ITO, Ward-1(1), Cuttack V. Smt. Bimala Devi Singhania, Cuttack

ITA 212/CTK/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9924 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 24-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Principle of natural justice; Opportunity of cross examination; Question of law; Wrong claim; Penny stocks; Audi alteram partem
• Section: 143(3); 142(1); 153A; 143(2); 69A; 43

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.212/CTK/2019 (नििाारण वषा / Asses s m ent Year :2013-2014) Incom e T ax Of f icer , W ard-1(1), Cutta c k ................. Re ve n u e Versus Sm t. Bim ala De vi S inghan ia, Ni lachal T ext waste Industr ies, Manik Ghosh Ba za r , Cuttac k-753002 PAN No.A NLPS 05 06 K ..................As s e s s e e AND ITA No.213/CTK/2019 (नििाारण वषा / Asses s m ent Year :2013-2014) Incom e T ax Of f icer , W ard-1(1), Cutta c k ................. Revenue Versus Sri Radhesh yam S i nghania, Ni lachal T ext waste Industr ies, Manik Ghosh Ba za r , Cuttac k-753002 PAN No.AGVPS 31 43 H ..................Assessee Shri Mohit Sheth, Advocate for the assessee Shri S.C.Mohanty, Sr.DR for the Revenue Date of Hearing : 06/07/2022 Date of Pronouncement : 06/07/2022 आदेश / O R D E R Per Bench : These are the appeals filed by the revenue in the case of two different assessees, who are husband and wife, against the order of ld. ITA No.212&213/CTK/2019 2 CIT(A), Cuttack passed in IT Appeal Nos.0018/2016-17 & 0012/2016-17, both dated 28.03.2019 for the assessment year 2013-2014. 2. Since the issue involved in both the appeals are identical, except difference in figures, therefore, the facts and grounds mentioned in the case of assessee-Smt. Bimala Devi Singhania shall be taken into consideration for deciding both the appeals and the final outcome of the same will apply mutatis mutandis to the case of assessee-Sri Radheshyam Singhania also. 3. It was submitted by the ld. Sr. DR that the assessee has filed the return of income showing total income of Rs.6,14,950/-. It was the submission that the assessee had disclosed Long Term Capital Gains (LTCG) of Rs.1,56,09,716/- on the sale of shares of CCL International Ltd. and had claimed exemption u/s.10(38) of the Act. It was the submission that the statement u/s.131(1A) of the Act had been recorded from the assessee in the course of survey operation. In reply to question No.16, Shri Radheshyam Singhania had agreed to pay taxes on the said Long Term Capital Gains claim. It was the submission that the assessee had not retracted the statement per se but had when filing the return claimed exemption u/s.10(38) of the Act. It was the submission that the CCL International Ltd. was a penny stock company and its shares had been traded for the purpose of claiming bogus long term capital gain. 4. To this extent, ld. Sr. DR placed before us the copy of the statement of one Shri Sanjay Bohra of Kolkata, who was a sharebroker. The said Sanjay Bohra had categorically identified CCL International Ltd. as one of ITA No.212&213/CTK/2019 3 the companies whose shares he had dealt with in the penny stock transactions. It was the submission that as the assessee had not complied with the statement recorded u/s.131(1A) of the Act but had proceeded to claim the exemption u/s.10(38) of the Act, the AO on the basis of the statement recorded from Shri Radheyshyam Singhania treated the transaction of the sale of shares of CCL International Ltd. and the claim of exemption u/s.10(38) of the Act as a colourable transaction and brought to tax the entire sale consideration of Rs.1,61,09,716/- as income under the head “income from other sources”. It was the submission that the assessee had made an investment of Rs.5 lakhs and the share value of CCL International Ltd. increases 32 times which clearly showed that this was a case of bogus long term capital gain claim. 5. It was the submission by the ld. Sr. DR that the ld. CIT(A) had deleted the addition on the ground that the transaction is a genuine transaction and it had complied with all the requirement for the claim of exemption u/s.10(38) of the Act. It was the submission of ld. Sr.DR that in respect of shares of CCL International Ltd. the SMC Delhi Bench of the Tribunal had in the case of Anif Rastogi and Anju Rastogi in ITA No.3809/Del/2018 vide an order dated 08.01.2019 had held that the claim of long term capital gains u/s.10(38) of the Act was not genuine. Ld.Sr. DR also placed before us a written submission, which is extracted hereinbelow :- Formal cross-examination is a part of procedural justice. It is governed by the rules of evidence and is the creation of Court. It is part of legal and statutory justice and not a part of natural justice, ITA No.212&213/CTK/2019 4 therefore, it cannot be laid down as a general proposition of law that the Revenue cannot rely on any evidence which has not been subjected to cross-examination (T. Devasahaya Nadar vs. CIT (51 ITR 20)(Madras HC). Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collusive Nature. The Hon'ble Allahabad High Court held in the case of Digvijay Chemicals Ltd. vs. ACIT (248 ITR 381) that it is not necessary that there must be always a cross-examination of a witness before discarding its evidence. Reliance is also placed on the decision of Hon'ble Kolkata High Court in the case of Hindustan Tobacco Company (27 taxmann.com 155) and Hon'ble Patna High Court in the case of Dr. Gauri Shankar Prasad (88 taxmann.com 700). 2. In the case of Smt. Kusum Lata Thukral (327 ITR 424) the Honourable Punjab & Haryana High Court had an occasion to deal with the same issue. In the cited case, the learned authorised representative of the assessee had sought annulment of the order on the ground that the assessee was not allowed to cross-examine the donors. The Honourable High Court disagreed with this preposition. Whatever material the Assessing Officer had gathered was put to the assessee to comment. Therefore, the statements of the donors who had denied to have made any gift, had not been utilized against the assessee without affording the opportunity of the assessee. The assessee had not discharged the initial onus to produce the necessary evidence to support the genuineness of the transactions. The donors in their statements had denied to have given any gifts to Smt. Kusum Lata Thukral, the assessee. They had denied even the acquaintance with the assessee. They had also denied to have made the deposit of cash in their accounts and issue of drafts for the purpose of gifts. When the donors had denied to have given any gifts it had to be logically concluded that it was the assessee's own money, which was routed through the mode of alleged gifts through the accounts of the persons, who were not aware about the deposit of money in their accounts and purchase of bank drafts in favour of the assessee. It was held by the Hon'ble Punjab & Haryana High Court that the question whether denial of opportunity of cross-examination resulted in violation of natural justice would depend upon the facts of each case. The object of cross-examination is to test the veracity of the version given in examination-in chief. It was held that even if cross-examination was allowed and the donors who had disowned the making of gifts, were confronted and shown to be factually wrong, the same would have made no difference, as there was no natural love and affection and in its absence, the gifts were not genuine. The appeal of the assessee was accordingly dismissed. Reverting back to the present case, the assessee firm never made any request to the AO to ITA No.212&213/CTK/2019 5 cross-examine the witnesses or for that matter also before the CIT(A) to cross-examine such witnesses. It is an argument just for the sake of the argument. 3. The Hon'ble Kolkata High Court in the case of Swati Bajaj & others in lA No.GA/2/2022 & In ITAT/6/2022 dated 14.06.2022 has held as under: "55. The first argument on behalf of the assessee is that the copy of the investigation report was not furnished to them despite specific written request made on behalf of the assesses to furnish the copy of the report, the statements recorded and provide those persons from whom statements were recorded to be cross examined on behalf of the assessee. There is no dispute to the fact that the copy of the statement said to have been recorded during the course of investigation has not been furnished to the asses sees and the request made by some of them for cross examining of those persons was not considered. The question would be as to whether the non-compliance of the above would render the assessments bad in law. The argument of the revenue is that the assessments cannot be held to be illegal merely on the grounds that the copy of the report was not furnished as the respective assessing officers have clearly mentioned as to the nature of investigation done by the department and as the report itself states that the investigation commenced not from the assessees end but the individuals who dealt with these penny stocks who were targeted. It is equally true invariably in all cases, the statement of the stock brokers, the entry operators or the Directors of the various penny stock companies does not directly implicate the assessee. If such being the situation, the assessee cannot be heard to say that the copy of the entire report should have been furnished to him, the person from whom the statements were recorded should have been produced for cross examination as admittedly there is nothing to implicate the assessee Smt. Swati Bajaj of insider trading or rigging of share prices. But the allegation against the assessee is that the claim for LTCG/LTCL is bogus. As pointed out by Mr. Rai, learned senior standing counsel, the investigation report is general in nature not assessee specific. Therefore, we are required to see as to whether non- furnishing of the report which according to the revenue is available in the public domain would vitiate the proceedings on the ground that the assessee was put to prejudice. 56. In State Bank of Patiala and Others versus S.K. Sharma, the Hon'ble Supreme Court pointed out that violation of any and every procedural provision cannot be said to automatically vitiate the domestic enquiry held against the delinquent employee or the order passed by the disciplinary authority except in cases falling under no notice, no opportunity and no ITA No.212&213/CTK/2019 6 hearing categories. Further it was held that if no prejudice is, established to have resulted from such violation of procedural provisions no interference is called for, against the ultimate orders. The test laid down was whether the person has received a fair hearing considering all things as the ultimate test is always the test of prejudice or the test of fair hearing as. Further the Hon'ble Supreme Court pointed out a distinction between a case of no opportunity and a case of no adequate opportunity and while examining the latter case, it was held that the violation has to be examined from the stand point of prejudice, in other words the Court or the tribunal has to see whether in the totality of the circumstances, the delinquent officer/employee did or did not have a fair hearing and the orders to be made shall depend upon the answers to the said query. Further it was held that there may be a situation where interest of the state or public interest may call for curtailing of rule of audi alteram partem and in such a situation the Court may have to balance public/state interest with the requirements of natural justice and arrive at an appropriate decision. 57. In a very recent decision of the Hon'ble Supreme Court in M.]. lames after referring to a catena of decisions on the point the Hon'ble Supreme Court pointed out that natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more lead to the conclusion that prejudice is thereby caused. Where procedural and /or substantive provisions of law embodied the principles of natural justice, their infraction per-se does not lead to invalidity of the order passed. The prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest but also in public interest. Further by referring to the decision in State of Uttar Pradesh Versus Sudhir Kumar Singh (2020) SCC Online SC 847, it was held that the "prejudice" exception must be more than a mere apprehension or even a reasonable suspicion of a litigant, it should exist as a matter of fact or to be cast upon a definite inference of likelihood of prejudice flowing from the non- observance of natural justice. 58. Therefore, the asses sees have to specifically point out as to how they were prejudiced on account of non-furnishing of the investigation report in its entirety, failure to produce the persons from whom the statements were recorded for being cross examined would cause prejudice to the assessee as nowhere in the report the names of the assessees feature. The investigation report states that the investigation has not commenced from the individuals but it has commenced who had dealt with the penny stocks, concept of working backwards. This is a very significant factor to be remembered. Therefore, there has been absolute anonymity of the assessee in the ITA No.212&213/CTK/2019 7 process of investigation. The endeavour of the department is to examine the "modus operandi" adopted and in that process now seek to identify the asses sees who have benefited on account of such "modus operandi". Therefore, considering the factual scenario no prejudice has been established to the assessee by not furnishing the investigation report in its entirety nor making the persons available for cross examination as admitted by the department in substantial number of cases the assessees have not been specifically indicted by those persons from whom statements have been recorded. 59. We are conscious of the fact that there may be exceptions however nothing has been brought before us to show that there was an exception in any of these appeals heard by us. In a few cases the assessee has been made known of the statement of the Director of the penny stock company or the stock broker, entry operator despite which those asses sees could not make any headway. While on this issue, we need to consider as to whether and under what circumstances the right of cross examination can be demanded as a vested right. In Kishanlal Agarwalla, the Hon'ble Division Bench of this Court pointed out that no natural justice requires that there should be a kind of formal cross examination as it is a procedural justice, governed by the rules and regulations. Further it was held that so long as the party charged has a fair and reasonable opportunity would receive, comment and criticize the evidence, statements or records on which the charges is being against him, the demand and tests of natural justice are satisfied. 60. In Bakshi Ghulam Mohammad AIR (1967) SC 122, the Hon'ble Supreme Court held that the right of hearing cannot include the right of cross examination and the right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. 65. Thus, the report submitted by the investigation department cannot be thrown out on the grounds urged on behalf of the asses sees. The assesses have not been shown to be prejudiced on account of non furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue, the statements do not indict the assessee. That apart, we have noted that the investigation has commenced targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submitted recommending the same to be placed before the DGIT (investigation) of all the states of the country. It is thereafter the concerned assessing officers have been informed to consider as to the bonafideness and genuineness of the claims of ITA No.212&213/CTK/2019 8 LTCG/LTCL of the respective asses sees qua the findings which emanated during the investigation conducted on the individuals who dealt with the penny stocks. Therefore, the assessments have commenced by the assessing officers calling upon the assessee to explain the genuineness of the claim of LTCG/ LTCL made by them. In all the assessment orders, substantial portion of the investigation report has been noted in full. A careful reading of the some would show that the assessee has not been named in the report. If such be the case, unless and until the assessee shows and proves that she/he was prejudiced on account of such report/statement mere mentioning that non-furnishing of the report or non- availability of the person for cross examination cannot vitiate the proceedings. The assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. In all the cases, the assessees have been issued notices under Sections 143(2) and 142(1) of the Act they have been directed to furnish the documents, the assessee have complied with the directions, appeared before the assessing officer and in many cases represented by Advocates/Chartered Accountants, elaborate legal submissions have been made both oral and in writing and thereafter the assessments have been completed. Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the inquiry which is being conducted by the assessing officer in scrutiny assessment under Section 143(3) of the Act. The assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non- furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced before us by the learned standing counsel for the revenue, nothing prevented the assesses who are ably defended by Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case 68. It is equally not in dispute that whatever information which was required to be made known to the assessee has been informed to the assessee by the assessing officer by issuance of a notice to each of the assesses to which they have responded by submitting their replies. Therefore, in the absence of any prejudice caused to the assessee on account of non- furnishing of the entire report, the assessees cannot be a heard to say that there has been violation of principles of natural justice and their right to defend themselves was in any manner ITA No.212&213/CTK/2019 9 affected. At this juncture, it would be of much relevance to refer to the decision in K. R. Ajmera. The question of law which arose for consideration before the Hon'ble Supreme Court was as to what is the degree of proof required to hold brokers/sub-brokers liable for fraudulent/manipulative practices under the SEBI Regulations and for violating the code of conduct of the SEBI (Stocks brokers and Sub-brokers) Regulations. It was pointed out that the code of conduct for stock brokers lays down that they shall maintain high standard of integrity, promptitude and fairness in the conduct of all investment business and shall act with due skill and care and diligence in the conduct of all investment business. The Code also enumerates different shades of duties of stock brokers towards the investor and those duties pertain to high standard of integrity that the stock broker is required to maintain in the conduct of his business. It was further pointed out that it is a fundamental principle of law that prove of an allegation levelled against a person may be in the form of direct substantive evidence or as in many cases such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/ charges made and levelled. It was further held that direct evidence is a more certain basis to come to a conclusion yet in the absence thereof the courts cannot be helpless. It was further pointed out that it is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion. The above tests laid down by the Hon'ble Supreme Court were applied to the facts of the case in K.R. Ajmera and it was noted that the scrips in which trading had been done wherefore illiquid scrips meaning thereby that such scrips though listed in the BSE were not a matter of every day buy and sell transactions. Further it was held that trading in such illiquid scrips is not impermissible yet voluminous trading over a period of time in such scrips is a fact that should attract the attention of a vigilant trader engaged in such trades. It was further pointed out that though proximity of time between the buy and sell orders may not be conclusive in an isolated case such an event in a situation where there is a huge volume and trading can reasonable point to some kind of a fraudulent/manipulative exercise with prior meeting of minds. Such meeting of minds so as to attract the liability of the brokers / sub-broker and may be between the brokers/sub-broker and the client or it could be between two brokers/sub brokers engaged in the buy and sell transactions. Further it was pointed out that when over a period of time such transactions have been made between the same set of brokers or a group of brokers a conclusion can be a reasonable reached that there is a concerted effort on the part ITA No.212&213/CTK/2019 10 of the brokers concerned to indulge in synchronized trade the consequences of which is large volumes of fictitious trading resulting in unnatural rise in hiking the price/value of the scrips. In the said case, it was argued that on a screen based trading the identity of the second party to be a client or the broker is not known to the first party/client or broker. This argument was rejected as being irrelevant. It was pointed out that the screen- based identity system keeps the identity of the parties anonymous and it will be too naive to rests the final conclusions on said basis which overlooks a meeting of minds elsewhere. Further it was held that direct proof of such meeting of mind elsewhere would rarely be forth coming and therefore the test is one of the preponderance of probabilities so far as the adjudication of a civil liability arising out of violation of the Act or to the Regulations. Further it was held that the conclusion has to be gathered from various circumstances like that volume of trade effected; the period of persistence in trading in particular scrips; the particulars of the buy and sell orders, namely, the volume thereof; the proximity of time between the two and such other relevant factors. 69. Thus, the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the .test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there 1ias been violation of the provisions of the Income Tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted. ITA No.212&213/CTK/2019 11 72. In the light of the above discussion, the only conclusion that can be arrived at is that the opinion can be formed and the decision can be taken by taking note of the surrounding circumstances which had been elaborated upon in K.R. Ajmera." 6. Without prejudice to the above, reliance is placed on the decision of the Hon'ble Supreme Court in the case of ITO vs. M. Pirai Choodi (63 DTR 187) wherein in the absence of an opportunity to cross- examine the witness, the matter was restored to the A.O. The Hon'ble Delhi High Court in the case of CIT vs. P C Chemicals (27 taxmann.com 9) held that where assessment was reopened and additions under section 69A were made without providing statements and materials, on basis of which such additions were made, to assessee, matter should be remitted back without quashing said order. The Hon'ble Madras High Court in the case of Vetrivel Minerals vs. ACIT (129 taxmann.com 126) held where assessment orders passed in case of assessee under section 153A were passed in gross violation of principles of natural justice as copies of all materials seized which were used for framing assessment had not been supplied to assessee, no opportunity for cross- examination had been provided and even section 65B of Evidence Act had : not been complied with before admitting electronic evidence, matter was to remanded back to Assessing Officer for adjudication afresh. In the alternative, the matter has to be restored to the file of the A.O. to provide an opportunity of cross-examination to the appellant firm. 6. In the above written submission, substantial reliance has been made on the decision of the Hon’ble Kolkata High Court in the case of Swati Bajaj & Ors. in IA No.GA/2/2022 & in ITAT/6/2022, dated 14.06.2022. 7. Ld. Sr. DR read through the various paragraphs of the said judgment of the Hon’ble Kolkata High Court. It was the submission that the assessee’s claim of exemption u/s.10(38) of the Act is liable to be denied as has been done by the AO and the order of the ld. CIT(A) is liable to be reversed. ITA No.212&213/CTK/2019 12 8. It was the alternate prayer of the ld. Sr. DR that the transaction which has been claimed as exemption u/s.10(38) of the Act should be directed to be assessed as adventure in nature of trade, insofar as the assessee has invested in some worthless company shares and has made a windfall gain which is being claimed as exemption u/s.10(38) of the Act. Another alternate claim raised by the ld. Sr. DR is that the transaction should be treated as two Short Term Capital Gains insofar as the assessee had purchased the shares of AAR Infrastructure on 17.11.2011. These shares got extinguished when the said company merged with CCL International Ltd. and has been allotted to the assessee in lieu of the shares of AAR Infrastructure and the same were sold on various dates, the first being on 15.10.2012 and the last being on 22.01.2013. 9. In reply, ld.AR vehemently supported the order of ld.CIT(A). It was the submission by the ld. AR that the assessee had purchased 50000 shares of AAR Infrastructure through direct allotment from the said company on 17.1.2011. The assessee is in no way connected with the management of AAR Infrastructure. The said AAR Infrastructure merged with M/s CCL International Ltd. on 20.06.2012 and consequently in lieu of 50000 shares of AAR Infrastructure held by the assessee, the assessee was given 1.25 lakhs shares of CCL International Ltd. It was the submission that all these shares were in demat form. The shares of CCL International Ltd. were sold by the assessee through a Government Broker namely Stock Holding Corporation of India Ltd. and ISE Security & Services Ltd., the first sale being on 15.10.2012 and the last sale being on ITA No.212&213/CTK/2019 13 22.1.2012. It was the submission that the assessee had no control over the merger nor the assessee had any association with M/s CCL International Ltd. it was the submission that when the assessee found the share value of CCL International ltd. to be high, the assessee had sold the same and it booked its profits. The assessee has paid the STT on the transaction. It was the submission that the sale of the shares were done through ISE Security and Services Ltd., a SEBI authorised broker and a member of Bombay Stock Exchange. It was the submission that the transaction of the purchase and sale of the shares were genuine and the assessee was entitled to the claim exemption u/s.10(38)n of the Act. It was the submission that the ld. CIT(A) had rightly deleted the addition as made by the AO. 10. We have considered rival submissions. 11. At the outset, we are faced with the decision of the SMC Bench of the Delhi Tribunal in the case of Anip Rastogi & Anju Rastogi(supra). This decision admittedly is in respect of CCL International Ltd. shares and the issue has been held against the assessee therein. The addition in the case of Anip Rastogi was based on a statement recorded from the brokers and the investigation wing’s report in respect of bogus claim of long term capital gain. Clearly the facts in the assessee’s case are different from that of Anip Rastogi’s case cited supra. 12. A perusal of the decision of the Hon’ble Kolkata High Court in the case of Swati Bajaj, referred to by the ld. Sr. DR, prima facie, revolves on the statement recorded from the brokers and the requirement of providing ITA No.212&213/CTK/2019 14 opportunity of cross examination to the assessee in respect of these said brokers whose statements have been used against the assessee therein. One peculiarity that has become evident in the decision of the Hon’ble Kolkata High Court in the case of Swati Bajaj (supra), is that the Hon’ble High Court was given to understand, wrongly, that the investigation report was available in the public domain and that was the very foundation on which the Hon’ble Kolkata High Court has proceeded on its judgment that the evidence was very much available to obtain. Unfortunately, the Hon’ble Kolkata High Court was wrongly informed. Another portion of the decision of the Hon’ble Kolkata High Court in the case of Swati Bajaj (supra) gave substantial importance insofar as in para 15 of the said order the Hon’ble Kolkata High Court relied on the decision of Kishanlal Agarwalla. The Hon’ble Kolkata High Court itself had held that no natural justice requires that there should be a kind of formal cross examination as it is a procedural justice, governed by the rules and regulations. Further it was held that so long as the party charged has a fair and reasonable opportunity, would receive, comment and criticize the evidence, statements or records on which the charges is being against him, the demand and tests of natural justice are satisfied. 13. As mentioned earlier, investigation report is not in the public domain and secondly the evidence which is used against the assessee clearly is not available to the assessee and the denial of providing these evidences to the assessee along with the opportunity of cross objection becomes a very foundation against the assessee in the course of assessment. It ITA No.212&213/CTK/2019 15 would be worthwhile referred to the decision of the Hon’ble Supreme Court in the case of M/s Andaman Timber Industries, Civil Appeal No.4228 of 2006, wherein the Hon’ble Supreme Court has categorically held that, “As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination.” The Hon’ble supreme Court further went to hold that, “Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above.” In that case, the Hon’ble Supreme Court when on to hold that they were of the opinion that if the testimony of these two witnesses is discredited, there was no material with the department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice therein. 14. The Hon’ble Kolkata High Court further went on to hold that the report submitted by the investigation department cannot be thrown out on the ground urged on behalf of the assessee as the assessee had not shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross examination, as the assessee has not specifically intimated as to how he was prejudiced which coupled with the fact as admitted by the revenue, the statement do not incite the assessee. The Hon’ble Kolkata High Court further went on to hold that unless and until the assessee shows and proves that she/he ITA No.212&213/CTK/2019 16 was prejudiced on account of such report, a statement mentioning that non-furnishing of the report and non-availability of the person for cross examination cannot vitiate the proceedings. This is to be read along with the indication given by the Hon’ble Kolkata High Court that the said report is available in the public domain and it was available to the assessee and its counsel to download and examine the same and thereafter put up through defence. If the evidence is to be used against the assessee in the course of any assessment or any proceedings, the basic principle of natural justice demands and has been repeatedly upheld by the Hon’ble Supreme Court that such evidences must be put to the assessee and he should be given opportunity to rebut the same. The Hon’ble Kolkata High Court further went onto hold in para 69 of the order that the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be, what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. 15. A perusal of the facts in the present case, clearly shows that there was a survey on the premises of the assessee Shri Radheshyam Singhania. In the course of such survey a statement has been recorded ITA No.212&213/CTK/2019 17 from him wherein he has repeatedly stated that he has done the transaction through proper channels and has claimed the exemption u/s.10(38) of the Act, but he is willing to pay the tax on the income thereon. When filing his returns the assessee did not disclose the said income as “income from other sources” nor paid tax on it. But he claimed the exemption u/s.10(38) of the Act. The AO relied upon the statement of Radheshyam Singhania taken in the course of survey and applying the principle of preponderance of probabilities, denied assessee’s claim of exemption u/s.10(38) of the Act and brought to tax the entire sale receipts. It should be mentioned here the AO did not give the benefit of even the cost of purchase to the assessee. Here we are faced with the situation that what is the validity of the statement recorded in the course of the survey. The statement of Shri Radheshyam Singhania admittedly has been recorded u/s.131(1A) of the Act. The statement admittedly has evidentiary value but it is still open to the assessee to prove that his claim of exemption u/s.10(38) of the Act is valid and once it is proved with substantial evidence, the statement recorded u/s.131(1A) will no more have the same strength or the evidentiary value. An assessee is fully entitled to produce substantial evidence to prove that the statement given by him in the course of survey is erroneous. In such situation it is for the AO to disprove the evidences so produced by the assessee. The evidences produced cannot be wished away by claiming that the assessee has offered to pay tax in the statement. An assessment is not made on the basis of statement recorded, but on the basis of the ITA No.212&213/CTK/2019 18 evidence available and substantiated. There can be no agreement much less any valid agreement between an AO and an assessee in respect of taxing of an income or source of income. 16. Other than the statement recorded from Shri Radheshyam Singhania, the AO has not relied upon any other evidence, however, the assessee has produced substantial evidence in the form of the first allotment of the shares in AAR Infrastructure Ltd., the merger of AAR Infrastructure with CCL International Ltd., the sale of shares through ISE Security & Services Ltd., a SEBI authorised broker, the proof of payment of STT as also the fact that these shares were in the Demat form. Other than the statement of the assessee showing that he is willing to pay tax on the transaction, there is no shred of evidence available with the AO to presume that the transaction done by the assessee in the purchase of AAR Infrastructure shares, merger of AAR Infrastructure with CCL International Ltd. shares was a colourable device or an attempt at evading tax by using the unscrupulous methods of tax planning bordering on side of tax evasion. 17. The revenue has not relied upon the report of the investigation authorities from the brokers for the purpose of making the assessment. The reliance on the statement of the broker Shri Sanjay Bohra and the investigation report has been made only in the annexures to the ground of appeal filed before the Tribunal. These are clearly evidences produced by the revenue to support its stand in respect of probability and possibility of assessee having indulged in colourable device of tax evasion, fringing of ITA No.212&213/CTK/2019 19 the area of tax evasion. In the present case, as the addition has been made by the AO solely on the basis of the statement of the assessee, the question of cross examination does not arise. The assessee having retracted his statement in principle and in fact in holding on to its claim of exemption u/s.10(38) of the Act as it was supported by proper and adequate evidence cannot be found fault with. 18. A perusal of the order of the ld. CIT(A) also shows that he has considered the fact that the transaction conducted by the assessee fell within the four corners of the requirements for claiming exemption u/s.10(38) of the Act. 19. The ld. Sr. DR had taken serious objection to the finding of the ld.CIT(A) that he has considered the statement of the assessee that the statement was recorded in the course of survey under duress. That issue no more survives, insofar as the statement recorded in the course of survey admittedly is not conclusive of evidence as has been held earlier. 20. This being so, as the statement recorded from the brokers, who have agreed to penny stock manipulation and the investigation report based thereon having not been relied upon by the ld. AO for the purpose of assessment, the decision relied on by the revenue in the case of Anip Rastogi & Anju Rastogi (supra) as also the decision of Hon’ble Kolkata High Court in the case of Swati Bajaj (supra), does not apply to the facts of the present case. In these circumstances, we find no error in the order of the ld.CIT(A), which calls for any interference and consequently, we uphold the same. ITA No.212&213/CTK/2019 20 21. In regard to alternate claim of the ld. Sr.DR that the income should be assessed under the head “adventure in the nature of trade”, we are unable to accept the contention, insofar as when all the criterion required for claim of exemption u/s.10(38) of the Act has been complied with by the assessee and no fault or error in such claim has been proved much less a falsity in the claim, the income of the assessee at to be exempt u/s.10(38) of the Act, cannot be brought to tax under the head “adventure in the nature of trade”. In regard to the plea of ld.Sr. DR that two terms of Short Term Capital Gains has to be assessed also no hold merger insofar as the assessee has not sold the shares or transferred the shares of AAR Infrastructure. In far, the AAR Infrastructure merged with CCL International Ltd. When such merger itself has not considered as transferred to treat that the assessee’s shareholding in AAR Infrastructure has got extinguished or has been transferred for the purpose of computing Short Term Capital Gains, will not arise. The assessee has been issued 1.25 lakhs shares of CCL International Ltd. in lieu of 50000 shares in AAR Infrastructure held by the assessee. There is no transfer as a consequence of the merger to treat the same as Short Term Capital Gains. Accordingly, we dismiss the appeal of the revenue filed in the case of Smt. Bimala Devi Singhania in ITA No.212/CTK/2019. 22. Similar issues have been raised by the revenue in its appeal i.e. ITA No.213/CTK/2019 in the case of Shri Radheyshyam Singhania, except difference in figures. This appeal of the revenue is also dismissed ITA No.212&213/CTK/2019 21 upholding the order of the CIT(A) following our observations given in the appeal in the case of Smt. Bimala Devi Singhania. 23. In the result, both appeals of the revenue are dismissed. Order dictated and pronounced in the open court on 06/07/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 06/07/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पिभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//