ITO, Ward - 40(4), Kolkata , Kolkata V. Shri Vishwanath Gupta, Kolkata

ITA 1732/KOL/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8618 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 26-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: MANISH TIWARI
• Keywords: Income from undisclosed sources; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Question of law; Cost of acquisition; Assessment record; Onus to prove
• Section: 142(1); 260A; 11; 68

Judgement Text

1 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 1732/KOL/2017 ASSESSMENT YEAR: 2014-15 INCOME-TAX OFFICER, WD-40(4), KOLKATA. VS. SHRI VISHWANATH GUPTA (PAN: ADBPG7164K) APPELLANT RESPONDENT DATE OF HEARING 10.10.2018 DATE OF PRONOUNCEMENT 12.12.2018 FOR THE APPELLANT SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR FOR THE RESPONDENT SHRI MANISH TIWARI, AR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-12, KOLKATA DATED 21.04.2017 FOR AY 2014-15. 2. THE SOLE GROUND OF APPEAL OF REVENUE IS AGAINST THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS.3,19,45,100/- U/S. 68 OF THE INC OME-TAX ACT, 961 (HEREINAFTER REFERRED TO AS THE ACT) WHICH WAS CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL GAIN EXEMPT U/S. 10(38) OF THE ACT. 3. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE THAT AT THE TIME OF ASSESSMENT STAGE THE ISSUE OF ASSESSEE CLAIMING LONG TERM CAPITAL GAIN W AS BROUGHT TO THE NOTICE OF THE LD. AR AND WAS ASKED BY THE AO TO FURNISH ALL RELEVANT DET AILS IN SUPPORT OF THE CLAIM OF DEDUCTION U/S. 10(38) OF THE ACT. THE ASSESSEE WAS ALSO ASKE D TO SHOW CAUSE AS TO WHY THE ENTIRE AMOUNT IN THE FORM OF ALLEGED CAPITAL GAIN SHOULD N OT BE TAKEN AS INCOME FROM OTHER SOURCES FOR FAILURE TO SUBSTANTIATE THE CLAIM WITH PROPER EVIDENCE/PROOF. THE CONTENTS OF THE SAID SHOW CAUSE ARE REPRODUCED AS UNDER: 2 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 DURING THE COURSE OF SCRUTINY IT WAS REVEALED FRO M AIR TRANSACTION THAT YOU HAVE MADE PENNY STOCK TRANSACTION THROUGH BSE LTD DURING THE RELEVANT FY 2013-14 IN RESPECT OF SHARES SCRIP OF MAINLY NCL RESEARCH & FINANCE SERVI CE LTD. ON WHICH YOU HAD MADE HUGE LONG TERM CAPITAL GAIN. COMPUTATION OF THE ACCOUNTS SHOWS THAT THE SALE CONSIDERATION NCL RESEARCH & FINANCE SERVICE LTD IS RS.3,19,45,100/- AND THE COST OF ACQUISITION OF SUCH SHARES IS RS.79,75,000/-,SHOWING A LONG TERM CAPITA L GAIN OF RS.2,39,70,100/-. IN THIS RESPECT THIS IS TO INFORM YOU THAT AS PER T HE INFORMATION RECEIVED FROM DGIT (LNV) THE TRANSACTION OF SHARES OF NCL RESEARCH & FINANCE SER VICE LTD IN WHICH YOU HAVE CLAIMED TO HAVE GENERATED LTCG/LTCL ARE A PENNY STOCK. NOT ONL Y THAT, THE SEBI VIDE ORDER U/S.11 (I), I1 (4) & 11 B OF THE SECURITIES & EXCHANGE BOARD OF INDIA ACT 1992 HAS RESTRAINED THE SAID SCRIP FROM ACCESSING THE SECURITY MARKET. IN THE LIGHT OF ABOVE INFORMATION AND FACTS, YOU AR E HEREBY SHOW CAUSED AS TO WHY NOT THE HUGE LONG TERM CAPITAL GAIN MADE BY YOU BY SELLING THE SCRIP OF NCL RESEARCH & FINANCE SERVICE LTD BE TREATED AS ACCOMMODATION ENTRY THROU GH A PRE-PLANNED MECHANISM TO BRING YOUR UNACCOUNTED MONEY INTO THE BOOKS AND THE SAME BE ADDED BACK AS YOUR INCOME FOR THE YEAR UNDER ASSESSMENT.' 4. AFTER PERUSAL OF THE REPLY BY THE ASSESSEE TO TH E SHOW CAUSE LETTER, THE AO NOTES THAT HE WAS NOT CONVINCED BY THE REPLY. SO, THE AO AFTE R TAKING NOTE OF THE INVESTIGATION MADE BY THE DGIT IN REGARD TO PENNY STOCK SHARES WAS OF THE OPINION THAT THE SALE OF SHARES OF M/S. NCL RESEARCH & FINANCE SERVICE LTD. WAS A BOGU S TRANSACTION AND SO HE TREATED THE ENTIRE SALE PROCEEDS OF ABOVE SHARES AS UNDISCLOSED INCOME FROM OTHER SOURCES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE SAID ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO DELE TED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 3.2. I HAVE PERUSED THE OBSERVATIONS AND FINDINGS CONTAINED IN THE ASSESSMENT ORDER. I HAVE ALSO CONSIDERED THE SUBMISSION OF THE APPELLANT ALONG WI TH PAPER BOOK FILED BY LD. AR WHICH CONTAINED, INTER ALIA, THE FOLLOWING DOCUMENTS: COPY OF CAPITAL GAIN CALCULATION SHEET FOR AY 2014- 15. COPY OF ALLOTMENT ADVICE AND SHARE APPLICATION FROM OF NCL RESEARCH & FINANCIAL SERVICES LTD. COPY OF DEMAT STATEMENT COPY OF SHOW CAUSE LETTER DATED 02.12.2016 COPY OF REPLY TO SHOW CAUSE LETTER FILED BEFORE AO COPY OF NOTICE U/S. 142(1) DATED 16.06.2016 & 12.09.2016 COPY OF REPLY TO NOTICE U/S. 142(1) DATED 07.11.201 6 FILED BEFORE AO -- 28 30 -- 33 40 43 27 -- -- 32 -- -- -- -- 29 31 -- 39 42 44 THE FACTUAL BACKGROUND REVEALS THAT THE APPELLANT C LAIMED EXEMPTION FOR RS.2,48,49,453/- TOWARDS LTCG ON SALE OF SHARES U/S. 10(38) IN RESPECT OF FO LLOWING SHARE SCRIPS: 3 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 4 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 5 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 6 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 AGGRIEVED BY THE AFORESAID ACTION OF THE LD. CIT(A) , THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. CIT(A) HAS MADE THE FOLLOWING FINDING OF FACTS I) THAT ASSESSEE SOLD SHARES THROUGH ONLINE TRADING SYSTEM THROUGH REGISTERED SHARE BROKER. (II) SHARES WERE DULY DEPOSITED/CREDITED IN THE DE MAT ACCOUNT MAINTAINED WITH THE THIRD PARTY AND WHEN THE SHARES WERE SOLD ALSO DEBITED FR OM DEMAT ACCOUNT. (III) THE CONTRACT NOTES CLEARLY INDICATED THE TRAD E NUMBER WITH TIME AS WELL AS ORDER DATE WITH TIME. (IV) THE SHARES WERE ACQUIRED AT ISSUE PRICE AND SOLD AT PREVAILING MARKET RATE. (V) ENTIRE TRANSACTION WERE ROUTED THROUGH THE STOC K EXCHANGE AND THE ENTIRE TRANSACTION WERE ROUTED THROUGH PROPER BANKING CHANNEL. (VI) THE ASSESSEE HAS PAID STT AS WELL AS ALL STATU TORY CHARGES LEVIED BY THE STOCK EXCHANGE. 6. WE NOTE THAT THE AFORESAID FINDING OF FACTS WHIC H THE LD. CIT(A) HAS FOUND HAS NOT BEEN ASSAILED IN ANY OF THE GROUNDS OF APPEAL PREFE RRED BY THE REVENUE WHICH READS AS UNDER: 7 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3,19,45,100/- MADE U/S 68 OF THE ACT, WHICH WAS CLA IMED BY THE ASSESSEE AS LONG TERM CAPITAL GAIN EXEMPT U/S 10(38) OF THE ACT WITHOUT APPRECIAT ING THE ENTIRE FACTS AND FINDINGS IN THE REPORT OF THE INVESTIGATION WING THAT TRANSACTIONS IN SHARES LIKE NCL RESEARCH AND SEVERAL OTHERS WERE NOTHING BUT BOGUS PREARRANGED TRANSACTI ONS FOR GIVING ENTRIES OF LONG TERM CAPITAL GAIN AND THEREBY, TO EVADE TAXES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION MADE BY A.O., SOLELY RELYING ON THE SUBMISSION OF THE AS SESSEE THAT THE TRANSACTIONS FROM WHICH THE ASSESSEE HAD EARNED CAPITAL GAIN WERE CARRIED OUT T HROUGH THE STOCK EXCHANGE MECHANISM AND THE ASSESSEE HAD NO ROLE IN MANIPULATIONS OF THE TR ANSACTIONS, AND THEREFORE GENUINE, IGNORING FACT THAT THE SEBI HAS PASSED ORDER BANNING TRADING OF SEVERAL SHARES INCLUDING NCL RESEARCH. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN HOLDING THAT THE A.O. CAME TO THE CONCLUSION WITHOUT CARRYING OUT ANY EXAMINAT ION OF THE DIRECTORS/PROMOTERS OF NCL RESEARCH, WHEREAS THE INVESTIGATION OF THE INVESTIG ATION WING WAS COMPLETE WITH INVESTIGATIONS OF THE ALL DIRECTORS AND PROMOTERS OF THE SCRIP AND THE STATEMENTS RECORDED OF THEM. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN FAILING TO APPRECIATE THAT THE LONG TERM CAPITAL GAIN FROM TRANSACTIONS OF SEV ERAL SCRIPS WERE PURELY PREARRANGED ENTRIES OF PROFIT & LOSSES FOR EVADING TAXES BY CLA IMING TO BE TAX EXEMPT U/S. 10(38) OF THE ACT. 7. SINCE THE REVENUE HAS NOT CHALLENGED THE AFORESA ID FACTS ENUMERATED SUPRA AS (I) TO (VI) OF PARA 5, IN ITS GROUNDS OF APPEAL, THESE FAC TS ARE TAKEN AS UNDISPUTED BY THE DEPARTMENT. FURTHER, WE NOTE THAT THE LD. CIT(A) HAS NOTED THAT THE ASSESSEE HAD APPLIED FOR 29500 EQUITY SHARES OF NCL RESEARCH & FINANCIAL SERVICES LTD.[ HEREIN AFTER NCL] ON PREFERENTIAL ALLOTMENT BASIS AND PURCHASE CONSIDERA TION WAS THROUGH ACCOUNT PAYEE CHEQUE AND THAT THE SOURCE OF INVESTMENT WAS EXPLAINED BY THE ASSESSEE, WHICH FACT ACCORDING TO LD CIT(A) HAS NOT BEEN DISPUTED BY AO IN THE ASSESSMEN T ORDER. THE LD. CIT(A) HAS TAKEN NOTE OF THE EVIDENCE OF THE ASSESSEES INVESTMENT I N THE SHARES OF NCL, WHICH FACT IS EVIDENT FROM THE SHARE APPLICATION AND BANK STATEMENT FILE D BEFORE HIM IN THE PAPER BOOK. IT WAS NOTED BY THE LD. CIT(A) THAT PURSUANT TO ASSESSEE A PPLYING FOR SHARE, HE WAS ALLOTTED THE SHARES AS PER ALLOTMENT ADVICE AND SHARE CERTIFICAT E WAS ALSO ISSUED TO THE ASSESSEE. THE LD. CIT(A) HAS NOTED THAT THIS INVESTMENT HAS BEEN DULY BEEN REFLECTED UNDER THE HEADING SHARE INVESTMENT IN THE AUDITED BALANCE SHEET FOR THE YE AR ENDED 31.03.2013. THE LD. CIT(A) HAS TAKEN NOTE OF THE COPY OF ALLOTMENT LETTER AND SHAR E CERTIFICATE AND BALANCE SHEET FILED BEFORE HIM TO RETURN A FINDING OF FACT ABOUT THE GENUINENE SS OF THE INVESTMENT IN SHARES OF NCL . THUS, AFTER TAKING NOTE OF THE RELEVANT MATERIALS F ILED BEFORE HIM AND FROM PERUSAL OF 8 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 ASSESSMENT RECORDS ONLY THE LD. CIT(A) HAS ENDORSED THE CLAIM OF THE ASSESSEE. WE FURTHER NOTE THAT THE ASSESSEE HAD MADE SPECIFIC REQUEST BE FORE THE AO TO FURNISH ANY DOCUMENTARY EVIDENCE OF SEBIS REPORT REGARDING PRICE RIGGING B Y THE ASSESSEE OR NCL COMPANY. WE NOTE THAT THE ASSESSEE ALSO REQUESTED FOR COPIES OF MATERIAL/EVIDENCES RECEIVED BY THE AO OR RELIED UPON BY THE AO TO HAVE BEEN RECEIVED FROM DI RECTOR OF INVESTIGATION, KOLKATA BASED ON WHICH THE ALLEGATION OF BOGUS LONG TERM CAPITAL GAIN WAS MADE BY THE AO. HOWEVER, WE NOTE THAT THE AO DID NOT GIVE ANY ADVERSE MATERIAL/ EVIDENCE TO THE ASSESSEE. THE ASSESSEE ALSO REQUESTED THE AO TO ALLOW CROSS EXAMINATION O F THOSE PERSONS WHOSE STATEMENTS WERE RELIED UPON BY THE INVESTIGATION WING OR BY THE AO HIMSELF TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE. HOWEVER, THE ASSESSEES PLEA WAS NOT FULFILLED. WE NOTE THAT THE LD. CIT(A) RIGHTLY TOOK NOTE OF THE JUDGMENT OF THE HO NBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIAL ENTERPRISES REPORTED IN 210 ITR 103 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT RIGHT TO CROSS EXAMINE A WITNESS ADVERSE TO THE ASSESSEE IS AN INDISPENSABLE RIGHT AND THE OPPORTUNITY OF SUCH CRO SS EXAMINATION IS ONE OF THE CORNER STONES OF NATURAL JUSTICE. WE CONCUR WITH THE LD. CIT(A) THAT THE AO HAS MECHANICALLY FOLLOWED INVESTIGATION REPORT/STUDY OF DIT (INV.) W ITHOUT BRINGING OUT ANY LINK OF SUCH REPORTS WITH THAT OF THE ASSESSEE OR THE SCRIPS WHI CH THE ASSESSEE TRANSACTED. WE NOTE THAT THE ASSESSMENT ORDER IS BASED ON PRESUMPTIONS AND ASSUM PTIONS AND WITHOUT BRINGING ANY RELEVANT MATERIAL/EVIDENCE THEREOF TO SHOW THAT THE SCRIPS ON WHICH THE ASSESSEE IS MAKING THE CLAIM IS BOGUS. THE AO NOWHERE HAS BEEN ABLE TO CONTROVERT THE MATERIAL/DOCUMENTS PRODUCED BY THE ASSESSEE TO PROVE THE TRANSACTION A S FABRICATED OR CONCOCTED OR FALSE. WHEN THE ASSESSEE HAS FILED THE DOCUMENTS TO PROVE THE P URCHASE OF SHARES OF NCL AND WHEN SALES HAPPENED THROUGH REGISTERED SHARE BROKER IN THE STO CK EXCHANGE AND THROUGH BANKING CHANNEL, THEN THE SALE PROCEEDS THE ASSESSEE RECEIV ED CANNOT BE HELD AS BOGUS UNLESS THERE IS ANY MATERIAL WITH THE AO TO TAKE AN ADVERSE VIEW. HOWEVER, THE AO HAS FAILED TO BRING ANY EVIDENCE ON RECORD TO SUGGEST INVOLVEMENT OF THE AS SESSEE IN SUCH ALLEGED MANIPULATIONS. THE ALLEGATION MADE BY AO TO DENY THE CLAIM CLEARL Y SHOW THAT THESE ARE SUSPICION, SURMISES AND CONJECTURES AND MORE SO WHEN THE ASSES SEE HAS DISCHARGED ITS ONUS BY PRODUCING NECESSARY DETAILS AND EVIDENCE. WE ALSO NOTE THAT THE HONBLE JURISDICTIONAL HIGH 9 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 COURT IN THE CASE OF CIT VS. BHAGWATI PRASAD AGARWA L (ITA NO. 22 OF 2009) DATED 29.04.2009 HAS HELD THAT THIS IS AN APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 CHALLENGING THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL. THE REVENUE CHAL LENGED THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL), INTER ALIA, DE LETING THE ADDITION OF RS.34,81,165/-, WHICH WAS TREATED AS INCOME FROM OTHER SOURCES BASE D ON THE INFORMATION RECEIVED FROM THE CALCUTTA STOCK EXCHANGE. THE AMOUNT WAS CLAIMED BY THE ASSESSEE AS LONG TERM CAPITAL GAINS. IT IS SUBMITTED BY MR. PRITHU DUDHARIA, LEARNED ADV OCATE FOR THE REVENUE THAT THE RECORDS FROM THE CALCUTTA STOCK EXCHANGE SHOWS THAT THE NAM E OF THE ASSESSEE IS NOT APPEARING IN RESPECT OF THE TRANSACTIONS-IN-QUESTION. THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION EN TERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. WE DO NOT, THEREFORE, THINK THAT THIS APPEAL INVOLV ES ANY SUBSTANTIAL QUESTION OF LAW REQUIRING INTERFERENCE BY THIS COURT UNDER SECTION 260A OF THE INCOME TAX ACT, 1961. THE APPEAL IS, THEREFORE, SUMMARILY DISMISSED. WE M AKE NO ORDER AS TO COSTS. 8. WE ALSO NOTE THAT THE HON'BLE JHARKHAND HIGH COURT HELD THAT THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE APPELLANT'S CL AIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT BY TREATING THE SALE OF SHARES IN THAT CASE AS BOGUS. [ CIT VS. ARUN KUMAR AGARWAL (HUF) - [2012] 26 TAXMANN.COM 113 ( JHARKHAND)] - IN THE FACTS OF THIS CASE THE ASSESSI NG OFFICER TOOK NOTE OF THE FACT THAT THE SECURITIES & EXCHANGE BOARD OF INDIA (SEBI) FINDING UNUSUAL RISE IN THE SHARE OF SOME OF THE COMPANIES WAS OF THE OPINION THAT THERE MAY BE A PRIMA FACIE CASE OF VIOLATION OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITY MARKET) REGULATION, 2003 AND O RDERED A DETAILED ENQUIRY UNDER SECTION 11B AND 114 OF THE SEBI ACT, 1992 .1 N THE ENQUIRY, FINDINGS WERE RECORDED AGAINST ELEVE N STOCK BROKERS AND THEIR TRADING WAS SUSPENDED BY TH E STOCK EXCHANGE. RELYING ON THESE ORDERS OF SEBI, THE ASSESSING OFFICER HELD THAT THE TRANSACTION OF THE PURCHASE OF THE SHARES AND SALE THEREOF WAS NOT GENUINE AND WAS A SHAM TRA NSACTION. THE COMMISSIONER (APPEALS) FOUND THAT THE PURCHASES OF THE SHARES WERE SHOWN B Y THE ASSESSEE IN HIS BALANCE SHEET OF THE LAST FIVE YEARS AND GENUINENESS OF THE BOOKS OF ACCOUNT WAS NEVER QUESTIONED. THE 10 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 COMMISSIONER ( APPEALS) FURTHER FOUND THAT THE PURCHASE TRANSACTIO NS WERE SUPPORTED BY THE DOCUMENTS AND THE PAYMENT WAS MADE THROUGH BANK AND IT WAS VERIFIED WELL FROM THE BANK STATEMENT. THE REVENUE CONTENDED THAT IT IS HIGHLY IMPROBABLE THAT THE SHARE PRICE OF A WORTHLESS COMPANY GONE FROM RS.3 TO RS.55 IN A SHOR T SPAN OF TIME AND MERE PAYMENT BY CHEQUE AND RECEIPT OF CHEQUE DOES NOT RENDER ITS TR ANSACTION GENUINE. THE REVENUE FURTHER CONTENDED THAT SOMETIMES ACCOUNTS APPARENT MAY NOT BE REAL. THE HON'BLE JHARKHAND HIGH COURT FOUND THAT IT IS NOT DISPUTED BY THE REVENUE THAT THE SHARES OF THESE ASSESSEES WERE ALREADY SHOWN IN THEIR EARLIER BALANCE SHEET SUBMIT TED BY THE ASSESSEES, AND THEREFORE, IN THAT SITUATION} HOW THE REVENUE CONDEMNED THE TRANS ACTION EVEN ON THE GROUND OF STEEP RISE IN THE SHARES. IF WITHIN A PERIOD OF ONE YEAR, THE SHARE PRICE HAS RISEN FROM RS.5 TO 55 AND FROM 9 TO 160 AND ONE PERSON WAS HOLDING THE SHARES MUCH PRIOR TO THAT START OF RISE OF THE SHARE, THEN HOW IT CAN BE INFERRED THAT SUCH PERSON ENTERED INTO SHAM TRANSACTION FEW YEARS AGO AND PREPARED FOR GETTING THE BENEFIT AFTER FEW YEARS WHEN THE SHARE WILL START RISING STEEPLY. IN PRESENT CASE EVEN THERE WAS NO REASON F OR SUCH SUSPICION WHEN THE SHARES WERE PURCHASED YEARS BEFORE THE UNUSUAL FLUCTUATION IN T HE SHARE PRICE. THE HON'BLE HIGH COURT HELD THAT- 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL FOR THE PARTIES AND WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED ASSESSING O FFICER WAS MUCH INFLUENCED BY THE ENQIURY REPORT WHICH MAY HAS BEEN BROUGHT ON RECORD BY THE EFFORTS OF THE ASSESSING OFFICER AND THAT ENQUIRY REPORT WAS PREPARED BY THE SEBI AND FROM TH E OBSERVATIONS MADE BY THE TAX APPEAL NO.4 OF 2011 WITH ANALOGOUS CASE ASSESSING OFFICER HIMSELF, IT IS CLEAR THAT AFTER GETTING THAT ENQUIRY REPORT, THE SEBI PRIMA FACIE FOUND INVOLVEM ENT OF SOME OF THE SHARE BROKERS IN UNFAIR TRADE PRACTICES. EVEN IN A CASE WHERE THE SHARE BRO KER WAS FOUND INVOLVED IN UNFAIR TRADE PRACTICE AND WAS INVOLVED IN LOWERING AND RISING OF THE SHARE PRICE, AND ANY PERSON, WHO HIMSELF IS NOT INVOLVED IN THAT TYPE OF TRANSACTION , IF PURCHASED THE SHARE FROM THAT BROKER INNOCENTLY AND BONAFIDELY AND IF HE SHOW HIS BONAFI DE IN TRANSACTION BY SHOWING RELEVANT MATERIAL, FACTS AND CIRCUMSTANCES AND DOCUMENTS, TH EN MERELY ON THE BASIS OF THE REASON THAT SHARE BROKER WAS INVOLVED IN DEALING IN THE SHARE O F A PARTICULAR COMPANY IN COLLUSION WITH OTHERS OR IN THE MANNER OF UNFAIR TRADE PRACTICES A GAINST THE NORMS OF S.E.B.I AND STOCK EXCHANGE, THEN MERELY BECAUSE OF THAT FACT A PERSON WHO BONAFIDELY ENTERED INTO SHARE TRANSACTION OF THAT COMPANY THROUGH SUCH BROKER THE N ONLY BY MERE ASSUMPTION SUCH TRANSACTIONS CANNOT BE HELD TO BE A SHAME TRANSACTI ON. FACT OF TINTED BROKER MAY BE RELEVANT FOR SUSPICION BUT IT ALONE NECESSARILY DOES LEAD TO CONCLUSION OF ALL TRANSACTION OF THAT BROKER AS TINTED. IN SUCH CIRCUMSTANCES, FURTHER ENQUIRY I S NEEDED AND THAT IS FOR INDIVIDUAL CASE. SUCH FURTHER ENQUIRY WAS NOT CONDUCTED IN THAT CASE . 11 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 9. WE NOTE THAT AO HAVE NOT APPRECIATED THAT THE TR ANSACTION OF SALE OF SHARES BY THE ASSESSEE WAS DULY BACKED UP BY MATERIAL/EVIDENCE IN CLUDING CONTRACT NOTES, DE-MAT STATEMENT, BANK ACCOUNT REFLECTING TRANSACTIONS, TH E SHARES HAVING BEEN SOLD ON THE ONLINE PLATFORM OF THE STOCK EXCHANGE AND EACH TRADE OF SA LE OF SHARES WERE HAVING UNIQUE TRADE NUMBER AND TRADE TIME. IT NEEDS TO BE KEPT IN MIND THAT THE STOCK EXCHANGE AND SEBI ARE THE STATUTORY AUTHORITIES APPOINTED BY THE GOVT. OF THE INDIA TO ENSURE THAT THERE IS NO RIGGING OR MANIPULATION. AS STATED EARLIER, THE AO HAS NOT BRO UGHT ANY EVIDENCE ON RECORD TO SHOW THAT THESE STATUTORY AGENCIES HAVE ALLEGED ANY STOCK MAN IPULATION BY THE ASSESSEE OR THE BROKERS OR THE COMPANYS SCRIP IN QUESTION AT THE TIME WHEN THE ASSESSEE MADE THE SALE. THE SHARES WERE SOLD ON THE DATE MENTIONED IN THE CONTRACT NOT E AT THE PREVAILING MARKET PRICE DULY RECORDED IN THE STOCK EXCHANGE. 10. WE NOTE THAT THE COORDINATE BENCHES OF THIS TRI BUNAL RECENT DECISIONS HAVE ACCEPTED THE CLAIM OF THE ASSESSEE IN SIMILAR FACTS WHEN ASS ESSEE HAS SUPPORTED ITS CLAIM WITH EVIDENCE SUPPORTING THE CLAIMS AS DONE BY THE ASSES SEE IN THIS CASE. WE NOTE THAT IN DOLARRAI HEMANI VS. ITO (ITA NO. 19/KOL/2014)(AY 20 05-06) (DT. 02.12.2016), WHEREIN IT HAS BEEN OBSERVED IN SIMILAR CASE BY THE TRIBUNAL A S UNDER: - ' WE FIND THAT THE SIMILAR ISSUE HAD BEEN ADJUDICAT ED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX VS SUNITA KHEMKA IN ITA NOS. 714 TO 718/KO112011 DATED 28.10.2015 AND IN THE CASE OF IN COME-TAX OFFICER VS RAJ KUMAR AGARWAL IN ITA NO. 1330 (KOL) OF 2007 DATED 10.08.2007 WHER EIN IT WAS HELD THAT WHEN PURCHASE AND SALE OF SHARES WERE SUPPORTED BY PROPER CONTRACT NO TES, DELIVERIES OF SHARES WERE RECEIVED THROUGH DE-MAT ACCOUNTS MAINTAINED WITH VARIOUS AGE NCIES, THE SHARES WERE PURCHASED AND SOLD THROUGH RECOGNIZED BROKER AND THE SALE CONSIDE RATIONS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES, THE TRANSACTIONS CANNOT BE TREATED AS BOGU S AND THE INCOME SO DISCLOSED WAS ASSESSABLE AS LTCG. WE FIND THAT IN THE INSTANT CAS E, THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF THE SUSPICION THAT THE DIFFERENCE IN PURCH ASE AND SALE PRICE OF THESE SHARES IS UNUSUALLY HIGH. THE REVENUE HAD NOT BROUGHT ANY MAT ERIAL ON RECORD TO SUPPORT ITS FINDING THAT THERE HAS BEEN COLLUSION/CONNIVANCE BETWEEN THE BRO KER AND THE ASSESSEE FOR THE INTRODUCTION OF ITS UNACCOUNTED MONEY. 11. WE NOTE THAT IN SIMILAR FACTS THE TRIBUNAL TOOK THE SAME VIEW - 1. SURYA PRAKASH TOSHNIWAL HUF, VS. INCOME TAX OFFI CER, WARD - 41(3), ITA NO. 1213/KOL/2016 DATED 11/01/2017 12 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 2. DEPUTY COMMISSIONER OF INCOME-TAX VS. SUNITA KHE MKA IN I T A NOS. 714 TO 718/KOL/2011 DATED 28.10.2015. 3. ITO VS. RAJKUMAR AGARWAL IN ITA NO. 1330 (KOL) O F 2007 DATED 10.08.2007. 4. MANISH KUMAR BAID & ANR. V. A.C.I.T. ITA NO. 123 6,1237/KOI/2017. 5. KIRAN KOTHARI (HUF) VS. INCOME-TAX OFFICER WD. 3 5(3) ITA NO. 443/KOL/2017 DATED 15.11.2017. 12. WE NOTE EVIDENCES/MATERIAL/DOCUMENTS TO PROVE T HE TRANSACTIONS WHICH WERE PRODUCED BY THE ASSESSEE ARE NOT CONTROVERTED BY TH E REVENUE AUTHORITIES. WE NOTE THAT NO MATERIAL PURPORTEDLY COLLECTED FROM THIRD PARTIES A ND IS REFERRED TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE WAS CONFRONTED TO THE ASSESSES AND NO OPPORTUNITY OF CROSS-EXAMINATION OF PERSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE WAS PROVIDED TO THE ASSESSEE. SO, THE ADD ITION BASED ON A GENERAL REPORT STUDY OF THE INVESTIGATION WING CANNOT BE THE SOLE BASIS OF REJECTING THE CLAIM OF THE ASSESSEE. 13. IN THIS CASE, WE NOTE THAT THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS BEEN GIVEN NO CREDENCE TO BY THE AO AND HAVE BEEN CARRIED AW AY BY THE GENERAL OBSERVATIONS BASED ON CERTAIN STATEMENTS, PROBABILITIES, HUMAN BEHAVIO R AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THA T HAVE SURFACED DURING INVESTIGATIONS. THERE MIGHT BY PERSONS INVOLVED IN THE UNSCRUPULOUS ACTIVITY OF PRICE RIGGING ETC. BUT IT HAS TO BE ESTABLISHED IN EACH C ASE, BY THE PARTY ALLEGING SO. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEES ACTION E XPOSING HER INVOLVEMENT IN THE SCAM SHOULD BE BROUGHT OUT/UNEARTHED. THE ALLEGATION OF AO IMPLIES THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG B Y WAY OF CHEQUE THROUGH BANKING CHANNELS, WHICH IS INCOME EXEMPT FROM INCOME TAX. T HIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVEN UE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF UNKNOWN PARTIES ST ATEMENTS RECORDED WHICH ADMITTEDLY HAS BEEN RECORDED BEHIND THE BACK OF THE ASSESSEE HAS B EEN RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. WHEN SUCH ACTIONS ARE CARRIED OUT, T HE AO HAS TO ENSURE TO GIVE COPIES OF THE ADVERSE MATERIAL/STATEMENT GIVEN TO THE ASSESSEE AN D ALLOWED THE ASSESSEE AN OPPORTUNITY OF CROSS EXAMINATION, IF THE AO IS GOING TO RELY ON AN Y ADVERSE STATEMENTS OF THIRD PARTY AS 13 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 EVIDENCE TO DRAW ADVERSE INFERENCE AGAINST THE ASSE SSEE. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFR ONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON M ERE CONJECTURES UNVERIFIED EVIDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMA N PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FRO M 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. WE NOTE THAT NEITHER THE EVIDENCE BAS ED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT GIVEN TO THE ASSESSEE TO REBUT. 15. IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALIZ ATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTIN G THE CLAIM OF THE ASSESSEE IN THE LIGHT OF DOCUMENTS FILED BY ASSESSEE TO SUBSTANTIATE THE TRA NSACTION. 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 TRA NSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUS TRANSACTION OR ESTABLISH CIRCUMSTANCE UNERRINGLY AN D REASONABLY RAISING 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 . 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 RESP ECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER, WE DO NOT FIND THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WH ICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE P URPOSE OF GENERATING BOGUS LONG TERM 14 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD T O SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NA MED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POS SIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPA RATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT I S THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER W HERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROP ER EVIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW . WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AS AGAINST THE ASSESSEE. IN ABSE NCE OF ANY FINDING SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSE SSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN T HIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REP ORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRIP FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NO T BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 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 COULD 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 GRAINS AND OTHER C OMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES 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 BEHALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTIO N OF THE APPELLANT UNDER THE DEFENCE OF INDIA RULES W AS 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 MER E POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE A MOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AN D THE FACT THAT THE APPELLANT INDULGED IN SPECULATI ON (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO T HE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTIO N OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS , INVOLVED IN THE HIGH DENOMINATION NOTES,---THIS 15 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART O F THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF T HE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERA BLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARG E AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM R EPRESENTED THE SECRETED PROFITS OF THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE REC ORD OF THE PROCEEDINGS. 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 PERVERSE OR VIT IATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND M ERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINA TION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALA NCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. 18. 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 CO LLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, I N THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MA TERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE I NCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLI CATED AGAINST THE ASSESSEE. 19. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LA W LAID DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART OF THE PRINCIPLE S 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 RELEVAN T EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SH OULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS-EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WIT NESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEAESTATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORA MCOTTON 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. AI R 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 CROSS-EXAMINATION OF A WITNESS. IN THE SAID CASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS-EXAMI NE THE REPRESENTATIVES OF THE FIRMS CONCERN, 16 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN AC COUNTED 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 RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNI TY TO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST TH E 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 CAN DO SO ONLY WHEN HE IS TOLD WH AT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITNESSES P RODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVAN T WILL BE ABLE TO REFER TO THE PREVIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVERNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS-EXAMINATION. 