VIVEK AGARWAL, Jaipur V. ITO, Jaipur

ITA 292/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6192 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 18-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Income from undisclosed sources; Share purchase agreement; Earning of tax free income; Accommodation entries; Sham transactions
• Section: 143(3); 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 292/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2013-14. SHRI VIVEK AGARWAL, C/O S.L. PODDAR & CO., E-3A, GOKUL, KANTI CHANDRA ROAD, BANI PARK, JAIPUR. CUKE VS. THE INCOME TAX OFFICER WARD 1(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABWPA 3003 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.03.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/04/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.03.2017 OF LD. CIT (A)-I, JAIPUR FOR THE ASSESSMENT YEAR 2013- 14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4,7 8,38,157/- ON ACCOUNT OF THE LONG TERM CAPITAL GAIN TREATING THE SAME AS UNDISCLOSED INCOME OF THE ASSESSEE WHEREAS THE ASSE SSEE HAS 2 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. SHOWN THE LONG TERM CAPITAL GAIN INCOME EXEMPT U/S 10(38) OF THE INCOME TAX ACT, 1961. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4,7 8,38,157/- WITHOUT PROVIDING OPPORTUNITY TO THE ASSESSEE FOR C ROSS EXAMINATION AND REBUTTING THE MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED BY NOT TREATING THE SALE OF SHARE AS GENUINE TRANSACTION ON THE GROUND OF HUMAN PROBABILITIES IN SPITE OF SUBMITTING CREDIBLE EVIDENCES WHICH ARE MORE RELIAB LE. 4. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS OR PROFESSION, HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. THE A SSESSEE FILED HIS RETURN OF INCOME ON 27 TH SEPTEMBER, 2013 DECLARING TOTAL INCOME OF RS. 9,86 ,410/-. THE ASSESSEE HAS CLAIMED EXEMPT INCOME OF RS. 4,78,38,1 57/- UNDER THE HEAD LONG TERM CAPITAL GAINS ON ACCOUNT OF SHARES. THE AO WH ILE PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) HAS HELD THAT THE LONG T ERM CAPITAL GAINS CLAIMED BY THE ASSESSEE IS BOGUS AS THE ASSESSEE HAS ARRANGED THE ACCOMMODATION ENTRIES FROM THE PERSONS WHO ARE ENGAGED IN PROVIDING BOGUS ACCOMMOD ATION ENTRIES OF CAPITAL GAINS. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE PURCHASED 10,000 SHARES OF RS. 10/- EACH OF M/S. PA RIDHI PROPERTIES LTD. ON 11.3.2011 AGAINST THE PAYMENT OF RS. 10,00,000/- BY CHEQUE. THE SHARES WERE ALLOTTED TO THE ASSESSEE IN THE PRIVATE PLACEMENT B Y THE COMPANY. THE LD. A/R OF 3 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. THE ASSESSEE HAS REFERRED TO THE APPLICATION DATED 27.02.2011 FOR ALLOTMENT OF SHARES IN PRIVATE PLACEMENT AND ALSO THE DETAILS OF THE PAYMENTS VIDE CHEQUE NO. 260359 DATED 28 TH FEBRUARY, 2011 DRAWN ON SBBJ SMS HIGHWAY, JAIPUR. HE HAS THUS SUBMITTED THAT WHEN THE ASSESSEE HAS PAID THE CONSIDERATION FOR PURCHASE OF SHARES DIRECTLY TO THE COMPANY, NAMELY M/S. PARIDHI PROPERTIES LTD. AND AGAINST THE SAID PAYMENT AND APPLICATION, THE SAID COMPANY HAS ALLOTTED 10,000 SHARES VIDE ALLOTMENT LETTER DATED 21 ST MARCH, 2011 WHICH IS PLACED AT PAGE 3 OF THE PAPER BOOK. THE LD. A/R HAS REFERRED TO THE SHARE CERTIFICATE W ITH FOLIO NO. V000004 DATED 19.03.2011 AT PAGE 4 OF THE PAPER BOOK. THUS THE LD . A/R HAS SUBMITTED THAT THE ACQUISITION OF THE SHARES BY THE ASSESSEE UNDER PRI VATE PLACEMENT DIRECTLY FROM THE COMPANY HAS BEEN ESTABLISHED WITHOUT ANY DOUBT AND WITHOUT ANY INVOLVEMENT OF ANY SO CALLED BROKER OR OTHER PERSON AS ALLEGED BY THE AO. THE LD. A/R HAS THEN EXPLAINED THAT THE SAID COMPANY M/S. PARIDHI PROPER TIES LTD. WAS AMALGAMATED WITH M/S. LUMINAIRE TECHNOLOGIES LTD. AND CONSEQUENTLY T HE ASSESSEE WAS ALLOTTED 100000 SHARES OF