ITO, Ward-32(4), Kolkata, Kolkata V. Shri Shaleen Khemani, Kolkata

ITA 1945/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1241 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 17-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset; Gift; Income from undisclosed sources; Question of law; Corroborative evidences; Non compliance; Penny stocks
• Section: 143(3); 54F; 260A; 133(6); 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1945/KOL/20 14 ASSESSMENT YEAR : 2010-1 1 I.T.O., WARD-32(4), KOLKATA -VS- SHALEEN KHEMANI [PAN: AGAPK 6810 K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI DAVID Z. CHOW NGTHU, ADDL. CIT DR FOR THE RESPONDENT : SHRI MIRAJ D. SHAH, AR DATE OF HEARING : 27.09.2017 DATE OF PRONOUNCEMENT : 18.10.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE REVENUE ARISE OUT OF THE ORDE R OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XIX, KOLKATA [ IN SHORT LD C ITA] IN APPEAL NO.30/CIT(A)- XIX/WARD 32(4)/KOL/13-14 DATED 18.8.2014 AGAINST TH E ORDER OF ASSESSMENT FRAMED BY LEARNED INCOME TAX OFFICER, WARD 32(4), KOLKATA [ I N SHORT THE LD AO] U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) ON 28.03.2013 FOR THE ASST YEAR 2010-11. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF DENIAL OF EXEMPTION FOR LONG TERM CAPITAL GAINS IN THE SUM OF RS 1,27,92,984/- BY TREATING TH E SAME AS UNEXPLAINED CASH CREDIT , IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE FILED HIS RETURN OF INCOME FOR THE ASST YEAR 2010-11 ON 30.7.2010 DECLARING TOTAL INCOME OF RS 4,86,180/-. THE ASSESSEE CLAIMED EXEMPTION FOR LONG TERM CAPITAL GAINS IN TH E SAID RETURN OF INCOME TO THE TUNE OF RS 1,27,27,984/-. THIS LONG TERM CAPITAL GAINS WA S REPORTED OUT OF SALE OF SHARES OF SHIV OM INVESTMENTS & CONSULTANCY LTD BY THE ASSESS EE. THE ASSESSEE OBTAINED 65000 SHARES OF SHIV OM INVESTMENTS & CONSULTANCY LTD (SOICL IN SHORT) AS GIFTS FROM TWO INDIVIDUALS AS FOLLOWS:- SL. NO. NAME OF THE DONOR DATE OF GIFT NO. OF SHARES GIFTED DATE OF ACQUISITION OF THE SHARES BY THE DONEE 1 MS. PUSHPA SINGH BANO MANZIL ROAD, RANCHI, JHARKHAND PAN: AGJPS 5134 L 24.09.2009 15,000 30.03.2003 2 M/S. MANISH KUMAR AGARWAL (HUF) KARTA MANISH KUMAR AGARWAL, JOKHIRAM MARKET, UPPER BAZAR, RANCHI-834001, JHARKHAND 08.09.2009 50,000 26.03.2003 3 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 3 3.1. THESE SHARES ARE LISTED IN CALCUTTA STOCK EXCH ANGE. THE ASSESSEE SOLD THE 65000 SHARES OF SOICL BETWEEN 13.1.2010 AND 2.3.2010 AT R S 197.35 PER SHARE FOR RS 1,27,92,983.48. THE ASSESSEE COMPUTED LONG TERM C APITAL GAINS AS UNDER:- SALE CONSIDERATION FOR 65000 SHARES 1,27,92,984 LESS: COST 65,000 ---------------- LONG TERM CAPITAL GAIN -EXEMPT 1,27,27,984 ---------------- 3.2. THE ASSESSEE FILED THE FOLLOWING DOCUMENTS DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS:- A) GIFT DEEDS, DULY NOTARIZED, AS EVIDENCE WITH RES PECT TO ACQUISITION OF 65000 SHARES; B) INCOME TAX RECORDS OF BOTH THE DONORS WHO HAD GI FTED THE SHARES TO ASSESSEE INCLUDING THEIR FULL ADDRESS AND PAN; C) CONTRACT NOTES ISSUED BY SEBI REGISTERED STOCK B ROKERS NAMELY TOSHITH SECURITIES (P) LTD (SEBI REGN NO. INB 030965439/CODE NO. 03/720) A ND P.DIDWANIA & CO. (SEBI REGN NO. INB 030658515 / CODE NO. 03/711) WITH RESP ECT TO SALE OF 65000 SHARES BY THE ASSESSEE THROUGH THE PRESCRIBED ONLINE MECHANIS M OF CALCUTTA STOCK EXCHANGE LIMITED ALONG WITH A SUMMARY SHEET CONTAINING FULL PARTICULARS ABOUT SUCH SALE; D) PHOTOCOPY OF BANK STATEMENTS AND ALL RELEVANT SH ARE LEDGERS WHEREIN THE TRANSACTION IS FULLY REFLECTED; E) COMPLETE DEMAT ACCOUNT OF THE ASSESSEE AS MAINTA INED WITH THE SEBI REGISTERED DEPOSITORY PARTICIPANT I.E DP NAMELY IDBI BANK LIMI TED, DP ID NO. IN300450. 3.3. THE LD AO SOUGHT TO EXAMINE THE VERACITY OF TH E LONG TERM CAPITAL GAINS EXEMPTION CLAIMED BY THE ASSESSEE WITH RESPECT TO SALE OF SHA RES OF SOICL. THE LD AO ISSUED NOTICES U/S 133(6) OF THE ACT TO VARIOUS PARTIES IN CLUDING THE DONORS, THE STOCK BROKERS AS 4 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 4 WELL AS DEPOSITORY PARTICIPANT AND COLLECTED FULL I NFORMATION WITH RESPECT TO THE TRANSACTION. ALL THE PARTIES RESPONDED TO THE SAI D STATUTORY NOTICES BY GIVING PROPER REPLIES BEFORE THE LD AO. THE LD AO OBSERVED THAT DURING THE FINANCIAL YEAR 2009-10, THE BSE SENSEX WAS 9901 AS ON 1.4.2009 AND 17527 O N 31.3.2010 REGISTERING A GROWTH OF 77% IN THE SENSEX. THE LD AO OBSERVED THAT THE SHARES SOLD BY THE ASSESSEE HAD REGISTERED A GROWTH OF 200 TIMES WHICH IN HIS OPINI ON , COULD NOT BE BELIEVED . THE LD AO IN ORDER TO EXAMINE THE DONORS OF THE SHARES GIF TED TO THE ASSESSEE ISSUED NOTICES TO THE SAID PARTIES. THE DONORS REPLIED TO THE NOTICE ISSUED U/S 133(6) OF THE IT ACT 1961 AND CONFIRMED THE TRANSACTION OF GIFT HOWEVER THE A O FOUND THE REPLY NOT SATISFACTORY. 3.3.1. THE LD AO ALSO ISSUED NOTICES TO THE STOCK BROKERS WHO WERE REGISTERED MEMBERS OF THE CALCUTTA STOCK EXCHANGE I.E. MS P DIDWANIA & CO AND MS TOSHIT SECURITIES. THE SAID BROKERS SUBMITTED THEIR REPLY BUT AS PER THE L D AO, THESE BROKERS DID NOT REPLY WITH RESPECT TO THE PROFIT EARNED BY THE BROKERS FROM TH E TRANSACTION IN THESE SHARES. THE LD AO ALSO FOUND THAT SEVERAL OTHER SHARE HOLDERS OF S OCIL WERE HAVING THE SAME ADDRESS AS THE DONORS. THE LD AO ALSO EXAMINED THE DEMAT AC COUNT OF THE ASSESSEE AND HE FOUND THAT THE ASSESSEE WOULD DELIVER THE SHARES TO BROKER ON THE DAY OF SALE OR A DAY OR TWO BEFORE THE DATE OF SALE. THUS THE LD AO CONCLUD ED THAT THIS WAY THE BROKER COULD CONTROL THE TRANSACTION. THE LD AO ALSO ISSUED NOT ICES TO THE CALCUTTA STOCK EXCHANGE AND THEY CONFIRMED THE TRANSACTION HOWEVER THE LD A O FOUND THAT THE BROKER P DIDWANIA & CO WAS THE BROKER REPRESENTING THE SELLER I.E. TH E ASSESSEE AND ALSO THE BUYER, THUS, AS PER THE LD AO, THE BROKER VIOLATED THE SEBI NOR MS. THE LD AO FOUND THAT ON THE DAY ON WHICH THE ASSESSEE SOLD THE SHARES OF SOCIL, ON THE SAME DAYS THE BROKER ALSO SOLD SHARES FOR SEVERAL OTHER PARTIES. THE LD AO ALSO IS SUED A NOTICE U/S 131 OF THE IT ACT 1961 TO THE ASSESSEE TO APPEAR ON 20/03/2013 AND TO PRODUCE THE DONORS BUT THE ASSESSEE EXPRESSED INABILITY TO PRODUCE THEM ON THAT DAY DUE TO THEIR PRE- OCCUPATION. THUS THE LD AO CONCLUDED THAT CAPITAL GAINS ON THE SALE OF SHAR ES OF SOCIL COULD NOT BE EXPLAINED 5 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 5 PROPERLY AND THEREFORE THE LD AO TREATED THE CAPITA L GAINS OF RS.1,27,92,984 AS CASH CREDIT U/S 68 OF THE IT ACT 1961. 4. THE ASSESSEE SUBMITTED THAT HE HAD FULLY DISCHAR GED THE INITIAL BURDEN PLACED ON HIM TO FURNISH SUPPORTING EVIDENCES AS REGARDS THE TRAN SACTIONS CLAIMED TO HAVE BEEN CARRIED OUT BY HIM AND HAD FURNISHED ALL THE EVIDENCES REAS ONABLY EXPECTED TO BE IN HIS POSSESSION. THE LD AO HAD NOT FOUND ANYTHING IRREGU LAR IN THE EVIDENCES SUBMITTED BY THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE DISTO RTION TO THE NATURE OF THE INCOME HAS BEEN MADE WITHOUT EXAMINING THE RELEVANT EVIDENCE L IKE CONTRACT NOTES, PAYMENTS RECEIVED AGAINST SALE OF SHARES, DELIVERY INSTRUCTI ONS, RELEVANT ENTRIES APPEARING IN THE BANK STATEMENT OF THE ASSESSEE AND IN THE BANK STAT EMENT OF KOLKATA BROKERS. HE ALSO SUBMITTED THAT NONE OF THE COMMUNICATION COLLECTED BY THE LD AO FROM THE STOCK BROKERS, DEPOSITORY PARTICIPANT AND OTHER INTERMEDI ARIES, STATE OR SUGGEST THAT THE TRANSACTIONS OF THE ASSESSEE WERE NOT GENUINE. TH E ASSESSEE SUBMITTED BEFORE THE LD CITA AS UNDER:- A) THE ASSESSEE IS AN INDIVIDUAL. B) THE ASSET IN QUESTION BEING TRANSFERRED IS A LON G TERM CAPITAL ASSET PURSUANT TO SECTION 2(42A)(B) OF THE ACT. C) THE ASSESSEE IS EQUITY SHARES IN A COMPANY. D) THE TRANSACTION HAS TAKEN PLACE AFTER 1.10.2004 , AND E) AT THE TIME OF TRANSFER, THE TRANSACTION HAS BEE N MADE CHARGEABLE TO SECURITIES TRANSACTION TAX (IN SHORT STT) AS EVIDENT FROM THE CONTRACT NOTES. 4.1. IT WAS SUBMITTED THAT NONE OF THE REPLIES AS R ECEIVED BY THE LD AO WERE FOUND IRREGULAR OR INCOHERENT WITH THE SUBMISSIONS OF THE ASSESSEE AND ALL THE ADVERSE INFERENCE DRAWN ARE BASICALLY FIGMENT OF HIS MIND A ND ARE NOT BACKED BY MATERIAL ON 6 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 6 RECORD OR FACTS OF THE CASE. IT WAS ARGUED THAT IN ABILITY OF THE DEPARTMENT TO VERIFY THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT A VALID GROUND TO REJECT THE EXPLANATION. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF S HASTIMAL VS CIT REPORTED IN 49 ITR 26 3 (MAD) . IT WAS SUBMITTED THAT THE ASSESSEE IS ENTITLED TO HAVE EVIDENCE PRODUCED TO B E CONSIDERED AND AN INFERENCE TO BE DRAWN THEREFROM. THE DEPARTMENT CANNOT, IN THE FE LICITOUS LANGUAGE OF HIDAYATULLA J. IN SREELEKHA BANERJEE VS CIT [(1963) 49 ITR (SC) 11 2, 120] , BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, CONVERT GOOD PROO F INTO NO PROOF. IT WAS ALSO SUBMITTED THAT REJECTION OF AN EXPLANATION OF THE A SSESSEE BY IGNORING TO CONSIDER IMPORTANT PIECES OF EVIDENCE IS AN ERROR OF LAW. R ELAINCE IN THIS REGARD WAS PLACED ON THE FOLLOWING DECISIONS :- A) D YASODAMMA, GUDUR VS CIT REPORTED IN 70 ITR 515 (AP) AT 517 B) BHAGWATI PRASAD MISRA VS CIT REPORTED IN 35 ITR 97 (ORISSA) 4.2. THE ASSESSEE REBUTTED THE OBSERVATIONS OF THE LD AO IN HIS ORDER BY DRAWING THE ATTENTION TO SOME OF THE ABSTRACTS OF THE ASSESSMEN T TO PROVE TO THAT THE LD AO HAD PASSED THE ORDER WITHOUT PROPER APPLICATION OF MIND AND WITH PREJUDICE MORE OUT OF FIGMENT OF HIS MIND THAT ON FACTS, AS UNDER:- A) ON PAGE ONE IN THE PARAGRAPH- BACK GROUND OF THE CASE- HE HAS STATED THAT HE FINDS IT DIFFICULT TO COMPREHEND THE PHENOMENAL RISE IN THE PRICE OF THE SHARES IN QUESTION AND HAS TRIED TO COMPARE THE GROWTH VIS--VIS THE SENSE X. ANY INVESTMENT BANKER WILL REFUTE THE SIMPLISTIC AND NOVICE CALCULATION OF THE LEARNE D ASSESSING OFFICER SINCE THE SENSEX IS AN AVERAGE OF A BOUQUET OF SHARES AND NOT ALL MO VE IN TANDEM WITH THE SENSEX. THE LEARNED ASSESSING OFFICER HAS QUESTIONED THE VALIDI TY OF TRANSACTIONS OCCURRING THROUGH THE CALCUTTA STOCK EXCHANGE, PERHAPS, NOT REALIZING THAT THE SAID EXCHANGE IS ONE OF THE OLDEST AUTHORIZED STOCK EXCHANGES IN THE COUNTR Y AND IS RECOGNIZED BY SEBI AND TRANSACTIONS HAPPENING THROUGH THE EXCHANGE ARE VAL ID FOR THE PURPOSES OF INCOME TAX ACT, 1961. IT APPEARS THAT THE LEARNED ASSESSING OF FICER HAS EXCEEDED HIS BRIEF WHILE TRYING TO EVALUATE THE EXCHANGE. HE HAS TRIED TO DE VELOP A RELATIONSHIP BETWEEN THE EARNINGS OF THE COMPANY AND THE STOCK PRICE MOVEMEN T OF THE SAME. IT IS TOO SIMPLISTIC AND THIS MODE IS NO MORE IN VOGUE IN THE INVESTMENT BANKING WORLD. SOME SHARES LIKE ROSS MURAKA FINANCE LIMITED, NARGARJUNA FERTILIZERS LIMITED ETC. HAD SUBSTANTIAL EPS 7 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 7 BUT THEIR STOCK PRICE ONLY REFLECTED A FRACTION OF THE BOOK PE OF THE SHARES. THE WORLD OF STOCK MARKET AND STOCK PRICE IS AN EXCEEDINGLY COMP LEX ON E AND SOME OF THE BEST BRAINS IN THE WORLD ARE ENGAGED IN THE EVALUATION OF THE S AME. THE LEARNED ASSESSING OFFICER HAS TRIED TO DEVELOP A SIMPLISTIC MODEL TO EVALUA TE THE SAME WHICH , ALAS, IS NO MORE ACCEPTABLE IN THE CURRENT SCENARIO. B) ON PAGE 2, THE LEARNED ASSESSING OFFICER HAS AG AIN QUESTIONED THE PROCEDURE OF STOCK MARKET PRICING. IT IS TO BE NOTED THAT THE GO VERNMENT OF INDIA, REGULATORY BODIES AS WELL AS ALL THE AGENCIES ACROSS THE COUNTRY HAVE ACCEPTE D THAT THE PRICES REFLECTED IN THE STOCK MARKET ARE THE PERFECT MARKET PRICES WHICH IN TURN ARE DETERMINED BY INTERPLAY OF DEMAND AND SUPPLY FACTORS. IN THIS REGARD, WE ENCLOSE HEREWITH AN ABSTRACT AS ISSUED BY SEBI WHICH CATEGORICALLY GRANTS PERMANENT REGISTRATION TO THE CALCUTTA STOCK EXCHANGE. WE WOULD HUMBLY LIKE TO SUBMIT THAT THE LEARNED ASSESSING OF FICER HAS NO RIGHT TO QUESTION THE MECHANISM WHICH TIME TESTED AND IN EXISTENCE FOR CE NTURIES. THE LEARNED ASSESSING OFFICER HAS AGAIN TIRED TO LINK THE TRANSACTION INCURRED BY TH E ASSESSEE WITH THE FINANCIALS OF THE COMPANY. HE HAS PERHAPS FAILED TO COMPREHEND THAT THE COMPAN Y IS A SEPARATE LEGAL ENTITY AND THERE IS A CORPORATE VEIL EXISTING BETWEEN THE OWNERS OF THE C OMPANY AND THE COMPANY. THE COMPANY IS A MAKING OF LAW AND THE TRANSACTIONS ENTERED INTO BY A SHARE HOLDER ARE NOT THE BUSINESS OF THE COMPANY AND VICE VERSA. HE HAS TRIED TO MAKE A COMP ARISON WHICH HAS GOT NO RELEVANCE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961. C) YOUR GOODSELF WILL APPRECIATE THAT THE DONORS HA VE CATEGORICALLY STATED AND INSISTED THAT THEY HAVE DONATED THE SHARES TO THE ASSESSEE AND TH E SAME WERE HELD BY THEM FOR A SEIZABLE PERIOD OF TIME. INSTEAD OF RELYING UPON SUCH DECLAR ATIONS GIVEN BY THE DONORS, HE HAS TRIED TO MAKE A SUBJECTIVE AND MISDIRECTED ANALYSIS OF THEIR FINANCIAL STATUS AND OTHER FACTORS WHICH HAVE GOT NO RELEVANCE WITH THE TRANSACTIONS IN HAND . AS A MATTER OF FACT, SOME OF THE WORDS USED BY HIM ARE PERHAPS NOT HEARD DURING THE COURSE OF AN INCOME TAX ASSESSMENT AND PERHAPS NEEDS SOME INTROSPECTION. FOR EXAMPLE ON PAGE 3 LIN E 16 HE HAS USED THE WORD 'UNNERVING'. IN THE 5TH LINE FROM THE BOTTOM OF PAGE 3 HE HAS HELD THAT 'GIFT WAS STAGE MANAGED' WITHOUT HAVING ANY MATERIAL ON RECORD TO SUGGEST SO. HE HAS ALSO SUGGESTED THAT GIFTS WHICH ARE GIVEN INTRA CITY OR INTRA STATE ARE NOT GENUINE AND HAS T HUS QUESTIONED THE GIFT ON THE BASIS THAT THE DONOR WAS LOCATED IN RANCHI WHEREAS THE DONEE WAS L IVING IN KOLKATA. HE HAS FORGOTTEN THAT INDIA IS A UNION OF STATES AND FREE PASSAGE OF GOOD S, GIFTS AND SERVICES HAS BEEN GUARANTEED BY THE CONSTITUTION OF INDIA WITHOUT ANY HINDRANCE. ON THIS COUNT ALSO IT CAN BE SAID THAT THE ASSESSMENT ORDER IS UNCONSTITUTIONAL. D) ON PAGE FOUR 11TH LINE FROM THE BOTTOM THE LEARN ED ASSESSING OFFICER HAS HELD THAT THE ''PRICES OF THE SHARES ARE RIGGED' AND HAVING STATE D SO, BEING A QUASI- JUDICIAL AUTHORITY, HE OUGHT TO HAVE TAKEN ACTION FOR THE SAME WHICH HE HA S NOT DONE. HE HAS AGAIN FORGOTTEN THAT THE GOVERNMENT OF INDIA HAS APPOINTED A REGULATORY BODY THROUGH STATUTE NAMELY SEBI TO ENSURE SMOOTH RUNNING OF THE STOCK EXCHANGES. IT APPEARS T HAT THE LEARNED ASSESSING OFFICER HAS QUESTIONED THE WORKING OF SUCH REGULATORY AUTHORITY . UNDER THE CIRCUMSTANCES, SINCE THE LEARNED ASSESSING OFFICER HAS GONE EXTRA TERRITORIA LLY BEYOND THE REALMS OF POWER GIVEN TO HIM 8 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 8 AND SINCE ALL HIS SURMISES ARE BASED ON PREJUDICIAL FIGMENT OF HIS MIND WITHOUT HAVING ANY CONNECTION WITH THE MATERIAL ON RECORD, THUS, HIS R EJECTION OF THE TRANSACTION OF GIFT CANNOT BE ACCEPTED AND IT IS HUMBLY REQUESTED THAT SUCH A SUR MISE OF THE LEARNED ASSESSING OFFICER SHOULD BE STRUCK DOWN. THUS, ONCE THE GENUINENESS OF THE GIFT IS ESTABLISHED, THE OTHER PARAMETERS OF THE TRANSACTIONS FULLY SUPPORTED BY S TATUTORY DOCUMENTS AND BACKED BY PAYMENT OF LEVIES AND DUTIES LIKE BROKERAGE, SERVICE-TAX, S ECURITIES TRANSACTIONS TAX ETC, THE QUESTION OF TREATING THE GENUINENESS OF LONG TERM CAPITAL GAINS AS CASH CREDIT DOES NOT ARISE, IT IS HUMBLY SUBMITTED. E) THE LEARNED ASSESSING OFFICER HAS QUOTED THE OTH ER SHAREHOLDINGS OF THE ASSESSEE AS WELL AS DETAILS OF OTHER SHARE HOLDERS OF THE COMPANY WHICH HAVE NO RELEVANCE WITH THE TRANSACTION. THE LEARNED ASSESSING OFFICER HAS SUGGESTED THAT TH E ASSESSEE HAS VERY FEW SHARE MARKET TRANSACTIONS. THIS IS A FACT SINCE YOUR ASSESSEE IS AN INVESTOR AND NOT A TRADER IN SHARES. AS A MATTER OF FACT, AS PER CBDT CIRCULAR 4/2007, IF THE ASSESSEE HAD INDULGED IN A LARGE NUMBER OF TRANSACTIONS HE WOULD HAVE BEEN TREATED AS A TRADER OF SHARES. THUS LACK OF KNOWLEDGE OF THE LEARNED ASSESSING OFFICER ABOUT THE TRANSACTIONS IN SHARES IS APPARENT. F) ON PAGE 7 THE LEARNED ASSESSING OFFICER HAS SUGG ESTED A REASON FOR HIS NOT WILLING TO ACCEPT THE TRANSACTION OF GIFT. HE HAS STATED THAT HE HAD REQUESTED THE ASSESSEE TO PRODUCE THE DONORS WHO WERE LOCATED IN RANCHI AND BECAUSE OF HIS INABI LITY TO PRODUCE THEN HE HAS CALCULATED THAT THE TRANSACTION IS NOT GENUINE. IT IS DIFFICULT TO FATHOM THAT WHEN THE LEARNED ASSESSING OFFICER HIMSELF HAS BEEN BESTOWED THE POWER TO SUMMONS THE DONOR WHY HE HAS NOT DONE SO HIMSELF. IT APPEARS THAT SINCE HE WAS PREJUDICED ABOUT THE TRAN SACTION, HE DID NOT WANT TO MAKE FULL EFFORTS WHICH ARE REQUIRED TO ANALYZE THIS TRANSACTION OBJE CTIVELY. THE DONOR IS NOT AT THE BECK AND CALL OF THE ASSESSEE. AND THE BASIS OF THE LEARNED ASSES SING OFFICER GOES AGAINST THE AGE OLD SAYING LEX NON COGIT AD IMPOSSIBIA:- A LAW CANNOT COMPEL A PERSON TO PERFORM AN ACT WHICH HE COULD NOT POSSIBLY PERFORM. G) ON PAGE 7 THE LEARNED ASSESSING OFFICER HAS AGAI N RAISED AN OBJECTION ABOUT THE DELIVERY OF SHARES BY THE ASSESSEE TO HIS BROKER. IT REALLY SHO WS THE IGNORANCE ON THE PART OF THE LEARNED ASSESSING OFFICER IN COMPREHENDING THE STOCK MARKET TRANSACTIONS. YOUR GOODSELF WILL KIND RELATE THAT ALL STOCK MARKET TRANSACTIONS ENTAIL A MARK TO MARKET MARGIN WHICH DIFFERS FROM SCRIP TO SCRIP. IN THE CASE OF SOME SHARES, THE SAI D MARGIN IS QUOTED HIGH AND IS APPLICABLE TO BOTH THE PURCHASE AND SALE TRANSACTIONS. FURTHER, A S A MEASURE OF SAFETY IN SOME CASES, THE BROKERS INSIST ON PRIOR DELIVERY OF SHARES AND MORE SO IN THE CASE WHERE THE SHARES ARE THINLY TREATED SO THAT THEY CAN FULLY EXECUTE THE SALE ORD ER AS ISSUED BY THE CLIENTS AS AND WHEN POSSIBLE. THEREFORE, AS REQUIRED BY THE SITUATION A ND THE MARGIN PRESCRIPTION ISSUED BY THE STOCK EXCHANGE, THE SHARES ARE DELIVERED EITHER ON THE DAY OF TRANSACTION OR A LITTLE PRIOR TO POST THE TRANSACTION. IT IS PERMISSIBLE. IN THE INSTANT CASE, SINCE THE SHARE WAS THINLY TRADED, THE STOCK MARKET AUTHORITIES HAD PERHAPS IMPOSED A SUBS TANTIAL MARK TO MARKET MARGIN WHICH WOULD CAUSE THE STOCK BROKERS TO INSIST ON DELIVERY OF SHARES PRIOR TO THE EXECUTION OF THE TRANSACTION. THE APATHY OF THE LEARNED ASSESSING OF FICER TOWARDS DERIVING A FAIR ASSESSMENT ORDER IS EVIDENT FROM THE FACT THAT THE TABULATION DONE BY HIM ON PAGE 7 ABOUT THE NUMBER OF 9 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 9 SHARES IS NOT CORRECT. THE NUMBER OF SHARES DELIVER ED ON 21ST JANUARY 2010 IS NOT 4000 BUT 5000 AND HE HAS MISSED A TRANSACTION THAT OCCURRED ON 3RD FEBRUARY, 2010 AMOUNTING TO 6500 SHARES. (KINDLY REFER TO DOCUMENTS ENCLOSED). IT AP PEARS THAT THE LEARNED ASSESSING OFFICER WAS IN A HURRY 10 MAKE THE ADDITION AND RESORTED TO A S LIP SHOD APPROACH TO CONCLUDE HIS ERRONEOUS ARGUMENTS. YOUR GOODSELF WILL APPRECIATE THAT SINCE THE QUANTUM OF ADDITIONS IS SUBSTANTIAL, HE OUGHT TO HAVE ACTED WITH MORE ALACRITY AND AGILE. H) ON PAGE 8 IN LINE 2 AFTER THE TABLE, HE HAS STAT ED THAT THE TRANSACTIONS STATED IN THE TABLE AT THE TOP OF THE PAGE ARE ILLEGAL. IT AGAIN REVEALS T HE IGNORANCE OF THE LEARNED ASSESSING OFFICER ABOUT THE TRANSACTIONS OCCURRING IN THE STOCK MARKE T. WE WOULD SUGGEST THAT THE TRANSACTIONS AS APPEARING IN THE CHART IS PROPER. NO BROKER IS AUTH ORIZED TO MAKE OFF MARKET TRANSACTIONS UNLESS UNDER SPECIAL CIRCUMSTANCES. SUPPOSE A BROKE R SAY P. DIDWANIA AND CO. HAS SECURED BOTH A BUY AND SELL ORDER FROM TWO DIFFERENT CLIENT S FOR THE SAME SHARES. AS PER REGULATIONS, HE HAS TO ENTER BOTH THE TRANSACTIONS IN THE ON LINE M ECHANISM AND IF THE SAID TRANSACTION IS EXAMINED, IT WILL BE SEEN THAT HE IS BOTH THE BUYER AND SELLING BROKER. THIS IS IN LINE WITH THE REGULATIONS ISSUED BY SEBI AND ANY VIEW TO THE CONT RARY SHALL BE ERRONEOUS. IT IS PERHAPS ON ACCOUNT OF SUCH IGNORANT IDEAS ABOUT THE STOCK MARK ET OPERATIONS THAT THE LEARNED ASSESSING OFFICER HAS CRAFTED A FULLY ERRONEOUS AND ULTRA VIR US HIGH PITCHED ASSESSMENT ORDER. WITH A VIEW TO PRESS HIS OPINION, HE HAS QUOTED A LARGE NU MBER OF OTHER DATA WHICH ARE NOT RELEVANT. ONE OF THE BASIS ON WHICH HE HAS STRUCTURED HIS ASS ESSMENT ORDER IS 'NOT RECEIVED A REPLY FROM A STOCK BROKER'. WE FAIL TO COMPREHEND THAT WHY AN INNOCENT ASSESSEE SHOULD BE PENALIZED FOR NON-COMPLIANCE BY ANY OTHER PARTY. IT IS TO BE NOTE D THAT THE LEARNED ASSESSING OFFICER HAS NOT INITIATED ANY ACTION AGAINST SUCH NON COMPLIANCE WH EREAS HE HAS MADE SUBSTANTIAL ADDITIONS IN THE HANDS OF THE ASSESSEE. IT CLEARLY SHOWS THAT HE WAS VEHEMENT IN HIS APPROACH AND FULL OF VENGEANCE AGAINST THE ASSESSEE THUS RESULTING IN A PREJUDICED ASSESSMENT ORDER. I) THE LEARNED ASSESSING OFFICER HAS MADE THE ADDIT ION AS AN UNEXPLAINED CASH CREDIT. YOUR GOODSELF WILL APPRECIATE THAT SECTION 68 CAN BE INV OKED WHEN ALL THE THREE UNDERNOTED CONDITIONS ARE FULFILLED:- 1. THE ASSESSEE IS REQUIRED TO MAINTAIN BOOKS OF AC COUNT 2. THERE IS A CREDIT ENTRY IN THE BOOKS OF ACCOUNT OF THAT YEAR AND 3. THOUGH NO EXPLANATION IS PROVIDED BY AN ASSESSEE OR AS EXPLAINED IS CONSIDERED TO BE UNSATISFACTORY BY THE ASSESSING OFFICER ABOUT THE N ATURE AND SOURCE OF SUCH CREDIT. YOUR GOODSELF WILL APPRECIATE THAT IN THE INSTANT C ASE, PURSUANT TO SECTION 44AA OR OTHERWISE OF THE INCOME-TAX ACT 1961, THE ASSESSEE IS NOT REQUIR ED TO MAINTAIN BOOKS OF ACCOUNT AND HENCE QUESTION OF INVOKING SECTION 68 DOES NOT ARISE. THE ABOVE PREMISE ON WHICH THE ADDITION HAS BEEN MADE IS ITSELF ERRONEOUS. FURTHER, THE LEARNED ASSESSING OFFICER HAS QUESTIONED THE CREDIT WORTHINESS OF THE DONORS. IN ADDITIONAL CIT V. HANU MAN AGARWAL (1985) 151 ITR 150(PAT) IT WAS HELD THAT THE ASSESSEE IS NOT BOUND WITH A DUTY TO KNOW THE ACCEPTABILITY OF THE CASH CREDITOR. WHERE THE ASSESSEE HAS OFFICIALLY FILED F ULL PARTICULARS ABOUT THE CREDITOR NAMELY NAME AND ADDRESS, INCOME TAX NUMBER AND CONFIRMATORY LET TER ABOUT THE TRANSACTION AND THEREAFTER 10 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 10 THE DEPARTMENT DID NOT SUMMON THE CREDITOR UNDER SE CTION 131, ANY ADDITION UNDER SECTION 68 WAS HELD UNJUSTIFIED. IT WAS SIMILARLY HELD BY THE BOMBAY HIGH COURT IN CIT V. U. M. SHAH (1973) 90 ITR 396. IN THE INSTANT CASE, THE DECLARA TION OF THE DONORS WAS FILED, AND REPLY TO NOTICES ISSUED TO THEM TOO WERE TAKEN ON RECORD. SI NCE THERE WAS NO MATERIAL ON RECORD FOR DOUBTING THE VERACITY OF SUCH DECLARATION AND REPLY , ANY ADDITION UNDER SECTION 68 CANNOT BE SUSTAINED AS IT WAS HELD BY THE HON'BLE SUPREME COU RT IN MEHTA PAREKH & CO. V.CIT (1956) 30 ITR 181 (SC). WE WOULD LIKE TO DRAW YOUR KIND ATTENTION TO THE FA CTS OF THE CASE KM. SAUMYA AGARWAL VS. ITO (2008) 174 TAXMAN 60 (ITAT AGRA) WHEREIN THE ASSESS EE DISCLOSED THE SALE OF SHARES AND RECEIPT THEREOF IN HER RETUM OF INCOME AND CLAIMED EXEMPTION U/S 54EC, BUT COULD NOT PRODUCE BROKER AND PURCHASER AND EVEN REQUISITION U/S. 133( 6) WERE RETURNED UN-SERVED. ASSESSING OFFICER TREATED THE SALE PROCEEDS OF SHARES AS HER UNEXPLAINED CASH CREDITS U/S. 68. HELD, THAT AS THE TRANSACTION ENTERED WAS DULY SUPPORTED BY BILL, CONTRACT NOTE, DELIVERY AND TRANSACTIONS HAVING BEEN REFLECTED IN BALANCE SHEETS, AND ASSESS ING OFFICER HAVING NO EVIDENCE, ADDITIONS BASED MERELY ON DOUBTS CANNOT BE JUSTIFIED, IT WAS HELD. WE WOULD FURTHER LIKE TO INVITE YOUR KIND ATTENTION TO THE FACT THAT THERE IS NO CREDIT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE CREDIT HAS COME IN THE FORM OF REALIZATION FROM A DEBTOR NAMELY THE STOCKBROKER FROM WHIM THE AMOUNT HAD BECOME DUE FOR SALE OF SHARES AND THE RECEIPT HAD ALREADY BEEN OFFERED FOR TAXATION BUT ON ACCOUNT OF THE PROVISIONS OF SECTION 10(38) OF THE INCOME TAX ACT, 1961, IT IS EXEMPT. THE LEARNED ASS ESSING OFFICER HAS FAILED TO TAKE INTO CONSIDERATION THE MOVEMENT OF SHARES WHICH HAPPENS THROUGH THE DEPOSITORIES OWNED BY THE GOVERNMENT OF INDIA AND PAYMENT OF LEVIES TO THE CE NTRAL GOVERNMENT ON EACH TRANSACTION OF SALE WHICH MAKES THE TRANSACTION GENUINE. 4.3. THE ASSESSEE FURTHER PLACED RELIANCE ON THE F OLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS :- I. T. O. WD 45(2), KOLKATA VS. RAJ KUMAR AGARWAL, I TA NO. 11301KO/12007 - IN THIS CASE THE HON'BLE ITAT 'E'-BENCH, KOLKATA HAS HELD A S UNDER, AND WE QUOTE:- '6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS OF THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSE E PURCHASED 8,500 QUOTED SHARES OF MLS. NAGESHWAR INVESTMENTS LTD., ON 10.7.2002 FROM THE REGISTERED SHARE BROKER M/S. BUBNA STOCK BROKING SERVICES LTD. FOR A CONSIDERATI ON OF RS. 17, 1701-. THE PAYMENT WAS BY ACCOUNT PAYEE CHEQUE TO THE SAID BROKER AND THE ASSESSEE RECEIVED DELIVERY OF THE SHARES IN DEMAT FORM IN HIS DEMAT ACCOUNT WITH ORIENTAL BANK OF COMMERCE (NOW GLOBAL TRUST BANK AFTER MERGER). SUBSEQUENTLY, THE ASSESSEE SOLD THESE 8,500 SHARES THROUGH THE SAID BROKER IN TWO LOTS, ONE FOR 4,000 SHARES ON 17.9.2003 @ RS. 86.06 PER SHARE AND OTHER ON 19.9.2003 FOR THE BALANCE 4,500 SHARES @ 85.36 PER SHARE AND DELIVERED THE POSSESSION OF ALL THESE SHARES FROM H IS DEMAT ACCOUNT TO BROKER'S 11 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 11 ACCOUNT. IN THE PROCESS, THE ASSESSEE HAD RECEIVED TWO ACCOUNT PAYEE CHEQUES FOR RS. 3,48,240 AND RS. 3,84,120 RESPECTIVELY AND THESE A RE DULY REFLECTED IN THE ASSESSEE'S BANK ACCOUNT. IN SUPPORT OF ALL THESE TRANSACTIONS , THE ASSESSEE HAS FILED COPIES OF BILLS AND CONTRACT NOTES OF SHARE BROKER, BANK STATEMENT , DETAILS. OF DEMAT ACCOUNT WITH THE BANK, BYE LAWS OF THE CALCUTTA STOCK EXCHANGE AND P RINT-OUTS FROM SOME WEB SITES ON PENNY STOCKS. WE FURTHER FIND THAT THE A. O. HAS AL LEGED THAT THE ASSESSEE FAILED TO PRODUCE THE STOCKBROKER, ALTHOUGH IN RESPONSE TO NO TICE U/S. 133(6), THE SAID SHARE BROKER M/S. BUBNA STOCK BROKING SERVICES LTD. HAD F ILED COPIES OF LEDGER ACCOUNT, PURCHASE & SALE BILLS AND CONTRACT NOTES BEFORE THE A. O. ALSO ISSUED NOTICE U/S. 133(6) TO THE CALCUTTA STOCK EXCHANGE ASSOCIATION AND GATH ERED INFORMATION FROM THEM THAT NO TRADING OF THE SHARES IN QUESTION WAS DONE BY THE S AID SHARE BROKER ON THE DATE MENTIONED BY THE ASSESSEE AS WELL AS THE SHARE BROK ER. THE AO., THEREFORE, CONCLUDED THAT THERE WAS NO REAL TRANSACTION OF PURCHASE AND SALE OF SHARES AND THE CONTRACT NOTES, BILLS ETC. WERE FALSE. HE ALSO ALLEGED THAT BY THESE TRANSACTIONS THE ASSESSEE HAS BROUGHT INTO HIS BOOKS HIS UNDISCLOSED MONEY IN THE GUISE OF LONG-TERM CAPITAL GAIN ON SHARE TAKING BENEFIT OF THE EXEMPTION GRANTED BY VI RTUE OF SEC. 54F OF THE ACT. HOWEVER, WE FIND THAT THE FINDING OF THE A O. IS MORE ON THE SUSPICION THAT ON FACTUAL GROUND. THE A O. HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLISH THAT THE EVIDENCE FILED BY THE ASSESSEE AS WELL AS THE SHARE BROKERS WERE FABR ICATED OR FALSE. THE SHARE BROKER IS A REGISTERED BROKER AND HE HAS CONFIRMED THE TRANSACT ION BY MENTIONING THE REGISTRATION NO., CONTRACT NOTES NO., SETTLEMENT NOS. ETC. IT IS NOT THE CASE OF THE REVENUE THAT THERE IS NO SUCH BROKER OR THE DISTINCTIVE NOS. OF THE SH ARES OF M/S. NAGESHWAR INVESTMENTS LTD. DO NOT EXIST OR THE TRANSACTIONS OR PURCHASE A ND SALE OF SUCH SHARES RECORDED THROUGH BANK AND DEMAT FORM ARE FICTITIOUS. THE A O . HAS SIMPLY ACTED ON THE INFORMATION GATHERED FROM THE CALCUTTA STOCK EXCHAN GE. THE ASSESSEE'S COUNSEL HAS EXPLAINED THAT THIS WAS 'OFF MARKET TRANSACTION', I .E. TRANSACTION TOOK PLACE OUT OF STOCK EXCHANGE, HENCE THERE WOULD BE NO RECORD RELATING T O THESE TRANSACTIONS WITH STOCK EXCHANGE, HENCE THERE WOULD BE NO RECORD RELATING T O THESE TRANSACTIONS WITH STOCK EXCHANGE. THIS SUBMISSION OF THE LEARNED COUNSEL HA S NOT BEEN CONTROVERTED BEFORE US. (I) IN THIS CONNECTION WE MAY REFER TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CARBO INDUSTRIAL HOLDINGS LTD. [244 I. T.R. 422], WHICH WAS FOLLOWED IN SUBSEQUENT DECISION IN THE CASE OF CIT VS. EMERALD COMMERCIAL LTD. [250 ITR 539J, WHEREIN IT HAS BEEN HELD AT PAGE 524 AS U NDER:- . PAYMENT BY ACCOUNT PAYEE CHEQUE HAS NOT BEEN D ISPUTED. PAYMENT ON PURCHASE AND SALE AND PAYMENT RECEIVED BY ACCOUNT PAYEE CHEQ UE WAS ON TWO DIFFERENT DATES. IF THE SHARE BROKER, EVEN AFTER ISSUE OF SUMMONS, DOES NOT APPEAR FOR THAT REASON, THE CLAIM OF THE ASSESSEE SHOULD NOT BE DENIED, SPECIAL LY IN CASES WHEN THE EXISTENCE OF THE BROKER IS NOT IN DISPUTE NOT THE PAYMENT IS IN DISP UTE. MERELY BECAUSE SOME BROKER FAILED TO APPEAR, THE ASSESSEE SHOULD NOT BE PUNISH ED FOR THE DEFAULT OF A BROKER AND WE ARE IN FULL AGREEMENT WITH THE TRIBUNAL THAT ON ME RE SUSPICION THE CLAIM OF THE ASSESSEE SHOULD NOT BE DENIED. ' 12 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 12 (II) IDENTICAL MATTER HAS BEEN DEALT WITH BY THE I. T.A. T , MUMBAI BENCH IN THE CASE OF MUKESH R. MAROLIA VS. ACIT, WHICH IS RELIED UPON BY THE ASSESSEE AND REPORTED IN [2006]6 SOT 247 (MUM). IN THAT CASE THE A. O. OBSER VING THAT PURCHASE AND SALE OF SHARES WERE NOT REFLECTED IN RECORDS OF BOMBAY STOC K EXCHANGE HELD THAT CLAIM OF THE ASSESSEE REGARDING PURCHASE OF SHARES WAS BOGUS AND NO SUCH SHARES WERE PURCHASED BY THE ASSESSEE AND, CONSEQUENTLY, SALE OF SHARES W AS ALSO BOGUS. THE SALE PROCEEDS WERE, THEREFORE TREATED AS UNEXPLAINED INVESTMENT U /S. 69 OF THE ACT,. THIS POSITION WAS UPHELD BY THE CIT(A). THE TRIBUNAL ALLOWING THE ASS ESSEE'S APPEAL HELD AS UNDER:- (III) THE ABOVE CIRCUMSTANCES HAVE MADE OUT A CLEAR CASE IN SUPPORT OF THE BOOK ENTRIES REFLECTING THE PURCHASE AND SALE OF SHARES AND ULTI MATELY SUPPORTING THE MONEY RECEIVED ON SALE OF SHARES AND FINALLY INVESTING THE SAME IN THE PURCHASE OF FLAT. THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROPERLY ACCOUNTED, DOCUMENTED AND SUPPORTED BY EVIDENCE. (IV) THEREFORE WE FIND THAT THE EXPLANATIONS OF THE ASSESSEE SEEM TO HAVE BEEN REJECTED BY THE ASSESSING AUTHORITY MORE ON THE GROUND OF PR ESUMPTION THAN ON FACTUAL GROUND. THE PRESUMPTION IS SO COMPELLING THAT COMPARATIVELY A SMALL AMOUNT OF INVESTMENT MADE BY THE ASSESSEE DURING THE PREVIOUS YEAR PERIO D RELEVANT TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01 HAVE GROWN INTO A VERY SIZABL E AMOUNT ULTIMATELY YIELDING A FABULOUS SUM OF RS. 1,41,08,484 WHICH WAS USED BY THE ASSESSEE FOR THE PURCHASE OF THE FLAT AT COLABA. THE SEQUENCE OF THE EVENTS AND ULTI MATE REALIZATION OF MONEY IS QUITE AMAZING, THAT ITSELF IS A PROVOCATION FOR THE ASSES SING OFFICER TO JUMP INTO A CONCLUSION THAT THE TRANSACTIONS WERE BOGUS. BUT, WHATEVER IT MAY BE, AN ASSESSMENT HAS TO BE COMPLETED ON THE BASIS OF RECORDS AND MATERIALS AVA ILABLE BEFORE THE ASSESSING AUTHORITY. PERSONAL KNOWLEDGE AND EXCITEMENT ON EVE NTS, SHOULD NOT LEAD THE ASSESSING OFFICER TO A STATE OF AFFAIRS WHERE SALIENT EVIDENC ES ARE OVERLOOKED. IN THE PRESENT CASE, HOWEVER UNBELIEVABLE IT MIGHT BE, EVERY TRANSACTION OF THE ASSESSEE HAS BEEN ACCOUNTED, DOCUMENTED AND SUPPORTED. EVEN THE EVIDENCES COLLEC TED FROM THE CONCERNED PARTIES HAVE BEEN ULTIMATELY TURNED IN FAVOUR OF THE ASSESS EE, THEREFORE, IT IS VERY DIFFICULT TO BRUSH ASIDE THE CONTENTIONS OF THE ASSESSEE THAT HE HAD PURCHASED A FLAT UTILIZING THE SALE PROCEEDS OF THOSE SHARES. (V) ON THE ABOVE FACTS AND IN VIEW OF THE DECISION S CITED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE EVIDENCES PRODUCED BY THE ASSESSEE AND THE SHARE BROKER WERE SUFFICIENT TO ENDORSE THE BONAFIDES OF THE SHA RE TRANSACTIONS MADE BY THE ASSESSEE. WE, THEREFORE, HOLD THAT THE SALE PROCEEDS OF SHARE S OF RS. 7,32,360/- HAS BEEN EXPLAINED AND THE CIT(A) WAS JUSTIFIED IN DELETING THE SAID ADDITION. WE DIRECT ACCORDINGLY. 13 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 13 4.3.1. THE ASSESSEE ALSO PLACED RELIANCE ON THE FOL LOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS:- A) ACIT, CIRCLE -28 , KOLKATA VS SWAPAN KUMAR BISWA S IN ITA NO. 121/KOL/2008 DATED 25.7.2008. B) JAYWANT HIMANI VS ITO , WARD 35(2), KOLKATA IN I TA NO. 340/KOL/2007 C) ANUP KUMAR JAYASWAL IN ITA NO.S 1678 & 1679/KOL/ 2004 D) CIT VS KUNDAN INVESTMENTS LTD REPORTED IN 263 IT R 626 (CAL) 5. THE LD CITA DELETED THE ADDITION BY OBSERVING A S UNDER:- 5. ALL THE GROUNDS OF APPEAL ARE RELATING TO THE AD DITION MADE U/S 68 OF THE ACT TREATING THE LONG TERM CAPITAL GAINS AS UNEXPLAINED CASH CREDIT HENCE ALL FOUR GROUNDS ARE DISPOSED TOGETHER. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS AND EXPLANATION GIVEN BY THE LEARNED AUTHORIZED REPRESENTATIVE DURING THE COURSE OF APPELLATE PROCEEDINGS. IN MY OPINION, THE APPELLANT DESERVES TO SUCCEED. THE AO CARRIED OUT EXTENSIVE INVESTIGATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE MAIN P OINT WHICH HAVE NOT BEEN PROPERLY CONSIDERED BY THE HIM OR HAVE BEEN TOTALLY IGNORED ARE AS UNDER:- A) GIFT DEED WITH RESPECT TO GIFT OF 50,000 SHARES AND 15,000 SHARES TOTALING 65,000 SHARES BY THE DONORS TO THE ASSESSEE. AS STATED BY THE AO IN HIS ASSESSMENT ORDER ITSELF, THE DONORS HAVE ADMITTED HAVING MADE THE GIFT. B) DEMAT ACCOUNT OF THE ASSESSEE REFLECTED THE ENTR Y AND EXIT OF THE SAID SHARES WHILE ACQUIRING AS WELL AS SELLING. C) PARTICULARS ABOUT THE SALE OF SUCH SHARES THROUG H SEBI REGISTERED STOCK BROKERS ON THE PRESCRIBED ON LINE MECHANISM OF A SEBI RECOGNIZED S TOCK EXCHANGE. D) CONTRACT NOTES ISSUED BY SEBI REGISTERED STOCK B ROKER WITH RESPECT TO SALE OF SHARES IN TERMS OF SECURITIES CONTRACT (REGULARIZATION) ACT, 1956. E) BANK STATEMENTS OF THE ASSESSEE WHEREIN THE SALE PROCEEDS WITH RESPECT TO THE SAID SALE OF SHARES IF FULLY REFLECTED. F) LEDGER ACCOUNT OF THE ASSESSEE AS SUBSISTING IN THE BOOKS OF THE BROKER WHO HAS SOLD THE SHARES. 14 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 14 G) CONFIRMATION FROM SEBI AS TO GRANTING OF REGISTR ATION TO THE CALCUTTA STOCK EXCHANGE LIMITED WHERE THE TRANSFER OF SHARES TOOK PLACE. THUS THERE IS NO INFIRMITY IN THE TRANSACTION PER S E. ALL THE COMPLIANCES AS MANDATED BY LAW HAVE BEEN FOLLOWED AND SUPPORTED BY DOCUMENTARY EVI DENCE. FROM THE ASSESSMENT ORDER ITSELF IT IS EVIDENT THAT IN ALL THE ENQUIRIES MADE WITH V ARIOUS AGENCIES INVOLVED, ALL HAVE ADMITTED THAT THE TRANSACTION DID TAKE PLACE AND THERE WAS N O INFIRMITY AS FAR AS THE CONDUCT OF THE ASSESSEE IS CONCERNED. I FIND THAT THE APPELLANT RE CEIVED GIFT OF THE SHARES OF SHIV OM INVESTMENT & CONSULTANCY LTD FROM MANISH KUMAR AGAR WAL & PUSHPA SINGH. ON PERUSAL OF THE AFFIDAVIT OF GIFT DEPOSED BY SRI MANISH KUMAR A GARWAL IT IS FOUND THAT THE SHARES WERE TRANSFERRED BY HIM THROUGH HIS DEMAT ACCOUNT TO THE APPELLANT ON 08.09.2009 AND THE SHARES WERE ACQUIRED BY HIM ON 26.03.2003. SIMILARLY ON PE RUSAL OF THE AFFIDAVIT OF GIFT DEPOSED BY SMT PUSHPA SINGH IT IS FOUND THAT THE SHARES WERE T RANSFERRED BY HER THROUGH HER DEMAT ACCOUNT TO THE APPELLANT ON 24.09.2009 AND THE SHAR ES WERE ACQUIRED BY HER ON 30.03.2003. ON PERUSAL OF THE DEMAT STATEMENT OF THE APPELLANT WIT H IDBI BANK LTD I FIND THAT THE CREDIT ON THE SHARES TOOK PLACE ON 08.09.2009 & 24.09.2009 RESPEC TIVELY. THE APPELLANT THEN SOLD THESE SHARES THROUGH A SEBI REGISTERED , MEMBER BROKER OF THE CALCUTTA STOCK EXCHANGE MS TOSHIT SECURITIES P LTD & P DIDWANIA & CO BETWEEN 13.01.20 10 TO 02.03.2010. ON PERUSAL OF THE CONTRACT NOTES ISSUED BY THE SAID BROKERS I FIND TH AT THE ORDER NO, TRADE NO, TRADE TIME, QUANTITY AND AMOUNT FOR WHICH THE 65000 SHARES WERE SOLD ARE IN ORDER WITH THE CLAIM OF THE APPELLANT. ON PERUSAL OF THE DEMAT STATEMENT OF THE APPELLANT I FIND THAT THE SHARES RE TRANSFERRED FROM HIS ACCOUNT TO THE BROKERS CLEARING MEMBER ACCOUNT. THU S THE RECEIPT AND DELIVERY OF SHARES ARE FULL DOCUMENTED AND VERIFIABLE FROM THE DEMAT ACCOU NT OF THE APPELLANT WITH IDBI BANK LTD. OP ID NO IN300450 CLIENT ID NO. 10146157. THE SALE PROCEEDS OF THE SHARES WERE RECEIVED BY THE APPELLANT BY ACCOUNT PAYEE CHEQUES WHICH WERE D EPOSITED IN HIS SAVING BANK ACCOUNT MAINTAINED WITH IDBI BANK LTD ACCOUNT NO 0131062148 900. THE APPELLANT HAD ALSO FILED HIS LEDGER ACCOUNT MAINTAINED IN THE BOOKS OF ACCOUNT O F THE STOCK BROKERS AND THE TRANSACTIONS AS CLAIMED BY THE APPELLANT ARE DULY RECORDED THEREIN. ON PAGE 5 OF THE ASSESSMENT ORDER I FIND THAT THE AO HAS HIMSELF RECORDED THE FACT THAT THE PERSONS WHO DONATED THE SHARES TO THE APPELLANT WERE SHARES HOLDERS IN THE YEAR 2008 & 20 09. THUS THE SHARE HOLDING OF THE DONORS WERE ALSO VERIFIED BY THE AO FROM THE LIST OF SHARE HOLDERS OBTAINED BY THE AO. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN TH AT NOTICES ISSUED BY THE LEARNED ASSESSING OFFICER TO THE DONORS OF THE SHARES, THE STOCK EXCH ANGE BOTH OF THEM HAVE CONFIRMED THE TRANSACTIONS. THE AO OBSERVED THAT THE SHARES S OLD THROUGH THE BROKER P DIDWANIA & CO BY THE APPELLANT WERE PURCHASED BY THEM AS A COUNTE R PARTY IN THE STOCK EXCHANGE ELECTRONIC TRADING SCREEN. I FIND THAT THE AO WITHOUT BRINGING ON RECORD THE FACT THAT THE SHARES PURCHASED BY P DIDWANIA & CO WERE ACTUALLY FUNDED BY THE APPE LLANT IN CASH COULD NOT DRAW ANY ADVERSE INFERENCES. THERE IS NO BAR IN THE LAW FOR A BROKER TO BE BOTH A SELLER AND BUYER OF THE SAME SCRIPT. A BROKER MAY HAVE VARIOUS CLIENTS WHO PURCH ASE AND SELL THE SAME SHARES. THE BROKER ACTS ON BEHALF OF BOTH THE SELLER AND THE BUYER. TH E BROKER IS BOUND BY STOCK EXCHANGE GUILD LINES TO ENTER ALL TRADES IN THE ELECTRONIC TRADING SYSTEM. THIS IS TO ENSURE THAT ALL TRANSACTIONS ARE REPORTED TO THE EXCHANGE AND SEBI CAN KEEP VIGI LANCE ON SHARE TRANSACTIONS. THE BROKER MERELY FOLLOWED THE DIRECTIONS OF SEBI AND EXCHANGE AND THIS COULD NOT BE HELD AS REASON TO HOLD THAT THE SALES MADE BY THE APPELLANT WERE BOGU S. THE AO FOUND SOME OTHER PARTIES WHO 15 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 15 WERE THE CLIENTS OF THE BROKER P DIDWANIA & CO HAS SOLD SHARES OF THE COMPANY HOWEVER THEIR NAMES WERE NOT IN THE LIST OF SHARE HOLDERS OF THE COMPANY AS PROVIDED BY THE REGISTRAR. I FIND THAT SUCH FACT WAS MOST IRRELEVANT IN MAKING ASSESS MENT IN THE CASE OF THE APPELLANT. THE AO FOUND THAT SOME NON-SHARE HOLDERS SOLD SHARES OF TH E PARTICULAR COMPANY THROUGH THE BROKER. HOWEVER IT IS IRRELEVANT HOW SUCH TRANSACTIONS WOUL D AFFECT THE TRANSACTIONS OF THE APPELLANT WITH THE BROKER. THE AO WAS THUS RELYING OF IRRELEV ANT FACTS AND CIRCUMSTANCES TO DRAW ADVERSE INFERENCES AGAINST THE APPELLANT. IN THE INSTANT CA SE, SINCE THE ASSESSING OFFICER COULD NOT ADDUCE ANY LEGAL EVIDENCE IN COUNTERING THE CONTENT ION OF THE ASSESSEE OR TO PROVE THAT ANY OF THE DOCUMENTS AS PRODUCED BY THE ASSESSEE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS WERE FALSE OR FABRICATED, HE FAILED TO ESTABLISH HIS CAS E AND TO DISCHARGE THE REQUISITE BURDEN CAST ON HIM. IN EFFECT, THE ASSESSING OFFICER HAS BASED HIS CONCLUSION ON UNFOUNDED ASSUMPTIONS AND SURMISES. IT IS RELEVANT TO RELY ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ALPINE INVESTMENT DATED 26.08,2008 , IN THIS CASE T HE SHARES WERE TRANSACTED THROUGH RECOGNIZED STOCK BROKERS AND THROUGH REGULAR BANK C HANNEL AND SUPPORTED BY CONTRACT NOTES AND BILLS. THE STOCK BROKER ALSO APPEARED AND ACCEP TED THE TRANSACTIONS TO BE GENUINE. THE AO HOWEVER RELIED SOLELY ON THE STATEMENT OF SHRI ROOP ANI AT THE TIME OF SEARCH WITHOUT TAKING COGNIZANCE OF CROSS EXAMINATION AND DOCUMENTS PRODU CED AND DISALLOWED THE LOSS TREATING IT TO BE BOGUS. THE CIT(A) UPHELD THE DISALLOWANCE WHICH WAS DELETED BY THE TRIBUNAL. WHILE DISMISSING THE REVENUE'S APPEAL U/S 260A THE CALCUT TA HIGH COURT OBSERVED AS 'IT APPEARS THAT THE SHARE LOSS AND THE WHOLE TRANSACTIONS WERE SUPP ORTED BY CONTRACT NOTES, BILLS AND WERE CARRIED THROUGH RECOGNIZED STOCK BROKER OF THE CALC UTTA STOCK EXCHANGE AND ALL THE PAYMENTS MADE TO THE STOCK BROKER AND ALL THE PAYMENTS RECEI VED FROM STOCK BROKER THROUGH ACCOUNT PAYEE INSTRUMENTS, WHICH WERE ALSO FILED IN ACCORDA NCE WITH THE ASSESSMENT. IT APPEARS FROM THE FACTS AND MATERIALS PLACED BEFO RE THE TRIBUNAL AND AFTER EXAMINING THE SAME THE TRIBUNAL CAME TO THE CONCLUSION AND ALLOWE D THE APPEAL FILED BY THE ASSESSEE. IN DOING SO, THE TRIBUNAL HELD THAT THE TRANSACTION FU LLY SUPPORTED BY THE DOCUMENTARY EVIDENCES COULD NOT BE BRUSHED ASIDE ON SUSPICION AND SURMISE S. HOWEVER, IT WAS HELD THAT THE TRANSACTIONS OF SHARE ARE GENUINE. THEREFORE WE DO NOT FIND THAT THERE IS ANY REASON TO HOLD THAT THERE IS ANY SUBSTANTIAL QUESTION OF LAW INVOLVED I N THIS MATTER. HENCE, THE APPEAL BEING ITA NO.6F30 OF 2008 IS DISMISSED. ' 5.1. I FIND THAT ALL THE EVIDENCES FILED BY THE APP ELLANT HAVE BEEN DULY VERIFIED AND FOUND TO BE TRUE. THE PARTIES INCLUDING THE DONORS, STOCK EXCHA NGE REPLIED AND SUPPORTED THE CLAIM OF THE APPELLANT. THE TRANSACTION IS DULY BACKED BY GIFT D EED, ALL RECEIPTS AND ISSUE OF SHARES ARE THROUGH DEMAT ACCOUNT, THE SALE PROCEEDS ARE RECEIV ED BY ACCOUNT PAYEE CHEQUES, THE STOCK EXCHANGE HAS VERIFIED THE TRANSACTIONS, THE TRANSAC TIONS ARE SUPPORTED BY VALID CONTRACT NOTES, THE AO FOUND THAT DONORS NAME APPEARED IN THE LIST OF THE SHARE HOLDERS OF THE COMPANY BEFORE THE DATE OF GIFT FROM THE COMPANY. I FIND THAT THES E EVIDENCES CANNOT BE BRUSHED ASIDE ON CONJECTURES AND SUMMARIZES OF THE AO. THUS, IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS WELL ESTABLISHED BY THE APPELLANT REGAR DING GENUINENESS OF SHARE TRANSACTIONS AND HE HAS SUFFICIENTLY DISCHARGED THE ONUS CAST UPON HIM. AO'S ACTION IS NOT WELL FOUNDED IN POSITION OF LAW IN ADDING ENTIRE AMOUNT OF SALE OF SHARES AS INCOME FROM UNDISCLOSED AND UNEXPLAINED 16 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 16 SOURCES U/S 68 OF THE ACT. THEREFORE, I AM DELETING THE ENTIRE AMOUNT OF RS. 1,27,92,984. THE AO IS DIRECTED TO ASSESS THE LONG TERM CAPITAL GAIN S AS SHOWN BY THE APPELLANT. FURTHER AS THE SHARES WERE ACQUIRED BY GIFT AND THE DONORS HAVE CO NFIRMED THAT THESE SHARES WERE HELD BY THEM SINCE 2003 THUS AS PER PROVISIONS OF SECTION 4 9(1) & 2(42A) OF THE ACT THE COST AND HOLDING PERIOD OF THE DONORS WOULD BE DEEMED TO BE THAT OF THE APPELLANT AND THE SALES OF SHARES BY THE APPELLANT WOULD BE CONSTRUCTED AS LON G TERM CAPITAL GAINS. THE AO IS DIRECTED TO COMPUTE THE CAPITAL GAINS ON THE SHARES AS LONG TER M CAPITAL GAINS. I FURTHER FIND THAT THE SALE OF SHARES ARE MADE THROUGH REGISTERED BROKER ON A R ECOGNIZED STOCK EXCHANGE AND THAT THE SALE OF SHARES HAVE SUFFERED SECURITY TRANSACTION TAX TH US I DIRECT THE AO TO TREAT RS. 1,27,27,984/- AS LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSES SEE WHICH IS EXEMPT PURSUANT TO SECTION 10(38) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE APPELLANT IS TR EATED AS ALLOWED. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE BY HOLDIN G THAT AOS ACTION IS NOT WELL FOUNDED IN POSITION OF LAW. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN UNDERSTANDING THE WHOLE GAMUT OF THE CASE WHERE THE VEIL OF PURPORTED GIFTS LIFTED BY THE AO WAS COMPLETELY OVERLOOKED ON THE PRETEXT OF EXISTENCE OF GIFT DEED ONLY. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE ENTIRE RECEIPT OF RS. 1,27,27,984/- AS LONG TERM CAPITAL GAIN. 4. THAT THE APPELLANT CRAVES LEAVE TO SUBMIT ADDITI ONAL GROUNDS OF APPEAL, IF ANY, AT OR BEFORE THE TIME OF HEARING AND/OR ALTER, MODI FY REFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 7. THE LD DR ARGUED THAT THE LD CITA ERRED IN DELET ING THE ADDITION MADE BY THE LD AO ON THE BASIS OF THE AFORESAID FINDINGS AND VARIOUS OBSERVATIONS MADE IN THE IMPUGNED APPELLATE ORDER. THE LD DR SUBMITTED THAT THE FINDI NGS MADE IN THE ASSESSMENT ORDER OF THE LD AO DEMONSTRATED THAT TRANSACTION OF THE GIFT OF SHARES WERE HIGHLY SUSPICIOUS AND THE CONDUCT OF THE BROKER INVOLVED IN THE SALE OF S HARES WERE ALSO SUSPICIOUS AND THE 17 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 17 FINANCIAL PERFORMANCE OF THE COMPANY DOES NOT JUSTI FY THE HIGH PRICE OF THE SHARES AND CONSIDERING THE VARIOUS FINDINGS RECORDED IN THE AS SESSMENT ORDER, THE ADDITION MADE BY THE LD AO DESERVED TO BE UPHELD AND HENCE THE ORDER OF THE CITA DESERVED TO BE REVERSED AND THE ORDER OF THE LD AO BE UPHELD. 8. IN RESPONSE TO THIS, THE LD AR OF THE ASSESSEE S TATED THAT THE LD CITA HAS CONSIDERED THE EVIDENCES ON RECORD AND THE LEGAL SUBMISSIONS A ND THE CASE LAWS AND AFTER CONSIDERING THE SAME, THE LD CITA FOUND THAT THE LD AO HAD MADE THE ADDITION MERELY ON CONJECTURES AND HENCE THE LD CITA RIGHTLY DELETE D THE ADDITION. THE LD AR SUBMITTED THAT THE ADDITION MADE BY THE LD AO IS BASED ON PRE SUMPTIONS AND SUSPICION ALONE AND ARE PERVERSE. IN THE COURSE OF HEARING OF THE CASE , THE LD AR REFERRED TO VARIOUS DOCUMENTARY EVIDENCES FURNISHED IN THE PAPER BOOK I N SUPPORT OF THE CLAIM OF THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIO NS RELATING TO LTCG ON SALE OF SHARES OF SOICL. THE DOCUMENTARY EVIDENCES INCLUDED THE FO LLOWING: (I) GIFT DEEDS EVIDENCING THE GIFT OF SHARES TO THE ASSESSEE. (II) THE IT RETURN OF BOTH THE DONORS (III) THE DEMAT ACCOUNT OF BOTH THE DONORS (IV) THE CONTRACT NOTE OF SALE OF SHARES BY THE A SSESSEE (V) THE DEMAT STATEMENT OF THE ASSESSEE SHOWING TH E RECEIPT AND ISSUE OF THE SHARES (VI) THE CONFIRMATION OF ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THE BROKER. (VIII) THE BANK ACCOUNT OF THE ASSESSEE SHOWING RE CEIPT OF THE CHEQUE FROM THE BROKER. 8.1. THE LD AR SUBMITTED THAT THE 65,000 SHARES OF SOICL WAS PURCHASED BY THE DONOR IN THE YEAR 31-03-2003 AND THE SHARES WERE THEN GIF TED TO THE ASSESSEE. THUS THE PURCHASE OF SHARES WAS MADE IN THE FY 2003-04 WHICH WAS AROUND 7 YEARS PRIOR TO THE 18 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 18 SALE OF SHARES BY THE ASSESSEE AND THERE WAS NO ADD ITION MADE IN THE HANDS OF THE DONORS OF THE SHARES SINCE THE DATE OF THE PURCHASE OF THE SHARES BY THE DEPARTMENT AND THE PURCHASE AND THE GIFT OF THE SHARES IN THE HAND S OF THE DONORS WERE ACCEPTED BY THE DEPARTMENT. THE LD AR SUBMITTED THAT THE EVIDENCES AND DOCUMENTS FURNISHED BY THE ASSESSEE WERE NEITHER FOUND TO BE FALSE NOR FABRICA TED. THE LD AR SUBMITTED THAT THE LD AO DOUBTED THE GENUINENESS OF THE SALE TRANSACTIONS ONLY THE BASIS OF PRESUMPTION AND SUMMARIZES THE AO HAS NOT BROUGHT ON RECORD ANY ADV ERSE FINDING AGAINST THE ASSESSEE, THE DONORS, AND THE STOCK BROKERS BY THE INVESTIGAT ION DEPARTMENT OF THE INCOME TAX DEPARTMENT AND OR SEBI. IT WAS SUBMITTED THAT THE L D AO DISALLOWED THE ASSESSEES CLAIM OF LTCG ON SALE OF SHARES OF SOICL ON SUSPICI ON AND PRESUMPTIONS ALONE. IT WAS SUBMITTED THAT THE LOWER AUTHORITIES HAVE NOT BROUG HT ANY MATERIAL OR EVIDENCE ON RECORD TO FALSIFY THE CLAIM OF THE ASSESSEE OR TO HOLD THA T THE SHARE TRANSACTIONS WERE BOGUS. 8.2. THE LD AR IN COURSE OF HEARING STATED THAT T HE LD AO RELIED ON IRRELEVANT MATERIAL FOR CREATING A BACKGROUND OF SUSPICION FOR MAKING T HE ADDITION ON THE ASSESSEE. THE LD AR STATED BEFORE US THAT THE COMPANY WAS INCORPORAT ED IN 1990 AND IN THE WEBSITE OF THE CALCUTTA STOCK EXCHANGE WRONGLY MENTIONED THE D ATE OF LISTING TO BE 1969, THIS CANNOT BE A REASON TO HOLD THE SALE OF SHARES BY TH E ASSESSEE TO BE BOGUS. HE SUBMITTED THAT THE COMPANY WAS ORIGINALLY INCORPORATED AS G. RAJ FINANCIAL CONSULTANCY PRIVATE LIMITED ON 21ST MAY, 1990 UNDER THE COMPANIES ACT, 1956 AS A PRIVATE LIMITED COMPANY IN THE STATE OF WEST BENGAL. ON 28TH JULY, 1992 THE COMPANY WAS CONVERTED INTO A PUBLIC COMPANY AS G. RAJ FINANCIAL CONSULTAN CY LIMITED. SUBSEQUENTLY, THE COMPANYS NAME WAS CHANGED TO SHIVOM INVESTMENT & C ONSULTANCY LIMITED ON 14TH DECEMBER, 1999. THE CORPORATE IDENTIFICATION NUMBER (CIN) OF THE COMPANY IS L74140WB1990PLC049044. THE LD AR FILED A COPY OF TH E INFORMATION MEMORANDUM ISSUED BY THE SAID COMPANY BEFORE THE STOCK EXCHANG ES DATED 16/12/2004 AND AS PER THIS THE CAPITAL STRUCTURE OF THE COMPANY HAS BEEN STATED TO BE AS FOLLOWS: - 19 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 19 THE LD AR THUS STATED THAT THE COMPANY WENT PUBLIC IN 1996, THUS IT IS OBVIOUS THAT THE LISTING OF THE SHARES OF THE COMPANY WOULD HAVE HAP PENED IN 1996 WHEN THE PUBLIC ISSUE WAS MADE AND THEREFORE THE DATE OF 1969 WRONG LY REFLECTING ON THE WEBSITE OF THE CALCUTTA STOCK EXCHANGE WAS NOT IN THE CONTROL OF T HE ASSESSEE AND HE COULD NOT BE MADE TO SUFFER FOR SUCH CLERICAL ERRORS. 8.3 THE LD AR ALSO DREW OUR ATTENTION TO PAGE 21 OF THE SAID INFORMATION MEMORANDUM THAT THE COMPANY WAS ALSO REGISTERED WITH THE RESER VE BANK OF INDIA AS A NON BANKING FINANCE COMPANY (NBFC) AND WAS HAVING REGISTRATION NO 05.01155 DATE 01/03/1998. THE LD AR ALSO DREW OUR ATTENTION TO THE FACT THAT COMPANY HAS MERGED ANOTHER COMPANY WITH IT AND SUCH MERGER DETAILS WERE AVAILA BLE ON PAGE 48 OF THE SAID INFORMATION MEMORANDUM WHEREIN IT HAS BEEN STATED T HAT THE COMPANY HAD FILED A PETITION U/S 391(2) & 394 OF THE COMPANIES ACT, 195 6 FOR APPROVAL OF A SCHEME OF 20 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 20 AMALGAMATION OF RELAX VINTRADE LIMITED AND INTIME D EALERS LIMITED IN THE COMPANY WITH THE HONBLE HIGH COURT OF CALCUTTA VIDE COMPAN Y PETITION NO. 649/2013 AND COMPANY APPLICATION NO. 1071/2011. THE PETITION HAS BEEN APPROVED BY HONBLE BENCH OF THE HIGH COURT OF CALCUTTA VIDE ITS ORDER DATED 13.05.2014. THUS THE AFFAIRS OF THE COMPANY WERE ALSO BEFORE THE HONBLE BENCH OF T HE HIGH COURT OF CALCUTTA AND SUCH MERGER WAS PASSED AFTER CLEARANCES FROM VARIOU S AUTHORITIES INCLUDING INCOME TAX DEPARTMENT, SEBI, STOCK EXCHANGE, RESERVE BANK OF I NDIA ETC. THE LD AR THEREFORE STATED THAT THE COMPANY BEING MONITORED BY VARIOUS AGENCIES AND THE ASSESSEE NOT BEING A PART OF THE MANAGEMENT OF THE COMPANY HAD NO ABIL ITY TO INFLUENCE ANY DECISIONS INCLUDING PRICE MOVEMENTS ON THE STOCK EXCHANGES. T HE LD AR ALSO DREW OUR ATTENTION TO PAGE 75 OF THE SAID INFORMATION MEMORANDUM WHERE IN IT HAS BEEN CERTIFIED BY THE COMPANY THAT THERE ARE NO PENDING LITIGATIONS, PROS ECUTIONS; INVESTIGATIONS INITIATED OTHER THAN UNDER NORMAL COURSE OF BUSINESS BY / UND ER THE COMPANIES ACT, 1956 AND 2013, WHEREVER APPLICABLE, FOREIGN EXCHANGE MANAGE MENT, 1999 OR UNDER THE PROVISIONS OF ANY OTHER ACT FOR THE TIME BEING IN F ORCE, SEBI, ROC, STOCK EXCHANGE, RBI, INCOME TAX DEPARTMENT OR ANY OTHER STATUTORY A GENCIES AS ON DATE AGAINST THE COMPANY. 8.4 THE LD AR ALSO BROUGHT TO OUR NOTICE THAT THE D ONORS DULY RESPONDED TO THE NOTICE OF THE LD AO AND ALL THE RELEVANT INFORMATIO N REGARDING THE TRANSACTION BETWEEN THE DONORS AND THE ASSESSEE WERE DULY PROVIDED BY T HE DONORS. THE LD AO WANTED OTHER INFORMATION RELATING TO THE DONORS PERSONAL A FFAIRS OR OTHER ISSUES WHICH DID NOT RELATE TO THE TRANSACTION BEING VERIFIED AND THEREF ORE SUCH IRRELEVANT QUERIES OF THE LD AO WAS NOT REPLIED TO BY THE DONORS AND SUCH ACTION CA NNOT MAKE THE GIFT TO BE BOGUS. 8.5 THE LD AR ALSO BROUGHT TO OUR NOTICE THAT THE S TOCK BROKERS THROUGH WHOM THE SHARES WERE SOLD IN THE CALCUTTA STOCK EXCHANGE AND ON SUCH SALE, SECURITY TRANSACTION 21 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 21 TAX (STT) WAS DULY PAID HAD DULY RESPONDED TO THE NOTICE OF THE LD AO AND ALL THE RELEVANT INFORMATION REGARDING THE TRANSACTION BETW EEN THE BROKERS AND THE ASSESSEE WERE DULY PROVIDED TO THE LD AO. 8.6 THE LD AR ALSO STATED THAT THE DATA RELATING TO THE SHAREHOLDERS OF THE COMPANY FROM 2007-2012 AS REPRODUCED IN THE ORDER WAS RATHE R SUPPORTING THE CASE OF THE ASSESSEE, AS THE DONORS NAME WERE DULY REFLECTED A S SHARE HOLDERS IN THE LIST OF SHARE HOLDERS FROM 2007 AND THIS PROVES THAT THE DONORS H AD THE SHARES IN THEIR POSSESSION AND THUS THE GIFT OF THE SHARES WERE DULY PROVED. THE L D AR ALSO BROUGHT TO OUR NOTICE THAT SOME OTHER FAMILY MEMBERS OF THE DONORS WERE ALSO H OLDING THE SHARES OF THE COMPANY AND THEY BEING FROM THE SAME FAMILY, IT IS QUITE N ATURAL THAT THEIR ADDRESS WILL BE COMMON. THUS SUCH FINDINGS OF THE LD AO ARE ALSO NO T RELEVANT TO TREAT THE CAPITAL GAINS AS BOGUS. 8.7 THE LD AR ALSO STATED THAT THE DELIVERY OF SHAR ES WERE MADE ON THE DATE OF THE TRANSACTION AND OR A DAY OR TWO BEFORE. THIS WAS DU E TO THE FACT THAT UNDER THE STOCK EXCHANGE RULES , THE DELIVERY OF SHARES HAS TO BE G IVEN WITHIN ONE OR TWO DAYS OF DELIVERY. THE DELIVERY OF SHARES REQUIRES THE ASSES SEE TO SEND A DEMAT DELIVERY INSTRUCTION TO ITS DEPOSITARY PARTICIPANT AND THE S AID DEPOSITARY PARTICIPANT THEN DELIVERS THE SHARE TO THE BROKER WITHIN A DAY. IF THE SHARES DO NOT REACH THE BROKER ON THE DAY WHERE THE BROKER HAS TO DELIVER THE SHARES TO THE S TOCK EXCHANGE THEN THE SALE OF SHARES WILL GET CANCELLED AND THE SHARES SOLD WILL GET AUC TIONED AT ATLEAST 20% HIGHER PENALTY. THUS THE ASSESSEE WOULD HAVE TO PAY A PENALTY OF AT LEAST 20% OF THE SALE VALUE FOR DELAY IN DELIVERY OF SHARES. THUS IN ORDER TO PREVENT SUC H POSSIBLE DELAY, THE ASSESSEE WOULD, AS A PRECAUTION, ENSURE THAT THE SHARES ARE DELIVER ED ON THE DAY OF THE SALE OR WHERE THE INSTRUCTION TO SELL HAS ALREADY BEEN GIVEN A DAY O R TWO IN ADVANCE TO THE BROKER, THEN THE SHARES ARE ALSO DELIVERED IN ADVANCE TO MITIGAT E THE RISK OF DEFAULT IN DELIVERY. 22 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 22 8.8 THE LD AR ALSO STATED THAT THE ALLEGATION OF T HE LD AO REGARDING THE SALE TRANSACTION BEING CROSS DEAL HENCE BEING ILLEGAL WA S NOT CORRECT. THE LD AR SUBMITTED THAT THE LD AO FAILED TO BRING ON RECORD ANY PROVIS IONS OF THE STOCK EXCHANGE RULES OR SEBI RULES WHICH PROHIBIT SUCH TRANSACTION. THIS AL LEGATION OF THE LD AO WAS MERELY A CREATION OF HIS IMAGINATION WHICH WAS NOT BACKED BY ANY BASIS OR LAW OR RULES FRAMED. AS PER THE LD AR, THERE WAS NOTHING PREVENTING A BR OKER FOR ACTING ON BEHALF OF THE SELLER AND BUYER. THE SELLER INSTRUCTS THE BROKER T O FEED THE DEAL IN THE ONLINE COMPUTER PLATFORM OF THE EXCHANGE, WHEREIN, THE NUMBER OF SH ARES AND THE PRICE IS FED INTO THE SYSTEM. ONCE THIS IS DONE, IT IS OPEN FOR ANYONE W HO IS ON THE ONLINE PLATFORM TO PURCHASE THE SHARES WHICH ARE ON OFFER. ON THE OTHE R HAND, WHEN THE SHARES ARE BEING OFFERED TO BE PURCHASED, THE BUYER INSTRUCTS THE B ROKER TO FEED THE DEAL IN THE ONLINE COMPUTER PLATFORM OF THE EXCHANGE, WHEREIN THE NUM BER OF SHARES AND THE PRICE IS FED INTO THE SYSTEM. ONCE THIS IS DONE, IT IS OPEN FOR ANYONE WHO IS ON THE ONLINE PLATFORM TO SELL THE SHARES WHICH ARE ON OFFERED PRICE. IT I S THE COMPUTER SYSTEM OF THE STOCK EXCHANGE WHICH WILL MATCH THE TRANSACTION AND COMPL ETE THE SAME. THUS THE ENTIRE TRANSACTIONS ARE INDEPENDENTLY FED INTO THE SYSTEM AND THE SAME CAN BE VERIFIED BY THE STOCK EXCHANGE AND THE TRANSACTIONS ARE DONE TRANSP ARENTLY. THUS AS PER THE LD AR, THE ALLEGATION OF THE LD AO THAT SUCH TRANSACTIONS WERE ILLEGAL HENCE THE SALE BE TREATED AS BOGUS IS ALSO NOT TENABLE. 8.9. THE LD AR SUBMITTED THAT THERE IS NO ALLEGATI ON BY ANY PERSON WHATSOEVER, THAT THE ASSESSEE APPROACHED THEM FOR SUCH ARRANGING ANY BOG US LTCG. AS PER THE LD AR, IN THE ONLINE SYSTEM OF TRADING, THE ASSESSEE DID NOT KNOW THE NAMES OF THE BUYERS AND HAS NO CONNECTION AND/OR RELATIONS WITH ANY SUCH PERSON S. THE TRANSACTIONS OF SALE OF SHARES WERE THROUGH ONLINE TRADING SYSTEM THROUGH HIS BROK ER FROM WHOM HE RECEIVED THE SALE CONSIDERATION. THE BROKER ALSO RECEIVES PAYMENTS FO R ALL HIS TRANSACTIONS FROM STOCK 23 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 23 EXCHANGE. THE SELLER AND THE BUYER CANNOT KNOW THE NAMES OF EACH OTHER AS WELL AS THEIR RESPECTIVE BROKERS, WHO WERE INVOLVED IN THE TRADING TRANSACTIONS IN THE SECONDARY PLATFORM. IN SUCH A SITUATION, IT CANNOT BE PRESUM ED THAT THERE COULD BE ANY TRANSFER OF CASH BETWEEN THE BUYERS AND SELLERS TO CONVERT THE UNACCOUNTED MONEY OF THE BENEFICIARIES AS ALLEGED BY THE LD AO. THE LD AR RE FERRED TO THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LAVANYA LA ND PVT. LTD. [2017] 83 TAXMANN.COM 161 (BOM) TO CONTEND THAT THERE WAS NO EVIDENCE WHATSOEVER T O ALLEGE THAT MONEY CHANGED HANDS BETWEEN THE ASSESSEE AND THE BR OKER OR ANY OTHER PERSON INCLUDING THE ALLEGED EXIT PROVIDER WHATSOEVER TO C ONVERT UNACCOUNTED MONEY FOR GETTING BENEFIT OF LTCG AS ALLEGED. IN THE SAID CAS E, THE HONBLE HIGH COURT AT PARA 21 HELD THAT IN ABSENCE OF ANY MATERIAL TO SHOW THAT H UGE CASH WAS TRANSFERRED FROM ONE SIDE TO ANOTHER , ADDITION CANNOT BE SUSTAINED. SIM ILAR VIEW WAS TAKEN IN THE FOLLOWING CASES:- (I) BAIJNATH AGARWALLA VS. ACIT [2010] 40 SOT 475 (AGRA THIRD MEMBER) (II) GANESHMULL BIIJAY SINGH BAID HUF VS. DCIT ITA NO. 544/KOL/13 DATED 4.12.2015 (KOLKATA TRIBUNAL) (III) MALTI GHANSHYAMBHAI PATODIA VS. ITO ITA NO. 3400/ AHD/2015 (AHMEDABAD TRIBUNAL) (IV) PRATIK SURYAKANT SHAH VS. ITO [ 2017] 77 TAXMANN.C OM 260 (AHMEDABAD TRIBUNAL) (V) PADDUCHARI JEEVAN PRASHANT VS. ITO ITA NO. 452/HY D/2015 (HYDERABAD TRIBUNAL) (VI) ANIL NAND KISHORE GOYAL VS.ACIT ITA NOS. 1256/PN/ 2012 (PUNE TRIBUNAL) (VII) CIT VS. JAMNA DEVI AGRAWAL [2012] 20 TAXMANN.COM 529 (BOM HC) 24 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 24 8.10 THE LD AR SUBMITTED THAT ALL THE OBSERVATIONS, CONCLUSIONS AND FINDINGS OF THE LD AO ARE BASED ON SUSPICION, SURMISES AND HEARSAY. IT IS A TRITE LAW THAT THE SUSPICION HOWSOEVER STRONG CANNOT PARTAKE THE CHARACTER OF LE GAL EVIDENCE. REFERENCE WAS MADE TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF LALCHAND BHAGA T AMBICA RAM VS. CIT (1959) 37 ITR 288 (SC) AND UMACHARAN SH AW 37 ITR 271 AND OMAR SALAY MOHAMED SAIT 37 ITR 151 . THE LD AR SUBMITTED THAT THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT THE ASSESS EE HAS PLOUGHED BACK HIS OWN UNACCOUNTED MONEY IN THE FORM OF BOGUS LTCG. HOWEVE R, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT THE ASSESSEE HAD BROUGHT BACK HIS UNACCOUNTED INCOME IN THE FORM OF LTCG. THE LD AR REFERRED TO THE JUDG EMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. VS. ACI T [2017] 164 ITD 1 (MUMBAI- TRIB.)(SB). THE TRIBUNAL OBSERVED AS UNDER: 46. ......... ULTIMATELY THE ENTIRE CASE OF REVENUE HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LAR GE SHARE IN SO CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULA TION. HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR T O BE TRUE BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK T HAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QU ITE A TRITE LAW THAT SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVIDENCE ON RECORD. THE THEORY OF PREPONDERANCE OF PROBABILITY IS APPLIED TO WEIGH THE EVIDENCES OF E ITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVO URABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRAWN ON THE BASIS OF CE RTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTIONS OF F ACTS THAT MIGHT GO AGAINST THE ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATIONS HAVE BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AG AINST THE ASSESSEE 8.11 THE LD AR SUBMITTED THAT THERE IS NO DIRECT EV IDENCE AGAINST THE ASSESSEE BROUGHT ON RECORD BY LD AO TO HOLD THAT THE ASSESSEE INTROD UCED ITS OWN UNACCOUNTED MONEY BY 25 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 25 WAY OF BOGUS LTCG. THE LD AR SUBMITTED THAT THERE I S NO EVIDENCE AGAINST THE ASSESSEE TO HOLD THAT THE ASSESSEE WAS A BENEFICIARY TO BOGU S TRANSACTIONS. 8.12 THE LD AR VEHEMENTLY SUBMITTED THAT THE ASSESS EE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE CLAIM OF THE ASSESSEE THAT IT EARNED LTCG ON TRANSACTIONS OF HIS INVESTMENT IN SHARES. THE TRANSACTIONS OF ACQUISITI ON OF SHARES BY GIFT WERE DULY SUPPORTED BY EVIDENCES AND WAS EVEN VERIFIED WITH T HE DONORS AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE ACQUISITION OF SHARES AND TH E SALE OF SHARES WERE ALSO REFLECTED IN DEMAT ACCOUNT STATEMENTS. THE SALE OF SHARES SUFFER ED STT, BROKERAGE ETC. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE HELD T HAT THE TRANSACTIONS WERE BOGUS. THE LD AR REFERRED TO THE FOLLOWING JUDGEMENTS OF HONBLE JURISDICTIONAL HIGH COURT:- (I) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 OF 20 12] (CAL HC) IN THIS CASE THE LD AO FOUND THAT THE FORMAL EVIDENCES PROD UCED BY THE ASSESSEE TO SUPPORT HUGE LOSSES CLAIMED IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE STAGE MANAGED. THE HONBLE HIGH COURT HELD THAT THE OPINION OF THE LD AO THAT THE ASSESSEE GENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACT IONS SO AS TO REDUCE THE QUANTUM OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPR ESSED BY THE LD AO BUT HE MISERABLY FAILED TO SUBSTANTIATE THAT. THE HIGH COU RT HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING PRICE AND THEREFORE THE SUSPICION OF THE LD AO WAS MISPLACED AND NOT SUBSTANTIATED. (II) CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITED [2 013] 40 TAXMANN.COM 439 (CAL) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD T HAT ON THE BASIS OF A SUSPICION HOWSOEVER STRONG IT IS NOT POS SIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. IT WAS FURTHER HELD THAT IN ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIBLE, TO HOLD THAT THE 26 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 26 TRANSACTIONS OF BUYING OR SELLING OF SHARES WERE CO LOURABLE TRANSACTIONS OR WERE RESORTED TO WITH ULTERIOR MOTIVE. (III) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD THAT THE ASSESSING OFFICER DOUBTED THE TRANSACTIONS SINCE THE SELLING BROKER WAS SUBJECTED TO SEBIS AC TION. HOWEVER THE TRANSACTIONS WERE AS PER NORMS AND SUFFERED STT, BROKERAGE, SERVICE T AX, AND CESS. THERE IS NO IOTA OF EVIDENCE OVER THE TRANSACTIONS AS IT WERE REFLECTED IN DEMAT ACCOUNT. THE APPEAL FILED BY THE REVENUE WAS DISMISSED. (IV) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRM ED THE DECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASS ESSEE WHERE THE LD AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS T RANSACTIONS IN ALLEGED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE LD AO DISALLOWED THE LOSS O N TRADING OF PENNY STOCK ON THE BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WA S ALSO FOUND THAT THE LD AO DID NOT DOUBT THE GENUINENESS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE TRIBUNAL HELD THAT THE LD AOS CONCLUSIONS ARE MERELY BASED ON TH E INFORMATION RECEIVED BY HIM. THE APPEAL FILED BY THE REVENUE WAS DISMISSED. (V) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIR MED THE DECISION OF THIS TRIBUNAL WHEREIN THE LOSS SUFFERED BY THE ASSESSEE WAS ALLOWED SINCE THE LD AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST THAT THE SA LE OF SHARES BY THE ASSESSEE WERE NOT GENUINE. 27 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 27 (VI) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.4.2009] IN THIS CASE THE ASSESSEE CLAIMED EXEMPTION OF INCO ME FROM LONG TERM CAPITAL GAINS. HOWEVER, THE LD AO, B ASED ON THE INFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WE RE BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL W HEREIN IT WAS FOUND THAT THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. IT WAS ALSO FOUND THAT T HE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DEMAT ACCOUNTS AND PRODUCED DOCUM ENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FA CTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 8.13 THE LD AR SUBMITTED BEFORE US THAT WHERE TH E PURCHASE AND SALE TRANSACTIONS ARE SUPPORTED AND EVIDENCED BY GIFT DEED, CONFIRMATION OF TRANSACTION FROM DONORS, BROKERS, STOCK EXCHANGES, BILLS, CONTRACT NOTES, DE MAT STATEMENTS AND BANK STATEMENTS ETC., THUS THE SAME COULD NOT BE TREATED AS BOGUS S IMPLY ON THE BASIS OF SUSPICION OF WRONG DOING OR THE FACT THAT THE SHARE PRICES MOVED VERY FAST. THE LD AR ALSO STATED THAT NO AUTHORITY HAS EVEN ALLEGED THAT THE ASSESSEE IS INVOLVED IN ANY PRICE RIGGING ACTIVITIES. THE SHARE PRICE IN A STOCK MARKET MAY MOVE FOR VARI OUS FACTORS AND THERE IS NO RELEVANCE TO THE CORRELATION BETWEEN THE PRICE AND THE EARNIN GS OR THE RETURN ON SENSEX AND INDIVIDUAL STOCK. THESE ARE MERELY COMPARATIVE TOO LS BUT THERE IS NO RULE/ LAW OR THEORY THAT THE STOCK PRICE WILL MOVE BASED ON THESE FACTO RS. THE LD AR SUBMITTED THAT THERE ARE THOUSANDS OF STOCKS WHICH DO NOT FOLLOW SUCH PATTER N OR BASIS. THUS THE LD AO WRONGLY RELIED ON SUCH BASIS TO COME TO SUCH CONCLUSIONS. I N SUPPORT OF THE AFORESAID SUBMISSIONS, THE LD AR, IN ADDITION TO THE AFORESA ID JUDGEMENTS, HAS REFERRED TO AND RELIED ON THE FOLLOWING CASES:- 28 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 28 (I) BAIJNATH AGARWAL VS. ACIT [2010] 40 SOT 475 (AGRA (TM) (II) ITO VS. BIBI RANI BANSAL [2011] 44 SOT 500 (AGRA) (TM) (III) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGRA/2009 (AGRA ITAT) (IV) ACIT VS. AMITA AGARWAL & OTHERS ITA NOS. 247/(KOL )/ OF 2011 (KOL ITAT) (V) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22-26/K OL/2P11 (KOL ITAT) (VI) SURYA PRAKASH TOSHNIWAL VS. ITO ITA NO. 1213/KOL/ 2016 (KOL ITAT) (VII) SUNITA JAIN VS. ITO ITA NO. 201 & 502/AHD/2016 (A HMEDABAD ITAT) (VIII) MS. FARRAH MARKER VS. ITO ITA NO. 3801/MUM/2011 ( MUMBAI ITAT) (IX) ANIL NANDKISHORE GOYAL VS. ACIT ITA NOS. 1256/PN/ 2012 (PUNE ITAT) (X) CIT VS. SUDEEP GOENKA [2013] 29 TAXMANN.COM 402 ( ALLAHABAD HC) (XI) CIT VS. UDIT NARAIN AGARWAL [2013] 29 TAXMANN.COM 76 (ALLAHABAD HC) (XII) CIT VS. JAMNADEVI AGARWAL [2012] 20 TAXMANN.COM 529 (BOMBAY HC) (XIII) CIT VS. HIMANI M. VAKIL [2014] 41 TAXMANN.COM 425 (GUJARAT HC) (XIV) CIT VS. MAHESHCHANDRA G. VAKIL [2013] 40 TAXMANN. COM 326 (GUJARAT HC) (XV) CIT VS. SUMITRA DEVI [2014] 49 TAXMANN.COM 37 (RAJA STHAN HC) (XVI) GANESHMULL BIJAY SINGH BAID HUF VS. DCIT ITA NOS. 544/KOL/2013 (KOLKATA ITAT) (XVII) MEENA DEVI GUPTA & OTHERS VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) 8.14 THE LD AR FURTHER SUBMITTED BEFORE US THAT ONC E THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRAN SACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNANAND AGNIHOTRI VS. THE STATE OF MADHYA PR ADESH [1977] 1 SCC 816 (SC) . IN THIS CASE, THE HONBLE APEX COURT HELD THAT THE BUR DEN OF SHOWING THAT A PARTICULAR 29 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 29 TRANSACTION IS BENAMI AND THE APPELLANT OWNER IS NO T THE REAL OWNER ALWAYS RESTS ON THE PERSON ASSERTING IT TO BE SO AND THE BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD DIRECT LY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY R AISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT IS NOT ENOU GH TO SHOW CIRCUMSTANCES WHICH MIGHT CREATE SUSPICION BECAUSE THE COURT CANNOT DEC IDE ON THE BASIS OF SUSPICION. IT HAS TO ACT ON LEGAL GROUNDS ESTABLISHED BY EVIDENCE. TH E LD AR SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGEMENTS WHILE DE CIDING THE ISSUE RELATING TO EXEMPTION CLAIMED BY THE ASSESSEE ON LTCG ON ALLEGE D PENNY STOCKS. (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. J. C. AGARWAL HUF ITYA NO. 32/AGR/2007 ( AGRA ITAT) 8.15 THE LD AR FURTHER SUBMITTED THAT THE LD AO WAS NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND ALLEGE THAT THERE WAS PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATION IN ANY ORDERS PASSED BY ANY AUTHORITY SUCH AS THE SEBI AND/OR THE STOCK EXCHANGE TO THE EFFECT THAT THE ASSESSEE AND/OR HIS BROKER WAS A PARTY TO THE P RICE RIGGING OR MANIPULATION OF PRICE IN CSE. THE LD AR REFERRED TO THE FOLLOWING JUDGEMENTS IN SUPPORT OF THIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE LD AO WAS NOT JUSTIFIED IN REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE ACT AND TO ASSESS THE SALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASS ESSEE UNDER SECTION 68 OF THE ACT :- (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. AMITA AGARWAL & OTHERS - ITA NOS. 247/(KO L)/ OF 2011 (KOL ITAT) (III) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693/KOL /2009 (KOL ITAT) (IV) MUKESH R. MAROLIA VS. ADDL. CIT [2006] 6 SOT 247 (MUM) 30 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 30 8.16. THE LD AR ALSO SUBMITTED THAT THE LD AO WAS N OT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT TO HOLD THAT TH E SALE PROCEEDS OF SHARES OF SOICL RECEIVED BY THE ASSESSEE FROM M/S P DIDWANIA & CO A ND TOSHITH SECURITIES P LTD WAS NOT SATISFACTORILY EXPLAINED BY THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD TO DISBELIEVE THAT THE ASSESSEE SOLD SHARES OF SOICL THROUGH M/S P DIDWANIA & CO AND TOSHITH SECURITIES P LTD., A REGISTERED SHARE AND STOCK BRO KER WITH CSE. THE ASSESSEE PRODUCED ALL EVIDENCES TO EXPLAIN THE SOURCE OF THE AMOUNTS RECEIVED BY THE ASSESSEE FROM M/S M/S P DIDWANIA & CO AND TOSHITH SECURITIES P LTD AN D THESE BROKERS AND THE STOCK EXCHANGE ALSO VERIFIED THE TRANSACTIONS ENTERED BY THE ASSESSEE. THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF SOICL AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 8.17. THE LD AR SUBMITTED THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND ON THE BASIS OF INCONTROVERTIBLE EVIDENCES PRODUCED BY THE ASSESSEE, THE LD AO WAS NOT JUSTIFIED IN CONCLUDING THAT THE ASSESSEES TRANSACTIONS RELA TING TO LTCG ON SALE OF SHARES OF SOICL WERE BOGUS. THUS AS PER THE AR, THE LD CITA WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE LD AO AND ALLOWING THE APPEAL AFTER PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE EVIDENCES PRODUCED BY THE ASSES SEE IN SUPPORT OF HIS CASE. THE LD CITA RELIED ON VARIOUS JUDGEMENTS REFERRED TO BY TH E ASSESSEE IN SUPPORT OF ASSESSEES CLAIM OF EXEMPTION OF LTCG ON SALE OF SHARES OF SOI CL AND THESE WERE CORRECTLY APPRECIATED BY THE LD CITA. THE LD AR PRAYED THAT THE ORDER OF THE LD CITA BE UPHELD AND THE EXEMPTION UNDER SECTION 10(38) OF THE ACT B E CONFIRMED IN FAVOUR OF THE ASSESSEE. 9. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF TH E LD AR THAT THE LD AO WAS NOT 31 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 31 JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGEMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTR IES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS O F THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFEREN CES WHICH REMAIN UNPROVED BASED ON THE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITE RATED FOR THE SAKE OF BREVITY. THE PRINCIPLES LAID DOWN IN VARIOUS CASE LAWS RELIED UP ON BY THE LD AR ARE ALSO NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT THE SHARES W ERE DONATED TO THE ASSESSEE BY TWO DONORS. MR MANISH KUMAR AGARWAL GIFTED 50,000 SHARE S AND MRS PUSHPA SINGH GIFTED 15,000 SHARES. WE FIND THAT SRI MANISH KUMAR AGARWA L WAS ASSESSED TO TAX UNDER PAN AAHM9530L AND HAD FILED HIS RETURN OF INCOME FOR TH E AY 2010-2011 (WHICH IS AVAILABLE IN PAGE 31 OF PAPER BOOK) THE SAID DONOR HAD VIDE HIS GIFT DEED WHICH WAS DULY AFFIRMED BEFORE THE NOTARY PUBLIC DECLARED (W HICH ARE AVAILABLE IN PAGES 27-28 OF PAPER BOOK) THAT THE SHARES WERE GIFTED BY HIM TO T HE DONOR AND ALSO THAT THE SHARES WERE HELD BY HIM SINCE 26-03-2003 AND THESE SHARES WERE HELD IN HIS DEMAT ACCOUNT NO. 10079366 DP ID NO. IN 301740. WE ALSO FIND THAT THE SAID DONOR REPLIED TO THE NOTICE ISSUED U/S 133(6) OF THE IT ACT 1961 ON 18-03-2013 TO THE LD AO ( WHICH IS AVAILABLE IN PAGE 33 OF PAPER BOOK), THE DONOR CONFIRMED THE FA CT OF MAKING THE GIFT AND DELIVERING THE SHARES BY TRANSFER TO THE DEMAT ACCOUNT OF THE ASSESSEE. THE COPY OF THE DEMAT ACCOUNT OF THE DONOR IS ALSO AVAILABLE IN PAGE 34 O F THE PAPER BOOK WHICH SHOWS THAT THE DONOR WAS HOLDING 100,000 SHARES OF SOCIL AS ON 31-03-2006. WE SIMILARLY FIND THAT THE OTHER DONOR MRS PUSHPA SINGH WHO HAD GIFTE D 15,000 SHARES WAS ASSESSED TO TAX UNDER PAN AGJPS5134L AND HAD FILED HER RETURN OF IN COME FOR THE AY 2010-2011 (WHICH IS AVAILABLE IN PAGE 32 OF PAPER BOOK) , THE SAID DONOR HAD VIDE HER GIFT DEED WHICH WAS DULY AFFIRMED BEFORE THE NOTARY PUBLIC DE CLARED (WHICH ARE AVAILABLE IN PAGES 29-30 OF PAPER BOOK) THAT THE SHARES WERE GIF TED BY HER TO THE DONOR AND ALSO THAT 32 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 32 THE SHARES WERE HELD BY HER SINCE 30-03-2003 AND TH ESE SHARES WERE HELD IN HIS DEMAT ACCOUNT NO. 10046924 DP ID NO. IN 301740. WE ALSO FIND THAT THE SAID DONOR REPLIED TO THE NOTICE ISSUED U/S 133(6) OF THE IT ACT 1961 ON 09-03-2013 TO THE LD AO ( WHICH IS AVAILABLE IN PAGE 35 OF PAPER BOOK), THE DONOR CON FIRMED THE FACT OF MAKING THE GIFT AND DELIVERING THE SHARES BY TRANSFER TO THE DEMAT ACCOUNT OF THE ASSESSEE. THE COPY OF THE DEMAT ACCOUNT OF THE DONOR ARE ALSO AVAILABLE I N PAGES 38-39 OF THE PAPER BOOK WHICH SHOWS THAT THE DONOR WAS HOLDING 40,000 SHARE S OF SOCIL AS ON 31-03-2006. THUS THE ASSESSEE HAS SUBSTANTIATED AND THE DONORS HAVE DULY CONFIRMED THE TRANSACTION OF GIFT, THEREFORE THE LD AO WAS NOT JUSTIFIED IN DOUBTING THE GIFT OF SHARES MADE TO THE ASSESSEE. 9.1 WE FURTHER FIND THAT THE TRANSACTION OF SALE OF SHARES BY THE ASSESSEE WAS DULY BACKED BY ALL EVIDENCES INCLUDING CONTRACT NOTES, D EMAT STATEMENT, BANK ACCOUNT REFLECTING THE TRANSACTIONS, THE STOCK BROKERS HAVE CONFIRMED THE TRANSACTIONS, THE STOCK EXCHANGE HAS CONFIRMED THE TRANSACTIONS, THE SHARES HAVE BEEN SOLD ON THE ONLINE PLATFORM OF THE STOCK EXCHANGE AND EACH TRADE OF SA LE OF SHARES WERE HAVING UNIQUE TRADE NO. AND TRADE TIME. IT IS NOT THE CASE THAT T HE SHARES WHICH WERE SOLD ON THE DATE MENTIONED IN THE CONTRACT NOTE WERE NOT TRADED PRIC E ON THAT PARTICULAR DATE. THE LD AO DOUBTED THE TRANSACTIONS DUE TO THE HIGH RISE IN TH E STOCK PRICE BUT FOR THAT, THE ASSESSEE COULD NOT BE BLAMED AND THERE WAS NO EVIDENCE TO PR OVE THAT THE ASSESSEE OR ANY ONE ON HIS BEHALF WAS MANIPULATING THE STOCK PRICES. THE S TOCK EXCHANGE AND SEBI ARE THE AUTHORITIES APPOINTED BY THE GOVERNMENT OF INDIA TO ENSURE THAT THERE IS NO STOCK RIGGING OR MANIPULATION. THE LD AO HAS NOT BROUGHT ANY EVID ENCE ON RECORD TO SHOW THAT THESE AGENCIES HAVE ALLEGED ANY STOCK MANIPULATION AGAINS T THE ASSESSEE AND OR THE BROKERS AND OR THE COMPANY. IN ABSENCE OF ANY EVIDENCES IT CANNOT BE SAID THAT MERELY BECAUSE THE STOCK PRICE MOVED SHARPLY, THE ASSESSEE WAS TO BE BLAMED FOR BOGUS TRANSACTIONS. IT IS ALSO TO BE SEEN THAT IN THIS CASE, THE SHARES W ERE HELD BY THE DONORS FROM 2003 AND 33 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 33 SOLD IN 2010 THUS THERE WAS A HOLDING PERIOD OF 7 Y EARS AS PER SECTION 49 OF THE ACT AND IT CANNOT BE SAID THAT THE ASSESSEE AND THE DONORS WERE MAKING SUCH PLANS FOR THE LAST 7 YEARS TO RIG THE STOCK PRICE TO GENERATE BOGUS CAPI TAL GAINS THAT TOO WITHOUT ANY EVIDENCES WHATSOEVER. 9.2 IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSE E AND / OR THE STOCK BROKER M/S P DIDWANIA & CO AND TOSHITH SECURITIES P LTD., BOTH R EGISTERED SHARE AND STOCK BROKERS WITH CALCUTTA STOCK EXCHANGE HAD CONFIRMED THE TRAN SACTION AND HAVE ISSUED LEGALLY VALID CONTRACT NOTES UNDER THE LAW AND SUCH CONTRAC T NOTES ARE AVAILABLE IN PAGES 41-52 OF THE PAPER BOOK. WE FIND THAT THE HONBLE CALCUTT A HIGH COURT IN THE CASE OF PR CIT VS RUNGTA PROPERTIES PRIVATE LIMITED ITAT NO 105 OF 2016 DATED 8 TH MAY 2017 IN A SIMILAR ISSUE DISMISSED THE APPEAL OF THE DEPARTMEN T BY MAKING THE FOLLOWING OBSERVATIONS: (11) ON THE LAST POINT, THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORDS ANY MATERIAL TO SHOW THAT THE TRANSACTIONS IN SHARES OF THE COMPANY INVOLVED WERE FALSE OR FICTITIOUS. IT IS FINDING OF THE ASSE SSING OFFICER THAT THE SCRIPS OF THIS COMPANY WAS EXECUTED BY A BROKER THROUGH CROSS DEAL S AND THE BROKER WAS SUSPENDED FOR SOME TIME. IT IS ASSESSEES CONTENTION ON THE O THER THAT EVEN THOUGH THERE ARE ALLEGATIONS AGAINST THE BROKER, BUT FOR THAT REASON ALONE THE ASSESSEE CANNOT BE HELD LIABLE. ON THIS POINT THE TRIBUNAL HELD AS A MATTER OF FACT THE AO DOUBTED THE INTEGRITY O F THE BROKER OR THE MANNER IN WHICH THE BROKER OPERATION AS PER THE STATEMENT OF ONE OF THE DIRECTORS OF THE BROKER FIRM AND ALSO AO OBSERVED THAT ASSESSEE HAD NOT FURNISHED ANY EXPLANATION IN RESPECT OF THE INTENTION OF SHOWING TRADING OF SHARES ONLY IN THREE PENNY STOCKS. AO RELIED THE LOSS OF RS.25,30,396/- ONLY ON THE BASIS OF INFORMATION SUBMITTED BY THE STOCK FICTITIOUS. AO H AS ALSO NOT DOUBTED THE GENUINENESS OF THE DOCUMENTS PLACED ON RECORD BY TH E ASSESSEE. AOS OBSERVATION AND CONCLUSION ARE MERELY BASED ON THE INFORMATION REPRESENTATIVE. THEREFORE ON SUCH BASIS NO DISALLOWANCE CAN BE MADE AND ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A), WHO HAS RI GHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO. 1 OF THE REVENUE IS DISMI SSED. 34 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 34 WE AGREE WITH THE REASONING OF THE TRIBUNAL ON THIS POINT ALSO. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. THE SU GGESTED QUESTIONS, IN OUR OPINION DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 9.3. WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGAT IONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO L EGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUME NTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROKERS G ETTING INVO2LVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEME NTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHAS E AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF T HE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE LD CITA RIGHTLY RELIED ON THE DECISION OF THE HONBLE HIGH COURT AT CALCUTTA IN T HE CASE OF ALPINE INVESTMENTS IN ITA NO. 620 OF 2008 DATED 26 TH AUGUST 2008 WHEREIN THE HONBLE COURT HELD AS FOLLOWS: IT APPEARS THAT THE SHARE LOSS AND THE WHOLE TRANS ACTIONS WERE SUPPORTED BY CONTRACT NOTES, BILLS AND WERE CARRIED OUT THROUGH RECOGNIZE D STOCKBROKER OF THE CALCUTTA STOCK EXCHANGE AND ALL THE PAYMENTS MADE TO THE STOCKBROK ER AND ALL THE PAYMENTS RECEIVED FROM STOCKBROKER THROUGH ACCOUNT PAYEE INSTRUMENTS, WHICH WERE ALSO FILED IN ACCORDANCE WITH THE ASSESSMENT. IT APPEARS FROM THE FACTS AND MATERIALS PLACED BEFO RE THE TRIBUNAL AND AFTER EXAMINING THE SAME THE TRIBUNAL CAME TO THE CONCLUSION AND AL LOWED THE APPEAL FILED BY THE ASSESSEE. IN DOING SO, THE TRIBUNAL HELD THAT THE T RANSACTION FULLY SUPPORTED BY THE 35 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 35 DOCUMENTARY EVIDENCES COULD NOT BE BRUSHED ASIDE ON SUSPICION AND SURMISES. HOWEVER, IT WAS HELD THAT THE TRANSACTIONS OF SHARE ARE GENUINE. THEREFORE, WE DO NOT FIND THAT THERE IS ANY REASON TO HOLD THAT THERE IS ANY SUBSTANTIAL QUESTION OF LAW INVOLVED IN THIS MATTER. HENCE, THE APPEAL BEING IT A NO.620 OF 2008 IS DISMISSED. 9.4. WE ALSO FIND THAT THE VARIOUS OTHER CASE LAWS OF HONBLE JURISDICTIONAL HIGH COURT AND OTHER CASE LAWS ALSO RELIED UPON BY THE LD AR A ND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD A O WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF SOICL AS UNDISCLOSED INCOME O F THE ASSESSEE U/S 68 OF THE ACT AND THEREFORE WE UPHOLD THE ORDER OF THE LD CITA AND DI SMISS THE APPEAL OF THE REVENUE. ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 18.10.2017 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18.10.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-32(4), KOLKATA, 10B, MIDDLETON ROW, 2 ND FLOOR, KOL=71. 2. SHRI SHALEEN KHEMANI, FLAT 2B, 2 ND FLOOR, ASTER COURT, 3, LOUDON STREET, KOL-17 3. C.I.T(A)- KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 36 SHALEEN KHEMANI I.T.A. NO. 1945/KOL/2014 ASSESSMENT YEAR: 2010-11 36