SHRI ASHOK AGARWAL, JAIPUR V. ACIT, CIRCLE-1, JAIPUR

ITA 124/JPR/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3248 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 29-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA; RUNI PAUL CIT DH
• Assessee Lawyers: SANDIP JHANWAR
• Keywords: Unexplained cash credit; Capital asset; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Question of law; Tangible material; Fair market value; Corroborative evidences; Third party statement; Accommodation entries; Scheme of amalgamation; Onus to prove; Sham transactions; Penny stocks; Capital Gains
• Section: 69C; 64; 43; 48; 13; 22; 131; 68; 54; 132

Judgement Text

VK;DJVIHYH; VF/KDJ.K] T;IQJU;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 124/JP/2020 FU/KZKJ.KO'K Z @ ASSESSMENTYEAR : 2014-15 ASHOK AGARWAL, 237, SHREE RAMESHWARAM, SONKHIYON KA RASTA, KISHANPOLE BAZAR, JAIPUR- 302001 (RAJASTHAN) CUKE VS. A.C.I.T., CIRCLE-1, JAIPUR. LFKK;HYS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABHPA 4354 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJVIHY LA- @ ITA NO. 188/JP/2020 FU/KZKJ.KO'K Z @ ASSESSMENTYEAR : 2014-15. RITU AGARWAL, SHREERAM BHAWAN, N.H.5, DAHANIGARIA, CHARAMPA BHADRAK- 756101, ORISSA (INDIA) CUKE VS. I.T.O., WARD 1(4), JAIPUR. LFKK;HYS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ADIPA 5633 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJVIHY LA- @ ITA NO. 185/JP/2020 FU/KZKJ.KO'K Z @ ASSESSMENTYEAR : 2014-15. SEEMA AGARWAL, MANSAROVAR, RAMESHWARAMPARISAR, TONK ROAD, SITABADI, JAIPUR- 302029, RAJASTHAN (INDIA) CUKE VS. I.T.O., WARD 1(4), JAIPUR. LFKK;HYS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ADIPA 5632 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJVIHY LA- @ ITA NO. 123/JP/2020 FU/KZKJ.KO'K Z @ ASSESSMENTYEAR : 2014-15. AJAY AGARWAL, 237, SHREE RAMESHWARAM, SONKHIYON KA RASTA, KISHANPOLE CUKE VS. I.T.O., WARD 1(4), JAIPUR. 2 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. BAZAR, JAIPUR- 302001 (RAJASTHAN) LFKK;HYS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABHPA 4132 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJLS@ ASSESSEEBY : SHRI SANDIP JHANWAR (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) & SMT. RUNI PAUL (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09/10/2020 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 18/11/2020. VKNS'K@ ORDER PER VIKRAM SINGH YADAV, A.M. THESE ARE FOUR APPEALS FILED BY THE AFORESAID INDI VIDUAL ASSESSEES AGAINST THE RESPECTIVE ORDERS OF LD. CIT(A)-1, JAIPUR ALL DATED 16.01.2020 & 30.01.2020 FOR A.Y 2014-15. SINCE THE COMMON ISSUES ARE INVOLVED, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER. ITA NO. 124/JP/2020 2. WITH THE CONSENT OF BOTH THE PARTIES, THE CASE O F ASSESSEE, SHRI ASHOK AGARWAL IN ITA NO. 124/JP/2020 FOR A.Y 2014-15 IS T AKEN AS THE LEAD CASE FOR THE PURPOSES OF PRESENT DISCUSSION WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A)-1, JAIPUR HAS ERRED IN CONFIRMING THE ADDITION OF RS 7,51,07,591/ - MADE BY THE ACIT, CIRCLE -1 BY TREATING THE LONG TERM CAPITAL G AINS EXEMPT UNDER SECTION 10(38) ON SALE OF SHARES OF M/S SUNRISE ASIAN LTD A S BOGUS AND THEREBY CONSIDERING THE SAME AS INCOME FROM OTHER SOURCES. 3 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 3. THE ASSESSEE IS AN INDIVIDUAL WHO HAS FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 06.12.2014 DECLARING TOTAL T AXABLE INCOME OF RS. 62,94620/-. DURING THE SCRUTINY ASSESSMENT, TH E ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DECLARED EXEMPT INCOME UNDER SECTION 1 0(38) OF THE ACT OF RS. 7,51,07,591/- ON PURCHASE AND SALE OF SHARES OF SUN ASIAN (SCRIP CODE: 506615) AND THE ISSUE OF GENUINENESS OF THE TRANSAC TION OF LONG TERM CAPITAL GAIN FROM PURCHASE AND SALE OF SAID SHARES WAS TAKEN UP. THE AO OBSERVED THAT THIS IS A TRANSACTION OF PURCHASE AND SALE OF PENNY STOCK IN THE NATURE OF OBTAINING THE ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GA IN. THE AO, AFTER DISCUSSING THE MODUS OPERANDI OF VARIOUS ENTRY PROVIDERS AS DE TECTED BY THE INVESTIGATION WING, KOLKATA AND OTHER PLACES, STATEMENT RECORDED DURING SEARCH PROCEEDINGS U/S 132, ANALYSIS OF FINANCIALS AND PRICE MOVEMENT OF T HE SHARES WHICH WERE LISTED ON THE BOMBAY STOCK EXCHANGE, HAS ISSUED A SHOW CAUSE NOTICE DATED 08.12.2016 TO THE ASSESSEE AS TO WHY THE LTCG CLAIMED BY THE ASSE SSEE U/S 10(38) SHOULD NOT BE TREATED AS BOGUS LTCG AND DISALLOWED. IN THE SHOW CAUSE NOTICE, THE AO HAS STATED THAT INFORMATION HAS BEEN RECEIVED FROM THE INVESTI GATION WING, KOLKATA THAT SUNRISE ASIAN LTD IS ENGAGED IN GIVING ENTRIES OF BOGUS LTC G. FURTHER, ENQUIRIES WERE MADE IN THE MATTER AND IT WAS FOUND THAT BSE HAS DECLARE D TRADING IN SUNRISE ASIAN LTD TO BE SUSPENDED DUE TO DIRECTION FROM SEBI. IN RESPON SE, THE ASSESSEE FILED HIS REPLY DATED 13.12.2016 AND EXPLAINED THE DETAILS OF THE T RANSACTIONS AND SUBMITTED THAT THE ASSESSEE WAS ALLOTTED 158,400 SHARES OF M/S. SA NTOSHIMATRADELINKS LTD ON 08.10.2011 AGAINST THE CONSIDERATION OF RS. 31,68,0 00/- PAID THROUGH BANKING CHANNEL. THE ASSESSEE PRODUCED THE ALLOTMENT ADVIC E AND ALSO THE BANK STATEMENT SHOWING THE PAYMENT OF THE PURCHASE CONSIDERATION A S WELL AS THE DEMAT ACCOUNT TO 4 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. SHOW THE DEMATERIALIZATION OF THE SHARES IN THE DEM AT ACCOUNT AND THEREAFTER ALLOTMENT OF 158,400 SHARES OF M/S SUNRISE ASIAN LT D (ALLOTTED IN LIEU OF SHARES OF M/S. SANTOSHIMATRADELINKS LTD AFTER AMALGAMATION WI TH M/S. SANTOSHIMATRADELINKS LTD). THE ASSESSEE ALSO PRODUCED THE RECORDS SHOWI NG THE SALE OF THE SHARES OF M/S. SUNRISE ASIAN LTD. FROM THE DEMAT ACCOUNT THROUGH S TOCK EXCHANGE DURING THE PERIOD STARTING 19 TH SEPTEMBER 2013 TO 25 TH MARCH 2014 AND THE SALE CONSIDERATION OF RS 7,82,75,591/- RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE. THUS THE ASSESSEE CONTENDED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF M/S. SUNRISE ASIA LTD IS GENUINE AND SINCE THE SHARES WE RE SOLD AFTER HOLDING FOR MORE THAN ONE YEAR AND STT HAS BEEN PAID, THEREFORE, THE CAPITAL GAIN ARISING FROM THE SAID TRANSACTIONS IS EXEMPT UNDER SECTION 10(38) OF THE IT ACT. THE ASSESSEE ALSO CHALLENGED THE OBSERVATIONS OF THE AO THAT THE M/S SUNRISE ASIAN LTD IS ENGAGED IN GIVING ACCOMMODATION ENTRIES AS THE INFORMATION SO GATHERED BY THE AO WERE NOT MADE AVAILABLE OR CONFRONTED TO THE ASSESSEE AND IN ANY CASE, THE SAID INFORMATION IS IN NATURE OF GENERALIZED INFORMATION WITHOUT POI NTING OUT THE ASSESSEES INVOLVEMENT OR THAT MATTER, THE SPECIFIC TRANSACTIO N PERTAINING TO THE ASSESSEE. THE ASSESSEE ALSO RELIED UPON VARIOUS DECISIONS IN SUPP ORT OF HIS CLAIM. THE AO DID NOT ACCEPT THE REPLY OF THE ASSESSEE AND HELD THAT THE REVENUE HAS STRONG EVIDENCES AGAINST THE ASSESSEE THAT THE LONG TERM CAPITAL GAI NS BOOKED BY THE ASSESSEE WERE PRE-ARRANGED METHOD TO EVADE TAXES AND LAUNDER MONE Y. THE AO HAS SUPPORTED HIS FINDINGS BY DECISION OF THE COORDINATE BENCH IN CAS E OF RATNAKAR M. PUJARI VS ITO (ITA NO. 995/MUM/2012). THE AO CONSEQUENTLY MADE AN ADDITION OF RS. 7,51,07591/- BY TREATING THE SAME AS BOGUS LTCG CLA IMED EXEMPT U/S 10(38) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) WHO HAS 5 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. CONFIRMED THE FINDINGS OF THE AO AND AGAINST THE SA ID ORDER OF THE LD. CIT (A), THE ASSESSEE HAS FILED THE PRESENT APPEAL. 4. DURING THE COURSE OF HEARING, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE AO HAS MADE THE ADDITION ON THE BASIS OF ASSUMP TION AND PRESUMPTION WITHOUT BRINGING ON RECORD ANY MATERIAL TO SHOW THAT THE TR ANSACTIONS OF SALES IN THE SHARES OF M/S SUNRISE ASIA LTD THROUGH STOCK EXCHANGE IS N OT GENUINE. THE LD. A/R HAS SUBMITTED THAT THE ASSESSEE HAS PRODUCED ALL THE RE LEVANT RECORDS AND DOCUMENTARY EVIDENCES IN SUPPORT OF THE PURCHASE AND SALE OF TH E SHARES. HE HAS REFERRED TO THE APPLICATION MADE BY THE ASSESSEE AND SUBSEQUENT ALL OTMENT ADVICE FOR ALLOTMENT OF 158,400 SHARES OF M/S. SANTOSHIMATRADELINKS LTD ON 08.10.2011 FOR A CONSIDERATION OF RS. 31,68,000/-. HE HAS ALSO REFERRED TO THE BA NK STATEMENT OF THE ASSESSEE SHOWING THE PAYMENT OF PURCHASE CONSIDERATION OF RS . 31,68,000/- AND SUBMITTED THAT THE TRANSACTION WAS THROUGH BANKING CHANNEL AN D THE ASSESSEE HAS CLEARLY ESTABLISHED THE PURCHASE OF SHARES BY PRODUCING THE APPLICATION SEEKING ALLOTMENT OF SHARES, ALLOTMENT ADVICE ISSUED BY THE COMPANY, PAY MENT TO THE COMPANY MADE THROUGH BANKING CHANNEL, AND DEMATERIALIZATION OF T HE SAME IN THE DEMAT ACCOUNT OF THE ASSESSEE. IT WAS SUBMITTED THAT M/S. SANTOSHIM ATRADELINKS LTD WAS SUBSEQUENTLY MERGED INTO M/S SUNRISE ASIAN LTD ON 2 2.03.2013 THROUGH A SCHEME OF AMALGAMATION APPROVED BY THE HONBLE BOMBAY HIGH CO URT. CONSEQUENTLY, THE ASSESSEE WAS ALLOTTED 158400 SHARES OF M/S SUNRISE ASIA LTD IN LIEU OF 158400 SHARES OF M/S SANTOSHIMATRADLINKS LTD. THE LD. A/R HAS RE FERRED TO THE DEMAT ACCOUNT SHOWING THE CREDIT OF 158400 SHARES OF M/S SUNRISE ASIA LTD IN THE DEMAT ACCOUNT OF THE ASSESSEE. THUS HE HAS CONTENDED THAT THE ASSESS EE HAS PRODUCED ALL THE 6 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. RELEVANT DOCUMENTARY EVIDENCES IN SUPPORT OF PURCHA SE OF SHARES OF M/S SANTOSHIMATRADLINKS LTD AND SUBSEQUENT EXCHANGE AND ALLOTMENT OF SHARES OF M/S SUNRISE ASIA LTD WHICH WERE CREDITED TO THE DEMAT A CCOUNT OF THE ASSESSEE. THEREAFTER, THE ASSESSEE SOLD THESE SHARES DURING T HE YEAR UNDER CONSIDERATION IN VARIOUS LOTS DURING THE PERIOD STARTING 19 TH SEPTEMBER 2013 TO 25 TH MARCH 2014. HE HAS REFERRED TO THE CONTRACT NOTES AND DEMAT ACCOUN T MAINTAINED WITH THE AXIS BANK WHERE THESE SALE TRANSACTIONS ARE DULY REFLECTED IN THE DEMAT ACCOUNT OF THE ASSESSEE. THE LD A/R HAS FURTHER REFERRED TO BANK STATEMENT SHOWING RECEIPTS OF SALES CONSIDERATION OF RS 7,82,75,591/-. THE LD. A /R HAS ACCORDINGLY CONTENDED THAT WHEN THE HOLDING OF THE SHARES ARE NOT IN DISPUTE, THEN THE TRANSACTION OF PURCHASE AND SALE OF SHARES CANNOT BE HELD AS BOGUS. THE LD . A/R HAS FURTHER CONTENDED THAT THE AO HAS MADE REFERENCE OF SEBI ORDER DATED 7.11. 2016 SUSPENDING THE TRADING IN THE SHARES OF M/S. SUNRISE ASIAN PVT LTD. IT WAS S UBMITTED THAT THE ASSESSEE WAS NOT PROVIDED WITH A COPY OF THE SAID ORDER AND IN ANY C ASE, FROM THE READING OF THE ASSESSMENT ORDER ITSELF, IT IS CLEAR THAT SAID SUSP ENSION IS ON ACCOUNT OF FAILURE TO MEET CERTAIN DISCLOSURE REQUIREMENTS AND HAS THUS N O BEARING ON THE MATTER UNDER CONSIDERATION SO FAR AS THE TRANSACTION OF PURCHASE AND SALE OF THE SHARES MADE BY THE ASSESSEE. THE LD. A/R HAS FURTHER SUBMITTED TH AT SINCE THE SHARES WERE PURCHASED IN THE EARLIER FINANCIAL 2011-12 AND ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AS ON 31 ST MARCH, 2012 AND ON 31 ST MARCH, 2013, THEREFORE, WHEN THE ASSESSEE HAS PRODUCED ALL THE RELEVANT DOC UMENTARY EVIDENCES WHICH INCLUDED ALLOTMENT ADVICE, PAYMENT THROUGH BANKING CHANNEL, DEMAT ACCOUNT SHOWING THE HOLDING OF SHARES BY THE ASSESSEE, BOOK S OF ACCOUNT AS ON 31 ST MARCH, 2012 AND 31 ST MARCH, 2013 WHEREIN THE ASSESSEE HAS DULY SHOWN TH E SHARES IN HIS 7 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. HAND, THEN THE TRANSACTION OF PURCHASE CANNOT BE DO UBTED. FURTHER, THE SALES OF THE SHARES ARE THROUGH STOCK EXCHANGE AND THE SALE CONS IDERATION HAS BEEN RECEIVED BY THE ASSESSEE DIRECTLY IN THE BANK ACCOUNT. THUS THE LD. A/R HAS SUBMITTED THAT ONCE THE ASSESSEE HAS PROVED THE TRANSACTION WITH THE SU PPORT OF DOCUMENTARY EVIDENCE AS WELL AS THE OTHER UNDISPUTED FACTS, THEN IN THE ABSENCE OF ANY CONTRARY MATERIAL, THE SAME CANNOT BE TREATED AS BOGUS. 5. IT WAS SUBMITTED BY THE LD A/R THAT THE AO HAS NOT BROUGHT ANY EVIDENCE TO PROVE THE ASSESSEE'S TRANSACTION AS NON GENUINE AND MERELY RELIED ON THE REPORT PREPARED BY INVESTIGATION WING OF KOLKATA & MUMBAI TO ARRIVE AT THE FINDING THAT ASSESSEE'S TRANSACTION ARE NON GENUINE AND ACCOMMOD ATION ENTRIES. IT WAS SUBMITTED THAT THE SAID REPORT OF INVESTIGATION WIN G IS GENERAL ANALYSIS OR ONE CAN SAY THAT IS A STUDY REPORT WHICH IS NOT ASSESSEE SP ECIFIC REPORT. IT ANALYSES NATURE OF CERTAIN TRANSACTIONS WHICH CAME ON SURFACE WHILE CA RRYING OUT CERTAIN INVESTIGATION HOWEVER NOWHERE BRINGS ON RECORD ANY EVIDENCE OR NE XUS WITH RESPECT OF ASSSESSEE'S TRANSACTION FOR THE REASONS STATED BELO W: I. LD. AO ADDED TO THE REPORT THAT THE ASSESSEE INV ESTED HUGE SUM IN A COMPANY, HE DOESN'T KNOW IN OFF MARKET TRANSACTION. WE MAY SUBMIT THAT LOOKING AT FINANCIAL NET WORTH OF ASSESSEE, A SUM OF RS. 31,68 ,000/- INVESTED BY HIM IS NOT HUGE. FURTHER, THE SUM WAS INVESTED THROUGH M/S MEH TA EQUITIES WHOM THE FAMILY KNOWS FOR A LONG TIME. THEREFORE, THE FINDING OF RE PORT DOES NOT APPLY ON ASSESSEE'S TRANSACTION. II. REPORT REFERS ABOUT DELIVERY OF UNACCOUNTED CAS H TO OPERATOR, HOWEVER, ASSESSEE HAS NOT DONE ANY SUCH TRANSACTION. IN THIS CASE, NEITHER THE AO NOR THE 8 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. REPORT SUGGEST ANY EVIDENCE OF HANDING OVER THE CAS H NOR ANY PERSONS HAS BEEN NAMED WHO WAS OPERATOR IN ASSESSEE'S TRANSACTION AL LEGED TO BE BOGUS. THEREFORE, IT IS INCORRECT TO LINK ASSESSEE'S TRANSACTION WITH TH E REPORT OF INVESTIGATION WING. III. THE LD. AO HAS ALLEGED THE SHARE BROKER OF THE ASSESSEE M/S MEHTA EQUITIES PROVIDES THE EXIT ENTRY. HOWEVER, IN THE INVESTIGAT ION REPORT NOWHERE IT IS MENTIONED THAT M/S MEHTA EQUITIES PROVIDES THE EXIT ENTRY AND NO ENQUIRY HAS BEEN CONDUCTED BY THE INCOME TAX DEPARTMENT ON M/S MEHTA EQUITIES. FURTHER, IN ALL THE NOTICES ISSUED TO THE RELATIVES IN THE SIMILAR CASE NOWHERE NAME OF M/S MEHTA EQUITIES WAS MENTIONED AS EXIT PROVIDER IN LIST PROVIDE BY THE L D. AO. IV. THE REPORT MENTIONS THAT BENEFICIARIES SHARES A RE PURCHASED BY BOGUS/PAPER COMPANIES. AO HAS REFERRED CERTAIN BSE DATA BUT NO SUCH DATA HAS BEEN GIVEN ANYWHERE. FURTHER, THE ASSESSEE HAS PLACED ORDER FO R SALE TO HIS BROKER AND, IN THE MECHANISM OF TRANSACTION THROUGH STOCK EXCHANGE, A SELLER CAN'T GET ANY INFORMATION OF BUYER. HE GOT PAYMENT OF SALE THROUGH HIS BROKER ONLY. THEREFORE, THE MODES OPERANDI EXPLAINED IN THE REPORT DOES NOT HAVE ANY CONNECT WITH THE ASSESSEE TRANSACTION. 6. IT WAS FURTHER SUBMITTED THAT THE FINDINGS OF TH E AO ARE MERELY ON SURMISES AND CONJECTURES. THE LD. AO DID NOT BEING ON RECORD ASSESSEE'S NEXUS WITH ANY OF THE PERSON OF WHOM THE STATEMENTS HAVE BEEN RECORDE D.NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED HAV E NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM.THE LD. AO DID NOT BRING ON RECORD ANY EVIDENCE SHOWING ANY NEXUS OF ASSESSEE WITH ANY OF THE SO CALLED ENTRY O PERATOR, EXIT OPERATOR.IN THE ASSESSEE CASE, ASSESSEE HAS JUST DEALT WITH HIS SHA RE BROKER, M/ S MEHTA EQUITIES 9 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. WHICH HAS NOWHERE BEEN NAMED IN THE SAID STUDY REPO RT AS PART OF THE ENTRY OPERATOR/ EXIT OPERATOR. EVEN NO NEXUS OF THE SAID BROKER HAS BEEN POINTED OUT WITH ANY OF THE PARTIES REFERRED TO BY ASSESSING OFFICER . IN THIS CASE, THE AO AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A START ING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE AO THAT SOME PERSONS MAY H AVE MISUSED THE SCRIP: FOR THE PURPOSE OF COLLUSIVE TRANSACTIONS. THE AO WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTIONS AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. HOWEVER, THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PR OVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORT ED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 7. IT WAS FURTHER SUBMITTED THAT NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED BY THE LD.AO.IN THIS REGARD, ITWAS SUBMITT ED THAT WHEN THE ASSESSING AUTHORITY RELIES ON ANY THIRD PARTY STATEMENT AS EV IDENCE TO MAKE THE ADDITION, THEN OPPORTUNITY OF CROSS EXAMINATION MUST BE PROVIDED T O THE ASSESSEE. IN THE ASSESSEE'S CASE STATEMENT OF SH. VIPUL VIDUR BHATT WERE RECORDED AT THE BACK OF THE ASSESSEE AND ON THE BASIS OF THE STATEMENTS RECORDE D, THE LD. AO ALLEGED THE ASSESSEE TO INDULGE IN THE SHAM TRANSACTION OF LTCG . AS THE ASSESSEE CAME TO KNOW OF THE SAID STATEMENT ON RECEIPT OF THE ASSESSMENT ORDER, HE EXPRESSLY REQUESTED THE LD. CIT(A) TO PROVIDE THE OPPORTUNITY FOR CROSS EXA MINATION OF THE SAID PERSON WHOSE STATEMENT IS BEING RELIED UPON BY THE LD.AO FOR MAK ING THE ADDITION SO THAT TRUE FACTS OF THE CASE CAN BE FOUND OUT, HOWEVER, THE SA ME WAS DENIED BY THE LD CIT(A). WE MAY FURTHER SUBMIT THAT IF ANY MATERIAL OR EVIDE NCE IS SOUGHT TO BE RELIED UPON 10 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. BY THE LD. AO, HE HAS TO CONFRONT THE ASSESSEE WITH THE MATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON MERE CONJECTUR ES UNVERIFIED BY EVIDENCE UNDER PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PR OBABILITIES AND THEORY OF HUMAN BEHAVIOUR BY THE DEPARTMENT. IT IS WELL SETTL ED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UN LESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT TH E EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITI ON. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECOR D BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSIONS OF THE ASSESSEE THAT HE IS JUST AN INVESTOR AND AS HE RECEIVED SOME TIPS AND HE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE PROCESS AND THAT HE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EV IDENCE WHEN A PERSON CLAIMS THAT HE HAS DONE THESE TRANSACTIONS IN A BONA FIDE MANNER, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. 8. IT WAS FURTHER SUBMITTED THAT A WRONG PERCEPTIO N HAS BEEN DRAWN BY LD. AO IN RESPECT OF ASTRONOMICAL RISE IN SHARE PRICE. THE L D. AO IN HIS ORDER, DOUBTED THE PRICE RISE OF M/S SAL OVER A VERY SHORT PERIOD OF J UST 15-18 MONTH. HE ALSO MENTIONED THAT THERE IS NOTHING WORTHWHILE TO MENT ION ON THE FRONT OF ASSETS AND NET WORTH OF THE COMPANY AS WELL, TO CONCLUDE THAT IT COULD COMMAND SUCH HIGH PREMIUMS LIKE BLUE CHIP COMPANIES. IT WAS ALSO FOUN D THAT DURING THE PERIOD OF ASTRONOMICAL RISE IN SHARES PRICE OF THE SCRIP THER E WAS NO CORPORATE ANNOUNCEMENT OR BIG ORDER OR ANY SUCH NEWS WHICH COULD RESULT IN TO SUCH FRENZY IN THE SCRIP PRICE. THE PRICE OF THE SCRIP IN THE SECONDARY MARKET MAIN LY DEPENDS UPON THE EPS, THE 11 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. BUSINESS HEALTH OF A COMPANY OR SOME NEW DEVELOPMEN T IN THE COMPANY WHICH PROMISES BRIGHT FUTURE FOR THE SHAREHOLDER. IT WAS SUBMITTED THAT THE FACTS THAT M/S SAL WAS TURNED FROM LOSS MAKING TO PROFIT EARNING I TSELF DEMONSTRATES THE FACTS THAT THERE WAS POTENTIAL IN SAL. FURTHER, THE TURNOVER O F THE COMPANY HAS BEEN SUBSTANTIALLY INCREASING FROM YEAR TO YEAR. AS SEEN IN THE ASSESSMENT ORDER, THE TURNOVER INCREASES BY 447 TIMES AT RS. 169.89 CRORE FROM RS.0.38 CRORE IN FY 2011- 12. CONSEQUENTLY THE RESULTANT PROFIT GREW UP BY RS . 1.45 CRORE FROM ZERO. MOREOVER, THE SHARE PRICE OF THE COMPANY DID NOT MOVE SO HIGH FROM THE AMALGAMATION. THE BROKER OF THE ASSESSEE SUGGESTED THE ASSESSEE THAT THE PRICE OF THE SHARE IS AT PEAK, HE SLOWLY SOLD ALL THE SHARES IN THE TIME SPAN OF S IX MONTHS. FURTHER AS FAR AS AO'S ALLEGATION IN RESPECT OF THE COMPANY HAS NO GOOD BU SINESS HEALTH AND FINANCIAL RATIOS IS CONCERNED, WE MAY SUBMIT THAT STOCK MARKET DOES NOT WORK ONLY ON THE BASIS OF FINANCIAL POSITION OF THE COMPANY BUT ALSO WORKS ON DEMAND& SUPPLY AND SPECULATIVE BASIS AND THERE ARE ENOUGH PRECEDENTS WHICH CAN BE SUBMITTED IN THIS REGARD. 9. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE S OLD THE SHARES OF LISTED COMPANY AFTER HOLDING THEM FOR MORE THAN ONE YEAR O N MUMBAI STOCK EXCHANGE THROUGH HIS BROKER M/ S MEHTA EQUITIES LIMITED AND STT WAS PAID ON SALE TRANSACTION. THUS, ALL THE CONDITIONS OF SECTION 10 (38) OF THE ACT ARE FULLY COMPLIED. HENCE, THE ASSESSEE BEING ELIGIBLE, RIGHTLY CLAIMED THE EXEMPTION OF LONG TERM CAPITAL GAINS U/S 10(38) OF THE ACT. IT WAS SUBMITT ED THAT THE LD. AO NOWHERE IN THE ASSESSMENT ORDER POINTED OUT NOR DISCUSSED NON FULF ILLMENT OR NON-COMPLIANCE OF ANY CONDITIONS OF SECTION 10(38) OF THE ACT. HENCE, REJ ECTING THE CLAIM U/S 10(38) OF THE 12 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ACT WITHOUT GIVING REASONS IS WRONG AND CONTRARY TO THE PROVISION OF LAW. IN SUPPORT OF HIS CONTENTIONS, HE HAS RELIED UPON THE FOLLOWIN G DECISIONS:- ANDAMAN TIMBER INDUSTRIES VS COMMISSIONER OF CENTRA L EXCISE [2015] 62 TAXMANN.COM 3(SC) CIT VS A.L LALPURIA CONSTRUCTION (P) LTD 32 TAXMANN .COM 384 (RAJ) CIT VS. SMT. POOJA AGARWAL (DBIT APPEAL NO. 209/201 8 DATED 11.09.2017) (RAJ HC) PCIT VS. SHRI PRAMOD JAIN & OTHERS (DBIT APPEAL NO. 385/2011 DATED 24.07.2018) (RAJ HC) ANRAJHIRALAL SHAH (HUF) VS ITO (4514/MUM/2018 DATED 16.07.2019) MEGRAJ SINGH SHEKHAWAT VS DCIT (ITA NO. 443 & 444/J P/2017 DATED 07.03.2018) ITO VS GAURAV BAGARIA (ITA NO. 550/JP/2019 DATED 10 .07.2019) DCIT VS SAURABH MITTAL (ITA NO. 16/JP/2018 DATED 29 .08.2018) ITO VS LALIT KUMAR BIYANI (ITA NO. 1153/JP/2019 DAT ED 03.02.2020) ANNOP JAIN VS ACIT [2020] 114 TAXMANN.COM 550 RAVINDRA KAJARIA VS ITO (ITA NO. 2412/KOL/2018 DATE D 23.08.2019) 10. PER CONTRA, THE LD. D/R HAS SUBMITTED THAT THE AO HAS DISCUSSED ALL THE RELEVANT FACTS IN THE ASSESSMENT ORDER AS WELL AS THE MODUS OPERANDI OF VARIOUS ENTRY PROVIDERS AS DETECTED BY THE DEPARTMENT DURING THE INVESTIGATION CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION, KOLKATA, DELHI ETC. A ND WHICH HAS BEEN UPHELD BY THE LD CIT(A) BY PASSING A DETAILED ORDER. THUS IT COMES TO THE LIGHT THAT LARGE SCALE MANIPULATION HAS BEEN DONE IN THE MARKET PRICE OF S HARES OF CERTAIN COMPANIES LISTED 13 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ON BOMBAY STOCK EXCHANGE BY A GROUP OF PERSONS WORK ING AS SYNDICATE FOR THE PURPOSE OF PROVIDING ENTRIES OF TAX EXEMPT BOGUS LO NG TERM CAPITAL GAINS TO LARGE NUMBER OF BENEFICIARIES IN LIEU OF UNACCOUNTED CASH . THUS, IN ORDER TO CONVERT BLACK MONEY INTO WHITE WITHOUT PAYMENT OF INCOME-TAX, A L ARGE NUMBER OF PERSONS ARE AVAILING ACCOMMODATION ENTRIES OF BOGUS LONG TERM C APITAL GAINS. THE LD. D/R HAS SUBMITTED THAT THE AO HAS DISCUSSED EACH AND EVERY ASPECT OF THE MODUS OPERANDI OF THE ENTRY PROVIDERS UNDER WHICH THE BENEFICIARIE S ARE ASKED TO BUY SOME SHARES OF PRE-DETERMINED PENNY STOCK COMPANY CONTROLLED BY TH EM AT A VERY NOMINAL PRICE MOSTLY OFF-LINE THROUGH PREFERENTIAL ALLOTMENT. TH E BENEFICIARIES HOLD THE SHARES FOR ONE YEAR TO AVAIL THE LONG TERM CAPITAL GAIN EXEMPT ION UNDER SECTION 10(38) OF THE IT ACT. IN THE MEANTIME, THE OPERATORS RIG THE PRI CE OF STOCK AND GRADUALLY RISE ITS PRICE MANY TIMES FROM 500 TO 1000 TIMES. THIS IS D ONE THROUGH LOW VOLUME TRANSACTION INDULGED IN BY THE DUMMIES OF THE OPERA TOR AT A PRE-DETERMINED PRICE. THUS THE LD. D/R HAS SUBMITTED THAT THE AO AFTER DI SCUSSING THE MODUS OPERANDI OF THE OPERATORS MINUTELY, HAS FOUND THE ASSESSEE IS O NE OF THE BENEFICIARIES OF AVAILING THE ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITA L GAIN AS THE ASSESSEE WAS ALLOTTED 158,400 SHARES OF M/S. SANTOSHIMATRADELINK S LTD. ON 08.10.2011 THROUGH PRIVATE PLACEMENT FOR RS 31,68,000/- WHICH IS AN OF F MARKET TRANSACTION NOT THROUGH THE RECOGNIZED STOCK EXCHANGE. THE ASSESSEE THEREA FTER SOLD EQUIVALENT SHARES OF M/S SUNRISE ASIAN LTD LISTED ON BOMBAY STOCK EXCHAN GE (ALLOTTED IN LIEU OF SHARES OF M/S. SANTOSHIMATRADELINKS LTD AFTER AMALGAMATION WI TH M/S. SANTOSHIMATRADELINKS LTD) FOR A CONSIDERATION OF RS 7,82,75,591/-. THUS THERE IS A STIFF RISE IN THE PRICE OF THE SHARES AT THE TIME OF SALE AS AGAINST THE ACQUI SITION COST WHICH CLEARLY SHOWS THAT THE TRANSACTION IS NOT GENUINE BUT IT IS A BOG US TRANSACTION OF ACCOMMODATION 14 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ENTRIES OF LONG TERM CAPITAL GAIN. THE LD. D/R HAS SUBMITTED THAT THE TRANSACTION THROUGH BANKING CHANNEL AND SALE OF SHARES ON THE S TOCK EXCHANGE IS NOT SACROSANCT TO HOLD THAT THE TRANSACTION IS GENUINE WHEN ALL OT HER SURROUNDING CIRCUMSTANCES INDICATE THAT THE ASSESSEE HAS OBTAINED ACCOMMODATI ON ENTRIES OF BOGUS CAPITAL GAIN IN RESPECT OF PENNY STOCK AND THE CIRCUMSTANTI AL EVIDENCE AND SURROUNDING CIRCUMSTANCES CANNOT THUS BE IGNORED. THUS THE AO HAS CLEARLY BROUGHT OUT THE CASE OF ACCOMMODATION ENTRIES OF BOGUS LONG TERM CA PITAL GAIN AND WHICH HAS BEEN RIGHTLY CONFIRMED BY THE LD CIT(A). IN SUPPOR T, RELIANCE WAS PLACED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF NAWABG ANJ SUGAR MILLS CO. LTD VS CIT [1972] 86 ITR 44. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SUMAN PODDAR VS. ITO, 112 TAX MANN.COM 329 (DELHI). THE LD. D/R HAS SUBMITTED THAT THE HONBLE HIGH COURT HAS C ONFIRMED THE DECISION OF THE TRIBUNAL WHEREBY THE LONG TERM CAPITAL GAINS CLAIME D BY THE ASSESSEE IN RESPECT OF PURCHASE AND SALE OF PENNY STOCK WERE TREATED AS BO GUS TRANSACTIONS BEING ACCOMMODATION ENTRIES. IT WAS SUBMITTED THAT THE S LP FILED BY THE ASSESSEE AGAINST THE JUDGMENT OF THE HONBLE DELHI HIGH COURT HAS BE EN DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN 112 TAXMANN.COM 330 (SC). FURTHER, RELIANCE WAS PLACED ON THE HONBLE GUHATI HIGH COURTS DECISION IN CASE OF CIT VS SMT. SANGHAMITRA BHARALI [2014] 50 TAXMANN.COM 47. IT WAS FURTHER S UBMITTED THAT IN CASE OF POOJA AGARWAL AND OTHER CASES RELIED UPON BY THE LD A/R, THE DECISIONS WERE MOSTLY BASED ON THE EVIDENCES IN THE FORM OF CONTRACT NOTES, TRA NSACTION ON THE STOCK EXCHANGE AND PAYMENTS THROUGH BANKING CHANNELS, HOWEVER, THE SURROUNDING CIRCUMSTANCES HAVE NOT BEEN APPRECIATED THEREIN. 15 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 11. THE LD A/R IN HIS REJOINDER SUBMITTED THAT THE DECISION RELIED UPON BY THE LD. D/R IN CASE OF SUMAN PODDAR VS. ITO (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE AS IN THE SAID CASE IT WAS A FINDIN G OF FACT BY THE TRIBUNAL HOLDING THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENC E OF ACTUAL SALE EXCEPT THE CONTRACT NOTES ISSUED BY THE SHARE BROKER WHEREAS I N THE CASE OF THE ASSESSEE, THE ASSESSEE PRODUCED ALL THE DOCUMENTARY EVIDENCES RIG HT FROM ALLOTMENT OF SHARES, HOLDING IN DEMAT ACCOUNT, PAYMENT OF PURCHASE CONSI DERATION AS WELL AS RECEIPT OF THE SALE CONSIDERATION THROUGH BANKING CHANNEL, THU S THE SAID DECISION CANNOT BE APPLIED IN THE PRESENT CASE. SIMILARLY, THE CASE OF CIT VS SMT. SANGHAMITRA BHARALI (SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE , NO DOCUMENTARY EVIDENCE WERE PRODUCED IN TERMS OF PURCHASE OF SHARES AND THE PRI CE PREVAILING AT THE TIME OF PURCHASE, PURCHASES WERE NOT DONE THROUGH THE BANK ACCOUNT OF THE ASSESSEE AND EVEN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR R ELEVANT TO YEAR OF PURCHASE WAS SUBMITTED AFTER THE DATE OF SALE OF SHARES AND ALSO THE FACT THAT THE DIRECTOR AND THE COMPANY WERE FOUND AT THE GIVEN ADDRESS AND THE SHA RE BROKER COULDNT SUBMIT ANY EVIDENCE EVEN FOR THE SALE OF SHARES, THE ASSESSING OFFICER TREATED THE CAPITAL GAINS AS BOGUS. ON THE OTHER HAND, THE DECISIONS OF THE H ONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL IN DBIT APPEA L NO. 209/2018 DATED 24.07.2018 AS WELL AS PCIT VS. SHRI PRAMOD JAIN & O THERS IN DBIT APPEAL NO. 385/2011 DATED 11.09.2011 ARE BINDING PRECEDENTS ON THIS ISSUE. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS DOUBTED THE TRANSACTIONS OF PUR CHASE AND SALE OF SHARES BY THE ASSESSEE OF M/S. SUNRISE ASIAN LTD BASED ON THE INV ESTIGATION CARRIED OUT BY THE 16 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. INVESTIGATION WING, KOLKATA WHEREIN CERTAIN PERSONS WERE FOUND INDULGED IN PROVIDING ACCOMMODATION ENTRIES, INTER-ALIA BOGUS L ONG TERM CAPITAL GAINS WHICH IS CLAIMED AS EXEMPT UNDER SECTION 10(38) OF THE ACT B Y THE BENEFICIARIES IN ORDER TO FACILITATE THE BENEFICIARIES TO CONVERT THEIR BLACK MONEY INTO WHITE WITHOUT PAYING INCOME-TAX. THE AO HAS NARRATED THE MODUS OPERANDI OF VARIOUS ENTRY PROVIDERS WHICH IS A GENERAL STATEMENT SO FAR AS THE INDULGEN CE OF CERTAIN PERSONS IN PROVIDING THE ACCOMMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAINS AS WELL AS OTHER TRANSACTIONS. HOWEVER, IN THE SAID NARRATION OF MO DUS OPERANDI, THERE IS NOTHING AGAINST THE PARTICULAR TRANSACTION OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE. THE AO HAS SPECIFICALLY MENTIONED THAT DURING THE C OURSE OF ENQUIRY IN CERTAIN CASES IT HAS COME TO LIGHT THAT LARGE SCALE MANIPULATION HAS BEEN DONE IN THE MARKET PRICE OF SHARES OF CERTAIN COMPANIES LISTED ON STOCK EXCH ANGE BY A GROUP OF PERSONS WORKING AS A SYNDICATE FOR THE PURPOSE OF PROVIDING ENTRY OF TAX EXEMPT BOGUS LONG TERM CAPITAL GAINS TO LARGE NUMBER OF BENEFICIARIES IN LIEU OF UNACCOUNTED CASH. THESE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDE R CANNOT CONSTITUTE ANY TANGIBLE MATERIAL OR EVIDENCE TO SHOW THAT THE TRANSACTION O F THE ASSESSEE IS BOGUS BEING AN ACCOMMODATION ENTRY. THE AO IN THE SHOW CAUSE NOTIC E HAS STATED THAT INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATION WING, KOLK ATA VIDE LETTER DATED 27.04.2015 THAT SUNRISE ASIAN LTD IS ENGAGED IN GIVING ENTRIES OF BOGUS LTCG AND FURTHER, ENQUIRIES WERE MADE IN THE MATTER AND IT WAS FOUND THAT BSE VIDE NOTICE NO. 2016110726 HAS DECLARED SUNRISE ASIAN LTD TO BE SUS PENDED DUE TO DIRECTION FROM SEBI. IN REPLY TO THE SHOW-CAUSE, THE ASSESSEE VID E LETTER DATED 13.12.2016 HAS SPECIFICALLY REQUESTED FOR SUCH INFORMATION/DOCUMEN TS/STATEMENTS AND DETAILS OF 17 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ENQUIRY WHICH HAS BEEN CONDUCTED BY THE AO AS APPAR ENT FROM HIS REPLY AND THE CONTENTS THEREOF READ AS UNDER: THIS REFERS TO YOUR SHOW CAUSE NOTICE (SCN) DATED 08.12.2016 WHEREIN YOUR GOODSELF HAS ASKED THE ASSESSEE TO JUSTIFY AS TO WH Y THE LONG TERM CAPITAL GAIN (LTCG) AND THE INVESTMENT MADE BY THE ASSESSEE IN THE TRANSACTIONS OF EQUITY SHARES OF M/S SUNRISE ASIAN LTD. (SUNRISE) S HOULD NOT BE TREATED AS BOGUS AND ADDED BACK TO THE INCOME OF THE ASSESSEE. IN CONNECTION WITH THE SAME, THE ASSESSEE WOULD LIKE TO SUBMIT AS UNDER 1. A PERUSAL OF THE SCN SHOWS THAT IN PARA 1 OF THE SCN, YOUR GOODSELF HAS NOTED THE FOLLOWING BASIS TO TREAT THE SAID TRA NSACTIONS AS BOGUS: (I) INFORMATION RECEIVED FROM INVESTIGATION WING, K OLKATA VIDE LETTER DATED 27.04.2015, WHEREIN IT WAS STATED THAT SUNRISE ASIA N LTD IS ENGAGED IN GIVING ACCOMMODATION ENTRIES OF LTCG. (II) ENQUIRIES WERE MADE IN THE MATTER AND IT WAS FOUND THAT BSE DECLARED SUNRISE ASIAN LTD., TO BE SUSPENDED DUE TO DIRECTIO N FROM SEBI. 2. BEFORE FURNISHING OUR EXPLANATION IN RESPECT OF THE AFORESAID NOTES IN PARA 1 OF THE SCN, WE WOULD LIKE TO STATE THAT THOU GH YOUR GOODSELF HAS DOUBTED THE GENUINENESS OF THE TRANSACTIONS ON THE BASIS OF INFORMATION RECEIVED, IT APPEARS FROM THE SCN THAT YOUR GOODSEL F IS NOT DOUBTING THE COMPUTATION PART OF THE CAPITAL GAIN TRANSACTION AN D ITSEXEMPTION U/S 10(38) READ WITH SECTION 2(29A) AND SECTION 2(29B). WE MAY ALSO STATE HERE THAT IN THE ASSESSEE'S TRANSACTION OF LTCG, THE SALE CONSID ERATION RECEIVED IS RS.7,82,75,591 PURSUANT TO SALE OF LISTED SCRIPTS O F SUNRISE BETWEEN 19.09.2013 - 25.03.2014 AND THE AMOUNT OF CAPITAL G AIN AS COMPUTED BY THE 18 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ASSESSEE IS RS.7,51,07,591/- AFTER TAKING INTO CONS IDERATION THE COST OF PURCHASES OF THOSE SCRIPTS ON 5.11.2011. SECURITIES TRANSACTION TAX HAS BEEN DULY PAID ON SUCH TRANSACTION AND THE INFORMATION I S AVAILABLE AS PER THE RECORDS ALREADY SUBMITTED. ALL THE TRANSACTIONS ARE THROUGH BANKING CHANNELS AND VIA MEANS AND PROCESS WHICH IS JUSTIFIED FOLLOW ING ALL RELEVANT LAWS, RULES AND PROCEDURES. THE RELATED DOCUMENTS HAVE ALREADY BEEN SUBMITTED AND NO DISCREPANCY THEREIN HAS BEEN POINTED OUT BY YOUR GO ODSELF IN THE SAME. 3. YOUR GOODSELF HAS REFERRED TO CERTAIN INFORMATI ON RECEIVE VIDE LETTER NO. DATED 27-04-2015 WHEREIN IT WAS STATED THAT SUNRISE ASIAN LTD IS ENGAGED IN GIVING ACCOMMODATION ENTRIES. WE MAY SUBMIT THAT TH E SAME IS NOT SUFFICIENT TO MAKE ADDITION IN THIS CASE FOR FOLLOWING REASONS : I) THE INFORMATION GATHERED HAS NEITHER BEEN MADE A VAILABLE NOR CONFRONTED WITH THE ASSESSEE. II) NOTHING IN YOUR LETTER STATES THAT WHY AND HOW IT IS FOUND THAT SUNRISE ASIAN LTD IS ENGAGED IN GIVING ENTRIES OF BOGUS LTC G. III) NOTHING HAS BEEN STATED TO SHOW THE INFORMATIO N WHERE ASSESSEE'S NAME IS APPEARING AS BENEFICIARY OF ACCOMMODATION E NTRY. IV) NOTHING HAS BEEN SHOWN THAT THE INFORMATION REF ERS TO ANY MATERIAL SHOWING RECORD OF CASH TRANSACTION ENTERED IN TO BY THE ASSESSEE IN LIEU OF RECEIVING CONSIDERATION FOR SALE/TRANSFER OF SHARES OF SUNRISE ASIAN LTD. V) YOUR GOODSELF APPEARS TO NEITHER MADE ANY FURTHE R ENQUIRY OVER AND ABOVE INFORMATION RECEIVED NOR APPLIED 'ANY MIND ON THEINFORMATION RECEIVED SO AS TO MAKE A CONCLUSIVE CONNECTION OF THE SAME W ITH THE ASSESSEE'S TRANSACTION. 19 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. VI) IT APPEARS THAT YOUR GOODSELF HAS SOME GENERALI SE INFORMATION IN HAND RATHER THAN ANY SPECIFIC INFORMATION PERTAINING TO ASSESSEE'S TRANSACTION. IF YOUR GOODSELF HAS ANY INFORMATION IN THIS REGARD, I T IS REQUESTED TO KINDLY PROVIDE THE SAME, OTHERWISE, IN ABSENCE OF ANY SUCH INFORMATION NO ADDITION CAN BE MADE BY TREATING THE CAPTIONED TRANSACTION A S NON GENUINE TRANSACTION. VII) EVEN IF IN THE DEPARTMENTAL ACTIONS, IT IS FOU ND THAT CERTAIN TRANSACTION IN SHARES OF SUNRISE ASIAN LTD ARE NON GENUINE, THE SAID FINDING BY ITSELF CANNOT BE A REASON' FOR CONCLUDING THAT THE ASSESSE E'S TRANSACTION IS ALSO NOT GENUINE UNLESS SOME CONCRETE AND SPECIFIC EVIDENCE IS BROUGHT ON RECORD SO AS TO PROVE THAT ASSESSEE'S TRANSACTION OF INCURRIN G LTCG WAS MERELY AN ACCOMMODATION ENTRY. 13. WE HOWEVER, FIND THAT NO SUCH INFORMATION/DOCU MENTS/STATEMENTSWAS MADE AVAILABLE TO THE ASSESSEE THEREBY VIOLATING THE BAS IC PRINCIPLE OF CONFRONTING THE ASSESSEE WITH THE DOCUMENTS WHICH THE REVENUE WISHE S TO RELY AGAINST THE ASSESSEE. FURTHER, IT IS NOTED THAT IN THE ASSESSME NT ORDER SO PASSED, THE AO HAS MADE REFERENCE TO A STATEMENT OF SHRI VIPUL VIDUR B HATT RECORDED U/S 132 DURING CERTAIN SEARCH OPERATIONS BY THE INVESTIGATION WING , MUMBAI AND HAS RELIED ON THE SAME FOR HOLDING THE TRANSACTION AS BOGUS BY AVAILI NG THE ACCOMMODATION ENTRY OF LONG TERM CAPITAL GAIN AND BENEFICIARY OF THE BOGUS LTCG SCAM.AS THE ASSESSEE WAS AGAIN NOT CONFRONTED WITH SUCH STATEMENT DURING THE SHOW-CAUSE NOTICE AND HE CAME TO KNOW OF THE SAME FROM PERUSAL OF THE ASSESS MENT ORDER, HE RAISED THE OBJECTION BEFORE THE LD CIT(A) THAT NO SUCH STATEME NT OF SHRI VIPUL VIDUR BHATT RECORDED U/S 132 WAS MADE AVAILABLE TO HIM DURING T HE COURSE OF ASSESSMENT 20 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. PROCEEDINGS AND SECONDLY, HE DESERVES A RIGHT TO CR OSS-EXAMINE SHRI VIPUL VIDUR BHATTWHOSE STATEMENT IS BEING USED AGAINST THE ASSE SSEE. HOWEVER, WE FIND THAT EVEN DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE WAS NOT MADE AVAILABLE ANY SUCH STATEMENT AND EVEN THE RIGHT OF CROSS EXAMINAT ION WAS DENIED BY THE LD CIT(A) WHO EXERCISES THE CO-TERMINUS POWERS AS THAT OF THE AO. THUS, IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF CIT VS A.L LALPURIA CONSTRUCTION (P) LTD (SUPRA) AND THE DECISION OF TH E HONBLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA), THE A SSESSMENT BASED ON STATEMENT OF THIRD PARTY WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE IS NOT SUSTAINABLE IN LAW. THE HONBLE SUPREME COURT IN CASE OF ANDAMAN TIMBER (SUPRA) WHILE DEALING WITH THE ISSUE HAS HELD IN PARA 5 TO 8 AS UNDER:- '5. WE HAVE HEARD MR.KAVINGULATI, LEARNED SENIOR CO UNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNANA, LEARNE D SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 6.ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CRO SS-EXAMINE THE WITNESS BY THE ADJUDICATING AUTHORITY THOUGH THE ST ATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNT ED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER AS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TW O WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE S TATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE AS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY TH E ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AF ORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTE NABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DE ALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH COULD NOT BE IN POSS ESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX- FACTORY PRICES REMAIN STATIC. IT WAS NO FOR THE TRIBUNAL TO HAVE GUESS WO RK AS TO FOR WHAT 21 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALER AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAI L THE OPPORTUNITY OF CROSS EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEP OT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETH ER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUB JECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICA TING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER O F THE CROSS- EXAMINATION AND MADE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATT ER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000 , ORDER DATED 17.2.2005 WAS PASSED REMITTING THE CASE BACK THE TRIBUNAL WIT H THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MA TERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY I TS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ON LY BASIS OF ISSUING THE SHOW CAUSE NOTICE.' 14. THEREFORE, THE STATEMENT OF A THIRD PARTY CANNO T BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EX AMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY.EV EN ON PERUSAL OF SUCH STATEMENT OF SHRI SHRI VIPUL VIDUR BHATT, WE FIND THAT IT IS A G ENERAL STATEMENT OF PROVIDING BOGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS W ITHOUT STATING ANYTHING ABOUT THE TRANSACTION OF ALLOTMENT OF SHARES BY THE COMPANY T O THE ASSESSEE. THE AO HAS EITHER DISCUSSED THE MODUS OPERANDI OF ENTRY PROVID ERS AND THEIR STATEMENTS BUT HAS NOT MADE ANY REFERENCE OF ANY MATERIAL OR DOCUMENTA RY EVIDENCE WHICH REVEALS THAT THE ASSESSEE HAS INDULGED IN AVAILING THE ACCOMMODA TION ENTRY OF BOGUS LONG TERM 22 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. CAPITAL GAIN. THERE IS NO DISPUTE THAT ONCE THE AS SESSEE HAS CLAIMED THE LONG TERM CAPITAL GAIN FROM PURCHASE AND SALE OF SHARES WHICH IS EXEMPT UNDER SECTION 10(38) OF THE ACT, THE PRIMARY ONUS IS ON THE ASSESSEE TO SUBSTANTIATE HIS CLAIM BY PRODUCING THE SUPPORTING EVIDENCE. WE FIND THAT IN THE CASE IN HAND THIS IS NOT AN ISOLATED TRANSACTION OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE OF M/S. SUNRISE ASIAN LTD BUT THE ASSESSEE HAS BEEN REGULARLY PURCH ASING AND SELLING THE SHARES AS IT IS EVIDENT FROM THE DETAILS OF THE HOLDING OF VARIO US SHARES AS REFLECTED IN THE 23 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. FINANCIAL STATEMENTS AS ON 31 ST MARCH, 2013 AS UNDER :- 24 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 15. THUS AS ON 31.03.2013, THE ASSESSEE WAS HOLDING THE SHARES OF ABOUT 12 COMPANIES WHICH INCLUDE SHARES OF M/S. SANTOSHIMATR ADELINKS LTDWORTH RS 31,68,000/- WHICH WERE ACQUIRED IN THE FINANCIAL YEAR 2011-12 AND SIMILARLY REFLECTED IN THE BALANCE SHEET AS ON 31.03.2012. W E FIND THAT THE ASSESSEE HAS DULY REFLECTED ALL THESE SHARES IN THE BALANCE SHEET AS ON 31.03.2012 AS WELL AS 31.03.2013 AND THE RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2012-13 AND 2013-14 WAS ALSO FILED IN TIME BEFORE THE DATE OF SALE OF T HE SHARES STARTING SEPTEMBER 2013 ONWARDS IN VARIOUS LOTS TILL MARCH 2014. THUS IT IS CLEAR THAT 158400 SHARES ACQUIRED BY THE ASSESSEE ON 08.10.2011 WERE REFLECTED IN THE BALANCE SHEET AS ON 31 ST MARCH, 2013. WE FURTHER NOTE THAT THE ASSESSEE PRODUCED T HE COPY OF ALLOTMENT ADVICE OF THESE SHARES ISSUED BY THE COMPANY ALONG WITH THE B ANK STATEMENT SHOWING THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE THROUGH CHEQUE WHEREBY THE SHARES WERE ALLOTTED OF FACE VALUE OF RS 10/- AT A PREMIUM OF RS 10/- EACH. THE BANK ACCOUNT OF THE ASSESSEE HAS REFLECTED THE PAYMENT O F RS. 31,68,000/- FOR PURCHASE OF SHARES. THE AO HAS NOT DISPUTED THAT SUBSEQUENT LY THERE WERE EVENTS OF AMALGAMATION OF THE COMPANY WITH M/S. SUNRISE ASIA N LTD. PURSUANT TO SCHEME OF AMALGAMATION DULY APPROVED BY THE HONBLE HIGH COUR T OF MUMBAI AND CONSEQUENTLY THE ASSESSEE WAS ALLOTTED 158,400 SHARES OF M/S SUN RISE ASIAN LTD AS AGAINST 158,400 SHARES OF M/S. SANTOSHIMATRADELINKS LTD ORI GINALLY ALLOTTED BY THE COMPANY. THE SHARES ACQUIRED BY THE ASSESSEE ARE DULY REFLEC TED IN THE DEMAT ACCOUNT OF THE ASSESSEE. ONCE THE SHARES ARE DEMATERIALIZED AND C REDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE, THE HOLDING OF THE SHARES BY THE ASSE SSEE CANNOT BE DISPUTED. THE AO HAS TREATED THE TRANSACTION OF SALE OF 158400 SHARE S AS BOGUS BEING ACCOMMODATION ENTRY BUT HAS NOT DOUBTED THE HOLDING OF THESE SHAR ES IN THE DEMAT ACCOUNT OF THE 25 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ASSESSEE. ONCE THE ASSESSEE HAS PRODUCED ALL THE SU PPORTING EVIDENCES WHICH INCLUDE ALLOTMENT ADVICE, BANK STATEMENT SHOWING TH E PAYMENT OF PURCHASE CONSIDERATION, DEMAT ACCOUNT SHOWING HOLDING OF SHA RES IN THE DEMAT ACCOUNT, SALE OF THE SHARES THROUGH STOCK EXCHANGE WHICH ARE ALSO REFLECTED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND RECEIPT OF THE SALE CONSIDERATI ON IN THE BANK ACCOUNT OF THE ASSESSEE AS IT IS EVIDENT FROM THE BANK ACCOUNT STA TEMENT OF THE ASSESSEE, THEN IN THE ABSENCE OF ANY CONTRARY MATERIAL OR EVIDENCE BR OUGHT ON RECORD BY THE AO, THE TRANSACTION OF PURCHASE AND SALE OF THE SHARES IN Q UESTION CANNOT BE HELD AS BOGUS MERELY ON THE BASIS OF THE INVESTIGATION CARRIED OU T BY THE DEPARTMENT IN SOME OTHER CASES WHERE SOME PERSONS WERE FOUND INDULGED IN PRO VIDING ACCOMMODATION ENTRY. THE AO IN THE ENTIRE ASSESSMENT ORDER HAS NOT MADE REFERENCE TO SINGLE DOCUMENTARY EVIDENCE WHICH CAN BE SAID TO BE AN INC RIMINATING MATERIAL AGAINST THE ASSESSEE TO SHOW THAT THE ASSESSEE HAS AVAILED ACCO MMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAIN. THEREFORE, THE MERE SUSPICION C ANNOT BE A GROUND FOR TREATING THE TRANSACTION AS BOGUS IN THE ABSENCE OF ANY EVID ENCE OR MATERIAL ON RECORD. 16. THE LD. D/R HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SUMAN PODDAR VS. ITO (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS CONFIRMED THE FINDING OF THE TRIBUNAL AND FINALLY O BSERVED IN PARA 8 AS UNDER :- 8. FROM THE ABOVE EXTRACT, IT WOULD BE SEEN THAT THE CRESSANDA SOLUTIONS LTD. WAS IN FACT IDENTIFIED BY THE BOMBAY STOCK EXCHANGE AS A PENNY STOCK BEING USED FOR OBTAINING BOGUS LONG T ERM CAPITAL GAIN. NO EVIDENCE OF ACTUAL SALE EXCEPT THE CONTRACT NOTE S ISSUED BY THE SHARE BROKER WERE PRODUCED BY THE ASSESSEE. NO QUE STION OF LAW, 26 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. THEREFORE ARISES IN THE PRESENT CASE AND THE CONSIS TENT FINDING OF FACT RETURNED AGAINST THE APPELLANT ARE BASED ON EVIDENC E ON RECORD. THUS IT IS CLEAR THAT IN THE SAID CASE THE TRIBUNAL S FINDING IS BASED ON THE FACT THAT NO EVIDENCE OF ACTUAL SALE EXCEPT THE CONTRACT NOTE S ISSUED BY THE SHARE BROKER WAS PRODUCED BY THE ASSESSEE. IN THOSE FACTS, THE HON BLE HIGH COURT HAS HELD THAT NO QUESTION OF LAW ARISES IN THE SAID CASE. ON THE CO NTRARY, IN THE CASE IN HAND THE ASSESSEE PRODUCED ALL THE RELEVANT DOCUMENTARY EVID ENCE TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. EVEN IF THE AO DOU BTED THE TRANSACTION, THEN TO ESTABLISH THAT THE TRANSACTION IS BOGUS, THE AO IS REQUIRED TO PRODUCE THE CONTRARY MATERIAL EVIDENCE SO THAT THE EVIDENCE PRODUCED BY THE ASSESSEE CAN BE CONTROVERTED. IN THE ABSENCE OF SUCH CONTRARY MATE RIAL OR EVIDENCE BROUGHT ON RECORD BY THE AO AND THE EVIDENCE PRODUCED BY THE A SSESSEE IS OTHERWISE INDEPENDENTLY VERIFIABLE BEING THE DOCUMENTS IN THE SHAPE OF ALLOTMENT ADVICE, BANK STATEMENT, DEMAT ACCOUNT, BOOKS OF ACCOUNT AND CONT RACT NOTES FOR WHICH THE ASSESSEE HAS NO CONTROL OR SAY, THEREFORE, THE SAID EVIDENCE CANNOT BE MANIPULATED BY THE ASSESSEE. ONCE THE EVIDENCE PRODUCED BY THE ASSESSEE IS NOT PREPARED OR BEYOND THE SCOPE OF ANY MANIPULATION BY THE ASSESSE E, THEN THE ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE THE TRANSACTION OF PUR CHASE AND SALE OF SHARES AND CONSEQUENTIAL CAPITAL GAIN. AS WE HAVE ALREADY MEN TIONED THAT THIS IS NOT AN ISOLATED TRANSACTION OF PURCHASE AND SALE OF SHARES IN SINGLE SCRIP, BUT THE ASSESSEE HAS BEEN HOLDING THE SHARES OF 12 COMPANIES OUT OF WHICH THE AO HAS DOUBTED ONLY ONE SCRIP. THUS THE DECISION OF HONBLE DELHI HIGH COURT WILL NOT HELP THE CASE OF THE DEPARTMENT. 27 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 17. THE LD. D/R HAS ALSO RELIED UPON THE DECISION OF HONBLE GUAHATI HIGH COURT IN CASE OF CIT VS SMT. SANGHAMITRA (SUPRA). IN THAT CASE, THE AO, IN THE ORDER OF ASSESSMENT, NOTED THAT THOUGH THE SHARES WERE SOLD THROUGH BANK ACCOUNT OF THE ASSESSEE, PURCHASE OF SHARES WERE NOT MADE THROUGH THE BANK ACCOUNT OF THE ASSESSEE. THE AO ALSO OBSERVED THAT SINCE THE RETUR N FOR THE ASST. YR. 2000-01 RELEVANT TO THE YEAR OF PURCHASE, WAS FILED AFTER T HE DATE OF SALE AND THAT PURCHASE OF SHARES WAS NOT DONE THROUGH THE BANK ACCOUNT OF THE ASSESSEE, THE ACTUAL EVENT OF PURCHASE OF THE SHARES OF ASSESSEE COULD NOT BE VERIFIED AND, THEREFORE, IT WAS APPARENTLY AN AFTERTHOUGHT AND A MODUS OPERANDI ADO PTED TO CONVERT THE UNDISCLOSED INCOME INTO 'CAPITAL GAIN'. THE DIRECTO R OF THE COMPANY WAS ALSO SUMMONED, BUT NO SUCH PERSON WAS FOUND AVAILABLE AT THE ADDRESS OF THE COMPANY OBTAINED FROM GUWAHATI STOCK EXCHANGE AND NO COMPAN Y BY NAME OF BIRDHICHAND PANNALAL AGENCY WAS IN EXISTENCE AT THE SAID GIVEN ADDRESS. THE SHARE BROKER WAS ALSO EXAMINED UNDER SECTION 131 AND IN COURSE OF EX AMINATION, HE STATED THAT ALL RECORDS OF PURCHASE AND SALE OF SHARES WERE LOST AN D THUS, THE ACTUAL PURCHASE AND SALE OF SHARES COULD NOT BE VERIFIED. THE AO, THER EFORE, TREATED THE 'CAPITAL GAIN' AS BOGUS AND DISALLOWED THE LONG-TERM 'CAPITAL GAIN', SOUGHT TO BE EXEMPTED UNDER S. 54 OF THE ACT, TO THE TUNE OF RS. 15,33,160 AND ADD ED BACK THE SAME AS INCOME FROM UNDISCLOSED SOURCES'. IN THE CONTEXT OF SAID F ACTS, IT WAS HELD BY THE HONBLE HIGH COURT THAT WHERE NO DOCUMENTS COULD BE PRODUCE D IN SUPPORT OF PURCHASE AND SALE OF SHARES AND THE TRANSACTION COULD NOT BE VER IFIED, THAT IN SUCH SITUATIONS, THE GENUINENESS OF THE TRANSACTION HAS TO BE EXAMINED F ROM THE SURROUNDING CIRCUMSTANCES AND HAS HELD AS UNDER: 28 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 35. IN THE PRESENT CASE, THE ASSESSEE HAS NOT BEEN ABL E TO PROVE THAT THE SHARES WERE PURCHASED, ON 12TH NOV., 1999, IN AS MUCH AS THERE IS NO DOCUMENTARY EVIDENCE PROVING THE SAID FACT IN AS MUCH AS THE SAID PURCHA SE WAS MADE IN CASH. FURTHER, THE ASSESSEE HAS ALSO NOT BEEN ABLE TO SHOW THAT THE SA ID SHARES WERE LISTED IN THE STOCK MARKET @ RS. 2.50, ON THE DAY OF PURCHASE, IN AS MU CH AS THE ASSESSEE HAS PRODUCED THE QUOTATION OF THE SHARES AS ON THE DATE OF SALE, ISSUED BY THE GUWAHATI STOCK EXCHANGE, BUT NO SUCH QUOTATION, ON THE DATE OF PUR CHASE, WAS PRODUCED BY THE ASSESSEE. 36. THERE IS NO DISPUTE THAT THE SALE AMOUNT WAS RECEI VED BY THE ASSESSEE THROUGH BANK; BUT WHAT IS DISPUTED IS AS TO WHETHER THE LON G-TERM 'CAPITAL GAIN', CLAIMED BY THE ASSESSEE, WAS REALLY A LONG-TERM 'CAPITAL GAIN' OR NOT. 40. HOWEVER, IN THE CASE IN HAND, THE ASSESSEE, ALTHOU GH HAS PRODUCED DOCUMENTARY EVIDENCE TO SHOW THAT SHARES WERE SOLD AT A PRICE P REVAILING IN THE STOCK MARKET ON THE DATE OF SALE, BUT NO DOCUMENTARY EVIDENCE WERE PROD UCED TO SHOW THAT ON THE DATE OF PURCHASE, THE MARKET PRICE OF THE SHARES WAS SAME A T WHICH THE SHARES WERE CLAIMED TO HAVE BEEN PURCHASED. 41. NO DOUBT, APPARENT MUST BE CONSIDERED REAL UNTIL I T IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AN D FOR THAT PURPOSE, TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE EXAMINED AND CONSI DERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. 42. IN THE PRESENT CASE, THE FACTS THAT TWO DIFFERENT ADDRESSES WERE GIVEN OF THE COMPANY, ONE IN GAUHATI STOCK EXCHANGE AND THE OTHE R IN THE OFFICE OF ROC, NO SUCH COMPANY WAS FOUND TO BE IN EXISTENCE AT BOTH THE PL ACES, THE ASSESSEE HAD FAILED TO FURNISH THE ADDRESS OF THE COMPANY AND THE NOTICE S ENT TO THE DIRECTOR OF THE COMPANY WAS RETURNED ON THE GROUND THAT NO SUCH PERSON WAS FOUND AVAILABLE AT THE ADDRESS OF THE COMPANY, THE CLAIM THAT SHARES OF THE COMPANY R OSE FROM RS. 2.50 TO RS. 67.97 WITHIN A SPAN OF ONE YEAR, WHEN THE PROFIT, UPON PA YMENT OF TAX OF THE COMPANY FOR 3 YEARS, WAS NEGLIGIBLE AND NO DIVIDEND COULD BE DECL ARED, BECAUSE OF THE INADEQUACY OF PROFITS, COUPLED WITH THE FACTS THAT THE PURCHAS E OF SHARES WAS MADE IN CASH, THE SHARE BROKER FAILED TO PRODUCE THE RECORDS RELEVANT TO THE PURCHASE AND SALE OF SHARES ON THE GROUND THAT THE SAME WERE LOST, THE SHARE QU OTATION PRICE OF THE PURCHASE WAS NOT PRODUCED BEFORE ANY AUTHORITY, THE RETURN OF IN COME, RELEVANT TO THE PURCHASE AND SALE OF SHARES WAS FILED AFTER THE TRANSACTION OF S ALE, AS CLAIMED, WAS OVER, ARE CLEARLY RELEVANT CIRCUMSTANCES POINTING OUT TOWARDS THE FAC T THAT THE TRANSACTION WAS NOT GENUINE AND THE SAME WAS AN AFTERTHOUGHT AND A SORT OF MODUS OPERANDI TO CONVERT THE UNDISCLOSED INCOME INTO A 'CAPITAL GAIN'. 43. FROM THE FACTS AND CIRCUMSTANCES NARRATED ABOVE, I T CANNOT BE SAID THAT THE EXPLANATION OFFERED BY THE ASSESSEE, AS REGARDS LON G-TERM 'CAPITAL GAIN' WAS REJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMO UNT WAS NOT ON ACCOUNT OF LONG- TERM 'CAPITAL GAIN' IS BASED ON NO EVIDENCE. 44. HAVING CONSIDERED THE FACTS AND THE CIRCUMSTANCES AND THE MATERIALS AVAILABLE ON RECORD, AN INFERENCE CAN BE REASONABLY DRAWN THAT I N REALITY, THE TRANSACTION WAS BOGUS AND IT WAS SIMPLY A SORT OF MODUS OPERANDI TO CONVERT THE UNDISCLOSED INCOME INTO A LONG-TERM 'CAPITAL GAIN' CLAIMING THE SAME T O BE EXEMPTED. 29 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 18. ON THE CONTRARY, IN THE CASE IN HAND THE ASSESS EE PRODUCED ALL THE RELEVANT DOCUMENTARY EVIDENCE TO ESTABLISH THE GENUINENESS O F THE TRANSACTION WHICH ARE OTHERWISE INDEPENDENTLY VERIFIABLE BEING THE DOCUME NTS IN THE SHAPE OF ALLOTMENT ADVICE, BANK STATEMENTS SHOWING PAYMENT TOWARDS THE PURCHASE AND SALE RECEIPTS, DEMAT ACCOUNT STATEMENT REFLECTING THE PURCHASE, CO NVERSION AND SUBSEQUENT SALE OF SHARES, FINANCIAL STATEMENTS AND BOOKS OF ACCOUN T AND THE RETURN OF INCOME RELEVANT FOR THE ASSESSMENT YEAR PERTAINING TO YEAR OF PURCHASE AND YEAR OF SALE, THE CONTRACT NOTES REFLECTING THE TRANSACTION EXECUTED AS PER PRICE PREVAILING ON THE STOCK EXCHANGE. WE THEREFORE FIND THAT UNLESS THES E DOCUMENTARY EVIDENCE ARE PROVED OTHERWISE OR ANY CONTRARY EVIDENCE BROUGHT O N RECORD, THE ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE THE TRANSACTION OF PUR CHASE AND SALE OF SHARES AND CONSEQUENTIAL CAPITAL GAIN. THUS THE DECISION OF H ONBLE GAUHATI HIGH COURT WILL NOT HELP THE CASE OF THE DEPARTMENT. 19. THERE IS ANOTHER DECISION OF THE JURISDICTIONAL HONBLE RAJASTHAN HIGH COURT IN CASE OF PRAMOD JAIN (SUPRA) RELIED UPON BY THE LD A/R WHERE THE HONBL E HIGH COURT HAS REFERRED TO ITS EARLIER DECISION IN CASE OF CIT VS. SMT. POOJA AGRAWAL (SUPRA) AND HAS AFFIRMED THE FINDINGS OF THE COORDI NATE BENCH AND HELD THAT NO QUESTION OF LAW ARISES AND HAS DISMISSED THE APPEAL OF THE REVENUE. THE RELEVANT FINDINGS OF THE COORDINATE BENCH ARE CONTAINED AT P ARA 6 TO 8 AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE PURCHASES 800 EQUITY SHARE S M/S GRAVITY BARTER LTD. FOR A CONSIDERATION OF RS. 4 LACS THE ASSESSEE HAS PRODUCED THE PURCHASE BILL OF THE SHARES PURCHASE FROM M/S WINALLVINIMAY PVT. LTD. WHICH SHOWS THAT THE 30 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ASSESSEE PURCHASE 800 EQUITY SHARES HAVING FACE VAL UE OF RS. 10/- EACH M/S GRAVITY BARTER PVT. LTD. IN ALLOTS OF 400 EACH FOR A CONSIDERATION OF RS. 2 LACS EACH TOTAL AMOUNT TO RS. 4 LACS @ RS. 500 PER SHARE S. THE PURCHASE PRICE OF RS. 500 PER SHARE ITSELF SHOWS THAT IT WAS NOT A TR ANSACTION OF PURCHASE OF PENNY STOCK. THESE SHARES WERE DULY REFLECTED IN TH E BALANCE SHEET AS 31.03.2011. THE PAYMENT OF THE PURCHASE CONSIDERATI ON WAS MADE BY THE ASSESSEE VIDE CHEQUE ON 17.05.2011 WHICH IS EVIDENT FROM THE BANK ACCOUNT OF THE ASSESSEE AT PAGE 40 OF THE PAPER BOOK. IN T HE MEAN TIME THE SAID M/S GRAVITY BARTER PVT. LTD. CHANGED ITS STATUS FROM PR IVATE LIMITED TO A PUBLIC LIMITED AND FRESH CERTIFICATE WAS ISSUED BY THE REG ISTRAR OF COMPANY ON 05.02.2011 WHICH IS PLACED AT PAGE 43 OF THE PAPER BOOK. THEREFORE, THERE IS NO REASON TO DISBELIEF THE FACT OF FRESH CERTIFICAT E ISSUED BY THE REGISTRAR OF COMPANIES ON 05.02.2011 AND HENCE, THE DATE MENTION ED IN THE ORDER OF THE HONBLE KOLKATA HIGH COURT AS 18.04.2011 APPEARS TO BE TYPOGRAPHICAL MISTAKE. EVEN OTHERWISE THESE TWO DATES DO NOT HAVE ANY EFFECT ON THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF EQUI TY SHARES BY THE ASSESSEE OF M/S GRAVITY BARTER PVT. LTD. THE ASSESSEE THOUGH PRODUCED ALL THE RELEVANT RECORDS AND EVIDENCES RIGHT FROM THE PURCHASE BILLS , CERTIFICATE ISSUED BY THE REGISTRAR ABOUT THE CHANGE OF NAME, THE COMMUNICATI ON BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES AND THEREAFTE R, THE AMALGAMATION OF M/S GRAVITY BARTER LTD. WITH M/S OASIS CINE COMMUNICATI ON LTD. WHICH WAS DULY APPROVED BY THE HONBLE HIGH COURT VIDE ORDER DATED 28.8.2011. THE ASSESSEE IN THE MEAN TIME GOT THE PHYSICAL SHARE CE RTIFICATE DEMATERIALIZED INTO DEMAT ACCOUNT ON 16.02.2012. THERE IS NO REASO N TO DOUBT THE ALLOTMENT 31 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. OF THE SHARES TO THE ASSESSEE AFTER AMALGAMATION TO OK PLACE BETWEEN M/S GRAVITY BARTER LTD. AND M/S OASIS CINE COMMUNICATIO N LTD. AND SUBSEQUENT TO AMALGAMATION THE ASSESSEE WAS ALLOTTED SHARES OF M/ S OASIS CINE COMMUNICATION LTD. ON 04.02.2012. HENCE, THE ALLOTM ENT OF 35,200 EQUITY SHARES OF M/S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUBTED OR DISPUTED AS THESE SHARES WERE ISSUED POST AMALGAMATION AND B Y A LISTED COMPANY. IT IS ALSO NOT IN DISPUTE THAT THESE SHARES OF M/S OASIS CINE COMMUNICATION LTD. WERE ISSUED IN EXCHANGE OF THE SHARES HELD BY THE A SSESSEE OF M/S GRAVITY BARTER LTD. THEREFORE, ONCE THE SHARES ISSUED BY M/ S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUBTED THEN THE HOLDI NG OF THE SHARES OF THE M/S GRAVITY BARTER LTD. BY THE ASSESSEE CORRESPONDI NGLY CANNOT BE DOUBTED BECAUSE OF THE REASONS THAT THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. COULD BE ALLOTTED ONLY IN EXCHANGE OF SHARES OF M/S GRAVITY BARTER LTD. THE HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. AND T HE ALLOTMENT OF SHARES M/S OASIS CINE COMMUNICATION LTD. ARE DIRECTLY INTERCON NECTED. IN THE ABSENCE OF HOLDING OF SHARES M/S GRAVITY BARTER LTD. THE SHARE S OF THE M/S OASIS CINE COMMUNICATION LTD. COULD NOT BE ISSUED OR ALLOTTED TO THE ASSESSEE. THEREFORE, HOLDING OF THE SHARES BY THE ASSESSEE AT LEAST AT TIME OF AMALGAMATION TOOK PLACE AND SHARES OF THE M/S OASIS CINE COMMUNICATION LTD. ON 04.02.2012 CANNOT BE DOUBTED. MOREOVER, THE SE SHARES WERE DEMATERIALIZED BY THE ASSESSEE IN THE DEMAT ACCOUNT , THEREFORE, ON THE DATE OF ALLOTMENT OF SHARE OF M/S OASIS CINE COMMUNICATI ON LTD THE ASSESSEE WAS HOLDING THESE SHARES AND PRIOR TO THAT THE ASSESSE E WAS HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. ON EXCHANGE OF THE SAME THE SHARES OF M/S OASIS 32 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. CINE COMMUNICATION LTD. WERE ISSUED TO THE ASSESSEE . THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS OF THE TRANSACTIONS HOW EVER, ONCE THE HOLDING OF SHARES OF THE ASSESSEE AT THE TIME OF THE SAME W ERE ISSUED BY M/S OASIS CINE COMMUNICATION LTD. IS NOT IN DISPUTE THEN THE HOLDING OF SHARES OF M/S GRAVITY BARTER LTD. ALSO CANNOT BE DISPUTE BECAUSE OF THE FACT THAT WITHOUT HOLDING OF THE SAME THE SHARES OF M/S OASIS CINE CO MMUNICATION LTD. COULD NOT BE ISSUED TO THE ASSESSEE. ONCE, THE SHARES WER E HELD BY THE ASSESSEE THEN, THE QUESTION OF GENUINENESS OF THE TRANSACTIO N DOES NOT ARISE HOWEVER, THE PURCHASE CONSIDERATION CAN BE DOUBTED BY THE AO IF THE SHARES WERE CLAIMED TO HAVE BEEN PURCHASED AGAINST CONSIDERATIO N PAID IN CASH WHICH IS NOT IN CASE OF THE ASSESSEE. THE ASSESSEE HAS PAID PURCHASE CONSIDERATION THROUGH CHEQUE AND THEREFORE, EVEN IF THE SAID CONS IDERATION IS FOUND TO BE VERY LESS IN COMPARISON TO THE SALE PRICE AT THE TI ME OF SALE OF SHARES IN THE ABSENCE OF ANY MATERIAL OR OTHER FACTS DETECTED OR BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS BROUGHT BACK HIS OWN UNACC OUNTED MONEY IN THE SHAPE OF LONG TERM CAPITAL GAIN AND HAS USED THE SA ME AS A DEVICE TO AVOID TAX, THE PURCHASE CONSIDERATION PAID BY THE ASSESSE E CANNOT BE DOUBTED IN THE ABSENCE OF ANY CORROBORATING EVIDENCE. THE ASSE SSING OFFICER HAS NOT DISPUTED THAT THE FAIR MARKET VALUE OF THE SHARES O F M/S GRAVITY BARTER LTD. WAS MORE THAN THE PURCHASE PRICE CLAIMED BY THE ASS ESSEE. IT MAY BE A CASE THAT ENSURING MERGER/AMALGAMATION OF THE SAID COMPA NY WITH M/S OASIS CINE COMMUNICATION LTD. THE ASSESSEE MIGHT HAVE ANTICIPA NT THE EXCEPTIONAL APPRECIATION IN THE SHARE PRICE DUE TO EXTRAORDINAR Y EVENT OF MERGER/ AMALGAMATION. HOWEVER, THE SAME CANNOT BE A REASON FOR DOUBTING 33 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. GENUINENESS OF THE TRANSACTION IF THE MOTIVE OF PUR CHASE OF THE SHARE IS TO EARN AN EXTRAORDINARY GAIN BECAUSE OF SOME INTERNAL INFORMATION AVAILABLE TO THE ASSESSEE. 7. IN CASE OF EQUITY SHARES M/S PARIDHI PROPERTIES LTD. THE ASSESSEE PURCHASE 50,000 EQUITY SHARE ON 26.03.2011 BY PAYIN G SHARE APPLICATION MONEY OF RS. 5 LACS WHICH IS DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AS PAID ON 28.03.2011. THEREFORE, THE PAYM ENT OF SHARE APPLICATION MONEY HAS BEEN DULY ESTABLISHED BY THE ASSESSEE THR OUGH HIS BANK ACCOUNT FOR ALLOTMENT OF SHARES OF 50,000 EQUITY SHARES OF M/S PARIDHI PROPERTIES LTD. THE SHARE ALLOTTED IN PRIVATE PLACEMENT AS PER OF R S. 10/- CANNOT BE TERMED AS PENNY STOCK. THE AO DOUBTED THAT THE ENTIRE PROC ESS OF APPLICATION AND ALLOTMENT OF SHARES AS IT HAVE BEEN COMPLETED WITHI N A SHORT DURATION OF 5 DAYS, WHICH IN THE OPINION OF THE AO IS NOT POSSIBL E IN ORDINARY COURSE. HOWEVER, WHEN THE ASSESSEE HAS PRODUCED THE RECORD INCLUDING THE SHARE APPLICATION, PAYMENT OF SHARE APPLICATION MONEY, AL LOTMENT OF SHARE THEN MERELY BECAUSE OF A SHORT PERIOD OF TIME WILL NOT B E A SUFFICIENT REASON TO HOLD THAT THE TRANSACTION IS BOGUS. THE SHARES ALLOTTED TO THE ASSESSEE VIDE SHARE CERTIFICATE DATED 31.03.2011 WERE DEMATERIALIZED ON 21.10.2011, THEREFORE, ON THE DATE OF DEMATERIALIZATION OF THE SHARES THE HOLDING OF THE SHARES OF THE ASSESSEE CANNOT BE DOUBTED AND HENCE THE ACQUISITIO N OF THE SHARES OF THE ASSESSEE CANNOT BE TREATED AS A BOGUS TRANSACTION. NOBODY CAN HAVE THE SHARES IN HIS OWN NAME IN DEMANT ACCOUNT WITHOUT AC QUIRING OR ALLOTMENT THROUGH DUE PROCESS HENCE, EXCEPT THE PURCHASE CONS IDERATION PAID BY THE ASSESSEE HOLDING OF SHARES CANNOT BE DOUBTED WHEN T HE ASSESSEE HAS 34 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. PRODUCED ALL THE RELEVANT RECORD OF ISSUING OF ALLO TMENT OF SHARES, PAYMENT OF SHARE APPLICATION MONEY THROUGH BANK, SHARE CERTIFI CATE AND DEMAT ACCOUNT SHOWING THE SHARES CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE ON DEMATERIALIZATION. THE SAID COMPANY M/S PARIDHI PRO PERTIES LTD. WAS SUBSEQUENTLY MERGED WITH M/S LUMINAIRE TECHNOLOGIES LTD. VIDE SCHEME APPROVED BY THE HONBLE BOMBAY HIGH COURT ORDER DAT ED 27.07.2012. HENCE, THE ASSESSEE GOT ALLOTTED THE EQUITY SHARES OF M/S LUMINAIRE TECHNOLOGIES LTD. AS PER SWAP RATIO APPROVED IN THE SCHEME AND C ONSEQUENTLY THE ASSESSEE WAS ALLOTTED 5 LACS SHARE OF RS. 1/- EACH ON M/S LU MINAIRE TECHNOLOGIES LTD. THE EVIDENCE PRODUCED BY THE ASSESSEE LEAVE NO SCOP E OF ANY DOUBT ABOUT THE HOLDING OF THE SHARES BY THE ASSESSEE. 8. AS REGARDS THE PURCHASE CONSIDERATION WHEN THE A SSESSEE HAS SHOWN THE SHARE APPLICATION MONEY PAID THROUGH HIS BANK A CCOUNT AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT APA RT FROM THE SHARE APPLICATION MONEY PAID THROUGH BANK ACCOUNT THE ASS ESSEE HAS BROUGHT HIS OWN UNACCOUNTED MONEY BACK AS LONG TERM CAPITAL GAI N. IT IS ALSO PERTINENT TO NOTE THAT THE SHARES OF M/S OASIS CINE COMMUNICATIO N LTD. ARE STILL HELD BY THE ASSESSEE IN ITS DEMAT ACCOUNT TO THE EXTENT OF 17,200 SHARES AND THEREFORE, THE HOLDING OF THE SHARES BY ANY PARAMET ER OR STRETCH OF IMAGINATION CANNOT BE DOUBTED. THE AO HAS PASSED TH E ASSESSMENT YEAR BASED ON THE STATEMENT OF SHRI DEEPAK PATWARI RECOR DED BY THE INVESTIGATION WING OF KOLKATA HOWEVER, THE ASSESSEE HAS SPECIFICA LLY DEMANDED THE CROSS EXAMINATION OF SHRI DEEPAK PATWARI VIDE LETTER DATE D 15.03.2016 SPECIFICALLY 35 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. IN PARAS 3 AND 4 AS REPRODUCED BY THE AO AT PAGE NO . 7 OF THE ASSESSMENT ORDER AS UNDER:- 3. SINCE, THE SHARES WERE ALLOTTED BY THE COMPANY THROUGH PRIVATE PLACEMENT AFTER COMPLETING THE FORMALITIES OF ROC AND WERE SO LD THROUGH THE RECOGNIZED BOMBAY STOCK EXCHAGE (BSE) THERE IS NO QUESTION OF KNOWING INDIVIDUAL PERSONS OR COMPANY OFFICIAL PERSONALLY IN THE WHOLE PROCESS, SO THE ASSESSEE IS NOT IN POSITION TO PRODUCE ANY ONE FOR CROSS EXA MINATION BEFORE YOUR GOOD SELF. SINCE YOUR GOOD SELF HAS GOT THE AUTHORITY, W E HUMBLY REQUEST YOU TO KINDLY ISSUE THE NOTICE U/S 131 OF THE INCOME TAX A CT 1961 TO THE CONCERNED INDIVIDUAL PERSONS OR COMPANY OFFICIALS FOR CROSS E XAMINATION. PLEASE NOTE THAT THE ASSESSEE IS READY TO BEAR THE COST OF THEIR TRA VELLING IN THIS REGARDS. 4. AS REGARD YOUR OPPORTUNITY GIVEN TO US TO READ T HE RECORDED STATEMENT OF SHRI DEEPAK PATWARI AND TO PRODUCE HIM FROM THE CRO SS EXAMINATION BEFORE YOUR GOOD SELF, WE HAVE TO SUBMIT THAT FROM THE REA DING OF THE STATEMENTS OF SHRI DEEPAK PATWARI IT IS CLEAR THAT HE HAS NEVER T AKEN THE NAME OF THE ASSESSEE, NOR THE ASSESSEE IS AWARE OF ANY SHRI DEE PAK PATWARI NEITHER HE HAS MADE ANY TRANSACTION WITH HIM, SO IN WHAT CAPAC ITY HE CAN CALL HIM FOR CROSS EXAMINATION BEFORE YOUR GOOD SELF. SINCE YOUR GOOD SELF HAS GOT THE AUTHORITY, WE HUMBLY REQUEST YOUTO KINDLY ISSUE THE NOTICE U/S 131 OF THE INCOME TAX ACT 1961 TO HIM ALSO FOR CROSS EXAMINATI ON. WE ALSO REQUEST YOUR GOOD SELF TO KINGLY PROVIDE US THE COPY OF STATEMEN TS OF SHRI DEEPAK PATWARI ALONG WITH THE OTHER RELEVANT DOCUMENTS. PLEASE NOT E THAT THE ASSESSEE IS READY TO BEAR THE COST OF HIS TRAVELLING IN THIS RE GARD. 36 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. IT IS MANIFEST FROM THE ASSESSEES REPLY TO SHOW CA USE NOTICE THAT THE ASSESSEE HAD SPECIFICALLY DEMANDED THE CROSS EXAMIN ATION OF SHRI DEEPAK PATWARI HOWEVER, THE ASSESSING OFFICER DID NOT OFFE R THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI DEEPAK PATWARI. FURT HER, THE AO ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THE M /S GRAVITY BARTER LTD. AND M/S PARIDHI PROPERTIES LTD. HOWEVER, IN OUR VIEW IF THE ASSESSING OFFICER WANTED TO EXAMINE THE PRINCIPAL OFFICERS OF THOSE C OMPANIES HE WAS HAVING THE AUTHORITY TO SUMMON THEM AND RECORD THEIR STATE MENTS INSTEAD OF SHIFTING BURDEN ON THE ASSESSEE. IT IS NOT EXPECTED FROM THE ASSESSEE INDIVIDUAL TO PRODUCE THE PRINCIPAL OFFICERS OF THE COMPANIES RAT HER THE AO OUGHT TO HAVE SUMMONED THEM IF THE EXAMINATION OF THE OFFICERS WE RE CONSIDERED AS NECESSARY BY THE AO. HENCE, IT WAS IMPROPER AND UNJ USTIFIED ON THE PART OF THE AO TO ASKED THE ASSESSEE TO PRODUCE THE PRINCIP AL OFFICERS OF THOSE COMPANIES. AS REGARDS THE NON GRANT OF OPPORTUNITY TO CROSS EXAMINE, THE HONBLE SUPREME COURT IN CASE OF ANDAMAN TIMBER IND USTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE ISSUE HAS HELD IN PARA 5 TO 8 AS UNDER: 5. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 6. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE 37 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND T HAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJ UDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASS ESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONE D THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEAL T WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS C ONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. T HE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS C OULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSS ESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX- FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUT HORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO D ETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRI CE WHICH IS MENTIONED 38 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTE R OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORIT Y TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EX AMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO PO INT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THI S COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DI RECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTI NG OR REJECTING THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MA TERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY I TS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ON LY BASIS OF ISSUING THE SHOW CAUSE NOTICE. THEREFORE, THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EXAMINATION A ND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION MADE BY THE AO ON THE BASIS OF SUSPICION AND SURMISES AND OBSERVED IN PARA 46 AS UNDER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INT O REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MAY GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGHED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE 39 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. MATERIAL FACTS STRONGLY INDICATE A PROBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVE RTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PER THEIR MU TUAL UNDERSTANDING WITH THE ASEESSEE. ANOTHER VERY STRONG PROBABLE FACTOR IS TH AT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DE SIGNED THAT ASSESSEE- COMPANY NEED NOT INCUR ADVERTISEMENT EXPENSES AND T HE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY UPON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLLECTI ON OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESS EE ONLY IF THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN U NEARTHED FROM SUCH GLOBAL LEVEL INVESTIGATION BY TWO CENTRAL GOVERNMEN T AUTHORITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING TH ROUGH THESE BENAMI BANK ACCOUNTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF T HE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC AS A CORPORATE ENTITY W AS HAVING THE CONTROL OF THESE BANK ACCOUNTS COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NI RMALA SUNDARAM, WE ARE OF THE OPINION THAT THIS ONE INCIDENT OF DONATION THRO UGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOE S NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESSEE-COMP ANY OR THE ASSESSEE- COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THA T ASSESSEE IS BOUND TO 40 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. HOWEVER, THIS PRESUMPTION OR SUSPI CION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT SUSPICION HOWSO EVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MAT ERIAL EVIDENCE ON RECORD. THE THEORY OF 'PREPONDERANCE OF PROBABILITY' IS APP LIED TO WEIGH THE EVIDENCES OF EITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVOURABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAV E TO BE DRAWN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGAINST ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECI ALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED OUT, THEN NOTHING C AN BE IMPLICATED AGAINST THE ASSESSEE. THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE T HE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY BY WAY OF BOGUS LONG TERM CAPITAL GAIN. THE HONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGRAWAL (SUPRA) HAS UPHELD THE FINDING OF THE TRIBUNAL ON THIS ISSU E IN PARA 12 AS UNDER:- 12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL AND CONTEN DED THAT IN VIEW OF 41 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK E XCHANGE AND TAKING INTO CONSIDERATION THE REVENUE TRANSACTIONS, THE ADDITION MADE WAS DELETED BY THE TRIBUNAL OBSERVING AS UNDER:- 'CONTENTION OF THE AR IS CONSIDERED. ONE OF THE MAI N REASONS FOR NOT ACCEPTING THE GENUINENESS OF THE TRANSACTIONS DECLA RED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. HOWE VER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPE LLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTE D BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUESTIO N VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHASE AND SALE O F SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MASTER DETAIL S FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANK RIT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHO WS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSACTIONS EN TERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT T HE APPELLANT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENT S AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACT IONS ARE ROUTED THROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVIDENC E THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTION 42 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUI NE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI IN SOME SHAM TR ANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PURO HIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHIL E DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG T ERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHER WAS EXEMPTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. AS THE APPELLAN T'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER T HAT CATEGORY OF ACCOMMODATION TRANSACTIONS. FURTHER AS PER THE REPO RT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND TO BE A N ENTRY PROVIDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMENT OF SH. PAWAN PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO ME NTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN TH E CASE OF SH. SUSHIL KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEME NT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUNTER THE OBJECTI ONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPR AISAL REPORT IS MADE BY THE INVESTING WING AFTER CONSIDERING ALL THEMATE RIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THA T THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGA RWAL WERE NON- GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACTION IN 43 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. QUESTION IN STATEMENT OF SH. PAWAN PUROHI. SIMPLY B ECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BA NK AND THE APPELLANT HAS ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOES NOT ESTABLISH THAT THE TRANSACTION M ADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE F ACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL CANNOT BE HELD AS NON- GENUINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TE RM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT C LAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED ON MERE SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAP E OF LONG TERM CAPITAL GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT A LL THE RELEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PUR CHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLDING OF THE SHARES B Y THE ASSESSEE AT THE TIME OF ALLOTMENT SUBSEQUENT TO THE AMALGAMATION/ME RGER IS NOT IN DOUBT, THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 20. THUS, IT IS CLEAR THAT THE TRIBUNAL IN THE SAID CASE HAS ANALYZED AN IDENTICAL ISSUE WHEREIN THE SHARES ALLOTTED IN THE PRIVATE PL ACEMENT @ RS. 10 AT PAR OF FACE VALUE WHICH WERE DEMATERIALIZED AND THEREAFTER SOLD BY THE ASSESSEE AND ACCORDINGLY THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME 44 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) AS WELL AS THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF CIT V S. SMT. POOJA AGARWAL (SUPRA) HAS HELD THAT WHEN THE ASSESSING OFFICER HAS NOT BROUGH T ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACC OUNTED MONEY BY WAY OF BOGUS LONG TERM CAPITAL GAIN. SIMILAR IN THE CASE IN HAND THE ASSESSEE HAS PRODUCED THE RELEVANT RECORD TO SHOW THE ALLOTMENT OF SHARES BY THE COMPANY BY WAY OF PRIVATE PLACEMENT OF FACE VALUE OF RS 10/- AT A PREMIUM OF RS 10/- ON PAYMENT OF CONSIDERATION BY CHEQUE AND THEREFORE, IT IS NOT A CASE OF PAYMENT OF CONSIDERATION IN CASH. BUT THE TRANSACTION IS ESTABLISHED FROM TH E EVIDENCE AND RECORD WHICH CANNOT BE MANIPULATED AS ALL THE ENTRIES ARE PART O F THE BANK ACCOUNT OF THE ASSESSEE AND THE ASSESSEE DEMATERIALIZED THE SHARES IN THE D-MAT ACCOUNT WHICH IS ALSO AN INDEPENDENT MATERIAL AND EVIDENCE CANNOT BE MANIPULATED. THEREFORE, THE HOLDING OF THE SHARES BY THE ASSESSEE CANNOT BE DOU BTED AND THE FINDING OF THE AO IS BASED MERELY ON THE SUSPICION AND SURMISES WITHO UT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS INTRODUCTION HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. THE AFORESAID DECISION OF THE HONBLE RAJASTHAN HIGH COURT THUS SUPPORTS THE CASE OF THE ASSESSEE AND BEING OF THE JURISDICTIONAL HIGH COURT IS BINDING ON THIS TRIBUNAL. 21. FURTHER THE AO HAS DISCUSSED THE ABNORMAL RISE IN THE SHARE PRICE OF THE SHARES OF SUNRISE ASIAN LTD WITHOUT ANY UNDER LYING FUNDAMENTALS. THE DELHI BENCHES OF THE TRIBUNAL IN CASE OF MOHAN LAL AGARWAL (HUF) VS ITO WARD (1)(4) (ITA 2767/ DEL/2018 ORDER DATED 26-11-2018) HAVE HELD THAT CAPITAL GAINS 45 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. CANNOT BE TREATED AS BOGUS SOLELY ON THE BASIS THAT THE PRICE OF THE SHARES HAS RISEN MANIFOLD AND THE REASON FOR ASTRONOMICAL RISE IS NO T RELATED TO ANY FUNDAMENTALS OF MARKET. IF THE TRANSACTIONS ARE DULY PROVED BY TRAD ING FROM STOCK EXCHANGE AND THE DOCUMENTATION IS PROPER, THE GAINS CANNOT BE ASSESS ED AS UNEXPLAINED CREDIT OR AS UNEXPLAINED MONEY. IT WAS FURTHER OBSERVED THAT NOW HERE IT HAS BEEN FOUND THAT ASSESSEE WAS IN ANY MANNER FOUND TO BE BENEFICIARY OF ANY ACCOMMODATION ENTRY UNDER ANY INQUIRY OR INVESTIGATION AND THERE IS NO MATERIAL THAT ANY ACTION HAS BEEN TAKEN BY THE SEBI AGAINST THE COMPANY AND THE COMPA NY HAS BEEN BLACK-LISTED OR SUSPENDED FROM TRADING ON ACCOUNT OF PRICE MANIPULA TION. ONCE ALL THESE TRANSACTIONS ARE DULY PROVED BY TRADING ON STOCK EX CHANGE, THEN TO HOLD THE SALE OF SHARES AS UNEXPLAINED AND BOGUS CANNOT BE UPHELD. SIMILARLY, IN THE INSTANT CASE, WE FIND THAT THE AO HAS NOT BROUGHT ON RECORD ANY M ATERIAL OR DOCUMENTARY EVIDENCE TO SHOW THAT THE ASSESSEE HAS AVAILED ACCO MMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAINS UNDER ANY ENQUIRY OR INVESTIGATI ON RATHER THE ASSESSEE HAS PRODUCED ALL RELEVANT DOCUMENTARY EVIDENCE IN SUPPO RT OF HIS PURCHASE AND SALE TRANSACTION THROUGH THE STOCK EXCHANGE AND THERE IS NOTHING ON RECORD THAT THE TRADING IN THE SCRIP HAS BEEN SUSPENDED BY SEBI ON ACCOUNT OF ANY PRICE MANIPULATION. WE THEREFORE FIND THAT THE ASSESSEE S ATISFIES THE NECESSARY INGREDIENTS AND CONDITIONS AS SO SPECIFIED IN SECTI ON 10(38) OF THE ACT, IN TERMS OF TRANSFER OF LONG TERM CAPITAL ASSET BY WAY OF SALE OF EQUITY SHARES ON WHICH STT HAS BEEN PAID, HE SHALL THEREFORE BE ELIGIBLE FOR EXEMP TION IN RESPECT OF WHOLE OF THE INCOME SO REALIZED ON TRANSFER OF SUCH SHARES AS TH E PROVISIONS OF SECTION 10(38) TALKS ABOUT ANY INCOME ARISING FROM TRANSFER OF SUC H LONG TERM CAPITAL ASSET WHICH SHALL BE EXEMPT FROM TAX. 46 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 22. FURTHER, THE MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT [2020] 121 TAXMANN.COM 100 (MUMBAI TRIB) HAS AGAIN DISCUSSED THIS ISSUE IN THREADBARE IN PAR A 7 TO 37 AS UNDER:- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI MADHUR AGGARWAL STATED THE FACT THAT ASSESSEE PURCHASED THE SHARES OF LISTED COMPANY AND HELD THEM FOR MORE THAN ONE YEAR. HE SOLD HIS SHARE S ON BOMBAY STOCK EXCHANGE PLATFORM THROUGH HIS BROKER GEOJIT AND STT WAS PAID ON SALE TRANSACTIONS. THUS, ALL THE CONDITIONS OF SEC 10(38 ) OF THE ACT ARE FULLY COMPLIED. HENCE, ASSESSEE BEING ELIGIBLE, RIGHTLY C LAIMED EXEMPTION OF LONG TERM CAPITAL GAINS UNDER SECTION 10(38) OF THE ACT. HE STATED THAT THE AO NOWHERE IN THE ASSESSMENT ORDER POINTED OUT NOR DIS CUSSED NON FULFILLMENT OR NON-COMPLIANCE OF ANY CONDITIONS OF SECTION 10(38) OF THE ACT. HENCE, REJECTING THE CLAIM UNDER SECTION 10 (38) OF THE AC T WITHOUT GIVING REASONS IS WRONG AND CONTRARY TO THE PROVISIONS OF LAW. HE THE N STATED THAT THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO JUST ON THE BAS IS OF CONJUNCTURES AND SURMISES. HE ASSAILED THE ORDERS OF THE LOWER AUTHO RITIES. HE ARGUED AND POINTED OUT THAT SECTION 10(38) OF THE ACT WAS INSE RTED BY FINANCE ACT 2 OF 2004 PROVIDING FOR EXEMPTION TO LONG-TERM CAPITAL G AINS ARISING ON SALE/ TRANSFER OR EQUALITY SHARES IN LISTED COMPANY, OR U NIT OF AN EQUITY ORIENTED FUND PROVIDED SUCH TRANSACTIONS HAVE SUFFERED SECUR ITIES TRANSACTION TAX UNDER THE SAID CHAPTER. IF SHARES OF LISTED COMPANIES PUR CHASED ARE SOLD ON THE EXCHANGE PLATFORM WITHIN ONE YEAR PAYING STT THEN G AIN OR LOSS IS TREATED AS SHORT TERM CAPITAL GAIN TAXABLE AT CONCESSIONAL RAT E OF TAX AS PER THE PROVISIONS OF INCOME TAX ACT AND IF THESE SHARES AR E SOLD ON STOCK EXCHANGE AFTER HOLDING FOR EXCEEDING ONE YEAR PAYING STT THE N RESULTANT GAIN OR LOSS IS TREATED AS LONG TERM GAIN/ LOSS WHICH IS EXEMPT FRO M TAX U/S 10(38) OF THE ACT. 9. HE REFERRED THAT TO THE ORDER OF THE AO AND THAT OF THE CIT(A) AND STATED THAT BOTH THE AUTHORITIES DID NOT ACCEPT THE ABOVE REFERRED EVIDENCES FILED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM AND BY RELYING ON THE GENERAL STUDY REPORT OF THE INVESTIGATING WING REJECTED THE CLAIM AND HELD THAT THE ENTIRE TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WERE MERELY AN ACCOMMODATION ENTRIES TAKEN FOR THE PURPOSE OF SECURING BOGUS LON G TERM CAPITAL GAINS AND TO CLAIM EXEMPT INCOME AND CONSEQUENTLY ASSESSED THE S ALE PROCEED AS AN UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . THE AO HAS REFERRED TO THE FINDINGS IN THE GENERAL STUDY REPORT OF THE INV ESTIGATION WING OF KOLKATA AND MUMBAI, WHEREIN IT LAID DOWN THE PURPORTED MODU S OPERANDI OF CONVERTING UNACCOUNTED MONEY INTO EXEMPT LTCG. IT I S STATED THAT A PERSON ACQUIRES SHARES OF PENNY STOCKS TRADING AT LOW PRIC E EITHER THROUGH PRIVATE PLACEMENT OR ON MERGER OF PRIVATE LIMITED COMPANY O F WHICH SUCH PERSON IS A 47 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. SHAREHOLDER WITH A PENNY STOCK COMPANY. THEREAFTER UNACCOUNTED MONEY FLOWS TO OPERATORS / EXIT PROVIDERS WHO ARTIFICIAL LY RAISE THE PRICES OF PENNY STOCKS ON STOCK EXCHANGE. THEREAFTER, THE PENNY STO CKS ARE SOLD TO EARN HUGE EXEMPT LTCG. 10. IN REGARDS TO THE PRESENT CASE THE LEARNED COUN SEL REFERRED TO THE OBSERVATIONS OF AO REGARDING PAL SCRIPT IN HIS SHOW CAUSE NOTICE: 'IN THE CASE OF M/S PINE ANIMATION LTD, THE INVESTI GATION WING MUMBAI HAS CONDUCTED A SURVEY ACTION ON M/S SARAF EQUITY SERVI CES PVT. LTD. ON 03.12.2015, AN EXIT PROVIDER IN SCRIPT PINE ANIMATI ON LTD. DURING THE COURSE OF SURVEY PROCEEDINGS, STATEMENT ON OATH OF SHRI. MAND AR DILIP NAIK, DIRECTOR OF M/S. SARAF EQUITY SERVICES PVT. LTD. WAS RECORDED W HEREIN HE HAS STATED THAT M/S. SARAF EQUITY SERVICES PVT. LTD. HAS INDULGED I N PROVIDING EXIT TO THE BENEFICIARIES IN COLLUSION WITH OPERATOR FOR MAKING BOGUS LTCG TRANSACTIONS FOR A COMMISSION OF 1%. FURTHER, ON VERIFICATION OF THE SCRIPT M/S PINE ANI MATION LTD. IT IS SEEN THAT THE OTHER EXIT PROVIDERS I.E. DHRITI TRADERS PVT. LTD, DREAM VALLEY TRADING PVT. LTD., DWARKA PURL CONSTRUCTIONS P LED, OLYMPIA SALE S AGENCIES P LTD, PARTICLE INDUSTRIES P LED, SIGNET VINIMAY P LTD, WINALLVINIM AY P LTD AND SPICE MERCHANTS P LTD HAVE PURCHASED SHARES OF M/S PINE A NIMATION LTD TO PROVIDE ACCOMMODATION ENTRY IN THE TERMS OF LTCG. THESE ENT ITIES ARE OPERATED BY ENTRY OPERATORS WHOSE STATEMENT HAS BEEN RECORDED B Y THE INVESTIGATION WING WHEREIN THEY HAVE STATED THAT THEY ARE AN ENTR Y OPERATOR AND IS INTO THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY MANA GING AND CONTROLLING VARIOUS BOGUS ENTITIES, EITHER DIRECTLY OR THROUGH HIS DUMMY DIRECTORS.' AO OBSERVED THAT THE PERSONS LISTED ABOVE IN THE NO TICE HAVE PURCHASED THE SHARES OF PAL AND ARE EXIT PROVIDERS AND ENTRY OPER ATOR AND ARE IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND REL IED UPON THEIR STATEMENTS VIZ. ANIL KHEMKA, SANJOY DEY & MANDAR NAIK (DIRECTO R OF SARAF EQUITY). THE RELEVANT OBSERVATIONS IN THE ASSESSMENT ORDER READS AS UNDER: - PARA 7.2: THE ASSESSEE HAS MAINLY TRADED IN MAINLY IN ONE SCRIPT DURING THE YEAR WHICH IS SUSPICIOUS PARA 7.3: 'AS DISCUSSED ABOVE, THE ASSESSEE TRADED IN SINGLE SCRIP AND HAS MADE HUGE PROFITS.' PARA 9: 'FURTHER, A SEBI ORDER HAS BEEN PASSED IN T HE CASE OF PINE ANIMATION LTD ORDER VIDE DATED 08.05.2015 WHICH DIRECTS THAT THE TRADING IN THE SECURITIES OF SHALL BE SUSPENDED TILL FURTHER DIREC TIONS...........THE SHARES ARE SOLD BY THE BENEFICIARIES HAVE BEEN PURCHASED BY PA PER/ BOGUS ENTITIES (E)IT PROVIDERS). PARA 11.3: ......TO PROVE GENUINENESS, PROOF OF PHY SICAL TRANSFER OF SHARES, REASONS TO TRADE OFF-MARKET WHEN OPTIONS TO ONLINE MARKET TRADING THROUGH 48 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. DEMAT ACCOUNT WERE AVAILABLE, TRADING PATTERN OF MA RKET TRANSACTIONS FOR THE LAST THREE YEARS, HAVE NOT BEEN SUBMITTED TO THIS O FFICE SUBMISSIONS ON ABOVE: 11. THE LEARNED COUNSEL ARGUED THAT THE FINDINGS OF THE INVESTIGATION DEPARTMENT ARE GENERAL IN NATURE AND IT IS BASICALL Y A STUDY REPORT AND NOT KNOWN WHICH CASES ARE INVESTIGATED. AS UNDERSTOOD F ROM THE ASSESSMENT ORDER THE ASSESSEE'S NAME OR HIS TRANSACTIONS ARE N OT REFERRED IN SUCH REPORTS AND THE AO HAS NOT ESTABLISHED ANY LINK BETWEEN THA T REPORT AND ASSESSEE'S TRANSACTIONS. THIS IS ALSO FATAL AS RELIANCE ON SUC H INVESTIGATION REPORT, WITHOUT CONFRONTING THE ASSESSEE WITH THE SAME, RENDERS THE ASSESSMENT BAD IN LAW. THE INVESTIGATION IN ASSESSEE'S CASE BY WAY OF SEAR CH DID NOT REVEAL ANY CONNECTION WITH THE FINDINGS OR EVIDENCES AS REFERR ED TO IN SUCH REPORTS. 12. HE STATED THAT THE STATEMENTS OF ANIL KHEMKA & SANJAY DEY AND MANDAR NAIK RELIED UPON THE AO DOES NOT ESTABLISH THAT THE ASSESSEE HAS PAID ANY UNACCOUNTED MONEY TO THESE PARTIES. NONE OF THE REP LIES TO THE QUESTION POSED INDICATE THAT THEY RECEIVED ANY UNACCOUNTED M ONEY FROM THE ASSESSEE OR THAT THEY RECEIVED OR UTILIZED THE UNACCOUNTED M ONEY RECEIVED FROM THE ASSESSEE WITH REFERENCE TO SHARES OF PAL. IT IS ALS O NOT ESTABLISHED THAT THEY HAD ANY ARRANGEMENT OR DEALINGS OR RELATION WITH TH E ASSESSEE LEAVE APART THE ALLEGED ACCOMMODATION OR EXIT PROVIDED WHO HAS NOT STATED ANY DEALING WITH THEM AGAINST THE PRINCIPLES OF NATURAL JUSTICE. FUR THER, AS REGARDS THE PARTIES LISTED BY AO IN THE ASSESSMENT ORDER (ABSTRACT REPR ODUCED ABOVE) AS EXIT PROVIDERS AND ENTRY OPERATORS I.E. DHRITI TRADERS P VT. LTD., DREAM VALLEY TRADING PVT. LTD, DWARKAPURI CONSTRUCTIONS P LTD, O LYMPIA SALES AGENCIES P LTD, PARTICLE INDUSTRIES P LTD, SIGNET VINIMAY P LT D, WINALLVINIMAY P LTD, SPICE MERCHANTS P LTD AND SARAF EQUITY SERVICES PVT. LTD. , THE ASSESSEE CATEGORICALLY DENIED THE SAME AND CONFIRMED THAT, H E DID NOT KNOW OR HAD ANY RELATION WITH ANY OF THE ABOVE SAID PARTIES AND HE NEVER DEALT WITH OR HAD ANY BUSINESS OR PERSONAL RELATIONS WITH ANY OF THEM . HE FURTHER CONFIRMED THAT AS HE DID NOT KNOW THEM, HENCE KNOWING THEIR B USINESS OR ACTIVITIES IS OUT OF QUESTION. 13. HE ARGUED THAT THE ASSESSEE HAS NEITHER TAKEN E XIT NOR ACCOMMODATION ENTRIES FROM ANY PARTY FOR PURCHASE OR SALE OF SHAR ES OF THE COMPANY, NOR HAS ANY EVIDENCE PROVIDED BY AO NOR STATEMENTS OF SUCH PERSONS REVEALED ANY DEALING WITH THE ASSESSEE. ALL TRANSACTIONS DONE BY THE ASSESSEE ARE THROUGH BSE AND BANK ACCOUNT IN THE NORMAL COURSE. EVEN OTH ERWISE ALSO THE STATEMENT OF THE PERSONS REFERRED BY THE AO AS EXIT OR ACCOMMODATION PROVIDERS (ANIL KHEMKA, SANJAY DEY & MANDAR NAIK) W ERE NOT RECORDED IN THE PRESENCE OF ASSESSEE NOR HAS HE BEEN PROVIDED TO CR OSS EXAMINE THEM BEFORE USING THESE STATEMENTS AGAINST THE ASSESSEE. HENCE RELIANCE ON SUCH STATEMENTS MADE IN BACK OF ASSESSEE CANNOT BE ADMIS SIBLE AS EVIDENCE AND MAKES THE ASSESSMENT ORDER INVALID. IN THE PRESENT FACTS, THE ASSESSEE AT FIRST WAS ALLOTTED SHARES THROUGH PREFERENTIAL ISSUE BY T HE COMPANY. THE ALLOTMENT OF SHARES BY THE COMPANY WAS MADE AFTER OBTAINING P RIOR APPROVAL OF BSE AS 49 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. PER SEBI ISSUE OF CAPITAL AND DISCLOSURE REQUIREMEN TS REGULATION, 2009. THE SALE OF SHARES OF PAL IS THROUGH A REPUTED BROKER G EOJIT. ALL NECESSARY SUPPORTING EVIDENCE HAVE BEEN SUBMITTED TO ESTABLIS H THE GENUINENESS OF THE TRANSACTIONS. ON INVESTIGATION, THE ROLE OF GEOJIT WAS NOT FOUND TO BE SUSPICIOUS OR QUESTIONABLE. THEREFORE, RELIANCE ON THE FINDINGS OF THE INVESTIGATION WING IN SOME OTHER CASES WHICH BEARS NO CONNECTION WITH THE CASE OF THE ASSESSEE IRRELEVANT. 14. IT WAS CONTENDED FURTHER THAT THERE IS NO EVIDE NCE THAT IMPLICATE THE ASSESSEE TO HAVE ENTERED INTO ANY ARRANGEMENT WITH ANY OPERATORS /EXIT PROVIDERS OR INVOLVEMENT OF UNACCOUNTED MONEY. THE ASSESSEE TOOK STRONG OBJECTIONS TO AO LINKING HIM OR HIS TRANSACTIONS WI TH SO CALLED ALLEGED EXIT PROVIDERS AND ACCOMMODATION ENTRY PROVIDERS WITHOUT ANY EVIDENCE OR INVOLVEMENT MENTIONED IN SUCH INVESTIGATION REPORTS AND STATEMENTS OF SUCH PERSONS. THE SEAMLESS PROCESS OF TRANSACTIONS AT BS E AS EXPLAINED HEREAFTER DOES NOT IDENTIFY AND PROVIDE US THE IDENTITY OF PE RSONS WHO HAVE PURCHASED THOSE SHARES SOLD BY ASSESSEE. THE ASSESSEE HAS ORD ERED HIS BROKER TO SELL THE SHARES OF PAL WHO IN TURN SOLD THE SHARES ON BS E PLATFORM. THE ASSESSEE/HIS BROKER WERE NOT AWARE ABOUT THE BUYERS OR THEIR BROKERS WHO PURCHASED THE SHARES OF PAL SOLD BY THE ASSESSEE. T HE ALLEGATION OF AO IN PARA 7.2 AND 7.3 OF THE ASSESSMENT ORDER THAT THAT THE ASSESSEE MAINLY TRADED IN ONE SCRIPT (PAL) WHICH IS SUSPICIOUS IS C OMPLETELY INCORRECT AND NOT SUPPORTED BY FACTS. DURING FY 2014-15 (AY 2015-16) THE ASSESSEE ALSO TRADED IN FOLLOWING SCRIPTS:- STCG: ICICI BANK, B) GUJ NRE, C) GITANJALI GEMS, D) HFCL. E) WONDRELLA, F) HIND MOTORS, G) TATA CHEM, H) CR. GRIEV., I) COAL INDIA, J) UNITECH, K) INFOSYS, L) TECH MAHINDRA, M) HCL TECHNO LTCG: PINE ANIMATION, B) SUNDARAM INV. C) CARE RATING, D) KOLTE PATIL, E) IDEA, F) BALMER LAWR, G) S. CLAYTON, H) GFL FINANCE, I) SUN PHARMA 15. FURTHER, THE LEARNED COUNSEL ALSO NARRATED THE FACT THAT THE ASSESSEE ALSO INCURRED LOSSES IN FEW SCRIPTS OUT OF THE ABOVE. WI TH REGARD TO THE OBSERVATIONS OF AO IN PARA 9 RELATING TO SUSPICION FOR TRADING IN PAL SHARES BY SEBI VIDE AD-INTERIM EX-PARTE ORDER DATED 08.05.201 5, IT WAS ARGUED THAT THE ASSESSEE AND HIS WIFE ALONG WITH MORE THAN 100 OTHE RS ENTITIES WERE EXONERATED OF ALL ALLEGATIONS AS DETAILED IN AD-INT ERIM EXPARTE ORDER FOR MANIPULATION OF PRICE AND VOLUME OF THE SCRIPT AND ALSO ANY ARRANGEMENT BY THE ASSESSEE WITH THE COMPANY OR ITS PROMOTERS, EXI T PROVIDERS, OR SEBI REGULATIONS ETC. VIDE SEBI IN ITS FINAL ORDER DATED 19.09.2017. 16. THE LEARNED COUNSEL FURTHER NARRATED THAT THE A LLEGATION OF AO IN PARA 11.3 THAT PROOF OF PHYSICAL TRANSFER OF SHARES, REA SONS FOR OFF MARKET TRADING AND TRADING PATTERN OF MARKET TRANSACTIONS FOR THE LAST THREE YEARS HAVE NOT 50 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. BEEN SUBMITTED IS ALSO UNFOUNDED AND CONTRARY TO TH E FACTS. THE ASSESSEE DURING COURSE OF ASSESSMENT SUBMITTED COMPLETE DOCU MENTS OF PREFERENTIAL ALLOTMENT OF SHARES AND TRADING IN SHARES OF SEVEN YEARS VIDE ITS REPLY DATED 23.11.17. THERE WAS NO PHYSICAL TRANSFER OF SHARES DURING THE YEAR UNDER APPEAL EXCEPT ONE IN WHICH COMPANY HAS BOUGHT BACK SHARES OF SUNDRAM INVESTMENT FOR RS. 5,257/-. THEREFORE, OBSERVATIONS REGARDING OFF MARKET TRADING ARE ABSOLUTELY WRONG AND CONTRARY TO THE FA CTS. 17. LD COUNSEL FOR THE ASSESSEE EXPLAINED THE PROCE SS AT STOCK EXCHANGE NETWORK, WHICH IS FILED IN THE SHAPE OF NOTE AS UND ER: - > AS PER STOCK EXCHANGE REGULATIONS, SHARES OR SEC URITIES OF ANY OF THE LISTED COMPANIES WHO HAS SIGNED LISTING AGREEMENT W ITH SE ARE DEALT ON THE STOCK EXCHANGE PLATFORM THROUGH A REGISTERED BROKER ONLY. THE PURCHASE AND SALE TRANSACTIONS ON THE STOCK EXCHANGE (SE)PLATFOR M ARE WITH THE STOCK EXCHANGE AND SETTLED THROUGH THE CLEARING SYSTEM AN D PAYMENT IS RECEIVED FROM BROKERS OR PAID TO BROKERS ONLINE TO OR BY THE EXCHANGE CLEARING SYSTEM. > WHEN ANY CUSTOMER ORDERS THE BROKER TO SELL ANY S CRIPT, THE STOCK BROKER SELLS THE SHARES ON TRADING SYSTEM THROUGH THE EXCH ANGE TERMINAL AND GENERATE CONTRACT NOTE. ON SALE, THE SHARES ARE DEL IVERED FROM THE CUSTOMER'S DEMAT A/C TO THE STOCK BROKER'S DEMAT A/C WHO IN TU RN TRANSFERS THE SHARES TO STOCK EXCHANGE POOL A/C, WHO ON SETTLEMENT DAY DELI VERS TO THE BUYER'S DEMAT A/C. ON THE OTHER SIDE, THE BUYER PAYS THE PRICE AS PER CONTRACT NOTE TO HIS BROKER WHO PAYS TO THE SE WHO THEN TRANSFERS THE AM OUNT TO THE SELLER'S BROKER ON SETTLEMENT DAY. THUS, THE SELLER AND THE BUYER OR THEIR BROKERS DOES NOT HAVE DIRECT RELATION NOR DEALING WITH EACH OTHE R. NOR THEY KNOW THE BUYING OR SELLING PARTIES OR THE BROKERS. THE CUSTO MERS DEAL WITH THEIR RESPECTIVE BROKERS AND BROKERS DEAL WITH SE OR THE CLEARING SYSTEM. > IN NUTSHELL, THE BUYERS BROKER MAKES PAYMENT TO SE AND SELLERS BROKERS DELIVER SHARES TO THE SE. THEREAFTER, SETTLEMENT IS DONE BY CLEARING SYSTEM AND TRANSFER OF AMOUNTS ONLINE TO SELLERS BROKERS BANK ACCOUNT AND SHARES TO BUYER'S BROKERS DEMAT ACCOUNT WHO IN TURN PAYS TO T HE SELLERS AND TRANSFERS SHARES TO THE DEMAT ACCOUNT OF THE BUYER. HENCE SEL LERS AND BUYERS DOES NOT DEAL DIRECTLY OR COME IN CONTACT NOR THEIR BROKER C OME IN DIRECT CONTACT AND NEITHER OF THEM KNOW THE CONTRA PARTY. > THE WHOLE SYSTEM OF BUYING AND SELLING OF SHARES DONE ON THE STOCK EXCHANGE PLATFORM IS FACELESS AND SE PLATFORM DEAL WITH BROKERS ONLY AND PARTIES DEAL WITH THEIR BROKERS. FOR EXAMPLE, SHARE S SOLD BY X THROUGH ITS BROKER BOUGHT BY ABCD BROKER FOR XYZ OR VICE A VERS A ARE NOT KNOWN TO EACH OTHER. EVEN THE BROKER DOES NOT KNOW, THE SHARES SO LD BY HIM ARE DELIVERED TO WHICH BROKERS OR WHICH BUYER. THE BROKER CAN ACT ON LY FOR THE PARTIES WHO ARE REGISTERED WITH HIM AFTER NECESSARY KYC AND DUE DIL IGENCE. NOBODY CAN DIRECTLY DEAL IN SHARES ON STOCK EXCHANGE. 51 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 18. FURTHER, THE LEARNED COUNSEL STATED THAT THE AS SESSEE HAS SOLD THESE SHARES THROUGH HIS BROKER GEOJIT WHO IS REGISTERED BROKER OF BOMBAY STOCK EXCHANGE (BSE), NATIONAL STOCK EXCHANGE (NSE) AND O THER EXCHANGES. THE BROKER GEOJIT IS AN OLD AND REPUTED SHARE BROKER AN D IS IN THIS BUSINESS FOR YEARS. THE ASSESSEE IS DEALING WITH IT FOR MORE THA N 10 YEARS AND SOLD EQUITY SHARES OF PAL ON BSE PLATFORM THROUGH HIS REGULAR B ROKER GEOJIT AND DELIVERED THE SHARES FROM HIS DEMAT ACCOUNT AND RECEIVED SALE PROCEEDS DIRECTLY IN HIS DESIGNATED BANK ACCOUNT AS EXPLAINED IN THE FACTS O F THE CASE. STT, BROKERAGE, STAMP DUTY, SEBI AND OTHER CHARGES WERE DULY PAID ON TRANSACTIONS DONE ON BSE PLATFORM. THE AO HAS ACCEP TED ALL THE DOCUMENTS FILED BY THE ASSESSEE WITHOUT ANY DOUBT ON ITS AUTH ENTICITY OR GENUINENESS. THE RELEVANT DOCUMENTS AND EVIDENCE OF THESE TRANSA CTIONS ARE ALSO SUBMITTED BEFORE US. THE BROKER GEOJIT ALSO DOES NO T KNOW TO WHOM THE SHARES WERE SOLD. ONLY SEBI OR STOCK EXCHANGE KNOWS WHO BOUGHT THESE SHARES AND THESE AUTHORITIES DO NOT SUPPLY SUCH INF ORMATION UNLESS CALLED BY GOVERNMENT AUTHORITY. THEREFORE, THE ASSESSEE OR HI S BROKER DID NOT HAVE ANY RECORD OR KNOWLEDGE OF THE PURCHASERS AT THE TIME O F SALE. HOWEVER, DURING THE COURSE OF INVESTIGATION BY SEBI, THE INFORMATIO N WAS SUPPLIED BY BSE TO THE ASSESSEE IN THE FORM OF A CD TO OFFER HIS REPLY ON THE EX-PARTE ORDER ISSUED BY SEBI ON 08.05.2015. FROM THE CD, THE ASSE SSEE CAME TO KNOW THAT HIS SHARES OF PAL WERE BOUGHT BY 50 BUYERS THROUGH MULTIPLE BROKERS. THE DELIVERY OF SHARES IS GIVEN TO GEOJIT BY THE ASSESS EE FROM HIS DEMAT ACCOUNT. COPY OF DEMAT STATEMENT IS ALREADY FILED IN ASSESSE E PAPER BOOK BEFORE US. THE BROKER IN TURN TRANSFERS THE SHARES TO BSE CLEA RING ACCOUNT. THE SALE PROCEEDS OF SALE OF SHARES IS SETTLED BY EXCHANGE S ETTLEMENT SYSTEM AND DIRECTLY CREDITED TO BROKER'S BANK ACCOUNTS BY THE BSE AND THE ASSESSEE RECEIVED PAYMENT FROM GEOJIT I.E. DIRECTLY INTO HIS DESIGNATED HANK ACCOUNT. COPY OF BANK STATEMENT IS FILED IN ASSESSEES PAPER BOOK (APB). 19. FURTHER, THE ASSESSEE HAS NO CONNECTION OR NEXU S WITH THE BUYERS AS ALSO THE ACTIVITIES OF THE BUYERS. EVEN IF THE BUYERS AR E DOUBTFUL OR OF SUSPICIOUS CHARACTER THAT DOES NOT AFFECT THE TRANSACTIONS OF SALE OF SHARES BY THE ASSESSEE THROUGH PROPER CHANNEL I.E. ON THE RECOGNI ZED STOCK EXCHANGE THROUGH THE REGISTERED BROKER AND PAYMENTS WERE REC EIVED. HE ARGUED THAT DURING SEARCH ITSELF AND IN THE COURSE OF INVESTIGA TION THE DEPARTMENT HAD MADE EXHAUSTIVE SURVEY AND ENQUIRY FOR THESE TRANSA CTIONS FROM GEOJIT AND OTHER BROKERS AND NOTHING INCRIMINATING WAS FOUND A GAINST THE ASSESSEE. THE DETAILS, DOCUMENTS AND THIRD PARTY EVIDENCES SUPPOR TING THE SALE TRANSACTIONS AND PAYMENTS RECEIVED HAVE BEEN FILED BY THE ASSESS EE. THE TRANSACTIONS WERE DONE AT PRICES PREVAILING ON THE DATE OF TRANS ACTION AND STT WAS PAID ON SUCH TRANSACTIONS CLEARED THROUGH EXCHANGE CLEAR ANCE SYSTEM. 20. THE LEARNED COUNSEL FURTHER REFERRED TO SEBI IN VESTIGATION IN CASE OF PAL. IT WAS ARGUED THAT IN CASE OF PAL, THE WHOLE TIME M EMBER OF SEBI THE MARKET REGULATOR, ON A PRELIMINARY REPORT OF ITS SURVEILLA NCE DEPARTMENT HAS PASSED AD INTERIM EXPARTE ORDER NO. WTM/RKA/ISD/36/2015 DA TED 08.05.2015 AGAINST PAL AND 177 ENTITIES INCLUDING ASSESSEE. HO WEVER, DESPITE NO CHARGE 52 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. AGAINST THE ASSESSEE, THE WHOLE TIME MEMBER OF THE SEBI CONFIRMED THE EX- PARTE ORDER VIDE PASSING CONFIRMATORY ORDER NO. WTM /RKA/ISD/61/2016 DATED 02.06.2016. THE ASSESSEE WENT IN APPEAL BEFOR E THE SECURITIES APPELLATE TRIBUNAL AGAINST THE CONFIRMATORY ORDER O F THE SEBI. WHILE THE ASSESSEE'S APPEAL WITH SAT WAS AT HEARING STAGE, TH E INVESTIGATION DEPARTMENT OF THE SEBI COMPLETED INVESTIGATION IN P AL AND PASSED FINAL ORDER VIDE ORDER NO. SEBI/WTM/MPB/EFDI-DRA-III/28/09/2017 DATED 19.09.2017. RELEVANT PARA NO.9, 10, AND 11 OF SEBI ORDER ARE RE PRODUCED HEREIN BELOW: 9) 'UPON COMPLETION OF INVESTIGATION BY SEBI, THE FOLLOWING ARE NOTED AS REGARDS 14 ENTITIES WHO WERE IDENTIFIED AS PREFEREN TIAL ALLOTTEES, EXIT PROVIDERS AND LTP CONTRIBUTORS VIDE THE INTERIM ORDER: SEBIS INVESTIGATION DID NOT FIND ANY ADVERSE EVIDEN CE AGAINST THEM TO SHOW ANY CONNECTION / NEXUS WITH PAL OR ITS PROMOTERS/ D IRECTORS OR PROMOTER RELATED ENTITIES OR ANY ROLE IN PRICE MANIPULATION VOLUME MANIPULATION IN THE SCRIP OF PAL. HENCE, VIOLATION OF PROVISIONS OF SEB I ACT, SCRA, PSUTP REGULATION, ETC. WERE NOT OBSERVED IN RESPECT OF TH E FOLLOWING 114 ENTITIES. ........21. MAHENDRA B MITTAL .......32. POOJA MAHENDRA MITTAL AND OTHER 112 ENTITIES AS PER SEBI ORDER 10) 'CONSIDERING THE FACT, THAT THERE ARE NO ADVERS E FINDINGS AGAINST THE AFOREMENTIONED 114 ENTITIES WITH RESPECT TO THEIR R OLE IN THE MANIPULATION TO THE SCRIP OF PAL, I AM OF THE CONSIDERED VIEW THAT THE DIRECTIONS ISSUED AGAINST THEM VIDE INTERIM ORDER DT 08.05.2015 WHICH WERE CONFIRMED VIDE ORDERS DT. JUNE 02, 2026, JULY 05, 2016, AUGUST 22, 2016 AND JUNE 02, 2017 NEED NOT BE CONTINUED.' 11) IN VIEW OF THE FOREGOING, I IN EXERCISE OF THE POWERS CONFERRED UPON ME UNDER SECTION 19 OF SEBI ACT, 1992 READ WITH SECTIO N 11, 11(4) AND 11B OF THE SEBI ACT, HEREBY REVOKE THE CONFIRMATORY ORDERS DT.02.06.2026, 05.07.2016, 22.08.2016 AND 02.06.2017 QUA AFORESAID THE 114 ENTITIES WITH IMMEDIATE EFFECT.' 21. THUS, THE SEBI'S FINAL ORDER DATED 19.09.2017 C LEARLY CAME TO THE CONCLUSION THAT SEBI'S INVESTIGATION DID NOT FIND A NY ADVERSE EVIDENCE AGAINST THE 114 ENTITIES INCLUDING THE ASSESSEE AND GIVEN F INDING THAT THE ASSESSEE HAS NO CONNECTION/NEXUS WITH PAL OR ITS PROMOTERS/D IRECTORS OR PROMOTERS RELATED ENTITIES NOR ANY ROLE IN PRICE MANIPULATION , VOLUME MANIPULATION IN THE SCRIPT OF PAL. NO VIOLATION OF PROVISIONS OF SEBI A CT, SCRA, PFUTP REGULATIONS, ETC. WERE OBSERVED IN RESPECT OF 114 ENTITIES (INCLUDING THE ASSESSEE). THE LIST OF 114 ENTITIES REFERRED IN THE SEBI ORDER ALSO INCLUDES FOLLOWING ALLEGED EXIT PROVIDERS DISCUSSED IN SHOW CAUSE NOTICE AND REFERRED TO IN THE ASSESSMENT ORDER AS UNDER: - SR. NO.NAME OF EXIT PROVIDER 53 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 121 DHRITI TRADERS PL 127 DREAMVALLEY TRADING FL 162 SIGNET VINIMAY PL 165 SPICE MERCHANTS FL 172 WINALLVINIMAY P L 22. THESE ALLEGED EXIT PROVIDERS WERE ALSO EXONERAT ED BY THE SEBI ORDER AND THE REMAINING ALLEGED EXIT PROVIDERS VIZ. 1) DWARKA PURI CONSTRUCTIONS P LTD., 2) OLYMPIA SALES AGENCIES P LTD. AND 3) PARTICLE IN DUSTRIES P LTD. WERE NEITHER REFERRED IN THE SEBI EX-PARTE ORDER DATED 0 8.05.201 5 NOR IN THE FINAL ORDER DATED 19.09.2017 WHICH GOES TO PROVE THAT NEI THER THE ASSESSEE NOR THE EXIT PROVIDERS ALLEGED BY THE AO WERE INVOLVED IN A NY ARRANGEMENT OR ACCOMMODATION AND HENCE , ALLEGATIONS OF AO ARE WRO NG AND WITHOUT ANY EVIDENCE. COPIES OF SEBI AD-INTERIM EX-PARTE ORDER DATED 08.05.2015, CONFIRMATORY ORDER DATED 02.06.2016 AND FINAL ORDER DATED 19.09.2017 ARE ENCLOSED AT PAGES 217-277 OF APB. SUBSEQUENTLY, THE SAT DISPOSED-OFF THE APPEAL OF THE ASSESSEE AS INFRUCTUOUS AND PASSED OR DER ACCORDINGLY VIDE ORDER NO. NIL DATED 26.09.2017. COPY ENCLOSED AT PAGES 27 8-283 OF APB. 23. IN VIEW OF THE ABOVE THE ASSESSEE HAS BEEN EXON ERATED BY SEBI IN THE CASE OF PAL STATING THAT HE HAD NO NEXUS/ CONNECTIO N OR COLLUSION WITH THE COMPANY, ITS DIRECTORS, OR PROMOTERS AND WAS NOT IN VOLVED IN PRICE MANIPULATION & VOLUME MANIPULATION, ETC. FURTHER, T HE ALLEGED EXIT PROVIDERS FOR THE SCRIPT HAVE NOT PLAYED ANY ROLE IN ASSESSEE 'S TRANSACTIONS IN THE SCRIPT AS HE HAS NEITHER TAKEN ANY ACCOMMODATION NOR ENTRY OR EXIT FROM ANY OF THE ALLEGED PARTIES. 24. ON THE OTHER HAND, THE LEARNED CIT DR SHRI MANJ UNATHA SWAMI, ARGUED THAT THE ENTIRE TRANSACTION IS BOGUS. HE STATED THA T HE IS RELYING ON THE ELABORATE ORDER WRITTEN BY THE AO AND THAT OF THE C IT(A). 25. WE HAVE NOTED THAT PAL MADE A PREFERENTIAL ALLO TMENT OF EQUITY SHARES IN THE YEAR 2013. THE ASSESSEE ON APPLICATION FOR SHAR ES WAS ALLOTTED THE SAME AT RS. 10 PER SHARE. THE COMPANY HAD SPLIT THE FACE VALUE OF ITS SHARES IN 2013. DUE TO THIS, ASSESSEE RECEIVED 15,00,000 SHAR ES AGAINST 1,50,000 SHARES ALLOTTED EARLIER. THE ASSESSEE ACQUIRED THE SHARES ON THE BASIS OF GUIDANCE FROM HIS FATHER AND FRIENDS. THE PURCHASE AND SALE OF SHARES WAS NEITHER PRE-PLANNED NOR UNDER ANY ARRANGEMENT WITH THE COMPANY OR ANY PARTY RELATED TO IT. THE ALLOTMENT OF SHARES BY PAL WAS MADE AFTER OBTAINING PRIOR APPROVAL OF BSE AS PER SEBI ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS REGULATION, 2009. WE NOTED FROM THE FA CTS THAT AS PER THE FINANCIALS PROVIDED IN THE ASSESSMENT ORDER, IT CAN BE SEEN THAT THE COMPANY HAD INCURRED A LOSS IN FY 11-12 OF RS. 7 LAKHS AND HAS EARNED PROFIT OF 16 LAKHS IN FY 12-13. THE FACT THAT PAL WAS TURNED FRO M LOSS MAKING TO PROFIT EARNING ITSELF DEMONSTRATES THE FACT THAT THERE WAS POTENTIAL IN PAL DUE TO WHICH THE ASSESSEE PURCHASED THE SHARES. FURTHER, T HE TURNOVER, IN THE FY 54 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 2013-14 INCREASED BY 10 TIMES AS COMPARED TO THE PR ECEDING PREVIOUS FY AND INCREASE IN THE NET PROFIT AFTER TAX WAS ALMOST ARO UND 4 TIMES THAN THAT OF THE NET PROFIT RECORDED IN THE YEAR OF PURCHASE. MOREOV ER, THE PRICES OF THE COMPANY WERE ALMOST CONSTANT FOR A YEAR. WHEN THE A SSESSEE THOUGHT THAT THE PRICES HAD REACHED ITS PEAK, HE SLOWLY SOLD ALL THE SHARES IN A TIME SPAN OF 3 MONTHS. TO PROVE THE GENUINENESS OF THE TRANSACTI ONS, THE ASSESSEE PROVIDED ALL THE SUPPORTING EVIDENCES LIKE, SHARE A PPLICATION FORM, BANK STATEMENT HIGHLIGHTING THE TRANSACTIONS, CONTRACT N OTES, BROKER'S LEDGER, DEMAT STATEMENT FORM 10DB, SEBI'S FINAL ORDER, SAT ORDER, ETC. 26. HOWEVER, THE AO MADE ADDITION UNDER SECTION 68 OF THE ACT AND CIT(A) CONFIRMED THE ADDITION BY IGNORING ALL THE FACTS AN D EVIDENCES AND WITHOUT PROVIDING ANY PROOF OF ASSESSEE'S INVOLVEMENT IN TH E MANIPULATION OF PRICE OR VOLUME OF THE SHARES OF THE COMPANY OR POINTING OUT ANY DEFECT OR DEFICIENCY IN THE PROCESS OF TRANSACTIONS OR ITS ELIGIBILITY T O DEDUCTION U/S 10(38) OF THE ACT. WE NOTED THAT THE AO IN HIS ASSESSMENT ORDER I N PARA 7 AND 8 HAS EXHAUSTIVELY MENTIONED IN DETAIL THE FINANCIALS OF PAL, PREFERENTIAL ALLOTMENT OF SHARES, PRICE OF PAL, EXIT PROVIDERS, ETC. FOLLO WING PARAS HAVE BEEN DITTO /COPIED FROM SEBI AD-INTERIM EX-PARTE ORDER DATED 0 8.05.2015. ALTHOUGH AFTER INVESTIGATION, SEBI IN ITS FINAL ORDER EXONERATED T HE ASSESSEE AND THE ALLEGED EXIT PROVIDERS BUT THE AO FAILED TO CONSIDER THE SE BI FINAL ORDER IN THE ASSESSMENT ORDER. IT MEANS THAT THE AO AND CIT(A) A LSO RELIED ON THE ORDER OF SEBI DATED 08.05.2015 MAINLY FOR DRAWING INFEREN CES AND DECIDING THE ISSUE ON THE BASIS OF CONJUNCTURES AND SURMISES AND NOT ON EVIDENCES. 27. IN VIEW OF THE ABOVE, WE NOTED THAT IT IS SEBI WHO MONITORS AND REGULATES THE STOCK EXCHANGES & STOCK MARKET AND WHEN THEIR I NVESTIGATION DID NOT REVEAL ANY PRICE OR VOLUME MANIPULATION BY THE ASSE SSEE AND THESE TRANSACTIONS ARE IN THE NORMAL COURSE THROUGH PROPE R & LEGAL CHANNELS. THEN THE ALLEGATIONS OF THE IT DEPARTMENT FALL FLAT AND DENIAL OF DEDUCTION U/S 10(38) OF THE ACT IS ARBITRARY AND ADDITION OF SALE PROCEEDS OF SHARES OF PAL U/S 68 IS AGAINST THE PROVISIONS OF ACT. THE ASSESS EE IN HIS REPLY DATED 20.11.2017 SUBMITTED TO THE AO THAT THE ALLEGATIONS MENTIONED IN PARAS OF SHOW CAUSE NOTICE ARE BASED ENTIRELY ON SEBI AD-INT ERIM EX-PARTE ORDER DATED 08.05.2015 WHICH WAS REVERSED AFTER DETAILED INVEST IGATION WHEREIN SEBI HAS EXONERATED THE ASSESSEE OF ALL THE ALLEGATIONS WITH OUT ANY QUALIFICATION. A COPY OF SEBI FINAL ORDER DATED 19.09.2017 WAS ALSO ENCLOSED WITH THE APB. BUT THE AO HAS FAILED TO REFER TO ASSESSEE'S SUBMIS SIONS AND SEBI'S FINAL ORDER DATED 19.09.2017 IN THE ASSESSMENT ORDER INSPITE OF THE FACT THAT ASSESSEE'S SUBMISSIONS AND SEBIS FINAL ORDER WERE ALREADY ON I TS RECORD THEREBY CONTRAVENING THE PRINCIPLES OF NATURAL JUSTICE. 28. WE ALSO NOTED THAT AS PER PROVISIONS OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS IN ANY PREVIOUS YEAR AND ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED IS NOT SATISFACTORY TO THE AO, THE SUM CRED ITED MAY BE CHARGED TO TAX UNDER SEC. 68 OF THE ACT. THE ASSESSEE IS REQUIRED TO PROVE: (I) THE IDENTITY OF 55 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. THE CREDITOR (II) SOURCE OF THE CREDIT AND (III) GE NUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. TO PROVE THE IDENTITY O F THE CREDITOR, THE NATURE OF TRANSACTIONS, SOURCE OF PAYMENTS AND THE GENUINENES S OF THE TRANSACTIONS OF SALE OF SHARES OF PAL, THE ASSESSEE HAS SUBMITTED F OLLOWING DOCUMENTS/ EVIDENCES: - A) TO PROVE THE IDENTITY OF CREDITOR AND NATURE OF TRANSACTION THE ASSESSEE SUBMITTED COPY OF CONTRACT NOTE ON SALE BY GEOJIT O N BSE PLATFORM. THE CONTRACT NOTES SHOWS THE QUANTITY, RATE, TIME STAMP , VALUE, TAXES AND CHARGES VIZ. STT, BROKERAGE, SEBI AND EXCHANGE TURNOVER CHA RGES, SERVICE TAX AND STAMP DUTY INCURRED ON ALL THE TRANSACTIONS DONE ON BSE PLATFORM, A STOCK EXCHANGE RECOGNIZED BY THE MARKET REGULATOR SEBI. T HE DOCUMENTS HAVE BEEN ACCEPTED BY THE AO. B) BANK STATEMENT SHOWING SALE PROCEEDS CREDITED BY THE BROKER GEOJIT. DEMAT ACCOUNT OF THE ASSESSEE SHOWING SOLD SHARES D EBITED / TRANSFERRED TO BROKER. C) THE SALE CONSIDERATION IS RECEIVED BY ASSESSEE F ROM GEOJIT, A REGISTERED BROKER OF SEBI/BSE, WITH WHO HAS BEEN DEALING WITH GEOJIT FOR MORE THAN 10 YEARS AS PER CONTRACT NOTE DIRECTLY IN THE BANK ACC OUNT AFTER SHARES ARE DELIVERED FROM DEMAT ACCOUNT AND RECEIVED BY THE AS SESSEE. COPY OF DEMAT ACCOUNT AND BANK STATEMENTS WHERE SALE PROCEEDS ARE RECEIVED ARE SUBMITTED AS DISCUSSED ABOVE. GEOJIT HAS ALSO BEEN EXAMINED A ND INTERROGATED BY THE INVESTIGATION DEPARTMENT DURING SEARCH PROCEEDINGS. GEOJIT'S SOURCE IS BSE SETTLEMENT SYSTEM. THIS EXPLAINS IDENTITY OF THE CR EDITOR AND SOURCE OF MONEY PAID BY ASSESSEE FOR GENUINE TRANSACTION OF SALE OF SHARES. D) SALE IS DONE AT PREVAILING PRICE QUOTED ON THE B SE. (BSE PUBLISHED QUOTATIONS DAILY AND RATE LIST OF THE RELEVANT DATE S CAN BE PRODUCED IF REQUIRED) E) THE SHARES ARE SOLD BY ASSESSEE'S BROKER ON BSE PLATFORM AND NOT OFF MARKET TO ANY BUYER HENCE SOURCE IS BSE'S CLEARING SYSTEM AND BROKER. THE TRANSACTIONS ON THE BSE PLATFORM AND SETTLEMENT SYS TEM WHO ARE RESPONSIBLE FOR THE TRANSACTIONS OF THE DEMAT ACCOUNT AND PREVA ILING PRICE ON PUBLIC DOMAIN PROVE THE GENUINENESS OF THE TRANSACTIONS. F) SEBI'S FINAL ORDER DT. 19.09.2017 RELATING TO PA L IS ENCLOSED. SEBI AFTER DETAILED INVESTIGATION INTO THE TRANSACTIONS IN THE SHARES OF THESE COMPANIES HELD THAT THE PARTIES TO THE INVESTIGATION INCLUDIN G ASSESSEE AND ALLEGED EXIT PROVIDERS ARE HAVING NO NEXUS OR CONNECTION WITH TH E COMPANY, THEIR DIRECTORS, PROMOTERS ETC. AND THERE IS NO PRICE OR VOLUME MANIPULATION IN THESE SCRIPTS. THIS ALSO EXPLAINS THE GENUINENESS O F THE TRANSACTIONS AND DISCARDS THE THEORY OF MANIPULATION OR ACCOMMODATIO N TO TAKE TAX ADVANTAGE ILLEGALLY. 56 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. 29. WE HAVE ALSO NOTED THE FACTS FURTHER THAT THE A SSESSEE HAS RECEIVED TOTAL AMOUNT OF RS. 14,16,80,449/- ON ACCOUNT OF SALE OF SHARES OF PAL DURING THE YEAR, IN THE ACCOUNT WITH AXIS BANK FROM GEOJIT, RE GISTERED BROKER OF BSE WITH WHOM THE ASSESSEE IS DEALING FROM LAST MORE THAN 10 YEARS. THE ASSESSEE HAS BEEN REGULAR INVESTOR IN SHARES & SECURITIES AND HI S PORTFOLIO COMPRISES OF VARIOUS SHARES AND THE AGGREGATE VALUE OF INVESTMEN TS FOR 5 YEARS HAVE BEEN AS UNDER: - AY ( AS ON DATE) TOTAL INVESTMENT IN SHARES AMOUNT (IN RS.) 31.03.2011 3,77,21,394 31.03.2012 3,33,40,018 31.03.2013 2,66,87,649 31.03.2014 2,91,24,876 31.03.2015 2,58,84,431 COPIES OF BALANCE SHEET OF THE ASSESSEE FOR THE ABO VE MENTIONED YEARS SHOWING THE INVESTMENTS MADE IN SHARES WERE SUBMITT ED TO THE AO VIDE SUBMISSION DATED 15.03.17 AS WELL AS BEFORE CIT(A) AND EVEN NOW BEFORE US. THIS ADDS TO THE BONAFIDE OF THE ASSESSEES TRANSAC TIONS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE TO GO THROUGH THE EXPRESSION OF 'NATURE AND SOURCE' AND HAS TO UNDERSTAND THE REQUI REMENT OF IDENTIFICATION OF THE SOURCE AND ITS GENUINENESS. SEC. 68 OF THE A CT PLACES THE BURDEN OF PROOF ON THE TAX PAYER, TO EXPLAIN THE NATURE OF SO URCE OF ANY CREDIT BUT NOT THE SOURCE OF THE SOURCE. HENCE WHEN AN ASSESSEE GI VES EVIDENCES OF IDENTITY OF THE PAYER, SOURCE OF THE CREDIT, EVIDENCES OF TH E TRANSACTIONS TO PROVE THE GENUINENESS, THE ASSESSEE IS SAID TO HAVE DISCHARGE D HIS INITIAL BURDEN. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ASSE SSEE HAS EXPLAINED AND SUBMITTED EVIDENCES TO PROVE IDENTITY, NATURE AND S OURCE OF THE CASH CREDIT ON ACCOUNT OF SALE PROCEEDS CREDITED / RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE AND ALSO FURNISHED ALL EVIDENCES COMPRISIN G CONTRACT NOTES, BROKERS, BANKING DETAILS IN SUPPORT OF THE GENUINENESS OF TH E TRANSACTIONS. THE AO HAS NOT POINTED OUT ANY DEFICIENCY IN THE DOCUMENTS OR INHERENT WEAKNESS IN THE EXPLANATION OR DOUBTED GENUINENESS OF THE TRANSACTI ONS FOR WANT OF ANY EVIDENCE. THE AO DID NOT PRODUCE ANY EVIDENCE WHATS OEVER TO PROVE THE ALLEGATION THAT UNACCOUNTED MONEY CHANGED HANDS BET WEEN THE ASSESSEE AND THE BROKER OR ANY OTHER PERSON INCLUDING THE ALLEGE D EXIT PROVIDER NOR PROVED THAT THE ASSESSEE HAS TAKEN ANY TYPE OF ACCOMMODATI ON FROM ANY PERSON OR SO CALLED EXIT PROVIDERS TO INTRODUCE UNACCOUNTED M ONEY INTO BOOKS BY WAY OF LTCG. WITH THE PURCHASE AND SALE TRANSACTIONS OF SH ARES OF PAL ARE PROVED GENUINE BY THIRD PARRY EVIDENCES - BANK, BROKER; DP -DEMAT ACCOUNT, AND IN THE ABSENCE OF ANY MATERIAL TO PROVE CASH CHANGING HANDS IN THE TRANSACTION, THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT, BY TREATING THE SALE CONSIDERATION AS UNEXPLAINED, SHAM, NON-GENUINE IS BASELESS. THE ADDITION UNDER SECTION 68 OF THE ACT MADE MERELY OF THE BASI S OF SUSPICION, PRESUMPTIONS AND PROBABILITY OF PREPONDERANCE WITHO UT ANY DIRECT EVIDENCE TO PROVE THE TRANSACTIONS AS NON-GENUINE OR SHAM OR DE MONSTRATING APPELLANT'S 57 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. INVOLVEMENT IN ANY KIND OF MANIPULATION IS ILLEGAL AND CANNOT SUSTAIN. THE FINDINGS OF INVESTIGATION & MODUS OPERANDI IN OTHER CASES NARRATED BY THE AO AND ALSO CIT(A) NOWHERE PROVE ANY CONNECTION WITH T HE ASSESSEE NOR THE ASSESSEE'S INVOLVEMENT OR CONNECTION OR COLLUSION W ITH THE BROKERS, EXIT PROVIDERS, ACCOMMODATION PROVIDERS OR COMPANIES OR DIRECTIONS ETC. FOR MAKING THE ADDITION, IT IS NECESSARY TO BRING ON RE CORD EVIDENCE TO ESTABLISH INGENUITY IN TRANSACTIONS OR ANY CONNECTION OF THE ASSESSEE OR ITS TRANSACTION WITH ANY OF THE ALLEGED PARTIES. THE ASSESSEE HAS D ISCHARGED HIS ONUS BY ESTABLISHING THE IDENTITY OF THE PAYER, SOURCE OF T HE CREDIT AND GENUINENESS OF THE TRANSACTIONS. 30. WE NOTED THAT THE LEARNED CIT DEPARTMENTAL REPR ESENTATIVE ALSO RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT, NAGP UR BENCH IN THE CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (2018) 89 TAXMAN N.COM 196 (BOM), WHEREIN THE DECISION ON THE IMPUGNED ISSUE WAS DISC USSED. HONBLE HIGH COURT HAS CONSIDERED THE FACTS OF SANJAY BIMAICHAND JAIN SUPRA FROM WHERE WE FIND THAT (I) IN THAT CASE, THE BROKER COMPANY T HROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AO'S LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SH ARES SOLD BY THE ASSESSEE (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE I N CASH (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY TH E SAME (IV) THE AUTHORIZED SIGNATORY AT BOTH THE COMPANIES WERE ALS O THE SAME PERSON (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DO NE BY THAT ASSESSEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BR OKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIA L FACTS, THE HON'BLE BOMBAY HIGH COURT RENDERED THE DECISION IN FAVOUR O F THE REVENUE. NONE OF THESE FACTORS WERE PRESENT IN THE FACTS OF THE ASSE SSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE DECISION OF HON BLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABLE. 31. NOW WE WILL DISCUSS THE MODUS OPERANDI, PREPOND ERANCE OF PROBABILITY AND HUMAN BEHAVIOR. WE NOTED THAT THE AO AS WELL AS CIT(A) HAVE REJECTED ALL EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO 'MODUS OPERANDI' OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH I S EXEMPT FROM INCOME TAX UNDER SECTION 10(38) OF THE ACT. ALL THESE OBSERVAT IONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL INCLUDING T HE ASSESSEE. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVE RTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED BY THE AO FROM T HIRD PARTIES IS CONFRONTED TO ASSESSEE. NO OPPORTUNITY OF CROSS-EXAMINATION OF PERSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IT PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A GENERAL R EPORT FROM THE INVESTIGATION WING. 32. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHE R IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBA BILITIES, HUMAN BEHAVIOR 58 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARN ING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DURING INVESTIGATIONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETH ER THE CLAIM IS GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARRY ALLEGING SO, THAT THIS ASSESSEE IN QUESTION WAS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEE'S ACTION GIVING HIS INVOLVEMENT IN THE SCA M SHOULD BE ESTABLISHED. THE ALLEGATION IMPLIES THAT CASH WAS PAID BY THE AS SESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENC E GATHERED BY THE DIRECTOR INVESTIGATION'S OFFICE BY WAY OF STATEMENT S RECORDED ETC. HAS TO ALSO BE BROUGHT ON RECORDING EACH CASE, WHEN SUCH A STAT EMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. O PPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESSEE, IF THE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN AD DITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSES SEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UN DER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 33. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEF ORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CAS E, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSIONS OF THE ASSESSEE THAT HE I S JUST AN INVESTOR AND AS HE RECEIVED SOME TIPS AND HE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE P ROCESS AND THAT HE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY T HE REVENUE WITH EVIDENCE WHEN A PERSON CLAIMS THAT HE HAS DONE THESE TRANSAC TIONS IN A BONA FIDE MANNER, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SU GGESTS, THERE ARE MANY BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE COURTS OF LAW. 34. IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALIS ATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR RE JECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RE CORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENC ES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUP REME COURT IN THE CASE OF OMAR SALAY MOHAMED SAIT V. CIT [1959] 37 ITR 151 (SC) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSP ICION AND CONJECTURES. IN THE CASE OF CIT V. DAULAT RAM RAWATMULL [1973] 87 I TR 349 (SC) (SC) THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BU RDEN OF PROVING A 59 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARG ED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF B OGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING INTE RFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW & BROS. V. CIT (1959) [1959] 37 ITR 271 (SC) HELD THAT SUSPICION H OWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTION WE R EFER TO THE GENERAL VIEW ON THE TOPIC OF CONVEYANCE OF IMMOVABLE PROPERTIES. TH E RATES/SALE PRICES ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTR ATION AUTHORITIES OF THE GOVERNMENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. THE COURTS HAVE LAID DOWN THAT JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS CANNOT BE TAKEN BASED ON GENERALISA TION. COURTS OF LAW ARE BOUND TO GO BY EVIDENCE. 35. BUT IN THE PRESENT CASE, WE NOTED THAT THE ASSE SSING OFFICER HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREP ARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. THE ASSESSING OFFICER H AS NOT BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSES SEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PAN OF ANY ARRANGEMENT FOR TH E PURPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BRO UGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPER ATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDINGS HOW IS IT POSSIBLE TO LINK THEIR WRONG DOI NGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPARTME NT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAIL ED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER WOULD BE SEN T TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH AC TION EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDINGS SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGAT ION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, THE AO AT BEST COULD HA VE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTI GATION. THE REPORT ONLY INFORMED THE AO THAT SOME PERSONS MAY HAVE MISUSED THE SCRIP: FOR THE PURPOSE OF COLLUSIVE TRANSACTIONS. THE AO WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACT IONS AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. HOWEVER, THE AO HAS NOT BROU GHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 36. THE HON'BLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HON'BLE COURT HELD: 60 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE ITO MIGHT BE OBSERVED THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIR ED BY 'S' AND THE NOTORIETY ACHIEVED BY 'D' AS A GREAT RECEIVING CENT RE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION A ND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY AR HATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE MER E POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE ITO AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE PRO FIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS COULD EXC EED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE ITO. AS RE GARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE ITO INDULGED IN SPECULATION WHE N HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE ITO I NDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BU T THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVI NG EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM R EPRESENTED THE SECRETED PROFITS OF THE APPELLANT IN ITS BUSINESS W AS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOU NDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE PROCEEDINGS. IF THE CONCLUSION OF THE ITO WAS THUS EITHER PERVER SE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK C OUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND M ERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS. 1,000 EACH WAS SATIS FACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. 37. THE OBSERVATIONS OF THE HON'BLE APEX COURT ARE EQUALLY APPLICABLE TO THE CASE OF THE ASSESSEE. THE AO AND CIT(A) BOTH, HAVIN G FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTIONS OF THE ASSESSEE WERE COLLUSIVE TRANSACTIONS COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, IN THIS CASE NOTHING HAS BEEN FO UND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERIAL AGAINS T THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE I NCOME TAX DEPARTMENT AND HENCE UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE, THE FINDINGS / ALLE GATIONS OF THE AO AND CIT(A) ARE BASELESS, WITHOUT ANY EVIDENCE, CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS OF THE ACT . HENCE, WE DELETE THE ADDITION MADE BY THE AO BY SETTING ASIDE THE ORDER OF LD. CIT(A) BASED UPON 61 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. SUCH FINDINGS. THIS COMMON ISSUE AS REGARDS TO ADDI TION UNDER SECTION 68 OF SURPLUS ARISING OUT OF SALE OF SHARES OF LISTED COM PANIES AND CONSEQUENT ADDITION UNDER SECTION 69C ON THE PRESUMPTION THAT COMMISSION AT THE RATE OF 3% WAS PAID IS HEREBY DELETED. ACCORDINGLY, THIS CO MMON AND INTERCONNECTED ISSUE OF THE FOUR ASSESSEES APPEALS IS ALLOWED. 23. IN THE AFORESAID DECISION, IT HAS BEEN HELD THA T IT IS SEBI WHO MONITORS AND REGULATES THE STOCK EXCHANGES & STOCK MARKET AND WH EN THEIR INVESTIGATION DID NOT REVEAL ANY PRICE OR VOLUME MANIPULATION BY THE ASSE SSEE AND THESE TRANSACTIONS ARE IN THE NORMAL COURSE THROUGH PROPER & LEGAL CHANNEL S. THEN THE ALLEGATIONS OF THE IT DEPARTMENT FALL FLAT AND DENIAL OF DEDUCTION U/S 10 (38) OF THE ACT IS ARBITRARY AND ADDITION OF SALE PROCEEDS OF SHARES OF PAL U/S 68 I S AGAINST THE PROVISIONS OF ACT. IN THE CASE IN HAND, THE LD. AO HAS REFERRED TO SEBI E NQUIRY AGAINST M/S SUNRISE ASIAN LTD. HOWEVER, WE NOTE THAT THE SAID ENQUIRY WAS REG ARDING FAILURE TO COMPLY WITH CERTAIN DISCLOSURE REQUIREMENTS AND THEREFORE, THE SUBJECT MATTER OF THE ENQUIRY HAS NO CONNECTION WITH THE TRANSACTION OF BOGUS LONG TE RM CAPITAL GAIN AND HAS NO BEARING IN JUDGING THE GENUINENESS OF THE TRANSACTI ON UNDERTAKEN BY THE ASSESSEE OR FOR THAT MATTER, THE PRICE AND REALIZATION ON SALE OF SHARES SO UNDERTAKEN BY THE ASSESSEE THROUGH THE STOCK EXCHANGE. FURTHER, IT H AS BEEN HELD IN THE AFORESAID CASE THAT THE FINDINGS OF INVESTIGATION & MODUS OPE RANDI IN OTHER CASES NARRATED BY THE AO AND ALSO CIT(A) NOWHERE PROVE ANY CONNECTION WITH THE ASSESSEE NOR THE ASSESSEE'S INVOLVEMENT OR CONNECTION OR COLLUSION W ITH THE BROKERS, EXIT PROVIDERS, ACCOMMODATION PROVIDERS OR COMPANIES OR DIRECTIONS ETC AND FOR MAKING THE ADDITION, IT IS NECESSARY TO BRING ON RECORD EVIDEN CE TO ESTABLISH INGENUITY IN TRANSACTIONS OR ANY CONNECTION OF THE ASSESSEE OR I TS TRANSACTION WITH ANY OF THE ALLEGED PARTIES. IN THE INSTANT CASE, AS WE HAVE DI SCUSSED EARLIER, THERE IS NO FINDING WHICH PROVES ASSESSEES CONNECTION, INVOLVEMENT OR COLLUSION WITH SO CALLED ACCOMMODATION ENTRY PROVIDERS. FURTHER IN THE AFORE SAID CASE, THE ISSUE AS TO WHETHER THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STA TEMENTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTE D IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DURING INVESTIGAT IONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETH ER THE CLAIM IS GENUINE OR NOT HAS BEEN DISCUSSED AT LENGTH. AND REFERRING TO LEGAL P ROPOSITION LAID DOWN BY THE 62 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. HONBLE SUPREME COURT THAT THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCE H ELD THAT THE MODUS OPERANDI, GENERALISATION, PREPONDERANCE OF HUMAN PROBABILITIE S CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCU MENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED. WE ARE IN COMPLETE AGREEM ENT WITH THE SAID VIEW AND IN THE INSTANT CASE, WE FIND THAT EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM OF PURCHASE AND SALE OF SHARES ON THE STOCK E XCHANGE HAVE NOT BEEN REFUTED BY ANY ADVERSE FINDINGS OR MATERIAL WHICH COULD DEM ONSTRATE INVOLVEMENT OF THE ASSESSEE OR COLLUSION WITH SO CALLED ACCOMMODATION ENTRY PROVIDERS TO OBTAIN BOGUS LTCG AS SO ALLEGED BY THE AUTHORITIES BELOW. 24. WE ALSO FIND THAT WHILE ANALYZING SALE OF SHARE S OF SIMILAR SCRIP OF M/S SUNRISE ASIAN LTD AND CLAIM OF EXEMPTION OF LONG TERM CAPIT AL GAINS U/S 10(38), THE MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF ANRAJ HIRALAL SHAH (HUF) VS ITO (SUPRA) HAS UPHELD THE CLAIM OF THE ASSESSEES CLAIM OF EXEMPTI ON UNDER SECTION 10(38) OF THE ACT AND THE RELEVANT FINDINGS OF THE COORDINATE BEN CH CONTAINED AT PARA 8 READ AS UNDER:- 8. THE ASSESSEE HAS EARNED SPECULATION PROFIT IN T HE IMMEDIATELY PRECEDING YEAR THROUGH M/S EDEN FINANCIAL SERVICES ALSO AND T HE SAID PROFIT HAS BEEN USED TO PURCHASE THE SHARES OF M/S SUNRISE ASIAN LT D. THE ASSESSEE HAS OFFERED THE SPECULATION PROFIT FOR INCOME TAX PURPO SES IN THE IMMEDIATELY PRECEDING YEAR AND IT HAS BEEN ACCEPTED. FURTHER TH E ASSESSEE HAS SHOWN THE PURCHASE OF IMPUGNED SHARES AS INVESTMENT IN THE BA LANCE SHEET. HENCE THE PURCHASE OF SHARES HAS BEEN ACCEPTED. FURTHER THE S HARES HAVE BEEN RECEIVED IN THE D-MAT ACCOUNT OF THE ASSESSEE AND THEY HAVE BEEN SOLD THROUGH THE D- MAT ACCOUNT ONLY. HENCE THE DELIVERY OF SHARES ALSO STAND PROVED. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS PART OF FRAUDULENT PRICE RIGGING. ACCORDINGLY, IN THE ABSEN CE OF ANY EVIDENCE TO IMPLICATE THE ASSESSEE OR TO PROVE THAT THE TRANSAC TIONS ARE BOGUS, I AM OF THE VIEW THAT THE CAPITAL GAINS DECLARED BY THE ASS ESSEE CANNOT BE DOUBTED 63 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. WITH. IN THAT VIEW OF THE MATTER, THE ADDITION MADE TOWARDS EXPENSES IS NOT ALSO SUSTAINABLE. 25. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT AND OF THAT OF THE COORDINATE BENCHES IN CASES REFERRED SU PRA, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED THE NECESSARY ONUS CAST ON HIM IN TERMS OF CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAINS U/S 1 0(38) OF THE ACT BY ESTABLISHING THE GENUINENESS OF TRANSACTION OF PURCHASE AND SALE OF SHARES AND SATISFYING THE REQUISITE CONDITIONS SPECIFIED THEREIN AND THE GAIN S SO ARISING ON SALE OF SHARES THEREFORE HAS BEEN RIGHTLY CLAIMED AS EXEMPT U/S 10 (38) OF THE ACT. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET-ASI DE THE ORDER OF THE LD. CIT(APPEALS) AND THE CLAIM OF THE ASSESSEE U/S 10(3 8) IS ALLOWED. THE MATTER IS THUS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE RESULT, THE GROUND OF APPEAL SO TAKEN BY THE ASSESSEE IS ALLOWE D. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO. 188/JP/2020, 185/JP/2020 &123/JP/2020 27. IN RESPECT OF GROUND OF APPEAL NO. 1 RELATING T O DENIAL OF CLAIM OF EXEMPTION UNDER SECTION 10(38) IN ALL THESE THREE APPEALS, BO TH THE PARTIES FAIRLY SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THESE CASES ARE EXAC TLY IDENTICAL AS IN ITA NO. 124/JP/2020 AND SIMILAR CONTENTIONS RAISED THEREIN MAY BE CONSIDERED. THEREFORE, CONSIDERING THE ADMITTED POSITION THAT THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES, OUR FINDINGS AND DIRECTIONS CONTAINE D IN ITA NO. 124/JP/2020 SHALL APPLY MUTATIS MUTANDIS TO THESE APPEAL MATTERS AND THE GROUND OF APPEAL OF THE RESPECTIVE ASSESSEE IS ACCORDINGLY ALLOWED. 28. GROUND NO. 2 IN ALL THREE APPEALS IS REGARDING THE ADDITION MADE BY THE AO ON ACCOUNT OF NOTIONAL COMMISSION U/S 69C OF THE ACT W HICH IS CONSEQUENTIAL TO THE ISSUE OF TREATMENT OF LONG TERM CAPITAL GAIN AS BOG US. ONCE, WE HAVE REVERSED THE FINDING OF THE AO ON THE ISSUE OF TREATMENT OF LONG TERM CAPITAL GAIN AS BOGUS THEN, THE CONSEQUENT ADDITION MADE BY THE AO ON NOTIONAL COMMISSION IS NOT SUSTAINABLE. 64 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ACCORDINGLY, THE SAME IS DELETED AND GROUND NO. 2 S O TAKEN BY THE ASSESSEE IN THEIR RESPECTIVE APPEALS IS HEREBY ALLOWED. 29. IN ITA NO. 123/JP/2020, GROUND NO. 3 IS REGARDI NG THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS 13, 77,391/-. 30. IN THIS REGARD, THE LD AR SUBMITTED THAT THE A PPELLANT HAD INTEREST BEARING FUNDS OF RS. 1,61,19,649/- AND INTEREST FREE FUNDS OF RS. 3,89,75,382 AGAINST WHICH THE APPELLANT HAD INVESTED INTO INCOME YIELDING AVE NUES OF RS. 4,22,36,830/- AND HAD INVESTED INTO NON INCOME YIELDING ASSETS OF RS. 1,28,58,201/-. THIS SHOWS THAT THE APPELLANT HA S MORE INCOME YIELDING ASSETS AS COMPARED TO INTEREST BEARING FUNDS AND HENCE NO ALL EGATION CAN BE RAISED AGAINST THE APPELLANT THAT HE HAS DIVERTED HIS INTEREST BEA RING FUNDS INTO NON INCOME YIELDING AVENUES. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT CLAIMED THAT THE INTEREST BEARING LOANS H AVE BEEN UTILISED AS UNDER: 1. FOR THE PURPOSE OF EARNING INTEREST INCOME (SHOW N UNDER INCOME FROM OTHER SOURCES) TO THE EXTENT OF RS. 17,65,936 AND ACCORDI NGLY AN AMOUNT OF INTEREST COST TO THIS EXTENT HAVE BEEN CLAIMED OUT OF INCOME FROM OTHER SOURCES. 2. IN THE PARTNERSHIP FIRM AS CAPITAL WHEREIN DURIN G THE YEAR, THE ASSESSEE HAS EARNED A SUM OF RS.11,24,110/- AS INTEREST FROM M/S ARUN UDHYOG WHEREIN HE IS A PARTNER. FURTHER, THE ASSESSEE HAS EARNED A SUM OF RS.13,31,100 AS REMUNERATION FROM M/S MAA CHANDI STONE CRUSHING. 31. IT WAS SUBMITTED THAT THE LD. AO HOWEVER REJECT ED THE CLAIM WITHOUT ANY BASIS AND WITHOUT ESTABLISHING ANY NEXUS TO SHOW THAT INT EREST BEARING FUNDS WERE UTILISED FOR NON INCOME YIELDING ASSETS AND WHICH HAS BEEN C ONFIRMED BY THE LD CIT(A) WITHOUT APPRECIATING THE FACTS OF THE ASSESSEE IN R IGHT PERSPECTIVE. 32. PER CONTRA, THE LD DR SUPPORTED THE FINDINGS O F THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT THE AO DISALLOWED THE INTEREST EXPEN SES AMOUNTING TO RS. 13,77,391/- BY HOLDING THAT THE APPELLANT HAS M ADE INTEREST FREE ADVANCES. IT IS ALSO SEEN THAT THE AO CLEARLY MENTIONED THAT THE AP PELLANT FAILED TO ESTABLISH NEXUS BETWEEN INTEREST BEARING FUNDS AND AMOUNT UTILIZED IN THE PARTNERSHIP FIRM. IN 65 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. ABSENCE OF SUCH NEXUS, THE BENEFIT OF INTEREST EARN ED FROM PARTNERSHIP FIRM CANNOT BE ALLOWED TO SET OFF. THEREFORE, THE DISALLOWANCE MADE BY THE AO WAS RIGHTLY UPHELD AND THE GROUND RAISED BY THE APPELLANT BE DI SMISSED. 33. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSE D THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, IT IS NOTED THAT THE ASSESSEE HAS INTEREST FREE FUNDS MORE THAN INTEREST BEARING FUNDS AND IN SUCH CASES OF MIXED F UNDS, THE COURTS HAVE HELD AND UPHELD THE PRESUMPTION THAT WHERE ANY INTEREST FREE ADVANCES HAVE BEEN GIVEN, THE SAME ARE GIVEN OUT OF INTEREST FREE FUNDS. THE SAM E IS HOWEVER SUBJECT TO CAVEAT WHERE IT IS ESTABLISHED THAT INTEREST BEARING FUNDS HAVE A DIRECT NEXUS AND HAVE BEEN UTILIZED IN INTEREST FREE ADVANCES. IN THE IN STANT CASE, THE REVENUE HAS NOT ESTABLISHED ANY SUCH DIRECT NEXUS WHICH ESTABLISHES THAT INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR THE PURPOSES OF MAKING INTEREST F REE ADVANCES. SECONDLY, THE AO HAS HELD THAT ASSESSEE HAS NOT RECEIVED ANY INTERES T INCOME FROM THE PARTNERSHIP FIRM WHICH WE FOUND FACTUALLY NOT CORRECT AS THE AS SESSEE HAS RECEIVED INTEREST FROM PARTNERSHIP FIRM OF RS 11,24,110/-. IN LIGHT OF TH E SAME, THE DISALLOWANCE OF INTEREST AMOUNTING TO RS 13,77,391/- IS HEREBY DELETED AND T HE GROUND OF APPEAL SO TAKEN BY THE ASSESSEE IS ALLOWED. IN THE RESULT, ALL THE APPEALS FILED BY THE RESPECT IVE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/11/2020. *SANTOSH VKNS'K DH IZFRFYFIVXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANTS- (1) SHRI ASHOK AGARWAL, JAIPUR. (2) SMT. RITU AGARWAL,BHADRAK, ORISSA. (3) SMT. SEEMA AGARWAL, JAIPUR. 66 ITA NO. 124/JP/2020 ASHOK AGARWAL VS ACIT & 3 ORS. (4) SHRI AJAY AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENTS- (1) THE A.C.I.T.,CIRCLE-1,JAIPUR. (2) THE I.T.O.,WARD 1(4),JAIPUR. 3. VK;DJVK;QDR@ CIT 4. VK;DJVK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJVIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZQKBZY@ GUARD FILE {ITA NO.124, 188, 185 & 123/JP/2020} VKNS'KKUQLKJ@ BY ORDER, LGK;DIATHDKJ@ ASST. REGISTRAR