Sanjay Kaul, New Delhi V. ITO, Ward-24(4), New Delhi

ITA 1593/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9239 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 27-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Capital asset; Income from undisclosed sources; Principle of natural justice; Question of law; Cost of acquisition; Corroborative evidences; Accommodation entries; Assessment record; Onus to prove; Penny stocks; Audi alteram partem; Capital Gains
• Section: 271(1)(c); 69C; 143(3); 201; 143(2); 73; 13; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.1593/DEL/2019 ASSESSMENT YEAR: 2015-16 SHRI SANJAY KAUL, C/O- DEEPAK KAPOOR, ADVOCATE, 59, NEHRU APARTMENTS, OUTYER RING ROAD, KALKAJI, NEW DELHI VS. ITO, WARD-24(4), NEW DELHI PAN :AAAPK2580P (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST O RDER DATED 14/01/2019 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-8, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2015-16, RAISING FOLLOWING GROUNDS: A. ADDITION OF RS.1,22,76,352/- BECAUSE THE CIT(A)-08, NEW DELHI, HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN DENYING THE CLAIM OF SET OFF OF SHORT TERM CAPITAL LOSS OF RS.1,22,76,352/- ON SALE OF SHARES SOLD ON RECOGNIZ ED STOCK EXCHANGE AND BRINGING TO TAX AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. APPELLANT BY SHRI DEEPAK KAPOOR, ADV. RESPONDENT BY SHRI SHAILESH KUMAR, SR.DR DATE OF HEARING 16.10.2019 DATE OF PRONOUNCEMENT 07.01.2020 2 ITA NO.1593/DEL/2019 2. BECAUSE THE LD. CIT (A) HAS ERRED IN CONCLUDING WITHOUT ANY BASIS THAT APPELLANT HAS INTRODUCED HIS UNACCOUNTED INCOME IN THE FORM OF SHORT TERM CAPITAL LOSS BY MANIPULATING THE PENNY STOCK. THIS CONCLUSION IS ABSOLUTELY PERVERSE IN AS MUCH AS ON ACCOUNT OF SHORT TERM CAP ITAL LOSS THE CAPITAL OF THE APPELLANT STANDS DEPLETED/ REDUCED. THE INFEREN CE BY THE INCOME-TAX OFFICER AS WELL AS CIT (A) IS PERVERSE AND AGAINST THE COMMON ACCOUNTING PRINCIPLES. 3. BECAUSE THE LD. CIT (A) HAS ALSO ERRED BOTH IN L AW AND ON FACTS IN MAKING AN ADDITION OF RS. 1,22,76,352/- BEING CAPIT AL LOSS INCURRED BY THE APPELLANT ON SALE OF SHARES LISTED ON RECOGNIZED ST OCK EXCHANGE AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT READ WITH SECTION 115BBE OF THE ACT. 4. BECAUSE BY SUSTAINING THE AFORESAID ADDITION AND DENYING THE SET OFF OF LOSS UNDER SECTION 70, THE LD. CIT (A) HAS FAILE D TO APPRECIATE THAT APPELLANT WAS OWNER OF EQUITY SHARES OF LISTED COMP ANIES WHICH THE APPELLANT HELD FOR NUMBER OF MONTHS AND THE SAME WE RE SOLD ON RECOGNIZED STOCK EXCHANGE AFTER PAYMENT OF SECURITIES TRANSACT ION TAX (STT), RESULTING INTO A SHORT TERM CAPITAL LOSS AND THEREFORE, THE S HORT TERM CAPITAL LOSS INCURRED BY THE APPELLANT ON TRANSFER OF SHORT TERM CAPITAL ASSET WAS TO BE SET OFF AGAINST THE LONG TERM CAPITAL GAIN ACCRUING TO THE APPELLANT UNDER SECTION 70 OF THE ACT. 5. BECAUSE THE LD. CIT (A) HAS FAILED TO APPRECIATE THE EVIDENCE TENDERED BY THE APPELLANT TO SUPPORT THE CLAIM OF SET OFF UN DER SECTION 70, HENCE THE FINDINGS MECHANICALLY RECORDED ON BORROWED INFERENC E IN DISREGARD OF EVIDENCE, BASED ON IRRELEVANT AND EXTRANEOUS CONSID ERATIONS ARE MISCONCEIVED AND MISPLACED. 6. BECAUSE THE LD. CIT (A) HAS CONFIRMED THE ABOVE ADDITION AND DENIED THE SET OFF WITHOUT CONFRONTING MATERIAL/ INVESTIGA TION TO THE APPELLANT AND ALSO PROVIDING CROSS EXAMINATION OF THE PARTIES ON WHOSE STATEMENT RELIANCE HAS BEEN PLACED IN THE IMPUGNED ORDER OF A SSESSMENT AND THEREFORE, THE ORDER, SO MADE IN DISREGARD OF PRINC IPLES OF NATURAL JUSTICE, IS VITIATED. 7. BECAUSE FURTHERMORE THE LD. CIT (A) HAS SUSTAINE D THE ADDITION ON MERE SPECULATION, GENERALIZED STATEMENTS, THEORETIC AL ASSUMPTIONS, ALLEGATIONS AND ASSERTIONS, WITHOUT THERE BEING ANY SUPPORTING EVIDENCE AND IS THEREFORE, NOT IN ACCORDANCE WITH LAW. 8. BECAUSE THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT ONCE THE BROKER OF THE APPELLANT VIZ. M/S ELITE WEALTH ADVISORS LTD. H AD NEITHER DENIED NOR DISPUTED THE GENUINENESS OF THE TRANSACTIONS, THE C ONCLUSION ARRIVED IN THE ORDER IS HIGHLY WHIMSICAL, ARBITRARY, ILLOGICAL AND WHOLLY UNTENABLE. 3 ITA NO.1593/DEL/2019 9. BECAUSE THE LD. CIT (A) WHILE SUSTAINING THE ABO VE ADDITION HAS ARBITRARILY AND MECHANICALLY REJECTED THE EXPLANATI ON AND EVIDENCE TENDERED BY THE APPELLANT AND MADE THE ADDITIONS AN D DENIED THE SET OFF BY DRAWING SUBJECTIVE PREMEDITATED AND PRECONCEIVED INFERENCES AND THEREFORE, THE SAME IS NOT SUSTAINABLE. 10. BECAUSE VARIOUS ADVERSE FINDINGS AND CONCLUSION S RECORDED BY THE LD. CIT (A) ARE FACTUALLY INCORRECT AND CONTRARY TO RECORD, LEGALLY MISCONCEIVED AND UNTENABLE. B) ADDITION OF RS. 3,06,908/-. 1. BECAUSE ON FACTS AND IN LAW AND ON GROUNDS TAKEN AND BASIS ADOPTED THE ADDITION OF RS. 3,06,908/- UNDER SECTION 69C RE AD WITH SECTION 115BBE OF THE ACT AS BEING UNEXPLAINED EXPENDITURE IS UNJUSTIFIED, ILLEGAL AND UNWARRANTED. THE LD. CIT (A) HAS SIMPLY CONFIRM ED THE ADDITION HOLDING THE SAME AS CONSEQUENTIAL IN NATURE WITHOUT APPLICATION OF MIND AND WITHOUT PASSING A REASONED ORDER. THE ADDITION OF RS. 3,06,908/- THEREFORE, ON FACTS AND IN LAW IS PERVERSE, UNJUSTI FIED AND ILLEGAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 30/09/2015 DECLARING TOTAL INCO ME OF RS. 3,12,59,350/-. THE CASE WAS SELECTED FOR SCRUTINY A ND NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) WAS ISSUED AND SERVED. THE ASSESSMENT UNDER S ECTION 143(3) OF THE ACT WAS COMPLETED ON 27/12/2017. IN THE RETU RN OF INCOME FILED, THE ASSESSEE DECLARED INCOME UNDER THE SALA RY, INCOME FROM HOUSE PROPERTY, INCOME FROM BUSINESS OR PROF ESSION, INCOME FROM CAPITAL GAIN AND INCOME FROM OTHER S OURCES. THE ASSESSEE DECLARED LONG-TERM CAPITAL GAIN OF RS.4,15 ,67,925/- ON SALE OF UNLISTED SHARES. AGAINST THE LONG-TERM CAPI TAL GAIN, THE ASSESSEE SET OFF SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF FOUR COMPANIES, OUT OF WHICH SHORT-TERM CAPITAL LOSS OF RS. 1,22,76,352/- ON SALE OF SHARES OF FOLLOWING COMPAN IES, WAS NOT ALLOWED BY THE ASSESSING OFFICER HOLDING THE SA ME AS PART OF THE ACCOMMODATION ENTRY BUSINESS OF PROVIDING BOGU S LONG- 4 ITA NO.1593/DEL/2019 TERM/SHORT-TERM CAPITAL LOSS THROUGH TRADING OF SHA RES OF PENNY STOCKS: NAME OF THE COMPANY DATE OF PURCHASE PURCHASE COST DATE OF SALE SALES PRICE SHORT CAPITAL GAIN/LOSS CRESSANDA SOLUTIONS LTD. 05.05.2014 3020080 MARCH, 15 551600 (-)2468480/- KAILASH AUTO FINANCE LTD. 23.02.2014 4764424 FEBRUARY, 15 511619 (-)4252805/- MKEL (MATRA KAUSHAL ENTERPRISES LTD.) 25.03.2014 7715360 MARCH, 15 2160293 (-)5555067/- 2.1 THE ASSESSING OFFICER HAS REFERRED EXTENSIVELY THE REPORT OF THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT - 2(3), KOLKATA, WHEREIN THE GENERAL PRACTICE FOLLOWED BY T HE COMPANIES, BROKERS AND OPERATORS FOR PROVIDING LONG-TERM CAPIT AL GAIN TO BENEFICIARIES AND PROVIDE LONG-TERM/SHORT-TERM CAPI TAL LOSS TO THE ENTITIES SEEKING SUCH CAPITAL LOSS. THE ASSESSING O FFICER HAS MENTIONED SPECIFIC INVOLVEMENT OF THE ASSESSEE IN T HE ENTIRE CHAIN OF GENERATING BOGUS ENTRIES OF LONG-TERM CAPITAL GA IN/LOSS. THE ASSESSING OFFICER HAS GIVEN DETAILED HISTORY OF THE PRICE FLUCTUATION IN THE SHARE PRICES OF THE COMPANIES UN DER REFERENCE VIS--VIS THEIR FINANCIAL PERFORMANCE DURING THE RE LEVANT PERIOD. THE ASSESSING OFFICER HAS SUMMARIZED HIS FINDING IN PARA 4.8 OF THE ASSESSMENT ORDER, WHICH ARE EXTRACTED AS UNDER FOR READY REFERENCE: 4.8 FROM THE ABOVE DEPICTION, IT IS CLEAR THAT THE ASSESSEE HAS ALSO FOLLOWED THE SAME MODUS OPERANDI TO SET OFF HUGE LTCG EARNED BY IT DURING THE YEAR. THE MODUS OPERANDI ADOPTED BY THE ASSESSEE, BY TRADING IN SUCH SCRIPS, IS DETAILED AS UNDER:- I. M/S KAILASH AUTO FINANCE LIMITED II. M/S CRESSANDA SOLUTIONS LTD 5 ITA NO.1593/DEL/2019 III. M/S KATRA KAUSHAL ENTERPRISES LTD A) THE UNCONVENTIONAL NATURE OF TRANSACTION ENTERED BY THE ASSESSEE IN PURCHASE AND SALE OF THE SCRIPTS OF THE SO CALLED PAPER COMP ANIES: M /S KAILASH AUTO FINANCE LTD., M/S CRESSANDA SOLUTIONS LTD AND M/S M ATRA KAUSHAL ENTERPRISE LTD., FOR THE PURPOSE OF CLAIMING STCL I S NOTHING BUT AN ACCOMMODATION ENTRY TO SET OFF HUGE LTCG EARNED BY IT DURING THE YEAR. THIS IS CORROBORATED FROM THE FOLLOWING FACTS AND EVIDEN CES DISCUSSED AS UNDER. B) THE ABOVE COMPANIES ARE OBSCURE COMPANIES WITH NO B USINESS ACTIVITY AND ASSETS AS EVIDENT FROM THE BALANCE SHEET AND FINANC IAL STATEMENTS OF THE COMPANIES AND IS A PENNY STOCK COMPANIES. THE SHARE S IN WHICH THE ASSESSEE HAS CLAIMED TO HAVE MADE A DEAL, ARE IDENTIFIED AS PENNY SHARES BY THE INVESTIGATION WING OF THE DEPARTMENT BECAUSE RATES OF THESE SHARES ARE NOT BASED ON BUSINESS RESULTS OF THE COMPANIES BUT SAME ARE FLUCTUATED BY INSIDER'S TRADING FROM ZERO VALUE (NEGLIGIBLE PRICE ) TO VERY HIGH PRICE AND VICE VERSA WITHOUT ANY REASON OR BASIS TO ACCOMMODATE OR GENERATE BOGUS CAPITAL GAIN OR LOSS. C) THE ASSESSEE HAS PURCHASED SHARES OF THESE COMPANIE S AT AROUND RS.38/- TO RS. 55/- PER SHARE. THEREAFTER, BY RIGGING, WITHIN A SHORT SPAN OF TIME IN 12 MONTHS, WAS SOLD AT NEARLY RS. 4.20 TO RS. 9/- PER SHARE. THE DIP IN PRICES OF THESE SCRIP ARE NOT SUPPORTED BY THE FUNDAMENTALS O F THE SAID COMPANIES. D) ASSESSEE HAS PURCHASED SHARES OF SUCH COMPANIES/SCR IP WHICH IS DEVOID OF ANY BASIC FUNDAMENTALS. ONE OF THE COMPANIES I.E M/ S KAILASH AUTO FINANCE LTD., WAS SUSPENDED BY THE BSE FOR TRADING PREVIOUS LY AS WELL AS AFTERWARD. A REGULAR AND GENUINE INVESTOR WOULD HARDLY KNOW THAT SUCH A COMPANY EVEN LISTED ON BSE. FROM THE AUDITED FINANCIALS FILED BY THE COMPANIES WITH BSE, IT IS A MATTER OF FACT THAT THESE LISTED COMPA NIES DOES NOT HAVE ANY SIGNIFICANT/REAL BUSINESS AS SEEN FROM ITS LAST MAN Y P&L ACCOUNTS AND DO NOT HAVE ANY SIGNIFICANT FIXED ASSETS OR PLANT AND MACH INERY (MOST OF ASSETS ARE EITHER INVESTMENT OR LOANS.) E) THE PRICE MOVEMENT OF SCRIP IS UNREALISTIC AND TYPI CALLY BELL SHAPED, THAT MEANS HUGE RISE OVER A SHORT SPAN, STAYING AT PEAK OVER A SHORT SPAN OF TIME AND THEN SHARP DECLINE IN PRICE OF SHARE AND NOT MA TCHING WITH OVERALL MOVEMENT OF SHARE MARKET IN GENERAL AND MOVEMENT OF OTHER SCRIPS IN SAME LINE OF BUSINESS. F) PRICE MOVEMENT OF SCRIP UPWARD AND DOWN WORD DONE M AINLY THROUGH THIN VOLUME AND MOST ENTITIES INVOLVED IN THE SAME ARE R ELATED IN SOME WAY AND ARE MAINLY OPERATED BY SOME ENTRY OPERATOR AND ARE BOGUS. G) THERE IS HARDLY ANY HISTORY OF DIVIDEND PAY-OUTS. H) THE TRADING IN THE SCRIP OF M/S KAILASH AUTO FINANC E LTD., WAS SUSPENDED BY THE BSE PURSUANT TO SEBI'S DIRECTIONS VIDE NOTICE N O.20160804-24 DATED 04.08.2016 AND CURRENTLY UNDER SUSPENSION. IN FACT, AS PER THE INFORMATION 6 ITA NO.1593/DEL/2019 AVAILABLE ON THE BSE WEBSITE, IT IS QUITE EVIDENT T HAT THE TRADING IN M/S KAILASH AUTO FINANCE LTD IS STILL SUSPENDED. I) FROM THE INVESTIGATION REPORT ON MANIPULATION OF PE NNY STOCKS AND THE STATEMENTS OF VARIOUS SCRIP OPERATORS. MANAGERS AND BROKERS, IT IS SELF- EVIDENT THAT THE SCRIP PRICE MOVEMENT WAS MAINLY ON ACCOUNT OF MANIPULATION IN A PRE-ARRANGED SYNCHRONIZED FASHION TO BOOK ACCO MMODATION ENTRIES IN FORM OF BOGUS LTCG AS WELL AS PROVIDE SHORTTERM CAP ITAL LOSS TO A HUGE NO. OF BENEFICIARIES. J) THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN AS TO HOW AND WHY DID IT INVEST IN SUCH SCRIPTS WITHOUT KNOWING THE FINANCIAL PERFORMA NCE OF THE COMPANY. THE ASSESSEE CLAIMS THAT THE TRANSACTIONS ARE ARRANGED THROUGH TAX CONSULTANTS. K) THE ASSESSEE IS NOT A REGULAR INVESTOR IN SHARES. H OWEVER, HE IS A PRUDENT BUSINESSMAN AND HIGH ON EDUCATIONAL QUALIFICATION. FROM SUCH AN EDUCATED PERSON IT IS EXPECTED THAT DUE DILIGENCE HAS BEEN D ONE BEFORE PURCHASING A STOCK. HOWEVER, THE ANALYSIS SHOW A VERY DIFFERENT PICTURE. THE INVESTOR HAS ONLY INVESTED IN HIGH RISK STOCKS ONLY, WHICH DURIN G THE INVESTIGATION WERE FOUND TO BE PENNY STOCKS, A SCHEME HATCHED BY VARIO US PLAYERS TO OBTAIN/PROVIDE ACCOMMODATION ENTRY OF BOGUS LTCG/ST CL THROUGH MANIPULATION OF STOCK MARKET. THIS BEING THE CASE, THE ASSESSEE HAS ENTERED INTO A SHAM TRANSACTION WITH THE FULL KNOWLEDGE OF IT, SO AS TO CONVERT UNACCOUNTED MONEY INTO ACCOUNTED MONEY IN THE GUISE OF CAPITAL LOSS. L) SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) HAS I N THE RECENT PAST, PASSED SOME ORDERS ON THE ISSUE OF MANIPULATION OF SHARE M ARKET FOR PROVIDING ACCOMMODATING ENTRY OF BOGUS LTCG. SEBI CONSIDERING THE INPUTS FORM INCOME TAX DEPARTMENT AS WELL AS FROM ITS OWN SURVE ILLANCE SYSTEM AND THAT OF THE STOCK EXCHANGES HAS TAKEN APPROPRIATE ACTION IN CASE OF THE SUSPECT SCRIPTS. THESE ACTIONS INCLUDE PASSING INTERIM DIRE CTION SUSPENDING THE TRADE REDUCING THE PRICE BAND ETC. IN A LARGE NUMBER OF P ENNY STOCKS, THE PRICE BAND HAD BEEN REDUCED TO THE LOWEST BAND OF 2 PERCENT. I NTERIM ORDERS WERE ALSO PASSED BY SEBI GIVING A FINDING THAT PRICE WAS RIGG ED. M) STATEMENT OF SH SUNIL DOKANIA S/O SH GAJADHAR DOKAN IA WAS RECORDED ON 12.06.2015 ON OATH BY THE DDIT (INV), UNIT-1(2), KO LKATA WHEREIN SH SUNIL DOKANIA ADMITTED THAT HE MANAGED ALL AFFAIRS OF M/S KAILASH AUTO FINANCE LTD AND THE DIRECTORS ON ROLL WERE DUMMY DIRECTORS FOR THE NAME SHAKE ONLY. HE FURTHER ADMITTED THAT IN ORDER TO PROVIDE BOGUS LTCG IN THE SCRIPS OF M/S KAILASH AUTO FINANCE LTD THE AMALGAMATION METHOD WA S FOLLOWED. HE HAS EXPLAINED THE MODUS OPERAND! ADOPTED IN ARRANGING B OGUS LTCG/STCL TO THE BENEFICIARIES, WHICH INCLUDES THE ASSESSEE AS A BEN EFICIARY. THE RELEVANT PORTION OF HIS STATEMENT IS REPRODUCED BELOW. 2.2 THE ASSESSING OFFICER HAS ALSO REPRODUCED THE STAT EMENT OF SH. SUNIL DOKANIA, KOLKATA GIVEN BEFORE THE DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION), KOLKATA ON 12/06/2015, WHERE HE 7 ITA NO.1593/DEL/2019 HAS ADMITTED OF HAVING ENGAGED IN PROVIDING ACCOMMO DATION ENTRY THROUGH CONTROL AND MANAGEMENT OF VARIOUS COM PANIES, INCLUDING THE SHARES OF M/S. KAILASH AUTO FINANCE L TD., I.E., THE SHARE OF COMPANY IN WHICH THE ASSESSEE HAS TRANSACT ED. THE RELEVANT QUESTION AND ANSWERS OF SH. SUNIL DOKANIA RELATED TO SCRIP OF KAILASH AUTO FINANCE REPRODUCED BY THE A SSESSING OFFICER ARE EXTRACTED AS UNDER: Q.15. PLEASE EXPLAIN THE MODUS OPERAND OF GETTING BOGUS LONG TERM CAPITAL GAIN THROUGH SCRIPS CONTROLLED AND MANAGED BY YOU. ANS. GENERALLY BENEFICIARIES APPROACHED TO THE BRO KER/ENTRY OPERATORS IN SEARCH OF GENERATION OF CAPITAL IN AN EASIER MANNER WITHOUT PAYING ANY TAX ON IT. BROKERS IDENTITY THE VARIOUS BOGUS SCRIPS TO PROVIDE LTCG AS THE SAME IS EXEMPT FROM T HE TAX, KAILASH AUTO IS SUCH SCRIPS WHICH IS ENGAGED IN PROVIDING A CCOMMODATION ENTRY IN FORM OF LTCG/STCL TO VARIOUS BENEFICIARIES . BENEFICIARIES ARE ALLOTTED THE SHARES AT NOMINAL PRICE AND THE PR ICE OF THE SHARES RISE ARTIFICIALLY BY USING LOOPHOLES OF STOCK EXCHA NGE MECHANISM AND THE SHARES WERE SOLD AT DESIRED LEVEL TO VARIOUS BO GUS ENTITIES. THESE BOGUS ENTITIES ARE PAID BY THE UNACCOUNTED MO NEY OF THE BENEFICIARIES IN CASH. AS A RESULT, UNACCOUNTED INC OME PLOUGHED BACK IN THE FILE OF INDIVIDUALS AND HUFS IN THE FO RM OF BOGUS L.TCG WITHOUT PAYING INCOME TAX ON IT. IN PROCESS THE BOG US SHORT TERM CAPITAL LOSS IS ALSO HOOKED BY THE ENTITIES WHO WAN TS TO REDUCE THEIR TAXABILITY. Q.16. PLEASE SPECIFICALLY MENTION MODUS OPERAND OF PROVIDING BOGUS LTCG IN SCRIPTS OF KAILASH AUTO FINANCE. ANS. SIR. IN THIS SCRIPS OF KAILASH AUTO FINANCE WE HAVE FOLLOWED AMALGAMATION METHOD. INITIALLY BENEFICIARIES WERE A LLOTTED SHARES OF PANCHSHUL MARKETING PVT LTD AND CAREFUL PROJECTS AD VISORY LIMITED ON HIGH PREMIUM. LATER ON, THESE TWO COMPANIES GOT AMALGAMATED VIDE HIGH COURT ORDER INTO KAILASH AUTO FINANCE LTD . BY THE VIRTUE OF AMLGAMATION SHAREHOLDERS OF PANCHSHUL MARKETING PVT . LTD. AND CAREFUL PROJECTS ADVISORY LIMITED GOT SHARES OF KAI LASH AUTO FINANCE. VALUATION OF SHARES ARE SO ARRANGED THAT B ENEFICIARIES OF LTCG GET HIGHER NUMBER OF SHARES OF KAILASH AUTO FI NANCE IN PLACE OF PANCHSHUL MARKETING PVT. LTD. AND CAREFUL PROJEC TS ADVISORY LIMITED. AFTER HOLDING THE SHARES OF KAILASH AUTO F OR ONE YEARS, WE DIRECT OUR CLIENTS TO SELL THE SHARES OF KALFIN ON ABNORMALLY HIGHER RATE. AT THIS STAGE WE GET EQUAL AMOUNT OF CASH FR OM THE BENEFICIARIES AND GET IT DEPOSITED TO VARIOUS UNDIS CLOSED 8 ITA NO.1593/DEL/2019 PROPRIETORSHIP CONCERNS AND GET IT LAYERED THROUGH VARIOUS ACCOUNTS AND FINALLY TRANSFER IT TO BOGUS/SHELL COMPANIES WH O PURCHASES SHARES FROM OUR BENEFICIARIES. Q.17. PLEASE FURNISH DETAILS OF MAJOR CLIENTS WHO H AVE TAKEN ACCOMMODATION ENTRY IN FORM OF LTCG THROUGH SCRIPS I.E OF KAILASH AUTO CONTROLLED AND MANAGED BY YOU. ANS. SIR. I HAVE ALREADY STATED THAT 1 UM ENGAGED I N PROVIDING ACCOMMODATION ENTRY AND SCRIPTS OF KAILASH AUTO IS USED FOR PROVIDING BOGUS LTCG TO VARIOUS CLIENTS. SIR, I WIL L SUBMIT THE LIST OF MAJOR CLIENTS WITHIN 7 DAYS. Q.18 PLEASE FURNISH DETAILS OF OTHER ENTRY OPERATO RS WHO ARRANGED BENEFICIARIES, BOGUS BUYER FOR TRANSACTIONS IN SCRI PS KAILASH AUTO IN ORDER TO EXECUTION OF BOGUS LTCG. ANS. SIR, SCRIPTS OF KAILASH AUTO IS CONTROLLED AND MANAGED BY ME. APART FROM ME, MR. VIMAL LOHATI AND MR. B.L. AGARWA L HAVE CREATED VARIOUS PAPER COMPANIES BY PLACING DUMMY DIRECTORS FOR PURCHASING OF SCRIPS FROM VARIOUS BENEFICIARIES IN ORDER TO P ROVIDE BOGUS LTCG. 2.3 FURTHER, ANSWER OF SH. SUNIL DIKANIA TO THE QUESTI ON NO. 28 & 29 ARE ALSO REPRODUCED AS UNDER FOR READY REFEREN CE: Q.28. DURING THE COURSE OF SURREY OPERATION U/S 13 3A OF THE INCOME TAX ACT, 1961 ON 19-05- 2015 AT THE REGISTERED OFFI CE OF KAILASH AUTO FINANCE LIMITED AT 19, ROLLANT COMPLEX, 37/17, THE MALL, KANPUR, STATEMENT OF MR. AJAV KEDIA WAS RECORDED. I AM SHOW ING YOU THE STATEMENT OF SHRI AJAV KEDIA IN WHICH HE HAS DEPOSE D THAT M/S KAILASH AUTO FINANCE LIMITED IS A PENNY STOCK COMPA NY AND THE SHARES OF M/S KAILASH AUTO FINANCE LIMITED HAVE BEE N USED TO PROVIDE, ENTRY OF BOGUS LTCG, AND BOGUS SHORT TERM CAPITAL LOSS TO VARIOUS BENEFICIARIES. HE ALSO STATED THAT HE HAS P ROVIDED TABLE SPACE FOR KAILASH AUTO FINANCE LTD. ON REQUEST OF M R. VIMAL LOHATI AND MR. SUNIL DOKNIA. PLEASE OFFER YOUR COMMENT. ANS. SIR, I HAVE GONE THROUGH THE STATEMENT OF SHRI AJAY KEDIA AND FOUND IT CORRECT. SIR, M/S KAILASH AUTO FINANCE LIM ITED IS A PENNY STOCK COMPANY AND THE SHARES OF M/S KAILASH AUTO FI NANCE LIMITED HAVE BEEN USED TO PROVIDE ENTRY OF BOGUS LTCG AND B OGUS SHORT TERM CAPITAL LOSS TO VARIOUS BENEFICIARIES AS PER T HEIR REQUIREMENT. 9 ITA NO.1593/DEL/2019 Q-29, DURING THE COURSE OF SURVEY OPERATION U/S 133 A OF THE INCOME TAX ACT, 1961 ON 19-05-2015 AT THE OFFICE OF M/S K AILASH AUTO FINANCE PVT. LTD. AT 32/33, GOPAL BHAVAN, 2ND FLOOR , 199, PRINCESS STREET, MUMBAI-400002, STATEMENT OF MR. DIPAN PATEL REGISTERED OFFICE OF KAILASH AUTO FINANCE LIMITED. PLEASE GO T HROUGH THE STATEMENT ANT) OFFER YOUR COMMENT. ANS. SIR, I HAVE GONE THROUGH THE STATEMENT OF MR, DIPAN PATEL AND FOUND IT CORRECT. 2.4 SH. SUNIL DOKANIA HAS ALSO PROVIDED LIST OF THE EN TITIES, WHO AVAILED THE BENEFIT OF BOGUS ACCOMMODATION ENTRY OF LONG-TERM CAPITAL GAIN. 2.5 REGARDING THE SHARES OF M/S. CRESENDA SOLUTIONS LT D., THE ASSESSING OFFICER HAS REPRODUCED STATEMENT OF SH. DEVESH UPHADHYA GIVEN BEFORE AUTHORITIES OF DIRECTOR OF I NVESTIGATION, KOLKATA, WHEREIN HE ADMITTED OF PROVIDING BOGUS ENT RIES OF LONG- TERM CAPITAL GAIN TO THE BENEFICIARIES ON ONE SIDE AND BOGUS LONG- TERM CAPITAL LOSS ON OTHER SIDE. 2.6 REGARDING THE SHARES OF M/S MATRA KAUSHAL ENTERPR ISES LTD, THE ASSESSING OFFICER HAS REPRODUCED STATEMENT OF SH. RAJKUMAR KEDIA, WHO ADMITTED TO HAVE ENGAGED IN PR OVIDING ACCOMMODATION ENTRIES OF LONG-TERM CAPITAL GAIN THR OUGH VARIOUS OPERATORS. HE HAS PROVIDED LIST OF BENEFICIARIES AS WELL AS OPERATORS AND MODUS OPERANDI. 2.7 THE ASSESSEE FAILED TO JUSTIFY BEFORE THE ASSESSIN G OFFICER FOR MAKING INVESTMENT IN THE SHARES OF ABOVE REFERRED C OMPANIES WITHOUT ANY FINANCIAL RATIONALE. 2.8 THE ASSESSING OFFICER ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT AND PREPONDERANCE OF THE PROBABILITIES, HELD THE SHORT TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE AS NOT GENUINELY MARKE T DERIVED LOSS 10 ITA NO.1593/DEL/2019 BUT A PRE-ARRANGED TRANSACTION ROOTED IN ACCOUNT OF THE ASSESSEE IN LIEU OF UNACCOUNTED CASH. THE ASSESSING OFFICER TREATED THE SHORT-TERM CAPITAL LOSS OF RS. 1,22,76,352/- AS UNEXPLAINED UNDER SECTION 68 OF THE ACT. THE ASSESSING OFFICER ALSO M ADE ADDITION FOR COMMISSION INCOME CHARGED BY THE ACCOMMODATION ENTR Y PROVIDERS @ 2.5% OF THE AMOUNT OF RS. 1,22,76,352/- IN TERMS OF SECTION 69C OF ACT. 2.9 ON FURTHER APPEAL, THE LD. CIT(A) REJECTED THE CON TENTION OF THE ASSESSEE TO PROVIDE CROSS-EXAMINATION OF THE AC COMMODATION ENTRY PROVIDERS ON THE GROUND THAT THE STATEMENT WA S NOT THE SOLE BASIS FOR MAKING ADDITION BY THE ASSESSING OFFICER AND HE HAS MADE THE ADDITION ON THE STRENGTH OF INDEPENDENT AN ALYSIS OF THE DOCUMENTS TO ARRIVE AT THE CONCLUSION THAT THE ASSE SSEE HAS FAILED TO PROVE GENUINENESS OF THE SHORT-TERM CAPITAL LOSS AND THE STATEMENT HAD BEEN USED ONLY AS COLLABORATIVE MATER IAL. THE LD. CIT(A) HELD THAT THE TRANSACTION OF ASSESSEE CAN BY NO STRETCH OF IMAGINATION BE CONSIDERED AS INVESTMENT TRANSACTION AND THEY ARE ONLY MAKE BELIEVE TRANSACTION. 2.10 THE LD. CIT(A) UPHELD THE ADDITION MADE UNDER SE CTION 68 OF THE ACT OF OBSERVING AS UNDER: 4.7 THE ENTIRE AMOUNT OF THE SO CALLED RECEIPT OF SHARE SALES COULD WELL ALSO BE TREATED AS UNEXPLAINED CREDIT U/S 68 O F THE I.T ACT AS IT HAS ALL THE INGREDIENTS OF ATTRACTING THE RIGOURS O F THE SAID SECTION. SECTION 68 OF THE ACT PROVIDES THAT WHERE ANY SUM I S FOUND CREDITED IN THE BOOKS OF THE APPELLANT MAINTAINED FOR ANY PR EVIOUS YEAR AND THE APPELLANT OFFERS NO EXPLANATION ABOUT THE NATUR E AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE AO SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE APPELLANT OF THAT YEAR. IN THE PRE SENT CASE THE APPELLANT'S EXPLANATION THAT THE SAID RECEIPT IS ON ACCOUNT OF INVESTMENT IN SHARES WHEREBY SHARE OF UNKNOWN COMPA NY HAS 11 ITA NO.1593/DEL/2019 JUMPED IN NO TIME HAS BEEN TOTALLY REJECTED BY THE AO. THE APPELLANT HAS NOT AT ALL BEEN ABLE TO ADDUCE COGENT EVIDENCES IN THIS REGARD. THERE IS NO ECONOMIC OR FINANCIAL JUSTIFICATION FOR THE SALE PRICE OF THESE SHARES. THE FANTASTIC SALE PRICE REALIZATION IS NOT AT ALL HUMANLY PROBABLE, AS THERE IS NO ECONOMIC OR FINANC IAL BASIS THAT A SHARE OF LITTLE KNOWN COMPANY WOULD JUMP SO HIGH, I N THESE CIRCUMSTANCES, I DO NOT FIND ANY INFIRMITY IN THE O RDERS OF THE AO IN VIEW OF THE FACTS DISCUSSED IN EARLIER PARAS, I AM OF THE CONSIDERED VIEW THAT THE AO WAS JUSTIFIED TO DISALLOW THE CLAI M OF SHORT TERM CAPITAL LOSS AND TO TREAT THE SAME AS INCOME FROM U NDISCLOSED SOURCES. THEREFORE, THE ADDITION OF RS, 1,22,76,352 /- ON ACCOUNT OF SHORT TERM CAPITAL LOSS MADE BY THE AO IS CONFIRMED . THIS GROUND OF APPEAL IS RULED AGAINST THE APPELLANT. THE OTHER AD DITIONS OF RS. 3,06,908/- BEING CONSEQUENTIAL IN NATURE IS ALSO CO NFIRMED. 3. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING PAGES 1 TO 111 AND CONTESTED THAT CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE FINDING OF THE ASSESSING OFFICER IGNORING THE FACT THAT SHARES HAVE BEEN SOLD ON RECOGNIZED S TOCK EXCHANGE AFTER PAYMENT OF SECURITY TRANSACTION TAX (STT) AND PAYMENT THROUGH BANKING CHANNELS. HE SUBMITTED THAT THE ADD ITION HAS BEEN MADE WITHOUT RECORDING ANY SPECIFIC DOCUMENTS/ MATERIAL AND WITHOUT ALLOWING THE ASSESSEE TO CONFRONT MATER IAL/CROSS EXAMINE OF THE PARTIES ON WHOSE STATEMENT THE ASSES SING OFFICER HAS RELIED UPON. HE SUBMITTED THAT BROKER OF THE AS SESSEE HAS NEITHER DENIED NOR DISPUTED GENUINENESS OF THE TRAN SACTION AND THUS THE ADDITION SUSTAINED BY THE LD. CIT(A) ON ME RE SPECULATION, ASSUMPTIONS AND ALLEGATIONS IS NOT IN ACCORDANCE WI TH LAW. 3.1 THE LD. COUNSEL FURTHER SUBMITTED THAT ADDITION UN DER SECTION 68 IS COMPLETELY PERVERSE AND IN IT LOGICAL MANNER WITHOUT APPLYING THE MIND INASMUCH AS THE CASH CREDIT WAS I NTRODUCED BY THE ASSESSEE AND ON THE CONTRARY, THE CAPITAL OF TH E ASSESSEE HAS GOT DEPLETED DUE TO SHORTEN CAPITAL LOSS. ACCORDING TO THE ASSESSEE, IT WAS A CASE OF CASH DEBIT INSTEAD OF CASH CREDIT. 12 ITA NO.1593/DEL/2019 4. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE H AS FAILED TO JUSTIFY THE FINANCIAL RATIONALE AND OTHER FACTORS B EHIND INVESTMENT IN COMPANIES NOT HAVING WORTH PROPORTIONATE TO INVE STMENT. ACCORDING TO HIM, EVIDENCES GATHERED DURING THE COU RSE OF SEARCH BY THE INVESTIGATION WING, PARTICULARLY IN RELATION TO THE SHARES TRANSACTED BY THE ASSESSEE, CLEARLY SHOWS THAT LARG E NUMBER OF PERSONS HAVE AVAILED BOGUS LONG-TERM CAPITAL GAIN A ND WHICH IS POSSIBLE ONLY THROUGH THE PERSONS AVAILABLE AND INT ERESTED IN GETTING LONG-TERM CAPITAL LOSS. ACCORDING TO THE LD . DR , THE ENTRY OPERATORS IN THEIR STATEMENTS HAVE ADMITTED THIS FA CT THAT CASH MONEY RECEIVED FROM LONG-TERM CAPITAL GAIN SEEKERS HAS EXCHANGED HANDS WITH THE PERSONS SEEKING LONG-TERM OR SHORT- TERM CAPITAL LOSS THROUGH A COMPLEX WEB OF DIRECTOR S OF THE COMPANIES, ENTRY OPERATORS, BROKERS ETC. HE SUBMITT ED THAT TRADING IN THE SHARES OF M/S. CRESENDA SOLUTIONS LT D. WAS SUSPENDED BY THE BSE DURING CALENDAR YEAR, 2013, I. E., PERIOD RELEVANT TO YEAR UNDER CONSIDERATION. HE ALSO SUBMI TTED THAT THE TRIBUNAL IN THE CASE OF SUMMAN PODDAR IN ITA NO. 1006/DEL/2019 FOR ASSESSMENT YEAR 2014-15 HAS UPHOL D THE ADDITION FOR BOGUS LONG-TERM CAPITAL GAIN ON SALE O F SHARES OF M/S. CRESENDA SOLUTIONS LTD., WHICH CONFIRM THAT SHARES OF THE SAID COMPANY WERE TRANSACTED FOR PROVIDING BOGUS LONG-TE RM OR SHORT- TERM CAPITAL GAIN OR LOSS. HE SUBMITTED THAT ORDER OF THE TRIBUNAL HAS BEEN FURTHER UPHELD BY THE HONBLE DELHI HIGH C OURT. THE LD. DR ALSO RELIED ON FOLLOWING DECISIONS: 1. UDIT KALRA VS. ITO, 2019-TIOL-751-HC-DEL-IT; 13 ITA NO.1593/DEL/2019 2. SANJAY BIMALCHAND JAIN L/H SHANTIDEVI BIMALCHAND JAIN VS. PCIT (ITA NO.18/2017 BOMBAY HIGH COURT (NAGPUR BENC H); 3. SANAT KUMAR VS. ACIT (2019-TIOL-1296-ITAT-DEL, I TA NO. 1881/DEL/2018) 4. POOJA AJMANI VS. ITO [2019] 106 TAXMANN.COM 65 ( DELHI-TRIB.) 5. ANIP RASTOGI VS. ITO (ITA NO.3809/DEL/2018) 6. ABHIMANYU SOIN VS. ACIT 2018-TIOL-733-ITAT-CHD 7. SMT. M.K. RAJESHWARI VS. ITO (ITA NO.1723/BANG/2 018) 8. CHANDAN GUPTA VS. CIT [2015] 54 TAXMANN.COM 10 ( PUNJAB & HARYANA)/[2015] 229 TAXMAN 173 9. BALBIR CHAND MAINI VS. CIT [2011] 12 TAXMANN.COM 276 (PUNJAB & HARYANA/[2011] 201 TAXMAN 94 (PUNJAB & HARYANA) (MAG)/[2012] 340 ITR 161 (PUNJAB & HARYANA)/[2012] 247 CTR 468 (PUNJAB & HARYANA) 10. USHA CHANDRESH SHAH VS. ITO [2014-TIOL-1459-ITA T-MUM] 11. RATNAKAR M PUJARI VS. ITO [2016-TIOL-1746-ITAT- MUM] 12. ARVIND M KARIYA VS. ACTI (ITA NO.7024/MUM/2010) 13. HONBLE ITAT MUMBAI IN THE CASE OF ITO VS. SHAM IM M BHARWANI (2016) (69 TAXMANN.COM 65) 14. HONBLE SUPREME COURT IN THE CASE OF CIT VS. DU RGA PRASAD MORE [(1972) 82 ITR 540] 15. MCDOWELL & CO. LTD. [(1985) 154 ITR (SC)] 4.1 IN THE REJOINDER, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE TRADING IN THE STOCK OF CRESSANDA SOLUTION S LTD. WERE STOPPED WITH EFFECT FROM 20/02/2013 FOR A SHORT PER IOD ON ACCOUNT OF REDUCTION AND CONSOLIDATION OF THE CAPIT AL AS EVIDENT FROM THE NOTICE DATED 14/02/2013 AND 12/03/2013 AVA ILABLE ON THE BSE PORTAL AND THE SCRIP WAS AGAIN LISTED WITH EFFECT FROM 14/03/2013. HE SUBMITTED THAT THE STOCK OF CRESANDA SOLUTIONS LTD. ARE STILL LISTED ON BSE AND TRADING ACTIVITIES ARE STILL 14 ITA NO.1593/DEL/2019 CONTINUING. HE SUBMITTED THAT THE DOCUMENTS AS EVID ENCE FILED BY THE ASSESSEE IN THE FORM OF BANK STATEMENT, BROKERS LEDGER, CONTACT NOTES, DE-MAT ACCOUNT STATEMENT, TRANSACTIO N STATEMENT ETC. DULY CONFIRMED THAT TRANSACTION WAS CARRIED OU T ON RECOGNIZING STOCK EXCHANGE. HE FURTHER SUBMITTED TH AT IN THE CASE OF SUMAN PODDAR (SUPRA) THE SHARES OF CRESENDA SOLU TIONS LTD. WERE PURCHASED AT PRICE OF RS. 10 PER SHARE AND WERE SOLD AT THE PRICE OF RS. 491 PER SHARE, HOWEVER, IN THE CASE OF THE ASSESSEE THE SHARES HAVE BEEN PURCHASED AT MUCH LOWER PRICE OF RS. 53/-PER SHARE. 4.2 THE LD. COUNSEL FURTHER SUBMITTED THAT TRADING IN THE CASE OF KAILASH AUTO LTD. WAS SUSPENDED BY THE BOMBAY STO CK EXCHANGE WITH EFFECT FROM 04/08/2016, WHERE THE ASS ESSEE PURCHASED SHARES OF KAILASH AUTO LTD. ON 20/03/2014 AND SOLD THE SAME ON 08/01/2015. HE SUBMITTED THAT TRADING I N THE SHARES OF MATRA KAUSHAL LTD. WAS NEVER SUSPENDED. 4.3 THE LD. COUNSEL ATTEMPTED TO JUSTIFY THE FALL IN P RICES OF THE SHARES PURCHASED BY THE ASSESSEE. THE ASSESSEE PROV IDED PERCENTAGE FALL IN THE PRICE OF THE SHARES TRANSACT ED AS UNDER: NAME OF THE COMPANY PURCHASE PRICE SALE PRICE % F ALL A) CRESSANDA SOLUTIONS LTD. 53.93 9.85 81.73% B) KAILASH AUTO FINANCE LTD. 38.37 4.12 89.29% C) MATRA KAUSHAL ENTERPRISES 47.06 13.18 71.99% 4.4 THE LD. COUNSEL OF ASSESSEE SUBMITTED THAT THERE W AS A SIMILAR FALL IN PRICE OF THE VARIOUS SHARES OF OTHE R COMPANIES. HE FILED A COPY OF THE NEWSPAPER REPORT DATED 14/10/20 19 WITH THE CAPTION TOP WEALTH DESTROYERS: ADOZON LOSS OVER 90 % MARKET 15 ITA NO.1593/DEL/2019 VALUE IN A YEAR. ACCORDING TO HIM, LOSS IN THE TRA NSACTION OF THE SHARES IS NORMAL FEATURE OF THE PRESENT VOLATILE/FI NANCIAL CAPITAL MARKET WHERE THE VALUE EROSION IS MUCH FASTER COMPA RED TO OLD TIMES. THE LD. COUNSEL SUBMITTED THAT PRINCIPLE OF THE PREPONDERANCE OF THE PROBABILITIES AND THE RATIO OF THE JUDGMENT IN THE SUMATI DAYAL VS. CIT (1995) 80 TAXMANN 89 (SC ) ARE NOT APPLICABLE OVER THE FACTS OF THE PRESENT CASE. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE CARRIED OUT ALL TRANSAC TION ON PUBLIC PLATFORM MANAGED BY THE RECOGNIZED BSE THROUGH REGI STERED BROKERS AND THERE IS NO EVIDENCE WHATSOEVER PRODUCE D BY THE ASSESSING OFFICER OR THE CIT(A) SPECIFICALLY AND PO INTEDLY SUPPORTING THE ALLEGATION THAT THE ASSESSEE WAS ENG AGED IN BOGUS TRADING. THE LD. COUNSEL FURTHER SUBMITTED THAT JUD GMENT IN THE CASE OF SUMATI DAYAL (SUPRA) IS NOT APPLICABLE IN T HE CASE OF THE ASSESSEE IN VIEW OF THE FACT THAT TRANSACTION IS NO T IN THE NATURE OF CASH CREDIT AND SECTION 68 IS NOT APPLICABLE IN THE PRESENT CASE. THE LD. COUNSEL OF THE ASSESSEE DISTINGUISHED THE DECISION IN THE CASE OF SUMAN PODDAR (SUPRA) AS UNDER: A) IN CASE OF SUMAN PODDAR THE GROUND OF APPEAL R ELATED TO LTCG AND THE ADDITION WAS CONFIRMED U/S 68 OF THE A CT. WHEREAS, THE PRESENT CASE RELATES TO STCL AND IN A CASE OF CASH DEBIT. B) SECTION 68 IS A DEEMING PROVISION AND IS ONLY A PPLICABLE WHERE THERE IS CASH CREDIT IN BOOKS. IN THE PRESENT CASE THERE IS CASH DEBIT. THUS IN THE CATINA OF LEGAL CASES TH E HONBLE SC HAS HELD THAT BURDEN OF PROOF LIES UPON THE I.T. DEPARTMENT IF A RECEIPT IS SOUGHT TO BE TAXED AS INCOME. SINCE THE PRESENT CASE IS NOT COVERED U/S 68 AND THE TRANSACTIONS ARE IN FACT IN THE NATURE OF CASH DEBIT, IT IS AMPLY CLEAR THAT TH E DEPARTMENT HAS MISERABLY FAILED TO DISCHARGE THE BU RDEN. C) SINCE SECTION 68 IS NOT APPLICABLE THE ONUS IS ON THE IT DEPARTMENT THAT THE LOSS INCURRED BY THE ASSESSEE I S NOT 16 ITA NO.1593/DEL/2019 GENUINE. THE IT DEPARTMENT HAS NOT LED ANY SPECIFIC , DIRECT AND POINTED EVIDENCE TO DISCHARGE THIS ONUS. D) SUMAN PODDAR PURCHASED SHARES OF CRASSANDA @RS. 10 AND SOLD THE SAME @ RS. 491. HOWEVER, IN CASE OF ASSESS EE THE ASSESSEE PURCHASED THE SHARES AT MUCH LOWER PRICE O F RS. 53 (AFTER THE PRICE OF CRASSANDA CORRECTED FROM 491 TO 53 I.E. A FALL OF 826%). 4.5 IN SUPPORT OF THE CONTENTION THAT SHORT-TERM CAPIT AL LOSS CLAIMED BY THE ASSESSEE IS NOT BOGUS ACCOMMODATION ENTRY, THE LD. COUNSEL RELIED ON FOLLOWING DECISIONS: S. NO. ISSUE INVOLVED CASE CITATION FORUM 1. EXEMPTION SHRI DEEPAK (2019) 73 ITR DELHI BENCH B OF LTCG NAGAR VS (TRIB) 74 (HAT IN ALLEGED A.C.I.T. [DEL]): PENNY STOCKS U/S 10(38) ITA NO. 3212/DEL/2019- (A.Y. 2015-16) (DATE: 12-06-2019) 2. -DO- MUKTA GUPTA VS ITO, WARD-1(4) MOHAN LAI AGARWAL (HUF) VS ITO, WARD- 1(4) ITA NO. 2766/DEL/2018- (A.Y. 2014-15) ITA NO. 2767/DEL/2018 (A.Y. 2014-15) (DATE: 26-11-2018) SMC BENCH 3. - DO- CIT IV VS FAIR FINVEST LTD. (2013) 357 ITR 146- DELHI HIGH COURT DEL 5822 (DATE: 22-11-2012 DELHI HIGH COURT 4. -DO- MAHAVIRJHANWAR VS ITO, WARD- 35(4) ITA NO. 2474/KOL/2018 (A.Y. 2014-15) (DATE: 01-02-2019) CO- ORDINATE BENCH OF KOLKATTA ITAT 5. STCL MANGILAL JAIN VS ITO, WARD-3(3) (RELATED TO SHORT TERM CAPITAL LOSS) ITA NO. 729/KOL/2018 (A.Y. 2014-15) (DATE: 15-05-2019) ITAT KOLKATTA 6. SHARE TRADING LOSS CIT VS M/S ALPINE INVESTMENTS (SHARE TRADING LOSS) ITA NO. 620 OF 2008 - HIGH COURT AT CALCUTTA (DATE: 26-08-2008) HIGH COURT AT CALCUTTA 7. UNEXPLAIN ED CREDIT U/S 68 MS. KANTABENBHOGIL ALKUBADIA VS ITO- 21(2)(1) ITA NO. 1937/MUM/2018 - ITAT MUMBAI (A.Y. 2014-15) (DATE: 10-07-2019) ITAT MUMBAI 17 ITA NO.1593/DEL/2019 8. EXEMPTION OF LTCG IN ALLEGED PENNY STOCKS U/S 10(38)EXE MPTION OF PR. CIT (CENTRAL) LUDHIANA VS PREM PAL GANDHI (2018) 401 ITR 253 (P&H); ITA NO. 95 OF 2017 (O&M) (DATE: 18-01-2018) PUNJAB AND HARYANA HIGH COURT 9. EXEMPTION OF LTCG IN ALLEGED PENNY STOCKS U/S 10(38) PRAKASH CHAND BHUTORIA VS ITO, WARD- 35(1) ITA NO. 2394/KOL/2017 (A.Y. 2014-15) (27-06-2018) ITAT KOLKATTA 10. DENIAL OF CROSS EXAMINATI ON SUNITA JAIN VS ITO, WARD- 10(3) ITA NO. 501 & 502/AHD/2016 (A.Y. 2008-09) (DATE: 09-03-2017) IT AT AHEMDABAD 11. LOSS ON ACCOUNT OF SALE OF SHARES CIT VS CARBO INDUSTRIAL HOLDINGS LTD. (LOSS ON ACCOUNT OF SALE OF SHARES) (2000) 244 ITR 422; 2000 SCC ONLINE CAL 677 (DATE: 14-03-2000) KOLKATTA HIGH COURT 4.6 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CAS E, ASSESSEE HAS PURCHASED SHARES OF THE THREE COMPANIES AT A PARTIC ULAR PRICE AND SOLD THEM AT A LOWER PRICE, WHICH RESULTED IN S HORT-TERM CAPITAL LOSS. THE LIST OF THE SHARES TRANSACTED BY THE ASSESSEE HAS BEEN REPRODUCED ABOVE. ACCORDING TO THE ASSESSEE PU RCHASE AND SALE OF THE SHARES HAVE BEEN MADE ON RECOGNIZED STO CK EXCHANGE THROUGH REGISTERED BROKERS AND PAYMENTS HAVE BEEN M ADE AND RECEIVED BY WAY OF BANK ACCOUNT. ACCORDING TO HIM, IN VIEW OF ALL THE DOCUMENTS CONTAINING CONTRACT NOTES, DE-MAT ACC OUNT STATEMENT ETC. THE TRANSACTION HAVE BEEN CARRIED OU T ARE IN THE NORMAL COURSE OF ITS INVESTMENT ACTIVITY. ON THE CO NTRA, ACCORDING TO THE REVENUE AUTHORITIES THE ASSESSEE HAS OBTAINE D THE ACCOMMODATION ENTRIES OF SHORT CAPITAL LOSS TO SET OFF THE TAX 18 ITA NO.1593/DEL/2019 LIABILITY OF LONG-TERM CAPITAL GAIN ARISING ON SALE SHARES OF UNLISTED COMPANIES. 4.7 THE FIRST, ISSUE WHICH HAS BEEN RAISED BY THE ASSE SSEE THAT IT HAS NOT BEEN CONFRONTED WITH THE STATEMENTS OF VARI OUS PARTIES RELIED UPON BY THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO CONTENDED THAT OPPORTUNITY OF CROSS-EXAMINING THOSE PARTIES/PERSONS WAS NOT PROVIDED TO THE ASSESSEE. A CCORDING TO THE ASSESSEE, THIS RESULTED IN THE VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE AND THUS ASSESSMENT SHOULD BE HELD VOID AB INTIO . HOWEVER, IN OUR OPINION, NOT PROVIDING OPPORTUNITY OF CROSS- EXAMINATION MAY BE IN THE NATURE OF IRREGULARITY WH ICH IS CURABLE BUT NOT AN ILLEGALITY LEADING TO ANNULLING OF THE A SSESSMENT. FURTHER, THE LD. CIT(A) IN PARA 4.1 OF THE IMPUGNED ORDER HAS HELD THAT ADDITION HAS NOT BEEN MADE SOLELY ON THE BASIS OF THE STATEMENT OF THOSE PERSONS/PARTIES. THE RELEVANT PA RT OF THE ORDER OF LD. CIT(A) IS REPRODUCED AS UNDER: 4.1 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND OBSERVATION OF THE AO MADE IN THE ASSESSMENT ORDER ON THE ISSUE THE APPELLANT HAS STATED THAT IT HAS NOT BEEN ALLOW ED CROSS- EXAMINATION OF PARTIES ON THE BASIS OF WHOSE STATEM ENT, THE ADDITION HAS BEEN MADE. ON THIS ISSUE IT IS OBSERVED FROM TH E ASSESSMENT RECORD THAT THE AO HAS MADE THE ADDITION ON THE STR ENGTH OF INDEPENDENT ANALYSIS OF THE DOCUMENTS TO ARRIVE AT THE CONCLUSION THAT THE APPELLANT HAS FAILED TO PROVE GENUINENESS OF THE TRANSACTION IN RESPECT OF STCL AS DISCUSSED ABOVE. STATEMENTS A ND OTHER MATERIAL FOUND IN THE COURSE OF INVESTIGATION HAS B EEN USED BY HIM AS A CORROBORATIVE MATERIAL TO STRENGTHEN HIS FINDI NGS. AS PER THE REQUIREMENT OF SECTION 68 OF THE ACT, THE AO HAS SH IFTED THE ONUS BACK ON THE APPELLANT BY CONFRONTING THE ADVERSE FI NDINGS. THEREFORE, THE APPELLANT HAS FAILED TO DISCHARGE TH E ONUS CAST UPON IT U/S 68 OF THE ACT TO EXPLAIN THE TRANSACTION. THE I NVESTIGATION WING HAS CONDUCTED DETAILED ENQUIRIES, MADE ANALYSIS OF THE SEIZED / IMPOUNDED DOCUMENTS AND MADE ANALYSIS OF BENEFICIAR IES. THE REPORT PREPARED CONTAINS DETAILS OF COMPLETE MODUS OPERANDI, 19 ITA NO.1593/DEL/2019 COMMISSION CHARGED AGAINST ACCOMMODATION ENTRIES, L IST OF CONDUIT COMPANIES, LIST OF THEIR BANK ACCOUNTS IN THE NAME OF CONDUITS. THE SAID LIST CONTAINS NAMES OF COMPANIES IN WHICH THE APPELLANT DEALT. THEREFORE, THE FINDINGS IN THE CASE OF INVESTIGATIO N WING CORROBORATE THE INDEPENDENT FINDINGS OF THE AO. THEREFORE, THE AO WAS NOT REQUIRED TO ALLOW THE APPELLANT THE OPPORTUNITY TO CROSS-EXAMINE. 4.8 THE TRIBUNAL IN THE CASE OF RAM NIWAS GUPTA, DEHRADUN VS DCIT, DEHRADUN ON 6 TH FEBRUARY, 2019 IN ITA NO.4881 TO 4883/DEL/2016 (ASSESSMENT YEARS: 2010-11, 2012-13 A ND 2013- 14), AFTER CONSIDERING VARIOUS DECISIONS OF THE HON BLE SUPREME COURT, INCLUDING THE DECISION IN THE CASE ANDAMAN T IMBERS INDUSTRIES VS COMMISSIONER OF CENTRAL EXCISE, KOLKA TA -II REPORTED IN 2015 (324) E.L.T. 641 (SC), 2017 (50) S .T.R. 93 (SC), 2016 (15) SCC 785 HAS HELD AS UNDER: 105. IN OUR OPINION RIGHT TO CROSS-EXAMINE THE WIT NESS WHO MADE ADVERSE REPORT, IS NOT AN INVARIABLE ATTRIBUTE OF T HE REQUIREMENT OF THE DICTUM, AUDI ALTERAM PARTEM. THE PRINCIPLES O F NATURAL JUSTICE DO NOT REQUIRE FORMAL CROSS-EXAMINATION. FORMAL CRO SS-EXAMINATION IS A PART OF PROCEDURAL JUSTICE. IT IS GOVERNED BY THE RULES OF EVIDENCE, AND IS THE CREATION OF COURT. IT IS PART OF LEGAL A ND STATUTORY JUSTICE, AND NOT A PART OF NATURAL JUSTICE, THEREFORE, IT CA NNOT BE LAID DOWN AS A GENERAL PROPOSITION OF LAW THAT THE REVENUE CANNO T RELY ON ANY EVIDENCE WHICH HAS NOT BEEN SUBJECTED TO CROSS-EXAM INATION. HOWEVER, IF A WITNESS HAS GIVEN DIRECTLY INCRIMINAT ING STATEMENT AND THE ADDITION IN THE ASSESSMENT IS BASED SOLELY OR M AINLY ON THE BASIS OF SUCH STATEMENT, IN THAT EVENTUALITY IT IS INCUMBENT ON THE ASSESSING OFFICER TO ALLOW CROSS-EXAMINATION. ADVERSE EVIDENCE AND MATERIAL, RELIED UPON IN THE O RDER, TO REACH THE FINALITY, SHOULD BE DISCLOSED TO THE ASSESSEE. BUT THIS RULE IS NOT APPLICABLE WHERE THE MATERIAL OR EVIDENCE USED IS O F COLLATERAL NATURE.' 4.9 WE FIND THAT THE ASSESSING OFFICER IN THE ASSESSME NT ORDER HAS REFERRED TO THE GENERAL MODUS OPERANDI OF THE B OGUS ACCOMMODATION ENTRY AND THEREAFTER, HE HAS FURTHER REFERRED TO STATEMENT OF THE PARTIES WHO HAD PROVIDED ACCOMMODA TION ENTRY 20 ITA NO.1593/DEL/2019 THROUGH MANAGING AND CONTROLLING THE SHARES OF THE COMPANIES, IN WHICH THE ASSESSEE HAS ALSO TRANSACTED. THE ASSE SSING OFFICER THEREAFTER ASKED THE ASSESSEE TO JUSTIFY THE RATION ALE BEHIND INVESTMENT IN THESE PENNY STOCK COMPANIES NOT HAVIN G FINANCIAL WORTH, HOWEVER, THE ASSESSEE FAILED TO JUSTIFY THE SAME. THE ASSESSING OFFICER PROVIDED AS WHY THE INVESTMENT IN THE SHARES TRANSACTED BY THE ASSESSEE WAS NOT JUSTIFIED IN VIE W OF THE COMPARISON OF THE OTHER SHARES AVAILABLE. THE ASSES SING OFFICER ALSO POINTED OUT THE PRICE FLUCTUATION IN THE SHARE S OF THE COMPANIES OVER A PERIOD, DIVIDEND HISTORY AND OTHER FINANCIAL PARAMETERS TO SUBSTANTIATE THAT THERE WAS NO FINANC IAL LOGIC FOR INVESTMENT IN THE COMPANY EXCEPT FOR CLAIM OF BOGUS SHORT-TERM CAPITAL LOSS AGAINST RECEIPT OF CASH MONEY. THE LD. ASSESSING OFFICER ACCORDINGLY CONCLUDED THAT THE ADDITION WAS MADE ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, THE SURR OUNDING CIRCUMSTANCES, THE HUMAN CONDUCT AND PREPONDERANCE OF PROBABILITIES. 4.10 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND IN LAW, WE FIND THAT IN INSTANT CASE ADDITION IN DISPUTE IS NO T SOLELY ON THE BASIS OF THE STATEMENT OF THE PERSONS AND THE ASSES SING OFFICER HAS RELIED ON OTHER MATERIALS. THE STATEMENTS OF TH E PERSONS WHO CONTROLLED THE BUSINESS OF PROVIDING ACCOMMODATION ENTRY HAVE BEEN CORROBORATED WITH THE MATERIAL, SURROUNDING CI RCUMSTANCES AND PREPONDERANCE OF PROBABILITY. WE ACCORDINGLY UP HOLD THE FINDING OF THE LD. CIT(A) ON THAT ISSUE IN DISPUTE. THE RELEVANT GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDING LY REJECTED. 5. THE NEXT ISSUE IS WHETHER THE TRANSACTION CARRIED OUT BY THE ASSESSEE AND THE CLAIM OF THE SHORT TERM CAPITAL LO SS IS IN THE 21 ITA NO.1593/DEL/2019 NORMAL COURSE OF THE INVESTMENT ACTIVITY OF THE ASS ESSEE. WE FIND THAT THE ASSESSING OFFICER HAS REFERRED TO INVESTIG ATION DONE BY THE DIRECTORATE OF INVESTIGATION, KOLKATA, TO HIGHL IGHT THE GENERAL MODUS OPERANDI OF PROVIDING BOGUS LONG-TERM OR SHORT-TERM CAPITAL GAIN/LOSS. THE SAID REPORT HIGHLIGHTS THAT LONG-TERM CAPITAL GAIN IS BOOKED WHILE THE SHARE PRICES ARE ARTIFICIA LLY JACKED UP AND WHILE DOWNWARD JOURNEY IS USED BY THE OPERATOR FOR BOOKING BOGUS LOSSES. THE PEOPLE WHO HAVE HUGE PROFIT BUT D OES NOT WISH TO PAY DUE TAXES THEREON, THEY CHOOSE THE MODE OF S HORT-TERM CAPITAL LOSS TO SET OFF THEIR PROFIT. THE LOSS SEEK ING BENEFICIARY PAYS CHEQUES TO THE BENEFICIARY OF LONG-TERM CAPITA L GAIN AND CASH PROVIDED BY THE BENEFICIARY OF LONG-TERM CAPITAL GA IN IS RETURNED TO THE BENEFICIARY OF SEEKING LOSS. THESE ARE ALSO TERMS AS EXIT PROVIDERS AS THEY FACILITATE EXIST TO THE LONG TER MS GAIN BENEFICIARY. THE OPERATOR WHO ARRANGED WEDDING OF B OTH THE BENEFICIARY OF CAPITAL GAIN AND EXIT PROVIDERS, DED UCT HIS COMMISSION BEFORE PAYMENT BY CASH. AS THE PRICES OF SHARES CRASH AND THE EXIST PROVIDERS SELLS THE SHARES FOR A SMALL VALUE, WHICH WERE BOUGHT AT HIGH-VALUE, RESULT IN GENERATI ON OF ARTIFICIAL LOSS. 5.1 AFTER DESCRIBING THE GENERAL MODUS OPERANDI OF ACCOMMODATION ENTRY BY WAY OF BOGUS CAPITAL GAIN/LO SS, THE ASSESSING OFFICER HAS HIGHLIGHTED THE STATEMENT OF THE PERSONS WHO CLAIMED TO HAVE PROVIDED BOGUS CAPITAL GAIN/LOS S ENTRIES. THE ASSESSEE WAS THEN ASKED TO JUSTIFY THE INVESTMENT I N THE RELEVANT SHARES. THE ASSESSING OFFICER HAS POINTED OUT THAT THESE COMPANIES ARE NOT HAVING ANY SIGNIFICANT/REAL BUSIN ESS AS SEEN FROM THE FINANCIAL STATEMENT OF THOSE COMPANIES. TH E PRICE 22 ITA NO.1593/DEL/2019 MOVEMENT OF THE SHARES WAS ALSO FOUND TO BE UNREALI STIC BY HIM. THE ASSESSING OFFICER HAS PARTICULARLY POINTED OUT THAT PRICE MOVEMENT OF THE RELEVANT SHARES TRANSACTED BY THE A SSESSEE, WERE NOT MATCHING WITH MOVEMENT OF THE SHARE MARKET IN G ENERAL AND MOVEMENT OF THE OTHER SCRIPS IN THE SAME LINE OF TH E BUSINESS. THE ASSESSING OFFICER ALSO POINTED OUT THAT VOLUME TRANSACTED IN THOSE SCRIPT WAS ALSO VERY LOW. THERE WAS NO HISTOR Y OF DIVIDEND PAYOUT BY THOSE COMPANIES. THE LD. ASSESSING OFFICE R HAS POINTED OUT THAT THE ASSESSEE COULD NOT EXPLAIN, WHY IT INV ESTED IN SUCH SCRIPT WITHOUT KNOWING THE FINANCIAL PERFORMANCE OF THE COMPANY. THE RELEVANT ANALYSIS HAS BEEN REPRODUCED BY THE AS SESSING OFFICER IN PARA 3.4 (PAGE-11) OF THE ASSESSMENT ORD ER. THE CONCLUSION OF AO HAS ALREADY BEEN REPRODUCED BY US IN BRIEF FACTS OF THE CASE. 5.2 IT WAS CLAIMED BY THE ASSESSEE THAT SAID TRANSACTI ONS WERE ARRANGED THROUGH TAX CONSULTANTS. THE ASSESSEE NEIT HER BEFORE THE LD. CIT(A) NOT BEFORE US HAS REBUTTED THESE ADV ERSE FINDING BY THE ASSESSING OFFICER. THE CONTENTION OF THE ASSESS EE IS THAT THE TRANSACTIONS HAVE BEEN DONE ON RECOGNIZED STOCK EXC HANGE THROUGH REGISTERED STOCK BROKER AND THROUGH BANK AC COUNT AND THUS, IT SHOULD BE TREATED AS GENUINE. HOWEVER, THE REPORT OF THE INVESTIGATION WING CLEARLY SHOWS THAT TRANSACTION O N THE STOCK EXCHANGE CAN ALSO BE MANIPULATED AND THUS, IN SUCH CIRCUMSTANCES, THE ONUS WAS ON THE ASSESSEE TO JUST IFY THE RATIONAL OF ENTERING INTO THE TRANSACTIONS, WHICH T HE ASSESSEE HAS FAILED TO DO SO. 5.3 WE FIND THAT BOTH THE ASSESSING OFFICER AND THE LEO NARD CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE SU PREME COURT IN 23 ITA NO.1593/DEL/2019 THE CASE OF SUMATI DAYAL (SUPRA), WHICH ACCORDING T O THE ASSESSEE ARE NOT APPLICABLE IN THE FACTS OF THE CASE BEING I T IS NOT CASE OF CASH CREDIT. IN OUR OPINION, HERE THE ISSUE IS WHET HER THE SHORT- TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE IS GENUIN E OR NOT. IN THE CASE OF SUMATI DAYAL (SUPRA) ALSO THE WINNING FROM THE HORSE RACES WAS NOT FOUND TO BE GENUINE. THE HONBLE COUR T HELD THAT THE EXCEPTIONAL LUCK ENJOYED BY THE TAXPAYER IN THA T CASE WAS HELD TO BE BEYOND PREPONDERANCE OF PROBABILITY AND THE HONBLE APEX COURT AFFIRMED THE VIEW THAT IT WOULD NOT BE U NREASONABLE TO INFER THAT THE TAXPAYER HAD NOT REALLY PARTICIPATED IN ANY OF THE RACES EXCEPT TO THE EXTENT OF PURCHASING THE WINNIN G TICKETS AFTER THE EVENTS PRESUMABLY WITH UNACCOUNTED FUNDS. IN TH E INSTANT CASE ALSO DESPITE BEING NO FINANCIAL RATIONAL THE I NVESTMENT IN THE SHARES HAS BEEN MADE TO CLAIM LONG-TERM CAPITAL LOS S AND PRESUMABLY UNACCOUNTED CASH HAS BEEN RECEIVED BY TH E ASSESSEE. THUS, THE CONTENTION OF THE LD. COUNSEL OF THE ASSE SSEE THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SUMATI DAYAL (SUPRA) APPLIES ONLY IN THE CASE OF THE CASH CREDIT ENTRIES IS REJECTED. 5.4 THE HONBLE DELHI HIGH COURT IN THE CASE OF SUMAN PODDAR (SUPRA), OBSERVED THAT SHARES OF CRESSANDA SOLUTIO NS LTD. HAVE BEEN IDENTIFIED BY THE BOMBAY STOCK EXCHANGE AS PEN NY STOCK USED FOR OBTAINING BOGUS LONG TERM CAIPTAL GAIN AND NO EVIDENCE OF ACTUAL SALE EXCEPT CONTRACT NOTES ISSUED BY THE SHARE BROKER WERE PRODUCED BY THE ASSESSEE. THE HONBLE HIGH COU RT ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE AS NO SUBSTANTIAL QUESTION OF LAW INVOLVED. 24 ITA NO.1593/DEL/2019 7. THUS, TRIBUNAL HAS IN DEPTH ANALYZED BALANCE SH EETS AND PROFIT AND LOSS ACCOUNTS OF CRESSANDA SOLUTIONS LTD. WHICH SHOWS THAT ASTRONOMICAL INCREASE IN SHARE PRICE OF SAID COMPAN Y WHICH LED TO RETURNS OF 491% FOR APPELLANT, WAS COMPLETELY UNJUS TIFIED. PERTINENTLY, EPS OF SAID COMPANY WAS RS. 0.01/- AS IN MARCH 2016, IT WAS RS. - 0.01/- AS IN MARCH 2015 AND -0.48/- AS IN MARCH 2014. SIMILARLY, OTHER FINANCIAL PARAMETERS OF SAID COMPA NY CANNOT JUSTIFY PRICE IN EXCESS OF RS. 500/- AT WHICH APPELLANT CLA IMS TO HAVE SOLD SAID SHARES TO OBTAIN LONG TERMS CAPITAL GAINS. IT IS NOT EXPLAINED AS TO WHY ANYONE WOULD PURCHASE SAID SHARES AT SUCH HIGH PRICE. TRIBUNAL GOES ON TO OBSERVE IN IMPUGNED ORDER AS F OLLOWS: 10. WITH SUCH FINANCIALS AND AFFAIRS OF BUSINESS, P URCHASE OF SHARE OF FACE VALUE RS. 10/- AT RATE OF RS.491/- BY ANY PERSON AND ASSESSEE'S CONTENTION THAT SUCH TRANSACTION IS GENUINE AND CREDIBLE AND ARGUING TO ACCEPT SUCH CONTENTION WOULD ONLY MAKE DECISION OF JUDICIAL AUTHORITIES FALLACY. 11. EVIDENCES PUT FORTH BY REVENUE REGARDING ENTRY OPERATION FAIRLY LEADS TO CONCLUSION THAT ASSESSEE IS ONE OF BENEFICIARIES OF ACCOMMODATION ENTRY RECEIPTS IN FORM OF LONG TER M CAPITAL GAINS. ASSESSEE HAS FAILED TO PROVE THAT SHARE TRAN SACTIONS ARE GENUINE AND HTTP://ITATONLINE.ORG COULD NOT FUR NISH EVIDENCES REGARDING SALE OF SHARES EXCEPT COPIES OF ITA 841/2019 PAGE 7 OF 10 CONTRACT NOTES, CHEQUES RECEI VED AGAINST OVERWHELMING EVIDENCES COLLECTED BY REVENUE REGARDING OPERATION OF ENTIRE AFFAIRS OF ASSESSEE. THIS CANNOT BE CASE OF INTELLIGENT INVESTMENT OR SIMPLE AND STR AIGHT CASE OF TAX PLANNING TO GAIN BENEFIT OF LONGTERM CAPITAL GA INS. EARNINGS @ 491% OVER PERIOD OF 5 MONTHS IS BEYOND HUMAN PROB ABILITY AND DEFIES BUSINESS LOGIC OF ANY BUSINESS ENTERPRIS E DEALING WITH SHARE TRANSACTIONS. NET WORTH OF COMPANY IS NO T KNOWN TO ASSESSEE. EVEN BROKERS WHO COORDINATED TRANSACTI ONS WERE ALSO UNKNOWN TO ASSESSEE. ALL THESE FACTS GIVE CRED ENCE TO UNRELIABILITY OF ENTIRE TRANSACTION OF SHARES GIVIN G RISE TO SUCH CAPITAL GAINS. RATIO LAID DOWN BY HON'BLE SUPREME C OURT IN CASE OF SUMATI DAYAL VS. CIT, 214 ITR 801 IS SQUARE LY APPLICABLE TO CASE. THOUGH ASSESSEE HAS RECEIVED AM OUNTS BY WAY OF ACCOUNT PAYEE CHEQUES, TRANSACTIONS CANNOT B E TREATED AS GENUME IN PRESENCE OF OVERWHELMING EVIDENCES PUT FORWARD BY REVENUE. FACT THAT IN SPITE OF EARNING S UCH STEEP PROFITS, ASSESSEE NEVER VENTURED TO INVOLVE HIMSELF IN ANY OTHER TRANSACTION WITH BROKER CANNOT BE MERE COINCI DENCE OF LACK OF INTEREST. RELIANCE IS PLACED ON JUDGMENT IN CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA), WH ERE IT WAS HELD THAT IT IS DUTY OF TRIBUNAL TO SCRATCH SURFACE AND PROBE DOCUMENTARY EVIDENCE IN DEPTH, IN LIGHT OF CONDUCT OF ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORDER TO SEE WHETHER ASSESSEE IS LIABLE TO PROVISIONS OF SECTION 68 OR N OT. IN CASE OF 25 ITA NO.1593/DEL/2019 NR PORTFOLIO, IT WAS HELD THAT GENUINENESS AND CRED IBILITY ARE DEEPER AND OBTRUSIVE. SIMILARLY, BANK STATEMENTS PR OVIDED BY ASSESSEE TO PROVE GENUINENESS OF TRANSACTIONS CANNO T BE CONSIDERED IN VIEW OF JUDGMENT OF HON'BLE COURT IN CASE OF PRATHAM TELECOM INDIA PVT. LTD., WHEREIN, IT WAS ST ATED THAT BANK STATEMENT IS NOT SUFFICIENT ENOUGH TO DISCHARG E BURDEN. REGARDING FAILURE TO ACCORD OPPORTUNITY OF CROSS EX AMINATION, WE RELY ON JUDGMENT OF PREM CASTINGS PVT. LTD. SIMI LARLY, TRIBUNAL IN CASE OF UDIT KALRA, ITA NO. 6717/DEL/20 17 FOR ASSESSMENT YEAR 2014-15 HAS CATEGORICALLY HELD THAT WHEN THERE WAS SPECIFIC CONFIRMATION WITH REVENUE THAT A SSESSEE HAS INDULGED IN ITA 841/2019 PAGE 8 OF 10 NON-GENUI NE AND BOGUS CAPITAL GAINS OBTAINED FROM TRANSACTIONS OF P URCHASE AND SALE OF SHARES, IT CAN BE GOOD REASON TO TREAT TRANSACTIONS AS BOGUS. DIFFERENCES OF CASE OF UDIT KALRA ATTEMPT ED BY LD. AR DOES NOT ADD ANY CREDENCE TO JUSTIFY TRANSACTION S. INVESTIGATION WING HAS ALSO CONDUCTED ENQUIRIES WHI CH PROVED THAT ASSESSEE IS ALSO ONE OF BENEFICIARIES OF TRANS ACTIONS ENTERED BY COMPANIES THROUGH MULTIPLE LAYERING OF TRANSACTIONS AND ENTRIES PROVIDED. EVEN BSE LISTED THIS COMPANY AS BEING USED FOR GENERATING BOGUS LTCG. ON FACTS OF CASE AND JUDICIAL PRONOUNCEMENTS WILL GIVE RISE TO ONLY CONCLUSION THAT ENTIRE ACTIVITIES OF ASSESSEE IS CO LOURABLE DEVICE TO OBTAIN BOGUS CAPITAL GAINS. HON'BLE HIGH COURT OF DELHI IN CASE OF UDIT KALRA, ITA NO. 220/2009 HELD THAT COMPANY HAD MEAGER RESOURCES AND ASTRONOMICAL GROWT H OF VALUE OF COMPANY'S SHARES ONLY EXCITED SUSPICION OF REVENUE AND HENCE, TREATED RECEIPTS OF SALE OF SHARES TO BE BOGUS. HON 'BLE HIGH COURT HAS ALSO DEALT WITH ARGUMENTS OF AS SESSEE THAT HE WAS DENIED RIGHT OF CROSS EXAMINATION OF IN DIVIDUALS WHOSE STATEMENTS LED TO ENQUIRY. LD. AR ARGUMENT TH AT NO QUESTION OF LAW HAS BEEN FRAMED IN CASE OF UDIT KAL RA ALSO DOES NOT MAKE ANY TANGIBLE DIFFERENCE TO DECISION O F THIS CASE. SINCE ADDITIONS HAVE BEEN CONFIRMED BASED ON ENQUIR IES BY REVENUE, TAKING INTO CONSIDERATION RATIO LAID DOWN BY VARIOUS HIGH COURTS AND HON'BLE SUPREME COURT, OUR DECISION IS EQUALLY APPLICABLE TO RECEIPTS OBTAINED FROM ALL TH REE ENTITIES. FURTHER, RELIANCE IS ALSO PLACED ON ORDERS OF VARIO US COURTS AND TRIBUNALS LISTED BELOW. MK. RAJESHWARI VS. ITO IN ITA NO.17231BANGL2018, ORDER DATED 12.10.2018. ABHIMANY U SOIN VS. ACIT IN ITA NO. 9511/CHD/2016, ORDER DATED 18.04.2018. SANJAY BIMALCHAND JAIN VS. ITO 89 TAXMA NN.COM 196. DINESH KUMAR KHANDELWAL, HUF VS. ITO IN ITA NO . 58 & 591NAGL2015, ORDER DATED 24.08.2016. RATNAKAR M PUJ ARI VS. ITO IN IT NO. 9951MUML2012, ORDER DATED 03.08.2016. ITA 841/2019 PAGE 9 OF 10 DISHA N. LALWANI VS. ITO IN I TA NO. 6398 I MUM I 2012, ORDER DATED 22.03.2017. ITO VS. SHAMIM. M BHARWONI [20 16] 69 TAXMANN.COM 65. USHA CHANDRES H 26 ITA NO.1593/DEL/2019 SHAH VS ITO IN ITA NO. 6858 I MUM I 2011, ORDER DAT ED 26.09.2014. CIT VS. SMT. JASVINDER KAUR 357 ITR 638 . 12. FACTS AS WELL AS RATIONALE GIVEN BY HON'BLE HIG H COURT ARE SQUARELY APPLICABLE TO CASE BEFORE US. HENCE, KEEPI NG IN VIEW OVERALL FACTS AND CIRCUMSTANCES OF CASE THAT PROFIT S EARNED BY ASSESSEE ARE PART OF MAJOR SCHEME OF ACCOMMODATION ENTRIES AND KEEPING IN VIEW RATIO OF JUDGMENTS QUOTED ABOVE , WE, HEREBY DECLINE TO INTERFERE IN ORDER OF LD. CIT(A). (EMPHASIS SUPPLIED) 8. FROM ABOVE EXTRACT, IT WOULD BE SEEN THAT CRESSA NDA SOLUTIONS LTD. WAS IN FACT IDENTIFIED BY BOMBAY STOCK EXCHANG E AS PENNY STOCK BEING USED FOR OBTAINING BOGUS LONG TERM CAPI TAL GAIN. NO EVIDENCE OF ACTUAL SALE EXCEPT CONTRACT NOTES ISSUE D BY SHARE BROKER WERE PRODUCED BY ASSESSEE. NO QUESTION OF LAW, THER EFORE ARISES IN PRESENT CASE AND CONSISTENT FINDING OF FACT RETURNE D AGAINST APPELLANT ARE BASED ON EVIDENCE ON RECORD. 5.5 IT IS EVIDENT THAT ONE LEG OF THE TRANSACTION (SAL E TRANSACTION OF THE SHARE FOR CAPITAL GAIN) IS BOGUS AND NON-GEN UINE, THEN IN SAME SET OF CIRCUMSTANCES; THE OTHER LEG OF THE TRA NSACTION (PURCHASE OF SHARE FOR CAPITAL LOSS) IS BOUND TO BE BOGUS AND NOT GENUINE. THUS, THE TRANSACTION OF THE ASSESSEE OF P URCHASE AND SUBSEQUENT SALE LEADING TO SHORT TERM CAPITAL LOSS ARE NOT GENUINELY ENTERED. 5.6 IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT BEING OF JURISDICTIONAL HIGH COURT AND IN RESPECT OF THE SAM E SHARE SCRIP IN WHICH THE ASSESSEE HAS TRANSACTED, THE RATIO OF OTHER DECISIONS OF THE TRIBUNAL AND OTHER HIGH COURTS RELIED UPON B Y THE ASSESSEE CANNOT BE APPLIED OVER THE FACTS OF THE INSTANT CAS E. 5.7 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE SHORT-TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE IS NOT FOUND T O BE GENUINE AND DESERVE TO BE DISALLOWED. THE RELEVANT GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 6. THE NEXT ISSUE WHICH HAS BEEN RAISED BY THE ASSESS EE THAT NO ADDITION COULD HAVE BEEN MADE UNDER SECTION 68 O F THE ACT IN THE CASE OF THE ASSESSEE. ACCORDING TO THE ASSESSEE , THE CASE OF 27 ITA NO.1593/DEL/2019 THE ASSESSEE IS OF CASH DEBIT AND NOT OF CASH CREDI T, HENCE PROVISIONS OF SECTION 68 ARE NOT ATTRACTED. WE FIND THAT THE LD. CIT(A) HAS REJECTED THIS CONTENTION OF THE ASSESSEE . WE AGREE WITH THE CONTENTION OF THE ASSEESEE THAT ADDITION FOR SH ORT TERM CAPITAL LOSS CANNOT BE MADE UNDER SECTION 68 OF THE ACT, BE CAUSE ADDITION HAS NOT BEEN MADE FOR UNEXPLAINED CREDIT O N SALE OF THE SHARES DURING THE YEAR BUT IN RESPECT OF THE CLAIM OF BOGUS SHORT CAPITAL LOSS. IN THE CASE OF THE ASSESSEE, CORRECT ACTION WOULD BE DISALLOWANCE OF CLAIM OF THE SHORT CAPITAL LOSS OF THE ASSESSEE. HOWEVER, IN OUR OPINION, MENTIONING WRONG SECTION I N THE ASSESSMENT ORDER CANNOT RENDER THE ENTIRE ASSESSMEN T NULL AND VOID. IT IS NOT THE JURISDICTIONAL REQUIREMENT FOR COMPLETING THE ASSESSMENT. THE ASSESSING OFFICER HAS CORRECTLY ACQ UIRED THE JURISDICTION OVER THE CASE AND ONLY MISTAKE IS UNDE R WHICH SECTION THE ADDITION SHOULD BE MADE. 6.1 IN VIEW OF THE LAW PRONOUNCED IN THE L. HAZARI MAL KUTHIALA VS. ITO (1961) 41 ITR 12 (SC), ITO VS. SEGHU BUCHIA H SETTY (1964) 52 ITR 538 (SC) : TC52R.1343 AND P.M. BHARUCHA & CO . VS. ITO (1969) 74 ITR 513 (GUJ), IT IS WELL SETTLED THAT WH ERE THE POWER TO PROCEED IS ACTUALLY THERE, THE MERE REFERENCE TO A WRONG SECTION FOR AUTHORITY TO ACT, WILL NOT VITIATE THE ACTION T AKEN. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF IMPERIAL BOX & CARTON MAKERS VS. COMMISSIONER OF INCOME TAX, REPORTED IN (1991) 97 CTR 0122 ALSO UPHELD THAT MER E MENTIONING OF WRONG SECTION CACNOT INVALIDATE THE P ENALTY LEVIED. THE RELEVANT FINDING OF THE HONBLE HIGH COUTY IS R EPRODUCED AS UNDER: 28 ITA NO.1593/DEL/2019 2 . THE QUESTION INVOLVED IS WITH REGARD TO LEVY OF PEN ALTY. IN THE ORDER PASSED BY THE TRIBUNAL UNDER S. 256(1), IT HA S BEEN OBSERVED AS UNDER : '8. QUESTION NOS. 1 AND 2 AS FRAMED, WERE DISCUSSED IN DETAIL BY THE TRIBUNAL IN PARA 7 WHILE DECIDING THE APPEAL . THE TRIBUNAL POINTED OUT THAT AT THE TIME OF COMPLETING ASSESSME NT THE ITO INITIATED PENALTY PROCEEDINGS UNDER S. 271(1)(C)_ O F THE ACT, 1961. SIMPLY BECAUSE THE ITO IN THE BODY OF THE ORDER MEN TIONED A WRONG SECTION , IT WILL NOT INVALIDATE THE ORDER. COMMISSIONER (A ) HAS CLEARLY HELD THAT EXPLANATION TO S. 271(1)(C) WAS ATTRACTED IN THE PRESENT CASES. BEFORE THE LEARNED COMMISSIONER(A) NO SUCH P LEA WAS TAKEN THAT THE ITO APPLIED WRONG PROVISION FOR IMPOSING PENALTY. MOREOVER THE TRIBUNAL AFTER HEARING THE ASSESSEE AND CONSIDE RING THE MATERIAL ON RECORD CAME TO THE FINDING OF FACT THAT PROVISIO N OF S. 271(1)(C) WERE ATTRACTED. EVEN ACCORDING TO THE ASSESSEE IN T HE PRESENT CASE EXPLANATION TO S. 271(1)(C) IS ATTRACTED. THAT PROV ISION WAS INTERPRETED BY THE TRIBUNAL AFTER APPRECIATING THE FACTS. THUS NO QUESTION OF LAW WOULD ARISE ON THESE POINTS. 6.2 IN VIEW OF THE ABOVE, WE REJECT THE CONTENTION OF T HE ASSSESSEE TO NULLIFY THE ORDER DUE TO WRONG APPLICA TION OF SECTION BY THE ASSESSING OFFICER WHILE REJECTING THE CLAIM OF THE SHORT TERM CAPITAL GAIN. THE GROUNDS OF THE APPEAL ARE AC CORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2020. SD/- SD/- ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 7 TH JANUARY, 2020. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI