CONFIDENT INVESTMENT CONSULTANTS PVT. LTD., ,KOLKATA vs. ITO, WARD - 6(1), , KOLKATA

.. अपीलाथ� /Appellant ��यथ� /Respondent Shri Subash Agarwal, Advocate अपीलाथ� क� ओर से/By Appellant Shri S. Venkatramani Addl. CIT-SR-DR ��यथ� क� ओर से/By Respondent 22-01-2019 सुनवाई क� तार�ख/Date of Hearing 31-01-2019 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R This assessee’s appeal for assessment year 2013-14, arises against the Commissioner of Income-tax (Appeals)-2, Kolkata’s order dated 13.07.2018 passed in case No.10131/CIT(A)-2/2016-17 involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

Confident Investment Consultants Pvt. Ltd. Vs. ITO Wd-6(1) Kol. Page 3 5. It must also be stated here that in Commissioner of Income Tax vs NR Portfolio Pvt Ltd on 22 November, 2013, the Hon'ble Delhi High court has held ..... "The Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when In doubt or when the assertion is debatable. Normally a factual assertion made should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee In such circumstances should cooperate and furnish papers, details and particulars. This may entail Issue of notices to third parties to furnish and supply information or confirm facts or even 'attend as witnesses. The Assessing Officer can also refer to Incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general- or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required. The verification and Investigation should be one with the least amount of Intrusion, Inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is Irrelevant. Certain facts or aspects may be neutral and should be noted. These should net be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the canons of equity, fairness and justice. The evidence should be Impartially and objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge In appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and Indeed this Court. The reasoning and the grounds given In any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer is denied advantage of the contention or factual assertion by the assessee before him. In case an assessee deliberately and intentionally falls to produce evidence before the Assessing Officer with the desire to prevent Inquiry or Investigation, an adverse view should be taken”.

Confident Investment Consultants Pvt. Ltd. Vs. ITO Wd-6(1) Kol. Page 5 9. I am in agreement with the Ld. AO that the transactions relating to the claim of LTCG as made by the Ld. AO come within the ambit of “suspicious transactions”, and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent' features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of “suspicious” and “dubious” transactions. The. Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win Chadha v. CIT (International Taxation) In. & 3107/Del/2005, the Hon'ble Delhi ITAT “B” Bench has observed, on 31.12.2010 as under: "SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious circumstances, by following observations: " ..... It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being un-rebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably. ........... Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence.”

Confident Investment Consultants Pvt. Ltd. Vs. ITO Wd-6(1) Kol. Page 6

CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence In Income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It Is evidence of venous facts, other than the fact In Issue which are so associated with the fact In Issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are - (1) the circumstances alleged must be established by such evidence, as In the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links In the case, .yet It Is not essential that every one of the links must appear on the surface of the evidence adduced ; some of these links may have to be Inferred from the proved facts ; (4) In drawing those .Inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5) The circumstantial evidence can, with equal facility, be resorted to In proof of a fact In Issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of In order to prove or disprove a fact alleged or In Issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has Its place to assist the process of arriving at the truth." 6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance in the Income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations, If assessee Is not forthcoming with proper or complete facts or his statement or explanation Is contradictory, drawing of suitable inferences and estimation of facts Is Inevitable. Courts generally will not Interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AO's record are In the nature of contentions challenging criminal or civil liabilities In a court of law. We are dealing with a process of adjudication of assesses tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court In the case of S.S. Gadgil (supra) no 'lis' is Involved In adjudication of tax liability. The Assessee's contention that there was no new material before the AO after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, In a sensitive matter like this, even a single clue or revelation can be of great Importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of Investigation agencies like CBI, Confident Investment Consultants Pvt. Ltd. Vs. ITO Wd-6(1) Kol. Page 7 DRI, ED whose were In the Offing, as the relevant Investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf.' The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright." In view of the above discussion, I find no Infirmity in the finding of the Ld. AO, and confirm the same. Grounds 2 taken by the appellant-individual stands dismissed.” Both the learned representatives reiterate their respective stands against and in favour of the impugned loss disallowance. The Revenue vehemently contends that the lower authorities have rightly disallowed the impugned loss(es) for the reason that Shri Sachet Saraf (Director/ main person) of M/s Marigold Vanijya Pvt. Ltd had deposed before the DIT(Inv) Kolkata to have provided bogus entries of loss in currency derivatives by taking cheques and returning cash to the beneficiaries / assessees. I find no merit in Revenue’s instant substantive plea. This tribunal’s co-ordinate bench’s decision in Kamla Prasad Kajaria (HUF) vs. ITO decided on 24.05.2018 has deleted identical disallowance as follows:- “4. I have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the claim of the assessee for the impugned loss incurred in trading in derivatives was disallowed by the authorities below mainly on the ground that the assessee had not given any margin money to the broker before the relevant transactions and in his statement, the Director of the broker company had admitted that his company was indulging in providing bogus loss in currency derivatives as per the requirement of the clients. At the time of hearing before the Tribunal, the learned DR has laid emphasis on these two aspects in support of the revenue’s case. However, as contended by the learned counsel for the assessee by relying on the decision of Hon’ble Bombay High Court in the case of Bonanja Commodities Brokers Pvt. Ltd. vs Mrs. Roshanara Bhinder (arbitration petition 195 of 2015 dated 16.04.2015), the collection of margin money as per the by-laws of MCX Stock Exchange Ltd. is only discretionary in nature and the transactions entered into by the clients without payment of margin money cannot be considered as illegal. As further contended by the learned counsel for the assessee, there is nothing in the statement of Shri Sachit Saraf, Director of the broker company nor anything has been brought on record by the A.O. to show that the transactions entered into by the assessee company through the said broker were bogus. As matter of fact, a perusal of the order of the A.O. shows that enquiry was directly made by him from MCX Stock Exchange Ltd. by issuing the notice u/s 133(6) of the Act in order to verify the transactions entered into by the assessee through M/s. Marigold Vanijya Pvt. Ltd. and in reply to the said notice, MCX Stock Exchange Ltd. had not only confirmed the transactions but had also furnished the required information along with a CD containing details of all transactions made by the assessee during the year under consideration through broker Marigold Vanijya Pvt. Ltd. As found by the A.O. on verification of the said details, total transactions involving sales of Rs.15,19,22,392/- and purchases of Rs. 15,19,23,880/- were made by the assessee resulting into a loss of Rs.1,488/-. This relevant evidence confirming the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. was brushed aside by the A.O. on the ground that loss shown therein was Rs. 1,488/- whereas the assessee had claimed a loss of Rs. 5,17,141/-. As submitted on behalf of the assessee before the Assessing Officer Confident Investment Consultants Pvt. Ltd. Vs. ITO Wd-6(1) Kol. Page 8 as well as before us, expenditure was incurred by the assessee relating to the said transactions on account of brokerage, service tax and other charges levied by the broker aggregating to Rs.5,15,653/- and accordingly the total loss as claimed by the assessee was to the tune of Rs. 5,17,141/-. As pointed out by the learned counsel for the assessee, this additional expenditure incurred by the assessee on account of brokerage, service tax and other charges was duly supported by the documentary evidence in the form of relevant bills issued by the broker and there was no reason whatsoever given by the A.O. for not accepting this explanation of the assessee. Keeping in view all these facts and circumstances of the case, I am of the view that the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker Marigold Vanijya Pvt. Ltd. was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant loss in dealing in currency derivatives is not tenable. I, therefore, delete the said disallowance and allow the appeal of the assessee.” I find that the factual position is no different in both the instant cases as Shri Sachet Saraf’s statement recorded u/s 132(4) of the Act forming part of record has nowhere mentioned these two assessees names. I further notice that these two assessees have filed all the relevant details in the nature of contract notes, bills, general ledger accounts regarding the broker concerned with bank statement, synopsis and Mr Sachet Saraf’s affidavits retracting the search statement. I accept assesseess’ sole substantive ground raised in these appeals and direct the Assessing Officer to delete the impugned disallowance of loss incurred in currency derivatives activity. All other grounds of interest etc. are treated to be mere consequential.”