Assistant Commissioner Of Income Tax, Central Circle-4, Jaipur V. Shri Gyandeep Khemka, Jaipur

ITA 842/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3713 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Unexplained expenditure; Depreciation; Salary income; Share purchase agreement; Earning of tax free income; Question of law; Fair market value; Corroborative evidences; Accommodation entries; Sham transactions; Reassessment proceedings; Rule 8D
• Section: 143(3); 142(1); 133A; 14A; 147; 131; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE -A, 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 VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 842/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15 ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4, JAIPUR CUKE VS. SHRI GYANDEEP KHEMKA, 30, KHEMKA HOUSE, KISHAN NAGAR, SHYAM NAGAR EXTN. JANPATH, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGBPK0640F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 28/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 842/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2014-15 SHRI GYANDEEP KHEMKA, 30, KHEMKA HOUSE, KISHAN NAGAR, SHYAM NAGAR EXTN. JANPATH, JAIPUR CUKE VS. DCIT, CENTRAL CIRCLE-4, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGBPK0640F IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI BHUPENDRA SHAH (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 11/12/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 08/03/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOTA DATED 15/03/2018 AND THE CR OSS OBJECTION FILED ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 2 BY THE ASSESSEE FOR A.Y 2014-15 WHEREIN RESPECTIVE GROUNDS OF APPEAL ARE AS UNDER:- GROUNDS OF REVENUES APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS O N ACCOUNT OF BOGUS BUSINESS LOSS FROM SHARE TRADING ACTIVITIES OF RS. 1,67,29,332/- AND ADDITION OF RS. 3,34,587/- ON ACCOUNT OF ESTIMATED UNEXPLAINED COMMISSION EXPENSES FOR ARRANGING THE ACCOMMODATION ENTRY OF BOGUS BUSINESS LOSS. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITIONS B Y OBSERVING THAT THE AO MADE ADDITION WITHOUT ESTABLISHING PROPER DEFAULT T HROUGH CORROBORATIVE EVIDENCES AND JUST BY SEEING THE NAMES FORWARDED BY THE INVESTIGATION WING AND LATER SEBI, COMPLETELY IGNORING THE FACT T HAT THE INVESTIGATION WING AND LATER SEBI, HAS LABORIOUSLY ESTABLISHED TH AT THE SCRIPT M/S NIKKI GLOBAL FINANCE LTD WAS USED AS AN INSTRUMENT OF GEN ERATING BOGUS LOSSES ONLY. GROUNDS OF ASSESSEES CROSS OBJECTION: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ERRED IN DISALLOWING RS. 3,28,345 /- U/S 14A READ WITH RULE 8D EVEN THOUGH A) PROPER SATISFACTION FOR DISALLOWANCE WAS NOT RECORD ED. B) BY OVERLOOKING THE FACT THAT NO EXPENDITURE WAS INC URRED FOR EARNING SUCH INCOME. ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 3 C) BY OVERLOOKING THE FACT THAT DIVIDEND RECEIVED WAS ONLY RS. 23,314/-. D) BY WRONGLY INCLUDING PPF, INSURANCE AND OTHER SHARE S OF PVT. LTD CO. ON WHICH NO DIVIDEND WAS EARNED IN THE CALCULAT ION OF AVERAGE INVESTMENT U/R 8D(3). 2. IN RESPECT OF REVENUES APPEAL, BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 15,30,380/- UNDER THE HEADS SALARY, H OUSE PROPERTY, BUSINESS & PROFESSION, CAPITAL GAINS AND OTHER SOUR CES. THE ASSESSMENT WAS COMPLETED U/S 143(3) BY THE DCIT, CIRCLE-2, JAI PUR WHEREIN HE DISALLOWED BUSINESS LOSS ON SALE OF SCRIP AMOUNTING TO RS. 1,67,29,332/- AND DISALLOWANCE U/S 14A R/W RULE 8D(3) AMOUNTING T O RS. 3,28,345/-. FURTHER, THE ASSESSING OFFICER BROUGHT TO TAX AN AM OUNT OF RS. 3,34,587/- AS UNDISCLOSED EXPENDITURE FOR ACQUIRING ACCOMMODATION ENTRY OF BUSINESS LOSS. BEING AGGRIEVED, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE DISALLOWANCE OF BUSINESS LOSS OF RS. 1,67,29,332/- AS WELL AS ADDIT ION ON ACCOUNT OF UNEXPLAINED EXPENDITURE OF RS. 3,34,587/-. HOWEVER, THE DISALLOWANCE MADE BY THE AO U/S 14A R/W RULE 8D(3) AMOUNTING TO RS. 3,28,345/- WAS UPHELD. NOW, THE REVENUE IS IN APPEAL AGAINST T HE FINDINGS OF THE LD.CIT(A) IN ALLOWING THE BUSINESS LOSS ON SALE OF SCRIP AS WELL AS ADDITION MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE AND THE ASSESSEE IN HIS CROSS OBJECTION HAS RAISED A SOLITARY GROUND CHALLENGING THE SUSTENANCE OF DISALLOWANCE MADE U/S 14A OF THE ACT. 3. DURING THE COURSE OF HEARING, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS CLAIMED BUSINESS LOSS ON SALE OF SCRIP NAMELY M/S NIKKI GLOBAL FINANCE LIMITED AMOUNTING TO RS. 1,67,29,332 /-. IT WAS SUBMITTED BY THE LD DR THAT THE ASSESSEE PURCHASED THE SHARE AT A PRICE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 4 OF RS. 911/- AND THE ASSESSEE RETAINED THE SHARES W ITH HIMSELF FOR ALMOST 3-4 MONTHS ONLY AND THEREAFTER, WHEN THE PRI CE REACHED A LEVEL OF RS. 142.5/-, I.E. A HUMONGOUS FALL OF OVER 84.35 % OVER A VERY SHORT PERIOD OF JUST 3-4 MONTHS, THE ASSESSEE SOLD THE SH ARES AND BOOKED THE BUSINESS LOSS AND HAS SET IT OFF AGAINST OTHER INCO ME. IT WAS SUBMITTED THAT THE SHARE PRICE MOVEMENT AND THE LOSS BOOKED B Y THE ASSESSEE WAS BEYOND HUMAN PROBABILITIES AND THEREFORE THE AS SESSING OFFICER CARRIED OUT FURTHER, INVESTIGATION IN THE MATTER AN D BASED ON SUCH INVESTIGATION, THE AO HAS RIGHTLY REACHED A CONCLUS ION THAT THE REASONS OF THE ASTRONOMICAL PRICE RISE & HUGE FALL IN PRICE OF THE SUBJECT SCRIP WERE LOCATED SOMEWHERE ELSE AND CERTAINLY COULD NOT BE RELATED TO THE FUNDAMENTAL OR ANY HYPOTHETICAL PROMISING FUTURE OR UNRELIABLE FUTURE OF THE COMPANY BY ANY STRETCH OF IMAGINATION, AND PRIC E RISE AND FALL BOTH HAVE BEEN MANIPULATED BY THE SO CALLED ENTITIES WHO ARE ENGAGED IN PROVIDING BOGUS LOSSES. 4. IT WAS SUBMITTED BY THE LD. DR THAT IT IS A CASE OF PENNY STOCK COMPANY WHEREIN THE ASSESSEE HAS INVESTED AND THERE AFTER HAS BOOKED A BUSINESS LOSS IN ORDER TO SET IT OFF AGAINST HIS OTHER INCOME. IT WAS SUBMITTED THAT THE SHARES IN M/S NIKKI GLOBAL FINAN CE LTD HAS BEEN IDENTIFIED AS PENNY STOCK BY THE INVESTIGATION WING OF THE DEPARTMENT. THE PRICE OF THESE SHARES ARE NOT BASED ON FUNDAMEN TALS/BUSINESS RESULTS OF THE COMPANIES BUT THE SAME ARE FLUCTUATE D BY INSIDERS TRADING FROM ZERO VALUE TO VERY HIGH PRICE AND VICE VERSA W ITHOUT ANY REASON OR BASIS TO ACCOMMODATE OR GENERATE BOGUS CAPITAL GAIN OR LOSS AND IT WAS ACCORDINGLY SUBMITTED THAT GIVEN THE SURROUNDING CI RCUMSTANCES, HUMAN CONDUCT AND PREPONDERANCE OF PROBABILITIES ALONG WI TH RELATED DOCUMENTARY EVIDENCES, THE ASSESSEE IS INVOLVED IN TAKING BOGUS BUSINESS LOSS ENTRY AND WHICH HAS BEEN RIGHTLY DISA LLOWED BY THE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 5 ASSESSING OFFICER. FURTHER, HE RELIED HEAVILY ON TH E FINDINGS OF THE ASSESSING OFFICER. 5. PER CONTRA, THE LD. AR SUBMITTED THAT THE ASSESS EE PURCHASED 22,200/- SHARES OF M/S NIKKI GLOBAL FINANCE LIMITED , WHICH ARE LISTED ON A RECOGNIZED STOCK EXCHANGE THROUGH A RECOGNIZED BS E BROKER IN THE MONTH OF JANUARY 2014. FURTHER, GIVEN THE HUGE FAL L IN THE PRICE OF THE SHARES, THE ASSESSEE DECIDED TO SELL HIS HOLDING IN THE MONTH OF MARCH 2014 AND AS A RESULT, HE HAS INCURRED A LOSS OF RS. 1,67,29,332/-. IT WAS SUBMITTED THAT THE SALE WAS ALSO DONE THROUGH THE R ECOGNIZED BSE BROKER ON THE STOCK EXCHANGE AND STT WAS ALSO PAID. IT WAS SUBMITTED THAT ALL THE TRANSACTIONS OF PURCHASE AND SALE OF S HARES HAVE BEEN DONE THROUGH THE BANKING CHANNELS AND THE SUPPORTING DOC UMENTATION IN TERMS OF CONTRACT NOTES OF THE BROKER, DEMAT ACCOUN T STATEMENT, STT PAYMENT DETAILS AND COPY OF THE BANK STATEMENT HAV E BEEN DULY SUBMITTED BEFORE THE ASSESSING OFFICER AND THE SAME ARE NOT DISPUTED BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT SIN CE THE TRANSACTIONS HAVE BEEN EXECUTED ON A RECOGNISED STOCK EXCHANGE, THE ASSESSEE HAS ABSOLUTELY NO CONTROL ON THE PRICE MOVEMENT OF THE STOCK. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS NOT AWARE OF ANY INV ESTIGATION AND CONSEQUENT FINDING OF SEBI WHEREIN SCRIP OF M/S NIK KI GLOBAL FINANCE LTD., HAS BEEN SUBJECT MATTER OF INVESTIGATION AND IN PARTICULAR, OF ANY PRICE MANIPULATION IN THE SAID SCRIP AS SO ALLEGED BY THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT THE AO HAS REFERRED TO THE STATEMENT OF SHRI SANJAY VORA AND SHRI DEEPAK PATWA RI HOWEVER NO SUCH STATEMENT WERE CONFRONTED TO THE ASSESSEE AND NO CROSS EXAMINATION OF THESE PERSONS WERE GIVEN TO THE ASSE SSEE. IT WAS FURTHER SUBMITTED THAT EVEN IN THESE STATEMENTS, TH ERE IS NO MENTION OF ANY SCRIP BY THE NAME OF M/S NIKKI GLOBAL FINANCE LIMITED. IT WAS ACCORDINGLY SUBMITTED THAT WHERE THE PURCHASE AND S ALE OF THE SHARES ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 6 HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER AND BASED ON THE MOVEMENT IN THE PRICE OF THE SHARES WHICH ARE LISTE D ON A RECOGNIZED STOCK EXCHANGE AND OVER WHICH THE ASSESSEE HAS NO C ONTROL, THE ASSESSEE DECIDES TO SELL HIS SHARE HOLDING AND IN T HE PROCESS, INCURS BUSINESS LOSS, THE ASSESSEE CANNOT BE PENALIZED AGA IN BY DISALLOWANCE OF THE SAID BUSINESS LOSS FOR TAX PURPOSES WHICH HE HAS ACTUALLY INCURRED. IT WAS FURTHER SUBMITTED THAT THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 115BBE WHICH DOES NOT APPLY T O BUSINESS LOSS AS IN THE INSTANT CASE. FURTHER, THE LD. AR SUPPORTED THE FINDINGS OF THE LD. CIT(A) WHO HAS RIGHTLY APPRECIATED THE FACTUAL POSI TION OF THE ASSESSEE. FURTHER, THE LD. AR RELIED ON THE CO-ORDINATE BENCH DECISION IN CASE OF KIRAN KOTHARI HUF, KOLKATA VS. ITO, WARD 35(3), KOL KATA DATED 15 TH NOVEMBER, 2017 AND DECISION OF THE CO-ORDINATE BENC H IN CASE OF PRAMOD JAIN AND OTHERS (ITA NO. 368-372/JP/2017) WHICH HAS BEEN SUBSEQUENTLY APPROVED BY THE HONBLE RAJASTHAN HIGH COURT. FURTHER, THE LD. AR RELIED ON THE DECISION OF HONBLE RAJAST HAN HIGH COURT IN CASE OF CIT VS. SMT. POOJA AGARWAL (DB APPEAL NO. 385/JP/2011 DATED 11/09/2017). 6. IN ORDER TO APPRECIATE THE RIVAL CONTENTIONS RAI SED BY BOTH THE PARTIES, WE REFER TO THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE FINDINGS OF LD. CIT(A). 7. THE ASSESSING OFFICER BASED ON THE INVESTIGATION CARRIED OUT BY THE INVESTIGATION WING OF THE DEPARTMENT STATED THA T M/S NIKKI GLOBAL FINANCE LTD. (SCRIP CODE-531272) IS A PENNY STOCK L ISTED COMPANY. IT HAS VERY SMALL CAPITAL BASE BUT ITS MARKET CAPITALI ZATION IS MULTIFOLD TO ITS CAPITAL BASE. THE ASSESSING OFFICER FURTHER OBSERVE D THAT ON EXAMINATION OF THE PURCHASE AND SALE TRANSACTIONS M ADE BY THE ASSESSEE DURING THE YEAR, IT WAS FOUND THAT THE ASS ESSEE HAS PURCHASED ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 7 22,200 SHARES OF M/S NIKKI GLOBAL FINANCE LIMITED F ROM OPEN MARKET ON DIFFERENT DATES AT PRICES OF RS. 911/- (APPROX.). T HE ASSESSEE RETAINED THE SHARES WITH HIMSELF FOR ALMOST 3-4 MONTHS ONLY AND DURING THE TIME WHEN THE SHARES WERE KEPT BY THE ASSESSEE, IT WAS F OUND THAT THE PRICE OF THE SCRIP KEPT FALLING THROUGHOUT THE PERIOD AND ITS PRICES REACHED AT LEVEL OF RS. 142.5/-, I.E. A HUMONGOUS FALL OF OVER 84.35% OVER A VERY SHORT PERIOD OF JUST 3-4 MONTHS. THE ASSESSEE THERE AFTER SOLD HIS SHARES FOR CONSIDERATION OF RS. 31,56,698 AND CLAIMED A LO SS OF RS. 1,67,29,332/-. 8. THE ASSESSING OFFICER OBSERVED THAT THESE FACTS DEMANDED A DEEPER STUDY OF THE PRICE MOVEMENTS AND SHARE MARKE T BEHAVIOR OF THE ENTITIES INVOLVED IN TRADE OF THE SCRIPS AS THE SHA RE PRICE MOVEMENTS AND THE PROFIT/LOSS EARNED BY THE BENEFICIARIES WER E BEYOND HUMAN PROBABILITIES. THUS A DEEPER STUDY WAS NEEDED TO AS CERTAIN WHETHER THE TRANSACTIONS WERE GENUINE INVESTMENT TRANSACTIONS O R SHAM AND COLOURABLE DEVICES ONLY TO COVERT THE UNACCOUNTED C ASH INTO TAX EXEMPT INCOME. IN SHORT, IT WAS TO BE ASCERTAINED WHETHER THE APPARENT WAS REAL. THEREAFTER, THE ASSESSING OFFICER NOTED THAT M/S NIKKI GLOBAL FINANCE LTD., WAS INCORPORATED IN 1986 AT DELHI AND EXAMINED THE PROFIT/LOSS ACCOUNT, THE BALANCE SHEET, KEY FINANCI AL RATIOS OF THE COMPANY AS WELL AS CAPITAL STRUCTURE AND THE PRICE MOVEMENT OF THE SCRIP. THE ASSESSING OFFICER OBSERVED THAT THE COMP ANYS SHARE PRICES WERE ON THE HIGHER SIDE DURING THE PERIOD FROM NOVE MBER, 2013 TO JANUARY, 2014, WHEREAS ON EXAMINATION, IT IS DETECT ED THAT NO SUCH FUNDAMENTALS HAD EXISTED WHICH CAN ACT AS A CATALYS T TO BOOST THE PRICES OF SHARES IN SUCH A HIGH TIME, THE REVENUE FROM OPE RATIONS WAS MINIMAL AS SO THE EXPENDITURE ON CONSUMPTION OF RAW MATERIA LS, PURCHASE OF TRADED GOODS, STOCKS, POWER & FUEL, EMPLOYEE COST. EVEN THE COMPANY DID NOT CLAIM ANY DEPRECIATION. SIMILARLY, NO SUCH CIRCUMSTANCES EXIST ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 8 WHICH JUSTIFY HUGE FALL IN SHARE PRICES AS THERE WA S NO HUGE LOSS OR REJECTION OF ANY BIG CORPORATE ORDER DURING THE PER IOD OF 3-4 MONTHS WHEREIN STEEP FALL IN PRICE OF SHARES OCCURRED. IT ONLY SUBSTANTIATES THAT THE COMPANY WAS MERELY A PAPER COMPANY AND THE RISE AS WELL AS FALL IN SHARE PRICES WERE DUE TO HUMAN INTERVENTION ONLY. I T FURTHER CORROBORATES THAT PRICE RISE AND PRICE FALL BOTH HA VE BEEN MANIPULATED BY THE SO CALLED ENTITIES IN PROVIDING BOGUS LOSESS . THE ASSESSING OFFICER FURTHER STATED THAT A CLOSE LOOK AT ALL SUCH DATA S UGGESTS THAT THERE IS A COMMON PATTERN IN THE TRADING OF THE SCRIP WHEREIN THE SCRIP REPRESENT A BELL SHAPE IN ITS TRADING WHEREIN PRICES START FR OM A LOW RANGE, THEN IT RISES RAPIDLY, STAYS THERE FOR A WHILE AND THEN IT DECREASES MORE RAPIDLY. 9. THE ASSESSING OFFICER FURTHER REFERRED TO THE SU RVEY OPERATION IN THE CASE OF M/S ANAND RATHI SHARES AND STOCK BROKER S LTD., KOLKATA, WHEREIN SHRI SANJAY VORA S/O LATE DHIRAJ LAI VORA A CCEPTED THAT HE ALLOWED SHRI DEEPAK PATWARI, SHRI PARVESH BERIA AND OTHERS TO TRADE WITHOUT ANY VERIFICATION DUE TO OLD RELATIONSHIP. T HE ASSESSING OFFICER FURTHER REFERRED TO THE STATEMENT OF SHRI DEEPAK PA TWARI RECORDED U/S 131 WHEREIN HE STATED THAT SCRIP OF DIFFERENT COMPA NIES WHICH ARE LISTED ON BSE HAVE BEEN PURCHASED THROUGH BROKERS ON THE I NSTRUCTIONS OF FINANCIERS WHO MANAGES THE FUNDS FOR THE PURPOSES O F PROVIDING CAPITAL GAINS TO BENEFICIARIES BY INCREASING THE PRICE AND HIS JAMAKHARCHE COMPANIES HAVE BEEN USED TO PROVIDE SUCH CAPITAL GA INS ENTRY. THE ASSESSING OFFICER THEREAFTER HELD THAT THE STAKE HO LDER INVOLVED IN THESE TRANSACTIONS WERE EITHER BOGUS OR DEVOID OF ANY FIN ANCIAL CAPABILITIES TO MAKE SUCH INVESTMENT AND WERE CONSCIOUS PARTIES IN THIS ENTIRE SCHEME AND PROVIDED EXIT TO THE BENEFICIARIES OF THE SCHEM E I.E. THE PERSON WHO WERE ALLOTTED SHARES. AS SUCH, THE WHOLE TRANSACTIO N OF PURCHASE & SALE OF SHARES OF M/S NIKKI GLOBAL FINANCE LTD BY THE AS SESSEE IS SHAM TRANSACTION CAMOUFLAGED WITH AN INTENTION TO EVADE TAXES. IT WAS HELD ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 9 THAT THE SHARES PRICE MOVEMENT AND SALE PURCHASE TR ANSACTIONS WERE NOT GENUINE, WERE RESULT OF METICULOUSLY PLANNED CI RCULAR TRADING AND THE ENTITIES INVOLVED WERE PART OF THIS EXERCISE IN AN EFFORT TO CREATE DOCUMENTARY EVIDENCES FOR A PRE-PLANNED SCHEME FOR CONVERTING UNACCOUNTED MONEY INTO TAX EXEMPT INCOME. THE AO FU RTHER HELD THAT THE HUGE BUSINESS LOSS EARNED BY THE ASSESSEE WITHI N A VERY SHORT PERIOD OF TIME BY INVESTING IN PENNY STOCK I.E. M/S NIKKI GLOBAL FINANCE LTD WHOSE FUNDAMENTALS, HAD NO SUPPORT FOR THE PREM IUM IT COMMANDED, WAS NEITHER THE RESULT OF A COINCIDENCE NOR OF A GENUINE INVESTMENT ACTIVITY BUT WERE CREATED THROUGH WELL P LANNED AND EXECUTED SCHEME IN WHICH THE COMPANY, THE BROKERS AND THE BU YERS AND SELLERS OF THE SCRIP WORKED IN TANDEM TO ACHIEVE THE PREDET ERMINED OBJECTIVES. 10. THE ASSESSING OFFICER FURTHER REFERRED TO THE M ODUS OPERANDI WHICH HAS BEEN DEDUCED BY VARIOUS INVESTIGATION WIN GS OF THE INCOME TAX DEPARTMENT, SEBI AND OTHER GOVERNMENT AGENCIES AND REFERRED TO FINDINGS OF SEBI IN THE CASE OF M/S FIRST FINANCIAL SERVICES LTD. (WTM/RKA/ISD/162/2014 DATED 19/12/2014), M/S MORYO INDUSTRIES LTD., (WTM/RKA/140/ISD/2014 DATED 04/12/2014), M/S PINE ANIMATION LTD., (WTM/RKA/ISD/36/2015 DATED 08/05/2015), M/S R EDFORD GLOBAL LTD (WTM/RKA/ISD/143/2015 DATED 09/11/2015), M/S SU NRISE ASIAN (WTN/RKA/ISD/30/2015 DATED 17/04/2015) ETC. WHICH H AS SPELT OUT THIS MODUS OPERANDI AND SUCCESSFULLY ESTABLISHED TH AT THAT ENTITIES INVOLVED IN SUCH SCHEMES ARE MANIPULATING THE MARKE TS TO GENERATE TAX EXEMPT LTCG. THE AO FURTHER HELD IN PARA 3.8.2 OF O RDER THAT SEBI HAS STARTED INQUIRIES IN THIS PARTICULAR SCRIP I.E. M/S NIKKI GLOBAL FINANCE LTD., (SCRIP CODE-531272) AND SEBI HAS ALSO PROVIDED INFO RMATION PERTAINING TO THE SCRIP TO THE INCOME TAX DEPARTMENT. IT WAS T HEREAFTER HELD BY THE AO THAT THE COMPANY, M/S NIKKI GLOBAL FINANCE LTD., AND VARIOUS ENTITIES INVOLVED IN CIRCULAR TRADING AND SALE AND PURCHASE OF THE SCRIP HAVE ALL ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 10 BEEN PART OF THIS EDIFICE TO CONVERT UNACCOUNTED MO NEY INTO ACCOUNTED ONE BY FOLLOWING THE ABOVE MODUS OPERANDI. 11. THEREAFTER ON 23.08.2016 A SHOW CAUSE WAS ISSUE D TO THE ASSESSEE AS TO WHY THE WHOLE SCHEME SHOULD NOT BE T REATED AS AN ATTEMPT TO CAMOUFLAGE TO REDUCE TAX LIABILITY & IMP UGNED BUSINESS LOSS AMOUNTING TO RS. 1,67,29,232/- IN M/S NIKKI GLOBAL FINANCE LTD. WAS PROPOSED TO BE ADDED ON ACCOUNT OF UNDISCLOSED INCO ME. THE ASSESSEE IN HIS RESPONSE DATED 24.10.2016 STATED THAT HE PUR CHASES THE SHARES M/S NIKKI GLOBAL FINANCE LTD. IN NORMAL COURSE OF I NVESTMENT AND PAYMENTS WERE MADE BY CROSSED ACCOUNT PAYEE CHEQUE/ RTGS AND THE PURCHASE OF SHARES WERE DONE THROUGH A RECOGNIZED B SE SHARE BROKER AND IT WAS A GENUINE TRANSACTION. IT WAS FURTHER S UBMITTED THAT THE SALE WAS ALSO MADE ONLINE AFTER PAYING STT AT THE PREVAL ENT MARKET RATES, THEREFORE SALE TRANSACTIONS WERE ALSO GENUINE. THE CONTENTIONS SO ADVANCED BY THE ASSESSEE WERE EXAMINED BUT NOT FOUN D ACCEPTABLE TO THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF TH E ASSESSING OFFICER ARE CONTAINED AT PARA 3.12 AND 3.13 OF ASSESSMENT ORDER WHICH ARE REPRODUCED AS UNDER:- 3.12. FURTHER, THE CONTENTION OF THE ASSESSEE WAS ALSO EXAMINED UNDER FOLLOWING POINTS:- (A) AS A NATURE, EVERY INVESTOR WANTS TO BUY THE SHARE AT LOWER PRICES & SALE THE SAME AT HIGHER PRICES TO MAXIMIZE PROFIT S. HOWEVER, IF AFTER PURCHASES, THE PRICES REDUCES I.E. TRANSACTION GIVE S LOSS, THEN THE INVESTOR DOES NOT SELL THE SHARES AND WAIT UNTIL IT BECOME A PROFIT GIVING SHARE. NOTWITHSTANDING THAT THE PRICES OF THE SCRIP I.E. M/S NIKKI GLOBAL FINANCE LTD HAVE COME DOWN SIGNIFICANTLY AFTER ASSE SSSEES PURCHASES, THE ASSESSEE SOLD AS SOON AS SIGNIFICANT LOSSES HAV E OCCURRED AND DID ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 11 NOT WAIT FOR PRICES TO INCREASE, ONLY INDICATE WHOL E PRACTICE IS A SHAM PRACTICE. (B) THE PARTICULAR SCRIP HAS BEEN HELD DURING THE P ERIOD OF DECEMBER TO FEBRUARY/MARCH OF AY AS REQUIRED UNDER PREVAILING INSTRUCTIONS OF THE ACT AND AFTER SUCH PERIOD AND W ITH THE CONNIVANCE OF VARIOUS ENTITIES WHEN THE PRICES OF SHARES HAVE DECREASED TO OPTIMAL LEVEL OR SO (THEREBY GIVING BUSINESS LOSS DURING TH E YEAR), THE ASSESSEE MADE EXIT. (C) THE ASSESSEE PURCHASED SHARES OF THE PENNY STOC K COMPANY WHO DO NOT HAVE ANY FUNDAMENTALS WHATSOEVER. THE PR ICES OF THE SCRIP I.E. M/S NIKKI GLOBAL FINANCE LIMITED WERE RIGGED T HEREBY GIVING LTCG TO CERTAIN BENEFICIARIES AND THEREAFTER PRICES WERE AGAIN RIGGED THEREBY GIVING BUSINESS LOSS TO CERTAIN BENEFICIARIES (ASSE SSEE IS ONE OF THEM). (D) OF LATE, THE DEPARTMENT STARTED INCOME DECLARAT ION SCHEME- 2016. IN THE SAID SCHEME, MANY INVESTORS WHO HAVE T AKEN BOGUS ENTRIES FOR THE SAKE OF LONG TERM CAPITAL GAIN/SHOR T TERM CAPITAL LOSS IN THE VERY SCRIP I.E. M/S NIKKI GLOBAL FINANCE LIMITE D, WHILE ACCEPTING THE MODUS OPERANDI, HAS SURRENDERED ON ACCOUNT OF BOGUS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL LOSS. IT FURTHER SU BSTANTIATE THAT WHOLE SCHEME WAS FOR SOME PARTICULAR INVESTORS STARTED BY SOME PARTICULAR BROKERS IN CONNIVANCE WITH OPERATORS/ENTITIES. (E) THE SHARES IN WHICH THE ASSESSEE HAS CLAIMED TO HAVE MADE A DEAL, ARE IDENTIFIED AS PENNY SHARES BY THE INVESTI GATION WING OF THE DEPARTMENT BECAUSE RATES OF THESE SHARES ARE NOT BA SED ON BUSINESS RESULTS OF THE COMPANIES BUT SAME ARE FLUCTUATED BY INSIDER'S TRADING FROM ZERO VALUE (NEGLIGIBLE PRICE) TO VERY HIGH PRI CE AND VICE VERSA WITHOUT ANY REASON OR BASIS TO ACCOMMODATE OR GENER ATE BOGUS CAPITAL GAIN OR LOSS. ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 12 (F) FURTHERMORE, THE ASSESSEE WAS SERVED UPON NOTIC E DATED 14.10.2016 U/S 142(1) OF THE ACT FOR PROVIDING CERT AIN INFORMATION. THE LD. A/R REPLIED VIDE LETTER 24.10.2016 THAT INVESTM ENT IN THE SCRIP I.E. M/S NIKKI GLOBAL FINANCE LIMITED HAS BEEN MADE AS R EGULAR INVESTOR. HOWEVER, IT IS NOT SO IN VIEW OF THE AFORESAID DISC USSION. THE ASSESSEE ON ONE SIDE IS INVESTING IN BLUE CHIP SHARES AS WEL L AS GOOD SHARES HAVING ROBUST FUNDAMENTALS WHEREAS ON THE OTHER SID E, IT IS INVESTING IN SUCH A WEAK SHARE DOES NOT MAKE SENSE. IT ALSO SHOW S THAT ASSESSEE IS HAVING INPUTS ABOUT PRICE RIGGING IN SHARES OF M /S NIKKI GLOBAL FINANCE LTD. IT ALSO CONFIRMS THAT WHOLE TRANSACTIO N AS A SHAM TRANSACTION AND ASSESSEE'S INVOLVEMENT IN TAKING BO GUS BUSINESS LOSS ENTRIES FROM THE ALLEGED ENTITIES. 3.13. ACCORDING TO OXFORD ENGLISH DICTIONARY S HAM MEANS 'A THING THAT IS NOT WHAT IT IS PURPORTED TO BE. IN THIS INS TANT CASE EVEN THOUGH PRIMA FACIE IT APPEARS THAT THE ASSESSEE RECEIVED T HE AFOREMENTIONED PROCEEDS OUT OF SALE OF SHARES OF THE SCRIP, IN REA LITY IT WAS HIS OWN CASH WHICH HE RECEIVED BACK THROUGH SOME CLANDESTIN E DEALS. THE DETAILED ANALYSIS AND THE MODUS OPERANDI DISCUSSED ABOVE FIRMLY ESTABLISH THE EVENTS IN THE INSTANT CASE. NOW THE Q UESTION IS WHETHER TO PROVE SOME TRANSACTION AS SHAM, DOES THE ASSESSI NG AUTHORITY NEEDS TO EXPOSE ALL THE FOUR CORNERS OF THE SCHEME AND ES TABLISH ITS FINDINGS THROUGH FOOLPROOF , DOCUMENTARY EVIDENCES ONLY AT PAR AS REQUIRED IN A CRIMINAL PROCEEDING AND FURTHER, WHETHER THE SURROU NDING CIRCUMSTANCES, HUMAN CONDUCT AND PREPONDERANCE OF P ROBABILITIES ALONG WITH RELATED DOCUMENTARY EVIDENCES ARE NOT SU FFICIENT TO ESTABLISH A TRANSACTION AS SUCH. ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 13 12. THE ASSESSING OFFICER THEREAFTER REFERRED TO TH E DECISION OF CO- ORDINATE BENCH IN CASE OF HERSH WIN CHADHA VS. DCIT (ITA NO. 3088 TO 3098 & 3107/DEL/2005) WHEREIN IT WAS HELD THAT THE ADMISSIBILITY OF DOCUMENTS, EVIDENCE OR MATERIAL DIFFERS GREATLY IN INCOME TAX PROCEEDINGS AND CRIMINAL PROCEEDINGS RESPECTIVELY. IN THE CRIMINAL PROCEEDINGS, THE CHARGE IS TO BE PROVED BY THE STAT E AGAINST THE ACCUSED, ESTABLISHED IT BEYOND DOUBT, WHEREAS AS PE R THE SETTLED PROPOSITION OF LAW, THE INCOME TAX LIABILITY IS ASC ERTAINED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, THE SURROUNDING C IRCUMSTANCES, HUMAN CONDUCT AND PREPONDERANCE OF PROBABILITIES. THE AO FURTHER REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN CASE OF SU MATI DAYAL VS. CIT (214 ITR 801) AND DURGA PRASAD MORE VS. CIT AND HEL D THAT THE APPARENT MUST BE CONSIDERED REAL UNTILL IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS NOT REAL AN D THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSI DERED BY THE APPLYING THE TEST OF HUMAN PROBABILITIES. THE ASSESSING OFFI CER HELD THAT IN THE CASE OF THE ASSESSEE, PRICES OF BOTH THE SCRIPS HAV E REDUCED TO ALMOST 75-85% WITHIN A PERIOD OF ALMOST 3-4 MONTHS (JUST B EFORE ENDING OF PARTICULAR AY) ENABLING THE ASSESSING TO SET OFF IT S CAPITAL GAIN FROM IMPUGNED DERIVED SHORT TERM CAPITAL LOSS DEFIES ANY LOGIC OR HUMAN PROBABILITIES AND THEREFORE CANNOT BE CONSIDERED AS GENUINE. THE AO ACCORDINGLY HELD THAT THE AMOUNT OF RS. 1,67,29,332 /- INTRODUCED BY THE ASSESSEE, OUT OF THESE PURPORTED SHARE SALE RECEIPT S DURING THE F.Y 2013-14 IN BOOKS OF ACCOUNTS AS BUSINESS LOSS AS SH AM TRANSACTION WHICH ARE TAXABLE @ 30% AS PROVIDED U/S 115BBE. ACC ORDINGLY, THE IMPUGNED LOSS OF RS. 1,67,29,332/- WAS DISALLOWED. 13. FURTHER, THE ASSESSING OFFICER HELD THAT IT IS ALSO UNEARTHED DURING THE COURSE OF INVESTIGATION BY THE WING THAT THE BE NEFICIARIES HAVE PAID ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 14 1% TO 2% COMMISSION ON ACQUIRING ACCOMMODATION ENTR IES FOR BOGUS BUSINESS LOSS ON THE SCRIP. THEREFORE, 2% COMMISSIO N PAID I.E. RS. 3,34,587/- (2% OF RS. 1,67,29,332/-) WAS TREATED AS UNDISCLOSED EXPENDITURE FOR ACQUIRING ACCOMMODATION ENTRY OF LO SS AND WHICH WAS BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. 14. WE NOW REFER TO THE FINDINGS OF THE LD. CIT(A). FIRSTLY, HE REFERRED TO THE FINDINGS OF THE ASSESSING OFFICER AND STATED THAT THE AO HAS PROCEEDED ON A PRESUMPTION THAT BASED ON SEARCHES B Y INVESTIGATION WING CARRIED OUT IN CASE OF CERTAIN ENTITIES, IT WA S FOUND THAT THEY WERE ENGAGED IN PROVIDING BOGUS ENTRIES OF LOSS/GAINS FO R TRADING IN SHARES OF PENNY STOCK COMPANIES. IN THE PRESENT CASE, THE AO HAS LISTED THAT THE ASSESSEE TRANSACTED IN SHARES OF M/S NIKKI GLOBAL F INANCE LTD., BEING A PENNY STOCK LISTED COMPANY. THE LD CIT(A) STATED TH AT THE MAIN OBJECTION OF THE AO WAS THAT THE ASSESSEE PURCHASED 22200 SHARES OF M/S NIKKI GLOBAL FINANCE LTD., FROM OPEN MARKET AT A VERY HIGH PRICE OF RS. 911/- AND WITHIN 3 TO 4 MONTHS, THE SHARE PRICE FELL TO RS. 142/- PER SHARE WHICH COMES TO A FALL OF 84.3% IN A VERY SHOR T SPAN. THE AO ALSO DOUBTED THE FINANCIALS OF THE COMPANY (WHICH IS IN EXISTENCE FOR AROUND MORE THAN 25 YEARS) AND NOTED THAT THE CASE FELL BE YOND HUMAN PROBABILITIES. THE LD. CIT(A) FURTHER STATED THAT T HE AO HAS RAISED CERTAIN THEORETICAL OBJECTIONS TO THE TRADES CONDUC TED BY THE ASSESSEE STATING THAT THE ASSESSEE ON THE ONE HAND IS INVEST ING IN BLUE CHIP SHARES & ON THE OTHER HAND IN SUCH WEAK SHARES WHIC H DOES NOT MAKE SENSE AND HENCE HE WAS AWARE OF PRICE RIGGING IN TH IS SHARE, SEVERAL PERSONS (NO SUCH LIST MADE AVAILABLE) HAVE DECLARED /SURRENDERED LOSS/GAIN EARNED IN THE SCRIP NIKKI GLOBAL FINANCE LTD., UNDER THE INCOME DECLARATION SCHEME, 2016, THUS PROVING THAT THE SCRIP WAS NOT GENUINE, THERE WAS A CONNIVANCE OF VARIOUS ENTITIES IN THIS MANIPULATION AND SINCE THE ASSESSEE SOLD THE SHARE WITHOUT WAITI NG FOR A PRICE TO ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 15 INCREASE, INDICATES THAT IT WAS A SHAM PRACTICE. TH E LD. CIT(A) FURTHER REFERRING TO THE FINDING OF THE ASSESSING OFFICER W HEREIN THE LATTER CITES THE DEFINITION OF WORD SHAM AND CERTAIN CASE LAWS ON RULES OF EVIDENCE JUSTIFYING STATEMENTS RECORDED ELSEWHERE U/S 133A & 131 BEING ADMISSIBLE AS EVIDENCES BASED ON SURROUNDING CIRCUM STANCES, HUMAN CONDUCT & PREPONDERANCE OF PROBABILITIES. 15. REGARDING STATEMENTS OF SH. SANJAY VORA, THE LD . CIT(A) HELD THAT SAID PERSON WHO HAS CLAIMED TO HAVE ALLOWED PERSONS SH. DEEPAK PATWARI, SH. PRAVESH BERIA & OTHERS TO TRADE WITHOU T ANY VERIFICATION DUE TO OLD RELATIONSHIP IS NOWHERE AN IMPLICATION F OR TAXABILITY IN THE APPELLANTS HANDS. THE LD. CIT(A) FURTHER REFERRED TO THE STATEMENT OF SH. SANJAY VORA WHEREIN HE WAS ASKED A LEADING QUES TION BY THE OFFICER WHO RECORDED HIS STATEMENT REGARDING JAMAKHARCHI CO MPANIES BEING RUN BY SH. DEEPAK PATWARI & SHRI PRITAM & SH. PARVE SH BERIA, BUT HE DENIED ANY KNOWLEDGE OF THE SAME. HE EVEN MENTIONED THAT THEY COLLECTED DECLARATIONS FROM THESE CLIENTS (WHO WERE CLIENTS OF ANAND RATHI SHARES & STOCK BROKERS) THAT THEY WERE NOT DO ING ANY SUSPICIOUS TRADES. HE TALKS ABOUT CLIENT CODE MODIFICATION IN THE PROCESS & THAT IT WAS STOPPED FROM HEAD OFFICE AT MUMBAI. IN FACT, HI S ENTIRE STATEMENT WAS NOT CATEGORICAL REGARDING BOGUS COMPANIES & PEN NY STOCKS MANAGED THROUGH SH. DEEPAK PATWARI & OTHERS, THOUGH HE MENTIONED THAT THEY BARRED TRADING IN THEIR SCRIPS FROM FEBRU ARY, 2015 DUE TO TRADING PATTERN. HE DENIED BEING PART OF ANY BOGUS LTCG SYNDICATE AND MENTIONED THAT THEY HAD EARNED ONLY BROKERAGE INCOM E FROM THESE TRANSACTIONS. REFERRING TO THE STATEMENT OF SH. DEE PAK PATWARI RECORDED U/S 131, THE LD. CIT(A) HELD THAT IN HIS STATEMENT, SH. DEEPAK PATWARI ACCEPTED BEFORE KOLKATA INVESTIGATION WING OF THE D EPARTMENT REGARDING TRADING IN UNQUOTED SHARES AND THAT HE PROVIDED ACC OMMODATION ENTRIES TO DIFFERENT BENEFICIARIES THROUGH SHELL COMPANIES CONTROLLED THROUGH ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 16 DUMMY DIRECTORS. HOWEVER, HE HAS NOWHERE NAMED DEAL ING IN THE SCRIP OF NIKKI GLOBAL FINANCE LTD., FOR THIS PURPOSE. 16. TAKING INTO CONSIDERATION THE FINDINGS OF THE A SSESSING OFFICER AND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS REC ORDED HIS FINDINGS WHICH ARE CONTAINED AT PAGE 65 TO 66 OF HIS ORDER W HICH IS REPRODUCED AS UNDER:- THE SUBMISSIONS MADE AS WELL AS THE CASE LAWS REFE RRED HAVE BEEN EXAMINED AT LENGTH. FROM A PERUSAL OF THE FACTS, THE FOLLOWING POINTS A RE SEEN:- 1) OVER THE PERIOD FROM 1ST OCTOBER 2013 TO 30TH AP RIL 2014, I.E. A PERIOD OF 7 MONTHS, THE TRADES AFFECTED IN THE SC RIP EXCEEDED LAKHS, OUT OF WHICH, THE ASSESSEE'S SCRIPS WERE ONLY 22000 . SECONDLY, SCRIP TRADING AT RS. 140/- PER SHARE ODD CANNOT BE SAID T O BE A 'PENNY' STOCK IN THE REAL VALUE SENSE OF THE TERM. THIRDLY, THE SCRIP STARTED IN OCTOBER 1ST, 2013 AT RS. 865/- PER SHARE AND OVER A PERIOD OF 3 MONTHS I.E. JAN. 2014, IT WAS STILL TRADING AT RS. 890/- ODD PER SHARE. HOW THIS CONTROL WAS MAINTAINED DESPITE SUCH VOLUMI NOUS TRANSACTIONS IS NOT CLEAR IN THE ORDER? EVEN BY PRUDENCE, IT WOULD BE NATURAL FOR ANY INVES TOR/TRADER TO SELL THE SHARES IF THE SCRIP IS 'FALLING' DOWN SO AS TO SALVAGE HIS INVESTMENT ONCE HE FEELS HE NO LONGER CAN WAIT FOR THE SCRIP TO GIVE GOOD RETURNS. THAT IS WHY THE CONCEPT OF GAIN & LOS S IS THERE IN THE ACT. IT CANNOT BE ALWAYS A WIN- WIN SITUATION FOR E VERYONE. THE UNCERTAINTY OF STOCK MARKETS IS A WELL KNOWN PHENOM ENON WORLDWIDE. ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 17 2) THE APPELLANT SUBMITTED ALL THE DETAILS IN RESP ECT OF THE TRANSACTIONS CARRIED OUT IN RESPECT OF THE SCRIP TO THE A.O. INCLUDING DETAILS OF PURCHASE, BANK TRANSACTION RELATED TO TH E PURCHASE & SALE OF THE SCRIP, CONTRACT NOTES OF THE BROKER, STT PAYMEN T DETAILS ETC. THUS DISCHARGING HIS PRIMARY ONUS IN RESPECT OF THE TRAN SACTION. 3) WHILE DISALLOWING THE TRADING LOSS CLAIMED THE A O DID NOT BRING ON RECORD ANY DIRECT EVIDENCE OF THE LOSS BEING BOGUS EXCEPT MENTIONING THAT NIKKI GLOBAL FINANCE WAS A PENNY STOCK COMPANY USED FOR PROVIDING SUCH BOGUS GAINS/LOSSES BY CERTAIN ENTITI ES/PERSON COLLUDING & MANIPULATING THE PRICES OF THE SHARES AT THE EXCHAN GE. 4) ON HIS PART, THE A.O. DID NOT BRING ON RECORD AN Y EVIDENCE OF 'ACCOMMODATION' ENTRY OR CASH AMOUNT EXCHANGING HAN DS IN THE CASE OR THE REASON WHY SUCH 'BOGUS' SHORT TERM LOSS WAS TRA NSACTED. 5) NO DETAILS OF 'EXIT PROVIDERS' WAS MENTIONED WHO PURCHASED SUCH SHARES AT A LOSS AS MENTIONED IN THE `MODUS OPERAND I' IS THERE. 6) NO DETAIL OF SEBI FINDING SPECIFIC TO THE SCRIP IN WHICH THE ASSESSEE TRADED HAS BEEN MENTIONED THE SEBI ORDERS REFERRED IN THE A.O.'S ORDER (PAGE 36) DOES NOT CERTAIN THE NAME OF NIKKI GLOBAL FINANCE LTD. 7) NO EXAMINATION OF BROKER THROUGH WHOM THE SHARE WAS TRADED HAS BEEN RECORDED NOR ANY PAYMENT OF CASH TO HIM FOR AR RANGING THE ALLEGED 'CIRCULAR' TRADING HAS BEEN BROUGHT ON RECORD BY TH E A.O. THE A.O. HAS NOT QUESTIONED THE SOURCE OF THE PURCH ASE RELATED PAYMENT, NOR THE PROCESS OF ONLINE TRANSACTION ON B SE THROUGH THE BROKER. IN FACT IF IT WAS AN ACCOMMODATION ENTRY, H E SHOULD HAVE FIRST CONFRONTED THE BROKER WITH HIS BOOKS OF ACCOUNTS TO TRY & PROVE THAT ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 18 CASH EXCHANGED HANDS THERE OR AT LEAST FIGURE OUT H IS MODUS OPERANDI. THE NEXUS BETWEEN THE BROKER AND THE 'PEN NY STOCK' COMPANY WAS ALSO NOT FIGURED OUT IN THE ASSESSMENT ORDER. THE `UNACCOUNTED MONEY' MENTIONED IN THE MODUS . OPERANDI LISTED BY THE A.O. HAS NOT BEEN ESTABLISHED. HOW THE ASSESSEE EST ABLISHED CONTACT WITH THE ENTRY OPERATOR, (WHO WAS PROBABLY LOCATED IN KOLKATA) IS ALSO NOT CLEAR. HOW DID THE 'CIRCULAR TRADING' HAPPENED IN THIS CASE, WHO WERE THE 'EXIT PROVIDERS' AND WHAT ACTION WAS TAKEN IN THEIR CASE IS ALSO NOT SPELLED OUT. THUS, THE ENTIRE ADDITION APP EARS TO BE BASED ON A THEORY WHICH WAS CONSIDERED AS 'ESTABLISHED' MAY BE IN THE COURSE OF SOME ACTION BY THE INVESTIGATION WING AND HAD WI DELY BEEN CIRCULATED TO THE A.O.'S WHO WITHOUT ESTABLISHING P ROPER DEFAULT THROUGH CORROBORATIVE EVIDENCES, MADE ADDITIONS/DIS ALLOWANCES JUST ON SEEING THE NAMES FORWARDED BY THE INVESTIGATION WING & LATER SEBI. 17. FURTHER, LD. CIT(A) REFERRED TO THE DECISION OF CO-ORDINATE BENCHES IN CASE OF KIRAN KOTHARI HUF, KOLKATA VS. I TO, WARD 35(3), KOLKATA; PRAMOD JAIN AND OTHERS (ITA NO. 368-372/JP /2017) AND THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CAS E OF CIT VS. SMT. POOJA AGARWAL WHEREIN SIMILAR FINDING HAS BEEN GIVE N AND DRAWING SUPPORT FROM THE SAID DECISIONS, THE LD CIT(A) GAVE HIS CONCLUDING FINDING THAT THE CLAIM OF BUSINESS LOSS ADVANCED BY THE ASSESSEE CANNOT BE DENIED MERELY ON THE BASIS OF PRESUMPTION AND SU RMISES IN RESPECT OF PENNY STOCK TRADE BY DISREGARDING THE DIRECT EVI DENCES ON RECORD RELATING TO THE BSE PORTAL BASED ONLINE SALE/PURCHA SE TRANSACTIONS IN SHARES SUPPORTED BY BROKERS CONTRACT NOTES, CONFIR MATION OF RECEIPT OF SALE PROCEEDS THROUGH REGULAR BANKING CHANNELS AND BROKERAGE RELATED PAYMENT ENTRIES IN THE ACCOUNTS. THE AO ON HIS PART HAS NOT BROUGHT ON RECORD ANY DIRECT, COGENT AND CORROBORATIVE MATERIA L OR EVIDENCE AGAINST ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 19 THE ASSESSEE AND BASED HER ADDITION ON PURELY INDIR ECT BASIS OF NEXUS PREVAILING IN SUCH CASES. THE DISALLOWANCE OF LOSS OF RS. 1,67,29,332/- FROM SHARE TRADING ACTIVITIES IS THEREFORE NOT UPHE LD AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. 18. REGARDING ADDITION ON ACCOUNT OF COMMISSION PAI D @ 2% ON THE AFORESAID ACCOMMODATIVE TRANSACTION, THE LD. CIT(A) HELD THAT IT IS CONSEQUENTIAL TO THE MATTER OF BUSINESS LOSS AND WH ICH HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE ADDITI ON MADE BY THE AO ON ACCOUNT OF NOTIONAL COMMISSION PAID OF RS. 3,34, 587/- WAS ACCORDINGLY HELD AS SUSTAINABLE BEING CONSEQUENTIAL TO THE FIRST ISSUE AND WAS ALSO DIRECTED TO BE DELETED. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS PURCHASED SH ARES OF M/S NIKKI GLOBAL FINANCE LTD, A COMPANY LISTED ON A RECOGNISE D STOCK EXCHANGE THROUGH A REGISTERED STOCK BROKER M/S BASAN EQUITY BROKING LTD. AS PER THE COPY OF THE CONTRACT NOTES AVAILABLE ON THE REC ORD, THE ASSESSEE HAS PURCHASED 5,500/- SHARES OF M/S NIKKI GLOBAL FINANC E LTD., ON 20.12.2014 AT A PRICE OF RS. 911 PER SHARE FOR A TO TAL VALUE OF RS. 50,10,100/- AND HAS PAID SECURITY TRANSACTION TAX O F RS. 5,010/-. THEREAFTER, THE ASSESSE HAS PURCHASED ANOTHER LOT O F 5,500 SHARES OF M/S NIKKI GLOBAL FINANCE LTD ON 21.01.2014 AT A PRI CE OF RS. 896/-PER SHARE FOR A TOTAL CONSIDERATION OF RS. 49,28,033/- AND HAS PAID SECURITY TRANSACTION TAX OF RS. 4,982/-. THEREAFTER, THE ASS ESSE HAS PURCHASED ANOTHER LOT OF 5,600 SHARES OF M/S NIKKI GLOBAL FIN ANCE LTD ON 22.01.2014 AT A PRICE OF RS. 889/-PER SHARE FOR A T OTAL CONSIDERATION OF RS. 49,81,640/- AND HAS PAID SECURITY TRANSACTION T AX OF RS. 4,982/-. THE ASSESSEE HAS FURTHER PURCHASED ANOTHER LOT OF 5 ,600/- SHARES OF M/S ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 20 NIKKI GLOBAL FINANCE LTD. ON 24.01.2014 AT A PRICE OF RS. 884/- PER SHARE FOR A TOTAL CONSIDERATION OF RS. 49,66,256/- AND HA S PAID SECURITY TRANSACTION TAX OF RS. 4,966/-. THE PAYMENT FOR THE SAID PURCHASES HAS BEEN MADE THROUGH BANKING CHANNEL AND THE AMOUNTS H AVE BEEN DEBITED IN THE ASSESSEES BANK A/C NO. 005003400044 13 MAINTAINED WITH HDFC BANK. SUBSEQUENTLY, THESE SHARES HAVE BEE N CREDITED IN THE ASSESSEES DMAT ACCOUNT MAINTAINED WITH MAVERICK SH ARE BROKERS LIMITED, DP OF CENTRAL DEPOSITORY SERVICES (I) LTD. , IN TWO LOTS OF 16,600 AND 5,600 SHARES, THEREFORE AS ON 29.01.2014, THE A SSESSEE WAS HOLDING 22,200/- SHARES IN HIS DMAT ACCOUNT. THEREFORE, AS PER THE ASSESSEE PURCHASE TRANSACTIONS ARE CONCERNED, THE SAME ARE D ULY SUPPORTED BY THE CONTRACT NOTES AS WELL AS THE BANK STATEMENT OF THE ASSESSEE AND THE SHARES WERE DEMATERIALIZED AND THE ASSESSEE PRO DUCED HIS DMAT ACCOUNT STATEMENT WHICH CLEARLY REFLECT THE SHARES OF M/S NIKKI GLOBAL FINANCE LTD. TOTALING TO 22,200/- IN HIS ACCOUNT. W E ALSO FIND THAT THESE ARE NOT ISOLATED TRANSACTIONS OF PURCHASE AND SALE OF SHARES OF NIKKI GLOBAL FINANCE LTD BY THE ASSESSEE BUT THERE ARE A NUMBER OF OTHER TRANSACTIONS WHEREIN THE ASSESSEE HAS PURCHASED AND SOLD THE SHARES OF DIFFERENT COMPANIES THROUGH IPO AS WELL AS OTHER TR ANSACTIONS SUCH AS JUST DIAL, POWER GRID CORPORATION OF INDIA LTD. THE ASSESSEE HAS SUBSEQUENTLY SOLD HIS ENTIRE SHAREHOLDING IN NIKKI GLOBAL FINANCE LIMITED THROUGH THE STOCK EXCHANGE. IN THIS REGARD, WE REFE R TO THE CONTRACT NOTES ISSUED BY BASAN EQUITY BROKING LTD WHEREIN ON 22.03.2014, THE ASSESSEE HAS SOLD 17,232 NUMBER OF HIS SHARES IN M/ S NIKKI GLOBAL FINANCE LTD. AT A PRICE OF RS. 142.50/- FOR A TOTAL SALE CONSIDERATION OF RS. 24,55,216/- AND ON WHICH THE ASSESSEE HAS PAID SECURITY TRANSACTION TAX OF RS. 2,455/-. FURTHER ON 24.03.2014, THE ASSE SSEE HAS SOLD 4,968 SHARES IN M/S NIKKI GLOBAL FINANCE LTD. AT A PRICE OF RS. 141.20/- FOR A TOTAL SALE CONSIDERATION OF RS. 701,481/- AND ON WH ICH THE ASSESSEE HAS ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 21 PAID SECURITY TRANSACTION TAX OF RS. 701. CORRESPON DINGLY, ALL 22,200 SHARES HAVE BEEN DEBITED IN THE DEMAT ACCOUNT OF TH E ASSESSEE AND AS ON 31.03.2014, THE ASSESSEE WAS HAVING NIL HOLDING IN M/S NIKKI GLOBAL FINANCE LTD. THE TOTAL SALE CONSIDERATION OF RS. 3 1,50,247/- HAS BEEN RECEIVED THROUGH CHEQUE AND CREDITED IN THE ASSESSE ES BANK ACCOUNT MAINTAINED WITH HDFC BANK ON 26 TH MARCH, 2014. IT IS NOT IN DISPUTE THAT M/S NIKKI GLOBAL FINANCE LTD. WAS LISTED ON TH E STOCK EXCHANGE. THE AO HAS NOT DISPUTED THE PREVAILING MARKET PRICE AND THE SHARES AT THE TIME OF PURCHASE AND AT THE TIME OF SALE. THOUGH TH ERE IS A MANIFOLD DECREASE IN THE MARKET PRICE OF THE SHARES AT THE T IME OF SALE IN COMPARISON TO THE TIME OF PURCHASE, HOWEVER, THE SA ID PRICE WAS NOT DISPUTED AS THE PREVAILING MARKET PRICE AT THE RELE VANT POINT IN TIME. SINCE THIS COMPANY WAS LISTED ON THE STOCK EXCHANGE , THERE WAS NO HURDLE AT DETERMINING THE PREVAILING MARKET OF THE PRICE AT THE TIME OF PURCHASE AS WELL AS SALE. SINCE THE MARKET PRICE AN D THE PRICE AT WHICH THE ASSESSEE PURCHASED THE SHARES AND SUBSEQUENTLY SOLD ARE NOT IN DISPUTE THEN MERELY BECAUSE THERE IS A HUGE LOSS IN CURRED BY THE ASSESSEE ON THE SALE OF HIS SHARE HOLDING, THE SAME CANNOT BE A BASIS FOR HOLDING THE TRANSACTION AS A SHAM TRANSACTION. THOUGH THE DECREASE IN THE MARKET PRICE OF THIS SUBJECT SCRIP IS MANIFO LD, THE SAME CAN BE A REASON TO CONDUCT THE ENQUIRY TO VERIFY THE GENUINE NESS OF THE CLAIM BUT THE SAME CANNOT BE A BASIS OF HOLDING THE TRANSACTI ON AS BOGUS. THEREFORE IN ABSENCE OF ANY MATERIAL OR FACT TO SHO W THAT THE ASSESSEE HAS INTRODUCED HIS OWN UNACCOUNTED MONEY IN THE SHA RES OF M/S NIKKI GLOBAL FINANCE LTD. AND IN THE PROCESS HAS INCURRED A BUSINESS LOSS, THE MERE SUSPICIOUS IS NOT ENOUGH TO DENY THE CLAIM OF THE ASSESSEE. THE DECISION OF THE AO HOLDING THE TRANSACTION AS SHAM AND DENYING THE CLAIM OF BUSINESS LOSS IS PURELY BASED ON SUSPICION WITHOUT ANY MATERIAL EVIDENCE TO CONTROVERT OR DISAPPROVE THE EVIDENCE P RODUCED BY THE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 22 ASSESSEE. THOUGH THERE IS A SUBSTANTIAL FALL IN THE SHARE PRICE BY AS MUCH AS 84.3% IN A VERY SHORT SPAN OF TIME AND THE SUSPICION OF THE ASSESSING OFFICER MAY BE WELL FOUNDED, HOWEVER, THE FACT OF THE MATTER IS THAT THERE IS NO SPECIFIC FINDING BY THE SEBI TO HOLD THAT THE PRICE OF SCRIP HAS BEEN RIGGED OR MANIPULATED. IN ABSENCE OF THE SAID FINDING BY THE SAID AUTHORITY WHICH IS THE APPROPRIATE AUTHORI TY AND THE REGULATOR FOR MONITORING THE TRANSACTIONS ON THE STOCK EXCHAN GE, THE SUSPICION OF THE AO HOWEVER STRONG CANNOT BE A BASIS FOR DENYING THE CLAIM OF BUSINESS LOSS IN THE HANDS OF THE ASSESSEE IN ABSEN CE OF ANY EVIDENCE OR WRONG DOING ON PART OF THE ASSESSEE. IN FACT TH E ASSESSING OFFICER IN PARA 3.8.2 OF HIS ORDER HAS STATED THAT SEBI HAS ST ARTED ENQUIRY IN THIS PARTICULAR SCRIP M/S NIKKI GLOBAL FINANCE LTD. THIS IN FACT CORROBORATES THE FACT THAT IT WAS PURELY A SUSPICION IN THE MIND OF THE AO AND A MERE INITIATION OF THE ENQUIRY PROCEEDINGS AND IN ABSENC E OF ANY SPECIFIC FINDING BY SEBI, THE VERY BASIS OF DISALLOWING THE CLAIM OF BUSINESS LOSS CANNOT BE SUSTAINED. FURTHER, THE ASSESSING OFFICER HAS REFERRED TO THE GENERAL MODUS OPERANDI AND THE SEARCHES CONDUCTED B Y THE INVESTIGATION WING OF THE DEPARTMENT IN OTHER CASES RELATING TO ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GA INS AND LOSSES THROUGH TRADING IN PENNY STOCK AND HAS ALSO REFERRE D TO THE STATEMENT OF SH. SANJAY VORA OF M/S ANAND RATHI SHARES & STOC K BROKERS AND SH. DEEPAK PATWARI. WE HOWEVER FIND THAT THE ASSESSEE H AS CARRIED OUT HIS TRANSACTIONS THROUGH M/S BASAN ENQUITY BROKING LTD. , AND NOT THROUGH M/S ANAND RATHI SHARES & STOCK BROKERS AND FURTHER IN THESE STATEMENTS SO REFERRED BY THE AO, WE DO NOT FIND AN Y IOTA OF EVIDENCE OR EVEN MENTION OF THE SCRIP OF M/S NIKKI GLOBAL FI NANCE LTD. THEREFORE, GENERAL INFORMATION ABOUT THE MODUS OPERANDI OF OBT AINING ACCOMMODATION ENTRY IN THE FORM OF BUSINESS LOSS WO ULD BE OF NO USE TO THE REVENUE UNLESS AND UNTIL THERE IS SOME SPECIFIC INFORMATION AND ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 23 MATERIAL QUA THE SUBJECT SCRIP AND THE ASSESSEE. THEREFORE, IN LIGHT OF ABOVE DISCUSSION, WE DONOT SEE ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) WHEREIN HE HAS HELD THAT THE CLAIM OF BUSINE SS LOSS CANNOT BE DENIED TO THE ASSESSEE MERELY ON PRESUMPTION AND SU RMISES BY DISREGARDING THE DIRECT EVIDENCE ON RECORD RELATING TO BSE LISTED COMPANY AND ONLINE SALE& PURCHASE TRANSACTIONS DULY SUPPORTED BY BROKERS CONTRACT NOTES, RECEIPT OF SALE PROCEEDS IN THE ASSESSESSS BANK ACCOUNT AND PAYMENT OF BROKERAGE, STT BY THE ASSESS EE. 20. THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CA SE OF PRAMOD JAIN (SUPRA) HAS DEALT WITH AN IDENTICAL ISSUE AND IN PARA 6 & 7 HAS HELD AS UNDER : '6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE PURCHASES 800 EQUI TY SHARES M/S GRAVITY BARTER LTD. FOR A CONSIDERATION OF RS. 4 LACS THE ASSESSEE HAS PRODUCED THE PURCHASE BILL OF THE SHAR ES PURCHASE FROM M/S WINALL VINIMAY PVT. LTD. WHICH SHOWS THAT THE ASSESSEE PURCHASE 800 EQUITY SHARES HAVING FACE VALUE OF RS. 10/- EACH M/S GRAVITY BARTER PVT. LTD. IN ALLOTS OF 400 EACH FOR A CONSIDERATION OF RS. 2 LACS EACH TOTAL AMOUNT TO RS . 4 LACS @ RS. 500 PER SHARES. THE PURCHASE PRICE OF RS. 500 PER S HARE ITSELF SHOWS THAT IT WAS NOT A TRANSACTION OF PURCHASE OF PENNY STOCK. THESE SHARES WERE DULY REFLECTED IN THE BALANCE SHE ET AS 31.03.2011. THE PAYMENT OF THE PURCHASE CONSIDERATI ON WAS MADE BY THE ASSESSEE VIDE CHEQUE ON 17.05.2011 WHIC H IS EVIDENT FROM THE BANK ACCOUNT OF THE ASSESSEE AT PA GE 40 OF THE PAPER BOOK. IN THE MEAN TIME THE SAID M/S GRAVITY B ARTER PVT. LTD. CHANGED ITS STATUS FROM PRIVATE LIMITED TO A P UBLIC LIMITED AND FRESH CERTIFICATE WAS ISSUED BY THE REGISTRAR OF CO MPANY ON 05.02.2011 WHICH IS PLACED AT PAGE 43 OF THE PAPER BOOK. ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 24 THEREFORE, THERE IS NO REASON TO DISBELIEF THE FACT OF FRESH CERTIFICATE ISSUED BY THE REGISTRAR OF COMPANIES ON 05.02.2011 AND HENCE, THE DATE MENTIONED IN THE ORDER OF THE H ON'BLE KOLKATA HIGH COURT AS 18.04.2011 APPEARS TO BE TYPO GRAPHICAL MISTAKE. EVEN OTHERWISE THESE TWO DATES DO NOT HAVE ANY EFFECT ON THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE OF EQUITY SHARES BY THE ASSESSEE OF M/S GRAVITY BARTER PVT. L TD. THE ASSESSEE THOUGH PRODUCED AL1 THE RELEVANT RECORDS A ND EVIDENCES RIGHT FROM THE PURCHASE BILLS, CERTIFICATE ISSUED B Y THE REGISTRAR ABOUT THE CHANGE OF NAME, THE COMMUNICATION BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES AND THEREAFTE R, THE AMALGAMATION OF M/S GRAVITY BARTER LTD. WITH M/S OA SIS CINE COMMUNICATION LTD. WHICH WAS DULY APPROVED BY THE H ON'BLE HIGH COURT VIDE ORDER DATED 28.8.2011. THE ASSESSEE IN THE MEAN TIME GOT THE PHYSICAL SHARE CERTIFICATE DEMATERIALI ZED INTO DEMAT ACCOUNT ON 16.02.2012. THERE IS NO REASON TO DOUBT THE ALLOTMENT OF THE SHARES TO THE ASSESSEE AFTER AMALGAMATION TO OK PLACE BETWEEN M/S GRAVITY BARTER LTD. AND M/S OASIS CINE COMMUNICATION LTD. AND SUBSEQUENT TO AMALGAMATION T HE ASSESSEE WAS ALLOTTED SHARES OF M/S OASIS CINE COMM UNICATION LTD. ON 04.02.2012. HENCE, THE ALLOTMENT OF 35,200 EQUITY SHARES OF M/S OASIS CINE COMMUNICATION LTD. CANNOT BE DOUB TED OR DISPUTED AS THESE SHARES WERE ISSUED POST AMALGAMAT ION AND BY A LISTED COMPANY. IT IS ALSO NOT IN DISPUTE THAT TH ESE SHARES OF M/S OASIS CINE COMMUNICATION LTD. WERE ISSUED IN EXCHAN GE OF THE SHARES HELD BY THE ASSESSEE OF M/S GRAVITY BARTER L TD. THEREFORE, ONCE THE SHARES ISSUED BY M/S OASIS CINE COMMUNICAT ION LTD. CANNOT BE DOUBTED THEN THE HOLDING OF THE SHARES OF THE M/S GRAVITY BARTER LTD. BY THE ASSESSEE CORRESPONDINGLY CANNOT BE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 25 DOUBTED BECAUSE OF THE REASONS THAT THE SHARES OF M /S OASIS CINE COMMUNICATION LTD. COULD BE ALLOTTED ONLY IN EXCHAN GE OF SHARES OF M/S GRAVITY BARTER LTD. THE HOLDING THE SHARES O F M/S GRAVITY BARTER LTD. AND THE ALLOTMENT OF SHARES M/S OASIS C INE COMMUNICATION LTD. ARE DIRECTLY INTERCONNECTED. IN THE ABSENCE OF HOLDING OF SHARES M/S GRAVITY BARTER LTD. THE SHARE S OF THE M/S OASIS CINE COMMUNICATION LTD. COULD NOT BE ISSUED O R ALLOTTED TO THE ASSESSEE. THEREFORE, HOLDING OF THE SHARES BY T HE ASSESSEE AT LEAST AT TIME OF AMALGAMATION TOOK PLACE AND SHARES OF THE M/S OASIS CINE COMMUNICATION LTD. ON 04.02.2012 CANNOT BE DOUBTED. MOREOVER, THESE SHARES WERE DEMATERIALIZED BY THE ASSESSEE IN THE DEMAT ACCOUNT, THEREFORE, ON THE DA TE OF ALLOTMENT OF SHARE OF M/S OASIS CINE COMMUNICATION LTD THE ASSESSEE WAS HOLDING THESE SHARES AND PRIOR TO THAT THE ASSESSEE WAS HOLDING THE SHARES OF M/S GRAVITY BARTER LTD. O N EXCHANGE OF THE SAME THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. WERE ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER HAS D OUBTED THE GENUINENESS OF THE TRANSACTIONS HOWEVER, ONCE THE H OLDING OF SHARES OF THE ASSESSEE AT THE TIME OF THE SAME WERE ISSUED BY M/S OASIS CINE COMMUNICATION LTD. IS NOT IN DISPUTE THEN THE HOLDING OF SHARES OF M/S GRAVITY BARTER LTD. ALSO C ANNOT BE DISPUTE BECAUSE OF THE FACT THAT WITHOUT HOLDING OF THE SAME THE SHARES OF M/S OASIS CINE COMMUNICATION LTD. COULD N OT BE ISSUED TO THE ASSESSEE. ONCE, THE SHARES WERE HELD BY THE ASSESSEE THEN, THE QUESTION OF GENUINENESS OF THE TRANSACTIO N DOES NOT ARISE HOWEVER, THE PURCHASE CONSIDERATION CAN BE DO UBTED BY THE AO IF THE SHARES WERE CLAIMED TO HAVE BEEN PURCHASE D AGAINST CONSIDERATION PAID IN CASH WHICH IS NOT IN CASE OF THE ASSESSEE. THE ASSESSEE HAS PAID PURCHASE CONSIDERATION THROUG H CHEQUE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 26 AND THEREFORE, EVEN IF THE SAID CONSIDERATION IS FO UND TO BE VERY LESS IN COMPARISON TO THE SALE PRICE AT THE TIME OF SALE OF SHARES IN THE ABSENCE OF ANY MATERIAL OR OTHER FACTS DETEC TED OR BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS BROUGHT B ACK HIS OWN UNACCOUNTED MONEY IN THE SHAPE OF LONG TERM CAPITAL GAIN AND HAS USED THE SAME AS A DEVICE TO AVOID TAX, THE PUR CHASE CONSIDERATION PAID BY THE ASSESSEE CANNOT BE DOUBTE D IN THE ABSENCE OF ANY CORROBORATING EVIDENCE. THE ASSESSIN G OFFICER HAS NOT DISPUTED THAT THE FAIR MARKET VALUE OF THE SHAR ES OF M/S GRAVITY BARTER LTD. WAS MORE THAN THE PURCHASE PRIC E CLAIMED BY THE ASSESSEE. IT MAY BE A CASE THAT ENSURING MERGER/AMALGAMATION OF THE SAID COMPANY WITH M/S OA SIS CINE COMMUNICATION LTD. THE ASSESSEE MIGHT HAVE ANTICIPA NT THE EXCEPTIONAL APPRECIATION IN THE SHARE PRICE DUE TO EXTRAORDINARY EVENT OF MERGER/ AMALGAMATION. HOWEVER, THE SAME CA NNOT BE A REASON FOR DOUBTING GENUINENESS OF THE TRANSACTION IF THE MOTIVE OF PURCHASE OF THE SHARE IS TO EARN AN EXTRAORDINAR Y GAIN BECAUSE OF SOME INTERNAL INFORMATION AVAILABLE TO THE ASSES SEE. 7. IN CASE OF EQUITY SHARES M/S PARIDHI PROPERTIES LTD. THE ASSESSEE PURCHASE 50,000 EQUITY SHARE ON 26.03.2011 BY PAYING SHARE APPLICATION MONEY OF RS. 5 LACS WHICH IS DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE AS PAID ON 28.03.2 011. THEREFORE, THE PAYMENT OF SHARE APPLICATION MONEY H AS BEEN DULY ESTABLISHED BY THE ASSESSEE THROUGH HIS BANK ACCOUN T FOR ALLOTMENT OF SHARES OF 50,000 EQUITY SHARES OF M/S PARIDHI PROPERTIES LTD. THE SHARE ALLOTTED IN PRIVATE PLACE MENT AS PER OF RS. 10/- CANNOT BE TERMED AS PENNY STOCK. THE AO DO UBTED THAT THE ENTIRE PROCESS OF APPLICATION AND ALLOTMENT OF SHARES AS IT ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 27 HAVE BEEN COMPLETED WITHIN A SHORT DURATION OF 5 DA YS, WHICH IN THE OPINION OF THE AO IS NOT POSSIBLE IN ORDINARY C OURSE. HOWEVER, WHEN THE ASSESSEE HAS PRODUCED THE RECORD INCLUDING THE SHARE APPLICATION, PAYMENT OF SHARE APPLICATION MONEY, AL LOTMENT OF SHARE THEN MERELY BECAUSE OF A SHORT PERIOD OF TIME WILL NOT BE A SUFFICIENT REASON TO HOLD THAT THE TRANSACTION IS B OGUS. THE SHARES ALLOTTED TO THE ASSESSEE VIDE SHARE CERTIFICATE DAT ED 31.03.2011 WERE DEMATERIALIZED ON 21.10.2011, THEREFORE, ON TH E DATE OF DEMATERIALIZATION OF THE SHARES THE HOLDING OF THE SHARES OF THE ASSESSEE CANNOT BE DOUBTED AND HENCE THE ACQUISITIO N OF THE SHARES OF THE ASSESSEE CANNOT BE TREATED AS A BOGUS TRANSACTION. NOBODY CAN HAVE THE SHARES IN HIS OWN NAME IN DEMAN T ACCOUNT WITHOUT ACQUIRING OR ALLOTMENT THROUGH DUE PROCESS HENCE, EXCEPT THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE HOL DING OF SHARES CANNOT BE DOUBTED WHEN THE ASSESSEE HAS PRODUCED AL L THE RELEVANT RECORD OF ISSUING OF ALLOTMENT OF SHARES, PAYMENT OF SHARE APPLICATION MONEY THROUGH BANK, SHARE CERTIFI CATE AND DEMAT ACCOUNT SHOWING THE SHARES CREDITED IN THE DE MAT ACCOUNT OF THE ASSESSEE ON DEMATERIALIZATION. THE SAID COMP ANY M/S PARIDHI PROPERTIES LTD. WAS SUBSEQUENTLY MERGED WIT H M/S LUMINAIRE TECHNOLOGIES LTD. VIDE SCHEME APPROVED BY THE HON'BLE BOMBAY HIGH COURT ORDER DATED 27.07.2012. H ENCE, THE ASSESSEE GOT ALLOTTED THE EQUITY SHARES OF M/S LUMI NAIRE TECHNOLOGIES LTD. AS PER SWAP RATIO APPROVED IN THE SCHEME AND CONSEQUENTLY THE ASSESSEE WAS ALLOTTED 5 LACS SHARE OF RS. 1/- EACH ON M/S LUMINAIRE TECHNOLOGIES LTD. THE EVIDENC E PRODUCED BY THE ASSESSEE LEAVE NO SCOPE OF ANY DOUBT ABOUT T HE HOLDING OF THE SHARES BY THE ASSESSEE.' ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 28 21. THE HONBLE RAJASTHAN HIGH COURT IN PCIT VS PRAMOD JAIN & OTHERS ( IN D.B. INCOME TAX APPEAL NO. 209/2018 & OTHERS DAT ED 24.07.2018 ) HAS APPROVED THE AFORESAID DECISION OF THE COORDI NATE BENCH AND THE RELEVANT FINDINGS ARE AS UNDER: 5. HOWEVER, NOW THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF THIS COURT IN ITA NO.385/2011 ( COMMISSIONER OF INCOME TAX VS. SMT. POOJA AGARWAL ) DECIDED ON 11.9.2017 WHICH READS AS UNDER:- '6. COUNSEL FOR THE APPELLANT HAS TAKEN US TO THE O RDER OF AO STATING THAT THE ASSESSEE INVOLVED IN JEWELRY BUSIN ESS HAS TAKEN ENTRY FOR THE PURPOSE OF CONVERTING THE BLACK MONEY INTO WHITE AND REFERRED THIS ENTRY FROM BROKER, ONE SHRI P.K.A GARWAL. ENTRY PROVIDED FROM CALCUTTA HAS BEEN TAKEN. 7. THE ASSESSEE DERIVES INCOME FROM SALARY, CAPITAL GAINS AND OTHER SOURCES. A SURVEY UNDER SECTION 133A OF THE A CT WAS CONDUCTED AS THE BUSINESS PREMISES OF M/S ROYAL JEW ELLERS, TELIPADA OF WHICH ASSESSEE IS 50% PARTNER, ON 21ST AND 22ND OF JANUARY, 2008, DURING WHICH VARIOUS INCRIMINATING D OCUMENTS WERE FOUND AND IMPOUNDED WHEREIN SEVERAL UNACCOUNTE D TRANSACTION WERE RECORDED. REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE UNDER SECTION 147 R/W 1 48 OF THE ACT. VIDE SHOW CAUSE NOTICE THE ASSESSEE WAS SPECIFICALL Y ASKED AS TO WHY THE AMOUNT OF RS.98,56,872/- SHOULD NOT BE TREA TED AS AN ACCOMMODATION ENTRY. 8. THE ASSESSEE SUBMITTED REPLY TO THE SHOW CAUSE N OTICE CONTENDING THEREIN THAT THE SHARE TRANSACTIONS ARE GENUINE AND THE 'SHORT TERM CAPITAL GAIN' OF RS.98,56,872/- HAS BEEN EARNED ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 29 FROM THE PURCHASES AND SALES OF SHARES OF KONARK CO MMERCIAL LTD. AND LIMTUX INVESTMENT LTD. INVESTIGATION REVEA LED THAT THE ENTIRE SHARE TRANSACTIONS WERE BOGUS AND MERE ACCOM MODATION ENTRIES OBTAINED FROM AN ENTRY PROVIDER SHRI P.K.AG ARWAL FORM KOLKATA. THE SAID FACT WAS REVEALED DURING SEARCH C ARRIED OUT BY THE INVESTIGATION WING, JAIPUR IN THE CASE OF B.C.P UROHIT GROUP. 9. IT IS PERTINENT TO NOTE THAT DURING THE SURVEY O PERATION, IT WAS ADMITTED BY THE ASSESSEE THAT NO INVESTMENT IN SHAR ES WAS MADE BY HIM DURING THE SAID PERIOD. IT WAS FURTHER FOUND THAT THE COMPANY M/S KONARK COMMERCIAL LTD. WAS NEVER LISTED IN CALCUTTA STOCK EXCHANGE AND THE ASSESSEE WAS NEVER ITS SHAREHOLDER. 10. AFTER CONSIDERING THE ENTIRE FACTUAL MATRIX THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD ARRANGED THE SAI D ACCOMMODATION ENTRIES FROM ENTRY PROVIDERS FOR CONV ERTING ITS UNDISCLOSED MONEY INTO WHITE MONEY AND THUS THE AMO UNT OF RS.98,56,872/- WAS TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. 11. COUNSEL FOR APPELLANT HAS TAKEN US TO THE ORDER OF AO. 12. HOWEVER, COUNSEL FOR THE RESPONDENT HAS TAKEN U S TO THE ORDER OF CIT(A) AND ALSO TO THE ORDER OF TRIBUNAL A ND CONTENDED THAT IN VIEW OF THE FINDING REACHED, WHICH WAS DONE THROUGH STOCK EXCHANGE AND TAKING INTO CONSIDERATION THE RE VENUE TRANSACTIONS, THE ADDITION MADE WAS DELETED BY THE TRIBUNAL OBSERVING AS UNDER:- ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 30 '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, IPC L, 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, COMPA NY'S MASTER DETAILS FROM REGISTRAR OF COMPANIES, KOLKATA WERE F ILED. COPY OF DEPOSITORY A/C OR DEMAT ACCOUNT WITH ALANKR IT ASSIGNMENT LTD., A SUBSIDIARY OF NSDL WAS ALSO FILED WHICH SHO WS THAT THE TRANSACTIONS WERE MADE THROUGH DEMAT A/C. WHEN THE RELEVANT DOCUMENTS ARE AVAILABLE THE FACT OF TRANSACTIONS EN TERED INTO CANNOT BE DENIED SIMPLY ON THE GROUND THAT IN HIS S TATEMENT THE APPELLANT DENIED HAVING MADE ANY TRANSACTIONS IN SH ARES. THE PAYMENTS AND RECEIPTS ARE MADE THROUGH A/C PAYEE CH EQUES AND THE TRANSACTIONS ARE ROUTED THROUGH KOLKATA STOCK E XCHANGE. THERE IS NO EVIDENCE THAT THE CASH HAS GONE BACK IN APPELLANTS'S ACCOUNT. PRIMA FACIE THE TRANSACTION WHICH ARE SUPP ORTED BY DOCUMENTS APPEAR TO BE GENUINE TRANSACTIONS. THE AO HAS DISCUSSED MODUS OPERANDI IN SOME SHAM TRANSACTIONS WHICH WERE DETECTED IN THE SEARCH CASE OF B.C. PUROHIT GROUP. THE AO HAS ALSO STATED IN THE ASSESSMENT ORDER ITSELF WHILE DI SCUSSING THE MODUS OPERANDI THAT ACCOMMODATION ENTRIES OF LONG T ERM CAPITAL GAIN WERE PURCHASED AS LONG TERM CAPITAL GAIN EITHE R WAS EXEMPTED FROM TAX OR WAS TAXABLE AT A LOWER RATE. A S THE ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 31 APPELLANT'S CASE IS OF SHORT TERM CAPITAL GAIN, IT DOES NOT EXACTLY FALL UNDER THAT CATEGORY OF ACCOMMODATION TRANSACTI ONS. FURTHER AS PER THE REPORT OF DCIT, CENTRAL CIRCLE- 3 SH. P. K. AGARWAL WAS FOUND TO BE AN ENTRY PROVIDER AS STATED BY SH. PAWA N PUROHIT OF B.C. PURIHIT AND CO. GROUP. THE AR MADE SUBMISSION 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 USHIL KUMAR PUROHIT. COPY OF THE ORDER OF SETTLEMENT COMMISSION WAS SUBMITTED. THE AO HAS FAILED TO COUNTER THE OBJECTI ONS RAISED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. SI MPLY MENTIONING THAT THESE FINDINGS ARE IN THE APPRAISAL REPORT AND APPRAISAL REPORT IS MADE BY THE INVESTING WING AFTE R CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORD DOES NOT HELP MUCH. THE AO HAS FAILED TO PROVE THROUGH ANY INDEPENDENT INQU IRY OR RELYING ON SOME MATERIAL THAT THE TRANSACTIONS MADE BY THE APPELLANT THROUGH SHARE BROKER P.K. AGARWAL WERE NON-GENUINE OR THERE WAS ANY ADVERSE MENTION ABOUT THE TRANSACTION IN QU ESTION IN STATEMENT OF SH. PAWAN PUROHI. SIMPLY BECAUSE IN TH E SHAM TRANSACTIONS BANK A/C WERE OPENED WITH HDFC BANK AN D THE APPELLANT HAS ALSO RECEIVED SHORT TERM CAPITAL GAIN IN HIS ACCOUNT WITH HDFC BANK DOES NOT ESTABLISH THAT THE TRANSACT ION MADE BY THE APPELLANT WERE NON GENUINE. CONSIDERING ALL THE SE FACTS THE SHARE TRANSACTIONS MADE THROUGH SHRI P.K. AGARWAL C ANNOT BE HELD AS NON- GENUINE. CONSEQUENTLY DENYING THE CLAI M OF SHORT TERM CAPITAL GAIN MADE BY THE APPELLANT BEFORE THE AO IS NOT APPROVED. THE AO IS THEREFORE, DIRECTED TO ACCEPT C LAIM OF SHORT TERM CAPITAL GAIN AS SHOWN BY THE APPELLANT.' ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 32 13. THE SAME WAS CONFIRMED BY CIT APPEAL, IN VIEW O F THIS WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE TRIBUNAL AS WELL AS CIT IS CORRECT. 14. IN THAT VIEW OF THE MATTER, THE ISSUES ARE ANSW ERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. IN THAT VIEW OF THE MATTER, NO SUBSTANTIAL QUESTION OF LAW ARISES. HENCE, THE APPEALS STAND DISMISSED. 22. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT REFERRED SUPRA, THE DI SALLOWANCE OF BUSINESS LOSS OF RS. 1,67,29,332/- FROM SHARE TRADI NG ACTIVITY SO CLAIMED BY THE ASSESSEE IS DIRECTED TO BE DELETED. THE ORD ER OF THE ASSESSING OFFICER TO THIS EXTENT IS SET-ASIDE AND THE ORDER O F THE LD CIT(A) IS CONFIRMED. FURTHER, THE DISALLOWANCE OF COMMISSION OF RS. 334,587/- IS CONSEQUENTIAL IN NATURE. THE SAME IS ALSO DIRECTED TO BE DELETED. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE THUS DIS MISSED. 23. IN ITS CROSS OBJECTION, THE ASSESSEE HAS CHALLE NGED THE DISALLOWANCE OF RS. 3,28,345/- U/S 14A OF THE ACT. DURING THE COURSE OF HEARING, THE LD. AR SUBMITTED THAT THE ASSESSING OF FICER HAS NOT RECORDED ANY SATISFACTION BEFORE DISALLOWANCE WAS M ADE BY HIM. FURTHER IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOME AND DURING THE YEAR UNDER C ONSIDERATION, ONLY AN AMOUNT OF RS. 23,314/- WAS EARNED BY THE ASSESSE E AS DIVIDEND INCOME AND IT IS NOW A SETTLED PROPOSITION THAT THE DISALLOWANCE CANNOT ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 33 EXCEED THE QUANTUM OF EXEMPT INCOME. PER CONTRA, T HE LD. DR RELIED ON THE FINDING OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE PROVISIONS OF SECTION 14A ARE CLEARLY APPLICABLE AS THE ASSESSEE HAS EARNED EXEMPT DIVIDEND INCOME. FURTHER, THE LD. CIT(A) HAS RIGHTL Y SUSTAINED THE DISALLOWANCE HOLDING THAT THE PROVISIONS OF SECTION 14A IN RELATION TO THOSE SHARES WHICH ARE HELD AS STOCK IN TRADE HAS B EEN SETTLED BY THE CALCUTTA HIGH COURT IN THE CASE OF DHANUKA & SONS V . CIT [2011] 339 ITR 319. 24. HEARD BOTH THE PARTIES. WE AGREE WITH THE CONTE NTION OF THE LD AR THAT THE DISALLOWANCE U/S 14A CANNOT EXCEED THE EXE MPT INCOME AS THE SAME HAS BEEN HELD BY THE VARIOUS COURTS AND EVEN T HIS BENCH HAS CONSISTENTLY TAKEN THE SAME VIEW. GIVEN THAT THE A SSESSEE HAS EARNED DIVIDEND INCOME OF RS. 23,314/-, THE DISALLOWANCE S O MADE BY THE AO IS RESTRICTED TO RS 23,314 AND THE BALANCE ADDITION IS HEREBY DIRECTED TO BE DELETED. IN THE RESULT, THE GROUND IS PARTLY ALLOW ED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND CROSS- OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/03/2019 SD/- SD/- FOT; IKWY 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:- 08/03/2019 *GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CENTRAL CIRCLE-4, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- SHRI GYANDEEP KHEMKA, JAIPUR 3. VK;DJ VK;QDR@ CIT ITA 842/JP/2018 & C.O. 28/JP/2018_ ACIT, JAIPUR VS. SHRI GYANDEEP KHEMKA, JAIPUR 34 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. 842/JP/2018 & 28/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR