JAGDISH B. PRAJAPATI (HUF), MUMBAI V. ACIT-24(2), MUMBAI

ITA 548/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3014 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA GAIKWADLD
• Assessee Lawyers: NEELKANTH KHANDELWAL LD
• Keywords: Bogus purchase; Unexplained cash credit; Earning of tax free income; Accommodation entries; Penny stocks; Capital Gains
• Section: 69C; 143(3); 133A; 133(6); 201; 13; 68

Judgement Text

ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.548/MUM/2019 ( / ASSESSMENT YEAR: 2014-15) JAGDISH B. PRAJAPATI (HUF) 311B, URMILA CHS LTD., KOL DONGRI SAHAR ROAD, ANDHERI (E) MUMBAI 400 069 / VS. ACIT - 24(2 ) 6 TH FLOOR, PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI - 400012 PAN NO. : A AEHJ - 9503 - P ( ! /APPELLANT ) : ( '# ! / RESPONDENT ) ASSESSEE BY : SHRI NEELKANTH KHANDELWAL-LD. AR REVENUE BY : MS. USHA GAIKWAD LD. SR. DR / DATE OF HEARING : 03/05/2021 / DATE OF PRONOUNCEMENT : 17/06/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (AY) 2014-15 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-36, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-36/IT-471/ACIT-24 (2)/2016-17 DATED 25/11/2018. THE ASSESSMENT WAS FRAMED BY LEAR NED ASSESSING OFFICER U/S 143(3) VIDE ORDER DATED 27/12/2016. 2. THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, HOWEVER, IN SUM AND SUBSTANCE, THE ASSESSEE IS AGGR IEVED BY ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 2 CONFIRMATION OF CERTAIN ADDITIONS U/S 68 IN VIEW OF THE FACT THAT THE EXEMPTION CLAIMED U/S 10(38) WITH RESPECT TO LONG-T ERM CAPITAL GAINS (LTCG) EARNED ON SALE OF CERTAIN SHARES WAS DENIED TO THE ASSESSEE AND SALE PROCEEDS OF SHARES WAS BROUGHT TO TAX AS U NEXPLAINED CASH CREDIT U/S 68. CONSEQUENTLY, ANOTHER ESTIMATED ADDI TION ON ACCOUNT OF ALLEGED COMMISSION EXPENSES @ 5% AGAINST THESE TRAN SACTIONS WAS ALSO MADE WHICH IS ALSO DISPUTED UNDER THE APPEAL. 3. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS AS PLACED IN THE PAPER BOOK. THE JUDICIAL PRECEDENTS AS RELIED UPON DURING THE COURSE OF HEARING HAVE DULY BEEN DELIBERATED UPON. OUR ADJUDICATION T O THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPH S. THE LD. AR RELIED ON VARIOUS FAVORABLE DECISIONS OF THE TRIBUN AL / HONBLE HIGH COURTS RENDERED ON SIMILAR FACTUAL MATRIX. ON THE O THER HAND, LD. DR SUBMITTED THAT THE ASSESSEE OBTAINED HUGE BENEFIT O N SALE OF SHARES WITHOUT ANY PLAUSIBLE JUSTIFICATION. ASSESSMENT PROCEEDINGS 4.1 THE ASSESSEE BEING RESIDENT HUF WAS ASSESSED U/ S 143(3) ON 27/12/2016. WHILE FRAMING THE ASSESSMENT, THE ASSES SEE WAS DENIED EXEMPTION U/S 10(38) ON CERTAIN LONG-TERM CAPITAL G AINS (LTCG) EARNED ON SALE OF SHARES OF AN ENTITY NAMELY M/S MORYO IND USTRIES LTD. (MIL). THE SAID GAINS WERE ULTIMATELY ADDED TO THE ASSESSE ES INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE ASSE SSEE HAS ALSO BEEN SADDLED WITH ADDITION U/S 69C FOR RS.38.47 LACS ON ACCOUNT OF ESTIMATED COMMISSION INCOME WHICH IS CONSEQUENTIAL TO THE MAI N ADDITION. ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 3 4.2 THE AFORESAID GAINS AROSE ON SALE OF 377500 SHA RES OF AN ENTITY NAMELY M/S MORYO INDUSTRIES LTD. (MIL). SINCE THE G AINS SO EARNED FULFILLED THE CONDITIONS OF SEC. 10(38), THE SAME W ERE CLAIMED TO BE EXEMPT WHILE FILING THE RETURN OF INCOME. THE SHARE S WERE STATED TO BE PURCHASED BY THE ASSESSEE ON 27/10/2012 FOR A SUM O F RS.50 LACS AND THE SAME WERE SOLD BETWEEN THE PERIODS JANUARY, 201 4 TO MARCH, 2014 THEREBY YIELDING LONG-TERM CAPITAL GAINS (LTCG) IN THE HANDS OF THE ASSESSEE. THE DETAILS OF PURCHASE & SALE OF SHARES HAVE ALREADY BEEN TABULATED IN PARA 3.2 OF THE ASSESSMENT ORDER. 4.3 IN SUPPORT OF PURCHASE TRANSACTIONS, THE ASSESS EE FURNISHED SHARE ALLOTMENT ADVICE AS WELL AS ITS BANK STATEMENTS EVI DENCING PAYMENT THOUGH BANKING CHANNELS. THE SHARES WERE STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE IN DEMAT ACCOUNT. THESE SHARES WERE SHOWN AS INVESTMENT IN BALANCE SHEET AS ON 31/03/2013. SIMIL ARLY, IN SUPPORT OF SALE TRANSACTIONS, THE ASSESSEE FURNISHED CONTRACT NOTES ISSUED BY THE BROKERS I.E. M/S PRABHUDAS LILLADHER PRIVATE LIMITE D, ACCOUNT STATEMENTS ISSUED BY THE BROKER, BANK STATEMENT EVIDENCING INF LOW OF FUNDS THROUGH BANKING CHANNELS. UPON PERUSAL OF CONTRACT NOTES, I T COULD BE NOTED THAT THE SHARES HAVE BEEN SOLD BY THE ASSESSEE AT STOCK EXCHANGE IN ONLINE MODE OF TRANSACTION. ON THE BASIS OF THESE DOCUMENT ARY EVIDENCES, THE ASSESSEE SUBSTANTIATED THE STATED TRANSACTIONS. 4.4 HOWEVER, IN THE BACKGROUND OF INVESTIGATION CAR RIED OUT BY KOLKATA INVESTIGATION WING IN THE MATTER OF PENNY STOCKS, I T WAS ALLEGED BY LD. AO THAT GAINS WERE ARRANGED, PREMEDITATED AND BOGUS. T HE AIM OF THE SCHEME WAS TO ROUTE THE UNACCOUNTED MONEY OF BENEFI CIARIES AS EXEMPT INCOME IN THE GARB OF LTCG BY SHOWING SALE OF SHARE S OF PREMEDITATED ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 4 SCRIPS ON RECOGNIZED STOCK EXCHANGES. AFTER MAKING PREFERENTIAL ALLOTMENT, THE PRICE OF THE SHARES WOULD BE RIGGED UP / JACKED UP THROUGH CIRCULAR TRADING BY CARTEL OF BROKERS ACTING IN CON CERT. THIS WOULD BE MANAGED BY THE OPERATOR OF THE SCRIP WHO WOULD MANA GE OVERALL AFFAIRS OF THE SCHEME. DURING THE INVESTIGATION, STATEMENTS OF VARIOUS OPERATORS, ENTRY PROVIDERS AND STOCK BROKERS WERE RECORDED WHE REIN THE SAID FACTS OF THEIR ENGAGEMENT IN PROVIDING ACCOMMODATION ENTR IES IN THE FORM OF LONG-TERM CAPITAL GAINS (LTCG) / SHORT-TERM CAPITAL LOSSES (STCL) WERE ADMITTED. IN THE ABOVE BACKGROUND, THE GAINS E ARNED BY THE ASSESSEE WERE ALLEGED TO BE PRE-ARRANGED IN CONNIVA NCE WITH THE OPERATORS OF THE SCRIP. 4.5 IT TRANSPIRED THAT THE ASSESSEE WAS ALLOTTED SH ARES AT FACE VALUE OF RS.25/- PER SHARE. THEREAFTER, THE SHARES WERE SUB- DIVIDED INTO TWO. THE SHARES WERE ULTIMATELY SOLD AT AN AVERAGE RATE OF R S.203/- PER SHARE (APPROX.) TO VARIOUS BUYERS (15 IN NUMBER) AS TABUL ATED IN PARA 6.2 OF THE ORDER. NOTICES ISSUED U/S 133(6) TO ALL THE BUYERS DID NOT ELICIT ANY SATISFACTORY RESPONSE. 4.6 IT WAS NOTED BY LD.AO THAT THERE WAS SHARP RISE IN THE PRICE OF THE SCRIP SINCE ITS ALLOTMENT. UPON ANALYSIS OF FINANCI ALS OF M/S MIL, IT WAS OBSERVED THAT ITS NET WORTH WAS NEGLIGIBLE AND IT W AS ALLEGED THAT THE SHARE PRICES WERE ARTIFICIALLY RIGGED BY OPERATORS TO ACCOMMODATE DESIROUS BENEFICIARIES. 4.7 DURING SURVEY U/S 133A BY INVESTIGATION WING ON ONE SHRI PRAVIN AGARWAL, DIRECTOR OF A STOCK-BROKING ENTITY NAMELY M/S GATEWAY FINANCIAL SERVICES LTD., HE ADMITTED TO HAVE HELPED VARIOUS P ERSONS TO OBTAIN ACCOMMODATION ENTRIES IN VARIOUS SCRIPS INCLUDING T HE SCRIP OF M/S MIL. ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 5 SIMILAR STATEMENT WAS RECORDED FROM SHRI SANJAY VOR A, DIRECTOR OF BROKING FIRM M/S ANAND RATHI SHARES & STOCK BROKERS WHEREIN AN ADMISSION WAS MADE THAT HIS BROKING FIRM TRADED IN THE SCRIP OF M/S MIL ON BEHALF OF VARIOUS CLIENTS FOR CLAIMING BOGUS LTC G ENTRIES. SIMILAR STATEMENT WAS RECORDED FROM SHRI SOUMEN CHAUDHARY O F M/S GATEWAY FINANCIAL SERVICES LTD. AS WELL AS FROM SHRI SURESH KUMAR SARAF OF M/S BINDAL EQUITIES LIMITED. 4.8 IN THE BACKGROUND OF INVESTIGATION FINDINGS, LD . AO ALLEGED THAT THE SCRIP OF M/S MIL WAS PENNY STOCK SCRIP USED TO PROV IDE UNDUE BENEFITS TO THE BENEFICIARIES. THE SHARP PRICE RISE WAS NOT SUP PORTED BY ANY FUNDAMENTALS OF THE ENTITY OR ANY OTHER GENUINE FAC TORS. THERE WAS DIRECT EVIDENCE THAT SHARE PRICE OF M/S MIL WERE ARTIFICIA LLY HIKED TO CREATE NON- GENUINE LTCG. IN FACT, SEBI PASSED AN ORDER U/S 11( 1), 11(4) & 11B OF THE SEBI ACT, 1992 WHICH NAMED THE ASSESSEE AS ONE OF THE BENEFICIARY. ACCORDINGLY, THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE SALE PROCEEDS OF SHARES BE NOT TREATED AS ACCOMMODATION ENTRIES OF CASH- CREDIT IN THE GARB OF LONG-TERM CAPITAL GAINS. ALON G WITH THE NOTICE, STATEMENTS OF VARIOUS PERSONS AS WELL AS SEBI ORDER WAS PROVIDED TO THE ASSESSEE. 4.9 THE ASSESSEE, VIDE REPLY DATED 22/12/2016, SUBM ITTED THAT HE WAS A REGULAR INVESTOR IN SHARES SINCE LAST COUPLE OF Y EARS AS EVIDENCED BY ITS FINANCIAL STATEMENTS. SIMILAR GAINS WERE EARNED IN EARLIER YEARS WHICH WERE OFFERED TO TAX AND ACCEPTED BY THE REVENUE. TH E ASSESSEE ALSO DEMANDED CROSS-EXAMINATION OF PERSONS WHOSE STATEME NTS WERE BEING RELIED UPON BY LD. AO. IN THE ABSENCE OF SUCH CROSS -EXAMINATION, THOSE STATEMENTS COULD NOT BE USED AGAINST THE ASSESSEE. THE ASSESSEE ALSO ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 6 SUBMITTED THAT THESE STATEMENTS DID NOT NAME THE AS SESSEE SPECIFICALLY. THE ALLEGATIONS OF LD. AO WERE TERMED AS BASED ON M ERE PRESUMPTION AND SURMISES. RATHER ATTENTION WAS DRAWN TO THE DOC UMENTARY EVIDENCES FURNISHED BY THE ASSESSEE IN SUPPORT OF THE STATED TRANSACTIONS. REGARDING ALLEGATION THAT M/S MIL WAS PENNY STOCK C OMPANY, IT WAS SUBMITTED THAT THE CONCLUSION WAS NOT BASED ON ANY DIRECT EVIDENCE. THE ASSESSEE ALSO SUBMITTED THAT THE FINDINGS OF INVEST IGATION WING WERE GENERAL IN NATURE WITHOUT IMPLICATING THE ASSESSEE SPECIFICALLY. SIMILARLY, SEBI REPORT DID NOT HOLD THE ASSESSEE AS BENEFICIAR Y OF PRICE RIGGING SCAM. MERE HOLDING OF SHARES COULD NOT IMPLICATE TH E ASSESSEE OF BEING A BENEFICIARY OF SUCH PRICE RIGGING SCAM. FURTHER, THE SHAREHOLDING PATTERN OF M/S MIL, AS OBTAINED FROM STOCK EXCHANGE S, WOULD SHOW THAT THERE WERE NUMBER OF NON-PROMOTERS SHAREHOLDERS IN THE SAID ENTITY. THE PRICE OF THE SCRIP WOULD BE TOTALLY DEPENDENT UPON MARKET PERCEPTION AND SENTIMENT IN WHICH THE ASSESSEE WOULD HAVE NO ROLE TO PLAY. THE ASSESSEE ALSO ASSAILED THE INVOCATION OF SEC.68 ON THESE TRANSACTIONS. IN SUPPORT, RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS. 4.10 HOWEVER, NOT CONVINCED WITH ASSESSEES EXPLANA TIONS, THE SALE PROCEEDS AS RECEIVED BY THE ASSESSEE WAS TREATED AS UNEXPLAINED CASH CREDIT U/S 68. THE COMMISSION AGAINST THESE TRANSAC TIONS WAS ESTIMATED @5% WHILE FRAMING THE ASSESSMENT. APPELLATE PROCEEDINGS 5. THOUGH THE ASSESSEE REITERATED ITS SUBMISSIONS B EFORE LD. CIT(A), HOWEVER, GOING BY THE FINDINGS OF LD. AO, IT WAS HE LD THAT REVENUE COULD NOT ACCEPT SUCH MAKE-BELIEVE TRANSACTIONS. TRUTH OF GENUINENESS OF SUCH TRANSACTIONS MUST PREVAIL OVER THE SMOKE-SCREE N CREATED BY WAY OF ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 7 PRE-MEDITATED SERIES OF STEPS TAKEN BY THE ASSESSEE WITH A VIEW TO IMPART COLOR OF GENUINENESS AND CHARACTER OF COMMER CIAL NATURE TO SUCH TRANSACTIONS. ONE HAS TO LOOK AT THE WHOLE TRANSACT IONS AND SERIES OF STEPS TAKEN TO ACCOMPLISH SUCH TRANSACTIONS IN INTE GRATED MANNER, WITH A VIEW TO ASCERTAIN THE TRUE NATURE AND CHARACTER OF SUCH PURCHASE AND SALE OF SHARES. IN THE SAID BACKGROUND, THE JUDICIA L PRONOUNCEMENTS AS RELIED UPON BY THE ASSESSEE WERE REJECTED. 6. IT WAS ALSO OBSERVED BY LD.CIT(A) THAT THOUGH TH E EARLIER ORDER OF SEBI DATED 04/12/2014, PROHIBITING MANY ENTITIES, W AS SUBSEQUENTLY REVOKED BY WHOLE-TIME DIRECTOR (WTD) OF SEBI VIDE O RDER DATED 21/09/2017, HOWEVER, THE PROCEEDINGS WOULD CONTINUE AGAINST M/S MIL. FINALLY THE ACTION OF LD. AO WAS UPHELD AGAINST WHI CH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. OUR FINDINGS AND ADJUDICATION 7.1 SO FAR AS THE MATERIAL FACTS ARE CONCERNED, WE FIND THAT THE ASSESSEE HAS SOLD CERTAIN SHARES OF A SCRIP NAMELY M/S MIL DURING THE YEAR. THESE SHARES WERE PURCHASED DURING OCTOBER, 2 012 AT COST OF RS.50 LACS AND SOLD DURING THE PERIOD 17/01/2014 TO 26/03/2014 THEREBY YIELDING LONG-TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE. THE SHARES SO PURCHASED BY THE ASSESSEE WERE REFLECTED AS INVE STMENT IN ASSESSEES BALANCE SHEET AS ON 31/03/2013. THE PAYM ENT TOWARDS PURCHASE OF SHARES WAS MADE THROUGH BANKING CHANNEL S AND THE SHARES WERE DULY RECEIVED IN THE DEMAT ACCOUNT. THE PURCHA SE OF SHARES IS FURTHER EVIDENCED BY THE SHARE ALLOTMENT ADVICE DAT ED 29/01/2013 WHEREIN THE ASSESSEE HAS BEEN ALLOTTED THE SAID SHA RES. ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 8 7.2 THE SHARES SO PURCHASED BY THE ASSESSEE HAVE UL TIMATELY BEEN SOLD IN ONLINE MECHANISM OF STOCK EXCHANGE THROUGH REGISTERED STOCK- BROKER. THE SALE TRANSACTIONS ARE DULY EVIDENCED BY THE CONTRACT NOTES ISSUED BY THE BROKER. THE SALE PROCEEDS HAVE BEEN R ECEIVED THROUGH BANKING CHANNELS AND THE SHARES HAVE BEEN DELIVERED BY THE ASSESSEE FROM ASSESSEES DEMAT ACCOUNT. THESE TRANSACTIONS H AVE BEEN SUBJECTED TO SECURITIES TRANSACTION TAX (STT). ALL THESE DOCUMENTS WERE FURNISHED BY THE ASSESSEE BEFORE LD. AO. THE S AME HAS ALSO BEEN PLACED BEFORE US IN THE PAPER-BOOK (PAGE NOS. 24 TO 77 OF ASSESSEES PAPER-BOOK). THE PERUSAL OF ALL THESE DOCUMENTS WOU LD SHOW THAT THE SHARES HAVE BEEN SOLD THROUGH REGISTERED STOCK BROK ERS IN ONLINE MECHANISM WHEREIN THE IDENTITY OF THE BUYER WOULD N OT BE KNOWN. UPON PERUSAL OF ALL THESE DOCUMENTS, IT IS QUITE DISCERN IBLE THAT THE ASSESSEE HAD FURNISHED ALL THE REQUISITE DOCUMENTARY EVIDENC ES TO SUBSTANTIATE THE TRANSACTIONS AND DISCHARGED THE PRIMARY ONUS AS REQUIRED UNDER LAW TO ESTABLISH THE GENUINENESS OF THE GAINS SO EARNED DURING THE YEAR. NO DEFECT HAS BEEN POINTED OUT BY THE REVENUE IN DOCUM ENTARY EVIDENCES FURNISHED BY THE ASSESSEE. THEREFORE, THE ONUS HAD, THUS, SHIFTED ON REVENUE TO DISPROVE ASSESSEES CLAIM AND ESTABLISH WITH COGENT EVIDENCES THAT THE TRANSACTIONS WERE NON-GENUINE TR ANSACTIONS THROUGH WHICH ASSESSEES UNACCOUNTED MONEY HAS FLOWN BACK T O ASSESSEE IN THE GARB OF BOGUS CAPITAL GAINS. HOWEVER, WE FIND THAT EXCEPT FOR GENERAL FINDINGS OF INVESTIGATION WING AND THIRD-PARTY STAT EMENTS ON THE BASIS OF WHICH IT HAS BEEN ALLEGED THAT THE SCRIP OF M/S MIL WAS PENNY STOCK, THERE IS NOTHING IN THE KITTY OF THE REVENUE TO PRO VE THE ASSESSEES INVOLVEMENT IN MANIPULATING THE PRICES OF THE SCRIP . NO EXCHANGE OF CASH ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 9 BETWEEN THE ASSESSEE AND THE VARIOUS EXIT PROVIDERS COULD BE PROVED. THEREFORE, THE ONUS AS CASTED UPON REVENUE TO DISLO DGE THE ASSESSEES CLAIM COULD NOT BE DISCHARGED. 7.3 SO FAR AS THE OBSERVATIONS OF LD. AO AS TO FINA NCIAL AND PROFITABILITY OF MIL IS CONCERNED, WE FIND THAT THE SALES TRANSAC TIONS HAVE TAKEN PLACE IN ONLINE MECHANISM THROUGH RECOGNIZED STOCK EXCHAN GE WHEREIN THE IDENTITY OF THE BUYER WOULD NOT BE KNOWN AND THERE WOULD BE NO PRIVITY OF CONTRACT BETWEEN THE ASSESSEE AND PROSPECTIVE BUYER S OF SHARES. IN ONLINE MODE OF TRADE, THE PRICES WOULD BE GUIDED BY THE BUYER WILLING TO BUY THE SHARES AT CERTAIN PRICES AND THE SELLER WIL LING TO SELL THE SHARES AT CERTAIN PRICES. THE PRICES WOULD BE GUIDED MORE BY THE MARKET FORCES RATHER THAN THE FINANCIALS OR OTHER PARAMETERS. THE RE WOULD BE BUYERS AND SELLERS LINING UP ON EITHER SIDE OF A POTENTIAL TRADE; ONE PARTY WILLING TO PART WITH OWNERSHIP AND OTHER PARTY WILLING TO A CQUIRE THE OWNERSHIP. WHEN BOTH THE PARTIES WOULD AGREE UPON A PRICE, THE TRADE IS MATCHED AND THAT PRICE WOULD BECOME NEW MARKET QUOTATION. T HEREFORE, THE FINANCIALS OF UNDERLYING ENTITIES, IN SUCH CASES, W OULD LOSE MUCH RELEVANCE IN SO FAR AS THE PRICE MOVEMENT OF SCRIP IS CONCERNED. NOTHING ADVERSE COULD BE DRAWN AGAINST THE ASSESSEE ON THE BASIS OF THE SAME. THEREFORE, THE AFORESAID OBSERVATIONS AS WELL AS CO NCLUSION OF LD. AO WOULD NOT BE MUCH GERMANE AS TO THE ADJUDICATION OF THE ISSUE. 7.4 PROCEEDING FURTHER, IT COULD BE OBSERVED THAT T HE PRIMARY REASON TO DOUBT THE GENUINENESS OF ASSESSEES TRANSACTIONS IS FINDINGS OF INVESTIGATION WING WHICH WAS BASED ON GENERAL STATE MENT OF VARIOUS STOCK-BROKERS / OPERATORS INCLUDING SHRI PRAVIN AGA RWAL, SHRI SANJAY VORA, SHRI SOUMEN CHAUDHARY & SHRI SURESH KUMAR SAR AF WHEREIN ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 10 THESE PERSONS, WITHOUT NAMING THE ASSESSEE SPECIFIC ALLY, MADE AN ADMISSION THAT THE SCRIP OF M/S MIL WAS A PENNY STO CK SCRIP. HOWEVER, DESPITE SPECIFIC REQUEST OF THE ASSESSEE, THE ADVER SE MATERIAL WHICH FORM THE VERY BASIS OF LD. AOS CONCLUSION, NO OPPO RTUNITY TO CROSS- EXAMINE THESE PERSONS WAS EVER PROVIDED TO THE ASSE SSEE. THE FAILURE TO DO SO WOULD MAKE THE ADDITIONS UNSUSTAINABLE AS PER SETTLED LEGAL POSITION. FURTHER, THE ADVERSE STATEMENTS MADE BY T HESE PERSONS ARE NOT BACKED BY ANY COGENT CORROBORATIVE MATERIAL ON RECO RD TO ESTABLISH THE ASSESSEES INVOLVEMENT IN PRICE RIGGING OF SHARES O F MIL. NO COLLUSION BETWEEN THE ASSESSEE AND ALLEGED ENTRY PROVIDERS OR OPERATORS OR EXIT PROVIDERS IS SHOWN TO HAVE EXISTED. THERE IS NO ADM ISSION OR EVIDENCE BASED FINDING THAT ANY CASH GOT EXCHANGED BETWEEN T HE ASSESSEE AND ANY OF THE BOGUS PURCHASERS OF THE SCRIP. IT IS TRI TE LAW THAT NO ADDITIONS COULD BE MADE MERELY ON THE BASIS OF SUSPICION, CON JECTURES OR SURMISE. THE ADDITION THUS MADE PURELY ON THE BASIS OF THIRD -PARTY STATEMENT RECORDED AT THE BACK OF THE ASSESSEE COULD NOT BE S USTAINED IN THE EYES OF LAW UNLESS THE SAME ARE CONFRONTED TO THE ASSESS EE AND THE SAME ARE BACKED BY ANY CORROBORATIVE MATERIAL. NO EFFECTIVE INVESTIGATION IS SHOWN TO HAVE BEEN CARRIED OUT BY LD. AO TO DISLODGE THE ASSESSEES CLAIM BY BRINGING ON RECORD COGENT EVIDENCES AS WELL AS CONF RONTING THE SAME. WE FIND THAT EXCEPT FOR GENERAL ALLEGATIONS AS NAR RATED IN THE INVESTIGATION WING REPORT, THERE IS NO EVIDENCE WHI CH WOULD LINK ASSESSEES INVOLVEMENT IN JACKING UP THE PRICES OF THE SHARES WITH A VIEW TO EARN ARTIFICIAL GAINS. THE ADDITIONS SO MADE COU LD NOT BE SUSTAINED IN THE EYES OF LAW AS PER THE DECISION OF HONBLE APEX COURT IN KISHANCHAND CHELLARAM V/S CIT (125 ITR 713) AND ALSO IN M/S ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 11 ANDAMAN TIMBER INDUSTRIES V/S CCE (CA NO.4228 OF 20 06 DATED 02/09/2015) WHEREIN IT HAS BEEN HELD THAT NOT ALLOWING THE ASSE SSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUT HORITY THOUGH THE STATEMENT OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER, IS A SERIOUS FLAW WHICH MAKES THE ORDER NULL ITY IN AS MUCH AS IT AMOUNTS TO VIOLATION OF PRINCIPAL OF NATURAL JUSTIC E BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. SIMILAR IS THE RA TIO OF DECISION OF HONBLE BOMBAY HIGH COURT IN H.R.MEHTA V/S ACIT (387 ITR 561). 7.5 THE PROPOSITION THAT THAT ADDITIONS MADE PURELY ON THE BASIS OF SUSPICIOUS, CONJECTURES OR SURMISES COULD NOT BE SU STAINED IN THE EYES OF LAW STEM FROM THE DECISION OF HONBLE SUPREME COURT IN OMAR SALAY MOHAMED SAIT V/S CIT (1959 37 ITR 151) WHEREIN IT WAS HELD THAT THE SUSPICION HOWEVER STRONG COULD NOT PARTAKE THE CHAR ACTER OF LEGAL EVIDENCE AS HELD BY HONBLE SUPREME COURT IN UMACHARAN SHAW & BROS. V/S CIT (1959 37 ITR 271) . THE ADDITIONS MADE ON MERE PRESUMPTIONS COULD NOT BE SUSTAINED AND THERE MUST BE SOMETHING MORE THAN MERE SUSPICION TO SUPPORT THE ASSESSMENT AS PE R THE DECISION OF HONBLE APEX COURT IN DHAKESHWARI COTTON MILLS LTD. V/S CIT (26 ITR 775). THE ASSESSMENT SHOULD NOT BE BASED MERELY ON SUSPIC ION OR GUESS WORK BUT ON LEGITIMATE MATERIAL FROM WHICH RE ASONABLE INFERENCE OF INCOME COULD HAVE BEEN DRAWN. 7.6 SO FAR AS THE SEBI PROCEEDINGS ARE CONCERNED, WE FIND THAT SEBI HAD PASSED AN AD-INTERIM EX-PARTE ORDER ON 04/12/20 14 IN THE MATTER OF M/S MORYO INDUSTRIES LIMITED THEREBY RESTRICTING 98 ENTITIES INCLUDING THE ASSESSEE, M/S MIL AND ITS PROMOTERS & DIRECTORS FRO M ACCESSING THE SECURITIES MARKET AND PROHIBITING THEM FROM DEALING IN SHARES. PURSUANT ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 12 TO THE INTERIM ORDER, SEBI CONDUCTED A DETAILED INV ESTIGATION OF THE ENTIRE SCHEME EMPLOYED, CONNECTION AMONGST DEBARRED ENTITI ES, FUNDS USED FOR THE PRICE MANIPULATION OF THE SCRIP OF M/S MIL AND OTHER COMPANIES SO AS TO ASCERTAIN THE VIOLATION OF THE SECURITIES LAW. U PON COMPLETION OF INVESTIGATION BY SEBI, IT WAS NOTED THAT THERE WAS NO ADVERSE EVIDENCE / FINDINGS AGAINST 85 ENTITIES INCLUDING ASSESSEE OR THEIR ROLE IN PRICE MANIPULATION OF THE SCRIP OF M/S MIL WARRANTING CON TINUATION OF ACTION U/S 11B & 11(4) OF THE SEBI ACT. ACCORDINGLY, AN ORDER WAS PASSED ON 21/09/2017 REVOKING ALL PREVIOUSLY CONFIRMED INTERI M ORDER. THEREFORE, THE RELIANCE OF LD.AO IN SEBI ORDER WOULD NOT BE OF MUCH HELP TO THE REVENUE. 7.7 THE LAST ASPECT OF THE MATTER IS THAT THE ADDIT IONS HAVE BEEN MADE BY LD. AO INVOKING THE PROVISIONS OF SECTION 68. TH E ADDITION U/S 68, IN OUR CONSIDERED OPINION, IS NOT SUSTAINABLE IN VIEW OF THE FACT THAT CREDIT IN ASSESSEES BANK ACCOUNT REPRESENTS SALE PROCEEDS OF SHARES SOLD IN RECOGNIZED STOCK EXCHANGE THROUGH REGISTERED STOCK BROKER. THE SALE TRANSACTIONS HAVE TAKEN PLACE THROUGH RECOGNIZED ST OCK EXCHANGE AND THE MONEY WAS RECEIVED IN SETTLEMENT THROUGH BANKIN G CHANNELS. THE ASSESSEE HAD DELIVERED THE SHARES FROM HIS DEMAT AC COUNT TO THE BROKER, WHO, IN TURN, PAID SALE CONSIDERATION TO THE ASSESS EE. IN SUCH A CASE, THERE COULD BE NO DOUBT AS TO FULFILLMENT OF PRIMAR Y INGREDIENTS OF SEC.68 VIZ. IDENTITY OF THE PAYER, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. THE SOURCE OF CREDIT RECEIVED IN THE BANK ACCOUNT COULD NOT BE HELD TO BE UNEXPLAINED UNLESS IT WAS ESTABLI SHED THAT ASSESSEES OWN MONEY WAS ROUTED IN HIS BANK ACCOUNT IN THE GAR B OF CAPITAL GAINS. ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 13 7.8 THE VARIOUS CASE LAWS AS CITED BY LD. AR ALSO S UPPORT OUR VIEW, SOME OF WHICH COULD BE TABULATED AS UNDER: - (I) HONBLE BOMBAY HIGH COURT IN CIT V/S MUKESH RATILAL MAROLIA (ITA NO.456 OF 2007; 07/09/2011) (II) HONBLE GUJARAT HIGH COURT IN CIT V/S MAHESHCHANDRA G.VAKIL (40 TAXMANN.COM 326; 25/09/2012) (III) HONBLE RAJASTHAN HIGH COURT IN CIT V/S SMT. SUMITRA DEVI (49 TAXMANN.COM 37; 24/02/2014) (IV) HONBLE RAJASTHAN HIGH COURT IN CIT V/S POOJA AGARWAL (ITA NO.385/2011 DATED 11/09/2017) (V) HONBLE DELHI HIGH COURT IN PR.CIT V/S SMT. KRISHNA DEVI & ORS.(ITA NO.125/2020 & ORS. DATED 15/01/2021) WE FIND THAT THE RATIO OF AFORESAID DECISIONS IS E QUALLY APPLICABLE TO THE FACT OF THE PRESENT CASE BEFORE US. 7.9 FINALLY, KEEPING IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT IMPUGNED ADDITIONS ARE NOT SU STAINABLE IN THE EYES OF LAW. THE ASSESSEE HAD DISCHARGED THE PRIMARY ONU S OF ESTABLISHING THE GENUINENESS OF THE TRANSACTIONS WHEREAS THE ONU S AS CASTED UPON REVENUE TO CORROBORATE THE IMPUGNED ADDITIONS BY CO NTROVERTING THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE AND BY BRINGING ON RECORD, ANY COGENT MATERIAL TO SUSTAIN THOSE ADDITI ONS, COULD NOT BE DISCHARGED BY THE REVENUE. THE WHOLE BASIS OF MAKIN G ADDITIONS IS THIRD- PARTY STATEMENT AND NO OPPORTUNITY OF CROSS-EXAMINA TION HAS BEEN PROVIDED TO THE ASSESSEE TO CONFRONT THESE PARTIES. AS AGAINST THIS, THE ASSESSEES POSITION THAT THAT THE TRANSACTIONS WERE GENUINE AND DULY SUPPORTED BY VARIOUS DOCUMENTARY EVIDENCES, COULD N OT BE DISTURBED BY THE REVENUE. HENCE, GOING BY THE FACTUAL MATRIX AND RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENTS AS ENUMER ATED IN THE ORDER, THE ADDITIONS MADE BY LD. AO AND CONFIRMED BY LD. CIT(A ), ARE NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE, WE ARE I NCLINED TO DELETE THE ITA NO.548/MUM/2019 JAGDISH B.PRAJAPATI (HUF) ASSESSMENT YEAR: 2014-15 14 SAME. WE ORDER SO. CONSEQUENTIALLY, THE ADDITION OF ESTIMATED COMMISSION ALSO STANDS DELETED. RESULTANTLY, THE AP PEAL STAND ALLOWED. CONCLUSION 8. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 17 TH JUNE, 2021 SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17/06/2021 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. *+'%, , , , / DR, ITAT, MUMBAI 6. +-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.