Sita Devi Agarwal, Jaipur V. ITO, Wd-4(1), Jaipur

ITA 56/JPR/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0490 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-09-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 03-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C.M. BATWARA
• Keywords: Unexplained cash credit; Deduction for capital gain; Unexplained expenditure; Income from undisclosed sources; Principle of natural justice; Opportunity of cross examination; Question of law; Accommodation entries; Scheme of amalgamation; Non passing of speaking order; Onus to prove; Penny stocks; Capital Gains
• Section: 131; 68; 144; 69C; 142(1); 133A; 133(6); 250; 143(2); 208; 113; 48; 13; 119

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC’’ JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 56/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2014-15 Sita Devi Agarwal A-25, Vivekanand Colony, East Khetri House, C.P. Gate, Jaipur- 302 2016 cuke Vs. The ITO Ward 4(1) Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAUPA 7450 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri C.M. Batwara, Advocate jktLo dh vksj ls@ Revenue by: Mrs. Monisha Choudhary, JCIT lquokbZ dh rkjh[k@ Date of Hearing : 06/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18 /10/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 08-12-2021, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2014-15 wherein the assessee has raised the following grounds of appeal. ‘’(1) Addition of Rs. 23,23,696/- U/S 68 of the Income Act Act: (a) That the learned commissioner of Income Tax (Appeals) erred in confirming the addition made by disallowing long form capital gain exemption U/S 10(38) of the IT Act on the basis of investigation report with named list of penny stock companies Without any having 2 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR corroborated evidence against assessee was having on record while the assessee put up all relevant evidence regarding his transaction. (b) That the learned CIT Appeals erred in confirming the impugned assessment order based completely on presumptions, surmises and conjectures for declaring bogus transactions in declared penny stock companies equity share © That the learned commissioner of Income Tax Appeals) confirmed the impugned order based completely on third persons statements recorded during investigation proceedings without providing copy of complete set of proceedings and statements which were recorded against principle of natural justice. (d) That the learned commissioner of Income Tax (Appeals) confirmed the order for addition in income on the basis of report prepared on the basis of third persons statements recorded behind the appellant without providing opportunity to cross examine them while specifically demanded by the appellant. (e) That the learned commissioner of Income Tax (Appeals) erred the confirming the impugned assessment order due to heavy gain in short period without considering the speculatary nature of the stock market. (f) That the learned Commissioner of Income Tax (Appeals) confirmed the impugned assessment order by non speaking order referring irrelevant judgement, which were neither applicable on facts or the law without considering the binding precedent of the Hon'ble I.T.A.T. Rajasthan, Hon'ble High court and other High court, Tribunal and Hon'ble Supreme court) (g) That the learned commissioner of Income Tax (Appeals) confirmed the impugned assessment order while the assessing officer failed in discharging his burden to prove that the appellant has relation with such brokers and got back the capital gain amount in cash or kind. (II) Addition of Rs.1,45,421/- U/S 69C of the Income Tax (a) That the learned Commissioner of Income Tax (Appeals) erred in confirming the impugned order which was completely based on presumptions surmises and conjectures that the transactions in shares of penny stock companies were bogus and deemed commission 6% of the gain against the written documentary evidence of registered broker and baking institutions 3 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (b) That the learned Commissioner of Income Tax (Appeals) passed order without any reason and basis, it is non specking order against principle of natural justice © That the assessee craves his right to amend, alter or add any ground before hearing of this appeal.’’ 2.1 Brief facts of the case are that the assessee had filed her e-return of income on 27-07-2014 declaring total income at Rs.520/- vide acknowledgement No. 267760850270714. The case of the assessee was selected for scrutiny on the basis of CASS. First Notice u/s 143(2) of the Act was issued on 18-09-2015 and was duly served upon the assessee on 22-09-2019. However, on change of incumbent, fresh notices u/s 143(2), 142(1) and questionnaire were issued on 15-06-2016. In compliance of the notices, the Advocate of the assessee appeared from time to time and furnished desired details before the AO. The AO noted that during the year under consideration, the assessee has shown interest income of Rs.82,209/-. Apart from it, the assessee has claimed exemption of Rs.23,23,696/- u/s 10(38) of the Act i.e. Long Term Capital Gain. From the assessment order, it is noted that the case of the assessee was selected for scrutiny mainly to examine suspicious transactions related to Long Term Capital Gain. Thus the AO on examination of documentary evidences brought on record during the course of assessment proceedings observed that the assessee has shown long term capital gains of Rs.23,23,696/- and claimed exemption u/s 10(38) of the Act during the year under consideration whose details are narrated as under:- 4 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains Sunrise Asian Ltd. 1.04.2012 1,00,000 2.08.2013 24,23,696 23,23,696 While examining the issue of Long Term Capital Gains, the AO noticed the following facts. ‘’2.1 The assessee has shown to have invested in shares of M/s. Santoshimaa Tradelinks Limited, an unlisted company on 01-04-2012. Later on, it was merged with Sunrise Asian Limited. Detaill with respect to this transaction was filed by the assessee during the courseof assessment proceedings. Following observations have been made in relation to alleged purchase of 5000 shares of M/s. Sunrise Asian Limited. (i) The assessee has shown purchase of 5000 shares on 01-04-2012 (ii) The Bill for this transaction was raised by one Santoshima Tradelinks Ltd. on 01-04-2012 (there is an overwriting / cutting) i.e. actual date of purchase is not ascertained i.e. actual date of purchase is not ascertained. (iii) The Santoshima Tradelinks Ltd. was merged with M/s. Sunrise Asian Ltd. The Board of Directors have approved the merger on 9-11-2012 and informed the BSE accordingly. (iv) The assessee has sold all the 5000 shares for Rs.24,23,696/- by 2-08-2013 in one lot. (v) The assessee allegedly earned dRs.23,23,696/- as Long Term Capital Gains on this transaction Besides above observations, the AO went through the reports of Investigation Wing of New Delhi, Mumbai, Kolkata relating to the actions conducted by them in cases of bogus LTCG/STCG/STCL/Loss entry providers and also in cases of beneficiaries of this arrangement. The AO at the time assessment proceedings noted that it was being noticed by the Department for a long time that certain share transactions in penny stock companies were fabricated one with a motive to launder the unaccounted money in form of bogus LTCG/STCG with nil taxes or taxes at nominal rates. There have also been cases of claims of huge bogus losses 5 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR on account of trading in such penny stock companies. The AO noted from the reports of the Investigation Wings that Coordinated actions u/s 132(1) & 133 of the Act, 1961 were carried out by the Investigation Wing of Kolkata, Mumbai, New Delhi and other units of the country. Statements of certain individuals relating to such bogus entry providers/ beneficiaries were recorded u/s 132(4) and u/s 131 of the Act and thus Investigation Wing unearthed LTCG/STCG/STCL/Loss entry of over Rs.38,000 Crores. Thus the Investigation finally identified 84 of such penny stock companies which were involved in the pool of entry providers’ syndicate wherein M/s. Sunrise Asian Limited is found to be one of such penny stock companies. In view of the above information and credible evidences, a show cause letter dated 13-12-2016 was issued by the AO to the assessee giving detailed discussions at para 3.1( sub-para (2) to(8). For the sake of convenience and brevity of the issue, the sub-para 6 to 8 of AO’s order is reproduced as under:- ‘’6. In view of the above detailed discussion in the light of credible evidences gathered during the course of survey actions on different entities, it has been conclusively established that the alleged long term capital gains shown by you on account of purchase/sale of shares of M/s. Sunrise Asian Limited is a bogus one and actually represents your unaccounted money routed back to you in the garb of Long Term Capital Gains. It is therefore proposed to treat the said amount of Rs.23,23,696/- as unexplained credit found in your books of account and proposed to be added u/s 68 to your total income for assessment year under reference. 7. During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the 6 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR beneficiaries in lieu of providing bogus entries. In fact, one of the beneficiaries Shri Ajit Gupta of Delhi have categorically admitted in his statements recorded u/s 132(4) that he paid commission of 6% in cash in lieu of bogus entry of Long Term Capital Gains shown from artificial trading in penny stock bogus company M/s. Sunrise Asian Limited. Looking to such credible evidence on this issue, I estimate an amount equivalent to 6% of the bogus Long Term Capital Gains entry which comes to Rs.1,45,421/- (calculated on sale proceeds of Rs.24,23,696/-) as commission paid by you in lieu of entry of bogus Long Term Capital Gain of Rs.23,23,696/-. Therefore, an addition of Rs.1,45,421/- on this count, is proposed to be added to your total income for the year under consideration. 8. In view of above, you are requested to show cause as to why exemption claimed u/s 10(38) towards Long Term Capital Gains of Rs.23,23,696/- be denied and why it should not be added u/s 68 to the total income. Further, explain as to why an amount of Rs.1,45,421/- be added u/s 69C to your total income being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains. Your reply (in soft copy also) should reach the undersigned on or before 20-12-2016 failing which it will be construed that you do not have any explanation to offer in this regard and the assessment will be completed as proposed and on the basis of material on record, without any further notice. This may be treated as notice u/s 144 of the Income Tax Act, 1961. Statutory notice u/s 142(1) is enclosed herewith.’’ 2.2 In response to the show cause notice, the assessee has submitted written reply vide his A/R letter dated 23-12-2016 which are mentioned in the assessment order at para 4.1. ‘’4.1 In responses to the show cause, the assessee has submitted written reply vide his A/R's letters dated 23.12.2016 which are reproduced as under: 7 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR "With reference to above referred notice the assessee submits reply as under:- 1.That the notice is issued to deny the claim of deduction UIS 10(38) (Long term capital gain on shares) of IT Act and Rs.2323695/- should be added in total income U/S 68 of the IT. Act and Rs.1,45,421/-be added U/S 69C of IT Act being unexplained expenditure incurred by way of commission. 2 That the assessee has already narrated in previous replies that she is doing. investment in share for last 10 years and in support of it copy demat account in SMC Global Securities Since 2007-08 is filed on record. Copy of demat a/c for 2012-13 shows the details of short term capital gain and long term capital gain transactions. Therefore it is established that the long term capital gain is not taken from accommodation entry provider, it is in due course of investment in share and securities Further it is pertinent to mention that the all transaction were done through account payee cheque and shares were transferred in the name of assessee in due course, the necessary entries are Showing in balance sheet of previous year. For ready reference mentioned here as under the copy of required documents has been already submitted on record 1. Copy of 5000 of Sunrise Asian Ltd (old name santoshimaa TradlinkLtd) @ 20/ per share purchased voucher M/S Silverice Mutti Trading Pvt Ltd 2. Copy of Shares transferred in the name of assessee 3 Copy of demat A/c in SMC Global Securities Ltd 4.Copy of balance sheet for the financial year 2012-13 The shares Satishimanto Tradelinks Ltd. Changed name Sunrise Asian Ltd 2012-13 holding was more than 18 months therefore is correct and acceptable as such long term capital gain exemption claimed U/s 10(38) of IT Act 3. That the Para 3rd of notice stated in detail about seam of long term capital gain short term capital gain is running by the operators based on Delhi, Kolkata & Mumbai etc. They proved facility to convert black money in exempted income u/s 10(38) of the IT. Act on commission of 6% by bogus long term capital gain entry. The syndicate of scam operators 8 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR managed all documents as legally required and managed the market price of shares astronomical proportions with in stipulated period of one year. The SEBI has also passed order for suspending trading by the document of such 26 scrips out of these penny stock companies. But by the documents of the assessee is also involved in the seam is not proved. The assessee is doing investment regularly for last eight year and declaring income in Income Tax return. If any person did any trading transaction in the scripts of selected companies selected in penny stock does not mean 100% transactions are relating to bogus transactions of shares. Further it is relevant to remember that the prices of shares in stock market depend on so many factors and does not in control of any one person, if the prices of any one or more scrip increased 10 times to 1000% or more in stock market does not mean there is any seam. So many companies script are available in market there price multiple 300% to 1000% list of some companies was published showing that some script increased 10000%. Therefore in, creasing in price of share does not mean there is any scam. 1. That the impugned notice is completely based on investigation report of the officials of Income Tax department and mentioned gist of facts to establish that the entry of the long term capital gain is bogus as statement on oath recorded during survey proceedings against the operators involved in scam. (A) Statement of Rakeshsomani s/o shri Prakash Ram somani recorded on 31.03.2015 (i) That the copy of pages regarding Q.No.3 to Q. No.22 were provided therefore this not provided, therefore there this incomplete statement it con not be ready against the assessee in quasi-judicial proceedings nor supposed to reply by the assessee (ii) That the statement of Shri Rakeshsomani was recorded in what capacity during survey of Eureka stock & share broking services Ltd and other is not mentioned therefore his statement is not considerable nor reliable (iii) That the list of bogus scripts penny stocks companies mentioned in question no.30 which is not showing name of santoshimaa lease finance 9 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR and investment (India) Ltd nor changed name sunrise Asian Ltd further he has not confirmed that he did any transaction in shares of companies relevant to the assessee. (iv) That Shri Rakeshsomani has not confined anywhere in his statement that he was involved in scam of bogus long term capital gain syndicate. Therefore, it is requested that the statement of shri Rekeshsomani does not help to presume the sunrise Asian was bogus Company (B) Statement of ShriSarnjayvora S/o Late ShriDhirajLalVord was recorded on 08.04.2015 (i) That the copy of pages regarding Q.No.3 to 24.28.to 58 and 61 onwards were not provided, therefore this in complete statement cannot be read against the assessee in quasi-judicial the preceding nor suppose to reply by the assessee. (ii) That the statement of shri Sanjay Vora was recorded in what capacity during survey operation of office premise of M/s AnandRathi shares and stock broker Ltd, Hemar Bharwada and other at Kolkata, 20 is not mentioned, therefore his statement is neither considerable nor reliable. (iii) That the Sanjay vora accepted in his answer of Q.No.60 the list of companies and quantity of shares traded but not accepted the trading was bogus nor accepted involvement in bogus long term capital gain syndicate and told that he derived only brokerage income from trading of those share as reflected in books of account. ( C ) Statement of ShriAnuj Agarwal S/oshriArarwal was recorded on 05.03.2016. (i) That the copy of pages regarding Q. No. 6 to 10 and 20 to 26 were not provided. therefore this incomplete statement cannot be read against the assessee in quasi-judicial proceedings not suppose to reply by the assessee. (ii). That the statement of Shri AnujAgarwal was recorded in what capacity during survey operation of office premises of korp securities Ltd and other companies situated at martio business house, Kolkata 01 is not mentioned therefore his statement is neither considerable nor reliable. (iii). That Shri Anuj Agarwal replied questions in statement shows that those were recorded like ipse dixit. It is not possible that a person having 10 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR knowledge about control and management of any company but don't know who was the promoter or Directors of the company, whereas the account books were maintained by other person i.e. Accountant Shri Vikas Gadia. (iv) That Shri AnujAgarwal told on answer of Q. No. 16 how his client were arranged the long term capital gain on share of bogus companies and got brokerage only 35% to 1% on cheque amount as per cash deposited in bank a/c of other companies. But no such evidences on record to the fact against document. Therefore the other companies are incorporated and working only as entry provider of non-taxable profits is not correct further the answers were recorded not according to questions of 18 and 19 therefore it is prima facies proved the statement is recorded only to write the certain companies are working for providing accommodation entry of long term capital gain. (v). That the statement on oath recorded in survey or soarch proceedings of the other persons and recorded answer of vague question which were not directly or indirectly related to the assesse, in their statement neither they told that the sunrise Asian Ltd is a bogus company nor the transferred entries were false in favour of the assessee (vi). That the in cremating statement of third persons recorded in survey proceedings behind the assessee therefore these statement cannot used against the assessee as per law and judicial precedent without providing opportunity in natural justice to cross them relating to transaction done by the assessee. Therefore, it is requested that the statement on oath if incriminating to the assessee should not be used without providing opportunity to cross them and copy of complete statement should be provided which is in possession of the Income Tax Department. 5. That the script of sunrise Asian limited is also indulged in providing accommodation entries or not the assesse cannot decide mere book results which were controlled the prices in stock market. The stock market is completely based on probabilities sentiments of market political scenario, trend of market fiscal policy stability of govt. speculation, global trade of market etc. If study the scripts then may find that 50% scripts prices does not based on their worth Therefore the high prices of any script in market cannot be deemed as involved in scam of penny stock scripts. 11 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR 6. That the assessee does regular working in share market for last 10 years and one of company script Sunrise Asian Ltd were traded cannot be deemed that the assessee is also involved in scam. There is no conclusive evidence of record to prove that the assessee was also did the transaction in such a manner merited in notice and paid return black money to the operator of the scam Therefore proposal to make addition is ab initio illegal and without any goods reason and bias for the same on record. 7. That the para 7 of notice is regarding commission paid to broker@ 6% in cash in lieu of bogus entry of long term capital gain shown artificial trading in penny stock bogus company while the assessee is not involved in such Scam the copy of statement provide me proved that he had received brokerage/ commission @ .050% to 1% which is normal in market trading as per customer creditability. Therefore the addition of 6% is also unjustifiable. Again, therefore it is requested that the proposal for addition in income U/S 68 and 69C is not justifiable. Notice is completely based on conjunctures and surmises, and on statement of third parties in survey of other trading companies is used against the assessee without providing opportunity to cross the person concerned is against the principle of natural justice and settled judicial precedents. The above referred notice may be vacated and assessment may be completed on return income." The AO thus submitted the rebuttal of the reply of the assessee at para 5.1 which is reproduced as under:- ‘’5.1 The assesee has put forth general plea in his reply, which can be summarized as under:- (i) The transactions of sale/purchase were duly recorded in the regular books of accounts of the assessee. (ii) Transactions were executed through banking channel. Apart from above, assessee has made investments since last 10 years. 12 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (iii) The persons whose statements were recorded by the Investigation Wing of the department are not related to the assessee. 2.3 Replies of the assessee have been considered, however, not found acceptable by the AO. The assessee has tried, though unsuccessfully to pose as if the share transaction leading to exempted LTCG was a genuine one, on the basis of mainly two logics. (i) Transactions were made through cheques and are recorded in the regular books of accounts, and; (ii) The persons who have admitted about the bogus LTCG scam are not related to the assessee. The AO also mentioned in the assessment order that various investigations conducted by the Income Tax Department confirms that the transactions made in the Scrip of M/s.Sunrise Asian Ltd. are not bonafide and are managed by the operators to create bogus LTCG in the hands of the beneficiaries which is exempt from income Tax. The huge capital gain in the hands of the assessee in only scrip of M/s.Sunrise Asian Ltd. also confirmed that the transactions are not genuine. According to the AO, following observations have also been made which prove that the transaction was just a cover to launder assessee’s money to give it a colour of genuineness. (i) The assesse has shown purchase of shares on 1-4-2012 through M/s. Santoshima Tradelink Ltd. 13 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (ii) The shares got dematerialized on 16-04-2013 i.e. after 12 months from the date of purchase. The assessee has not offered any explanation. (iii) The assesee has failed to tell the name and address of the person on whose recommendation he invested in an unknown unlisted company. (iv) The assessee purchased the shares of M/s. Santoshima Tradelink Ltd. Interestingly this company i.e. M/s. Santoshima Tradelink Ltd. also merged with the Sunrise Asian Limited with the same order of merger. It shows that M/s. M/s. Santoshima Tradelink Ltd. was also a part & parcel of the entire arrangement. (v) The assesee has vehemently argued that the persons whose statements were recorded on oath by the investigation wing of the department were not related to the assessee. However, it may be pointed out that the all these persons whose statements were recorded have categorically admitted that the transactions made for these scripts were actually bogus. (vi) Shri Sanjay Vora, Regional Director of M/s. Anand Rathi Shares and Stock Brokers Ltd. one of the other share brokers of the racket, also admitted about the entire modus operandi of the scam including involvement his company M/s. Anand Rathi Shares and Stock Brokers Ltd. in it. A notice u/s 133(6) was issued to M/s. Sunrise Asian Limited to its only known address at 133, Panchratna, Opera House, Mumbai which return back by the postal authorities with the remarks ‘’not claim return to sender’’. Further on googal search, the same address is found to be belonged to Patel Manilal Maganlal & Sons, a angadia service provider i.e. courier agent’’ It is also noted that the AO in the assessment order has mentioned that the request of the assessee for cross examination of all such persons (more than 100 of such 14 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR persons) at this juncture of time, appears to be an attempt to delay/ halt the proceedings by assuming the instrument of Cross Examination as a right. The AO further mentioned that in order to exercise the power of cross examination, there must be sufficient reasons with the assessee that she/ he was not in knowledge of the evidences which were gathered by the Investigation Wing of the Department and it is not the case of the assessee. The AO also relied on the following case laws on the issue of cross examination in an authoritative manner. (i) State of Jammu & Kashmir vs Bakshi Ghulam Mohammed (1967 AIR 122, SC) (ii) Rabindra Kumar Sahu vs Utkal University (1969 AIR Orissa HC) (iii) Dhakeshwari Cotton Mills Ltd. vs CIT 261 ITR 775 (SC) (iv) Smt. Kusum Lata Thukral 327 ITR 424 (P&H) (v) Nath International Sales and Anr. Vs Union of India And Ors (17-10-1992) (1992 AIR 295 – Delhi) It is also noted that AO at para 8.6 has mentioned that the assessee has vehemently pleaded while relying on some judicial pronouncement in his A/R’s reply to the show cause that the transaction was genuine as it was made through cheque. In this context, the AO relied upon the decisions of Hon’ble High Courts of Madras and Calcutta where in the case of Mangilal Jain vs ITO (Mad) 315 ITR 105 & CIT vs Precision Finance P Ltd. (Cal) 208 ITR 465, that when the assessee has failed to prove the genuineness of credit, mere proof of identity of creditor or that transaction was by cheque, is not sufficient. Addition u/s 68 was justified. Thus 15 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR taking into consideration the above facts and circumstances of the case came to the conclusion that it has been established beyond doubt that the unaccounted income of Rs.7,23,257/- routed back to the assessee during the year under consideration, camouflaged as Long Term Capital Gains which has been proved as bogus entry. According to the AO, the assessee was in receipt of cash credit of Rs.23,23,696/- for which she failed to offer any satisfactory explanation especially in the light of credible evidences gathered by the Department. Thus the AO added a sum of Rs.23,23,696/- u/s 68 of the Act to the total income of the assesee as unexplained cash credit. As regards the issue of commission paid in lieu of bogus entry of LTCG, the AO noted that the assesee has failed to controvert his observations as these syndicate members which include promoters/directors of penny stock company, share brokers etc. had admitted that they provided bogus LTCG entry in lieu of commission. The AO noted that the gist of statements of beneficiaries namely Shri Sanjeev Kumar Agarwal, Manish Uppal, Ajit Gupta, Shri Charchit Gupta and others who categorically admitted in their statements under oath before the Investigation Wing of the Department that they paid commission for getting bogus LTCG entries. Hence, the AO held that the assessee had paid commission @ Rs.6% of sale value of M/s. Sunrise Asian Ltd. and paid a sum of Rs.1,45,421/- equal to 6% of the amount of sale proceeds of bogus share transaction and the assessee had not offered any explanation about the source of the same. Thus the 16 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR AO made two additions namely Rs.23,23,696/- u/s 68 and Rs. 1,45,421/- u/s 69C of the Act respectively. 2.4 In first appeal, the ld. CIT(A) has confirmed the action of the AO by dismissing the appeal of the assessee and the relevant observation of the ld. CIT(A) is mentioned as under:- ‘’6.3. I have carefully considered the matter. From a reading of the assessment order, it is noticed that the AO relied to a large extent on the findings of investigation wing of the department regarding systematic manipulation of share prices of many penny stock companies by collusion of promoters, brokers, entry providers and willing beneficiaries. The fact of certain shares of companies being manipulated in order to generate bogus LTCG or loss has been unearthed by the department. The AQ had based his order on the facts unearthed. Besides, the AO had demonstrated that the performance of the company whose shares have been manipulated had no fundamentals that would lead to dramatic increase in share prices just to be followed by equally sharp fall in prices. On the other hand, the appellant stated that she was indeed a genuine purchaser and seller of shares. She had all documentary evidences in support of purchases and sales. Transactions were through registered brokers and that receipts and payments were through banking channels. The AO had overly relied on findings of investigation wing which were in turn based on statement recorded in course of survey u/s 133A of the Act 6.3.1. The Directorate of Income-tax (Investigation) had unravelled wide- spread misuse of exemption allowed by the IT Act u/s 10(38). Shares of many companies which had practically no asset, business and profit were systematically manipulated by unscrupulous brokers in connivance with operators and willing beneficiaries. The company whose shares were bought and sold by appellant was found out to be one of the penny stock entities whose share price was manipulated. The modus operandi had been dealt with in great detail by the AO. They need not be repeated here. The company whose shares were purchased and sold by assessee had practically no business at all. It has no meaningful asset which would arouse interest of bona fide investors to invest in its shares. It has no business worth-mentioning. The climb in the prices of its shares and the fall thereafter is tell-tale sign of the price being manipulated. The statements of Rakesh Somani, Sanjay Vora and Anuj Agarwal, were taken in course of survey u/s 133A and they had stated that the share price of Sunrise Asian Ltd was manipulated. The statements of those three persons were confirmed circumstantially by the unnatural movements in the price of the shares of Sunrise Asian Ltd. Assessee's investment had multiplied manifold within a short span of 17 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR only sixteen months. The investment in shares of a non-descript company without any business worth mentioning but yielding manifold increase in value simply defies logic. It is beyond of realm of human possibility. It is not a case of the company striking a gold mine or oil field. Human probability had to be kept into consideration in deciding this kind of cases. Mere ownership of paper evidence will not suffice. In fact, because of existence of paper evidences only, the companies whose shares were claimed to have been bought and sold are called paper companies and the transactions are fittingly labelled paper transactions. In this kind of operation yielding bogus LTCG, there is systematic collusion between brokers, operators and beneficiaries. When such collusion takes place, any amount of paper evidences can be generated. Such evidences do not appeal to me as genuine considering the facts of the case. AO had relied on various decisions of Hon'ble Higher Appellate Authorities in his order. They need not be repeated here. In the written submission, appellant relied on several decision of Hon'ble Jurisdictional Tribunal and that of Hon'ble Jurisdictional High Court. But in similar type of case, the Hon'ble Apex Court in Suman Poddar vs ITO [2019] 112 taxmann.com330 9SC) had already decided the matter in favour of department. In that case, the assessee, Suman Poddar was showing huge profit on sale of shares of Cressenda Solution. The assessed allegedly purchased 15000/- shares of M/s Smart Champ I.T. and Infra limited on 22.09.2011 @10 per shares. On 21.02 2013, Smart Champ was amalgamated into Cressenda Solution and 15,000/- shares of Cressenda Solution were allotted to assessce Between 18.7.2013 to 12.09.2013, the shares numbering 15,000/- were sold for Rs. 73,77,806/- @Rs. 501.75 to 503.50). After examination of the Balance Sheet, Profit and Loss Account of Cressenda Solution and other relevant facts, the Hon'ble Tribunal concluded as under: ‘’11. The evidences put forth by the Revenue regarding the entry operation fairly leads to a conclusion that the assessee is one of the beneficiaries of the accommodation entry receipts in the form of long-term capital gains. The assessee has failed to prove that the share transactions are genuine and could not furnish evidences regarding the sale of shares except the copies of the contract notes cheques received against the overwhelming evidences collected by the Revenue regarding the operation of the entire affairs of the assessee. This cannot be a case of intelligent investment or a simple and straight case of tax planning to gain benefit of long-term capital gains. The earnings @ 491% over a period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assesse. Even the brokers who coordinated the transactions were also unknown to the assessee. All these facts give credence to the unreliability of the entire transaction of shares giving rise to such capital gains. The ratio laid down by the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT. 214 ITR 801 is squarely applicable to the case. Though the assessee has received the amounts by way of account payee cheques the transactions cannot be treated as genuine in the 18 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR presence of the overwhelming evidences put forward by the Revenue. The fact that in spite of earning such steep profits, the assessee never ventured to involve himself in any other transaction with the broker cannot be a mere coincidence of lack of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee arid other surrounding circumstances in order to see whether the assessee is able to the provisions of section 68 or not. In the case of NR Portfolio, it was held that the genuineness and credibility are deeper and obtrusive. Similarly, the bank statements provided by the assessee to prove the genuineness of the transactions cannot be considered in view of the judgment of Hon'ble court in the case of Pratham Telecom India Pvt Ltd, wherein, it was stated that bank statement is not sufficient enough to discharge the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. Similarly, the Tribunal in the case of Udit Kalra, ITA No. 6717/Del/2017 for the assessment year 2014-15 has categorically held that when there was specific confirmation with the Revenue that the assessee has indulged in non-genuine and bogus capital gains obtained from the transactions of purchase and sale of shares, it can be a good reason to treat the transactions as bogus. The differences of the case of Udit Kalra attempted by the Ld. AR does not add any credence to justify the transactions. The Investigation Wing has also conducted enquiries which proved that the assessee is also one of the beneficiaries of the transactions entered by the Companies through multiple layering of transactions and entries provided Even the BSE listed this company as being used for generating bogus LTCG On the facts of the case and judicial pronouncements will give rise to only conclusion that the entire activities of the assessee is a colourable device to obtain bogus capital gains. The Hon'ble High Court of Delhi in the case of Udit Kalra, ITA No. 220/2009 held that the company had meager resources and astronomical growth of the value of the company's shares only excited the suspicion of the Revenue and hence, treated the receipts of the sale of shares to be bogus. Hon'ble High Court has also dealt with the arguments of the assessee that he was denied the right of cross examination of the individuals whose statements led to the enquiry. The Id AR argument that no question of law has been framed in the case of Udit Kalra also does not make any tangible difference to the decision of this case. Since the additions have been confirmed based on the enquiries by the Revenue, taking into consideration ratio laid down by the various High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals listed below. 19 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR > M.K. Rajeshwari vs. ITO in ITA No. 1723/Bang/2018, order dated 12. 10.2018. >Abhimanyu Soin vs. ACIT in ITA No. 951/Chd/2016, order dated 18.04.2018. > Sanjay Bimalchand Jain vs. ITO 89 taxmann, com 196 > Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 59/Nag/2015, order dated 24.08.2016 > Ratnakar M. Pujari vs. ITO in ITA No. 995/Mum/2012, order dated 03. 08. 2016 > Disha N. Lalwani vs. ITO in ITA No. 6398/Mum/2012, order dated 22.03.2017. >ITO vs Shamim M. Bharwoni [2016] 69 taxmann. com 65. > Usha Chandresh Shah Vs ITO in ITA No. 6858/Mum/2011, order dated 26. 09. 2014. > CIT vs. Smt. Jasvinder Kaur 357 ITR 638 12. The facts as well as rationale given by the Hon'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, we, hereby decline to interfere in the order of the Id. CIT(A)’’ The above decision of Hon'ble Tribunal was confirmed by Hon'ble Delhi High Court in Suman Poddar vs ITO (ITA NO. 841/2019 decided on 17.09.2019). Assessee's SLP was dismissed by Hon'ble Apex Court in the case cited above. The decision of Hon'ble Apex Court on similar issue has to be given precedence over the case laws cited by the appellant. 6.3.1. Suffice it to say that there was systematic-generation of bogus capital gains by manipulating the prices of penny stocks shares which was unearthed by the Investigation Wing of the department in Kolkatta. Appellant and other assessees were found to be beneficiaries of the sham and pre-arranged transactions. Bogus LTCG was generated for laundering of black money only. In view of the threadbare factual findings of the AO as well as circumstances of the facts, am of the considered view that his decision deserves to be upheld. Grounds taken are dismissed. Appeal is dismissed. Order is passed u/s 250 of the Act.’’ 20 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR 2.5 During the course of hearing, the ld. AR of the assessee prayed that the lower authorities have erred in confirming the addition of Rs. Rs.23,23,696/- u/s 68 and Rs. 1,45,421/- u/s 69C of the Act respectively for which the ld. AR of the assessee has filed the written arguments as under:- ‘’The humble appellants respectfully submits as under 1 That the appellant has submitted the written facts and arguments (Page No.1 to 13 the paper book) before the learned Commissioner of Income Tax (Appeals) therefore to avoid repetition, kindly treat as submitted before the Hon'ble Tribunal with necessary modification. 2 That is pertinent to mention some additional facts in assessment order and appeal order those are incorrect and against the documentary evidences, as under: (a) In order of the A.O. (i) ‘’Page 2(i)- the bill for this transaction was raised by one M/S Santoshema Tradelinks Ltd on 01.04.2012 (there is an overwriting/ cutting) i.e. actual date of purchase is not ascertained." The above said fact is not correct for ready reference and verification the assessee submits the copy of relevant purchase invoice herewith, No. cutting in purchase invoice. (ii) Page-5- last three lines before the point No.4 In a large number of penny stocks, the price band had been reduced to the lowest bond of 2 percent. Out of these scrips, interim orders have also been passed by SEBI in the case of 11 scrips, giving a finding that price in the scrips was rigged. Details of such order are available on the website of SEBI. Moreover, the SEBI has suspended trading in 26 scrips out of these penny stock companies" But the learned Respondent has not established that an action against penny script of sunrise Asain Ltd was taken by SEBI. Therefore the said fact mentioned in assessment order is not relevant in the matter of the assessee. (b) In order of CIT Appeals: 21 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (i) on Page 17 para 5.3 stated that cross examination of more then 100 persons involved in the scam which appears to be an attempt to delay or halt the proceedings by instrument of cross examination While in impugned assessment order only three persons statements on oath (partly referred) which were general and vague in nature and nobody told specifically about involvement with the assessee in transaction. (ii) On Page 23 in first line mentioned that the assessee purchased 10000 shares of Sunrise Asain Ltd. while the assessee purchased only 5000 shares of santoshima Tradelink Ltd in Rs 100000/-. (iii) and mentioned in para 8.02 that the penny scrip jumped by almost 4000% while the appellant got Rs 2423696/ against investment of Rs 100000/- which is almost 2400%. So many companies having ups and down every year for ready reference last three year market data submitting for record. 3. That the learned CIT Appeals copied the written arguments in the impugned appeal order. The points are submitting for ready reference as under: (i) supporting arguments: (A) (1) The impugned order is against the facts of this case, Completely based on cooked story, based on observations on investigation Authority report while these were against documentary evidence. (ii) Without any corroborated evidence put on record. (iii) bonafide investor for last eight years and submitting I.T. Return regularly. (B) The Respondent had not provided copy of relevant documents and statements on oath on record. therefore the statements were not completely and closely scrutinized even objections raised in reply of notice dated 13.12.2016 (Page 46 to 52 of Paper book) (C) Third person incremental statements recorded in absence of assessee cannot used against the assessee without providing opportunity to cross examine of the person concern. (D) Not considering the nature of stock market which is based on so many reasons mentioned in para 5 of reply dt 13.12.2016 and may other also.. 22 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (E) Order based on suspicion and surmises without any cogent material to show off the gain amount returned back cash to the assessee The assessee has also mentioned the supporting precedents of the Hon'ble jurisdictional Rajasthan High Court and Income Tax Appellate Tribunal followed the precedent of Hon'ble Supreme Court. For ready reference: copy of judgements were also submitted. (II) Respondent Reasoning's were not applicable in this case (i) Earning of huge amount in short span of time is against human probabilities and genuineness. (ii) denial for cross examinations of third persons statements used against the appellant (iii) Involvement of the appellant (assessee) in scam the Respondent discharged burden. 4. That the learned CIT Appeals decided the issues with observations at page 50 or in Para 6.3.1 that investment in shares of the sunrise Asian Ltd Yield manifold increased in value which is beyond human probability. further said the these so called paper companies shares transaction is I done with systematic collusion between broker, operators and beneficiaries. Although the decision in several cases given by the jurisdictional Tribunal and Hon'ble High court. But the Hon'ble Supreme Court has already held in similar type of i.e. Suman Poddar Vs I.T.O. 112 Tax man Page 330 (S.C.) cases in favour of the department has held that "When there was specific confirmation with the revenue that the assessee has indulged in non genuine and bogus capital gains obtained from the transactions of purchase and sale of shares, It can be good reason to treat the transactions as bogus." Further the CIT Appeal relied on under mentioned cited cases of the various Hon'ble High courts and Tribunals. 5. That the learned Commissioner (Appeals) has erred in applying the suman Poddar's cases and other referred cases on Page 53 & 54 of the impugned order), for ready reference the appellant submits reasons for non application of the each referred judgement in the matter sub-judice before this Hon’ble Tribunal: (a) Suman Poddar Vs ITO (2019) 112 Tax mannn. com 330 9SC) order is special leave petition is dismissed' copy enclosed for ready reference. 23 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (i) The above order is not binding precedent under Article 141 of the constitution. The order in SLP in case of Suman Poddar was rejected limney by non speaking order of dismissal saying that it is not a fit case and does not constitute the law laid down by the Hon'ble Supreme Court (ii) That the Hon'ble Supreme Court decided this issue in several judgements and having constant view, For ready reference submits copy of the following judgements: (1) State of Manipur & other Vs Thingujam Brojen (AIR 1996 S.C. 2124 (Page 9) (2) Collector of customs Bombay Vs Elephanta Oil Industries Ltd ( AIR 2003 S.C. 1455 (Para 15) (3) Union of India Vs Jaipal Singh ( AIR 2004 S.C. 1005 Para 3) (b) Udit Kalra Vs I.T.O. ward 5(1), Appeal No. 220/2019 order dated 08.03.2019 the Hon'ble High Court held that " Having regard to these circumstances and principally on the ground that the findings are entirely of fact. This court is of the opinion that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed" Order in aforesaid case is also not created binding precedent being the order is without assigning any reason as principle laid down by the Hon'ble supreme court in cases referred in Para A" c) Citations or particulars of other cases Referred in appellate order available to the appellant and find ratio of the orders as under (1) M.K. Rajeshwari Vs I.T.O. (ITA No. 1723/Mang.2018 order dated 12.10.2018 Appeal dismissed due to assessee has opted to file an application under Vivad se vishwas Act 2020 Therefore it is not create binding precedent (ii) Sanjai Bal Chand Jain Vs ITO Nagpur (ITA No.61/ Nag/ 2013 dated 18.07.2016) Appeal dismissed on ground the fantastic sale price is not at all humanly probably as there no financial and economical basis, on the basis of Hon'ble Supreme court: cases Referred sumati Dayal and Durga Prasad Mor (these case were discussed separately in appeal) the Hon'ble High 24 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR Court Bombay decided limine that no substantial question of law arises therefore appeal dismissed (Not binding under Article 141) (iii) Dinesh Kumar Khandelwal HUF Vs Income Tax officer (ITAN 539/Nag/2015 order dated 24.08.2016 The said order dated 24.08.2016 has been recalled by order dated 06.01.2017 in M.A. Nos 23 & 24/Nag/2016 in ITA No. 58 & 59/Nag/2015. Therefore not created any precedent (iv) Diesh N Lalwani Vs I.T.O. (ITANO. 6398/mum/2012 order date 22.03.2017. The matter/ issue in appeal was proceeding initiated U/S 147/148 of the I.T.Act In that case accepted on oath Shri Mukesh Choksi(CA) Managed the bogus long term gain in lieu of cash and the assessee duly cross examined (Page 18 of the order) "If the material available on record and the judicial pronouncements discussed hereinabove are kept in juxtaposition with the facts of the present appeal, we find that there was admission by Shri Mukesh Chokshi that he was engaged in providing bogus long term gains claim in lieu of cash and he was duly examined by the assessee Totality of facts clearly indicates that there was reasonable belief with the Assessing officer that income has escaped assessment, therefore, so far as, reopening is concerned. we find no infirmity in the conclusion of the Id Commissioner of Income Tax (appeal) thus, this ground is decided against the assessee." While in present appeal the Assessee ( appellant) requested for cross examination but not permitted therefore this judgement is on different facts (v) Usha Chandresh Shah Vs ITO. (ITA No. 6858/mum/2011. order dated 26.09 2014. That case is also decided on principle of human probabilities it is not help to the Respondent this issue also discussed separately. 6. It is also pertinent to mention and discuss the application of the judgements referred in impugned assessment order (a) Para 5.3 of assessment order: (i) State of jammu & Kashmir Vs Bakshi Ghulam Mohammed (AIR 1967 S.C. 122) The learned 1.T.O. referred the Hon'ble court 25 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR observation in para 5.3.1. regarding application of principle of natural justice as held by the Hon'ble Supreme court in case of agendra Nath Bora Vs Commr. of Hills Division and Appeal Assam that: "That the rules of natural justice vary with the varying constitution of statutory bodies and rules prescribed by the Act under which they function, and the question whether or not any rules of natural justice had been contravened should be decided not under any preconceived notions but in the light of the statutory rules and provisions" Therefore the specific provisions of relevant Act i.e. J & K. Commission of Inquiry Act 1962 " are applicable and right of cross will be available according to sec. 10 and rules provided relating to cross examination. It is prima facie appears that the above said judgement Le state of Jammu & Kashmir Vs Bakshi Ghulam Mohammad wrongly applied. No restrictions and procedure provided in the Income Tax Act for cross examination of witness, therefore general procedure of evidence Act and principle of natural justice shall be applied as the Hon'ble Supreme court held in case of Andaman Timber Industries Vs CCE ( 127 DTR 241) as under:- ‘’According to us not allowing the assessee cross examine the witnesses by the Adjudication Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected" (b) Para 5.3.2 Rajendra Kumar Sahu Vs Utkal University (AIR 1969 Orisa 206) (H.C. Orisa) based on the case of the state of Jammu & Kashmir Vs Bakshi Ghulam Mohammed (1967 S.C. 122). But in case of the appellant it is not applicable as referred the following order of our jurisdictional High Court and ITAT Rajasthan in submission before the CIT Appeal: Cases of Rajasthan High Court, Jaipur Bench: 26 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (i) CIT Central Jaipur v. M/s Maverick Share Brokers Pvt. Ltd.. Income Tax Appeal No. 14/2016 decided on 23/03/2017 (ii) Commissioner of Income Tax-1, Jaipur v. Pooja Agarwal, Income Tax Appeal No. 385/2011 decided on 11/09/2017 (iii) Principal Commissioner of Income Tax-1, Jaipur v. Pramod Jain, Income Tax Appeal No. 212/2018 decided on 24/07/2018 Case of Income Tax Appellate Tribunal, Jaipur Bench: (iv) Sandeep Sharma v. The Income Tax Officer, Ward-6 (3). Jaipur Appeal No. 233/JP/2019 decided on 21/05/2019 (v) Deputy Commissioner of Income Tax, Circle Bharatpur v Saurabh Mittal Appeal No. 16/JP/2018 decided on 29/08/2018 (vi) Pramod Kumar Lodha v. The Income Tax Officer, Ward-6 (2). Jaipur, Appeal No. 826/JP/2014 decided on 16/07/2018 (vii) Vivek Agarwal v. The Income Tax Officer, Ward - 1 (2), Jaipur,Appeal No. 292/JP/2017 decided on 06/04/2018 (viii) Pramod Jain v The DCIT, Circle-3. Jaipur. (c) Para 5.3.3- Dhakeshwari Cotton Mill Ltd Vs CIT (261 ITR 775-S.C.) The said case regarding documentary evidences collected placed before the assessee while framing the assessment order. But in case of the assessee no documentary evidence except statement of some persons used against the assessee without having any correlative evidence and without having specific statement against the assessee. Therefore the said judgment is not applicable. (d) Para 5.3.4 Smt Kusum Late Thukral ( 327 ITR 424) (H Court P & H) (e) Para 5.3.5 Nath International Sales and Anr. vs Union of India (AIR 1992 Del 295). These judgments are also neither applicable nor having binding precedent force therefore referred only ornamentally. 27 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR (f) In para 7.6- The learned Income Tax officer referred the following cases (1) Harsh win chadha VS DCIT (ITA No. 3088 to 3098 & 3107/ Del 2005. (ii) Indian & Eastern News Paper Society VS CIT (119 ITR 976 S.C.) (iii) Dhakeshwari Cotton Mills Ltd Vs CIT (26ITR 775 SC.) (iv) Mahindra & Mahindra Ltd Vs U.O.I. (1979 S.C.798). (v) CIT (Addl.) Vs Jai Engineering Works Ltd (1978) 113 ITR 389 (Del.) (vi) Bhagat Halwai (1928) 3ITC 48 (All) (vii) Gaiti (SS) Vs Lal & Co. (1964) 53 ITR 231(SC) (viii) CIT Vs Metal Products of India (1984)150 ITR 174 (P&H) The all above judgments are regarding the proceedings nature under Income Tax Act is quasi judicial and may collect evidence (documentary) from any sources on record, which may be confidential and not open to the public. Therefore opt the principle of human conduct and preponderance of probabilities with reference of following judgments: (i) Sumati Dayal Vs CIT (2014 ITR 801) (ii) Durga Prasad More Vs CIT (1971 S.C. 2439) The above cases facts are different from assessee's case and the evidences shows that the result of competition was purchased. For ready reference of facts and reason for conclusion reproduce as under: Sumati Dayal Vs CIT (214 ITR 801 (S.C.) Facts in Para 9 and reasons in para 10 are showing that the horse racing income during exemption from tax and considered as under: ‘’Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonable be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test 28 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR of human probabilities has rightly concluded that the appellant claim about the amount being her winning from reces is not genuine." (i) Durga Prasad More Vs CIT (1971) 829 ITR 542 of AIR 1971 S.C. 2439. "In that case the dispute was facts that investment in immovable property was made by the assessee for herself or for the Trust where saying that the Trust was created orally and other evidence on record, ITO. no Commissioner (Appeal) and Tribunal held that is personal property. High court directed to decide with evidence of the facts. That the question of law raised that The HC Has jurisdiction for such order raised before the Hon'ble supreme court that the facts confirmed by the Tribunal then the High court have no jurisdiction to interfere in the matter. The Hon'ble supreme court held as under: "Para 19- "In our openion no question of law arose from the order of the Tribunal and therefore the High court was not justified directing the tribunal to State a case and we are further of opinion that the answer by the High court to the given by the High court to the question referred to is unsustainable. We accordingly discharge that answer that question in the affirmative and in favour of the Department" Therefore, it is requested that the ratio of judgment does not create the sach binding precedent as narrated by the Respondent. In para 8.5 to 8.6 some ITAT cases were also referred for following the principle of human probabilities to decide the genuineness. That the genuineness of the transaction on probability basis is depend on nature and circumstances of each transaction. Therefore justification of event should be decided by considering the factors of all possible reasons as a prudent man and the result should be liberally constructed in favour of the person concern unless otherwise apparently proved. (C) Following cases also cited by the Respondent for justification of cooked story - MC Dowell Vs CTO (Para 8.3 if A.O. order) The above judgments are laid down general principle but the cases are not relevant in matter of the assessee. Arguments: 29 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR The humble appellant submitted written submission with copy of reply before 1.T.O. dated 13.12.2016 (Marked as Annexure of Paper Book Page 46 to 52) and argument in support of grounds of appeal submitted alongwith copy of judgments given by the jurisdiction Hon'ble Rajasthan Court and Hon'ble ITAT. But the learned CIT (appeals) has not considered in passing the impugned order. Kindly also consider the written arguments and documents submitted before the learned CIT Appeal in the interest of justice and may allow the appeal in toto.’’ 2.6 During the course of hearing, the ld. DR supported the order of the ld. CIT(A) and also submitted that SEBI, the capital market regulator has fined 86 entities Rs.1.00 crore on Friday for manipulating the Shares of Sunrise Asian Ltd. The relevant extract of supporting document produced by the ld. DR is as under:- ‘’ Sebi slaps Rs 1 crore fine on 86 entities for fraudulent trading Sebi, the capital markets regulator, fined 86 entities Rs 1 crore on Friday for manipulating the shares of Sunrise Asian Ltd. Sunrise Asian Ltd (SAL), its five former directors, and 80 related organisations were fined Rs 1 crore by the regulator. PTI JUNE 17, 2022 / 16:42 PM IST (Representative Image) Capital markets regulator Sebi on Friday imposed a fine of Rs 1 crore on 86 entities for manipulation in the shares of Sunrise Asian Ltd. In its order, the regulator levied a fine of Rs 1 crore on Sunrise Asian Ltd (SAL), its five former directors and 80 connected entities. The amount has to be paid jointly and severally by the entities. Sebi had conducted an investigation into the scrip of Sunrise Asian for the period October 2012 to September 2015, based on a reference received from the Principal Director of Income Tax (Investigation), Kolkata, Under a scheme of amalgamation, Sunrise Asian and its then directors had devised a fraudulent mechanism whereby 80 connected entities had manipulated the price of the scrip in four patches of trading during the 30 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR investigation period. Further, 77 out of the 86 entities were counterparties to the sale of shares by 1,059 entities/allottees at artificially inflated or manipulated prices, thereby violating rules. Of the 86 entities, two have passed away and one has settled the case with Sebi. "However, notices 1 to 6 (SAL and its whole time directors) had devised an arrangement in collusion with notices 7 to 86, whereby through a combined and collective strategy and had executed series of trades among themselves and had manipulated the price of the scrip during the investigation period," Sebi Adjudicating Officer Soma Majumder said. "The regulator had debarred the notices from accessing securities markets for up to one year for the violations vide order dated 6 September 2021," she noted. By doing so, the notices have violated... PFUTP (Prohibition of Fraudulent and Unfair Trade Practices), the order added. In another order, the regulator has imposed a fine of Rs lakh on two individuals in a case. pertaining to disclosure lapses in the matter of Bronze Trading Ltd (BTL). The amount has to be paid jointly and severally. The order came after Sebi received a report from BSE Ltd regarding circulation of SMS/calls recommending the purchase of BTL scrip providing a target price to be reached by the stock in a time-bound manner for the period July 2016 to December 2016.’’ The ld. DR has also relied on following case laws. (i) Ms. Manvi Khandelwal vs ITO (ITA No. 3212/Del/2018 dated 26-11- 2019 – ITAT Delhi Bench) (ii) Satish Kishore vs ACIT (SA No.373/Del/2019 dated 18-04-2019 – ITAT Delhi Bench) (iii) M/s. Pankaj Agarwal & Sons (Huf) and Others vs ITO (ITA No. 1413, 1414, 1415, 1416,1417, 1418, 1419 & 1420/Chny/2018 dated 6-12-2018 – Chennai ) (iv) Pooja Ajmani vs ITO (ITA NO.5714/Del/2018 - ITAT Delhi Bench) (v) Sanjay Bimalchand Jain vs PRCIT-1, Nagpur (IT Appeal No. 18 of 2017 dated 10-04-2017) (vi) C. Vasantlal And Co. Vs CIT, 45 ITR 206 (SC) (vii) Securities And Exchange Board of India vs Rakhi Trading Pvt. Ltd. (Civil Appeal No. 1969 of 2011 dated 8-02-2018 (SC) (viii) PCIT vs Krishna Devi (2022) 138 taxmann.com 150 (SC – 01-04-2022) 31 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR 2.7 The Bench has heard both the parties and perused the materials available on record as well as the case laws cited above. In this case, it is noted that the assessee had filed her e-return of income on 27-07-2014 declaring total income at Rs.520/-. The case of the assessee was selected for scrutiny on the basis of CASS. The notices u/s 143(2), 142(1) and questionnaire were issued to the assessee on 15-06- 2015. In compliance of the notice issued to the assessee, the ld. AR of the assessee attended the hearing from time to time before the AO and submitted relevant details as asked for by the AO. The AO during the year under consideration noted that the assessee has shown interest income of Rs.82,209/-. Apart from it, the assessee has claimed exemption of Rs.23,23,696/- u/s 10(38) of the Act as to Long Term Capital Gains, for which the AO mentioned the details of transaction of purchase/ sale of shares leading to LTCG, exempted u/s 10(38) of the Act as under:- Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains Sunrise Asian Ltd. 1.04.2012 1,00,000 2.08.2013 24,23,696 23,23,696 While examining the issue of Long Term Capital Gains, the AO noticed the following facts. ‘’2.1 The assessee has shown to have invested in shares of M/s. Santoshimaa Tradelinks Limited, an unlisted company on 01-04-2012. Later on, it was merged with Sunrise Asian Limited. Detail with respect to this transaction was filed by the assessee during the course of assessment proceedings. Following observations 32 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR have been made in relation to alleged purchase of 5000 shares of M/s. Sunrise Asian Limited. (i) The assessee has shown purchase of 5000 shares on 01-04-2012 (ii) The Bill for this transaction was raised by one Santoshima Tradelinks Ltd. on 01-04-2012 (there is an overwriting / cutting) i.e. actual date of purchase is not ascertained i.e. actual date of purchase is not ascertained. (iii) The Santoshima Tradelinks Ltd. was merged with M/s. Sunrise Asian Ltd. The Board of Directors have approved the merger on 9-11-2012 and informed the BSE accordingly. (iv) The assessee has sold all the 5000 shares for Rs.24,23,696/- by 2-08-2013 in one lot. (v) The assessee allegedly earned dRs.23,23,696/- as Long Term Capital Gains on this transaction Besides above observations, the AO went through the reports of Investigation Wing of New Delhi, Mumbai, Kolkata relating to the actions conducted by them in cases of bogus LTCG/STCG/STCL/Loss entry providers and also in cases of beneficiaries of this arrangement. The AO at the time assessment proceedings noted that it was being noticed by the Department for a long time that certain share transactions in penny stock companies were fabricated one with a motive to launder the unaccounted money in form of bogus LTCG/STCG with nil taxes or taxes at nominal rates. There have also been cases of claims of huge bogus losses on account of trading in such penny stock companies. The AO noted from the reports of the Investigation Wings that Coordinated actions u/s 132(1) & 133 of the Act, 1961 were carried out by the Investigation Wing of Kolkata, Mumbai, New Delhi and other units of the country. Statements of certain individuals relating to such bogus entry providers/ beneficiaries were recorded u/s 132(4) and u/s 131 of 33 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR the Act and thus Investigation Wing unearthed LTCG/STCG/STCL/Loss entry of over Rs.38,000 Crores. Thus the Investigation finally identified 84 of such penny stock companies which were involved in the pool of entry providers’ syndicate wherein M/s. Sunrise Asian Limited is found to be one of such penny stock companies. In view of the above information and credible evidences, a show cause letter dated 13-12-2016 was issued by the AO to the assessee giving detailed discussions at para 3.1( sub-para (2) to(8) which was rebutted by the AO vide para 5.1 to his assessment order. Thus the AO conclusively made addition of Rs.23,23,696/- us 68 of the Act and also made an addition of Rs.1,45,421/- holding that the assessee has paid commission @ 6% of sale value of shares of M/s. Sunrise Asian Limited and thus treated the amount of Rs.1,45,421/- as unexplained expenditure u/s 69C of the Act. In first appeal, the ld. CIT(A) has confirmed the action of the AO. In this case, it is noted that the assessee invested Rs.1.00 lac in 5000 equity shares of Santoshima Tradelinks Ltd on 01-04-2012. As per amalgamation order, the equity shares were converted in the name of Sunrise Asian Ltd. These 5000 equity shares sold on 02-08-2013 through Registered broker at Bombay Stock Exchange in Rs.24,23,696/- and in the income tax return claim of Rs.23,23,696/- was made u/s 10(38) of the Act as exempted income. It was noticed that DCIT, Investigation Kolkata reported that 58 scrips of listed companies are penny stocks. The authority formulated system under which 34 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR unaccounted money may regularize by exempted income u/s 10(38) of the Act and so many persons were involved in LTCG/STCG/SCAM/through pre-arranged transaction for money routed back by accommodation entries on commission. The SEBI suspended only trading of 26 scrips out of the above said 58 scrips and only 11 scrips prices were found rigged. Sunrise Asian Ltd. (Scrip Code 506615) was not included in these scrips. The assessee had purchased the shares on 01-04-2012. The AO has issued notices u/s 143(2), 142(1) of the Act and show cause dated 13- 12-2016 with copy of part statement of Rakesh Somani, Sanjai Vohra, Anuj Agarwal (PBP 21 to 45). The assessee submitted reply with complete facts and requested for cross examination of the said persons and also requested to provide copy of their complete statements (PBP 46 to 52). It is noted that the assessee requested the AO for cross examination of all such persons but the assessee was not provided opportunity of cross examination holding that at this juncture of time, it is an attempt to delay/ halt the proceedings by assuming the instrument of cross examination as a right. It is understandable that for the sake of natural justice, the assessee can exercise his power to cross examine the evidences gathered against her. Hence, the assessee was deprived off to cross examine the persons whose statements / evidences were obtained against her. Thus the ld. AR submitted that subordinate authorities passed the impugned order against principles of natural justice laid down by the Hon’ble Supreme Court in several cases 35 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR wherein third person statements recorded behind a person cannot be used without allowing cross examination for which the ld. AR relied on following decisions. (i) Andman Timber Industries vs CCE (127 DTR 241-SC) (ii) CIT vs Sunita Dhaddha (403 ITR 183- SC) He also relied on the decision of Hon’ble Rajasthan High Court in the case of CIT vs Maverick Share Brokers Pvt Ltd. (ITA No. 14/2016 dated 23-03-2017). The ld. AR further submitted that ld. CIT(A) followed the judgement in the case of State of Jammu Kashmir vs Bakshi Ghulam Mohammed (1967) AIR 122 (SC)in his order which is wrongly applied to deny the request (Reply clause 4(iv) page 50 of the Paper Book) for cross examination of the witness due to specific provision in the relevant which restrained the cross examination. Another judgemnet dated 8- 03-2019 of Hon’ble Delhi High Court in case of Udit Kalara (Appeal No. 220/2019 ) referred by the ld. CIT(A) in his order is not binding precedent as statements were recorded in presence of the assessee. Thus, the Hon’ble Court held that no question of law arises. It is also noted that the ld. CIT(A) dismissed the appeal of the assessee on the basis of Hon’ble Delhi High Court Judgement in the case of Suman Poddar (supra) as precedence of Hon’ble Apex Court. To this effect, the ld. AR submitted that SLP preferred against Delhi High Court Judgement in Suman Poddar case before the Hon’ble Apex Court and the petition dismissed at the admission stage i.e. limine saying that Counsel could not raise any 36 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR question of law. As per Article 141, the order of Hon’ble Supreme Court in the case of Suman Poddar is not binding precedent for which the ld. AR relied on following case laws. (i) State of Manipur & Other vs Thingujam Bregam (AIR 1996 SC 224 Para 9). (ii) Collector of Customs, Bombay vs Elephanta Oil Industries (AIR 2003 SC 1455, Para 15) (iii) Union of India vs Jaipal Singh (AIR 2004 SC 1005 para 3) The ld AR submitted that judgement of Hon’ble Rajasthan High Court and ITAT, Jaipur Bench referred by the assessee are binding precedent in similar facts of the case. (i) PCIT vs Pramod Jain and Other (Appeal No. 209/2018, 212/2018l, 214/2018, 515/2018, decided by judgement dated 24-07-2019 (PBPB 112 to 118). (ii) Commr. Of Income Tax vs Smt. Pooja Agarwal, Jaipur (Appeal No. 2385/2011 and 603/2011 judgement dated 11-09-2017 (PBP 119 to 124) ITAT Jaipur Bench (i) Pramod Jain vs DCIT, Circle-3, Jaipur (Appeal No. 368 to 372) judgement dated 30-01-2018 (PBP No. 126-157) (ii) Vivek Agarwal vs ITO, Ward 1(3), Jaipur (Appeal No. 292/2017 dated 6-04-2018 – PBP No. 158-171) 37 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR The ld. AR further submitted that ld. CIT(A) has referred the decision of Hon’ble Supreme Court in the case of Sumati Dayal vs CIT, 214 ITR 801 (horse race lotteries ticket) based on theory of probabilities but the theory of probability wrongly applied in case of the assesseee on the basis of pre-arranged transactions in the penny stock companies scrips and rigged the prices accordingly. It is worthwhile to mention that the equity market is under control and supervision of SEBI, price of scrip is not in control of the assessee or any individual person. The stock market is completely based on probabilities of market political scenario, trend of market, fiscal policy, stability of government speculation, global trend of market etc. (PBP 50). Theory of probability of gain or loss is always there but it may not be pre-arranged as the market is based completely on electronic system. The SEBI suspended only trading of 26 scrips out of the above said 58 scrips and only 11 scrips prices were found rigged. Sunrise Asian Ltd. (Scrip Code 506615) was not included in these scrips whose shares assessee had purchased on 01-04- 2012.It is also noted that no cogent evidence against the assessee has been found by the lower authorities and all the payments were routed through banking channel by using cheque. In this case, it is found that the enquiries were conducted by the DCIT at Kolkata and the statements were recorded at the back of the assessee. The assessee was deprived off to cross examine the witnesses. It is also noted that no any cogent material to show that the assessee has brought back his own 38 ITA NO.56/JP/2022 SMT SITA DEVI AGARWAL VS ITO, WARD 4(1), JAIPUR unaccounted income in cash. In view of the above deliberations, facts and circumstances of the case, the Bench finds that the ld. CIT(A) is not justified in dismissing the appeal of the assessee by confirming the above additions (supra), hence, the Bench delete the additions made by the lower authorities by allowing the appeal of the assessee. 3.0 In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 18 /10/2022. Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 18 /10/2022 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Sita Devi Agarwal, Jaipur 2. izR;FkhZ@ The Respondent- The ITO, Ward 4 (1),Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 56/JP/2022) vkns'kkuqlkj@ By order, Asstt. Registrar