Appeal Details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 5180 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-08-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Next Hearing Date
02-07-2019
Assessment Year
2014-2015
Appeal Filed On
19-11-2018
Judgement Text
1 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 , SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 2412/KOL/2018 ASSESSMENT YEARS: 2014-15 RABINDRA KAJARIA (PAN:AFRPK2004E) VS. INCOME-TAX OFFICER, WD-36(1), KOLKATA APPELLANT RESPONDENT FOR THE APPELLANT SHRI SUNIL SURANA, FCA FOR THE RESPONDENT SHRI SANKAR HALDER, JCIT, SR. D R DATE OF HEARING 02.07.2019 DATE OF PRONOUNCEMENT 23.08.2019 ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL OF THE ASSESSEE ARISES OUT OF ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 10, KOLKATA FOR AY 2014-15 DATED 19.09.2018. 2. GROUND NO. 5 IS GENERAL IN NATURE AND SO IT DOES NOT REQUIRE ANY ADJUDICATION, SO THE SAME STANDS DISMISSED. 3. IN RESPECT OF GROUND NOS. 1 & 2 THE MAIN GRIEVAN CE OF THE ASSESSEE IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF TH E AO TO TREAT THE LONG TERM CAPITAL GAINS (LTCG) OF RS.30,78,601/- AS BOGUS AND THEREBY DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE U/S. 10(38) OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) AND ALSO CONFIRMING THE ACTION OF AO ON ACCOUNT OF ADDITION OF RS.15,393/- U/S. 69C OF THE ACT ON THE PRESUMPTION THAT COMMISSION @ 5% WAS PAI D FOR ARRANGING THE AFORESAID BOGUS LONG TERM CAPITAL GAIN. 4. BRIEF FACTS OF THE CASE AS NOTED BY THE AO IS TH AT THE AO DURING THE SCRUTINY ASSESSMENT NOTED THAT THE ASSESSEE HAD CLAIMED LTCG ON SALE OF SHARES OF M/S. SMART 2 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 CHAMPS I T INFRA LTD. (M/S. CRESSANDA SOLUTIONS LTD .) ACCORDING TO AO, THE ASSESSEE HAD PURCHASED 10,000 SHARES OF M/S. CRESSANDA SOLUTIONS LTD. ON 07.12.2011 INVESTING RS. 1,00,000/- AND SOLD THE ENTIRE SHARE OF M/S. CRESSA NDA SOLUTIONS LTD. (AMALGAMATED COMPANY) BETWEEN 25.03.2013 TO 07.05.2013 FOR RS.30 ,78,601/-. THEREAFTER, THE AO TOOK NOTE OF THE INVESTIGATION CARRIED OUT BY THE INVEST IGATION WING OF KOLKATA IN RESPECT OF TRANSACTION OF SHARES OF PENNY STOCK COMPANIES CARR IED OUT AT KOLKATA STOCK EXCHANGE & BOMBAY STOCK EXCHANGE WHEREIN IT WAS FOUND OUT THAT ARTIFICIAL GAINS IN THE FORM OF LTCG OR ARTIFICIAL LOSS IN THE FORM OF STCL WAS GENERATE D TO THE BENEFICIARIES AS PER THEIR REQUIREMENTS WAS CARRIED OUT SYSTEMATICALLY TO EVAD E TAX. THEREAFTER, HE DISCUSSES THE MODUS OPERANDI AS UNRAVELED BY THE DEPARTMENT. IT WAS ALSO NOTED BY THE AO THAT ASSESSEE WAS ONE OF THE BENEFICIARIES AFTER THE INVESTIGATIO N WAS CARRIED OUT. THE AO NOTED THAT DESPITE THE FINANCIAL NEGATIVITY OF THE M/S. CRESSA NDA SOLUTIONS LTD, THE ASSESSEE WITH THE MODUS OPERANDI USING THE SYNDICATE/RACKET WAS ABLE TO PRE-ARRANGE SALE/PURCHASE OF THESE SHARES OF THE SAID COMPANY AT A PRICE AS HIGH AS AR OUND RS.500/- WITHIN A GAP OF 15 MONTHS, WHICH PER-SE CANNOT BE TERMED AS NORMAL BEHAVIOR A ND IS NOT ACCEPTABLE AS PER THE HUMAN PROBABILITIES. THE AO ALSO NOTED FROM THE HISTORY OF THIS SCRIP THAT M/S. SMART CHAMPS IT AND INFRA LTD. GOT AMALGAMATED WITH M/S. CRESSENDA SOLUTIONS LTD. WHICH WAS NOT A BLUE CHIP COMPANY RATHER IT IS A PENNY STOCK COMPANY AND , THEREFORE, THERE WAS NO REASON HOW THE SHARE VALUE OF M/S. CRESSENDA SOLUTIONS LTD. CA N GO TO ASTRONOMICAL PRICE AND ASSESSEE WAS ABLE TO GET LTCG OF SUCH A HUGE AMOUNT, THEREFO RE, BY APPLYING THE TEST OF HUMAN PROBABILITY CONCLUDED THAT THE CLAIM OF THE ASSESSE E OF THE LTCG FROM SALE OF SHARES OF M/S. CRESSENDA SOLUTIONS LTD. TO THE TUNE OF RS.30,78,60 1/- AS BOGUS AND, THEREFORE, WAS TREATED AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. AGG RIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM T HE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 5. THE LD. AR ASSAILING THE DECISION OF THE LD. CIT (A) DREW OUR ATTENTION TO THE PAPER BOOK FILED BY THE ASSESSEE WHEREIN THE ASSESSEE HAD FILED THE DOCUMENTS TO PROVE THAT THE ASSESSEE HAD PURCHASED THE SHARES OF M/S. SMART CHA MPS IT AND INFRA LTD. FOR WHICH CONTRACT NOTES HAVE BEEN FILED AND LATER ON M/S. SM ART CHAMPS IT AND INFRA LTD. GOT AMALGAMATED WITH M/S. CRESSENDA SOLUTIONS LTD. AS P ER THE HONBLE HIGH COURTS ORDER AND 3 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 LATER ON M/S. CRESSENDA SOLUTIONS LTD.S SHARES WER E ALLOTTED TO THE ASSESSEE WHICH WAS SOLD IN THE STOCK EXCHANGE WHICH WAS EVIDENCED BY THE CO NTRACT NOTE AS WELL AS THE SALE CONSIDERATION HAVE BEEN RECEIVED BY ACCOUNT PAYEE C HEQUES AND THE SHARES WERE HELD IN THE DE MAT ACCOUNT. ALL THESE DOCUMENTS ACCORDING TO L D AR, WERE FILED BEFORE THE AUTHORITIES BELOW AND DREW OUR ATTENTION TO PAGE NOS. 1 TO 15 T O PROVE THE LTCG CLAIM MADE BY THE ASSESSEE. THE LD. AR WONDERED AS TO HOW THE LD. CI T(A) IGNORED THE AFORESAID DOCUMENTS AND WITHOUT POINTING OUT ANY FAULT IN THE SAID DOCU MENTS HAS TURNED DOWN THE CLAIM OF THE ASSESSEE WHICH ACTION, ACCORDING TO LD. AR, IS ARBI TRARY AND PERVERSE. LD. AR DREW OUR ATTENTION TO JUDICIAL PRECEDENTS LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS BY HONBLE HIGH COURTS AND TRIBUNALS DECISIONS IN SUPPORT OF THE CLAIM MADE BY THE ASSESSEE WHEREIN SIMILAR CLAIM OF LTCG HAS BEEN UPH ELD. THE LD. AR ALSO DREW OUR ATTENTION TO THE COORDINATE BENCH DECISION IN NAVNE ET AGARWAL, L/H OF LT. KIRAN AGARWAL VS. ITO, ITA NO. 2281/KOL/2017 FOR AY 2014-15 DATED 20.07.2018 WHEREIN THE TRIBUNAL WAS PLEASED TO UPHOLD THE LTCG CLAIM OF THE ASSESSE E IN RESPECT OF SALE OF SCRIPS OF M/S. CRESSENDA SOLUTIONS LTD. AS WELL AS THE DECISION IN SUMAN SARAF VS. ITO IN ITA NO. 1395/KOL/2018 DATED 05.10.2018 WHEREIN ALSO THE TRI BUNAL UPHELD THE LTCG CLAIM OF ASSESSEE IN RESPECT OF M/S. CRESSENDA SOLUTIONS LTD ., AS WELL AS THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SMT. RITIKA S AROGI VS. ITO IN ITA NO. 1206/KOL/2018 FOR AY 2014-15 DATED 21.02.2019. SO HE PRAYED THAT ASSESSEES CLAIM OF LTCG BE UPHELD. 6. PER CONTRA, THE LD. DR WHILE SUPPORTING THE ORDE R OF THE LD. CIT(A) DREW OUR ATTENTION TO THE FACT THAT THE SCRIP WHICH WAS VALU ED RS. 1/- EACH BEFORE AMALGAMATION WITH M/S. CRESSENDA SOLUTIONS LTD. HAS GONE UPTO RS.500 /- PER SHARE WITHIN FIFTEEN MONTHS IS AGAINST HUMAN PROBABILITY AND THE ASSESSEE FAILED T O PRODUCE ANY EVIDENCE TO SHOW THAT THERE WAS ANY EXTRAORDINARY EVENT WHICH COULD HAVE BEEN INSTRUMENTAL IN THE RISE OF THE VALUE OF THE SHARES. ACCORDING TO LD. DR, THE PRIC E OF SHARE OF M/S. SMART CHAMPS IT AND INFRA LTD. WHICH ASSESSEE PURCHASED FOR RS. 1/- EAC H WAS ALSO A PAPER COMPANY, WHICH WAS LATER AMALGAMATED WITH M/S. CRESSENDA SOLUTIONS LTD . WHICH WAS ALSO A PENNY STOCK COMPANY WHICH HAD NO FINANCIAL WORTH-MENTIONING. SO , ACCORDING TO LD. DR, IT IS AGAINST THE HUMAN PROBABILITY THAT SHARES COULD HAVE BEEN T RADED AT SUCH A HIGH VALUE EARNING THE ASSESSEE HUGE PROFIT. AND THE LD. D.R. HEAVILY RELI ED UPON THE DECISION OF THE HONBLE 4 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX APPEAL NO. 18 OF 2017 TO SUPPORT THE ORDERS OF LOWER AUTHORITIES AND OTHER C ASES WHICH WILL BE DISCUSSED INFRA. ACCORDING TO LD. DR, INVESTIGATION WING OF KOLKATA HAS CLEARLY UNRAVELED THE MODUS OPERANDI FOLLOWED BY THESE UNSCRUPULOUS PERSONS/BR OKERS WHICH WERE SYSTEMATICALLY CARRIED OUT WITH TRANSACTIONS SUPPORTED BY DOCUMENT S CANNOT BE THEREFORE, ACCEPTED AND, THEREFORE, HE DOES NOT WANT US TO INTERFERE WITH TH E ORDER OF LD. CIT(A). 7. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I NOTE THAT THE ASSESSEE HAD PURCHASED 10,00 0 SHARES OF M/S. SMART CHAMPS IT AND INFRA LTD. ON 07.12.2011 (PAGE 1 OF PAPER BOOK). T HEREAFTER ON 24.01.2013 THE HONBLE BOMBAY HIGH COURT APPROVED THE SCHEME OF AMALGAMATI ON OF M/S. SMART CHAMPS IT AND INFRA LTD. WITH M/S. CRESSANDA SOLUTIONS LTD. AS P ER THE SCHEME OF AMALGAMATION M/S. CRESSANDA SOLUTIONS LTD. WAS TO ALLOW EQUAL NUMBER OF SHARES TO THE SHAREHOLDERS OF M/S. SMART CHAMPS IT AND INFRA LTD. PURSUANT TO THE SAID SCHEME, THE ASSESSEE RECEIVED 10000 SHARES OF M/S. CRESSANDA SOLUTIONS LTD. AND THEREA FTER, SOLD THE SAME THROUGH STOCK EXCHANGE AND THE SALE CONSIDERATION, THE ASSESSEE R ECEIVED THROUGH BANKING CHANNEL SINCE THE LTCG RECEIVED BY ASSESSEE, SATISFIES THE CONDIT ION LAID DOWN IN SEC. 10(38) OF THE ACT, THE ASSESSEE HAS CLAIMED THE AMOUNT TO BE EXEMPT FR OM TAX. 8. I NOTE THAT THE ABOVE TRANSACTION HAS BEEN CARRI ED OUT ON A RECOGNIZED STOCK EXCHANGE I.E. BOMBAY STOCK EXCHANGE AND THROUGH A REGISTERED BROKER I.E. INDIA INFOLINE LTD. I NOTE THAT THE TRANSACTION HAS BEEN CARRIED OUT AFTER PAY ING THE STT DUE ON IT. I NOTE THAT THE CONTRACT NOTES, DE MAT ACCOUNT EVIDENCING THE SHARE MOVEMENT, BANK ACCOUNT HIGHLIGHTED THE PAYMENTS ARE FURNISHED IN THE PAPER BOOK. I AL SO NOTE THAT THESE DOCUMENTS WERE FURNISHED BEFORE THE AO AS WELL AS BEFORE THE LD. C IT(A). I NOTE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO INFLUENCED BY THE REPORT OF THE INVESTIGATION WING HAS NOT EXPRESSED HIS VIEW IN RESPECT OF THE DOCUMENTS FILED BY THE A SSESSEE TO SUBSTANTIATE HER CLAIM AND DID NOT POINT OUT ANY DEFECT IN THE DOCUMENTS PROVIDED BY THE ASSESSEE. THE ASSESSEE IN ORDER TO PROVE ITS BONAFIDENESS IN THE TRANSACTION FILED THE BANK STATEMENT, INVOICE OF PURCHASE OF SHARES, CONTRACT NOTES FOR SALE OF SHARES, EARLIER YEARS BALANCE SHEET SHOWING THE SAME BEING REFLECTED AS SHARES AS INVESTMENTS ETC. I NO TE THAT DURING ASSESSMENT PROCEEDINGS WHEN THE AO EXPRESSED DOUBTS ABOUT THE GENUINENESS OF HER CLAIM BASED ON THE 5 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 INVESTIGATION REPORT OF THE INVESTIGATION WING, THE ASSESSEE REQUESTED FOR A COPY OF THE INVESTIGATION REPORT OF THE INVESTIGATION WING, WHI CH WAS NOT FURNISHED TO THE ASSESSEE. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT THE A SSESSEE AN INDIVIDUAL WAS NOT RELATED IN ANY MANNER TO THE PROMOTERS OR THE DIRECTORS OF THE COMPANY IN QUESTION OR TO ANY PERSON TO WHOM THE SHARES HAVE BEEN SOLD. THE ASSESSEE CONTE STED THE AOS VIEW THAT M/S. CRESSENDA SOLUTIONS LTD. WAS A PENNY STOCK COMPANY AND ITS STOCKS WERE ARTIFICIALLY RIGGED TO BENEFIT THE ASSESSEE. THOUGH THE ASSESSEE FILED ALL THE DOCUMENTS TO SUPPORT ITS CLAIM FOR LTCG THE AO & LD. CIT(A) WITHOUT FINDING ANY FAULT WITH THE DOCUMENTS FILED HAVE NEGATED THE CLAIM BASED ONLY ON HUMAN PROBABILITY A ND THE INVESTIGATION REPORT WHICH WAS NOT FURNISHED TO ASSESSEE. ACCORDING TO ME, THE NON -FURNISHING OF ANY MATERIAL WHICH IS USED BY THE AO TO DRAW ADVERSE VIEW AGAINST THE ASSESSEE ITSELF IS IN VIOLATION OF NATURAL PRINCIPLE. I NOTE THAT THE SAME ISSUE AROSE IN THE CASE OF AN ASSESSEE NAMED NAVNEET AGARWAL (SUPRA) WHO ALSO CLAIMED LTCG FOR SALE OF S HARES OF M/S. CRESSENDA SOLUTIONS LTD. WHICH WAS NOT ACCEPTED BY BOTH THE AO AND TH E LD. CIT(A), WHICH ACTION WAS ASSAILED BEFORE THIS TRIBUNAL AND THIS TRIBUNAL IN ITA NO. 2281/KOL/2017 WAS PLEASED TO ALLOW THE LTCG CLAIM OF THE ASSESSEE BY HOLDING AS UNDER: 2.THE ASSESSEE HAD FILED RETURN OF INCOME ON 16.07 .2014 DISCLOSING TOTAL INCOME OF RS. 4,63,515/-. THIS WAS PROCESSED U/S. 143(1) OF THE A CT AND SUBSEQUENTLY SELECTED FOR SCRUTINY. THE ASSESSEE HAD CLAIMED EXEMPTION ON INCOME FROM L ONG TERM CAPITAL GAINS OF RS. 2,18,13,073/-. THIS GAIN WAS EARNED FROM SALE OF FI FTY THOUSAND SHARES OF M/S CRESSENDA SOLUTION LTD., DURING THE FINANCIAL YEAR 2013-14 RE LEVANT TO ASSESSMENT YEAR 2014-15. THE ASSESSING OFFICER IN HIS ORDER PASSED U/S. 143(3) O F THE ACT REFERRED TO THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, KOLKATA AND AT PARA. 4, HE STATED AS FOLLOWS: 4. BEFORE GOING INTO THE DETAILS OF THIS PARTICULA R CASE, IT IS PERTINENT TO DISCUSS THE BACKGROUND OF THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, KOLKATA. FOR THIS RELEVANT PORTIONS OF THE INVESTIGATION REPORTS ARE REPRODUCED HEREIN: IN THE WHOLE PROJECT TOTAL 84 BSE LISTED PENNY STOC KS HAVE BEEN IDENTIFIED AND WORKED UPON. AFTER THAT, NUMBER OF SEARCH AND SURVEYS WERE CONDU CTED IN THE OFFICE PREMISES OF MORE THAN 32 SHARES BROKING ENTITIES, WHICH ACCEPTED THAT THE Y WERE ACTIVELY INVOLVED IN THE BOGUS LTCS/STCL SCAM. SURVEYS WERE ALSO CONDUCTED IN THE OFFICE PREMISES OF MANY ACCOMMODATION ENTRY PROVIDERS AND THEIR STATEMENTS RECORDED. ALL HAVE ACCEPTED THEIR ROLE IN THE SCAM. BENEFICIARIES OF MORE THAN RS. 38 THOUSAND CRORE HA VE BEEN IDENTIFIED AND SEGREGATED DGIT(INV.) WISE. TOTAL NUMBER OF MORE THAN 60 THOUS AND PAN NUMBERS OF THE BENEFICIARIES HAVE BEEN IDENTIFIED, WHICH IS BEING REPORTED TO AS SESSMENT WINGS THROUGH THE DGITS. 6 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 THIS REPORT ALSO COVERS MORE THAN 5000 SHELL/PAPER COMPANIES WHICH ARE BETTER KNOWN AS JAMAKHARCHI COMPANIES, WHICH ARE INVOLVED IN PROVID ING BOGUS ACCOMMODATION OF VARIOUS KINDS. STATEMENTS OF MOST OF THE DIRECTORS WERE REC ORDED ON OATH AND PART OF THE SAID REPORT. LATER, HE STATED THAT M/S CRESSENDA SOLUTION LTD. I S ONE OF THE 84 SCRIPS WHICH WERE IDENTIFIED BY THE DIRECTORATE OF INVESTIGATION, A S INVOLVED IN THE SCHEME OF BOGUS LTCG/STCG AND THAT THE NAME AND PAN NO. OF THE ASSE SSEE IS PART OF LIST OF BENEFICIARIES IDENTIFIED BY THE DIRECTORATE. THEREAFTER, HE DISCU SSED THE MODUS OPERANDI OF THESE COMPANIES AND HELD THAT THE TOTAL SALE CONSIDERATIO N EARNED BY THE ASSESSEE IS TO BE ADDED AS UNEXPLAINED CASH CREDIT AS THESE ARE SALE OF BOGUS SHARES. 3. THE MODUS OPERANDI LISTED OUT BY THE AO IS SUMMA RIZED AS FOLLOWS: I. THE INITIAL ALLOTMENT OF SHARES TO BENEFICIARIES IS GENERALLY DONE THROUGH PREFERENTIAL ALLOTMENT. II. THE MARKET PRICE OF SHARES OF THESE COMPANIES RISE TO VERY HIGH LEVEL WITHIN A SPAN OF ONE YEAR. III. THE TRADING VOLUME OF SHARES DURING THE PERIOD, IN WHICH MANIPULATIONS ARE DONE TO RAISE THE MARKET PRICE, IS EXTREMELY THIN. IV. MOST OF THE PURPORTED INVESTORS ARE RETURNED THEIR INITIAL INVESTMENT AMOUNT IN CASH. ONLY SMALL AMOUNT IS RETAINED BY THE OPERATOR AS SECURIT Y. THUS, AN ENQUIRY WOULD REVEAL THAT MOST OF THE CAPITAL RECEIPTS THROUGH PREFERENTIAL A LLOTMENT OR OTHER MEANS WOULD HAVE FOUND THEIR WAY OUT OF SYSTEM AS CASH. V. MOST OF THESE COMPANIES HAVE NO BUSINESS AT ALL. FE W OF THE COMPANIES WHICH HAVE SOME BUSINESS DO NOT HAVE THE CREDENTIALS TO JUSTIFY THE SHARP RISE IN MARKET PRICE OF THEIR SHARES. VI THE SHARP RISE IN MARKET PRICE OF THE SHARES OF THESE ENTITIES IS NOT SUPPORTED BYFUNDAMENTALS OF THE COMPANY OR ANY OTHER GENUINE FACTORS. VI. AN ANALYSIS IN RESPECT OF PERSONS INVOLVED IN TRANS ACTIONS APPARENTLY CARRIED OUT IN ORDER TO JACK UP THE SHARE PRICES HAS BEEN DONE IN RESPECT O F 84 COMPANIES. IT HAS BEEN NOTED THAT MANY COMMON PERSONS/ENTITIES WERE INVOLVED IN TRADI NG IN MORE THAN 1 LTCG COMPANIES DURING THE PERIOD WHEN THE SHARES WERE MADE TO RISE WHICH IMPLIES THAT THEY HAD CONTRIBUTED TO SUCH PRICE RISE. VII. NAMES OF MOST OF THE LTCG COMPANIES ARE CHANGED DUR ING THE PERIOD OF THE SCAM. VIII. MOST OF THE COMPANIES SPLIT THE FACE VALUE OF SHARE S [THIS IS PROBABLY DONE TO AVOID THE EYES OF MARKET ANALYSTS]. IX. THE VOLUME OF TRADE JUMPS MANIFOLD IMMEDIATELY WHEN THE MARKET PRICES OF SHARES REACH AT OPTIMUM LEVEL SO AS TO RESULT IN LTCG ASSURED TO TH E BENEFICIARIES. THIS MAXIMUM IS REACHED AROUND THE TIME WHEN THE INITIAL ALLOTTEES HAVE HEL D THE SHARES FOR ONE YEAR OR LITTLE MORE AND THUS, THEIR GAIN ON SALE OF SUCH SHARES WOULD BE EL IGIBLE FOR EXEMPTION FROM INCOME TAX. X. AN ANALYSIS OF SHARE BUYERS OF SOME OF LTCG COMPANI ES WAS DONE TO SEE IF THERE WERE COMMON PERSONS/ENTITIES INVOLVED IN BUYING THE BOGU S INFLATED SHARES. IT WAS NOTED THAT THERE WERE MANY COMMON BUYERS [WHICH WERE PAPER COMPANIES ]. 7 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 XI. THE PRICES OF THE SHARES FALL VERY SHARPLY AFTER TH E SHARES OF LTCG BENEFICIARIES HAVE BEEN OFF LOADED THROUGH THE PRE-ARRANGED TRANSACTIONS ON THE STOCK EXCHANGE FLOOR/PORTAL TO THE SHORT TERM LOSS SEEKERS OR DUMMY PAPER ENTITIES. XII. THE SHARES OF THESE COMPANIES ARE NOT AVAILABLE FOR BUY/SELL TO ANY PERSON OUTSIDE THE SYNDICATE. THIS IS GENERALLY ENSURED BY WAY OF SYNC HRONIZED TRADING BY THE OPERATORS AMONGST THEMSELVES AND/OR BY UTILIZING THE MECHANIS M OF UPPER/LOWER CIRCUIT OF THE EXCHANGE. THE ASSESSEE SUBMITTED VARIOUS DOCUMENTS IN SUPPORT OF HER CLAIM THAT THE TRANSACTIONS IN QUESTION ARE GENUINE. SHE ALSO RELIED ON CERTAIN CA SE LAWS. THE AO DID NOT ACCEPT THE EVIDENCE FILED BY THE ASSESSEEIN SUPPORT OF HER CLA IM AND BY RELYING ON THE REPORT OF THE INVESTIGATING WING REJECTEDTHE CLAIM OF THE ASSESSE E THAT SHE HAD EARNED CAPITAL GAINS ON THE GENUINE SALE OF SHARES. HE HELD THAT THE RECEIPT IS AN UNEX PLAINED CASH CREDIT AND MADE AN ADDITION U/S. 68 OF THE ACT. AGGRIEVED THE ASSESSE E CARRIED THE MATTER ON APPEAL. 4. THE FIRST APPELLATE AUTHORITY HAD GIVEN HIS DECI SION FROM PAGE 41 OF HIS ORDER. HIS FINDINGS ARE SUMMARIZED AS FOLLOWS: A) THE AO HAD PLACED ON RECORD THE ENTIRE GAMUT OF FIN DING AND THERE IS NO FURTHER REQUIREMENT FOR ELABORATION. B) THERE IS DIRECT EVIDENCE TO CLEARLY INDICATE THAT T HE ENTIRE TRANSACTION UNDERTAKEN BY THE ASSESSEEWAS MERELY AN ACCOMMODATION TAKEN FOR THE P URPOSE OF BOGUS LONGTERM CAPITAL GAINS TO CLAIM EXEMPT INCOME. THE AUTHORITIES SUCH AS SEBI HAVE AFTER INVESTIGATING SUCH ABNORMAL PRICE INCREASE OF CERTAIN STOCKS, SUSPENDE D CERTAIN SCRIPS. C) THE SUBMISSIONS OF THE ASSESSEE POINTED OUT ELABORA TE DOCUMENTATION SUCH AS: I) APPLICATION OF SHARES. II) ALLOTMENT OF SHARES. III) SHARE CERTIFICATES IV) PAYMENT BY CHEQUES V) FILINGS BEFORE REGISTRAR OF COMPANIES. VI) PROOF OF AMALGAMATION OF COMPANIES. VII) COPIES OF BANK STATEMENT, VIII) BANK CONTRACT NOTES. IX) DELIVERY INSTRUCTION TO THE BROKER ETC. D) THE ELABORATE PAPER BOOK IS FILED TO STRENGTHEN THE MATTER RELEVANT TO THE BOGUS CLAIM OF LTCG, AND THIS IS CLEARLY BEEN SCHEMED AND PRE-PLAN NED WITH MALAFIDE INTENTION. THEREFORE, ALL THESE DOCUMENTS ARE NOT EVIDENCE. E) THE TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOU S. THERE ARE GRAVE DOUBTS IN THE STORY PROPOUNDED BY THE ASSESSEE BEFORE THE AUTHORITIES B ELOW. BANKING DOCUMENTS ARE MERE SELF- SERVING RECITALS. 5. THEREAFTER, HE REFERRED TO A NUMBER OF JUDGMENTS RELATING TO HUMAN BEHAVIOR AND PREPONDERANCE OF PROBABILITIES AND UPHELD THE ADDIT ION MADE BY THE ASSESSING OFFICER BY RELYING ON WHAT HE CALLS RULES OF SUSPICIOUS TRAN SACTIONS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 8 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS RAISED BY THE ASSESSEEBEFORE THE LOWER AUTHORITIES. THE SUM & SUBSTANCE OF HIS SUBMISSIONSIS THAT THE ASSESSEE HAS BEEN ALLOTTED FIFTY THOUSAND EQUITY SHARES OF SMART CHA MP IT & INFRA LTD, ON AN APPLICATION MADE BY THE ASSESSEE, AND THE AMOUNT IN QUESTION W AS PAID THROUGH BANKING CHANNELS AND THE NAME OF THE ASSESSEE WAS REFLECTED BY THE COMPA NY SMART CHAMP IT & INFRA LTD. IN ITS RETURN FILED BEFORE THE REGISTRAR OF COMPANIES AS A SHAREHOLDER IN THE YEAR 2011-12 AND THAT THE ASSESSEE HAD LODGED THE SHARES WITH A DEPOSITAR Y, WITH ADEMAT REQUEST ON 11.02.2012. FURTHER, THE HONBLE BOMBAY HIGH COURT HADAPPROVED THE SCHEME OF AMALGAMATION OF SMART CHAMP IT & INFRA LTD. WITH A COMPANY M/S.C RESSANDA SOLUTION LTD.. THAT IN ACCORDANCE WITH THE SCHEME OF AMALGAMATION THE ASSE SSEE WAS ALLOTTED FIFTY THOUSAND EQUITY SHARES OF M/S.CRESSANDA SOLUTION LTD. AND THAT THE DOCUMENTS FILEDREFLECTED THE TRANSACTION STATEMENT FOR THE PERIOD 01.11.2011 TO 31.12.2013. IT WAS FURTHER SUBMITTED THAT THESE SHARES WERE SOLD THROUGH THE BROKERSKP STOCK BROKING PVT. LTD.WHO IS A SEBI REGISTERED BROKER AND ALL THE EVIDENCES IN THIS REGARD WERE FILED. IT WAS PLEADED THAT THE SCRIPTS WERE HELD FOR MORE THAN 500 DAYS, WHICH PROVES THE BONAFIDE NATURE OF THE SHAREHOLDINGS AS NO SALE WAS DONE IMMEDIATELY ON COMPLETION OF 365 DAYS. IT WAS SUBMITTED THAT THE ASSESSEE IS NOT CONNECTED WITH THE PROMOTERS AND HAS NOTHING TO DO WITH THE ALLEGED RIGGING OF SHARES, IF ANY. RELIANCE WAS PLACED ON NUMBER OF DECISIONS FOR THE PROPOSITION THAT, EVIDENCE CANNOT BE DISCARDED BY APPLYING THEORY OF HUMAN BEHAVIOR A ND THE THEORY OF PREPONDERANCE OF PROBABILITIES. 7. ON THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS LD. CIT(A), HE SUBMITTED AS FOLLOWS: A. AS REGARDS THE ALLEGATION IN RESPECT OF ARTIFICIAL RIGGING UP OF THE PRICE OF SHARES, IT IS SUBMITTED THAT THE LD. A.O. DID NOT PROVIDE ANY DOCUMENTARY EVIDENCE OF A LIVE LINK AND DIRECT RELATION TO SUCH ALLEGED RIGGING OF PRICES W ITH THE ASSESSEE. HENCE, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE IN TH IS REGARD. B. THAT THE SALE TRANSACTIONS IN QUESTION HAD TAKEN PL ACE IN THE STOCK EXCHANGE ELECTRONICALLY, THROUGH A REGISTERED BROKER SKP STO CK BROKING PVT. LTD. (NOW RELY BULLS STOCK BROKING PVT. LTD.). ALL SUCH ACTIVITY OF PURC HASE AND SALE ON THE PLATFORM OF THE STOCK EXCHANGE ARE LOGGED IN, ON REAL TIME BASIS. IT IS N OT POSSIBLE TO SELL / PURCHASE THE SHARES OF ANY COMPANY ON THE STOCK EXCHANGE IN VARIANCE TO TH E PREVAILING MARKET PRICE AT ANY POINT OF TIME. HENCE, THE ASSESSEE CANNOT BE, NOR IS SUPP OSED TO BE AWARE OF AND KNOW THE IDENTITY OF THE PERSONS, WHO HAVE SOLD THE SHARES AT THE TIM E OF PURCHASE OF THE SHARES BY THE ASSESSEE AND PURCHASER OF THE SHARES AT THE TIME OF SALE OF THE SAID SHARES BY THE ASSESSEE AT THE STOCK EXCHANGE. C. IT IS FURTHER SUBMITTED THAT THE SHARE PRICE IS ALW AYS DETERMINED BY THE MARKET MECHANISM AT ANY GIVEN POINT OF TIME BECAUSE THERE IS A ROBUST SYSTEM OF THE STOCK EXCHANGE WHICH IS TRANSPARENT, OPEN AND EQUITABLE, AND THE A SSESSEE HAS ALSO SOLD THE SHARES ON SUCH A PLATFORM AT A PRICE WHICH WAS A REFLECTION OF THE MARKET PRICE DERIVED THROUGH THE INTERPLAY OF THE FORCES OF MARKET DEMAND AND SUPPLY . D. IN THE INSTANT CASE, THE ASSESSEE IS NOT CONNECTED WITH CRESSANDA SOLUTIONS LTD. OR THE AMALGAMATED COMPANY OR THEIR PROMOTERS, DIRECTO RS OR ANY OTHER PERSON WHO EXERCISES ANY CONTROL OVER CRESSSANDA SOLUTIONS LTD OR THE AM ALGAMATED COMPANY OR ANY SO-CALLED ENTRY OPERATOR. AS A MATTER OF FACT, THE ASSESSEE H AS NEVER INDULGED IN ANY SUCH QUESTIONABLE ACTIVITY NOR HAS BEEN PART OF ANY MODUS OPERANDI AS STATED BY THE A.O. E. THE ASSESSEE HAS TRANSACTED IN THE SHARES OF CRESSA NDA SOLUTIONS LTD. / AMALGAMATED COMPANY IN THE NORMAL COURSE OF INVESTM ENT LIKE MILLIONS OF INVESTORS DO IN THE 9 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 STOCK MARKET. THEREFORE, THE QUESTION OF ALLEGED CO NVERSION OF UNACCOUNTED MONEY IN THE FORM OF ALLEGED BOGUS LONG TERM CAPITAL GAIN WITH T HE HELP OF MANY ALLEGED CONNECTED PARTIES THROUGH PRICE RIGGING AND PRICE MANIPULATIONS DOES NOT ARISE. F. THE A.O. HAS DRAWN AN ADVERSE INFERENCE IN REGARD T O PURCHASES THROUGH PRIVATE PLACEMENT OF SHARES. IT IS COMMON KNOWLEDGE THAT TH E MANAGEMENT OF VARIOUS COMPANIES COMES OUT WITH PRIVATE PLACEMENT OF EQUITY SHARES, OF WHICH INFORMATION IS DISSEMINATED THROUGH MARKET GRAPEVINE. APPLICATIONS ARE MADE ON THAT BASIS AND ALLOTMENT IS OBTAINED. THERE ARE ALSO MARKET RUMOURS THAT THE SHARES IN QU ESTION WILL SEE A PHENOMENAL RISE IN THE NEAR FUTURE. THE ASSESSEE MERELY ACTED ON THE BASIS OF SUCH MARKET INFORMATION AND HAPPENED TO GET PHENOMENAL GAIN. IT COULD HAVE BEEN OTHERWISE AS WELL. THE RAGS TO RICHES STORY IN THE STOCK MARKET ARE A GALORE. BUT THE SCO PE OF DOWNSIDE IN THIS PARTICULAR SCRIP WAS VIRTUALLY NIL AS THE ASSESSEE WAS GETTING THE SHARE S AT THE ROCK BOTTOM PRICE. SO, SHE TOOK A PRUDENT BUT CALCULATED RISK. G. IT HAS BEEN SUBMITTED THAT THE ALLEGED CIRCUMSTANCE S, CIRCUMSTANTIAL EVIDENCE AND MATERIAL HAS LED THE A.O. TO BELIEVE THAT THE REAL IS NOT THE APPARENT. IN THE ABSENCE OF ANY LINK BETWEEN THE ASSESSEE AND THE ALLEGED ADMISSION S OF THE DIRECTORS AND BROKERS, HUMAN PROBABILITY IS BEING USED AS A VAGUE AND CONVENIENT MEDIUM FOR THE DEPARTMENTS CONJECTURES. BLAMING THE ASSESSEE BY VAGUE OBSERVAT IONS AND DRAWING AN ADVERSE INFERENCE WITHOUT ANY ADMISSIBLE EVIDENCE ON RECORD, IS BAD I N LAW, ILLEGAL, INVALID AND VOID-AB-INITIO. H. IT IS FURTHER SUBMITTED THAT INVESTMENT IN A COMPAN Y WITH WEAK FUNDAMENTALS CAN BE FOR SEVERAL REASONS SUCH AS PROFESSIONAL ADVICE, RE ASONABLE PRICE PER SHARE, A FORESEEABLE TURNAROUND, PAST PRICING AND VOLUME PATTERNS AND JU ST MARKET RUMOUR ABOUT PHENOMENAL MOVEMENT IN SHARE PRICE OF A PARTICULAR SCRIP. MORE OVER, THE MERE FACT THAT THE SHARES WERE SOLD AT A HIGH PRICE CANNOT BE TERMED AS CONCLUSIVE PROOF OR A GROUND FOR AN ALLEGATION THAT THE ASSESSEE HAS CONVERTED SOME UNACCOUNTED MONEY T HROUGH ACCOMMODATION ENTRIES AS ALLEGED BY THE A.O. IN THE ASSESSMENT ORDER. I. THE LD. A.O. IN THE ASSESSMENT ORDER RELIED UPON TH E PURPORTED STATEMENTS OF VARIOUS ALLEGED OPERATORS ON THE BASIS OF WHICH THE LD. A.O. HAD DRAWN ADVERSE INFERENCE IN THE INSTANT CASE. IT IS WORTHY TO NOTE THAT NOWHERE ANY OF THEM HAS EVER NAMED THE ASSESSEE IN THE ALLEGED MANIPULATION. FURTHER, THE LD. A.O. DID NOT PROVIDE ANY OPPORTUNITY TO CROSS EXAMINE THE SAID PERSONS. IT IS A WELL-SETTLED PRIN CIPLE OF LAW THAT NO CREDENCE CAN BE GIVEN TO THE STATEMENT/REPORT OF ANY PERSON GIVEN BEHIND THE BACK OF THE ASSESSEE UNLESS ANY OPPORTUNITY TO CROSS EXAMINE HIM IS AFFORDED TO THE ASSESSEE. J. THAT THE ASSESSEE CONDUCTED ALL THE TRANSACTIONS TH ROUGH A RECOGNIZED SHARE BROKER AND RECEIVED AND MADE THE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES. IT IS SUBMITTED THAT THE GENUINE TRANSACTIONS CANNOT BE AND SHOULD NOT BE TR EATED AS INGENUINE MERELY ON AN ARBITRARY VIEW OF SUSPICION. K. THE A.O.S CONTENTION THAT THE COMPANY IN QUESTION HAD INSIGNIFICANT BUSINESS OPERATION, WHICH FACT DOES NOT SUPPORT THE UNPRECED ENTED RISE IN ITS PRICE IS ALSO OF NO CONSEQUENCE. IT IS A WELL-KNOWN FACT IN THE STOCK M ARKET THAT SHARE PRICE MOVEMENT HAS VERY OFTEN, NO CORRELATION WITH THE FUNDAMENTALS OF THE COMPANY. THE PRICE OF ANY COMMODITY INCLUDING SHARES IS DETERMINED BY THE MARKET FORCES OF DEMAND AND SUPPLY OF THE MARKET PLAYERS AND NOT BY THEIR INTRINSIC WORTH. 10 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 L. THE ASSESSEE CATEGORICALLY SUBMITS THAT THE ASSESSE E BONAFIDELY PURCHASED THE SHARES IN PRIVATE PLACEMENT IN ANTICIPATION OF SUBS TANTIAL GAIN AND SOLD THE SHARES IN THE ONLINE SYSTEM, WHEN SUBSTANTIAL GAINS MATERIALISED. IT IS SUBMITTED THAT JUST BECAUSE THE ASSESSEE IS ABLE TO DRAW BENEFIT OUT OF THE RIGGING OF PRICES DONE BY OTHERS IN THE TRANSACTIONS BONAFIDELY DONE IN THE FULLY LEGALISED SYSTEM WITH NOT A SHRED OF EVIDENCE ON RECORD TO PROVE THE COMPLICITY OF THE ASSESSEE IN THE ALLEGED CRIME , IT IS NOT POSSIBLE TO DRAW ANY ADVERSE INFERENCE AGAINST THE ASSESSEE. M. THE A.O. HAS ALSO, NOWHERE IN THE ASSESSMENT ORDER REFERRED TO ANY MATERIAL WHICH CAN PROVE THE COMPLICITY OF ASSESSEE IN THE ALLEGED ACCOMMODATION ENTRY OPERATION. IF THE ASSESSEE HAS TAKEN ADVANTAGE OF THE PRICE RISE IN A N OPEN MANNER THROUGH THE TRANSACTION CONDUCTED IN THE OFFICIAL ONLINE SYSTEM, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. 8. HE SUBMITTED THAT THE OVERWHELMING DOCUMENTARY AND CIRCUMSTANTIAL EVIDENCE HAS TO BE CONSIDERED AND NOT MERE SUSPICION AND PREPONDERANCE OF PROBABILITIES. HE RELIED ON A NUMBER OF CASE LAWS, WHICH WE WOULD REFER TO, AS AN D WHEN NECESSARY. 9. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND REITERATED THE FINDINGS MADE THEREIN AND SUBMITTED THAT THE SAME BE UPHELD. HE VEHEMENTLY ARGUED THAT MERELY BECAUSE THE ASSESSEE HAS PRODUCE D ALL THE EVIDENCES REQUIRED TO PROVE HIS CLAIM, THE SAME CANNOT BE ACCEPTED AS THESE ARE ORGANIZED AND MANAGED TRANSACTIONS. HE TOOK THIS BENCH THROUGH THE MODUS OPERANDI MENTI ONED BY THE AO AND SUBMITTED THAT IN ALL CASES WHERE THE SHARES OF THESE COMPANIES ARE P URCHASED AND SOLD, ADDITIONS HAVE TO BE MADE, IRRESPECTIVE OF THE EVIDENCE PRODUCED AS THER E ARE CASES WHERE MANIPULATION HAS TAKEN PLACE. HE REITERATED EACH AND EVERY OBSERVATI ON AND FINDING OF THE LD. AO AS WELL AS THE LD. CIT(A) AND PRAYED THAT THE SAME BE UPHELD. 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMIS SIONS, PERUSAL OF THE PAPERS ON RECORD AND ORDER OF THE LOWERS AUTHORITIES BELOW, AS WELL AS C ASE LAW CITED, WE HOLD AS FOLLOWS. 11. THE ASSESSEE IN THIS CASE HAS STATED THE FOLLOW ING FACTS AND PRODUCED THE FOLLOWING DOCUMENTS AS EVIDENCES: 1. THE ASSESSEE HAD MADE AN APPLICATION FOR ALLOTMENT OF 50000 EQUITY SHARES OF SMART CHAMPS IT AND INFRA LTD. AND SHE WAS ALLOTTED THE SHARE ON 3 RD DECEMBER 2011 (COPY OF APPLICATION FORM, INTIMATION OF ALLOTMENT AND SHARE CERTIFICATE PAPER BOOK AT PAGE 8 TO 10). 2. THE PAYMENT FOR THE ALLOTMENT OF SHARES WAS MADE TH ROUGH AN ACCOUNT PAYEE CHEQUE (COPY OF THE BANK STATEMENT EVIDENCING THE SOURCE OF MONE Y AND PAYMENT MADE TO SMART CHAMPS IT & INFRA LTD. FOR SUCH SHARES ALLOTTED IS PLACED IN THE PAPER BOOK AT PAGE NO. 11). 3. ANNUAL RETURN NO. 20B WAS FILED WITH REGISTRAR OF C OMPANIES BY SMART CHAMPS IT & INFRA LTD SHOWING THE ASSESSEES NAME AS SHAREHOLDER (CO PY OF ANNUAL RETURN NO. 20B FILED WITH REGISTRAR OF COMPANIES BY SMART CHAMPS IT & INFRA LTD. IS PLACED IN THE PAPER BOOK AT PAGE NO. 12 TO 18.) 4. THE ASSESSEE LODGED THE SAID SHARES WITH THE DEPOSI TORY M/S. EUREKA STOCK & SHARE BROKING SERVICES LTD. WITH A DEMAT REQUEST ON 11 TH FEBRUARY, 2012. THE SAID SHARES WERE 11 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 DEMATERIALIZED ON 31 ST MARCH, 2012 (COPY OF DEMAT REQUEST SLIP ALONG WITH THE TRANSACTION STATEMENT IS PLACED IN THE PAPER BOOK AT PAGE NO. 1 9 TO 21). 5. ON 24.01.2013, THE HONBLE BOMBAY HIGH COURT APPROV ED THE SCHEME OF AMALGAMATION OF SMART CHAMPS IT AND INFRA LTD. WITH CRESSANDA SO LUTIONS LTD. IN ACCORDANCE WITH THE SAID SCHEME OF AMALGAMATION, THE ASSESSEE WAS ALLOT TED 50000 EQUITY SHARES OF M/S. CRESSANDA SOLUTIONS LTD. THE DEMAT SHARES ARE REFL ECTED IN THE TRANSACTION STATEMENT OF THE PERIOD FROM 1 ST NOVEMBER 2011 TO 31 ST DECEMBER, 2013 (A COPY OF THE SCHEME OF AMALGAMATION ALONG WITH COPY OF ORDER OF THE HONBL E BOMBAY HIGH COURT AND A COPY OF THE LETTER TO THIS EFFECT SUBMITTED BY CRESSANDA S OLUTIONS LTD. TO BOMBAY STOCK EXCHANGE IS PLACED IN THE PAPER BOOK AT PAGE NO 22 TO 43.) 6. THE ASSESSEE SOLD 50000 SHARES COSTING RS. 500000/- THROUGH HER BROKER SKP STOCK BROKING PVT. LTD WHICH WAS A SEBI REGISTERED BROKE R AND EARNED A LONG TERM CAPITAL GAIN OF RS. 2,18,13,072/-. (COPY OF THE BANK STATEM ENT, BROKERS CONTRACT NOTE TOGETHER WITH THE DELIVERY INSTRUCTIONS GIVEN TO THE DP AND BROKE RS CONFIRMATION IS ALSO PLACED IN THE PAPER BOOK AT PAGE NO 44 TO 65). 7. COPY OF FORM NO. 10DB ISSUED BY THE BROKER, IN SUPP ORT OF CHARGING OF S.T.T. IN RESPECT OF THE TRANSACTIONS APPEARING IN THE LEDGER IS PLACED IN THE PAPER BOOK AT PAGE NO. 66. 8. THE HOLDING PERIOD OF THE SAID SCRIP IS MORE THAN O NE YEAR (ABOVE 500 DAYS) THROUGH IN ORDER TO GET THE BENEFIT OF CLAIM OF LONG TERM CAPITAL GA IN THE HOLDING PERIOD IS REQUIRED TO BE 365 DAYS. 12.THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERANDI OF PERSON S FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FROM INCOME TAX. ALL THESE OBSERV ATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVERTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTIES IS CONFRON TED TO THE ASSESSES. NO OPPORTUNITY OF CROSS-EXAMINATION OF PERSONS, ON WHOSE STATEMENTS T HE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE B ASED ON A REPORT FROM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHE R, IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THA T HAVE SURFACED DURING INVESTIGATIONS,SHOULD GUIDE THE AUTHORITIES IN ARRI VING AT A CONCLUSION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITONWAS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LT CG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THI S ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVEN UE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORD ED ETC. HAS TO ALSO BE BROUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF THE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN ADDITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJEC TED BASED ON MERE CONJECTURES UNVERIFIED 12 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 BY EVIDENCE UNDER THE PRETENTIOUS GARB OF PREPONDER ANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOTBE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FORTHE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION O F THE ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVE ST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE PROCE SS AND THAT SHE IS NOT PARTYTO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EV IDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJEC TURES. AS THE REPORT OF INVESTIGATION WING SUGGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORTLAID DOWN BY THE COURTS OF LAW. 15.IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALISA TION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTIN G THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VAL IDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORT ED IN (1959) 37 ITR 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF S URMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATM ULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WH ICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTION WE REFER TO THE GENERAL VIEW ON THE TOPI C OF CONVEYANCE OF IMMOVABLE PROPERTIES. THE RATES/SALE PRICE ARE AT VARIANCE WITH THE CIRC LE RATES FIXED BY THE REGISTRATION AUTHORITIES OF THE GOVERNMENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. THE COURTS HAVE LAID DOWN THAT JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS CANNOT BE TAKEN BASED ON GENERALISATIONS. COURTS OF LAW ARE BOUND TO GO BY EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER, WE DO NOT FIND THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WH ICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE P URPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD T O SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NA MED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POS SIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPA RATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT I S THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER W HERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROP ER EVIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW . WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSE SSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOM E PERSONS MAY HAVE MISUSED THE SCRIPT FOR 13 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACT ION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECOR D ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHE RWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COU LD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAIN S AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIE TY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH A S EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIO NS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH I T HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PA RT OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALA I ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTI ON OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTE S,---THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE INCOME-TAX OFFICER. AS R EGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF THE POSSI BILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET L OSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FR OM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BU T THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AM OUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS O F THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF T HE PROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS EITHER PERVERSE OR VITI ATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY P ERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RH YME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY T HE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQU ALLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A CO LLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, I N THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MA TERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE I NCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW.THAT CROSS-EXAMINATION IS ONE PART OF THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHANNOORKHAN PATHAN VS. THE STATE OF MAHAR ASHTRA AND ORS. 14 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P .V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC1623, HELD THAT THE RULES O F NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVAN T EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SH OULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS-EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T. R. VARMA, AIR 1957 SC 882; MEENGLAS TEAESTATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORA MCOTTON MILLS LTD. V. GANGADHAR AND ORS. ,AIR 1964 SC708; NEW INDIA ASSURANCE CO. L TD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT S INGH AND ORS. AIR 2009 SC 2448;BIECCO LAWRIE AND ANR. V. STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V.SAROJ KUMAR SINHA AIR 2010 SC 31 31). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRA L EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER THE CENTRAL EXCISE ACT, 1944,CONSIDERED A SIMILAR ISSUE I.E. PERMISSION WITH RESPECT TO THE CROSS-EXAMINATION OF A WITNESS. IN THE SAID CASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS-EXAMI NE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HA D BEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE C OURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS -EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNI TY TO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST TH E CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE G IVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITN ESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SER VANT WILL BE ABLE TO REFER TO THE PREVIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVERNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS-EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2 009SC 1100, THIS COURT HELD: EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DONE AS REGARDS T HE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PR INCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATUR AL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMINED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION O R SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE O N A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON-EXAMINATION. IF THE BASIC PRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEE N A GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCIS ED ITS JURISDICTION OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS- EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL J USTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX., KOLKATA-II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K.RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 15 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-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 OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-E XAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOUL D BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS S PECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS T OTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF THE SAID DEALERS C OULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT T HEMSELVES TO EXPLAIN AS TO WHY THEIR EX- FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TR IBUNAL TO 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. 6. 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-EXAMINATION. THAT AP ART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEP OT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FAC T, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF C OULD BE THE SUBJECT MATTER OF CROSS- EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICA TING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATIO N AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCC ASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005[2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE T RIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING O R REJECTING THE SUBMISSIONS. 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTM ENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO W ITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTAHIGH COURT IN THE CASE OF BLB CABLES &CONDUCTORS[ITA NO. 78 OF2017] DATED19.06.2018. THE HIGH COURT HELD VID E PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGU S, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SU PPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ON LY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. B OTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH TH E BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOA RD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN V IEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF A SSESSEES APPEAL. [QUOTED VERBATIM] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FA CT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FINDING THAT OFF MARKE T TRANSACTIONS ARE NOT PROHIBITED. AS 16 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUN AL HAVING ANALYZED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXERCISE OF OUR JURISDICTION UNDER SECT ION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APP EAL. THE APPEAL AND THE STAY PETITION, ACCORDINGLY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL[ITA NO.292/JP/2017]ORDER DATED 06.04.2018 HELD AS UNDER VIDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVIDE NCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C)THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PREMPAL GANDHI[ITA-95- 2017(O&M)] DATED18.01.2018 AT VIDE PAGE 3 PARA 4 HE LD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES INCOME FROM UN DISCLOSED SOURCES. IN ITA-18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE AS SESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIATION IS VERY HIGH, THE SHARES WERE TRADED O N THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND T HAT THE TRADING ON THE NATIONAL STOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH THE ASSESSING OFFICER RELIED UPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND THAT THERE WAS NO CO-RELAT ION BETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME WAS PERVERSE OR I RRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. D) THE BENCH DOF KOLKATAITAT IN THE CASE OF GAUTA M PINCHA[ITA NO.569/KOL/2017]ORDER DATED 15.11.2017 HELD AS UNDE R VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XI V) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASS ESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS SUPPORTED WITH MA TERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A) . WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT THE ASSESSEE /BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO B E FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENC E CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED 17 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCO RPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRI VE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT TH E IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THERE FORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KI RAN KOTHARI HUF [ITA NO. 443/KOL/2017] ORDER DATED 15.11.2017 HELD VIDE PAR A 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE M ATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS L EVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAN D AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS WHIC H ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND C OULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE AS SESSE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE CONSE QUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT E VIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUI NENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG T ERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FA LSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CL EARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE ACT ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KE PT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDE NCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCO RPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IM PUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH AOF KOLKATA ITAT IN THE CASE OF SHA LEEN KHEMANI[ITA NO.1945/KOL/2014]ORDER DATED 18.10.2017 HELD AS UND ER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVE RSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST 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 ARGUMENTS OFTHE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THEORDERS OF THE LD AO. WE FIN D THAT THE ALLEGATION THAT THE ASSESSEE AND / ORBROKERS GETTING INVOLVED IN PRICE RIGGING OF SO ICL SHARES FAILS. IT IS ALSO AMATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS,CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THEGENUIN ENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THES E EVIDENCES WERE NEITHER 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 AS SESSEE THAT THE TRANSACTIONS OF THE ASSESSEE 18 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO W AS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OFTHE ACT. G) THE BENCH HOF MUMBAIITAT IN THE CASEOF ARVIND KUMAR JAINHUF[ITA NO.4682/MUM/2014]ORDER DATED 18.09.2017 HELD AS UND ER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGAT ION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH THE ACTIVITY OF THE BROKER . DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVEST MENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELI VERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THE REFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED T HAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNO T BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED W ITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PER IWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNAFINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIE S. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHEREIN O N SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSI TIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H)THE HONBLE PUNJAB AND HARYANA HIGH COURT INTHE C ASE OFVIVEK MEHTA[ITA NO. 894 OF2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 H ELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSE SSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) RECORDED A FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE V ALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUC H FINDING OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FIND ING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUE STION(S) OF LAW AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL IS DI SMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT I N THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION E NTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE C ONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS . TEJU ROHIT KUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION O F LAW LAID DOWN BY THE HONBLE GUJRAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MADE BY THE A SSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUN T PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE T O SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOU ND THAT THE ASSESSEE THE TRADER HAD ALSO 19 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 SHOWN SALES OUT OF PURCHASES MADE FROM RAJ IMPEX WH ICH WERE ALSO ACCEPTED BY THE REVENUE, NO QUESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW AS LAID DOWN IN THE ABOVE-MENTIONED JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND REL Y ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OUR DECIS ION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAIM THAT THE INCOME IN QUESTION IS A BONA FIDE LONG TERM CAPITAL GAIN ARISING FROM THE SALE OF SHA RES AND HENCE EXEMPT FROM INCOME TAX. 21.UNDER THE CIRCUMSTANCES AND IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION IN QUESTION . 9. I NOTE THAT THE AO IS HIS ASSESSMENT ORDER, HAS TRIED TO EXPLAIN THE MODUS OPERANDI OF SO CALLED BOGUS PRE-ARRANGED LTCG, IN WHICH HE GOES ON TO MENTION 'THE OPERATOR ASKS THE BENEFICIARY TO DELIVER THE UNACCOUNTED CASH. ONCE T HE UNACCOUNTED CASH HAS BEEN DELIVERED BY THE BENEFICIARY THE SAME IS THEN ROUTED BY THE O PERATOR TO THE BOOKS OF VARIOUS PAPER/BOGUS COMPANIES WHICH ULTIMATELY BUY THE SHAR ES BELONGING TO THE COMPANIES AT HIGH PRICES'. HOWEVER, I NOTE THAT AO FAILED TO EXPOSE THE WRONG DOING IF ANY ON THE PART OF THE ASSESSEE BY BRINGING OUT OR UNRAVELING ANY NEXUS OF ASSESSEE/BROKER WITH THE PURCHASE OF SHARES. FURTHER, I NOTE THAT AO HAS NOT BROUGHT AN Y EVIDENCE/MATERIAL TO SUGGEST THAT THE APPELLANT KNOWS ANY OF THE SO-CALLED ENTRY OPERATOR S/BROKER/PAPER COMPANIES OR THEY HAVE NAMED THE APPELLANT IN PARTICULAR, THAT THEY HAVE D EALT WITH THE APPELLANT. SO, IT IS UPON MERE SURMISE AND ASSUMPTION THAT AO SAYS THAT ASSESSEES OWN UNACCOUNTED CASH HAVE BEEN GIVEN TO PURCHASERS IN ORDER TO CLAIM BOGUS LTCG. 10. I NOTE THAT IN ORDER TO CREATE A TAX LIABILITY IN A CASE OF THIS NATURE, THE AO HAS TO PROVE AND ESTABLISH THE CASH TRAIL AND THE ALLEGATI ONS, PARTICULARLY IN RESPECT OF THE APPELLANT, WHICH IS YET TO BE PROVED IN THE INSTANT CASE. SIMI LAR VIEW HAS BEEN PRONOUNCED BY HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS JATIN IN VESTMENT (P) LTD. WHEREIN IT WAS OBSERVED 'A TRANSACTION CANNOT BE TREATED AS FRAUDULENT IF T HE APPELLANT HAS FURNISHED THE DOCUMENTARY PROOF AND PROVED THE IDENTITY OF THE PU RCHASER AND NO DISCREPANCY IS FOUND. THE AO HAS TO EXERCISE HIS POWERS U/S 131 & 133(6) OF THE ACT TO VERIFY THE GENUINENESS OF THE CLAIM AND CANNOT PROCEED ON SURMISES. THE AO MU ST ESTABLISH THAT CASH HAS CHANGED HANDS. THERE IS NO MATERIAL OR EVIDENCE EVEN TO SUG GEST THAT THE CHEQUES DIRECTLY OR 20 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 INDIRECTLY EMANATED FROM THE APPELLANT SO THAT IT C OULD BE SAID THAT THE APPELLANTS' OWN MONEY WAS BROUGHT BACK IN THE GUISE OF SALE PROCEED S. 11. IN THE CASE OF CIT VS. LAVANYA LAND PVT LTD. TH E HONBLE BOMBAY HIGH COURT RULED THAT THE ALLEGATIONS MADE BY THE AUTHORITIES HAVE T O BE SUPPORTED BY ACTUAL CASH PASSING HANDS OR ACTUALLY HAS CHANGED HANDS. 12. IN THE CASE OF DOLARRAI HEMANI VS. ITO, THIS TR IBUNAL HELD THAT THE FACT THAT THE STOCK IS THINLY TRADED & THERE IS UNUSUALLY HIGH GA IN, IS NOT SUFFICIENT TO TREAT THE LTCG AS BOGUS WHEN ALL THE PAPERWORK IS IN ORDER. THE REVEN UE HAS TO BRING MATERIAL ON RECORD TO SUPPORT IT'S FINDINGS THAT THERE HAS BEEN COLLUSION /CONNIVANCE BETWEEN THE BROKER & THE APPELLANT FOR THE INTRODUCTION OF UNACCOUNTED MONEY . 13. IN THE CASE OF DCIT VS. SUNITA KHEMKA, ITAT KOL KATA RULED THAT THE AO CANNOT TREAT A TRANSACTION AS BOGUS ONLY THE BASIS OF SUSP ICION OR SURMISES. HE HAS TO BRING MATERIAL ON RECORD TO SUPPORT HIS FINDINGS THAT THERE HAS BE EN A COLLUSION/CONNIVANCE BETWEEN THE BROKER AND THE APPELLANT FOR THE INTRODUCTION OF IT S UNACCOUNTED MONEY. A TRANSACTION OF PURCHASE AND SALE OF SHARES, SUPPORTED BY CONTRACT NOTES AND D-MAT STATEMENTS AND ACCOUNT PAYEE CHEQUES CANNOT BE TREATED AS BOGUS. 14. IN THE CASE OF KAMALA DEVI S DOSHI VS. ITO ITAT MUMBAI, VIDE IT'S ORDER DATED 22.5.2017 HELD THAT STATEMENT U/S 131 OF THE ACT IMPLICATING APPELLANT IS NOT SUFFICIENT TO DRAW ADVERSE INFERENCE WHERE DOCUMENT S IN THE FORM OF CONTRACT NOTES, BANK STATEMENTS, STT PAYMENT ETC. PROVES THE GENUINENESS OF PURCHASE AND SALE OF PENNY STOCK. FAILURE TO PROVIDE CROSS EXAMINATION IS A FATAL ERR OR. 15. SO, AS THE FACTS OF THE CASE ARE VERY SIMILAR, THE AO HAS FAILED TO ESTABLISH ANY LINK AND THEREFORE THE ORDER IS BASED ON SURMISES, PREDE TERMINED, SOLELY RELYING UPON THE INVESTIGATION REPORT WHICH IS GENERAL IN NATURE AND NO CONCRETE MATERIAL HAS BEEN BROUGHT ON RECORD PROVING OTHERWISE. 16. THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SU PPORT OF THE CLAIM OF THE ASSESSEE THAT IT EARNED LTCG ON TRANSACTIONS OF HIS INVESTMENT IN SHARES. THE PURCHASE OF SHARES HAD BEEN 21 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 ACCEPTED BY THE AO IN THE YEAR OF ITS ACQUISITION AND THEREAFTER UNTIL THE SAME WERE SOLD. THE OFF MARKET TRANSACTION FOR PURCHASE OF SHARES I S NOT ILLEGAL AS WAS HELD BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF D OLARRAI HEMANI VS. ITO IN ITA NO. 19/KOL/2014 DATED 2.12.2016 AND THE DECISION BY HONBLE CALCUTTA HIGH COURT IN PCIT VS. BLB CABLES & CONDUCTORS PVT. LTD. IN ITAT NO. 78 OF 2017 DATED 19.06.2018 WHEREIN ALL THE TRANSACTIONS TOOK PLACE OFF MARKET AND THE LOSS ON COMMODITY EXCHANGE WAS ALLOWED IN FAVOUR OF ASSESSEE. THE TRANSACTIONS WERE ALL THROUGH ACCOUNT PAYEE CHEQUES AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE PURCHASE OF SHARES AN D THE SALE OF SHARES WERE ALSO REFLECTED IN DEMAT ACCOUNT STATEMENTS. THE SALE OF SHARES SUFFER ED STT, BROKERAGE ETC. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE HELD THAT T HE TRANSACTIONS WERE BOGUS. THE FOLLOWING JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT :- (I) THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME VS M/S. BLB CABLES AND CONDUCTORS ; ITAT NO.78 OF 2017, GA NO.747 OF 2017; DT. 19 JUN E, 2018, HAD UPHELD THE ORDER OF THE TRIBUNAL BY OBSERVING A S FOLLOWS:- '4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRST BOOK IS RUNNING I N PAGES NO. 1 TO 88 AND 2ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE US THE LD. AR SUBM ITTED THAT THE ORDER OF THE AO IS SILENT ABOUT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF MARKET TRANSACTIONS SH OULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANSACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF B OTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAYEE CHEQUES. THE LD. AR HAS ALSO SUBMITTE D THE IT RETURN, LEDGER COPY, LETTER TO AO LAND PAN OF THE BROKER IN SUPPORT OF HIS CLAIM WHIC H IS PLACED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTR ACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAPER BOOK. THE PURCHASE AND SALES REGIST ERS WERE ALSO SUBMITTED IN THE FORM OF THE PAPER BOOK WHICH IS PLACED AT PAGES 76 TO 87. THE B OARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIONS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES . 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS AND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. THE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WH ERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. II) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 OF 20 12] (CAL HC) IN THIS CASE THE LD AO FOUND THAT THE FORMAL EVIDENCES PRODUCED BY T HE ASSESSEE TO SUPPORT HUGE LOSSES CLAIMED IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE STAGE MANAGED. THE HONBLE HIGH COURT HELD THAT THE OPINION OF THE AO THAT THE ASSESSEE G ENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACTIONS SO AS TO REDUCE THE QUANTU M OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPRESSED BY THE LD AO BUT HE MISERABLY F AILED TO SUBSTANTIATE THAT. THE HIGH COURT 22 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING P RICE AND THEREFORE THE SUSPICION OF THE AO WAS MISPLACED AND NOT SUBSTANTIATED. III)CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITE D [2013] 40 TAXMANN.COM 439 (CAL) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD T HAT ON THE BASIS OF A SUSPICION HOWSOEVER STRONG IT IS NOT POSSIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. IT WAS FURTHER HELD THAT I N ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIBLE, TO HOLD THAT THE TRANS ACTIONS OF BUYING OR SELLING OF SHARES WERE COLOURABLE TRANSACTIONS OR WERE RESORTED TO WITH UL TERIOR MOTIVE. IV) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CA L HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD THAT THE ASSESSING OFFICER DOUBTED THE TRANSACTIONS SINCE THE SELLING BROKER WAS SUBJECTED TO SEBIS ACTION. HOWE VER THE TRANSACTIONS WERE AS PER NORMS AND SUFFERED STT, BROKERAGE, SERVICE TAX, AND CESS. THE RE IS NO IOTA OF EVIDENCE OVER THE TRANSACTIONS AS IT WERE REFLECTED IN DEMAT ACCOUNT. THE APPEAL F ILED BY THE REVENUE WAS DISMISSED. V) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE D ECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE WHERE T HE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS TRANSACTIONS IN ALLEGED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE AO DISALLOWED THE LOSS ON TRADING OF PENNY STOCK ON TH E BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WAS ALSO FOUND THAT THE AO DID NOT DOUB T THE GENUINENESS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE TRIBUNAL HELD THAT T HE AOS CONCLUSIONS ARE MERELY BASED ON THE INFORMATION RECEIVED BY HIM. THE APPEAL FILED BY TH E REVENUE WAS DISMISSED. VI) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE DECISION OF THIS TRIBUNAL WHEREIN THE LOSS SUFFERED BY THE ASSESSEE WAS ALLOWED SINCE THE AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST THAT THE SALE OF SHARES BY THE ASSESSEE WERE NOT GENUINE. VII) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.4.2009] IN THIS CASE THE ASSESSEE CLAIMED EXEMPTION OF INCO ME FROM LONG TERM CAPITAL GAINS. HOWEVER, THE AO, BASED ON THE I NFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WERE BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WAS FOUND THAT THE CHAIN OF TRA NSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTE D BY EVIDENCE. IT WAS ALSO FOUND THAT THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DE MAT ACCOUNTS AND PRODUCED DOCUMENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 17. I NOTE THAT SINCE THE PURCHASE AND SALE TRAN SACTIONS ARE SUPPORTED AND EVIDENCED BY BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND BANK ST ATEMENTS ETC., AND WHEN THE TRANSACTIONS OF PURCHASE OF SHARES WERE ACCEPTED BY THE LD AO IN EARLIER YEARS, THE SAME COULD NOT BE TREATED AS BOGUS SIMPLY ON THE BASIS OF SOME REPORT S OF THE INVESTIGATION WING AND/OR THE ORDERS OF SEBI AND/OR THE STATEMENTS OF THIRD PARTI ES. IN SUPPORT OF THE AFORESAID SUBMISSIONS, THE LD AR, IN ADDITION TO THE AFORESAI D JUDGEMENTS, HAS REFERRED TO AND RELIED ON THE FOLLOWING CASES:- 23 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 (I) BAIJNATH AGARWAL VS. ACIT [2010] 40 SOT 475 (AGRA (TM) (II) ITO VS. BIBI RANI BANSAL [2011] 44 SOT 500 (AGRA) (TM) (III) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGRA/2009 (AGRA ITAT) (IV) ACIT VS. AMITA AGARWAL & OTHERS ITA NOS. 247/(KOL )/ OF 2011 (KOL ITAT) (V) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22-26/K OL/2P11 (KOL ITAT) (VI) SURYA PRAKASH TOSHNIWAL VS. ITO ITA NO. 1213/KOL/ 2016 (KOL ITAT) (VII) SUNITA JAIN VS. ITO ITA NO. 201 & 502/AHD/2016 (A HMEDABAD ITAT) (VIII) MS. FARRAH MARKER VS. ITO ITA NO. 3801/MUM/2011 ( MUMBAI ITAT) (IX) ANIL NANDKISHORE GOYAL VS. ACIT ITA NOS. 1256/PN/ 2012 (PUNE ITAT) (X) CIT VS. SUDEEP GOENKA [2013] 29 TAXMANN.COM 402 ( ALLAHABAD HC) (XI) CIT VS. UDIT NARAIN AGARWAL [2013] 29 TAXMANN.COM 76 (ALLAHABAD HC) (XII) CIT VS. JAMNADEVI AGARWAL [2012] 20 TAXMANN.COM 529 (BOMBAY HC) (XIII) CIT VS. HIMANI M. VAKIL [2014] 41 TAXMANN.COM 425 (GUJARAT HC) (XIV) CIT VS. MAHESHCHANDRA G. VAKIL [2013] 40 TAXMANN. COM 326 (GUJARAT HC) (XV) CIT VS. SUMITRA DEVI [2014] 49 TAXMANN.COM 37 (RAJA STHAN HC) (XVI) GANESHMULL BIJAY SINGH BAID HUF VS. DCIT ITA NOS. 544/KOL/2013 (KOLKATA ITAT) (XVII) MEENA DEVI GUPTA & OTHERS VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) (XVIII) MANISH KUMAR BAID ITA 1236/KOL/2017 (KOLKATA ITAT) (XIX) MAHENDRA KUMAR BAID ITA 1237/KOL/2017 (KOLKATA ITAT ) 18. THE LD AR ALSO BROUGHT TO OUR NOTICE THAT ONCE THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRAN SACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNANAND AGNIHOTRI VS. THE STATE OF MADHYA PRADE SH [1977] 1 SCC 816 (SC) . IN THIS CASE THE HONBLE APEX COURT HELD THAT THE BURDEN OF SHOWING THAT A PARTICULAR TRANSACTION IS BENAMI AND THE APPELLANT OWNER IS NOT THE REAL OWNE R ALWAYS RESTS ON THE PERSON ASSERTING IT TO BE SO AND THE BURDEN HAS TO BE STRICTLY DISCHARG ED BY ADDUCING EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD DIRECTLY PROVE THE FACT OF BE NAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY RAISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT IS NOT ENOUGH TO SHOW CIRCUMSTANCES WH ICH MIGHT CREATE SUSPICION BECAUSE THE COURT CANNOT DECIDE ON THE BASIS OF SUSPICION. IT H AS TO ACT ON LEGAL GROUNDS ESTABLISHED BY EVIDENCE. THE LD AR SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGMENTS WHILE DECIDING THE ISSUE RELATING TO EXEMPTION CLAI MED BY THE ASSESSEE ON LTCG ON ALLEGED PENNY SOCKS. (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. J. C. AGARWAL HUF ITYA NO. 32/AGR/2007 ( AGRA ITAT) 24 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 19. MOREOVER IT WAS SUBMITTED BEFORE US BY LD AR THAT THE AO WAS NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND ALLEGING PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATION IN ORDERS OF SEBI AND/OR THE ENQUIRY REPORT OF THE INVESTIGATION WING TO THE EFFECT THAT THE ASSESSEE, THE COMPANIES DEALT IN AND/OR HIS BROKER WAS A PARTY TO THE PRICE RIGGING OR MANIPULATION OF PRICE IN CSE. THE LD AR REFERRED TO THE FOLLOWING J UDGMENTS IN SUPPORT OF THIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE AC T AND TO ASSESS THE SALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT :- (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. AMITA AGARWAL & OTHERS - ITA NOS. 247/(KO L)/ OF 2011 (KOL ITAT) (III) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693/KOL /2009 (KOL ITAT) (IV) MUKESH R. MAROLIA VS. ADDL. CIT [2006] 6 SOT 247 (MUM) 2 0. I NOTE THAT THE LD. D.R. HAD HEAVILY RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX AP PEAL NO. 18 OF 2017. WE NOTE THAT IN THE CASE RELIED UPON BY THE LD. D.R, WE FIND THAT T HE FACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN HAND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MADE BY THE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPANIES AND THE PURCHASE OF SHARES OF THE COMPANIES WAS DONE THROUGH THE BROKER AND THE ADDRESS OF THE BROKER WA S INCIDENTALLY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY THE ASSESSEE WAS SHOW N 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 SALES OF THE SHARES WITHIN THE AMBIT OF ADVENTU RE IN NATURE OF TRADE. THUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE OF SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT . 21. THE LD. DR HAS RELIED ON THE FOLLOWING CASE LAW S, WHICH I WOULD LIKE TO DISCUSS INFRA. HE ALSO RELIED ON 23 JUDICIAL PRONOUNCEMENT S IN HIS SUPPORT. I NOTE THAT THE SAID JUDICIAL PRONOUNCEMENTS ARE ALL DISTINGUISHABLE ON FACTS AS WELL AS ON LAW. THE SAID DECISIONS ARE DEALT WITH HEREIN BELOW IN SERIATIM A S UNDER: 1. RATNAKAR M. PUJARI VS. ASSESSEE -ITA NO.995/MUM/201 2, ORDER DT. 3RD AUGUST, 2016 [AY 2006-07] -ITAT MUMBAI IN THIS CASE THE ITAT, MUMBAI BENCH WERE CONSIDERIN G A CASE WHERE THE PURCHASES OF SHARES WERE TREATED AS BOGUS AND SHAM TRANSACTIO NS BY THE REVENUE IN THE 25 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 IMMEDIATELY PRECEDING FINANCIAL YEAR 2005-06 AND TH E SAID FINDINGS OF THE AO WITH RESPECT TO BOGUS AND SHAM PURCHASES WERE NOT CHALLE NGED BY THE ASSESSEE. IN SUCH FACTS OF THE CASE THE TRIBUNAL HAD TREATED THE EXEM PT LONG TERM CAPITAL GAINS ARISING ON SALES OF SHARES AS BOGUS AND SHAM. HOWEVER, THER E IS NO SUCH FINDING OF FACT IN THE INSTANT CASE AND THUS THE FACTS IN THE INSTANT CASE ARE DISTINGUISHABLE. IT WAS BROUGHT TO MY NOTICE THAT THE AFORESAID ORDE R OF ITAT, MUMBAI, INTER-ALIA, HAD BEEN DISTINGUISHED BY CO-ORDINATE BENCHES OF THE TR IBUNAL IN THE FOLLOWING CASES: A. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KO/2018, O RDER DT. 03.06.2019 (KOL, ITAT)] B. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) 2. RITU SANJAY MANTRY VS. ITO - ITA NO.2003/MUM/2017, ORDER DT. 9TH FEBRUARY, 2018 - ITAT MUMBAI IN THIS CASE IS THAT WAS REOPENED BY THE AO ON THE BASIS OF INFORMATION RECEIVED FROM OFFICE OF DGIT (C&IB), NEW DELHI THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRY FROM M/S. MAGASAGAR SECURITIES PVT. LTD. (A COMPAN Y IN THE MAHASAGAR SECURITIES PVT. LTD. GROUP SHARE SCAM CASE) OF RS.10,32,289/-. SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED U/S. 147 R.W.S. 143(3) OF THE ACT AFTER M AKING AN ADDITION OF RS.10,39,289/- ON ACCOUNT OF BOGUS SHARE TRANSACTIO NS AND RS.20,786/- BEING COMMISSION PAID TO THE BROKER FOR ARRANGING ACCOMMO DATION ENTRIES IN THE FORM OF SHARE TRANSACTIONS. THE AO HAD GIVEN A FINDING THAT THE ASSESSEE HAD TAKEN ENTRIES FROM MAHASAGAR SECURITIES PVT. LTD. INVOLVED IN THE SHARES SCAM CASE FOR RS.10,39,289/- FOR BOGUS SPECULATION PROFIT DURING THE FINANCIAL YEAR 2007 -08. IT WAS FURTHER FOUND BY THE AO THAT THE ASSESSEE HAS PAID CASH OF EQUIVALENT AMOUNT AND RECEIVED BACK BY CHEQUE AND BOGUS CONTRACT NOTES AN D BILLS FOR THE TRANSACTIONS NOT ACTUALLY ROOTED THROUGH STOCK EXCHANGE. IT IS NOTE D THAT THE ITAT, MUMBAI HAD RELIED UPON AND FOLLOWED THE JUDGMENT OF HON'BLE BO MBAY HIGH COURT IN SANJAY BIMALCHAND JAIN V. PCIT, ORDER DATED 10.04.2017 (BO M.), BEING JUDGMENT OF JURISDICTIONAL HIGH COURT. HOWEVER, IN THIS CASE, THE AO OBSERVED THAT THE ASSESSEE HAD TAKEN ENTRIES AND PAID CASH OF EQUIVALENT AMOUN T AND RECEIVED BACK BY CHEQUE. AND ON THE BASIS OF SUCH ADVERSE INFERENCE, THE TRI BUNAL CONFIRMED THE ADDITION 26 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 MADE BY THE AO. HOWEVER, IN THE PRESENT CASE IN HAN D, THERE IS NO SUCH FINDING MADE BY THE AO. FURTHER. IT IS NOTED THAT THE ABOVEMENTIONED JUDGME NT OF ITAT, MUMBAI BENCH HAS BEEN CONSIDERED AND DISTINGUISHED BY THE ITAT, KOLK ATA BENCHES AND OTHER BENCHES OF THE TRIBUNAL, INTER-ALIA, IN THE FOLLOWING CASES : A. SATYANARAYAN SARIA VS. ITO [ITA NO.1224/KOIL2016 , ORDER DT. 28.06.2019 (KOL ITAT)] B. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOIL2018, ORDER DT. 03.06.2019 (KOL, ITAT)] C. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) REFERENCE IS ALSO MADE TO THE RECENT JUDGMENT DATED 01.07.2019 RENDERED BY THIS TRIBUNAL IN THE CASE OF APARNA MISRA VS. ITO (ITA N O. 161/KOL/2019) WHEREIN THE TRIBUNAL HAD RELIED UPON THE FOLLOWING JURISDICTION AL CALCUTTA HIGH COURT JUDGMENTS TO DECIDE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. I) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 O F 2012] II) CIT VS. LAKSHMANGARH ESTATE & TRADING CO. LIMIT ED [2013] 40 TAXMANN.COM 439 (CAL) III) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012 ] IV) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 105 OF 2016] V) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] VI) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-3473 8-ITA NO. 22 OF 2009, ORDER DT. 29.4.09] 3) COMING TO THE CASE OF ITO VS. SHAMIM M. BHARWANI (2016) 69 TAXMANN.COM (MUM ITAT), ORDER DT. 27.03.2015 OF MUMBAI TRIABUNA L, THE BRIEF FACTS IN THIS CASE WAS THAT THE ASSESSEE PURCHASED 2500 SHARES OF EMR ALD COMMERCIAL LTD. (ECL). THE PURCHASE WAS IN CASH. ACCORDING TO THE AO SINCE THE PURCHASE WAS MADE IN CASH, THE SAME WAS NOT VERIFIABLE. FURTHER, THE A.O. FOUND TH AT SAID TRANSACTION WAS NOT THROUGH THE STOCK EXCHANGE. THE SHARES WERE IN A NO NDESCRIPT COMPANY, WITH NO FINANCIAL AND/OR PHYSICAL ASSETS OF VALUE OR REPORT ED EARNINGS. THE SHARES, PURCHASED AT AN AVERAGE RATE OF RS. 21.70 PER SHARE IN MAY 20 04, WENT UP TO AS MUCH AS FROM RS. 465 TO RS. 489 IN JULY, 2005, I.E., JUST OVER Y EARS' TIME. EACH OF THESE INCIDENTS 27 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 MATCHED WITH THAT WHICH COULD BE EXPECTED IN A CASE OF A TRANSACTION IN A PENNY STOCK, THE MODUS OPERANDI OF THE TRANSACTIONS IN WH ICH WAS ALSO LISTED BY THE AO. ACCORDINGLY, RELYING ON THE DECISIONS BY THE APEX C OURT IN THE CASE OF SUMATI DAYAL V. CIT [1995] 214 ITR 801/80 TAXMAN 89 (SC); DURGA PRASAD MORE V. CIT [1971] 182 ITR 540 (SC) AND MC. DOWELL & CO. LTD. V. CTO [ 1985] 154 ITR 148/22 TAXMAN 11 (SC), BESIDES BY THE TRIBUNAL IN THE CASE OF ASSTT. CIT V. SOM NATH MAINI [2006] 7 SOT 202 (CHD.), HE ASSESSED THE IMPU GNED CREDIT OF RS. 12.15 LACS AS UNEXPLAINED INCOME U/S. 68 OF THE ACT. THE TRIBUNAL CONFIRMED THE ADDITION OBSERVING THAT THE PURCHASE OF SHARES WAS OFF MARKE T PURCHASE NOT REPORTED IN THE STOCK EXCHANGE. FURTHER, IT WAS OBSERVED BY THE TRI BUNAL THAT THE PURCHASE WAS THROUGH A BACK DATE CONTRACT NOTE IN CASH AND, THER E WAS NO TRAIL. THUS IT IS NOTED THAT TRIBUNAL IN THIS CASE CONFIRMED THE ADDITION O N A FACTUAL FINDING THAT THE PURCHASE WAS THROUGH A BACK DATED CONTRACT NOTE IN CASH AND, THERE WAS NO TRAIL. THIS FACT IS NOT APPLICABLE IN THE PRESENT CASE. FURTHER, IT IS NOTED THAT THE ABOVEMENTIONED JUDGME NT OF TRIBUNAL, MUMBAI BENCH WAS CONSIDERED/DISTINGUISHED BY THE MUMBAI ITAT IN ITS FOLLOWING JUDGMENTS WHILE ALLOWING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE: A. DCIT VS. ANIL KAINYA [ ITA NOS.4077 & 4078/MUM/2 013, ORDER DT. 22.03.16 MUM ITAT)] B. ANJALI PANDIT VS. ACIT [2017] 88 TAXMANN.COM 657 (MUMBAI - TRIB.) FURTHER, IT IS NOTED THAT LTHE SAID JUDGMENT HAS BE EN CONSIDERED/DISTINGUISHED BY THE KOLKATA AND OTHER BENCHES OF THE TRIBUNAL, INTER-AL IA, IN THE FOLLOWING CASES WHILE ALLOWING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. A. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOL ITAT)] B. ANUPAMA GARG VS. ITO [ITA NO.5971/0EL/2018, ORDE R DT. 12.12.2018 (DEL, ITAT)] C. RADHIKA GARG. VS. ITO [ITA NO.4738/0EL/2018, ORD ER DT. 01.01.2019 (DEL-TRIB) 4. COMING TO THE CASE OF VIDYA REDDY - ITA NO.126/CHNY /2017 - CHENNAI ITAT HAD DISALLOWED THE CLAIM OF EXEMPT LTCG AND HAD CON FIRMED THE ADDITION MADE ON THE GROUND THAT THE ASSESSEE HAS NOT PLACED ANY MAT ERIAL BEFORE THE LOWER AUTHORITIES 28 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 TO PROVE THAT HER TRANSACTIONS ARE GENUINE. THE TR IBUNAL OBSERVED SHE HAS ALSO NOT PLACED ANY MATERIAL TO PROVE THAT HER CLAIM OF EXEM PTION U/S. 10(38) IS GENUINE AND VALID. HOWEVER, IN THE CASE OF THE ASSESSEE COMPAN Y ALL RELEVANT DOCUMENTS WERE FURNISHED TO SUPPORT PURCHASES AS WELL AS SALE OF S HARES. FURTHER, THE CHENNAI TRIBUNAL HAD RELIED UPON AND FOLLOWED THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN SANJAY BIMALCHAND JAIN VS. PCIT, ORDER DATED 10. 04.2017, WHICH JUDGMENT HAS BEEN CONSIDERED AND DISTINGUISHED BY KOLKATA AND OT HER BENCHES OF THE TRIBUNAL, INTER-ALIA, IN THE FOLLOWING CASES: A. SATYANARAYAN SARIA VS. ITO [ITA NO.1224/KOL/2016 , ORDER DT. 28.06.2019 (KOL ITAT)] B. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOL, ITAT)] C. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) REFERENCE IS ALSO MADE TO THE RECENT JUDGMENT DATED 1ST JULY, 2019 RENDERED BY THE TRIBUNAL IN THE CASE OF APARNA MISRA VS. ITO [ITA N O.161/KOIL2019] WHEREIN THE TRIBUNAL HAD RELIED UPON THE JURISDICTIONAL CALCUTT A HIGH COURT JUDGMENTS, AS MENTIONED HEREINABOVE. 5. M. K. RAJESHWARI VS. ITO [2018] 99 TAXMANN.COM 339 THE BANGALORE TRIBUNAL NOTED THE ACTS IN THIS CASE AS THE ASSESSE E EARNED LONG-TERM CAPITAL GAIN ON SALE OF SHARES OF MARL AND CLAIMED EXEMPTION ON IT UNDER SECTION 10(38). THE ASSESSING OFFICER RELYING UPON THE REPORT OF THE IN VESTIGATION WING, SEBI REPORT AND FINDINGS/OBSERVATIONS OF THE SIT, CONCLUDED THAT EX EMPTION UNDER SECTION 10(38) CLAIMED BY THE ASSESSEE WAS NOT ACCEPTABLE AND THE ACT OF THE ASSESSEE IN PURCHASING THE PENNY STOCK SHARES AND SALE OF FEE WITHIN THE A MBIT OF ADVENTURE IN THE NATURE OF TRADE. CONSEQUENTLY, AMOUNT IN QUESTION WAS LIABLE TO BE TAXED UNDER THE HEAD 'BUSINESS INCOME'. THE TRIBUNAL CONFIRMED THE ADDIT ION BY OBSERVING THAT THE DEPARTMENT HAD BROUGHT SUFFICIENT MATERIAL ON RECOR D TO DEMONSTRATE THAT UNACCOUNTED MONEY WAS INTRODUCED IN THE BOOKS OF AC COUNT THROUGH LONG-TERM CAPITAL GAIN BY ADOPTING SUCH METHOD. IT IS NOTED THAT IN THE AFORESAID CASE, THE TRIBUNA L CONFIRMED THE ADDITION ON A FACTUA1 FINDING THAT THE DEPARTMENT HAD BROUGHT SUFFICIENT MATERIAL ON RECORD TO DEMONSTRATE 29 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 THAT UNACCOUNTED MONEY WAS INTRODUCED IN THE BOOKS OF ACCOUNT THROUGH LONG-TERM CAPITAL GAIN BY ADOPTING SUCH METHOD. THIS FACT IS NOT APPLICABLE IN THE PRESENT CASE. FURTHER, THE ABOVEMENTIONED JUDGMENT HAS BEEN CONSI DERED/DISTINGUISHED BY THIS TRIBUNAL, INTER-ALIA, IN THE FOLLOWING CASES WHILE ALLOWING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE: A. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOI ITAT)] B. YOGESH DALMIA VS. ACIT [ITA NO.113/KOL/2018, ORD ER DT. 03.06.2019 (KOI ITAT)] C. NAVIN KUMAR KAJARIA VS. ACIT [ITA NO.1254-55/KOL /2018, ORDER DT. 03.04.2019 (KOL- TRIB) D. SOUMITRA CHOUDHURY VS. ACIT [ITA NO.256/KOL/2019 , ORDER DT. 15.03.2019 (KOL ITAT)] 6. COMING TO THE CASE OF ABHIMANYU SOIN [2018-TIOL-733 -ITAT-CHD THE CHANDIGARH BENCH OF TRIBUNAL HAD CONFIRMED THE ADDI TION MADE BY AO AFTER OBSERVING THAT '11. THE ASSESSEE HAS FAILED TO PROVE THAT THE PURC HASE AND SALE TRANSACTIONS ARE GENUINE AND COULD NOT EVEN FURNISH AND IOTA OF EVID ENCE REGARDING THE SALE OF SHARES .............. HOWEVER, IN THE CASE OF THE ASSESSE E COMPANY ALL RELEVANT DOCUMENTS WERE FURNISHED TO SUPPORT, AND PROVE BEYOND ALL DOU BTS, PURCHASES AND AS WELL AS SALE OF SHARES, WHICH WAS EVIDENTLY ABSENT IN THAT CASE, SO IS NOT APPLICABLE TO CASE IN HAND. 7. COMING TO THE CASE OF BALBIR CHAND MAINI VS. CIT (2011) 12 TAXMANN.COM 276 (P&H) THE HONBLE PUNJAB & HARYANA HIGH COURT HAD CONFIRMED T HE ADDITION MADE BY ASSESSING OFFICER ON THE BASIS OF FINDING O F FACT BY THE TRIBUNAL: 10. THE TRIBUNAL WHILE ADJUDICATING THE ISSUE AGAI NST THE ASSESSEE HAD RECORDED A FINDING OF FACT THAT THE TRANSACTION OF SALE AND PU RCHASE OF SHARES OF M/S. ANKUR INTERNATIONAL LTD., WAS NOT A GENUINE TRANSACTION, A PART WHERE OF RELEVANT TO THE PRESENT ISSUE, MENTIONED IN PARA NOS. 27 AND 28 OF THE ORDER, READS AS UNDER .... 30 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 HOWEVER, IN THE CASE OF THE ASSESSEE COMPANY ALL RE LEVANT DOCUMENTS WERE FURNISHED TO SUPPORT, AND PROVE BEYOND ALL DOUBTS, PURCHASES AND AS WELL AS SALE OF SHARES. FURTHER THIS JUDGMENT HAS BEEN CONSIDERED AND DISTI NGUISHED BY THIS TRIBUNAL AND OTHER BENCHES OF THE TRIBUNAL, INTER-ALIA, IN THE F OLLOWING CASES WHILE ALLOWING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE: A. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOL ITAT)] B. KAMAL SINGH KUNDALIA VS. ITO [ITA NO.2359/KOL/20 17, ORDER DT. 08.05.2019 (KOL ITAT)] C. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) 8. COMING TO THE CASE OF CHANDAN GUPTA VS. CIT (2015) 54 TAXMANN.COM 10 (P&H ) THE HON'BLE PUNJAB & HARYANA HIGH COURT HAD CON FIRMED THE ADDITION MADE BY ASSESSING OFFICER ON THE BASIS OF FINDING O F FACT BY THE TRIBUNAL THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION OF SALE AND PURCHASE OF SHARES. THE RELEVANT OBSERVATION IS AS UNDER: ' ..... ON APPRECIATION OF THE EVIDENCE, THE TRIBUNAL HELD THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION OF SALE AN D PURCHASE OF SHARES. ONCE THE TRANSACTION OF PURCHASE AND SALE WAS FOUND TO BE BO GUS THEN THE SALE PROCEEDS HAD TO BE ADDED AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT BECAUSE THE MONEY RECEIVED ON THE BASIS OF BOGUS TRANSACTION HAD BEEN CREDITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT WHICH REMAINED UNEXPLAINED. 9. IN VIEW OF THE FINDINGS OF FACT RECORDED BY THE AUTHORITIES BELOW WHICH COULD NOT BE DEMONSTRATED TO BE ERRONEOUS OR PERVERSE IN ANY MAN NER, NO INTERFERENCE IS CALLED FOR. ' HOWEVER, IN THE INSTANT CASE OF THE ASSESSEE COMPAN Y ALL RELEVANT DOCUMENTS WERE FURNISHED TO SUPPORT AND PROVE BEYOND ALL DOUBTS, P URCHASES AS WELL AS SALE OF SHARES. FURTHER THIS JUDGMENT HAS BEEN CONSIDERED AND DISTI NGUISHED BY THIS TRIBUNAL AND OTHER BENCHES OF THE TRIBUNAL, INTER-ALIA, IN THE F OLLOWING CASES WHILE ALLOWING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE: A. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOL, ITAT)] B. KAMAL SINGH KUNDALIA VS. ITO [ITA NO.2359/KOL/20 17, ORDER DT. 08.05.2019 (KOL ITAT)] 31 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 C. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) 9. COMING TO THE CASE OF CIT VS. SUNITA DHADDA (HONBL E SUPREME COURT JUDGMENT DATED 06.06.2018), IT IS NOTED THAT THIS JUDGMENT RELIED UPON BY THE DEPARTMENT HAS NO APPLICATION IN THE FACTS OF THE I NSTANT CASE. THE CONTENTION OF LD. DR THAT MATTER SHOULD BE SET ASIDE TO AO FOR SUPPLY ING THE ASSESSEE WITH INVESTIGATION WING REPORT AND STATEMENTS OF PARTIES RELIED UPON CANNOT BE APPLIED IN EACH AND EVERY CASE. THE ASSESSEE COMPANY HAD IN T HE CASE IN HAND DISCHARGED THE ONUS CASTED UPON IT TO PROVE THE CLAIM OF LTCG/STCL , THEN IT WAS THE BOUNDEN DUTY OF THE AO TO BRING OUT THE FALSITY/FABRICATION/WRON G DOING IF ANY ON THE PART OF ASSESSEE OR CONFRONT THE ASSESSEE WITH ANY MATERIAL WHICH IS ADVERSE AGAINST THE ASSESSEE AND TO PROCEED IN ACCORDANCE TO LAW I.E. I N CONFRONTING WITH PRINCIPLE OF NATURAL JUSTICE WITHOUT DOING SO, AND WHEN ASSESSEE PLACED ALL DOCUMENTARY EVIDENCES BEFORE THE AO/LD. CIT(A), THE ASSESSEE CA NNOT BE AGAIN SENT BACK BEFORE AO AND THE DECISION TO SEND BACK TO AO IS DECIDED W HEN PROPER OPPORTUNITY HAS NOT BEEN GIVEN BY AO DURING ASSESSMENT STAGE AND THAT I S NOT THE CASE HERE IN THE CASE IN HAND. 10. COMING TO THE FOLLOWING CASES. I NOTE THAT IN THESE CASES GIVEN BELOW MAHENDRA KUMAR BHANDARI VS. ITO [ORDER DT. 06.04.20 18] ARAVIND KUMAR, CHENNAI VS. ITO [ORDER DT. 08.11.201 8] VIKRAM DUGHAR, CHENNAI VS. ITO [ORDER DT. 13.11.201 8] SADHANA, BANGALORE VS. ITO [ORDER DT. 26.05.2017] ARUN KUMAR BHAIYA, NEW DELHI VS. ITO [ORDER DT. 30. 08.2018] NATTI SINGH HUF, JAIPUR VS. ACIT [ORDER DT. 31.10.2 018] VINOD J. SHARMA, THANE [ORDER DT. 28.10.2015] ALL THE MATTERS WERE SET ASIDE TO THE FILE OF THE A O FOR FRESH CONSIDERATION AND/OR TO CONFRONT THE ASSESSEE WITH THE ADVERSE MATERIALS US ED AGAINST HIM. THE MATTERS IN EACH OF THE SAID CASES WERE SET ASIDE IN THE SPECIF IC FACTS AND CIRCUMSTANCES OF EACH OF THE CASES WERE SET ASIDE IN THE SPECIFIC FACTS AND CIRCUMSTANCES OF EACH OF THE CASES WHEREIN ALL FACTS WERE NOT AVAILABLE ON RECOR D AND/OR WHERE IN THE WORDS OF THE D/R THE AO HAS BOTCHED UP ENQUIRY. 32 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 HOWEVER, IN THE CASE IN HAND THERE IS NO OCCASION FOR SETTING ASIDE THE MATTER IN AS MUCH AS THE ASSESSEE HAD FURNISHED ALL RELEVANT DOC UMENTS, MATERIALS AND/OR EVIDENCE TO SUPPORT ITS TRANSACTIONS OF PURCHASE AND AS WELL AS SALE OF SHARES AND THE AO HAD FAILED TO POINT OUT ANY DEFECT AND/OR LACUNA IN THE SAID DOCUMENTS, MATERIALS AND/OR EVIDENCE. FURTHER, THIS TRIBUNAL IN ITS ORDERS HAD DECIDED SI MILAR ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING ON BINDING JUDICIAL PRONOUNCEMENTS. REF ERENCE IS ALSO MADE TO THE RECENT JUDGMENT DATED 1 ST JULY, 2019 RENDERED BY THE TRIBUNAL IN THE CASE OF APARNA MIWSRA, SUPRA WHEREIN THE TRIBUNAL HAD RELIED UPON THE FOLL OWING JURISDICTIONAL CALCUTTA HIGH COURT JUDGMENTS TO DECIDE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. I) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 OF 2012] II)CIT VS. LAKSHMANGARH ESTATE & TRADING CO. LIMITE D [2013] 40 TAXMANN.COM 439 (CAL) III) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] IV) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA N O. 105 OF 2016] V) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA N O. 721 OF 2008] VI) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-34738 -ITA NO. 22 OF 2009, ORDER DT. 29.4.09] 11. COMING TO THE CASES GIVEN BELOW PREM JAIN VS. ITO [ITAT, DELHI, ORDER DT. 22.03.201 8] SANJAY BIMALCHAND JAIN VS. PCIT [2018] 89 TAXMANN.C OM 196 (BOM) THE DECISIONS OF THESE CASES HAD BEEN RELIED UPON B Y D/R TO CONTEND THAT GAINS FROM SALE OF SHARES SHOULD BE ASSESSED AS 'BUSINESS INCO ME' AND NOT UNDER THE HEAD 'CAPITAL GAINS'. IT IS NOTED THAT THE LEARNED D/R I S TRYING TO PUT FORWARD A COMPLETELY NEW ARGUMENT WHICH DO NOT EMANATE OUT OF THE ORDERS OF THE LOWER AUTHORITIES AND ALSO FROM THE RECORDS OF THE CASE A ND THUS IS NOT PERMISSIBLE TO BE RAISED AS THIS STAGE. EVEN OTHERWISE, THE ITAT, DELHI BENCH IN PREM JAIN (SUPRA) HAD HELD WHEN THE FACTS OF THE CASE WAS THAT THE ASSESSEE HAD CLAIMED THE I NCOME FROM SALE OF SHARES TO BE ASSESSED AT BUSINESS PROFITS AND NOT CAPITAL GAINS WHERE THERE WAS SHORT DURATION OF HOLDING OF SHARES AND LACK OF CLARITY IN ACCOUNT BO OKS, SALE AND PURCHASE OF SHARES. IN 33 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 SUCH FACTS OF THE CASE, IT WAS HELD THAT PROFITS FR OM SALE OF SHARES WOULD AMOUNT TO BUSINESS INCOME AND NOT SHORT TERM CAPITAL GAIN. HO WEVER, NO SUCH CASE HAD BEEN MADE OUT BY THE ASSESSING OFFICER IN THE INSTANT CA SES. THE AFORESAID ORDER HAS BEEN CONSIDERED BY THIS TRI BUNAL WHILE DECIDING SIMILAR ISSUE IN FAVOUR OF AN ASSESSEE IN THE CASE OF KAUSHALYA A GARWAL VS. ITO (ITA NO. 194/KOL/2018, ORDER DATED 03.06.2019 (ITAT, KOL). MORE PARTICULARLY, THE JUDGMENT OF HONBLE BOMBAY H IGH COURT IN SANJAY BIMALCHAND JAIN V. PCIUT, ORDER DATED 10.04.2017 (B OM HC) HAD BEEN CONSIDERED AND DISTINGUISHED BY THIS TRIBUNAL AND OTHER BENCHE S OF THE TRIBUNAL, INTER-ALIA, IN THE FOLLOWING CASES: A. SATYANARAYAN SARIA VS. ITO [ITA NO.1224/KOL/2016 , ORDER DT. 28.06.2019 (KOL ITAT)] B. KAUSHALYA AGARWAL VS. ITO [ITA NO.194/KOL/2018, ORDER DT. 03.06.2019 (KOL, ITAT)] C. MEENU GOEL VS. ITO [2018] 94 TAXMANN.COM 158 (DE L-TRIB) 12. COMING TO THE CASES GIVEN BELOW: ACIT VS. MADHURI SUNIL KOTECHA [ITAT, PUNE, ORDER D T. 28.03.2018] CHARU AGARWAL, MEERUT VS. ITO [ITAT, DELHI, ORDER D T. 10.09.2018] DAYARAM KHANDELWAL VS. PCIT [MP HIGH COURT, ORDER D T. 01.03.2018] SOURABH KHANDELWAL VS. PCIT [MP HIGH COURT, ORDER D T. 01.03.2018] IT IS NOTED THAT IN ALL OF THESE CASES RELATES TO I MPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN THE FACTS WHERE THE ASSESSE E HAD WITHDRAWN/SURRENDERED HIS/HER CLAIM OF EXEMPT L TCG U/S. 10(38) OF THE AC T AND PAID TAXES ON THE GAINS ARISING FROM SALE OF SHARES. ALL THESE JUDGMENTS AR E IRRELEVANT AND HAS NO APPLICATION TO THE FACTS OF THE INSTANT CASE BEFORE THE TRIBUN AL. 13. COMING TO THE CASE OF SEBI V. RAKHI TRADING P. LTD [CIVIL APPEAL NO.1969 OF 2011, JUDGMENT DATED 8TH FEBRUARY, 2018 (OF THE HON BLE SUPREME COURT ) IT IS NOTED THAT THE HON'BLE SUPREME COURT WAS CONCERNED WITH A CASE WHERE SEBI HAD INITIATED ACTIONS AGAINST FEW TRADERS AND BROKERS FOR VIOLATI ON OF REGULATIONS 3(A), (B) AND (C) AND 4 (1), (2)(A) AND (B) OF THE SECURITIES AND EXC HANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING T O SECURITIES MARKET) REGULATIONS, 34 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 2003 ('THE PFUTP REGULATIONS'). IN THE SAID CASE, T HE HON'BLE APEX COURT UPHELD THE ACTION INITIATED IN THE CASE OF TRADERS AS THE SAID TRADERS HAVE ADMITTED OF BEING INVOLVED IN SYNCHRONIZED TRADE TO MANIPULATE THE PR ICES OF SHARES. THERE IS NO SUCH ADMISSION BY THE ASSESSEE IN THE INSTANT CASE THAT IT HAS INVOLVED IN ANY PRICE MANIPULATION AND/OR ANY DUBIOUS TAX PLANNING. MOREO VER, THE HON'BLE APEX COURT HAD SET ASIDE THE ACTION INITIATED BY SEBI IN THE C ASE OF BROKERS AS THERE WAS NO EVIDENCE ON RECORD TO SHOW INVOLVEMENT OF THE SAID BROKERS. SIMILARLY IN THE INSTANT CASES THE DEPARTMENT HAD FAILED TO BRING ON RECORD ANY EVIDENCE WHATSOEVER TO SHOW THAT THE ASSESSEE WAS INVOLVED IN ANY PRICE MANIPUL ATIONS. THUS THE JUDGMENT OF THE HON'BLE SUPREME COURT IS CLEARLY DISTINGUISHABLE ON FACTS. THE SAID JUDGMENT HAD BEEN HELD TO BE DISTINGUISHABLE BY THE ITAT, KOLKAT A BENCHES IN THE FOLLOWING JUDGMENTS:- I. SUMAN SARAF V. ITO IN ITA NO.1395/KOI/2018, ORDE R DATED 05.10.2018. II. JIGNESH DESAI V. ITO IN ITA NO.1394/KOI/2018, O RDER DATED 05.10.2018. III. RISHAB JAIN V. ITO IN ITA NO.1392/KOI/2018, OR DER DATED 05.10.2018. IV. REKHA DEVI V. ITO IN ITA NO.1269/KOI/2018, ORDE R DATED 05.10.2018. V. SUNITA DEVI V. ITO IN ITA NO. 1268/KO1/2018, ORD ER DATED 05.10.2018. VI. JAGAT LAL JAIN V.ITO IN ITA NO.1226/KOI/2018, O RDER DATED 05.10.2018. VII. SNEHA CHOUDHARY V. ITO IN ITA NO.1218/KOI/2018 , ORDER DATED 05.10.2018. VIII. U.C.CHOUDHARY & ORS (HUF) V. ITO IN ITA NO.12 17/KOI/2018, ORDER DATED 05.10.2018. IX. VIRENDARA BARMECHA V. ITO IN ITA NO.1201/KOI/20 18, ORDER DATED 05.10.2018. X. TARUNA DEVI BARMECHA V. ITO IN ITA NO.1199/KOI/2 018, ORDER DT. 05.10.2018. XI. PREMLATA AGARWAL VS. ITO IN ITA NO.874/KOI/2018 , ORDER DT. 05.10.2018. XII. SUNIL KUMAR LADHA VS. ITO IN ITA NO.851/KOI/20 18, ORDER DT.05.10.2018. XIII. BALRAM GUPTA VS. ITO IN ITA NO.817/KOI/2018, ORDER DT.05.10.2018. XIV. ALKA CHANGOIWALA VS. ITO IN ITA NO.634/KOI/201 8, ORDER DT.05.10.2018. XV. SANTOSH CHORARIA VS. ITO IN ITA NO.521/KOI/2018 , ORDER DT.05.10.2018. XVI. SONAL BAJAJ VS. ITO IN ITA NO.239/KOI/2018, OR DER DT.05.10.2018. XVII. SUDHA KHANDELWAL V. ITO IN ITA NO.86/KOI/2018 , ORDER DT. 05.10.2018. XVIII. BINA AGARWAL VS. ITO IN ITA NO.1403/KOI/2018 , ORDER DT.05.1 0.2018. XIX. HARISH JAIN VS. ITO IN ITA NO. 1404/KO1/2018, ORDER DT.05.10.2018. THUS, IT IS NOTED THAT AFORESAID DECISION OF THE HO NBLE SUPREME COURT, HONBLE BOMBAY HIGH COURT AND TRIBUNAL ARE DISTINGUISHABLE AND SO THE RATIO IS NOT APPLICABLE TO THE CASE/CASES IN HAND. 22. IN THE LIGHT OF THE DOCUMENTS FILED BY THE ASSE SSEE BEFORE THE AO/LD. CIT(A) AND BEFORE US, WHICH COULD NOT BE CONTROVERTED BY ANY M ATERIAL BY AO, SO RESPECTFULLY FOLLOWING THE RATIO LAID BY THE HONBLE JURISDICTIONAL HIGH C OURT AND OTHER HIGH COURTS AND THE RATIO 35 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 LAID BY THE HONBLE SUPREME COURT AND THIS TRIBUNAL , AND THE DECISION IN THE CASE OF NAVNEET AGARWAL (SUPRA) WHEREIN THE CLAIM OF LTCG F OR SALE OF SHARES OF M/S. CRESSENDA SOLUTIONS LTD. WHICH WAS ALLOWED BY THE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAME, I ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM C APITAL GAIN IN RESPECT OF SALE OF SHARES OF M/S. CRESSANDA SOLUTIONS LTD AND DIRECT DELETION OF ADDITION OF RS.30,78,601/-. GROUNDS OF APPEAL OF ASSESSEE CHALLENGING THE ADDITION MADE ON THIS ISSUE ARE ALLOWED. SINCE ADDITION IS HEREBY DELETED IN FAVOUR OF THE ASSESSEE THE ADD ITION ON ACCOUNT OF COMMISSION EXPENSES OF RS.15,393/- U/S. 69C OF THE ACT FOR ARRANGING LT CG IS ALSO HEREBY ALLOWED IN FAVOUR OF THE ASSESSEE. 23. GROUND NO. 3 IS AGAINST THE ACTION OF LD. CIT(A ) IN UPHOLDING THE ACTION OF AO ON ACCOUNT OF DISALLOWANCE U/S. 14A READ WITH RULE 8D OF THE I. T. RULES, 1962. IN RESPECT OF THIS ISSUE THE LD. CIT(A) HAS HELD AS UNDER: 7. GROUND NO. 3 RELATES TO THE ACTION OF THE LD. A O IN ADDING RS.7,041/- U/S 14A OF T. ACT, 1961 READ WITH RULE 8D. THE MATTER HAS BEEN DEALT BY THE LD. A.O AS UNDER: DISALLOWANCE U/S 14A: DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE HAD INVESTED IN SHARES OF DIFFERENT COMPANIES. THE ASSESSEE HAD ALS O EARNED EXEMPTED INCOME IN THE NATURE OF DIVIDEND. HOWEVER, THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961 OUT THE EXPENSES CLAIMED IN THE PROFI T & LOSS A/C. 6.2 IN VIEW OF THE ABOVE, THE ASSESSEE WAS ASKED TO EXPLAIN WHY SECTION 14A OF THE INCOME TAX ACT, 1961 SHOULD NOT BE APPLICABLE IN HIS CASE. DURING THE COURSE OF HEARING, THE A.R. OF THE ASSESSEE HAS ONLY STATED THAT NO EXPENSE HAS BE EN CLAIMED FOR EARNING EXEMPTED INCOME. 6.3 IT IS HELD THAT SOME EXPENDITURE MUST HAVE BEEN HAPPENED FOR MAINTAINING THE AFORESAID INVESTMENT. THOUGH IT HAS NOT BEEN CLAIMED DIRECTLY , IT MAY HAVE BEEN CLAIMED IN THE GUISE OF OTHER EXPENSES. HENCE, IT CANNOT BE ACCEPTED THAT T HERE IS NO EXPENDITURE RELATABLE TO THE EFFORT THAT IS REQUIRED IN ORDER TO MONITOR SUCH IN VESTMENTS. THEREFORE, I AM SATISFIED THAT SOME AMOUNT OF EXPENDITURE IS REQUIRED TO BE DISALL OWED UNDER THE PURVIEW OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 80(2) OF TH E INCOME TAX RULES, 1962, WHICH IS CALCULATED AS FOLLOWS: SL. NO. DETAILS AMOUNT (A) AMOUNT OF EXPENDITURE UNDER THE HEAD INTEREST 50,624 (B) AVERAGE VALUE OF INVESTMENT 8,29,422 (C) AVERAG E VALUE OF TOTAL ASSETS 1,45,07,138 (D) INTEREST DERIVED TO BE RELATABLE TO EXEMPT INCOME [(A)X(B)/(C)] 2,894 (E) OTHER EXPENSES DERIVED TO BE RELATABLE TO EXEMPT INCOME [(B) X 0.5%] 4,147 (F) TOTAL AMOUNT DERIVED TO BE RELATABLE TO EXEMPT INCOME [(D) + E)] 7,041 36 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 6.4 IN THE LIGHT OF THE DISCUSSIONS MADE AS ABOVE, AN AMOUNT OF 7,041/- IS DISALLOWED U/S 14A OF THE INCOME TAX ACT, 1961. [DISALLOWANCE: RS. 7,041/-] 08. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THE FOLLOWING SUBMISSIONS: DISALLOWANCE U/S 14A: DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE HAD INVESTED IN SHARES OF DIFFERENT COMPANIES. THE ASSESSEE HAD ALSO EARNED EXCEPTED INCOME IN THE NATURE OF DIVIDEND. HOWEVER, THE ASSESSEE HAS NOT M ADE ANY DISALLOWANCE U/S 14A OF THE I T ACT, 1961 OUT OF THE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT. 5.2. IN VIEW OF THE ABOVE, THE ASSESSEE WAS ASKED T O EXPLAIN WHY SECTION 14A OF THE I T ACT, 1961 SHOULD NOT BE APPLICABLE IN HIS CASE. DURING T HE COURSE OF HEARING, THE A.R OF THE ASSESSEE HAS ONLY STATED THAT NO EXPENSE HAS BEEN C LAIMED FOR EARNING EXEMPTED INCOME. 5.3. IT IS HELD THAT SOME EXPENDITURE MUST HAVE BEE N HAPPENED FOR MAINTAINING THE AFORESAID INVESTMENT. THOUGH IT HAS NOT BEEN CLAIMED DIRECTLY , IT MAY HAVE BEEN CLAIMED IN THE GUISE OF OTHER EXPENSES. HENCE, IT CANNOT BE ACCEPTED THAT T HERE IS NO EXPENDITURE RELATABLE TO THE EFFORT THAT IS REQUIRED IN ORDER TO MONITOR SUCH IN VESTMENTS. THEREFORE, I AM SATISFIED THAT SOME AMOUNT OF EXPENDITURE IS REQUIRED TO BE DISALL OWED UNDER THE PURVIEW OF SECTION 14A OF THE I T ACT 1961 READ WITH RULE 8D(2) OF THE INCOME -TAX RULES, 1962, WHICH IS CALCULATED AS FOLLOWS: SL. NO. DETAILS AMOUNT (A) AMOUNT OF EXPENDITURE UNDER THE HEAD INTEREST 50,624 (B) AVERAGE V ALUE OF INVESTMENT 8,29,422 (C) AVERAGE VALUE OF TOTAL ASSETS 1,45,07,138 (D) INTEREST DERIVED TO BE RELATABLE TO EXEMPT INCOME [ (A)X(B)/(C)] 2,894 (E) OTHER EXPENSES DERIVED TO BE RELATABLE TO EXEMPT IN COME [(B) X 0.5%] 4,147 (F) TOTAL AMOUNT DERIVED TO BE RELATABLE TO EXEMPT INCOME [(D) + E)] 7,041 5.4. IN THE LIGHT OF THE DISCUSSIONS MADE AS ABOVE, AN AMOUNT OF RS. 7041/- IS DISALLOWED U/S 14A OF THE I T ACT, 1961. OUR SUBMISSION : IN COURSE OF HEARING OF ASSESSMENT PROCEEDINGS BEFORE THE LD. AO THE APPELLANT MADE THE FOLLOWING SUGGESTION ' IN PARA 6 OF YOUR ABOVE SHOW CAUSE LETTER YOU HAV E PROPOSED DISALLOWANCE UNDER SE 'ON 14A OF THE I T ACT READ WITH RULE 80 OF THE INCOME- TAX RULES. IN THIS RESPECT IT IS RESPECTFULLY SUBMITTED THAT NO DISALLOWANCE UNDER THIS SECTION C AN BE MADE AT ALL AS NO EXPENDITURE HAS BEEN INCURRED TO EARN EXEMPT INCOME WHICH IS EVIDEN T FROM THE PROFIT & LOSS ACCOUNT ITSELF. ' WITHOUT PREJUDICE TO THE ABOVE SUBMISSION THE APPEL LANT RELIES ON THE FOLLOWING CASE LAW OF HON'BLE MEMBERS KOLKATA ITAT ' A ' BENCH IN THE I T A NO. 1236/KOL/2017 AND ITA NO. 1237/KOL/2017 OF MANISH KUMAR BAID VS. ACIT, CIR 35 AND MAHENDRA KUMAR BAID VS. ACIT, CIR 35 DATED 18.8.2017. 09. FINDINGS & DECISION: AFTER EXAMINING THE MATTER , I FIND THAT NEITHER THE LD. A.O NOR THE APPELLANT HAVE MENTIONED EVEN SO MUCH AS THE AM OUNT OF DIVIDEND INCOME EARNED. THE LD. A.O HAS SIMPLY INVOKED SEC 14A READ WITH RU LE 80, WHILE THE APPELLANT HAS CONTENDED THAT ONLY THOSE INVESTMENTS WHICH YIELD D IVIDEND INCOME OUGHT TO CONTRIBUTE TO ANY CALCULATION FOR DISALLOWANCE UNDER RULE 80. THE DETAILS BEING SKETCHY AND INCOMPLETE, I DO NOT FEED ANY CAUSE TO INTERFERE WITH THE ACTION OF THE LD. A.O IN MAKING THE IMPUGNED DISALLOWANCE. 37 ITA NO. 2412/KOL/2018 RABINDRA KAJARIA, AY 2014-15 BEFORE ME THE LD. AR DID NOT MAKE ANY SUBMISSION SO THE DECISION OF THE LD. CIT(A) IS CONFIRMED. 24. GROUND NO. 4 OF ASSESSEES APPEAL IS AGAINST TH E ACTION OF LD. CIT(A) ON ACCOUNT OF UPHOLDING THE CHARGING OF INTEREST U/S. 234A & 234B OF THE ACT. THIS GROUND IS CONSEQUENTIAL IN NATURE, THEREFORE, NO ADJUDICATION IS REQUIRED FROM MY END. HENCE, THIS GROUND OF APPEAL IS DISMISSED BEING INFRUCTUOUS. 25. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23RD AUGU ST, 2019 SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 23RD AUGUST, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHRI RABINDRA KAJARIA, C/O SRI JITENDR A KAUSHIK, ADVOCATE, 19D, MUKTARAM BABU STREET, KOLKATA 2 RESPONDENT ITO, WARD-36(1), KOLKATA. 3 4 5 CIT(A)-10, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR
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