M/S SHAILESH JAIN HUF, MUMBAI V. ITO 19 (3)(3), MUMBAI

ITA 6068/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4884 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 25-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Assessee Lawyers: SANJAY N KAP ADIA
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Question of law; Tangible material; Wrong claim; Corroborative evidences; Third party statement; Accommodation entries; Onus to prove; Penny stocks; Set aside; Audi alteram partem; Capital Gains
• Section: 69C; 143(3); 133A; 260A; 191; 73; 13; 22; 147; 131; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G, BENCH MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.6068/M/2019 ( ASSESSMENT YEAR: 2014-15 ) M/S. SHAILESH JAIN HUF, 2405, PANCHRATNA, OPERA HOUSE, MAMA PARMANAND MARG, CHARNI ROAD, MUMBAI-400 004 VS. ITO 19(3)(3), 2 ND FLOOR, MATRU MANDIR BLDG., GRANT ROAD, MUMBAI-400 007 PAN/GIR NO. AAIHS3182H ( APPELLANT ) .. ( RESPONDENT ) ITA NO.7064/M/2019 ( ASSESSMENT YEAR: 2015-16 ) SMT. KRITIKA RAJENDRA JAIN, 2405, PANCHRATNA, OPERA HOUSE, MAMA PARMANAND MARG, CHARNI ROAD, MUMBAI-400 004 VS. ITO 19(3)(3), 2 ND FLOOR, MATRU MANDIR BLDG., GRANT ROAD, MUMBAI-400 007 PAN/GIR NO. AGSPJ9797K (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI SANJAY N. KAPADIA, AR REVENUE BY SHRI T.S. KHALSA, DR DATE OF HEARING 04/0 2 /202 1 DATE OF PRONOUNCEME NT 16 / 02 /2021 / O R D E R PER RAJESH KUMAR (A.M) : THE PRESENT APPEALS BY TWO DIFFERENT ASSESSEES HAVE BEEN PREFERRED AGAINST THE ORDER DATED 22.08.2019 & 20.0 9.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 2 REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EARS 2014-15 & 2015-16 RESPECTIVELY. ITA NO.6068/M/2019 A.Y. 2014-15 2. THIS APPEAL IS ARGUED AS LEAD CASE AND IS BEING TAKEN FOR ADJUDICATION ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE HONBLE CIT(A) ERRED IN UPHOLDING THE ASSESSING OFFICERS A CTION OF REOPENING OF THE COMPLETED ASSESSMENT UNDER SECTION. 147 OF THE IT A CT 1961 AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISION OF INCOME TAX ACT AND RULES MADE THERE UNDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONBLE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.1,86,6 4,374/- MADE TO THE RETURNED INCOME BY TREATING GENUINE LTCG EARNED ON PURCHASE AND SALE OF SHARES CLAIMED AS EXEMPT UNDER SECTION 10(38) OF TH E IT ACT AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE IT ACT, 1961 AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT AND RULES MADE THERE UNDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONBLE CIT(A) ERRED IN UPHOLDING ADDITION OF RS.3,73,287/- MADE TO THE RETURNED INCOME BY WRONGLY ASSUMING THAT COMMISSION HAS BEEN PAID TO EARN LTCG AND THE REASON ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT AND RULES MADE THERE U NDER. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALT ER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HE ARING. 3. WE ARE FIRST ADJUDICATING THE GROUND NO.2. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE ORDER OF LD. C IT(A) UPHOLDING THE ADDITION OF RS.1,86,64,374/- BY LD. C IT(A) WHICH WAS MADE BY THE AO UNDER SECTION 68 OF THE ACT BY REJECTING THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM C APITAL GAIN UNDER SECTION 10(38) OF THE ACT ON SALE OF SHARES. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 30.06.2014 DECLARING AN INCOME OF RS.8,19 ,650/- BY CLAIMING RS.1,86,04,374/- AS EXEMPT U/S 10(38) OF T HE ACT IN RESPECT OF LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES OF ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 3 M/S. FOUR K ANIMATION LTD. ON THE BASIS OF INFORMA TION FROM KOLKATA INVESTIGATION WING THAT THE ASSESSEE IS A B ENEFICIARY OF LONG TERM CAPITAL GAIN ON SALE OF PENNY STOCKS WHIC H ARE SUSPICIOUS AND BOGUS AS REVEALED DURING INVESTIGATION/SEARCHES ON VARIOUS OPERATORS, BROKER S, EXIT PROVIDERS ETC. ACCORDINGLY, THE CASE OF THE ASSESS EE WAS REOPENED UNDER SECTION 147 OF THE ACT BY ISSUING NO TICE UNDER SECTION 148 DATED 15.09.2016 WHICH WAS COMPLIED WIT H BY THE ASSESSEE BY STATING THAT THE RETURN FILED ON 30.06. 2014 MAY KINDLY BE TREATED AS FILED IN RESPONSE TO NOTICE UN DER SECTION 148 ACT. ACCORDINGLY, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS ,THE AO CALLED UPON THE ASSESSEE TO FUR NISH THE DETAILS/DOCUMENTS IN RESPECT OF CLAIM OF LONG TERM CAPITAL GAIN OF RS.1,86,04,374/-CLAIMED UNDER SECTION 10(38) OF THE ACT. THE ASSESSEE APPLIED AND BOUGHT 20,000 SHARES AT RS .3 EACH IN M/S. FOUR K ANIMATION LTD. WHICH WERE ALLOTTED TO THE ASSESSEE ON 07.12.2012. THESE SHARES WERE TRANSFERR ED AND CREDITED IN THE D-MAT ACCOUNT OF THE ASSESSEE ON 0 1.05.2012. THEREAFTER, THE SHARES OF RS.10 EACH WERE SPLIT INT O 10 SHARES OF FACE VALUE OF RS.1 EACH AND ACCORDINGLY THE ASSESSE E WAS ALLOTTED 2,00,000 EQUITY SHARES IN LIEU OF 20,000 S HARES ORIGINALLY ALLOTTED TO THE ASSESSEE. THE ASSESSEE SOLD THESE 2,00,000 SHARES DURING THE YEAR FOR A CONSIDERATIO N OF RS. 1,86,64,374/-AND EARNED LONG TERM CAPITAL GAIN OF R S. 1,87,04,374/- AND CLAIMED THE GAIN ON THE SAID SHAR ES AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE AO DI SCUSSED THE MODUS OPERANDI IN DETAIL AS TO HOW THESE SHARES WER E SOLD. THE AO OBSERVED THAT THE FUNDAMENTALS OF THE SAID COMPA NY WERE VERY WEEK AND FINALLY TREATED THE SAID GAIN AS BOGU S. THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 4 ASSESSEE PRODUCED THE FOLLOWING CORROBORATING EVID ENCES BEFORE THE AO IN SUPPORT OF ITS CLAIM OF EXEMPTION UNDER S ECTION 10(38) ON LONG TERM CAPITAL GAIN ON SALE OF SHARES: I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHA RES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT FINALLY, THE AO, AFTER REJECTING THE VARIOUS CONTE NTIONS AND SUBMISSIONS OF THE ASSESSEE AND IN A DETAILED FINDI NG RECORDED IN THE ASSESSMENT ORDER, CAME TO THE CONCLUSION TH AT THE ASSESSEE HAS ALLEGEDLY OBTAINED LONG TERM CAPITAL G AIN BY PRE- ARRANGED AND WELL ORGANIZED TRADING IN THE SHARES O F M/S. FOUR K ANIMATION LTD. AND ACCORDINGLY REJECTED THE CLA IM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT RESULTING INTO AN ADDITION OF ENTIRE SALES CONSIDERATION OF RS.1,86,6 4,374/- TO THE INCOME OF THE ASSESSEE IN ASSESSMENT FRAMED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, 1961 VIDE ORDER DATE D 31.12.2017. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD. CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASS ESSEE AFTER TAKING INTO ACCOUNT THE DETAILS/EXPLANATIONS SUBMI TTED BY THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 5.7 CONCLUSION 5.7.1 THE FACTS OF THE CASE ARE THAT THE APPELLANT FILED THE RETURN OF INCOME FOR THE A.Y. 2014-15 ON 30.06.2014 WHEREIN LONG TERM CAPITA L GAIN EXEMPT U/S 10(38) WAS MADE FOR RS.1,86,04,374/-. THE LD. AO ASSESSED THE TOTAL INCOME AT RS. 1,98,57,310/- AGAINST THE RETURNED INCOME OF RS. 8, 19,650/-. ADDITION OF RS. 1,86,64,374/- WAS MADE IN RESPECT OF SALE PROCEEDS OF SHARES U/S 68 AND RS. 3,73,287- IN RESPECT OF COMMISSION PAID ON SALE OF SHARES U/S 69 OF THE INCOME TAX ACT, 1961. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 5 5.7.2 THE APPELLANT HAD PURCHASED 20,000 SHARES OF M/S PINE ANIMATION LTD. ON 15.03.2013, IN AN OFF MARKET TRANSACTION, @ RS.3/-P ER SHARE FOR A TOTAL CONSIDERATION OF RS.60,000/-. PAYMENT FOR THE PURCH ASES WAS MADE BY CHEQUE. QUANTITY OF SHARES INCREASED FROM 20,000 TO 2,00,00 0 SHARES DUE TO STOCK SPLIT . DEMAT FOR THE SAID PURCHASES TOOK PLACE ON 21.05.20 13. 5.7.3 THE APPELLANT SOLD 200000 SHARES BETWEEN THE PERIOD 20.01. 2014 TO 11.02.2014 AT AN AVERAGE RATE OF RS. 93.15 PER SHAR E, FOR NET SALE CONSIDERATION OF RS. 1,86,64,374/- ON BSE AND THE SALE CONSIDERATION WAS RECEIVED BY CHEQUE. THE DEMAT ACCOUNT OF APPELLANT IN HDFC BANK AT PP 29 OF THE PAPERBOOK REVEALS THAT 200000 SHARES OF PINE ANIMATION LTD. WAS DEBITED IN JANUARY 2014 THE LAST ONE BEING 22.01.2014 - THIS IS STRANGE AS THE LAST SALE TOOK PLACE ON 17.02.2014. THESE ARE PLACED AT ANNEXURE. 5.7.4 IN VIEW OF THE AFORESAID FACTS, THE PURCHASE OF THE SHARES IS HELD TO BE BOGUS/SHAM TRANSACTION. THIS TRANSACTION OF PURCHAS E IS AN OFF - MARKET TRANSACTION. THE SALE IS DEBITED IN THE DEMAT ACCOU NT PRIOR TO THE DATE OF SALE WHICH IS PURPORTEDLY THROUGH THE STOCK EXCHANGE. TH ERE IS A SPECTACULAR GAIN IN PRICE FROM RS. 3/-PER SHARE TO RS. 93/-PER SHARE. T HIS CHALLENGES THE TEST OF HUMAN PROBABILITY. 5.7.5 THE HON'BLE SUPREME COURT IN THE CASE OF SUMA TI DAYAL (214 ITR 801 SC ) AND DURGA PRASAD MORE ((1971) 82 ITR 540 SC ) HAS HELD THAT THE APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AND THAT THE TAXING AUTHORITIE S ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY A ND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILIT IES. RELIANCE IS FURTHER PLACED ON THE DECISIONS CITED IN PARA 5 SUPRA. IN THIS CAS E, THE SURROUNDING CIRCUMSTANCES, AS DETAILED ABOVE, ESTABLISH THAT THE PURCHASE IS N OT REAL. THUS, THE ENTIRE TRANSACTION IS A SHAM TRANSACTION AND THE ACTION OF THE LD AO IN HOLDING THE TRANSACTION TO BE BOGUS IS UPHELD. 5.7.6 THELD.AO HAS ADDED RS.1,86,64,374/- BEING SAL E PROCEEDS OF THE SALE OF SHARES OF M/S PINE ANIMATION LTD. WHICH WAS HELD TO BE SHAM TRANSACTION, AGAINST WHICH THE APPELLANT HAD CLAIMED LONG TERM CAPITAL G AIN CLAIMED AS EXEMPT U/S 10(38]. ADDITION OF RS.3,73,287/- U/S 69C OF THE AC T, BEING 2% COMMISSION PAID FOR THE ACCOMMODATION ENTRIES IS ALSO HELD TO BE REASON ABLE AND IS UPHELD. THEREFORE, THE ACTION OF THE LD. AO IS UPHELD AND THE GROUNDS OF APPEAL 1 AND 2 ARE DISMISSED. 5.8 GROUND OF APPEAL NO. 3 IS WITH RESPECT TO LEVY OF PENALTY U/S 271(L)(C}. LEVY OF PENALTY IS CONSEQUENTIAL IN NATURE AND IS THE DISCR ETION OF THE AO. THIS GROUND OF APPEAL BEING PREMATURE IS NOT ADJUDICATED UPON AND IS DISMISSED. 5.9 GROUND OF APPEAL NO. 4 IS GENERAL IN NATUR E AND IS THEREFORE NOT ADJUDICATED UPON. 6. IN THE RESULT, FOR THE STATISTICAL PURPOS ES, THE APPEAL FILED FOR THE A.Y. 2014- 15 IS TREATED AS DISMISSED. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 6 6. THE LD. A.R. SUBMITTED THAT ALL THE CONDITIONS F OR CLAIMING EXEMPTION U/S 10(38) OF THE ACT ARE FULLY SATISFIED BY THE ASSESSEE WHILE CLAIMING THE EXEMPTION IN THE INCOME TAX RETURN FOR THE RELEVANT ASSESSMENT YEAR UNDER APPEAL. THE DATE OF PURCHASE/ALLOTMENT OF EQUITY SHARES, MODE OF PAYMEN T OF BY ACCOUNT PAYEE CHEQUES ONLY, PERIOD OF HOLDING, DATE S OF SALES OF EQUITY SHARES THROUGH THE ONLINE SCREEN BASED TRADI NG ON THE BOLT PLATFORM OF STOCK EXCHANGE, IDENTIFICATIONS AN D DETAILS OF SEBI AND STOCK EXCHANGE REGISTERED REPUTED BROKERS AND STOCK BROKER LTD, TRANSACTION RELATED EXPENSES SUCH AS BR OKERAGE, SERVICE TAX, STT, STAMP DUTY, EXCHANGE AND SEBI TUR NOVER CHARGES ETC ARE ALREADY ON RECORDS OF THE REVENUE AND ALSO FORMS PART OF ASSESSMENT ORDER. THE LD AR SUBMITS T HAT THE LD. AO IN THE IMPUGNED ASSESSMENT ORDER HAS REJECTED TH E CLAIM OF EXEMPTION U/S 10(38) OF THE ACT AND MADE ADDITION O F THE ENTIRE SALE PROCEEDS OF SHARES AS UNEXPLAINED CREDIT U/S 6 8 OF THE ACT, ALLEGING THAT THE APPELLANT HAS ARRANGED BOGUS LTCG BY TRADING IN PENNY STOCK COMPANY ON THE BASIS OF :I) INVESTI GATION REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA; II) ALLEGED BOGUS LTCG RESULTING FROM STEEP MOVEMENT OF SHARE PRICES ETC DETAILED IN THE ASSESSMENT ORDER.; III) STATEMENTS RECORDED BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA OF V ARIOUS PARTIES. THE LD AR SUBMITS THAT IN ESSENCE THE ENTIRE ADDIT ION IS BASED ON PREPONDERANCE OF POSSIBILITIES, CIRCUMSTANTIAL E VIDENCES AND NOT BASED ON JUSTIFIABLE/CLINCHING EVIDENCES, HUMAN CONDUCT IN GENERAL AND NOT SPECIFIC FINDINGS OR ALLEGATIONS I N RELATION TO THE ASSESSEE. THE LD AR SUBMITTED THAT THERE ARE S EVERAL JUDICIAL PRONOUNCEMENTS OF ITAT AND HIGH COURTS WHE REIN IT ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 7 HAS BEEN CATEGORICALLY HELD THAT ADDITION BASED ON SUCH GENERAL HYPOTHESIS IS WRONG AND CAN NOT BE SUSTAINED. 6.1. THE LD AR ALSO CONTENDED THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND ALSO IN APPELLATE PROCEE DINGS BEFORE CIT(A), THE APPELLANT FILED ALL DOCUMENTS F OR ESTABLISHING BONAFIDE AND GENUINENESS OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT. THEREFORE, THE DENIAL OF CLAIM OF EXEMPTIO N MADE BY THE LD. AO IGNORING THE RELEVANT AND FACTUAL DOCUMENTAR Y EVIDENCES FILED BY THE APPELLANT IS ABSOLUTELY IMPR OPER AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY . 6.2. THE LD AR, WHILE REFERRING TO THE ASSESSMENT O RDER, SUBMITS THAT NONE OF THE DESCRIPTIONS, ALLEGATIONS , OBSERVATIONS, FINDINGS, STATEMENTS REPRODUCED ETC I N THE IMPUGNED ORDER OF AO ARE RELEVANT OR HAVING ANY CO GENT, COLLABORATIVE, IDENTIFIABLE OR CLINCHING TO THE LTC G REALIZED BY THE APPELLANT. THE LD AR SUBMITS THAT THE APPELLAN T HAD NEVER TRANSACTED WITH ANY OPERATOR OR SUCH INTERMEDIARY I N THE PROCESS OF CARRYING OUT INVESTMENTS AND FURTHER THA T THE ALLEGED OPERATORS AND THEIR RECORDS DO NOT IN ANY MANNER ME NTION ANY CONNECTION WITH APPELLANT. THE LD AR SUBMITS THAT T HE SHARES WERE DULY ALLOTTED TO THE APPELLANT AND WERE RECORD ED INTO THE D-MAT ACCOUNT UPON SUCH PURCHASE/ALLOTMENT. SHARES WERE SOLD ON STOCK EXCHANGE THROUGH REGULAR REGISTERED B ROKERS OF ASSESSEE UNDER SCREEN BASED TRADING WHERE THE SELLE R AND BUYER OF SHARES ARE WHOLLY UNAWARE OF THE IDENTITY OF THE OTHER PERSON. STTS WERE PAID AT THE TIME OF SALE OF SHARES AND PR OCEEDS WERE RECEIVED INTO BANK ACCOUNTS OF THE ASSESSEE ONLY TH ROUGH PROPER BANKING CHANNEL. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 8 6.3. THE LD AR SUBMITS THAT BASED ON INQUIRY AND I NVESTIGATION BY INVESTIGATION WING OF THE DEPTT., THE AO HAS SUR MISED THAT ASSESSEE ROUTED HIS BLACK MONEY WITHOUT ESTABLISHIN G ANY MONEY TRAIL. THE LD AR ARGUED THAT THE LD. AO HAS HOPELESSLY FAILED TO ESTABLISH THAT THE ASSESSEE HAS PAID HIS UNACCOUNTED MONEY TO ANY OF THE PARTIES REFERRED BY THE LD. AO IN THE IMPUGNED AO. NONE OF THE REPLIES TO THE QUESTIONS O F SUCH PARTIES INDICATES THAT THEY HAVE RECEIVED ANY UNACC OUNTED MONEY FROM THE ASSESSEE AT THE TIME OF SELLING OF T HESE EQUITY SHARES BY THE ASSESSEE. THE FINDINGS OF THE INVESTI GATION WING OF THE REVENUE ARE GENERAL IN NATURE AND IT IS BAS ICALLY A STUDY REPORT AND NOT SPECIFICALLY MENTIONING WHICH CASES WERE INVESTIGATED. THE LD AR ARGUES THAT NOWHERE IN THE ASSESSMENT ORDER, THE AO HAS ESTABLISHED ANY LINKAGE BETWEEN T HE REPORTS OF THE INVESTIGATION WING AND ASSESSEE'S TRANSACTIO NS. MOREOVER THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGAT ION REPORT WHICH WAS RELIED BY THE AO. THE AR STRONGLY ARGUE D THAT THIS IS A FATAL AND INCURABLE MISTAKE ON THE PART OF THE AO AND CAN NOT BE RECTIFIED AS RELIANCE ON SUCH INVESTIGATION REPORT, WITHOUT CONFRONTING THE ASSESSEE WITH THE SAME, RENDERS THE ASSESSMENT FRAMED AS BAD IN LAW. THE LD AR IN DEFEN SE OF HIS ARGUMENTS RELIED ON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF ADAMINE CONSTRUCTION PVT. LTD. 99 TA XMANN 45 WHEREIN WHILE DISMISSING THE APPEAL, THE HONBLE C OURT HAS REFERRED TO OBSERVATIONS OF DELHI HC THAT WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE REPORT RECEIVED AND DID NOT MAKE THE NECESSARY FURTHER ENQUIRIES SUCH AS INTO THE B ANK ACCOUNTS OR OTHER PARTICULARS AVAILABLE WITH HIM BUT RATHER BASED THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 9 ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONS IDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE O NUS INITIALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH W ERE NOT SUITABLY ENQUIRED INTO BY THE AO. 6.4. THE LD AR SUBMITS THAT THE LD. AO PLACED RELIA NCE ON STATEMENTS OF SEVERAL THIRD PARTIES WITHOUT PROVIDI NG OPPORTUNITIES FOR CROSS EXAMINATION WHICH IS CONTR ARY TO THE DECISION OF HONBLE SUPREME COURT IN M/S ANDAMAN TI MBER INDUSTRIES V/S CCE (CA NO.4228 OF 2006) WHEREIN IT W AS HELD THAT NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY WHEREAS THE STATEMEN T OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY IN AS MU CH AS IT AMOUNTS TO VIOLATION OF PRINCIPAL OF NATURAL JUSTIC E BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE WHOL E BASIS OF MAKING THE ADDITION IS THIRD PARTY STATEMENT WITHOU T THERE BEING ANY TANGIBLE MATERIAL. THE LD. AR SUBMITS THA T IT IS TRITE LAW THAT ADDITIONS MERELY ON THE BASIS OF SUSPICION , CONJECTURES OR SURMISES COULD NOT BE SUSTAINED IN THE EYES OF L AW AS HELD BY HONBLE SUPREME COURT IN OMAR SALAY MOHAMED SAIT V/ S CIT (1959 37 ITR 151). THE LD AR SUBMITTED THAT THE SUS PICION HOWEVER STRONG COULD NOT PARTAKE THE CHARACTER OF L EGAL EVIDENCE AS HELD BY HONBLE SUPREME COURT IN UMACHA RAN SHAW & BROS. V/S CIT (1959 37 ITR 271). 6.5. THE LD AR SUBMITS THAT MOVEMENT IN PRICES OF S HARES IS GOVERNED BY SEVERAL FACTORS WITHOUT THERE BEING ANY NEXUS TO THE PROJECTS, PROJECTION ETC AND THIS FACT GETS CLE ARLY ESTABLISHED IF ONE REFERS TO THE PRESENT MOVEMENT IN SHARES OF SEVERAL ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 10 COMPANIES. THE LD. AO HAS FAILED TO ESTABLISH ANY L INK TO THE PROCESS OF RIGGING AND MANIPULATING OF PRICES OF SH ARES IN CONNIVANCE WITH PARTIES WHOSE NAMES ARE MENTIONED I N THE IMPUGNED ASSESSMENT ORDERS. 6.6. THE LD AR ALSO ARGUES THAT THE PROVISIONS OF S ECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE A NY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF AN ASSES SEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION A BOUT THE NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASS ESSEE IS NOT SATISFACTORY IN THE OPINION OF THE AO, THEN SUM CRE DITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR U/S 68 OF T HE ACT WHICH IS NOT THE CASE OF THE ASSESSEE. THE ASSESSEE HAS R ECEIVED CONSIDERATION FROM SALE OF SHARES ON WHICH HE HAS M ADE LTCG AND FURNISHED ALL EVIDENCES BEFORE THE AUTHORITIES BELOW. THE LD AR RELIED HEAVILY ON THE DECISION OF THE COORDINAT E BENCH IN THE CASE OF SHRI KUNAL DEDHIA ITA NO. 3893/MUM/2019. TH E LD AR ALSO RELIED ON THE FOLLOWING DECISIONS WHEREIN THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT: A. SHRI VIJAYRATTAN BALKRISHAN MITTAL VS DCIT (ITA NO. 3429/MUM/2019) (MUMBAI ITAT) B. SHRI KUNAL DEDHIA VS DCIT (ITA NO. 3893/MUM/2019) ( MUMBAI ITAT) C. MUKESH B SHARMA VS ITO (ITA NO. 6249/MUM/2018) (MUM BAI ITAT) 6.7. THE LD AR ALSO DISTINGUISHED THE DECISION RELI ED UPON BY THE LD. AO AND LD. CIT(A). 6.8. FINALLY, THE LD AR PRAYED BEFORE THE BENCH TH AT IN VIEW OF THE FACTS AND MERITS AND DECISIONS AS DISCUSSED ABO VE THE , THE GROUND NO. 2 MAY KINDLY BE ALLOWED. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 11 7. PER CONTRA, THE LD DR STRONGLY REBUTTED THE ARGU MENTS AS MADE BY THE LD AR BY SUBMITTING THAT THE LTCG IS NO THING BUT OWN MONEY ROUTED INTO THE BOOKS THROUGH ACCOMMODATI ON ENTRIES IN THE FORM OF SALES CONSIDERATION FROM SAL ES OF PENNY STOCK WHICH WAS PART OF A ORGANIZED RACKET IN WHIC H SEVERAL BROKERS/EXIT PROVIDERS WERE INVOLVED AS HAS BEEN BR OUGHT TO LIGHT BY THE SEARCH OPERATION BY INVESTIGATION WING OF THE DEPTT. IT HAS BEEN FOUND THAT THE VALUE OF SCRIP WAS GRADUALLY RAISED SUBSTANTIALLY WITHIN A PERIOD OF ABOUT ONE YEAR AND THE SHARES WERE SOLD THROUGH A SET O F EXIT PROVIDERS WHO MANIPULATED AND BOOK E D HUGE LOS SES . IT IS GATHERED THAT INITIALLY NATIONWIDE SEARCHES WERE CARRIED OUT BY INVESTIGATION WING, KOLKATA OF THE INCOME TAX DEPARTMENT IN DECEMBER 2014 , DURING THE COURSE OF WHICH IT WAS FOUND THAT VARIOUS PERSONS HAD RECEIVED ENTRIES OF LONG TERM CAPITAL GAINS THROUGH RIGGIN G OF SH ARES OF SMALL LISTED COMPANIES AND THE NAME OF THE PR ESE N T ASSESSEE PROMINENTLY APPEARED THEREIN. DURING THE C OURSE OF S EARCH IT WAS ACCEPTED BY THE STOCK BROKERS THAT R E LE VA NT COMPANIES WE R E BOGUS C OMPANIES (JAMA KHARCHI COMPA NIES ) A ND TH A T T H EY WER E BEING USED ONLY FOR PROVIDING ACCOMMOD A TI ON ENTR I E S . STATEMENTS OF VARIOUS ENTRY OPERATORS, DIR E CTORS OF COMPANIES WERE ALSO RECORDED WHEREIN TH E Y HAD A C CEPTED THAT TH E SE C O M PAN I ES WERE BEING USED FOR PROVIDING BOGUS LONG TERM CAPI T AL GAINS. TH E SE FACTS HAVE BEEN ELABORATELY DISCUSSED BY THE CIT(A), AND ALSO BY TH E AO IN THEIR RESPECTIVE ORDERS , WHICH AR E THE SUB J ECT MATTER OF THE PRESENT APPEAL. THE LD ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 12 DR EVEN REFERS TO THE SEBI REPORT 18.11.2019 AND SUBMITTED THAT THE SHARE AS WAS PURCHASED AND SOLD BY THE ASSESSEE WAS HELD TO BE RIGGED BY THE OPERATORS /EXIT PROVIDERS. THE LD DR TAKES US THROUGH VARIOUS FINDI NGS OF THE SEBI AND SUBMITTED THAT THE SHARES PRICES WERE CLREARLY RIGGED BY THE OPERATORS IN AN ORGANIZED MA NNER ON THE STOCK EXCHANGE SO THAT UNDUE BOGUS GAINS ARE REALIZED IN FAVOUR OF THE SELLERS INCLUDING THE ASS ESSEE. 8. IN THE REJOINDER, THE LD AR SUBMITTED THAT SEBI ORDER HAS NOTHING TO DO WITH THE LONG TERM CAPITAL GAIN E ARNED BY THE ASSESSEE. THE LD AR SUBMITTED THAT SEBI IS A FORUM WHICH REGULATES THE MARKETS SO THAT THE INTER EST OF THE INVESTORS ARE PROTECTED AND IN NO WAY GOES INTO THE ISSUE OF BOGUS OR NON BOGUS CAPITAL GAIN. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THIS CASE THE ASSESSEE HAS APPLIED FOR 20,000 EQUITY SHARES OF RS.3 EACH OF M/S. FOUR K ANIMATION LTD. IN THE PREFERENTIAL ALLOTMENT FOR A CONSIDERATION OF RS.60,000/- WHICH WERE ALLOTTED ON 7.12.2012. TH ESE SHARES WERE CREDITED IN THE D-,MAT ACCOUNT OF THE ASSESSE ON 01.05.2012. THEREAFTER, THE SHARES WERE SPLIT IN T HE RATIO OF 1:10 I.E. 10 SHARES WERE ALLOTTED FOR EVERY ONE SH ARE HELD AND ACCORDINGLY THE ASSESSEE WAS ALLOTTED 2,00,000 EQUI TY SHARES IN LIEU OF 20,000 EQUITY SHARES. THE ASSESSEE SOLD TH ESE 2,00,000 SHARES DURING THE YEAR FOR A CONSIDERATION OF RS. 1 ,86,64,674 AND CLAIMED THE RESULTANT GAIN ON THE SALE OF SAID SHARES OF RS. 1,86,04,374/-AS EXEMPT UNDER SECTION 10(38) OF THE ACT. WE NOTE THAT THE ASSESSEE HAS INVESTED IN THESE SHARES BY MAKING ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 13 A PAYMENT THROUGH ACCOUNT PAYEE CHEQUES FROM THE RE GULAR BANK ACCOUNT OF THE ASSESSEE AND THESE WERE HELD IN D-MAT ACCOUNT BEFORE THE DATE OF SALE AND AFTER BEING HEL D FOR MORE THAN 12 MONTHS THESE SHARES WERE SOLD THROUGH THE R ECOGNIZED STOCK EXCHANGE THROUGH THE REGISTERED BROKERS AS ST ATED ABOVE THEREBY MAKING A LONG TERM CAPITAL GAIN OF RS.1,86, 04,374/-. NOW THE ISSUE BEFORE US IS WHETHER THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT IS CORRECT OR NOT. WE ALSO NOTE THAT THE COMPANY M/S. FOUR K ANIMATION LTD. IN WHICH THE ASSESSEE INVESTED MONEY AND EARNED LONG TERM CAPITA L GAIN OF RS.1,86,04,374/- IS A LISTED COMPANY ON THE STOCK E XCHANGE AND SUBJECTED TO VARIOUS RULES AND REGULATIONS AND COMPLIANCES WHICH HAS TO BE COMPLIED WITH BEFORE MA KING ANY ALLOTMENT TO THE APPLICANT UNDER PREFERENTIAL ALLOT MENT PROCESS. WE HAVE ALSO EXAMINED THE VARIOUS DOCUMENTS FILED B Y THE ASSESSEE IN THE PAPER BOOK REGARDING DATE OF APPLIC ATION FOR PREFERENTIAL ALLOTMENT, ALLOTMENT OF EQUITY SHARES, MODE OF PAYMENT OF SHARES THROUGH ACCOUNT PAYEE CHEQUE, PER IOD OF HOLDING AND SALES OF THESE SHARES THROUGH ONLINE SC REEN BASED TRADING ON BOLT PLATFORM OF STOCK EXCHANGE AND ALSO THE PROOF OF EXPENSES INCURRED BY THE ASSESSEE BY WAY OF BROKERA GE, SERVICE TAX, STT, STAMP DUTY, EXCHANGE AND SEBI TURNOVER CH ARGES ETC. THE ASSESSEE HAS FILED ALL THESE PROOFS BEFOR E THE AO AS WELL AS THE LD. CIT(A) AS HAS BEEN STATED HEREINABO VE AND ARE BEING REPRODUCED FOR THE SAKE OF CONVENIENCE. I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHA RES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 14 VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE BY DISBELIEVING ALL THE ABOVE DOCUMENTS WHICH ARE A TH IRD PARTY DOCUMENTS AND TREATED THE SALE OF SHARES AS UNEXPLA INED CASH CREDIT UNDER SECTION 68 OF THE ACT ON THE GROUND TH AT ASSESSEE HAS EARNED THIS LONG TERM CAPITAL GAIN BY TRADING I N PENNY STOCK COMPANY AND RELIED HEAVILY ON THE INVESTIGATI ON REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA, UPWARD MOVEMENT OF SHARE PRICES, STATEMENTS RECORDED BY THE DIRECTO RATE OF INVESTIGATION WING, KOLKATA OF VARIOUS OPERATORS/EX IT PROVIDERS. THUS WE NOTE THAT AO HAS RELIED MAINLY ON THE STATE MENT OF THIRD PARTIES AND CIRCUMSTANTIAL EVIDENCES AND NO S UBSTANTIVE AND SPECIFIC MATERIAL WAS BROUGHT ON RECORD TO PROV E THESE ALLEGATIONS. SIMILARLY LD. CIT(A) HAS REPRODUCED TH E ENTIRE ORDER OF AO AND UPHELD THE SAME BY HOLDING THAT ASS ESSEE WAS BENEFICIARY OF ACCOMMODATION RACKET AND DOUBTED ONL Y THE MANIFOLD INCREASE IN THE SHARE PRICE BY REJECTING T HE FACTS ON RECORD AND VARIOUS EVIDENCES CORROBORATING THOSE F ACTS. THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS AS STATED HEREINABOVE TO CORROBORATE THE CLAIM UNDER SECTION 10(38) OF THE ACT. WE NOTE THAT ASSESSEE HAS FURNISHED ALL T HE DETAILS QUA BANK ACCOUNTS, D-MAT AND TRADING ACCOUNT, PROCE SS OF PREFERENTIAL ALLOTMENT AND THE PERSON THROUGH WHOM THE INVESTMENTS WERE MADE AND ALSO THE CONTRACT NOTE QU A THE SALE OF SHARES ON THE RECOGNIZED STOCK EXCHANGE THROUGH REGISTERED STOCK BROKERS. WE ALSO NOTE THAT IN THE INVESTIGAT ION CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION WING, KOLKA TA AND ALSO IN THE STATEMENTS RECORDED OF VARIOUS INDIVIDUALS A S STATED HEREINABOVE. WE FIND THAT NOWHERE THE ASSESSEES N AME ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 15 FIGURED NOR EVIDENCES WERE FOUND DURING THE COURSE OF SEARCH AND THE ENTIRE ALLEGATIONS WERE BASED UPON THE SURM ISES AND CONJUNCTURES. THE SHARES WERE DULY ALLOTTED TO THE ASSESSEE AND WERE RECORDED IN THE D-MAT ACCOUNT AND THEREAFT ER WERE SOLD ON THE BOMBAY STOCK EXCHANGE THROUGH THE REGIS TERED BROKER AND SCREEN BASED TRADING WHERE THE BUYER AND SELLER OF THE SHARES ARE NOT AWARE OF EACH OTHER AND THE FACT THAT THE CONSIDERATION WAS PAID AND RECEIVED THROUGH BANKING CHANNELS. MOREOVER, THE AUTHORITIES BELOW HAVE FAI LED TO ESTABLISH THE MONEY TRAIL INVOLVED IN THE TRANSACTI ON AND HAS ONLY GUESSED THAT ASSESSEE MIGHT HAVE PAID HIS OWN MONEY TO ROUTE THE SAME INTO BOOKS OF ACCOUNTS. THUS WE NOTE THAT THE FINDING OF THE AO IN DISCUSSING THE MODUS OPERANDI OF THE SCAM AND ALSO DISCUSSED VARIOUS STATEMENTS OF THE EXIT P ROVIDERS IS ONLY GENERAL IN NATURE WHICH NOWHERE STATE THE NAME OF THE ASSESSEE. THE AO HAS ALSO FAILED TO ESTABLISH A LI NK AMONG THESE REPORTS, STATEMENTS AND THE INVESTMENT MADE B Y THE ASSESSEE AND THEREFORE THE ADDITION MADE CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DEC ISION OF THE HONBLE APEX COURT IN THE CASE OF ADAMINE CONSTRUCT ION PVT. LTD. 99 TAXMAN 45 WHEREIN WHILE DISMISSING THE APPE AL OF THE REVENUE HAS REFERRED TO THE FOLLOWING OBSERVATION O F THE HONBLE DELHI HIGH COURT. WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE RE PORT RECEIVED AND DID NOT MAKE THE NECESSARY FURTHER ENQUIRIES - SUCH AS INTO THE BANK ACCOUNTS OR OTHER PARTICULARS AVAILABLE WITH HIM BU T RATHER RECEIVED THE ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONSIDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE O NUS INITIALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH WERE N OT SUITABLY ENQUIRED INTO BY THE AO. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 16 9.1. FURTHER, WE NOTE THAT THE AO HAS RELIED ON TH E STATEMENT OF HIS THIRD PARTIES WITHOUT AFFORDING ANY REASONAB LE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THOSE PARTIES WHICH IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTI CE AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF ANDAM AN TIMBER INDUSTRIES VS. CCE (CA) NO.4228 OF 2006 WHEREIN IT WAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS EXAMINE THE WIT NESS BY ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF 6 W ITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS NULLIT Y IN AS MUCH AS WHICH AMOUNTS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. BESIDES THE ADDITION MERELY ON THE BASIS OF SUSPICI ON, CONJUNCTURE AND SURMISES CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF HON BLE APEX COURT IN THE CASE OF OMAR SALAY MOHAMED SAIT V/S CI T (1959) 37 ITR 151(SC). THE HONBLE APEX COURT IN THE CASE OF UMACHARAN SHAW & BROS. VS CIT (1959 37 ITR 271) HAS HELD THAT SUSPICION HOW SO FAR STRONG COULD NOT TAKE THE CHARACTER OF LEGAL EVIDENCE. THUS WE NOTE THAT NONE OF THE PART IES ALLEGED BY THE REVENUE SUCH AS BROKER, OPERATOR, DIRECTORS, EX IT PROVIDERS ETC. WHOSE STATEMENTS WERE RECORDED BY THE DIRECTOR ATE OF INVESTIGATION WING, KOLKATA STATED THE NAME OF THE APPELLANT. THE CASE OF THE ASSESSEE IS SUPPORTED BY A SERIES O F DECISIONS AS HAS BEEN RELIED UPON BY THE LD. COUNSEL OF THE A SSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE US AS UNDER : (A) IN THE CASE OF KUNAL DEDHIA VS. DCIT ITA NO.3893/M/2019 A.Y. 2014-15 & ORS. ORDER DATED 31.0 7.2020 THE BENCH OBSERVED AS UNDER: ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 17 22. THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUN TS OF AN ASSESSEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION ABOUT NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY IN THE OPINION OF THE AC, THEN SUM CREDITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR. IN CASE, ANY SUM FOUND CREDITED IN ANY FINAN CIAL YEAR, THE ASSESSEE IS REQUIRED TO PROVE, THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITOR. IN THIS CASE, ALTHOUGH THE AO HAS BROUGHT SUM RECEIVED TOWARDS SALE OF SHARES AS UNEXPLAINED CREDIT, BUT THE SAME-NEEDS TO BE EXAMINED WITH REFERENCE TO FIRST TWO ASPECTS OF SECTION 68 OF THE ACT, BEIN G THE IDENTITY AND GENUINENESS OF THE TRANSACTION AND THE OTHER ASPECT BEING CREDIT WORTHINESS IS STRICTLY NOT NECESSARY, BECAUSE THE SUM RECEIVED TOWARDS SAL E OF SHARES IS NEITHER A LOAN NOR A CREDIT. THEREFORE, THE TRANSACTION IS REQUIRE D TO BE TESTED UNDER FIRST TWO LIMBS, I.E. THE IDENTITY AND THE GENUINENESS OF THE TRANSACTION. TO PROVE IDENTITY OF SUM RECEIVED TOWARDS SALE OF SHARES , THE ASSESSEE HAS FILED COMPLETE DETAILS OF AMOUNT RECEIVED FROM THE BRO KER WHO FACILITATE TRANSFER OF SHARES INCLUDING, CONTRACT NOTE ISSUED BY THE BROKE R FOR SALE OF SHARES IN BSE, LEDGER POLIO SIGNED BY THE BROKER, CONFIRMATION FRO M THE BROKER. IN FACT, THERE IS NO DISPUTE WITH REGARD TO IDENTITY OF THE BROKER, B ECAUSE THE BROKER WHO SOLD SHARES FOR THE ASSESSEE WAS A REGISTERED BROKER WIT H BSE/NSE, IN SO FAR AS GENUINENESS OF TRANSACTION, TRANSFER OF SHARES IS M ADE THROUGH DEMAT FORMAT IN BSE PLATFORM. THERE IS NO LINK OR NEXUS BETWEEN THE BUYER OF SHARES AND THE ASSESSEE. ALTHOUGH, THE AO, LINKED SALE OF SHARES T O SO CALLED EXIT PROVIDERS FROM WHOM THE ASSESSEE HAD INITIALLY PURCHASED SH ARES, BUT SAID TRANSACTION WAS DONE ALMOST TWO YEAR LATER. THE ASSESSES HAS PAID STT ON TRANSFER OF SHARES. THE SHARES HAVE BEEN TRANSFERRED TO THE BUY ER AFTER PAYMENT OF APPLICABLE STAMP- DUTY AND THE SHARE TRANSFER AGENT ENDORSED THE SALE. THE SALE PROCEEDS HAVE BEEN PAID THOROUGH BANK. THE SALE H AS BEEN MADE ON THE PREVAILING QUOTED RATE IN STOCK EXCHANGE ON THE DAT E OF SALE. AS REGARDS ALLEGATION OF THE AO REGARDING JACKING OF SHARES PRICE THROUGH GROUP OF PERSONS INVOLVED IN THE ALLEGED SCAM, WE FIND THAT ALTHOUGH S EBI HAS SUSPENDED TRADING PARTICULAR SCRIPT IN BSE/NSE PENDING ENQUIRY, BUT A FTER ENQUIRY SUSPENSION WAS REVOKED AND ONLY AFTER THE SCRIPT, WAS AGAIN STA RTS TRADING IN EXCHANGES, THE ASSESSEE HAS PURCHASED SHARES. FROM THE ABOVE, IT I S VERY CLEAR THAT THE OBSERVATIONS OF THE AO IN HIS ASSESSMENT ORDER ON T HE BASIS OF REPORT OF INVESTIGATION WING, KOLKATA IS A GENERAL OBSER VATION OF MODUS OPERANDI OF CERTAIN BROKERS MAY BE INVOLVED IN ALLEGED SCAM OF LTCG, BUT IT CANNOT BE A CONCLUSIVE EVIDENCE TO DRAW AN ADVERSE INFERENCE AG AINST THE ASSESSEE OF HAVING BENEFITED FROM SO CALLED ALLEGED SCARN. NO DOUBT, A N ALLEGED SCAM MAY HAVE TAKEN PLACE. BUT, IT HAS TO BE SEEN WHETHER THE ASSESSEE IS PART OF AN ALLEGED SCAM AND HE HAD ANY DIRECT OR INDIRECT ROLE IN ALLEGED SCAM. UNLESS, THE EVIDENCES IN THE POSSESSION OF THE AO DIRECTLY OR INDIRECTLY LINKED TO THE ASSESSEE, IT IS DIFFICULT TO IMPLICATE THE ASSESSEE IN THE ALLEGED SCAM. THIS IS BECAUSE, SUSPICION HOWEVER STRONG, CANNOT TAKE PLACE OF EVIDENCE AS HELD BY TH E HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW & BROS VS. CIT(1959) 37 ITR 271(SC). IN OUR CONSIDERED VIEW, ON THE BASIS SUSPICION, MODUS OPERAND!, PREPONDERANCE OF HUMAN PROBABILITIES, THE CLAIM OF ASSESSEE CANNOT BE DI SCARDED, UNLESS SPECIFIC EVIDENCES ARE BROUGHT ON RECORD TO CONTROVERT VOLUM INOUS EVIDENCES FILED BY THE ASSESSEE. THIS VIEW IS FORTIFIED BY THE DECISION OF HON'BLE SUPREME COURT IN THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 18 CASE OF OMAN SALAY MOHAMED SAIT VS. CIT (1959) 37 I TR 151(SC> WHERE IT WAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SUSPIC ION AND CONJECTURES. IN THE CASE OF CIT VS. DAULAT RAM RAWATMUIL (1973) 87 ITR 349 (SC) IT WAS HELD THAT THE ONUS TO PROVE THAT APPARENT IS NOT REAL IS ON THE P ERSON WHO CLAIMS IT TO BE SO. (B) IN THE CASE OF VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT ITA NO.3429/M/2019 & ORS. ORDER DATED 01.10.2019, THE C O- ORDINATE BENCH HAS HELD UNDER SIMILAR FACTS BY FOLL OWING VARIOUS DECISIONS OF THE APEX COURT AND HONBLE BOM BAY HIGH COURT THAT ADDITION MADE WHILE REJECTING THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT BE DELETED VIDE PARA NO.30 TO 37 OF THE SAID DECISION. (C) IN THE CASE OF MUKESH B. SHARMA VS. ITO ITA NO.6249/M/2018 A.Y. 2014-15 ORDER DATED 29.05.2019 THE SCIP INVOLVED WAS OF THE SAME COMPANY AND THE ADDIT ION WAS DELETED BY THE CO-ORDINATE BENCH BY OBSERVING AND H OLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE PRIMAR Y FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITER ATED FOR THE SAKE OF BREVITY. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS WITH R EGARD TO PURCHASE OF SHARES :- A) COPY OF RELEVANT EXTRACT OF BANK STATEMENT REFLECTI NG THE PAYMENT OF RS 30 LACS MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUE TO THE COMPANY DIRECTLY AND SOURCE THEREOF ALONG WITH ALLOTMENT LETTER ISSUED BY THE S AID COMPANY (I.E GIFL) AND COPY OF SHARE CERTIFICATE ISSUED BY GIFL TO THE ASSESSEE ON 12.6.2012. THESE DOCUMENTS ARE ENCLOSED IN PAGES 71 TO 73 OF PAPER BOOK. B) DEMAT ACCOUNT HELD WITH NKGSB CO-OPERATIVE BANK LIM ITED REFLECTING CREDIT OF SHARES PURCHASED (ENCLOSED IN PAGE 154 OF PAPER BOO K). C) COPY OF APPROVAL LETTER FROM GIFL. D) COPY OF ALLOTMENT LETTER FROM GIFL FOR SHARES ALLOT TED TO THE ASSESSEE. E) COPY OF SHARE CERTIFICATE ISSUED BY GIFL. F) VARIOUS EVENTS REPORTED BY GIFL TO BSE. 6.1. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS W ITH REGARD TO SALE OF SHARES:- A) COPY OF DEMAT STATEMENT REFLECTING THE SALE OF SHAR ES. B) COPIES OF CONTRACT NOTES ISSUED BY BOTH THE BROKERS FOR SALE OF SHARES. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 19 C) COPY OF HOLDING STATEMENT FOR FINANCIAL YEARS 2012- 13 AND 2013-14. D) PRICE CHART OF GIFL FROM THE DATE OF PURCHASE OF SH ARES TILL THE RECENT PERIOD. E) COPY OF RELEVANT EXTRACT OF BANK STATEMENT OF THE A SSESSEE REFLECTING THE SALE PROCEEDS RECEIVED FROM THE BROKER AND CREDITED TO T HE BANK ACCOUNT. 6.2 WE FIND THAT THE ASSESSEE PLEADED THAT IN AN ON LINE PLATFORM, THERE WOULD BE NO NEXUS BETWEEN THE PURCHASERS AND THE SELLER A ND THE DELIVERY OF SHARES AND PAYMENTS WOULD BE MADE THROUGH THEIR RESPECTIVE STO CK BROKERS. HENCE THE LD AO OUGHT TO HAVE SUMMONED THE ASSESSEES BROKERS TO EX AMINE THE AUTHENTICITY OF THE SALE OF SHARES OF GIFL AND THE AMOUNT RECEIVED ON S ALE OF SHARES. WE FIND THAT THE LD AR ALSO PLACED EVIDENCES ON RECORD TO PROVE THAT TH E SAID COMPANY GIFL IS STILL LISTED IN THE STOCK EXCHANGE AND SHARES OF THIS COMPANY AR E BEING TRADED AND SEBI HAD NOT PASSED ANY ADVERSE ORDER AGAINST THE SAID COMPANY. WE FIND THAT THE DETAILS OF REVENUE AND PROFITS OF GIFL FOR VARIOUS YEARS ARE A S UNDER:- FINANCIAL YEAR ENDING REVENUE PROFIT 31.3.2012 191 LACS 7.97 LACS 31.3.2013 1515.58 LACS 105.13 LACS 31.3.2014 2487 LACS 161 LACS 31.3.2015 3836 LACS 76 ACS 6.3. WE FIND THAT THE LD AO HAD PLACED RELIANCE ON CERTAIN STATEMENTS RECORDED BY THE INVESTIGATION WING OF KOLKATA INCOME TAX DEP ARTMENT DURING SOME SURVEY PROCEEDINGS CONDUCTED IN THIRD PARTY CASES. WE FIND THAT IN NONE OF THOSE STATEMENTS, THE NAME OF THE ASSESSEE OR THE NAME OF THE BROKERS THROUGH WHOM ASSESSEE HAD TRANSACTED WERE MENTIONED. WE ALSO FIN D THAT THERE IS NO MENTION OF ANY CONNIVANCE ON THE PART OF THE ASSESSEE WITH THE SHARE BROKER AND STOCK EXCHANGE TO LAUNDER THE UNACCOUNTED MONIES OF THE ASSESSEE A ND BRING IT BACK IN THE FORM OF SALE PROCEEDS OF SHARES AND CLAIM EXEMPTION U/S 10( 38) OF THE ACT FOR THE LONG TERM CAPITAL GAINS DERIVED THEREON. NONE OF THE PARTIES ON WHOM SURVEY ACTIONS WERE CONDUCTED IN KOLKATA WERE RELATED TO ASSESSEE OR TH E BROKERS IN ANY MANNER WHATSOEVER. WE FIND THAT THE VARIOUS PURCHASE AND S ALE DETAILS TOGETHER WITH THE SUPPORTING EVIDENCES WERE NOT CONTROVERTED BY THE R EVENUE BEFORE US. EVEN THE CROSS EXAMINATION OF THE PARTIES MENTIONED IN THE S HOW CAUSE NOTICE ISSUED TO THE ASSESSEE BY THE LD AO WERE SOUGHT BY THE ASSESSEE A ND THE SAME WERE REFUSED BY THE LD AO . WE FIND THAT THE LD AO HAD ALSO PLACED RELI ANCE ON THE ORDER PASSED BY SEBI WHILE CONCLUDING THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN THE FORM OF SALE OF SHARES AS SHAM AND BOGUS. FROM THE PERUSAL OF TH E SEBI ORDER DATED 25.8.2016 IN THE CASE OF FIRST FINANCIAL SERVICES LTD, WE FIND T HAT FROM THE EXTRACTS THEREON, THAT IT WAS STATED THAT M/S GIFL WAS INVOLVED IN PROVIDING EXIT TO THE SELLERS OF EQUITY SHARES OF FIRST FINANCIAL SERVICES LTD AND NO WHERE STATED THAT THIS COMPANY WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF CAPITAL GAINS BY ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 20 TRANSACTING ITS OWN SHARES THROUGH THE ALLEGED BOGU S OPERATORS. WE ALSO FIND THAT THE SEBI HAD PASSED ON ORDER DATED 8.1.2018 IN THE CASE OF GIFL, WHEREIN IT WAS FOUND THAT THE NAME OF THE ASSESSEE HEREIN OR THE BROKERS THROUGH WHOM THE ASSESSEE TRANSACTED WERE NOT EVEN INCLUDED IN THE SAID ORDER AS PARTIES AGAINST WHOM ANY ADVERSE INFERENCE / FINDINGS WERE FOUND IN RESPECT OF VIOLATION OF PROVISIONS OF SEBI. WE FIND THAT SEBI HAD ISSUED A SHOW CAUSE NOTICE VI DE REFERENCE SEBI/EAD- 12/SM/EE/693/25/2018 DATED 8.1.2018 WHICH ARE ENCLO SED IN PAGES 252 TO 266 OF THE PAPER BOOK. IN PAGES 257 AND 258 OF THE PAPER BOOK, THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED BY SEBI IS LISTED OU T. IN THE ENTIRE LIST, NEITHER THE NAME OF THE ASSESSEE NOR HIS LBROKERS WERE INCLUDED . LATER THERE WAS ANOTHER SHOW CAUSE NOTICE VIDE REFERENCE EFD/DRA3/OW/NB/6663/201 8 DATED 1.3.2018 WAS ISSUED BY ENFORCEMENT DEPARTMENT OF SEBI MENTIONING THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED. EVEN IN THIS LIST, THE NAME OF THE ASSESSEE OR HIS BROKER WAS NOT INCLUDED BY SEBI. HENCE IT COULD BE SAFELY CONCLUDED THAT SEBI DID NOT ALLEGE ANY WRONG DOING ON THE PART OF THE ASSES SEE OR HIS BROKERS WITH REGARD TO CARRYING OUT TRANSACTIONS IN SALE OF SHARES OF GIFL IN OPEN MARKET IN ONLINE PLATFORM. IN THIS SUBSEQUENT SHOW CAUSE NOTICE DATED 1.3.2018 , THE SEBI ALSO TAKES RECORDS THE FACT OF ISSUANCE OF SHARES ON PREFERENTIAL ALLOTMEN T BASIS ON 12.6.2012 BY GIFL TO VARIOUS PARTIES (WHICH INCLUDES THE ASSESSEE ALSO T HOUGH NOT NAMED IN THE SEBI SHOW CAUSE NOTICE). IN THIS SHOW CAUSE NOTICE ALSO, THE SEBI ONLY ACCUSED NOTICE NO. 1 TO 7 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS, TO HAVE ENGAGED IN MANIPULATION OF PRICE O F THE SCRIP OF GIFL. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED THAT NOTICE NOS. 13 TO 46 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESS EE OR HIS BROKERS, TO HAVE SOLD THE SHARES AT INFLATED PRICE AND BOOKED SUBSTANTIAL PROFIT. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED NOTICES NOS. 8 TO 12 (WH ICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS) WERE PART OF THE MANIP ULATIVE SCHEME TO MAKE PREFERENTIAL ALLOTMENT AND MANIPULATE THE PRICE, TH ROUGH, ENTITIES CONNECTED TO COMPANY AND PROMOTER, TO BENEFIT PROMOTER, PROMOTER RELATED ENTITIES AND CONNECTED PREFERENTIAL ALLOTTEES. IT IS NOT THE CAS E OF THE REVENUE THAT THE ASSESSEE OR HIS BROKERS WERE EITHER THE PROMOTERS OF GIFL, OR P ROMOTER RELATED ENTITIES OF GIFL OR RELATED TO CONNECTED PREFERENTIAL ALLOTTEES THERE ON. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SEBI HAD NOT FOUND ANY ADVERSE F INDINGS WITH REGARD TO THE ASSESSEE OR HIS REGISTERED SHARE BROKERS VIS A VIS GIFL. HENCE THERE IS ABSOLUTELY NO IOTA OF EVIDENCE LINKING THE ASSESSEE OR THE REGIST ERED BROKERS TO EVEN REMOTELY ALLEGE THAT THEY WERE INVOLVED IN ARTIFICIAL RIGGIN G OF PRICE OF SCRIPS WHICH WERE DEALT BY THE ASSESSEE HEREIN. 6.4 WE FIND THAT THE LD AO HAD STATED THAT GIFL IS A COMPANY OF NO VALUE. THE REVENUE STREAM AND THE PROFITABILITY CHART REPRODUC ED HEREINABOVE DOES NOT SUPPORT THE CASE OF THE LD AO. MOREOVER, THE STATUS REPORTE D BY THE LD AO ABOUT GIFL WAS IN ASST YEAR 2008-09 WHICH IS NEITHER THE YEAR OF P URCHASE OF SHARES BY THE ASSESSEE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 21 NOR THE YEAR OF SALE OF SHARES IN OPEN MARKET. HENC E THOSE FINDINGS ARE TOTALLY IRRELEVANT FOR ADJUDICATION OF THE ISSUE BEFORE US. 6.5. WE FIND THAT THE REVENUE HAD MERELY DISBELIEVE D THE ENTIRE DOCUMENTARY EVIDENCES ON RECORD AND ALLEGED THE SHARE SALE TRAN SACTIONS MADE IN THE OPEN MARKET AS BOGUS BASED ON THE STATEMENTS RECORDED DURING SU RVEY, WHICH DOES NOT HAVE ANY EVIDENTIARY VALUE. RELIANCE IN THIS REGARD IS PLACE D ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF S.KHADER KHAN (2008) 300 ITR 157 (MAD) ASSUMES SIGNIFICANCE, WHEREIN IT WAS HELD THAT :- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EV IDENCE , BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON , WHO MADE IT, TO SHOW IT HAS INCORRECTLY BEEN MADE AND THE PERSON, MAKING THE ST ATEMENT SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT IT DOES NOT SHOW TH E CORRECT STATE OF FACTS. THE MATERIALS FOUND IN THE COURSE OF SURVEY COULD N OT BE THE BASIS FOR MAKING ANY ADDITION IN THE ASSESSMENT. THE WORD MAY USED IN SECTION 133A(3)(III) MAKES IT CLEAR THAT THE MATERIAL COLLECTED AND STATEMENT REC ORDED DURING THE SURVEY U/S 133A OF THE ACT ARE NOT CONCLUSIVE PIECE OF EVIDENCES BY ITSELF. THE AFORESAID DECISION WAS AFFIRMED BY THE HONOURABLE SUPREME COURT IN CIT , S ALEM VS S.KHADER KHAN IN CIVIL APPEAL NO. 13224 OF 2008 & 6747 OF 2012 DATED 20.9. 2012, WHEREIN THEIR LORDSHIPS OF SUPREME COURT HELD AS UNDER:- CIT VS S KHADER KHAN SON REPORTED IN (2012) 25 TAXM ANN.COM 413 (SC) / 210 TAXMAN 248 (SC) AND 254 CTR 228 (SC) HEARD COUNSEL ON BOTH THE SIDES. LEAVE GRANTED. THE CIVIL APPEAL FILED BY THE DEPARTMENT PERTAINS T O ASSESSMENT YEAR 2001- 02. IN VIEW OF THE CONCURRENT FINDINGS OF FACT, THIS CI VIL APPEAL IS DISMISSED. IN ANY CASE, WE FIND THAT THESE STATEMENTS WERE NEV ER SUBJECTED TO ANY CROSS EXAMINATION BY THE ASSESSEE DESPITE THE REQUEST MAD E BY THE ASSESSEE IN THIS REGARD, WHICH HAS BEEN SUMMARILY REJECTED BY THE LD AO. THIS FACT IS ALSO RECORDED BY THE LD AO IN HIS ASSESSMENT ORDER. HENCE IN THE SE CIRCUMSTANCES, WE HOLD THAT NO ADDITION COULD BE MADE MERELY BASED ON THE STATE MENTS RECORDED DURING SURVEY. 6.6. ONE MORE EXCRUCIATING FACTOR WHICH GOES IN FAV OUR OF THE ASSESSEE IS THAT THE ASSESSEE HAD SOLD ONLY 883000 SHARES OUT OF 200 0000 SHARES HELD BY HIM AND THE REMAINING SHARES WERE RETAINED BY THE ASSESSEE. HE NCE THE ALLEGATIONS LEVELED ON THE ASSESSEE THAT ASSESSEE HAD CONVERTED HIS UNACCO UNTED MONEY IN THE FORM OF LONG TERM CAPITAL GAINS CLAIMED AS EXEMPT DOES NOT HOLD WATER . EVEN THESE 883000 SHARES WERE SOLD AFTER HOLDING THE SAME FOR A SUBSTANTIAL MINIMUM PERIOD OF 26 MONTHS BY THE ASSESSEE FROM THE DATE OF ITS PURCHASE. MOREOVE R, WHEN THE PURCHASE OF SHARES MADE BY THE ASSESSEE HAS BEEN ACCEPTED AS GENUINE W HICH WAS DONE IN ASST YEAR 2013-14, THE SALE OF THE VERY SAME SHARES IN PART I N ASST YEAR 2014-15 IN OPEN MARKET AT PREVAILING MARKET PRICES AFTER SUFFERING STT SHO ULD NOT BE DOUBTED . NONE OF THE DOCUMENTS FILED BY THE ASSESSEE WITH REGARD TO PURC HASE AND SALE OF SHARES HAVE BEEN FOUND TO BE DEFICIENT IN ANY MANNER WHATSOEVER BY T HE REVENUE. FROM THE TURNOVER CHART STATED HEREINABOVE, IT COULD BE SEEN THAT THE REVENUE OF GIFL HAD INCREASED FROM RS 191 LACS AS ON 31.3.2012 TO RS 2487 LACS AS ON 31.3.2014. THIS GOES TO PROVE THAT THE PROJECTIONS GIVEN BY THE SAID COMPANY IN I TS INVITATION LETTER TO THE ASSESSEE REQUESTING FOR MAKING PREFERENTIAL APPLICATION OF S HARES HAD PROVED TO BE CORRECT AND CANNOT BE DOUBTED. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 22 6.7. WE FIND THAT THE LD AO HAD FURNISHED CERTAIN L IST OF PARTIES WHO WERE ALLEGED PURCHASERS OF SHARES FROM THE ASSESSEE WHEN IT WAS SOLD IN THE OPEN MARKET BY THE ASSESSEE. THE ASSESSEE HAD PLEADED THAT SINC E THE SHARES WERE SOLD IN THE OPEN MARKET IN ONLINE PLATFORM, HE IS NOT AWARE OF THE N AME OF THE PARTIES AS TO WHO HAD BOUGHT THE SAME IN THE OPEN MARKET. THE LD AO SOUGH T TO ISSUE SUMMONS TO THOSE ALLEGED PURCHASERS OF SHARES U/S 131 OF THE ACT, WH ICH REMAIN UNCOMPLIED BY THOSE PARTIES. BASED ON THIS, THE LD AO HAD DRAWN AN ADVE RSE INFERENCE AGAINST THE ASSESSEE DISREGARDING THE ENTIRE DOCUMENTARY EVIDENCES ON RE CORD AND THE PREVAILING MARKET PRACTICES WITH REGARD TO PURCHASE AND SALE OF SHARE S IN THE OPEN MARKET IN ONLINE PLATFORM. IT IS NOT IN DISPUTE THAT THE ASSESSEE HA D RECEIVED THE SALE PROCEEDS OF SHARES FROM THE REGISTERED BROKER THROUGH THE STOCK EXCHANGE ONLY AND NOT FROM THE ALLEGED PURCHASERS OF SHARES DIRECTLY. MOREOVER, TH E LD AO STATES THAT THE ASSESSEE HAD SOLD THE SHARES AT RS 211.76 PER SHARE WHEREAS THE AVERAGE SALE PRICE OF THE ASSESSEE WAS ONLY RS 89 PER SHARE. 6.8. WE FIND THAT THE LD DR MADE GENERAL SUBMISSION S WITH REGARD TO THE INVESTIGATIONS CARRIED OUT BY KOLKATA INCOME TAX DE PARTMENT AFTER IDENTIFYING 84 SCRIPS TO BE PENNY STOCKS AND THE MODUS OPERANDI AD OPTED BY THOSE SCRIPS WITH THE CONNIVANCE OF VARIOUS ENTRY OPERATORS, BROKERS AND STOCK EXCHANGE. WE FIND THAT THE LD DR WAS NOT SPECIFICALLY ABLE TO CONTROVERT THE D OCUMENTARY EVIDENCES FILED BY THE ASSESSEE FOR PURCHASE AND SALE OF SHARES AND VARIOU S OTHER DOCUMENTS REFERRED TO IN THE PAPER BOOK MORE PARTICULARLY THE SEBI SHOW CAUS E NOTICE AS DETAILED HEREINABOVE, EXCEPT STATING THAT SEBI SHOW CAUSE NOTICE WAS ISSU ED IN THE NAME OF GIFL, THE SCRIP IN WHICH ASSESSEE DEALT. THE LD DR ALSO SOUGHT PERMIS SION FROM THE BENCH TO GRANT TIME FOR FILING HIS WRITTEN SUBMISSIONS WITH REGARD TO THE ENTIRE APPEAL. NO SUCH WRITTEN SUBMISSION WAS FILED BY THE LD DR TILL THE DATE OF DICTATION OF THIS ORDER. THE LD DR DREW OUR ATTENTION TO THE STATEMENT RECORDED FRO M THE ASSESSEE BY THE LD AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 19.1 2.2016, THE GIST OF WHICH IS MENTIONED IN PAGE 31 OF ASSESSMENT ORDER. WE HAVE G ONE THROUGH THE SAME AND WE FIND THAT THE ASSESSEE HAD STATED BEFORE THE LD AO THAT HE HAD MADE INVESTMENT IN SHARES OF GIFL WITHOUT LOOKING INTO THE FUNDAMENTAL S OF THE SAID COMPANY AND BASED ON INFORMATION GIVEN BY A FAMILY FRIEND. WE HAVE AL READY SEEN THE DOCUMENTARY EVIDENCES AVAILABLE ON RECORD WHEREIN THE ASSESSEE IN RESPONSE TO AN INVITATION LETTER ISSUED BY GIFL FOR MAKING INVESTMENT IN PREFERENTIA L ALLOTMENT BASIS, HAD ISSUED ACCOUNT PAYEE CHEQUES AND GOT THE SHARES ALLOTTED I N HIS NAME ON PREFERENTIAL ALLOTMENT BASIS. THESE FACTS HAVE ALSO BEEN NOTED B Y SEBI IN THE SECOND SHOW CAUSE NOTICE DATED 1.3.2018 WHICH HAS BEEN DISCUSSED HERE INABOVE. MERELY BECAUSE THE ASSESSEE HIMSELF IS ENGAGED IN INDEPENDENT MANUFACT URING BUSINESS , IT CANNOT BE SAID THAT ALL HIS INVESTMENT DECISIONS WOULD BE PRUDENT AND WOULD BE DONE ONLY AFTER ANALYZING THE ENTIRE FUNDAMENTALS AND FINANCIALS OF THE INVESTEE COMPANY. IT IS IN EVERYBODYS KNOWLEDGE, THAT AN INVESTOR WOULD TRY T O TAKE CALCULATED RISKS BY INVESTING HIS MONEY ON AN UNKNOWN SCRIP BASED ON CE RTAIN INFORMATION FROM FRIENDS, RELATIVES, OR IN SOME STOCK MARKET RELATED WEBSITES AND TAKE A CHANCE. SINCE THE SCRIP PURCHASED BY THE ASSESSEE WAS SHOWING CONSIDERABLE GROWTH FROM THE TIME OF PURCHASE, THE ASSESSEE BEING A GULLIBLE INVESTOR, C ONTINUED TO HOLD IT FOR A PERIOD OF 26 MONTHS AND LATER SOLD IT IN OPEN MARKET IN ONLINE P LATFORM AT PREVAILING MARKET PRICES. 6.9. WE FIND THAT THE CO-ORDINATE BENCH OF KOLKATA TRIBUNAL IN ITA NO.354/KOL/2018 IN SANJEEV GOEL (HUF) VS. ITO DATED 24.08.2018 ON SIMILAR SET OF FACTS AND CIRCUMSTANCES HAD HELD AS FOLLOWS:- ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 23 4. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONS IDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOL D AS FOLLOWS:- 5. IN IDENTICAL CASES, THE SUBMISSION OF THE ASSESSEE, FINDINGS OF THE ASSESSING OFFICER, FINDINGS OF THE LD. CIT(A) AND THE CONCLUS ION OF THE TRIBUNAL HAVE BEEN BROUGHT OUT AS UNDER:- 6. THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY O BSERVING AS UNDER:- I. THE INITIAL ALLOTMENT OF SHARES TO BENEFICIARIES IS GENERALLY DONE THROUGH PREFERENTIAL ALLOTMENT. II. THE MARKET PRICE OF SHARES OF THESE COMPANIES RISE TO VERY HIGH LEVEL WITHIN A SPAN OF ONE YEAR. III. THE TRADING VOLUME OF SHARES DURING THE PERIOD, IN WHICH MANIPULATIONS ARE DONE TO RAISE THE MARKET PRICE, I S EXTREMELY THIN. IV. MOST OF THE PURPORTED INVESTORS ARE RETURNED THEIR INITIAL INVESTMENT AMOUNT IN CASH. ONLY SMALL AMOUNT IS RETAINED BY TH E OPERATOR AS SECURITY. THUS, AN ENQUIRY WOULD REVEAL THAT MOST OF THE CAPI TAL RECEIPTS THROUGH PREFERENTIAL ALLOTMENT OR OTHER MEANS WOULD HAVE FO UND THEIR WAY OUT OF SYSTEM AS CASH. V. MOST OF THESE COMPANIES HAVE NO BUSINESS AT ALL. FE W OF THE COMPANIES WHICH HAVE SOME BUSINESS DO NOT HAVE THE CREDENTIAL S TO JUSTIFY THE SHARP RISE IN MARKET PRICE OF THEIR SHARES. VI. THE SHARP RISE IN MARKET PRICE OF THE SHARES OF THE SE ENTITIES IS NOT SUPPORTED BY FUNDAMENTALS OF THE COMPANY OR ANY OTH ER GENUINE FACTORS. VII. AN ANALYSIS IN RESPECT OF PERSONS INVOLVED IN TRANS ACTIONS APPARENTLY CARRIED OUT IN ORDER TO JACK UP THE SHARE PRICES HA S BEEN DONE IN RESPECT OF 84 COMPANIES. IT HAS BEEN NOTED THAT MANY COMMON PE RSONS/ENTITIES WERE INVOLVED IN TRADING IN MORE THAN 1 LTCG COMPAN IES DURING THE PERIOD WHEN THE SHARES WERE MADE TO RISE WHICH IMPLIES THA T THEY HAD CONTRIBUTED TO SUCH PRICE RISE. VIII. NAMES OF MOST OF THE LTCG COMPANIES ARE CHANGED DUR ING THE PERIOD OF THE SCAM. IX. MOST OF THE COMPANIES SPLIT THE FACE VALUE OF SHARE S [THIS IS PROBABLY DONE TO AVOID THE EYES OF MARKET ANALYSTS]. X. THE VOLUME OF TRADE JUMPS MANIFOLD IMMEDIATELY WHEN THE MARKET PRICES OF SHARES REACH AT OPTIMUM LEVEL SO AS TO RE SULT IN LTCG ASSURED TO THE BENEFICIARIES. THIS MAXIMUM IS REACHED AROUND T HE TIME WHEN THE INITIAL ALLOTTEES HAVE HELD THE SHARES FOR ONE YEAR OR LITTLE MORE AND THUS, THEIR GAIN ON SALE OF SUCH SHARES WOULD BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX. XI. AN ANALYSIS OF SHARE BUYERS OF SOME OF LTCG COMPANI ES WAS DONE TO SEE IF THERE WERE COMMON PERSONS/ENTITIES INVOLVED IN BUYING THE BOGUS INFLATED SHARES. IT WAS NOTED THAT THERE WERE MANY COMMON BUYERS [WHICH WERE PAPER COMPANIES]. XII. THE PRICES OF THE SHARES FALL VERY SHARPLY AFTER TH E SHARES OF LTCG BENEFICIARIES HAVE BEEN OFF LOADED THROUGH THE PRE- ARRANGED TRANSACTIONS ON THE STOCK EXCHANGE FLOOR/PORTAL TO THE SHORT TER M LOSS SEEKERS OR DUMMY PAPER ENTITIES. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 24 XIII. THE SHARES OF THESE COMPANIES ARE NOT AVAILABLE FOR BUY/SELL TO ANY PERSON OUTSIDE THE SYNDICATE. THIS IS GENERALLY ENS URED BY WAY OF SYNCHRONIZED TRADING BY THE OPERATORS AMONGST THEMS ELVES AND/OR BY UTILIZING THE MECHANISM OF UPPER/LOWER CIRCUIT OF T HE EXCHANGE. 7. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL . 8. THE FIRST APPELLATE AUTHORITY UPHELD THE ORDER OF T HE ASSESSING OFFICER BY GIVING HIS FINDINGS AS FOLLOWS:- A) THE AO HAD PLACED ON RECORD THE ENTIRE GAMUT OF FIN DING AND THERE IS NO FURTHER REQUIREMENT FOR ELABORATION. B) THERE IS DIRECT EVIDENCE TO CLEARLY INDICATE THAT T HE ENTIRE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS MERELY AN ACCOMMODAT ION TAKEN FOR THE PURPOSE OF BOGUS LONG TERM CAPITAL GAINS TO CLAIM E XEMPT INCOME. THE AUTHORITIES SUCH AS SEBI HAVE AFTER INVESTIGATING S UCH ABNORMAL PRICE INCREASE OF CERTAIN STOCKS, SUSPENDED CERTAIN SCRIP S. C) THE SUBMISSIONS OF THE ASSESSEE POINTED OUT TOWARDS ELABORATE DOCUMENTATION SUCH AS : I) APPLICATION OF SHARES. II) ALLOTMENT OF SHARES. III) SHARE CERTIFICATES IV) PAYMENT BY CHEQUES V) FILINGS BEFORE REGISTRAR OF COMPANIES. VI) PROOF OF AMALAGAMATION OF COMPANIES. VII) COPIES OF BANK STATEMENT, VIII) BANK CONTRACT NOTES. IX) DELIVERY INSTRUCTION TO THE BROKER ETC. D) THE ELABORATE PAPER BOOK IS FILED TO STRENGTHEN THE MATTER RELEVANT TO BOGUS CLAIM OF LTCG, AND THIS IS CLEARLY BEEN SCHEM ED AND PRE-PLANNED WITH MALAFIDE INTENTION. THEREFORE, ALL THESE DOCUM ENTS ARE NOT EVIDENCE. E) THE TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOU S. THERE ARE GRAVE DOUBTS IN THE STORY PROPOUNDED BY THE ASSESSEE BEFO RE THE AUTHORITIES BELOW. BANKING DOCUMENTS ARE MERE SELF-SERVING RECI TALS. 9. THEREAFTER HE REFERRED TO A NUMBER OF JUDGMENTS REL ATING TO HUMAN BEHAVIOR AND PREPONDERANCE OF HUMAN PROBABILITIES AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY RELYING ON WHAT HE CALLS RULES OF SUSPICIOUS TRANSACTIONS. 10. THE ASSESSEE IN THIS CASE HAS FILED THE FOLLOWING E VIDENCE BEFORE THE ASSESSING OFFICER IN SUPPORT OF HIS CONTENTIONS:- A) COPIES OF BILLS, EVIDENCING PURCHASE OF SHARES B) COPIES OF CONTRACT NOTES OF SALE OF SHARES C) BANK STATEMENT COPIES D) COPY OF LEDGER A/C OF BROKER E) DEMAT STATEMENT ETC. THE ASSESSING OFFICER HAS JUST RELIED ON GENERAL OB SERVATIONS. NO EVIDENCE WAS CONTROVERTED BY THE ASSESSING OFFICER. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 25 11. THE KOLKATA BENCH OF THE ITAT IN A NUMBER OF DECISI ONS HAVE, ON SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE LIST SOME OF THESE DECISIONS:- SHRI GAUTAM KUMAR PINCHA VS. ITO, ITA NO. 569/KOL/2 017, DT. 15/11/2017 ITO VS. SHRI SHALEEN KHEMANI, ITA NO. 1945/KOL/201 4, DT. 18/10/2017 MAHENDRA KUMAR BAID VS. ACIT, CIRCLE-35; ITA NO. 12 37/KOL/2017; ORDER DT. 18/08/2017 KIRAN KOTHARI HUF VS. ITO, ITA NO. 443/KOL/2017, OR DER DT. 15/11/2017 THE HONBLE JURISDICTIONAL HIGH COURT ON SIMILAR FA CTS, HAD IN THE FOLLOWING CASES, UPHELD THE CLAIM OF THE ASSESSEE:- CIT VS. SHREYASHI GANGULI (ITA NO. 196 OF 2012) (CA L HC) 2012 (9) TMI 1113 CIT VS. RUNGTA PROPERTIES PRIVATE LIMITED (ITA NO. 105 OF 2016) (CAL HC)DT. 08/05/2017 CIT VS. BHAGWATI PRASAD AGARWAL (2009 TMI-34738 (CA L HC) IN ITA NO. 22 OF 2009 DATED 29.04.2009 11. RECENTLY, THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF NAVNEET AGARWAL,-VS- ITO, WARD-35(3), KOLKATA; I.T.A. NO. 2 281/KOL/2017; ASSESSMENT YEAR: 2014-15, WHILE DEALING WITH IDENTICAL ISSUE OF SALE OF SHARE S OF M/S. CRESSENDA SOLUTIONS PVT. LTD., DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING UPON A PLETHORA OF JUDGMENTS OF VARIOUS COU RTS. IT HELD AS FOLLOWS:- 12. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A ) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERAN DI OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FR OM INCOME TAX. ALL THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE A PPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THI S CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVE RTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTI ES IS CONFRONTED TO THE ASSESSES. NO OPPORTUNITY OF CROSS-EXAMINATION OF PE RSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A REPORT FR OM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER, I N SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUID E OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEME NTS, PROBABILITIES, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DUR ING INVESTIGATIONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCL USION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITON WAS PART OF THIS SCAM. TH E CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER IN VOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CA SH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BA NKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 26 EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDE D ETC. HAS TO ALSO BE BROUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEME NT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. O PPORTUNITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF T HE AO RELIES ON ANY STATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN AD DITION. IF ANY MATERIAL OR EVIDENCE IS SOUGHT TO BE RELIED UPON BY THE AO, HE HAS TO CONFRONT THE ASSESSEE WITH SUCH MATERIAL. THE CLAIM OF THE ASSES SEE CANNOT BE REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UN DER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND TH EORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THI RD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PU T BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF TH E ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULAT ED RISK AND HAD GAINED IN THE PROCESS AND THAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EVIDENCE. WHEN A P ERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION B ASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SU GGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE C OURTS OF LAW. 15. IN OUR VIEW MODUS OPERANDI, GENERALISATION, PREPOND ERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR RE JECTING THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RE CORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENC ES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUP REME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 IT R 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMIS ES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA V S. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT H ELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE P ARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRIN GLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 H ELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE L D. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREP ARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER WE DO NOT FIND THAT, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), HAVE B ROUGHT OUT ANY PART OF THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 27 INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE P URPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BRO UGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUS ION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT THE INVESTIGATION WING IS A S EPARATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION W ING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEG ATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER E VIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WI NG AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AG AINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE H ELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATE D. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONS IDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE RE PORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSE D THE SCRIPT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFF ICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTE RED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO P ROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHE RWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACT IONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF L ALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGG LING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY B OATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGH T HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LIC ENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDE R THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE I NASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHI CH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE Y EAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 28 KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE I NFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRA NSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATI ON NOTES,--- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE P ART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES FR OM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE S UM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING TH E YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PRO FITS OF THE APPELLANT IN ITS BUSINESS WAS THE RESULT OF PURE CO NJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE P ROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS E ITHER PERVERSE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TR IBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS . 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT N OT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUA LLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW THE ASSESSING OFFICER HAV ING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION O F THE ASSESSEE WAS A COLLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE E VIDENCES SUBMITTED BY THE ASSESSEE. IN FACT IN THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERI AL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WI NGS OF THE INCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTAN CES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAI D DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART O F THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHARAS HTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P. V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC 1623, HELD THAT THE RULES OF NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVANT EVIDENCE UPON WHICH HE RELIE S, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNI TY OF CROSS- EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 29 SAID OPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEA ESTATE V. WORKMEN, AI R 1963 SC 1719; M/S. KESORAM COTTON MILLS LTD. V. GANGADHAR A ND ORS. ,AIR 1964 SC 708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS. AIR 2009 SC 2448; BIECCO LAWRIE AND ANR. V . STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V. SAROJ KUMAR SINHA AIR 2010 SC 3131). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRA L EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER TH E CENTRAL EXCISE ACT, 1944, CONSIDERED A SIMILAR ISSUE I.E. PERMISSI ON WITH RESPECT TO THE CROSS-EXAMINATION OF A WITNESS. IN THE SAID CAS E, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS-EXAMI NE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOUNTED FOR IN THEIR BOOKS OF A CCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGH T TO CROSS- EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNITY T O SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASON ABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SH OULD BE GIVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGA INST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITN ESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THE PRE VIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVE RNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIV E AND USEFUL CROSS-EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2009 SC 1100, THIS COURT HELD: EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DONE AS REGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PRINCIPLES ANALOGOUS TO TH E PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF N ATURAL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMI NED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CO NSIDER THE ISSUE ON A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON- EXAMINATION. IF THE BASI C PRINCIPLES OF LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEEN A GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUDICIAL REVIEW. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 30 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BE MADE AVAILA BLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL JUSTICE. I N THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MAT TER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATIO N IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATUR AL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX ., KOLKATA-II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS -EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUST ICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED U PON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NO T GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHO RITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT R EJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE AP PELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PR ICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS W ORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESS ES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT W ANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, T HE ADJUDICATING AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAIN TAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEV Y OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID D EALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST I TSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 31 ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COU LD BE THE SUBJECT MATTER OF THE CROSS- EXAMINATION AND MAKE T HE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN E ARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE T RIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING IT S REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 7. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MA TERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY I TS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ON LY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTA HIGH COURT IN THE CASE OF BLB CABLES & CONDUCTORS [ITA NO. 78 OF 2017] DATED 19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BRO KER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGU S, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACT IONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HA VE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CON FIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WIT H THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD T HE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEES APPEAL. [ QUOTED VERBATIM ] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FA CT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FI NDING THAT OFF MARKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXER CISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX A CT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 32 APPEAL. THE APPEAL AND THE STAY PETITION, ACCORDING LY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL [ITA N O. 292/JP/2017] ORDER DATED 06.04.2018 HELD AS UNDER V IDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROV ERT THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CL AIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE H AS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CA PITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF PREM PAL GANDHI [ITA-95-2017 (O&M)] DATED 18.01.2018 AT VIDE PAGE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REP RESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES. IN ITA -18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE AS SESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIA TION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTS WERE ROUTED THROUGH THE B ANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NATIONAL S TOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH T HE ASSESSING OFFICER RELIED UPON IN THE APPEAL WERE NO T PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AN D FOUND THAT THERE WAS NO CO-RELATION BETWEEN THE AMOUNTS S OUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THI S WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO IN DICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDING LY, NO QUESTION OF LAW ARISES. D) THE BENCH D OF KOLKATA ITAT IN THE CASE OF GAUTAM PINCHA [ITA NO.569/KOL/2017] ORDER DATED 15.11.2017 HELD AS UND ER VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XI V) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMP LICATE THE ASSESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRA NTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 33 SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECO RD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT T HE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANI PULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REP ETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDEN CE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACC OUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(3 8) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HEL D: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER IS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALR EADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPR A) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUS ION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPP ORT THE IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFO RESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KIRAN KOTHARI HUF [ ITA NO. 443/KOL/2017 ] ORDER DATED 15.11.2017 HELD VIDE PARA 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE M ATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANT ED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFO RE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT T HE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDE RS OF THE AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE AS SESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHAR ES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETIT ION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACC OUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A ) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM O F THE ASSESSEE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 34 THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING TH E CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE ACT ON THE BASI S OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT H AS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPR A) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. T HE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT TH E IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FAC TS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEED S OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH A OF KOLKATA ITAT IN THE CASE OF SHALEE N KHEMANI [ITA NO. 1945/KOL/2014] ORDER DATED 18.10.2017 HELD AS UNDER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVE RSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWAR RANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESS EE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYE S OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS O F THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERE LY RELIED ON THE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATIO N THAT THE ASSESSEE AND / OR BROKERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD THAT TH E ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTR ACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUI NENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARE S RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDEN CES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF TH E ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH H OF MUMBAI ITAT IN THE CASE OF ARVIND KUMAR JAIN HUF [ITA NO.4682/MUM/2014] ORDER DATED 18.09.2017 H ELD AS UNDER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGAT ION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH TH E ACTIVITY OF THE BROKER. DETAILED FINDING HAS BEEN RECORDED BY C IT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 35 PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FR OM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN , CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THE REFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKE R. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUS E THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HI S ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENU INE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED W ITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF TH E COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONC LUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DE TAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CON TROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON REC ORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF VIVEK MEHTA [ITA NO. 894 OF 2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 HELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSE SSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) REC ORDED A FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTIO N OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THE REOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WE RE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FI NDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUCH FINDIN G OF FACT IS SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LA W AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN T HE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 D ATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION E NTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUM ENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOT ES, DETAILS ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 36 OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THR OUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. T EJU ROHITKUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AS UNDE R: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY A S WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PUR CHASES ALREADY MADE BY THE ASSESSEE FROM RAJ IMPEX WERE DU LY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPEX ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE F ROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO Q UESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE AB OVE JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AN D BASE OUR DECISION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROV ERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCE S, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAIM THAT THE INCOME IN QUESTION IS LONG TERM CAPITAL GAIN FROM SALE OF SHA RES AND HENCE EXEMPT FROM INCOME TAX. 12. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE FACT S AND CIRCUMSTANCES OF THIS CASE ARE SAME AS THE FACTS AND CIRCUMSTANCES O F THE CASES OF NAVNEET AGARWAL (SUPRA), WE DELETE THE ADDITION MADE U/S 68 OF THE ACT, ON ACCOUNT OF SALE OF SHARES IN THE CASE OF BOTH THE ASSESSEES. T HE CONSEQUENTIAL ADDITION U/S 69C IS ALSO DELETED. ACCORDINGLY BOTH THE APPEALS O F THE ASSESSEE ARE ALLOWED. 6.10. IT WOULD BE PERTINENT TO ADDRESS THE CASE LAW RELIED UPON BY THE LD DR BEFORE US ON THE DECISION OF HONBLE BOMBAY HIGH CO URT (NAGPUR BENCH) IN THE CASE OF SANJAY BIMALCHAND JAIN VS PR.CIT (NAGPUR) R EPORTED IN (2018) 89 TAXMANN.COM 196 (BOMBAY) DATED 10.4.2017 ON THE IMP UGNED ISSUE. FROM THE FACTS OF SANJAY BIMALCHAND JAIN SUPRA, WE FIND THAT (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AOS LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASSESSEE ; (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE IN CASH ; (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY TH E SAME ; (IV) THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WERE ALSO THE SAME PERSON ; (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSES SEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIAL FACTS, THE HONBLE BOMBAY HI GH COURT RENDERED THE DECISION IN FAVOUR OF THE REVENUE. NONE OF THESE FACTORS WER E PRESENT IN THE FACTS OF THE ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 37 ASSESSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLU DED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABL E. 6.11. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007 DATED 7.9.2011 HAD HELD AS UNDER:- 5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORDER A LLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES D URING THE YEAR 1999- 2000 AND 2000-2001 WERE DULY RECORDED IN THE BOOKS MAINT AINED BY THE ASSESSEE. THE ITAT HAS RECODED A FINDING THAT THE SOURCE OF F UNDS FOR ACQUISITION OF THE SHARES WAS THE AGRICULTURAL INCOME WHICH WAS DULY O FFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCE D CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE EFFECT THAT THE SHA RES WERE IN-FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES , THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES OUT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. 6. SIMILARLY, THE SALE OF THE SAID SHAERS FOR RS 1,41, 08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT LTD AND M/S SCORPIO MANAGEMENT CONSULTANTS PVT LTD CANNOT BE DISPUTED, BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTO R OF M/S RICHMAND SECURITIES PVT LTD REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S RICHMAND SECURITIE S PVT LTD HELD THAT THE SALE TRANSACTION WAS GENUINE. 7. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFO RE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS 1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCO ME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AND T HE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 6.12. IN VIEW OF THE AFORESAID FINDINGS IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRE CEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD CITA WAS NOT JUSTI FIED IN UPHOLDING THE ACTION OF THE LD AO IN BRINGING THE SALE PROCEEDS OF SHARES O F GIFL IN THE SUM OF RS 7,88,77,854/- AS UNEXPLAINED INCOME OF THE ASSESSEE TREATING THE SAME AS JUST AN ACCOMMODATION ENTRY. CONSEQUENTIALLY, THE ADDITION MADE TOWARDS COMMISSION ON SUCH ACCOMMODATION ENTRY AT THE RATE OF 5% IN TH E SUM OF RS 39,43,898/- IS ALSO HEREBY DIRECTED TO BE DELETED. ACCORDINGLY, TH E GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 38 9.2. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF VARIOUS DECISIONS OF THE CO-ORDINATE B ENCHES AND HONBLE JURISDICTIONAL HIGH COURT, WE ARE NOT IN AG REEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT TH E LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE FROM SALE OF SH ARES IS A NON GENUINE TRANSACTION AND ACCORDINGLY WE SET ASIDE TH E ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SECTION 68 OF THE ACT AND FURTHER DIRECT THE AO TO GRANT EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPEC T OF LONG TERM CAPITAL GAIN. THE GROUND NO. 2 IS ALLOWED. 10. THE ISSUE RAISED IN GROUND NO. 3 IS IN RESPECT OF CONFIRMATION OF ADDITION BY THE CIT(A) OF RS.3,73, 287/- AS MADE BY THE AO TOWARDS COMMISSION @5% OF THE TOTAL TRANSACTION VALUE IS CONSEQUENTIAL TO GROUND NO. 2 WHICH HAVE BEEN ALLOWED BY US. CONSEQUENTLY GROUND NO. 3 IS AL LOWED AND THE AO IS DIRECTED TO DELETE THE ADDITION. 11. SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSE E ON MERITS, THE LEGAL GROUND NO. 1 CHALLENGING THE RE-O PENING OF ASSESSMENT IS NOT BEING ADJUDICATED. 12. IN THE RESULT, ALL THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED. ITA NOS.7064/M/2019 13. THE ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS SIMILAR TO ONE AS DECIDED BY US IN ITA NO. 6068/MUM/2019. T HEREFORE OUR FINDING/ DECISION IN ITA NO. 6068/MUM/2019 WOUL D, ITA NO.6068/M/2019 & ITA NO.7064/M/2019 M/S. SHAILESH JAIN HUF& SMT. KRITIKA RAJENDRA JAIN 39 MUTATIS MUTANDIS, APPLY TO THIS APPEAL AS WELL. ACC ORDINGLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 16/02/2 021 SD/- ( AMARJIT SINGH ) SD/- ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 16/02/2021 KISHORE COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//