TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 1400
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....nking channel as well as impugned shares were duly received by the appellant which were later credited in his DMAT account, thus purchase and ownership of shares with assessee is established and cannot be doubted, therefore the profit from sale of such shares cannot be held as bogus. 1.2 That the Ld. AO and also CIT(A) failed to appreciate that shares of M/s Kappac Pharma Ltd. are quoted in recognized stock exchange and its shares were sold by the assessee through authorised share broker on the online portal of the recognized stock exchange after paying STT and payment was received through banking channels as well as shares were duly debited in DMat account and thereby sale of shares is established and not at all doubtful and therefore consequent LTCG is not at all non-genuine and thus the addition made u/s 68 deserves to be deleted. 1.3 That the above mentioned addition made by the A.O. after interalia observing that the financial transaction effected by the assessee were sham ones and confirmed by Ld CIT(A) without rebutting the documentary evidences of purchase, banking channel payment, D-Mat account and subsequent sale on on-line portal at market price and payment received ....
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....on whims and fancies and baselessly alleging that the assessee has paid commission at the rate of 2% of the long term capital gain to the entry provider without appreciating the facts and circumstances of the case and the submissions made and further bringing no evidence on record for saying so. Thus, the addition of Rs. 63,402/- deserves to be deleted.'' 2.1 Apropos Ground No. 1 to 1.6 and 2 of the assessee, brief facts of the case are that the assessee is an individual and during the year under consideration has derived Income from Salary, Income from Share trading and Income from other sources. Return of Income for the year was filed on 26.08.2015 declaring total income at Rs. 5,48,200/-. The case of assessee was selected for scrutiny by issue of notice u/s 143(2) of the Act. Details and information sought by AO were furnished and assessment was completed u/s 143(3) of the Act after making addition u/s 68 to the tune of Rs. 31,70,080/- by treating the long term capital gain [claimed exempt u/s 10(38)] as accommodation entry and thus bogus, and further addition of Rs. 63,402/- u/s 69C that assessee might have paid commission for obtaining such accommodation entry. The relevant p....
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.... were put up before the Hon'ble ITAT who has decided the issue in favour of the Revenue. The abve decision has been upheld by the Hon'ble High Court of Delhi and Hon'ble Apex Court. Therefore, the same becomes the guiding principle in taxing such sort of transactions. (42) As I mentioned at several places that the issue relating to penny stock of share capital is very critical issue from both taxation point of view as well as from the economic point of view. These practices of converting unaccounted money into white money was running through several years and it is only in 2013 and onwards the various agencies of Government of India as well as Income Tax Department acted on this and busted the racket. Therefore, these issues need to be decided in the context and background not otherwise. It is the substance of the transaction which is more important than the Form of transaction i.e. simply showing that the assessee has earned exempt long term capital gain and there are umpteen number of facts which suggest that entire design or form the transaction is fishy or suspicious. The decision of SC in Sumati Dayal (supra) and Durga Prasad More (supra) does not lays down the principle of ....
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....y ld.AO u/s 68 of the Act by treating genuine Long Term Capital Gain earned by assessee as mere accommodation entry and bogus and thereby withdrawing exemption u/s 10(38). As all the grounds of appeal are interrelated, the same are dealt with together for the sake of convenience. Brief facts pertaining to these grounds of appeal are that assessee was holding 12500 shares of M/s Kappac Pharma Ltd., acquired by him in F.Y. 2012-13 on 16.1.2013 (APB-32) for Rs. 1,87,500/-, which were sold during the year for consideration for Rs. 31,58,765/-[in Nov.- Dec., 2014] (APB 42-44) after holding the same for more than twelve months. Accordingly, Long term capital gain of Rs. 29,71,725/- earned from the sale of such shares was declared in the return of income filed. As shares sold were of a listed public limited company i.e. M/s Kappac Pharma Ltd. and were sold through recognised stock exchange after holding for a period of more than one year and the STT was paid on sale, the profit earned being long term capital gains was claimed as exempt u/s 10(38) of the Act. These shares were purchased by the assessee after making payment through payees account cheque which stood debited in the bank accou....
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....e above named two persons whose statements were solely relied upon to conclude that the assessee has obtained accommodation entries, was demanded but the same was not allowed nor there was any whisper in the assessment order as to why such opportunity was denied to the assessee. In first appeal, ld. CIT(A) without appreciating the evidences and details submitted, confirmed the action of the ld. AO by primarily quoting numerous case laws on human probabilities, however again no defect whatsoever was pointed out in the documentary evidences furnished by assessee and these document evidences were not rebutted by ld. CIT(A) also. Ld. CIT(A) on his own theories and assumptions has denied the opportunity of cross examination and further tried to deviate his finding from the direct judgment of Hon'ble jurisdictional high court on this issue where the Hon'ble court has confirmed the order passed by the Hon'ble Jaipur bench of ITAT. In this regard, at the outset, it is submitted that neither information nor the statements relied upon by ld.AO for making addition were supplied to assessee despite of specific request made by assessee. In fact, request of assessee seeking cross examination....
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....e in any manner that assessee has approached them for providing accommodation entry. Further they had not stated that the broker M/s KIFS Securities Ltd. through whom the assessee has sold the scrips was involved in arranging accommodation entries. However, relying upon the statements of Shri Jai Kishan Poddar and Sh. Anil Khemka, ld. AO concluded that M/s Kappac Pharma ltd. is a bogus entity and further went on holding that long term capital gain earned by assessee on sale of shares of M/s Kappac Pharma Ltd. is merely an accommodation entry and exemption claimed u/s 10(38) was denied (even though assessee has neither purchased nor sold the shares of this company through broking firms of Sh.Jai Kishan Poddar or Sh. Anil Khemka). It would not be out of place to mention here that apart from the so called information received from Investigation Wing, Kolkatta containing statements of Shri Jai Kishan Poddar and Sh. Anil Khemka, there was no corroborative material available with the Ld. AO or referred to by him in the assessment order found as a result or gathered during the course of assessment proceedings in support of the impugned addition made by him except analysis of financial s....
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....g purchase of shares, copy of Dmat Account, payments being made by account payees cheque and similarly also the evidence related to sale, which was made online on the Bombay Stock Exchange and through recognized stock exchange broker namely M/s KIFS Securities Ltd. However all these evidences were just ignored and not rebutted by the AO before making addition. In view of these facts, it is submitted that the impugned addition being solely based upon such uncorroborated statements of third parties is clearly bad in law. It would not be out of place to mention here that ld. AO has completely followed casual approach and has ignored the facts of the case, which is evident from the observations of ld. AO at page 25 para 3.5 that "It was found that the shares of the company were scarcely traded in the past but all of a sudden after the purchases by the assessee, the prices of the shares increased abnormally for almost one year without any reason whatsoever. As soon as the assessee sold last of its shares, the price and volume again became disproportionate to real financial position of the company." Your honours would appreciate that the prices of Kappac Pharma were at all time high be....
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.... summons to lenders and verify the identity/creditworthiness of such lenders, whereas in the case of assessee, ld.AO has simply relied upon the information readily available on various websites and without verifying the same with regards to assessee. Even ld. AO has not provided the opportunity to cross examine his witness nor statements of such persons were ever supplied thus such action of the AO is contrary to the principle laid down by hon'ble Apex court who clearly held that proper and sufficient enquiries should have been made before reaching to the conclusion. Your honours' would appreciate that a judgement may render certain principles, however the same cannot be blatantly applied in any and every case unless facts involved are same. In the instant case of assessee, there was no search/survey action conducted in the premises of assessee and no specific information was collected, rather enquiries conducted in some other case were relied upon that too without supplying the copies of the same to the assessee, thus decision of Hon'ble Supreme Court is not applicable in the case of assessee. Ld. CIT(A) has also relied upon decision of Hon'ble Delhi Bench of ITAT in the case of....
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....w so ever 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." The aforesaid judgement of Hon'ble Special Bench was followed by Hon'ble Kolkatta ITAT in the case of Mahendra Kumar Baid Vs. ACIT dated 18.08.2017. Hon'ble SC in the case of [Umacharan Shaw & Bros. v. CIT (1959) 37 ITR 271 (SC)] has held that "There was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine and further observed that the conclusion is the result of suspicion which cannot take the place of proof in these matters. In the present case too, the Assessing Officer had rejec....
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....s passed on by investigation wing that too of Kolkata and some EPS/PE analysis data available on internet and no independent enquiry has been made by ld.AO. Thus, facts in the case of Pooja Agarwal (cited supra) are identical to present case and action of ld.AO in not considering the same is against the principle of judicial precedence. Hon'ble Jaipur bench of ITAT in the case of ACIT vs Saroj Parwal in ITA No. 753/JP/19 has also decide the issue in favour of the assessee. Recently Hon'ble Jaipur bench of ITAT vide order dated 31.08.2022 in the case of Manohar Lal Chug vs. ITO in ITA No. 312/JP/2021 has held that: "6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others (supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 160 DTR 0198 (Raj.) deleted the addition by observing as under :- "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any 30 ITA No. 312/JP/2021 Shri Manohar Lal Chugh, Jaipur. cogent material to show....
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....e casual replies given by assessee, transactions cannot be held as sham. It is pertinent to note here that in the case before Hon'ble Punjab and Haryana High Court, shares were purchased for cash, then too, transaction was held as genuine as all the documents were in favour of assessee,. Thus instant case of assessee is far better as payment for purchase of such shares was made by account payee cheques. As has been submitted that the statements of Shri Anil Kumar Khemka were recorded behind the back of assessee, therefore vide reply dated 23.11.2017, a specific request was made before the Ld. AO that such person be confronted and assessee may be allowed to cross-examine him so as to verify the veracity / truthfulness of the statements made by him (APB 51-58 para 3 at page 53). However, in spite of the dire necessity of cross-examination in the circumstances of the case, the assessee's request for cross-examination was turned down in an arbitrary manner, without specifying any justifiable reason. Ld. CIT(A) also affirmed such action of ld.AO in not affording opportunity of cross examination by placing reliance on some judicial pronouncements, which all are not at all relevant an....
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....pex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under: S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. In this regard, it is further submitted that: i. Impugned addition have been made solely on the basis of statements of third parties i.e. Shri Jai Kishan Poddar and Anil Khemka who are completely unknown and unrelated to the assessee. There is no corroborative evidence found either during the course of search or brought on record during the course of assessment proceedings. No other material has been referred to by the Ld. AO or by ld. CIT(A); ii. The said statements were not even recorded by Assessing Officer himself, but....
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....law which renders the order a nullity. Hon'ble Jaipur Bench of Tribunal in the case of DCIT vs Saurabh Mittal ITA No. 16/JP/18 has deleted the additions made on similar issues. Excerpts of decision are as under: S. 68 Bogus capital gains from penny stocks: Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE Vs Andaman Timber Industries 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Hon'ble Ahmedabad bench of ITAT also in the case of Smt. Sunita Jain vs ITO (Case law Paper Book Pages 134-143) quashed the assessment order by placing reliance on Apex Court judgement in the case of Andaman Timber (cited supra) as entire assessment was based upon the statements of Sh. Mukesh Choksi, which were neither supplied to assessee nor was opportunity of cross examination was provided. The Ld. AO as well ld. CIT(A) have....
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....nd time stamp and other necessary details as prescribed and mandated by the Bombay Stock Exchange as evident from the contract note issued by its member brokers to the assessee in relation to the online transaction of these shares done on Bombay Stock Exchange. Obviously as the sale was made online, the sales of share was at prevailing market rate at that time and it cannot be manipulated by assessee by and means. vi. Further, at the time of sale STT had been paid. Thus the assessee fulfilled all the conditions of section 10(38) to claim such profits as exempt income. It is further submitted that assessee has been regularly investing in shares and in fact during the year under consideration is also holding scrips of other companies which is evident from the copy of statement of holding (APB 37). The assessee had been regularly investing in shares. In this regard, reliance is placed on decision of Hon'ble Jaipur bench of ITAT in the case of Hon'ble Jaipur bench of tribunal in the case of Sh. Pramod Jain vs. DCIT wherein it has been categorically held that Para No. 6 "The Assessing Officer has doubted the genuineness of the transactions however, once the holding of shares ....
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....y 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 swap ratio approved in the scheme and consequently the assessee was allotted 5 lacs share of Rs. 1/- each on M/s Luminaire Technologies Ltd. The evidence produced by the assessee leave no scope of any doubt about the holding of the shares by the assessee. Para No. 8 As regards the purchase consideration when the assessee has shown the share application money paid through his bank account and the AO has not brought on record any material to show that apart from the share application money paid through bank account the assessee has brought his own unaccounted money back as long term capital gain. The facts of assessee's case are identical to the case of Shri Pramod Jain (supra). The assessee has purchased shares, for which the payment of Rs. 1,87,500/- was made through banking channels for allotment of these shares, which stood debited in the bank account of the assessee on 04.04.2013. Assessee got them converted in D-mat and shares stood credited in the D-mat account of the assessee many months before the sale. From the above, it....
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....of transaction are nothing more than suspicion. SEBI enquiry cannot be a basis for addition: The main reason of addition is the enquiry made by SEBI that these companies are involved in price rigging and thereby helping others in purchasing the capital gain. This cannot be considered as conclusive evidence to hold the assessee as liable for making addition in the income tax proceedings. In this regard reliance is placed on the decision of Hon'ble Jharkhand High Court in the case of CIT v. Arun Kumar Agarwal (HUF) (2013) 085 DTR 0219 wherein it has been held as under: 10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enquiry report which may has been brought on record by the efforts of the Assessing Officer and that enquiry report was prepared by the SEBI and from the observations made by the Assessing Officer himself, it is clear that after getting that enquiry report, the SEBI prima facie found involvement of some of the share brokers in unfair trade practices. Even in a case where the share broker was found involved in unfair trade practice and w....
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....ttention of the Hon'ble Bench is invited to the fact that the said report was available on online portal from 30.12.2017 and prior to that it was available with the department only. The assessment in this case was completed on 05.12.2017, therefore, there was no occasion for the assessee to consider the report of Investigation Wing. Further the ld. AO also has not referred nor relied upon the report of Investigation Wing which is the primary focus of the Hon'ble Calcutta High Court while deciding the appeal against the assessees. Further the case of Swati Bajaj is distinguishable on other counts also for which a detailed note is appended alongwith this written submission for perusal and record. The reliance is also placed on the following decisions: Pr. CIT vs Jatin Investment Pvt. Ltd. (Delhi High Court) (Caselaws PB Pages12-16) S 68 Bogus Capital Gains: A transaction cannot be treated as fraudulent if the assessee has furnished documentary proof and proved the identity of the purchasers and no discrepancy is found. The AO has to exercise his powers u/s 131 & 133(6) to verify the genuineness of the claim and cannot proceed on surmises." CIT vs Mukesh Ratilal Marolia (Bomba....
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....ushottam Soni vs ITO (Jaipur ITAT) ITA No. 288/JP/2017 xiv. Dipesh Ramesh Vardhan vs DCIT (Delhi ITAT) ITA No. 7648/Mum/2019 Therefore, in light of the submissions made above and case laws cited, it is prayed that the addition of Rs. 31,70,080/- made u/s 68 may please be directed to be deleted. Ground of Appeal No. 3: Under this ground of appeal, assessee has challenged action of ld.CIT(A) in confirming the addition of Rs. 63,402/- made by ld.AO by alleging that assessee has paid commission at the rate of 2% of the long term capital gain to the entry provider. In this regard, it is submitted that while holding the capital gain declared by assessee as bogus merely on the basis of statements of a third party, the Ld. AO has further presumed that a commission of the above mentioned amount @ 2% might have been paid by assessee as a consideration for arranging such accommodation entry. In fact, ld. CIT(A) has confirmed the addition stating the same is covered by ground of appeal relating to long term capital gain transaction. It is submitted that firstly, the transaction entered into by the assessee and the LTCG arising therefrom is completely genuine as has been submitted ....
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....ore than one year and due STT [Securities Transaction Tax] was paid, long term capital gain was claimed exempt u/s 10(38) of Income Tax Act, 1961. These shares were purchased after making payment through account payee's cheque which stood debited in the bank account of the assessee. These shares were credited in the D-mat account of the assessee maintained with independent third party. Subsequently, these shares were sold online through registered share broker and sale proceeds were received through banking channels. However, the AO, based on some information received from Investigation Wing, Calcutta particularly the statement of one Shri Jai Kishan Poddar of some M/s Consortium Capital Pvt. Ltd. and of Shri Anil Kumar Khemka of M/s Dev Shyam Stock Broking Pvt. Ltd. wherein they have admitted to be engaged in providing accommodation entries in the guise of LTCG through their stock broking companies named above, has considered the transaction of sale of shares of M/s Kappac Pharma Ltd. made by assessee, as bogus. It is uncontroverted fact that assessee has furnished copy of bank statement showing payment so made for purchase of shares, copy of statement of holding of shares reflect....
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.... shares] and 26.08.2013 [500 shares] and deposited in the DMAT account maintained by Alankit Assignment Ltd., the independent third party.Thus it is clear that 12500 shares were purchased by the assessee and same is quite evident not only from the books on accounts of the assessee but also D-MAT account of the assessee maintained by independent third party, duly recognized by the concerned authorities. The amount of purchase consideration stood debited in the bank account of assessee. These facts and evidences more particularly the shares being reflected in D-MAT account of the assessee maintained by independent third party clearly lead to infer that holding of the share and consequently also the purchase of these shares by assessee cannot be disputed. 2.5.1 Now coming to the sale of share, it is seen that assessee has sold these shares through online transaction via recognized stock broker M/s KIFS Securities Ltd. Transaction of sale is supported by contract notes and as per the contract notes, these shares were sold on three different dates namely 24.11.2014, 25.11.2014 and 10.12.2014. These contract notes are having time stamped, different trade numbers, order time and trade ti....
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....ident that assessee has not carried out any transaction through these persons or their companies) but for converting a doubt into certainty, the AO is required to produce the contrary material evidence and evidence produced by the assessee need to be controverted, but the AO has failed to do so. It is to mention here that evidence produced by the assessee is otherwise independently verifiable being the document in the shape of bank account, D-MAT account maintained by independent third party, bills of purchase and also of the sales on which assessee has no control or say and therefore said evidences cannot be manipulated by assessee. Once the evidences produced by assessee is neither prepared by it nor is any scope of manipulation by him, then transaction of purchase and sale of shares and consequent capital gain shown by the assessee cannot be doubted. It is reiterated that all the various evidences were filed by the assessee before the ld. AO and are now also filed before us in paper book in support of long term capital gain shown on sale of shares, which are as under:- S.No. Particulars Paper book Page No. 1. Copy of contract notes dated 10.12.2014, 25.11.2014 and 24.11.20....
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....relied upon the information stated to have been available with him without independently verifying the details. The ld. AR has also brought to my notice through its written submission that judgment in the case of Suman Poddar 423 ITR 480 has already been distinguished by Hon'ble Delhi High Court itself in the case of PCIT Vs. Krishna Devi in ITA No. 125/2020 and issue was decided in favour of assessee. During the course of hearing ld. D/R has placed heavy reliance on the decision of the Swati Bajaj of hon'ble Calcutta High Court and submitted that the report of Investigation Wing was available on online thus it cannot be said that relevant information was not supplied and therefore, the judgement of Andman Timber is not applicable to the facts of the case. In this regard ld. AR submitted that the assessment in the present case was completed much before the date when the report of Investigation Wing, Calcutta was available online and thus the judgment of Hon'ble Apex Court in the case of Odeon Builders still hold the water which says that the no addition could be made unless the material available with AO is not confronted to the assessee and opportunity of the cross examine the wit....
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....gh Court are bound by the decision of Hon'ble Rajasthan High Court. 3. Hon'ble Rajasthan High Court in the case of PCIT vs Sanjay Chhabra D.B. ITA No. 22/2021 noted that prejudice is caused to the assessee when material used against him is not provided and opportunity of cross examination is not provided: It was submitted before the Hon'ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon'ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon'ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: "..The Tribunal by impugned order has categorically held that the materia....
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....der, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law..." 5. Hon'ble Calcutta High Court has mainly decided the case against the assessees for the reason that factual position in any of the 89 appeals forming part of the bunch was not discussed by the Hon'ble ITAT (para 40, Page 80). In the instant case it is submitted that assessee's case was not part of any bunch of cases and, therefore, there cannot be any situati....
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....y to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 7.2 CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) Hon'ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided more so when assessee placed on record all the evidences. The relevant findings are as under: Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not p....
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....assumptions and presumptions. Reliance is placed on the decision of Hon'ble Supreme Court in case of PCIT vs Krishna Devi [2022] 138 taxmann.com 150 (SC) wherein SLP filed against the decision of Hon'ble Delhi High Court in the case of PCIT vs Krishna Devi [2021] 126 taxmann.com 80 (Delhi) was dismissed. Hon'ble Delhi High Court categorically noted that the Court has to decide the issue on the basis of evidence and proof and not suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the assessee. If the revenue has failed to bring evidence on record that money changed hands and there was agreement to convert unaccounted money mere reliance on the report of investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: "11. .........The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entr....
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....LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the d....
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....T has mainly followed the decision of ITAT Jaipur Bench itself in the case of Pramod Jain &Ors. in ITA No. 368 to 372/JP/2017 dated 31.01.2018. This decision of Pramod Jain &Ors. of ITAT Jaipur Bench has mainly relied upon the jurisdictional Rajasthan High Court decision in the case of CIT Vs. Pooja Agarwal, 160 DTR 198. The relevant para 6.2, 6.3 & 6.4 of decision in the case of Manohar Lal Chug is reproduced below wherein relevant paras of the case of Pramod Jain &Ors. on the issue of non granting of cross examination as well as on other issues are incorporated :- 6.2. Further, the Ld. A/R has also taken a legal plea that no cross examination of the person, whose statement was relied upon, was granted despite specific request made to the AO. The aspect of not granting cross examination has specifically been answered by the Hon'ble ITAT Jaipur in the case of Shri Pramod Jain & Others in ITA Nos. 368 to 372/JP/2017 dated 31.01.2018. The relevant extract on the issue at page 24 to 28 are as under: "As regard the non grant of opportunity to cross examine, the Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held i....
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.... that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000 , order dated 17.2.2005 was passed remitting the case back 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 nullity. The Mumbai Special of the Tribunal in case of GTC Industries vs. ACIT (supra) had the occasion to consider the addition made by the AO on the basis of suspicion and surmises and observed in para 46 as under:- "46. ln situations like this case, one may fall into realm of 'preponderance of probability' where there are many probable factors, some in favour of the assessee and some may go against the a....
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....h 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, in the absence of any contrary material or evidence brought on record by the AO, the transaction of purchase and sale of the shares in question cannot be held as bogus merely on the basis of Report of the Investigation Wing of the Department in some other cases where some persons were found indulged in providing accommodation entry, and further it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. 6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others (supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT....