Mahendra Kumar Baid, Kolkata V. ACIT Circle 35, Kolkata, Kolkata

ITA 1237/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1694 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN ADD L
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Earning of tax free income; Source of fund; Wrong claim; Accommodation entries; Penny stocks
• Section: 69C; 143(3); 133A; 234B; 14A; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI A.T. VARKEY, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 1236/KOL/20 17 ASSESSMENT YEAR : 2014-1 5 MANISH KUMAR BAID -VS- ACIT, CIR-35, KOLKATA [PAN: AHMPB 3024 E] (APPELLANT) (RESPONDENT) I.T.A NO. 1237/KOL/2017 ASSESSMENT YEAR : 2014-1 5 MAHENDRA KUMAR BAID -VS- ACI T, CIR-35, KOLKATA [PAN: AEJPB 7691 C] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI A.K. TIBREWAL , FCA SHRI AMIT AGARWAL, ADVOCATE FOR THE RESPONDENT : SHRI SALLONG YADEN, ADD L. CIT DATE OF HEARING : 10.08.2017 DATE OF PRONOUNCEMENT : 18.08.2017 ORDER PER M.BALAGANESH, AM 1. THESE TWO APPEALS OF THE ASSESSEE ARISE OUT OF T HE INDEPENDENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -10, KOLKATA [ IN SHORT LD CITA] IN APPEAL NO.230/CIT(A)-10/CIR-35/16-17/KOL DATED 28.3.2017 I N THE CASE OF MANISH KUMAR BAID AND IN APPEAL NO.228/CIT(A)-10/CIR-35/16-17/KO L DATED 28.3.2017 IN THE CASE OF MAHENDRA KUMAR BAID, AGAINST THE INDEPENDENT ORDER OF ASSESSMENTS FRAMED BY ACIT, CIRCLE-35, KOLKATA [ IN SHORT THE LD AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 28.12.201 6 IN THE CASE OF MANISH KUMAR BAID 2 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 2 AND ORDER OF ASSESSMENT FRAMED U/S 143(3) OF THE AC T ON 27.12.2016 IN THE CASE OF MAHENDRA KUMAR BAID, FOR THE ASST YEAR 2014-15. A S THE ISSUES INVOLVED ARE IDENTICAL IN BOTH THE APPEALS, THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE FACTS IN THE CASE OF MANISH KUMAR BAID ARE TAKEN UP FOR ADJUDICATION AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE TO MAHENDRA KUMAR BAID ALSO, EXCEPT WITH VARIANCE IN F IGURES. 2. THOUGH THE ASSESSEE HAD RAISED SEVERAL GROUNDS O F APPEAL, THE FOLLOWING COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS AND THE QUE STIONS RAISED THEREON ARE REFRAMED AS UNDER:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE LD AO U/S 68 OF THE ACT IN RESPECT OF SALE PROCEEDS OF SHARES OF KAILASH AUTO FINANCE LIMITED (KAFL) TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES AFTER REJECTING THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAINS (LTCG) ON SALE OF THOSE SHARES. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE LD AO IN TREATING T HE TRANSACTIONS IN SHARES OF KAILASH AUTO FINANCE LIMITED (KAFL) RESULTING IN LO NG TERM CAPITAL GAIN AS BOGUS AND THEREUPON MAKING ADDITION U/S 69C ON THE PRESUMPTION THAT COMMISSION @ 5% WAS PAID FOR ARRANGING THE AFORESAI D BOGUS LONG TERM CAPITAL GAIN. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE LD AO U/ S 14A READ WITH RULE 8D OF THE ACT. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE CHARGING OF INTEREST U/S 234A, 23 4B AND 234C OF THE ACT. 3. THE BRIEF FACTS OF THE FIRST ISSUE AS HAS BEEN R ECORDED BY THE LD AO IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE CLAIMED LONG TERM CAPIT AL GAINS FROM TRANSACTIONS IN SHARES OF KAILASH AUTO FINANCE LIMITED (KAFL). THE LD AO F OUND THAT THE ASSESSEE, ON 20.12.2011, PURCHASED 240000 SHARES OF THE FACE VAL UE OF RS.1 EACH IN CAREFUL PROJECTS 3 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 3 ADVISORY LIMITED (CPAL) THROUGH OFF MARKET FROM M/S . BRIJDHARA MERCANTILE PRIVATE LIMITED (NAME CHANGED TO M/S TREMENDOUS MERCANTILE PRIVATE LIMITED ) FOR A CONSIDERATION OF RS.2,40,000. THE LD AO ALSO FOUND THAT CPAL WAS AMALGAMATED WITH KAFL BY VIRTUE OF AN ORDER OF HONBLE ALLAHABAD HIG H COURT AND IN PURSUANCE TO SUCH AMALGAMATION, THE ASSESSEE WAS ALLOTTED 240000 SHA RES OF KAFL OF THE FACE VALUE OF RS.1 EACH. THE LD AO ALSO NOTED THAT ANOTHER COMPAN Y NAMED PANCHSUL MARKETING LTD. (PML) ALSO MERGED WITH THE SAID KAFL. HOWEVER, IN T HE PRESENT CASE, WE ARE NOT CONCERNED WITH THE MERGER OF PML WITH KAFL. THE ASS ESSEE SOLD THESE 240000 SHARES THROUGH M/S. ASHIKA STOCK BROKING LIMITED, A REGIST ERED SHARE BROKER OF BSE. THE SAID SHARES WERE SOLD THROUGH THE ONLINE MEDIUM OF STOCK EXCHANGE ON DIFFERENT DATES FALLING WITHIN THE PREVIOUS YEAR 2013-14 CORRESPONDING TO T HE ASST YEAR 2014-15. THE AFORESAID TRANSACTIONS RESULTED IN LONG TERM CAPITA L GAINS AND THE ASSESSEE CLAIMED EXEMPTION U/S 10(38) OF THE ACT. 3.1 THE LD AO OBSERVED THAT THE ASSESSEE MADE GAIN OF ALMOST 3805% IN A SPAN OF 24 MONTHS. THE PRICE MOVEMENT OF THE SCRIP IN THE SPAN OF 24 MONTHS RAISED DOUBTS IN THE MIND OF THE LD AO THAT PROFIT EARNED BY THE ASSESSE E WERE BEYOND HUMAN PROBABILITIES. THE LD AO THEREFORE MADE A DEEPER STUDY TO ASCERTAI N WHETHER THE TRANSACTIONS WERE GENUINE INVESTMENT TRANSACTIONS OR SHAM / COLOURABL E DEVICE TO CONVERT THE UNACCOUNTED CASH INTO TAX EXEMPT INCOME. 3.2 THE LD AO NOTICED THAT THE COMPANY, CPAL, WAS INCORPORATED ON 18.09.2010 WITH AUTHORIZED AND PAID UP SHARE CAPITAL OF RS.1 L AKH. THE COMPANY INCREASED ITS AUTHORIZED SHARE CAPITAL TO RS.34.50 LAKHS AND THER EAFTER ISSUED 330155 SHARES OF THE FACE VALUE OF RS.10 EACH AT THE PREMIUM OF RS.590 T O DIFFERENT ENTITIES. THE LD AO ALSO OBSERVED THAT DURING THE FY 2011-12, CPAL INCREASED ITS AUTHORISED SHARE CAPITAL TO RS.29 CRORES AND THEN THE SHARES OF RS.10 EACH WERE SPLIT INTO 1:10 I.E. EACH SHARES OF RS.10 INTO SHARES OF RE.1 EACH. THE SAID COMPANY CP AL THEREAFTER ISSUED BONUS SHARES 4 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 4 TO THE EXISTING EQUITY SHAREHOLDERS IN THE RATIO OF 1:55. THE LD AO, CONSIDERING THE WEAK OPERATING PROFITS OF CPAL, SUSPECTED THE ISSUE OF B ONUS SHARES IN THE UNREALISTIC RATIO OF 1:55. HE HELD THAT THE PROBABLE REASONS WERE WITH A VIEW TO PROVIDE LARGE AMOUNT OF LTCG IN THE HANDS OF BENEFICIARIES AFTER AMALGAMATI NG THE SAID COMPANY WITH KAFL. 3.3 THE LD AO FURTHER OBSERVED THAT CPAL WAS INCORP ORATED WITH A DUBIOUS PLAN AND PREMEDITATED ARRANGEMENT AND ARTIFICE TO INCREASE N UMBER OF SHARES THEREIN THROUGH SHAM AND NON GENUINE TRANSACTIONS OF ITS SHARES WHI CH RESULTED IN FETCHING EXHORBITANT AND UNREALISTIC CONSIDERATIONS IN THE SCHEME OF AMA LGAMATION. WHILE ARRIVING AT THE AFORESAID CONCLUSIONS, THE LD AO ALSO DOUBTED THE S CHEME OF AMALGAMATION. 3.4 THE LD AO REFERRED TO THE STATEMENT OF SHRI SUN IL DOKANIA RECORDED U/S 131 OF THE ACT BY THE INVESTIGATION WING ON 12.06.2015, WH EREIN, SHRI DOKANIA HAS EXPLAINED THE MODUS OPERANDI OF PROVIDING OF LTCG IN THE SCRI P OF KAFL. HE STATED THAT BY WAY OF AMALGAMATION OF CPAL WITH KAFL, THE BENEFICIARIE S OF LTCG GOT HIGHER NUMBER OF SHARES OF KAFL AS AGAINST SHARES OF CPAL. MR. DOKAN IA, IN THE AFORESAID STATEMENT, STATED BEFORE THE INVESTIGATION WING THAT HE HAD GOT EQUAL AMOUNT OF CASH FROM THE BENEFICIARIES, DEPOSITED THE SAME TO VARIOUS UNDISC LOSED PROPRIETORSHIP CONCERNS, AND FINALLY TRANSFERRED THE SAME TO BOGUS/SHELL COM PANIES, BY LAYERING THROUGH VARIOUS ACCOUNTS, WHO HAD ULTIMATELY PURCHASED THE SHARES SOLD BY THE BENEFICIARIES . THE LD AO HAS ALSO RELIED UPON ANOTHER STATEMEN T OF SHRI SUNIL DOKANIA RECORDED U/S 131 BY THE INVESTIGATION WING ON 6.3.2 013, IN THE CASE OF RASHMI GROUP OF KOLKATA ; STATEMENT OF SHRI BIDYOOT SARKAR RECORDED ON 8.4.2015 U/S 133A IN THE CASE OF RELIGARE SECURITIES LIMITED; STATEMENT OF SHRI NARENDRA BALASIA RECORDED ON OATH U/S 133A IN THE CASE OF SMC GLOBAL SECURITIES LIMITED ; STATEMENT OF SHRI PRADIP JAIN RECORDED ON 31.3.2015 U/S 131 AND THE TWO STATEMENT S OF SHRI AMIT DALMIA RECORDED BY THE INVESTIGATION WING ON 31.3.2015 AND 5.6.2015. T HE STATEMENTS WERE ANNEXED TO THE 5 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 5 ASSESSMENT ORDER TO COME TO A CONCLUSION THAT THE A SSESSEE WAS ONE OF THE BENEFICIARIES OF THE TRANSACTIONS IN SHARES OF KAFL WHICH RESULTE D IN BOGUS CLAIM OF EXEMPT LTCG. 3.5 THE LD AO, ON THE BASIS OF MOVEMENT OF PRICE OF KAFL QUOTED IN BOMBAY STOCK EXCHANGE DURING THE PERIOD OF SEPTEMBER, 2013 TO JA NUARY, 2014 (THE PERIOD OF SALE OF SHARES OF KAFL BY THE ASSESSEE), FOUND THAT THE PRI CE OF SHARES WAS INCREASED BY 267%. THE LD AO CONCLUDED THAT WHILE SENSEX SHOWED ALMOST NO PROGRESS, PRICE OF SHARES OF KAFL MOVED PHENOMENALLY. THE LD AO ALSO REFERRED T O THE FINANCIALS OF KAFL DURING THE FINANCIAL YEARS 2011-12 TO 2015-16 AND CONCLUDE D THAT EARNINGS PER SHARE (EPS) DURING THAT PERIOD WAS EITHER NIL OR NEGATIVE BUT T HE VALUE OF SHARES WAS INFLATED HIGHLY. THE LD AO OBSERVED THAT THE PRICES OF SHARES OF KAF L WERE RIGGED BY THE ENTITIES CONNECTED TO KAFL. 3.6 THE LD AO REFERRED TO THREE SEPARATE ORDERS PAS SED BY SEBI DATED 29 TH MARCH, 2016, 15 TH JUNE, 2016 AND 31 ST OCTOBER, 2016 IN SUPPORT OF HIS ADVERSE CONCLUSION S DRAWN AGAINST THE ASSESSEE THAT SEVERAL ENTITIES RE LATED/CONNECTED TO KAFL RIGGED THE PRICES BY 230% DURING THE PERIOD OF JANUARY, 2013 T O JUNE, 2013 (PATCH-1), CREATED ARTIFICIAL DEMAND AND THEREAFTER PROVIDED EXIT TO T HE BENEFICIARIES DURING THE PERIOD OF JULY 2013 TO NOVEMBER, 2014 (PATCH-2). THE SAID ORD ERS PASSED BY SEBI CONTAINED LIST OF RELATED/CONNECTED PARTIES OF KAFL AND ALSO THE L IST OF BENEFICIARIES. SOME OF THESE WERE RESTRAINED FROM ACCESSING THE SECURITIES MARKE T AND BUYING, SELLING OR DEALING IN SECURITIES. THE LD AO CONCLUDED THAT THE INDEPTH AN ALYSIS DONE BY SEBI IN THE THREE ORDERS IS DIRECT EVIDENCE AGAINST THE ASSESSEE TO HOLD THAT THE PRICES OF KAFL WERE MANIPULATED AND ARTIFICIALLY HIKED TO CREATE NON-GE NUINE LTCG IN THE TRANSACTIONS OF KAFL. THE LD AO FURTHER CONCLUDED THAT CONFESSIONS GIVEN ON OATH BY THE PROMOTERS/BROKERS/OPERATORS ARE THE CIRCUMSTANTIAL EVIDENCE AGAINST THE ASSESSEE THAT THE LTCG WAS ARRANGED ONE. 6 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 6 3.7 THE LD AO MADE ENQUIRIES FROM THE BOMBAY STOCK EXCHANGE AS TO THE COUNTER PARTY MEMBERS WHO BOUGHT THE SHARES OF KAFL SOLD BY THE ASSESSEE THROUGH HIS SHARE BROKER VIZ. ASHIKA STOCK BROKING LIMITED. THE LD AO FOUND THAT THE BUYERS OF THE SHARES HAD WEAK FINANCIALS AND THEREFORE HE DOUBTED THE GENUINENESS OF THE TRANSACTIONS. THE SUMMONS ISSUED TO THE SAID PARTIES CAME BACK UN -SERVED AND/OR NO RESPONSE WAS RECEIVED THEREON. THE LD AO REFERRED TO HIS TEST CH ECK ANALYSIS OF ONE OF THE BUYER OF SHARES SOLD BY THE ASSESSEE VIZ. M/S. RAJWANSHI PRO MOTERS PRIVATE LIMITED AND FOUND THAT THE SOURCE OF FUNDS FOR MAKING INVESTMENT BY M /S. RAJWANSHI PROMOTERS PRIVATE LIMITED WAS THE FUNDS RECEIVED FROM DIFFERENT ENTIT IES AND OBSERVED THAT THE ULTIMATE SOURCE WAS CASH DEPOSITED IN TWO BANK ACCOUNTS AT 4 TH OR 5 TH LAYERS. ON THE BASIS OF THE SAID TEST CHECK ANALYSIS, THE LD AO DOUBTED THE GE NUINENESS OF PURCHASES TRANSACTIONS DONE BY ALL THE BUYERS IN RELATION TO SHARES SOLD B Y THE ASSESSEE. THE LD AO OBSERVED THAT THE CASH TRAIL ANALYSIS PREPARED ON SAMPLE BAS IS STRENGTHENS THE SUSPICIONS OVER THE GENUINENESS OF THE BUYERS OF SHARES AND FURTHER SUS PECTED THAT THE UNACCOUNTED CASH OF THE ASSESSEE WAS LAYERED INTO THE BANK ACCOUNT OF T HE EXIT PROVIDERS. 3.8 THE LD AO RELYING ON THE VARIOUS DECISIONS VIZ. HERSH WIN CHADDHA V. DCIT [ITA NOS.3088 TO 3098 & 3104/DEL/2005, SUMATI DAYAL V. CIT 214 ITR 801 (SC), DURGA PRASAD MORE V. CIT, MCDOWELL & CO. V. CTO, CI T V. P. MOHANKALA] OBSERVED THAT TAX LIABILITIES CAN BE ASSESSED BY REVENUE AUT HORITIES ON CONSIDERATION OF MATERIAL AVAILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDER ANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATI ON/EVIDENCE AVAILABLE ON RECORD. THE LD AO ULTIMATELY CONCLUDED THAT IN SUCH CLANDES TINE OPERATIONS AND TRANSACTIONS, IT IS IMPOSSIBLE TO HAVE DIRECT EVIDENCE OR DEMONSTRAT IVE PROOF OF EVERY MOVE . 3.9 THE LD AO CONCLUDED THAT THE ASSESSEES TRANSAC TIONS RESULTING IN LTCG ON SALE OF SHARES OF KAFL WERE BOGUS AND THAT THE ASSESSEE PLOUGHED BACK HIS UNACCOUNTED MONEY IN THE BOOKS OF ACCOUNTS WHICH IS ASSESSABLE UNDER SECTION 68 OF THE ACT. 7 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 7 4. ON FIRST APPEAL, THE LD CIT(A) DISMISSED THE GRO UNDS RAISED BY THE ASSESSEE AGAINST HIS CLAIM OF EXEMPTION U/S 10(38) OF THE AC T AND HE ALSO CONFIRMED THE ADDITIONS MADE BY THE LD AO UNDER SECTION 68 OF THE ACT. AGGR IEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD AR ARGUED THAT THE LD CIT(A) ERRED IN CON FIRMING THE ADDITION MADE BY THE LD AO ON THE BASIS OF THE AFORESAID FINDINGS AN D VARIOUS OBSERVATIONS MADE IN THE IMPUGNED ASSESSMENT ORDER. THE LD AR SUBMITTED THAT THE FINDINGS OF THE LD AO ARE BASED ON PRESUMPTIONS AND SUSPICION ALONE AND ARE P ERVERSE. IN THE COURSE OF HEARING OF THE CASE, THE LD AR REFERRED TO VARIOUS DOCUMENTARY EVIDENCES FURNISHED IN THE PAPER BOOK IN SUPPORT OF THE CLAIM OF THE ASSESSEE TO PRO VE THE GENUINENESS OF THE TRANSACTIONS RELATING TO LTCG ON SALE OF SHARES OF KAFL. THE DOC UMENTARY EVIDENCES INCLUDED THE FOLLOWING: (I) PURCHASE BILL FOR PURCHASE OF 2,40,000 SHARES O F CPAL FROM M/S BRIJDHARA MERCANTILE PVT. LTD. ON 20.12.2011 FALLIN G IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2012-13. (II) BANK STATEMENT SHOWING PAYMENT OF THE PURCHASE CONSIDERATION OF SHARES OF CPAL TO BRIJDHARA. (III) BALANCE SHEET OF THE ASSESSEE FOR THE FY 2011 -12 TO 2012-13 TO SHOW THAT THE INVESTMENT IN THE SHARES OF CPAL WAS DULY DISCL OSED. (IV) DEMAT STATEMENT WITH UNITED BANK OF INDIA, A D EPOSITORY PARTICIPANT (DP) SHOWING THE AFORESAID SHARES OF CPAL IN THE AC COUNT OF THE ASSESSEE. (V) THE LETTER DATED 8 TH JUNE, 2013 OF KAFL INFORMING THE ASSESSEE THAT THE CPAL WAS MERGED WITH KAFL BY VIRTUE OF COURT ORDER AND THE ASSESSEE WAS ALLOTTED SHARES OF KAFL AS AGAINST THE SHARES OF CP AL IN THE RATIO OF 1:1. (VI) THE DEMAT STATEMENT OF THE ASSESSEE WITH UNITE D BANK OF INDIA SHOWING RECEIPT OF SHARES OF KAFL ON AMALGAMATION AS AFORES AID. 8 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 8 (VII) CONTRACT NOTES OF ASHIKA STOCK BROKING LTD., SHARE BROKER THROUGH WHOM THE ASSESSEE SOLD SHARES OF KAFL IN THE FY 2013-14 RELEVANT TO THE AY 2014-15. (VIII) BANK STATEMENT SHOWING RECEIPT OF SALE CONSI DERATION FROM M/S ASHIKA STOCK BROKING LTD. BY ACCOUNT PAYEE CHEQUES. (IX) DEMAT STATEMENT SHOWING DELIVERY OF SHARES OF KAFL ON SALE OF SHARES. 5.1. THE LD AR SUBMITTED THAT THE PURCHASE OF SHAR ES IN THE FY 2011-12 WAS ACCEPTED BY THE LD AO. IN THE CASE OF SRI MAHENDRA KUMAR BAI D THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2012-13 WAS PASSED UNDER SECTION 14 3(3) ON 30 TH JANUARY, 2015 AND THE PURCHASE OF SHARES OF CPAL WAS ACCEPTED. THE AS SESSMENT IN THE CASE OF MANISH KUMAR BAID WAS PROCESSED UNDER SECTION 143(1) OF TH E ACT ACCEPTING THE PURCHASE OF SHARES. THE LD AR ALSO SUBMITTED THAT EVEN IN THE I MPUGNED ASSESSMENT ORDER THE PURCHASE OF SHARES BY THE ASSESSEE WAS NOT HELD TO BE BOGUS. THE LD AR SUBMITTED THAT THE EVIDENCES AND DOCUMENTS FURNISHED BY THE ASSESS EE WERE NEITHER FOUND TO BE FALSE NOR FABRICATED. THE LD AR SUBMITTED THAT THE LD A O DOUBTED THE GENUINENESS OF THE SALE TRANSACTIONS ON THE BASIS OF VARIOUS ORDERS OF SEBI AND/OR THE INVESTIGATION WING AND THE STATEMENTS OF VARIOUS PERSONS RECORDED BY INVES TIGATION WING IN THE CASES OF PERSONS UNCONNECTED TO THE ASSESSEE. IT WAS SUBMITT ED THAT THE LD AO DISALLOWED THE ASSESSEES CLAIM OF LTCG ON SALE OF SHARES OF KAFL ON SUSPICION AND PRESUMPTIONS ALONE. IT WAS SUBMITTED THAT THE LOWER AUTHORITIES HAVE NOT BROUGHT ANY MATERIAL OR EVIDENCE ON RECORD TO FALSIFY THE CLAIM OF THE ASSE SSEE OR TO HOLD THAT THE SHARE TRANSACTIONS WERE BOGUS. 5.2. THE LD AR HAS SHOWN THAT THE THREE ORDERS OF SEBI AND THE REPORT OF THE INVESTIGATION WING AND/OR THE STATEMENTS OF DIFFERE NT PERSONS RECORDED BY INVESTIGATION WING NOWHERE NAMED THE ASSESSEE AS A BENEFICIARY TO THE TRANSACTIONS RELATING TO KAFL . IT IS SEEN FROM THE INTERIM ORDER DATED 29 TH MARCH, 2016 THAT SEBI HAS LISTED THE NAMES OF VARIOUS ENTITIES/PERSONS WHO WERE THE PROM OTERS AND/OR THE CONNECTED OR 9 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 9 RELATED PARTIES PROVIDED BOGUS TRANSACTIONS OF LTCG TO VARIOUS BENEFICIARIES. THE LIST OF THE NAMES OF THE BENEFICIARIES WAS ALSO GIVEN IN TH E SAID ORDER. THE LD AR REFERRING TO THE SAID LISTS HAS SHOWN TO US THAT THE NAME OF THE ASSESSEE AND/OR HIS BROKER NAMELY ASHIKA STOCK BROKING LTD. NOWHERE APPEAR IN THE SA ID LISTS ANNEXED TO SEBIS INTERIM ORDER DATED 29 TH MARCH, 2016. ON A SPECIFIC QUERY TO THE LD DR APPE ARING FOR REVENUE, HE FAIRLY AGREED THAT THE ASSESSEES NAME AND/OR TH E NAME OF ASHIKA STOCK BROKING LTD. DO NOT APPEAR IN THE LIST ANNEXED TO VARIOUS ORDERS OF THE SEBI INCLUDING FINAL ORDER DATED 15 TH JUNE, 2016 REFERRED TO IN THE IMPUGNED ASSESSMENT ORDER. 5.3. THE LD AR ALSO BROUGHT OUR ATTENTION TO THE EN QUIRY REPORT MADE BY PR. DIRECTOR OF INCOME TAX (INVESTIGATION), KOLKATA IN THE MATTE R OF TRANSACTIONS OF KAFL. THE LD AO RELIED ON THE STATEMENTS OF DIFFERENT PERSONS IN CLUDING SRI SUNIL KUMAR DOKANIA RECORDED BY THE INVESTIGATION WING OF KOLKATA WHO E XPLAINED THE MODUS OPERANDI OF PROVIDING ACCOMMODATION ENTRIES OF LTCG AND SHORT T ERM CAPITAL LOSS (STCL). THESE PERSONS ALSO PROVIDED THE LISTS OF BENEFICIARIES TO WHOM THEY PROVIDED ACCOMMODATION ENTRIES. THE LD AR HAS SHOWN THAT THE LIST OF BENEFICIARIES PROVIDED BY THESE PERSONS ALSO DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/ OR THE NAME OF THE SHARE BROKER VIZ. ASHIKA STOCK BROKING LTD. 5.4. THE LD AR, ON THE OTHER HAND, RELIED ON THE AD INTERIM EXPARTE ORDER DATED 29 TH MARCH, 2016 PASSED BY SEBI IN FAVOUR OF ASSESSEE. H E DREW OUR ATTENTION TO PARA 24 OF THE SAID ORDER WHEREIN SEBI FOUND THAT SOME INNOCEN T AND GULLIBLE INVESTORS HAD BEEN LURED INTO THE TRADING OF SHARES OF KAFL AND HAD BE EN ENTRAPPED IN THE PRICE FLUCTUATION OF THE SCRIPT. THIS FINDING OF SEBI SUPPORTS THE CA SE OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE WAS LURED TO PURCHASE SHARES OF CPAL, WHEN HE KNEW THAT THE COMPANY ALLOTTED BONUS SHARES IN THE RATIO OF 1:55. THE ASS ESSEE SOLD THE SHARES OF KAFL WHEN HE FOUND THAT THE PRICES INCREASED SUBSTANTIALLY IN TH E MARKET. THE LD AR SUBMITTED THAT HE 10 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 10 BEING INNOCENT GULLIBLE INVESTOR, HIS NAME DID NOT APPEAR IN THE LIST OF SEBI WHO WERE NAMED AS BENEFICIARY TO THE ALLEGED SCHEME FORMULAT ED BY SOME PERSONS. 5.5 THE LD AR, IN COURSE OF HEARING BEFORE US, FILE D A COPY OF THE AUDITED FINANCIALS OF KAFL FOR THE FY 2012-13 AND DREW OUR ATTENTION T O THE NOTICE CONVENING THE AGM. HE SUBMITTED THAT IT WAS THE 28 TH AGM OF KAFL WHICH SHOWS THAT THE SAID COMPANY WAS INCORPORATED FOR MORE THAN 28 YEARS AS ON THE E ND OF THE SAID FINANCIAL YEAR I.E. 2011-12. HE CONCLUDED THAT IN SUCH CIRCUMSTANCES, THE MERGER OF THE TWO COMPANIES WITH KAFL COULD NOT BE SAID TO BE A PREMEDITATED AR RANGEMENT TO GIVE BENEFIT OF LTCG TO BENEFICIARIES. AT LEAST A GULLIBLE INVESTOR WOUL D BE LURED TO MAKE INVESTMENT IN SUCH COMPANIES. 5.6. THE LD AR ALSO BROUGHT TO OUR NOTICE THE FINAN CIALS OF KAFL REPORTED IN SEBIS INTERIM ORDER DATED 29 TH MARCH, 2016 TO SHOW THAT THE PRICE EARNINGS RATIO (IN SHORT P/E RATIO) OF THAT COMPANY INCREASED TO RS.4,065 IN FY 2013-14 FROM RS. NIL IN THE FY 2012-13. THE LD AR STATED THAT THE CONCLUSION DRAWN BY LD AO THAT THE FINANCIALS OF THE COMPANY SHOWS NIL P/E RATIO AND DID NOT GIVE RISE T O STEEP INCREASE OF MARKET PRICE OF THE SHARES OF KAFL, IS CONTRARY TO THE FACTS ON REC ORD. 5.7. THE LD AR ALSO REFERRED TO THE STATEMENT OF SR I SUNIL DOKANIA RELIED ON BY THE LD AO TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. HE REFERRED TO THE FOLLOWING STATEMENT AGAINST Q. NO. 15 :- Q.15 PLEASE EXPLAIN THE MODUS OPERANDI OF GETTING B OGUS LONG TERM CAPITAL GAIN THROUGH SCRIPS CONTROLLED AND MANAGED BY YOU. ANS. GENERALLY BENEFICIARIES APPROACHED TO THE BROK ER/ENTRY OPERATOR IN SEARCH OF GENERATION OF CAPITAL IN AN EASIER MANNER WITHOU T PAYING ANY TAX ON IT. BROKERS IDENTIFY THE VARIOUS BOGUS SCRIPTS TO PROVI DE LTCG AS THE SAME IS EXEMPT FROM THE TAX. KAILASH AUTO IS SUCH SCRIPS WH ICH IS ENGAGED IN PROVIDING ACCOMMODATION ENTRY IN FORM OF LTCG / STCL TO VARIO US BENEFICIARIES. BENEFICIARIES ARE ALLOTTED THE SHARES AT NOMINAL PR ICE AND THE PRICE OF THE SHARES 11 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 11 RISE ARTIFICIALLY BY USING LOOPHOLES OF STOCK EXCHA NGE MECHANISM AND THE SHARES WERE SOLD AT DESIRED LEVEL TO VARIOUS BOGUS ENTITIE S. THESE BOGUS ENTITIES ARE PAID BY THE UNACCOUNTED MONEY OF THE BENEFICIARIES IN CA SH. AS A RESULT UNACCOUNTED INCOME PLOUGHED BACK IN THE FILE OF INDIVIDUALS AND HUFS IN THE FORM OF BOGUS LTCG WITHOUT PAYING INCOME TAX ON IT. IN PROCESS TH E BOGUS SHORT TERM CAPITAL LOSS IS ALSO BOOKED BY THE ENTITIES WHO WANTS TO RE DUCE THEIR TAXABILITY. 5.8. THE LD AR SUBMITTED THAT THERE IS NO ALLEGATIO N BY SHRI SUNIL DOKANIA AND/OR THE LD AO THAT THE ASSESSEE EVER APPROACHED SHRI DOKANIA A ND/OR ANY OTHER PERSON WHATSOEVER, TO APPROACH FOR SUCH BOGUS LTCG. THEREFORE THE LD A O HAS WRONGLY DRAWN INFERENCE AGAINST THE ASSESSEE FROM THE STATEMENT OF SHRI DOK ANIA. THE LD. AR ALSO REFERRED TO THE STATEMENTS OF VARIOUS OTHER PERSONS ANNEXED WITH TH E ASSESSMENT ORDER TO SHOW THAT NONE OF THE SAID PERSONS NAMED THE ASSESSEE TO HAVE BEEN BENEFITTED BY THEM IN RESPECT OF LTCG CLAIMED BY THE ASSESSEE. THE LD AR SUBMIT TED THAT THE LD AO WAS UNJUSTIFIED IN DRAWING AN ADVERSE INFERENCE AGAINST THE ASSESSEE ON THE BASIS OF HIS ENQUIRY MADE FROM BSE TO FIND OUT THE NAMES OF BUYE RS WHO ULTIMATELY BOUGHT THE SHARES SOLD BY THE ASSESSEE. ON THE BASIS OF SUCH E NQUIRY, THE LD AO PREPARED A CASH TRAIL TO ALLEGE THAT CASH DEPOSITED IN 5 TH OR 6 TH LAYER WERE THE UNACCOUNTED INCOME OF THE ASSESSEE. IT WAS HIS SUBMISSION THAT THE ASSESSEE D ID NOT KNOW THE NAMES OF THE BUYERS AND HAS NO CONNECTION AND/OR RELATIONS WITH ANY SUC H PERSONS. THE TRANSACTIONS OF SALE OF SHARES WERE ONLINE TRADING SYSTEM THROUGH HIS BR OKER FROM WHOM HE RECEIVED THE SALE CONSIDERATION. THE BROKER ALSO RECEIVES PAYMENTS FO R ALL HIS TRANSACTIONS FROM STOCK EXCHANGE. THE SELLER AND THE BUYER CANNOT KNOW THE NAMES OF EACH OTHER AS WELL AS THEIR RESPECTIVE BROKERS, WHO WERE INVOLVED IN THE TRADING TRANSACTIONS IN THE SECONDARY PLATFORM. IN SUCH A SITUATION IT CANNOT BE PRESUME D THAT THERE COULD BE ANY TRANSFER OF CASH BETWEEN THE BUYERS AND SELLERS TO CONVERT THE UNACCOUNTED MONEY OF THE BENEFICIARIES AS ALLEGED BY THE LD AO. THE LD AR RE FERRED TO THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LAVANYA LA ND PVT. LTD. [2017] 83 TAXMANN.COM 161 (BOM) TO CONTEND THAT THERE WAS NO EVIDENCE WHATSOEVER T O ALLEGE THAT MONEY CHANGED HANDS BETWEEN THE ASSESSEE AND THE BR OKER OR ANY OTHER PERSON 12 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 12 INCLUDING THE ALLEGED EXIT PROVIDER WHATSOEVER TO C ONVERT UNACCOUNTED MONEY FOR GETTING BENEFIT OF LTCG AS ALLEGED. IN THE SAID CAS E, THE HONBLE HIGH COURT AT PARA 21 HELD THAT IN ABSENCE OF ANY MATERIAL TO SHOW THAT H UGE CASH WAS TRANSFERRED FROM ONE SIDE TO ANOTHER , ADDITION CANNOT BE SUSTAINED. SIM ILAR VIEW WAS TAKEN IN THE FOLLOWING CASES:- (I) BAIJNATH AGARWALLA VS. ACIT [2010] 40 SOT 475 (AGRA THIRD MEMBER) (II) GANESHMULL BIIJAY SINGH BAID HUF VS. DCIT ITA NO. 544/KOL/13 DATED 4.12.2015 (KOLKATA TRIBUNAL) (III) MALTI GHANSHYAMBHAI PATODIA VS. ITO ITA NO. 3400/ AHD/2015 (AHMEDABAD TRIBUNAL) (IV) PRATIK SURYAKANT SHAH VS. ITO [ 2017] 77 TAXMANN.C OM 260 (AHMEDABAD TRIBUNAL) (V) PADDUCHARI JEEVAN PRASHANT VS. ITO ITA NO. 452/HY D/2015 (HYDERABAD TRIBUNAL) (VI) ANIL NAND KISHORE GOYAL VS.ACIT ITA NOS. 1256/PN/ 2012 (PUNE TRIBUNAL) (VII) CIT VS. JAMNA DEVI AGRAWAL [2012] 20 TAXMANN.COM 529 (BOM HC) 5.9. THE LD AR SUBMITTED THAT ALL THE OBSERVATIONS, CONCLUSIONS AND FINDINGS OF THE LOWER AUTHORITIES ARE BASED ON SUSPICION, SURMISES AND HEARSAY. IT IS A TRITE LAW THAT THE SUSPICION HOWSOEVER STRONG CANNOT PARTAKE THE CHARA CTER OF LEGAL EVIDENCE. REFERENCE WAS MADE TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF LALCHAND BHAGA T AMBICA RAM VS. CIT (1959) 37 ITR 288 (SC) . THE LD AR SUBMITTED THAT THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT THE ASSESSEE HAS PLOUGHED BACK HIS OWN UNACCOUNTED MONEY IN THE FORM OF BOGUS LTCG. HOWEVE R, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT THE ASSESSEE HAD BROUGHT BACK HIS UNACCOUNTED INCOME IN THE FORM OF LTCG. THE LD AR REFERRED TO THE JUDG EMENT OF SPECIAL BENCH OF MUMBAI 13 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 13 TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. VS. ACI T [2017] 164 ITD 1 (MUMBAI- TRIB.)(SB) THE TRIBUNAL OBSERVED AS UNDER: 46. ......... ULTIMATELY THE ENTIRE CASE OF REVENUE HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LAR GE SHARE IN SO CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULA TION. HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR T O BE TRUE BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK T HAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QU ITE A TRITE LAW THAT SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVIDENCE ON RECORD. THE THEORY OF PREPONDERANCE OF PROBABILITY IS APPLIED TO WEIGH THE EVIDENCES OF E ITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVO URABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRAWN ON THE BASIS OF CE RTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTIONS OF F ACTS THAT MIGHT GO AGAINST THE ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATIONS HAVE BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AG AINST THE ASSESSEE . 5.10. THE LD AR SUBMITTED THAT THERE IS NO DIRECT E VIDENCE AGAINST THE ASSESSEE BROUGHT ON RECORD BY LD AO TO HOLD THAT THE ASSESSEE INTROD UCED ITS OWN UNACCOUNTED MONEY BY WAY OF BOGUS LTCG. THE DIRECT EVIDENCE AS ALLEGED B Y THE LD AO TO BE THE SEBIS ORDERS IS NO EVIDENCE AGAINST THE ASSESSEE FOR THE REASONS STATED EARLIER. THE LD AR SUBMITTED THAT ALTHOUGH VARIOUS INVESTIGATIONS WERE CARRIED OUT BY DIFFERENT AGENCIES, THERE IS NO EVIDENCE AGAINST THE ASSESSEE TO HOLD T HAT THE ASSESSEE WAS A BENEFICIARY TO THE MODUS OPERANDI ADOPTED BY DIFFERENT ENTITIES / BROKERS / ENTRY OPERATORS. THE LD AR SUBMITTED THAT, IN VIEW OF THE AFORESAID JUDGEMENT OF SPECIAL BENCH OF HONBLE MUMBAI TRIBUNAL, VARIOUS JUDGEMENTS RELIED ON BY THE LD A O AGAINST THE ASSESSEE ARE IRRELEVANT IN AS MUCH AS THE SAID JUDGEMENTS ARE BASED ON CONC LUSIONS DRAWN ON THE BASIS OF CIRCUMSTANTIAL EVIDENCES ONLY WITHOUT ANY MATERIAL EVIDENCE ON RECORD. 5.11. THE LD AR VEHEMENTLY SUBMITTED THAT THE ASSES SEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE CLAIM OF THE ASSESSEE THAT IT EARNED LTCG ON TRANSACTIONS OF HIS INVESTMENT IN SHARES. THE PURCHASE OF SHARES HAD BE EN ACCEPTED BY THE LD AO IN THE YEAR 14 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 14 OF ITS ACQUISITION AND THEREAFTER UNTIL THE SAME WE RE SOLD. THE OFF MARKET TRANSACTION FOR PURCHASE OF SHARES OF CPAL IS NOT ILLEGAL AS WAS HE LD BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DOLARRAI HEMA NI VS. ITO IN ITA NO. 19/KOL/2014 DATED 2.12.2016 . THE TRANSACTIONS WERE ALL THROUGH ACCOUNT PAYEE C HEQUES AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE PURCHASE OF SHARES AN D THE SALE OF SHARES WERE ALSO REFLECTED IN DEMAT ACCOUNT STATEMENTS. THE SALE OF SHARES SUFFERED STT, BROKERAGE ETC. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CAN NOT BE HELD THAT THE TRANSACTIONS WERE BOGUS. THE LD AR REFERRED TO THE FOLLOWING JUDGEMEN TS OF JURISDICTIONAL HIGH COURT:- (I) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 OF 20 12] (CAL HC) IN THIS CASE THE LD AO FOUND THAT THE FORMAL EVIDENCES PROD UCED BY THE ASSESSEE TO SUPPORT HUGE LOSSES CLAIMED IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE STAGE MANAGED. THE HONBLE HIGH COURT HELD THAT THE OPINION OF THE LD AO THAT THE ASSESSEE GENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACT IONS SO AS TO REDUCE THE QUANTUM OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPR ESSED BY THE LD AO BUT HE MISERABLY FAILED TO SUBSTANTIATE THAT. THE HIGH COU RT HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING PRICE AND THEREFORE THE SUSPICION OF THE LD AO WAS MISPLACED AND NOT SUBSTANTIATED. (II) CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITED [2 013] 40 TAXMANN.COM 439 (CAL) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD T HAT ON THE BASIS OF A SUSPICION HOWSOEVER STRONG IT IS NOT POS SIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. IT WAS FURTHER HELD THAT IN ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIBLE, TO HOLD THAT THE TRANSACTIONS OF BUYING OR SELLING OF SHARES WERE CO LOURABLE TRANSACTIONS OR WERE RESORTED TO WITH ULTERIOR MOTIVE. 15 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 15 (III) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD THAT THE ASSESSING OFFICER DOUBTED THE TRANSACTIONS SINCE THE SELLING BROKER WAS SUBJECTED TO SEBIS AC TION. HOWEVER THE TRANSACTIONS WERE AS PER NORMS AND SUFFERED STT, BROKERAGE, SERVICE T AX, AND CESS. THERE IS NO IOTA OF EVIDENCE OVER THE TRANSACTIONS AS IT WERE REFLECTED IN DEMAT ACCOUNT. THE APPEAL FILED BY THE REVENUE WAS DISMISSED. (IV) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRM ED THE DECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASS ESSEE WHERE THE LD AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS T RANSACTIONS IN ALLEGED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE LD AO DISALLOWED THE LOSS O N TRADING OF PENNY STOCK ON THE BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WA S ALSO FOUND THAT THE LD AO DID NOT DOUBT THE GENUINENESS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE TRIBUNAL HELD THAT THE LD AOS CONCLUSIONS ARE MERELY BASED ON TH E INFORMATION RECEIVED BY HIM. THE APPEAL FILED BY THE REVENUE WAS DISMISSED. (V) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIR MED THE DECISION OF THIS TRIBUNAL WHEREIN THE LOSS SUFFERED BY THE ASSESSEE WAS ALLOWED SINCE THE LD AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST THAT THE SA LE OF SHARES BY THE ASSESSEE WERE NOT GENUINE. (VI) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.4.2009] IN THIS CASE THE ASSESSEE CLAIMED EXEMPTION OF INCO ME FROM LONG TERM CAPITAL GAINS. HOWEVER, THE LD AO, B ASED ON THE INFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WE RE BOGUS. THE HONBLE JURISDICTIONAL 16 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 16 HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL W HEREIN IT WAS FOUND THAT THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. IT WAS ALSO FOUND THAT T HE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DEMAT ACCOUNTS AND PRODUCED DOCUM ENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FA CTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 5.12. THE LD AR SUBMITTED BEFORE US THAT WHERE T HE PURCHASE AND SALE TRANSACTIONS ARE SUPPORTED AND EVIDENCED BY BILLS, CONTRACT NOTES, D EMAT STATEMENTS AND BANK STATEMENTS ETC., THE TRANSACTIONS OF PURCHASE OF SH ARES WERE ACCEPTED BY THE LD AO IN EARLIER YEARS, THE SAME COULD NOT BE TREATED AS BOG US SIMPLY ON THE BASIS OF SOME REPORTS OF THE INVESTIGATION WING AND/OR THE ORDERS OF SEBI AND/OR THE STATEMENTS OF THIRD PARTIES. IN SUPPORT OF THE AFORESAID SUBMISSIONS, THE LD AR, IN ADDITION TO THE AFORESAID JUDGEMENTS, HAS REFERRED TO AND RELIED ON THE FOLLO WING CASES:- (I) BAIJNATH AGARWAL VS. ACIT [2010] 40 SOT 475 (AGRA (TM) (II) ITO VS. BIBI RANI BANSAL [2011] 44 SOT 500 (AGRA) (TM) (III) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGRA/2009 (AGRA ITAT) (IV) ACIT VS. AMITA AGARWAL & OTHERS ITA NOS. 247/(KOL )/ OF 2011 (KOL ITAT) (V) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22-26/K OL/2P11 (KOL ITAT) (VI) SURYA PRAKASH TOSHNIWAL VS. ITO ITA NO. 1213/KOL/ 2016 (KOL ITAT) (VII) SUNITA JAIN VS. ITO ITA NO. 201 & 502/AHD/2016 (A HMEDABAD ITAT) (VIII) MS. FARRAH MARKER VS. ITO ITA NO. 3801/MUM/2011 ( MUMBAI ITAT) (IX) ANIL NANDKISHORE GOYAL VS. ACIT ITA NOS. 1256/PN/ 2012 (PUNE ITAT) (X) CIT VS. SUDEEP GOENKA [2013] 29 TAXMANN.COM 402 ( ALLAHABAD HC) (XI) CIT VS. UDIT NARAIN AGARWAL [2013] 29 TAXMANN.COM 76 (ALLAHABAD HC) (XII) CIT VS. JAMNADEVI AGARWAL [2012] 20 TAXMANN.COM 529 (BOMBAY HC) (XIII) CIT VS. HIMANI M. VAKIL [2014] 41 TAXMANN.COM 425 (GUJARAT HC) 17 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 17 (XIV) CIT VS. MAHESHCHANDRA G. VAKIL [2013] 40 TAXMANN. COM 326 (GUJARAT HC) (XV) CIT VS. SUMITRA DEVI [2014] 49 TAXMANN.COM 37 (RAJA STHAN HC) (XVI) GANESHMULL BIJAY SINGH BAID HUF VS. DCIT ITA NOS. 544/KOL/2013 (KOLKATA ITAT) (XVII) MEENA DEVI GUPTA & OTHERS VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) 5.13. THE LD AR FURTHER SUBMITTED BEFORE US THAT ON CE THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRAN SACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNANAND AGNIHOTRI VS. THE STATE OF MADHYA PR ADESH [1977] 1 SCC 816 (SC) . IN THIS CASE THE HONBLE APEX COURT HELD THAT THE BURD EN OF SHOWING THAT A PARTICULAR TRANSACTION IS BENAMI AND THE APPELLANT OWNER IS NO T THE REAL OWNER ALWAYS RESTS ON THE PERSON ASSERTING IT TO BE SO AND THE BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD DIRECT LY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY R AISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT IS NOT ENOU GH TO SHOW CIRCUMSTANCES WHICH MIGHT CREATE SUSPICION BECAUSE THE COURT CANNOT DEC IDE ON THE BASIS OF SUSPICION. IT HAS TO ACT ON LEGAL GROUNDS ESTABLISHED BY EVIDENCE. TH E LD AR SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGEMENTS WHILE DE CIDING THE ISSUE RELATING TO EXEMPTION CLAIMED BY THE ASSESSEE ON LTCG ON ALLEGE D PENNY SOCKS. (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. J. C. AGARWAL HUF ITYA NO. 32/AGR/2007 ( AGRA ITAT) 5.14. THE LD AR FURTHER SUBMITTED THAT THE LD AO WA S NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATI ON IN ORDERS OF SEBI AND/OR THE ENQUIRY REPORT OF THE INVESTIGATION WING TO THE EFFECT THAT THE ASSESSEE AND/OR HIS BROKER WAS A 18 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 18 PARTY TO THE PRICE RIGGING OR MANIPULATION OF PRICE IN BSE. THE LD AR REFERRED TO THE FOLLOWING JUDGEMENTS IN SUPPORT OF THIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE LD AO WAS NOT JUSTIFIED I N REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE ACT AND TO ASSESS THE SALE PR OCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT :- (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. AMITA AGARWAL & OTHERS - ITA NOS. 247/(KO L)/ OF 2011 (KOL ITAT) (III) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693/KOL /2009 (KOL ITAT) (IV) MUKESH R. MAROLIA VS. ADDL. CIT [2006] 6 SOT 247 (MUM) 5.15. THE LD AR ALSO SUBMITTED THAT THE LD AO WAS N OT JUSTIFIED IN DISALLOWING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT BY CONCLUDING THAT THE TRANSACTIONS OF THE ASSESSEE RESULTING IN LTCG ON S ALE OF SHARES OF KAFL WERE BOGUS RELYING ON THE STATEMENTS OF VARIOUS PERSONS RECORD ED BY INVESTIGATION WING WHEREIN THESE PERSONS ACCEPTED TO HAVE PROVIDED ACCOMMODATI ON ENTRIES OF VARIOUS NATURES INCLUDING LTCG TO DIFFERENT PERSONS. THE LD AR SUBM ITTED THAT IN THE STATEMENT OF THIRD PARTIES, THE NAME OF THE ASSESSEE WAS NOT IMPLICAT ED. EVEN OTHERWISE, NO ADVERSE INFERENCE COULD BE TAKEN AGAINST THE ASSESSEE ON TH E BASIS OF UNTESTED STATEMENTS WITHOUT ALLOWING OPPORTUNITY OF CROSS-EXAMINATION. THE LD A R REFERRED TO AND RELIED ON THE FOLLOWING JUDGEMENTS IN SUPPORT OF THE AFORESAID SU BMISSIONS:- (I) ANDMAN TIMBER INDUSTRIES VS. CCE [2015] 62 TAXMAN N.COM 3 (SC) (II) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 (AGRA ITAT) (III) ACIT VS. AMITA AGARWAL & OTHERS ITA NO. 247/(KOL) OF 2011 (KOL ITAT) (IV) ITO VS. BIJAYA GANGULY - ITA NOS. 624 & 625/KOL/20 11 (KOL ITAT) (V) GANESHMULL BIJAY SINGH BAID HUF VS. DCIT ITA NOS. 544/KOL/2013 (KOLKATA ITAT) (VI) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22-26/K OL/2P11 (KOL ITAT) 19 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 19 (VII) MALTI GHANSHYAMBHAI PATADIA VS. ITO - ITA NO.3400/ AHD/2015 (AHMEDABAD ITAT) (VIII) PRATIK SURYAKANT SHAH VS. ITO [2017] 77 TAXMANN.C OM 260 (AHMEDABAD ITAT) (IX) SUNITA JAIN VS. ITO - ITA NO. 201 & 502/AHD/2016 (A HMEDABAD ITAT) (X) ATUL KUMAR KHANDELWAL VS. DCIT ITA NO. 874/DEL/20 16 (DELHI ITAT) (XI) FARAH MARKER VS. ITO ITA NO. 3801/MUM/2011 (MUMBA I ITAT) 5.16. THE LD AR ALSO SUBMITTED THAT THE LD AO WAS N OT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT TO HOLD THAT TH E SALE PROCEEDS OF SHARES OF KAFL RECEIVED BY THE ASSESSEE FROM M/S ASHIKA STOCK BRO KING LTD. WAS NOT SATISFACTORILY EXPLAINED BY THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD TO DISBELIEVE THAT THE ASSESSEE SOLD SHARES OF KAFL THROUGH M/S ASHIKA STOCK BROKIN G LTD., A REGISTERED SHARE AND STOCK BROKER WITH BSE. THE ASSESSEE PRODUCED ALL EV IDENCES TO EXPLAIN THE SOURCE OF THE AMOUNTS RECEIVED BY THE ASSESSEE FROM M/S ASHIKA ST OCK BROKING LTD. THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHA RES OF KAFL AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5.17. THE LD AR SUBMITTED THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND ON THE BASIS OF INCONTROVERTIBLE EVIDENCES PRODUCED BY THE ASSESSEE, THE LD AO WAS NOT JUSTIFIED IN CONCLUDING THAT THE ASSESSEES TRANSAC TIONS RELATING TO LTCG ON SALE OF SHARES OF KAFL WERE BOGUS. THE LD CIT(A) WAS ALSO N OT JUSTIFIED IN DISMISSING THE APPEAL WITHOUT PROPERLY APPRECIATING THE FACTS OF T HE CASE AND THE EVIDENCES PRODUCED BY THE ASSESSEE IN SUPPORT OF HIS CASE. VARIOUS JUDGEM ENTS REFERRED TO BY THE ASSESSEE IN SUPPORT OF ASSESSEES CLAIM OF EXEMPTION OF LTCG ON SALE OF SHARES OF KAFL WAS NOT DISTINGUISHED ON FACTS AND/OR ON LAW BY THE LD CIT( A) . ON THE OTHER HAND, HE AGREED WITH THE LD AO, WHO RELYING ON SURROUNDING CIRCUMS TANCES HELD THAT THE ASSESSEES TRANSACTIONS OF LTCG WERE BOGUS IGNORING ALL LEGAL EVIDENCES FURNISHED BY THE ASSESSEE 20 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 20 IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS R ESULTING IN LTCG. THE LD AR PRAYED THAT THE ORDER OF THE LD CIT(A) BE SET ASIDE AND TH E EXEMPTION UNDER SECTION 10(38) OF THE ACT BE ALLOWED TO THE ASSESSEE. 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF TH E LD AR THAT THE LD AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGEMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTR IES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS O F THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFEREN CES WHICH REMAIN UNPROVED BASED ON THE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITE RATED FOR THE SAKE OF BREVITY. THE PRINCIPLES LAID DOWN IN VARIOUS CASE LAWS RELIED UP ON BY THE LD AR ARE ALSO NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT THE AMALGAMA TION OF CPAL WITH KAFL HAS BEEN APPROVED BY THE ORDER OF HONBLE HIGH COURT. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AMALGAMATION SCHEME APPROVED BY THE HONBLE HIGH COURT IN MAY 2013 MERELY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BEEN SUBJECT TO CROSS EXAMINATION. MOROEVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BROKING LTD NAME IS NEITH ER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DEALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF SHARES OF KAFL . HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASS ESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINS T THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EY ES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE AR GUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES 21 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 21 APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA. WE FIND THAT THE SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM A S DIRECT EVIDENCE AGAINST THE ASSESSEE DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BROKING LTD. THROUGH WHOM THE ASSESSEE SOLD THE SHARES OF KAFL A S A BENEFICIARY TO THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE RELATED ENTIT IES / PROMOTERS / BROKERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPA L WERE PURCHASED BY THE ASSESSEE WAY BACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL W ITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHARES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY EXITING AT THE MOST OPPORTUNE MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GOOD RETURN ON HIS INVESTMENT. WE FIND THAT THE ASSESSEE AND / O R THE BROKER ASHITA STOCK BROKING LTD WAS NOT THE PRIMARY ALLOTTEES OF SHARES EITHER IN C PAL OR IN KAFL AS COULD BE EVIDENT FROM THE SEBIS ORDER. WE FIND THAT THE SEBI ORDE R DID MENTION THE LIST OF 246 BENEFICIARIES OF PERSONS TRADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AND / OR ASHITA STOCK BROKING LTDS NAME IS NOT REFLECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FAILS. WE ALSO FIND THAT EVEN THE SEBIS ORDER HE AVILY RELIED UPON BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL HAD PERFORMED VERY WEL L DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTANTIALLY. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND/OR THE STATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNECTION WITH THE ALLEGED B OGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMPLICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FO RM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUI NENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THES E EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF T HE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF TH E ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE TH E LD AO WAS NOT JUSTIFIED IN 22 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 22 REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER S ECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HONBLE JURISDIC TIONAL HIGH COURT RELIED UPON BY THE LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO TH IS EFFECT. HENCE WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORD INGLY HOLD THAT THE REFRAMED QUESTION NO. 1 RAISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 7. THE NEXT COMMON ISSUE IN THE APPEALS IS AGAINST THE ADDITION OF UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT ON THE GROUND THAT T HE ASSESSEE MUST HAVE INCURRED COMMISSION EXPENSES @ 5% OF THE LTCG. THE LD. AR SU BMITTED THAT THERE IS NO EVIDENCE OF INCURRING SUCH EXPENDITURE. IT WAS PLEA DED THAT NO ADDITION U/S 69C OF THE ACT COULD BE MADE UNLESS IT IS FOUND THAT THE ASSES SEE INCURRED SOME EXPENDITURE WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE FAILED TO SUBSTANTIATE THE SOURCE OF SUCH EXPENDITURE. 7.1. WE HAVE ALREADY HELD THAT THE TRANSACTIONS REL ATING TO LTCG WERE GENUINE AND NOT THE ACCOMMODATION ENTRIES AS ALLEGED BY THE LD AO. CONSEQUENTLY THE ADDITION U/S 69C OF THE ACT IS HEREBY DIRECTED TO BE DELETED. W E ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 2 RAISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 8. THE NEXT COMMON ISSUE IN THE APPEALS RELATE TO DISALLOWANCE U/S 14A OF THE ACT. THE LD AR OF THE ASSESSEE SUBMITTED THAT THE LD AO DISA LLOWED EXPENDITURE U/S 14A OF THE ACT WITHOUT RECORDING ANY SATISFACTION IN TERMS OF SECTION 14A(2) OF THE ACT READ WITH RULE 8D(1) OF THE RULES, HAVING REGARD TO THE ACCOU NTS OF THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE LD AO THAT HE DID NOT INCUR AN Y EXPENDITURE IN RELATION TO EXEMPT INCOME EXCEPT DEMAT EXPENSES WHICH THE ASSESSEE DID NOT CLAIM ANY DEDUCTION. THE LD 23 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 23 AR PLACING RELIANCE ON THE JUDGEMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. REI AGRO LTD. IN ITAT NO. 161 OF 2013 SUBMITTED THAT THE DISALLOWANCE MADE BY THE LD AO BE DIRECTED TO BE DELETED IN THE ABSENCE OF SATISFACTION RECORDED BY THE LD AO WITH REFERENCE TO THE BOOKS OF ACCOUNTS EXAMINED BY HIM. THE LD DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ARGUED T HAT FOR THE YEAR UNDER APPEAL , THE PROVISIONS CONTAINED IN RULE 8D(2) OF THE RULES ARE VERY MUCH APPLICABLE AND HENCE THE SAME HAD BEEN RIGHTLY WORKED OUT BY THE LD AO. 8.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE LD AO DID NOT RECORD ANY SATISFACTION IN TERMS OF SECTION 14A OF THE ACT . WE ALSO FIND THAT DEMAT EXPENSES WERE NOT CLAIMED BY THE ASSESSEE IN THE RETURN FILE D. WE HOLD THAT THE LD AO OUGHT TO HAVE RECORDED PRIMARILY HIS SATISFACTION AS MANDATE D IN TERMS OF SECTION 14A(2) OF THE ACT AND RULE 8D(1) OF THE RULES AND WITHOUT RESORTI NG TO THE SAME , HE OUGHT NOT TO HAVE PROCEEDED DIRECTLY AS PER RULE 8D(2) OF THE RULES. ONLY IF THE TEST PROVIDED IN RULE 8D(1) OF THE RULES FAIL, THE LD AO IS AUTHORIZED IN LAW TO PROCEED WITH THE COMPUTATION MECHANISM PROVIDED IN RULE 8D(2) OF THE RULES. IN VIEW OF THIS FINDING AND RESPECTFULLY FOLLOWING THE JUDGEMENT OF HONBLE CALCUTTA HIGH CO URT (SUPRA) , WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE DISALLOWANCE MADE BY THE LD AO IS DIRECTED TO BE DELETED. ACCORDINGLY, THE REFRAMED QUESTION NO. 3 RAISED HER EINABOVE IS DECIDED IN THE NEGATIVE AND HELD IN FAVOUR OF THE ASSESSEE. 9. THE NEXT COMMON ISSUE IS AGAINST CHARGING OF IN TEREST U/S 234A, 234B AND 234C OF THE ACT. THE CHARGING OF INTEREST UNDER SECTION 23 4A, 234B AND 234C ARE MANDATORY AND IN ANY CASE IS ONLY CONSEQUENTIAL IN NATURE. TH E LD AO IS DIRECTED TO RECALCULATE THE AMOUNT OF INTEREST ON FINALLY ASSESSED TAX AFTER GI VING EFFECT TO THIS ORDER. 24 ITA NOS.1236 & 1237/KOL/2017 MANISH KUMAR BAID & MAHENDRA KUMAR BAID A.YR.2014-15 24 10. THE ASSESSEE MR. MANISH KUMAR BAID IN ITA NO.12 36/KOL/2017 HAS RAISED ANOTHER ISSUE RELATING TO ADDITION OF RS.2,00,000 U NDER SECTION 68 OF THE ACT IN RESPECT OF UNSECURED LOAN OBTAINED FROM SMT. MANJU DEVI DUGAR AND CONSEQUENTIAL DISALLOWANCE OF INTEREST OF RS.51,929 PAID THEREON. THIS WAS STA TED TO BE NOT PRESSED DURING THE COURSE OF HEARING IN VIEW OF SMALLNESS OF THE AMOUNT. ACCO RDINGLY THE REGULAR GROUND NO. 8 RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED IN VIEW OF THE SMALLNESS OF THE AMOUNT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 1236/KOL/2017 IS PARTLY ALLOWED AND APPEAL OF THE ASSESSEE IN ITA NO. 1237/KOL/2017 IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18.08.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18.08.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. MANISH KUMAR BAID & MAHENDRA KUMAR BAID, 20, OLD COURT HOUSE STREET, DALHOUSIE, KOLKATA-700001 2. ACIT, CIRCLE-35, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, KOLKATA-700107 3..C.I.T.(A)-10, KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S