Nisha Agarwal, Lucknow V. The DCIT, CC-1, Lucknow

ITA 235/LKW/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4635 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 10-08-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Application of stay; Question of law; Accommodation entries; Tax effect; Benefit of exemption; Penny stocks; Capital Gains
• Section: 143(3); 260A; 133(6); 143(1); 201; 64; 72; 13; 22; 68

Judgement Text

I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.234/LKW/2020 ASSESSMENT YEAR:2017-18 MS. MEENAKSHI AGARWAL, 3/3 GULMOHAR ENCLAVE, GOKHALE MARG, LUCKNOW. PAN:BMQPS6091E VS. DY.C.I.T., CENTRAL CIRCLE-1, LUCKNOW. (APPELLANT) (RESPONDENT) STAY APPLICATION NO. 29/LKW/2020 [ IN ITA NO.234/LKW/2020] ASSESSMENT YEAR:2017-18 MS. MEENAKSHI AGARWAL, 3/3 GULMOHAR ENCLAVE, GOKHALE MARG, LUCKNOW. PAN:BMQPS6091E VS. DY.C.I.T., CENTRAL CIRCLE-1, LUCKNOW. (APPELLANT) (RESPONDENT) ITA NO.235/LKW/2020 ASSESSMENT YEAR:2017-18 MS. NISHA AGARWAL, 3/3 GULMOHAR ENCLAVE, GOKHALE MARG, LUCKNOW. PAN:ACTPA5677Q VS. DY.C.I.T., CENTRAL CIRCLE-1, LUCKNOW. (APPELLANT) (RESPONDENT) I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 2 STAY APPLICATION NO. 30/LKW/2020 [IN ITA NO.235/LKW/2020] ASSESSMENT YEAR:2017-18 MS. NISHA AGARWAL, 3/3 GULMOHAR ENCLAVE, GOKHALE MARG, LUCKNOW. PAN:ACTPA5677Q VS. DY.C.I.T., CENTRAL CIRCLE-1, LUCKNOW. O R D E R PER T. S. KAPOOR, A.M. THESE TWO APPEALS HAVE BEEN FILED BY TWO DIFFERENT ASSESSEES AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A) BOTH DATED 17 /06/2020. THE GROUNDS OF APPEAL TAKEN BY THESE ASSESSEES, IN THES E APPEALS, ARE SIMILAR AND THE APPEALS WERE HEARD TOGETHER THEREFORE, FOR THE SAKE OF CONVENIENCE A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. 2. FOR THE SAKE COMPLETENESS, THE GROUNDS OF APPEAL TAKEN IN I.T.A. NO.234 ARE REPRODUCED BELOW: 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LA W IN UPHOLDING THE ADDITION OF RS.2,93,82,349/- AS UNEXP LAINED CASH CREDIT U/S.68 OF THE INCOME TAX ACT, 1961 DENY ING THE EXEMPTION CLAIMED IN RESPECT OF LONG TERM CAPITAL G AINS U/S.10(38) OF THE IT. ACT, 1961, THE ADDITION MADE AND UPHELD IS CONTRARY TO THE FACTS BAD IN LAW AND BE DELETED. APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY S MT. SHEELA CHOPRA, CIT, D.R. DATE OF HEARING 14 / 07 /20 21 DATE OF PRONOUNCEMENT 11/08/2021 I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 3 2. BECAUSE COMPLETE DETAILS OF PURCHASE AND SALE OF SHARES, SUCH AS BILLS, CONTRACT NOTES, AND THE TRAN SACTION HAVING TAKEN THROUGH PROPER BANKING CHANNELS, ON SE PORTALS, THROUGH SEBI REGISTERED BROKERS, CREDITED TO THE DE MAT ACCOUNT THE LONG TERM CAPITAL GAINS ON SALE OF SHAR ES CAN NEITHER BE DENIED NOR DISBELIEVED MERELY ON SUSPICI ON, THE EXEMPTION U/S. 10(38) AS CLAIMED, BE ALLOWED. 3. BECAUSE THE ENTIRE PROCEEDS OF SALE OF SHARES IS NEITHER AN ADVANCE NOR A DEPOSIT, THE CIT(A) AS WELL AS DY. CIT HAVE ERRED IN LAW AND ON FACTS IN TREATING THE SALE PROC EEDS AS UNEXPLAINED CASH CREDIT BY APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT, WHICH PROVISIONS ARE NOT APPLICABLE, THE DENIAL OF EXEMPTION U/S. 10(38) OF RS.2,93,82,3497-IN RESP ECT OF LTCGS BE ALLOWED AND THEREBY THE ADDITION MADE TO T HE TOTAL INCOME, BE DELETED. 4. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING A SUM OF RS.8,81,470/- U/S.69C OF THE IT. ACT 1961, ON THE BASIS OF PRESUMPTIVE PAYMENT TO THE BROKER, IS ALTOGETHER CONTRARY TO THE FACTS, BAD IN LAW, BASED ON AN ENTIRELY WRONG PREMISE BE DELETED. 5. BECAUSE ON A PROPER CONSIDERATION OF THE FACTS A ND INTERPRETATION OF LAW, A DISALLOWANCE U/S.69C CAN O NLY BE MADE WHERE AN EXPENDITURE HAS BEEN 'ACTUALLY INCURR ED', THERE BEING NEITHER ANY EVIDENCE NOR ANY MATERIAL O N RECORD, THE ADDITION MADE AND UPHELD IS BOTH CONTRARY TO 6. BECAUSE THE ADDITION OF RS.2,93,82,3497- U/S.68 BY WAY OF DENIAL OF EXEMPTION U/S. 10(38) IN RESPECT OF LT CGS ON SALE OF SHARES AND THE ADDITION OF RS.8,81,4707- U/S.69C ON ACCOUNT OF PRESUMPTIVE EXPENSES, BASED ON THE REPOR T OF THE INVESTIGATION WING, IS GENERAL IN NATURE, WHICH REP ORT HAS NEITHER BEEN PROVIDED NOR CONFRONTED TO THE ASSESSE E, RELIANCE PLACED ON THE SAME BY THE AO AND UPHELD BY THE CIT( A) MAKES THE ENTIRE ASSESSMENT ORDER BAD VOID ABINITO, OVER LOOKING THE PRINCIPLES OF NATURAL JUSTICE, ADDITION S TO THE TOTAL INCOME MADE BE DELETED. 7. BECAUSE THE CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND THE LEGAL POSITION, THAT THE IMPUGNED ASSESSMEN T ORDER I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 4 HAS BEEN PASSED U/S. 143(3) DT. 28.12.2018 AFTER TA KING APPROVAL OF JCIT, WHICH IS AGAINST THE MANDATE OF T HE SECTION, IN AS MUCH AS THERE BEING REFERENCE MADE U/S.144A, IS AN ORDER WITHOUT JURISDICTION, BAD IN LAW AND BE QUASH ED, IN AS MUCH AS THERE IS NO REQUIREMENT IN LAW TO SEEK APPR OVAL AND ON ANY SUCH APPROVAL, THE ORDER CEASES TO BE AS THA T AS PASSED BY THE DC IT, SUCH ORDER MERGES WITH THE ORD ER OF THE AO AND BECOMES AN ORDER AS PASSED BY JCIT, THE ORDE R PASSED BE QUASHED. 3. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT IN BOTH THESE CASES THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL GAIN EXEMPT U/S 10(38) OF THE ACT AND WHICH THE AUTHORITIES BE LOW HAS DENIED BY HOLDING THAT THE ASSESSEES HAD MANAGED SUCH LONG TE RM CAPITAL GAIN WITH THE HELP OF ENTRY PROVIDERS, WHO WITH THE HELP OF S OME PERSONS MANIPULATES THE PRICE OF SHARES AND HELP IN GENERATING LONG TER M CAPITAL GAINS AND THEREFORE HE DENIED THE BENEFIT OF EXEMPTION U/S. 1 0(38) OF THE ACT AS INCOME FROM LONG TERM CAPITAL GAIN. LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD SUBMITTED THAT THE ASSESSEES ARE REGULAR INV ESTORS IN THE SHARE MARKET AND HAD BEEN HOLDING SHARES OF VARIOUS COMPA NIES AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PARA 2 OF THE ASSESSMENT ORDER WHERE THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, HA D SUBMITTED TO THE ASSESSING OFFICER THE DETAILS OF SHARES HELD BY THE ASSESSEES IN VARIOUS YEARS. IT WAS SUBMITTED THAT ONE OF THE OBJECTIONS OF THE AUTHORITIES BELOW IS THAT THE BROKER, THROUGH WHOM THE SHARES WERE SO LD, WAS BANNED BY THE SEBI IN 2010 ON ACCOUNT OF PRICE MANIPULATION OF SH ARES AND RIGGING OF STOCK PRICES. IT WAS SUBMITTED THAT ANOTHER OBJECTION OF AUTHORITIES BELOW FOR REJECTING THE CLAIM OF ASSESSEES IS THAT THE SCRIP HAD GAINED MANIFOLD IN A SHORT PERIOD OF TIME AND THE FINANCIALS OF THE COMP ANY DID NOT WARRANT SUCH EXORBITANT INCREASE IN PRICES. LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT IN THIS RESPECT THE AUTHORITIES BELOW HAS RELI ED ON CERTAIN CASE LAWS WHEREIN THE TRIBUNAL/COURTS HAD DECIDED THE ISSUE A GAINST THE ASSESSEE. IT I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 5 WAS SUBMITTED THAT AS REGARDS THE ALLEGATION OF THE AUTHORITIES BELOW THAT ASSESSEE HAD SOLD THE SHARES THROUGH A BROKER, WHO WAS BANNED BY SEBI IN 2010, THE AUTHORITIES BELOW HAS FURTHER NOTED IN TH EIR RESPECTIVE ORDERS ITSELF THAT SUCH BAN WAS LATTER ON REVOKED AND SEBI HAD RE STRAINED SUCH BROKER ONLY FOR PURCHASE AND SALE OF SHARES THROUGH PROPRI ETARY ACCOUNT AND BAN ON SALE AND PURCHASE OF SHARES OF CLIENT WAS REVOKE D. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD SOLD T HESE SHARES IN THE YEAR 2016 I.E. AFTER A PERIOD OF SIX YEARS FROM SUCH BAN (WHICH ULTIMATELY WAS LIFTED ALSO) AND THEREFORE, THIS ALLEGATION OF THE REVENUE DOES NOT SURVIVE. MOREOVER, IT WAS SUBMITTED THAT THE DEPARTMENT HAD CARRIED OUT A DETAILED INVESTIGATION IN THE MODUS OPERANDI ADOPTED BY VARI OUS BROKERS/EXIT PROVIDERS AND HAD IDENTIFIED 84 COMPANIES AND HAD A LSO EXAMINED AND INVESTIGATED VARIOUS STOCK BROKERS AND THE NAME OF THE BROKER DOES NOT FIND MENTION IN THAT LIST WHO WERE BANNED FROM THE STOCK MARKET AND NEITHER THE SCRIP SOLD BY THE ASSESSEES RELATES TO ANY OF THE 8 4 IDENTIFIED COMPANIES. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS REGARDS THE RELIANCE PLACED BY AUTHORITIES BELOW ON THE CASE LAW OF UDIT KALRA, DECIDED BY HON'BLE DELHI HIGH COURT, THE SAME HAS BEEN CONSIDE RED BY HON'BLE DELHI HIGH COURT IN THE CASE OF SMT. KRISHNA DEVI & OTHER S IN ITA NO. 125, 130 & 131 AND FURTHER BY I.T.A.T. IN THE CASE OF SWATI LU THRA IN I.T.A. NO.6480/DEL/2019 BY ORDER DATED 28/06/2019 AND IN B OTH THESE CASES THE HON'BLE DELHI HIGH COURT AND I.T.A.T. HAS ALLOWED R ELIEF TO THE ASSESSEES AFTER CONSIDERING THE CASE LAW OF UDIT KALRA. AS R EGARDS THE RELIANCE PLACED BY THE AUTHORITIES IN THE CASE OF SANJAY BIMALCHAND JAIN VS INCOME TAX OFFICER, DECIDED BY HON'BLE BOMBAY HIGH COURT, IT W AS SUBMITTED THAT THE SAME HAS ALSO BEEN DISTINGUISHED BY I.T.A.T. KOLKAT A BENCH IN I.T.A. NO.2243/KOL/2017 AND FURTHER BY MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GEETA KHARE IN ITA NO. 4267/MUM/2018. LEARNED CO UNSEL FOR THE I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 6 ASSESSEE SUBMITTED THAT AUTHORITIES BELOW HAS FURTH ER PLACED RELIANCE IN THE CASE OF SUMATI DAYAL AND DURGA PRASAD MORE, 82 ITR 540 FOR THE PROPOSITION OF THEORY OF PREPONDERANCE BASED UPON T HE HUMAN PROBABILITIES. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE LATEST DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. SMT. KRISHNA DEVI & OTHERS IN I.T.A. NO. 125 OF 2020, 130/2020 & 131 OF 2020, VIDE ORDER DATED 15/01/2021, THE HON'BLE COURT, UNDER SIMILAR FACTS AND CIRCUMSTANCES, HAS ALLOWED RELIEF TO THE ASSESSEE BY REJECTING THE THE ORY OF PREPONDERANCE AND BY RELYING ON THE EVIDENCES FILED BY THE ASSESSEE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE ALLOWING RELIEF TO TH E ASSESSEE THE HON'BLE DELHI HIGH COURT HAS CONSIDERED THE CASE LAWS OF HO N'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL AND HAS ALSO CONSIDERED TH E CASE LAWS OF SUMAN PODDAR AND SWATI LUTHRA. LEARNED COUNSEL FOR THE A SSESSEES SUBMITTED THAT A NUMBER OF BENCHES OF THE TRIBUNAL, INCLUDING LUCK NOW BENCH, HAS CONSIDERED SUCH ISSUE OF LONG TERM CAPITAL GAIN ON VARIOUS SCRIPS AND HAS ALLOWED RELIEF TO THE ASSESSEES AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO THE CASE LAWS RELIED ON BY THE ASSESSEE, PLACED AT PAGES 1 TO 216 OF THE PAPER BOOK. RELIANCE WAS FURTHER PLACED ON THE FOLL OWING JUDGMENTS OF VARIOUS BENCHES OF THE TRIBUNAL WHERE UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE ASSESSEES HAS BEEN ALLOWED RELIE F: 1. SMT. KARUNA GARG VS. INCOME TAX OFFICER, ITA NO. 1069/DEL/2019 ORDER DTD. 06.08.2019. 2. REESHU GOEL VS. INCOME TAX OFFICER, ITA NO. 1691 /DEL/2019 ORDER DTD. 07.10.2019. 3. SWATI LUTHRA VS. INCOME TAX OFFICER, ITA NO. 648 0/DEL/2017 ORDER DTD. 28.06.2019 I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 7 3.1 AS REGARDS THE EVIDENCE FOR SALE AND PURCHASE O F SHARES, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEES H AD PURCHASED SHARES THROUGH STOCK BROKER FAIR INTERMEDIATE INVESTMENT P VT. LTD. AND THE PAYMENT OF WHICH WAS MADE THROUGH BANKING CHANNELS AND IN THIS RESPECT RESPECTIVE PAPER BOOK PAGES WERE REFERRED TO WHEREI N THE EVIDENCE FOR PURCHASE OF SUCH SHARES AND FOR MAKING PAYMENTS WER E PLACED. LEARNED COUNSEL FOR THE ASSESSEES FURTHER SUBMITTED THAT TH ESE SHARES WERE DELIVERED TO THE ASSESSEE IN THE DEMAT FORM IN THEI R RESPECTIVE DEMAT ACCOUNTS AND THE ASSESSEES, AFTER HOLDING SUCH SHAR ES FOR A PERIOD OF ABOUT TWO YEARS, SOLD THE SHARES ON SCREEN BASED PLATFORM THROUGH SEBI REGISTERED STOCK BROKER AND WHO HAD ISSUED CONTRACT NOTES FOR SALE OF SHARES AND HAD MADE THE PAYMENTS THROUGH BANKING CHANNELS AND IN THIS REGARD OUR ATTENTION WAS INVITED TO RESPECTIVE PAPER BOOK PAGES WHERE SUCH EVIDENCE OF SALE OF SHARES AND THE CREDIT OF PROCEE DS IN THE BANK ACCOUNTS OF ASSESSEES WERE PLACED. THEREFORE, IN VIEW OF TH E ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE JUDICIAL PRECEDENT S, IT WAS SUBMITTED THAT THE APPEALS FILED BY THE ASSESSEES MAY BE ALLOWED. 4. LEARNED CIT, D.R., ON THE OTHER HAND HEAVILY PLA CED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND ARGUED THAT THE BROKERS, THROUGH WHOM SHARES WERE SOLD, IS A TAINTED BROKER WHO WAS SUSPE NDED BY SEBI AND FURTHER SOME DIRECTORS OF OTHER TAINTED COMPANIES H AD JOINED THE COMPANY OF SUB-BROKER AS DIRECTORS. THEREFORE, THE AUTHORI TIES BELOW HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE BY HOLDING THE T RANSACTIONS OF SALE AND PURCHASE AS AN ACCOMMODATION ENTRIES. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THERE IS NO DISPUTE ABOUT THE DOCUMENTARY EVIDENCES WHICH THE ASSESSEES HAD FILED BEFORE THE ASSESSING OFFICER FOR I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 8 CLAIMING EXEMPTION U/S 10(38) OF THE ACT. IN SUPPO RT OF THE CLAIM FOR PURCHASE OF SHARES FROM FAIR INTERMEDIATE INVESTMEN T PVT. LTD., THE ASSESSEES HAD FILED A COPY OF SALE BILL IN FAVOUR O F THE ASSESSEE WHEREIN THE SAID BROKER HAD SOLD 1,25,000 EQUITY SHARES TO THE ASSESSEES @RS.12.33 PER SHARE. A COPY OF SUCH SALE BILL IS PLACED IN PAPER BOOK PAGES 38 AND 34 RESPECTIVELY. A COPY OF LEDGER ACCOUNT OF THE ASSE SSEES IN THE BOOKS OF BROKER REFLECTING THE ENTRIES OF SHARES SO PURCHASE D, ALONG WITH ENTRIES FOR PURCHASE OF OTHER SHARES BY THE ASSESSEES IS PLACED AT PAPER BOOK PAGES 39 AND 35 RESPECTIVELY. THE ABOVE COPIES OF STATEMENT OF ACCOUNTS WITH THE BROKER OF THE ASSESSEES REFLECTS THAT ASSESSEES HAD PAID RS.35 LACS AND RS.40 LACS RESPECTIVELY FOR PURCHASE OF VARIOUS SCR IPS BELONGING TO VARIOUS COMPANIES OUT OF WHICH THE PURCHASE CONSIDERATION F OR THE SCRIP, UNDER CONSIDERATION HAS BEEN DEBITED TO THE ACCOUNT OF TH E ASSESSEES ON 22/04/2014. FROM THE ABOVE STATEMENT OF ACCOUNT, WE FURTHER NOTE THAT ASSESSEE HAD INVESTED IN SHARES OF OTHER COMPANIES ALSO. EVEN THE ASSESSING OFFICER HAS NOTED THIS FACT IN THE ASSESS MENT ORDER AT PAGE 2 VIDE PARA 6 WHICH FOR THE SAKE OF COMPLETENESS IS REPROD UCED BELOW: 6. A DETAILED SHOW CAUSE NOTICE WAS ISSUED ON 17.1 2.2018 FIXING THE COMPLIANCE DATE ON 21.12.2018. ASSESSEE HAS SUBMITT ED REPLY OF THIS SHOW CAUSE ON 24.12.2018. IN THIS REPLY ASSESSEE HA S STATED THAT: 'AS PER THE STATEMENT OF CAPITAL ACCOUNT OF EACH YE AR SUBMITTED, ASSESSEE IS REGULAR IN INVESTING AMOUNTS IN DIFFERE NT EQUITIES. DURING THE PERIOD, ASSESSEE HAS TRADED IN NO, OF EQUITIES SUCH AS: (A) VIPUL (B) VIKAS ECO (C) SAFAL HERBS (D) WANBURY (E) AAGAM CAPITAL (F) ASIAN HOTELS (G) NITIN FIRE (H) VMS INDUSTRIES I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 9 (I) GULF PETRO..ETC. INVESTMENT IN EQUITY IS MADE OUT THROUGH SELF STUDY BASED ON THE RECOMMENDATIONS RECEIVED FROM NEWSPAPER, TV CHANNEL S, SOMETIMES FROM FRIENDS AND SOMETIMES FROM BROKERS. PURCHASE AND SALE OF EQUITY CAN ONLY BE DONE THROUG H STOCK EXCHANGES, EITHER FROM BSE OR NSE, WITH THE HELP OF REGISTERED STOCK BROKERS. THE QUESTIONED SCRIP ' SHANTANU AQUA' WAS PURCHASED THROUGH STOCK BROKER M/S FAIR INTERMEDIATE INVESTME NT PRIVATE LIMITED VIDE BILL NO. 00009 DATED 22.04.2014 FOR A SUM OF RS. 15,41,250/-FROM BOMBAY STOCK EXCHANGE SETTLEMENT NO . BC2014014. COPY OF THE CONTRACT NOTE IS ENCLOSED. PAYMENT OF T HE SHARES PURCHASED WAS MADE THROUGH ACCOUNT PAYEE CHEQUE. AS WE HAD THINK OF, THE PRICE OF 'SHANTANU AQUA' RO SE TO A NEW HEIGHT AND WE STARTED SELLING THE SHARES IN SMALL QUANTITI ES FROM DATE 13TH APRIL, 2016 AND SOLD ALL SHARES TILL 3 RD AUGUST, 2016. IN THE START OF SHARES WERE SOLD AT A PRICE OF RS. 210.00 AND SOLD AT A MAXIMUM OF RS.269.00/-. ALL THE SHARES WERE SOLD THROUGH REGIS TERED STOCK BROKERS M/S FAIR INTERMEDIATE INVESTMENT PRIVATE LIMITED AN D THROUGH ASHIKA STOCK BROKERS PVT. LTD. THE TRANSACTIONS HAVE BEEN THROUGH THE NSE/BSE AND STT HAS DULY BEEN PAID.' 'ASSESSEE HAS FURTHER PLACED RELIANCE ON ITA NO. 45 7/DEL/2018 IN THE CASE OF ARUN KUMAR C/O KAPIL GOEL VS. ACIT, CIRCLE- 1 NOIDA. 5.1 FURTHER THE FACT THAT ASSESSEE IS A REGULAR INV ESTOR IN SHARE MARKET IS VERIFIABLE FROM THE COPY OF DEMAT ACCOUNT (PLACED I N P.B. PAGE 62 TO 65 & 58 TO 62 RESPECTIVELY) WHERE A NUMBER OF SCRIPS ARE THERE IN THE ACCOUNT OF ASSESSEES. WE FURTHER FIND THAT ASSESSEE STARTED SE LLING SHARES THROUGH ASHIKA STOCK BROKING LTD. AND COPY OF CONTRACT NOTE S FOR SALE OF 1,25,000 SHARES IS PLACED AT PAGES 40 TO 61 AND FROM 36 TO 5 5 RESPECTIVELY. THE SALE PROCEEDS OF SUCH SALE WAS CREDITED TO THE ACCOUNT O F ASSESSEE WITH HDFC BANK, THE COPY OF THE BANK ACCOUNT IS PLACED AT PAG ES 68 TO 72 AND FROM 64 TO 65 RESPECTIVELY. THE COPY OF DEMAT ACCOUNT OF T HE ASSESSEES WHERE THE I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 10 SHARES WERE TRANSFERRED IS PLACED AT PAPER BOOK PAG ES 62 TO 65 AND FROM 58 TO 62 OF THE PAPER BOOK RESPECTIVELY. 5.2 THE DEMAT ACCOUNT OF THE ASSESSEES WAS ORIGINAL LY WITH FAIR INTERMEDIATED (P) LTD. WHEREIN ON 22/04/2014 125000 SHARES OF SCRIP UNDER CONSIDERATION WERE CREDITED TO THE RESPECTIVE ACCOU NTS OF ASSESSEES. SUCH SHARES WERE TRANSFERRED TO ANOTHER DEMAT ACCOUNT OF ASSESSEES WITH ASHIKA STOCK BROKING LTD., A COPY OF WHICH IS PLACED IN TH E FILES CONTAINING STAY PETITIONS. AS AND WHEN THESE SHARES WERE SOLD THE S HARES FROM THESE DEMAT ACCOUNTS WERE DEBITED. 5.3 ALL THESE EVIDENCES DEMONSTRATE THAT ASSESSEES HAD SOLD THE SHARES THROUGH SCREEN BASED TRADING THROUGH SEBI REGISTERE D BROKER AND THE TRANSACTIONS WERE SUBJECTED TO SECURITY TRANSACTION TAX AND PROCEEDS OF THE SALES, AFTER DEDUCTION OF SUCH EXPENSES, WERE CREDI TED TO THE BANK ACCOUNTS OF THE ASSESSEES. THE AUTHORITIES BELOW HAS NOT CO MMENTED ON THE VERACITY OF SUCH CRUCIAL EVIDENCE FILED BY THE ASSESSEES AND THEY HAVE DISALLOWED THE CLAIM OF THE ASSESSEES BY HOLDING THAT THE BROKER, THROUGH WHOM THE ASSESSEES HAD SOLD SHARES, WAS A TAINTED STOCK BROK ER WHO WAS BANNED BY SEBI IN 2010. HOWEVER, WHILE HOLDING SO THE AUTHOR ITIES BELOW HAS FURTHER OBSERVED THAT SUCH BAN WAS REVOKED BY THE SEBI AND THE ONLY ORDER REMAINED IN FORCE WAS THAT THE BROKER WAS NOT ALLOW ED TO TRADE IN ITS PROPRIETARY NAME. IN THIS RESPECT PARA 7.5 OF ASSES SMENT ORDER IS RELEVANT WHICH FOR SAKE OF COMPLETENESS IS REPRODUCED BELOW: 7.5 FURTHER, IT IS SEEN THAT ASSESSEE SMT. NISHA AGRAWAL HAS TRADED INTO SCRIPS OF SHANTANU SHEROY AQUA THROUGH ASHIKA STOCK BROKING LT. IT IS PERTINENT TO NOTE HERE THAT ASHIK A STOCK BROKING LIMITED ALONG WITH TWO OTHER STOCK BROKERS AND PROM OTERS OF 4 LISTED COMPANIES WERE BANNED BY SECURITIES EXCHANGE OF INDIA (SEBI) VIDE ITS ORDER DATED 02 DECEMBER, 2010 ON AC COUNT OF PRICE I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 11 MANIPULATIONS AND RAMPING UP/ RIGGING OF STOCK PRIC ES. THE REASON FOR THE SAID BAN WAS THAT SEBI HAD UNEARTHED A NEXU S BETWEEN SOME MID-CAP COMPANIES AND STOCK MARKET OPERATORS A ND BROKERS LIKE ASHIKA STOCKBROKING LIMITED WHO RIGGED THE SHA RE PRICES OF THESE FIRMS AHEAD OF CONVERTIBLE BOND ISSUES AND PR IVATE PLACEMENTS TO INSTITUTIONAL INVESTORS. IN THE SAID ORDER SEBI DIRECTED ASHIKA STOCK BROKING AND OTHERS NOT TO BUY , SELL OR DEAL IN THE SECURITIES IN THEIR OWN/PROPRIETARY ACCOUNT IN ANY MANNER TILL FURTHER DIRECTIONS AND ORDERED STOCK EXCHANGES NOT TO ALLOW THE CONCERNED FIRMS TO TAKE FRESH POSITIONS. IN THE SAI D ORDER OBSERVATIONS WERE MADE ON THE BASIS OF EVIDENCE UNE ARTHED THAT THE CONCERNED COMPANIES HAD COLLUDED WITH OPERATORS AND SHARE BROKERS LIKE ASHIKA STOCKBROKING LIMITED TO PUMP UP THE PRICE OF SHARES PRIOR TO CAPITAL RAISING IN THE PERIOD FROM 2006-2009. THE ISSUE WAS ONCE AGAIN CONSIDERED BY SEBI IN JULY 201 1 WHEN ORDER WAS PASSED BY ITS WHOLE TIME MEMBER DR. K. M. ABRAH AM ON 19/07/2011 IN WHICH IT WAS OBSERVED THAT 'DURING EX AMINATION OF THE SUBMISSIONS OF ASHIKA STOCKBROKING LIMITED AND ITS CLIENTS (THE FOURTEEN ENTITIES) WITH THE TRADE DATA, SEBI HAD NO TICED SIGNIFICANT FACTUAL INACCURACIES WITH REGARD TO SUBMISSIONS MAD E ON BEHALF OF ASBL AND THE OTHER ASHIKA GROUP ENTITIES.' THE SAID ORDER ALTHOUGH REVOKED THE EARLIER DIRECTION PROHIBITING ASHIKA ST OCKBROKING LIMITED TAKING OF FRESH CLIENTS, THE DIRECTIONS RES TRAINING IT FROM BUYING, SELLING OR DEALING IN THE SECURITIES IN ITS OWN PROPRIETARY ACCOUNT IN ANY MANNER WAS CONTINUED. THUS, IT IS CLEAR THAT ASHIKA STOCKBROKING LIMITED, ITS GROUP COMPANIES AND ITS ASSOCIATED CLIENT COMPANIES HAVE BEEN FOUND TO BE ENGAGED IN THE PROCESS OF SHARE PRICE MANIPULATI ON IN COLLUSION WITH OTHER OPERATORS, PROMOTERS, BROKERS ETC. BY MA RKET REGULATOR SEBI ON EARLIER OCCASIONS ALSO. 5.4 THE FINDINGS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER DEMONSTRATES THAT THE BAN WAS ONLY FOR ITS PROPRIET ARY TRADES AND THERE WAS NO BAN ON THE TRANSACTIONS FOR CLIENTS, THEREFORE, THE RELIANCE PLACED BY REVENUE ON THIS ORDER OF SEBI IS MISPLACED. MOREOVE R, WE FIND THAT THE BAN WAS IMPOSED BY SEBI IN 2010 (WHICH WAS LATER ON REV OKED ALSO) AND ASSESSEES HAD SOLD THE SHARES IN THE YEAR 2016 I.E. AFTER A GAP OF ABOUT SIX YEARS AND IN THE MEANTIME THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT HAD CARRIED OUT INVESTIGATION AND VIDE R EPORT DATED 27/04/2015 I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 12 HAD IDENTIFIED 84 COMPANIES WHICH WERE ENGAGED IN T HE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND NAME OF THE SCR IP ON WHICH THE ASSESSEES HAD EARNED CAPITAL GAIN DOES NOT FIND ITS NAME IN THAT LIST AND NEITHER NAME OF BROKER FINDS PLACE IN THE LIST OF B ROKER INVESTIGATED BY THE INVESTIGATION WING OF THE DEPARTMENT. 5.5 LEARNED CIT(A), WHILE DISMISSING THE APPEAL OF THE ASSESSEES, HAS RELIED ON THE FOLLOWING CASE LAWS: 1. HON'BLE DELHI HIGH COURT IN THE CASE OF UDIT KALRA VS. INCOME TAX OFFICER IN I.T.A. NO.220/2019 & CM NO.10774/2019 2. I.T.A.T. DELHI IN I.T.A. NO.6717/DEL/2017 3. MADRAS HIGH COURT IN THE CASE OF SMT. THARAKUMARI V S. INCOME TAX OFFICER (TAX CASE APPEAL NO. 128 OF 2019) 4. HON'BLE DELHI HIGH COURT IN THE CASE OF SUMAN PODDA R VS. INCOME TAX OFFICER, I.T.A. NO.841/2019 5. HON'BLE BOMBAY HIGH COURT IN THE CASE OF SANJAY BIM ALCHAND JAIN VS. INCOME TAX OFFICER 6. HON'BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL V S. CIT 214 ITR 801 (SC) 7. CIT VS. DURGA PRASAD MORE [1971] 82 ITR 540 5.6 AS REGARDS THE RELIANCE PLACED BY LEARNED CIT(A ) ON THE CASE LAW OF SUMAN PODDAR AND SMT. SUMATI DAYAL, THE HON'BLE DEL HI HIGH COURT IN THE CASE OF SMT. KRISHNA DEVI AND OTHERS IN I.T.A. NO. 125, 130 & 131 VIDE ORDER DATED 15/01/2021 AND AFTER CONSIDERING THE AB OVE CASE LAWS HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING AS UNDER: 3. THE PRESENT APPEALS UNDER SECTION 260A OF THE I NCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] AR E DIRECTED AGAINST THE COMMON ORDER DATED 6TH AUGUST, 2019 [HE REINAFTER REFERRED TO AS THE IMPUGNED ORDER] PASSED IN ITA NO. 1069/DEL/2019 (FOR AY 2014-15), 2772/DEL/2019 (FOR AY 2015- 16) AND OTHER APPEALS FOR THE SAME AYS, BY THE INCO ME TAX APPELLATE TRIBUNAL [HEREINAFTER REFERRED TO AS THE ITAT]. HOWEVER, THE IMPUGNED ORDER RECORDS THE FACTUAL POS ITION ONLY IN RESPECT OF ITA NO. 1069/DEL/2019. 4. THE REVENUE UR GES I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 13 IDENTICAL QUESTIONS OF LAW IN ALL THE AFORE-NOTED A PPEALS WITH THE ONLY DIFFERENCE BEING THE FIGURES RELATING TO THE A DDITIONS MADE UNDER SECTION 68 READ WITH SECTION 115BBE OF THE AC T. ACCORDINGLY, THE SAME ARE BEING DECIDED BY WAY OF T HIS COMMON ORDER. 5. IT IS NOT IN DISPUTE, AS NOTED IN THE IMP UGNED ORDER, THAT THE FACTUAL BACKGROUND IN ALL THE THREE APPEALS IS QUITE SIMILAR. HOWEVER, FOR THE SAKE OF CONVENIENCE, THE FACTS IN RESPECT OF ITA 125/2020 ARE BEING NOTED AND DISCUSSED ELABORATELY. BRIEFLY STATED, THE RESPONDENT-ASSESSEE IS AN INDIVIDUAL WH O HAS DERIVED INCOME FROM INTEREST ON LOAN, FDR, NSC AND BANK INT EREST UNDER THE HEAD OF INCOME FROM OTHER SOURCES IN RESPECT OF A.Y. 2015- 16. SHE FILED HER RETURN OF INCOME, DECLARING TOTAL INCOME OF RS. 13,96,116/-. AFTER CLAIMING DEDUCTION OF RS. 1,60,0 00/- UNDER CHAPTER VI-A, THE TOTAL TAXABLE INCOME OF RESPONDEN T WAS DECLARED TO BE RS. 12,36,120/-. THE RETURN WAS PROC ESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER THE CASE W AS SELECTED FOR SCRUTINY. DURING THE SCRUTINY PROCEEDINGS, THE AO N OTICED THAT FOR THE RELEVANT YEAR UNDER CONSIDERATION, THE RESPONDE NT HAD CLAIMED EXEMPTED INCOME OF RS. 96,75,939/- AS RECEI PTS FROM LONG TERM CAPITAL GAIN [HEREINAFTER REFERRED TO AS LTCG] UNDER SECTION 10(38) OF THE ACT. HE INTER ALIA CONC LUDED THAT THE ASSESSEE HAD ADOPTED A COLORABLE DEVICE OF LTCG TO AVOID TAX AND ACCORDINGLY FRAMED THE ASSESSMENT ORDER UNDER S ECTION 143(3) OF THE ACT AT THE TOTAL INCOME OF RS. 1,09,1 2,060/-, MAKING AN ADDITION OF RS. 96,75,939/- UNDER SECTION 68 REA D WITH 115BBE OF THE ACT ON ACCOUNT OF BOGUS LTCG ON SALE OF PENN Y STOCKS OF A COMPANY NAMED M/S GOLD LINE INTERNATIONAL FINVEST L IMITED. THE APPEAL BEFORE THE CIT(A) WAS DISMISSED AND ADDITION S WERE CONFIRMED WITH THE OBSERVATION THAT THE RESPONDENT HAD INTRODUCED UNACCOUNTED MONEY INTO THE BOOKS WITHOUT PAYING TAXES. FURTHER APPEAL FILED BY THE RESPONDENT BEFOR E THE LEARNED ITAT WAS ALLOWED IN HER FAVOUR, AND THE ADDITIONS W ERE DELETED VIDE THE IMPUGNED ORDER, RELEVANT PORTION WHEREOF R EADS AS UNDER: 21. A PERUSAL OF THE ASSESSMENT ORDER CLEAR LY SHOWS THAT THE ASSESSING OFFICER WAS CARRIED AWAY BY THE REPOR T OF THE INVESTIGATION WING KOLKATA. IT CAN BE SEEN THAT THE ENTIRE ASSESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER WITHOUT CONDUCTING ANY ENQUIRY FROM THE RELEVANT PARTIES OR INDEPENDENT SOURCE OR EVIDENCE BUT HAS MERELY RELIED UPON THE S TATEMENTS RECORDED BY THE INVESTIGATION WING AS WELL AS INFOR MATION RECEIVED FROM THE INVESTIGATION WING. IT IS APPAREN T FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INDEPENDENT AND SEPARATE ENQUIRY IN THE CASE OF THE ASSESSEE. EVEN, THE STATEMENT RECORDED BY THE INVESTIGATION W ING HAS NOT I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 14 BEEN GOT CONFIRMED OR CORROBORATED BY THE PERSON DU RING THE ASSESSMENT PROCEEDINGS. XX XX XX 23. IT IS PROVIDED U/S. 142 (2) OF THE ACT THAT FOR THE PURPOSE OF OBTAINING FULL INFORMATION IN RESPECT OF INCOME OR LOSS OF ANY PERSON, THE ASSESSING OFFICER MAY MAKE SUCH ENQUIRY AS HE CONSIDERS NECESSARY. IN OUR CONSIDERED VIEW THE ASS ESSING OFFICER OUGHT TO HAVE CONDUCTED A SEPARATE AND INDEPENDENT ENQUIRY AND ANY INFORMATION RECEIVED FROM THE INVESTIGATION WIN G IS REQUIRED TO BE CORROBORATED AND AFFIRM DURING THE ASSESSMENT BY THE ASSESSING OFFICER BY EXAMINING THE CONCERNED PERSON S WHO CAN AFFIRM THE STATEMENTS ALREADY RECORDED BY ANY OTHER AUTHORITY OF THE DEPARTMENT. FACTS NARRATED ABOVE CLEARLY SHOW T HAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY AND THE ENTIRE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLA TE AUTHORITY ARE DEVOID OF ANY SUCH ENQUIRY. 24. THE REPORT FROM THE DIRECTORATE INCOME TAX INVESTIGATION WING, KOLKATA IS DATED 27.04.2015 WHEREAS THE IMPUGNED SALES TRANSACTIONS TOOK PLACE IN THE MONTH OF MARCH, 2014. THE EXPARTE AD INTERIM OR DER OF SEBI IS DATED 29.06.2015 WHEREIN AT PAGE 34 UNDER PARA 5 0 (A) M/S. ESTEEM BIO ORGANIC FOOD PROCESSING LTD WAS RESTRAIN ED FROM ACCESSING THE SECURITIES MARKET AND BUYING SELLING AND DEALING IN SECURITIES EITHER DIRECTLY OR INDIRECTLY IN ANY MAN NER TILL FURTHER DIRECTIONS. A LIST OF 239 PERSONS IS ALSO MENTIONED IN SEBI ORDER WHICH ARE AT PAGES 34 TO 42 OF THE ORDER THE NAMES OF THE APPELLANTS DO NOT FIND ANY PLACE IN THE SAID LIST. AT PAGES 58 AND 59 THE NAMES OF PRE IPO TRANSFEREE IN THE SCRIP OF M/S. ESTEEM BIO ORGANIC FOOD PROCESSING LTD IS GIVEN AND IN THE SAID LIST ALSO THE NAMES OF THE APPELLANTS DO NOT FIND ANY PLACE. AT PAGE 63 OF THE SEBI ORDER-TRADING BY TRADING IN M/S. ESTEEM BI O QRGANIC FOOD PROCESSING LTD A FURTHER LIST OF 25 PERSONS IS MENTIONED AND ONCE AGAIN THE NAMES OF THE APPELLANTS DO NOT F IND PLACE IN THIS LIST ALSO. 25. AS MENTIONED ELSEWHERE THE BROK ERS OF THE ASSESSEE NAMELY ISG SECURITIES LIMITED AND SMC GLOB AL SECURITIES LIMITED ARE STATIONED AT NEW DELHI AND T HEIR NAMES ALSO DO NOT FIND PLACE IN THE LIST MENTIONED HERE I N ABOVE IN THE SEBI ORDER. THERE IS NOTHING ON RECORD TO SHOW THAT THE BROKERS WERE SUSPENDED BY THE SEBI NOR THERE ANYTHING ON RE CORD TO SHOW THAT THE TWO BROKERS OF THE APPELLANTS MENTIONED HE RE IN ABOVE WERE INVOLVED IN THE ALLEGED SCAM. THE ASSESSING OF FICER HAS NOT EVEN CONSIDERED EXAMINING THE BROKERS OF THE APPELL ANTS. IT IS A MATTER OF THE FACT THAT SEBI LOOKS INTO IRREGULAR M OVEMENTS IN SHARE PRICES ON RANGE AND WARN INVESTOR AGAINST ANY SUCH UNUSUAL INCREASE IN SHARES PRICES. NO SUCH WARNINGS WERE ISSUED BY THE SEBI. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 15 26. THERE IS NO DISPUTE THAT THE STATEMENTS WHICH W ERE RELIED BY THE ASSESSING OFFICER WERE NOT RECORDED BY THE ASSE SSING OFFICER IN THE ASSESSMENT PROCEEDINGS BUT THEY WERE PRE-EXI STING STATEMENTS RECORDED BY THE INVESTIGATION WING AND T HE SAME CANNOT BE THE SOLE BASIS OF ASSESSMENT WITHOUT COND UCTING PROPER ENQUIRY AND EXAMINATION DURING THE ASSESSMENT PROCE EDINGS ITSELF. IN OUR HUMBLE OPINION, NEITHER THE ASSESSIN G OFFICER CONDUCTED ANY ENQUIRY NOR HAS BROUGHT ANY CLINCHING EVIDENCES TO DISPROVE THE EVIDENCES PRODUCED BY THE ASSESSEE. TH E REPORT OF INVESTIGATION WING IS MUCH LATER THAN THE DATES OF PURCHASE / SALE OF SHARES AND THE ORDER OF THE SEBI IS ALSO MUCH LA TER THAN THE DATE OF TRANSACTIONS TRANSACTED AND NOWHERE SEBI HA S DECLARED THE TRANSACTION TRANSACTED AT EARLIER DATES AS VOID . XX XX XX 30. CONSIDERING THE VORTEX OF EVIDENCES, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS SUCCESSFULLY DISCHARGED THE ONUS CAST UPON HIM BY PROVISIONS OF SECTION 68 OF THE ACT AS MENTIONED ELSEWHERE, SUCH DISCHARGE OF ONUS IS PURELY A QUEST ION OF FACT AND THEREFORE THE JUDICIAL DECISIONS RELIED UPON BY THE DR WOULD DO NO GOOD ON THE PECULIAR PLETHORA OF EVIDENCES IN RE SPECT OF THE FACTS OF THE CASE IN HAND AND HENCE THE JUDICIAL DE CISIONS RELIED UPON BY BOTH THE SIDES, THOUGH PERUSED, BUT NOT CON SIDERED ON THE FACTS OF THE CASE IN HAND. 6. AGGRIEVED BY THE AFO RESAID FINDINGS, THE REVENUE HAS FILED THE INSTANT APPEALS CONTENDIN G THAT, NOTWITHSTANDING THE TAX EFFECT IN THE APPEALS FALLI NG BELOW THE THRESHOLD PRESCRIBED UNDER CIRCULAR NO. 23 DATED 6 TH SEPTEMBER, 2019, THE APPEALS ARE MAINTAINABLE IN VIEW OF THE O FFICE MEMORANDUM DATED 16TH SEPTEMBER, 2019 ISSUED BY THE CBDT, WHICH CLARIFIES THAT THE MONETARY LIMITS PRESCRIBED IN THE AFOREMENTIONED CIRCULAR SHALL NOT APPLY WHERE AN AS SESSEE IS CLAIMING BOGUS LTCG THROUGH PENNY STOCKS, AND THE A PPEALS BE HEARD ON MERITS. 7. MR. ZOHEB HOSSAIN, LEARNED SENI OR STANDING COUNSEL FOR THE REVENUE (APPELLANT HEREIN), CONTEND S THAT THE LEARNED ITAT HAS COMPLETELY ERRED IN LAW IN DELETIN G THE ADDITION, AND THUS THE IMPUGNED ORDER SUFFERS FROM PERVERSITY . HE SUBMITS THAT THERE ARE CERTAIN GERMANE FACTUAL ERRORS, INAS MUCH AS THE LEARNED ITAT HAS WRONGLY RECORDED THAT THERE WAS NO INDEPENDENT ENQUIRY CONDUCTED BY THE AO, WHEN IN FA CT THE AO HAD ISSUED NOTICES TO THE COMPANIES IN QUESTION UND ER SECTION 133(6) OF THE ACT. HE POINTS OUT THAT THE OBSERVATI ONS RECORDED IN PARA 25 OF THE IMPUGNED ORDER ARE FACTUALLY INCORRE CT, AND IN CONFLICT WITH PARA 4 OF THE ORDER OF THE CIT(A) DAT ED 24TH DECEMBER, 2018 WHICH READS AS FOLLOWS: 4. EVEN THE BROKER THROUGH WHOM THE SHARES WERE DEMATERIALIZED AND SOL D I.E. SMC GLOBAL SECURITIES LTD. WAS ALSO A PART OF THE SCAM. THIS IS A DELHI I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 16 BASED BROKER WHOSE REGIONAL OFFICE WAS ALSO SURVEYE D. THE SUB BROKERS WERE ALSO SURVEYED AND ALSO STATEMENTS RECO RDED WHICH CONFIRMED THE PAYMENT OF CASH COMMISSION BY THE BEN EFICIARIES FOR BEING PART OF THE SYNDICATE. 8. MR. HOSSAIN AR GUES THAT IN CASES RELATING TO LTCG IN PENNY STOCKS, THERE MAY N OT BE ANY DIRECT EVIDENCE IN THE HANDS OF THE REVENUE TO ESTA BLISH THAT THE INVESTMENT MADE IN SUCH COMPANIES WAS AN ACCOMMODAT ION ENTRY. THUS THE COURT SHOULD TAKE THE ASPECT OF HUMAN PROB ABILITIES INTO CONSIDERATION THAT NO PRUDENT INVESTOR WOULD INVEST IN PENNY SCRIPS. CONSIDERING THE FACT THAT THE FINANCIALS OF THESE COMPANIES DO NOT SUPPORT THE GAINS MADE BY THESE COMPANIES IN THE STOCK EXCHANGE, AS WELL AS THE FACT THAT DESPITE THE NOTI CES ISSUED BY THE AO, THERE WAS NO EVIDENCE FORTHCOMING TO SUSTAIN TH E CREDIBILITY OF THESE COMPANIES, HE ARGUES THAT IT CAN BE SAFELY CONCLUDED THAT THE INVESTMENTS MADE BY THE PRESENT RESPONDENTS WER E NOT GENUINE. HE SUBMITS THAT THE AO MADE SUFFICIENT IND EPENDENT ENQUIRY AND ANALYSIS TO TEST THE VERACITY OF THE CL AIMS OF THE RESPONDENT AND AFTER OBJECTIVE EXAMINATION OF THE F ACTS AND DOCUMENTS, THE CONCLUSION ARRIVED AT BY THE AO IN R ESPECT OF THE TRANSACTION IN QUESTION, OUGHT NOT TO HAVE BEEN INT ERFERED WITH. IN SUPPORT OF HIS SUBMISSION, MR. HOSSAIN RELIES UPON THE JUDGMENT OF THIS COURT IN SUMAN PODDAR V. ITO, [202 0] 423 ITR 480 (DELHI) , AND OF THE SUPREME COURT IN SUMATI DAYAL V. CIT, (1995) SUPP. (2) SCC 453. 9. MR. HOSSAIN FURTHER ARGUES THAT THE LEARNED ITAT HAS ERRED IN HOLDING THAT THE AO DID NOT CONSIDER EXAMINING THE BROKERS OF THE RESPONDENT. HE ASSERTS THAT THIS HOLDING IS CONTRAR Y TO THE FINDINGS OF THE AO. AS A MATTER OF FACT, THE DEMAT ACCOUNT STATEMENT OF THE RESPONDENT WAS CALLED FOR FROM THE BROKER M/S SMC GLOBAL SECURITIES LTD UNDER SECTION 133(6) OF T HE ACT, ON PERUSAL WHEREOF IT WAS FOUND THAT THE RESPONDENT WA S NOT A REGULAR INVESTOR IN PENNY SCRIPS. 10. WE HAVE HEARD MR. HOSSAIN AT LENGTH AND GIVEN OUR THOUGHTFUL CONSIDERATION TO HIS CONTENTIONS, BUT ARE NOT CONVINCED WITH THE SAME FO R THE REASONS STATED HEREINAFTER. 11. ON A PERUSAL OF THE RECORD, IT IS EASILY DISCERNIBLE THAT IN THE INSTANT CASE, THE AO HAD PR OCEEDED PREDOMINANTLY ON THE BASIS OF THE ANALYSIS OF THE F INANCIALS OF M/S GOLD LINE INTERNATIONAL FINVEST LIMITED. HIS CONCLUSION AND FINDINGS AGAINST THE RESPONDENT ARE CHIEFLY ON THE STRENGTH OF THE ASTOUNDING 4849.2% JUMP IN SHARE PRICES OF THE AFORESAID COMPANY WITHIN A SPAN OF TWO YEARS, WHICH IS NOT SU PPORTED BY THE FINANCIALS. ON AN ANALYSIS OF THE DATA OBTAINED FROM THE WEBSITES, THE AO OBSERVES THAT THE QUANTUM LEAP IN THE SHARE PRICE IS NOT JUSTIFIED; THE TRADE PATTERN OF THE AF ORESAID COMPANY I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 17 DID NOT MOVE ALONG WITH THE SENSEX; AND THE FINANCI ALS OF THE COMPANY DID NOT SHOW ANY REASON FOR THE EXTRAORDINA RY PERFORMANCE OF ITS STOCK. WE HAVE NOTHING ADVERSE T O COMMENT ON THE ABOVE ANALYSIS, BUT ARE CONCERNED WITH THE A XIOMATIC CONCLUSION DRAWN BY THE AO THAT THE RESPONDENT HAD ENTERED INTO AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY C LAIMING FICTITIOUS LTCG, WHICH IS EXEMPT UNDER SECTION 10(3 8), IN A PREPLANNED MANNER TO EVADE TAXES. THE AO EXTENSIVEL Y RELIED UPON THE SEARCH AND SURVEY OPERATIONS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT IN KOLKATA, DELHI, MUMBAI AND AHMEDABAD ON PENNY STOCKS, WHICH SETS OUT THE MODUS OPERANDI ADOPTED IN THE BUSINESS OF PROVI DING ENTRIES OF BOGUS LTCG. HOWEVER, THE RELIANCE PLACED ON THE REPORT, WITHOUT FURTHER CORROBORATION ON THE BASIS OF COGEN T MATERIAL, DOES NOT JUSTIFY HIS CONCLUSION THAT THE TRANSACTIO N IS BOGUS, SHAM AND NOTHING OTHER THAN A RACKET OF ACCOMMODATI ON ENTRIES. WE DO NOTICE THAT THE AO MADE AN ATTEMPT T O DELVE INTO THE QUESTION OF INFUSION OF RESPONDENTS UNACCOUNTE D MONEY, BUT HE DID NOT DIG DEEPER. NOTICES ISSUED UNDER SECTIONS 133(6)/131 OF THE ACT WERE ISSUED TO M/S GOLD LINE INTERNATIONAL FINVEST LIMITED, BUT NOTHING EMERGED FROM THIS EFFO RT. THE PAYMENT FOR THE SHARES IN QUESTION WAS MADE BY SH. SALASAR TRADING COMPANY. NOTICE WAS ISSUED TO THIS ENTITY A S WELL, BUT WHEN THE NOTICES WERE RETURNED UNSERVED, THE AO DID NOT TAKE THE MATTER ANY FURTHER. HE THEREAFTER SIMPLY PROCEEDED ON THE BASIS OF THE FINANCIALS OF THE COMPANY TO COME TO THE CONCLU SION THAT THE TRANSACTIONS WERE ACCOMMODATION ENTRIES, AND THUS, FICTITIOUS. THE CONCLUSION DRAWN BY THE AO, THAT THERE WAS AN A GREEMENT TO CONVERT UNACCOUNTED MONEY BY TAKING FICTITIOUS LTCG IN A PRE- PLANNED MANNER, IS THEREFORE ENTIRELY UNSUPPORTED B Y ANY MATERIAL ON RECORD. THIS FINDING IS THUS PURELY AN ASSUMPTION BASED ON CONJECTURE MADE BY THE AO. THIS FLAWED APP ROACH FORMS THE REASON FOR THE LEARNED ITAT TO INTERFERE WITH T HE FINDINGS OF THE LOWER TAX AUTHORITIES. THE LEARNED ITAT AFTER C ONSIDERING THE ENTIRE CONSPECTUS OF CASE AND THE EVIDENCE BROUGHT ON RECORD, HELD THAT THE RESPONDENT HAD SUCCESSFULLY DISCHARGE D THE INITIAL ONUS CAST UPON IT UNDER THE PROVISIONS OF SECTION 6 8 OF THE ACT. IT IS RECORDED THAT THERE IS NO DISPUTE THAT THE SHAR ES OF THE TWO COMPANIES WERE PURCHASED ONLINE, THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL, AND THE SHARES WERE DEMATE RIALIZED AND THE SALES HAVE BEEN ROUTED FROM DE-MAT ACCOUNT AND THE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHA NNELS. THE ABOVE NOTED FACTORS, INCLUDING THE DEFICIENT ENQUIR Y CONDUCTED BY THE AO AND THE LACK OF ANY INDEPENDENT SOURCE OR EV IDENCE TO I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 18 SHOW THAT THERE WAS AN AGREEMENT BETWEEN THE RESPON DENT AND ANY OTHER PARTY, PREVAILED UPON THE ITAT TO TAKE A DIFFERENT VIEW. BEFORE US, MR. HOSSAIN HAS NOT BEEN ABLE TO POINT O UT ANY EVIDENCE WHATSOEVER TO ALLEGE THAT MONEY CHANGED HA NDS BETWEEN THE RESPONDENT AND THE BROKER OR ANY OTHER PERSON, OR FURTHER THAT SOME PERSON PROVIDED THE ENTRY TO CONVERT UNAC COUNTED MONEY FOR GETTING BENEFIT OF LTCG, AS ALLEGED. IN T HE ABSENCE OF ANY SUCH MATERIAL THAT COULD SUPPORT THE CASE PUT F ORTH BY THE APPELLANT, THE ADDITIONS CANNOT BE SUSTAINED. 12. M R. HOSSAINS SUBMISSIONS RELATING TO THE STARTLING SPIKE IN THE SHARE PRICE AND OTHER FACTORS MAY BE ENOUGH TO SHOW CIRCUMSTANCES T HAT MIGHT CREATE SUSPICION; HOWEVER THE COURT HAS TO DECIDE A N ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT ON SUSPICION A LONE. THE THEORY OF HUMAN BEHAVIOR AND PREPONDERANCE OF PROBA BILITIES CANNOT BE CITED AS A BASIS TO TURN A BLIND EYE TO T HE EVIDENCE PRODUCED BY THE RESPONDENT. WITH REGARD TO THE CLAI M THAT OBSERVATIONS MADE BY THE CIT(A) WERE IN CONFLICT WI TH THE IMPUGNED ORDER, WE MAY ONLY NOTE THAT THE SAID OBSE RVATIONS ARE GENERAL IN NATURE AND LATER IN THE ORDER, THE CIT(A ) ITSELF NOTES THAT THE BROKER DID NOT RESPOND TO THE NOTICES. BE THAT AS IT MAY, THE CIT(A) HAS ONLY APPROVED THE ORDER OF THE AO, F OLLOWING THE SAME REASONING, AND RELYING UPON THE REPORT OF THE INVESTIGATION WING. LASTLY, RELIANCE PLACED BY THE REVENUE ON SUMAN POD DAR V. ITO (SUPRA) AND SUMATI DAYAL V. CIT (SUPRA) IS O F NO ASSISTANCE. UPON EXAMINING THE JUDGMENT OF SUMAN PODDAR (SUPRA) AT LENGTH, WE FIND THAT THE DECISION THEREI N WAS ARRIVED AT IN LIGHT OF THE PECULIAR FACTS AND CIRCUMSTANCES DE MONSTRATED BEFORE THE ITAT AND THE COURT, SUCH AS, INTER ALIA, LACK OF EVIDENCE PRODUCED BY THE ASSESSEE THEREIN TO SHOW A CTUAL SALE OF SHARES IN THAT CASE. ON SUCH BASIS, THE ITAT HAD RETURNED THE FINDING OF FACT AGAINST THE ASSESSEE, HOLDING THAT THE GENUINENESS OF SHARE TRANSACTION WAS NOT ESTABLISHE D BY HIM. HOWEVER, THIS IS QUITE DIFFERENT FROM THE FACTUAL M ATRIX AT HAND. SIMILARLY, THE CASE OF SUMATI DAYAL V. CIT (SUPRA) TOO TURNS ON ITS OWN SPECIFIC FACTS. THE ABOVE-STATED CASES, THUS, ARE OF NO ASSISTANCE TO THE CASE SOUGHT TO BE CANVASSED BY TH E REVENUE. 13. THE LEARNED ITAT, BEING THE LAST FACT-FINDING AUTHO RITY, ON THE BASIS OF THE EVIDENCE BROUGHT ON RECORD, HAS RIGHTL Y COME TO THE CONCLUSION THAT THE LOWER TAX AUTHORITIES ARE NOT A BLE TO SUSTAIN THE ADDITION WITHOUT ANY COGENT MATERIAL ON RECORD. WE THUS FIND NO PERVERSITY IN THE IMPUGNED ORDER. 14. IN THIS VI EW OF THE MATTER, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. 15. ACCORDINGLY, THE PRESENT APPEALS ARE DISMISSED. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 19 6. IN THE ABOVE NOTED JUDGMENT, THE HON'BLE COURT H AS HELD THAT STARTLING SPIKE IN THE SHARE PRICES AND OTHER FACTORS MAY BE ENOUGH TO SHOW CIRCUMSTANCES THAT MIGHT CREATE SUSPICION BUT THE C OURT HAS TO DECIDE AN ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT O N SUSPICION ALONE. THE HON'BLE COURT FURTHER DISTINGUISHED THE JUDGMENT IN THE CASE OF SUMAN PODAR WHICH WAS IN FAVOUR OF REVENUE. THE HON'BLE COURT FURTHER HELD THAT CASE OF SUMATI DAYAL U/S CIT WAS ALSO NOT APPLICABL E TO THE ASSESSEE. THE HON'BLE COURT FURTHER HELD THAT RELIANCE PLACED BY THE ASSESSING OFFICER ON THE INVESTIGATION REPORT OF INVESTIGATION WING WITH OUT FURTHER CORROBORATION ON THE BASIS OF COGENT MATERIAL DOES NOT JUSTIFY HI S CONCLUSION THAT THE TRANSACTION IS BOGUS, SHAM AND NOTHING OTHER THAN A RACKET OF ACCOMMODATION ENTRIES. 7. AS REGARDS THE RELIANCE PLACED BY LEARNED CIT(A) ON THE CASE OF SANJAY BIMALCHAND JAIN DECIDED BY HON'BLE BOMBAY HI GH COURT, WE FIND THAT THE ABOVE SAID CASE LAW HAS BEEN DISTINGUISHED BY H ON'BLE I.T.A.T. KOLKATA BENCH IN ITA NO. 2243/KOL/2017 WHERE THE HON'BLE TR IBUNAL VIDE PARA 31 HELD AS UNDER: 31. WE NOTE THAT THE ID. D.R. HAD HEAVILY RELIED UP ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF BIMALCHAND JAIN IN TAX APPEAL NO. 18 OF 2017. WE NO TE THAT IN THE CASE RELIED UPON BY THE ID. D.R, WE FIN D THAT THE FACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN H AND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MADE BY T HE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPA NIES AND THE PURCHASE OF SHARES OF THE COMPANIES WAS DONE TH ROUGH THE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDE NTALLY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY TH E ASSESSEE WAS SHOWN AS CAPITAL GAINS WHICH WAS NOT ACCEPTED BY THE A.O. AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE ASSESSEE BY TREATING THE SAL ES OF THE I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 20 SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF T RADE. THUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UP ON BY THE ID. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED O N SALE OF SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 7.1 THE ABOVE CASE LAW OF HON'BLE BOMBAY HIGH COURT HAS FURTHER BEEN DISTINGUISHED BY MUMBAI BENCH OF THE TRIBUNAL IN TH E CASE OF GEETA KHARE IN ITA NO. 4267/MUM/2018 WHERE THE HON'BLE TRIBUNAL HA S HELD AS UNDER: 7.8 IT WOULD BE PERTINENT TO ADDRESS THE CASE LAW RELIED UPON BY THE LD DR BEFORE US ON THE DECISION OF HON'BLE B OMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF SANJAY BIMALCHA ND JAIN VS PR. CIT (NAGPUR) REPORTED IN (2018) 89 TAXMANN.COM 196 (BOMBAY) DATED 10.4.2017 ON THE IMPUGNED ISSUE. FROM THE FAC TS OF SANJAY BIMALCHAND JAIN SUPRA, WE FIND THAT (I) IN THAT CAS E, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AO'S LETTER REGARDING THE NAMES AND ADDRESS AND BAN K ACCOUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASS ESSEE; (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF B OTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE I N CASH; (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGL Y THE SAME; (IV) THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WERE ALSO THE SAME PERSON; (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSESSEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIAL FACTS, THE HON'BL E BOMBAY HIGH COURT RENDERED THE DECISION IN FAVOUR OF THE REVENU E. NONE OF THESE FACTORS WERE PRESENT IN THE FACTS OF THE ASSE SSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE DECISIO N OF HON'BLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABL E. 7.2 AS REGARDS THE RELIANCE PLACED BY LEARNED CIT(A ) ON THE ORDER OF UDIT KALRA (SUPRA), WE FIND THAT THE ABOVE CASE LAW HAS BEEN HELD TO BE DISTINGUISHABLE BY HON'BLE DELHI TRIBUNAL IN THE CA SE OF KARUNA GARG IN I.T.A. NO.1069/LKW/2019 VIDE ORDER DATED 06/08/2019 AND FURTHER IN THE CASE OF SWATI LUTHRA VS. INCOME TAX OFFICER IN I.T. A. NO.6480/LKW/2019 VIDE ORDER DATED 28/06/2019. IN THESE TWO CASES TH E HON'BLE TRIBUNAL HAS AGAIN ALLOWED RELIEF TO THE ASSESSEE THOUGH FROM A DIFFERENT SCRIP BUT IN THE I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 21 DECISIONS THEY HAVE HELD THAT THE JUDGMENT OF HON'B LE DELHI HIGH COURT IN UDIT KALRA WAS DISTINGUISHABLE AS IN THAT CASE THE HON'BLE HIGH COURT HAS ONLY DISMISSED THE APPEAL AS THE HON'BLE HIGH COURT FOUND THAT THE ISSUE INVOLVED WAS ONLY A QUESTION OF FACT. IN THIS RESP ECT, PARA 28 OF THE TRIBUNAL ORDER IN THE CASE OF KARUNA GARG IS RELEVANT WHICH IS REPRODUCED BELOW: 28. THE DR HEAVILY RELIED UPON THE JUDGMENT OF HO N'BLE HIGH COURT OF DELHI IN THE CASE OF UDIT KALRA VS. ITO IN ITA NO.220/2019. WE HAVE CAREFULLY PERUSED THE ORDER OF THE HON'BLE HIGH COURT AND ON GOING THROUGH THE SAID JU DGMENT WE FIND THAT NO QUESTION OF LAW WAS FORMULATED BY THE HON'BLE HIGH COURT OF DELHI IN THE SAID CASE AND THERE IS ONLY D ISMISSAL OF APPEAL IN LIMINE AS THE HON'BLE HIGH COURT FOUND TH AT THE ISSUE INVOLVED IS A QUESTION OF FACT. 7.3 SIMILARLY IN THE CASE OF SWATI LUTHRA (SUPRA), THE HON'BLE TRIBUNAL WHILE DEALING WITH THE CASE LAW OF UDIT KALRA VIDE PARA 14 HAS HELD AS UNDER: 14. THAT THE LD DR DURING THE COURSE OF HEARING P LACED HEAVY RELIANCE ON JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF UDIT KALRA VS ITO IN ITA NO. 220/2019. RELEVANT EXTRACTS OF SAID JUDGMENT ARE EXTRACTED AS BELOW: 'THE ASSESSEE IS AGGRIEVED BY THE CONCURRENT FINDIN GS OF THE TAX AUTHORITIES - INCLUDING THE LOWER APPELLATE AUTHORITIES REJECTING ITS CLAIM FOR A LONG TERM CAP ITAL GAIN REPORTED BY IT, TO THE TUNE OF RS.13,33,956/- AND RS.14,34,501/- IN RESPECT OF 4,000 SHARES OF M/S KA PPAC PHARMA LTD. THE ASSESSEE HELD THOSE SHARES FOR APPROXIMATELY 19 MONTHS; THE ACQUISITION PRICE WAS RS.12/- PER SHARE WHEREAS THE MARKET PRICE OF THE S HARES AT THE TIME OF THEIR SALE, WAS RS.720/-. IT IS CONT ENDED THAT THE ASSESSEE WAS NOT GRANTED FAIR OPPORTUNITY. MR. RAJESH MAHNA, LEARNED COUNSEL APPEARING FOR THE ASSESSEE RELIED UPON THE ORDERS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, IN RESPECT OF THE SAME COMPANY I.E . M/S I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 22 KAPPAC PHARMA LTD., AND POINTED OUT THAT THE TAX AUTHORITY'S APPROACH IN THIS CASE WAS ENTIRELY ERRO NEOUS AND INCONSISTENT. THE MAIN THRUST OF THE ASSESSEE'S ARGUMENT IS THAT HE WAS DENIED THE RIGHT TO CROSS-EXAMINATION OF THE TW O INDIVIDUALS WHOSE STATEMENTS LED TO THE INQUIRY AND ULTIMATE DISALLOWANCE OF THE LONG TERM CAPITAL GAIN CLAIM IN THE RETURNS WHICH ARE THE SUBJECT MATTER OF THE PRESENT APPEAL. THIS COURT HAS CONSIDERED THE SUBMISSIONS OF THE PA RTIES. ASIDE FROM THE FACT THAT THE FINDINGS IN THIS CASE ARE ENTIRELY CONCURRENT - A.O., CIT(A) AND THE ITAT HAV E ALL CONSISTENTLY RENDERED ADVERSE FINDINGS - WHAT IS IN TRIGUING IS THAT THE COMPANY (M/S KAPPAC PHARMA LTD.) HAD MEAGRE RESOURCES AND IN FACT REPORTED CONSISTENT LO SSES. IN THESE CIRCUMSTANCES, THE ASTRONOMICAL GROWTH OF THE VALUE OF COMPANY'S SHARES NATURALLY EXCITED THE SUSPICIONS OF THE REVENUE. THE COMPANY WAS EVEN DIRECTED TO BE DELISTED FROM THE STOCK EXCHANGE. HA VING REGARD TO THESE CIRCUMSTANCES AND PRINCIPALLY ON TH E GROUND THAT THE FINDINGS ARE ENTIRELY OF FACT, THIS COURT IS OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE PRESENT APPEAL. THIS APPEAL IS ACCORDINGLY DISMISSED.' 15. ON GOING THROUGH THE AFORESAID JUDGMENT, WE FIN D THAT NO QUESTION OF LAW WAS FORMULATED BY HON'BLE HIGH COUR T OF DELHI IN THE SAID CASE AND THERE IS ONLY DISMISSAL OF APP EAL IN LIMINE AND THE HON'BLE HIGH COURT FOUND THAT THE ISSUE INV OLVED IS A QUESTION OF FACT AS HELD BY HON'BLE APEX COURT IN KUNHAYYAMMED VS STATE OF KERALA REPORTED IN 245 ITR 360 AND ALSO IN CIT VS. RASHTRADOOT (HUF) REPORTED IN 412 I TR 17. EVEN ON MERITS AND FACTS, THE SAID JUDGMENT IN THE CASE OF UDIT KALRA VS ITO (SUPRA) IS DISTINGUISHABLE AS IN THAT CASE T HE SCRIPS OF THE COMPANY WERE DELISTED ON STOCK EXCHANGE, WHEREA S, IN THE INSTANT CASE, THE INTERIM ORDER OF SEBI IN THE CASE S OF M/S ESTEEM BIO AND M/S TURBOTECH HAVE BEEN COOLED DOWN BY SUBSEQUENT ORDER OF SEBI PLACED BY ASSESSEES IN ITS PAPER BOOK. THUS, THE CASE OF UDIT KALRA VS ITO RELIED BY LD. DR IS I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 23 CLEARLY DISTINGUISHABLE ON FACTS AND IS NOT APPLICA BLE TO THE FACTS OF ASSESSEE. THUS, WE HOLD THAT THE CASE OF ASSESSE E IS FACTUALLY AND MATERIALLY DISTINGUISHABLE FROM THE FACTS OF TH E CASE OF UDIT KALRA VS ITO SO RELIED BY LD DR. 8. AS REGARDS THE RELIANCE PLACED ON THE ORDER OF I .T.A.T. IN ITA NO. 6717/DEL/2017, WE FIND THAT IN THAT CASE PURCHASE O F SHARES WERE MADE IN CASH AND THE SHARES WERE ORIGINALLY ALLOTTED IN PHY SICAL FORM WHEREAS IN THE PRESENT CASE THE PAYMENTS HAS BEEN MADE THROUGH BAN KING CHANNELS AND SHARES HAS BEEN ALLOTTED ELECTRONICALLY. AS REGARDS THE CASE LAW OF MADRAS HIGH COURT, WE FIND THAT IN THAT CASE THE ASSESSEE HAD NOT FILED ANY EVIDENCE OF TRANSACTIONS AND HAD NOT EVEN APPEARED BUT HERE IN THE PRESENT CASES THE ASSESSEES HAS FILED ALL EVIDENCES AND AGA INST WHICH THERE IS NO ADVERSE FINDINGS BY THE AUTHORITIES. THEREFORE, ALL ABOVE CASE LAWS RELIED ON BY LEARNED CIT(A) ARE NOT APPLICABLE TO THE FACTS A ND CIRCUMSTANCES OF THE PRESENT CASES. 9. BESIDES THE RELIANCE PLACED BY LEARNED COUNSEL F OR THE ASSESSEE ON THE ORDER OF HON'BLE DELHI HIGH COURT IN THE CASE O F SMT. KRISHNA DEVI, LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON VARIOUS CASE LAWS WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES IN TH E CASE OF PENNY STOCKS MENTIONED IN THE INVESTIGATION REPORT OF INCOME TAX DEPARTMENT, THE TRIBUNAL HAS ALLOWED RELIEF TO THE ASSESSEES BY REL YING ON THE EVIDENCES AND BY REJECTING THE THEORY OF PREPONDERANCE OF HUMAN P ROBABILITIES. THE CASE LAWS RELIED ON BY LEARNED COUNSEL ARE LISTED BELOW: 1. PRAKASH CHAND SHARMA VS. DCIT, ITA NO. 780 & 781 /JP/2019 ORDER DATED 18.11.2020, ITAT - JAIPUR. 2. ANOOP JAIN VS. ACIT, ITA NO. 6703/DEL/2019 ORDER DATED 10.01.2020, ITAT - DELHI. 3. RLAZ MUNSHI VS. ACIT, ITA NO. 8314/DEL/2018 ORDE R DATED 11.03.2020, ITAT - DELHI. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 24 4. SURESH KUMAR AGGARWAL VS. ACIT, ITA NO. 8703/DEL /2019 ORDER DATED 29.06.2020, ITAT -DELHI. 5. MUKESH NAUBHAI DESAI VS. ACIT, ITA NO. 781/SRT/2 018 ORDER DATED 06.05.2021, ITAT -SURAT. 6. UMA SHANKER DHANDHANIA VS. ITO, ITA NO. 475 & 68 1/LKW/2019 ORDER DT. 16.02.2021, ITAT -LUCKNOW. 7. ACHAL GUPTA VS. ITO, ITA NO. 501/LKW/20 19, ORDER DATED 16.12.2020, ITAT - LUCKNOW. 8. SMT. KARUNA GARG VS. INCOME TAX OFFICER ITA NO . 1069/DEL/2019, ORDER DT. 06.08.2019 9. REESHU GOEL VS. ITO ITA NO. 1691/DEL/2019, ORD ER DT. 07.10.2019. 10. SWATI LUTHRA VS. ITO ITA NO. 6480/DEL/2017, O RDER DT. 28.06.2019. 11. IN ALL THE ABOVE CASE LAWS DECIDED BY DIFFERENT BENCHES OF THE TRIBUNAL, THE ISSUE IS SAME AND THE SCRIPS INVOLVE D IN THESE CASES ARE THOSE IDENTIFIED BY THE INVESTIGATION DEPARTMENT AS PENNY STOCK AND ARE PART OF 84 COMPANIES IDENTIFIED BY THE DEPARTMENT. THE SCRIPS INVOLVED IN THE PRESENT APPEALS ARE NOT EVEN PART OF THE 84 COMPANIES IDENT IFIED BY THE DEPARTMENT AND MOREOVER THE NAME OF THE BROKER THROUGH WHOM SH ARES WERE SOLD BY ASSESSEES DO NOT FIND MENTION BY THE INVESTIGATION WING. ONE OF THE REASONS FOR REJECTION OF THE CLAIM OF THE ASSESSEES IS THAT SOME DIRECTORS OF ALLEGED DUMMY COMPANIES HAD JOINED THE BOARD OF THE BROKER COMPANY. THE RELIANCE PLACED BY AUTHORITIES BELOW ON THIS REASON IS ALSO MISPLACED AS NOTHING WRONG HAS BEEN SHOWN TO HAVE BEEN DONE BY T HE BROKER COMPANY BY INVESTIGATION WING OF THE DEPARTMENT. THE BAN WH ICH WAS IMPOSED ON THIS BROKER IN 2010 WAS ALSO LIFTED IMMEDIATELY AND THE ASSESSEES HAS SOLD SHARES ONLY IN 2016 I.E. AFTER A PERIOD OF SIX YEAR S AND NO ADVERSE INFERENCE AGAINST THE BROKER CAN BE TAKEN IN THE ABSENCE OF A NY ADVERSE FINDINGS BY ANY AUTHORITY. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 25 11. IN THE CASE OF PR. CIT VS. PARASBEN KASTURCH AND KOCHAR, R/TAX APPEAL NO. 204 OF 2020, THE REVENUE HAD FILED APPEA L AGAINST THE ORDER OF TRIBUNAL WHERE THE TRIBUNAL HAD ALLOWED RELIEF TO T HE ASSESSEE, AGAIN IN A CASE U/S. 10(38) OF THE ACT, UNDER SIMILAR FACTS AN D CIRCUMSTANCES, THE HON'BLE GUJARAT HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER: 1. THIS APPEAL UNDER SECTION 260A OF THE INCOME TA X ACT, 1961 (FOR SHORT 'THE ACT 1961') IS AT THE INSTANCE OF THE REVENUE AND IS DIRECTED AGAINST THE ORDER PASSED BY THE INC OME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH DATED 20-2-2020 IN THE ITA NO.549/AHD/2018 FOR THE A.Y. 2014-15. THE REVENUE H AS PROPOSED THE FOLLOWING QUESTION OF LAW FOR THE CONS IDERATION OF THIS COURT:- 'WHETHER THE APPELLATE TRIBUNAL WAS RIGHT IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS.9,70,468/- MAD E ON ACCOUNT OF LTCG CLAIMED AS EXEMPT U/S. 10(38) OF TH E ACT WITHOUT APPRECIATING THE FACT THAT THE TRANSACTION WAS PRE- ARRANGED AS WELL AS SHAM AND WAS CARRIED OUT THROUG H PENNY SCRIPTS COMPANIES / PAPER COMPANIES?' 2. WE TAKE NOTICE OF THE FACT THAT THE ISSUE IN THE PRESENT APPEAL IS WHETHER THE ASSESSEE EARNED LONG TERM CAP ITAL GAIN C/TAXAP/204/2020 ORDER THROUGH TRANSACTIONS WITH BO GUS COMPANIES. IN THIS REGARD, THE FINDING OF FACT RECO RDED BY THE TRIBUNAL IN PARAS 9, 10 AND 11 READS THUS:- '9. IN OUR CONSIDERED OPINION, IN SUCH CASE ASSESSE E CANNOT BE HELD THAT HE EARNED LONG TERM CAPITAL GAIN THROU GH BOGUS COMPANY WHEN HE HAS DISCHARGED HIS ONUS BY PLACING ALL THE RELEVANT DETAILS AND SOME OF THE SH ARES ALSO REMAINED IN THE ACCOUNT OF THE APPELLANT AFTER EARN ING OF THE LONG TERM CAPITAL GAIN. 10. LEARNED A.R. CONTENTION IS THAT NO STATEMENT OF THE INVESTIGATION WING WAS GIVEN TO THE ASSESSEE WHICH HAS ANY REFERENCE AGAINST THE ASSESSEE. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 26 11. IN SUPPORT OF ITS CONTENTION, LEARNED A.R. ALSO CITED AN ORDER OF COORDINATE BENCH IN ITA NO.62/AHD/2018 IN THE MATTER OF MOHAN POLYFAB PVT. LTD. VS. ITO WHERE IN ITAT HAS HELD THAT A.O. SHOULD HAVE GRANTED AN OPPORTUNI TY TO CROSS EXAMINE THE PERSON ON WHOSE STATEMENT NOTICE WAS ISSUED TO THE ASSESSEE FOR BOGUS LONG TERM CAPITAL GAIN. BUT IN THIS CASE, NEITHER STATEMENT WAS SUPPLYING TO TH E ASSESSEE NOR CROSS EXAMINATION WAS ALLOWED BY THE L EARNED A.O. THEREFORE, IN OUR CONSIDERED OPINION, ASSESSEE HAS DISCHARGED HIS ONUS AND NO ADDITION CAN BE SUSTAINE D IN THE HANDS OF THE ASSESSEE.' 3. THUS, THE TRIBUNAL HAS RECORDED THE FINDING OF F ACT THAT THE ASSESSEE DISCHARGED HIS ONUS OF ESTABLISHING THAT T HE TRANSACTIONS WERE FAIR AND TRANSPARENT AND FURTHER, ALL THE RELE VANT DETAILS WITH REGARD TO SUCH TRANSACTIONS WERE FURNISHED BEFORE T HE INCOME TAX AUTHORITIES AND THE TRIBUNAL ALSO TOOK NOTICE OF TH E FACT THAT SOME OF THE SHARES ALSO REMAINED IN THE ACCOUNT OF THE A PPELLANT. 4. WE TAKE NOTICE OF THE FACT THAT THE ASSESSEE HAS A DEMAT ACCOUNT MAINTAINED WITH THE ICICI SECURITIES LTD. A ND HAS ALSO FURNISHED THE DETAILS OF SUCH BANK TRANSACTIONS WIT H REGARD TO THE PURCHASE OF THE SHARES. IN THE LAST, THE TRIBUNAL T OOK NOTICE OF THE FACT THAT THE STATEMENTS RECORDED BY THE INVESTIGAT ION WING OF THE REVENUE WITH REGARD TO THE TAX ENTRY PROVIDED WERE INFORMED TO THE ASSESSEE DESPITE GIVING HIM OPPORTUNITY TO MEET SUCH AN ALLEGATION. IN THE OVERALL VIEW OF THE MATTER, WE B ELIEVE THAT THE PROPOSED QUESTION CANNOT BE TERMED AS A SUBSTANTIAL QUESTION OF LAW FOR THE PURPOSE OF MAINTAINING THE APPEAL UNDER SECTION 260- A OF THE ACT, 1961. 5. IN THE RESULT, THIS APPEAL FAILS AND IS HEREBY D ISMISSED. 12. WE FURTHER FIND THAT THE ORDER OF HON'BLE GUJAR AT HIGH COURT WAS CHALLENGED BY THE DEPARTMENT BY FILING S.L.P. AND V IDE ORDER DATED 02.08.2021 IN S.L.P. (C) NO. 6782/2021 THE HON'BLE SUPREME COURT HAS DISMISSED THE PETITION BY HOLDING AS UNDER: WE ARE NOT INCLINED TO INTEREFERE WITH THE IMPUGNE D ORDER. THE SPECIAL LEAVE PETITION IS, ACCORDINGLY. DISMISSED. PENDING APPLICATION, IF ANY, STANDS DISPOSED OF. I.T.A. NO.234 & 235/LKW/2020 ASSESSMENT YEAR:2017-18 27 13. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF JUDICIAL PRECEDENT, THE DENIAL OF CLAIM U/S 10(38) OF THE AC T IS NOT JUSTIFIED AND THE ORDERS OF LEARNED CIT(A) ARE REVERSED AND ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE U/S. 10(38) OF THE ACT. AS WE HAVE ALLOWED RELIEF TO THE ASSESSEES ON ACCOUNT OF DENIAL OF LON G TERM CAPITAL GAIN THE ADDITION ON ACCOUNT OF ASSUMED COMMISSION WHICH THE REVENUE HAS ASSUMED TO HAVE BEEN PAID TO THE BROKERS IS ALSO DE LETED. IN VIEW OF OF THE ABOVE, GROUND NOS. 1 TO 6 ARE ALLOWED. GROUND NO.7 WAS NOT ARGUED, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 14. SINCE WE HAVE DECIDED THE APPEALS OF THE ASSESS EE ON MERITS, THEREFORE, THE STAY APPLICATIONS NOS.29 & 30/LKW/20 20 ARISING OUT OF I.T. ACT NOS. 234 & 235 /LKW/2020 FILED BY THE ASSESSEES HA VE BECOME INFRUCTUOUS AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE PARTLY ALLOWED AND STAY APPLICATIONS ARE DISMISSED AS INFRUCTUOUS. (ORDER PRONOUNCED IN THE OPEN COURT ON 11/08/2021) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:11/08/2021 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW BY ORDER ASSISTANT REGISTRAR