INCOME TAX OFFICER 4(3)(3), MUMBAI vs. SAJJAN KUMAR BAJORIA, MUMBAI

आदेश / O R D E R Per Bench 1. Aforesaid appeals by revenue for Assessment Years 2013-14 & 2014-15 in case of different assessee contest separate order of learned first appellate authority. However, the facts as well as issues are identical in both the appeals and it is admitted position that adjudication in any of the appeal would equally apply to other appeal also. Accordingly, we proceed to adjudicate Ld. Commissioner of Income Tax (Appeals)-9, Mumbai [CIT(A)], Appeal No.CIT(A)- 9/ITO-4(3)(3)/125/16-17 dated 03/10/2017 wherein the assessee is aggrieved by confirmation of certain addition u/s 68 since the claim made u/s 10(38) towards sale of shares was denied.

3.6 However, primarily going by the findings of investigation wing, Ld. AO rejected the submissions thus made by the assessee by alleging that the entire transaction was camouflaged in the guise of LTCG. The shares of a non-descript dummy company was purchased without verifying the financial strength, nature of business, its profitability & credentials etc. Finally, the sale consideration thus received was treated as assessee’s undisclosed income and added as unexplained cash credit u/s 68 while computing the total income. Proceedings before Ld. CIT(A) 4.1 Aggrieved as aforesaid, the assessee contested the impugned addition before Ld. CIT(A) and inter-alia, reiterated that the gains so earned were genuine and the same could not be treated as bogus merely on the basis of third-party statements particularly when no opportunity of cross-examination was provided to the assessee. Reliance was placed on various judicial pronouncements in support of various pleas, which have already been extracted in the impugned order and not repeated here to avoid duplication. 4.2 The Ld. CIT(A) observed that the assessee was regular investor in equity market as evident from its Balance Sheet for past several years. The transactions of purchase and sale of shares were backed by requisite documentary evidences and all the conditions as prescribed u/s 10(38) were duly fulfilled by the assessee. The purchase of shares in earlier years was accepted and not held to be bogus. The documentary evidences as furnished by the assessee were not found to be false or fabricated, in any manner. Since the shares were sold in online mechanism through recognized stock exchange, there was no privity of contract between the assessee and buyer of these shares. 4.3 It was also observed that Ld. AO, during the course of assessment proceedings, had taken a detailed statement on oath from the assessee wherein Ld. AO could not disprove his contentions and did not find anything adverse with regard to the impugned capital gains but this fact was conveniently ignored by Ld. AO while framing the assessment. The purchase as well as sale of shares was sufficiently documented and supported by a number of evidences in the form of share purchase bill, bank statement evidencing movement of funds through banking channels, demat statement evidencing movement of shares and sale contract notes. The sale transactions were subjected to Securities Transaction Tax (STT). None of these evidences could be controverted by Ld. AO. 4.4 Proceeding further, another finding was that investigation report as well as recorded statements as forwarded by DIT (Investigation) did not specifically name the assessee as beneficiary of such transactions. Therefore, the inference drawn by Ld. AO solely on the basis of said reports and statement of Shri Prakash Jajodia could not form basis for treating the LTCG as bogus. The Ld.AO failed to conduct any independent investigation to point out defects in the evidences furnished by the assessee. No adverse inference could be draw with respect to the genuineness of the transactions merely because the addresses of several entities were common.

4.5 Another observation was that the statement made by Shri Prakash Jajodia u/s 133A during the course of survey proceedings would have no evidentiary value unless corroborated with cogent material and the same could not form the basis of addition in case of third-parties as held by Hon’ble Apex Court in CIT V/s S.Khader Khan 300 ITR 157 as well as Hon’ble Bombay High Court in CIT Vs Ashish International (ITA No. 4299 of 2009 dated 22/02/2011). No opportunity of cross-examination of persons making adverse statement against the assessee was ever provided to the assessee. Further, the statement made by Shri Prakash Jajodia did not refer to any exchange of cash between the assessee and any of his entities. Therefore, the said transactions could not be treated as bogus transactions in terms of decision of Mumbai Tribunal in Shyam R.Pawar V/s DCIT (ITA No. 5585/Mum2011 dated 04/05/2012). The appeal filed by the department against the said order stood dismissed by Hon’ble Bombay High Court which is reported at 54 Taxmann.com 108. Similar was the decision of Mumbai Tribunal in Mukesh Marolia V/s CIT (6 SOT 247) Mumbai which was first approved by Hon’ble Bombay High Court and thereafter SLP filed by the department against the same stood dismissed by Hon’ble Apex Court by way of CA No.20146/2012 dated 27/01/2014. Similar was the ratio of various other decisions as elaborated in the impugned order. In the above background, the additions made by Ld. AO were deleted which has given rise to revenue’s appeal before us.

Our Adjudication 5. We have carefully considered the factual matrix as enumerated in the preceding paragraphs and gone through the orders of lower authorities. We find that the purchase as well as sale transactions undertaken by the assessee were duly backed by sufficient documentary evidences in the shape of purchase bills, bank statements, demats statements and sale contract notes. 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. The funds have moved in and out through banking channels. Similarly the shares have moved in and out of assessee’s demat statement. All these evidences remain uncontroverted and no defect has been found in the same. It is another undisputed fact that the assessee was a habitual investor of shares for past several years. The purchase of shares in earlier year was duly reflected in its Balance Sheet which was accepted by the revenue. Apparently, all the conditions as prescribed u/s 10(38) have duly been fulfilled by the assessee.

Another uncontroverted finding is that the assessee was not named either in investigation report or in the statement made by Shri Prakash Jajodia. There is no admission or finding that any cash got exchanged between the assessee and any of the alleged bogus entities of Shri Prakash Jajodia. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmise. The addition thus made purely on the basis of third-party statement recorded at the back of the assessee could not be sustained in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. The Hon’ble Apex Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) 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. The proposition that additions merely 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 Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151) wherein it was held that the suspicion however strong could not partake the character of legal evidence as held by Hon’ble Supreme Court in Umacharan Shaw & Bros. V/s CIT (1959 37 ITR 271). In view of the forgoing, it could very well be said that onus casted upon Ld. AO 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. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said 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.

. Facts as well as issues being pari-materia the same as in preceding appeal, our findings as well as adjudication therein shall mutatis-mutandis apply to this appeal also. Consequently, the appeal stand dismissed. Conclusion

10. Both the appeals stand dismissed.

Order pronounced on 20th January, 2021.