TaxTMI 
TaxTMI 
2026 (3) TMI 1765
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....otices under section 142(1) were also issued and complied with. During the course of assessment proceedings, the Authorised Representative appeared and filed the requisite details from time to time. The Assessing Officer completed the assessment under section 143(3) of the Act on 27.12.2017 determining the total income at Rs. 13,30,80,440/- as against the returned income of Rs. 29,10,160/-. 3. During the year under consideration, the assessee had declared Long Term Capital Gain on sale of shares of M/s Maa Jagdambe Tradelinks Ltd. (MAAJTL), which was claimed as exempt under section 10(38) of the Act. The relevant facts noted by the Assessing Officer are as under: i. The assessee had acquired shares through preferential allotment at a nominal price. ii. The shares were held for more than one year and thereafter sold through stock exchange. iii. The assessee earned Long Term Capital Gain of Rs. 12,15,90,744/- on sale of such shares. iv. The total sale consideration received was Rs. 12,40,90,744/- against cost of Rs. 25,00,000/-. 4. The Assessing Officer observed that there was an abnormal rise in the share price, resulting in a return of appr....
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....with alleged operators or accommodation entry providers. (iv) No evidence was brought on record to show that the assessee had paid any cash or received any accommodation entry. (v) The addition was made in violation of principles of natural justice as no opportunity of cross-examination of persons whose statements were relied upon was provided. (vi) The assessee also filed additional evidence in the form of SEBI investigation report dated 31.07.2018, contending that no adverse finding was recorded against the assessee therein. 7. The learned CIT(A) called for a remand report from the Assessing Officer. In the remand report, the Assessing Officer reiterated the findings recorded in the assessment order and submitted that the SEBI report does not exonerate the assessee but rather confirms manipulation in the scrip and the assessee was a beneficiary of such manipulated transactions. 8. The learned CIT(A), after considering the assessment order, remand report, submissions of the assessee and material on record, upheld the action of the Assessing Officer. The key findings of the CIT(A) are summarized as under: (i) The company MAAJTL had weak fin....
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....sale of shares resulting in receipt of sale proceeds of Rs.12,40,90,744 and deriving long term capital gain of Rs. 12,15,90,744 is a genuine transaction carried out by the appellant. B) ADDITION U/S.69C - UNEXPLAINED EXPENDITURE RS.60,79,537 2. On the facts and in the circumstances of the case and in law, learned CIT(A) erred in not adjudicating Ground No.2 of the appeal filed before the CIT(A) with respect to addition of Rs.60,79,537 made to the total income of the appellant u/s.69C of the Act being alleged commission paid, for so called accommodation entry of long term capital gains, @ 5% of Rs.12,15,90,744 i.e. 5% of long term capital gains by treating the same as undisclosed expenditure for acquiring accommodation entry. The appellant prays that it be held that addition of Rs.60,79,537 made to the total income of the appellant u/s.69C is wrongly made and the same ought to be deleted and further held that no such commission is paid by the appellant. C) REMAND REPORT NOT FURNISHED TO THE APPELLANT 3. On the facts and in the circumstance of the case and in law, the learned CIT(A) erred in not intimating to the appellant of his action of....
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....ransactions were routed through recognized stock exchange, supported by contract notes, demat statements and bank statements, thereby establishing the genuineness of the transactions. ix. The learned AR placed strong reliance on the findings of SEBI in its investigation report, wherein it was observed that: "Counterparties to trade of top 10 entities were analyzed. In none of their trades the counterparty was found to be connected to them. Hence no adverse inference is drawn against trades of Dharmendra Valji Karia." Further, it was pointed out that SEBI had exonerated preferential allottees, including the assessee, by observing: "No connection could be established between preferential allottees and entities who manipulated price ... no role of company and its directors was observed in the price manipulation of the scrip." x. It was thus submitted that the regulatory authority, after detailed investigation, has not found any adverse material against the assessee and therefore the addition made merely on the basis of suspicion and general investigation reports is unsustainable in law. 12. The learned AR, in support of the contention th....
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.... M/s. Confidence Finance and Trading Ltd., M/s. Shreenath Commercial, M/s. Moryo Industries Ltd., M/s. Maa JagdambeTradelinks Ltd. and ACI Infotech. The learned DR pointed out that the trade data obtained from BSE, as referred in the statement, demonstrates that various entities controlled by the said operator executed large volume of transactions in the aforesaid scrips, thereby artificially rigging the price and creating fictitious capital gains. 16. The learned DR further submitted that the Assessing Officer has brought on record detailed analysis of "exit providers", i.e., entities which purchased shares from beneficiaries at inflated prices. It was submitted that such exit providers were nothing but shell entities having no financial credibility and were used merely as conduits. It was pointed out that a large number of such entities, including companies such as Groundzero Vincom Pvt. Ltd., Gurukul Enclave Pvt. Ltd., Littlestar Tradecom Pvt. Ltd., Lunkad Textiles Pvt. Ltd., Sampada Chemicals Ltd. and Saraswati VintradePvt. Ltd., have been identified as shell companies by the Ministry of Corporate Affairs and were part of the accommodation entry network. The learned DR also ....
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....sequently split, and thereafter sold through the recognised stock exchange through registered brokers against contract notes and banking receipts. The Assessing Officer, however, treated the entire sale proceeds as unexplained cash credit under section 68 and estimated commission under section 69C by holding that the entire transaction formed part of a penny-stock accommodation entry scheme. 20. At the outset, it is necessary to examine the authorities cited on behalf of the assessee. 21. The learned AR has placed heavy reliance on the decision of the co-ordinate Bench in the case of Deepak Valji Karia vs ITO (ITA No. 259/Mum/2021 dated 10.03.2022), which pertains to identical facts, same scrip and family group. 22. The co-ordinate Bench, while dealing with identical facts relating to the same scrip and family group, has categorically held that denial of cross-examination and non-supply of statements vitiates the assessment. The Co-ordinate Bench, while quashing the assessment order, observed as under: "The Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE (supra) held that when the assessment was made on the basis of the statements recorde....
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....otice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus :- "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No.62/ Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity 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. Therefo....
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....hese facts are borne out from documentary evidences placed on record and have not been disproved by the Revenue. Thus, the primary evidences relied upon by the assessee remain intact and uncontroverted. 33. The principal contention of the learned DR is that the transaction is not genuine in view of the investigation reports and surrounding circumstances. However, upon careful examination, we find that the entire case of the Revenue is based on general investigation reports, statements of alleged operators and suspicion arising from price movement of the scrip. No independent inquiry has been carried out by the Assessing Officer to establish that the assessee had any direct or indirect nexus with such operators. There is no material on record to demonstrate that the assessee had made any cash payment, or that there existed any prior arrangement for accommodation entries, or that the assessee was a party to any price manipulation. In absence of such linkage, the reliance placed by the Revenue on general reports cannot be elevated to the level of evidence against the assessee. As held by the Hon'ble Gujarat High Court in Parasben Kasturchand Kochar, mere reliance on investigati....
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....ports, without confronting the assessee with specific material or establishing linkage, cannot substitute the requirement of proof. The doctrine of human probabilities, as laid down by the Hon'ble Supreme Court, permits lifting of the veil only when surrounding circumstances are supported by credible and cogent material pointing towards non-genuineness. In the absence of such material, and where primary evidences remain uncontroverted, the invocation of such doctrine amounts to disregarding direct evidence on mere suspicion. This approach is impermissible in law, as suspicion, however strong, cannot take the place of proof. Accordingly, we hold that the reliance placed by the Assessing Officer on the theory of preponderance of probabilities is misplaced and cannot be a valid basis to sustain the impugned addition. 37. The learned DR has further placed reliance on the involvement of alleged exit providers and shell entities, contending that the non-compliance of notices issued under section 133(6) to such entities supports the inference of non- genuineness of the transaction. We have duly considered the said contention. It is an admitted position that the transactions of sale....