KARISHMA AJAY AGARWAL , MUMBAI V. INCOME TAX OFFICER , MUMBAI

ITA 2586/MUM/2022

AI Insights

The case revolves around the appeal by Karishma Ajay Agarwal against the order of the National Faceless Appeal Centre (NFAC)/CIT(A), which confirmed the addition of long-term capital gains and alleged undisclosed commission under Section 68 of the Income Tax Act. The primary contention was regarding the genuineness of the transactions involving the sale of shares of M/s KDJ Holidayscapes and Resorts Ltd. The Assessing Officer (AO) had doubted the genuineness based on an investigation report and other circumstantial evidence, leading to substantial additions to the assessee's income. The Tribunal, after examining the evidence and the submissions, concluded that the assessee had discharged the burden of proving the genuineness of the transactions, and the additions made by the AO were not sustainable.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299524 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 14-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 09-10-2022
• Other Referred Cases: ITO Vs. Shri Jimeet Vipul Modi, Nishith Rameshchandra Shah Vs. ITO, Pr. CIT Vs. Karuna Garg, Pr. CIT Vs. Krishna Devi, CIT Vs. Shyam R. Pawar, Pr. CIT Vs. Parasben Kasturchand Kochar, Pr. CIT Vs. Prem Pal Gandhi, CIT Vs. Smt. Jamnadevi Agrawal
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Source of fund; Question of law; Accommodation entries; Assessment record; Onus to prove; Sham transactions; Penny stocks; Capital Gains
• Section: 68; 143(3); 142(1); 250; 143(2); 48; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 2586/Mum/2022 (A.Y: 2014-15) Karishma Ajay Agarwal 218A/219, Shah Nahar Industrial Estate, BK Kher Marg, Lower Parel, Mumbai-400013 Vs. ITO, Ward – 21(2)(1) Aayakar Bhavan, M.K.Road, Mumbai-400020 PAN/GIR No. : AGAPA3857D Appellant .. Respondent Appellant by : Shri Prakash Jhunjhunwala.AR Respondent by : Shri Tejinder Pal SinghAnand.DR Date of Hearing 15.12.2022 Date of Pronouncement 02.03.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC)/CIT(A), Delhi passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal: The appellant prefers an appeal against an order passed by Commissioner of Income Tax (Appeals), ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 2 - National Faceless Appeal Centre, Delhi dated 18/08/2022 on following amongst other grounds each of which are without prejudice to any other :- 1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s 68 of Long Term Capital gain on sale of STT paid listed share of M/s KDJ Holidayscapes and Resorts Ltd of Rs.4,41,37,566/- and alleged undisclosed commission of Rs 37,07,006/- totalling to Rs 4,78,44,571/-; 2.0 The Ld. CIT(A), before confirming the addition of Long Term Capital Gain on sale of listed share of Rs.4,41,37,566/-, ought to have considered the understated vital facts, being; a) The correctness of exhaustive documentary evidences such as Contract- cum-bills, transaction statements, D- mat statements, bank statements, bhav copy, confirmation of broker, letter of allotment, Intimation by listed company to BSE and other documents filed on assessment record had not been disputed by the AO and CIT(A); b) The period of holding of the listed shares in appellant's D-mat account exceeds 12 months; c) The listed shares had been sold on floor of recognized Bombay stock exchange at prevailing market price on making the payment of STT and Service Tax and mere substantial increase in price of shares cannot be a sole reason to treat the bonafide transactions as non-genuine; c) The genuineness of capital asset acquired in earlier year ended 31/3/2013 cannot be disputed in impugned year; ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 3 - d) The appellant is not related to any directors/promoters and exit providers and general statements of 3rd persons recorded at back of the appellant without allowing an opportunity of cross examination is incorrect; e) The addition has been made on the basis of circumstantial evidence, since no contrary material and cash trail has been established by the AO; 3. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s 68 of alleged commission paid of Rs. 37,07,005/- The appellant craves leave to add, amend, alter and or withdraw any of the aground of appeal at the time hearing. 2. The brief facts of the case are that the assessee is an individual and derives income from capital gains and income from other sources. The assessee has filed the return of income for the A.Y 2014-15 on 30.07.2014 disclosing a total income of Rs. 8,65,760/- after claiming exemption u/s 10(38) of the Act on LTCG on sale of shares of KDJ Holidays Scapes & Resorts Ltd of Rs.4,41,37,566/-.Subsequently the case was selected for scrutiny as reasons for scrutiny was claim of long term capital gains on shares. The Assessing officer (A.O) has issued notice u/s 143(2) and 142(1) of the Act. In compliance, the assessee has filed the details on 11.05.2016 along with the ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 4 - details of capital gains earned and related information. Further the assessee has filed the information on 02.06.2016, 14.06.2016 & 7-12-2016. The AO on perusal of the facts and information found that the assessee has purchased 1,00,000 shares of face value of Rs.10/- at a premium of Rs.12/- each of M/s Gomti finlease India Ltd on 16.01.2012 for a consideration of Rs. 22,00,000/- and the assessee has submitted allotment letter, approval of BSE for allotment of shares, bank statement, Demat account, holding of shares in Demat account, rate publication of BSE and financial statements. Further this company has acquired three companies of KDJ group and the shares having face value of Rs.10/-each are split into 5 shares of Rs2/- each share and the total shares post split allotted are 5,00,000 shares credited in to the demat account. The assessee has sold the shares in the financial year 2013-14 at average price of Rs.92/- per share at BSE through a SEBI registered broker. The AO has doubted the allotment of shares on the preferential issue at higher price and based on the investigation wing Kolkata report, trading of shares on stock exchange and ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 5 - statement recorded in search operations on 16.12.16 dealt at Para 7 of the order, observe that the transactions are not genuine. The AO dealt on the various facts of transactions, the allotment of shares, payment of premium on allotment of shares, the price trend on stock exchange, the report of the kolkata investigation wing and the statement of persons and has doubted the earning of Long Term Capital Gains. The A.O observed that there is a no correlation of the price rise and fall of the share price and was not satisfied with the explanations and material information and observed that there could be money trail and came to a unilateral conclusion that transactions are not genuine and made addition as unexplained cash credit u/s 68 of the Act of Rs.4,78,44,571/- including commission estimated @8% on the transactions and assessed the total income of Rs.4,87,10,330/- and passed the order u/s 143(3)(ii) of the Act dated 28.12.2016. 3. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) considered the grounds of appeal, submissions of the assessee, findings of the scrutiny assessment and was not ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 6 - satisfied with the explanations and details and sustained the order of the AO and dismissed the appeal.Aggrieved by the order of the CIT(A), the assessee has filed appeal with the Hon’ble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the addition overlooking the facts and submissions that the purchase of shares are genuine and the assessee has substantiated with various details referred in the assessment order and the CIT(A) order. Further there is no scope for the AO to make the additions based on the surmises and conjectures as the assessee has filed the voluminous documentary evidence in support of the claim. The Ld. AR explained the reasons for purchase of the shares credited to the demat account, shares split and the amalgamation of companies with the approval of the Hon’ble High Court of Bombay. The Ld. AR substantiated the submissions in respect of increase in price and credit worthiness of the shares transacted with the supporting evidences and whereas the AO has only relied on the investigation report and no independent enquiry conducted. The Ld.AR substantiated the submissions with the ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 7 - synopsis, factual paper book and the judicial decisions and prayed for allowing the appeal. Contra, the Ld.DR mentioned that the transactions are not genuine and relied on the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue is that the CIT(A) has confirmed the action of the AO in respect of addition of long term capital gains on sale of shares and estimated commission overlooking the submissions and evidence filed before the both the authorities in support of transactions of purchase and sale of shares made by the assessee. The assessee has purchased 1,00,000 shares of face value of Rs.10/- at a premium of Rs.12/- each of M/s Gomti finlease India Ltd on 16.01.2012 for a consideration of Rs. 22,00,000/- through banking channel and the assessee has submitted allotment letter, approval of BSE for allotment of shares, bank statement, demat account substantiating holding of shares, rate publication of BSE. Further this company has acquired three companies of KDJ group and the shares having face value of Rs.10/-each are split into 5 shares of Rs2/-each share and the total shares ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 8 - post split allotted are 5,00,000 shares credited to the demat account. The assessee has sold the shares in the financial year 2013-14 at average price of Rs.92/- per share at BSE through a SEBI registered broker. The AO has doubted the allotment of shares and sale of shares transaction. 6. The Ld. AR demonstrated the evidence in support of sale of shares with the sale cum contract notes, confirmation of account of the SEBI registered stock broker, bank statement reflecting credits of sale proceeds, demat account for the debits on account of sales, bhav copy of BSE prevailing rate on the date of sale and CIN Master data and certificate of incorporation substantiating the identity and name change of the company placed at page 2 to 23 of the paper book. Further the Ld. AR referred to the affidavit filed by the assessee at page 38 of the paper book. The contentions are that the assessee has filed the documentary evidence to justify the genuineness of the purchase and sales and the long term capital gains as the assessee has sold the shares on the recognized stock exchange where the STT has been paid in respect of listed shares and held for more 12 ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 9 - months. And in respect of allotment of shares, the Ld.AR demonstrated the allotment letter, bank statement disclosing the payments, demat account for shares credit and period of holding at page 25 to 30 of the paper book and a letter for allotment under preferential issue. The AO has relied on the statement of third party and no opportunity of cross examination was provided. Further, the share values has increased due to diversification of business activities and acquisition of 3 company as per the scheme of amalgamation approved by the Honble High Court of Bombay on 13.02.2013.The shares were listed after the subdivision on 26.12.2013 and due to increase in market capitalization there is more flow of equity and the assessee has sold the shares during the period and the transaction is genuine and there cannot any reasons to take a adverse opinion by the lower authorities. 7. We find that the assessee has substantiated the facts before the lower authorities and AO has relied on the statement of the third party and has not conducted any independent investigation. Further, the assessee has given the complete details on the ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 10 - nature of the business activities and audited financial statements of the company and justification of increase in share price and placed reliance on the evidences referred at page 48 to 63 of paper book but AO has failed to examine the company profile and made additions on presumptions and conjectures. The Ld.AR relied on the judicial decisions of Honble High Court and Honble Tribunal in support of e submissions. We find the facts and circumstances of the present case are similar and identical and pertains to A.Y.2014-15 in respect of sale of Shares M/s KDJ Holidayscapes and resorts ltd (earlier known as M/s Gomti Finlease (India) Ltd) dealt by the Coordinate Bench of the Honble Tribunal in the case ITO Vs. Shri Jimeet Vipul Modi in ITA No. 4297/Mum/2022 and has dismissed the revenue appeal observing at Page 4 Para 4.1 of the order read as under: 4.1 During appellate proceedings, the assessee again refuted the allegations of Ld. AO by way of elaborate written submissions which have already been extracted in the impugned order. The Ld. CIT(A), at the outset, noted that provisions of Sec.68 were invoked by Ld. AO to add back the purchase price of shares. However, the payment for purchase of shares was made through banking ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 11 - channels which stood corroborated by various documents submitted by the assessee. All the payment for purchases was made through account payee cheques which were debited in assessee’s books of accounts. Thus, the transaction was a debit entry in the books of accounts and therefore, the purchase price paid by the assessee could not be held to be unexplained cash credit in the books of account. This being so, the provisions of Sec.68 would have no applicability to the fact of the case and the addition was totally on a wrong footing. Therefore, the impugned additions were not sustainable under law. 4.2 At the same time, in para-5.3, it was observed by Ld. CIT(A) that Ld. AO had not considered the documents pertaining to purchase and sale of shares of Gomti Finlease (India) Limited. These documents were in the shape of contract note, bank statements, brokers ledger and Demat Account statement of the assessee which were duly submitted at the time of assessment proceedings. The assessee had fully discharged the onus to prove the transactions. The assessee had purchased the shares of a listed company through recognized stock broker on BSE and similarly sold the shares through recognized stock broker on BSE at the prevalent price. As regards adjustment / fluctuation in rate (Rs 494/- to Rs. 99/-), the same was due to splitting of shares since the scrip had face value of Rs.10/- which was split on 26/12/2013 to Rs.2/- per share. Accordingly, the market value was reduced in that proportion. The assessee had fully discharged his onus to prove the transaction of purchase of shares including source of funds for the purchase. The assessee furnished justification for purchase of shares based on the market information that the said company, as per Special Resolution passed on 29/11/2012 and the Board of Directors meeting held on 09/03/2013, had ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 12 - decided to invest Rs.15 Crores in the equity of KDJ Hospital Limited wherein the company had existing equity of 40.76%. By making additional investment, the holding would be more than 75% and accordingly, the scrip exhibited a consistent Higher-Top Higher-Bottom pattern on its charts. It has also exhibited pattern of correcting and bouncing back from its 14 days moving average which also coincided with a lower-bottom in the charts. The stock was trading well above the long-term average i.e. 200 days moving average of the stock, which indicated that the long term trend of the stock was firmly up. The said shares were sold as the price of any script would be market driven. Since the assessee was an investor, when the prices were continuously falling, the assessee exited from the said script and booked losses to safeguard himself against future losses. The statement of Shri Nikhil Jain and Shri Bidyoot Sarkar as referred to by Ld. AO did not contain any reference to the assessee. The reliance on the said statement without any co-relation does not prove that the transactions were non-genuine. There was no evidence of any cash transaction and Ld. AO failed to bring on record any evidence to support the conclusions that the losses were not genuine. Rather the conclusions were based merely on surmises and conjectures. On the other hand, the assessee had furnished all the documentary evidences in support of the claim. 4.3 Finally, relying upon the decision of Hon’ble Bobay High Court in the case of CIT vs. Mukesh Ratilal Marolia (ITA 456 of 2007 dated 07/09/2011), the decision of Hon’ble Punjab & Haryana High Court in case of Pr. CIT vs. Prem Lal Gandhi (ITA No.95 of 2017 dated 18/01/2018) and the decision of Delhi Tribunal in Chander Prakash vs. ITO in (ITA No.6880/Del/2017 dated 12/03/2018), the impugned additions as well as consequential addition of estimated commission, as made ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 13 - by Ld.AO, was deleted. Aggrieved, the revenue is in further appeal before us. Our findings & Adjudication 5. After having gone through the findings of Ld. CIT(A) in the impugned order, the undisputed fact that emerges are that the purchase as well as sale transactions have taken place on stock exchange through stock-broker. There is movement of shares in assessee’s demat statement. The transactions have taken place through banking channels and duly supported by broker’s contract notes, demat statements, ledger statements as well as bank statements. The assessee is regular investor in shares. The assessee has always maintained that the transactions were genuine. As against this, the only adverse material in the armory of Ld. AO is the investigation findings. However, the assessee has not been named in any of the statement. The assessee has denied having known Shri Nikhil Jain & Shri Bidyoot Sarkar whose statements form the very basis of doubting the assessee’s transactions. The assessee, as rightly pointed out by Ld. CIT(A), had duly discharged the onus to establish the genuineness of the transactions and the onus was on Ld. AO to dislodge them. However, except for mere allegations, there is no adverse material against the assessee and the additions are based merely on conjectures and surmises. Another aspect is that the provisions of Sec.68, as invoked by Ld. AO, had no applicability to the fact of the case. The invoking of wrong provisions would make the additions unsustainable in the eyes of law. Therefore, we are of the considered opinion that the issue has been clinched in the right perspective by Ld.CIT(A) in the impugned order. Finding no reason to interfere in the same, we dismiss the appeal. 6. In the result, the appeal stands dismissed. ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 14 - 8. The Honble Tribunal in the case of Nishith Rameshchandra Shah Vs. ITO, ITA No. 1116/Mum/2022 has observed at Para 5 of the order as under: 5. Having heard the rival submissions and perused the materials available on record, we are of the considered opinion that the AO has reopened the assessee’s case based on the information received from the investigation wing. It is pertinent to point out that the assessment order in the present case does not have any mention about the independent inquiry that was conducted by the AO relevant to the impugned transaction. It is also observed that the AO has failed to examine the alleged Directors of M/s. Diamant Infrastructure Limited as to the nature of business carried out by the said company nor has the AO examined the alleged brokers involved in the impugned transactions. We would like to place our reliance on the decision cited by the assessee in the case of DCIT Vs. Sunita Khumka ITAT, (Cul.) (2016) ITRV- ITAT- CUL.-057 which held that the transaction cannot be held to be bogus merely on the basis of suspicion or surmise and that the AO has to substantiate his finding by bringing material on record to prove collusion/connivance between the broker and the assessee for introducing unaccounted money. We would also like to place our reliance on the decision of Hon’ble jurisdictional Bombay High Court in the case of Commissioner of Income Tax-13 Vs. Shyam R. Pawar wherein it was held that where D- MAT account and contract note showed details of share transaction, and AO had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income u/s 68. It is pertinent ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 15 - to point out that we have also considered the recent decision of Hon’ble Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Swati Bajaj on similar issue which held that the AO should conduct enquiry on the impugned transaction to substantiate that the claim of the assessee for LTCG/STCL is non genuine and further held that the AO can rely on circumstantial evidence based on the doctrine of preponderance of probabilities in such cases where it is beyond the reach to carve out direct evidences. But, in the present case we find that the AO has made no enquiry other than relying on the report of the investigation wing and the steep increase in the price of the shares. We are of the considered opinion that the AO should have done a further analysis and enquired into the genuineness of the alleged transaction. We place our reliance for this proposition on the decision of the Hon’ble Apex Court in the decision of Principal Commissioner of Income Tax Vs. NRA Iron and Steel Private Limited (2019) 412 ITR 161 (SC). In the present case in hand the assessment order is flawed by lack of enquiry by the AO. 6. From the above observation and by respectfully following the decision cited above, we hereby direct to delete the addition made u/s 68 of the Act. 9. The Ld. AR contentions are that the assessee name nor the company shares traded were never in the investigation of concerned authorities. The Ld. AR relied on the decision of Hon’ble High Court of Delhi in the case of Pr. CIT Vs. Karuna Garg, ITA No. 477/ 2022 has observed at page2 para3 read as under: ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 16 - 3. Though Revenue has mentioned in the present appeal that the issue involved is covered by the judgment of this Court in Suman Poddar v. ITO 423 ITR 480, wherein appeal of the Assessee was dismissed taking judicial notice of the fact that there was an astronomical increase in the share price of a company which was not commensurate with the financial parameters of the said company, yet this Court finds that a Coordinate Bench of this Court in PCIT vs. Smt. Krishna Devi [ITA 125/2022] & connected ITAs has upheld the ITAT order which is impugned in the present appeal. 4. The relevant portion of the order in PCIT vs. Smt. Krishna Devi (supra) is reproduced hereinbelow:- “11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 17 - Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that thtransaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 18 - were dematerialized and the sales have been routed from demat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 19 - that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above- stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.” 5. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed. 10. The Hon’ble High Court of Delhi in the case of Pr. CIT Vs. Krishna Devi, 126 taxmann.com 80 has observed as under: Section 68 of the Income-tax Act, 1961 Cash credit (Bogus LTCG on sale of shares) - Assessment years 2014-15 and 2015-16 Assessee had sold shares of a company held by it and claimed exemption under section 10(38) on account of long-term capital gain (LTCG) arose on such sale of shares - Assessing Officer noted that there was astounding 4849.2 per cent jump in share ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 20 - prices of said company within a span of two years and financials of said company did not show any reason for such extraordinary performance of its stock - Thus, he concluded that assessee had adopted a colourable device of LTCG to avoid tax and, accordingly, made addition under section 68 treating such LTCG arose on sale of such shares as bogus It was noted that there was no dispute that shares of said company were purchased by assessee online and payments were made through banking channel - Shares were dematerialized and sales were routed from demat account and consideration was received through banking channels Assessing Officer simply proceeded on basis of financials of company to come to conclusion that transactions were bogus Assessing Officer had not made its conclusion on basis of any cogent material Finding of Assessing Officer was thus purely an assumption based on conjecture made by Assessing Officer Whether, on facts, impugned addition made under section 68 by treating impugned LTCG as bogus was unjustified and same was to be deleted - Held, yes [Paras 11 and 13 in favour of assessee] 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 21 - and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 22 - on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 23 - regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 24 - 11. We find the Jurisdictional High Court of Bombay in the case of CIT Vs. Shyam R. Pawar, 54 taxmann.com 108 has observed as under: Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) - Assessment years 2003-04 to 2006-07 Assessee declared capital gain on sale of shares of two companies. Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices. held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted Held, yes [Para 7] [In favour of assessee] It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange- words showed that the shares were purchased for code numbers S003 and R121 of STPL and RMPL pectively. Out of these two, only RMPL is listed in the appraisal report and it is stated to be involved in dus operandi It is on this material that the Assessing Offices holds that the transactions of sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 25 - and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the assessee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the assessee to the transactions and which are attributed to the promoters/directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not cared forward by the revenue. A copy of the DMAT account, placed before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available which gave details of the transactions. The contract note is a system generated and prescribed by the stock exchange. From this material, the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client code has been referred to. But the Tribunal concluded that same, by itself, is not enough to prove that the transactions in the impugned shares were bogus sham. The details received from stock exchange have been relied upon for the purposes of faulting the revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. [Para 6] ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 26 - 12. Hon’ble Supreme Court in the case of Pr. CIT Vs. Parasben Kasturchand Kochar, 130 taxmann.com 177 (SC) has observed as under: Section 10(38) of the Income-tax Act, 1961 Capital gains Income arising from transfer of long-term securities (Shares) Assessment year 2014-15 Assessee-individual engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under section 10(38) - Assessing officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under section 10(38) High court by impugned order held that no substantial question of law. arose from Tribunal's order - Whether SLP against said impugned order was to be dismissed -Held, yes (Para 2) (In favour of assessee) 13. Similarly Hon’ble High Court in the case of Pr. CIT Vs. Prem Pal Gandhi, (401 ITR 0253) (P & H) has observed as under: Capital gain-Share transaction-Addition-Deletion thereof- During course of assessment proceedings u/s 153A, it was noticed by AO that assessee had shown long term capital gain on sale of shares of company-AO treated share transaction as non-genuine transaction and amount ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 27 - was shown as long term capital gain on share transaction was added to income of assessee-CIT(A) deleted addition- Tribunal upheld order passed by CIT(A) and dismissed appeal of revenue-Held, assessee sold shares through MTL shares and Stock Broker limited which was SEBI registered Stock Broker-Payment for sale of shares was received through banking channels-All documentary evidence being in favour of assessee, deletion of addition made by CIT(A) was upheld by Tribunal-All these documentary evidences in favour of assessee were rejected by AO merely on basis of some casual replies given by assessee to AO- Documentary evidences were in favour of assessee and CIT(A) had passed very reasoned and speaking order-Dividend amount was received with regard to holding of shares and said amount was disclosed by assessee in his return of income and exemption was claimed accordingly-Thus, addition being without any logical basis was deleted-Revenue's appeal dismissed. Held: The CIT(A) examined the matter and the comments of the Assessing Officer in the remand report. It has been recorded by the CIT(A) that the purchase of shares in the financial year 2006-07 for an amount of Rs. 11 lakhs had been physically transferred in favour of the assessee in the books of the company namely GeeFCee Finance Limited. Further, the said shares were dematerialized and credited in the assessee's account maintained with depositary participant i.e. HDFC on 16.10.2006. The dividend amount of Rs. 1,50,000/- had been received with regard to aforementioned holding of shares on 23.10.2007. The said amount had been disclosed by the in his return of income and exemption was claimed ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 28 - accordingly. Thus, the addition being without any logical basis was directed to be deleted. (Para 4) Assessee had sold shares through MTL shaes and Stock Brokers Limited as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking channels. All these documentary evidences in favour of the assessee were rejected by Assessing Offiver merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same." 14. The Hon’ble High Court of Bombay in the case of CIT Vs. Smt. Jamnadevi Agrawal, 328 ITR 656 (Bom) has observed as under: Income-Cash credit-Genuineness of share transactions- Assessees offered long- term capital gains arising from sale of shares-On the basis of material seized during the search in the case of various assessees who belong to H group, AO did not accept the capital gains and treated the entire sale proceeds of the shares as income from undisclosed sources under s. 68-Not justified-Fact that the assessees in the group have purchased and sold shares of the same companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence has been produced to establish the genuineness of the sale- Company has confirmed that it has handed over the shares purchased by the assessees-Similarly, the sale of ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 29 - shares to the respective buyers is also established by producing documentary evidence-Purchase and sale price of the shares declared by the assessees is in conformity with the market rates prevailing on the respective dates- Thus, the fact that some of the transactions were off- market transactions cannot be a ground to treat the transactions as sham transactions-Tribunal has arrived at a finding of fact that the transactions were genuine- Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence-Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees-Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. The fact that the assessees in the group have purchased and sold shares of similar companies hrough the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 30 - transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TT) (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished. (Paras 11 to 14 & 16) Conclusion: Assessees having established the genuineness of purchase and sale of shares by producing documentary evidence and declaring the purchase and sale price of shares in conformity with the market rates prevailing on the respective dates, the finding of the Tribunal that the transactions were genuine is a finding of fact based on ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 31 - documentary evidence on record and, therefore, no substantial question of law arises from the order of the Tribunal deleting the addition under s. 68. 15. We have considered the overall facts, submissions and the information find that the assessee has furnished the financials, details of broker, affidavit and the transactions status and MCA website details of the company. The AO has doubted the purchase and sale of shares and observed that the price rigging is not commensurate with the financials of the assessee company. The assessee has substantiated with all details and information and the revenue could not make out a case that there is unaccounted money transactions took place in the hands of the assessee and the AO has relied on the investigation report of income tax department and treated the long term capital gains on sale of shares as not genuine. Further the A.O. has not made any enquiry or independent investigation and relied on the statement of the parties and the assessee’s name is not included in the list of investigation report. The fact remains that the assessee has submitted the requisite details in respect of purchase and sale of shares and were not disproved. The transaction of purchase and sale ITA No. 2586/Mum/2022 Karishma Ajay Agarwal, Mumbai. - 32 - of shares is through banking channel. Further as discussed in the above paragraphs the Honble Tribunal dealt on the same scrip of share and for the same assessment has up held the relief granted by the CIT(A) and has dismissed the revenue appeal. Accordingly, we considering facts, circumstances, ratio of judicial decisions, submissions, evidences and rely on the judicial precedents and are of the opinion that the addition cannot be sustained and set aside the order of the CIT(A) and direct the assessing officer to delete the additions and allow the grounds of appeal in favour of the assessee. 16. In the result the appeal filed by the assessee is allowed. Order pronounced in the open court on 02.03.2023. Sd/- Sd/- ( PRASHANT MAHARISHI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 02.03.2023 KRK, PS /Copy of the Order forwarded to :