Sh. Jatinder Kumar Jain, Ludhiana V. ITO, W-2(4), Ludhiana

ITA 338/CHANDI/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7617 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MS. MAPLE GOODS; PRODUCING COUNTER EVIDENCE BUT
• Keywords: Opportunity of cross examination; Question of law; Accommodation entries; Set aside; Capital Gains
• Section: 131; 68; 133A; 208; 13; 22

Judgement Text

आयकर य कर , य य “A”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘A’, CHANDIGARH BEFORE: SHRI N.K. SAINI, VICE PRESIDENT, AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No. 338/Chd/2018 (Assessment Year : 2013-14) Shri Jatinder Kumar Jain # 100, W.No. 6, Madhopuri-2, Ludhiana. बनाम Income Tax Officer, Ward 2(4), Ludhiana. थायी लेखा सं./PAN NO: AAQPJ 0072 M नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv. राज व क ओर से/ Revenue by : Smt. Priyanka Dhar, Sr. D.R स ु नवाई क तार ख/Date of Hearing: 31.03.2022 उदघोषणा क तार ख/Date of Pronouncement: 14.06.2022 आदेश/ORDER Per Sudhanshu Srivastava : This is assessee’s appeal against order dated 14.02.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Ludhiana [CIT(A)] and pertains to assessment year 2013-14. 2. The brief facts of the case are that the Department had received information from the Investigation Wing through the Ld. Principal Commissioner of Income Tax-1, Ludhiana that the assessee had allegedly earned bogus Long Term Capital Gain to the 2 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain tune of Rs. 2,00,10,326/- on sale of shares of M/s. Access Global Limited through another allegedly bogus client company of Shri Ashok Kumar Kayan with Kolkata Stock Exchange and on the basis of such report of the Investigation Wing, along with the statements of certain other persons including statement of Shri Harshvardhan Kayan, the Assessing Officer (AO) came to the conclusion that Shri Ashok Kumar Kayan had provided bogus Long Term Capital Gain entry to the assessee as well as to some other beneficiaries. The AO proceeded to issue show cause notice to the assessee along with a copy of the statement of Shri Harshvardhan Kayan which had been recorded under section 133A of the Income Tax Act, 1961 (hereinafter called “the Act”) and the assessee was asked to explain and establish the genuineness of the Long Term Capital Gain. The assessee was also directed to produce Shri Harshvardhan Kayan. 2.1 In response to the said show cause notice, the assessee submitted before the AO that the statement of Shri Harshvardhan Kayan had been recorded under section 133A and not under any oath and, therefore, the same did not have any evidentiary value. It was also submitted by the assessee that in the said statement of Shri Harshvardhan Kayan the assessee’s name did not appear as one of the beneficiaries. The assessee also gave evidences of the transactions relating to shares and also sought to explain the 3 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain modus operandi along with the fact of amalgamation/merger of the company. The assessee also requested the AO that an opportunity may be provided to him to cross examine Shri Harshvardhan Kayan. The assessee also submitted that the company M/s. Access Global Limited was listed with the Kolkata Stock Exchange and that the AO could verify the various contentions of the assessee under the Powers granted to him by the Income Tax Act, 1961 (the Act) from Kolkata Stock Exchange itself. It was further submitted that the assessee was a bonafide holder of 79,900 shares of M/s. Access Global Limited which was apparent from the list of shareholders submitted by the company M/s. Access Global Limited in Form No. 2 (Return of Allotment) filed with the Registrar of Companies. The assessee also submitted that the assessee had not sold any shares through Shri Harshvardhan Kayan or through any of the companies in which he was holding Directorship and that the assessee had sold the shares only through Shri Ashok Kumar Kayan which was evident from the Bills, Contract Notes and copies of account. It was also submitted before the AO that all these transactions had been executed through account payee cheques and that the assessee had duly paid Securities Transaction Tax on the sale of shares and the sale proceeds had also been received through the bank account of the assessee. Thus, the assessee attempted to justify that he had 4 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain rightly claimed the Long Term Capital Gain as exempt under section 10(38) of the Act. 2.2 However, the various submissions of the assessee and the documentary evidences filed in support thereof did not find favour with the AO. The AO did not accept the assessee’s prayer for opportunity of cross examining Shri Harshvardhan Kayan. The AO also proceeded to record the statement of the assessee in this regard. The AO did not accept the various contentions of the assessee and relying upon the principle of preponderance of probability held that the Long Term Capital Gain was bogus and made an addition of Rs. 2,00,10,326/- under section 68 of the Act. 2.3 Aggrieved, the assessee carried the matter before the Ld. CIT (A) but the Ld. CIT (A) also did not accept the contentions of the assessee and upheld the addition made by the AO. 2.4 Now the assessee has approached this Tribunal and has challenged the action of the Ld. CIT (A) in upholding the addition by raising the following grounds of appeal :- 1. That the ld. Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making the addition u/s 68 to the tune of Rs 2,00,10,326/-, which is against the facts and circumstances of the case. 5 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain 2. That the ld. CIT (A) has also erred in disallowing the exemption u/s 10(38) of the Income Tax Act, 1961 disregarding the long term capital gain as claimed in the computation of income. 3. That the ld. CIT (A) has also erred in confirming the addition, specially when no cross examination of Shri Ashok Kumar Kayan or Harshvardhan Kayan was allowed to the assessee and, thus, the statement recorded at the back of the assessee has no evidentiary value. 4. That the confirmation of addition without allowing the cross examination to the assessee is against the principles laid down by the Hon’ble Supreme Court in the case of M/s. Andaman Timber Industries as reported in 127 DTR 0241 and, thus, the sustaining of addition, is against the facts and circumstances of the case. 5. That the confirmation of addition by the CIT (A) on human probabilities is not proper and is against the documentary evidences furnished before the authorities below, which has not been doubted at all. 6. That the confirmation of addition is against the judgment of Hon’ble Punjab & Haryana High Court on the similar issue as delivered in that case of Shri Hitesh Gandhi. 7. That the addition has been made against the facts and circumstances of the case. 8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 3.0 The Ld. A/R submitted that the assessee had purchased 1700 shares of M/s. Maple Goods Limited and subsequently there was an amalgamation of three companies viz. M/s. Maple Goods Limited, M/s. Seaview Supplier Limited and M/s. Matrix Barter Private Limited as per the direction of the Hon’ble High Court of Kolkata and, thereafter, 7900 shares of M/s. Access Global Limited were allotted to the assessee. It 6 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain was submitted that it were these shares which were sold by the assessee during the year under consideration. To establish the veracity of the above contentions, he drew our attention to the following documents filed by the assessee in form of Paper Book :- (1) Copy of letter addressed to the assessee by M/s. Maple Goods Limited carrying the distinctive numbers, Certificate number and Share Folio number of the shares allotted to the assessee (placed at page 1). (2) Copy of letter dated 16.11.2011 as issued by M/s. Access Global Limited specifying the details of the amalgamation by way of order of the Hon’ble Kolkata High Court along with the copy of Option Form placed at pages 2 and 3. (3) Copy of the Demat Account Statement of the assessee maintained with Ludhiana Stock Exchange and indicating the holding of shares of M/s. Access Global Limited placed at pages 4 and 5. (4) Copy of Contract Notes issued by Shri Ashok Kumar Kayan for the sale of shares placed at pages 6 to 20. (5) Copy of details of share transactions pertaining to sale through Shri Ashok Kumar Kayan placed at page 21. 7 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain (6) Copy of bank account of the assessee with State Bank of Bikaner & Jaipur showing the details of purchase and sale of shares placed at pages 22 to 33. 3.1 The Ld. A/R further submitted that the assessee had purchased the shares of M/s. Maple Goods Limited on 24.06.2011 through proper banking channels for an amount of Rs. 8,22,800/- and the identity of the broker through whom these shares have been purchased has not been doubted. Referring to the Contract Note, it was submitted that this Contract Note contained all the relevant information such as Trade number, Trade time, Contract Note number, Settlement number, details of Service Tax payment, details of brokerage and details of Securities Transaction Tax. It was further submitted that all these transactions were made On-Line and he also sought to demonstrate that the Client Code with the name of the assessee has been duly mentioned in the said Contract Note. It was submitted that inspite of these documentary evidences establishing the credentials and genuineness of the transaction, the AO doubted the sale and proceeded to act on mere surmises and conjectures. He referred to the judgment of the Hon’ble Punjab and Haryana High Court in the case of Hitesh Gandhi in ITA No. 18/2017 and another judgment of the Hon’ble Apex Court in the case of Shri Daulat Ram Rawatmull reported in 87 ITR 349 (SC) wherein the 8 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain Hon’ble Court had held that in the face of documentary evidences, the test of human probability cannot be held to be good and that the bonafides of the assessee cannot be doubted only on mere suspicion and surmises. 3.2 The Ld. A/R further submitted that there was no independent statement of Shri Ashok Kumar Kayan and the reliance only on the statement of Shri Harshvardhan Kayan was not proper in as much as the assessee had only dealt with Shri Ashok Kumar Kayan. Referring to the other statements, which had been relied upon by the AO viz. Shri Nand Jain of M/s. Access Global Limited and Shri Suresh Khemka, it was submitted that in these statements there is only a passing reference of the company M/s. Access Global Limited but there is no specific mention of assessee’s name. 3.3 It was further submitted by the Ld. A/R that the statement of Shri Harshvardhan Kayan had been recorded under section 133A of the Act and, therefore, no evidentiary value could be attached to such statement in view of the judgment of the Hon’ble Apex Court in the case of S. Kadhar Khan Sons reported in 352 ITR 480 (SC). 3.4 Taking the submissions forward, the Ld. A/R also submitted that the statement of Shri Harshvardhan Kayan and others had been recorded by the Investigation Wing at the back of the assessee and as such they were witnesses of the Income Tax Department. The Ld. A/R submitted 9 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain that specific request had been made to the AO to allow the assessee to cross examine Shri Harshvardhan Kayan but this request had been declined by the AO despite there being specific direction from the Ld. CIT (A) in this regard. It was submitted that the AO, while denying the assessee an opportunity to cross examine, had categorically stated that it was sufficient that the assessee had been given a copy of the statement of Shri Harshvardhan Kayan and that no further cross examination was required to be afforded to the assessee. In this regard he also drew our attention to copy of the remand report sent by the AO to the Ld. CIT (A) wherein the AO has specifically denied giving opportunity of cross examination of Shri Harshvardhan Kayan to the assessee. 3.5 It was further submitted that, therefore, in absence of such cross examination having been afforded to the assessee to refute the contents of the statement of Shri Harshvardhan Kayan, which was undisputedly recorded at the back of the assessee, such statement could not have been made the basis for making the impugned addition. The Ld. A/R placed reliance on the judgment of Hon’ble Apex Court in the case of Andaman Timber Industries reported in 281 CTR 241 (SC) for the proposition that in absence of cross examination no reliance could be placed on any statement which had been recorded at the back of the assessee. 10 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain 3.6 The Ld. A/R also placed on record a tabulated chart refuting the observations of the Ld. CIT (A) in the impugned order. The said chart is being reproduced hereunder for ready reference :- Relevant part of CIT(A) order Our comments 1. In para no. 10 of the CIT (A) order, the CIT (A) held that the impugned addition has been occasioned on account of appellant’s inability to satisfy the Assessing Officer about the genuineness of the purchase and sale transaction of shares of a Company. i) The Assessee has duly discharged his onus by satisfying all the ingredients of section 68 of the Act. ii) The Assessee has duly filed all the relevant documents relating to sales and purchases of shares and all transactions are by way of normal banking channels. 2. The CIT(A) further relied upon the Judgment of the Cal HC in the case of CIT vs. United Commercial & Industrial Company Pvt. Ltd. 187 ITR 596. The facts of the said case are as under : He also filed copies of accounts to show that the receipts and repayments were made by cheques. The Income- tax Officer, however, called upon the assessee to produce the parties, but the assessee did not do that. He (Income-tax Officer, accordingly issued notices under Section 131 of the Act to the hundi creditors but the same were received back unserved. Even those on whom notices would be served did not appear in response to the said notices. The Income- tax Officer, accordingly, held that no reliance could be placed on the confirmatory letters It was also held by him that the enquiries revealed all those parties being bogus hundi-wallas, the said loans i) The facts of the case as relied upon by the CIT (A) are not at all applicable in the case of the Assessee as summons in the case of the Assessee as issued to the Brokers were duly served and reply was received from them. ii) The brokers showed their inability to visit the Income Tax Department at Ludhiana. iii) There is no mistake in the case of the Assessee in case the brokers are not co- operating with the department. iv) The broker on the other hand has also not given any adverse remark/statement specifically with regard to the transaction of the Assessee. v) It is not only the bank transfer in the case of the Assessee but other documents as submitted by the Assessee are also not doubted at all. vi) The case law as relied upon by the department is not at all applicable as in the said case, the notices were unserved and came back from the bogus hundi- walas. 11 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain were, therefore, not genuine. 3. The CIT(A) further relied upon the Judgment of the Cal HC in the case of CIT vs Precision Finance Pvt Ltd. 208 ITR 465. The facts of the said case are as under : The enquiry of the Income-tax Officer revealed that either the asessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly it is to be presumed that the transactions were genuine. It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the Revenue. i) In the case of the Assessee, the identity of the broker is not in doubt at all. ii) The department itself is relying upon the statement of the brokers. iii) It is not only the bank transfer in the case of the Assessee but other documents as submitted by the Assessee are also not doubted at all. iv) The facts of the case as relied upon by the CIT (A) are not at all applicable in the case of the Assessee as summons in the case of the Assessee as issued to the Brokers were duly served and reply was received from them. v) The brokers showed their inability to visit the Income Tax Department at Ludhiana. 4. The CIT (A) in para 11 has held that the “ground reality is that the appellant has been i) The CIT (A) has only assumed that the Assesee is involved in getting entry from those Companies who are engaged in 12 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain a beneficiary of an organized racket of providing bogus entries of long term capital gains on exchange of an equivalent amount of unaccounted and untaxed money or along with a mark up for commission or brokerage.” providing dummy gains. ii) There is no adverse statement specifically in the case of Assessee. iii) The Long Term capital gains as claimed by the Assessee is properly backed by documents. iv) The CIT (A) cannot assume that the every entry relating to the specific scrip or through specific broker will be bogus. 5. The Hon’ble SC in the case of Rakhi Trading Pvt. Ltd. Civil Appeal No. 1969 of 2011, penalized the group of investors and brokers for punching in synchronized trades on the stock exchange platform. i) The case law as quoted by the CIT (A) has nothing to do with the case of the Assessee. ii) The law would naturally penalize those persons who are breaking it. iii) But the case of the Assessee is very much clear as the Assessee has made the genuine sale and purchase of shares and the payment and receipt is through banking channels. 6. The purchase is an isolated purchase of shares with dubious motive. i) The CIT (A) has only assumed that the Assessee has done the purchase transaction with dubious motive. ii) The department cannot assume the things if the documentation itself is very much clear. iii) The Assessee might have some information regarding its amalgamation with the other Company. iv) The assumptions cannot overcome the documentary evidences. 7. The CIT(A) in para 13 of the order has referred to the statement of Sh Suresh Khemka as taken by the Investigation Wing. i) The statement was never referred by the Assessing Officer. ii) The CIT (A) has only referred to one question of the statement. iii) There is no reference of the Assessee in the said statement. iv) The statement is general and cannot be relied upon. 8. The CIT (A) in para 14 to 17 has referred to the statements of Sh. Harshvardhan Kayan and Ashok Kumar Kayan and has held that they have agreed to the fact that they are involved in entry business. i) At the outset it is submitted that the said statements were taken at the back of the Assessee. ii) The statements were general statements and not specific in the case of the Assessee. iii) If any particular person is engaged in providing entries, it cannot be said that the said broker is not involved in genuine business also. 13 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain iv) Even-otherwise the reply for relying upon the said statements has already been given n our submissions before the CIT (A). 9. The CIT (A) in para 18 has referred to the attempt made by the department in affording opportunity to the Assessee in the form of giving direction to the AO to write to Ashok Kumar Kayan to come to Ludhiana. i) Though the CIT (A) has referred t the fact that effort was made by the AO to write to the broker asking for his visit to Ludhiana but the fact is that the cross examination was never allowed to the Assessee. ii) On the other hand the Assessee has duly discharged his onus by submitting the documents relating to sales and purchase. 10. The CIT (A) from para 19 onwards has referred to the theory of human probability. i) In this regard it is submitted that the case laws as relied upon by the CIT (A) with regard to the human probabilities has duly been relied upon by various Hon’ble Courts (supra) and it has been duly held that assumptions and probabilities cannot supercede the documents. 3.7 The Ld. A/R also placed reliance on the judgment of the Hon’ble Apex Court in the case of PCIT vs. Parasben Kasturchand Kochar reported in (2021) 130 taxmann.com 177 (SC) wherein the AO’s addition on account of alleged bogus penny stock transaction had been deleted on the basis of documentary evidences furnished by the assessee before the Hon’ble High Court of Gujarat and on appeal by the Department before the Hon’ble Apex Court, the judgment of the Hon’ble Gujarat High Court had been upheld. 3.8 The Ld. A/R also placed reliance on numerous other case laws wherein the alleged bogus Long Term Capital Gain had been deleted based on the documentary evidences furnished by the assessee and also 14 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain on the denial of opportunity of cross examination. All these judgments, filed in the form of Paper Book, have been taken on record. The Ld. A/R, while referring to the judgments being relied upon, argued that no addition could have been made on mere surmises and conjectures and that where assessee had furnished all the relevant details and explanations, the onus would shift to the Department to prove otherwise and that the Department cannot draw any negative inference simply based on doubts and suspicion. 4.0 In response to the arguments advanced by the Ld. A/R, the Ld. Senior D/R submitted that the Department had received a detailed report from the Investigation Wing. Our attention was drawn to the contents of the said report which has been reproduced in the order of assessment. It was submitted that besides the report from the Investigation Wing, there were number of statements recorded of persons who were associated with the company and she relied upon the statement of Shri Harshvardhan Kayan wherein he has admitted that he had been giving only accommodation entries to various parties. The Ld. Senior D/R submitted that the assessee was one of the beneficiaries of such accommodation entries and, therefore, the addition had rightly been made by the AO. It was also submitted that the AO had made genuine efforts to provide opportunity of cross examination of Shri Harshvardhan Kayan to the assessee by writing letters to him and even despite the efforts made by 15 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain the AO, if the said person did not appear for the purpose of cross examination, the same should not be held against the Department. Referring again to the statement of Shri Harshvardhan Kayan, the Ld. Senior D/R submitted that the statement makes it absolutely clear and leaves no room for doubt about the modus operandi having been adopted by the assessee to have earned bogus Long Term Capital Gain. The Ld. Senior D/R also placed reliance on numerous judgments of the Hon’ble Courts on the issue wherein the Long Term Capital Gains were held to be bogus and the addition on that account was confirmed. The Ld. Senior D/R prayed that the order of the Ld. CIT (A) confirming the addition be upheld. 5.0 In the re-joinder, the Ld. A/R relied upon the order of the ITAT Chandigarh Bench in the case of Shri Sanjay Singla and Others vide order dated 28.09.2021 in ITA No. 708/Chd/2018 and eight other cases having identical grounds and issues wherein the issue of Long Term Capital Gain and the related issue of opportunity of cross examination was discussed at length and, thereafter, the appeals of the assessees were allowed following the judgment of the Hon’ble Apex Court in the case of Andaman Timber Industries (supra) by holding that without cross examination no reliance can be placed on the statement of a third party. With regard to the various judgments being relied upon by the Ld. Senior D/R, the Ld. A/R submitted that each judgment has to be considered on 16 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain the peculiar facts of that case and that all of the cases relied upon by the Ld. Senior D/R were distinguishable on facts. 6.0 We have heard the rival submissions and have also perused the material on record. We have also gone through the assessment order as well as the order passed by the Ld. CIT (A) and the various judgments which have been relied upon by both the parties in support of their contentions. 6.1 At the very outset, we would like to observe that when the AO raised a query requiring the assssee to establish the genuineness of the impugned Long Term Capital Gains, the assessee had furnished documentary evidences which included copies of Contract Notes, Demat Account, details of share transactions with Shri Ashok Kumar Kayan, Contract Notes giving details like Trade number, Trade time, Contract Note number, Settlement number, details of Service Tax payment, STT paid and the brokerage paid to the broker. It was also demonstrated by the assessee that the purchase of shares for an amount of Rs. 8,22,800/- had been made through cheque in June, 2011. The assessee had also demonstrated that, subsequently, the sale proceeds from the shares of M/s. Access Global Limited were received again through banking channels. Apart from this, the assessee had also filed the judgment of the Hon’ble High Court of Kolkata ordering amalgamation of three 17 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain companies viz. M/s. Maple Goods Limited, M/s. Seaview Supplier Limited and M/s. Matrix Barter Private Limited as a consequence to which the assessee was allotted 7900 shares of M/s. Access Global Limited. The assessee had also furnished a copy of letter addressed to the assessee by M/s. Maple Goods Limited which showed the distinctive number of shares allotted to the assessee along with the Certificate number and the share folio number. All these documents have, apparently, been accepted by the lower authorities in as much as neither the AO nor the Ld. CIT (A) has pointed out any defect in these documents. A perusal of the orders of both the lower authorities would show that nowhere have the lower authorities cast any doubt on the genuineness of these documents. The only reason for not accepting the assessee’s claim of having earned Long Term Capital Gain is on the basis of the statement of Shri Harshvardhan Kayan and also of two more persons viz. Shri Nand Jain and Shri Suresh Khemka. 6.2 We have also gone through the statement of Shri Harshvardhan Kayan and it is palpable that nowhere in the statement, Shri Harshvardhan Kayan has made any reference to the name of the assessee. Even in the statements of Shri Nand Jain and Shri Suresh Khemka there has been a passing reference of the name of the company M/s. Access Global Limited but there is no specific mention of the name 18 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain of the assessee. It is also noteworthy that the statement of Shri Harshvardhan Kayan was recorded at the back of the assessee and only a copy of the statement was supplied to the assessee along with show cause notice issued by the AO but even after the assessee had made repeated requests for opportunity to cross examine Shri Harshvardhan Kayan, this request could not be acceded to. It is also a case in point that nowhere any statement of Shri Ashok Kumar Kayan has been recorded, with whom the assessee was having the dealings and instead the statement of Shri Harshvardhan Kayan has been relied upon by the lower authorities even when it was the assessee’s submission before them that he had no dealings whatsoever with Shri Harshvardhan Kayan. The Ld. A/R has also rightly pointed out that the statement of Shri Harshvardhan Kayan was recorded under section 133A of the Act and not under section 131 and as such it was a statement which was not administered under oath and, therefore, the same did not have any evidentiary value in the face of the assessee denying any dealings with Shri Harshvardhan Kayan and also in the face of assessee providing voluminous evidences in support of the assessee’s claim of having earned Long Term Capital Gains. 6.3 It is also to be noted that the AO had recorded the statement of the assessee during the course of assessment proceedings (this statement has also been reproduced by the AO in the assessment order) and in the 19 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain said statement, the assessee has sought to explain in detail the sale and purchase of the shares, the same has been rejected only on the basis of statement of Shri Harshvardhan Kayan. Thus, in effect, although the assessee has furnished documentary evidences in support of his contention of having earned Long Term Capital Gains and has also in the statement recorded during the course of assessment proceedings, explained in detail, how the Long Term Capital Gains came to be earned by the assessee, first the AO and later the Ld. CIT (A) completely discarded the submissions of the assessee merely on the basis of preponderance of probability as well as on the basis of the statement of Shri Harshvardhan Kayan with whom the assessee had no dealings whatsoever and whose statement had been recorded behind the back of the assessee and who was not made available for cross examination by the assessee even when there were repeated requests by the assessee to do so. Thus, conspectus of the entire factual matrix would show that the Department acted firstly on the report of the Investigation Wing, secondly on the statement of Shri Harshvardhan Kayan and thirdly on the surmise that it was highly unlikely and improbable that the assessee could have earned such huge amount of Long Term Capital Gain. 6.4 We have also gone through the report of the Investigation Wing and undoubtedly the name of Shri Ashok Kumar Kayan appears at serial no. 20 and it has been indicated in this report that this person was actively 20 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain involved in Long Term Capital Gain scam. It is also seen that in reply to question no. 7, Shri Harshvardhan Kayan had stated in the statement recorded that he and his father Shri Ashok Kumar Kayan were engaged in providing Long Term Capital Gain/Loss entry through trading of different scripts by different ‘Jama-Kharchi’ companies through their broking companies M/s. Kayan Securities Pvt. Ltd and M/s. Ashok Kumar Kayan. Further, in the list of names pertaining to scrips in C- Star of Kolkata Stock Exchange, the name of the company M/s. Access Global Limited is also mentioned. However, the name of the assessee does not appear anywhere and the AO has simply proceeded to assume that since Shri Ashok Kumar Kayan’s name was in the list of entry operators providing entries relating to Long Term Capital Gain/Loss and, further, since the name of M/s. Access Global Limited figured in the list of scrips traded on platform C-Star of Kolkata Stock Exchange and, further, since the assessee had dealings with Shri Ashok Kumar Kayan and the assessee had sold shares of M/s. Access Global Limited, it was indicative that the assessee had earned bogus Long Term Capital Gains. However, in our considered view, suspicion howsoever strong cannot take substitute of facts. 6.5 The assessee has demonstrated with substantial evidences before the AO that the actual purchase and sale of the shares took place, such shares had distinctive numbers, the transactions were routed through 21 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain the normal banking channels and the shares had been allotted to the assessee subsequently under an order of amalgamation/merger by the judgment of Hon’ble High Court of Kolkata and, therefore, mere reliance on the report of Investigation Wing and statement of Shri Harshvardhan Kayan which do not even mention the name of the assessee, in our considered opinion cannot be upheld. 6.6 It is also our observation that when the AO had received the report of the Investigation Wing, he ought to have conducted independent enquiry to examine and verify the involvement of the assessee in the allegedly bogus Long Term Capital Gain claim rather than simply and blindly following the report of the Investigation Wing and the statement of Shri Harshvardhan Kayan to make a case against the assessee. A perusal of the assessment order would show that no independent enquiry had been conducted by the AO and he has not even negated the evidences furnished by the assessee by producing counter evidence but has simply dismissed the assessee’s explanation simply on the basis of the said investigation report and the statement of Shri Harshvardhan Kayan. 6.7 The Hon’ble High Court of Delhi in the case of CIT vs. Finvest Limited reported in 357 ITR 146 (Delhi) has held that when the assessee had filed documents including certified copies issued by the Registrar of Companies in relation to share application, affidavits of the Directors, 22 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain Form 2 filed with the Registrar of Companies, confirmations by the applicant for company’s shares, certificates by the Auditors etc. but even then when the AO choose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of one Shri Mahesh Garg, such inferences would be improper when the asessee had produced the relevant material. The Hon’ble Delhi High Court went on to observe that at least the AO ought to have enquired into the matter, if necessary, by invoking powers under section 131 of the Act but no effort was made in this regard and, therefore, in absence of any such finding that the material disclosed was untrustworthy or lacked credibility, the AO merely concluded on the basis of the investigation report to make the addition under section 68 of the Act which was unsustainable in the eyes of law. In the present case it is apparent that the AO has not made any enquiry and the entire assessment order as well as the order of the Ld. First Appellate Authority is devoid of fact of any such enquiry, but the lower authorities have heavily relied upon the report of Investigation Wing wherein M/s. Access Global Limited has been allegedly identified as one of the penny stock company whose share prices had been artificially rigged to create non genuine Long Term Capital Gain. However, the AO failed to bring on record any part of the said report wherein the name of the assessee has ever been named or implicated. At the cost of repetition, we once again 23 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain reiterate that the lower authorities have failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that these documents furnished in support of the claim of the assessee were not authenticate. It would also not out of place to mention that no specific enquiry or investigation was conducted by the Department in the case of Shri Ashok Kumar Kayan which would lend some credence to the theory which has been advanced by the Department. Therefore, in our considered opinion, the lower authorities had merely acted on surmises and conjectures and had delved on the theory of preponderance of probability even in the face of documentary evidences which were not negated as being false. 6.8 The Hon’ble Jurisdictional High Court i.e. High Court of Punjab and Haryana in the case of Daulat Ram Rawatmull (supra) had held that documentary evidences cannot be brushed aside merely on suspicion. This judgment of the Hon’ble Punjab and Haryana High Court was further upheld by the Hon’ble Apex Court. 6.9 The Department has relied on numerous decisions of the Coordinate Bench as well as of the Hon’ble Delhi High Court in the case of Udit Kalra in ITA No. 220/2019. However, we note that in the case Udit Kalra (supra) the glaring fact was that this company was directed to be delisted from the Stock Exchange whereas in the case of M/s. Access Global Limited no such finding of fact has been recorded. As per record, 24 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain this company was not even issued any warning by the SEBI and as per record the transactions in shares of M/s. Access Global Limited were also not suspended by SEBI. Therefore, the reliance by the Department on the case of Udit Kalra (supra) will not be of much assistance to the Department. Further, the reliance on the case of Sumati Dayal reported in 214 ITR 801 (SC) and Durga Prasad More, 82 ITR 540 (SC) would also not help as both these judgments relate to the issue of circumstantial evidence, surrounding circumstances and applying the test of human probability when documentary evidences are missing. However, in the present case the assessee has provided ample evidences in support of his contention and the Department has not been able to negate them with counter evidence. 6.10 Therefore, considering the evidences furnished by the assessee, which the AO did not negate with any counter evidence, we are of the considered opinion that the assessee has successfully discharged the onus cast upon him in terms of provisions of section 68 of the Act and this discharge of onus is a pure question of fact and, therefore, the various decisions relied upon by the Department on the question of law would not be of any assistance to the Department. Since, in our considered view, on the facts of the case, the assessee has been able to successfully discharge the onus cast upon him, the impugned addition 25 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain has no feet to stand. We accordingly set aside the order of the Ld. CIT (A) and direct the deletion of the impugned addition. 6.11 As far as the assessee’s alternate plea of quashing the assessment on the ground of not providing opportunity to the assessee to cross examine Shri Harshvardhan Kayan is concerned, since we have already given complete relief to the assessee on merits of the case, the ground raised by the assessee regarding not granting opportunity of cross examination becomes academic in nature and we are not inclined to adjudicate the issue at this juncture. 7.0 In the final result, the appeal of the assessee stands allowed. Order pronounced on 14.06.2022. Sd/- Sd/- ( N. K. SAINI ) (SUDHANSHU SRIVASTAVA) Vice President याय क सद य/Judicial Member Dated: 14.06.2022 *Das* # $ % & '( )* '! / Copy of the order forwarded to : 1. अपीलाथ+/ The Appellant 2. %,यथ+/ The Respondent 3. आयकर आय ु -त/ CIT 4. आयकर आय ु -त (अपील)/ The CIT(A) 5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH 26 ITA No. 338/Chd/2018 Shri Jatinder Kumar Jain 6. गाड फाईल/ Guard File # $ स / By order, सह (ंज / Assistant Registrar Draft dictated 09/10.06.2022 Sr.PS Draft placed before author 13.06.2022 Sr.PS Approved Draft comes to the Sr.PS/PS 14.06.2022 Sr.PS Order signed and pronounced on 14.06.2022 File sent to the Bench Clerk Sr.PS Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.