ITO, Ward - 4(1), Kolkata, Kolkata V. M/s. Tribute Trading And Finance Ltd., Kolkata

ITA 1496/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8472 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIP MAJUMDAR CITSRDR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Unexplained cash credit; Bogus Share capital; Unexplained expenditure; Income from undisclosed sources; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Source of fund; Question of law; Corroborative evidences; Accommodation entries; Onus to prove
• Section: 69C; 133A; 260A; 68

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 2275 / KOL / 20 18 & ITA NO.1495-1496/KOL/2017 ASSESSMENT YEARS :2014-15, 2013- 14 & 2014-15 SRI SUBRATA BANERJEE 20, CAPE TOWER, C-1, HILAND PARK, KOLKATA-107 [ PAN NO. ADRPB 6866 B ] _____________________ INCOME TAX OFFICER, WARD- 4(1), 8 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 001 V/S . V/S . ACIT, CIRCLE-51(1), DS-2 & 3, MANIKTALLA CIVIC CENTRE, UTTARAPAN, KOLKATA- 54 ____________________ M/S TRIBUTE TRADING AND FINANCE LTD., 2 ND FLOOR, 3, BENTICK STREET, KOLKATA- 700001 [ PAN NO.AAACT 53329 A ] /APPELLANT .. / RESPONDENT(S) /BY ASSESSEE SHRI MANISH TIWARI, FCA /BY REVENUE SHRI PRADIP MAJUMDAR, ADDL. CIT-SR-DR /DATE OF HEARING 26-12-2018 /DATE OF PRONOUNCEMENT 31-12-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS BATCH OF THREE CASES PERTAINS TO TWO ASSESSEES SHRI SUBRATA BANERJEE AND M/S TRIBUTE TRADING & FINANCE LTD.. TH E FORMER ASSESSEES APPEAL ITA NO.2275/KOL/2018 FOR ASSESSMENT YEAR HAS ARISEN FROM THE CIT(A)-15 KOLKATAS ORDER DATED 04.10.2018 PASSED I N CASE NO 278/CIT(A)- 4/16-17/CIR.51(1)/KOL AFFIRMING THE ASSESSING OFFIC ERS ACTION TREATING HIS LONG TERM CAPITAL GAINS (LTCG) OF 3,26,63,032/- FROM SALE PROCEED OF SHARES HELD IN M/S NCL RESEARCH & FINANCIAL SERVICES LTD. TO BE INCOME FROM UNDISCLOSED SOURCES FOLLOWED BY COMMISSION DISALLOW ANCE TO THE TUNE OF ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 2 6,53,260/- MADE IN THE COURSE OF ASSESSMENT FRAMED ON 29.12.2016. THE REVENUES TWO APPEAL(S) ITA NO.1495-1496/KOL/2017 I S LATTER M/S TRIBUTE TRADING & FINANCE LTDS CASES ARE DIRECTED AGAINST CIT(A), PLEASE VERY APPEAL NO. 423-544/CIT(A)-2/16-17 THE CIT(A)-2 KOLKATAS S EPARATE ORDERS BOTH DATED 21.04.2017, IN CASE REVERSING THE ASSESSING O FFICERS ACTION TREATING SHORT TERM CAPITAL LOSS(ES) OF 78,25,188/- IN ASSESSMENT YEAR 2013-14 AND 1,44,20,606/- IN ASSESSMENT YEAR 2014-15 RESPECTIVE LY AS UNEXPLAINED. RELEVANT PROCEEDINGS IN ALL THREE CASES ARE U/S 143 (3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE LEARNED REPRESENTATIVES. CASE FILE(S ) PERUSED. 2. WE NOTICE AT THE OUTSET THAT ALTHOUGH THE SOLE S UBSTANTIVE IDENTICAL ISSUE INVOLVED IN ALL THESE THREE APPEAL(S) IS THAT OF GENUINENESS OF THE ASSESSEES LONG TERM CAPITAL GAINS & LOSSES HEREINA BOVE, THE ASSESSING OFFICER IN ASSESSMENTS FRAMED IN BOTH ASSESSEES CAS ES HAD TREATED THE RESPECTIVE CAPITAL GAINS ARISING FROM SALE OF SHARE S IN M/S NCL RESEARCH & FINANCIAL SERVICES IN FORMER AS WELL AS LOSSES IN L ATTER CASES (SUPRA) TO BE LACKING GENUINENESS. BOTH THE LEARNED REPRESENTATIV ES ARE AD IDEM DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER REASON ING IN VERY MUCH IDENTICAL. WE THUS TREAT THE CIT(A)S ORDER IN FORMER ASSESSEE SHRI SUBRATA BANERJEE ITA NO.2275/KOL/2018 AS THE LEAD CASE. LEARNED REPRESENTATIVES AT THIS STAGE TAKES US TO CIT(A)S DETAILED FINDINGS IN ABO VE LEAD CASE UPHOLDING ASSESSING OFFICERS ACTION TREATING ASSESSEES CAPI TAL GAINS OF 3,26,63,032/- TO BE INCOME FROM UNDISCLOSED SOURCE AS FOLLOWS:- GROUNDS OF APPEAL: AGGRIEVED BY THE ORDER PASSED BY THE A.O., ACIT,CIR -51(L) KOLKATA DATED 29.12.2016 THE APPELLANT HAS PREFERRED THIS APPEAL WITH THE FO LLOWING GROUNDS OF APPEAL. 2.1 (A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. A.A. HAS ERRED TO HOLDING PURCHASE AND SALE OF INVESTMENT IN SHARES O F NCL RESEARCH & FINANCIAL SERVICES LTD AS BOGUS AND/ OR COLOURABLE BY REFERRI NG TO REPORT OF DIRECTORATE OF INVESTIGATION. (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. A.O. IS WRONG AND UNJUSTIFIED IN CONSIDERING PURCHASE AND SALE OF SHA RES OF NCL RESEARCH & FINANCIAL SERVICES PVT. LTD. AS BOGUS AND/OR COLOURABLE WITHO UT MAKING ANY ENQUIRY OF HIS OWN. (C) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. A.O. IS WRONG AND UNJUSTIFIED IN DENYING EXEMPTION D/S. 10(38) OF IT. ACT, 1961 AND THEREBY MAKING ADDITION OF RS. 3,26,63,032/- AS UNEXPLAINED CASH C REDIT U/ S. 68 OF IT. ACT, 1961. . ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 3 2.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE ACTION OF LD. A.O. TO MAKE ADDITION OF RS. 6,53,260/ - AS COMMISSION PAID TO SHARE BROKER IS ERRONEOUS AND UNFOUNDED SINCE THE PROVISIONS OF SECTION 69C O F LT. ACT, 1961 IS INTENDED FOR ADDITION ON THE BASIS OF ACTUAL EXPENSES. 2.3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. A.O. IS WRONG AND UNJUSTIFIED IN MAKING AD-HOC DISALLOWANCE OF RS. 5, 00,000/- OUT OF TRIP EXPENSES AND REPAIRS & MAINTENANCE EXPENSES WITHOUT FINDING ANY DEFECT ON VERIFICATION OF SAMPLE BILLS. 2.4 THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, ADDUCE OR AMEND ANY GROUND OR GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APP EAL. 3. ASSERTION OF THE ASSESSING OFFICER: DURING THE COURSE OF ASSESSMENT IT IS NOTICED THAT THE ASSESSEE HAS CLAIMED LONG TERM CAPITAL GAINS OF RS. 3,26,63,032/-. IN VIEW OF THE ABOVE, THE ASSESSEE WAS ASKED TO SUBMIT PARTICULARS OF TRANSACTIONS IN SHAR ES. ON SCRUTINY OF DETAILS IT REVEALED THAT THE ENTIRE LONG TERM CAPITAL GAINS CL AIM OF RS. 3,26,63,032/- HAS BEEN MADE OUT OF SALE OF SHARES OF M/S NCL, RESEARCH AND FINANCIAL SERVICES LTD. 'FROM THE DETAILS FILED BY THE ASSESSEE IT IS NOTICED THA T THE ASSESSEE PURCHASED 29,000 UNITS OF SHARES OF M/S. NCL RESEARCH AND FINANCIAL SERVICES LTD. FOR A TOTAL CONSIDERATION OF RS. 79,75,000/. SUBSEQUENTLY, THE SE SHARES WERE CREDITED TO HIS DEMAT ACCOUNT. THE ASSESSEE SOLD ALL THESE SHARES O F M/S. NCL RESEARCH AND FINANCIAL SERVICES LTD. FOR RS. 4,06,38,032/(NET) MAKING A PROFIT OF RS.3,26,63,032/ THROUGH THE BROKER M/S. KOTAK SECURITIES LIMITED AF TER ADJUSTMENT OF ALL CHARGES. IN THE CASE OF CIT VS L.N. DALMIA (1994) 207 ITR 89 , THE HON'BLE CALCUTTA HIGH COURT HELD THE DEVICE ADOPTED BY THE ASSESSEE TO REDUCE T HE TAX LIABILITY TO BE COLOUR AND SHAM. IN THIS CASE THE COURT OBSERVED AS FOLLOWS:- 'AS DISCUSSED, THE ASSESSEE AFFECTED A TRANSACTION OF SALE OF SHARES HELD BY HIM TO THE COMPANIES FORMED BY HIMSELF HOLDING THE MAJOR PART OF THE SHARES OF SUCH COMPANIES ALONG WITH THE NEPHEW AND THE WIF E, WHO HELD ONLY THE SMALLER PART THEREIN AND ARE SHOWN TO HAVE SUFFERED A LOSS BY THE SALE WHICH WOULD BE A CUSHION AGAINST FUTURE TAX LIABILITY FOR GAINS EITHER UNDER THE REVENUE HEAD OR UNDER THE CAPITAL HEAD. WE HAVE OBS ERVED THAT AS FAR AS THE EXERCISE OF CONTROL OF THE COMPANY (PUNALUR PAPER M ILLS LTD.) THERE HAS BEEN NO CHANGE WHATSOEVER. HE CONTINUED TO EXERCISE THE SAME CONTROL OVER PUNALUR PAPER MILLS LTD. AS BEFORE. THIS SPECIAL AS PECT CANNOT BE OVERLOOKED BY ANY APPELLATE AUTHORITY DEALING WITH TAX MATTERS . WHEN THERE WAS NO REAL CHANGE WHATSOEVER, THE APPARENT CHANGE BEING THE TR ANSFER ON THE SURFACE OF SHARES FROM THE INDIVIDUAL TO THE COMPANY A HANDMAI D OF THE TRANSFERRING INDIVIDUAL, CANNOT BE OVERLOOKED AND WE ARE IN COMP LETE AGREEMENT WITH THE VIEW OF THE TAXING AUTHORITY THAT THERE WAS NO REAL CHANGE AND TRANSFER CLAIMED WAS SHAM TRANSFER.' IT WAS FURTHER OBSERVED THEREIN.- IN CONTEXT OF DETERMINING WHETHER A TRANSACTION IS A SHAM OR ILLUSORY OR A DEVICE OR A RUSE. THE INCOME TAX AUTHORITIES ARE ENTITLED TO PE NETRATE THE VEIL COVERING IT AND ASCERTAIN THE TRUTH. THE TAXING AUTHORITIES ARE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENTS PRODUCED BEFORE THEM. THEY ARE ENTITLED TO LOOK INTO TE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F THE RECEIPTS MADE IN THE DOCUMENTS. IT IS THE DUTY OF THE COURT IN EVERY CAS E, WHERE INGENUITY IS EXPENDED TO AVOID TAXING AND WELFARE LEGISLATIONS, TO GET BEHIN D THE SMOKES ERE EN AND DISCOVER THE TRUE STAT OF AFFAIRS. THE COURT IS NOT TO BE SA TISFIED WITH THE FORM AND LEAVE ALONE THE SUBSTANCE OF THE TRANSACTIONS.' FURTHER, IN THE CASE OF CIT VS SHEKHAWATI RAJPUTANA TRADING CO. (P) LTD. (1999) 236 ITR 590, .THE HON'BLE JURISDICTIONAL CALCUTTA HIGH COURT HELD THAT THE TRIBUNAL MAINLY BASED ITS FINDINGS ON THE GROUND THAT THE CONSIDERA TION WAS RECEIVED THROUGH CHEQUE ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 4 AND WAS DULY CREDITED IN THE BANK ACCOUNT OF THE AS SESSEE. THE TRIBUNAL DID NOT APPRECIATE PROPERLY THE FACT THAT THE TRANSACTION W AS BETWEEN THE COMPANY AND ITS CHAIRMAN AND THERE WAS NO SUBSTANTIAL CREDIT OF THE PARTIES IN THE BANK, AT THE TIME WHEN THE CHEQUES WERE ISSUE BY THE ASSESSEE AS WELL AS BY ITS CHAIRMAN ALL UPON THE SAME BANK. IT HAS BEEN SUBMITTED THAT ALL TRANS ACTIONS THEMSELVES MAKE THE TRANSACTION GENUINE. THE TRANSACTION IN THE INSTANT CASE IS BETWEEN THE ASSESSEE COMPANY AND THE CHAIRMAN. THE ONUS LIES HEAVILY ON THE ASSESSEE TO PROVE THAT THE TRANSACTION IS GENUINE WHICH WAS NOT DISCHARGED BY THE ASSESSEE IN THE INSTANT CASE, CHEQUES WERE ISSUED SIMULTANEOUSLY BY THE PARTIES I N FAVOUR OF EACH OTHER FOR PURCHASE AND REPURCHASE ON THE SAME DAY WITHOUT BOT H THE PARTIES HAVING SUFFICIENT FUNDS IN THE BANK. THAT ITSELF GOES TO SHOW THAT TH E TRANSACTION WAS NOT GENUINE. THIS ASPECT, HOWEVER, COULD NOT BE EXPLAINED BY THE ASSE SSEE. REGARDING SALE OF SHARES OF THREE COMPANIES PARTICULARLY J. LTD. NO EVIDENCE WAS PRODUCED ON BEHALF OF THE ASSESSEE THAT THERE WAS NO OTHER BUYER OF THE SHARE S EXCEPT ITS CHAIRMAN, ALTHOUGH THOSE SHARES WERE QUOTED IN THE STOCK EXCHANGE. THE FACT THAT THOUGH THE SALE THROUGH BROKER OF LISTED SHARES IS ESSENTIAL UNDER THE SECURITIES CONTRACTS) REGULATION) ACT, 1956, IT WAS NOT DONE IN THE INSTA NT CASE WAS ALSO IGNORED BY THE TRIBUNAL. THE TRIBUNAL FAILED TO TAKE NOTE OF THE F ACT THAT THE ASSESSEE COMPANY AND K TRIED TO CLAIM LOSS IN THEIR RESPECTIVE ASSESSMEN T FOR TAX AVOIDANCE BY FACTIOUS TRANSACTIONS. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS NOT CORRECT IN LAW IN DIRECT ING THE ASSESSING OFFICER THE SHARE OF LOSS OF TO THE ASSESSEE COMPANY. 4. SUBMISSION OF THE ASSESSEE: RELEVANT EXTRACTS OF THE APPELLANTS' SUBMISSION ARE AS UNDER: 1. ADDITION IN RESPECT OF LTCG OF RS. 3,26,63,032/- CLAIMED AS EXEMPT U/S. 10(38) DURING THE YEAR UNDER CONSIDERATION THE APPELLANT S OLD 29000 SHARES OF M/S. NCL RESEARCH & FINANCIAL SERVICES LTD IN THE BOMBAY STO CK EXCHANGE AT A CONSIDERATION OF RS.4,06,38,032/- ON DIFFERENT DATES WHICH WERE P URCHASED IN EARLIER YEAR AT A COST OF RS.79,75,000/-. IN THE PROCESS, THE APPELLANT DE RIVED LONG TERM CAPITAL GAIN OF RS. 3,26,63,032/- WHICH WAS CLAIMED AS EXEMPT U/S. 10(38) OF THE I.T. ACT, 1961. THE TRANSACTIONS REGARDING PURCHASE WAS RELATED TO EARL IER YEARS AND SALE OF SHARES WERE EFFECTED IN THE RELEVANT F.Y. THROUGH ASSESSEES SHA RE BROKER M/S. KOTAK SECURITIES LTD. PARTICULARS OF SALES AND PURCHASE AS WELL AS C OPY OF DEMAT A/C, LEDGER A/C OF SHARE BROKER ETC WERE ALSO FURNISHED. A.O. BY REFER RING TO REPORT OF DIRECTORATE OF INVESTIGATIONS, KOLKATA AS WELL AS SEBIS CLARIFICAT IONS ETC HAS HELD SUCH L TCG AS BOGUS AND/OR COLOURABLE ONE. THERE HAS BEEN NO APPL ICATION OF MIND TO THE FACTS OF THE CASE OR ANY ENQUIRY BY A.O. HIMSELF TO PROVE TH AT THE LTCG EARNED BY THE A WAS BOGUS. THEREFORE THE DENIAL OF EXEMPTION U/S, 10(38 ) AND ADDITION OF RS.3,26,63,0 32/- TO THE RETURNED INCOME IS NOT SUSTAINABLE IN L AW. ADDITION ON ACCOUNT OF PAYMENT OF COMMISSION TO BRO KER FOR ACCOMMODATION OF LTCG RS. 6,53,260/- CONSEQUENT UPON TREATING LTCG AS BOGUS, A.D. HAS PR OCEEDED TO MAKE ADDITION @ 2% OF LTCG AS COMMISSION PAID TO BROKER AS UNEXPLAI NED EXPENDITURE. THE PROVISIONS OF SECTION 69C WHICH DEALS WITH UNEXPLAI NED EXPENDITURE SPEAKS FOR ADDITION WHERE THE A.C. IS IN POSSESSION OF DOCUMEN T IN SUPPORT OF ACTUAL EXPENDITURE. IT IS SUBMITTED THAT SECTION 69C CANNO T BE APPLIED FOR HYPOTHETICAL FIGURE. HENCE, ADDITION IS NOT VALID. 3. DISALLOWANCE OUT OF TRIP EXPENSES & REPAIR & MAI NTENANCE RS.5,00.000/- P&L A/C WAS DEBITED BY RS.10,47,18,665/- AS TRIP EXPENSES A ND RS.4,36,63,996/- AS REPAIR & MAINTENANCE EXPENSES. THE QUERY RAISED ON THIS POIN T WAS EXPLAINED. IT WAS STATED THAT AROUND 80 TANKERS ARE ENGAGED IN TRANSPORTATIO N OF LPG TO CATER SUPPLY TO CUSTOMERS OF IDC HAVING PUMPS AT UTTAR PRADESH, BIH AR, JHARKHAND AND THROUGHOUT ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 5 WEST BENGAL THEREFORE, BILLS ARE SUPPORTED TO BE HI GH, AD. ALSO EXAMINED BILLS/VOUCHERS ON SAMPLE BASIS WITHOUT FINDING ANY DEFECT. ADHOC DISALLOWANCE OF RS. 5,00,000/- HAS BEEN MADE ON PURE SUSPICION AND CONJECTURE AS EVIDENT FROM HIS FINDING THAT THERE I S A CHANCE OF LEAKAGE OF REVENUE AND TO PLUG POSSIBLE LOSS OF REVENUE SUCH DISALLOWA NCE IS MADE. IN THE BACKGROUND OF ABOVE FACTS, WE MAKE DETAILED SUBMISSION ON VARIOUS GROUNDS AS UNDER:- GROUND NOS. 1(A) TO 1(C) THESE GROUNDS HAVE BEEN PREFERRED AGAINST AO.'S ACT ION TO CONSIDER L TCG ON SALE OF SHARES OF NCL RESEARCH & FINANCIAL SERVICES LTD. AMOUNTING TO RS. 3,26,63,032/- AS UNEXPLAINED CASH CREDIT U/S 68 BY DENYING EXEMPT ION U/S 10(38). 1. THE RETURN FILED WAS SELECTED FOR SCRUTINY AND T HE ASSESSEE COMPLIED WITH ALL STATUTORY NOTICES ISSUED FROM TIME TO TIME BY FURNI SHING ALL RELEVANT DETAILS, EVIDENCES AND EXPLAINED THE RETURN BY PRODUCING THE BOOKS OF ACCOUNTS ETC. 2. THE APPELLANT PURCHASED 29000 SHARES OF NCL RESE ARCH & FINANCIAL SERVICES LTD. AT A CONSIDERATION OF RS.79,75,000 @ RS. 275/SHARE. THE SAID SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE APPELLANT ASSESSEE ON 2 5.07.2012 MAINTAINED WITH STOCK HOLDING CORPORATION OF INDIA LIMITED. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2014-15 THE APPELLANT SOLD 29000 SH ARES OF NCL RESEARCH & INVESTMENT LIMITED (NCL), LISTED SECURITY AT BOMBAY STOCK EXCHANGE (BSE) AT A NET CONSIDERATION OF RS. 4,06,38,032/-. THE INVESTMENT IN THE SHARES HAVING BEEN HELD FOR MORE THAN 12 MONTHS THE APPELLANT CLAIMED THAT LONG TERM CAPITAL GAINS OF RS. 3,26,63,032/- AS EXEMPT UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE WAS ALLOTTED 29000 SHARES OF NCL RE SEARCH & INVESTMENT LIMITED THROUGH PREFERENTIAL ALLOTMENT AT THE RATE OF RS. 2 75 PER SHARE. THE PURCHASE CONSIDERATION WAS PAID BY ACCOUNT PAYEE CHEQUE AND THE TRANSACTION WAS REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THE PR EVIOUS YEAR ENDING 31.03.2013. THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14 WAS ACCEPTED BY THE ASSESSING OFFICER. HENCE, GENUINENE SS OF THE INVESTMENT OF RS. 79,75,000/- IN SHARES OF NCL RESEARCH AND FINANCIAL SERVICES LTD. IS BEYOND ANY CONTROVERSY. IN SUPPORT OF THE AFORESAID CONTENTION S THE ASSESSEE PRODUCED AND FURNISHED THE FOLLOWING DOCUMENTS BEFORE THE ASSESS ING OFFICER. (I) COPY OF THE DEMAT ACCOUNT STATEMENT FOR THE R ELEVANT ASSESSMENT YEAR. (II) LIST OF PURCHASE & SALE OF SHARES (III) DETAILS OF INVESTMENT MADE BY THE ASSESSEE AL ONG WITH SUPPORTING EVIDENCE FOR SUCH INVESTMENT. (IV) DETAILS OF CAPITAL GAINS ALONG WITH CONTRACT NOTES (V) COPY OF TRANSACTION CUM HOLDING STATEMENT OF TH E ASSESSEE FOR FY 2012- 13 & 2013-14 (VI) COPY OF SHARE APPLICATION FORM SUBMITTED BY THE ASSESSEE TO THE COMPANY (VII) COPY OF ALLOTMENT ADVICE ISSUED BY THE COMP ANY. (VIII) SOURCE OF FUND FOR ACQUIRING THE SHARES FR OM THE COMPANY. 4. THE APPELLANT ASSESSEE SOLD 29,000 SHARES OF NCL THROUGH A REGISTERED SHARE BROKER NAMELY 'KOTAK SECURITIES LTD.' ON DIFFERENT DATES DURING THE FINANCIAL YEAR 2013-14. THE SALE TRANSACTIONS SUFFERED SECURITIES TRANSACTION TAX AS IS REFLECTED IN RESPECTIVE CONTRACT NOTES ISSUED BY THE ABOVEMENTIO NED SHARE BROKER. THE DELIVERY OF SHARES OF NCL SOLD IS REFLECTED IN THE DEMAT STA TEMENT OF THE ASSESSEE. THE NET CONSIDERATION OF RS. 4,06,38,032/- WAS RECEIVED BY APPELLANT ASSESSEE ON DIFFERENT DATES THROUGH PROPER BANKING CHANNELS AND THE SAME WAS CREDITED IN ASSESSEE'S SAVINGS BANK ACCOUNT. THE AFORESAID 29,000 SHARES O F NCL WERE SOLD ON LINE AT BSE AT MARKET RATES PREVAILING ON THE RESPECTIVE DATES OF SALE, AS EVIDENCED BY THE QUOTATIONS GIVEN BY THE BOMBAY STOCK EXCHANGE. ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 6 THE FOLLOWING DOCUMENTS WERE PRODUCED BY THE ASSESS EE BEFORE THE ASSESSING OFFICER IN SUPPORT OF THE AFORESAID TRANSACTIONS OF SALE OF SHARES OF NCL (I) CONTRACT NOTES FOR SALE OF SHARES OF NCL. (II) LEDGER/DEMAT STATEMENT ISSUED BY DEPOSITORY PA RTICIPANT VIZ. KOTAK SECURITIES LTD. SHOWING DELIVERY OF SHARES OF NCL O N SALE OF SHARES. (III) BANK STATEMENT / PASS BOOK SHOWING RECEIPT OF SALE CONSIDERATION THROUGH BANKING CHANNELS. (IV) MARKET RATE QUOTATIONS . (V)BOOKS OF ACCOUNTS PRODUCED. 5. IT APPEARS FROM THE OBSERVATIONS MADE IN THE ASS ESSMENT ORDER THAT LD. A.O. HAS HEAVILY RELIED UPON THE REPORT: OF DIRECTORATE OF I NVESTIGATION, KOLKATA WHILE CARRYING OUT INVESTIGATION TO UNEARTH THE RACKET OF GENERATI NG BOGUS ENTRIES OF LONG TERM CAPITAL GAINS (L TCG) WHICH IS EXEMPT FROM TAX AND THE MODUS OPERANDI ADOPTED BY THE OPERATORS TO MAKE THE BENEFICIARY BY SHARES OF PRE- DETERMINED PENNY STOCK CONTROLLED BY THEM. AFTER DISCUSSING THE INVESTIGAT ION REPORT IN A GENERAL VIEW A.O. CONCLUDED AS UNDER. - (I) INDIVIDUALS WHO HAVE TAKEN BOGUS ENTRIES OF LTC G AMOUNTED TO SEVERAL CRORES FROM 2010 TO 2014. (II) THE RESULT OF ENQUIRY WAS ALSO SHARED WITH SEB I WHO AFTER INVESTIGATING CASES FOUND THE ALLEGATION TO BE CORRECT. THE BALANCE CAS ES ARE STILL UNDER INVESTIGATION BY SEBI. (III) ALMOST ALL THE 25 TOP GROUPS HAVE ACCEPTED HA VING TAKEN ENTRIES ON RECEIPT OF COMMISSION AND HAVE VOLUNTARILY SURRENDERED AND OFF ERED FOR TAXATION. (IV) THIS PARTICULAR SCRIPT LE. NCL RESEARCH AND FI NANCIAL SERVICES LTD. FINDS MENTION IN THE LIST OF BOGUS LONG TERM / SHORT TERM CAPITAL LOSS AS PER INFORMATION AND DATA PROVIDED BY INCOME TAX INVESTIGATION WING, KOLKATA 6. LD. AO. HAS ALSO RELIED UPON THE FINANCIAL RESUL TS AND GRAPH SHOWING INCREASE AND SUBSEQUENT FALL OF PRICE OF SHARE OF NCL RESEARCH & FINANCIAL SERVICES LTD. IN HOLDING THAT TRANSACTION REGARDING PURCHASE OF 2900 0 SHARES OF NCL RESEARCH & FINANCIAL SERVICES WAS AN ARRANGED AFFAIR. 7. MOREOVER, THE MERE FACT THAT THE SHARES WERE SOL D AT A HIGH PRICE CANNOT BE TERMED AS CONCLUSIVE PROOF OR GROUND FOR AN ALLEGAT ION THAT THE APPELLANT ASSESSEE CONVERTED SOME UNACCOUNTED MONEY THROUGH ACCOMMODAT ION ENTRIES, AS HAD BEEN ALLEGED BY THE ASSESSING OFFICER. IN FACT, ANY SUSP ICION, HOWEVER SO EVER STRONG, THAT THE DEPARTMENT MAY HAVE, CANNOT TAKE PLACE OF PROOF AS CLEARLY LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT [1959] 37 ITR 271. 8. THE ALLEGATIONS OF THE ASSESSING OFFICER MADE IN HIS IMPUGNED ASSESSMENT ORDER WERE ALL BASED ON MERE SURMISE, CONJECTURES AND SUS PICIONS. THE ASSESSING OFFICER HAD ALLOWED HIS VISION TO BE COLOURED BY EXTRANEOUS CIRCUMSTANCES AND EVENTS WHICH HAD NO BEARING AND ROLE IN DECIDING THE GENUINENESS OR OTHERWISE OF THE TRANSACTIONS OF SALE OF SHARES OF NCL. IN FACT THE ASSESSING OFF ICER HAD NOT DEALT WITH THE SPECIFIC FACTS OF THE CASE. MERELY MAKING CERTAIN OBSERVATIO NS ON THE BASIS OF BASELESS ASSUMPTIONS AND DRAWING AN ADVERSE INFERENCE THEREO N, WITHOUT ANY EVIDENCE ON RECORD, IS BAD IN LAW. RELIANCE IN THIS CONNECTION IS PLACED ON THE CELEBRATED DECISION OF THE HON'BLE SUPREME COURT IN LALCHAND BHAGAT AMB LCA RAM VS. ERR [1959) 37 ITR 288 (SC) WHEREIN THE HON'BLE APEX COURT HAD RELIED ON ITS EARLIER JUDGEMENT RENDERED IN THE CASE OF OMAR SALAY MOHAMED SAIT [19 59] 37 ITR 151 (SC) AND HAD HELD THAT: IT IS, THEREFORE, CLEAR THAT THE TRIBUNAL IN ARRIV ING AT THE CONCLUSION IT DID IN THE PRESENT CASE INDULGED IN SUSPICIONS, CONJECTURES AN D SURMISES AND ACTED WITHOUT ANY EVIDENCE OR UPON A VIEW OF THE FACTS WH ICH COULD NOT REASONABLY ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 7 BE ENTERTAINED OR THE FACTS FOUND WERE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COUL D HAVE FOUND, OR THE FINDING WAS, IN OTHER WORDS, PERVERSE AND THIS COURT IS ENT ITLED TO INTERFERE. IT IS MOST RESPECTFULLY SUBMITTED THAT NOT ALLOWING OPPORTUNITY OF CROSS-EXAMINATION OF THE WITNESS IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY. PLEASE REFER TO THE FOLLOWING JUDGEMENTS ON THIS ISSUE: (I) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C ENTRAL EXCISE [2015J 62 TAXMANN.COM 3 (SQ]. IN THIS CASE THE ADJUDICATING A UTHORITY HAD PASSED AN ORDER AGAINST THE ASSESSEE RELYING ON THE STATEMENTS OF T HIRD PARTIES BY OBSERVING THAT THERE WAS NO NEED TO PROVIDE OPPORTUNITY OF CROSS E XAMINATION. HOWEVER, THE HON'BLE SUPREME COURT LAID DOWN THAT NOT ALLOWING AN OPPORT UNITY TO CROSS EXAMINATION IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY 9. THAT THE FACTS OF THE PRESENT APPELLANT AND THE FACTS OF THE CASE RELIED UPON IN THE JUDGEMENT OF IT AT 'A' BENCH KOLKATA DATED 18.08.20 17 ARE SAME AND IDENTICAL WILL BE EVIDENT FROM THE FOLLOWING: - FACTS OF THE PRESENT APPELLANT FACTS IN THE REFERRE D CASE THE APPELLANT PURCHASED 29000 SHARES OF NCL RESEARCH & FINANCIAL SERVICES LTD. AT A CONSIDERATION OF RS.79,7S,000 @ RS. 275/SHARE. THE SAID SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE APPELLANT ASSESSEE ON 25.07.2012 MAINTAINED WITH STOCK HOLDING CORPORATION OF INDIA LIMITED. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2014-15 THE APPELLANT SOLD 29000 SHARES OF NCL RESEARCH & INVESTMENT LIMITED (NCL), LISTED SECURITY AT BOMBAY STOCK EXCHANGE (BSE) AT A NET CONSIDERATION OF RS. 4,06,38,032/-. THE INVESTMENT IN THE SHARES HAVING BEEN HELD FOR MORE THAN 12 MONTHS THE APPELLANT CLAIMED THAT LONG TERM CAPITAL GAINS OF RS. 3,26,63,032/- AS EXEMPT UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961. THE BRIEF FACTS OF THE FIRST ISSUES AS HAS BEEN RECORDED BY THE LD. A.O. IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE CLAIMED LONG TERM CAPITAL GAINS FROM TRANSACTIONS IN SHARES OF KAILASH AUTO FINANCE LTD. (KAFL. THE LD. A.O. FOUND THAT THE ASSESSEE ON 20.12.2011 PURCHASED 240000 SHARES OF THE FACE VALUE OF RS. 1/- EACH IN CAREFUL PROJECTS ADVISORY LTD. (CPAL) THROUGH OFF MARKET FROM M/S. BRIJDHARA MERCANTILE PRIVATE LIMITED (NAME CHANGED TO M/S. TREMENDOUS MERCANTILE PVT. LTD.) FOR A CONSIDERATION OF RS. 2,40,000/-. THE LD A.O. ALSO FOUND THAT CAPL WAS AMALGAMATED WITH KFAL BY VIRTUE OF AN ORDER OF HON'BLE ALLAHABAD HIGH COURT AND IN PURSUANCE TO SUCH AMALGAMATION, THE ASSESSEE WAS ALLOTTED 240000 SHARES OF KFAL OF THE FACE VALUE OF RS. 1/- EACH THE LD. AO. ALSO NOTED THAT ANOTHER COMPANY NAMED PANCHSUL MARKETING LTD. (PML) ALSO MERGED WITH THE SAID KAFL. HOWEVER, IN THE PRESENT CASE WE ARE NOT CONCERNED WITH THE MERGER OF PML WITH KAFL. THE ASSESSEE SOLD THESE 240000 SHARES THROUGH M/S. ASHIKA STOCK BROKING LTD., A REGISTERED SHARE BROKER OF BSE. THE SAID SHARES WERE SOLD THROUGH THE ONLINE MEDIUM OF STOCK EXCHANGE ON DIFFERENT DATES FALLING WITHIN THE PREVIOUS YEAR 2013-14 CORRESPONDING TO THE ASSESSMENT YEAR 2014- 15. THE AFORESAID TRANSACTIONS RESULTED IN LONG TERM CAPITAL GAINS AND THE ASSESSEE CLAIMED EXEMPTION U/S 10(38) OF THE ACT. THE AFORESAID TRANSACTIONS FOR PURCHASE AND IN COUR SE OF HEARING OF THE CASE, THE LD. AR ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 8 SALE OF SHARES RESULTED IN LONG TERM CAPITAL GAINS OF RS. 3,26,63,032/- WHICH THE ASSESSEE CLAIMED TO BE EXEMPT' UNDER SECTION 10(38) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED FOLLOWING DETAILS DOCUMENTS AND EVIDENCES IN RELATION TO SUCH TRANSACTIONS OF PURCHASE AND SALE OF SHARES. (I) DEMAT ACCOUNT STATEMENT SHOWING CREDIT OF 29000 SHARES OF NCL (II) BALANCE SHEET AS ON 31.03.2011, 31.03.2012 & 31.03.2013 AND ALSO THE DETAILS OF INVESTMENT IN SHARES TO SHOW THAT THE SHARES PURCHASED BY ASSESSEE AT DIFFERENT TIMES DID APPEAR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND WERE REFLECTED IN HIS BALANCE SHEET. THERE WERE OTHER INVESTMENTS IN SHARES AND THOSE WERE ALSO REFLECTED IN THE BALANCE SHEET. THE ASSESSMENT FOR A.Y. 2013-14 IN WHICH INVESTMENT IN SHARES OF NCL WAS MADE WAS COMPLETED U/S 143(3). (SEBI APPROVED DEPOSITORY PARTICIPANT) (IV) FIFTEEN CONTRACT NOTES IN RESPECT OF SHARES OF NCL SOLD BY ASSESSEE ON DIFFERENT DATES DURING THE FINANCIAL YEAR 201314. (V) BANK STATEMENT SHOWING PAYMENTS RECEIVED BY ACCOUNT PAYEE CHEQUES ON DIFFERENT DATES FOR SUCH SALE OF SHARES OF NCL REFERRED TO VARIOUS DOCUMENTARY EVIDENCES FURNISHED IN THE PAPER BOOK IN SUPPORT OF THE CLAIM OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO LTCG ON SALE OF SHARE OF KAFL. THE DOCUMENTARY EVIDENCES INCLUDED THE FOLLOWING: - (I) PURCHASE BILL FOR PURCHASE OF 240000 SHARES OF CAPL FROM M/S. BRIJDHARA MERCANTILE PVT. LTD. ON 20.12.2011 FALLING IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2012-13 (II) BANK STATEMENT SHOWING PAYMENT OF THE PURCHASE CONSIDERATION OF SHARES OF CAPL TO BRIJDHARA. (III) BALANCE SHEET OF THE ASSESSEE FOR THE F.Y. 2011-12 TO 2012-13 TO SHOW THAT THE INVESTMENT IN THE SHARES OF CPAL WAS DULY DISCLOSED. (IV) DEMAT STATEMENT WITH UNITED BANK OF INDIA, A DEPOSITORY PARTICIPANT (DP) SHOWING THE AFORESAID SHARES OF CAPL IN THE ACCOUNT OF THE ASSESSEE. (V) THE LETTER DATED 8TH JUNE 2013 OF KAFL INFORMING THE ASSESSEE THAT THE CPAL WAS MERGED WITH KAFL BY VIRTUE OF COURT ORDER AND THE ASSESSEE WAS ALLOTTED SHARES OF KAFL AS AGAINST THE SHARES OF CPAL IN THE RATIO 1:1. (VI) THE DEMAT STATEMENT OF THE ASSESSEE WITH UNITED BANK OF INDIA SHOWING RECEIPT OF SHARES OF KAFL ON AMALGAMATION AS AFORESAID. (VII) CONTRACT NOTES OF ASHIKA STOCK BROKING LTD., SHARE BROKER THROUGH WHOM THE ASSESSEE SOLD SHARES OF KAFL IN THE F.Y. 201314 RELEVANT TO THE AY. 2014-15. (VIII) BANK STATEMENT SHOWING RECEIPT OF SALE CONSIDERATION FROM M/SO ASHIKA STOCK BROKING LTD. BY ACCOUNT PAYEE CHEQUES. (IX) DEMAT STATEMENT SHOWING DELIVERY OF SHARES OF KAFL ON SALE OF SHARES. IT APPEARS FROM THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER THAT LD. A.O. HAS HEAVILY RELIED UPON THE REPORT OF DIRECTORATE OF INVESTIGATION, KOLKATA WHILE CARRYING OUT INVESTIGATION TO UNEARTH THE RACKET OF GENERATING BOGUS ENTRIES OF LONG TERM CAPITAL GAINS (LTCG) WHICH IS EXEMPT FROM TAX AND THE MODUS OPERANDI ADOPTED BY THE OPERATORS TO MAKE THE BENEFICIARY BY SHARES OF PRE-DETERMINED PENNY STOCK CONTROLLED BY THEM. AFTER DISCUSSING THE INVESTIGATION REPORT IN A GENERAL VIEW A.O. THE LD. AR ALSO BROUGHT OUR ATTENTION TO THE ENQUIRY REPORT MADE BY PR. DIRECTOR OF INCOME TAX (INVESTIGATION, KOLKATA IN THE MATTER OF TRANSACTIONS OF KAFL. THE LD. AO RELIED ON THE STATEMENTS OF DIFFERENT PERSONS INCLUDING SRI SUNIL KUMAR DOKANIA RECORDED BY THE INVESTIGATION WING OF KOLKATA WHO EXPLAINED THE MODUS OPERANDI OF PROVIDING ACCOMMODATION ENTRIES OF LTCG AND SHORT TERM CAPITAL LOSS (STCL). THESE PERSONS ALSO PROVIDED THE LISTS OF BENEFICIARIES TO WHO THEY PROVIDED ACCOMMODATION ENTRIES. THE ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 9 CONCLUDED AS UNDER: - (I) INDIVIDUALS WHO HAVE TAKEN BOGUS ENTRIES OF L TCG AMOUNTED TO SEVERAL CRORES FROM 2010 TO 2014. (II) THE RESULT OF ENQUIRY WAS ALSO SHARED WITH SEBI WHO AFTER INVESTIGATING CASES FOUND THE ALLEGATION TO BE CORRECT. THE BALANCE CASES ARE STILL 'UNDER INVESTIGATION BY SEBI. (III) ALMOST ALL THE 25 TOP GROUPS HAVE ACCEPTED HAVING TAKEN ENTRIES ON RECEIPT OF COMMISSION AND HAVE VOLUNTARILY SURRENDERED AND OFFERED FOR TAXATION. (IV) THE PARTICULAR SCRIPT LE. NCL RESEARCH AND FINANCIAL SERVICES LTD. FINDS MENTION IN THE LIST OF BOGUS LONG TERM / SHORT TERM CAPITAL LOSS AS PER INFORMATION AND DATA PROVIDED BY INCOME TAX INVESTIGATION WING, KOLKATA LD. A/R HAS SHOWN THAT THE LIST OF BENEFICIARIES PROVIDED BY THESE PERSONS ALSO DID NOT CONTAIN THE NAME OF ASSESSEE AND / OR THE NAME OF THE SHARE BROKER VIZ. ASHIKA STOCK BRAKING LTD. IT IS REITERATED THAT THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY AND ALSO THERE IS NO CORROBORATING EVIDENCE TO SUPPORT THE ALLEGATIONS OF THE AO. IT IS SUBMITTED THAT PARTIES WHOSE STATEMENTS WERE RECORDED BY THE INVESTIGATION WING OF THE KOLKATA, HAS NOT BEEN EXAMINED BY THE AO. FURTHER, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS-EXAMINE THEM. HENCE ADVERSE INFERENCE DRAWN IS NOT SUSTAINABLE. THE LD. AR SUBMITTED THAT THERE IS NO DIRECT EVIDENCE AGAINST THE ASSESSEE BROUGHT ON RECORD BY LD. A.O. TO HOLD THAT THE ASSESSEE INTRODUCED ITS OWN UNACCOUNTED MONEY BY WAY OF BOGUS LTCG. THE DIRECT EVIDENCE AS ALLEGED BY THE LD. AO TO BE THE SEBL'S ORDERS IS NO EVIDENCE AGAINST THE ASSESSEE FOR THE REASONS STATED EARLIER. THE LD. AR SUBMITTED THAT ALTHOUGH VARIOUS INVESTIGATIONS WERE CARRIED OUT BY DIFFERENT AGENCIES, THERE IS NO EVIDENCE AGAINST THE ASSESSEE TO HOLD THAT THE ASSESSEE WAS A BENEFICIARY TO THE MODUS OPERANDI ADOPTED BY DIFFERENT ENTITIES / BROKERS / ENTRY OPERATORS. THE LD. AR SUBMITTED THAT, IN VIEW OF THE AFORESAID JUDGEMENT OF SPECIAL BENCH OF HON'BLE MUMBAI TRIBUNAL, VARIOUS JUDGEMENTS RELIED ON BY THE LD. AO AGAINST THE ASSESSEE ARE IRRELEVANT IN AS MUCH AS THE SAID JUDGEMENTS ARE BASED ON CONCLUSIONS DRAWN ON THE BASIS OF CIRCUMSTANTIAL EVIDENCES ONLY WITHOUT ANY MATERIAL EVIDENCE ON RECORD. THE FACTS OF THE APPELLANT'S CASE AND THE ABOVE 'ME NTIONED CASE ARE IDENTICAL AND SIMILAR. HON'BLE KOLKATA IT AT HAS ALSO ADOPTED THE SAME VIE W IN THE FOLLOWING CASES WHICH ARE EQUALLY AND FORCEFULLY APPLICABLE TO THE APPELLANTS CASE. 1.) KIRAN KOTHARI (HUF) VS. ITO, WD-3S(3), KOLKATA, ITA NO. 443/KOV2017 DATED 15.11.2017 2.) SRI DOLARRAI HEMANI VS. ITO, WD-34(3), KOLKATA, ITA NO. 19/KOL/2014 DATED 02.12.2016 3.) GAUTAM KR. PINCHA VS. ITO, WD-34(4), KOLKATA, I TA NO. 569/KOL/2017 DATED 15.11.2017 4.) ITO, WD-32(3), KOTKATA VS. KUMARI TANVI KEJRIWA L, ITA NO. 1849/KOV2017 DATED 20.12.2017 ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 10 5) PRAKASH CHAND BHUTORIA VS. ITO, WD-3S(1), KOLKAT A, IT A NO. 2394/KOV2017 DATED 27.06.2018 NAVNEET AGARWAL LEGAL HEIR OF LATE KIRAN AGARWAL VS . ITO, WD-35(3), KOLKATA, ITA NO. 2281/KOV2017 DATED 20.07.2018 GROUND NO. 2 THIS GROUND REFERS TO ADDITION OF RS. 6,S3,260/~ FO R UNEXPLAINED EXPENDITURE WITHIN THE MEANING OF SECTION 69C OF INCOME TAX ACT, 1961. THE ADDITION IS NOT SUSTAINABLE IN LAW AS EXPLAINED BELOW: - 1. THE PROVISIONS OF SECTION 69C IS REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: - WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURR ED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT IN THE O PINION OF THE ASSESSING OFFICER SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSES SEE FOR SUCH FINANCIAL YEAR. 2. IT IS IMPLIED FROM THE LANGUAGE USED THAT ASSESS EE MUST HAVE INCURRED EXPENDITURE AND THE ASSESSEE HAS EITHER FAILED TO OFFER ANY EXP LANATION REGARDING SOURCE FROM WHICH EXPENDITURE WAS INCURRED OR SUCH EXPLANATION IS IN THE OPINION OF A.O. IS NOT SATISFACTORY. 3. THE OBSERVATIONS AND FINDINGS RECORDED AT PARA 5 OF ASSESSMENT ORDER DO NOT SUGGEST ANY CLUE THAT THE ASSESSEE HAD INCURRED EXP ENDITURE. THE OBSERVATIONS THAT VARIOUS BROKERS AND OPERATORS GIVING ENTRIES OF BOG US L TCG AS PER REPORT OF INVESTIGATION WING ADMITTED. THAT BENEFICIARIES HAV E TO PAY COMMISSION @ 2% OF TOTAL TRANSACTION CANNOT BE UTILISED IN ASSESSEE'S CASE S INCE THE NAME OF SHARE BROKER KOTAK SECURITIES LTD. IS NOT FOUND IN THE INVESTIGA TION REPORT. 4. MOREOVER, A.O.'S OBSERVATIONS DO NOT SUGGEST THA T THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN THE SOURCE OF INCURRING COMM ISSION EXPENSE. THEREFORE PROVISIONS OF SECTION 69C CANNOT HAVE APPLICATION. 5. WITHOUT PREJUDICE TO THE ABOVE, THIS GROUND MAY BE SAID AS INTERRELATED WITH GROUND NO. 1. IF GROUND NO. 1 IS DECIDED IN FAVOUR OF THE APPELLANT THERE ARISES NO QUESTION FOR SO-CALLED ADDITION AS PER GROUND NO. 2 . GROUND NO. 3 THIS GROUND HAS BEEN PREFERRED AGAINST ESTIMATED DI SALLOWANCE OF RS. 5,00,000/- OUT OF TRIP EXPENSES AND REPAIR / MAINTENANCE. 1. IT APPEARS FROM A.O.'S OBSERVATIONS AT PARA 3 OF ORDER THAT HE IS FULLY AWARE OF THE BUSINESS ACTIVITIES AND MODE OF OPERATION. 2. IT FURTHER APPEARS FROM OBSERVATIONS AT PARA 6 T HAT DOCUMENTS IN SUPPORT CLAIM FOR TRIP EXPENSES AS WELL AS REPAIR / MAINTENANCE WERE FURNISHED AND DULY EXAMINED. 3. IT IS ALSO AN ADMITTED FACT THAT A.O. EXAMINED B ILLS & VOUCHERS IN SUPPORT OF SUCH EXPENSES ON A TEST CHECK BASIS AND NO IRREGULARITIE S WERE FOUND. 4. INSPITE OF ABOVE ADMITTED FACT LD. A.O. HAS MADE A DISALLOWANCE OF RS. 5,00,000/- ON THE GROUND THAT THERE IS A CHANCE OF LEAKAGE OF REVENUE. THE DISALLOWANCE HAS BEEN MADE TO PLUG POSSIBLE REVENUE LOSS WHICH IS NO T PERMITTED IN LAW. SUCH ACTION MAY BE CONSIDERED AS ARBITRARY AND ERRONEOUS. 5. OBSERVATION AND DECISION: GROUND OF APPEAL NO. 1 & 2.:- THE A.O. HAS PASSED A DETAILED ORDER AND TO AVOID R EPETITION THE FINDINGS OF THE AO ARE NOT REPRODUCED. AO HAS DISCUSSED IN DETAILS THA T THE ENTIRE PROCESS HAS BEEN ADOPTED TO GET THE ACCOMMODATION ENTRY BY THE ASSES SEE. IT WOULD BE RELEVANT TO REFER TO THE FOLLOWING CASE LAWS:- CASH CREDIT (SEC.68) (I) KALE KHAN MOHAMMAD HAMIF VS. CIT 50 ITR 1 (SC) :- 'WHETHER THE BURDEN OF PROVING THE SOURCE OF THE CA SH CREDITS IS ON THE ASSESSEE?' IT SEEMS TO US THAT THE ANSWER TO THIS QUESTION MUS T BE IN THE AFFIRMATIVE AND THAT IS HOW IT WAS ANSWERED BY THE HIGH COURT. IT IS WELL E STABLISHED THAT THE ONUS OF PROVING ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 11 THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN REC EIVED BY THE ASSESSEE IS ON HIM. IF HE DISPUTES LIABILITY FOR TAX IT IS FOR HIM TO SHOW EITHER THE RECEIPT WAS NOT INCOME OR THAT IF IT WAS, IT WAS EXEMPT FROM TAXATI ON UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF, THE ITO IS ENTITLED T O TREAT IT AS TAXABLE INCOME. (II) SUMATI DAYAL VS CIT 214 ITR 801 (SC) :- AS LAID DOWN BY THIS COURT, APPARENT MUST BE CONSID ERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPL YING THE TEST OF HUMAN PROBABILITIES. IN THIS CASE, IT IS OBSERVED THAT SUDDENLY WITHIN O NE YEAR THE PRICES OF THESE SHARES JUMPED. NO BUSINESS ACTIVITY AND PROFIT OF THE COMP ANY HAS BEEN REPORTED. NO REASON HAS BEEN ADDUCED TO EXPLAIN HOW THE COMPANY' S SHARE SUDDENLY ROSE TO THIS LEVEL. MERELY TRANSACTING THROUGH BANKING CHANNEL WILL NOT MAKE THE APPELLANT ENTITLED FOR EXEMPTION U/S. 10(38). THE APPELLANT ENTERED INTO A N ADVENTURE IN THE NATURE OF TRADE AND THEREFORE THE INCOME IS TAXABLE AS BUSINESS PRO FIT AND NOT AS LTCG. RELIANCE IS PLACED ON THE ORDER OF THE JUDGMENT OF HON'BLE ITAT IN THE CASE OF SANJAY BIMALCHAND JAIN LIH SHANTIDEVI BIMALCHAND JAIN INCO ME TAX APPELLATE TRIBUNAL NAGPUR BENCH NAGPUR ITA NO. 61/NAG/2013. 'THE FACTS OF THE CASE CLEARLY INDICATE THAT THE AS SESSEE HAS INDULGED IN PENNY STOCK TRANSACTION. THE ASSESSEE IS A SENIOR C ITIZEN. ON PURPORTED ADVICE OF AN INCOME TAX CONSULTANT, SHE PURCHASED S HARES OF TWO PENNY STOCK CALCUTTA BASED COMPANIES AT RS. 5.50 PER SHAR E AND RS.4/- PER SHARE RESPECTIVELY IN (J()3. BOTH THE COMPANIES HAD NO ST ANDING AND THE AO FOUND THEIR EXISTENCE OF DUBIOUS CHARACTERS. BOTH PURPORT EDLY MERGED WITH OTHER COMPANY, NAMELY, KHOOBSURAT LTD. AND THE ASSESSEE R ECEIVED SHARES IN KHOOBSURAT LTD. IN LIEU OF HER SHARES IN EARLIER CO MPANIES. THE ASSESSEE WAS ABLE TO SELL THE SHARES AT THE PRICE OF RS.486.55 A ND RS.485.65 RESPECTIVELY IN 2005. THE PURCHASE BY THE ASSESSEE OF SHARES OF TWO UNKNOWN COMPANIES WHOSE DETAILS WERE NOT AT ALL KNOWN BY THE ASSESSEE CAN BY NO STRETCH OF IMAGINATION BE SAID TO BE AN INVESTMENT TRANSACTION . THE COMPANY WHOSE SHARES ROSE FROM RS. 5/- TO RS.485/- WITHIN SHORT S PAN HAS NO WORTHWHILE POSITION AND BALANCE SHEET AND IS NOT AT ALL DIVIDE ND PAYING COMPANY. THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD D ID NOT RESPOND TO AO'S LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACC OUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASSESSEES. IN THES E CIRCUMSTANCES IT IS A CLEAR CASE WHERE THE ASSESSEE HAD INDULGED IN BOGUS AND DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE BOGUS AND UNDI SCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. ' IN THIS REGARD I MAY GAINFULLY REFER TO THE DECISIO N OF HON 'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAJOR METALS LTD. VS UNION OF INDIA AND OTHERS IN W.P. NO.397 OF 2011 VIDE ORDER DATED 22.02.2012 WHERE IT WAS HELD THAT A COMPANY CANNOT COMMAND DISPROPORTIONATE AND HUGE SHARE PREMIUM AND SUCH RE CEIPT OF BOGUS SHARE APPLICATION MONEY EVEN THOUGH THROUGH BANKING CHANN EL CAN BE HELD TO BE ASSESSEE'S UNDISCLOSED INCOME RECEIVED IN THE GARB OF UNJUSTIFIED SHARE APPLICATION MONEY. IN THE PRESENT CASE I FIND THAT THERE IS NO JUSTIFICATION WHATSOEVER THAT THE SHARES OF AN UNKNOWN COMPANY OF RS. 51- CAN BE SOLD WITHIN TWO YEARS TIME OF RS.485/- WITHOUT THERE BEING ANY REASON ON RECORD. THIS UNEXPLAINED SPURT IN THE VALUE OF UNKNOWN COMPANY SHARES IS BEYOND PREPONDER ANCE OF PROBABILITY. IT HAS BEEN HELD BY HON'BLE APEX COURT IN THE CASE OF DURG A PRASAD MORE AND SUMATI DAYAL THAT THE TEST OF HUMAN PROBABILITIES HAVE ALS O TO BE APPLIED BY THE AUTHORITIES BELOW. IN THE CASE OF SUMATI DAYAL 214 ITR 801. IT WAS HELD THAT DURING THE YEAR ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 12 1970-71 (PERTAINING TO THE ASSESSMENT YEAR 1971-72) BETWEEN APRIL 6, 1970, AND MARCH 20, 1971 THE APPELLANT CLAIMS TO HAVE WON IN HORSE RACE A TOTAL AMOUNT OF RS.3, 11, 831/- ON 13 OCCASIONS OUT OF WHICH TEN WI NNINGS WERE FROM JACKPOTS AND THREE WERE FROM TREBLE EVENTS. SIMILARLY IN THE YEA R 1971-72, THE APPELLANT WON RACES ON TWO OCCASIONS AND BOTH TIMES THE WINNING WERE FR OM A JACKPOT. THESE RECEIPTS WERE TESTED ON THE TOUCH STONE OF HUMAN PROBABILITY AND IT WAS FOUND THAT APPARENT WAS NOT REAL. THAT IT WAS CONTRARY TO STATISTICAL T HEORY AND EXPERIENCE OF THE FREQUENCIES AND PROBABILITIES. THE EXCEPTIONAL LUCK ENJOYED BY THE ASSESSEE WAS HELD TO BE BEYOND PREPONDERANCE OF PROBABILITY. HEN CE THE HON'BLE APEX COURT HAS AFFIRMED THE VIEW THAT IT WOULD NOT BE UNREASONABLE TO INFER THAT THE APPELLANT .HAD NOT REALLY PARTICIPATED IN ANY OF THE RACES EXCEPT TO T HE EXTENT OF PURCHASING THE WINNING TICKETS AFTER THE EVENTS PRESUMABLY WITH UNACCOUNTE D FUNDS. WHEN THE PRESENT CASE IS EXAMINED ON THE TOUCH STON E OF ABOVE CASE LAW, IT IS CLEAR THAT THESE TRANSACTIONS OF THE ASSESSEE CAN BY NO S TRETCH OF IMAGINATION BE CONSIDERED AS INVESTMENT TRANSACTIONS. THEY ARE ONL Y MAKE BELIEVE TRANSACTION. HENCE I DO NOT FIND ANY INFIRMITY IN THE REVENUE TA XING THE RECEIPT IN THIS REGARD. THE ENTIRE AMOUNT OF THE SO CALLED RECEIPT OF SHARE SALES COULD WELL ALSO BE TREATED AS UNEXPLAINED CREDIT U/S. 68 OF THE I. T. ACT AS I T HAS ALL THE INGREDIENTS OF ATRACTING THE RIGOURS OF THE SAID SECTION. SECTION 68 OF THE I.T. ACT PROVIDES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAIN TAINED FOR ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THERE OF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE AD SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF THAT YEAR. IN THE PRESENT CASE THE ASSESSEE'S EXPLANATION THAT THE SA ID RECEIPT IS ON ACCOUNT OF INVESTMENT IN SHARES WHEREBY SHARE OF RS. 5/- OF UN KNOWN COMPANY HAS JUMPED TO RS. 485/- IN NO TIME HAS BEEN TOTALLY REJECTED BY T HE AUTHORITIES BELOW. THE ASSESSEE HAS NOT AT ALL BEEN ABLE TO ADDUCE COGENT EVIDENCES IN THIS REGARD. THERE IS NO ECONOMIC OR FINANCIAL JUSTIFICATION FOR THE SALE PR ICE OF THESE SHARES. THE SO CALLED PURCHASER OF THESE SHARES HAS NOT BEEN IDENTIFIED D ESPITE EFFORTS OF THE AO. THE BROKER COMPANY THROUGH WHICH SHARES WERE SOLD DID N OT RESPOND TO QUERIES IN THIS REGARD. HENCE THE FANTASTIC SALE PRICE REALIZATION IS NOT AT ALL HUMANLY PROBABLY AS THERE IS NO ECONOMIC OR FINANCIAL BASIS, THAT A SHA RE OF LITTLE KNOWN COMPANY WOULD JUMP FROM RS. 5/- TO 485/-, IN THESE CIRCUMSTANCES, I DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW ACCORDINGLY I AFFIR M THE SAME AND DECIDE THE ISSUE AGAINST THE ASSESSEE. THE ABOVE JUDGMENT OF THE HONBLE ITAT SQUARELY COVE RS THE CASE OF THE APPELLANT THE HON'BLE HIGH COURT OF MUMBAI IN THE ABOVE CASE INCOME TAX APPEAL NO. 18/2017 IN THE CASE OF SANJAY BLMALCHAND JAIN L/H S HANTI DEVI BIMALCHAND JOIN VS THE PR. CIT NAGPUR & ANOTHER HAS HELD AS UNDER;- BY REFERRING TO THE AFORESAID FACTS, WHICH ARE NARR ATED IN THE EARLIER PART OF THIS ORDER, THE AUTHORITIES FOUND THAT THE ASSESSEE HAD MADE INVESTMENT IN TWO UNKNOWN COMPANIES OF WHICH THE DETAILS WERE NOT KNO WN TO HER. IT WAS HELD THAT THE TRANSACTION OF SALE AND PURCHASE OF SHARES OF TWO PENNY STOCK COMPANIES, THE MERGER OF THE TWO COMPANIES WITH ANO THER COMPANY VIZ KHOOBSURAT LIMITED DID NOT QUALIFY AN INVESTMENT AN D RATHER IT WAS AN INVESTMENT MADE BY THE ASSESSEE WAS NOT TO DERIVE I NCOME BUT TO EARN PROFIT. BOTH THE BROKERS I.E. THE BROKER THROUGH WHOM THE A SSESSEE PURCHASED THE SHARES AND THE BROKER THROUGH WHOM THE SHARES WERE SOLD WERE LOCATED AT KO. D THE ASSESSEE DID NOT HAVE AN INKLING AS TO WH AT WAS GOING ON IN THE WHOLE TRANSACTION EXCEPT PAYING A SUM OF RS.65,000/ - IN CASH FOR THE PURCHASE OF SHARES OF THE TWO PENNY STOCK COMPANIES . THE AUTHORITIES FOUND THAT THOUGH THE SHARES WERE PURCHASED BY THE ASSESS EE AT RS. 5,50 PS. PER ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 13 SHARE AND RS. 4/- PER SHARE FROM THE TWO COMPANIES IN THE YEAR 2003, THE ASSESSEE WAS ABLE TO SELL THE SHARES JUST WITHIN A YEARS TIME AT RS.486.55 PS AND RS. 485.65 PS PER SHARE. THE BROKER THROUGH WHO M THE SHARES WERE SOLD BY THE ASSESSEE DID NOT RESPOND TO THE ASSESSING OF FICER'S LETTER SEEKING THE NAMES, ADDRESSES AND THE BANK ACCOUNTS OF THE PERSO NS THAT HAD PURCHASED THE SHARES SOLD BY THE ASSESSEE. THE AUTHORITIES HA VE RECORDED A CLEAR FINDING OF FACT THAT THE ASSESSEE HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. WHILE SO OBSERVING, THE AUTHORITIES HELD THAT THE ASSESSEE HAD NOT TENDERED COGENT EVIDENCE TO EXPLAIN AS TO HOW THE S HARES IN AN UNKNOWN COMPANY WORTH RS. 5/- HAD JUMPED TO RS. 485/- IN NO TIME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE FANTASTIC SALE PRI CE WAS NOT AT ALL POSSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS AS TO HOW A SHARE WORTH RS. 5/- OF A LITTLE KNOWN COMPANY WOULD JUMP FROM RS. 5/- TO 485 . THE FINDINGS RECORDED BY THE AUTHORITIES ARE PURE FINDINGS OF FACTS BASED ON A PROPER APPRECIATION OF THE MATERIAL ON RECORD. WHILE RECORDING THE SAID FI NDINGS. THE AUTHORITIES HAVE FOLLOWED THE TESTS LAID DOWN BY THE HON'BLE SUPREME COURT AND THIS COURT IN SEVERAL DECISIONS. THE FINDINGS DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THE JUDGMENTS REPORTED IN (2012) 20 TAXMAN.COM 259 (BOMBAY)(CIT VERSUS JAMNADEVI AGARWAL), (1957) 31 ITR 294(BOMBAY ) (URANMAL RADHAKRISHAN VERSUS CIT), (1970)77ITR 253 (SC)(RAJA BAHADUR VERSUS CIT AND (2015) 235 TAXMAN 1 (BOM) (CIT VERSUS SMT DATTA M. SHAH) AND RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DIST INGUISHABLE ON FACTS AND CANNOT BE APPLIED TO THE CASE IN HAND. SINCE NO SUB STANTIAL QUESTION OF LAW ARISES IN THIS APPEAL, THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS, THE ORD ER OF THE A.O. MAKING AN ADDITION OF RS. 3,26,63,032/- IS CONFIRMED AND THE ADDITION OF RS.6,53,2601- AS COMMISSION PAID TO SHARE BROKER IS ALSO CONFIRMED. AS RESULT, THE GROUNDS OF APPEAL NO. 1 & 2 ARE DISMISSED. 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. RELEVANT PAPER BOOK COMPRISING OF ASSESSEES ALLOTM ENT ADVICE ALONGWITH SHARE APPLICATION FROM IN M/S NCL RESEARCH & FINANC IAL SERVICES, COPY OF LEDGER ACCOUNTS OF M/S KOTAK SECURITIES LTD. IN ITS BOOKS, RECONCILIATION OF SALE VALUE AS PER BROKER CONTRACT NOTES, DEMAT ACCOUNT S TATEMENT, LTCG DETAILS & BANK STATEMENT STANDS PERUSED. THE ASSESSEE VEHEMEN TLY CONTENDS DURING THE COURSE OF HEARING THAT HE HAD SUCCESSFULLY PROV ED BOTH BEFORE THE ASSESSING OFFICER AS WELL AS CIT(A) TO HAVE IN FACT ACTUALLY DERIVED LTCG FROM SALE OF SHARES HELD IN M/S NCL RESEARCH & FINANCIAL SERVICES. THE REVENUES CASE ON THE OTHER HAND IS THAT BOTH THE L OWER AUTHORITIES HAVE RIGHTLY TREATED ASSESSEES CAPITAL GAINS A INCOME F ROM UNDISCLOSED SOURCES AFTER EXAMINING ALL RELEVANT PARTICULARS OF THE SCR IP IN ISSUE AS WELL ARTIFICIAL RIGGING IN ITS PRICES THROUGHOUT THE RELEVANT HOLDI NG PERIOD. IT STRONGLY ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 14 EMPHASISES THAT ASSESSEE HAD DECLARED IMPUGNED LTCG IN COLLUSION WITH VARIOUS ENTRY OPERATORS ENGAGED IN RAISING PRICES O F THE RELEVANT SCRIPS PRICES. ITS CASE THEREFORE IS THAT THE IMPUGNED EXORBITANT PRICE-RISE OF THE ABOVE SCRIP IS A STAGE MANAGED SHOW NOT LIABLE TO BE ACCEPTED A S GENUINE AS PER HON'BLE APEX COURTS DECISIONS IN SUMATI DAYAL VS. CIT (199 5) 80TAXMANN 89 / 214 ITR 801(SC) AND CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC). WE FIND NO MERIT IN REVENUES ABOVE ARGUMENTS. THE FACT REM AINS THAT THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THROUGHOUT WITH THE H ELP OF EVIDENCE ON RECORD TO HAVE MADE THE IMPUGNED SALE PURCHASE TRANSACTION S IN THE RELEVANT SCRIP FOR PRESCRIBED MODE AS PER ITS VOLUMINOUS DOCUMENTA RY EVIDENCE (SUPRA). THE REVENUE FAILS TO PIN POINT EVEN A SINGLE MATERIAL D URING THE COURSE OF HEARING INDICATING ANY OF THE ALLEGED ENTRY OPERATOR TAKING THE ASSESSEES NAME FOR PROVIDING ACCOMMODATION ENTRY ITS BY WAY OF THE LON G TERMS CAPITAL GAINS. WE NOTICE IN THIS BACKDROP OF THE FACT THAT THIS TRIBU NALS CO-ORDINATE BENCHS DECISION IN ITO VS. SHRI SURERSH CHAND GUPTA ITA N O.1730/KOL/2017 DECIDED ON 26.122018 HAS REVERSED THE IDENTICAL ADDITION OF LTCG TREATED AS UNEXPLAINED CASH CREDITS FOR LACK OF EVIDENCE AS FO LLOWS:- 3. LEARNED CIT-DR VEHEMENTLY CONTENDS DURING THE CO URSE OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY ADDED ASSESSEES ALLE GED LTCG TO BE BOGUS IN NATURE AFTER REJECTING GENUINENESS / CREDITWORTHINESS OF I TS EXPLANATION. HE QUOTES HON'BLE APEX COURTS LANDMARK DECISIONS IN SUMATI DAYAL VS. CIT (1995) 80 TAXMANN 89/214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) THAT ANY EXPLANATION SUBMITTED IN INCOME TAX PROCEEDINGS HAS TO BE APPRECIATED IN THE LIGHT OF HUMAN PROBABILITIES THAN ON MECHANICAL ASPECTS. HIS FURTHER CASE IS THAT ASSESSEE HAS AVAILED ENTRIES FROM ENTRY OPERATORS REGARDING THE IMPUGNED LTCG. THESE ENTRY OPERATORS ARE STATED TO HAVE DEPOSED IN THEIR SEARC H STATEMENTS THAT THEY HAD RIGGED PRICES OF M/S NCL RESEARCH AND FINANCIAL SERVICES L TD. FOLLOWED BY IMPUGNED ENTRIES ON SALE OF SHARES THEREIN. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENTS. THIS TRIBUNALS DECISION IN ITA NO.1551/KOL/2018 IN D.D. AGARWAL (HUF) VS. ITO DECIDED ON 16.11.2018 HAS ALREADY DECLINED THE REVE NUES SIMILAR ARGUMENTS QUA THE VERY SCRIP QUOTING A CATENA OF CASE LAW AS FOLL OWS:- 2. THE SOLE ISSUE THAT ARISES FOR MY ADJUDICATION IS WHETHER THE ASSESSING OFFICER WAS RIGHT IN REJECTING THE CLAIM OF THE ASS ESSEE THAT HE HAD EARNED LONG TERM CAPITAL GAINS ON PURCHASE AND SALE OF THE SHARES OF M/S NCL RESEARCH & FINANCIAL SERVICES LTD. THE AO BASED ON A GENERAL REPORT AND MODUS OPERANDI ADOPTED GENERALLY IN THESE CASES AND ON GENERAL OBSERVATIONS HAS CONCLUDED THAT THE ASSESSEE HAS CL AIMED BOGUS LONG TERM CAPITAL GAIN. HE MADE AN ADDITION OF THE ENTIRE SAL E PROCEEDS OF THE SHARE AS INCOME AND REJECTED THE CLAIM OF EXEMPTION MADE U/S 10(38) OF THE ACT. THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE TRANSACTION WAS REJECTED. ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 15 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL AND TH E LD. CIT(A), KOLKATA, HAD UPHELD THE ADDITION. THE LD. CIT(A) HAS IN HIS ORDER RELIE D UPON CIRCUMSTANTIAL EVIDENCE AND HUMAN PROBABILITIES TO UPHOLD THE FINDINGS OF THE AO. HE ALSO RELIED ON THE SO CALLED RULES OF SUSPICIOUS TRANSACTION. NO DIRECT MATERIAL WAS FOUND TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE, IN SUPPORT OF THE G ENUINENESS OF THE TRANSACTIONS. IN OTHER WORDS, THE OVERWHELMING EVIDENCE FILED BY THE ASSESSEE REMAINS UNCHALLENGED AND UNCONTROVERTED. THE ENTIRE CONCLUSIONS DRAWN BY THE REVENUE AUTHORITIES, ASSESSEE BASED ON A COMMON REPORT OF THE DIRECTOR O F INVESTIGATION, KOLKATA, WHICH WAS GENERAL IN NATURE AND NOT SPECIFIC TO ANY ASSES SEE. THE ASSESSEE WAS NOT CONFRONTED WITH ANY STATEMENT OR MATERIAL ALLEGED T O BE THE BASIS OF THE REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT AND WHICH WERE THE BASIS ON WHICH CONCLUSION WERE DRAWN AGAINST THE ASSESSEE. COPY OF THE REPORT WAS ALSO NOT GIVEN. 4. UNDER THE CIRCUMSTANCES, IN A NUMBER OF CASES TH IS BENCH OF THE TRIBUNAL HAS CONSISTENTLY HELD THAT DECISION IN ALL SUCH CASES S HOULD BE BASED ON EVIDENCE AND NOT ON GENERALISATION, HUMAN PROBABILITIES, SUSPICI ON, CONJECTURES AND SURMISES. WE HAVE IN ALL CASES DELETED SUCH ADDITIONS. SOME OF T HE CASES WERE DETAILED FINDING HAVE BEEN GIVEN ON THIS ISSUE ARE LISTED BELOW:- SL.NO ITA NO.S NAME OF THE ASSESSEE DATE OF ORDER / JUDGMENT 1 1236-1237/K/17 ITAT-KOLKATA MANISH KUMAR BAID & OTHERS VS ACIT 18.08.2017 2 443/KOL/2017 KIRAN KOTHARI (HUF) VS.ITO 15.11.201 7 3 22 OF 2009 CALCUTTA HIGH COURT CIT, KOLKATA-III VS. BHAGWATI PRASAD AGARWAL 29.04.2009 4 456 OF 2007 BOMBAY HIGH COURT CIT VS SHRI MUKHESH RATILAL MAROLIA 07.09.2011 5 18 OF 2017 PUNJAB AND HARYANA HIGH COURT PR. CIT(CENTRAL) LUDHIANA VS SH. HITESH GANDHI 16.02.2017 6 95 OF 2017 PUNJAB AND HARYANA HIGH COURT PR. CIT VS. PREM PAL GANDHI 18.01.2018 7 2281/KOL/2017 ITAT-KOLKATA NAVNEET AGARWAL, LEGAL HEIR OF LATE KIRAN AGARWALA VS ITO, WARD-35(3), CALCUTTA 20.07.2018 5. WE ARE BOUND BY THE PROPOSITION OF LAW LAID DOWN IN THESE CASE LAW BY THE JURISDICTIONAL HIGH COURT AS WELL AS BY THE ITAT KO LKATA. THEY ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE LD. DEPARTMENTAL REPR ESENTATIVE, THOUGH NOT LEAVING HIS GROUND, COULD NOT CONTROVERT THE CLAIM OF THE LD. C OUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DEC ISIONS OF THE HON'BLE HIGH COURTS AND THE ITAT. THIS TRIBUNALS YET ANOTHER DECISION IN ITA NO.838/ KOL/2017 SMT. NALINI BOTHRA VS. ITO DECIDED ON 16.11.2018 QUA THE VERY SCRIP READS AS FOLLOWS:- 5. WE ARE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIV AL CONTENTION. WE FIRST OF ALL FIND THAT THIS TRIBUNALS CO-ORDINATE BENCHS ORDER IN NEERAJ GUPT A VS. ITO IN ITA NO.863/KOL/2018 REJECTS REVENUES IDENTICAL ARGUMENTS REGARDING THE SAID AS SESSEES LTCG DERIVED FROM SALE OF SHARES HELD IN M/S NCL RESEARCH FINANCE SERVICES LT D. AS FOLLOWS:- 2. THE SOLE ISSUE THAT ARISES FOR MY ADJUDICATION IS WHETHER THE ASSESSING OFFICER WAS RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE TH AT HE HAD EARNED LONG TERM CAPITAL GAINS ON PURCHASE AND SALE OF THE SHARES OF M/S UNN O INDUSTRIES LIMITED AND M/S ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 16 NCL RESEARCH & FINANCIAL SERVICES LTD. THE AO BASED ON A GENERAL REPORT AND MODUS OPERANDI ADOPTED GENERALLY IN THESE CASES AND ON GENERAL OBSERVATIONS HAS CONCLUDED THAT THE ASSESSEE HAS CLAIMED BOGUS LONG TERM CAPITAL GAIN. HE MADE AN ADDITION OF THE ENTIRE SALE PROCEEDS OF THE SHARES AS INCOME AND REJECTED THE CLAIM OF EXEMPTION MADE U/S 10(38) OF THE ACT. THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS WAS REJECTED. 3.THE ASSESSEE CARRIED THE MATTER IN APPEAL AND THE LD. CIT(A), HAD UPHELD THE ADDITION. THE LD. CIT(A) HAS IN HIS ORDER RELIED UPON CIRCUMSTANTIAL EVIDENCE AND HUMAN PROBABILITIES TO UPHOLD THE FINDINGS OF THE AO. HE ALSO RELIED ON THE SO CALLED RULES OF SUSPICIOUS TRANSACTION . NO DIRECT MATERIAL WAS FOUND TO CONTROVERT THE E VIDENCE FILED BY THE ASSESSEE, IN SUPPORT OF THE GENUINENESS OF THE TRAN SACTIONS. IN OTHER WORDS, THE OVERWHELMING EVIDENCE FILED BY THE ASSESSEE REMAINS UNCHALLENGED AND UNCONTROVERTED. THE ENTRE CONCLUSIONS DRAWN BY THE REVENUE AUTHORITIES, ARE B ASED ON A COMMON REPORT OF THE DIRECTOR O INVESTIGATION, KOLKATA, WHICH WAS GENERAL IN NATU RE AND NOT SPECIFIC TO ANY ASSESSEE. THE ASSESSEE WAS NOT CONFRONTED WITH ANY STATEMENT OR M ATERIAL ALLEGED TO BE THE BASIS OF THE REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT AND WHICH WERE THE BASIS ON WHICH CONCLUSION WERE DRAWN AGAINST THE ASSESSEE. COPY OF THE REPORT WAS ALSO NOT GIVEN. 4. UNDER THE CIRCUMSTANCES, IN A NUMBER OF CASES TH IS BENCH OF THE TRIBUNAL HAS CONSISTENTLY HELD THAT DECISION IN ALL SUCH CASES SHOULD BE BASE D ON EVIDENCE AND NOT ON GENERALISATON, HUMAN PROBABILITIES, SUSPICION, CONJECTURES AN SURM ISES. WE HAVE IN ALL CASES DELETED SUCH ADDITIONS. SOME OF THE CASES WERE DETAILED FINDING WHICH ARE LISTED BELOW:- SL. NO. ITA NOS. NAME OF THE ASSESSEE DATE OF ORDER / JUDGMENT 1. 1236-1237/K/17 MANISH KUMAR BAID & OTHERS VS. ACIT 18.08.2017 2. ITA KOLKATA 2443/KOL/2017 KIRAN KOTHARI (HUF) VS. ITO 15.11.2017 3. 22 OF 2009 CIT, KOLKATA-III VS BHAGWATI PRASAD AGAR WAL 29.04.2009 CALCUTTA HIGH COURT 4. 456 OF 2007 CIT VS. SHRI MUKESH RATILAL MAROLIA 07. 09.2011 BOMBAY HIGH COURT 5. 18 OF 2017 PUNJAB PR. CIT (CENTRAL) LUDHIANA VS SH. HITESH 16.02.2017 AND HARYANA HIGH GANDHI, COURT 6. 95 OF 2017 PR. CIT VS. PREM PAL GANDHI 18.01.2018 P UNJAB AND HARYANA HIGH COURT 7. 2281/KOL/2017 NAVNEET AGARWAL, LEGAL HEIR OF LATE K IRAN 20.07.2018 ITAT KOLKATA AGARWAL VS ITO, WARD-35(3), CALCUTTA ITA NO. 863/KO L/2018 ASSESSMENT YEAR: 2014-15 NEERJ GUPTA. 5. I AM BOUND BY THE PROPOSITION OF LAW LAID DOWN I N THESE CASE LAW. THEY ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE LD. DEPART MENTAL REPRESENTATIVE, THOUGH NOT LEAVING HIS GROUND, COULD NOT CONTROVERT THE CLAIM OF THE L D. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DECISIONS OF THE HON'BLE HIGH COURTS AND THE ITAT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE FILED DETAIL ED WRITTEN SUBMISSIONS AND RELIED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F SECURITIES AND EXCHANGE BOARD OF INDIA VS RAKHI TRADING PRIVATE LTD IN CIVIL APPEAL NO.1969 OF 2011 WITH CIVIL APPEAL NOS. 3174-3177 OF 2001 AND CIVIL APPEAL NO.3180 OF 2011. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THERE IS NO SURVIVING ORDER OF SEBI AG AINST THE ASSESSEE OR THE COMPANY, THE SCRIPT OF WHICH WAS PURCHASED AND SOLD BY THE ASSES SEE. WHEN THERE IS NO SURVIVING ADVERSE ORDER OF SEBI, AGAINST THE CLAIM OF THE ASSESSEE, T HE JUDGMENT OF THE HON'BLE SUPREME COURT CANNOT BE APPLIED TO THE FACTS OF THIS CASE. 7. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION IN QUESTION IS DELETED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. IT ALSO EMERGES THAT THIS TRIBUNALS YET ANOTHER CO -ORDINATE BENCHS DECISION IN NAVNEET AGARWAL VS. ITO IN ITA NO.2281/KOL/2017 DECIDED ON 20.07.2018 HAS REJECTED REVENUES SIMILAR ARGUMENTS GOING BY SUSPICIOUS CIRCUMSTANCES THAN BASED ON EVIDENCE AS FOLLOWS:- 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETH ER, IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 17 GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILI TIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DURING INVESTIGATIONS, SHOULD GU IDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETHER THE CLAIM IN GENUINE OR NO T. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISH ED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESTION WAS PAR T OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEES ACTION GIVING H ER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION TH AT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENC E GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORD ED ETC. HAS TO ALSO BE BROUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEMENT, EVIDENC E ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESSEE, IF THE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN ADDITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CL AIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EV IDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF TH E ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASE D ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE PROCESS AND T HAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EVIDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS TH E REPORT OF INVESTIGATION WING SUGGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. E ACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE C OURTS OF LAW. 15.IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALISA TION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VALIDITY AND CO RRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESS EE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 ITR 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSP ICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATMULL REPO RTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSAC TION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RA ISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTION WE REFER TO THE GENERAL VIEW ON THE TOPIC OF CONVEYANCE OF IMMOVAB LE PROPERTIES. THE RATES/SALE PRICE ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTR ATION AUTHORITIES OF THE GOVERNMENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. THE COURTS HAVE LAID DOWN THAT JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS C ANNOT BE TAKEN BASED ON GENERALISATIONS. COURTS OF LAW ARE BOUND TO GO BY EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER, ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 18 WE DO NOT FIND THAT THE ASSESSING OFFICER AS WELL A S THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSES SEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GEN ERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASS ESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPARTMENT WHI CH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVE STIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIG ATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER SHOULD B E SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AG AINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESS ING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTI GATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRI PT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND T O MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVI DENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWE VER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT TH E TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COU LD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD G RAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND T HE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMOD ITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN IND ULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEH ALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF T HE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERA BLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,--- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE P ART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEA R UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDUL GED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSI DERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-T AX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HA VE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARR IVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS OF THE APPELLANT I N ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOU NDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE P ROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS EITHER PERVERSE OR VITI ATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY P ERVERSE OR VITIATED IF THE TRIBUNAL ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 19 TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT A NY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION T HAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTO RILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATIO N NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUA LLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A COLLUSIVE TRA NSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, IN TH IS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERI AL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE INCOME T AX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAIN ST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART OF THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHANNOORKHAN PATHAN VS. THE STATE OF MAHAR ASHTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P .V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC1623, HELD THAT THE RULES O F NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL R ELEVANT EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOS ITE PARTY SHOULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNI TY OF CROSS-EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS- EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEAE STATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORAMCOTTON MILLS LTD. V. GANGADHAR AND ORS. ,AIR 1964 SC708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS. AIR 2009 SC 2448;BIECCO LAWRIE AND ANR. V. STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V.SAROJ KUMAR SINHA AIR 2010 SC 3131). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRA L EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER THE CENTRAL EXCISE ACT, 1944,CONSIDERED A SIMILAR ISSUE I.E. PERMISSION WITH RESPECT TO THE C ROSS-EXAMINATION OF A WITNESS. IN THE SAID CASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO B E ALLOWED TO CROSS-EXAMINE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS-EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGH T TO BE HEARD I.E. AUDI ALTERAMPARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNI TY TO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS T HAT THE GOVERNMENT SERVANT IS AFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE GIVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE C AN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO S O BY CROSS-EXAMINING THE WITNESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPL YING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THE PRE VIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAI D STATEMENTS ARE PROVIDED TO THE GOVERNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS- EXAMINATION. ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 20 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2 009SC 1100, THIS COURT HELD: EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DONE AS REGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WE RE PROVED. THE PRINCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALS O THE PRINCIPLES OF NATURAL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMI NED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE N OT AVAILABLE FOR CROSS-EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNE D 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 PRINCIPL ES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS- EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE P RINCIPLES OF NATURAL JUSTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD T HAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INT EGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX., KOLKATA-II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K.RADHAKRISHNAN, LEARNED SENIOR C OUNSEL WHO APPEARED FOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THO SE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND T HAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAI D TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNI TY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AF ORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE T RIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TR IBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL T O HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEI R TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATIO N. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETH ER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS ME NTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFO RE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005[2005 (187) E.L. T. A33 (S.C.)] WAS PASSED ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 21 REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DI RECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTIN G THE SUBMISSIONS. 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPA RTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE A FORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTAHIGH COURT IN THE CASE OF BLB CABLES &CONDUCTORS[ITA NO. 78 OF2017] DATED19.06.2018. THE HIGH COURT HELD VID E PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECL ARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSAC TION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONF IRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION . THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HO LD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AU THORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEES APPEAL. [QUOTED VERBATIM] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FA CT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FINDING THAT OFF MA RKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS , THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXER CISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTA NTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, A CCORDINGLY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL[ITA NO.292/JP/2017]ORDER DATED 06.04.2018 HELD AS UNDER VIDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AO HAS ALSO F AILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAP E OF LONG TERM CAPITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PREMPAL GANDHI[ITA-95- 2017(O&M)] DATED18.01.2018 AT VIDE PAGE 3 PARA 4 HE LD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEE S INCOME FROM UNDISCLOSED SOURCES. IN ITA-18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHA TSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIA TION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYME NTS AND RECEIPTS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 22 CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NA TIONAL STOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH THE ASSESSING OFFIC ER RELIED UPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCE EDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND TH AT THERE WAS NO CO-RELATION BETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTR IES IN THOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO IN DICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARIS ES. D) THE BENCH DOF KOLKATAITAT IN THE CASE OF GAUTA M PINCHA[ITA NO.569/KOL/2017]ORDER DATED 15.11.2017 HELD AS UNDE R VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XI V) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THE REFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS SUPP ORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDE RS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGA TIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MU ST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNIS HED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SA LE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE C ASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEM PTED U/S 10(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE L AWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFORESAID FA CTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN U PHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KI RAN KOTHARI HUF [ITA NO. 443/KOL/2017] ORDER DATED 15.11.2017 HELD VIDE PAR A 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE M ATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANTED ALLEGA TIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS N O LEGS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CON TROVERT THE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE ASSESSE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIP ULATION OF SHARES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NO TE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NO TES, DEMAT STATEMENT AND BANK ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 23 ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTION S RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICT ITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EX EMPTED U/S 10(38) OF THE ACT ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO S UPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE A DDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH AOF KOLKATA ITAT IN THE CASE OF SHA LEEN KHEMANI[ITA NO.1945/KOL/2014]ORDER DATED 18.10.2017 HELD AS UND ER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVE RSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGAT IONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARG UMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROK ERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECOR D THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEM AT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATI NG TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOU ND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONA FIDE AND GENUINE AND THEREFORE THE LD AO WAS N OT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH HOF MUMBAIITAT IN THE CASE OF ARVIN DKUMAR JAINHUF[ITA NO.4682/MUM/2014]ORDER DATED 18.09.2017 HELD AS UND ER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGAT ION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH THE ACTIVITY OF T HE BROKER. DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSE E HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCER NED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVES TIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED W ITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BA SANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/ S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR ME RE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF TH E COORDINATE BENCH, WHEREIN ON ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 24 SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSE SSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CON TROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDING LY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VIVEK MEHTA [ITA NO. 894 OF2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 H ELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSE SSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) RECORDED A FIND ING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE AS SESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FI NDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBU NAL HAS AFFIRMED SUCH FINDING. SUCH FINDING OF FACT IS SOUGHT TO BE DISPUTED IN TH E PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAIS ED IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT I N THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION E NTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTE D BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPE AL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS . TEJU ROHIT KUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJRAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MA DE BY THE ASSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WER E MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRMED THE TRANSACTIONS . THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES O UT OF PURCHASES MADE FROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO Q UESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW AS LAID DOWN IN THE ABOVE-MENTIONED JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND REL Y ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OUR DECISION ON SU CH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BRO UGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAIM THAT THE INCOME IN QUESTION IS A BONA FIDE LONG TERM CAPITAL GAIN ARISING FROM THE SALE OF SHARES A ND HENCE EXEMPT FROM INCOME TAX. 21.UNDER THE CIRCUMSTANCES AND IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION IN QUESTION . 6. WE AFFORDED SUFFICIENT OPPORTUNITY TO THE REVENU E FOR INDICATING ANY MATERIAL ON RECORD INDICATING THE ASSESSEES NEXUS WITH THE ALLEGED SH ARE PRICE RIGGING OR HER NAME HAVING SPECIFICALLY MENTIONED IN ANY SEARCH STATEMENT. THE RE IS NO SUCH MATERIAL FORTHCOMING FROM THE CASE FILE. WE THEREFORE ADOPT THE ABOVE DETAILE D REASONING MUTATIS MUTANDIS TO DELETE THE IMPUGNED ADDITION OF UNEXPLAINED LTCG. ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 25 4. WE ADOPT THE ABOVE DETAILED REASONING MUTATIS MU TANDIS TO DELETE THE IMPUGNED ADDITION OF 3,26,63,032/- MADE IN ASSESSMENT ORDER AS AFFIRMED IN LOWER APPELLATE PROCEEDINGS. THE FORMER ASSESSEE SU CCEEDS IN APPEAL ITA NO.2275/KOL/2018. 5. COMING TO LATTER TWO APPEAL(S) FILED AT THE REVE NUES BEHEST (SUPRA), THERE IS NO DISPUTE THAT THE ASSESSING OFFICER HAD ADOPTE D IDENTICAL REASONING IN DISALLOWING THE LOSSES IN ISSUE TO THE TUNE OF 78,25,188/- AND 1,44,20,606/-; RESPECTIVELY AFTER ALLEGING HOLDING SAME TO BE BOGU S ENTRIES. THE CIT(A)S FINDINGS REVERSING THE SAID IDENTICAL ADDITION READ AS FOLLOWS: I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DURING THE ASSE SSMENT PROCEEDINGS. THE FACTS OF THE CASE ARE THAT THE AO IN TREATING THE SHARE TRAD ING LOSS OF SUM OF RS78,25,188/- AS BOGUS IN NATURE. THE APPELLANT IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF NON-BANKING FINANCIAL ACTIVITIES. THE APPELLANT FOR THE YEAR UNDER CONSIDERATION FILED ITS RETURN OF INCOME DECLARING INCOME OF RS 3 0,26,790/-. THE SAID INCOME WAS DECLARED AFTER CLAIMING LOSS ON PURCHASE AND SALE O F EQUITY SHARES OF RS 78,25,188/-. THE SAID LOSS WAS INCURRED FOR 17,000 EQUITY SHARES OF BLUE CIRCLE SERVICE LTD OF RS 9,60,171/- AND FOR 48,550 EQUITY SHARES OF TUNI TEX TILES LTD OF RS 68,65,017/-. THE AO IN THE ASSESSMENT ORDER ALLEGES THAT, HE HAS RECEIVED SOME INFORMATION FROM THE INVESTIGATION WING, KOLKATA ABOUT THE APPELLANT THAT IT HAS CLAIMED BOGUS/FICTITIOUS LOSS BY TRADING IN SCRIPTS NAMELY 'BLUE CIRCLE SERV ICES LTD' & 'TUNI TEXTILE LTD'. FINALLY, THE AO RELYING ENTIRELY UPON THE INFORMATION OF THE INVESTIGATION WING, KOLKATA HELD THAT LOSS INCURRED BY APPELLANT COMPANY BY TRADING IN SCRIPTS OF BLUE CIRCLE SERVICES LIMITED AMOUNTING TO RS9,60,171/- AND TUNI TEXTILE MILLS LTD AMOUNTING TO RS 68,65,017/- ARE FICTITIOUS LOSS. THE AR HAS SUBMITTED THAT DURING THE COURSE OF SCRU TINY ASSESSMENT PROCEEDINGS THE ASSESSEE'S LETTER DATED 15.03.2016 AND 18.03.2016 F ILED IN THE OFFICE OF AO AND THE SAID LETTERS INCLUDED COMPLETE DETAILS OF PURCHASE, SALE, PAYMENTS, MOVEMENT OF SHARES, CONTRACT NOTICES RECEIVED FROM RESPECTIVE S TOCK EXCHANGE LOSS/ GAINS ETC. IN RESPECT EACH AND EVERY SHARES WHICH WERE TRADED BY THE APPELLANT DURING THE RELEVANT YEAR, THE DOCUMENTS, EVIDENCES FILED BY TH E APPELLANT WERE NOT FOUND TO BE BOGUS OR FALSE, THERE WAS NO IRREGULARITY OR DISCRE PANCY POINTED OUT BY THE AO IN RESPECT OF DETAILS FILED BY THE APPELLANT DURING TH E RELEVANT CLAIM THAT THE SHARE LOSS IS A GENUINE LOSS. THE AR FURTHER HAS SUBMITTED THAT I N THE ASSESSMENT ORDER; BESIDES RELYING UPON THE GENERAL REPORT OF THE INVESTIGATIO N WING, KOLKATA. THE AO HAS NOT BROUGHT ON RECORD ANY COGENT, RELEVANT EVIDENCES AN D FACTS WHICH CAN PROVE THAT IN REALITY THERE WAS NO PURCHASE & SALE OF SHARES BY T HE APPELLANT OR THE LOSS INCURRED BY THE APPELLANT WAS A BOGUS LOSS, THE AR HAS FURTH ER SUBMITTED THAT THE APPELLANTS BEING A REGISTERED NBFC, ITS MAIN INCOME IS ONLY FR OM SHARE TRADING AND INTEREST INCOME, PURCHASE AND SALE OF SHARES IS THE REGULAR BUSINESS ACTIVITY OF THE APPELLANT IT IS NOT THAT THE APPELLANT HAS ONLY DEALT IN SHAR ES OF THESE TWO COMPANIES, THE APPELLANT HAS TRADED IN NUMBER OF SCRIPTS WHICH HAS RESULTED IN PROFITS AS WELL AS LOSSES ALSO, SO, IT'S A REGULAR BUSINESS ACTIVITY O F THE APPELLANT COMPANY, THE APPELLANT FILED COMPLETE DETAILS OF ENTIRE SHARE TR ANSACTION INCLUDING THOSE MENTIONED HEREIN ABOVE BEFORE THE AO, SUCH DETAILS INCLUDED S TATEMENT OF QUANTITY OF SHARES ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 26 PURCHASED AND SOLD OF EACH SCRIP, SCRIP WISE PROFIT AND LOSS EARNED DURING THE RELEVANT YEAR, DETAILS OF PURCHASE AND SALE OF TUNI TEXTILE MILLS LTD AND BLUE CIRCLE SERVICES LTD ALONG WITH CONTRACT NOTES RECEIVED FRO M RESPECTIVE STOCK EXCHANGE INCLUDING SETTLEMENT NUMBER, DEMAT STATEMENT (ISSUE D BY THE DEPOSITORY PARTICIPANT) SHOWING INWARD AND OUTWARD .MOVEMENT IN SUCH SCRIPT S, COPIES OF BANK STATEMENTS WERE ALSO FURNISHED TO SUBSTANTIATE THE PAYMENTS MA DE AND PAYMENTS RECEIVED IN RESPECT OF TRADING OF SHARES OF THESE SCRIPTS AND A N EXPLANATION WAS ALSO FILED VIDE LETTER DATED 15,03,2016 EXPLAINING AS TO WHY NO DIS ALLOWANCE OF SHARE LOSS SHOULD BE MADE BY THE AO, THE AR FURTHER SUBMITTED THAT THE S CRIPTS WERE NOT SUSPENDED BY SEBI EITHER AT THE TIME OF TRANSACTION ENTERED BY T HE APPELLANT OR THEREAFTER. THERE IS NO DENIAL OF ANY OF THE TRANSACTION OF EITHER PURCH ASE OR SALE BY THE STOCK EXCHANGES WHERE THE TRANSACTIONS WERE ENTERED UPON. THE SHARE S WERE PURCHASED AND SOLD AT PREVAILING MARKET RATE THROUGH THE STOCK EXCHANGE A ND THE ENTIRE TRANSACTIONS WERE ROUTED THROUGH PROPER BANKING CHANNEL. THE SHARES W ERE DULY REFLECTED IN THE DEMAT ACCOUNT OF THE APPELLANT COMPANY. THE AR OF THE APP ELLATE ALSO PLACED HIS RELIANCE ON VARIOUS JUDGEMENTS AS MENTIONED ABOVE IN HIS SUB MISSIONS, I HAVE GONE THROUGH THE SUBMISSIONS ALONG WITH DOCU MENT AS FILED BY THE AR DURING THE APPELLATE PROCEEDING. I FIND THAT ALL THE TRANS ACTIONS WERE EXECUTED IN THE RELEVANT YEAR, THE PURCHASE AND SALE OF SHARES WERE MADE THR OUGH ONLINE TRADING SYSTEM. I FIND FROM THE PERUSAL OF PAPER BOOK FILED ALONG WIT H WRITTEN SUBMISSIONS THAT THE CONTRACT NOTES WERE RECEIVED FROM RESPECTIVE STOCK EXCHANGE IN SUPPORT OF PURCHASE AND SALE OF SUCH SHARES, SIMILARLY THE DEM AT ACCOUNT AND BANK STATEMENT OF THE APPELLANT COMPANY PLACED IN THE PAPER BOOK R EFLECT ALL THE TRANSACTIONS OF THE APPELLANT. I FIND THAT FROM THE MATERIALS AVAILABLE IN PAPER BOOK, IT CAN SAFEIY BE CONCLUDED THAT THE TRANSACTIONS WERE COMPLETE IN TE RMS OF DOCUMENTATION AND THERE WAS NO DEFECT IN THE PAPERS SUBMITTED BY THE APPELL ANT IN SUPPORT OF THE TRANSACTIONS. THE APPELLANT HAS PROVED THE TRANSACTION ON THE BAS IS OF DOCUMENTS AND THEREFORE THE GENERAL REPORT OF THE INVESTIGATION WING WITHOU T CONSIDERING THE POSITIVE EVIDENCES AS WELL AS WITHOUT ESTABLISHING ANY NEXUS WITH ANY OF THE OPERATOR WITH THE APPELLANT COMPANY SHOULD BE HELD TO BE INVALID. NO INVESTIGATION HAS BEEN CARRIED OUT BY THE AO OR BY THE INVESTIGATION WING TO BRING ON RECORD ANY MATERIAL TO DISBELIEVE THE CLAIM OF THE APPELLANT. THE AO OR TH E INVESTIGATION WING HAS MADE ACADEMIC DISCUSSION REGARDING THE PROBABILITY OF TH E APPELLANT HAVING ENTERED INTO TRANSACTIONS IN COLLUSION WITH OPERATOR OF SCRIPTS WITH A VIEW TO CLAIM LOSS IN SHARE TRADING BUSINESS AND THEREBY REDUCING THE TAXABLE I NCOME AND TAX LIABILITY. IN FACT THERE IS NO EVIDENCE THAT THE PRICES OF THE SCRIPTS HAVE BEEN DEFLATED BY THE APPELLATE TO TAKE ADVANTAGE TO AVOID TAX. THE AO HAS NOT DOUB TED THE PURCHASE OR SALE PRICE PREVAILING AT THE MATERIAL POINT OF TIME. IT IS A S ETTLED LAW BY NOW THAT NO ADDITION OR DISALLOWANCE SHOULD BE MADE OR SUSTAINED ON CONJECT URES, SPECULATION AND SUSPICION, HOW HIGH OR STRONG THEY MAY BE, BECAUSE SUSPICION AND SURMISES WITHOUT ANY EVIDENCE CANNOT TAKE THE PLACE OF PROOF. I FIND THAT THE AO DID NOT DISCHARGE THE BURDEN WHICH HAD SHIFTED ON HIM AND HAD JUST MECHAN ICALLY ADHERED TO DISALLOW THE LOSS ON THE BASIS OF GENERAL REPORT OF THE INVESTIG ATION WING, CLAIMED BY THE APPELLANT WITHOUT REBUTTING ANY OF THE SUBMISSIONS OF THE APP ELLANT. THE ASSESSING OFFICER HAD NOT DEALT WITH THE SPECIFIC FACTS OF THE CASE. MERE LY MAKING CERTAIN OBSERVATIONS ON THE BASIS OF ASSUMPTIONS AND DRAWING AN ADVERSE INF ERENCE THEREON, WITHOUT ANY ACCEPTABLE EVIDENCE ON RECORD. I FIND THAT IN THE P RESENT CASE INDULGED IN SUSPICIONS, CONJECTURES AND SURMISES AND ACTED WITHOUT ANY EVID ENCE OR UPON A VIEW OF THE FACTS WHICH COULD NOT REASONABLY BE ENTERTAINED OR THE FA CTS FOUND WERE SUCH THAT NO PERSON ACTING JUDICIALLY AND PROPERLY INSTRUCTED AS TO THE RELEVANT LAW COULD HAVE FOUND, OR THE FINDING WAS, IN OTHER WORDS, IS ENTIT LED TO SUSTAIN. I FIND THAT THE AO DISALLOWED THE LOSS OF RS.78,25, 188/- SUFFERED BY THE ASSESSEE COMPANY SOLELY ON THE BASIS OF THE INFORMATION OF T HE INVESTIGATION WING WITHOUT ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 27 MAKING ANY INDEPENDENT ENQUIRY IN RESPECT OF THE AS SESSEE COMPANY'S TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF THE TWO COMPANIES VIZ. BLUE CIRCLE AND TUNI TEXTILES. THE AO DISREGARDED THE SUBMISSIONS OF THE ASSESSEE COMPANY AND ALL LEGAL EVIDENCES PRODUCED / FURNISHED BY IT IN RELATION TO THE AFORESAID LOSS IN THE TRANSACTIONS OF PURCHASE AND SALE OF THE SHARES OF THE TWO COMPANIES. THE ASSESSING OFFICER DID NOT BRING ON RECORD ANY LEGAL EVIDENCE OR MATERIAL ON RECORD TO HOLD THAT THE APPELLANT'S TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES OF THE AFORESAID TWO COMPANIES WERE MANIPULATED/PRICES RIG GED/BOGUS. I FIND THAT THE APPELLANT HAD DISCHARGED ITS ONUS OF BY FURNISHING ALL EVIDENCES BUT THE AO HAS NOT DISCHARGED HIS ONUS BY MAKING FRESH ENQUIRY AND PRO VING THAT THE DOCUMENTS / EVIDENCES AS FILED BY THE APPELLATE ARE PROVED TO B E FALSE OR BOGUS. IT IS DIFFICULT, IF NOT IMPOSSIBLE, TO HOLD THAT THE TRANSACTION OF BUYING AND SELLING OF SHARES WAS A COLOURABLE TRANSACTION OR WAS RESORTED TO WITH ANY ULTERIOR MOTIVE OF REDUCING THE TAX PAYABLE. THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF HIS DEMT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYM ENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. IT CANNOT BE SAID BY ANY STR ETCH OF IMAGINATION THAT ANY LOSS WAS GENERATED. THE OPINION THAT THE ASSESSEE GENERA TED A SIZABLE AMOUNT OF LOS:, OUT OF PRE-ARRANGED TRANSACTIONS SO AS TO REDUCE TH E QUANTUM OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPRESSED BY THE ASSESSING OFFICER, BUT HE MISERABLY FAILED TO SUBSTANTIATE THAT LOSS MIGHT HAVE BEEN SU FFERED. IF THE LOSS WAS SUFFERED. THEN APPROPRIATE DEDUCTION HAS TO BE MADE AND THERE IS NO REASON WHY THE ASSESSING OFFICER SHOULD HAVE REFUSED TO DO SO. THE TRANSACTIONS WERE CARRIED OUT AT THE PREVAILING PRICE. THEREFORE, THE QUESTION OF GE NERATING LOSS COULD NOT HAVE ARISEN. THE SUSPICION ENTERTAINED BY THE ASSESSING OFFICER WAS MISPLACED OR IN ANY EVENT NOT SUBSTANTIATED. THE TRANSACTIONS WERE AS PER NOR MS UNDER CONTROLLED BY THE SECURITIES TRANSACTION TAX, BROKERAGE SERVICE TAX A ND CESS, WHICH WERE ALREADY PAID. THEY WERE COMPLIED WITH. ALL THE TRANSACTIONS WERE THROUGH BANK. THERE IS NO IOTA OF EVIDENCE OVER THE ABOVE TRANSACTIONS AS IT WERE THROUGH D-MAT FORMAT. THE ASSESSEE, HOWEVER, CLARIFIED THAT HE HAD CARRIED OU T ALL THE TRANSACTIONS OF PURCHASE AND SALE OF THOSE SHARES THROUGH REGISTERED SHARE B ROKERS AND THAT THEY HAD ISSUED THE CONTRACT NOTES WHICH HAD BEEN DULY SUBMITTED. I T WAS ALSO POINTED OUT THAT THE CONSIDERATION FOR PURCHASE AND SALE OF THOSE SHARES HAVE BEEN PAID OR RECEIVED THROUGH BANKING CHANNELS AND COPIES OF BANK STATEME NTS HAVE ALSO BEEN SUBMITTED. IT FURTHER APPEARED THAT ON PURCHASE OF THESE SHARE S THE DELIVERY WAS TAKEN IN DEMAT ACCOUNT AND SIMILARLY WHEN THE SHARES WERE SOLD, TH E DELIVERY TO THE RESPECTIVE BROKERS HAVE ALSO BEEN GIVEN THROUGH DEMAT ACCOUNT. THE COPY OF THE DERNAT ACCOUNT WAS ALSO SUBMITTED DURING THE ASSESSMENT PR OCEEDING AND THE SAME HAS ALSO BEEN FILED DURING THE APPELLATE PROCEEDING (PB PAGE-267 TO 270). THE ASSESSING OFFICER HAD NOT BROUGHT ANYTHING ON R ECORD TO PROVE THAT THERE WAS ANY CONNIVANCE BETWEEN THE ASSESSEE AND THE SHARE B ROKERS. THE ASSESSING OFFICER HIMSELF HAD NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE TRANSACTIONS OF PURCHASE AND SALE OF THE SHARES IN WHICH THE ASSESSEE HAD SU FFERED THE LOSS WERE NOT GENUINE TRANSACTIONS. THE APPELLATE HAD SUBMITTED THE COMPL ETE DOCUMENTARY EVIDENCES TO PROVE HIS TRANSACTIONS OF PURCHASE AND SALE OF THOS E SHARES AND THE ASSESSING OFFICER COULD NOT PROVE THAT THE EVIDENCE SUBMITTED BY THE ASSESSEE WAS EITHER FALSE OR FICTITIOUS. THE AR OF THE APPELLATE ALSO PLACED HIS RELIANCE IN VARIOUS JUDGEMENT INCLUDING OF JURISDICTION HIGH COURT AND ITAT AS ME NTIONED ABOVE IN IS SUBMISSION. KEEPING IN VIEW OF ABOVE, I AM OF THE VIEW THAT THE APPELLATE HAD SUBMITTED THE COMPLETE DOCUMENTARY EVIDENCES TO PROVE HIS TRANSAC TIONS OF PURCHASE AND SALE OF THOSE SHARES AND THE ASSESSING OFFICER COULD NOT PR OVE THAT THE EVIDENCE SUBMITTED BY THE ASSESSEE WAS EITHER FALSE OR FICTITIOUS. THE AO HAS MADE THE ADDITION SIMPLY ON THE BASIS OF GENERAL REPORT OF THE INVESTIGATION WING. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDIT ION AND THIS GROUND OF APPEAL IS ALLOWED. ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 28 THERE IS NO DISPUTE THAT THE CIT(A) HAD ADOPTED THE VERY REASONING IN REVENUES LATTER APPEAL ITA NO.1496/KOL/2017 FOR AS SESSMENT YEAR 2014-15 S WELL. 5. WE HAVE HEARD RIVAL CONTENTIONS AT REVENUES AND ASSESSEES BEHEST AGAINST AND IN SUPPORT OF CIT(A)S FINDINGS REVERSI NG ASSESSING OFFICERS IDENTICAL ACTION TREATING THE ASSESSEES LOSSES ARI SING FROM SALE OF VARIOUS SCRIPT TO BE NON-GENUINE. THE REVENUE FAILS TO DISP UTE HEREIN AS WELL AS THERE IS NO MATERIAL EITHER OF THE CASE FILE INDICATING T HIS ASSESSEE TO HAVE AVAILED ACCOMMODATION ENTRIES AS PER ANY SEARCH / SURVEY ST ATEMENT. THE REVENUE SEEKS TO PLACE A VERY HEAVY RELIANCE IN DEPARTMENT INVESTIGATION WING SURVEY OPERATION STATEMENTS U/S. 133A FROM ONE OF THE ASSE SSEES DIRECTORS AGAINST GENUINENESS OF THE IMPUGNED LOSSES. WE FIND THAT SU CH A SEARCH AND SURVEY STATEMENT; IF ANY IN ABSENCE OF ANY EVIDENCE IN ITS ELF CARRIES NO VALUE AS PER CBDTS CIRCULAR DATED 10.03.2003 AS REITERATED IN S UBSEQUENT CLARIFICATION DATED 18.12.2014. WE THEREFORE GO BY OUR FOREGOING DETAILED DISCUSSION TO CONCLUDE THAT THE CIT(A) HAS RIGHTLY DELETED THE IM PUGNED LOSS DISALLOWANCE IN BOTH ASSESSMENT YEAR(S). THE REVENUES TWO APPEALS ITA NO. 1495- 1496/KOL/2017 FAIL ACCORDINGLY. 6. THE FORMER ASSESSEES APPEAL ITA NO.2275/KOL/201 8 IS ALLOWED WHEREAS REVENUES TWO APPEALS ITA NO.1495-1496/KOL/ 2017 IN LATTER ASSESSEES CASE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 31 /12/2018 SD/- SD/- ( ) (( ) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S )- 31 / 12 /201 8 ITA NO.2275/KOL/2018, 1495-1496/KOL/2017 A. YS. 14-15, 13-14 & 14-15 SH S BANERJEE VS.ACIT, CIR-51(1), KOL. & ITO WD.4(1) KOL. VS. M/S TRIBUTE TRADING & FINANCE LTD PAGE 29 / COPY OF ORDER FORWARDED TO:- 1 . /ASSESSEE -SRI SUBRATA BANERJEE, 20, CAPE TOWER, C -1, HILAND PARK,KOL-107 M/S TRIBUTE TRA DING & FINANCE LTD. 2 ND FL,3, BENTICK ST, KOLKATA-001 2. /REVENUE-ACIT, CIR-51(1), DS-2&3, MANIKTALLA CIVIC CENTRE, UTTARAPANA, KOL-54 ITO WARD-4(1) 8 TH FL, AYAKAR BHAWAN, P-7, CHOWRINGHEE SQ., KOLK-69 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 4,