Gilt Commodities Pvt. Ltd., Kolkata V. I.T.O.,Ward-3(1), Kolkata

ITA 1447/KOL/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0828 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-06-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 12-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence; Accommodation entries; Revised return; Penny stocks; Set aside; Capital Gains; Bogus
• Section: 131; 68; 13; 22; 20

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्ष े त्र) एवं श्री संजय अवस्थी, ल े खा सदस्य क े समक्ष Before SRI RAJPAL YADAV, VICE-PRESIDENT & SRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd........................................................Appellant [PAN: AADCG 7443 H] Vs. ITO, Ward-3(1), Kolkata........................................................Respondent Appearances: Assessee represented by: Miraj D. Shah, A/R. Department represented by: B.K. Singh, Addl. CIT. Date of concluding the hearing : June 6 th , 2024 Date of pronouncing the order : July 23 rd , 2024 ORDER Per Sanjay Awasthi, Accountant Member: In this case the assessee filed the return of income for AY 2014-15 on 26.09.2014 declaring a total loss of Rs. 16,38,240/-. A perusal of the Assessing Officer’s (hereinafter referred to as ld. 'AO') order reveals that the assessee company is engaged in the business of shares. During the year under consideration the assessee dealt in shares of some companies in which there was profit or loss as under: a) Eros International Media Ltd. profit/(loss) Rs. 10700722.91 b) Shree Shaleen Textiles Ltd. profit/(loss) (Rs. 28,06,000.00) I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 2 of 26 c) Unno Industries Ltd. profit/(loss) (Rs. 30,24,013.65) d) Global Infratech & Finance Ltd. profit/(loss) (Rs. 55,40,967.98) 1.1. This exercise in trading in shares resulted in a net loss of Rs. 6,70,259.63. Thereafter the AO proceeded to disallow the entire loss arising out of trading in shares, at Rs. 1,13,70,981/- and assessed the total income at Rs. 97,32,741/-. In brief, the ld. AO has given a finding that he was of the considered opinion that the trading loss arising on account of dealing in penny shares, that too at the fag end of the financial year, could not be understood from any prudent commercial point of view. The ld. AO proceeded to cast a doubt that the transactions leading to the said loss were artificially designed in such a manner that the gain in dealing in the shares of Eros International Media Ltd. could be erased through the resultant loss. In the body of the assessment order the ld. AO has gone to great lengths to show that the three companies in which loss has occurred are either having negligible profits or are loss-making entities. The ld. AO has also presumably used publicly available data to show that these three companies have the kind of financials and profitability that should warn a prudent investor from staying away from them. Ld. AO has also reproduced share price movement charts in his order to allege that the trading pattern shows a degree of pre- mediation, in as much as the loss could be “arranged” to suit the convenience of this assessee. It has also been mentioned in the ld. AO’s order that in the present case specific information was received from the Investigation Wing alleging that the said assessee was indulging in bogus/non-genuine trading of shares who earned long or short term capital gains. 1.2. Aggrieved with this order the appellant approached the Commissioner of Income Tax (Appeals) [hereinafter referred to as ld. 'CIT(A)'], who is seen to have relied on a number of authorities in coming to the conclusion that the kind of transactions seen in the case of this assessee were outside of the realm of prudent investment behaviour and the ld. CIT(A) thereafter proceeded to confirm the action of the ld. AO by dismissing the said appeal. I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 3 of 26 2. Aggrieved with the orders of the authorities below, the appellant has come in appeal before us with the following grounds of appeal: “1. For that the Learned Authorities below erred in holding the loss of Rs.55,40,968 incurred on transaction of the shares of GBL Infra Ltd which was transacted on the stock exchange as a sham transaction. Such finding is perverse and is not based on any independent inquiry hence the finding be reversed. 2. For that the Learned Authorities below erred in holding the loss of Rs.28,06,000 incurred on transaction of the shares of Shree Shaleen Textile Ltd which was transacted on the stock exchange as a sham transaction. Such finding is perverse and is not based on any independent inquiry hence the finding be reversed. 3. For that the Learned Authorities below erred in holding the loss of Rs.30,24,014 incurred on transaction of the shares of Unno Industries Ltd which was transacted on the stock exchange as a sham transaction. Such finding is perverse and is not based on any independent inquiry hence the finding be reversed. 4. For that the Lower Authorities failed to appreciate the evidences filed before him/her and thus the addition/disallowances were made merely on conjecture and without any proper material or basis. Thus the addition/ disallowance was un justified and uncalled for and the same be deleted. 5. For that the Lower Authorities erred in relying on material / statement not provided to the assessee and such material / statement therefore be held to be inadmissible for purpose of assessment and all addition and disallowance on such basis be deleted. 6. For that the Lower Authorities erred in not providing cross examination of the adverse statement and as such therefore such statement be held to be inadmissible for purpose of assessment and all addition and disallowance on such basis be deleted. 7. For that in the facts and circumstances of the case the assessment order was passed merely based on report provided by third party and no independent inquiry was made by the Learned Assessing Officer. Hence the addition / disallowances made be deleted. 8. The appellant prays that leave be granted to produce additional evidence in terms of Income Tax Appellate Tribunal Rules at the time of hearing of the appeal. 9. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal.” I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 4 of 26 2.1. Before us, ld. Counsel for the assessee has primarily reiterated the contentions raised before both the ld. AO and the ld. CIT(A) and has put before us the following issues in brief covering all the grounds of appeal: a) The assessee’s business is investment and trading in shares and mutual funds, and also to provide secured and unsecured credit. During the year under consideration, the assessee has dealt in shares of a few companies in which there was a profit in one case and losses in three cases. It has been averred that this was done in the regular course of business. b) The ld. Counsel for the assessee has rebutted the ld. AO’s proposition that the loss-making transactions were conducted in a manner that gives rise to suspicion about the genuineness, by stating that it is well settled that an assessee is entitled to run his business according to his own wisdom. c) The ld. Counsel for the assessee has taken exception to the allegation by the ld. AO that the penny stocks were prone to price rigging and there was an adverse report submitted by the Investigation Wing of the Income Tax Department in such cases of trading, which were allegedly meant to result in bogus losses. The ld. Counsel for the assessee has averred that no investigation was conducted by the ld. AO to prove his suspicion, nor was the report of the Investigation Wing ever made available on the basis of which such adverse inference was drawn. d) It has been averred that dealing in all kinds of equity shares, including penny stocks, is routinely done by investors based on their understanding of the markets as well as individual scrips. In fact, the explanation of the appellant in this regard deserves to be extracted: “8. As per the policy of the assessee company, the directors of the company are in charge of trading of shares and securities and personally place orders with the broker over phone. Based on the tips of the market participants and considering the volume of trade, huge interest of the investors and quick price rise in the said script which are evident from the live screen of the computer, the directors entered into buying the shares of the said company. This practice is commonly followed to make a quick buck during a short duration from the stock market. The assessee company had initially purchased 40,000 shares of Shree Shaleen Textiles Ltd at a price @ I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 5 of 26 Rs.56.75 on 17/01/2014 - which when reduced to @ Rs.32.50, the assessee bought further 35,000 shares. However, thereafter there was no sign of revival and to avoid more loss, the assessee was forced to sale 75,000 shares @Rs. 19.80 in March 2014. In the case of Unno Industries Ltd, initial lot of 75000 shares were acquired @Rs.32.65. Within a gap of 4 days the price was reduced @Rs.32.55 - which tempted the assessee to buy more shares to reduce the average price per share and the assessee acquired further 80,000 shares of Unno Industries Ltd. Such course of actions, are quite usual in the business of share-trading and not driven by ill-motive as alleged by the AO.” e) The price movement of the three scrips in which loss occurred does not in any way show that the exit price, leading to the impugned loss, was artificially arranged in such a manner that an allegedly bogus loss could be booked by this assessee. It has been averred that while the assessee has dealt with in shares numbering in several thousands the charts reproduced in the body of the assessment order by the ld. AO show volumes in millions of shares traded in specified time periods, which have apparently been noticed for adverse consideration by the ld. AO. f) The said shares were sold or purchased from the Bombay Stock Exchange at rates prevailing on particular dates and through brokers whose identity cannot be doubted considering that their addresses and SEBI registration etc. were duly available with the ld. AO. Also all the transactions took place through banking channels of Karur Vysya Bank, Shakespeare Sarani, Kolkata. Finally, the purchase and sale of shares were made through de-mat account maintained with NSDL, through registered Depository Participants. g) It has been further averred that the accounts of the assessee have been duly audited and no fault has been found by the AO in the detailed accounts available before him. h) The ld. Counsel for the assessee has relied on a number of judicial decisions to canvass the point that the surrounding facts and circumstances would easily lead to believe that the transactions were conducted through the Bombay Stock Exchange, by genuinely existing brokers, through banking channels and the shares were traded through de-mat accounts. It has been emphasized that there appears to be no plausible reason why the ld. AO has I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 6 of 26 not passed any adverse comment on the gains registered through trading in M/s. Eros International Media Ltd. but has doubted the loss accruing through three other scrips. Thus, it has been contended that the purchase/sale and loss/gain has to be seen in its entirety and not as per the convenience of the ld. AO. Thus, relying on several judicial decisions, it has been averred that the transactions were genuine and deserve to be allowed as such. 3. Before us, the ld. D/R filed written submissions dated 03.06.2024 through which the following facts have been placed before us: a) The poor financial condition of the assessee company in as much as the profit after tax was negligible at Rs. 1,049/- for AY 2013-14 and the said company had a loss of Rs. 16,38,240/- for the present year. The company had no employees needed to be reported u/s 217(2A) of the Companies Act. Also, the company does not have any fixed assets during both AY 2013-14 & AY 2014-15. It has also been mentioned that in spite of such weak financials the company has managed to secure share capital of Rs. 16 Lakh at a premium of Rs. 1,85,00,000/-, which defies rational human considerations. b) The relatively poor financial condition of the three companies in which losses have been booked have been placed before us with the following conclusion drawn by the ld. AO: “On the basis of the above financial matrix and facts of the cases, a man of common prudence can easily infer that the investor company i.e. GILT COMMODITIES PVT LTD and the three investee companies are all solely paper companies which do not exist for business profit but they all resemble to be the nominal companies and penny stock companies meant for providing accommodation entries to the targeted beneficiaries. The bell shaped transactions in the share trading of the involved companies depicts that what appears is not real and the claimed financial yields are not at all reliable and they appear to be the fabricated ones. On the basis of the petty turn over, meagre cash and bank balance, meagre income, meagre operating profit, and net profit, non-payment of dividend against huge unsecured investment, poor EPS, the price movement chart allied with weak financial credentials of the investee companies and report from investigation wing, it can be objectively & rationally inferred that the claimed share transaction loss is not real loss but artificially make arrangement loss. I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 7 of 26 In the background of these facts, the assessing officer rightly disallowed the trading loss on penny stock, which was later upheld by the Ld. CIT(A). Taking cognizance of merits of the self-speaking contents of the assessment order, this order deserves to be upheld by the Hon'ble ITAT.” c) The ld. Counsel for the assessee repeated his arguments, as mentioned (supra), and further emphasized that the AO has tried to project the case of a suspicious business entity (being the appellant) who has entered in suspicious trading of shares to consume a substantial gain through an allegedly bogus loss creating exercise. The ld. Counsel for the assessee argued that mere suspicion could not substitute for hard facts placed before both the authorities below regarding the genuineness of the transaction and the genuineness of the entities involved in such transactions. d) Ld. D/R also relied on the case of Swati Bajaj reported in 446 ITR 56 (Cal) 4. We have considered the rival submissions and perused the documents placed before us. While the ld. A/R has relied on the following cases of Coordinate Benches of ITAT, Kolkata viz Nalanda Builders Pvt. Ltd. vs. DCIT in ITA No. 763/KOL/2022 order dated 11.01.2024, Vicky Fincon Pvt. Ltd. vs. ACIT in ITA No. 1362/KOL/2023 order dated 22.02.2024 and recent order dated 09.05.2024 in the case of Namokar Builders Pvt. Ltd. vs. DCIT in ITA No. 762/KOL/2022 in support of the contention that mere suspicion, in the face of any facts to the contrary, cannot be allowed to cast any doubt on business transactions. It is seen that the case of Namokar Builders Pvt. Ltd. (supra) is virtually on similar facts as compared to the present case and therefore, in the fitness of things it would be prudent to extract relevant portions from this order: “6. After hearing the rival contentions and perusing the material available on record, the undisputed fact as gathered from the records before us are that during the year the assessee sold a flat measuring 1682 sft. at Chandra Mahal, 15, Burdwan Road, Kolkata for a consideration of Rs.1,85,00,000/- and earned capital gain on such transfer which was purchased for Rs.15,30,058/- on 11.04.1992 resulting in the LTCG of Rs.1,50,45,540/- after making allowance of index cost of acquisition of Rs.34,54,460/-. During the year, the assessee has also sold equity shares of two companies viz. M/s. Tuni Textiles Ltd. and M/s. Blue Circle Services Limited on which I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 8 of 26 the assessee had incurred loss of Rs.1,87,25,176/-. The above STCG was set off against LTCG realized from the sale of flat as stated supra. We have also perused the decision referred before us by the Ld. Counsel for the assessee as stated hereinabove particularly in the case of Nalanda Builders Pvt. Ltd. (supra) wherein the issue of sale of two stocks namely, M/s. Tuni Textiles Ltd. and M/s. Blue Circle Services Limited was involved and the losses suffered on the sale of above shares was adjusted against the LTCG accrued from sale of fixed asset i.e flat. We have perused the above decision carefully and observed that the facts are quite similar and also that the decision in the case of Gateway Financial Services Ltd. (supra) has been followed by the Coordinate Bench. We also note that the decision in the case of Nalanda Builders Pvt. Ltd. as relied upon by the Ld. AR has considered the decision of the Coordinate Bench in the case of Gateway Financial Services Ltd. (supra) which has distinguished the decision of the Hon’ble High Court in the case of Swati Bajaj(supra). The operative part of the decision in the case of Nalanda Builders Pvt. Ltd. (supra) is extracted below: “13. We have also perused carefully the facts of the decisions passed by the Coordinate Benches in the case of Gateway Financial Services Ltd. (supra) and Raigarh Jute & Textile Mills Pvt. Ltd. (supra) and find that the facts of the assessee’s case are substantially similar to that in the above cases as decided by the Coordinate Benches. We also note that the decision of the Hon’ble Jurisdictional High Court in the case Swati Bajaj & Ors. (supra), relied upon by the ld. D/R, has been distinguished by the Coordinate Bench and held to be not applicable to the facts of those cases. For the sake of ready reference and convenience the relevant part of the order in the case of Gateway Financial Services Ltd. (supra) is expected below:- “21. So far as the recent judgment of Hon'ble Jurisdictional High Court in the case of Principal CIT Vs Swati Bajaj reported in [2022] 446 ITR 56 (Cal) is concerned, we observe that the Hon'ble High Court at Calcutta in the case of Principal CIT Vs Swati Bajaj [2022] 446 ITR 56 (Cal) at Page 142 of the judgment in the second last paragraph has observed that where a witness has given directly incriminating statement and the addition in the assessment is based solely and mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross examination of the witness. Adverse evidence and material, relied upon in the order, to reach the finality should be disclosed to the assessee. In the case of the appellant the Assessing Officer has noted at Page-2 of the assessment order dated 18.12.2016 that employee of Gateway Financial Sri Ranjeet Kumar Gupta, Sri Kiranjeet Mahanta in their statement on oath dated 10.02.2015 accepted that they are appointed as director in different zama kharchi companies. Further the employee of Gateway Financial Sri Soumen Chowdhury in his statement on oath dated 10.02.2015 accepted that the said company is engaged in buying and selling of different shares including jamakharchi companies for providing accommodation entry in different forms such bogus long term capital gain/loss etc. He also explained I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 9 of 26 the modus operandi of pre-arranged bogus LTCG transactions. The AO further observed that statement of Sri Amit Singh was recorded on oath on 22.12.2015 who in reply to Question No.5 accepted that he was working under the direction of Sri Bal Kishan Sikaria Director of Sikaria Share & Stock Broking Services Ltd. The AO further noted that statement of Sri Bal Kishan Sikaria was recorded on oath on 04.01.2016 who is a Director of Sikaria Share & Stock Broking Services Ltd which is the member of Calcutta Stock Exchange and 5 Other companies. Mr. Amit Singh of an employee of him, who in reply to Question No. 6 confirmed that he was indulging in providing accommodation entries to various parties and in reply to Question No. 12 he stated that he confirms that Sri Amit Singh was the Proprietor of M/s SS Enterprises which is controlled and managed by him have purchased 2,69,870 shares of Radford Global through Calcutta Stock Exchange which were sold by Pratik Agarwal Beneficiary Trust, Praveen Agarwal HUF, Pinky Agarwal and Nishit Agarwal Beneficiary Trust of approx. Rs.2,19,10,234/- through their sellerbroker M/s. Gateway Financial Services Pvt. Ltd resulting in facilitation of pre-arranged accommodation entry of LTCG to them. This evidence was utilised by the Assessing Officer in treating their Long Term Capital Gains from transaction in shares of Radford Global Ltd as bogus and making addition u/s 68 of the Act. 22. Regarding the report of SEBI report dated 19.12.2014 we find that the said order was revoked by SEBI by the final order dated 20.09.2017 in SEBI/WTM/MPB/EFD-1-DRA-III/ 30 /2017 by observing as under: “Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 are liable to be revoked. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the Confirmatory Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 qua aforesaid 82 entities (paragraph 9 above) with immediate effect.” 23. It is well settled that while acting in their quasi-judicial capacity the income tax authorities have to adhere to the principles of natural justice and in the instant cases Assessing Officers of respective assessee(s) ought to have given opportunity to assessee(s) to cross examine these five persons whose statements were the basis of alleged additions. 24. Coordinate Bench Delhi in the case of Nokia India (P.) Ltd. vs. DCIT reported in [2015] 59 taxmann.com 212 (Delhi - Trib.) has held that “whether I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 10 of 26 cross-examination is to be provided or not depends upon the facts of each case and there is no thumb rule or straight tight jacket formula for arriving at this conclusion. It all depends on facts of each case whether principles of natural justice have been complied with or not. If decision making authority has provided due opportunity to the person complaining of non-observance of principles of natural justice, then it is for the person so complaining to demonstrate the same and show the prejudice caused to him. Mere bald assertion of non-observance of the principles of natural justice is of no consequence. 25. Further, Supreme Court in the case of Andaman Timber Industries v. CCE reported in (2015) 281 CTR 241 (SC) has considered that “if there was no material with the Department on the basis of which it could justify its action, and if the statement of the two witnesses who were unknown to the appellant was the only basis of issuing the Show Cause Notice, right to cross examination has to be given and held that we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.” 26. The Hon’ble Supreme Court of India in New India Assurance Company Ltd. v. Nusli Neville Wadia & Anr., AIR 2008 SC 876, while considering a case under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, held that though the statute may not provide for cross- examination, the same being a part of Principles of Natural Justice should be held to be an indefeasible right. It was held as follows: “If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right" 27. In the case of Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100 Hon'ble Supreme Court observed that “effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross- examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review.” I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 11 of 26 28. The aforesaid decision makes it evident that, not only should the opportunity of cross examination be made available, but it should be an effective cross examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross- examination is an integral part and parcel of the principles of natural justice. Cross-examination is must where Assessing Officer relies upon only on the statement of the Third Party unconnected with the appellant 29. In the case of Krishna Chand Chela Ram v. CIT reported in (1980) 125 ITR 713 (SC) the Supreme Court has held that “cross-examination is must where Assessing Officer relies upon only on the statement of the Third Party unconnected with the appellant. Hon’ble Supreme Court has held that the letters, dated 14.02.1955 and 09.03.1959, did not constitute any material evidence which the Tribunal could legitimately taken into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from its Madras Office, and if these two letters were eliminated from consideration, there was no material evidence at all before the Tribunal which could support its finding. What the manager of the bank wrote in his letters could not possibly be based on his personal knowledge but was based on here say. The revenue authorities ought to have called upon the manager to produce the documents and papers on the basis of which he made the statement and confronted the assessee with those documents and papers.” 30. In the case of Dhakeswari Cotton Mills Ltd. v. CIT reported in (1954) 26 ITR 775 (SC) the Hon'ble Supreme Court has held that “the rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh where it was stated that while proceeding under sub-section (3) of section 23, the Income-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it." It was held in that case that "In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing.” I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 12 of 26 31. In Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri reported in (1954) 26 ITR 1 (SC) the Supreme Court has held that “the assessment proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before any conclusion is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act.” 32. In respect of the report of the Investigation Wing of the Department, the appellant pointed out the said report nowhere states the name of the appellant or the transaction of the appellant. The said investigation was carried out in case of any other person and not in case of the appellant. In the said investigation the transaction in question of the appellant was not commented upon by the Investigation Wing and therefore the said Investigation Wing report is not evidence to impeach the transaction of the appellant. We find that the Ld. Departmental Representative could not point out anything to show that the said Investigation report was relied upon by ld. AO in the order of assessment was related to the specific transaction of the appellant. In the circumstances, the said Investigation Report wherein some other persons were found to be involved in some manipulation does not establish that the appellant was also involved in any manipulation. 33. Recently, Hon'ble High Court of Orissa in the case of PCIT vs. Dipansu Mohapatra reported in [2023] 149 taxmann.com 99 (Orissa) adjudicating similar case of exemption claimed u/s 10(38) of the Act and the assessee was alleged to have taken accommodation entries from Kolkata based companies on the basis of the report of Investigation Wing of Income Tax Department. The relevant finding of the Hon'ble Court dealing with the issue of opportunity of cross-examination and principles of natural justice not given to the assessee held as follows: “6. Another ground on which the ITAT found fault with the additions made by the AO was that reliance was placed on statement of 'so called entry operator' to justify the additions under sections 68 and 69 of the IT Act. These statements were recorded on various dates in some other proceedings not connected with the Assessee. Further, the statements were recorded much before the date of the survey conducted on the Assessee. It was unable to be disputed by the Department that the Assessee did not have an opportunity to challenge such statements and further, no opportunity to cross-examine the so-called entry providers was given to the Assessees. 7. Having heard learned Senior Standing Counsel for the Department (Appellant) and having perused the impugned orders of the AO, CIT(A) and the ITAT, the Court finds that both the grounds viz., the claim for benefit of section 10(38) of the Act and denial of an opportunity to cross examine the entry providers, turned on facts. The ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 13 of 26 Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO.” Therefore the Assessing Officer was bound to supply those statements and allow the cross examination of the maker of the statements to the assessee according to the judgement of the Hon'ble Calcutta High Court in Swati Bajaj (supra) case as well as in view of the judgments of Hon'ble Supreme Court in the case of Andaman Timber Industries Vs Commissioner of Central Excise reported in [2016] 38 GSTR 117 (SC), Principal Commissioner of Income Tax (Central) Vs Oriental Power Cables Ltd reported in [2022] 143 taxmann.com 371 (SC), Kishinchand Chellaram (AIR 1980 14 SC 2117) and the Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprise (1994) (Cal) [210 ITR 103].” 34. In view of the above discussion, we notice that so far as the statement of Mr. Praveen Kumar Agarwal is concerned who is the director of one of the group companies namely M/s. Gateway Financial Services Ltd. already stands retracted by him by filing affidavit before the Investigation Wing of Income Tax Department and also as regards the submissions of ld. D/R that proceedings under other Acts were carried out in the case of Mr. Praveen Kumar Agarwal it was stated by ld. Counsel for the assessee as an officer of Court that as on date no proceedings are pending against Mr. Praveen Kumar Agarwal in regard to the alleged transactions before any authorities other than Income Tax Department. Even otherwise, we are not dealing with the case of Praveen Kumar Agarwal. So far as the statements of remaining persons which have been referred by ld. AOs in the assessment orders they have all either been taken during the course of search/survey in some other cases or during the course of any proceeding in the case of the company the shares of which have been traded by the assessee(s), however, there is no documentary evidence either placed by these persons during the course of recording the statement or at any other stage which could show that the assessee(s) were directly involved in the racket of providing accommodation entries or were aware of such activities being carried out. The claim of the assessee has always been that as a prudent investor it had made the investments and some investments did not give any return rather gave losses and, in some cases, profits were earned. It was incumbent upon ld. AO to provide the assessee(s) a proper opportunity of cross-examination with all those persons who stated to be either involved in accommodation entries or were having some connection with the alleged transactions. There was no opportunity with the assessee(s) to cross-examine those persons, that why they have referred these transactions as bogus or accommodation in nature. No such exercises have been carried out at any stage by the Revenue authority. Though the assessee has placed material on record to show that on merits also the case of the assessee is strong and the alleged transactions have been carried out through banking channel as well as through recognised stock exchange and demat accounts and also it has been claimed that in one case there is a loss and there is no addition u/s I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 14 of 26 68 of the Act but without going into the merits of the case even on legal ground itself, we, in view settled judicial procedure referred hereinabove, are inclined to hold that there is a violation of principles of natural justice as opportunity of cross-examination of all those persons whose statements though not directly referred to the alleged transactions but the statements having been used by ld. AO to make additions in the hands of the assessee(s) in appeal before us, was not provided to the assessee(s) even though requested during the course of hearing before the AO well as ld. CIT(A). Based on these facts, we find merit in the contention of the ld. Counsel for the assessee that principles of natural justice have been violated in the case of all the four assessees namely M/s. Gateway Financial Services Ltd., M/s. Nishit Agarwal Beneficiary Trust, Pinky Agarwal and Pratik Agarwal Beneficiary Trust. 35. In the preceding paragraphs, we have dealt with the legal issue regarding the matter that since the assessee has not been provided sufficient opportunity to cross examine those persons who were directly related to the assessee company i.e., Gateway Financial Services Ltd., and other assessee(s) even when their statements have been relied heavily by the Assessing Officers to deny the claim of short term capital loss /long-term capital gains as the case may be, we note that apart from placing reliance on the statements, the revenue authorities have also referred to the report of the investigation Wing which carried out search and survey in some other cases prior to the conclusion of assessment proceedings in the instant appeals and such investigation included the persons who have been alleged to be entry providers/operators, share brokers etc. 36. Now, before us in case of one of the assessee’s, namely, Gateway Financial Services Ltd., the issue relates to bogus short-term capital loss from sale of equity shares of Blue Circle Services Ltd. and in the remaining three cases the issue is regarding alleged bogus Long term capital gain from sale of scrip, namely, Radford Global Ltd. 37. Since the facts relating to claim of loss and gain are different, we will first take up the issue regarding alleged bogus short-term capital alleged by the AO in the case of Gateway Financial Services Ltd.. Though we have discussed the facts of this issue in detail in the preceding paragraphs and have also discussed the finding of the Hon’ble Jurisdictional High Court in the case of Swati Bajaj (supra), wherein also there was a reference to the report of the investigation Wing but in that case the issues were relating to long-term capital gains and additions were made u/s 68 of the Act. But in case of Gateway Financial Services Ltd., which is a share broking firm as well as trader in equity shares and being assessed to tax for past many years has dealt in the equity share, namely, Blue Circle Services Ltd.. Since the AO has only disallowed the claim of bogus loss, it in itself means, that the genuineness of purchases of equity shares of Blue Circle Services Ltd., has not been disputed by the revenue authorities. The assessee in this case I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 15 of 26 has purchased 5232616 equity shares. The ld. AO has also referred to the equity shares price chart of Blue Circle Services Ltd., wherein there is a steep upward trend from 2011-12 onwards then a downward trend which goes up to the end of 2013 and again there is an increase in trend during 2013-14 but not to that extent of the past trend of steep increase. The claim of the assessee is that, looking at the trend of equity share, in the anticipation of earning good profits it made the investment in equity shares of Blue Circle Services Ltd., and there was some increase in the price but subsequently it started decreasing and since the assessee did not want to lose all its capital it sold the equity shares as and when it got the opportunity. Even though, the transactions have been carried out on the recognised stock exchange and well within the rules and regulations provided by the SEBI, we note that in all the alleged statements of the alleged third parties and the report of the investigation Wing there is specifically no indication that whether the assessee was directly involved with the promoters/directors of Blue Circle Services Ltd., for such a steep increase/decrease of the prices. It prima facie seems to be a case where the assessee has made an adventure in the business of trading in equity shares being in the business of share trading and investment and shares brokerage were given past many years. At this juncture when the purchase of equity shares has not been doubted by the revenue authorities, and the claim of the assessee is that it has entered into the purchase and sale transactions in the regular course of business and also considering the fact that it is not the case of earning long-term capital gains for claiming exemption u/s 10(38) of the Act, but is a case where the assessee has lost its capital by incurring huge loss. This Tribunal in the case of Raigarh Jute & Textile Mills Ltd. vs. ACIT in ITA No. 2286/Kol/2019; AY 2014-15; order dt. 27/06/2023, wherein the same combination of Judicial and Accountant Member has dealt with the issue regarding the claim of short term capital loss/business loss from sale of equity shares which was alleged by the revenue authorities being arranged from penny stock companies has decided in favour of the assessee after dealing with the facts of the case, modus operandi of carrying out such transactions by the assessee and also dealing with the judgement of the Hon’ble jurisdictional High Court in the case of Principal CIT Vs Swati Bajaj 446 ITR 56 (Cal), and also examining that the facts of the case are different with that of Swati Bajaj (Supra) and the same being not applicable in the case and has held as follows:- “9. We have considered the rival contentions and gone through the record. The Hon’ble Supreme Court in the case of NRA Steelin the case of “PCIT v/s NRA Iron & Steel (P) Ltd.” reported in [2019] 103 taxmann.com 48(SC) has taken note of the observations made by the Supreme Court in the land mark case of “Kale Khan Mohammed Hanif v. CIT”[1963] 50 ITR 1 (SC) and “Roshan Di Hatti v. CIT” [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 16 of 26 transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. Thereafter the hon’ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. “11. The principles which emerge where sums of money are credited as Share Capital/Premium are : In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act.” 9.1 The Hon’ble Supreme court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. Once the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifts upon the Assessing Officer to examine the evidences furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. 9.2 The Hon’ble Calcutta High Court, however, in the case of PCIT vs. Swati Bajaj & Ors (supra) has observed that to prove the allegations a logical process of reasoning from the totality of the attending facts and circumstances surrounding is to be adopted. That it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 17 of 26 to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor. A holistic approach is required to be made and the test of preponderance of probabilities has to be applied. The Hon’ble High Court observed that the assessees therein had failed to justify the rationale behind investment in the companies not having financial worth. They had failed to establish genuineness of steep rise in price of shares within a short period of time that too when general market trend was recessive. That the ld. Assessing Officer has pointed out that the assessee could not explain, why it invested in such script without knowing the financial performance of the company. That such cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months which is beyond human probability and defies business logic of any business enterprises dealing with share transactions. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio. That the Assessing officer was justified in making the additions on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. 10. Now, we have to examine the contentions of the assessee in the light of the ratio of law laid down by the hon’ble Supreme Court in the case of “NRA steels” (Supra) and by the Calcutta High Court in the case of “Swati Bajaj”(supra). 10.1 The plea of the assessee in this case is that the assessee was bona fide purchaser of the shares in question. That the assessee had duly taken note of the financials and share price movement of the companies before purchasing the shares. The ld. counsel in this respect has referred to the financials of the said companies, the market trend and the reasons to exit as mentioned in the written submissions as reproduced above. Firstly referred to the financial details and share price movement of Rutron International Ltd. It has been submitted that Rutron International Ltd. was a listed public company. The assessee company took note of the annual reports. The said company had reported total assets of 17.88 for F.Y 2012- 13 and its turnover and proceeds had improved substantially from its previous years. Its income has also increased substantially. It reported net profit of Rs.0.50 Crores in FY 2012-13 as against Rs.0.11 Crores in FY 2011- 12 implying an increment of 354.54%. The stock even started declaring dividends (Equity Dividend of Rs.0.18 Crores in FYE Mar’13 as against NIL in FYE Mar’12, Mar’11 and Mar’10 implying a trend reversal and a dividend payout of 36%). That having regard to these fundamentals of Rutron, the assessee company had purchased shares in a staggered manner in January 2014 in anticipation of trading profits. The purchase of the stock was motivated not only by the dividend but the anticipated price rise. I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 18 of 26 However, since the stock of Rutron was in a sustained fall and therefore like any prudent trader, the company purchased the stock only when its price fell substantially. However, when it became apparently clear that the financials of Rutorn were not indicative of future financial performance of the stock, the assessee company, being a prudent trader switched gears and immediately cut short its losses by exiting its position in Rutron. The ld. AR, therefore, has demonstrated that the investments in these shares were governed on commercial prudence. 10.2 The Ld. Counsel has further demonstrated that the Trades in Comfort Fincap Ltd. (‘Comfort’) shares, were also based on the company’s own reading of the financial statements of the said company. That its stock parameters had improved from its previous reporting period. (Total Assets of Rs.25.23 Crores in FYE Mar’13 as against Rs.21.49 Crores in FYE Mar’12; Operating Profit of Rs.1.83 Crores in FYE Mar’13 as against Rs..86 Crore in FYE Mar’12; Reported Net Profit of Rs.0.99 Crore in FYE Mar’13 as against Rs.0.59 Crore in FYE Mar’12 implying an increment of 67.79% ) and the stock even started declaring dividends whose trend showed a marked upward trajectory (Equity Dividend of Rs.0.54 Crores in FYE Mar’13 as against Rs.0.22 Crore in FYE Mar’12 and NIL in FYE Mar’11 and Mar’10 implying a trend reversal and a dividend payout of 59.60%). The purchase of the stock was timed in anticipation of the expected price action that usually follows in such stocks showing a reversal in dividend payout trend. That the shares of Comfort (still Comfort Fincap Ltd 535267) were purchased in a staggered manner in January 2014 in anticipation of trading profits and the same were sold, again in a staggered manner, in March 2014 when the trade went awry. The stock of Comfort was also in a steep fall when the company purchased it. However, the company purchased the stocks only when the price fall was sustained over a period of time. It is notable that the company did not enter/exit at the highest/lowest price and the trades in shares of Comfort were entered into on the basis of the trend visible in the then latest financials of the stock available publicly. 10.3 Regarding the third company, it has been demonstrated that Luminaire Technologies Ltd. (‘Luminaire’), was a listed public company at the relevant time. That the shares of Luminaire were purchased in a staggered manner in January and February 2014 in anticipation of trading profits and the same were sold on the 5th of March 2014. The stock of Luminaire was also in a steep fall when the company purchased it. However, the company purchased the stocks only when the price fall was arrested and a trend reversal was visible. However, the favourable technical analysis of the stock, which prompted the company to purchase the stock, did not lead to the anticipated price rise owing to the weak market outlook regarding the stock. The company, having entered the trade to profit in the immediate short term, immediately chose to cut short its losses as the stock price deteriorated further. I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 19 of 26 10.4 Regarding the decision to trade in the stock of Unno Industries Ltd., the ld. Counsel has explained that the same was based on the company’s own reading of the financials of Unno, which was a listed public company at the relevant time. That the trade was undertaken based on the not only the fundamentals but also the technical aspects of the stock. The shares of Unno were purchased on 22nd January 2014 in anticipation of trading profits and the same were sold on 20th March 2014 when there was an indicator for a further decline in the prices of a stock. That the stock of Unno was in a steep fall and the company had purchased the stock only when its price fell substantially. That the company did not enter/exit at the highest/lowest price and the trades in Unno were entered into only after carefully considering both the technical and fundamental aspects of the stock. The trend visible in the then latest financials of the stock available publicly was upbeat. That Unno had reported Total Assets of Rs.42.55 Crores for FYE Mar’13 and its turnover and profit had remained stable over the years despite the falling prices in the market. Unno had a Turnover of Rs.0.65 Crore both in FYE Mar’13 and FYE Mar’12; Total Income of Rs.0.65 Crore in FYE Mar’13 as against Rs.0.67 Crore in FYE Mar’12; Reported Net Profit of Rs.0.07 Crore in both FYE Mar’13 and FYE Mar’12 implying a marked stability in financial performance in the recent years. However, the head and shoulders pattern on the stock charts implied an oncoming decline in the stock prices, therefore, the assessee company immediately sold the stock to avoid further loss. 10.5 In case of Global Infratech& Finance Ltd. (‘Global’) shares, it has been explained that the trade was undertaken based on the parameters which clearly set out both the logic and rationale behind the trades. The stock of Global was also in a steep fall when the company purchased it. The shares of Global were purchased in a staggered manner in February 2014 in anticipation of trading profits and the same were sold, again in a staggered manner, in March 2014. However, the company purchased the stock only when the price fall was sustained over a period of time. That the stock parameters had improved from its previous reporting period (Total Assets of Rs.56.62 Crores in FYE Mar’13 as against Rs.20.90 Crores in FYE Mar’12; Operating Profit of Rs.1.49 Crores in FYE Mar’13 as against Rs.0.01 Crore in FYE Mar’12; Reported Net Profit of Rs.1.05 Crore in FYE Mar’13 as against Rs.0.08 Crore in FYE Mar’12 implying an increment of 1,212.50% and trend reversal). The company, being a prudent trader, did not only rely on the financials of Global to make its decisions in the market. It was also prone to keep tabs on the technical aspects of the stock to pre-empt market movements in it. Envisaging a further fall in the stock prices owing to its interpretation of the deteriorating technical parameters of Global even in the face of robust fundamentals, the company sought to exit its position in the stock completely for the time being. 10.6 It has been further explained that the SEBI has also investigated regarding the allegation of share trading in respect of two companies out of I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 20 of 26 the above mentioned 5 companies. In the case of Rutron, only 14 persons were suspected to be involved in price rigging who were restrained from accessing the security market for a period of 6 months. Neither the assessee nor his share brokers were ever named for restrain from trading in the said scrip. Even, the company itself was not implicated of any wrong doing. Any other person, except the aforesaid 14 persons, was not restrained for trading in the shares in the said company. The second company investigated was Global Infratech & Finance Ltd, in respect of which, only 46 specific persons/entities were found guilty of price manipulation in shares of the said company after detailed investigation. That some of the entities had inter alia questioned the act of SEBI in not holding all persons/entities who had traded in the shares of Global Infratech and Finance Limited to be artificial or suspicious. However, the SEBI in their Order had specifically observed that only the promoters and/or their connected entities were found to be guilty of price manipulation and that the unrelated entities were not to be made party to these proceedings. It has been further submitted that in respect of other three companies, the SEBI did not choose to make any investigation and there is no action taken by the SEBI against the other three companies namely Comfort Fincap Ltd, Luminaire Technologies Ltd and Unno Industries Ltd. It has been submitted that no adverse orders ever have been passed by the SEBI regarding price manipulation in respect of aforesaid three companies. The Ld. Counsel, therefore has submitted that the facts of the case of the assessee, when considered in the light of the proposition of law laid down by the Hon’ble supreme Court in the case of NRA Steel (supra) and of the hon’ble Calcutta High Court in the case of Swati Bajaj (supra), the evidence furnished by the assessee, the surrounding circumstances would show that the assessee’s decision to invest in those companies was based on business prudence and that there was no evidence, even circumstantial, that the assessee was involved in price rigging or otherwise instrumental to book bogus short term capital loss. 11. The Ld. Counsel has further submitted that the facts of the case of the assessee were quiet distinguishable from that of the cases of “Swati Bajaj & others”(supra). He has submitted that in most of the cases before the Hon’ble High Court, the purchases were off the Stock Exchange/private placements. That there were orders of SEBI suspending the scrip and/or wherein the concerned trader were found guilty of price manipulation. Further, that there were statements recorded from the brokers of the assessees, who had admitted to have indulged in price manipulation and therefore adverse view was taken. That in the specific facts before the hon’ble High Court, it was noted that the price of the scrips showed steep increase during recessive trends and therefore the movement in prices was held to be ingenuine. That the Hon’ble High Court had observed that the onus was on the assessee to establish that the price rise was genuine in light of the fundamentals of the scrip. However, in case of the assessee, the trades were made on the Stock Exchange. There was no adverse statement I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 21 of 26 of assessee’s broker. Moreover the Director of the assessee was examined and confronted with the allegations u/s 131 of the Act and he had specifically denied the same. That the assessee has sufficiently demonstrated that the financial results and the fundamentals of the scrips was mirrored in their price movements and therefore it was not a case that the movement in prices was not explained. Even as demonstrated above, in three (3) out of the five (5) scrips, there were no adverse orders of SEBI regarding any kind of price manipulation. Further in the remaining two scrips, the SEBI upon completion of investigation found specific entities/persons guilty of manipulation. The Ld. Counsel has further submitted that in the similar facts and circumstances, the coordinate benches of the Tribunal have opined in favour of the assessees therein. 12. We find force in the contentions raised by the ld. counsel for the assessee. Firstly, in this case, the assessee has not claimed long-term capital gains on account of unrealistic steep rise in the share prices of these scrips traded in as was in the case of PCIT vs. Swati Bajaj &Ors (supra). The Hon’ble High Court had held, under the circumstances, that the burden was upon the assessee to explain the business prudence of investment in these scrips of the companies having negligible financial worth and thereafter of steep rise in their share price resulting into huge capital gains within a short span of time. The case before us is of business loss in share trading. The assessee, as observed above, has duly explained the factors and considerations which prevailed for making decision by the assessee company of purchasing in the aforesaid five scrips, which included their financial worth, the market position, their income, dividends etc. Further, it was not a case that the shares shown to have been purchased off market/privately and thereafter they were put into demat account after sufficient lapse of time from the alleged date of physical purchase and then sale of the same within a short span of time after they were accounted in the demat account, gaining high monetary capital gains. In the case of the assessee, the shares were traded on the stock exchange, the same were kept in the demat account of the assessee. There is no allegation of involvement of the assessee or even his share broker in any type of price rigging. There even does not seem any probability of meeting minds of the assessee and/or his share broker and the promoters of the companies. A very peculiar fact which is noted from the assessment order/investigation wing report is that in the list of the persons whose statement was allegedly recorded and who in their statement have admitted of price rigging, the names of share brokers, entry operators and exit providers have been mentioned. The facts on the file itself show that there was meeting of minds of the entry operators and the share brokers and exit providers. The price rigging was done by giving benefit to various subscribers with connivance of share brokers and the motive was to convert their unaccounted money into tax exempt long-term capital gains and for that purpose, there were certain persons chosen as exit providers who would buy shares when the share prices would be at its peak and those exit providers thereafter would I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 22 of 26 suffer losses on account of fall in the price of the shares. This specific fact on the file shows that the exit providers were already chosen to execute the plan. The motive was to give the benefit of bogus long-term capital gains to various beneficiaries and to make that plan foolproof, the exit providers were already chosen with a predetermined planning as to at what stage the beneficiaries of bogus long-term capital gains would be given exit. That perhaps was not dependent upon chance exit providers willing to book bogus short-term capital loss. Neither the name of the assessee nor of his share broker is mentioned in the list of exit providers. The circumstances of this case do not suggest of unnatural and unrealistic human conduct. The Assessing Officer in this case has not pointed out any adverse evidence against the assessee. He has simply relied upon the investigation report which is a general investigation report. The Hon’ble Calcutta High Court in the case of PCIT vs. Swati Bajaj & Ors (supra) has considered the said report and analysed the same vis-a-vis circumstantial evidences like the negligible financial worth of the companies whose shares were traded in, the unrealistic steep hike in the share prices as against the recessive market trend and the failure of the assessee to explain the commercial prudence for making such huge investments. The additions thus have been made on the basis of circumstantial evidences and considering the preponderance of probabilities. Hon'ble Supreme Court in Padmasundra Rao v. State of T.N. 255 ITR 147 (SC) has held that circumstantial flexibility, e.g. one additional or different fact, may make a world of difference between conclusions in two cases: “Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington Vs. British Railways Board (1972) 2 WLR 537.Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases.” The Hon’ble Karnataka High Court in the case of “Flipkart India (P.) Ltd. v/s Assistant Commissioner of Income-tax”, [2017] 79 taxmann.com 159 (Karnataka) has observed that considering the fact that this blind appreciation of a precedent is a frequent occurrence, in catena of cases, the Hon'ble Supreme Court has clearly opined that a judgment should not be read as a provision of law. A judgment is confined to the facts and circumstances of its own case. It is only when the facts and circumstances in two cases are similar that the ratio of the former case becomes applicable to the latter case. As discussed above, in the absence of any direct incriminating evidence against the assessee, the distinguishable and weak circumstantial I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 23 of 26 evidence, in our view, do not suggest the preponderance of probability of the assessee being involved in price rigging of the scrips or being the predetermined and pre planned beneficiary of the devised scheme, therefore, the impugned additions are not warranted in this case, and the same are accordingly ordered to be deleted.” 38. Respectfully following the above decision of this Tribunal in the case of Raigarh Jute & Textile Mills Ltd. vs. ACIT (supra), which is squarely applicable on the facts of the instant case of assessee i.e., M/s. Gateway Financial Services Ltd., we find that the alleged loss has been incurred by the assessee in the regular course of its business. We also note that the statement of various persons recorded by the AO/investigation wing/search team in the course of other proceedings as well as the report of the Kolkata investigation wing, there is no reference to a direct evidence indicating that the transactions in question is in the nature of accommodation entry or for arranging bogus loss. Thus, the addition/disallowance made by the assessee is merely on the basis of preponderance of probabilities. Therefore, in the present case, when the statements and investigation report relied upon by the AO has not been given to the assessee for the purpose of cross- examination as well as rebuttal, we in view of the above decision are inclined to hold that the alleged loss being genuine loss from share trading incurred by the assessee in regular course of business, deserves to be allowed. Thus, impugned disallowance is uncalled for. 44. Thus, to conclude we hold that firstly the principles of natural justice have been violated while carrying out the assessment proceedings in the case of the assessee(s) since no opportunity for cross-examination was provided for those persons whose statements have been relied upon by the assessing officer for making the alleged additions. Secondly, there is no direct evidence referred to by the assessing officer or in the report of the investigation Wing that the assessee(s) have made arrangements with the entry operators/company owners for carrying out the alleged transactions. Thirdly, additions made by the assessing officer are merely based on a theory called preponderance of probability that in same type of cases prices are rigged up and down by the entry operators in order to provide accommodation entry to various persons in the form of Long term capital gain and though, the assessing authority can apply preponderance of probabilities in some cases on account of surrounding circumstances but so far as the cases on hand are concerned, we notice that firstly some observations were made by the SEBI regarding some fishy transactions carried out in case of few companies. Based on such primary information, the income tax department has carried out extensive enquiries and search and surveys in the case of various entry operators and alleged companies and based on such statements, a theory was established regarding such accommodation/bogus entries in the form of capital gains. However, since in the case of the assessee, SEBI at a later stage has intensively carried out the investigation on the facts of the assessee(s) along with other persons as I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 24 of 26 referred in the order of the SEBI (extracted supra), and after a detailed investigation and examination of records exonerated, the assessee(s) from the charges levelled in the show cause notice issued to them. Therefore, when the assessee(s) have been exonerated and the charges against them have been waived and the transactions of purchase and sale of equity shares carried out by them have been found to be genuine, the theory of preponderance of probabilities is ruled out in the case of the present assessee(s). Thus, when the transactions giving rise to the long term capital gain have been found to be genuine, and as per rules and regulation of SEBI, the finding of the ld. CIT(A) deserves to be set aside and the impugned additions in case of assessee(s) in appeal before us are uncalled for. 13.1. In the case of Pr. CIT Vs. Renu Aggarwal (Supra), the Hon’ble Apex Court has dismissed the special leave petition filed by the revenue affirming the decision the Hon’ble High court of Allahabad in ITA No. 44 of 2022 which in turn has upheld the decision of the tribunal in ITA No. 204/Lkw/2020 A.Y. 2014-15 & anothers. The Hon’ble Apex Court, however, kept the legal issue open. We have perused the decision of the tribunal wherein the following findings of fact were recorded: “The above findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The ld. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences filed by the assessee before Assessing Officer. I do not find any adversity in the order of ld. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of cases after relying on the judgment of Hon'ble Delhi High Court in the case of Krishna Devi and others had allowed relief to various assessees.” 13.2. The Hon’ble High Court, after taking into the concurrent findings of the first appellate authority and the tribunal, held that no substantial question of law is involved in the appeal of the revenue and accordingly dismissed the appeal of the Revenue. In the present case before us also there is no adverse comment in the form of general and specific statement by Pr. Officer of the Stock Exchange or by the company whose shares were involved in the above said transactions. We note that the AO only referred to the report of the investigation wing which was based upon the statements I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 25 of 26 of several persons who were wholly unrelated. The same is the position with regard to report of the SEBI. In the instant case also the name of the assessee was neither quoted by any of such persons nor any materials relating to the assessee was found at any place where investigation/searches were carried out by the Wing. Thus find the above decision squarely applies to the instant case. 13.3. We note that the Hon’ble High Court of Orissa in the case of PCIT vs Dipansu Mohapatra(supra), has held that tribunal was justified in allowing assessee’s claim u/s 10(38) of the Act where the assessee has filed the details of purchase and sales of shares along with contract notes for purchase and sale, D-mat A/C and bank statement and furthermore no incriminating materials were found against the assessee in the survey conducted in the premises of the assessee and therefore the AO could not deny the claim u/s 10(38) of the Act merely by relying on the statements of accommodation entry providers which were recorded much before the date of survey. In the present case before us the facts of the assessee are on better footing even as there is no survey on the assessee’s premises and AO relied on the statements of entry providers which were recorded long ago. Besides there was no incriminating materials against the assessee found even in the premises of entry operators/stock brokers. Therefore this case also squarely applies to the facts of the case. 14. In view of the above discussion and in the given facts and circumstances of case, we are inclined to hold that the Assessing Officer has failed to carry out any independent investigations/enquiries into the evidences filed by the assessee and has rejected the claim by the assessee qua loss from shares trading only on the basis of surmises and conjectures and relying on the statements of entry operators who never named the assessee and their statements were recorded long before. Therefore, we set aside the order of first appellate authority and direct the Assessing Officer to delete the allow the loss of Rs.3,19,65,849/-. The first issue raised by the assessee is allowed. The ground Nos. 5 to 9 are allowed. 7. Since the facts before us are materially same vis-a-vis the facts in the case as discussed above, therefore, we are inclined to follow the decision of Coordinate Bench in the case of Nalanda Builders Pvt. Ltd.(supra), accordingly, we set aside the order of Ld. CIT(A) and direct the AO to allow the loss incurred on sale of shares to the tune of Rs.1,87,25,176/- and allow the set off of the same against the LTCG earned by the assessee. Resultantly, the appeal of the assessee is allowed.” 5. Considering the finding given in the order of Namokar Builders Pvt. Ltd. (supra) and the fact that the ld. AO has not been able to prove that the impugned transactions were bogus and merely intended to neutralize the gain in trading of shares of M/s. Eros International Media Ltd, we are not inclined I.T.A. No.: 1447/KOL/2019 Assessment Year: 2014-15 Gilt Commodities Pvt. Ltd. Page 26 of 26 to agree with the findings of authorities below. We are also considerably persuaded by the argument that whereas the ld. AO has adversely viewed the incurring of loss, he has taken the transaction leading to gain as being genuine. In our view this is a selective interpretation of the facts before him in as much as the ld. AO has cherry picked whatever is convenient to him and ignored what is not. Also, the very graphs reproduced in the body of the ld. AO’s order show that millions of shares are being transacted in the three companies in which loss has occurred, with the assessee trading in those shares in the thousands only. Therefore, any allegation of rigging the markets to suit a particular convenience is not borne out by the facts before us. Considering the totality of facts and circumstances and following the order in the case of NBL (supra), we hold that the impugned addition deserves to be deleted, with consequential relief to the assessee. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 23 rd July, 2024. Sd/- Sd/- [Rajpal Yadav] [Sanjay Awasthi] Vice President Accountant Member Dated: 23.07.2024 Bidhan (P.S.) Copy of the order forwarded to: 1. Gilt Commodities Pvt. Ltd., 7, Waterloo Street, 1 st Floor, Shed, Dalhousie, Kolkata, West Bengal, 700069. 2. ITO, Ward-3(1), Kolkata. 3. CIT(A)-10, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata