Navin Kumar Kajaria, Kolkata V. ACIT, Circle - 35, Kolkata , Kolkata

ITA 1254/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9861 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 07-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARYA
• Assessee Lawyers: S M SURANA; SUNIN SURANA
• Keywords: Unexplained cash credit; Unexplained expenditure; Gift; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Question of law; Avoidance of tax; Accommodation entries; Assessment record; Onus to prove; Penny stocks; Set aside
• Section: 69C; 143(3); 133(6); 143(1); 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI S.S, GODARA, JUDICIAL MEMBER ITA NO.1254-1255/KOL/2018 ASSESSMENT YEAR:2014-15 NAVEEN KUMAR KAJARIA 32, ARMENIAN STREET, KOLKATA-700001 [ PAN NO.AGDPK 0069 N ] SMT. SUSHILA DEVI KAJARIA, 32, ARMENIAN STREET, KOLKATA-001 [ PAN NO.AFYPK 7990 Q ] / V/S . / V/S . ACIT, CIRCLE-35, AAYAKAR BHAWAN, POORVA, 110, SHANTIPALLY, 7 TH FLOOR, KOLKAKTA-107 ACIT, CIRCLE-36, AAYKAR BHAWA, POORVA 110, SHANTIPALLY, 7 TH FLOOR, KOLKATA-107 /APPELLANT .. /RESPONDENT /BY ASSESSEE SHRI SUNIN SURANA, ADVOCATE & SHRI S.M. SURANA, ADVOCATE /BY RESPONDENT SHRI ARINDAM BHATTACHARYA, ADDL CIT-DR /DATE OF HEARING 03-01-2019 /DATE OF PRONOUNCEMENT 03-04-2019 /O R D E R THESE TWO ASSESSEES HAVE FILED INSTANT APPEAL(S) F OR ASSESSMENT YEAR 2014-15, AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)-10 , KOLKATAS SEPARATE ORDER BOTH DATED 13.03.2018 PASSED IN CASE NO. 141/CIT(A)-10/C -35/2014-15 & 300/CIT(A)- 10/C-36/2014-15/2016-17/KOL, AFFIRMING ASSESSING O FFICERS IDENTICAL ACTION TREATING THEIR BUSINESS LOSS(ES) OF 2.93.720/- AND 3,33,500/- FOLLOWED BY COMMISSION DISALLOWANCE IN FORMER CASE TO THE TUNE OF 14,686/- @ 5%; RESPECTIVELY INVOLVING PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT. HEARD BOTH THE LEARNED REPRESENTATIVE(S) REITERATIN G THEIR RESPECTIVE STANDS AGAINST AND IN SUPPORT OF THE IMPUGNED IDENTICAL BU SINESS LOSSDISALLOWANCE(S) / ADDITION(S). CASE FILE(S) PERUSED. ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 2 2. IT TRANSPIRES DURING THE COURSE OF HEARING THAT THE CIT(A)S IDENTICAL DISCUSSION IN LEAD CASE ITA NO.1254/KOL/2018 AFFIRMING THE IMP UGNED ADDITION OF BOGUS LOS ARISING FROM SALE OF SHARES HELD IN M/S NIKKI GLOBA L FINANCE LTD. READS AS UNDER:- 13. FINDINGS & DECISION 1. I HAVE CAREFULLY CONSIDERED THE ACTION OF THE LD . AO IN TREATING THE CLAIM OF LOSS OF RS.2,93,720/- AS BOGUS, AND ADDING THE SAME AS AN U NEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT, 1961. AFTER AN EXHAUSTIVE DISCU SSIONS AND ELABORATING THE FACTUAL AND LEGAL MATRIX, I FIND THAT THEE LD. AO HAS HELD THAT THE CLAIM OF SHORT TERM CAPITAL LOSS WAS TO BE DENIED TO THE ASSESSEE-INDIVIDUAL, A ND WAS TO BE ASSESSED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE IT ACT. THE LD. AO HAS PLACED ON RECORD THE ENTIRE GAMUT OF FINDINGS, AND THERE IS, IN MY CONSI DERED VIEW NO FURTHER REQUIREMENT ELABORATION FROM THIS FORUM. IN MY VIEW OF THE FACT S THERE ARE ELABORATE AND DIRECT EVIDENCE TO CLEARLY INDICATE THAT THAT THE ENTIRE T RANSACTIONS UNDERTAKEN BY THE APPELLANT WERE MERELY ACCOMMODATION ENTRIES TAKEN F OR THE PURPOSE OF SUCH BOGUS SHORT TERM CAPITAL LOSS MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR. IT IS APPARENT THAT, IN THE GRAB OF ALLEGED STCG, THE ASSESSEE WAS TRYING TO SET OFF ACTUAL INCOMES AGAINST THIS MANUFACTURED LOSS. 2. THE LD. AO HAS VERY CAREFULLY ANALYZED THE INFOR MATION RECEIVED FROM THE INVESTIGATION WING, AND HAS RECORDED THE NOTEWORTHY FEATURES OF THE COMPANY WHOSE SHARES WERE PURCHASED / SOLD BY THE ASSESSEE-INDIVI DUAL. THE ECONOMIC PARAMETERS OF THE SAID COMPANY OVER THE IMPUGNED PERIOD HAS ALSO BEEN BROUGHT ON RECORD, IN THE ANALYSIS. THE RISE AND FALL OF THE PRICES AS RECORD ED HAD BEEN BROUGHT OUT BY THE LD. AO TO BE ARTIFICIAL AND NOT COMMENSURATE WITH THE N ORMAL MARKET, AS THE COMPANY HAD NO BUSINESS AT ALL. THE LD. AO HAS ALSO BROUGHT FORTH INFORMATION THAT THE REGULATORY AUTHORITY SEBI HAS ALSO AFTER INVESTIGAT ING SUCH ABNORMAL PRICE INCREASES OF CERTAIN STOCKS INVESTIGATED THE MATTER AND SUSPE NDED TRADING IN CERTAIN SCRIPTS. IT IS VERY CLEAR THAT THE PRICES OF THESE SCRIPTS FELL SH ARPLY AFTER THE OFFLOADING OF THESE SCRIPTS BY PRE-ARRANGED AND MANIPULATED TRANSACTION S. THE ENTIRE TRANSACTIONS WERE CARRIED OUT ON THE STOCK EXCHANGE TO GIVE IT A COLO R OF REAL TRANSACTIONS. 3. I ALSO FIND THAT THE WHOLE GAMUT OF TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOUS, AND THEREFORE THE RULES OF SUSPICIOUS TRANSACTIONS OUGHT TO APPLY IN THE INSTANT CASE. THERE ARE GRAVE DOUBTS IN THE STORY P ROPOUNDED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. NONE OF THE MATERIAL PRODUCE D BEFORE THE LD. AO BY THE ASSESSEE- APPELLANT ARE ENOUGH TO JUSTIFY THE HUMON GOUS GAINS ACCRUING TO THE ASSESSEE BY WAY OF CAPITAL GAINS. IN MY CONSIDERED VIEW THE BANKING DOCUMENTS ARE MERE SELF SERVING RECITALS. THE LAW IN THE MATTER OF SELF-SER VING RECITALS HAS BEEN LONG ESTABLISHED BY THE HON'BLE APEX COURT. IN THE CASE OF CIT VS P.MOHANKALA 291 ITR 278, THE HON'BLE SUPREME COURT HELD THAT 'THE MONEY CAME BY WAY OF BANK CHEQUE AND WAS PAID THROUGH THE PROCESS OF BANKING TRANSAC TIONS WAS NOT BY ITSELF OF ANY CONSEQUENCES.' THE BURDEN OF PROOF IS ON THE ASSESS EE IN THE MATTER OF JUSTIFICATION OF RECEIPTS WHICH ARE OF SUSPICIOUS AND DUBIOUS NATURE . IN THE CASE OF CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC), THEIR LORDSHIPS LAYING DOWN THE SIGNIFICANCE OF HUMAN PROBABILITIES HELD AS UNDER: ' IN A CASE WHERE A PARTY RELIED ON SELF SERVING RECITALS IN DOCUMENTS, IT WAS FOR THAT PARTY TO EST ABLISH THE TRUTH OF THOSE RECITALS: THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO T HE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. ' SIMILARLY IN THE CASE OF SUMATI DAYAL VS. CIT ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 3 (1995) 214 ITR 801 (SC), THEIR LORDSHIPS HELD AS UN DER: 'IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS O F THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSES OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASS ESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER , NOT SATISFACTORY. IN SUCH A CASE, THERE IS PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE VIZ. THE RECEIPT OF MONEY, AND IF HE FAILS -TO REBUT, THE SAID EVIDENCE BEING UN-REBUTTE D, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. ' IN THE CASE OF SAJJAN DAS & SONS VS. CIT (2003) 264 ITR 435 (DELHI), THEIR LORDSHIPS OF THE HIGH COURT OF DELHI, WHILE CONSIDERING A CAS E IN WHICH GIFTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKING CHANNELS LAID IMPORTAN CE ON THE CAPACITY OF THE DONOR FOR MAKING THE GIFT AND HIS IDENTITY AS WELL AS IMP ORTANCE OF RELATIONSHIP BETWEEN THE DONOR AND DONEE IN DETERMINATION OF GENUINENESS OF GIFT HELD AS UNDER: 'THAT A MERE IDENTIFICATION OF THE DONOR AND SHOWING THE MOVEMEN T OF THE GIFT AMOUNT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO PROVE THE GE NUINENESS OF THE GIFT. SINCE THE CLAIM OF THE GIFT WAS MADE BY THE ASSESSEE, THE ONU S LAY ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE PERSON MAKING THE GIFT BUT ALSO HIS CAPACITY TO MAKE A GIFT AND THAT IT HAD ACTUALLY BEEN RECEIVED AS A GIFT FROM THE DO NOR. 'IN MY CONSIDERED VIEW WHEREVER DOCUMENTS ARE RELIED UPON THEY SHOULD PASS THE TEST OF NORMAL BEHAVIOUR OF THE ASSESSEE IN THE COURSE OF BUSINESS VIZ., HUMAN CONDUCT, PREPONDERANCE OF PROBABILITY AND SURROUNDING CIRCUMSTANCES. IN MY CO NSIDERED VIEW, EVEN IF DOCUMENTARY EVIDENCE IS PRODUCED, THE SAME MUST PAS S THE TEST OF HUMAN PROBABILITIES AND SURROUNDING CIRCUMSTANCES IF THEY DO NOT, THEN ADDITION JUSTIFIED. RELIANCE ON SUCH MATTERS IS PLACED ON THE CASE OF SMT PHOOLWATI DEVI 314 ITR (AT) 1 (DEL.) 4. IT MUST ALSO BE STATED HERE THAT IN COMMISSIONER OF INCOME TAX VS NR PORTFOLIO PVT LTD ON 22 NOVEMBER, 2013, THE HON'BLE DELHI HIGH CO URT HAS HELD ..... 'THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. WHEN A FACT IS ALLEGED AND STATED BEFORE THE ASSESSING OFFICER BY AN ASSESSEE, HE MUST AND SHOULD EXAMINE AND VERIFY, WHEN IN DOUBT OR WHEN TH E ASSERTION IS DEBATABLE. NORMALLY A FACTUAL ASSERTION MADE SHOULD BE ACCEPTE D BY THE ASSESSING OFFICER UNLESS FOR JUSTIFICATION AND REASONS THE AS SESSING OFFICER FEELS THAT HE NEEDS/REQUIRES A DEEPER AND DETAILED VERIFICATION O F THE FACTS ALLEGED. THE ASSESSEE IN SUCH CIRCUMSTANCES SHOULD COOPERATE AND FURNISH PAPERS, DETAILS AND PARTICULARS. THIS MAY ENTAIL ISSUE OF NOTICES T O THIRD PARTIES TO FURNISH AND SUPPLY INFORMATION OR CONFIRM FACTS OR EVEN ATTEND AS WITNESSES. THE ASSESSING OFFICER CAN ALSO REFER TO INCRIMINATING M ATERIAL OR EVIDENCE AVAILABLE WITH HIM AND CALL UPON THE ASSESSEE TO FI LE THEIR RESPONSE. WE CANNOT LAY DOWN OR STATE A GENERAL OR UNIVERSAL PROCEDURE OR METHOD WHICH SHOULD BE ADOPTED BY THE ASSESSING OFFICER WHEN VERIFICATION OF FACTS IS REQUIRED. THE MANNER AND MODE OF CONDUCTING ASSESSMENT PROCEEDING S HAS TO BE LEFT TO THE DISCRETION OF THE ASSESSING OFFICER, AND THE SAME S HOULD BE JUST, FAIR AND SHOULD NOT CAUSE ANY HARASSMENT TO THE ASSESSEE OR THIRD P ERSONS FORM WHOM CONFIRMATION OR VERIFICATION IS REQUIRED. THE VERIF ICATION AND INVESTIGATION SHOULD BE ONE WITH THE LEAST AMOUNT OF INTRUSION, I NCONVENIENCE OR HARASSMENT ESPECIALLY TO THIRD PARTIES, WHO MAY HAVE ENTERED I NTO TRANSACTIONS WITH THE ASSESSEE. THE ULTIMATE FINDING OF THE ASSESSING OFF ICER SHOULD REFLECT DUE APPLICATION OR MIND ON THE RELEVANT FACTS AND THE D ECISION SHOULD TAKE INTO CONSIDERATION THE ENTIRE MATERIAL, WHICH IS GERMANE AND WHICH SHOULD NOT BE ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 4 IGNORED AND EXCLUDE THAT WHICH IS IRRELEVANT. CERTA IN FACTS OR ASPECTS MAY BE NEUTRAL AND SHOULD BE NOTED. THESE SHOULD NOT BE IG NORED BUT THEY CANNOT BECOME THE BEDROCK OR SUBSTRATUM OF THE CONCLUSION. THE PROVISIONS OF EVIDENCE ACT ARE NOT APPLICABLE, BUT THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHORITY, MUST TAKE CARE AND CAUTION TO E NSURE THAT THE DECISION IS REASONABLE AND SATISFIES THE CANONS OF EQUITY, FAIR NESS AND JUSTICE. THE EVIDENCE SHOULD BE IMPARTIALLY AND OBJECTIVELY ANAL YZED TO ENSURE THAT THE ADVERSE FINDINGS AGAINST THE ASSESSEE WHEN RECORDED ARE ADEQUATELY AND DULY SUPPORTED BY MATERIAL AND EVIDENCE AND CAN WITHSTAN D THE CHALLENGE IN APPELLATE PROCEEDINGS. PRINCIPLE OF PREPONDERANCE O F PROBABILITIES APPLIES. WHAT IS STATED AND THE SAID STANDARD, EQUALLY APPLY TO THE TRIBUNAL AND INDEED THIS COURT. THE REASONING AND THE GROUNDS GIVEN IN ANY DECISION OR PRONOUNCEMENT WHILE DEALING WITH THE CONTENTIONS AN D ISSUES SHOULD REFLECT APPLICATION OF MIND ON THE RELEVANT ASPECTS. WHEN A N ASSESSEE DOES NOT PRODUCE EVIDENCE OR TRIES TO AVOID APPEARANCE BEFOR E THE ASSESSING OFFICER, IT NECESSARILY CREATES DIFFICULTIES AND PREVENTS ASCER TAINMENT OF TRUE AND CORRECT FACTS AS THE ASSESSING OFFICER IS DENIED ADVANTAGE OF THE CONTENTION OR FACTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IN CASE AN AS SESSEE DELIBERATELY AND INTENTIONALLY FAILS TO PRODUCE EVIDENCE BEFORE THE ASSESSING OFFICER WITH THE DESIRE TO PREVENT INQUIRY OR INVESTIGATION, AN ADVE RSE VIEW SHOULD BE TAKEN'. 5. IN THIS CONNECTION, I WOULD ALSO WISH TO REFER T O THE DECISION OF THE HON'BLE ITAT BOMBAY BENCH 'B' ( ITA NO.614/BOM/87 A.Y. 1983-84) IN THE CASE OF M/S. MONT BLANE PROPERTIES AND INDUSTRIES PVT. LTD., WHICH WA S UPHELD BY THE HON'BLE SUPREME COURT. THE HON'BLE TRIBUNAL HELD THAT THE WORD ' EVIDENCE ' AS USED IN SEC. 143(3) COVERED CIRCUMSTANTIAL EVIDENCE ALSO. THE WORD ' EVIDENCE ' AS USED IN SEC.143(3) OBVIOUSLY COULD NOT BE CONFINED TO DIRECT EVIDENCE. THE WORD 'EVIDENCE' WAS COMPREHENSIVE ENOUGH TO COVER THE CIRCUMSTANTIAL EV IDENCE ALSO. UNDER THE TAX JURISPRUDENCE, THE WORD ' EVIDENCE ' HAD MUCH WIDER CONNOTATIONS. WHILE THE WORD ' EVIDENCE ' MIGHT RECALL THE ORAL AND DOCUMENTARY EVIDENCE AS MAY BE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT THE USE OF WORD 'MATE RIAL' IN SEC.143(3) SHOWED THAT THE ASSESSING OFFICER, NOT BEING A COURT COULD RELY UPON MATERIAL, WHICH MIGHT NOT STRICTLY BE EVIDENCE ADMISSIBLE UNDER THE INDIAN EV IDENCE ACT FOR THE PURPOSE OF MAKING AN ORDER OF ASSESSMENT. COURT OFTEN TOOK JUD ICIAL NOTICE OF CERTAIN FACTS WHICH NEED NOT BE PROVED BEFORE THEM. THE PLAIN READING O F SECTION 142 AND 143 CLEARLY SUGGESTS THAT THE ASSESSING OFFICER MAY ALSO ACT ON THE MATERIAL GATHERED BY HIM. THE WARD ' MATERIAL ' CLEARLY SHOWS THAT THE ASSESSING OFFICER IS NOT F ETTERED BY THE TECHNICAL RULES OF EVIDENCE AND THE LIKE, AND THAT HE MAY ACT ON MATERIAL WHICH MAY NOT STRICTLY SPEAKING BE ACCEPTED EVIDENCE IN COURT OF LAW. 6. THE HON'BLE SUPREME COURT IN CIT V. DURGA PRASAD MORE[1971] 82 ITR 540 AT PAGES 545-547 MADE A REFERENCE TO THE TEST OF HUMAN PROBABILITIES IN THE FOLLOWING FACT SITUATION: - ' ..... IT IS TRUE THAT AN APPARENT MUST BE CONSIDE RED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A D EED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS. OTHERWISE IT WILL BE VERY EASY T O MAKE SELF- SERVING STATEMENTS IN DOCUMENTS EITHER EXECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVAD E TAX IS TO HAVE SOME RECITALS MADE IN A DOCUMENT EITHER EXECUTED BY HIM OR EXECUT ED IN HIS FAVOR THEN THE ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 5 DOOR WILL BE LEFT WIDE-OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE PRESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY WERE ENTITLED TO LOOK INTO THE SU RROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUMENTS . 7. IT IS A WELL SETTLED PRINCIPLE OF LAW AS DECL ARED BY THE HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS.CIT (214 ITR 801) (SC) THAT THE TRUE NATURE OF TRANSACTION HAVE TO BE ASCERTAINED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES. IT NEEDS TO BE EMPHASIZED THAT STANDARD OF PROOF BEYOND REAS ONABLE DOUBT HAS NO APPLICABILITY IN DETERMINATION OF MATTERS UNDER TAXING STATUTES. IN THE PRESENT CASE, IT IS CLEAR THAT APPARENT IS NOT THE REAL AS EVIDENCED FROM THE INVE STIGATION REPORT. FURTHER, THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MAL V CIT (1988) 172 ITR 250, HIGHLIGHTED THE FACT THAT THE PRINCIPLE OF EVIDENCE LAW ARE NOT TO BE IGNORED BY THE AUTHORITIES, BUT AT THE SAME TIME, HUMAN PROBABILIT Y HAS TO BE THE GUIDING PRINDPLE, SINCE THE AO IS NOT FETTERED, BY TECHNICAL RULES OF EVIDENCE, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MIL LS V CIT (1954) 261 TR 775. THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MA L V CIT (SUPRA) HELD THAT WHAT WAS MEANT BY SAYING THAT EVIDENCE ACT DID NOT APPLY TO THE PROCEEDINGS UNDER INCOME-TAX ACT,1961, WAS THAT THE RIGORS OF RULES O F EVIDENCE, CONTAINED IN THE EVIDENCE ACT WAS NOT APPLICABLE; BUT THAT DID NOT M EAN THAT WHEN THE TAXING AUTHORITIES WERE DESIROUS OF INVOKING THE PRINCIPLE S OF EVIDENCE ACT, IN PROCEEDINGS BEFORE THEM, THEY WERE PREVENTED FROM DOING SO. IT WAS FURTHER HELD BY THE HON'BLE APEX COURT THAT ALL THAT SECTION 110 OF THE EVIDENC E ACT, 1872 DID, WAS TO EMBODY A SALUTARY PRINCIPLE OF COMMON LAW, JURISPRUDENCE VIZ , WHERE A PERSON WAS FOUND IN POSSESSING OF ANYTHING, THE ONUS OF PROVING THAT HE WAS NOT ITS OWNER, WAS ON THAT PERSON. THUS, THIS PRINCIPLE COULD BE ATTRACTED TO A SET OF CIRCUMSTANCES THAT SATISFIES ITS CONDITIONS AND WAS APPLICABLE TO TAXING PROCEED INGS. 8. I AM IN AGREEMENT WITH THE LD. AO THAT THE TRANS ACTIONS RELATING TO THE CLAIM OF LTCG AS MADE BY THE LD. AO COME WITHIN THE AMBIT OF ' SUSPICIOUS TRANSACTIONS ', AND THEREFORE THE RULES OF SUSPICIOUS TRANSACTIONS WOULD APPLY TO THE CASE. PAYMENT THROUGH BANKS, PERFORMANCE THROUGH STOCK EXCHANGE A ND OTHER SUCH FEATURES ARE ONLY APPARENT FEATURES. THE REAL FEATURES ARE THE MANIPU LATED AND ABNORMAL PRICE OF OFF LOAD AND THE SUDDEN DIP THEREAFTER. THEREFORE, I HA VE TO REACH THE INEVITABLE CONCLUSION THAT THE TRANSACTIONS AS DISCUSSED BY TH E LD.AO FALL IN THE REALM OF ' SUSPICIOUS ' AND ' DUBIOUS ' TRANSACTIONS. THE LD. AO HAS THEREFORE NECESSARIL Y TO CONSIDER THE SURROUNDING CIRCUMSTANCES, WHICH HE IN DEED HAS DONE IN A VERY METICULOUS AND CAREFUL MANNER. IN THE CASE OF WIN C HADHAVS CIT (INTERNATIONAL TAXATION) IN ITA NO.3088 & 3107/DEL/200S, THE HON'B LE DELHI ITAT 'B'-BENCH HAS OBSERVED, ON 31.12.2010 AS UNDER: 'SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEAL T WITH: 6.11. THE TAX LIABILITY IN THE CASES OF SUSPICIOUS TRANSACTIONS, IS TO BE ASSESSED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, S URROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND N ATURE OF INCRIMINATING INFORMATION/ EVIDENCE AVAILABLE WITH AO. ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 6 6.12. IN THE CASE OF SUMATI DAYAL V. CIT (1995) 80 TAXMAN 89 (SC), THE HON'BLE SUPREME COURT HAS DEALT WITH THE RELEVANCE OF HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND SURROUNDING CIRC UMSTANCE, BURDEN OF PROOF AND ITS SHIFTING ON THE DEPARTMENT IN CASES OF SUSP ICIOUS CIRCUMSTANCES, BY FOLLOWING OBSERVATIONS: ....... IT IS, NO DOUBT, TRUE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTME NT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUS E IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSE E. BUT IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHA RGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH CASE THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIZ., TH E RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME, THE SAID EVIDENC E BEING UN-REBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT IS A REC EIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREASONABLY. ........... HAVING REGARD TO THE CONDUCT OF THE APP ELLANT AS DISCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER MATERIAL ON THE RECORD, AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNING TICKETS WERE P URCHASED BY THE APPELLANT AFTER THE EVENT. THE MAJORITY OPINION AFTER CONSIDE RING SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBAB ILITIES HAD RIGHTLY CONCLUDED THAT THE APPELLANT'S CLAIM ABOUT THE AMOU NT BEING HER WINNING FROM RACES, WAS NOT GENUINE. IT COULD NOT BE SAID THAT T HE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAD BEEN R EJECTED UNREASONABLY AND THAT THE FINDING THAT THE SAID AMOUNTS WERE INCOME OF THE APPELLANT FROM OTHER SOURCES WAS NOT BASED ON EVIDENCE. 11 CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. IT WOULD, AT THIS STAGE, BE RELEVANT TO CONSI DER THE ADMISSIBILITY AND USE OF CIRCUMSTANTIAL EVIDENCE IN INCOME TAX PROCEEDING S. CIRCUMSTANTIAL EVIDENCE IS EVIDENCE OF THE CIRCUMSTANCES, AS OPPOSED TO DIR ECT EVIDENCE. IT MAY CONSIST OF EVIDENCE AFFORDED BY THE BEARING ON THE FACT TO BE PROVED, OF OTHER AND SUBSIDIARY FACTS, WHICH ARE RELIED ON AS INCONSISTE NT WITH ANY RESULT OTHER THAN THE TRUTH OF THE PRINCIPAL FACT. IT IS EVIDENCE OF VARIOUS FACTS, OTHER THAN THE FACT IN ISSUE WHICH ARE SO ASSOCIATED WITH THE FACT IN I SSUE, THAT TAKEN TOGETHER, THEY FORM A CHAIN OF CIRCUMSTANCES LEADING TO AN INFEREN CE OR PRESUMPTION OF THE EXISTENCE OF THE PRINCIPAL FACT. IN THE APPRECIATIO N OF CIRCUMSTANTIAL EVIDENCE, THE RELEVANT ASPECTS, AS LAID DOWN FROM TIME TO TIM E ARE - (1) THE CIRCUMSTANCES ALLEGED MUST BE ESTABLISHED B Y SUCH EVIDENCE, AS IN THE CASE OF OTHER EVIDENCE (2) THE CIRCUMSTANCES PROVED MUST BE OF A CONCLUSIV E NATURE AND NOT TOTALLY INCONSISTENT WITH THE CIRCUMSTANCES OR CONTRADICTOR Y TO OTHER EVIDENCE. ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 7 (3) ALTHOUGH THERE SHOULD BE NO MISSING LINKS IN TH E CASE, YET IT IS NOT ESSENTIAL THAT EVERYONE OF THE LINKS MUST APPEAR ON THE SURFA CE OF THE EVIDENCE ADDUCED; SOME OF THESE LINKS MAY HAVE TO BE INFERRED FROM TH E PROVED FACTS; (4) IN DRAWING THOSE INFERENCES OR PRESUMPTIONS, TH E AUTHORITIES MUST HAVE REGARD TO THE COMMON COURSE OF NATURAL EVENTS, TO H UMAN CONDUCT AND THEIR RELATION TO THE FACTS OF THE PARTICULAR CASE. (5)THE CIRCUMSTANTIAL EVIDENCE CAN, WITH EQUAL FACI LITY, BE RESORTED TO IN PROOF OF A FACT IN ISSUE WHICH ARISES IN PROCEEDINGS FOR THE ASSESSMENT OF TAXES BOTH DIRECT AND INDIRECT, CIRCUMSTANTIAL EVIDENCE CAN BE MADE USE OF IN ORDER TO PROVE OR DISPROVE A FACT ALLEGED OR IN ISSUE. IN FA CT, IN WHATEVER PROCEEDINGS OR CONTEXT INFERENCES ARE REQUIRED TO BE DRAWN FROM TH E EVIDENCE OR MATERIALS AVAILABLE OR LACKING, CIRCUMSTANTIAL EVIDENCE HAS I TS PLACE TO ASSIST THE PROCESS OF ARRIVING AT THE TRUTH. 6.14. IT WILL ALSO BE WORTHWHILE TO CONSIDER THE NA TURE OF BURDEN OF PROOF ON THE AO FOR PROVING A FACT OR CIRCUMSTANCE IN THE INCOME TA X PROCEEDINGS. THE QUESTIONS RAISED ABOUT THE TAX LIABILITY BY THE AO ARE TO BE ANSWERE D BY THE ASSESSEE BY FURNISHING REASONABLE AND PLAUSIBLE EXPLANATIONS. IF ASSESSEE IS NOT FORTHCOMING WITH PROPER OR COMPLETE FACTS OR HIS STATEMENT OR EXPLANATION IS C ONTRADICTORY, DRAWING OF SUITABLE INFERENCES AND ESTIMATION OF FACTS IS INEVITABLE. C OURTS GENERALLY WILL NOT INTERFERE WITH SUCH ESTIMATE OF FACTS, UNLESS THE INFERENCES OR ESTIMATES ARE PERVERSE OR CAPRICIOUS. 6.15. THE ASSESSEE'S TECHNICAL CONTENTIONS ABOUT AD MISSIBILITY AND RELIANCE ON MATERIAL AVAILABLE ON THE AD'S RECORD ARE IN THE NA TURE OF CONTENTIONS CHALLENGING CRIMINAL OR CIVIL LIABILITIES IN A COURT OF LAW. WE ARE DEALING WITH A PROCESS OF ADJUDICATION OF ASSESSES TAX LIABILITY I.E. ASSESSM ENT UNDER INCOME TAX ACT RATHER THAN CONDUCTING CRIMINAL OR CIVIL COURT PROCEEDINGS. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF S.S. GADGIL (SUPRA) NO ' IIS ' IS INVOLVED IN ADJUDICATION OF TAX LIABILITY. THE ASSESSEE'S CONTENTION THAT THERE WAS NO NEW MAT ERIAL BEFORE THE AO AFTER THE CIT(A)'S SETTING ASIDE ORDER CANNOT BE ACCEPTED. NE W INFORMATION AND MATERIAL DID INDEED COME ON RECORD. IN OUR VIEW, IN A SENSITIVE MATTER LIKE THIS, EVEN A SINGLE CLUE OR REVELATION CAN BE OF GREAT IMPORTANCE. TO REVERS E THE ORDER OF THE AO ON THIS TECHNICAL PLEA WILL AMOUNT TO TAKING A LOPSIDED VIE W OF THE PROCEEDINGS. BESIDES, THE JPC HAS UNDERLINED THE IMPORTANCE OF REPORTS OF INV ESTIGATION AGENCIES LIKE CBI, ORI, EO WHOSE WERE IN THE OFFING, AS THE RELEVANT I NVESTIGATIONS WERE IN . PROCESS. IN VIEW OF THESE OBSERVATIONS, WE DO NOT ACCEDE TO THE ASSESSEE'S PLEAS IN THIS BEHALF. THE ASSESSEE'S CONTENTIONS AND OBJECTIONS IN THIS BEHAL F THAT THE MATERIAL AVAILABLE ON RECORD WAS NOT ADMISSIBLE AS EVIDENCE AND THAT IT C ANNOT BE RELIED ON BY THE AO, ARE DEVOID OF ANY MERIT AND ARE REJECTED OUTRIGHT ' 9. WHEN THE IMPOSSIBLE IS PROJECTED AS POSSIBLE THR OUGH A PLETHORA OF WELL ARRANGED DOCUMENTS, IT WOULD BE VERY REASONABLE TO REJECT TH E DOCUMENTS OUTRIGHT AS MAKE BELIEVE AND SELF SERVING. IN THE CASE OF USHA CHAND RESH SHAH VS ITO, WARD- 19(1}{2), MUMBAI, THE HON'BLE ITAT- 'F'-BENCH MUMBA I BY THEIR ORDER FOR A.Y 2006-07 DATED 26TH SEPTEMBER, 2014 HAVE, IN THE OPE RATIONAL PORTION ADJUDICATED AS UNDER: [ QUOTE] 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE PERTINENT POINTS ARE THAT THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED THE IMPUGNED SHARES THROUGH OFF MARKET TRANSACTION. THE PURCHASE PRICE WAS NOT PAID BY CHEQUE, BUT IT WAS CLAIMED TO ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 8 HAVE BEEN ADJUSTED AGAINST THE SPECULATION PROFIT C LAIMED TO HAVE BEEN MADE BY THE ASSESSEE. THE SMALL DIFFERENCE OF RS.324/- WAS CLAI MED TO HAVE BEEN PAID BY WAY OF CASH. IT IS ALSO PERTINENT TO NOTE THAT THE ALLEGED SPECULATION TRANSACTION CARRIED OUT EARLIER TO THE PURCHASE OF SHARES OF PRIME CAPITAL MARKETS LTD WAS ALSO CLAIMED TO HAVE BEEN CARRIED IN OFF MARKET TRANSACTION. ANOTHE R IMPORTANT POINT IS THAT THE ASSESSEE DID NOT POSSESS COPIES OF SHARE CERTIFICAT ES OR COPIES OF SHARE TRANSFER FORMS. THE BROKER M/S KHANDELWAL & CO., HAS EXPRESSED ITS INABILITY TO FURNISH COPIES OF CONTRACT NOTES AVAILABLE WITH IT AND ALSO FAILED TO FURNISH ITS BOOKS OF ACCOUNT TO SUBSTANTIATE THE TRANSACTIONS OF PURCHASE OF SHARES BY THE ASSESSEE. SINCE THE IMPUGNED TRANSACTION WAS AN OFF MARKET TRANSACTION, THE PURCHASE TRANSACTION COULD NOT BE CONFIRMED BY THE KOLKATA STOCK EXCHANGE. THE SAID SHARES WERE EARLIER HELD BY M/S BRIGHTSUN MERCHANTS (P) LTD AND THE ASSESSEE HA D PURCHASED THE SHARES FROM THEM. THE NOTICE ISSUED TO M/S BRIGHTSUN MERCHANTS (P) LTD WAS RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARK 'UNKNOWN' . IN THIS REGARD, THE ASSESSEE HAD REPLIED THAT THE NAME OF THE COMPANY WAS WRONGLY ME NTIONED BY THE AO AS M/S BRIGHTSUNS (P) LTD AND HENCE THE NOTICE GOT RETURNE D. BUT THERE IS NOT COMMENT ABOUT THE ADDRESS, MEANING THEREBY, THE AO HAD ISSUED NOT ICE TO THE CORRECT ADDRESS ONLY AND HENCE THE SLIGHT VARIATION IN THE NAME OF THE C OMPANY WOULD NOT NORMALLY MAKE ANY DIFFERENCE. HENCE THE FACT THAT THE NOTICE WAS RETURNED BACK ONLY SHOWS THAT THE SELLER OF THE SHARES COULD NOT BE IDENTIFIED. ALL T HESE DISCUSSIONS WOULD SHOW THAT THE PURCHASE TRANSACTION COULD NOT BE CROSS VERIFIED BY THE ASSESSING OFFICER. 10. ONE MORE POINT TO BE NOTED HERE IS THAT THE SPE CULATION TRANSACTIONS CAN BE ENTERED ONLY ON PAYMENT OF MARGIN MONEY. BUT THE DETAILS OF SAID PAYMENT ARE NOT AVAILABLE. WITH REGARD TO THE QUERY RAISED BY THE AO RELATING TO MARGIN MONEY, THE BROKER M/S D. K. KHANDELWAL & CO HAS REPLIED IN THE CONTEXT OF PURCHASE OF SHARES OF M/S PRIME CAPITAL MARKETS LTD AND NOT IN THE CONTEXT OF SPECU LATION TRANSACTIONS THUS, IT IS SEEN THAT THE QUESTION OF KEEPING MARGIN MONEY FOR SPECU LATION, TRANSACTIONS REMAINS UNANSWERED BOTH BY THE ASSESSEE AS WELL AS BY THE S HARE BROKER CITED ABOVE. FURTHER THE SPECULATION TRANSACTION IS ALSO CLAIMED TO BE A N OFF MARKET TRANSACTION, WHICH FURTHER CASTS SHADOW OF DOUBT OVER THE CLAIM PUT FO RTH BY THE ASSESSEE. 11. THOUGH THE ASSESSEE HAS CLAIMED TO HAVE PURCHAS ED THE SHARES IN PHYSICAL FORMAT IN MAY, 2004, SHE CHOSE TO D-MAT THE SAME ONLY IN J UNE 2005, JUST TWO MONTHS PRIOR TO ITS SALE. THE SHARES WERE SOLD THROUGH A SHARE B ROKER NAMED SANJU KABRA, WHO IS INDICTED BY SEBI FOR RIGGING THE PRICES OF PENNY ST OCK SHARES. IT IS PERTINENT TO NOTE THAT THE SHARE PRICES OF M/S PRIME CAPITAL MARKETS LTD WENT FROM RS.5.17 (MAY, 2004) TO RS.279.50 (SEP., 2005). THE ASSESSEE COULD NOT FURNISH ANY REASONS OR AT- LEAST STOCK MARKET NEWS TO SUPPORT THE ABNORMAL INC REASE IN THE PRICES OF THE ABOVE SAID SHARES. THE FINANCIAL STATEMENTS OF THE ABOVE SAID COMPANY WERE ALSO NOT PRODUCED. THOUGH M/S PRIME CAPITAL MARKETS LTD HAS CONFIRMED THE ENTRIES IN ITS BOOKS OF ACCOUNT WITH REGARD TO THE PURCHASES MADE BY THE ASSESSEE, IT COULD NOT IDENTIFY THE NAME OF PURCHASER TO WHOM THE SHARES W ERE SOLD BY THE ASSESSEE. 12. WE HAVE ALREADY SEEN THAT THE TAX AUTHORITIES H AVE APPLIED THE TEST OF HUMAN PROBABILITIES EXPLAINED BY THE HON'BLE SUPREME COUR T IN THE CASES OF SUMATI DAYAL AND DURGA PRASAD MORE (SUPRA) TO DISBELIEVE THE CLA IM OF LONG TERM CAPITAL GAINS PUT FORTH BY THE ASSESSEE. WE NOTICE THAT THE TEST OF H UMAN PROBABILITIES WAS NOT APPLIED BY THE CO-ORDINATE BENCHES OF TRIBUNAL IN THE CASE OF SHRI AVINASH KANTILAL JAIN (SUPRA) AND MR. SHYAM R PAWAR (SUPRA). HENCE, IN OU R VIEW, THE ASSESSEE CANNOT TAKE SUPPORT FROM THE ABOVE SAID DECISIONS. WE FURTHER N OTICE THAT THE ID CIT(A) HAS PLACED RELIANCE ON THE DECISION DATED 04.1.2011 REN DERED BY ITAT DELHI IN THE CASE OF HARESH WIN CHADDHA VS. DDIT, WHEREIN THE TRIBUNAL H AS EXPRESSED THE VIEW THAT ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 9 THERE IS NO PRESUMPTION IN LAW THAT THE AO IS SUPPO SED TO DISCHARGE AN IMPOSSIBLE BURDEN TO ASSESS THE TAX LIABILITY BY DIRECT EVIDEN CE ONLY AND TO ESTABLISH THE EVASION BEYOND DOUBT AS IN CRIMINAL PROCEEDINGS. FURTHER IT WAS HELD THAT THE AO CAN ASSESS ON CONSIDERATION OF MATERIAL AVAILABLE ON RECORD, S URROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATION / EVIDENCE AVAILABLE ON RECORD. 13. IN THE CASE OF SMT. JAMNADEVI AGRAWAL (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS UPHELD THE ORDER OF TRIBUNAL ON THE REASONING T HAT NO FAULT CAN BE FOUND WITH THE FINDINGS RECORDED BY THE TRIBUNAL. A PERUSAL OF THE ABOVE SAID ORDER WOULD SHOW THAT THE REVENUE IN THE ABOVE SAID CASE HAD CONTENDED TH AT THE ASSESSEES IN THE GROUP HAVE PURCHASED AND SOLD SHARES OF SIMILAR COMPANIES THRO UGH THE SAME BROKER. FURTHER THE PURCHASE PRICES AND SALE PRICES WERE SUPPORTED BY P RODUCING THE EVIDENCES TO SHOW THAT THE SAID TRANSACTIONS WERE UNDERTAKEN AT THE R ATES PREVAILING ON THE RESPECTIVE DATES. UNDER THESE SET OF FACTS, THE HIGH COURT HEL D THAT THE FINDINGS GIVEN BY THE TRIBUNAL CANNOT BE FOUND FAULT WITH AND FURTHER HEL D THAT THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL ( SUPRA) WAS NOT APPLICABLE. IN THE CASE OF SHRI MUKESH RATILAL MAROLIA (SUPRA), THE HO N'BLE BOMBAY HIGH COURT HAS OBSERVED THAT THE ASSESSEE HAS FURNISHED COPIES OF SHARE CERTIFICATES TO SHOW THAT THE SHARES WERE IN FACT TRANSFERRED TO THE NAME OF THE ASSESSEE BEFORE IT. FURTHER THERE WAS NO ALLEGATION THAT THE PRICES OF SHARES PURCHASED B Y THE ASSESSEE IN THE CASE BEFORE HIGH COURT WERE MANIPULATED. 14. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE COUL D NOT PRODUCE THE COPIES OF SHARE CERTIFICATES AND COPIES OF SHARE TRANSFER FORMS. TH E TRANSACTION OF PURCHASE OF SHARES COULD NOT BE CROSS VERIFIED. THE SHARES OF M/S PRIM E CAPITAL MARKETS LTD WAS DECLARED AS ' PENNY STOCK ' BY SEBI AND THE BROKER SANJU KABRA, THROUGH WHOM THE SHARES WERE SOLD BY THE ASSESSEE WAS INDICTED FOR M ANIPULATING THE PRICES OF PENNY STOCK SHARES. HENCE, IN OUR VIEW, THE TAX AUTHORITI ES HAVE RIGHTLY APPLIED THE TEST OF HUMAN PROBABILITIES TO EXAMINE THE CLAIM OF PURCHAS E AND SALE OF SHARES MADE BY THE ASSESSEE. 15. WE NOTICE THAT THE MUMBAI D BENCH HAS CONSIDERE D AN IDENTICAL ISSUE IN THE CASE OF SHRI RAMESH KUMAR D JAIN IN ITA NO.3192/MUM/2010 RELATING TO ASSESSMENT YEAR 2006-07. THE TRIBUNAL, VIDE ITS ORDER DATED 15 -06-2011, REJECTED THE CLAIM OF MAKING SPECULATION GAINS ON THE REASONING THAT SPEC ULATION TRANSACTIONS COULD NOT HAVE BEEN ENTERED INTO BY THE ASSESSEE THEREIN WITH OUT PAYING MARGIN MONEY TO THE BROKER. ACCORDINGLY, THE CLAIM OF PURCHASE OF SHARE S WAS REJECTED BY THE TRIBUNAL AND CONSEQUENTLY THE CLAIM OF SALE OF SHARES WAS ALSO R EJECTED. IT IS PERTINENT TO NOTE THAT, IN THE DECISIONS RELIED UPON BY THE ASSESSEE, THE C LAIM OF SPECULATION PROFITS WAS NOT CONSIDERED BY THE TRIBUNAL. IN YET ANOTHER CASE OF SHRI ARAVING M KARIYA CONSIDERED BY 'A' BENCH OF MUMBAI ITAT, THE TEST OF HUMAN PROB ABILITIES WAS APPLIED TO REJECT THE CLAIM OF PROFIT REALIZED ON SALE OF PENNY STOCK S. THERE SHOULD NOT BE ANY DISPUTE THAT THE ONUS TO PRODUCE NECESSARY EVIDENCES TO CON VINCINGLY SHOW THAT THE SHARES WERE PURCHASED AND SOLD AT THE PRICES CLAIMED ALWAY S LIES UPON THE ASSESSEE. OUR VIEW FINDS SUPPORT FROM THE DECISION RENDERED BY HON'BLE GUWAHATI HIGH COURT IN THE CASE OF CIT VS. SMT. JASVINDER KAUR (357 ITR 638). 16. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE DECISIONS RELIED UPON BY THE ASSESSEE CANNOT BE TAKEN SUPPORT OF BY THE ASSESSEE FOR THE REASONS DISCUSSED SUPRA. ACCORDINGLY, WE ARE OF THE VIEW TH AT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY AP PLYING THE TEST OF HUMAN PROBABILITIES. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS DISMISSED ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 10 [ UNQUOTE] 10.RELIANCE IS ALSO PLACED IN THE CASE OF SOMNATH M AINI VS ITO (226) 100 TTJ 917 WHEREIN THE HON'BLE CHANDIGARH BENCH OF !TAT HELD T HAT IF FACTS AND CIRCUMSTANCES SO WARRANT THAT IT DOES NOT ACCORD WITH THE TEST OF HUMAN PROBABILITIES, TRANSACTIONS HAVE TO BE HELD TO BE NON-GENUINE. [ QUOTE] 3. THE RELEVANT FACTS BRIEFLY STATED ARE THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAD INCU RRED A LONG-TERM CAPITAL LOSS ON ACCOUNT OF SALE OF GOLD JEWELLERY DECLARED UNDER TH E VDIS, 1997, AMOUNTING TO RS.19,87,705 AND ALSO THERE WAS A SHORT-TERM CAPITA L GAIN NEAR TO THIS AMOUNT OF LONG TERM CAPITAL LOSS AMOUNTING TO RS. 20,36,700 RESULT ING INTO NET CAPITAL GAIN OF RS. 48,995. THE AO ON PERUSAL OF RECORD FURTHER OBSERVE D THAT IN THE CASE OF A FAMILY MEMBER OF THE SAME ASSESSEE SHRI D.C. MAINI, IN THE SAME ASSESSMENT YEAR, SIMILAR EXERCISE HAS BEEN DONE BY THE ASSESSEE WHEREIN A LO NG-TERM CAPITAL LOSS OF RS.11,59,066 HAD BEEN INCURRED ON ACCOUNT OF SALE O F GOLD JEWELLERY DECLARED UNDER THE VDIS AND SHORT-TERM CAPITAL GAIN OF RS. 11,75,1 00 RESULTING INTO A NET GAIN OF RS. 16,034. ON GOING THROUGH THE NATURE OF TRANSACTIONS , THE AO DOUBTED THE GENUINENESS OF THE SHORT-TERM CAPITAL GAIN IN THE CASE OF THE A SSESSEE AND HE MADE FURTHER INQUIRY THAT DURING THE YEAR ASSESSEE HAD PURCHASED 45,000 SHARES OF M/S ANKUR INTERNATIONAL LTD. AT VARYING RATES FROM RS. 2.06 TO RS. 3.1 PER SHARE AND SOLD THEM WITHIN A SHORT SPAN OF SIX-SEVEN MONTHS AT THE RATE VARYING FROM R S. 47.75 TO RS. 55. THESE SHARES WERE PURCHASED THROUGH A BROKER MUNISH ARORA & CO. AND SOLD THROUGH ANOTHER BROKER M/S S.K. SHARMA & CO. THE AO TOOK BY SURPRIS E THE ASTRONOMICAL RISE IN SHARE PRICE OF A COMPANY FROM RS. 3 TO RS. 55 AND STARTED FURTHER INQUIRY. THE AO ISSUED NOTICE UNDER SECTION 131 TO BOTH THE BROKERS FROM W HOM SHARES WERE PURCHASED AND SOLD AND STATEMENTS WERE RECORDED. THE AO ALSO ANAL YZED THE BALANCE SHEET OF- M/S ANKUR INTERNATIONAL LTD. TO JUSTIFY AS TO HOW THE S HARE PRICE OF A COMPANY CAN GO UP FROM A MERE RS. 3 TO RS. 55 IN A SHORT SPAN OF SIX TO SEVEN MONTHS' TIME. THE AO MADE DETAILED AND EXTRANEOUS EXERCISE OF FINDING TH E FUNDAMENTAL OF THE SHARE OF THE COMPANY BY DIFFERENT METHODS AND CONCLUDED THAT THE SE SHARES WERE NOT GENUINE AND TRANSACTIONS WERE SO ARRANGED SO AS TO COVER UP THE LOSS INCURRED ON ACCOUNT OF SALE OF JEWELLERY ONLY. THE AO ALSO RECORDED THE FINDING TH AT TRANSACTIONS WERE DONE AT LUDHIANA WHERE ALSO THE SHARE PRICE OF THE COMPANY IS QUOTED BUT MAXIMUM VALUE OF THE SHARE QUOTED WAS RS. 17 BUT THAT WAS ONLY IN JU LY, 1997, I.E. LONG BEFORE THE SHARES WERE SOLD BY THE ASSESSEE TO M/S S.K. SHARMA & CO. IN THE MONTHS OF FEBRUARY AND MARCH, 1998. THE AO ALSO RECORDED THE FINDING THAT ALTHOUGH THE SHARES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE, THEY WERE STILL LYING IN THE NAME OF ASSESSEE MUCH AFTER THE SALE TO M/S S.K. SHARMA & CO. THE LE ARNED CIT(A) DELETED THE ADDITION ON THE GROUND THAT BOTH THE BROKERS FROM W HOM THE SHARES HAVE BEEN PURCHASED AND SOLD WERE CALLED UNDER SECTION 131 BY THE AO. BOTH HAVE CONFIRMED THE SALE AND PURCHASE OF SAID SHARES. OTHER ASPECT OF THE FACTS AND CIRCUMSTANCES RAISED BY THE AO WAS NOT DISCUSSED BY THE CIT(A) IN HIS ORDER. 4. IN APPEAL BEFORE US, THE LEARNED DEPARTMENTAL RE PRESENTATIVE CONTENDED THAT IT IS HIGHLY IMPROBABLE THAT SHARES OF A COMPANY GO UP SO HIGH IN FEW MONTHS' TIME. THE LEARNED DEPARTMENTAL REPRESENTATIVE TOOK US THROUGH VARIOUS PAGES OF THE ASSESSMENT ORDER AND THE PAPER BOOK WHEREIN SALE BILL OF THE S HARES WITH THE SAID M/S S.K. SHARMA &' CO. WERE ALSO FILED. THE LEARNED DEPARTME NTAL REPRESENTATIVE POINTED OUT THAT SHARES HAVE BEEN SOLD AT LUDHIANA WHEN ACTUALL Y STOCK EXCHANGE WAS NOT FUNCTIONAL - A FACT WHICH IS ALSO RECORDED BY THE A O. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO POINTED OUT THAT SHARES HAVE BE EN SOLD TO M/S S.K. SHARMA & CO. ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 11 ON 9TH FEB., 1998 AND 23'0 MARCH, 1998, WHEREAS FRO M THE STATEMENT OF ACCOUNT OF M/S S.K. SHARMA & CO., PAYMENTS HAVE BEEN RECEIVED BY THE ASSESSEE FROM 31' MARCH, 1998 TO 27'H JULY, 1998, MEANING THEREBY THA T HAD THE TRANSACTIONS BEEN GENUINE, PAYMENT COULD HAVE BEEN RECEIVED IN ONE GO BY S.K. SHARMA & CO. THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THA T ANY SUCH TYPE OF TRANSACTIONS RELATING TO THESE TYPES OF COMPANY OPERATING ON STO CK EXCHANGES PAYMENTS ARE RECEIVED IN PIECEMEAL WHEREAS IN NORMAL MARKET SHAR E TRANSACTIONS, CONTRACT NOTES ARE ISSUED BY THE BROKER AND PAYMENTS ARE RECEIVED IN O NE GO. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO ARGUED THAT AS PER THE STATEMEN T OF S.K. SHARMA & CO. RECORDED AT THE TIME OF INQUIRY, HE DID NOT PRODUCE ANY BOOKS O F ACCOUNT AND IDENTITY OF PERSONS TO WHOM THE SHARES HAVE BEEN SOLD. ORDINARILY, WHEN BROKERS ARE ENQUIRED ABOUT SHARE TRANSACTIONS, THEY KEEP PROPER BOOKS OF ACCOUNT FRO M WHOM SHARES HAVE BEEN PURCHASED AND SOLD. HOWEVER, IN THIS CASE, S.K. SHA RMA & CO. FAILED TO PROVIDE THE NAMES OF PURCHASERS OF THE SHARES AND IDENTITY OF T HE PURCHASERS. 5. ON THE OTHER HAND, THE LEARNED AUTHORISED REPRES ENTATIVE CONTENDED THAT IN THE SHARE MARKET, SHARE PRICE DOES NOT MOVE ACCORDING T O THE FUNDAMENTALS OF A COMPANY. THEY GO UP AND DOWN AS PER SENTIMENTS PREVAILING AT THAT TIME. TO CONTROVERT, THE ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE , HE ARGUED THAT SHARE PRICES ARE QUOTED AT JAIPUR STOCK EXCHANGE AND WERE QUOTED ON THE RELEVANT DATE OF SALE AT THE SAME PRICE ON WHICH SHARES WERE SOLD TO M/S S.K. SH ARMA & CO. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTROVERTED HI S ARGUMENT BY SAYING THAT VOLUME OF TRANSACTIONS ON THE RELEVANT DATES IS ONL Y 600 SHARES ON 9TH FEB., 1998 AND 1000 SHARES ON 23'D MARCH, 1998 WHEREAS NUMBER OF S HARES INVOLVED IN THE TRANSACTIONS WITH S.K, SHARMA & CO. ARE 45000 SHARE S. 6. AFTER HEARING THE RIVAL SUBMISSIONS, GOING THROU GH THE ORDERS OF AUTHORITIES BELOW AND PAPER BOOK, WE FIND THAT M/S ANKUR INTERNATIONA L LTD., ALTHOUGH IT IS A QUOTED COMPANY, ITS SHARES WERE NOT BEING TRANSACTED AT LU DHIANA STOCK EXCHANGE AT, THE RELEVANT TIME. SHARES HAVE BEEN PURCHASED AND SOLD THROUGH THE BROKERS AND PAYMENTS HAVE BEEN RECEIVED IN CHEQUE ON DIFFERENT DATES AS PER THE STATEMENT OF ACCOUNT OF M/S S.K. SHARMA & CO, FACTUAL MATRIX OF THE CASE FROM S TART OF THE PURCHASE OF SHARES AT THE RATE OF RS. 3 TO THE SALE OF SHARES AT RS. 55 I N A SHORT SPAN OF TIME AND SHARES BEING NOT, QUOTED AT LUDHIANA STOCK EXCHANGE AND THE WAY IN WHICH DIFFERENT, INSTALMENT PAYMENTS HAVE BEEN RECEIVED FROM THE BROKERS AND NO N-AVAILABILITY OF THE RECORDS OF THE BROKERS AND THE SHARES REMAINING IN THE NAME OF ASSESSEE EVEN LONG AFTER THE SALE OF THE SHARES DOES NOT STAND THE TEST OF PROBABILIT IES. AS RIGHTLY POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THESE TYPES OF COMPANIES FUNCTION IN THE CAPITAL MARKET WHOSE SALE PRICE IS MANIPULATED TO ASTRONOMI CAL HEIGHT ONLY TO CREATE THE ARTIFICIAL TRANSACTION IN THE FORM OF CAPITAL GAIN. SURROUNDING CIRCUMSTANCES DIFFER FROM THE NORMAL SHARE MARKET TRANSACTIONS IN WHICH THEY ARE ORDINARILY CARRIED OUT. TAKING ALL THE STEPS TOGETHER, FINAL CONCLUSION DOE S NOT ACCORD WITH THE HUMAN PROBABILITIES. THE HON'BLE SUPREME COURT IN THE CAS E OF CIT V. DURGA PRASAD MORE HELD AS UNDER: IT IS A STORY THAT DOES NOT ACCORD WITH HUMAN PROBA BILITIES. IT IS STRANGE THAT HIGH COURT FOUND FAULT WITH THE TRIBUNAL FOR NOT SW ALLOWING THAT STORY. IF THAT STORY IS FOUND TO BE UNBELIEVABLE AS THE TRIBUNAL H AS FOUND AND IN OUR OPINION, RIGHTLY THAT THE DECISIONS REMAINS THAT THE CONSIDE RATION FOR THE SALE PROCEEDED FROM THE ASSESSEE AND THEREFORE, IT MUST BE ASSUMED TO BE HIS MONEY. IT IS SURPRISING THAT THE HIGH COURT HAS FOUND FAULT WITH THE ITO FOR NOT EXAMINING THE WIFE AND THE FATHER-IN-LAW OF THE ASSESSEE FOR PROVING THE DEPARTMENT'S CASE. ALL THAT WE CAN SAY IS THAT THE HIGH COURT HA S IGNORED THE FACTS OF LIFE. IT ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 12 IS UNFORTUNATE THAT, THE HIGH COURT HAS TAKEN A SUP ERFICIAL VIEW OF THE ONUS THAT LAY ON THE DEPARTMENT. 7. THE LEARNED CIT(A) ONLY GOT SWAYED BY THE ISSUAN CE OF NOTICE BY THE AO UNDER SECTION 131 TO BOTH THE BROKERS FROM WHOM SHARES WE RE PURCHASED AND SOLD AND CAME TO THE CONCLUSION THAT SHARE TRANSACTIONS WERE GENU INE OVERLOOKING THE MATE, GATHERED BY THE AO FROM THE STATEMENTS RECORDED OF BROKER M/ S S.K. SHARMA & CO. AND THE OTHER FACTS AND CIRCUMSTANCES THAT VOLUME OF TRANSA CTIONS OF JALPUR SOCK EXCHANGE IS ONLY 600 SHARES AND 1000 SHARES. PAYMENTS HAVE BEEN RECEIVED FROM THAT BROKERS ONLY IN INSTALMENTS OVER A PERIOD OF 6-7 MONTHS. IT IS T RUE THAT WHEN TRANSACTIONS ARE THROUGH CHEQUES, IT LOOKS LIKE REAL TRANSACTION BUT AUTHORITIES ARE PERMITTED TO LOOK BEHIND THE TRANSACTIONS AND FIND OUT THE MOTIVE BEH IND TRANSACTIONS. GENERALLY, IT IS EXPECTED THAT APPARENT IS REAL BUT IT IS NOT SACROS ANCT. IF FACTS AND CIRCUMSTANCES SO WARRANT THAT IT DOES NOT ACCORD WITH THE TEST OF HU MAN PROBABILITIES, TRANSACTIONS HAVE BEEN HELD TO BE NON-GENUINE, IT IS HIGHLY IMPROBABL E THAT SHARE PRICE OF A WORTHLESS COMPANY CAN GO FROM RS. 3 TO RS. 55 IN A SHORT SPAN OF TIME. MERE PAYMENT BY CHEQUE AND RECEIPT BY CHEQUE DOES NOT. RENDER A TRA NSACTION GENUINE. CAPITAL GAIN TAX WAS CREATED TO OPERATE IN A REAL WORLD AND NOT THAT OF MAKE BELIEF. FACTS OF THE CASE ONLY LEAD TO THE INFERENCE THAT THESE TRANSACTIONS ARE NOT GENUINE AND MAKE BELIEVE ONLY TO OFF SET THE LOSS INCURRED ON THE SALE OF JE WELLERY DECLARED UNDER VDIS. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THIS CASE AN D MATERIAL ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) WAS NOT JUSTIFIED I N DELETING THE IMPUGNED ADDITION. WE, ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) A ND RESTORE THAT OF THE AO. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED. [ UNQUOTE] 11. MOREOVER, ALL THE JUDGMENTS RELIED UPON BY THE APPELLANT FALL FLAT IN THE FACE OF THE FACTS THE CASE, AND THE PREPONDERANCE OF PROBABILIT Y AGAINST THE ASSESSEE. IN A DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF SANJAY BLMALCHAND JAIN VS 'PR.CIT BY THEIR ORDER DATED 10'' APRIL, 2017 HAVE UPHELD THE ORDERS OF THE HON'BLE ITAT, NAGPUR BENCH DATED 18.07.2016 IN ITA NO. 61/NAG/2013 IN SA NJAY BIMALCHAND JAIN VS ITO, LRD-4(2), NAGPUR, WHEREIN IT WAS HELD THAT ON THE F ACTS EMERGENT IN THE CASE, AND THE PREPONDERANCE OF PROBABILITIES, ENTIRE CAPITAL GAIN S CLAIMS WERE TO BE TREATED AS FICTITIOUS AND BOGUS. BOGUS LTCG FROM PENNY STOCKS: THE ASSESSEE HAS NOT TENDERED COGENT EVIDENCE TO EXPLAIN HOW THE SHARES IN AN UNKNOWN COMPANY WORTH RS.5 HAD JUMPED TO RS.485 IN NO TIME. THE FANTASTIC SALE PRICE WAS NOT AT ALL PO SSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS TO JUSTIFY THE PRICE RISE. THE ASSE SSEE HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE UNDISCLOSED IN COME IN THE GARB OF LONG TERM CAPITAL GAIN. THE GAIN HAS ACCORDINGLY TO BE ASSESS ED AS UNDISCLOSED CREDIT U/S 68 IN VIEW OF THE ABOVE DISCUSSION, I FIND NO INFIRMIT Y IN THE ORDERS OF THE LD. AO, AND I CONFIRM THE SAME, HOLDING THE CLAIM OF STCL OF RS.2 ,93,720/- TO BE BOGUS. THE GROUND ORE STANDS DISMISSED. 14. GROUND NO 5 EMANATES FROM THE ACTION OF THE LD. AO IN COMPUTING RS.14,686/- AS UNDISCLOSED EXPENDITURE (CALCULATED @ 5% ON RS 2,93,720/-) AND ADDING BACK THE SAME TO TOTAL INCOME U/S 69 OF THE I.T ACT 1961. THE IMPUGNED MATTER HAS BEEN DEALT WITH BY THE LD. AO UNDER: 5.1.4 IN VIEW OF THE ABOVE, IT CAN SAFELY CONCLUDED THAT THE ASSESSEE HAS RESORTED TO COLOURABLE DEVICE IN THE WAY OF PURCHAS E OF SHARES FROM SECONDARY MARKET AT A VERY HIGH RATE AND IMMEDIATELY SOLD OUT THE SHARES AT ABNORMALLY ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 13 LOW RATE TO CREATE LOSS SYSTEMATICALLY FOR THE ONLY PURPOSE MINIMIZING THE TAX LIABILITY DURING THE YEAR UNDER CONSIDERATION. HENC E, SET OFF LOSS OF RS 2,93,720/- WITH INCOME FROM OTHER SOURCE IS HERE BY DISALLOWED U/S 68 OF THE INCOME TAX ACT, 1961 AND ADDED TO TOTAL INCOME OF T HE ASSESSEE. ACCORDINGLY, A SUM OF RS. 14,686/- BEING 5% OF RS.2,93,720/- IS ADDED AS UNDISCLOSED EXPENDITURE WITHIN THE MEANING OF SECTION 69C OF TH E INCOME-TAX ACT, 1961. 15. DURING THE COURSE OF THE APPEAL, IN RESPECT OF THIS GROUND, THE APPELLANT / LD. A.R FOR THE APPELLANT HAS MADE THE FOLLOWING SUBMISSION S: ADDITION OF RS 14686 ON ACCOUNT OF UNDISCLOSED EX PENDITURE THE LD AO HAS MADE AN ADDITION OF RS 293720 TO THE TOTAL INCOME OF THE APPELLANT TREATING SHORT TERM CAPITAL LOSS AS BOGUS AND IN CO NSEQUENCE HAS ALSO MADE AN ADDITION OF RS 14686 ON ACCOUNT OF UNDISCLOSED EXPENDITURE U /S 69 OF THE I T ACT 1961. WE HAVE MADE SUBMISSION BEFORE YOUR GOODSELF HEREIN ABOVE TO DELETE THE ADDITION OF RS 293720 AND ON RELIEF BEING ALLOWED AS PRAYED ADD ITION OF RS 14686 WILL AUTOMATICALLY GETS DELETED AS MADE IN CONSEQUENCE T O ADDITION OF RS 293720. 16. FINDINGS & DECISION: 1. I HAVE ALREADY UPHELD THE ,ACTION OF THE LD AO I N TREATING THE CLAIM OF BUSINESS LOSS OF RS.2,93,720/- AS BOGUS. AS A NATUR AL COROLLARY, THE ADDITION OF RS.14,686/- BEING 5% OF RS.2,93,720/- WHICH HAD BEE N ADDED BACK BY THE LD AO AS UNDISCLOSED EXPENDITURE WITHIN THE MEANING OF SECTION 69C OF THE INCOME-TAX ACT, 1961 IS UPHELD. 2. AS A RESULT, THIS GROUND OF APPEAL STANDS DISMI SSED. 3. I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO RIVA L CONTENTIONS. FORMER ASSESSEES DETAILED PAPER BOOK COMPRISING OF ASSESS ING OFFICER SHOW-CAUSE LETTER DATED 02.12.2016 REGARDING LOSS IN TRADING OF SHARE S TRADING REPLY DATED 02.12.2016, SHOW-CAUSE LETTER DATED 30.11.2016 WITH RESPECT TO COMMODITY LOSS, DETAILS OF SHARE TRADING LOSS, COPY OF CONTRACT NOTES, DEMAT STATEME NT, RELEVANT BANK STATEMENT, DIFFERENCE ISSUED BY BROKER FOR COMMODITY LOSS, COR RESPONDING BROKERS CONTRACT NOTES AS WELL AS BANK STATEMENT; STANDS PERUSED. MR. BHAT TARCHYA HAS FILED HIS DETAILED WRITTEN SUBMISSIONS TO THE FOLLOWING EFFECT:- RESPECTED SIR, SUB: ITA NO. 1254/KOL/2018 A.Y-2014-15, THE CASE OF NAVIN KUMAR KAJARIA VIS ACIT, CIRLCE-35, KOLKATA.- CASE FOR HEARING 03/01/2 019 WRITTEN SUBMISSION - REGARDING YOUR HONOUR IS REQUESTED TO KINDLY CONSIDER THE FOL LOWING SUBMISSION WHILE DECIDING THE CASE UNDER APPEAL. 1. THIS CASE HAS BEEN SELECTED FOR SCRUTINY ON THE BASIS OF INPUTS RECEIVED FROM INVESTIGATION WING ABOUT SUSPICIOUS TRANSACTION WIT H A STOCK GIVING SHORT TERM ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 14 CAPITAL LOSS. THEREFORE, AO HAS REASON TO DOUBT THE GENUINENESS OF SUCH TRANSACTION FROM THE VERY BEGINNING. 2. FIRST QUESTION NEEDS TO DECIDE WHETHER INVESTMEN T IN THE STOCK UNDER CONSIDERATION WAS AN INVESTMENT DECISION OF THE ASSESSEE OR NOT? IT HAS NEVER BEEN EXPLAINED AS TO HOW AND WHY ASSESSEE WAS CONVINCED THAT IT WAS A GR EAT COMPANY WORTH INVESTMENT. OTHERWISE, ASSESSEE COULD HAVE MADE SUCH INVESTMENT S IN MULTIPLE COMPANIES ON THE BASIS OF TIPS/ RECOMMENDATION FROM DIFFERENT SOURCE S EVERY NOW AND THEN. THERE MUST BE SOME SPECIFIC REASON AS TO WHY ASSESSEE SELECTED ONLY THIS STOCK AND INVESTED SUBSTANTIAL AMOUNT FOR ACQUIRING LARGE NUMBER OF SH ARES AT A TIME WHICH ASSESSEE HAD DONE EVER BEFORE. 3. THE COMPANY UNDER CONSIDERATION DOES NOT SATISFY ANY OF THE FOLLOWING CRITERION GENERALLY CONSIDERED BY AN INVESTOR WHILE SELECTING A COMPANY FOR INVESTMENT, SOME OF THEM ARE AS UNDER : THE COMPANY SHOULD HAVE A GOOD BUSINESS MODEL AND 'LONG-TERM PROSPECTS' IT IT CONTROLLED BY A GOOD MANAGEMENT ITS FINANCIAL STRENGTH AND CAPITAL STRUCTURE GIVE S CONFIDENCE AND REDUCES RISK. ITS DIVIDEND PAYING RECORD AND EARNING CAPACITY G IVES INVESTOR CONFIDENCE OF RECEIVING GOOD REGULAR RETURNS WHETHER IN THE FORM OF DIVIDEND OR APPRECIATION OF ITS VALUE OVER A PERIOD OF TIME. RISK MANAGEMENT IS THE KEY WORD FOR ANY INVESTMEN T DECISION. NOBODY IS WILLING TO PUT A LARGE AMOUNT OF HIS HARD-EARNED MONEY INTO A STOCK WITHOUT BEING CONVINCED THAT HIS CAPITAL IS AT LEAST SAFE. DURING THE COURSE OF ASSESSMENT ASSESSEE NEVER EXPL AINED THE REASON FOR SELECTION OF THAT PARTICULAR STOCK FOR INVESTMENT. IT APPEARS, S UCH ACTION HAD BEEN TAKEN FOR ANY OTHER REASON WHICH ASSESSEE PREFERRED NOT TO DISCLO SE. FOLLOWING ISSUES DESERVES PROPER CONSIDERATION :- 4. IN THE INSTANT CASE, THE ASSESSEE HAS ENTERED IN TO SALE AND PURCHASE OF SHARES OF NIKKI GLOBAL FINANCE LTD (NGFL). IT IS FOUND FROM T HE SUBMISSION THAT THE ASSESSEE HAS BOUGHT 4300 SHARES OF NGFL FOR 9,13,5511- ON 07 /03/2014 AND SOLD 4300 SHARES OF THE SAME SCRIPTS ON 21103/2014 FOR RS. 6,19,8311 - AND THE ASSESSEE HAS INCURRED ALLEGED BUSINESS LOSS OF RS. 2,93,7201- ON THE SALE OF THOSE SHARES. THE A.O. THEN MADE A DEEPER STUDY OF THE PRICE MOVEMENT AND SHARE MARKET BEHAVIOUR OF THE ENTITIES INVOLVING IN TRADE, OF THE SCRIPT AS THE SHARE PRIC E MOMENT AND THE PROFIT EARNED BY THE BENEFICIARIES WERE BEYOND HUMAN PROBABILITY AND THE A.O. STATED THAT THERE IS NOTHING WORTHWHILE TO MENTION ON THE FRONT OF ASSETS AND NE T WORTH OF THE COMPANY AS WELL, TO CONCLUDE THAT IT COULD COMMAND SUCH HIGH PREMIUMS. THE COMPANY MERELY FORWARDED THE SHARE CAPITAL RECEIVED THROUGH PREFERENTIAL PLA CEMENT OF SHARES TOWARDS LOANS AND ADVANCES. IT WAS ALSO FOUND THAT DURING THE PERIOD OF ASTRONOMICAL RISE OF SHARES PRICE OF THE SCRIP OR VERTICAL DIP, THERE WAS NO CORPORAT E ANNOUNCEMENT OR BIG ORDER OR ANY SUCH NEWS WHICH COULD RESULT INTO SUCH FRENZY IN TH E SCRIP PRICE. MOREOVER, THERE WAS ALSO NOTHING NOTED IN THE BSE, NSE, CSE ETC. DURING THE SUCH PERIOD A SURPRISE FALL OF INDEX OF THE SHARES LISTED IN THOSE EXCHANGE. THE R ISE AND FALL OF THE PRICE OF SCRIPT IN THE SECONDARY MARKET MAINLY DEPENDS UPON THE EPS, T HE BUSINESS HEALTH OF COMPANY OR SOME NEW DEVELOPMENT IN THE COMPANY WHICH PROMIS ES BRIGHT FUTURE FOR THE SHAREHOLDERS. THEREFORE THE REASONS OF THIS ASTRONO MICAL PRICE FALL WERE LOCATED SOMEWHERE ELSE AND CERTAINLY COULD NOT BE RELATED T O THE FUNDAMENTALS OR ANY ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 15 HYPOTHETICAL PROMISING FUTURE OF THE COMPANY BY ANY STRETCH OF IMAGINATION. THIS ABNORMAL PRICE FALL IS ALSO HIGHLIGHTED BY THE OVER ALL PERCENTAGE DECREASE IN THE SENSEX DURING THE PERIOD WHEN THE SHARES SAW PHENOM ENAL PRICE RISE. NORMALLY, THE SENSEX IS A BENCHMARK OFTHE AVERAGE PRICE MOVEMENT IN ANY SHARE. MOST OF THE STOCKS WHICH HAVE GOOD MARKET CAPITALIZATION AND AR E MAJORLY HELD BY PUBLIC TEND FOLLOW THE PRICE MOVEMENT OF THE SENSEX. THE DEVIAT ION IN PRICE MOVEMENT VIS-- VIS SENSEX IS USUALLY GUIDED BY THE FUNDAMENTALS OF THE COMPANY AND THE BEHAVIOUR OF INDIVIDUAL INVESTORS. WHEN THE PRICE DECREASE IN THE SHARES OF THE SCRIPT WAS COMPARED WITH THE MOVEMENT IN THE SENSEX IT WAS SEE N THAT THERE WAS NO CORRELATION. WHILE SENSEX HAD SHOWN ALMOST NO PROGR ESS, THE PRICE OF THE SCRIPT FALLS PHENOMENALLY. THUS CLEARLY PRICE RIGGING WAS DONE TO DECREASE THE SCRIPT PRICE SIGNIFICANTLY. TRADE DATA FOR SHRI NAVIN KAJARIA, THE ASSESSEE WAS OBTAINED FROM THE BSE FOR RELEVANT PERIOD. FROM THE SUCH DATA OBTAINED, COUNT ER PARTY MEMBER (I.E BROKER) WAS IDENTIFIED CONSORTIUM SECURITIES PVT. LTD.'. CONSOR TIUM SECURITIES PVT. LTD' WAS INVOLVED IN MANAGED AND SYNCHRONIZED TRANSACTIONS A S PER DATA GATHERED BY THE INVESTIGATION WING, KOLKATA. SHRI BIPLAB CHOUDHARY , THE ALLEGED OPERATOR HAS ACCEPTED THAT CONSORTIUM SECURITIES PVT. TD. WAS IN VOLVED IN PROVIDING ACCOMMODATION ENTRY IN THE FORM OF LTCG/STCL. THESE TYPES OF TRANSACTIONS ARE RESORTED BY THE ASS ESSEE IN ORDER TO EVADE TAX BY SET OF NORMAL CAPITAL GAIN WITH SUCH MAN-MADE CREATED LOSS , INVESTIGATIONS INTO THESE TYPES OF TRANSACTIONS WERE CONDUCTED BY DIRECTOR OF INCOM E-TAX (INVESTIGATION) KOLKATA AND THE INVESTIGATION WING HAS SUMMARIZED THESE TRANSAC TIONS AS:- THE TRANSACTION INVOLVES THREE LEGS. (I) PURCHASE OF SHARE BY THE BENEFICIARY. IN THIS THE B ENEFICIARY IS SOLD A FIXED NUMBER OF SHARES AT A NOMINAL RATE. THE PRICE AND T HE NUMBER OF SHARES TO BE PURCHASED ARE DECIDED ON THE BASIS OF THE BOOKING T AKEN AND THE VALUE UP TO WHICH PRICE WOULD BE RIGGED. THIS LEG OF THE TRANSA CTION MOSTLY IS OFF-LINE. THIS IS DONE TO SAVE ON STT USING THE LOOPHOLE IN S ECTION 10(38) OF THE IT ACT WHICH PLACES RESTRICTION OF TRADING BY PAYMENT OF S TT ON SALE OF SHARES AND NOT ON PURCHASE. (II) PRICE RIGGING. AFTER THE SHARES HAVE BEEN PURCHASED BY THE BENEFICIARIES, THE SYNDICATE MEMBERS STARTS RIGGING THE PRICE GRADUALL Y THROUGH THE BROKERS. IN THESE TRANSACTIONS THE VOLUME IS ALMOST NEGLIGIBLE. TWO FIXED BROKERS WHO ARE IN LEAGUE WITH THE SYNDICATE BUY SHARES AT A FIXED TIME AND AT A FIXED PRICE. THESE LOW VOLUME TRANSACTIONS ARE MANAGED THROUGH P APER COMPANIES OF ENTRY OPERATORS. (III) FINAL SALE BY THE BENEFICIARY. THIS IS DONE AFTER B ENEFICIARY HELD THE SHARE FOR REQUIRED PERIOD. THE PERIOD OF HOLDING MAY BE A LIT TLE MORE TO MATCH THE AMOUNT OF BOOKING WITH THE FINAL RATE. THE BENEFICI ARY IS CONTACTED EITHER BY SYNDICATE MEMBER OR THE BROKER (MIDDLE MAN) THROUGH WHOM THE INITIAL BOOKING WAS DONE. THE BENEFICIARY PROVIDES THE REQU IRED AMOUNT OF CASH WHICH IS ROUTED THROUGH SOME OF THE PAPER COMPANIES , OF THE ENTRY OPERATOR AND IS FINALLY PARKED IN ONE COMPANY WHICH WILL BUY THE SHARE FROM THE ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 16 BENEFICIARY. THE PAPER COMPANY ISSUES CHEQUE TO THE BENEFICIARY. THE ABOVE MENTIONED METHODOLOGY IS REFERRED TO AS CONVENTIONA L METHOD. 5. THE MODUS OPERANDI TO GENERATE BOGUS STCL. SOMETIMES, THE OPERATOR ALSO HAS REQUEST FROM SOME COMPANIES, WHICH FORESEE THAT THEY ARE GOING TO HAVE HUGE PROFITS IN THEIR BOOKS OF ACCOUNTS. THE COMPANY WISHES TO REDUCE ITS TAXABLE INCOME BY TAKING ENTRY OF BOG US LOSS IN ITS BOOKS OF ACCOUNT SO AS TO SET-OFF THE PROFIT, THAT IT IS GOING TO EARN. TH ESE COMPANIES ARE GIVEN ENTRY OF BOGUS SHORT TERM CAPITAL LOSS IN THE FOLLOWING MANNER: LET US SUPPOSE THAT THERE IS A COMPANY 'B' (BENEFI CIARY) WHICH FORESEES THAT IT IS GOING TO HAVE HUGE PROFITS IN ITS BOOKS OF ACCOUNTS . THE COMPANY WISHES TO REDUCE ITS TAXABLE INCOME BY TAKING ENTRY OF BOGUS LOSS IN ITS BOOKS OF ACCOUNT SO AS TO SET-OFF THE PROFIT THAT IT IS GOING TO EARN. NOW THIS COMPA NY 'B' THEN APPROACHES THE ENTRY OPERATOR '0'. OPERATOR IS A PERSON WHO MANAGES THE OVERALL SCHEME OF THE SEAM. AN OPERATOR MAINTAINS A COMPLEX NEXUS OF VARIOUS PAPER /BOGUS ENTITIES AND IS ALSO IN CONTROL OF SOME COMPANIES WHOSE SHARES ARE LIST ON ONE OR THE OTHER STOCK EXCHANGES. WHEN APPROACHED BY 'B', THE OPERATOR ASKS THE 'B' T O BUY SOME SPECIFIC NUMBER OF SHARES A SPECIFIC LISTED COMPANY. THESE SHARE ARE B OUGHT BY THE BENEFICIARY COMPANY AT VERY HIGH PRICE ON THE STOCK EXCHANGE. THE SHARE S WHICH ARE BOUGHT BY THE BENEFICIARY COMPANY ARE HELD BY EITHER THE PAPER/BO GUS ENTITIES MAINTAINED BY THE OPERATOR OR BY THE BENEFICIARIES WISH TO TAKE AN EN TRY OF BOGUS LTCG/STCL IN THEIR BOOKS. THE COMPANY NIKKI GLOBAL FINANCE LTD. AND VA RIOUS BROKERS, SUB BROKERS AND OTHER ENTITIES AS DISCUSSED ABOVE WHERE THE ENTRY O PERATORS IN THE INSTANT CASE. THEREAFTER, THE OPERATOR RIGS THE PRICE OF THE SHAR ES THROUGH CIRCULAR TRADING AND DECREASES THE PRICE OF THE SCRIPT. THE PRICES ARE R IGGED TO AN OPTIMUM AMOUNT OVER A PERIOD OF TIME. ONCE THE PRICE OF THE SHARES HAS BE EN DECREASED BY CIRCULAR TRADING, THE OPERATOR ASKS THE BENEFICIARY COMPANY TO PLACE A SE LL OPTION FOR THE SHARES BELONGING TO THE BENEFICIARY IN A PARTICULAR LOT SIZE ON A PA RTICULAR DATE AND TIME. THE LOS THAT IS INCURRED BY THE BENEFICIARY COMPANY IS RETURNED BAC K TO THE COMPANY IN CASH. IN THIS WAY THE BENEFICIARY COMPANIES DESIROUS OF BOOKING A LOSS THEIR BOOKS OF ACCOUNT GET AN ENTRY OF BOGUS STCL WHICH IS SET-OFF AGAINST THE REGULAR PROFIT OF THE COMPANY. THE FACT IS EVIDENCED WITH THE SPEAKING DOCUMENTARY MATERIALS AVAILABLE ON ASSESSMENT RECORDS OF THE PRESENT CASE. IN THIS CAS E ALL THOSE PERSONS INCLUDING THE ASSESSEE, WHO WERE ALLOTTED SHARES ON PREFERENTIAL PLACEMENT BASIS AS DISCUSSED ABOVE WERE THE BENEFICIARIES. THE MODUS OPERANDI MENTIONE D ABOVE IS BASED ON FACTS AND HAS BEEN DEDUCED BY VARIOUS INVESTIGATION WINGS OF THE INCOME TAX DEPARTMENT, SEBI AND OTHER GOVERNMENT AGENCIES. SEBI IN ITS ORDER IN A NUMBER OF CASES HAS SPELT OUT THIS MODUS OPERANDI AND SUCCESSFULLY ESTABLISHED TH AT ENTITIES INVOLVED IN SUCH SCHEMES ARE MANIPULATING THE MARKET TO GENERATE LOS S. HE, THEREFORE, ON CONSIDERATION OF THE CIRCUMSTANTIAL EVIDENCES, NATURAL HUMAN COND UCT AND PREPONDERANCE OF PROBABILITIES REACHED A CONCLUSION THAT THE APPAREN T IN THIS CASE WAS NOT REAL AND THAT THESE FINANCIAL TRANSACTIONS WERE NOT REAL BUT SHAM ONES AND THE ENTIRE EDIFICE WAS A COLOURABLE DEVICE USED TO EVADE TAX. IN VIEW OF THE ABOVE, IT CAN SAFELY CONCLUDED THAT THE ASSESSEE HAS RESORTED TO COLOURABLE DEVICE IN T HE WAY OF PURCHASE OF SHARES FROM SECONDARY MARKET AT A VERY HIGH RATE AND IMMEDIATEL Y SOLD OUT THE SHARES AT ABNORMALLY LOW RATE TO CRATE LOSS SYSTEMATICALLY FO R THE ONLY PURPOSE MINIMIZING THE TAX LIABILITY DURING THE YEAR UNDER CONSIDERATION. HENCE, SET OFF LOSS OF RS. 2,93,7201- WITH INCOME FROM OTHER SOURCE IS HERE BY DISALLOWED ULS 68 OF THE ACT AND ADDED TO TOTAL INCOME OF THE ASSESSEE . ACCORDINGLY, A SUM O F RS. 14,686/- BEING 5% OF RS. 2,93,7201- IS ADDED AN UNDISCLOSED EXPENDITURE UNDE R SECTION 69C OF THE ACT. ITA NO.1254-1255/KOL/2018 A.Y .2014-15 NAVIN KR. KAJARIA & SMT. SUSHILA DEVI KAJARIA VS. ACIT CIR-35/36 KOL PAGE 17 6. COMMODITY LOSS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSEE HAD BOOKED COMMODITY LOSS TO THE TUNE OF RS.2,99,424/- FOR FY 2013-14. FOR VERIFICATION OF THE SAME, NOTICES U/S 133(6) WERE ISSUED TO UNIVERSAL C OMMODITY EXCHANGE LIMITED AND AS WELL TO HIS BROKER SIMPLEX COMMODITIES TRADE PVT . LTD. WHICH WERE RETURNED BACK BY THE POSTAL DEPARTMENT AS THERE IS NO EXISTENCE O F THE SAID TWO CONCERNS. AN INSPECTOR WAS ALSO DEPUTED TO SERVE THE NOTICE U/S 133(6)