Aghor Kumar Dudhwewala, Kolkata V. ITO, Ward - 22(4) , Kolkata

ITA 2605/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4824 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-07-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 17-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Share purchase agreement; Principle of natural justice; Earning of tax free income; Question of law; Accommodation entries; Sham transactions; TDS; Set aside; Capital Gains; Bogus
• Section: 68; 205; 201; 13; 22; 20

Judgement Text

1 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 , SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 2605/KOL/2018 ASSESSMENT YEAR: 2015-16 AGHOR KUMAR DUDHWEWALA (PAN: ADCPA 9872 H) VS. ITO, WARD 22(4), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 01.07.2019 DATE OF PRONOUNCEMENT 09.08.2019 FOR THE APPELLANT SHRI AKKAL DUDHWEWALA, ACA FOR THE RESPONDENT SHRI SANKAR HALDER. JCIT, SR. D R ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) 6, KOLKATA DATED 19.11.2018 FOR ASSESSMENT YEAR 2015-1 6. 2. THE MAIN GRIEVANCE OF THE APPELLANT IN THIS APPE AL IS AS TO WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LDCIT(A) WAS JUSTIFI ED IN UPHOLDING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT IN RESPECT OF GAIN DERIVED ON SALE OF SHARES OF M/S RAJ LAKSHMI INDUSTRIES LIMITED (RLIL) TREATING THE SAME AS IN COME FROM UNDISCLOSED SOURCES AFTER REJECTING THE ASSESSEES CLAIM OF LONG TERM CAPITAL GAINS (LTCG) ON SALE OF THOSE SHARES. 3. THE BRIEF FACTS OF THE ISSUE AS HAS BEEN RECORDE D BY THE AO IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE HAD PURCHASED 5000 SHARES OF M/S RAJ LAKSHMI INDUSTRIES LIMITED. OUT OF THESE, THE ASSESSEE HAD SOLD 2530 SHARES DURING THE FY 2014-15 RESULTING IN LONG TERM CAPITAL GAIN OF RS.4,52,257/-. THE AO VIDE HIS REQU ISITION DATED 14.09.2017 REQUIRED THE ASSESSEE TO FURNISH THE COMPLETE DETAILS OF THE PUR CHASE & SALE OF SHARES OF M/S RAJ LAKSHMI INDUSTRIES LIMITED. AFTER GOING THROUGH THE SUBMISS IONS OF THE ASSESSEE, THE AO ISSUED A 2 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 SHOW CAUSE LETTER DATED 06.12.2017. THE AO RELYING ON THE PROJECT REPORT OF THE INVESTIGATION WING, KOLKATA ALLEGED THAT THE CLAIM OF ASSESSEE OF EXEMPT INCOME (LTCG) WAS BOGUS IN NATURE. THEREAFTER, THE AO TREATED THE SAME AS CASH CREDIT U/S 68 OF THE ACT AND ADDED THE ENTIRE LTCG TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME. ON FIRST APPEAL, THE LD. CIT(A) DISMISSED THE GROUNDS RAISED BY THE ASSESSEE AGAINST HIS CLAIM OF EXEMPTION U/S 10(38) OF THE ACT AND HE ALSO CONFIRM ED THE ADDITIONS MADE BY THE AO UNDER SECTION 68 OF THE ACT. AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE THIS TRIBUNAL. 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ASSAILING THE ORDER OF THE AO, THE LD. AR OF THE APPELLANT TOOK ME THROUGH THE SEQUENCE OF EVENTS WHICH OCCURRED IN THE FACTS OF T HE INSTANT CASE. IT WAS SUBMITTED THAT THE APPELLANT INDIVIDUAL WAS ENGAGED IN PROFESSION AND WAS INVESTING HIS SURPLUS MONIES IN THE FORM OF INVESTMENT IN SHARES & SECURITIES. THE LD. AR DREW MY ATTENTION TO THE FACT THAT BEFORE THE AO THE APPELLANT HAD FURNISHED COMPLETE DETAILS & EVIDENCES TO SUBSTANTIATE HIS TRANSACTION IN THE SHARES OF RLIL. IT WAS POINTED O UT THAT THE AO HAD MADE GENERAL ASSERTIONS AND ALLEGATIONS IN HIS SHOW CAUSE AS WEL L AS THE IMPUGNED ORDER WITHOUT POINTING OUT ANY SPECIFIC DETAIL OR INFIRMITY IN THE DOCUMEN TS FURNISHED BEFORE HIM. HE INVITED MY ATTENTION TO THE LETTER DATED 18.12.2017 WHEREIN TH E APPELLANT HAD SPECIFICALLY SOUGHT THE AO TO PROVIDE THE COPY OF THE SO CALLED REPORT OF INVE STIGATION WING BASED ON WHICH ALLEGATIONS WERE BEING LEVELLED AGAINST HIM. IT WAS SUBMITTED T HAT THERE WAS NO PROJECT REPORT OR ANY OTHER CREDIBLE EVIDENCE OBTAINED FROM THE INVESTIGA TION WING BY THE AO WHICH WOULD IN ANY MANNER SUGGEST THAT THE GAIN DERIVED BY THE APP ELLANT ON SALE OF SHARES OF RLIL WAS BOGUS. IN ABSENCE OF ANY DIRECT OR INDIRECT EVIDENC E AGAINST THE APPELLANT, IT WAS CLAIMED THAT THE LOWER AUTHORITIES ERRED IN DENYING THE BEN EFIT OF EXEMPTION CLAIMED U/S 10(38) IN RESPECT OF SALE OF SHARES OF RLIL BY THE APPELLANT. HE FURTHER BROUGHT TO MY ATTENTION THAT THIS TRIBUNAL IN THE FOLLOWING CASES,ON SIMILAR SET OF FACTS AND CIRCUMSTANCES, HAS HELD THAT WHERE THE PURCHASE AND SALE TRANSACTIONS ARE SUPPOR TED AND EVIDENCED BY BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND BANK STATEMENTS ETC., A ND WHEN THE TRANSACTIONS OF PURCHASE OF SHARES WERE ACCEPTED BY THE LD AO IN EARLIER YEARS, THE SAME COULD NOT BE TREATED AS BOGUS SIMPLY ON THE BASIS OF SOME GENERAL REPORTS OF THE INVESTIGATION WING AND/OR THE STATEMENTS 3 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 OF THIRD PARTIES. IN SUPPORT OF THE AFORESAID SUBMI SSIONS, THE LD AR, IN ADDITION TO THE AFORESAID JUDGEMENTS, HAS REFERRED TO AND RELIED ON THE FOLLOWING CASES:- (I) BAIJNATH AGARWAL VS. ACIT [2010] 40 SOT 475 ( AGRA (TM) (II)ITO VS. BIBI RANI BANSAL [2011] 44 SOT 500 (A GRA) (TM) (III) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGRA /2009 (AGRA ITAT) (IV) ACIT VS. AMITA AGARWAL & OTHERS ITA NOS. 24 7/(KOL)/ OF 2011 (KOL ITAT) (V) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22 -26/KOL/2P11 (KOL ITAT) (VI) SURYA PRAKASH TOSHNIWAL VS. ITO ITA NO. 1213 /KOL/2016 (KOL ITAT) (VII) SUNITA JAIN VS. ITO ITA NO. 201 & 502/AHD/2 016 (AHMEDABAD ITAT) (VIII) MS. FARRAH MARKER VS. ITO ITA NO. 3801/MUM /2011 (MUMBAI ITAT) (IX) ANIL NANDKISHORE GOYAL VS. ACIT ITA NOS. 125 6/PN/2012 (PUNE ITAT) (X) CIT VS. SUDEEPGOENKA [2013] 29 TAXMANN.COM 4 02 (ALLAHABAD HC) (XI) CIT VS. UDITNARAIN AGARWAL [2013] 29 TAXMANN .COM 76 (ALLAHABAD HC) (XII) CIT VS. JAMNADEVI AGARWAL [2012] 20 TAXMANN.C OM 529 (BOMBAY HC) (XIII) CIT VS. HIMANI M. VAKIL [2014] 41 TAXMANN. COM 425 (GUJARAT HC) (XIV) CIT VS. MAHESHCHANDRA G. VAKIL [2013] 40 TA XMANN.COM 326 (GUJARAT HC) (XV) CIT VS. SUMITRA DEVI [2014] 49 TAXMANN.COM 37 (RAJASTHAN HC) (XVI) GANESHMULLBIJAY S BAID HUF VS. DCIT ITA NOS . 544/KOL/2013 (KOLKATA ITAT) (XVII) MEENA DEVI GUPTA VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) (XVIII) MANISH KUMAR BAID ITA 1236/KOL/2017 (KOLKA TA ITAT) (XIX) MAHENDRA KUMAR BAID ITA 1237/KOL/2017 (KOLKAT A ITAT) (XX) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693 /KOL/2009 (KOL ITAT) 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE V EHEMENTLY OPPOSED THE CONTENTIONS OF THE ASSESSEE AND TOOK US THROUGH THE AOS ORDER AND LD. CIT(A) ORDER AND SUBMITTED THATTHE SCRIPS OF M/S. RLIL WAS ARTIFICIALLY RIGGED TO PROVIDE LTCG TO THE ASSESSEE WHICH CANNOT BE ALLOWED AND SUPPORTED THE IMPUGNED ORDER AND RELIED ON THE ORDER OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BINOD CHAND JAIN I N TAX APPEAL NO.18 OF 2017. 6. COMING TO THE FACTS OF INSTANT CASE, IT IS NOTED BY ME THAT THE ASSESSEE HAD PURCHASED 5000 SHARES @ RS.20/- EACH OF M/S. RAJ LAKSHMI INDU STRIES LIMITED FOR A CONSIDERATION OF RS.1,00,000/- FROM MR.DILIPNASKAR IN AN OFF MARKET TRANSACTION. IT IS CLARIFIED THAT OFF MARKET TRANSACTION HAS NOT BEEN PROHIBITED AND IF C ARRIED OUT LEGALLY CANNOT BE HELD TO BE BOGUS ONLY ON THIS COUNT. IT IS FURTHER NOTED THAT OUT OF 5000 SHARES, THE APPELLANT LATER SOLD 2530 SHARES AT A PRICE OF RS.5,02,857/- IN THE STOC K EXCHANGE OF BOMBAY, WHICH ACCORDING TO ASSESSEE, RESULTED IN LONG TERM CAPITAL GAINS AF TER REMITTING STT AND SO THE ASSESSEE 4 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 CLAIMED EXEMPTION U/S 10(38) OF THE ACT OF RS.4,52, 257/-. IT IS NOTED THAT THE PURCHASE BILL OF MR. DILIPNASKAR AND DETAILS OF PAYMENT MADE FOR PURCHASE OF SHARES FOUND ARE PLACED AT PAGES 14 TO 16 OF PAPER BOOK. THE AFORESAID 5,000 S HARES OF M/S. RAJ LAKSHMI INDUSTRIES LIMITED WERE RECEIVED IN THE DEMAT (PAGE 17 OF PAPE R BOOK). THE ASSESSEE SOLD THE SAID SHARES DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR UNDER CONSIDERATION AND SUCH SALE WAS MADE IN THE BOMBAY STOCK EXCHANGE THROUGH M/S. ORTEM SECURITIES LTD., A REGISTERED SHARE AND STOCK BROKER (CONTRACT NOTES P LACED AT PAGES 52-58 OF PAPER BOOK) AFTER DULY PAYING THE SECURITY TRANSACTION TAX (STT). THE SALE CONSIDERATION THE ASSESSEE RECEIVED BY ACCOUNT PAYEE CHEQUE IN ITS INDUSIND BA NK ACCOUNT WHICH IS EVIDENT FROM THE BANK STATEMENT FILED BEFORE US AT PAGES37-44 OF THE PAPER BOOK. THEREFORE, THE LONG TERM CAPITAL EARNED IN THE PROCESS HAS BEEN CLAIMED AS E XEMPT INCOME UNDER SECTION 10(38) OF THE ACT. I ALSO NOTE THAT IN SUPPORT OF THE ASSESSEES CONTENTION VARIOUS DOCUMENTS HAD BEEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS I .E. COPIES OF PURCHASE BILLS, COPY OF BANK STATEMENTS SHOWING PAYMENTS MADE FOR PURCHASE OF SH ARES, DEMAT ACCOUNT WITH EAST INDIA SECURITIES LIMITED, TRANSACTION STATEMENT FROM BSE, COPIES OF CONTRACT NOTES IN RESPECT OF SALE OF SHARES, EXTRACTS OF TRANSACTIONAL DATA IN R ESPECT OF THE TRADES CONDUCTED IN THE SHARES OF RLIL, COPY OF BANK STATEMENTS SHOWING RECEIPTS A GAINST SALE OF SHARES, ALL OF WHICH IS AVAILABLE AT PAGES 14-59 OF PAPER BOOK. 7. I NOTE THAT SHARES OF M/S. RLIL WERE SOLD BY ASS ESSEE THROUGH RECOGNIZED BROKER IN A RECOGNIZED STOCK EXCHANGE. THE DETAILS OF SUCH SALE AND CONTRACT NOTE HAVE BEEN SUBMITTED BEFORE AO/LD. CIT(A). I TAKE NOTE THAT WHEN THE TRA NSACTIONS HAPPENED IN THE STOCK EXCHANGE, THE SELLER WHO SELLS HIS SHARES ON THE ST OCK EXCHANGE DOES NOT KNOW WHO PURCHASES SHARES. IT IS NOTED THAT THE SHARES ARE S OLD AND BOUGHT IN AN ELECTRONIC MODE ON THE COMPUTERS ON-LINE BY THE BROKERS AND THERE IS ALSO NO DIRECT CONTACT AT ANY LEVEL EVEN BETWEEN THE BROKERS. IT IS NOTED THAT AS AND WHEN A NY SHARES ARE OFFERED FOR SALE IN THE STOCK EXCHANGE PLATFORM, ANY ONE OF THE THOUSANDS OF BROK ERS REGISTERED WITH THE STOCK EXCHANGE IS AT LIBERTY TO PURCHASE IT. AS FAR AS OUR UNDERST ANDING THE SELLING BROKER DOES NOT EVEN KNOW WHO IS THE PURCHASING BROKER. THIS IS HOW THE SEBI KEEPS A STRICT CONTROL OVER THE TRANSACTIONS TAKEN PLACE IN RECOGNIZED STOCK EXCHAN GES. UNLESS THERE IS AN EVIDENCE TO SHOW 5 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 THAT THERE IS A BREACH IN THE AFORESAID PROCESS WHI CH IN FACT HAS BEEN UNEARTHED BY METICULOUS INVESTIGATION, I AM OF THE OPINION THAT THE UNSCRUPULOUS ACTIONS OF FEW PLAYERS EXPLOITING THE LOOPHOLES OF THE STOCK EXCHANGE, IF ANY, CANNOT BE THE BASIS TO PAINT THE ENTIRE SALE/PURCHASE OF A SCRIP LIKE THAT OF M/S. R LIL AS BOGUS WITHOUT BRINGING OUT ADVERSE MATERIAL SPECIFICALLY AGAINST THE ASSESSEE. 8. THE LD. CIT(A) IN HIS ORDER HAS OBSERVED THAT TH E MR. NASKAR FROM WHOM THE ASSESSEE HAD PURCHASED THE SHARES IN THE OFF MARKET TRANSACTION HAD IN TURN PURCHASED THE SHARES FROM M/S HEDE CONSULTANCY COMPANY PVT. LTD. WHICH WAS BASED OUT OF GOA. ACCORDING TO LD. CIT(A) THE FACT THAT MR. NASKAR HA D PURCHASED SHARES JUST THREE DAYS PRIOR TO SELLING THE SAME SHARES TO THE APPELLANT SHOWED THAT THIS ACT OF INVESTING PRIVATELY WAS AGAINST FINANCIAL PRUDENCE. THIS OBSERVATION HOWEVE R APPEARS TO BE IRRELEVANT. IT IS WELL ACCEPTED THAT THE REVENUE IS NOT EMPOWERED TO SIT I N JUDGEMENT WITH REGARD TO THE REASONABLENESS OR NECESSITY OF INCURRING EXPENDITUR E OR FOR THAT MATTER EARNING ANY INCOME AND DETERMINE ITS REASONABLENESS AND EXPEDIENCY. I N OTHER WORDS THE REVENUE CANNOT DECIDE OR DICTATE AS TO HOW AN ASSESSEE SHOULD COND UCT HIS BUSINESS. HENCE MERELY BECAUSE THE SELLER WHO SOLD THE SHARES TO THE APPELLANT HAD PURCHASED IT THREE DAYS AGO CANNOT BE HELD AGAINST THE APPELLANT. IT IS FURTHER NOTED THAT THE RE IS NO DENYING THE FACT THAT THE APPELLANT HAD OBTAINED PHYSICAL DELIVERY OF SHARE CERTIFICATE S WHICH WERE LATER ON HANDED OVER TO THE DEPOSITORY PARTICIPANT FOR BEING HELD IN DEMATERIAL IZED FORM. FROM THE COPY OF THE DEMAT REQUEST FORM FILED BY THE APPELLANT WITH M/S EAST I NDIA SECURITIES LIMITED IT IS NOTED THAT THE SHARE FOLIO NUMBER, DISTINCTIVE NUMBERS OF THE SHAR E CERTIFICATES HANDED OVER ETC. WERE SET OUT IN DETAIL. ON THESE FACTS THEREFORE THE LD. CIT (A)S OBSERVATION DOUBTING THE GENUINENESS OF THE PURCHASE OF SHARES IS FOUND TO B E UNSUSTAINABLE. 9. I FURTHER NOTE THAT THE FACT OF HOLDING THE SHAR ES IN THE DEMAT ACCOUNT HAS NOT BEEN DISPUTED. THEREFORE, ONCE, THE HOLDING OF SHA RES IS DEMAT ACCOUNT STANDS PROVED, THEN THE TRANSACTION CANNOT BE HELD AS BOGUS. THE A O HAS NOT DISPUTED THE SALE OF SHARES FROM THE D-MAT ACCOUNT OF THE ASSESSEE AND T HE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE, THERE FORE, ONCE THE ASSESSEE PRODUCED ALL 6 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 RELEVANT EVIDENCE TO SUBSTANTIATE THE TRANSACTION O F PURCHASE, DEMATERIALIZATION AND SALE OF SHARES THEN, IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD THE SAME CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE B ASIS OF REPORT OF INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENERAL STATEMENT OF PROVIDING BOGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS WITHOUT STA TING ANYTHING ABOUT THE TRANSACTION OF ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. 10. I NOTE THAT THE AO HAS MADE REFERENCE TO A GENE RAL REPORT OF INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. NOWHERE THE AO OR THE LD. CIT(A) HAS BROUGHT ON RECORD THE SPECIFIC CONTENTS OF THE GENERAL REPORT OF INVESTIGATION WING NOR IS THERE ANY MATERIAL TO SUGGEST THAT THE ASSESSEE HAS INDULGED IN ANYNEFARIOUS ACTIVITIES OR HIS BROKER HAS CARRIED OUT ANY STAGE MANAGED/PRE-DETERM INED SALE OF THE SHARES AS CONTENDED BY THE AO. I THUS NOTE THAT THERE IS NO S PECIFICEVIDENCE WHICH HAVE BEEN COLLECTED BY THE AO IN COMING TO A CONCLUSION THAT THE SALECONSIDERATION FROM THE SALE OF SHARES OF M/S. RLIL IS BOGUS. IT IS NOTEDTHAT TH IS TRIBUNAL HADAN OCCASION TO EXAMINE THE CLAIM OF AN ASSESSEE ON ANOTHER SCRIP N AMELY, M/S. GIFL ANDHAS ALLOWED THE CLAIM OF THE ASSESSEE IN ITA NO. 711/KOL/2018 K ANWARLAL AGARWAL (HUF) VS. ITO FOR AY2014-15 BY ORDER DATED 01.02.2019. IN THE INS TANT CASE THIS TRIBUNAL HAS TAKEN INTO CONSIDERATION THE LD. ARS SUBMISSIONAND RELIA NCE PLACED BY THE LD. DR ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT DECISION IN SANJAY BIMALCHAND JAINVS. PR. CIT 89 TAXMAN.COM 196, WHEREIN THE TRIBUNAL VID E PARA 6 AND 7 HAS OBSERVED ASUNDER: 6. REGARDING THE CASE LAWS RELIED UPON BY THE ID. DEPARTMENTAL REPRESENTATIVE, I FIND THAT, INTHE CASE OF M/S. PANKAJ AGARWAL & SONS (HUF)(SUPRA), THE ISSUE WAS DECIDED AGAINST THEASSESSEE FOR THE REASON THAT, TH E ASSESSEE COULD NOT JUSTIFY HIS CLAIM AS GENUINE BY PRODUCINGEVIDENCE AND WAS ONLY ARGUING FOR THE MATTER TO BE SET ASIDE TO THE LOWER AUTHORITIES ON THEGROUND OF NATURAL JUSTICE. AS SIMILAR ARGUMENTS WERE NOT RAISED BEFORE THE LOWER AUTHORIT IESBY THE ASSESSEE, THE ITAT REJECTED THESE ARGUMENTS. IN THE CASE ON HAND, ALL EVIDENCES WEREPRODUCED BY THE ASSESSEE. IN THE CASE OF SANJAY BIMOLCHAND JAIN, LE GAL HEIR OF SANTI DEVIBIMALCHAND JAIN, THE HON'BLE HIGH COURT UPHELD THE STAND OF THE REVENUE THAT THE TRANSACTIONIN QUESTION IS AN ADVENTURE IN NATURE OF TRADE AND THE PROFIT OF 7 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 THE TRANSACTIONS IS ASSESSABLEUNDER THE HEAD OF 'BU SINESS INCOME'. IN THE CASE ON HAND, THE LD. ASSESSING OFFICER HAS NOTASSESSED THI S AMOUNT AS 'BUSINESS INCOME'. IN ANY EVENT, I AM BOUND TO FOLLOW THE JUDGMENT OFT HE JURISDICTIONAL HIGH COURT IN THIS MATTER. I FIND THAT THE ASSESSEE HAS FILED ALL NECESSARYEVIDENCES IN SUPPORT OF THE TRANSACTIONS. SOME OF THESE EVIDENCES ARE (A ) EVIDENCE OF PURCHASEOF SHARES, (B) EVIDENCE OF PAYMENT FOR PURCHASE OF SHA RES MADE, BY WAY OF ACCOUNT PAYEECHEQUE, COPY OF BANK STATEMENTS, (C) COPY OF B ALANCE SHEET DISCLOSING INVESTMENTS, (D) COPY OFDEMAT STATEMENT REFLECTING PURCHASE, (E) COPY OF MERGER ORDER PASSED BY THE HIGH COURT, (F)COPY OF ALLOTMEN T OF SHARES ON MERGER, (G) EVIDENCE OF SALE OF SHARES THROUGH THE STOCKEXCHANG E, (H) COPY OF DEMAT STATEMENT SHOWING THE SALE OF SHARES, (I) COPY OF BANK STATEM ENTREFLECTING SALE RECEIPTS, (J) COPY OF BROKERS LEDGER, (K) COPY OF CONTRACT NOTES ETC. 7. THE PROPOSITION OF LAW LAID DOWN IN THESE CASE L AWS BY THE JURISDICTIONAL HIGH COURT ASWELL AS BY THE ITAT, KOLKATA ON THESE ISSUE S ARE IN FAVOUR OF THE ASSESSEE. THESE ARE SQUARELYAPPLICABLE TO THE FACTS OF THE CA SE. THE LD. DEPARTMENTAL REPRESENTATIVE, THOUGH NOT LEAVINGHIS GROUND, COULD NOT CONTROVERT THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DECISIONS OF THE HONBLE JURISDICTIONAL CALCU TTA HIGHCOURT AND THE ITAT. I AM BOUND TO FOLLOW THE SAME. 11. THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN CA SE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION M ADE BY THE AO ON THE BASIS OF SUSPICION AND SURMISES AND OBSERVED IN PAR 46 AS UN DER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INT O REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MAY GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGHED ON MATERIAL FACTS SOCOLLECTED. HERE IN T HIS CASE THE MATERIAL FACTS STRONGLY INDICATE A PROBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVERTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PER THEIR MUTUAL UNDERSTANDING W ITH THE ASSESSEE. ANOTHER VERY STRONG PROBABLE FACTOR IS THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE COMPANY NE ED NOT INCUR ADVERTISEMENT EXPENSES AND THE RESPONSIBILITY FOR S ALES PROMOTION AND ADVERTISEMENT LIES WHOLLY UPON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLLECTION OF PREMIUM. THE PR OBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESSEE ONLY IF THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEECOMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNT S. AT LEAST SOMETHING WOULD HAVE BEEN UNEARTHED FROM SUCH GLOBAL LEVEL IN VESTIGATION BY TWO CENTRAL GOVERNMENT AUTHORITIES. IN CASE OF CERTAIN DONATION S GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOUNTS ON T HE BEHEST OF ONE OF THE 8 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 EMPLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICA TE THAT GTC AS A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BANK ACCOUNT S COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENT S OF THE WITNESSES SMT. NIRMALA SUNDARAM, WE ARE OF THE OPINION THAT THIS ONE INCID ENT OF DONATION THROUGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THR OUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE-COMPANY HAD DIRECT CONTROL ON THESE BA NK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPT ION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDE NCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRE T MONEY. IT IS QUITE A TRITE LAW THAT SUSPICION HOWSOEVER STRONG MAY BE BUT CANN OT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVIDENCE ON RECORD. THE TH EORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF E ITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVO URABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRAWN ON THE BASIS OF CE RTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FA CTS THAT MIGHT GO AGAINST ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF I NVESTIGATION HAVE BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE.' 12. THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT, THEN IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY B Y WAY OF BOGUS LONG TERM CAPITAL GAIN. THE HON'BLE RAJASTHAN HIGH COURT IN CASE OF C IT VS. SMT. POOJA AGRAWAL (SUPRA) HAS UPHELD THE FINDING OF THE TRIBUNAL ON THIS ISSUE IN PARA 12 AS UNDER:- '12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL AND CONTENDED THA T IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATION THE REVENUE TRANSACTIONS, THE ADDITION MADE WAS DEL ETED BY THE TRIBUNAL OBSERVING AS UNDER:- 'CONTENTION OF THE AR IS CONSIDERED. ONE OF THE MAI N REASONS FOR NOT ACCEPTING THE GENUINENESS OF THE TRANSACTIONS DECLARED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. HOWEVER, SUBSEQUENTLY THE FACTS CAME ON REC ORD THAT THE APPELLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTE D BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPCL, BPCL AN D TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUESTION VARIOUS DETA ILS LIKE COPY OF CONTRACT NOTE 9 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 REGARDING PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SH ARE BROKER, COMPANY'S MASTER DETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKRIT ASSIG NMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSACTIO NS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABL E THE FACT OF TRANSACTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPELLANT DENIED HAVING MADE ANY TRANSACTIONS IN SH ARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVIDENC E THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANS ACTION WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETEC TED IN THE SEARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE A SSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION EN TRIES OF LONG TERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHE R WAS EXEMPTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. AS THE APPELLANT'S CAS E IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACC OMMODATION TRANSACTIONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND TO BE AN ENTRY PROVIDER AS STATED BY SH. PAWANPUROH IT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THAT TH E FACT WAS NOT CORRECT AS IN THE STATEMENT OF SH. PAWANPUROHIT THERE IS NO ME NTION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. S USHIL KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED . THE AO HAS FAILED TO COUNTER THE OBJECTIONS RAISED BY THE APPELLANT DURI NG THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTING WING AFTER CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MU CH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BR OKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACTION IN QUESTION IN STATEMENT OF SH. PAWANPUROHIT. SIMPLY BECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BANK AND THE APPELLANT HA S ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOE S NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARW AL CANNOT BE HELD AS NON- GENUINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TE RM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFORE THE AO I S NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT CLAIM OF SHORT TERM C APITAL GAIN AS SHOWN BY THE APPELLANT.' 13. GAINFUL REFERENCE IN THIS REGARD MAY ALSO BE MA DE TO THE DECISION OF THE JURISDICTIONAL HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. L AKSHMANGARH ESTATE & TRADING CO. LIMITED [2013] 40 TAXMANN.COM 439 WHEREIN IT WAS HE LD THAT ON THE BASIS OF A SUSPICION 10 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 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 IN THE ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIB LE, TO HOLD THAT THE TRANSACTIONS OF BUYING OR SELLING OF SHARES WERE COLOURABLE TRANSACTIONS OR W ERE RESORTED TO WITH ULTERIOR MOTIVE. 14. I NOTE THAT THE SALE OF SHARES OF M/S. RLIL WH ICH WAS DEMATERLIZED IN DEMAT ACCOUNT HAS TAKEN PLACE THROUGH RECOGNISED STOCK EXCHANGE A ND ASSESSEE RECEIVED MONEY THROUGH BANKING CHANNEL. SO, ASSESSEE HAS EXPLAINED THE NAT URE AND SOURCE OF THE MONEY WITH SUPPORTING DOCUMENTS AND THUS HAS DISCHARGED THE ON US CASTED UPON HIM BY PRODUCING THE RELEVANT DOCUMENTS MENTIONED IN PARA 6 (SUPRA), ACC ORDINGLY, THE QUESTION OF TREATING THE SAID GAIN AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT CANNOT ARISE UNLESS THE AO IS ABLE TO FIND FAULT/INFIRMITY WITH THE SAME. I NO TE THAT THE SOURCE OF THE RECEIPT OF THE AMOUNT HAS BEEN EXPLAINED AND THE TRANSACTION IN RE SPECT OF WHICH THE SAID AMOUNT HAS BEEN RECEIVED BY ASSESSEE HAS NOT BEEN CANCELLED BY THE STOCK EXCHANGE/SEBI. SO, IT IS DIFFICULT TO COUNTENANCE THE ACTION OF AO/LD. CIT(A) IN THE AFOR ESAID FACTS AND CIRCUMSTANCES EXPLAINED ABOVE. 15. EVEN ASSUMING THAT THE BROKERS MAY HAVE DONE SO ME MANIPULATION THEN ALSO THE ASSESSEE CANNOT BE HELD LIABLE FOR THE ILLEGAL ACTI ON OF THE BROKERS WHEN THE ENTIRE TRANSACTIONS HAVE BEEN CARRIED OUT THROUGH BANKING CHANNELS, DULY RECORDED IN THE DEMAT ACCOUNTS WITH A GOVERNMENT DEPOSITORY AND TRADED ON THE STOCK EXCHANGE UNLESS SPECIFIC EVIDENCE EMERGES THAT THE ASSESSEE WAS IN HAND IN G LOVES WITH THE BROKER FOR COMMITTING THE UNSCRUPULOUS ACTIVITY TO LAUNDER HIS OWN MONEY IN T HE GUISE OF LTCG. THERE IS ALSO NOTHING ON RECORD WHICH COULD SUGGEST THAT THE ASSESSEE GAV E HIS OWN CASH AND GOT CHEQUE FROM THE ALLEGED BROKERS/BUYERS. 16. LET US LOOK AT CERTAIN JUDICIAL DECISIONS ON S IMILAR FACTS:- 11 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 17. THE CASE OF THE ASSESSEES IS SIMILAR TO THE D ECISION OF HONBLE BOMBAY HIGH COURT, NAGPUR BENCH IN CIT VS. SMT. JAMNADEVI AGRAWAL &ORS . DATED 23RD SEPTEMBER, 2010 REPORTED IN (2010) 328 ITR 656 WHEREIN IT WAS HELD THAT: 'THE FACT THAT THE ASSESSEES IN THE GROUP HAVE PURC HASED AND SOLD SHARES OF SIMILAR COMPANIES THROUGH THE SAME BROKER CANNOT BE A GROUND TO HOLD THAT THE TRANSACTIONS ARE SHAM AND BOGUS, ESPECIALLY WHEN DO CUMENTARY ITA NOS. 93 TO 99/RPR/2014 & C.O. NOS. 12 TO 18/RPR/2014 . A.Y. 20 04-05 10 PRODUCED TO ESTABLISH THE GENUINENESS OF THE CLAIM. FROM THE DO CUMENTS 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 H AVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE S ALE 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 T HE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON THE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THER EFORE, THE FACT THAT SOME OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS CANNO T 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 D EMONSTRATED TO BE WRONG BY PRODUCING DOCUMENTARY EVIDENCE TO THE EFFECT THA T 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 RE CORD TO SHOW THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO T HE 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 SHARE S CANNOT BE LINKED TO THE ASSESSEES. MOREOVER, YN THE LIGHT OF THE DOCUMENTAR Y EVIDENCE ADDUCED TO SHOW THAT THE SHARES PURCHASED AND SOLD BY THE ASSE SSEES WERE IN CONFORMITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FIND ING OF FACT THAT THE CASH CREDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTR IBUTED 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 TRIBUN AL.ASSTT. CIT VS. KAMAL KUMAR S. AGRAWAL (INDL.) &ORS. (2010) 41 DTR (NAG) (TRIB) 105: (2010) 133 TTJ (NAG) 818 AFFIRMED; SUMATIDAYAL VS. CIT (1995) 125 CTR (SC) 124: (1995) 80 TAXMAN 89 (SC) DISTINGUISHED. 12. THE HO N'BLE HIGH COURT OF RAJASTHAN IN CIT VS. SMT. PUSHPAMALPANI - REPORTED IN (2011) 242 CTR (RAJ.) 559; (2011) 49 DTR 312 DISMISSED THE APPEAL OF DEPA RTMENT OBSERVING 'WHETHER OR NOT THERE WAS SALE OF SHARES AND RECEIP T OF CONSIDERATION THEREOF ON APPRECIATED VALUE IS ESSENTIALLY A QUESTION OF F ACT. CIT(A) AND TRIBUNAL HAVE BOTH GIVEN REASONS IN SUPPORT OF THEIR FINDING S AND HAVE FOUND THAT AT THE TIME OF TRANSACTIONS, THE BROKER IN QUESTION WAS NO T BANNED BY SEBI AND THAT ASSESSEE HAD PRODUCED COPIES OF PURCHASE BILLS, CON TRACT NUMBER SHARE CERTIFICATE, APPLICATION FOR TRANSFER OF SHARE CERT IFICATE TO DEMAT ACCOUNT ALONG WITH COPIES OF HOLDING STATEMENT IN DEMAT ACCOUNT, BALANCE SHEET AS ON 31ST MARCH, 2003, SALE BILL, BANK ACCOUNT, DEMAT ACCOUNT AND OFFICIAL REPORT AND 12 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 QUOTATIONS, OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. ON 23RD JULY, 2003. THEREFORE, 'THE PRESE/ITDPPEAL DOES NOT RAISE ANY Q UESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 18. THE HONBLE HIGH COURT OF PUNJAB AND HARYANA I N THE CASE OF ANUPAM KAPOOR 299 ITR 0179 HAS HELD AS UNDER:- THE TRIBUNAL ON THE BASIS OF THE MATERIAL ON RECOR D, HELD THAT PURCHASE CONTRACT NOTE, CONTRACT NOTE FOR SATES, DISTINCTIVE NUMBERS OF SHARES PURCHASED AND SOLD, COPY OF SHARE CERTIFICATES AND THE QUOTAT ION OF SHARES ON THE DATE OF PURCHASE AND SALE WERE SUFFICIENT MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT BOGUS BUT A GENUINE TRANSACTION. THE PURCHASE OF SH ARES WAS MADE ON 28TH APRIL, 1993 I.E.. ASST. YR. 1993-94 AND THAT ASSESS MENT WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS NO CHALLENGE TO THE PURCHA SE OF SHARES IN THAT YEAR. IT WAS ALSO PLACED BEFORE THE RELEVANT AO AS WELL A S BEFORE THE TRIBUNAL THAT THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE AC COUNTS OF THE ASSESSEE AND WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE TRI BUNAL WAS RIGHT IN REJECTING THE APPEAL OF THE REVENUE BY HOLDING THAT THE ASSESSEE WAS SIMPLY A SHAREHOLDER OF THE COMPANY. HE HAD MADE INVESTMENT IN A COMPANY IN WHICH HE WAS NEITHER A DIRECTOR NOR WAS HE IN CONTROL OF THE COMPANY. THE ASSESSEE HAD TAKEN SHARES FROM THE MARKET, THE SHARES WERE L ISTED AND THE TRANSACTION TOOK PLACE THROUGH A REGISTERED BROKER OF THE STOCK EXCHANGE. THERE WAS NO MATERIAL BEFORE THE AO, WHICH COULD HAVE LEAD TO A CONCLUSION THAT THE TRANSACTION WAS SIMPLICITIER A DEVICE TO CAMOUFLAGE ACTIVITIES, TO DEFRAUD THE REVENUE. NO SUCH PRESUMPTION COULD BE DRAWN BY THE AO MERELY ON SURMISES AND CONJECTURES. IN THE ABSENCE OF ANY COGENT MATER IAL IN THIS REGARD, HAVING BEEN PLACED ON RECORD, THE AO COULD NOT HAVE REOPEN ED THE ASSESSMENT. THE ASSESSEE HAD MADE AN INVESTMENT IN A COMPANY, EVIDE NCE WHEREOF WAS WITH THE AO. --THEREFORE, THE AO COULD NOT HAVE ADDED INCOME , WHICH WAS RIGHTLY DELETED BY THE CIT(A) AS WELL AS THE TRIBUNAL. IT I S SETTLED LAW THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PRO OF. CONSEQUENTLY, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION O F LAW, ARISES FOR ADJUDICATION. C. VASANTLAL& CO. VS. CIT (1962) 45 ITR 206 (SC), M.O. THOMAKUTTY VS. CIT (.1958) 34 ITR 501 (KER)) AND MU KAND SINGH VS. SALES TAX TRIBUNAL (1998) 107 STC 300 (PUNJAB) RELIED ON; UMA CHARAN SHAW &BROS. VS. CIT (1959) 37 ITR 271 (SC) APPLIED; JASPAL SINGH VS . CIT (2006) 205 CTR (P & H) 624 DISTINGUISHED 19. IN THE CASE BEFORE THE HONBLE CALCUTTA HIGH CO URT IN THE CASE OF CIT V. BHAGWATI PRASAD AGARWAL IN ITA NO. 22 OF 2009DATED 29.4.2009 , THE ASSESSEE HAD CLAIMED EXEMPTION OF INCOME FROM LONG TERM CAPITAL GAINS. HOWEVER, TH E AO, BASED ON THE INFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSA CTIONS WERE BOGUS. THE HONBLE 13 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WAS FOUND THATTHE CHAIN OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. IT WAS ALSO F OUND THAT THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DEMAT ACCOUNTS AND PRODU CED DOCUMENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THE SE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT 20. AS FAR AS THE LD. DRS RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX APPEAL NO. 18 OF 2017 IS CONCERNED, I FIND THAT THE FACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN HAND. I N THAT CASE, THE PURCHASES MADE BY THE ASSESSEE OF SHARES OF COMPANIES WERE DONE THROUGH T HE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDENTALLY THE ADDRESS OF THE COMPANY. THE PR OFIT EARNED BY THE ASSESSEE WAS SHOWN AS CAPITAL GAINS WHICH WERE NOT ACCEPTED BY THE A.O . AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE ASSESSEE BY TREATING THE SALE OF THE SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF TRADE. THUS, IT CAN BE SEEN THAT IN THE D ECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE OF SH ARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 21. INSTEAD I NOTE THAT SIMILAR ISSUE AROSE IN MANI SH KUMAR BAID, (SUPRA) WHEREIN, THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE IN RESPECT O F LTCG FROM SALE OF SHARES OF M/S. KAFL(A DIFFERENT SCRIP) BY OBSERVING AS UNDER: 6. WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF TH E LD AR THAT THE LD AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPONDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGEMENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTR IES LTD. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMENTS OF THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FOR DRAWING ADVERSE INFEREN CES WHICH REMAIN UNPROVED BASED ON THE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITE RATED FOR THE SAKE OF BREVITY. THE PRINCIPLES LAID DOWN IN VARIOUS CASE LAWS RELIED UP ON BY THE LD AR ARE ALSO NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT TH E AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED BY THE ORDER OF HONBLE HIGH COUR T. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALIDITY OF THE AMALGAMATION SCHEME APPROVED BY THE HONBLE HIGH COURT IN MAY 2013 MERELY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT 14 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 BEEN SUBJECT TO CROSS EXAMINATION. MOROEVER, IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BRO KING LTD NAME IS NEITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DEALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACT IONS OF SHARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL T O IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS OF THE LD AR WIT H CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA. WE FIND THAT TH E SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM AS DIRECT EVIDENCE AGAINST T HE ASSESSEE DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BRO KING LTD. THROUGH WHOM THE ASSESSEE SOLD THE SHARES OF KAFL AS A BENEFICIARY T O THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY THE RELATED ENTITIES / PROMOTERS / BROK ERS / ENTRY OPERATORS. IN THE INSTANT CASE, THE SHARES OF CPAL WERE PURCHASED BY THE ASSE SSEE WAY BACK ON 20.12.2011 AND PURSUANT TO MERGER OF CPAL WITH KAFL, THE ASSESSEE WAS ALLOTTED EQUAL NUMBER OF SHARES IN KAFL, WHICH WAS SOLD BY THE ASSESSEE BY E XITING AT THE MOST OPPORTUNE MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GO OD RETURN ON HIS INVESTMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHITA S TOCK BROKING LTD WAS NOT THE PRIMARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KAFL AS CO ULD BE EVIDENT FROM THE SEBIS ORDER. WE FIND THAT THE SEBI ORDER DID MENTION THE LIST OF 246 BENEFICIARIES OF PERSONS TRADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AN D / OR ASHITA STOCK BROKING LTDS NAME IS NOT REFLECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KA FL SHARES FAILS. WE ALSO FIND THAT EVEN THE SEBIS ORDER HEAVILY RELIED UPON BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL HAD PERFORMED VERY WELL DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTANTIALLY. THUS WE HOLD THAT THE SAID ORDERS OF SEBI IS NO EVIDENCE AGAINST THE ASSESSEE, MUCH LESS TO SPEAK OF DIRECT EVIDENCE. THE ENQUIRY BY THE INVESTIGATION WING AND/OR THE ST ATEMENTS OF SEVERAL PERSONS RECORDED BY THE INVESTIGATION WING IN CONNECTION WI TH THE ALLEGED BOGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMPLICATE THE ASSES SEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EV IDENCES IN THE FORM OF BILLS, CONTRACT NOTES,DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PRO VE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARE S RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABR ICATED. 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 BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HON BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRAR Y CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE S ALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 RAISED HEREINABOVE IS DECID ED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 15 ITA NO. 2605/KOL/2018 AGHOR KUMAR DUDHWEWALA, AY 2015-16 22. SO, RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE ESPECIALLY TAKING INTO CONSIDERATION THE FACTS NARRATED ABOVE, I HOLD THAT THE LOWER AUTHORITIES ERRED IN HOLDING THE ASSESSEES CLAIM ON LTCG FROM THE SALE OF SHARES OF M/S. RLIL AS BOGUS. THEREFORE, WE ARE INCLINED TO ALLOW THE ASSESSEES LTCG CLAIM AND DIR ECT THE AO NOT TO TREAT THE LONG TERM CAPITAL ON SALE OF SHARES OF M/S RLIL AS BOGUS AND DELETE THE CONSEQUENTIAL ADDITION. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH AUGUST , 2019 SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 9TH AUGUST, 2019 BISWAJIT (SR. PS) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT AGHOR KUMAR DUDHWEWALA, AD-6A, 1 ST FLOOR, SECTOR-I, SALT LAKE, KOLKATA 700 064. 2 RESPONDENT ITO, WARD-22(4), KOLKATA. 3 4 5 CIT(A) - 6, KOLKATA. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O. ITAT, KOLKATA BENCHES