M/S PATRON VINIMAY PVT. LTD.,KOLKATA vs. I.T.O.,WARD-10(4), KOLKATA

Per Shri A.T.Varkey, JM This is an appeal preferred by the Assessee against the revision order of Ld. Pr. CIT– 4, Kolkata dated 06.02.2019 for AY 2014-15.

2 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 dated 16.03.2016, which circular, according to him, debar from allowing short term losses arising from the transaction of penny stock. He accordingly issued a show cause notice calling upon the assessee as to why he should not exercise the revisional jurisdiction u/s. 263 of the Act and after hearing the assessee, the ld. Pr. CIT held that AO's order was erroneous and prejudicial to the revenue for lack of enquiry in respect of the claim of loss and was pleased to set aside the order of AO and directed him to pass order afresh after taking note of his observations in the impugned order passed u/s 263 of the Act. Aggrieved by the impugned revision order of the ld. Pr. CIT, the appellant has preferred this appeal before us.

3 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 i) Name of scrip ii) Date of purchase iii) Quantity iv) Rate v) Mode of payment vi) Date of sale vii) Quantity sold viii) Rate ix) Date of Dividend declaration x) Amount of dividend xi) STT paid xii) S.T. Capital loss.

4 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 6. We note that pursuant to the aforesaid notice, the assessee had replied vide letter dated 06.06.2016 which is found placed at page 6 of the paper book wherein the assessee had filed the details of trading in shares, details of investment and attached copy of the contract note and ledger copy as well as filed the details of stock. Likewise, from a perusal of the reply dated 08.08.2016, we note that the assessee had filed details of all directors, copy of tax audit report, copy of bank statement, copy of return along with copy of acknowledgment details in respect of short term capital loss. We also note that vide letter dated 25.08.2016, the assessee has replied that “the gain is from STCG and the loss arrived is a business loss.” We note that the AO had issued notice to the Principal Officer of the broker M/s. Tran scan Securities Pvt. Ltd. on 22.11.2016 wherein he asked for the following details:

“During the course of assessment proceedings of the aforesaid assessee, it is found that the assessee has made some investment through your concern during the FY 2013-14. You are therefore requested to furnish the following particulars within 30.11.2016 positively. 1. Date of account opening with you 2. Copy of KYC obtained by you alongwith a copy of the agreement 3. Ledger copy of the transaction for the FY 2013-14 4. Details of transactions by the assessee in the shares of different companies for the FY 2013-14 5. In respect of sale and purchase of shares through you, please furnish the details of counter member whose client has purchased/sold by any of your clients, please furnish the complete details of the said client i.e. Name, Address and PAN 6. Details of share prices of movement of the aforesaid share for the FY 2013-14 with traded volumes through your Brokerage. ”

5 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 was duly disclosed in the return of income for AY 2014-15. He therefore submitted that it was not a case of lack of enquiry as alleged by the Ld. Pr. CIT in his order u/s 263 of the Act and, therefore, the very assumption of jurisdiction u/s 263 was on an erroneous premises and so is bad in law and consequently the impugned order deserves to be quashed.

6 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 can be termed as erroneous for the purpose of Section 263 of the Act. Coming next to the second limb, the AO’s erroneous order can be revised by the CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an “erroneous” order passed by the Assessing Officer. For invoking powers conferred by Section 263; the CIT should not only show that the AO’s order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order some real and tangible loss is caused to the interest of the revenue. Their Lordship in the said judgment therefore held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It further observed that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law.

7 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 available at Page 4 of the paper book, the AO had informed the assessee that he had received inputs from Investigation Wing regarding assessee’s suspicious transactions relating to ‘short term capital loss’ claimed in the return and therefore to examine its veracity he required the assessee to furnish the following details:

