MEGHRAJ SINGH SHEKHAWAT, Jaipur V. DCIT, Jaipur

ITA 444/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1993 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMLENDU VERMA
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Share purchase agreement; Opportunity of being heard; Principle of natural justice; Rule of consistency; Earning of tax free income; Fair market value; Corroborative evidences; Accommodation entries; Competent authority; Retraction; Sham transactions
• Section: 69C; 143(3); 153A; 131; 68; 132

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 443 & 444/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 & 2014-15 SHRI MEGHRAJ SINGH SHEKHAWAT C- 28, HANUMAN NAGAR, KHATIPURA, JAIPUR. CUKE VS. THE DCIT, CENTRAL CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AHUPS9495C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL (C. A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI VIMLENDU VERMA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 07/02/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 07/03/2018 VKNS'K@ ORDER PER BENCH: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF LD. CIT (A), JAIPUR ALL DATED 28 .04.2017 FOR THE ASSESSMENT YEARS 2013-14 & 2014-15 RESPECTIVELY. FOR THE ASSESSMENT YEAR 2013-14 THE ASSESSEE HAS RA ISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 2 1,32,56,113/- MADE BY LD. AO U/S 68 OF THE I. T. AC T, 1961 BY ALLEGING THAT THE LONG TERM CAPITAL GAIN CLAIMED AS EXEMPT INCOME U/S 10(38) WAS A BOGUS ACCOMMODATION ENTRY WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E AND THE SUBMISSIONS MADE AS WELL AS THE DETAILS SUBMITTED B EFORE HIM. THUS, THE ADDITION OF RS. 1,32,56,113/- SO UPHOLD D ESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDI TION MADE BY LD. AO WITHOUT PROVIDING OPPORTUNITY FOR CROSS-EXAM INATION, WHEN SPECIFIC REQUESTS WERE MADE BEFORE LD. AO WHIC H WERE TURNED DOWN ARBITRARILY, WITHOUT ASSIGNING ANY REAS ON. THUS, THE IMPUGNED ASSESSMENT COMPLETED, COMMITTING SUCH A SE RIOUS ILLEGALITY DESERVES TO BE QUASHED AND THE CONSEQUEN T ADDITION BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ADDITION MADE BY LD. AO, BY COMPLETELY IGNORING THE FACT THAT SH. ANIL A GRAWAL, WHOSE STATEMENTS WERE HEAVILY RELIED UPON FOR MAKING ADDI TION, HAD RETRACTED SUCH STATEMENTS AND COPY OF AFFIDAVIT WAS ALSO PROVIDED TO BOTH LD. AO AND LD. CIT(A). THUS, ADDITION MADE ON THE BASIS OF RETRACTED STATEMENTS DESERVES TO BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION BY RELY ING UPON THE REPORT OF SEBI, WHICH WAS NOWHERE DISCUSSED BY LD. AO DURING ASSESSMENT PROCEEDINGS . THUS ACTION OF LD. CIT(A) IN PLACING RELIANCE UPON REPORT OF SEBI WITHOUT PROVIDING ASSE SSEE WITH THE OPPORTUNITY OF BEING HEARD IS BAD IN LAW. 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, ID. CIT(A) ERRED IN CONFIRMING THE ADDITION ON THE OBSERVATION THAT SEBI HAS BANNED THE TRADING OPERATIONS OF THE ASSESSEE ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 3 COMPANY AND FURTHER IMPOSED MONETARY PENALTY OF RS. 30 LACS ON M/S ANAND RATHI STOCK & SHARE BROKERS LTD. THROUGH AN INTERIM ORDER, AND CURRENT STATUS OF SAID BROKING FIRM IS U NDER INVESTIGATION BY COMPLETELY IGNORING THE FACT THAT TRANSACTIONS ENTERED BY ASSESSEE THROUGH SAID BROKER MUCH PRIOR AND THUS CANNOT BE HELD BOGUS ON THE BASIS OF SUBSEQUENT DEV ELOPMENT. 5. THAT THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRM ING ADDITION BY OBSERVING THAT: (I) PREFERENTIAL SHARE ALLOTMENT LETTER WAS NOT BEA RING ANY RUNNING/ DISTINCTIVE NO. (II) PURCHASE TRANSACTION WAS NOT ONLINE WHEN THE S ALE TRANSACTION WAS ONLINE. (III) SHARES WERE CREDITED IN DMAT ACCOUNT AFTER A LAPSE OF 3 MONTHS. (IV) SEBI INQUIRY WAS CONDUCTED IN THE DEALINGS OF BROKING FIRM OF SH ANIL KUMAR AGARWAL AND M/S ANAND RATHI SHARE AND STOCK BROKER LTD., WHICH FACTS WERE KEPT AWAY FROM THE KN OWLEDGE OF LD. AO WHEREAS ASSESSEE HIMSELF WAS UNAWARE OF SUCH FACTS. (V) SEBI HAS BARRED SH. ANIL KUMAR AGARWAL AMONG OT HERS FROM SECURITIES MARKET FROM SUSPECTED TAX EVASION AND LA UNDERING OF BLACK MONEY THROUGH STOCK MARKET PLATFORMS AND HAS DEBARRED TRADING OF SHARES OF THE ENTITY M/S RUTRON INTERNAT IONAL LTD. ON BSE. (VI) THE ASSESSEE HAS FAILED TO FURNISH (A) COPY OF SHARE CERTIFICATES (B) ARTICLE OF ASSOCIATION (C) VALUATI ON REPORT OF REGISTERED VALUER EVIDENCING ALLOTMENT OF SHARES (D ) DETAILS OF ANNUAL RETURN FILED BEFORE ROC (E) COPY OF BOARD RE SOLUTION AUTHORISING ADDITION OF SHAREHOLDERS DURING THE YEA R (F) DETAILS OF REGISTER OF MEMBERS/ SHAREHOLDERS DULY AUTHENTICATE D BY COMPETENT AUTHORITY & (G) MINUTES OF GENERAL & BOAR D MEETING DURING F.Y.2011-12, BY IGNORING THE FACT THAT AS PE R THE PROVISION OF SECTION 10(38) NO SUCH DOCUMENTS ARE REQUIRED TO CLAIM LONG ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 4 TERM CAPITAL GAINS FROM SALE OF SHARES AS EXEMPT. SUCH OBSERVATIONS OF LD. CIT (A) DESERVE TO BE IGNO RED AND EXCLUDED AND CONSEQUENT ADDITION BASED ON THESE ALL EGATIONS DESERVES TO BE DELETED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 2,65,122/- MADE BY LD. AO U/S 69C OF THE I. T. ACT, 1961 ON WHIMS AND FANCIES AND BASELESSLY ALLEGING THAT THE ASSESSEE HAS PAID COMMISSION AT THE RATE OF 2% OF THE LONG TERM CAPITAL GAIN TO THE ENTRY PROVIDER WITHOUT APPRECIATING THE FACT S AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS MADE AND FURTHER BRINGING ON EVIDENCE ON RECORD FOR SAYING SO. THUS, THE ADDITION OF RS. 2,65,122/- DESERVES TO BE DELETED. 7. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND/ AL TER ALL OR ANY OF THE GROUNDS OF THIS APPEAL ON OR BEFORE THE HEAR ING OF THE MATTER. 2. GROUND NOS. 1 TO 5 ARE REGARDING THE LONG TERM C APITAL GAIN FROM SALE OF SHARES DECLARED BY THE ASSESSEE AND CLAIMED AS EXEMPT INCOME U/S 10(38) OF THE ACT WAS TREATED BY THE AO AS BOGU S AND ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINE SS OF RETAIL SALE OF IMFL/BEER. A SEARCH U/S 132 OF THE INCOME TAX ACT W AS CONDUCTED ON 17.07.2013 IN CASE OF MRS GROUP OF WHICH THE ASSESS EE BELONGS. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/ S 153A OF THE ACT, THE ASSESSEE DECLARED TOTAL INCOME RS. 16,08,31,700/- I NCLUDING THE INCOME ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 5 SURRENDERED AND DECLARED BY THE ASSESSEE DURING THE SEARCH AND SEIZURE ACTION OF RS. 12,12,04,711/- AS UNDISCLOSED INCOME EARNED FROM BUSINESS AND PROFESSION. DURING THE ASSESSMENT PROC EEDING THE AO NOTED THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 1,32,56,113/- WHICH IS CLAIMED AS EXEMPT U/S 10(38) OF THE ACT ON SALE OF SHARES OF M/S RUTRON INTERNATIONAL LTD. THE AO R ECEIVED INFORMATION FROM INVESTIGATION WING, KOLKATA THAT DURING THE SE ARCH CONDUCTED U/S 132 OF THE ACT ON 12.04.2015 AT THE BUSINESS PREMIS ES OF ONE SHRI ANIL AGARWAL GROUP IT WAS FOUND THAT SHRI ANIL AGARWAL I SONE OF THE PROMOTERS OF M/S RUTRON INTERNATIONAL LTD. FURTHER, IT WAS UNEARTH THROUGH SEARCH ACTION THAT SHRI ANIL AGARWAL THROUG H A NUMBER OF PRIVATE LIMITED SHELL COMPANIES AND OTHER PENNY STO CK COMPANIES WAS INVOLVED IN PROVIDING BOGUS LONG TERM CAPITAL GAIN TO CUSTOMERS FOR COMMISSION. ACCORDINGLY, THE ASSESSING OFFICER ISSU ED A SHOW CAUSE NOTICE DATE 03.03.2016. IN RESPONSE TO THE SHOW CAU SE NOTICE THE ASSESSEE FILED HIS REPLY DATED 15.03.2016 WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE 3 & 4 OF THE ASSESSMENT ORDER. TH E ASSESSEE GIVEN THE DETAILS OF THE PURCHASE AND SALE OF SHARES OF M /S RUTRON INTERNATIONAL LTD. AND CLARIFIED THAT THE SHARES WE RE ALLOTTED TO THE ASSESSEE BY THE COMPANY AS PREFERENTIAL SHARES ALLO TMENTS ON PAYMENT ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 6 THROUGH CHEQUE. THE SHARES WERE SOLD BY THE ASSESSE E FROM HIS D-MAT ACCOUNT THROUGH THE BROKER M/S ANAND RATHI SHARE AN D STOCK BROKERS LTD. AND THEREFORE, THE ASSESSEE DENIED ANY INVOLVE MENT OF AVAILING THE BOGUS OF LONG TERM CAPITAL GAIN. THE AO DID NOT ACC EPT AND EXPLANATION OF THE ASSESSEE AND REFERRED TO THE STATEMENT OF SH RI ANIL AGARWAL RECORDED BY INVESTIGATION WING KOLKATA U/S 132(4) O F THE ACT AND HELD THAT SINCE, SHRI ANIL AGARWAL WAS INVOLVED IN PROVI DING BOGUS LONG TERM CAPITAL GAIN IN RESPECT OF THE SHARES OF THE COMPAN IES INCLUDING M/S RUTRON INTERNATIONAL LTD., THEREFORE, THE TRANSACTI ON OF THE ASSESSEE SHOWING THE LONG TERM CAPITAL GAIN FROM SALE OF SHA RES OF M/S RUTRON INTERNATIONAL LTD. IS BOGUS AND CONSEQUENTLY THE AO MADE AN ADDITION OF RS. 1,32,56,113/- TO THE TOTAL INCOME OF THE ASS ESSEE U/S 68 OF THE ACT. AGGRIEVED BY THE ACTION OF THE AO THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) HOWEVER, THE LD. CIT(A) HAS C ONFIRMED THE TREATMENT OF LONG TERM CAPITAL GAIN AS BOGUS TRANSA CTION AND CONSEQUENTIAL ADDITION MADE BY THE AO. 3. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THIS ADDITION SOLELY ON THE BASIS OF THE STATEMENT OF SHRI ANIL AGARWAL RECORDED STATEMENT U /S 132(4) BY THE INVESTIGATION WING, KOLKATA WITHOUT ANY CORROBORATI VE EVIDENCE TO SHOW ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 7 THAT THE ASSESSEE HAS CONVERTED ITS UNACCOUNTED INC OME IN THE LONG TERM CAPITAL GAIN. HE HAS FURTHER CONTENDED THAT EV EN IN THE SAID STATEMENT RECORDED U/S 132(4) SHRI ANIL AGARWAL HAS NOT MENTIONED ANY FACT ABOUT PROVIDING BOGUS LONG TERM CAPITAL GAIN E NTRY TO THE ASSESSEE OR EVEN HE WAS A PROMOTER OF M.S RUTRON INTERNATION AL LTD. THE LD. AR HAS FURTHER SUBMITTED THAT THE ASSESSEE SPECIFICALL Y DEMANDED THE CROSS EXAMINE OF SHRI ANIL AGARWAL ON WHOSE STATEMENT TH E AO HAS BASED HIS ASSESSMENT ORDER AND MADE ADDITION ON ACCOUNT O F BOGUS LONG TERM CAPITAL GAIN. THUS, IN VIEW OF THE DECISION OF HON BLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES 127 DTR 241 . THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE WAS ALLOTTED 3,50,000/- EQUITY SH ARES BY M/S RUTRON INTERNATIONAL LTD. ON 01.03.2012 VIDE ALLOTMENT LET TER DATED 08.03.2012. THE SHARES WERE ALLOTTED BY THE COMPANY AT FACE VA LUE OF RS. 10/- EACH WITHOUT CHARGING ANY PREMIUM UNDER PREFERENTIAL ISS UE. HE HAS REFERRED TO THE BANK STATEMENT OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE PAID THE PURCHASE CONSIDERATION/ SHARE APPLICATION MONEY VIDE CHEQUE ON 29.02.2012 THE PAYMENT MADE BY THE ASSESSEE IS D ULY REFLECTED IN THE BACK STATEMENT OF THE ASSESSEE. THEREFORE, THE ASSESSEE PURCHASED SHARES IN PREFERENTIAL ALLOTMENT OF THE COMPANY AND AGAINST THE ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 8 PURCHASE CONSIDERATION PAID BY THE ASSESSEE THROUGH CHEQUE. HE HAS ALSO REFERRED TO THE D-MAT ACCOUNT OF THE ASSESSEE AND SUBMITTED THAT THE SHARES WERE DEMATERIALIZED ON 18.06.2012 AND TH EREAFTER THE SHARES WERE SOLD FROM 13.03.2013 ONWARDS ON VARIOUS DATES THROUGH M/S ANAND RATHI SHARES & STOCK BROKERS LTD. THE SHA RES WERE SOLD BY THE ASSESSEE ARE REFLECTED IN THE D-MAT ACCOUNT OF THE ASSESSEE AND THE SALE CONSIDERATION WAS DIRECTLY CREDITED TO THE BAN K ACCOUNT OF THE ASSESSEE. THEREFORE, THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVIDENCE TO SHOW THE ALLOTMENT OF SHARES, PAYMENT O F CONSIDERATION THROUGH CHEQUE AT THE TIME OF ALLOTMENT OF SHARES D EMATERIALIZATION OF THE SHARES AND THEREAFTER, SALE OF SHARES FROM THE D-MAT ACCOUNT. HENCE, THE TRANSACTION OF PURCHASE AND SALE OF SHAR ES IS GENUINE ONE AS THE ASSESSEE HAS PROVED THE GENUINENESS BY PRODUCIN G THE RELEVANT RECORD WHEREAS THE ASSESSING OFFICER HAS NOT PRODUC ED ANY MATERIAL OR RECORD TO CONTROVERT THE EVIDENCE PRODUCE BY THE AS SESSEE. THUS, LD. AR HAS SUBMITTED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES IS GENUINE AND THE LONG TERM CAPITAL GAIN ARISING FROM PURCHASE AND SALE OF SHARES CANNOT BE TREATED AS BOGUS TRANSACTION. H ENCE, LD. AR HAS PLEADED THAT THE ADDITION MADE BY THE AO BE DELETED AND THE CLAIM OF THE ASSESSEE ACCEPTED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 9 THE HONBLE JURISDICTION HIGH COURT DATED 11-09-201 7 IN CASE OF CIT VS. SMT. POOJA AGRAWAL 385/2011 WHEREIN THE HONBLE HIG H COURT HAS HELD THAT WHEN THE ASSESSEE FURNISHED ALL SUPPORTING DOC UMENTS INCLUDING THE CHEQUE, COPY OF CONTRACT NOTE AND D-MAT ACCOUNT ETC. THEN, THE TRANSACTION ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE ASSESSEE DENIED MADE ANY TRANSACT ION. WHEREAS IN THIS CASE, THE ASSESSEE NEVER DENIED HAVING THESE T RANSACTIONS BUT THE AO HAS SOLELY RELIED UPON THE STATEMENT OF SHRI ANI L AGRAWAL WHICH WAS RECORDED BY THE INVESTIGATION WING, KOLKATA WITHOUT GIVING AN OPPORTUNITY OF CROSS EXAMINE TO THE ASSESSEE. THE L D. AR HAS RELIED UPON THE DECISION OF HONBLE PUBJAB AND HARYANA HIG H COURT DATED 18.01.2018 IN CASE OF CIT VS. PREM PAL GANDHI IN IT A NO. 95/2017. HE HAS ALSO RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 31.01.2018 IN CASE OF PRAMOD JAIN & OTHERS VS. DCIT IN ITA NO. 368/JP/2017 AND SUBMITTED THAT IN ALL THESE DECISIONS WHEN THE ASSESSEE PRODUCED THE SUPPORTING EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND THE AO HAS FAILED TO PRODUCE A NY COUNTER EVIDENCE TO DISPROVE THE EVIDENCE PRODUCE BY THE ASSESSEE IT WAS HELD THAT THE TRANSACTIONS CANNOT BE TREATED AS BOGUS MERELY ON T HE BASIS OF ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 10 STATEMENT WITHOUT ANY CORROBORATING EVIDENCE BROUGH T BY THE ASSESSING OFFICER. 4. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS SHOWN A HUGE LONG TERM CAPITAL GAIN WITHIN A SHORT PERIOD OF ONE YEAR FROM THE SALE OF SHARES AND THEREFORE, AS PER THE R ULE OF PREPONDERANCE OF HUMAN PROBABILITY THE TRANSACTION OF THE ASSESSE E CANNOT BE ACCEPTED AS GENUINE AND THE ONUS IS ON THE ASSESSEE TO PROVE THE SAME AS HOW THERE IS A SPIKE IN THE PRICE OF THE SHARES WITHIN SUCH SHORT DURATION. THE SURROUNDING CIRCUMSTANCES CLEARLY LEA D TO ONLY ONE POSSIBLE CONCLUSION THAT THE ASSESSEE HAS MANIPULAT ED THE ENTIRE RECORD AND AVAILED THE BOGUS TRANSACTION OF LONG TERM CAPI TAL GAIN TO CONVERT HIS UNACCOUNTED INCOME TO AVOID TAX THROUGH LONG T ERM CAPITAL GAIN. HE HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT 89 TAXAMAN.COM 1 96. THE LD. DR HAS THEN REFERRED TO THE FINDING OF THE AO AS WELL AS LD. CIT(A) AND SUBMITTED THAT WHEN SH. ANIL AGARWAL HAS CLEARLY AD MITTED IN THE STATEMENT THAT THROUGH HIS COMPANY HE IS ENGAGED IN PROVIDING BOGUS LONG TERM CAPITAL GAIN TO THE CLIENTS AND M/S RUTRO N INTERNATIONAL LTD. IS ONE OF THE COMPANY IS WHOSE SHARE TRANSFERRED BY S HRI ANIL AGRAWAL. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BE LOW. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 11 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS PRODUCED RECOR D OF ALLOTMENT OF 3,50,000 EQUITY SHARES OF M/S RUTRON INTERNATIONAL LTD. UNDER PREFERENTIAL ISSUE AT PAR OF FACE VALUE OF RS. 10/- EACH VIDE ALLOTMENT LETTER DATED 08.03.2012. THE ASSESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE LETTER OF ALLOTMENT ISSUED BY TH E COMPANY TO THE ASSESSEE WHEREIN IT HAS BEEN COMMUNICATED THAT THE ASSESSEE HAS BEEN ALLOTTED 3,50,000 EQUITY SHARES VIDE ALLOTMENT LETT ER DATED 08.03.2012 AGAINST THE APPLICATION OF THE ASSESSEE AT PAR OF F ACE VALUE OF RS. 10/- EACH WITHOUT ANY PREMIUM. THE ASSESSEE HAS ALSO PRO DUCED THE BANK STATEMENT SHOWING THE PAYMENT OF CONSIDERATION OF T HE ACQUISITION OF SHARES ON 29.02.2012. IT APPEARS THAT THE SAID PAYM ENT WAS MADE BY THE ASSESSEE AT THE TIME OF APPLYING FOR ALLOTMENT OF SHARES AND SUBSEQUENTLY THE SHARES WERE ALLOTTED BY THE COMPAN Y ON 01.03.2012. THUS, IT IS CLEAR THAT THE SHARES ACQUIRED BY THE A SSESSEE IS NOT A TRADING TRANSACTION BUT THESE WERE ALLOTTED DIRECTL Y BY THE COMPANY UNDER THE PREFERENTIAL ISSUE AND HENCE, THE ROLE OF INTERMEDIATE IS RULED OUT. ONCE, THE SHARES WERE DIRECTLY ALLOTTED BY THE COMPANY M/S RUTRON INTERNATIONAL LTD. AGAINST THE CONSIDERATION PAID B Y THE ASSESSEE THROUGH CHEQUE. THEN THE ROLE OF ANY INTERMEDIATELY PARTICULAR OF SHRI ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 12 ANIL AGRAWAL IS SAID ALLOTMENT DOES NOT APPEAR FROM ANY OF THE RECORD. EVEN AS PER THE STATEMENT AS REPRODUCED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER SHRI ANIL AGRAWAL HAS STATED THAT HE IS HAVING BUSINESS NEXUS WITH THE COMPANIES INCLUDING M/S RUT RON INTERNATIONAL LTD. THE DEPARTMENT PUT A QUESTION ABOUT THE ASSOCI ATION WITH AS MANY AS 13 COMPANIES AND IN RESPONSE TO THAT HE HAS ACCE PTED THAT HE IS HAVING BUSINESS NEXUS WITH THESE COMPANIES INCLUDIN G M/S RUTRON INTERNATIONAL LTD. THE NATURE OF SERVICE WAS ALSO E XPLAINED BY SHRI ANIL AGRAWAL AS THE CONSULTANCY SERVICES. FOR READY REFE RENCE WE QUOTE QUESTION NO. 4 AND 5 AND ANSWER, THERETO IN THE STA TEMENT OF SHRI ANIL AGARWAL AS REPRODUCED AS UNDER:- Q 4. WHETHER M/S COMFORT SECURITIES PVT. LTD. OR YOU HA VE ANY ASSOCIATION WITH THE FOLLOWING COMPANIES OR HAVE EV ER HAD ANY BUSINESS TRANSACTIONS WITH THE COMPANIES AS MENTION ED BELOW: 1. FIRST FINANCIAL SERVICES LTD. (FFSL) 2. SPLASH MEDIA AND INFRA LTD. ( SPMIL) 3. D B (INTERNATIONAL) STOCK BROKERS LTD. ( DBSBL) 4. UNISYS SOFTWARES & HOLDINGS INDUSTRIES LTD. (USH L) 5. FACT ENTERPRISES LTD. ( FEL) 6. PARIKH HERBAL LTD. ( NOW SAFAL HERBS LTD) 7. PREMIER CAPITAL SERVICE 8. RUTRON INTERNATIONA LTD. 9. RADFORD GLOBAL LTD 10. JMD TELEFILMS INDUSTRIES LTD 11. DHANLEELA INVESTMENTS & TRADING CO. LTD. 12. SRK INDUSTRIES LTD. 13. DHENU BUILDCON INFRA LTD. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 13 ANS. M/S COMFORT SECURITIES LTD. HAS BUSINESS NEXUS WI TH THE FOLLOWING COMPANIES NAME OF THE COMPANY NATURE OF BUSINESS TRANSACTION 1. FIRST FINANCIAL SERVICES LTD. BROKERAGE AND CONS ULTANCY SERVICES 2. SPLASH MEDIA AND INFRA LTD. BROKERAGE, SHARE HOL DING AND CONSULT ANCY SERVICES 3. FACT ENTERPRISES LTD BROKING AS WELL AS SHARE H OLDING 4. RUTRON INTERNATIONAL LTD. CONSULTANCY SERVICES 5. D.B. (INTERNATIONAL) STOCK CONSULTANCY SERVICES BROKERS LTD. 6. UNISYS SOFTWARE & HOLDING BROKING SERVICES INDUSTRIES LTD. APART FROM THE ABOVE MENTIONED COMPANIES NEITHER I NOR M/S COMFORT SECURITIES LTD. HAS ANY BUSINESS NEXUS WITH THE COMPANIES MENTIONED SUPRA. Q5. DO YOU KNOW THE PROMOTERS AND DIRECTORS OF THE ABO VE SAID COMPANIES? WHETHER M/S COMFORT SECURITIES PVT. LTD. OR YOU HAVE ANY ASSOCIATION WITH THE PROMOTERS AND DIRECTORS OF THE ABOVE SAID COMPANIES OR HAVE EVER HAD ANY BUSINESS TRANSA CTIONS WITH THE PROMOTERS AND DIRECTORS OF THE ABOVE SAID COMPA NIES. ANS. SIR, I KNOW SOME OF THE DIRECTORS OF THE FIRST FIN ANCIAL SERVICES LIMITED, SPLASH MEDIA & INFRA SERVICES LTD , RUTRON INTERNATIONAL LIMITED AND FACT ENTERPRISE LTD. REGA RDING OTHER COMPANIES I AM NOT AWARE WHO ARE THE DIRECTORS OF T HESE COMPANIES. THUS, IT IS CLEAR FROM THE RELEVANT PART OF STATEME NT OF SHRI ANIL AGRAWAL AS REPRODUCED BY THE AO THAT HE HAS STATED HAVING B USINESS NEXUS WITH THESE COMPANIES AND NATURE OF BUSINESS BEING CONSU LTANCY SERVICES. HENCE, HE HAS NOT STATED ANYTHING ABOUT PROVIDING B OGUS LONG TERM CAPITAL GAIN IN RESPECT OF THE EQUITY SHARES OF M/S RUTRON INTERNATIONAL ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 14 LTD. A BUSINESS NEXUS WITH ANY COMPANY WILL NOT AUT OMATICALLY LEAD TO THE CONCLUSION THAT THE SHARES ALLOTTED BY THE OTHE R COMPANY IS BOGUS TRANSACTION. AS PER QUESTION NO. 5 AND ANSWER THERE TO IT IS CLEAR THAT SHRI ANIL AGRAWAL WAS NOT THE DIRECTOR OF M/S RUTRO N INTERNATIONAL LTD. BUT HE HAS STATED TO KNOW SOME OF THE DIRECTORS OF THESE COMPANIES INCLUDING M/S RUTRON INTERNATIONAL LTD. HENCE, FROM THIS RELEVANT PART OF THE STATEMENT OF SHRI ANIL AGRAWAL IT CANNOT BE IN FERRED THAT HE HAS PROVIDED THE BOGUS LONG TERM CAPITAL GAIN FROM PURC HASE AND SHARES OF EQUITY SHARES OF M/S RUTRON INTERNATIONAL LTD. MUCH LESS THE SPECIFIC TRANSACTION OF PREFERENTIAL ISSUE ALLOTMENT OF SHAR ES BY THE COMPANY ITSELF TO THE ASSESSEE. FURTHER, THOUGH HE HAS EXPL AINED THE MODUS OPRENDI OF PROVIDING BOGUS LONG TERM CAPITAL GAIN E NTRIES IN THE EQUITY SHARES HOWEVER, WHEN THE TRANSACTION WAS NOT ROUTED THROUGH SHRI ANIL AGRAWAL AND THE SHARES WERE ALLOTTED DIRECTLY BY TH E COMPANY TO THE ASSESSEE AT PAR ON FACE VALUE THEN THE SAME CANNOT BE CONSIDERED AS A PENNY STOCK TRANSACTIONS. THE ASSESSEE HAS PRODUCED THE D-MAT ACCOUNT AND THEREFORE, AS ON 18.06.2012 THE ASSESSE E WAS HOLDING 3,50,000 EQUITY SHARES OF M/S RUTRON INTERNATIONAL LTD. IN D-MAT ACCOUNT. THIS FACT OF HOLDING THE SHARES IN THE D-M AT ACCOUNT AS ON 18.06.2012 CANNOT BE DISPUTED. FURTHER, THE ASSESSI NG OFFICER HAS NOT ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 15 EVEN DISPUTED THE EXISTENCE OF THE D-MAT ACCOUNT AN D SHARES CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSEE. THEREFORE, ON CE, THE HOLDING OF SHARES IS D-MAT ACCOUNT CANNOT BE DISPUTED THEN THE TRANSACTION 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 CONSIDER ATION WAS DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE, THERE FORE, ONCE THE ASSESSEE PRODUCED ALL RELEVANT EVIDENCE TO SUBSTANT IATE THE TRANSACTION OF PURCHASE, DEMATERIALIZATION AND SALE OF SHARES T HEN, IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD THE SAM E CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE BASIS OF STATEMENT OF ONE SHRI ANIL AGRAWAL RECORDED BY THE INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENERAL STATEMENT OF PROVIDING BOGUS LONG TERM CAPI TAL GAIN TRANSACTION TO THE CLIENTS WITHOUT STATING ANYTHING ABOUT THE T RANSACTION OF ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. FURTHER, SHIR ANIL AGRAWAL WAS NOT A DIRECTOR OF M/S RUTRON INTERNATIO NAL LTD. AS PERCEIVED BY THE AO AND THEREFORE, THE ENTIRE FINDI NG OF THE AO IS WITHOUT ANY CORROBORATIVE EVIDENCE OR TANGIBLE MATE RIAL. 6. THE ASSESSEE HAS SPECIFICALLY DEMANDED THE CROSS EXAMINED TO SHRI ANIL AGRAWAL WHICH WAS DENIED BY THE AO AS UND ER :- (II) THE ASSESSEES PLEAS THAT EFFECTIVE OPPORTUNI TY MAY BE PROVIDED TO CROSS EXAMINATION. IN THIS REGARD, IT I S POINTED ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 16 OUT THAT THE HONBLE SUPREME COURT IN THE CASE OF C.VASANTLAL & CO. V/S CIT 45 ITR 206 (SC) (3 JUDGE BENCH) HAS OBSERVED THAT THE ITO IS NOT BOUND BY ANY TECH NICAL RULES OF THE LAW OF EVIDENCE. IT IS OPEN TO HIM TO COLLECT MATERIAL TO FACILITATE ASSESSMENT EVEN BY PRIVATE E NQUIRY. THUS, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) THE ASSESSMEN T BASED ON STATEMENT WITHOUT GIVING AN OPPORTUNITY IS NOT SUST AINABLE IN LAW. WE FURTHER NOTE THAT THE ASSESSEE PRODUCED COPY OF AFF IDAVIT OF SHRI ANIL AGRAWAL WHO HAS RETRACTED HIS STATEMENT BEFORE THE INVESTIGATION WING, KOLKATA HOWEVER, WITHOUT GOING INTO CONTROVERSY OF THE RETRACTION OF THE STATEMENT WE FIND THAT THE STATEMENT CANNOT BE USED BY THE AO WITHOUT GIVING AN OPPORTUNITY TO CROSS EXAMINATION OF SHRI ANIL AGRAWAL. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF PRAMOD JAIN AND OTHERS VS. DCIT (SUPRA) WHOLE DEALING WITH AN IDENTICAL ISSUE AS HELD IN PARA 6 TO 8 AS UDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE PURCHASES 800 EQUITY SHARES M/S GRAVITY BARTER LTD. FOR A CONSIDERATION OF RS. 4 LACS THE ASSESSEE HAS PRODUCED THE PURCHASE BILL OF THE SHAR ES PURCHASE FROM M/S WINALL VINIMAY PVT. LTD. WHICH SHOWS THAT THE ASSESSEE PURCHASE 800 EQUITY SHARES HAVING FACE VALUE OF RS. 10/- EACH M/S GRAVITY BARTER PVT. LTD. IN ALLOTS OF 400 EACH FOR A CONSIDERATION OF RS. 2 LACS EACH TOTAL AMOUNT TO RS . 4 LACS @ RS. 500 PER SHARES. THE PURCHASE PRICE OF RS. 500 PER S HARE ITSELF SHOWS THAT IT WAS NOT A TRANSACTION OF PURCHASE OF PENNY STOCK. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 17 THESE SHARES WERE DULY REFLECTED IN THE BALANCE SHE ET AS 31.03.2011. THE PAYMENT OF THE PURCHASE CONSIDERATI ON WAS MADE BY THE ASSESSEE VIDE CHEQUE ON 17.05.2011 WHIC H IS EVIDENT FROM THE BANK ACCOUNT OF THE ASSESSEE AT PA GE 40 OF THE PAPER BOOK. IN THE MEAN TIME THE SAID M/S GRAVITY B ARTER PVT. LTD. CHANGED ITS STATUS FROM PRIVATE LIMITED TO A P UBLIC LIMITED AND FRESH CERTIFICATE WAS ISSUED BY THE REGISTRAR OF CO MPANY ON 05.02.2011 WHICH IS PLACED AT PAGE 43 OF THE PAPER BOOK. THEREFORE, THERE IS NO REASON TO DISBELIEF THE FACT OF FRESH CERTIFICATE ISSUED BY THE REGISTRAR OF COMPANIES ON 05.02.2011 AND HENCE, THE DATE MENTIONED IN THE ORDER OF THE H ONBLE KOLKATA HIGH COURT AS 18.04.2011 APPEARS TO BE TYPO GRAPHICAL MISTAKE. EVEN OTHERWISE THESE TWO DATES DO NOT HAVE ANY EFFECT ON THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF EQUITY SHARES BY THE ASSESSEE OF M/S GRAVITY BARTER PVT. L TD. THE ASSESSEE THOUGH PRODUCED ALL THE RELEVANT RECORDS A ND EVIDENCES RIGHT FROM THE PURCHASE BILLS, CERTIFICATE ISSUED B Y THE REGISTRAR ABOUT THE CHANGE OF NAME, THE COMMUNICATION BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES AND THEREAFTE R, THE AMALGAMATION OF M/S GRAVITY BARTER LTD. WITH M/S OA SIS CINE COMMUNICATION LTD. WHICH WAS DULY APPROVED BY THE H ONBLE HIGH COURT VIDE ORDER DATED 28.8.2011. THE ASSESSEE IN THE MEAN TIME GOT THE PHYSICAL SHARE CERTIFICATE DEMATERIALI ZED INTO DEMAT ACCOUNT ON 16.02.2012. THERE IS NO REASON TO DOUBT THE ALLOTMENT OF THE SHARES TO THE ASSESSEE AFTER AMALGAMATION TO OK PLACE BETWEEN M/S GRAVITY BARTER LTD. AND M/S OASIS CINE COMMUNICATION LTD. AND SUBSEQUENT TO AMALGAMATION T HE ASSESSEE WAS ALLOTTED SHARES OF M/S OASIS CINE COMM UNICATION LTD. ON 04.02.2012. HENCE, THE ALLOTMENT OF 35,200 EQUITY SHARES OF M/S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUB TED OR DISPUTED AS THESE SHARES WERE ISSUED POST AMALGAMAT ION AND BY A LISTED COMPANY. IT IS ALSO NOT IN DISPUTE THAT TH ESE SHARES OF M/S OASIS CINE COMMUNICATION LTD. WERE ISSUED IN EXCHAN GE OF THE SHARES HELD BY THE ASSESSEE OF M/S GRAVITY BARTER L TD. THEREFORE, ONCE THE SHARES ISSUED BY M/S OASIS CINE COMMUNICAT ION LTD. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 18 CANNOT BE DOUBTED THEN THE HOLDING OF THE SHARES OF THE M/S GRAVITY BARTER LTD. BY THE ASSESSEE CORRESPONDINGLY CANNOT BE DOUBTED BECAUSE OF THE REASONS THAT THE SHARES OF M /S OASIS CINE COMMUNICATION LTD. COULD BE ALLOTTED ONLY IN EXCHAN GE OF SHARES OF M/S GRAVITY BARTER LTD. THE HOLDING THE SHARES O F M/S GRAVITY BARTER LTD. AND THE ALLOTMENT OF SHARES M/S OASIS C INE COMMUNICATION LTD. ARE DIRECTLY INTERCONNECTED. IN THE ABSENCE OF HOLDING OF SHARES M/S GRAVITY BARTER LTD. THE SHARE S OF THE M/S OASIS CINE COMMUNICATION LTD. COULD NOT BE ISSUED O R ALLOTTED TO THE ASSESSEE. THEREFORE, HOLDING OF THE SHARES BY T HE ASSESSEE AT LEAST AT TIME OF AMALGAMATION TOOK PLACE AND SHARES OF THE M/S OASIS CINE COMMUNICATION LTD. ON 04.02.2012 CANNOT BE DOUBTED. MOREOVER, THESE SHARES WERE DEMATERIALIZED BY THE ASSESSEE IN THE DEMAT ACCOUNT, THEREFORE, ON THE DA TE OF ALLOTMENT OF SHARE OF M/S OASIS CINE COMMUNICATION LTD THE ASSESSEE WAS HOLDING THESE SHARES AND PRIOR TO THA T THE ASSESSEE WAS HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. O N EXCHANGE OF THE SAME THE SHARES OF M/S OASIS CINE COMMUNICATIO N LTD. WERE ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER HAS D OUBTED THE GENUINENESS OF THE TRANSACTIONS HOWEVER, ONCE THE H OLDING OF SHARES OF THE ASSESSEE AT THE TIME OF THE SAME WERE ISSUED BY M/S OASIS CINE COMMUNICATION LTD. IS NOT IN DISPUTE THEN THE HOLDING OF SHARES OF M/S GRAVITY BARTER LTD. ALSO C ANNOT BE DISPUTE BECAUSE OF THE FACT THAT WITHOUT HOLDING OF THE SAME THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. COULD N OT BE ISSUED TO THE ASSESSEE. ONCE, THE SHARES WERE HELD BY THE ASSESSEE THEN, THE QUESTION OF GENUINENESS OF THE TRANSACTIO N DOES NOT ARISE HOWEVER, THE PURCHASE CONSIDERATION CAN BE DO UBTED BY THE AO IF THE SHARES WERE CLAIMED TO HAVE BEEN PURCHASE D AGAINST CONSIDERATION PAID IN CASH WHICH IS NOT IN CASE OF THE ASSESSEE. THE ASSESSEE HAS PAID PURCHASE CONSIDERATION THROUG H CHEQUE AND THEREFORE, EVEN IF THE SAID CONSIDERATION IS FO UND TO BE VERY LESS IN COMPARISON TO THE SALE PRICE AT THE TIME OF SALE OF SHARES IN THE ABSENCE OF ANY MATERIAL OR OTHER FACTS DETEC TED OR BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS BROUGHT B ACK HIS OWN ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 19 UNACCOUNTED MONEY IN THE SHAPE OF LONG TERM CAPITAL GAIN AND HAS USED THE SAME AS A DEVICE TO AVOID TAX, THE PUR CHASE CONSIDERATION PAID BY THE ASSESSEE CANNOT BE DOUBTE D IN THE ABSENCE OF ANY CORROBORATING EVIDENCE. THE ASSESSIN G OFFICER HAS NOT DISPUTED THAT THE FAIR MARKET VALUE OF THE SHAR ES OF M/S GRAVITY BARTER LTD. WAS MORE THAN THE PURCHASE PRI CE CLAIMED BY THE ASSESSEE. IT MAY BE A CASE THAT ENSURING MERGER/AMALGAMATION OF THE SAID COMPANY WITH M/S OA SIS CINE COMMUNICATION LTD. THE ASSESSEE MIGHT HAVE ANTICIPA NT THE EXCEPTIONAL APPRECIATION IN THE SHARE PRICE DUE TO EXTRAORDINARY EVENT OF MERGER/ AMALGAMATION. HOWEVER, THE SAME CA NNOT BE A REASON FOR DOUBTING GENUINENESS OF THE TRANSACTION IF THE MOTIVE OF PURCHASE OF THE SHARE IS TO EARN AN EXTRAORDINAR Y GAIN BECAUSE OF SOME INTERNAL INFORMATION AVAILABLE TO THE ASSES SEE. 7. IN CASE OF EQUITY SHARES M/S PARIDHI PROPERTIES LTD. THE ASSESSEE PURCHASE 50,000 EQUITY SHARE ON 26.03.2011 BY PAYING SHARE APPLICATION MONEY OF RS. 5 LACS WHICH IS DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AS PAID ON 28.03.2 011. THEREFORE, THE PAYMENT OF SHARE APPLICATION MONEY H AS BEEN DULY ESTABLISHED BY THE ASSESSEE THROUGH HIS BANK ACCOUN T FOR ALLOTMENT OF SHARES OF 50,000 EQUITY SHARES OF M/S PARIDHI PROPERTIES LTD. THE SHARE ALLOTTED IN PRIVATE PLACE MENT AS PER OF RS. 10/- CANNOT BE TERMED AS PENNY STOCK. THE AO DO UBTED THAT THE ENTIRE PROCESS OF APPLICATION AND ALLOTMENT OF SHARES AS IT HAVE BEEN COMPLETED WITHIN A SHORT DURATION OF 5 DA YS, WHICH IN THE OPINION OF THE AO IS NOT POSSIBLE IN ORDINARY C OURSE. HOWEVER, WHEN THE ASSESSEE HAS PRODUCED THE RECORD INCLUDING THE SHARE APPLICATION, PAYMENT OF SHARE APPLICATION MONEY, AL LOTMENT OF SHARE THEN MERELY BECAUSE OF A SHORT PERIOD OF TIME WILL NOT BE A SUFFICIENT REASON TO HOLD THAT THE TRANSACTION IS B OGUS. THE SHARES ALLOTTED TO THE ASSESSEE VIDE SHARE CERTIFICATE DAT ED 31.03.2011 WERE DEMATERIALIZED ON 21.10.2011, THEREFORE, ON TH E DATE OF DEMATERIALIZATION OF THE SHARES THE HOLDING OF THE SHARES OF THE ASSESSEE CANNOT BE DOUBTED AND HENCE THE ACQUISITIO N OF THE SHARES OF THE ASSESSEE CANNOT BE TREATED AS A BOGUS TRANSACTION. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 20 NOBODY CAN HAVE THE SHARES IN HIS OWN NAME IN DEMAN T ACCOUNT WITHOUT ACQUIRING OR ALLOTMENT THROUGH DUE PROCESS HENCE, EXCEPT THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE HOL DING OF SHARES CANNOT BE DOUBTED WHEN THE ASSESSEE HAS PRODUCED AL L THE RELEVANT RECORD OF ISSUING OF ALLOTMENT OF SHARES, PAYMENT OF SHARE APPLICATION MONEY THROUGH BANK, SHARE CERTIFI CATE AND DEMAT ACCOUNT SHOWING THE SHARES CREDITED IN THE DE MAT ACCOUNT OF THE ASSESSEE ON DEMATERIALIZATION. THE SAID COMP ANY M/S PARIDHI PROPERTIES LTD. WAS SUBSEQUENTLY MERGED WIT H M/S LUMINAIRE TECHNOLOGIES LTD. VIDE SCHEME APPROVED B Y THE HONBLE BOMBAY HIGH COURT ORDER DATED 27.07.2012. H ENCE, THE ASSESSEE GOT ALLOTTED THE EQUITY SHARES OF M/S LUMI NAIRE TECHNOLOGIES LTD. AS PER SWAP RATIO APPROVED IN THE SCHEME AND CONSEQUENTLY THE ASSESSEE WAS ALLOTTED 5 LACS SHARE OF RS. 1/- EACH ON M/S LUMINAIRE TECHNOLOGIES LTD. THE EVIDENC E PRODUCED BY THE ASSESSEE LEAVE NO SCOPE OF ANY DOUBT ABOUT T HE HOLDING OF THE SHARES BY THE ASSESSEE. 8. AS REGARDS THE PURCHASE CONSIDERATION WHEN THE A SSESSEE HAS SHOWN THE SHARE APPLICATION MONEY PAID THROUGH HIS BANK ACCOUNT AND THE AO HAS NOT BROUGHT ON RECORD ANY MA TERIAL TO SHOW THAT APART FROM THE SHARE APPLICATION MONEY PA ID THROUGH BANK ACCOUNT THE ASSESSEE HAS BROUGHT HIS OWN UNACC OUNTED MONEY BACK AS LONG TERM CAPITAL GAIN. IT IS ALSO PE RTINENT TO NOTE THAT THE SHARES OF M/S OASIS CINE COMMUNICATION LTD . ARE STILL HELD BY THE ASSESSEE IN ITS DEMAT ACCOUNT TO THE EX TENT OF 17,200 SHARES AND THEREFORE, THE HOLDING OF THE SHARES BY ANY PARAMETER OR STRETCH OF IMAGINATION CANNOT BE DOUBTED. THE AO HAS PASSED THE ASSESSMENT YEAR BASED ON THE STATEMENT OF SHRI DEEPAK PATWARI RECORDED BY THE INVESTIGATION WING OF KOLK ATA HOWEVER, THE ASSESSEE HAS SPECIFICALLY DEMANDED THE CROSS E XAMINATION OF SHRI DEEPAK PATWARI VIDE LETTER DATED 15.03.2016 SP ECIFICALLY IN PARAS 3 AND 4 AS REPRODUCED BY THE AO AT PAGE NO. 7 OF THE ASSESSMENT ORDER AS UNDER:- 3. SINCE, THE SHARES WERE ALLOTTED BY THE COMPANY THROUGH PRIVATE PLACEMENT AFTER COMPLETING THE FORMALITIES OF ROC AND ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 21 WERE SOLD THROUGH THE RECOGNIZED BOMBAY STOCK EXCHA GE (BSE) THERE IS NO QUESTION OF KNOWING INDIVIDUAL PERSONS OR COMPANY OFFICIAL PERSONALLY IN THE WHOLE PROCESS, SO THE AS SESSEE IS NOT IN POSITION TO PRODUCE ANY ONE FOR CROSS EXAMINATION B EFORE YOUR GOOD SELF. SINCE YOUR GOOD SELF HAS GOT THE AUTHORI TY, WE HUMBLY REQUEST YOU TO KINDLY ISSUE THE NOTICE U/S 131 OF T HE INCOME TAX ACT 1961 TO THE CONCERNED INDIVIDUAL PERSONS OR COM PANY OFFICIALS FOR CROSS EXAMINATION. PLEASE NOTE THAT THE ASSESSE E IS READY TO BEAR THE COST OF THEIR TRAVELLING IN THIS REGARDS. 4. AS REGARD YOUR OPPORTUNITY GIVEN TO US TO READ T HE RECORDED STATEMENT OF SHRI DEEPAK PATWARI AND TO PRODUCE HIM FROM THE CROSS EXAMINATION BEFORE YOUR GOOD SELF, WE HAVE TO SUBMIT THAT FROM THE READING OF THE STATEMENTS OF SHRI DEEPAK P ATWARI IT IS CLEAR THAT HE HAS NEVER TAKEN THE NAME OF THE ASSES SEE, NOR THE ASSESSEE IS AWARE OF ANY SHRI DEEPAK PATWARI NEITHE R HE HAS MADE ANY TRANSACTION WITH HIM, SO IN WHAT CAPACITY HE CAN CALL HIM FOR CROSS EXAMINATION BEFORE YOUR GOOD SELF. SI NCE YOUR GOOD SELF HAS GOT THE AUTHORITY, WE HUMBLY REQUEST YOUTO KINDLY ISSUE THE NOTICE U/S 131 OF THE INCOME TAX ACT 1961 TO HI M ALSO FOR CROSS EXAMINATION. WE ALSO REQUEST YOUR GOOD SELF T O KINGLY PROVIDE US THE COPY OF STATEMENTS OF SHRI DEEPAK PA TWARI ALONG WITH THE OTHER RELEVANT DOCUMENTS. PLEASE NOTE THAT THE ASSESSEE IS READY TO BEAR THE COST OF HIS TRAVELLING IN THIS REGARD. IT IS MANIFEST FROM THE ASSESSEES REPLY TO SHOW CA USE NOTICE THAT THE ASSESSEE HAD SPECIFICALLY DEMANDED THE CROSS EX AMINATION OF SHRI DEEPAK PATWARI HOWEVER, THE ASSESSING OFFICER DID NOT OFFER THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE S HRI DEEPAK PATWARI. FURTHER, THE AO ASKED THE ASSESSEE TO PROD UCE THE PRINCIPAL OFFICERS OF THE M/S GRAVITY BARTER LTD. A ND M/S PARIDHI PROPERTIES LTD. HOWEVER, IN OUR VIEW IF THE ASSESSI NG OFFICER WANTED TO EXAMINE THE PRINCIPAL OFFICERS OF THOSE C OMPANIES HE WAS HAVING THE AUTHORITY TO SUMMON THEM AND RECORD THEIR STATEMENTS INSTEAD OF SHIFTING BURDEN ON THE ASSESS EE. IT IS NOT EXPECTED FROM THE ASSESSEE INDIVIDUAL TO PRODUCE TH E PRINCIPAL ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 22 OFFICERS OF THE COMPANIES RATHER THE AO OUGHT TO HA VE SUMMONED THEM IF THE EXAMINATION OF THE OFFICERS WERE CONSID ERED AS NECESSARY BY THE AO. HENCE, IT WAS IMPROPER AND UNJ USTIFIED ON THE PART OF THE AO TO ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THOSE COMPANIES. AS REGARDS THE NON GRA NT OF OPPORTUNITY TO CROSS EXAMINE, THE HONBLE SUPREME C OURT IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE ISSUE HAS HELD IN PARA 5 TO 8 AS UNDER: 5. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNA N, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 6. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CR OSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS O F THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE OR DER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMIS SIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TW O WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDIC ATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASS ESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PAS SED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONE D THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS N OT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE T RIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS T OTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATI ON OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHI CH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXP LAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT F OR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLA NT WANTED TO ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 23 CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT W ANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, T HE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FAC T, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIO NED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CR OSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORIT Y TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS -EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALS O POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAM E BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTI FY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS TH E ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. THEREFORE, THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EX AMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CON SIDER THE ADDITION MADE BY THE AO ON THE BASIS OF SUSPICION AND SURMISES AND OBSERVED IN PAR 46 AS UNDER:- ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 24 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INTO REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MA Y GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE W EIGHED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE MATERIAL FACTS STRONGLY INDICATE A PROBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVE RTISEMENT AND OTHER EXPENSES AND IT WAS THEIR LIABILITY AS PE R THEIR MUTUAL UNDERSTANDING WITH THE ASEESSEE. ANOTHER VERY STRON G PROBABLE FACTOR IS THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE-COMPANY NE ED NOT INCUR ADVERTISEMENT EXPENSES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY UPON WHOLES ALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLL ECTION OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAIN ST THE ASSESSEE ONLY IF THERE WOULD HAVE BEEN SOME EVIDENC E FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN UNEART HED FROM SUCH GLOBAL LEVEL INVESTIGATION BY TWO CENTRAL GOVE RNMENT AUTHORITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOUNTS ON T HE BEHEST OF ONE OF THE EMPLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC 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 SUNDARAM, WE ARE OF THE OPINION THAT THIS O NE INCIDENT OF DONATION THROUGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT THE COUNTRY AND DE POSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASSESS EE-COMPANY OR THE ASSESSEE-COMPANY HAD DIRECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENU E HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AN D ITS ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 25 CIRCULATION. HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED 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 SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVIDENCE ON RECORD. THE TH EORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF EITHER SIDE AND DRAW A CONCLUSION IN FAVOUR OF A PA RTY WHICH HAS MORE FAVOURABLE FACTORS IN HIS SIDE. THE CONCLUSION S HAVE TO BE DRAWN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MA TERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGAINST ASSESSEE. ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH AID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VAR IOUS ROUNDS OF INVESTIGATION HAVE BEEN CARRIED OUT, THEN NOTHING C AN BE IMPLICATED AGAINST THE ASSESSEE. THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PA ID OVER AND ABOVE THE PURCHASE CONSIDERATION AS CLAIMED AND EVI DENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDEN CE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UN ACCOUNTED MONEY BY WAY OF BOGUS LONG TERM CAPITAL GAIN. THE H ONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POO JA AGRAWAL (SUPRA) HAS UPHELD THE FINDING OF THE TRIBUNAL ON T HIS 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 A ND 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 D ECLARED BY THE ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 26 APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. HOWE VER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPE LLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTE D BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, H CL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS I N QUESTION VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDIN G PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., ASSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BR OKER, COMPANY'S MASTER DETAILS FROM REGISTRAR OF COMPANIE S, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANK RIT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILE D WHICH SHOWS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSA CTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPELLANT DENIED HAVING MADE ANY TRANSACTIONS I N SHARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CH EQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STOCK E XCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTION WHICH ARE SUPP ORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHILE DI SCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG T ERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHE R WAS EXEMPTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. A S THE APPELLANT'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACCOMMODATION TRANSACTI ONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K . AGARWAL WAS FOUND TO BE AN ENTRY PROVIDER AS STATED BY SH. PAWA N PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION BEFORE THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMEN T OF SH. PAWAN ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 27 PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. I T WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AG ARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. S USHIL KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUNTER THE OBJECTI ONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SI MPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTING WING AFTE R CONSIDERING ALL THEMATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQU IRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACTION IN QU ESTION IN STATEMENT OF SH. PAWAN PUROHI. SIMPLY BECAUSE IN TH E 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 DOES NOT ESTABLISH THAT THE TRANSACT ION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THE SE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL C ANNOT BE HELD AS NON-GENUINE. CONSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT CLAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED ON MERE SUSPICION AND SURMISES WITHOUT ANY CO GENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RE LEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLD ING OF THE SHARES BY THE ASSESSEE AT THE TIME OF ALLOTMENT SUB SEQUENT TO THE AMALGAMATION/MERGER IS NOT IN DOUBT, THEREFORE, THE TRANSACTION ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 28 CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. THUS, IT IS CLEAR THAT THE TRIBUNAL IN THE SAID CAS E HAS ANALYZED AN IDENTICAL ISSUE WHEREIN THE SHARES ALLOTTED IN THE PRIVATE PLACEMENT @ RS. 10 AT PAR OF FACE VALUE WHICH WERE DEMATERIALIZ ED AND THEREAFTER SOLD BY THE ASSESSEE AND ACCORDINGLY THE TRIBUNAL A FTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) AS WELL AS THE DECISION O F HONBLE JURISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL (S UPRA) AS HELD THAT WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATE RIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE PURC HASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HA S INTRODUCED HIS OWN UNACCOUNTED MONEY BY WAY OF BOGUS LONG TERM CAP ITAL GAIN. SIMILAR IN THE CASE IN HAND THE ASSESSEE HAS PRODUC ED THE RELEVANT RECORD TO SHOW THE ALLOTMENT OF SHARES BY THE COMPA NY ON PAYMENT OF CONSIDERATION BY CHEQUE AND THEREFORE, IT IS NOT A CASE OF PAYMENT OF CONSIDERATION BY IN CASH. BUT THE TRANSACTION IS ES TABLISHED FROM THE EVIDENCE AND RECORD WHICH CANNOT BE MANIPULATED AS ALL THE ENTRIES ARE PART OF THE BANK ACCOUNT OF THE ASSESSEE AND THE AS SESSEE ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 29 DEMATERIALIZED THE SHARES IN THE D-MAT ACCOUNT WHIC H IS ALSO AN INDEPENDENT MATERIAL AND EVIDENCE CANNOT BE MANIPUL ATED. THEREFORE, THE HOLDING OF THE SHARES BY THE ASSESSEE CANNOT BE DOUBTED AND THE FINDING OF THE AO IS BASED MERELY ON THE SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS I NTRODUCTION HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. WE FIND THAT THE LD. CIT(A) HAS ALSO REFERRED TO SEBI ENQUI RY AGAINST THE M/S ANAND RATHI SHARE AND STOCK BROKERS LTD. HOWEVER, W E NOTE THAT THE SAID ENQUIRY WAS REGARDING FINANCIAL IRREGULARITIES AND USE OF FUND BELONGING TO THE CLIENTS FOR THE PURPOSE OTHER THAN , THE PURCHASE OF SHARES ON BEHALF OF THE CLIENTS. THEREFORE, THE SUB JECT MATTER OF THE ENQUIRY HAS NO CONNECTION WITH THE TRANSACTION OF B OGUS LONG TERM CAPITAL GAIN. THE DECISIONS REPLIED UPON THE LD. DR IN CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (SUPRA) IS NOT APPLICAB LE IN THE FACTS OF THE PRESENT CASE AS THE SAID DECISION IS IN RESPECT PE NNY STOCK PURCHASE BY THE ASSESSEE FROM A PERSONS WHO WAS FOUND TO BE IND ULGED IN PROVIDING BOGUS CAPITAL GAIN ENTRIES WHEREAS IN THE CASE OF T HE ASSESSEE THE SHARES WERE ALLOTTED TO THE ASSESSEE BY THE COMPANY AT PAR OF FACE VALUE. HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANCE S WHEN WE HOLD THAT THE ORDER OF THE ASSESSING OFFICER TREATING THE LON G TERM CAPITAL GAIN AS ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 30 BOGUS AND CONSEQUENTIAL ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE IS NOT SUSTAINABLE. HENCE, WE DELETE THE A DDITION MADE BY THE AO ON THIS ACCOUNT. 7. GROUND NO. 6 IS REGARDING THE ADDITION MADE BY T HE AO ON ACCOUNT OF NOTIONAL COMMISSION OF RS. 2,65,122/- U/ S 69C OF THE ACT WHICH IS CONSEQUENTIAL TO THE ISSUE OF TREATMENT OF LONG TERM CAPITAL GAIN AS BOGUS. ONCE, WE HAVE REVERSED THE FINDING O F THE AO ON THE ISSUE OF TREATMENT OF LONG TERM CAPITAL GAIN AS BOG US THEN, THE CONSEQUENT ADDITION MADE BY THE AO ON NOTIONAL COMM ISSION IS NOT SUSTAINABLE. ACCORDINGLY, THE SAME IS DELETED. 8. FOR THE ASSESSMENT YEAR 2014-15 THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 7,62,05,438/- MADE BY LD. AO U/S 68 OF THE I. T. AC T, 1961 BY ALLEGING THAT THE LONG TERM CAPITAL GAIN CLAIMED AS EXEMPT INCOME U/S 10(38) WAS A BOGUS ACCOMMODATION ENTRY WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E AND THE SUBMISSIONS MADE AS WELL AS THE DETAILS SUBMITTED B EFORE HIM. THUS, THE ADDITION OF RS. 7,62,05,438/- SO UPHOLD D ESERVES TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDI TION MADE BY LD. AO WITHOUT PROVIDING OPPORTUNITY FOR CROSS-EXAM INATION, WHEN SPECIFIC REQUESTS WERE MADE BEFORE LD. AO WHIC H WERE TURNED DOWN ARBITRARILY, WITHOUT ASSIGNING ANY REAS ON. THUS, THE ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 31 IMPUGNED ASSESSMENT COMPLETED, COMMITTING SUCH A SE RIOUS ILLEGALITY DESERVES TO BE QUASHED AND THE CONSEQUEN T ADDITION BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) FURTHER ERRED IN CONFIRMING THE ADDITION MADE BY LD. AO, BY COMPLETELY IGNORING THE FACT THAT SH. ANIL A GRAWAL, WHOSE STATEMENTS WERE HEAVILY RELIED UPON FOR MAKING ADDI TION, HAD RETRACTED SUCH STATEMENTS AND COPY OF AFFIDAVIT WAS ALSO PROVIDED TO BOTH LD. AO AND LD. CIT(A). THUS, ADDITION MADE ON THE BASIS OF RETRACTED STATEMENTS DESERVES TO BE DELETED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ADDITION BY RELY ING UPON THE REPORT OF SEBI, WHICH WAS NOWHERE DISCUSSED BY LD. AO DURING ASSESSMENT PROCEEDINGS . THUS ACTION OF LD. CIT(A) IN PLACING RELIANCE UPON REPORT OF SEBI WITHOUT PROVIDING ASSE SSEE WITH THE OPPORTUNITY OF BEING HEARD IS BAD IN LAW. 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, ID. CIT(A) ERRED IN CONFIRMING THE ADDITION ON THE OBSERVATION THAT SEBI HAS BANNED THE TRADING OPERATIONS OF THE ASSESSEE COMPANY AND FURTHER IMPOSED MONETARY PENALTY OF RS. 30 LACS ON M/S ANAND RATHI STOCK & SHARE BROKERS LTD. THROUGH AN INTERIM ORDER, AND CURRENT STATUS OF SAID BROKING FIRM IS U NDER INVESTIGATION BY COMPLETELY IGNORING THE FACT THAT TRANSACTIONS ENTERED BY ASSESSEE THROUGH SAID BROKER MUCH PRIOR AND THUS CANNOT BE HELD BOGUS ON THE BASIS OF SUBSEQUENT DEV ELOPMENT. 5. THAT THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRM ING ADDITION BY OBSERVING THAT: (I) PREFERENTIAL SHARE ALLOTMENT LETTER WAS NOT BEA RING ANY RUNNING/ DISTINCTIVE NO. (II) PURCHASE TRANSACTION WAS NOT ONLINE WHEN THE S ALE TRANSACTION WAS ONLINE. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 32 (III) SHARES WERE CREDITED IN DMAT ACCOUNT AFTER A LAPSE OF 3 MONTHS. (IV) SEBI INQUIRY WAS CONDUCTED IN THE DEALINGS OF BROKING FIRM OF SH ANIL KUMAR AGARWAL AND M/S ANAND RATHI SHARE AND STOCK BROKER LTD., WHICH FACTS WERE KEPT AWAY FROM THE KN OWLEDGE OF LD. AO WHEREAS ASSESSEE HIMSELF WAS UNAWARE OF SUCH FACTS. (V) SEBI HAS BARRED SH. ANIL KUMAR AGARWAL AMONG OT HERS FROM SECURITIES MARKET FROM SUSPECTED TAX EVASION AND LA UNDERING OF BLACK MONEY THROUGH STOCK MARKET PLATFORMS AND HAS DEBARRED TRADING OF SHARES OF THE ENTITY M/S RUTRON INTERNAT IONAL LTD. ON BSE. (VI) THE ASSESSEE HAS FAILED TO FURNISH (A) COPY OF SHARE CERTIFICATES (B) ARTICLE OF ASSOCIATION (C) VALUATI ON REPORT OF REGISTERED VALUER EVIDENCING ALLOTMENT OF SHARES (D ) DETAILS OF ANNUAL RETURN FILED BEFORE ROC (E) COPY OF BOARD RE SOLUTION AUTHORISING ADDITION OF SHAREHOLDERS DURING THE YEA R (F) DETAILS OF REGISTER OF MEMBERS/ SHAREHOLDERS DULY AUTHENTICATE D BY COMPETENT AUTHORITY & (G) MINUTES OF GENERAL & BOAR D MEETING DURING F.Y.2011-12, BY IGNORING THE FACT THAT AS PE R THE PROVISION OF SECTION 10(38) NO SUCH DOCUMENTS ARE REQUIRED TO CLAIM LONG TERM CAPITAL GAINS FROM SALE OF SHARES AS EXEMPT. SUCH OBSERVATIONS OF LD. CIT (A) DESERVE TO BE IGNO RED AND EXCLUDED AND CONSEQUENT ADDITION BASED ON THESE ALL EGATIONS DESERVES TO BE DELETED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 15,24,109/- MADE BY LD. AO U/S 69C OF THE I. T. ACT , 1961 ON WHIMS AND FANCIES AND BASELESSLY ALLEGING THAT THE ASSESSEE HAS PAID COMMISSION AT THE RATE OF 2% OF THE LONG TERM CAPITAL GAIN TO THE ENTRY PROVIDER WITHOUT APPRECIATING THE FACT S AND ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 33 CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS MADE AND FURTHER BRINGING ON EVIDENCE ON RECORD FOR SAYING SO. THUS, THE ADDITION OF RS. 15,24,109/- DESERVES TO BE DELETED. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF L D. AO IN TREATING ADDITIONAL BUSINESS INCOME OF RS.36,53,330 /- DECLARED BY ASSESSEE AS INCOME FROM OTHER SOURCES ARBITRARILY. APPELLANT PRAYS INCOME OF RS.36,53,330 /- MAY BE TREATED AS BUSINESS INCOME AS CLAIMED BY ASSES SEE. 8. THAT THE APPELLANT CRAVES THE LEAVE TO AMEND / A LTER ALL OR ANY OF THE GROUNDS OF THIS APPEAL ON OR BEFORE THE HEARING OF THE MATTER. 9. GROUND NO. 1 TO 6 ARE COMMON TO THE GROUNDS RAIS ED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14 DUE TO PAR T OF THE SALE OF THE SHARE FALLS IN THE A.Y. IN VIEW OF OUR FIND INGS ON THESE ISSUES FOR THE ASSESSMENT YEAR 2013-14 THE GROUND NOS. 1 T O 6 ASSESSEES APPEAL STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN THE SAME TERMS. 10. GROUND NO. 7 IS REGARDING THE INCOME OFFERED BY THE ASSESSEE AS UNDISCLOSED INCOME FROM BUSINESS AND PR OFESSION WAS TREATED BY THE AO AS INCOME FROM OTHER SOURCES. 11. WE HAVE HEARD LD AR AS WELL AS LD. DR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF S EARCH AND SEIZURE ACTION THE ASSESSEE SURRENDERED THE UNDISCLOSED INC OME FROM BUSINESS ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 34 AND PROFESSION WHICH WAS OFFERED TO TAX IN VARIOUS ASSESSMENT YEARS INCLUDING THE ASSESSMENT YEARS 2012-13, 2013-14 & 2 014-15. THE ASSESSING OFFICER HAS ACCEPTED THE SAID INCOME OFFE RED BY THE ASSESSEE AS INCOME FROM BUSINESS AND PROFESSION WHILE PASSIN G THE ASSESSMENT ORDER FOR THE ASSESSMENT YEARS 2012-13 & 2013-14 HO WEVER, THE AO HAS TREATED THE SAID INCOME AS INCOME FROM OTHER SO URCES FOR THE A.Y. 2014-15. IT IS PERTINENT TO NOTE THAT THIS TREATMEN T OF INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME IS RE VENUE NEUTRAL AS THERE WAS NO ISSUE OF ANY LOSS TO BE CARRIED FORWAR D. THEREFORE, IN VIEW OF FACTS THAT THE AO HAS ACCEPTED THIS INCOME AS BU SINESS INCOME FOR THE ASSESSMENT YEAR 2012-13 & 2013-14 THE AO IS NOT PERMITTED TO TAKE A DIFFERENT AND CONTRARY DECISION WHICH IS AGAINST THE RULE OF CONSISTENCY. SINCE THIS ACTION OF THE AO IS NOT HAV ING ANY REVENUE EFFECT, THEREFORE, IN THE FACTS AND CIRCUMSTANCES O F THE CASE WHEN THE AO HAS ACCEPTED THE NATURE OF INCOME AS BUSINESS IN COME IN ALL THE EARLIER ASSESSMENT YEARS PASSED U/S 143(3) R.W.S. 1 53A OF THE ACT. THEN, THE AO CANNOT TAKE A DIFFERENT AND CONTRARY S TAND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, IN VIEW OF THE RULE OF CONSISTENCY WE DIRECT THE AO TO TREAT THE INCOME OF FERED BY THE ASSESSEE AS BUSINESS INCOME. ITA NO. 443 &444/JP/2017 SHRI MEGHRAK SINGH SHEKHAWAT VS DCIT, JAIPUR 35 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2018 SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/03/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MEGHRAJ SINGH SHEKHAWAT, JAIPUR . 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 443 & 444/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR