Swati Mall, Kolkata V. ITO, Ward - 36(2), Kolkata , Kolkata

ITA 2423/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0137 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Income from undisclosed sources; Salary income; Principle of natural justice; Transactions in derivatives; Earning of tax free income; Question of law; Accommodation entries; Scheme of amalgamation; Onus to prove; Penny stocks
• Section: 143(3); 260A; 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 2423/KOL/20 17 ASSESSMENT YEAR : 2014-1 5 SWATI MALL -VS- ITO, WARD-36(2), KOLKATA . [PAN: AFLPM 0374 H] (APPELLANT) (RESPOND ENT) FOR THE APPELLANT : SHRI A. BANERJEE, ADVOCATE SHRI V.K. JAIN, FCA MRS. S. MITRA (DUTTA) FOR THE RESPONDENT : SHRI C. J. SINGH, SR. D R DATE OF HEARING : 05.11.2018 DATE OF PRONOUNCEMENT : 07. 12 .2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-10, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO. 491/ITO, WARD-36(2),/CIT(A)-10/KOL/2016-17 DATED 16.10.2017 AGAINST THE ORDER PASSED BY THE ITO, WARD-36(2), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30 .12.2016 FOR THE ASSESSMENT YEAR 2014-15. 2. THOUGH THE ASSESSEE HAD RAISED VARIOUS GROUNDS B EFORE US, THE ONLY EFFECTIVE ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE LD CIT A WAS JUSTIFIED IN CONFIRMING THE 2 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 2 ADDITION MADE TOWARDS UNEXPLAINED CASH CREDIT U/S 6 8 OF THE ACT BY TREATING THE LONG TERM CAPITAL GAIN (LTCG IN SHORT) DERIVED FROM SALE OF SHARES OF TRINITY TRADEMARK LTD (SINCE MERGED WITH SHARP TRADING & INVESTING LT D) (STIL IN SHORT) OF RS 96,36,783/- IN THE FACTS AND CIRCUMSTANCES OF THE C ASE. THE INTERCONNECTED ISSUE INVOLVED IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE TOWARDS UNEXPLAINED EXPENDITURE ON COMMISSION AMOUN TING TO RS 48,184/- SINCE THE SALE CONSIDERATION WAS TREATED AS BOGUS IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS APPEAL ARE THAT THE ASSE SSEE FILED RETURN OF INCOME FOR THE ASST YEAR 2014-15 ON 30.6.2014 DECLARING TOTAL INCOME OF RS 10,19,740/-. THE ASSESSEE EARNED INCOME FROM SALARY, TRADING IN SHARES, INTER EST ON LOAN AND OTHER INCOME. THE ASSESSEE CLAIMED EXEMPT INCOME U/S 10(38) OF THE AC T IN RESPECT OF LONG TERM CAPITAL GAIN DERIVED ON SALE OF LISTED COMPANY SHARES OF ST IL WHERE SECURITIES TRANSACTION TAX (STT IN SHORT) WAS DULY SUFFERED BY THE ASSESSEE. T HE ASSESSEE PURCHASED 10000 SHARES OF TRINITY TRADELINK LTD (TTL IN SHORT) ON 10.3.201 2 ON ALLOTMENT MADE BY THE COMPANY AT PAR. THE ASSESSEE WAS ISSUED SHARE CERT IFICATES NUMBERING FROM 0002346 TO 0002347 HOLDING 5000 SHARES EACH WITH DISTINCTIVE N UMBERS 011159656 TO 011169655 . THE ASSESSEE MADE PAYMENT OF RS 1,00,000/- VIDE C HEQUE NO. 464353 DATED 23.2.2012 DRAWN ON CITI BANK N.A. , KOLKATA WHILE APPLYING FO R THE SHARES. THESE SHARES WERE IMMEDIATELY DEMATTED BY THE ASSESSEE WITH CITI BANK N.A. ITSELF AND ASSESSEE WAS ALLOTTED CLIENT ID NO. 10458867. THE CHEQUE FOR R S 1,00,000/- ISSUED BY THE ASSESSEE GOT CLEARED IN HER BANK ON 2.3.2012. .LATER THIS C OMPANY WAS MERGED WITH M/S SHARP TRADING & INVESTING LTD AS PER HONBLE BOMBAY HIGH COURT ORDER DATED 10.1.2014. PURSUANT TO THIS MERGER, THE ASSESSEE WAS ALLOTTED 10000 SHARES OF STIL IN LIEU OF HOLDING 10000 SHARES OF TTL. THE ASSESSEE SOLD THE SHARES OF STIL IN ASST YEAR 2014- 15 ON VARIOUS DATES DURING THE PERIOD FROM 20.2.201 4 TO 25.3.2014. THE SALE OF SHARES WERE EFFECTED IN THE STOCK EXCHANGE THROUGH A REGIS TERED SHARE BROKER AFTER DULY SUFFERING STT. HENCE THE ASSESSEE CLAIMED TOTAL L ONG TERM CAPITAL GAINS AS EXEMPT U/S 3 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 3 10(38) IN THE RETURN OF INCOME TO THE TUNE OF RS 96 ,36,783/-. THE ASSESSEE SUBMITTED THE COMPLETE EVIDENCES OF PURCHASE OF SHARES MADE BY TH E ASSESSEE AND THE SALE CONTRACT NOTES TOGETHER WITH THE BANK STATEMENTS AND DEMAT S TATEMENTS BEFORE THE LD AO EVIDENCING THE ENTIRE TRANSACTIONS BEING ROUTED THR OUGH REGULAR DISCLOSED BANK ACCOUNT OF THE ASSESSEE. 4. THE LD AO TREATED THE LONG TERM CAPITAL GAIN ON SALE OF SHARES OF STIL AS BOGUS ON THE GROUND THAT THE SAID COMPANY DOES NOT DESERVE S UCH A HUGE HIKE IN SALE PRICE AND ACCORDINGLY DISBELIEVED THE MARKET PRICES. THE LD AO ALSO ALLEGED THAT THE SHARES PRICE WAS ARTIFICIALLY RIGGED AND MANIPULATED BEYOND ITS NORMAL PRICING WITH CONNIVANCE OF SHARE BROKERS AND STOCK EXCHANGE WITH THE GUIDANCE OF VARIOUS ENTRY OPERATORS WHEREIN THE ILLEGAL MONEY WAS CONVERTED INTO LEGAL MONEY IN THE FORM OF LONG TERM CAPITAL GAINS. THE LD AO ACCORDINGLY BROUGHT THE LTCG DERIVED ON S ALE OF SHARES OF STIL OF RS 96,36,783/- AS UNEXPLAINED CASH CREDIT U/S 68 OF TH E ACT. THE LD AO ALSO MADE ADDITION TOWARDS COMMISSION AS UNEXPLAINED EXPENDITURE AT TH E RATE OF 0.5% ON RS 96,36,783/- AND MADE ADDITION OF RS 48,184/-. THIS ACTION OF T HE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT EMERGES AT THE OUTSET THAT BOTH THE LOWER AUTHORITIES HAVE ADOPTED IDENTICAL LINE OF REASONIN G IN TREATING THE SALE CONSIDERATION RECEIVED ON TRANSFER OF SHARES IN STIL TO BE BOGUS THEREBY TREATING THE LTCG ON SALE OF SUCH SHARES AS UNEXPLAINED CASH CREDIT U/S 68 OF TH E ACT. THE LD DR DREW OUR ATTENTION TO A VOLUMINOUS EXERCISE UNDERTAKEN BY THE LD AO IN VOLVING A LONG DRAWN PROCESS OF STOCK MARKET PRICES RIGGING IN COLLUSION WITH THE V ARIOUS ENTRY OPERATORS. THE LD DR DREW OUR ATTENTION TO THE ASSESSMENT ORDER INDICATI NG THE ASSESSEE TO HAVE ALLEGEDLY INVESTED THE MONEY IN M/S TTL (SINCE MERGED WITH ST IL) NOT HAVING ANY SOUND FINANCIAL POSITION OR BUSINESS ACTIVITY SO AS TO JU STIFY THE LTCG IN ISSUE. THE CASES OF SUMATI DAYAL VS. CIT 214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE (1971) 82 ITR 4 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 4 (SC) WERE QUOTED IN SUPPORT TO PLEAD THAT BOTH THE LOWER AUTHORITIES HAVE MADE IT CLEAR IN THEIR RESPECTIVE ORDER(S) ABOUT THE ASSESSEE HAV ING ACTED IN COLLUSION WITH VARIOUS ENTRY OPERATORS FOR THE PURPOSE OF BOGUS LTCG IN IS SUE. THERE IS NO DISPUTE THAT ASSESSEE HAVING DERIVED THE LTCG ON TRANSFER OF SHA RES HELD IN STIL. 5.1. THE LD DR VEHEMENTLY RELIED ON THE FOLLOWING D ECISIONS :- A) CO-ORDINATE BENCH DECISION OF BANGALORE TRIBUNAL IN THE CASE OF SMT M K RAJESHWARI VS ITO IN ITA NO. 1723/BANG/2018 FOR ASS T YEAR 2015-16 DATED 12.10.2018. B) CO-ORDINATE BENCH DECISION OF MUMBAI TRIBUNAL IN THE CASE OF ITO VS SHAMIM M BHARWANI REPORTED IN 69 TAXMANN.COM 65 (MUMBAI TR IB.) DATED 27.3.2015. C) HONBLE BOMBAY HIGH COURT IN THE CASE OF SANJAY BIMALCHAND JAIN VS PCIT REPORTED IN 89 TAXMANN.COM 196 (BOMBAY) DATED 10.4.2017. 5.2. WE FIND THAT THE LD CITA IN PAGES 2 AND 3 OF H IS ORDER CATEGORICALLY STATED THAT THE FOLLOWING DOCUMENTS WERE DULY SUBMITTED BY THE ASSE SSEE BEFORE THE LD AO :- A) PROFIT AND LOSS ACCOUNT AND BALANCE SHEET B) COMPUTATION OF TOTAL INCOME C) RETURN OF INCOME ACKNOWLEDGEMENT D) BANK STATEMENT PHOTO COPIES E) CHART OF RECEIPTS OF INTEREST INCOME , DIVIDEND, SALARY AND BONUS F) DETAILS OF LONG TERM CAPITAL GAIN G) FORM 26AS H) DETAILS OF SHARE PURCHASED AND SOLD DURING THE Y EAR AND THREE PRECEDING YEARS WITH STT PAID. THE SPECIFIC QUERY OF ASSESSING OFFICER WAS ABOUT THE LONG TERM CAPITAL GAIN EARNED ON SALE OF QUOTED EQUITY SHARES OF TRIN ITY TRADELINK LIMITED. THE ASSESSEE ANSWERED THE SAME BY FORWARDING THE RELEVANT DOCUME NTS SUCH AS :- (I) EVIDENCES OF PURCHASES AND SALES (II) DEMAT STATEMENT (III) BANK STATEMENT SHOWING THE TRANSACTION (IV) CONTRACT NOTES OF SHARE BROKERS I) EVIDENCES OF PAYMENT OF SECURITIES TRANSACTION T AX IN CONTRACT NOTE OF SHARE BROKERS J) FORM NO. 10DDB OF SECURITIES TRANSACTION TAX PAI D K) DETAILS OF SHARES AND SECURITIES 5.3. THE LD DR ARGUED THAT THE GAINS RECEIVED ON SA LE OF SHARES OF STIL SHOULD BE TAXED AS BUSINESS INCOME AS IT IS ADVENTURE IN THE NATURE OF TRADE FOR THE ASSESSEE HEREIN IN 5 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 5 VIEW OF THE FACT THAT THE ASSESSEE DOES NOT HAVE AN Y INCOME FROM BUSINESS AND IS HAVING ONLY SALARY INCOME AND INCOME FROM OTHER SOURCES. W E FIND THAT THIS ASPECT NEED NOT BE GONE INTO THIS CASE AS THE ISSUE IS ALREADY SETTLED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS CO-ORDINATE BENCH DECISIONS OF THIS TRIBUNAL. WE FI ND THAT THE LD DR COULD NOT CONTROVERT THE FINDINGS RECORDED BY THE CO-ORDINATE BENCH DECI SION OF THIS TRIBUNAL IN ASSESSEES FAVOUR IN THE CASE OF SANJAY MEHTA VS ACIT IN ITA N O.1089/KOL/2018 DATED 28.9.2018 FOR ASST YEAR 2014-15 AS FOLLOWS:- 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL CONTENTIONS. CASE FILE AS WELL AS A COMPILATION OF JUDICIAL PRECEDENT STAND P ERUSED. LEARNED DEPARTMENTAL REPRESENTATIVE EMPHASIZES TIME AND AGAIN THAT THE I NSTANT ISSUE OF BOGUS LTCG HAS RIGHTLY BEEN DECIDED AGAINST THE ASSESSEE IN BOTH A SSESSMENT AS WELL AS LOWER APPELLATE PROCEEDINGS RAISED PERTAINING TO ARTIFICIAL MANIPUL ATION OF SHARE PRICES IN BOTH M/S UNNO INDUSTRIES LTD. & SHARP TRADING FINANCE LTD. W E FIND NO FORCE IN REVENUES INSTANT ARGUMENT. THIS TRIBUNAL CO-ORDINATE BENCHS DECISION IN ITA 2394/KOL/2017 PRAKASH CHAND BHUTORIA VS. ITO DECIDED ON 27.06.201 8 FOR AY 2014-15 ITSELF UPHOLDS SUCH A SHARE PRICES INCREASE TO BE GENUINE QUA THE ABOVE FORMER ENTITY AS UNDER:- 5. IN RESPONSE TO THE QUERIES RAISED BY THE ASSESSI NG OFFICER ON THE ISSUE OF THE FACT THAT THE ASSESSEE RECEIVED RS. 31,62,372/- FROM SALE OF ONCE SCRIPS I.E. UNNO INDUSTRIES LTD. THE ASSESSEE SUBMITTED THE FOLLOWING FACTS: DETAILS OF PURCHASE OF SHARE FOR LONG TERM CAPITA L GAIN F.Y.2013-14 (A.Y.2014-15): 1. I STATE THAT I HAD PURCHASED 100 EQUITY SHARES OF PINNACLE VINTRADE LTD. ON 20.01.2012 FROM UNIGLORY DEVELOPERS PVT. LTD. PINNACLE VINTRAD E LTD. WAS MERGED WITH UNNO INDUSTRIES LTD. AND THERE WAS CHANGE OF MANAGEMENT AND CONTROL OF UNNO INDUSTRIES LTD. PURSUANT TO SCHEME OF ARRANGEMENT SANCTIONED B Y THE HONBLE HIGH COURT AT BOMBAY. 2. PAYMENT FOR THE PURCHASE OF AFORESAID 100 EQUITY OF PINNACLE VINTRADE LTD. WAS MADE BY ACCOUNT PAYEE TAMILNAD MERCANTILE LTD. BANK CHE QUE NO. 736027. 3. BANK STATEMENT OF TAMILNAD MERCANTILE LTD. BANK REF LECTING PAYMENT (CHEQUE NO. 736027) FOR PURCHASE OF THE SAID INVESTMENT IN EQUI TY SHARES OF PINNACLE VINTRADE LTD. IS ENCLOSED (HIGHLIGHTING THE SAID ENTRY). ANNEXURE-I. 4. THE EQUITY SHARES OF UNNO INDUSTRIES LTD. WERE ALLO TTED PURSUANT UPON MERGER OF PINNACLE VINTRADE LTD. WITH UNNO INDUSTRIES LTD. PU RSUANT TO SANCTION OF SCHEME OF ARRANGEMENT BY THE HONBLE HIGH COURT AT BOMBAY, I WAS ISSUED 91000 EQUITY SHARES OF UNNO INDUSTRIES LTD. IN LIEU OF MY SHAREHOLDING IN PINNACLE VINTRADE LTD. THE RELEVANT GIST OF THE SCHEME OF ARRANGEMENT SANCTION ED BY THE HONBLE HIGH COURT WAS COMMUNICATED BY THE COMPANY TO THE BOMBAY STOCK EXC HANGE VIDE LETTER DATED 12 TH FEBRUARY, 2013. A COPY OF THE SAID LETTER DOWNLOADE D FROM BSE WEBSITE IS ENCLOSED FOR YOUR READY REFERENCE. I ALSO ENCLOSE UNNO INDUSTRIE S LTD. LETTER DATED 12 TH FEBRUARY, 2013 AND 7 TH MARCH, 2013 COMMUNICATING THE ISSUANCE OF SHARES I N LIEU SHARES OF 6 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 6 PINNACLE VINTRADE LTD. UPON SANCTION OF SCHEME OF A RRANGEMENT BY THE HONBLE COURT. ANNEXURE II 5. AS THE EQUITY SHARES OF PINNACLE VINTRADE LTD. PURC HASED WERE NOT LISTED, HENCE NO CONTRACT NOTES WERE ISSUED. HOWEVER, COPY OF BILL I NDICATING PURCHASE OF SAID EQUITY SHARES IS ENCLOSED. ANNEXURE III 6. EQUITY SHARES OF PINNACLE VINTRADE LTD., WERE DIREC TLY PURCHASED FROM UNIGLORY DEVELOPERS PVT. LTD. 209, VIRESHWAR CHAMBERS, M.G. ROAD, NERA SHAN TALKIES VILE PARLE (E), MUMBAI, MAHARASHTRA-400057. 7. EQUITY SHARES OF PINNACLE VINTRADE LTD. WERE PURCHA SED IN PHYSICAL FORM. 8. I HAVE THREE DEMAT ACCOUNTS AS FOLLOWS- A) NAME OF DP- ASHIKA STOCK BROKING LTD. (DP ID NO. 12034500) DEMAT ACCOUNT NO. 1203450000003128 ADDRESS OF DP-TRINITY, 7 TH FLOOR, 226/1, A.J.C. BOSE ROAD, KOLKATA-700020. DP ACCOUNT OPENED ON-31.08.2004 B) NAME OF DP- GUINESS SECURITIES LTD. (DP ID NO. IN302898) DEMAT ACCOUNT NO. 10350406 ADDRESS OF DP-GUINESS HOUSE, 18, DESHPRIYA PARK ROA D, KOLKATA-700026. DP A/C OPENED ON-25.05.2013 C) NAME OF DP- TAMILNAD MERCANTILE BANK LTD. (DP ID NO. IN303069) DEMAT ACCOUNT NO. 10051996 ADDRESS OF DP-PEARL TOWERS DPS CELL, AC 16, III FLO OR, II AVENUE, ANNA NAGAR WEST, CHENNAI-600040. 9. DEMAT STATEMENTS OF M/S ASHIKA STOCK BROKING LTD. A ND GUINESS SECURITIES LTD. FOR F.Y. 2013-14 AND 2014-15 IN RESPECT OF LONG TERM CAPITAL GAINS ARE ENCLOSED. ANNEXURE IV. 10. THE EQUITY SHARES OF M/S UNNO INDUSTRIES LTD. WERE SUBMITTED FOR DEMATERIALIZATION ON 01.04.2013 AND CREDITED TO MY DEMAT A/C NO. 1203450 000003128 WITH M/S ASHIKA STOCK BROKING LTD. (DP ID NO. 12034500) ON 12.04.20 13 (91000 SHARES). DETAILS OF SALE OF SHARE FOR LONG TERM CAPITAL GAIN FINANCIAL YEAR 2013-14(A.Y.2014-15): 1. THE EQUITY SHARES OF M/S UNNO INDUSTRIES LTD. ARE L ISTED AT BOMBAY STOCK EXCHANGE (BSE), A RECOGNIZED STOCK EXCHANGE OF INDIA SINCE L AST SO MANY YEARS AND EVEN DURING THE TIME OF SALE BY ME. THE SECURITY CODE OF THE SA ID EQUITY SHARES AT BSE IS 519273 AND ISIN NO. IS INE 142N01023. 2. EQUITY SHARES OF UNNO INDUSTRIES LTD. WERE SOLD ON BOMBAY STOCK EXCHANGE THROUGH SEBI REGISTERED STOCK BROKER ASHIKA STOCK BROKING L TD. AND GUINESS SECURITIES LTD. WHOSE DETAILS ARE AS UNDER: A) NAME: ASHIKA STOCK BROKING LTD. ADDRESS: TRINITY, 7 TH FLOOR, 226/1, A.J.C. BOSE ROAD, KOLKATA-700020. CONTACT NO. 033 22839952. B) NAME: GUINESS SECURITIES LTD. ADDRESS: GUINESS HOUSE, 18, DESHPRIYA PARK ROAD, KO LKATA-700026 7 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 7 CONTACT NO. 033 30015555. 3. CONTRACT NOTES ISSUED REGARDING SALE OF EQUITY SHAR ES OF UNNO INDUSTRIES LTD. ON BOMBAY STOCK EXCHANGE BY SEBI REGISTERED BROKERS- A SHIKA STOCK BROKING LTD. AND GUINESS SECURITIES LTD. ARE ENCLOSED. ANNEXURE V. 4. THE RELEVANT DEMAT ACCOUNT STATEMENTS OF ASHIKA STO CK BROKING LTD. AND GUINESS SECURITIES LTD. REFLECTING THE DEBIT OF SHARES OF U NNO INDUSTRIES LTD. UPON SALE ARE ENCLOSED. (ENTRIES HIGHLIGHTED). ANNEXURE VI . 5. THE LEDGER OF THE BROKERS OF ASHIKA STOCK BROKING L TD. AND GUINESS SECURITIES LTD. FOR THE FINANCIAL YEAR 2013-14 ARE ENCLOSED. ANNEXURE VII. 6. TAMILNAD MERCANTILE LTD. BANK STATEMENT REFLECTING THE RECEIPTS OF SALE CONSIDERATION FROM THE SEBI REGISTERED STOCK BROKERS (HIGHLIGHTIN G THE SAID ENTRIES) IS ENCLOSED. ANNEXURE VIII. 7. OUT OF SALE CONSIDERATION MONEY OF RS. 3151423.00 F ROM UNNO INDUSTRIES LTD. A SUM OF RS. 3150000.00 HAS BEEN INVESTED IN EQUITY SHARES O F GLOW DIAM DESIGNS PVT. LTD. ALL THE EVIDENCES WERE ATTACHED AS ANNEXURES AS STA TED ABOVE. 6. THE ASSESSING OFFICER IN HIS ORDER DID NOT REFER TO ANY OF THESE EVIDENCES. INSTEAD AT PARA 6 AND 7 HE CONCLUDED HELD AS FOLLOWS: 6. THE DETAILS OF PURCHASE AND SALE OF THIS PARTIC ULAR SCRIP I.E. UNNO INDUSTRIES LTD. (HEREINAFTER REFERRED AS THE SCRIP) WERE EXAMINED I N WHICH SHARES WERE SOLD IN JUNE/AUGUST, 2013 AT THE PRICE OF RS. 31,62,379/- A ND PURCHASED RS. 1,00,000/- I.E. A HUMONGOUS RISE OF OVER 3100% OVER A VERY SHORT PERI OD OF JUST 24 MONTHS. THESE FACTS DEMANDED A DEEPER STUDY OF THE PRICE MOVEMENTS AND SHARE MARKET BEHAVIOR OF THE ENTITIES INVOLVED IN TRADE, OF THE SCRIP AS THE SHA RE PRICE MOVEMENTS AND THE PROFIT EARNED BY THE BENEFICIARIES WERE BEYOND HUMAN PROBA BILITIES. THUS A DEEPER STUDY WAS NEEDED TO ASCERTAIN WHETHER THE TRANSACTIONS WERE G ENUINE INVESTMENT TRANSACTION OF SHAM ONES AND COLORABLE DEVICE ONLY TO CONVERT THE UNACCOUNTED CASH INTO TAX EXEMPT. 7. APART FROM THIS, THE DIRECTORATE OF INCOME TAX, KOLKATA VARIOUS ENQUIRIES HAVE BEEN MADE ON PROJECT BASIS, WHICH HAS RESULTED INTO THE UNEARTHING OF HUGE SYNDICATE OF ENTRY OPERATORS, SHARE BROKERS AND MONEY LENDER INVOLVED IN PROVIDING BOGUS ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL LOSS. IT HAS COME TO THE LIGHT THAT LARGE SCALE MANIPULATION HAS BEEN DONE IN MARKET PRICE OF SHOWN OF CERTAIN COMPANIES LISTED IN THE BSE BY CERTAIN B ENEFICIARY IS UTILIZED TO PURCHASE SHARES OF SUCH COMPANY AT A VERY HIGH ARTIFICIALLY INFLATED MARKET PRICE. SOME OF THE LISTED COMPANIES DIRECTLY OR IN DIRECTLY OWNED BY O PERATORS AND WHOSE SHARES PRICE HAVE BEEN APPARENTLY MANIPULATED BY THE SYNDICATE O F OPERATORS. OUT OF THE ABOVE ENQUIRY MADE BY DIT(INV.), KOLKATA HAS ESTABLISHED THAT ONE OF THE MAIN MANIPULATED COMPANY WHICH YOU HAD AVAILED IS ALSO UNDER THIS SY NDICATE. HENCE, IT IS CRYSTAL CLEAR THAT SHARP TRADING COMPANY IS ONE OF THE MAIN MANIP ULATED COMPANY (PENNY LISTED) TO CONVERT UNACCOUNTED CASH OF BENEFICIARY THROUGH LON G TERM CAPITAL GAIN WITH CLAIM A CERTAIN PERCENTAGE OF COMMISSION. 7. THEREAFTER THE AO MADE AN ADDITION UNDER 68 OF T HE ACT. AGGRIEVED THE ASSESSEE CARRIED THE MATTER AN APPEAL. THE LD. FIRST APPELLATE AUTHORITY CONFIRMED THE ACTION OF THE AO ON THE 8 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 8 GROUND THAT, THE TRANSACTION IN QUESTION COMES WITH IN THE AMBIT OF SUSPICIOUS TRANSACTION AND THEREFORE, THE RULES OF SUSPICIOUS TRANSACTION WO ULD APPLY TO THE CASE. HE FURTHER STATED THAT THE PAYMENTS THROUGH BANK OF PROCESSING OF TRANSACT ION THROUGH STOCK EXCHANGE AND OTHER SUCH FEATURES ARE ONLY APPARENT FEATURES AND THAT THE RE AL FEATURE ARE THE MANIPULATION AND ABNORMAL PRICE RAISE AND THE SUDDEN DIP THEREAFTER. BASED ON SURROUNDING CIRCUMSTANCES AND CIRCUMSTANTIAL EVIDENCE AND THE ORDER OF THE TRIBUN AL IN THE CASE OF BHAG CHAND CHABRA (HUF) VS. ITO, IN I.T.A. NO. 3088& 3107/2007 DATED 31.12.2010, THE ADDITION MADE BY THE AO WAS CONFIRMED. AGGRIEVED THE ASSESSEE IS IN APPE AL BEFORE US. 8. A PERUSAL OF THE ORDER OF THE AO DEMONSTRATES T HAT THIS ADDITION WAS MADE MERELY ON SUSPICION AND IN A ROUTINE AND MECHANICAL MANNER. THIS IS CLEAR FROM THE FACT THAT THE AO REFERS TO SOME SHARP TRADING COMPNAY AS ONE OF THE MAIN ,MANIPULATED COMPANY AND WHEREAS THE ASSESSEE SOLD SCRIPS IN UNNO INDUSTRIES LTD. TH E AO REFERS TO VARIOUS ENQUIRIES MADE BY THE DIRECTORS OF INCOME TAX, KOLKATA ON PROJECT B ASIS AND THAT THIS RESULTED INTO UNEARTHING OF A HUGE SYNDICATE OF ENTRY OPERATORS AND SHARE BR OKERS AND MONEY LENDERS INVOLVED IN PROVIDING OF BOGUS ACCOMMODATION ENTRIES. THE REPOR T AS THE SO-CALLED PROJECT AND THE EVIDENCE COLLECTED BY THE DIT (INV.), KOLKATA ETC HAVE NOT B EEN BROUGHT ON RECORD. IT IS WELL SETTLED THAT ANY DOCUMENT RELIED UPON BY THE AO FOR MAKING AN AD DITION HAS TO BE SUPPLIED TO THE ASSESSEE AND AN OPPORTUNITY SHOULD BE PROVIDED TO THE ASSESS EE TO REBUT THE SAME. IN THIS CASE, GENERAL STATEMENTS HAVE BEEN MADE BY THE AO AND THE ADDITIO N IS MADE BASED ON SUCH GENERALIZATIONS. THE ASSESSEE HAS NOT BEEN CONFRONTED WITH ANY OF TH E EVIDENCE COLLECTED IN THE INVESTIGATION DONE BY THE DIT(INV.), KOLKATA. EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST THE ASSESSEE WITHOUT GIVING A COPY OF THE SAME TO T HE ASSESSEE AND THEREAFTER GIVING HIM AN OPPORTUNITY TO REBUT THE SAME. 9. THE AO FURTHER RELIES ON THE SHOP INCREASE OF 3 1000% OF THE VALUE OF SHARES OVER THE PERIOD OF 2 YEARS. THOUGH THIS IS HIGHLY SUSPICIOUS, IT CA NNOT TAKE THE PLACE OF EVIDENCE. THE HON'BLE SUPREME COURT HAS STATED THAT SUSPICION HOWEVER STR ONG CANNOT BE THE BASIS FOR MAKING AN ADDITION. THE EVIDENCE PRODUCED BY THE ASSESSEE LIS TED ABOVE PROVES HIS CASE AND THE AO COULD NOT CONTROVERT THE SAME BY BRINGING ON RECORD ANY E VIDENCE. THE EVIDENCE SAID TO HAVE BEEN COLLECTED BY THE DIT (INV.), KOLKATA AND THE REPORT IS NOT PRODUCED BEFORE THIS BENCH. 10. I NOW DISCUSS THE CASE LAW ON THE SUBJECT. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT, KOLKATA-III VS. SMT. SHREYASHI GANGULI REPORTE D IN [2012] (9) TMI 1113 HELD AS FOLLOWS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ORDER OF THE LD.. TRIBUNAL IS PERVERSE IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AS UNEXPLAINED CASH CREDIT UNDER SECTION 6 8 OF THE INCOME TAX ACT, 1961, BY IGNORING THE FACTS ON RECORD. THE LD. TRIBUNAL AFTER CONSIDERING THE MATERIAL AND HEARING CAME TO A FACT FINDING WHICH IS AS FOLLOWS: THE ASSESSING OFFICER HAS DOUBTED THE TRANSACTION S INCE THE SELLING BROKER WAS SUBJECTED TO SEBIS ACTION. HOWEVER, THE DEMAT ACCO UNT GIVEN THE STATEMENT OF TRANSACTIONS FROM 01.04.2004 TO 31.03.2005 I.E. REL EVANT FOR THE ASSESSMENT YEAR UNDER APPEAL (2005-06) ARE BEFORE US. THERE CA NNOT BE ANY DOUBT ABOUT THE TRANSACTION AS HAS BEEN OBSERVED BY THE ASSESSI NG OFFICER. THE TRANSACTIONS WERE AS PER NORMS UNDER CONTROLLED BY THE SECURITIE S TRANSACTION TAX, BROKERAGE SERVICE TAX AND CESS, WHICH WERE ALREADY PAID. THEY WERE COMPLIED WITH. ALL THE TRANSACTIONS WERE THROUGH BANK. THERE IS NO IOTA OF EVIDENCE OVER THE ABOVE TRANSACTIONS AS IT WERE THROUGH DEMAT FOR MAT. HENCE, WE AGREE WITH 9 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 9 THE GIVEN FINDINGS OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) IN ACCEPTING THE TRANSACTIONS AS GENUINE TOO. IN VIEW OF THE FACT FINDINGS WE CANNOT REAPPRECIATE , RECORDING IS SUCH, CANNOT BE SAID TO BE PERVERSE AS IT IS NOT FACT FINDING OF THE LD. TRIBUNAL ALONE. THE COMMISSIONER OF INCOME TAX CAME TO THE SAME FACT FI NDING. CONCURRENT FACT FINDING ITSELF MAKES THE STORY OF PERVERSITY, UNBEL IEVABLE. THE D BENCH OF THE KOLKATA TRIBUNAL IN THE CASE O F GAUTAM KUMAR PINCHA VS. ITO, IN I.T.A. NO. 569/KOL/2017 DATED 15.11.2017 AT PARA 19 ONWARD S HELD AS FOLLOWS: (I) 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 THE ASSESSEE TO SUPPORT HUGE LOSSES CLAIMED IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WER E 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 HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING P RICE AND THEREFORE THE SUSPICION OF THE AO WAS MISPLACED AND NOT SUBSTANTIATED. (II) CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITED [2 013] 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. (III) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CAL 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. HOWEVER 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. (IV) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE DECISI ON OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE WHERE THE AO DI D NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS TRANSACTIONS IN ALLEGED PENNY STO CKS. 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. ( V) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE D ECISION 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 WER E NOT GENUINE. (VI) 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. TH E HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WA S FOUND THAT THE CHAIN OF TRANSACTIONS 10 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 10 ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCO UNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. IT WAS ALSO FOUND THAT THE A SSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DEMAT ACCOUNTS AND PRODUCED DOCUMENTS SH OWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 8.4. IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I T O XIV) 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 MATER IAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE T HAT 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, DEMA T STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PUR CHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(38) OF THE ACT. FOR COMING TO SUCH A CONCLUSION WE RELY ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. ALI PINE INVESTMENTS IN ITA NO.620 OF 2008 DATED 26 TH AUGUST, 2008 WHEREIN THE HIGH COURT HELD AS FOLLOW S : IT APPEARS THAT THERE WAS LOSS AND THE WHOLE TRANS ACTIONS WERE SUPPORTED BY THE CONTRACT NOTES, BILLS AND WERE CARRIED OUT THROUGH RECOGNIZE D STOCK BROKER OF THE CALCUTTA STOCK EXCHANGE AND ALL THE BILLS WERE RECEIVED FROM THE S HARE BROKER THROUGH ACCOUNT PAYEE WHICH ARE ALSO FILED IN ACCORDANCE WITH THE ASSESSMENT. IT APPEARS FROM THE FACTS AND MATERIALS PLACED BEFO RE THE TRIBUNAL AND AFTER EXAMINING THE SAME, THE TRIBUNAL ALLOWED THE APPEAL BY THE ASSESS EE. IN DOING SO THE TRIBUNAL HELD THAT THE TRANSACTIONS CANNOT BE BRUSHED ASIDE ON SUSPICION AND SURMISES. HOWEVER IT WAS HELD THAT THE TRANSACTIONS OF THE SHARES ARE GENUINE. THEREFORE WE DO NOT FIND THAT THERE IS ANY REASON TO HOLD THAT THER E IS NO SUBSTANTIAL QUESTION OF LAW HELD IN THIS MATTER. HENCE THE APPEAL BEING ITA NO.620 OF 2008 I S DISMISSED. 8.5. 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 THE IM PUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE H OLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHAR ES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. THE A BENCH OF THE KOLKATA TRIBUNAL IN THE CASE O F ITO VS. SHALEEN KHEMANI IN I.T.A. NO. 1945/KOL/2014 DATED 18.10.2017 AT PARA 9.1. TO 9.4 HELD AS FOLLOWS: 9.1 WE FURTHER FIND THAT THE TRANSACTION OF SALE OF SHARES BY THE ASSESSEE WAS DULY BACKED BY ALL EVIDENCES INCLUDING CONTRACT NOTES, D EMAT STATEMENT, BANK ACCOUNT REFLECTING THE TRANSACTIONS, THE STOCK BROKERS HAVE CONFIRMED THE TRANSACTIONS, THE STOCK 11 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 11 EXCHANGE HAS CONFIRMED THE TRANSACTIONS, THE SHARES HAVE BEEN SOLD ON THE ONLINE PLATFORM OF THE STOCK EXCHANGE AND EACH TRADE OF SA LE OF SHARES WERE HAVING UNIQUE TRADE NO. AND TRADE TIME. IT IS NOT THE CASE THAT T HE SHARES WHICH WERE SOLD ON THE DATE MENTIONED IN THE CONTRACT NOTE WERE NOT TRADED PRIC E ON THAT PARTICULAR DATE. THE LD AO DOUBTED THE TRANSACTIONS DUE TO THE HIGH RISE IN TH E STOCK PRICE BUT FOR THAT, THE ASSESSEE COULD NOT BE BLAMED AND THERE WAS NO EVIDENCE TO PR OVE THAT THE ASSESSEE OR ANY ONE ON HIS BEHALF WAS MANIPULATING THE STOCK PRICES. THE S TOCK EXCHANGE AND SEBI ARE THE AUTHORITIES APPOINTED BY THE GOVERNMENT OF INDIA TO ENSURE THAT THERE IS NO STOCK RIGGING OR MANIPULATION. THE LD AO HAS NOT BROUGHT ANY EVID ENCE ON RECORD TO SHOW THAT THESE AGENCIES HAVE ALLEGED ANY STOCK MANIPULATION AGAINS T THE ASSESSEE AND OR THE BROKERS AND OR THE COMPANY. IN ABSENCE OF ANY EVIDENCES IT CANNOT BE SAID THAT MERELY BECAUSE THE STOCK PRICE MOVED SHARPLY, THE ASSESSEE WAS TO BE BLAMED FOR BOGUS TRANSACTIONS. IT IS ALSO TO BE SEEN THAT IN THIS CASE, THE SHARES W ERE HELD BY THE DONORS FROM 2003 AND SOLD IN 2010 THUS THERE WAS A HOLDING PERIOD OF 7 Y EARS AS PER SECTION 49 OF THE ACT AND IT CANNOT BE SAID THAT THE ASSESSEE AND THE DONORS WERE MAKING SUCH PLANS FOR THE LAST 7 YEARS TO RIG THE STOCK PRICE TO GENERATE BOGUS CAPI TAL GAINS THAT TOO WITHOUT ANY EVIDENCES WHATSOEVER. 9.2 IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSE E AND / OR THE STOCK BROKER M/S P DIDWANIA & CO AND TOSHITH SECURITIES P LTD., BOTH R EGISTERED SHARE AND STOCK BROKERS WITH CALCUTTA STOCK EXCHANGE HAD CONFIRMED THE TRAN SACTION AND HAVE ISSUED LEGALLY VALID CONTRACT NOTES UNDER THE LAW AND SUCH CONTRAC T NOTES ARE AVAILABLE IN PAGES 41-52 OF THE PAPER BOOK. WE FIND THAT THE HONBLE CALCUTT A HIGH COURT IN THE CASE OF PR CIT VS RUNGTA PROPERTIES PRIVATE LIMITED ITAT NO 105 OF 2016 DATED 8 TH MAY 2017 IN A SIMILAR ISSUE DISMISSED THE APPEAL OF THE DEPARTMEN T BY MAKING THE FOLLOWING OBSERVATIONS: (11) ON THE LAST POINT, THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORDS ANY MATERIAL TO SHOW THAT THE TRANSACTIONS IN SHARES OF THE COMPANY INVOLVED WERE FALSE OR FICTITIOUS. IT IS FINDING OF THE ASSE SSING OFFICER THAT THE SCRIPS OF THIS COMPANY WAS EXECUTED BY A BROKER THROUGH CROSS DEAL S AND THE BROKER WAS SUSPENDED FOR SOME TIME. IT IS ASSESSEES CONTENTION ON THE O THER THAT EVEN THOUGH THERE ARE ALLEGATIONS AGAINST THE BROKER, BUT FOR THAT REASON ALONE THE ASSESSEE CANNOT BE HELD LIABLE. ON THIS POINT THE TRIBUNAL HELD AS A MATTER OF FACT THE AO DOUBTED THE INTEGRITY O F THE BROKER OR THE MANNER IN WHICH THE BROKER OPERATION AS PER THE STATEMENT OF ONE OF THE DIRECTORS OF THE BROKER FIRM AND ALSO AO OBSERVED THAT ASSESSEE HAD NOT FURNISHED ANY EXPLANATION IN RESPECT OF THE INTENTION OF SHOWING TRADING OF SHARES ONLY IN THREE PENNY STOCKS. AO RELIED THE LOSS OF RS.25,30, 396/- ONLY ON THE BASIS OF INFORMATION SUBMITTED BY THE STOCK FICTITIOUS. AO H AS ALSO NOT DOUBTED THE GENUINENESS OF THE DOCUMENTS PLACED ON RECORD BY TH E ASSESSEE. AOS OBSERVATION AND CONCLUSION ARE MERELY BASED ON THE INFORMATION REPRESENTATIVE. THEREFORE ON SUCH BASIS NO DISALLOW ANCE CAN BE MADE AND ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD . CIT(A), WHO HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. THUS GROUND NO. 1 OF THE REVENUE IS DISMISSED. 12 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 12 WE AGREE WITH THE REASONING OF THE TRIBUNAL ON THIS POINT ALSO. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. THE SU GGESTED QUESTIONS, IN OUR OPINION DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 9.3. WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGAT IONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO L EGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUME NTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROKERS G ETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEM AT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOU ND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONA FIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JU STIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE LD CITA RIGHTLY RELIED ON THE DECISION OF THE HONBLE HIGH COURT AT CALCUTTA IN THE CASE OF ALPINE INVESTMENTS IN ITA NO. 620 OF 2008 DATED 26 TH AUGUST 2008 WHEREIN THE HONBLE COURT HELD AS FOLLOWS: IT APPEARS THAT THE SHARE LOSS AND THE WHOLE TRANS ACTIONS WERE SUPPORTED BY CONTRACT NOTES, BILLS AND WERE CARRIED OUT THROUGH RECOGNIZED STOCKBROKER OF THE CALCUTTA STOCK EXCHANGE AND ALL THE PAYMENTS MA DE TO THE STOCKBROKER AND ALL THE PAYMENTS RECEIVED FROM STOCKBROKER THROUGH ACCOUNT PAYEE INSTRUMENTS, WHICH WERE ALSO FILED IN ACCORDANCE WITH THE ASSESS MENT. IT APPEARS FROM THE FACTS AND MATERIALS PLACED BEFO RE THE TRIBUNAL AND AFTER EXAMINING THE SAME THE TRIBUNAL CAME TO THE CONCLUS ION AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. IN DOING SO, THE TRIB UNAL HELD THAT THE TRANSACTION FULLY SUPPORTED BY THE DOCUMENTARY EVIDENCES COULD NOT BE BRUSHED ASIDE ON SUSPICION AND SURMISES. HOWEVER, IT WAS HELD THAT T HE TRANSACTIONS OF SHARE ARE GENUINE. THEREFORE, WE DO NOT FIND THAT THERE IS AN Y REASON TO HOLD THAT THERE IS ANY SUBSTANTIAL QUESTION OF LAW INVOLVED IN THIS MA TTER. HENCE, THE APPEAL BEING ITA NO.620 OF 2008 IS DISMISSED. 9.4. WE ALSO FIND THAT THE VARIOUS OTHER CASE LAWS OF HONBLE JURISDICTIONAL HIGH COURT AND OTHER CASE LAWS ALSO RELIED UPON BY THE LD AR A ND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF SOICL AS UNDISCLOSED INCOME O F THE ASSESSEE U/S 68 OF THE ACT AND THEREFORE WE UPHOLD THE ORDER OF THE LD CITA AND DI SMISS THE APPEAL OF THE REVENUE. ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE ARE D ISMISSED. APPLYING THE PROPOSITION OF LAW LAID DOWN IN ALL TH E ABOVE REFERRED CASES, THE FACTS OF THIS CASE, I FIND FORCE IN THE SUBMISSION OF THE ASSESSEE AND TH ERE ARE BACKED BY EVIDENCE. I ALSO FIND THAT THE REVENUE HAS NOT BASED ITS FINDING ON IN ANY EVIDENC E. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION MADE U/S 68 OF THE ACT IS HEREBY DELETED. 13 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 13 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS AT THIS STAGE THAT THE DIT(INV) HAS CARRIED OUT A DETAILED INVESTIGATION I N VARIOUS ENTRY OPERATORS CASES. THEY HAVE BEEN FOUND TO HAVE RIGGED SUCH KIND SCRIPS PRICES RISE. THERE IS NOT EVEN A SINGLE MATERIAL DURING THE COURSE OF HEARING WHICH COULD SUGGEST TH E ASSESSEE TO HAVE ENGAGED IN ANY KIND OF FOUL PLAY. THIS TRIBUNALS ANOTHER CO-ORDINATE BEN CH DECISION IN ITA NO.2281/KOL/2017 NAVNEET AGARWAL VS. ITO DECIDED ON 20.07.2018 HAS REJECTED REVENUES ALL THESE ARGUMENTS AS FOLLOWS: 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 SA ME BE UPHELD. HE VEHEMENTLY ARGUED THAT MERELY BECAUSE THE ASSESSEE HAS PRODUCED ALL T HE EVIDENCES REQUIRED TO PROVE HIS CLAIM, THE SAME CANNOT BE ACCEPTED AS THESE ARE ORG ANIZED AND MANAGED TRANSACTIONS. HE TOOK THIS BENCH THROUGH THE MODUS OPERANDI MENTIONE D BY THE AO AND SUBMITTED THAT IN ALL CASES WHERE THE SHARES OF THESE COMPANIES ARE PURCH ASED 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 SUBMI SSIONS, PERUSAL OF THE PAPERS ON RECORD AND ORDER OF THE LOWERS AUTHORITIES BELOW, AS WELL AS CASE 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 SH ARE 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 O F MONEY AND PAYMENT MADE TO SMART CHAMPS IT & INFRA LTD. FOR SUCH SHARES ALLO TTED 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 SHAREHOLD ER (COPY OF ANNUAL RETURN NO. 20B FILED WITH REGISTRAR OF COMPANIES BY SMART CHAMPS IT & INFRA LTD. IS PLACED IN THE PAPER BOOK AT PAGE NO. 12 TO 18.) 4. 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 DEMATERIALIZED ON 31 ST MARCH, 2012 (COPY OF DEMAT REQUEST SLIP ALONG WITH THE TRANSACTION STATEMENT IS PLACED IN THE PAPER BOOK A T PAGE NO. 19 TO 21). 5. ON 24.01.2013, THE HONBLE BOMBAY HIGH COURT APPROV ED THE SCHEME OF AMALGAMATION OF SMART CHAMPS IT AND INFRA LTD. WITH CRESSANDA SOLUTIONS LTD. IN ACCORDANCE WITH THE SAID SCHEME OF AMALGAMATION, THE ASSESSEE WAS ALLOTTED 50000 EQUITY SHARES OF M/S. CRESSANDA SOLUTIONS LTD. THE DEMAT SHARES AR E REFLECTED IN THE TRANSACTION STATEMENT OF THE PERIOD FROM 1 ST NOVEMBER 2011 TO 31 ST DECEMBER, 2013 (A COPY OF THE SCHEME OF AMALGAMATION ALONGWITH COPY OF ORDER OF T HE HONBLE BOMBAY HIGH COURT AND A COPY OF THE LETTER TO THIS EFFECT SUBMITTED B Y CRESSANDA SOLUTIONS LTD. TO BOMBAY STOCK EXCHANGE IS PLACED IN THE PAPER BOOK A T PAGE NO 22 TO 43.) 14 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 14 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 BAN K STATEMENT, BROKERS CONTRACT NOTE TOGETHER WITH THE DELIVERY INSTRUCTIONS GIVEN TO TH E DP AND BROKERS 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 CAPI TAL GAIN THE HOLDING PERIOD IS REQUIRED TO BE 365 DAYS. 12.THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERANDI OF 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 ASSESSEE S WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVE RTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTIES IS CONFRONTED TO THE ASSESSES. NO OPPORTUNITY OF CROSS- EXAMINATION OF PERSONS, ON WHOSE STATEMENTS THE REV ENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASE D 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 MA TTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILITIES, HUMAN BEHAVIOR AND DISC OVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURF ACED DURING INVESTIGATIONS SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO W HETHER 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 QUESTION W AS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEES ACTION GIVING HER I NVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSE SSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WA Y OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDED ETC. HAS TO ALSO BE BROUGHT ON RECORDING EACH CASE, WHEN SUC H A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUNITY O F CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESSEE, 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 ASSES SEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UNDER THE PRETEN TIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE D EPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE 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 REP ORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT B ROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE PROCESS AND T HAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EVIDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE 15 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 15 TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS TH E REPORT OF INVESTIGATION WING SUGGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. E ACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE COURTS OF LAW. 15. IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALIS ATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VALIDITY AND CO RRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESS EE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 IT R 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT TH E 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, WHICH WOULD DIRECTLY PROVE THE FACT OF B OGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING AN INTERFERENCE T O THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 2 71 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTI ON WE REFER TO THE GENERAL VIEW ON THE TOPIC OF CONVEYANCE OF IMMOVABLE PROPERTIES. THE RATES/SALE PRICE ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTRATION AUTHORITIES OF THE GOVERN MENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. T HE COURTS HAVE LAID DOWN THAT JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS CANNOT BE TAKEN BASE D 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 BOG US CAPITAL GAINS TRANSACTIONS. HOWEVER, WE DO NOT FIND THAT THE ASSESSING OFFICER AS WELL AS T HE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GENERATING BO GUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INV ESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOIN GS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPARTMENT WHICH HAS NOT BEEN AS SIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. TH E ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSME NT 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 IN VESTIGATION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF TH E PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONS IDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED TH E ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRIPT FOR THE PURPOSE OF COLLUSIV E TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RE LATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BR OUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 16 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 16 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD N OT 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 G RAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND T HE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WE RE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WIT H THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATIO N OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDE R THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WA S ACQUITTED OF THE OFFENCE WITH WHICH IT 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 PART OF THE INCOME-TAX OFFICER AN D THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIM ATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRA NSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,---THIS ALS O WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE INCOME-TAX OFFICER. AS REGARDS T HE 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 FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EAR NED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SEC RETED PROFITS OF THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SUR MISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE A PPELLANT ON THE RECORD OF THE PROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OF FICER WAS THUS EITHER PERVERSE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, TH E FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS I T WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS . 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALA NCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUA LLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A COLLUSIVE TRANSAC TION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, IN THIS CASE NO THING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE INCOME TAX DEP ARTMENT 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) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHA RASHTRA AND ORS. 17 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 17 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P.V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC1623, HELD THAT THE RULES OF NATURAL JUS TICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVANT EVIDENCE UPON WH ICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BE TAKEN IN HIS PRESEN CE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS-EXAMINING THE WITNESSES EXAMIN ED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLA TE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882 ; MEENGLAS TEA ESTATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORAM COTTON MILLS LTD. V. GAN GADHAR AND ORS. ,AIR 1964 SC708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS. AIR 2009 SC 2448;BIEC CO 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 3131). 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-EXAMINE T HE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOU NTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS-EXAMINE, WOULD AMOUNT TO ADENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAMPARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNI 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 THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE GIVEN AN OPPORTUNITY T O DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT T HE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITNESSES P RODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVAN T 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 PRINCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATURAL JUST ICE 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 OR SIMILAR SITU ATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE ON A TECHN ICAL 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 BEEN A GROSS VIOLATION O F THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUD ICIAL 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: 18 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 18 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K.RADHAKRISHNAN, LEARNED SENIOR C OUNSEL WHO APPEARED FOR THE REVENUE. 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 TH E ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TW O WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNI TY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AF ORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUN AL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TR IBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL T O HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 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 APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOO DS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED I N THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALS O POINT OUT THAT ON AN EARLIER OCCASION 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 TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR 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 AFORESA ID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTA HIGH COURT IN THE CASE OF BLB CABLE S &CONDUCTORS[ITA NO. 78 OF2017] DATED19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE 19 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 19 EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WI TH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGE D HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PAR TY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WIT H THE 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. I N VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUN DS OF ASSESSEES 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 MA RKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS , THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OFF ACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXER CISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QU ESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, ACCORDING LY, SHALL STAND DISMISSED. B) THE JAIPURITAT IN THE CASE OF VIVEKAGARWAL[ITA N O.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 ASSESSING OFFICER HAS AL SO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAP E OF LONG TERM CAPITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOU NT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF PREMPAL GANDHI[ITA-95-2017(O&M)] DATED18.01.2018 AT VIDE PA GE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES INCOME FROM UN DISCLOSED SOURCES. IN ITA-18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT T HE ASSESSING 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 ON 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 C LOSELY HELD COMPANY AND THAT THE TRADING ON THE NATIONAL STOCK EXCHANGE WAS MANIPULA TED 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 OFFIC ER RELIED UPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCE EDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND TH AT THERE WAS NO CO-RELATION BETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTRIES IN T HOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. 20 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 20 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 AS SESSING OFFICER AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LE GS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY O N THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE A LLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARE S MUST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNIS HED 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 BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUST IFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(3 8) 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 INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDIT ION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. 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 ALLEGATIO NS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LE GS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE AL LEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARE S MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSE E HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PUR CHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WER E FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACT S OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE AC T ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSP ICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. 21 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 21 IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO S UPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTA NCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH AOF KOLKATAITAT IN THE CASE OF SHAL EENKHEMANI [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 ALLEGAT IONS 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 ARG UMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROKERS G ETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD T HAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEM AT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATI NG TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOU ND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONA FIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JU STIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH H OF MUMBAI ITAT IN THE CASE OF ARV INDKUMAR 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 T HE BROKER. DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NO T FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS P ER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKE R. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICUL AR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANS ACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED WITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYI NG ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRC UMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) A T PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSI TIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). 22 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 22 H)THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VIVEK 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 T HAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE V ALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUC H FINDING OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RI SE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, T HE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT I N THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.04.2009 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 SUPPORTE D BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX (APP EAL) THE CONTRACT 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 OF LAW LAID DOWN BY THE HONBLE GUJRAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MA DE BY THE ASSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULA RLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PUR CHASES MADE FROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO QUESTION OF L AW 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 DECISION ON S UCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BRO UGHT 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 GAINARISING FROM THE SALE OF SHARES AND HEN CE EXEMPT FROM INCOME TAX. 21. UNDER THE CIRCUMSTANCES AND IN VIEW OF THE ABOV E DISCUSSION, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND DELETE THE ADDITION IN QUESTION. 7. WE ADOPT ALL THIS REASONING MUTATIS MUTANDIS TO CONCLUDE IN THIS FACTUAL BACKDROP THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN TREATING ASSESSEES LTCG TO BE BOGUS. THE IMPUGNED ADDITION(S) OF 93,19,895/- AND 4,65,995/- ARE DELETED. 23 ITA NO.2423/KOL/2017 SWATI MALL A.YR. 2009-10 23 5.4. WITH REGARD TO DECISIONS RELIED UPON BY THE L D DR, WE HOLD THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE AFORESAID CASE HAD DU LY CONSIDERED THE SEVERAL DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT AS REPRODUCED SUP RA AND ACCORDINGLY THE SAME WOULD BE BINDING ON THIS TRIBUNAL. WE FIND THAT THE REV ENUE DID NOT INDICATE ANY SPECIFIC EVIDENCE AGAINST THE ASSESSEE IN ABOVE TERMS QUA TH E LTCG DERIVED FROM TRANSFER OF SHARE IN STIL. WE THEREFORE ADOPT THE ABOVE EXTRACT ED REASONING MUTATIS MUTANDIS TO DELETE THE IMPUGNED BOGUS LTCG ADDITION OF RS 96,36 ,783/-. CONSEQUENTLY THE ADDITION MADE TOWARDS UNEXPLAINED EXPENDITURE ON AC COUNT OF COMMISSION OF RS 48,184/- ALSO STANDS AUTOMATICALLY DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 07.12.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 07.12.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. SWATI MALL, C/O, RSVPC & COMPANY, 41A, A.J.C. BO SE ROAD, SUITE NO. 613, 6 TH FLOOR, KOLKATA-700017. 2. ITO, WARD-36(2), KOLKATA, AAYAKAR BHAWAN POORVA, 8TH FLOOR, 110, SHANTIPALLY, KOLKATA-700069. 3..C.I.T.(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER AS SISTANT REGISTRAR ITAT, KOLKATA BENCHES