Sanjay Prataplal Mehta, Bhavnagar V. DCIT, Circle-1, Bhavnagar

ITA 509/AHD/2018

AI Insights

The case revolves around the long-term capital gains claimed by the assessee, Sanjay Prataplal Mehta, from the sale of shares of M/s Comfort Fincap Ltd, which were treated as unexplained cash credits under section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the claim based on findings that the shares were part of a manipulated scheme to generate bogus long-term capital gains. The learned CIT(A) upheld the AO's decision. However, the Tribunal, after examining the evidence and the circumstances, concluded that the assessee had not engaged in any manipulation or wrongdoing, thus allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135801 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 05-03-2018
• Other Referred Cases: Durga Prasad Moore vs. CIT, Sumati Dayal vs. CIT, Shivnarayan Sharma & Ors vs. ITO, Parasben Kasturchand Kochar vs. ITO, PCIT vs. Swati Bajaj, CIT vs. Sanghamitra Bharali, CIT vs. Durga Prasad More, CIT vs. Sumati Dayal
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEEANDONAPERUSALOFTHEORDERSOFTHEINCOMETAXAUTHORITIES; ITAPPEARS; FORTHEASSESSEEAREDISTINGUISHABLEONFACTS; FORTHEREVENUETOGOONESTEPFURTHERANDDEMONSTRATEBEYONDA; FORTHEASSESSEETOFORESEE; SHRIVIJAYKUMARJAISWAL
• Assessee Lawyers: .WEHAVECONSIDEREDRIVALCONTENTIONSANDCAREFULLYGONETHROUGHTHEORDERSOF

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’A’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRISIDDHARTHANAUTIYAL,JUDICIALMEMBER आयकरअपीलसं ./ITANo.509/AHD/2018 धििाधरणवरध/Asstt.Year:2014-15 SanjayPrataplalMehta, 1563/A“Aashirwad”, RupaniSardarnagarRoad, Bhavnagar. PAN:AABPM2791D Vs. D.C.I.T, Circle-1, Bhavnagar. (Applicant)(Respondent) Assesseeby:ShriTusharHemani,Sr.Advocate withShriParimalsinhB.Parmar& ShriKushalFofaria,A.Rs Revenueby:ShriVijayKumarJaiswal,CIT.D.R सुिवाईकीतारीख/DateofHearing:27/04/2023 घोरणाकीतारीख /DateofPronouncement:25/07/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals)-6,(inshort“Ld. CIT(A)”)arisinginthematterofassessmentorderpassedunders.143(3)ofthe ITAno.509/AHD/2018 Asstt.Year2014-15 2 IncomeTaxAct1961(here-in-afterreferredtoas"theAct")relevanttothe AssessmentYear2014-15. 2.Theassesseehasraisedthefollowinggroundsofappeal: 1.ThelearnedCIT(A)haserredbothinlawandonthefactsofthecaseinconfirmingthe actionofAOofaddinglong-termcapitalgainofRs.5,51,09,170/-asunexplainedcash creditsu/s68oftheAct. 2.ThelearnedCIT(A)haserredinlawandonfactsinconfirmingtheadditiondespiteAO notsupplyingnecessarymaterialtotheappellantonthebasisofwhichimpugnedaddition hasbeenmadeandalsonotprovidingappellantwiththeopportunitytocrossexamine personswhosestatementswererecordedu/s133AoftheAct. 3.Boththelowerauthoritieshavepassedtheorderswithoutproperlyappreciatingthe factsandtheyfurthererredingrosslyignoringvarioussubmissions,explanationsand informationsubmittedbytheappellantfromtimetotimewhichoughttohavebeen consideredbeforepassingtheimpugnedorder.Thisactionofthelowerauthoritiesisin clearbreachoflawandPrinciplesofNaturalJusticeandthereforedeservestobequashed. 4.ThelearnedCIT(A)haserredinlawandonfactsofthecaseinconfirmingactionofthe ld.AOinlevyinginterestu/s.234A/B/CoftheAct. 5.ThelearnedCIT(A),haserredinlawandonfactsofthecaseinconfirmingactionofthe Ld.AOininitiatingpenaltyu/s.271(1)(c)oftheAct. Theappellantcraves,leavertoadd,amend,alter,edit,delete,modifyorchangeallorany ofthegroundsofappealatthetimeoforbeforethehearingoftheappeal. 3.TheonlyeffectiveissueraisedbytheassesseeisthatthelearnedCIT(A) erredinconfirmingthedisallowanceofexemptedcapitalgainundersection10(38) oftheActforRs.5,51,09,170/-onlyandtreatingthesameasunexplainedcash credit. 4.Thefactsinbriefarethattheassesseeisanindividualandfiledhisreturn ofincomedeclaringincomefromothersourcesandexemptedLTCG.Theassessee inthereturnofincomehasclaimedexemptionofcapitalgainofRs.5,51,09,170/- undersection10(38)oftheActonaccountofsaleofsharesofM/sComfort FincapLtd.TheAOfoundthattheimpugnedcompanyM/sComfortFincapLtd wasincorporatedon12 th November1982asM/sParasnathTextileLtdwhichwas acquiredbyM/sLuhrukaSales&ServicesLimitedason05 th July2010.The appellantassesseewasallotted2lakhsharesofM/sParasnathTextileLtdason ITAno.509/AHD/2018 Asstt.Year2014-15 3 14 th March2011atRs.18pershare(premiumRs.8/share)inprivateplacement. ThenameofM/sParasnathTextileLtdgotchangedtoM/sComfortFincapLtd w.e.f.04 th June2011andthereafter,theassesseedematerializedhissharesdated 30 th October2011.Subsequently,thesharesofM/sComfortFincapLtdgotlisted onBSEw.e.f.20 th March2013atinitialpriceofRs.387pershare. 4.1Further,theAOfromthefinancialstatementofM/sComfortFincapLtd foundthatduringtheperiod2009to2011,thecompanywasnotdoingsubstantial business,notdeclaringdividendandnotannouncedanyfutureprojectbutits sharewaslistedatabnormallyhighprice.Afterthelistingofshares,ahuge amountoftradingwascarriedoutduringF.Y.2013-14andthepriceofthescript rapidlyincreasedashighastoRs.448pershare.However,fromApril2014,the sharepriceofthecompanystarteddecreasingandreachedaslowastoRs.14 pershareandthereafterthepricebecomesconstant.Hence,theimpugnedscript wasmanipulatedwiththehelpofentryprovider,brokerandsub-brokers.The tradingoftheimpugnedscriptwasalsosuspendedfromtradingbytheSEBIvide orderdated19-12-2014andalsorestrictedM/sComfortFincapLtdandM/s ComfortSecuritiesLtdfromenteringintocapitalmarketforallegedinsidertrading. 4.2TheAOalsofoundthatDDITKolkata,incountrywideinvestigationcarried out,found84scriptsofdifferentcompaniesutilizedbytheentryoperatorand brokerorsub-brokertoprovideaccommodationentryintheformofLTCGand STCLetc.M/sComfortFincapLtdisincludedinthelistof84scriptsidentifiedby theDDIT-Kolkata.Itwasalsofoundthattheinvestigationwingofincometax MumbaialsocarriedsurveyproceedingatthepremisesofComfortgroupwherein statementofShriAnujAggarwalanentryoperatorandkeypersonof“comfort group”(ComfortFincapLtdandComfortSecuritiesLtd)wasrecorded.ShriAnuj Aggarwalexclusivelyadmittedthathehasprovidedaccommodationentrythrough thescriptofM/sComfortFincapLtd. ITAno.509/AHD/2018 Asstt.Year2014-15 4 4.3TheAOonanalysisoftradedatafromBSEalsofoundthatthecounter party(exitprovider)whopurchasedsharesfromtheassesseewerealsomanaged byentryoperator.Intheproceedingsundersection133A/132oftheActcarried byDDITKolkata,thedirectororkeypersonofcounterpartiesintheirrespective statementacceptedtohavebeenprovidingaccommodationentries.Forexample, inthecaseofcounterpartynamelyM/sEastIndiaSecuritiesLtd(whopurchased sharesofM/sComfortFincapltdfromassesseeforRs.59,35,051/-),the statementofkeypersonnamelyShriArunKhemka,BalramDalmiaandVivek Aggarwalwererecordedandallofthemcategoricallyacceptedtohavebeen providingaccommodationentriesintheimpugnedscript. 4.4TheAOalsofoundthattheassesseewassummonedundersection131of theActandhisstatementwasrecordedthereinwherehestatedthathehasno knowledgeaboutthebusinessofM/sComfortFinacapLtdandheisnotfamiliar withthedirector/promoterofthesaidcompany.However,hewasallotted2lakh sharesinaprivateplacement.FurtheronperusalofDemataccount,itisnoticed thattheassesseehasnotindulgedinfrequenttransactionofsaleandpurchases ofshares.Allthesefactssuggestthattheassesseehastakenaccommodation entryintheformoffictitiouslongtermcapitalgain. 4.5Therefore,theAOinviewoftheaboveobservationandafterreferringto judgmentofHon’bleSupremecourtincaseofDurgaPrasadMoorein82ITR540 andSumatiDayalin214ITR801wherethetestofpreponderanceofhuman probabilityandsurroundingcircumstantialevidencewasdiscussedandaccordingly treatedtheLTCGonthescriptofM/sComfortFincapLtdasshamtransaction. Thus,theAOdisallowedtheclaimofexemptedlong-termcapitalonsaleof impugnedscriptsforRs.5,51,09,170/-andaddedtothetotalincomeofthe assessee. 5.Aggrieved,assesseepreferredanappealbeforethelearnedCIT(A). ITAno.509/AHD/2018 Asstt.Year2014-15 5 6.TheassesseebeforethelearnedCIT(A)submittedthattransactionof purchaseandsaleofsharesofM/sComfortFincapLtdaregenuineandduly supportedbydocumentaryevidencesuchasshareallotmentletter,contractnote, demataccountetc. 7.TheallegationoftheAOisthatthescripofM/sComfortFincapLtdisa pennystockandthemodusoperandiadoptedbyitislikepennystock.However, noevidenceinthisregardbroughtonrecordbytheAOtosuggestthathehas beeninvolvedinanysuchactivityofpennystock.Further,theAOallegedthat severalentryoperatorsadmittedhavingprovidedaccommodationentryinthe impugnedscript,buthehasnotroutedhistransactionthroughsuchoperator.It wasalsocontendedthatthematerialsreliedon,andstatementreferredbytheAO werenotprovidedforrebuttal,northeopportunityofcrossexaminationwas providedthereforenocredencecanbegiventosuchmaterialandstatements. TheassesseesubmittedthathesoldimpugnedscriptthroughICICIsecurities whereastheAOallegedtohavetradedthroughM/sComfortSecuritiesLtdwhich infactuallyincorrect.TheAOallegedthattheimpugnedscriptwasriggedupbut nowherepointedoutwhoriggedupthepriceofscriptandfurtherhehasno knowledgeofsuchactivityofrigginguptheprice.Itwasfurtherallegedthatthe tradingofimpugnedscripwassuspendedbytheSEBI.However,thescriptisvery muchtradingattheBSEcurrentlyi.e.ason25-01-2018. 7.1TheassesseefurthersubmittedthattheAOreferredtotheprincipleoftest ofpreponderanceofhumanprobabilityandsurroundingcircumstantialevidence butthesamecannotbeappliedinhiscase.Inhiscase,theprofitwasearnedon saleofshareswhichwasbasedondocumentsthereforetestofhumanprobability cannotbeappliedinthepresentcase. 8.However,thelearnedCIT(A)afterconsideringtheassessmentorderand submissionoftheassesseesustainedtheadditionmadebytheAObyobserving asunder: ITAno.509/AHD/2018 Asstt.Year2014-15 6 Thesubmissionsoftheappellanthavebeenconsidered.However,thereisnosubstancein thesame.Infactmanyofthesubmissionsarefactuallyincorrect.Thesharestradedare ComfortFincapwhiletheappellantinpartsofhissubmissionmentionsthescripas 'ConfidenceTrading'or'JMCL'ascanbeseenfromportionsinquotesintheabovepara andfromsubmissionoftheappellantreproducedinPara5.2above.Assaidabovealso thereisnosubstanceinthesubmissionoftheappellantandnoconcreteevidenceisfiled todislodgetheshadowofdoubtcastongenuinenessofsharetransactionsasbroughtout bytheAO.Further,merelysayingthatthetransactionisthroughbankingchanneldoesnot makeitgenuine. Itisasettledpositionoflawthatsection68oftheActputsonusofproofonthe taxpayer.Ifanamounthasbeencreditedinthebooksoftheappellant,theonusisonthe taxpayertoprovethenatureandsourceofthesametothesatisfactionoftheAD.Section 68readsasfollows: 68.Whereanysumisfoundcreditedinthebooksofanassesseemaintainedforany previousyear,andtheassesseeoffersnoexplanationaboutthenatureandsourcethereof ortheexplanationofferedbyhimisnot,intheopinionoftheAssessingOfficer, satisfactory,thesumsocreditedmaybechargedtoincome-taxastheincomeofthe assesseeofthatpreviousyear: Providedthatwheretheassesseeisacompany(notbeingacompanyinwhichthepublic aresubstantiallyinterested),andthesumsocreditedconsistsofshareapplicationmoney, sharecapital,sharepremtumoranysuchamountbywhatevernamecalled,any explanationofferedbysuchassessee-companyshallbedeemedtobenoisatisfactory, unless- (a)theperson,beingaresidentinwhosenamesuchcreditisrecordedinthebooksof suchcompanyalsooffersanexplanationaboutthenatureandsourceofsuchsumso credited;and(b)suchexplanationintheopinionoftheAssessingOfficeraforesaidhas beenfoundinbesatisfactory:(emphasisadded). ThustheonusisonthetaxpayertoexplaintothesatisfactionoftheAOthenatureand sourceofanysumcreditedInhis/herbooks.Inthiscase,theAObasedoninformationin hispossessionhadreasontobelievethatthetransactionofshareswasbogus,hencethe onuswasontheappellanttorebutthispresumptionwhichhehasfailedtodomiserably. Theappellanthad2,00,000sharesofComfortFincap.Thatwouldmakehimabiginvestor ofthiscompany.Theappellantcouldhaveproducedsomepersonofsignificancefromthe companybeforetheAOtodenyallegationsofrigginginthisshare.Theappellantdidnot doso.Thustheappellantfailedtodischargetheonuscastonhimtoprovethe presumptionofAOwrong.Thusthereisnosubstanceinvariouscontentionsofthe appellant. Further,thereareseveralotherpeculiaraspects/factsinrespectoftransactionbythe appellantofthisscripwhichcastahugeshadowofdoubtoverthegenuinenessofthis transaction.Someofthesefacts/aspectsaredetailedbelow: (1)TheappellantisaresidentofBhavnagar,Gujarat.Fromheretheappellantinvestsina Mumbaibasedcompany.Inthenormalcoursethiswouldnotraiseanysuspicion.Buthere itisatotallynon-descriptcompanywithhardlyanybusinessactivityandanysignificant performance.SoitraisessuspicionastowhywouldtheappellantInvestahugeamountin suchacompany. ITAno.509/AHD/2018 Asstt.Year2014-15 7 (11)Further,asperstatementoftheappellantbeforetheAO,hedidn'tknowanyofthe directorsofthecompany.Despitethistheappellantappliesforandgets2,00,000shares inpreferentialallotment. (ii)Thetimingofthetransactionisperfect.Thescripispurchasedon15.03.2011, dematerializedon31.0.2011andsoldbetweenJanuary,14andFebruary,2014,just outsideoftwelve(12)monthstomaketheappellanteligibletoclaimtheprofitonthis transactionasexemptu/s10(38)oftheAct.Alsowhentheshareisbought,Itisnotlisted onstockexchange.ThescripislistedonlyinMarch,2013andtheappellantsellsshares afterthat. (iv).Duringtheperiodofholdingofsharebytheappellant,thepriceofthesharerises veryhigh.SomuchsothatitreachesRs.448/-pershare.Oncetheshareshavebeensold, thepricestartsfallingandreachestheofRs.14/-pershare.Afterthisthereispractically nomovementintheshareprice.AllthisismentionedbytheAOintheassessmentorder. Itisclearthatboththeriseandfallinsharepricearesuddenandabnormal. (v)FinancialsofthecompanyasdetailedbytheAOintheorderwerenotsuchthatit wouldattractanyinvestortoinvestinthecompany.Fromthefinancialdatagivenbythe AOitisseenthatthecompanyhadnegligiblebusinessactivity.Thecompanyhadnilor negligibleprofit.Thusitisclearthatthewasnothavingasubstantialbusinessactivity.It defieslogicastowhyapersonwouldinvestinsuchacompanywithsuchpoorfinancials. Alsosuchpoorfinancialsdonotwarrantanyspectacularriseinsharepriceespeciallyin theabsenceofanycorporateannouncementsregardingbigbusinessdealsetc. (vi)ThefinancialsofthecompanyasdetalledabovedonotwarrantpriceofRs.387/-on openingfortradingwhenthecompanyislistedonthestockexchange. Alltheaboveaspects/factsmentionedaboveleadtotheconclusionthattransactionin questionwasriggedinordertogarnerhugeLTCGandclaimthesameasexempt.Hon'ble SupremeCourtInSumatiDayalv.CommissionerofIncome-tax[1995]80TAXMAN89(SC) heldasfollows: 4.ItisnodoubttruethatinallcasesinwhichareceiptissoughttobetaxedasIncome, theburdenliesonthedepartmenttoprovethatitiswithinthetaxingprovisionandif receiptisinthenatureofincome,theburdenofprovingthatitisnottaxablebecauseit fallswithinexemptionprovidedbytheActlasupontheasseParimisettiSutharamamina's casa(supra)atp.536.But,inviewofsection60oftheAct,whereanysumisfoundcited inthebooksoftheassesseeforanypreviousyearthesamemaybechargedtoincome-lax satheincomeoftheassesseeofthatpreviousyeariftheoxplanationofferedbythe assesseeaboutthenatureandsourcethereofis,intheopinionoftheAssessingOfficer, notsatisfactory.Insuchcasethereis,primafacie,evidenceagainsttheassessee,viz,the receiptofmoney,andifhefallstorebut,thesaidevidencebeingunrebuted,canbeused againsthimbyholdingthatitwasareceiptofanincomenaturs,Whiteconsideringthe explanationoftheassessedthedepartmentcannot,however,actunsasonably-Sreelatha Banerjee'scase(supra)atp.120. 12.Thematterhastobeconsideredinthelightofhumanprobabilities....AnInference aboutsuchapurchasehastobedrawnonthebasisofthecircumstancesavailableonthe record.Havingregardtotheconductoftheappellantasdisclosedinherswornstatement aswellasothermaterialontherecordanInferencecouldreasonablybedrawnthatthe winningticketswerepurchasedbytheappellantaftertheevent.Weare,therefore,unable toagreewiththeviewoftheChairmaninhisdissentingopinion.Inouropinion,the majorityopinionafterconsideringsurroundingcircumstancesandapplyingthetestof ITAno.509/AHD/2018 Asstt.Year2014-15 8 humanprobabilitieshasrightlyconcludedthattheappellant'sclaimabouttheamount beingherwinningfromracesisnotgenuine.Itcannotbesaidthattheexplanationoffered bytheappellantinrespectofthesaidamountshasbeenrejectedunreasonablyandthat thefindingthatthesaidamountsareincomeoftheappellantfromothersourcesisnot basedonevidence."(Emphasisadded) Thusaslaiddownbythehon'bleApexCourtthematterhastobeconsideredinthelight ofhumanprobabilitiesandafterconsideringsurroundingcircumstances.Inthepresent case,preponderanceofprobabilitiescastsseriousdoubtsonthecontentionofthe appellantandpointstowardsthetransactionbeingbogus. Hon'bleSupremeCourtinCITvsDurgaPrasadMore,(1971)82ITR 540(SC)hasheldasfollows:"...itistruethatanapparentmustbeconsideredrealuntilit isshownthattherearereasonstobelievethattheapparentisnottherealpartywho reliesonarecitalinadeedhastoestablishthetruthofthoserecitals,otherwiseitwillbe veryeasytomakeself-servingstatementsindocumentseitherexecutedortakenbya partyandrelyonthoserecitals.Ifallthatanassesseewhowantstoevadetaxistohave somerecitalsmadeinadocumenteitherexecutedbyhimorexecutedinhisfavourthen thedoorwillbeleftwideopentoevadetax.Alittleprobingwassufficientinthepresent casetoshowthattheapparentwasnotthereal.Thetaxingauthoritieswerenotrequired towhilelookingatthedocumentsproducedbeforethem.TheywereentitledtolookInto thesurroundingcircumstancestofindouttherealityoftherecitalsmadeinthose documents. Hon'bleBombayHighCourt,NagpurBenchInIncomeTaxAppealNo.18/2017Inthecase ofSanjayBimalchandJainL/HShantideviBimichandJainvsPr.CIT-1,Nagpur&Another hasconfirmedadditiononaccountofbogusLTCGonpennystockshares.Hon'bleCourt hasheldasfollows: "TheassesseehadontheadviceofanincometaxConsultantpurchasedsharesoftwo pennystockKolkatabasedcompaniesie.,8000sharesattherateofRs.5.50pershareon 08.08.2003and4000sharesattherateofRs.4/-pershareon05.06.2003fromSyncom MarketingPvt.Ltd.andofSkyzoomDistributorsPvt.Ltd.thepaymentsweremadebythe assesseeicashforacquisitionofsharesofboththecompanies.Theaddressofboththe companieswasinterestingly,thesame.Theauthorizedsignatoryofboththecompanies wasalsothesameperson.Thepurchaseofsharesofboththecompanieswasdonebythe assesseethroughGlobalStockandSecuritiesLtdandtheaddressofthesaidbrokerwas Incidentlytheaddressofthetwocompanies.BoththecompaniesIntimatedtheassessee- on07.04.2004regardingthemergerofthecompanieswithanothercompany,viz. KhoobsuratLimited,Kolkataandtheassessereceivedthesharesofthenewcompanyin theratioof1:4ofthenumberofsharesoftheprevioustwocompaniesheldbythe assessee.Theassesseesold2200sharesatanexorbitantrateofRs.486.55pershareon 07.06.2005and800shareson20.06.2005attherateofRs.485.65.Thesharesweresold throughanotherbroker,viz.AshishStockBrakingPrivateLimited.Theproceedsfromthe aforesaidsaletransactionweredirectlycreditedbythebrokerintheSavingsBankAccount oftheassesseeintheUnionBankofIndia.Theassessingofficerdidnotacceptthecaseof theassesseethatshewasentitledtoexemptionunderSection10(38)oftheIncomeTax Act.Theassessingofficerheldthattheaforesaidtransactionsofpurchaseoftwopenny stocksharesforRs.60,000/-,themergerofthecompanieswithanewcompanyandthe saleofthesharesforRs.11,58,930/-fellwithintheambitofadventureinthenatureof tradeandtheassesseehadprofitedbyRs.13,98,930/Theassessingofficer,therefore, broughttheaforesaidamounttotaxunderthehead'businessincome'.Beingaggrievedby theorderoftheassessingofficer,theassesseefiledanappealbeforetheCommissionerof IncomeTax(Appeals).Theappealfiledbytheassesseewasdismissedandsowasthe ITAno.509/AHD/2018 Asstt.Year2014-15 9 subsequentappealfiledbytheassesseeagainsttheorderoftheCommissionerofIncome Tax(Appeals)beforetheIncomeTaxAppellateTribunal.Onhearingthelearnedcounsel fortheassesseeandonaperusaloftheordersoftheincometaxauthorities,itappears thatthereisnoscopeforinterferencewiththesaldordersinthisappeal.Byreferringto theaforesaidfacts,whicharenarratedintheearlierpartofthisorder,theauthorities foundthattheassesseehadmadeinvestmentintwounknowncompaniesofwhichthe detailswerenotknowntoher.Itwasheldthatthetransactionofsaleandpurchaseof sharesoftwopennystockcompanies,themergerofthetwocompanieswithanother company,viz.KhoobsuratLimiteddidnotqualifyaninvestmentandratheritwasan adventureinthenatureoftrade.Itwasheldbyalltheauthoritiesthatthemotiveofthe investmentmadebytheassesseewasnottoderiveincomebuttoearnprofit.Boththe brokers,ie,thebrokerthroughwhomtheassesseepurchasedthesharesandthebroker throughwhomthesharesweresold,werelocatedatKolkataandtheassesseedidnot haveaninklingastowhatwasgoingoninthewholetransactionexceptpayingasumof Rs.65,000/-incashforthepurchaseofsharesofsharesofthetwopennystockcompanies. TheauthoritiesfoundthatthoughttheshareswerepurchasedbytheasseseeatRs.5.50 Ps.PersharesandRs.4/-persharefromthetwocompaniesintheyear2003,the assesseewasabletosellthesharesjustwithinayearstimeatRs.486.55Psand Rs.485.65Pspershare.Thebrokerthroughwhomthesheresweresolesbytheassessee didnotrespondtotheassessingofficer'sletterseakingthenames,addressesandthe bankaccountsofthepersonsthathadpurchasedthesharessoldbytheassessee.The authoritieshaverecordedaclearfindingoffactthattheassesseehedindulgedina dubioussharetransactionmeanttoaccountfortheundisclosedincomeinthegarboflong termcapitalgain.Whilesoobserving,theauthoritiesheldthattheassesseehadnot tenderedcogentevidencetoexplainastohowthesharesinanunknowncompanyworth Rs.5/-hadJumpedtoRs.485/-innotime.TheIncomeTaxAppellateTribunalheldthat thefantasticsalepricewasnotatallpossibleastherewasnoeconomicorfinancialbasis astohowashareworthRs.5/-ofalittleknowncompanywouldjumpfromRs.5/-to Rs.485/--Thefindingsrecordedbytheauthoritiesarepurefindingsoffactsbasedona properappreciationofthematerialonrecord.Whilerecordingthesaidfindings,the authoritieshavefollowedthetestslaiddownbytheHon'bleSupremeCourtandthisCourt inseveraldecisions.Thefindingsdonotgiverisetoanysubstantialquestionoflaw.The judgmentsreportedInt(2012)20Taxman.com529(Bombay)(CITVersusJamnadevi Agrawal),(1957)31ITR294(Bombay)(PuranmalRadhakishanVersusCIT),(1970)77 ITR253(5C)(RajaBahadurVersusCIT)and(2015)235Taxman1(Bom)(CITVersusSmt. DetteM.andreliedonbythelearnedcounselfortheassesseearedistinguishableonfacts andcannotbeappliedtothecaseinhand.Sincenosubstantialquestionoflawarisesin thisappeal,theappealisdismissedwithnoorderastocosts." Factsinthepresentcaseareidenticaltothefactsoftheabovecase.Henceratioof decisionintheabovecaseissquarelyapplicabletothepresentcase. Further,hon'bleITAT,MumbaiInCITvsShamimM.BharwaniinITANo. 4906/Mum/2011(A.Y.2006-07)inorderdated27.03.2015heldIdenticaltransactionsas bogusconfirmedactionofAOintreatingtheseasunexplainedandaddingthesameu/s68 oftheAct.Ratiooftheabovejudgmentisfullyapplicabletothepresentcase. Further,hon'bleGuwahatiHighCourtInCITvs.SanghamitraBharall(361ITR481)has heldsimilartransactionstobebogusandsham. Caselawsreliedonbytheappellantarenotapplicabletothepresent caseasthesamearedistinguishedonfacts. ITAno.509/AHD/2018 Asstt.Year2014-15 10 Inviewofdiscussionaboveandrelyingontheabovecitedjudgments,Iupholdtheaction oftheAOinholdingthetransactioninsharesofComfortFincapLtd.asbogusandadding theamountofRs.5,51,09,170/-totheincomeoftheappellantu/s68oftheAct. Accordingly,additionofRs.5,51,09,170/-isupheld.Thisgroundofappealisdismissed. 9.BeingaggrievedbytheorderofthelearnedCIT(A)theassesseeisin appealbeforeus. 10.ThelearnedARbeforeusfiledpaperbookrunningfrompages1to57and inter-aliacontendedthatthesharesweresoldafterthepaymentofSTTonthe floorofthestockexchangewherethebuyersandthesellersarenotknownto eachother.Thereisnodisputeraisedbytherevenueasfarasthepurchaseof thesharesisconcerned.Allthepurchasesaresupportedbythenecessary documentaryevidencesuchaslettersofallotment,sharecertificates,contract notes. 10.1Besidestheabove,therewasnoevidencejustifyinganylivenexusinthe assesseeortheentryoperatororthecompanyoritsdirectorsasdiscussedabove. Likewise,therewasnoinformationregardingtheexchangeofcashoutofthesale ofsharestransactions.Assuch,theAOhasmadetheadditionbasedonsuspicion butthesamecannotpartakethecharacteroftheevidence. 10.2Theinformation/materials/statementsrecordedofthe3 rd partieswerenot providedforthecross-examination.Therefore,noadverseinferencebasedon suchmaterialscanbedrawnagainsttheassessee. 10.3ThelearnedARalsosubmittedthattheprincipleslaiddownbytheHon’ble CalcuttaHighCourtinthecaseofPCITVs.SwatiBajajreportedin446ITR56 werenotapplicabletothecaseinhand.Tothiseffect,thelearnedARhasfiled thewrittensubmissionwhichisreproducedasunder: Thecaptionedappealwasheardon22.12.2022andHon'bletheITAThadaskedusto placeonrecord"statementofinvestmentsasat31.03.2014".Thesaidstatementis annexedherewithandmarkedasAnnexure"A". ITAno.509/AHD/2018 Asstt.Year2014-15 11 Hon'bletheITATfurtheraskedustoplaceonrecordasmallnotesoastodemonstrateas tohowdecisionofHon'bleCalcuttaHighCourtinthecaseof"PCITvs.SwatiBajaj-(2022) 446ITR56(Calcutta)"citedbytherevenue.Inthisregard,assesseemostrespectfully submitsasfollows: FactorswhichweighedwithHon'bletheCalcuttaHighCourtwerereportofInvestigation Wing,hugefluctuationsinthepriceoftheunderlyingscrip,substantialgainearnedby variouspersonspursuanttosellingsharesoftheunderlyingscripaswellasthefactthat certainsectionofthesocietyindulgedintobogustransactionsintheunderlyingscripwhich, inturn,resultedintohugegainsinthehandsofvariouspersons. AssesseesubmitsthatdecisionofHon'bletheCalcuttaHighCourtismoreon"generalized information"ratherthan"case-specificinformation".Presumingforamomentthata certainsectionofsocietyindulgedintobogustransactionsinthescripinquestion,then alsoitismandatoryfortherevenuetogoonestepfurtheranddemonstratebeyonda shadowofdoubtthattheassesseeconcernedisalsoapartytosuchbogustransactions andhasbenefittedonaccountofsuchbogustransactions.Unlesstherevenueestablishes "livenexus"betweentheso-called"generalizedinformation'and"caseoftheassessee concerned",noadverseinferencecanbedrawnbytherevenuefordoubtingthegains earnedbytheassesseeonaccountofdealingsintheunderlyingscrip. Eveninviewoffollowingsfacts,caseoftheassesseecanbedistinguishedascomparedto factsofthecasebeforeHon'bletheCalcuttaHighCourt: AssesseehasplacedfollowingdocumentaryevidencesonrecordtodemonstratethatLTCG inquestionisabsolutelygenuine: Letterw.r.t.allotmentofshares-Pg.21ofP/B; Sharecertificate-Pg.22ofP/B; Detailsofbillsforsaleofshares-Pg.23ofP/B; Contractnotesw.r.tsaleofshares-Pgs.24-32ofP/B; Demataccount(Relevantextract)-Pg.33-34ofP/B; Revenuehasnotatallbroughtanycogentmaterialonrecordsoastoevenremotely demonstrateanyinfirmityinsuchdocumentaryevidencesplacedonrecordbythe assessee. "AO"hasalloweddeductionof"costofacquisition"fromthetotal"saleconsideration"of shares(Pg.29ofAsst.OrderrwPg.4ofPB)whichimpliesthat"purchase"ofshareshas beenadmittedtobe"genuinetransaction"byAO. Asregards"suspensionoftrading"inscripvideorderdated19.12.14.Itispostfactoevent i.e.,sucheventisoccurredaftertheendofyearinquestion(i.e.,FY13-14/AY14-15).The saidaspecthasbeenelaboratelydiscussedinthesynopsisofargumentsfiledduringthe courseofhearing. Asregards"sharpriseinprice"ofthescripinquestion,thesameisbeyondthecontrolof theassesseeandcannotbetheguidingfortreatinggenuinegainsasbogus.Thesaid aspecthasbeenelaboratelydiscussedinthesynopsisofargumentsfiledduringthecourse ofhearing. ITAno.509/AHD/2018 Asstt.Year2014-15 12 Thereisnoevidencetoprovethatthereisanylivenexusbetweenthe"assessee"&"entry provider"or"companyinquestionoritsdirectors".Unlesssuchnexusisestablishedbythe revenue,allthepersonswhodealtwiththescripinquestioncannotbepaintedwiththe samebrushmerelycertainpersonsindulgedintobogustransactionsinthescripin questionandmadebogusgains. Thereisnothingonrecordsoastoevenremotelydemonstratethatassesseehas"paid anycash"tothebuyer,brokeroranyotherentryproviderfortakingentryinformofLTCG. Asregardssome"generalinformationwithAO",itissubmittedthatsuch"general information"withAOw.r.t.accommodationentriesinrelationtothescripinquestioncan, atbest,bethe"startingpointofinvestigation"soastofindoutwhetherassesseehas actuallyearnedgenuineLTCGorhasavailedaccommodationentries.However,such "generalinformation"(which,inthiscase,hasalsonotbeenpartedwiththeassessee)can nevertakeplaceof"evidence"toholdthatassesseehasearnedbogusLTCG. Inviewoftheabove,itismostrespectfullysubmittedbeforeHon'bletheITATthatratio laiddownbyHon'bletheCalcuttaHighCourtinthecaseof"PCITvs.SwatiBajaj-(2022) 446ITR56(Calcutta)"isnotapplicabletothefactsandcircumstancesofthepresentcase. Hence,inviewoforalargumentsmadeduringthecourseofhearing,argumentsforming partofsynopsisfurnishedduringthecourseofhearingaswelltheabovestatedfactsand contentions,theimpugnedadditiondeservestobedeleted. 11.Onthecontrary,thelearnedDRcontendedthatthecompanybeingM/s ComfortFincapLtdwasnotcarryingoutanyactivityandthereforetheriseinthe priceofthesharesisnotfreefromtheclutchesofdoubt.Theassesseeisnota regularsharetraderandsuddenlyacquiredthesharesofsuchcompanyandmade suchahugeprofitwhichwasclaimedasexemptedundersection10(38)ofthe Act.Thus,thepreponderanceofprobabilityalsodoesnotsuggestthatthegain shownbytheassesseeisfromgenuinesources.ThelearnedDRinsupportofhis contention,besidesrelyingontheorderoftheauthoritiesbelowhasalsoreferred tothejudgementofHon’bleCalcuttaHighCourtinthecaseofPCITVs.Swati Bajajreportedin446ITR56. 12.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Inthepresentcase,thelong-termcapitalgain declaredbytheassesseeonsaleofsharesofM/sComfortFincapLtdfor₹ 5,51,09,170/-wastreatedasbogusandmanipulated,leadingtotheadditionby theAOundersection68oftheAct.TheviewoftheAOwasbasedoncertain ITAno.509/AHD/2018 Asstt.Year2014-15 13 factorswhichhavebeenelaboratedintheprecedingparagraphwhichhasalso beenconfirmedbythelearnedCIT(A). 12.1The1 st observationoftheAOforholdingtheimpugnedcapitalgainas boguswasthattheatthetimeofinvestmentbytheassesseethecompanywas notknowninpublicdomainandshareswerepurchasedinofflinemode.Inthis regard,firstlywenotethattheofflinepurchaseofshareisnotprohibitedunder thestatute,secondlyifsomeoneinvestsinthesharesofacompanywhichatthat timewasnotknowninpublicdomainormadeinvestmentinprivateplacement doesnotmeanthattheinvestmentisnotgenuineorprearrangedunlesssome adversematerialisavailableonrecord. 12.2ItwasalsoallegedthatthepriceoftheshareofM/sComfortFincapLtd. wasincreasedmanifoldsinashortperiodoftimewhichwasnotbelievedbythe authoritiesbelowontheprinciplesofpreponderanceofhumanprobabilitiesinthe givenfactsandcircumstances.Theriseinthepriceofthescriptsofacompany, havingnofinancialbase/businessactivity/profitabilitycertainlygivesrisetodoubt aboutsuchanincreaseintheprice.However,inthegivencase,theimpugned companywasengagedinbusinessactivity,anditwasregularlyshowingincome fromoperation,andhavingregistrationwithRBIasNBFC.Furtherinour consideredview,thesharpriseinthepriceofscriptcannotbeasolecriterionfor reachingtotheconclusionthatthepricewasriggeduptogeneratethelong-term capitalgainwhichisexemptedundersection10(38)oftheAct.Suchobservation duringtheassessmentproceedingsprovidesareasontoinvestigatethematterin detailandthesamecannottaketheplaceoftheevidence.Butinthecaseinhand, therewasnoenquiryconductedeitherbytheSEBIorthestockexchangewith respecttoriggingupofthesharepriceofM/sComfortFincapLtd.bythe assesseeorhisbroker.Assuchtheassesseecarriedoutthetransactionthrough ICICISecuritiesLtd.Inthisregardthesubmissionoftheassesseebeforethe learnedCIT(A)readsasunder: ITAno.509/AHD/2018 Asstt.Year2014-15 14 WithregardstothesecondobjectionoflearnedAOthat,EntryOperatorreferredatpoint no(1)to(iv)ofPara3.7.7haveacceptedthattheyhaveprovidedaccommodationentryin thescript"M/sComfortFincapLtd".Inthisconnection,theappellantmostrespectfully submitsthattheappellanthasnotrouteditstransactionthroughanyofthebrokers/firms. PleaserefertotheDEMATaccountstatementreferredatpageno33oftheP/bwhere YourhonourscanappreciatethattheappellanthasinfacttradedthroughICICIsecurities. Accordingly,theobjectionoflearnedAOthattheappellanthastradedthroughthe brokeragefirmofShriAnujAgrawalandShriAnilAgrawalI.eM/s.ComforSecuritiesLtdis factuallyincorrect. 12.2.1Similarly,therewasnocomplaintfiledbyanyofthepartieseithertoSEBI orthestockexchangeabouttheassesseeorhisbrokersimpleadingthatthey wereinvolvedintheactivityofriggingupthepriceoftheshares.Similarly,theAO hasnotconductedanyenquiryfromtheSEBIorBSEabouttheassesseewhether hewasengagedinfrivolousactivitiesasalleged.TheAOallegedthatSEBIhas prohibitedtheimpugnedcompanyfromenteringatransactionatstockmarket. However,wenotethatSEBIhasnottakenanyactionagainstthescriptofthe impugnedcompanyastheactionwastakenagainstthedirectorpromoterandthe companyfromaccessingtosharemarket. 12.3Further,thepriceofasharelistedonthestockexchangeisnotlinkedto thefinancialstrengthofthecompany.Assuchthesameisgovernedbyseveral marketdrivenfactors.Theassesseehasalsomadeaninvestmentinthescriptsof othercompanies.Wealsonotethatthepriceoftheimpugnedscripreachedas highasRs.448pershare,however,thehighestpriceatwhichtheassessee transferredwasRs.280to303pershare.Thus,inourconsideredview,hadthe assesseeindulgedinprearrangingtransactionfortakingaccommodationentries, thenheshouldhavetransferredentireholdingatthehighestpossibleprice. 12.4TheAOfurtherallegedthattheCEOofComfortFinSecuritiesandkey personofthecomfortgroupinthestatementrecordedbeforetheDDITKolkata admittedhavingprovidedaccommodationentryinthescriptofM/sComfort FincapLtd.Similar,admissionwasalsomadebytheotherstockbrokerduringthe searchandsurveyproceedingconductedbytheDDITKolkatainthematterof pennystock.However,theirstatementswerenotprovidedtotheassesseeforthe ITAno.509/AHD/2018 Asstt.Year2014-15 15 rebuttalandcrossexamination.Itwasalsonotbroughtonrecordthatanyofthe personwhosestatementwasrecordedhastakenthenameoftheassesseeorhis broker.Wealsonotethattherewasnoallegationagainstthebrokeri.e.ICICI securitiesthroughwhomtheassesseesoldtheimpugnedscrip.Whathasbeen adoptedbytheAOformakingtheadditionwasthemodusofoperandihighlighted bytheinvestigationwingofKolkata.Toourunderstanding,themeremodusof operandicannotbethebasisofmakingtheadditionortreatingthecapitalgainas bogusuntilandunlessitissupportedbythematerialdocuments.Onanalyzing thefactsofthepresentcase,wenotethattheAOononehandhasallegedthat theentiretransactionwasbogusbutontheotherhandtheAOhimselfhas allowedthecostofacquisitionagainstthesaleofshares,meaningthereby,the purchaseoftheshareshasbeenadmittedasgenuine.Thetransactionsof purchaseandsalesgohandinhand.Insimplewords,asaleisnotpossible withouthavingthepurchases.Thus,oncepurchaseshavebeenadmittedas genuine,thencorrespondingsalescannotbedoubteduntilandunlesssome adversematerialsarebroughtonrecord.Assuch,wenotethattheAOinthe presentcasehastakencontradictorystand.Ononehand,theAOistreatingthe entiretransactionasshamtransactionandontheotherhandhe’sallowingthe benefitofthecostofacquisitionfortheshareswhiledeterminingtheboguslong- termcapitalgain. 12.5TheallegedscammighthavetakenplaceongeneratingLTCGtoavoidthe paymentoftax.Butithastobeestablishedineachcase,bythepartyallegingso, thatthisassesseeinquestionwaspartofthisarrangement.Thechainofevents andthelivelinkoftheassessee’sactionthathewasinvolvedinsuchriggingupof sharepriceshouldbeestablishedbasedoncogentmaterials.Theallegationas discussedaboveimpliesthattherewascashexchangedfortakingexempted incomebywayoflong-termcapitalgainbywayofchequethroughbanking channels.Thisallegationthatcashhadchangedhandshastobebroughton recordbytheRevenue,butwefindthatthereisnosuchwhisperintheorderof theAO.Therewasnoinformationbroughtonrecordsuggestingthattherewasan ITAno.509/AHD/2018 Asstt.Year2014-15 16 exchangeofcashagainstthelong-termcapitalgainshownbytheassessee.Here wepertinenttorefertheorderoftheco-ordinatebenchofMumbaiTribunalin caseofITOvs.IndravadanJainHUFinITANo.4861/Mum/2014.Inthesaidcase theassesseeIndravadanJainHUFpurchasedshareofM/sRamakrishnaFincap Ltdintheyear2003forRs.3.12pershareatthefloorofKolkatastockexchange throughthebrokernamelyM/sBasantPeriwal&Co.TheassesseeIndrvadanJain HUFsoldtheimpugnedshareintheyear2005atRs.155.04pershareatthefloor ofKolkatastockexchangethroughthebrokernamelyM/sBasantPeriwal&Co andclaimedexemptedlong-termcapitalaspertheprovisionofsection10(38)of theAct.SubsequentlytheAOreceivedaninformationthataninvestigationcarried outbytheSEBIwhereinitwasfoundthatbrokernamelyM/sBasantPeriwal&Co wasindulgedinpricemanipulationthroughsynchronizedandcrossdealinscripof RamkrishnaFincapLtd.TheassesseesoldhisholdinginRamkrishnaFincapLtd duringthesameperiodwhenthebrokernamelyM/sBasantPeriwal&Co.was foundtobeindulgedinmanipulationofthepriceofscriptofRamkrishnaFincap Ltd.Thus,thecaseoftheassesseewasreopenedandfinallytheexemptedlong- termcapitalclaimedbytheassesseewasheldasbogusbytheAOandaddedto totalincomeinaccordancewithprovisionofsection68oftheAct.Inthis backdropthecoordinatebenchadjudicatedtheissueinthefavoroftheassessee byobservingasunder: "8.Wehaveconsideredrivalcontentionsandcarefullygonethroughtheordersof authoritiesbelowandfoundfromtherecordthattheAOhastreatedthesharetransaction asbogusonthepleathatSEBIhasinitiatedinvestigationinrespectofRamkrishnaFincap Pvt.Ltd.TheAOfurtherstatedthatinvestigationrevealedthattransactionthroughM/s BasantPeriwalandCo.onthefloorofstockexchangewasmorethan83%.Wefoundthat asfarasinitiationofinvestigationofbrokerisconcerned,theassesseeisnoway concernedwiththeactivityofthebroker.DetailedfindinghasbeenrecordedbyCIT(A)to theeffectthatassesseehasmadeinvestmentinshareswhichwaspurchasedonthefloor ofstockexchangeandnotfromM/sBasantPeriwalandCo.Againstpurchasespayment hasbeenmadebyaccountpayeecheque,deliveryofsharesweretaken,contractofsale wasalsocompleteaspertheContractAct,therefore,theassesseeisnotconcernedwith anywayofthebroker.NowheretheAOhasallegedthatthetransactionbytheassessee withtheseparticularbrokerorsharewasbogus,merelybecausetheinvestigationwas donebySEBIagainstbrokerorhisactivity,assesseecannotbesaidtohaveenteredinto ingenuinetransaction,insofarasassesseeisnotconcernedwiththeactivityofthebroker andhavenocontroloverthesame.WefoundthatM/sBasantPeriwalandCo.never statedanyoftheauthoritythattransactioninM/sRamkrishnaFincapPvt.Ltd.onthefloor ofthestockexchangeareingenuineormereaccommodationentries.TheCIT(A)after relyingonthevariousdecisionofthecoordinatebench,whereinonsimilarfactsand ITAno.509/AHD/2018 Asstt.Year2014-15 17 circumstances,issuewasdecidedinfavouroftheassessee,cametotheconclusionthat transactionenteredbytheassesseewasgenuine.DetailedfindingrecordedbyCIT(A)at para3to5hasnotbeencontrovertedbythedepartmentbybrininganypositivematerial onrecord.Accordingly,wedonotfindanyreasontointerfereinthefindingsofCIT(A). Moreover,issueisalsocoveredbythedecisionofjurisdictionalHighCourtinthecase ofShyamR.Pawar(supra),whereinundersimilarfactsandcircumstances,transactionsin shareswereheldtobegenuineandadditionmadebyAOwasdeleted.Respectfully followingthesamevis-à-visfindingsrecordedbyCIT(A)whichareaspermaterialon record,wedonotfindanyreasontointerfereintheorderofCIT(A). 12.6TheabovefindingoftheMumbaiTribunalcametoaffirmedbytheHon’ble BombayHighCourtvideorderdated12 th July2023oninstanceoffurtherappeal preferredbytheRevenueinIncomeTaxAppealNo.454of2018.Consideringthe factsinvolvedinabovementionedcaseviz-a-vizfactsinvolvedinthecaseofthe presentassessee,wefindthatthecaseofthepresentassesseeisbetterplaced. 12.7Likewise,wealsonotethattheassesseehasdischargedtheonusimposed undersection68oftheActbyfurnishingthenecessarydocumentaryevidencein supportofthenatureoftransactionandsourcesthereof.Thenecessarydetails furnishedbytheassesseestandasunder: 1.Purchaseconsiderationofshareswaspaidthroughcheque. 2.Sharewasdulydematerializedindemataccount. 3.SharesweresoldthroughthestockexchangeafterthepaymentofSTT. Thetransactionshavebeenconfirmedbybrokers. 4.ThepaymentsarereceivedthroughECSthroughdemataccount. 5.Inflowofsharesarereflectedindemataccount.Sharesaretransferred throughdemataccountandbuyerarenotknowntotheassessee. 6.Thereisnoevidencethattheassesseehaspaidcashtothebuyerorthe brokeroranyotherentryproviderforbookingLTCGandsharewere purchasedbythedeterminedbuyer. 7.Theassesseehasnonexusoranyrelationwiththecompany,itsdirectoror entryoperator. 8.Theassesseemayhavegotonlyincidentalbenefitofpricerise. 9.Theopportunityofcrossexaminationhasnotbeenextendedtothe assesseedespitehavingtherequestfromtheassessee. ITAno.509/AHD/2018 Asstt.Year2014-15 18 12.8Fromtheabove,theconductoftheassesseesuggeststhathewasnot involvedinriggingoranywrongdoing.Thecaselawsreliedbytheauthorities belowaredistinguishablefromthepresentfactsofthecaseinsofartherewas SEBIenquiryconductedandfoundguiltyofwrongpractices,butitisnotsointhe caseonhand. 12.9Inourview,theincomegeneratedbytheassesseecannotbeheldbogus onlybasedonthemodusoperandi,generalisation,andpreponderanceofhuman probabilities.Toholdincomeearnedbytheassesseeasbogus,specificevidence hastobebroughtonrecordbytheRevenuetoprovethattheassesseewas involvedinthecollusionwiththeentryoperator/stockbrokersforsuchan arrangement.Inabsenceofsuchfinding,itisnotjustifiabletolinkthefactwith thefindingunearthedincaseofsomethirdpartyorpartieswiththetransactions carriedoutbytheassessee.FurtherthecaselawsreliedbytheAOareregarding thetestofhumanprobabilitieswhichmaybeofgreaterimpactbutthesame cannotusedblindlywithoutdisposingofftheevidenceforwardedbytheassessee. Insimplewords,therewerenotbroughtanyevidencefromindependentenquiry tocorroboratetheallegation.Assuch,theAOhashighlightedvarioussuspicious circumstances,butnoadditioncanbemademerelyonthebasisofsuspicious circumstancesorpresumptionunlesssomecogentmaterialevidencebroughton record.Inthisregard,wedrawsupportandguidancefromthejudgmentof Hon’bleRajasthanHighCourtinthecaseofCITvs.SumitraDevireported49 taxmann.com37whereinitwasheldasunder: 7.TrueitisthatseveralsuspiciouscircumstanceswereindicatedbytheAObutthen,the findingsasultimatelyrecordedbyhimhadbeenbasedmoreonpresumptionsratherthan oncogentproof.AsfoundconcurrentlybytheCIT(A)andtheTribunal,theAOhadfailed toshowthatthematerialdocumentsplacedonrecordbytheassesseelikebroker'snote, contractnote,relevantextractofcashbook,copiesofsharecertificate,de-matstatement etc.werefalse,fabricatedorfictitious.Theappellateauthoritieshaverightlyobservedthat thefactsasnoticedbytheAO,likethenoticeunders,133(6)tothecompanyhavingbeen returnedunserved,delayedpaymenttothebrokers,anddematerialisationofsharesjust beforethesalewouldleadtosuspicionandcallfordetailedexaminationandverification butthen,forthesefactsalone,thetransactioncouldnotberejectedaltogether, particularlyinabsenceofanycogentevidencetothecontrary. ITAno.509/AHD/2018 Asstt.Year2014-15 19 12.10Thecontroversyalsoariseswhetherapersonwhogenuinelypurchasesthe sharesatalowpriceandsoldathighprice,therefore,heenjoyedthewindfall fromsuchscripts,canhebedisallowedthebenefitoftaxexemptionprovided undersection10(38)oftheActinasituationwhereitisestablishedthattheshare priceofthecompanywasriggeduptoextendthebenefittocertainparties. Justicecannotbedeliveredinamechanicalmanner.Inotherwords,whatwesee ontherecordsavailablebeforeus,sometimeswehavetotravelbeyonditafter ignoringthesame.Furthermore,whiledeliveringthejustice,wehavetoensurein thisprocessthatculpritsshouldonlybepunished,andnoinnocentshouldbe castigated.Aninnocentpersonshouldnotsufferforthewrongdoingsoftheother parties.Inthecaseonhand,admittedlytherewasnoevidenceavailableonrecord suggestingthattheassesseeorhisbrokerwasinvolvedintheriggingupofthe priceofthescriptofM/sComfortFincapLtd.Thus,itappearsthattheassessee actedinthegivenfactsandcircumstancesingoodfaith.Furthermore,theshares wereheldbytheassesseeforalmost3years.Assuchtheassesseepurchasedthe impugnedshareson15 th March2011andsoldthesameduringtheperiod27 th Januaryto6 th February2014.Thus,itwasnotpossiblefortheassesseetoforesee thepriceofthescriptinfuture. 12.11Inholdingso,wedrawsupportandguidancefromthejudgmentofHon’ble DelhiHighcourtincaseofPr.CITvs.Smt.KrishnaDevireportedin126 taxmann.com80whereitwasheldasunder: 11.Onaperusaloftherecord,itiseasilydiscerniblethatintheinstantcase,theAOhad proceededpredominantlyonthebasisoftheanalysisofthefinancialsofM/sGoldLine InternationalFinvestLimited.HisconclusionandfindingsagainsttheRespondentare chieflyonthestrengthoftheastounding4849.2%jumpinsharepricesoftheaforesaid companywithinaspanoftwoyears,whichisnotsupportedbythefinancials.Onan analysisofthedataobtainedfromthewebsites,theAOobservesthatthequantumleapin thesharepriceisnotjustified;thetradepatternoftheaforesaidcompanydidnotmove alongwiththesensex;andthefinancialsofthecompanydidnotshowanyreasonforthe extraordinaryperformanceofitsstock.Wehavenothingadversetocommentonthe aboveanalysis,butareconcernedwiththeaxiomaticconclusiondrawnbytheAOthatthe Respondenthadenteredintoanagreementtoconvertunaccountedmoneybyclaiming fictitiousLTCG,whichisexemptundersection10(38),inapreplannedmannertoevade taxes.TheAOextensivelyrelieduponthesearchandsurveyoperationsconductedbythe InvestigationWingoftheIncome-taxDepartmentinKolkata,Delhi,Mumbaiand Ahmedabadonpennystocks,whichsetsoutthemodusoperandiadoptedinthebusiness ITAno.509/AHD/2018 Asstt.Year2014-15 20 ofprovidingentriesofbogusLTCG.However,therelianceplacedonthereport,without furthercorroborationonthebasisofcogentmaterial,doesnotjustifyhisconclusionthat thetransactionisbogus,shamandnothingotherthanaracketofaccommodationentries. WedonoticethattheAOmadeanattempttodelveintothequestionofinfusionof Respondent'sunaccountedmoney,buthedidnotdigdeeper.Noticesissuedunder sections133(6)/131oftheActwereissuedtoM/sGoldLineInternationalFinvestLimited, butnothingemergedfromthiseffort.Thepaymentforthesharesinquestionwasmade bySh.SalasarTradingCompany.Noticewasissuedtothisentityaswell,butwhenthe noticeswerereturnedunserved,theAOdidnottakethematteranyfurther.Hethereafter simplyproceededonthebasisofthefinancialsofthecompanytocometotheconclusion thatthetransactionswereaccommodationentries,andthus,fictitious.Theconclusion drawnbytheAO,thattherewasanagreementtoconvertunaccountedmoneybytaking fictitiousLTCGinapre-plannedmanner,isthereforeentirelyunsupportedbyanymaterial onrecord.ThisfindingisthuspurelyanassumptionbasedonconjecturemadebytheAO. ThisflawedapproachformsthereasonforthelearnedITATtointerferewiththefindings ofthelowertaxauthorities.ThelearnedITATafterconsideringtheentireconspectusof caseandtheevidencebroughtonrecord,heldthattheRespondenthadsuccessfully dischargedtheinitialonuscastuponitundertheprovisionsofSection68oftheAct.Itis recordedthat"Thereisnodisputethatthesharesofthetwocompanieswerepurchased online,thepaymentshavebeenmadethroughbankingchannel,andtheshareswere dematerializedandthesaleshavebeenroutedfromde-mataccountandtheconsideration hasbeenreceivedthroughbankingchannels."Theabovenotedfactors,includingthe deficientenquiryconductedbytheAOandthelackofanyindependentsourceorevidence toshowthattherewasanagreementbetweentheRespondentandanyotherparty, prevailedupontheITATtotakeadifferentview.Beforeus,Mr.Hossainhasnotbeenable topointoutanyevidencewhatsoevertoallegethatmoneychangedhandsbetweenthe Respondentandthebrokeroranyotherperson,orfurtherthatsomepersonprovidedthe entrytoconvertunaccountedmoneyforgettingbenefitofLTCG,asalleged.Inthe absenceofanysuchmaterialthatcouldsupportthecaseputforthbytheAppellant,the additionscannotbesustained. 12.Mr.Hossain'ssubmissionsrelatingtothestartlingspikeinthesharepriceandother factorsmaybeenoughtoshowcircumstancesthatmightcreatesuspicion;howeverthe Courthastodecideanissueonthebasisofevidenceandproof,andnotonsuspicion alone.Thetheoryofhumanbehaviorandpreponderanceofprobabilitiescannotbecited asabasistoturnablindeyetotheevidenceproducedbytheRespondent. 12.12RespectfullyfollowingthejudgmentofHon’bleDelhiHighCourt(Supra), weholdthatinabsenceofanyspecificfindingagainsttheassesseeinthe investigationwingreport,theassesseecannotbeheldtobeguiltyorlinkedtothe wrongactsofthepersonsinvestigatedasfaraslong-termcapitalgainearnedon saleofshareofM/sComfortFincapLtdisconcern. 12.13WealsonotethatthisTribunalinthecaseofParasbenKasturchandKochar MehtaLodha&Co.CharteredAccountantvs.ITObearingITANo.549/Ahd/2008 involvingidenticalfactsandcircumstanceshasheldasunder: ITAno.509/AHD/2018 Asstt.Year2014-15 21 7.Wehavegonethroughtherelevantrecordandimpugnedorderandheardboththe parties.AssesseesubmittedthatheisacustomerofICICIBankandhavingdemataccount ofICICISecuritiesLtd.andhehaspurchasedsharesthroughICICISecuritiesLtd.and moneyhasbeenpaidthroughbankingchannel.CopiesofbankstatementandDemat accounthavebeensubmittedbeforethelowerauthorities. 8.Ld.A.R.alsodrawnourattentiontowardsthestatementofEdelweissBrokingLtd. throughthesaidcompanysharesweresoldandalsoshownuscopyoftheContractNote andallthesedetailswerefurnishedbeforethelowerauthorities.Theassesseehasearned longtermcapitalgainfromthesaleofcompaniessharei.e.AlphaGraphicIndiaLtd.and BlazonMarbles. 9.Inourconsideredopinion,insuchcaseassesseecannotbeheldthatheearnedLong TermCapitalgainthroughboguscompanywhenhehasdischargedhisonusbyplacingall therelevantdetailsandsomeofthesharesalsoremainedintheaccountoftheappellant afterearningofthelongtermcapitalgain. 10.Ld.A.R.contentionisthatnostatementoftheInvestigationWingwasgiventothe assesseewhichhasanyreferenceagainsttheassessee. 11.Insupportofitscontention,ld.A.R.alsocitedanorderofCo-ordinateBenchinITANo. 62/Ahd/2018inthematterofMohanPolyfabPvt.Ltd.vs.ITOwhereinITAThasheldthat A.O.shouldhavegrantedanopportunitytocrossexaminethepersononwhosestatement noticewasissuedtotheassesseeforboguslongtermcapitalgain.Butinthiscase,neither statementwassupplyingtotheassesseenorcrossexaminationwasallowedbytheld.A.O. Therefore,inourconsideredopinion,assesseehasdischargedhisonusandnoaddition canbesustainedinthehandsoftheassessee. 12.14Atthisjuncture,wealsofeelpertinenttorefertheorderofcoordinate benchofIndoreTribunalincaseofShivnarayanSharma&OrsbearingITANos. 889/Ind/2018,474,206,60,987/Ind/2019,whereinidenticalfactand circumstancesheldasunder: 16.Sinceweareadjudicatingtheabovestatedcommonissueonthebasisofabove assesseenamelyShriShivnarayanSharma,wenotethattheassesseepurchased6000 equitysharesofConartTradersLtdon22.10.2011atacostofRs.1,50,000/-.Thereisno restrictionunderthelawtopurchaseequitysharesonofflinemode.Videorderdated 22.3.2013oftheHon’bleMumbaiHighCourtM/sConartTradersLimitedwasmergedwith M/sSALandinlieuthereof6000sharesofM/sSALwerereceivedbytheassesseeinits demataccount.Afterholdingtheequitysharesformorethan12monthssincepurchased on22.10.2011,assesseesoldthesharesofM/sSALduringtheperiodApril2014toJune 2014througharegisteredbrokerandallthetransactionsofsaleofsharestookplaceon therecognisedstockexchange.Saleconsiderationwasreceivedinthebankaccount attachedwiththeDemataccount.Thedetailofthepersonspurchasingthesharesisnot providedontheportalofSEBIandallthetransactionsofpurchaseandsaletookplaceon theportalthroughregisteredbrokersunderthecontrolofSEBI.M/sSALhasnotbeen strikedoffasashellcompany.TradingofsharesofM/sSALwaspermittedbySEBI.Prime facie,alltheconditionsprovidedu/s10(38)oftheActseemstohavebeenfulfilledbythe assessee. 17.Asregardsthesecondissueraisedisthatassesseewasnotprovidedopportunityof crossexamination,weobservethatLd.A.Ohasreferredtosomeinvestigationcarriedout bytheDepartmentinthecaseofsomebrokersandotherassessee(s)locatedatKolkata ITAno.509/AHD/2018 Asstt.Year2014-15 22 andotherplacesandthereisareferenceofthecompanyM/sSAL.Howeveritisnot disputedthatnameoftheassesseeisnotappearinginsuchreportnoranyevidencewas foundbytheLd.A.Owhichcouldindicatethatassesseewasalsoapartorconnectedto theallegedracketofprovidingaccommodationentryofbogusLTCGnoranyproofofany agreementbetweentheassesseeandotherpersonsmentionedinthereporthasbeen found.Sothebasisofadditionisprimarilyonthestatementofthirdpartyaswellasthe informationgatheredfromothersources.Perusaloftherecordsshowsthattheassessee hasnotbeenprovidedanyaccesstosuchreportnoranyopportunitywasprovidedto crossexaminethosepersonswhoacceptedtohaveprovidedaccommodationentriesfor thebogusLTCG,totheassessee. 18.WeobservethatalltheabovestatedfactsandtheissueofgenuinenessofLTCGand failureoftheLd.A.Otoprovideopportunitytocrossexaminationbytheassesseewith regardtotheadditionmadeu/s68oftheActforthesaleconsiderationreceivedfromsale ofequitysharesofM/sSALandadditionforestimatedbrokerageexpenseshasbeendealt bytheCo-ordinateBenchofMumbaiTribunalinthecaseofDipeshRameshVardhanV/s DCIT(supra)andthesameissquarelyapplicableontheinstantappeals. ******************* 23.Wethereforeinthelightofabovejudgmentswhicharesquarelyapplicableinthe issuesraisedintheinstantappealsareoftheconsideredviewthattheclaimofLongTerm CapitalGainmadebytherespectiveassessee(s)deservestobeallowedastheyhave enteredintothetransactionsofpurchaseandsalesdulysupportedbythedocuments whichhavenotfoundtobeincorrect.Theconditionsprovidedu/s10(38)oftheActhave beenfulfilledbytheassessee(s)namelyShivnarayanSharma,SapanShaw,PrayankJain, GovindHarinarayanAgrawal(HUF)andManishGovindAgrawal(HUF)astheyhavesold theequitysharesheldinDemataccountandtransactionsperformedonarecognisedstock exchangethroughregisteredbrokeratthepriceappearingontheexchangeportalandat thepointoftimeofsaleofequityshares,companieswerenotmarkedasshellcompanies bySEBIandnorthetradingofthesescripsweresuspended.Theassesseealsodeserves tosucceedonthelegalgroundasnoopportunitywasawardedtocrossexaminationthe thirdpersonwhichwereallegedlyfoundtobeprovidingaccommodationentriesand thereforenoadditionwascalledforinthehandsoftheassesseewithoutproviding opportunityofcrossexaminationinviewoftheratiolaiddownbyHon'bleApexCourtin thecaseofAndamanTimberIndustriesvs.CCE281CTR241(SC)that“notallowingthe assesseetocrossexaminethewitnessesbytheadjudicatingauthoritythoughthe statementsofthosewitnessesweremadethebasisoftheimpugnedorderisaserious flawwhichmakestheordernullityinasmuchasitamountedtoviolationofprinciplesof naturaljusticebecauseofwhichtheassesseewasadverselyaffected”. 24.Weaccordinglyinviewofourabovediscussions,factsandcircumstancesofthecase andrespectfullyfollowingjudicialprecedentsandthedecisionsofCo-ordinatebenches squarelyapplicableontheinstantcases,areoftheconsideredviewthatinthecaseofthe assessee(s)namelyShivnarayanSharma,SapanShaw,PrayankJain,GovindHarinarayan Agrawal(HUF)andManishGovindAgrawal(HUF),theclaimofexemptincomeu/s10(38) oftheActofLongTermCapitalGainfromsaleofequitysharesdeservestobeallowedand noadditioniscalledfortheestimatedbrokerageexpensesmadeinthehandsofthe assessee(s).ThusfindingofLd.CIT(A)issetasideandtheGroundsraisedbythe assessee(s)inITANos.889/Ind/2018,474/Ind/2019,206/Ind/2019,60/Ind/2019, 61/Ind/2019and987/Ind/2019areallowed. ITAno.509/AHD/2018 Asstt.Year2014-15 23 12.15ItisalsoimportanttonotethattheadditionwasmadebytheAObasedon thestatements/informationreceivedfromthe3 rd party,butnoopportunitywas affordedbytherevenueforthecross-examinationwhichisagainsttheprinciples ofnaturaljusticeasheldbytheHon’bleApexCourtinthecaseofAndaman TimberIndustriesinCivilAppealNo.4228of2006.Likewise,theHon’bleApex courtinthecaseofKishinchandChellaramreportedin125ITR713heldthatthe incometaxauthoritiesbeforerelyinguponanymaterialarerequiredtoprovide suchmaterialtotheassesseeforrebuttable.Therelevantobservationofthe Hon’bleApexCourtisextractedasunder: Itistruethattheproceedingsundertheincome-taxlawarenotgovernedbythestrict rulesofevidenceand,therefore,itmightbesaidthatevenwithoutcallingthemanagerof thebankinevidencetoprovethisletter,itcouldbetakenintoaccountasevidence.But beforetheincome-taxauthoritiescouldrelyuponit,theywereboundtoproduceitbefore theassesseesothattheassesseecouldcontrovertthestatementscontainedinitby askingforanopportunitytocrossexaminethemanagerofthebankwithreferencetothe statementsmadebyhim. 12.16Inthecaseonhand,therevenueauthoritiestoholdthetransactioncarried outbytheassesseeasshamtransactionreferredandreliedonmaterialand statementsofvariousbrokerorentryoperatorrecordedorcollectedbytheDDIT KolkataandMumbai.However,anymaterial/statementwasneitherprovidedto theassesseeforhisrebuttablenoranyindependentcogentmaterialbroughton recordsuggestinganylivelinkbetweenthematerialreceivedfromtheDDITand transactioncariedoutbytheassesseeonhand.Therefore,noadverseinference canbedrawnagainstthepresentassesseebasedonsuchmaterialwhichdonot constituteadmissibleevidenceinthelightofjudgmentofHon’bleApexcourt. 12.17Itisalsoimportanttohighlightthatitisnotthecasethattheassesseehas enteredintosoletransactionofsaleandpurchaseofsharesintheimpugnedscrip ofM/sComfortFincapLtdonlyandearnedexemptedlong-termcapital.Assuch theassesseehasmadeinvestmentinsharesofvariousprivateandpublic companywhicharedetailedasunder: ITAno.509/AHD/2018 Asstt.Year2014-15 24 SanjayP.Mehta 1563/A,“AASHIRWAD” RupaniSardarnagarRoad, Bhavnagar. Investments. GroupSummary 1-Apr-2013to31-Mar-2014 ClosingBalance DebitCredit FixedDeposit4,27,393.00 LICOFINDIA1,14,33,554.00 MadhavIndustriesLtd.21,21,756.00 NationalSaving Ceritificate 28,000.00 PPFA/c-069456862011,80,078.00 ShareofPriyablue Import&ExportPvt. Ltd. 50,000.00 ShareofPriyablue InfrastructurePvt.Ltd. 50,000.00 ShareofPriyablue ShippingPvt.Ltd. 50,000.00 ShareofPriyablue TextilePvt.Ltd. 50,000.00 ShareofPriyaholding Pvt.Ltd. 22,200.00 SharesofAdamji BuildingPremises 250.00 SharesofPriyaBlue IndustriesPvt.Ltd 3,61,53,684.00 ULIP15,000.00 GrandTotal 12.18BeforepartingitisalsoimportanttohighlightthatthelearnedDRattime ofhearingvehementlyreliedupontherecentjudgmentofHon’bleCalcuttaHigh CourtinthecaseofPCITvs.SwatiBajaj&othersreportedin[2022]446ITR56. However,wefindthatintheidenticalfactsandcircumstancesHon’bleDelhiHigh CourtandBombayHighCourt(supra)hasdecidedtheissueinfavourofthe assessee.Moreover,theHon’bleGujaratHighCourtinthecaseofPCITVs. ChampalalGopiramAgarwalintaxappealNo.366of2023,involvingidentical factsandcircumstanceshasdismissedtheappealoftheRevenueattheadmission stage,meaningtherebytheorderoftheTribunalwasupheld.Thus,inviewofthe abovediscussion,weholdthatthecapitalgainearnedbytheassesseecannotbe heldbogusmerelybasedonsomereport/findingunearthedincaseofthird party/partiesinthegivenfactsandcircumstancesunlesscogentmaterialis ITAno.509/AHD/2018 Asstt.Year2014-15 25 broughtagainstparticularassesseeonrecord.Therefore,weherebysetasidethe findingofthelearnedCIT(A)anddirecttheAOtodeletetheadditionmadeby him.Hencethegroundsofassessee’sappealareallowed. 13.Intheresult,theappealoftheassesseeisherebyallowed. OrderpronouncedintheCourton25/07/2023atAhmedabad. Sd/-Sd/- (SIDDHARTHANAUTIYAL)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated25/07/2023 Manish