M/S. LUMINAIRE TECHNOLOGIES LTD IN LIEU OF THE SHARES OF M/S. PARIDHI PROPERTIES LTD. THESE SHARES WERE THEN DEM ATERIALIZED ON 25 TH OCTOBER, 2012 AS REFLECTED IN THE DEMAT ACCOUNT. THE LD. A/R HAS REFERRED TO THE DEMAT ACCOUNT WHEREIN THE SHARES ARE CREDITED AND DEMATER IALIZED. SUBSEQUENTLY, THE ASSESSEE SOLD THESE SHARES BETWEEN THE PERIOD 20 TH NOVEMBER, 2012 TO 13 TH MARCH, 2013 THROUGH STOCK EXCHANGE AND THE SALE WAS EFFECT ED FROM THE DEMAT ACCOUNT OF THE ASSESSEE. THE COPIES OF CONTRACT NOTES IN RESP ECT OF SALE OF THE SHARES ARE PLACED AT PAGES 6 TO 52 OF THE PAPER BOOK. THUS THE LD. A/R HAS CONTENDED THAT WHEN THE ACQUISITION OF THE SHARES AS WELL AS THE S ALE OF SHARES ARE DULY REFLECTED FROM THE EVIDENCE PRODUCED BY THE ASSESSEE THEN THE ACTION OF THE AO TO TREAT THIS 4 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. TRANSACTION AS BOGUS IS WITHOUT ANY BASIS AND MEREL Y ON PRESUMPTION AND ASSUMPTION OF FACTS BY RELYING ON THE STATEMENT OF SHRI DEEPAK PATWARI RECORDED BY THE INVESTIGATION WING, KOLKATA. THE LD. A/R HAS R ELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 31.01.2018 IN THE CASE OF SHRI PRAMOD JAIN & OTHERS VS. DCIT & OTHERS IN ITA NOS. 368 TO 370/J P/2017 AND SUBMITTED THAT THE SAME SCRIPT WAS INVOLVED IN THE SAID CASE AND BY CO NSIDERING AN IDENTICAL CASE, THE TRIBUNAL HAS DECIDED THE ISSUE OF GENUINENESS OF TH E TRANSACTION OF PURCHASE AND SALE OF SHARES AND CONSEQUENTIAL CAPITAL GAIN. 3.1. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF HONBLE BOMBAY HIG H COURT DATED 10 TH APRIL, 2017 IN CASE OF SANJAY BIMALCHAND JAIN VS. CIT IN ITA NO. 1 8/2017. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL I SSUE OF PURCHASE AND SALE OF SHARES OF M/S. PARIDHI PROPERTIES LTD. WHICH WAS GOT MERGE D WITH M/S. LUMINAIRE TECHNOLOGIES LTD. AND SUBSEQUENT TO THE MERGER, THE SHARES OF M/S. LUMINAIRE TECHNOLOGIES LTD. WERE ALLOTTED TO THE ASSESSEE WHI CH WERE DULY DEMATERIALIZED IN THE DEMAT ACCOUNT AND THEREAFTER SOLD BY THE ASSESS EE WAS CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SH RI PRAMOD JAIN & OTHERS VS. DCIT & OTHERS (SUPRA) IN PARA 7 TO 9 AS UNDER :- 7. IN CASE OF EQUITY SHARES M/S PARIDHI PROPERTIES LTD. THE ASSESSEE PURCHASE 50,000 EQUITY SHARE ON 26.03.2011 BY PAYING SHARE APPLICATION MONEY OF RS. 5 LACS WHICH IS DULY REFLE CTED IN THE BANK ACCOUNT OF THE ASSESSEE AS PAID ON 28.03.2011. THER EFORE, THE PAYMENT OF SHARE APPLICATION MONEY HAS BEEN DULY ES TABLISHED BY THE 5 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. ASSESSEE THROUGH HIS BANK ACCOUNT FOR ALLOTMENT OF SHARES OF 50,000 EQUITY SHARES OF M/S PARIDHI PROPERTIES LTD. THE SH ARE ALLOTTED IN PRIVATE PLACEMENT AS PER OF RS. 10/- CANNOT BE TERM ED AS PENNY STOCK. THE AO DOUBTED THAT THE ENTIRE PROCESS OF APPLICATI ON AND ALLOTMENT OF SHARES AS IT HAVE BEEN COMPLETED WITHIN A SHORT DUR ATION OF 5 DAYS, WHICH IN THE OPINION OF THE AO IS NOT POSSIBLE IN O RDINARY COURSE. HOWEVER, WHEN THE ASSESSEE HAS PRODUCED THE RECORD INCLUDING THE SHARE APPLICATION, PAYMENT OF SHARE APPLICATION MON EY, ALLOTMENT OF SHARE THEN MERELY BECAUSE OF A SHORT PERIOD OF TIME WILL NOT BE A SUFFICIENT REASON TO HOLD THAT THE TRANSACTION IS B OGUS. THE SHARES ALLOTTED TO THE ASSESSEE VIDE SHARE CERTIFICATE DAT ED 31.03.2011 WERE DEMATERIALIZED ON 21.10.2011, THEREFORE, ON THE DAT E OF DEMATERIALIZATION OF THE SHARES THE HOLDING OF THE SHARES OF THE ASSESSEE CANNOT BE DOUBTED AND HENCE THE ACQUISITIO N OF THE SHARES OF THE ASSESSEE CANNOT BE TREATED AS A BOGUS TRANSACTI ON. NOBODY CAN HAVE THE SHARES IN HIS OWN NAME IN DEMANT ACCOUNT W ITHOUT ACQUIRING OR ALLOTMENT THROUGH DUE PROCESS HENCE, EXCEPT THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE HOLDING OF SHARE S CANNOT BE DOUBTED WHEN THE ASSESSEE HAS PRODUCED ALL THE RELE VANT RECORD OF ISSUING OF ALLOTMENT OF SHARES, PAYMENT OF SHARE AP PLICATION MONEY THROUGH BANK, SHARE CERTIFICATE AND DEMAT ACCOUNT S HOWING THE SHARES CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE ON DE MATERIALIZATION. THE SAID COMPANY M/S PARIDHI PROPERTIES LTD. WAS SU BSEQUENTLY MERGED WITH M/S LUMINAIRE TECHNOLOGIES LTD. VIDE S CHEME APPROVED BY THE HONBLE BOMBAY HIGH COURT ORDER DATED 27.07. 2012. HENCE, THE ASSESSEE GOT ALLOTTED THE EQUITY SHARES OF M/S LUMI NAIRE TECHNOLOGIES LTD. AS PER SWAP RATIO APPROVED IN THE SCHEME AND C ONSEQUENTLY THE ASSESSEE WAS ALLOTTED 5 LACS SHARE OF RS. 1/- EACH ON M/S LUMINAIRE TECHNOLOGIES LTD. THE EVIDENCE PRODUCED BY THE ASSE SSEE LEAVE NO SCOPE OF ANY DOUBT ABOUT THE HOLDING OF THE SHARES BY THE ASSESSEE. 6 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. 8. AS REGARDS THE PURCHASE CONSIDERATION WHEN THE A SSESSEE HAS SHOWN THE SHARE APPLICATION MONEY PAID THROUGH HIS BANK ACCOUNT AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SH OW THAT APART FROM THE SHARE APPLICATION MONEY PAID THROUGH BANK ACCOU NT THE ASSESSEE HAS BROUGHT HIS OWN UNACCOUNTED MONEY BACK AS LONG TERM CAPITAL GAIN. IT IS ALSO PERTINENT TO NOTE THAT THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. ARE STILL HELD BY THE ASSESSEE I N ITS DEMAT ACCOUNT TO THE EXTENT OF 17,200 SHARES AND THEREFORE, THE H OLDING OF THE SHARES BY ANY PARAMETER OR STRETCH OF IMAGINATION CANNOT B E DOUBTED. THE AO HAS PASSED THE ASSESSMENT YEAR BASED ON THE STATEME NT OF SHRI DEEPAK PATWARI RECORDED BY THE INVESTIGATION WING OF KOLKATA HOWEVER, THE ASSESSEE HAS SPECIFICALLY DEMANDED TH E CROSS EXAMINATION OF SHRI DEEPAK PATWARI VIDE LETTER DATE D 15.03.2016 SPECIFICALLY IN PARAS 3 AND 4 AS REPRODUCED BY THE AO AT PAGE NO. 7 OF THE ASSESSMENT ORDER AS UNDER:- 3. SINCE, THE SHARES WERE ALLOTTED BY THE COMPANY THROUGH PRIVATE PLACEMENT AFTER COMPLETING THE FORMALITIES OF ROC AND WERE SOLD THROUGH THE RECOGNIZED BOMBAY STOCK EXCHA GE (BSE) THERE IS NO QUESTION OF KNOWING INDIVIDUAL PERSONS OR COMPANY OFFICIAL PERSONALLY IN THE WHOLE PROCESS, SO THE AS SESSEE IS NOT IN POSITION TO PRODUCE ANY ONE FOR CROSS EXAMINATION B EFORE YOUR GOOD SELF. SINCE YOUR GOOD SELF HAS GOT THE AUTHORI TY, WE HUMBLY REQUEST YOU TO KINDLY ISSUE THE NOTICE U/S 131 OF T HE INCOME TAX ACT 1961 TO THE CONCERNED INDIVIDUAL PERSONS OR COM PANY OFFICIALS FOR CROSS EXAMINATION. PLEASE NOTE THAT T HE ASSESSEE IS READY TO BEAR THE COST OF THEIR TRAVELLING IN THIS REGARDS. 4. AS REGARD YOUR OPPORTUNITY GIVEN TO US TO READ T HE RECORDED STATEMENT OF SHRI DEEPAK PATWARI AND TO PRODUCE HIM FROM THE CROSS EXAMINATION BEFORE YOUR GOOD SELF, WE HAVE TO SUBMIT THAT FROM THE READING OF THE STATEMENTS OF SHRI DEEPAK P ATWARI IT IS CLEAR THAT HE HAS NEVER TAKEN THE NAME OF THE ASSES SEE, NOR THE ASSESSEE IS AWARE OF ANY SHRI DEEPAK PATWARI NEITHE R HE HAS MADE ANY TRANSACTION WITH HIM, SO IN WHAT CAPACITY HE CAN CALL HIM FOR CROSS EXAMINATION BEFORE YOUR GOOD SELF. SI NCE YOUR GOOD SELF HAS GOT THE AUTHORITY, WE HUMBLY REQUEST YOUTO KINDLY 7 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. ISSUE THE NOTICE U/S 131 OF THE INCOME TAX ACT 1961 TO HIM ALSO FOR CROSS EXAMINATION. WE ALSO REQUEST YOUR GOOD SE LF TO KINGLY PROVIDE US THE COPY OF STATEMENTS OF SHRI DEEPAK PA TWARI ALONG WITH THE OTHER RELEVANT DOCUMENTS. PLEASE NOTE THAT THE ASSESSEE IS READY TO BEAR THE COST OF HIS TRAVELLIN G IN THIS REGARD. IT IS MANIFEST FROM THE ASSESSEES REPLY TO SHOW CA USE NOTICE THAT THE ASSESSEE HAD SPECIFICALLY DEMANDED THE CRO SS EXAMINATION OF SHRI DEEPAK PATWARI HOWEVER, THE ASSESSING OFFICER DID NOT OFFER THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI DEEPAK PATWARI. FURTHER, THE AO ASKED THE ASSESSEE TO PRODUCE THE P RINCIPAL OFFICERS OF THE M/S GRAVITY BARTER LTD. AND M/S PARIDHI PROPERT IES LTD. HOWEVER, IN OUR VIEW IF THE ASSESSING OFFICER WANTED TO EXAMINE THE PRINCIPAL OFFICERS OF THOSE COMPANIES HE WAS HAVING THE AUTHO RITY TO SUMMON THEM AND RECORD THEIR STATEMENTS INSTEAD OF SHIFTIN G BURDEN ON THE ASSESSEE. IT IS NOT EXPECTED FROM THE ASSESSEE INDI VIDUAL TO PRODUCE THE PRINCIPAL OFFICERS OF THE COMPANIES RATHER THE AO OUGHT TO HAVE SUMMONED THEM IF THE EXAMINATION OF THE OFFICERS WE RE CONSIDERED AS NECESSARY BY THE AO. HENCE, IT WAS IMPROPER AND UNJ USTIFIED ON THE PART OF THE AO TO ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THOSE COMPANIES. AS REGARDS THE NON GRANT OF OPP ORTUNITY TO CROSS EXAMINE, THE HONBLE SUPREME COURT IN CASE OF ANDAM AN TIMBER INDUSTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE I SSUE HAS HELD IN PARA 5 TO 8 AS UNDER: 5. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNA N, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 6. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS O F THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL 8 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMIS SIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TW O WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORR ECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJ UDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASS ESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY M ENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOW EVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS T OTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROS S- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE AP PELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PR ICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS W ORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FR OM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPO SE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS ME NTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CR OSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORIT Y TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER O F THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE . WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL O N MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE S UBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTI FY ITS ACTION, 9 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. THEREFORE, THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EX AMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUS TRIES 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 UNDER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INTO REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MA Y GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGHED ON MATERIAL FACTS SO COLLECTED. HERE IN THI S 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 L IABILITY AS PER THEIR MUTUAL UNDERSTANDING WITH THE ASEESSEE. A NOTHER VERY STRONG PROBABLE FACTOR IS THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE-COMPANY NEED NOT INCUR ADVERTISEMENT EXPEN SES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTIS EMENT LIES WHOLLY UPON WHOLESALE BUYERS WHO WILL BORNE OUT THE SE EXPENSES FROM ALLEGED COLLECTION OF PREMIUM. THE PR OBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESSEE ONLY I F THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEE -COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOME THING WOULD HAVE BEEN UNEARTHED FROM SUCH GLOBAL LEVEL INVESTIG ATION BY TWO CENTRAL GOVERNMENT AUTHORITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOUNTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF T HE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC AS A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BANK ACCOUNTS COMPLETEL Y. WITHOUT 10 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. GOING INTO THE AUTHENTICITY AND VERACITY OF THE STA TEMENTS OF THE WITNESSES SMT. NIRMALA SUNDARAM, WE ARE OF THE OPIN ION THAT THIS ONE INCIDENT OF DONATION THROUGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOE S NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THR OUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUA LLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE-COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENT IRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT ASSESS EE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. HOWEVER, T HIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR T O BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ES TABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT SUSPICION HOWSO EVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT F OR SOME MATERIAL EVIDENCE ON RECORD. THE THEORY OF 'PREPOND ERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF E ITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MO RE FAVOURABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAV E TO BE DRAWN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MATERIAL S AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGA INST ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VAR IOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED OUT, THEN NOTHING C AN BE IMPLICATED AGAINST THE ASSESSEE. THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PA ID OVER AND ABOVE THE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT F ROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CAN NOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY B Y WAY OF BOGUS LONG TERM CAPITAL GAIN. THE HONBLE JURISDICTION HI GH COURT IN CASE OF CIT VS. SMT. POOJA AGRAWAL (SUPRA) HAS UPHELD THE F INDING OF THE TRIBUNAL ON THIS ISSUE IN PARA 12 AS UNDER:- 11 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. 12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUN AL AND CONTENDED THAT IN VIEW OF THE FINDING REACHED, WHIC H WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATIO N THE REVENUE TRANSACTIONS, THE ADDITION MADE WAS DELETED 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 TR ANSACTIONS DECLARED BY THE APPELLANT THAT AT THE TIME OF SURVE Y THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY T RANSACTIONS IN SHARES. HOWEVER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPELLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTED BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUESTION VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MASTER DETAILS FROM REG ISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILE D WHICH SHOWS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSACTIONS ENTERED INTO CANNOT BE DENIED SIMPLY O N THE GROUND THAT IN HIS STATEMENT THE APPELLANT DENIED H AVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENTS AND RECEIP TS 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 F ACIE THE TRANSACTION WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OP ERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE S EARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN TH E ASSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI TH AT ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN WER E PURCHASED AS LONG TERM CAPITAL GAIN EITHER WAS EXEM PTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. AS THE APPELLAN T'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL U NDER THAT CATEGORY OF ACCOMMODATION TRANSACTIONS. FURTHER AS PER THE 12 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL W AS FOUND TO BE AN ENTRY PROVIDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFOR E THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMENT O F SH. PAWAN PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. I T WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AG ARWAL 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 OBJECTI ONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SI MPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTING WING AFTE R CONSIDERING ALL THEMATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NO N-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACT ION IN QUESTION IN STATEMENT OF SH. PAWAN PUROHI. SIMPLY B ECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDF C BANK AND THE APPELLANT HAS ALSO RECEIVED SHORT TERM CAPI TAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOES NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL CANNOT BE HELD AS NON-GENUINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT CLAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MAD E BY THE AO IS BASED ON MERE SUSPICION AND SURMISES WITHOUT ANY CO GENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOU NTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. ON THE OTHER H AND, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT MATERIAL TO SUBSTANTIA TE ITS CLAIM THAT TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLDING OF THE SHARES BY THE ASSESSEE AT THE TIME OF ALLOTMENT SUBSEQUENT TO THE AMALGAMATION/MERGER IS NOT IN DOUBT, 13 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 9. GROUND NO. 3 IS REGARDING ADDITION ON ACCOUNT OF PAYMENT OF COMMISSION TO SHRI DEEPAK PATWARI. THIS ISSUE IS CO NSEQUENTIAL TO THE ISSUE INVOLVED IN GROUND NO. 1 AND 2 THEREFORE, WHE N WE HAVE GIVEN A FINDING THE TRANSACTION OF PURCHASE AND SALE SHARES AND CONSEQUENTIAL LONG TERM CAPITAL GAIN CANNOT BE TREATED AS BOGUS T HEN THE ADDITION MADE BY THE AO ON ACCOUNT OF NOTIONAL COMMISSION PA ID TO SHRI DEEPAK PATWARI WILL NOT BE SUSTAINABLE BEING CONSEQ UENTIAL TO THE FIRST ISSUE AND HENCE DELETED. THUS IT IS CLEAR THAT SO FAR AS THE FACTS OF THE PR ESENT CASE OF ACQUIRING THE SHARES OF M/S. PARIDHI PROPERTIES LTD. UNDER PRIVATE PLACEMEN T DIRECTLY FROM THE COMPANY AND SUBSEQUENTLY ON MERGER OF THE SAID COMPANY WITH M/S . LUMINAIRE TECHNOLOGIES LTD. THE SHARES OF THE NEW ENTITY WERE ALLOTTED TO THE A SSESSEE WHICH WERE DULY DEMATERIALIZED AND THEN SOLD FROM THE DEMAT ACCOUNT ARE IDENTICAL TO THE CASE OF SHRI PRAMOD JAIN & OTHERS VS. DCIT & OTHERS. IN VI EW OF THE FINDING OF THE COORDINATE BENCH ON THE IDENTICAL ISSUE, WE FIND TH AT WHEN THE PAYMENT OF PURCHASE CONSIDERATION PAID THROUGH CHEQUE DIRECTLY TO THE C OMPANY AND THE SUBSEQUENT MERGER OF THE COMPANY AS PER THE SCHEME OF MERGER A PPROVED BY THE HIGH COURT, THEN THE TRANSACTION AND SALE OF SHARES IN QUESTION CANNOT BE HELD AS BOGUS. THE AO HAS PASSED THE IMPUGNED ORDER ON THE BASIS OF THE S TATEMENT OF SHRI DEEPAK PATWARI WHICH IS IDENTICAL AS IN THE CASE OF SHRI P RAMOD JAIN & OTHERS VS. DCIT. ACCORDINGLY FOLLOWING THE ORDER OF THE COORDINATE B ENCH OF THIS TRIBUNAL, WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVIDENCE FILE D BY THE ASSESSEE IN SUPPORT OF 14 ITA NO. 292/JP/2017 SHRI VIVEK AGARWAL, JAIPUR. THE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTAB LISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TE RM CAPITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 06/04/20 18. SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/04/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI VIVEK AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE ITO, WARD 1(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO.292/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR