CIT (A) has referred t the fact that effort was made by the AO to write to the broker asking for his visit to Ludhiana but the fact is that the cross examination was never allowed to the Assessee. ii) On the other hand the Assessee has duly discharged his onus by submitting the documents relating to sales and purchase. 10. The CIT (A) from para 19 onwards has referred to the theory of human probability. i) In this regard it is submitted that the case laws as relied upon by the CIT (A) with regard to the human probabilities has duly been relied upon by various Hon'ble Courts (supra) and it has been duly held that assumptions and probabilities cannot supercede the documents. 3.7 The Ld. A/R also placed reliance on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsolutely clear and leaves no room for doubt about the modus operandi having been adopted by the assessee to have earned bogus Long Term Capital Gain. The Ld. Senior D/R also placed reliance on numerous judgments of the Hon'ble Courts on the issue wherein the Long Term Capital Gains were held to be bogus and the addition on that account was confirmed. The Ld. Senior D/R prayed that the order of the Ld. CIT (A) confirming the addition be upheld. 5.0 In the re-joinder, the Ld. A/R relied upon the order of the ITAT Chandigarh Bench in the case of Shri Sanjay Singla and Others vide order dated 28.09.2021 in ITA No. 708/Chd/2018 and eight other cases having identical grounds and issues wherein the issue of Long Term Capital Gain and the related issue of opportunity of cross examination was discussed at length and, thereafter, the appeals of the assessees were allowed following the judgment of the Hon'ble Apex Court in the case of Andaman Timber Industries (supra) by holding that without cross examination no reliance can be placed on the statement of a third party. With regard to the various judgments being relied upon by the Ld. Senior D/R, the Ld. A/R submitted that each judgment ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....We have also gone through the statement of Shri Harshvardhan Kayan and it is palpable that nowhere in the statement, Shri Harshvardhan Kayan has made any reference to the name of the assessee. Even in the statements of Shri Nand Jain and Shri Suresh Khemka there has been a passing reference of the name of the company M/s. Access Global Limited but there is no specific mention of the name of the assessee. It is also noteworthy that the statement of Shri Harshvardhan Kayan was recorded at the back of the assessee and only a copy of the statement was supplied to the assessee along with show cause notice issued by the AO but even after the assessee had made repeated requests for opportunity to cross examine Shri Harshvardhan Kayan, this request could not be acceded to. It is also a case in point that nowhere any statement of Shri Ashok Kumar Kayan has been recorded, with whom the assessee was having the dealings and instead the statement of Shri Harshvardhan Kayan has been relied upon by the lower authorities even when it was the assessee's submission before them that he had no dealings whatsoever with Shri Harshvardhan Kayan. The Ld. A/R has also rightly pointed out that the statement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng Long Term Capital Gain/Loss entry through trading of different scripts by different 'Jama-Kharchi' companies through their broking companies M/s. Kayan Securities Pvt. Ltd and M/s. Ashok Kumar Kayan. Further, in the list of names pertaining to scrips in CStar of Kolkata Stock Exchange, the name of the company M/s. Access Global Limited is also mentioned. However, the name of the assessee does not appear anywhere and the AO has simply proceeded to assume that since Shri Ashok Kumar Kayan's name was in the list of entry operators providing entries relating to Long Term Capital Gain/Loss and, further, since the name of M/s. Access Global Limited figured in the list of scrips traded on platform C-Star of Kolkata Stock Exchange and, further, since the assessee had dealings with Shri Ashok Kumar Kayan and the assessee had sold shares of M/s. Access Global Limited, it was indicative that the assessee had earned bogus Long Term Capital Gains. However, in our considered view, suspicion howsoever strong cannot take substitute of facts. 6.5 The assessee has demonstrated with substantial evidences before the AO that the actual purchase and sale of the shares took place, such shares had d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s apparent that the AO has not made any enquiry and the entire assessment order as well as the order of the Ld. First Appellate Authority is devoid of fact of any such enquiry, but the lower authorities have heavily relied upon the report of Investigation Wing wherein M/s. Access Global Limited has been allegedly identified as one of the penny stock company whose share prices had been artificially rigged to create non genuine Long Term Capital Gain. However, the AO failed to bring on record any part of the said report wherein the name of the assessee has ever been named or implicated. At the cost of repetition, we once again reiterate that the lower authorities have failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that these documents furnished in support of the claim of the assessee were not authenticate. It would also not out of place to mention that no specific enquiry or investigation was conducted by the Department in the case of Shri Ashok Kumar Kayan which would lend some credence to the theory which has been advanced by the Department. Therefore, in our considered opinion, the lower authorities had merely ....