Sunil Kumar Shaw , Hooghly V. ITO, Ward - 24(3) , Hooghly

ITA 2410/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8564 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 19-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Opportunity of cross examination; Question of law; Third party statement; Accommodation entries; Sham transactions; TDS; Set aside; Capital Gains; Bogus
• Section: 68; 2; 205; 13

Judgement Text

1 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 , C(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL C(SMC) BENCH : KOLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 2410/KOL/2018 ASSESSMENT YEAR: 2015-16 SUNIL KUMAR SHAW (PAN: ASTPS5705P) VS. INCOME-TAX OFFICER, WD-24(3), HOOGHLY. APPELLANT RESPONDENT DATE OF HEARING 19.03.2019 DATE OF PRONOUNCEMENT 10.04.2019 FOR THE APPELLANT SHRI R. P. DAS, FCA FOR THE RESPONDENT SHRI RABIN CHOUDHURY, ADDL. CIT , SR. DR ORDER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) - 6, KOLKATA DATED 09.10.2018 FOR AY 2015-16. 2. THE ASSESSEES SOLE GROUND OF APPEAL IS AS TO WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT IN RESPECT OF SALE PROCEEDS OF SHARES OF KA ILASH AUTO FINANCE LIMITED (KAFL) TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCE S AFTER REJECTING THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAINS (LTCG) ON SALE OF THOSE SHA RES. 3. THE BRIEF FACTS OF THE ISSUE AS HAS BEEN RECORDE D BY THE AO IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE CLAIMED LONG TERM CAPITAL GAI NS FROM SALE OF SHARES OF M/S. KAILASH AUTO FINANCE LIMITED (KAFL). THE AO NOTED THAT THE ASSESSEE HAD PURCHASED SHARES OF M/S. KAILASH AUTO AT A PRICE OF RS.40,000/-. THE SA ID SHARES WERE LATER SOLD AT A PRICE OF RS.14,12,359/-, WHICH ACCORDING TO ASSESSEE, RESULT ED IN LONG TERM CAPITAL GAINS AND SO 2 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 THE ASSESSEE CLAIMED EXEMPTION U/S 10(38) OF THE AC T OF RS.13,72,359/-. HOWEVER, THE AO RELYING ON THE REPORT OF THE INVESTIGATION WING, KO LKATA AND AN ORDER BY SEBI ALLEGED THAT THE CLAIM OF ASSESSEE OF EXEMPT I NCOME (LTCG) WAS BOGUS IN NATURE. THE AO FURTHER ALLEGED THAT THE TRANSACTIONS IN THE SCRIP OF KAILASH AUTO FINANCE LTD. (KAFL) WERE BEING MANIPULATED BY ENTRY OPERATORS A ND THE SHARE PRICES WERE HIKED ARTIFICIALLY TO EARN LTCG. SO, THE AO DID NOT ACCE PT THE ASSESSEES CLAIM OF LTCG AND EXEMPTION THEREOF CLAIMED BY THE ASSESSEE. THEREAF TER, THE AO TREATED THE SAME AS CASH CREDIT U/S 68 OF THE ACT AND ADDED THE ENTIRE LTCG TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME. ON FIRST APPEAL, THE LD. CIT(A) DISMISSED THE GROUNDS RAISED BY THE ASSESSEE AGAINST HIS CLAIM OF EXEMPTION U/S 10(38) OF THE ACT AND HE ALSO CONFIRMED THE ADDITIONS MADE BY THE AO UNDER SECTION 68 OF THE AC T. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AT THE TIME OF HEARING IT WAS BROUGHT TO MY NOTICE BY THE LD. AR THAT THIS TRIBUNAL IN THE FOLLOWING CASES HAVE DECIDED THAT THE SCRIPS OF KAFL ARE NOT BOGUS AND HELD THAT THE LTCG CLAIM OF THE ASSESSEE NEEDS TO BE ALLOWED: I) MANISH KUMAR BAID VS. ACIT, ITA NOS. 1236& 1237/ KOL/2017 DATED 18.08.2017 II) RUKMINI DEVI MANPRIA VS. DCIT, ITA NO.1724/KOL/ 2017 DATED 24.10.2018 III) JAGMOHAN AGARWAL VS. ACIT, ITA NO.604/KOL/2018 DATED 05.09.2018. IT WAS ALSO BROUGHT TO OUR NOTICE BY THE LD. AR THA T AO WAS INFLUENCED BY AN INTERIM ORDER OF SEBI DATED 29.03.2016, WHICH THE SEBI HAS WITHDR AWN BY LATER ORDER DATED 21.09.2017 BY VIRTUE OF IT ALL THE RESTRICTIONS IMPOSED UPON B Y THE EARLIER ORDER DATED 29.03.2016 HAS BEEN WITHDRAWN, SINCE SEBI COULD NOT FIND ANY INFIR MITY IN THE SCRIPS OF M/S. KAFL. SO HE PLEADED THAT THE CLAIM OF ASSESSEE FOR LTCG SHOULD BE ALLOWED. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE V EHEMENTLY OPPOSED THE CONTENTIONS OF THE ASSESSEE AND TOOK US THROUGH THE AOS ORDER AND LD. CIT(A) ORDER AND SUBMITTED THAT 3 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 SCRIPS OF M/S. KAFL WAS ARTIFICIALLY RIGGED TO PROV IDE LTCG TO THE ASSESSEE WHICH CANNOT BE ALLOWED AND SUPPORTED THE IMPUGNED ORDER AND REL IED ON THE ORDER OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BINOD CHAND JAIN IN TAX A PPEAL NO.18 OF 2017 DOES NOT WANT ME TO INTERFERE. WE NOTE THAT SIMILAR ISSUE AROSE IN MANISH KUMAR BAID, (SUPRA) WHEREIN, THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE IN RESPECT O F LTCG FROM SALE OF SCRIPS OF M/S. KAFL HAS HELD AS UNDER: 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF TH E LD AR THAT THE LD AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WIT HOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGE MENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS OF THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFERENCES WHICH REMAIN UNPROVED BASED ON T HE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE PRINCIP LES LAID DOWN IN VARIOUS CASE LAWS RELIED UPON BY THE LD AR ARE ALSO NOT REITERATED FOR THE S AKE OF BREVITY. WE FIND THAT THE AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED B Y THE ORDER OF HONBLE HIGH COURT. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AMALGAMATION SCHEME APPROVED BY THE HONBLE HIGH COURT IN MAY 2013 MERELY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BEEN SUBJECT TO CROSS EXAMINATION. MOROEVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BROKING LTD NAME IS NEITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DE ALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF S HARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINS T THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE AR GUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA . WE FIND THAT THE SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM AS DIRECT EVIDE NCE AGAINST THE ASSESSEE DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BROKING LTD. THROUGH WHOM THE ASSESSEE SOLD THE SHARES OF KAFL AS A BENEFICIARY T O THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE RELATED ENTITIES / PROMOTERS / BROK ERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPAL WERE PURCHASED BY THE ASSESSEE W AY BACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL WITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHARES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY EXITING AT THE MO ST OPPORTUNE MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GOOD RETURN ON HIS INVES TMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHITA STOCK BROKING LTD WAS NOT THE PRI MARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KAFL AS COULD BE EVIDENT FROM THE SEBIS ORDE R. WE FIND THAT THE SEBI ORDER DID MENTION THE LIST OF 246 BENEFICIARIES OF PERSONS TR ADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AND / OR ASHITA STOCK BROKING LTDS NAME I S NOT REFLECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FAILS. WE ALSO FIND THAT EV EN THE SEBIS ORDER HEAVILY RELIED UPON 4 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL H AD PERFORMED VERY WELL DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTA NTIALLY. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND/OR THE ST ATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNECTION WITH THE ALLEG ED BOGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMPLICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE T RANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE N EITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED I N REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY TH E LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD A O WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 R AISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 6. COMING BACK TO THE INSTANT CASE, I NOTE THAT THE ASSESSEE HAD PURCHASED 40,000 SHARES @ RS.1/- EACH OF M/S. PANCHSHUL MARKETING LTD. ON 0 6.03.2013 MERGED WITH M/S. KAFL) FOR A CONSIDERATION OF RS.40,000/-. THE SAID SHARES WERE LATER SOLD AT A PRICE OF RS.14,12,359/-, WHICH ACCORDING TO ASSESSEE, RESULT ED IN LONG TERM CAPITAL GAINS AND SO THE ASSESSEE CLAIMED EXEMPTION U/S 10(38) OF THE AC T OF RS.13,72,359/-. I NOTE THAT THE ASSESSEE HAS PAID THE AMOUNT OF RS.40,000/- THROUGH ACCOUNT PAYEE CHEQUE TO M/S. SHIVSHAKTI EXPORTS PVT. LTD. THE AFORESAID 40,000 SHARES OF M/S. PANCHSHUL MARKETING LTD. WERE RECEIVED IN THE DEMAT. THE SAID COMPANY (M/S. PANCHSHUL MARKETING LTD.) WAS LATER MERGED WITH M/S. KAILASH AUTO FINANCE LTD. AS PER AN ORDER OF THE HONBLE HIGH COURT OF ALLAHABAD DATED 09.05.2013 AND CONSEQUENT TO MER GER, THE ASSESSEE HAD RECEIVED 40,000 SHARES OF M/S. KAFL. THE ASSESSEE SOLD THE SAID SH ARES DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION AND SUCH SALE W AS MADE THROUGH M/S. SBICAP SECURITIES, A REGISTERED SHARE AND STOCK BROKER (CONTRACT NOTE PLACED AT PAGES 10 OF PAPER BOOK) AFTER DULY PAYING THE SECURITY TRANSACTION TAX (STT). THE SALE CONSIDERATION THE ASSESSEE RECEIVED BY ACCOUNT PAYEE CHEQUE IN ITS STATE BANK OF INDIA ACCOUNT WHICH IS EVIDENT FROM THE BANK STATEMENT FILED BEFORE US AT PAGE 11 OF TH E PAPER BOOK. THEREFORE, THE LONG TERM 5 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 CAPITAL EARNED IN THE PROCESS HAS BEEN CLAIMED AS E XEMPT INCOME UNDER SECTION 10(38) OF THE ACT. I ALSO NOTE THAT IN SUPPORT OF THE ASSESSEES CONTENTION VARIOUS DOCUMENTS HAD BEEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS I .E. COPIES OF PURCHASE BILLS, WHICH IS AVAILABLE IN PAPER BOOK PAGE 6 TO7, COPY OF BANK ST ATEMENTS SHOWING PAYMENTS MADE FOR PURCHASE OF SHARES, WHICH IS AVAILABLE IN PAPER BOO K PAGE8, DEMAT ACCOUNT WITH SBICAP SECURITIES LTD., WHICH IS AVAILABLE AT PAPER BOOK P AGE 9, COPIES OF CONTRACT NOTES IN RESPECT OF SALE OF SHARES, WHICH IS AVAILABLE AT PAGE 10 OF PAPER BOOK, COPY OF BANK STATEMENTS SHOWING RECEIPTS AGAINST SALE OF SHARES, WHICH IS A VAILABLE AT PAGE 11 OF THE PAPER. 7. I NOTE THAT SHARES OF M/S. KAFL WERE SOLD BY ASS ESSEE THROUGH RECOGNIZED BROKER IN A RECOGNIZED STOCK EXCHANGE. THE DETAILS OF SUCH SA LE AND CONTRACT NOTE HAVE BEEN SUBMITTED BEFORE AO/LD. CIT(A). I TAKE NOTE THAT WH EN THE TRANSACTIONS HAPPENED IN THE STOCK EXCHANGE, THE SELLER WHO SELLS HIS SHARES ON THE STOCK EXCHANGE DOES NOT KNOW WHO PURCHASES SHARES. IT IS NOTED THAT THE SHARES ARE SOLD AND BOUGHT IN AN ELECTRONIC MODE ON THE COMPUTERS BY THE BROKERS AND THERE IS ALSO NO D IRECT CONTACT AT ANY LEVEL EVEN BETWEEN THE BROKERS. IT IS NOTED THAT AS AND WHEN ANY SH ARES ARE OFFERED FOR SALE IN THE STOCK EXCHANGE PLATFORM, ANY ONE OF THE THOUSANDS OF BROK ERS REGISTERED WITH THE STOCK EXCHANGE IS AT LIBERTY TO PURCHASE IT. AS FAR AS OUR UNDERS TANDING THE SELLING BROKER DOES NOT EVEN KNOW WHO IS THE PURCHASING BROKER. THIS IS HOW THE SEBI KEEPS A STRICT CONTROL OVER THE TRANSACTIONS TAKEN PLACE IN RECOGNIZED STOCK EXCHAN GES. UNLESS THERE IS A EVIDENCE TO SHOW THAT THERE IS A BREACH IN THE AFORESAID PROCESS WHI CH FACT HAS BEEN UNEARTHED BY METICULOUS INVESTIGATION, I AM OF THE OPINION THAT THE UNSCRUP ULOUS ACTIONS OF FEW PLAYERS EXPLOITING THE LOOPHOLES OF THE STOCK EXCHANGE CANNOT BE THE BASIS TO PAINT THE ENTIRE SALE/PURCHASE OF A SCRIP LIKE THAT OF M/S. KAFL AS BOGUS WITHOUT BRING ING OUT ADVERSE MATERIAL SPECIFICALLY AGAINST THE ASSESSEE. 8. THE FACT OF HOLDING THE SHARES IN THE D-MAT ACCO UNT CANNOT BE DISPUTED. FURTHER, THE ASSESSING OFFICER HAS NOT EVEN DISPUTED THE EXISTEN CE OF THE D-MAT ACCOUNT AND SHARES 6 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSEE. THER EFORE, ONCE, THE HOLDING OF SHARES IS D- MAT ACCOUNT CANNOT BE DISPUTED, THEN THE TRANSACTIO N CANNOT BE HELD AS BOGUS. THE AO HAS NOT DISPUTED THE SALE OF SHARES FROM THE D-MAT ACCO UNT OF THE ASSESSEE AND THE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE BANK ACC OUNT OF THE ASSESSEE, THEREFORE, ONCE THE ASSESSEE PRODUCED ALL RELEVANT EVIDENCE TO SUBSTANT IATE THE TRANSACTION OF PURCHASE, DEMATERIALIZATION AND SALE OF SHARES THEN, IN THE A BSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD THE SAME CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE BASIS OF REPORT OF INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENE RAL STATEMENT OF PROVIDING BOGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS WITHOU T STATING ANYTHING ABOUT THE TRANSACTION OF ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. 9. THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GT C INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION MADE BY THE A O ON THE BASIS OF SUSPICION AND SURMISES AND OBSERVED IN PAR 46 AS UNDER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INT O REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVO UR OF THE ASSESSEE AND SOME MAY GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGHED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE MATERIAL FACTS STR ONGLY INDICATE A PROBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FO R SPENDING IT ON ADVERTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PER THEIR MU TUAL UNDERSTANDING WITH THE ASEESSEE. ANOTHER VERY STRONG PROBABLE FACTOR IS THAT THE ENT IRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE COMPANY NE ED NOT INCUR ADVERTISEMENT EXPENSES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVE RTISEMENT LIES WHOLLY UPON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEG ED COLLECTION OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESSEE ONLY I F THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEE- COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LE AST SOMETHING WOULD HAVE BEEN UNEARTHED FROM SUCH GLOBAL LEVEL INVESTIGATION BY T WO CENTRAL GOVERNMENT AUTHORITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOUNTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC AS A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BA NK ACCOUNTS COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NIRMALA SUNDARAM, WE ARE OF THE OPINION THAT THIS ONE INCIDENT OF DONATI ON THROUGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICA TE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE-COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES U PON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. 7 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG I T MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK T HAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL E VIDENCE ON RECORD. THE THEORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF EITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVO URABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRAWN ON THE BASIS OF CERTAIN ADMITTED F ACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGAINST ASSESSEE . ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AG AINST THE ASSESSEE.' 10. THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY B Y WAY OF BOGUS LONG TERM CAPITAL GAIN. THE HON'BLE JURISDICTION HIGH COURT IN CASE O F CIT VS. SMT. POOJA AGRAWAL (SUPRA) HAS UPHELD THE FINDING OF THE TRIBUNAL ON THIS ISSU E IN PARA 12 AS UNDER:- '12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL AND CONTENDED THAT IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATION THE RE VENUE TRANSACTIONS, THE ADDITION MADE WAS DELETED BY THE TRIBUNAL OBSERVING AS UNDER:- 'CONTENTION OF THE AR IS CONSIDERED. ONE OF THE MAI N REASONS FOR NOT ACCEPTING THE GENUINENESS OF THE TRANSACTIONS DECLARED BY THE APP ELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY T RANSACTIONS IN SHARES. HOWEVER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPE LLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTED BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTION S IN QUESTION VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., A SSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MASTER DETAIL S FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSAC TIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSACTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS S TATEMENT THE APPELLANT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENT S AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACTIONS ARE ROUTED T HROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTION WHICH ARE SUPPORTED BY DOCUMENTS AP PEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI IN SOME SHAM TR ANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION 8 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 ENTRIES OF LONG TERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHER WAS EXEMPTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. A S THE APPELLANT'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER T HAT CATEGORY OF ACCOMMODATION TRANSACTIONS. FURTHER AS PER THE REPORT OF DCIT, CE NTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND TO BE AN ENTRY PROVIDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THA T THE FACT WAS NOT CORRECT AS IN THE STATEMENT OF SH. PAWAN PUROHIT THERE IS NO MENT ION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. SUSHIL KUM AR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAI LED TO COUNTER THE OBJECTIONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCE EDINGS. SIMPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPR AISAL REPORT IS MADE BY THE INVESTING WING AFTER CONSIDERING ALL THE MATERIAL F ACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY I NDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APP ELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE M ENTION ABOUT THE TRANSACTION IN QUESTION IN STATEMENT OF SH. PAWAN PUROHIT. SIMPLY BECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BANK AND THE APPELLA NT HAS ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOE S NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL C ANNOT BE HELD AS NON-GENUINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITA L GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED . THE AO IS THEREFORE, DIRECTED TO ACCEPT CLAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED O N MERE SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESS EE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT MATERIAL TO S UBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLDING OF THE SHARES BY THE ASSESSEE AT THE TIME O F ALLOTMENT SUBSEQUENT TO THE AMALGAMATION/MERGER IS NOT IN DOUBT, THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY T HE AO ON THIS ACCOUNT.' THUS, IT IS CLEAR THAT THE TRIBUNAL IN THE SAID CAS E HAS ANALYZED AN IDENTICAL ISSUE WHEREIN THE SHARES ALLOTTED IN THE PRIVATE PLACEMEN T @ RS. 10 AT PAR OF FACE VALUE WHICH WERE DEMATERIALIZED AND THEREAFTER SOLD BY TH E ASSESSEE AND ACCORDINGLY THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) AS WELL AS THE DECISION OF HON'BLE JURISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL (SUPRA) AS HELD THAT WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATE RIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE PURCHASE CONSIDERA TION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDEN CE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY B Y WAY OF BOGUS LONG TERM CAPITAL GAIN. SIMILAR IN THE CASE IN HAND THE ASSES SEE HAS PRODUCED THE RELEVANT RECORD TO SHOW THE ALLOTMENT OF SHARES BY THE COMPANY ON P AYMENT OF CONSIDERATION BY CHEQUE AND THEREFORE, IT IS NOT A CASE OF PAYMENT O F CONSIDERATION BY IN CASH. BUT THE TRANSACTION IS ESTABLISHED FROM THE EVIDENCE AND RE CORD WHICH CANNOT BE MANIPULATED 9 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 AS ALL THE ENTRIES ARE PART OF THE BANK ACCOUNT OF THE ASSESSEE AND THE ASSESSEE DEMATERIALIZED THE SHARES IN THE D-MAT ACCOUNT WHIC H IS ALSO AN INDEPENDENT MATERIAL AND EVIDENCE CANNOT BE MANIPULATED. THEREFORE, THE HOLDING OF THE SHARES BY THE ASSESSEE CANNOT BE DOUBTED AND THE FINDING OF THE A O IS BASED MERELY ON THE SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW TH AT THE ASSESSEE HAS INTRODUCTION HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CA PITAL GAIN. WE FIND THAT THE LD. CIT(A) HAS ALSO REFERRED TO SEBI ENQUIRY AGAINST TH E M/S ANAND RATHI SHARE AND STOCK BROKERS LTD. HOWEVER, WE NOTE THAT THE SAID E NQUIRY WAS REGARDING FINANCIAL IRREGULARITIES AND USE OF FUND BELONGING TO THE CLI ENTS FOR THE PURPOSE OTHER THAN, THE PURCHASE OF SHARES ON BEHALF OF THE CLIENTS. THEREF ORE, THE SUBJECT MATTER OF THE ENQUIRY HAS NO CONNECTION WITH THE TRANSACTION OF B OGUS LONG TERM CAPITAL GAIN. THE DECISIONS REPLIED UPON THE LD. DR IN CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESE NT CASE AS THE SAID DECISION IS IN RESPECT PENNY STOCK PURCHASE BY THE ASSESSEE FROM A PERSONS WHO WAS FOUND TO BE INDULGED IN PROVIDING BOGUS CAPITAL GAIN ENTRIES WH EREAS IN THE CASE OF THE ASSESSEE THE SHARES WERE ALLOTTED TO THE ASSESSEE BY THE COM PANY AT PAR OF FACE VALUE. HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANCES WHEN WE HOLD TH AT THE ORDER OF THE ASSESSING OFFICER TREATING THE LONG TERM CAPITAL GAIN AS BOGU S AND CONSEQUENTIAL ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE IS NOT SUSTAINA BLE. HENCE, WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 11. I NOTE THAT THE SALE OF SHARES OF M/S. KAFL WHI CH WAS DEMATERLIZED IN DEMAT ACCOUNT HAS TAKEN PLACE THROUGH RECOGNISED STOCK EX CHANGE AND ASSESSEE RECEIVED MONEY THROUGH BANKING CHANNEL. SO, ASSESSEE HAS EXPLAINED THE NATURE AND SOURCE OF THE MONEY WITH SUPPORTING DOCUMENTS AND THUS HAS DISCHARGED T HE ONUS CASTED UPON HIM BY PRODUCING THE RELEVANT DOCUMENTS MENTIONED IN PARA 6 (SUPRA), ACCORDINGLY, THE QUESTION OF TREATING THE SAID GAIN AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT CANNOT ARISE UNLESS THE AO IS ABLE TO FIND FAULT/INFIRMITY WITH THE SAME. I NO TE THAT THE SOURCE OF THE RECEIPT OF THE AMOUNT HAS BEEN EXPLAINED AND THE TRANSACTION IN RE SPECT OF WHICH THE SAID AMOUNT HAS BEEN RECEIVED BY ASSESSEE HAS NOT BEEN CANCELLED BY THE STOCK EXCHANGE/SEBI. SO, IT IS DIFFICULT TO COUNTENANCE THE ACTION OF AO/LD. CIT(A) IN THE AFOR ESAID FACTS AND CIRCUMSTANCES EXPLAINED ABOVE. 12. EVEN ASSUMING THAT THE BROKERS MAY HAVE DONE SO ME MANIPULATION THEN ALSO THE ASSESSEE CANNOT BE HELD LIABLE FOR THE ILLEGAL ACTI ON OF THE BROKERS WHEN THE ENTIRE TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH BANKING CHANNELS DULY RECORDED IN THE DEMAT 10 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 ACCOUNTS WITH A GOVERNMENT DEPOSITORY AND TRADED ON THE STOCK EXCHANGE UNLESS SPECIFIC EVIDENCE EMERGES THAT THE ASSESSEE WAS IN HAND IN G LOVES WITH THE BROKER FOR COMMITTING THE UNSCRUPULOUS ACTIVITY TO LAUNDER HIS OWN MONEY IN T HE GUISE OF LTCG. 13. THERE IS ALSO NOTHING ON RECORD WHICH COULD SUG GEST THAT THE ASSESSEE GAVE HIS OWN CASH AND GOT CHEQUE FROM THE ALLEGED BROKERS/BUYERS . THE ASSESSMENT IS BASED UPON SOME THIRD PARTY STATEMENTS RECORDED BEHIND THE BACK OF THE ASSESSEE AND THE ASSESSEE HAS NOT BEEN ALLOWED TO CROSS EXAMINE THOSE PERSONS BY THE ASSESSEE, SO THE STATEMENTS EVEN IF ADVERSE AGAINST THE ASSESSEE CANNOT BE RELIED UPON BY THE AO TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE IN THE LIGHT OF THE DOCUMENTS TO SUBSTANTIATE THE CLAIM OF LTCG, WHICH HAS NOT BEEN FOUND FAULT WITH BY THE AO. 14. LET US LOOK AT CERTAIN JUDICIAL DECISIONS ON SI MILAR FACTS:- 15. THE CASE OF THE ASSESSEES IS SIMILAR TO THE DE CISION OF HONBLE BOMBAY HIGH COURT, NAGPUR BENCH IN CIT VS. SMT. JAMNADEVI AGRAWAL & OR S. DATED 23RD SEPTEMBER, 2010 REPORTED IN (2010) 328 ITR 656 WHEREIN IT WAS HELD THAT: 'THE FACT THAT THE ASSESSEES IN THE GROUP HAVE PURC HASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUN D TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALLY WHEN DOCUMENTARY ITA NOS. 93 TO 99/RPR/2014 & C.O. NOS. 12 TO 18/RPR/2014 . A.Y. 2004-05 10 PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. FROM THE DOCUMENTS PRODUCED, IT IS SEEN THAT THE SHARES IN Q UESTION WERE IN FACT PURCHASED BY THE ASSESSEES ON THE RESPECTIVE DATES AND THE COMPANY H AS CONFIRMED TO HAVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE S ALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RA TES PREVAILING ON THE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. THE STATEMENT OF THE BROKER P TH AT THE TRANSACTIONS WITH THE H GROUP WERE BOGUS HAS BEEN DEMONSTRATED TO BE WRONG BY PRODUCIN G DOCUMENTARY EVIDENCE TO THE EFFECT THAT THE SHARES SOLD BY THE ASSESSEES WERE IN CONSO NANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE DOCUMENTARY EVIDENCE, THE TRIBUNAL HAS ARRIVE D AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUMENTARY EVIDENCE ON RECORD. THE TRIBUNAL HAS FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE,BANK A CCOUNTS OF SOME OF THE BUYERS OF SHARES 11 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 CANNOT BE LINKED TO THE ASSESSEES. MOREOVER, YN THE LIGHT OF THE DOCUMENTARY EVIDENCE ADDUCED TO SHOW THAT THE SHARES PURCHASED AND SOLD BY THE A SSESSEES WERE IN CONFORMITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FINDING OF FA CT THAT THE CASH CREDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE ABOVE FINDING RECORDED BY THE TRIBUNAL. THEREFORE, THE DECISION O F THE TRIBUNAL IS BASED ON FINDING OF FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDE R OF THE TRIBUNAL.ASSTT. CIT VS. KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. (2010) 41 DTR (NAG) (TRIB) 105: (2010) 133 TTJ (NAG) 818 AFFIRMED; SUMATI DAYAL VS. CIT (1995) 125 CTR (SC) 124: (1995) 80 TAXMAN 89 (SC) DISTINGUISHED. 12. THE HON'BLE HIGH COURT OF RAJASTHAN IN CIT VS. SMT. PUSHPA MALPANI - REPORTED IN (2011) 242 CTR (RAJ.) 559; (2011) 49 DTR 312 DISMIS SED THE APPEAL OF DEPARTMENT OBSERVING 'WHETHER OR NOT THERE WAS SALE OF SHARES AND RECEIP T OF CONSIDERATION THEREOF ON APPRECIATED VALUE IS ESSENTIALLY A QUESTION OF FACT. CIT(A) AND TRIBUNAL HAVE BOTH GIVEN REASONS IN SUPPORT OF THEIR FINDINGS AND HAVE FOUND THAT AT THE TIME O F TRANSACTIONS, THE BROKER IN QUESTION WAS NOT BANNED BY SEBI AND THAT ASSESSEE HAD PRODUCED COPIE S OF PURCHASE BILLS, CONTRACT NUMBER SHARE CERTIFICATE, APPLICATION FOR TRANSFER OF SHAR E CERTIFICATE TO DEMAT ACCOUNT ALONG WITH COPIES OF HOLDING STATEMENT IN DEMAT ACCOUNT, BALAN CE SHEET AS ON 31ST MARCH, 2003, SALE BILL, BANK ACCOUNT, DEMAT ACCOUNT AND OFFICIAL REPORT AND QUOTATIONS, OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. ON 23RD JULY, 2003. THEREFORE, 'TH E PRESE/ITDPPEAL DOES NOT RAISE ANY QUESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 16. THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF ANUPAM KAPOOR 299 ITR 0179 HAS HELD AS UNDER:- THE TRIBUNAL ON THE BASIS OF THE MATERIAL ON RECOR D, HELD THAT PURCHASE CONTRACT NOTE, CONTRACT NOTE FOR SATES, DISTINCTIVE NUMBERS OF SHA RES PURCHASED AND SOLD, COPY OF SHARE CERTIFICATES AND THE QUOTATION OF SHARES ON THE DAT E OF PURCHASE AND SALE WERE SUFFICIENT MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT BOGUS BUT A GENUINE TRANSACTION. THE PURCHASE OF SHARES WAS MADE ON 28TH APRIL, 1993 I.E.. ASST. YR. 1993-94 AND THAT ASSESSMENT WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS NO CHALLEN GE TO THE PURCHASE OF SHARES IN THAT YEAR. IT WAS ALSO PLACED BEFORE THE RELEVANT AO AS WELL A S BEFORE THE TRIBUNAL THAT THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSE SSEE AND WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE TRIBUNAL WAS RIGHT IN REJECTING T HE APPEAL OF THE REVENUE BY HOLDING THAT THE ASSESSEE WAS SIMPLY A SHAREHOLDER OF THE COMPAN Y. HE HAD MADE INVESTMENT IN A COMPANY IN WHICH HE WAS NEITHER A DIRECTOR NOR WAS HE IN CO NTROL OF THE COMPANY. THE ASSESSEE HAD TAKEN SHARES FROM THE MARKET, THE SHARES WERE LISTE D AND THE TRANSACTION TOOK PLACE THROUGH A REGISTERED BROKER OF THE STOCK EXCHANGE. THERE WAS NO MATERIAL BEFORE THE AO, WHICH COULD HAVE LEAD TO A CONCLUSION THAT THE TRANSACTION WAS SIMPLICITIER A DEVICE TO CAMOUFLAGE ACTIVITIES, TO DEFRAUD THE REVENUE. NO SUCH PRESUMP TION COULD BE DRAWN BY THE AO MERELY ON SURMISES AND CONJECTURES. IN THE ABSENCE OF ANY COG ENT MATERIAL IN THIS REGARD, HAVING BEEN PLACED ON RECORD, THE AO COULD NOT HAVE REOPENED TH E ASSESSMENT. THE ASSESSEE HAD MADE AN INVESTMENT IN A COMPANY, EVIDENCE WHEREOF WAS WITH THE AO. --THEREFORE, THE AO COULD NOT HAVE ADDED INCOME, WHICH WAS RIGHTLY DELETED BY THE CIT(A) AS WELL AS THE TRIBUNAL. IT IS SETTLED LAW THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. CONSEQUENTLY, NO QUESTION OF LAW, MUCH LESS A SUBST ANTIAL QUESTION OF LAW, ARISES FOR ADJUDICATION. C. VASANTLAL & CO. VS. CIT (1962) 45 ITR 206 (SC), M.O. THOMAKUTTY VS. CIT (.1958) 34 ITR 501 (KER)) AND MUKAND SINGH VS. SALE S TAX TRIBUNAL (1998) 107 STC 300 12 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 (PUNJAB) RELIED ON; UMACHARAN SHAW &BROS. VS. CIT ( 1959) 37 ITR 271 (SC) APPLIED; JASPAL SINGH VS. CIT (2006) 205 CTR (P & H) 624 DISTINGUIS HED 17. THE CO-ORDINATE BENCH OF AHMEDABAD IN ITA NOS. 501 & 502/AHD/2016 HAD THE OCCASION TO CONSIDER A SIMILAR ISSUE WHICH WAS WHER EIN THE ASSESSMENT WAS FRAMED ON THE STRENGTH OF THE STATEMENT OF A BROKER. THE RELEVANT PART READS AS UNDER:- 14. THE ENTIRE ASSESSMENT IS BASED UPON THE STATEM ENT OF SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMEN T WAS SUPPLIED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN BY THE A SSESSING OFFICER/CIT(A). THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTR IES IN CIVIL APPEAL NO. 4228 OF 2006 WAS SEIZED WITH THE FOLLOWING ACTION OF THE TRIBUNA L:- 6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION OF THE DEA LERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF TH E APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SI NCE WE ARE NOT UPHOLDING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CON TRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS. 15. THE HONBLE APEX COURT HELD AS UNDER:- ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THO SE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND T HAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAI D TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNI TY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AF ORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE T RIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TR IBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EXFACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL T O HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR T ESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS EXAMINATIO N. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE 13 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETH ER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS ME NTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFO RE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REM ITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL O N MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTM ENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESA ID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 16. ON THE STRENGTH OF THE AFOREMENTIONED DECISIO N OF THE HONBLE SUPREME COURT, THE ASSESSMENT ORDER HAS TO BE QUASHED. 17. EVEN ON FACTS OF THE CASE, THE ORDERS OF THE AU THORITIES BELOW CANNOT BE ACCEPTED. THERE IS NO DENYING THAT CONSIDERATION WAS PAID WHEN THE SHA RES WERE PURCHASED. THE SHARES WERE THEREAFTER SENT TO THE COMPANY FOR THE TRANSFER OF NAME. THE COMPANY TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE. THERE IS NOTHING ON RECOR D WHICH COULD SUGGEST THAT THE SHARES WERE NEVER TRANSFERRED IN THE NAME OF THE ASSESSEE. THER E IS ALSO NOTHING ON RECORD TO SUGGEST THAT THE SHARES WERE NEVER WITH THE ASSESSEE. ON THE CON TRARY, THE SHARES WERE THEREAFTER TRANSFERRED TO DEMAT ACCOUNT. THE DEMAT ACCOUNT WAS IN THE NAME OF THE ASSESSEE, FROM WHERE THE SHARES WERE SOLD. IN OUR UNDERSTANDING OF THE F ACTS, IF THE SHARES WERE OF SOME FICTITIOUS COMPANY WHICH WAS NOT LISTED IN THE BOMBAY STOCK EX CHANGE/NATIONAL STOCK EXCHANGE, THE SHARES COULD NEVER HAVE BEEN TRANSFERRED TO DEMAT A CCOUNT. SHRI MUKESH CHOKSI MAY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PER SONS BUT SO FAR AS THE FACTS OF THE CASE IN HAND SUGGEST THAT THE TRANSACTIONS WERE GENUINE AND THEREFORE, NO ADVERSE INFERENCE SHOULD BE DRAWN. 18. IN THE LIGHT OF THE DECISIONS OF THE HONBLE S UPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA) AND CONSIDERING THE FACTS IN TOT ALITY, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ON THE BASIS OF PRESUMPTION AND SURMISES IN RESPECT OF PENNY STOCK BY DISREGARDING THE DIRECT EVIDENCES ON RECORD RELATING TO THE SALE/PUR CHASE TRANSACTIONS IN SHARES SUPPORTED BY BROKERS CONTRACT NOTES, CONFIRMATION OF RECEIPT OF SALE PROCEEDS THROUGH REGULAR BANKING CHANNELS AND THE DEMAT ACCOUNT. 19. ACCORDINGLY, WE DIRECT THE A.O. TO TREAT THE GA INS ARISING OUT OF THE SALE OF SHARES UNDER THE HEAD CAPITAL GAINS- SHORT TERM OR LONG TERM AS THE CASE MAY BE. THE OTHER GRIEVANCE OF THE ASSESSEE BECOMES INFRUCTUOUS. 18. THE LD. D.R. HAD HEAVILY RELIED UPON THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX APPEAL NO. 18 OF 2017. I NOTE THAT IN THE CASE RELIED 14 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 UPON BY THE LD. D.R, I FIND THAT THE FACTS ARE DIFF ERENT FROM THE FACTS OF THE CASE IN HAND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MADE BY T HE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPANIES AND THE PURCHASE OF SHARES OF T HE COMPANIES WAS DONE THROUGH THE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDENTAL LY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY THE ASSESSEE WAS SHOWN AS CAPITAL GAINS W HICH WAS NOT ACCEPTED BY THE A.O. AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE AS SESSEE BY TREATING THE SALES OF THE SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF TRADE. T HUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE OF SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 19. IT IS CLEAR FROM THE ABOVE THAT THE FACTS OF T HE CASE OF THE ASSESSEE ARE IDENTICAL WITH THE FACTS IN THE ABOVE CASE WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DELETED THE ADDITION IN THE CASE OF SMT. POOJA AGGARWAL (SUPRA) IN RESPECT OF SALE OF SHARES OF M/S KAFL. I, THEREFORE, RESPECTFULLY FOLLOWING THE SAME SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO NOT TO TREAT THE LONG TERM CAPITAL O N SALE OF SHARES OF M/S KAFL AS BOGUS AND DELETE THE CONSEQUENTIAL ADDITION. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH APRIL, 2019 SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 10TH APRIL, 2019 JD.(SR.P.S.) 15 ITA NO. 2410/KOL/2018 SUNIL KUMAR SHAW., AY 2015-16 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHRI SUNIL KUMAR SHAW, BANDEL BAZAR, H/O K. P. SHAW, BALIKATA, BANDEL, HOOGHLY-712123. 2 RESPONDENT ITO, WARD-24(3), HOOGHLY. 3 4 5 CIT(A)-6 , KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR