L.K. Prahladka, HUF, Kolkata V. ITO, Ward - 35(3), Kolkata , Kolkata

ITA 317/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7547 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 23-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Assessee Lawyers: S JHAJHARIA
• Keywords: Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Question of law; Corroborative evidences; Accommodation entries; Sham transactions; Penny stocks
• Section: 133(6); 205; 131; 68

Judgement Text

1 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 317/KOL/2018 ASSESSMENT YEAR: 2014-15 L. K. PRAHLADKA, HUF (PAN: AAAHL5309M) VS. INCOME-TAX OFFICER, WD-35(3), KOLKATA APPELLANT RESPONDENT FOR THE APPELLANT S/SHRI S. JHAJHARIA, AR & SUJOY S EN, AR FOR THE RESPONDENT SHRI SANKAR HALDER, ADDL. CIT, SR. DR DATE OF HEARING 13.11.2018 DATE OF PRONOUNCEMENT 16.01.2019 ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -10, KOLKATA FOR AY 2014-15 D ATED 16.11.2017. 2. THOUGH THE ASSESSEE HAD RAISED SEVERAL GROUNDS O F APPEAL THE MAIN ISSUE IS AS TO W HETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE LD AO U/S 68 OF THE ACT I N RESPECT OF SALE PROCEEDS OF SHARES OF M/S KAILASH AUTO FINANCE LIMITED (KAFL) TREATING TH E SAME AS INCOME FROM UNDISCLOSED SOURCES AFTER REJECTING THE ASSESSEES CLAIM OF LON G 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 CLAIMED LONG TERM CAPITAL GAI NS FROM SALE OF SHARES OF M/S. KAILASH AUTO FINANCE LIMITED (KAFL). THE AO FOUND THAT THE ASSESSEE HAD PURCHASED 2,00,000 SHARES OF THE FACE VALUE OF RS.1 EACH IN M/S. CAREF UL PROJECTS ADVISORY LIMITED (CPAL) FOR 2 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 A TOTAL CONSIDERATION OF RS.2,00,000/- WHICH LATER GOT AMALGAMATED WITH M/S. KAFL. THE AO TOOK NOTE THAT M/S. CPAL WAS AMALGAMATED WITH M/ S. KAFL BY VIRTUE OF AN ORDER OF HONBLE HIGH COURT AND IN PURSUANCE TO SUCH AMALGAM ATION, THE ASSESSEE WAS ALLOTTED 2,00,000 SHARES OF M/S. KAFL OF THE FACE VALUE OF R S.1 EACH. THE AO NOTED THAT THE SAID SHARES WERE SOLD BY THE ASSESSEE THROUGH A BROKER N AMED M/S. RATNABALI CAPITAL MARKETS LTD. ON DIFFERENT DATES FALLING WITHIN THE PREVIOUS YEAR 2013-14 CORRESPONDING TO THE ASST YEAR 2014-15 AT A PRICE OF RS.76,34,233/-. THE AFOR ESAID TRANSACTIONS, ACCORDING TO ASSESSEE, RESULTED IN LONG TERM CAPITAL GAINS AND THE ASSESSE E CLAIMED EXEMPTION U/S 10(38) OF THE ACT FOR RS.74,34,233/-. 4. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEE S CLAIM OF LTCG AND EXEMPTION THEREOF CLAIMED BY THE ASSESSEE. THE AO TAKING NOT E OF THE STUDY CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT ABOUT 84 BSE L ISTED PENNY STOCK DISCUSSES FROM PARA 4 OF ASSESSMENT ORDER, THE GENERAL OBSERVATIONS/ST UDY/MODUS OPERANDI FROM PAGES 2 TO 10 OF THE ASSESSMENT ORDER GOES ON TO STATE ABOUT THE SCRIPS ASSESSEE PURCHASED AND SOLD. ACCORDING TO AO, IT IS UNBELIEVABLE THAT THE ASSESS EE CAN MAKE A FANTASTIC GAIN IN A SPAN OF 22 MONTHS. ACCORDING TO AO, THE PRICE MOVEMENT OF THE SCRIP IN THE SPAN OF 22 MONTHS RAISED DOUBTS IN HIS MIND AND THAT PROFIT EARNED BY THE ASSESSEE WERE BEYOND HUMAN PROBABILITIES. THE AO NOTICED THAT THE COMPANY, M/S . CPAL, WAS INCORPORATED ON 18.09.2010 WITH AUTHORIZED AND PAID UP SHARE CAPITA L OF RS.1 LAKH. THE COMPANY INCREASED ITS AUTHORIZED SHARE CAPITAL TO RS.34.50 LAKHS AND THEREAFTER ISSUED 330155 SHARES OF THE FACE VALUE OF RS.10 EACH AT THE PREMIUM OF RS.590 TO DIF FERENT ENTITIES. THE AO ALSO OBSERVED THAT DURING THE FY 2011-12, M/S. CPAL INCREASED ITS AUTHORISED SHARE CAPITAL TO RS.29 CRORES AND THEN THE SHARES OF RS.10 EACH WERE SPLIT INTO 1:10 I.E. EACH SHARES OF RS.10 INTO SHARES OF RE.1 EACH. THE SAID COMPANY CPAL THEREAFT ER ISSUED BONUS SHARES TO THE EXISTING EQUITY SHAREHOLDERS IN THE RATIO OF 1:55. THE AO SU SPECTED THE ISSUE OF BONUS SHARES IN THE UNREALISTIC RATIO OF 1:55. HE WAS OF THE OPINION TH AT THE PROBABLE REASONS WERE WITH A VIEW TO PROVIDE LARGE AMOUNT OF LTCG IN THE HANDS OF BENEFI CIARIES AFTER AMALGAMATING THE SAID COMPANY WITH KAFL. THE AO CONCLUDED THAT CPAL WAS I NCORPORATED WITH A DUBIOUS PLAN AND PREMEDITATED ARRANGEMENT AND ARTIFICE TO INCREA SE NUMBER OF SHARES THEREIN THROUGH SHAM AND NON GENUINE TRANSACTIONS OF ITS SHARES WHI CH RESULTED IN FETCHING EXORBITANT AND 3 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 UNREALISTIC CONSIDERATIONS IN THE SCHEME OF AMALGAM ATION. THE AO TAKES NOTE OF THE INVESTIGATION WINGS STUDY REPORT OF A COMPANY M/S. VINDHYWASSINI NIKETAN PVT. LTD. WHICH HAD DEALT WITH THE SHARES OF M/S. KAFL SCRIPS AND THE STATEMENT OF ITS DIRECTOR MR. GAURAV KUMAR WHICH WAS RECORDED AT PAGES 28 AN 29 OF THE ASSESSMENT ORDER. AND THAT OF THE STATEMENT OF MR. ATUL AGARWAL OF M/S. KORP SECU RITIES (BROKERS) STATEMENT WAS RECORDED TO EXPOSE THE ROLE OF BROKERS IN UNSCRUPUL OUS PRACTICE OF LAUNDERING OF BLACK MONEY WHICH FACTS WERE CONFRONTED TO ASSESSEE VIDE SHOW CAUSE NOTICE DATED 14.12.2016 AND AFTER RECEIPT OF REPLY, THE AO WAS OF THE OPINI ON THAT HE WAS NOT SATISFIED WITH THE REPLY OF ASSESSEE AND ADDED RS.76,34,233/- U/S. 68 BEING CLAIMED FROM BOGUS SHARE SALE CONSIDERATION. 5. THE AO REFERRED TO THREE SEPARATE ORDERS PASSED BY SEBI DATED 29 TH MARCH, 2016, 15 TH JUNE, 2016 AND 31 ST OCTOBER, 2016 IN SUPPORT OF HIS ADVERSE CONCLUSION S DRAWN AGAINST THE ASSESSEE THAT SEVERAL ENTITIES RELATED/CONNECTE D TO KAFL RIGGED THE PRICES BY 230% DURING THE PERIOD OF JANUARY, 2013 TO JUNE, 2013 (P ATCH-1), CREATED ARTIFICIAL DEMAND AND THEREAFTER PROVIDED EXIT TO THE BENEFICIARIES DURIN G THE PERIOD OF JULY 2013 TO NOVEMBER, 2014 (PATCH-2). THE SAID ORDERS PASSED BY SEBI CONT AINED LIST OF RELATED/CONNECTED PARTIES OF KAFL AND ALSO THE LIST OF BENEFICIARIES. SOME OF THESE WERE RESTRAINED FROM ACCESSING THE SECURITIES MARKET AND BUYING, SELLING OR DEALING IN SECURITIES. THE AO CONCLUDED THAT THE IN DEPTH ANALYSIS DONE BY SEBI IN THE THREE ORDERS IS DIRECT EVIDENCE AGAINST THE ASSESSEE TO HOLD THAT THE PRICES OF KAFL WERE MANIPULATED AND A RTIFICIALLY HIKED TO CREATE NON-GENUINE LTCG IN THE TRANSACTIONS OF KAFL. THE AO FURTHER C ONCLUDED THAT CONFESSIONS GIVEN ON OATH BY THE PROMOTERS/BROKERS/OPERATORS ARE THE CIR CUMSTANTIAL EVIDENCE AGAINST THE ASSESSEE THAT THE LTCG WAS ARRANGED ONE. 6. THE AO RELYING ON THE VARIOUS DECISIONS SUMATI D AYAL V. CIT 214 ITR 801 (SC), DURGA PRASAD MORE V. CIT, MCDOWELL & CO. V. CTO, CI T V. P. MOHANKALA] OBSERVED THAT TAX LIABILITIES CAN BE ASSESSED BY REVENUE AUTHORIT IES ON CONSIDERATION OF MATERIAL AVAILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT , PREPONDERANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATION/EVIDENCE AVAILA BLE ON RECORD. THE AO ULTIMATELY CONCLUDED THAT IN SUCH CLANDESTINE OPERATIONS AND T RANSACTIONS, IT IS IMPOSSIBLE TO HAVE 4 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 DIRECT EVIDENCE OR DEMONSTRATIVE PROOF OF EVERY MOV E AND ALSO REFERRED TO THE REPORT OF SIT ON BLACK MONEY. 7. THE AO CONCLUDED THAT THE ASSESSEES TRANSACTION S RESULTING IN LTCG ON SALE OF SHARES OF KAFL WERE BOGUS AND THAT THE ASSESSEE PLO UGHED BACK HIS UNACCOUNTED MONEY IN THE BOOKS OF ACCOUNTS WHICH IS ASSESSABLE UNDER SEC TION 68 OF THE ACT. 8. ON FIRST APPEAL, THE CIT(A) DISMISSED THE GROUND S RAISED BY THE ASSESSEE AGAINST HIS CLAIM OF EXEMPTION U/S 10(38) OF THE ACT AND HE ALS O CONFIRMED THE ADDITIONS MADE BY THE AO UNDER SECTION 68 OF THE ACT. AGGRIEVED, THE ASSE SSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AT THE TIME OF HEARING IT WAS BROUGHT TO OUR NOTICE BY THE LD. AR THAT THOUGH THE AO REFERRED TO INVESTIGATION WINGS REPORT MADE AFTER SEARCH OF M/S. VINDHYWASIN NIKETAN PVT. LTD. WHICH WAS SUPPOSED TO HAVE INDULGED IN PROVIDI NG ACCOMMODATION ENTRIES FOR SALE OF M/S. KAFL AND HAS RECORDED THE STATEMENT OF ITS DIR ECTOR MR. GAURAV KUMAR, WHICH RELEVANT PORTIONS HAVE BEEN RECORDED BY AO AT PAGES 28 AND 29 OF HIS ORDER, NEITHER ANY WHERE THE NAME OF ASSESSEE NOR HIS BROKER HAS BEEN MENTIONED BY THE SAID DIRECTOR. AND THE LD. AR DREW OUR ATTENTION TO THE PAGE 31 OF AOS OR DER WHICH REPRODUCES THE STATEMENT OF SHRI ANUJ AGARWAL OF M/S. KORP SECURITIES WHICH ACC ORDING TO AO EXPOSES THE ROLE OF BROKERS IN THIS BOGUS TRANSACTION. THE LD. AR DREW OUR ATTENTION TO THE STATEMENT AND CONTENDED THAT NO WHISPER OF ASSESSEES NAME OR ITS BROKERS ROLE HAS BEEN ADVERSELY COMMENTED/MENTIONED BY THIS PERSON. AND THE LD. AR SUBMITTED THAT NEITHER THE STUDY CONDUCTED BY THE INVESTIGATION WING OF DEPARTMENT N OR THE SEBI HAS FOUND ANY ADVERSE MATERIAL/ADVERSE REMARK AGAINST THE ASSESSEE OR ITS BROKER WHO DEALT WITH THE TRANSACTION IN BOMBAY STOCK EXCHANGE. SO, ACCORDING TO LD. AR, TH E AO ON GENERAL STATEMENT/STUDY REPORT/MODUS OPERANDI CARRIED OUT BY SOME UNSCRUPUL OUS PLAYERS HAVE PAINTED THE ASSESSEE ALSO BAD AND HELD THE LTCG CLAIM AS BOGUS. THEREFO RE, ACCORDING TO LD. AR IN THE LIGHT OF ALL SUPPORTING EVIDENCE TO SHOW GENUINE LTCG CLAIM WHICH HAS NOT BEEN FOUND TO BE FALSE OR CONCOCTED OR FABRICATED, THE CLAIM NEED TO BE AL LOWED. AND HE TOOK AN ATTENTION TO PAGE 106 TO 112 OF PAPER BOOK WHICH IS THE LATEST ORDER OF SEBI DATED 29.03.2016 REVOKING THE 5 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 BAN OF 244 ENTITIES OUT OF 246 ENTITIES WHICH WERE ALL EARLIER BANNED AFTER TRADING SCRIPS OF M/S. KAFL. SO, ACCORDING TO LD AR, SEBI AFTER INVE STIGATION HAS FOUND ONLY 2 ENTITIES WERE INFACT INVOLVED IN SOME NEFARIOUS PRACTICE AND NOT THE OTHER 244 ENTITIES AND THE AO HAS HEAVILY RELIED ON THE EARLIER INTERIM ORDER OF SEBI TO DRAW ADVERSE INFERENCE AGAINST THE ASSESSEE SO, ACCORDING TO LD. AR, THE EDIFICE UPON WHICH THE AO MADE THE ADDITION HAS FALLEN DOWN, SO THE ADDITION SHOULD BE DELETED. THE LD. AR ALSO BROUGHT TO OUR NOTICE THAT THIS TRIBUNAL IN THE FOLLOWING CASES HAVE DECIDED T HAT THE SCRIPS OF KAFL ARE NOT BOGUS AND THE LTCG CLAIM OF THE ASSESSEE NEEDS TO BE ALLOWED: I) MANISH KUMAR BAID VS. ACIT, ITA NOS. 1236& 1237/ KOL/2017 DATED 18.08.2017 II) RUKMINI DEVI MANPRIA VS. DCIT, ITA NO.1724/KOL/ 2017 DATED 24.10.2018 III) JAGMOHAN AGARWAL VS. ACIT, ITA NO.604/KOL/2018 DATED 05.09.2018. 10. THE LD. DR FOR THE REVENUE VEHEMENTLY OPPOSED T HE CONTENTIONS OF THE ASSESSEE AND TOOK US THROUGH THE AOS ORDER AND LD. CIT(A)S ORD ER AND SUBMITTED THAT SCRIPS OF M/S. KAFL WAS ARTIFICIALLY RIGGED TO PROVIDE LTCG TO THE ASSESSEE WHICH CANNOT BE ALLOWED AND SUPPORTED THE IMPUGNED ORDER AND RELIED ON THE ORDE R OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BINOD CHAND JAIN IN TAX APPEAL NO. 18 OF 20 17 AND SO HE DOES NOT WANT US TO INTERFERE WITH THE IMPUGNED ORDER. 11. WE NOTE THAT SIMILAR ISSUE AROSE IN MANISH KUMA R BAID (SUPRA) WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF LTCG FR OM SALE OF SCRIPS OF M/S. KAFL HAS HELD 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 WIT HOUT BRINGING ON RECORD ANY LEGAL EVIDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGE MENT OF SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES 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 INFERENCES WHICH REMAIN UNPROVED BASED ON T HE EVIDENCES AVAILABLE ON RECORD, ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE PRINCIP LES LAID DOWN IN VARIOUS CASE LAWS RELIED UPON BY THE LD AR ARE ALSO NOT REITERATED FOR THE S AKE OF BREVITY. WE FIND THAT THE AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED B Y THE ORDER OF HONBLE HIGH COURT. 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 BEEN SUBJECT TO CROSS EXAMINATION. MOROEVER, IT IS ALSO PERTINENT TO NOTE THAT 6 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 THE ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BROKING LTD NAME IS NEITHER MENTIONED IN THE SAID STATEMENT AS A PERSON WHO HAD ALLEGEDLY DE ALT WITH SUSPICIOUS TRANSACTIONS NOR THEY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF S HARES OF KAFL. HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINS T 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 AR GUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES APART FROM PLACING THE COPY OF SEBIS INTERIM ORDER SUPRA . WE FIND THAT THE SEBIS ORDERS RELIED ON BY THE LD AO AND REFERRED TO HIM AS DIRECT EVIDE NCE AGAINST THE ASSESSEE DID NOT CONTAIN THE NAME OF THE ASSESSEE AND/OR THE NAME OF ASHIKA STOCK BROKING 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 ASSESSEE W AY 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 EXITING AT THE MO ST OPPORTUNE MOMENT BY MAKING GOOD PROFITS IN RODER TO HAVE A GOOD RETURN ON HIS INVES TMENT. WE FIND THAT THE ASSESSEE AND / OR THE BROKER ASHITA STOCK BROKING LTD WAS NOT THE PRI MARY ALLOTTEES OF SHARES EITHER IN CPAL OR IN KAFL AS COULD BE EVIDENT FROM THE SEBIS ORDE R. WE FIND THAT THE SEBI ORDER DID MENTION THE LIST OF 246 BENEFICIARIES OF PERSONS TR ADING IN SHARES OF KAFL, WHEREIN, THE ASSESSEE AND / OR ASHITA STOCK BROKING LTDS NAME I S NOT REFLECTED AT ALL. HENCE THE ALLEGATION THAT THE ASSESSEE AND / OR ASHITA STOCK BROKING LTD GETTING INVOLVED IN PRICE RIGGING OF KAFL SHARES FAILS. WE ALSO FIND THAT EV EN THE SEBIS ORDER HEAVILY RELIED UPON BY THE LD AO CLEARLY STATES THAT THE COMPANY KAFL H AD PERFORMED VERY WELL DURING THE YEAR UNDER APPEAL AND THE P/E RATIO HAD INCREASED SUBSTA NTIALLY. 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 WITH THE ALLEG ED BOGUS TRANSACTIONS IN THE SHARES OF KAFL ALSO DID NOT IMPLICATE THE ASSESSEE AND/OR HIS BROKER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE T RANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE N EITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACT IONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED I N REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HONBLE JURISDICTIONAL HIGH COURT RELIED UPON BY TH E LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD THAT THE LD A O WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 R AISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. 12. COMING BACK TO THE BRIEF FACTS OF THE INSTANT C ASE, WE NOTE THAT ASSESSEE IS A REGULAR INVESTOR IN SHARES AND SECURITIES INCLUDING MUTUAL FUNDS, WHICH IS UNDISPUTED FACT AND EVIDENT FROM BALANCE SHEET AS ON 31.03.2014 WHEREIN THE AMOUNT OF INVESTMENT IN SHARES IS RS.86,64,810/- AND MUTUAL FUNDS RS.2,58,000/-. THE ASSESSEE MADE A LONG TERM CAPITAL GAIN OF RS.74,34,233/- BY SELLING QUOTED EQUITY SHARES O N BOMBAY STOCK EXCHANGE WHICH 7 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 SUFFERED STT AND CLAIMED EXEMPTION U/S. 10(38) OF T HE ACT. THE SALE PROCEEDS OF RS.76,34,233/- WAS CREDITED IN HIS BANK ACCOUNT. 13. WE NOTE THAT THE FOLLOWING DOCUMENTS WERE PRODU CED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF EXEMPT LTCG BEFORE AO/LD. CIT(A): I) PURCHASE BILL EVIDENCING THE PURCHASE OF 2,00, 000 SHARES CONTAINING THE PAN OF BOTH PARTIES ALONG WITH OTHER DETAILS (PAPER BOOK PAGE 40) II) CERTIFICATE OF BOOK VALUE OF SHARES PURCHASED OF M/S. CAREFUL PROJECTS ADVISORY LTD. AT THE BREAK VALUE OF RE. 1/- AS CERTIFIED BY THE CHARTERED ACCOUNTANT ANT (MR A.K. JAIN, MEMBERSHIP NO.. 05393) (PAPER BOOK PAGE 41). III) BANK STATEMENT REFLECTING PAYMENT MADE FOR P URCHASE THROUGH CHEQUE VIDE CHEQUE NO. 737263 WHICH IS CLEARLY EVIDENT DULY HIG HLIGHTED (PAPER BOOK PAGE 42). IV) CONFIRMATION LETTER FROM M/S WONDROUS MARKETI NG PVT. LTD. (FORMERLY KNOWN AS M/S JATADHARI MARKETING PVT. LTD.) CONFIRMING THE S AID TRANSACTION PROVING THE PURCHASE OF EQUITY SHARES OF M/S CAREFUL PROJECTS ADVISORY LTD. PAYMENT MADE AND DELIVERY OF SHARES OF DIRECTLY IN THE D-MAT ACCOUNT (PAPER BOOK PAGE 43). V) D-MAT STATEMENT EVIDENCING THE RECEIPT OF DELI VERY OF SHARES FROM CLIENT ID 10415082 BELONGS TO M/S WONDROUS MARKETING PVT. LTD . (FORMERLY KNOWN AS M/S JATADHARI MARKETING PVT. LTD.) (PAPER BOOK PAGE 44) . VI) D-MAT STATEMENT OF M/S WONDROUS MARKETING PVT . LTD. (FORMERLY KNOWN AS M/S JATADHARI MARKETING PVT. LTD.) SHOWING THE DEL IVERY OF SHARES TO ASSESSEE'S ACCOUNT NO. (PAPER BOOK PAGE 45). VII) BALANCE SHEET SHOWING INVESTMENT IN SHARES A ND SECURITIES PROVING REGULAR INVESTOR. (PAPER BOOK PAGE 46). - VIII) HIGH COURT MERGER ORDER EVIDENCING PURCHASE D SHARES WERE MERGED WITH M/S KAILASH AUTO FINANCE LTD. (PAPER BOOK PAGES 47 TO 55). IX) MERGER LETTER RECEIVED FROM M/S KAILASH AUTO F INANCE LTD. SHOWING THE STATEMENT OF SHARES OF M/S KAILASH AUTO FINANCE LTD . IN LIEU OF SHARES OF M/S CAREFUL PROJECTS ADVISORY LTD. UPON MERGER. (PAPER BOOK P AGE 56. X) D-MAT STATEMENT SHOWING THE AUTOMATIC CONVERSIO N OF SHARES OF M/S CAREFUL PROJECTS ADVISORY LTD. TO M/S. KAILASH AUTO FINANCE LTD. (PAPER BOOK PAGE 57-58). 8 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 XI) BSE NOTICE SHOWING THE LISTING OF 38,05,900 E QUITY SHARES OF RE.L/- EACH AS PER THE BYE-LAW 33 OF THE RULES, BYE LAWS AND REGULATI ONS OF THE EXCHANGE. (PAPER BOOK PAGE 59). XII) BSE NOTICE SHOWING THE LISTING AND TRADING P ERMISSION FOR EQUITY SHARES OF M/S. KAILASH AUTO FINANCE LTD. (PAPER BOOK PAGES 60-61). XIII) TIME STAMPED CONTRACT NOTES.95 CONTRACT NOT ES) SHOWING ORDER NO., ORDER TIME, TRADE NO., STT AND OTHER CHARGES GROSS RATE P ER SECURITY OF SHARES PURCHASED WERE SOLD THROUGH GUINESS SECURITIES LTD. , A SEBI REGISTERED BROKER MEMBER OF THE BOMBAY STOCK EXCHANGE. (PAPER BOOK PAGES 62-66) . XIV) DELIVERY SLIPS SHOWING THE DELIVERY OF SHARE S MADE TO THE BROKER M/S. GUINESS SECURITIES LTD. (PAPER BOOK PAGES 67-71) XV) D-MAT STATEMENT SHOWING THE DELIVERY OF SHARE S TO THE BROKER M/S GUINESS SECURITIES LTD. (PAPER BOOK PAGES72). XVI) BANK STATEMENT SHOWING THE AMOUNT RECEIVED O N SALE OF SHARES FROM M/S GUINESS SECURITIES LTD., DULY HIGHLIGHTED. (PAPER BOOK PAGE 73) XVII) FORM NO. 10DB (STT CERTIFICATE) ISSUED BY T HE BROKER M/S GUINESS SECURITIES LTD. (PAPER BOOK PAGE 74). 14. WE NOTE FROM A PERUSAL OF THE RELEVANT DOCUMENT S TO SUPPORT THE PURCHASE AND SALE TRANSACTION THE COPIES OF PURCHASE BILL (P-40), BAN K STATEMENT SHOWING THE PAYMENT (P-15), CONFIRMATION BY THE SELLER OF PURCHASED SHARES (P-4 2), DELIVERY OF SHARES RECEIVED IN D-MAT A/C DIRECTLY FROM THE SELLER'S D-MAT ACCOUNT (P-44) , TIME STAMPED SALE CONTRACT NOTE WHICH SUFFERED STT (P-62 TO 66), DELIVERY OF SOLD SHARES TO THE STOCK EXCHANGE THROUGH THE REGISTERED MEMBER (P-67 TO 71), RECEIPT OF SALE PRO CEEDS IN BANK ACCOUNT FROM STOCK EXCHANGE THROUGH REGISTERED MEMBER (P-73), STT PAID CERTIFICATE (P-74), AMONG OTHER DOCUMENTS. THUS THE TRANSACTION WAS CARRIED OUT AS PER THE STOCK EXCHANGE RULES GUIDED BY SEBI. WE NOTE THAT THE SALE WAS THROUGH A GENUINE M EMBER OF RECOGNIZED BOMBAY STOCK EXCHANGE (BSE) AND IN DE-MAT FORM AND SALE CONSIDER ATION PASSED ON TO ASSESSEE THROUGH PROPER BANKING CHANNEL. 15. WE NOTE THAT THE AO HAS NOT REFUTED ANY OF THE DOCUMENTS/EVIDENCES SUBSTANTIATING THE WHOLE TRANSACTION. THE AO JUST RELIED UPON THE GENERAL STUDY MADE BY INVESTIGATION 9 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 REPORT AND WE NOTE THAT THE ASSESSEES NAME NOWHERE APPEARS IN THE D.I. INVESTIGATION REPORT NOR THE ASSESSEE CLAIMS THAT THOSE ALLEGED SHARES W ERE SOLD THROUGH SO CALLED ENTRY OPERATORS. 16. WE FURTHER NOTE THAT THE AO/LD. CIT(A) COMPLETE LY IGNORED THE FOLLOWING RELEVANT MATERIAL FACTS: A) THAT 2,00,000 SHARES WERE PURCHASED ON 03.11.2011 F ROM M/S. JATADHARI MARKETING PVT. LTD. WHICH IS A ROC REGISTERED COMPA NY HAVING PAN, AND THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUE NO. 7 37263 AND DELIVERY OF PURCHASED SHARES WERE RECEIVED IN D-MAT ACCOUNT DIR ECTLY. B) THAT THE DEALING WAS WITH RESPECT TO THE SHARES OF A LISTED COMPANY. C) THAT THE COMPANY, (HAVING BSE CODE 511357) HAD SATI SFIED ALL THE STRINGENT NORMS OF THE SEBI & BOMBAY STOCK EXCHANGE WITH RESP ECT TO LISTING. D) THAT THE APPELLANT HAD ACQUIRED THE SHARES IN ITS O WN NAME. E) THAT THE SHARES WERE TRANSACTED THROUGH HDFC BANK D -MAT ACCOUNT (DP ID: IN300476, CLIENT ID: 40434996) SUBSTANTIATING THE A SPECT OF OWNERSHIP AND GENUINENESS OF MOVEMENT OF SHARES UNDER THE CUSTODI ANSHIP OF NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL). F) THAT THE APPELLANT SOLD THE SHARES THROUGH M/S. GUINESS SECURITIES LTD A SEBI- REGISTERED (REGD. NO: INB 011146033) BROKING COMPAN Y. G) THAT THE STOCK-BROKER IS A MEMBER OF BSE (NO: 30 27). H) THAT THE STOCK-BROKING COMPANY HAD TO COMPLY WIT H ALL THE REQUIREMENTS WITH RESPECT TO THE COMPANIES ACT, SECURITIES CONTRACT A CT AND SEBI REGULATIONS. I) THAT THE STOCK-BROKING COMPANY WAS NOT DEBARRED BY BSE/SEBI/MCA EVEN AS ON TODAY FROM CARRYING OUT ITS OPERATIONS. 17. WE NOTE THAT THE AO IS HIS ASSESSMENT ORDER, HA S TRIED TO EXPLAIN THE MODUS OPERANDI OF SO CALLED BOGUS PRE-ARRANGED LTCG, IN WHICH HE G OES ON TO MENTION 'THE OPERATOR ASKS THE BENEFICIARY TO DELIVER THE UNACCOUNTED CASH. ON CE THE UNACCOUNTED CASH HAS BEEN DELIVERED BY THE BENEFICIARY THE SAME IS THEN ROUTE D BY THE OPERATOR TO THE BOOKS OF VARIOUS PAPER/BOGUS COMPANIES WHICH ULTIMATELY BUY THE SHAR ES BELONGING TO THE COMPANIES AT HIGH 10 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 PRICES'. HOWEVER, WE NOTE THAT AO FAILED TO EXPOSE THE WRONG DOING IF ANY ON THE PART OF THE ASSESSEE BY BRINGING OUT OR UNRAVELING ANY NEXU S OF ASSESSEE/BROKER WITH THE PURCHASE OF SHARES. FURTHER, WE NOTE THAT AO HAS NOT BROUGHT A NY EVIDENCE/MATERIAL TO SUGGEST THAT THE APPELLANT KNOWS ANY OF THE SO-CALLED ENTRY OPERATOR S/BROKER/PAPER COMPANIES OR THEY HAVE NAMED THE APPELLANT IN PARTICULAR, THAT THEY HAVE D EALT WITH THE APPELLANT. SO, IT IS UPON MERE SURMISE AND ASSUMPTION THAT AO SAYS THAT ASSESSEES OWN UNACCOUNTED CASH HAVE BEEN GIVEN TO PURCHASERS IN ORDER TO CLAIM BOGUS LTCG. 18. WE NOTE THAT IN ORDER TO CREATE A TAX LIABILITY IN A CASE OF THIS NATURE, THE AO HAS TO PROVE AND ESTABLISH THE CASH TRAIL AND THE ALLEGATI ONS, PARTICULARLY IN RESPECT OF THE APPELLANT, WHICH IS YET TO BE PROVED IN THE INSTANT CASE. SIMI LAR VIEW HAS BEEN PRONOUNCED BY HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS JATIN IN VESTMENT (P) LTD. WHEREIN IT WAS OBSERVED 'A TRANSACTION CANNOT BE TREATED AS FRAUDULENT IF T HE APPELLANT HAS FURNISHED THE DOCUMENTARY PROOF AND PROVED THE IDENTITY OF THE PU RCHASER AND NO DISCREPANCY IS FOUND. THE AO HAS TO EXERCISE HIS POWERS U/S 131 & 133(6) OF THE ACT TO VERIFY THE GENUINENESS OF THE CLAIM AND CANNOT PROCEED ON SURMISES. THE AO MU ST ESTABLISH THAT CASH HAS CHANGED HANDS. THERE IS NO MATERIAL OR EVIDENCE EVEN TO SUG GEST THAT THE CHEQUES DIRECTLY OR INDIRECTLY EMANATED FROM THE APPELLANT SO THAT IT C OULD BE SAID THAT THE APPELLANTS' OWN MONEY WAS BROUGHT BACK IN THE GUISE OF SALE PROCEED S. 19. IN THE CASE OF CIT VS. LAVANYA LAND PVT LTD. TH E HONBLE BOMBAY HIGH COURT RULED THAT THE ALLEGATIONS MADE BY THE AUTHORITIES HAVE T O BE SUPPORTED BY ACTUAL CASH PASSING HANDS OR ACTUALLY HAS CHANGED HANDS. 20. IN THE CASE OF DOLARRAI HEMANI VS. ITO, THIS TR IBUNAL HELD THAT THE FACT THAT THE STOCK IS THINLY TRADED & THERE IS UNUSUALLY HIGH GA IN, IS NOT SUFFICIENT TO TREAT THE LTCG AS BOGUS WHEN ALL THE PAPERWORK IS IN ORDER. THE REVEN UE HAS TO BRING MATERIAL ON RECORD TO SUPPORT IT'S FINDINGS THAT THERE HAS BEEN COLLUSION /CONNIVANCE BETWEEN THE BROKER & THE APPELLANT FOR THE INTRODUCTION OF UNACCOUNTED MONEY . 11 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 21. IN THE CASE OF DCIT VS. SUNITA KHEMKA, ITAT KOL KATA RULED THAT THE AO CANNOT TREAT A TRANSACTION AS BOGUS ONLY THE BASIS OF SUSP ICION OR SURMISES. HE HAS TO BRING MATERIAL ON RECORD TO SUPPORT HIS FINDINGS THAT THERE HAS BE EN A COLLUSION/CONNIVANCE BETWEEN THE BROKER AND THE APPELLANT FOR THE INTRODUCTION OF IT S UNACCOUNTED MONEY. A TRANSACTION OF PURCHASE AND SALE OF SHARES, SUPPORTED BY CONTRACT NOTES AND D-MAT STATEMENTS AND ACCOUNT PAYEE CHEQUES CANNOT BE TREATED AS BOGUS. 22. IN THE CASE OF KAMALA DEVI S DOSHI VS. ITO ITAT MUMBAI, VIDE IT'S ORDER DATED 22.5.2017 HELD THAT STATEMENT U/S 131 OF THE ACT IMPLICATING APPELLANT IS NOT SUFFICIENT TO DRAW ADVERSE INFERENCE WHERE DOCUMENT S IN THE FORM OF CONTRACT NOTES, BANK STATEMENTS, STT PAYMENT ETC. PROVES THE GENUINENESS OF PURCHASE AND SALE OF PENNY STOCK. FAILURE TO PROVIDE CROSS EXAMINATION IS A FATAL ERR OR. 23. SO, AS THE FACTS OF THE CASE ARE VERY SIMILAR, THE AO HAS FAILED TO ESTABLISH ANY LINK AND THEREFORE THE ORDER IS BASED ON SURMISES, PREDE TERMINED, SOLELY RELYING UPON THE INVESTIGATION REPORT WHICH IS GENERAL IN NATURE AND NO CONCRETE MATERIAL HAS BEEN BROUGHT ON RECORD PROVING OTHERWISE. 24. WE NOTE THAT THE AO IN HIS ORDER HAS MENTIONED THAT SEBI HAS GIVEN ADVERSE REPORT ON SO MANY SCRIPS INCLUDING THAT OF KAILASH AUTO. FURTHER, WE NOTE THAT SEBI, IN ITS TWO REPORTS ON THE SAID SCRIP, HAS NAMED AND BANNED/SUS PENDED THE BENEFICIARIES IN PARTICULAR. HOWEVER, WE NOTE THAT THE APPELLANTS NAME DOES NOT APPEAR IN THIS LIST. AND THAT THE SEBI DID NOT STOP/SUSPEND THE TRADE OF SALE OF M/S. KAFL WHEN ASSESSEE SOLD THE SCRIP. WE NOTE THAT M/S. KAFL WAS VERY MUCH LISTED ON THE STOCK EX CHANGE AND TRADING IN THE SAID SCRIP WAS PERMISSIBLE ON THE STOCK EXCHANGE. MOREOVER SE BI REPORT AGAINST CERTAIN BENEFICIARIES OF KAILASH AUTO WAS IN PUBLIC MUCH AFTER THE APPEL LANT HAS SOLD THE SHARES, AND WE NOTE THAT ON 29.03.2016 SEBI HAS REVOKED THE BAN ON SUCH ENTI TIES WHICH IMPLIES THAT THERE WAS NO EVIDENCE AGAINST THEM. 25. WE NOTE THAT AT PARA -18 OF THE ASSESSMENT ORDE R AO MENTIONS ABOUT THE ROLE OF BROKERS IN ALLOWING ENTRY OPERATORS TO REGISTER THE IR BOGUS COMPANIES AS THEIR CLIENT AND ALSO 12 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 CERTAIN ADMISSION MADE BY SOME BROKERS ABOUT THEIR INVOLVEMENT IN SO CALLED JAMA KHARCHI COMPANIES. IN THE SAID PARA SOME NAMES OF FEW BROK ERS AND JAMA KHARCHI OPERATORS HAVE BEEN MENTIONED. HOWEVER, WE NOTE THAT THE NAME OF ASSESSEES BROKER, M/S. GUINESS SECURITIES LTD., THROUGH WHOM THE ASSESSEE SOLD HIS SHARES, DOES NOT APPEAR AT ALL IN THAT REPORT. 26. WE NOTE THAT M/ S GUINESS SECURITIES LTD WAS NO T NAMED IN THE ASSESSMENT ORDER / D.I. REPORT AS A BROKER WHO WAS INVOLVED IN PRICE R IGGING OF PENNY STOCKS. ON THE OTHER HAND, WE NOTE THAT M/S. GUINESS SECURITIES LTD IS A SEBI REGISTERED STOCK BROKING COMPANY HAVING REGISTRATION NO. INB 011146033 AND ALSO IS A MEMBER OF BOMBAY STOCK EXCHANGE HAVING MEMBERSHIP NO. 3027; NEITHER DURING THE TIME OF EXECUTION OF THE CONTRACT IN FY 2013-14 NOR EVEN TODAY, THIS STOCK-BROKING COMPANY WAS SUSPENDED BY SEBI OR BSE ON ANY CHARGE OF IRREGULARITIES LIKE PRICE RIGGING ETC AS ALLEGED BY THE AO. WE NOTE THAT AO FAILED TO BRING ON RECORD ANY MATERIAL TO CONNECT T HE ASSESSEE TO ANY OF THE ALLEGED ENTRY OPERATORS/ BROKERS WHO ARE A PART OF THIS SO CALLED PRICE RIGGING GROUP OR LTCG GENERATOR GROUP. 27. WE NOTE THAT IN AN IDENTICAL/SIMILAR CASE, WHER EIN THE AO MADE ADDITION OF THE LTCG CLAIM MADE ON SALE OF M/S. KAFL SCRIPS ON SIMILAR R EASONING BASED ON THE SEBI INTERIM REPORT, INVESTIGATION REPORT OF THE WING OF THE DEP ARTMENT AND CERTAIN STATEMENTS RECORDED BY THE DEPARTMENT IN THE CASE OF SANJIV SHROFF VS. ACIT IN ITA NO. 1197/KOL/2018 DATED 02,01.2019 WHEREIN THE SAME BENCH OBSERVED AS UNDER AND GAVE RELIEF TO THE ASSESSEE: WE NOTE THAT SHARES OF M/S. KAFL WERE SOLD BY ASSE SSEE THROUGH RECOGNIZED BROKER IN A RECOGNIZED BOMBAY STOCK EXCHANGE. THE DETAILS OF SU CH SALE AND CONTRACT NOTE HAVE BEEN SUBMITTED BEFORE AO/LD. CIT(A). WE TAKE NOTE THAT W HEN THE TRANSACTIONS HAPPENED IN THE STOCK EXCHANGE, THE SELLER WHO SELLS HIS SHARES ON THE STOCK EXCHANGE DOES NOT KNOW WHO PURCHASES SHARES. ACCORDING TO OUR KNOWLEDGE, THE SHARES ARE SOLD AND BOUGHT IN AN ELECTRONIC MODE ON THE COMPUTERS BY THE BROKERS AND THERE IS A LSO NO DIRECT CONTACT AT ANY LEVEL EVEN BETWEEN THE BROKERS. WE NOTE THAT AS AND WHEN ANY 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 UNDERSTANDIN G, THE SELLING BROKER DOES NOT EVEN KNOW WHO THE PURCHASING BROKER IS. THIS IS HOW THE SEBI KEEP S A STRICT CONTROL OVER THE TRANSACTIONS TAKING PLACE IN RECOGNIZED STOCK EXCHANGES. UNLESS THERE I S A EVIDENCE TO SHOW THAT THERE IS A BREACH IN THE AFORESAID PROCESS WHICH FACT HAS BEEN UNEARTHED BY METICULOUS INVESTIGATION, WE ARE OF THE OPINION THAT THE UNSCRUPULOUS ACTIONS OF FEW PLAYER S EXPLOITING THE LOOPHOLES OF THE STOCK 13 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 EXCHANGE CANNOT BE THE BASIS TO PAINT THE ENTIRE SA LE/PURCHASE OF A SCRIP LIKE THAT OF M/S. KAFL AS BOGUS WITHOUT BRINGING OUT ADVERSE MATERIAL SPEC IFICALLY AGAINST THE ASSESSEE. 17. THE FACT OF HOLDING THE SHARES OF M/S. KAFL IN THE D-MAT ACCOUNT CANNOT BE DISPUTED. FURTHER, THE ASSESSING OFFICER HAS NOT EVEN DISPUTE D THE EXISTENCE OF THE D-MAT ACCOUNT AND SHARES CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSE E. THEREFORE, ONCE, THE HOLDING OF SHARES IS D-MAT ACCOUNT CANNOT BE DISPUTED THEN THE TRANSACTI ON CANNOT BE HELD AS BOGUS. THE AO HAS NOT DISPUTED THE SALE OF SHARES FROM THE D-MAT ACCOUNT OF THE ASSESSEE AND THE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE AS SESSEE, THEREFORE, ONCE THE ASSESSEE PRODUCED ALL RELEVANT EVIDENCE TO SUBSTANTIATE THE TRANSACTI ON OF PURCHASE, DEMATERIALIZATION AND SALE OF SHARES THEN, IN THE ABSENCE OF ANY CONTRARY MATERIA L BROUGHT ON RECORD THE SAME CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE BASIS OF STATEME NT OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI RECORDED B Y THE INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENERAL STATEMENT OF PROVIDING B OGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS WITHOUT STATING ANYTHING ABOUT THE TRANSACT ION OF ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. 18. THE ASSESSEE HAS REQUESTED THE CROSS EXAMINATI ON OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI WHI CH WAS NOT PROVIDED TO THE ASSESSEE BY THE AO. THUS, IN VIEW OF THE DECISION OF HON'BLE SUPREM E COURT IN CASE OF CCE VS. ANDAMANTIMBER INDUSTRIES 127 DTR 241(SC) THE ASSESSMENT BASED ON STATEMENT W ITHOUT GIVING AN OPPORTUNITY TO ASSESSEE TO CROSS EXAMINE THE MAKER OF THE ADVERSE STATEMENTS RELIED ON BY THE AO, IS NOT SUSTAINABLE IN LAW. WE FIND THAT THE STATEMENT CANNOT BE USED BY THE AO WITHOUT GIVING AN OPPORTUNITY TO CROSS EXAMINATION OF SHRI SUNIL DOKANI, SHRI BIDYOOT SARAL, SHRI NARENDRA BASIN AND SHRI AMIT DOKANI. THEREFORE , THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNIT Y OF CROSS EXAMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY . THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION MADE 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 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 WEIGH ED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE MATERIAL FACTS STRONGLY INDICATE A PR OBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVE RTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PER THEIR MUTUAL UNDERSTANDING W ITH THE ASEESSEE. ANOTHER 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 ADVER TISEMENT EXPENSES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY U PON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLLECTION OF PREMIUM. THE PROBABLE 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 A SSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN U NEARTHED FROM SUCH GLOBAL LEVEL INVESTIGATION BY TWO CENTRAL GOVERNMENT AUTHORITIES . IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOU NTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GT C AS A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BANK ACCOUNTS COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NIRMALA SUNDAR AM, WE ARE OF THE OPINION THAT THIS ONE INCIDENT OF DONATION THROUGH BANK ACCOUNTS AT THE D IRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE- COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. H OWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CO RROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT 14 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVIDENCE ON RECORD. THE THEORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF EITHER SIDE AND DRAW A CONCLUSION IN F AVOUR OF A PARTY WHICH HAS MORE FAVOURABLE FACTORS IN HIS SIDE. THE CONCLUSIONS HAVE TO BE DRA WN ON THE BASIS OF CERTAIN 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 A ID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED O UT, THEN NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE.' 19. SINCE, WHEN THE ASSESSING OFFICER HAS NOT BROU GHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE PURCHASE C ONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDEN CE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY BY WAY OF BOGU S LONG TERM CAPITAL GAIN. THE HON'BLE RAJASTHAN HIGH COURT DATED 11-09-2017IN CASE OF CIT VS. SMT. POOJA AGRAWAL [ ITA NO 385/2011 ] HAS UPHELD THE FINDING OF THE TRIBUNAL O N 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 THAT IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATION THE RE VENUE 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 TRANSACTIONS DECLARED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SH ARES. HOWEVER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPELLANT HAD TRANSACTED NO T ONLY IN THE SHARES WHICH ARE DISPUTED BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPU TERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUESTION VARIOUS DETA ILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK CO MMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MAS TER DETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSACTIONS WE RE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSA CTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPELLANT D ENIED HAVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTIO N WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MO DUS OPERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PURO HIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPIT AL GAIN EITHER 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 ACCOMMODATION T RANSACTIONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND T O BE AN ENTRY PROVIDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMENT OF SH. PAW AN PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO ME NTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. SUSHIL KUM AR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUN TER THE OBJECTIONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONIN G THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTIN G WING AFTER CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE A O HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THA T THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT 15 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 THE TRANSACTION IN QUESTION IN STATEMENT OF SH. PAW AN PUROHIT. SIMPLY BECAUSE IN THE SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BANK AN D THE APPELLANT HAS 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. AGARWAL CANNOT BE HELD AS NON-GEN UINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MA DE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT C LAIM 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 MADE BY THE AO IS BASED ON MERE SUSPIC ION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PUR CHASE 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, THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO O N THIS ACCOUNT.' 20. WE NOTE THAT THE SALE OF SHARES OF M/S. KAFL WH ICH WAS DEMATERLIZED IN DEMAT ACCOUNT HAS TAKEN PLACE THROUGH RECOGNISED STOCK EX CHANGE AND ASSESSEE RECEIVED MONEY THROUGH BANKING CHANNEL. SO, ASSESSEE HAS EXPLAINED THE NATURE 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 15 (SUPRA), AC CORDINGLY, 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. WE NOTE THAT TH E SOURCE OF THE RECEIPT OF THE AMOUNT HAS BEEN EXPLAINED AND THE TRANSACTION IN RESPECT OF WHICH T HE 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 AFORESAID FACTS AND CIRCUMS TANCES EXPLAINED ABOVE. 21. 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 EXCHA NGE UNLESS SPECIFIC EVIDENCE EMERGES THAT THE ASSESSEE WAS IN HAND IN GLOVES WITH THE BROKER FOR COMMITTING THE UNSCRUPULOUS ACTIVITY TO LAUNDER HIS OWN MONEY IN THE GUISE OF LTCG IS BROUG HT ON RECORD BY THE AO. 22. THERE IS ALSO NOTHING ON RECORD WHICH COULD SUG GEST THAT THE ASSESSEE GAVE HIS OWN CASH AND GOT CHEQUE FROM THE ALLEGED BROKERS/BUYERS . THE ASSESSMENT IS BASED UPON SOME THIRD PARTIES STATEMENTS RECORDED BEHIND THE BACK OF THE ASSESSEE AND THE ASSESSEE HAS NOT BEEN ALLOWED TO CROSS EXAMINE THOSE PERSONS, SO THE STA TEMENTS EVEN IF ADVERSE AGAINST THE ASSESSEE CANNOT BE RELIED UPON BY THE AO TO DRAW ADVERSE INF ERENCE AGAINST THE ASSESSEE IN THE LIGHT OF THE DOCUMENTS TO SUBSTANTIATE THE CLAIM OF LTCG, WH ICH HAS NOT BEEN FOUND FAULT WITH BY THE AO. 23. LET US LOOK AT CERTAIN JUDICIAL DECISIONS ON SI MILAR FACTS:- 24. THE CASE OF THE ASSESSEES IS SIMILAR TO THE DE CISION OF HONBLE BOMBAY HIGH COURT, NAGPUR BENCH IN CIT VS. SMT. JAMNADEVI AGRAWAL & OR S. 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 DOCUMENTARY ITA NOS. 93 TO 99/RPR/2 014 & C.O. NOS. 12 TO 18/RPR/2014 . A.Y. 2004-05 10 PRODUCED TO ESTABLISH THE GENUINENE SS OF THE CLAIM. FROM THE DOCUMENTS PRODUCED, IT IS SEEN THAT THE SHARES IN QUESTION WE RE IN FACT PURCHASED BY THE ASSESSEES ON THE 16 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 RESPECTIVE DATES AND THE COMPANY HAS CONFIRMED TO H AVE HANDED OVER THE SHARES PURCHASED BY THE ASSESSEES. SIMILARLY, THE SALE OF THE SHARES TO THE RESPECTIVE BUYERS IS ALSO ESTABLISHED BY PRODUCING DOCUMENTARY EVIDENCE. IT IS TRUE THAT SOM E OF THE TRANSACTIONS WERE OFF-MARKET TRANSACTIONS. HOWEVER, THE PURCHASE AND SALE PRICE OF THE SHARES DECLARED BY THE ASSESSEES WERE IN CONFORMITY WITH THE MARKET RATES PREVAILING ON T HE RESPECTIVE DATES AS IS SEEN FROM THE DOCUMENTS FURNISHED BY THE ASSESSEES. THEREFORE, TH E FACT THAT SOME OF THE TRANSACTIONS WERE OFF- MARKET TRANSACTIONS CANNOT BE A GROUND TO TREAT THE TRANSACTIONS AS SHAM TRANSACTIONS. THE STATEMENT OF THE BROKER P THAT THE TRANSACTIONS WIT H THE H GROUP WERE BOGUS HAS BEEN DEMONSTRATED TO BE WRONG BY PRODUCING DOCUMENTARY E VIDENCE TO THE EFFECT THAT THE SHARES SOLD BY THE ASSESSEES WERE IN CONSONANCE WITH THE MARKET PRICE. ON PERUSAL OF THOSE DOCUMENTARY EVIDENCE, THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT THAT THE TRANSACTIONS WERE GENUINE. NOTHING IS BROUGHT ON RECORD TO SHOW THAT THE FINDI NGS RECORDED BY THE TRIBUNAL ARE CONTRARY TO THE DOCUMENTARY EVIDENCE ON RECORD. THE TRIBUNAL HA S FURTHER RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE,BANK ACCOUNTS OF SOME OF TH E BUYERS OF SHARES 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 ASSESSEES WERE IN CONFORM ITY WITH THE MARKET PRICE, THE TRIBUNAL RECORDED A FINDING OF FACT THAT THE CASH CREDITS IN THE BUYERS' BANK ACCOUNTS CANNOT BE ATTRIBUTED TO THE ASSESSEES. NO FAULT CAN BE FOUND WITH THE AB OVE FINDING RECORDED BY THE TRIBUNAL. THEREFORE, THE DECISION OF THE TRIBUNAL IS BASED ON FINDING OF FACTS. NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL.ASSTT. C IT VS. KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. (2010) 41 DTR (NAG) (TRIB) 105: (2010) 133 TTJ (NAG) 818 AFFIRMED; SUMATI DAYAL VS. CIT (1995) 125 CTR (SC) 124: (1995) 80 TAXMAN 89 (S C) DISTINGUISHED. 12. THE HON'BLE HIGH COURT OF RAJASTHAN IN CIT VS. SMT. PUSHPA MALPANI - REPORTED IN (2011) 242 CTR (RAJ.) 559; (2011) 49 DTR 312 DISMISSED THE APPEAL OF DEPARTMENT OBSERVING 'WHETHER OR NOT THERE WAS SALE OF SHARES AND RECEIP T OF CONSIDERATION THEREOF ON APPRECIATED VALUE IS ESSENTIALLY A QUESTION OF FACT. CIT(A) AND TRIBUNAL HAVE BOTH GIVEN REASONS IN SUPPORT OF THEIR FINDINGS AND HAVE FOUND THAT AT THE TIME O F TRANSACTIONS, THE BROKER IN QUESTION WAS NOT BANNED BY SEBI AND THAT ASSESSEE HAD PRODUCED COPIE S OF PURCHASE BILLS, CONTRACT NUMBER SHARE CERTIFICATE, APPLICATION FOR TRANSFER OF SHAR E CERTIFICATE TO DEMAT ACCOUNT ALONG WITH COPIES OF HOLDING STATEMENT IN DEMAT ACCOUNT, BALAN CE SHEET AS ON 31ST MARCH, 2003, SALE BILL, BANK ACCOUNT, DEMAT ACCOUNT AND OFFICIAL REPORT AND QUOTATIONS, OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. ON 23RD JULY, 2003. THEREFORE, 'TH E PRESE/ITDPPEAL DOES NOT RAISE ANY QUESTION OF LAW, MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW. 25. THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN 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 PURCH ASED AND SOLD, COPY OF SHARE CERTIFICATES AND THE QUOTATION OF SHARES ON THE DATE OF PURCHASE AND SALE WERE SUFFICIENT MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT BOGUS BUT A GENUINE TRANSAC TION. THE PURCHASE OF SHARES WAS MADE ON 28TH APRIL, 1993 I.E.. ASST. YR. 1993-94 AND THAT A SSESSMENT WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS NO CHALLENGE TO THE PURCHASE OF SHARES IN THAT YEAR. IT WAS ALSO PLACED BEFORE THE RELEVANT AO AS WELL AS BEFORE THE TRIBUNAL THAT THE SALE PROCEEDS HAVE BEEN ACCOUNTED FOR IN THE ACCOUNTS OF THE ASSESSEE AND WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE TRIBUNAL WAS RIGHT IN REJECTING THE APPEAL OF THE REVENUE BY HOL DING 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 LISTED AND THE TRANSACTION TOOK PLA CE THROUGH A REGISTERED BROKER OF THE STOCK EXCHANGE. THERE WAS NO MATERIAL BEFORE THE AO, WHIC H 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 SURM ISES AND CONJECTURES. IN THE ABSENCE OF ANY COGENT MATERIAL IN THIS REGARD, HAVING BEEN PLA CED ON RECORD, THE AO COULD NOT HAVE REOPENED THE ASSESSMENT. THE ASSESSEE HAD MADE AN I NVESTMENT IN A COMPANY, EVIDENCE WHEREOF WAS WITH THE AO. --THEREFORE, THE AO COULD NOT HAVE ADDED INCOME, WHICH WAS RIGHTLY DELETED 17 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 BY THE CIT(A) AS WELL AS THE TRIBUNAL. IT IS SETTLE D LAW THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. CONSEQUENTLY, NO QUE STION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF 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; UMACHARAN SHAW &BRO S. VS. CIT (1959) 37 ITR 271 (SC) APPLIED; JASPAL SINGH VS. CIT (2006) 205 CTR (P & H ) 624 DISTINGUISHED 26. THE CO-ORDINATE BENCH OF AHMEDABAD IN ITA NOS. 501 & 502/AHD/2016 HAD THE OCCASION TO CONSIDER A SIMILAR ISSUE WHICH WAS WHER EIN THE ASSESSMENT WAS FRAMED ON THE STRENGTH OF THE STATEMENT OF A BROKER. THE RELEVANT PART READS AS UNDER:- 14. THE ENTIRE ASSESSMENT IS BASED UPON THE STATEMENT O F SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMEN T WAS SUPPLIED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CROSS-EXAMINATION WAS GIVEN BY THE A SSESSING OFFICER/CIT(A). THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTR IES IN CIVIL APPEAL NO. 4228 OF 2006 WAS SEIZED WITH THE FOLLOWING ACTION OF THE TRIBUNA L :- 6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION OF THE DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE POSSESSION OF THE APPELLANT THE MSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOLDING AN D APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVISAGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONERS ORDERS. 15. THE HONBLE APEX COURT HELD AS UNDER :- ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-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 INASMU CH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WA S ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON T HE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORR ECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT G RANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE 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 TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROS S-EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EXFACTORY PRICES REMAIN STA TIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED T O CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY F OR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS EXAMINATION. THAT APART, THE A DJUDICATING 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 D EALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUB JECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOS E AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARKS AS MENTI ONED 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 T HE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 18 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTM ENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNE SSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE. WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 16. ON THE STRENGTH OF THE AFOREMENTIONED DECISIO N OF THE HONBLE SUPREME COURT, THE ASSESSMENT ORDER HAS TO BE QUASHED . 17. EVEN ON FACTS OF THE CASE, THE ORDERS OF THE AU THORITIES BELOW CANNOT BE ACCEPTED. THERE IS NO DENYING THAT CONSIDERATION WAS PAID WHEN THE SHARES WERE PURCHASED. THE SHARES WERE THEREAFTER SENT TO THE COMPANY FOR THE TRANSFER OF NAME. THE C OMPANY TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE. THERE IS NOTHING ON RECORD WHICH COUL D SUGGEST THAT THE SHARES WERE NEVER TRANSFERRED IN THE NAME OF THE ASSESSEE. THERE IS A LSO NOTHING ON RECORD TO SUGGEST THAT THE SHARES WERE NEVER WITH THE ASSESSEE. ON THE CONTRARY, THE SHARES WERE THEREAFTER TRANSFERRED TO DEMAT ACCOUNT. THE DEMAT ACCOUNT WAS IN THE NAME OF THE A SSESSEE, FROM WHERE THE SHARES WERE SOLD. IN OUR UNDERSTANDING OF THE FACTS, IF THE SHARES WE RE OF SOME FICTITIOUS COMPANY WHICH WAS NOT LISTED IN THE BOMBAY STOCK EXCHANGE/NATIONAL STOCK EXCHANGE, THE SHARES COULD NEVER HAVE BEEN TRANSFERRED TO DEMAT ACCOUNT. SHRI MUKESH CHOK SI MAY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS BUT SO FAR AS THE FACTS OF THE CASE IN HAND SUGGEST THAT THE TRANSACTIONS WERE GENUINE AND THEREFORE, NO ADV ERSE INFERENCE SHOULD BE DRAWN. 18. IN THE LIGHT OF THE DECISIONS OF THE HONBLE S UPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA) AND CONSIDERING THE FACTS IN TOT ALITY, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ON THE BASIS OF PRESUMPTION AND SURMISES IN RESPECT OF PENNY STOCK BY DISREGARDING THE DIRECT EVIDENCES ON RECORD RELATING TO THE SALE/PUR CHASE TRANSACTIONS IN SHARES SUPPORTED BY BROKERS CONTRACT NOTES, CONFIRMATION OF RECEIPT OF SALE PROCEEDS THROUGH REGULAR BANKING CHANNELS AND THE DEMAT ACCOUNT. 19. ACCORDINGLY, WE DIRECT THE A.O. TO TREAT THE GA INS ARISING OUT OF THE SALE OF SHARES UNDER THE HEAD CAPITAL GAINS- SHORT TERM OR LONG TERM AS THE CASE MAY BE. THE OTHER GRIEVANCE OF THE ASSESSEE BECOMES INFRUCTUOUS. 27. THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SU PPORT OF THE CLAIM OF THE ASSESSEE THAT IT EARNED LTCG ON TRANSACTIONS OF HIS INVESTMENT IN SH ARES. THE PURCHASE OF SHARES HAD BEEN ACCEPTED BY THE AO IN THE YEAR OF ITS ACQUISITION AND THEREAFTER UNTIL THE SAME WERE SOLD. THE OFF MARKET TRANSACTION FOR PURCHASE OF SHARES IS NO T ILLEGAL AS WAS HELD BY THE DECISION OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DOLA RRAI HEMANI VS. ITO IN ITA NO. 19/KOL/2014 DATED 2.12.2016 AND THE DECISION BY HONBLE CALCUTTA HIGH COURT IN PCIT VS. BLB CABLES & CONDUCTORS PVT. LTD. IN ITAT NO. 78 OF 2017 DATED 1 9.06.2018 WHEREIN ALL THE TRANSACTIONS TOOK PLACE OFF MARKET AND THE LOSS ON COMMODITY EXCHANGE WAS ALLOWED IN FAVOUR OF ASSESSEE. THE TRANSACTIONS WERE ALL THROUGH ACCOUNT PAYEE CHEQUES AND REFLECTED IN THE BOOKS OF ACCOUNTS. THE PURCHASE OF SHARES AND THE SALE OF SHARES WERE ALSO REFLECTED IN DEMAT ACCOUNT STATEMENTS. THE SALE OF SHARES SUFFERED STT, BROKERAGE ETC. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE HELD THAT THE TRANSACTIONS WERE BOGUS. THE FOLL OWING JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT:- (I) THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME VS M/S. BLB CABLES AND CONDUCTORS ; ITAT NO.78 OF 2017, GA NO.747 OF 2017; DT. 19 JUN E, 2018, HAD UPHELD THE ORDER OF THE TRIBUNAL BY OBSERVING A S FOLLOWS:- 19 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 '4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRST BOOK IS RUNNING I N PAGES NO. 1 TO 88 AND 2ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE US THE LD. AR SUBM ITTED THAT THE ORDER OF THE AO IS SILENT ABOUT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF MARKET TRANSACTIONS SH OULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANSACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF B OTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAYEE CHEQUES. THE LD. AR HAS ALSO SUBMITTE D THE IT RETURN, LEDGER COPY, LETTER TO AO LAND PAN OF THE BROKER IN SUPPORT OF HIS CLAIM WHIC H IS PLACED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTR ACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAPER BOOK. THE PURCHASE AND SALES REGIST ERS WERE ALSO SUBMITTED IN THE FORM OF THE PAPER BOOK WHICH IS PLACED AT PAGES 76 TO 87. THE B OARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIONS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES . 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS AND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. THE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WH ERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. II) M/S CLASSIC GROWERS LTD. VS. CIT [ITA NO. 129 OF 20 12] (CAL HC) IN THIS CASE THE LD AO FOUND THAT THE FORMAL EVIDENCES PRODUCED BY T HE ASSESSEE TO SUPPORT HUGE LOSSES CLAIMED IN THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE STAGE MANAGED. THE HONBLE HIGH COURT HELD THAT THE OPINION OF THE AO THAT THE ASSESSEE G ENERATED A SIZEABLE AMOUNT OF LOSS OUT OF PREARRANGED TRANSACTIONS SO AS TO REDUCE THE QUANTU M OF INCOME LIABLE FOR TAX MIGHT HAVE BEEN THE VIEW EXPRESSED BY THE LD AO BUT HE MISERABLY F AILED TO SUBSTANTIATE THAT. THE HIGH COURT HELD THAT THE TRANSACTIONS WERE AT THE PREVAILING P RICE AND THEREFORE THE SUSPICION OF THE AO WAS MISPLACED AND NOT SUBSTANTIATED. III)CIT V. LAKSHMANGARH ESTATE & TRADING CO. LIMITE D [2013] 40 TAXMANN.COM 439 (CAL) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD T HAT ON THE BASIS OF A SUSPICION HOWSOEVER STRONG IT IS NOT POSSIBLE TO RECORD ANY FINDING OF FACT. AS A MATTER OF FACT SUSPICION CAN NEVER TAKE THE PLACE OF PROOF. IT WAS FURTHER HELD THAT I N ABSENCE OF ANY EVIDENCE ON RECORD, IT IS DIFFICULT IF NOT IMPOSSIBLE, TO HOLD THAT THE TRANS ACTIONS OF BUYING OR SELLING OF SHARES WERE COLOURABLE TRANSACTIONS OR WERE RESORTED TO WITH UL TERIOR MOTIVE. IV) CIT V. SHREYASHI GANGULI [ITA NO. 196 OF 2012] (CA L HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT HELD THAT THE ASSESSING OFFICER DOUBTED THE TRANSACTIONS SINCE THE SELLING BROKER WAS SUBJECTED TO SEBIS ACTION. HOWE VER THE TRANSACTIONS WERE AS PER NORMS AND SUFFERED STT, BROKERAGE, SERVICE TAX, AND CESS. THE RE IS NO IOTA OF EVIDENCE OVER THE TRANSACTIONS AS IT WERE REFLECTED IN DEMAT ACCOUNT. THE APPEAL F ILED BY THE REVENUE WAS DISMISSED. V) CIT V. RUNGTA PROPERTIES PRIVATE LIMITED [ITA NO. 1 05 OF 2016] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE D ECISION OF THIS TRIBUNAL , WHEREIN, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE WHERE T HE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN RESPECT OF HIS TRANSACTIONS IN ALLEGED PENNY STOCKS. THE TRIBUNAL FOUND THAT THE AO DISALLOWED THE LOSS ON TRADING OF PENNY STOCK ON TH E BASIS OF SOME INFORMATION RECEIVED BY HIM. HOWEVER, IT WAS ALSO FOUND THAT THE AO DID NOT DOUB T THE GENUINENESS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE TRIBUNAL HELD THAT T HE AOS CONCLUSIONS ARE MERELY BASED ON THE INFORMATION RECEIVED BY HIM. THE APPEAL FILED BY TH E REVENUE WAS DISMISSED. 20 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 VI) CIT V. ANDAMAN TIMBERS INDUSTRIES LIMITED [ITA NO. 721 OF 2008] (CAL HC) IN THIS CASE THE HONBLE CALCUTTA HIGH COURT AFFIRMED THE DECISION OF THIS TRIBUNAL WHEREIN THE LOSS SUFFERED BY THE ASSESSEE WAS ALLOWED SINCE THE AO FAILED TO BRING ON RECORD ANY EVIDENCE TO SUGGEST THAT THE SALE OF SHARES BY THE ASSESSEE WERE NOT GENUINE. VII) CIT V. BHAGWATI PRASAD AGARWAL [2009- TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.4.2009] IN THIS CASE THE ASSESSEE CLAIMED EXEMPTION OF INCO ME FROM LONG TERM CAPITAL GAINS. HOWEVER, THE AO, BASED ON THE I NFORMATION RECEIVED BY HIM FROM CALCUTTA STOCK EXCHANGE FOUND THAT THE TRANSACTIONS WERE NOT RECORDED THEREAT. HE THEREFORE HELD THAT THE TRANSACTIONS WERE BOGUS. THE HONBLE JURISDICTIONAL HIGH COURT, AFFIRMED THE DECISION OF THE TRIBUNAL WHEREIN IT WAS FOUND THAT THE CHAIN OF TRA NSACTIONS ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTE D BY EVIDENCE. IT WAS ALSO FOUND THAT THE ASSESSEE PRODUCED THE CONTRACT NOTES, DETAILS OF DE MAT ACCOUNTS AND PRODUCED DOCUMENTS SHOWING ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANKS. ON THESE FACTS, THE APPEAL OF THE REVENUE WAS SUMMARILY DISMISSED BY HIGH COURT. 28. WE NOTE THAT SINCE THE PURCHASE AND SALE TRA NSACTIONS ARE SUPPORTED AND EVIDENCED BY BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND BANK ST ATEMENTS ETC., AND WHEN THE TRANSACTIONS OF PURCHASE OF SHARES WERE ACCEPTED BY THE LD AO IN EA RLIER YEARS, THE SAME COULD NOT BE TREATED AS BOGUS SIMPLY ON THE BASIS OF SOME REPORTS OF THE IN VESTIGATION WING AND/OR THE ORDERS OF SEBI AND/OR THE STATEMENTS OF THIRD PARTIES. IN SUPPORT OF THE AFORESAID SUBMISSIONS, 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 (AGRA) (TM) (III) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGRA/2009 (AGRA ITAT) (IV) ACIT VS. AMITA AGARWAL & OTHERS ITA NOS. 247/(KOL )/ OF 2011 (KOL ITAT) (V) RITA DEVI & OTHERS VS. DCIT IT(SS))A NOS. 22-26/K OL/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/2016 (A HMEDABAD ITAT) (VIII) MS. FARRAH MARKER VS. ITO ITA NO. 3801/MUM/2011 ( MUMBAI ITAT) (IX) ANIL NANDKISHORE GOYAL VS. ACIT ITA NOS. 1256/PN/ 2012 (PUNE ITAT) (X) CIT VS. SUDEEP GOENKA [2013] 29 TAXMANN.COM 402 ( ALLAHABAD HC) (XI) CIT VS. UDIT NARAIN AGARWAL [2013] 29 TAXMANN.COM 76 (ALLAHABAD HC) (XII) CIT VS. JAMNADEVI AGARWAL [2012] 20 TAXMANN.COM 529 (BOMBAY HC) (XIII) CIT VS. HIMANI M. VAKIL [2014] 41 TAXMANN.COM 425 (GUJARAT HC) (XIV) CIT VS. MAHESHCHANDRA G. VAKIL [2013] 40 TAXMANN. COM 326 (GUJARAT HC) (XV) CIT VS. SUMITRA DEVI [2014] 49 TAXMANN.COM 37 (RAJA STHAN HC) (XVI) GANESHMULL BIJAY SINGH BAID HUF VS. DCIT ITA NOS. 544/KOL/2013 (KOLKATA ITAT) (XVII) MEENA DEVI GUPTA & OTHERS VS. ACIT ITA NOS. 4512 & 4513/AHD/2007 (AHMEDABAD ITAT) (XVIII) MANISH KUMAR BAID ITA 1236/KOL/2017 (KOLKATA ITAT) (XIX) MAHENDRA KUMAR BAID ITA 1237/KOL/2017 (KOLKATA ITAT ) 29. THE LD AR ALSO BROUGHT TO OUR NOTICE THAT ONCE THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNANAND AG NIHOTRI VS. THE STATE OF MADHYA PRADESH [1977] 1 SCC 816 (S C) . IN THIS CASE THE HONBLE APEX COURT HELD THAT THE BURDEN OF SHOWING THAT A PARTICULAR T RANSACTION IS BENAMI AND THE APPELLANT OWNER IS NOT THE REAL OWNER ALWAYS RESTS ON THE PERSON AS SERTING IT TO BE SO AND THE BURDEN HAS TO BE 21 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 STRICTLY DISCHARGED BY ADDUCING EVIDENCE OF A DEFIN ITE CHARACTER WHICH WOULD DIRECTLY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGL Y AND REASONABLY RAISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT I S NOT ENOUGH TO SHOW CIRCUMSTANCES WHICH MIGHT CREATE SUSPICION BECAUSE THE COURT CANNOT DEC IDE ON THE BASIS OF SUSPICION. IT HAS TO ACT ON LEGAL GROUNDS ESTABLISHED BY EVIDENCE. THE LD AR SU BMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGMENTS WHILE DECIDING THE ISSUE RE LATING TO EXEMPTION CLAIMED BY THE ASSESSEE ON LTCG ON ALLEGED PENNY SOCKS. (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. J. C. AGARWAL HUF ITYA NO. 32/AGR/2007 ( AGRA ITAT) 30. MOREOVER IT WAS SUBMITTED BEFORE US BY LD AR TH AT THE AO WAS NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND ALLEGING PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATION IN ORDERS OF SEBI AND/OR THE ENQUIRY REPORT OF THE INVESTIGATION WING TO THE EFF ECT THAT THE ASSESSEE, THE COMPANIES DEALT IN AND/OR HIS BROKER WAS A PARTY TO THE PRICE RIGGING OR MANIPULATION OF PRICE IN CSE. THE LD AR REFERRED TO THE FOLLOWING JUDGMENTS IN SUPPORT OF T HIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE ACT AND TO ASSESS THE SALE PROCEEDS O F SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT :- (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 ( AGRA ITAT) (II) ACIT VS. AMITA AGARWAL & OTHERS - ITA NOS. 247/(KO L)/ OF 2011 (KOL ITAT) (III) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693/KOL /2009 (KOL ITAT) (IV) MUKESH R. MAROLIA VS. ADDL. CIT [2006] 6 SOT 247 (MUM) 31. WE NOTE THAT THE LD. D.R. HAD HEAVILY RELIED UP ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMALCHAND JAIN IN TAX AP PEAL NO. 18 OF 2017. WE NOTE THAT IN THE CASE RELIED UPON BY THE LD. D.R, WE FIND THAT THE F ACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN HAND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MAD E BY THE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPANIES AND THE PURCHASE OF SHARES OF T HE COMPANIES WAS DONE THROUGH THE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDENTALLY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY THE ASSESSEE WAS SHOWN AS CAPITAL GAINS WHICH WAS N OT ACCEPTED BY THE A.O. AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE ASSESSEE BY TREAT ING THE SALES OF THE SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF TRADE. THUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE O F SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 32. IT IS CLEAR FROM THE ABOVE THAT THE FACTS OF T HE CASE OF THE ASSESSEE ARE IDENTICAL WITH THE FACTS IN THE CASES WHEREIN THE CO-ORDINATE BENCH O F THE TRIBUNAL HAS DELETED THE ADDITION AND ALLOWED THE CLAIM OF LTCG ON SALE OF SHARES OF M/S KAFL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, AND SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO NOT TO TREAT THE LONG TERM CAPITAL AS BOGUS AND DELETE THE CONSEQUEN TIAL ADDITION. 33. THE NEXT ISSUE IN CONFIRMING THE ADDITION OF RS .1,83,020/- AS UNEXPLAINED EXPENDITURE TOWARDS COMMISSION CHARGES OF SALE OF SUCH SHARES B Y THE OPERATOR. WE HAVE ALREADY HELD THAT THE TRANSACTIONS RELATING TO LTCG WERE GENUINE AND NOT THE ACCOMMODATION ENTRIES AS ALLEGED BY THE AO. CONSEQUENTLY THE ADDITION OF RS.1,83,020 /- IS HEREBY DIRECTED TO BE DELETED. WE ACCORDINGLY HOLD THAT THE ISSUE IS ALLOWED IN FAVOU R OF THE ASSESSEE. 28. IN THE LIGHT OF THE DOCUMENTS FILED BY THE ASSE SSEE BEFORE THE AO/LD. CIT(A) AND BEFORE US, WHICH COULD NOT BE CONTROVERTED BY ANY M ATERIAL BY AO, SO RESPECTFULLY FOLLOWING THE RATIO LAID BY THE HONBLE JURISDICTIO NAL HIGH COURT AND OTHER HIGH COURTS AND THE RATIO LAID BY THE HONBLE SUPREME COURT AND THIS TRIBUNAL, WE ALLOW THE CLAIM 22 ITA NOS. 317/KOL/2018 L.K. PRAHLADKA,HUF, AYS 2014-15 OF THE ASSESSEE IN RESPECT OF LONG TERM CAPITAL GAI N IN RESPECT OF SALE OF SHARES OF M/S. KAFL AND DIRECT DELETION OF ADDITION OF RS.76,34,23 3/-. GROUND OF APPEAL OF ASSESSEE CHALLENGING THE ADDITION MADE ON THIS ISSUE IS ALLO WED. 29. GROUND NO. 5 IS GENERAL IN NATURE, THEREFORE, I T IS DISMISSED. 30. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16/01/201 9 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16TH JANUARY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT L. K. PRAHLADKA, HUFC/O SALARPURIA JAJ ODIA & CO., 7, C. R. AVENUE, KOLKATA-700072. 2 RESPONDENT ITO, WARD-35(3), KOLKATA. 3 4 5 CIT(A)-10, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY