M/S. M.K. KANDOI & SONS, HUF,KOLKATA vs. ITO, WARD - 35(4), , KOLKATA

These two assessees’ appeals for assessment years 2012-13 & 2015-16 are directed against the CIT(A)-15, Kolkata & CIT(A)-10, Kolkata’s orders dated 23.02.2018 & 27.07.2018 passed in case nos. 07/CIT(A)-15/16-17/Circle-51/Kol &

It transpires at the outset that the sole issue that requires my apt adjudication is as to whether both the lower authorities have correctly made the impugned unexplained cash credit addition in two assessees’ cases. There is no dispute between the parties that these assessees have claimed the impugned long term capital gains on sale of shares in different scrips. They have duly placed on record all the corresponding evidence of sale/purchase bank statement(s), brokers’ certificate, contract notes, ledgers, DEMAT statement, bills, contract notes etc. before the Assessing Officer as well as CIT(A). Both the learned authorities quote, hon’ble apex court decision in Sumati Dayal vs CIT reported in [1995] 214 ITR 801 (SC) and CIT vs. Durga Prasad More reported in 82 ITR 540 (SC) to conclude that these assessees have indulged in artificial rigging of scrips prices in collusion various entry operators/ promoters. They have gone by circumstantial evidences than the assessee’s documentary evidence whilst making the impugned addition. I find in this backdrop of facts that this tribunal’s co-ordinate bench decision in Mahavir Jhanwar vs ITO, Ward-35(4), Kolkata in decided on 01.02.2019 has deleted identical addition by following detailed discussion: 2.The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s Unno Industries. The AO based on a general report and modus operandi adopted generally and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transaction was rejected. 2

Regarding the case laws relied upon by the ld. Departmental Representative, I find that, in the case of M/s. Pankaj Agarwal & Sons (HUF)(supra), the issue was decided against the assessee for the reason that, the assessee could not justify his claim as genuine by producing evidence and was only arguing for the matter to be set aside to the lower authorities on the ground of natural justice. As similar arguments were not raised before the lower authorities by the assessee, the ITAT rejected these arguments. In the case on hand, all evidences were produced by the assessee. In the case of Sanjay Bimalchand Jain, legal heir of Santi Devi Bimalchand Jain, the Hon’ble High Court upheld the stand of the Revenue that the transaction in question is an adventure in nature of trade and the profit of the transactions is assessable under the head of ‘Business Income’. In the case on hand, the ld. Assessing Officer has not assessed this amount as ‘Business Income’. In any event, I am bound to follow the judgment of the Jurisdictional High Court in this matter. I find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc.

The proposition of law laid down in these case laws by the Jurisdictional High Court as well as by the ITAT Kolkata on these issues are in favour of the assessee. These are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon’ble Jurisdictional Calcutta High Court and the ITAT. I am bound to follow the same. 8. In view of the above discussion I delete the addition made u/s 68 of the Act, on account of Long Term Capital Gains.”

Mr. Singh submits that this former assessee Shri Santi Ranjan Das had been allowed to cross-examine the broker who failed to support his case during the course of assessment. I find no merit in Revenue’s instant argument as this broker’s statement forming part of case record nowhere alleged the assessee to have indulged in any cash transaction or long term capital gains entries. I accordingly adopt the learned co- ordinate bench’s above extracted detailed discussion to delete the impugned addition