Prakasho Devi Saria, Siliguri V. D.C.I.T., Circle - 3(1), Siliguri, Siliguri

ITA 2360/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4793 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH JCIT LD
• Assessee Lawyers: DHIRAJ LAKHOTIA LD
• Keywords: Unexplained cash credit; Business income; Income from undisclosed sources; Principle of natural justice; Penny stocks; Reassessment proceedings; Set aside
• Section: 143(3); 143(1); 250; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI J. SUDHAKAR REDDY, AM & SHRI S.S. GODARA, JM ] I .T . A NO. 2360 /KOL/201 7 A.Y 20 14 - 15 PRAKASHO DEVI SARIA VS. CIT(A), SILIGURI PAN: AGZPD611L (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI DHIRAJ LAKHOTIA, LD.AR FOR THE RESPONDENT /ASSESSEE : SHRI C.J. SINGH , JCIT, LD.DR DATE OF HEARING : 31 - 01 - 201 & 17 - 05 - 2019 DATE OF PRONOUNCEMENT : 17 - 05 - 2019 ORDER SHRI S.S. GODARA, JM : 1. THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 20 14 - 15 ARISE S AGAINST THE CIT(A) , SILIGURIS ORDER DATED 2 9 - 08 - 2017 PASSED IN CASE NO . 45/CIT(A)/SLG/2016 - 17 INVOLVING PROCEEDINGS U/S 143(3) /153D/153A OF THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT APPEAL CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION ADDING HER SHORT TERM CAPITAL LOSS ARISING FROM SALE OF SHARES ( SECURITIES T RANS ACTION TAX - STT) PAID AMOUNTING TO RS. 93,41,510/ - CLAIMED AS SET OFF AGAINST SHORT TERM CAPITAL GAIN ON IN THE MATTER OF COMPENSATION RECEIVED FROM GO VT. OF HARYANA AGAINST ACQUISITION OF LAND . 3. THE CIT(A) DETAILED DISCUSSION ADHERING ASSESSING OFFICERS ACTION MAKING THE IMPUGNED DISALLOWANCE READS AS UNDER: - 2 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 2 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA THE CIT(A)S FINDINGS: 5. DECISION : - THE ONLY GROUND OF APPEAL RELATES TO THE DISALLOWANCE OF LOSS IN SHARES TRANSACTION AMOUNTING TO RS. 93,41,510/ - WHICH WAS CLAIMED AS SHORT TERM CAPITAL LOSS. THIS STCL WAS SET OFF AGAINST THE COMPENSATION OF RS.1 ,22, 12,055COMPENSATION THE AO REJECTED T HE SHORT TERM CAPITAL LOSS OF RS. 93,41,510/ - ARISING FROM SHARES TRANSACTIONS AND THEREAFTER ADDED BACK THE SAME TO THE TOTAL INCOME. PERUSAL OF FACT SHOWS THAT IN THE RETURN OF INCOME, THE APPELLANT HAS CLAIMED TO HAVE RECEIVED COMPENSATION OF RS.1 ,2 2,12,0551 - FROM THE LAND ACQUISITION OFFICER, HARYANA GOVT AGAINST ACQUISITION OF HER LAND. SHE HAD DECLARED THE SAID AMOUNT AS SHORT TERM CAPITAL GAIN WHICH HAD BEEN SET OFF WITH THE SHORT TERM CAPITAL LOSS OF RS.93,41 ,510/ - FROM SHARE DEALINGS. AS PER T HE DETAILS FILED BY THE ASSESSEE, SHE DEALT WITH THE SHARES OF SEVEN (7) DIFFERENT COMPANIES AND CLAIMED TO HAVE INCURRED ABOVE SAID LOSS. THE DETAILS OF THE SHARES DEALINGS ARE GIVEN AS UNDER: - SL. NO. NAME OF THE COMPANY NOS OF SHARES PURCHASE SALES GAIN/LOSS RS. DATE AMOUNT ALL VALUES EXCLUDING DATE AMOUNT ALL VALUES EXCLUDING 1 STRIDES ACCOLAB LTD 1,100 STT(RS.) 17/12/13 9,95,436 STT(RS.) 24/02/2014 3,88,754 (6.06,682) 2 OIL & NATURAL GAS LTD 9,000 2013 - 14 24,68 ,852 2013 - 14 26,05,541 1,36,689 3 FIRST FIN 2,75,000 17/7/13 81,61,087 14/01/14 22,86,664 (58,74,423) 4 ASHOK LEYLAND 10,000 15/7/13 1,75,086 25/2/14 1,55,326 (19,760) 5. RUTRON INT. 1,50,000 12/7/13 40,49,207 19/3/14 10,67,296 (29,81,911) 6 NHPC LTD 5,000 11/7/13 91,484 17/9/13 95,900 4,416 3 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 3 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA 7 SJVN LTD 3000 11 - 7 - 13 60,120 25 - 02 - 14 60,281 161 TOTAL (RS.) 1,60,01,272 66,59,762 (93,41,510 THE A/R OF THE ASSESSE EXPLAINED BOTH VERBALLY AND IN WRITING THAT THE ASSESSEE HAD RECEIVED ENHANCED COMPENSATION AND THE INTEREST ON THE COMPENSATION ON 03/07/2013 FROM THE GOVT. OF HARYANA AND IMMEDIATELY AFTER THE SAID DATE SHE HAS STARTED INVESTING IN THE SHARES OF VARIOUS COMPANIES WHICH CAN BE OBSERVED FROM THE TABLE GIVEN ABOVE. ULTIMATEL Y, AT THE CLOSE OF THE FINANCIAL YEAR THE ASSESSEE INCURRED HUGE LOSS IN THE SHARE DEALINGS AND THEREFORE SUCH LOSS WAS SET OFF WITH THE SHORT TERM CAPITAL GAIN I.E. COMPENSATION AMOUNT SO RECEIVED. THE ABOVE SHORT TERM CAPITAL LOSS OF RS.93,41 ,5101 - I NCLUDES LOSS FROM TWO SCRIP T S VIZ. FIRST FINANCIAL SERVICES LIMITED (RS.58,74,423) AND RUTRON INTERNATIONAL LIMITED. (RS.29,81 ,911) .. THE AO DISALLOWED THE LOSS ARE ACCEPT OF VARIOUS OBSERVATION WHICH ARE ENLISTED AS UNDER: (I) THE ASSESSEE IS NOT A HABITUAL INVESTOR IN SHARES AS THERE WAS NO SUCH RECORD OF SHARE INVESTMENTS/DEALINGS EVEN IN SMALL AMOUNT IN ANY EARLIER PERIOD. SHE BEING A SENIOR CITIZEN LADY SHE HAD NO PREVIOUS KNOWLEDGE OF INVESTING IN SHARES AND STOCKS. HOW COULD SHE IN VEST SUCH HUGE SUM' OF MONEY IN THE SHARES OF LESSER KNOWN PENNY STOCK COMPANIES VIZ. M / S FIRST FINANCIAL SERVICES LTD. AND M / S RUTRON INTERNATIONAL LIMITED. THEREFORE DEALING IN ABOVE NAMED PENNY STOCKS WAS NOTHING BUT A WELL THOUGHT MANIPULATION TO BO OK MANUFACTURED LOSS IN CONNIVANCE WITH THE ENTRY OPERATORS / SHARES BROKERS. ( II ) A SEARCH & SEIZURE OPERATION U/S.132 OF THE LT. ACT, 1961 WAS CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT IN THE OFFICE AND RES IDENTIAL PREMISES OF VARIOUS SHARE BROKERS, ENTRY OPERATORS AND PROMOTERS ACROSS THE COUNTRY INCLUDING AT MUMBAI AND KOLKATA ON 12/04/2015 REVEAL THAT THE ABOVE STATED SCRIPTS VIZ. FIRST FIN AND RUTRON INT. ARE PENNY STOCK COMPANIES WHICH ARE BOGUS. THE STATEMEN T ON OATH GIVEN BY ONE OF THE ENTRY OPERATOR SHRI ANIL AGARWAL THE PROMOTER/OPERATOR U/S.132(4) OF THE I. T: ACT, 1961 ON 12/04/2015 IN ANSWER TO Q.7, Q.8, Q.9, Q.10 4 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 4 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA STATED THAT TRADING WERE DONE ON BEHALF OF CLIENT/BENEFICIARY TO BOOK BOGUS L.T.C;G OR S.T.C LOSS AS PER THEIR REQUIREMENT. (IN THE COURSE OF A SEARCH OPERATION U/S 132 OF I TACT 1961 ON 12/04/2015 IN THE OFFICE AND RESIDENCE OF ONE THE ENTRY OPERATOR SHRI ANIL AGARWAL, WHO WAS THE PROMOTER. OF COMPANIES VIZ. M/S FIRST FINANCIAL SERVICE S LTD. AND RUTRON INTERNATIONAL, IN HIS STATEMENT RECORDED U/S 132(4), HAS! ACCEPTED SUCH DUBIOUS AND UNSCRUPULOUS ENTRIES WERE DONE THROUGH THE ACCOUNTS OF THE COMPANIES MANAGED OR PROMOTED BY HIM. THE MODUS OPERANDI OF HOW THE CAPITAL GAINS OR LOSSES ARE CREATED AS PER THE REQUIREMENT OF THE BENEFICIARIES THROUGH ENTRY OPERATIONS BY LAYERING OF FUNDS UNDER THE VARIOUS PENNY STOCK COMPANIES ~ARE WELL DESCRIBED BY HIM IN HIS STATEMENT MADE ON OATH BEFORE THE INVESTIGATING OFFICER, THE DCIT (INV),UNIT - 8(1), MUMBAI. THE EXTRACT OF ANSWERS TO QUESTIONS NOS 8 AND 9 OF THE STATEMENTS GIVEN BY SHRI ANIL AGARWAL, ON OATH RECORDED US 132(4) ARE REPRODUCED BELOW: - 'Q8. PLEASE EXPLAIN THE MODUS OPERANDI OF THE BOGUS L TCG/STCL ENTRY OBTAINED BY THE BENEFICI ARIES. ANS: SIR, THE BOGUS L TC,C? ENTRY BENEFICIARY APPROACHES AN ENTRY OPERATOR WHO IS HAVING A LISTED COMPANY THROUGH SOME A GENT / MEDIATOR OR DIRECTLY. THESE LISTED COMPANIES ARE PENNY STOCK COMPANIES, HAVING NO ACTUAL BUSINESS AND HAVING A CLOSED SH ARE HOLDING PATTERN. THEREAFTER, THE BENEFICIARY ON INSTRUCTION OF THE OPERATOR, PURCHASES THE SHARES OF THESE PENNY STOCK COMPANIES AT A VERY LOW PRICE. THE PURCHASE IS USUALLY THROUGH THE ROUTE OF PRIVATE' PLACEMENT I E. PREFERENTIAL ALLOTMENT. ONCE T HE PREFERENTIAL SHARE ALLOTMENT IS COMPLETE, THE OPERATOR (IGGS THE PRICE OF THE PENNY STOCK THROUGH CIRCULAR TRANSACTIONS AND THUS THE PRICE OF THY PENNY STOCK IS INCREASED. ONCE A PERIOD OF ONE YEAR IS OVER FROM THE PURCHASE OF THE SHARES (PRE - REQUISI TE FOR CLAIMING EXEMPT L TCG) AND THE PRICE OF THE STOCK REACHES THE DESIRED LEVEL, THE BENEFICIARY IS INTIMATED BY THE OPERATOR/AGENT OF THE OPERATOR TO PROVIDE CASH, WHICH CAN BE ROUTED TO SOME OTHER PAPER/BOGUS ENTITIES TO BY THESE SHARES FROM THE BENE FICIARY. THE ENTRY OPERATOR THEN ROUTES AND LAYERS BACK THIS CASH S O RECEIVED INTO VARIOUS PAPER ENTITIES WHICH ARE CONTROLLED AND MANAGED BY HIM. THESE PAPER ENTITIES WHICH HAVE RECEIVED LAYERED MONEY ARE THEN USED AS A DUMMY BUYER FOR BUYING THE RIGGED / ARTIFICIALLY JAGGED UP SHARES FROM THE BENEFICIARIES. WHEN THE BUYERS ARE READY, THEN THE ENTRY OPERATOR INTIMATES THE BENEFICIARIES TO SELL SPECIFIC NUMBER OF SHARES AT 5 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 5 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA SPECIFIC PRICE AT A SPECIFIC TIME. THIS ENSURES THAT THE SHARES OF ONLY THE BENEF ICIARIES ARE PURC HASED BY T HE DUMMY BUYERS. THE TRANSACTIONS TAKE PLACE THOUGH THE STOCK EXCHANGE AND BROKERS AND SOME NOMINAL COMMISSION IS CHARGED IN CASH ON THE NET PRE - ARRANGED BOGUS L TCG ACCRUING TO THE BENEFICIARY. THIS PRE - ARRANGED BOGUS CAPITAL GA IN INCOME SO EARNED THROUGH RIGGING OF SHARES IS CLAIMED AS EXEMPT IN THE BOOKS OF THE BENEFICIARY. IN THE SAME PROCESS, THE ENTITIES WHICH PURCHASE THE SHARES OF THE BENEFICIARIES AT HIGH PRICE BOOK BOGUS SHORT TERM CAPITAL LOSS BY SELLING THE SHARES WHEN THE PRICES FALL. 09. PLEASE EXPLAIN IN DETAIL ABOUT YOW ROLE IN PROVIDING BOGUS LTCG TO THE BENEFICIARIES OF THE SCRIPTS REDFORD G LOBAL LIMITED, FIST FINANCIAL SERVICES LIMITED AND RUTRON INTERNATIONAL LIMITED. ANS: - SIR, I KNEW THREE PERSONS, NAMELY, SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JOIN, OF MUMBAI, WHO ARE PRIMARILY INVOLVED IN THE BUSINES S OF PROVIDING ENTRY OF LTCG. I KNEW THE DIRECTORS OF MLS RUTRON INTERNATIONAL L IMITED AND M / S FIRST FINANCIAL SERVICES LIMITED AND INTRODUCED THEM TO SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN. I ALSO CAME TO KNOW THAT MLS REDFORD GLOBAL LIM ITED IS ALSO ONE SUCH PENNY STOCK COMPANY WHICH WAS OPERATED BY SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN. SOME CLIENTS CONTACTED ME TOT AVAILING THE ENTRY OF L TCG AND I INTRODUCED THEM TO SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJA Y JAIN. THEREAFTER. AS PER THE MODUS OPERANDI THE BENEFICIARIES INVERTED IN THE PENNY STOCK OF MLS REDFORD GLOBAL LIMITED, M/S RUTRON INTERNATIONAL LIMITED AND M/S FIRST FINANCIAL SERVICES LIMITED. THE SHARES OF THESE COMPANIES WERE RIGGED AND THE PRICE WAS INCREASED TO DESIRED LEVEL OVER A DESIRED PERIOD. ONCE THE PRICES OF THE SHARES REACHED THEIR PEAK PRICE, THE SALE OF HE ABOVE MENTIONED SCRIP T S WAS ERRER.QED BY SHRI PARAS CTIEPLOT. SHRI PANKAJ SHAH AND SHRI VIJAY JAIN SO AS TO PROVIDE ENTRY OF L TC G TO THE BENEFICIARIES. IN THIS PROCESS SOME OF THE ENTITIES WERE GIVEN ENTRY OF SHORT TERM CAPITAL LOSS ALSO. ') (III) THAT THE EXTRACT STATEMENTS OF SHRI ANI! AGARWAL IT TRANSPIRES THAT HIS COMPANIES INCLUDING M/S FIRST FINANCIAL SERVICES LTD AND M/S RUTRON INTERNATIONAL LTD. WERE INVOLVED TO GIVE THE ACCOMMODATION ENTRY UNSCRUPULOUSLY IN THE FORM OF CAPITAL GAINS AND LOSSES (IV) IT WAS ALSO NOTED THAT BOTH THE COMPANIES I. E. MS FIRST FINANCIAL SERVICES LIMITED AND M/S RUTRON INTERNATIONAL LIMITED A RE SUSPENDED BY THE SECURITY EXCHANGE BOARD OF INDIA (SEBI), DUE TO FACT THAT ORDER W3S PASSED BY SEBI AGAINST M/S. FINANCIAL SERVICES LTD DATED 14.06.2016 M/S. RUTRON INTERNATIONAL LTD WHERE IN ITS IS HELD THAT M/S. FIRST FINANCIAL GROUP MISUSED 6 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 6 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA STOCK E XCHANGE MECHANISM TO EXIT AT A HIGHER PRICE IN ORDER TO TENURE FICTITIOUS L TCG AND SALE THESE SHARES AT FREE LOAN PRICE WITHIN A PERIOD OF ONE YEAR USING THE STOCK EXCHANGE MECHANISM. THEREFORE, BY BOOKING LOSSES. (V) THAT THE ASSESSEE HAD RESORTED TO ADOPT ABOVE METHOD TO AVOID PAYING TAX ON THE INCOME RECEIVED FROM CAPITAL GAIN AND INTEREST FROM COMPULSORY ACQUISITION OF LAND BY THE HARYANA GOVT. (VI) THE HON'BLE SUPREME COURT IN THE CASE OF MCDOWELL & CO. LTD. VS CTO 154 ITR HAS HELD THAT 'TAX PLANNING MAY BE' LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONORABLETO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHOD . IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY TAX HONESTLY WITHOUT RESORTING TO SUBTERFUGES. THE TAXING AUTHORITY IS ENTITLED AND INDEED BOUND TO DETERMINE THE TRUE LEGAL RELATION RESULTING FROM A TRANSACTION. IF THE PARTIES HAVE CHOSEN TO CONCEAL BY A DE VICE THE LEGAL RELATION, IT IS OPEN - TO THE TAXING AUTHORITIES TO UNRAVEL THE DEVICE AND TO DETERMINE THE TRUE CHARACTER OF THE RELATIONSHIP'. DURING THE COURSE OF HEARING, THE AJR OF THE ASSESSEE IN HIS SUBMISSION HAS ACCEPTED THIS FACT THAT ABOVE SAID TW O COMPANIES ARE LESSER KNOWN COMPANIES. FURTHER, IT IS FAR FROM THE TRUTH THAT HOW A SIMPLE ELDERLY LADY SPENDS SUCH A HUGE COMPENSATION MONEY IN THE UNKNOWN SHARES OF THE UNKNOWN COMPANIES TO INCUR HUGE LOSSES. THIS WAS NOTHING BUT A WILLFUL INTENTION T O EVADE THE TAX BY SETTING OFF SUCH BOGUS LOSS WITH THE CAPITAL GAIN MADE FROM COMPENSATION AMOUNT RECEIVED FROM HARYANA GOVT. PERUSAL OF AFORESAID OBSERVATIONS OF THE AO AND FINDING OF INVESTIGATION WING SHOWS THAT THE ENTRY OPERATOR SHRI ANIL AGARWAL , WHO WAS THE PROMOTER OF COMPANIES VIZ. M/S FIRST FINANCIAL SERVICES LTD. AND RUTRON INTERNATIONAL, IN HIS STATEMENT RECORDED U / S 132(4), HAS ACCEPTED SUCH DUBIOUS AND UNSCRUPULOUS ENTRIES WERE DONE THROUGH THE ACCOUNTS OF THE COMPANIES MANAGED OR PROM OTED BY HIM. IN HIS 'STATEMENT SH. ANIL AGARWAL STATED THAT SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN, OF MUMBAI, WHO ARE PRIMARILY INVOLVED .IN THE BUSINESS OF PROVIDING ENTRY OF L TCG WERE KNOWN TO HIM. HE ALSO KNEW THE DIRECTORS OF M/S RUTRON INTERNATIONAL LIMITED AND MLS FIRST FINANCIAL SERVICES LIMITED AND INTRODUCED THEM TO SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN. HE ALSO CAME TO KNOW THAT M/S REDFORD GLOBAL LIMITED IS ALSO ONE SUCH PENNY STOCK COMPANY WHICH WAS OPE RATED BY SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN. SOME 7 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 7 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA CLIENTS CONTACTED ME FOR AVAILING THE ENTRY OF L TCG AND I INTRODUCED THEM TO SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN. THEREAFTER, AS PER THE MODUS OPERANDI THE BEN EFICIARIES INVESTED IN THE PENNY STOCK OF M/S REDFORD GLOBAL LIMITED, MLS RUTRON INTERNATIONAL LIMITED AND M/S FIRST FINANCIAL SERVICES LIMITED. THE SHARES OF THESE COMPANIES WERE RIGGED AND THE PRICE WAS INCREASED TO DESIRED LEVEL OVER A DESIRED PERIOD. ONCE THE PRICES OF THE SHARES REACHED THEIR PEAK PRICE, THE SALE OF THE ABOVE MENTIONED SCRIPTS WAS ARRANGED BY SHRI PARAS CHAPLOT, SHRI PANKAJ SHAH AND SHRI VIJAY JAIN SO AS TO PROVIDE ENTRY OF LTCG TO THE BENEFICIARIES. IN THIS PROCESS SOME OF THE E NTITIES WERE GIVEN ENTRY OF SHORT TERM CAPITAL LOSS ALSO. THE APPELLANT IS NOT A HABITUAL INVESTOR IN SHARES AS THERE WAS NO SUCH RECORD OF SHARE INVESTMENTS/DEALINGS EVEN IN SMALL AMOUNT IN ANY EARLIER PERIOD. SHE BEING A SENIOR CITIZEN LADY SHE HAD NO PREVIOUS KNOWLEDGE OF INVESTING ILL SHARES AND STOCKS. HOW COULD SHE INVEST SUCH HUGE SUM OF MONEY IN THE SHARES OF LESSER KNOWN PENNY STOCK COMPANIES VIZ. M/S FIRST FINANCIAL SERVICES LTD. AND MLS RUTRON INTERNATIONAL LIMITED. THEREFORE DEALING IN ABOVE NAMED PENNY STOCKS WAS NOTHING BUT A WELL THOUGHT MANIPULATION TO BOOK MANUFACTURED LOSS IN CONNIVANCE WITH THE ENTRY OPERATORS/ SHARES BROKERS. IN CASE OF SH. AVTAR SINGH, SIRSA VS DEPARTMENT OF INCOME TAX ON 8 NOVEMBER, 2012 IN THE INCOME TAX APPELL ATE TRIBUNALCHANDIGARH BENCH 'A' CHANDIGARH ITA NO. 948/CHD/2011 ASSESSMENT YEAR: 2008 - 09 THE HONORABLE ITAT HAS HELD THE SHARE LOSS AS STRUCTURED AND COLORABLE TRANSACTION IN ORDER TO REDUCE LOSS. THE GIST OF THE DECISION IS REPRODUCE AS UNDER: 'IT IS THE DUTY OF THE COURT IN EVERY CASE, WHERE INGENUINITY IS EXPENDED, TO AVOID TAXING AND WELFARE LEGISLATION, TO GET BEHIND THE SMOKE SCREEN AND DISCOVER THE TRUE STATE OF AFFAIRS. THE COURT IS NOT TO BE SATISFIED WITH FORM AND LEAVE ALONE THE SUBSTANCE O F THE TRANSACTION THIS VIEW HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT, IN WORKMAN OF ASSOCIATED RUBBER INDUSTRIES LTD. (1986) 157 ITR 77 (S.C) AND IN ESS ESS KAY ENGG. CO.(P) LTD. V CIT (1985) 15 ITR 636 (P&H). THE HON'BLE KERALA HIGH COURT IN ONAM AGAR BATI CO. V DY.CIT (2009) 310 ITR 56 (KER) HAS HELD THAT THOUGH A TAX PAYER MAY RESORT TO A DEVICE TO DIVERT THE INCOME BEFORE IT ACCRUES TO HIM, THE EFFECTIVENESS OF ADVICE DEPENDS UPON ITS GENUINENESS. THE SUBSTANCE OF T HE TRANSACTION HAS TO BE ASSESSED BY APPLYING THE TAXING STATUTE SO AS TO ASCERTAIN WHETHER IT IS A SHAM OR MAKE - BELIEVE TRANSACTION OR ONE WHICH IS GENUINE. 8 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 8 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA LD. ' D R' PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SOMNATH MAINI V CIT (2008) 3061TR 414 (P &H) AND BALBIR CHAND MAINI V CIT & ANOTHER (2012) 340 ITR 161 (P&H) AND CONTENDED THAT THE ISSUE IN QUESTION IS COVERED BY THESE DECISIONS. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE FACTS AND THE RATIO OF THE DECISIONS OF THE JURISDICTIONAL HIGH COURT , IN THE CASE OF BALBIR C HAND MAINI (SUPRA) AND SOMNATH MAINI V CIT (SUPRA) AND FOUND THAT THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THIS DECISION. THE RELEVANT AND OPERATIVE PART OF THE DECISION IN THE CASE OF BALBIR CHAND MAINI (SUPRA) IS REP RODUCED HEREUNDER 'THE RETURN FOR THE ASSESSMENT YEAR 1998 - 99, FILED BY THE ASSESSEE AT AN INCOME OF RS 7,93,140 WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME - TAX ACT, 1961. SUBSEQUENTLY, IN RESPONSE TO A NOTICE UNDER SECTION 148, THE ESSES - SEE AGAIN FILED A RETURN DECLARING THE SAME INCOME AS SHOWN IN THE RETURN FILED EARLIER. I DURING THE REASSESSMENT PROCEEDINGS. T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD PURCHASED 30000 SHARES OF A AT THE RATE BETWEEN RS. 2.50 AND RS 3.40 PER SHARE, IN THE MONTH OF APRIL, 1997, AND OUT OF THOSE SHARES , HE SOLD 24000 SHARES THROUGH A BROKER. THE ASSESSING OFFICER CAME TO THE OPINION THAT THE VALUE OF THE SHARES COULD NOT BE AS HIGH AS RS. 55 PER SHARE AND ACCORDINGLY MADE AN ADDITION OF RS.12,47,500 TO THE IN COME OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES. HOWEVER, HE DETERMINED A SUM OF RS. 2,85,620 AS LONG - TERM CAPITAL LOSS, WHILE COMPUTING THE INCOME. THE COMMISSIONER (APPEALS) DELETED THE ADDITIONS WHEREAS THE TRIBUNAL REVERSED THE ORDER OF THE CO MMISSIONER (APPEALS) AND UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER. ON APPEAL :HELD, DISMISSING THE APPEAL, (I) THAT THE TRIBUNAL RECORDED A FINDING OF FACT THAT THE TRANSACTION OF SALE AND PURCHASE OF SHARES OF A WAS NOT A GENUINE TRANSACTION. TH E A SSESSING OFFICER HAD FOUND THAT THE SALE OF SHARES HAD NOT TAKEN PLACE THROUGH ANY - STOCK EXCHANGE. ON SCRUTINY OF THE BOOKS OF ACCOUNT IF THE BROKER THE ASSESSING OFFICER FOUND THAT THERE WERE CASH DEPOSITS IN ITS BANK ACCOUNT PRECEDING THE ISSUE OF CH EQUES IN THE NAME OF THE ASSESSEE FOR PURCHASE OF SHARES CLAIMED TO BE - TBE SALE PROCEEDS OF THE SAME SHARES RECEIVED IN ADVANCE. THE BROKER COULD NOT GIVE THE DETAILS OF THE PURCHASER OF THE SHARES. THE AO FOUND THAT IT WAS A CLOSE CIRCUIT TRANSACTION AND CLEARLY A STRUCTURED ONE. THE AO HAD ALSO DETERMINED THE V A LUE OF SHARES OF A ON THE BASIS OF THE FINANCIAL DATA COLLECTED BY HIM AND WORKED OU T THE VALUE OF SHARES TO BE NOT MORE THAN RS. 9. 37 PER SHARE BY ADOPTING TWO METHODS FOR CALCULATION OF NET ASSET VALUE. THERE WAS NO PERVERSITY OR ERROR OF LAW IN THE ORDER OF THE TRIBUNAL. ' 9 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 9 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA 15. IT IS ESSENTIAL ON THE PART OF THE REVENUE AUTHORITY, TO LOOK INTO THE REAL NATURE OF TRANSACTION AND WHAT HAPPENS IN THE REAL WORD AND CONTEXTUETIZE THE SAME TO S UCH TRANSACTIONS IN THE REAL MARKET SITUATION. IT IS PERTINENT TO STATE HERE, THE JUDICIAL WISDOM OF HON 'BLE SUPREME COU RT IN CIT V ARVINDA RAJU (TN) (1979) 120 ITR 46 (S. C) WHEREIN IT WAS HELD THAT 'ONE DAY, IN OUR WELFARE STATE GEARED TO SOCIAL JUSTIC E, THIS CLEVER CONCEPT OF 'AVOIDANCE' AS AGAINST 'EVASION' M A Y HAVE TO BE EXPOSED.' IN THE PRESENT CASE, THERE IS AN OBVIOUS AND PLAIN TRANSACTION OF LAX EVASION WHICH HAS BEEN CLOTHED WITH THE SMOKE - SCREEN OF SUBTERFUGES, BY THE ASSESSEE APPELLANTS. THE FACTS OF THE PRESENT CASE CLEARLY REVEALS THAT SUCH TRADING TRANSACTIONS OF PURCHASE AND SALE OF SHARES, HAD NOT BEEN EFFECTED, FOR COMMERCIAL PURPOSE BUT TO CREATE ARTIFICIAL LOSS, WITH A VIEW TO REDUCING TAX LIABILITY. THE APPELLANT RESORTED TO READYMA DE SCHEME FOR PURCHASE AND SALE OF SHARES WHICH ULTIMATELY FOUND THEIR LAST DESTINATION, TO THE ORIGINAL SELLER I.E. THE SAID UNLISTED COMPANY. SUCH TRANSACTION A RE NOT G ENUINE AND NATURAL TRANSACTIONS BUT PRECONCEIVE D TRANSACTIONS , DEMONSTRATING CREATION OF SUCH SHORT TERM CAPITAL LOSS. SUCH TRANSACTIONS ARE MUTUALLY SELF - SERVING. IT I S MENTIONED THAT EA RN ING PROFIT IS A NATURAL INSTINCT INGRAINE D IN HUMAN BEINGS, PARTICULA RL Y M THE BUSINESSMAN UNLESS OF COURSE, EARNING OF LOSS IS ALSO A PROFITAB LE PROPOSITION, A S IS DISCERNIBLE FROM THE FACT - SITUATION OF THE PRESENT APPEALS. THE APPELLANTS RESTORED TO A PRECONCEIVED SCHEME, TO PROCURE SHORT TERM CAPITAL LOSS, FOR THE PURPOSE OF NEUTRALIZING THE SHORT TERM CAPITAL GAINS, BY WAY OF PRICE - DIFFERENT IAL, IN THE SAID SHARE TRANSACTIONS, NOT SUPPORTED BY MARKET FACTORS. CUMULATIVE EVENTS IN SUCH TRANSACTIONS OF SHARES REVEALS THAT THE SAME ARE DEVOID OF ANY COMMERCIAL NATURE AND FALL IN THE REALM OF NOT BEING BONAFIDE, IN CONTENTS. IN VIEW OF THE ABO VE LEGAL AND FACTUAL DISCUSSIONS AND JUDICIAL PRECE DENTS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE FINDINGS OF THE CIT(APPEALS) ARE NOT BASED ON RELEVANT, COGENT AND CREDIBLE MATERIAL OR EVIDENCE: SUCH SHARE TRANSACTIONS WERE NOT QUOTED AND CONSEQU ENTLY, WERE NOT TRADED THROUGH STOCK EXCHANGE. WHEN ALL THE FACTS AND CIRCUMSTANCES OF THE CASE ARE VIEWED, IN TOTALITY, IT IS EVIDENT THAT THE ASSESSEE APPELLANTS FAILED TO DISCHARGE THE ONUS, TO PROVE THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE AND S ALES SUCH SHARES. THE IMPUGNED TRANSACTIONS OF SHARES ARE PRE - ORDAINED ONE, NOT FOR LEGITIMATE COMMERCIAL PURPOSE IN VIEW BUT FOR THE PURPOSE OF CREATING NON - GENUINE AND ARTIFICIAL SHORT TERM CAPITAL LOSS, WITH A VIEW TO REDUCING VALID TAX - LIABILITY. TH ESE TRANSACTIONS OF SHARES WERE NOT GOVERNED BY MARKET FACTORS PREVALENT AT THAT RELEVANT TIME, IN SUCH TRADE, BUT THE SAME ARE PRODUCT OF THE DESIGN AND MUTUAL UNDER S TANDING ON THE PART OF THE APPELLANTS AND THE SAID HISSAR BASED UNLISTED COMPANY. LD. C IT' ( APPEALS) HAS FAILED TO BRING ANY COGENT AND CREDIBLE EVIDENCE, TO DISLODGE SUCH FINDING. 10 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 10 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA HAV ING REGARD TO THE PECULIAR FACT - SITUATION OF THE PRESENT CASE, IT IS EVIDENT THAT SUCH SHARE TR ANSACTIONS WERE CLOSE CIRCUIT TRANSACTIONS A ND CLEARLY STRUCTU RED ONE. THEREFORE, IN THE LIGHT OF JUDICIAL PRECEDENTS OF JURISDICTIONAL HIGH COURT AND HON'BLE SUPREME COURT, AS DISCUSSED ABOVE, WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE CIT(APPEALS). HAVING REGARD TO THE ABOVE LEGAL AND FACTUAL DISCUSSIONS, INC LUDING JU DICIAL PRECEDENTS DISCUSSED ABOVE, OF THE - ION 'BLE SUPREME COURT AND JURISDICTIONAL HIGH COURT, THE FINDINGS OF THE AO, AS RECORDED IN THE IMPUGNED ASSESSMENT ORDER, ARE RESTORED.' CONSIDERING THE AFORESAID ACTS AND ORDER PASSED BY SEBI AGAINS T M/S. FINANCIAL SERVICES LTD AND DATED 14.06.201F M/S. RUTRON INTERNATIONAL LTD WHERE IN ITS IS HELD THAT M/S. FIRST FINANCIAL GROUP MISUSED STOCK EXCHANGE MECHANISM TO EXIT AT A HIGHER PRICE IN ORDER TO TENURE FICTITIOUS LTCG AND SALE THR SE SHARES AT FREE LOAN PRICE WITHIN A PERIOD OF ONE YEAR USING THE STOCK EXCHANGE MECHANISM, THEREFORE , BY BOOKING LOSSES. (THE ORDER OF SEBI IS MADE AS ANNEXURE - A.). THE HON'BLE SUPRR .NE COURT, IN THE CASE OF CIT V DURGA PRASAD MORE (1971) 82 ITR 540 (S .C) HAS CATEGORICALLY HELD THAT THE REVENUE IS ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES, TO FIND OUT THE REALITY OF THE RECITALS MADE IN THE DOCUMENTS. THE RELEVANT OBSERVATIONS AND FINDINGS OF H ON'BLE SUPREME COURT, IN THE MATTER OF DISCHARGE O F 'ONUS OF PROOF' AND THE RELEVANCE OF SURROUNDING CIRCUMSTANCES OF THE CASE ARE; 'THAT THOUGH AN APPELLANT'S STATEMENT MUST BE CONSIDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPELLANT WAS NOT THE REAL, IN A CASE WHERE THE PARTY RELIED ON SELF - SERVING RECITALS IN THE DOCUMENTS, IT WAS FOR THE PARTY TO ESTABLISH THE TRANSFER OF THOSE RECITALS. THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS. SCIENCE HA S NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE COURTS AND THE TRIBUNALS HAVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITY. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF PIECE OF EVIDENCE, BUT, IN THE SPHERE, THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MADE CONCLUSIVE BY LAW.' ' THE ABOVE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT HAS BEEN REITERATED AND APPLIED BY THE HON'BLE APEX COUR T IN THE CASE OF SUMATI DAYAL V C I T 214 I TR 801 (S.C).KEEPING IN VIEW OF THE AFORESAID FACTS IT IS HELD THAT THE TRANSACTION MADE BY THE APPELLANT WAS BOGUS AND SAME IN ORDER TO REDUCE ITS TAXABLE LIABILITY UNDER THE GUISE OF BOGUS CAPITAL LOSS, THERE FORE, THE ACTION TAKEN BY THE AO HEREBY UPHELD AND GROUND OF APPEAL APPELLANT IS HEREBY DISMISSED. 11 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 11 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA 3. WE HEARD THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE FACTS OF THE CASE AS WELL AS ASSESSEES DETAILED PAPER BOOK AS FILED BEFORE US COMPRISIN G OF ASSESSING OFFICERS SHOW CAUSE NOTICE DATED 28 - 10 - 2016, REPLY DATED 16 - 11 - 2016, ANOTHER SHOW CAUSE NOTICE DATED 23 - 11 - 2016 AND REPLY THERETO DATED 30 - 11 - 2016 , SEARCH STATEMENT U/S. 132(4) OF SHRI ANIL AGARWAL, VARIOUS JUDICIAL PRONOUNCEMENTS AND SEBI S FINAL ORDER DATED 02 - 04 - 2018 IN THE MATTER OF M/S. FIRST FINANCIAL SERVICES LTD RESPECTI VE LY; STAND S PERUSED. 4. LEARNED AUTHROSIED REPRESENTATIVE VEHEMENTLY CONTENDS DURING THE COURSE OF HEARING THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS FACT S IN TREATING THE ASSESSEES IMPUGNED SHORT TERM CAPITAL LOSS AS BOGUS IN THE NATURE OF UNEXPLAINED CASH CREDITS T HEREBY DOUBTING GENUINENESS THEREOF IN THE COURSE OF ASSESSMENT AND UPHELD IN THE LOWER APPELLATE PROCEEDINGS. HE INVITE S OUR ATTENTION TO THE CASE RECORDS COMPRISING OF DETAILS OF ASSESSEES SHARE S PURCHASE IN AS MANY AS 7 SCRIPS LISTED IN BSE/NSE ON VARIOUS DATES RANGING BETWEEN 11 - 07 - 2013 TO 17 - 12 - 2013 , DETAILS OF THE SALE TRANS ACTIONS BETWEEN 18 - 07 - 2013 TO 19 - 3 - 13, CONTRACT NOTES REGARDING THE IMPUGNED PURCHASE S AS WELL AS SALE S , BROKERS BILLS, D - MAT STATEMENT, SECURITY TRANSACTION TAX (STT) , BROKERAGE AND SERVICE TAX DETAILS, ON LINE PRICE QUOTATION OF THE SCRIPS, BANK STATEME NT, BROKERS LEDGER TO SUBMIT THAT THIS TAXPAYER HAS FILED ALL THE RELEVANT PARTICULARS IN SUPPORT OF HER IMPUGNED SHORT TERM CAPITAL GAIN/LOSS. 5. THE REVENUES CASE ON THE OTHER HAND SUPPORT S THE CIT( A)S FINDING UNDER CHALLENGE THAT THE ASSESSE HAS FAILED TO PROVE THE GENUINENESS OF THE SHARES TRANSACTIONS IN VIEW OF OVER WHELMING EVIDENCE INDICATING HER TO HAVE ENGAGED IN DUBIOUS METHOD S OF SCRIPS PRICES RIGGING ALONGWITH ENTRY OPERATORS. IT REFERS TO S EARCH STATEMENT OF SHRI ANIL AGARWAL, (SUPRA) MADE BEFORE THE INVESTIGATION AUTHORITIES THAT HE HAD ENGAGED IN ARTIFICIAL PRICE RIGGING OF M/S. FIRST FINANCIAL SERVICES LTD AND M/S. RUTRON INTERNATIONAL 12 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 12 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA LTD (SUPRA) . L EARNED DEPARTMENT REPRESENTATIVE S CASE IS THAT THE ASSESSE HAS FAILED TO EXPLAIN/PROVE THE GENUINENESS OF HER SHARE TRANSACTIONS ON BOTH PURCHASE AND SALE ASPECTS . AND ALSO EVEN LACK OF CROSS EXAMINATION TO ASSESSEE IN SUCH CIRCUMSTANCES DOES NOT VITIATE THE ENTIRE PROCEEDINGS. MR. SINGH LASTLY QUOTE S HONBLE SUPREME COURTS DECISION S IN (1995) 214 ITR 801(SC) SUMATI DAYAL V/S. CIT V/S. DURGA PRASAD MORE 82 ITR 540(SC) THAT ASSESSEES EXPLANATION HAS TO BE CONSIDERED IN THE LIGHT OF HUMAN PROBABILIT IES BY REMOVING ALL BLINKERS . 8. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL CONTENTION S . THE QUESTION THAT ARISES FOR OUR CONSIDERATION/ADJUDICATION IS ABOUT THE GENUINENESS OF ASSESSEES IMPUGNED SHORT TERM CAPITAL GAIN TREATED AS BOGUS BY BOTH THE LOWER AUTHORITIES . SHE HAS FILED ALL THE REQUISITE DETAILS ON RECORD IN SUPPORT OF HER SHARE TRANSACTION S . THE REVENUES CASE QUESTIONS THE GENUINE NE SS OF ASSESSEES DETAILS PARTICULARLY IN THE LIGHT OF S EARCH STATEMENT BY SHRI ANIL AGARWAL IN THE LIGHT OF SEBIS PROCEEDINGS FINA LIZED ON 2 - 4 - 2018 REGARDING M/S. FIRST FINANCIAL SERVICES LTD. RUTRON INTERNATIONAL LTD (SUPRA). L EARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THAT T HERE IS NO DIRECT EVIDENCE AGAINST THE ASSESSE E TO HAVE INDULGE D IN ARTIFICIAL RIGGING OF ANY OF THE 7 SCRIPS SHARES . OR THAT SAID STATEMENT OF SHRI ANIL AGARWAL HAS NOWHERE QUOTED THE ASSESSEES NAME ADOPTING ANY OF THE ALLEGED DUBIOUS MEAN S FOR ARTIFICIAL RIGGING OF SCRIPS PRICE S . T HIS TRIBUNALS RECENT DECISION IN MAHAVIR JHANWAR V/S. ITO, KOLKATA, ITA NO. 2474/KOL/2018 DECIDED ON 01 - 02 - 2019 HAS TAKEN INTO CONSIDERATION HONBLE JURISDICTIONAL HIGH COURTS DECISION AS WELL AS THIS CO - ORDINATE BENCHS ORDER DECIDING THE SIMILAR ISSUE OF GENUINENESS OF LONG TERM CAPITAL GAIN TREATED A S BOGUS BY OBSERVING AS UNDER: - 5. AFTER HEARING BOTH SIDES, I FIND THAT IN A NUMBER OF CASES THIS BENCH OF THE TRIBUNAL AND JURISDICTIONAL CALCUTTA HIGH COURT HAS CONSISTENTLY HELD THAT, DECISION IN ALL SUCH CASES SHOULD BE BASED ON EVIDENCE AND NOT ON GENERALIZATION, HUMAN PROBABILITIES, 13 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 13 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA SUSPICION, CONJECTURES AND SURMISES. IN ALL CASES ADDITIONS WERE DELETED. SOME OF THE CAS ES WERE, DETAILED FINDING HAVE BEEN GIVEN ON THIS ISSUE, ARE LISTED BELOW. - SL.NO. ITA NOS. NAME OF THE ASSESSEE DATE OF ORDER/JUDGMENT 1. ITA NO. 714 TO 718/KOL/2011 ITAT, KOLKATA DCIT VS. SUNITA KHEMKA 28.10.2015 2. 214 ITR 244 CALCUTTA HIGH COURT CIT VS. CARBO INDUSTRIAL HOLDINGS LTD - 3. 250 ITR 539 CIT VS. EMERALD COMMERCIAL LTD 23.03.2001 4. ITA NO. 1236 - 1237/KOL/2017 MANISH KUMAR BAID VS. ACIT 18.08.2017 5. ITA NO. 569/KOL/2017 GAUTAM PINCHA 15.11.2017 6. ITA NO. 443/KOL/2017 KIRAN KOTHARI HUF 15.11.2017 7. ITA NO. 2281/KOL/2017 NAVNEET AGARWAL VS. ITO 20.07.2008 8. ITA NO. 456 OF 2007 BOMBAY HIGH COURT. CIT VS.SHRI MUKESH RATILAL MAROLIA 07.09.2011 9. ITA NO. 95 OF 2017 ( O & M) PCIT VS. PREM PAL GANDHI 18.01.2018 10. ITA NO. 1089/KOL/2018 SANJAY MEHTA 28.09.2018 6. REGARDING THE CASE LAWS RELIED UPON BY THE ID. DEPARTMENTAL REPRESENTATIVE, I FIND THAT, IN THE CASE OF M/S. PANKAJ AGARWAL & SONS (HUF)(SUPRA), THE ISSUE WAS DECIDED AGAINST THE ASSESSEE FOR THE REASON THAT, T HE ASSESSEE COULD NOT JUSTIFY HIS CLAIM AS GENUINE BY PRODUCING EVIDENCE AND WAS ONLY ARGUING FOR THE MATTER TO BE SET ASIDE TO THE LOWER AUTHORITIES ON THE GROUND OF NATURAL JUSTICE. AS SIMILAR ARGUMENTS WERE NOT RAISED BEFORE THE LOWER AUTHORITIES BY THE ASSESSEE, THE ITAT REJECTED THESE ARGUMENTS. IN THE CASE ON HAND, ALL EVIDENCES WERE PRODUCED BY THE ASSESSEE. IN THE CASE OF SANJAY BIMALCHAND JAIN, LEGAL HEIR OF SANTI DEVI BIMALCHAND J AIN, THE HON'BLE HIGH COURT UPHELD THE STAND OF THE REVENUE THAT THE TRANSACTION IN QUESTION IS AN ADVENTURE IN NATURE OF TRADE AND THE PROFIT OF THE TRANSACTIONS IS ASSESSABLE UNDER THE HEAD OF 'BUSINESS INCOME'. IN THE CASE ON HAND, THE ID. ASSESSING OFFICER HAS NOT ASSESSED THIS AMOUNT AS 'BUSINESS INCOME'. IN ANY E VENT, I AM BOUND TO FOLLOW THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THIS MATTER. I FIND THAT THE ASSESSEE HAS FILED ALL NECESSARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS. SOME OF THESE EVIDENCES ARE (A) EVIDENCE OF PURCHASE OF SHARES, (B) EVIDENC E OF PAYMENT FOR PURCHASE OF SHARES MADE BY WAY OF ACCOUNT PAYEE CHEQUE, COPY OF BANK STATEMENTS, ( C) COPY OF BALANCE SHEET DISCLOSING INVESTMENTS, (D) COPY OF DEMAT STATEMENT REFLECTING PURCHASE, (E) COPY OF MERGER ORDER PASSED BY THE HIGH COURT, (T) COPY OF ALLOTMENT OF SHARES ON MERGER, (G) EVIDENCE OF SALE OF SHARES THROUGH THE STOCK EXCHANGE, (H) COPY OF DEMAT STATEMENT SHOWING THE SALE OF SHARES, (I) COPY OF BANK STATEMENT REFLECTING SALE RECEIPTS, UJ COPY OF BROKERS LEDGER, (K) COPY OF CONTRACT NOTES ETC. 14 ITA NO. 2360/KOL/17 PRAKASHO DEVI SARIA 14 ITA NO. 2360/KOL/2017 PRAKASHO DEVI SARIA 7. THE PROPOSITION OF LAW LAID DOWN IN THESE CASE LAWS BY THE JURISDICTIONAL HIGH COURT AS WELL AS BY THE ITAT KOLKATA ON THESE ISSUES ARE IN FAVOUR OF THE ASSESSEE. THESE ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE ID. DEPARTMENTAL REPRESENTATIVE, THOUGH NOT LEAVING HIS GROUND, COULD NOT CONTROVERT THE CLAIM OF THE ID. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DECISIONS OF THE HON'BLE JURISDICTIONAL CALCUTTA HIGH COURT AND THE ITAT. I AM BOUND TO FOLLOW THE SAME. WE ADOPT THE ABOVE DETAILED DISCUSSION/REASONING MUTA TIS MUTANDIS TAKING INTO CONSIDERATION THE HONBLE HIGH COURTS DECISION (SUPRA) TO CONCLUDE THAT SUCH A DISALLOWANCE HAS TO BE BASED ON EVIDENCE RATHER AS ALLEGED SUSPICION CIRCUMSTANCES. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION . 8 . TH IS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONO UNCED IN THE COURT ON 17 - 05 - 2019 SD/ - SD/ - [ J. SUDHKAR REDDY ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17 - 05 - 2019 **PRADIP, SR. PS C OPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ ASSESSEE: SMT. PRAKASHO DEVI SARIA C/O PRADIP LAKHOTIA, 2 ND FLOOR, METRO PLAZA, SF ROAD, SILIGURI - 734005. 2. RESPONDENT/ DEPARTMENT; THE CIT(A), SILIGURI, AAYKAR BHAWAN, MATIGARA , SILIGURI - 734005. 3..C.I.T (A) . - 4. C.I.T. - KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR H.O.O/D.D.O KOLKATA