Appeal Details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 3251 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 4 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-11-2020
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2015-2016
Appeal Filed On
27-06-2019
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BE NCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 780/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-02, JAIPUR CUKE VS. SH. PRAKASH CHAND SHARMA C-42, GOKUL PATH VAISHALI NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPS2776H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 781/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-02, JAIPUR CUKE VS. SMT. KALAWATI SHARMA C-42, GOKUL PATH VAISHALI NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACAPS1025K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SH. B. K. GUPTA (CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. P. C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 11/09/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 18/11/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF LD. CIT(A)-4, JAIPUR DATED 29.03.2019 IN RESPECT OF AFORESAID ASSESSEES FOR A.Y 2015-16. SINCE THE COMMON ISSUES ARE INVOLVED, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 2 ITA NO. 780/JP/2019 2. WITH THE CONSENT OF BOTH THE PARTIES, THE CASE O F ASSESSEE, SHRI PRAKASH CHAND SHARMA IN ITA NO. 780/JP/2019 FOR A.Y 2015-16 IS TAKEN AS THE LEAD CASE FOR THE PURPOSES OF PRESENT DISCUSSION WHEREIN THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, LD. CIT(A), WAS RIGHT IN ADJUDICATING THAT ADDITION WAS MADE WI THOUT REFERENCE TO SEIZED MATERIAL WITHOUT APPRECIATING THE FACT DURIN G THE COURSE OF SEARCH PROCEEDING U/S 132(1) OF THE ACT THAT THE SCRIPT OF M/S MISIKA FINANCE AND TRADING COMPANY AND ASSESSEE HAS BEEN BANNED FROM A CCESSING IN SECURITY MARKET AND BUYING, SELLING IN SECURITIES V IDE ORDER DATED 17.05.2015 WHICH LEAD TO SUSPECT ON BOGUS CLAIM OF LTCG HENCE TANTAMOUNT TO INCRIMINATING EVIDENCE. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A), WAS RIGHT IN DELETING THE ADDITION OF RS. 3,60,05,0 17/- MADE U/S 68 ON ACCOUNT OF BOGUS LTCG. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS. 7, 20,100/- U/S 69C OF THE IT ACT, 1961 MADE BY THE AO ON ACCOUNT OF UNEXPLAIN ED COMMISSION EXPENDITURE FOR TAKING BOGUS ACCOMMODATION ENTRY IN THE FORM OF LTCG WITHOUT APPRECIATING THE FACTS OF THE CASE. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS RIGHT IN ADJUDICATING THAT AO HAS PREDOM INATELY RELIED ON THE STATEMENT OF ENTRY PROVIDER AND INFORMATION RECEIVE D FROM INVESTIGATION WING ONLY WITHOUT APPRECIATING THE FACTS THAT THE F INANCIAL FUNDAMENTALS OF THE COMPANY HAS ALSO BEEN ANALYZED IN THE ASSESSMEN T ORDER WITH CATEGORICAL FINDING THAT COMPANY DOES NOT HAVE PROF IT EARNING APPARATUS. 5. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) WAS RIGHT IN ADJUDICATING THAT THE AO HAS DISCUSSED THE ABNORMAL PRICE IN THE SHARE PRICE OF PENNY STOCK WITHOUT ANY UNDERLIN E FUNDAMENTAL WITHOUT APPRECIATING THE FACTS THAT THE FINANCIAL FUNDAMENT ALS OF THE COMPANY ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 3 INCLUDING P&L ACCOUNT, BALANCE SHEET AND VARIOUS FI NANCIAL RATIO HAS BEEN ANALYZED IN DETAIL IN THE ASSESSMENT ORDER WITH CAT EGORICAL FINDING THAT COMPANY DOES NOT HAVE PROFIT EARNING APPARATUS TO S UPPORT SHARE MOVEMENT PATTERN WITH ASTRONOMICAL RAISE IN THE PRI CE OF SHARE TO THE EXTENT TO 5000% OVER A VERY SHORT PERIOD OF TIME WI TH HAVING NIL INCOME, NO PROFITABILITY AND ASSETS. 6. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A), WAS RIGHT IN ADJUDICATING THAT THE SEBI LIFTED BAN ON TRADING IN SHARE OF M/S MISKHA FINANCE AND TRADING LTD. IN ITS FINAL ORDER AND ASSOCIATE PERSON WERE EXONERATED WITHOUT APPRECIATING THE FACTS THAT THE SCRIPT WAS NOT EXONERATED BUT SOME OF BENEFICIARIES WERE ALLOWED A ND THE INTERIM ORDER ON SCRIPT ALONGWITH SOME OTHER PERSON WAS CONTINUED . 7. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE LD. CIT(A), WAS RIGHT FOR NOT APPRECIATING THE FACT THAT THE SE BI ALSO FOUND IN ITS ORDER THAT M/S MISHIKA FINANCE AND TRADING LTD IS PENNY S TOCK AND RATES OF THEIR SHARE WERE ARTIFICIALLY MANIPULATE TO ENABLE BENEFI CIARY TO OBTAIN ACCOMMODATION ENTRIES OF BOGUS LTCG AND HELD THAT I NVESTMENT IN COMPANY HAVING SUCH POOR AND MEAGER FUNDAMENTALS CA NNOT PRIMA FACIE BE LEARNED AS RATIONAL INVESTMENT AND ONLY IF THE A LLOTEES HAD A NEXUS WITH M/S MISHIKA FINANCE & TRADING LTD. AND ITS DIRECTOR S/PROMOTERS WAS UNDER PRIOR ARRANGEMENT AND HAD THAT BENEFICIAL ALLOTMENT WAS USED TO TOOL FOR IMPLANTATION OF THE DUBIOUS PLAN, DEVICE AND ENTITI ES OF EXIT PROVIDER, BENEFICIAL ALLOTEES AND PROMOTERS. 8. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE, LD. CIT(A) WAS RIGHT IN ADJUDICATING THAT THE ADDITION WAS MAD E SIMPLY ON THE BASIS OF STATEMENT OF THIRD PERSON WITHOUT GIVING OPPORTUNIT Y TO CROSS EXAMINATION OF THOSE PERSONS WHOSE STATEMENT WERE RELIED UPON I N THE ASSESSMENT ORDER RELYING ON APEX COURT CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SC) WITHOUT APPRECIATING THAT FACTS THAT THE RATIO IS NOT APPLICABLE IN THIS CASE AS IN THE CASE OF ANDAMAN TIMBER INDUSTRIES TH E STATEMENT WERE SOLE BASIS OF ALLEGATION WHEREAS IN THIS CASE VARIOUS OT HER FACTORS WERE BROUGHT ON RECORD INCLUDING FINANCIAL FUNDAMENTAL OF THE SC RIPT IN DETAIL WITH FINDING THAT COMPANY WITH NO TURNOVER, INCOME AND SETS DOES NOT HAVE CREDENT TO SUPPORT ASTRONOMICAL RISE IN THE PRICE. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 4 3. THE FIRST GROUND OF APPEAL TAKEN BY THE REVENUE RELATES TO CHALLENGING THE FINDINGS OF THE LD CIT(A) THAT THE ADDITIONS WERE M ADE BY THE ASSESSING OFFICER WITHOUT REFERENCE TO INCRIMINATING EVIDENCE/MATERIA L WHILE PASSING THE ORDER UNDER SECTION 143(3) R/W 153A OF THE ACT AND THUS A LLOWING THE LEGAL GROUND TAKEN BY THE ASSESSEE CHALLENGING THE ORDER SO PASS ED BY THE ASSESSING OFFICER. 4. IN THIS REGARD, BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME U/S 139(1) OF THE ACT ON 30.08.2015 DECLARING TOTAL INCOME OF RS. 23,78,450/-. THEREAFTER, A SEARCH AND SEIZURE ACTION U/S 132 WAS CARRIED OUT IN CASE OF PRAKASH DEEP FINANCE GROUP O N 04.03.2017 TO WHICH THE ASSESSEE BELONGS. PURSUANT TO THE SEARCH AND SEIZU RE ACTION, THE ASSESSING OFFICER ISSUED NOTICE U/S 153A OF THE ACT ON 13.09. 2017 AND IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE E-FILED HIS RETURN OF INC OME ON 03.10.2017 DECLARING TOTAL INCOME OF RS. 23,78,450/- AS DECLARED IN THE RETURN OF INCOME ORIGINALLY FILED U/S 139(1) OF THE ACT. THEREAFTER, NOTICE U/S 143(2 ) OF THE ACT AS WELL AS NOTICES U/S 142(1) OF THE ACT WERE ISSUED AND THE ASSESSING OFFICER DISALLOWED THE LONG TERM CAPITAL GAINS EXEMPTION AMOUNTING TO RS. 3,60, 05,017/- CLAIMED BY THE ASSESSEE U/S 10(38) OF THE ACT AND THE SAID AMOUNT WAS BROUGHT TO TAX AS UNDISCLOSED INCOME THROUGH BOGUS LONG TERM CAPITAL GAINS U/S 68 OF THE ACT. FURTHER, COMMISSION AMOUNTING TO RS. 7,20,100/- WAS BROUGHT TO TAX AS UNEXPLAINED EXPENDITURE FOR TAKING THE SAID ACCOMMO DATION ENTRY. ACCORDINGLY, THE ASSESSMENT U/S 143(3) READ WITH SECTION 153A WA S COMPLETED AT RS. 3,91,03,570/- AS AGAINST THE RETURNED INCOME OF RS. 23,78,450/-. 5. BEING AGGRIEVED, THE ASSESSEE CHALLENGED THE ACT ION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND RAISED A LEGAL OB JECTION THAT THE ADDITION MADE BY THE AO BY DENYING THE CLAIM OF EXEMPTION OF LONG TERM CAPITAL GAINS U/S 10(38) OF THE ACT WAS WITHOUT REFERENCE TO ANY INCR IMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 5 RESPECT OF WHICH THE ASSESSMENT ALREADY STOOD CONC LUDED. THE LD. CIT(A) ALLOWED THE LEGAL CONTENTION SO RAISED BY THE ASSES SEE AND HELD THAT THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH IN THE CASE OF ASSESSEE RELATING TO DISALLOWANCE OF CLAIM U/S 10(38) OF THE ACT. AGAINST THE SAID FINDINGS OF THE LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEF ORE US. 6. DURING THE COURSE OF HEARING, THE LD. CIT/DR SUB MITTED THAT AS PER THE PROVISIONS OF SECTION 132 R.W.S 153A OF THE ACT, TH E AO IS BOUND TO ISSUE THE NOTICE FOR INITIATION OF PROCEEDINGS U/S 153A OF TH E ACT TO ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PR ECEDING THE ASSESSMENT YEAR, RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH S EARCH IS CONDUCTED OR REQUISITION IS MADE. THE LD. CIT/DR HAS THUS CONTEN DED THAT THE PROCEEDING U/S 153A ARE MANDATORY IN NATURE AND THERE IS NO ESCAPE MENT OF THE ASSESSMENT OR REASSESSMENT PROCEEDINGS PURSUANT TO THE SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT. IT WAS SUBMITTED THAT THERE IS NO PREJUDIC E CAUSED TO THE ASSESSEE IF THE AO MADE THE ADDITION U/S 68 OF THE ACT IN THE PROCE EDING U/S 153A BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING BASIS SURVEY AND SEARCH OPERATIONS DISCLOSING THE FACT THAT THE LONG TERM CAPITAL GAIN S SHOWN BY THE ASSESSEE IS NOTHING BUT ACCOMMODATION ENTRY PROVIDED BY SYNDICA TES AND ENTRY PROVIDERS THROUGH TRADING OF SHARES IN PENNY STOCK COMPANIES WHEN IT WAS OPEN TO THE AO TO INITIATE THE PROCEEDING U/S 147/148 OF THE ACT A T THAT POINT OF TIME BUT DUE TO THE MANDATORY NATURE OF THE PROVISIONS OF SECTION 1 53A OF THE ACT, THE AO HAS PROCEEDED IN ACCORDANCE WITH THE PROVISIONS OF LAW. IT WAS FURTHER SUBMITTED THAT THE SCRIPT OF M/S MISIKA FINANCE AND TRADING C OMPANY AND ASSESSEE WERE BANNED FROM ACCESSING THE SECURITY MARKET AND BUYIN G, SELLING IN SECURITIES VIDE SEBI ORDER DATED 17.05.2015 WHICH LEAD TO SUSPICION ON BOGUS CLAIM OF LTCG HENCE THE SAME TANTAMOUNT TO INCRIMINATING EVIDENCE AND WHERE THE AO HAS RELIED ON THE SAME WHILE FRAMING THE ASSESSMENT, TH E SAME NEEDS TO BE UPHELD. IT WAS FURTHER SUBMITTED BY THE LD. CIT/DR THAT IN CASE OF MEETA GUTGUTIA, ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 6 THOUGH SLP OF THE DEPARTMENT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT, HOWEVER, MERELY DISMISSAL OF THE SLP CANNOT BE READ AS AFFIRMATION OF THE VIEW TAKEN BY THE HONBLE DELHI HIGH COURT. IT WAS FURTHER SUBMITTED THAT THERE ARE TWO SUBSEQUENT SLPS WHICH HAVE BEEN ADMITTED BY THE HONBLE SUPREME COURT ON SIMILAR MATTERS AND THEREFORE, THE DEPARTM ENT IS NOT ACCEPTING THE POSITION TAKEN IN CASE OF MEETA GUTGUTIA AND OTHER DECISIONS CITED BY THE LD. AR. HE HAS ACCORDINGLY RELIED UPON THE ORDER AND THE FI NDINGS OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, LD. AR HAS SUBMITTED THAT TH E ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCING AND IS ALSO A DIRECTOR IN TWO FINANCE COMPANIES NAMELY SHUBHDEEP FINANCE CO. PVT. LTD. AND PRAKASH DEEP FI NANCE CO. LTD. HE FILED HIS RETURN OF INCOME 30.08.2015 DECLARING INCOME OF RS. 23,78,450/- AFTER CLAIMING EXEMPTION OF RS. 3,60,05,017/- U/S 10(38) OF IT ACT , 1961. A SEARCH WAS CARRIED OUT ON ASSESSEE ON 04.03.2017. AFTER SEARCH, IN RES PONSE TO NOTICE U/S 153A, ASSESSEE AGAIN FILED THE RETURN OF INCOME ON 03.10. 2017 AT THE SAME INCOME. IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBM ITTED THAT IN SEARCH, NO INCRIMINATING DOCUMENTS RELATING TO ANY UNDISCLOSED INCOME WAS FOUND AND THEREFORE, NO ADDITION CAN BE MADE. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTIONS AND MADE AN ADDITION OF RS. 3,60,05,017 /- BY TREATING LONG TERM CAPITAL GAIN AS INCOME FROM UNDISCLOSED SOURCES AND RS. 7,20,100/- ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE FOR ACQUIRING SU CH ACCOMMODATION ENTRY. ON APPEAL, THE LD. CIT(A) OBSERVED THAT THE DISALLOWAN CE OF CLAIM MADE U/S 10(38) IS NOT RELATABLE TO ANY INCRIMINATING SEIZED MATERI AL FOUND DURING THE COURSE OF SEARCH. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSMENT STOOD COMPLETED AT THE TIME OF SEARCH AND THERE WAS NO TI ME LEFT TO ISSUE NOTICE U/S 143(2). IN CASE OF COMPLETED ASSESSMENT, THE LAW PE RMITS TO MAKE ADDITIONS ONLY ON THE BASIS OF INCRIMINATING SEIZED MATERIAL FOUND & SEIZED DURING THE COURSE OF SEARCH. FOR THIS PURPOSE HE RELIED ON VARIOUS CASE LAWS REPRODUCED AT PG 34 TO ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 7 42 OF THE APPELLATE ORDER. HE FURTHER STATED THAT S TATEMENT OF ASSESSEE RECORDED U/S 132(4) OR STATEMENT OF THIRD PARTY RECORDED U/S 131 OR U/S 132(4) OF THE ACT IS NOT CONSIDERED AS INCRIMINATING MATERIAL. FOR TH IS PURPOSE, HE PLACED RELIANCE ON THE DECISIONS OF HONBLE RAJASTHAN HIGH COURT IN CASE OF MANTRI SHARE BROKERS PVT. LTD. REPORTED IN 96 TAXMANN.COM 279 AFFIRMED B Y THE HONBLE SUPREME COURT AND HONBLE DELHI HIGH COURT IN CASE OF HARJE EV AGARWAL REPORTED IN 70 TAXMANN.COM 95. ACCORDINGLY, THE LD CIT(A) HELD THA T AS THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH CARR IED ON THE ASSESSEE RELATING TO THE DISALLOWANCE OF CLAIM U/S 10(38) OF THE ACT, TH E LEGAL GROUND OF THE ASSESSEE WAS HELD TENABLE AND WAS DECIDED IN FAVOUR OF THE A SSESSEE. 8. IT WAS SUBMITTED BY THE LD AR THAT AS THE ASSESS EE FILED HIS ORIGINAL RETURN ON 30.08.2015, THE TIME LIMIT FOR SERVICE OF NOTICE U/S 143(2) WAS UPTO 30.09.2016. NO NOTICE WAS HOWEVER ISSUED TO THE ASS ESSEE BEFORE THIS DATE. THUS, THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION WERE NOT PENDING ON THE DATE OF SEARCH. IN SEARCH, NO INCRIM INATING MATERIAL RELATING TO THE YEAR UNDER CONSIDERATION WAS FOUND TO ALLEGE TH AT THE ASSESSEE HAD UNDISCLOSED INCOME FROM ANY SOURCE WHICH IS ROUTED THROUGH ALLEGED ACCOMMODATION ENTRY. SECTION 153A EMPOWERS THE AO T O ISSUE NOTICE TO A PERSON WHO IS SEARCHED U/S 132 TO FILE RETURN IN RE SPECT OF SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR IN WHICH SEARCH IS CO NDUCTED AND TO ASSESS OR REASSESS THE TOTAL INCOME OF THESE YEARS NOTWITHSTA NDING ANYTHING CONTAINED IN SECTION 139, 147 AND OTHER RELATED SECTIONS. THUS, THE ASSESSMENT U/S 153A ARE NOT DE NOVO ASSESSMENTS SINCE THE PURPOSE OF MAKING THE REASSESSMENT UNDER SECTION 153A IS TO BRING TO TAX, HITHERTO UNDISCLOS ED INCOME UNEARTHED DURING THE COURSE OF THE SEARCH. IT IS FOR THIS REASON THAT TH E SECOND PROVISO TO SECTION 153A(1) PROVIDES ONLY FOR THE ABATEMENT OF THE PEND ING ASSESSMENTS. THIS IS DONE TO ENSURE THAT THE REGULAR ASSESSMENT PROCEEDI NGS UNDER THE NORMAL PROVISIONS AND THE ASSESSMENT PROCEEDINGS UNDER SEC TION 153A ARE NOT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 8 CONDUCTED SIMULTANEOUSLY SINCE THAT WOULD RESULT IN REDUNDANCY. THEREFORE, ALREADY COMPLETED ASSESSMENTS DO NOT ABATE AND THEY SHALL HOLD THE FIELD. IT CAN BE INTERFERED BY THE AO WHILE MAKING THE ASSESSMENT U/S 153A ONLY IF SOME INCRIMINATING MATERIAL IS UNEARTHED DURING THE COUR SE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY IS DECL ARED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. THUS, WHEN NO INCRIMINATING MATERIAL FOR THE YEAR UNDER CONSIDERATION IN RESPECT OF A PARTICULAR ISSUE IS F OUND, ADDITION MADE BY THE AO IN ASSESSMENT PROCEEDINGS U/S 153A IS ILLEGAL AND BAD IN LAW. FOR THIS PURPOSE, RELIANCE IS PLACED ON THE FOLLOWED CASES:- PCIT VS. MEETA GUTGUTIA (2018) 257 TAXMAN 441 (SC) M/S RAJASTHAN FORT & PLACE PVT. LTD. VS. DCIT (ITA NO. 597 TO 599/JP/2017 ORDER DATED 24.01.2018) (JAIPUR) (TRIB.) PRINCIPAL CIT VS. DIPAK JASHVANTLAL PANCHAL [2017] 397 ITR 153 (GUJ.) CIT VS. DEEPAK KUMAR AGARWAL & ORS. (2017) 158 DTR 100 (BOM.) JAI STEEL (INDIA) VS. ACIT (2013) 88 DTR 1 (RAJ.) PCIT VS. SAUMYA CONSTRUCTION PVT. LTD. (2016) 387 I TR 529 (GUJ.) PCIT VS. DEVANGI ALIA RUPA (2017) 98 CCH 0051 (GUJ. ) CIT VS. KABUL CHAWLA (2015) 126 DTR 130 (DEL.) CIT VS. CONTINENTAL WAREHOUSING CORPORATION (2015) 120 DTR 89 (BOM.) IN VIEW OF ABOVE, IT WAS SUBMITTED THAT THE ORDER O F LD. CIT(A) BE UPHELD BY DISMISSING THE GROUND OF DEPARTMENT. HE ACCORDINGLY SUPPORTED THE FINDINGS OF THE LD CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, A SEARCH AND SEIZURE ACTION WAS CARRIED OUT IN CASE OF THE ASSESSEES GROUP ON 4.03.2017. THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE U/S 139 ON 30.08.2015 AND THE LAST DAY OF ISSUING NOTICE SECTION 143(2) ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 9 HAD THUS EXPIRED ON 30.09.2016 BEFORE THE DATE OF S EARCH AND THE ASSESSMENT PROCEEDINGS THEREFORE WERE NOT PENDING AS ON 4.03.2 017 I.E. THE DATE OF SEARCH. AS PER SECTION 153A OF THE ACT, ONCE A SEARCH AND S EIZURE ACTION IS CARRIED OUT, THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME O F THE ASSESSEE IN RESPECT OF SIX YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH A SEARCH IS CONDUCTED OR REQUISITION IS MADE. IN CASE THE ASSESSMENT IS PENDING ON THE DATE OF SEARCH, THE SA ME SHALL BE ABATED AS PER PROVISO TO SECTION 153A(1) OF THE ACT AND THE AO IS FREE TO ASSESS THE INCOME OF THE ASSESSEE AS REGULAR ASSESSMENT. HOWEVER, IN CAS E OF COMPLETED ASSESSMENT AND NOT ABATED DUE TO INITIATION OF SEARCH U/S 132 OR MAKING OF REQUISITION U/S 132A, THE AO HAS TO REASSESS THE TOTAL INCOME OF TH E ASSESSEE AND THEREFORE, THE ASSESSMENT ALREADY COMPLETED CAN BE TINKERED WITH O R DISTURBED WHERE ANY INCRIMINATING MATERIAL IS FOUND AND SEIZED DURING T HE COURSE OF SEARCH OR REQUISITION AS CASE MAY BE, INDICATING UNDISCLOSED INCOME OF THE ASSESSEE. THEREFORE, THE SCOPE AND JURISDICTION OF THE AO TO REASSESS THE TOTAL INCOME OF THE ASSESSEE U/S 153A IS LIMITED ONLY TO THE EXTENT OF THE INCOME DISCLOSED BY THE INCRIMINATING MATERIAL FOUND AND SEIZED DURING THE SEARCH AND SEIZURE ACTION IN CASE OF THE ASSESSEE. THEREFORE, WHAT IS THE RELEVA NT TO DETERMINE IN THE INSTANT CASE IS WHETHER ANY INCRIMINATING MATERIAL/EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE AND BASIS WHI CH THE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER. 10. THE LD CIT/DR HAS REFERRED TO THE INFORMATION R ECEIVED BY THE AO FROM INVESTIGATION WING BASIS SURVEY AND SEARCH OPERATIO NS DISCLOSING THE FACT THAT THE LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE I S NOTHING BUT ACCOMMODATION ENTRY PROVIDED BY SYNDICATES AND ENTRY PROVIDERS T HROUGH TRADING OF SHARES IN PENNY STOCK COMPANIES. IN THIS REGARD, WE FIND THA T THE AO HAS REFERRED TO STATEMENT OF SHRI SANJAY VORA RECORDED ON 8.04.2015 DURING THE COURSE OF SURVEY IN CASE OF M/S ANAND RATHI SHARES AND STOCK BROKERS LTD AND STATEMENT OF SHRI ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 10 DEEPAK PATWARI RECORDED U/S 131 ON 22.07.2013. THES E STATEMENTS WERE THUS RECORDED BY THE INVESTIGATION WING CALCUTTA MUCH PR IOR TO THE DATE OF SEARCH IN CASE OF ASSESSEE ON 4.03.2017 AND WERE THUS AVAILAB LE WITH THE ASSESSING OFFICER PRIOR TO THE DATE OF SEARCH. TO OUR MIND, THESE ST ATEMENTS MAY BE CONSIDERED AS RELEVANT PIECE OF EVIDENCE BUT AT THE SAME TIME, TH ESE STATEMENTS HAVE BEEN RECORDED IN CASE OF SEARCH AND SURVEY OPERATIONS IN OTHER CASES AND NOT IN THE CASE OF THE ASSESSEE AND IN ANY CASE, THESE STATEME NTS ALONE WITHOUT ANY CORROBORATIVE EVIDENCE CANNOT BE REGARDED AS INCRIM INATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH AND SEIZURE U/S 132 OF THE ACT IN CASE OF THE ASSESSEE. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH IN CASE OF M/S KOTA DALL MILL VS DCIT (ITA NO. 997 TO 1002/JP/2018 & 1119/JP/2018 DATED 31.12.2018) WHEREIN IT WAS HELD AS UNDER: .NEITHER IN THE ASSESSMENT ORDER NOR IN THE ORDER OF THE LD. CIT (A) THERE IS ANY MENTION OR FINDING THAT THE ADDITIONS HAVE BEEN MADE BY THE AO ON THE BASIS OF ANY INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH AND SEIZURE IN THE CASE OF THE ASSESSEE. THE AO HAS SOLELY REL IED UPON THE REPORT OF THE INVESTIGATION WING KOLKATA AND STATEMENT OF ONE SHR I ANAND SHARMA RECORDED BY THE INVESTIGATION WING DURING THE SURVEY UNDER SECT ION 133A OF THE ACT. THEREFORE, EVEN IF THE INFORMATION/REPORT OF THE IN VESTIGATION WING KOLKATA IS CONSIDERED AS A RELEVANT EVIDENCE, THE SAME CANNOT BE REGARDED AS INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH AND SEIZURE UNDER SECTION 132 OF THE IT ACT IN CASE OF THE ASSESSEE. THE REQUIREMEN T FOR MAKING THE ADDITION UNDER SECTION 153A IN THE ASSESSMENT YEARS WHERE TH E ASSESSMENT WAS NOT PENDING ON THE DATE OF SEARCH AND THE PROCEEDINGS A RE IN THE NATURE OF REASSESSMENT IS ESSENTIALLY THE INCRIMINATING MATER IAL DISCLOSING UNDISCLOSED ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 11 INCOME WHICH WAS NOT DISCLOSED BY THE ASSESSEE. IN THE CASE IN HAND, THE AO HIMSELF HAS NOT CLAIMED ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH AND SEIZURE IN THE CASE OF THE ASSESSEE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE BINDING PRECEDENTS O N THIS ISSUE IN WHICH THE SLP FILED BY THE REVENUE WAS ALSO DISMISSED BY THE HON BLE SUPREME COURT, THE ADDITIONS MADE BY THE AO WHILE PASSING THE ASSESSME NT ORDERS UNDER SECTION 153A FOR THE ASSESSMENT YEARS 2010-11 TO 13-14 ARE NOT SUSTAINABLE AND ACCORDINGLY THE SAME ARE LIABLE TO BE DELETED. 11. THE LD CIT/DR HAS FURTHER REFERRED TO SEBI ORDE R DATED 17.05.2015 WHEREIN THE SCRIPT OF M/S MISIKA FINANCE AND TRADIN G COMPANY AND VARIOUS PERSONS INCLUDING THE ASSESSEE WERE BANNED FROM ACC ESSING THE SECURITY MARKET AND IN BUYING AND SELLING OF SECURITIES. WE FIND T HAT THE AFORESAID SEBI ORDER DATED 17.05.2015 WAS AGAIN AVAILABLE WITH THE AO PR IOR TO THE SEARCH IN CASE OF THE ASSESSEE AND FOLLOWING THE AFORESAID REASONING MAY BE CONSIDERED AS A RELEVANT EVIDENCE BUT CANNOT BE REGARDED AS INCRIMI NATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH AND SEIZURE U/S 132 IN CASE OF THE ASSESSEE WHICH WERE CONDUCTED ON 4.03.2017. 12. WE THEREFORE FIND THAT THE ASSESSING OFFICER HA S REASSESSED THE INCOME OF THE ASSESSEE BY DISALLOWING THE LONG TERM CAPITAL G AINS EXEMPTION CLAIMED U/S 10(38) WITHOUT MAKING ANY REFERENCE TO ANY INCRIMIN ATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THERE IS NO FINDING OF THE AS SESSING OFFICER OR ANY OTHER MATERIAL BROUGHT ON RECORD THAT THESE TRANSACTIONS OF SALE OF SHARES WERE CONCEALED AND NOT REPORTED TO THE REVENUE WHILE FIL ING THE ORIGINAL RETURN OF INCOME ON 30.08.2015 FOR THE IMPUGNED ASSESSMENT YE AR. ONCE THESE TRANSACTIONS WERE REPORTED IN THE RETURN OF INCOME FURNISHED BEFORE THE DATE OF SEARCH, THE SAID TRANSACTIONS WERE DULY DISCLOSED T O THE DEPARTMENT AND THUS, ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 12 DOESNT REPRESENT ANY UNDISCLOSED TRANSACTIONS SO A S TO CONSTITUTE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN CASE OF THE ASSESSEE. THEREFORE, THE ADDITION MADE BY THE AO BY DISALLOWING THE CLAI M OF EXEMPTION U/S 10(38) AND REASSESSMENT COMPLETED U/S 153A IS UNDISPUTEDLY NOT BASED ON ANY INCRIMINATING MATERIAL FOUND OR SEIZED DURING THE C OURSE OF SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT. 13. THE HONBLE DELHI HIGH COURT IN CASE OF CIT V. KABUL CHAWLA (SUPRA) WHILE CONSIDERING AN IDENTICAL ISSUE HAS HELD AS UN DER:- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FO R SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE O F THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAK ES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS I N SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YE ARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RE SPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSE D INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST - SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE A O WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSES S MENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONL Y ON THE BASIS OF SEIZED MATERIAL.' ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 13 V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPL ETED ASSESSMEN T CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABAT ED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE J URISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND AN Y OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEA RCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 39. THE QUESTION FRAMED BY THE COURT IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 14. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTION HIGH COURT IN CASE OF JAI STEEL INDIA V ACIT (SUPRA) AS HELD IN PARA 22 TO 30 AS UNDER:- 22. IN THE FIRM OPINION OF THIS COURT FROM A PLAIN READING OF THE PROVISION ALONG WITH THE PURPOSE AND PURPORT OF THE SAID PROVISION, WHICH IS INTRICATELY LINKED WITH SEARCH AND REQUISITION UNDER SECTIONS 132 AND 132A OF THE ACT, IT IS APPARENT THAT: (A ) THE ASSESSMENTS OR REASSESSMENTS, WHICH STAND ABATE D IN TERMS OF II PROVISO TO SECTION 153A OF THE ACT, THE AO ACTS UND ER HIS ORIGINAL JURISDICTION, FOR WHICH, ASSESSMENTS HAVE TO BE MAD E; (B ) REGARDING OTHER CASES, THE ADDITION TO THE INCOME T HAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL AND (C ) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPL ETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T CAN BE MADE. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 14 THOUGH SUCH A CLAIM BY THE ASSESSEE FOR THE FIRST T IME UNDER SECTION 153A OF THE ACT IS NOT COMPLETED, THE CASE IN HAND, HAS TO BE CONSIDERED AT BEST SIMILAR TO A CASE WHERE IN SPITE OF A SEARCH AND/OR REQUISITION, NOTHING INCRIMINATING IS FOUND. IN SUCH A CASE THOUGH SECTI ON 153A OF THE ACT WOULD BE TRIGGERED AND ASSESSMENT OR REASSESSMENT TO ASCE RTAIN THE TOTAL INCOME OF THE PERSON IS REQUIRED TO BE DONE, HOWEVER, THE SAME WOULD IN THAT CASE NOT RESULT IN ANY ADDITION AND THE ASSESSMENTS PASS ED EARLIER MAY HAVE TO BE REITERATED. 23. THE RELIANCE PLACED BY THE COUNSEL FOR THE APPELLA NT ON THE CASE OF ANIL KUMAR BHATIA (SUPRA) ALSO DOES NOT HELP THE CASE OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE SAID JUDGMENT READS AS UNDER: '19. UNDER THE PROVISIONS OF SECTION 153A, AS WE HA VE ALREADY NOTICED, THE ASSESSING OFFICER IS BOUND TO ISSUE NOTICE TO THE A SSESSEE TO FURNISH RETURNS FOR EACH ASSESSMENT YEAR FALLING WITHIN THE SIX ASS ESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVI OUS YEAR IN WHICH THE SEARCH OR REQUISITION WAS MADE. ANOTHER SIGNIFICANT FEATURE OF THIS SECTION IS THAT THE ASSESSING OFFICER IS EMPOWERED TO ASSESS O R REASSESS THE 'TOTAL INCOME' OF THE AFORESAID YEARS. THIS IS A SIGNIFICA NT DEPARTURE FROM THE EARLIER BLOCK ASSESSMENT SCHEME IN WHICH THE BLOCK ASSESSMENT ROPED IN ONLY THE UNDISCLOSED INCOME AND THE REGULAR ASSESSMENT P ROCEEDINGS WERE PRESERVED, RESULTING IN MULTIPLE ASSESSMENTS. UNDER SECTION 153A, HOWEVER, THE ASSESSING OFFICER HAS BEEN GIVEN THE POWER TO A SSESS OR REASSESS THE 'TOTAL INCOME' OF THE SIX ASSESSMENT YEARS IN QUEST ION IN SEPARATE ASSESSMENT ORDERS. THIS MEANS THAT THERE CAN BE ONLY ONE ASSES SMENT ORDER IN RESPECT OF EACH OF THE SIX ASSESSMENT YEARS, IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. 20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT T O BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A ) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVI NG OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME, TAKING NOTE TO THE UNDISCLOSED INCOME, IF ANY, UNEA RTHED DURING THE SEARCH. FOR THIS PURPOSE, THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE STRICT PROCEDURE TO ASSUME JURISDICTION TO REOP EN THE ASSESSMENT UNDER SECTIONS 147 AND 148, HAVE BEEN REMOVED BY THE NON OBSTANTE CLAUSE WITH WHICH SUB-SECTION (1) OF SECTION 153A OPENS. THE TI ME-LIMIT WITHIN WHICH THE NOTICE UNDER SECTION 148 CAN BE ISSUED, AS PROVIDED IN SECTION 149 HAS ALSO BEEN MADE INAPPLICABLE BY THE NON OBSTANTE CLAUSE. SECTION 151 WHICH REQUIRES SANCTION TO BE OBTAINED BY THE ASSESSING O FFICER BY ISSUE OF NOTICE TO REOPEN THE ASSESSMENT UNDER SECTION 148 HAS ALSO BEEN EXCLUDED IN A CASE COVERED BY SECTION 153A. THE TIME-LIMIT PRESCR IBED FOR COMPLETION OF AN ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 15 ASSESSMENT OR REASSESSMENT BY SECTION 153 HAS ALSO BEEN DONE AWAY WITH IN A CASE COVERED BY SECTION 153A. WITH ALL THE STOPS HAVING BEEN PULLED OUT, THE ASSESSING OFFICER UNDER SECTION 153A HAS BEEN E NTRUSTED WITH THE DUTY OF BRINGING TO TAX THE TOTAL INCOME OF AN ASSESSEE WHOSE CASE IS COVERED BY SECTION 153A, BY EVEN MAKING REASSESSMENTS WITHOUT ANY FETTERS, IF NEED BE. 21. NOW THERE CAN BE CASES WHERE AT THE TIME WHEN T HE SEARCH IS INITIATED OR REQUISITION IS MADE, THE ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF TH E SIX ASSESSMENT YEARS MENTIONED ABOVE, MAY BE PENDING. IN SUCH A CASE, TH E SECOND PROVISO TO SUB-SECTION (1) OF SECTION 153A SAYS THAT SUCH PROC EEDINGS 'SHALL ABATE'. THE REASON IS NOT FAR TO SEEK. UNDER SECTION 153A, THERE IS NO ROOM FOR MULTIPLE ASSESSMENT ORDERS IN RESPECT OF ANY OF THE SIX ASSESSMENT YEARS UNDER CONSIDERATION. THAT IS BECAUSE THE ASSESSING OFFICER HAS TO DETERMINE NOT MERELY THE UNDISCLOSED INCOME OF THE ASSESSEE, BUT ALSO THE 'TOTAL INCOME' OF THE ASSESSEE IN WHOSE CASE A SEARCH OR R EQUISITION HAS BEEN INITIATED. OBVIOUSLY THERE CANNOT BE SEVERAL ORDERS FOR THE SAME ASSESSMENT YEAR DETERMINING THE TOTAL INCOME OF THE ASSESSEE. IN ORDER TO ENSURE THIS STATE OF AFFAIRS NAMELY, THAT IN RESPECT OF THE SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE YEAR IN WHICH T HE SEARCH TOOK PLACE THERE IS ONLY ONE DETERMINATION OF THE TOTAL INCOME , IT HAS BEEN PROVIDED IN THE SECOND PROVISO OF SUB-SECTION (1) OF SECTION 15 3A THAT ANY PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT OF THE ASSESSEE WHIC H ARE PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING REQUISIT ION 'SHALL ABATE'. ONCE THOSE PROCEEDINGS ABATE, THE DECKS ARE CLEARED, FOR THE ASSESSING OFFICER TO PASS ASSESSMENT ORDERS FOR EACH OF THOSE SIX YEARS DETERMINING THE TOTAL INCOME OF THE ASSESSEE WHICH WOULD INCLUDE BOTH THE INCOME DECLARED IN THE RETURNS, IF ANY, FURNISHED BY THE ASSESSEE AS WELL AS THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH OR REQUISITION. THE POSITION THUS EMERGING IS THAT THE SEARCH IS INITIATED OR REQUISI TION IS MADE, THEY WILL ABATE MAKING WAY FOR THE ASSESSING OFFICER TO DETERMINE T HE TOTAL INCOME OF THE ASSESSEE IN WHICH THE UNDISCLOSED INCOME WOULD ALSO BE INCLUDED, BUT IN CASE WHERE THE ASSESSMENT OR REASSESSMENT PROCEEDINGS HA VE ALREADY BEEN COMPLETED AND ASSESSMENT ORDERS HAVE BEEN PASSED DE TERMINING THE ASSESSEE'S TOTAL INCOME AND SUCH ORDERS SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUES TION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. IN THIS LATTER SI TUATION, THE ASSESSING OFFICER WILL REOPEN THE ASSESSMENTS OR REASSESSMENT S ALREADY MADE (WITHOUT HAVING THE NEED TO FOLLOW THE STRICT PROVISIONS OR COMPLYING WITH THE STRICT CONDITIONS OF SECTIONS 147, 148 AND 151) AND DETERM INE THE TOTAL INCOME OF THE ASSESSEE. SUCH DETERMINATION IN THE ORDERS PASS ED UNDER SECTION 153A WOULD BE SIMILAR TO THE ORDERS PASSED IN ANY REASSE SSMENT, WHERE THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT ORDER AND THE INCOME THAT ESCAPED ASSESSMENT ARE CLUBBED TOGETHER AND ASSESSE D AS THE TOTAL ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 16 INCOME. IN SUCH A CASE, TO REITERATE, THERE IS NO Q UESTION OF ANY ABATEMENT OF THE EARLIER PROCEEDINGS FOR THE SIMPLE REASON TH AT NO PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT WERE PENDING SINCE THEY HAD ALREADY CULMINATED IN ASSESSMENT OR REASSESSMENT ORDERS WHE N THE SEARCH WAS INITIATED OR THE REQUISITION WAS MADE.' (EMPHASIS S UPPLIED) 24. THE SAID JUDGMENT ALSO IN NO UNCERTAIN TERMS HOLDS THAT THE REASSESSMENT OF THE TOTAL INCOME OF THE COMPLETED ASSESSMENTS HAVE TO BE MADE TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING TH E SEARCH AND THE INCOME THAT ESCAPED ASSESSMENTS ARE REQUIRED TO BE CLUBBED TOGE THER WITH THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT AND ASSESSED AS THE TOTAL INCOME. THE OBSERVATIONS MADE IN THE JUDGMENT CONTRASTING THE P ROVISIONS OF DETERMINATION OF UNDISCLOSED INCOME UNDER CHAPTER XIVB WITH DETER MINATION OF TOTAL INCOME UNDER SECTIONS 153A TO 153C OF THE ACT HAVE TO BE R EAD IN THE CONTEXT OF SECOND PROVISO ONLY, WHICH DEALS WITH THE PENDING ASSESSME NT/REASSESSMENT PROCEEDINGS. THE FURTHER OBSERVATIONS MADE IN THE C ONTEXT OF DE NOVO ASSESSMENT PROCEEDINGS ALSO HAVE TO BE READ IN CONT EXT THAT IRRESPECTIVE OF THE FACT WHETHER ANY INCRIMINATING MATERIAL IS FOUND DU RING THE COURSE OF SEARCH, THE NOTICE AND CONSEQUENTIAL ASSESSMENT UNDER SECTION 1 53A HAVE TO BE UNDERTAKEN. 25. THE ARGUMENT OF THE LEARNED COUNSEL THAT THE AO IS ALSO FREE TO DISTURB INCOME, EXPENDITURE OR DEDUCTION DE HORS THE INCRIM INATING MATERIAL, WHILE MAKING ASSESSMENT UNDER SECTION 153A OF THE ACT IS ALSO NOT BORNE OUT FROM THE SCHEME OF THE SAID PROVISION WHICH AS NOTICED ABOVE IS ESSENTIALLY IN CONTEXT OF SEARCH AND/OR REQUISITION. THE PROVISIONS OF SECTIO NS 153A TO 153C CANNOT BE INTERPRETED TO BE A FURTHER INNINGS FOR THE AO AND/ OR ASSESSEE BEYOND PROVISIONS OF SECTIONS 139 (RETURN OF INCOME), 139(5) (REVISED RETURN OF INCOME), 147 (INCOME ESCAPING ASSESSMENT) AND 263 (REVISION OF O RDERS) OF THE ACT. 26. THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT AS THE FIRST PROVISO PROVIDES FOR ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN THE SIX ASSESSMENT Y EARS, IS MERELY READING THE SAID PROVISION IN ISOLATION AND NOT IN THE CONTEXT OF THE ENTIRE SECTION. THE WORDS 'ASSESS' OR 'REASSESS' HAVE BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCTION OF THE ENTIRE PROVISION WOU LD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE WORD 'ASSESS' HAS BEEN USED IN THE CONTEXT OF AN ABATED PROCEEDINGS AND REASSESS HAS BEEN USED FOR COMPLETE D ASSESSMENT PROCEEDINGS, WHICH WOULD NOT ABATE AS THEY ARE NOT PENDING ON TH E DATE OF INITIATION OF THE SEARCH OR MAKING OF REQUISITION AND WHICH WOULD ALS O NECESSARILY SUPPORT THE INTERPRETATION THAT FOR THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONLY BASED ON THE INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH OR REQUISITION OF DOCUMENTS. 27. THE ALLAHABAD HIGH COURT IN SMT. SHAILA AGARWAL'S (SUPRA) HAS HELD AS UNDER: ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 17 '19. THE SECOND PROVISO TO SECTION 153A OF THE ACT, REFERS TO ABATEMENT OF THE PENDING ASSESSMENT OR RE-ASSESSMENT PROCEEDINGS . THE WORD 'PENDING' DOES NOT OPERATE ANY SUCH INTERPRETATION, THAT WHER EVER THE APPEAL AGAINST SUCH ASSESSMENT OR REASSESSMENT IS PENDING, THE SAM E ALONG WITH ASSESSMENT OR REASSESSMENT PROCEEDINGS IS LIABLE TO BE ABATED. THE PRINCIPLES OF INTERPRETATION OF TAXING STATUTES DO NOT PERMIT THE COURT TO INTERPRET THE SECOND PROVISO TO SECTION 153A IN A M ANNER THAT WHERE THE ASSESSMENT OR REASSESSMENT PROCEEDINGS ARE COMPLETE , AND THE MATTER IS PENDING IN APPEAL IN THE TRIBUNAL, THE ENTIRE PROCE EDINGS WILL ABATE. 20. THERE IS ANOTHER ASPECT TO THE MATTER, NAMELY T HAT THE ABATEMENT OF ANY PROCEEDINGS HAS SERIOUS CAUSES AND EFFECT IN AS MUC H AS THE ABATEMENT OF THE PROCEEDINGS, TAKES AWAY ALL THE CONSEQUENCES TH AT ARISE THEREAFTER. IN THE PRESENT CASE AFTER DEDUCTING BOGUS GIFTS IN THE REGULAR ASSESSMENT PROCEEDINGS, THE PROCEEDINGS FOR PENALTY WERE DRAWN UNDER SECTION 271(1)(C) OF THE ACT. THE MATERIAL FOUND IN THE SEA RCH MAY BE A GROUND FOR NOTICE AND ASSESSMENT UNDER SECTION 153A OF THE ACT BUT THAT WOULD NOT EFFACE OR TERMINATE ALL THE CONSEQUENCE, WHICH HAS ARISEN OUT OF THE REGULAR ASSESSMENT OR REASSESSMENT RESULTING INTO THE DEMAN D OR PROCEEDINGS OF PENALTY.' (EMPHASIS SUPPLIED) THE SAID JUDGMENT WHICH ESSENTIALLY DEALS WITH SECO ND PROVISO TO SECTION 153A OF THE ACT ALSO SUPPORTS THE CONCLUSION, WHICH WE HAVE REACHED HEREINBEFORE. 28. IT HAS BEEN OBSERVED BY THE HON'BLE SUPREME COURT IN K.P. VARGHESE V. ITO [1981] 131 ITR 597/7 TAXMAN 13 THAT 'IT IS WELL RECOGNIZED RULE OF CONSTRUCTION THAT A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POSSIBLE THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED.' 29. THE ARGUMENT OF THE COUNSEL FOR THE APPELLANT IF T AKEN TO ITS LOGICAL END WOULD MEAN THAT EVEN IN CASES WHERE THE APPEAL ARIS ING OUT OF THE COMPLETED ASSESSMENT HAS BEEN DECIDED BY THE CIT(A), ITAT AND THE HIGH COURT, ON A NOTICE ISSUED UNDER SECTION 153A OF THE ACT, THE AO WOULD HAVE POWER TO UNDO WHAT HAS BEEN CONCLUDED UP TO THE HIGH COURT. ANY I NTERPRETATION WHICH LEADS TO SUCH CONCLUSION HAS TO BE REPELLED AND/OR AVOIDED A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF K.P. VARGHESE (SUPRA). 30. CONSEQUENTLY, IT IS HELD THAT IT IS NOT OPEN FOR T HE ASSESSEE TO SEEK DEDUCTION OR CLAIM EXPENDITURE WHICH HAS NOT BEEN CLAIMED IN THE ORIGINAL ASSESSMENT, WHICH ASSESSMENT ALREADY STANDS COMPLETED, ONLY BEC AUSE A ASSESSMENT UNDER SECTION 153A OF THE ACT IN PURSUANCE OF SEARCH OR R EQUISITION IS REQUIRED TO BE MADE. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 18 15. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIR ETY OF FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE REASSESSMENT IS COMPLETED U/S 153A WITHOUT ANY REFERENCE TO THE INCRIMINATING MATERIAL FOUND DURING THE COUR SE OF SEARCH, FOLLOWING THE BINDING PRECEDENTS AS CITED ABOVE INCLUDING THAT OF THE JURISDICTIONAL HIGH COURT, THE ADDITION MADE BY THE AO BY DISALLOWING THE CLAI M OF EXEMPTION U/S 10(38) IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ACCORDINGLY AFFIRM THE FINDINGS OF THE LD CIT(A) WHO HAS RIGHTLY APPRECIATED THE FACTS OF THE PRESENT CASE AND HAS FOLLOWED THE LEGAL PROPOSITION SO LAID DOWN BY THE VARIOUS C OURTS AND AS FOLLOWED CONSISTENTLY BY VARIOUS BENCHES INCLUDING THE JAIPU R BENCHES OF THE TRIBUNAL. IN THE RESULT, THE GROUND OF APPEAL SO TAKEN BY THE RE VENUE IS HEREBY DISMISSED. 16. NOW, COMING TO OTHER GROUNDS OF APPEAL NO. 2 - 8 RAISED BY THE REVENUE. ALL THESE GROUNDS OF APPEAL EFFECTIVELY RELATES TO ADDITION OF RS. 3,60,05,017/- MADE U/S 68 ON ACCOUNT OF BOGUS LTCG MADE BY THE AO BY DENIAL OF CLAIM OF EXEMPTION UNDER SECTION 10(38) IN RESPECT OF SALE O F SHARES OF MISHKA FINANCE & TRADING LTD AND THE CONSEQUENTIAL ADDITION OF RS. 7 ,20,100/- U/S 69C MADE BY THE AO ON ACCOUNT OF UNEXPLAINED COMMISSION EXPENDI TURE FOR TAKING BOGUS ACCOMMODATION ENTRY IN THE FORM OF LTCG AND BOTH OF WHICH HAVE BEEN DELETED BY THE LD CIT(A). 17. THE RELEVANT FACTS ARE AS FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES HIS INCOME FROM SALARY, HOUSE PROPERTY AND OTHER SO URCES. BESIDES THIS, HE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.3,60,05,017/- ON SALE OF SHARES OF MISHKA FINANCE & TRADING LTD AND RS.1,84,233/- IN RESPECT OF OTHER SECURITIES AND CLAIMED EXEMPTION U/S 10(38) OF THE ACT. THE ASSES SEE HAD APPLIED FOR 12,500 SHARES OF M/S PYRAMID TRADING AND FINANCE LTD. OF F ACE VALUE OF RS.10/- PER SHARE AT A PREMIUM OF RS.75/- PER SHARE. THEREAFTER, THE NAME OF COMPANY WAS CHANGED TO M/S MISHKA FINANCE AND TRADING LTD. AND ACCORDINGLY ON 20.11.2012, THESE SHARES WERE CREDITED IN THE DEMAT ACCOUNT IN THE NAME OF M/S MISHKA ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 19 FINANCE AND TRADING LTD. IN FEB.2013, THE COMPANY A NNOUNCED BONUS OF 7 SHARES FOR EVERY 1 SHARES AND ACCORDINGLY, 87,500 B ONUS SHARES WERE CREDITED IN THE DEMAT ACCOUNT ON 15.02.2013. SUBSEQUENTLY ON 18 .01.2014, THE FACE VALUE OF RS.10 PER SHARE WAS SPLIT INTO RS.1 PER SHARE AN D ACCORDINGLY, 10,00,000 SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF ASSESS EE. OUT OF THE ABOVE SHARES, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE S OLD 7,75,000 SHARES OF M/S MISHKA FINANCE AND TRADING LTD. FOR RS.3,65,20,671/ - THROUGH M/S SHAREKHAN LTD., A REGISTERED BROKER WITH BOMBAY STOCK EXCHANG E IN DIFFERENT LOTS ON WHICH STT WAS PAID AND CLAIMED EXEMPTION U/S 10(38) IN RE SPECT OF GAIN ON SALE OF THESE SHARES. 18. THE AO OBSERVED THAT SEARCHES HAVE BEEN CONDUCT ED BY THE INVESTIGATION WING OF THE DEPARTMENT AT VARIOUS PLACES THROUGHOUT THE COUNTRY. DURING THE SEARCHES & AS PER THE INFORMATION MADE PUBLIC BY TH E SEBI, IT IS DISCOVERED THAT VARIOUS SYNDICATES HAVE ARRANGED ACCOMMODATION ENTR Y OF BOGUS LTCG, BOGUS STCG, BOGUS LONG/ SHORT TERM CAPITAL LOSS THROUGH T RADING OF SHARES OF PENNY STOCKS. THE MODUS OPERANDI FOUND IS THAT THE INVESTORS/BENEFICIARIES HOLD THES E SHARES FOR ONE YEAR OR SO & THEN SELL IT TO ONE OF THE SHELL PRIVATE LIMITED COMPANIES OF THE OPERATOR. THESE FACTS WERE CONFIRM ED BY THE STAKEHOLDERS VIZ. OPERATORS/ SYNDICATE MEMBERS/ BROKERS WHO WERE PROV IDING ACCOMMODATION ENTRIES IN STATEMENTS RECORDED U/S 133A/132 OF THE IT ACT. IT HAS BEEN MANIFESTLY ACCEPTED BY THEM THAT SUCH PENNY STOCK C OMPANIES ARE THE CONDUIT FOR CONVERTING UNTAXED MONEY BROUGHT ON RECORD BY P AYING NO TAXES IN THE GARB OF EXEMPTED INCOME. IT IS FURTHER DETECTED THAT M/S MISHKA FINANCE & TRADING LTD. (SCRIP CODE-512191) IS A PENNY STOCK LISTED CO MPANY. THE ASSESSEE BOUGHT THESE SHARES AT A MEAGRE PRICE. THE PRICE OF THE SH ARES KEPT RISING THROUGHOUT THE PERIOD WHEN THE SHARES WERE HELD BY THE ASSESSE E. THE SHARE PRICE MOVEMENT & THE PROFIT EARNED BY THE BENEFICIARIES W ERE BEYOND HUMAN PROBABILITIES. THE AO, THEREAFTER, AT PAGES 4 TO 15 DISCUSSED THE FINANCIAL RESULTS ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 20 AND HELD THAT THE RISE IN THE PRICE COULD NOT BE RE LATED TO THE FUNDAMENTALS. ON PAGES 16 TO 41, HE GAVE THE TREND OF THE SHARE PRIC E. ON PAGES 42 TO 62, HE REFERRED TO THE STATEMENT OF SH. SANJAY VORA & SH. DEEPAK PATWARI RECORDED DURING SURVEY OPERATION CARRIED OUT IN CASE OF M/S ANAND RATHI SHARES & STOCK BROKERS LTD. KOLKATA WHEREIN THEY ACCEPTED THE ACTU AL FACT OF THESE TRANSACTIONS. THEREAFTER, ON PAGES 67 TO 69, HE DISCUSSED THE MOD US OPERANDI . THE AO FURTHER OBSERVED THAT SEBI HAS SUSPENDED THIS PARTICULAR SC RIP FROM TRADING IN BSE/NSE W.E.F. 17.04.2015. ACCORDINGLY, HE ISSUED SHOW CAUS E DATED 08.10.2018. IN RESPONSE TO SAME, THE ASSESSEE FILED THE REPLY DATE D 17.10.2018 WHICH IS REPRODUCED AT PAGE 77 & 78 OF THE ORDER. THE AO, H OWEVER, REJECTED THE VARIOUS CONTENTIONS OF ASSESSEE FOR THE REASONS STATED AT P AGES 79 TO 83 OF THE ORDER AND RELIED ON VARIOUS CASE LAWS REPRODUCED AT PG 84 TO 90 OF THE ORDER. ACCORDINGLY, HE TREATED CAPITAL GAIN OF RS.3,60,05, 017/- ON SALE OF SHARES AS ASSESSEES UNDISCLOSED INCOME AND TAXED U/S 115BBE OF THE ACT. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS PAID COMMISSION @ 2% OF SHARE CAPITAL OF M/S MISHKA FINANCE & TRADING LTD AMOUNTING TO RS.7,20,1 00/- AND ACCORDINGLY HE MADE ADDITION OF THE SAME BY TREATING SUCH AMOUNT A S UNEXPLAINED EXPENDITURE U/S 69C. 19. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BE FORE THE LD CIT(A). THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS FILED ALL THE POSSIBLE DOCUMENTARY EVIDENCE RELATING TO PURCHASE AND SALE OF THE STOCK ON WHICH LTCG WAS EARNED. THE AO HAS BASED DENIAL OF EXEMPTION U/S 10(38) OF THE ACT ON THE BASIS OF STATEMENT OF ENTRY OPERATOR AND INFORMATION RECEIVE D FROM THE INVESTIGATION WING. HOWEVER, IN THE STATEMENT OF ENTRY OPERATOR, NO QUESTION WAS EVER PUT REGARDING TRANSACTION THROUGH THE COMPANIES THROUGH WHICH ALLEGED CASH OF ASSESSEE WAS ROUTED. THE ASSESSEE PROVED THE ORAL S TATEMENT TO BE INCORRECT BY FILING VARIOUS DOCUMENTS. AO DID NOT PROVE THE DOCU MENTARY EVIDENCE TO BE UNTRUE/ BOGUS/ NO GENUINE. THE AO HAS DISCUSSED THE ABNORMAL RISE IN THE SHARE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 21 PRICE OF PENNY STOCK WITHOUT ANY UNDER LYING FUNDAM ENTALS. THE COORDINATE BENCH IN CASE OF MUKTA GUPTA VS. ITO (ITA 2766/DEL/2018 ORDER DT. 26.11.2015) HAVE HELD THAT CAPITAL GAIN CANNOT BE TREATED AS BO GUS SOLELY ON THE BASIS THAT THE PRICE OF THE SHARES HAS RISEN MANIFOLD AND THE REASON FOR ASTRONOMICAL RISE IS NOT RELATED TO ANY FUNDAMENTALS OF MARKET. IF THE T RANSACTIONS ARE DULY PROVED BY TRADING FROM STOCK EXCHANGE AND THE DOCUMENTATION I S PROPER, THE GAIN CANNOT BE ASSESSED AS UNEXPLAINED CREDIT. THE SEBI BANNED THE TRADING IN SHARES OF MISHKA FINANCE IN THE INTERIM ORDER BUT IN THE FINA L ORDER PASSED BY SEBI SAID INTERIM BAN WAS LIFTED AND THE SCRIPT AND ASSOCIATE D PERSONS WERE EXONERATED. THE STATEMENT ALONE CANNOT BE TREATED AS INCRIMINAT ING MATERIAL FOR THE PURPOSE OF MAKING ADDITION FOR ASSESSMENT COMPLETED U/S 143 (3). THE STATEMENT OF WITNESS CANNOT BE SOLE BASIS OF THE ASSESSMENT WITH OUT GIVING AN OPPORTUNITY OF CROSS EXAMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THEREAFTER, BASED ON AFORESAID REASONING A ND FINDINGS AND AFTER RELYING ON THE VARIOUS CASE LAWS REFERRED AT PG 55-63 OF HI S ORDER, LD. CIT(A) HELD THAT THE ACTION OF AO IN DENYING THE CLAIM OF EXEMPTION U/S 10(38) OF THE ACT IS NOT TENABLE AND HENCE, THE SAME WAS DIRECTED TO BE DELE TED. FURTHER, SINCE THE COMMISSION IS BASED ON ESTIMATED ADDITION OF ALLEGE D BOGUS LTCG NOW TREATED AS GENUINE, AMOUNT OF COMMISSION WAS ALSO DIRECTED TO BE DELETED. AGAINST THE SAID FINDINGS, THE REVENUE IS NOW IN APPEAL BEFORE US. 20. DURING THE COURSE OF HEARING, THE LD. DR SUBMIT TED THAT THE AO HAS DISCUSSED ALL THE RELEVANT FACTS IN THE ASSESSMENT ORDER AS WELL AS THE MODUS OPERANDI OF VARIOUS ENTRY PROVIDERS AS DETECTED BY THE DEPARTMENT DURING THE INVESTIGATION CARRIED OUT BY THE DIRECTORATE OF INV ESTIGATION, KOLKATA, DELHI ETC. THUS IT COMES TO THE LIGHT THAT LARGE SCALE MANIPUL ATION HAS BEEN DONE IN THE MARKET PRICE OF SHARES OF CERTAIN COMPANIES LISTED ON BOMBAY STOCK EXCHANGE BY A GROUP OF PERSONS WORKING AS SYNDICATE FOR THE PUR POSE OF PROVIDING ENTRIES OF TAX EXEMPT BOGUS LONG TERM CAPITAL GAINS TO LARGE N UMBER OF BENEFICIARIES IN ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 22 LIEU OF UNACCOUNTED CASH. THUS, IN ORDER TO CONVER T BLACK MONEY INTO WHITE WITHOUT PAYMENT OF INCOME-TAX, A LARGE NUMBER OF PE RSONS ARE AVAILING ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GA INS. THE LD. CIT D/R HAS SUBMITTED THAT THE AO HAS DISCUSSED EACH AND EVERY ASPECT OF THE MODUS OPERANDI OF THE ENTRY PROVIDERS UNDER WHICH THE BEN EFICIARIES ARE ASKED TO BUY SOME SHARES OF PRE-DETERMINED PENNY STOCK COMPANY C ONTROLLED BY THEM AT A VERY NOMINAL PRICE MOSTLY OFF-LINE THROUGH PREFEREN TIAL ALLOTMENT. THE BENEFICIARIES HOLD THE SHARES FOR ONE YEAR TO AVAIL THE LONG TERM CAPITAL GAIN EXEMPTION UNDER SECTION 10(38) OF THE IT ACT. IN T HE MEANTIME, THE OPERATORS RIG THE PRICE OF STOCK AND GRADUALLY RAISE ITS PRIC E MANY TIMES FROM 500 TO 1000 TIMES. THIS IS DONE THROUGH LOW VOLUME TRANSACTION INDULGED IN BY THE DUMMIES OF THE OPERATORS AT A PRE-DETERMINED PRICE. THUS TH E LD. D/R HAS SUBMITTED THAT THE AO AFTER DISCUSSING THE MODUS OPERANDI OF THE O PERATORS MINUTELY, HAS FOUND THE ASSESSEE IS ONE OF THE BENEFICIARIES OF AVAILIN G THE ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GAIN AS THE ASSESSEE HAS PU RCHASED SHARES OF M/S. PYRAMID TRADING AND FINANCE LTD ON 18.09.2012 WHICH IS AN OFF MARKET TRANSACTION NOT THROUGH THE RECOGNIZED STOCK EXCHAN GE AND THE NAME OF THE SAID COMPANY WAS THEREAFTER CHANGED TO M/S MISHKA FINANC E AND TRADING LTD. THE ASSESSEE THEREAFTER SOLD 7,75,000 SHARES OF M/S MIS HKA FINANCE AND TRADING LTD. FOR A CONSIDERATION OF RS. 3,65,20,671/- AS AGAINST THE PURCHASE CONSIDERATION OF RS. 10,62,500/-. THUS THERE IS A STIFF RISE IN THE PRICE OF THE SHARES AT THE TIME OF SALE AS AGAINST THE ACQUISITION COST WHICH CLEARLY SHOWS THAT THE TRANSACTION IS NOT GENUINE BUT IT IS A BOGUS TRANSACTION OF ACCOMM ODATION ENTRIES OF LONG TERM CAPITAL GAIN. THE LD. D/R HAS SUBMITTED THAT THE T RANSACTION THROUGH BANKING CHANNEL IS NOT SACROSANCT TO HOLD THAT THE TRANSACT ION IS GENUINE WHEN ALL OTHER SURROUNDING CIRCUMSTANCES INDICATE THAT THE ASSESSE E HAS OBTAINED ACCOMMODATION ENTRIES OF BOGUS CAPITAL GAIN IN RESP ECT OF PENNY STOCK. THUS THE AO HAS CLEARLY BROUGHT OUT THE CASE OF ACCOMMODATIO N ENTRIES OF BOGUS LONG TERM CAPITAL GAIN. HE HAS RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 23 IN CASE OF SUMATI DAYAL VS. CIT AS WELL AS IN CASE OF DURGA PRASAD MORE. THE LD. CIT D/R HAS ALSO RELIED UPON THE DECISION OF HONBL E DELHI HIGH COURT IN CASE OF SUMAN PODDAR VS. ITO, 112 TAXMANN.COM 329 (DELHI). THE LD. CIT D/R HAS SUBMITTED THAT THE HONBLE HIGH COURT HAS CONFIRMED THE DECISION OF THE TRIBUNAL WHEREBY THE LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE IN RESPECT OF PURCHASE AND SALE OF PENNY STOCK WERE TREATED AS BO GUS TRANSACTIONS BEING ACCOMMODATION ENTRIES. IT WAS ALSO POINTED OUT THA T THE SLP FILED BY THE ASSESSEE AGAINST THE JUDGMENT OF THE HONBLE DELHI HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN 112 TAXMANN.COM 330 (SC). 21. PER CONTRA, THE LD. AR SUBMITTED THAT THE ADDIT ION HAS BEEN MADE BY THE AO ON THE BASIS OF STATEMENT OF CERTAIN PERSONS REC ORDED IN THE SURVEY CONDUCTED BY THE INVESTIGATION WING KOLKATA ON M/S ANAND RATHI SHARES AND STOCK BROKERS LIMITED, ORDER OF SEBI WHEREBY IT RES TRAINED 129 ENTITIES INCLUDING M/S MISHKA FINANCE AND TRADING LTD. AND ITS PROMOTE RS FROM ACCESSING THE SECURITIES MARKET AND PROHIBITING THEM FROM BUYING, SELLING OR DEALING IN SECURITIES, EITHER DIRECTLY OR INDIRECTLY, IN ANY M ANNER WHATSOEVER, TILL FURTHER DIRECTIONS AND THE RISE IN PRICE OF SHARES NOT RELA TED TO THE FUNDAMENTALS OF COMPANY. 22. IT WAS SUBMITTED THAT DURING THE ASSESSMENT PRO CEEDINGS, THE AO HAS REFERRED TO THE STATEMENT OF DEEPAK PATWARI AND SAN JAY VORA WHICH IS REPRODUCED AS SUCH AT PAGE 42-62 OF THE ASSESSMENT ORDER. FROM THE STATEMENT OF SHRI SANJAY VORA RECORDED DURING THE COURSE OF S URVEY U/S 133A BY DDIT(INV.), KOLKATA, IT IS NOTED THAT HE IS REGIONA L DIRECTOR, EAST ZONE OF M/S ANAND RATHI SHARES AND STOCK BROKERS LTD. SINCE 200 7. WHILE REPLYING TO QUESTION NO. 45, HE HAS CATEGORICALLY DENIED OF BEI NG PART OF THE BOGUS LTCG SYNDICATE. AGAIN WHILE REPLYING TO QUESTION NO. 62, HE STATED THAT HE STRONGLY DENY RECEIVING ANY COMMISSION APART FROM BROKERAGE EARNED WHICH IS DULY ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 24 REFLECTED IN THE BOOKS OF ACCOUNTS. THUS FROM THE S TATEMENT OF SANJAY VORA IT IS CLEAR THAT HE HAS NO ROLE IN ACCOMMODATION ENTRY PR OVIDER SYNDICATE. IT IS FURTHER SUBMITTED THAT ASSESSEE IS NOT HAVING ANY TRANSACTI ON WITH M/S ANAND RATHI SHARES AND STOCK BROKERS LTD. IN WHATSOEVER MANNER. ASSESSEE HAS ENTERED INTO TRANSACTION WITH SHARE KHAN LIMITED. THUS, NO ADVER SE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE ON THE BASIS OF STATEMENT OF S HRI SANJAY VORA WITH REGARD TO LTCG EARNED BY ASSESSEE. REGARDING STATEMENT OF DEEPAK PATWARI, WHILE REPLYING TO QUESTION NUMBER 8 AND 9, HE HAS LISTED 14 COMPANIES WHICH ARE CONTROLLED AND MANAGED BY HIM BUT NAME OF M/S MISHK A FINANCE AND TRADING LIMITED FORMERLY KNOWN AS PYRAMID TRADING AND FINAN CE LIMITED IS NOT APPEARING IN THE SAID LIST. IT IS SUBMITTED THAT BOTH THESE P ERSONS IN THE STATEMENT RECORDED HAVE NOT PROVIDED CLIENT LIST OR NAME/ADDRESS OR CO NTACT NUMBER TO WHOM THEY HAVE PROVIDED ACCOMMODATION ENTRY IN THE FORM OF BO GUS LTCG. THE ASSESSEE HAS NOT ENTERED INTO ANY TRANSACTION WHATSOEVER WIT H THESE PERSONS. THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSES SEE ON THE BASIS OF STATEMENT OF THESE PERSONS. OTHERWISE ALSO NEITHER ANY TRANSACTION HAS BEEN CARRIED OUT BY THE ASSESSEE THROUGH THESE BROKERS N OR THESE PERSONS HAVE STATED THAT THEY HAVE DONE ANY TRANSACTION IN THE SHARES O F M/S MISHKA FINANCE AND TRADING LTD. FOR THE ASSESSEE. 23. IT WAS FURTHER SUBMITTED THAT THE SEBI HAS COND UCTED AN EXAMINATION INTO THE DEALINGS IN THE SCRIP OF M/S MISHKA FINANCE AND TRADING LTD. ON BSE LIMITED DURING THE PERIOD FROM FEBRUARY 14, 2013 TO DECEMBE R 31, 2014 AS THERE WAS HUGE RISE IN THE PRICE OF THE SCRIP. AFTER PRELIMIN ARY EXAMINATION, SEBI PASSED AN INTERIM EX-PARTE ORDER DATED APRIL 17, 2015 AND RES TRAINED 129 ENTITIES INCLUDING MISHKA AND ITS PROMOTERS AND DIRECTORS FROM ACCESSI NG THE SECURITIES MARKET AND FURTHER PROHIBITED THEM FROM BUYING, SELLING OR DEA LING IN SECURITIES, EITHER DIRECTLY OR INDIRECTLY, IN ANY MANNER WHATSOEVER TI LL FURTHER DIRECTIONS. SUBSEQUENTLY SEBI VIDE ORDER DATED DT. 05.10.2017 A FTER DETAILED ENQUIRIES FOUND ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 25 THAT THERE IS NO ADVERSE MATERIAL AGAINST 104 ENTIT IES MENTIONED AT S. NO. 1-104 IN TABLE NO. 2 OF ORDER WITH RESPECT TO THEIR ROLE IN THE PRICE MANIPULATION / PRIMA FACIE VIOLATIONS FOR WHICH INTERIM ORDER DATED APRI L 17, 2015 WAS PASSED AND THUS REVOKED THE RESTRAINED ORDER WITH REFERENCE TO THES E ENTITIES. AT TABLE NO. 2, PAGE NO. 6 OF THE ORDER, THE NAME OF ASSESSEE IS AP PEARING. THIS PROVES BEYOND DOUBT THAT THE ASSESSEE IS A GENUINE INVESTOR IN TH E SCRIPT OF M/S MISHKA FINANCE AND TRADING LTD. 24. IT WAS FURTHER SUBMITTED THAT THE AO HAS REFERR ED TO THE FINANCIALS OF M/S PYRAMID TRADING AND FINANCE LTD. AT PG 4 TO 6 O F THE ASSESSMENT ORDER. FROM THE SAME, IT CAN BE NOTED THAT DURING FY 2012- 13 WHEN ASSESSEE PURCHASED THE SHARES, THE TURNOVER OF CO. WAS RS.16 .45 CR. AND PROFIT BEFORE TAX WAS RS.17 LACS. IN FY 2014-15, IT INCREASED TO RS.2 7.11 CR. AND PROFIT BEFORE TAX AT RS.59 LACS. AGAIN IN FY 2015-16, THE TURNOVER WA S RS.18.38 CR. AND PBT WAS RS.23 LACS. THE SHARE PRICE OF THE COMPANY AS MENTI ONED AT PG 16 TO 40 OF THE ASSESSMENT ORDER SHOWS THAT DURING THE MONTH OF DEC , 2013 TO 15.01.2014, IT RANGED BETWEEN RS.177 TO RS.327 PER SHARE OF RS.10 EACH BUT AFTER IT SPLIT INTO RS.1 PER SHARE, THE SHARE PRICE FROM 16.01.2014 TO 30.12.2014 RANGED BETWEEN RS.30 TO RS.56 PER SHARE. THUS, THE SHARES WERE TRA DED IN THE STOCK EXCHANGE FOR MORE THAN 1 YEAR @ RS.18 PER SHARE TO RS.56 PER SHA RE. THUS, NOT ONLY THE TURNOVER OF COMPANY HAS INCREASED DURING THE PERIOD WHEN ASSESSEE SOLD THE SHARES BUT ALSO SHARES OF THE COMPANY WAS QUOTED IN STOCK EXCHANGE AT A CONSTANT RATE ALMOST FOR A YEAR. THE ASSESSEE HAS P ROVIDED ALL THE SUPPORTING EVIDENCES IN RESPECT OF PURCHASE OF SHARES TILL THE SAME ARE SOLD AND THEREFORE, IT IS INCORRECT ON PART OF AO TO ALLEGE THAT RISE IN T HE PRICE OF SHARES IS NOT RELATED TO THE FUNDAMENTALS OF COMPANY THOUGH THE SAME IS N OT A CRITERIA TO JUDGE THE SHARE PRICE OF A COMPANY. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 26 25. IT WAS FURTHER SUBMITTED THAT THE VARIOUS OBSER VATIONS AND THE CONCLUSIONS DRAWN BY THE AO IN THE ASSESSMENT ORDER ARE BASED O N SUSPICION, SURMISES AND HEARSAY. IT IS TRITE LAW THAT SUSPICION HOWEVER STR ONG CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE (LAL CHAND BHAGAT AMBIK A RAM VS. CIT 37 ITR 288 SC). THE SUSPICION OR PRESUMPTION, HOWEVER STRONG I T MAY APPEAR TO BE TO TRUE, NEEDS TO BE CORROBORATED BY SOME EVIDENCE TO ESTABL ISH A LINK THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN FORM OF LTCG. IN THIS CONNECTION, REFERENCE CAN BE MADE TO THE JUDGMENT OF SPECIAL BE NCH OF MUMBAI, ITAT IN CASE OF GTC INDUSTRIES VS. ACIT 164 ITD 1. FURTHER, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT (2019) 33 NY PTTJ 740 (MUM.) (TRIB.) SMT. KARUNA GARG VS. ITO (2019) 178 ITD 823 (DELHI) (TRIB.) CHANDRA PRAKASH JHUNJHUNWALA VS. DCIT (2019) 201 TT J 831 (KOL.) (TRIB.) SMT. MADHU KILLA VS. ACIT (2019) 178 DTR 236 (KOL.) (TRIB.) RAMPRASAD AGARWAL VS. ITO (2019) 174 ITD 286 (MUM.) (TRIB.) DCIT VS. SAURABH MITTAL (2018) 172 DTR 291 (JAIPUR) (TRIB.) MAHAVIR JHANWAR VS. ITO (2019) 55 CCH 150 (KOL.) (T RIB.) ARUN KUMAR & ORS. VS. ACIT (ITA NO.457/DEL/2018, 2825/DEL/2018 AND 2826/DEL/2018 ORDER DT. 05.11.2018) DCIT VS. RAKESH SARAOGI & SONS (HUF) (2018) 32 NYPT TJ 1116 (RAIPUR) (TRIB.) 26. THE LD. AR FURTHER SUBMITTED THAT THE DECISION RELIED UPON BY THE LD. CIT/DR IN CASE OF SUMAN PODDAR VS. ITO (SUPRA) IS N OT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE AS IN THE SAID CASE IT WAS A FI NDING OF FACT BY THE TRIBUNAL ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 27 HOLDING THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE OF ACTUAL SALE EXCEPT THE CONTRACT NOTES ISSUED BY THE SHARE BROKE R WHEREAS IN THE CASE OF THE ASSESSEE, THE ASSESSEE PRODUCED ALL THE DOCUMENTARY EVIDENCES RIGHT FROM ALLOTMENT OF SHARES, HOLDING IN DEMAT ACCOUNT, PAYM ENT OF PURCHASE CONSIDERATION, CONTRACT NOTES AS WELL AS RECEIPT OF THE SALE CONSIDERATION THROUGH BANKING CHANNEL, THUS THE SAID DECISION CANNOT BE A PPLIED IN THE PRESENT CASE. ON THE OTHER HAND, THE DECISIONS OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL IN DBIT APPEAL NO. 20 9/2018 DATED 24.07.2018 AS WELL AS PCIT VS. SHRI PRAMOD JAIN & OTHERS IN DBIT APPEAL NO. 385/2011 DATED 11.09.2011 ARE BINDING PRECEDENTS ON THIS ISSUE AND SUPPORTS THE CASE OF THE ASSESSEE AND WHICH HAS BEEN RIGHTLY FOLLOWED BY THE LD CIT(A). THE LD. AR HAS ACCORDINGLY SUPPORTED THE FINDINGS OF THE LD. CIT ( A). 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS DOUBTED THE TRANSACTIONS OF P URCHASE AND SALE OF SHARES BY THE ASSESSEE OF M/S. MISHKA FINANCE AND TRADING LTD BASED ON THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING KOLKATA WHEREIN CERTAIN PERSONS WERE FOUND INDULGED IN PROVIDING ACCOMMODAT ION ENTRIES, INTER-ALIA BOGUS LONG TERM CAPITAL GAINS WHICH IS CLAIMED AS E XEMPT UNDER SECTION 10(38) OF THE IT ACT BY THE BENEFICIARIES IN ORDER TO FACI LITATE THE BENEFICIARIES TO CONVERT THEIR BLACK MONEY INTO WHITE WITHOUT PAYING INCOME- TAX. THE AO HAS NARRATED THE MODUS OPERANDI OF VARIOUS ENTRY PROVIDERS WHICH IS A GENERAL STATEMENT SO FAR AS THE INDULGENCE OF CERTAIN PERSONS IN PROVIDI NG THE ACCOMMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAINS AS WELL AS OTHER TRAN SACTIONS. HOWEVER, IN THE SAID NARRATION OF MODUS OPERANDI, THERE IS NOTHING AGAIN ST THE PARTICULAR TRANSACTION OF PURCHASE AND SALE OF SHARES BY THE ASSESSEE. THE AO HAS SPECIFICALLY MENTIONED THAT DURING THE COURSE OF ENQUIRY IN CERT AIN CASES, IT HAS COME TO LIGHT THAT LARGE SCALE MANIPULATION HAS BEEN DONE IN THE MARKET PRICE OF SHARES OF CERTAIN COMPANIES LISTED ON STOCK EXCHANGE BY A GRO UP OF PERSONS WORKING AS A ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 28 SYNDICATE FOR THE PURPOSE OF PROVIDING ENTRY OF TAX EXEMPT BOGUS LONG TERM CAPITAL GAINS TO LARGE NUMBER OF BENEFICIARIES IN L IEU OF UNACCOUNTED CASH. THESE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER CANN OT CONSTITUTE ANY TANGIBLE MATERIAL OR EVIDENCE TO SHOW THAT THE TRANSACTION O F THE ASSESSEE IS BOGUS BEING AN ACCOMMODATION ENTRY. THE AO HAS DISCUSSED THE MO DUS OPERANDI OF ENTRY PROVIDERS ON THE ISSUE BUT HAS NOT MADE ANY REFEREN CE OF ANY MATERIAL OR DOCUMENTARY EVIDENCE WHICH REVEALS THAT THE ASSESSE E HAS INDULGED IN AVAILING THE ACCOMMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAIN. THERE IS NO DISPUTE THAT ONCE THE ASSESSEE HAS CLAIMED THE LONG TERM CA PITAL GAIN FROM PURCHASE AND SALE OF SHARES WHICH IS EXEMPT UNDER SECTION 10(38) OF THE ACT, THE PRIMARY ONUS IS ON THE ASSESSEE TO SUBSTANTIATE HIS CLAIM BY PRO DUCING THE SUPPORTING EVIDENCE. WE FIND THAT THE ASSESSEE HAD APPLIED FO R 12,500 SHARES OF M/S PYRAMID TRADING AND FINANCE LTD. OF FACE VALUE OF R S.10/- PER SHARE AT A PREMIUM OF RS.75/- PER SHARE. THE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE BEARING NO. 397519 DATED 18.09.2012 DRAWN ON SBBJ, M.I, ROAD, JAIPUR. THE SHARES WERE THEREAFTER ALLOTTED BY THE COMPANY ON 2 4.09.2012 AND NECESSARY REGULATORY FILINGS IN TERMS OF FORM 2 ALONG WITH BO ARDS RESOLUTION HAVE BEEN PLACED ON RECORD. THEREAFTER, THE NAME OF COMPANY WAS CHANGED TO M/S MISHKA FINANCE AND TRADING LTD. AND ON 20.11.2012, THESE S HARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE IN THE NAME OF M/S MI SHKA FINANCE AND TRADING LTD. THUS IT IS CLEAR THAT 12,500 SHARES WERE ACQUI RED BY THE ASSESSEE ON 18.09.2012 AND WERE CREDITED IN THE DEMAT ACCOUNT O F THE ASSESSEE. THE AO HAS NOT DISPUTED THAT SUBSEQUENTLY IN FEB.2013, THE COM PANY ANNOUNCED BONUS OF 7 SHARES FOR EVERY 1 SHARES AND ACCORDINGLY, 87,500 B ONUS SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE ON 15.02.2013. SU BSEQUENTLY, ON 18.01.2014, THE FACE VALUE OF RS.10 PER SHARE WAS SPLIT INTO RS .1 PER SHARE AND ACCORDINGLY, 10,00,000 SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF ASSESSEE. ONCE THE SHARES ARE DEMATERIALIZED AND CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE, THE HOLDING OF THE SHARES BY THE ASSESSEE CANNOT BE DIS PUTED. IT IS ALSO NOT IN ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 29 DISPUTE THAT OUT OF 10,00,000 SHARES HELD IN THE DE MAT ACCOUNT OF THE ASSESSEE, THE ASSESSEE SOLD 7,75,000 SHARES FOR RS.3,65,20,67 1/- IN DIFFERENT LOTS ON WHICH STT IS PAID AND CLAIMED EXEMPTION U/S 10(38) IN RES PECT OF GAIN ON SALE OF THESE SHARES. THE AO HAS TREATED THE TRANSACTION OF SALE OF 7,75,000/- SHARES AS BOGUS BEING ACCOMMODATION ENTRY BUT HAS NOT DOUBTED THE H OLDING OF THE SHARES BY THE ASSESSEE TO THE TUNE OF 10,00,000/- SHARES IN THE D EMAT ACCOUNT OF THE ASSESSEE. ONCE THE ASSESSEE HAS PRODUCED ALL THE SU PPORTING EVIDENCES WHICH INCLUDE ALLOTMENT OF SHARES, BANK STATEMENT SHOWING THE PAYMENT OF PURCHASE CONSIDERATION, DEMAT ACCOUNT SHOWING HOLDING OF SHA RES IN DEMAT FORM, SALE OF THE SHARES THROUGH STOCK EXCHANGE WHICH ARE ALSO RE FLECTED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND RECEIPT OF THE SALE CON SIDERATION IN THE BANK ACCOUNT OF THE ASSESSEE AS IT IS EVIDENT FROM THE BANK ACCO UNT STATEMENT OF THE ASSESSEE, THEN IN THE ABSENCE OF ANY CONTRARY MATERIAL OR EVI DENCE BROUGHT ON RECORD BY THE AO, THE TRANSACTION OF PURCHASE AND SALE OF THE SHARES IN QUESTION CANNOT BE HELD AS BOGUS MERELY ON THE BASIS OF THE INVESTIGAT ION CARRIED OUT BY THE DEPARTMENT IN SOME OTHER CASES WHERE SOME PERSONS W ERE FOUND INDULGED IN PROVIDING ACCOMMODATION ENTRY. THE AO IN THE ENTIR E ASSESSMENT ORDER HAS NOT MADE REFERENCE TO SINGLE DOCUMENTARY EVIDENCE WHICH CAN BE SAID TO BE AN INCRIMINATING MATERIAL AGAINST THE ASSESSEE TO SHOW THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRY OF BOGUS LONG TERM CAPITAL GAIN . THEREFORE, THE MERE SUSPICION CANNOT BE A GROUND FOR TREATING THE TRANS ACTION AS BOGUS IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL ON RECORD. 28. THE LD. D/R HAS RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN CASE OF SUMAN PODDAR VS. ITO (SUPRA) WHEREIN THE HO NBLE HIGH COURT HAS CONFIRMED THE FINDING OF THE TRIBUNAL AND FINALLY O BSERVED IN PARA 8 AS UNDER :- 8. FROM THE ABOVE EXTRACT, IT WOULD BE SEEN THAT THE CRESSANDA SOLUTIONS LTD. WAS IN FACT IDENTIFIED BY THE BOMBAY STOCK EXCHANGE AS A PENNY STOCK BEING USED FOR OBTAINING BOGUS LONG TER M CAPITAL GAIN. NO ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 30 EVIDENCE OF ACTUAL SALE EXCEPT THE CONTRACT NOTES I SSUED BY THE SHARE BROKER WERE PRODUCED BY THE ASSESSEE. NO QUESTION OF LAW, THEREFORE ARISES IN THE PRESENT CASE AND THE CONSISTENT FINDING OF FACT RET URNED AGAINST THE APPELLANT ARE BASED ON EVIDENCE ON RECORD. THUS IT IS CLEAR THAT IN THE SAID CASE, THE TRIBUNA LS FINDING IS BASED ON THE FACT THAT NO EVIDENCE OF ACTUAL SALE EXCEPT THE CONTRACT NOTES ISSUED BY THE SHARE BROKER WAS PRODUCED BY THE ASSESSEE. IN THOSE FACT S, THE HONBLE HIGH COURT HAS HELD THAT NO QUESTION OF LAW ARISES IN THE SAID CASE. ON THE CONTRARY, IN THE CASE IN HAND THE ASSESSEE PRODUCED ALL THE RELEVANT DOCUMENTARY EVIDENCE TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. EVEN IF THE AO DOUBTED THE TRANSACTION, THEN TO ESTABLISH THAT THE TRANSACTION IS BOGUS, THE AO IS REQUIRED TO PRODUCE THE CONTRARY MATERIAL EVIDENCE SO THAT THE EVIDENCE PRODUCED BY THE ASSESSEE CAN BE CONTROVERTED. IN THE ABSENCE OF SU CH CONTRARY MATERIAL OR EVIDENCE BROUGHT ON RECORD BY THE AO AND THE EVIDEN CE PRODUCED BY THE ASSESSEE IS OTHERWISE INDEPENDENTLY VERIFIABLE BEIN G THE DOCUMENTS IN THE SHAPE OF BANK STATEMENTS, DEMAT ACCOUNT, CONTRACT NOTES R EFLECTING THE TRANSACTION EXECUTED ON THE STOCK EXCHANGE FOR WHICH THE ASSESS EE HAS NO CONTROL OR SAY, THEREFORE, THE SAID EVIDENCE CANNOT BE MANIPULATED BY THE ASSESSEE. ONCE THE EVIDENCE PRODUCED BY THE ASSESSEE IS NOT PREPARED O R BEYOND THE SCOPE OF ANY MANIPULATION BY THE ASSESSEE, THEN THE ASSESSEE HAS DISCHARGED HIS ONUS TO PROVE THE TRANSACTION OF PURCHASE AND SALE OF SHARE S AND CONSEQUENTIAL CAPITAL GAINS. THUS THE DECISION OF HONBLE DELHI HIGH COU RT WILL NOT HELP THE CASE OF THE DEPARTMENT. 29. THE LD. CIT (A) HAS DECIDED THIS ISSUE AFTER DI SCUSSING ALL THE RELEVANT FACTS AS WELL AS THE DECISIONS ON THIS POINT IN PARAS 7 T O 9 AS UNDER :- 7. THE APPELLANT HAS CLAIMED LTCG EXEMPT U/S 10(38 ) OF THE ACT FOR THE TWO A.YRS. FOR THE SAKE OF REFERENCE THE WRITTEN SUBMIS SIONS FOR THE A.YRS. 2014-15 ARE TAKEN AS REFERENCE AND DISCUSSED. IT MAY BE NOT ED THE LTCG FOR BOTH THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 31 A.YRS. IS FOR THE SAME SCRIPT MISHKA FINANCE AND TR ADING LTD. THE LTCG FOR THE TWO A.YRS. IS AS UNDER: A.YRS. LTCG COMMISSION THERE OF SCRIPTS 2014-15 RS. 10255809 RS. 205116 MISHKA FINANCE AND TRADING LTD. 2015-16 RS. 36005017 RS. 720100 MISHKA FINANCE AND TRADING LTD. CAREFUL PERUSAL OF THE ORDER PASSED BY THE LD. AO I NDICATES THAT THE LD. AO HAS BASED HIS DECISION TO DISALLOW THE CLAIM OF U/S 10(38) OF THE ACT ON THE BASIS OF THE FOLLOWING: 1. THAT THE SCRIPT WAS PURCHASED AT VERY LOW PRICE AND THEN WAS SOLD AT VERY HIGH PRICE WHICH IS AGAINST NORMAL PROBABILITY 2. THAT THE BUSINESS OF COMPANY IS DUBIOUS, IN THE WOR DS OF LD. AO, AND EVEN THE FINANCIAL ARE NOT HEALTHY TO SUPPORT T HE HIGH VALUATION THAT THE SHARE PRICE MOVEMENT WAS QUOTED FROM PAGE 18 TO 40 OF THE ORDER TO DRAWN INFERENCE THE LTCG CLAIM WAS BOGUS. 3. THAT THE LD. AO RELIED ON THE STATEMENT RECORDED BY THE INVESTIGATION WING. COPY OF STATEMENT OF MANOJ KUMAR AGARWAL, JAI KISHAN PODDAR & SUBRATA HALDER WAS PROVLDED TO APPELLANT. HOWEVER L D. AO PREDOMINANTLY RELIED ON THE STATEMENT DEEPAK PATWARI & SANJAY VOR A, STATEMENT OF THESE TWO PERSONS ARE MENTIONED IN THE ASSESSMENT ORDER 4. THAT LD. AO MENTIONED THAT SEBI PASSED INTERIM ORDE R BANNING THE TRADING OF MISHA FINANCE & TRADING PVT. LTD. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 32 5. THAT THE LD. AO ALSO DISCUSSED IN LENGTH THE GENERA L MODUS OPERANDI OF CAPITAL GAIN EXTRACTED FROM THE REPORT. 7.2 I HAVE PERUSED THE WRITTEN SUBMISSIONS SUBM ITTED BY THE LD. A/R AND THE ORDER OF AO. I HAVE ALSO GONE THROUGH VARIOUS J UDGMENTS CITED BY THE LD. A/R AND THOSE CONTAINED IN THE ORDER OF AO. I HAVE ALSO GONE THROUGH THE APB FROM PAGE 1 TO 55. AFTER CAREFUL PERUSAL OF LD. AO ORDER AND SUBMISSI ONS I AM NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. AO F OR THE FOLLOWING REASONS: 7.3 THE LD. A/R HAS FILED ALL THE POSSIBLE DOCUMEN TARY EVIDENCE RELATING TO PURCHASE AND SALE OF THE STOCK ON WHICH THE LTCG WA S EARNED. ALL THE DETAILS ARE FILED IN APB AND THE SAME WERE FILED BEFORE THE LD. AO. THE DETAILS FILED ARE DESCRIPTION APB PAGES COPY OF ALLOTMENT OF SHARES 8 EVI DENCE RELATI NG TO PURCHASE OF SHARE 9 COPY OF BANK STATEMENT EVI DENCING PAYMENT FOR PURCHASE 10 - 11 COPY OF DEMAT ACCOUNT 12 - 16 COPY OF BANK STATEMENT WHEREIN SALE PROCEEDS WERE R ECEIVED 25 - 29 COPY OF CONTRACT NOTES FOR SALE OF SHARES 21 - 24 COPY OF FINAL ORDER OF SEBI* 36 - 46 SIMILAR DETAILS WERE FILED FOR THE A. YRS 2015-16 T OO 7.4 IN SHORT, AFTER THE LD. AO CONFRONTED THE APPEL LANT WITH STATEMENTS OF ENTRY OPERATOR AND OTHER CIRCUMSTANTIAL EVIDENCES T HE LD. A/R FILED ALL POSSIBLE DOCUMENTARY EVIDENCES IN HIS POSSESSION. IT IS CLEA R THAT AO HAS BASED DENIAL OF EXEMPTION U/S 10(38) OF THE ACT ON THE BASIS OF STATEMENT OF THE ENTRY OPERATOR AND INFORMATION RECEIVED FROM THE INVESTIG ATION WING. HOWEVER IN THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 33 STATEMENT OF ENTRY OPERATOR NO QUESTION WAS EVER PU T TO THE ENTRY OPERATOR REGARDING TRANSACTION THROUGH THE COMPANIES, THROUG H WHICH ALLEGED CASH OF APPELLANT WAS ROUTED. ON ONE HAND THE AO HAS ORAL S TATEMENTS/ORAL EVIDENCES IN THE FORM OF STATEMENT OF ENTRY OPERATOR; THE APP ELLANT HAS REBUFFED THESE ORAL EVIDENCES BY FILING DOCUMENTARY EVIDENCES LIST ED ABOVE. IT IS A SETTLED LAW THAT DOCUMENTARY EVIDENCES WILL ALWAYS CARRY MORE W EIGHT THAN THE ORAL STATEMENTS. AFTER THE ORAL STATEMENT WERE AVAILABLE TO THE AO THE APPELLANT PROVED THE ORAL STATEMENT TO BE INCORRECT BY FILING DOCUMENTARY EVIDENCES. THEREAFTER THE AO DID NOT PROVE THE DOCUMENTARY EVI DENCE TO BE UNTRUE/ BOGUS/ NON GENUINE. THE AO NEVER CONFRONTED THE DOC UMENTARY EVIDENCE TO THE PERSON WHOSE ORAL STATEMENT WAS RECORDED & RELI ED UPON. THEREFORE THE ORAL STATEMENT LOSSES THEIR EVIDENTIARY VALUE IN LI GHT OF THE DOCUMENTARY EVIDENCE PLACED BY APPELLANT. EVEN THE ORAL STATEME NT IS GENERAL AND DOES NOT PIN POINT OR MENTION APPELLANT NAME ANYWHERE. NEITH ER DOES IT MENTION ANYWHERE THAT CASH FROM APPELLANT WAS RECEIVED & IT WAS SAME CASH WHICH WAS ROUTED BACK TO THE APPELLANT BANK ACCOUNT. CONSIDER ING THE ABOVE DOCUMENTARY EVDENCES CLEARLY OUT WEIGHT THE ORAL EV IDENCES RELIED UPON. 7.5 FURTHER THE AO HAS DISCUSSED THE ABNORMAL RISE IN THE SHARE PRICE OF THE PENNY STOCK WITHOUT ANY UNDER LYING FUNDAMENTALS. R ECENTLY HON'BLE ITAT DELHI IN THE CASE OF MUKTA GUPTA VS. ITO , ITA 2766/ DEL/2018 ORDER DATED 26-11-2018 HAVE HELD THAT CAPITAL GAINS CANNOT BE TREATED AS BOGUS- SOLELY ON THE BASIS THAT THE PRICE OF THE SHARES HA S RISEN MANIFOLD AND THE REASON FOR ASTRONOMICAL RISE IS NOT RELATED TO ANY FUNDAMENTALS OF MARKET. IF THE TRANSACTIONS ARE DULY PROVED BY TRADING FROM ST OCK EXCHANGE AND THE DOCUMENTATION IS PROPER, THE GAINS CANNOT BE ASSESS ED AS UNEXPLAINED CREDIT OR AS UNEXPLAINED MONEY. IT WAS FURTHER OBSERVED BY THE HON'BLE ITAT DELHI THAT NOWHERE IT HAS BEEN FOUND THAT ASSESSEE WAS IN ANY MANNER FOUND TO BE BENEFICIARY OF ANY ACCOMMODATION ENTRY UNDER ANY IN QUIRY OR INVESTIGATION. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 34 ONCE ALL THESE TRANSACTIONS ARE DULY PROVED BY TRAD ING FROM STOCK EXCHANGE, THEN TO HOLD THE SALE OF SHARES AS UNEXPLAINED CRED IT OR AS UNEXPLAINED MONEY CANNOT BE UPHELD. IT WAS ALSO POINTED OUT THAT THOUGH THE SEBI BANNED THE TRADING IN THE SHARE OF MISKHA FINANCE IN THE INTERIM ORDER BUT IN THE FINAL ORDER PASSED BY THE SEBI SAID INTERIM BAN WAS LIFTED AND THE SCRIPT AND ASSOCIATED PERSONS WERE EXONERATED. THE FINAL ORDER OF THE SEBI IS PLA CED ON THE RECORD BY THE LEARNED A/R. 7.6 THE RELEVANT PARA OF SEBI REPORT ARE PARA 9 & 1 0. IN THESE PARA THE SEBI HAS ESPECIALLY EXONERATED SMT. KALAWATI SHARMA (APP ELLANT) & SHRI PRAKASH CHAND SHARMA. THE RELEVANT PARA IS REPRODUCED HEREI N AS UNDER: 9. IN VIEW OF THE FOREGOING, IN EXERCISE OF THE PO WERS CONFERRED UPON ME UNDER SECTION 19 OF THE SECURITIES AND EXCH ANGE BOARD OF INDIA ACT, 1992 READ WITH SECTIONS 11, 11(4) AND 11 B OF THE SEBI ACT, HEREBY REVOKE THE CONFIRMATORY ORDERS DATED OCTOBER 12, 2015, OCTOBER 21, 2015, APRIL 13, 2016, JULY 05, 2016 AND AUGUST 26, 2016 QUA AFORESALD 113 ENTITIES (PARAGRAPH 7 ABOVE) WITH IMMEDIATE EFFECT. 10. THE REVOCATION OF THE DIRECTIONS ISSUED VLDE TH IS ORDER IS ONLY IN RESPECT OF THE ENTITIES MENTIONED AT PARAGRAPH 7 OF THIS ORDER IN THE MATTER OF MISHKA PERTAINING TO THE PERIOD FROM FEBRUARY 14, 2013 TO DECEMBER 31, 2014 IN RESPECT OF THE PRIMA F ACIE VIOLATIONS FOR WHICH THE CONFIRMATORY ORDER DATED 12, 2015, OC TOBER 21, 2015, APRIL 13, 2016, JULY 05, 2016 AND AUGUST 26, 2016 WERE PASSED BY SEBI. AS REGARDS REMAINING 13 ENTITIES IN THE SCRIP OF MISHKA, VIOLATIONS UNDER SEBI ACT AND/OR SCRA AND/O R PFUPT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 35 REGULATIONS AND OTHER SECURITIES LAWS WERE OBSERVED AND SEBI SHALL CONTINUE ITS PROCEEDINGS AGAINST THEM. HENCE, THE D IRECTIONS ISSUED VLDE ORDER DATED APRIL 17, 2015 AGAINST REMAINING 1 3 ENTITIES SHALL CONTINUE. 7.7 FURTHER, IN THE DETAILED SUBMISSION MADE BY THE LD. A/R IT HAS VEHEMENTLY ARGUED THAT THE SETTLED POSITION OF LAW IS THAT ADDITION CANNOT BE MADE SIMPLY ON THE BASIS OF STATEMENT, IN THIS CASE THE STATEMENT OF 3 RD PERSON. THE SAME HAS TO BE SUBSTANTIATED AND CORROB ORATED EITHER BY ENQUIRIES OR BY LINKING IT WITH TANGIBLE MATERIAL/ EVIDENCE. 8. I AM IN AGREEMENT WITH THE LD. A/R THAT IT IS A SETTLED LAW THAT STATEMENT ALONE CANNOT BE TREATED AS INCRIMINATING MATERIAL FOR THE PURPOSES OF MAKING ADDITION FOR ASSESSMENT COMPLETED U/S 143 (3). IT HAS BEEN HELD IN MANY JUDGMENTS THAT MERE STATEMENT U/S 132(4) OR U/ S 131 IS NOT SUFFICIENT TO MAKE AN ADDITION. A STATEMENT MADE MUST BE RELAT ABLE TO SOME INCRIMINATING MATERIAL OR THE STATEMENT MUST BE MAD E RELATABLE TO MATERIAL BY SUBSEQUENT INQUIRY/INVESTIGATIONS. HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF MANT RI SHARE BROKERS PVT. LTD. (96 TAXMANN.COM 279) HAVE HELD AS UNDER: SECTION 69B OF THE INCOME-TAX ACT, 1961 - UNDISCLOS ED INVESTMENTS (BURDEN OF PROOF) - WHETHER WHERE EXCEP T STATEMENT OF DIRECTOR OF ASSESSEE-COMPANY OFFERING ADDITIONAL INCOME DURING SURVEY IN HIS PREMISES, THERE WAS NO OTHER MATERIAL EITHER IN FORM OF CASH, BULLION, JEWELLERY OR DOCUMENT OR IN ANY O THER FORM TO CONCLUDE THAT STATEMENT MADE WAS SUPPORTED BY SOME DOCUMENTARY EVLDENCE, SALD SUM COULD NOT BE ADDED I N HANDS OF ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 36 ASSESSEE AS UNDISCLOSED INVESTMENTS - HELD, YES [PA RAS 10-11] [IN FAVOUR OF ASSESSEE] PARA 10 & 11 OF THE ORDER IS AS UNDER 10. BEFORE PROCEEDING WITH THE MATTER, IT WILL NO T BE OUT OF PLACE TO MENTION THAT EXCEPT THE STATEMENT IN THE LETTER, THE AO HAS NO OTHER MATERIAL ON RECORD TO ASSESS THE INCOME OF RS . 1,82,00,000/-. 11. IT IS SETTLED PROPOSITION OF LAW THAT MERELY O N THE STATEMENT THAT TOO ALSO WAS TAKEN IN VIEW OF THREAT GIVEN IN QUESTION NO.36 AS NARRATED BY MR. GUPTA AND THE SAME SOUGHT TO HAVE B EEN RELIED UPON, THERE IS NO OTHER MATERIAL EITHER IN THE FORM OF CASH, BULLION, JEWELLERY OR DOCUMENT IN ANY OTHER FORM WHICH CAN C OME TO THE CONCLUSION THAT THE STATEMENT MADE WAS SUPPORTED BY SOME DOCUMENTARY EVLDENCE. WE HAVE GONE THROUGH THE RECO RD AND FIND THAT THE CIT (A) HAS RIGHTLY OBSERVED AS STATED HER EINABOVE, WHICH WAS CONFIRMED BY THE TRIBUNAL. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THIS O RDER OF HON'BLE RAJASTHAN HIGH COURT HAS BEEN CONFIRMED BY HON'BLE SUPREME COURT ALSO. FURTHER, HON'BLE DELHI HIGH COURT IN CASE OF HARJE EV AGARWAL (70 TAXMANN.COM 95) HELD THUS: HARJEEV AGGARWAL [2016] 70 TAXMANN.COM 95 (DELHI) '...A PLAIN READING OF SECTION 132 (4) OF THE ACT I NDICATES THAT THE AUTHORIZED OFFICER IS EMPOWERED TO EXAMINE ON OATH ANY PERSON WHO IS FOUND IN POSSESSION OR CONTROL OF ANY BOOKS OF A CCOUNTS, DOCUMENTS, MONEY, BULLION, JEWELLERY OR ANY OTHER V ALUABLE ARTICLE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 37 OR THING. THE EXPLANATION TO SECTION 132 (4), WHICH WAS INSERTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 W.E.F. 1S T APRIL, 1989, FURTHER CLARIFIES THAT A PERSON MAY BE EXAMINED NOT ONLY IN RESPECT OF THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS FOUND A S A RESULT OF SEARCH BUT ALSO IN RESPECT OF ALL MATTERS RELEVANT FOR THE PURPOSES OF ANY INVESTIGATION CONNECTED WITH ANY PROCEEDING UND ER THE ACT. HOWEVER, AS STATED EARLIER, A STATEMENT ON OATH CAN ONLY BE RECORDED OF A PERSON WHO IS FOUND IN POSSESSION OF BOOKS OF ACCOUNTS, DOCUMENTS, ASSETS, ETC. PLAINLY, THE INTE NTION OF THE PARLIAMENT IS TO PERMIT SUCH EXAMINATION ONLY WHERE THE BOOKS OF ACCOUNTS, DOCUMENTS AND ASSETS POSSESSED BY A PERSO N ARE RELEVANT FOR THE PURPOSES OF THE INVESTIGATION BEING UNDERTA KEN. NOW, IF THE PROVISIONS OF SECTION 132(4) OF THE ACT ARE READ IN THE CONTEXT OF SECTION 158BB (1) READ WITH SECTION 158B (B) OF THE ACT, IT IS AT ONCE CLEAR THAT A STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT CAN BE USED IN EVLDENCE FOR MAKING A BLOCK ASSE SSMENT ONLY IF THE SALD STATEMENT IS MADE IN THE CONTEXT OF OTHER EVLDENCE OR MATERIAL DISCOVERED DURING THE SEARCH. A STATEMENT OF A PERSON, WHICH IS NOT RELATABLE TO ANY INCRIMINATING DOCUMEN T OR MATERIAL FOUND DURING SEARCH AND SEIZURE OPERATION CANNOT, B Y ITSELF, TRIGGER A BLOCK ASSESSMENT. THE UNDISCLOSED INCOME OF AN AS SESSEE HAS TO BE COMPUTED ON THE BASIS OF EVLDENCE AND MATERIAL F OUND DURING SEARCH. THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT MAY ALSO BE USED FOR MAKING THE ASSESSMENT, BUT ONL Y TO THE EXTENT IT IS RELATABLE TO THE INCRIMINATING EVLDENCE/MATER IAL UNEARTHED OR FOUND DURING SEARCH. IN OTHER WORDS, THERE MUST BE A NEXUS BETWEEN THE STATEMENT RECORDED AND THE EVLDENCE/MAT ERIAL FOUND ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 38 DURING SEARCH IN ORDER TO FOR AN ASSESSMENT TO BE B ASED ON THE STATEMENT RECORDED....' THOUGH THE ABOVE PRINCIPLE IS LAID DOWN IN RELATION TO ASSESSMENT OF BLOCK PERIOD U/S 158 BC OF THE ACT, THE SAME WAS ALSO APP LIED IN RESPECT OF ASSESSMENT U/S 153A BY DELHI HIGH COURT IN CASE OF BEST INFRASTRUCTURE (84 TAXMANN.COM 287) WHEN IT WAS HELD THUS: 38. FIFTHLY, STATEMENTS RECORDED UNDER SECTION 132 (4) OF THE ACT OF THE ACT DO NOT BY THEMSELVES CONSTITUTE INCRIMI NATING MATERIAL AS HAS BEEN EXPLAINED BY THIS COURT IN HARJEEV AGGARW AL (SUPRA). 8.2 FURTHER, THE LD. A/R HAS ALSO TAKEN A LEGAL PLE A THAT NO CROSS EXAMINATION OF THE PERSON, WHOSE STATEMENT WAS RELIED UPON, WAS GRANTED DESPITE SPECIFIC REQUEST MADE TO THE AO. THE ASPECT OF NOT GRANTING CROSS EXAMINATION HAS SPECIFICALLY BEEN ANSWERED BY THE HON'BLE ITAT JAIPUR IN THE CASE OF SHRI PRAMOD JAIN . THE RELEVANT EXTRACT ON THE ISSUE IS AS UNDER: 'AS REGARD THE NON GRANT OF OPPORTUNITY TO CROSS EX AMINE, THE HON'BLE SUPREME COURT IN CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (SUPRA) WHILE DEALING WITH THE ISSUE HAS HELD IN PARA 5 TO 8 AS UNDER:- '5. WE HAVE HEARD MR.KAVIN GULATI, LEARNED SENIOR C OUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNA NA, LEARNED SENOR COUNSEL WHO APPEARED FOR THE REVENUE. 6. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO C ROSS-EXAMINE THE WITNESS BY THE ADJUDICATING AUTHORITY THOUGH THE ST ATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 39 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 AS BASED UP ON THE STATEMENTS GIVEN BY THE AFORESALD TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DLD NOT G RANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHO RITY HE AS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESALD PLEA IS NOT EVEN DEALT WITH BY THE ADJUDI CATING. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION O F THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED T HAT CROSS- EXAMINATION OF THE SALD DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH COULD NOT BE IN POSSESSION OF THE AP PELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PR ICES REMAIN STATIC. IT WAS NO FOR THE TRIBUNAL TO HAVE GUESS WO RK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOS E DEALER AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. 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, THE A DJUDICATING 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 SALD 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. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 40 ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COU LD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MADE TH E 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 17.2.2005 WAS PASSED REMITTING THE CASE BACK THE TRIBUNAL WITH THE DIRECTIONS TO DECLD E THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTIN G THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF THE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESALD TWO WITNESSES WAS THE ONLY BASIS OF I SSUING THE SHOW CAUSE NOTICE.' 8.3 THEREFORE, THE STATEMENT OF WITNESS CANNOT BE S OLE BASIS OF THE ASSESSMENT WITHOUT GIVEN AN OPPORTUNITY OF CROSS EX AMINATION AND CONSEQUENTLY IT IS A SERIOUS FLAW WHICH RENDERS THE ORDER A NULLITY. THE MUMBAI SPECIAL OF THE TRIBUNAL IN CASE OF GTC INDUS TRIES VS. ACIT (SUPRA) HAD THE OCCASION TO CONSLDER THE ADDITION MADE BY T HE AO ON THE BASIS OF SUSPICION AND SUIIIIISES AND OBSERVED IN PARA 46 AS UNDER:- '46. IN SITUATIONS LIKE THIS CASE, ONE MAY FALL IN TO REALM OF 'PREPONDERANCE OF PROBABILITY' WHERE THERE ARE MANY PROBABLE FACTORS, SOME IN FAVOUR OF THE ASSESSEE AND SOME MA Y GO AGAINST THE ASSESSEE. BUT THE PROBABLE FACTORS HAVE TO BE W EIGHED ON MATERIAL FACTS SO COLLECTED. HERE IN THIS CASE THE MATERIAL FACTS STRONGLY INDICATE A PROBABILITY THAT THE WHOLESALE BUYERS HAD COLLECTED THE PREMIUM MONEY FOR SPENDING IT ON ADVE RTISEMENT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 41 AND OTHER EXPENSE AND IT WAS THEIR LIABILITY AS PER THEIR MUTUAL UNDERSTANDING WITH THE ASSESSEE. ANOTHER VERY STRON G PROBABLE FACTOR IS THAT THE ENTIRE SCHEME OF 'TWIN BRANDING' AND COLLECTION OF PREMIUM WAS SO DESIGNED THAT ASSESSEE-COMPANY NE ED NOT INCUR ADVERTISEMENT EXPENSES AND THE RESPONSIBILITY FOR SALES PROMOTION AND ADVERTISEMENT LIES WHOLLY UPON WHOLES ALE BUYERS WHO WILL BORNE OUT THESE EXPENSES FROM ALLEGED COLL ECTION OF PREMIUM. THE PROBABLE FACTORS COULD HAVE GONE AGAIN ST THE ASSESSEE ONLY IF THERE WOULD HAVE BEEN SOME EVLDENC E FOUND FROM SEVERAL SEARCHES EITHER CONDUCTED BY DRI OF BY THE DEPARTMENT THAT ASSESSEE-COMPANY WAS BENEFICIARY OF ANY SUCH A CCOUNTS. AT LEAST SOMETHING WOULD HAVE BEEN UNEARTHED FROM SUCH GLOBAL LEVEL INVESTIGATION BY TWO CENTRAL GOVERNMENT AUTHO RITIES. IN CASE OF CERTAIN DONATIONS GIVEN TO A CHURCH, ORIGINATING THROUGH THESE BENAMI BANK ACCOUNTS ON THE BEHEST OF ONE OF THE EM PLOYEES OF THE ASSESSEE COMPANY, DOES NOT IMPLICATE THAT GTC A S A CORPORATE ENTITY WAS HAVING THE CONTROL OF THESE BANK ACCOUNT S COMPLETELY. WITHOUT GOING INTO THE AUTHENTICITY AND VERACITY OF THE STATEMENTS OF THE WITNESSES SMT. NIRMLALASUNDARAM, WE ARE OF T HE OPINION THAT THIS ONE INCLDENT OF DONATION THROUGH BANK ACC OUNTS AT THE DIRECTION OF ONE OF THE EMPLOYEE OF THE COMPANY DOE S NOT IMPLICATE THAT THE ENTIRE PREMIUM COLLECTED ALL THR OUGHOUT THE COUNTRY AND DEPOSITED IN BENAMI BANK ACCOUNTS ACTUA LLY BELONGS TO THE ASSESSEE-COMPANY OR THE ASSESSEE-COMPANY HAD DI RECT CONTROL ON THESE BANK ACCOUNTS. ULTIMATELY, THE ENTIRE CASE OF THE REVENUE HINGES UPON THE PRESUMPTION THAT ASSESSEE IS BOUND TO HAVE SOME LARGE SHARE IN SO-CALLED SECRET MONEY IN THE FORM O F PREMIUM AND ITS CIRCULATION. HOWEVER, THIS PRESUMPTION OR SUSPICION HOW STRONG IT MAY APPEAR TO BE TRUE, BUT NEEDS TO BE CORROBORATED BY SOME ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 42 EVLDENCE TO ESTABLISH A LINK THAT GTC ACTUALLY HAD SOME KIND OF A SHARE IN SUCH SECRET MONEY. IT IS QUITE A TRITE LAW THAT SUSPICION HOWSOEVER STRONG MAY BE BUT CANNOT BE THE BASIS OF ADDITION EXCEPT FOR SOME MATERIAL EVLDENCE ON RECORD. THE THEORY OF 'PREPONDERANCE OF PROBABILITY' IS APPLIED TO WEIGH THE EVLDENCES O F EITHER SLDE AND DRAW A CONCLUSION IN FAVOUR OF A PARTY WHICH HAS MO RE FAVOURABLE FACTORS IN HIS SLDE. THE CONCLUSIONS HAVE TO BE DRA WN ON THE BASIS OF CERTAIN ADMITTED FACTS AND MATERIALS AND NOT ON THE BASIS OF PRESUMPTION OF FACTS THAT MIGHT GO AGAINST ASSESSEE . ONCE NOTHING HAS BEEN PROVED AGAINST THE ASSESSEE WITH ALD OF AN Y DIRECT MATERIAL ESPECIALLY WHEN VARIOUS ROUNDS OF INVESTIGATION HAV E BEEN CARRIED OUT, THEN NOTHING CAN BE IMPLICATED AGAINST THE ASS ESSEE.' 8.4 THE ISSUE OF PENNY STOCK AND CONSEQUENT ADDITIO NS MADE HAS ELABORATELY DEALT WITH BY HON'BLE HIGH COURT OF RAJASTHAN AND A LSO HON'BLE ITAT JAIPUR. BOTH JURISDICTIONAL HIGH COURT AND TRIBUNAL HAVE GIVEN J UDGMENTS DIRECTLY ON THE ISSUE, GIST OF SOME OF WHICH IS AS UNDER (I) PCIT V. PRAMOD JAIN & OTHERS DB APPEAL NO.209/2018 DATED 24-07-2018 (RAJ) IN THIS CASE THE HON'BLE ITAT AFTER RELYING ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL AN D VARIOUS OTHER DECISIONS DELETED THE ADDITION MADE BY THE AO BY HOLDING AS U NDER: 'IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AO IS BASED ON MERE SUSPICION AND SURMISES WITHOUT ANY CO GENT MATERIAL TO SHOW THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. ON ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 43 THE OTHER HAND, THE ASSESSEE HAS BROUGHT ALL THE RE LEVANT MATERIAL TO SUBSTANTIATE ITS CLAIM THAT TRANSACTIONS OF THE PURCHASE AND SALE OF SHARES ARE GENUINE. EVEN OTHERWISE THE HOLD ING OF THE SHARES BY THE ASSESSEE AT THE TIME OF ALLOTMENT SUB SEQUENT TO THE AMALGAMATION/ MERGER IS NOT IN DOUBT, THEREFORE, TH E TRANSACTION CANNOT BE HELD AS BOGUS. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT.' 8.5 ON FURTHER APPEAL BY THE DEPARTMENT TO THE HI GH COURT, THE COURT BY REFERRING TO THE DECISION OF POOJA AGARWAL HELD THA T NO SUBSTANTIAL QUESTION OF LAW ARISE IN THIS CASE. (II) CIT VS. SMT. POOJA AGRAWAL DBIT APPEAL NO. 385/2011 DATED 11.09.2017 (RAJ)(HC) IN THIS DECISION, THE HON'BLE HIGH COURT APPROVED T HE FOLLOWING FINDING OF THE ITAT REPRODUCED AT PARA 12 OF THE ORDER: 'CONTENTION OF THE AR IS CONSIDERED. ONE OF THE MAI N REASONS FOR NOT ACCEPTING THE GENUINENESS OF THE TRANSACTIONS D ECLARED BY THE APPELLANT THAT AT THE TIME OF SURVEY THE APPELLANT IN HIS STATEMENT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. HOWE VER, SUBSEQUENTLY THE FACTS CAME ON RECORD THAT THE APPE LLANT HAD TRANSACTED NOT ONLY IN THE SHARES WHICH ARE DISPUTE D BUT SHARES OF VARIOUS OTHER COMPANIES LIKE SATYAM COMPUTERS, HCL, IPCL, BPCL AND TATA TEA ETC. REGARDING THE TRANSACTIONS IN QUE STION VARIOUS DETAILS LIKE COPY OF CONTRACT NOTE REGARDING PURCHA SE AND SALE OF SHARES OF LIMTEX AND KONARK COMMERCE & IND. LTD., A SSESSEE'S ACCOUNT WITH P.K. AGARWAL& CO. SHARE BROKER, COMPAN Y'S MASTER ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 44 DETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE F ILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKRIT ASSIG NMENT LTD., A SUBSLDIARY OF NSDL WAS ALSO FILED WHICH SHOWS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCU MENTS ARE AVAILABLE THE FACT OF TRANSACTIONS ENTERED INTO CAN NOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS STATEMENT THE APPE LLANT DENIED HAVING MADE ANY TRANSACTIONS IN SHARES. THE PAYMENT S AND RECEIPTS ARE MADE THROUGH A/C PAYEE CHEQUES AND THE TRANSACT IONS ARE ROUTED THROUGH KOLKATA STOCK EXCHANGE. THERE IS NO EVLDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRI MA FACIE THE TRANSACTION WHICH ARE SUPPORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OP ERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE S EARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE A SSESSMENT ORDER ITSELF WHILE DISCUSSING THE MODUS OPERANDI THAT ACC OMMODATION ENTRIES OF LONG TERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHER WAS EXEMPTED FROM TAX OR WAS TA XABLE AT A LOWER RATE. AS THE APPELLANT'S CASE IS OF SHORT TERM CAPI TAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACCOMMODATI ON TRANSACTIONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE-3 SH. P.K. AGARWAL WAS FOUND TO BE AN ENTRY PROVLDER AS STATED BY SH. PAWAN PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSI ON BEFORE THE AO THAT THE FACT WAS NOT CORRECT AS IN THE STATEMEN T OF SH. PAWAN PUROHIT THERE IS NO MENTION OF SH. P. K. AGARWAL. I T WAS ALSO SUBMITTED THAT THERE WAS NO MENTION OF SH. P. K. AG ARWAL IN THE ORDER OF SETTLEMENT COMMISSION IN THE CASE OF SH. S USHI! KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUNTER THE OBJECTIONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SIMPLY MENTIONIN G THAT THESE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 45 FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTING WING AFTER CONSLDERING ALL THE MATERI AL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQUIRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BR OKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE M ENTION ABOUT THE TRANSACTION IN QUESTION IN STATEMENT OF SH. PAW AN PUROHI. SIMPLY BECAUSE IN THE SHAM TRANSACTIONS BANK A/C WE RE OPENED WITH HDFC BANK AND THE APPELLANT HAS ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOES NOT ESTABLISH THAT THE TRANSACTION MADE BY THE APPELLANT WERE NON GENU INE. CONSLDERING ALL THESE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL CANNOT BE HELD AS NON-GENUINE. CO NSEQUENTLY DENYING THE CLAIM OF SHORT TERM CAPITAL GAIN MADE B Y THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT CLAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' CIT VS. SMT. SUMITRA DEVI (2014) 102 DTR 0342 (RAJ. ) IN THIS CASE, ASSESSEE HAD SHOWN LTCG FROM THE SALE OF SHARES AND SAME WAS CLAIMED AS EXEMPT U/S 10(38). AO OBSERVED THAT COMPANIES, WHOSE SHARES WERE ALLEGEDLY DEALT WITH, WERE NOT VERY WELL KNOWN AND IT WAS ENTIRELY UNLIKELY THAT THERE WAS A HUGE RISE IN PRICES OF THEIR SHARES IN A VERY SHORT SPAN OF T IME. AO TREATED HUGE RISE IN PRICE AS MANIPULATION BY STOCK BROKER AND MADE ADDITIONS IN INCOME OF ASSESSEE TOWARDS TRANSACTION S OF PURCHASE AND SALE OF SHARES AND UNDISCLOSED COMMISSION PALD IN CASH.CLT(A) OBSERVED THAT SHARES WERE SOLD BY ASSESSEE FOR CONS LDERATION THROUGH NAMED STOCK BROKER AND APPELLANT FURNISHED ALL THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 46 EVLDENCE LIKE BROKER'S NOTE, CONTRACT NOTE, EXTRACT OF CASH BOOK, BALANCE-SHEET, SHARE CERTIFICATE ETC. TO ESTABLISH THE GENUINENESS OF TRANSACTIONS. THE AO FAILED TO BRING ANY EVLDENCE I N REBUTTAL NOR WAS IT PROVED THAT DOCUMENTS PRODUCED BY ASSESSEE W ERE FALSE, FABRICATED OR FICTITIOUS. ITAT UPHELD THE ORDER OF CIT(A) THAT AO PROCEEDED ONLY ON PRESUMPTIONS AND WAS NOT JUSTIFIE D IN MAKING ADDITIONS U/S 68 OF THE ACT. HELD, FINDINGS OF AO W ERE BASED ON PRESUMPTIONS RATHER THAN ON COGENT PROOF. CIT(A) AN D TAT FOUND THAT THE AO FAILED TO SHOW THAT THE MATERIAL DOCUME NTS PLACED ON RECORD BY ASSESSEE LIKE BROKER'S NOTE, CONTRACT NOT E, RELEVANT EXTRACT OF CASH BOOK, COPIES OF SHARE CERTIFICATE, DE-MAT STATEMENT ETC. WERE FALSE, FABRICATED OR FICTITIOUS. THE APPE LLATE AUTHORITIES HAVE RIGHTLY OBSERVED THAT THE FACTS AS NOTICED BY THE AO, LIKE THE NOTICE U/S 136 TO THE COMPANY HAVING BEEN RETURNED UNSERVED; DELAYED PAYMENT TO THE BROKERS; AND DE-MATERIALISAT ION OF SHARES JUST BEFORE THE SALE WOULD LEAD TO SUSPICION AND CA LL FOR DETAILED EXAMINATION AND VERIFICATION BUT THEN, FOR THESE FA CTS ALONE, THE TRANSACTION COULD NOT BE REJECTED ALTOGETHER, PARTI CULARLY IN ABSENCE OF ANY COGENT EVLDENCE TO THE CONTRARY. THE FINDINGS AS RECORDED BY THE APPELLATE AUTHORITIES, AFTER THOROU GH CONSLDERATION OF MATERIAL ON RECORD THAT THE TRANSACTION OF PURCH ASE AND SALE OF SHARES COULD NOT BE TREATED AS NON-GENUINE WAS JUST IFIED. NO SUBSTANTIAL QUESTION OF LAW WORTH CONSLDERATION IN PRESENT CASE. THE FINDINGS AS CONCURRENTLY RECORDED BY THE CIT(A) AND THE ITAT, THAT ADDITION UNDER SECTION 68 OF THE ACT WAS NOT S USTAINABLE, REMAIN ESSENTIALLY IN THE REALM OF APPRECIATION OF EVLDENCE. THE APPELLATE AUTHORITIES HAVE RETURNED THE FINDING OF FACT IN FAVOUR OF THE ASSESSEE AFTER DUE APPRECIATION OF EVLDENCE ON RECORD, ON RELEVANT CONSLDERATIONS, AND ON SOUND REASONING. TH E FINDING ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 47 NEITHER APPEARS SUFFERING FROM ANY PERVERSITY NOR I S OF SUCH NATURE THAT CANNOT BE REACHED AT ALL. HENCE, NO SUBSTANTIA L QUESTION OF LAW IS INVOLVED IN THIS APPEAL. SHRI MEGHRAJ SINGH SHEKHAWAT VS. DCIT (2017) 443 & 444/JP/2017 (JP) ORDER DATED 7-03-2018 BRIEF FACTS ARE THAT THE ASSESSEE IS AN INDIVLDUAL AND ENGAGED IN THE BUSINESS OF RETAIL SALE OF IMFL/BEER. DURING TH E ASSESSMENT PROCEEDING THE AO NOTED THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 1,32,56,113/-WHICH IS CLAIMED A S EXEMPT U/S 10(38) OF THE ACT ON SALE OF SHARES OF M/S RUTRON I NTERNATIONAL LTD. THE AO RECEIVED INFORMATION FROM INVESTIGATION WING, KOLKATA THAT DURING THE SEARCH CONDUCTED U/S 132 OF THE ACT ON 12.04.2015 AT THE BUSINESS PREMISES OF ONE SHRI ANI L AGARWAL GROUP IT WAS FOUND THAT SHRI ANIL AGARWAL IS ONE OF THE PROMOTERS OF M/S RUTRON INTERNATIONAL LTD. THE SHARES WERE SO LD BY THE ASSESSEE FROM HIS D-MAT ACCOUNT THROUGH THE BROKER M/S ANANDRATHI SHARE AND STOCK BROKERS LTD. AND THEREFO RE, THE ASSESSEE DENIED ANY INVOLVEMENT OF AVAILING THE BOG US OF LONG TERM CAPITAL GAIN. CONSEQUENTLY THE AO MADE AN ADDI TION OF RS. 1,32,56,113/- TO THE TOTAL INCOME OF THE ASSESSEE U /S 68 OF THE ACT. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE WAS ALLOTTED 3,50,000/- EQUITY SHARES BY M/S RUTRON INTERNATIONA L LTD. ON 01.03.2012 VLDE ALLOTMENT LETTER DATED 08.03.2012. THE SHARES WERE ALLOTTED BY THE COMPANY AT FACE VALUE OF RS. 1 0/- EACH WITHOUT CHARGING ANY PREMIUM UNDER PREFERENTIAL ISS UE. THE ASSESSEE PALD THE PURCHASE CONSLDERATION/ SHARE APP LICATION MONEY VLDE CHEQUE ON 29.02.2012 THE PAYMENT MADE BY THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 48 ASSESSEE IS DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THE SHARES WERE DEMATERIALIZED ON 18.06.2012 AND TH EREAFTER THE SHARES WERE SOLD FROM 13.03.2013 ONWARDS ON VARIOUS DATES THROUGH M/S ANAND RATHI SHARES & STOCK BROKERS LTD. THE ASSESSEE HAS PRODUCED ALL THE RELEVANT EVLDENCE TO SHOW THE ALLOTMENT OF SHARES, PAYMENT OF CONSLDERATION THROU GH CHEQUE AT THE TIME OF ALLOTMENT OF SHARES DEMATERIALIZATION O F THE SHARES AND THEREAFTER, SALE OF SHARES FROM THE D-MAT ACCOU NT. THE ASSESSING OFFICER HAS NOT PRODUCED ANY MATERIAL OR RECORD TO CONTROVERT THE EVLDENCE PRODUCE BY THE ASSESSEE. CO NSLDERING ALL THESE FACTS THE HON'BLE ITAT HELD THAT THE ORDER OF THE ASSESSING OFFICER TREATING THE LONG TERM CAPITAL GAINAS BOGUS AND CONSEQUENTIAL ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE IS NOT SUSTAINABLE & DELETED THE SAME. SHRI VIVEK AGARWAL VS. ITO (2017) 292/JP/2017 (ITAT JAIPUR) ORDER DT. 6/4/18 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVLDUAL & HAS CLAIMED EXEMPT INCOME OF RS. 4,78,38,157/- UNDE R THE HEAD LONG TERM CAPITAL GAINS ON ACCOUNT OF SHARES. THE A O WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 143(3) H AS HELD THAT THE LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE IS BOGUS AS THE ASSESSEE HAS ARRANGED THE ACCOMMODATION ENTRIES FROM THE PERSONS WHO ARE ENGAGED IN PROVLDING BOGUS ACCOMMOD ATION ENTRIES OF CAPITAL GAINS. THE HON'BLE ITAT HELD THA T THE FACTS OF THE PRESENT CASE ACQUIRING OF SHARES OF M/S. PARLDH I PROPERTIES LTD. UNDER PRIVATE PLACEMENT DIRECTLY FROM THE COMP ANY AND SUBSEQUENTLY ON MERGER OF THE SALD COMPANY WITH M/S . LUMINAIRE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 49 TECHNOLOGIES LTD. THE SHARES OF THE NEW ENTITY WERE ALLOTTED TO THE ASSESSEE WHICH WERE DULY DEMATERIALIZED AND THE N SOLD FROM THE DEMAT ACCOUNT ARE LDENTICAL TO THE CASE OF SHRI PRAMOD JAIN & OTHERS VS. DCIT & OTHERS. IN VIEW OF THE FINDING OF THE COORDINATE BENCH ON THE LDENTICAL ISSUE, IT WAS FOUND THAT WHE N THE PAYMENT OF PURCHASE CONSLDERATION PALD THROUGH CHEQUE DIREC TLY TO THE COMPANY AND THE SUBSEQUENT MERGER OF THE COMPANY AS PER THE SCHEME OF MERGER APPROVED BY THE HIGH COURT, THEN T HE TRANSACTION AND SALE OF SHARES IN QUESTION CANNOT B E HELD AS BOGUS. THE AO HAS PASSED THE IMPUGNED ORDER ON THE BASIS OF THE STATEMENT OF SHRI DEEPAK PATWARI WHICH IS LDENTICAL AS IN THE CASE OF SHRI PRAMOD JAIN & OTHERS VS. DCIT. ACCORDINGLY, FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICIO N AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVLDENCE FILED BY THE ASSESSEE INSUPPORTTHE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROU GHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITA L GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. SHRI PURUSHOTAM SONI VS. ITO(2017) 288/JP/2017 (ITA T JAIPUR) ORDER DT.6/4/18 THE FACTS OF THIS CASE ARE THAT ASSESSEE CLAIMED LO NG TERM CAPITAL GAIN ON SALE OF SHARES OF LUMINARE TECHNOLOGY LIMIT ED. THE AO ON THE BASIS OF THE INFORMATION RECEIVED FROM INVESTIG ATION WING TREATED THE SAME AS BOGUS & MADE THE ADDITION. THE CIT(A) CONFIRMED THE SAME. ON FURTHER APPEAL, THE HON'BLE ITAT BY FOLLOWING THE DECISION OF PRAMOD KUMAR JAIN & OTHER S VS. DCIT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 50 ITA NO. 368/JP/2017 AS WELL AS IN THE CASE OF MEGHR AJ SINGH SHEKHAWAT VS. DCIT 443 & 444/JP/2017 ALLOWED THE AP PEAL OF THE ASSESSEE. MAHESH KUMAR BALD VS. ACIT, ITA NO. 1236/KO1/2017 D T 18.08.2017 (CAL.)(TRIB.) THE FINDING OF HON'BLE ITAT IN PARA 6 IS REPRODUCED AS UNDER: WE HAVE HEARD BOTH THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND LOT OF FORCE IN THE ARGUMENTS OF THE LD AR THAT THE LD AO WAS NOT JUSTI FIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THEORY OF SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, AND PREPO NDERANCE OF PROBABILITY WITHOUT BRINGING ON RECORD ANY SPECI AL EVLDENCE AGAINST THE ASSESSEE. WE RELY ON THE JUDGMENT OF SP ECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF GTC INDUSTRIES LT D. (SUPRA) FOR THIS PROPOSITION. THE VARIOUS FACETS OF THE ARGUMEN TS OF THE LD AR SUPRA, WITH REGARD TO IMPLEADING THE ASSESSEE FO R DRAWING ADVERSE INFERENCES WHICH REMAIN UNPROVED BASED ON T HE EVLDENCES AVAILABLE ON RECORD, ARE NOT REITERATED F OR THE SAKE OF BREVITY. THE PRINCIPLES LALD DOWN IN THE VARIOUS CA SE LAWS RELIED UPON BY THE LD AR ARE ALSO NOT REITERATED FOR THE S AKE OF BREVITY. WE FIND THAT THE AMALGAMATION OF CPAL WITH KAFL HAS BEEN APPROVED BY THE ORDER OF HON'BLE HIGH COURT. THE LD AO OUGHT NOT TO HAVE QUESTIONED THE VALLDITY OF THE AMALGAMA TION SCHEME APPROVED BY THE HON'BLE HIGH COURT IN MAY 2013 MERE LY BASED ON A STATEMENT GIVEN BY A THIRD PARTY WHICH HAS NOT BE EN SUBJECT TO CROSS-EXAMINATION. MOREOVER, IT IS PERTINENT TO NOT E THAT THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 51 ASSESSEE AND / OR THE STOCK BROKER ASHITA STOCK BRO KING LTD NAME IS NEITHER MENTIONED IN THE SALD STATEMENT AS A PER SON WHO HAD ALLEGEDLY DEALT WITH SUSPICIOUS TRANSACTIONS NOR TH EY HAD BEEN THE BENEFICIARIES OF THE TRANSACTIONS OF SHARES OF KAFL . HENCE WE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL T O IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGAT IONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CON SLDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF THE LA W. THE ENQUIRY BY THE INVESTIGATION WING IN CONNECT ION WITH THE ALLEGED BOGUS TRANSACTION IN SHARES ALSO DLD NOT IM PLICATE THE ASSESSEE AND / OR HIS BROKER. IT IS ALSO A MATTER O F RECORD THAT THE ASSESSEE HAS FURNISHED ALL EVLDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PR OVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHAS E AND SALE OF SHARES RESULTING IN LTCG. THESE EVLDENCES WERE NEIT HER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF T HE CASE AND THE EVLDENCES IN SUPPORT OF THE ASSESSEE'S CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE BONAFLDE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S CLAIM OF EXEMPTION U/S 10(38) OF THE ACT . WE ALSO FIND THAT THE VARIOUS CASE LAWS OF HON'BLE JURISDICTIONA L HIGH COURT RELIED UPON BY THE LD AR AND FINDINGS GIVEN THEREON WOULD APPLY TO THE FACTS OF THE INSTANT CASE. THE LD DR WAS NOT ABLE TO FURNISH ANY CONTRARY CASES TO THIS EFFECT. HENCE WE HOLD TH AT THE LD AO WAS NOT JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES OF KAFL AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE ACCORDINGLY HOLD THAT THE REFRAMED QUESTION NO. 1 R AISED HEREINABOVE IS DECIDED IN THE NEGATIVE AND IN FAVOUR OF THE ASS ESSEE. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 52 8.6 IN THIS DECISION, HON'BLE ITAT HAS REFERRED TO VARIOUS DECISIONS AT PAGES 1719 OF THE ORDER. SIMILAR VIEW HAS BEEN TAKEN BY I TAT MUMBAI BENCH IN CASE OF ACIT VS. M/S KRISHNA SHEET PROCESSORS PVT. LTD. IN ITA NO. 403/1VIUM/2015 DATED 05.05.2017. 8.7 SOME MORE DECISIONS DIRECTLY ON THE ISSUE ARE A S FOLLOWS 1. CIT VS. SHYAM R. PAWAR [2015] 54 TAXMANN.COM 108 (BOM) 2. CIT VS. SMT. PUSHPA MALPANI (2011) 49 DTR 0312 (RAJ .) 3. DOLAR RAI HEMANI VS. ITO (2017) 183 TIJ 0433 (ITAT KOLKATA) 4. SURYA PRAKASH TOSHNIWAL HUF VS. ITO IN ORDER DTD.11 .01.2017 IN ITA NO. 1213/KOL/2016 (ITAT KOLKATA) 5. ITO VS. M/S INDRAVADAN JAIN, HUF, ITA NO. 4861 & 51 68/MUM/ 2014 6. FARRAH MARKER VS. ITO IN ORDER DATED 27.04.2016 ITA NO. 3801/MUM/2011(ITAT MUMBAI) 7. ITO VS. KHALIL M. BHARWANI IN ORDER DATED 27.11.201 5 ITA NO. 223/MUM/2011(MUM. TRIB) 8. SMT. SMITA P. PATIL & ORS. VS .ACIT (201 3) 96 DTR 0313 (PUNE) (TRIB.) 8.8 THUS CONSIDERING THE ABOVE FACTUAL & LEGAL POSI TION ESPECIALLY BY THE HON'BLE HIGH COURT OF RAJASTHAN AND HON'BLE ITAT JA IPUR, I AM OF THE VIEW THAT THE AO ACTION OF DENYING THE CLAIM OF EXEMPTION U/S 10(38) OF THE ACT IS NOT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 53 TENABLE. THE SAME IS DIRECTED TO BE DELETED. SINCE THE COMMISSION IS BASED ON ESTIMATED ADDITION OF ALLEGES BOGUS LTCG, NOW TREAT ED S GENUINE AMOUNT OF COMMISSION IS ALSO TO BE DELETED. IN SHORT THE APPE LLANT GETS RELIEF AS FOLLOWS - A.YRS. LTCG CLAIMED COMMISSION THEREOF SCRIPTS 2014-15 RS. 10255809 RS. 205116 MISHKA FINANCE AND TRADING LTD. 2015-16 RS. 36005017 RS. 720100 MISHKA FINANCE AND TRADING LTD. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPEALS ARE THUS ALLOWED. 30. THUS, IT IS CLEAR THAT THE LD. CIT(A) HAS GIVE N HIS DETAILED FINDINGS BASED ON THE VARIOUS DOCUMENTARY EVIDENCES PRODUCED BY THE A SSESSEE IN SUPPORT OF HIS CLAIM AND FURTHER HE HAS RELIED UPON VARIOUS DECISI ONS OF THIS TRIBUNAL AS WELL AS THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I NCLUDING THE DECISION IN CASE OF CIT VS. POOJA AGARWAL (SUPRA) AS WELL AS IN CASE OF PCIT VS. PRAMOD JAIN & OTHERS (SUPRA). REGARDING CIT/DRS CONTENTIONS REG ARDING THE ABNORMAL RISE IN THE SHARE PRICE OF THE SHARES, THE LD CIT(A) HAS RE FERRED TO THE DECISION OF THE COORDINATE BENCH IN CASE OF MUKTA GUPTA VS. ITO (SU PRA) WHEREIN IT WAS HELD THAT THE CAPITAL GAINS CANNOT BE TREATED AS BOGUS S OLELY ON THE BASIS THAT THE PRICE OF THE SHARES HAS RISEN MANIFOLD AND THE REAS ON FOR ASTRONOMICAL RISE IS NOT RELATED TO ANY FUNDAMENTALS OF MARKET WHERE THE TRANSACTIONS ARE DULY PROVED BY TRADING FROM STOCK EXCHANGE AND THE DOCUM ENTATION IS PROPER, THE GAINS CANNOT BE ASSESSED AS UNEXPLAINED CREDIT OR A S UNEXPLAINED MONEY. FURTHER, IN THE INSTANT CASE, WE NOTE THAT THE ASSE SSEE SATISFIES THE NECESSARY INGREDIENTS AND CONDITIONS AS SO SPECIFIED IN SECTI ON 10(38) OF THE ACT, IN TERMS OF TRANSFER OF LONG TERM CAPITAL ASSET BY WAY OF SA LE OF EQUITY SHARES ON WHICH STT HAS BEEN PAID, HE SHALL THEREFORE BE ELIGIBLE F OR EXEMPTION ON WHOLE OF THE INCOME SO REALIZED AS THE PROVISIONS TALKS ABOUT AN Y INCOME ARISING FROM ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 54 7. TRANSFER OF SUCH LONG TERM CAPITAL ASSET WHICH SHAL L BE EXEMPT FROM TAX. WE ACCORDINGLY DONOT SEE ANY INFIRMITY OR ILLEGALITY I N THE SAID FINDINGS OF THE LD CIT(A). 31. FURTHER, THE MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT (SUPRA) HAS AGAIN DISCUSSED THIS ISSUE IN THREADBARE IN PARA 7 TO 37 AS UNDER :- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI MADHUR AGGARWAL STATED THE FACT THAT ASSESSEE PURCHASED THE SHARES OF LISTED COMPAN Y AND HELD THEM FOR MORE THAN ONE YEAR. HE SOLD HIS SHARES ON BOMBAY STOCK EXCHANGE P LATFORM THROUGH HIS BROKER GEOJIT AND STT WAS PAID ON SALE TRANSACTIONS. THUS, ALL TH E CONDITIONS OF SEC 10(38) OF THE ACT ARE FULLY COMPLIED. HENCE, ASSESSEE BEING ELIGIBLE, RIGHTLY CLAIMED EXEMPTION OF LONG TERM CAPITAL GAINS UNDER SECTION 10(38) OF THE ACT. HE STATED THAT THE AO NOWHERE IN THE ASSESSMENT ORDER POINTED OUT NOR DISCUSSED NON FULFILLMENT OR NON-COMPLIANCE OF ANY CONDITIONS OF SECTION 10(38) OF THE ACT. HENCE, REJECTING THE CLAIM UNDER SECTION 10 (38) OF THE ACT WITHOUT GIVING REASONS IS WRONG AND CONTRARY TO THE PROVISIONS OF LAW. HE THEN STATED THAT THE CIT(A) ALSO CONFIRMED THE ACTI ON OF THE AO JUST ON THE BASIS OF CONJUNCTURES AND SURMISES. HE ASSAILED THE ORDERS O F THE LOWER AUTHORITIES. HE ARGUED AND POINTED OUT THAT SECTION 10(38) OF THE ACT WAS INSERTED BY FINANCE ACT 2 OF 2004 PROVIDING FOR EXEMPTION TO LONG-TERM CAPITAL GAINS ARISING ON SALE/ TRANSFER OR EQUALITY SHARES IN LISTED COMPANY, OR UNIT OF AN EQUITY ORIE NTED FUND PROVIDED SUCH TRANSACTIONS HAVE SUFFERED SECURITIES TRANSACTION TAX UNDER THE SAID CHAPTER. IF SHARES OF LISTED COMPANIES PURCHASED ARE SOLD ON THE EXCHANGE PLATFO RM WITHIN ONE YEAR PAYING STT THEN GAIN OR LOSS IS TREATED AS SHORT TERM CAPITAL GAIN TAXABLE AT CONCESSIONAL RATE OF TAX AS PER THE PROVISIONS OF INCOME TAX ACT AND IF THES E SHARES ARE SOLD ON STOCK EXCHANGE AFTER HOLDING FOR EXCEEDING ONE YEAR PAYING STT THE N RESULTANT GAIN OR LOSS IS TREATED AS LONG TERM GAIN/ LOSS WHICH IS EXEMPT FROM TAX U/S 1 0(38) OF THE ACT. 9. HE REFERRED THAT TO THE ORDER OF THE AO AND THAT OF THE CIT(A) AND STATED THAT BOTH THE AUTHORITIES DID NOT ACCEPT THE ABOVE REFERRED E VIDENCES FILED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM AND BY RELYING ON THE GENERAL STUDY REPORT OF THE INVESTIGATING WING ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 55 REJECTED THE CLAIM AND HELD THAT THE ENTIRE TRANSAC TIONS UNDERTAKEN BY THE ASSESSEE WERE MERELY AN ACCOMMODATION ENTRIES TAKEN FOR THE PURPOSE OF SECURING BOGUS LONG TERM CAPITAL GAINS AND TO CLAIM EXEMPT INCOME AND C ONSEQUENTLY ASSESSED THE SALE PROCEED AS AN UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THE AO HAS REFERRED TO THE FINDINGS IN THE GENERAL STUDY REPORT OF THE INVESTIGATION WING OF KOLKATA AND MUMBAI, WHEREIN IT LAID DOWN THE PURPORTED MODUS OP ERANDI OF CONVERTING UNACCOUNTED MONEY INTO EXEMPT LTCG. IT IS STATED TH AT A PERSON ACQUIRES SHARES OF PENNY STOCKS TRADING AT LOW PRICE EITHER THROUGH PR IVATE PLACEMENT OR ON MERGER OF PRIVATE LIMITED COMPANY OF WHICH SUCH PERSON IS A S HAREHOLDER WITH A PENNY STOCK COMPANY. THEREAFTER UNACCOUNTED MONEY FLOWS TO OPER ATORS / EXIT PROVIDERS WHO ARTIFICIALLY RAISE THE PRICES OF PENNY STOCKS ON ST OCK EXCHANGE. THEREAFTER, THE PENNY STOCKS ARE SOLD TO EARN HUGE EXEMPT LTCG. 10. IN REGARDS TO THE PRESENT CASE THE LEARNED COUN SEL REFERRED TO THE OBSERVATIONS OF AO REGARDING PAL SCRIPT IN HIS SHOW CAUSE NOTICE: 'IN THE CASE OF M/S PINE ANIMATION LTD, THE INVESTI GATION WING MUMBAI HAS CONDUCTED A SURVEY ACTION ON M/S SARAF EQUITY SERVI CES PVT. LTD. ON 03.12.2015, AN EXIT PROVIDER IN SCRIPT PINE ANIMATION LTD. DURI NG THE COURSE OF SURVEY PROCEEDINGS, STATEMENT ON OATH OF SHRI. MANDAR DILI P NAIK, DIRECTOR OF M/S. SARAF EQUITY SERVICES PVT. LTD. WAS RECORDED WHEREI N HE HAS STATED THAT M/S. SARAF EQUITY SERVICES PVT. LTD. HAS INDULGED IN PRO VIDING EXIT TO THE BENEFICIARIES IN COLLUSION WITH OPERATOR FOR MAKING BOGUS LTCG TR ANSACTIONS FOR A COMMISSION OF 1%. FURTHER, ON VERIFICATION OF THE SCRIPT M/S PINE ANI MATION LTD. IT IS SEEN THAT THE OTHER EXIT PROVIDERS I.E. DHRITI TRADERS PVT. LTD, DREAM VALLEY TRADING PVT. LTD., DWARKA PURL CONSTRUCTIONS P LED, OLYMPIA SALES AGEN CIES P LTD, PARTICLE INDUSTRIES P LED, SIGNET VINIMAY P LTD, WINALL VINI MAY P LTD AND SPICE MERCHANTS P LTD HAVE PURCHASED SHARES OF M/S PINE ANIMATION L TD TO PROVIDE ACCOMMODATION ENTRY IN THE TERMS OF LTCG. THESE ENT ITIES ARE OPERATED BY ENTRY OPERATORS WHOSE STATEMENT HAS BEEN RECORDED B Y THE INVESTIGATION WING WHEREIN THEY HAVE STATED THAT THEY ARE AN ENTRY OPE RATOR AND IS INTO THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY MANA GING AND CONTROLLING VARIOUS BOGUS ENTITIES, EITHER DIRECTLY OR THROUGH HIS DUMMY DIRECTORS.' AO OBSERVED THAT THE PERSONS LISTED ABOVE IN THE NO TICE HAVE PURCHASED THE SHARES OF PAL AND ARE EXIT PROVIDERS AND ENTRY OPER ATOR AND ARE IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND RELIED UPON THEIR STATEMENTS VIZ. ANIL KHEMKA, SANJOY DEY & MANDAR NAIK (DIRECTOR OF SARAF EQUITY). THE RELEVANT OBSERVATIONS IN THE ASSESSMENT ORDER READS AS UNDER : - PARA 7.2: THE ASSESSEE HAS MAINLY TRADED IN MAINLY IN ONE SCRIPT DURING THE YEAR WHICH IS SUSPICIOUS ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 56 PARA 7.3: 'AS DISCUSSED ABOVE, THE ASSESSEE TRADED IN SINGLE SCRIP AND HAS MADE HUGE PROFITS.' PARA 9: 'FURTHER, A SEBI ORDER HAS BEEN PASSED IN T HE CASE OF PINE ANIMATION LTD ORDER VIDE DATED 08.05.2015 WHICH DIR ECTS THAT THE TRADING IN THE SECURITIES OF SHALL BE SUSPENDED TIL L FURTHER DIRECTIONS...........THE SHARES ARE SOLD BY THE BEN EFICIARIES HAVE BEEN PURCHASED BY PAPER/ BOGUS ENTITIES (E)IT PROVIDERS) . PARA 11.3: ......TO PROVE GENUINENESS, PROOF OF PHY SICAL TRANSFER OF SHARES, REASONS TO TRADE OFF-MARKET WHEN OPTIONS TO ONLINE MARKET TRADING THROUGH DEMAT ACCOUNT WERE AVAILABLE, TRADING PATTE RN OF MARKET TRANSACTIONS FOR THE LAST THREE YEARS, HAVE NOT BEE N SUBMITTED TO THIS OFFICE SUBMISSIONS ON ABOVE: 11. THE LEARNED COUNSEL ARGUED THAT THE FINDINGS OF THE INVESTIGATION DEPARTMENT ARE GENERAL IN NATURE AND IT IS BASICALLY A STUDY REPOR T AND NOT KNOWN WHICH CASES ARE INVESTIGATED. AS UNDERSTOOD FROM THE ASSESSMENT ORD ER THE ASSESSEE'S NAME OR HIS TRANSACTIONS ARE NOT REFERRED IN SUCH REPORTS AND T HE AO HAS NOT ESTABLISHED ANY LINK BETWEEN THAT REPORT AND ASSESSEE'S TRANSACTIONS. TH IS IS ALSO FATAL AS RELIANCE ON SUCH INVESTIGATION REPORT, WITHOUT CONFRONTING THE ASSES SEE WITH THE SAME, RENDERS THE ASSESSMENT BAD IN LAW. THE INVESTIGATION IN ASSESSE E'S CASE BY WAY OF SEARCH DID NOT REVEAL ANY CONNECTION WITH THE FINDINGS OR EVIDENCE S AS REFERRED TO IN SUCH REPORTS. 12. HE STATED THAT THE STATEMENTS OF ANIL KHEMKA & SANJAY DEY AND MANDAR NAIK RELIED UPON THE AO DOES NOT ESTABLISH THAT THE ASSESSEE HA S PAID ANY UNACCOUNTED MONEY TO THESE PARTIES. NONE OF THE REPLIES TO THE QUESTION POSED INDICATE THAT THEY RECEIVED ANY UNACCOUNTED MONEY FROM THE ASSESSEE OR THAT THEY RE CEIVED OR UTILIZED THE UNACCOUNTED MONEY RECEIVED FROM THE ASSESSEE WITH R EFERENCE TO SHARES OF PAL. IT IS ALSO NOT ESTABLISHED THAT THEY HAD ANY ARRANGEMENT OR DEALINGS OR RELATION WITH THE ASSESSEE LEAVE APART THE ALLEGED ACCOMMODATION OR E XIT PROVIDED WHO HAS NOT STATED ANY DEALING WITH THEM AGAINST THE PRINCIPLES OF NAT URAL JUSTICE. FURTHER, AS REGARDS THE PARTIES LISTED BY AO IN THE ASSESSMENT ORDER (ABSTR ACT REPRODUCED ABOVE) AS EXIT PROVIDERS AND ENTRY OPERATORS I.E. DHRITI TRADERS P VT. LTD., DREAM VALLEY TRADING PVT. LTD, DWARKAPURI CONSTRUCTIONS P LTD, OLYMPIA SALES AGENC IES P LTD, PARTICLE INDUSTRIES P LTD, SIGNET VINIMAY P LTD, WINALL VINIMAY P LTD, SPICE M ERCHANTS P LTD AND SARAF EQUITY SERVICES PVT. LTD., THE ASSESSEE CATEGORICALLY DENI ED THE SAME AND CONFIRMED THAT, HE DID NOT KNOW OR HAD ANY RELATION WITH ANY OF THE ABOVE SAID PARTIES AND HE NEVER DEALT WITH ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 57 OR HAD ANY BUSINESS OR PERSONAL RELATIONS WITH ANY OF THEM. HE FURTHER CONFIRMED THAT AS HE DID NOT KNOW THEM, HENCE KNOWING THEIR BUSINESS OR ACTIVITIES IS OUT OF QUESTION. 13. HE ARGUED THAT THE ASSESSEE HAS NEITHER TAKEN E XIT NOR ACCOMMODATION ENTRIES FROM ANY PARTY FOR PURCHASE OR SALE OF SHARES OF THE COM PANY, NOR HAS ANY EVIDENCE PROVIDED BY AO NOR STATEMENTS OF SUCH PERSONS REVEALED ANY D EALING WITH THE ASSESSEE. ALL TRANSACTIONS DONE BY THE ASSESSEE ARE THROUGH BSE A ND BANK ACCOUNT IN THE NORMAL COURSE. EVEN OTHERWISE ALSO THE STATEMENT OF THE PE RSONS REFERRED BY THE AO AS EXIT OR ACCOMMODATION PROVIDERS (ANIL KHEMKA, SANJAY DEY & MANDAR NAIK) WERE NOT RECORDED IN THE PRESENCE OF ASSESSEE NOR HAS HE BEEN PROVIDE D TO CROSS EXAMINE THEM BEFORE USING THESE STATEMENTS AGAINST THE ASSESSEE. HENCE RELIANCE ON SUCH STATEMENTS MADE IN BACK OF ASSESSEE CANNOT BE ADMISSIBLE AS EVIDENC E AND MAKES THE ASSESSMENT ORDER INVALID. IN THE PRESENT FACTS, THE ASSESSEE AT FIRS T WAS ALLOTTED SHARES THROUGH PREFERENTIAL ISSUE BY THE COMPANY. THE ALLOTMENT OF SHARES BY THE COMPANY WAS MADE AFTER OBTAINING PRIOR APPROVAL OF BSE AS PER SEBI I SSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS REGULATION, 2009. THE SALE OF SHARES O F PAL IS THROUGH A REPUTED BROKER GEOJIT. ALL NECESSARY SUPPORTING EVIDENCE HAVE BEEN SUBMITTED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. ON INVESTIGATION, THE ROLE OF GEOJIT WAS NOT FOUND TO BE SUSPICIOUS OR QUESTIONABLE. THEREFORE, RELIANCE ON THE FINDINGS OF THE INVESTIGATION WING IN SOME OTHER CASES WHICH BEARS NO CONNECTION WITH THE CASE OF THE ASSESSEE IRRELEVANT. 14. IT WAS CONTENDED FURTHER THAT THERE IS NO EVIDE NCE THAT IMPLICATE THE ASSESSEE TO HAVE ENTERED INTO ANY ARRANGEMENT WITH ANY OPERATOR S /EXIT PROVIDERS OR INVOLVEMENT OF UNACCOUNTED MONEY. THE ASSESSEE TOOK STRONG OBJE CTIONS TO AO LINKING HIM OR HIS TRANSACTIONS WITH SO CALLED ALLEGED EXIT PROVIDERS AND ACCOMMODATION ENTRY PROVIDERS WITHOUT ANY EVIDENCE OR INVOLVEMENT MENTIONED IN SU CH INVESTIGATION REPORTS AND STATEMENTS OF SUCH PERSONS. THE SEAMLESS PROCESS OF TRANSACTIONS AT BSE AS EXPLAINED HEREAFTER DOES NOT IDENTIFY AND PROVIDE US THE IDEN TITY OF PERSONS WHO HAVE PURCHASED THOSE SHARES SOLD BY ASSESSEE. THE ASSESSEE HAS ORD ERED HIS BROKER TO SELL THE SHARES OF PAL WHO IN TURN SOLD THE SHARES ON BSE PLATFORM. TH E ASSESSEE/HIS BROKER WERE NOT AWARE ABOUT THE BUYERS OR THEIR BROKERS WHO PURCHAS ED THE SHARES OF PAL SOLD BY THE ASSESSEE. THE ALLEGATION OF AO IN PARA 7.2 AND 7.3 OF THE ASSESSMENT ORDER THAT THAT THE ASSESSEE MAINLY TRADED IN ONE SCRIPT (PAL) WHICH IS SUSPICIOUS IS COMPLETELY INCORRECT AND NOT SUPPORTED BY FACTS. DURING FY 2014-15 (AY 2 015-16) THE ASSESSEE ALSO TRADED IN FOLLOWING SCRIPTS:- STCG: ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 58 A) ICICI BANK, B) GUJ NRE, C) GITANJALI GEMS, D) HFCL. E) WONDRELLA, F) HIND MOTORS, G) TATA CHEM, H) CR. GRIEV., I) COAL I NDIA, J) UNITECH, K) INFOSYS, L) TECH MAHINDRA, M) HCL TECHNO LTCG: A) PINE ANIMATION, B) SUNDARAM INV. C) CARE RATING, D) KOLTE PATIL, E) IDEA, F) BALMER LAWR, G) S. CLAYTON, H) GFL FINANCE , I) SUN PHARMA 15. FURTHER, THE LEARNED COUNSEL ALSO NARRATED THE FACT THAT THE ASSESSEE ALSO INCURRED LOSSES IN FEW SCRIPTS OUT OF THE ABOVE. WITH REGARD TO THE OBSERVATIONS OF AO IN PARA 9 RELATING TO SUSPICION FOR TRADING IN PAL SHARES BY SEBI VIDE AD-INTERIM EX-PARTE ORDER DATED 08.05.2015, IT WAS ARGUED THAT THE ASSESSEE A ND HIS WIFE ALONG WITH MORE THAN 100 OTHERS ENTITIES WERE EXONERATED OF ALL ALLEGATI ONS AS DETAILED IN AD-INTERIM EXPARTE ORDER FOR MANIPULATION OF PRICE AND VOLUME OF THE S CRIPT AND ALSO ANY ARRANGEMENT BY THE ASSESSEE WITH THE COMPANY OR ITS PROMOTERS, EXI T PROVIDERS, OR SEBI REGULATIONS ETC. VIDE SEBI IN ITS FINAL ORDER DATED 19.09.2017. 16. THE LEARNED COUNSEL FURTHER NARRATED THAT THE A LLEGATION OF AO IN PARA 11.3 THAT PROOF OF PHYSICAL TRANSFER OF SHARES, REASONS FOR O FF MARKET TRADING AND TRADING PATTERN OF MARKET TRANSACTIONS FOR THE LAST THREE YEARS HAV E NOT BEEN SUBMITTED IS ALSO UNFOUNDED AND CONTRARY TO THE FACTS. THE ASSESSEE D URING COURSE OF ASSESSMENT SUBMITTED COMPLETE DOCUMENTS OF PREFERENTIAL ALLOTM ENT OF SHARES AND TRADING IN SHARES OF SEVEN YEARS VIDE ITS REPLY DATED 23.11.17. THERE WAS NO PHYSICAL TRANSFER OF SHARES DURING THE YEAR UNDER APPEAL EXCEPT ONE IN WHICH CO MPANY HAS BOUGHT BACK SHARES OF SUNDRAM INVESTMENT FOR RS. 5,257/-. THEREFORE, OBSE RVATIONS REGARDING OFF MARKET TRADING ARE ABSOLUTELY WRONG AND CONTRARY TO THE FA CTS. 17. LD COUNSEL FOR THE ASSESSEE EXPLAINED THE PROCE SS AT STOCK EXCHANGE NETWORK, WHICH IS FILED IN THE SHAPE OF NOTE AS UNDER: - > AS PER STOCK EXCHANGE REGULATIONS, SHARES OR SEC URITIES OF ANY OF THE LISTED COMPANIES WHO HAS SIGNED LISTING AGREEMENT W ITH SE ARE DEALT ON THE STOCK EXCHANGE PLATFORM THROUGH A REGISTERED BR OKER ONLY. THE PURCHASE AND SALE TRANSACTIONS ON THE STOCK EXCHANG E (SE) PLATFORM ARE WITH THE STOCK EXCHANGE AND SETTLED THROUGH THE CLE ARING SYSTEM AND PAYMENT IS RECEIVED FROM BROKERS OR PAID TO BROKERS ONLINE TO OR BY THE EXCHANGE CLEARING SYSTEM. > WHEN ANY CUSTOMER ORDERS THE BROKER TO SELL ANY S CRIPT, THE STOCK BROKER SELLS THE SHARES ON TRADING SYSTEM THROUGH T HE EXCHANGE TERMINAL ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 59 AND GENERATE CONTRACT NOTE. ON SALE, THE SHARES ARE DELIVERED FROM THE CUSTOMER'S DEMAT A/C TO THE STOCK BROKER'S DEMAT A/ C WHO IN TURN TRANSFERS THE SHARES TO STOCK EXCHANGE POOL A/C, WH O ON SETTLEMENT DAY DELIVERS TO THE BUYER'S DEMAT A/C. ON THE OTHER SID E, THE BUYER PAYS THE PRICE AS PER CONTRACT NOTE TO HIS BROKER WHO PAYS T O THE SE WHO THEN TRANSFERS THE AMOUNT TO THE SELLER'S BROKER ON SETT LEMENT DAY. THUS, THE SELLER AND THE BUYER OR THEIR BROKERS DOES NOT HAVE DIRECT RELATION NOR DEALING WITH EACH OTHER. NOR THEY KNOW THE BUYING O R SELLING PARTIES OR THE BROKERS. THE CUSTOMERS DEAL WITH THEIR RESPECTI VE BROKERS AND BROKERS DEAL WITH SE OR THE CLEARING SYSTEM. > IN NUTSHELL, THE BUYERS BROKER MAKES PAYMENT TO SE AND SELLERS BROKERS DELIVER SHARES TO THE SE. THEREAFTER, SETTL EMENT IS DONE BY CLEARING SYSTEM AND TRANSFER OF AMOUNTS ONLINE TO S ELLERS BROKERS BANK ACCOUNT AND SHARES TO BUYER'S BROKERS DEMAT ACCOUNT WHO IN TURN PAYS TO THE SELLERS AND TRANSFERS SHARES TO THE DEMAT AC COUNT OF THE BUYER. HENCE SELLERS AND BUYERS DOES NOT DEAL DIRECTLY OR COME IN CONTACT NOR THEIR BROKER COME IN DIRECT CONTACT AND NEITHER OF THEM KNOW THE CONTRA PARTY. > THE WHOLE SYSTEM OF BUYING AND SELLING OF SHARES DONE ON THE STOCK EXCHANGE PLATFORM IS FACELESS AND SE PLATFORM DEAL WITH BROKERS ONLY AND PARTIES DEAL WITH THEIR BROKERS. FOR EXAMPLE, S HARES SOLD BY X THROUGH ITS BROKER BOUGHT BY ABCD BROKER FOR XYZ OR VICE A VERSA ARE NOT KNOWN TO EACH OTHER. EVEN THE BROKER DOES NOT KNOW, THE SHARES SOLD BY HIM ARE DELIVERED TO WHICH BROKERS OR WHICH BUYER. THE BROKER CAN ACT ONLY FOR THE PARTIES WHO ARE REGISTERED WITH HIM AF TER NECESSARY KYC AND DUE DILIGENCE. NOBODY CAN DIRECTLY DEAL IN SHARES O N STOCK EXCHANGE. 18. FURTHER, THE LEARNED COUNSEL STATED THAT THE AS SESSEE HAS SOLD THESE SHARES THROUGH HIS BROKER GEOJIT WHO IS REGISTERED BROKER OF BOMBA Y STOCK EXCHANGE (BSE), NATIONAL STOCK EXCHANGE (NSE) AND OTHER EXCHANGES. THE BROKE R GEOJIT IS AN OLD AND REPUTED SHARE BROKER AND IS IN THIS BUSINESS FOR YEARS. THE ASSESSEE IS DEALING WITH IT FOR MORE THAN 10 YEARS AND SOLD EQUITY SHARES OF PAL ON BSE PLATFORM THROUGH HIS REGULAR BROKER GEOJIT AND DELIVERED THE SHARES FROM HIS DEMAT ACCO UNT AND RECEIVED SALE PROCEEDS DIRECTLY IN HIS DESIGNATED BANK ACCOUNT AS EXPLAINE D IN THE FACTS OF THE CASE. STT, BROKERAGE, STAMP DUTY, SEBI AND OTHER CHARGES WERE DULY PAID ON TRANSACTIONS DONE ON BSE PLATFORM. THE AO HAS ACCEPTED ALL THE DOCUMENTS FILED BY THE ASSESSEE WITHOUT ANY DOUBT ON ITS AUTHENTICITY OR GENUINENESS. THE RELEV ANT DOCUMENTS AND EVIDENCE OF THESE TRANSACTIONS ARE ALSO SUBMITTED BEFORE US. THE BROK ER GEOJIT ALSO DOES NOT KNOW TO WHOM THE SHARES WERE SOLD. ONLY SEBI OR STOCK EXCHA NGE KNOWS WHO BOUGHT THESE SHARES AND THESE AUTHORITIES DO NOT SUPPLY SUCH INF ORMATION UNLESS CALLED BY GOVERNMENT AUTHORITY. THEREFORE, THE ASSESSEE OR HI S BROKER DID NOT HAVE ANY RECORD OR ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 60 KNOWLEDGE OF THE PURCHASERS AT THE TIME OF SALE. HO WEVER, DURING THE COURSE OF INVESTIGATION BY SEBI, THE INFORMATION WAS SUPPLIED BY BSE TO THE ASSESSEE IN THE FORM OF A CD TO OFFER HIS REPLY ON THE EX-PARTE ORDER ISSUE D BY SEBI ON 08.05.2015. FROM THE CD, THE ASSESSEE CAME TO KNOW THAT HIS SHARES OF PAL WE RE BOUGHT BY 50 BUYERS THROUGH MULTIPLE BROKERS. THE DELIVERY OF SHARES IS GIVEN T O GEOJIT BY THE ASSESSEE FROM HIS DEMAT ACCOUNT. COPY OF DEMAT STATEMENT IS ALREADY F ILED IN ASSESSEE PAPER BOOK BEFORE US. THE BROKER IN TURN TRANSFERS THE SHARES TO BSE CLEARING ACCOUNT. THE SALE PROCEEDS OF SALE OF SHARES IS SETTLED BY EXCHANGE SETTLEMENT SY STEM AND DIRECTLY CREDITED TO BROKER'S BANK ACCOUNTS BY THE BSE AND THE ASSESSEE RECEIVED PAYMENT FROM GEOJIT I.E. DIRECTLY INTO HIS DESIGNATED HANK ACCOUNT. COPY OF BANK STAT EMENT IS FILED IN ASSESSEES PAPER BOOK (APB). 19. FURTHER, THE ASSESSEE HAS NO CONNECTION OR NEXU S WITH THE BUYERS AS ALSO THE ACTIVITIES OF THE BUYERS. EVEN IF THE BUYERS ARE DO UBTFUL OR OF SUSPICIOUS CHARACTER THAT DOES NOT AFFECT THE TRANSACTIONS OF SALE OF SHARES BY THE ASSESSEE THROUGH PROPER CHANNEL I.E. ON THE RECOGNIZED STOCK EXCHANGE THROU GH THE REGISTERED BROKER AND PAYMENTS WERE RECEIVED. HE ARGUED THAT DURING SEARC H ITSELF AND IN THE COURSE OF INVESTIGATION THE DEPARTMENT HAD MADE EXHAUSTIVE SU RVEY AND ENQUIRY FOR THESE TRANSACTIONS FROM GEOJIT AND OTHER BROKERS AND NOTH ING INCRIMINATING WAS FOUND AGAINST THE ASSESSEE. THE DETAILS, DOCUMENTS AND THIRD PART Y EVIDENCES SUPPORTING THE SALE TRANSACTIONS AND PAYMENTS RECEIVED HAVE BEEN FILED BY THE ASSESSEE. THE TRANSACTIONS WERE DONE AT PRICES PREVAILING ON THE DATE OF TRANS ACTION AND STT WAS PAID ON SUCH TRANSACTIONS CLEARED THROUGH EXCHANGE CLEARANCE SYS TEM. 20. THE LEARNED COUNSEL FURTHER REFERRED TO SEBI IN VESTIGATION IN CASE OF PAL. IT WAS ARGUED THAT IN CASE OF PAL, THE WHOLE TIME MEMBER O F SEBI THE MARKET REGULATOR, ON A PRELIMINARY REPORT OF ITS SURVEILLANCE DEPARTMENT H AS PASSED AD INTERIM EXPARTE ORDER NO. WTM/RKA/ISD/36/2015 DATED 08.05.2015 AGAINST PA L AND 177 ENTITIES INCLUDING ASSESSEE. HOWEVER, DESPITE NO CHARGE AGAINST THE AS SESSEE, THE WHOLE TIME MEMBER OF THE SEBI CONFIRMED THE EX-PARTE ORDER VIDE PASSING CONFIRMATORY ORDER NO. WTM/RKA/ISD/61/2016 DATED 02.06.2016. THE ASSESSEE WENT IN APPEAL BEFORE THE SECURITIES APPELLATE TRIBUNAL AGAINST THE CONFIRMAT ORY ORDER OF THE SEBI. WHILE THE ASSESSEE'S APPEAL WITH SAT WAS AT HEARING STAGE, TH E INVESTIGATION DEPARTMENT OF THE SEBI COMPLETED INVESTIGATION IN PAL AND PASSED FINA L ORDER VIDE ORDER NO. SEBI/WTM/MPB/EFDI-DRA-III/28/09/2017 DATED 19.09.20 17. RELEVANT PARA NO.9, 10, AND 11 OF SEBI ORDER ARE REPRODUCED HEREIN BELOW: ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 61 9) 'UPON COMPLETION OF INVESTIGATION BY SEBI, THE FOLLOWING ARE NOTED AS REGARDS 14 ENTITIES WHO WERE IDENTIFIED AS PREFE RENTIAL ALLOTTEES, EXIT PROVIDERS AND LTP CONTRIBUTORS VIDE THE INTERIM ORD ER: SEBIS INVESTIGATION DID NOT FIND ANY ADVERSE EVIDEN CE AGAINST THEM TO SHOW ANY CONNECTION / NEXUS WITH PAL OR ITS PROMOTE RS/ DIRECTORS OR PROMOTER RELATED ENTITIES OR ANY ROLE IN PRICE MANI PULATION VOLUME MANIPULATION IN THE SCRIP OF PAL. HENCE, VIOLATION OF PROVISIONS OF SEBI ACT, SCRA, PSUTP REGULATION, ETC. WERE NOT OBSERVED IN RESPECT OF THE FOLLOWING 114 ENTITIES. ........21. MAHENDRA B MITTAL .......32. POOJA MAHENDRA MITTAL AND OTHER 112 ENTITIES AS PER SEBI ORDER 10) 'CONSIDERING THE FACT, THAT THERE ARE NO ADVERS E FINDINGS AGAINST THE AFOREMENTIONED 114 ENTITIES WITH RESPECT TO THEIR R OLE IN THE MANIPULATION TO THE SCRIP OF PAL, I AM OF THE CONSI DERED VIEW THAT THE DIRECTIONS ISSUED AGAINST THEM VIDE INTERIM ORDER D T 08.05.2015 WHICH WERE CONFIRMED VIDE ORDERS DT. JUNE 02, 2026, JULY 05, 2016, AUGUST 22, 2016 AND JUNE 02, 2017 NEED NOT BE CONTINUED.' 11) IN VIEW OF THE FOREGOING, I IN EXERCISE OF THE POWERS CONFERRED UPON ME UNDER SECTION 19 OF SEBI ACT, 1992 READ WITH SEC TION 11, 11(4) AND 11B OF THE SEBI ACT, HEREBY REVOKE THE CONFIRMATORY ORDERS DT.02.06.2026, 05.07.2016, 22.08.2016 AND 02.06.201 7 QUA AFORESAID THE 114 ENTITIES WITH IMMEDIATE EFFECT.' 21. THUS, THE SEBI'S FINAL ORDER DATED 19.09.2017 C LEARLY CAME TO THE CONCLUSION THAT SEBI'S INVESTIGATION DID NOT FIND ANY ADVERSE EVIDE NCE AGAINST THE 114 ENTITIES INCLUDING THE ASSESSEE AND GIVEN FINDING THAT THE ASSESSEE HA S NO CONNECTION/NEXUS WITH PAL OR ITS PROMOTERS/DIRECTORS OR PROMOTERS RELATED ENTITI ES NOR ANY ROLE IN PRICE MANIPULATION, VOLUME MANIPULATION IN THE SCRIPT OF PAL. NO VIOLAT ION OF PROVISIONS OF SEBI ACT, SCRA, PFUTP REGULATIONS, ETC. WERE OBSERVED IN RESPECT O F 114 ENTITIES (INCLUDING THE ASSESSEE). THE LIST OF 114 ENTITIES REFERRED IN THE SEBI ORDER ALSO INCLUDES FOLLOWING ALLEGED EXIT PROVIDERS DISCUSSED IN SHOW CAUSE NOTI CE AND REFERRED TO IN THE ASSESSMENT ORDER AS UNDER: - SR. NO. NAME OF EXIT PROVIDER 121 DHRITI TRADERS PL 127 DREAMVALLEY TRADING FL 162 SIGNET VINIMAY PL 165 SPICE MERCHANTS FL 172 WINALL VINIMAY P L ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 62 22. THESE ALLEGED EXIT PROVIDERS WERE ALSO EXONERAT ED BY THE SEBI ORDER AND THE REMAINING ALLEGED EXIT PROVIDERS VIZ. 1) DWARKAPURI CONSTRUCTIONS P LTD., 2) OLYMPIA SALES AGENCIES P LTD. AND 3) PARTICLE INDUSTRIES P LTD. WERE NEITHER REFERRED IN THE SEBI EX-PARTE ORDER DATED 08.05.201 5 NOR IN THE FINAL O RDER DATED 19.09.2017 WHICH GOES TO PROVE THAT NEITHER THE ASSESSEE NOR THE EXIT PROVID ERS ALLEGED BY THE AO WERE INVOLVED IN ANY ARRANGEMENT OR ACCOMMODATION AND HENCE , ALL EGATIONS OF AO ARE WRONG AND WITHOUT ANY EVIDENCE. COPIES OF SEBI AD-INTERIM EX- PARTE ORDER DATED 08.05.2015, CONFIRMATORY ORDER DATED 02.06.2016 AND FINAL ORDER DATED 19.09.2017 ARE ENCLOSED AT PAGES 217-277 OF APB. SUBSEQUENTLY, THE SAT DISPOSE D-OFF THE APPEAL OF THE ASSESSEE AS INFRUCTUOUS AND PASSED ORDER ACCORDINGLY VIDE ORDER NO. NIL DATED 26.09.2017. COPY ENCLOSED AT PAGES 278-283 OF APB. 23. IN VIEW OF THE ABOVE THE ASSESSEE HAS BEEN EXON ERATED BY SEBI IN THE CASE OF PAL STATING THAT HE HAD NO NEXUS/ CONNECTION OR COLLUSI ON WITH THE COMPANY, ITS DIRECTORS, OR PROMOTERS AND WAS NOT INVOLVED IN PRICE MANIPULATIO N & VOLUME MANIPULATION, ETC. FURTHER, THE ALLEGED EXIT PROVIDERS FOR THE SCRIPT HAVE NOT PLAYED ANY ROLE IN ASSESSEE'S TRANSACTIONS IN THE SCRIPT AS HE HAS NEITHER TAKEN ANY ACCOMMODATION NOR ENTRY OR EXIT FROM ANY OF THE ALLEGED PARTIES. 24. ON THE OTHER HAND, THE LEARNED CIT DR SHRI MANJ UNATHA SWAMI, ARGUED THAT THE ENTIRE TRANSACTION IS BOGUS. HE STATED THAT HE IS R ELYING ON THE ELABORATE ORDER WRITTEN BY THE AO AND THAT OF THE CIT(A). 25. WE HAVE NOTED THAT PAL MADE A PREFERENTIAL ALLO TMENT OF EQUITY SHARES IN THE YEAR 2013. THE ASSESSEE ON APPLICATION FOR SHARES WAS AL LOTTED THE SAME AT RS. 10 PER SHARE. THE COMPANY HAD SPLIT THE FACE VALUE OF ITS SHARES IN 2013. DUE TO THIS, ASSESSEE RECEIVED 15,00,000 SHARES AGAINST 1,50,000 SHARES A LLOTTED EARLIER. THE ASSESSEE ACQUIRED THE SHARES ON THE BASIS OF GUIDANCE FROM H IS FATHER AND FRIENDS. THE PURCHASE AND SALE OF SHARES WAS NEITHER PRE-PLANNED NOR UNDE R ANY ARRANGEMENT WITH THE COMPANY OR ANY PARTY RELATED TO IT. THE ALLOTMENT O F SHARES BY PAL WAS MADE AFTER OBTAINING PRIOR APPROVAL OF BSE AS PER SEBI ISSUE O F CAPITAL AND DISCLOSURE REQUIREMENTS REGULATION, 2009. WE NOTED FROM THE FACTS THAT AS P ER THE FINANCIALS PROVIDED IN THE ASSESSMENT ORDER, IT CAN BE SEEN THAT THE COMPANY H AD INCURRED A LOSS IN FY 11-12 OF RS. 7 LAKHS AND HAS EARNED PROFIT OF 16 LAKHS IN FY 12- 13. THE FACT THAT PAL WAS TURNED FROM LOSS MAKING TO PROFIT EARNING ITSELF DEMONSTRATES T HE FACT THAT THERE WAS POTENTIAL IN PAL DUE TO WHICH THE ASSESSEE PURCHASED THE SHARES. FUR THER, THE TURNOVER, IN THE FY 2013- 14 INCREASED BY 10 TIMES AS COMPARED TO THE PRECEDI NG PREVIOUS FY AND INCREASE IN THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 63 NET PROFIT AFTER TAX WAS ALMOST AROUND 4 TIMES THAN THAT OF THE NET PROFIT RECORDED IN THE YEAR OF PURCHASE. MOREOVER, THE PRICES OF THE COMPA NY WERE ALMOST CONSTANT FOR A YEAR. WHEN THE ASSESSEE THOUGHT THAT THE PRICES HAD REACH ED ITS PEAK, HE SLOWLY SOLD ALL THE SHARES IN A TIME SPAN OF 3 MONTHS. TO PROVE THE GEN UINENESS OF THE TRANSACTIONS, THE ASSESSEE PROVIDED ALL THE SUPPORTING EVIDENCES LIKE , SHARE APPLICATION FORM, BANK STATEMENT HIGHLIGHTING THE TRANSACTIONS, CONTRACT N OTES, BROKER'S LEDGER, DEMAT STATEMENT FORM 10DB, SEBI'S FINAL ORDER, SAT ORDER, ETC. 26. HOWEVER, THE AO MADE ADDITION UNDER SECTION 68 OF THE ACT AND CIT(A) CONFIRMED THE ADDITION BY IGNORING ALL THE FACTS AND EVIDENCE S AND WITHOUT PROVIDING ANY PROOF OF ASSESSEE'S INVOLVEMENT IN THE MANIPULATION OF PRICE OR VOLUME OF THE SHARES OF THE COMPANY OR POINTING OUT ANY DEFECT OR DEFICIENCY IN THE PROCESS OF TRANSACTIONS OR ITS ELIGIBILITY TO DEDUCTION U/S 10(38) OF THE ACT. WE NOTED THAT THE AO IN HIS ASSESSMENT ORDER IN PARA 7 AND 8 HAS EXHAUSTIVELY MENTIONED IN DETAIL THE FINANCIALS OF PAL, PREFERENTIAL ALLOTMENT OF SHARES, PRICE OF PAL, EXI T PROVIDERS, ETC. FOLLOWING PARAS HAVE BEEN DITTO /COPIED FROM SEBI AD-INTERIM EX-PARTE OR DER DATED 08.05.2015. ALTHOUGH AFTER INVESTIGATION, SEBI IN ITS FINAL ORDER EXONER ATED THE ASSESSEE AND THE ALLEGED EXIT PROVIDERS BUT THE AO FAILED TO CONSIDER THE SEBI FI NAL ORDER IN THE ASSESSMENT ORDER. IT MEANS THAT THE AO AND CIT(A) ALSO RELIED ON THE ORD ER OF SEBI DATED 08.05.2015 MAINLY FOR DRAWING INFERENCES AND DECIDING THE ISSUE ON TH E BASIS OF CONJUNCTURES AND SURMISES AND NOT ON EVIDENCES. 27. IN VIEW OF THE ABOVE, WE NOTED THAT IT IS SEBI WHO MONITORS AND REGULATES THE STOCK EXCHANGES & STOCK MARKET AND WHEN THEIR INVESTIGATI ON DID NOT REVEAL ANY PRICE OR VOLUME MANIPULATION BY THE ASSESSEE AND THESE TRANS ACTIONS ARE IN THE NORMAL COURSE THROUGH PROPER & LEGAL CHANNELS. THEN THE ALLEGATIO NS OF THE IT DEPARTMENT FALL FLAT AND DENIAL OF DEDUCTION U/S 10(38) OF THE ACT IS ARBITR ARY AND ADDITION OF SALE PROCEEDS OF SHARES OF PAL U/S 68 IS AGAINST THE PROVISIONS OF A CT. THE ASSESSEE IN HIS REPLY DATED 20.11.2017 SUBMITTED TO THE AO THAT THE ALLEGATIONS MENTIONED IN PARAS OF SHOW CAUSE NOTICE ARE BASED ENTIRELY ON SEBI AD-INTERIM EX-PAR TE ORDER DATED 08.05.2015 WHICH WAS REVERSED AFTER DETAILED INVESTIGATION WHEREIN SEBI HAS EXONERATED THE ASSESSEE OF ALL THE ALLEGATIONS WITHOUT ANY QUALIFICATION. A COPY OF SE BI FINAL ORDER DATED 19.09.2017 WAS ALSO ENCLOSED WITH THE APB. BUT THE AO HAS FAILED T O REFER TO ASSESSEE'S SUBMISSIONS AND SEBI'S FINAL ORDER DATED 19.09.2017 IN THE ASSESSME NT ORDER INSPITE OF THE FACT THAT ASSESSEE'S SUBMISSIONS AND SEBIS FINAL ORDER WERE A LREADY ON ITS RECORD THEREBY CONTRAVENING THE PRINCIPLES OF NATURAL JUSTICE. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 64 28. WE ALSO NOTED THAT AS PER PROVISIONS OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS IN ANY PREVIOUS YEAR AN D ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED IS NOT SATISFACTORY TO THE AO, THE SUM CREDITED MAY BE CHARGED TO TAX UNDER SE C. 68 OF THE ACT. THE ASSESSEE IS REQUIRED TO PROVE: (I) THE IDENTITY OF THE CREDITOR (II) SOURCE OF THE CREDIT AND (III) GENUINENESS OF THE TRANSACTION TO THE SATISFACTION OF THE AO. TO PROVE THE IDENTITY OF THE CREDITOR, THE NATURE OF TRANSACTIONS, SOURCE OF PAY MENTS AND THE GENUINENESS OF THE TRANSACTIONS OF SALE OF SHARES OF PAL, THE ASSESSEE HAS SUBMITTED FOLLOWING DOCUMENTS/ EVIDENCES: - A) TO PROVE THE IDENTITY OF CREDITOR AND NATURE OF TRA NSACTION THE ASSESSEE SUBMITTED COPY OF CONTRACT NOTE ON SALE BY GEOJIT ON BSE PLATFORM. THE CONTRACT NOTES SHOWS THE QUANTITY, RA TE, TIME STAMP, VALUE, TAXES AND CHARGES VIZ. STT, BROKERAGE, SEBI AND EXCHANGE TURNOVER CHARGES, SERVICE TAX AND STAMP DUTY INCURR ED ON ALL THE TRANSACTIONS DONE ON BSE PLATFORM, A STOCK EXCHANGE RECOGNIZED BY THE MARKET REGULATOR SEBI. THE DOCUMENTS HAVE BEEN ACCEPTED BY THE AO. B) BANK STATEMENT SHOWING SALE PROCEEDS CREDITED BY TH E BROKER GEOJIT. DEMAT ACCOUNT OF THE ASSESSEE SHOWING SOLD SHARES DEBITED / TRANSFERRED TO BROKER. C) THE SALE CONSIDERATION IS RECEIVED BY ASSESSEE FROM GEOJIT, A REGISTERED BROKER OF SEBI/BSE, WITH WHO HAS BEEN DE ALING WITH GEOJIT FOR MORE THAN 10 YEARS AS PER CONTRACT NOTE DIRECTLY IN THE BANK ACCOUNT AFTER SHARES ARE DELIVERED FROM DEMAT ACCOUNT AND RECEIVED BY THE ASSESSEE. COPY OF DEMAT ACCOUNT AND BANK STATEMENTS WHERE SALE PROCEEDS ARE RECEIVED ARE SUB MITTED AS DISCUSSED ABOVE. GEOJIT HAS ALSO BEEN EXAMINED AND INTERROGATED BY THE INVESTIGATION DEPARTMENT DURING SEARCH PROCEEDI NGS. GEOJIT'S SOURCE IS BSE SETTLEMENT SYSTEM. THIS EXPLAINS IDEN TITY OF THE CREDITOR AND SOURCE OF MONEY PAID BY ASSESSEE FOR G ENUINE TRANSACTION OF SALE OF SHARES. D) SALE IS DONE AT PREVAILING PRICE QUOTED ON THE BSE. (BSE PUBLISHED QUOTATIONS DAILY AND RATE LIST OF THE RELEVANT DATE S CAN BE PRODUCED IF REQUIRED) E) THE SHARES ARE SOLD BY ASSESSEE'S BROKER ON BSE PLA TFORM AND NOT OFF MARKET TO ANY BUYER HENCE SOURCE IS BSE'S CLEAR ING SYSTEM AND BROKER. THE TRANSACTIONS ON THE BSE PLATFORM AND SE TTLEMENT SYSTEM WHO ARE RESPONSIBLE FOR THE TRANSACTIONS OF THE DEM AT ACCOUNT AND PREVAILING PRICE ON PUBLIC DOMAIN PROVE THE GENUINE NESS OF THE TRANSACTIONS. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 65 F) SEBI'S FINAL ORDER DT. 19.09.2017 RELATING TO PAL I S ENCLOSED. SEBI AFTER DETAILED INVESTIGATION INTO THE TRANSACTIONS IN THE SHARES OF THESE COMPANIES HELD THAT THE PARTIES TO THE INVEST IGATION INCLUDING ASSESSEE AND ALLEGED EXIT PROVIDERS ARE HAVING NO N EXUS OR CONNECTION WITH THE COMPANY, THEIR DIRECTORS, PROMO TERS ETC. AND THERE IS NO PRICE OR VOLUME MANIPULATION IN THESE S CRIPTS. THIS ALSO EXPLAINS THE GENUINENESS OF THE TRANSACTIONS AND DI SCARDS THE THEORY OF MANIPULATION OR ACCOMMODATION TO TAKE TAX ADVANTAGE ILLEGALLY. 29. WE HAVE ALSO NOTED THE FACTS FURTHER THAT THE A SSESSEE HAS RECEIVED TOTAL AMOUNT OF RS. 14,16,80,449/- ON ACCOUNT OF SALE OF SHARES OF PAL DURING THE YEAR, IN THE ACCOUNT WITH AXIS BANK FROM GEOJIT, REGISTERED BROKER OF BS E WITH WHOM THE ASSESSEE IS DEALING FROM LAST MORE THAN 10 YEARS. THE ASSESSEE HAS BEEN REGULAR INVESTOR IN SHARES & SECURITIES AND HIS PORTFOLIO COMPRISES OF VARIOUS S HARES AND THE AGGREGATE VALUE OF INVESTMENTS FOR 5 YEARS HAVE BEEN AS UNDER: - AY ( AS ON DATE) TOTAL INVESTMENT IN SHARES AMOUNT (IN RS.) 31.03.2011 3,77,21,394 31.03.2012 3,33,40,018 31.03.2013 2,66,87,649 31.03.2014 2,91,24,876 31.03.2015 2,58,84,431 COPIES OF BALANCE SHEET OF THE ASSESSEE FOR THE ABO VE MENTIONED YEARS SHOWING THE INVESTMENTS MADE IN SHARES WERE SUBMITTED TO THE AO VIDE SUBMISSION DATED 15.03.17 AS WELL AS BEFORE CIT(A) AND EVEN NOW BEFORE US. TH IS ADDS TO THE BONAFIDE OF THE ASSESSEES TRANSACTIONS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE TO GO THROUGH THE EXPRESSION OF 'NATURE AND SO URCE' AND HAS TO UNDERSTAND THE REQUIREMENT OF IDENTIFICATION OF THE SOURCE AND ITS GENUINENESS. SEC. 68 OF THE ACT PLACES THE BURDEN OF PROOF ON THE TAX PAYER, TO EXPLAIN TH E NATURE OF SOURCE OF ANY CREDIT BUT NOT THE SOURCE OF THE SOURCE. HENCE WHEN AN ASSESSE E GIVES EVIDENCES OF IDENTITY OF THE PAYER, SOURCE OF THE CREDIT, EVIDENCES OF THE TRANS ACTIONS TO PROVE THE GENUINENESS, THE ASSESSEE IS SAID TO HAVE DISCHARGED HIS INITIAL BUR DEN. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS EXPLAINED AND SUBMITTED EVIDENCES TO PROVE IDENTITY, NATURE AND SOURCE OF THE CASH CREDIT ON ACCOUNT OF SALE PR OCEEDS CREDITED / RECEIVED IN THE BANK ACCOUNT OF THE ASSESSEE AND ALSO FURNISHED ALL EVIDENCES COMPRISING CONTRACT NOTES, BROKERS, BANKING DETAILS IN SUPPORT OF THE G ENUINENESS OF THE TRANSACTIONS. THE AO HAS NOT POINTED OUT ANY DEFICIENCY IN THE DOCUME NTS OR INHERENT WEAKNESS IN THE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 66 EXPLANATION OR DOUBTED GENUINENESS OF THE TRANSACTI ONS FOR WANT OF ANY EVIDENCE. THE AO DID NOT PRODUCE ANY EVIDENCE WHATSOEVER TO PROVE THE ALLEGATION THAT UNACCOUNTED MONEY CHANGED HANDS BETWEEN THE ASSESSEE AND THE BR OKER OR ANY OTHER PERSON INCLUDING THE ALLEGED EXIT PROVIDER NOR PROVED THAT THE ASSESSEE HAS TAKEN ANY TYPE OF ACCOMMODATION FROM ANY PERSON OR SO CALLED EXIT PRO VIDERS TO INTRODUCE UNACCOUNTED MONEY INTO BOOKS BY WAY OF LTCG. WITH THE PURCHASE AND SALE TRANSACTIONS OF SHARES OF PAL ARE PROVED GENUINE BY THIRD PARRY EVIDENCES - B ANK, BROKER; DP-DEMAT ACCOUNT, AND IN THE ABSENCE OF ANY MATERIAL TO PROVE CASH CHANGI NG HANDS IN THE TRANSACTION, THE ADDITION MADE BY THE AO UNDER SECTION 68 OF THE ACT , BY TREATING THE SALE CONSIDERATION AS UNEXPLAINED, SHAM, NON-GENUINE IS BASELESS. THE ADDITION UNDER SECTION 68 OF THE ACT MADE MERELY OF THE BASIS OF SUSPICION, PRESUMPTIONS AND PROBABILITY OF PREPONDERANCE WITHOUT ANY DIRECT EVIDENCE TO PROVE THE TRANSACTIO NS AS NON-GENUINE OR SHAM OR DEMONSTRATING APPELLANT'S INVOLVEMENT IN ANY KIND O F MANIPULATION IS ILLEGAL AND CANNOT SUSTAIN. THE FINDINGS OF INVESTIGATION & MODUS OPER ANDI IN OTHER CASES NARRATED BY THE AO AND ALSO CIT(A) NOWHERE PROVE ANY CONNECTION WIT H THE ASSESSEE NOR THE ASSESSEE'S INVOLVEMENT OR CONNECTION OR COLLUSION WITH THE BRO KERS, EXIT PROVIDERS, ACCOMMODATION PROVIDERS OR COMPANIES OR DIRECTIONS ETC. FOR MAKIN G THE ADDITION, IT IS NECESSARY TO BRING ON RECORD EVIDENCE TO ESTABLISH INGENUITY IN TRANSACTIONS OR ANY CONNECTION OF THE ASSESSEE OR ITS TRANSACTION WITH ANY OF THE ALLEGED PARTIES. THE ASSESSEE HAS DISCHARGED HIS ONUS BY ESTABLISHING THE IDENTITY OF THE PAYER, SOURCE OF THE CREDIT AND GENUINENESS OF THE TRANSACTIONS. 30. WE NOTED THAT THE LEARNED CIT DEPARTMENTAL REPR ESENTATIVE ALSO RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT, NAGPUR B ENCH IN THE CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT (2018) 89 TAXMANN.COM 1 96 (BOM), WHEREIN THE DECISION ON THE IMPUGNED ISSUE WAS DISCUSSED. HONBLE HIGH COUR T HAS CONSIDERED THE FACTS OF SANJAY BIMAICHAND JAIN SUPRA FROM WHERE WE FIND THA T (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AO'S LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSO N WHO PURCHASED THE SHARES SOLD BY THE ASSESSEE (II) MOREOVER, AT THE TIME OF ACQUI SITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE IN CASH (II I) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY THE SAME (IV) THE AUTH ORIZED SIGNATORY AT BOTH THE COMPANIES WERE ALSO THE SAME PERSON (V) THE PURCHAS E OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSESSEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 67 INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASE D ON THESE CRUCIAL FACTS, THE HON'BLE BOMBAY HIGH COURT RENDERED THE DECISION IN FAVOUR O F THE REVENUE. NONE OF THESE FACTORS WERE PRESENT IN THE FACTS OF THE ASSESSEE B EFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABLE. 31. NOW WE WILL DISCUSS THE MODUS OPERANDI, PREPOND ERANCE OF PROBABILITY AND HUMAN BEHAVIOR. WE NOTED THAT THE AO AS WELL AS CIT(A) HA VE REJECTED ALL EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO 'MODUS OPERANDI' OF PERSON S FOR EARNING LONG TERM CAPITAL GAINS WHICH IS EXEMPT FROM INCOME TAX UNDER SECTION 10(38 ) OF THE ACT. ALL THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BO ARD TO ALL INCLUDING THE ASSESSEE. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVERTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED BY THE AO FROM T HIRD PARTIES IS CONFRONTED TO ASSESSEE. NO OPPORTUNITY OF CROSS-EXAMINATION OF PE RSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IT PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A GENERAL REPORT FROM THE INVESTIGATION WI NG. 32. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHE R IN SUCH CASES, THE LEGAL EVIDENCE PRODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATIONS BASED ON STATEMENTS, PROBABILITIES, HU MAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTC G AND STCG, THAT HAVE SURFACED DURING INVESTIGATIONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETHER THE CLAIM IS GENUINE OR NOT. AN ALLEGED SCA M MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARRY ALLEGING SO, THAT THIS ASSESSEE IN QUESTION WAS PART OF THIS SCAM. THE CHAIN OF EVE NTS AND THE LIVE LINK OF THE ASSESSEE'S ACTION GIVING HIS INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLIES THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN TH E ASSESSEE RECEIVED LTCG, WHICH IS EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BA NKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS HAS TO BE PROVED WITH E VIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATION'S OFFICE BY WAY OF STATEMENTS RECORDED ETC. HAS TO ALSO BE BROUGHT ON RECORDING EACH CASE, WHEN SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUN ITY OF CROSS EXAMINATION HAS TO BE PROVIDED TO THE ASSESSEE, IF THE AO RELIES ON ANY S TATEMENTS OR THIRD PARTY AS EVIDENCE TO MAKE AN ADDITION. 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 ASSESSEE CANNOT BE ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 68 REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EV IDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 33. IT IS WELL SETTLED THAT EVIDENCE COLLECTED FROM THIRD PARTIES CANNOT BE USED AGAINST AN ASSESSEE UNLESS THIS EVIDENCE IS PUT BEFORE HIM AND HE IS GIVEN AN OPPORTUNITY TO CONTROVERT THE EVIDENCE. IN THIS CASE, THE AO RELIE S ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPO RT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSIONS OF THE ASSESSEE THAT HE IS JUST AN INVESTOR AND AS HE RECEIVED SOME TIPS AND HE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK A ND HAD GAINED IN THE PROCESS AND THAT HE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROV ERTED BY THE REVENUE WITH EVIDENCE WHEN A PERSON CLAIMS THAT HE HAS DONE THESE TRANSAC TIONS IN A BONA FIDE MANNER, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SUGGESTS, THERE ARE MANY BENEFIC IARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON PRINCIPLES OF LEGAL IMPORT LAID D OWN BY THE COURTS OF LAW. 34. IN OUR VIEW, JUST THE MODUS OPERANDI, GENERALIS ATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTIN G THE CLAIM OF THE ASSESSEE. UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVER T THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAY MOH AMED SAIT V. CIT [1959] 37 ITR 151 (SC) HAD HELD THAT NO ADDITION CAN BE MADE ON THE B ASIS OF SURMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT V. DAULAT RAM RAWAT MULL [1973] 87 ITR 349 (SC) (SC) THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PRO VING 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 UNERRINGLY A ND REASONABLY RAISING INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW & BROS. V. CIT (1959) [1959] 37 ITR 271 (SC) HELD THAT SUSPICION H OWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. IN THIS CONNECTION WE REFER TO THE GEN ERAL VIEW ON THE TOPIC OF CONVEYANCE OF IMMOVABLE PROPERTIES. THE RATES/SALE PRICES ARE AT VARIANCE WITH THE CIRCLE RATES FIXED BY THE REGISTRATION AUTHORITIES OF THE GOVERNMENT I N MOST CASES AND THE GENERAL IMPRESSION IS THAT CASH WOULD HAVE CHANGED HANDS. T HE COURTS HAVE LAID DOWN THAT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 69 JUDICIAL NOTICE OF SUCH NOTORIOUS FACTS CANNOT BE T AKEN BASED ON GENERALISATION. COURTS OF LAW ARE BOUND TO GO BY EVIDENCE. 35. BUT IN THE PRESENT CASE, WE NOTED THAT THE ASSE SSING OFFICER HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESP ECT TO BOGUS CAPITAL GAINS TRANSACTIONS. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIG ATED AND /OR FOUND TO BE A PAN OF ANY ARRANGEMENT FOR THE PURPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASS ESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDINGS HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT, THE INVESTIGATION WING IS A SEPARATE DEPAR TMENT 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 DU TY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER W HERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECT ING PROPER EVIDENCES THE MATTER WOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AGAINST THE A SSESSEE. IN ABSENCE OF ANY FINDINGS SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGAT ION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF TH E PERSONS INVESTIGATED. IN THIS CASE, THE AO AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE AO THAT SOME PERSONS MAY HAVE MISUSED THE SCRIP: FOR THE PURPOSE OF COLLUSIVE TRANSACTION S. THE AO WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTIONS AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. HOWEVER, THE AO HAS NOT BROUGHT ON REC ORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHE RWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 36. THE HON'BLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COU LD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HON'BLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGH ED WITH THE ITO MIGHT BE OBSERVED THAT THE NOTORIETY FOR SMUGGLING FOOD GRAI NS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY 'S' AND THE NOT ORIETY ACHIEVED BY 'D' AS A ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 70 GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE ME RELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WIT H THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN IND ULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEH ALF. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE Y EAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE ITO AND TH E FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NO T LEGITIMATELY LEAD TO THE INFERENCE THAT THE PROFIT IN A SINGLE TRANSACTION O R IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENO MINATION NOTES,THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE ITO. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONS IDERATION IN THE HEAD OFFICE AND IN BRANCHES THE ITO INDULGED IN SPECULATION WHE N 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 ITO INDI CATED THE PROBABLE SOURCE OR SOURCES FROM WHICH THE APPELLANT COULD HAVE EARNED A LARGE AMOUNT IN THE SUM OF RS. 2,91,000 BUT THE CONCLUSION WHICH HE ARRIVED AT IN REGARD TO THE APPELLANT HAVING EARNED THIS LARGE AMOUNT DURING THE YEAR AND WHICH ACCORDING TO HIM REPRESENTED THE SECRETED PROFITS OF THE APPELLANT I N ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HA D NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE PROCEEDINGS. IF THE CONCLUSION OF THE ITO WAS THUS EITHER PERVERSE OR V ITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNA L WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PR OBABILITIES AND WITHOUT ANY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS I T WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINA TION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. 37. THE OBSERVATIONS OF THE HON'BLE APEX COURT ARE EQUALLY APPLICABLE TO THE CASE OF THE ASSESSEE. THE AO AND CIT(A) BOTH, HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTIONS OF THE ASSESSEE WERE COLLUSIV E TRANSACTIONS COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT, I N THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENC ES OR MATERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WI NGS OF THE INCOME TAX DEPARTMENT AND HENCE UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE, THE FINDINGS / ALLEGATIONS OF TH E AO AND CIT(A) ARE BASELESS, WITHOUT ANY EVIDENCE, CONTRARY TO THE FACTS AND CIRCUMSTANC ES OF THE CASE AND PROVISIONS OF THE ACT. HENCE, WE DELETE THE ADDITION MADE BY THE AO B Y SETTING ASIDE THE ORDER OF LD. CIT(A) BASED UPON SUCH FINDINGS. THIS COMMON ISSUE AS REGARDS TO ADDITION UNDER SECTION 68 OF SURPLUS ARISING OUT OF SALE OF SHARES OF LISTED COMPANIES AND CONSEQUENT ADDITION UNDER SECTION 69C ON THE PRESUMPTION THAT COMMISSION AT THE RATE OF 3% WAS ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 71 PAID IS HEREBY DELETED. ACCORDINGLY, THIS COMMON AN D INTERCONNECTED ISSUE OF THE FOUR ASSESSEES APPEALS IS ALLOWED. 38. SIMILARLY, COMMON AND INTER-CONNECTED ISSUES IN THE CASES OF VIJAY RATAN BALKRISHAN MITTAL IN ITA NOS. 3427- 3429/MUM/2019 FOR AYS 2012 -13 TO 2014-15, MAHENDRA B MITTAL (HUF) IN ITA NO. 3426/MUM/2019 FOR AY 2013-1 4, POOJA MAHENDRA MITTAL IN ITA NOS. 3311-3314/MUM/2019 FOR AYS 2012-13 TO 2015-16 & MAHENDRA B MITTAL IN ITA NOS. 3264 & 3265/MUM/2019, 3247/MUM/2019 AY 2012-13 , 2014-15 & 2013-14 RESPECTIVELY, HENCE, TAKING CONSISTENT VIEW IN THES E APPEALS ALSO, WE ALLOW THE SAME. 32. IN THE AFORESAID DECISION, IT HAS BEEN HELD THA T WHERE SEBI WHO MONITORS AND REGULATES THE STOCK EXCHANGES & STOCK MARKET IN ITS INVESTIGATION DID NOT REVEAL ANY PRICE OR VOLUME MANIPULATION BY THE ASSESSEE AND TH ESE TRANSACTIONS ARE IN THE NORMAL COURSE THROUGH PROPER & LEGAL CHANNELS, THEN THE AL LEGATIONS OF THE IT DEPARTMENT FALL FLAT AND DENIAL OF DEDUCTION U/S 10(38) OF THE ACT IS ARBITRARY AND ADDITION OF SALE PROCEEDS OF SHARES OF PAL U/S 68 IS AGAINST THE PRO VISIONS OF ACT. IN THE CASE IN HAND, THE AO MADE A REFERENCE TO THE SEBI INTERIM ORDER D ATED 17.04.2015 WHEREIN THE COMPANY, ITS PROMOTERS/DIRECTORS AND SHAREHOLDERS I NCLUDING THE ASSESSEE WERE RESTRICTED FROM ACCESSING THE SECURITIES MARKET, HO WEVER, WE FIND THAT IN THE SUBSEQUENT ORDER DATED 5.10.2017, THE SEBI HAS NOTE D THAT THERE ARE NO ADVERSE FINDINGS AGAINST 104 ENTITIES INCLUDING THE ASSESSE E WITH RESPECT TO THEIR ROLE IN THE PRICE MANIPULATION/PRIMA FACIE VIOLATION FOR WHICH INTERI M ORDER WAS PASSED AND THEREFORE, DIRECTIONS ISSUED AGAINST THEM WERE REVOKED. THEREF ORE, THE SEBI ORDER SHALL HAVE NO BEARING IN JUDGING THE GENUINENESS OF THE TRANSACTI ON UNDERTAKEN BY THE ASSESSEE OR FOR THAT MATTER, THE PRICE AND REALIZATION ON SALE OF S HARES SO UNDERTAKEN BY THE ASSESSEE THROUGH THE STOCK EXCHANGE. FURTHER, IT HAS BEEN H ELD IN THE AFORESAID CASE THAT THE FINDINGS OF INVESTIGATION & MODUS OPERANDI IN OTHER CASES NARRATED BY THE AO AND ALSO CIT(A) NOWHERE PROVE ANY CONNECTION WITH THE ASSESS EE NOR THE ASSESSEE'S INVOLVEMENT OR CONNECTION OR COLLUSION WITH THE BROKERS, EXIT P ROVIDERS, ACCOMMODATION PROVIDERS OR COMPANIES OR DIRECTIONS ETC AND FOR MAKING THE ADDI TION, IT IS NECESSARY TO BRING ON RECORD EVIDENCE TO ESTABLISH INGENUITY IN TRANSACTI ONS OR ANY CONNECTION OF THE ASSESSEE OR ITS TRANSACTION WITH ANY OF THE ALLEGED PARTIES. IN THE INSTANT CASE AS WELL, AS WE HAVE DISCUSSED EARLIER, THERE IS NO FINDING WHICH PROVES ASSESSEES CONNECTION, INVOLVEMENT ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 72 OR COLLUSION WITH SO CALLED ACCOMMODATION ENTRY PRO VIDERS. FURTHER IN THE AFORESAID CASE, THE ISSUE AS TO WHETHER THE LEGAL EVIDENCE PR ODUCED BY THE ASSESSEE HAS TO GUIDE OUR DECISION IN THE MATTER OR THE GENERAL OBSERVATI ONS BASED ON STATEMENTS, 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 CONCLUSION AS TO W HETHER THE CLAIM IS GENUINE OR NOT HAS BEEN DISCUSSED AT LENGTH. AND REFERRING TO LEGAL P ROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT THAT THE BURDEN OF PROVING A TRANSACT ION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCE HELD THAT THE MODUS OPERANDI, GENERALISATION, PREPONDERANCE OF HUMAN PROBABILITIES CANNOT BE THE ONLY BASIS FOR REJECTING THE CLAIM OF THE ASSESSEE UNLESS SPECIFIC EVIDENCE IS BROUGHT ON RECORD TO CONTROVERT THE VALIDITY AND CORRECTNESS OF THE DOCUMENTARY EVIDENCES PRODUCED, THE SAME CANNOT BE REJECTED. WE ARE IN AGREEMENT WITH THE SAID VIEW AND IN THE INST ANT CASE, WE FIND THAT EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM OF PURCHASE AND SALE OF SHARES ON THE STOCK EXCHANGE HAVE NOT BEEN REFUTED BY ANY ADVERSE FINDINGS OR MATERIAL WHICH COULD DEMONSTRATE INVOLVEMENT OF THE ASSESSEE OR COLLUSIO N WITH SO CALLED ACCOMMODATION ENTRY PROVIDERS TO OBTAIN BOGUS LTCG AS SO ALLEGED BY THE AUTHORITIES BELOW. 33. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIR ETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHARGED THE NECESSARY ONUS CAST ON HIM IN TERMS OF CLAIM OF EXE MPTION OF LONG TERM CAPITAL GAINS U/S 10(38) OF THE ACT BY ESTABLISHING THE GEN UINENESS OF TRANSACTION OF PURCHASE AND SALE OF SHARES AND SATISFYING THE REQU ISITE CONDITIONS SPECIFIED THEREIN AND THE GAINS SO ARISING ON SALE OF SHARES THEREFORE HAS BEEN RIGHTLY CLAIMED AS EXEMPT U/S 10(38) OF THE ACT. ACCORDING LY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) WHO HAS RIGHTLY ALLOW ED THE SAID CLAIM OF THE ASSESSEE AND THE SAME IS HEREBY AFFIRMED. IN THE R ESULT, THE GROUNDS OF APPEAL SO TAKEN BY THE REVENUE ARE DISMISSED. 34. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA NO. 780 & 781-2019 DCIT, JAIPUR VS. PRAKASH CHAN D SHARMA & SMT. KALAWATI SHARMA, JAIPUR 73 ITA NO. 781/JP/19 35. BOTH THE PARTIES FAIRLY SUBMITTED THAT THE FACT S AND CIRCUMSTANCES OF THE CASE ARE EXACTLY IDENTICAL AS IN ITA NO. 780/JP/19 AND SIMILAR CONTENTIONS RAISED THEREIN MAY BE CONSIDERED. THEREFORE, CONSIDERING THE ADMITTED POSITION THAT THERE ARE NO CHANGES IN THE FACTS AND CIRCUMSTANCES , OUR FINDINGS AND DIRECTIONS CONTAINED IN ITA NO. 780/JP/19 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL MATTER AND THE APPEAL OF THE REVENUE IS DISMISSED. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENU E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/11/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CENTRAL CIRCLE-02, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- SH. PRAKASH CHAND SHARMA, JAIPUR, - SMT KALAWATI SHARMA, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 780 & 781/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
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