Alpa Udaykumar Shah, Bhavnagar, V. ITO, Ward-1(2), Bhavnagar

ITA 267/AHD/2021

AI Insights

The case revolves around the penalty imposed on the assessee, Alpa Udaykumar Shah, by the Income Tax Officer for alleged inaccuracies in the income tax return filed for the Assessment Year 2014-15. The assessee had declared a long-term capital gain from the sale of shares, which the Assessing Officer treated as unexplained cash credit under section 68 of the Act, leading to a penalty under section 271(1)(c). The assessee contested the penalty, arguing that the quantum proceedings were still pending and that the documents supporting the capital gain claim were genuine. The Tribunal, referencing a co-ordinate bench judgment that had deleted the additions made by the Assessing Officer, ruled in favor of the assessee, leading to the deletion of the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114218 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 21-10-2021
• Other Referred Cases: Pr. CIT vs. Smt. Krishna Devi, Parasben Kasturchand Kochar Mehta Lodha & Co. Chartered Accountant vs. ITO, Shivnarayan Sharma & Ors vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Salary income; Principle of natural justice; Opportunity of cross examination; Cost of acquisition; Accommodation entries; Penny stocks; Set aside; Capital Gains
• Section: 68; 271(1)(c); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Alpa Udaykumar Shah B/1, 201, Siddhchakra Appartmet, Krushnanagar Bhavnagar PAN No: BFLPS7506A (Appellant) Vs The Income Tax Officer, Ward-1(2), Bhavnagar (Respondent) Assessee Represented: Shri Darshan Gandhi, A.R. Revenue Represented : Ms. Leena Lal, Sr.D.R. Date of hearing : 18-01-2023 Date of pronouncement : 25-01-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Appellate order dated 27.08.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), confirming the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2014-15. ITA No. 267/Ahd/2021 Assessment Year 2014-15 I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 2 2. The brief facts of the case is that the assessee is an individual deriving income from Salary, Business, Capital Gain and Income from other Sources. The assessee filed her Return of Income for the Assessment Year 2014-15 on 31.07.2014 declaring total income of Rs. 4,33,420/- including Long Term Capital Gain of Rs. 1,15,49,320/- claimed the same as exempt u/s. 10(38) of the Act. The return was selected for scrutiny assessment and a show cause notice was issued why the claim of Long Term Capital Gain on sale of scripts namely M/s. Comfort Fincap Ltd. be treated as bogus and treat the consideration of Rs. 1,15,49,320/- as unexplained cash credit u/s. 68 of the Act. 2.1. The assessee replied to the same and however the Assessing Officer held the above transaction as a Penny Stock scripts and thereby added as the unexplained cash credit u/s. 68 of the Act and demanded tax thereon and also initiated penalty proceedings u/s. 271(1)(c) of the Act. 3. Aggrieved against the same, the assessee filed an appeal before the Ld. Commissioner of Income Tax (Appeals). The Ld. CIT(A) sustained the addition vide order dated 29.12.2017. It is thereafter the penalty proceedings kept in abeyance was reinitiated. The assessee did not avail the opportunities given during the penalty proceedings. Therefore after considering the facts of the case, the Assessing Officer held that the assessee has committed default within the meaning of provisions of Section 271(1)(c) of the Act and thereby levied a minimum penalty of Rs. 38,58,341/-. I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 3 4. Aggrieved against the penalty order, the assessee filed an appeal before Ld. NFAC. The assessee submitted before Ld. NFAC that the quantum proceedings is pending before Income Tax Appellate Tribunal vide ITA No. 391/Ahd/2018. Therefore the Assessing Officer is not correct in levying the penalty u/s. 271(1)(c) of the Act. Further the genuineness of document furnished by the assessee in support of Long Term Capital Gain claimed as exempt was not doubted by the Ld. A.O. Therefore penalty cannot be levied on the ground that the assessee furnished inaccurate particulars of Income. 4.1. During the appellate proceedings, the assessee was given sufficient opportunities of being heard. However the assessee has not responded to the notice and not filed any written submissions to the hearing notices given on 21.12.2020, 25.12.2020, 11.06.2021 and 19.08.221. Thus the assesse has not chosen to defend its case. Based on the materials available on record, the NFAC decided the case on merit and following various judicial precedents upheld the levy of penalty and thereby dismissed the assessee’s appeal as follows: 8.15. It is admitted fact the appellant carried out sale transactions for an amount of Rs. 1,15,49,320/- in respect of 55,000 shares of M/s. Comfort Fincap Ltd. (earlier knows as Parasnath Textile Ltd.), in the relevant financial year. It is also admitted fact that the appellant does not show substantial trading activity or investment in shares of listed companies. It had been observed that in the absence of such expertise and experience, the move to acquire the shares of M/s. Comfort Fincap Ltd. earlier known as Parasnath Textile Ltd. @ Rs. 18/- per share purchased off market through preferential allotment was a predetermined move which had the sole aim to bring back unaccounted money. It had been further observed that the purchase of shares at the rate of Rs. 18/-, that too in such huge quantities of 55000 made when the company had no proven financial results was an indicator to the events to be occurring in the future. I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 4 Considering the financials and fundamentals of the company in the context of no significant corporate announcements or any big orders of purchase, the price movements of the scrip quite abnormal compared to the rise of the index i.e. BSE Sensex during the corresponding period. The script under reference was one such Penny Stock which was used for such purposes as admitted by the share brokers in the enquiries conducted by the investigation wing of the Income tax Departments. Further, vide order dated 19-12-2014 and 02-06-2016 SEBI restrained shares from accessing the securities market and buying and selling of securities. Thus, considering all the facts and circumstances, purchase of stock to receiving of cheque for its sale was done in a systematic and organized manner to give it a real and legal colour by a group of persons (being the operators). Thus, on consideration of the circumstantial evidences, natural human conduct and preponderance of probabilities I reached on conclusion that the apparent in this case was not real and that these financial transactions were no real but sham ones and the entire edifice was a colourable device used to evade tax. In view the fact that the appellant failed to prove the source of the credit and genuineness of the credit of the entire sum received in the garb of alleged capital gains, brought into tax as unexplained cash credit under section 68 of the Income Tax Act. The appellant was very well in the knowledge of these accommodation entries and thus mens rea established and leads that the appellant is liable to be penal proceedings in terms of the provision of section 271(1)(c) of the Act. 8.16 In view of the above discussion and case laws, I am of the view that the Assessing Officer has correctly levied the penalty u/s 271(1)(c) of the Act and did not call any interference. Thus, these grounds of appeal are dismissed. 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. On the facts and circumstances of the case and under the law, the Ld. CIT (Appeal), NFAC has erred in confirming the penalty order of the Learned A.O. dated 13.03.2019 passed under Section 271(l)(c) of the Income Tax Act, 1961 by his order u/s. 250 of the Income tax Act, 1961 dated 27.08.2021. 2. On the facts and circumstances of the case and under the law, the Learned CIT (Appeal), NFAC has erred in recording non-compliance of the notice dated 19/08/2021 which could actually not be responded by the appellant because of the notice dated 19/08/2021 and window of response thereof being not visible/available on the portal. The Learned CIT (Appeal), NFAC issued the notice dated 19.08.2021 by granting time to file response/written submission by 25.08.2021. But, when the appellant visited the online portal and tried to file submission on 25.08.2021, neither the said notice nor the window to responds the said notice was I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 5 visible/available on the portal. The relevant screen shots of the portal showing that the notice dated 19.08.2021 and the window to respond the said notice were not available/visible at the relevant point of time will be furnished at the time of hearing. Accordingly, there is no failure on the part of appellant to respond or to file written submission in response to the notice dated 19/08/2021. It is technical glitch of the portal and the same is not attributable to the appellant. Accordingly, there is violation of principles of natural justice. 3. On the facts and circumstances of the case and under the law, the Learned CIT(Appeal), NFAC has erred in confirming the penalty of Rs.38,58,341/- levied by the Id. A.O. being 100% of the tax sought to be evaded under Section 271(l)(c) of the Income Tax Act, 1961. 4. On the facts and circumstances of the case and under the law, the Learned CIT (Appeal), NFAC has erred in confirming the penalty of Rs.38,58,341/- on account of the appellant's failure to respond the notice dated 19/08/2021 and disprove the finding of the Learned AO by filing a submission. The Learned CIT (Appeal), NFAC failed to appreciate the proposition of the law that mere non submission will not result into admission of penalty. 5. On the facts and circumstances of the case and under the law, the Learned CIT (Appeal), NFAC has erred in holding that financial transactions were not real but sham ones and the entire edifice was a colourable device used to evade tax. 5.1. At the time of hearing of the above appeal, Ld. Counsel Mr. Darshan Gandhi submitted before us, Co-ordinate Bench judgment of the Tribunal in assessee’s quantum appeal (Authored by the Accountant Member herein) for the very same Assessment Year 2014-15 in ITA No. 391/Ahd/2018 dated 26.08.2022 wherein deleting the addition made by the Assessing Officer and allowed the exemption u/s. 10(38) of the Act. Thus the Ld. A.R. submitted the additions made by the Assessing Officer is being deleted, the penalty proceedings has no legs to stand on the impugned additions made by the Assessing Officer. The Ld. A.R. placed copy of the above decision for ready reference and claimed that the penalty levied u/s. 271(1)(c) is to be deleted. I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 6 5.2 Per contra, the Ld. Sr. D.R. Ms. Leena Lal appearing for the Revenue could not dispute the quantum order passed by the Co- ordinate Bench of the Tribunal. Further the Ld. Sr. D.R. could not inform whether the quantum order is a subject matter of appeal by the Revenue before the Hon’ble High Court of Gujarat. Thus she supported the order passed by the Lower Authorities and pleaded to confirm the levy of penalty. 6. We have given our thoughtful consideration and perused the materials available on record. The Co-ordinate Bench decision of the Tribunal in ITA No. 391/Ahd/2018 in the quantum appeal deleted the addition made u/s. 10(38) of the Act as follows: 7.5 On further analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, sale is not possible without having the purchases. Thus, once purchases has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he’s allowing the benefit of the cost of acquisition for the shares while determining the bogus long-term capital gain. 7.6 The alleged scam might have taken place on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee’s action that he was involved in such rigging up of share price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by way of long term capital gain by way of cheque through banking channels. This allegation that cash had changed hands, has not been brought on record by the Revenue and there is also no such whisper in the order of the AO. There was no information brought on record suggesting that there was I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 7 exchange of cash against the long-term capital gain shown by the assessee. Likewise we also note that the assessee has discharged the onus imposed under section 68 of the Act by furnishing the necessary documentary evidence in support of the identity, genuineness of transaction and creditworthiness of the parties. Therefore the same cannot be made subject to tax under the provisions of section 68 of the Act. 7.7 We also note that there was no dispute raised by the Revenue with respect to the following facts: 1. Purchase consideration of share was made through cheque 2. Share was duly dematerialized in demat account 3. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers. 4. The payment were received through ECS through demat account 5. Inflow of shares are reflected in demat account. Shares are transferred through demat account and buyers do not know the assessee. 6. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer. 7. The assessee has no nexus or any relation with company, its director or entry operator. 8. The assessee may have got only incidental benefit of price rise. 9. The opportunity of cross examination has not been extended to the assessee despite having the request from the assessee. 7.8 From the above, conduct of the assessee suggests that he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was SEBI enquiry conducted and found guilty of wrong practices but it is not so in the case on hand. 7.9 In our view, the income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 8 7.10 Now the controversy also arises whether a person who genuinely purchases the shares at a low price and sold at high price, therefore, he enjoyed the windfall from such scripts, can he be disallowed the benefit of tax exemption provided under section 10(38) of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties. The Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s Comfort Fincap Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. 7.11 In holding so we draw support and guidance from the judgment of Hon’ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 9 were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 7.12 Respectfully, following the judgment of Hon’ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long term capital gain earned on sale of share of M/s Comfort Fincap Ltd. is concern. I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 10 7.13 We also note that this Tribunal in the case of Parasben Kasturchand Kochar Mehta Lodha & Co. Chartered Accountant vs. ITO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under: “7. We have gone through the relevant record and impugned order and heard both the parties. Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities. 8. Ld. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles. 9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10.Ld. A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, ld. A.R. also cited an order of Co- ordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the ld. A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee. “ 7.14 At this juncture we also feel pertinent to refer the order of coordinate bench of Indore in case of Shivnarayan Sharma & Ors bearing ITA Nos. 889/Ind/2018, 474,206,60,987/Ind/2019, where in identical fact and circumstances, it was held as under: “16. Since we are adjudicating the above stated common issue on the basis of above assessee namely Shri Shivnarayan Sharma, we note that the assessee purchased 6000 equity shares of Conart I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 11 Traders Ltd on 22.10.2011 at a cost of Rs.1,50,000/- . There is no restriction under the law to purchase equity shares on off line mode. Vide order dated 22.3.2013 of the Hon’ble Mumbai High Court M/s Conart Traders Limited was merged with M/s SAL and in lieu there of 6000 shares of M/s SAL were received by the assessee in its demat account. After holding the equity shares for more than 12 months since purchased on 22.10.2011, assessee sold the shares of M/s SAL during the period April 2014 to June 2014 through a registered broker and all the transactions of sale of shares took place on the recognised stock exchange. Sale consideration was received in the bank account attached with the Demat account. The detail of the persons purchasing the shares is not provided on the portal of SEBI and all the transactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee. 17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee. 18. We observe that all the above stated facts and the issue of genuineness of LTCG and failure of the Ld. A.O to provide opportunity to cross examination by the assessee with regard to the addition made u/s 68 of the Act for the sale consideration received from sale of equity shares of M/s SAL and addition for estimated brokerage expenses has been dealt by the Co-ordinate Bench of Mumbai Tribunal in the case of Dipesh Ramesh Vardhan V/s DCIT (supra) and the same is squarely applicable on the instant appeals. ******************* 23. We therefore in the light of above judgments which are squarely applicable in the issues raised in the instant appeals are of the I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 12 considered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The assessee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon'ble Apex Court in the case of Andaman Timber Industries vs. CCE 281 CTR 241 (SC) that “not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected”. 24. We accordingly in view of our above discussions, facts and circumstances of the case and respectfully following judicial precedents and the decisions of Co-ordinate benches squarely applicable on the instant cases, are of the considered view that in the case of the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF), the claim of exempt income u/s 10(38) of the Act of Long Term Capital Gain from sale of equity shares deserves to be allowed and no addition is called for the estimated brokerage expenses made in the hands of the assessee(s). Thus finding of Ld. CIT(A) is set aside and the Grounds raised by the assessee(s) in ITA Nos.889/Ind/2018, 474/Ind/2019, 206/Ind/2019, 60/Ind/2019, 61/Ind/2019 and 987/Ind/2019 are allowed.” 7.15 In view of the above discussion we hold that the capital gain earned by the assessee cannot be held as bogus merely on the basis of some report unearthed in case of third party/parties unless cogent material is brought against particular assessee on record. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the I.T.A No. 267/Ahd/2021 A.Y. 2014-15 Page No Alpa Udaykumar Shah vs. ITO 13 addition made by him. Hence the grounds of assessee’s appeal are allowed. 6.1. Respectfully following the above judicial precedent, as the addition made in the quantum appeal is deleted consequential levy of penalty u/s. 271(1)(c) has not legs to stand in the eyes of law. Therefore we have no hesitation in deleting the penalty levied u/s. 271(1)(c) of the Act. Thus the grounds raised by the Assessee is hereby allowed. 7. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 25-01-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 25/01/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद