RAMPRASAD AGARWAL, MUMBAI V. INCOME TAX WARD 2(3)2, MUMBAI

ITA 4843/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1125 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 13-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Capital asset; Income from undisclosed sources; Search and seizure; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Cost of acquisition; Tangible material; Speculation loss; Corroborative evidences; Accommodation entries; Retraction; Sham transactions; Penny stocks
• Section: 147; 131; 68; 148; 6; 132; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4843/M/2018 ASSESSMENT YEAR: 2013-14 ITA NO.1228/M/2018 ASSESSMENT YEAR: 2014-15 MR. RAMPRASAD AGARWAL, 305/306, APPEEJAY HOUSE, 130, BOMBAY SAMACHAR MARG, FORT, MUMBAI 400 023 PAN: AABPA3703B VS. INCOME TAX OFFICER 2(3)(2), ROOM NO.581A, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NEEL KHANDELWAL, A.R. REVENUE BY : SHRI CHAITANYA ANJARIA, D.R. DATE OF HEARING : 13.11.2018 DATE OF PRONOUNCEMENT : 30.11.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED TWO APPEALS HAVE BEEN PREFERRED B Y THE ASSESSEE AGAINST THE ORDER DATED 31.07.2018 & 15.12 .2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFT ER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2013 -14 & 2014- 15 RESPECTIVELY. ITA NO.4843/M/2018 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE INCOME TAX OFFICER - 2(3)(2), MUMBAI (HEREIN AFTER REFERRED TO AS THE ASSESSING OFFICER) ERRED IN ISSUING NOTICE UNDER SE CTION 148 OF THE ACT. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ISSUE OF NOTICE UNDER SECTION 148 IS WI THOUT JURISDICTION, BAD IN LAW AND HENCE, NEEDS TO BE QUASHED. ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 2 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) - 6, M UMBAI (HEREINAFTER REFERRED TO AS THE CIT(A)) ERRED IN UPHOLDING THE A CTION OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF A SUM OF RS 83,45,689 UNDER S ECTION 68 OF THE ACT HOLDING THE CAPITAL GAINS ON SALE OF LONG-TERM CAPITAL ASSETS B EING, SHARES OF RUTRON INTERNATIONAL LTD TO BE NON-GENUINE AND THEREBY NOT ALLOWING EXEMPTION UNDER SECTION 10(38) OF THE ACT. THE APPELLANT CONTENDS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CLI(A) OUGHT NOT TO HAVE UPHELD THE ACT ION OF THE ASSESSING OFFICER IN CONSIDERING THE CAPITAL GAINS ON SALE OF LONG-TERM CAPITAL ASSETS BEING, SHARES OF RUTRON INTERNATIONAL LTD TO BE NON-GENUINE INASMUCH AS THE SAID SHARES HAVE BEEN PURCHASED DURING AN EARLIER YEAR ARE INVESTMENTS; T HE SAME BEING SOLD SHALL NECESSARILY GIVE RISE TO CAPITAL GAINS AND THE IMPU GNED SHARES BEING LONG-TERM CAPITAL ASSET, THE CAPITAL GAINS RS 83,45,689 ARE L ONG-TERM CAPITAL GAINS IN RESPECT OF WHICH THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED E XEMPTION OF SECTION 10(38) OF THE ACT; ACCORDINGLY, THE IMPUGNED ADDITION UNDER S ECTION 68 OF THE ACT IS NOT JUSTIFIED. THE APPELLANT FURTHER, CONTENDS THAT THE CIT(A) OUG HT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADD ITION INASMUCH AS THE ASSESSMENT ORDER HAS BEEN FRAMED IN VIOLATION AND U TTER DISREGARD TO THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS, AMONGST OTHERS, THE ASSESSING OFFICER HAS NOT GIVEN THE DOCUMENTS/ STATEMENTS ON OATH TO THE APPELLANT FOR REBUTTAL, WHICH ARE IN HIS POSSESSION AND ON WHICH HE HAS RELIED UPON AND HAS NOT GIVEN AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE PERSONS WHOSE ST ATEMENT THE ASSESSING OFFICER HAS RELIED UPON. THE APPELLANT FURTHER, CONTENDS THAT THE CIT(A) OUG HT NOT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADD ITION INASMUCH AS THE ASSESSING OFFICER HAS NOT PROVED THAT THE CASH EMANATED FROM THE COFFERS OF THE APPELLANT. 3. AT THE TIME OF HEARING THE LD. A.R. DID NOT PRES S THE GROUND NO.1 WHICH IS AGAINST THE ISSUE OF NOTICE UNDER SEC TION 148 OF THE ACT AND THEREFORE SAME IS DISMISSED AS NOT BEIN G PRESSED. 4. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.83,45,689/- BY THE L D. CIT(A) AS MADE BY THE AO BY TREATING THE CAPITAL GAIN ON SAL E OF LONG TERM SHARES OF RUTRON INTERNATIONAL LTD. AS NON GENUINE AND HOLDING THAT EXEMPTION UNDER SECTION 10(38) OF THE ACT WAS NOT ALLOWABLE. ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 3 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS DIRE CTOR OF M/S. SUDHIR SWITCHGEARS P. LTD. AND EARNS INCOME BY WAY OF SALARY FROM THE SAID COMPANY, HOUSE PROPERTY, OTHER SOURCE S AND LONG TERM CAPITAL GAIN. THE ASSESSEE FILED RETURN OF IN COME ON 27.03.2014 DECLARING INCOME OF RS.21,22,111/- WHICH WAS PROCESSED UNDER SECTION 143(1). THEREAFTER, THE CA SE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT AFTER THE AO RE CEIVED INFORMATION FROM DGIT (INV.), KOLKATA VIDE LETTER D ATED 08.09.2016 THAT SOME COMPANIES WERE ENGAGED IN THE BUSINESS OF ISSUING PENNY STOCKS FOR WHICH THERE WERE LARGE NUMBER OF BENEFICIARIES CLAIMING BOGUS LONG TERM CAPITAL GAIN /SHORT TERM CAPITAL LOSS/BUSINESS LOSS/SPECULATION LOSS. THE A O, BASED ON THE SAID INFORMATION, FOUND THAT ASSESSEE IS ONE OF THE BENEFICIARIES OF THE SAID RACKET AND HAD EARNED PRO FIT ON SALE OF INVESTMENTS IN EQUITY SHARES OF RUTRON INTERNATIONA L LTD. TO THE TUNE OF RS.83,45,689/- AND CLAIMED THE SAME AS EXEM PT UNDER SECTION 10(38) OF THE ACT AS PER DETAILS BELOW: SCRIP NAME : RUTRON INTERNATIONAL LTD. SALE DATE NO. OF SHARES SOLD SALE CONSIDERATION PURCHASE DATE PURCHASE COST CAPITAL GAIN 14.02.2013 5000 1100624.69 2.12.2011 50000 1050624.69 18.02.2013 4000 903408.68 2.12.2011 40000 863408.68 19.02.2013 5000 1132517.10 2.12.2011 50000 1082517.10 01.03.2013 14370 1070535.64 2.12.2011 43700 1026835.64 7.03.2013 630 158575.89 2.12.2011 6300 152275.89 08.03.2013 5000 1252520.78 2.12.2011 50000 1202520.78 ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 4 12.03.2013 2000 515021.11 2.12.2011 20000 495021.1 1 13.03.2013 6000 1543173.2 2.12.2011 60000 1483173.20 18.03.2013 4000 1029311.86 2.12.2011 40000 989311.86 6. THE AO CAME TO THE CONCLUSION THAT THE SAID CAPI TAL GAIN OF RS. RS.83,45,689/- ON THE SALE OF SHARE OF RUTRON I NTERNATIONAL LTD. WAS EARNED BY THE ASSESSEE THROUGH CONNIVANCE WITH THE OPERATOR TO AVOID TAXES. THE AO ALSO NOTED THAT TH E PRICE OF THE SHARES OF THE SAID COMPANY WHICH WAS LESS THAN RS.1 IN JUNE 2012 ROSE TO RS.26 IN MARCH 2013 IN LESS THAN 9 MON THS. THE PRICE OF THE SHARES WAS SO MANIPULATED THAT THE LON G TERM CAPITAL GAIN WOULD BE BOOK PROFIT ON THE SALE OF SH ARES AND THEREAFTER THE PRICES WERE MANIPULATED TO FLUCTUATE SO THAT INTERESTED BENEFICIARY COULD BOOK PROFIT ON MARKET RATE AND CAN AVAIL THE BENEFIT OF LONG TERM/SHORT TERM CAPITAL L OSS. THEREAFTER, AGAIN THE SHARE PLUNGED TO RS.1. THE W HOLE MODUS OPERANDI OF THIS RACKET WAS UNEARTHED UPON A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT IN T HE CASE OF SHRI ANIL AGARWAL. SHRI ANIL AGARWAL IS A DIRECTOR OF M /S. COMFORT SECURITIES LTD., A STOCK BROKER COMPANY REGISTERED WITH NSE, BSE, MCX, MCX-SX, NCDEX WHICH IS IN THE BUSINESS OF STOCK BROKING. SHRI ANIL AGARWAL HAS BEEN THE OPERATOR A ND HAS BEEN MANIPULATING THE PRICES OF RUTRON INTERNATIONAL LTD . AND HE WAS ALSO ONE OF THE DIRECTORS OF RUTRON INTERNATIONAL L TD ALSO. IN HIS STATEMENT RECORDED ON 12.04.2015 UNDER SECTION 132( 4) OF THE ACT HE SAID THAT M/S. COMFORT SECURITIES LTD. A STO CK BROKING FIRM HAS HELPED VARIOUS PERSONS IN OBTAINING ACCOMM ODATION ENTRIES IN THE FORM OF LTCG AND STCG. HE STATED TH AT HE HAS PROVIDED SUCH ENTRIES IN RESPECT OF SHARES OF VARIO US COMPANIES ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 5 NAMELY SPLASH MEDIA INFRA LTD., FIRST FINANCIAL SER VICES LTD., D.B. (INTERNATIONAL) STOCK BROKERS LTD., UNISYS SOF TWARES & HOLDINGS INDUSTRIES LTD. FOR PROVIDING BOGUS LTCG O R STCG. THEREAFTER, THE AO ISSUED A SHOW CAUSE NOTICE TO TH E ASSESSEE WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 16.12.2017. THEREAFTER, THE AO BRUSHED ASIDE THE CONTENTIONS OF THE ASSESSEE AS NOT PLAUSIBLE AND ADDED THE SAME UNDER SECTION 6 8 OF THE ACT TO THE INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT READ WITH SECTION 147 VID E ORDER DATED 19.12.17. THE LD. CIT(A) ALSO AFFIRMED THE ORDER O F AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND VARIOUS C ONTENTIONS RAISED DURING THE APPELLATE PROCEEDINGS. 7. THE LD. COUNSEL, AT THE OUTSET, SUBMITTED THAT I DENTICAL ISSUE IN THE CASE OF MEGHRAJ SINGH SHEKHAWAT VS. DC IT IN ITA NOS.443 & 444/JP/2017 A.Y. 2013-14 AND 2014-15 HAS BEEN DECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN VOLVING THE SAME COMPANY M/S RUTRON INTERNATIONAL LTD. AND WITH ALL IDENTICAL FACTS HOLDING THAT THE ORDER OF THE AO TR EATING THE LTCG AS BOGUS AND CONSEQUENTIAL ADDITION TO TOTAL I NCOME OF THE ASSESSEE IS NOT CORRECT AND DELETED THE SAME. THE L D. AR PRAYED THAT FOLLOWING THE SAME ORDER THE ADDITION MADE IN THE CASE OF THE ASSESSEE BY TREATING LONG TERM CAPITAL GAIN AS BOGUS HAS TO BE DELETED. 8. WHEN THE ISSUE WAS CONFRONTED TO THE LD. D.R. WH ETHER THE DECISION RENDERED BY THE CO-ORDINATE JAIPUR BENCH OF THE TRIBUNAL WAS DELIVERED ON THE IDENTICAL FACTS INVOL VING THE SHARES OF SALES OF RUTRON INTERNATIONAL LTD. FROM WHICH TH E ASSESSEE DERIVED LTCG ,THE LD. D.R. CANDIDLY ADMITTED THAT T HE SAID ISSUE ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 6 ALSO AROSE OUT OF THE SAME RACKET IN WHICH THE ASSE SSEE MADE CAPITAL GAIN BY SELLING THE SHARE OF RUTRON INTERNA TIONAL LTD., HOWEVER, THE LD. D.R. RELIED HEAVILY ON THE ORDER O F AUTHORITIES BELOW AND SUBMITTED THAT ALL THESE TRANSACTIONS WER E THOROUGHLY INVESTIGATED BY THE INVESTIGATION WING OF THE DEPAR TMENT AND FOUND THAT THE PRESENT ASSESSEE WAS BENEFICIARY OF SUCH BOGUS LONG TERM CAPITAL GAIN AND THEREFORE PRAYED BEFORE THE BENCH THAT THE APPEAL OF THE ASSESSEE SHOULD BE DISMISSED . 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DE CISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ITA NOS.443 & 444/JP/2017 A.Y. 2013-14 AND 2014-15 IN THE CASE OF MEGHRAJ SINGH SHEKHAWAT VS. DCIT. WE FIND THAT THE FACTS O F THE ASSESSEES CASE ARE IDENTICAL TO THE CASE AS CITED ABOVE. THE RELEVANT PARAS ARE REPRODUCED AS UNDER: 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 INCO ME U/S 10(38) OF THE ACT WAS TREATED BY THE AO AS BOGUS AND ADDED THE SAID AMOUN T TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. THE ASSESSEE IS AN INDI VIDUAL AND ENGAGED IN THE BUSINESS OF RETAIL SALE OF IMFL/BEER. A SEARCH U/S 132 OF THE INCOME TAX ACT WAS CONDUCTED ON 17.07.2013 IN CASE OF MRS GROUP OF WHI CH THE ASSESSEE BELONGS. IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/ S 153 A OF THE ACT , THE ASSESSEE DECLARED TOTAL INCOME RS. 16,08,31,700/- INCLUDING THE INCOME SURRENDERED AND DECLARED BY THE ASSESSEE DURING THE SEARCH AND SEIZ URE ACTION OF RS. 12,12,04,711/- AS UNDISCLOSED INCOME EARNED FROM BUSINESS AND PROF ESSION. DURING THE ASSESSMENT PROCEEDING 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 RECEIVED IN FORMATION FROM INVESTIGATION WING, KOLKATA THAT DURING THE SEARCH CONDUCTED U/S 132 OF THE ACT ON 12.04.2015 AT THE BUSINESS PREMISES OF ONE SHRI ANIL AGARWAL GROU P IT WAS FOUND THAT SHRI ANIL AGARWAL ISONE OF THE PROMOTERS OF M/S RUTRON INTERN ATIONAL LTD. FURTHER, IT WAS UNEARTH THROUGH SEARCH ACTION THAT SHRI ANIL AGARWA L THROUGH A NUMBER OF PRIVATE LIMITED SHELL COMPANIES AND OTHER PENNY STOCK COMPA NIES WAS INVOLVED IN PROVIDING BOGUS LONG TERM CAPITAL GAIN TO CUSTOMERS FOR COMMI SSION. ACCORDINGLY, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE DATE 0 3.03.2016. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE FILED HIS REPLY DATE D 15.03.2016 WHICH HAS BEEN REPRODUCED BY THE AO AT PAGE 3 & 4 OF THE ASSESSMEN T ORDER. THE ASSESSEE GIVEN ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 7 THE DETAILS OF THE PURCHASE AND SALE OF SHARES OF M /S RUTRON INTERNATIONAL LTD. AND CLARIFIED THAT THE SHARES WERE ALLOTTED TO THE ASSE SSEE BY THE COMPANY AS PREFERENTIAL SHARES ALLOTMENTS ON PAYMENT THROUGH C HEQUE. THE SHARES WERE SOLD BY THE ASSESSEE FROM HIS D-MAT ACCOUNT THROUGH THE BROKER M/S ANAND RATHI SHARE AND STOCK BROKERS LTD. AND THEREFORE, THE ASSESSEE DENIED ANY INVOLVEMENT OF AVAILING THE BOGUS OF LONG TERM CAPITAL GAIN. THE A O DID NOT ACCEPT AND EXPLANATION OF THE ASSESSEE AND REFERRED TO THE STATEMENT OF SH RI ANIL AGARWAL RECORDED BY INVESTIGATION WING KOLKATA U/S 132(4) OF THE ACT AN D HELD THAT SINCE, SHRI ANIL AGARWAL WAS INVOLVED IN PROVIDING BOGUS LONG TERM C APITAL GAIN IN RESPECT OF THE SHARES OF THE COMPANIES INCLUDING M/S RUTRON INTERN ATIONAL LTD., THEREFORE, THE TRANSACTION OF THE ASSESSEE SHOWING THE LONG TERM C APITAL GAIN FROM SALE OF SHARES OF M/S RUTRON INTERNATIONAL LTD. IS BOGUS AND CONSE QUENTLY THE AO MADE AN ADDITION OF RS. 1,32,56,113/- TO THE TOTAL INCOME O F THE ASSESSEE U/S 68 OF THE ACT. AGGRIEVED BY THE ACTION OF THE AO THE ASSESSEE FILE D THE APPEAL BEFORE THE LD. CIT(A) HOWEVER, THE LD. CIT(A) HAS CONFIRMED THE TREATMENT OF LONG TERM CAPITAL GAIN AS BOGUS TRANSACTION AND CONSEQUENTIAL ADDITION MADE B Y 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 STATE MENT OF SHRI ANIL AGARWAL RECORDED STATEMENT U/S 132(4) BY THE INVESTIGATION WING, KOLKATA WITHOUT ANY CORROBORATIVE EVIDENCE TO SHOW THAT THE ASSESSEE HA S CONVERTED ITS UNACCOUNTED INCOME IN THE LONG TERM CAPITAL GAIN. HE HAS FURTHE R CONTENDED THAT EVEN IN THE SAID STATEMENT RECORDED U/S 132(4) SHRI ANIL AGARWAL HAS NOT MENTIONED ANY FACT ABOUT PROVIDING BOGUS LONG TERM CAPITAL GAIN ENTRY TO THE ASSESSEE OR EVEN HE WAS A PROMOTER OF M.S RUTRON INTERNATIONAL LTD. THE LD. A R HAS FURTHER SUBMITTED THAT THE ASSESSEE SPECIFICALLY DEMANDED THE CROSS EXAMINE OF SHRI ANIL AGARWAL ON WHOSE STATEMENT THE AO HAS BASED HIS ASSESSMENT ORDER AND MADE ADDITION ON ACCOUNT OF 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 S UBMITTED THAT THE ASSESSEE WAS ALLOTTED 3,50,000/- EQUITY SHARES BY M/S RUTRON INT ERNATIONAL LTD. ON 01.03.2012 VIDE ALLOTMENT LETTER DATED 08.03.2012. THE SHARES WERE ALLOTTED BY THE COMPANY AT FACE VALUE OF RS. 10/- EACH WITHOUT CHARGING ANY PR EMIUM UNDER PREFERENTIAL ISSUE. HE HAS REFERRED TO THE BANK STATEMENT OF THE ASSESS EE AND SUBMITTED THAT THE ASSESSEE PAID THE PURCHASE CONSIDERATION/ SHARE APP LICATION MONEY VIDE CHEQUE ON 29.02.2012 THE PAYMENT MADE BY THE ASSESSEE IS DULY REFLECTED IN THE BACK STATEMENT OF THE ASSESSEE. THEREFORE, THE ASSESSEE PURCHASED SHARES IN PREFERENTIAL ALLOTMENT OF THE COMPANY AND AGAINST THE PURCHASE C ONSIDERATION PAID BY THE ASSESSEE THROUGH CHEQUE. HE HAS ALSO REFERRED TO TH E D-MAT ACCOUNT OF THE ASSESSEE AND SUBMITTED THAT THE SHARES WERE DEMATER IALIZED ON 18.06.2012 AND THEREAFTER THE SHARES WERE SOLD FROM 13.03.2013 ONW ARDS 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 BANK ACCOUNT OF THE ASSESS EE. THEREFORE, THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVIDENCE TO SHOW THE ALLO TMENT OF SHARES, PAYMENT OF CONSIDERATION THROUGH CHEQUE AT THE TIME OF ALLOTME NT OF SHARES DEMATERIALIZATION OF THE SHARES AND THEREAFTER, SALE OF SHARES FROM T HE D-MAT ACCOUNT. HENCE, THE TRANSACTION OF PURCHASE AND SALE OF SHARES IS GENUI NE ONE AS THE ASSESSEE HAS ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 8 PROVED THE GENUINENESS BY PRODUCING THE RELEVANT RE CORD WHEREAS THE ASSESSING OFFICER HAS NOT PRODUCED ANY MATERIAL OR RECORD TO CONTROVERT THE EVIDENCE PRODUCE BY THE ASSESSEE. 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 BO GUS TRANSACTION. HENCE, LD. AR HAS PLEADED THAT THE ADDITION MADE BY THE AO BE DEL ETED AND THE CLAIM OF THE ASSESSEE ACCEPTED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE HONBLE JURISDICTION HIGH COURT DATED 11-09-2017 IN CASE OF CIT VS. SMT. POOJA AGRAWAL 385/2011 WHEREIN THE HON'BLE HIGH COURT HAS HELD TH AT WHEN THE ASSESSEE FURNISHED ALL SUPPORTING DOCUMENTS INCLUDING THE CH EQUE, COPY OF CONTRACT NOTE AND D-MAT ACCOUNT ETC. THEN, THE TRANSACTION ENTERED IN TO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE ASSESSEE DENIE D MADE ANY TRANSACTION. WHEREAS IN THIS CASE, THE ASSESSEE NEVER DENIED HAV ING THESE TRANSACTIONS 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 O PPORTUNITY OF CROSS EXAMINE TO THE ASSESSEE. THE LD. AR HAS RELIED UPON THE DECISI ON OF HON'BLE PUBJAB AND HARYANA HIGH COURT DATED 18.01.2018 IN CASE OF CIT VS. PREM PAL GANDHI IN ITA NO. 95/2017. HE HAS ALSO RELIED UPON THE DECISION OF TH E 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 DECISIO NS WHEN THE ASSESSEE PRODUCED THE SUPPORTING EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND THE AO HAS FAILED TO PRODUCE ANY COUNTER EVIDENCE TO DISPR OVE THE EVIDENCE PRODUCE BY THE ASSESSEE IT WAS HELD THAT THE TRANSACTIONS CANN OT BE TREATED AS BOGUS MERELY ON THE BASIS OF STATEMENT WITHOUT ANY CORROBORATING EV IDENCE BROUGHT 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 RULE OF PREPONDERANCE OF HUMA N PROBABILITY THE TRANSACTION OF THE ASSESSEE 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 MANIPULATED THE EN TIRE RECORD AND AVAILED THE BOGUS TRANSACTION OF LONG TERM CAPITAL GAIN TO CONV ERT HIS UNACCOUNTED INCOME TO AVOID TAX THROUGH LONG TERM CAPITAL GAIN. HE HAS RE LIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT 89 TAXAMAN.COM 196. 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 BOGU S LONG TERM CAPITAL GAIN TO THE CLIENTS AND M/S RUTRON INTERNATIONAL LTD. IS ONE OF THE COMPANY IS WHOSE SHARE TRANSFERRED BY SHRI ANIL AGRAWAL. HE HAS RELIED UPO N THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS PRODUCED RECORD 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 AS SESSING OFFICER HAS NOT DISPUTED THE GENUINENESS OF THE LETTER OF ALLOTMENT ISSUED B Y THE COMPANY TO THE ASSESSEE ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 9 WHEREIN IT HAS BEEN COMMUNICATED THAT THE ASSESSEE HAS BEEN ALLOTTED 3,50,000 EQUITY SHARES VIDE ALLOTMENT LETTER DATED 08.03.201 2 AGAINST THE APPLICATION OF THE ASSESSEE AT PAR OF FACE VALUE OF RS. 10/- EACH WITH OUT ANY PREMIUM. THE ASSESSEE HAS ALSO PRODUCED THE BANK STATEMENT SHOWING THE PA YMENT OF CONSIDERATION OF THE ACQUISITION OF SHARES ON 29.02.2012. IT APPEARS THA T THE SAID PAYMENT WAS MADE BY THE ASSESSEE AT THE TIME OF APPLYING FOR ALLOTMENT OF SHARES AND SUBSEQUENTLY THE SHARES WERE ALLOTTED BY THE COMPANY ON 01.03.2012. THUS, IT IS CLEAR THAT THE SHARES ACQUIRED BY THE ASSESSEE IS NOT A TRADING TRANSACTI ON BUT THESE WERE ALLOTTED DIRECTLY BY THE COMPANY UNDER THE PREFERENTIAL ISSU E AND HENCE, THE ROLE OF INTERMEDIATE IS RULED OUT. ONCE, THE SHARES WERE DI RECTLY ALLOTTED BY THE COMPANY M/S RUTRON INTERNATIONAL LTD. AGAINST THE CONSIDERA TION PAID BY THE ASSESSEE THROUGH CHEQUE. THEN THE ROLE OF ANY INTERMEDIATELY PARTICULAR OF SHRI ANIL AGARWAL IS SAID ALLOTMENT DOES NOT APPEAR FROM ANY OF THE R ECORD. EVEN AS PER THE STATEMENT AS REPRODUCED BY THE ASSESSING OFFICER IN THE ASSES SMENT ORDER SHRI ANIL AGRAWAL HAS STATED THAT HE IS HAVING BUSINESS NEXUS WITH TH E COMPANIES INCLUDING M/S RUTRON INTERNATIONAL LTD. THE DEPARTMENT PUT A QUES TION ABOUT THE ASSOCIATION WITH AS MANY AS 13 COMPANIES AND IN RESPONSE TO THAT HE HAS ACCEPTED THAT HE IS HAVING BUSINESS NEXUS WITH THESE COMPANIES INCLUDING M/S R UTRON INTERNATIONAL LTD. THE NATURE OF SERVICE WAS ALSO EXPLAINED BY SHRI ANIL A GRAWAL AS THE CONSULTANCY SERVICES. FOR READY REFERENCE WE QUOTE QUESTION NO. 4 AND 5 AND ANSWER, THERETO IN THE STATEMENT OF SHRI ANIL AGARWAL AS REPRODUCED AS UNDER:- Q 4. WHETHER M/S COMFORT SECURITIES PVT. LTD. OR YO U HAVE ANY ASSOCIATION WITH THE FOLLOWING COMPANIES OR HAVE EVER HAD ANY B USINESS TRANSACTIONS WITH THE COMPANIES AS MENTIONED 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. ANS. M/S COMFORT SECURITIES LTD. HAS BUSINESS NEXUS WITH THE FOLLOWING COMPANIES NAME OF THE COMPANY NATURE OF BUSINESS TRANSACTIO N 1. FIRST FINANCIAL SERVICES LTD. BROKERAGE AND CON SULTANCY SERVICES 2. SPLASH MEDIA AND INFRA LTD. BROKERAGE, SHARE HO LDING AND CONSULTANCY SERVICES 3. FACT ENTERPRISES LTD BROKING AS WELL AS SHARE HOLDING 4. RUTRON INTERNATIONAL LTD. CONSULTANCY SERVICES 5. D.B. (INTERNATIONAL) STOCK CONSULTANCY SERVICES BROKERS LTD. 6. UNISYS SOFTWARE & HOLDING BROKING SERVICES ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 10 INDUSTRIES LTD. APART FROM THE ABOVE MENTIONED COMPANIES NEITHER I NOR M/S COMFORT SECURITIES LTD. HAS ANY BUSINESS NEXUS WITH THE COM PANIES MENTIONED SUPRA. Q5. DO YOU KNOW THE PROMOTERS AND DIRECTORS OF THE ABOVE SAID COMPANIES? WHETHER M/S COMFORT SECURITIES PVT. LTD. OR YOU HAV E ANY ASSOCIATION WITH THE PROMOTERS AND DIRECTORS OF THE ABOVE SAID COMPA NIES OR HAVE EVER HAD ANY BUSINESS TRANSACTIONS WITH THE PROMOTERS AND DI RECTORS OF THE ABOVE SAID COMPANIES. ANS. SIR, I KNOW SOME OF THE DIRECTORS OF THE FIRST FINANCIAL SERVICES LIMITED, SPLASH MEDIA & INFRA SERVICES LTD, RUTRON INTERNATI ONAL LIMITED AND FACT ENTERPRISE LTD. REGARDING OTHER COMPANIES I AM NOT AWARE WHO ARE THE DIRECTORS OF THESE 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 BUSI NESS NEXUS WITH THESE COMPANIES AND NATURE OF BUSINESS BEING CONSULTANCY SERVICES. HENCE, HE HAS NOT STATED ANYTHING ABOUT PROVIDING BOGUS LONG TERM CAP ITAL GAIN IN RESPECT OF THE EQUITY SHARES OF M/S RUTRON INTERNATIONAL LTD. A B USINESS NEXUS WITH ANY COMPANY WILL NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THE SHARES ALLOTTED BY THE OTHER COMPANY IS BOGUS TRANSACTION. AS PER QUESTION NO. 5 AND ANSWER THERETO IT IS CLEAR THAT SHRI ANIL AGRAWAL WAS NOT THE DIRECTOR OF M/S RUTRON INTERNATIONAL LTD. BUT HE HAS STATED TO KNOW SOME OF THE DIRECTORS OF THESE C OMPANIES INCLUDING M/S RUTRON INTERNATIONAL LTD. HENCE, FROM THIS RELEVANT PART O F THE STATEMENT OF SHRI ANIL AGRAWAL IT CANNOT BE INFERRED THAT HE HAS PROVIDED THE BOGUS LONG TERM CAPITAL GAIN FROM PURCHASE AND SHARES OF EQUITY SHARES OF M/S RU TRON INTERNATIONAL LTD. MUCH LESS THE SPECIFIC TRANSACTION OF PREFERENTIAL ISSUE ALLOTMENT OF SHARES BY THE COMPANY ITSELF TO THE ASSESSEE. FURTHER, THOUGH HE HAS EXPLAINED THE MODUS OPRENDI OF PROVIDING BOGUS LONG TERM CAPITAL GAIN E NTRIES IN THE EQUITY SHARES HOWEVER, WHEN THE TRANSACTION WAS NOT ROUTED THROUG H SHRI ANIL AGRAWAL AND THE SHARES WERE ALLOTTED DIRECTLY BY THE 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 ASSESSEE WAS HOLDING 3,50,000 EQUITY SHARES OF M/S RUTRON INTERN ATIONAL LTD. IN D-MAT ACCOUNT. THIS FACT OF HOLDING THE SHARES IN THE D-MAT ACCOUN T AS ON 18.06.2012 CANNOT BE DISPUTED. FURTHER, THE ASSESSING OFFICER HAS NOT EV EN DISPUTED THE EXISTENCE OF THE D-MAT ACCOUNT AND SHARES CREDITED IN THE D-MAT ACCO UNT OF THE ASSESSEE. THEREFORE, ONCE, THE HOLDING OF SHARES IS D-MAT ACC OUNT 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 CONSIDERATION WAS DIRECTLY CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE, THERE FORE, ONCE THE ASSESSEE PRODUCED ALL RELEVANT EVIDENCE TO SUBSTANTIATE THE TRANSACTION OF PURCHASE, DEMATERIALIZATION AND SALE OF SHARES THEN, IN THE A BSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD THE SAME CANNOT BE HELD AS BOGUS TRANSACTION MERELY ON THE BASIS OF STATEMENT OF ONE SHRI ANIL AGRAWAL RECORDE D BY THE INVESTIGATION WING, KOLKATA WHEREIN THERE IS A GENERAL STATEMENT OF PRO VIDING BOGUS LONG TERM CAPITAL GAIN TRANSACTION TO THE CLIENTS WITHOUT STATING ANY THING ABOUT THE TRANSACTION OF ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 11 ALLOTMENT OF SHARES BY THE COMPANY TO THE ASSESSEE. FURTHER, SHIR ANIL AGRAWAL WAS NOT A DIRECTOR OF M/S RUTRON INTERNATIONAL LTD. AS PERCEIVED BY THE AO AND THEREFORE, THE ENTIRE FINDING OF THE AO IS WITHOUT ANY CORROBORATIVE EVIDENCE OR TANGIBLE MATERIAL. 6. THE ASSESSEE HAS SPECIFICALLY DEMANDED THE CROSS EXAMINED TO SHRI ANIL AGRAWAL WHICH WAS DENIED BY THE AO AS UNDER :- '(II) THE ASSESSEE'S PLEAS THAT EFFECTIVE OPPORTUNI TY MAY BE PROVIDED TO CROSS EXAMINATION. IN THIS REGARD, IT IS POINTED OU T THAT THE HON'BLE SUPREME COURT IN THE CASE OF C.VASANTLAL & CO. V/S CIT 45 I TR 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 ENQUIRY.' THUS, IN VIEW OF THE DECISION OF HON'BLE SUPREME CO URT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) THE ASSESSMENT BASED ON STATEMENT WITHOUT GIVING AN OPPORTUNITY IS NOT SUSTAINABLE IN LAW. WE FURTHER N OTE THAT THE ASSESSEE PRODUCED COPY OF AFFIDAVIT OF SHRI ANIL AGRAWAL WHO HAS RETR ACTED HIS STATEMENT BEFORE THE INVESTIGATION WING, KOLKATA HOWEVER, WITHOUT GOING INTO CONTROVERSY OF THE RETRACTION OF THE STATEMENT WE FIND THAT THE STATEM ENT 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 HE LD 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 PROD UCED THE PURCHASE BILL OF THE SHARES PURCHASE FROM M/S WINALL VINIMAY PVT. LT D. WHICH SHOWS THAT THE ASSESSEE PURCHASE 800 EQUITY SHARES HAVING FACE VAL UE 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 SHARE S. THE PURCHASE PRICE OF RS. 500 PER SHARE ITSELF SHOWS THAT IT WAS NOT A TR ANSACTION OF PURCHASE OF PENNY STOCK. THESE SHARES WERE DULY REFLECTED IN T HE BALANCE SHEET AS 31.03.2011. THE PAYMENT OF THE PURCHASE CONSIDERATI ON WAS MADE BY THE ASSESSEE VIDE CHEQUE ON 17.05.2011 WHICH IS EVIDENT FROM THE BANK ACCOUNT OF THE ASSESSEE AT PAGE 40 OF THE PAPER BOOK. IN TH E MEAN TIME THE SAID M/S GRAVITY BARTER PVT. LTD. CHANGED ITS STATUS FROM PR IVATE LIMITED TO A PUBLIC LIMITED AND FRESH CERTIFICATE WAS ISSUED BY THE REG ISTRAR OF COMPANY 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 CERTIFICAT E ISSUED BY THE REGISTRAR OF COMPANIES ON 05.02.2011 AND HENCE, THE DATE MENTION ED IN THE ORDER OF THE HON'BLE KOLKATA HIGH COURT AS 18.04.2011 APPEAR S TO BE TYPOGRAPHICAL MISTAKE. EVEN OTHERWISE THESE TWO DATES DO NOT HAVE ANY EFFECT ON THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF EQUI TY SHARES BY THE ASSESSEE OF M/S GRAVITY BARTER PVT. LTD. THE ASSESS EE THOUGH PRODUCED ALL THE RELEVANT RECORDS AND EVIDENCES RIGHT FROM THE P URCHASE BILLS, CERTIFICATE ISSUED BY THE REGISTRAR ABOUT THE CHANGE OF NAME, T HE COMMUNICATION BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES A ND THEREAFTER, THE ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 12 AMALGAMATION OF M/S GRAVITY BARTER LTD. WITH M/S OA SIS CINE COMMUNICATION LTD. WHICH WAS DULY APPROVED BY THE H ON'BLE HIGH COURT VIDE ORDER DATED 28.8.2011. THE ASSESSEE IN THE MEA N TIME GOT THE PHYSICAL SHARE CERTIFICATE DEMATERIALIZED INTO DEMAT ACCOUNT ON 16.02.2012. THERE IS NO REASON TO DOUBT THE ALLOTMENT OF THE SHARES TO T HE ASSESSEE AFTER AMALGAMATION TOOK PLACE BETWEEN M/S GRAVITY BARTER LTD. AND M/S OASIS CINE COMMUNICATION LTD. AND SUBSEQUENT TO AMALGAMAT ION THE ASSESSEE WAS ALLOTTED SHARES OF M/S OASIS CINE COMMUNICATION LTD. ON 04.02.2012. HENCE, THE ALLOTMENT OF 35,200 EQUITY SHARES OF M/S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUBTED OR DISPUTED AS THESE SHARES WERE ISSUED POST AMALGAMATION AND BY A LISTED COMPANY. I T IS ALSO NOT IN DISPUTE THAT THESE SHARES OF M/S OASIS CINE COMMUNICATION L TD. WERE ISSUED IN EXCHANGE OF THE SHARES HELD BY THE ASSESSEE OF M/S GRAVITY BARTER LTD. THEREFORE, ONCE THE SHARES ISSUED BY M/S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUBTED THEN THE HOLDING OF THE SHARES OF THE M/S GRAVITY BARTER LTD. BY THE ASSESSEE CORRESPONDINGLY CANNOT BE DOUB TED BECAUSE OF THE REASONS THAT THE SHARES OF M/S OASIS CINE COMMUNICA TION LTD. COULD BE ALLOTTED ONLY IN EXCHANGE OF SHARES OF M/S GRAVITY BARTER LTD. THE HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. AND THE ALLOT MENT OF SHARES M/S OASIS CINE 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 OR ALLOTTED TO THE ASSESSEE. THEREFORE, HOLDING OF THE SHARES BY THE 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, THE SE SHARES WERE DEMATERIALIZED BY THE ASSESSEE IN THE DEMAT ACCOUNT , THEREFORE, ON THE DATE OF ALLOTMENT OF SHARE OF M/S OASIS CINE COMMUN ICATION LTD THE ASSESSEE WAS HOLDING THESE SHARES AND PRIOR TO THAT THE ASSESSEE WAS HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. ON EX CHANGE OF THE SAME THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. WERE IS SUED TO THE ASSESSEE. THE ASSESSING OFFICER HAS DOUBTED THE GENUINENESS O F THE TRANSACTIONS HOWEVER, ONCE THE HOLDING 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. AL SO CANNOT BE DISPUTE BECAUSE OF THE FACT THAT WITHOUT HOLDING OF THE SAM E THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. COULD NOT BE ISSUED TO THE ASSESSEE. ONCE, THE SHARES WERE HELD BY THE ASSESSEE THEN, THE QUESTION OF GENUINENESS OF THE TRANSACTION DOES NOT ARISE HOWEVER, THE PURCHASE CO NSIDERATION CAN BE DOUBTED BY THE AO IF THE SHARES WERE CLAIMED TO HAV E BEEN PURCHASED AGAINST CONSIDERATION PAID IN CASH WHICH IS NOT IN CASE OF THE ASSESSEE. THE ASSESSEE HAS PAID PURCHASE CONSIDERATION THROUGH CH EQUE AND THEREFORE, EVEN IF THE SAID CONSIDERATION IS FOUND TO BE VERY LESS IN COMPARISON TO THE SALE PRICE AT THE TIME OF SALE OF SHARES IN THE ABS ENCE OF ANY MATERIAL OR OTHER FACTS DETECTED OR BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS BROUGHT BACK HIS OWN UNACCOUNTED MONEY IN THE SHAPE OF LONG TERM CAPITAL GAIN AND HAS USED THE SAME AS A DEVICE TO AVOID TAX , THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE CANNOT BE DOUBTE D IN THE ABSENCE OF ANY CORROBORATING EVIDENCE. THE ASSESSING OFFICER HAS N OT DISPUTED THAT THE FAIR ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 13 MARKET VALUE OF THE SHARES OF M/S GRAVITY BARTER LT D. WAS MORE THAN THE PURCHASE PRICE 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 EXTRAORDINAR Y EVENT OF MERGER/ AMALGAMATION. HOWEVER, THE SAME CANNOT BE A REASON FOR DOUBTING GENUINENESS OF THE TRANSACTION IF THE MOTIVE OF PUR CHASE OF THE SHARE IS TO EARN AN EXTRAORDINARY GAIN BECAUSE OF SOME INTERNAL INFORMATION AVAILABLE TO THE ASSESSEE. 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 A PPLICATION MONEY OF RS. 5 LACS WHICH IS DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AS PAID ON 28.03.2011. THEREFORE, THE PAYMENT OF SHARE APPLICA TION MONEY HAS BEEN DULY ESTABLISHED BY THE ASSESSEE THROUGH HIS BANK A CCOUNT FOR ALLOTMENT OF SHARES OF 50,000 EQUITY SHARES OF M/S PARIDHI PROPE RTIES LTD. THE SHARE ALLOTTED IN PRIVATE PLACEMENT AS PER OF RS. 10/- CA NNOT BE TERMED AS PENNY STOCK. THE AO DOUBTED THAT THE ENTIRE PROCESS OF AP PLICATION AND ALLOTMENT OF SHARES AS IT HAVE BEEN COMPLETED WITHIN A SHORT DURATION OF 5 DAYS, WHICH IN THE OPINION OF THE AO IS NOT POSSIBLE IN ORDINAR Y COURSE. HOWEVER, WHEN THE ASSESSEE HAS PRODUCED THE RECORD INCLUDING THE SHARE APPLICATION, PAYMENT OF SHARE APPLICATION MONEY, ALLOTMENT OF SH ARE THEN MERELY BECAUSE OF A SHORT PERIOD OF TIME WILL NOT BE A SUF FICIENT REASON TO HOLD THAT THE TRANSACTION IS BOGUS. THE SHARES ALLOTTED TO TH E ASSESSEE VIDE SHARE CERTIFICATE DATED 31.03.2011 WERE DEMATERIALIZED ON 21.10.2011, THEREFORE, ON THE DATE OF DEMATERIALIZATION OF THE SHARES THE HOLDING OF THE SHARES OF THE ASSESSEE CANNOT BE DOUBTED AND HENCE THE ACQUIS ITION OF THE SHARES OF THE ASSESSEE CANNOT BE TREATED AS A BOGUS TRANSACTI ON. NOBODY CAN HAVE THE SHARES IN HIS OWN NAME IN DEMANT ACCOUNT WITHOUT AC QUIRING OR ALLOTMENT THROUGH DUE PROCESS HENCE, EXCEPT THE PURCHASE CONS IDERATION PAID BY THE ASSESSEE HOLDING OF SHARES CANNOT BE DOUBTED WHEN T HE ASSESSEE HAS PRODUCED ALL THE RELEVANT RECORD OF ISSUING OF ALLO TMENT OF SHARES, PAYMENT OF SHARE APPLICATION MONEY THROUGH BANK, SHARE CERT IFICATE AND DEMAT ACCOUNT SHOWING THE SHARES CREDITED IN THE DEMAT AC COUNT OF THE ASSESSEE ON DEMATERIALIZATION. THE SAID COMPANY M/S PARIDHI PROPERTIES LTD. WAS SUBSEQUENTLY MERGED WITH M/S LUMINAIRE TECHNOLOGIES LTD. VIDE SCHEME APPROVED BY THE HON'BLE BOMBAY HIGH COURT ORDER DAT ED 27.07.2012. HENCE, THE ASSESSEE GOT ALLOTTED THE EQUITY SHARES OF M/S LUMINAIRE 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 EVIDENCE PRODUCED B Y THE ASSESSEE LEAVE NO SCOPE OF ANY DOUBT ABOUT THE HOLDING OF THE SHAR ES BY THE ASSESSEE. 8. AS REGARDS THE PURCHASE CONSIDERATION WHEN THE A SSESSEE HAS SHOWN THE SHARE APPLICATION MONEY PAID THROUGH HIS BANK ACCOU NT AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT APART F ROM THE SHARE APPLICATION MONEY PAID THROUGH BANK ACCOUNT THE ASS ESSEE HAS BROUGHT HIS OWN UNACCOUNTED MONEY BACK AS LONG TERM CAPITAL GAI N. IT IS ALSO PERTINENT ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 14 TO NOTE THAT THE SHARES OF M/S OASIS CINE COMMUNICA TION LTD. ARE STILL HELD BY THE ASSESSEE IN ITS DEMAT ACCOUNT TO THE EXTENT OF 17,200 SHARES AND THEREFORE, THE HOLDING OF THE SHARES BY ANY PARAMET ER OR STRETCH OF IMAGINATION CANNOT BE DOUBTED. THE AO HAS PASSED TH E ASSESSMENT YEAR BASED ON THE STATEMENT OF SHRI DEEPAK PATWARI RECOR DED BY THE INVESTIGATION WING OF KOLKATA HOWEVER, THE ASSESSEE HAS SPECIFICALLY DEMANDED THE CROSS EXAMINATION OF SHRI DEEPAK PATWA RI VIDE LETTER DATED 15.03.2016 SPECIFICALLY IN PARAS 3 AND 4 AS REPRODU CED 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 A ND WERE SOLD THROUGH THE RECOGNIZED BOMBAY STOCK EXCHAGE (BSE) THERE IS NO QUESTION OF KNOWING INDIVIDUAL PERSONS OR COMPANY OFFICIAL PERSONALLY I N THE WHOLE PROCESS, SO THE ASSESSEE IS NOT IN POSITION TO PRODUCE ANY ONE FOR CROSS EXAMINATION BEFORE YOUR GOOD SELF. SINCE YOUR GOOD SELF HAS GOT THE AUTHORITY, 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 COMPANY OFFICIA LS FOR CROSS EXAMINATION. PLEASE NOTE THAT THE ASSESSEE IS READY TO BEAR THE COST OF THEIR TRAVELLING IN THIS REGARDS. 4. AS REGARD YOUR OPPORTUNITY GIVEN TO US TO READ T HE RECORDED STATEMENT OF SHRI DEEPAK PATWARI AND TO PRODUCE HIM FROM THE CRO SS EXAMINATION BEFORE YOUR GOOD SELF, WE HAVE TO SUBMIT THAT FROM THE REA DING OF THE STATEMENTS OF SHRI DEEPAK PATWARI IT IS CLEAR THAT HE HAS NEVE R TAKEN THE NAME OF THE ASSESSEE, NOR THE ASSESSEE IS AWARE OF ANY SHRI DEE PAK PATWARI NEITHER HE HAS MADE ANY TRANSACTION WITH HIM, SO IN WHAT CAPAC ITY HE CAN CALL HIM FOR CROSS EXAMINATION BEFORE YOUR GOOD SELF. SINCE 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 HIM ALSO FOR CROSS EXAMINATI ON. WE ALSO REQUEST YOUR GOOD SELF TO KINGLY PROVIDE US THE COPY OF STA TEMENTS OF SHRI DEEPAK PATWARI ALONG WITH THE OTHER RELEVANT DOCUMENTS. PL EASE NOTE THAT THE ASSESSEE IS READY TO BEAR THE COST OF HIS TRAVELLIN G IN THIS REGARD.' IT IS MANIFEST FROM THE ASSESSEE'S REPLY TO SHOW CA USE NOTICE THAT THE ASSESSEE HAD SPECIFICALLY DEMANDED THE CROSS EXAMIN ATION OF SHRI DEEPAK PATWARI HOWEVER, THE ASSESSING OFFICER DID NOT OFFE R THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI DEEPAK PATWARI. FURT HER, THE AO ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THE M /S GRAVITY BARTER LTD. AND M/S PARIDHI PROPERTIES LTD. HOWEVER, IN OUR VIEW IF THE ASSESSING OFFICER WANTED TO EXAMINE THE PRINCIPAL OFFICERS OF THOSE C OMPANIES HE WAS HAVING THE AUTHORITY TO SUMMON THEM AND RECORD THEIR STATE MENTS INSTEAD OF SHIFTING BURDEN ON THE ASSESSEE. IT IS NOT EXPECTED FROM THE ASSESSEE INDIVIDUAL TO PRODUCE THE PRINCIPAL OFFICERS OF THE COMPANIES RATHER THE AO OUGHT TO HAVE SUMMONED THEM IF THE EXAMINATION OF T HE OFFICERS WERE CONSIDERED AS NECESSARY BY THE AO. HENCE, IT WAS IM PROPER AND UNJUSTIFIED ON THE PART OF THE AO TO ASKED THE ASSESSEE TO PROD UCE THE PRINCIPAL OFFICERS OF THOSE COMPANIES. AS REGARDS THE NON GRANT OF OPP ORTUNITY TO CROSS ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 15 EXAMINE, THE HON'BLE SUPREME COURT IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE ISSUE HAS HELD IN P ARA 5 TO 8 AS UNDER: '5. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SEN IOR 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 OF THE IMPUGNED ORDER IS A SERI OUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLAT ION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS A DVERSELY 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. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANT ED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPOR TUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED 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 NOT EVEN DEALT WI TH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT T HEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WA S NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLA NT WANTED TO CROSS- EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPEL LANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DIS CREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNIT Y OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIE D UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED I N THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. T HEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARK S AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCC ASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO TH E 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 JUSTIFY ITS ACTION, AS THE STATEMENT OF THE ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 16 AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUI NG THE SHOW CAUSE NOTICE.' THEREFORE, THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EXAMINATION AND CONSE QUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THE MUMBAI SPECI AL OF THE TRIBUNAL IN CASE OF GTC INDUSTRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSIDER THE ADDITION MADE BY THE AO ON THE BASIS OF SUSPICION AND SURMISES AND O BSERVED IN PAR 46 AS UNDER:- 46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL INT O REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MAY GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE WEIGHED 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 PER THEIR MU TUAL UNDERSTANDING WITH THE ASEESSEE. ANOTHER VERY STRONG PROBABLE FACTOR I S THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE- COMPANY NEED NOT INCUR ADVERTISEMENT EXPENSES AND T HE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY UPON WHOLESALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLLECTI ON OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAINST THE ASSESS EE ONLY IF THERE WOULD HAVE BEEN SOME EVIDENCE FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OR BY THE DEPARTMENT THAT ASSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH ACCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN U NEARTHED FROM SUCH GLOBAL LEVEL INVESTIGATION BY TWO CENTRAL GOVERNMEN T AUTHORITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING TH ROUGH THESE BENAMI BANK ACCOUNTS ON THE BEHEST OF ONE OF THE EMPLOYEES OF T HE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC AS A CORPORATE ENTITY W AS HAVING THE CONTROL OF THESE BANK ACCOUNTS COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NI RMALA SUNDARAM, WE ARE OF THE OPINION THAT THIS ONE INCIDENT OF DONATION T HROUGH BANK ACCOUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOES NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THROUGHOUT TH E COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUALLY BELONGS TO THE ASS ESSEE-COMPANY OR THE ASSESSEE-COMPANY HAD DIRECT CONTROL ON THESE BANK A CCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRES UMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM OF PREMIUM AND ITS CIRCULATION. HOWEVER, THIS PRESUMPT ION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CO RROBORATED BY SOME EVIDENCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT SUS PICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT F OR SOME MATERIAL EVIDENCE ON RECORD. THE THEORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVIDENCES OF EITHER SIDE AND DRAW A CO NCLUSION IN FAVOUR OF A PARTY WHICH HAS MORE FAVOURABLE FACTORS IN HIS SIDE . THE CONCLUSIONS HAVE TO BE DRAWN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGA INST ASSESSEE. ONCE ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 17 NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH A ID OF ANY DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAV E BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE.' THEREFORE, WHEN THE ASSESSING OFFICER HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS PAID OVER AND ABOVE THE PURCHASE CONSIDERATION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY EVIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY BY WAY OF BOGUS LONG TERM CAPITAL GAIN. THE HON'BLE JU RISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGRAWAL (SUPRA) HAS UPHELD THE FINDING OF THE TRIBUNAL ON THIS ISSUE IN PARA 12 AS UNDER:- '12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN US TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL AND CONTEN DED THAT IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHA NGE AND TAKING INTO CONSIDERATION THE REVENUE TRANSACTIONS, THE ADDITIO N 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 DECLA RED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STA TEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. HOWEVER, SUBSEQUEN TLY THE FACTS CAME ON RECORD THAT THE APPELLANT HAD TRANSACTED NOT ONLY I N THE SHARES WHICH ARE DISPUTED BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPC L, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTION S IN QUESTION VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDIN G PURCHASE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., A SSESSEE'S ACCOUNT WITH P.K. AGARWAL & CO. SHARE BROKER, COMPANY'S MASTER D ETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE FILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSACTIONS ENTERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPELLANT DENIED HAVING M ADE ANY TRANSACTIONS IN SHARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STO CK EXCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS' S ACCOUNT. PRIMA FACIE THE TRANSACTION WHICH ARE SUPPORTED BY DOCUMENTS AP PEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI I N SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSE LF WHILE DISCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG T ERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHER WAS EXEM PTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. AS THE APPELLANT'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACC OMMODATION TRANSACTIONS. 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 ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 18 CORRECT AS IN THE STATEMENT OF SH. PAWAN PUROHIT TH ERE IS NO MENTION OF SH. P. K. AGARWAL. IT WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AGARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN TH E CASE OF SH. SUSHIL KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMM ISSION WAS SUBMITTED. THE AO HAS FAILED TO COUNTER THE OBJECTIONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE B Y THE INVESTING WING AFTER CONSIDERING ALL THEMATERIAL FACTS AVAILABLE O N RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPE NDENT INQUIRY 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 QUESTION I N STATEMENT OF SH. PAWAN PUROHI. SIMPLY BECAUSE IN THE SHAM TRANSACTIO NS BANK A/C WERE OPENED WITH HDFC BANK AND THE APPELLANT HAS ALSO RE CEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOES NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL CANNOT BE HELD AS NON-GENUINE. CONSEQUENTLY DENYING THE CLAIM OF S HORT TERM CAPITAL GAIN (6 OF 6) [ ITA-385/2011] MADE BY THE APPELLANT BEFO RE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT C LAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED ON MERE SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. ON THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RELEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TR ANSACTIONS OF THE PURCHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLDING OF THE SHARES BY THE ASSESSEE AT THE TIME OF ALLOTMENT SUBSEQUENT TO THE AMALGAMATION/MERGER IS NOT IN DOUBT, THEREFORE, THE TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION M ADE 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 PLACEMEN T @ RS. 10 AT PAR OF FACE VALUE WHICH WERE DEMATERIALIZED AND THEREAFTER SOLD BY TH E ASSESSEE AND ACCORDINGLY THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CCE VS. ANDAMAN TIMBER INDUSTRIES (SUPRA) AS WELL AS THE DECISION OF HON'BLE JURISDICTION HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL (SUPRA) 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 PURCHASE CONSIDERA TION AS CLAIMED AND EVIDENT FROM THE BANK ACCOUNT THEN, IN THE ABSENCE OF ANY E VIDENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MON EY BY WAY OF BOGUS LONG TERM CAPITAL GAIN. SIMILAR IN THE CASE IN HAND THE ASSESSEE HAS PRODUCED THE RELEVANT RECORD TO SHOW THE ALLOTMENT OF SHARES BY THE COMPANY ON PAYMENT OF CONSIDERATION BY CHEQUE AND THEREFORE, IT IS NOT A CASE OF PAYMENT OF CONSIDERATION BY IN CASH. BUT THE TRANSACTION IS ESTABLISHED FROM THE EVIDENCE AND RECORD WHICH ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 19 CANNOT BE MANIPULATED AS ALL THE ENTRIES ARE PART O F THE BANK ACCOUNT OF THE ASSESSEE AND THE ASSESSEE DEMATERIALIZED THE SHARES IN THE D-MAT ACCOUNT WHICH IS ALSO AN INDEPENDENT MATERIAL AND EVIDENCE CANNOT BE MANIPULATED. THEREFORE, THE HOLDING OF THE SHARES BY THE ASSESSEE CANNOT BE DOU BTED AND THE FINDING OF THE AO IS BASED MERELY ON THE SUSPICION AND SURMISES WITHO UT ANY COGENT MATERIAL TO SHOW THAT THE ASSESSEE HAS INTRODUCTION HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. WE FIND THAT THE LD. CIT(A) HAS ALSO REFERRED TO SEBI ENQUIRY AGAINST THE M/S ANAND RATHI SHARE AND STOCK BROKERS LTD. HOWEVER, WE NOTE THAT THE SAID ENQUIRY WAS REGARDING FINANCIAL IRREGULARI TIES AND USE OF FUND BELONGING TO THE CLIENTS FOR THE PURPOSE OTHER THAN, THE PURCHAS E OF SHARES ON BEHALF OF THE CLIENTS. THEREFORE, THE SUBJECT MATTER OF THE ENQUI RY HAS NO CONNECTION WITH THE TRANSACTION OF BOGUS LONG TERM CAPITAL GAIN. THE DE CISIONS REPLIED UPON THE LD. DR IN CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE AS THE SAID DECISION IS IN RESPECT PEN NY STOCK PURCHASE BY THE ASSESSEE FROM A PERSONS WHO WAS FOUND TO BE INDULGED IN PROV IDING BOGUS CAPITAL GAIN ENTRIES WHEREAS IN THE CASE OF THE ASSESSEE THE SHA RES WERE ALLOTTED TO THE ASSESSEE BY THE COMPANY AT PAR OF FACE VALUE. HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANCES WHEN WE HOLD THAT THE ORDER OF THE ASSESSING OFFICE R TREATING THE LONG TERM CAPITAL GAIN AS BOGUS AND CONSEQUENTIAL ADDITION MADE TO TH E TOTAL INCOME OF THE ASSESSEE IS NOT SUSTAINABLE. HENCE, WE DELETE THE ADDITION M ADE BY THE AO ON THIS ACCOUNT. 10. IT IS CLEAR FROM THE ABOVE THAT THE FACTS OF TH E CASE OF THE ASSESSEE ARE IDENTICAL WITH THE FACTS IN THE ABOVE CASE WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DELETED T HE ADDITION. WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO NOT TO TREAT THE LONG TERM CAPITAL AS BOGUS AND DELETE THE CONSEQUENTIAL ADDI TION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO.1228/M/2018 12. THE ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS IDENTICAL TO ONE AS DECIDED BY US IN ITA NO 4843/MUM/2018 SUP RA. THEREFORE OUR DECISION IN ITA NO. 4843/MUM/2018, WO ULD, MUTATIS MUTANDIS, APPLY TO THIS APPEAL AS WELL. ACC ORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.4843/M/2018 & ITA NO.1228/M/2018 MR. RAMPRASAD AGARWAL 20 13. IN RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2018. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30.11.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.