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 T HE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PRINCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATURAL JUST ICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMINED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE ON A TECHN ICAL 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 O F THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUD ICIAL 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 PRINCIPLES OF NATURAL J USTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. 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 COUNSEL 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 OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-E XAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOUL D BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS S PECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS T OTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS C OULD NOT HAVE BROUGHT OUT ANY MATERIAL 17 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT T HEMSELVES TO EXPLAIN AS TO WHY THEIR EX- FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TR IBUNAL TO 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 THEIR T ESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT AP ART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEP OT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FAC T, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF C OULD BE THE SUBJECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICA TING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATIO N AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCC ASION 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 REMITTING THE CASE BACK TO THE T RIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING O R REJECTING 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 DEPARTM ENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO W ITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 20. 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 VIDE 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 DECLARED IN IT S BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE H AS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE E VIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLA INED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CON FIRMING 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 C OMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES 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 MARKE T 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, TRIBUN AL 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 EXERCISE OF OUR JURISDICTION UNDER SECT ION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL. THE APPEAL AND THE STAY PETITION, ACCORDINGLY, SHALL STAND DISMISSED. 18 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 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 FILE D BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT T HE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L 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 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSAC TIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES 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 WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHE R HAND, ALTHOUGH THE APPRECIATION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A 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 OFFICER RELIED UPO N IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND THAT THERE WAS NO CO-RELATION B ETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THIS WAS ON AN APPR ECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. 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 ASS ESSEE 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 THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS SUPPORTED WITH MATER IAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT THE ASSESSEE /BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED 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 SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER 19 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS 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 A UTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FRO M LTCG IS EXEMPTED 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 INCO RPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRI VE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IM PUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT T HE 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 PARA 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 ALLEGATIONS L EVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAN D AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS WHIC H ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND C OULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE AS SESSE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE CONSE QUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT E VIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUI NENESS OF THE TRANSACTIONS 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 O R FICTITIOUS 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 A UTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED 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 INCO RPORATED 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 SUPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE H OLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHAR ES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DE LETE THE ADDITION. 20 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 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 ALLEGATIONS 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 ARGUMENTS OFTHE LD AR WITH CONTR ARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THEORDERS OF THE LD AO. WE FIND TH AT THE ALLEGATION THAT THE ASSESSEE AND / ORBROKERS GETTING INVOLVED IN PRICE RIGGING OF SOIC L SHARES FAILS. IT IS ALSO AMATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FO RM OF BILLS,CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THEGENUINENESS OF TH E TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES W ERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDEN CES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED I N REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OFTHE ACT. G) THE BENCH HOF MUMBAIITAT IN THE CASEOF ARVIND KUMAR 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 THE BROKER . DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVEST MENT 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, DELI VERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THE REFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED T HAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNO T 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 BASANT PER IWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNAFINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIE S. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHEREIN O N SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSI TIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDI NGS OF CIT (A). H)THE HONBLE PUNJAB AND HARYANA HIGH COURT INTHE C ASE OFVIVEK 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 FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE V ALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUCH FINDING OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT 21 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT REC ORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LAW A S SOUGHT TO BE RAISED 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 SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYM ENTS 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 O F 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 MADE BY THE A SSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUN T PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE T O SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND TH AT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE FROM RAJ IMPEX WHICH WE RE ALSO ACCEPTED BY THE REVENUE, NO QUESTION OF LAW ARISES. 21. WE NOTE IN THE PRESENT CASE THE LD CIT(A) HAS F OUND AS A FACT THAT THE AO DID NOT FIND ANY FAULT/INFIRMITY IN THE DOCUMENT/SUPPORTING EVID ENCES FILED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. THE DOCUMENTS FILED BY THE ASSESSEE ARE RECORDS OF THE TRANSACTION WHICH HAPPENED IN THE PLATFORM OF SEBI AUTHORIZED S TOCK EXCHANGE, WHICH WAS CARRIED OUT THROUGH AUTHORIZED BROKER OF BOMBAY STOCK EXCHANGE OF SCRIPS WHICH WERE HELD IN DEMAT ACCOUNT AND CONSIDERATION RISING FROM THE PURCHASE/ SALE WHICH WERE THROUGH THE BANKING CHANNEL CANNOT BE HELD TO BE BOGUS, WITHOUT THE AO RETURNING A FINDING THAT THESE DOCUMENTS FILED BY ASSESSEE ARE FALSE, CONCOCTED OR FABRICATED. WITHOUT DOING SO, BASED ON A GENERAL REPORT/STUDY BY THE DIT (INV.) THAT THE S CRIPS ON WHICH THE ASSESSEE RECEIVED LTCG CANNOT BE HELD TO BE BOGUS. HERE IN THIS CASE THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE HONBLE SUPREME COURT IN RAKHI TRADING PVT. LTD. (SUPRA) WHICH WE SEE DOES NOT COME TO THE AID OF REVENUE. HERE, IN THIS CASE, THE HONBLE APEX COURT WHILE 22 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 ADJUDICATING THE ACTION OF SECURITIES APPELLATE TRI BUNAL (SAT) REVERSED SAT DECISION IN RESPECT OF THREE TRADERS AND RESTORED THE PENALTY L EVIED BY THE ADJUDICATING AUTHORITY OF SEBI, WHEREAS IN RESPECT OF THREE BROKERS, THE HON BLE SUPREME COURT UPHELD THE ACTION OF SECURITIES APPELLATE TRIBUNAL DELETING THE PENALTY LEVIED AGAINST THE BROKERS NAMELY (I) INDIA BOLT SECURITIES LTD., (II) ANGEL CAPITAL & D EBT MARKET LTD. AND (III) PRASHANT JAYANTILAL PATEL. THE HONBLE APEX COURT APPROVED THE VIEW OF SAT IN RESPECT OF BROKERS BY OBSERVING AS FAR AS BROKERS ARE CONCERNED, WE ARE OF THE VIEW THAT IS HARDLY ANY EVIDENCE ON THEIR INVOLVEMENT SO AS TO PROCEED AGAI NST THEM FOR VIOLATION OF REGULATION 7A OF THE BROKER REGULATION. MERELY BECAUSE A BROKER FACILITATED A TRANSACTION, IT CANNOT BE SAID THAT THERE IS VIOLATION OF REGULATION OF SEBI HAS NOT PROVIDED ANY MATERIAL TO SUGGEST NEGLIGENCE OR CONNIVANCE ON THE PART OF THE BROKERS . HOWEVER WE NOTE THAT IN THE CASE OF TRADERS, THE HONBLE SUPREME COURT RESTORED THE PEN ALTY BECAUSE THE HONBLE SUPREME COURT FOUND THAT THE TRADERS IN THE FACTS OF THAT CASE WERE INVOLVED NOT ONLY IN SYNCHRONIZED TRADING; BUT ALSO IN TRADE REVERSALS WHICH INDICATE D THAT THE PARTIES DID NOT INTENDED TO TRANSFER BENEFICIAL OWNERSHIP AND THROUGH THESE ORC HESTRATED TRANSACTIONS, INTENTION OF WHICH WAS NOT REGULAR TRADING, AND ALSO BY THIS PRACTICE OTHER INVESTORS HAVE BEEN EXCLUDED IN PARTICIPATING IN THESE TRADES. IT WAS ALSO NOTED FR OM THE FACTS OF THAT CASE BY THE HONBLE SUPREME COURT THAT WHEN THE TRADE WAS NOT SYNCHRONI ZING , THE TRADERS PLACED IT AT UNATTRACTIVE PRICES WHICH WAS ALSO A STRONG INDICAT ION THAT THE TRADERS INTENDED TO PLAY WITH THE MARKET. THUS, WE NOTE THAT THE HONBLE SUPREME COURT HAS FOUND AS A MATTER OF FACT THAT THE TRADERS BY THEIR ACTIONS/TRANSACTION DEPRIVED O THER MARKET PLAYERS FROM FULL PARTICIPATION. THE REPEATED REVERSALS AND PREDETERMINED ARRANGEMEN T TO BOOK PROFITS AND LOSSES RESPECTIVELY MADE IT CLEAR THAT PARTIES WERE NOT TR ADING IN NORMAL SENSE AND ORDINARY COURSE. THE HONBLE SUPREME COURT FOUND THAT BY SYNCHRONIZA TION AND RAPID REVERSE TRADE DONE BY TRADERS, THE PRICE DISCOVERY ITSELF WAS AFFECTED. IT WAS ALSO FOUND AS A MATTER OF FACT THAT EXCEPT THE PARTIES WHO HAVE PRE-FIXED THE PRICE, NO BODY WAS IN A POSITION TO PARTICIPATE IN THE TRADE. THUS HONBLE SUPREME COURT HELD THAT TH ESE FACTS HAD AN IMPACT ON THE FAIRNESS, INTEGRITY AND TRANSPARENCY OF THE STOCK MARKET AND THESE FACTS GO ON TO SHOW THAT TRADERS INDULGED IN THE ALLEGED TRANSACTIONS (SPECIFICALLY CHARGED TRANSACTIONS SPELLED OUT BY SEBI IN THOSE CASES) TANTAMOUNT, TO VIOLATION OF THE RE GULATIONS OF THE SEBIS (PROHIBITION OF 23 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 FRAUDULENT AND UNFAIR TRADE PRACTICE RELATING TO SE CURITIES MARKET) IN RESPECT TO TRADERS THEREFORE, IN THE AFORESAID FACTUAL MATRIX, THE TRA DERS WERE PENALIZED. HOWEVER, AS STATED EARLIER THE DECISION OF SAT TO DELETE THE PENALTY O N THE BROKERS WAS ACCEPTED BY THE HONBLE SUPREME COURT, SO WE NOTE THAT THE CHARGES LEVELLED AGAINST THE TRADERS IN THE FACTS OF THOSE CASES INDICATED THEIR HAND IN MANIPULATING THE MARK ET BY VARIOUS ACTS WHICH HAVE BEEN MENTIONED (SUPRA). SO THE HONBLE SUPREME COURT RES TORED THE PENALTY ON THEM, WHICH IS NOT THE CASE BEFORE US. HERE, THE AO HAS NOT BROUG HT ANYTHING ON RECORD TO SHOW THAT ASSESSEE OR THE BROKER ON INSTRUCTION FROM ASSESSEE TOOK PART IN OR ENTERED INTO TRANSACTIONS IN SCRIPS WITH THE INTENTION TO ARTIFICIALLY RAISE OR DEPRESS THE PRICE AND THEREBY AUTOMATICALLY INDUCED THE INNOCENT INVESTORS IN THE MARKET TO BUY /SELL THEIR STOCK. IT IS NOT THE CASE OF THE AO THAT ASSESSEE OR BROKER AS PER INSTRUCTION FROM ASSESSEE HAS MANIPULATED THE PRICES OF THE SCRIP. EVEN THE MARKET REGULAR SEBI HAS NOT MADE A NY SUCH SPECIFIC FINDING IN ITS REPORT AGAINST THE ASSESSEE. IN ANY CASE, IF THE AO HAD AN Y ADVERSE MATERIAL AGAINST THE ASSESSEE, HE WAS DUTY BOUND TO FURNISH A COPY TO ASSESSEE AND GR ANTED HER AN OPPORTUNITY TO REBUT THE SAME AND ALSO PROVIDED AN OPPORTUNITY TO CROSS EXAM INE IF THE MATERIAL ADVERSE TO ASSESSEE IS USED AGAINST THE ASSESSEE TO DRAW ADVERSE INFERE NCE AS HELD BY THE HONBLE SUPREME COURT IN PLETHORA OF CASES [SUPRA]. 22. WE ALSO NOTE THAT THE COORDINATE BENCHES IN THE CASE OF GAUTAM PINCHA VS. ITO, ITA NOS. 644 & 645/KOL/2018 DATED 24.0.2018 HAVE UPHELD THE ASSESSEES CLAIM OF LTCG ON PURCHASE AND SALE OF SHARES OF M/S. NCL RESEARCH & FINANCIAL SERVICES LTD. FOR AY 2014- 15, AS IN THE INSTANT CASE BEFORE US. SO RESPECTFU LLY FOLLOWING THE AFORESAID DECISION AND ALSO TAKING NOTE OF THE DOCUMENTS FILED BEFORE US, AO AND LD CIT(A) (PAPER BOOK PAGES 1 TO 44) FROM WHICH WE NOTE THAT ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION. SINCE AO COULD NOT FIND ANY FAULT OR SPECIFIC ADVERSE MATERIALS AGAINST THE ASSESSEE/BROKER/ OR SCRIPS OF M/S. NCL, THE ADDITIO N U/S. 68 CANNOT BE SUSTAINED. THE ADDITION IS BASED ON A COMMON/GENERAL REPORT/STUDY OF DIT (INV.) AND THERE IS NOTHING IN THE REPORT SPECIFICALLY AGAINST THE ASSESSEE, CANNOT BE THE BASIS FOR MAKING THE ADDITION OR DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE, SO THE ACTI ON OF AO CANNOT BE SUSTAINED. IN THIS CASE, WHEN THE ASSESSEE HAS PRODUCED THE PRIMARY EVIDENCE S TO PROVE THE PURCHASE AND LATER THE 24 ITA NO. 1732/KOL/2017 VISHWANATH GUPTA, AY 2014-15 SALE OF SHARES AS A MATTER OF FACT AND THE DEPARTME NT HAS NOT QUESTIONED THESE FINDING OF FACTS MADE BY LD CIT(A) AS NOTED EARLIER, IN PARA 5 SU PRA WE ARE INCLINED TO UPHOLD THE ORDER OF LD. CIT(A). THEREFORE, THE CLAIM OF EXEMPT INCOME O N LTCG ON SALE OF SCRIPS OF M/S. NCL HAS BEEN RIGHTLY ALLOWED AND, THEREFORE, THE REVENU E APPEAL IS DISMISSED. 23. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12/12/201 8 SD/- SD/ (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ITO, WARD-40(4), KOLKATA. 2 RESPONDENT SHRI VISHWANATH GUPTA, 16, TARACHAND D UTTA STREET, KOLKATA-73. 3 4 5 CIT(A)-12, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY