Shri Uma Shanker Dhandhania, Kanpur V. Income Tax Officer - 1(5), Kanpur

ITA 681/LKW/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1689 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 25-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Opportunity of being heard; Bonafide belief; Additional evidence; Question of law; Accommodation entries; Tax effect; Penny stocks; Set aside; Capital Gains; Bogus
• Section: 68; 69C; 143(3); 260A; 133(6); 143(1); 143(2); 64; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B LUCKNOW [THROUGH VIRTUAL HEARING] BEFORE SHRI A.D JAIN, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 475 & 681/LKW/2019 A.YS. 2014-15 &2015-16 INCOME TAX OFFICER (1)5, KANPUR VS. UMA SHANKER DHANDHANIA, PRO. M/S. SHRI SHYAM JI, MINERALS, 29/8, KAMLA TOWER, KANPUR PAN AFBPD 0165P (RESPONDENT) (APPELLANT) SHRI RAKESH GARG, ADVOCATE APPELLANT BY SHRI AJAY KUMAR, DR RESPONDENT BY 23/12/2020 DATE OF HEARING 16 /02/2021 DATE OF PRONOUNCEMENT O R D E R PER BENCH: THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. CIT(A) DATED 26.07.2019 AND 18.10.2019 RESPECTIVELY FOR AYS. 2014-15 AND 2015-16. 2. THE ASSESSEE HAS TAKEN SIMILAR GROUNDS IN THESE APPEALS, WHICH INCLUDES BOTH ON LEGAL ISSUES AS WELL AS ON MERITS OF THE CASE. THESE APPEALS WERE HEARD TOGETHER AND THEREFORE FOR THE SAKE OF CONVENIENCE A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. FOR THE SAKE COMPLETENESS, GROUNDS OF APPEAL IN I.T.A. NO. 475 ARE REPRODUCED BELOW: 2 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE NOTICE DATED 22.09.2015 ISSUED U/S 143{2) IS A VALID NOTICE THEREBY UPHOLDING THE ASSESSMENT FRAMED U/S 143(3), WHICH ASSESSMENT IS WITHOUT JURISDICTION, BAD IN LAW AND BE QUASHED. 2. BECAUSE NO NOTICE HAVING BEEN ISSUED U/S 143(2) IN THE EXPLICIT TERMS AS PROVIDED IN SECTION 143(2)(II), THE NOTICE ISSUED FAILS TO VEST JURISDICTION IN AO TO FRAME THE ASSESSMENT U/S 143(3), THE ENTIRE ASSESSMENT FRAMED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS BAD IN LAW AND BE QUASHED. 3. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE SURPLUS OF RS.88,88,529/- ARISING ON SALE OF EQUITY SHARES THAT THE APPELLANT HELD IN M/S. SULABH ENGINEERING AND SERVICES LTD. WAS ON ACCOUNT OF SHAM TRANSACTION AND ON THAT BASIS DENYING THE APPELLANT'S CLAIM FOR EXEMPTION OF RS.88,88,529/- U/S 10(38) OF THE IT. ACT, 1961, WHICH ORDER PASSED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) IS BAD IN LAW, THE DENIAL OF EXEMPTION U/S 10(38) BE ALLOWED. 4. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN OVERLOOKING THE FACTS WHICH ARE AS UNDER: A) THE APPELLANT HAD PURCHASED SHARES FROM SULABH ENGINEERING AND SERVICES LTD., A COMPANY REGISTERED AT STOCK EXCHANGE THROUGH PREFERENTIAL ALLOTMENT IN THE EARLIER YEARS; B) PAYMENT FOR PURCHASE OF SHARES HAD BEEN MADE DIRECTLY TO M/S. SULABH ENGINEERING AND SERVICES LTD. AS THE APPELLANT WAS A PROFESSIONAL ALLOTTEE [WRONGLY MENTIONED IN THE ASSESSMENT ORDER THAT THE PAYMENT HAD BEEN MADE THROUGH BROKERS M/S. ANANT FINANCIAL CONSULTANCY PVT LTD. REGISTERED WITH STOCK EXCHANGE.] C) INVESTMENT SO MADE WAS REFLECTED IN THE STATEMENT OF AFFAIRS OF THE 'APPELLANT' IN THE EARLIER YEAR (IN THE YEAR, OF ACQUISITION AND ONWARD)FOR WHICH 'RETURN' HAD DULY BEEN FILED; D) THE SHARES SO ACQUIRED HELD IN DEMAT ACCOUNT; E) THE SHARES WERE SOLD TO THE COMPANIES THROUGH THE BROKERS; 3 F) THE BROKERS THROUGH WHOM SHARES HAD BEEN SOLD, HAD DULY ACCEPTED SUCH SALES (BY THE 'APPELLANT); G) THE SALE OF SHARES WAS SUPPORTED BY THE BILLS AND CONTRACT NOTES ISSUED BY THE BROKERS AND FURTHER SUPPORTED BY CORRESPONDING MOVEMENT IN DEMAT ACCOUNT; H) THE PRICE ON WHICH SALE CONSIDERATION HAD BEEN REALIZED WAS IN FULL CONFORMITY WITH THE RATES PREVALENT IN THE STOCK EXCHANGE AT THE RELEVANT TIME; I) THE TRANSACTIONS WERE SECURITY TRANSACTION TAX (STT) PAID AND THUS, REQUIREMENT OF CONDITION FOR EXEMPTION AS CONTAINED IN SECTION 10(38) HAD BEEN FULLY COMPLIED WITH; J) IN ADDITION TO PAYMENT OF BROKERAGE, SERVICE TAX HAD ALSO BEEN PAID BY THE 'APPELLANT' THROUGH BILLS ISSUED BY THE BROKERS; K) OTHER MATERIAL, FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT'S CLAIM FOR EXEMPTION UNDER SECTION 10(38)WAS LIABLE TO BE ALLOWED; L) THE AO FAILED TO APPRECIATE THAT THE AMOUNT RECEIVED ON SALE OF SHARES IS NEITHER SALE NOR AN ADVANCE; M) THE AMOUNT RECEIVED, BEING PROPERLY EXPLAINED, NEITHER BEING UNEXPLAINED NOR UNDISCLOSED; THE APPELLANT'S CLAIM FOR EXEMPTION U/S 10(38) BE ALLOWED. 5. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT MERELY BECAUSE THE BUYERS OF SHARES WERE SHELL COMPANIES AS PER THE IMAGINATION OF THE REVENUE, AND BASED ON THE STATEMENTS GIVEN BY THE BROKERS AT THE BACK OF THE APPELLANT, THE APPELLANT'S CLAIM FOR EXEMPTION U/S 10(38) COULD NOT HAVE BEEN DISALLOWED, THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW. 6. BECAUSE THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT THE STATEMENTS OF THE BROKERS RELIED UPON, BOTH BY THE ASSESSING OFFICER AND BY THE CIT(A), RECORDED AT THE BACK OF THE APPELLANT WITHOUT GIVING THE APPELLANT ANY OPPORTUNITY TO CONFRONT THE SAME, 4 THE ADDITIONS MADE ON THE BASIS OF THE SAME AND THE DENIAL OF EXEMPTION U/S 10(38) BOTH ARE BAD IN LAW, THE EXEMPTION CLAIMED BE ALLOWED. 3. AT THE OUTSET, LD. AR SUBMITTED THAT ISSUE INVOLVED IN THESE APPEALS IS DENIAL OF EXEMPTION U/S. 10(38) OF THE ACT WHICH THE ASSESSEE HAD EARNED ON THE SALE OF EQUITY SHARES AFTER HOLDING THEM FOR MORE THAN A YEAR. IT WAS SUBMITTED THAT THE SCRIP INVOLVED IN THESE APPEALS IS M/S SULABH ENGINEERS AND SERVICES LTD. AND INCOME TAX DEPARTMENT ON THE BASIS OF AN INVESTIGATION REPORT BY INVESTIGATION WING HAD HELD GAINS FROM THIS SCRIP AND MANY OTHER SCRIPS AS BOGUS AND HAD THEREFORE MADE THE ADDITIONS BY TREATING THE LONG TERM CAPITAL GAIN AS BOGUS. IT WAS SUBMITTED THAT VARIOUS BENCHES OF THE TRIBUNAL HAS ALREADY ALLOWED RELIEF TO VARIOUS ASSESSEES IN THE CASE OF THIS SCRIP BY HOLDING THE CAPITAL GAIN EARNED BY THE ASSESSEES AS GENUINE. RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS: 1. SMT. SUMAN KOTHARI VS. ITO, IN ITA NO. 2467/KOL/2017, ORDER DATED 10.05.2018. 2. SMT. NAINIMAL JAIN ANITHA VS. ITO, IN ITA NO. 384/KOL/2019 ORDER DATED 18.06.2019. 3. SANJAY KUMAR AGARWAL (HUF) VS. ITO, IN ITA NO. 2378/KOL/2018 ORDER DATED 07.08.2019. 4. VASUDHA JAIN VS. ITO, IN ITA NO. 1018/KOL/2018 ORDER DATED 15.02.2019. 5. DEEPAK KUMAR AGARWAL VS. ACIT IN IT(SS) NO. 125 AND 126/KOL/2018 ORDER DATED 10.05.2019. 4. ARGUING APPEAL FOR ASSESSMENT YEAR 2014-15, THE LD. AR SUBMITTED THAT THE ASSESSEE WAS ALLOTTED SHARES BY THE COMPANY AND THE PAYMENT OF WHICH WAS PAID TO THE COMPANY THROUGH BANKING CHANNELS AND OUR ATTENTION WAS INVITED TO PAPER BOOK PGS. 2 TO 8, WHERE A COPY OF BANK ACCOUNT OF THE ASSESSEE FROM WHERE THE PAYMENT WAS MADE WAS PLACED. OUR SPECIFIC 5 ATTENTION WAS INVITED TO PAPER BOOK PG. 3, WHERE THE PAYMENT WAS REFLECTED TO HAVE BEEN DEBITED TO THE ACCOUNT OF THE ASSESSEE. OUR ATTENTION WAS FURTHER INVITED TO PAPER BOOK PG.1 WHERE A COPY OF ALLOTMENT LETTER OF SHARES TO THE ASSESSEE WAS PLACED WHEREBY THE ASSESSEE WAS ALLOTTED ONE LAC EQUITY SHARES @ 20 PER SHARE. THE LD. AR FURTHER TOOK US TO PAPER BOOK PAGE 25 OF AY 2015-16 WHERE A COPY OF THE DEMAT ACCOUNT OF THE ASSESSEE WAS PLACED AND WHERE TEN LAC SHARES ALLOTTED BY THE COMPANY WERE FOUND CREDITED TO THIS ACCOUNT. IT WAS SUBMITTED THAT ASSESSEE WAS ALLOTTED ONE LAC SHARES OF RS.10/- EACH WHICH WERE SPLIT INTO TEN SHARES FOR ONE SHARE WHICH MADE TEN LAC SHARES OF RS.1/- EACH.THE LD. AR THEN TOOK US TO PAPER BOOK PGS. 9 TO 14, WHERE THE COPY OF CONTRACT NOTES ISSUED BY THE BROKER M/S INDIA INFOLINE LTD. THROUGH WHOM 1,11,700 SHARES WERE SOLD WAS PLACED. WE WERE ALSO TAKEN TO PAPER BOOK PGS. 16 TO 27 WHERE THE BILLS ISSUED BY THE BROKER M/S INDIA INFOLINE LTD. WERE PLACED. IT WAS SUBMITTED THAT PROCEEDS OF SALE OF SUCH SHARES WERE RECEIVED BY THE ASSESSEE THROUGH BANKING CHANNEL AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PGS. 2 TO 8 WHERE A COPY OF BANK ACCOUNT OF THE ASSESSEE WHERE THE PROCEEDS WERE CREDITED WAS PLACED. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, IT WAS SUBMITTED THAT ASSESSEE HAD SUBMITTED ALL THE DOCUMENTS WHICH WERE REQUIRED TO PROVE THAT ASSESSEE DID EARN LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES AND ON WHICH STT AND SERVICE TAX WAS DULY PAID. IT WAS ARGUED THAT THE VARIOUS BENCHES OF TRIBUNAL IN THE ABOVE NOTED CASES HAVE ALLOWED RELIEF TO THE ASSESSEE ON THE BASIS OF SUCH EVIDENCES THEREFORE, THE APPEAL OF THE ASSESSEE MAY ALSO BE ALLOWED FOLLOWING THE ABOVE TRIBUNALS ORDER. 5. ARGUING THE APPEAL IN ITA NO. 681 IT WAS SUBMITTED THAT IN THIS YEAR ALSO THE ASSESSEE HAD EARNED LONG TERM CAPITAL GAIN ON THE SALE OF SAME SCRIP I.E. M/S SULABH ENGINEERING AND SERVICES LTD. AND DURING THIS YEAR 6 30000 SHARES OUT OF THE BALANCE SHARES ORIGINALLY ALLOTTED WERE SOLD AND OUR ATTENTION WAS INVITED TO PAPER BOOK PGS. 11 TO 15, WHERE A COPY OF CONTRACT NOTES ISSUED BY INDIA INFOLINE LTD. WAS PLACED. OUR ATTENTION WAS FURTHER INVITED TO PAPER BOOK PGS. 17 TO 19, WHERE A COPY OF ACCOUNT OF THE BROKER INDIA INFOLINE LTD. WAS PLACED AND WHERE THE PROCEEDS OF SALE OF THE SHARES WAS CREDITED TO THE ACCOUNT OF THE ASSESSEE. OUR FURTHER ATTENTION WAS INVITED TO PAPER BOOK PGS. 2 TO 10 WHERE A COPY OF BANK STATEMENT OF ASSESSEE WAS PLACED AND WHEREIN THE PROCEEDS WERE CREDITED FOR THE SALE OF SUCH SHARES. IT WAS FURTHER SUBMITTED THAT IN THIS YEAR BESIDES THE ISSUE OF LONG TERM CAPITAL GAIN THERE WAS AN ISSUE OF DEPOSIT IN THE BANK ACCOUNT OF THE ASSESSEE. THE LD. AR SUBMITTED THAT SUCH DEPOSITS WERE MADE OUT OF CASH SALE FOR THE PERIOD 01.04.2014 TO 31.03.2015 AND FURTHER SUBMITTED THAT CERTAIN BANK STATEMENTS COULD NOT BE SUBMITTED TO SUBSTANTIATE THE CASH DEPOSITS. THE REASON FOR NON SUBMISSION OF SUCH DOCUMENTS WAS THAT THOUGH ASSESSEE HAD SUBMITTED THESE DOCUMENTS TO HIS COUNSEL BUT HE DID NOT FILE THE SAME. IT WAS SUBMITTED THAT ASSESSEE WAS DEPENDENT ON HIS COUNSEL UNDER A BONAFIDE BELIEF THAT SAME WOULD HAVE BEEN FILED AND HE COULD NOT FOLLOW AS HE WAS SUFFERING FROM CANCER AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGES 52 TO 64 WHERE COPIES OF PRESCRIPTIONS WERE PLACED. THEREFORE, IT WAS PRAYED THAT THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL MAY BE ADMITTED. 6. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE INVESTIGATION DEPARTMENT OF THE INCOME TAX DEPARTMENT HAD CARRIED OUT INVESTIGATION AND HAD FOUND VARIOUS SCRIP WHICH VARIOUS ASSESSEES WERE USING FOR CONVERTING THEIR UNACCOUNTED MONEY INTO ACCOUNTED MONEY AFTER MANAGING LONG TERM CAPITAL GAINS FROM CERTAIN SCRIPS WITH THE HELP OF INTERMEDIARIES. IT WAS SUBMITTED THAT INVESTIGATION WING OF THE DEPARTMENT HAD CARRIED OUT EXTENSIVE INVESTIGATION AFTER RECORDING STATEMENTS OF VARIOUS BROKERS AND 7 SUCH BROKERS HAD ADMITTED THAT SUCH SCRIPS WERE USED FOR PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF LONG TERM CAPITAL GAIN. LD. DR IN THIS RESPECT INVITED OUR ATTENTION TO FINDINGS OF ASSESSING OFFICER AND LD. CIT(A) AND HEAVILY PLACED RELIANCE ON THEM. IT WAS SUBMITTED THAT THE SCRIP ON WHICH THE ASSESSEE EARNED LONG TERM CAPITAL GAIN WAS ALSO MENTIONED IN THAT INVESTIGATION REPORT. IT WAS FURTHER SUBMITTED THAT THE LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE WAS HIS OWN UNACCOUNTED MONEY WHICH HE HAD CONVERTED INTO TAX FREE CAPITAL GAIN WITH THE HELP OF BROKERS AND INTER MEDIATORIES. THEREFORE, THE APPEALS OF THE ASSESSEE SHOULD BE DISMISSED. 7. AS REGARDS FILING OF ADDITIONAL EVIDENCES, THE LD. DR SUBMITTED THAT THESE EVIDENCES ON THE FIRST HAND SHOULD NOT BE ADMITTED AND IF ADMITTED SAME MAY BE SENT BACK TO ASSESSING OFFICER FOR EXAMINATION OF SUCH EVIDENCES. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THERE IS NO DISPUTE BETWEEN THE PARTIES REGARDING THE EVIDENCES WHICH THE ASSESSEE HAD PRODUCED BEFORE THE AUTHORITIES BELOW FOR CLAIMING THAT ASSESSEE INDEED WAS ALLOTTED ONE LAC SHARES @ RS.20/- EACH AND WHICH WERE SOLD PARTLY DURING AY 2014-15 AND PARTLY DURING AY 2015-16. THERE IS ALSO NO DISPUTE REGARDING CONTRACT NOTES ISSUED BY THE BROKERS AND PROCEEDS PAID BY THEM THROUGH BANKING CHANNELS. THE ONLY DISPUTE BETWEEN THE PARTIES IS THAT ASSESSING OFFICER ON THE BASIS OF A REPORT FROM INVESTIGATION WING OF THE DEPARTMENT HAS HELD THE CAPITAL GAIN TO BE BOGUS AND HAS HELD THE AMOUNT OF CAPITAL GAIN AS ASSESSEES OWN MONEY BEING UNACCOUNTED MONEY CONVERTED INTO ACCOUNTED MONEY BY MANAGING THE CAPITAL GAINS. THE ASSESSEE, ON THE OTHER HAND, PRODUCED BEFORE THE AUTHORITIES BELOW EVIDENCES FOR ALLOTMENT OF SHARES AND FOR MAKING PAYMENT TO THE COMPANY DIRECTLY THROUGH BANKING CHANNELS. COPY OF ALLOTMENT LETTER FROM THE COMPANY IS PLACED AT PAPER 8 BOOK PG.1 WHEREBY THE COMPANY HAD ACKNOWLEDGED THE RECEIPT OF RS.20.00 LACS AND HAD ALLOTTED ONE LAC SHARES TO THE ASSESSEE. THE PAYMENT TO THE COMPANY WAS MADE FROM THE BANK ACCOUNT OF THE ASSESSEE, A COPY OF WHICH IS PLACED IN PAPER BOOK PG. 2 TO 8. A PART OF THE SHARES WERE SOLD BY INDIA INFOLINE LTD. IN THE TWO YEARS AND THE CONTRACT NOTES ISSUED BY INDIA INFOLINE ARE PLACED IN PAPER BOOK PGS. 9 TO 14 AND 11 TO 15 IN THE TWO YEARS RESPECTIVELY. COPY OF DEMAT ACCOUNT OF THE ASSESSEE WHERE THE SHARES ALLOTTED BY COMPANY WERE CREDITED AND FROM WHERE THE SHARES WERE SOLD IS PLACED AT PAPER BOOK PGS. 33 TO 40 AND 24 TO 31 RESPECTIVELY IN THE TWO YEARS. THE COPY OF BANK ACCOUNT WHEREIN THE PROCEEDS WERE CREDITED IS PLACED AT PGS. 2 TO 8 AND 2 TO 10 RESPECTIVELY FOR BOTH YEARS. FROM THE CONTRACT NOTES ISSUED BY THE BROKER INDIA INFOLINE LTD. WE FIND THAT ASSESSEE HAD PAID SERVICE TAX AND STT AND SHARES WERE SOLD THROUGH SCREEN BASED TRANSACTIONS WHEREIN THE EXACT TIME AND ORDER NUMBERS ARE MENTIONED. THE COPY OF DEMAT STATEMENT OF ASSESSEE SHOWS CREDIT OF TEN LAC SHARES AND ON SALE OF 1,11,700 DURING THE AY 2014-15 THE BALANCE IS REFLECTED AT 8,88,300 SHARES AS ON 31/03/2014 (PB-26) AND ON SALE OF 30,000 SHARES DURING AY 2015-16, BALANCE SHARES ARE REFLECTED AT 8,58,300 AS ON 31/03/2015 (PB-27). THESE BALANCE SHARES OF 8,58,300 ARE REFLECTED IN THE DEMAT STATEMENTS UPTO 31/03/2019. FROM THE DEMAT STATEMENT, WE FURTHER OBSERVE THAT ASSESSEE WAS HOLDING CERTAIN OTHER SCRIPS ALSO. THE ASSESSEE, THEREFORE, HAD FILED SUFFICIENT EVIDENCES TO PROVE THE GENUINENESS OF THE TRANSACTIONS BUT AUTHORITIES BELOW HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF AN INVESTIGATION REPORT OF THE DEPARTMENT WHEREBY THE SCRIP WAS HELD TO BE PENNY STOCK WHICH WAS BEING USED FOR PROVIDING BOGUS LONG TERM GAINS. WE FIND THAT THE KOLKATA TRIBUNAL IN ITA 2467/KOL/2017, VIDE ORDER DATED 10.5.2018 HAS CONSIDERED A SIMILAR ISSUE OF THE SAME SCRIP M/S SULABH ENGINEERS AND SERVICES LTD. AND HAS ALLOWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 9 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE HAS SUBMITTED BEFORE US THE STATEMENT SHOWING PURCHASES AND SALE OF LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES (PB-1). THE ASSESSEE SUBMITTED ALLOTMENT ADVICE FOR 75,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. (PB-2). THE ASSESSEE SUBMITTED THE BANK DETAIL FOR PAYMENT (VIDE PB-3 TO 5). THE ASSESSEE SUBMITTED BEFORE US NSDL STATEMENT SHOWING PREFERENTIAL ALLOTMENT OF 75000 SHARES OF M/S SULABH ENGINEERING AND SERVICES LTD. WE NOTE THAT THE ASSESSEE ALSO SUBMITTED EXTRACT OF RESOLUTION PASSED AND SCREENSHOT OF MONEY CONTROL SHOWING SPLITTING OF FACE VALUE FROM RS.10 TO RS. 1 OF M/S SULABH ENGINEERING AND SERVICES LTD. (PB-11 TO 13). THE ASSESSEE SUBMITTED THE NSDL STATEMENT SHOWING ALLOTMENT OF 7,50,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. AT FAIR VALUE OF RS. 1 (PB-14 TO 17). THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT ALONG WITH INVESTMENT SCHEDULE SHOWING 7,50,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. FOR ASSESSMENT YEAR 2013-14 (PB-18 TO 23) WERE ALSO SUBMITTED. THE ASSESSEE ALSO SUBMITTED THE SALE BILL ALONG WITH CONTRACT NOTE FROM BROKER FOR SALE OF 1,25,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. (PB- 23 TO 46). THE BROKERS STATEMENT SHOWING PAYMENT MADE FOR THE SALE HAS ALSO BEEN SUBMITTED BY THE ASSESSEE,(VIDE PB-47 TO 59). THE BANK STATEMENT REFLECTING RECEIPT OF SALE CONSIDERATION FOR SALE OF 1,25,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD IS PLACED IN PAPER BOOK VIDE,(PB-60 TO 63). THE PROFIT & LOSS ACCOUNT AND COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2014-15 (PB-64 TO 69) WERE ALSO PLACED IN THE PAPER BOOK. WITH HELP OF THESE PLETHORA DOCUMENTS AND EVIDENCES, THE LD COUNSEL CLAIMED THAT LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES OF SULABH ENGINEERING AND SERVICES LTD. OF RS. 1,12,13,010/- DURING THE CURRENT FINANCIAL YEAR, IS GENUINE. 8. WE NOTE THAT THE ASSESSEE HAS EARNED LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES OF SULABH ENGINEERING AND SERVICES LTD. OF RS. 1,12,13,010/- DURING THE CURRENT FINANCIAL YEAR. DURING ASSESSMENT PROCEEDINGS DETAILS AND EVIDENCES IN SUPPORT OF PURCHASE AND SALE OF SHARES AS ASKED FOR HAVE BEEN SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER FROM TIME TO TIME. HOWEVER, THE LD. ASSESSING OFFICER HAS TREATED THE TRANSACTION IN EQUITY SHARES OF M/S SULABH ENGINEERING AND SERVICES LTD. AS BOGUS AND ADDED RS. 1,12,13,010/- BEING LONG TERM CAPITAL GAIN ON SALE OF SUCH EQUITY SHARES ONLY ON THE BASIS OF HIS SUSPICION WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD IN SUPPORT OF HIS CONTENTION IN SPITE OF THE FACT THAT THE SALE TRANSACTIONS HAVE BEEN DONE THROUGH RECOGNIZED EXCHANGE THROUGH THE AUTHORIZED BROKER AND ALL RELEVANT SUPPORTING DOCUMENTS HAVE BEEN SUBMITTED BEFORE THE LEARNED ASSESSING OFFICER. FURTHER, LEARNED ASSESSING OFFICER HAS ALSO ADDED RS. 56,065/- ON ACCOUNT OF UNDISCLOSED COMMISSION PAYMENT @ 0.5% OF THE LONG TERM CAPITAL GAIN THAT HAD BEEN ASSUMED TO BE INCURRED TO ARRANGE BOGUS LONG TERM CAPITAL GAIN AMOUNTING TO RS. 1,12,13,010/-. WE NOTE THAT THE SCRIPTS / EQUITY SHARES OF M/S SULABH ENGINEERING AND SERVICES LTD. HAS BEEN DEALT WITH BY THE SMC BENCH OF THIS TRIBUNAL IN THE CASE OF VASUDHA JAIN, IN ITA NO.1018/KOL/2018, FOR A.Y. 2015-16, ORDER DATED 15.02.2019, WHEREIN THE SMC BENCH OF THIS TRIBUNAL HELD THAT ADDITION HAS BEEN MADE BY AO MAINLY ON THE BASIS OF SUSPICION AND PROBABILITY. NO PRICE RIGGING ESTABLISHED BY AO. THE LD AO AS WELL AS LD CIT(A), WERE GUIDED BY THE REPORT OF THE INVESTIGATION WING, WHICH IS GENERAL IN NATURE AND NO SPECIFIC FINDINGS FOR THE ASSESSEE, AND HENCE BASED ON THESE FACTS THE SMC BENCH DELETED THE ADDITION, OBSERVING THE FOLLOWING. 10 13. THE LD AR ALSO BROUGHT TO OUR NOTICE THAT ONCE THE ASSESSEE HAS FURNISHED ALL EVIDENCES IN SUPPORT OF THE GENUINENESS OF THE TRANSACTIONS, THE ONUS TO DISPROVE THE SAME IS ON REVENUE. HE REFERRED TO THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF KRISHNAN AND AGNIHOTRI VS. THE STATE OF MADHYA PRADESH [1977] 1 SCC 816 (SC). IN THIS CASE THE HONBLE APEX COURT HELD THAT THE BURDEN OF SHOWING THAT A PARTICULAR TRANSACTION IS BENAMI AND THE APPELLANT OWNER IS NOT THE REAL OWNER ALWAYS RESTS ON THE PERSON ASSERTING IT TO BE SO AND THE BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING EVIDENCE OF A DEFINITE CHARACTER WHICH WOULD DIRECTLY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY RAISING INFERENCE OF THAT FACT. THE HONBLE APEX COURT FURTHER HELD THAT IT IS NOT ENOUGH TO SHOW CIRCUMSTANCES WHICH MIGHT CREATE SUSPICION BECAUSE THE COURT CANNOT DECIDE ON THE BASIS OF SUSPICION. IT HAS TO ACT ON LEGAL GROUNDS ESTABLISHED BY EVIDENCE. THE LD AR SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE FOLLOWING JUDGMENTS WHILE DECIDING THE ISSUE RELATING TO EXEMPTION CLAIMED BY THE ASSESSEE ON LTCG ON ALLEGEDPENNY SOCKS. (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 (AGRA ITAT) (II) ACIT VS. J. C. AGARWAL HUF ITYA NO. 32/AGR/2007 (AGRA ITAT) 14. MOREOVER IT WAS SUBMITTED BEFORE US BY LD AR THAT THE AO WAS NOT JUSTIFIED IN TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE ON THE GROUND OF ABNORMAL PRICE RISE OF THE SHARES AND ALLEGING PRICE RIGGING. IT WAS SUBMITTED THAT THERE IS NO ALLEGATION IN ORDERS OF SEBI AND/OR THE ENQUIRY REPORT OF THE INVESTIGATION WING TO THE EFFECT THAT THE ASSESSEE, THE COMPANIES DEALT IN AND/OR HIS BROKER WAS A PARTY TO THE PRICE RIGGING OR MANIPULATION OF PRICE IN CSE. THE LD AR REFERRED TO THE FOLLOWING JUDGMENTS IN SUPPORT OF THIS CONTENTION WHEREIN UNDER SIMILAR FACTS OF THE CASE IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN REFUSING TO ALLOW THE BENEFIT UNDER SECTION 10(38) OF THE ACT AND TO ASSESS THE SALE PROCEEDS OF SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT :- (I) ITO VS. ASHOK KUMAR BANSAL ITA NO. 289/AGR/2009 (AGRA ITAT) (II) ACIT VS.AMITA AGARWAL & OTHERS - ITA NOS. 247/(KOL)/ OF 2011 (KOL ITAT) (III) LALIT MOHAN JALAN (HUF) VS. ACIT ITA NO. 693/KOL/2009 (KOL ITAT) (IV) MUKESH R. MAROLIA VS. ADDL. CIT [2006] 6 SOT 247 (MUM) 15. WE NOTE THAT THE LD. D.R. HAD HEAVILY RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BIMAL CHAND JAIN IN TAX APPEAL NO. 18 OF 2017. WE NOTE THAT IN THE CASE RELIED UPON BY THE LD. D.R, WE FIND THAT THE FACTS ARE DIFFERENT FROM THE FACTS OF THE CASE IN HAND. FIRSTLY, IN THAT CASE, THE PURCHASES WERE MADE BY THE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF COMPANIES AND THE PURCHASE OF SHARES OF THE COMPANIES WAS DONE THROUGH THE BROKER AND THE ADDRESS OF THE BROKER WAS INCIDENTALLY THE ADDRESS OF THE COMPANY. THE PROFIT EARNED BY THE ASSESSEE WAS SHOWN AS CAPITAL GAINS WHICH WAS NOT ACCEPTED BY THE A.O. AND THE GAINS WERE TREATED AS BUSINESS PROFIT OF THE ASSESSEE BY TREATING THE SALES OF THE SHARES WITHIN THE AMBIT OF ADVENTURE IN NATURE OF TRADE. THUS, IT CAN BE SEEN THAT IN THE DECISION RELIED UPON BY THE LD. DR, THE DISPUTE WAS WHETHER THE PROFIT EARNED ON SALE OF SHARES WAS CAPITAL GAINS OR BUSINESS PROFIT. 11 16. IT IS CLEAR FROM THE ABOVE THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE SIMILAR WITH THE FACTS IN THE CASES WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DELETED THE ADDITION AND ALLOWED THE CLAIM OF LTCG ON SUCH SALE OF SHARES THEREFORE, RESPECTFULLY FOLLOWING THE SAME RATIO, I AM INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO NOT TO TREAT THE LONG TERM CAPITAL AS BOGUS AND ORDER TO ALLOW THE CLAIM OF LTCG ON SALE OF SHARE OF M/S. SESL AND DELETE THE CONSEQUENTIAL ADDITION. 9. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SMC BENCH OF ITAT KOLKATA, AND THERE IS NO CHANGE IN FACTS AND LAW AND THE REVENUE IS UNABLE TO PRODUCE ANY MATERIAL TO CONTROVERT THE AFORESAID FINDINGS OF THE SMC BENCH IN THE CASE OF VASUDHA JAIN (SUPRA), WE FIND NO REASON TO INTERFERE IN THE SAID ORDER OF THE SMC BENCH OF THIS TRIBUNAL AND THE SAME IS HEREBY UPHELD. THEREFORE, WE DELETE THE ADDITION OF RS.1,12,13,010/- AND WE ALSO DELETE THE CONSEQUENTIAL ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE TOWARDS COMMISSION AT RS.56,065/-. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 9. SIMILARLY THE CHENNAI BENCH OF ITAT IN ITA 384 VIDE ORDER DATED 18.06.2019 IN THE CASE OF SAME SCRIP OF M/S SULABH ENGINEERING LTD. HAS ALLOWED RELIEF TO THE ASSESSEE. SIMILAR IS THE POSITION OF SMC BENCH KOLKATA, WHEREBY IN ITA NO. 2378 VIDE ORDER DATED 07.08.2019, THE TRIBUNAL ALLOWED RELIEF TO THE ASSESSEE. AGAIN SMC KOLKATA BENCH IN ITA 1018 VIDE ORDER DATED 15.02.2019 ALLOWED RELIEF TO THE ASSESSEE ON THE SAME SCRIP AND SIMILAR IS THE POSITION OF B BENCH OF KOLKATA WHEREIN VIDE ORDER DATED 10.05.2019 IN ITA NOS. 125 AND 126 THE SAME SCRIP OF SULAB ENGINEERING AND SERVICES LTD. WAS CONSIDERED AND RELIEF WAS GRANTED TO THE ASSESSEE. 9.1 WE FURTHER FIND THAT IN A RECENT JUDGMENT BY THE HON'BLE DELHI HIGH COURT VIDE ORDER DATED 15.01.2021 IN AN APPEAL FILED BY REVENUE AGAINST THE ORDER OF TRIBUNAL THE HON'BLE COURT IN A CONSOLIDATED ORDER IN THREE APPEALS DISMISSED THE APPEALS OF THE REVENUE. IN I.T.A. NO.125, ON THE BASIS OF SAME INVESTIGATION REPORT, THE ASSESSING OFFICER AND CIT(A) HAD NOT ALLOWED CLAIM OF THE ASSESSEE OF LONG TERM CAPITAL GAIN ON THE SCRIP M/S GOLD LINE INTERNATIONAL FINVEST LTD. IN I.T.A. NO. 130 AND 131 SIMILAR CLAIM 12 WAS MADE ON SCRIP OF M/S EASTERN BIO ORGANIC FOOD PROCESSING LTD. AND ON SCRIP OF RANDER CORPORATION LTD. THE AUTHORITIES BELOW HAD NOT ALLOWED CLAIM OF THE ASSESSEE ON THE BASIS OF SAME INVESTIGATION REPORT ON THE BASIS OF WHICH CLAIM OF THE ASSESSEE HAS BEEN REJECTED. THESE SCRIPS ARE MENTIONED AT SL. NO. 24, 19 AND 49 IN THE LIST OF PENNY STOCKS PREPARED BY INVESTIGATION TEAM. THE TRIBUNAL HOWEVER ALLOWED RELIEF TO THE ASSESSEE BY SEPARATE ORDERS WHICH WERE CONFIRMED BY HON'BLE DELHI HIGH COURT. THE RELEVANT FINDINGS OF HON'BLE COURT ARE REPRODUCED BELOW: 3. THE PRESENT APPEALS UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] ARE DIRECTED AGAINST THE COMMON ORDER DATED 6TH AUGUST, 2019 [HEREINAFTER REFERRED TO AS THE IMPUGNED ORDER] PASSED IN ITA NO. 1069/DEL/2019 (FOR AY 2014-15), 2772/DEL/2019 (FOR AY 2015-16) AND OTHER APPEALS FOR THE SAME AYS, BY THE INCOME TAX APPELLATE TRIBUNAL [HEREINAFTER REFERRED TO AS THE ITAT]. HOWEVER, THE IMPUGNED ORDER RECORDS THE FACTUAL POSITION ONLY IN RESPECT OF ITA NO. 1069/DEL/2019. 4. THE REVENUE URGES IDENTICAL QUESTIONS OF LAW IN ALL THE AFORE-NOTED APPEALS WITH THE ONLY DIFFERENCE BEING THE FIGURES RELATING TO THE ADDITIONS MADE UNDER SECTION 68 READ WITH SECTION 115BBE OF THE ACT. ACCORDINGLY, THE SAME ARE BEING DECIDED BY WAY OF THIS COMMON ORDER. 5. IT IS NOT IN DISPUTE, AS NOTED IN THE IMPUGNED ORDER, THAT THE FACTUAL BACKGROUND IN ALL THE THREE APPEALS IS QUITE SIMILAR. HOWEVER, FOR THE SAKE OF CONVENIENCE, THE FACTS IN RESPECT OF ITA 125/2020 ARE BEING NOTED AND DISCUSSED ELABORATELY. BRIEFLY STATED, THE RESPONDENT-ASSESSEE IS AN INDIVIDUAL WHO HAS DERIVED INCOME FROM INTEREST ON LOAN, FDR, NSC AND BANK INTEREST UNDER THE HEAD OF INCOME FROM OTHER SOURCES IN RESPECT OF A.Y. 2015-16. SHE FILED HER RETURN OF INCOME, DECLARING TOTAL INCOME OF RS. 13,96,116/-. AFTER CLAIMING DEDUCTION OF RS. 1,60,000/- UNDER CHAPTER VI-A, THE TOTAL TAXABLE INCOME OF RESPONDENT WAS DECLARED TO BE RS. 12,36,120/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY. DURING THE SCRUTINY PROCEEDINGS, THE AO NOTICED THAT FOR THE RELEVANT YEAR UNDER CONSIDERATION, THE RESPONDENT HAD CLAIMED EXEMPTED INCOME OF RS. 96,75,939/- AS RECEIPTS FROM LONG TERM CAPITAL GAIN [HEREINAFTER REFERRED TO AS LTCG] UNDER SECTION 10(38) OF THE ACT. HE INTER ALIA CONCLUDED THAT THE ASSESSEE HAD ADOPTED A COLORABLE DEVICE OF LTCG TO AVOID TAX AND ACCORDINGLY FRAMED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT AT THE TOTAL INCOME OF RS. 1,09,12,060/-, MAKING AN ADDITION OF RS. 96,75,939/- UNDER SECTION 68 READ WITH 115BBE OF THE ACT ON ACCOUNT OF BOGUS LTCG ON SALE OF PENNY STOCKS OF A COMPANY NAMED M/S GOLD LINE INTERNATIONAL FINVEST LIMITED. THE APPEAL BEFORE THE CIT(A) WAS DISMISSED AND ADDITIONS WERE CONFIRMED WITH THE OBSERVATION THAT THE RESPONDENT HAD INTRODUCED UNACCOUNTED MONEY INTO THE 13 BOOKS WITHOUT PAYING TAXES. FURTHER APPEAL FILED BY THE RESPONDENT BEFORE THE LEARNED ITAT WAS ALLOWED IN HER FAVOUR, AND THE ADDITIONS WERE DELETED VIDE THE IMPUGNED ORDER, RELEVANT PORTION WHEREOF READS AS UNDER: 21. A PERUSAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER WAS CARRIED AWAY BY THE REPORT OF THE INVESTIGATION WING KOLKATA. IT CAN BE SEEN THAT THE ENTIRE ASSESSMENT HAS BEEN FRAMED BY THE ASSESSING OFFICER WITHOUT CONDUCTING ANY ENQUIRY FROM THE RELEVANT PARTIES OR INDEPENDENT SOURCE OR EVIDENCE BUT HAS MERELY RELIED UPON THE STATEMENTS RECORDED BY THE INVESTIGATION WING AS WELL AS INFORMATION RECEIVED FROM THE INVESTIGATION WING. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY INDEPENDENT AND SEPARATE ENQUIRY IN THE CASE OF THE ASSESSEE. EVEN, THE STATEMENT RECORDED BY THE INVESTIGATION WING HAS NOT BEEN GOT CONFIRMED OR CORROBORATED BY THE PERSON DURING THE ASSESSMENT PROCEEDINGS. XX XX XX 23. IT IS PROVIDED U/S. 142 (2) OF THE ACT THAT FOR THE PURPOSE OF OBTAINING FULL INFORMATION IN RESPECT OF INCOME OR LOSS OF ANY PERSON, THE ASSESSING OFFICER MAY MAKE SUCH ENQUIRY AS HE CONSIDERS NECESSARY. IN OUR CONSIDERED VIEW THE ASSESSING OFFICER OUGHT TO HAVE CONDUCTED A SEPARATE AND INDEPENDENT ENQUIRY AND ANY INFORMATION RECEIVED FROM THE INVESTIGATION WING IS REQUIRED TO BE CORROBORATED AND AFFIRM DURING THE ASSESSMENT BY THE ASSESSING OFFICER BY EXAMINING THE CONCERNED PERSONS WHO CAN AFFIRM THE STATEMENTS ALREADY RECORDED BY ANY OTHER AUTHORITY OF THE DEPARTMENT. FACTS NARRATED ABOVE CLEARLY SHOW THAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY AND THE ENTIRE ASSESSMENT ORDER AND THE ORDER OF THE FIRST APPELLATE AUTHORITY ARE DEVOID OF ANY SUCH ENQUIRY. 24. THE REPORT FROM THE DIRECTORATE INCOME TAX INVESTIGATION WING, KOLKATA IS DATED 27.04.2015 WHEREAS THE IMPUGNED SALES TRANSACTIONS TOOK PLACE IN THE MONTH OF MARCH, 2014. THE EXPARTE AD INTERIM ORDER OF SEBI IS DATED 29.06.2015 WHEREIN AT PAGE 34 UNDER PARA 50 (A) M/S. ESTEEM BIO ORGANIC FOOD PROCESSING LTD WAS RESTRAINED FROM ACCESSING THE SECURITIES MARKET AND BUYING SELLING AND DEALING IN SECURITIES EITHER DIRECTLY OR INDIRECTLY IN ANY MANNER TILL FURTHER DIRECTIONS. A LIST OF 239 PERSONS IS ALSO MENTIONED IN SEBI ORDER WHICH ARE AT PAGES 34 TO 42 OF THE ORDER THE NAMES OF THE APPELLANTS DO NOT FIND ANY PLACE IN THE SAID LIST. AT PAGES 58 AND 59 THE NAMES OF PRE IPO TRANSFEREE IN THE SCRIP OF M/S. ESTEEM BIO ORGANIC FOOD PROCESSING LTD IS GIVEN AND IN THE SAID LIST ALSO THE NAMES OF THE APPELLANTS DO NOT FIND ANY PLACE. AT PAGE 63 OF THE SEBI ORDER-TRADING BY TRADING IN M/S. ESTEEM BIO QRGANIC FOOD PROCESSING LTD A FURTHER LIST OF 25 PERSONS IS MENTIONED AND ONCE AGAIN THE NAMES OF THE APPELLANTS DO NOT FIND PLACE IN THIS LIST ALSO. 25. AS MENTIONED ELSEWHERE THE BROKERS OF THE ASSESSEE NAMELY ISG SECURITIES LIMITED AND SMC GLOBAL SECURITIES LIMITED ARE STATIONED AT NEW DELHI AND THEIR NAMES ALSO DO NOT FIND PLACE IN THE LIST MENTIONED HERE IN ABOVE IN THE SEBI ORDER. THERE IS NOTHING ON RECORD TO SHOW THAT THE BROKERS WERE SUSPENDED BY THE SEBI NOR THERE ANYTHING ON RECORD TO SHOW THAT THE TWO BROKERS OF THE APPELLANTS MENTIONED HERE IN ABOVE WERE INVOLVED IN THE ALLEGED SCAM. THE ASSESSING OFFICER HAS NOT EVEN CONSIDERED EXAMINING THE 14 BROKERS OF THE APPELLANTS. IT IS A MATTER OF THE FACT THAT SEBI LOOKS INTO IRREGULAR MOVEMENTS IN SHARE PRICES ON RANGE AND WARN INVESTOR AGAINST ANY SUCH UNUSUAL INCREASE IN SHARES PRICES. NO SUCH WARNINGS WERE ISSUED BY THE SEBI. 26. THERE IS NO DISPUTE THAT THE STATEMENTS WHICH WERE RELIED BY THE ASSESSING OFFICER WERE NOT RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS BUT THEY WERE PRE-EXISTING STATEMENTS RECORDED BY THE INVESTIGATION WING AND THE SAME CANNOT BE THE SOLE BASIS OF ASSESSMENT WITHOUT CONDUCTING PROPER ENQUIRY AND EXAMINATION DURING THE ASSESSMENT PROCEEDINGS ITSELF. IN OUR HUMBLE OPINION, NEITHER THE ASSESSING OFFICER CONDUCTED ANY ENQUIRY NOR HAS BROUGHT ANY CLINCHING EVIDENCES TO DISPROVE THE EVIDENCES PRODUCED BY THE ASSESSEE. THE REPORT OF INVESTIGATION WING IS MUCH LATER THAN THE DATES OF PURCHASE / SALE OF SHARES AND THE ORDER OF THE SEBI IS ALSO MUCH LATER THAN THE DATE OF TRANSACTIONS TRANSACTED AND NOWHERE SEBI HAS DECLARED THE TRANSACTION TRANSACTED AT EARLIER DATES AS VOID. XX XX XX 30. CONSIDERING THE VORTEX OF EVIDENCES, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS SUCCESSFULLY DISCHARGED THE ONUS CAST UPON HIM BY PROVISIONS OF SECTION 68 OF THE ACT AS MENTIONED ELSEWHERE, SUCH DISCHARGE OF ONUS IS PURELY A QUESTION OF FACT AND THEREFORE THE JUDICIAL DECISIONS RELIED UPON BY THE DR WOULD DO NO GOOD ON THE PECULIAR PLETHORA OF EVIDENCES IN RESPECT OF THE FACTS OF THE CASE IN HAND AND HENCE THE JUDICIAL DECISIONS RELIED UPON BY BOTH THE SIDES, THOUGH PERUSED, BUT NOT CONSIDERED ON THE FACTS OF THE CASE IN HAND. 6. AGGRIEVED BY THE AFORESAID FINDINGS, THE REVENUE HAS FILED THE INSTANT APPEALS CONTENDING THAT, NOTWITHSTANDING THE TAX EFFECT IN THE APPEALS FALLING BELOW THE THRESHOLD PRESCRIBED UNDER CIRCULAR NO. 23 DATED 6 TH SEPTEMBER, 2019, THE APPEALS ARE MAINTAINABLE IN VIEW OF THE OFFICE MEMORANDUM DATED 16TH SEPTEMBER, 2019 ISSUED BY THE CBDT, WHICH CLARIFIES THAT THE MONETARY LIMITS PRESCRIBED IN THE AFOREMENTIONED CIRCULAR SHALL NOT APPLY WHERE AN ASSESSEE IS CLAIMING BOGUS LTCG THROUGH PENNY STOCKS, AND THE APPEALS BE HEARD ON MERITS. 7. MR. ZOHEB HOSSAIN, LEARNED SENIOR STANDING COUNSEL FOR THE REVENUE (APPELLANT HEREIN), CONTENDS THAT THE LEARNED ITAT HAS COMPLETELY ERRED IN LAW IN DELETING THE ADDITION, AND THUS THE IMPUGNED ORDER SUFFERS FROM PERVERSITY. HE SUBMITS THAT THERE ARE CERTAIN GERMANE FACTUAL ERRORS, INASMUCH AS THE LEARNED ITAT HAS WRONGLY RECORDED THAT THERE WAS NO INDEPENDENT ENQUIRY CONDUCTED BY THE AO, WHEN IN FACT THE AO HAD ISSUED NOTICES TO THE COMPANIES IN QUESTION UNDER SECTION 133(6) OF THE ACT. HE POINTS OUT THAT THE OBSERVATIONS RECORDED IN PARA 25 OF THE IMPUGNED ORDER ARE FACTUALLY INCORRECT, AND IN CONFLICT WITH PARA 4 OF THE ORDER OF THE CIT(A) DATED 24TH DECEMBER, 2018 WHICH READS AS FOLLOWS: 4. EVEN THE BROKER THROUGH WHOM THE SHARES WERE DEMATERIALIZED AND SOLD I.E. SMC GLOBAL SECURITIES LTD. WAS ALSO A PART OF THE SCAM. THIS IS A DELHI BASED BROKER WHOSE REGIONAL OFFICE WAS ALSO SURVEYED. THE SUB BROKERS WERE ALSO SURVEYED AND ALSO STATEMENTS RECORDED WHICH CONFIRMED THE PAYMENT OF CASH COMMISSION BY THE BENEFICIARIES FOR BEING PART OF THE SYNDICATE. 8. MR. HOSSAIN ARGUES THAT IN CASES RELATING TO LTCG IN PENNY STOCKS, THERE MAY NOT 15 BE ANY DIRECT EVIDENCE IN THE HANDS OF THE REVENUE TO ESTABLISH THAT THE INVESTMENT MADE IN SUCH COMPANIES WAS AN ACCOMMODATION ENTRY. THUS THE COURT SHOULD TAKE THE ASPECT OF HUMAN PROBABILITIES INTO CONSIDERATION THAT NO PRUDENT INVESTOR WOULD INVEST IN PENNY SCRIPS. CONSIDERING THE FACT THAT THE FINANCIALS OF THESE COMPANIES DO NOT SUPPORT THE GAINS MADE BY THESE COMPANIES IN THE STOCK EXCHANGE, AS WELL AS THE FACT THAT DESPITE THE NOTICES ISSUED BY THE AO, THERE WAS NO EVIDENCE FORTHCOMING TO SUSTAIN THE CREDIBILITY OF THESE COMPANIES, HE ARGUES THAT IT CAN BE SAFELY CONCLUDED THAT THE INVESTMENTS MADE BY THE PRESENT RESPONDENTS WERE NOT GENUINE. HE SUBMITS THAT THE AO MADE SUFFICIENT INDEPENDENT ENQUIRY AND ANALYSIS TO TEST THE VERACITY OF THE CLAIMS OF THE RESPONDENT AND AFTER OBJECTIVE EXAMINATION OF THE FACTS AND DOCUMENTS, THE CONCLUSION ARRIVED AT BY THE AO IN RESPECT OF THE TRANSACTION IN QUESTION, OUGHT NOT TO HAVE BEEN INTERFERED WITH. IN SUPPORT OF HIS SUBMISSION, MR. HOSSAIN RELIES UPON THE JUDGMENT OF THIS COURT IN SUMAN PODDAR V. ITO, [2020] 423 ITR 480 (DELHI), AND OF THE SUPREME COURT IN SUMATI DAYAL V. CIT, (1995) SUPP. (2) SCC 453. 9. MR. HOSSAIN FURTHER ARGUES THAT THE LEARNED ITAT HAS ERRED IN HOLDING THAT THE AO DID NOT CONSIDER EXAMINING THE BROKERS OF THE RESPONDENT. HE ASSERTS THAT THIS HOLDING IS CONTRARY TO THE FINDINGS OF THE AO. AS A MATTER OF FACT, THE DEMAT ACCOUNT STATEMENT OF THE RESPONDENT WAS CALLED FOR FROM THE BROKER M/S SMC GLOBAL SECURITIES LTD UNDER SECTION 133(6) OF THE ACT, ON PERUSAL WHEREOF IT WAS FOUND THAT THE RESPONDENT WAS NOT A REGULAR INVESTOR IN PENNY SCRIPS. 10. WE HAVE HEARD MR. HOSSAIN AT LENGTH AND GIVEN OUR THOUGHTFUL CONSIDERATION TO HIS CONTENTIONS, BUT ARE NOT CONVINCED WITH THE SAME FOR THE REASONS STATED HEREINAFTER. 11. ON A PERUSAL OF THE RECORD, IT IS EASILY DISCERNIBLE THAT IN THE INSTANT CASE, THE AO HAD PROCEEDED PREDOMINANTLY ON THE BASIS OF THE ANALYSIS OF THE FINANCIALS OF M/S GOLD LINE INTERNATIONAL FINVEST LIMITED. HIS CONCLUSION AND FINDINGS AGAINST THE RESPONDENT ARE CHIEFLY ON THE STRENGTH OF THE ASTOUNDING 4849.2% JUMP IN SHARE PRICES OF THE AFORESAID COMPANY WITHIN A SPAN OF TWO YEARS, WHICH IS NOT SUPPORTED BY THE FINANCIALS. ON AN ANALYSIS OF THE DATA OBTAINED FROM THE WEBSITES, THE AO OBSERVES THAT THE QUANTUM LEAP IN THE SHARE PRICE IS NOT JUSTIFIED; THE TRADE PATTERN OF THE AFORESAID COMPANY DID NOT MOVE ALONG WITH THE SENSEX; AND THE FINANCIALS OF THE COMPANY DID NOT SHOW ANY REASON FOR THE EXTRAORDINARY PERFORMANCE OF ITS STOCK. WE HAVE NOTHING ADVERSE TO COMMENT ON THE ABOVE ANALYSIS, BUT ARE CONCERNED WITH THE AXIOMATIC CONCLUSION DRAWN BY THE AO THAT THE RESPONDENT HAD ENTERED INTO AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY CLAIMING FICTITIOUS LTCG, WHICH IS EXEMPT UNDER SECTION 10(38), IN A PREPLANNED MANNER TO EVADE TAXES. THE AO EXTENSIVELY RELIED UPON THE SEARCH AND SURVEY OPERATIONS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT IN KOLKATA, DELHI, MUMBAI AND AHMEDABAD ON PENNY STOCKS, WHICH SETS OUT THE MODUS OPERANDI ADOPTED IN THE BUSINESS OF PROVIDING ENTRIES OF BOGUS LTCG. HOWEVER, THE RELIANCE PLACED ON THE REPORT, WITHOUT FURTHER CORROBORATION ON THE BASIS OF COGENT MATERIAL, DOES NOT JUSTIFY HIS CONCLUSION THAT THE TRANSACTION IS BOGUS, SHAM AND NOTHING OTHER THAN A 16 RACKET OF ACCOMMODATION ENTRIES. WE DO NOTICE THAT THE AO MADE AN ATTEMPT TO DELVE INTO THE QUESTION OF INFUSION OF RESPONDENTS UNACCOUNTED MONEY, BUT HE DID NOT DIG DEEPER. NOTICES ISSUED UNDER SECTIONS 133(6)/131 OF THE ACT WERE ISSUED TO M/S GOLD LINE INTERNATIONAL FINVEST LIMITED, BUT NOTHING EMERGED FROM THIS EFFORT. THE PAYMENT FOR THE SHARES IN QUESTION WAS MADE BY SH. SALASAR TRADING COMPANY. NOTICE WAS ISSUED TO THIS ENTITY AS WELL, BUT WHEN THE NOTICES WERE RETURNED UNSERVED, THE AO DID NOT TAKE THE MATTER ANY FURTHER. HE THEREAFTER SIMPLY PROCEEDED ON THE BASIS OF THE FINANCIALS OF THE COMPANY TO COME TO THE CONCLUSION THAT THE TRANSACTIONS WERE ACCOMMODATION ENTRIES, AND THUS, FICTITIOUS. THE CONCLUSION DRAWN BY THE AO, THAT THERE WAS AN AGREEMENT TO CONVERT UNACCOUNTED MONEY BY TAKING FICTITIOUS LTCG IN A PRE-PLANNED MANNER, IS THEREFORE ENTIRELY UNSUPPORTED BY ANY MATERIAL ON RECORD. THIS FINDING IS THUS PURELY AN ASSUMPTION BASED ON CONJECTURE MADE BY THE AO. THIS FLAWED APPROACH FORMS THE REASON FOR THE LEARNED ITAT TO INTERFERE WITH THE FINDINGS OF THE LOWER TAX AUTHORITIES. THE LEARNED ITAT AFTER CONSIDERING THE ENTIRE CONSPECTUS OF CASE AND THE EVIDENCE BROUGHT ON RECORD, HELD THAT THE RESPONDENT HAD SUCCESSFULLY DISCHARGED THE INITIAL ONUS CAST UPON IT UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. IT IS RECORDED THAT THERE IS NO DISPUTE THAT THE SHARES OF THE TWO COMPANIES WERE PURCHASED ONLINE, THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL, AND THE SHARES WERE DEMATERIALIZED AND THE SALES HAVE BEEN ROUTED FROM DE-MAT ACCOUNT AND THE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHANNELS. THE ABOVE NOTED FACTORS, INCLUDING THE DEFICIENT ENQUIRY CONDUCTED BY THE AO AND THE LACK OF ANY INDEPENDENT SOURCE OR EVIDENCE TO SHOW THAT THERE WAS AN AGREEMENT BETWEEN THE RESPONDENT AND ANY OTHER PARTY, PREVAILED UPON THE ITAT TO TAKE A DIFFERENT VIEW. BEFORE US, MR. HOSSAIN HAS NOT BEEN ABLE TO POINT OUT ANY EVIDENCE WHATSOEVER TO ALLEGE THAT MONEY CHANGED HANDS BETWEEN THE RESPONDENT AND THE BROKER OR ANY OTHER PERSON, OR FURTHER THAT SOME PERSON PROVIDED THE ENTRY TO CONVERT UNACCOUNTED MONEY FOR GETTING BENEFIT OF LTCG, AS ALLEGED. IN THE ABSENCE OF ANY SUCH MATERIAL THAT COULD SUPPORT THE CASE PUT FORTH BY THE APPELLANT, THE ADDITIONS CANNOT BE SUSTAINED. 12. MR. HOSSAINS SUBMISSIONS RELATING TO THE STARTLING SPIKE IN THE SHARE PRICE AND OTHER FACTORS MAY BE ENOUGH TO SHOW CIRCUMSTANCES THAT MIGHT CREATE SUSPICION; HOWEVER THE COURT HAS TO DECIDE AN ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT ON SUSPICION ALONE. THE THEORY OF HUMAN BEHAVIOR AND PREPONDERANCE OF PROBABILITIES CANNOT BE CITED AS A BASIS TO TURN A BLIND EYE TO THE EVIDENCE PRODUCED BY THE RESPONDENT. WITH REGARD TO THE CLAIM THAT OBSERVATIONS MADE BY THE CIT(A) WERE IN CONFLICT WITH THE IMPUGNED ORDER, WE MAY ONLY NOTE THAT THE SAID OBSERVATIONS ARE GENERAL IN NATURE AND LATER IN THE ORDER, THE CIT(A) ITSELF NOTES THAT THE BROKER DID NOT RESPOND TO THE NOTICES. BE THAT AS IT MAY, THE CIT(A) HAS ONLY APPROVED THE ORDER OF THE AO, FOLLOWING THE SAME REASONING, AND RELYING UPON THE REPORT OF THE INVESTIGATION WING. LASTLY, RELIANCE PLACED BY THE REVENUE ON SUMAN PODDAR V. ITO (SUPRA) AND SUMATI DAYAL V. CIT (SUPRA) IS OF NO ASSISTANCE. UPON EXAMINING THE JUDGMENT OF SUMAN PODDAR (SUPRA) AT LENGTH, WE FIND THAT THE DECISION THEREIN WAS ARRIVED AT IN LIGHT OF THE PECULIAR FACTS AND CIRCUMSTANCES 17 DEMONSTRATED BEFORE THE ITAT AND THE COURT, SUCH AS, INTER ALIA, LACK OF EVIDENCE PRODUCED BY THE ASSESSEE THEREIN TO SHOW ACTUAL SALE OF SHARES IN THAT CASE. ON SUCH BASIS, THE ITAT HAD RETURNED THE FINDING OF FACT AGAINST THE ASSESSEE, HOLDING THAT THE GENUINENESS OF SHARE TRANSACTION WAS NOT ESTABLISHED BY HIM. HOWEVER, THIS IS QUITE DIFFERENT FROM THE FACTUAL MATRIX AT HAND. SIMILARLY, THE CASE OF SUMATI DAYAL V. CIT (SUPRA) TOO TURNS ON ITS OWN SPECIFIC FACTS. THE ABOVE-STATED CASES, THUS, ARE OF NO ASSISTANCE TO THE CASE SOUGHT TO BE CANVASSED BY THE REVENUE. 13. THE LEARNED ITAT, BEING THE LAST FACT-FINDING AUTHORITY, ON THE BASIS OF THE EVIDENCE BROUGHT ON RECORD, HAS RIGHTLY COME TO THE CONCLUSION THAT THE LOWER TAX AUTHORITIES ARE NOT ABLE TO SUSTAIN THE ADDITION WITHOUT ANY COGENT MATERIAL ON RECORD. WE THUS FIND NO PERVERSITY IN THE IMPUGNED ORDER. 14. IN THIS VIEW OF THE MATTER, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. 15. ACCORDINGLY, THE PRESENT APPEALS ARE DISMISSED. 10. IN THE ABOVE NOTED JUDGMENT, THE HON'BLE COURT HAS HELD THAT STARTLING SPIKE IN THE SHARE PRICE AND OTHER FACTORS MAY BE ENOUGH TO SHOW CIRCUMSTANCES THAT MIGHT CREATE SUSPICION BUT THE COURT HAS TO DECIDE AN ISSUE ON THE BASIS OF EVIDENCE AND PROOF, AND NOT ON SUSPICION ALONE. THE HON'BLE COURT FURTHER DISTINGUISHED THE JUDGMENT IN THE CASE OF SUMAN PODAR WHICH WAS IN FAVOUR OF REVENUE. THE HON'BLE COURT FURTHER HELD THAT CASE OF SUMATI DAYAL U/S CIT WAS ALSO NOT APPLICABLE TO THE ASSESSEE. THE HON'BLE COURT FURTHER HELD THAT RELIANCE PLACED BY THE ASSESSING OFFICER ON THE INVESTIGATION REPORT OF INVESTIGATION WING WITHOUT FURTHER CORROBORATION ON THE BASIS OF COGENT MATERIAL DOES NOT JUSTIFY HIS CONCLUSION THAT THE TRANSACTION IS BOGUS, SHAM AND NOTHING OTHER THAN A RACKET OF ACCOMMODATION ENTRIES. 11. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF JUDICIAL PRECEDENTS, GROUND NOS. 3 AND 4 ARE ALLOWED IN ITA NO. 475/LKW/2019 AND GROUND NO. 1, 2, 5 & 6 WERE NOT ARGUED, THEREFORE, SAME ARE DISMISSED AS NOT PRESSED. IN VIEW OF ABOVE, APPEAL IN ITA NO. 475/LKW/2019 IS PARTLY ALLOWED. 12. AS REGARDS, APPEAL IN ITA NO. 681/LKW/2019, GROUND NOS. 5 AND 6 ARE ALLOWED. GROUND NOS. 1 TO 4 AND GROUND NO. 7 TO 8 WERE NOT ARGUED, THEREFORE, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. AS REGARDS GROUND 18 NO. 9 AND 10, THE ASSESSING OFFICER HAD MADE ADDITIONS U/S 69C AS DEEMED COMMISSION ON THE ARRANGEMENT OF CAPITAL GAINS. SINCE WE HAVE ALLOWED RELIEF TO THE ASSESSEE ON GROUND NO. 5 & 6, THEREFORE, THESE GROUNDS ARE ALSO ALLOWED. 13. AS REGARDS GROUNDS 11 TO 13 REGARDING DEPOSIT IN BANK, THE ASSESSEE HAS FILED ADDITIONAL EVIDENCES WHICH COULD NOT BE FILED BECAUSE OF MISTAKE OF COUNSEL AND ILLNESS OF ASSESSEE THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE OFFICE OF THE ASSESSING OFFICER WHO, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WILL PASS APPROPRIATE ORDERS. IN VIEW OF THE ABOVE, GROUND NO. 11 TO 13 ARE ALLOWED FORSTATISTICAL PURPOSES. 14. IN VIEW OF ABOVE, APPEAL IN ITA NO. 681 IS ALSO PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE COMBINED RESULT, APPEAL NO. 475 IS PARTLY ALLOWED WHEREAS APPEAL IN ITA NO. 681 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 16/02/2021) SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER AKS/SINGH DTD. 16/02/2021 COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER