IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC KOLKATA BEFORE SHRI S.S, GODARA, JUDICIAL MEMBER ITA NO.729/KOL/2018 ASSESSMENT YEAR:2014-15 MANGILAL JAIN C/O ADVOCATE PRADIP LAKHOTIA, 2 ND FLOOR, METRO PLAZA, SF ROAD, SILIGURI-734005 [ PAN NO.AFKPJ 4178 D ] / V/S . INCOME TAX OFFICER, WARD-3(3), NR. LAL KOTHI, DARJEELING /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI DHIRAJ LAKHOTIA, A.R /BY RESPONDENT SHRI C.J. SINGH, JCIT-SR-DR /DATE OF HEARING 05-03-2019 /DATE OF PRONOUNCEMENT 15-05-2019 /O R D E R THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 ARISES AGAINST THE COMMISSIONER OF INCOME-TAX (APPEALS)-SILIGURIS ORD ER DATED 22.03.2018 PASSED IN CASE NO.69/CIT(A)/SLG/2016-17, INVOLVING PROCEEDIN GS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT APPEAL SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES FINDINGS TREATIN G HIS SHORT TERM CAPITAL LOSS (STCL) ARISING FROM SALE OF SHARES AFTER PAYMENT OF SECURITY TRANSACTION TAX (STT), AMOUNTING TO 1,92,320/- AS BOGUS UNEXPLAINED CASH CREDITS. THE C IT(A)S DETAILED DISCUSSION TO THIS EFFECT READS AS UNDER:- 4. DECISION :- I HAVE PERUSED THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL AND THE SUBMISSIONS MADE BY THE LD.. A/R ON BEHALF OF THE APPELLANT. MY OBSERVA TIONS & FINDINGS ARE AS UNDER :- 4.1. THE PRESENT APPEAL EMANATES AFTER DISALLOWING RS. 11,92,320/- ARISING OUT OF SHARES TRANSACTION AND TREATED THE SAME AS BOGUS. IN THIS CASE THE ASSESSEE PURCHASED 32000 SHARES OF GLOBAL INFRATECH & FINANCE LTD. THROUGH EUREKA STOC K AND SHARES BROKING SERVICES LIMITED @ RS. 77.37 PER SHARE AGGREGATING TO RS. 24,79,714/ - ON 11.02.2014 AND FURTHER SOLD THE ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 2 32000 SHARES OF GLOBAL INFRATECH & FINANCE LTD. THR OUGH THE SAME BROKING HOUSE @ RS. 40.11 PER SHARE TO THE TUNE OF RS. 12,83,520/- ON 2 7.03.2014. THEREBY, CLAIMING SHORT TERM CAPITAL LOSS OFRS. 11,92,320/-. THE A/R ON BEHALF OF THE ASSESSEE, DURING THE APPEL LATE PROCEEDINGS, HAS STATED THAT SINCE THE SHARES WERE HELD FOR LESS THAN 12 MONTHS, THEREFORE , AS PER SEC 2(42A), THESE SHARES WERE SHORT TERM CAPITAL ASSET. MOREOVER THE SELLING PRIC E (LE. 12,83,520) BEING LESS THAN THE PURCHASE PRICE (LE. 24,75,840) GIVING RISE TO SHORT TERM CAPITAL LOSS AMOUNTING TO RS. 11,92,320/-. THE LD. A/R HAS FURTHER STATED THAT IT WAS CLAIMED BY THE LD.. AO THAT THE AMOUNT CLAIMED AS CAPITAL LOSS IS BOGUS IN NATURE SINCE THE SHARES AR E PENNY STOCK WHICH WERE USED FOR ACCOMMODATION OF BOGUS SHORT TERM CAPITAL LOSS THRO UGH OF STOCK MARKET. 4.2 THE AO DURING THE ASSESSMENT PROCEEDINGS, ISS UED ON THE INFORMATION UPLOADED BY THE DDEIT(INV.), KOLKATA WHERE THE MODUS OPERANDI OF BO GUS SHORT TERM CAPITAL LOSS IS EXPLAINED. IN VIEW OF THE FACTS AND INFORMATION COL LECTED FROM DDIT (INV.), KOLKATA, THE A.O. ISSUED SHOW CAUSE NOTICE ENQUIRING FROM THE ASSESSE E THE DETAIL EXPLANATION ALONG WITH DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE CLAIM OF SHORT TERM CAPITAL LOSS. A SHOW CAUSE LETTER REQUIRING EXPLANATION ON THE POINTS RAISED W AS ISSUED WHICH READS AS UNDER: 'DURING THE YEAR UNDER CONSIDERATION, YOU HAVE SHOW N TO HAVE ACCRUED SHORT TERM CAPITAL LOSS ON ACCOUNT OF SALE OF 32000 SHARES OF GLOBAL I NFRATECH & FINANCE LIMITED BOOKED THROUGH EUREKA STOCK AND SHARES BROKING SERVICES LI MITED LISTED IN BOMBAY STOCK EXCHANGE. ON PERUSAL OF RECORDS, IT IS FOUND THAT ONE OF THE DIRECTOR OF GLOBAL INFRATECH & FINANCE LIMITED, SHRI MAHENCRA SETHIA HAS RECORDED HIS STAT EMENT U/S. 131 OF THE 1. T. ACT, 1961 ON 22,04.2014 WHEREIN HE HAS CLARIFIED THAT THE GLOBAL INFRATECH & FINANCE LIMITED IS A PAPER COMPANY MANAGED BY HIM TO ACCOMMODATE ENTRIES FOR A CCRUING LONG TERM CAPITAL LOSS AND SHORT TERM CAPITAL LOSS IN THE FORM OF SHARE CAPITA L TO BENEFICIARIES. FURTHER, THE STATEMENT OF OATH OF SHRI RAKES' RAM S OMANI, ONE OF THE DIRECTOR OF EUREKA STOCK AND SHARES BROKING SERVICES LIMITED RECORDED DURING THE COURSE OF SURVEY OPERATION U/S 133A OF THE I. T. ACT, 1961 CONDUCTED ON 30.03. 2015 AT THE BUSINESS PREMISES OF EUREKA STOCK AND SHARES BROKING SERVICES LIMITED ALSO CONF IRMS THAT THE COMPANY PROVIDES TRANSACTIONS IN BOGUS SCRIPS/PENNY STOCKS THROUGH T HEIR BROKING HOUSE TO THESE PAPER COMPANIES. IN VIEW OF THE FINDINGS AS RECORDED BY THE INVESTIG ATION WING, YOU ARE BEING SHOW CAUSED TO EXPLAIN AS TO WHY THE AMOUNT OF RS. 24,79,714/- INV ESTED IN GLOBAL INFRATECH & FINANCE LIMITED THROUGH EUREKA STOCK & SHARE BROKING SERVIC ES LTD. SHOULD NOT BE TREATED AS BOGUS AND ADDED BACK TO THE INCOME AS UNEXPLAINED INVESTM ENT U/S 69 OF THE IT. ACT, 1961.' IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED A SUBMISSION EXPLAINING THAT THE SHARES WERE PURCHASED THROUGH EUREKA STOCK & SHARE BROKING SERVICES LTD. ONLINE AND THE PAYMENTS WERE MADE THROUGH A/C PAYEE CHEQUES. FURTH ER, THE ASSESSEE STATED THAT THE INVESTMENT IN THE SHARES WERE MADE FROM ADVANCE AGA INST SALE OF FLAT WHICH WERE ALSO RECEIVED THROUGH A/C PAYEE CHEQUES. 4.3 AFTER ACCUMULATING ALL THE FACTS AND CIRCUMSTAN CES OF THE CASE, THE A.O, BELIEVED THAT THE SALE AND PURCHASE OF THE SHARES OF 'GLOBAL INFRATEC H & FINANCE LTD. MADE BY THE APPELLANT IS NOTHING BUT A SHAM TRANSACTION, FROM THE VARIOUS ST ATEMENTS RECORDED AND THE FACTS ON RECORD, THE A.O. HAS POINTED OUT THE FOLLOWING ABNORMALITIE S: 'IT IS OBSERVED THAT THE PLEA OF THE ASSESSEE IS TH AT ALL THE PAYMENTS FOR PURCHASE AND SALE OF SHARES WERE MADE THROUGH A/C PAYEE CHEQUES. BUT, THE FACT THAT THESE SHARE WERE PURCHASED FROM A PAPER COMPANY HAS NOT BEEN EX PLAINED. IT IS PERTINENT TO MENTION HERE THAT THE STATEMENT OF SHRI MAHENDRA SE THIA RECORDED ON OATH U/S 131 OF THE I. T. ACT, 1961 CONFESSING AT QUESTION NO. 19 A T SI. NO. 7 THAT M/S. GLOBAL ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 3 INFRATECH AND FINANCE LIMITED IS A PAPER COMPANY MA NAGED BY HIM BEFORE THE DDIT(INV.J, UNIT-1I(3), KOLKATA CANNOT BE OVERLOOKE D AND DENIED. FURTHER, THE STATEMENT OF OATH RECORDED U/S. 133A OF THE 1. T. A CT, 1961 OF SHRI RAKESH SOMANI, DIRECTOR OF M/S. EUREKA STOCK AND SHARES BROKING SE RVICES LIMITED CONFESSING BEFORE THE DDIT(INV.J, KOLKATA THAT THE COMPANY PRO VIDED TRANSACTIONS IN BOGUS SCRIPS/PENNY STOCKS THROUGH THEIR BROKING HOUSE TO THESE PAPER COMPANIES VIZ. M/S. GLOBALLNFRATECH AND FINANCE LIMITED CANNOT ALSO BE IGNORED. ON CAREFUL ANALYSIS OF ALL THE FACTS AND CIRCUMSTAN CES STATED ABOVE, IT APPEARS THAT THE ASSESSEE HAD PURCHASED AND SOLD THE SCRIP AT PRE-DE TERMINED PRICE, PRE-DETERMINED TIME AND TO PRE-DETERMINED BUYERS WITH THE HELP OF ACCOMMODATION ENTRY PROVIDERS, SHARE BROKER ETC. TO BRING SHORT TERM CAPITAL LOSS WHICH THE ASSESSEE HAS SET OFF DURING THE A. Y 2015-16 WITH THE LONG TERM CAPITAL GAIN OF RS. 13,20,800/- ON SALE OF FLAT. IN VIEW OF THE ABOVE DISCUSSION, THE CLAIM OF STCL OF RS.11,92,320/- IS TREATED AS BOGUS AND IS DISALLOWED TO BE CARRIED FORWARD TO TH E SUCCEEDING ASSESSMENT YEAR. ' 4.4 I CONCUR WITH THE FINDING OF THE ASSESSING OFFI CER THE APPELLANT FAILED TO PROVE THAT THE TRANSACTION LEADING TO SHORT TERM CAPITAL LOSS WAS NOT GENUINE BUT REPRESENTED A PART OF SERIES OF TRANSACTION TO CREATE SHORT TERM CAPITAL LOSS IN THE BOOKS OF ACCOUNT THROUGH SHARE TRANSACTION. IT MAY ALSO BE PERTINENT TO MENTION HE RE THAT THE ISSUE OF MANIPULATION OF STOCK MARKET WITH THE CONNIVANCE OF BLOCS TO GENERATE LTC G/STCL WAS ALSO NOTICED AND RED FLAGGED BY SIT HEADED BY EMINENT JUDGE OF SUPREME C OURT, HON. JUSTICE M.V. SHAH (RETD.) AND HON. JUSTICE HARI DAS (RETD.) FOR NECESSARY ACT ION BY ENFORCEMENT AGENCY. THE STCL OF THE ASSESSEE THROUGH TRANSACTION IN THE SHARES OF G LOBAL INFRATECH & FINANCE LTD WHICH IS A PENNY STOCK IS VERY MUCH PART OF THE WIDER SEAM OPE RATING IN SHADOW ECONOMY HIGHLIGHTED BY SIT. THIS CONFIRMS THE FINDING OF THE A.O. THAT SHA RES OF THIS COMPANY WERE BEING MANIPULATED IN ORDER TO PROVIDE UNDUE BENEFIT TO VA RIOUS PERSONS. 4.5 THE A.O. HAS CLEARLY HIGHLIGHTED THE INVESTIGAT ION REPORT OF THE DDIT, UNIT- 2(3), KOLKATA WHERE IN THE NAME OF THE SCRIPT GLOBAL INFR ATECH & FINANCE LTD. FIGURES PROMINENTLY AS ONE OF THE PENNY STOCK MANIPULATED BY BROKERS TO PROVIDE LTCG/STCL. THE A.O. HAS ALREADY HIGHLIGHTED THAT THE NUMBER OF ENTITIES INVOLVED IN ARRANGING THIS TRANSACTION WERE INVESTIGATED BY INVESTIGATION WING , KOLKATA THROUGH SURVEY U/S 133A AND RECORDING OF STATEMENT U/S 131. IT HAS BEEN POINTED OUT BY THE A.O. THAT IT HAS BEEN ADMITTED BY A NUMBER OF PERSONS INVOLVED IN RUNNING SUCH ENT ITIES OF THEIR ROLE IN ARRANGING THESE SHARE TRANSACTION. IT HAS BEEN REVEALED THAT THE SHARES OF GLOBAL INFR ATECH & FINANCE LTD. HAVE BEEN USED BY DIFFERENT SHARE BROKERS FOR PROVIDING BOGUS LTCG BY CREATING ARTIFICIAL MARKET AND PRICE MANIPULATION. IT WAS ALSO REVEALED THAT THE METHOD FOLLOWED FOR PROVIDING ENTRY OF LTCG WAS THE SAME IN THE ASSESSEE'S CASE. IT IS THEREFORE CL EAR THAT THE SAID ENTRIES OF LTCG IN THE ASSESSEE'S CASE ARE NOTHING BUT PAYMENTS MADE IN CA SH OUT OF THE ASSESSEE'S OWN UNDISCLOSED INCOME TO BRING BACK INCOME IN GENUINE FORM UNDER T HE GUISE OF LTCG. 4.6 WITH RESPECT TO THE CIRCUMSTANTIAL EVIDENCE AND IN THE MATTER RELATED TO THE DISCHARGE OF 'ONUS OF PROOF' AND THE RELEVANCE OF SURROUNDING CI RCUMSTANCES OF THE CASE, THE RELEVANT OBSERVATIONS AND FINDINGS OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE, ARE: 'THAT THOUGH AN APPELLANT'S STATEMENT MUST BE CONSI DERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE APPELLANT WA S NOT THE REAL, IN A CASE WHERE THE PARTY RELIED ON SELF-SERVING RECITALS IN THE DOCUME NTS, IT WAS FOR THE PARTY TO ESTABLISH THE TRANSFER OF THOSE RECITALS, THE TAXING AUTHORIT IES WERE ENTITLED TO LOOK INTO THE ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 4 SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY O F SUCH RECITALS. SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT OR TRIBUNAL. THEREFORE, THE COURTS AND THE TRIBUNALS H AVE TO JUDGE THE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITY. HUM AN MINDS MAY DIFFER AS TO THE RELIABILITY OF PIECE OF EVIDENCE, BUT, IN THE SPHER E, THE DECISION OF THE FINAL FACT FINDING AUTHORITY IS MADE CONCLUSIVE BY LAW. ' 4.7 THE ABOVE RATIO LAID DOWN BY THE HON'BLE SUPREM E COURT HAS BEEN REITERATED AND APPLIED BY THE HON'BLE APEX COURT IN THE CASE OF SUMATI DAY AL V CIT 214 ITR 801 (S.C). IT IS ESSENTIAL ON THE PART OF THE AO TO LOOK INTO THE RE AL NATURE OF TRANSACTION AND WHAT HAPPENS IN THE REAL WORD AND CONTEXTUALIZE THE SAME TO SUCH TR ANSACTIONS IN THE REAL MARKET SITUATION. IT IS PERTINENT TO STATE HERE, THE WISDOM OF HON'BLE SUPR EME COURT IN CIT V ARVINDA RAJU (TN) (1979) 120 ITR 46 (S.C) WHEREIN IT WAS HELD THAT- 'ONE DAY, IN OUR WELFARE STATE GEARED TO SOCIAL JUS TICE, THIS CLEVER CONCEPT OF ' AVOIDANCE ' AS AGAINST ' EVASION ' MAY HAVE TO BE EXPOSED' 4.8 HON'BLE SUPREME COURT IN THE CASE OF MCMOWELL & CO LTD. (1985) 154 ITR 148 (S.C), WHEREIN THE HON'BLE SUPREME COURT HAS DENOUNCED TAX AVOIDANCE, IF NOT BONA FIDE. THE RELEVANT PART OF THE OBSERVATION OF THE HON'BLE SUP REME COURT IS REPRODUCED HEREUNDER: 'TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITH IN THE FRAMEWORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WR ONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOURABLE TO AVOID THE PAYMENT OF TAX BY RES ORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONEST LY WITHOUT RESORTING TO SUBTERFUGES. ' EVERY PERSON IS ENTITLED TO SO ARRANGE HIS AFFAIRS AS TO AVOID TAXATION BUT THE ARRANGEMENT MUST BE REAL AND GENUINE AND NOT A SHAM OR MAKE BELIEVE. 4.9 MUMBAI ITAT IN THE CASE OF RATNAKAR M. PUJARI V S ITO IN I.T.A. NO.99 5/MUM/2012 WHERE THE FACTS OF THE CASE ARE IDENTICAL TO THAT I N THE PRESENT CASE, HAS HELD THAT- 'F) PENNY SHARE' THE SHARES IN WHICH THE ASSESSEE HAS CLAIMED TO HAV E MADE A DEAL, ARE IDENTIFIED AS PENNY SHARES BY THE INVESTIGATION WING OF THE DEPAR TMENT BECAUSE RATES OF THESE SHARES ARE NOT BASED ON BUSINESS RESULTS OF THE COM PANIES BUT SAME ARE FLUCTUATED BY INSIDER'S TRADING FROM ZERO VALUE (NEGLIGIBLE PRICE ) TO VERY HIGH PRICE AND VICE VERSA WITHOUT ANY REASON OR BASIS TO ACCOMMODATE OR GENER ATE BOGUS CAPITAL GAIN OR LOSS. 5.9 IN THE INSTANT CASE, ALL THE ABOVE FEATURES ARE PRESENT IN THE TRANSACTION OF SHARES MADE BY THE ASSESSEE. MOREOVER, THERE IS ALSO A SPECIFIC IN FORMATION THAT ASSESSEE IS INDULGED IN NON- GENUINE & BOGUS CAPITAL GAIN OBTAINED FROM THE TRAN SACTIONS OF PURCHASE AND SALE OF SHARES OF M/S SHIV OM INVESTMENTS & CONSULTANCY LTD., A KOLKA TA BASED COMPANY. IN THIS RESPECT, IT IS ALSO PERTINENT TO MENTION THAT EVEN ASSESSEE HAS FA ILED TO FURNISH THE PROOF OF PAYMENT FOR THESE TRANSACTIONS. SUBJECT TO THE ABOVE DISCUSSION, IT IS HELD THAT TH E SO CALLED PURCHASE OF SHARES IS A FABRICATED TRANSACTION AND HENCE THE SAME ARE HELD AS BOGUS. THE SAID PURCHASES HAVE BEEN TREATED AS BOGUS AND S HAM TRANSACTIONS BY THE REVENUE AS IT IS ALLEGED THAT CERTAIN BROKERS HAVE MANIPULATED AND I SSUED PRE-DATED CONTRACT NOTES WHICH EVEN DID NOT HAVE DETAILS SUCH AS TIME OF CONTRACT, TRAD E NUMBER, TRANSACTION DETAILS ETC AND PAYMENTS WERE ALSO MADE IN CASH BY THE ASSESSEE AGA INST SUCH SHAM AND BOGUS PURCHASE WITH THE OBJECTIVE OF INTRODUCING BY MANIPULATING TAX FR EE EXEMPT LONG TERM CAPITAL GAINS U/S 10(38) OF THE ACT LEADING TO ESCAPEMENT OF INCOME F ROM TAXATION, AND THE SAID FINDINGS OF THE AO WITH RESPECT TO BOGUS AND SHAM PURCHASES HAVE BE COME CONCLUSIVE AND FINAL AS THE ASSESSEE HAS NOT CHALLENGED THE FINDINGS OF THE LEA RNED AO MADE IN THE ASSESSMENT ORDER DATED 24.12.2009 PASSED BY THE AO U/S 143(3) READ W ITH SECTION 147 OF THE ACT IN THE FIRST APPEAL FILED WITH LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2005-06 AND HENCE THE FINDING OF THE AO HAS ATTAINED FINALITY. SINCE THE SAID FINDINGS O F THE AO WITH RESPECT TO PURCHASES OF4000 ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 5 SHARES OF M/S SHIV OM INVESTMENT AND CONSULTANCY LI MITED IN ASSESSMENT YEAR 2005-06 HAVE BECOME CONCLUSIVE HAVING ATTAINED FINALITY, THE SAL ES IN CONSEQUENCE THEREOF THE SHAM AND BOGUS PURCHASES CANNOT BE ACCEPTED AS GENUINE. THE ASSESSEE HAS EXPLAINED THAT THE PURCHASES WERE BACKED WITH CONTRACT NOTES OF THE BROKERS AND PAYMENTS WERE MADE IN CASH WILL NOT BE OF ANY HELP AT THIS STAGE AS THE SAID FINDING OF THE A O TREATING THE PURCHASE OF SHARES AS SHAM AND BOGUS IN THE ASSESSMENT YEAR 2005-06 HAS ATTAINED F INALITY. SINCE, PURCHASES ARE HELD TO BE BOGUS AND SHAM WHICH HAS ATTAINED FINALITY, THE SAL E IN CONSEQUENCE THEREOF WHEREBY PAYMENTS ARE RECEIVED THROUGH CHEQUE OR SHARES BEIN G SOLD THROUGH STOCK EXCHANGE ARE NOT OF ANY HELP 10 THE ASSESSEE FOR CLAIMING THE EXEMPTION AS LONG TERM CAPITAL GAINS AS THE ALLEGATION OF THE REVENUE IS THAT THE ASSESSEE HAS IN COLLUSION WITH THE BROKERS HAS MANIPULATED AND CAMOUFLAGED THE ENTIRE TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN GETTING ISSUED PRE-DATED CONTRACT NOTES FOR PURCHASES OF SH ARES FOR WHICH PAYMENTS WERE ALSO MADE FOR THESE PURCHASE IN CASH AND HENCE THESE PURCHASE S NEVER EXISTED AT THAT RELEVANT TIME. IT IS THE ALLEGATION OF THE REVENUE THAT THE ENTIRE SALE AND PURCHASE OF SHARES WERE MANIPULATED BY THE ASSESSEE IN COLLUSION WITH THE BROKERS IN ORDER TO EARN TAX FREE EXEMPT LONG TERM CAPITAL GAINS ON SALES OF SHARES U/S 10(38) OF THE ACT WHER EBY UN-ACCOUNTED CASH OF THE ASSESSEE HAS BEEN INTRODUCED IN DISGUISE IN LIEU OF SALE PROCEED S OF SHARES. KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER OUR DISCUSSION S AND REASONING AS SET OUT ABOVE, WE FIND NO INFIRMITY IN THE ORDERS OF THE LEARNED CIT(A) WH ICH WE UPHOLD AND SUSTAIN. THE ASSESSEE RELIED UPON THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF ITO V. SMT AARTI MITTAL (2014) 41 TAXMANN.COM 1/8(HYD.-TRIB) WHEREBY THE TRIBUNAL HAS ARRIVED AT THE DECISION THAT SALE AND PURCHASE WAS GENUINE EVEN THOUGH PURC HASE WAS OFF-MARKET TRANSACTION WHICH WAS ROUTED NOT THROUGH STOCK EXCHANGE BUT BACKED BY PHYSICAL DELIVERY OF SHARES WHICH WAS LATER DE-MATED AND UNDER THE CIRCUMSTANCES THE ITAT HELD THE TRANSACTIONS AS GENUINE IN NATURE AND THE ASSESSEE CLAIM WAS FOUND TO BE IN OR DER, BUT IN THE INSTANT CASE THERE IS A CONCLUSIVE AND FINAL FINDING OF FACT THAT PURCHASES OF SHARES WERE BOGUS AND SHAM AS WAS HELD BY THE REVENUE) IN THE ASSESSMENT YEAR 2005-06 WHIC H HAS NOT BEEN DISLODGED SO FAR AS THE ASSESSEE ACCEPTED THE SAID FINDINGS WHICH BECAME CO NCLUSIVE, THUS THE FACTS IN THE INSTANT CASE ARE DISTINGUISHABLE AS AGAINST THE RELIED UPON CASE OF THE ASSESSEE IN SMT AARTI MITITAL (SUPRA) ON THAT GROUND ITSELF SIMILARLY, CONTENTIONS OF THE ASSESSEE THAT THE REVENUE HAS ACCEPTED THE GAINS ON SALE OF 1500 SHARES OF M/S SHIV OM INVEST MENT AND CONSULTANCY LIMITED IN THE SUCCEEDING ASSESSMENT YEAR 2007-08 AS LONG TERM CAP ITAL GAINS WHILE PROCESSING OF RETURN U/S 143(1) OF THE ACT IS NOT HELP THE ASSESSEE AS EVERY ASSESSMENT YEAR IS SEPARATE ASSESSMENT YEAR AND MERELY BECAUSE THE REVENUE HAS NOT SELECTED THE CASE UNDER SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT AND FRAMING DETAILED SCRUTINY U/S 143(3) OF THE ACT INSTEAD CHOSE TO PROCESS THE RETURN U/S 143(1) OF THE ACT WITHOUT SCRUTINY W ILL NOT ENTITLE THE ASSESSEE TO GET THE WELL REASONED ASSESSMENT ORDERS AND APPELLATE ORDERS OF THE LEARNED CIT(A) DISLODGED IN THE ABSENCE OF THE COGENT MATERIAL AND EVIDENCES TO DEM OLISH THE FINDINGS OF THE AUTHORITIES BELOW. THE REVENUE IN THE CASE OF THE ASSESSEE'S BR OTHER HAS ALSO DECLARED THE PURCHASE AND SALE OF SHARES AS BOGUS BUT BROUGHT TO TAX, GAINS A RISING FROM SALE OF SHARES AS SHORT TERM CAPITAL GAINS. THIS IN OUR CONSIDERED VIEW, IS ALSO NOT OF HELP AS THE REVENUE IN THE INSTANT CASE HAS COME TO THE CONCLUSIVE FINDING WHICH ATTAI NED FINALITY THAT THE TRANSACTIONS OF PURCHASE OF SHARES ARE SHAM AND BOGUS TRANSACTIONS CAMOUFLAGED WITH AN INTENTION TO EVADE TAXES. WE ORDER ACCORDINGLY. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 995/MUM/20I2 FOR THE ASSESSMENT YEAR 2006-07 IS DISMISSED. 4.10 REFERENCE IS ALSO MADE TO THE DECISION OF ITAT CHANDIGARH IN THE CASE OF ACIT VS SOM NATH MAINI (2006) 100 TTJ CHD 917 WHERE IN THE HON' BLE TRIBUNAL HAS OBSERVED AS UNDER: '6. AFTER HEARING THE RIVAL SUBMISSIONS, GOING THRO UGH THE ORDERS OF AUTHORITIES BELOW AND PAPER BOOK. WE FIND THAT M/S ANKUR INTERNATIONA L LTD, ALTHOUGH IT IS A QUOTED COMPANY, ITS SHARES WERE NOT BEING TRANSACTED AT LU DHIANA STOCK EXCHANGE AT, THE RELEVANT TIME. SHARES HAVE BEEN PURCHASED AND SOLD THROUGH THE BROKERS AND PAYMENTS HAVE BEEN RECEIVED IN CHEQUE ON DIFFERENT DATES AS PER THE STATEMENT OF ACCOUNT OF M/S SK. SHARMA & CO, FACTUAL MATRIX OF THE CASE FRO M START OF THE PURCHASE OF SHARES ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 6 AT THE RATE OF RS. 3 TO THE SALE OF SHARES AT RS. 5 5 IN A SHORT SPAN OF TIME AND SHARES BEING NOT, QUOTED AT LUDHIANA STOCK EXCHANGE AND TH E WAY IN WHICH DIFFERENT, INSTALMENT PAYMENTS HAVE BEEN RECEIVED FROM THE BRO KERS AND NON-AVAILABILITY OF THE RECORDS OF THE BROKERS AND THE SHARES REMAINING IN THE NAME OF ASSESSEE EVEN LONG AFTER THE SALE OF THE SHARES DOES NOT STAND THE TES T OF PROBABILITIES. AS RIGHTLY POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE SE TYPES OF COMPANIES FUNCTION IN THE CAPITAL MARKET WHOSE SALE PRICE IS MANIPULATED TO ASTRONOMICAL HEIGHT ONLY TO CREATE THE ARTIFICIAL TRANSACTION IN THE FORM OF CA PITAL GAIN. SURROUNDING CIRCUMSTANCES DIFFER FROM THE NORMAL SHARE MARKET TRANSACTIONS IN WHICH THEY ARE ORDINARILY CARRIED OUT. TAKING ALL THE STEPS TOGETHER, FINAL CONCLUSIO N DOES NOT ACCORD WITH THE HUMAN PROBABILITIES. THE HON'BLE SUPREME COURT IN THE CAS E OF CIT V. DURGA PRASAD MORE HELD AS UNDER: 'IT IS A STORY THAT DOES NOT ACCORD WITH HUMAN PROB ABILITIES. IT IS STRANGE THAT HIGH COURT FOUND FAULT WITH THE TRIBUNAL FOR NOT SW ALLOWING THAT STORY. IF THAT STORY IS FOUND TO BE UNBELIEVABLE AS THE TRIBUNAL H AS FOUND AND IN OUR OPINION, RIGHTLY THAT THE DECISIONS REMAINS THAT TH E CONSIDERATION FOR THE SALE PROCEEDED FROM THE ASSESSEE AND THEREFORE, IT MUST BE ASSUMED TO BE HIS MONEY. IT IS SURPRISING THAT THE HIGH COURT HAS FOUND FAUL T WITH THE ITO FOR NOT EXAMINING THE WIFE AND THE FATHER-IN-LAW OF THE ASS ESSEE FOR PROVING THE DEPARTMENT'S CASE. ALL THAT WE CAN SAY IS THAT THE HIGH COURT HAS IGNORED THE FACTS OF LIFE. IT IS UNFORTUNATE THAT, THE HIGH COU RT HAS TAKEN A SUPERFICIAL VIEW OF THE ONUS THAT LAY ON THE DEPARTMENT .' 6. THE LEARNED CIT(A) ONLY GOT SWAYED BY THE ISSUAN CE OF NOTICE BY THE AO UNDER SECTION 131 TO BOTH THE BROKERS FROM WHOM SHARES WE RE PURCHASED AND SOLD AND CAME TO THE CONCLUSION THAT SHARE TRANSACTIONS WERE GENU INE OVERLOOKING THE MATERIAL GATHERED BY THE AO FROM THE STATEMENTS RECORDED OF BROKER M/S SK. SHARMA & CO. AND THE OTHER FACTS AND CIRCUMSTANCES THAT VOLUME O F TRANSACTIONS OF JAIPUR STOCK EXCHANGE IS ONLY 600 SHARES AND 1000 SHARES. PAYMEN TS HAVE BEEN RECEIVED FROM THE BROKERS ONLY IN INSTALMENTS OVER A PERIOD OF 6-7 MO NTHS. IT IS TRUE THAT WHEN TRANSACTIONS ARE THROUGH CHEQUES, IT LOOKS LIKE REA L TRANSACTION BUT AUTHORITIES ARE PERMITTED TO LOOK BEHIND THE TRANSACTIONS AND FIND OUT THE MOTIVE BEHIND TRANSACTIONS. GENERALLY, IT IS EXPECTED THAT APPARENT IS REAL BUT IT IS NOT SACROSANCT. IF FACTS AND CIRCUMSTANCES SO WARRANT THAT IT DOES NOT ACCORD WI TH THE TEST OF HUMAN PROBABILITIES, TRANSACTIONS HAVE BEEN HELD TO BE NON-GENUINE, IT I S HIGHLY IMPROBABLE THAT SHARE PRICE OF A WORTHLESS COMPANY CAN GO FROM RS. 3 TO RS. 5 5 IN A SHORT SPAN OF TIME. MERE PAYMENT BY CHEQUE AND RECEIPT BY CHEQUE DOES NOT RE NDER A TRANSACTION GENUINE. CAPITAL GAIN TAX WAS CREATED TO OPERATE IN A REAL W ORLD AND NOT THAT OF MAKE BELIEF FACTS OF THE CASE ONLY LEAD TO THE INFERENCE THAT T HESE TRANSACTIONS ARE NOT GENUINE AND MAKE BELIEVE ONLY TO OFFSET THE LOSS INCURRED ON TH E SALE OF JEWELLERY DECLARED UNDER VDIS IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THIS CASE AND MATERIAL ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE IMPUGNED ADDITION. WE, ACCORDINGLY SET ASIDE THE ORDER OF TH E CIT(A) AND RESTORE THAT OF THE AO.' 4.11 WHILE CONFIRMING THE DECISION OF ITAT CHANDIGA RH BENCH (SOMNATH MAINI VS. CIT, HON'BLE P &H HIGH COURT HAS HELD AS UNDER- 'THE ASSESSEE INCURRED CAPITAL LOSS ON ACCOUNT OF S ALE OF GOLD JEWELLERY AND ALSO HAD SHORT-TERM CAPITAL GAIN OF ALMOST EQUAL AMOUNT. THE AO OBSERVED THAT SHORT-TERM GAIN WAS NOT GENUINE INASMUCH AS ASSESSEE HAD PURCHASED 45,000 SHARES OF M/S ANKUR INTERNATIONAL LTD AT VARYING RATES FROM RS. 2.06 TO RS. 3. F PER SHARE AND SOLD THEM WITHIN A SHORT SPAN OF SIX-SEVEN MONTHS AT THE RATE VARYING FROM RS. 47.75 PAISE TO RS. 55. THESE SHARES WERE PURCHASED THROUGH A BROKE R, MUNISH ARORA & CO. AND SOLD ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 7 THROUGH ANOTHER BROKER, M/S SK SHARMA & CO. THE AO WAS TAKEN BY SURPRISE BY THE ASTRONOMICAL RISE IN SHARE PRICE OF A COMPANY FROM RS. 3 TO RS. 55 AND STARTED FURTHER ENQUIRY. THE AO AFTER ENQUIRY MADE ADDITION TO THE INCOME OF THE ASSESSEE, WHICH WAS UPHELD BY THE CIT(A) AS WELL AS BY THE TRIBUNAL . 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VIEW TAKEN BY THE TRIBUNAL IS PERVERSE. THE ASSESSEE HAVING DISCHARGED THE BURDEN OF PROVING THE TRANSACTIONS OF SALE AND PURCHASE OF THE SHARES TO BE GENUINE, BURD EN OF PROVING THAT THE SAID TRANSACTIONS WERE NOT GENUINE, WAS ON THE DEPARTMEN T AND IN THE ABSENCE OF ANY MATERIAL ON RECORD, HOLDING THE TRANSACTIONS TO BE NOT GENUINE, WAS NOT PERMISSIBLE. WE ARE UNABLE TO ACCEPT THE SUBMISSION MADE. THE BU RDEN OF PROVING THAT INCOME IS SUBJECT TO TAX IS ON THE REVENUE BUT ON THE FACTS, TO SHOW THAT THE TRANSACTION IS GENUINE, BURDEN IS PRIMARILY ON THE ASSESSEE. THE A 0 IS TO APPLY THE TEST OF HUMAN PROBABILITIES FOR DECIDING GENUINENESS OR OTHERWISE OF A PARTICULAR TRANSACTION. MERE LEADING OF EVIDENCE THAT THE TRANSACTION WAS GENUIN E, CANNOT BE CONCLUSIVE. SUCH EVIDENCE IS REQUIRED TO BE ASSESSED BY THE AO IN A REASONABLE WAY. GENUINENESS OF THE TRANSACTION CAN BE REJECTED EVEN IF THE ASSESSE E LEADS EVIDENCE WHICH IS NOT TRUSTWORTHY, EVEN IF THE DEPARTMENT DOES NOT LEAD A NY EVIDENCE ON SUCH AN ISSUE. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE FIND ING RECORDED BY THE TRIBUNAL IS A FINDING OF FACT AND CANNOT BE HELD TO BE PERVERSE. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED.' 4.12 AS STATED BY THE HON'BLE P&H HIGH COURT IN THE ABOVE MENTIONED CASE, MERE LEADING THE EVIDENCE THAT THE TRANSACTION WAS GENUINE, CANNOT B E TAKEN AS CONCLUSIVE. SUCH EVIDENCE IS REQUIRED TO BE ASSESSED BY THE AO IN A REASONABLE W AY. GENUINENESS OF THE TRANSACTION CAN BE REJECTED IF THE ASSESSEE LEADS EVIDENCE WHICH IS NO T TRUSTWORTHY, EVEN IF THE DEPARTMENT DOES NOT LEAD ANY EVIDENCE ON SUCH AN ISSUE. IN THE PRES ENT CASE, PRIMA FACIE THE APPELLANT HAS PRODUCED THE DOCUMENTS SHOWING THE DETAILS OF THE T RANSACTION, BUT HE MISERABLY FAILS TO SATISFY THE TEST OF HUMAN PROBABILITIES AS DISCUSSE D BY THE AO IN DETAIL IN THE ASSESSMENT ORDER. 4.13 RELIANCE IS ALSO PLACE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS P. MOHANKALA (15/05/2007) WHEREIN THE SC HELD THAT- 'THE QUESTION IS WHAT IS THE TRUE NATURE AND SCOPE OF SECTION 68 OF THE ACT? WHEN AND IN WHAT CIRCUMSTANCES SECTION 68 OF THE ACT WOULD C OME INTO PLAY? THAT A BARE READING OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS; OR THE EXPLANATION OFFERED BY T HE ASSESSEE IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, IT IS ONLY T HEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE EXPRESSION ' THE ASSESSEE OFFERS NO EXPLANATION ' MEANS WHERE THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS RE GARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. IT IS TRUE TH E OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE AS SESSEE AS NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATE RIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATE RIAL AVAILABLE ON RECORD APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION.' IN THIS CASE THE HON'BLE SUPREME COURT HAS REVERSED THE DECISION OF THE HON'BLE MADRAS HIGH COURT AND UPHELD THE FINDINGS OF THE LOWER AUTHORIT IES REGARDING THE TRANSACTIONS OF GIFT RECEIVED BY ASSESSEE EVEN THOUGH THESE WERE DONE TH ROUGH BANKING CHANNELS, TO BE THOUGH APPARENT BUT NOT BE REAL ONE. ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 8 4.14 IN THIS CONNECTION, I WOULD ALSO LIKE TO REFER TO THE DECISION OF THE HON'BLE ITAT BOMBAY BENCH 'B' ( ITA NO.614/BOM/87 A.Y. 1983-84) IN THE CASE OF M/S. MONT BLANE PROPE RTIES AND INDUSTRIES PVT. LTD., WHICH WAS UPHELD BY THE HON'B LE SUPREME COURT. THE HON'BLE TRIBUNAL HAD HELD THAT THE WORD 'EVIDENCE' AS USED IN SEC. 1 43(3) COVERED CIRCUMSTANTIAL EVIDENCE ALSO. THE WORD 'EVIDENCE' AS USED IN SEC. 143 (3) OBVIOUS LY COULD NOT BE CONFINED TO DIRECT EVIDENCE. THE WORD 'EVIDENCE' WAS COMPREHENSIVE ENO UGH TO COVER THE CIRCUMSTANTIAL EVIDENCE ALSO. UNDER THE TAX JURISPRUDENCE, THE EVIDENCE ' HAD MUCH WIDER CONNOTATIONS. WHILE THE WORD ' EVIDENCE ' MIGHT RECALL THE ORAL AND DOCUMENTARY EVIDENCE AS MAY BE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT, THE USE O F WORD ' MATERIAL ' IN SEC. 143(3) SHOWED THAT THE ASSESSING OFFICER, NOT BEING A COURT COULD RELY UPON MATERIAL, WHICH MIGHT NOT STRICTLY BE EVIDENCE ADMISSIBLE UNDER THE INDIAN EVIDENCE AC T FOR THE PURPOSE OF MAKING AN ORDER OF ASSESSMENT. COURT OFTEN TOOK JUDICIAL NOTICE OF CER TAIN FACTS WHICH NEED NOT BE PROVED BEFORE THEM. THE PLAIN READING OF SECTION 142 AND 143 CLEA RLY SUGGESTS THAT THE ASSESSING OFFICER MAY ALSO ACT ON THE MATERIAL GATHERED BY HIM. THE WORD 'MATERIAL' CLEARLY SHOWS THAT THE ASSESSING OFFICER IS NOT FETTERED BY THE TECHNICAL RULES OF E VIDENCE AND THE LIKE, AND THAT HE MAY ACT ON MATERIAL WHICH MAY NOT STRICTLY SPEAKING BE ACCEPTE D EVIDENCE IN A COURT OF LAW. 4.15 IT MUST ALSO BE STATED HERE THAT IN CIT VS NR PORTFOLIO PVT LTD ON 22 NOVEMBER, 2013, THE HON'BLE DELHI HIGH COURT HAS HELD THAT- 'THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. WHEN A FACT IS ALLEGED AND STATED BEFORE THE ASSESSING OFFICER BY AN ASSESSEE, HE MUST AND SHOULD EXAMINE AND VERIFY, WHEN IN DOUBT OR WHEN THE ASSER TION IS DEBATABLE. NORMALLY A FACTUAL ASSERTION MADE SHOULD BE ACCEPTED BY THE AS SESSING OFFICER UNLESS FOR JUSTIFICATION AND REASONS THE ASSESSING OFFICER FEE LS THAT HE NEEDS/REQUIRES A DEEPER AND DETAILED VERIFICATION OF THE FACTS ALLEGED. THE AS SESSEE IN SUCH CIRCUMSTANCES SHOULD COOPERATE AND FURNISH PAPERS, DETAILS AND PARTICULA RS. THIS MAY ENTAIL ISSUE OF NOTICES TO THIRD PARTIES TO FURNISH AND SUPPLY INFORMATION OR CONFIRM FACTS OR EVEN ATTEND AS WITNESSES. THE ASSESSING OFFICER CAN ALSO REFER TO INCRIMINATING MATERIAL OR EVIDENCE AVAILABLE WITH HIM AND CALL UPON THE ASSESSEE TO FI LE THEIR RESPONSE. WE CANNOT LAY DOWN OR STATE A GENERAL OR UNIVERSAL PROCEDURE OR M ETHOD WHICH SHOULD BE ADOPTED BY THE ASSESSING OFFICER WHEN VERIFICATION OF FACTS IS REQUIRED THE MANNER AND MODE OF CONDUCTING ASSESSMENT PROCEEDINGS HAS TO BE LEFT TO THE DISCRETION OF THE ASSESSING OFFICER, AND THE SAME SHOULD BE JUST, FAIR AND SHOU LD NOT CAUSE ANY HARASSMENT TO THE ASSESSEE OR THIRD PERSONS FORM WHOM CONFIRMATION OR VERIFICATION IS REQUIRED THE VERIFICATION AND INVESTIGATION SHOULD BE ONE WITH T HE LEAST AMOUNT OF INTRUSION, INCONVENIENCE OR HARASSMENT ESPECIALLY TO THIRD PAR TIES, WHO MAY HAVE ENTERED INTO TRANSACTIONS WITH THE ASSESSEE. THE ULTIMATE FINDIN G OF THE ASSESSING OFFICER SHOULD REFLECT DUE APPLICATION OR MIND ON THE RELEVANT FAC TS AND THE DECISION SHOULD TAKE INTO CONSIDERATION THE ENTIRE MATERIAL, WHICH IS GERMANE AND WHICH SHOULD NOT BE IGNORED AND EXCLUDE THAT WHICH IS IRRELEVANT. CERTAIN FACTS OR ASPECTS MAY BE NEUTRAL AND SHOULD BE NOTED. THESE SHOULD NOT BE IGNORED BUT TH EY CANNOT BECOME THE BEDROCK OR SUBSTRATUM OF THE CONCLUSION. THE PROVISIONS OF EVI DENCE ACT ARE NOT APPLICABLE, BUT THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHOR ITY, MUST TAKE CARE AND CAUTION TO ENSURE THAT THE DECISION IS REASONABLE AND SATISFIE S THE CANONS OF EQUITY, FAIRNESS AND JUSTICE. THE EVIDENCE SHOULD BE IMPARTIALLY AND OBJ ECTIVELY ANALYZED TO ENSURE THAT THE ADVERSE FINDINGS AGAINST THE ASSESSEE WHEN RECO RDED ARE ADEQUATELY AND DULY SUPPORTED BY MATERIAL AND EVIDENCE AND CAN WITHSTAN D THE CHALLENGE IN APPELLATE PROCEEDINGS. PRINCIPLE OF PREPONDERANCE OF PROBABIL ITIES APPLIES. WHAT IS STATED AND THE SAID STANDARD, EQUALLY APPLY TO THE TRIBUNAL AN D INDEED THIS COURT. THE REASONING AND THE GROUNDS GIVEN IN ANY DECISION OR PRONOUNCEM ENT WHILE DEALING WITH THE CONTENTIONS AND ISSUES SHOULD REFLECT APPLICATION O F MIND ON THE RELEVANT ASPECTS. WHEN AN ASSESSEE DOES NOT PRODUCE EVIDENCE OR TRIES TO AVOID APPEARANCE BEFORE THE ASSESSING OFFICER, IT NECESSARILY CREATES DIFFICULT IES AND PREVENTS ASCERTAINMENT OF TRUE AND CORRECT FACTS AS THE ASSESSING OFFICER IS DENIED ADVANTAGE OF THE CONTENTION OR FACTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IN CASE AN ASSESSEE DELIBERATELY AND ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 9 INTENTIONALLY FAILS TO PRODUCE EVIDENCE BEFORE THE ASSESSING OFFICER WITH THE DESIRE TO PREVENT INQUIRY OR INVESTIGATION, AN ADVERSE VIEW S HOULD BE TAKEN '. , 4.16 SIMILAR DECISION HAS BEEN TAKEN IN FOLLOWING CASES: SANIAY BIMALCHAND JAIN L/H SHANDTIDEVI BIMALCHAND J AIN VS PCIT (ITA NO. 18/2017 BOMBAY HIGH COURT (NAGPUR BENCH) (COPY ENCL OSED) THE ASSESSEE HAD PURCHASED SHARES OF TWO PENNY STOC KS OF KOLKATA BASED COMPANIES I.E., 8000 SHARES AT THE RATE OF RS. 5.50 PER SHARE ON 08.08.2003 AND 4000 SHARES AT THE RATE OF RS. 4/PER SHARE ON 05.08.2003. THE ASSESSEE SOLD 2200 SHARES AT AN EXORBITANT RATE OF RS. 486.55 PER SHARE ON 07.06.2005 AND 800 SHARES ON 20.06.2005 AT THE RATE OF RS. 485.65. THE AUTHORITIES HELD THAT THE ASSESSEE HAD NOT TENDERED COGENT EVIDENCE TO EXPLAIN AS TO HOW THE SHARES IN AN UNKNOWN COMPANY WORTH RS. 5/HAD JUMPED TO RS.485/IN NO TIME. ADDITION CONFIRMED. IN CASE OF CHANDAN GUPTA VS CIT (20115) 54 TAXMANN. COM 10 (PUNJAB & HARYANA)/(2015) 229 TAXMAN 173 HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT WHERE ASSESSEE COULD NOT EXPLAIN RECEIPT OF ALLEGED SHARE TRANSACTIONS PROFI TS CREDITED IN HIS BANK ACCOUNTS, THEN SALE PROCEEDS HAD TO BE ADDED AS INCOME OF ASSESSEE UNDE R SECTION 68.S IN CASE OF BALBIR CHAND MAINI VS CIT (2011) 12 TAXM ANN.COM 276 (PUNJAB & HARYANA)/(2011) 201 TAXMAN 94 (PUNJAB & HARYANA) (M AF.)/[2012] 340 ITR 161 (PUNJAB & HARYANA)/[2012] 247 CTR 468 (PUNJAB & HARYANA) WHER E IN SECTION 69 OF THE INCOME TAX ACT, 1961 IS UPHELD. IN THIS CASE IN ASSESSMENT YEA R 1998-99 ,THE, ASSESSING OFFICER FOUND THAT ASSESSEE HAD PURCHASED CERTAIN SHARES OF A COM PANY AT RATE BETWEEN RS. 2.50 AND RS. 3.40 PER SHARE IN MONTH OF APRIL, 1997 AND PART OF THOSE SHARES WERE SOLD THROUGH A BROKER AT RS. 55 PER SHARE - HE CAME TO OPINION THAT VALUE OF SAI D SHARES COULD NOT BE AS HIGH AS RS. 55 PER SHARE-HE RECORDED STATEMENT OF BROKER WHO ADMITTED TO HAVE PURCHASED SHARES IN QUESTION BUT FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER RELEVA NT DOCUMENTS-HE ALSO FOUND THAT ALLEGED SALE OF SHARES HAD NOT TAKEN PLACE THROUGH ANY STOC K EXCHANGE-ON SCRUTINY OF BOOKS OF ACCOUNT OF BROKER, IT WAS FOUND THAT THERE WERE CAS H DEPOSITS IN ITS BANK ACCOUNT PRECEDING ISSUE OF CHEQUES IN NAME OF ASSESSEE FOR PURCHASE O F SHARES CLAIMED TO BE SALE PROCEEDS OF SAME SHARES RECEIVED IN ADVANCE-BROKER COULD NOT GI VE DETAILS OF PURCHASER OF SHARES. MOREOVER, SHARES CLAIMED TO HAVE BEEN SOLD THROUGH BROKER HAD NOT BEEN TRANSFERRED EVEN AT TIME OF MAKING ENQUIRY BY ASSESSING OFFICER AND SAM E CONTINUED TO BE REGISTERED IN NAME OF ASSESSEE - IN THOSE CIRCUMSTANCES, ASSESSING OFFICE R HELD THAT TRANSACTION OF SALE OF SHARES WAS AN INGENUINE TRANSACTION AND MADE ADDITION OF ALLEG ED SALE CONSIDERATION TO ASSESSEE'S INCOME AS INCOME FROM UNDISCLOSED SOURCES- WHETHER ON FACT S, ADDITION MADE BY ASSESSING OFFICER WAS JUSTIFIED-HELD, YES. IN CASE OF USHA CHANDRESH SHAH VS ITO [I.T.A. NO. 6 858/MUM/2011] HORI'BLE ITAT .MUMBAI HELD THAT IN THIS CASE THE ASSESSEE COULD N OT PRODUCE THE COPIES OF SHARE CERTIFICATES AND COPIES OF SHARE TRANSFER FORMS. THE TRANSACTION OF PURCHASE OF SHARES COULD NOT BE CROSS VERIFIED. THE SHARES OF THE COMPANY WAS DECLARES AS ' PENNY STOCK ' BY SEBI AND THE BROKER SANJU KABRA, THROUGH WHOM THE SHARES WERE SOLD BY T HE ASSESSEE WAS INDICATED FOR MANIPULATING THE PRICES OF PENNY STOCK SHARES. THE TAX AUTHORITIES HAVE RIGHTLY APPLIED THE TEST OF HUMAN PROBABILITIES TO EXAMINE THE CLAIM OF PURC HASE AND SALE OF SHARES MADE BY THE ASSESSEE. THE CIT(A) WAS JUSTIFIED IN CONFIRMING TH E ORDER OF THE AO BY APPLYING THE TEST OF HUMAN PROBABILITIES. 4.17 IT IS FURTHER OBSERVE THAT HON. DELHI HIGH COU RT IN THE CASE OF CIT V EMPIRE BUILTECH P LTD 361 ITR 258 (DEL), HAS HELD THAT WHEN THE ASSES SEE DOES NOT PRODUCE EVIDENCE OR TRIES TO AVOID THE APPEARANCE BEFORE THE ASSESSING AUTHORITY IT NECESSARILY CREATES DIFFICULTIES AND PREVENTS ASCERTAINMENT OF THE TRUTH AND CORRECT FAC TS AS THE ASSESSING OFFICER IS DENIED THE ADVANTAGE OF THE ATTENDANCE OR FACTUAL ASSERTION BY THE ASSESSEE BEFORE HIM. IF AN ASSESSEE DELIBERATELY AND INTENTIONALLY FAILS TO PRODUCE EVI DENCE BEFORE THE ASSESSING OFFICER WITH THE ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 10 DESIRE TO PREVENT ENQUIRY OR INVESTIGATION AN ADVER SE OPINION SHOULD BE DRAWN. THE' ASSESSEE HAD NOT DISCHARGED THE INITIAL ONUS TO ESTABLISH TH E IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE JUSTIFIED AND SUSTAINABLE. 4.18 THE RELIANCE CAN ALSO BE PLACED UPON THE DECIS IONS OF HON'BLE ITAT, PUNE IN THE CASE OF SH. ZIKRULLAH CHAUDHARY IN ITA.NO.669/PN/2012 DATED 04.03.2014, HON'BLE ITAT, MUMBAI IN THE CASE OF SH. ARVIND M. KARIYA IN I.T.A. NO.70 24/MUM/2010 DATED 16.01.2013 AND HON'BLE ITAT, DELHI BENCH 98 ITD 285 IN THE CASE OF M/S NAPAR DRUGS LIMITED. ALL THESE CASES ARE APPLICABLE TO THE FACTS AND CIR CUMSTANCES OF THE PRESENT CASE IN WHICH THE VARIOUS JUDICIAL AUTHORITIES HAVE DECIDED THE CASES IN FAVOUR OF REVENUE AFTER GOING THROUGH THE ENTIRETY OF THE CIRCUMSTANCES AND NOT GETTING INFLUENCED BY THE PICTURE SHOWN BY THE APPELLANT WHICH IS COLORED BY THE USE OF SHAM DEVIC ES AND LAYERING OF TRANSACTIONS. THE CASE LAWS RELIED UPON BY THE AR HAVE BEEN PERUS ED. IT CANNOT BE DENIED THAT THE DECISIONS IN THESE CASES ARE IN FAVOUR OF THE ASSESSEE BUT IT APPEARS THAT THE HON'BLE TRIBUNALS/COURTS WHICH HAVE PASSED THESE JUDGMENTS HAVE NOT BEEN MAD E AWARE OF THE ENTIRETY OF THE CIRCUMSTANCES. MOREOVER, THE FACT THAT THE ASSESSEE S IN THESE CASES FAIL TO CLEAR THE TEST OF HUMAN PROBABILITIES, HAS NOT BEEN BROUGHT TO THE KN OWLEDGE OF THESE JUDICIAL AUTHORITIES. THEREFORE, THESE CASES ARE NOT BEING FOUND RELEVANT IN THE PRESENT CASE WHERE THE AO HAS GONE TO THE VERY ROOT OF THE TRANSACTIONS AFTER DOING DE EP ANALYSIS OF THE FACTS AND CIRCUMSTANCES AND AFTER TAKING INTO ACCOUNT THE VARIOUS INPUTS AV AILABLE WITH HIM FROM DIFFERENT SOURCES, SOME OF WHICH THE AO HAS FOUND HIMSELF WITH THE HEL P OF ONLINE RESOURCES AVAILABLE ON INTERNET. 4.19 IN THE PRESENT CASE, THERE IS AN OBVIOUS AND P LAIN TRANSACTION OF TAX EVASION WHICH HAS BEEN CLOTHED WITH THE SMOKE-SCREEN OF SUBTERFUGES, BY THE APPELLANT. THE FACTS OF THE PRESENT CASE CLEARLY REVEAL THAT THE TRANSACTIONS OF PURCHA SE AND SALE OF SHARES HAD BEEN EFFECTED TO CREATE BOGUS LOSS UNDER THE HEAD STCG. SUCH TRANSAC TIONS ARE NOT GENUINE AND NATURAL TRANSACTIONS, BUT PRECONCEIVED TRANSACTIONS, RESULT ING IN CREATION OF BOGUS LOSS. SUCH TRANSACTIONS ARE MUTUALLY SELF-SERVING TO THE PARTI ES TO THE TRANSACTIONS. I HAVE COME TO CONCLUDE ON THE BASIS OF ABOVE ANALYSIS, DOCUMENTAR Y EVIDENCES, CIRCUMSTANTIAL EVIDENCES, HUMAN CONDUCT AND PREPONDERANCE OF PROBABILITIES TH AT WHAT IS APPARENT IN THIS CASE IS NOT REAL, THAT THESE FINANCIAL TRANSACTIONS WERE SHAM O NES AND THAT THIS ENTIRE EDIFICE WAS ONLY A COLOURABLE DEVICE. USED TO EVADE TAX. MOREOVER, THE IMPUGNED TRANSACTIONS OF SHARES ARE PREORDAINED ONE, NOT FOR LEGITIMATE PURPOSE IN VIEW BUT FOR THE PURPOSE OF CREATING NON- GENUINE AND ARTIFICIAL PROFITS, WITH A VIEW TO REDU CE VALID TAX LIABILITY. KEEPING IN VIEW OF VARIOUS DECISIONS, FACT OF THE CASE AND OBSERVATION S MADE BY UNDERSIGNED, THE ADDITIONS MADE BY THE AO IS HEREBY CONFIRMED ON ACCOUNT OF BOGUS S HORT TERM CAPITAL LOSS AND THE APPEAL OF THE APPELLANT IS DISMISSED . 3. I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO RIVA L CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED ADDITION AS PER RESPECTIVE STANDS OF THE PARTIES. THERE IS HARDLY ANY DISPUTE THAT REVENUE HAS PLACED ON RELIA NCE OF THE CIRCUMSTANTIAL EVIDENCE ON STATEMENT OF AN ALLEGED ENTRY OPERATOR INDICATIN G ARTIFICIAL RIGGING OF SCRIP PRICES IN ISSUE. THE ASSESSING OFFICER AS WELL AS CIT(A) ARE OF THE VIEW THAT THE SAID CLINCHING EVIDENCE IN THE NATURE OF SEARCH STATEMENT MAKE IT CLEAR THAT THE ASSESSEES STCL IS NOT GENUINE. LEARNED DEPARTMENTAL REPRESENTATIVE PL ACES STRONG RELIANCE ON HON'BLE ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 11 APEX COURTS LANDMARK DECISIONS IN SUMATI DAYAL VS. CIT (1995) 80 TAXMANN. 89/214 ITR 801 (SC) AND CIT VS. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) THAT SUSPICIOUS CIRCUMSTANCES HIGHLIGHTED IN THE LOWER A PPELLATE DISCUSSION EXTRACTED HEREINABOVE DESERVES TO BE UPHELD AS PER THE HUMAN PROBABILITIES BY REMOVING ALL BLINKERS. THIS TRIBUNALS CO-ORDINATE BENCHS DECIS ION IN ITA NO.2477/KOL/2018 MAHAVIR JHANWAV VS. ITO DECIDED ON 01.02.2019 HOLDS THAT SUCH CIRCUMSTANTI AL CARRIES NO SIGNIFICANCE AS UNDER:- 5. AFTER HEARING BOTH SIDES, I FIND THAT IN A NUMB ER OF CASES THIS BENCH OF THE TRIBUNAL AND JURISDICTIONAL CALCUTTA HIGH COURT HAS CONSISTENTLY HELD THAT, DECISION IN ALL SUCH CASES SHOULD BE BASED ON EVIDE NCE AND NOT ON GENERALISATION, HUMAN PROBABILITIES, SUSPICION, CONJECTURES AND SUR MISES. IN ALL CASES ADDITIONS WERE DELETED. SOME OF THE CASES WERE, DETAILED FIND ING HAVE BEEN GIVEN ON THIS ISSUE, ARE LISTED BELOW:- SL.NO ITA NOS. NAME OF THE AS SESSEE DATE OF ORDER /JUDGMENT 1. ITA NO.714 TO 718/KOL/2011 ITAT, KOLKATA DICT VS. SUNITA KHEMKA 28.10.2015 2 214 ITR 244 CALCUTTA HIGH COURT CIT VS. CARBO INDUSTRIAL HOLDINGS LTD. - 3. 250 ITR 539 CIT VS. EMERALD COMMERCIAL LTD. 23. 03.2001 4. ITA NO.1236- 1237/KOL/2017 MANISH KUMAR BAID VS. ACIT 18.08.2017 5. ITA NO.569/KOL/2017 GAUTAM PINCHA 15.11.2017 6 ITA NO.443/KOL/2017 KIRAN KOTHARI HUF 15.11.2017 7 ITA NO.2281/KOL/2017 NAVNEET AGARWAL VS. ITO 20. 07.2018 8 ITA NO.456 OF 2007 BOMBAY HIGH COURT CIT VS. SHRI MUKESH RATILAL MAROLIA 07.09.2011 9 ITA NO.95 OF 2017 (O&M) PCIT VS. PREM PAL GANDHI 18.01.2018 10 ITA NO.1089/KOL/2018 SANJAY MEHTA 28.09.2018 6. REGARDING THE CASE LAWS RELIED UPON BY THE LD. D EPARTMENTAL REPRESENTATIVE, I FIND THAT, IN THE CASE OF M/S. PANKAJ AGARWAL & SONS (HUF) (SUPRA), THE ISSUE WAS DECIDED AGAINST THE ASSESSEE FOR THE REASON THAT, T HE ASSESSEE COULD NOT JUSTIFY HIS CLAIM AS GENUINE BY PRODUCING EVIDENCE AND WAS ONLY ARGUING FOR THE MATTER TO BE SET ASIDE TO THE LOWER AUTHORITIES ON THE GROUND OF NATURAL JUSTICE. AS SIMILAR ARGUMENTS WERE NOT RAISED BEFORE THE LOWER AUTHORIT IES BY THE ASSESSEE, THE ITAT REJECTED THESE ARGUMENTS. IN THE CASE ON HAND, ALL EVIDENCES WERE PRODUCED BY THE ASSESSEE. IN THE CASE OF SANJAY BIMALCHAND JAIN, LEGAL HEIR OF SANTI DEVI BIMALCHAND JAIN, THE HONBLE HIGH COURT UPHELD THE STAND OF THE REVENUE THAT THE ITA NO.729/KOL/2018 A.Y. 2014-15 MANGILAL JAIN VS. ITO WD-3(3), DJR PAGE 12 TRANSACTION IN QUESTION IS AN ADVENTURE IN NATURE O F TRADE AND THE PROFIT OF THE TRANSACTIONS IS ASSESSABLE UNDER THE HEAD OF BUSIN ESS INCOME. IN THE CASE ON HAND, THE LD. ASSESSING OFFICER HAS NOT ASSESSED TH IS AMOUNT AS BUSINESS INCOME. IN ANY EVENT, I AM BOUND TO FOLLOW THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THIS MATTER. I FIND THAT THE ASSESSEE HAS FILED ALL NECESSARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS. SOME OF THESE EVIDENCES ARE (A ) EVIDENCE OF PURCHASE OF SHARES, (B) EVIDENCE OF PAYMENT FOR PURCHASE OF SHA RES MADE BY WAY OF ACCOUNT PAYEE CHEQUE, COPY OF BANK STATEMENTS, (C) COPY OF BALANCE SHEET DISCLOSING INVESTMENTS, (D) COPY OF DEMAT STATEMENT REFLECTING PURCHASE, (E) COPY OF MERGER ORDER PASSED BY THE HIGH COURT , (F) COPY OF ALLOTMENT OF SHARES ON MERGER, (G) EVIDENCE OF SALE OF SHARES THROUGH THE STOCK EXCHANGE, (H) COPY OF DEMAT STATEMENT SHOWING THE SALE OF SHARES, (I) COP Y OF BANK STATEMENT REFLECTING SALE RECEIPTS, (J) COPY OF BROKERS LEDGER, (K) COPY OF CONTRACT NOTES ETC. 7. THE PROPOSITION OF LAW LAID DOWN IN THESE CASE L AWS BY THE JURISDICTIONAL HIGH COURT AS WELL AS BY THE ITAT KOLKATA ON THESE ISSUE S ARE IN FAVOUR OF THE ASSESSEE. THESE ARE SQUARELY APPLICABLE TO THE FACTS OF THE C ASE. THE LD. DEPARTMENTAL REPRESENTATIVE, THOUGH NOT LEAVING HIS GROUND, COUL D NOT CONTROVERT THE CLAIM OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IN QUESTION IS COVERED BY THE ABOVE CITED DECISIONS OF THE HONBLE JURISDICTIONAL CALCU TTA HIGH COURT AND THE ITAT. I AM BOUND TO FOLLOW THE SAME. I ADOPT THE ABOVE EXTRACTED DETAILED DISCUSSION MUTATIS MUTANDIS TO DELETE THE IMPUGNED ADDITION. 4. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 15/05/2019 SD/- (S.S. GODARA) JUD ICIAL MEMBER KOLKATA, *DKP/SR.PS - 15/05/2019 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-MANGILAL JAIN, C/O ADVOCATE PRADIP LAKHO TIA, 2 ND FLOOR, METERO PLAZA, SF ROAD, SILIGURI-7340 05 2. /RESPONDENT-ITO WARD-3(3), NR. LAL KOTHI, DARJEELIN G 3. ' % / CONCERNED CIT 4. % - / CIT (A) 5. & ))' , ' / DR, ITAT, KOLKATA 6. + / GUARD FILE. BY ORDER/ , /TRUE COPY/ ',