NIKUNJ DUDHANI,KOLKATA vs. ITO, WARD - 35(2), KOLKATA , KOLKATA

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. Kailash Auto Finance Ltd. The AO based on a general report and modus operandi adopted generally in these cases 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.

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.

I find that, in a number of cases, the Jurisdictional High Court as well as this bench of the Tribunal has consistently held that the decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. The Benches have in all cases deleted such additions. Some of the cases where detailed findings are given on this issue are listed below :-

1236-1237/K/17 Manish Kumar Baid & Others vs ACIT 18.08.2017 ITAT - Kolkata 2 443/Kol/2017 Kiran Kothari (HUF) vs ITO 15.11.2017 3. 22 of 2009 CIT, Kolkata-III vs Bhagwati Prasad 29.04.2009 Calcutta High Court Agarwal 4. 456 if 2007 CIT vs Shri Mukhesh Ratilal Marolia 07.09.2011 Bombay High Court 5. 18 of 2017 Punjab Pr. C.I.T. (Central)Ludhiana vs Sh.Hitesh 16.02.2017 and Haryana High Gandhi, Court 6. 95 of 2017 Pr. C.I.T. vs Prem Pal Gandhi 18.01.2018.

I am bound by the proposition of law laid down in these case law. They are squarely applicable to the facts of this 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 High Courts and that of the ITAT.

In view of the above discussion the addition in question is deleted.

In the result appeal of the assessee is allowed.