“10. Details of Suspicious transaction relating to Sort Term Capital Loss on shares (inputs from investigation Wing) i.e. Name of Scrip, Date of purchase, Quantity, Rate in Mode of payment. Date of Sale, Quantity sold, Rate, Date of Dividend declaration, Amount of dividend, STT paid, S.T. Capital Loss.” 11. We note that in compliance with the AO’s notice u/s.142(1)the appellant furnished the required details vide its submission dated 08.08.2016. Along with the letter dated 08/08/2016 the appellant furnished a statement giving detailed break-up of the ‘short term capital gain’ as well as ‘short term capital loss’ incurred on sale of investments in shares and other securities. It is further noted that the appellant furnished copies of its bank statements, contract notes, etc. in support of its transactions conducted in shares of Nikki Global which resulted in short term capital loss of Rs.19,70,000/-. On examination of the details furnished, we find that the direct evidences furnished by the appellant ex-facie substantiated its claim of short term capital loss. Hence we do not find any substance in the SCN of Pr. CIT issued u/s 263 of the Act wherein he alleged that AO did not conduct any enquiry on this issue. At the most it can be said that the enquiry conducted by the AO before passing of the order was not as per the standards expected by the Ld. Pr. CIT. The question that arises on the foregoing facts therefore is whether it was indeed a case of lack of enquiry or alleged inadequate enquiry. The settled position of law is that lack of enquiry on the part of the AO on an issue makes his order erroneous on that issue whereas inadequate enquiry does not make the order erroneous unless, the ld. Pr.CIT after himself conducting the inquiry on the issue, demonstrates with tangible material that the finding of fact of AO in the order passed on the issue, was factually or legally wrong or view followed by him in the order was unsustainable in law. In such an event only the ld. Pr.CIT would be able to satisfy the jurisdictional fact which is required to interdict and exercise revisional jurisdiction u/s 263 of the Act.

8 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 12. In order to understand the difference between "lack of inquiry" and "inadequate inquiry" and when it can be termed as erroneous, let us look at the following case laws wherein their Lordships explained the difference between the two as follows:-

INCOME TAX OFFICER vs. DG HOUSING PROJECTS LTD343 ITR 329 (Delhi)

Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under s. 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether

9 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. COMMISSIONER OF INCOME TAX vs. J. L. MORRISON (INDIA) LTD. 366 ITR 593

As regard the submission on behalf of the Revenue that power under Section 263 of the Act can be exercised even in a case where the issue is debatable, it was held that the case of CIT vs. M. M. Khambhatwala was not applicable. The observation that the Commissioner can exercise power under Section 263 of the Act even in a case were the issue is debatable was a mere passing remark which is again contrary to the view taken by the Apex Court in thecase of Malabar Industrial Company Ltd. & Max India Ltd. If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power under Section 263 of the Act. CIT vs. M. M. Khambhatwala reported in 198 ITR 144; CIT vs. Ralson Industries Ltd. reported in 288 ITR 322 (SC), not applicable; Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83, relied on. (Para 72) As regard the third question as to whether the assessment order was passed by the Assessing Officer without application of mind, it was held that the Court has to start with the presumption that the assessment order was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. 13. From a perusal of the impugned order of Ld. Pr. CIT, we note that the sheet anchor on which he has found fault with the AO's order in the present case is the lack of enquiry on

10 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 the part of the AO in allowing appellant’s claim for short term capital loss. In this context we find that there is a clear distinction between "lack of enquiry" and "inadequate enquiry”. If there is an enquiry, even if inadequate, that would not by itself give occasion to the ld. Pr.CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the CIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then the Ld. Pr. CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law. Keeping the judicial precedents cited above and the discussion made in paras 4 – 7 and para 10 above and in the given facts of the present case, as noted earlier, the AO had made due enquiries into the claim of short term capital loss incurred by the appellant in the shares of Nikki Global. The AO had called for complete details of the short term capital loss incurred in shares which was reported to be suspicious by the Investigation Wing. After examining the specific details furnished by the appellant vide its letter dated 08/08/2016 that the AO issued another questionnaire dated 15.09.2016 wherein he once again called for the following details :

11 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 (xii) S.T. Capital Loss. 14. We note that the appellant complied with the above questionnaire as well by replying to it. On these facts therefore it cannot be said that AO did not enquire into the claim of short term capital loss or that the assessment order suffered from ‘lack of enquiry’. It is noted that the SCN as well as the impugned order proceeded on the premise that the AO did not enquire into the short term capital loss in the manner set out by the CBDT in its Instruction No.287/30/2014-IT(Inv II)Vol. III dated 16.03.2016. The relevant extracts of the said Circular is as follows:

“Kind attention is invited to the above referred EFS Instruction issued by the System Directorate regarding handling cases of Penny Stocks (suspect Long Term Capital Gains/Short Term Capital Loss etc). 2. It is informed that the said instruction is in the context of investigation conducted by Kolkata Investigation Directorate in respect of large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. Extensive investigation, including search and seizure/survey action on entry providers, riggers, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks. 3. Vide EFS Instruction under reference a new button 'Penny Stock' has been added on Individual Transaction Screen (ITS) to display information related to penny stock, now enabled on the screen of the Assessing Officers (AOs). Available information regarding the manipulative transactions has been captured in the functionality, including the investigation report of the Kolkaia Investigation Directorate. The functionality also contains a guidance note for the Assessing Officers. Such details are visible to the AOs of those assessees whose particulars have emanated out of the investigation report of Kolkata Investigation Directorate and whose cases have been considered actionable, at this stage. The details are also visible to supervisory officers of such AOs. 4. In case of any difficulty in viewing the information on ITS, Shri Vipul Agarwal, JDIT (Sys) 2(1) could be contacted on 0120-2770052 or email at vipul.agarwal@nic.in 5. The undersigned is directed to request that necessary directions may kindly be issued to the officers working under your jurisdiction to access this functionality and ensure that information available in the 'Penny Stock' functionality which may be useful for the purpose of cases presently under scrutiny, is examined and considered while finalizing assessments and considering reopening of cases under section 148 of the IT Act, 1961.(Emphasis supplied) 6. This issues with the approval of Member (Inv), CBDT.” 15. On perusal of the above Instruction, it is noted that the CBDT had only informed the field officers that a button 'Penny Stock' has been added on their Individual Transaction

12 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 Screen to display information related to penny stock, including the investigation report of the Kolkata Investigation Directorate. Accordingly the CBDT had issued directions to CITs to ensure that the officers working under their respective jurisdictions should access this functionality. We do not find that the CBDT instruction referred to by the PCIT in his SCN, any way out lined the mode or the manner of the enquiry to be conducted by the Assessing Officers concerning such suspicious transactions inter alia including purchase& sale of penny stock shares. Upon being enquired as to whether the CBDT has laid down any specific guidelines for the field officers, pursuant to the above Instruction for investigation into the suspicious transactions in shares, the Ld. CIT, DR was unable to bring to our notice the so-called specific line of enquiry which the CBDT had mandated the AOs to abide by. We therefore find that very premise viz., violation of the directions contained in CBDT Instruction No.287/30/2014-IT(Inv II)Vol. III, based on which the ld. Pr.CIT initiated the proceedings u/s 263 for alleged lack of enquiry by the AO into the appellant’s claim of short term capital loss, is found to be factually untenable.

13 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 himself conducted any enquiry. The revisional jurisdiction of Ld. Pr. CIT u/s. 263 cannot be used to conduct roving enquiries time and again or there will be no finality of the assessment proceeding and the Parliament would not have stipulated the condition precedents in sec. 263 of the Act to invoke the same. We find that before the order of assessment was passed, the AO had required the assessee to furnish transactional documents proving the purchase and sale of all shares held as investment during the year. On examination of the material placed before him by the appellant, the AO was satisfied that the short term capital loss was incurred by the appellant on sale of shares listed on the Bombay Stock Exchange. The appellant had filed before the AO the relevant details and also produced the time stamped contract notes issued by its broker. All the transactions were made through registered share broker at rates prevailing on the stock exchange on the relevant dates. The payment for acquisition of shares and the subsequent sale proceeds were also transacted through the appellant’s regular bank account. It is noted that the listed shares were sold within a period of one year from the date of acquisition and therefore the gain/loss was short term in nature. In the facts and circumstances as discussed above therefore we find that the AO had discharged his duties as an investigator as well as that of an adjudicator and applied his mind on the issue before him and taking into consideration the explanation rendered by the appellant, the AO had taken a plausible decision to allow the claim of short term capital loss as made by the appellant in the return of income in consonance with judicial decisions as under:

"4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase & sale contracts notes which are placed on pages 28

14 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence.”

15 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 on record to support his findings that there has been a collusion/connivance between the Broker and the Appellant for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and d-mat statements and account payee cheques cannot be treated as bogus.

"The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary ITA Nos. 93 to 99/RPR/2014 & C.O. Nos. 12 to 18/RPR/2014 . A.Y. 2004-05 10 produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off- market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the,bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, yn the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.—Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished.”

16 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15

“ In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon’ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated.”

17 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 26. CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) –

In this case the Hon’ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. 27. CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) – In this case the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. 28. CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this tribunal , wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO’s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. 29. CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] –

In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon’ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court.

18 ITA No. 1614/Kol/2019 M/s. Patron vinimy Pvt. Ltd., AY: 2014-15 being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and, therefore, all subsequent actions are 'null' in the eyes of law. We therefore quash the order of Ld. Pr. CIT impugned before us.

Order is pronounced in the open court on 31st December, 2019

Sd/- Sd/- (P.M. Jagtap) (Aby. T. Varkey) Vice-President Judicial Member

Dated : 31st December, 2019 Jd. (Sr. P.S.) Copy of the order forwarded to:

/True Copy,

By order, Assistant Registrar ITAT, Kolkata