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Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM]
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 &
2 & 2085/Kol/2018 Santi Ranjan Das & M. K. Kandoi & Sons, HUF A.Yrs. 2012-13 & 2015-16 1089/CIT(A)-10/Wd-35(4)/15-16/2017-18/Kol, upholding the Assessing Officer’s action treating their long term capital gains of Rs. 22,92,2832/- and Rs. 41,51,877/- from sale of shares to be unexplained cash credit u/s 68 of the Act, involving proceedings u/s 143(3) read with section 147 and section 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’), respectively. Heard the assessees reiterating their respective stands against in support of the impguend addition. Case file perused.
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
3 & 2085/Kol/2018 Santi Ranjan Das & M. K. Kandoi & Sons, HUF A.Yrs. 2012-13 & 2015-16 3. The assessee carried the matter in appeal and the ld. CIT(A), Kolkata, had upheld the addition. The ld. CIT(A) has in his order relied upon “circumstantial evidence” and “human probabilities” to uphold the findings of the AO. He also relied on the so called “rules of suspicious transaction”. No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given.
4. The ld. D/R, submitted that the transaction was not genuine. He argued that the entire capital gain was stage managed by a few operators and investors. He relied on the order of ld. Assessing Officer and argued that the same be upheld. He relied on the order of the Chennai ‘A’ Bench of the Tribunal in the case of M/s. Pankaj Agarwal & Sons (HUF) vs. ITO in to 1420/CHNY/2018; order dt. 06/12/2018, for the proposition that such capital gains have to be brought to tax. He also relied on the judgment of the Hon’ble Bombay High Court in the case of Sanjay Bimalchand Jain vs. Principal Commissioner of Income-tax-1, Nagpur; [2018] 89 taxmann.com 196 (Bombay) and the decision of the Smt. M.K. Rajeshwari vs. ITO; ITA No.1723/Bng/2018; Assessment Year 2015-16, order dt. 12/10/2018.
After hearing both sides, I find that in a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. Some of the cases were, detailed finding have been given on this issue, are listed below:-
Sl.No of the Assessee Date of order /Judgment 1. ITA No.714 to DICT vs. Sunita Khemka 28.10.2015 718/Kol/2011 ITAT, Kolkata 2 214 ITR 244 CIT vs. Carbo Industrial Holdings Ltd. - Calcutta High Court 3. 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4. ITA No.1236- Manish Kumar Baid vs. ACIT 18.08.2017 1237/KOl/2017 5. ITA No.569/Kol/2017 Gautam Pincha 15.11.2017 6 ITA No.443/KOl/2017 Kiran Kothari HUF 15.11.2017 7 ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO 20.07.2018 8 ITA No.456 of 2007 CIT vs. Shri Mukesh Ratilal Marolia 07.09.2011 Bombay High Court 9 ITA No.95 of 2017 PCIT vs. Prem Pal Gandhi 18.01.2018 (O&M) 10 ITA No.1089/Kol/2018 Sanjay Mehta 28.09.2018 3
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
5 & 2085/Kol/2018 Santi Ranjan Das & M. K. Kandoi & Sons, HUF A.Yrs. 2012-13 & 2015-16 commission disallowance; if any, made qua the said addition component would also follow the suit as a necessary corollary.
5. No other argument has been raised before me.
6. These two assessees appeals are allowed in above terms.
Order pronounced in the Court on 22.03.2019