Shivani Ashokbhai Shah, Ahmedabad V. The Income Tax Officer, Ward-5(2)(3), Ahmedabad

ITA 517/AHD/2023

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9763 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 25-06-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ITA NO. AHD SHIVANI
• Keywords: Bogus purchase; Unexplained cash credit; Unexplained investment; Capital asset; Gift; Depreciation; Income from undisclosed sources; Search and seizure; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Question of law; Cost of acquisition; Corroborative evidences; Accommodation entries; Onus to prove; Sham transactions; Penny stocks; Set aside; Capital Gains
• Section: 68; 69; 271(1)(c); 69C; 143(3); 153A; 133(6); 205; 250; 251; 143(2); 64; 43; 48; 73; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I. T.A. No. 517/Ahd/20 23 ( नधा रण वष / As sess ment Year : 2014 -1 5) Shivani Asho kbh ai Shah 2/2/B, Center Po int Flats, Panchwati Circle, Ambawad i, Ah medabad बनाम/ Vs. Income Tax Off icer Ward-5(2)(3), Ah med abad थायी लेखा सं./जीआइआर सं./PAN/ GIR No . : F KIPS 117 2J (Appellant) . . (Respondent) अपीलाथ ओर से /Appellant by : Shri Anil Kshatriya & Shri Alay Anil Kshatriya, ARs. यथ क ओर से/Respondent by : Shri Ashok Kumar Suthar, Sr. DR Date o f Hearing 09/10/2023 Date o f Pronouncement 30/11/2023 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal has been filed at the instance of the assessee is directed against the order dated 27.04.2023 passed by the National Faceless Appeal Centre (in short ‘NFAC’) under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’), arising out of the order dated 27.12.2016 passed by the ITO, Ward-5(2)(3), Ahmedabad, under Section 143(3) of the Act for Assessment Year 2014-15. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 2 - 2. We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. 3. The appellant, an individual, deriving income from capital gains and income from other sources, such as interest from bank, maintaining books of accounts on mercantile basis filed her return of income on 16.07.2015 declaring total income at Rs. Nil, which was completed under Section 143(3) of the Act upon determining total income at Rs.2,16,59,190/- on 27.12.2016 upon making addition of Rs.2,16,59,190/- under Section 10(38) of the Act disallowing the assessee’s claim of exempted long term capital gains under Section 10(38) of the Act, which was further been confirmed by the First Appellate Authority. Hence, the instant appeal before us. 4. The brief facts leading to the case is this that the assessee received 1,60,000 shares of M/s. Kappac Pharma Ltd. as gift from her mother, namely, Smt. Meenaben Ashokbhai Shah, the same was acquired by her in F.Y. 2009- 10 by making investment through account payee cheques in the preferential warrants of the said company. 5. On 09.06.2009, the mother of the appellant applied for 5000 warrant of convertible (equity shares) of M/s. Kappac Pharma Ltd. against payment of Rs.54,80,000/- as an application money. On 27.08.2009, she paid Rs.6,60,000/- as the first call money by way of drawing cheque on HDFC Bank, Ambawadi Branch, Ahmedabad and then paid Rs.7,10,000/- by way of cheque drawn on HDFC Bank, Ambawadi Branch, Ahmedabad on 20.10.2010. She was given preferential 5 lakh shares of M/s. Kappac Pharma Ltd. on 25.11.2010. On 25.11.2010, she received physical share certificate ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 3 - being No. 0015350 and the same were under lock-in-up to November 19, 2011. The physical share certificate was surrendered for demat account by her to the broker M/s. India Infoline Ltd.and got credited in her demat account on 13.05.2013. 6. Thereafter, on 25.03.2014 out of natural love and affection, she gifted 1,60,000 shares of the said M/s. Kappac Pharma Ltd. to her daughter, the appellant before us, under a deed of gift duly notarized. Consequentially, shares got transferred into the demat account of appellant with M/s. Indo Thai Security Ltd. The appellant accordingly accounted for the above 1,60,000 shares in her books of account for Rs.21,92,000/-. Only on 28.03.2014, the appellant then sold 5000 shares of M/s. Kappac Pharma Ltd. for a consideration of Rs.34,34,850/- through her broker Indo Thai Ltd. followed by further sale of 27000 shares of M/s. Kappac Pharma Ltd. for Rs.1,86,37,735/- through her same broker, namely, Indo Thai Ltd. on 31.03.2014. As a result whereof, the claim of long term capital gain of Rs.2,16,59,185/- on account of sale of shares of 5000 + 27000 i.e. 32000 shares crystalized. 7. The working of long term capital gain is as follows: (1) Working of LTCG: Sale value of Shares Rs.2,20,97,585/- Less: Purchase cost (Cost in the hands of Previous owner u/s. 49(1) Of the Act.) Rs. 4,38,400/- LTCG Rs. 2,16,59,185/- 8. The cost of the share shown by the assessee at Rs.13.70 and the sale price at Rs.690/- per share as during the year under consideration. The ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 4 - appellant received 1,60,000 shares of M/s. Kappac Pharma Ltd. as a gift from her mother and out of which 32,000 were sold wherein the cost price was shown at Rs.4,38,400/- against which the shares were sold at Rs.2,20,97,585/- and claimed exemption under Section 10(38) of the Act of long term capital gain of Rs.2,16,59,185/-. The assessee was issued the following show cause by the Revenue: “Please refer to the above subject and your submission dated 22-12-2016 In this connection you are requested to furnish the following further information/details: 2. During the course of enquiries conducted by the Investigation Wing of Income Tax Department at Kolkotta statements of various share brokers and directors of companies were recorded on path In the statements they have categorically affirmed that they were indulging in arranging and providing accommodation entry to various clients through LTCG and the scrip of Kappac Pharma is also used for providing long term capital gain entry to the beneficiaries. This pre-arranged bogus capital gain income so earned through rigging of shares is claimed as exempt in the books of beneficiary it is further seen that Kappac Pharma itself has attracted regulatory action from SEBI Trading in scrip itself was suspended by BSE as a surveillance measure and is still remain suspended. The following chart shows the price of the scrip which was not real price but it was rigged one so as the alleged investors can be benefited by offloading their position at the high time. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 5 - From the above it could be seen that the shares which was priced@ Rs. 10/- to Rs. 13.50 in 2009 were sold in the year 2013-14 @ Rs.680 and above. 3. It is noticed that your mother Smt. Meenaben Ashokbhai Shah has received preferential warrants of Kappc Pharma @ Rs. 13.70 per warrant which were converted in to shares thereafter on 20-11-2010 out of which 160000 shares were gifted to you. On perusal of financial position it is evident that the said company was indulging in providing accommodation entries and the price was artificially rigged for of funds. The beneficiaries have shown to have sold the shares at such high price so that they can claim LTCG which is exempt from tax. 4. You are, therefore, required to show cause as to why the sale consideration of Rs 2.16.59,185 in the form of Long Term Capital Gain should not be treated as your undisclosed income of the year under consideration 5. Your reply should reach this office on or before 27-12-2016 No attendance/non-furnishing of details/books of account may result into penalty proceedings w/s 271(1)(b) of the IT Act and finalization of assessment us 144 of the I.T. Act on the basis of maternal available on record Please note that this being a time barring matter, no further adjournment will be granted. This is for your information.” 9. In response to the same, the assessee replied on 26.12.2016. The contents whereof is as follows: "I am in receipt of the above referred notice issued from your honour's office by which your honour has given the show-cause that why the sales consideration of Rs.2, 16,59,185/- received on sale of shares of Kappac Pharma Ltd. in the form of Long Term Capital Gain (LTCG) should not be treated as your undisclosed income and added to your income as per observations/findings given in the show-cause notice As against the above show-cause and observations given therein, the rebuttal of the assessee is as under: Para 2 During the course of enquiries conducted by the Investigation wing of Income Tax Department at Kolkata, statements of various share brokers and directors of companies were recorded on oath. In the statements they have categorically affirmed that they were indulging in arranging and providing accommodation entry to various clients through LTCG and the scrip of Kappac Pharma is also used for providing long term capital gain entry to the beneficiaries. This pre-arranged bogus capital gain income so earned through rigging of shares is claimed as exempt in the books of beneficiary. It is further seen that Kappac Pharma itself has attracted ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 6 - regulatory action from SEBI. Trading in scrip itself was Suspended by BSE as a surveillance measure and is still remain suspended. The price of the scrip which was not real market price but it was rigged one so as the allege investors can be benefited by offloading their position at the high time. From the above it could be seen that the shares which was priced @ Rs. 10/- to Rs. 13.50 in 2009 were sold in the year 2013-14 @ Rs.680 and above. That in this Para your honour has relied up on the enquiries conducted by the Investigation Wing of the Income Tax Department at Kolkata, Statements of various brokers and directors of the companies recorded by the department and the findings arrived/based on such enquiries. However no such material/records and/or statements of brokers and directors of the companies recorded by the department have been provided to the assessee with the show-cause for her rebuttal. Hence your honour is kindly requested to provide the copy of such enquires, list of brokers and directors whose statements have been recorded, copies of such statements and their cross examination before taking any adverse inference in the case of the assessee while relying on the said enquiries/statements. From the plain reading of this Para, it seems that your honour has made the general statement as if the same would applied to all the persons who have carried out the transactions in the shares of Kappac Pharma Ltd irrespective of facts of the each case and examining it independently like the case of the assessee. It is also not known from the observations given in this Para that whether statements of directors of Kappac Pharma Ltd and broker through whom the assessee has sold shares were recorded by the department as well as whether they have revealed the name of the assessee as one of the beneficiaries for which allegation has been made in this Para of the show-cause notice or not. Hence without bringing on record such facts from the materiel/ evidences gathered by your honour, drawing adverse inference in the case of the assessee, on the basis of observations given in this Para is mere wild presumption/ suspicion not permissible under the law as per the settled legal principles. That as regards your honour's observation that the company itself attracted regulatory action from SEBI and trading in the scrip itself was suspended by BSE as a surveillance measure and is still remained suspended, the assessee would like to submit that the regulatory action from SEBI and the surveillance measure taken to suspend the scrip took place in 2015 i.e. considerable period of time after approx. 6 years from the year of purchase and 1 year after sale of shares by the assessee. are also numbers of companies which have been suspended by the stock exchanges on year to year for various reasons/factors and therefore suspension of Trading in shares of the said company by the stock exchange itself did not automatically proves/establishes that the transactions that took place in the shares of such companies much prior to suspension are not genuine and/or sham transaction. It is therefore submitted that the period during which the investment made by mother of the assessee Meena Shah and its subsequent sales by assessee since the company Kappac Pharma Ltd was a regular listed company at the recognized stock exchange of India and trading in the shares of the said company ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 7 - was done like any other scrip, the events happened post facto to the transactions done by the assessee does not by itself prove that the assessee has routed her alleged unaccounted money through sale of shares on which LTCG has arisen. However if your honour is in possession of any material/evidence regarding the outcome of such regulatory action from SEBI and the surveillance measure by BSE which lead your honour to reach the conclusion that assessee has taken accommodation entries to route his unaccounted money, the same may please be specifically provided to the assessee for rebuttal and any adverse view taken without the said material/evidence for rebuttal is bad in the eye of law and against the principal of natural justice and equity. That as regards your honour's observation that shares which was priced at Rs. 13.50/- in 2009 was sold at Rs.680/- in F.Y.2013/2014, it is submitted that in the stock market in the commercial terms it is well known that the prices of the scrip are flown with the winds and the sentiments irrespective of the fundamentals of the scrip and therefore the price of the scrip has been gone substantially high after shares were purchased does not automatically mean that the transaction of the assessee in the said scrip is not genuine. Merely increase in the price of shares was higher does not mean that the transactions entered into by the assessee is not genuine and therefore to treat the said transactions as doubtful is merely on surmises, conjectures and personal presumption not supported by any cogent material evidences. In fact, no material/evidences have been brought on record by your honour to arrive at the conclusion that there was involvement of the assessee to inflate the sale price in alleged connivance with the brokers and the price at which the shares were sold were not genuine price. The assessee submits that in the stock exchange it is not a case that only the market price of the scrip which has been sold by the assessee has gone substantially high but there is numerous scrip whose prices has gone high/low depending on market sentiments Irrespective of its fundamentals. Hence merely price of shares were gone up cannot prove that the transactions entered in to by the assessee are not genuine and more particularly when the holding period of shares was more than 55 months from the date of the original investments made by mother of the assessee Meena Shah. Hence the proposed show-cause notice based on the observations given in this Para of the notice is bad in law and mere suspicion and therefore required to be withdrawn. Para 3 It is noticed that your mother Smt. Meenaben Ashokbhal Shah has received preferential warrants of Kappac Pharma @ Rs.13.70 per warrant which were converted in to shares thereafter on 20-11-2010 out of which 160000 shares were gifted to you. On perusal of financial position it is evident that the said company was indulging in providing accommodation entries and the price was artifically rigged for layering of funds. This penny stock transaction is suspicious in nature. The beneficiaries have shown to have sold the shares at such high price so that they can claim LTCG which is exempt from tax. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 8 - That as regards the observations given in this Para, the assessee has no objections as regards the 160000 shares of Kappac Pharma Ltd received by her as gift from her mother Meena A. Shah as the same is based on the facts of the case. The subsequent observation in the said Para is general in nature and no material/evidence has been brought on record to establish/prove that the said company is indulged in providing accommodation entries and the price was rigged and also the involvement of the and his mother Meena A. Shah in rigging of the price of the shares. Merely financials of the company is not matched with the price of the shares quoted on stock exchange does not mean that the said company is indulged in providing the accommodation entry and its price was rigged. The company whose shares have been sold by the assessee is a penny stock company also does not automatically mean that the transactions of the assessee in the said scrip is not genuine and in the nature of accommodation entry in absence of any cogent material/ evidences brought on record. The observations given in this Para is also noting but the wild presumption and therefore cannot be taken as base for drawing adverse inference in the case of assessee. Hence the proposed show-cause notice based on the observations given in this Para of the notice is also bad in law and mere suspicion and therefore required to be withdrawn. Facts of the case: 1. That the assessee has received 160000/- shares as gift from his mother Meena A. Shah on 25/03/14 which has been credited in her demat A/c with Indo Thai Securities Ltd. 2. That the mother Meena A. Shah of the assessee has made an application in 5,00,000 Convertible Preferential warrants of Kappac Pharma Ltd @Rs.13.70 per warrants in F.Y.2009/2010 to be converted into equity shares of Rs. 10 each of the said company after 1 from the date of allotment of warrants. That she has made the payment of Rs.65,80,000/- towards such warrants through her SB A/c with HDFC Bank and Bank of India. 3. The said 5,00,000 preferential warrants were converted in to equivalent number of Equity Shares (i.e. 5,00,000) of Rs. 10/- each at a premium of Rs.3.70/- per share in the month of November 2010 and out of such 5,00,000 equity shares, she has gifted 160000 shares to the assessee during the year under consideration. 4. That the assessee has sold 32000 shares of Kappac Pharma Ltd at an aggregate consideration of Rs. 2,20,97,585/- and after claiming proportionate cost of the said shares at Rs. 4,38,400/- (Rs. 13.70 per share) eamed the capital gain of Rs.2, 16,59,185/-. 5. It is submitted that as per provisions of the Income Tax Act, 1961 in case of where the capital asset which becomes the property of the assessee in the circumstances mentioned in section 49(1) read with section 2(424)/47 [1.e., when ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 9 - an asset is acquired by gift, will, succession, Inheritance or the asset is acquired at the time of partition of family or under a revocable or irrevocable trust or under amalgamation, etc.), the penad for which the asset was held by the previous owner should be Included. In the present case, the shares of Kappac Pharma Ltd has been received by the assessee as gift from her mother and the said shares since held by her from F.Y. 2009/2010, the period of holding in the case of the assessee is also to be reckoned from F.Y. 2009/2010 and thus the shares of the said company become Long Term Capital Asset in the case of the assessee. 6. It is submitted that as per provisions of section 49(1) of the Act assets becomes the property of the assessee under gift or will, the cost to the previous owner is deemed to be the cost of acquisition to the assessee. In the present case, the cost of acquisition of shares in case of Meena A. Shah is Rs. 13.70 per share which becomes the cost of acquisition of the assessee. 7. The said LTCG has been shown by the assessee in his return of income filed for the year in question as exempt income u/s 10(38) of the Act as the conditions laid down under the said section has been duly fulfilled by the assessee. 8. The assessee would like to submit that your honour has not disputed the sale made by the assessee through registered broker and recognized stock exchange. Further, your honour has not brought any material on record to prove that the gift received by the assessee is not genuine and on the contrary the assessee has with best possible evidence has placed on record the complete material/evidences in support of the gift as well as investment in the shares of Kappac Pharma Ltd made by her mother. That your honour has forgotten the fact that without genuine purchase transaction genuine sale transaction not possible. 9. The assessee kindly invite the attention of your honour to the provisions of section 2(42A) defining the Short term Capital asset and section 10(38) of the Act being conditions for claiming exemption of LTCG which is reproduced herein below for ready reference purpose: "2(424) ["short-term capital asset" means a capital asset held by an assessee for not more than (thirty-six) months immediately preceding the date of its transfer-:] [Provided that in the case of a security (other than a unit) listed in a recognized stock exchange in India) (or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or (a unit of an equity oriented fund]] (or a zero coupon bond), the provisions of this clause shall have effect as if for the words "thirty-six months", the words "twelve months" had been substituted:1 [Provided further that in case of a share of a company (not being a share listed in a recognized stock exchange) or a unit of a Mutual Fund specified under clause (230) of section 10, which is transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, the provisions of this clause ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 10 - shall have effect as if for the words "thirty- six months", the words "twelve months" had been substituted.) 10(38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust) where- (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force and (b) Such transaction is chargeable to securities transaction tax under that chapter: 10. That from the reading of provisions of section 10(38) of the Act, the only requirement to claim exemption under said section is that the share is Long Term Assets and sale transaction is chargeable to securities transaction tax. There is nothing in the provision of section 10(38) of the Act to provide that both purchase and sale transaction shall be done through recognized stock exchange and should get chargeable to security transaction tax [STT]. The condition stipulated under the provision of section 10(38) of the Act gets duly fulfilled in the case of the assessee as (i) the shares sold by him is a Long Term Capital Asset in view of provisions 2(42A) 49(1) of the Act and (ii) the assessee has duly paid STT on sale transaction which is verifiable from the Invoice/contract issued by the broker, the fact which was not disputed by your honour. In view of the facts of the case which till date has not been negated by your honour, the proposed action to treat the sales consideration received on sale of shares as undisclosed income of the assessee is based on mere surmises, conjectures and suspicions and therefore bad in alw and requires to be withdrawn. Legal Contention/submission: 1. It is contended that the when it is an undisputed fact that the sale of shares of Kappac Pharma Ltd is through demat A//c, how the genuineness of such sale transactions can be question by your honour and on what basis in absence of any contrary evidence of connivance with either the stock exchange or depository or broker and parties as stated by your honour? Hence, the assessee is unable to understand as to on what basis your honour is suspecting the sales through the demat account and authorized channels are non-genuine. Further, your honour has also failed to appreciate the fact that the assessee has sold the shares though Stock Exchange and at prevailing market rates as on the date of respective sale and hence once again it is not understandable as to how the sale effected through the Stock Exchange and routed through demat A/c can be manipulated. The assessee hereby requests your honour to throw some light on the same with conclusive evidences establishing the allegation. In the considered opinion and facts of the case, the entire case has been built by your honour entirely on unsubstantiated suspicions which is wholly unjustified and bad in law. That apart, your honour has also not ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 11 - appreciated the fact that share market is driven by various sentiments and there are so many factors and reasons for increase in the value of the shares though notwithstanding to and in sharp contrast to the financial standing of the companies. It may not be out of place to emphasize here that the assessee has nowhere connected or remotely related with the management of the investee company and there is no evidence that the assessee has rigged or manipulated the share prices of Kappac Pharma Ltd. 2. That the assessee is relying upon following decisions including binding decisions of jurisdictional court of law i.e. Hon'ble Gujarat High Court and Hon'ble ITAT, Ahmedabad Bench, wherein interalia, on identical & circumstances of the case, it has been held that no addition is warranted in the hands of assessee while considering the transactions as fictitious/sham transactions: FOR CAPITAL GAIN ON SALE OF SHARES CIT v. Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat) Where assessee duly proved genuineness of share transactions by bringing on record contract notes for sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not Justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. CIT v. Maheshchandra G. Vakil [2013 40 taxmann.com 326 (Gujarat) Where assessee proved genuineness of share transactions by contract notes for sale and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange, Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit CIT v. Jitendra Dalpatbhai Shah [2014] 41 taxmann.com 523 (Gujarat) Section 68 of the Income-tax Act, 1961- Cash credit [Shares) - Assessing Officer treated short-term capital gain declared by assessee from sale of shares as unexplained cash credit - Commissioner (Appeals) directed Assessing Officer to accept capital gain as disclosed by assessee Tribunal upheld order of Commissioner (Appeals) holding that it was merely on basis of doubts and suspicion that Assessing Officer had treated short-term capital gain declared by assessee as unexplained credit Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose there from Held, yes [Para 4) [In favour of assessee) Meenadevi N. Gupta v. ACIT Circle -5, Surat [2013] 35 taxmann.com 211 (Ahd) Section 45, read with section 68, of the Income-tax Act, 1961 Capital gains - Chargeable [Share transactions] Assessment year 2004-05-Assessee filed return showing capital gain arising out of purchase and sales of shares done through a share broker - She furnished purchase and sale bills of share transaction-Since ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 12 - share brokers denied transaction, Assessing Officer concluded that share transaction was not genuine and, therefore, taxed it as income from undisclosed sources However, it was found that shares were in respect of a listed company and transaction was through Demat account as per recognized Stock quoted price - Whether there was no reason to hold such nature of transaction as non-genuine Held, yes [Para 5] [In favour of assessee) Vasantraj Birawat v. ACIT [2015] 61 taxmann.com 295 (Mumbai - Trib.) Where no incriminating material was found during search which could indicate that long-term capital gains arising out of sale of shares was bogus and assessment was completed without considering details of purchase of shares produced by assessee, assessment was void. Estimation of income (Share dealings) - Assessment years 2004-05 to 2006-07- Investigation Wing of Department had furnished statement recorded of a person named that he had issued bogus purchase bills for purchase of shares in IFSL Ltd- Assessee had also purchased shares of IFSL Ltd through a sub-broker and declared income arising on sale of shares under head Capital gains Revenue carried out search and seizure operations in residential premises of assessee group - No evidence was found during course of search in order to doubt veracity of long-term capital gains declared by assessee However, based on statement given by 'N', Assessing Officer assessed entre amount of sale proceeds of shares as assessee's income from other sources on ground that transactions relating to shares were bogus and meant to convert unaccounted money in books by showing them as long- term capital gains Commissioner (Appeals) confirmed order of Assessing Officer It was found that assessee had furnished all relevant details to support claim of purchase of shares, however, Assessing Officer rejected claim of purchase only for reason that assessee had failed to produce said sub-broker Whether since Department had not established that there was link between 'N' and sub-broker, it could not be presumed that shares purchased by assessee were bogus-Held, yes - Whether, therefore, order of Commissioner (Appeals) was to be deleted - Held, yes [Paras 18,20 and 22] [In favour of assessee) Smt. Smita P. Patil v. ACIT [2015]55 taxmann.com 346 (Pune - Trib.) Section 69 of the Income-tax Act, 1961- Unexplained investments Assessment years 2004-05 to 2006-07- Merely because there was a delay in converting physical shares into electronic form, i.e., demat account that could not be criteria to hold that shares transactions were arranged and camouflaged where assessee had recorded their share transactions in the regular books of account prior to date of search [In favour of assessee) CIT vs. Shyam R. Pawar [2015]54 taxmann.com 108 (Bombay HC) Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 13 - Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) Assessment years 2003-04 to 2006-07-Assessee declared capital gain on sale of shares of two companies Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68- On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted Held, yes (Para 7] [In favour of assessee) CIT v. Smt. Sumitra Devi taxmann.com 37 (Rajasthan) Section 68, r.w.s. 45, of the Income-tax Act, 1961 - Cash credits (Share Transactions) - Assessment year 2006-07-Assessing Officer treated transaction of shares by assessee as bogus and accordingly profit on sale of shares declared by assessee was brought to tax as unexplained cash credit under section 68- Whether since Assessing Officer had failed to show that material documents placed on record by assessee like broker's note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious, transaction of purchase and sale of shares could not be treated as non-genuine Held, yes [Paras 7 & 8] [In favour of assessee] ITO v. Smt. Aarti Mittal [2014] 41 taxmann.com 118 (Hyderabad - Trib.) Where assessee having purchased shares in physical form, converted them in D- form and thereupon sale of those shares was carried out through recognized stock exchange after paying securities transaction tax, said transactions were to be regarded as genuine in nature and, therefore, assessee's claim for exemption uis 10(38) was to be allowed Section 10(38) of the Income-tax Act, 1961 Capital gains Exemption of, on of securities [Genuineness of transactions] - Assessment year 2006-07- Assessee filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assessee claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise It was also apparent that assessee having purchased shares ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 14 - in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax Whether on facts, transactions of purchase sale of shares were to be regarded as genuine in and, therefore, assessee's claim was rightly allowed-Held, yes [Para 23] [In favour of assessee) Ramesh Kumar Jain (HUF) v. DCIT [2013] 36 taxmann.com 524 (Jodhpur-Trib) Where assessee produced proof of purchase and sale of shares and genuineness of sale of shares was established from stock exchange, exemption under section 10(38) on long-term capital gains from such shares could not be denied. Section 10(38), read with section 153C, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of securities (Burden of proof) - Assessment year 2008-09-Assessee-HUF derived long-term capital gain from sale of shares of two companies and such capital gains was claimed as exempt under section 10(38) Assessing Officer having found that alleged purchaser of shares from assessee was engaged in fraudulent billing activities, treated transaction of shares as bogus and accordingly denied exemption under section 10(38) Whether since entire proof of purchase and sale of these shares were found in books of account of assessee and sale of shares was found genuine when Assessing Officer made enquiries from stock exchange directly, addition on account of undisclosed income and denial of exemption under section 10(38) could not be sustained Held, yes [Para 17] [In favour of assessee) DCIT v. Smt. Hansa Choudhary [2012] 23 taxmann.com 302 (Jodhpur- Trib.) Section 68 of the Income-tax Act, 1961- Cash credit Assessment years 2002- 03 and 2004-05- Where purchase of shares in question was not in dispute and on record showed that said shares were sold through a broker and consideration for transfer was received through cheque, sale consideration could not be treated as assessee's own undisclosed funds [In favour of assessee) The assessee claimed to have earned capital gain on sale of shares. The Assessing Officer relying upon statement of a broker who was involved in issuing accomodation entries, treated sale proceeds of shares as assessee's own undisclosed funds and made addition to income of assessee. Held that that it was clearly seen that assessee purchased shares in earlier year. They were shown in the balance sheet which was filed along with the return of income. The payments were made through books of account which had not been doubted. The shares belonged to a listed company which was also not in doubt. The company itself had issued certificate that all those shares had been demated, copy of the same was placed on record. Once the purchase of shares was not doubted, then the sale of same shares should not have been doubted. Further, the payment was received through cheque. The Assessing Officer had failed to discharge his onus to prove that assessee had invested his own money except relying on statement of a third person who had given a general statement he was issuing accommodation ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 15 - entries to some persons. Accordingly, addition made by the Assessing Officer was to be deleted. Astt. CIT v. Kamal Kumar S. Agarwal (Indl.) [2010] 133 TTJ 818 (Nag.) A search action took place on the Haldiram Group on 20-1-2005 pursuant to which notices under section 153A were issued to different assesses. In the course of assessment proceedings, apart from other enquiries, the Assessing Officer found that various assesses of the group had shown long-term capital gain resulting from the sale of shares. Thereafter the Assessing Officer relying on the statement of one 'p', a stock broker, and for the reason that some of the stock brokers were not traceable at the address on record, formed an opinion that the transactions were not genuine. The Assessing Officer also found that the transactions had been done off the market and in some cases the brokers had not informed the stoke exchange regarding this transaction and that the transactions of sale resulted into purchase of shares by the buyers at a huge loss. Thereafter, the Assessing Officer rejected the transactions and held that so called sale proceeds of shares were to be taxed as income from undisclosed sources. Held: that all such transactions had been taken into consideration while filing the returns for these years in the normal course and the department had also accepted such nature of transactions. It is very important to note that no Incriminating material had been found during the course of search which could have cast doubt on the genuineness of the transactions or could have indicated that it was a case of assessee's own undisclosed money utilized in the execution of such transactions. In the assessment order as well as at the first appellate stage and also before the Tribunal, the focus of the department was on the of the transactions entered into by the group a whole and, therefore, there was substantial merit in the view of the Commissioner (appeals) that it was this fact which had resulted into such action of the Assessing Officer. Voluminous documentary evidences had been filed by the assessee to prove its claim which supported the genuineness of the transaction. Thus on appreciation of the documentary evidences submitted by the assessee, the genuineness of the transactions appeared to have been established. As regards the aspect of off market transaction, it was noted that neither these were illegal nor prohibited and only some of the compliances had to be made by the brokers. As regards the aspect of such compliances, it was not the case that all the off market transactions had not been reported by the concerned brokers to the stock exchange as per the rules and even otherwise, any failure on the part of the brokers in doing such compliance could not make the contract between the assessee and the broker illegal or void as the broker might face the consequences for his default under relevant statute. It is also noted that all the transactions were not made off market transactions; hence, the Assessing Officer's approach to pick and choose the only such instances which were favorable to him could not justify such addition. Thus, the share transactions could not be considered as ingenuine/sham and, consequently, the sale proceeds of such share transactions could not be taxed. Jafferali K. Rattonsey v. DCIT[2012] 23 taxmann.com 21 (Mum.) ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 16 - While computing capital gains in case of securities, 'date of purchase' has to be taken from broker's note/contract note and period of holding is also to be reckoned from 'date of purchase' and not from date of dematerialization Section 69 of the Income-tax Act 1961 Unexplained investment - Assessment year 2006-07-In return of income, assessee had shown long-term capital gain on sale of certain shares In support of his claim, he furnished contract notes issued by broker in respect of purchase; copy of ledger account of broker in books of assessee and statement of demat account held by it Assessing Officer held that date of purchase of shares could be considered only date of dematerialisation of said shares in demat account; and as purchase on that date was not accounted for in books of account, it had to be treated as unaccounted purchase and entire purchase amount became unexplained investment in shares - Whether dematerialization of shares from physical holding is a lengthy process and, takes considerable time and, therefore, when there was no dispute to dematerialization of shares before date of sale, it was clear that shares were purchased much prior to date of sale Held, yes Whether therefore, purchase amount of shares could not be treated as unexplained investment - Held, yes [In favour of assessee) 3. It is contended that since the reopening of assessment for the year in question and the also proposed show-cause notice in the case of the assessee was based on the oral statements of third party; your honour is kindly requested to provide the Cross Examination of the said persons before taking any adverse inference in my case. It is contended that it is by now trite law that in absence of an opportunity of cross examination of a party whose statement is relied upon, no addition is warranted based on such statement. Reliance is placed on the following decisions in support of the above proposition of law. FOR PROVIDING OPPORTUNITY OF CROSS EXAMINATION Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015]62 taxmann.com 3 (SC)/[2015] 52 GST 355 (SC) The assessee raised a plea that it was not allowed to cross-examine the dealers statements were relied upon by the Adjudicating Authority in passing the order. However, the Tribunal rejected the plea on the basis that "The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static". On appeal by the assessee to the Supreme Court HELD allowing the appeal: Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 17 - was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted. As far as the Tribunal is concerned, we find that rejection of this is totally untenable. The Tribunal has stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. R.W. Promotions (P.) Ltd. v. ACIT [2015] 61 taxmann.com 54(Bombay) Where assessee was not given an opportunity to cross-examine representatives of two companies whose statement was relied upon by revenue in disallowing amount paid by assessee to said companies to carry out promotional and advertisement activities, same was breach of principles of natural justice and accordingly issue was to be restored for fresh disposal. CIT v. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) Section 69, r.w.s. 68, of the Income-tax Act, 1961- Unexplained investments- Undisclosed Income Block assessment 1-4-1996 to 6-9-2001- Whether, where assessee had proved identity and creditworthiness of donor and genuineness of transaction, gift from assessee's mother could not be added as undisclosed Income- Held, yes Whether, addition cannot be made for transactions which do not fall within block period under consideration Held, yes - Whether, where additions were made on basis of statements of persons who were not allowed to be cross examined by assessee, additions were not sustainable Held, yes Whether, investments could not be treated as unexplained, if they were reflected in books of account and of payments were available - Held, yes (Paras 4 to 15] [In favour of assessee] Commissioner of Income-tax, Central, Jaipur v. Supertech Diamond Tools (P.) Ltd. [2014] 44 taxmann.com 469(Raj.) Section 68 of the Income-tax Act, 1961- Cash credit (Share application money) - Assessment year 2004-05-Assessing Officer made addition under section 68 on account of amount received for share capital, its premium and amount paid as commission for arranging it on basis of statement made by third parties who were related to purchasing companies stating that these companies were engaged in providing accommodation entries in lieu of commission However, said party statement was made behind back of assessee and no opportunity of being heard or cross-examining third parties was provided to assessee Assessing Officer could not bring any material to disapprove genuineness of confirmation and affidavits filed by assessee Further, all transaction were through account payee cheques, all these companies had PAN numbers and were regularly assessed to tax Investor companies were registered under Companies Act and Form No. 2 for allotment was ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 18 - also filed - Whether appellate authorities could not be said to have erred in deleting addition-Held, yes Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) "Though the proceedings before the income-tax authorities are not governed by the strict rules of evidence, before the income-tax authorities could rely upon a piece of evidence, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity for cross-examination of the person with reference to the statements made by him." Metal Box Company of India Ltd. Vs. Their Workmen [1969] 73 ITR 53(SC) "The accounts of a company are prepared by the management. The balance sheet and the profit and loss account are also prepared by the company's officers. The labour has no concern in it. When so much depends on this item, the principles of equity and justice demand that an industrial court should insist upon a clear proof of the same and also give a real and adequate opportunity to the labour to canvass the correctness of the particulars furnished by the employer. The necessity of proper proof of the correctness of statements in the balance sheet was repeated in Petlad Turkey Red Dye Works Ltd. Vs. Dyes & Chemical Warkers' Union (1960) 20 FJR 539 (SC). These observations made with regard to balance sheets and P & L accounts would equally apply to statements made in the auditors' certificates prepared on the instructions and information supplied to them by employers. Mere production of auditors' certificate, especially when it is not admitted by labour, not by the auditor but by the employees of the company who admitted not to have been concerned with its preparation or the calculations on which it was based, would not be conclusive. We do not say that in such a case the Tribunal should insist upon proof of depreciation on each and every item of the assets. It should, however, insist on some reasonable proof of the correctness of the figure of depreciation claimed by the employer either by examining the auditors who calculated and certified it or by some other proper proof, Depreciation, in some cases, would be of a large amount affecting materially the available surplus. Fairness, therefore, requires that an opportunity must be given to the employees to verify such figures by cross examination of the employer or his witnesses who have calculated depreciation amount. Notwithstanding the unions' challenge to the figure of depreciation claimed by the company, the only thing that the company did was to examine Verma, who admittedly had nothing to do with its calculation, and to produce through him the said certificate. In our view, that was neither proper nor sufficient. The proper course for the Tribunal in such a case was to insist upon the company adducing legal evidence in support of its claim instead of taking the figure of depreciation from the P & L account which was not worked out in accordance with the Income tax Act but under section 205 of the Companies Act, and saying that the company had failed to prove that it was a mistaken figure. In our view, the question as to the correct amount of depreciation must go back to the Tribunal for a fresh decision. The Tribunal give opportunity to the company to prove its claim for ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 19 - depreciation by reasonable proof and to the unions to test such evidence by cross examination or otherwise". Conclusion: The facts regarding transactions carried out by the assessee in the shares Kappac Pharma Ltd thus summarized in the following manner: • The acquisition and sale of shares of Kappac Pharma Ltd is supported by valid gift deed and contract notes issued by the Brokers. • That the shares of Kappac Pharma Ltd have been held by mother of the assessee for more than 55 months prior to the date of sale. • That the delivery of shares on sale have been given to broker through demat A/c. • That the assessee has received the payment against the sale of shares from broker through RTGS/NEFT which has been duly reflected in the bank account of the assessee. • The existence of the broker through which the shares have been sold by the assessee has not been disputed. • That no enquiry has been carried out with the broker through whom the has sold the shares and also with the BSE I.e. stock exchange on which the assessee has sold the shares. • That the assessee has duly paid the STT and other Govt. levies on sale of shares which is evident from the contract notes received from brokers. • That the assessee has duly fulfilled all the conditions laid down under the provisions of law for claiming exemption u/s 10(38) of the Act. In view of the above facts and legal submission placed on record, it is submitted that the LTCG earned by the assessee on sale of shares of Kappac Pharma Ltd is genuine & bonafide transactions and therefore exempt under the provisions of section 10(38) of the Act in absence of any material/evidences brought on record by your honour to prove contrary. Hence the show-cause notice and addition proposed therein is required to be quashed. In case of a contrary view, kindly revert back for further rebuttal along with an adequate opportunity of personal hearing for which the assessee shall remain obliged. Thanking you, Yours Faithfully, ------------------- Shivani Shah” ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 20 - 10. It is the opinion of the Ld. AO that long term capital gain booked by assessee in her books of account were pre-arranged to evade taxes and launder money. Considering the finding of the Investigation Wing, particularly, the Director of Investigation, Kolkata, the Ld. AO came to a finding that entry operators being M/s. Kappac Pharma Ltd. worked out an arrangement in which the share prices were rigged and sold at high price to arrive at tax free capital gains. In fact, during the transaction of purchase and sale of shares have not affected for commercial price but to credit artificial gains with a view to evade taxes. It was a product of design and mutual connivance on the part of the assessee and operators. The assessee resorted to a preconceived scheme to procure long term capital gain by way of price difference in share transactions not supported by market factors. The share transactions were devoid of any commercial nature and fell in realm of not being bonafide and therefore the same was not found to be allowable by the Ld. AO. Further that the referring SEBI came to a finding that the prices of those shares were determined artificially by manipulations and does not have any iota of doubt that the same is not a product of market factors or commercial principles. Apart from that the assessee has not been able to prove the unusual rise and fall of share prices to be natural and that too on the basis of market forces. It was found that such share transactions were closed circuit transactions and clearly structured one. The Ld. AO was of the view on the basis of the investigation done by the Investigation Wing, Kolkata that the transactions entered into by the assessee involved series of preconceived steps, the performance of each of which is depending on the others being carried out. The nature of such share transactions lacked commercial contents and artificially structured transactions entered into between the parties only to evade taxes and thus finally claimed under Section 10(38) of the Act made by ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 21 - the assessee in regard to long term capital gain of Rs.2,16,59,185/- was duly rejected, which was, in turn, confirmed by the First Appellate Authority. 11. The case of the assessee as appearing from the written notes as follows: “1. Preliminary 1.1 The Preliminary facts are that the appellant is an individual deriving income from capital gains and income from other sources such as interest from bank. The appellant is regularly assessed to tax since decades. Regular books of account are maintained on mercantile basis, and returns of income are filed on the basis of such accounts from year to year. 1.2 For A.Y. 2014-15, the appellant submitted her e-return on 16.07.2015, declaring total Income of Rs. Nil. However, the A.O. has completed the assessment u/s. 143(3) of the Act determining total Income at Rs. 2,16,59,190/- as per order dated 27.12.2016. While making the Impugned order, the A.O. has made addition of Rs.2,16,59,190/- u/s. 68 of the Act, disallowing appellant's claim of exempted long term capital gain u/s.10(38) of the Act. 1.3 Being aggrieved and dissatisfied, the appellant had preferred an appeal before the Ld.CIT(A) who has dismissed the appeal of the appellant as per impugned appellate order dated 27.04.2023. 1.4 Being aggrieved further, the appellant has preferred the present appeal before the Hon'ble Tribunal, for getting due justice while deciding appeal of the appellant in the interest of justice and equity. 2. Regarding the order being bad in law and perverse. 2.1 During the course of the appellate proceedings before the Ld. CIT(A), the appellant has submitted fairly detailed written submissions duly indexed paper book dated 07.03.2023, furnished under e- proceeding response acknowledgment no. 977780201090323. To be precise, the appellant has raised specific pleas on two counts that the order passed by the A.O. is bad in law being in violation of settled principles of natural justice inasmuch (i) as the assessment proceedings are initiated on the basis of alleged statement of one S/Shri Prateek Rameshchandra Shah & Other entities, when the appellant was never confronted with the alleged statement nor allowed to cross examine the deponent, the appellant cannot be put to any disadvantage on the basis of statement of a third party and that too recorded elsewhere; (ii) that for proper justice, the appellant be allowed cross examination of said S/Shri Prateek Rameshchandra Shah & Other entities in the course of present appellate proceedings through his authorized representative. 2.2 The Ld.CIT(A) has reproduced selective portion of appellant's written submission dated 07.03.2023, at para 5.2. The Ld.CIT(A) while recording his decision at para 2.3 has dealt with only one ground on merits of the case and leaving aside rest of the pleas raised by the appellant, the related legal grounds are dismissed in a casual manner vide para 6.14 of the appellate order. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 22 - 2.3 Since the specific pleas of the appellant raised before the Ld. CIT(A) being in violation of settled principle of natural justice and allowing cross examination of S/Shri Prateek Rameshchandra Shah & Other entities, in the course of appellate proceedings before the Ld. CIT(A), which go to the root of the matter. Since the grounds of appeal are already reproduced at para-4 on page-2-3 of the appellate order, hence the same is not repeated here. 2.4 However, the appellant would like to place on record the second relevant plea taken before the CIT(A), as below: THE APPELLANT SPECIFICALLY REQUEST A PROPER JUSTICE, BY RAISING THIS FOR SPECIFIC PLEA OF ALLOWING CROSS-EXAMINATION OF S/SHRI PRATEEK RAMESHCHANDRA SHAH & OTHER ENTITIES, IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THROUGH HIS AUTHORIZED REPRESENTATIVE. It is repeatedly submitted that more than merits, the legality issue involved in the matter is of vital importance, as may be appreciated from the peculiar facts as below: (1) As submitted above, the appellant vehemently challenged the assessment proceedings u/s 143(3) by way of fairly detailed written submission dated 07.03.2023 that the A.O. has simply proceeded to frame the assessment taking a note from the report of the investigation wing of IT, Kolkata, allegedly Informing that there was search and seizure conducted by the department with respect to trading of scrips of M/s. Turbotech Engineering Ltd. Group and other so-called entry operators/share brokers of Kolkata. On the basis of such report, the A.O. straight away issued a show cause notice dated 21.12.2016 asking the appellant as to why amount of long term capital gain as claimed on account of sale of shares of Kappac Pharma Ltd. should not be treated as appellant's undisclosed Income. The assessment proceedings are solely based on alleged statement of said entities without offering an opportunity of cross-examining her. (2) The Ld. CIT(A) has erred in law and on facts in outrightly ignoring and not adjudicating and deciding a special plea taken before him vide para-5.14 of appellant's written submission whereby a specific demand has been made before the Ld. CIT(A) for making the statements of the referred persons available to the appellant by AO and demanded that the appellant may be allowed to cross-examine the third parties at this stage i.e. appellate proceedings before the Ld. CIT(A). (3) Without prejudice to the above and without conceding but for the sake of clarity it is stated that appellant was previously representing by M/s. Ashesh Alkesh & Co., CA till the brief of the case having been handed over to the present A.R. at the stage of appellate proceedings. Since the appellant being not very well versed with the taxation laws, he was dependent upon the then A.R. Unfortunately, the case of the appellant could not be properly represented before the A.O. With the result, neither a copy of the statement of said S/Shri Prateek Rameshchandra Shah & Other entities was asked for nor his cross-examination was demanded in crystal clear terms before the A.O., as a matter of right. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 23 - (4) Without prejudice to what is stated as above, it is submitted that various courts have been taking a consistent view that an appellant should not suffer for mistake or failure on the part of the counsel/agent, particularly when the appellant is dependent upon him for his expert A few of them may be cited as under: (i) Mahaveer Prasad Jain v. CIT 172 ITR 331 (M.P.) From middle of page 332 "If we reject this appeal, as Mr.A.K.Sanghi invited us to do, the only one who would suffer would not be the lawyer who did not appear but the party whose interest he represented. The problem that agitates us is whether it is proper that the party should suffer for inaction, deliberate omission or misdemeanor of his agent. The answer obviously in the negative. May be that the Ld. Advocate absented himself deliberately or intentionally. We have no material for ascertaining that aspect of the matter. We say nothing more on that aspect of the matter. However, we cannot be a party to an innocent party suffering injustice merely because his chosen Advocate defaulted, therefore, we allow this appeal. (ii) T. Ashok Pai v. CIT 292 ITR 11 (SC) Facts: The appellant, an individual, was an engineering graduate, who had income by way of salary and income from proprietary business as well as shares in profits of a number firms. He gave a power of attorney in favor of his tax counsel. In his case proceedings for imposition of penalty u/s 271(1)(c) were initiated. Penalty was levied. The High Court confirmed the penalty. However, the Hon'ble Supreme Court of India, reversing the decision of the High Court, observed: From the catch note page 13 In response to proceedings u/s 271(1)(c), in the cause shown, the appellant contended that he acted bona fide as the tax affairs were being looked after by the professional group working with the banker; but that contention was not accepted and penalty was imposed. The Appellant Tribunal, held that the bona fides of the appellant had been proved by the facts and circumstances of the case because: (1) merely because some omission or wrong statement was made in the original return, proceedings u/s 271(1)(c) might not be attracted; (ii) the revised return having been accepted, the appellant could not be considered guilty and (iii) the fault, If any, was with his tax counsel; and even the tax counsel, could not be said to have acted in mala fide manner, the tribunal was right in holding that penalty was not exigible." (4) Therefore, the had seized the very first available opportunity I.e. before the Ld. CIT(A) raising issue of non grant of cross-examination by the A.O., in the form of detailed written submission before the Ld.CIT(A), for getting due justice. In the fitness of things, therefore, the appellant has puts his humble demand that the appellant may be allowed to cross-examine said S/Shri Prateek Rameshchandra Shah & Other entities. However, the same has not been entertained without any reason. (5) Without prejudice to the above, the appellant would like to Invite your kind attention towards a recent Judicial Pronouncement by Hon'ble Kerala High Court ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 24 - wherein the issue of estoppel or waiver was under consideration before the Hon'ble Court. The relevant portion of the observation of the Hon'ble Court may be re- produced as under: "34. A waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction, lays down the Supreme Court Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, cannot be waived, for consent cannot give a court jurisdiction where there is none. Even if there is inherent jurisdiction, certain provisions cannot be waived. Maxwell in his book "On the Interpretation of Statutes", 11th Edn., at p. 375, describes the rule: "Another maxim which sanctions the non- observance of a statutory provision is that cuilibet licet renuntiare juri pro se introducto. Everyone a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy." As quoted in Nath Gorai (supra)" In the light of the aforesaid ratio laid down by the Hon'ble Court, the appellant respectfully craves to consider the bonafide claim of the appellant for cross- examining said S/Shri Prateek Rameshchandra Shah & Other entities as a matter of right, not withstanding with the fact that such right might have waived by the then A.R. who represented the appellant, to protect the interest of the appellant. (6) Without prejudice further it is submitted that apart from the aforesaid public right, another legality issue involved in the matter is also of vital importance on which the Hon'ble Court in the case of Premkumar (supra), has analyzed the scope of appeal and powers of Appellate Authority, especially with respect to powers of Commissioner of Income Tax (Appeals) laid down u/s 251 of the Act. Relevant portion of the observation is re-produced below: "31. Sri Mather relies on a CBDT's circular to drive home how the amendment has affected the Appellate Commissioner's powers. He has cited the circular in his written submissions. Para 78 of the clarificatory circular notes that the power of the Appellate Commissioner does not include the power to set aside the assessment. It was to finalize the assessment early and to avoiding prolonged litigation. The Appellate Commissioner will not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment. But the Appellate Commissioner continues to have the powers under Section 250 to inquire further, or to direct the Assessing Officer to inquire and report the result to him. After receiving the Assessing Officers" enquiry report, the authority can rely on it or gather additional facts or evidence." (7) Needless to add here that the scope of appeal and the powers of appellate authority are wide enough under the provisions of section 251 of the Act as extracted below: "Section 251 of the Act spells out the powers of the Commissioner (Appeals). Before the amendment by Finance (No.2) Act, 2014, the provision read: 251. Powers of the [***] Commissioner (Appeals).- ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 25 - (1) In disposing of an appeal, the [***] Commissioner (Appeals) shall have the following powers- (a) in an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment; [***] Explanation.- In disposing of an appeal, the [***] Commissioner (Appeals) may consider and decide any matter arising out of proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [***] Commissioner (Appeals) by the appellant. vide Circular No.14/2001 dated 09/11/2001 Para 78 of the clarificatory circular notes that the power of the Appellate Commissioner does not include the power to set aside the assessment. It was to finalize the assessment early and to avoiding prolonged litigation. The Appellate commissioner will not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment. But the Appellate Commissioner continues to have the powers under Section 250 to inquire further, or to direct the Assessing Officer to inquire and report the result to him. After receiving the Assessing Officers" enquiry report, the authority can rely on it or gather additional facts or evidence." (8) Having regards to the above and in the fitness of things, therefore, the appellant puts his humble demand that by exercising the powers so vested with your Honour, the A.O. may kindly be directed to supply the appellant with a copy of statement so relied and used against the appellant and also the appellant should be allowed to cross-examine S/Shri Prateek Rameshchandra Shah & Other entities through his authorized representative. (9) For the appropriate reasons, the order under appeal, is a result of complete misreading of cogent documentary evidences placed on record by the appellant, which renders the impugned assessment order perverse devoid of very merit. 2.5 However, despite such specific pleas made before him, the Ld.CIT(A) has wholly ignored/overlooked the same and merely agreeing with the A.O. has affirmed that the A.O. was perfectly justified in framing the assessment (on the basis of information received from investigation wing), he has dismissed the related grounds of appeal vide para 6.14 of the appellate order. It is submitted that there is not a whisper as to the specific pleas(supra) taken before him, neither he has adjudicated nor decided such pleas while passing impugned order, therefore, the order passed by Ld.CIT(A) is perverse to that extent, as such it is liable to be quashed and set aside and it may kindly be held so. 3. Regarding impugned addition of Rs. 2,16,59,185/- u/s.68 on account of disallowance of long term capital gain sale of shares of Kappac Pharma Ltd. (Ground No.3) 3.1 For the year under consideration the appellant has submitted his e- return of income on 21.07.2015, disclosing total income of Rs.NIL. The case of the appellant having been selected for scrutiny under CASS, a notice u/s 143(2) of the act was issued on ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 26 - 27.06.2016. This being a formal notice no hearing took place. Subsequently, due to change of incumbent, a notice u/s 142(1)/129 of the Act was issued on 30.08.2016. In response to the same the appellant attended and submitted requisite details as called for under appellant's letter dated 17.11.2016. 3.2 During the course of assessment proceedings, the A.O. noticed that the appellant has claimed long term capital gain of Rs.2,16,59,185/- on sale of 32,000 shares of Kappac Pharma Ltd. Also taking a note from the report of the Investigation Wing of I.T., Kolkatta allegedly informing that there was search and seizure conducted by D.I. (Inv.) with respect to the trading of the scrips of M/s Turbo Tech Engineering Ltd. group and other so-called entry operators/ share brokers of Kolkata. As per the A.O. certain entities/entry operators had been indulged in providing accommodation entries. On that basis, the A.O. straight away issue a show cause notice dated 21.12.2016, asking the appellant to show cause as to why amount of long term capital gain of Rs.2,16,59,185/- on account of sale of shares of Kappac Pharma Ltd. should not be treated as appellant undisclosed income. 3.3 In response to the above notice, the appellant attended and submitted a fairly detailed written submission dated 26.12.2016 and also explained the nature of transaction and as to how the claim of the appellant is genuine and hence justified. It is submitted that during the course of assessment proceedings the appellant has submitted number of supporting/cogent material evidences, under various submissions so made before the A.O. inter alia: A. Documents submitted under letter dated 17.11.2016: (i). Copy of bank statement from Bank of India, along with bank passbook of Panchvati Branch, Ahmedabad (P.B.P.No. 33 to 36) (ii). Demat Account activation statement with Indo Thai Securities Ltd. (P.B.P.No.53) (iii). Copy of ledger account for the period from 01.04.2013 to 31st March 2014 of broker Indo Thai Securities Ltd., along with confirmation. (P.B.P.No.51 & 52) (iv). Copy of gift deed for shares of Kappac Pharma Ltd. received from her mother Smt. Meenaben A. Shah. (P.B.P.No.32) (v). Copy of ledger of M/s. Kappac Pharma Ltd. (P.B.P.No.47) (vi). Demat slip for transfer of share from the Demat account of mother to the account of the appellant. (P.B.P.No.48) (vii). Contact notes/bills of broker in respect of sale of shares of Kappac Pharma Ltd. (P.B.P.No. 49 & 50) B. Documents submitted under letter dated 18.12.2016 (P.B.P.No.54 to 82) ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 27 - (i). Copy of account of preferential warrants of Kappac Pharma Ltd, from books of appellant's mother. (P.B.P.No.58) (ii). Copy of application form and call notices per payment issued by the company in the name of mother. (P.B.P.No.59 to 61) (iii). Bank statement of HDFC bank and Bank of India of mother showing payments for preferential warrant of Kappac Pharma Ltd. (P.B.P.No. 63 & 64) (iv). Copy of record of investment in shares of Kappac Pharma Ltd from the books of account or mother. (P.B.P.No. 67 to 71) (v). Copy of demat account of appellant's mother reflecting the transactions of shares of Kappac Pharma Ltd. (P.B.P.No. 72 to 82) 3.3.1 Without prejudice to the above, it is respectfully submitted in compliance to A.O.'s show cause notice dated 21.12.2016, the appellant has strongly objected to the A.O.'s proposed action to treat the long term capital gain of Rs.2,16,59,185/- on sale of shares of Kappaс Pharma Ltd. as appellant's undisclosed income and specifically requested the A.O. in not less than the following words:- "Para 2: That the appellant is hereby kindly request your honor to provide complete details and material/information gathered by both the authorities and available with your honor's office for rebuttal of the appellant in the principle of natural justice and equity. In absence of providing such material/evidences, reliance cannot be placed on the same in order to treat the transactions in the scrip of Kappac Pharma Ltd. as non genuine. Your honour is also kindly requested to give the cross examination of the persons whose statements have been relied upon for drawing adverse inference in the case of the appellant. That as regard your honor's observation that the company itself attracted regulatory action from SEBI and trading in scrip itself was sustained by BSE, the appellant would like to submit that the regulatory action from SEBI and the surveillance measure taken to suspend the scrip took place in 2015. That is after six years from the year of purchase and one year after sale of shares by the appellant. There are also numbers of companies which have been suspended by the stock exchanges on yet to yet for various reasons. It is therefore submitted that the period during which the investment made by mother and its subsequent sales by appellant, the company Kappac Pharma Ltd. was regular listed company at the recognized stock exchange of India. However, if your honor is in permission of any material/evidence regarding the outcome of such regulatory action from SEBI which lead your honor to reach the conclusion that appellant has take accommodation entries to route her unaccounted money the same may please be specifically provided to the appellant for rebuttal and any adverse view taken without providing the said material / evidence for rebuttal is bad in the eye of law and against the principle of natural justice and equity. Para 3: That the appellant has no objection as regards 1,60,000 shares of Kappac Pharma Ltd. received by her as gift from her mother Mina Shah as the same is based on the facts of the case. The subsequent observation the said para is general in nature and no material/evidence has been brought on record to establish/prove ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 28 - that the said company is indulged in providing accommodation entries and the price was rigged and also the involvement of the appellant and his mother Mina Shah in rigging of the price of the shares. Merely financial of the company is not matched with the price of the shares quoted on stock exchange does not mean that the said company is indulged in providing accommodation entry and its price was rigged. The company whose have been sold by the appellant is penny stock company also does not automatically mean that transaction of the appellant in the said scrip is not genuine and in the nature of accommodation entry in absence of cogent material/evidences brought on record. The observation given in this para is nothing but the wild presumption and therefore cannot be taken as base for drawing adverse inference in the case of appellant. Hence, the proposed show cause notice based on the observation given in this para of the notice is also bad in law suspicion and therefore required to be withdrawn." 3.3.2 From the aforesaid it may kindly be appreciated that the A.O. has relied on the statements of number of persons/broker/directors allegedly recorded on oath, and therefore, the A.O. was requested to provide with the coples of all the statements referred above and also allow opportunity to cross-examine them; Further, A.O. was also specifically requested to supply with all other material which he intended to use against the appellant to frame the assessment with an opportunity to submit in rebuttal so as to avoid multiple round of litigations. 3.3.3 Although, the A.O. has taken a specific note of the appellant's referred submissions dated 26.12.2016 as well as reproduced in entirety at para 4 of the assessment order; But, he has tacitly ignored/overlooked the appellant's such submissions, and has suppressed the material facts and proceeded to frame the assessment order in a quite pre determined manner arbitrarily. 3.3.4 From the above, it may kindly be appreciated that the A. Ο. has neither provided any statements of various brokers and directors of the companies and other entities allegedly recorded by the Department, which are being relied upon by the A.O., nor the appellant is afforded an opportunity to cross-examine them, at all. Thus, the appellant has been deprived of his right to defend his case and submit proper rebuttal. 3.3.5 That in any case, the appellant was never confronted with the alleged statements of the referred third parties nor allowed to cross examine the deponents, the appellant cannot be put to any disadvantage on the basis of statements of third parties and that too recorded elsewhere. 3.4 As may be perused from aforesaid para 3.3 of the present SOF, by producing more than sufficient quantity of material details/supporting evidences, the appellant has established that the transaction of shares of the referred company has been quite genuine beyond doubt and thus, onus casted on the appellant has been fully discharged. However, without appreciating the facts of the case in proper prospective, the A.O. proceeded to disbelieve the explanation of the appellant in a quite pre- determined manner. 3.5 As may be perused from the impugned assessment order that vide para 4.1 to para 4.10of the order, the A.O., In the guise of 'giving a back ground of Investigation carried out by the investigation wing, Kolkata', has purportedly re-produced selective portions from the alleged report of DI (Inv.), running into 4 pages. However, there is not a whisper as to the ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 29 - investigation/inquiries independently conducted by the A.O. and being influenced by the report of the DI (Inv), in the beginning of para-4.1 of the order, he has opined that the explanation of the appellant is found to be not tenable. AND vide para 5 he has, once again, heavily relying on the alleged enquiry report of the Investigation Wing of the Department, stating that the Revenue cannot take or accept such make - believe transaction as presented by the appellant, truth or genuineness of such transaction must prevail over the smoke screen created by way of steps taken by the appellant" and again repeating at para 5.3 of the order as to the so called findings of the search/survey, enquires conducted in the cases of brokers etc., it is concluded that the long term capital gain of Rs.2,16,59,185/- in purchase and sale of Pharma Ltd., claimed as exempt u/s 10(38) of the Act cannot be allowed, and he has disallowed the claim of the appellant and added back as income u/s 68 of the Act. For drawing such an illogical conclusion, the A.O. has not brought any material evidence on record to prove that the appellant has taken alleged entry by paying un-accounted income. 3.6 It is submitted that the appellant has not invested and/or purchased and scrips of Kappac Pharma Ltd. but as may be perused from material on record that the appellant's mother Mina Shah has gifted 1,60,000 shares of Kappac Pharma Ltd. to the appellant under a duly notarized gift deed on 20.03.2014 and the same had been transferred to her demat account with Indo Thai Securities Ltd. on 25.03.2014. Out of the same, she has sold 32,000 shares in open market out of broker account with STT paid transaction. As a result she has earned long term capital gain of Rs.2,16,59,185/-.For the sake of completeness; the appellant would like to furnish details of purchase and sale of shares of Kappac Pharma Ltd., resulting into capital gain during the previous year as follows: Sl. No. Name of scrips Purchased No. of shares date Sold No. of shares date Long Term Capital gain (Rs.) 1 Kappac Pharma Ltd. The shares were allotted to appellant's mother on 22.11.2010. These shares received as a gift from her by the appellant 25.03.2014 on 1,60,000 25.03.14 (acquired by way of gift from her mother) 5,000 28.03.14 27,000 31.03.14 2,16,59,185 (a) Long Term Capital Gain in shares of Kappac Pharma Ltd.: Sale value of shares .... 2,20,97,585 Less purchase cost (cost in the hands of previous owner .... Rs. 4,38,400 u/s 49(1) of the Act) LTCG ... Rs.2,16,59,185 (b) In the statement of total income the appellant has shown Rs.2,16,59,185 under the head "Long Term Capital Gains" and claimed has exempt u/s 10(38) of the Act. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 30 - (c) It is pertinent to note that while making the assessment for the year under consideration, on one hand the A.O. has accepted the cost of acquisition in the hands of the appellant as well as sale value of shares as such: whereas on the other hand he has disbelieved the surplus being resulted into long term capital gain, net result. It is a classic illustration of blowing hot and cold at the same time by the A.O., without valid reasons. 4.1 It is submitted that although it appears to be a detailed and speaking appellate order so passed by the Ld. CIT(A), running into 64 pages, it is not so, briefly stated as under: para Contents/ particulars Page Nos. 4 Grounds of appeal reproduced 1 to 4 5.1 Observation of the A. O. reproduced 5 to 9 5.2 Selective portion of appellant's submission reproduced 9 to 27 6 Under the heading 'Decision', selective portion of report of investigation wing, copy/pasted 28 to 29 6.13 Selective portion of decision in the case of Swati Bajaj 30 to 63 6.14 It's a three liner finding upholding addition made by A.O. u/s.68 & appellant's ground dismissed 63 (bottom) 4.2 From the aforesaid facts, it may kindly be appreciated that the Ld. CIT(A) without appreciating the facts and material supporting evidences placed before him, has passed the appellate order in a quite summary manner, when he ought to have perused the appellant's written submission objectively and decided the case of the appellant judicially. 4.3 As stated in para-6.14, the Ld. CIT(A) has heavily relied on inquiry made by Investigation Wing of Income Tax Department (Kolkata) and has made a passing remark "inquiry and analysis made by A.O. in his order and ratio of above quoted Kolkata High Court Decision in the case of Swati Bajaj", he has concluded to uphold the addition made by the A.O. 4.4 With regard to inquiry and analysis made by the A.O. in his order, it is submitted that this is nothing but an eye wash and a short cut method to ignore/overlook the material facts by the appellant. In fact, neither any independent enquiry nor any alleged analysis has been made by the A.O. in his order, except reproducing selective portion of the report of the Investigation Wing, Kolkata. In fact, vide para-5.7 of the written submission before the Ld, CIT(A), the appellant has submitted point to point rebuttal to alleged reasoning of the A.O. at para-5 of his assessment order, as being reproduced below. "(a) Para 5.1 (a): Reasoning of the A.O. The appellant has purchased the shares on 22.03.2013 and same are sold on 28.03.2014 & 31.03.2014, resulting into capital gain of Rs.2,16,19,185/-, which is the increase in the cost price and rise in the share prices is not holding to any commercial principle and market factors. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 31 - Appellant's submission in rebuttal That the remark of the A.O. is absurd without pin-pointedly detecting anything unusual based upon facts and figures. Secondly, that appellant has acquired the referred shares by way of gift from for mother through a duly notarized gift deed. It is a matter of fact on record that her mother Smt. Meenaben A. Shah is a regular tax payer (PAN:APDPS3192P), in whose case assessment for the year under consideration has been made u/s 143(3) of the Act on 23.12.2016 without drawing any adverse inference. Meaning thereby, the department has accepted the transaction of gift of 1,60,000 shares of referred company in favour of the appellant. The shares were held by the appellant as investment and not as "stock- in-trade" and has shown capital gain in her return. Thirdly, that the transaction in purchase and sale of shares of Kappac Pharma Ltd. are carried out through the reputed broker and essentially through banking channel with STT paid transaction. The entity from whom the appellant has acquired shares and to whom shares are sold have confirmed the transactions as per material placed on record. Fourthly, the fact that transactions have been carried out in open market out of broker account M/s. Indo Thai Security Ltd. and the sale consideration is transferred to bank account of the appellant with Bank of India, Panchvati Branch. These facts have not been disputed by the A.O. Thus, A.O.'s observation is devoid of any merit, factually incorrect and perverse. (b) Para 5.1 (b): Reasoning of the A.O. That the finding of D.I.(Inv.) Kolkata proved that entry operators have worked out an arrangement in which shares price were rigged and sold at low price to arrive at short term capital loss. Appellant's submission in rebuttal The reasoning is factually incorrect, in absence of any cogent material/ evidence having brought on record to prove that the resorted to price rigging and there is no evidence that cash has been routed from various accounts by the so called entry providers to accommodate the appellant and therefore since the same is based on own presumption, general in nature and self serving conclusion drawn on the basis of so called report of the Investigation Wing of Kolkata, which is not permissible under the law. The A.O. has neither provided copies of statement of directors/brokers and their cross- examination before taking any adverse inference in the case of the appellant, despite specifically demanded under appellant's letter dated 26.12.2016. (Kindly P.B.P.No.92 to 105) The A.O. has nowhere stated the name of person in whose statement name of the appellant reflected as one of the beneficiaries for which allegation being made. Hence, the observation of the A.O. is devoid of any merit and baseless. (c) Para 5.1 (c): Reasoning of the A.O. That such trading transaction of purchase sales shares have not been effected for commercial purpose but to create artificial gains/losses with a view to evade taxes. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 32 - Appellant's submission in rebuttal That the observation of the A.O. is baseless for the reason that the transaction a shares of Kappac Pharma Ltd. and long term capital gain incurred thereon are genuine transactions as they are supported by valid debit/credit notes, share certificates, both transactions are duly reflected books of account and confirmed by contra accounts, physical delivery of shares have been received/given and the A.O. has not pin-paintedly detected any irregularity in the transactions. In fact, no contrary material/ evidence has been brought on record by the A.O. to negate the document placed on records by the appellant to substantiate genuineness of purchase and sale and consequential long term capital gain occurred on sale of said shares. (d) Para 5.1 (c)(a): Reasoning of the A.O. That the appellant has not been able to prove the unusual rise and fall of share prices to be natural and based on market forces. Appellant's submission in rebuttal That appellant has submitted authentic bills of broker M/s. Indo Thai Security Ltd. for acquisition and sales of shares of Kaррас Pharma Ltd. along with confirmation of the parties involved, the transactions have been through banking channel only and the A.O. has not brought any material on record to prove that the appellant has resorted to pre conceive scheme to procure long term capital gain to evade taxes by way of price difference. Therefore, the allegation that the appellant has failed to discharge his onus is wholly unfair. (e) Para 5.1 (c) (c): Reasoning of the A.O. That the net worth of the penny stock company is negligible and business activity of the company is negligible, the set prices have been artificially rigged high/low. Appellant's submission in rebuttal It is submitted that firstly the A.O. has not brought any material on record to allege that the referred company's net worth is negligible nor he has made any analysis on record about the alleged negligible it is business activity of that company. It is known fact that in share market majority of small and ordinary persons, like the appellant, are investing in shares of the scrip they do not make analysis of fundamentals of the company, its promoter and/or his business turn over etc; but they are investing on the basis of market information. In the process of such investment activity, it may happen that the some scrip gives handsome return, in some cases heavy losses and some scrips remains idle for years resulting into Nil return on investment. Hence, high/low price of the scrip not supportive of its fundamental and do not automatically establish that the same is rigged one and not real price to benefit the alleged investors. The appellant being a mere investor and has not benefited by alleged rigging in the prices of the said scrips. Therefore, the reasoning/finding of the A.O. is nothing but mere allegation. (f) Para 5.1 (c) (d) Reasoning of the A.O. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 33 - That SEBI has passed an order where the operators and M/s Kolkata Stock Exchange are said to be indulging in share manipulations. Appellant's submission in rebuttal It is stated that the appellant has carried out the transaction to open market through reputed broker account with STT; these facts have not been disputed by the A.O. Since, the appellant is having no connection either with the Kolkata Stock Exchange or any broker based at Kolkata, hence the reliance being placed on so called order of the SEBI passed in the case of alleged promoter/operators cannot be taken as basis for drawing adverse inference in the case of the appellant. The A.O. has neither placed copy of alleged order of SEBI in the impugned assessment order nor provided to the appellant during the course of the assessment proceedings for its rebuttal. (g) Para 5.1 (c) (e) Reasoning of the A.O. The investigations in the fund flow analyzed in the accounts of entry providers have established that cash has been routed from various accounts to provide accommodation to appellant. Appellant's submission in rebuttal It is submitted that without bringing anything narrating fund flow analysis of account of the so called entry operators on record, and without bringing any corroborative evidence to show even remotely the involvement of the appellant in routing of cash in whatsoever manner, drawing such an adverse inference to implicate the appellant, is nothing but mere wild presumption/suspicion not permissible under the law as per the settled legal principles. (h) Para 5.1 (c) (f)Reasoning of the A.O. The transactions entered by the appellant involve the series of preconceived steps, the true nature of share transactions lacked, commercial contents, entered into with the sold intent to evade taxes. Appellant's submission in rebuttal As may be perused from the table (supra) the appellant has received shares of Kappac Pharma Ltd. which is duly supported by valid gift deed and contract notes issued by the broker. Delivery of shares on sale have been given to broker through demat account. The appellant has duly paid STT and other government levies on sale of shares which is evident from the contract notes received from brokers. Hence, the allegation of the A.O., of appellant's involvement in series of preconceived steps, is mere presumption/assumption without any material having brought on record. The action of the A.O. is based on mere suspicion, own presumption, general in nature and self serving conclusion being drawn on the basis of so called report of the D.I. (Inv). Kolkata which is not permissible under the law. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 34 - 5.8 Lastly vide para-5.3 the A.O. has heavily relied upon the alleged findings of the search/survey, enquires conducted in the case of brokers/ operators and has arrived at a conclusion that the transaction entered by the appellant, the long term capital gain of Rs.2,16,59,185/- in purchase and sale of shares of M/s. Kappac Pharma Ltd. claimed as exempt u/s 10(38) of the Act cannot be allowed added back towards appellant's taxable income u/s 68 of the Act. 5.8.1 At the cost of repetition, it is submitted that in the exactly identical set of facts and circumstances, when the department has accepted long term capital gains on sale of shares of M/s.Kappac Pharma Ltd., in the case of Appellant's father Shri Ashok Hiralal Shah. In that case, in A.Y.2014-15, 24100 shares of M/s. Kappac Pharma Ltd. were sold by him for Rs.1,68,00,655/- which resulted into capital gain of Rs.34,32,024/-, the same was disclosed in the return of income. The case has also been scrutinized and regular assessment has been completed u/s 143(3) of the on 29.12.2016 by the very same Assessing Officer i.e. ITO, Ward- 5(2)(3), Ahmedabad, accepting the sale of referred company's share as genuine and as such no addition on this count case made in his hands. Although the principle of res- judicata does not apply to tax proceedings, when the facts are identical, the Revenue Department in expected to adopt a consistent approach during finalization of the assessment. Otherwise, also it is not open to the Revenue Department to keep on changing its stand in respect of the same nature of transaction. There is absolutely no justification in disallowing the claim of the appellant for capital gain arose on account of sale of shares of very same company in the hands of the appellant. (The date of assessment order in the appellant's case is 27.12.2016 i.e. just two days prior to the order of appellant's father). In this regard the appellant relies upon judicial pronouncement in the case of Berger Paints India Ltd. Vs CIT reported in [2004] 267 ITR 99 (SC), wherein it is held that the decision in the case of one assessee, department accepts and not challenging its correctness, then it is not open to take a different stand, in other case without a just cause. It is submitted that the conclusion drawn by the A.O. is wholly illegal and against the set principle of law. The appellant has, right from the beginning, categorically explained the genuineness of transaction carried out by him and strongly objected to A.O's show cause notice dated 21.12.2016 (Kindly P.B.P.No. 89 to 91) by way of fairly detailed explanation dated 26.12.2016. (Kindly P.B.P. No. 92 to 105) The finding of the A.O. is quite vague and baseless for the simple reason that neither the A.O. has provided copies of any of the persons who have deposed against the appellant nor afforded any opportunity to cross-examine them by enforcing their attendance. The A.O. has misdirected himself in coming to the conclusion that the claim of the appellant of Rs.2,16,59,185/-, for long term capital gain is disallowable and added back u/s 68 of the Act. 5.9 Besides, it is stated that the assessing officer has not disputed the fact that 1,60,000 of M/s. Kappac Pharma Ltd. were gifted to the appellant under a duly notarized gift deed dated 20.03.2014 by her mother Smt. Meenaben Ashokkumar Shah and the same have been transferred to appellant's demat account with M/s. Indo Thai Securities Ltd. on 25.03.2014. 5.9.1 As may be perused from the flow chart in respect of shares of Kapac Pharma Ltd. enclosed for ready as per Exbhit-1, Smt. Meenaben Shah mother of the appellant had applied for 5,00,000 preferential warrants convertible into equity ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 35 - shares on 09.06.2009 against payment of Rs.54,80,000/- as an application money. She paid call money of Rs. 6,60,000/- on 28.08.2009 and on 20.10.2010 and warrants got converted into 5,00,000 equity shares and physical share certificates no. 0015350 have been issued for 5,00,000 shares which were under lock in up to 19.11.2011 and she surrendered physical certificates for demat to her broker M/s. India Infoline Ltd. and same was credited to her demat account on 13.05.2013. Out of the above shares, Smt. Meenaben Shah gifted 1,60,000 shares to the appellant and transfer the same to her demat account no. 12050900-00038673 with M/S. Indo Thai Securities Ltd. on 25.03.2014. 5.9.2 It is stated that Smt. Meenaben Ashokbhal Shah has maintained regular books of accounts on mercantile basis and has been assessed to tax in her individual capacity bearing PAN ADSPS3192P. As may be perused from the Stock Summary being part of the balance sheet as on 31.03.2011, Smt. Meenaben Shah held total number of 79,93,744 shares of different companies including aforesaid 5,00,000 shares of M/s. Kappac Pharma as stock-in-trade. Same number shares of Kappac Pharma were continued as her holding till 31.03.2013 and out of the referred shares, she gifted to the appellant on 25.03.2014, leaving balance of 96,500 shares of M/s. Kappac Pharma with her as on 31.03.2014 as stock-in-trade. 5.9.3 The appellant has accounted for the referred 1,60,000 shares in her books of accounts @Rs.695.70 (closing rate of BSE) valued at Rs.11,13,12,000/-. These shares were in dematerialized form on 25.03.2014 and they were entered into demat account on 25.03.2014. Out of these shares, the appellant sold total number of 5000 shares on 28.03.2014 and 27000 shares on 31.03.2014 for Rs. 34,34,850/- and Rs.1,86,62,735/- through her broker M/s. Indo Thai Securities Ltd., Indore, M.P. As a result, there has been long term capital gain of Rs.2,16,59,185/- in the hands of the appellant, which has been shown under the head long term capital gain and claimed as exempt u/s.10(38) of the Act. 5.9.4 From the aforesaid facts, it may kindly be noted that holding period of shares was more than 55 months from the date of original investments made by the mother of the appellant Smt. Meenaben Shah, when the scrip of M/s. Kappac Pharma Ltd. was not alleged as ‘penny stock company’. In this connection, the appellant invites a kind attention of Hon’ble Jurisdictional High Court of Gujarat in the case of The Principal Commissioner of Income Tax 1 vs. Jagat Pravinbhai Sarabhai Tax Appeal NO. 332 of 2022 (Gujarat HC) Facts: The assessee individual’s return of income declaring total income of Rs.3,11,490/- was processed u/s.143(1). Subsequently, the assessment was reopened on receipt of information that the assessee indulged into scrip of shell company and had claimed LTCG on sale of shares of Devika Proteins Ltd. The A.O. treated the transaction as bogus and made addition of sale proceeds of shares u/s.68 of the Act. Being aggrieved, the assessee carried appeal before CIT(A) who held that the shares were in nature of old investment, they could not be treated as penny stock by any stretch of imagination. The revenue carried the matter before ITAT who dismissed the appeal of the revenue. Relevant portion of the judgment is reproduced as under: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 36 - “4. The Income Tax Appellate Tribunal further examined the question in appeal preferred by the revenue and confirmed the view of the appellate authority noticing that the shares were purchased in the year 2001 and they were sold after long time in the year 2010-11. 5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010.The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such longtime. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was long standing and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed.” In so far as the case of the appellant is concerned, that the shares in question were initially allotted to appellant’s mother on 22.11.2010 and the said shares came to be gifted to the appellant on 25.03.2014 and the shares were sold by the appellant on 28/31.03.2014 i.e. after long time from the initial year of acquisition in the hands of previous owner. Besides, the genuineness of the transaction of acquisition in the hands of the appellant is substantiated by producing copy of a notarized gift deed of her mother, flow chart in respect of shares of the company right from 09.06.2009 till completion of transaction. The shares were essentially retained for more than 55 months and were sold after such long time. In the circumstances and having regard to the ratio laid down by Hon’ble Court, the transaction could not be treated as bogus or investment having made in penny stock.” 4.5 However, the Ld. CIT(A) has proceeded to pass the impugned order ignoring and overlooking the vital facts placed before him, and has dismissed the appeal of the appellant in a quite pre-determined/preconceived manner, which is wholly unjustified. 4.6 Ignoring/overlooking applicable case laws in the case on hand: While submitting the written submission dated 07.03.2023, the appellant has relied upon catena of judicial pronouncements of Hon’ble Courts vide page-14 to 80 of the submission, how the ratios of Hon’ble Courts applies in the appellant’s case and have also submitted copies of judgment/case laws relied upon by the appellant at page-120 to 348 of the indexed paper book. However, there is not a whisper in the appellate order as to how they are not applicable and/or distinguishable with the facts of the case of the appellant. To that extent, it is submitted that the order so passed by the Ld. CIT(A) is perverse and bad in law. 4.7 Regarding decision of Swati Bajaj of Hon’ble Kolkata High Court In this regard, it is submitted that the Ld. CIT(A) has misdirected himself in placing reliance on the order and ratio of Kolkata High Court’s decision in the case of Swati Bajaj. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 37 - 4.7.1 With due respect to the Hon’ble High Court, the appellant submits that the facts as compared to the case on hand are distinct, in as much as in the case of Swati Bajaj, the crux of the issues was as to whether not providing of the investigation report to the assessee violated the principles of natural justice and giving of cross-examination and whether it was necessary. That apart, peculiar facts involved in that case wherein 89 different appeals of different assessees were disposed off by Tribunal in a single consolidated order without taking cognizance of specific facts involved in each case. The HC has not disturbed the settled position of law that circumstantial evidences can be looked into only when direct evidences are not available. (Para-69) In the present case, direct irrefutable evidences are made available before the A.O. which are not rebutted by the A.O. 4.7.2 Further peculiar facts vis-à-vis case Swati Bajaj (Supra) A perusal of factual matrix of the case of the appellant, it may kindly be appreciated that the distinguishable facts with reference to the case of Swati Bajaj, may be briefly stated as follows: (a) Case not subjected to search/survey: It is undisputed fact on record that neither any search proceeding u/s.132 of the Act nor survey action u/s.133A of the Act has been carried out in the case of the appellant. (b) Name of the appellant not featuring in the report: With a due respect to the Hon’ble Court, it is submitted that in the report of investigation wing, appellant has not been named who were involved in the scam. Hence, the burden on the appellant is to prove genuineness of the transactions, which she had discharged by producing direct documentary evidences in her case. (c) Appellant’s broker was not subjected to search: It is submitted that nowhere in the investigation report the name of the appellant’s broker namely Indo Thai Securities Ltd. figures whose cases were covered u/s.132/133A of the Act. (d) The appellant was not party to/or responsible for unreasonable rise in prices of scrip. Although, the appellant who has earned and offered LTCG on penny stock was certainly not a party for such unreasonable rise nor there is any evidence to that effect. The persons responsible for manipulations of such unreasonable rise in prices were the company whose shares were being traded and the operators involved therein. Therefore, the burden is not on the appellant to prove the steep rise in prices of scrip. Therefore, once the appellant had produced the direct evidences as stated in para 3.3 herein above in support of her transaction such as contract notes from the brokers, P&L account, balance sheet, computation of total income, statement of short term capital gains/long term capital gains, dematerialized account, bank ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 38 - statements and all other related details. Therefore, the onus on the appellant stands adequately discharged. (e) Stock exchanges are regulated by SEBI: The appellant has categorically discharged her initial burden cast upon her, the moment the appellant has produced all documentary evidences in respect of share transactions. The so-called initial burden on the appellant, it is submitted that it does not include the burden to prove the genuineness of rise in the prices on the stock exchange(s), especially when the stock exchanges are regulated by the statute (SEBI Act, 1992) and a body constituted thereunder namely SEBI. (f) The appellant was under no obligation for manipulation: It is submitted that in the aforesaid circumstances, the appellant was under no obligation to prove that there was no manipulation “at the other hand”, since the appellant has only earned capital gain which has been disclosed in the return of income so filed for the year under consideration, and that the capital gains earned by her on penny stock was not tainted. (g) The A.O. has relied on the order of SEBI about the surveillance measures taken to suspend the scrip of Kappac Pharma Ltd. which took place in 2015. However, the same is after 6 years from the year of purchase of the share and gifted by appellant’s mother and even one year after sale of such shares in the hands of the appellant. It is therefore submitted that period during which the investment made by her mother and its subsequent sales by the appellant, the company Kappach Pharma Ltd. was a regular listed company at the recognized stock exchange of India. Having regard to the aforesaid facts, it may kindly be appreciated that the facts of the case on hand are quite distinct and distinguishable with the facts of the case of Swati Bajaj and therefore, no adverse inference could be drawn in the case of the appellant. 4.7.3 In nutshell, the appellant has categorically demonstrated with all supporting documentary evidences including bank statements, invoice of brokers, contra accounts and statements of sale proceeds. It is reiterated that the receipt of money being sale proceeds on account of sale of shares are routed through banking channel only and in none of the account, cash was ever deposited to show circulation. It is also the fact that statement of Shri Prateek Rameshchandra Shah & Others which is being strongly relied by the A.O has no evidentiary or corroborative value for the reason that the A.O has merely relied on the report of DI(Inv.), Kolkata. The A.O has framed the assessment order without conducting any inquiry from the relevant parties or independent source of evidence. Even the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. The A.O has neither conducted any inquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. On the other hand, the case of the appellant is on much better footing as may be verified from the factual matrix of the case. The appellant has adduced more than adequate quantities of evidences, material which are sufficient to prove identities of the parties through whom the appellant has transacted. Eventually, the appellant has fully discharged the onus casted upon him u/s.68 of the Act. Therefore, there is no reason to disbelieve and/or doubt so far as the share transactions are concerned. The A.O could not have ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 39 - formed bios opinion on the basis of report from the internal agency. The A.O cannot treat a genuine transaction of sale of share as accommodation entry, without conducting independent inquiries, especially, the appellant has discharged her primary onus. 5. Discharging onus casted upon the appellant u/s.68 of the Act. 5.1 While passing the impugned appellate order, the Ld. CIT(A) has upheld the addition made by the A.O. u/s.68 of the Act on account of disallowance of long term capital gain on sale of shares claimed by the appellant. It is submitted that even the appellant’s case cannot be brought under ambit of provisions of section 68 of the Act, for the reason that as per the settled position in law, the appellant has to prove the identity of the party through whom sale consideration is received, creditworthiness and genuineness of the transaction. In this context, it is respectfully submitted that the appellant has received the sale consideration through a recognized broker M/s. Indo Thai Securities Ltd. being a member with BSE/NRD/NSE, bearing DPID12050900 whose contract notes and contra accounts are produced during the course of assessment proceedings. Thus, the identity is undoubtedly proved. Similarly, creditworthiness is also proved by placing contra account of the broker on record. Thirdly, with regard to genuineness of the transaction, it is submitted that the entire sale consideration has been received through proper banking channel, by producing copies of bank statements evidencing transaction of sale of shares including purchases as well. Thus, by adducing more than adequate evidences on record, the appellant has discharged not only primary onus but in entirety, cast upon the appellant within the meaning of provisions of section 68 of the Act. The case of the appellant is covered by the decision of Hon’ble Gujarat High Court in the case of Rohini Builders reported in [2002] 256 ITR 360 (Guj). The Hon’ble Supreme Court has dismissed the special writ petition filed by the revenue against this judgment. Furthermore, the decision of Hon’ble Gujarat High Court in the case of Dharmdev Finance P. Ltd. reported in [2014] 43 Taxmann.com 395 (Guj) also supports the contention of the appellant wherein the Hon’ble High Court has held as under: From the head note: Section 68 of the I.T. Act, 1961 – cash credit (burden of proof)- various additions were made to the assessee’s income on account of cash credit-it was found that in respect of said credits the assessee had filed PAN of creditors, their confirmation and their bank statement which established their creditworthiness. Moreover, transactions were made through banking channel- whether any addition could not be made u/s.68 of the Act? – Held, Yes 5.2 At the cost of repetition it is stated that the appellant has categorically demonstrated with all supporting documentary evidences including bank statement, invoices of brokers, contra accounts and statement of sale proceeds with particulars of buyers and their PANs. It is reiterated that the receipt of money being sale proceeds on account of sale of shares are routed through banking channel only and in none of the account, cash was ever deposited to show the circulation. Thus, the appellant has adduced more than adequate quantities of evidences, material which are sufficient to prove identities of the parties through whom appellant has transacted. Eventually, the appellant has fully discharged the onus casted upon him u/s 68 of the Act. Therefore, there is no reason to disbelieve and/or doubt, so far as the share transactions are concerned. The A.O. is not justified in making addition on mere surmises and conjunctures. The A.O. could not have formed such a bias opinion on the basis of report from the agency. The A.O. cannot treat a genuine transaction of sale of share as accommodation entry, without conducting independent inquiries, especially when the appellant has discharged his primary onus. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 40 - 5.3 It is further submitted that while arriving at the conclusion, the A.O. did not consider it worthwhile to make concrete inquiry such as issuing commissions to the concerned A.Os assessing those entities, or issuing notices u/s 133(6) of the Act calling for material details. But he simply carried out arm – chair proceedings and based his order in a pre-conceived manner, without brining any cogent material on record. Neither the A.O. has supplied copies of statement of alleged entities whose names are referred to in his show-cause notice dated 23.12.2016 nor he has brought any material on record as to what action is taken by the department in their cases. The A.O. has simply relied upon intimation received from the internal agency and has concluded that the appellant was beneficiary of entry and has disallowed and added back total amount of Rs.2,16,59,185/-. 5.4 Assuming without conceding or admitting even if the addition is rightly made u/s 68 of the Act, not only the initial burden but the whole burden is discharged by appellant by furnishing necessary details. In such an eventuality, the source of such credit in the bank account of the appellant is not the alleged entry provider but M/s. Shah Investors Home Ltd. Thus, the source of such entry is genuinely confirmed and established beyond doubt. No cogent and reliable material is brought on record to prove and established the complete nexus between the parties concerned to prove the same. The appellant says and states that he does not know the alleged master-mind i.e. entry providers and has never met him and the A.O. has also not established the same otherwise. 5.5 At the cost of repetition, it is submitted that the credit entries in the appellant’s bank account has been by way of ECS from the brokers. In support of the same the appellant has submitted detailed transaction statement from the brokers i.e. M/s. Shah Investor Home Ltd. as well as contra account from the said brokers. Thus, the source of such entry is not only established but the source of source is also established beyond doubt. Thus, not only the initial burden but the whole of the burden is discharged by the appellant. 5.6 In the light of the decisions of the Hon'ble Supreme Court in the case of Andaman Timber Industries and others and considering the facts in totality, the claim of the appellant cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. 5.7 Needless to state that the judicial discipline demands that the judgment of the jurisdictional High Court is bound to be followed by the authorities below, in its true letter and spirit. 5.8 Moreover, the provisions of section 68 of the Act are not applicable to the facts of the case because the said provisions are applicable where any sum is found credited in the books of the appellant maintained for any previous year and the appellant does not offer any explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer satisfactory, the sum so credited may be charged to income-tax as the income of the appellant of that previous year. 5.9 Having regard to the aforesaid peculiar facts and circumstances of the case of the appellant, there is absolutely no justification for making addition of Rs.2,16,59,185/- in the hands of the appellant. The same deserved to be deleted. 5.10 In nutshell, the appellant says and states that ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 41 - (i) The A.O. has not disputed the purchase of shares during the course of proceedings for the year under consideration. It is matter of fact on record that the appellant has received 1,60,000 shares as gift from her mother Mina Shah on 25.03.2014 which have been credited in for demat account with Indo Thai Securities Ltd. The shares having been acquired under a valid gift, the cost thereof in the hands of previous owner has been accepted by A.O. in view of provisions of section 49(1) of the Act. (ii) The statement of third parties are said to have been taken by DI(Inv.) which are not made part of record, who have said anything having any relation with the appellant. The appellant is not at all named in the show-cause statement as evidenced from the selective portion extracted by the A.O. in the body of assessment order. (iii) Even the so-called details/papers stated in the order are self-serving and have no evidentiary value in the eyes of law. (iv) The A.O. has failed to corroborate or prove the contents of papers/statements being relied upon without providing copies thereof and/or affording any opportunity to the appellant to cross-examined them. (v) The company whose shares have been received as gift from her mother and sold by the appellant during the year under consideration is existing company and duly listed on BSE. (vi) No notices u/s 133(6) of the Act are issued by the A.O. to cross verify the dealing of appellant and obtain details from share brokers through whom the share transaction is undertaken by the appellant; nor such notice issued for obtaining details from company whose shares have been purchased or sold by the appellant.; nor any details gathered under such notice from stock exchange. (vii) As submitted above all the payments in respect of shares sold are through banking channel only and the A.O. has not pin-pointedly detected any entries in cash either prior or subsequent to the dates of sales. In all fairness, the A.O. was duty bound to make some efforts to bring some evidence on record to disbelieve the appellant’s claim. (viii) The A.O. has not brought any material on record to show that the appellant was carrying on any business which could be sourced to earn any such un-disclosed income. (ix) There is no cash credit introduced in the books of account, but what the appellant has disclosed in the return of income has been short term capital gain on account of sale of shares of a company which is exempted by virtue of provision of Section 10(38) of the Act. The surplus has been disclosed as long term capital gain while submitting return of income. (x) The regulatory action from SEBI and the surveillance measure taken to suspend the scrip of M/s. Kappac Pharma Ltd. took place in the year 2015 i.e. after considerable period of about 6 years from the year of initial purchase and even one year after the sale of shares by the appellant. Therefore, transactions took place in ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 42 - respect of shares of the referred company much prior to the suspension, the suspension of trading in shares of the said scrip itself do not automatically prove/establish that the transaction which took place much prior to the suspension are not genuine. (xi) The stock market in the commercial terms, it is well known that the prices of the scrip are flown with the winds and the sentiments irrespective of the fundamentals of the scrip and therefore the price of the scrip has been gone high after the shares were purchased does not mean that the transaction of the appellant not genuine merely on surmises, conjectures and personal assumption in absence of cogent material. (xii) There is no material/evidence of whatsoever nature brought on record by the A.O. to arrive at a conclusion that there was involvement of the assessee to inflate the sale price in alleged connivance with the brokers and the price the shares were sold is not genuine price. The appellant submits that in the stock exchange, it is not a case that only the market price of the scrip of M/s. Kappac Pharma Ltd. sold by the appellant has gone substantially high but there is numerous scrip whose prices has gone high/low depending on market sentiments irrespective of its fundamentals. Hence, merely price of shares were gone high cannot prove that the transaction entered into by appellant are not genuine and more particularly when the holding period for shares was more than 55 months from the date of original investments made by appellant’s mother Smt. Meenaben Shah. 6. Having regard to the aforesaid peculiar facts and circumstances of the case on hand, there is absolutely no justification in making addition of Rs.2,16,59,186/- in the hands of the appellant. The orders of the authorities below are therefore liable to be quashed and addition so made and being sustained by the Ld. CIT(A) be deleted in the interest of justice and equity.” 12. It is the case of the assessee that a copy of the enquiries, list of brokers and Directors whose statements were recorded during investigation at Kolkata were neither given to the assessee prior to taking any adverse inference in the case of the assessee. In spite of repeated request made by the assessee for affording opportunity to cross examine witnesses. It is the further case of the assessee that the trading of these scrip was suspended by SEBI as a surveillance measure and it is not the case of the Revenue the regulatory action taken by SEBI in this regard was during that material point of time when the shares were purchased by the Mother of the assessee and transfer to the assessee and in turn sold by the assessee. Moreso, since the company, namely, M/s. Kappac Pharma Ltd. was a regular listed company at the ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 43 - recognized stock exchange of India, the trading in shares of the said company was done like any other scrip and the events happened post facto to the transactions done by the assessee’s mother or the assessee itself does not prove that the assessee has routed her unaccounted money through sale of shares of which long term capital gain arose. 13. It is a fact that the price rigged up from 13.50 in 2009 to Rs.680/- in F.Y. 2013-14. It was submitted by the assessee that in the stock market in the commercial terms, it is well known that the prices of the scrip are flown with the winds and the sentiments irrespective of the fundamentals of the scripts. In that view of the matter, price of the scrip though went substantially high after shares were purchased, doesn’t automatically mean that the transaction of the assessee in the said scrip is not genuine. The same cannot be, therefore, said to be doubtful mainly on surmises, conjunctures and on presumption basis without any supportive documents in the hands of the Revenue. There was no role to play by the assessee in inflation of sale price as alleged or at all with the connivance with the brokers and the price at which shares were sold were neither genuine price. 14. Furthermore, there was no material and/or evidence brought on record by the Revenue in order to establish that the company has indulged in providing accommodation entries and the prices were rigged and the mother of the assessee or the assessee was involved in rigging of the price of shares. The case of the Revenue has been dealt with on entirely unsubstantiated suspicions is wholly unjustified and bad in law. The assessee at the time of hearing of the matter before the authorities below relied upon various judgments: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 44 - FOR CAPITAL GAIN ON SALE OF SHARES CIT v. Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat) CIT v. Maheshchandra G. Vakil [2013 40 taxmann.com 326 (Gujarat) CIT v. Jitendra Dalpatbhai Shah [2014] 41 taxmann.com 523 (Gujarat) Meenadevi N. Gupta v. ACIT Circle -5, Surat [2013] 35 taxmann.com 211 (Ahd) Vasantraj Birawat v. ACIT [2015] 61 taxmann.com 295 (Mumbai - Trib.) Smt. Smita P. Patil v. ACIT [2015]55 taxmann.com 346 (Pune - Trib.) CIT vs. Shyam R. Pawar [2015]54 taxmann.com 108 (Bombay HC) CIT v. Smt. Sumitra Devi taxmann.com 37 (Rajasthan) ITO v. Smt. Aarti Mittal [2014] 41 taxmann.com 118 (Hyderabad - Trib.) Ramesh Kumar Jain (HUF) v. DCIT [2013] 36 taxmann.com 524 (Jodhpur-Trib) DCIT v. Smt. Hansa Choudhary [2012] 23 taxmann.com 302 (Jodhpur- Trib.) Astt. CIT v. Kamal Kumar S. Agarwal (Indl.) [2010] 133 TTJ 818 (Nag.) Jafferali K. Rattonsey v. DCIT[2012] 23 taxmann.com 21 (Mum.) FOR PROVIDING OPPORTUNITY OF CROSS EXAMINATION Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II [2015]62 taxmann.com 3 (SC)/[2015] 52 GST 355 (SC) R.W. Promotions (P.) Ltd. v. ACIT [2015] 61 taxmann.com 54(Bombay) CIT v. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) Commissioner of Income-tax, Central, Jaipur v. Supertech Diamond Tools (P.) Ltd. [2014] 44 taxmann.com 469(Raj.) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) 15. The Ld. DR has not been able to controvert the contention made by the assessee at this stage of the hearing of the matter. 16. It was further argued by the Ld. Counsel appearing for the assesse that the scrip of M/s. Kappac Pharma Ltd. was found to be genuine in very many cases in appeal by the ITAT itself. One of such matter is Shri Prakash Javia Huf vs. ITO & Ors. in ITA No.464/Ind/2019 & Ors. and ACIT vs. M/s. Affluence Commodities Pvt. Ltd. in ITA No.593/Ahd/2020. In that view of the matter as scrip of the said company has been held to be genuine, the addition on surmises and conjunctures is found to be not sustainable and liable to be set aside as is the crux of the case made out by the assessee. ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 45 - 17. We have considered the entire set of judgments relied upon by the assessee and order passed by the ITAT in identical case, we find substance in such submission advanced by the Ld. Counsel appearing for the assessee that the issue is squarely covered by the judgment in case of Shri Prakash Javia Huf vs. ITO & Ors. in ITA No.464/Ind/2019 & Ors., wherein the scrip of M/s. Kappac Pharma Ltd. has been held to be genuine and the claim under Section 10(38) of the Act has been allowed with the following observations: “21. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions, paper book and plethora of judgments referred and relied by both sides. Common issue raised in all three appeal is genuineness of claim of Long Term Capital Gain as exempt income u/s 10(38) of the Act arising out of the transactions of sale of equity shares of Kappac Pharma Limited. 22. The assessees namely Prakash Javia HUF, Jayesh Kumar Javia HUF and Prajash Javia purchased equity shares of Kappac Pharma Limited totaling to 3000, 2000 & 3000 respectively in cash through offline mode from existing shareholder of Kappac Pharma Ltd. at Rs.36000/-, Rs.24,000/- & Rs.36,000/-. Subsequently, during the F.Y. 2013-14 all these equity shares were converted in DMAT form maintained by respective assessees with Kotak Securities Ltd. During F.Y. 2013-14 after holding the shares for more than 12 months, respective assessee(s) sold their holding of Kappac Pharma Ltd. through a registered broker namely Kotal Securities Ltd on the recognized stock exchange namely Bombay Stock Exchange Ltd and Long term Capital Gain calculated in each case have been shown in the income tax returns as exempt income u/s 10(38) of the Act. 23. During the assessment proceedings the assessing officer on the basis of report of the investigation carried out by the Investigation Wing of Income Tax Department at various brokers in other parts of the country, lack of information from the purchaser of equity shares sold by one of the assessee namely Prakash Javia HUF and raising doubt on the abnormal increase of the share price of Kappac Pharma Ltd. which in no way could termed as a fair market value looking to the financial position, gross sales and income shown by the listed company KPL and based on all these observations concluded that the alleged transactions of sale of equity shares of KPL are bogus, Kappac Pharma Ltd. is a penny stock company, and the assessee has adopted a colorable devise to convert unaccounted money into accounted money by arranging bogus LTCG. 24. As far as, the contention that share prices of Kappac Pharma Ltd. saw abnormal rise which is not commensurate to the financial results/position of the company, we find that this tribunal has dealt with this issue recently in the case of Aditya Mundra (supra) observing as follows: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 46 - Para 37 – “On the other hand all the relevant documents to prove the purchase and sale were before the Ld. A.O. Purchases were at the fair market value at Rs.12/-. Sales have been effected through registered broker after payment of security transaction tax and sold at the prices appearing at the recognized stock exchange. Merely observing that the prices of the equity shares have been increased drastically cannot be a evidence in itself to treat the transactions as bogus. There are number of incidences where the share prices of certain listed companies increased drastically but that all depends on demand and supply of the equity share, perception of its growth and the market sentiments. Unless and until the company of which the equity shares are being traded is found to be involved in malpractices the financial results are not commensurate with the prices at the NSE/BSE portal and sufficient proofs are available showing the alleged company to be a bogus/penny stock or paper company, one cannot question the genuineness of transactions carried out on the portal of NSE/BSE which are under the control of Securities and Exchange Board of India." [emphasis supplied] 25. The above finding of this Tribunal indicates that there are various other factors for the sudden rise and fall in the share prices of a listed company which are majorly linked to the market sentiments, performance of the sector, availability of shares i.e demand and supply, holding of the promoters, future prospects etc. In the instant case, nothing on record is available to show that any enquiry was conducted by department at the business premises of Kappac Pharma Ltd. and its involvement in this alleged racket of managing bogus LTCG. Kappac Pharma Ltd. is registered with Registrar of Companies and is still live at the portal of Registrar of companies. All transfers of shares of particular listed company is well recorded in the Registrar of shareholders. Even the purchase of shares by assessee is directly from a shareholder company, being original allottee of equity shares of Kappac Pharma Ltd. which were subsequently transferred in the name of respective assessee(s). 26. We, further note that as far as conditions provided in section 10(38) of the Act are concerned the same are duly fulfilled in the instant case Section 10(38) of the Act reads as follows: “any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust where – a)The transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and b) Such a transaction is chargeable to securities transaction tax under that Chapter.............” xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 27. From perusal of above section we observe that following conditions are to be satisfied to claim income exempt u/s 10(38) – a. Asset transferred should be a long term capital asset b. Asset transferred should be either equity share or units of equity oriented fund or units of a business trust ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 47 - c. Transaction of sale of such equity share or units of equity oriented fund or units of a business trust is entered into on or after 01st October 2014 d. Securities transaction tax (STT) is paid (which is possible only when the transaction is carried out on a registered stock exchange ) 28. Ongoing through the facts of the case, we find that the assets are in the nature of equity shares which are not part of a business stock and have been held for more than 12 months so will comes under the category of Long Term Capital Asset. The equity shares are sold through recognized stock exchange (Bombay Stock Exchange) and security transactions tax have been paid on this transaction. 29. Now coming to the part of purchase and sale: Purchase is off line and made in cash. Ld. AO has raised doubt on the purchases being made in cash but there is no bar under the law to make purchase in cash. In all these cases equity shares were purchase from Shah & Sons Propon Private Limited. PAN No. of the seller was provided before both the lower authorities. The seller namely Shah & Sons Propon Private Limited purchased equity shares in November 2010 and was originally allotted the shares by Kappac Pharma Ltd. which is a company registered at Mumbai. Genuineness of the documents namely share certificate placed page 10 of the paper book is not doubted. For sure the details of shareholder would be available on the portal of the Registrar of Company where annual returns are filed by the Companies. Further has this certificate being bogus then how could the shares are dematerialized. Because once a share are lodged for dematerialization the original share certificate is to be deposited and the correctness of the certificate is verified through the company which has issued the share certificate. Once the details are found to be correct the shares are dematerialized. 30. Now coming to the sale part: The assessee has opened DMAT account with Kotak Securities Ltd. which is known to be a reputed company engaged in the providing services as share broker. Kotal Security is registered with Bombay Stock Exchange. Sale is effected on the portal operated and controlled by Bombay Stock Exchange. The seller has no idea as to who is the buyer on the other side. On the portal the payment for the sale is received by broker which in this case is Kotak Security Limited who after deducting the brokerage and other applicable tax including Security Transactions Tax remits the balance amount in the bank account of the assessee which is registered in the DMAT Account. In the instant case, no flaw or any inconsistency has been found by the Revenue authorities with all these transaction of purchase and sale. 31. Further the aspect that whether Kappac Pharma Ltd is a ‘penny stock’ company or not has been dealt in detail by I.T.A.T., Kolkata Bench in the case of Yogendra Dalmia (supra) wherein the Tribunal after considering another decision of Bangalore Tribunal in the case Canara Bank vs. JCIT held the transaction from sale of equity shares of Kappac Pharma Limited as genuine and also allowed the claim of assessee of LTCG from the sale of equity shares of Kappac Pharma Ltd. and also deleted the alleged commission expenditure added by Ld. AO for arranging the bogus LTCG. The relevant extract of decision of Coordinate Bench Kolkata in the case of Yougendra Dalmia (supra) is reproduced below: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 48 - Para 6 – “Next comes assessee’s latter appeal ITA No.775/Kol/2018 seeking to reverse both the lower authorities action treating his sale proceeds amounting to Rs.1,81,009/- derived from sale of shares in M/s GCM Securities Pvt. Ltd and Kappac Pharma Ltd. has to be in the nature of unexplained cash credits. Both the lower authorities have further disallowed the alleged commission expenditure @ 5% thereupon with coming to O1,81,009/- u/s. 69C of the Act. The CIT(A)’s detailed discussion under challenge to this effect reads as under:-...........” Para 7 – “We have given our thoughtful consideration to rival contentions. There can hardly be any dispute that assessee has placed on record his supportive documentary evidence comprising of relevant purchase bills of shares allotment, certified copies, contract notes, brokerage details etc. We put up a specific query as to whether any of entry operators searched or survey has quoted these assessees names or not before the departmental authorities. There is no such material in the case file indicating such as statement. I find that this co-ordinate bench’s decision in ITA No. 1918/Kol/2018 in Smt. Sangita Jhunjhunwala vs. ITO decided on 04.01.2019 has deleted similar bogus LTCG vide following detailed discussion in para 3 to 5 as under............” Para 8 – “This tribunal’s yet another decision in (2017) 60 ITR (Trib) 1 (Bang) Canara Bank vs. JCIT holds that the estopple principle does not apply in income tax proceedings. We therefore reject Revenue’s arguments in support of impugned addition. We take into account all the relevant facts and circumstances to adopt the learned co-ordinate bench’s above extracted detailed reasoning mutatis mutandis to delete the impugned addition forming subject-matter of the instant appeal. Commission expenditure disallowance; if any, shall automatically follow suit as a necessary corollary. No other argument has been raised before us during the course of hearing. This assessee’s latter appeal ITA No. 775/Kol/2018 is allowed.” [emphasis supplied] 32. Records placed before us also shows that report of the investigation wing or any enquiry conducted from 3rd persons were not made available to the assessee which thus grossly violates the principles of natural justice. As the assessee never got opportunity to go through these reports this action of the lower authorities was not justified in view of ratio laid down by Hon'ble Supreme Court in the case of Sona Builders (supra) wherein Hon'ble Court held that: Para 7 –“ Having regard to the statutory limit within which the appropriate authority has to act and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the appropriate authority. We must set his order aside. Para 8 – “The appeal is, accordingly, allowed. The judgment and order under appeal is set aside. The order of the appropriate authority dated 31-5-1993 is quashed.” [emphasis supplied] 33. We, therefore, in the totality of facts and in view of the ratios laid down by Hon'ble Courts and decision of Coordinate Benches squarely applicable on the instant issue raised before us, are of the considered view the alleged transaction of purchase and sale of equity shares of Kappac Pharma Ltd. are not bogus as the respective assessee(s) have duly charged there onus to prove the genuineness of purchase and sale of equity shares of listed company KPL (listed in Bombay Stock Exchange) by placing necessary documents to prove ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 49 - that the purchase are directly from the shareholder and sold through a registered broker and nothing adverse has been found by the revenue authorities and KPL is not held to be a penny stock company. 34. Further, with regard to the alleged addition we find that the it is purely based on the report of the investigation wing carried out in the case of other persons finding no mention or the involvements of assessee(s) in any of such report and thus, the claim of the LTCG has been rightly made as exempt income u/s 10(38) of the Act. We, thus, set aside the finding of the Ld. CIT(A) in all the instant appeals and direct the Ld. Assessing Officer to allow the claim of LTCG made u/s 10(38) of the Act made by the respective assessee(s) and also delete the disallowance of brokerage expenses of Rs.61,380/- made in the case of Prakash Javia. 35. In the result, all grounds raised by the assessee(s) are allowed and appeals filed by the assessee in ITANo. 464,465 & 466/Ind/2019 are decided in favour of the assessee and against the revenue.” 18. We have carefully considered the judgment passed in case of ACIT vs. M/s. Affluence Commodities Pvt. Ltd. in ITA No.593/Ahd/2020, wherein deletion of addition under Section 10(38) of the Act in respect of the LTCG out of the sale of scrip of M/s. Kappac Pharma Ltd. was upheld. The Co- ordinate Bench while dealing with the same observed as follows: “9. The 3rd ground namely losses booked under penny stocks of Rs. 73,12,905/- on sale of Alang Industrial Gases Ltd. shares. The assessee has proved the genuineness of the transactions beyond doubt by furnishing contract notes, ledger accounts, bank transactions from books of brokers whereas the A.O. without any material evidence disallowed the losses of in scripts of Alang Industrial Gases Ltd. and the valuation of the closing stock in Kappac Pharma just based on the SEBI general information and Investigation Wing, Kolkatta. The A.O. made the disallowance without documentary proof whereas the assessee proved the genuineness of the transactions and established on online trading platforms and it had no control whatsoever on share prices and thus incurred losses in shares of Alang Industrial Gases Ltd. It is the case of the assessee that it sold only part of the shares and remaining shares have been held by the assessee in subsequent assessment year also. Thus following Jurisdictional High Court Judgment, the Ld. CIT(A) deleted the addition. 9.1. The Ld. D.R. could not produce any contra judgments in support of its case, whereas Ld. Counsel for the assessee submitted before us the following case laws: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 50 - (i) CIT V/s. Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat) (ii) PCIT V/s, Ramniwas Ramjivan Kasat [2017] 82 taxmann.com 458 (Gujarat) (iii) CIT V/s. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) (iv) Meenadevi N. Gupta V/S, ACIT [2013] 35 taxmann.com 211 (Ahmedabad - Trib.) (v) CIT V/s. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com 64 (SC), (vi) Chandra Prakash Jhunjhunwala in ITA No. 2351/Kol/2017 dated 09- 08-2019 (vii) Shashi Bala Bajaj - ITAT Kolkata in ITA No. 1547/Kol/2018 dated 16- 11-2018 (viii) PCIT V/s. Prem Pal Gandhi 401 ITR 253 (P&H) (ix) PCIT V/s. Dhawani Mahendra Shah - Tax Appeal No. 674/2017 dated 12-09- 2017 Gujarat High Court (x) PCIT V/s. Bharati Somchand Shah - Tax Appeal No.1023/2017 dated 22-01- 2018 Gujarat High Court (xi) Shantaben Parasmal Jain V/s. DCIT ITAT Ahmedabad in ITA No. 726/Ahd/2017 dated 15-10-2018 10. The Jurisdictional High Court of Gujarat in the case of Himani M. Vakil (cited supra) held as follows: “Assessee filed her return declaring certain amount as short term capital gain arising from sale of shares - Assessing Officer taking a view that share transactions were bogus, added amount of capital gain to assessee's taxable income as unexplained cash credit - Tribunal, however, concluded that genuineness of transactions was duly proved by contract notes for sale and purchase, bank statement of broker, demat Account showing transfer in and out of shares, as also abstract of transactions furnished by CSE - accordingly, addition made by Assessing Officer was deleted - Whether since finding recorded by Tribunal was based on appreciation of material on record, no substantial question of law arose therefrom.” 10.1. In the case of Ramniwas Ramjivan Kasat (cited supra) held as follows: “Assessment year 2006-07- During relevant year, assessee sold certain shares owned by him - Assessing Officer opined that purchase of shares in question itself was bogus and, thus, there was no question of sale of same He thus added amount of sale proceeds of shares to assessee's taxable income Tribunal noted that shares had been purchased in previous assessment year - It was further found that assessment for previous assessment year had been taken in scrutiny and in assessment order purchase of shares had been accepted as genuine - Tribunal thus concluded that no addition could be made with aid of section 68 when such shares were sold in relevant assessment year - Whether on facts, impugned order passed by Tribunal did not require any interference.” 10.2. In the case of Maheshchandra G. Vakil (cited supra) held as follows: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 51 - “Assessment year 2006-07 - Assessee filed return of income declaring certain amount as short term capital gain arising from sale of shares - Assessing Officer framed assessment treating short term capital gain as explained cash credit - Tribunal, however, opined that genuineness of transactions was proved by contract notes for sale and purchase, bank statement of broker, Demat Account Showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange - Accordingly, Tribunal deleted addition made by Assessing Officer - Whether since impugned order of Tribunal was based on appreciation of evidence on record, it did not require any interference.” 11. Respectfully following the above Jurisdictional High Court judgments and also the fact that the assessee is a retaining Kappac Pharma shares as stock-in- trade and the closing stock is valued at the market rate. Since the market rate is lower it has incurred a business loss of Rs. 53,02,455/-, though the shares are not sold. The difference is only because of valuation of shares which is as per the Accounting Standard and the share of Kappac Pharma are still forming part of closing stock of the assessee company as on 31.03.2019. Thus, we have no hesitation in deleting the disallowance made by the A.O. which was correctly deleted by the Ld. CIT(A). Thus the grounds raised by the Revenue is without any basis and the same is liable to be rejected.” 19. We find that the Co-ordinate Bench while upholding the order passed by the Ld. CIT(A) in deleting addition made under Section 10(38) of the Act in respect of sale of scrip of M/s. Kappac Pharma Ltd. relied upon the judgment passed by the Jurisdictional High Court in the case of Maheshchandra G. Vakil (supra). 20. It appears that the holding period is more than 55 months in case of the assessee before us too which facts cannot be brushed aside and therefore, the judgment passed by the Jurisdictional High Court in the case of PCIT vs. Jagat Pravinbhai Sarabhai Tax Appeal No. 332 of 2022 seems to be applicable. 21. So far as the judgment relied upon in the case of PCIT vs. Swati Bajaj, reported in [2022] 446 ITR 56 (HC. CAL.) by the Ld. CIT(A) while ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 52 - confirming addition, we find that the assessee made a contradiction statement distinguishing the fact made out by Revenue appearing at Page Nos. 349 to 372 of the paper book filed before us. The crux of the same is as follows: ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 53 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 54 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 55 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 56 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 57 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 58 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 59 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 60 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 61 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 62 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 63 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 64 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 65 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 66 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 67 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 68 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 69 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 70 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 71 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 72 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 73 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 74 - ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 75 - 22. We find substance in such submissions made by the Ld. AR particularly for the reason that scrip was subscribed by the mother of the assessee way back in F.Y. 2009-10 which was acquired by the assessee as gift from her. In that view of the matter, the observation and final decision of the judgment passed by the High Court at Kolkata has no manner of application in the ITA No. 517/Ahd/2023 (Shivani Ashokbhai Shah vs. ITO) A.Y.– 2014-15 - 76 - instant case due to difference in the facts of the matter. The judgment of Swati Bajaj (supra) is of, therefore, no consequence. Moreso, the broker is of Ahmedabad and not from Kolkata. 23. Thus, having regard to the facts and circumstances of the case and having regard to the order passed by different authorities including Hon’ble Jurisdictional High Court upholding the genuineness of the scrip of M/s. Kappac Pharma Ltd., we do not find any reason for addition made by the Revenue which is found to be solely on the basis of surmises and conjunctures and without any cogent document in the hands of the Revenue. The same is, thus, hereby deleted. 24. In the result, the appeal preferred by the assessee is allowed. This Order pronounced on 30/11/2023 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 30/11/2023 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. "वभागीय &त&न ध, आयकर अपील)य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड/ फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad