Navneet Agarwal, Legal Heir of Late Kiran Agarwal, Kolkata V. ITO, Ward - 35(3), Kolkata , Kolkata

ITA 2281/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5844 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 07-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Unexplained cash credit; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Question of law; Wrong claim; Accommodation entries; Scheme of amalgamation; Capital receipt; Onus to prove
• Section: 143(3); 260A; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & HONB LE SHRI S.S. VISWANETHRA RAVI, JM ] I.T.A NO. 2281/KOL/20 17 ASSESSMENT YEAR : 2014-1 5 NAVNEET AGARWAL, LEGAL HEIR OF LATE -VS- ITO , WARD-35(3), KOLKATA KIRAN AGARWAL [PAN: ADGPA 9851 N ] (APPELLANT) (RESPON DENT) FOR THE APPELLANT : SHRI SUBASH AGARWAL, ADVO CATE FOR THE REVENUE : SHRI SAURABH KUMAR, ADDL. CIT SR. DR DATE OF HEARING : 24.04.2018 DATE OF PRONOUNCEMENT : 20.07.2018 ORDER PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE, DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 10, KOLKATA P ASSED U/S.250 OF THE INCOME TAX ACT, 1961(THE ACT). 2.THE ASSESSEE HAD FILED RETURN OF INCOME ON 16.07. 2014 DISCLOSING TOTAL INCOME OF RS. 4,63,515/-. THIS WAS PROCESSED U/S. 143(1) O F THE ACT AND SUBSEQUENTLY SELECTED FOR SCRUTINY. THE ASSESSEE HAD CLAIMED EXE MPTION ON INCOME FROM LONG TERM CAPITAL GAINS OF RS. 2,18,13,073/-. THIS GAIN WAS EARNED FROM SALE OF FIFTY THOUSAND SHARES OF M/S CRESSENDA SOLUTION LTD., DUR ING THE FINANCIAL YEAR 2013- 2 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 2 14 RELEVANT TO ASSESSMENT YEAR 2014-15. THE ASSESSI NG OFFICER IN HIS ORDER PASSED U/S. 143(3) OF THE ACT REFERRED TO THE INVES TIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, KO LKATA AND AT PARA. 4, HE STATED AS FOLLOWS: 4. BEFORE GOING INTO THE DETAILS OF THIS PARTICULA R CASE, IT IS PERTINENT TO DISCUSS THE BACKGROUND OF THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, KOLKATA. FOR THIS RELEVANT PORTIONS OF THE INVESTIGATION REPORTS ARE REPRODUCED HEREIN: IN THE WHOLE PROJECT TOTAL 84 BSE LISTED PENNY STOC KS HAVE BEEN IDENTIFIED AND WORKED UPON. AFTER THAT, NUMBER OF SEARCH AND SURVEYS WERE CONDUCTED IN THE OFFICE PREMISES OF MORE THAN 32 SHARES BROKING ENTITIES, WHICH ACCE PTED THAT THEY WERE ACTIVELY INVOLVED IN THE BOGUS LTCS/STCL SCAM. SURVEYS WERE ALSO CONDUCTED IN THE OFFICE PREMISES OF MANY ACCOMMODATION ENTRY PROVIDERS AND THEIR STATEMENTS RECORDED. ALL HAVE ACCEPTED THEIR ROLE IN THE SCAM. BENEFICIARIES OF MORE THAN RS. 38 THOUSAND CRORE HA VE BEEN IDENTIFIED AND SEGREGATED DGIT(INV.) WISE. TOTAL NUMBER OF MORE THAN 60 THOUS AND PAN NUMBERS OF THE BENEFICIARIES HAVE BEEN IDENTIFIED, WHICH IS BEING REPORTED TO ASSESSMENT WINGS THROUGH THE DGITS. THIS REPORT ALSO COVERS MORE THAN 5000 SHELL/PAPER COMPANIES WHICH ARE BETTER KNOWN AS JAMAKHARCHI COMPANIES, WHICH ARE INVOLVED IN PRO VIDING BOGUS ACCOMMODATION OF VARIOUS KINDS. STATEMENTS OF MOST OF THE DIRECTORS WERE RECORDED ON OATH AND PART OF THE SAID REPORT. LATER, HE STATED THAT M/S CRESSENDA SOLUTION LTD. I S ONE OF THE 84 SCRIPS WHICH WERE IDENTIFIED BY THE DIRECTORATE OF INVESTIGATIO N, AS INVOLVED IN THE SCHEME OF BOGUS LTCG/STCG AND THAT THE NAME AND PAN NO. OF TH E ASSESSEE IS PART OF LIST OF BENEFICIARIES IDENTIFIED BY THE DIRECTORATE. THE REAFTER, HE DISCUSSED THE MODUS OPERANDI OF THESE COMPANIES AND HELD THAT T HE TOTAL SALE CONSIDERATION EARNED BY THE ASSESSEE IS TO BE ADDED AS UNEXPLAINE D CASH CREDIT AS THESE ARE SALE OF BOGUS SHARES. 3. THE MODUS OPERANDI LISTED OUT BY THE AO IS SUMMA RIZED AS FOLLOWS: 3 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 3 I. THE INITIAL ALLOTMENT OF SHARES TO BENEFICIARIES IS GENERALLY DONE THROUGH PREFERENTIAL ALLOTMENT. II. THE MARKET PRICE OF SHARES OF THESE COMPANIES RISE TO VERY HIGH LEVEL WITHIN A SPAN OF ONE YEAR. III. THE TRADING VOLUME OF SHARES DURING THE PERIOD, IN WHICH MANIPULATIONS ARE DONE TO RAISE THE MARKET PRICE, IS EXTREMELY TH IN. IV. MOST OF THE PURPORTED INVESTORS ARE RETURNED THEIR INITIAL INVESTMENT AMOUNT IN CASH. ONLY SMALL AMOUNT IS RETAINED BY TH E OPERATOR AS SECURITY. THUS, AN ENQUIRY WOULD REVEAL THAT MOST O F THE CAPITAL RECEIPTS THROUGH PREFERENTIAL ALLOTMENT OR OTHER MEANS WOULD HAVE FOUND THEIR WAY OUT OF SYSTEM AS CASH. V. MOST OF THESE COMPANIES HAVE NO BUSINESS AT ALL. FE W OF THE COMPANIES WHICH HAVE SOME BUSINESS DO NOT HAVE THE CREDENTIAL S TO JUSTIFY THE SHARP RISE IN MARKET PRICE OF THEIR SHARES. VI THE SHARP RISE IN MARKET PRICE OF THE SHARES OF THESE ENTITIES IS NOT SUPPORTED BYFUNDAMENTALS OF THE COMPANY OR ANY OTHE R GENUINE FACTORS. VI. AN ANALYSIS IN RESPECT OF PERSONS INVOLVED IN TRANS ACTIONS APPARENTLY CARRIED OUT IN ORDER TO JACK UP THE SHARE PRICES HA S BEEN DONE IN RESPECT OF 84 COMPANIES. IT HAS BEEN NOTED THAT MANY COMMON PERSONS/ENTITIES WERE INVOLVED IN TRADING IN MORE THAN 1 LTCG COMPAN IES DURING THE 4 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 4 PERIOD WHEN THE SHARES WERE MADE TO RISE WHICH IMPL IES THAT THEY HAD CONTRIBUTED TO SUCH PRICE RISE. VII. NAMES OF MOST OF THE LTCG COMPANIES ARE CHANGED DUR ING THE PERIOD OF THE SCAM. VIII. MOST OF THE COMPANIES SPLIT THE FACE VALUE OF SHARE S [THIS IS PROBABLY DONE TO AVOID THE EYES OF MARKET ANALYSTS]. IX. THE VOLUME OF TRADE JUMPS MANIFOLD IMMEDIATELY WHEN THE MARKET PRICES OF SHARES REACH AT OPTIMUM LEVEL SO AS TO RE SULT IN LTCG ASSURED TO THE BENEFICIARIES. THIS MAXIMUM IS REACHED AROUN D THE TIME WHEN THE INITIAL ALLOTTEES HAVE HELD THE SHARES FOR ONE YEAR OR LITTLE MORE AND THUS, THEIR GAIN ON SALE OF SUCH SHARES WOULD BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX. X. AN ANALYSIS OF SHARE BUYERS OF SOME OF LTCG COMPANI ES WAS DONE TO SEE IF THERE WERE COMMON PERSONS/ENTITIES INVOLVED IN BUYING THE BOGUS INFLATED SHARES. IT WAS NOTED THAT THERE WERE MANY COMMON BUYERS [WHICH WERE PAPER COMPANIES]. XI. THE PRICES OF THE SHARES FALL VERY SHARPLY AFTER TH E SHARES OF LTCG BENEFICIARIES HAVE BEEN OFF LOADED THROUGH THE PRE- ARRANGED TRANSACTIONS ON THE STOCK EXCHANGE FLOOR/PORTAL TO THE SHORT TER M LOSS SEEKERS OR DUMMY PAPER ENTITIES. 5 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 5 XII. THE SHARES OF THESE COMPANIES ARE NOT AVAILABLE FOR BUY/SELL TO ANY PERSON OUTSIDE THE SYNDICATE. THIS IS GENERALLY ENS URED BY WAY OF SYNCHRONIZED TRADING BY THE OPERATORS AMONGST THEMS ELVES AND/OR BY UTILIZING THE MECHANISM OF UPPER/LOWER CIRCUIT OF T HE EXCHANGE. THE ASSESSEE SUBMITTED VARIOUS DOCUMENTS IN SUPPORT OF HER CLAIM THAT THE TRANSACTIONS IN QUESTION ARE GENUINE. SHE ALSO RELI ED ON CERTAIN CASE LAWS. THE AO DID NOT ACCEPT THE EVIDENCE FILED BY THE ASSESSE EIN SUPPORT OF HER CLAIM AND BY RELYING ON THE REPORT OF THE INVESTIGATING WING REJECTEDTHE CLAIM OF THE ASSESSEE THAT SHE HAD EARNED CAPITAL GAINS ON THE GENUINE SALE OF SHARES. HE HELD THAT THE RECEIPT IS AN UNEXPLAINED CASH CREDIT AND MADE AN ADDITION U/S. 68 OF THE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MATTER ON APPEAL. 4. THE FIRST APPELLATE AUTHORITY HAD GIVEN HIS DECI SION FROM PAGE 41 OF HIS ORDER. HIS FINDINGS ARE SUMMARIZED AS FOLLOWS: A) THE AO HAD PLACED ON RECORD THE ENTIRE GAMUT OF FIN DING AND THERE IS NO FURTHER REQUIREMENT FOR ELABORATION. B) THERE IS DIRECT EVIDENCE TO CLEARLY INDICATE THAT T HE ENTIRE TRANSACTION UNDERTAKEN BY THE ASSESSEEWAS MERELY AN ACCOMMODATI ON TAKEN FOR THE PURPOSE OF BOGUS LONGTERM CAPITAL GAINS TO CLAIM EX EMPT INCOME. THE AUTHORITIES SUCH AS SEBI HAVE AFTER INVESTIGATING S UCH ABNORMAL PRICE INCREASE OF CERTAIN STOCKS, SUSPENDED CERTAIN SCRIP S. 6 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 6 C) THE SUBMISSIONS OF THE ASSESSEE POINTED OUT ELABORA TE DOCUMENTATION SUCH AS: I) APPLICATION OF SHARES. II) ALLOTMENT OF SHARES. III) SHARE CERTIFICATES IV) PAYMENT BY CHEQUES V) FILINGS BEFORE REGISTRAR OF COMPANIES. VI) PROOF OF AMALAGAMATION OF COMPANIES. VII) COPIES OF BANK STATEMENT, VIII) BANK CONTRACT NOTES. IX) DELIVERY INSTRUCTION TO THE BROKER ETC. D) THE ELABORATE PAPER BOOK IS FILED TO STRENGTHEN THE MATTER RELEVANT TO THE BOGUS CLAIM OF LTCG,AND THIS IS CLEARLY BEEN SCHEME D AND PRE-PLANNED WITH MALAFIDE INTENTION. THEREFORE, ALL THESE DOCUM ENTS ARE NOT EVIDENCE. E) THE TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOU S. THERE ARE GRAVE DOUBTS IN THE STORY PROPOUNDED BY THE ASSESSEE BEFO RE THE AUTHORITIES BELOW. BANKING DOCUMENTS ARE MERE SELF-SERVING RECI TALS. 5. THEREAFTER,HE REFERRED TO A NUMBER OF JUDGMENTS RELATING TO HUMAN BEHAVIOR AND PREPONDERANCE OF PROBABILITIES AND UPHELD THE A DDITION MADE BY THE ASSESSING OFFICER BY RELYING ON WHAT HE CALLS RULES OF SUSPICIOUS TRANSACTIONS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 7 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS RAISED BY THE ASSESSEEBEFORE THE LOWER AUTHORITIES. THE SUM & SU BSTANCE OF HIS SUBMISSIONSIS THAT THE ASSESSEE HAS BEEN ALLOTTED FIFTY THOUSAND EQUITY SHARES OF SMART CHAMP IT & INFRA LTD, ON AN APPLICATION MADE BY THE ASSE SSEE, AND THE AMOUNT IN QUESTION WAS PAID THROUGH BANKING CHANNELS AND THE NAME OF THE ASSESSEE WAS REFLECTED BY THE COMPANY SMART CHAMP IT & INFRA LT D. IN ITS RETURN FILED BEFORE THE REGISTRAR OF COMPANIES AS A SHAREHOLDER IN THE YEAR 2011-12 AND THAT THE ASSESSEE HAD LODGED THE SHARES WITH A DEPOSITAR Y, WITH ADEMAT REQUEST ON 11.02.2012. FURTHER, THE HONBLE BOMBAY HIGH COURT HADAPPROVED THE SCHEME OF AMALGAMATION OF SMART CHAMP IT & INFRA LTD. WI TH A COMPANY M/S.CRESSANDA SOLUTION LTD.. THAT IN ACCORDANCE W ITH THE SCHEME OF AMALGAMATION THE ASSESSEE WAS ALLOTTED FIFTY THOUSA ND EQUITY SHARES OF M/S.CRESSANDA SOLUTION LTD. AND THAT THE DOCUMENTS FILEDREFLECTED THE TRANSACTION STATEMENT FOR THE PERIOD 01.11.2011 TO 31.12.2013. IT WAS FURTHER SUBMITTED THAT THESE SHARES WERE SOLD THROUGH THE BROKERSKP STOCK BROKING PVT. LTD.WHO IS A SEBI REGISTERED BROKER AND ALL THE EVIDENCES IN THI S REGARD WERE FILED. IT WAS PLEADED THAT THE SCRIPTS WERE HELD FOR MORE THAN 50 0 DAYS, WHICH PROVES THE BONAFIDE NATURE OF THE SHAREHOLDINGS AS NO SALE WAS DONE IMMEDIATE LY ON COMPLETION OF 365 DAYS. IT WAS SUBMITTED THAT THE A SSESSEE IS NOT CONNECTED WITH THE PROMOTERS AND HAS NOTHING TO DO WITH THE ALLEGE D RIGGING OF SHARES, IF ANY. RELIANCE WAS PLACED ON NUMBER OF DECISIONS FOR THE PROPOSITION THAT, EVIDENCE CANNOT BE DISCARDED BY APPLYING THEORY OF HUMAN BEH AVIOR ANDTHE THEORY OF PREPONDERANCE OF PROBABILITIES. 7. ON THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS LD. CIT(A), HE SUBMITTED AS FOLLOWS: 8 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 8 A. AS REGARDS THE ALLEGATION IN RESPECT OF ARTIFICIAL RIGGING UP OF THE PRICE OF SHARES, IT IS SUBMITTED THAT THE LD. A.O. DID NOT P ROVIDE ANY DOCUMENTARY EVIDENCE OF A LIVE LINK AND DIRECT RELATION TO SUCH ALLEGED RIGGING OF PRICES WITH THE ASSESSEE. HENCE, NO ADVERSE INFERENCE COUL D BE DRAWN AGAINST THE ASSESSEE IN THIS REGARD. B. THAT THE SALE TRANSACTIONS IN QUESTION HAD TAKEN PL ACE IN THE STOCK EXCHANGE ELECTRONICALLY, THROUGH A REGISTERED BROKER SKP STO CK BROKING PVT. LTD. (NOW RELYBULLS STOCK BROKING PVT. LTD.). ALL SUCH A CTIVITY OF PURCHASE AND SALE ON THE PLATFORM OF THE STOCK EXCHANGE ARE LOGG ED IN, ON REAL TIME BASIS. IT IS NOT POSSIBLE TO SELL / PURCHASE THE SHARES OF ANY COMPANY ON THE STOCK EXCHANGE IN VARIANCE TO THE PREVAILING MARKET PRICE AT ANY POINT OF TIME. HENCE, THE ASSESSEE CANNOT BE, NOR IS SUPPOSED TO B E AWARE OF AND KNOW THE IDENTITY OF THE PERSONS, WHO HAVE SOLD THE SHARES A T THE TIME OF PURCHASE OF THE SHARES BY THE ASSESSEE AND PURCHASER OF THE SHARES AT THE TIME OF SALE OF THE SAID SHARES BY THE ASSESSEE AT THE STOCK EXCHANGE. C. IT IS FURTHER SUBMITTED THAT THE SHARE PRICE IS ALW AYS DETERMINED BY THE MARKET MECHANISM AT ANY GIVEN POINT OF TIME BECAUSE THERE IS A ROBUST SYSTEM OF THE STOCK EXCHANGE WHICH IS TRANSPARENT, OPEN AND EQUITABLE, AND THE ASSESSEE HAS ALSO SOLD THE SHARES ON SUCH A PLA TFORM AT A PRICE WHICH WAS A REFLECTION OF THE MARKET PRICE DERIVED THROUG H THE INTERPLAY OF THE FORCES OF MARKET DEMAND AND SUPPLY. D. IN THE INSTANT CASE, THE ASSESSEE IS NOT CONNECTED WITH CRESSANDA SOLUTIONS LTD. OR THE AMALGAMATED COMPANY OR THEIR PROMOTERS , DIRECTORS OR ANY 9 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 9 OTHER PERSON WHO EXERCISES ANY CONTROL OVER CRESSSA NDA SOLUTIONS LTD OR THE AMALGAMATED COMPANY OR ANY SO-CALLED ENTRY OPER ATOR. AS A MATTER OF FACT, THE ASSESSEE HAS NEVER INDULGED IN ANY SUCH Q UESTIONABLE ACTIVITY NOR HAS BEEN PART OF ANY MODUS OPERANDI AS STATED BY TH E A.O. E. THE ASSESSEE HAS TRANSACTED IN THE SHARES OF CRESSA ND SOLUTIONS LTD. / AMALGAMATED COMPANY IN THE NORMAL COURSE OF INVESTM ENT LIKE MILLIONS OF INVESTORS DO IN THE STOCK MARKET. THEREFORE, THE QU ESTION OF ALLEGED CONVERSION OF UNACCOUNTED MONEY IN THE FORM OF ALLE GED BOGUS LONG TERM CAPITAL GAIN WITH THE HELP OF MANY ALLEGED CONNECTE D PARTIES THROUGH PRICE RIGGING AND PRICE MANIPULATIONS DOES NOT ARISE. F. THE A.O. HAS DRAWN AN ADVERSE INFERENCE IN REGARD T O PURCHASES THROUGH PRIVATE PLACEMENT OF SHARES. IT IS COMMON KNOWLEDGE THAT THE MANAGEMENT OF VARIOUS COMPANIES COMES OUT WITH PRIVATE PLACEME NT OF EQUITY SHARES, OF WHICH INFORMATION IS DISSEMINATED THROUGH MARKET GR APEVINE. APPLICATIONS ARE MADE ON THAT BASIS AND ALLOTMENT IS OBTAINED. T HERE ARE ALSO MARKET RUMOURS THAT THE SHARES IN QUESTION WILL SEE A PHEN OMENAL RISE IN THE NEAR FUTURE. THE ASSESSEE MERELY ACTED ON THE BASIS OF S UCH MARKET INFORMATION AND HAPPENED TO GET PHENOMENAL GAIN. IT COULD HAVE BEEN OTHERWISE AS WELL. THE RAGS TO RICHES STORY IN THE STOCK MARKET ARE A GALORE. BUT THE SCOPE OF DOWNSIDE IN THIS PARTICULAR SCRIP WAS VIRT UALLY NIL AS THE ASSESSEE WAS GETTING THE SHARES AT THE ROCK BOTTOM PRICE. SO , SHE TOOK A PRUDENT BUT CALCULATED RISK. 10 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 10 G. IT HAS BEEN SUBMITTED THAT THE ALLEGED CIRCUMSTANCE S, CIRCUMSTANTIAL EVIDENCE AND MATERIAL HAS LED THE A.O. TO BELIEVE T HAT THE REAL IS NOT THE APPARENT. IN THE ABSENCE OF ANY LINK BETWEEN THE AS SESSEE AND THE ALLEGED ADMISSIONS OF THE DIRECTORS AND BROKERS, HUMAN PROB ABILITY IS BEING USED AS A VAGUE AND CONVENIENT MEDIUM FOR THE DEPARTMENTS CONJECTURES. BLAMING THE ASSESSEE BY VAGUE OBSERVATIONS AND DRAWING AN A DVERSE INFERENCE WITHOUT ANY ADMISSIBLE EVIDENCE ON RECORD, IS BAD I N LAW, ILLEGAL, INVALID AND VOID-AB-INITIO. H. IT IS FURTHER SUBMITTED THAT INVESTMENT IN A COMPAN Y WITH WEAK FUNDAMENTALS CAN BE FOR SEVERAL REASONS SUCH AS PRO FESSIONAL ADVICE, REASONABLE PRICE PER SHARE, A FORESEEABLE TURNAROUN D, PAST PRICING AND VOLUME PATTERNS AND JUST MARKET RUMOUR ABOUT PHENOM ENAL MOVEMENT IN SHARE PRICE OF A PARTICULAR SCRIP. MOREOVER, THE ME RE FACT THAT THE SHARES WERE SOLD AT A HIGH PRICE CANNOT BE TERMED AS CONCL USIVE PROOF OR A GROUND FOR AN ALLEGATION THAT THE ASSESSEE HAS CONVERTED S OME UNACCOUNTED MONEY THROUGH ACCOMMODATION ENTRIES AS ALLEGED BY THE A.O . IN THE ASSESSMENT ORDER. I. THE LD. A.O. IN THE ASSESSMENT ORDER RELIED UPON TH E PURPORTED STATEMENTS OF VARIOUS ALLEGED OPERATORS ON THE BASIS OF WHICH THE LD. A.O. HAD DRAWN ADVERSE INFERENCE IN THE INSTANT CASE. IT IS WORTHY TO NOTE THAT NOWHERE ANY OF THEM HAS EVER NAMED THE ASSESSEE IN THE ALLEGED MANIPULATION. FURTHER, THE LD. A.O. DID NOT PROVIDE ANY OPPORTUNITY TO CRO SS EXAMINE THE SAID PERSONS. IT IS A WELL-SETTLED PRINCIPLE OF LAW THAT NO CREDENCE CAN BE GIVEN 11 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 11 TO THE STATEMENT/REPORT OF ANY PERSON GIVEN BEHIND THE BACK OF THE ASSESSEE UNLESS ANY OPPORTUNITY TO CROSS EXAMINE HIM IS AFFO RDED TO THE ASSESSEE. J. THAT THE ASSESSEE CONDUCTED ALL THE TRANSACTIONS TH ROUGH A RECOGNIZED SHARE BROKER AND RECEIVED AND MADE THE PAYMENTS THROUGH A CCOUNT PAYEE CHEQUES. IT IS SUBMITTED THAT THE GENUINE TRANSACTI ONS CANNOT BE AND SHOULD NOT BE TREATED AS INGENUINE MERELY ON AN ARBITRARY VIEW OF SUSPICION. K. THE A.O.S CONTENTION THAT THE COMPANY IN QUESTION HAD INSIGNIFICANT BUSINESS OPERATION, WHICH FACT DOES NOT SUPPORT THE UNPRECEDENTED RISE IN ITS PRICE IS ALSO OF NO CONSEQUENCE. IT IS A WELL-K NOWN FACT IN THE STOCK MARKET THAT SHARE PRICE MOVEMENT HAS VERY OFTEN, NO CORRELATION WITH THE FUNDAMENTALS OF THE COMPANY. THE PRICE OF ANY COMMO DITY INCLUDING SHARES IS DETERMINED BY THE MARKET FORCES OF DEMAND AND SUPPLY OF THE MARKET PLAYERS AND NOT BY THEIR INTRINSIC WORTH. L. THE ASSESSEE CATEGORICALLY SUBMITS THAT THE ASSESSE EBONAFIDELY PURCHASED THE SHARES IN PRIVATE PLACEMENT IN ANTICIPATION OF SUBSTANTIAL GAIN AND SOLD THE SHARES IN THE ONLINE SYSTEM, WHEN SUBSTANTIAL G AINS MATERIALISED. IT IS SUBMITTED THAT JUST BECAUSE THE ASSESSEE IS ABLE TO DRAW BENEFIT OUT OF THE RIGGING OF PRICES DONE BY OTHERS IN THE TRANSACTION S BONAFIDELY DONE IN THE FULLY LEGALISED SYSTEM WITH NOT A SHRED OF EVIDENCE ON RECORD TO PROVE THE COMPLICITY OF THE ASSESSEE IN THE ALLEGED CRIME, IT IS NOT POSSIBLE TO DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. 12 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 12 M. THE A.O. HAS ALSO, NOWHERE IN THE ASSESSMENT ORDER REFERRED TO ANY MATERIAL WHICH CAN PROVE THE COMPLICITY OF ASSESSEE IN THE ALLEGED ACCOMMODATION ENTRY OPERATION. IF THE ASSESSEE HAS TAKEN ADVANTAGE OF THE PRICE RISE IN AN OPEN MANNER THROUGH THE TRANSACTIO N CONDUCTED IN THE OFFICIAL ONLINE SYSTEM, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. 8. HE SUBMITTED THAT THE OVERWHELMING DOCUMENTARY AND CIRCUMSTANTIAL EVIDENCE HAS TO BE CONSIDERED AND NOT MERE SUSPICIO N AND PREPONDERANCE OF PROBABILITIES. HE RELIED ON A NUMBER OF CASE LAWS, WHICH WE WOULD REFER TO, AS AND WHEN NECESSARY. 9. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND REITERATED THE FINDINGS MADE THEREIN AND SUBMIT TED THAT THE SAME BE UPHELD. HE VEHEMENTLY ARGUED THAT MERELY BECAUSE THE ASSESS EE HAS PRODUCED ALL THE EVIDENCES REQUIRED TO PROVE HIS CLAIM, THE SAME CAN NOT BE ACCEPTED AS THESE ARE ORGANIZED AND MANAGED TRANSACTIONS. HE TOOK THIS BE NCH THROUGH THE MODUS OPERANDI MENTIONED BY THE AO AND SUBMITTED THAT IN ALL CASES WHERE THE SHARES OF THESE COMPANIES ARE PURCHASED AND SOLD, ADDITION S HAVE TO BE MADE, IRRESPECTIVE OF THE EVIDENCE PRODUCED AS THERE ARE CASES WHERE MANIPULATION HAS TAKEN PLACE. HE REITERATED EACH AND EVERY OBSERVATI ON AND FINDING OF THE LD. AO AS WELL AS THE LD. CIT(A) AND PRAYED THAT THE SAME BE UPHELD. 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMIS SIONS, PERUSAL OF THE PAPERS ON RECORD AND ORDER OF THE LOWERS AUTHORITIES BELOW, A S WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS. 13 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 13 11. THE ASSESSEE IN THIS CASE HAS STATED THE FOLLOW ING FACTS AND PRODUCED THE FOLLOWING DOCUMENTS AS EVIDENCES: 1. THEASSESSEE HAD MADE AN APPLICATION FOR ALLOTMENT O F 50000 EQUITY SHARES OF SMART CHAMPS IT AND INFRA LTD. AND SHE WAS ALLOTT ED THE SHARE ON 3 RD DECEMBER 2011 (COPY OF APPLICATION FORM, INTIMATION OF ALLOT MENT AND SHARE CERTIFICATE PAPER BOOK AT PAGE 8 TO 10). 2. THE PAYMENT FOR THE ALLOTMENT OF SHARES WAS MADE TH ROUGH AN ACCOUNT PAYEE CHEQUE (COPY OF THE BANK STATEMENT EVIDENCING THE S OURCE OF MONEY AND PAYMENT MADE TO SMART CHAMPS IT & INFRA LTD. FOR SUCH SHA RESALLOTTED IS PLACED IN THE PAPER BOOK AT PAGE NO. 11). 3. ANNUAL RETURN NO. 20B WAS FILED WITH REGISTRAR OF C OMPANIES BY SMART CHAMPS IT & INFRA LTD SHOWING THE ASSESSEES NAME AS SHAR EHOLDER (COPY OF ANNUAL RETURN NO. 20B FILED WITH REGISTRAR OF COMPANIES BY SMART CHAMPS IT & INFRA LTD. IS PLACED IN THE PAPER BOOK AT PAGE NO. 12 TO 18.) 4. THEASSESSEE LODGED THE SAID SHARES WITH THE DEPOSIT ORY M/S. EUREKA STOCK & SHARE BROKING SERVICES LTD. WITH A DEMAT REQUEST ON 11 TH FEBRUARY, 2012. THE SAID SHARES WERE DEMATERIALIZED ON 31 ST MARCH, 2012 (COPY OF DEMAT REQUEST SLIP ALONG WITH THE TRANSACTION STATEMENT IS PLACED IN T HE PAPER BOOK AT PAGE NO. 19 TO 21). 5. ON 24.01.2013, THE HONBLE BOMBAY HIGH COURT APPROV ED THE SCHEME OF AMALGAMATION OF SMART CHAMPS IT AND INFRA LTD. WI TH CRESSANDA SOLUTIONS LTD. IN ACCORDANCE WITH THE SAID SCHEME OF AMALGAM ATION, THE ASSESSEE WAS 14 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 14 ALLOTTED 50000 EQUITY SHARES OF M/S. CRESSANDA SOL UTIONS LTD. THE DEMAT SHARES ARE REFLECTED IN THE TRANSACTION STATEMENT O F THE PERIOD FROM 1 ST NOVEMBER 2011 TO 31 ST DECEMBER, 2013 (A COPY OF THE SCHEME OF AMALGAMATI ON ALONGWITH COPY OF ORDER OF THE HONBLE BOMBAY HIGH COURT AND A COPY OF THE LETTER TO THIS EFFECT SUBMITTED BY CRESSANDA SOLUTIONS LTD. TO B OMBAY STOCK EXCHANGE IS PLACED IN THE PAPER BOOK AT PAGE NO 22 TO 43.) 6. THE ASSESSEE SOLD 50000 SHARES COSTING RS. 500000/- THROUGH HER BROKER SKP STOCK BROKING PVT. LTD WHICH WAS A SEBI REGISTERED BROKER AND EARNED A LONG TERM CAPITAL GAIN OF RS. 2,18,13,072/-. (COPY OF TH E BANK STATEMENT, BROKERS CONTRACT NOTE TOGETHER WITH THE DELIVERY INSTRUCTIO NS GIVEN TO THE DP AND BROKERS CONFIRMATION IS ALSO PLACED IN THE PAPER BOOK AT PA GE NO 44 TO 65). 7. COPY OF FORM NO. 10DB ISSUED BY THE BROKER, IN SUPP ORT OF CHARGING OF S.T.T. IN RESPECT OF THE TRANSACTIONS APPEARING IN THE LEDGER IS PLACED IN THE PAPER BOOK AT PAGE NO. 66. 8. THE HOLDING PERIOD OF THE SAID SCRIP IS MORE THAN O NE YEAR (ABOVE 500 DAYS) THROUGH IN ORDER TO GET THE BENEFIT OF CLAIM OF LON G TERM CAPITAL GAIN THE HOLDING PERIOD IS REQUIRED TO BE 365 DAYS. 12.THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERANDI OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FROM INCOME TAX. AL L THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCESPRODUCED BY THE AS SESSEEARE NOT CONTROVERTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THI RD PARTIES IS CONFRONTED TO THE 15 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 15 ASSESSES. NO OPPORTUNITY OF CROSS-EXAMINATION OF PE RSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A REPORT FROM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHE R, IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILITIES, HU MAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THA T HAVE SURFACED DURING INVESTIGATIONS,SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCA M MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITONWAS PART OF THIS SCAM. THE CHAIN OF EVEN TS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN TH E ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THR OUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE P ROVED WITH EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDED ETC. HAS TO ALSO BE BROUGHT ON RECORDIN EACH CASE, WHEN SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS . OPPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF THE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN ADDITION. IF ANY MATERIAL OR EV IDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH M ATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERI FIED BY EVIDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABIL ITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 16 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 16 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOTBE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIE S ONLY ON A REPORT AS THE BASIS FORTHE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPO RT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TI PS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK A ND HAD GAINED IN THE PROCESS AND THAT SHE IS NOT PARTYTO THE SCAM ETC., HAS TO BE CONTROV ERTED BY THE REVENUE WITH EVIDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE TRANSA CTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS S UBMISSION BASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SU GGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORTLAID DOWN BY THE COURTS OF LAW. 15.IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALISA TION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTIN G THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVER T THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED,THE SAME CANNOT BE R EJECTED BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOH AMED SAIT REPORTED IN (1959) 37 ITR 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKA TA VS. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT H ELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARG ED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTAB LISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD T HAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE . IN THIS CONNECTION WE REFER TO THE GENERAL VIEW O N 17 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 17 THE TOPIC OF CONVEYANCE OF IMMOVABLE PROPERTIES. T HE RATES/SALE PRICE ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTR ATION AUTHORITIES OF THE GOVERNMENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. THE COURTS HAVE LAID DOWN THAT JUDIC IAL NOTICE OF SUCH NOTORIOUS FACTS CANNOT BE TAKEN BASED ON GENERALISATIONS. COU RTS OF LAW ARE BOUND TO GO BY EVIDENCE. 16 . WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESP ECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER, WE DO NOT FIND THAT THE ASSE SSING OFFICER AS WELL AS THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGAT ION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING H AS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPER ATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN AB SENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESS EE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASS ESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. TH E ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVAS ION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER SHOULD B E SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTIO N EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPE CIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE H ELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOM E PERSONS MAY HAVE MISUSED THE 18 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 18 SCRIPT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. TH E ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING O FFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLU SIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPP ORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAIN S AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIE TY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUN D OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROS ECUTION OF THE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH IT HAD BEEN CHARGED AND ITS LICE NCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE Y EAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AN D THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATE LY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS CO ULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,---THIS ALSO WAS A PURE CONJECTU RE OR SURMISE ON THE PART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINES S IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDUL GED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN T HE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVI NG EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS OF THE APPELLANT IN ITS BUSINESS WAS 19 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 19 THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF T HE PROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS EITHER PERVERSE OR VITI ATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND M ERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH D ENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT T HAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUA LLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A COLLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. I N FACT, IN THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT E VIDENCES OR MATERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY V ARIOUS WINGS OF THE INCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTAN CES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW.THAT CROSS-EXAMINATION IS ONE PART OF THE PRINC IPLES OFNATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHANNOORKHAN PATHAN VS. THE STATE OF MAHAR ASHTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P.V. CHINTAMANSADASHIVAVAISHAMPAYAN AIR 1961 SC1623, HEL D THAT THE RULES OF NATURAL JUSTICE, REQUIRETHAT A PARTY MUST BE GIVEN THE OPPO RTUNITY TO ADDUCEALL RELEVANT EVIDENCE UPON WHICH HE RELIES, AND FURTHERTHAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BETAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THEOPP ORTUNITY OF CROSS-EXAMINING THE WITNESSESEXAMINED BY THAT PARTY. NOT PROVIDING THE SAIDOPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLATETHE PRINCIPLES OF NATURAL J USTICE. (SEE ALSO: UNION OFINDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEAESTATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORAMCOTTON MILLS LTD. V. GANGADHAR AND ORS. ,AIR 1964 SC708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLEWADIA AND ANR. A IR 2008 SC 876; RACHPAL SINGH ANDORS. V. GURMIT SINGH AND ORS.AIR 2009 SC 2448;BI ECCO LAWRIE AND ANR. V. STATE OF 20 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 20 WEST BENGAL ANDANR. AIR 2010 SC 142; AND STATE OF U TTAR PRADESH V.SAROJ KUMAR SINHA AIR 2010 SC 3131). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRA LEXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALINGWITH A CASE UNDER THE CENTRAL E XCISE ACT, 1944,CONSIDERED A SIMILAR ISSUE I.E. PERMISSION WITH RESPECTTO THE CR OSS-EXAMINATION OF A WITNESS. IN THE SAIDCASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWEDTO CROSS-EXAMINE THE REPRESENTATIVES OF THE FIRMSCONCERN, TO ESTABLISH T HAT THE GOODS IN QUESTION HADBEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, ANDTHAT E XCISE DUTY HAD BEEN PAID. THE COURT HELD THATSUCH A REQUEST COULD NOT BE TURNED DOWN, A S THE DENIALOF THE RIGHT TO CROSS- EXAMINE, WOULD AMOUNT TO ADENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAMPARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNI TYTO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKENBY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT ISAFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIMSELFAGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY ISHELD. THE GOVERNMENT SERVANT SHOULD BE GI VEN ANOPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HISINNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THECHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BYCROSS-EXAMINING THE WITNESSES PRODUCED AGAINST HIM.THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THEPREVIOUS STATEMENTS OF THE WITNESSES PR OPOSED TO BEEXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS AREPROVIDED TO THE GOVER NMENT SERVANT, HE WILL NOT BEABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS-EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2 009SC 1100, THIS COURT HELD:EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DO NE ASREGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IFTHE CONTENTS OF THEM WER E PROVED. THE PRINCIPLESANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACTAS ALSO TH E PRINCIPLES OF NATURAL JUSTICE DEMAND THATTHE MAKER OF THE REPORT SHOULD BE EXAMIN ED, SAVE ANDEXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THEWITNESSES ARE NOT AVAI LABLE FOR CROSS-EXAMINATION ORSIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNEDJUDGMENT P ROCEEDED TO CONSIDER THE ISSUE ON ATECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUS EDTO THE APPELLANT BY SUCH NON- EXAMINATION. IF THE BASICPRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THEREHAS BEEN A GROSS VIOLATION OF THE PRINCIPLES OF NATURALJUSTI CE, THE HIGH COURT SHOULD HAVE EXERCISED ITSJURISDICTION OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOTONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BEMADE AVAILABLE, BUT IT SHOULD B E ONE OF EFFECTIVE CROSS- EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THEPR INCIPLES OF NATURAL JUSTICE. IN THE ABSENCE OF SUCH ANOPPORTUNITY, IT CANNOT BE HELD TH AT THE MATTER HAS BEENDECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATIONIS AN INTE GRAL PART AND PARCEL OF THE PRINCIPLES OFNATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS.COMMISSIONER OF C. EX., KOLKATA-II WHEREIN IT WAS HELD THAT: 21 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 21 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIORC OUNSEL APPEARING FOR THE ASSESSEE, AND MR. K.RADHAKRISHNAN, LEARNED SENIOR C OUNSEL WHO APPEAREDFOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITYTHOUGH THE STATEMENTS OF THOS E WITNESSES WERE MADETHE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICHMAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TOVIOLATION OF PRINCIPLES OF NATURAL JUSTI CE BECAUSE OFWHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BEBORNE IN MIND THAT T HE ORDER OF THE COMMISSIONER WASBASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWOWITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THECORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THISOPPORTUNIT Y TO THE ASSESSEE. IT WOULD BE PERTINENT TONOTE THAT IN THE IMPUGNED ORDER PASSED BY THEADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONEDTHAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE.HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THEAFORESAID PLEA IS NOT EVEN DEALT WITH BY THEADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL I SCONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLYUNTENABLE. THE TRIBUNAL HAS SIM PLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHTOUT ANY MATE RIAL WHICH WOULD NOT BE IN POSSESSION OFTHE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNALTO HAVE G UESS WORK AS TO FOR WHAT PURPOSES THEAPPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS ANDWHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTEDT HE TRUTHFULNESS OF THE STATEMENTS OF THESE TWOWITNESSES AND WANTED TO DISCREDIT THEIR TE STIMONY FORWHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OFCROSS-EXAMINATION. THAT APART, THE ADJUDICATINGAUTHORITY SIMPLY RELIED UPON THE PRICE LIST ASMAINTAINED AT T HE DEPOT TO DETERMINE THE PRICE FOR THEPURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOOD SWERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THEPRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BETHE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, ITW AS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSEAS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTIONEDABOVE. WE MAY ALSO POINT OU T THAT ON AN EARLIEROCCASION WHEN THE MATTER CAME BEFORE THIS COURT INCIVIL APPEAL NO . 2216 OF 2000, ORDER DATED 17-3- 2005[2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMIT TINGTHE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TODECIDE THE APPEAL ON MERITS G IVING ITS REASONS FORACCEPTING OR REJECTING THE SUBMISSIONS. 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THETESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THEREWAS NO MATERIAL WITH THE DEPARTME NT ON THE BASIS OFWHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THEAFORESAI D TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: 22 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 22 A) THE CALCUTTAHIGH COURT INTHE CASE OF BLBCABLES & CONDUCTORS[ITA NO. 78 OF2017] DATED19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WI TH THE SUPPORTIVE EVIDENCE. HERE INTHE CASE THE TRANSACTIONS OF THE COMMODITY EXCHAN GED HAVE NOT ONLYBEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEENDULY SUP PORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THELD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OFCOMMODITY TRANSACTION. THE BROKER WAS EXP ELLED FROM THE COMMODITYEXCHANGE CANNOT BE THE CRITERIA TO HOLD TH E TRANSACTION AS BOGUS. INVIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIE S AND ALLOWTHE COMMON GROUNDS OF ASSESSEES APPEAL. [QUOTED VERBATIM] THIS ISESSENTIALLY A FINDING OF THE TRIBUNAL ON FAC T. NO MATERIAL HAS BEENSHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FINDING THAT OFF M ARKETTRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS ,THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANTMATERIALS. THAT B EING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OFFACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OFINTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EX ERCISE OF OUR JURISDICTIONUNDER SECTION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIALQUE STION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAYPETITION, ACCORDINGL Y, SHALL STAND DISMISSED. B) THE JAIPURITAT IN THE CASEOF VIVEKAGARWAL[ITA NO .292/JP/2017]ORDER DATED 06.04.2018 HELD AS UNDER VIDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ONSUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THEEVIDEN CE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AOHAS ALSO FAILED TO ESTABL ISH THAT THE ASSESSEE HAS BROUGHT BACK HISUNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAP ITAL GAIN. HENCE WEDELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C)THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THEC ASE OF PREMPAL GANDHI[ITA-95-2017(O&M)] DATED18.01.2018 AT VIDE PA GE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES INCOME FROM UN DISCLOSED SOURCES. IN ITA-18-2017 23 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 23 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT T HE ASSESSING OFFICER HAD NOTPRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF T HE SUSPICION. ON THEOTHER HAND, ALTHOUGH THE APPRECIATION IS VERY HIGH, THE SHARES WERETRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTSWERE ROUTED T HROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FORINSTANCE THAT THIS WAS A CL OSELY HELD COMPANY AND THAT THE TRADING ONTHE NATIONAL STOCK EXCHANGE WAS MANIPULAT ED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THETRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH THE ASSESSING OFFIC ER RELIEDUPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENTPROCEEDING S. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAILAND FOUND THAT THERE WAS N O CO-RELATION BETWEEN THE AMOUNTS SOUGHT TOBE ADDED AND THE ENTRIES IN THOSE DOCUMENT S. THIS WAS ON ANAPPRECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME W ASPERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. D) THE BENCH DOF KOLKATAITAT IN THE CASEOF GAUTAM PINCHA[ITA NO.569/KOL/2017]ORDER DATED 15.11.2017 HELD AS UNDE R VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XI V) IN PARA 6(SUPRA) WE FIND THATTHERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASS ESSEE TO HAVEENTERED GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND ANDTHEREFOR E HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTSSUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ONTHE ORDERS OF THE AO/C IT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCETHE ALLEGATIONS THAT THE ASSESS EE/BROKERS GOT INVOLVED IN PRICERIGGING/MANIPULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OFREPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT E VIDENCE IN THEFORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE TH EGENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARESRESULTIN G IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THEAO NOR BY THE LD . CIT (A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THECASE AND THE EVIDENCE IN SUP PORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OFTHE ASSESSEE THAT THE TRANSACTIONS OF T HE ASSESSEE WERE GENUINE AND THEAUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THATINCOME FROM LTCG IS EXEMPTED U/S 10(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIMWHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED INTHE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TOARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASELAWS T O SUPPORT THE IMPUGNED DECISION OF 24 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 24 THE LD. CIT (A)/AO. IN THE AFORESAIDFACTS AND CIRCU MSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOTJUSTIFIED IN UPHOLDING THE ADDIT ION OF SALE PROCEEDS OF THE SHARES ASUNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT THEAO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KI RAN KOTHARI HUF [ITA NO. 443/KOL/2017] ORDER DATED 15.11.2017 HELD VIDE PARA 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE M ATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIO NS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LE GS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE AL LEGATIONS THAT THE ASSESSE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARE S MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSE E HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PUR CHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WER E FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACT S OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE AC T ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSP ICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO S UPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTA NCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH AOF KOLKATAITAT IN THE CASEOF SHALE ENKHEMANI[ITA NO.1945/KOL/2014]ORDER DATED 18.10.2017 HELD AS UND ER VIDE PAGE 24 PARA 9.3: 25 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 25 WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVE RSE MATERIAL TO IMPLICATE THEASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVE LED BY THE LD AOAGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STA ND INTHE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS OFTHE LD A R WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THEORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / ORBROKERS GETTING INVOLVED IN PR ICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO AMATTER OF RECORD THAT THE ASSESSEE FURNISH ED ALL EVIDENCES IN THE FORM OF BILLS,CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THEGENUINENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF S HARESRESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FAL SEOR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THEASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONSOF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOTJUSTIFIED IN REJECTING THE ASSESSE ES CLAIM OF EXEMPTION UNDER SECTION 10(38) OFTHE ACT. G) THE BENCH HOF MUMBAIITAT IN THE CASEOF ARVIND KUMAR JAINHUF[ITA NO.4682/MUM/2014]ORDER DATED 18.09.2017 HELD AS UNDER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGAT ION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH THE ACTIVITY OF T HE BROKER. DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NO T FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS P ER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKE R. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICUL AR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANS ACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED WITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNAFINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYI NG ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRC UMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) A T PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSI TIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H)THE HONBLE PUNJAB AND HARYANA HIGH COURT INTHE C ASE OFVIVEK MEHTA[ITA NO. 894 OF2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 HELD AS UNDER: 26 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 26 ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSE SSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) RECORDED A FINDING OF FACT T HAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE V ALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUC H FINDING OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RI SE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, T HE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT I N THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.0 4.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION E NTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUP PORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, A LSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASS ESSEE THROUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS . TEJUROHITKUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION O F LAW LAID DOWN BY THE HONBLE GUJRAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MA DE BY THE ASSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRMED THE TRANSACTIONS.THERE WAS N O EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE.PARTICULARLY, WHE N IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE F ROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO QUESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW AS LAID DOWN IN THE ABOVE-MENTIONEDJUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OUR D ECISION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MAT ERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISHED BY THE ASSE SSEE. UNDER THESE CIRCUMSTANCES, 27 ITA NO.2281/KOL/2017 NAVNEET AGARWAL A.YR .2014-15 27 WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND AL LOW THE CLAIM THAT THE INCOME IN QUESTION ISA BONA FIDELONG TERM CAPITAL GAINARISING FROM THE SALE OF SHARES AND HENCE EXEMPT FROM INCOME TAX. 21.UNDER THE CIRCUMSTANCES AND IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION IN QUESTION. 22. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20.07.2018 SD/- SD/- [S.S.VISWANETHRA RAVI] [ J.SUDHAK AR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED : 20.07.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. NAVNEET AGARWAL, LEGAL HEIR OF LATE KIRAN AGARWA L, C/O, SUBASH AGARWAL & ASSOCIATES SIDDHA GIBSON, 1, GIBSON LANE, 2 ND FLOOR, SUITE-213, KOLKATA-700069. 2. ITO, WARD-35(3), AAYAKAR BHAWAN (POORVA), 110, S HANTIPALLY, KOLKATA-700107. 3..C.I.T.(A)- , KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S