Soumitra Choudhury , Kolkata V. ACIT, Circle - 22 , Kolkata

ITA 256/KOL/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1370 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER JCITSRDR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Question of law; Corroborative evidences; Accommodation entries; Scheme of amalgamation; Onus to prove; Penny stocks
• Section: 143(3); 260A; 133(6); 147; 131; 68; 69; 148; 154; 15

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 256 / KOL / 20 19 ASSESSMENT YEARS :2012-13 SOUMITRA CHOUDHURY 28C, SATISH MUKHERJEE ROAD, KOLKATA-700026 [ PAN NO.ACNPC 4627 Q ] V/S . ACIT, CIRCLE-12 54/1, RAFI AHMED KIDWAI ROAD, KOLKARTA-16 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI MIRAJ D SHAH, ADVOCATE /BY RESPONDENT SHRI SANKAR HALDER, JCIT-SR-DR /DATE OF HEARING 13-03-2019 ITA NO. 2421/KOL/2018 ASSESSMENT YEAR :2015-16 PURUSHOTTAM DAS AGARWAL C/O BALAJI ENTERPRISES, 83/85 N.S. ROAD, GROUND FLOOR, KOLKATA [ PAN NO.ACTPA 9138 Q ] V/S . INCOME TAX OFFICER, WARD-35(1), AAYAKAR BHAWAN PORVA, 110, SHANTIPALLY, KOKATA- 107 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL ADVOCATE /BY RESPONDENT SHRI SANKAR HALDER, JCIT-SR-DR /DATE OF HEARING 14-03-2019 /DATE OF PRONOUNCEMENT 15-03-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THESE TWO ASSESSEES HAVE FILED THEIR INSTANT APPEAL (S) FOR ASSESSMENT YEAR(S) 2012-13 & 2015-16 AGAINST THE COMMISSIONER OF INCOME TAX ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 2 (APPEALS)-6 & 10 KOLKATAS SEPARATE ORDER DATED 08. 02.2019 & 21.08.2018, PASSED IN CASE NO(S). CIT(A), KOLKTA-6/10503/2018-1 9-957/CIT(A)-10/W- 35(1)/2015-16/2017-18/KOL UPHOLDING ASSESSING OFFIC ERS IDENTICAL ACTION TREATING THEIR LONG TERM CAPITAL GAINS (LTCG) AS E XEMPT U/S 10(38) AMOUNTING TO 70,25,200/- AND 32,11,451/-; RESPECTIVELY TO BE UNEXPLAINED CASH CREDITS U/S 68, INVOLVING PROCEEDINGS U/S 143( 3), R.WS. 147 AND SEC. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. WE HAVE HEARD THE PARTIES REITERATING THEIR RESPECT IVE STANDS. RELEVANT CASE FILE(S) OF THE FORMER ASSESSEE COMPRISING OF A SSESSING OFFICER SECTION 148 NOTICE DATED 23.03.2018 REOPENING REAS ONS SUPPLIED ON 13.08.2018, OBJECTIONS FILED BEFORE THE ASSESSING O FFICER AGAINST RE- OPENING IN ISSUE DATED 26.11.2018, LTCG STATEMENT F ORWARDED LETTER DATED 23.08.2018 IN RESPECT OF LTCG TRANSACTIONS, P URCHASE BILLS DATED 25.07.2009, SHARE CERTIFICATES OF M/S TWENTY FIRST CENTURY INDIA LTD. WITH TRANSFER ADVICE, BANK STATEMENT, HON'BLE JURIS DICTIONAL HIGH COURTS AMALGAMATION ORDER DATED.24.12.2010, ALLOTMENT ADVI CE REGARDING ISSUE OF SHARES BY MERGED COMPANIES (TWENTY FIRST CENTURY INDIA LTD.) ALONGWITH SHARE CERTIFICATES ALLOWING 22,800 EQUITY SHARES APPLICATION DEMAT STATEMENT OF SHARE ALONGWITH AFFIDAVIT, CONTR ACT NOTES REGARDING SALE OF SHARES, BANK STATEMENT IN RELATION TO RECE IPT OF SHARES SALE CONSIDERATION COMPANY MASTER DATA, STATEMENT OF SH RI. SAJENDRA MOOKIM DATED 01.04.2017, STATEMENT OF SHRI PRADEEP KR. GARG DATED 17.04.2017 WITH ROC MASTER DATA AND PAN, STATEMENT OF SHRI SHAILENDRA KR. SHARMA WITH ROC MASTER DATA, STATEME NT OF SHRI ABHIJIT BASU WITH ROC MASTER DATA AND SUMMONS U/S. 131, ASS ESSEES DEPOSITION, STATEMENT OF OWNER OF THE BROKERAGE FIR M AND REPLY WITH SUPPORTING EVIDENCE TO THE ASSESSING OFFICER IN RES PONSE TO U/S 133(6) NOTICE FROM M/S SARGAM DEALERS PVT. LTD. DATED 11.1 2.2018; RESPECTIVELY STAND PERUSED IN THE LEAD CASE HEREIN ITA NO.256/KOL/2019. ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 3 2. WE NOTICE AT THE OUTSET THAT THE CIT(A)S DETAIL ED DISCUSSION IN ABOVE LEAD CASE UPHOLDING THE ASSESSING OFFICERS ACTIO N TREATING THE ASSESSEES PROFITS DERIVED FROM SALES OF SHARES READS AS UNDER :- 5. APROPOS THE SOLE ISSUE RAISED COVERING GROUND NO S. 9 TO 15 IS CONCERNED, THE FACTS ARE THAT THAT THE APPELLANT HAD PURCHASED 600 SHARES OF M/ S SARATHI DEALERS PRIVATE LIMITED FOR A TOTAL CONSIDERATION OF RS.2,4 0,000/- FROM M/S. SARGAM DEALERS PVT. LTD. SUBSEQUENTLY, M/S. SARATHI DEALERS PRIVAT E LIMITED WAS MERGED WITH TWENTY FIRST CENTURY INDIA LTD BY AN ORDER OF THE H ON'BLE CALCUTTA' HIGH COURT. IN FACT, TWENTY FIRST CENTURY INDIA LTD ALLOTTED 22,80 0 EQUITY SHARES IN M/S. TWENTY FIRST CENTURY INDIA LTD IN LIEU OF 600 SHARES OF M/S. SAR ATHI DEALERS PRIVATE LIMITED. THESE SHARES WERE SOLD BY THE APPELLANT ON DIFFERENT DATE S DURING THE RELEVANT PREVIOUS YEAR AT A TOTAL CONSIDERATION OF RS.72,64,675 AND THUS, AN AMOUNT OF RS. 70,25,200/- WAS DISCLOSED AS LONG-TERM CAPITAL GAINS FROM SALE OF T HESE SHARES WHICH THE APPELLANT HAS CLAIMED TO BE TOTALLY EXEMPT UNDER THE PROVISIO NS OF SECTION 10(38) OF THE ACT IN HIS RETURN. THE A.O. DISALLOWED APPELLANT'S CLAIM O F LONG TERM CAPITAL GAIN U/S 10(38) AND HELD IT AS BOGUS LONG TERM CAPITAL GAIN FOR RS.70,25,200/-. THE A.O. HAS DISCUSSED THE FACTS OF THE CASE ON PAGE NO. 2 TO 13 OF HIS ASSESSMENT ORDER. THE SALE WAS MADE THROUGH BROKER M/S. H M FATHEPURIA, A MEMBER' OF THE CALCUTTA STOCK EXCHANGE AND ALSO. REGISTERED WITH SRBI AS A STOCK BROKER. THE A.O. IN THE MEANWHILE HAD RECEIVED INFORMATION FROM DTT(INV.), KOLKATA THAT THEY HAVE INVESTIGATED AND IDENTIFIED 84 PENNY STOCK COMPANIE S. SEARCH AND SURVEY WERE ALSO CONDUCTED IN THE OFFICE PREMISES OF 32 SHARE B ROKERS WHO ACCEPTED THAT THEY WERE INVOLVED IN BOGUS LTCG/STCG SCAM. ONE SUCH PEN NY STOCK COMPANY IDENTIFIED BY THE DIT(INV.), KOLKATA IS M/S. TWENTY FIRST CENTURY INDIA LTD. BASIC TRADING PATTERN OF ALL THESE 84 PENNY STOCK SCRIPS REPRESENTED A BELL SHAPED TRADING I.E. PRICES START AT A LOW RANGE AND RISE RAPIDLY, STAYS THERE FOR A WHILE AND THEN DECREASES RAPIDLY. THIS MAKES A BELL SHAPED PATTERN . THE A.O. ON PAGE NO.3 OF HIS ORDER HAS DEMONSTRATED THIS PHENOMENON BY A GIVING THE DATA OF THE SHARE PRICE OF M/S. TWENTY FIRST CENTURY INDIA LTD FROM FY 2001-20 02 TO FY 2013-2014. SUCH MOVEMENT OF SHARE IS NOT SUPPORTED BY ACTUAL FINANC IAL CREDENTIALS AS THE COMPANY CONCERNED HAS ALMOST NO FIXED ASSET, NO TURNOVER, N O PROFITABILITY AND DO NOT PAY TAXES. HENCE, SUCH COMPANIES WERE DESIGNED ONLY FOR THE LIMITED PURPOSES OF BOGUS LTCG/STCG TO WILLING BENEFICIARY. THE AO AFTER GIVI NG DUE OPPORTUNITY TO THE APPELLANT OF BEING HEARD HELD THAT THE SALE VALUE O F SHARES INCREASES BY ALMOST 38 TIMES OF ITS PURCHASE VALUE WITHIN A SPAN OF AROUND 2 YEARS IS NOTHING BUT BOOKING OF BOGUS LTCG. ACCORDINGLY, THE ENTIRE AMOUNT OF LTCG OF RS.70,25,200/- WAS ADDED BACK TO THE INCOME OF THE APPELLANT. DURING THE APP ELLATE PROCEEDINGS, THE AR OF THE APPELLANT FILED A PAPER BOOK WITH NUMBERED PAGE AND AN INDEX. THE APPELLANT HAD REITERATED THE FOLLOWING WHICH ARE SUMMED UP IN THE STATEMENT OF FACTS FILED WITH THE APPEAL, WHICH IS AS FOLLOWS: (I) THAT THE ASSESSEE HAD PURCHASED 600 SHARES OF M S SARATHI DEALERS PRIVATE LIMITED FROM SARGAM DEALERS PVT. LTD. FOR A CONSIDERATION OF RS.240,000/- WHICH WAS PAID BY ACCOUNT PAYEE CHEQUE AT RS.230,000/- AND RS.10,000/- ON 29.03.2010. (II) THAT THERE WAS A SCHEME OF AMALGAMATION BY WHI CH SARATHI DEALERS PRIVATE LIMITED WAS MERGED WITH M/ S. TWENTY FIRST CENTURY INDIA LTD. THIS ORDER WAS PASSED BY HORI'BLE CALCUTTA HIGH COURT ON 24.12.201U. IN COMPANY PETITION NO 409 OF 2010 CONNECTED WITH COMP ANY APPLICATION NO. 453 OF 2010. (III) THAT AS A RESULT OF THE AMALGAMATION ORDER PA SSED BY THE HON'BLE CALCUTTA HIGH COURT THE ASSESSEE WAS ALLOTTED 22,80 0 SHARES IN M/S. TWENTY ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 4 FIRST CENTURY INDIA LTD IN LIEU OF 600 SHARES OF M/ S. SARATHI DEALERS PRIVATE LIMITED. THESE SHARES WERE ALLOTTED IN DEMAT FORM I N THE ACCOUNT OF THE ASSESSEE AND WERE CREDITED TO HIS ACCOUNT ON 19.01. 2011. (IV) THAT THE ASSESSEE SOLD THESE SHARES DURING AY 2012-2013 THROUGH HIS OLD AND REGULAR SHARE BROKER M/ S. H. M. FATEHPURIA MEMBER OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD AND RECEIVED THE SAL E CONSIDERATION BY ACCOUNT PAYEE CHEQUE. (V) THE SHARE WERE DELIVERED TO THE BROKER TO THE D EMAT ACCOUNT OF THE ASSESSEE. (VI) THAT THE ASSESSEE FILED THE FOLLOWING DOCUMENT S IN SUPPORT OF THE TRANSACTION: (A) PURCHASE BILL DATED 25.07.2009. (B) COPY OF SHARE CERTIFICATE OF SARATHI DEALERS PRIVATE LIMITED (C) BANK STATEMENT REFLECTING PAYMENT OF PURCHASE O N 29.03.2010 (D) AMALGAMATION ORDER PASSED BY THE HON'BLE CALCUT TA HIGH COURT (E) DEMAT STATEMENT SHOWING CREDIT OF SHARES IN ASS ESSEE DEMAT ACCOUNT (F) CONTRACT NOTE FOR SALE (G) BANK STATEMENT REFLECTING RECEIPT OF PAYMENT ON 18.5.2011, 23.5.2011 & 27.5.2011. (H) DEMAT STATEMENT SHOWING DEBIT OF SHARES IN ASSE SSEE DEMAT ACCOUNT (VII) THAT THE ASSESSEE SOLD THE SHARES THROUGH M/ S. H.M. FATEHPURIA, A SEBI REGISTERED SHARE BROKER WHO WAS A MEMBER OF CALCUTT A STOCK EXCHANGE. ALL THE EVIDENCES IN SUPPORT OF THE TRANSACTIONS WERE P RODUCED. THE ASSESSEE WAS SUMMONED U/S 131 OF THE IT ACT 1961 AND HIS STA TEMENT WAS RECORDED. THE BROKER OF THE ASSESSEE WAS SUMMONED U/S 131 OF THE IT ACT 1961 AND HIS STATEMENT WAS RECORDED. ALL THE PARTIES- CONFIR MED THE TRANSACTION AND THERE WAS NO ADVERSE MATERIAL OR EVIDENCES COLLECTE D IN THE ASSESSEE CASE. (VIII) THAT THE ASSESSEE SOLD THESE SHARES DURING A Y 2012-2013 THROUGH HIS OLD AND REGULAR SHARE BROKER M/S. H. M. FATEHPURIA MEMBER OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD AND RECEIVED THE SALE CONS IDERATION BY ACCOUNT PAYEE CHEQUE. (IX) THAT THE LD ASSESSING OFFICER BASED ON A SURVE Y REPORT PREPARED BY THE INVESTIGATION DEPARTMENT AND ON STATEMENT OF SOME U NCONNECTED PERSONS CAME TO A CONCLUSION THAT THE ASSESSEE BROUGHT BACK HIS OWN INCOME IN THE FORM OF LONG TERM CAPITAL GAINS AND THE TRANSACTION WAS HELD NOT BE GENUINE. (X) THAT THE ASSESSING OFFICER DID NOT PROVIDE ANY CROSS EXAMINATION OF ANY PERSON WHOSE STATEMENT WERE RECORDED AND WERE USED AGAINST THE ASSESSEE. (XI) THAT THERE WAS NO FINDING AGAINST THE ASSESSEE OR HIS STOCK BROKER IN THE INVESTIGATION REPORT. (XII) THAT THE FINDING WERE MADE IN SURVEY PROCEEDI NGS BY THE INVESTIGATION WING AND HENCE THESE EVIDENCES ARE NOT ADMISSIBLE A S EVIDENCES IN ASSESSMENT PROCEEDINGS OF THIRD PARTIES INCLUDING T HAT OF THE ASSESSEE. ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 5 THE APPELLANT DURING THE APPELLATE PROCEEDING SUBMI TTED VARIOUS JUDGMENTS TO DEMONSTRATE THAT THE AO HAS ERRED IN HOLDING THE LT CG OF RS.70,25,200 AS BOGUS. THE CASES ARE LISTED AS BELOW: A. JATIN CHHADWA IN ITA NO. 8573/MUM/2010 B. LALCHAND BHAGAT AMBICA RAM VS. CIT (1959) 37 I TR 288 (SC) C. GTC INDUSTRIES LIMITED VS. ACIT REPORTED IN (2 017) 164 ITD 1 D. KIRON KOTHARI HUF VS. ITO, ITA NO. 443/KOL/201 7 E. GAUTAM KR PINCHA VS. ITO, ITA NO. 569/KOL/2017 F. ITO VS. SHALE EN KEMANI, ITA NO. 1945/KOL/2014 G. HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PR CI T VS RUNGTA PROPERTIES PRIVATE LIMITED ITAT NO 105 OF 2016 H. SMITA S PATIL V. ACIT (ITA NO.1407-1409/PN/2012) , I. ITAT KOLKATA IN THE CASE OF DCIT V. SUNITA KHEMK A (ITA NO 714 TO 718/KOL/2011) J. CIT VS. SHYAM R PAWAR [2015] 54 TAXMANN.COM 108, (BOMBAY HIGH COURT) K. CIT V. SMT SUMITRA DEVI, ITA NO. 54/2012, HON'BL E HIGH COURT OF RAJASTHAN L. CIT VS. UDIT NARAIN AGARWAL, ITA 560 OF 2009, HO N'BLE HIGH COURT OF ALLAHABAD M. CIT V. MAHESH CHANDRA G. VAKIL [2013] 40 TAXMANN .COM 326 (GUJARAT) 6. I HAVE ARE FULLY CONSIDERED THE ASSESSMENT ORDER WHEREIN AN ADDITION OF RS.70,25,200/- WAS MADE BY THE LD. AO ON ACCOUNT OF BOGUS LONG TERM CAPITAL GAIN BY TREATING THE SAME AS FICTITIOUS CLAIM. I FI ND THAT THE LD. AO HAD COMPLETED THE ASSESSMENT PROCEEDINGS AFTER ANALYZING VARIOUS INFO RMATION RECEIVED FROM THE INVESTIGATION WING. SOME OF THE OBSERVATIONS WHICH COME TO LIGHT UPON EXAMINATION OF THE RECORDS OF THE APPELLANT ARE AS BELOW: A. THERE IS A COMMON PATTERN IN THE TRADING OF SUCH SCRIPS AND THE PATTERN IS THAT THEY REPRESENT A BELL SHAPE IN THEIR TRADING. B. IN THE BALANCE SHEET OF THE LISTED PENNY STOCKS IT IS FOUND THAT THEY HAVE NO ACTUAL FINANCIAL CREDENTIALS TO SUPPORT THEIR SHARE , MOVEMENT PATTERN. ALMOST ALL THE COMPANIES HAVE NO FIXED ASSETS. NO TURNOVER. AN D NO PROFITABILITY. C. NO SUCH EVENT OF GROWTH HAPPENED DURING THE SALE PERIOD OF THE SAID SCRIPT FOR WHICH THE INVESTMENT IN SHARES COULD HAVE JUMPED AL MOST 38 TIMES IN A VERY SHORT SPAN OF TIME OF 2 YEARS. D. IN THE WHOLE PROJECT TOTAL 84 LISTED PENNY STOCK COMPANIES WERE IDENTIFIED AND WORKED UPON. AFTER THAT, NUMBER OF SEARCH AND SURVE YS WERE CONDUCTED IN THE OFFICE PREMISES OF MORE THAN 32 SHARE BROKING ENTIT IES WHO HAVE ACCEPTED THAT THEY WERE INVOLVED IN THE BOGUS LTCG/STCL SEAM. SUR VEYS WERE ALSO CONDUCTED IN THE OFFICE PREMISES OF MANY 'ACCOMMODA TION ENTRY PROVIDERS AND THEIR STATEMENTS RECORDED. ALL HAVE ACCEPTED THEIR ROLE IN THE SEAM. E. OUT OF 84 LISTED PENNY STOCKS WHICH HAVE BEEN US ED FOR GENERATING BOGUS LTCG. M/S. TWENTY FIRST CENTURY INDIA LIMITED WHICH HAD B EEN SOLD BY THE PRESENT ASSESSEE IS ONE OF THEM. 6.1 A DEEPER EXAMINATION GIVES A MUCH CLEAR PICTURE OF THE ENTIRE PROCESS BEING .STAGED MANAGED. THE MOST VITAL ASPECT TO BE CONSID ERED IS HOW DID HE APPELLANT GET TO KNOW OF THE EXISTENCE OF M/S SARATHI DEALERS PRI VATE LIMITED. AND WHAT PROMPTED HIM TO MAKE A DECISION FOR INVESTMENT IN THIS COMPA NY. THE INVESTMENT MADE BY THE APPELLANT IN SUCH A COMPANY WHICH DOES NOT HAVE ANY CREDENTIALS, DOES NOT MATCH WITH THE NATURE OF INVESTMENT OF THE APPELLANT. THE APPELLANT COULD ALSO NOT EXPLAIN AS TO HOW HE CAME TO KNOW THAT THE SHARES OF M/S.SARAT HI DEALERS PRIVATE LIMITED WERE PRIVATELY AVAILABLE FOR SALE WITH ONE SARGAM DEALER S PVT. LTD. DURING THE ASSESSMENT PROCEEDINGS THE AO FOR VERIFICATION SEND NOTICE U/S .133(6) TO SARGAM DEALERS PVT. LTD. BUT THE SAME WAS RETURNED BACK BY THE POSTAL A UTHORITIES WITH THE REMARKS ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 6 ' ADDRESSEE MOVED/NOT KNOWN '. THE ASSESSING OFFICER ALSO ISSUED NOTICES TO THE PERSONS WHO ULTIMATELY PURCHASED THE SHARES SOLD BY THE APPELLANT, THESE NOTICES WERE NOT SERVED, AND THEREFORE THE PARTIES WERE NOT TRACEABLE. IT IS APPARENT THAT BOTH PURCHASE AND SALE OF SHARES OF M/S TWENTY FIRST CEN TURY LTD. HAS BEEN ARRANGED BY INTERMEDIARIES WHO ARE ALSO KNOWN AS ENTRY OPERATOR S. EVEN THE DIRECTOR OF M/S TWENTY FIRST CENTURY LTD. MR. PRADEEP KUMAR GARG HA S ACCEPTED THAT HE IN LEAGUE WITH MR. ANI! KUMAR KHEMKA WHO WAS ALSO INVOLVED IN PRICE MANIPULATION OF SHARES, IN ORDER TO PROVIDE BOGUS LTCG TO VARIOUS BENEFICIA RIES; DURING THE APPELLATE PROCEEDINGS, THE APPELLANT ALSO COULD NOT EXPLAIN A S TO WHY AGAINST ALL PRUDENCE, HE INVESTED IN M/S SARATHI DEALERS AND THAT TOO AT A H UGE PREMIUM OF RS. 390 PER SHARE OF FACE VALUE OF RS. 10/ -. M/S SARATHI DEALERS PVT . LTD WAS ACTUALLY A LOSS MAKING COMPANY. 6.2 THE MAIN CONTENTION OF THE APPELLANT IS THAT AL L THE SUPPORTING EVIDENCES IN THE FORM OF BANK STATEMENT, CONTRACT NOTES, DE-MAT STAT EMENT, PROVES THE GENUINENESS OF THE TRANSACTIONS. IN MY VIEW, ALL THESE DOCUMENT S AS REFERRED TO BY THE APPELLANT ARE MERE DOCUMENTS AND NOT ANY EVIDENCE. THE TRANSA CTIONS ARE NOT NATURAL AT ALL. IN MY OPINION, PAYMENT MADE THROUGH BANKING CHANNEL DO ES NOT CONSTITUTE THE TRANSACTIONS TO BE GENUINE TRANSACTION SINCE THE BA NKING DOCUMENTS ARE MERELY SELF SERVING RECITALS. NONE OF THE MATERIAL PRODUCED BY THE APPELLANT IS ENOUGH TO JUSTIFY THE HUGE GAINS AS CLAIMED UNDER THE HEAD CAPITAL GA INS. 6.3 IN A PENNY STOCK WHICH HAS NO BUSINESS ACTIVITY OR ANY PLAN OR INITIATIVE OR ANY PROSPECT FOR GROWTH, INVESTOR NORMALLY SELL OFF SUC H STOCK WHENEVER PRICE HAS APPRECIATED TO SOME EXTENT AND THERE IS TOTAL UNCER TAINTY TO HOLD SUCH STOCK FOR FABULOUS APPRECIATION WHEN THE INVESTMENT IS NOT BA CKED BY ANY FUNDAMENTAL OF THE COMPANY, ITS BUSINESS POLICY AND FUTURE PROSPECT. I N ABSENCE OF ANY SUCH FACT THE PERSON WHO KNOWS BEFOREHAND THAT ITS PRICE IS BEING MANIPULATED IN A CONCERTED WAY AND HE IS PART OF SUCH SYSTEM WILL BENEFIT. PRICE M OVEMENT AND VOLUME MOVEMENT OF THIS STOCK INDICATES SUCH FACT. THE SAID TRANSACTIO N DEFIES ALL LOGIC OF HUMAN PROBABILITY. IN THIS CONTEXT THE HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. DURGA PRASAD MORE (82 ITR 540) HAS HELD THAT THE SURROUND ING CIRCUMSTANCES MUSS BE SEEN TO FIND OUT THE REALITY OF THE RECITALS MADE I N THE DOCUMENT. THIS PRINCIPLE WAS REAFFIRMED BY THE HON'BLE SUPREME COURT IN 214 ITR 801 WHERE IN IT WAS HELD THAT THE APPARENT CAN BE REJECTED WHERE THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT THE REAL FACT. 6.4 I FIND ALL THE JUDGEMENTS RELIED UPON BY THE AP PELLANT FALL FLAT IN THE FACE OF THE FACTS OF THE CASE AND PREPONDERANCE OF PROBABILITY AGAINST THE ASSESSEE. IN FACT,' THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (2018) 89 TAXMANN.COM 196 (BOM) IS QUIT E RELEVANT FOR DECIDING THE ISSUE. IT WAS HELD THAT WHERE THE ASSESSEE HAD PURC HASED SHARES OF PENNY STOCKS COMPANIES AT LESSER AMOUNT AND WITHIN A YEAR SOLD S UCH SHARES AT MUCH HIGHER AMOUNT AND ASSESSEE HAD NOT TENDERED COGENT EVIDENC E TO EXPLAIN AS TO HOW SHARES IN AN UNKNOWN COMPANY HAD JUMPED TO SUCH HIGHER AMO UNT IN NO TIME AND ALSO FAILED TO PROVIDE DETAILS OF PERSON WHO PURCHASED S AID SHARES, SAID TRANSACTIONS WERE ATTEMPT TO HEDGE UNDISCLOSED INCOME AS LONG TERM CA PITAL GAIN. APPLYING THE AFORESAID RATIO, I CONCLUDE THAT THE APPELLANT HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE UNDISCLOSED IN COME IN THE GARB OF LONG TERM CAPITAL GAIN SINCE SHE HAS NOT TENDERED ANY COGENT EVIDENCE TO EXPLAIN HOW THE PRICE OF SHARES OF AN UNKNOWN COMPANY HAS JUMPED IN NO TI ME. IN SUPPORT OF THIS FINDING, I ALSO GARNER SUPPORT FROM THE FOLLOWING JUDGEMENTS W HICH ARE AS UNDER:- 1. CHANDAN GUPTA VS CIT (2015)229 TAXMAN 173 (P&H) WHERE THE ASSESSEE COULD NOT EXPLAIN RECEIPT OF ALLEGED SHARE TRANSACTION PROFITS CREDITED IN HIS BANK ACCOUNTS, THEN SALE PROCEEDS H AD TO BE ADDED AS INCOME UNDER SECTION 68. 2. BAZPIR CHAND MAINI VS CIT (2012) 340 ITR 161 ( P&H) ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 7 SECTION 69 OF THE INCOME-TAX ACT, 1961 - UNEXPLAINE D INVESTMENT - ASSESSMENT YEAR 1998-99 - DURING ASSESSMENT PROCEED INGS, ASSESSING OFFICER FOUND THAT ASSESSEE HAD PURCHASED CERTAIN S HARES OF A COMPANY AT RATE BETWEEN RS. 2.50 AND RS. 3.40 PER SHARE IN MON TH OF APRIL, 1997 AND PART OF THOSE SHARES WERE SOLD THROUGH A BROKER AT RS. 5 5 PER SHARE - HE CAME TO OPINION THAT VALUE OF SAID SHARES COULD NOT BE AS H IGH AS RS.55 PER SHARE - HE RECORDED STATEMENT OF BROKER WHO ADMITTED TO HAVE P URCHASED SHARES IN QUESTION BUT FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS - HE ALSO FOUND THAT ALLEGED SALE OF SHARES HAD NOT TAKEN PLACE THROUGH ANY STOCK EXCHANGE - ON SCRUTINY OF BOOKS OF ACCOUNT OF BROKER, IT WAS FOUND THAT THERE WERE CASH DEPOSITS IN ITS BANK ACCOUNT PRECED ING ISSUE OF CHEQUES IN NAME OF ASSESSEE FOR PURCHASE OF SHARES CLAIMED TO BE SALE PROCEEDS OF SAME SHARES RECEIVED IN ADVANCE - BROKER COULD NOT GIVE DETAILS OF PURCHASER OF SHARE - MOREOVER, SHARES CLAIMED TO HAVE BEEN SO LD THROUGH BROKER HAD NOT BEEN TRANSFERRED EVEN AT TIME OF MAKING ENQUIRY BY ASSESSING OFFICER AND SAME CONTINUED TO BE REGISTERED IN NAME OF ASSESSEE - IN THOSE CIRCUMSTANCES, ASSESSING OFFICER HELD THAT TRANSACT ION OF SALE OF SHARES WAS AN INGENUINE TRANSACTION AND MADE ADDITION OF ALLEG ED SALE CONSIDERATION TO ASSESSEE'S INCOME AS INCOME FROM UNDISCLOSED SOURCE S - WHETHER ON FACTS, ADDITION MADE BY ASSESSING OFFICER WAS JUSTIFIED - HELD, YES. 3. USHA CHANDRESH SHAH VS ITO (2014-TIOL-14S9-ITAT- MUM) WHERE THE ASSESSEE COULD NOT PRODUCE THE COPIES OF SHARE CERTIFICATES AND COPIES OF SHARE TRANSFER FORMS. THE TRANSACTION OF PURCHASE OF SHARES COULD NOT BE CROSS VERIFIED. THE SHARES OF THE COMPANY WA S DECLARED AS ' PENNY STOCK ' BY SEBI AND THE BROKER SANJU KABRA; THROUGH WHOM THE SHARES WERE SOLD BY THE ASSESSEE WAS INDICTED FOR MANIPULATING THE PRICES OF PENNY STOCK SHARES. THE TAX AUTHORITIES HAVE RIGHTLY APPLIED TH E TEST OF HUMAN PROBABILITIES TO EXAMINE THE CLAIM OF PURCHASE AND SALE OF SHARES MADE BY THE ASSESSEE. THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE AO BY APPLYING THE TEST OF HUMAN PROBABILITIES. 4. RATNAKAR M PUJARI VS ITO (2016-TIOL-1746-ITAT- MUM) WHERE A TRANSACTION OF 'OFF MARKET PURCHASE OF SHAR E FOR WHICH PAYMENTS WERE MADE IN CASH AND THE BROKERS HAD ISSUED PRE DA TED CONTRACT NOTES, IS LIABLE TO BE TREATED AS BOGUS TRANSACTION, AND HENC E SUCH CASH RECEIPTS ARE LIABLE TO BE TREATED AS 'UNEXPLAINED CASH RECEIPTS' . 5.M.K. RAJESHWARI VS. ITO (2018) 99 TAXMANN.COM 339 (BANG) WHERE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(3 8) IN RESPECT OF CAPITAL GAIN ARISING FROM SALE OF SHARES, IN VIEW OF FACT T HAT FINANCIAL WORTH OF SAID COMPANY WAS MEAGRE AND, MOREOVER, THERE WAS ABNORMA L RISE IN PRICE OF SHARES, IT COULD BE CONCLUDED THAT ASSESSEE INTRODU CED HER OWN UNACCOUNTED MONEY IN GARB OF LONG TERM CAPITAL GAIN AND, THUS, CLAIM RAISED BY HER WAS TO BE REJECTED. 6 ITAT, SMC-C BENCH, BANGALORE ITA NO. 1723/BENG/ 2 018, A.Y. 2015-16 IN SMT. M.K. RAJESHWARI -VS- ITO DATED 12-10-2018 HAS HELD AT PARA 8 & 9. '8. THE AO HAS ALSO EXAMINED THE SEBI'S FINDINGS AB OUT THE ACCOMMODATION ENTRY PROVIDERS OBTAINED ON THE BASIS OF VARIOUS INVESTIGATIONS AND HAS BROUGHT OUT SUFFICIENT MATER IAL ON RECORD TO DEMONSTRATE THAT THE TRANSACTIONS ARE NOT GENUINE A ND HE ACCORDINGLY CONCLUDED THAT THE LONG TERM CAPITAL GAIN BOOKED BY THE ASSESSEE IN THE BOOKS WERE PRE-ARRANGED METHOD TO EVADE TAXES A ND LAUNDERED MONEY. THE FINDINGS AND OBSERVATIONS OF THE AO WERE NOT CONTROVERTED BY THE ASSESSEE BY PLACING ANY EVIDENC E. HE PLACED ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 8 RELIANCE UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS I N SUPPORT OF HIS CONTENTION THAT ONCE THE ASSESSEE HAS PLACED THE EV IDENCES WITH REGARD TO PAYMENTS AND THE IDENTITY OF THE PERSONS AND THE CREDIT WORTHINESS OF THE CREDITORS, NO ADDITION UNDER SECT ION 68 IS CALLED FOR. SINCE THE ASSESSEE HAS PLACED THE CONTRACT NOTE, PA YMENT THROUGH CHEQUES IDENTIFYING THE COMPANY WHOSE SHARES WERE T RANSACTED, THE GENUINENESS OF CLAIM OF LONG TERM CAPITAL GAIN SHOU LD NOT HAVE BEEN DOUBTED. WE DO NOT FIND MERIT IN THESE CONTENTIONS OF THE ASSESSEE IN THE LIGHT OF THE FACTS THAT THERE IS PREVALENT PRAC TICE IN THE COUNTRY THROUGH WHICH UNACCOUNTED MONEY IS CONVERTED INTO L ONG TERM CAPITAL GAIN BY CIRCUITOUS MEANS. WHILE DEALING WITH THE IS SUE OF LONG TERM CAPITAL GAIN ACCRUED TO THE ASSESSEE IN SHORT SPAN, ONE HAS TO EXAMINE THE FINANCIALS OF THE COMPANY WHOSE SHARES WERE INFLATED WITHIN A SHORT PERIOD AND AFTER THE SHARP RISE IN T HE PRICE OF SHARES IT AGAIN COMES DOWN. IN THE INSTANT CASE, FINANCIALS W ERE EXAMINED BY US AND WE FIND THAT THE FINANCIAL WORTH OF THE COMP ANY IS MEAGRE AND NOT AT ALL WORTH TO BE INVESTED THEREIN. WITH SUCH FINANCIALS, WE ARE UNABLE TO UNDERSTAND HOW THERE CAN BE MANIFOLD INCR EASE IN THE SHARES. IN THE LIGHT OF THE DURATION OF TRANSACTION S AND THE FINANCIALS OF THE COMPANY WHOSE SHARES WERE TRANSACTED, WE FIND T HAT THE REVENUE HAS BROUGHT SUFFICIENT MATERIAL ON RECORD TO DEMONS TRATE THAT UNACCOUNTED MONEY WAS INTRODUCED IN THE BOOKS OF AC COUNTS THROUGH LONG TERM CAPITAL GAIN BY ADOPTING SUCH METHOD. WHA TEVER JUDICIAL PRONOUNCEMENTS ARE RELIED ON, THESE ARE IN THOSE CA SES WHERE THE TRANSACTIONS ARE GENUINE. UNDER THESE CIRCUMSTANCES , WE ARE OF THE VIEW THAT REVENUE AUTHORITIES HAVE RIGHTLY ADJUDICA TED THE ISSUE AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE C IT(A). 9. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DISMISSED. 7. ITAT, CHENNAI A-BENCH, ITA NO. 1413/CHNY I 2018, A.Y. 2014-15 IN M/S PANKAJ AGARWAL & SONS (HUF) -VS- ITO, NON-CORPORATE WARD-1 0(3) CHANNAI, DATED 06-12- 2018 HAS HELD AT PARA 7 & 8. '7. BEFORE US THE LD.AR SUBMITTED THAT THE ASSESSEE S WERE NOT PROVIDED WITH AN OPPORTUNITY TO CROSS-EXAMINE THE WITNESS WHO WER E RELIED BY THE REVENUE AND FURTHER FAILED TO FURNISH. THE INVESTIGATION RE PORT OF THE INTELLIGENCE WING OF THE REVENUE BEFORE CONCLUDING THE ASSESSMENT. THE L D.AR FURTHER ARGUED THAT THE ASSESSEES WERE NOT PROVIDED WITH PROPER OP PORTUNITY OF BEING HEARD. IT WAS THEREFORE PLEADED THAT THE MATTER MAY BE REM ITTED BACK TO THE FILE OF LD.AO FOR FRESH CONSIDERATION. THE LD. DR STRONGLY OPPOSED TO THE SUBMISSION OF THE LD.AR AND REQUESTED FOR CONFIRMIN G THE ORDERS OF THE LD. REVENUE AUTHORITIES. 1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. AT THE OUTSET WE MUST SAY THAT THE LD. AR COULD NOT JUSTIFY BEFORE US ANY OF THEIR CLAIMS MADE BEFO RE THE LD. REVENUE AUTHORITIES THAT THE TRANSACTION WAS GENUINE. FURTH ER THE LD.AR COULD NOT SUCCESSFULLY CONTROVERT TO ANY OF THE FINDINGS OF THE LD. REVENUE AUTHORITIES BEFORE US WHICH ARE AGAINST THE ASSESSE ES. INSTEAD THE LD.AR HAS ONLY COME OUT WITH THE PLEA THAT THE ASSE SSEES WERE NOT PROVIDED WITH OPPORTUNITY OF CROSS-EXAMINING THE WI TNESS, THE INVESTIGATION REPORT WAS NOT FURNISHED AND PROPER O PPORTUNITY WAS NOT PROVIDED OF BEING HEARD. HOWEVER WE FIND THAT ALL T HESE ARGUMENTS RAISED BY THE LD.AR BEFORE US WAS NEVER ALLEGED BEF ORE THE LD. REVENUE AUTHORITIES WHEN THE MATTER WAS BEFORE THEM . IN THIS SITUATION. WE DO NOT HAVE ANY OTHER OPTION BUT TO C ONFIRM THE ORDERS OF THE LD. REVENUE AUTHORITIES IN THE CASE OF ALL THE ASSESSEES BECAUSE ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 9 THE LD.AO AS WELL AS THE LD. CIT(A) HAVE ARRIVED AT THEIR RESPECTIVE DECISIONS AFTER CONSIDERING THE ISSUES IN THE APPEA L IN DETAIL AND THERE IS NOTHING BEFORE US TO DISTURB THEIR FINDINGS. ACC ORDINGLY WE HEREBY CONFIRM THE ORDER OF THE LD. REVENUE AUTHORITIES ON THIS ISSUE. THUS THE FIRST GROUND RAISED BY THE ASSESSEES HEREIN ABO VE IN ALL THE APPEALS ARE HELD AGAINST THE ASSESSEES. 8. THE ORDER DATED 04-01-2019 PASSED BY THE ITAT PU NE 'B' BENCH, PUNE, ITA NO.1648&1649/PUN/15, A.Y.-2005-06 & 2006-07 IN RAJK UMAI' B AGARWAL VS. DCIT, CENTRAL CIRCLE 1(2), PUNE DATED 04-01-2019 HAS HELD AT PARA 15 TO 17. 15. IT IS FURTHER PERTINENT TO NOTE THAT IT WAS NOT ONLY THE ASSESSEE WHO BOOKED SHORT TERM CAPITAL GAIN ON THE SALE OF SHARES OF PI L TO THE ABOVE EXTENT, BUT HIS FAMILY MEMBERS WERE ALSO NOT LEFT BEHIND. THEY ALSO INDULGED IN THE SIMILAR PAPER TRANSACTIONS BY ALLEGEDLY PURCHASING AND SELLING SHARES OF PIL FROM THE SAME BROKERS AND SHOWING HUGE AMOUNTS OF S HORT TERM CAPITAL GAINS, FOR WHICH ADDITION OF RS.18, 71,906/- HAS BE EN MADE IN THE HANDS OF HIS SON SH. BHARAT RAJKUMAR AGARWAL AND RS.20,21,00 1/- IN THE HANDS OF HIS WIFE AMEETA RAJKUMAR AGARWAL FOR THE SAME ASSESSMEN T YEAR, THE APPEALS OF WHICH ARE BEING DISPOSED OFF THROUGH THIS BATCH OF CASES. 16. IN VIEW OF THE FACTUAL AND LEGAL POSITION DISCU SSED ABOVE, IT IS CRYSTAL CLEAR THAT PIL IS A PENNY STOCK COMPANY AND THE ASSESSEE OBTAINED ONLY ACCOMMODATION ENTRIES IN THE GARB OF SHORT TERM GAI N FROM TRANSFER OF SHARES OF PIL, FOR WHICH AN APPROPRIATE ADDITION HAS RIGHT LY BEEN MADE AND UPHELD BY THE AUTHORITIES BELOW. WE, THEREFORE, COUNTENANCE T HE IMPUGNED ORDER ON THIS SCORE. 17. BEFORE PARTING WITH THIS ISSUE, WE WANT TO RECO RD THAT THE ID.AR HAS RELIED ON CERTAIN DECISIONS IN WHICH THE ADDITIONS MADE ON ACCOUNT, OF ACCOMMODATION ENTRIES GOT DELETED. IN THE OPPUGNATI ON, ID. DR HAS ALSO RELIED ON CERTAIN DECISIONS, INCLUDING THOSE REFERR ED TO IN THE IMPUGNED ORDER, IN WHICH THE ADDITION ON ACCOUNT OF ACCOMMODATION E NTRIES GOT CONFIRMED. WE ARE NOT SEPARATELY REFERRING TO THOSE DECISIONS AS THE FACTUAL POSITION PREVAILING IN SUCH CASE VARIES WITH THE FACTS OF TH E INSTANT CASE AS RECORDED ABOVE. EVEN A SINGLE SLIGHTEST VARIATION IN THE FAC TUAL MATRIX OF TWO APPARENTLY SIMILAR CASES CHANGES THE ENTIRE COMPLEXION OF THE DECISION. AS THE FACTUAL PANORAMA OBTAINING IN THE EXTANT CASE IS DIFFERENT FROM THOSE RELIED ON BY THE RIVAL PARTIES, WE ARE, THEREFORE, DESISTING FROM DI STINGUISHING SUCH CASES SEPARATELY. THESE GROUNDS ARE, THEREFORE, DISMISSED . 8. THE LATEST ORDER DATED 08-01-2019 PASSED BY THE ITAT DELHI 'SMC' BENCH NEW DELHI, ITA NO.3810/DEL/2018, A.Y.-201S-16 IN ANJU R ASTOGI VS. ITO WARD 1(1), MEERUT DATED 08.,,01-2019 HAS HELD AT PARA 7 TO 9. 7. I HAVE HEARD' BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER. I NOTE THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN AMOUNTING TO RS.22,28,172/- EARNED DURING THE FY 20 14-15 AND EXEMPT U/S. 10(38) OF THE IT. ACT, 1961. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF AFORESAID LONG TERM CAPITAL GAIN DURING THE COURSE OF SCRUTINY PROCEEDINGS. THE EXPLANATION OFFERED THAT IT IS SALE PROCEEDS OF SHARES ARE FOUND TO BE UNSATISFACTORY. THE EXPLANATION OF THE ASSESSEE IS GENERAL IN NATURE THAT AS THE TRANSACTION IS THROUGH STOCK EXCHANGE AND THE P AYMENT IS BY CHEQUE, THE TRANSACTIONS SHOULD BE TREATED AS GENUINE. FURTHER, REGARDING THE STATEMENT OF SH: JAI KISHARI PODDAR THE ASSESSEE HAS ONLY STA TED THAT IN THE STATEMENT THERE IS NO SPECIFIC LINK WITH THE CLAIM OF EXEMPTI ON IN RESPECT OF LONG TERM CAPITAL GAIN OF RS. 22,78,172/- U/S. 10(38) BY HIM. HE HAS NOT STATED A THING WITH RESPECT TO THE STATEMENT OF SH JAI KISHAN PODD AR IN WHICH HE HAS ACCEPTED THAT FACILITATION OF ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN / ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 10 LONG TERM CAPITAL LOSS THROUGH HIS SHARE BANKING FI RM HAS BEEN DONE TO FEW BENEFICIARIES WITH THE HELP OF DIFFERENT ACCOMMODAT ION ENTRY OPERATORS, PROMOTERS OF THE SCRIPTS OF VARIOUS PENNY STOCKS OT HER BROKERS ETC. SH JAI KISHARI PODDAR ALSO GAVE DETAILS OF DIFFERENT BOGUS SCRIPTS/ PENNY STOCKS WHICH HAVE BEEN USED FOR PROVIDING THE ACCOMMODATIO N ENTRIES OF LTCG AND LTCL TO DIFFERENT BENEFICIARIES USING HIS BROKERAGE COMPANY CONSORTIUM CAPITAL PUT. LTD. AND THE NAME OF CCL INTERNATIONAL LIMITED HAVING SCRIP NAME CCL INTER APPEARS IN THE LIST WHOSE SHARES WER E SOLD BY THE ASSESSEE AND EXEMPTION ON LTCG AMOUNTING TO RS. 22,28,172/- CLAIMED U/ S. 10(38) OF THE ACT. AFTER PERUSING THE RECORDS, I FIND THAT IN THE INSTANT CASE THE INVESTMENT IN SHARES MADE BY THE ASSESSEE REVEALS T HAT HE HAS NOT BEEN DEALING IN SHARES ON A REGULAR BASIS AND THE ENTRIE S OF LTCG HAVE ALSO BEEN TAKEN BY OTHER MEMBERS OF THE ASSESSEE COMPANY AND THE PURCHASE OF THESE SHARES WERE CLAIMED TO BE THROUGH OFF MARKET DEALS ARID NOT THROUGH STOCK EXCHANGE. THE FINANCIALS OF - PENNY STOCK COMPANY M /S CCL INTERNATIONAL LTD. AND MOVEMENT OF ITS PRICE ARE ABRUPT, UNREALIS TIC AND BASED UPON ANY REALISTIC PARAMETERS. FROM THE PERUSAL OF FINANCIAL STATEMENTS OF THE AFORESAID COMPANY M/S CCL INTERNATIONAL LTD. FROM THE MINISTR Y OF CORPORATE AFFAIRS WEBSITE (MCA) EXAMINING THE INFORMATION AVAILABLE I N THE PUBLIC DOMAIN FROM WHERE IT WAS OBSERVED THAT THERE IS NO EXTRAORDINAR Y INCREASE IN THE PROFITS OF THE COMPANY TO JUSTIFY THE INCREASE IN VALUE OF THE SHARES. I FURTHER NOTE THAT INVESTIGATION .WING HAD RECORDED THE STATEMENT OF S H. JAI KISHAN PODDAR WHO IS ONE OF THE DIRECTOR OF M/ S CONSORTIUM CAPITAL P VT. LTD. WHICH IS ONE OF THE ENTITIES UTILISED FOR PROVIDING ENTRY OF BOGUS LONG TERM CAPITAL GAIN OF M/ S - CCL INTERNATIONAL LTD. WHO HAD ADMITTED THAT HE WAS INVOLVED IN SEAM OF PROVIDING BOGUS LONG TERM CAPITAL GAINS THROUGH SHA RES OF M/S CCL INTERNATIONAL LTD. HAD ALSO ADMITTED THAT THEY WERE ALSO INVOLVED IN TRADING OF THESE JAMAKHARCHI COMPANIES THROUGH WHICH MANIPULAT IVE TRANSACTIONS IN SECURITIES TO EITHER ARTIFICIALLY RAISE OR LOWER TH E MARKET RATE OF THE SHARES ARE BEING DONE. I ALSO NOTE THAT THE INDEPENDENT FINDIN GS OF THE AO, WHICH ARE - CORROBORATED BY THE INFORMATION GIVEN BY THE INVEST IGATION WING, THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE GENUINENESS OF ALLE GED SHARE TRANSACTIONS IN RESPECT OF LONG TERM CAPITAL GAIN U/S. 10(38) OF TH E ACT. IN VIEW OF ABOVE DISCUSSIONS, THE LANDMARK DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF MCDOWELL AND COMPANY LIMITED, 154 ITR 148 ARE SQ UARELY APPLICABLE IN THIS CASE WHEREIN IT HAS BEEN HELD THAT TAX PLANNIN G MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF THE LAW AND ANY COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO E NCOURAGE OR ENTERTAIN THE BELIE! THAT IT IS HONOURABLE TO AVOID THE PAYMENT O F TAX BY DUBIOUS METHODS. HOWEVER, THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSESSEE ARE ON DISTINGUISHED FACTS, HENCE, NOT APPLICABLE IN THE I NSTANT CASE. THE ASSESSEE HAS NOT ARGUED' ANY OTHER GROUND MENTIONED IN THE G ROUNDS OF APPEAL, BUT ONLY ARGUED ON- MERIT FOR WHICH ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CLAIM BEFORE THE LOWER REVENUE AUTHORITIES AS WELL AS BEF ORE THIS BENCH. IN VIEW OF ABOVE DISCUSSIONS, I AM OF THE CONSIDERED OPINION T HAT LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION IN DISPUTE, WHICH DOES NOT N EED ANY INTERFERENCE ON MY PART, THEREFORE, I UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUNDS RAISED BY THE ASSESS EE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. SINCE IN OTHER APPEAL I.E. IN THE CASE OF ANJU R ASTOGI, ITA NO. 3810/DEI/2018 (AY 2015-16), SIMILAR FACTS ARE PERME ATINQ AND SAME FINDING HAS BEEN GIVEN, THEREFORE, MY FINDING GIVEN ABOVE W ILL APPLY MUTATIS MUTANDIS IN THIS APPEAL ALSO, BECAUSE THE NATURE - OF TRANSA CTIONS, EVIDENCES AND DOCUMENTS ARE EXACTLY THE SAME. THUS, BOTH THE APPE ALS ARE TREATED AS DISMISSED ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 11 9. IN THE RESULT, BOTH THE APPEALS OF THE DIFFERENT ASSESSEES ARE DISMISSED.' 6.5 IN VIEW OF THE ABOVE DISCUSSION, I FIND NO INFI RMITY IN THE ORDER OF THE LD. A.O. AND I CONFIRM THE ACTION OF THE LD. A.O. IN HOLDING THE LONG TERM CAPITAL GAINS OF RS.70,25,200/- TO BE BOGUS. ACCORDINGLY, GROUND NO. 9 TO 15 ARE DISMISSED . 3. MR. SHAH VEHEMENTLY CONTENDS DURING THE COURSE O F HEARING THAT THE ASSESSING OFFICER HAD CONDUCTED A DETAILED EXERCISE DURING THE COURSE OF RE- ASSESSMENT IN QUESTION IN ORDER TO TEST GENUINENESS / CREDITWORTHINESS OF THE ASSESSEES LTCG IN ISSUE. HE REFERS TO THE ABOVE DE TAILED PAPER BOOKS CONTENTS NARRATED IN PRECEDING PARAGRAPH TO THIS EF FECT. HIS CASE THEREFORE IS THAT THERE IS NOT EVEN A SINGLE EVIDENCE WITH EITHE R OF THE LOWER AUTHORITY IN SUPPORT OF THE IMPUGNED ADDITION. HE PARTICULARLY R EFERS TO THE BROKERAGE FIRMS STATEMENT MADE BEFORE THE ASSESSING OFFICER DURING SCRUTINY DENYING ANY CASH COMPONENT IN FURTHERANCE TO ASSESSEES SHARE T RANSACTIONS. THE REVENUES CASE ON THE OTHER HAND IS THAT BOTH THE L OWER AUTHORITIES HAVE RIGHTLY GONE BY THE CIRCUMSTANTIAL EVIDENCE INDICAT ING ASSESSEE TO HAVE ACTED IN COLLUSION WITH VARIOUS ENTRY OPERATORS FOR ARTIF ICIAL RIGGING OF SCRIP PRICES IN THE RELEVANT HOLDING PERIOD IN LIGHT OF VARIOUS CAS E LAWS (SUPRA) FAILS TO DISPUTE THE CLINCHING FACT THAT ASSESSEES VOLUMINOUS EVIDE NCE FORMING PART OF CASE FILE HAS NOWHERE BEEN CONTROVERTED EITHER IN THE CO URSE OF ASSESSMENT OR HIS LOWER APPELLATE PROCEEDINGS. THIS TRIBUNALS CO-ORD INATE BENCHS DECISION IN SANJAY MEHTA VS. ACIT IN ITA NO.1089/KOL/2018 DECIDED ON 28.09.2018 HAS DELETED IDENTICAL ADDITION WITH THE FOLLOWING DETAI LED DISCUSSION:- 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL CONTENTIONS. CASE FILE AS WELL AS A COMPILATION OF JUDICIAL PRECEDENT STAND PERUSE D. 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 ARTIFICI AL MANIPULATION OF SHARE PRICES IN BOTH M/S UNNO INDUSTRIES LTD. & SHARP TRADING FINAN CE LTD. WE FIND NO FORCE IN REVENUES INSTANT ARGUMENT. THIS TRIBUNAL CO-ORDINA TE BENCHS DECISION IN ITA 2394/KOL/2017 PRAKASH CHAND BHUTORIA VS. ITO DECIDED ON 27.06.2018 FOR AY 2014-15 ITSELF UPHOLDS SUCH A SHARE PRICES INCREAS E 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): ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 12 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 BY 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 CHEQUE 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 SANCTIONED 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 PINNACLE VINTRADE LTD. UPON SANCTION OF SCHEME OF ARRANGEMEN T 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 12.04.2013 (91 000 SHARES). ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 13 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 SAID EQUITY SHARES AT BSE IS 519273 AND ISIN NO. IS INE 142N0 1023. 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 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 SHARE S OF 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 EXAM INED IN 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 MOVEMEN TS AND SHARE MARKET BEHAVIOR OF THE ENTITIES INVOLVED IN TRADE, OF THE SCRIP AS THE SHARE 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 WE RE GENUINE 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 INV OLVED 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 CER TAIN BENEFICIARY IS UTILIZED TO ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 14 PURCHASE SHARES OF SUCH COMPANY AT A VERY HIGH ARTI FICIALLY INFLATED MARKET PRICE. SOME OF THE LISTED COMPANIES DIRECTLY OR IN DIRECTL Y OWNED BY OPERATORS AND WHOSE SHARES PRICE HAVE BEEN APPARENTLY MANIPULATED BY TH E SYNDICATE OF OPERATORS. OUT OF THE ABOVE ENQUIRY MADE BY DIT(INV.), KOLKATA HAS ES TABLISHED THAT ONE OF THE MAIN MANIPULATED COMPANY WHICH YOU HAD AVAILED IS ALSO U NDER THIS SYNDICATE. HENCE, IT IS CRYSTAL CLEAR THAT SHARP TRADING COMPANY IS ONE OF THE MAIN MANIPULATED COMPANY (PENNY LISTED) TO CONVERT UNACCOUNTED CASH OF BENEF ICIARY THROUGH LONG 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 GROUND THAT, THE TRANSACTION IN QUESTION COMES WITH IN THE AMBIT OF SUSPICIOUS TRANSACTION AND THEREFORE, THE RULES OF SUSPICIOUS TRANSACTION WOULD APPLY TO THE CASE. HE FURTHER STATED THAT THE PAYMENTS THROUGH BANK OF PROCESSING OF TRA NSACTION THROUGH STOCK EXCHANGE AND OTHER SUCH FEATURES ARE ONLY APPARENT FEATURES AND THAT T HE REAL 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 C LEAR FROM THE FACT THAT THE AO REFERS TO SOME SHARP TRADING COMPANY AS ONE OF THE MAIN ,MANIPULATED COMPANY AND WHEREAS THE ASSESSEE SOLD SCRIPS IN UNNO INDUSTRIES LTD. THE AO REFERS TO VARIOUS ENQUIRIES MADE BY THE DIRECTORS OF INCOME TAX, KOLKATA ON P ROJECT BASIS AND THAT THIS RESULTED INTO UNEARTHING OF A HUGE SYNDICATE OF ENTRY OPERATORS A ND SHARE BROKERS AND MONEY LENDERS INVOLVED IN PROVIDING OF BOGUS ACCOMMODATION ENTRIE S. THE REPORT AS THE SO-CALLED PROJECT AND THE EVIDENCE COLLECTED BY THE DIT (INV.), KOLKATA E TC HAVE NOT BEEN BROUGHT ON RECORD. IT IS WELL SETTLED THAT ANY DOCUMENT RELIED UPON BY THE A O FOR MAKING AN ADDITION HAS TO BE SUPPLIED TO THE ASSESSEE AND AN OPPORTUNITY SHOULD BE PROVIDED TO THE ASSESSEE TO REBUT THE SAME. IN THIS CASE, GENERAL STATEMENTS HAVE BEEN MA DE BY THE AO AND THE ADDITION IS MADE BASED ON SUCH GENERALIZATIONS. THE ASSESSEE HAS NOT BEEN CONFRONTED WITH ANY OF THE 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 THE ASSESSEE AND THEREAFTER GIVING HIM AN OPPORTUNITY TO REBUT T HE 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 CANNOT TAKE THE PLACE OF EVIDENCE. THE HON'BLE SUPREME COURT HAS STATED THAT SUSPICION HOW EVER STRONG CANNOT BE THE BASIS FOR MAKING AN ADDITION. THE EVIDENCE PRODUCED BY THE AS SESSEE LISTED ABOVE PROVES HIS CASE AND THE AO COULD NOT CONTROVERT THE SAME BY BRINGING ON RECORD ANY EVIDENCE. THE EVIDENCE SAID TO HAVE BEEN COLLECTED BY THE DIT (INV.), KOLKATA A ND 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 ACCOUNT GIVEN THE STATEMENT OF TRANSACTIONS FROM 01.04.2004 TO 31.03. 2005 I.E. RELEVANT FOR THE ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 15 ASSESSMENT YEAR UNDER APPEAL (2005-06) ARE BEFORE U S. THERE CANNOT BE ANY DOUBT ABOUT THE TRANSACTION AS HAS BEEN OBSERVED BY THE ASSESSING OFFICER. THE TRANSACTIONS WERE AS PER NORMS UNDER CONTROLLED BY THE SECURITIES TRANSACTION TAX, BROKERAGE SERVICE TAX AND CESS, WH ICH 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 FORMAT. HENCE, WE AGREE WITH THE GIVEN FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING THE TRANSACTIONS AS GENU INE 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 ONWARDS 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 WERE STAGE MANAGED. THE HONBLE HIGH COURT HELD THAT THE OPINION OF THE AO THAT THE ASSESSEE GENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACT IONS SO AS TO REDUCE THE QUANTUM OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW E XPRESSED BY THE LD AO BUT HE MISERABLY FAILED TO SUBSTANTIATE THAT. THE HIGH COU RT HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING PRICE 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 FILED 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 D ECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE WHERE T HE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS TRANSACTIONS IN ALLE GED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE AO DISALLOWED THE LOSS ON TRADING OF PENNY STOCK ON THE BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WAS ALSO FOUND THAT THE AO DID NOT DOUBT 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 B Y THE 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 INFORMATION RECEIVED BY ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 16 HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRA NSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WE RE BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WAS FOUND THAT THE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE . IT WAS ALSO FOUND THAT THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DE MAT ACCOUNTS AND PRODUCED DOCUMENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARIL Y 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 FOU ND 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 JUSTIFIED IN REJECTIN G THE 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. ALIPINE 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 T HERE IS NO SUBSTANTIAL QUESTION OF LAW HELD IN THIS MATTER. HENCE THE APPEAL BEING ITA NO.620 OF 2 008 IS 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 DELE TE 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 EXCHANGE HAS CONFIRMED THE TRANSACTIONS, THE SHARES HAVE BEEN SOLD ON THE ONLINE PLATFORM OF THE STOCK EXCHANGE AND EACH TRAD E OF SALE OF SHARES WERE HAVING ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 17 UNIQUE TRADE NO. AND TRADE TIME. IT IS NOT THE CASE THAT THE SHARES WHICH WERE SOLD ON THE DATE MENTIONED IN THE CONTRACT NOTE WERE NOT TR ADED PRICE ON THAT PARTICULAR DATE. THE LD AO DOUBTED THE TRANSACTIONS DUE TO THE HIGH RISE IN THE STOCK PRICE BUT FOR THAT, THE ASSESSEE COULD NOT BE BLAMED AND THERE WAS NO E VIDENCE TO PROVE THAT THE ASSESSEE OR ANY ONE ON HIS BEHALF WAS MANIPULATING THE STOCK PRICES. THE STOCK EXCHANGE AND SEBI ARE THE AUTHORITIES APPOINTED BY THE GOVERNMEN T OF INDIA TO ENSURE THAT THERE IS NO STOCK RIGGING OR MANIPULATION. THE LD AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THESE AGENCIES HAVE ALLEGED ANY STOCK MANIPULATION AGAINST THE ASSESSEE AND OR THE BROKERS AND OR THE COMPANY. IN ABSENCE O F 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 T HIS CASE, THE SHARES WERE HELD BY THE DONORS FROM 2003 AND SOLD IN 2010 THUS THERE WAS A HOLDING PERIOD OF 7 YEARS AS PER SECTION 49 OF THE ACT AND IT CANNOT BE SAID THAT TH E ASSESSEE AND THE DONORS WERE MAKING SUCH PLANS FOR THE LAST 7 YEARS TO RIG THE S TOCK PRICE TO GENERATE BOGUS CAPITAL 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 CALC UTTA HIGH COURT IN THE CASE OF PR CIT VS RUNGTA PROPERTIES PRIVATE LIMITED ITAT NO 10 5 OF 2016 DATED 8 TH MAY 2017 IN A SIMILAR ISSUE DISMISSED THE APPEAL OF THE DEPARTM ENT 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 TRANSACTIO NS IN SHARES OF THE COMPANY INVOLVED WERE FALSE OR FICTITIOUS. IT IS FINDING OF THE ASSESSING OFFICER THAT THE SCRIPS OF THIS COMPANY WAS EXECUTED BY A BROKER THROUGH CROSS DEALS AND THE BROKER WAS SUSPENDED FOR SOME TIME. IT IS ASSESSEES CONTENTIO N ON THE OTHER THAT EVEN THOUGH THERE ARE ALLEGATIONS AGAINST THE BROKER, BUT FOR T HAT 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. 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 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 ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 18 THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROK ERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECO RD 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 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 N OT JUSTIFIED 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 THRO UGH ACCOUNT PAYEE INSTRUMENTS, WHICH WERE ALSO FILED IN ACCORDANCE WI TH THE ASSESSMENT. 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 EVID ENCES COULD NOT BE BRUSHED ASIDE ON SUSPICION AND SURMISES. HOWEVER, I T WAS HELD THAT THE TRANSACTIONS OF SHARE ARE GENUINE. THEREFORE, WE DO NOT FIND THAT THERE IS ANY REASON TO HOLD THAT THERE IS ANY SUBSTANTIAL QUESTI ON OF LAW INVOLVED IN THIS MATTER. 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 L D AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF SOICL AS U NDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT AND THEREFORE WE UPHOLD THE ORDER OF THE LD CITA AND DISMISS THE APPEAL OF THE REVENUE. ACCORDINGLY THE GROUNDS RAI SED BY THE REVENUE ARE DISMISSED. 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 ASSESSE E AND THERE ARE BACKED BY EVIDENCE. I ALSO FIND THAT THE REVENUE HAS NOT BASED ITS FINDING ON IN ANY EVIDENCE. IN VIEW OF THE ABOVE DISCUSSION THE ADDITION MADE U/S 68 OF THE ACT IS H EREBY DELETED. 6. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS AT THIS STAGE THAT THE DIT(INV) HAS CARRIED OUT A DETAILED INVESTIGATION IN 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 THE ASSESSEE TO HAVE ENGAGED IN ANY KIND OF FOUL PLAY. THIS TRIBUNALS ANOTHER CO-ORDINATE BENCH DECISION IN ITA NO.2281/KOL/2017 NAVNEET AGARWAL VS. ITO DECIDED ON 20.07.2018 HAS REJECTED REVENUES ALL TH ESE 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 P URCHASED AND SOLD, ADDITIONS HAVE TO ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 19 BE MADE, IRRESPECTIVE OF THE EVIDENCE PRODUCED AS T HERE ARE CASES WHERE MANIPULATION HAS TAKEN PLACE. HE REITERATED EACH AND EVERY OBSER VATION 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 SHARE CERTIFICATE PAPER BOOK AT PAGE 8 TO 10). 2. THE PAYMENT FOR THE ALLOTMENT OF SHARES WAS MADE TH ROUGH AN ACCOUNT PAYEE CHEQUE (COPY OF THE BANK STATEMENT EVIDENCING THE SOURCE O F MONEY AND PAYMENT MADE TO SMART CHAMPS IT & INFRA LTD. FOR SUCH SHARES ALLOTTED IS PLACED IN THE PAPER BOOK AT PAGE NO. 11). 3. ANNUAL RETURN NO. 20B WAS FILED WITH REGISTRAR OF C OMPANIES BY SMART CHAMPS IT & INFRA LTD SHOWING THE ASSESSEES NAME AS 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 AT PAGE NO. 1 9 TO 21). 5. ON 24.01.2013, THE HONBLE BOMBAY HIGH COURT APPROV ED THE SCHEME OF AMALGAMATION OF SMART CHAMPS IT AND INFRA LTD. WITH CRESSANDA SOLUTIONS LTD. IN ACCORDANCE WITH THE SAID SCHEME OF AMALGAMATION, THE ASSESSEE WAS A LLOTTED 50000 EQUITY SHARES OF M/S. CRESSANDA SOLUTIONS LTD. THE DEMAT SHARES ARE REFL ECTED IN THE TRANSACTION STATEMENT OF THE PERIOD FROM 1 ST NOVEMBER 2011 TO 31 ST DECEMBER, 2013 (A COPY OF THE SCHEME OF AMALGAMATION ALONGWITH COPY OF ORDER OF THE HONBLE BOMBAY HIGH COURT AND A COPY OF THE LETTER TO THIS EFFECT SUBMITTED BY CRESSANDA S OLUTIONS LTD. TO BOMBAY STOCK EXCHANGE IS PLACED IN THE PAPER BOOK AT PAGE NO 22 TO 43.) 6. THE ASSESSEE SOLD 50000 SHARES COSTING RS. 500000/- THROUGH HER BROKER SKP STOCK BROKING PVT. LTD WHICH WAS A SEBI REGISTERED BROKE R AND EARNED A LONG TERM CAPITAL GAIN OF RS. 2,18,13,072/-. (COPY OF THE BANK STATEM ENT, BROKERS CONTRACT NOTE TOGETHER WITH THE DELIVERY INSTRUCTIONS GIVEN TO THE DP AND 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 PLAC ED 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 PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FROM INCOME TAX. ALL THESE OBSERV ATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT 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 MATTER OR THE GENERAL OBSERVATIONS ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 20 BASED ON STATEMENTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THA T HAVE SURFACED DURING INVESTIGATIONS SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCL USION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSE SSEE IN QUESTION WAS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESSEES ACTION GIVING HER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CA SH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY 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 SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REV ENUE TO MAKE ANY ADDITIONS. OPPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESSE E, 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 WIT H SUCH MATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERI FIED BY EVIDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND TH EORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 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 REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF TH E ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASE D 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 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 C OURTS OF LAW. 15. IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALIS ATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTIN G THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VAL IDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 ITR 151 (SC) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSP ICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATMULL REPO RTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSAC TION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RA ISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTION WE REFER TO THE GENERAL VIEW ON THE TOPIC OF CONVEYANCE OF IMMOVABL E PROPERTIES. THE RATES/SALE PRICE ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTR ATION AUTHORITIES OF THE GOVERNMENT IN MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. THE COURTS HAVE LAID DOWN THAT JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS C ANNOT BE TAKEN BASED ON GENERALISATIONS. COURTS OF LAW ARE BOUND TO GO BY EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER, WE DO NOT FIND THAT THE ASSESSING OFFICER AS WELL A S THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSES SEE HAS BEEN INVESTIGATED AND /OR FOUND TO ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 21 BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GEN ERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASS ESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPARTMENT WHI CH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVE STIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIG ATION 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 B E SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AG AINST 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 THIS CASE, IN OUR VIEW, THE ASSESS ING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTI GATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRI PT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND T O MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVI DENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWE VER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT TH E TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COU LD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD 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 COMMOD ITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN IND ULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEH ALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF T HE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERA BLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,--- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE P ART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEA R UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDUL GED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSI DERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-T AX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HA VE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARR IVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS OF THE APPELLANT I N ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOU NDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE P ROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS EITHER PERVERSE OR VITI ATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY P ERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT A NY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION T HAT THE POSSESSION OF 150 HIGH ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 22 DENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTO RILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATIO N 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 CO LLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, I N THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MA TERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE I NCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART OF THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHA RASHTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P.V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC1623, HELD THAT THE RULES O F NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVAN T EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SH OULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS-EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WIT NESSES, WOULD VIOLATE 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 C OTTON MILLS LTD. V. GANGADHAR 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;BIECCO LAWRIE AND ANR. V. STATE OF WEST BENGAL AND ANR. AI R 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-EXAMI NE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HA D BEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE C OURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS-EX AMINE, 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 TH E CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE G IVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITN ESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT 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 PR INCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATUR AL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMINED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION O R SIMILAR SITUATION. THE HIGH COURT IN ITS ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 23 IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE O N A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON-EXAMIN ATION. IF THE BASIC PRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEEN A GROSS VI OLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTI ON OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS- EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL J USTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX., KOLKATA-II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K.RADHAKRISHNAN, LEARNED SENIOR 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 THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND T HAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAI D TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNI TY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AF ORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE T RIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TR IBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR 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 THEI R TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATIO N. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETH ER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS ME NTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFO RE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUB JECT MATTER OF THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005[2005 (187) E.L. T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DI RECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTIN G 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 DEPA RTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE A FORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 24 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTAHIGH COURT IN THE CASE OF BLBCABLES &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 DECL ARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSAC TION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONF IRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION . THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HO LD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AU THORITIES AND ALLOW THE COMMON GROUNDS 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 SUBSTA NTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, A CCORDINGLY, 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 EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE ASSESSING OFF ICER HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOM E IN THE SHAPE OF LONG TERM CAPITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 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 ASSESSEE S INCOME FROM UNDISCLOSED SOURCES. IN ITA-18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHA TSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIA TION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYME NTS AND RECEIPTS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NA TIONAL STOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 25 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 ENTR IES IN THOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO IN DICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARIS ES. 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 ASSESSEE 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 CONTRO VERT THE FACTS SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ON LY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL /EVIDENCE THE ALLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANI PULATION 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 PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCE S WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS OR BOG US. 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 A UTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN 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 L AWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FAC TS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UP HOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 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 ALLEGA TIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS N O LEGS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CON TROVERT THE 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 ALLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANI PULATION OF SHARES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NO TE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NO TES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTION S RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICT ITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 26 THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EX EMPTED U/S 10(38) OF THE ACT ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. 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 CIRCU MSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE A DDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH AOF 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 BROK ERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECOR D 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 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 N OT JUSTIFIED 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 UN DER 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 ASSESSE E HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCER NED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVES TIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED W ITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BA SANT 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 ME RE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF TH E COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSE SSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CON TROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDING LY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 27 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 FIND ING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE AS SESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FI NDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBU NAL HAS AFFIRMED SUCH FINDING. SUCH FINDING OF FACT IS SOUGHT TO BE DISPUTED IN TH E PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAIS ED IN THE PRESENT APPEAL. HENCE, THE 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 DO CUMENTS 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 GUJARAT 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 WER E 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. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES O UT OF PURCHASES MADE FROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO Q UESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW AS LAID DOWN IN THE ABOVE-MENTIONED JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OU R DECISION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISH ED 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 CAP ITAL GAIN ARISING FROM THE SALE OF SHARES AND HENCE 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 HA VE ERRED IN TREATING ASSESSEES LTCG TO BE BOGUS. THE IMPUGNED ADDITION( S) OF 93,19,895/- AND 4,65,995/1- ARE DELETED. 4. WE ADOPT THE ABOVE EXTRACTED DETAILED DISCUSSION MUTATIS MUTANDIS TO CONCLUDE THAT THE ASSESSEE HAS SUCCESSFULLY PROVED GENUINENESS OF THE SHARE ITA NO.256/KOL/2019 & 2421/KOL/2018 A.YS 12-1 3 & 15-16 SOUMITRA CHOUDHURY VS. ACIT, CIR-22, KOL PURUSHOTTAM DAS AGARWAL VS. ITO WD-35(1) KOL. PAGE 28 PROFITS IN ISSUE CLAIMED AS LTCG U/S 10(38) OF THE ACT. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITI ON OF 70,75,200/- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. COMMISS ION EXPENSE DISALLOWANCE; IF ANY SHALL ALSO FOLLOW SUIT AS A NE CESSARY COROLLARY. 5. LEARNED COUNSEL NO MORE PRESSES ASSESSEES LATTE R SUBSTANTIVE GROUND CHALLENGING VALIDITY OF RE-OPENING / RE-ASSESSMENT IN ISSUE. THIS FORMER LEAD APPEAL ITA NO.256//KOL/2019 IS PARTLY ALLOWED ON ME RITS IN ABOVE TERMS. 6. SAME ORDER FOLLOW IN LATTER ASSESSEE PURUSHOTTAM DAS AGARWALS CASE INVOLVING IDENTICAL LTCG ADDED AS UNEXPLAINED CASH CREDITS AMOUNTING TO 32,11,451/- U/S. 68 OF THE ACT. 7. THESE TWO ASSESSEES APPEALS ARE ALLOWED ON MERI TS IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT 15 /03/2019 SD/- SD/- ( %) (' %) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 15 / 03 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SOUMITRA CHOUDHURY 28C, SATISH MUKHERJEE ROAD, KOLKATA-26/ PURUSHOTTAM DAS A GARWAL, C/O BALAJI ENTERPRISES, 83/85 N.S. ROAD, GR. FLOOR, KOLKAT A 2. % /REVENUE-ACIT CIR-22, 54/1, RAFI AHMED KIDWAI ROAD , KOLAKTA-16/ITO WD.35(1) AAYAKAR BHAWAN, PO ORVA, 110, SHANTIPALLY, KOLKATA-107 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ''4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ / 4,