Shri Pawan Kumar Todi, Kolkata V. ITO, Ward - 35(1), Kolkata, Kolkata

ITA 2243/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4780 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 27-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: S M SURANA
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Earning of tax free income; Question of law; Accommodation entries; Sham transactions; Penny stocks; TDS
• Section: 131; 68; 69C; 133(6); 205

Judgement Text

1 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 2243/KOL/2017 ASSESSMENT YEAR: 2014-15 SHRI PAWAN KUMAR TODI (PAN: ABQPT8865P) VS. INCOME-TAX OFFICER, WD-35(1), KOLKATA APPELLANT RESPONDENT FOR THE APPELLANT SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT SHRI ROBIN CHOUDHURY, ADDL. CI T, SR. DR DATE OF HEARING 14.11.2018 DATE OF PRONOUNCEMENT 12.02.2019 ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -10, KOLKATA FOR AY 2014-15 D ATED 16.08.2017. 2. THE MAIN GRIEVANCE OF ASSESSEE AN INDIVIDUAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION MADE BY AO U/S. 68 IN RESPE CT TO THE LONG TERM CAPITAL GAINS (LTCG) CLAIM OF ASSESSEE IN RESPECT OF SALE CONSIDE RATION FROM SHARES OF M/S. SRK INDUSTRIES LTD. AND COMMISSION ADDED @ 0.50% ON IT. 3. THE BRIEF FACTS IS THAT AO NOTED THAT ASSESSEE H AS CLAIMED AS EXEMPT INCOME THE LTCG PROCEEDS FROM SALE OF SHARES OF M/S. SRK INDU STRIES LTD. WHICH WERE SOLD THROUGH ELECTRONIC PLATFORM OF BOMBAY STOCK EXCHANGE (BSE) TO THE TUNE OF RS.99,37,070/- ON THE SALE OF THE SHARES OF RS.1,12,28,130/-. THE AO NOT ED THAT ASSESSEE PURCHASED 55600 SHARES OF M/S. SRK INDUSTRIES LTD. (HEREINAFTER REFERRED T O AS M/S. SRK) ON 07.08.2012 FOR RS.4.50 PER SHARE AND SOLD IT FROM 06.09.2013 TO 14 .03.2014 AT THE RATE OF RS.195.65/- AND 2 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 THE AO WAS OF THE OPINION THAT THE PRICES WAS JACKE T UP RIGGED PURPOSEFULLY AND THE SALES WERE ALL PRE-ARRANGED AND STAGE MANAGED BY PLAYERS WHO WERE RUNNING IT AS A RACKET TO LAUNDER THE ILL GOTTEN MONEY OF THE ASSESSEES THROU GH SUCH NEFARIOUS ACTIVITIES. SO, HE ADDED THE ENTIRE AMOUNT OF RS.,12,28,130/- U/S. 68 OF THE ACT AND ALSO MADE AN ADDITION OF RS.49,686/- AS COMMISSION @ 0.5% OF LTCG OF RS.99,3 7,070/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS P LEASED TO CONFIRM THE ACTION OF AO. AGGRIEVED, THE ASSESSEE IS BEFORE US. 4. THE LD. AR ASSAILING THE ACTION OF THE LD. CIT(A ) BROUGHT TO OUR NOTICE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS THE PROMOTER DIREC TOR OF THE COMPANY M/S. TODI SECURITIES PRIVATE LIMITED (M/S. TSPL) WHICH IS THE MEMBER OF NATIONAL STOCK EXCHANGE AND BSE. THE ASSESSEE REGULARLY INVESTS IN THE CAPITAL MARKE T AND MAINTAINS A LARGE PORTFOLIO OF INVESTMENTS IN SHARES AND SECURITIES. THE PAYMENT FOR THE PURPORTED SHARE TRANSACTION (M/S. SRK INDUSTRIES LTD.) WAS MADE WITHIN TWO DAYS OF PU RCHASE AND THE SHARES WERE DULY RECEIVED IN HIS DEMAT ACCOUNT. THE SHARES WERE SOL D ON THE BSE THROUGH THE ASSESSEES REGULAR REGISTERED BROKER AND PAYMENT RECEIVED AS P ER NORMAL BUSINESS PRACTICE. ACCORDING TO LD. AR, THE SHARES OF (M/S. SRK INDUSTRIES LTD. ) ARE REGULARLY TRADED AT THE BSE EVEN TODAY. ACCORDING TO LD. AR, THE AO RELIED ON A GEN ERAL INVESTIGATION REPORT WHICH HAS NO CONNECTION WITH THE ASSESSEE. ACCORDING TO LD. AR, THE PROFIT AND REVENUE FROM OPERATION OF THE SCRIP TRADED BY THE ASSESSEE HAS SHOWN GOOD GROWTH. IT WAS POINTED OUT BY LD. AR THAT THE TRANSACTION OF SALE WAS CARRIED OUT THROUG H M/S. RAIMA EQUITIES PRIVATE LIMITED, A COMPANY WHICH IS A RECOGNIZED MEMBER OF THE BSE. I T WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT THE ASSESSEE REGULARLY TRADES THROUGH THE B ROKER AND ALL CONTRACTS WERE EXECUTED IN REAL TIME ON THE EXCHANGE PLATFORM. THEREFORE, ACCO RDING TO LD. AR, THERE IS NO BASIS FOR DENYING THE EXEMPTION ON THE GROUND THAT THE ORIGIN AL SELLER OF SHARES FROM WHOM THE ASSESSEE HAS PURCHASED WAS NOT AVAILABLE. ACCORDING TO LD. AR, THE AO HAS ALSO PROVIDED ABSOLUTE INCORRECT DATA AS REGARDS THE PARTIES INVO LVED IN THE TRANSACTION. ALL THE TRANSACTIONS WERE DONE ON THE TRADING PLATFORM OF BSE. ONE OF T HE COUNTER PARTY STATED BY THE AO IS THE CALCUTTA STOCK EXCHANGE WHICH IS AN ENTITY FUNCTION UNDER THE SECURITIES EXCHANGE BOARD OF INDIA (SEBI) AND IT IS BEYOND BELIEF THAT THE PA RTY WAS NOT AVAILABLE OR COULD NOT BE FOUND BY THE AO. THE LD. AR ALSO RELIED ON THE COORDINAT E BENCH DECISION IN ITA NO. 3 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 1388/KOL/2018 FOR AY 2014-15 SMT. PUSHPA DEVI CHOPR A VS. ITO DATED 05.10.2018 WHEREIN LTCG FROM SALE OF M/S. SRK INDUSTRIES LTD. S SHARES HAVE BEEN ACCEPTED BY COORDINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DA TED 05.10.2018 AND ALSO THAT OF ITA NO. 2477/KOL/2007 IN THE CASE OF AMRITA BAID DATED 09.1 1.2018. HE, THEREFORE, PRAYED THAT ASSESSEES CLAIM OF LTCG ON SALE OF SHARES OF M/S. SRK INDUSTRIES LTD. BE ALLOWED. 5. PER CONTRA, THE LD. DR SUPPORTED THE ORDER OF LD . CIT(A) AND AO AND ACCORDING TO HIM, THE INVESTIGATION REPORT OF DEPARTMENT HAS SHO WN THAT ASSESSEES WERE INDULGING IN THEIR ILLEGAL ACTIVITIES TO LAUNDER THEIR ILL GOTTEN UNAC COUNTED MONEY. AND THESE, ACCORDING TO HIM, ARE STAGE MANAGED, PRE-ARRANGED, RIGGED TRANSA CTION, WHICH IS BEYOND HUMAN PROBABILITIES AND RELIED ON THE DECISION OF THE HON BLE HIGH COURT OF BOMBAY ORDER IN SANJAY BIMALCHAND JAIN VS. PR. CIT, NAGPUR DATED 10 .04.2017 AND CIT VS. INDEPENDENT MEDIA (P) LTD. AND SMT. M. K. RAJESHWAR VS. ITO (BA NGALORE ITAT) DATED 12.10.2018 AND THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CHANDAN GUPTA VS. CIT DATED 16.09.2014 AND WANTS US TO CONFIRM THE ORDER OF LD. CIT(A) AND DOES NOT WANT US TO INTERFERE WITH THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A REGULAR INVEST OR IN EQUITY SHARE MARKET, MUTUAL FUND ETC. AND HAS EARNED REGULAR INCOME AS DIVIDEND AND PROFI T ON SALE OF SHARES ETC. FOR THE LAST FEW YEARS (SEE CHART BELOW). ASST. YEAR AMOUNT OF INVESTMENT IN SHARE/BOND NO. OF SCRIPS DIVIDEND RECEIVED CAPITAL GAIN 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 1,51,77,202.58 1,63,85,341.52 1,67,56,774.33 2,01,15,052.66 2,36,66,523.34 2,22,60,579.32 138 106 111 109 108 125 32,166.36 57,689.90 25,327.48 4,315.92 24,645.07 19,540.4 27,818.83 50,52,376.77 1,44,464.78 23,52,367.91 80,82,615.17 18,471.45 4 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 THE LD. AR BROUGHT TO OUR NOTICE THESE DATA REGARDI NG PRICES OF CERTAIN STOCKS DURING THE ASSESSEES PERIOD OF HOLDING PARTICULARS PRICE AS ON 31.07.2012 PRICE AS ON 14.03.2014 % CHANGE MMTC LTD. SUZION ENERGY LTD. STEEL AUTHORITY OF INDIA LTD. HINDALCO INDUSTRIES LTD. BSE SENSEX TATA CONSULTANCY SERVICES LTD. MRF LTD. PAGE INDUSTRIES LTD. EICHER MOTORS LTD. JOLLY PLASTIC INDUSTRIES LTD. CAPLLN POINT LABORATORIES LTD. LA OPALA RG LTD. SURABHI CHEMICALS 697.00 18.45 85.60 119.90 17,236.18 1,240.65 9,582.55 2,926.15 1,950.90 14.73 30.25 108.00 2.52 52.55 10.01 55.75 115.25 21,809.80 2,141.15 20,907.50 6,529.55 5,558.70 66.00 148.65 701.40 81.15 -92.46% - 45.75% -34.87% - 3.88% 26.53% 72.58% 118.15% 123.14% 184.93% 348.07% 391.40% 549.44% 3120.24% 7. THUS, ACCORDING TO LD. AR, IT IS EVIDENT THAT TH E PRICE PERFORMANCE AND RETURNS DELIVERED BY THE BSE SENSEX INDEX IS ONLY REPRESENT ATIVE OF THE 30 STOCKS IT CONSTITUTES. THE PRICE PERFORMANCE OF INDIVIDUAL STOCKS ARE OFTEN FA R DISTINCT FROM THE BROAD MARKET INDEX DEPENDING ON THEIR INDIVIDUAL BETAS, I.E., INDIVIDU AL RISK/VOLATILITY OF A PARTICULAR STOCK IN COMPARISON TO THE MARKET AS A WHOLE. ACCORDING TO L D. AR, IN VIEW OF THE COLLECTIVE DATA AS SET OUT ABOVE, IT SEEMS AN ORDINARY FACT THAT THE A SSESSEE INVESTMENT IN S R K INDUSTRIES LIMITED YIELDED THE RETURNS IT DID. 8. ACCORDING TO LD. AR, IT IS ALSO SIGNIFICANT TO N OTE THAT STOCK PRICE PERFORMANCE IS NOT ALWAYS GOVERNED BY THE UNDERLYING FUNDAMENTALS. THE DATA SET OUT IN THE TABLE ABOVE DIVULGES THAT SUPER NORMAL RETURNS HAVE BEEN DELIVE RED BY NOT ONLY FUNDAMENTALLY STRONG COMPANIES SUCH AS MRF LTD., PAGE INDUSTRIES LTD., E ICHER MOTORS LTD AND LA OPALA LTD BUT ALSO BY COMPANIES WITH RELATIVELY 'WEAK FUNDAMENTAL S'. ON THE OTHER HAND, IT MUST ALSO BE NOTED THAT SOME OF THE OTHERWISE FUNDAMENTALLY STRO NG COMPANIES HAVE UNDERPERFORMED THE INDEX BY A HUGE MARGIN SUCH AS MMTC, SUZION ENERGY AND STEEL AUTHORITY OF INDIA LTD. THUS, ACCORDING TO LD. AR IT CAN BE SAFELY INFERRED THAT PRICE PERFORMANCE CANNOT BE HELD AS ANY JUSTIFIABLE GROUND TO COMMENT ON THE FUNDAMENTA LS OF A COMPANY AND THUS, CERTAINLY 5 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 SUPERIOR PRICE PERFORMANCE CANNOT BE HELD AS A JUST IFIABLE GROUND FOR ACCUSING THE ASSESSEE OF RIGGING OF PRICES. 9. ACCORDING TO LD. AR, THE DATA PROVIDED BY THE AO ARE PARADOXICAL AND CONTRARY TO HIS STATEMENTS. AND, ACCORDING TO LD. AR, EVEN THE DATA RELIED UPON BY THE ASSESSING OFFICER SHOW THAT THE SHARES OF SRK WERE INDEED PROMISING P ROSPECTS (IN CRORE) PARTICULARS 2013 2012 2011 2010 REVENUE FROM OPERATION PROFIT BEFORE TAX TAX PROFIT AFTER TAX 33.97 2.50 0.55 1.95 10.40 0.00 0.00 0.00 7.45 0.02 0.01 0.01 3.66 0.02 0.00 0.02 THUS WE SEE THAT IN THIS SPAN OF FOUR YEAR THE GROW TH OF THE COMPANY HAS BEEN AS UNDER: PARTICULARS 2010 2013 % REVENUE FROM OPERATION PROFIT AFTER TAX 3.66 0.02 33.97 1.95 828 9650 `10. FURTHER, THE LD. AR SUBMITTED THAT THE LEGITIM ACY OF THE ASSESSEE TRANSACTION IS EVIDENT THROUGH THE FOLLOWING DOCUMENTS PRESENTED B EFORE THE AO AND SUBMITTED BEFORE LD. CIT(A) AND BEFORE US, WHICH INTER ALIA INCLUDE S : I) COPY OF THE ASSESSEE RELEVANT CONTRACT NOTES/ BI LLS TOR PURCHASE AND SALE, II) COPY OF THE ASSESSEE BANK STATEMENT III) COPY OF THE ASSESSEE DEMAT ACCOUNT STATEMENT F OR FY 2013-14 IV) COPY OF NOTICES GIVEN BY BSE AND THE SHARE TRAN SFER AGENT 11. WE NOTE THAT THE ASSESSEE HAD PURCHASED THE SHA RES OF M/S. S R K INDUSTRIES LIMITED ON 07.08.2012; THE RELEVANT CONTRACT NOTE IS FOUND PLACED ON RECORD. WE NOTE THAT ASSESSEE AFTER HOLDING THE SHARES FOR A PERIOD OF MORE THAN 12 MONTHS HAD SOLD THESE SHARES ON VARIOUS DATES THROUGH HIS RECOGNIZED SEBI BROKER NA MELY M/S. RAIMA EQUITIES PRIVATE LIMITED, WHICH TRANSACTIONS HAVE BEEN DULY REFLECTE D IN HIS DEMAT ACCOUNT, CONTRACT NOTE AND BANK ACCOUNT STATEMENT. THE TRANSACTIONS UNDERT AKEN WERE THROUGH THE APPROPRIATE BANKING CHANNELS AND SECURITIES TRANSACTION TAX (ST T) WAS ALSO DULY PAID AND IS DISCLOSED IN THE RELEVANT CONTRACT NOTES. 6 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 12. THUS ASSESSEE HAS DISCHARGED ONUS OF PROVING TH E GENUINENESS OF THE TRANSACTIONS RESULTING IN LONG TERM CAPITAL GAIN AND WHERE THE A SSESSEE HAS DISCHARGED HIS ONUS OF PROVING THE GENUINENESS OF THE TRANSACTIONS BY FURN ISHING ALL EVIDENCES AS STATED IN PARAGRAPH HEREIN ABOVE, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE WITHOUT ANY MATERIAL TO DOUBT THE VERACITY OF THE DOCUMENTS FILED FOR SUBSTANTIATING THE TRANSACTION. THE SALE PROCEEDS WERE RECEIVED THROUGH HIS REGULAR STOCK BROKER WHO IS A MEMBER OF STOCK EXCHANGE AGAINST WHOM THERE ARE NO ADVERSE FI NDINGS OF ANY REGULATORY AGENCIES. UNDER THE AFORESAID FACTS AND CIRCUMSTANCES ADDITI ON U/S. 68 IS UNTENABLE. WE NOTE THAT THE CREDIT TO THE ACCOUNT OF THE ASSESSEE ARE FROM FUND S GIVEN BY THE EXCHANGE THROUGH THE REGISTERED BROKER AND WAS IN COMPLIANCE WITH ALL SE CURITIES LAW IN INDIA, CONSEQUENTLY APPLICATION OF SECTION 68 WAS UNJUST, INCORRECT. 13. WE NOTE THAT THE COORDINATE BENCH IN ITA NO. 13 88/KOL/2018 FOR AY 2014-15 SMT. PUSHPA DEVI CHOPRA VS. ITO DATED 05.10.2018 WHEREIN LTCG FROM SALE OF M/S. SRK INDUSTRIES LTD.S SHARES HAVE BEEN ACCEPTED BY COOR DINATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 05.10.2018 AND ALSO THAT OF ITA NO. 247 7/KOL/2007 IN THE CASE OF AMRITA BAID DATED 09.11.2018, THE COORDINATE BENCH IN SIMILAR C ASE AS THAT OF LTCG CLAIM OF M/S. SRK INDUSTRIES LTD. WHEREIN THE TRIBUNAL HAS HELD AS UN DER: 2. THE SOLE ISSUE THAT ARISES FOR MY ADJUDICATION IS WHETHER THE ASSESSING OFFICER WAS RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE THAT HE HAD EAR NED LONG TERM CAPITAL GAINS ON PURCHASE AND SALE OF THE SHARES OF M/S. SRK INDUSTRIES LTD. AND M/S TUNI TEXTILE MILLS LTD. THE AO BASED ON A GENERAL REPORT AND MODUS OPERANDI ADOPTED GENE RALLY IN THESE CASES AND ON GENERAL OBSERVATIONS HAS CONCLUDED THAT THE ASSESSEE HAS CL AIMED BOGUS LONG TERM CAPITAL GAIN. HE MADE AN ADDITION OF THE ENTIRE SALE PROCEEDS OF THE SHARES AS INCOME AND REJECTED THE CLAIM OF EXEMPTION MADE U/S 10(38) OF THE ACT. THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE TRANSACTION WAS REJECTED. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL AND TH E LD. CIT(A)-10, KOLKATA, HAD UPHELD THE ADDITION. THE LD. CIT(A) HAS IN HIS ORDER RELIED UP ON CIRCUMSTANTIAL EVIDENCE AND HUMAN PROBABILITIES TO UPHOLD THE FINDINGS OF THE AO. HE ALSO RELIED ON THE SO CALLED RULES OF SUSPICIOUS TRANSACTION. NO DIRECT MATERIAL WAS FOU ND TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE, IN SUPPORT OF THE GENUINENESS OF THE TRAN SACTIONS. IN OTHER WORDS, THE OVERWHELMING EVIDENCE FILED BY THE ASSESSEE REMAINS UNCHALLENGED AND UNCONTROVERTED. THE ENTIRE CONCLUSIONS DRAWN BY THE REVENUE AUTHORITIES, ARE BASED ON A CO MMON REPORT OF THE DIRECTOR OF INVESTIGATION, KOLKATA, WHICH WAS GENERAL IN NATURE AND NOT SPECIFIC TO ANY ASSESSEE. THE ASSESSEE WAS NOT CONFRONTED WITH ANY STATEMENT OR M ATERIAL ALLEGED TO BE THE BASIS OF THE REPORT 7 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 OF THE INVESTIGATION WING OF THE DEPARTMENT AND WHI CH WERE THE BASIS ON WHICH CONCLUSION WERE DRAWN AGAINST THE ASSESSEE. COPY OF THE REPORT WAS ALSO NOT GIVEN. 4. UNDER THE CIRCUMSTANCES, IN A NUMBER OF CASES T HIS BENCH OF THE TRIBUNAL HAS CONSISTENTLY HELD THAT DECISION IN ALL SUCH CASES SHOULD BE BASE D ON EVIDENCE AND NOT ON GENERALISATION, HUMAN PROBABILITIES, SUSPICION, CONJECTURES AND SUR MISES. WE HAVE IN ALL CASES DELETED SUCH ADDITIONS. SOME OF THE CASES WERE DETAILED FINDING WHICH ARE LISTED BELOW :- SL. NO. ITA NOS. NAME OF THE ASSESSEE DATE OF ORDER/JUDGM ENT 1 1236-1237/K/17 ITAT-KOLKATA MANISH KUMAR BAID & O RS VS. ACIT 18.08.2017 2 443/KOL/2017 KIRAN KOTHARI (HUF) VS ITO 15.11.201 7 3 22 OF 2009 CALCUTTA HIGH COURT CIT, KOLKATA-III V S BHAGWATI PRASAD AGARWAL 29.04.2009 4 456 OF 2007 BOMBAY HIGH COURT CIT VS SHRI MUKHESH RATILAL MAROLIA 07.09.2011 5 18 OF 2017 PUNJAB AND HARYANA HIGH COURT PR. C.I.T. (CENTRAL)LUDHIANA VS SH.HITESH GANDHI, 16.02.2017 6 95 OF 2017 PUNJAB AND HARYANA HIGH COURT PR. C.I.T. VS PREM PAL GANDHI 18.01.2018 7 2281/KOL/2017 ITAT KOLKATA NAVNEET AGARWAL, LEGAL HEIR OF LATE KIRAN AGARWAL VS. ITO, WARD-35(3), CALCUTTA 20.07.2018 5. I AM BOUND BY THE PROPOSITION OF LAW LAID DOWN I N THESE CASE LAW. THEY ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE LD. DEPARTMENTAL REPR ESENTATIVE, THOUGH NOT LEAVING HIS GROUND, COULD NOT CONTROVERT THE CLAIM OF THE LD. COUNSEL F OR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DECISIONS OF THE HONBLE HIGH COURTS AND THE ITAT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SECURITIES AND EXCHANGE BOARD OF INDIA VS RAKHI TRADING PRIVATE LTD IN CIVIL APPEAL NO. 1969 OF 2011 WITH CIVIL APPEAL NOS.3174-3177 OF 2001 AND CIVIL APPEAL NO.3180 OF 2011. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THERE IS NO SURVIVING ORDER OF SEBI AGAINST THE ASSESSEE OR THE COMPANY, THE SCRIPT OF WHICH WAS PU RCHASED AND SOLD BY THE ASSESSEE. WHEN THERE IS NO SURVIVING ADVERSE ORDER OF SEBI, AGAINST THE CLAIM OF THE ASSESSEE, THE JUDGMENT OF THE HONBLE SUPREME COURT CANNOT BE APPLIED TO THE FACT S OF THIS CASE. 7. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION IN QUESTION IS DELETED. THE CONSEQUENTIAL ADDITION U/S 69C IS ALSO DELETED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 14. WE NOTE THAT SIMILAR ISSUE AROSE IN MANISH KUMA R BAID (SUPRA) WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF LTCG FR OM SALE OF SCRIPS OF M/S. KAFL HAS HELD AS UNDER: 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF TH E LD AR THAT THE LD AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WIT HOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGE MENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS OF THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFERENCES WHICH REMAIN UNPROVED BASED ON T HE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE PRINCIP LES LAID DOWN IN VARIOUS CASE LAWS RELIED UPON BY THE LD AR ARE ALSO NOT REITERATED FOR THE S AKE OF BREVITY. WE FIND THAT THE 8 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED B Y THE ORDER OF HONBLE HIGH COURT. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AMALGAMATION SCHEME APPROVED BY THE HONBLE HIGH COURT IN MAY 2013 MERELY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BEEN SUBJECT TO CROSS EXAMINATION. MOROEVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BROKING LTD NAME IS NEITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DE ALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF S HARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINS T THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE AR GUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA . WE FIND THAT THE SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM AS DIRECT EVIDE NCE AGAINST THE ASSESSEE DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BROKING LTD. THROUGH WHOM THE ASSESSEE SOLD THE SHARES OF KAFL AS A BENEFICIARY T O THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE RELATED ENTITIES / PROMOTERS / BROK ERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPAL WERE PURCHASED BY THE ASSESSEE W AY BACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL WITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHARES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY EXITING AT THE MO ST OPPORTUNE MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GOOD RETURN ON HIS INVES TMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHITA STOCK BROKING LTD WAS NOT THE PRI MARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KAFL AS COULD BE EVIDENT FROM THE SEBIS ORDE R. WE FIND THAT THE SEBI ORDER DID MENTION THE LIST OF 246 BENEFICIARIES OF PERSONS TR ADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AND / OR ASHITA STOCK BROKING LTDS NAME I S NOT REFLECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FAILS. WE ALSO FIND THAT EV EN THE SEBIS ORDER HEAVILY RELIED UPON BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL H AD PERFORMED VERY WELL DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTA NTIALLY. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND/OR THE ST ATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNECTION WITH THE ALLEG ED BOGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMPLICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE T RANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE N EITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED I N REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY TH E LD AR AND 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 KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 R AISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 15. WE NOTE THAT IN ORDER TO CREATE A TAX LIABILITY IN A CASE OF THIS NATURE, THE AO HAS TO PROVE AND ESTABLISH THE CASH TRAIL AND THE ALLEGATI ONS, PARTICULARLY IN RESPECT OF THE APPELLANT, WHICH IS YET TO BE PROVED IN THE INSTANT CASE. SIMI LAR VIEW HAS BEEN PRONOUNCED BY HONBLE 9 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 DELHI HIGH COURT IN THE CASE OF PR. CIT VS JATIN IN VESTMENT (P) LTD. WHEREIN IT WAS OBSERVED 'A TRANSACTION CANNOT BE TREATED AS FRAUDULENT IF T HE APPELLANT HAS FURNISHED THE DOCUMENTARY PROOF AND PROVED THE IDENTITY OF THE PU RCHASER AND NO DISCREPANCY IS FOUND. THE AO HAS TO EXERCISE HIS POWERS U/S 131 & 133(6) OF THE ACT TO VERIFY THE GENUINENESS OF THE CLAIM AND CANNOT PROCEED ON SURMISES. THE AO MU ST ESTABLISH THAT CASH HAS CHANGED HANDS. THERE IS NO MATERIAL OR EVIDENCE EVEN TO SUG GEST THAT THE CHEQUES DIRECTLY OR INDIRECTLY EMANATED FROM THE APPELLANT SO THAT IT C OULD BE SAID THAT THE APPELLANTS' OWN MONEY WAS BROUGHT BACK IN THE GUISE OF SALE PROCEED S. 16. IN THE CASE OF CIT VS. LAVANYA LAND PVT LTD. TH E HONBLE BOMBAY HIGH COURT RULED THAT THE ALLEGATIONS MADE BY THE AUTHORITIES HAVE T O BE SUPPORTED BY ACTUAL CASH PASSING HANDS OR ACTUALLY HAS CHANGED HANDS. 17. IN THE CASE OF DOLARRAI HEMANI VS. ITO, THIS TR IBUNAL HELD THAT THE FACT THAT THE STOCK IS THINLY TRADED & THERE IS UNUSUALLY HIGH GA IN, IS NOT SUFFICIENT TO TREAT THE LTCG AS BOGUS WHEN ALL THE PAPERWORK IS IN ORDER. THE REVEN UE HAS TO BRING MATERIAL ON RECORD TO SUPPORT IT'S FINDINGS THAT THERE HAS BEEN COLLUSION /CONNIVANCE BETWEEN THE BROKER & THE APPELLANT FOR THE INTRODUCTION OF UNACCOUNTED MONEY . 18. IN THE CASE OF DCIT VS. SUNITA KHEMKA, ITAT KOL KATA RULED THAT THE AO CANNOT TREAT A TRANSACTION AS BOGUS ONLY THE BASIS OF SUSP ICION OR SURMISES. HE HAS TO BRING MATERIAL ON RECORD TO SUPPORT HIS FINDINGS THAT THERE HAS BE EN A COLLUSION/CONNIVANCE BETWEEN THE BROKER AND THE APPELLANT FOR THE INTRODUCTION OF IT S UNACCOUNTED MONEY. A TRANSACTION OF PURCHASE AND SALE OF SHARES, SUPPORTED BY CONTRACT NOTES AND D-MAT STATEMENTS AND ACCOUNT PAYEE CHEQUES CANNOT BE TREATED AS BOGUS. 19. IN THE CASE OF KAMALA DEVI S DOSHI VS. ITO ITAT MUMBAI, VIDE IT'S ORDER DATED 22.5.2017 HELD THAT STATEMENT U/S 131 OF THE ACT IMPLICATING APPELLANT IS NOT SUFFICIENT TO DRAW ADVERSE INFERENCE WHERE DOCUMENT S IN THE FORM OF CONTRACT NOTES, BANK STATEMENTS, STT PAYMENT ETC. PROVES THE GENUINENESS OF PURCHASE AND SALE OF PENNY STOCK. FAILURE TO PROVIDE CROSS EXAMINATION IS A FATAL ERR OR. 10 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 20. SO, AS THE FACTS OF THE CASE ARE VERY SIMILAR, THE AO HAS FAILED TO ESTABLISH ANY LINK AND THEREFORE THE ORDER IS BASED ON SURMISES, PREDE TERMINED, SOLELY RELYING UPON THE INVESTIGATION REPORT WHICH IS GENERAL IN NATURE AND NO CONCRETE MATERIAL HAS BEEN BROUGHT ON RECORD PROVING OTHERWISE. 21. WE NOTE THAT THE AO IN HIS ORDER HAS MENTIONED THAT SEBI HAS GIVEN ADVERSE REPORT ON SO MANY SCRIPS INCLUDING THAT OF KAILASH AUTO. FURTHER, WE NOTE THAT SEBI, IN ITS TWO REPORTS ON THE SAID SCRIP, HAS NAMED AND BANNED/SUS PENDED THE BENEFICIARIES IN PARTICULAR. HOWEVER, WE NOTE THAT THE APPELLANTS NAME DOES NOT APPEAR IN THIS LIST. AND THAT THE SEBI DID NOT STOP/SUSPEND THE TRADE OF SALE OF M/S. KAFL WHEN ASSESSEE SOLD THE SCRIP. WE NOTE THAT M/S. KAFL WAS VERY MUCH LISTED ON THE STOCK EX CHANGE AND TRADING IN THE SAID SCRIP WAS PERMISSIBLE ON THE STOCK EXCHANGE. MOREOVER SE BI REPORT AGAINST CERTAIN BENEFICIARIES OF KAILASH AUTO WAS IN PUBLIC MUCH AFTER THE APPEL LANT HAS SOLD THE SHARES, AND WE NOTE THAT ON 29.03.2016 SEBI HAS REVOKED THE BAN ON SUCH ENTI TIES WHICH IMPLIES THAT THERE WAS NO EVIDENCE AGAINST THEM. 22. WE NOTE THAT AT PARA -18 OF THE ASSESSMENT ORDE R AO MENTIONS ABOUT THE ROLE OF BROKERS IN ALLOWING ENTRY OPERATORS TO REGISTER THE IR BOGUS COMPANIES AS THEIR CLIENT AND ALSO CERTAIN ADMISSION MADE BY SOME BROKERS ABOUT THEIR INVOLVEMENT IN SO CALLED JAMA KHARCHI COMPANIES. IN THE SAID PARA SOME NAMES OF FEW BROK ERS AND JAMA KHARCHI OPERATORS HAVE BEEN MENTIONED. HOWEVER, WE NOTE THAT THE NAME OF ASSESSEES BROKER, M/S. GUINESS SECURITIES LTD., THROUGH WHOM THE ASSESSEE SOLD HIS SHARES, DOES NOT APPEAR AT ALL IN THAT REPORT. 23. WE NOTE THAT IN AN IDENTICAL/SIMILAR CASE, WHER EIN THE AO MADE ADDITION OF THE LTCG CLAIM MADE ON SALE OF M/S. KAFL SCRIPS ON SIMILAR R EASONING BASED ON THE SEBI INTERIM REPORT, INVESTIGATION REPORT OF THE WING OF THE DEP ARTMENT AND CERTAIN STATEMENTS RECORDED BY THE DEPARTMENT IN THE CASE OF SANJIV SHROFF VS. ACIT IN ITA NO. 1197/KOL/2018 DATED 02,01.2019 WHEREIN THE SAME BENCH OBSERVED AS UNDER AND GAVE RELIEF TO THE ASSESSEE: 11 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 WE NOTE THAT SHARES OF M/S. KAFL WERE SOLD BY ASSE SSEE THROUGH RECOGNIZED BROKER IN A RECOGNIZED BOMBAY STOCK EXCHANGE. THE DETAILS OF SU CH SALE AND CONTRACT NOTE HAVE BEEN SUBMITTED BEFORE AO/LD. CIT(A). WE TAKE NOTE THAT W HEN THE TRANSACTIONS HAPPENED IN THE STOCK EXCHANGE, THE SELLER WHO SELLS HIS SHARES ON THE STOCK EXCHANGE DOES NOT KNOW WHO PURCHASES SHARES. ACCORDING TO OUR KNOWLEDGE, THE SHARES ARE SOLD AND BOUGHT IN AN ELECTRONIC MODE ON THE COMPUTERS BY THE BROKERS AND THERE IS A LSO NO DIRECT CONTACT AT ANY LEVEL EVEN BETWEEN THE BROKERS. WE NOTE THAT AS AND WHEN ANY SHARES ARE OFFERED FOR SALE IN THE STOCK EXCHANGE PLATFORM, ANY ONE OF THE THOUSANDS OF BROK ERS REGISTERED WITH THE STOCK EXCHANGE IS AT LIBERTY TO PURCHASE IT. AS FAR AS OUR UNDERSTANDIN G, THE SELLING BROKER DOES NOT EVEN KNOW WHO THE PURCHASING BROKER IS. THIS IS HOW THE SEBI KEEP S A STRICT CONTROL OVER THE TRANSACTIONS TAKING PLACE IN RECOGNIZED STOCK EXCHANGES. UNLESS THERE I S A EVIDENCE TO SHOW THAT THERE IS A BREACH IN THE AFORESAID PROCESS WHICH FACT HAS BEEN UNEARTHED BY METICULOUS INVESTIGATION, WE ARE OF THE OPINION THAT THE UNSCRUPULOUS ACTIONS OF FEW PLAYER S EXPLOITING THE LOOPHOLES OF THE STOCK EXCHANGE CANNOT BE THE BASIS TO PAINT THE ENTIRE SA LE/PURCHASE OF A SCRIP LIKE THAT OF M/S. KAFL AS BOGUS WITHOUT BRINGING OUT ADVERSE MATERIAL SPEC IFICALLY AGAINST THE ASSESSEE. 17. THE FACT OF HOLDING THE SHARES OF M/S. KAFL IN THE D-MAT ACCOUNT CANNOT BE DISPUTED. FURTHER, THE ASSESSING OFFICER HAS NOT EVEN DISPUTE D THE EXISTENCE OF THE D-MAT ACCOUNT AND SHARES CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSE E. THEREFORE, ONCE, THE HOLDING OF SHARES IS D-MAT ACCOUNT CANNOT BE DISPUTED THEN THE TRANSACTI ON CANNOT BE HELD AS BOGUS. THE AO HAS NOT DISPUTED THE SALE OF SHARES FROM THE D-MAT ACCOUNT OF THE ASSESSEE AND THE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE AS SESSEE, THEREFORE, ONCE THE ASSESSEE PRODUCED ALL RELEVANT EVIDENCE TO SUBSTANTIATE THE TRANSACTI ON OF PURCHASE, DEMATERIALIZATION AND SALE OF SHARES THEN, IN THE ABSENCE OF ANY CONTRARY MATERIA L BROUGHT ON RECORD THE SAME CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE BASIS OF STATEME NT OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI RECORDED B Y THE INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENERAL STATEMENT OF PROVIDING B OGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS WITHOUT STATING ANYTHING ABOUT THE TRANSACT ION OF ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. 18. THE ASSESSEE HAS REQUESTED THE CROSS EXAMINATI ON OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI WHI CH WAS NOT PROVIDED TO THE ASSESSEE BY THE AO. THUS, IN VIEW OF THE DECISION OF HON'BLE SUPREM E COURT IN CASE OF CCE VS. ANDAMANTIMBER INDUSTRIES 127 DTR 241(SC) THE ASSESSMENT BASED ON STATEMENT W ITHOUT GIVING AN OPPORTUNITY TO ASSESSEE TO CROSS EXAMINE THE MAKER OF THE ADVERSE STATEMENTS RELIED ON BY THE AO, IS NOT SUSTAINABLE IN LAW. WE FIND THAT THE STATEMENT CANNOT BE USED BY THE AO WITHOUT GIVING AN OPPORTUNITY TO CROSS EXAMINATION OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI. THEREFORE , THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNIT Y OF CROSS EXAMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY . THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION MADE BY THE AO ON THE BASIS OF SUSPICION AND SURMISES AND OBSERVED IN PAR 46 AS UNDER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INT O REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MAY GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGH ED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE MATERIAL FACTS STRONGLY INDICATE A PR OBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVE RTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PER THEIR MUTUAL UNDERSTANDING W ITH THE ASEESSEE. ANOTHER VERY STRONG PROBABLE FACTOR IS THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE COMPANY NEED NOT INCUR ADVER TISEMENT EXPENSES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY U PON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLLECTION OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESSEE ONLY IF THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT A SSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN U NEARTHED FROM SUCH GLOBAL LEVEL 12 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 INVESTIGATION BY TWO CENTRAL GOVERNMENT AUTHORITIES . IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOU NTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GT C AS A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BANK ACCOUNTS COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NIRMALA SUNDAR AM, WE ARE OF THE OPINION THAT THIS ONE INCIDENT OF DONATION THROUGH BANK ACCOUNTS AT THE D IRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE- COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. H OWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CO RROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE 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 EITHER SIDE AND DRAW A CONCLUSION IN F AVOUR OF A PARTY WHICH HAS MORE FAVOURABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRA WN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FA CTS THAT MIGHT GO AGAINST ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH A ID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED O UT, THEN NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE.' 19. SINCE, WHEN THE ASSESSING OFFICER HAS NOT BROU GHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE PURCHASE C ONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDEN CE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY BY WAY OF BOGU S LONG TERM CAPITAL GAIN. THE HON'BLE RAJASTHAN HIGH COURT DATED 11-09-2017IN CASE OF CIT VS. SMT. POOJA AGRAWAL [ ITA NO 385/2011 ] HAS UPHELD THE FINDING OF THE TRIBUNAL O N THIS ISSUE IN PARA 12 AS UNDER:- '12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL AND CONTENDED THAT IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATION THE RE VENUE TRANSACTIONS, THE ADDITION MADE WAS DELETED BY THE TRIBUNAL OBSERVING AS UNDER :- 'CONTENTION OF THE AR IS CONSIDERED. ONE OF THE MAI N REASONS FOR NOT ACCEPTING THE GENUINENESS OF THE TRANSACTIONS DECLARED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SH ARES. HOWEVER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPELLANT HAD TRANSACTED NO T ONLY IN THE SHARES WHICH ARE DISPUTED BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPU TERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUESTION VARIOUS DETA ILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK CO MMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MAS TER DETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSACTIONS WE RE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSA CTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPELLANT D ENIED HAVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTIO N WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MO DUS OPERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PURO HIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPIT AL GAIN EITHER WAS EXEMPTED FROM TAX OR 13 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 WAS TAXABLE AT A LOWER RATE. AS THE APPELLANT'S CAS E IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACCOMMODATION T RANSACTIONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND T O BE AN ENTRY PROVIDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMENT OF SH. PAW AN PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO ME NTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. SUSHIL KUM AR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUN TER THE OBJECTIONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONIN G THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTIN G WING AFTER CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE A O HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THA T THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACTION IN QUESTION IN STATEMENT OF SH. PAW AN PUROHIT. SIMPLY BECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BANK AN D THE APPELLANT HAS ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOE S NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL CANNOT BE HELD AS NON-GEN UINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MA DE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT C LAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED ON MERE SUSPIC ION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PUR CHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLDING OF THE SHARES BY THE ASSESSEE AT THE TIME OF ALLOTMENT SUBSEQUENT TO THE AMALGAMATION/MERGER IS NOT IN DOUBT, THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO O N THIS ACCOUNT.' 20. WE NOTE THAT THE SALE OF SHARES OF M/S. KAFL WH ICH WAS DEMATERLIZED IN DEMAT ACCOUNT HAS TAKEN PLACE THROUGH RECOGNISED STOCK EX CHANGE AND ASSESSEE RECEIVED MONEY THROUGH BANKING CHANNEL. SO, ASSESSEE HAS EXPLAINED THE NATURE AND SOURCE OF THE MONEY WITH SUPPORTING DOCUMENTS AND THUS HAS DISCHARGED THE ON US CASTED UPON HIM BY PRODUCING THE RELEVANT DOCUMENTS MENTIONED IN PARA 15 (SUPRA), AC CORDINGLY, THE QUESTION OF TREATING THE SAID GAIN AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT CANNOT ARISE UNLESS THE AO IS ABLE TO FIND FAULT/INFIRMITY WITH THE SAME. WE NOTE THAT TH E SOURCE OF THE RECEIPT OF THE AMOUNT HAS BEEN EXPLAINED AND THE TRANSACTION IN RESPECT OF WHICH T HE SAID AMOUNT HAS BEEN RECEIVED BY ASSESSEE HAS NOT BEEN CANCELLED BY THE STOCK EXCHANGE/SEBI. SO, IT IS DIFFICULT TO COUNTENANCE THE ACTION OF AO/LD. CIT(A) IN THE AFORESAID FACTS AND CIRCUMS TANCES EXPLAINED ABOVE. 21. EVEN ASSUMING THAT THE BROKERS MAY HAVE DONE SO ME MANIPULATION THEN ALSO THE ASSESSEE CANNOT BE HELD LIABLE FOR THE ILLEGAL ACTI ON OF THE BROKERS WHEN THE ENTIRE TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH BANKING CHANNELS DULY RECORDED IN THE DEMAT ACCOUNTS WITH A GOVERNMENT DEPOSITORY AND TRADED ON THE STOCK EXCHA NGE UNLESS SPECIFIC EVIDENCE EMERGES THAT THE ASSESSEE WAS IN HAND IN GLOVES WITH THE BROKER FOR COMMITTING THE UNSCRUPULOUS ACTIVITY TO LAUNDER HIS OWN MONEY IN THE GUISE OF LTCG IS BROUG HT ON RECORD BY THE AO. 22. THERE IS ALSO NOTHING ON RECORD WHICH COULD SUG GEST THAT THE ASSESSEE GAVE HIS OWN CASH AND GOT CHEQUE FROM THE ALLEGED BROKERS/BUYERS . THE ASSESSMENT IS BASED UPON SOME THIRD PARTIES STATEMENTS RECORDED BEHIND THE BACK OF THE ASSESSEE AND THE ASSESSEE HAS NOT BEEN ALLOWED TO CROSS EXAMINE THOSE PERSONS, SO THE STA TEMENTS EVEN IF ADVERSE AGAINST THE ASSESSEE CANNOT BE RELIED UPON BY THE AO TO DRAW ADVERSE INF ERENCE AGAINST THE ASSESSEE IN THE LIGHT OF 14 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 THE DOCUMENTS TO SUBSTANTIATE THE CLAIM OF LTCG, WH ICH HAS NOT BEEN FOUND FAULT WITH BY THE AO. 23. LET US LOOK AT CERTAIN JUDICIAL DECISIONS ON SI MILAR FACTS:- 24. THE CASE OF THE ASSESSEES IS SIMILAR TO THE DE CISION OF HONBLE BOMBAY HIGH COURT, NAGPUR BENCH IN CIT VS. SMT. JAMNADEVI AGRAWAL & OR S. DATED 23RD SEPTEMBER, 2010 REPORTED IN (2010) 328 ITR 656 WHEREIN IT WAS HELD THAT: 'THE FACT THAT THE ASSESSEES IN THE GROUP HAVE PURC HASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY ITA NOS. 93 TO 99/RPR/2 014 & C.O. NOS. 12 TO 18/RPR/2014 . A.Y. 2004-05 10 PRODUCED TO ESTABLISH THE GENUINENE SS OF THE CLAIM. FROM THE DOCUMENTS PRODUCED, IT IS SEEN THAT THE SHARES IN QUESTION WE RE IN FACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO H AVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE SALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOM E OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON T HE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, TH E FACT THAT SOME OF THE TRANSACTIONS WERE OFF- MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. THE STATEMENT OF THE BROKER P THAT THE TRANSACTIONS WIT H THE H GROUP WERE BOGUS HAS BEEN DEMONSTRATED TO BE WRONG BY PRODUCING DOCUMENTARY E VIDENCE TO THE EFFECT THAT THE SHARES SOLD BY THE ASSESSEES WERE IN CONSONANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE DOCUMENTARY EVIDENCE, THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE FINDI NGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUMENTARY EVIDENCE ON RECORD. THE TRIBUNAL HA S FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE,BANK ACCOUNTS OF SOME OF TH E BUYERS OF SHARES CANNOT BE LINKED TO THE ASSESSEES. MOREOVER, YN THE LIGHT OF THE DOCUMENTAR Y EVIDENCE ADDUCED TO SHOW THAT THE SHARES PURCHASED AND SOLD BY THE ASSESSEES WERE IN CONFORM ITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE AB OVE FINDING RECORDED BY THE TRIBUNAL. THEREFORE, THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL.ASSTT. C IT VS. KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. (2010) 41 DTR (NAG) (TRIB) 105: (2010) 133 TTJ (NAG) 818 AFFIRMED; SUMATI DAYAL VS. CIT (1995) 125 CTR (SC) 124: (1995) 80 TAXMAN 89 (S C) DISTINGUISHED. 12. THE HON'BLE HIGH COURT OF RAJASTHAN IN CIT VS. SMT. PUSHPA MALPANI - REPORTED IN (2011) 242 CTR (RAJ.) 559; (2011) 49 DTR 312 DISMISSED THE APPEAL OF DEPARTMENT OBSERVING 'WHETHER OR NOT THERE WAS SALE OF SHARES AND RECEIP T OF CONSIDERATION THEREOF ON APPRECIATED VALUE IS ESSENTIALLY A QUESTION OF FACT. CIT(A) AND TRIBUNAL HAVE BOTH GIVEN REASONS IN SUPPORT OF THEIR FINDINGS AND HAVE FOUND THAT AT THE TIME O F TRANSACTIONS, THE BROKER IN QUESTION WAS NOT BANNED BY SEBI AND THAT ASSESSEE HAD PRODUCED COPIE S OF PURCHASE BILLS, CONTRACT NUMBER SHARE CERTIFICATE, APPLICATION FOR TRANSFER OF SHAR E CERTIFICATE TO DEMAT ACCOUNT ALONG WITH COPIES OF HOLDING STATEMENT IN DEMAT ACCOUNT, BALAN CE SHEET AS ON 31ST MARCH, 2003, SALE BILL, BANK ACCOUNT, DEMAT ACCOUNT AND OFFICIAL REPORT AND QUOTATIONS, OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. ON 23RD JULY, 2003. THEREFORE, 'TH E PRESE/ITDPPEAL DOES NOT RAISE ANY QUESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 25. THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF ANUPAM KAPOOR 299 ITR 0179 HAS HELD AS UNDER:- THE TRIBUNAL ON THE BASIS OF THE MATERIAL ON RECOR D, HELD THAT PURCHASE CONTRACT NOTE, CONTRACT NOTE FOR SATES, DISTINCTIVE NUMBERS OF SHARES PURCH ASED AND SOLD, COPY OF SHARE CERTIFICATES AND THE QUOTATION OF SHARES ON THE DATE OF PURCHASE AND SALE WERE SUFFICIENT MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT BOGUS BUT A GENUINE TRANSAC TION. THE PURCHASE OF SHARES WAS MADE ON 28TH APRIL, 1993 I.E.. ASST. YR. 1993-94 AND THAT A SSESSMENT WAS ACCEPTED BY THE DEPARTMENT AND 15 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 THERE WAS NO CHALLENGE TO THE PURCHASE OF SHARES IN THAT YEAR. IT WAS ALSO PLACED BEFORE THE RELEVANT AO AS WELL AS BEFORE THE TRIBUNAL THAT THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE AND WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE TRIBUNAL WAS RIGHT IN REJECTING THE APPEAL OF THE REVENUE BY HOL DING THAT THE ASSESSEE WAS SIMPLY A SHAREHOLDER OF THE COMPANY. HE HAD MADE INVESTMENT IN A COMPANY IN WHICH HE WAS NEITHER A DIRECTOR NOR WAS HE IN CONTROL OF THE COMPANY. THE ASSESSEE HAD TAKEN SHARES FROM THE MARKET, THE SHARES WERE LISTED AND THE TRANSACTION TOOK PLA CE THROUGH A REGISTERED BROKER OF THE STOCK EXCHANGE. THERE WAS NO MATERIAL BEFORE THE AO, WHIC H COULD HAVE LEAD TO A CONCLUSION THAT THE TRANSACTION WAS SIMPLICITIER A DEVICE TO CAMOUFLAGE ACTIVITIES, TO DEFRAUD THE REVENUE. NO SUCH PRESUMPTION COULD BE DRAWN BY THE AO MERELY ON SURM ISES AND CONJECTURES. IN THE ABSENCE OF ANY COGENT MATERIAL IN THIS REGARD, HAVING BEEN PLA CED ON RECORD, THE AO COULD NOT HAVE REOPENED THE ASSESSMENT. THE ASSESSEE HAD MADE AN I NVESTMENT IN A COMPANY, EVIDENCE WHEREOF WAS WITH THE AO. --THEREFORE, THE AO COULD NOT HAVE ADDED INCOME, WHICH WAS RIGHTLY DELETED BY THE CIT(A) AS WELL AS THE TRIBUNAL. IT IS SETTLE D LAW THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. CONSEQUENTLY, NO QUE STION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW, ARISES FOR ADJUDICATION. C. VASANTLAL & CO . VS. CIT (1962) 45 ITR 206 (SC), M.O. THOMAKUTTY VS. CIT (.1958) 34 ITR 501 (KER)) AND MU KAND SINGH VS. SALES TAX TRIBUNAL (1998) 107 STC 300 (PUNJAB) RELIED ON; UMACHARAN SHAW &BRO S. VS. CIT (1959) 37 ITR 271 (SC) APPLIED; JASPAL SINGH VS. CIT (2006) 205 CTR (P & H ) 624 DISTINGUISHED 26. THE CO-ORDINATE BENCH OF AHMEDABAD IN ITA NOS. 501 & 502/AHD/2016 HAD THE OCCASION TO CONSIDER A SIMILAR ISSUE WHICH WAS WHER EIN THE ASSESSMENT WAS FRAMED ON THE STRENGTH OF THE STATEMENT OF A BROKER. THE RELEVANT PART READS AS UNDER:- 14. THE ENTIRE ASSESSMENT IS BASED UPON THE STATEMENT O F SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMEN T WAS SUPPLIED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN BY THE A SSESSING OFFICER/CIT(A). THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTR IES IN CIVIL APPEAL NO. 4228 OF 2006 WAS SEIZED WITH THE FOLLOWING ACTION OF THE TRIBUNA L :- 6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION OF THE DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF THE APPELLANT THE MSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOLDING AN D APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS. 15. THE HONBLE APEX COURT HELD AS UNDER :- ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMU CH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WA S ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON T HE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORR ECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT G RANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROS S-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EXFACTORY PRICES REMAIN STA TIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED T O CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 16 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY F OR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS EXAMINATION. THAT APART, THE A DJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID D EALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUB JECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOS E AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTI ONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING T HE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTM ENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNE SSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 16. ON THE STRENGTH OF THE AFOREMENTIONED DECISIO N OF THE HONBLE SUPREME COURT, THE ASSESSMENT ORDER HAS TO BE QUASHED . 17. EVEN ON FACTS OF THE CASE, THE ORDERS OF THE AU THORITIES BELOW CANNOT BE ACCEPTED. THERE IS NO DENYING THAT CONSIDERATION WAS PAID WHEN THE SHARES WERE PURCHASED. THE SHARES WERE THEREAFTER SENT TO THE COMPANY FOR THE TRANSFER OF NAME. THE C OMPANY TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE. THERE IS NOTHING ON RECORD WHICH COUL D SUGGEST THAT THE SHARES WERE NEVER TRANSFERRED IN THE NAME OF THE ASSESSEE. THERE IS A LSO NOTHING ON RECORD TO SUGGEST THAT THE SHARES WERE NEVER WITH THE ASSESSEE. ON THE CONTRARY, THE SHARES WERE THEREAFTER TRANSFERRED TO DEMAT ACCOUNT. THE DEMAT ACCOUNT WAS IN THE NAME OF THE A SSESSEE, FROM WHERE THE SHARES WERE SOLD. IN OUR UNDERSTANDING OF THE FACTS, IF THE SHARES WE RE OF SOME FICTITIOUS COMPANY WHICH WAS NOT LISTED IN THE BOMBAY STOCK EXCHANGE/NATIONAL STOCK EXCHANGE, THE SHARES COULD NEVER HAVE BEEN TRANSFERRED TO DEMAT ACCOUNT. SHRI MUKESH CHOK SI MAY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS BUT SO FAR AS THE FACTS OF THE CASE IN HAND SUGGEST THAT THE TRANSACTIONS WERE GENUINE AND THEREFORE, NO ADV ERSE INFERENCE SHOULD BE DRAWN. 18. IN THE LIGHT OF THE DECISIONS OF THE HONBLE S UPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA) AND CONSIDERING THE FACTS IN TOT ALITY, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ON THE BASIS OF PRESUMPTION AND SURMISES IN RESPECT OF PENNY STOCK BY DISREGARDING THE DIRECT EVIDENCES ON RECORD RELATING TO THE SALE/PUR CHASE TRANSACTIONS IN SHARES SUPPORTED BY BROKERS CONTRACT NOTES, CONFIRMATION OF RECEIPT OF SALE PROCEEDS THROUGH REGULAR BANKING CHANNELS AND THE DEMAT ACCOUNT. 19. ACCORDINGLY, WE DIRECT THE A.O. TO TREAT THE GA INS ARISING OUT OF THE SALE OF SHARES UNDER THE HEAD CAPITAL GAINS- SHORT TERM OR LONG TERM AS THE CASE MAY BE. THE OTHER GRIEVANCE OF THE ASSESSEE BECOMES INFRUCTUOUS. 27. THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SU PPORT OF THE CLAIM OF THE ASSESSEE THAT IT EARNED LTCG ON TRANSACTIONS OF HIS INVESTMENT IN SH ARES. THE PURCHASE OF SHARES HAD BEEN ACCEPTED BY THE AO IN THE YEAR OF ITS ACQUISITION AND THEREAFTER UNTIL THE SAME WERE SOLD. THE OFF MARKET TRANSACTION FOR PURCHASE OF SHARES IS NO T ILLEGAL AS WAS HELD BY THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DOLA RRAI HEMANI VS. ITO IN ITA NO. 19/KOL/2014 DATED 2.12.2016 AND THE DECISION BY HONBLE CALCUTTA HIGH COURT IN PCIT VS. BLB CABLES & CONDUCTORS PVT. LTD. IN ITAT NO. 78 OF 2017 DATED 1 9.06.2018 WHEREIN ALL THE TRANSACTIONS TOOK 17 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 PLACE OFF MARKET AND THE LOSS ON COMMODITY EXCHANGE WAS ALLOWED IN FAVOUR OF ASSESSEE. THE TRANSACTIONS WERE ALL THROUGH ACCOUNT PAYEE CHEQUES AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE PURCHASE OF SHARES AND THE SALE OF SHARES WERE ALSO REFLECTED IN DEMAT ACCOUNT STATEMENTS. THE SALE OF SHARES SUFFERED STT, BROKERAGE ETC. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE HELD THAT THE TRANSACTIONS WERE BOGUS. THE FOLL OWING JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT:- (I) THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME VS M/S. BLB CABLES AND CONDUCTORS ; ITAT NO.78 OF 2017, GA NO.747 OF 2017; DT. 19 JUN E, 2018, HAD UPHELD THE ORDER OF THE TRIBUNAL BY OBSERVING A S FOLLOWS:- '4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRST BOOK IS RUNNING I N PAGES NO. 1 TO 88 AND 2ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE US THE LD. AR SUBM ITTED THAT THE ORDER OF THE AO IS SILENT ABOUT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF MARKET TRANSACTIONS SH OULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANSACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF B OTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAYEE CHEQUES. THE LD. AR HAS ALSO SUBMITTE D THE IT RETURN, LEDGER COPY, LETTER TO AO LAND PAN OF THE BROKER IN SUPPORT OF HIS CLAIM WHIC H IS PLACED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTR ACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAPER BOOK. THE PURCHASE AND SALES REGIST ERS WERE ALSO SUBMITTED IN THE FORM OF THE PAPER BOOK WHICH IS PLACED AT PAGES 76 TO 87. THE B OARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIONS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES . 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS AND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. THE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WH ERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. II) 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 PRODUCED BY T HE 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 AO THAT THE ASSESSEE G ENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACTIONS SO AS TO REDUCE THE QUANTU M OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPRESSED BY THE LD AO BUT HE MISERABLY F AILED TO SUBSTANTIATE THAT. THE HIGH COURT HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING P RICE AND THEREFORE THE SUSPICION OF THE AO WAS MISPLACED AND NOT SUBSTANTIATED. III)CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITE D [2013] 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 POSSIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. IT WAS FURTHER HELD THAT I N ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIBLE, TO HOLD THAT THE TRANS ACTIONS OF BUYING OR SELLING OF SHARES WERE COLOURABLE TRANSACTIONS OR WERE RESORTED TO WITH UL TERIOR MOTIVE. IV) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CA L 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 ACTION. HOWE VER THE TRANSACTIONS WERE AS PER NORMS AND 18 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 SUFFERED STT, BROKERAGE, SERVICE TAX, AND CESS. THE RE IS NO IOTA OF EVIDENCE OVER THE TRANSACTIONS AS IT WERE REFLECTED IN DEMAT ACCOUNT. THE APPEAL F ILED BY THE REVENUE WAS DISMISSED. V) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE D ECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE WHERE T HE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS TRANSACTIONS IN ALLEGED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE AO DISALLOWED THE LOSS ON TRADING OF PENNY STOCK ON TH E BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WAS ALSO FOUND THAT THE AO DID NOT DOUB T THE GENUINENESS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE TRIBUNAL HELD THAT T HE AOS CONCLUSIONS ARE MERELY BASED ON THE INFORMATION RECEIVED BY HIM. THE APPEAL FILED BY TH E REVENUE WAS DISMISSED. VI) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE DECISION OF THIS TRIBUNAL WHEREIN THE LOSS SUFFERED BY THE ASSESSEE WAS ALLOWED SINCE THE AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST THAT THE SALE OF SHARES BY THE ASSESSEE WERE NOT GENUINE. VII) 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 AO, BASED ON THE I NFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WERE BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WAS FOUND THAT THE CHAIN OF TRA NSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTE D BY EVIDENCE. IT WAS ALSO FOUND THAT THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DE MAT ACCOUNTS AND PRODUCED DOCUMENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 28. WE NOTE THAT SINCE THE PURCHASE AND SALE TRA NSACTIONS ARE SUPPORTED AND EVIDENCED BY BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND BANK ST ATEMENTS ETC., AND WHEN THE TRANSACTIONS OF PURCHASE OF SHARES WERE ACCEPTED BY THE LD AO IN EA RLIER YEARS, THE SAME COULD NOT BE TREATED AS BOGUS SIMPLY ON THE BASIS OF SOME REPORTS OF THE IN VESTIGATION WING AND/OR THE ORDERS OF SEBI AND/OR THE STATEMENTS OF THIRD PARTIES. IN SUPPORT OF THE AFORESAID SUBMISSIONS, THE LD AR, IN ADDITION TO THE AFORESAID JUDGEMENTS, HAS REFERRED TO AND RELIED ON THE FOLLOWING CASES:- (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) 19 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 (XVII) MEENA DEVI GUPTA & OTHERS VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) (XVIII) MANISH KUMAR BAID ITA 1236/KOL/2017 (KOLKATA ITAT) (XIX) MAHENDRA KUMAR BAID ITA 1237/KOL/2017 (KOLKATA ITAT ) 29. THE LD AR ALSO BROUGHT TO OUR NOTICE THAT ONCE THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNANAND AG NIHOTRI VS. THE STATE OF MADHYA PRADESH [1977] 1 SCC 816 (S C) . IN THIS CASE THE HONBLE APEX COURT HELD THAT THE BURDEN OF SHOWING THAT A PARTICULAR T RANSACTION IS BENAMI AND THE APPELLANT OWNER IS NOT THE REAL OWNER ALWAYS RESTS ON THE PERSON AS SERTING IT TO BE SO AND THE BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING EVIDENCE OF A DEFIN ITE CHARACTER WHICH WOULD DIRECTLY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGL Y AND REASONABLY RAISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT I S NOT ENOUGH 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. THE LD AR SU BMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGMENTS WHILE DECIDING THE ISSUE RE LATING TO EXEMPTION CLAIMED BY THE ASSESSEE ON LTCG ON ALLEGED PENNY SOCKS. (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) 30. MOREOVER IT WAS SUBMITTED BEFORE US BY LD AR TH AT THE AO WAS NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND ALLEGING PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATION IN ORDERS OF SEBI AND/OR THE ENQUIRY REPORT OF THE INVESTIGATION WING TO THE EFF ECT THAT THE ASSESSEE, THE COMPANIES DEALT IN AND/OR HIS BROKER WAS A PARTY TO THE PRICE RIGGING OR MANIPULATION OF PRICE IN CSE. THE LD AR REFERRED TO THE FOLLOWING JUDGMENTS IN SUPPORT OF T HIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE ACT AND TO ASSESS THE SALE PROCEEDS O F SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE 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) 31. WE NOTE THAT THE LD. D.R. HAD HEAVILY RELIED UP ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX AP PEAL NO. 18 OF 2017. WE NOTE THAT IN THE CASE RELIED UPON BY THE LD. D.R, WE FIND THAT THE F ACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN HAND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MAD E BY THE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPANIES AND THE PURCHASE OF SHARES OF T HE COMPANIES WAS DONE THROUGH THE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDENTALLY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY THE ASSESSEE WAS SHOWN AS CAPITAL GAINS WHICH WAS N OT ACCEPTED BY THE A.O. AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE ASSESSEE BY TREAT ING THE SALES OF THE SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF TRADE. THUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE O F SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 32. IT IS CLEAR FROM THE ABOVE THAT THE FACTS OF T HE CASE OF THE ASSESSEE ARE IDENTICAL WITH THE FACTS IN THE CASES WHEREIN THE CO-ORDINATE BENCH O F THE TRIBUNAL HAS DELETED THE ADDITION AND ALLOWED THE CLAIM OF LTCG ON SALE OF SHARES OF M/S KAFL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, AND SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO NOT TO TREAT THE LONG TERM CAPITAL AS BOGUS AND DELETE THE CONSEQUEN TIAL ADDITION. 20 ITA NO. 2243/KOL/2017 PAWAN KUMAR TODI, AY 2014-15 33. THE NEXT ISSUE IN CONFIRMING THE ADDITION OF RS .1,83,020/- AS UNEXPLAINED EXPENDITURE TOWARDS COMMISSION CHARGES OF SALE OF SUCH SHARES B Y THE OPERATOR. WE HAVE ALREADY HELD THAT THE TRANSACTIONS RELATING TO LTCG WERE GENUINE AND NOT THE ACCOMMODATION ENTRIES AS ALLEGED BY THE AO. CONSEQUENTLY THE ADDITION OF RS.1,83,020 /- IS HEREBY DIRECTED TO BE DELETED. WE ACCORDINGLY HOLD THAT THE ISSUE IS ALLOWED IN FAVOU R OF THE ASSESSEE. 24. IN THE LIGHT OF THE DOCUMENTS FILED BY THE ASSE SSEE BEFORE THE AO/LD. CIT(A) AND BEFORE US, WHICH COULD NOT BE CONTROVERTED BY ANY M ATERIAL BY AO, SO RESPECTFULLY FOLLOWING THE RATIO LAID BY THE HONBLE JURISDICTIO NAL HIGH COURT AND OTHER HIGH COURTS AND THE RATIO LAID BY THE HONBLE SUPREME COURT AND THIS TRIBUNAL, WE ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM CAPITAL GAI N IN RESPECT OF SALE OF SHARES OF M/S. KAFL AND DIRECT DELETION OF ADDITION OF RS.76,34,23 3/-. GROUND OF APPEAL OF ASSESSEE CHALLENGING THE ADDITION MADE ON THIS ISSUE IS ALLO WED. 25. GROUND NO. 5 IS GENERAL IN NATURE, THEREFORE, I T IS DISMISSED. 26. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12/02/201 9 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12TH FEBRUARY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHRI PAWAN KUMAR TODI, 1, R. N. MUKHER JEE ROAD, MARTIN BURN BUILDING, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-35(1), KOLKATA. 3 4 5 CIT(A)-10, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR