MOHAMMED AAMER, MORADABA V. ACIT- 17 (2), MUMBAI

ITA 953/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8889 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 19-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Income from undisclosed sources; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Transactions in derivatives; Earning of tax free income; Source of fund; Question of law; Tangible material; Wrong claim; Corroborative evidences; Third party statement; Accommodation entries; Capital receipt; Onus to prove; Penny stocks; Set aside; Audi alteram partem; Capital Gains; Bogus
• Section: 131; 68; 69C; 143(3); 133A; 260A; 191; 208; 43; 73; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.953/MUM/2019 ( ASSESSMENT YEAR: 2015-16 ) SHRI MOHAMMED AAMER, GROUND FLOOR, ANWAR HOUSE, PANDIT NAGLA MINI BYE PASS ROAD, PANDIT NAGLA, MORADABAD, UTTAR PRADESH- 244 001 VS. ASSISTANT COMMISSIONER OF INCOME TAX-17(2), 1 ST FLOOR, AYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 PAN/GIR NO. A D A PA8647A ( APPELLANT ) .. ( RESPONDENT ) ITA NO.954/MUM/2019 ( ASSESSMENT YEAR: 2015-16 ) SHRI AHMED SADAT, GROUND FLOOR, ANWAR HOUSE, PANDIT NAGLA MINI BYE PASS ROAD, PANDIT NAGLA, MORADABAD, UTTAR PRADESH- 244 001 VS. ASSISTANT COMMISSIONER OF INCOME TAX-17(1), 1 ST FLOOR, AYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 PAN/GIR NO. AABPA7646R ( APPELLANT ) .. ( RESPONDENT ) ITA NO.1219/MUM/2019 ( ASSESSMENT YEAR: 2015-16 ) SHRI MOHAMMED ANWAR, GROUND FLOOR, ANWAR HOUSE, PANDIT NAGLA MINI BYE PASS ROAD, PANDIT NAGLA, MORADABAD, UTTAR PRADESH- 244 001 VS. ITO-17(2)(5), 1 ST FLOOR, AYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 2 PAN/GIR NO. AA D P M9208K ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI V.K. TULSIAN, AR REVENUE BY SHRI BHARAT ANDHARE, DR DATE OF HEARING 05 / 0 1 /202 1 DA TE OF PRONOUNCEME NT 08/02 /202 1 / O R D E R PER RAJESH KUMAR (A.M) : THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY THREE DIFFERENT ASSESSEES AGAINST THE ORDERS DATED 28.01.2019, 19.02.2019 & 28.01.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2015-16. ITA NO.954/M/2019 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-28, MUMBAI [CIT(A)] ERRED IN CONFIRMING ADDITION OF RS.1,88,45,952/- ON ALTERNATIVE GROUND, WHICH ORIGINALLY MADE UNDER THE PROVISIONS OF SECTION 68 OF THE ACT BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX 17(1), MUMBAI [ACIT] WITHOUT GIVING PROPER AND SUFFICIENT OPPORTUNITY, AS BUSINESS INCOME HOLDING IT AS PROFIT/GAIN EARNED FROM ADVENTURE IN THE NATURE OF TRADE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ALLEGED ADDITION DISREGARDING THE CONCLUSIVE FINDING OF THE SEBI VIDE ITS ORDER NO. WTM/SR/SEBI/EFD-DRA2/70/09/2017 DATED 6 TH SEPTEMBER, 2017 AT PARA NHO 4 S NO.179 THAT YOUR APPELLANT WAS NOT OBSERVED IN THE PRICE MANIPULATION AND IPO MANIPULATION. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ALLEGED ADDITION DISREGARDING THE FACT THAT THERE WAS NO INDEPENDENT FINDING BY ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 3 THE LEARNED ACIT AND ALSO DISREGARDING THE FACT THAT HE HAD NEITHER PROVIDED ANY MATERIAL NOR PROVIDED ANY OPPORTUNITY TO CONFRONT WITH NOR GAVE ANY OPPORTUNITY TO CROSS EXAMINE THE CONCERNED PARTIES SO RELIED BY THE AUTHORITIES, THUS IT IS CLEARLY IN VIOLATION THE PRINCIPLES OF NATURAL JUSTICE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.9,42,297/- BEING THE ALLEGED COMMISSION @ 5% ALLEGEDLY PAID ON THE LONG TERM CAPITAL GAIN ON TRANSFER OF SHARES IN ESTEEM BIO FOOD PROCESSING LTD; MADE UNDER SECTION. 69C OF THE IT ACT. 3. THE ISSUE RAISED IN GROUND NO.1 TO 3 IS AGAINST THE ORDER OF LD. CIT(A) UPHOLDING THE ADDITION OF RS.1,88,45,952/- BY LD. CIT(A) WHICH WAS MADE BY THE AO UNDER SECTION 68 OF THE ACT BY REJECTING THE CLAIM OF THE ASSESSEE IN RESPECT OF LONG TERM CAPITAL GAIN ON SALE OF SHARES UNDER SECTION 10(38) OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 27.01.2016 DECLARING AN INCOME OF RS.63,29,670/- AFTER CLAIMING RS.1,90,87,075/- AS EXEMPT U/S 10(38) OF THE ACT WHICH COMPRISED LONG TERM CAPITAL GAIN OF RS.1,88,45,952/- ON SALE OF EQUITY SHARES OF M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY ON THE BASIS OF INFORMATION FROM KOLKATA INVESTIGATION WING THAT THE ASSESSEE IS A BENEFICIARY OF LONG TERM CAPITAL GAIN ON SALE OF PENNY STOCKS WHICH ARE SUSPICIOUS AND BOGUS AS REVEALED DURING INVESTIGATION/SEARCHES ON VARIOUS OPERATIONS, BROKERS, EXIT PROVIDERS ETC. ACCORDINGLY, THE AO CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS/DOCUMENTS IN RESPECT OF CLAIM OF LONG TERM CAPITAL GAIN OF RS.1,88,45,952/- CLAIMED UNDER SECTION 10(38) OF THE ACT. THE ASSESSEE APPLIED FOR 10,000 SHARES OF RS.10 EACH IN M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. WHICH WERE ALLOTTED TO THE ASSESSEE. THEREAFTER, THE SAID COMPANY DECLARED BONUS SHARES IN THE RATIO OF 1:3. ALL ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 4 THESE SHARES WERE THEREAFTER TRANSFERRED TO D-MAT ACCOUNT OF THE ASSESSEE ON 29.01.2013. OUT OF THESE SHARES, 36,000 SHARES WERE SOLD ON VARIOUS DATES COMMENCING FROM 11.04.2014 TO 12.08.2014 AND ASSESSEE WAS LEFT WITH 4000 EQUITY SHARES. THEREAFTER, THE SHARES OF RS.10 EACH WERE SPLIT INTO 10 SHARES OF FACE VALUE OF RS.1 EACH AND ACCORDINGLY THE ASSESSEE WAS ALLOTTED 40,000 EQUITY SHARES ON 10.01.2015 IN LIEU OF 4000 EQUITY SHARES AND THEREAFTER ASSESSEE SOLD 20,000 SHARES, 10,000 SHARES ON 20.02.2015 AND ANOTHER 10,000 SHARES ON 10.03.2015 AND CLAIMED THE GAIN ON THE SAID SHARES AS EXEMPT UNDER SECTION 10(38) OF THE ACT. THE AO DISCUSSED THE MODUS OPERANDI HOW THESE SHARES WERE SOLD. THE AO OBSERVED THAT THE FUNDAMENTALS OF THE SAID COMPANY WERE VERY WEEK AND FINALLY TREATED THE SAID GAIN AS BOGUS. THE ASSESSEE PRODUCED THE FOLLOWING CORROBORATING EVIDENCES BEFORE THE AO IN SUPPORT OF ITS CLAIM OF EXEMPTION UNDER SECTION 10(38) ON LONG TERM CAPITAL GAIN ON SALE OF SHARES: I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHARES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT FINALLY, THE AO, AFTER REJECTING THE VARIOUS CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE AND IN A DETAILED FINDING RECORDED IN THE ASSESSMENT ORDER, CAME TO THE CONCLUSION THAT THE ASSESSEE HAS ALLEGEDLY OBTAINED LONG TERM CAPITAL GAIN BY PRE- ARRANGED AND WELL ORGANIZED TRADING IN THE SHARES OF M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. AND ACCORDINGLY REJECTED THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 5 CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT RESULTING INTO AN ADDITION OF RS.1,88,45,952/- TO THE INCOME OF THE ASSESSEE IN ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT, 1961 DATED 30.12.2017. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO ACCOUNT THE DETAIL SUBMITTED BY THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 6.1 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO CONSIDERED JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE AO AND THE APPELLANT. I HAVE ALSO TRIED TO APPRECIATE THE FACTS OF THE CASE. I ALSO NOTE THAT INVESTIGATION MADE BY VARIOUS DIRECTORATES, STATEMENTS RECORDED DURING THE ENQUIRY AND INVESTIGATION, CLEARLY PROVE THAT THE PURCHASE AND SALE OF SHARES OF ESTEEM BIO ORGANIC FOOD PROCESSING LTD AND THE SUBSEQUENT BOOKING OF HUGE AND INORDINATE GAIN IN THE SAID TRANSACTIONS ARE NOTHING BUT A DETAILED AND CUNNING MODUS OPERAND!, USED TO LAUNDER BLACK MONEY AVAILABLE WITH THE APPELLANT IN THE FORM OF LTCG AND TO EVADE DUE TAXES ON IT. 6.2 IT IS SETTLED THAT THE TAX AUTHORITIES SHOULD EXAMINE THE TRUE NATURE OF TRANSACTIONS AND NOT MERELY THE FORM IN WHICH A TRANSACTION APPEARS. THE TAXING AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY. SIMPLY BECAUSE, THE TRANSACTIONS HAVE TAKEN PLACE THROUGH STOCK EXCHANGE DOES NOT PROVE THEM TO BE GENUINE. FURTHER, II HAS BEEN WELL HELD BY THE APEX COURT AND SEVERAL HIGH COURTS OF THIS COUNTRY THAT, IT IS THE SUBSTANCE OF THE TRANSACTION THAT IS OF PARAMOUNT SIGNIFICANCE AND ONE NEED NOT GET SWAYED BY THE MERE APPEARANCE OR THE FORM OF THE TRANSACTION. THE COURTS SAY THAT IN THE MODERN AGE VARIOUS INGENIOUS AND SOPHISTICATED MEANS OF TAX EVASION HAVE BEEN DEVISED AND THEREFORE, THE TAX AUTHORITIES ALSO HAVE TO GO BEYOND THE MERE FORM OR ARRANGEMENT WHICH IS SHOWN TO THEM AND GO TO THE ROOT OF THE ISSUE. IN THE INSTANT CASE IT IS CLEAR THAT THE ARTIFICIALLY HIKED SCRIP AND THE MODUS OPERANDI THEREOF IS THE REAL STORY RATHER THAN THE MERE FORM OF THE APPELLANT'S TRANSACTIONS. IT IS VERY IMPORTANT TO NOTE THAT THE CURRENT JUDICIAL TREND IS THAT, 'SUBSTANCE' IS ANY TIME TO BE GIVEN PREFERENCE OVER, 'FORM'. 6.3 IN THIS REGARD. I FIND AND NOTE THAT THERE ARE SEVERAL JUDICIAL PRONOUNCEMENTS TO THE EFFECT THAT, SIMPLY BECAUSE, THE PAYMENTS ARE ROUTED THROUGH BANKING CHANNELS, THAT FACT ALONE DOES NOT LEAD TO THE CONCLUSION THAT THE TRANSACTIONS ARE SACROSANCT AND ABOVE BOARD. THEREFORE, THE CLAIM OF THE APPELLANT THAT THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 6 PAYMENTS HAVE BEEN MADE BY THE A/C PAYEE CHEQUE ALSO DOES NOT MAKE THE CLAIM AS BONAFIDE IN VIEW OF THE JUDICIAL PRONOUNCEMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE PVT. LTD. 208 ITR 465 CAL. (1994). IT WAS HELD THAT TRANSACTION THROUGH BANK IS NOT SUFFICIENT TO PROVE A TRANSACTION AS BONAFIDE. MERELY BECAUSE THE MONEY IS TRANSFERRED THROUGH THE BANK ACCOUNT DOES NOT PROVE THAT THE MONEY IS EXPLAINED. THE RATIO LAID DOWN IN THE CASE OF PRECISION FINANCE IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE OF THE APPELLANT BECAUSE HERE ALSO THE FUNDS MAY HAVE BEEN TRANSFERRED THROUGH BANKING CHANNELS, HOWEVER, THE FACT CANNOT BE DENIED THAT THE APPELLANT HAS BENEFITTED FROM A PRE-ARRANGED MODUS OPERAND! WHERE CERTAIN SCRIPS WITH NO INTRINSIC VALUE ARE ARTIFICIALLY JACKED UP TO RESULT IN WINDFALL GAINS TO THE APPELLANT. 6.4 IT IS FURTHER PERTINENT 10 NOTE THAT THE VERACITY OF THE TRANSACTIONS THROUGH BANKING CHANNELS IS NOT A SINE-QUA-NON TO PROVE THAT THE TRANSACTION MUST INDEED BE BEYOND THE SHADOW OF DOUBT AND ALSO THAT THERE CANNOT BE ANY INFIRMITY WITH THE SAME. JUDICIAL DECISIONS HAVE ALSO TAKEN NOTE OF THIS ASPECT AND STARTED RECOGNIZING THAT MODERN INSTRUMENTS OF TAX EVASION ARE INGENIOUS ENOUGH TO SHAPE THEM IN SUCH A MANNER THAT ON THE SURFACE, THEY APPEAR GENUINE ENOUGH. THE ABOVE IS SUPPORTED BY THE FOLLOWING CASE LAWS I.E.:- 1. CIT VS. JANA SAMPARK ADVT. DEL. HIGH COURT/ITA NO.525/2014. RATIO 'THE FACT THAT TRANSACTIONS ARE THROUGH BANKING CHANNEL, IT DOES NOT NECESSARILY FOLLOW THAT SATISFACTION AS TO THE CREDITWORTHINESS OF PARTIES OR GENUINENESS OF TRANSACTION HAS BEEN ESTABLISHED.' 2.CIT VS. VIRBHAN& SONS, 273 ITR, 2O6(P&H)-HIGH COURT. 'MERE FACT THAT AMOUNT WAS RECEIVED BY CHEQUE, BY ITSELF, DOES NOT CONCLUSIVELY PROVE THE GENUINENESS OF THE TRANSACTION.' 6.5 FURTHER, IT IS OBSERVED THAT THIS IS A CLASSIC CASE WHERE THE APPARENT IS NOT REAL AND THE REAL IS NOT APPARENT THIS IS BECAUSE MANY SUBTERFUGES ARE BEING USED IN THE MODERN TIME TO LAUNDER MONEY AND IN THE CASE AT HAND, THERE IS AN INGENIOUS SCHEME DEVISED BY THE PARTIES CONCERNED WHERE THE VALUE OF THE PENNY STOCK IS JACKED UP SEVERAL TIMES OVER WITHIN A SHORT PERIOD WITHOUT ANY BASIC FUNDAMENTALS OR FINANCIAL LOGIC, SO AS TO ARRANGE THE SO-CALLED CAPITAL GAIN. THAT, THE APPARENT IS NOT REAL & THE REAL IS NOT APPARENT, HAS BEEN HELD BY HON'BLE SUPREME COURT IN CASES OF CIT V/S DURGA PRASAD MORE 82 ITR 540 AND SUMATI DAYAL V/S CIT 214 ITR 801. IT IS HELD THAT THE TAX AUTHORITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND APPLY THE TEST OF HUMAN PROBABILITY. THE HON'BLE COURT HAS GONE TO THE EXTENT OF SAYING THAT TAX AUTHORITIES ARE NOT REQUIRED TO PUT ON BLINKERS WHILE EXAMINING THE DOCUMENTS PRESENTED BEFORE THEM BUT ARE REQUIRED TO LOOK INTO THE CIRCUMSTANTIAL EVIDENCES AND THE SURROUNDING CIRCUMSTANCES TO DISTINGUISH 'THE REAL' FROM 'THE APPARENT'. THE HON'BLE SCS DECISION IN CASE OF MEENAXI MILLS LTD 63 ITR 609 AND MCDOWELL 85 CO. 1 54 ITR 148 LENDS SUPPORT TO THE STANCE OF AO IN THIS CASE. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 7 6.6 BOTH THE APPELLANT AS WELL AS THE AO HAVE RELIED ON A VARIETY OF CASE LAWS. IT IS THEREFORE, THE CASE THAT THERE ARE RIVAL PRECEDENTS QUOTED BY BOTH, THE SIDES, IT IS ALSO FOUND THAT THE DECISIONS ON PENNY STOCK IN CASE OF SANJAY BIMALCHAND JAM VS. PCIT [2018] 89 TAXMANN.COM 196 (BOMBAY). ITO VS. SHAMIM M. BHARWANI [2016] 69 TAXMANN.COM 65 (MUMBAI - TRIB.), RATNAKAR M. PUJARI VS. ITO (ITAT MUMBAI) APPEAL NUMBER: I.T.A. NO.995/MUM/2012. DATE OF JUDGEMENT/ORDER: 03.08.2016, ASSESSMENT YEAR 2006-07 ARE IN FAVOUR OF DEPARTMENT. 6.7 IT IS VERY PERTINENT TO NOTE THAT VERY RECENTLY, HON'BLE ITAT PUNE IN THE CASE OF RAJKUMAR B. AGANVAL VS. DCIT CENTRAL CIRCLE 1(2), PUNE IN ITA NOS. 1648 & 1649/PUN/15 AND OTHER GROUP CASES, VIDE ORDER DATED 04.01.2019 HAS CONFIRMED THE ADDITION MADE IN RESPECT OF THE BOGUS LTCG WITH RESPECT TO PENNY STOCKS. SIMILARLY, THE HON'BLE ITAT, CHENNAI IN THE CASE OF M/S. PANKAJ AGARVVAL & SONS, ITA NO. 1413 OF 2018 AND OTHER GROUP CASES, HAS UPHELD THE ADDITION WITH RESPECT TO THE LTCG ON PENNY STOCKS. 6.8 IT IS FURTHER PERTINENT TO NOTE THAT THE APPELLANT HAD PURCHASED 10,000 (PRE BONUS & PRE-SPLIT) SHARES OF M/S ESTEEM BIO ORGANIC FOOD PROCESSING LTD IN AN OFF MARKET DEAL FOR A CONSIDERATION OF RS 1,00,000/- BEING SHARE PRICE OF RS 10 /- PER SHARE FROM THE COMPANY BY WAY OF PREFERENTIAL ALLOTMENT. WHICH BUSINESSMAN OR INVESTOR WILL PURCHASE SHARE FROM AN UNKNOWN COMPANY? THIS IS UNHEARD OF IN THIS TRADE. THE CIRCUMSTANCES UNDER WHICH THESE SHARES HAVE BEEN PURCHASED ARE THEREFORE HIGHLY QUESTIONABLE. THERE IS NOTHING ON RECORD TO PROVE THAT THE PURCHASE IS A GENUINE TRANSACTION BETWEEN TWO UNRELATED PARTIES. 6.9 FURTHER THE APPELLANT HAS SOLD THE 10,000 (PRE BONUS AND PRE SPLIT) SHARES FOR RS 2,02,31,783/-, THUS RESULTING INTO LONG TERM CAPITAL GAIN OF RS 2,01,32,032/-, WHICH IS 202 TIMES THE INCREASE OF THE COST PRICE. IT IS PERTINENT TO NOTE THAT DURING THE CORRESPONDING PERIOD THE SALES / REVENUE OF THE COMPANY WAS ERRATIC AND NEGLIGIBLE AND THERE WAS NO COMMERCIAL ACTIVITY CARRIED OUT BY THE COMPANY AND THEREFORE THE RISE IN SHARE PRICES IS NOT ACCORDING TO ANY COMMERCIAL PRINCIPLES, MARKET FACTORS OR FUNDAMENTALS OF THE INVESTEE COMPANY. THE DEPARTMENT HAS RECORDED THE STATEMENT OF VARIOUS PERSONS WHO HAVE ACCEPTED THAT THE PRICES OF THE SHARES WERE RIGGED TO PROVIDE BENEFITS TO A NUMBER OF PERSONS LIKE THE APPELLANT ON COMMISSION BASIS. 6.10 AS HAS BEEN OBSERVED ABOVE, THE SAID SCRIP IN QUESTION I.E. ESTEEM BIO ORGANIC FOOD PROCESSING LTD HAD BEEN SUSPENDED SOON AFTER THE PRICE RIGGING WAS IDENTIFIED BY SEBI FOR SURVEILLANCE. FURTHER, IT IS PERTINENT TO NOTE THAT THE ABOVE SAID COMPANY HAD NO FUNDAMENTALS AND HENCE ASTRONOMICAL RISE IN THE PRICE OF THE STOCK IS TOTALLY UNWARRANTED AND AS A PART OF WELL SCRIPTED DESIGN OF ARTIFICIALLY JACKING UP OF THE PRICE. 6.11. FURTHER, IT IS OBSERVED THAT IN THE CAPITAL MARKET, PEOPLE DO INVEST OBVIOUSLY FOR EARNING MONEY THROUGH INVESTMENT IN THE STOCKS OF VARIOUS COMPANIES. HOWEVER, BEFORE DOING SO THE INVESTOR WILL DEFINITELY LOOK INTO THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 8 FUNDAMENTALS AND FINANCIAL STRENGTH OF THE COMPANY AND ASPECT SUCH AS NET WORTH, TURNOVER, PROFITS AND EARNINGS PER SHARE ETC. IN THE INSTANT CASE, I.E. THAT OF M/S ESTEEM BIO ORGANIC FOOD PROCESSING LTD., THE FINANCIALS AND THE KEY PARAMETERS SUCH AS NET WORTH, TURNOVER, PROFITS AND EARNINGS PER SHARE ETC., ARE EXTREMELY WEAK AND COMPANY HAS NO FINANCIAL STRENGTH. THEREFORE, IT IS A PENNY STOCK AND A PERSON WILL MAKE A LARGE INVESTMENT IN THE SAME IF HE IS AWARE AND A PART OF AN ACTIVITY OF SYSTEMATIC RIGGING OF THE SCRIPT BY COLLUSIVE DEVICE. 6.12 FURTHER, THE FINDINGS OF THE DIRECTORATE OF INVESTIGATION OF KOLKATA AS DISCUSSED IN THE ASSESSMENT ORDER HAVE PROVED THAT ASSOCIATED BROKERS, ENTRY OPERATORS AND THE APPELLANT HAD WORKED OUT AN ARRANGEMENT IN WHICH THE SHARES WERE ACQUIRED BY THE APPELLANT, THE SHARES WERE RIGGED AND THEN WITH THE HELP OF ENTRY OPERATORS BY ROUTING THE CASH, SHARES WERE SOLD AT HIGH PRICE TO ARRIVE AT TAX FREE CAPITAL GAIN. LOOKING TO THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE, I DO NOT HAVE ANY DOUBT THAT THE APPELLANT IS ONE OF THE BENEFICIARIES. 6.13 THE HON'BLE SUPREME COURT IN CASE OF KANWAR NATWAR SINGH IN THEIR ORDER DATED 5TH OCTOBER 2010, IN CIVIL APPEAL NO.8601 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 10553 OF 2008 AND IN CIVIL APPEAL NO.8602 OF 2010 ARISING OUT OF SPECIAL LEAVE PETITION (C) NO, 10554 OF 2008, ON THE ISSUE OF CROSS EXAMINATION OF THE WITNESS HAS HELD AS UNDER:- '36. ON A FAIR READING OF THE STATUTE AND THE RULES SUGGESTS THAT THERE IS NO DUTY OF DISCLOSURE OF ALL THE DOCUMENTS IN POSSESSION OF THE ADJUDICATING AUTHORITY BEFORE FORMING AN OPINION THAT AN INQUIRY IS REQUIRED TO BE HELD INTO THE ALLEGED CONTRAVENTIONS BY A NOTICE. EVEN THE PRINCIPLES OF NATURAL JUSTICE AND CONCEPT OF FAIRNESS DO NOT REQUIRE THE STATUTE AND THE RULES TO BE SO READ. ANY OTHER INTERPRETATION MAY RESULT IN DEFEAT OF THE VERY OBJECT OF THE ACT. CONCEPT OF FAIRNESS IS NOT A ONE WAY STREET. THE PRINCIPLES OF NATURAL JUSTICE ARE NOT INTENDED TO OPERATE AS ROAD BLOCKS TO OBSTRUCT STATUTORY INQUIRIES. DUTY OF ADEQUATE DISCLOSURE IS ONLY AN ADDITIONAL PROCEDURAL SAFEGUARD IN ORDER TO ENSURE THE ATTAINMENT OF THE FAIRNESS AND IT HAS ITS OWN LIMITATIONS. THE EXTENT OF ITS APPLICABILITY DEPENDS UPON THE STATUTORY FRAMEWORK HEGDE J. SPEAKING FOR THE SUPREME COURT PROPOUNDED.' 6.14 IN VIEW OF THE DISCUSSION MADE IN THE PRECEDING PARAGRAPHS, I AM OF THE CONSIDERED OPINION THAT THE DEALING IN SHARES BY THE APPELLANT IN ABOVE SCRIP HAS TO BE TAKEN AS DEALING IN PENNY STOCKS WHICH WAS IN THE FORM OF ACCOMMODATION ENTRIES AND DEVOID OF ANY SUBSTANCE. THE TRANSACTION THOUGH COLOURED AS INVESTMENT IN SHARES BUT IN REALITY IS A SHAM TRANSACTION FOR MONEY LAUNDERING. HENCE, THE ACTION OF THE AC IN TREATING ENTIRE SALE CONSIDERATION OF THE SCRIP OF M/S ESTEEM BIO ORGANIC FOOD PROCESSING LTD., AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT IS IN ORDER AND NEEDS NO INTERFERENCE. THE ORDER OF THE ID. AO IS ACCORDINGLY UPHELD AND THE ADDITION OF RS. 2,01,32,032/- IS CONFIRMED. THUS, ACCORDINGLY, THE GROUND NO.1 ON THE ABOVE IMPUGNED ISSUE IS DISMISSED. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 9 6. THE LD. A.R. VEHEMENTLY SUBMITS THAT THE ASSESSEE IS A REGULAR INVESTOR AND MAKES INVESTMENTS THROUGH REGISTERED BROKERS AND THUS CARRIES OUT PURCHASE AND SALE OF EQUITY SHARES ON RECOGNIZED STOCK EXCHANGE ON THE SCREEN BASED ONLINE PLATFORM. THE LD. A.R. SUBMITTED THAT DURING THE YEAR THE ASSESSEE WAS HOLDING SHARES OF 12 COMPANIES NAMELY; TVS MOTOR LTD., TATA POWER COMPANY LTD., STEEL AUTHORITY OF INDIA LTD., ZINDAL STEEL WORKS LTD., JAIN IRRIGATION LTD., INDIA CEMENT LTD., IDEA CELLULAR LTD., INDALCO LTD., DABUR INDIA LTD., ITC LTD., CIPLA LTD. AND M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. THE LD. A.R. ALSO SUBMITTED THAT SEBI FINAL ORDER DATED 06.09.2017 IT IS CLEARLY STATED THAT THERE IS NO ADVERSE EVIDENCE AGAINST THE ASSESSEE, THUS THE INTERIM ORDER OF SEBI DATED 29.06.2015 HAS BEEN REVOKED VIDE THE FINAL ORDER AND FROM THAT DATE THE STOCK WAS CONTINUOUSLY TRADED ON THE STOCK EXCHANGE. 6.1. THE LD. A.R. SUBMITTED THAT ALL THE CONDITIONS FOR CLAIMING EXEMPTION U/S 10(38) OF THE ACT ARE FULLY SATISFIED BY THE ASSESSEE WHILE CLAIMING THE EXEMPTION IN THE INCOME TAX RETURN FOR THE RELEVANT ASSESSMENT YEAR UNDER APPEAL. THE DATES OF PURCHASE/ALLOTMENT OF EQUITY SHARES, MODE OF PAYMENT OF PURCHASE BEING BY ACCOUNT PAYEE CHEQUES ONLY, PERIOD OF HOLDING, DATES OF SALES OF EQUITY SHARES THROUGH THE ONLINE SCREEN BASED TRADING ON THE BOLT PLATFORM OF STOCK EXCHANGE, IDENTIFICATIONS AND DETAILS OF SEBI AND STOCK EXCHANGE REGISTERED REPUTED BROKERS AND STOCK BROKER LTD, TRANSACTION RELATED EXPENSES SUCH AS BROKERAGE, SERVICE TAX, STT, STAMP DUTY, EXCHANGE AND SEBI TURNOVER CHARGES ETC ARE ALREADY ON RECORDS OF THE REVENUE AND ALSO FORMS PART OF ASSESSMENT ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 10 ORDER. THE LD AR SUBMITS THAT THE LD. AO IN THE IMPUGNED ASSESSMENT ORDERS HAS REJECTED THE CLAIM OF EXEMPTION U/S 10(38) OF THE ACT AND MADE ADDITIONS OF THE ENTIRE SALE PROCEEDS OF SHARES AS UNEXPLAINED CREDIT U/S 68 OF THE ACT, ALLEGING THAT THE APPELLANT HAS ARRANGED BOGUS LTCG BY TRADING IN PENNY STOCK COMPANIES IN HIS NAME I) INVESTIGATION REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA; II) ALLEGED BOGUS LTCG RESULTING FROM STEEP MOVEMENT OF SHARE PRICES ETC DETAILED IN THE ASSESSMENT ORDER.; III) STATEMENTS RECORDED BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA OF VARIOUS PARTIES. THE LD AR SUBMITS THAT IN ESSENCE THE ENTIRE ADDITION IS BASED ON PREPONDERANCE OF POSSIBILITIES, CIRCUMSTANTIAL EVIDENCES AND NOT BASED ON JUSTIFIABLE/CLINCHING EVIDENCES, HUMAN CONDUCT IN GENERAL AND NOT SPECIFIC FINDINGS OR ALLEGATIONS ON THE ASSESSEE. THERE ARE SEVERAL JUDICIAL PRONOUNCEMENTS OF JURISDICTIONAL ITAT AND HIGH COURTS WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT ADDITION BASED ON SUCH GENERAL HYPOTHESIS CANNOT BE MADE. 6.2. THE LD AR ALSO CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS BEFORE CIT(A), THE APPELLANT FILED ALL DOCUMENTS FOR ESTABLISHING BONAFIDE AND GENUINENESS OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT. THEREFORE, THE DENIAL OF CLAIM OF EXEMPTION MADE BY THE LD. AO IGNORING THE RELEVANT AND FACTUAL DOCUMENTARY EVIDENCES FILED BY THE APPELLANT IS ABSOLUTELY IMPROPER AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 11 6.3. THE LD AR, WHILE REFERRING TO THE ASSESSMENT ORDER, SUBMITS THAT NONE OF THE DESCRIPTIONS, ALLEGATIONS, OBSERVATIONS, FINDINGS, STATEMENTS REPRODUCED ETC IN THE IMPUGNED ORDER OF AO ARE RELEVANT OR HAVING ANY COGENT, COLLABORATIVE, IDENTIFIABLE OR CLINCHING TO THE LTCG REALIZED BY THE APPELLANT. THE LD AR SUBMITS THAT THE APPELLANT HAD NEVER TRANSACTED WITH ANY OPERATOR OR SUCH INTERMEDIARY IN THE PROCESS OF CARRYING OUT INVESTMENTS AND FURTHER THAT THE ALLEGED OPERATORS AND THEIR RECORDS DO NOT IN ANY MANNER MENTION ANY CONNECTION WITH APPELLANT. THE LD AR SUBMITS THAT THE SHARES WERE DULY ALLOTTED TO THE APPELLANT AND WERE RECORDED INTO THE D-MAT ACCOUNT UPON SUCH PURCHASE/ALLOTMENT. SHARES WERE SOLD ON STOCK EXCHANGE THROUGH REGULAR REGISTERED BROKERS OF ASSESSEE UNDER SCREEN BASED TRADING WHERE THE SELLER AND BUYER OF SHARES ARE WHOLLY UNAWARE OF THE IDENTITY OF THE OTHER PERSON. STTS WERE PAID AT THE TIME OF SALE OF SHARES AND PROCEEDS WERE RECEIVED INTO BANK ACCOUNTS OF THE ASSESSEE ONLY THROUGH PROPER BANKING CHANNEL. 6.4. THE LD AR SUBMITS THAT BASED ON INQUIRY AND INVESTIGATION OF WING, THE AO HAS SURMISED THAT ASSESSEE ROUTED HIS BLACK MONEY WITHOUT ESTABLISHING ANY MONEY TRAIL. THE LD AR ARGUED THAT THE LD. AO HAS HOPELESSLY FAILED TO ESTABLISH THAT THE ASSESSEE HAS PAID ANY UNACCOUNTED MONEY TO ANY OF THE PARTIES REFERRED BY THE LD. AO IN THE IMPUGNED AO. NONE OF THE REPLIES TO THE QUESTIONS OF SUCH PARTIES INDICATES THAT THEY HAVE RECEIVED ANY UNACCOUNTED MONEY FROM THE ASSESSEE AT THE TIME OF SELLING OF THESE EQUITY SHARES BY THE ASSESSEE. THE FINDINGS OF THE INVESTIGATION WING OF THE REVENUE ARE GENERAL IN NATURE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 12 AND IT IS BASICALLY A STUDY REPORT AND NOT SPECIFICALLY MENTIONING WHICH CASES ARE INVESTIGATED. THE LD AR ARGUES THAT NOWHERE IN THE ASSESSMENT ORDER, THE AO HAS ESTABLISHED ANY LINKAGE BETWEEN THE REPORTS OF THE INVESTIGATION WING AND ASSESSEE'S TRANSACTIONS. MOREOVER THE ASSESSEE WAS NOT CONFRONTED WITH THE INVESTIGATION REPORT WHICH WAS RELIED BY THE AO. THE AR STRONGLY ARGUED THAT THIS IS A FATAL AND INCURABLE MISTAKE ON THE PART OF THE AO AND CAN NOT BE RECTIFIED AS RELIANCE ON SUCH INVESTIGATION REPORT, WITHOUT CONFRONTING THE ASSESSEE WITH THE SAME, RENDERS THE ASSESSMENT FRAMED AS BAD IN LAW. THE LD AR IN DEFENSE OF HIS ARGUMENTS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ADAMINE CONSTRUCTION PVT. LTD. 99 TAXMANN 45 WHEREIN WHILE DISMISSING THE APPEAL, THE HONBE COURT HAS REFERRED TO OBSERVATIONS OF DELHI HC THAT WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE REPORT RECEIVED AND DID NOT MAKE THE NECESSARY FURTHER ENQUIRIES SUCH AS INTO THE BANK ACCOUNTS OR OTHER PARTICULARS AVAILABLE WITH HIM BUT RATHER BASED THE ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONSIDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE ONUS INITIALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH WERE NOT SUITABLY ENQUIRED INTO BY THE AO. 6.5. THE LD AR SUBMITS THAT THE LD. AO PLACED RELIANCE ON STATEMENTS OF SEVERAL THIRD PARTIES WITHOUT PROVIDING OPPORTUNITIES FOR CROSS EXAMINATION WHICH IS CONTRARY TO THE DECISION OF HONBLE SUPREME COURT IN M/S ANDAMAN TIMBER INDUSTRIES V/S CCE (CA NO.4228 OF 2006) WHEREIN IT WAS HELD THAT NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 13 BY THE ADJUDICATING AUTHORITY WHEREAS THE STATEMENT OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY IN AS MUCH AS IT AMOUNTS TO VIOLATION OF PRINCIPAL OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. THE WHOLE BASIS OF MAKING THE ADDITION IS THIRD PARTY STATEMENT WITHOUT THERE BEING ANY TANGIBLE MATERIAL. THE LD. AR SUBMITS THAT IT IS TRITE LAW THAT ADDITIONS MERELY ON THE BASIS OF SUSPICIOUS, CONJECTURES OR SURMISES COULD NOT BE SUSTAINED IN THE EYES OF LAW AS HELD BY HONBLE SUPREME COURT IN OMAR SALAY MOHAMED SAIT V/S CIT (1959 37 ITR 151). THE SUSPICION HOWEVER STRONG COULD NOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE AS HELD BY HONBLE SUPREME COURT IN UMACHARAN SHAW & BROS. V/S CIT (1959 37 ITR 271). 6.6. THE LD AR SUBMITS THAT MOVEMENT IN PRICES OF SHARES IS GOVERNED BY SEVERAL FACTORS WITHOUT THERE BEING ANY NEXUS TO THE PROJECTS, PROJECTION ETC AND THIS FACT GETS CLEARLY ESTABLISHED IF ONE REFERS TO THE PRESENT MOVEMENT IN SHARES OF SEVERAL COMPANIES. THE LD. AO HAS FAILED TO ESTABLISH ANY LINK TO THE PROCESS OF RIGGING AND MANIPULATING OF PRICES OF SHARES IN CONNIVANCE WITH PARTIES WHOSE NAMES ARE MENTIONED IN THE IMPUGNED ASSESSMENT ORDERS. 6.7. THE LD AR ALSO ARGUES THAT THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF AN ASSESSEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASSESSEE IS NOT ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 14 SATISFACTORY IN THE OPINION OF THE AO, THEN SUM CREDITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR U/S 68 OF THE ACT WHICH IS NOT THE CASE OF THE ASSESSEE. THE ASSESSEE HAS RECEIVED CONSIDERATION FROM SALE OF SHARES ON WHICH HE HAS MADE LTCG AND FURNISHED ALL EVIDENCES BEFORE THE AUTHORITIES BELOW AS HAS BEEN HELD BY THE COORDINATE BENCH IN THE CASE OF SHRI KUNAL DEDHIA ITA NO. 3893/MUM/2019. THE LD AR RELIED ON THE FOLLOWING DECISIONS: A. SHRI VIJAYRATTAN BALKRISHAN MITTAL VS DCIT (ITA NO. 3429/MUM/2019) (MUMBAI ITAT) B. SHRI KUNAL DEDHIA VS DCIT (ITA NO. 3893/MUM/2019) (MUMBAI ITAT) C. MUKESH B SHARMA VS ITO (ITA NO. 6249/MUM/2018) (MUMBAI ITAT) 6.8. THE LD AR ALSO DISTINGUISHED THE DECISION RELIED UPON BY THE LD. AO AND LD. CIT(A). 6.9. FINALLY, THE LD AR PRAYED BEFORE THE BENCH THAT IN VIEW OF THE FACTS AND MERITS AND DECISIONS AS DISCUSSED ABOVE THE , THE GROUND NO. 1 TO 3 MAY KINDLY BE ALLOWED. 7. PER CONTRA, THE LD DR STRONGLY REBUTTED THE ARGUMENTS AS MADE BY THE LD AR BY SUBMITTING THAT THE LTCG IS NOTHING BUT OWN MONEY ROUTED INTO THE BOOKS THROUGH ACCOMMODATION ENTRIES AND WAS PART OF A ORGANIZED RACKET IN WHICH SEVERAL BROKERS/EXIT PROVIDERS WERE INVOLVED AS HAS BEEN BROUGHT TO LIGHT BY THE SEARCH OPERATION BY INVESTIGATION WING OF THE DEPTT. ROUTE AND NOT THROUGH NORMAL STOCK EXCHANGE OPERATION AND EVI DENCES OF GRADUAL RIGGING OF PRICES OF THESE SELECTED 7 - 8 COMPANIES THROUGH CIRCULAR TRADING AND THROUGH LOW ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 15 VOLUME TRANSACTIONS. IT HAS BEEN FOUND THAT THE VALUE OF SCRIP WAS GRADUALLY RAISED SUBSTANTIALLY WITHIN A PERIOD OF ABOUT ONE YEAR AND THE SHARES WERE SOLD THROUGH A SET O F EXIT PROVIDERS WHO MANIPULATED AND BOOK E D HUGE LOS SES . IT IS GATHERED THAT INITIALLY NATIONWIDE SEARCHES WERE CARRIED OUT BY INVESTIGATION WING, KOLKATA OF THE INCOME TAX DEPARTMENT IN DECEMBER 2014 , DURING THE COURSE OF WHICH IT WAS FOUND THAT VARIOUS PERSONS HAD RECEIVED ENTRIES OF LONG TERM CAPITAL GAINS THROUGH RIGGIN G OF SH ARES OF SMALL LISTED COMPANIES AND THE NAME OF THE PR ESE N T ASSESSEE PROMINENTLY APPEARED THEREIN. DURING THE C OURSE OF S EARCH IT WAS ACCEPTED BY THE STOCK BROKERS THAT R E LE VA NT COMPANIES WE R E BOGUS C OMPANIES (JAMA KHARCHI COMPA NIES ) A ND TH A T T H EY WER E BEING USED ONLY FOR PROVIDING ACCOMMOD A TI ON ENTR I E S . STATEMENTS OF VARIOUS ENTRY OPERATORS, DIR E CTORS OF COMPANIES WERE ALSO RECORDED WHEREIN TH E Y HAD A C CEPTED THAT TH E SE C O M PAN I ES WERE BEING USED FOR PROVIDING BOGUS LONG TERM CAPI T AL GAINS. TH E SE FACTS HAVE BEEN ELABORATELY DISCUSSED BY THE CIT(A), AND ALSO BY TH E AO, WHICH AR E THE SUB J ECT MATTER OF THE PRESENT APPEAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THIS CASE THE ASSESSEE HAS APPLIED FOR 10,000 EQUITY SHARES OF RS.10 EACH OF M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. IN THE PREFERENTIAL ALLOTMENT FOR A CONSIDERATION OF RS.10,00,000/- DURING THE FINANCIAL YEAR 2017-18 AND THESE SHARES WERE ALLOTTED ON 29.09.2012. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 16 THEREAFTER, THE SAID COMPANY ISSUED BONUS SHARES IN THE RATIO OF 1:3 AND THE ASSESSEE BECAME THE OWNER OF 40,000 SHARES WHICH WERE TRANSFERRED TO D-MAT ACCOUNT OF THE ASSESSEE ON 29.01.2013. OUT OF THESE SHARES, 36,000 SHARES WERE SOLD ON VARIOUS DATES COMMENCING FROM 11.04.2014 TO 12.08.2014 AND ASSESSEE WAS LEFT WITH 4000 EQUITY SHARES TILL 15.01.2015. THEREAFTER, THE SHARES OF RS.10 EACH WERE SPLIT INTO 10 SHARES OF FACE VALUE OF RS.1 EACH AND ACCORDINGLY THE ASSESSEE WAS ALLOTTED 40,000 EQUITY SHARES ON 10.01.2015 IN LIEU OF 4000 EQUITY SHARES AND THEREAFTER ASSESSEE SOLD 20,000 SHARES, 10,000 SHARES ON 20.02.2015 AND ANOTHER 10,000 SHARES ON 10.03.2015 AND CLAIMED THE GAIN ON THE SAID SHARES AS EXEMPT UNDER SECTION 10(38) OF THE ACT. WE NOTE THAT THE ASSESSEE HAS INVESTED IN THESE SHARES BY MAKING A PAYMENT THROUGH ACCOUNT PAYEE CHEQUES FROM THE REGULAR BANK ACCOUNT OF THE ASSESSEE AND WERE HELD IN D-MAT ACCOUNT AND AFTER BEING HELD FOR MORE THAN 12 MONTHS THESE SHARES WERE SOLD THROUGH THE RECOGNIZED STOCK EXCHANGE THROUGH THE REGISTERED BROKERS ON VARIOUS DATES AS STATED ABOVE THEREBY MAKING A LONG TERM CAPITAL GAIN OF RS.1,88,45,952/-. NOW THE ISSUE BEFORE US IS WHETHER THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT IS CORRECT OR NOT. WE ALSO NOTE THAT THE COMPANY M/S. ECO FRIENDLY FOOD PROCESSING PARK LTD. IN WHICH THE ASSESSEE INVESTED MONEY AND EARNED LONG TERM CAPITAL GAIN OF RS.1,88,45,952/- IS A LISTED COMPANY ON THE STOCK EXCHANGE AND SUBJECTED TO VARIOUS RULES AND REGULATIONS AND COMPLIANCES WHICH HAS TO BE COMPLIED WITH BEFORE MAKING ANY ALLOTMENT TO THE APPLICANT UNDER PREFERENTIAL ALLOTMENT PROCESS. WE HAVE ALSO EXAMINED THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 17 VARIOUS DOCUMENTS FILED BY THE ASSESSEE IN THE PAPER BOOK REGARDING DATE OF APPLICATION FOR PREFERENTIAL ALLOTMENT , ALLOTMENT OF EQUITY SHARES, MODE OF PAYMENT OF SHARES THROUGH ACCOUNT PAYEE CHEQUE, PERIOD OF HOLDING AND SALES OF THESE SHARES THROUGH ONLINE SCREEN BASED TRADING ON BOLT PLATFORM OF STOCK EXCHANGE AND ALSO THE PROOF OF EXPENSES INCURRED BY THE ASSESSEE BY WAY OF BROKERAGE, SERVICE TAX, STT, STAMP DUTY, EXCHANGE AND SEBI TURNOVER CHARGES ETC. THE ASSESSEE HAS FILED ALL THESE PROOFS BEFORE THE AO AS WELL AS THE LD. CIT(A) AS HAS BEEN STATED HEREINABOVE AND ARE BEING REPRODUCED FOR THE SAKE OF CONVENIENCE. I. EVIDENCE OF PURCHASE OF SHARES APPLICATION OF SHARES, ALLOTMENT OF SHARES, SHARE CERTIFICATES II. EVIDENCE OF PAYMENT FOR PURCHASE OF SHARES MADE BY ACCOUNT PAYEE CHEQUES, COPY OF BANK STATEMENTS III. COPY OF DEMAT STATEMENT REFLECTING PURCHASE IV. COPY OF DEMAT STATEMENT SHOWING SALE OF SHARES V. COPIES OF CONTRACT NOTE OF SALES OF SHARES VI. COPY OF BANK STATEMENT REFLECTING SALES RECEIPT THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE BY DISBELIEVING ALL THE ABOVE DOCUMENTS WHICH ARE A THIRD PARTY DOCUMENTS AND TREATED THE SALE OF SHARES AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT ON THE GROUND THAT ASSESSEE HAS EARNED THIS LONG TERM CAPITAL GAIN BY TRADING IN PENNY STOCK COMPANY AND RELIED HEAVILY ON THE INVESTIGATION REPORT OF DIRECTORATE OF INVESTIGATION WING, KOLKATA, UPWARD MOVEMENT OF SHARE PRICES, STATEMENTS RECORDED BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA OF VARIOUS PARTIES SUCH AS SHRI SOUMEN CHODHURY , RAJ KUMAR KEDIA AND OTHERS. THUS WE NOTE THAT AO HAS RELIED MAINLY ON THE STATEMENT OF THIRD PARTIES AND CIRCUMSTANTIAL EVIDENCES AND NO SUBSTANTIVE AND SPECIFIC ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 18 MATERIAL WAS BROUGHT ON RECORD TO PROVE THESE ALLEGATIONS AND SIMILARLY LD. CIT(A) HAS REPRODUCED THE ENTIRE ORDER OF AO AND UPHELD THE SAME BY HOLDING THAT ASSESSEE WAS BENEFICIARY OF ACCOMMODATION RACKET AND DOUBTED ONLY THE MANIFOLD INCREASE IN THE SHARE PRICE BY REJECTING THE FACTS ON RECORD AND VARIOUS EVIDENCING AND CORROBORATING THOSE FACTS. THE ASSESSEE HAS FURNISHED VARIOUS DOCUMENTS AS STATED HEREINABOVE TO CORROBORATE THE CLAIM UNDER SECTION 10(38) OF THE ACT. WE NOTE THAT ASSESSEE HAS FURNISHED ALL THE DETAILS QUA BANK ACCOUNTS, D-MAT AND TRADING ACCOUNT, PROCESS OF PREFERENTIAL ALLOTMENT AND THE PERSON TO WHOM THE INVESTMENTS WERE MADE AND ALSO THE CONTRACT NOTE QUA THE SALE OF SHARES ON THE RECOGNIZED STOCK EXCHANGE THROUGH REGISTERED STOCK BROKERS. WE ALSO NOTE THAT IN THE INVESTIGATION CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA AND ALSO IN THE STATEMENTS RECORDED OF VARIOUS INDIVIDUALS AS STATED HEREINABOVE. WE FIND THAT NOWHERE THE ASSESSEES NAME FIGURED AND NO EVIDENCES WERE FOUND DURING THE COURSE OF SEARCH AND THE ENTIRE ALLEGATIONS WERE BASED UPON THE SURMISES AND CONJUNCTURES. THE SHARES WERE DULY ALLOTTED TO THE ASSESSEE AND WERE RECORDED IN THE D-MAT ACCOUNT AND THEREAFTER WERE SOLD ON THE BOMBAY STOCK EXCHANGE THROUGH THE REGISTERED BROKER AND SCREEN BASED TRADING WHERE THE BUYER AND SELLER OF THE SHARES ARE NOT AWARE OF EACH OTHER AND THE FACT THAT THE CONSIDERATION WAS PAID AND RECEIVED THROUGH BANKING CHANNELS. MOREOVER, THE AUTHORITIES BELOW HAVE FAILED TO ESTABLISH THE MONEY TRAIL INVOLVED IN THE TRANSACTION AND HAS ONLY GUESSED THAT ASSESSEE MIGHT HAVE PAID HIS OWN MONEY TO ROUTE THE SAME INTO BOOKS OF ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 19 ACCOUNTS. THUS WE NOTE THAT THE FINDING OF THE AO IN DISCUSSING THE MODUS OPERANDI OF THE SCAM AND DISMISSING THE VARIOUS STATEMENTS OF THE EXIT PROVIDERS IS ONLY GENERAL IN NATURE WHICH NOWHERE STATES THE NAME OF THE ASSESSEE. THE AO HAS ALSO FAILED TO ESTABLISH A LINK AMONG THESE REPORTS, STATEMENTS AND THE INVESTMENT MADE BY THE ASSESSEE AND THEREFORE THE ADDITION MADE CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ADAMINE CONSTRUCTION PVT. LTD. 99 TAXMAN 45 WHEREIN WHILE DISMISSING THE APPEAL OF THE REVENUE HAS REFERRED TO THE FOLLOWING OBSERVATION OF THE HONBLE DELHI HIGH COURT. WHAT IS EVIDENT IS THAT THE AO WENT BY ONLY THE REPORT RECEIVED AND DID NOT MAKE THE NECESSARY FURTHER ENQUIRIES - SUCH AS INTO THE BANK ACCOUNTS OR OTHER PARTICULARS AVAILABLE WITH HIM BUT RATHER RECEIVED THE ENTIRE FINDINGS ON THE REPORT, WHICH CANNOT BE CONSIDERED AS PRIMARY MATERIAL. THE ASSESSEE HAD DISCHARGED THE ONUS INITIALLY CAST UPON IT BY PROVIDING THE BASIC DETAILS WHICH WERE NOT SUITABLY ENQUIRED INTO BY THE AO. 8.1. FURTHER, WE NOTE THAT THE AO HAS RELIED ON THE STATEMENT OF HIS THIRD PARTIES WITHOUT AFFORDING ANY REASONABLE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THOSE PARTIES WHICH IS IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. CCE (CA) NO.4228 OF 2006 WHEREIN IT WAS HELD THAT NOT ALLOWING ASSESSEE TO CROSS EXAMINE THE WITNESS BY ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF 6 WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS NULLITY IN AS MUCH AS WHICH AMOUNTS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. BESIDES THE ADDITION MERELY ON THE BASIS OF SUSPENSION, ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 20 CONJUNCTURE AND SURMISES CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF HONBLE APEX COURT IN THE CASE OF OMAR SALAY MOHAMED SAIT V/S CIT (1959) 37 ITR 151. THE HONBLE APEX COURT IN THE CASE OF UMACHARAN SHAW & BROS. VS CIT (1959 37 ITR 271) HAS HELD THAT SUSPICION HOW SO FAR STRONG COULD NOT TAKE THE CHARACTER OF LEGAL EVIDENCE. THUS WE NOTE THAT NONE OF THE PARTIES ALLEGED BY THE REVENUE SUCH AS BROKER, OPERATOR, DIRECTORS, EXIT PROVIDERS ETC. WHOSE STATEMENTS WERE RECORDED BY THE DIRECTORATE OF INVESTIGATION WING, KOLKATA STATED THE NAME OF THE APPELLANT/HIS FAMILY MEMBER. THE CASE OF THE ASSESSEE IS SUPPORTED BY A SERIES OF DECISIONS AS HAS BEEN RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEFORE US AS UNDER: (A) IN THE CASE OF KUNAL DEDHIA VS. DCIT ITA NO.3893/M/2019 A.Y. 2014-15 & ORS. ORDER DATED 31.07.2020 THE BENCH OBSERVED AS UNDER: 22. THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 DEALS WITH A CASE, WHERE ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF AN ASSESSEE IN ANY FINANCIAL YEAR AND ASSESSEE OFFERS NO EXPLANATION ABOUT NATURE AND SOURCE OR EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY IN THE OPINION OF THE AC, THEN SUM CREDITED MAY BE CHARGED TO TAX FOR THAT ASSESSMENT YEAR. IN CASE, ANY SUM FOUND CREDITED IN ANY FINANCIAL YEAR, THE ASSESSEE IS REQUIRED TO PROVE, THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDIT WORTHINESS OF THE CREDITOR. IN THIS CASE, ALTHOUGH THE AO HAS BROUGHT SUM RECEIVED TOWARDS SALE OF SHARES AS UNEXPLAINED CREDIT, BUT THE SAME-NEEDS TO BE EXAMINED WITH REFERENCE TO FIRST TWO ASPECTS OF SECTION 68 OF THE ACT, BEING THE IDENTITY AND GENUINENESS OF THE TRANSACTION AND THE OTHER ASPECT BEING CREDIT WORTHINESS IS STRICTLY NOT NECESSARY, BECAUSE THE SUM RECEIVED TOWARDS SALE OF SHARES IS NEITHER A LOAN NOR A CREDIT. THEREFORE, THE TRANSACTION IS REQUIRED TO BE TESTED UNDER FIRST TWO LIMBS, I.E. THE IDENTITY AND THE GENUINENESS OF THE TRANSACTION. TO PROVE IDENTITY OF SUM RECEIVED TOWARDS SALE OF SHARES, THE ASSESSEE HAS FILED COMPLETE DETAILS OF AMOUNT RECEIVED FROM THE BROKER WHO FACILITATE TRANSFER OF SHARES INCLUDING, CONTRACT NOTE ISSUED BY THE BROKER FOR SALE OF SHARES IN BSE, LEDGER POLIO SIGNED BY THE BROKER, CONFIRMATION FROM THE BROKER. IN FACT, THERE IS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 21 NO DISPUTE WITH REGARD TO IDENTITY OF THE BROKER, BECAUSE THE BROKER WHO SOLD SHARES FOR THE ASSESSEE WAS A REGISTERED BROKER WITH BSE/NSE, IN SO FAR AS GENUINENESS OF TRANSACTION, TRANSFER OF SHARES IS MADE THROUGH DEMAT FORMAT IN BSE PLATFORM. THERE IS NO LINK OR NEXUS BETWEEN THE BUYER OF SHARES AND THE ASSESSEE. ALTHOUGH, THE AO, LINKED SALE OF SHARES TO SO CALLED EXIT PROVIDERS FROM WHOM THE ASSESSEE HAD INITIALLY PURCHASED SHARES, BUT SAID TRANSACTION WAS DONE ALMOST TWO YEAR LATER. THE ASSESSES HAS PAID STT ON TRANSFER OF SHARES. THE SHARES HAVE BEEN TRANSFERRED TO THE BUYER AFTER PAYMENT OF APPLICABLE STAMP- DUTY AND THE SHARE TRANSFER AGENT ENDORSED THE SALE. THE SALE PROCEEDS HAVE BEEN PAID THOROUGH BANK. THE SALE HAS BEEN MADE ON THE PREVAILING QUOTED RATE IN STOCK EXCHANGE ON THE DATE OF SALE. AS REGARDS ALLEGATION OF THE AO REGARDING JACKING OF SHARES PRICE THROUGH GROUP OF PERSONS INVOLVED IN THE ALLEGED SCAM, WE FIND THAT ALTHOUGH SEBI HAS SUSPENDED TRADING PARTICULAR SCRIPT IN BSE/NSE PENDING ENQUIRY, BUT AFTER ENQUIRY SUSPENSION WAS REVOKED AND ONLY AFTER THE SCRIPT, WAS AGAIN STARTS TRADING IN EXCHANGES, THE ASSESSEE HAS PURCHASED SHARES. FROM THE ABOVE, IT IS VERY CLEAR THAT THE OBSERVATIONS OF THE AO IN HIS ASSESSMENT ORDER ON THE BASIS OF REPORT OF INVESTIGATION WING, KOLKATA IS A GENERAL OBSERVATION OF MODUS OPERANDI OF CERTAIN BROKERS MAY BE INVOLVED IN ALLEGED SCAM OF LTCG, BUT IT CANNOT BE A CONCLUSIVE EVIDENCE TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE OF HAVING BENEFITED FROM SO CALLED ALLEGED SCARN. NO DOUBT, AN ALLEGED SCAM MAY HAVE TAKEN PLACE. BUT, IT HAS TO BE SEEN WHETHER THE ASSESSEE IS PART OF AN ALLEGED SCAM AND HE HAD ANY DIRECT OR INDIRECT ROLE IN ALLEGED SCAM. UNLESS, THE EVIDENCES IN THE POSSESSION OF THE AO DIRECTLY OR INDIRECTLY LINKED TO THE ASSESSEE, IT IS DIFFICULT TO IMPLICATE THE ASSESSEE IN THE ALLEGED SCAM. THIS IS BECAUSE, SUSPICION HOWEVER STRONG, CANNOT TAKE PLACE OF EVIDENCE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAW & BROS VS. CIT(1959) 37 ITR 271(SC). IN OUR CONSIDERED VIEW, ON THE BASIS SUSPICION, MODUS OPERAND!, PREPONDERANCE OF HUMAN PROBABILITIES, THE CLAIM OF ASSESSEE CANNOT BE DISCARDED, UNLESS SPECIFIC EVIDENCES ARE BROUGHT ON RECORD TO CONTROVERT VOLUMINOUS EVIDENCES FILED BY THE ASSESSEE. THIS VIEW IS FORTIFIED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF OMAN SALAY MOHAMED SAIT VS. CIT (1959) 37 ITR 151(SC> WHERE IT WAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SUSPICION AND CONJECTURES. IN THE CASE OF CIT VS. DAULAT RAM RAWATMUIL (1973) 87 ITR 349 (SC) IT WAS HELD THAT THE ONUS TO PROVE THAT APPARENT IS NOT REAL IS ON THE PERSON WHO CLAIMS IT TO BE SO. (B) IN THE CASE OF VIJAYRATTAN BALKRISHAN MITTAL VS. DCIT ITA NO.3429/M/2019 & ORS. ORDER DATED 01.10.2019, THE CO- ORDINATE BENCH HAS HELD UNDER SIMILAR FACTS BY FOLLOWING VARIOUS DECISIONS OF THE APEX COURT AND HONBLE BOMBAY HIGH COURT THAT ADDITION MADE WHILE REJECTING THE CLAIM OF THE ASSESSEE UNDER SECTION 10(38) OF THE ACT BE DELETED VIDE PARA NO.30 TO 37 OF THE SAID DECISION. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 22 (C) IN THE CASE OF MUKESH B. SHARMA VS. ITO ITA NO.6249/M/2018 A.Y. 2014-15 ORDER DATED 29.05.2019 THE SCIP INVOLVED WAS OF THE SAME COMPANY AND THE ADDITION WAS DELETED BY THE CO-ORDINATE BENCH BY OBSERVING AND HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE PRIMARY FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THE SAME ARE NOT REITERATED FOR THE SAKE OF BREVITY. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS WITH REGARD TO PURCHASE OF SHARES :- A) COPY OF RELEVANT EXTRACT OF BANK STATEMENT REFLECTING THE PAYMENT OF RS 30 LACS MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUE TO THE COMPANY DIRECTLY AND SOURCE THEREOF ALONG WITH ALLOTMENT LETTER ISSUED BY THE SAID COMPANY (I.E GIFL) AND COPY OF SHARE CERTIFICATE ISSUED BY GIFL TO THE ASSESSEE ON 12.6.2012. THESE DOCUMENTS ARE ENCLOSED IN PAGES 71 TO 73 OF PAPER BOOK. B) DEMAT ACCOUNT HELD WITH NKGSB CO-OPERATIVE BANK LIMITED REFLECTING CREDIT OF SHARES PURCHASED (ENCLOSED IN PAGE 154 OF PAPER BOOK). C) COPY OF APPROVAL LETTER FROM GIFL. D) COPY OF ALLOTMENT LETTER FROM GIFL FOR SHARES ALLOTTED TO THE ASSESSEE. E) COPY OF SHARE CERTIFICATE ISSUED BY GIFL. F) VARIOUS EVENTS REPORTED BY GIFL TO BSE. 6.1. THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS WITH REGARD TO SALE OF SHARES:- A) COPY OF DEMAT STATEMENT REFLECTING THE SALE OF SHARES. B) COPIES OF CONTRACT NOTES ISSUED BY BOTH THE BROKERS FOR SALE OF SHARES. C) COPY OF HOLDING STATEMENT FOR FINANCIAL YEARS 2012-13 AND 2013-14. D) PRICE CHART OF GIFL FROM THE DATE OF PURCHASE OF SHARES TILL THE RECENT PERIOD. E) COPY OF RELEVANT EXTRACT OF BANK STATEMENT OF THE ASSESSEE REFLECTING THE SALE PROCEEDS RECEIVED FROM THE BROKER AND CREDITED TO THE BANK ACCOUNT. 6.2 WE FIND THAT THE ASSESSEE PLEADED THAT IN AN ONLINE PLATFORM, THERE WOULD BE NO NEXUS BETWEEN THE PURCHASERS AND THE SELLER AND THE DELIVERY OF SHARES AND PAYMENTS WOULD BE MADE THROUGH THEIR RESPECTIVE STOCK BROKERS. HENCE THE LD AO OUGHT TO HAVE SUMMONED THE ASSESSEES BROKERS TO EXAMINE THE AUTHENTICITY OF THE SALE OF SHARES OF GIFL AND THE AMOUNT RECEIVED ON SALE OF SHARES. WE FIND THAT THE LD AR ALSO PLACED EVIDENCES ON RECORD TO PROVE THAT THE SAID COMPANY GIFL IS STILL LISTED IN THE STOCK EXCHANGE AND SHARES OF THIS COMPANY ARE BEING TRADED AND SEBI HAD NOT ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 23 PASSED ANY ADVERSE ORDER AGAINST THE SAID COMPANY. WE FIND THAT THE DETAILS OF REVENUE AND PROFITS OF GIFL FOR VARIOUS YEARS ARE AS UNDER:- FINANCIAL YEAR ENDING REVENUE PROFIT 31.3.2012 191 LACS 7.97 LACS 31.3.2013 1515.58 LACS 105.13 LACS 31.3.2014 2487 LACS 161 LACS 31.3.2015 3836 LACS 76 ACS 6.3. WE FIND THAT THE LD AO HAD PLACED RELIANCE ON CERTAIN STATEMENTS RECORDED BY THE INVESTIGATION WING OF KOLKATA INCOME TAX DEPARTMENT DURING SOME SURVEY PROCEEDINGS CONDUCTED IN THIRD PARTY CASES. WE FIND THAT IN NONE OF THOSE STATEMENTS, THE NAME OF THE ASSESSEE OR THE NAME OF THE BROKERS THROUGH WHOM ASSESSEE HAD TRANSACTED WERE MENTIONED. WE ALSO FIND THAT THERE IS NO MENTION OF ANY CONNIVANCE ON THE PART OF THE ASSESSEE WITH THE SHARE BROKER AND STOCK EXCHANGE TO LAUNDER THE UNACCOUNTED MONIES OF THE ASSESSEE AND BRING IT BACK IN THE FORM OF SALE PROCEEDS OF SHARES AND CLAIM EXEMPTION U/S 10(38) OF THE ACT FOR THE LONG TERM CAPITAL GAINS DERIVED THEREON. NONE OF THE PARTIES ON WHOM SURVEY ACTIONS WERE CONDUCTED IN KOLKATA WERE RELATED TO ASSESSEE OR THE BROKERS IN ANY MANNER WHATSOEVER. WE FIND THAT THE VARIOUS PURCHASE AND SALE DETAILS TOGETHER WITH THE SUPPORTING EVIDENCES WERE NOT CONTROVERTED BY THE REVENUE BEFORE US. EVEN THE CROSS EXAMINATION OF THE PARTIES MENTIONED IN THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE BY THE LD AO WERE SOUGHT BY THE ASSESSEE AND THE SAME WERE REFUSED BY THE LD AO . WE FIND THAT THE LD AO HAD ALSO PLACED RELIANCE ON THE ORDER PASSED BY SEBI WHILE CONCLUDING THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN THE FORM OF SALE OF SHARES AS SHAM AND BOGUS. FROM THE PERUSAL OF THE SEBI ORDER DATED 25.8.2016 IN THE CASE OF FIRST FINANCIAL SERVICES LTD, WE FIND THAT FROM THE EXTRACTS THEREON, THAT IT WAS STATED THAT M/S GIFL WAS INVOLVED IN PROVIDING EXIT TO THE SELLERS OF EQUITY SHARES OF FIRST FINANCIAL SERVICES LTD AND NO WHERE STATED THAT THIS COMPANY WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF CAPITAL GAINS BY TRANSACTING ITS OWN SHARES THROUGH THE ALLEGED BOGUS OPERATORS. WE ALSO FIND THAT THE SEBI HAD PASSED ON ORDER DATED 8.1.2018 IN THE CASE OF GIFL, WHEREIN IT WAS FOUND THAT THE NAME OF THE ASSESSEE HEREIN OR THE BROKERS THROUGH WHOM THE ASSESSEE TRANSACTED WERE NOT EVEN INCLUDED IN THE SAID ORDER AS PARTIES AGAINST WHOM ANY ADVERSE INFERENCE / FINDINGS WERE FOUND IN RESPECT OF VIOLATION OF PROVISIONS OF SEBI. WE FIND THAT SEBI HAD ISSUED A SHOW CAUSE NOTICE VIDE REFERENCE SEBI/EAD- 12/SM/EE/693/25/2018 DATED 8.1.2018 WHICH ARE ENCLOSED IN PAGES 252 TO 266 OF THE PAPER BOOK. IN PAGES 257 AND 258 OF THE PAPER BOOK, THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED BY SEBI IS LISTED OUT. IN THE ENTIRE LIST, NEITHER THE NAME OF THE ASSESSEE NOR HIS LBROKERS WERE INCLUDED. LATER THERE WAS ANOTHER SHOW CAUSE NOTICE VIDE REFERENCE EFD/DRA3/OW/NB/6663/2018 DATED 1.3.2018 WAS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 24 ISSUED BY ENFORCEMENT DEPARTMENT OF SEBI MENTIONING THE LIST OF PARTIES TO WHOM SHOW CAUSE NOTICES WERE ISSUED. EVEN IN THIS LIST, THE NAME OF THE ASSESSEE OR HIS BROKER WAS NOT INCLUDED BY SEBI. HENCE IT COULD BE SAFELY CONCLUDED THAT SEBI DID NOT ALLEGE ANY WRONG DOING ON THE PART OF THE ASSESSEE OR HIS BROKERS WITH REGARD TO CARRYING OUT TRANSACTIONS IN SALE OF SHARES OF GIFL IN OPEN MARKET IN ONLINE PLATFORM. IN THIS SUBSEQUENT SHOW CAUSE NOTICE DATED 1.3.2018, THE SEBI ALSO TAKES RECORDS THE FACT OF ISSUANCE OF SHARES ON PREFERENTIAL ALLOTMENT BASIS ON 12.6.2012 BY GIFL TO VARIOUS PARTIES (WHICH INCLUDES THE ASSESSEE ALSO THOUGH NOT NAMED IN THE SEBI SHOW CAUSE NOTICE). IN THIS SHOW CAUSE NOTICE ALSO, THE SEBI ONLY ACCUSED NOTICE NO. 1 TO 7 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS, TO HAVE ENGAGED IN MANIPULATION OF PRICE OF THE SCRIP OF GIFL. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED THAT NOTICE NOS. 13 TO 46 LISTED IN THE SAID NOTICE WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS, TO HAVE SOLD THE SHARES AT INFLATED PRICE AND BOOKED SUBSTANTIAL PROFIT. THE SAID SHOW CAUSE NOTICE DATED 1.3.2018 ALSO STATED NOTICES NOS. 8 TO 12 (WHICH ADMITTEDLY DOES NOT INCLUDE THE ASSESSEE OR HIS BROKERS) WERE PART OF THE MANIPULATIVE SCHEME TO MAKE PREFERENTIAL ALLOTMENT AND MANIPULATE THE PRICE, THROUGH, ENTITIES CONNECTED TO COMPANY AND PROMOTER, TO BENEFIT PROMOTER, PROMOTER RELATED ENTITIES AND CONNECTED PREFERENTIAL ALLOTTEES. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE OR HIS BROKERS WERE EITHER THE PROMOTERS OF GIFL, OR PROMOTER RELATED ENTITIES OF GIFL OR RELATED TO CONNECTED PREFERENTIAL ALLOTTEES THEREON. HENCE IT COULD BE SAFELY CONCLUDED THAT THE SEBI HAD NOT FOUND ANY ADVERSE FINDINGS WITH REGARD TO THE ASSESSEE OR HIS REGISTERED SHARE BROKERS VIS A VIS GIFL. HENCE THERE IS ABSOLUTELY NO IOTA OF EVIDENCE LINKING THE ASSESSEE OR THE REGISTERED BROKERS TO EVEN REMOTELY ALLEGE THAT THEY WERE INVOLVED IN ARTIFICIAL RIGGING OF PRICE OF SCRIPS WHICH WERE DEALT BY THE ASSESSEE HEREIN. 6.4 WE FIND THAT THE LD AO HAD STATED THAT GIFL IS A COMPANY OF NO VALUE. THE REVENUE STREAM AND THE PROFITABILITY CHART REPRODUCED HEREINABOVE DOES NOT SUPPORT THE CASE OF THE LD AO. MOREOVER, THE STATUS REPORTED BY THE LD AO ABOUT GIFL WAS IN ASST YEAR 2008-09 WHICH IS NEITHER THE YEAR OF PURCHASE OF SHARES BY THE ASSESSEE NOR THE YEAR OF SALE OF SHARES IN OPEN MARKET. HENCE THOSE FINDINGS ARE TOTALLY IRRELEVANT FOR ADJUDICATION OF THE ISSUE BEFORE US. 6.5. WE FIND THAT THE REVENUE HAD MERELY DISBELIEVED THE ENTIRE DOCUMENTARY EVIDENCES ON RECORD AND ALLEGED THE SHARE SALE TRANSACTIONS MADE IN THE OPEN MARKET AS BOGUS BASED ON THE STATEMENTS RECORDED DURING SURVEY, WHICH DOES NOT HAVE ANY EVIDENTIARY VALUE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF S.KHADER KHAN (2008) 300 ITR 157 (MAD) ASSUMES SIGNIFICANCE, WHEREIN IT WAS HELD THAT :- AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE , BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON , WHO MADE IT, TO SHOW IT HAS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 25 INCORRECTLY BEEN MADE AND THE PERSON, MAKING THE STATEMENT SHOULD BE GIVEN PROPER OPPORTUNITY TO SHOW THAT IT DOES NOT SHOW THE CORRECT STATE OF FACTS. THE MATERIALS FOUND IN THE COURSE OF SURVEY COULD NOT BE THE BASIS FOR MAKING ANY ADDITION IN THE ASSESSMENT. THE WORD MAY USED IN SECTION 133A(3)(III) MAKES IT CLEAR THAT THE MATERIAL COLLECTED AND STATEMENT RECORDED DURING THE SURVEY U/S 133A OF THE ACT ARE NOT CONCLUSIVE PIECE OF EVIDENCES BY ITSELF. THE AFORESAID DECISION WAS AFFIRMED BY THE HONOURABLE SUPREME COURT IN CIT , SALEM VS S.KHADER KHAN IN CIVIL APPEAL NO. 13224 OF 2008 & 6747 OF 2012 DATED 20.9.2012, WHEREIN THEIR LORDSHIPS OF SUPREME COURT HELD AS UNDER:- CIT VS S KHADER KHAN SON REPORTED IN (2012) 25 TAXMANN.COM 413 (SC) / 210 TAXMAN 248 (SC) AND 254 CTR 228 (SC) HEARD COUNSEL ON BOTH THE SIDES. LEAVE GRANTED. THE CIVIL APPEAL FILED BY THE DEPARTMENT PERTAINS TO ASSESSMENT YEAR 2001- 02. IN VIEW OF THE CONCURRENT FINDINGS OF FACT, THIS CIVIL APPEAL IS DISMISSED. IN ANY CASE, WE FIND THAT THESE STATEMENTS WERE NEVER SUBJECTED TO ANY CROSS EXAMINATION BY THE ASSESSEE DESPITE THE REQUEST MADE BY THE ASSESSEE IN THIS REGARD, WHICH HAS BEEN SUMMARILY REJECTED BY THE LD AO. THIS FACT IS ALSO RECORDED BY THE LD AO IN HIS ASSESSMENT ORDER. HENCE IN THESE CIRCUMSTANCES, WE HOLD THAT NO ADDITION COULD BE MADE MERELY BASED ON THE STATEMENTS RECORDED DURING SURVEY. 6.6. ONE MORE EXCRUCIATING FACTOR WHICH GOES IN FAVOUR OF THE ASSESSEE IS THAT THE ASSESSEE HAD SOLD ONLY 883000 SHARES OUT OF 2000000 SHARES HELD BY HIM AND THE REMAINING SHARES WERE RETAINED BY THE ASSESSEE. HENCE THE ALLEGATIONS LEVELED ON THE ASSESSEE THAT ASSESSEE HAD CONVERTED HIS UNACCOUNTED MONEY IN THE FORM OF LONG TERM CAPITAL GAINS CLAIMED AS EXEMPT DOES NOT HOLD WATER . EVEN THESE 883000 SHARES WERE SOLD AFTER HOLDING THE SAME FOR A SUBSTANTIAL MINIMUM PERIOD OF 26 MONTHS BY THE ASSESSEE FROM THE DATE OF ITS PURCHASE. MOREOVER, WHEN THE PURCHASE OF SHARES MADE BY THE ASSESSEE HAS BEEN ACCEPTED AS GENUINE WHICH WAS DONE IN ASST YEAR 2013-14, THE SALE OF THE VERY SAME SHARES IN PART IN ASST YEAR 2014-15 IN OPEN MARKET AT PREVAILING MARKET PRICES AFTER SUFFERING STT SHOULD NOT BE DOUBTED . NONE OF THE DOCUMENTS FILED BY THE ASSESSEE WITH REGARD TO PURCHASE AND SALE OF SHARES HAVE BEEN FOUND TO BE DEFICIENT IN ANY MANNER WHATSOEVER BY THE REVENUE. FROM THE TURNOVER CHART STATED HEREINABOVE, IT COULD BE SEEN THAT THE REVENUE OF GIFL HAD INCREASED FROM RS 191 LACS AS ON 31.3.2012 TO RS 2487 LACS AS ON 31.3.2014. THIS GOES TO PROVE THAT THE PROJECTIONS GIVEN BY THE SAID COMPANY IN ITS INVITATION LETTER TO THE ASSESSEE REQUESTING FOR MAKING PREFERENTIAL APPLICATION OF SHARES HAD PROVED TO BE CORRECT AND CANNOT BE DOUBTED. 6.7. WE FIND THAT THE LD AO HAD FURNISHED CERTAIN LIST OF PARTIES WHO WERE ALLEGED PURCHASERS OF SHARES FROM THE ASSESSEE WHEN IT WAS SOLD IN THE OPEN MARKET BY THE ASSESSEE. THE ASSESSEE HAD PLEADED THAT SINCE THE SHARES WERE SOLD IN THE OPEN MARKET IN ONLINE PLATFORM, HE IS NOT AWARE OF THE NAME OF THE PARTIES AS TO WHO HAD BOUGHT THE SAME IN THE OPEN MARKET. THE LD AO SOUGHT TO ISSUE SUMMONS TO THOSE ALLEGED PURCHASERS OF SHARES U/S 131 OF THE ACT, WHICH REMAIN UNCOMPLIED BY THOSE PARTIES. BASED ON THIS, THE LD AO HAD DRAWN AN ADVERSE INFERENCE AGAINST THE ASSESSEE DISREGARDING THE ENTIRE DOCUMENTARY EVIDENCES ON RECORD AND THE PREVAILING MARKET PRACTICES WITH REGARD TO PURCHASE AND SALE OF SHARES IN THE OPEN MARKET IN ONLINE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 26 PLATFORM. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD RECEIVED THE SALE PROCEEDS OF SHARES FROM THE REGISTERED BROKER THROUGH THE STOCK EXCHANGE ONLY AND NOT FROM THE ALLEGED PURCHASERS OF SHARES DIRECTLY. MOREOVER, THE LD AO STATES THAT THE ASSESSEE HAD SOLD THE SHARES AT RS 211.76 PER SHARE WHEREAS THE AVERAGE SALE PRICE OF THE ASSESSEE WAS ONLY RS 89 PER SHARE. 6.8. WE FIND THAT THE LD DR MADE GENERAL SUBMISSIONS WITH REGARD TO THE INVESTIGATIONS CARRIED OUT BY KOLKATA INCOME TAX DEPARTMENT AFTER IDENTIFYING 84 SCRIPS TO BE PENNY STOCKS AND THE MODUS OPERANDI ADOPTED BY THOSE SCRIPS WITH THE CONNIVANCE OF VARIOUS ENTRY OPERATORS, BROKERS AND STOCK EXCHANGE. WE FIND THAT THE LD DR WAS NOT SPECIFICALLY ABLE TO CONTROVERT THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE FOR PURCHASE AND SALE OF SHARES AND VARIOUS OTHER DOCUMENTS REFERRED TO IN THE PAPER BOOK MORE PARTICULARLY THE SEBI SHOW CAUSE NOTICE AS DETAILED HEREINABOVE, EXCEPT STATING THAT SEBI SHOW CAUSE NOTICE WAS ISSUED IN THE NAME OF GIFL, THE SCRIP IN WHICH ASSESSEE DEALT. THE LD DR ALSO SOUGHT PERMISSION FROM THE BENCH TO GRANT TIME FOR FILING HIS WRITTEN SUBMISSIONS WITH REGARD TO THE ENTIRE APPEAL. NO SUCH WRITTEN SUBMISSION WAS FILED BY THE LD DR TILL THE DATE OF DICTATION OF THIS ORDER. THE LD DR DREW OUR ATTENTION TO THE STATEMENT RECORDED FROM THE ASSESSEE BY THE LD AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON 19.12.2016, THE GIST OF WHICH IS MENTIONED IN PAGE 31 OF ASSESSMENT ORDER. WE HAVE GONE THROUGH THE SAME AND WE FIND THAT THE ASSESSEE HAD STATED BEFORE THE LD AO THAT HE HAD MADE INVESTMENT IN SHARES OF GIFL WITHOUT LOOKING INTO THE FUNDAMENTALS OF THE SAID COMPANY AND BASED ON INFORMATION GIVEN BY A FAMILY FRIEND. WE HAVE ALREADY SEEN THE DOCUMENTARY EVIDENCES AVAILABLE ON RECORD WHEREIN THE ASSESSEE IN RESPONSE TO AN INVITATION LETTER ISSUED BY GIFL FOR MAKING INVESTMENT IN PREFERENTIAL ALLOTMENT BASIS, HAD ISSUED ACCOUNT PAYEE CHEQUES AND GOT THE SHARES ALLOTTED IN HIS NAME ON PREFERENTIAL ALLOTMENT BASIS. THESE FACTS HAVE ALSO BEEN NOTED BY SEBI IN THE SECOND SHOW CAUSE NOTICE DATED 1.3.2018 WHICH HAS BEEN DISCUSSED HEREINABOVE. MERELY BECAUSE THE ASSESSEE HIMSELF IS ENGAGED IN INDEPENDENT MANUFACTURING BUSINESS , IT CANNOT BE SAID THAT ALL HIS INVESTMENT DECISIONS WOULD BE PRUDENT AND WOULD BE DONE ONLY AFTER ANALYZING THE ENTIRE FUNDAMENTALS AND FINANCIALS OF THE INVESTEE COMPANY. IT IS IN EVERYBODYS KNOWLEDGE, THAT AN INVESTOR WOULD TRY TO TAKE CALCULATED RISKS BY INVESTING HIS MONEY ON AN UNKNOWN SCRIP BASED ON CERTAIN INFORMATION FROM FRIENDS, RELATIVES, OR IN SOME STOCK MARKET RELATED WEBSITES AND TAKE A CHANCE. SINCE THE SCRIP PURCHASED BY THE ASSESSEE WAS SHOWING CONSIDERABLE GROWTH FROM THE TIME OF PURCHASE, THE ASSESSEE BEING A GULLIBLE INVESTOR, CONTINUED TO HOLD IT FOR A PERIOD OF 26 MONTHS AND LATER SOLD IT IN OPEN MARKET IN ONLINE PLATFORM AT PREVAILING MARKET PRICES. 6.9. WE FIND THAT THE CO-ORDINATE BENCH OF KOLKATA TRIBUNAL IN ITA NO.354/KOL/2018 IN SANJEEV GOEL (HUF) VS. ITO DATED 24.08.2018 ON SIMILAR SET OF FACTS AND CIRCUMSTANCES HAD HELD AS FOLLOWS:- 4. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 5. IN IDENTICAL CASES, THE SUBMISSION OF THE ASSESSEE, FINDINGS OF THE ASSESSING OFFICER, FINDINGS OF THE LD. CIT(A) AND THE CONCLUSION OF THE TRIBUNAL HAVE BEEN BROUGHT OUT AS UNDER:- 6. THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 27 I. THE INITIAL ALLOTMENT OF SHARES TO BENEFICIARIES IS GENERALLY DONE THROUGH PREFERENTIAL ALLOTMENT. II. THE MARKET PRICE OF SHARES OF THESE COMPANIES RISE TO VERY HIGH LEVEL WITHIN A SPAN OF ONE YEAR. III. THE TRADING VOLUME OF SHARES DURING THE PERIOD, IN WHICH MANIPULATIONS ARE DONE TO RAISE THE MARKET PRICE, IS EXTREMELY THIN. IV. MOST OF THE PURPORTED INVESTORS ARE RETURNED THEIR INITIAL INVESTMENT AMOUNT IN CASH. ONLY SMALL AMOUNT IS RETAINED BY THE OPERATOR AS SECURITY. THUS, AN ENQUIRY WOULD REVEAL THAT MOST OF THE CAPITAL RECEIPTS THROUGH PREFERENTIAL ALLOTMENT OR OTHER MEANS WOULD HAVE FOUND THEIR WAY OUT OF SYSTEM AS CASH. V. MOST OF THESE COMPANIES HAVE NO BUSINESS AT ALL. FEW OF THE COMPANIES WHICH HAVE SOME BUSINESS DO NOT HAVE THE CREDENTIALS TO JUSTIFY THE SHARP RISE IN MARKET PRICE OF THEIR SHARES. VI. THE SHARP RISE IN MARKET PRICE OF THE SHARES OF THESE ENTITIES IS NOT SUPPORTED BY FUNDAMENTALS OF THE COMPANY OR ANY OTHER GENUINE FACTORS. VII. AN ANALYSIS IN RESPECT OF PERSONS INVOLVED IN TRANSACTIONS APPARENTLY CARRIED OUT IN ORDER TO JACK UP THE SHARE PRICES HAS BEEN DONE IN RESPECT OF 84 COMPANIES. IT HAS BEEN NOTED THAT MANY COMMON PERSONS/ENTITIES WERE INVOLVED IN TRADING IN MORE THAN 1 LTCG COMPANIES DURING THE PERIOD WHEN THE SHARES WERE MADE TO RISE WHICH IMPLIES THAT THEY HAD CONTRIBUTED TO SUCH PRICE RISE. VIII. NAMES OF MOST OF THE LTCG COMPANIES ARE CHANGED DURING THE PERIOD OF THE SCAM. IX. MOST OF THE COMPANIES SPLIT THE FACE VALUE OF SHARES [THIS IS PROBABLY DONE TO AVOID THE EYES OF MARKET ANALYSTS]. X. THE VOLUME OF TRADE JUMPS MANIFOLD IMMEDIATELY WHEN THE MARKET PRICES OF SHARES REACH AT OPTIMUM LEVEL SO AS TO RESULT IN LTCG ASSURED TO THE BENEFICIARIES. THIS MAXIMUM IS REACHED AROUND THE TIME WHEN THE INITIAL ALLOTTEES HAVE HELD THE SHARES FOR ONE YEAR OR LITTLE MORE AND THUS, THEIR GAIN ON SALE OF SUCH SHARES WOULD BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX. XI. AN ANALYSIS OF SHARE BUYERS OF SOME OF LTCG COMPANIES WAS DONE TO SEE IF THERE WERE COMMON PERSONS/ENTITIES INVOLVED IN BUYING THE BOGUS INFLATED SHARES. IT WAS NOTED THAT THERE WERE MANY COMMON BUYERS [WHICH WERE PAPER COMPANIES]. XII. THE PRICES OF THE SHARES FALL VERY SHARPLY AFTER THE SHARES OF LTCG BENEFICIARIES HAVE BEEN OFF LOADED THROUGH THE PRE-ARRANGED TRANSACTIONS ON THE STOCK EXCHANGE FLOOR/PORTAL TO THE SHORT TERM LOSS SEEKERS OR DUMMY PAPER ENTITIES. XIII. THE SHARES OF THESE COMPANIES ARE NOT AVAILABLE FOR BUY/SELL TO ANY PERSON OUTSIDE THE SYNDICATE. THIS IS GENERALLY ENSURED BY WAY OF SYNCHRONIZED TRADING BY THE OPERATORS AMONGST THEMSELVES AND/OR BY UTILIZING THE MECHANISM OF UPPER/LOWER CIRCUIT OF THE EXCHANGE. 7. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 28 8. THE FIRST APPELLATE AUTHORITY UPHELD THE ORDER OF THE ASSESSING OFFICER BY GIVING HIS FINDINGS AS FOLLOWS:- A) THE AO HAD PLACED ON RECORD THE ENTIRE GAMUT OF FINDING AND THERE IS NO FURTHER REQUIREMENT FOR ELABORATION. B) THERE IS DIRECT EVIDENCE TO CLEARLY INDICATE THAT THE ENTIRE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS MERELY AN ACCOMMODATION TAKEN FOR THE PURPOSE OF BOGUS LONG TERM CAPITAL GAINS TO CLAIM EXEMPT INCOME. THE AUTHORITIES SUCH AS SEBI HAVE AFTER INVESTIGATING SUCH ABNORMAL PRICE INCREASE OF CERTAIN STOCKS, SUSPENDED CERTAIN SCRIPS. C) THE SUBMISSIONS OF THE ASSESSEE POINTED OUT TOWARDS ELABORATE DOCUMENTATION SUCH AS : I) APPLICATION OF SHARES. II) ALLOTMENT OF SHARES. III) SHARE CERTIFICATES IV) PAYMENT BY CHEQUES V) FILINGS BEFORE REGISTRAR OF COMPANIES. VI) PROOF OF AMALAGAMATION OF COMPANIES. VII) COPIES OF BANK STATEMENT, VIII) BANK CONTRACT NOTES. IX) DELIVERY INSTRUCTION TO THE BROKER ETC. D) THE ELABORATE PAPER BOOK IS FILED TO STRENGTHEN THE MATTER RELEVANT TO BOGUS CLAIM OF LTCG, AND THIS IS CLEARLY BEEN SCHEMED AND PRE-PLANNED WITH MALAFIDE INTENTION. THEREFORE, ALL THESE DOCUMENTS ARE NOT EVIDENCE. E) THE TRANSACTIONS ARE UNNATURAL AND HIGHLY SUSPICIOUS. THERE ARE GRAVE DOUBTS IN THE STORY PROPOUNDED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. BANKING DOCUMENTS ARE MERE SELF-SERVING RECITALS. 9. THEREAFTER HE REFERRED TO A NUMBER OF JUDGMENTS RELATING TO HUMAN BEHAVIOR AND PREPONDERANCE OF HUMAN PROBABILITIES AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER BY RELYING ON WHAT HE CALLS RULES OF SUSPICIOUS TRANSACTIONS. 10. THE ASSESSEE IN THIS CASE HAS FILED THE FOLLOWING EVIDENCE BEFORE THE ASSESSING OFFICER IN SUPPORT OF HIS CONTENTIONS:- A) COPIES OF BILLS, EVIDENCING PURCHASE OF SHARES B) COPIES OF CONTRACT NOTES OF SALE OF SHARES C) BANK STATEMENT COPIES D) COPY OF LEDGER A/C OF BROKER E) DEMAT STATEMENT ETC. THE ASSESSING OFFICER HAS JUST RELIED ON GENERAL OBSERVATIONS. NO EVIDENCE WAS CONTROVERTED BY THE ASSESSING OFFICER. 11. THE KOLKATA BENCH OF THE ITAT IN A NUMBER OF DECISIONS HAVE, ON SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE LIST SOME OF THESE DECISIONS:- SHRI GAUTAM KUMAR PINCHA VS. ITO, ITA NO. 569/KOL/2017, DT. 15/11/2017 ITO VS. SHRI SHALEEN KHEMANI, ITA NO. 1945/KOL/2014, DT. 18/10/2017 ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 29 MAHENDRA KUMAR BAID VS. ACIT, CIRCLE-35; ITA NO. 1237/KOL/2017; ORDER DT. 18/08/2017 KIRAN KOTHARI HUF VS. ITO, ITA NO. 443/KOL/2017, ORDER DT. 15/11/2017 THE HONBLE JURISDICTIONAL HIGH COURT ON SIMILAR FACTS, HAD IN THE FOLLOWING CASES, UPHELD THE CLAIM OF THE ASSESSEE:- CIT VS. SHREYASHI GANGULI (ITA NO. 196 OF 2012) (CAL HC) 2012 (9) TMI 1113 CIT VS. RUNGTA PROPERTIES PRIVATE LIMITED (ITA NO. 105 OF 2016) (CAL HC)DT. 08/05/2017 CIT VS. BHAGWATI PRASAD AGARWAL (2009 TMI-34738 (CAL HC) IN ITA NO. 22 OF 2009 DATED 29.04.2009 11. RECENTLY, THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF NAVNEET AGARWAL,-VS- ITO, WARD-35(3), KOLKATA; I.T.A. NO. 2281/KOL/2017; ASSESSMENT YEAR: 2014-15, WHILE DEALING WITH IDENTICAL ISSUE OF SALE OF SHARES OF M/S. CRESSENDA SOLUTIONS PVT. LTD., DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY RELYING UPON A PLETHORA OF JUDGMENTS OF VARIOUS COURTS. IT HELD AS FOLLOWS:- 12. THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE REJECTED THESE EVIDENCES FILED BY THE ASSESSEE BY REFERRING TO MODUS OPERANDI OF PERSONS FOR EARNING LONG TERM CAPITAL GAINS WHICH HIS EXEMPT FROM INCOME TAX. ALL THESE OBSERVATIONS ARE GENERAL IN NATURE AND ARE APPLIED ACROSS THE BOARD TO ALL THE 60,000 OR MORE ASSESSEES WHO FALL IN THIS CATEGORY. SPECIFIC EVIDENCES PRODUCED BY THE ASSESSEE ARE NOT CONTROVERTED BY THE REVENUE AUTHORITIES. NO EVIDENCE COLLECTED FROM THIRD PARTIES IS CONFRONTED TO THE ASSESSES. NO OPPORTUNITY OF CROSS-EXAMINATION OF PERSONS, ON WHOSE STATEMENTS THE REVENUE RELIES TO MAKE THE ADDITION, IS PROVIDED TO THE ASSESSEE. THE ADDITION IS MADE BASED ON A REPORT FROM THE INVESTIGATION WING. 13. THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER, 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, HUMAN BEHAVIOR AND DISCOVERY OF THE MODUS OPERANDI ADOPTED IN EARNING ALLEGED BOGUS LTCG AND STCG, THAT HAVE SURFACED DURING INVESTIGATIONS, SHOULD GUIDE THE AUTHORITIES IN ARRIVING AT A CONCLUSION AS TO WHETHER THE CLAIM IN GENUINE OR NOT. AN ALLEGED SCAM MIGHT HAVE TAKEN PLACE ON LTCG ETC. BUT IT HAS TO BE ESTABLISHED IN EACH CASE, BY THE PARTY ALLEGING SO, THAT THIS ASSESSEE IN QUESITON WAS PART OF THIS SCAM. THE CHAIN OF EVENTS AND THE LIVE LINK OF THE ASSESEES ACTION GIVING HER INVOLVEMENT IN THE SCAM SHOULD BE ESTABLISHED. THE ALLEGATION IMPLY THAT CASH WAS PAID BY THE ASSESSEE AND IN RETURN THE ASSESSEE RECEIVED LTCG, WHICH IS INCOME EXEMPT FROM INCOME TAX, BY WAY OF CHEQUE THROUGH BANKING CHANNELS. THIS ALLEGATION THAT CASH HAD CHANGED HANDS, HAS TO BE PROVED WITH EVIDENCE, BY THE REVENUE. EVIDENCE GATHERED BY THE DIRECTOR INVESTIGATIONS OFFICE BY WAY OF STATEMENTS RECORDED ETC. HAS TO ALSO BE BROUGHT ON RECORD IN EACH CASE, WHEN SUCH A STATEMENT, EVIDENCE ETC. IS RELIED UPON BY THE REVENUE TO MAKE ANY ADDITIONS. OPPORTUNITY OF CROSS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 30 EXAMINATION HAS TO BE PROVIDED TO THE ASSESEE, IF THE AO RELIES ON ANY STATEMENTS 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 REJECTED BASED ON MERE CONJECTURES UNVERIFIED BY EVIDENCE UNDER THE PRETENTIOUS GARB OF PREPONDERANCE OF HUMAN PROBABILITIES AND THEORY OF HUMAN BEHAVIOR BY THE DEPARTMENT. 14. 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 RELIES ONLY ON A REPORT AS THE BASIS FOR THE ADDITION. THE EVIDENCE BASED ON WHICH THE DDIT REPORT IS PREPARED IS NOT BROUGHT ON RECORD BY THE AO NOR IS IT PUT BEFORE THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT SHE IS JUST AN INVESTOR AND AS SHE RECEIVED SOME TIPS AND SHE CHOSE TO INVEST BASED ON THESE MARKET TIPS AND HAD TAKEN A CALCULATED RISK AND HAD GAINED IN THE PROCESS AND THAT SHE IS NOT PARTY TO THE SCAM ETC., HAS TO BE CONTROVERTED BY THE REVENUE WITH EVIDENCE. WHEN A PERSON CLAIMS THAT SHE HAS DONE THESE TRANSACTIONS IN A BONA FIDE AND GENUINE MANNER AND WAS BENEFITTED, ONE CANNOT REJECT THIS SUBMISSION BASED ON SURMISES AND CONJECTURES. AS THE REPORT OF INVESTIGATION WING SUGGESTS, THERE ARE MORE THAN 60,000 BENEFICIARIES OF LTCG. EACH CASE HAS TO BE ASSESSED BASED ON LEGAL PRINCIPLES OF LEGAL IMPORT LAID DOWN BY THE COURTS OF LAW. 15. IN OUR VIEW 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 BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF OMAR SALAV MOHAMED SAIT REPORTED IN (1959) 37 ITR 151 (S C) HAD HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF SURMISES, SUSPICION AND CONJECTURES. IN THE CASE OF CIT(CENTRAL), KOLKATA VS. DAULAT RAM RAWATMULL REPORTED IN 87 ITR 349, THE HON'BLE SUPREME COURT HELD THAT, THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. THE BURDEN OF PROVING A TRANSACTION TO BE BOGUS HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCES, WHICH WOULD DIRECTLY PROVE THE FACT OF BOGUSNESS OR ESTABLISH CIRCUMSTANCE UNERRINGLY AND REASONABLY RAISING AN INTERFERENCE TO THAT EFFECT. THE HON'BLE SUPREME COURT IN THE CASE OF UMACHARAN SHAH & BROS. VS. CIT 37 ITR 271 HELD THAT SUSPICION HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE. 16. WE FIND THAT THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAS BEEN GUIDED BY THE REPORT OF THE INVESTIGATION WING PREPARED WITH RESPECT TO BOGUS CAPITAL GAINS TRANSACTIONS. HOWEVER WE DO NOT FIND THAT, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A), HAVE BROUGHT OUT ANY PART OF THE INVESTIGATION WING REPORT IN WHICH THE ASSESSEE HAS BEEN INVESTIGATED AND /OR FOUND TO BE A PART OF ANY ARRANGEMENT FOR THE PURPOSE OF GENERATING BOGUS LONG TERM CAPITAL GAINS. NOTHING HAS BEEN BROUGHT ON RECORD TO ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 31 SHOW THAT THE PERSONS INVESTIGATED, INCLUDING ENTRY OPERATORS OR STOCK BROKERS, HAVE NAMED THAT THE ASSESSEE WAS IN COLLUSION WITH THEM. IN ABSENCE OF SUCH FINDING HOW IS IT POSSIBLE TO LINK THEIR WRONG DOINGS WITH THE ASSESSEE. IN FACT THE INVESTIGATION WING IS A SEPARATE DEPARTMENT WHICH HAS NOT BEEN ASSIGNED ASSESSMENT WORK AND HAS BEEN DELEGATED THE WORK OF ONLY MAKING INVESTIGATION. THE ACT HAS VESTED WIDEST POWERS ON THIS WING. IT IS THE DUTY OF THE INVESTIGATION WING TO CONDUCT PROPER AND DETAILED INQUIRY IN ANY MATTER WHERE THERE IS ALLEGATION OF TAX EVASION AND AFTER MAKING PROPER INQUIRY AND COLLECTING PROPER EVIDENCES THE MATTER SHOULD BE SENT TO THE ASSESSMENT WING TO ASSESS THE INCOME AS PER LAW. WE FIND NO SUCH ACTION EXECUTED BY INVESTIGATION WING AGAINST THE ASSESSEE. IN ABSENCE OF ANY FINDING SPECIFICALLY AGAINST THE ASSESSEE IN THE INVESTIGATION WING REPORT, THE ASSESSEE CANNOT BE HELD TO BE GUILTY OR LINKED TO THE WRONG ACTS OF THE PERSONS INVESTIGATED. IN THIS CASE, IN OUR VIEW, THE ASSESSING OFFICER AT BEST COULD HAVE CONSIDERED THE INVESTIGATION REPORT AS A STARTING POINT OF INVESTIGATION. THE REPORT ONLY INFORMED THE ASSESSING OFFICER THAT SOME PERSONS MAY HAVE MISUSED THE SCRIPT FOR THE PURPOSE OF COLLUSIVE TRANSACTION. THE ASSESSING OFFICER WAS DUTY BOUND TO MAKE INQUIRY FROM ALL CONCERNED PARTIES RELATING TO THE TRANSACTION AND THEN TO COLLECT EVIDENCES THAT THE TRANSACTION ENTERED INTO BY THE ASSESSEE WAS ALSO A COLLUSIVE TRANSACTION. WE, HOWEVER, FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE TRANSACTIONS ENTERED BY THE ASSESSEE WHICH ARE OTHERWISE SUPPORTED BY PROPER THIRD PARTY DOCUMENTS ARE COLLUSIVE TRANSACTIONS. 17. THE HONBLE SUPREME COURT WAY BACK IN THE CASE OF LALCHAND BHAGAT AMBICA RAM VS. CIT [1959] 37 ITR 288 (SC) HELD THAT ASSESSMENT COULD NOT BE BASED ON BACKGROUND OF SUSPICION AND IN ABSENCE OF ANY EVIDENCE TO SUPPORT THE SAME. THE HONBLE COURT HELD: ADVERTING TO THE VARIOUS PROBABILITIES WHICH WEIGHED WITH THE INCOME-TAX OFFICER WE MAY OBSERVE THAT THE NOTORIETY FOR SMUGGLING FOOD GRAINS AND OTHER COMMODITIES TO BENGAL BY COUNTRY BOATS ACQUIRED BY SAHIBGUNJ AND THE NOTORIETY ACHIEVED BY DHULIAN AS A GREAT RECEIVING CENTRE FOR SUCH COMMODITIES WERE MERELY A BACKGROUND OF SUSPICION AND THE APPELLANT COULD NOT BE TARRED WITH THE SAME BRUSH AS EVERY ARHATDAR AND GRAIN MERCHANT WHO MIGHT HAVE BEEN INDULGING IN SMUGGLING OPERATIONS, WITHOUT AN IOTA OF EVIDENCE IN THAT BEHALF. THE CANCELLATION OF THE FOOD GRAIN LICENCE AT NAWGACHIA AND THE PROSECUTION OF THE APPELLANT UNDER THE DEFENCE OF INDIA RULES WAS ALSO OF NO CONSEQUENCE INASMUCH AS THE APPELLANT WAS ACQUITTED OF THE OFFENCE WITH WHICH IT HAD BEEN CHARGED AND ITS LICENCE ALSO WAS RESTORED. THE MERE POSSIBILITY OF THE APPELLANT EARNING CONSIDERABLE AMOUNTS IN THE YEAR UNDER CONSIDERATION WAS A PURE CONJECTURE ON THE PART OF THE INCOME-TAX OFFICER AND THE FACT THAT THE APPELLANT INDULGED IN SPECULATION (IN KALAI ACCOUNT) COULD NOT LEGITIMATELY LEAD TO THE INFERENCE THAT THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 32 PROFIT IN A SINGLE TRANSACTION OR IN A CHAIN OF TRANSACTIONS COULD EXCEED THE AMOUNTS, INVOLVED IN THE HIGH DENOMINATION NOTES,--- THIS ALSO WAS A PURE CONJECTURE OR SURMISE ON THE PART OF THE INCOME-TAX OFFICER. AS REGARDS THE DISCLOSED VOLUME OF BUSINESS IN THE YEAR UNDER CONSIDERATION IN THE HEAD OFFICE AND IN BRANCHES THE INCOME-TAX OFFICER INDULGED IN SPECULATION WHEN HE TALKED OF THE POSSIBILITY OF THE APPELLANT EARNING A CONSIDERABLE SUM AS AGAINST WHICH IT SHOWED A NET LOSS OF ABOUT RS. 45,000. THE INCOME-TAX OFFICER INDICATED THE PROBABLE SOURCE OR SOURCES 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 IN ITS BUSINESS WAS THE RESULT OF PURE CONJECTURES AND SURMISES ON HIS PART AND HAD NO FOUNDATION IN FACT AND WAS NOT PROVED AGAINST THE APPELLANT ON THE RECORD OF THE PROCEEDINGS. IF THE CONCLUSION OF THE INCOME-TAX OFFICER WAS THUS EITHER PERVERSE OR VITIATED BY SUSPICIONS, CONJECTURES OR SURMISES, THE FINDING OF THE TRIBUNAL WAS EQUALLY PERVERSE OR VITIATED IF THE TRIBUNAL TOOK COUNT OF ALL THESE PROBABILITIES AND WITHOUT ANY RHYME OR REASON AND MERELY BY A RULE OF THUMB, AS IT WERE, CAME TO THE CONCLUSION THAT THE POSSESSION OF 150 HIGH DENOMINATION NOTES OF RS. 1,000 EACH WAS SATISFACTORILY EXPLAINED BY THE APPELLANT BUT NOT THAT OF THE BALANCE OF 141 HIGH DENOMINATION NOTES OF RS. 1,000 EACH. THE OBSERVATIONS OF THE HONBLE APEX COURT ARE EQUALLY APPLICABLE TO THE CASE OF THE ASSESSEE. IN OUR VIEW THE ASSESSING OFFICER HAVING FAILED TO BRING ON RECORD ANY MATERIAL TO PROVE THAT THE TRANSACTION OF THE ASSESSEE WAS A COLLUSIVE TRANSACTION COULD NOT HAVE REJECTED THE EVIDENCES SUBMITTED BY THE ASSESSEE. IN FACT IN THIS CASE NOTHING HAS BEEN FOUND AGAINST THE ASSESSEE WITH AID OF ANY DIRECT EVIDENCES OR MATERIAL AGAINST THE ASSESSEE DESPITE THE MATTER BEING INVESTIGATED BY VARIOUS WINGS OF THE INCOME TAX DEPARTMENT HENCE IN OUR VIEW UNDER THESE CIRCUMSTANCES NOTHING CAN BE IMPLICATED AGAINST THE ASSESSEE. 18. WE NOW CONSIDER THE VARIOUS PROPOSITIONS OF LAW LAID DOWN BY THE COURTS OF LAW. THAT CROSS-EXAMINATION IS ONE PART OF THE PRINCIPLES OF NATURAL JUSTICE HAS BEEN LAID DOWN IN THE FOLLOWING JUDGMENTS: A) AYAAUBKHAN NOORKHAN PATHAN VS. THE STATE OF MAHARASHTRA AND ORS. 23. A CONSTITUTION BENCH OF THIS COURT IN STATE OF M.P. V. CHINTAMAN SADASHIVA VAISHAMPAYAN AIR 1961 SC 1623, HELD THAT THE RULES OF NATURAL JUSTICE, REQUIRE THAT A PARTY MUST BE GIVEN THE OPPORTUNITY TO ADDUCE ALL RELEVANT EVIDENCE UPON WHICH HE RELIES, AND FURTHER THAT, THE EVIDENCE OF THE OPPOSITE PARTY SHOULD BE TAKEN IN HIS PRESENCE, AND THAT HE SHOULD BE GIVEN THE OPPORTUNITY OF CROSS- ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 33 EXAMINING THE WITNESSES EXAMINED BY THAT PARTY. NOT PROVIDING THE SAID OPPORTUNITY TO CROSS-EXAMINE WITNESSES, WOULD VIOLATE THE PRINCIPLES OF NATURAL JUSTICE. (SEE ALSO: UNION OF INDIA V. T.R. VARMA, AIR 1957 SC 882; MEENGLAS TEA ESTATE V. WORKMEN, AIR 1963 SC 1719; M/S. KESORAM COTTON MILLS LTD. V. GANGADHAR AND ORS. ,AIR 1964 SC 708; NEW INDIA ASSURANCE CO. LTD. V. NUSLI NEVILLE WADIA AND ANR. AIR 2008 SC 876; RACHPAL SINGH AND ORS. V. GURMIT SINGH AND ORS. AIR 2009 SC 2448; BIECCO LAWRIE AND ANR. V. STATE OF WEST BENGAL AND ANR. AIR 2010 SC 142; AND STATE OF UTTAR PRADESH V. SAROJ KUMAR SINHA AIR 2010 SC 3131). 24. IN LAKSHMAN EXPORTS LTD. V. COLLECTOR OF CENTRAL EXCISE (2005) 10 SCC 634, THIS COURT, WHILE DEALING WITH A CASE UNDER THE CENTRAL EXCISE ACT, 1944, CONSIDERED A SIMILAR ISSUE I.E. PERMISSION WITH RESPECT TO THE CROSS-EXAMINATION OF A WITNESS. IN THE SAID CASE, THE ASSESSEE HAD SPECIFICALLY ASKED TO BE ALLOWED TO CROSS-EXAMINE THE REPRESENTATIVES OF THE FIRMS CONCERN, TO ESTABLISH THAT THE GOODS IN QUESTION HAD BEEN ACCOUNTED FOR IN THEIR BOOKS OF ACCOUNTS, AND THAT EXCISE DUTY HAD BEEN PAID. THE COURT HELD THAT SUCH A REQUEST COULD NOT BE TURNED DOWN, AS THE DENIAL OF THE RIGHT TO CROSS- EXAMINE, WOULD AMOUNT TO A DENIAL OF THE RIGHT TO BE HEARD I.E. AUDI ALTERAM PARTEM. 28. THE MEANING OF PROVIDING A REASONABLE OPPORTUNITY TO SHOW CAUSE AGAINST AN ACTION PROPOSED TO BE TAKEN BY THE GOVERNMENT, IS THAT THE GOVERNMENT SERVANT IS AFFORDED A REASONABLE OPPORTUNITY TO DEFEND HIMSELF AGAINST THE CHARGES, ON THE BASIS OF WHICH AN INQUIRY IS HELD. THE GOVERNMENT SERVANT SHOULD BE GIVEN AN OPPORTUNITY TO DENY HIS GUILT AND ESTABLISH HIS INNOCENCE. HE CAN DO SO ONLY WHEN HE IS TOLD WHAT THE CHARGES AGAINST HIM ARE. HE CAN THEREFORE, DO SO BY CROSS-EXAMINING THE WITNESSES PRODUCED AGAINST HIM. THE OBJECT OF SUPPLYING STATEMENTS IS THAT, THE GOVERNMENT SERVANT WILL BE ABLE TO REFER TO THE PREVIOUS STATEMENTS OF THE WITNESSES PROPOSED TO BE EXAMINED AGAINST HIM. UNLESS THE SAID STATEMENTS ARE PROVIDED TO THE GOVERNMENT SERVANT, HE WILL NOT BE ABLE TO CONDUCT AN EFFECTIVE AND USEFUL CROSS-EXAMINATION. 29. IN RAJIV ARORA V. UNION OF INDIA AND ORS. AIR 2009 SC 1100, THIS COURT HELD: EFFECTIVE CROSS-EXAMINATION COULD HAVE BEEN DONE AS REGARDS THE CORRECTNESS OR OTHERWISE OF THE REPORT, IF THE CONTENTS OF THEM WERE PROVED. THE PRINCIPLES ANALOGOUS TO THE PROVISIONS OF THE INDIAN EVIDENCE ACT AS ALSO THE PRINCIPLES OF NATURAL JUSTICE DEMAND THAT THE MAKER OF THE REPORT SHOULD BE EXAMINED, SAVE AND EXCEPT IN CASES WHERE THE FACTS ARE ADMITTED OR THE WITNESSES ARE NOT AVAILABLE FOR CROSS-EXAMINATION OR SIMILAR SITUATION. THE HIGH COURT IN ITS IMPUGNED JUDGMENT PROCEEDED TO CONSIDER THE ISSUE ON A TECHNICAL PLEA, NAMELY, NO PREJUDICE HAS BEEN CAUSED TO THE APPELLANT BY SUCH NON- EXAMINATION. IF THE BASIC PRINCIPLES OF ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 34 LAW HAVE NOT BEEN COMPLIED WITH OR THERE HAS BEEN A GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE, THE HIGH COURT SHOULD HAVE EXERCISED ITS JURISDICTION OF JUDICIAL REVIEW. 30. THE AFORESAID DISCUSSION MAKES IT EVIDENT THAT, NOT ONLY SHOULD THE OPPORTUNITY OF CROSS-EXAMINATION BE MADE AVAILABLE, BUT IT SHOULD BE ONE OF EFFECTIVE CROSS-EXAMINATION, SO AS TO MEET THE REQUIREMENT OF THE PRINCIPLES OF NATURAL JUSTICE. IN THE ABSENCE OF SUCH AN OPPORTUNITY, IT CANNOT BE HELD THAT THE MATTER HAS BEEN DECIDED IN ACCORDANCE WITH LAW, AS CROSS-EXAMINATION IS AN INTEGRAL PART AND PARCEL OF THE PRINCIPLES OF NATURAL JUSTICE. B) ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF C. EX., KOLKATA-II WHEREIN IT WAS HELD THAT: 4. WE HAVE HEARD MR. KAVIN GULATI, LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE, AND MR. K. RADHAKRISHNAN, LEARNED SENIOR COUNSEL WHO APPEARED FOR THE REVENUE. 5. ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS ADVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPELLANT WANTED FROM THEM. 6. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 35 AUTHORITY SIMPLY RELIED UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS- EXAMINATION AND MAKE THE REMARKS AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 7. 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 AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAUSE NOTICE. 19. ON SIMILAR FACTS WHERE THE REVENUE HAS ALLEGED THAT THE ASSESSEE HAS DECLARED BOGUS LTCG, IT WAS HELD AS FOLLOWS: A) THE CALCUTTA HIGH COURT IN THE CASE OF BLB CABLES & CONDUCTORS [ITA NO. 78 OF 2017] DATED 19.06.2018. THE HIGH COURT HELD VIDE PARA 4.1: WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WHERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANSACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DULY SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED THE BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSEES APPEAL. [ QUOTED VERBATIM ] THIS IS ESSENTIALLY A FINDING OF THE TRIBUNAL ON FACT. NO MATERIAL HAS BEEN SHOWN TO US WHO WOULD NEGATE THE TRIBUNALS FINDING THAT OFF MARKET TRANSACTIONS ARE NOT PROHIBITED. AS REGARDS VERACITY OF THE TRANSACTIONS, THE TRIBUNAL HAS COME TO ITS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 36 CONCLUSION ON ANALYSIS OF RELEVANT MATERIALS. THAT BEING THE POSITION, TRIBUNAL HAVING ANALYZED THE SET OF FACTS IN COMING TO ITS FINDING, WE DO NOT THINK THERE IS ANY SCOPE OF INTERFERENCE WITH THE ORDER OF THE TRIBUNAL IN EXERCISE OF OUR JURISDICTION UNDER SECTION 260A OF THE INCOME TAX ACT, 1961. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THIS APPEAL. THE APPEAL AND THE STAY PETITION, ACCORDINGLY, SHALL STAND DISMISSED. B) THE JAIPUR ITAT IN THE CASE OF VIVEK AGARWAL [ITA NO. 292/JP/2017] ORDER DATED 06.04.2018 HELD AS UNDER VIDE PAGE 9 PARA 3: WE HOLD THAT THE ADDITION MADE BY THE AO IS MERELY BASED ON SUSPICION AND SURMISES WITHOUT ANY COGENT MATERIAL TO CONTROVERT THE EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. FURTHER, THE AO HAS ALSO FAILED TO ESTABLISH THAT THE ASSESSEE HAS BROUGHT BACK HIS UNACCOUNTED INCOME IN THE SHAPE OF LONG TERM CAPITAL GAIN. HENCE WE DELETE THE ADDITION MADE BY THE AO ON THIS ACCOUNT. C) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF PREM PAL GANDHI [ITA-95-2017 (O&M)] DATED 18.01.2018 AT VIDE PAGE 3 PARA 4 HELD AS UNDER: .. THE ASSESSING OFFICER IN BOTH THE CASES ADDED THE APPRECIATION TO THE ASSESSEES INCOME ON THE SUSPICION THAT THESE WERE FICTITIOUS TRANSACTIONS AND THAT THE APPRECIATION ACTUALLY REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES. IN ITA-18-2017 ALSO THE CIT (APPEALS) AND THE TRIBUNAL HELD THAT THE ASSESSING OFFICER HAD NOT PRODUCED ANY EVIDENCE WHATSOEVER IN SUPPORT OF THE SUSPICION. ON THE OTHER HAND, ALTHOUGH THE APPRECIATION IS VERY HIGH, THE SHARES WERE TRADED ON THE NATIONAL STOCK EXCHANGE AND THE PAYMENTS AND RECEIPTS WERE ROUTED THROUGH THE BANK. THERE WAS NO EVIDENCE TO INDICATE FOR INSTANCE THAT THIS WAS A CLOSELY HELD COMPANY AND THAT THE TRADING ON THE NATIONAL STOCK EXCHANGE WAS MANIPULATED IN ANY MANNER. THE COURT ALSO HELD THE FOLLOWING VIDE PAGE 3 PARA 5 THE FOLLOWING: QUESTION (IV) HAS BEEN DEALT WITH IN DETAIL BY THE CIT (APPEALS) AND THE TRIBUNAL. FIRSTLY, THE DOCUMENTS ON WHICH THE ASSESSING OFFICER RELIED UPON IN THE APPEAL WERE NOT PUT TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE CIT (APPEALS) NEVERTHELESS CONSIDERED THEM IN DETAIL AND FOUND THAT THERE WAS NO CO-RELATION BETWEEN THE AMOUNTS SOUGHT TO BE ADDED AND THE ENTRIES IN THOSE DOCUMENTS. THIS WAS ON AN APPRECIATION OF FACTS. THERE IS NOTHING TO INDICATE THAT THE SAME WAS PERVERSE OR IRRATIONAL. ACCORDINGLY, NO QUESTION OF LAW ARISES. D) THE BENCH D OF KOLKATA ITAT IN THE CASE OF GAUTAM PINCHA [ITA ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 37 NO.569/KOL/2017] ORDER DATED 15.11.2017 HELD AS UNDER VIDE PAGE 12 PARA 8.1: IN THE LIGHT OF THE DOCUMENTS STATED I.E. (I TO XIV) IN PARA 6(SUPRA) WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO HAVE ENTERED GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS SUPPORTED WITH MATERIAL EVIDENCES WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE AO/CIT (A). WE NOTE THAT IN THE ABSENCE OF MATERIAL/EVIDENCE THE ALLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE ALSO FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. THESE EVIDENCES WERE NEITHER FOUND BY THE AO NOR BY THE LD. CIT (A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE THAT INCOME FROM LTCG IS EXEMPTED U/S 10(38) OF THE ACT. FURTHER IN PAGE 15 PARA 8.5 OF THE JUDGMENT, IT HELD: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER IS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED BY US TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT (A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE, THEREFORE, DIRECT THE AO TO DELETE THE ADDITION. E) THE BENCH D OF KOLKATA ITAT IN THE CASE OF KIRAN KOTHARI HUF [ ITA NO. 443/KOL/2017 ] ORDER DATED 15.11.2017 HELD VIDE PARA 9.3 HELD AS UNDER: .. WE FIND THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNFOUNDED/UNWARRANTED ALLEGATIONS LEVELED BY THE AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION HAS NO LEGS TO STAND AND THEREFORE HAS TO FALL. WE TAKE NOTE THAT THE LD. DR COULD NOT CONTROVERT THE FACTS WHICH ARE SUPPORTED WITH MATERIAL EVIDENCES FURNISHED BY THE ASSESSEE WHICH ARE ON RECORD AND COULD ONLY RELY ON THE ORDERS OF THE ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 38 AO/CIT(A). WE NOTE THAT THE ALLEGATIONS THAT THE ASSESSEE/BROKERS GOT INVOLVED IN PRICE RIGGING/MANIPULATION OF SHARES MUST THEREFORE CONSEQUENTLY FAIL. AT THE COST OF REPETITION, WE NOTE THAT THE ASSESSEE HAD FURNISHED ALL RELEVANT EVIDENCE IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENT AND BANK ACCOUNT TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELEVANT TO THE PURCHASE AND SALE OF SHARES RESULTING IN LONG TERM CAPITAL GAIN. NEITHER THESE EVIDENCES WERE FOUND BY THE AO NOR BY THE LD. CIT(A) TO BE FALSE OR FICTITIOUS OR BOGUS. THE FACTS OF THE CASE AND THE EVIDENCE IN SUPPORT OF THE EVIDENCE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT THE TRANSACTIONS OF THE ASSESSEE WERE GENUINE AND THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE EXEMPTED U/S 10(38) OF THE ACT ON THE BASIS OF SUSPICION, SURMISES AND CONJECTURES. IT IS TO BE KEPT IN MIND THAT SUSPICION HOW SO EVER STRONG, CANNOT PARTAKE THE CHARACTER OF LEGAL EVIDENCE. IT FURTHER HELD AS FOLLOWS: WE NOTE THAT THE LD. AR CITED PLETHORA OF THE CASE LAWS TO BOLSTER HIS CLAIM WHICH ARE NOT BEING REPEATED AGAIN SINCE IT HAS ALREADY BEEN INCORPORATED IN THE SUBMISSIONS OF THE LD. AR (SUPRA) AND HAVE BEEN DULY CONSIDERED TO ARRIVE AT OUR CONCLUSION. THE LD. DR COULD NOT BRING TO OUR NOTICE ANY CASE LAWS TO SUPPORT THE IMPUGNED DECISION OF THE LD. CIT(A)/AO. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF SALE PROCEEDS OF THE SHARES AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT. WE THEREFORE DIRECT THE AO TO DELETE THE ADDITION. F) THE BENCH A OF KOLKATA ITAT IN THE CASE OF SHALEEN KHEMANI [ITA NO. 1945/KOL/2014] ORDER DATED 18.10.2017 HELD AS UNDER VIDE PAGE 24 PARA 9.3: WE THEREFORE HOLD THAT THERE IS ABSOLUTELY NO ADVERSE MATERIAL TO IMPLICATE THE ASSESSEE TO THE ENTIRE GAMUT OF UNWARRANTED ALLEGATIONS LEVELED BY THE LD AO AGAINST THE ASSESSEE, WHICH IN OUR CONSIDERED OPINION, HAS NO LEGS TO STAND IN THE EYES OF LAW. WE FIND THAT THE LD DR COULD NOT CONTROVERT THE ARGUMENTS OF THE LD AR WITH CONTRARY MATERIAL EVIDENCES ON RECORD AND MERELY RELIED ON THE ORDERS OF THE LD AO. WE FIND THAT THE ALLEGATION THAT THE ASSESSEE AND / OR BROKERS GETTING INVOLVED IN PRICE RIGGING OF SOICL SHARES FAILS. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE FURNISHED ALL EVIDENCES IN THE FORM OF BILLS, CONTRACT NOTES, DEMAT STATEMENTS AND THE BANK ACCOUNTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS RELATING TO PURCHASE AND SALE OF SHARES RESULTING IN LTCG. THESE EVIDENCES WERE NEITHER FOUND BY THE LD AO TO BE FALSE OR FABRICATED. THE FACTS OF THE CASE AND THE EVIDENCES IN SUPPORT OF THE ASSESSEES CASE CLEARLY SUPPORT THE CLAIM OF THE ASSESSEE THAT ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 39 THE TRANSACTIONS OF THE ASSESSEE WERE BONAFIDE AND GENUINE AND THEREFORE THE LD AO WAS NOT JUSTIFIED IN REJECTING THE ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 10(38) OF THE ACT. G) THE BENCH H OF MUMBAI ITAT IN THE CASE OF ARVIND KUMAR JAIN HUF [ITA NO.4682/MUM/2014] ORDER DATED 18.09.2017 HELD AS UNDER VIDE PAGE 6 PARA 8: WE FOUND THAT AS FAR AS INITIATION OF INVESTIGATION OF BROKER IS CONCERNED, THE ASSESSEE IS NO WAY CONCERNED WITH THE ACTIVITY OF THE BROKER. DETAILED FINDING HAS BEEN RECORDED BY CIT (A) TO THE EFFECT THAT ASSESSEE HAS MADE INVESTMENT IN SHARES WHICH WAS PURCHASED ON THE FLOOR OF STOCK EXCHANGE AND NOT FROM M/S BASANT PERIWAL AND CO. AGAINST PURCHASES PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE, DELIVERY OF SHARES WERE TAKEN, CONTRACT OF SALE WAS ALSO COMPLETE AS PER THE CONTRACT ACT, THEREFORE, THE ASSESSEE IS NOT CONCERNED WITH ANY WAY OF THE BROKER. NOWHERE THE AO HAS ALLEGED THAT THE TRANSACTION BY THE ASSESSEE WITH THESE PARTICULAR BROKER OR SHARE WAS BOGUS, MERELY BECAUSE THE INVESTIGATION WAS DONE BY SEBI AGAINST BROKER OR HIS ACTIVITY, ASSESSEE CANNOT BE SAID TO HAVE ENTERED INTO INGENUINE TRANSACTION, INSOFAR AS ASSESSEE IS NOT CONCERNED WITH THE ACTIVITY OF THE BROKER AND HAVE NO CONTROL OVER THE SAME. WE FOUND THAT M/S BASANT PERIWAL AND CO. NEVER STATED ANY OF THE AUTHORITY THAT TRANSACTIONS IN M/S RAMKRISHNA FINCAP PVT. LTD. ON THE FLOOR OF THE STOCK EXCHANGE ARE INGENUINE OR MERE ACCOMMODATION ENTRIES. THE CIT (A) AFTER RELYING ON THE VARIOUS DECISION OF THE COORDINATE BENCH, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, CAME TO THE CONCLUSION THAT TRANSACTION ENTERED BY THE ASSESSEE WAS GENUINE. DETAILED FINDING RECORDED BY CIT (A) AT PARA 3 TO 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT (A). H) THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VIVEK MEHTA [ITA NO. 894 OF 2010] ORDER DATED 14.11.2011 VIDE PAGE 2 PARA 3 HELD AS UNDER: ON THE BASIS OF THE DOCUMENTS PRODUCED BY THE ASSESSEE IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEAL) RECORDED A FINDING OF FACT THAT THERE WAS A GENUINE TRANSACTION OF PURCHASE OF SHARES BY THE ASSESSEE ON 16.3.2001 AND SALE THEREOF ON 21.3.2002. THE TRANSACTIONS OF SALE AND PURCHASE WERE AS PER THE VALUATION PREVALENT IN THE STOCKS EXCHANGE. SUCH FINDING OF FACT HAS BEEN RECORDED ON THE BASIS OF EVIDENCE PRODUCED ON RECORD. THE TRIBUNAL HAS AFFIRMED SUCH FINDING. SUCH FINDING OF FACT IS ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 40 SOUGHT TO BE DISPUTED IN THE PRESENT APPEAL. WE DO NOT FIND THAT THE FINDING OF FACT RECORDED BY THE COMMISSIONER OF INCOME TAX IN APPEAL, GIVES GIVE RISE TO ANY QUESTION(S) OF LAW AS SOUGHT TO BE RAISED IN THE PRESENT APPEAL. HENCE, THE PRESENT APPEAL IS DISMISSED. I) THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BHAGWATI PRASAD AGARWAL IN I.T.A. NO. 22/KOL/2009 DATED 29.04.2009 AT PARA 2 HELD AS FOLLOWS: THE TRIBUNAL FOUND THAT THE CHAIN OF TRANSACTION ENTERED INTO BY THE ASSESSEE HAVE BEEN PROVED, ACCOUNTED FOR, DOCUMENTED AND SUPPORTED BY EVIDENCE. THE ASSESSEE PRODUCED BEFORE THE COMMISSIONER OF INCOME TAX(APPEAL) THE CONTRACT NOTES, DETAILS OF HIS DEMAT ACCOUNT AND, ALSO, PRODUCED DOCUMENTS SHOWING THAT ALL PAYMENTS WERE RECEIVED BY THE ASSESSEE THROUGH BANK. J) THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TEJU ROHITKUMAR KAPADIA ORDER DATED 04.05.2018 UPHELD THE FOLLOWING PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT AS UNDER: IT CAN THUS BE SEEN THAT THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL CAME TO CONCURRENT CONCLUSION THAT THE PURCHASES ALREADY MADE BY THE ASSESSEE FROM RAJ IMPEX WERE DULY SUPPORTED BY BILLS AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. RAJ IMPEX ALSO CONFIRMED THE TRANSACTIONS. THERE WAS NO EVIDENCE TO SHOW THAT THE AMOUNT WAS RECYCLED BACK TO THE ASSESSEE. PARTICULARLY, WHEN IT WAS FOUND THAT THE ASSESSEE THE TRADER HAD ALSO SHOWN SALES OUT OF PURCHASES MADE FROM RAJ IMPEX WHICH WERE ALSO ACCEPTED BY THE REVENUE, NO QUESTION OF LAW ARISES. 20. APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE ABOVE JUDGMENTS TO THE FACTS OF THIS CASE WE ARE BOUND TO CONSIDER AND RELY ON THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM AND BASE OUR DECISION ON SUCH EVIDENCE AND NOT ON SUSPICION OR PREPONDERANCE OF PROBABILITIES. NO MATERIAL WAS BROUGHT ON RECORD BY THE AO TO CONTROVERT THE EVIDENCE FURNISHED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ACCEPT THE EVIDENCE FILED BY THE ASSESSEE AND ALLOW THE CLAIM THAT THE INCOME IN QUESTION IS LONG TERM CAPITAL GAIN FROM SALE OF SHARES AND HENCE EXEMPT FROM INCOME TAX. 12. CONSISTENT WITH THE VIEW TAKEN THEREIN, AS THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE SAME AS THE FACTS AND CIRCUMSTANCES OF THE CASES OF NAVNEET AGARWAL (SUPRA), WE DELETE THE ADDITION MADE U/S 68 OF THE ACT, ON ACCOUNT OF SALE OF SHARES IN THE CASE OF BOTH THE ASSESSEES. THE CONSEQUENTIAL ADDITION U/S 69C IS ALSO DELETED. ACCORDINGLY BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 41 6.10. IT WOULD BE PERTINENT TO ADDRESS THE CASE LAW RELIED UPON BY THE LD DR BEFORE US ON THE DECISION OF HONBLE BOMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF SANJAY BIMALCHAND JAIN VS PR.CIT (NAGPUR) REPORTED IN (2018) 89 TAXMANN.COM 196 (BOMBAY) DATED 10.4.2017 ON THE IMPUGNED ISSUE. FROM THE FACTS OF SANJAY BIMALCHAND JAIN SUPRA, WE FIND THAT (I) IN THAT CASE, THE BROKER COMPANY THROUGH WHICH THE SHARES WERE SOLD DID NOT RESPOND TO AOS LETTER REGARDING THE NAMES AND ADDRESS AND BANK ACCOUNT OF THE PERSON WHO PURCHASED THE SHARES SOLD BY THE ASSESSEE ; (II) MOREOVER, AT THE TIME OF ACQUISITION OF SHARES OF BOTH THE COMPANIES BY THE ASSESSEE, THE PAYMENTS WERE MADE IN CASH ; (III) THE ADDRESS OF BOTH THE COMPANIES WERE INTERESTINGLY THE SAME ; (IV) THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WERE ALSO THE SAME PERSON ; (V) THE PURCHASE OF SHARES OF BOTH THE COMPANIES WAS DONE BY THAT ASSESSEE THROUGH BROKER, GSSL AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTALLY THE ADDRESS OF THE TWO COMPANIES. BASED ON THESE CRUCIAL FACTS, THE HONBLE BOMBAY HIGH COURT RENDERED THE DECISION IN FAVOUR OF THE REVENUE. NONE OF THESE FACTORS WERE PRESENT IN THE FACTS OF THE ASSESSEE BEFORE US. HENCE IT COULD BE SAFELY CONCLUDED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT SUPRA IS FACTUALLY DISTINGUISHABLE. 6.11. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007 DATED 7.9.2011 HAD HELD AS UNDER:- 5. ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORDER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES DURING THE YEAR 1999- 2000 AND 2000-2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HAS RECODED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS THE AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE EFFECT THAT THE SHARES WERE IN-FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES OUT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. 6. SIMILARLY, THE SALE OF THE SAID SHAERS FOR RS 1,41,08,484/- THROUGH TWO BROKERS NAMELY, M/S RICHMOND SECURITIES PVT LTD AND M/S SCORPIO MANAGEMENT CONSULTANTS PVT LTD CANNOT BE DISPUTED, BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT IS NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTOR OF M/S RICHMAND SECURITIES PVT LTD REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S RICHMAND SECURITIES PVT LTD HELD THAT THE SALE TRANSACTION WAS GENUINE. 7. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS 1,41,08,484/- REPRESENTED ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 42 UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED. 8. IN THE RESULT, WE SEE NO MERIT IN THIS APPEAL AND THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS. 6.12. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD CITA WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE LD AO IN BRINGING THE SALE PROCEEDS OF SHARES OF GIFL IN THE SUM OF RS 7,88,77,854/- AS UNEXPLAINED INCOME OF THE ASSESSEE TREATING THE SAME AS JUST AN ACCOMMODATION ENTRY. CONSEQUENTIALLY, THE ADDITION MADE TOWARDS COMMISSION ON SUCH ACCOMMODATION ENTRY AT THE RATE OF 5% IN THE SUM OF RS 39,43,898/- IS ALSO HEREBY DIRECTED TO BE DELETED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF VARIOUS DECISIONS OF THE CO-ORDINATE BENCHES AND HONBLE JURISDICTIONAL HIGH COURT WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) THAT THE LONG TERM CAPITAL GAIN MADE BY THE ASSESSEE FROM SALE OF SHARES IS A NON GENUINE TRANSACTION AND ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE UNDER SECTION 68 OF THE ACT AND DIRECT THE AO TO GRANT EXEMPTION UNDER SECTION 10(38) OF THE ACT IN RESPECT OF LONG TERM CAPITAL GAIN. THE GROUND NO. 1 TO 3 ARE ALLOWED. 10. THE ISSUE RAISED IN GROUND NO. 4 IS IN RESPECT OF CONFIRMATION OF ADDITION BY THE CIT(A) OF RS.9,42,297/- AS MADE BY THE AO TOWARDS COMMISSION @5% OF THE TOTAL TRANSACTION VALUE IS CONSEQUENTIAL TO GROUND NO. 1 TO 3 WHICH HAVE BEEN ALLOWED BY US. CONSEQUENTLY GROUND NO. 4 IS ALLOWED AND THE AO IS DIRECTED TO DELETE THE ADDITION. 11. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.953/MUM/2019 & ORS. SHRI MOHAMMED AAMER & ORS. 43 ITA NOS.953 & 1219/M/2019 12. THE ISSUE RAISED BY THE ASSESSEE IN BOTH THESE APPEALS IS SIMILAR TO ONE AS DECIDED BY US IN ITA NO. 954/MUM/2019. THEREFORE OUR FINDING/ DECISION IN ITA NO. 954/MUM/2019 WOULD, MUTATIS MUTANDIS, APPLY TO THESE APPEALS AS WELL. ACCORDINGLY BOTH THE APPEALS ARE ALLOWED. 13. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS: 08/02/2021 SD/- (AMARJIT SINGH) SD/- (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 08/02/2021 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//