Sh. Sunny Jain (Deceased) through Legal Heir Smt. Monika Jain, Ludhiana V. ITO, W-7(2), Ludhiana

ITA 1167/CHANDI/2019

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0627 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 27-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Deemed to accrue or arise in india; Cost of acquisition; Initiation of penalty proceedings; Accommodation entries; Retraction; Penny stocks; Set aside; Capital Gains
• Section: 131; 68; 10; 133A; 208

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी एन.के .सैनी, उपा य! एवं ी स ु धांश ु ीवा&तव, या(यक सद&य BEFORE: SHRI. N.K.SAINI, VP & SHRI. SUDHANSHU SRIVASTAVA, JM आयकर अपील सं./ ITA NO. 1167/Chd/2019 नधा रण वष / Assessment Year : 2013-14 Shri Sunny Jain (Deceased) Through Legal heir Smt. Monika Jain 171/A, Major Gurdial Singh Road, Civil Lines, Ludhiana बनाम The ITO Ward-7(2), Ludhiana थायी लेखा सं./PAN NO: AAZPJ9463D अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज व क! ओर से/ Revenue by : Shri Akashdeep, JCIT, Sr. DR स ु नवाई क! तार&ख/Date of Hearing : 26/07/2022 उदघोषणा क! तार&ख/Date of Pronouncement : 04/08/2022 आदेश/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Legal heir of the assessee against the order dt. 01/06/2019 of Ld. CIT(A)-3, Ludhiana. 2. Following grounds have been raised in this appeal. 1. That the Ld. CIT(A)-3, Ludhiana has erred in dismissing the appeal filed by the assessee and thus confirming addition of Rs. 2,99,97,757/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961 as per para 4 and 5 of the order. 2. That the action of the Ld. CIT(A) in confirming the addition of Rs. 2,99,94,757/-made by the Assessing officer by disallowing the exemption claimed u/s 10(38) on account of long term capital gain by sale of shares holding the same as unexplained cash credit u/s 68 of the Act is against the facts of the case. 3. That the Ld. CIT(A) has erred in not considering that transaction of sale entered into by the assesse are genuine and not accommodation entries for the purpose of Capital gain and thus holding addition of Rs. 2,99 Crores u/s 68 of the Act by treating the same as unexplained cash credit is against the facts and circumstance of the case. 4. That the Ld. CIT(A) has erred in not considering that during assessment proceedings details of shares purchased and sold by the assessee alongwith their sources, 'demat account' reflecting sale of shares, copy of bank statement, showing all the transaction and all other particulars regarding sale and purchase of shares to the satisfaction of the Assessing Officer were filed. 2 5. That the Ld. CIT(A) has also erred in not considering that in the Assessment order addition u/s 68 was not made with reference to sale proceeds of Rs. 3.12 Crores realized on sale of shares, but the addition was with reference Rs. 2.99 Crores after allowing deduction of purchase cost of shares. The above facts substantiates that the Ld. Assessing Officer admits that the shares were purchased by the asssessee at the price mentioned in the brokers invoices and purchase of shares was genuine. 6. That in view of above facts, the Ld. CIT(A) has erred in holding the action of the Assessing Officer in confirming addition made by him and by not considering that addition has been made against the facts of the case on estimation and guess work and on the information received from Investigation wing without considering actual facts and evidence filed during the course of hearing. 7. That the detailed submission filed during the course of hearing alongwith various judicial pronouncements has also not been considered. 8. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 3. The only grievance of the assessee in this appeal relates to the confirmation of addition of Rs. 2,99,97,757/- made by the AO by invoking the provisions of Section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). 4. During the course of hearing the Ld. Counsel for the legal heir of the deceased Assessee at the very outset stated that the assessee during the year under consideration earned Long Term Capital Gain (LTCG) from the sale of shares of M/s Access Global Ltd. The said capital gain was claimed exempt under section 10(38) of the Act. However the AO made an addition by disallowing the claim of the assessee and holding that the same was unexplained cash credit under section 68 of the Act. It was submitted that an identical issue having similar fact was involved in the case of Shri Jatinder Kumar Jain Father of the deceased assessee for the same assessment year and the issue had been decided by the ITAT in ITA No. 338/Chd/2018 in the case of Shri Jatinder Kumar Jain Vs. The ITO, Ludhiana vide order dt. 14/06/2022 for the A.Y. 2013-14. 4.1 It was further stated that the Ld. CIT(A) while sustaining the addition made by the AO followed the decision of the Ld. CIT(A)-1, Ludhiana in the case of the deceased assessee’s father i.e; Shri Jatinder Kumar Jain which is evident from para 4.2 of the impugned order. He accordingly submitted that the issue under consideration now stands covered in favour of the assessee vide order dt. 14/06/2022 in ITA No. 338/Chd/2018 for the A.Y. 2013-14 in the case of Shri Jatinder Kumar Jain Vs. ITO (supra) 5. In his rival submissions the Ld. DR submitted that the facts of the assessee’s case are distinguishable from the facts of the case of the deceased assessee because in the 3 said case the statement of the broker was not recorded while in the case of the deceased assessee the statement of Shri Khemka was recorded. 5.1 The Ld. DR reiterated the observations made by the AO in the assessment order and strongly supported the impugned order passed by the Ld. CIT(A). 6. In his rejoinder the Ld. Counsel for the deceased Assessee reiterated that the facts of the present case are identical to the facts of Shri Jatinder Kumar Jain’s case, (father of the deceased assessee) and that the Ld. CIT(A) while sustaining the disallowance followed, the earlier decision in the case of Shri Jatinder Kumar Jain. 7. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is not in dispute that the deceased assessee earned LTCG amounting to Rs. 2,99,97,757/- from the sale of shares of M/s Access Global Ltd. and claimed the exemption under section 10(38) of the Act which was denied by the AO. When the matter was taken to the Ld. CIT(A) she followed the decision in the case of the father of the deceased assessee namely Shri Jatinder Kumar Jain, the relevant findings are given by the Ld. CIT(A) in para 4.2 of the impugned order which read as under: 4.2 I have carefully considered the rival submissions. I have also gone through the assessment order and the other material placed on record, the appellant has invited by attention toward the appellant order passed by Ld. Commissioner Of Income Tax(Appeal)- 1, Ludhiana vide order dated 14.02.2018 in case of Sh. Jatinder Kumar Jain the father of the appellant. Wherein the Ld CIT(A)-1, Ludhiana has decided the identical issue in favor of revenue by holding as under:- "From the aforesaid grounds of appeal, as extracted from the Appeal Memo, it is evident that the legal foundation of the impugned assessment order consists of the appellant's inability to satisfy the Assessing Officer about the genuineness of the sale and purchase transaction of shares of a Kolkata-based company viz. Maple Goods Ltd., which at the time of purchase was an unlisted company and prior to the sale stood amalgamated with a non-Government Public Company Limited by shares viz. Access Global Ltd., which sale is purported to have caused LTCG to the appellant during the year under consideration i.e. A.Y.2013-14. The appellant seeks to assail the non-satisfaction of the Assessing Officer regarding the genuineness of the credit entry in the shape of LTCG in the backdrop of the evidences/documents adduced in support of the LTCG and its exemption from taxation within the meaning of section 10 (38) of the Act. 1. Facts relevant for the adjudication of the controversy involved in the instant appeal, as elucidated by the AO, is required to be noted in brief. The appellant, a General Commission Agent, also derives income from salary as Director of one of the family- controlled companies and "share ofprofit" and "interest" from a partnership firm where he is the partner. During the financial year 2010-11, he is purported to have purchased 1700 shares of an unlisted company based in Kolkata at 23A, N. S. Road, viz Maple Goods Ltd. @ Rs.484/- per share through a broker by the name of S. K Khemka, also located at Kolkata, for an amount of Rs.8,22,800/-, which amount was paid through account payee's 4 cheque through bank clearing to the broker. Subsequently, he said company, Maple Goods Ltd., was amalgamated, into Access Global Ltd. through an order of the Hon'ble High Court of Calcutta under an approved amalgamation scheme, which envisaged 47 shares of Access Global Ltd., the amalgamated company against one share of Maple Goods Ltd., the amalgamating company. With this amalgamation, the appellant became holder/owner of 79,900 shares of Access Global Ltd. The said shares were, then, purportedly sold during the financial year under consideration i.e. 2012-13 at the recognised platform C-Star of Calcutta Stock Exchange against contract notes of a broker by the name M/s Ashok Kumar Kayan, also of Calcutta and STT on such sale was duly paid. The payment of sale proceeds of shares were received by the appellant through an account payee cheque, which stood credited in the appellant's account. 2. Before the assessment could be finalised, the AO received information from the Investigation Wing of the Department at Kolkata that pursuant to a concerted investigation, an organized racket was unearthed which revealed that a cartel of brokers, including the brokers with whom the appellant dealt with viz. M/s Ashok Kumar Kayan & S. K Khemka, manipulated the share prices of many paper companies/penny stocks including that of Maple Goods Ltd. & Access Global Ltd. to launder unaccounted money of various parties located in and out of Kolkata, in the shape of bogus LTCGs. During the assessment proceedings, the AO, vide a final show cause letter dated 11/03/2016 gave an opportunity to show cause as to why the LTCG disclosed in the LTR and claimed as exempt, may not be considered as deemed income. The said show cause letter, seen to be served on the appellant on 15/03/2016, also elucidated in detail the modus operandi of the brokers in connivance with the beneficiaries to generate bogus LTCGs. The AO further made available the relevant statements of the brokers recorded by the DDIT (Inv.) Kolkata. In response, the appellant merely raised a technical issue of statement having been recorded at his back and no opportunity to cross examine the brokers whose statements were supposed to be utilised for the treatment of LTCG as deemed income. Not being satisfied by the explanation of the appellant, the AO treated the amount of LTCG as deemed income within the meaning of section 68 of the Act, raising a tax and interest demand of Rs. 87,25,660/- along with initiation of penalty proceedings for having furnished inaccurate particulars of his income. 3. In the appellate proceedings, the same grounds were raised. The AO was, therefore, requested to provide an opportunity to the appellant to cross-examine M/s Ashok Kumar Kayan. The AO, in all fairness, communicated this to Sh. Harshvardhan Kayan, who had given his statement during the investigation at Kolkata. In response, the AO received a communication from Sh. Ashok Kumar Kayan that whatever statement was given by them during survey operations on 27/01/2015 be regarded as true and that because of ill-health, it would not be possible for him to travel to Ludhiana for cross examination. 4. On receipt of this communication, the appellant contended that the right to cross- examine has been denied which is against the principle of natural justice. A plethora of case laws were 'cited to propound that lack of opportunity of cross-examination of the witness was a serious flaw, which makes the impugned order a nullity. Besides, reliance, interalia, was placed on the decision of the Hon 'ble WAT, Ahmedabad in the case of Smt. Sunita Jain & others in LTA No. 501 & 502/Ahd/2016. In particular, paragraphs 17 and 18 were extracted in the appellant's submissions, which for the sake offacility of reference, is also being extracted hereinbelow: "17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was'paid when the shares were purchased. The \ shares were, thereafter, sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were, thereafter, transferred to the Demat account. The Demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed on the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to J Demat account. Sh. MukeshChoksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand 5 suggests that the transactions are ' genuine and, therefore, no adverse inference should be drawn. " "18. In the light of the decisions of the Hon 'ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the Demat account. " 5. The appellant further chose to rely on the decision of the jurisdictional Tribunal at Chandigarh in the case of Sh. Pradeep Kumar Agarwal [70 taxman.com 154] and that of the jurisdictional High Court of Punjab & Haryana in the case of Hitesh Gandhi fITA No. 18 of 2017; 16/02/2017]. In both the aforesaid cases, it was held that applying the test of 'human 1 probabilities' cannot be held to be good in the face of documentary evidences establishing the bonafide of the appellant as against suspicion and surmises. 6. It was, thus, urged that under the circumstances obtaining in the case of the appellant, there could not have been any lawful reason to reject the bonafides of the purchase and sale transaction of shares resulting in LTCG. It was also expostulated that there is not an iota of evidence to prove that any amount of untaxed and unaccounted money emanated from the coffers of the appellant to be returned back after being laundered as LTCG. On the strength of the aforesaid submissions and judicial precedents, the appellant pleaded for deletion of the impugned addition of Rs.2,00,10,326/- as deemed income. 7. On a careful examination of the facts on record, the assessment order and the submissions of the appellant, it is evident that the impugned addition has been occasioned on account of the appellant's inability to satisfy the Assessing Officer about the genuineness of the purchase and sale transaction of shares of a company, which could be categorised as paper company/penny stock on the basis of a concerted country-wide investigation of a well-oiled, entrenched Reorganised racket of generation of bogus entries of long-term capital gains/short-term capital losses. There is no dispute about the basic legal postulate of section 68, which provides that where any sum is found credited in the books of accounts of an assessee maintained for any previous year, and the assessee offers no explanation about the "nature and source " thereof, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as income of the assessee of that previous year. The expression "nature and source " appearing in section 68 Has to be understood as a requirement of the genuineness of the source. It is also a settled legal position that the onus of the assessee, of explaining the genuineness of the source does not get discharged merely by demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars. In view of various decisions including that of CIT v. United Commercial & Industrial Company Pvt. Ltd. [1991] 187 LTR 596 (Cal) & CLT v. Precision Finance Pvt. Ltd. [1994] 208 LTR 465 (Cal), there is absolutely no escape from proving the genuineness of the transaction before the AO, so as to escape the rigours of section 68 of the Act. 8. As one proceeds to deal with the aspect of genuineness, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realities. The ground reality is that the appellant has been a beneficiary of an organised 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. It would, therefore, be useful to understand as to how this racket has been operating almost unhindered and with the finesse of a genuine transaction with all the completed paperwork The modus operandi adopted by the operators of this racket is to deal in penny stock companies controlled by them. A penny stock company is generally a company without any significant trading, manufacturing or service activity, or with high-volume low margin transactions-to give it a colour of a normal business company, used as a vehicle for various financial manoeuvres. A penny stock company, by itself, is not an illegal entity but it is its act of abetment of, and being part of, financial manoeuvring to legitimise and launder illicit monies and evade 6 taxes, that makes it beyond what is legally permissible. These companies have every semblance of a genuine company - existence of identity, a statutory documentation as necessary for a legitimate business concern and other documentation trail as a legitimate company would normally have. The only thing which sets it apart from a genuine company is lack of genuineness in its actual operations. The operations carried out by these companies, are only to facilitate financial manoeuvring for the benefit of its clients, or, with the predominant underlying objective, to give the colour of genuineness to these entities. The penny stock companies, which are routinely used to launder unaccounted money, are fact of life, and as much a part of the underbelly of the financial world, as many other evils afflicting the society. The Assessing Officer or the Appellate Authorities cannot, now, be oblivious of these ground realities. It would be interesting to look at the modus operandi of this racket of providing bogus entries of long-term capital gains. A beneficiary of this racket is one who is desirous of laundering his unaccounted and untaxed money. On his request, he is made to buy some shares of a predetermined penny stock company controlled by the operators. The shares of such companies are transferred to the beneficiary at a very nominal price, mostly off-line, through preferential allotment or off- line sale, mostly to save on STT. The beneficiary holds the share for one year, which is the statutory period after which long-term capital gains is exempt under the provisions of section 10 (38) of the Act. In the meantime, the operators rig the price of the stock by circular trading and gradually raise its price manifold. This is done through low-volume transaction indulged in by the dummies of the operator at a predetermined price. When the price reaches the desired level, the beneficiary who bought the shares at a nominal price, is made to sell it to a dummy paper company maintained by the operator. For this, unaccounted cash is provided by the beneficiary which is routed through a few layers of paper companies by the operator and is finally parked with the dummy paper company that ultimately buys the shares. The Directorate of Investigation, Kolkata carried out a countrywide investigation to unearth this organised racket, the results of which have been shared with all the Assessing Officers. Even the Securities and Exchange Board of India [SEBIJ, which is the regulator and watchdog to maintain fairness, integrity and transparency of the stock market in India, on inputs from the Income Tax Department as well as from its own surveillance system and that of the Stock Exchanges, has taken appropriate action in case offew suspect scrips in terms of suspending the trade, reducing the price band etc.. As recent as 8* of February, 2018, the Hon 'ble Supreme Court upheld an adjudication order by SEBI in a 2007 case [Civil Appeal No. 1969 of 2011; Rakhi Trading Pvt. Ltd. &Ors.J, penalising a group of investors and brokers for punching in synchronised trades on the stock exchange platform, solely for the purposes of tax evasion and conversion of black money into legitimate income. These trades were done in connivance with brokers who helped generate fake long-term capital gains, which used to be tax free till January, 2018, or generate fake short-term losses which could, then, be offset against short-term profits. The Hon'ble Supreme Court in the said order held that "the impugned transactions are manipulative/deceptive device to create a desired loss and/or profit...." Though, the Hon'ble Supreme Court has not touched upon the tax evasion angle in this judgement, but has made it abundantly clear that all that is seen on the screen of the Stock Exchanges are not genuine and that the synchronised trades do affect the integrity of the stock market. 9. Now coming to the specifics of the instant case, it is noted with concern that the appellant is not a regular investor in as much as he has not, in the past, spent any amount on purchase of shares of unlisted companies based in Calcutta. Tliis purchase is an isolated transaction. The purchase of1700 shares of an unlisted company, Maple Goods Ltd. of Calcutta which had no credentials at all, through a broker in Kolkata @ Rs.482/- per share is, decidedly, a premeditated act with dubious motives. Such isolated investment cannot, in the circumstances now known, be cloaked with a cover of genuine transaction aimed at reaping benefits either by way of any dividend or general appreciation of the price of the shares in due course. The intention behind such a purchase is not far to seek It was only meant to encash it after holding it for a year, when the price of this share would be manipulated and rigged and would be sold through the good offices of a broker who is part of the racket. Merely because the appellant paid the purchase price of the said share by cheque does not establish the genuineness of this transaction. 7 10. The broker through whom the appellant purchased the aforesaid shares viz Sh. Suresh Khemka was investigated by the Investigation Wing at Kolkata and his statement was recorded on 13/03/2015. In reply to a question [No. 7] regarding the nature of business done by him, he deposed the following: "Ans:-Sir, I am mainly a stockbroker. I have also issued "KachhaPanna" of shares to my clients for various private limited companies. These private limited companies were merged with different listed companies afterwards. My proprietorship concern is S. K .Khemka at 34 Vivekananda Road, Kolkata-7. My broker code of Calcutta Stock Exchange is 03/577." Further, in reply to Question No.-10, which required him to specify the names of the companies, whose shares were sold via contract notes for the purposes of providing bogus long-term capital gains, Sh. Khemka, inter alios, named Maple Goods Pvt. Ltd. 11. During the process of investigation of this racket, the Investigation Wing at Kolkata also examined Sh. HarshvardhanKayan, S/o Sh. Ashok Kumar Kayan. The appellant is said to have sold the shares of Maple Goods Ltd., which stood amalgamated with Access Global Ltd., on the C-Star Calcutta Stock Exchange through M/s Ashok Kumar Kayan. Sh. HarshvardhanKayan, in his statement before the Investigation Wing on 27/01/2015 accepted that he and his father Sh. Ashok Kumar Kayan were actively involved in the long-term capital gain scam. In response to Question No. 14 requiring him to explain the details of business activity done by M/s Kayan Securities Private Limited & M/s Ashok Kumar Kayan, he categorically deposed: "Ans:-The main business activity is that of buying and selling of share and securities commission earned by the same through various "jama-kharchi companies " registered with us as client. The firm is engaged in trading of certain scrips which are controlled by different persons. The said persons used to contact Sri Ashok Kumar Kayan and HarshvardhanKayan for trading in scrips controlled by them. Such controllers of scrips also arrange clients for trading of their scrips. Some of the clients are Kolkata based and the others are based out of Kolkata. We after getting information from the scrip controller, contact the clients and obtain KYC from them for SEBI requirement. Such clients purchase the share of a particular scrip at the price fixed by the controller of the scrip. The whole process if duly followed for raising the price of the scrip artificially by the controller of the scrip with a view to provide long term capital gain entry to the beneficiaries. Cash are received from the operators/managers of different client companies such as SachinBadani, Sunil Dokania, Vishal Bharadwaz, JagdishPurohit. Said cash are deposited in different bank accounts of different companies/concerns controlled and managed by AshisAgarwal, AmitSaraogi, DeveshUpadhyay, PankajAgarwal. Funds are routed from such bank accounts in form of bank transfer and deposited in the bank accounts of client private limited companies for purchase of bogus share of different scrips with a view to provide long term capital gain entry to the beneficiaries." 12. Further, in response to Question No. 19, requiring him to explain the modus operandi of long-term capital gain/loss entry being provided to the beneficiaries, it was submitted by him: "Ans:-The Long Term (LT) entry beneficiary approaches an entry operator who is having a listed company through some agent/mediator or directly. Beneficiary then on the instruction of entry operator buys the shares of a listed paper company (generally not doing any business or with a miniscule business activity) at a very low price. The share price of the listed company are then jacked up to a desired level with the concerted and regular buying and selling of the shares by the other dummy persons or other paper companies/HUF (generally controlled and managed by same entry operator). Sometimes a cartel is formed by various entry operators for jacking up the price of the shares and thus paper companies of various entry operators are used for buying and selling of shares and raising the price of shares to a desired level. When finally the shares held by the beneficiary of the listed company reach the desired level/price then the beneficiary is intimated by the operator or an agent of the operator to provide cash which can be routed to some other jamakahrchi company/entity to buy these shares from the beneficiary. The cash received form the beneficiary is then handed over to the operator through agents or directly. The entry operator then routes and layers back this cash so received, into various paper entities which are controlled and managed by him. These paper entities which have received layered money are then used as dummy buyers (Counter Parties) for buying the rigged/artificially jacked-up shares form the beneficiary. When the buyers (Counter Parties) are ready, then the entry operator intimates the beneficiary to sell specific number of shares at a specific price and a specific time. This ensures that the 8 shares of only the beneficiary as directed by the operator are bought through the dummy buyer. The transaction takes place through stock exchange and brokers and some nominal commission is charged in cash on the net pre-arranged bogus capital gain accruing to the beneficiary. This pre-arranged bogus capital gain income so earned through rigging of shares is claimed as exempt in the books of beneficiary." 13. From the aforesaid, it can safely be deduced that despite the apparent compliance to the formalities in terms of purchase and sale through registered share brokers and payment & receipt of purchase and safe considerations by account payee cheques, sale on the screen of Calcutta Stock Exchange and payment of STT thereon, the appellant actually and in reality only indulged in laundering his unaccounted money through the cartel of brokers and operators functioning with impunity at Calcutta. The probability of the appellant indulging in this nefarious act is heavily stacked against him. When the shares of Maple Goods Ltd. were acquired through a broker at Calcutta, it was quite known to the appellant that it was only a paper company. There was no worthwhile business in the said company which had a paid-up capital, of only Rs. 19.20 lakhs. The credentials of the said company was not such as to persuade anybody to invest for ultimate advantage in terms of either dividend or genuine appreciation in the price of the shares. With the manipulation indulged in by the operators, Maple Goods Ltd. amalgamated into Access Global Ltd., making the appellant the owner of 47 times of the already held shares. Even the amalgamated company was a paper company in as much as for the financial years 2010-11 & 2011-12, there was no revenue from either sale of products or sale of services and the total profit from continuing operations was merely Rs. 7742/- & Rs. 7488/-respectively. 14. It must also be stated here, that the facts of the cases relied upon by the appellant is materially different in as much as the share scrip dealt by the appellant has been identified as Penny Stock and the brokers through whom the appellant purchased and sold the said shares, have admitted to be indulging in the racket of providing bogus LTCG entries through the scrips of Maple Goods Ltd. and Access Global Ltd. during the sustained investigation by the Directorate of Investigation at Kolkata. This was neither the case in Pradeep Kumar Aggarwal, nor in Hitesh Gandhi. The appellant's case stands on its own footing. In the case of Hitesh Gandhi, there was a disbursement of dividend during the period for which the shares were held, which went on to prove that transactions were undertaken in the shares of a genuine company and not in paper company or penny stock 15. So far as the lack of opportunity for cross examination is concerned, the appellant should not have a legitimate grievance in as much as there was a sincere attempt at affording him this opportunity by giving direction to the AO to write to Ashok Kumar Kayan to present himself at Ludhiana on a specified date. However, it was communicated back that it wouldn't be possible for him to come to Ludhiana because of his failing health. But Sh. Ashok Kumar Kayan confirmed that whatever has been stated in the statement recorded earlier is true and that he stands by it. This effectively means that there is no retraction from the enculpating statement made before the Investigation Directorate. The appellant's demand that the impugned assessment be considered a nullity, only because he did not get an opportunity to cross examine Sh. Ashok Kumar Kayan, is only a legal nitpicking at this stage. Even the broker through whom the appellant is stated to have purchased the shares has also admitted to be a part of the racket and even named Maple Goods Ltd. as the company which was used for providing bogus long-term capital gains. In the circumstances, the gripe of lack of opportunity of cross-examination lacks genuineness. 16. While seriously doubting the genuineness of the impugned transactions, one is reminded of the Hon'ble Supreme Court's observation in the case of CLT vs. Durga Prasad More [1971] 82 ITR 540, to the effect that "science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of SumatiDayal vs. CLT [1995] 214 ITR 801, the Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent is not real and observed that "this, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities......Similarly the observation........that if it is alleged that these tickets were obtained through fraudulent 9 means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available........ In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amount has been rejected unreasonably," 20. The appellant cannot also insist on proof or direct evidence regarding allegation of use of Unaccounted and untaxed cash emanating from his coffers. Presumption plays a critical role in coming to a finding in the circumstances, as to the involvement of unaccounted cash to obtain the benefit of laundering. The connivance and understanding between the parties to this manipulation is in the special knowledge of the conspiring parties and hence direct evidence may not be available. Since it is exceedingly difficult to prove facts which are especially within the knowledge of the parties concerned, the legal proof in such circumstances partakes the character of a prudent person's estimate as to the probabilities of the case. 21. The Hon 'ble Supreme Court in the case of SEBI Vs. Kishore R. Ajmera [2016] 6 SCC 368, while emphasizing that in the quasi-judicial proceedings, the standard of proof, is "preponderance of probability" held as under: "26.lt is a fundamental principte of law that proof of an allegation leveled 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. While direct evidence is a more certain basis to come to a conclusion, yet, in the absences thereof, the Courts cannot be helpless. 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. "IEmphasis providedl 22. Taking a holistic view of the matter, in the light of the surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not at all convincing but apparently in order documents, and on the basis of detailed analysis set out earlier in this order, it is held that the purported transactions of sale and purchase of share's resulting in long-term capital gains cannot be held to be genuine on the peculiar facts and circumstances of the case. 23. However, before parting, it is hastened to add that the phenomenon of penny stock companies being subjected to deeper scrutiny by tax and enforcement officials is rather recent, and that, till recently little was known outside the underbelly of financial world about the modus operandi of using the penny stocks to generate fake long term capital gains or generate fake short term capital losses to launder unaccounted money & evade tax on short term profits respectively. There were, therefore, not many questions raised about the genuineness of transactions in respect of penny stocks. That is not the case any longer. Just because these issues were not raised in the past does not mean that these issues cannot be raised now as well, and, to that extent, it is respectfully stated that the earlier judicial precedents relied upon by the appellant company cannot have blanket application in the current situation. The Hon'ble Supreme Court, in the case of Mumbai KamgarSabha vs. AbdulbhaiFaizullabhai, AIR 1976 SC 1455, has observed: "It is trite, going by Anglophonic principles that a ruling of a Superior Court is binding law. It is not of a scriptural sanctity but of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decisions, exalting the precedents into a prison house of bigotry, regardless of the varying circumstances and myriad developments. Realism dictates that the judgement has to be read, subject to the facts directly presented for consideration and not affecting the matters which may lurk in the dark " 24. In the light of the above, and taking note of the entirety of the case and the facts, the action of the Assessing Officer in bringing the impugned long-term capital gains to tax as deemed income is upheld. It is ordered accordingly. 10 25. In the result, the appeal is dismissed. Thereafter the Ld. CIT(A) in para 4.4 of the impugned order held as under: 4.4 after carefully going through rival submission, and case laws relied upon by Id. A.O. as well as appellant I find striking similarities in both cases. Accordingly in view of the above mentioned facts and circumstances of the case,as the issues are identical., therefore, following the order passed by the Ld. CIT(A)-1, Ludhiana, the addition of Rs. 2,99,97,754/- is order to be confirmed. Thus these grounds of appeal stands dismissed 7.1 It is noticed that the case of Shri Jatinder Kumar Jain, Ludhiana father of the deceased assessee was a subject matter of the appeal in ITA No. 338/Chd/2018 for the A.Y. 2013-14 wherein vide order dt. 14/06/2022 the case has been decided in favour of the said assessee and the relevant findings have been given in para 6 to 6.11 which read as under: 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 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 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 11 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 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 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 CStar 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 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 12 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, 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 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, 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 13 assessee has been able to successfully discharge the onus cast upon him, the impugned addition 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. Since the facts of the present case are identical to the facts involved in the case of Shri Jatinder Kumar Jain Vs. ITO (supra) the only difference is that in the said case the assessee earned LTCG of Rs. 2,00,10,326/- on sale of shares of M/s Access Global Limited while in the present case, the LTCG of Rs. 2,99,97,757/- was earned from the sale of shares of M/s Access Global Limited. So, respectfully following the aforesaid referred to order dt. 14/06/2022 in ITA No. 338/Chd/2018 for the A.Y. 2013-14 in case of Shri Jatinder Kumar Jain Vs. ITO, Ludhiana , the imopugned addition made by the AO and sustained by the Ld. CIT(A) is deleted. 8. In the result, appeal of the assessee is allowed. (Order pronounced in the open Court on 04/08/2022 ) Sd/- Sd/- स ु धांश ु ीवा&तव एन.के .सैनी, (SUDHANSHU SRIVASTAVA) ( N.K. SAINI) या(यक सद&य/ JUDICIAL MEMBER उपा य! / VICE PRESIDENT AG Date: 04/08/2022 आदेश क! त,ल-प अ.े-षत/ 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 न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File