Manharbhai Vallabhbhai Vaghani, Bhavnagar V. ITO, Ward-1(1), Bhavnagar

ITA 2145/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8192 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 17-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Opportunity of cross examination; Earning of tax free income; Accommodation entries; Benefit of exemption; Sham transactions; Revised return; Penny stocks; Set aside; Capital Gains; Bogus
• Section: 131; 68; 271(1)(c); 143(3); 208; 13; 22; 20

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ASSESSEE BY : SHRI RASHMIKANT MODI, A.R REVENUE BY : SHRI VIRENDRA OJHA, CIT.D.R /DATE OF HEARING : 14/07/2021 /DATE OF PRONOUNCEMENT: 09/08/2021 SL. NO(S) ITA NO(S) ASSET. YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 2145 /AHD/2018 2015 - 16 MANHARBHAI VALLABHBHAI VAGHANI, PLOT NO.252, ADARSH SOCIETY, STREET NO.5, VIJAYRAJ NAGAR, BHAVNAGAR-364002. PAN: ABOPV3650L INCOME TAX OFFICER, WARD 1(1), BHAVNAGAR. 2. 2149 /AHD/2018 2015 - 16 MAHESH VALLABHBHAI VAGHANI, PLOT NO.252, ADARSH SOCIETY, STREET NO.5, VIJAYRAJ NAGAR, BHAVNAGAR-364002. PAN: AAWPV3196N INCOME TAX OFFICER, WARD 1(5), BHAVNAGAR. 3. 2150 /AHD/2018 2015 - 16 HARESH BHIKHABHAI VAGHANI, PLOT NO.252, ADARSH SOCIETY, STREET NO.5, VIJAYRAJ NAGAR, BHAVNAGAR-364002. PAN: ABPPV4917M INCOME TAX OFFICER, WARD-1(1), BHAVNAGAR . (APPLICANT) (RESPONDENT) 2 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTANCE OF DIFFERENT ASSESSEE AGAINST THE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AHMEDABAD ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2015-2016. 2. FIRST WE TAKE UP ITA NO. 2145/AHD/2018 FOR A.Y. 2015-16 FOR THE PURPOSE OF ADJUDICATION. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CITFA) ERRED IN CONFIRMING THE ADDITION OF RS.2,58,03,348/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF SUCHAK TRADING LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.6,55,86,480/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF DHYANA FINSTOCK LTD. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 3. THE INTERCONNECTED ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,5803,348/- AND RS. 6,55,86,480/- MADE BY THE AO BY TREATING THE LONG TERM CAPITAL GAIN ON THE SALE OF SHARE OF M/S SUCHAK TRADING LTD AND M/S DHAYANA FINSTOCK LTD RESPECTIVELY AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 4. THE FACTS NECESSARY TO BE STATED FOR THE PURPOSE OF DISPOSING OFF THE PRESENT APPEAL ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND EARNING INCOME UNDER THE HEAD SALARY AND CAPITAL GAIN. THE ASSESSEE CLAIMED TO HAVE BEEN INVESTING IN EQUITY SHARES REGULARLY FOR THE LAST 10 YEARS. 3 4.1 THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DECLARED LONG-TERM CAPITAL GAIN ON THE SALE OF SCRIPTS OF TWO COMPANIES LISTED ON THE STOCK EXCHANGE. THE ASSESSEE WITH RESPECT TO SUCH LONG-TERM CAPITAL GAIN HAS CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE ACT. THE DETAILS OF THE SCRIPTS STAND AS UNDER: S.NO. NAME OF COMPANY AMOUNT OF GAIN EXEMPTION CLAIMED 01 SUCHAK TRADING LTD. RS. 2,58,03,348/- RS. 2,58,03,348/- 02 DHAYANA FINSTOCK LTD RS. 6,55,86,480 RS. 6,55,86,480 4.2 THE ABOVE EXEMPTION ON LONG TERM CAPITAL GAIN WAS DISALLOWED BY THE AO AND THE SAME WERE ADDED TO THE TOTAL OF INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. THE DETAILED DISCUSSION ARE AS FOLLOWS: SUCHAK TRADING LIMITED A. THE ASSESSE HAS BOUGHT 200000 EQUITY SHARE OF THE SUCHAK TRADING LTD DATED 20 TH OCTOBER 2012 IN AN OFF-MARKET TRANSACTION @ RS. 10/- PER SHARE. SUBSEQUENTLY, THE SCRIPT GOT LISTED AT BSE AND ASSESSEE TRANSFERRED SHARES TO HIS DEMAT ACCOUNT W.E.F. 07 TH OCTOBER 2013. AFTER LOCK-IN PERIOD THE ASSESSEE SOLD 1,64,614 SHARES BETWEEN 20 TH NOVEMBER TO 31 ST DECEMBER 2014 AT A PRICE VARYING BETWEEN RS. 131.08 TO 176.57 PER SHARE. AS A RESULT, THE ASSESSEE, OVERALL EARNED LONG TERM CAPITAL GAIN OF RS. 2,58,03,348/- ON SUCH TRANSACTION AND CLAIMED THE SAME AS EXEMPTED INCOME UNDER SECTION 10(38) OF THE ACT. B. HOWEVER, THE AO OBSERVED THAT THE COMPANY SUCHAK TRADING LTD. WAS NEITHER HAVING SUBSTANTIAL BUSINESS ACTIVITY DURING THE PERIOD OF F.Y. 2010-11 TO 2014-15 NOR DECLARING ANY DIVIDEND. BUT THE PRICE OF THE SHARE INCREASED BY 17 TIME RELATIVELY IN A SHORT PERIOD OF 27 MONTHS. FURTHER, THE ASSESSEE HAS ACCEPTED IN THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT THAT HE HAS MADE SUCH HUGE INVESTMENT WITHOUT HAVING ANY KNOWLEDGE ABOUT THE COMPANY WHICH IS QUITE UNUSUAL. THUS THE AO WAS OF THE OPINION THAT SUCH AN INCREASE IN THE PRICE OF THE SCRIPT IS DOUBTFUL WHICH LEAD TO INFER THAT SCRIPT OF THE COMPANY WAS USED AS CONDUIT FOR TAX EVASION. PER SE THE PRICE OF THE 4 SCRIPT WAS MANIPULATED ARTIFICIALLY IN COLLUSION WITH BROKER IN ORDER TO GENERATE BOGUS EXEMPT INCOME. AS SUCH THE ENTIRE FLOW OF THE TRANSACTION IS SIMILAR TO THE PREVAILING MODUS OPERANDI OF PENNY STOCK WHICH IS USED AS A TOOL TO EVADE TAXES BY THE VARIOUS ASSESSEES IN THE NAME OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. C. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 22 ND DECEMBER 2017 JUSTIFIED HIS CLAIM OF CAPITAL GAIN AS GENUINE BY CONTENDING THAT: I. HE HAS BEEN INVESTING IN DIFFERENT SCRIPT/SHARES FOR THE LAST 10 YEARS. ACCORDINGLY, HE, AFTER GETTING TIPS AND INFORMATION FROM FRIENDS AND RELATIVE INVESTED IN IMPUGNED EQUITY SHARE. THE SHARES WERE PURCHASED BY MAKING PAYMENT THROUGH ACCOUNT PAYEE CHEQUES AFTER FOLLOWING ALL THE NECESSARY PROCEDURES. THE ASSESSEE IN SUPPORT OF THE INVESTMENT IN THE IMPUGNED SHARES FILED THE ALLOTMENT LETTER, SHARE CERTIFICATES, COPY OF CHEQUE AND OTHER NECESSARY DETAILS DURING THE STATEMENT RECORDED UNDER SECTION 131 OF THE ACT. II. AS A PRUDENT INVESTOR, HE SOLD PART OF THE SHARES DURING THE PERIOD 20 TH NOVEMBER 2014 TO 31 ST DECEMBER 2015 (THE YEAR UNDER CONSIDERATION) WHEN PRICE INCREASED ON STOCK EXCHANGE. THE SHARES WERE SOLD THROUGH A BROKER NAMELY M/S SUNTECH WEALTHMAX AGAINST THE PAYMENT, RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSEE IN SUPPORT OF SALE OF THE SHARES FILED THE SALE BILL/CONTRACT NOTES ISSUED BY THE BROKER. THUS THE ASSESSEE CLAIMED THAT PURCHASE AND SALE OF THE IMPUGNED SHARES WAS DONE THROUGH THE BANKING CHANNEL AND WITHOUT VIOLATING ANY RULES OF SEBI/ STOCK EXCHANGE. III. SIMILARLY, THERE IS NO EVIDENCE WITH THE AUTHORITIES THAT THERE WAS ANY CASH INVOLVED IN THE IMPUGNED TRANSACTION OF PURCHASE AND SALE OF SHARES. THUS, THE SALE PRICE OF THE SCRIPT CANNOT BE VIEWED AS MANIPULATED/ RIGGED UP AS ALLEGED. IV. THE RISE IN THE PRICE OF THE SHARES IN MARKET IS NOT ALWAYS BASED ON THE COMPANYS FINANCIAL POSITION, PROFIT/GROWTH RATHER ITS VALUE/PRICE IS 5 DETERMINED ON THE DEMAND AND SUPPLY OF THE SCRIPT. AS SUCH THE PRICE OF THE SCRIPT DEPENDS UPON VARIOUS FACTORS SUCH AS DETAILED UNDER: A. THE FIELD IN WHICH THE COMPANY IS OPERATING B. THE COMPETITION THAT THE COMPANIES FACING C. THE DIFFICULTY FOR MAKING THE ENTRY IN THE PARTICULAR FIELD D. THE BACKGROUND OF THE PROMOTERS E. THE ECONOMIC BOOM F. GOVT. POLICY G. BUDGET PROPOSALS H. FUTURE PLANS I. DEVELOPMENT CHANCES J. EXISTING GROWTH IN SALES K. HIGH CAPITAL L. RESERVE M. POSITIVE NET WORTH AND NO BORROWINGS SO ON AND SO FORTH. V. THERE ARE VARIOUS COMPANIES INCURRING HUGE LOSSES BUT PRICE OF THEIR SHARES IN MARKET ARE HIGH. SIMILARLY, THERE ARE VARIOUS COMPANIES HAVING HIGH BOOK VALUE BUT TRADING AT A VERY LOW PRICE. ACCORDINGLY THE ASSESSEE CONTENDED THAT THE HIGH PROFIT/TAXABLE INCOME CANNOT BE A CRITERIA TO DECIDE THE PRICE OF THE SHARE/SCRIPT. VI. UNUSUAL PRICE RISE IN THE SHARES OF THE COMPANY CANNOT BE A BASIS TO DRAW AN INFERENCE THAT LONG-TERM CAPITAL GAIN GENERATED BY THE ASSESSEE IS BOGUS IN NATURE. AS SUCH THERE IS NO IOTA OF EVIDENCE AVAILABLE WITH THE REVENUE ABOUT THE ALLEGATION THAT THERE WAS A GROUP/OPERATOR/BROKER WHO WAS RIGGING THE PRICE OF THE IMPUGNED SCRIPTS. VII. THROUGHOUT THE PERIOD HE HAS ALSO INCURRED LOSSES ON THE INVESTMENTS MADE IN CERTAIN COMPANIES AS THESE COMPANIES WERE DELISTED BY THE STOCK EXCHANGE. 6 VIII. THERE WAS NO ENQUIRY/INVESTIGATION EITHER BY THE SEBI OR ANY STOCK EXCHANGE ABOUT THE PRICE RIGGING OF THE IMPUGNED SCRIPT. IX. THE ASSESSEE ALSO SUBMITTED THAT THE PROVISIONS OF SECTION 68 ARE NOT APPLICABLE ON THE SALE OF IMPUGNED SCRIPTS. IT IS BECAUSE THE ASSESSEE HAS FURNISHED ALL THE NECESSARY DETAILS ABOUT THE SALE OF IMPUGNED SCRIPTS. D. HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS MADE SUCH A HUGE INVESTMENT IN A SCRIPT IN RESPECT OF WHICH NO VITAL INFORMATION WAS AVAILABLE IN PUBLIC DOMAIN. SUCH FACTS SUGGEST THAT THE TRANSACTION OF PURCHASE OF IMPUGNED SHARE AT LOW PRICE IN OFF MARKET WAS PRE PLANNED IN ORDER TO GENERATE EXEMPT INCOME IN THE HAND OF THE ASSESSEE, ESPECIALLY IN THE FACTS & CIRCUMSTANCES WHERE ASSESSEE HAS NOT MADE SUCH LARGE INVESTMENT ON EARLIER OCCASION. E. THE AO FURTHER OBSERVED THAT THERE IS NO DOUBT ABOUT THE CONTENTION OF THE ASSESSEE THAT PRICE OF A SCRIPT DEPENDS UPON VARIOUS FACTORS AND THERE IS ALWAYS RISK INVOLVED IN INVESTMENT. BUT INVESTORS ALWAYS MAKE INVESTMENT ON SOME REASONABLE/RATIONAL BASIS. THE INVESTOR NEVER MAKES THE INVESTMENT MERELY ON THE BASIS OF LOW PRICE OF THE SCRIPT. THE PRICE OF THE IMPUGNED SHARE INCREASED FROM 10 TO 174 AND THEN STARTED TO FALL AND REACHES TO ITS LOWEST. FURTHERMORE, THE PRICE OF THE IMPUGNED SHARE IS NOT AVAILABLE FROM 06 TH JANUARY 2015 AND TRADING WAS SUSPENDED BY THE BSE. THUS, THE INFERENCE DRAWN IS THAT THE PRICE OF THE IMPUGNED SCRIPT WAS MANIPULATED TO GET LTCG IN THE HAND OF BENEFICIARY AND THEREAFTER SAME WAS SYSTEMICALLY BROUGHT TO LOW PRICE TO IN ORDER TO GENERATE STCL. F. FURTHER THE AO DURING THE ASSESSMENT PROCEEDINGS ALSO REFERRED TO THE COUNTRYWIDE INVESTIGATION CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION CALCUTTA TO UNEARTH THE RACKETS ENGAGED IN THE ACTIVITY OF GENERATING THE BOGUS LONG-TERM CAPITAL GAIN ELIGIBLE FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT WHICH IS AKIN TO THE MODUS OF OPERANDI USED BY THE PRESENT ASSESSEE. 7 G. WITH RESPECT TO THE APPLICABILITY OF SECTION 68 OF THE ACT, THE AO HELD THAT THE PROVISION OF SECTION 68 APPLIES IN CASE WHERE AMOUNT CREDITED IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE FAILS TO EXPLAIN THE SOURCE OF SUCH AMOUNT. IN THE CASE ON HAND THE IMPUGNED LONG TERM CAPITAL GAIN CREDITED IN THE BOOKS OF THE ASSESSEE. THE ONUS LIES UPON THE ASSESSEE TO PROVE THAT SUCH AN EXEMPT INCOME IS GENUINE. FURTHER THE GENUINENESS OF THE TRANSACTION SHOULD BE PROVEN BY CONSIDERING THE PREPONDERANCE OF HUMAN PROBABILITIES, MERELY DOCUMENTATION OF EVIDENCE WILL NOT BE CONCLUSIVE. AS SUCH THE VALIDITY OF DOCUMENTARY EVIDENCE SHOULD BE DETERMINED ON THE BASIS OF SURROUNDING FACT AND CIRCUMSTANCES OF THE CASE ON HAND. THE AO IN THIS RESPECT MADE REFERENCE TO THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF SUMATI DAYAL VS. CIT (1995) 214 ITR 801 (SC) AND IN CASE OF DURGA PRASAD MORE 82 ITR 540 (SC). 4.3 IN VIEW OF THE ABOVE THE AO TREATED SUCH LONG-TERM CAPITAL GAIN OF RS. 2,58,03,348/- AS BOGUS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT BY OBSERVING AS UNDER: IN VIEW OF THE DISCUSSION MADE ABOVE AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE FOLLOWING FACTS BECOME CLEAR:- I) THAT SOME UNSCRUPULOUS OPERATORS IN THE CAPITAL MARKET WERE RUNNING A SCHEME OF PROVIDING ENTRIES OF LTC& FOR A COMMISSION, II) THE FINANCIAL RESULT OF THE PENNY STOCKS USED FOR THE PURPOSE CLEARLY INDICATE THAT ITS QUOTED PRICE AT THE PEAK WAS THE RESULT OF RIGGING III) THE ABOVE MENTIONED FACTS HAVE BEEN INDEPENDENTLY ALSO BEEN CONFIRMED BY SEBI. IV) THAT SUCH SCHEMES ARE PREVALENT FOR CONVERTING BLACK MONEY INTO WHITE IS COMMON KNOWLEDGE, INDEPENDENTLY CONFIRMED BY SEBI V) THAT A LARGE NUMBER OF INDIVIDUALS AVAILED OF THE BENEFITS OF THE SCHEME AND TOOK ENTRIES OF LTCG AMOUNTING TO SEVERAL CRORES. VI) MANY SUCH INDIVIDUALS HAVE VOLUNTARILY WITHOUT ANY ENQUIRY BY ANY AUTHORITY HAVE VOLUNTARILY WITHDRAWN THEIR CLAIM AND FILED REVISED RETURN. VII) STATEMENTS OF BROKERS, OPERATORS AND KEY PERSONS OF PAPER COMPANIES THAT HAS BOUGHT THESE SHARES, DIRECTORS OF PENNY STOCK COMPANIES ALL CONFESS TO SUCH A SCHEME WITH DETAILED MODUS OPERANDI WHICH TALLIES WITH ACTUAL TRANSACTIONS. 8 VIII)THE ASSESSEE IS LONE SUCH BENEFICIARY WHO HAS TAKEN ENTRY OF LTCG. IX) AS THE TRADING IN THESE SHARES ARE AT A PRE-DETERMINED TIME BETWEEN PREDETERMINED BROKERS AT A PRE-DETERMINED PRICE; THERE IS VIRTUALLY NO SCOPE OF ANY GENUINE TRADER IN SHARE TO BUY OR SELL THESE SHARES. X) THUS WHOEVER I HAS BENEFITTED FROM TRANSACTION IN THESE SHARES HAVE TRANSACTED IN ACCORDANCE WITH THE SCHEME AND HAS ADMITTEDLY CONVERTED HIS UNACCOUNTED CASH EQUAL TO THE SALE PROCEEDS OF SHARE IN '0 WHITE IN THE GUISE OF EXEMPTION UNDER SECTION 10(38) OF THE INCOME TAX ACT, 1961. XI) WITH SO MUCH OF EVIDENCE AGAINST THE ASSESSEE, THE ONUS WAS ON ASSESSEE TO PROVE THAT HIS TRANSACTIONS WERE GENUINE AND THAT HE HAD NOT AVAILED BENEFIT OF THE AFOREMENTIONED SCHEME TO CONVERT BLACK MONEY INTO WHITE. XII)IN SUMATI DAYAL VS. COMMISSIONER OF INCOME TAX THE SUPREME COURT OBSERVED AS UNDER: 'IT IS NO DOUBT TRIJE THAT IN ALL CASES IN WHICH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE, IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSES. BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME' TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT (SATISFACTORY. IN SUCH CASE THERE IS PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT 1 OF MONEY, AND IF HE FAILS TO REBUT, THE SAID EVIDENCE BEING UN-REBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE, ' 5.7 THE FOLLOWING IMPORTANT DECISIONS OF THE HON'BLE SUPREME COURT AND OTHER DECISIONS ARE RELIED UPON, WHILE ARRIVING AT CONCLUSION TO FIRMLY SAY THAT THE TRANSACTIONS ENTERED INTO BY THE I ASSESSEE IN PURCHASE AND SALE OF L1C& ARE NOT GENUINE AND HAS TAKEN BOGUS ENTRY OF LTC(S. (I) SUMATI DAYAL V. CIT - (199|5) 214 ITR 801 (SC); (II) DURGA PRASAD MORE - 82 ]TR 540 (SC) (HI) ME. DOWELL & CO. LTD. 154 ITR 148 (SC), (IV) ASST. CIT V. SOM NATH MANI - (2006) 100 TTJ 917 (CHD) (V) 6OVINDA RAJULU MUDALIAR V. CIT - (1958) 34 ITR 807 (SC) (VI) SREELEKHA BANERJEE & OTHRS. V. CIT (1963) 49 ITR 112 (SC) (VII) KALEKHAN MOHAMMED HANIF V. CIT (1963) 50 ITR 1(SC) (VIII) CIT V. BIJU PATIAIK - (1986) 160 ITR 674 (SC) (IX) CIT V. P. MOHANAKALA AOTHERS -(2007) 291 ITR 278 (SC) IN THE DECISION DELIVERED ON 27.3.2015, THE HON'BLE ITAT, E-8ENCH, AAUMBA; HAS ALLOWED THE REVENUE APPEAL IN THE CASE OF SHAMIM M. BHARWANI VIDE ITA NO.4906/ ALUM/2011 (AY 2006-07) AND OBSERVED AS UNDER: 'FIRSTLY, DOCUMENTARY EVIDENCES, IN THE FACE OF UNUSUAL EVENTS, AS PREVAILING IN THE INSTANT CASE, AND WITHOUT ANY CORROBORATIVE OR CIRCUMSTANTIAL EVIDENCE/S, CANNOT BE REGARDED AS CONCLUSIVE. TWO, THE PREPONDERANCE OF PROBABILITIES ONLY DENOTES THE I SIMULTANEOUS EXISTENCE OF SEVERAL FACTS 1 ', EACH PROBABLE IN ITSELF, ALBEIT LOW, SO AS TO CAST A SERIOUS DOUBT ON THE TRUTH OF THE REPORTED 'FACTS', WHICH TOGETHER MAKE UP FOR A\ I BIZARRE STATEMENT: LEADING TO THE INFERENCE OF COLLUSIVENESS OR A DEVICE SET UP TO CONCEAL THE TRUTH, I.E., IN THE ABSENCE OF CREDIBLE AND INDEPENDENT EVIDENCES' RELIANCE IS ALSO PLACED ON THE ABOVE DECISION'. 9 6 IN VIEW OF THE FACT AND CIRCUMSTANCES DISCUSSED SUPRA AND CIRCUMSTANTIAL EVIDENCE AVAILABLE ON RECORD, IT IS FOUND THAT THE ASSESSEE HAD PURCHASED 2,00,000 SHARE OF SUCHAK TRADING LIMITED ON 20.10.2012 WITH PRICE OF RS.10 INVESTING RS. 20,00,000/- AND SOLD IT DURING 20.11.2014 TO 31.12.2014 AT DIFFERENT WITH EARNING LONG TERM CAPITAL GAIN OF RS. 2,58,03,348/- WHICH HAS BEEN CLAIMED AS THAT THE TRANSACTIONS WERE EXEMPT U/S 10(38) OF THE I.T.ACT, 1961. SO, IT HAS BEEN CONCLUDED SHAM TRANSACTIONS AND AIMED ONLY TO BRING UNACCOUNTED MONEY IN THE GUISE OF EXEMPTED LONG TERM CAPITAL GAINS AND PAPER WORK HAS BEEN GOT UP AND DONE MERELY TO GIVE A COLOUR OF AUTHENTICITY TO THE TRANSACTION AND BY CREATING A FACADE OF LEGITIMATE TRANSACTIONS. THEREFORE, |HE ENTIRE AMOUNT RECEIVED ON SALE OF SCRIPT OF SUCHAK TRADING LIMITED OF RS, 2,58,03,348/- IS TREATED AS BOGUS AND THE SAME IS ADDED UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. PENALTY UNDER SECTION 271(L)(C) OF THE ACT IS ALSO INITIATED FOR FURNISHING INACCURATE PARTICULARS INCOME. M/S DHYANA FINSTOCK LIMITED 4.4 THE ASSESSEE GOT 2 LAKH EQUITY SHARES IN THE IMPUGNED NBFC COMPANY @ RS. 10/- PER SHARE AS A PREFERENTIAL ALLOTTEE VIDE ALLOTMENT DATED 30 TH NOVEMBER 2013 IN AN OFF MARKET ARRANGEMENT WITH A LOCK-IN PERIOD OF 1 YEAR. SUBSEQUENTLY THE IMPUGNED COMPANY GOT LISTED WITH BSE W.E.F. 13 TH JUNE 2014 AT A PRICE OF RS. 251/- PER SHARE. CONSEQUENTLY, THE SHARES HELD BY THE ASSESSEE WERE DEMATERIALIZED. THE ASSESSEE SOLD ALL THE SHARES OF THE IMPUGNED COMPANY DURING THE PERIOD 16-01-2015 TO 22-03-2015 AT A PRICE VARYING BETWEEN RS. 320.68/- PER SHARE TO RS. 349.75/- PER SHARE. FROM THIS TRANSACTION, THE ASSESSEE EARNED LONG TERM CAPITAL GAIN OF RS. 6,55,86,480/- ON THE ENTIRE TRANSACTION. 4.5 THE AO DURING ASSESSMENT PROCEEDING OBSERVED THAT THE FINANCIAL POSITION OF THE IMPUGNED COMPANY IS VERY POOR. AS SUCH CASH AND BANK BALANCE FOR THE UNDER CONSIDERATION IS AT RS. NIL AND HAVING NEGATIVE WORKING CAPITAL IN F.Y. 2010-11 TO 2013-14. SIMILARLY, THE IMPUGNED COMPANY WAS NOT HAVING SIGNIFICANT BUSINESS ACTIVITIES. AS SUCH THE EPS VARY BETWEEN RS. 0.2 TO 0.71 DURING THE PERIOD OF F.YS. 2010-11 TO 2014-15. HOWEVER THE PRICE OF THE SHARE INCREASED SIGNIFICANTLY IN SHORT PERIOD OF TIME WHICH SUGGEST THAT THE PRICE OF THE SHARE WERE MANIPULATED WITH A PRE-PLANNED MOTIVE. 4.6 THE AO FURTHER OBSERVED THAT THERE WERE INVESTIGATIONS CARRIED OUT BY THE SEBI AND BSE IN THE CASE OF IMPUGNED COMPANY WITH REGARD TO PRICE MANIPULATION 10 OF SHARE AND FRAUD FOR THE TRANSACTION CARRIED OUT DURING 27 AND 29 JULY 2015. THE BSE PRIMA FACIE FOUND THAT THE STOCK EXCHANGE SYSTEM WERE USED FOR GENERATING BOGUS LONG TERM CAPITAL IN ORDER TO EVADE TAXES. ACCORDINGLY, BSE WITHHELD THE PAY- OUT OF THE TRANSACTION CARRIED OUT DURING THE ABOVE MENTIONED PERIOD. 4.7 FURTHER, THE SEBI IN ITS PRELIMINARY INVESTIGATION ALSO FOUND THAT MANAGEMENT OF THE IMPUGNED COMPANY MANIPULATED THE PRICE OF ITS SCRIPT TO PROVIDE BOGUS/FICTITIOUS LONG TERM CAPITAL IN HAND OF ITS PREFERENTIAL ALLOTTEES, PROMOTERS AND RELATED ENTITIES IN ORDER TO EVADE THE TAXES AND BRING UNACCOUNTED INCOME IN THE BOOKS OF ACCOUNT. ACCORDINGLY THE SEBI VIDE INTERIM ORDER PROHIBITED 76 ENTITIES SUCH AS PROMOTERS, PREFERENTIAL ALLOTTEE AND EXIT PROVIDER FROM ENTERING INTO TRANSACTION AT BSE AND FREEZED THEIR DEMAT ACCOUNT INCLUDING THE ASSESSEE. 4.7 THE AO ON THE BASIS OF ABOVE FURTHER PROCEEDED TO ANALYZE THE TRADE DATA OF THE IMPUGNED SCRIPT FOR THE PERIOD FROM 13 TH JUNE 2014 TILL 23 RD DECEMBER 2015. THE AO ANALYZED THE TRANSACTION UNDERTAKEN BY THE BENEFICIARIES WHO SOLD SHARES FOR RS. 3 LAKH OR MORE AND PURCHASED THE SHARE OUTSIDE BSE/EXCHANGE. THE AO FOUND THAT A TOTAL OF 132 BENEFICIARIES FALLS UNDER THIS CATEGORY AND MADE ARTIFICIAL LONG TERM CAPITAL GAIN OF 141,78,46,468/- ONLY. THE ASSESSEE ON HAND WAS ONE OF THE TOP 6 BENEFICIARIES WHICH ARE DETAILED AS UNDER: S.NO. PAN NAME SELL QUANTITY SELL AMOUNT AVERAGE SELL RATE 1 ANHPS8282 JYOTZBEN MAHSNB&ABHAI SHAH 324289 112845458 348 2 ABTP&3143L KALPESH UGAKCHANS GAOHECHA 246401 89419894 363 3 A8PPV4917F, HARE5H BHIKHABHAI VAGHANI 200000 67697480 338 4 ABOPV3650, MANHARBHAI % ; VALLABHBHAI VAGHANI 200000 67654191 338 5 AAWPV319&N MAHE5U VALLABHBHAI VAGANI 200000 67605283 338 6 AABPV4486, 7 SANJAYBHAI 8HIKHABHAI VAGHANI 200000 67503449 338 11 IN VIEW OF THE ABOVE, THE AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE TREATING THE CAPITAL GAIN AS UNEXPLAINED INCOME OF THE ASSESSEE. 4.8 THE ASSESSEE IN RESPONSE TO SUCH SHOW CAUSE NOTICE VIDE LETTER DATED 24 TH DECEMBER 2016 SUBMITTED THAT ALL THE ALLEGATIONS WERE BASED ON THE INQUIRY/INVESTIGATION OF THE SEBI AND BSE WITH RESPECT TO THE EVENT WHICH OCCURRED ON 27 JULY 2015 WHICH IS NOT RELEVANT FOR THE YEAR UNDER CONSIDERATION. AS SUCH THERE NOT ANY INDEPENDENT FINDING OR CORROBORATIVE MATERIAL AVAILABLE TO THE REVENUE THAT THE ASSESSEE HAS EARNED BOGUS LONG TERM CAPITAL GAIN. 4.9 THE SEBI AND BSE IN THEIR RESPECTIVE INQUIRY HAS MADE VARIOUS OBSERVATION ON THE BASIS OF WHICH SEBI VIDE INTERIM ORDER RESTRICTED PREFERENTIAL ALLOTTEE FROM ENTERING INTO TRANSACTION AT STOCK EXCHANGED AND FREEZED BANK ACCOUNTS. BEING ONE OF THE PREFERENTIAL ALLOTTEE HIS ACCOUNT ALSO GOT FREEZED AGAINST WHICH HE IS IN APPEAL. BUT NOWHERE SEBI OR BSE HAS GIVEN A FINDING THAT THE ASSESSEE WAS DIRECTLY INDULGED IN THE MANIPULATION OF THE PRICES OR IN ANY OTHER FRAUD. THE ASSESSEE ALSO CLAIMED THAT HE HAD NO CONNECTION WITH THE PROMOTERS OF THE IMPUGNED COMPANY AND THEREFORE HE HAD NO ROLE IN THE MANIPULATION OF THE PRICES AS ALLEGED BY THE REVENUE WHICH HAPPENED AFTER HIS SELLING OF HIS SHARES. FURTHER, THE SEBI AND BSE ONLY DOUBTED THE POSSIBILITY OF MONEY LAUNDERING OR TAX EVASION. AS SUCH THE AUTHORITIES HAVE NOT REACHED TO THE CONCLUSION. 4.10 THE ASSESSEE ALSO SUBMITTED THAT THE PROPOSED ADDITION IS BASED ON THE REPORT OF THE SEBI AND THE STOCK EXCHANGE WITHOUT ANY INDEPENDENT FINDING BASED ON THE CORROBORATIVE EVIDENCE AGAINST HIM. THE SALE WAS MADE ON THE STOCK EXCHANGE WHERE THE SELLER DOESNT KNOW THE PURCHASER AND VICE VERSA. THUS THERE IS NO POSSIBILITY FOR RETAIL INVESTOR TO PLAY ANY ROLE IN THE MANIPULATION OF THE PRICE. 12 4.11 ACCORDINGLY THE ASSESSEE PRAYED THAT THERE CANNOT BE ANY DISALLOWANCE OR ADDITION IN THE GIVEN FACTS AND CIRCUMSTANCES. 4.12 HOWEVER THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE AND TREATED THE LONG-TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS BOGUS IN NATURE BY ADDING THE SAME AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT BY OBSERVING AS UNDER: 11. CONSIDERING THE ABOVE, I AM OF THE PRIME FACIE VIEW THAT THE ASSESSEE'S PREFERENTIAL \ALLOTMENT OF SHARES WAS ARTIFICE OF BHYANA GROUP USED AS A TOOL FOR IMPLEMENTATION OF THE DUBIOUS PLAN, DEVICE AND AND ALLOTTEES. IN THE INSTANT CASE, THE PREFERENTIAL ALLOTMENT ROUTEWAS PREFERRED OVER SECONDARY MARKET ROUTE BECAUSE THE SHARE CAPITAL OF BHYANA PRIOR TO PREFERENTIAL ALLOTMENT WAS VERY SMALL I.E. 30,01,100 EQUITY SHARES (FACE VALUE 10) TO I ACCOMMODATE THE REQUIRED FICTITIOUS LTCG, AS SUCH THE CAPITAL EXPANSION THROUGH PREFERENTIAL ALLOTMENT PROVIDED MUCH BIGGER SOURCE TO THE PERSONS INVOLVED IN TERMS OF VOLUME AND PRICE MANIPULATION TO FACILITATE THE WHOLE OPERATION. SINCE PRIOR TO THE TRADING IN ITS SCRIP; BHYANA DID NOT HAVE ANY BUSINESS OR FINANCIAL STANDING IN THE SECURITIES MARKET. THEREFORE, IT IS DEFINITE LY TO SAY THAT ONLY WAY IT COULD HAVE INCREASED ITS SHVIRE VALUE IS BY WAY OF MARKET MANIPULATION. IT IS FURTHER NOTED THAT THE TRADED VOLUME AND PRICE OF THE ' SCRIP INCREASED SUBSTANTIALLY ONLY AFTER DHYANA GROUP AND PREFERENTIAL ALLOTTEES STARTED TRADING IN THE SCRIP ARTD TRADED AMONGST THEM. THERE WAS NO CHANGE IN THE BENEFICIAL OWNERSHIP OF THE SUBSTANTIAL NUMBER OF TRADED SHARES AS THE BUYERS AND SELLERS BOTH WERE PART OF THE COMMON GROUP AND WERE ACTING IN LEAGUE/CONCERT TO PROVIDE LTCG BENEFITS TO THE PREFENTIAL ALLOTTEES. IT IS NO DOUBT TO SAY THAT DHYANA GROUP AND PREFERENTIAL ALLOTTEES USED SECURITIES MARKET SYSTEM TO ARTIFICIALLY INCREASE VOLUME AND PRICE OF THE SCRIP FOR MAKING ILLEGAL GAINS TO AND TO CONVERT ILL-GOTTEN GAIN INTO GENUINE ONE. THEREFORE, THE ENTIRE AMOUNT RECEIVED ON SALE SCRIPT OF DHYNA FINSTOCK LIMITED OF RS.6,55,86,480/- IS TREATED AS BOGUS AND THE SAME IS ADDED UNDER SECTION 68 OF THE INCOME TAX ACT,1961. PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS ALSO INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). 5.1 THE ASSESSEE BESIDES REITERATING THE SUBMISSION MADE BEFORE THE AO CLAIMED THAT IN CASE OF M/S DHAYNA FINSTOCK LTD., SEBI CARRIED INVESTIGATION FOR ALLEGED RIGGING OF PRICE BY THE MANAGEMENT OF M/S DHAYANA FINSTOCK IN COLLUSION WITH PROMOTERS/ENTRY PROVIDER/EXIT PROVIDER. HOWEVER, THE SEBI IN ITS REPORT DATED 24 TH APRIL 2018 CLEARLY HAS GIVEN FINDING THAT APPELLANT ALONG-WITH 33 OTHER ENTITIES/PERSON WERE NOT THE PART OF SUCH PRICE RIGGING. THEREFORE IN ABSENCE OF ANY EVIDENCE THAT THE APPELLANT INDULGED INTO ANY WRONG DOING, THE ADDITION MADE IS NOT JUSTIFIED. 13 6. HOWEVER, THE LEARNED CIT(A) WAS PLEASED TO CONFIRM THE ORDER OF THE AO BY OBSERVING AS UNDER: THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSIDERED. HOWEVER, THERE IS NO SUBSTANCE IN THE SAME AND NO CONCRETE EVIDENCE IS FILED TO DISLODGE THE SHADOW OF DOUBT CASH ON GENUINENESS OF SHARE TRANSACTIONS AS BROUGHT OUT BY THE AO. FURTHER, MERELY SAYING THAT THE TRANSACTION IS THROUGH BANKING CHANNEL DOES NOT MAKE IT GENUINE. FURTHER, IN CASE OF TRANSACTION IN RESPECT OF DHYANA FINSTOCK THE RELIANCE PLACED BY THE APPELLANT ON ORDER OF SEBI DATED 24.04.2018 DOES NOT HELP THE CASE OF THE APPELLANT. THIS ORDER DOES NOT SAY THAT THERE WAS NO RIGGING IN THE SHARE OF DHYANA FINSTOCK. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX FURTHER, THERE ARE SEVERAL OTHER PECULIARLY ASPECT/FACTS IN RESPECT OF TRANSACTIONS BY THE APPELLANT OF THESE SCRIPS WHICH CAST A HUGE SHADOW OF DOUBT OVER THE GENUINENESS OF THESE TRANSACTIONS. SOME OF THESE FACTS/ASPECTS ARE DETAILED BELOW (I) THE APPELLANT IS A RESIDENT OF BHAVNAGAR, GUJARAT. FROM HERE THE APPELLANT INVESTS IN MUMBAI BASED COMPANY (SUCHAK TRADING) AND IN AN AHRNEDABAD BASED COMPANY( DHYANA FINSTOCK). IN THE NORMAL COURSE THIS WOULD NOT RAISE ANY SUSPICION. BUT HERE THESE ARE TOTALLY NON-DESCRIPT COMPANIES WITH HARDLY ANY BUSINESS ACTIVITY AND ANY SIGNIFICANT PERFORMANCE. SO IT RAISES SUSPICION AS TO WHY WOULD THE APPELLANT INVEST IN SUCH COMPANIES. (II) FURTHER, AS PER STATEMENT OF THE APPELLANT BEFORE THE AO, HE DIDN'L KNOW ANY OF THE DIRECTORS OF THE COMPANIES. DESPITE THIS THE APPELLANT APPLIES FOR AND GETS 2,00,000 SHARES EACH IN PREFERENTIAL ALLOTMENT IN THE ABOVE TWO COMPANIES. (III) THE TIMING OF THE TRANSACTIONS ARE PERFECT. IN CASE OF SUCHAK, THE SCRIP IS PURCHASED ON 20.10.2012 AND SOLD BETWEEN 20.11.2014 AND 31.12.2014 JUST OUTSIDE OF TWELVE (12) MONTHS TO MAKE THE APPELLANT ELIGIBLE TO CLAIM THE PROFIT ON THIS TRANSACTION AS EXEMPT U/S 10(38) OF THE ACT. IN CASE OF DHYANA, THE SCRIP IS PURCHASED ON 30.11.2013 AND SOLD BETWEEN 16.01.2015 AND 22.03.2015, AGAIN JUST OUTSIDE OF TWELVE (12) MONTHS TO MAKE THE APPELLANT ELIGIBLE TO CLAIM THE PROFIT ON THIS TRANSACTION AS EXEMPT U/S 10(30) OF THE ACT. ALSO IN CASE OF DHYANA FINSTOCK WHEN THE SHARE IS BOUGHT, IT IS NOT LISTED ON STOCK EXCHANGE. (IV) DURING THE PERIOD OF HOLDING OF SHARE BY THE APPELLANT , THE PRICE OF BOTH THE SHARES RISES VERY HIGH AS DETAILED ABOVE. AND ONCE THE SHARES HAVE BEEN SOLD, THE PRICE STARTS FALLING AND AFTER CERTAIN TIME THERE IS PRACTICALLY NO MOVEMENT IN THE SHARE PRICE. ALL THIS IS MENTIONED BY THE AO IN THE ASSESSMENT ORDER. IT IS CLEAR THAT BOTH THE RISE AND FALL IN SHARE PRICE ARE SUDDEN AND ABNORMAL. (V) FINANCIALS OF THE COMPANIES AS DETAILED BY THE AO IN THE ASSESSMENT ORDER WERE NOT SUCH THAT IT WOULD ATTRACT ANY INVESTOR TO INVEST IN THE COMPANY. THE COMPANIES HAD NEGLIGIBLE PROFIT SHOWING THAT THE COMPANIES WERE NOT HAVING A SUBSTANTIAL BUSINESS ACTIVITY. IT DEFIES LOGIC AS TO WHY A PERSON WOULD INVEST IN SUCH COMPANIES WITH SUCH POOR FINANCIALS. ALSO SUCH POOR FINANCIALS DO NOT WARRANT ANY SPECTACULAR RISE IN SHARE PRICES ESPECIALLY IN THE ABSENCE OF ANY CORPORATE ANNOUNCEMENTS REGARDING BIG BUSINESS DEALS ETC. 7. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 14 7.1 THE LD. AR BEFORE US FILED A PAPER BOOK A PAPER BOOK RUNNING FROM PAGES 1 TO 208 RESPECTIVELY AND CONTENDED THAT THE TRANSACTIONS FOR THE PURCHASE AND SALES OF THE SHARES WERE DULY SUPPORTED ON THE PURCHASE AND SALES WILL, PAYMENT WAS MADE THROUGH BANKING CHANNEL AND THERE WAS NO DOUBT RAISED BY THE REVENUE. LIKEWISE, THE SHARES WERE SOLD THROUGH THE STOCK EXCHANGE AT THE PREVAILING PRICE. IT WAS ALSO CONTENDED THAT THE REVENUE HAS NOT CARRIED OUT ANY VERIFICATION FROM THE COMPANIES/STOCKBROKERS BUT TREATED THE LONG-TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS BOGUS MERELY ON THE INFORMATION RECEIVED FROM THE 3 RD PARTIES. THUS THE LEARNED AR WAS OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR THE EXEMPTION UNDER SECTION 10(38) OF THE ACT. 7.2 ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE ASSESSEE HAS SHOWN LONG- TERM CAPITAL GAIN AND CLAIMED EXEMPTION UNDER SECTION 10(38) OF THE ACT WITH RESPECT TO PENNY STOCK COMPANIES. ACCORDINGLY, THE ASSESSEE IS NOT ENTITLED FOR THE TAX EXEMPTION PROVIDED UNDER SECTION 10(38) OF THE ACT. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WAS TREATED AS BOGUS AND MANIPULATED, LEADING TO THE ADDITION BY THE AO UNDER SECTION 68 OF THE ACT. THE VIEW OF THE AO WAS BASED ON CERTAIN FACTORS WHICH HAVE BEEN ELABORATED IN THE PRECEDING PARAGRAPH. SUBSEQUENTLY, THE LEARNED CIT (A) UPHELD THE FINDING OF THE AO. 8.1 AT THE OUTSET WE FIND THE ADDITION WAS MADE WITH REGARD TO TWO DIFFERENT SHARE/ SCRIPTS NAMELY M/S SUCHAK TRADING LTD AND M/S DHAYAN FINSTOCK LTD. FOR THE SAKE OF CLARITY WE DECIDED TO ADJUDICATE BOTH THE SCRIPTS INDEPENDENTLY. HENCE WE FIRST TAKE UP M/S SUCHAK TARDING LTD. 8.2 INDEED, THE PRICE OF THE SHARE WAS INCREASED FROM 10 TO 174 WITHIN A SPAN OF 27 MONTHS WHICH WAS NOT BELIEVED BY THE AUTHORITIES BELOW ON THE PRINCIPLE OF PREPONDERANCE OF HUMAN PROBABILITIES IN THE GIVEN FACTS AND CIRCUMSTANCES. FIRST OF 15 ALL, WE NOTE THAT THE FINDING OF THE AO THAT THE COMPANY, NAMELY M/S SUCHAK TRADING LTD. IS NOT INVOLVED IN ANY BUSINESS ACTIVITY DOES NOT APPEAR TO BE CORRECT. IT IS FOR THE REASON THAT THE ASSESSEE FOR THE YEAR ENDING MARCH 2015 HAS SHOWN GROSS REVENUE FROM OPERATIONS AMOUNTING TO 4.58 CRORES. THE AMOUNT OF GROSS REVENUE SUGGESTS THAT THE IMPUGNED COMPANY WAS CARRYING ON SOME ACTIVITIES. THIS FACT CAN BE VERIFIED FROM PAGE 3 OF THE ORDER OF THE AO. 8.3 THE RISE IN THE PRICE OF THE SCRIPTS OF A COMPANY, HAVING NO FINANCIAL BASE/BUSINESS ACTIVITY/PROFITABILITY CERTAINLY GIVES RISE TO THE DOUBT ABOUT SUCH INCREASE IN THE PRICE. BUT IN OUR CONSIDERED VIEW, THIS CANNOT BE SOLE CRITERIA FOR REACHING TO THE CONCLUSION THAT THE PRICE WERE RIGGED UP TO GENERATE THE LONG-TERM CAPITAL GAIN WHICH IS EXEMPTED UNDER SECTION 10(38) OF THE ACT. SUCH OBSERVATION DURING THE ASSESSMENT PROCEEDINGS PROVIDES REASONS TO INVESTIGATE THE MATTER IN DETAIL AND THE SAME CANNOT TAKE THE PLACE OF THE EVIDENCE. BUT IN THE CASE ON HAND THERE WAS NO ENQUIRY CONDUCTED EITHER BY THE SEBI OR THE STOCK EXCHANGE WITH RESPECT TO RIGGING UP OF SHARE PRICE OF M/S SUCHAK TRADING LTD. SIMILARLY THERE WAS NO COMPLAINT FILED BY ANY OF THE PARTY EITHER TO THE SEBI OR THE STOCK EXCHANGE ABOUT THE ASSESSEE OR BROKERS OR SUCHAK TRADING LIMITED THAT IT WAS INVOLVED IN THE ACTIVITY OF RIGGING UP THE PRICE OF THE SHARES. SIMILARLY THE AO HAS NOT CONDUCTED AN ENQUIRY FROM THE SEBI OR BSE ABOUT THE COMPANY WHETHER IT WAS ENGAGED IN THE FRIVOLOUS ACTIVITIES AS ALLEGED. 8.4 WE ALSO NOTE THAT THE AO HAS REFERRED TO THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF KOLKATA WHEREIN IT WAS UNEARTHED THAT THE COMPANIES LIKE THE PRESENT ASSESSEE WERE INVOLVED IN GENERATING BOGUS LONG-TERM CAPITAL GAIN, ELIGIBLE FOR EXEMPTION UNDER SECTION 10(38) OF THE ACT. HOWEVER, THERE WAS NO INFORMATION AVAILABLE ON RECORD WHETHER THE NAME OF THE ASSESSEE WAS APPEARING IN THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF KOLKATA OR ANY OTHER INVESTIGATION CARRIED OUT BY THE INCOME TAX DEPARTMENT. 8.5 THE ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON GENERATING LTCG TO AVOID THE PAYMENT OF TAX. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, 16 THAT THIS ASSESSEE IN QUESTION WAS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEES ACTION THAT HE WAS INVOLVED IN THE SCAM SHOULD BE ESTABLISHED BASED ON COGENT MATERIALS. THE ALLEGATION AS DISCUSSED ABOVE IMPLIES THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. 8.6 THERE IS NO DISPUTE RAISED BY THE REVENUE WITH RESPECT TO THE FOLLOWING FACTS: ( I ) ALL THE EVIDENCE OF SALE AND PURCHASE OF SH ARES, INCLUDING CONTRACT NOTE ARE SUBMITTED. NO FAULT WITH THESE DOCUMENTS HAS BEEN FOUND. ( II ) THE PAYMENTS ARE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. ( III ) TRANSACTION OF SALE IS DONE THROUGH STOCK EXCHANGE AFTER THE PAYMENT OF STT. THE TRANSACTIONS HAVE BEEN CONFIRMED BY BROKERS. ( IV ) INFLOW OF SHARES IS REFLECTED IN DEMAT ACCOUNT. SHARES ARE TRANSFERRED THROUGH DEMAT ACCOUNT. THE ASSESSEE DOES NOT KNOW THE BUYER. ( V ) THERE IS NO EVIDENCE THAT ASSESSEE HAS PAID CASH TO PURCHASE LTCG. ( VI ) THE ASSESSEE IS NOT A PARTY IN THE ALLEGED RIGGING UP THE PRICES OF THE SHARES . HE HAS NO NEXUS WITH THE COMPANY, ITS DIRECTORS OR OPERATORS. HE IS NOT CONCERNED WITH THE ACTIVITY OF BROKER AND HAS NO CONTROL OVER THE SAME. ( VII ) IT MAY HAVE GOT ONLY INCIDENTAL BENEFIT OF PRICE RISE. ( VIII ) THE PURCHASE AND SALE OF SHARES HAVE BEEN DULY RECOGNIZED BY THE CONCERNED COMPANY. THEY ARE ALSO REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. ( IX ) THE ASSESSEE INVESTED IN PENNY STOCKS WHICH GAVE RISE TO HUGE CAPITAL GAINS IN A SHORT PERIOD, DOES NOT MEAN THAT THE TRANSACTION IS BOGUS AS ALL THE DOCUMENTS AND EVIDENCES HAVE BEEN PRODUCED. 17 ( X ) OPPORTUNITY OF CROSS EXAMINATION IS NOT GIVEN. 8.7 IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE HAS BEEN DEALING IN SHARES INVESTMENT IN THE LAST 10 YEARS AND HE ALSO INCURRED THE LOSS WITH RESPECT TO CERTAIN COMPANIES WHICH WERE DELISTED BY THE SEBI. HAD THE ASSESSEE BEEN INVOLVED IN MANIPULATING THE PRICES, THEN THERE WOULD NOT HAVE BEEN ANY LOSS OF THIS TYPE. THUS THE CONDUCT OF THE ASSESSEE SUGGESTS THAT HE WAS NOT INVOLVED. THE CASE LAWS RELIED BY THE AUTHORITIES BELOW ARE DISTINGUISHABLE FROM THE PRESENT FACTS OF THE CASE IN SO FAR THERE WAS SEBI ENQUIRY CONDUCTED BUT IT IS NOT SO IN THE CASE ON HAND. 8.8 IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALISATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO PROVE THAT THE ASSESSEE WAS INVOLVED IN THE COLLUSION WITH THE ENTRY OPERATOR/ STOCK BROKERS FOR SUCH A SCHEME. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. FURTHER THE CASE LAWS RELIED BY THE AO ARE WITH REGARD TO TEST OF HUMAN PROBABILITIES WHICH MAY BE OF GREATER IMPACT BUT THE SAME CANNOT USED BLINDLY TO DISPOSE OFF THE EVIDENCE FORWARDED BY THE ASSESSEE ESPECIALLY WITHOUT BRINGING ANY EVIDENCES FROM INDEPENDENT ENQUIRY TO CORROBORATE THE ALLEGATION. IN HOLDING SO WE DRAW SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. SMT. KRISHNA DEVI REPORTED IN 126 TAXMANN.COM 80 WHERE IT WAS HELD AS UNDER: 11. ON A PERUSAL OF THE RECORD, IT IS EASILY DISCERNIBLE THAT IN THE INSTANT CASE, THE AO HAD PROCEEDED PREDOMINANTLY ON THE BASIS OF THE ANALYSIS OF THE FINANCIALS OF M/S GOLD LINE INTERNATIONAL FINVEST LIMITED. HIS CONCLUSION AND FINDINGS AGAINST THE RESPONDENT ARE CHIEFLY ON THE STRENGTH OF THE ASTOUNDING 4849.2% JUMP IN SHARE PRICES OF THE AFORESAID COMPANY WITHIN A SPAN OF TWO YEARS, WHICH IS NOT SUPPORTED BY THE FINANCIALS. ON AN ANALYSIS OF THE DATA OBTAINED FROM THE WEBSITES, THE AO OBSERVES THAT THE QUANTUM LEAP IN THE SHARE PRICE IS NOT JUSTIFIED; THE TRADE PATTERN OF THE AFORESAID COMPANY DID NOT MOVE ALONG WITH THE SENSEX; AND THE FINANCIALS OF THE COMPANY DID NOT SHOW ANY REASON FOR THE EXTRAORDINARY PERFORMANCE OF ITS STOCK. WE HAVE NOTHING ADVERSE TO COMMENT ON THE ABOVE ANALYSIS, BUT ARE CONCERNED WITH THE AXIOMATIC CONCLUSION DRAWN BY THE AO THAT THE RESPONDENT HAD ENTERED INTO AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY CLAIMING FICTITIOUS LTCG, WHICH IS EXEMPT UNDER SECTION 10(38), IN A PREPLANNED MANNER TO EVADE TAXES. THE AO EXTENSIVELY RELIED UPON THE SEARCH AND SURVEY OPERATIONS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT IN KOLKATA, DELHI, MUMBAI AND AHMEDABAD ON PENNY STOCKS, WHICH SETS OUT THE MODUS OPERANDI ADOPTED IN THE BUSINESS OF PROVIDING ENTRIES OF BOGUS LTCG. HOWEVER, THE RELIANCE PLACED ON THE REPORT, WITHOUT FURTHER CORROBORATION ON THE BASIS OF 18 COGENT MATERIAL, DOES NOT JUSTIFY HIS CONCLUSION THAT THE TRANSACTION IS BOGUS, SHAM AND NOTHING OTHER THAN A RACKET OF ACCOMMODATION ENTRIES. WE DO NOTICE THAT THE AO MADE AN ATTEMPT TO DELVE INTO THE QUESTION OF INFUSION OF RESPONDENT'S UNACCOUNTED MONEY, BUT HE DID NOT DIG DEEPER. NOTICES ISSUED UNDER SECTIONS 133(6)/131 OF THE ACT WERE ISSUED TO M/S GOLD LINE INTERNATIONAL FINVEST LIMITED, BUT NOTHING EMERGED FROM THIS EFFORT. THE PAYMENT FOR THE SHARES IN QUESTION WAS MADE BY SH. SALASAR TRADING COMPANY. NOTICE WAS ISSUED TO THIS ENTITY AS WELL, BUT WHEN THE NOTICES WERE RETURNED UNSERVED, THE AO DID NOT TAKE THE MATTER ANY FURTHER. HE THEREAFTER SIMPLY PROCEEDED ON THE BASIS OF THE FINANCIALS OF THE COMPANY TO COME TO THE CONCLUSION THAT THE TRANSACTIONS WERE ACCOMMODATION ENTRIES, AND THUS, FICTITIOUS. THE CONCLUSION DRAWN BY THE AO, THAT THERE WAS AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY TAKING FICTITIOUS LTCG IN A PRE-PLANNED MANNER, IS THEREFORE ENTIRELY UNSUPPORTED BY ANY MATERIAL ON RECORD. THIS FINDING IS THUS PURELY AN ASSUMPTION BASED ON CONJECTURE MADE BY THE AO. THIS FLAWED APPROACH FORMS THE REASON FOR THE LEARNED ITAT TO INTERFERE WITH THE FINDINGS OF THE LOWER TAX AUTHORITIES. THE LEARNED ITAT AFTER CONSIDERING THE ENTIRE CONSPECTUS OF CASE AND THE EVIDENCE BROUGHT ON RECORD, HELD THAT THE RESPONDENT HAD SUCCESSFULLY DISCHARGED THE INITIAL ONUS CAST UPON IT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. IT IS RECORDED THAT 'THERE IS NO DISPUTE THAT THE SHARES OF THE TWO COMPANIES WERE PURCHASED ONLINE, THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL, AND THE SHARES WERE DEMATERIALIZED AND THE SALES HAVE BEEN ROUTED FROM DE-MAT ACCOUNT AND THE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHANNELS.' THE ABOVE NOTED FACTORS, INCLUDING THE DEFICIENT ENQUIRY CONDUCTED BY THE AO AND THE LACK OF ANY INDEPENDENT SOURCE OR EVIDENCE TO SHOW THAT THERE WAS AN AGREEMENT BETWEEN THE RESPONDENT AND ANY OTHER PARTY, PREVAILED UPON THE ITAT TO TAKE A DIFFERENT VIEW. BEFORE US, MR. HOSSAIN HAS NOT BEEN ABLE TO POINT OUT ANY EVIDENCE WHATSOEVER TO ALLEGE THAT MONEY CHANGED HANDS BETWEEN THE RESPONDENT AND THE BROKER OR ANY OTHER PERSON, OR FURTHER THAT SOME PERSON PROVIDED THE ENTRY TO CONVERT UNACCOUNTED MONEY FOR GETTING BENEFIT OF LTCG, AS ALLEGED. IN THE ABSENCE OF ANY SUCH MATERIAL THAT COULD SUPPORT THE CASE PUT FORTH BY THE APPELLANT, THE ADDITIONS CANNOT BE SUSTAINED. 12. MR. HOSSAIN'S SUBMISSIONS RELATING TO THE STARTLING SPIKE IN THE SHARE PRICE AND OTHER FACTORS MAY BE ENOUGH TO SHOW CIRCUMSTANCES THAT MIGHT CREATE SUSPICION; HOWEVER THE COURT HAS TO DECIDE AN ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT ON SUSPICION ALONE. THE THEORY OF HUMAN BEHAVIOR AND PREPONDERANCE OF PROBABILITIES CANNOT BE CITED AS A BASIS TO TURN A BLIND EYE TO THE EVIDENCE PRODUCED BY THE RESPONDENT. 8.9 RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT (SUPRA) , WE HOLD THAT IN ABSENCE OF ANY SPECIFIC FINDING AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED AS FAR AS LONG TERM CAPITAL EARNED ON SALE OF SHARE OF M/S SUCHAK TRADING IS CONCERN. 8.10 COMING TO THE ISSUE INVOLVING THE SALE OF SCRIPTS OF M/S DHAYANA FINSTOCK LTD. FROM THE PRECEDING DISCUSSION, THERE REMAINS NO AMBIGUITY TO THE FACT THAT THE COMPANY WAS ENGAGED IN ESCALATING ITS PRICES IN THE SHARE MARKET ARTIFICIALLY IN ORDER TO EXTEND THE BENEFIT OF EXEMPTION OF TAX PROVIDED UNDER SECTION 10(38) OF THE ACT TO CERTAIN PARTIES. THE SEBI IN THE INTERIM ORDER DATED 01 ST JUNE 2016 IDENTIFIED 19 AROUND 132 PARTIES IN THE DOUBTFUL CATEGORY WHO MAY BE INVOLVED IN THE SCAM OF JACKING UP THE PRICE AS THESE PARTIES WERE AVAILING THE BENEFIT OF LONG-TERM TAX EXEMPTION PROVIDED UNDER SECTION 10(38) OF THE ACT. IN THE INITIAL ORDER NAME OF THE ASSESSEE WAS ALSO APPEARING. 8.11 HOWEVER, THE SEBI IN THE FINAL ORDER DATED 24 TH APRIL 2018 HAS EXCLUDED CERTAIN PARTIES I.E. 34 IN NUMBERS BY HOLDING THAT THESE WERE NOT INVOLVED IN THE IMPUGNED SCAM. THE NAME OF THE ASSESSEE WAS ALSO APPEARING IN THE LIST OF SUCH PARTIES WHOSE NAMES WERE REMOVED FROM THE TAX SCAM AS ALLEGED BY THE REVENUE. THE RELEVANT EXTRACT OF THE ORDER OF THE SEBI IS REPRODUCED AS UNDER: 9. UPON COMPLETION OF INVESTIGATION BY SEBI, THE FOLLOWING ARE NOTED AS REGARDS TO 34 ENTITIES (MENTIONED BELOW) WHO WERE IDENTIFIED AS PREFERENTIAL ALLOTTEES, EXIT PROVIDERS AND ENTITIES CONNECTED/RELATED TO DHYANA VIDE THE INTERIM ORDER: (A) SEBI'S INVESTIGATION DID NOT FIND ANY ADVERSE EVIDENCE AGAINST THEM. (B) SEBI'S INVESTIGATION ALSO DID NOT FIND THEIR ANY ROLE IN PRICE MANIPULATION & VOLUME MANIPULATION IN THE SCRIP OF DHYANA. (C) HENCE, VIOLATION OF PROVISIONS OF SEBI ACT, PFUTP REGULATIONS, ETC., WERE NOT | OBSERVED IN RESPECT OF THE FOLLOWING 34 ENTITIES. SR. NO. NAME OF THE ENTITIES PAN 1 SANJAY BHIKHABHAI VAGHANI AABPV4486G 2 KUMAR A AAEPK1457D 3 RUPAL M SHAH AAEPR519SJ 4 KANTILAL ARNULKHDAS VOHERA HUF AAFHK8045N 5 RAJESH PUKHRAJ RAKA (HUF) AAFHR7898G 6 UTTAM CHUNNILAL JAIN AAFPJ3365A 7 PRADIPKUMAR HARAKCHAND DOSHI AAHPD4722B 8 MANISH B SHAH AAIPM4715G 9 DILIPKUMAR MANILAL CHOKSHI AAKPC1264A 20 10 MAHESH V VAGHANI AAWPV3196N 11 JAYPRAKASH MANEKLAL PATEL ABCPP1959N 12 MANHARBHAI VALLABHBHAI VAGHANI ABOPV3650L 13 HARESH BHIKHABHAI VAGHANI ABPPV4917M 14 MOHIT AIREN ABXPA1053F 15 ALOK GUPTA ACHPG2799K 16 KANTILAL ARNULKHDAS VOHERA ACHPV3687R 17 RAJ RATTAN ADXPR0831L 18 BHAVINI S SHAH AEVPB8830Q 19 REENU JAIN AEYPJ8903R 20 ASHWINKUMAR K. PATEL AGAPP9577F 21 ASHOK KUMAR SETHI AGTPS5503P 22 CHETNA H CHANDAN AHGPC9842D 23 PURVESH NARESHBHAI CHAUHAN AHKPC9950A 24 SURESH CHINDE GOWDA AHVPG4424G 25 ANEELKUMAR ALBERTBHAI PATEL ALOPP2057M 26 SANJAY P SHAH AMIPS4672G 27 JYOTIBEN MAHENDRABHAI SHAH ANHPS8282Q 28 ANKIT MAHENDRABHAI SHAH ANTPS6591E 29 ASHOBHAI G JARATAL AOCPJ0735R 30 JARATAL MAYABEN ASHOBHAI AOCPJ0760Q 31 FANCY AUGUSTINE CHRISTIAN AOSPC1308R 32 PINAKIN DAHYABHAI MAKWANA APJPM5729E 33 GUARAV MANOJ AGRAWAL AQMPA9216A 34 SHALUBEN NIKESHBHAI SHAH BPCPS1154K 21 10. CONSIDERING THE FACT THAT THERE ARE NO ADVERSE FINDINGS AGAINST THE AFOREMENTIONED 34 ENTITIES WITH RESPECT TO THEIR ROLE IN THE MANIPULATION OF THE SCRIP OF DHYANA, I AM OF THE CONSIDERED VIEW THAT THE DIRECTIONS ISSUED AGAINST THEM VIDE INTERIM ORDER DATED JUNE 01, 2016 WHICH WERE CONFIRMED VIDE ORDERS DATED AUGUST 24, 2016, OCTOBER 10, 2016, OCTOBER 28, 2016, NOVEMBER 01, 2016 AND MAY 26, 2017 QUA THE AFOREMENTIONED 34 ENTITIES NEED NOT BE CONTINUED. 8.12 NOW THE CONTROVERSY ARISES WHETHER A PERSON WHO GENUINELY PURCHASES THE SHARES AT A LOW PRICE AND SOLD AT HIGH PRICE, THEREFORE, HE ENJOYED THE WINDFALL FROM SUCH SCRIPTS, CAN HE BE DISALLOWED THE BENEFIT OF TAX EXEMPTION PROVIDED UNDER SECTION 10(38) OF THE ACT IN A SITUATION WHERE IT IS ESTABLISHED THAT THE SHARE PRICE OF THE COMPANY WAS RIGGED UP TO EXTEND THE BENEFIT TO CERTAIN PARTIES. 8.13 THE JUSTICE CANNOT BE DELIVERED IN A MECHANICAL MANNER. IN OTHER WORDS, WHAT WE SEE ON THE RECORDS AVAILABLE BEFORE US, SOMETIME WE HAVE TO TRAVEL BEYOND IT AFTER IGNORING THE SAME. FURTHERMORE, WHILE DELIVERING THE JUSTICE, WE HAVE TO ENSURE IN THIS PROCESS THAT CULPRITS SHOULD ONLY BE PUNISHED AND NO INNOCENT SHOULD BE CASTIGATED. AN INNOCENT PERSON SHOULD NOT SUFFER FOR THE WRONGDOINGS OF THE OTHER PARTIES. IN THE CASE ON HAND, ADMITTEDLY THE ASSESSEE WAS NOT INVOLVED IN THE RIGGING UP OF THE PRICE OF THE SCRIPT AS EVIDENT FROM THE ORDER OF THE SEBI DISCUSSED HERE IN ABOVE BUT HE GOT THE BENEFIT INCIDENTALLY ON ACCOUNT OF THE PROHIBITED ACTIVITY CARRIED OUT BY THE OTHER PARTIES. THUS, THE ASSESSEE ACTED IN THE GIVEN FACTS AND CIRCUMSTANCES IN GOOD-FAITH. 8.14 FURTHERMORE, IT IS NOT THE CASE THAT THE ASSESSEE HAS CARRIED OUT 1 OR FEW TRANSACTIONS OF SHARES INVESTMENTS. IN FACT THE AUTHORITIES BELOW HAVE DULY ADMITTED THAT THE ASSESSEE HAS BEEN DOING SHARE INVESTMENT ACTIVITIES FOR THE LAST 10 YEARS. THUS IT IS INFERRED THAT THE ASSESSEE WAS HABITUAL OF CARRYING OUT ACTIVITIES OF INVESTMENT IN SHARES. THUS THE ASSESSEE, IF ACTED ON THE ADVICE AND TIPS OF HIS FRIENDS FOR THE INVESTMENT IN THE PRESENT COMPANY, EARNS WINDFALL BUT HIS ACTIVITIES CANNOT BE SUSPECTED. 8.15 SECURITIES AND THE EXCHANGE BOARD OF INDIA, IS THE NATIONAL REGULATORY BODY FOR THE SECURITIES MARKET, SET UP UNDER THE SECURITIES AND EXCHANGE BOARD OF INDIA 22 ACT, 1992, TO PROTECT THE INTEREST OF INVESTORS IN SECURITIES AND TO PROMOTE THE DEVELOPMENT OF, AND TO REGULATE THE SECURITIES MARKET AND FOR MATTERS CONNECTED THEREWITH AND INCIDENTAL TOO. 8.16 ONCE THE SEBI HAS GIVEN CLEAN CHIT TO THE ASSESSEE BY HOLDING THAT HE WAS NOT INVOLVED IN ANY OF THE SCAM COMMITTED BY THE MANAGEMENT OF COMPANY NAMELY M/S DHYANA FINSTOCK LTD. ALONG WITH THE OTHER PERSONS, THUS IN OUR CONSIDERED VIEW THE ASSESSEE SHOULD NOT BE PUNISHED FOR THE CRIME IN WHICH HE WAS NOT INVOLVED. 8.17 IN VIEW OF THE ABOVE WE SET ASIDE THE ORDER OF THE LD. CIT-A AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8.18 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. COMING TO THE ITA NO.2149/AHD/2018 FOR A.Y. 2015-16 IN THE CASE OF MAHESH VALLABHBHAI VAGHANI. 9. THE ASSESSEE HAS RAISED THE FOLLOWINGS GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,29,21,895/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF SUCHAK TRADING LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.6,56,04,448/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF DHYANA FINSTOCK LTD. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 10. AT THE OUTSET WE NOTE THAT SIMILAR GROUND WAS RAISED BY THE ASSESSEE IN THE CASE OF MAHESH VALLABHBHAI VAGHANI, BEARING ITA NO. 2145/AHD/2018 CORRESPONDING TO A.Y. 2015-16 WHICH HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE PARAGRAPH NO. 8 OF THIS ORDER. FOR DETAILED DISCUSSION PLEASE REFER THE ABOVE 23 MENTIONED PARAGRAPH NUMBER OF THIS ORDER. ACCORDINGLY WE HOLD THAT FINDING GIVEN IN ABOVE PARAGRAPHS WITH REGARD TO ITA NO.2145/AHD/2018 WILL MUTATIS MUTANDIS APPLY HERE IN THIS CASE ALSO. 10.1 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. COMING TO THE ITA NO.2150/AHD/2018 FOR A.Y. 2015-16 IN THE CASE OF HARESH BHIKHABHAI VAGHANI. 11. THE ASSESSEE HAS RAISED THE FOLLOWINGS GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,49,98,462/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF SUCHAK TRADING LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.6,56,29,803/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AFTER REJECTING THE GENUINE AND BONA FIDE CLAIM OF THE APPELLANT AND THE SAID AMOUNT WAS IN THE NATURE OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF DHYANA FINSTOCK LTD. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 12. AT THE OUTSET WE NOTE THAT SIMILAR GROUND WAS RAISED BY THE ASSESSEE IN THE CASE OF MAHESH VALLABHBHAI VAGHANI, BEARING ITA NO. 2145/AHD/2018 CORRESPONDING TO A.Y. 2015-16 WHICH HAS BEEN DECIDED IN FAVOUR OF ASSESSEE VIDE PARAGRAPH NO. 8 OF THIS ORDER. FOR DETAILED DISCUSSION PLEASE REFER THE ABOVE MENTIONED PARAGRAPH NUMBER OF THIS ORDER. ACCORDINGLY WE HOLD THAT FINDING GIVEN IN ABOVE PARAGRAPHS WITH REGARD TO ITA NO.2145/AHD/2018 WILL MUTATIS MUTANDIS APPLY HERE IN THIS CASE ALSO. 12.1 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 24 13. IN THE COMBINED RESULTS, THE APPEALS FILED BY THE DIFFERENT ASSESSEE BEARING ITA NOS. 2145/AHD/2018, NO.2149/AHD/2018 AND 2150 /AHD/2018 FOR A.Y. 2015-16 ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 09/08/2021 AT AHMEDABAD. SD/- SD/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) (TRUE COPY) AHMEDABAD; DATED 09/08/2021 MANISH