Pinac Stock Brokers Pvt. Ltd, Ahmedabad V. The DCIT, Central Circle-1(1), Ahmedabad

ITA 253/AHD/2020

AI Insights

The case involves multiple appeals by Pinac Stock Brokers Pvt. Ltd. and Lopa Saumil Bhavnagari against the orders of the Commissioner of Income Tax (Appeals), Ahmedabad, which confirmed the additions made by the Assessing Officer under section 68 of the Income Tax Act. The additions were primarily based on the grounds that the transactions involved were with shell companies and the entries were accommodation entries. The Tribunal examined the evidences, including the statements of the directors and the documents seized during the search operations, and found that the assessee had discharged the burden of proof regarding the genuineness of the transactions for the sale of shares but not for the loans received.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134528 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 16-03-2020
• Other Referred Cases: S.R. Koshti Vs. CIT, CIT vs. Smt. Krishna Devi
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Document seized; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Additional evidence; Cost of acquisition; Accommodation entries; Sham transactions; Penny stocks; Documents seized; Set aside
• Section: 147; 131; 68; 132; 143(3); 133(6); 251; 13

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA Nos. 253-254/AHD/2020 िनधाᭅरण वषᭅ/Asstt. Year: 2011-12 & 2012-13 Pinac Stock Brokers Pvt. Ltd., 408, Shyamal Complex, Bhd kamdhenu, Ambavadi, Ahmedabad. PAN: AADCP3224D Vs. D.C.I.T., Central Circle-1(1), Ahmedabad. (Applicant) (Respondent) And आयकर अपील सं./ITA No. 255/AHD/2020 िनधाŊरण वषŊ/Asstt. Year:2012-13 Lopa Saumil Bhavnagari 601, Parshwa Tower Nr. Shamal Cross Road, 132 Ft. Ring Road, Satellite, Ahmedabad. PAN: ABMPB3580D Vs. D.C.I.T., Central Circle-1(1), Ahmedabad. Assessee by : Shri Deepak Shah, A.R Revenue by : Shri Durga Dutt, CIT. D.R सुनवाई कᳱ तारीख/Date of Hearing : 22/06/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 12/07/2023 ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 2 आदेश/O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: The captioned appeals have been filed at the instance of the different assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals) Ahmedabad, (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-12 & 2012-13. 2. First, we take up ITA No. 253/AHD/2020 in the case of M/s Pinac Stockbrokers Pvt. Ltd. for AY 2011-12, an appeal by the assessee. 2.1 The assessee has raised the following grounds of appeal: 1. The reopening of assessment u/s 147 is bad in law and invalid in the absence of proper Reasons to believe as envisaged by section 147 of the Act. It be so held now and reassessment be quashed. 95 2. Without prejudice to the above the learned CIT(appeals) has erred both in law and in fact in confirming addition of Rs. 7,50,00,000/- by not properly considering the facts and submissions that receipts were fully and satisfactorily explained towards sale of shares. The addition confirmed on untenable basis holding that genuineness and creditworthiness was not proved is patently wrong It be so held now and addition be deleted. 3. The Id CIT(Appeals) also erred in law and on facts in observing that appellant had received funds from shell companies and that the directors of the SCS group were witness of appellant The appellant having discharged the onus u/s 68 of the Act and amounts credited as sales, the addition made and confirmed is against the sanction of law. It be so held now and addition of Rs.7,50,00,000/- be deleted. The Id CIT(A) erred in law and on facts in not appreciating that the AO failed to afford cross examination as requested by appellant and hence assessment based on the statements and records of third party is a nullity. It be so held now. 5. The Id CIT(Appeals) erred in law and on facts in not appreciating that receipts of Rs. 7,50,00,000/- was not towards any share capital or loan or capital gains hence the invocation of section 68 was wrong. It be so held now. 6. The Id CIT(Appeals) also erred in law and on facts in confirming addition of Rs. 55,63,457/- in respect of loss relating to genuine transaction on shares of Chandani textile Engg. Industries Ltd. treating the same as bogus when the appellant had proved genuineness of transaction and substantiated the same by evidences. The disallowance of ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 3 loss merely on surmise and suspicion by not adhering to principles of natural justice is erroneous as whenever profit earned was also accepted as income. It be so held now and addition be deleted 7. The Id CIT(Appeals) further erred in law and on facts in confirming addition of Rs. 1,03,57,900/- by wrongly invoking section 68 of the Act when the appellant had discharged the burden to prove genuineness, identity and capacity of lenders. The Id CIT(Appeals) failed to appreciate that appellant had furnished documentary evidences available within short time and the amounts received were also repaid The addition ought o be deleted. It be deleted now. 8. The Id CIT(Appeals) erred in law and on facts in not following the judgments cited before him while confirming the additions made by the AO. It be so held now 9. The Id CIT(Appeals) erred both in law and on facts in not properly considering the written submissions and not applying the correct legal position to the facts of the appellant’s case and in wrongly confirming the additions made by the AO. It be so held now and additions made by AO be deleted. 10. The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing. 2.2 The first interconnected issue raised by the assessee in Ground Numbers 1 to 5 is that the learned CIT-A erred in confirming the addition made by the AO for ₹7.25 crores (wrongly mentioned as 7.50 crores) treating the same as unexplained cash credit under section 68 of the Act. 3. Briefly, stated facts are that the assessee in the present case is a private limited company and claimed to be engaged in the trading business of sale/ purchase of shares/securities. The assessee in the year consideration has sold certain shares of a company namely M/s Akshar Entertainment Limited to certain companies which were duly disclosed in the profit and loss account. The details of the companies to whom the shares were sold by the assessee stand as under: Sr. No. Name of the company of SCS (payer) Amt. of OT entry 1. Emporis Projects Ltd 17500000 2. Mahan Industries Ltd 17000000 3. Prraneta Industries (Aadhar Venture) 16500000 4. Shri Ganesh Spinners Ltd 24000000 Total 75000000 ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 4 3.1 However, the AO during the assessment proceedings observed that the sale consideration received by the assessee against the transfer of shares to the companies discussed above represents the unexplained cash credit under the provisions of section 68 of the Act. The view of the AO was based on the reasoning as detailed below: i. All the four companies to whom the assessee sold the shares were controlled and managed by Shri Shirish Chandrakant Shah (SCS), a person based in Mumbai, who was found to be engaged in providing the accommodation entries. This fact was revealed because of a search/ seizure operation conducted on him under the provisions of section 132 of the Act dated 9-04-2013 and various other companies including Amarpali Group dated 26-10-2012. Likewise, there were certain persons who were subject to the survey operation including Shri Rajesh N Jhavri Group, dated 9-4-2013. There were recovered documents evidencing that Shri SCS is engaged in providing accommodation entries and this fact was also admitted by Shri SCS in the statement furnished under section 131 of the Act dated 13 January 2014. ii. It was also found that Shri Rajesh N Jhavri, one of the main intermediaries, is engaged in providing accommodation entries to the parties based in Ahmedabad. In search and survey operation, excel sheets containing cash and bank transactions depicting the movement of funds through the involvement of various companies for the beneficiaries were found. Based on such excel sheet marked as “n Navkar” in MS excel file “ Bom K -R” in “BOM” a folder located at the path F:\pen drive back up\Removable Disk\Bips backup 14-02- 2012\BOM of the hard disk seized as Annexure-35, it was found that cheques have been issued to the assessee against the receipt of cash through the involvement of the companies discussed above amounting to ₹7.25 crores which was claimed by the assessee against the sale of shares. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 5 iii. The directors of the above-stated companies have also admitted that there was no actual business carried out by such companies and they were merely engaged in providing the accommodation entries. All such companies were controlled and managed by Shri SCS. 3.2 Based on the above reasoning, the AO sought clarification from the assessee proposing the amount of ₹7.25 crores received from the above stated companies as unexplained cash credit under section 68 of the Act vide letter dated 16 October 2015. The assessee in response to such show cause notice vide letter dated 2 November 2015 submitted that Shri SCS is engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loan, long-term capital gain, and short-term capital gain as evident from the finding of the AO. But the assessee has not taken any of the accommodation entry as discussed above from Shri SCS as alleged by the AO. According to the assessee, it has received money from the aforesaid four companies against the sale of shares which was duly recorded in the books of accounts and therefore the same cannot be categorized as one of the accommodation entries against the receipt of cash. 3.3 The assessee also submitted that any cash transaction recorded between Shri SCS and Shri Rajesh N Jhavri cannot be explained by it as it is not a party to such transactions. It is only Shri Rajesh N Jhavri Raje who can explain the transactions recorded in the seized documents. As such, it was submitted by the assessee that it has not received any entry from the aforesaid companies against the cash payment. Likewise, the assessee has nothing to say about the allegation framed by the AO that the aforesaid companies are being controlled and managed by Shri SCS. As per the assessee, it has made sales of the securities to the aforesaid companies against the consideration received through banking channel. Therefore, it is not its concern about the party who controls and manages the affairs of these companies. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 6 3.4 It was also contended by the assessee that once the sale proceeds of the shares have been recorded in the profit and loss account, the same cannot be assumed as unexplained cash credit under section 68 of the Act otherwise it would lead to the double addition. As such, there was absolutely no addition in the capital account of the assessee on account of sale of the shares and therefore the same cannot come under the purview of unexplained cash credit under section 68 of the Act. 3.5 Even in the statement of Shri SCS, it was submitted by him in response to question No. 10 and 18 that he has received cash from the promoters of the companies whose shares were transferred which was subsequently handed over to Shri Rajesh N Jhavri. Thus, as per the assessee, there was no allegation in the statement of Shri SCS to draw any adverse inference against the assessee. Furthermore, the statements relied upon for proposing the addition cannot be a basis until and unless the opportunity of cross examination is afforded to the assessee. Likewise, if any enquiry is to be made the same should have been done from the promoters of the companies whose shares were in dispute to find out involvement of any unexplained cash credit in the transactions of sale, purchase of the shares. 3.6 It was also submitted by the assessee that there was no material recovered by the AO suggesting that the assessee was engaged in accepting the unexplained cash credit within the meaning of the provisions of section 68 of the Act against the sale of shares as discussed above. 3.7 However, the AO was not satisfied with the contention of the assessee on the reasoning that the companies from whom the assessee has received consideration against the sale of shares were only engaged in providing the accommodation entries. As such, these companies were not doing any actual business. The companies existed only on paper. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 7 3.8 It was also found by the AO that the loan amount from the aforesaid companies was squared off by the assessee against the sale of shares as evident from the tax audit report as well as the ledger copies of the companies. Likewise, it was also admitted by Shri SCS in the statement furnished under section 131 of the Act dated 13 January 2014 that the shares were transferred to the aforesaid companies to square of the loan transactions which were representing one-time entries. For this purpose, the AO has referred to question No. 18 and 19 of the statement of Shri SCS. Furthermore, the AO found that there was no worth of the shares of the companies which could have compelled the assessee to buy the shares. On top of it, the persons involved in such transaction already handed over signed share transfer forms to the accommodation entry provider at the time of allotment of shares which is evident from the statement of Shri SCS. 3.9 The addition under section 68 of the Act was made based on the search materials found during search and survey operation. As such, the additions were not merely based on the statements of the parties. The statements of the parties of Shri SCS and his close associates were only corroborating the documents found during the search and survey operations. 3.10 In view of the above, the AO treated the amount of sale consideration of the shares as unexplained cash credit under section 68 of the Act by observing as under: 5.7 The assessee has failed to discharge the onus with regard to funds received in its accounts for the reasons summarized as under.. The funds received in the assessee company have been paid by SCS companies against receipt of cash that has been recorded in the seized evidence in the name of Rajesh Jhaveri. The funds received in the assessee company against sale of shares mere squaring off transactions as explained by SCS in his statement dated 13.01.2014. The SCS companies from which funds have been received by the Rajesh Jhaveri entities listed above do not have any business activities, have dummy directors and are operated and managed by SCS, as detailed at Annexure 1. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 8 Further, SCS has accepted that the funds paid in these companies are one time accommodation entries paid against receipt of cash or squaring off transactions and the same is also corroborated with the evidence seized/impounded during the course of search and survey action in case of SCS and discussed in detail in the preceding paragraphs. Further the managing director of assessee company Shri Rupak K Shah was also examined on oath u/s 131 of the Act on 02.11.2015. Neither he identifies the main persons/directors of above mentioned paper companies nor was he aware about the business activities of above companies. Thus it becomes evident that such huge credits were received by Assessee Company from the above companies without any relation/negotiation. 5.8 In view of detailed discussion made above, it is clearly established that the credit/payment of Rs.7,50,00,000/- received in the books of assessee from above referred four companies managed and controlled by Shri Shirish Chandrakant Shah are not genuine transactions, as all the companies are mere paper/shell companies having no business activities and the funds received in their accounts are also layering of funds. Therefore, amount of Rs.7,50,00,000/- claimed to be received from these four parties are treated as unexplained within the meaning of section 68 of the Act and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT-A. 5. The assessee before the learned CIT-A submitted that the shares transferred to the aforesaid four companies were acquired in the earlier year and current year. There was no iota of doubt raised by the revenue as far as the genuineness of purchase of the shares is concerned. It was duly admitted by the revenue. As such these shares were acquired by the assessee against the payment made by it. However, what has been doubted is this that sale consideration on the transfer of such shares which is not possible without having a doubt on the purchase of the shares. As such, the investment was made by the assessee through the banking channel which was realized on the sale of the shares in the year under consideration, which cannot be subject to the provisions of section 68 of the Act. 5.1 There was no documentary evidence found suggesting that the assessee has transferred shares against the cash handed over to the entry-operators. Even, in the statement of Shri SCS, it was admitted that cash was provided by the promoters of the company namely M/s Akshar Entertainment Limited. As such, ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 9 there was no allegation in the statement of Shri SCS that the assessee has handed over the cash against the sale of the shares. 5.2 It was also submitted that AO has violated the principles of natural justice by not affording the opportunity of cross examination despite the request of the assessee for such facility. However, the learned CIT-A rejected the contention of the assessee and confirmed the order of the AO by observing as under: The AO has made the addition of Rs.7,50,00,000/- in respect of credits taken by the assessee from four parties as per the details mentioned in para No. 2.6 of the assessment order. During the course of assessment proceedings the AO concluded that all the above amounts were the accommodation entries taken by the assessee from shell companies managed and controlled by Shri Shirish C. Shah. It was also observed by the AO that all the four entities from whom the assessee has taken the accommodation entries are part of camouflage of 212 companies controlled and managed by Shri Shirish C. Shah. The detailed modus operandi in respect of providing the accommodation entries are discussed in detail in para No.2.1 to 5.8 of the assessment order. During the course of search proceedings carried out in the group cases of Shri Shirish C. Shah various incriminating documents found and seized including the cash sheets as well as various accounts maintained in the name of Intermediates who introduced clients to SCS, From the documents and statements it was established that the main inter-mediatory through whom clients of Ahmedabad availed accommodation entries from SCS was Shri Rajesh Jhaveri. These accommodation entries were provided through cheque/RTGS as one time accommodation entry as against the cash receipts by entities of SCS. The directors of the company from whom the assessee has received credits have admitted such entries. The assessee has stated that it has filed confirmations, copy of accounts, PAN of the parties and receipts of consideration against sale of shares through banking channels. Therefore, it has discharged the primary onus cast u/s.68 of IT Act. However, in view of the clear finding of the search proceedings in the group cases Shri Shirish C. Shah, statement recorded of various directors and, the incriminating documents found and seized during the course of search it was clearly established that all the companies from whom the assessee has received credits were paper companies having no business activities, controlled and managed by SCS and used by him for providing accommodation entries. The mere fact that the payments were received through cheques and banking channels and assessee has received confirmation will not satisfy the requirement of section 68 of IT Act more particularly when such companies were proved to be paper companies having no business activities and admittedly used for providing entries. The AO have also observed that in Annexure-2 of Form No.3CD the auditor has duly shown the credits as unsecured loans from two companies and they have been squared off by showing sale of shares.) In the remaining two companies the assessee has shown such credits in view of sale of shares but such sale is nothing except to squaring off transactions in books of accounts. Shri SCS in the statement recorded on 13.01.2014 accepted the modus operandi about such in-genuine transactions of shares. With regard to the assessee's request of providing cross- examination of Shri SCS and Shri Damodar Attal key employee of SCS it is observed that the issue under consideration arised on the basis of various incriminating documents found the course of search in SCS group. On the basis of such documents SCS and other directors have elaborated the entries recorded in the evidences found and seized. Even otherwise also Shri SCS and other employees of the ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 10 directors were the witnesses of the assessee company and the onus was upon the assessee to produce them in support to prove the genuineness of the credits taken by the assessee. But the assessee has failed to produce such directors of the entities. Further, the addition was not based upon the statement of the persons but mainly on the basis of incriminating documents found and seized. On the basis of ample evidences it was proved that the assessee has received funds from Shell companies and the funds received in these Shell companies were also proved to be layering of funds/cash. The relevant part of the statements of SCS has been reproduced by the AO in the assessment order itself. In view of the detailed findings of the AO in the assessment order, the credit shown in the name of the entities amounting to Rs.7.50 crores are the accommodation entries as the genuineness and credit worthiness are unproved. These accommodation entries were taken by making the cash payments to the respective Shell companies having no business activities. Therefore, the addition made by the AO is found correct and justified and hence the same is confirmed. The grounds of appeal are dismissed. 6. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 7. The learned AR before us submitted that the assessee has received the money from the companies against the sale of shares purchased by it. As such, the amount of sales realized cannot be treated as unexplained cash credit under section 68 of the Act. 8. On the other hand, the learned DR before us filed the necessary details vide letter dated 3 July 2023 and reiterated the findings of the authorities below by referring to their respective orders. The learned DR vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, the controversy arises for our adjudication so as to whether the sale consideration received by the assessee represents the unexplained cash credit under the provisions of section 68 of the Act in the given facts and circumstances. The predominant reason of the revenue to treat the sale consideration as unexplained cash credit was based on the fact that the assessee has received sale consideration from the companies which were existing on papers, were not carrying sout any actual activity and ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 11 further, these were controlled and managed by the entry operator. It is the admitted position that the assessee is not the part and parcel of such entry operator being Shri SCS and Rajesh N Jhaveri group. Before us there is no question to decide whether Shri SCS and Rajesh N Jhaveri group are entry operators and therefore, we are not going to look into this aspect. 9.1 There were two bases adopted by the revenue for treating the impugned sale consideration as unexplained cash credit under section 68 of the Act. One of the bases was the seized document, containing the following entries: DATE DETAILS PARTY CITY COMM PAID RECEIVED BALANCE 21.02.11 PINAC STOCK PRRANETA PINAC 40,00,000.00 - 1,59,87,580.00 21.02.11 PINAC STOCK SGL Pinac 60,00,000.00 -99,87,580.00 23.02.11 PINAC STOCK MAHAN Pinac 1,70,000.00 - 1,29,52,580.00 24.02.11 PINAC STOCK SGL Pinac 80,00,000.00 - 1,88,80,080.00 26.03.11 PINAC STOCK SGL Pinac 1,00,00,000.00 -88,80,080.00 01.03.11 TRF TO YT 39,37,500.00 -49,42,580.00 01.03.11 TRF to YT- COMM A/C 49,42,580.00 0.00 03.03.11 PINAC STOCK Emporis Pinac 1,50,00,000.00 - 1,24,46,350.00 03.03.11 PINAC STOCK Prraneta Pinac 1,25,00,000.00 53,650.00 9.2 At this juncture, it is pertinent to state that during the course of search in the case of SCS, an account of Rajesh Jhaveri in the books of Shirish Shah maintained in MS Excel format (till 30.10.2012)-“n navkar bips 30.10.12” was found and impounded. Relevant portions of the sheet is extracted and reproduced on page 3 of the assessment order. 9.3 The impugned excel sheet was found from the premises of 3 rd party and there was no link with the assessee except the name of the assessee and the transactions recorded therein matched with the transactions disclosed by the assessee in the books of accounts. The question arises whether the impugned excel sheet can be made basis of the additions in the hands of the assessee in the ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 12 given facts and circumstances in the absence of any corroborative material. Undeniably, there is no corroborative material available on record suggesting that the assessee was indulged in the accommodation entry in the disguise of sale of the shares or the assessee handed over the cash against the sale of shares. Admittedly, the assessee has acquired the shares of the company namely M/s Akshar Entertainment Limited in the earlier year and in the year under consideration. This fact can be verified from the submission of the assessee before the ld. CIT-A. The appellant has discharged its onus by showing evidences of sale of shares of Akshar Entertainment Ltd and receipt of amount by cheques against such sales and the genuine holding of such shares which is acquired in earlier year and was in opening stock as on 1st April 2010 in the books (which are not rejected-) and also the shares which are acquired during the previous year relevant to assessment year under appeal le AY 2011- 12. AO has failed to discharge the onus that shifted on him and has presumed that appellant might have paid cash against receipt of cheques against sale of shares. The documents found in search at third persons place also does not anywhere indicate or prove that any such cash is paid by appellant. 9.4 The shares acquired by the assessee were duly disclosed in the books of accounts, meaning thereby the assessee has paid the consideration against the transfer of shares for ₹7.25 crores only, which has nowhere been doubted by the authorities below. The transaction of sale and purchase goes hand in hand, meaning thereby if one of the transactions say purchase is doubtful then the sale against such purchases also becomes doubtful generally. In the given case, the purchase has not been doubted. As such, the assessee has incurred an expense of ₹7.25 crores on the purchase of the shares which have been duly admitted by the revenue. Now, on the sale of the shares, the assessee has received a sum of 7.25 crores which has been treated as unexplained cash credit under section 68 of the Act which is contrary to the prevailing practice. Generally, the provisions of section 68 of the Act are invoked where the assessee tries to bring its unaccounted money into accounting form either by way of loan, share capital premium, or long-term capital gain not chargeable to tax. But the assessee in the present case is not indulged in bringing own unaccounted money in accounting form. It is for the reason that the money which has been utilized by the assessee in the acquisition ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 13 of the shares of ₹7.25 crores is free from any allegation whatsoever. In other words, so much money, i.e. 7.25 cores was already available with the assessee and therefore there was no reason for the assessee to bring such sum of money in accounting form. In other words, the assessee was not at all a beneficiary of unexplained cash credit under section 68 of the Act as alleged by the authorities below. Thus, we are of the view that the finding given by the lower authorities is not sustainable. 9.5 At this juncture, it is equally important to refer the relevant part of the statement recorded of Shri SCS which is reproduced as under: Ans: Sir, as far as I remember now the biggest client who approached through Rajesh Jhaveri for whom both one time and LTCG entries were arranged was Shri Yashwant A Thakkar to whom one time entries in Akshar Entertainment Private Limited and LTCG entries in the shares of M/s. Prraneta Industries Limited were arranged. In certain cases funds were paid into Jhaveri Trading Private Limited and other group concerns of Rajesh Jhaveri and the same were squared off by recording purchase of shares of various companies in the books of accounts of the companies managed and controlled by me. Un these cases also the cash was received from the promoters or the main persons of the companies whose shares were recorded to be purchased by me and on their instance RTGS was paid into Rajesh Jhaveri group companies like Jhaveri Trading & Investment Private Limited. In certain cases the funds were also paid as temporary loans to Rajesh Jhaveri group entities and the same were returned back, however, such transactions would not be more than 15 crores. However the cash component of the transaction with me was never reversed. That is even in cases where loans were repaid to my entities the cash against which the initial cheques were issued by my entities was never returned back except where such returns are recorded in the cash sheets. I do not know as to how accounts were settled by them with Rajesh Jhaveri or how the funds from Rajesh Jhaveri and his group concerns moved to the persons or the group concerns from whom the cash was received. The cash with regard to the other entities mentioned in the table in the question was received from other persons introduced by Shri Rajesh Jhaveri the details of which have been provided by me-in reply to the preceding questions. 9.6 On perusal of the above statement of Shri SCS, it is noticed that the fund was involved of the promoters of the company i.e M/s Akshar Entertainment Limited in the given case. There is no dispute about the fact that the assessee is not the promoter of the company, namely M/s Akshar Entertainment Limited. Therefore, any transaction involving unaccounted money was pertaining to the promoters of the company namely M/s Akshar Entertainment Limited and not the assessee in dispute. Thus, in our considered view, the assessee cannot be penalized under the provisions of section 68 of the Act in the given facts and ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 14 circumstances. Hence, the finding given by the learned CIT-A is set-aside with the direction to the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is hereby allowed. 10. The second issue raised by the assessee is that the Ld. CIT(A) erred in confirming the disallowance made by the AO for Rs. 55,63,457/- representing the loss on the sale of shares of M/s Chandani textile Engg. Industries Ltd. being bogus in nature. 11. The AO during the assessment proceedings found that the assessee has shown loss of Rs. 55,63,457/- on the sale of shares of M/s Chandani Textile Engg. Ltd. According to the AO, the trading in the shares of M/s Chandani Textile Engg. Industries Ltd. was managed and manipulated by the broker Shri Shirish C. Shah. As such, the price of the shares of the company was rigged up by the broker in such a way to extend the bogus losses to the assessee. Therefore, the same was disallowed and added to the total income of the assessee. 12. Aggrieved assessee carried the matter to the Ld. CIT(A), who upheld the order of the AO by observing as under: 5.3 I have carefully considered the facts mentioned in the assessment order and the submission of the appellant. It has been noticed that the assessee has claimed the loss of Rs.55,63,457/- on sale of shares in the scrip of Chandni Textile Engg. Industries Ltd. which was found to be not genuine by AO. It has been observed that the counter parties of assessee trades are mainly the companies managed and controlled by SCS or his accommodation entry clients. Since the price and volume of this scrip are managed by SCS through synchronized trading for providing accommodation to his clients and the transactions of shares of above company were sham transactions. The assessee has also failed to produce any evidence for the sale of shares in the physical form and to whom these shares were sold. Further, during the course of survey carried out at the office premises the key employee of SCS namely Shri Damodar Attal in the statement recorded have admitted that all the companies were bogus companies for the purpose of executing trades through synchronized trading on the behest of SCS. Further admitted that the directors of these companies were dummy and the entire activities were being managed by SCS. In absence of genuineness the AO made the disallowance of bogus losses on sale of shares of Chandni Textile Engg. Industries Ltd. with detailed discussion in para No.6 to 6.8 of the assessment order. Having gone through the facts and modus operandi as revealed during the course of search and seizure action in the SCS group of cases it was evident from the various incriminating documents found and seized and also the admission by various directors and ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 15 persons it is well established that the assessee's group of cases were indulged in providing the accommodation entries to various clients and no genuine transactions in respect of shares or unsecured loans or any other kind have taken place. The assessee in the assessment proceedings or in the present appellate proceedings have failed to rebut the findings of the AO as described in the assessment order. In view of the findings and in absence of any verification of the genuineness the disallowance of the claim of bogus loss made by the AO is correct and hence the same is confirmed. The ground of appeal is dismissed. 13. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 14. The Ld. AR before us submitted that the assessee in the year under consideration has not made any sale of shares of Chandani Textile Engg. Industries Ltd. As such the assessee in the year under consideration has made mainly purchase of 2,49,500 shares of Chandani Textile Engg. Industries Ltd., amounting to Rs. 1,62,43,769/- only. According to the Ld. AR, the loss of Rs. 55,63,457/- was represented on account of valuation made as on 31/03/2011 as per the market rate. Thus, it was contended that impugned loss cannot be disallowed to the assessee. 15. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 16. We have heard the rival contentions of both the parties and perused the materials available on record. On perusal of the order of the AO, we note that the impugned loss has been disallowed by the AO on the presumption that the assessee has made sales of the shares. The relevant finding of the AO to this effect is reproduced as under: Further, the assessee has not produced any evidence for the sale of share in the physical form and to whom these shares were sold of Rs.1,06,80,312/-. In view of above facts, the loss booked of Rs.55,63,457/- by assessee on sale of shares of Chandani Textile Engineering Industries Ltd. in physical form is treated as bogus and disallowed. 16.1 However, the undisputed fact is this that the assessee has not made any sales of the shares of the impugned company. Therefore, in our considered view ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 16 the addition has been made by the AO which was consequently confirmed by the Ld. CIT(A), on wrong assumption of facts. 16.2 It is also pertinent to note that the loss was shown by the assessee on account of valuation of the shares determined as on 31/03/2011, which can be verified from the copy of the ledger placed on record. It is a settled position of law that the closing stock of one year becomes the opening stock of subsequent year meaning thereby there is no effect on the income of the assessee on account of difference in valuation of closing stock except shifting of the profit from one year to another year barring exception circumstances. 16.3 In view of the above, and after considering the facts in totality we do not find any reason to uphold the order of the Ld. CIT(A). Accordingly, we set aside the finding of Ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed. 17. The next issue raised by the assessee in ground no. 7 is that the Ld. CIT(A), erred in confirming the addition of Rs. 1,03,57,900/- under the provisions of section 68 of the Act. 18. The assessee in the year under consideration has shown the receipt of loan from the following parties: Sr.No Name of the Party Amount 1. Shri Shital M. Seth 41,57,900/- 2. GGF Mercantile Pvt. Ltd. 52,00,000/- 3. Microtech IT Systems Pvt. Ltd. 10,00,000/- 19. The assessee during the assessment proceedings could not discharge the onus-imposed u/s 68 of the Act, therefore the AO treated the same as unexplained cash credit u/s 68 of the Act, and added to the total income of the assessee. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 17 20. Aggrieved assessee preferred an appeal to the Ld. CIT(A). 21. The assessee before the Ld. CIT(A) submitted that it has already filed necessary details during the assessment proceedings such as confirmation, PAN, bank statement, copy of ITR with respect to the party namely Shri Shital M. Sheth. 22. The assessee filed necessary additional documents under rule 46A of Income Tax Rules such as confirmation, bank statement, copy of ITR with respect to the party namely M/s Microtech IT Systems Pvt. Ltd. in support of the loan transactions. 23. The assessee further submitted that the amount of the loan received from the parties namely Shri Shital M. Sheth and M/s Microtech IT Systems Pvt. Ltd. was repaid and therefore the same cannot be treated as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) called for the remand report on the additional documents submitted by the assessee from the AO who vide letter dated 15/01/2018 objected on the admission of the additional documents filed by the assessee on the reasoning that sufficient opportunities were given to the assessee during the assessment proceedings. 24. Besides the above, the AO in the remand report on the merit of case submitted that the loan parties did not have sufficient credit worthiness to justify the loans given to the assessee without charging any interest. 24.1 The AO regarding the argument of repayment of loan observed that the credit worthiness of Shri Shital M. Sheth does not justify advancing of such loan of Rs. 41,57,900 without charging any interest. The AO, with respect to M/s Microtech IT Systems Pvt. Ltd. observed that the amount of loan received by the assessee of Rs. 10,00,000 dated 24/12/2010 remained outstanding till 31/03/2017 and that too without charging any interest. The duration of the loan is not as per ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 18 generally accepted commercial practices. Accordingly, the AO held that the amount of loan shown by the assessee remained unexplained cash credit u/s 68 of the Act. 25. The ld. CIT-A after considering the submissions of the assessee and the remand report of the AO, confirmed the order of the AO by observing as under: Having gone through the above, it is noticed that in the assessment proceedings the AO has granted various opportunities of hearing to the assessee and the same has not been fully availed by the assessee. Further, in the application under Rule 46A the assessee has not brought out this case for admission of additional evidences under any of the specified circumstances provided in clause (a), clause(b), clause(c) & clause (d) of Rule 46A. Therefore, the decisions cited by the assessee are of no avail and therefore the additional evidences submitted does not warrant the admission and hence rejected. Without prejudice to the above, the additional evidences submitted by the assessee are decided on merits as under: . It has been found that Shri Shital M. Shah from whom the unsecured loan of Rs.41,57,900/- claimed to have been taken does not have any credit worthiness which is apparent from the small quantum of returned income shown from A.Y.2002- 03 to 2013- 14. The returns have been always filed either belatedly or not filed. No interest has been charged by the aforesaid person on the specific facts. Further it has been noticed that there was no substantial balance in the bank account of the assessee on day-to-day basis, whenever an amount has credited into the bank account the same is debited on the next day or within a short period. With regard to the unsecured loan from Microtech IT System Pvt. Ltd., no repayment of the loan has been made for the entire length of period starting from 24.12.2010 to 31.03.2017 ie. almost seven years. Further no interest has been paid on such loans so it was against the general commercial practices. Further from the bank statement submitted, name, address and branch of bank is not verifiable as the same have not been submitted to the AO in the remand proceedings. In view of the various discrepancies noticed in the remand report of AO submitted the genuineness of the unsecured loans claimed to have been taken are found non-genuine more particularly when SCS group fully indulged in the accommodation entries to various entities created for such purposes. Further, the assessee has failed to prove the identity, genuineness and of the unsecured loans. Therefore, the AO has rightly made the addition of the unsecured loans and hence the same is confirmed. The ground of appeal dismissed. 26 Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 27. The Ld. AR before us submitted that the assessee has strong case on merit and therefore assessee should not be deprived of filing additional documents ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 19 received from the loan parties otherwise a wrong addition will stand confirmed in the hands of the assessee. 27.1 As per the Ld. AR, the amount of loan has been repaid to the parties namely Shri Shital M. Sheth and M/s Microtech IT Systems Pvt. Ltd. which demonstrates that the assessee was not the beneficiary of the money as alleged by the AO by treating the same as unexplained cash credit u/s 68 of the Act. 28. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 29. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the Ld. CIT(A), on the additional documents filed by the assessee has called for the remand report from the AO. Accordingly, we are of the view that the same should have been admitted by the Ld. CIT(A). It is also not out of place to mention that the Ld. CIT(A), has also given findings on the merit of the case as well. The action of the Ld. CIT(A), suggest that he (the Ld. CIT(A)), was convinced with the additional documents filed by the assessee under the Rule 46A of Income Tax Rules. 29.1 It is a trite law that the meritorious case should not be dismissed on account of technical lapses. In this regard, we draw support and guidance from the judgement of Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under: 20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms: "The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 20 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt." 29.2 From the above, it is revealed that the income of the assessee should not be over assessed even if there is a mistake of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. 29.3 We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 was pleased to hold as under: It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground of limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits. 29.4 In view of the above and after considering the facts in totality, we are of the view that it is a fit case where the delay in filing the supporting documents by the assessee before the AO deserves to be condoned. Accordingly, we admit the additional documents filed by the assessee and proceed to adjudicate the issue on merit. Admittedly, the loan received from the parties, namely Shri Shital M. Sheth and M/s Microtech IT Systems Pvt. Ltd. was repaid to both the parties. In this regard, we refer the judgment of the Hon’ble Gujarat High Court in case of CIT vs. Ayachi Chandrashekhar Narsangji reported in 42 taxmann.com 251 where it was held as under: It is required to note that as such an amount of Rs. 1,00,00,000 vide cheque No. 102110 and an amount of Rs. 60 lakhs vide cheque No. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crores, Rs. 15 lakhs vide cheque no. 196107 was repaid and therefore, an amount of Rs. 1,45,00,000 remained outstanding to be paid to IA. It has also come on record that the said loan amount has been repaid by the assessee to 'IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, there was no reason to interfere with the impugned order passed by the Tribunal. [Para 6] ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 21 28.5 In view of the above elaborated discussion and after considering the facts in totality, we hereby hold that the assessee discharged the onus cast under section 68 of the Act with respect to the loan received from the parties, namely Shri Shital M. Sheth and M/s Microtech IT Systems Pvt. Ltd. Hence, we do not find any reason to uphold the finding of the learned CIT(A) for the loan received from the aforesaid parties. 28.6 As regard to the loan taken from the party namely GGF Mercantile Pvt. Ltd., we note that the assessee has not filed any of the document either before the lower authorities or before us to justify the amount of loan received from GGF Mercantile Pvt. Ltd. Hence, in the absence of necessary details, we do not find any reason to deviate from the findings of the Ld. CIT(A). Accordingly, we confirm the addition of Rs. 52 lacs under the provision of section 68 of the Act. Hence, the ground of appeal of the assessee is hereby partly allowed. 28.7 In the result, the appeal filed by the assessee is partly allowed. Coming to ITA No. 254/AHD/2020, an appeal by the assessee for the AY 2012-13. 29. The assessee has raised the following grounds of appeal: 1. The learned CIT(appeals) has erred both in law and in fact in confirming addition of Rs. 1,65,00,000/- by not properly considering the facts and submissions that receipts were fully and satisfactorily explained towards sale of shares. The addition confirmed on untenable basis holding that genuineness and creditworthiness was not proved is patently wrong .It be so held now and addition be deleted. 2. The Id CIT(Appeals) also erred in law and on facts in observing that appellant had received funds from shell companies and that the directors of the SCS group were witness of appellant as held by him in the appellate order for AY 2011-12 The appellant having discharged the onus u/s 68 of the Act and amounts credited as sales, the addition made and confirmed is against the sanction of law. It be so held now and addition of Rs. 1,65,00,000/- be deleted. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 22 3. The Id CIT(A) erred in law and on facts in not appreciating that the AO failed to afford cross examination as requested by appellant and hence assessment based on the statements and records of third party is a nullity. It be so held now. 4. The Id CIT(Appeals) erred in la wand on facts in not appreciating that receipts of Rs. 1,65,00,000/- was not towards any share capital or loan or capital gains hence the invocation of section 68 was wrong. It be so held now. 5. The Id CIT(Appeals) also erred in law and on facts in confirming the action of the Id AO to treat the real and genuine profit of Rs 12,09,099/- earned from trading of shares of Chandani textile Engg. Industries Ltd. treating the same as bogus profit and sham when the appellant had proved genuineness of transaction and substantiated the same by evidences. The addition of profit however is retained by not reducing the same from total income is contrary to facts merely on surmise and suspicion by not adhering to principles of natural justice It be so held now 6. The Id CIT(Appeals) erred both in law and on facts in not properly considering the written submissions and not applying the correct legal position to the facts of th appellant's case and in wrongly confirming the additions made by the AO. It be held now and additions made by AO be deleted. 7. The appellant craves leave to add, alter, modify or delete any of the grounds at time of hearing. 30. The first interconnected issue raised by the assessee in Ground Numbers 1 to 4 is that the learned CIT-A erred in confirming the addition made by the AO for ₹1.65 treating the same as unexplained cash credit under section 68 of the Act. 31. At the outset, we note that the interconnected issue raised by the assessee in its ground of appeal from 1 to 4 for the AY 2012-13 is identical to the issue raised by the assessee in ITA No. 253/AHD/2020 for the assessment year 2011- 12. Therefore, the findings given in ITA No. 253/AHD/2020 shall also be applicable for the assessment year 2012-13. The appeal of the assessee for the AY 2011-12 has been decided by us vide paragraph No. 9 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the assessment year 2012-13. Hence, the ground of appeal filed by the assessee is hereby allowed. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 23 32. The next issue raised by the assessee is that the Ld. CIT(A), erred in confirming the order of the AO by treating the real and genuine profit of Rs. 12,09,099.00 as sham/bogus profit. 33. The AO during the assessment proceedings found that the assessee has shown the profit on the sale of shares of the company namely Chandani Textile Engineering Industries Ltd. amounting to Rs. 12,09,099.00 only. As per the AO, the trading in the shares of the company namely Chandani Textile Engineering Industries Ltd. was managed and manipulated by the entry provider namely Shri SCS and therefore the AO treated the impugned profit being bogus from the purchase and sale of the shares. 34. On appeal, the Ld. CIT(A) confirmed the same by observing as under: I have considered the facts and material available on record. It is worth here to mention that in assessee's own case in the immediately preceding year the identical issue with regard to the income shown by the assessee on trading of shares of Chandni Textile Engg. Industries Ltd. was held to be bogus in view of the synchronized trading and findings of the search and seizure action carried out in SCS group of cases. This issue has been decided against the assessee vide appellate order passed by this office in appeal No. CIT(A)-11/475-A/CC- 1(1)/A'bad/2015-16 dated 31.01.2020. Since the issue involved is identical in the year under consideration and it has been established that the Shri Shirish C. Shah was engaged in providing accommodation entries in lieu of cash through its various entities as per the findings of the search and seizure action carried out in his group cases as elaborately discussed by the AO in the assessment order. In the immediately preceding year the share transactions in scrip of Chandni Textile Engg. Industries Ltd. were found to be ingenuine. So following the same decision in the year under consideration the findings made by the AO in the assessment order passed for the year under consideration is found correct and justified and hence the same is confirmed. The ground of appeal is dismissed. 35. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 36. The Ld. AR before us submitted that there was no addition made by the AO to the total income of the assessee as the assessee has already shown income on the sale of impugned shares for Rs. 12,09,099.00 only. However, the same was treated as bogus/sham transaction on the reasoning that the shares of Chandani ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 24 Textile Engineering Industries Limited was managed and manipulated by the entry provider. 36.1 The Ld. AR before us contended that the share transaction could not be treated as bogus unless and until the assessee is provided the materials and statement of the parties based on which the trading in the shares of impugned company was treated as bogus. 37. On the other hand, the ld. DR before us vehemently supported the order of the authorities below. 38. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee on the sale of shares of M/s Chandani Textile Engineering Industries Limited has disclosed the income, which was treated as bogus and manipulated by the Revenue. The sole basis of treating the income shown by the assessee on the sale of shares of M/s Chandani Textile Engineering Industries Limited was that the share activity of the company was controlled and managed by the entry operators. However, we note that the assessee has not been provided with the materials and the statements of the alleged entry operators. Likewise, it was also not brought on record that any of the person whose statement recorded have taken the name of the assessee or his broker to have taken the advantage of manipulated share trading. 38.1 Moving further, on analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, a sale is not possible without having the purchases. Thus, once purchase has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 25 the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he’s allowing the benefit of the cost of acquisition for the shares while determining the income. Accordingly, we are of the view that the profit shown by the assessee cannot the assumed as the nature of bogus/ manipulated profit. 38.2 In this regard, we draw support and guidance from the judgment of Hon’ble Rajasthan High Court in the case of CIT vs. Sumitra Devi reported 49 taxmann.com 37 wherein it was held as under: 7. True it is that several suspicious circumstances were indicated by the AO but then, the findings as ultimately recorded by him had been based more on presumptions rather than on cogent proof. As found concurrently by the CIT(A) and the Tribunal, the AO had failed to show that the material documents placed on record by the assessee like broker's note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious. The appellate authorities have rightly observed that the facts as noticed by the AO, like the notice under s, 133(6) to the company having been returned unserved, delayed payment to the brokers, and dematerialisation of shares just before the sale would lead to suspicion and call for detailed examination and verification but then, for these facts alone, the transaction could not be rejected altogether, particularly in absence of any cogent evidence to the contrary. 38.3 We also draw support and guidance from the judgment of Hon’ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 26 Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 38.4 Respectfully following the judgment of Hon’ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In view of the above discussion, we hold that the income earned by the assessee cannot be held bogus merely based on some report findings unearthed in case of third party/parties unless cogent material is brought against particular assessee on record. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to treat the income shown by the assessee on the sale of shares as genuine. Hence, the grounds of assessee’s appeal is allowed. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 27 38.5 In the result, the appeal of the assessee is allowed. 38.6 Coming to ITA No. 255/AHD/2020, an appeal by the assessee, in the case of Smt. Lopa Sumil Bhavnagari for the AY 2012-13 39. The assessee has raised the following grounds of appeal: 1. The learned CIT(appeals) has erred both in law and in fact in confirming addition of Rs. 8,72,369/- in respect of genuine loss in transactions of trading in shares of companies treating the same as bogus when the appellant had proved genuineness of transaction and substantiated the same by evidences. The addition is contrary to facts merely on surmise and suspicion by not adhering to principles of natural justice. It be so held now 2. On the facts and in circumstances of the case, the loss of Rs. 8,72,369/- be allowed as claimed 3. The Ld CIT(Appeals) erred both in law and on facts in not properly considering the written submissions and not applying the correct legal position to the facts of the appellant's case and in wrongly confirming the additions made by the AO. It be so held now and additions made by AO be deleted. 4. The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing. 40. At the outset, we note that the interconnected issue raised by the assessee in its ground of appeal for the AY 2012-13 is identical to the issue raised by the assessee being M/s Pinac Stockbrokers Pvt. Ltd. in ITA No. 254/AHD/2020 for the assessment year 2012-13. Therefore, the findings given in ITA No. 254/AHD/2020 shall also be applicable for the assessment year 2012-13. The appeal of the assessee for the AY 2012-13 has been decided by us vide paragraph No.16 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings in the case of M/s Pinac Stock Brokers Pvt. Ltd. shall also be applied to the assessee on hand. Hence, the ground of appeal filed by the assessee is hereby allowed. 41. In the result, the appeal filed by the assessee is hereby allowed. ITA no.253-255/AHD/2020 Asstt. Year 2011-12-2012-13 28 42. In the combined result, the appeals filed by the different assessee bearing ITA No.253/Ahd/2020 for A.Y. 2011-12 is partly allowed whereas ITA bearing Nos.254-255/Ahd/2020 for A.Y. 2012-13 are allowed. Order pronounced in the Court on 12/07/2023 at Ahmedabad. Sd/- Sd/- (T.R SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 12/07/2023 Manish