Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 1748 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
11 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
G
Assessment Year
2014-2015
Appeal Filed On
20-06-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL ' G ' BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JUDICIAL MEMBER AND SHRI M. BALAGANESH , ACCOUNTANT MEMBER ITA NO. 4267 /MUM/2018 (ASSESSMENT YEAR: 2014 - 15 ) SMT. GEETA KHARE 4 TH FLOOR, SIDDHIVINAYAK ARCADE MAHATMA PHULE ROAD DOMBIVALI (W), MUMBAI 421202 VS. A C I T, CIRCLE 3 KALYAN PAN AHOPK7823N APPELLANT RESPONDENT ITA NO. 694 /MUM/2018 (ASSESSMENT YEAR: 2014 - 15 ) SHRI SHASHIKANT B. MHATRE (HUF) B - 5, SAI GARDEN CHS NEAR DHURI SERVICE CENTRE DEWANMAN, VASAI (W) MUMBAI 401202 VS. INCOME TAX OFFICER 4(4) ASHAR IT PARK ROAD NO. 16Z, MIDC THANE (W) 400061 PAN AAUHS1747L APPELLANT RESPONDENT APPELLANT BY: SHRI NEELKANTH KHANDELWAL RESPONDENT BY: SHRI CHAUDHARY ARUNKUMAR SINGH DATE OF HEARING: 05 .0 3 .2019 DAT E OF PRONOUNCEMENT: 29 .0 5 .2019 O R D E R PER M. BALAGANESH , AM THE SE APPEAL S FILED BY THE ASSESSEE S ARE DIRECTED AGAINST THE ORDER S OF THE CIT(A) - 3 , NASHIK DATED 02.04.2018 AND CIT(A) - 3, THANE DATED 01.11.2017 RESPECTIVELY AND THEY RELATES TO THE ASSESSMENT YEAR 201 4 - 1 5 . AS IDENTICAL ISSUES 2 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE ARE INVOLVED IN BOTH THE APPEALS, THEY ARE TAKEN UP TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BOTH THE PARTIES BEFORE US AGREED THAT THE APPEAL IN ITA NO. 4267/MUM/2018 IN THE CASE OF SMT GEETA KHARE MAY BE TAKEN AS THE LEAD CASE AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR THE APPEAL IN ITA NO. 694/MUM/2018 ALSO IN THE CASE OF SHASHIKANT B MHATRE, EXCEPT WITH VARIANCE IN FIGURES AND THE NAME OF THE SC RIP. 3. THE ONLY COMMON ISSUE INVOLVED IN THESE APPEALS IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE LD AO IN TREATING THE LONG TERM CAPITAL GAIN ON SALE OF SHARES OF SRK INDUSTRIES LTD IN THE SUM OF RS 2,26,36,372/ - AS BOGUS AND CONSEQUENTIALLY DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(38) OF THE ACT BY TAXING IT U/S 68 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAD FILED HER RETURN OF INCOME FOR THE ASST YEAR 2014 - 15 ON 12.3.2015 DECLARING TOTAL INCOME OF RS 19,04,740/ - . THE LD AO FROM THE WORKINGS OF LONG TERM CAPITAL GAINS ATTACHED WITH THE RETURN OF INCOME OBSERVED THAT ASSESSEE HAD SHOWN GAIN OF RS 2,26,36,372/ - SALE OF SHARES OF SRK INDUSTRIES LTD AND CLAIMED THE SAME AS EXEMPT U/S 10(38) OF THE ACT. THE ASSESSEE SUBMITTED THE DETAILS OF THE SAME BY SUBMITTING THAT SHE HAD PURCHASED 30000 SHARES OF M/S TRANSCEND COMMERCE LTD ON 25.9.2012 FOR RS 3,00,000/ - FROM M/S SUBHM ANGAL SALES PRIVATE LIMITED. THE ASSESSEE MADE PAYMENT FOR THE SAME BY REAL TIME GROSS SETTLEMENT (RTGS IN SHORT) MODE ON 20.10.2012 AND THE SAME IS DEBITED ON THE BANK STATEMENT OF THE ASSESSEE ON THE SAID DATE. THESE SHARES WERE DEMATTED BY THE ASSESSEE ON 29.10.2012 WITH SHAREKHAN LIMITED BEING THE DEPOSITORY PARTICIPANT, ALONG WITH 3 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE OTHER EXISTING SHARES OF VARIOUS OTHER COMPANIES HELD BY THE ASSESSEE. THE SAME IS DULY REFLECTED IN THE DEMAT STATEMENT ISSUED BY SHAREKHAN LIMITED FOR THE PERIOD 1.4.2012 TO 31.3.2013. LATER TRANSCEND COMMERCE LTD WAS MERGED WITH SRK INDUSTRIES LTD PURSUANT TO SCHEME OF ARRANGEMENT AND ASSESSEE WAS ALLOTTED 66600 EQUITY SHARES IN SRK INDUSTRIES LTD OF FACE VALUE OF RS 10 EACH. THERE IS NO DISPUTE THAT THE SCHEME OF ARRAN GEMENT WAS DULY APPROVED BY THE HONBLE BOMBAY HIGH COURT AND HONBLE MADRAS HIGH COURT. LATER THE FACE VALUE OF SHARES OF SRK INDUSTRIES LTD WAS BROUGHT DOWN FROM RS 10 TO RS 5 PER SHARE PURSUANT TO SUB - DIVISION OF SHARES. CONSEQUENTLY THE ASSESSEE WAS AL LOTTED 133200 SHARES IN SRK INDUSTRIES LTD IN LIEU OF 66600 SHARES ALREADY HELD BY HER. ALL THESE FACTS WERE DULY REFLECTED IN THE DEMAT STATEMENT ISSUED BY SHAREKHAN LIMITED FOR THE PERIOD 1.4.2013 TO 31.3.2014. THE ASSESSEE LATER SOLD THE ENTIRE 133200 SHARES OF SRK INDUSTRIES LTD IN THE OPEN MARKET IN ONLINE PLATFORM COMMENCING FROM 29.11.2013 TO 15.1.2014 THROUGH THE REGISTERED SHARE BROKER M/S SHAREKHAN LIMITED. THE SAID SALE IS DULY SUPPORTED BY THE CONTRACT NOTES ISSUED BY M/S SHAREKHAN LIMITED AN D SALE PROCEEDS OF THE SHARES WERE DULY CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE WHICH WERE RECEIVED BY THE ASSESSEE FROM M/S SHAREKHAN LIMITED AFTER DEDUCTING THE SECURITIES TRANSACTION TAX (STT IN SHORT) AND BROKERAGE AND OTHERS FROM THE SALE CONSID ERATION. THE TOTAL SALE CONSIDERATION OF SHARES WAS RS 2,29,36,372/ - AND AFTER DEDUCTING THE COST THEREON OF RS 3,00,000/ - , THE LONG TERM CAPITAL GAIN WAS WORKED OUT BY THE ASSESSEE AT RS 2,26,36,372/ - AND SINCE THE SHARES WERE HELD FOR MORE THAN ONE YEAR FROM THE DATE OF PURCHASE AND SINCE STT WAS DULY SUFFERED AT THE TIME OF SALE, THE ASSESSEE CLAIMED THE LONG TERM CAPITAL GAINS OF RS 2,26,36,372/ - AS EXEMPT U/S 10(38) OF THE ACT. THE ASSESSEE GAVE THE COMPLETE DETAILS OF PURCHASE AND SALE TRANSACTIONS TO GETHER WITH THE RELATED DOCUMENTS BEFORE THE LD AO. THERE IS NO DISPUTE THAT THE SHARES WERE HELD FOR MORE THAN 12 MONTHS FROM THE DATE OF PURCHASE OF THE SAME. 4 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 5. THE LD AO MADE AN ADDITION OF RS 2,26,36,372/ - U/S 68 OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAINS ON SALE OF SHARES OF M/S. SRK INDUSTRIES LTD ON THE FOLLOWING GROUNDS: - A) BY PLACING RELIANCE ON THE COPIES OF STATEMENTS OF VARIOUS PERSONS RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS CARRIED OUT BY KOLKATA INVESTIGATION WING OF INCOM E TAX DEPARTMENT B) BY HOLDING THAT THE ENTIRE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WERE PRE - ARRANGED BY THE ASSESSEE WITH A MALIGN INTENTION TO LAUNDER HER UNDISCLOSED INCOME IN THE FORM OF LONG TERM CAPITAL GAINS ON SALE OF SHARES C) THE ASSESSEE HAD NOT TAKEN THE ADVICE OF HER REGULAR SHARE BROKER AND HAD PURCHASED THE SHARES OF TRANSCEND COMMERCE LTD OFF MARKET THROUGH AN UNKNOWN COMPANY I.E M/S SUBHMANGAL SALES PRIVATE LIMITED. D) THE ASSESSEE HAS NOT MADE ANY OTHER INVESTMENT IN SHARES OF REP UTED COMPANY WHILE ASSESSEE MADE A WINDFALL GAIN IN THIS SHARE WHICH HAS VERY DUBIOUS FINANCIALS. E) ASSESSEE IS NOT AWARE OF THE DIRECTORS OF SRK INDUSTRIES LTD , ITS NATURE OF BUSINESS , TURNOVER OR PROFIT . SHE WAS NOT EVEN AWARE OF SHRI RAKESHCHAND J AIN, MANAGING DIRECTOR OF BOTH SRK INDUSTRIES LTD AND TRANSCEND COMMERCE LTD. THE ASSESSEE HAD STATED ON OATH THAT SHE HAD PURCHASED THE SHARES OF TRANSCEND COMMERCE LTD ON ADVICE OF HER FRIEND SHRI SHIVAJIRAO JONDHALE, WHO HAS ALSO PURCHASED SHARES FROM THE SAME BROKER AND ON THE SAME DATE AND THROUGH THE SAME MECHANISM. F) THE ASSESSEE HAD NEVER REINVESTED IN THESE SHARES AGAIN DESPITE THE FACT THAT SHE MADE HUGE GAINS ON SALE OF SHARES OF SRK INDUSTRIES LTD IN THE PAST. G) ON THE BASIS OF ANALYSIS OF PRICE MOVEMENTS OF THE SCRIP OF SRK INDUSTRIES LTD. 6. THE ACTION OF THE LD AO WAS UPHELD BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE PRIMARY FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. WE FIND THAT THE LD AO HAD PLACED RELIANCE ON CERTAIN STATEMENTS RECORDED BY THE INVESTIGATION WING OF KOLKATA INCOME TAX DEPARTMENT DURING SOME SURVEY PROCEEDINGS C ONDUCTED IN THIRD PARTY CASES. WE FIND THAT IN NONE OF THOSE STATEMENTS, THE NAME OF THE ASSESSEE OR THE NAME OF THE BROKERS THROUGH WHOM ASSESSEE HAD TRANSACTED WERE MENTIONED. WE ALSO FIND THAT THERE IS NO MENTION OF ANY CONNIVANCE ON THE PART OF THE ASSESSEE WITH THE SHARE BROKER A ND STOCK EXCHANGE TO LAUNDER THE UNACCOUNTED MONIES OF THE ASSESSEE AND BRING IT BACK IN THE FORM OF SALE PROCEEDS OF SHARES AND CLAIM EXEMPTION U/S 10(38) OF THE ACT FOR THE LONG TERM CAPITAL GAINS DERIVED THEREON. NONE OF THE PARTIES ON WHOM SURVEY ACTI ONS WERE CONDUCTED WERE RELATED TO ASSESSEE OR THE BROKERS IN ANY MANNER WHATSOEVER. WE FIND THAT THE VARIOUS PURCHASE AND SALE DETAILS TOGETHER WITH THE SUPPORTING EVIDENCES WERE NOT CONTROVE RTED BY THE REVENUE BEFORE US. THE REVENUE HAD NOT BROUGHT ON RE CORD ANY ADVERSE ORDER PASSED BY SEBI LINKING THE ASSESSEE OR HER BROKER WITH THE ALLEGED PR ICE RIGGING AND MANIPULATION. HENCE THERE IS ABSOLUTELY NO IOTA OF EVIDENCE LINKING THE ASSESSEE OR THE REGISTERED BROKERS TO EVEN REMOTELY ALLEGE THAT THEY WERE IN VOLVED IN ARTIFICIAL RIGGING OF PRICE OF SCRIPS WHICH WERE DEALT BY THE A SSESSEE HEREIN. THE STATEMENTS OF VARIOUS OPERATORS WERE RECORDED BY THE LD AO AND THE SAME ARE REPRODUCED IN THE ASSESSMENT ORDER. BUT NOWHERE IN THOSE STATEMENTS, THE NAME OF THE ASSESSEE OR THE BROKER THROUGH WHOM THE ASSESSEE DEALT WITH REGARD TO SALE OF SHARES WERE EVEN REMOTELY MENTIONED BY THOSE OPERATORS. WE FIND FROM PERUSAL OF THE ASSESSMENT ORDER, THERE IS NO MENTION OR REFERENCE AS TO WHETHER THESE STATEMENTS WERE EVEN P ROVIDED TO THE ASSESSEE FOR HIS VERIFICATION AND SEEK FOR CROSS EXAMINATION, IF ANY. HENCE IT COULD BE SAFELY CONCLUDED THAT THESE STATEMENTS WERE TAKEN BEHIND THE BACK OF THE ASSESSEE AND WERE NEVER PUT TO T HE ASSESSEE FOR HIS REBUTTAL. HENCE NO EVIDENTIA RY VALUE COULD 6 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE BE ATTACHED TO THOSE STATEMENTS. WE FIND THAT THE STATEMENT WAS RECORDED ON OATH U/S 131 OF THE ACT FROM THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE LD AO, BUT NO QUESTIONS REGARDING THE STATEMENTS OBTAINED FROM ENTRY OPE RATORS WERE EVEN PUT TO THE ASSESSEE BY THE LD AO. 7.1. ON ANALYSIS OF PRICE MOVEMENTS OF SHARES OF SRK INDUSTRIES LTD , WE FIND THAT AS PER THE DATA RELIED UPON BY THE LD AO IN HIS ASSESSMENT ORDER, THE TOTAL NUMBER OF SHARES TRADED IN RESPECT OF THIS SCRIP IN THE ENTIRE MARKET FROM FEB 2012 ( I.E THE TIME OF PURCHASE OF SHARES BY THE ASSESSEE HEREIN) TO JAN 2014 (I.E THE TIME OF SALE OF SHARES BY THE ASSESSEE HEREIN) WAS 40254365 SHARES. WHEREAS THE SAME TRANSACTIONS FROM FEB 2014 TO DEC 2015 WERE 828 18409 SHARES. THIS WILL BE CLEAR FROM THE FOLLOWING TABLE: - UPTO JAN JAN 14 TO 2014 DEC - 15 NO. OF NO. OF SHARES TRADED SHARES TRADED 100 4778156 500 20544716 200 1200905 100 2982153 300 558044 100 48031 35 25842 62156 188670 528 1755017 172 5965728 941 4542919 219901 800299 445841 2361304 134745 4568884 863657 2135413 2220786 3212730 2208340 4916774 4197610 3271357 6277016 5489375 7 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 10156920 9210300 13464417 4243196 3659 14937 TO TAL 40254365 82818409 7.1.1. FROM THE ABOVE TABULATION, IT COULD BE SEEN THAT THE ASSESSEE HAD EXITED FROM THE MARKET BY SELLING THE SHARES ONCE THERE WAS HEAVY SELLING OF THE SHARES OF SRK INDUSTRIES LTD ON THE FEAR ELEMENT BEING SETTING IN FOR FURT HER REDUCTION OF PRICES. WE FIND THAT THESE AFTER JAN 2014, THESE SHARES WERE HEAVILY TRADED IN THE OPEN MARKET. IN ANY CASE, IT IS NOT FOR THE REVENUE TO DECIDE AS TO AT WHAT TIME THE ASSESSEE SHOULD EXIT FROM HIS HOLDING OF SHARES IN THE OPEN MARKET. IT IS FOR THE ASSESSEE TO DECIDE. THE REVENUE CANNOT STEP INTO THE SHOES OF THE ASSESSEE AND DECIDE THE PURCHASE AND SALE TRANSACTIONS OF SHARES AND THE TIMING TOGETHER WITH THE PRICING THEREON. RELIANCE IN THIS REGARD IS PLACED HAS BEEN RIGHTLY PLACED B Y THE LD AR ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS DHANRAJGIRI RAJA NARASINGIRJI REPORTED IN 91 ITR 544 (SC). 7.2. WE FIND THAT THE LD AR PLEADED THAT IN AN ONLINE PLATFORM, THERE WOULD BE NO NEXUS BETWEEN THE PURCHASERS AND THE SELLER AND THE DELIVERY OF SHARES AND PAYMENTS WOULD BE MADE THROUGH THEIR RESPECTIVE STOCK BROKERS. HENCE THE LD AO OUGHT TO HAVE SUMMONED THE ASSESSEES BROKERS TO EXAMINE THE AUTHENTICITY OF THE SALE OF SHARES OF SRK INDUSTRIES LTD AND THE AMOUNT RECE IVED ON SALE OF SHARES. WE FIND THAT THE LD AR ALSO PLACED EVIDENCES ON RECORD TO PROVE THAT THE SAID COMPANY SRK INDUSTRIES LTD IS STILL LISTED IN THE STOCK EXCHANGE AND SHARES OF THIS COMPANY ARE BEING TRADED AND SEBI HAD NOT PASSED ANY ADVERSE ORDER AGA INST THE SAID COMPANY EITHER SUSPENDING THE TRADING OF THE SCRIP OR BANNING THE SCRIP. MOREOVER, THE LD AR ALSO PLACED ON RECORD THE LETTER DATED 14.2.2019 ADDRESSED BY SRK INDUSTRIES LTD TO BOMBAY STOCK EXCHANGE INFORMING THE OUTCOME OF THE BOARD MEETING HELD ON 14.2.2019 APPROVING THE UNAUDITED STANDALONE FINANCIAL 8 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE RESULTS OF SRK INDUSTRIES LTD FOR THE QUARTER ENDED 31 ST DECEMBER 2018 IN THE FORMAT PRESCRIBED BY SEBI LISTING NORMS AND THE STOCK EXCHANGE. FROM THE SAID QUARTERLY FINANCIALS, WE FIND THAT S RK INDUSTRIES LTD REVENUE FROM OPERATIONS FOR THE QUARTER ENDED DEC 2018 WAS RS 30.61 CRORES WHICH CLEARLY SHOWS THAT IT IS AN OPERATIONAL COMPANY AND NOT MERELY A COMPANY HAVING NO VALUE AS ALLEGED BY THE REVENUE BEFORE US TO MAKE IT FALL UNDER THE CATEGO RY OF PENNY STOCK. MOREOVER, THE STATUS OF THIS COMPANY M/S SRK INDUSTRIES LTD IN THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS AS ON 26.2.2019 IS STILL SHOWN UNDER THE CATEGORY OF ACTIVE. IN THE SAID STATUS REPORT OF WEBSITE OF MINISTRY OF CORPOR ATE AFFAIRS, WE FIND THAT THE FIXED ASSETS AND CURRENT ASSETS OF SRK INDUSTRIES LTD WERE SUBJECTED TO SOME CHARGE OR ENCUMBRANCE WITH CERTAIN LOAN CREDITORS AND THE SAID CHARGE ON ASSETS WERE ALSO DULY CLEARED BY SRK INDUSTRIES LTD SUBSEQUENTLY. THIS IS E VIDENT FROM THE STATUS REPORT MENTIONED THEREIN AS CLOSED. THESE FACTS GO TO PROVE BEYOND DOUBT THAT SRK INDUSTRIES LTD IS AN OPERATIONAL COMPANY EVEN AS ON 26.2.2019. 7.3. WE FIND THAT THE LD AO SOUGHT TO IDENTIFY THE ALLEGED PURCHASERS OF SHARES F ROM THE ASSESSEE AND ISSUED NOTICES U/S 133(6) OF THE ACT TO ALL OF THEM. ALL THE NOTICES SENT THROUGH SPEED POST RETURNED UNSERVED. BASED ON THIS, ADVERSE INFERENCE WAS DRAWN BY THE LD AO ON THE ASSESSEE. WE FIND THAT THE LD AR HAD ALREADY SUBMITTED TH AT IN AN ONLINE PLATFORM OF TRADING OF SHARES IN THE OPEN MARKET THROUGH A REGISTERED STOCK BROKER, IT IS NOT POSSIBLE FOR THE ASSESSEE TO EVEN KNOW THE NAME AND ADDRESS OF THE PURCHASERS WHEN THE ASSESSEE SELLS THE SHARES IN THE OPEN MARKET. IN ANY CASE , MERELY BECAUSE THE ALLEGED PURCHASERS LIST GIVEN BY THE LD AO IN HIS ASSESSMENT ORDER HAD NOT RESPONDED TO NOTICE U/S 133(6) OF THE ACT, NO ADVERSE INFERENCE COULD BE DRAWN ON THE ASSESSEE FOR THE DEFAULT COMMITTED BY THOSE ALLEGED PURCHASERS. THE LD AO COULD HAVE VERY WELL RESORTED TO ISSUANCE OF SUMMONS U/S 131 OF THE ACT TO THOSE ALLEGED PURCHASERS AND / OR TAKE NECESSARY ACTION ON THEM IN THE MANNER KNOWN TO LAW FOR NON - COMPLIANCE 9 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE FROM THEIR SIDE. WE HOLD THAT THE ASSESSEE NEED NOT DISCHARGE HER ON US OF BRINGING ON RECORD THE ALLEGED PURCHASERS ESPECIALLY WHEN THE SHARES WERE SOLD IN THE OPEN MARKET IN AN ONLINE PLATFORM. ACCORDINGLY, THE ASSESSEE NEED NOT PROVE THE IDENTITY, CREDITWORTHINESS OF THOSE ALLEGED PURCHASERS OF SHARES AND THE GENUINENES S OF TRANSACTIONS WITHIN THE MEANING OF SECTION 68 OF THE ACT. THE ASSESSEE HAS RECEIVED THE SALE PROCEEDS OF SHARES FROM HER BROKER M/S SHAREKHAN LIMITED. THE ASSESSEE HAD SHOWN THE CREDIT IN THE NAME OF M/S SHAREKHAN LIMITED IN HER BOOKS. HENCE THE AS SESSEE HAD DULY DISCHARGED HER ONUS BY FURNISHING THE ENTIRE SALE DETAILS MADE THROUGH THE REGISTERED STOCK BROKER M/S SHAREKHAN LIMITED. WE FIND THAT THE LD AO HAD NOT EVEN BOTHERED TO MAKE ANY ENQUIRY WITH M/S SHAREKHAN LIMITED TO UNDERSTAND THESE FACTS. HENCE NO FAULT COULD BE ATTRIBUTED ON THE ASSESSEE IN THIS REGARD. WE FIND THAT NONE OF THE PURCHASE AND SALE DETAILS WITH SUPPORTING EVIDENCES WERE FOUND TO BE DEFICIENT IN ANY MANNER WHATSOEVER EITHER BY THE LD AO OR BY THE LD CITA. 7.4. WE FIND THA T THE ASSESSEE WAS DULY EXAMINED ON OATH U/S 131 OF THE ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 29.11.2016 WHICH FACT IS ALSO MENTIONED IN PAGE 26 OF THE ASSESSMENT ORDER. IN THE SAID STATEMENT, THE ASSESSEE IN REPLY TO QUESTION NO. 9 HAD CATEGO RICALLY STATED THAT SHE HAD BEEN MAKING INVESTMENTS IN CAPITAL MARKET AND EQUITY SHARES THROUGH BROKER M/S SHAREKHAN LIMITED AND THROUGH RELATIVES AND FRIENDS. THE ASSESSEE HAD ALSO CATEGORICALLY REPLIED IN RESPONSE TO QUESTION NO. 13 THAT THE INVESTMENT I N SHARES OF SRK INDUSTRIES LTD (TRANSCEND COMMERCE LTD PRIOR TO MERGER) WAS MADE BASED ON THE ADVICE OF HER FRIEND SHRI SHIVAJIRAO JONDHALE. THE ASSESSEE IN REPLY TO QUESTION NO. 17 HAD ALSO STATED THAT SHE DID NOT MAKE ANY ENQUIRY ABOUT THE FINANCIAL COND ITION OF THE SHARES OF SRK INDUSTRIES LTD BUT SHE WAS TOLD BY SHRI SHIVAJIRAO JONDHALE THAT THE VALUE OF THE SHARES WOULD GET APPRECIATED. THIS WAS THE SOLE BASIS OF THE ASSESSEE MAKING THE INVESTMENT IN SHARES OF TRANSCEND COMMERCE LTD 10 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE (LATER MERGED WITH SRK INDUSTRIES LTD) WHICH CANNOT BE DOUBTED AT ALL. IN OUR CONSIDERED OPINION, IT CANNOT BE SAID THAT ALL THE INVESTMENT DECISIONS OF THE ASSESSEE WOULD BE PRUDENT AND WOULD BE DONE ONLY AFTER ANALYZING THE ENTIRE FUNDAMENTALS AND FINANCIALS OF THE INVES TEE COMPANY. IT IS IN EVERYBODYS KNOWLEDGE, THAT AN INVESTOR WOULD TRY TO TAKE CALCULATED RISKS BY INVESTING HIS MONEY ON AN UNKNOWN SCRIP BASED ON CERTAIN INFORMATION FROM FRIENDS, RELATIVES, OR IN SOME STOCK MARKET RELATED WEBSITES AND TAKE A CHANCE. SINCE THE SCRIP PURCHASED BY THE ASSESSEE WAS SHOWING CONSIDERABLE GROWTH FROM THE TIME OF PURCHASE, THE ASSESSEE BEING A GULLIBLE INVESTOR CONTINUED TO HOLD IT FOR A PERIOD OF 14 MONTHS AND LATER SOLD IT IN OPEN MARKET IN ONLINE PLATFORM AT PREVAILING MA RKET PRICES. 7.5. WE FIND THAT THE LD AO HAD OBSERVED THAT THE ASSESSEE HAD TRADED ONLY IN THE SHARES OF SRK INDUSTRIES LTD. THIS IS FACTUALLY INCORRECT STATEMENT OF THE LD AO. MOREOVER, THE LD AO HAD DURING THE COURSE OF EXAMINATION OF THE ASSESSEE ON OATH U/S 131 OF THE ACT HAD EVEN POSED A QUESTION VIDE QUESTION NO. 24 THAT ASSESSEE HAD PURCHASED VERY FEW SHARES OF WELL REPUTED COMPANIES DURING THE YEAR LIKE INDUS IND BANK, CROMPTON GREAVES, LARSEN AND TOUBRO ETC. WE FIND THAT THE LD AO IN PARA 13 .4 OF HIS ORDER HAD OBSERVED THAT ON EXAMINATION OF SHRI SHIVAJIRAO JONDHALE ON OATH U/S 131 OF THE ACT, IT WAS NOTICED THAT HE HAD ALSO INVESTED IN THE SHARES OF SRK INDUSTRIES LTD ONLY BASED ON AN ADVICE OF HIS FRIEND. BASED ON THIS, THE LD AO HAD CONCLU DED THAT THE WHOLE BASIS OF PURCHASE OF THIS SHARE IS A PRE - KNOWLEDGE OF RIGGING OF PRICE AND SUBSEQUENTLY TAKING ACCOMMODATION ENTRY FOR LONG TERM CAPITAL GAINS. WE FIND FROM THE DEMAT STATEMENTS FOR THE PERIOD 1.4.2012 TO 31.3.2013 AND 1.4.2013 TO 31.3 .2014, THE ASSESSEE HAD DEALT IN VARIOUS REPUTED SCRIPS AND HAD DULY DEMATTED THE SAME AND ALL THESE TRANSACTIONS ARE DULY REFLECTED IN THE DEMAT STATEMENTS ISSUED BY THE DEPOSITORY PARTICIPANT. 11 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 7.6. WE FIND THAT THE LD DR MADE GENERAL SUBMISSIONS WITH R EGARD TO THE INVESTIGATIONS CARRIED OUT BY KOLKATA INCOME TAX DEPARTMENT AFTER IDENTIFYING 84 SCRIPS TO BE PENNY STOCKS AND THE MODUS OPERANDI ADOPTED BY THOSE SCRIPS WITH THE CONNIVANCE OF VARIOUS ENTRY OPERATORS, BROKERS AND STOCK EXCHANGE. WE FIND THAT THE LD DR WAS NOT SPECIFICALLY ABLE TO CONTROVERT THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE FOR PURCHASE AND SALE OF SHARES AND VARIOUS OTHER DOCUMENTS REFERRED TO IN THE PAPER BOOK. THE LD DR ALSO FILED WRITTEN SUBMISSIONS WHEREIN HE HAD REITERAT ED THE FINDINGS OF THE LD AO. 7.7. WE FIND THAT THE CO - ORDINATE BENCH OF KOLKATA TRIBUNAL IN ITA NO.661/KOL/ 2018 IN SHREYANS CHOPRA VS ACIT DATED 25.7.2018 ON SIMILAR SET OF FACTS AND CIRCUMSTANCES HAD HELD AS FOLLOWS: - IN THE INCOME TAX APPELLATE TR IBUNAL KOLKATA SMC BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER) ITA NO. 661/KOL/2018 ASSESSMENT YEAR: 2014 - 15 SHRI SHREYANS CHOPRA .. ........ ... ...... APPELLANT 3A, MANGOE LANE KOLKATA 700 001 [PAN : AAAFZ 1337 P ] ASSISTANT COMMISSIONER OF INCOME TAX, C IRCLE - 36, KOLKATA .......RESPONDENT APPEARANCES BY: SHRI MIRAJ D. SHAH A/R, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SATYAJIT MANDAL, ADDL. CIT, D/R. APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 28TH, 2018 DATE OF PRONOUNCING THE ORDER : JULY 25TH, 2018 12 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE ORDER PER J. SUDHAKAR REDDY, AM : - THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 10, KOLKATA, (HEREINAFTER THE LD. CIT(A)), DT. 15/02/2018, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), RELATING TO ASSESSMENT YEAR 2014 - 15. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS, PROFESSIONAL CAPITAL GAINS AND OTHER SOURCES. THE FA CTS OF THE CASE AND THE ISSUES INVOLVED IN THIS APPEAL ARE BROUGHT OUT BY THE ASSESSING OFFICER AT PARAGRAPHS 3 & 4 OF THE ASSESSMENT ORDER, WHICH IS EXTRACTED FOR READY REFERENCE: - 3. BRIEF FACTS OF THE CASE: THE ASSESSEE HAS FILED HIS/HER RETURN SHOWIN G INCOME FROM SALARY OF RS.84,000/ - & INCOME FROM OTHER SOURCES OF RS.6,12,677/ - . HOWEVER, IN ITS COMPUTATION OF INCOME THE ASSESSEE HAS COMPUTED LTCG OF RS.5,50,159/ - AND CLAIMED EXEMPTION U/S 10(38) OF THE I. T. ACT. THEREFORE, ALL OF A SUDDEN EARNING OF SUCH HUGE EXEMPTED INCOME FROM LTCG REQUIRES FOR EXAMINATION IN DETAIL. RETURN DATA ANALYSIS OF PAST YEARS SHOWS THE FOLLOWING PICTURE: - ASSESSMENT YEAR INCOME FROM SALARY SHORT TERM CAPITAL GAIN INCOME FROM OTHER SOURCE GROSS TOTAL INCOME TOTAL INCOME EXEMPT LTCG 2012 - 13 0 0 8,63,168 8,63,168 7,43, 168 NIL 2013 - 14 2,40,000 0 3,98,213 6,38,213 5,36,940 NIL 2014 - 15 0 4,80,227 6,12,677 11,76,904 10,61,900 5,50,158 4. MAIN ISSUES INVOLVED: THE MAIN REASON FOR SELECTION OF SCRUTINY OF THIS CASE WAS TO EX AMINE THE EARNING OF SUSPICIOUS CAPITAL GAIN FROM TRANSACTION IN PENNY STOCK (INPUT GIVEN BY INVESTIGATION WING). IN COURSE OF SCRUTINY, IT IS SEEN THAT ASSESSEE HAD SHOWN INCOME FROM LONG TERM CAPITAL GAINS FROM SALE OF SHARES OF M/S SRK INDUSTRIES LTD. T O THE TUNE OF RS.5,50,158/ - ON SALES OF SHARES FOR RS.5,57,658/ - . THIS LONG TERM CAPITAL GAIN WAS CLAIMED EXEMPT FROM INCOME TAX. THE ASSESSEE HAD DECLARED FOLLOWING CALCULATION REGARDING INCOME FROM LONG TERM CAPITAL GAIN ON SALE OF SHARES EXEMPT FROM TAX ATION U/S 10(38): NAME OF COMPANY SALE PRICE PURCHASE PRICE EXEMPT U/S 10(38) SRK INDUSTRIES LTD. 5,57,658 7,500 5,50,158 SHARES WERE PURCHASED OFF MARKET @7,500/ - BUT THEIR VALUE INCREASED LATER IN PURSUANT TO ORDER DATED 21/12/2013 OF BOMBAY HIGH COU RT AND ORDER 13 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE DATED 21/02/2013 OF MADRAS HIGH COURT VIDE LETTER NO. SRK/SA/ELEC/ 000771/2013 DATED 20.05.2013 IN COURSE OF THE ASSESSMENT, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF SUCH SHARE TRANSACTIONS. 3. THE ASSESSING OFFICER IN HIS DETAILED O RDER DISCUSSED THE MODUS OPERANDI AS WELL AS THE OTHER EVIDENCES AVAILABLE WITH HIM AND, THEREAFTER, AT PARA 6 & 7, CONCLUDED AS FOLLOWS: - 6. THUS IN VIEW OF THE ELABORATE DISCUSSION MADE ABOVE, I HEREBY HOLD THE AMOUNT OF RS.5,57,658/ - INTRODUCED/CREDIT ED BY THE ASSESSEE OUT OF THESE PURPORTED SHARE SALE RECEIPTS DURING THE FINANCIAL YEAR 2013 - 14 (AY 2014 - 15) IN HIS CAPITAL ACCOUNT AS HIS INCOME BEING UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT (TAXABLE AT THE RATE OF 30% AS PROVIDED U/S 115BBE) . THEREFORE, AN AMOUNT OF RS.5,57,658/ - IS ADDED BACK WITH THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I.T. ACT AS UNEXPLAINED CASH CREDIT DURING THE RELEVANT YEAR. [ADDITION: RS.5,57,658/ - ] 7. UNDER THE CIRCUMSTANCES, RS.5,50,158/ - IS TREATED AS BOGU S AND ALSO A SUM OF RS.27,508/ - BEING 5% OF RS.5,50,158/ - IS ADDED AS UNDISCLOSED EXPENDITURE WITHIN THE MEANING OF SECTION 69C OF THE INCOME - TAX ACT, 1961. [ADDITION OF RS.27,508/ - ] 4. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY, HAS CLASSIFIED THESE TRANSACTIONS AS SUSPICIOUS AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. I HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPER S ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, I HOLD AS FOLLOWS: - 6.1. RECENTLY, THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF NAVNEET AGARWAL, - VSITO, WARD - 35(3), KOLKATA; I.T.A. NO. 2281/KOL/2017; ASSESSMENT YEAR: 2014 - 15 , WHILE DEALING WITH IDENTICAL ISSUE OF SALE OF SHARES DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING UPON A PLETHORA OF JUDGMENTS OF VARIOUS COURTS. IT HELD AS FOLLOWS: - 12. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THESE EVI DENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERANDI OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FROM INCOME 14 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE TAX. ALL THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVERTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTIES IS CONFRONTED TO THE ASSESSES. NO OPPORTUNITY OF CROSS - EXAMINATION OF PERSONS, ON WHOSE STATEM ENTS THE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A REPORT FROM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER, IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DURING INVESTIGATIONS, SHOULD GUI DE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITON WAS PART OF TH IS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM I NCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDED ETC. HAS TO ALSO BE BR OUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF THE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAK E AN ADDITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UNDER THE PRETENTIOUS GARB O F PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNI TY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF THE A SSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE 15 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE PROCESS AND THAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE RE VENUE WITH EVIDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SUGGESTS, THERE AR E MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE COURTS OF LAW. 15. IN OUR VIEW MODUS OPERANDI, GENERALISATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF O MAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 ITR 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF B OGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER WE DO NOT FIND THAT, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) , HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW T HAT THE PERSONS INVESTIGATED , INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT THE INVESTIGATION WING I S A SEPARATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION 16 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESSING O FFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRIPT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BR OUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGHED WITH THE INCOME - TAX OFFICE R WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICIO N AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARN ING CONSIDERABLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME - TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES, --- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE INCOME - TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEA R UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME - TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. 17 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE THE INCOME - TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHIC H ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS OF THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE PROCEEDINGS. IF THE CONCLUSION OF THE INCOME - TAX OFFICER WAS THUS EITHER PERVERSE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR R EASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,0 00 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUALLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A COLLUSIVE TRANSACT ION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT IN THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS O F THE INCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW. THAT CROSS - EXAMINATION IS ONE PART OF THE PRINCIPLE S OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHARASHTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P. V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC 1623, HELD TH AT THE RULES OF NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVANT EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS - EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS - EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEA ESTA TE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORAM COTTON MILLS LTD. V. GANGADHAR AND ORS. ,AIR 1964 SC 708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 18 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS.AIR 2009 SC 2448; BIECCO LA WRIE AND ANR. V. STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V. SAROJ KUMAR SINHA AIR 2010 SC 3131). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRAL EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER T HE CENTRAL EXCISE ACT, 1944, CONSIDERED A SIMILAR ISSUE I.E. PERMISSION WITH RESPECT TO THE CROSS - EXAMINATION OF A WITNESS. IN THE SAID CASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS - EXAMINE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ES TABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS - EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNITY TO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIM SELF AGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE GIVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, D O SO BY CROSS - EXAMINING THE WITNESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THE PREVIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVERNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS - EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2009 SC 1100, THIS COURT HELD: EFFECTIVE CROSS - EXAMINATION COULD HAVE BEEN DONE AS REGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PRINCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATURAL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMINED, SAVE A ND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS - EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE ON A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON - EXAMINATION. IF THE BASIC PRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEEN A GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUDICIAL REVIEW. 19 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 30. T HE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS - EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSSEXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL JUSTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS - EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX., KOLKATA - II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS - EXAMI NE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO C ROSS - EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER 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 TH AT CROSS - 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 EX - FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO F OR WHAT PURPOSES THE APPELLANT WANTED TO CROSS - EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT T HEIR TESTIMONY FOR WHICH PURPOSE 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. WHE THER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF 20 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE COULD BE THE SUBJECT MATTER OF CROSS - EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF 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 - 3 - 2005 [2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WIT NESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENU E HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTA HIGH COURT IN THE CASE OF BLB CABLES & CONDUCTORS [ITA NO. 78 OF 2017] DATED 19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSAC TIONS 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 WHERE THE TRANSACTI ONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH H AVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TR ANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEES APPEAL. [QUOTED VERBATIM] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FACT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEG ATE THE TRIBUNALS FINDING THAT OFF MARKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OF FAC TS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXERCISE OF OUR JURISDICTION UNDER SECTION 260A OF THE 21 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE AP PEAL AND THE STAY PETITION, ACCORDINGLY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL [ITA NO. 292/JP/2017] ORDER DATED 06.04.2018 HELD AS UNDER VIDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON S USPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAP ITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PREM PAL GANDHI [ITA95 - 2017 (O&M)] DATED 18.01.2018 AT VIDE PAGE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BO TH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES. IN ITA - 18 - 2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIATION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIP TS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NATIONAL STOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 T HE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH THE ASSESSING OFFICER RELIED UPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPE ALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND THAT THERE WAS NO CO - RELATION BETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. D) THE BENCH D OF KOLKATA ITAT IN THE CASE OF GAUTAM PINCHA [ITA NO.569/KOL/2017] ORDER DATED 15.11.2017 HELD AS UNDER VIDE PAGE 12 PARA 8.1: 22 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XIV) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 1 0(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HELD: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT T HE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KIRAN KOTHARI HUF [ITA NO. 443/KOL/2017] ORDER DATED 15.11.2017 HELD VIDE PARA 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGA INST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COU LD ONLY RELY ON THE ORDERS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE 23 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE ASSESSE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY TH E AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE ACT ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HEL D AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR C ONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE P ROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH A OF KOLKATA ITAT IN THE CASE OF SHALEEN KHEMANI [ITA NO. 1945/KOL/2014] ORDER DATED 18.10.2017 HELD AS UNDER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STA ND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROKERS GETTING IN VOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. 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 TRANSACTIONS RELATING TO PUR CHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER 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 24 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH H OF MUMBAI ITAT IN THE CASE OF ARVIND KUMAR JAIN HUF [ITA NO.4682/MUM/201 4] ORDER DATED 18.09.2017 HELD AS UNDER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGATION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH THE ACTIVITY OF THE BROKER. DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO T HE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SAL E WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGAT ION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED WITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWA L AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHER EIN ON SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMEN T BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VIVEK MEHTA [ITA NO. 894 OF 2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 HELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSESSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) RECORDED A FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUCH FINDING OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING 25 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, THE PRESEN T APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYME NTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TEJU ROHITKUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJRAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MADE BY THE ASSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPACTS ALSO CONFIRM ED THE TRANSACTIONS. THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE FROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REV ENUE, NO QUESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE ABOVE JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OUR DECISION ON SU CH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAI M THAT THE INCOME IN QUESTION IS LONG TERM CAPITAL GAIN FROM SALE OF SHARES AND HENCE EXEMPT FROM INCOME TAX. THE SCRIPS IN QUESTION WERE THE SUBJECT MATTER OF ADJUDICATION BEFORE THIS TRIBUNAL. THE KOLKATA BENCH OF THE ITAT IN A NUMBER OF DECISIONS HAVE , ON SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE LIST SOME OF THESE DECISIONS: - 26 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE SHRI GAUTAM KUMAR PINCHA VS. ITO, ITA NO. 569/KOL/2017, DT. 15/11/2017 ITO VS. SHRI SHALEEN KHEMANI, ITA NO. 1945/KOL/2014, D T. 18/10/2017 MAHENDRA KUMAR BAID VS. ACIT, CIRCLE - 35; ITA NO. 1237/KOL/2017; ORDER DT. 18/08/2017 KIRAN KOTHARI HUF VS. ITO, ITA NO. 443/KOL/2017, ORDER DT. 15/11/2017 THE HONBLE JURISDICTIONAL HIGH COURT HAD IN THE FOLLOWING CASES, UPHELD THE CLAIM O F THE ASSESSEE: - CIT VS. SHREYASHI GANGULI (ITA NO. 196 OF 2012) (CAL HC) 2012 (9) TMI 1113 CIT VS. RUNGTA PROPERTIES PRIVATE LIMITED (ITA NO. 105 OF 2016) (CAL HC)DT. 08/05/2017 CIT VS. BHAGWATI PRASAD AGARWAL (2009 TMI - 34738 (CAL HC) IN ITA NO. 22 OF 2009 DATED 29.04.2009 6.2. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE SAME AS THE FACTS AND CIRCUMSTANCES OF THE CASES OF NAVNEET AGARWAL (SUPRA), WE DELETE THE ADDITION MADE U/S 68 OF THE ACT, ON ACCOUNT OF S ALE OF SHARES IN THE CASE OF BOTH THE ASSESSEES. THE CONSEQUENTIAL ADDITION U/S 69C IS ALSO DELETED. ACCORDINGLY BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 25TH DAY OF JULY, 2018. SD/ - [ J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED : 25.07.2018 7.8. IT WOULD BE PERTINENT TO ADDRESS THE CASE LAW RELIED UPON BY THE LD DR BEFORE US ON THE DECISION OF HONBLE BOMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF SANJAY BIMALCHAND JAIN VS PR.CIT (NA GPUR) REPORTED IN (2018) 89 TAXMANN.COM 27 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE 196 (BOMBAY) DATED 10.4.2017 ON THE IMPUGNED ISSUE. FROM THE FACTS OF SANJAY BIMALCHAND JAIN SUPRA, WE FIND THAT (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AOS LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASSESSEE ; (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE IN CASH ; (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY THE SAME ; (IV) THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WERE ALSO THE SAME PERSON ; (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSESSEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIAL FACTS, THE HONBLE BOMBAY HIGH COURT RENDERED THE DECISION IN FAVOUR OF THE REVENUE. NONE OF THESE FACTORS WERE PRESENT IN THE FACTS OF THE ASSESSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABLE. 7.9. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007 DATED 7.9.2011 HAD HELD AS UNDER: - 5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORDER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES DURING THE YEAR 1999 - 2000 AND 2000 - 2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HA S RECORDED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS THE AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE E FFECT THAT THE SHARES WERE IN - FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES OUT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. 6. SIMILARL Y, THE SALE OF THE SAID SHAERS FOR RS 1,41,08,484/ - THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT LTD AND M/S SCORPIO MANAGEMENT CONSULTANTS PVT LTD CANNOT BE DISPUTED, BECAUSE THE FACT THAT 28 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DIS PUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUG H THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTOR OF M/S RICHMAND SECURITIES PVT LTD REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S RICHMAND SECURITIES PVT LTD HELD THAT THE SALE TRANSACTION WAS GENU INE. 7. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS 1,41,08,484/ - REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AND THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 7.10. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD CITA WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE LD AO IN BRINGING THE LONG TERM CAPITAL GAINS ON SALE OF SHARES OF SRK INDUSTRIES LTD IN THE SUM OF RS 2,26,36,372/ - AS UNEXPLAINED INCOME OF THE ASSESSEE TREATING THE SAME AS JUST AN ACCOMMODATION ENTRY. THE LD AO IS DIRECTED TO GRANT EXEMPTION U/S 10(38) OF THE ACT IN THE SUM OF RS 2,26,36,372/ - TO THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE AS SESSEE IS ALLOWED. 8. BOTH THE PARTIES BEFORE US AGREED THAT THE FACTS IN ITA NO. 694/MUM/2018 IN THE CASE OF SHRI SHASHIKANT B MHATRE (HUF) ARE IDENTICAL TO THAT OF SMT GEETA KHARE SUPRA EXCEPT WITH VARIANCE IN FIGURES AND NAME OF THE SCRIP THAT WAS DEA LT WITH. BOTH THE PARTIES BEFORE US STATED THAT IDENTICAL REASONING WAS GIVEN BY BOTH THE LOWER AUTHORITIES FOR DENYING THE CLAIM OF EXEMPTION U/S 10(38) OF THE ACT TO THE ASSESSEE. THE DECISION RENDERED IN THE CASE OF SMT GEETA KHARE WOULD APPLY WITH 29 ITA NO S . 4267 & 694 /MUM/2018 SMT. GEETA KHARE & SHRI SHASHIKANT B. MHATRE EQ UAL FORCE FOR THIS ASSESSEE ALSO AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IN ITA NO. 694/MUM/2018 IS ALLOWED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY , 2019. SD/ - SD/ - ( MAHAVIR SINGH ) ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29 TH MAY , 2019 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) - 3 , NASHIK 4 . THE PR.CIT 1 , THANE 5 . THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.
