The DCIT, Central Circle-2(4), Ahmedabad V. Shri Amit Madanlal Gupta, Ahmedabad

ITSSA 23/AHD/2021

AI Insights

The case revolves around an appeal by the Revenue against the decision of the CIT(A) which had deleted the additions made by the Assessing Officer on the grounds of alleged bogus long-term capital gains and unexplained expenditures. The search operation under section 132 of the Income Tax Act, 1961, conducted on 25-02-2016 at the premises of 'JP Iscon Group', including the residence of the assessee, led to proceedings under section 153A. The CIT(A) found that the additions made by the AO were not supported by incriminating material specific to the assessment year in question, leading to the deletion of these additions. The Tribunal, referencing various precedents and the lack of incriminating evidence, upheld the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134493 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2021
• Other Referred Cases: PCIT Vs. Saumya Construction, Andaman Timber Industries vs. CIT, Pr. CIT vs. Smt. Krishna Devi, Shri Dilip B. Jiwrajka
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Share purchase agreement; Principle of natural justice; Tangible material; Accommodation entries; Set aside
• Section: 68; 132; 69C; 143(3); 133A; 153A; 191

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No.23/AHD/2021 िनधा रण वष /Asstt. Year: 2013-2014 D.C.I.T., Central Circle-2(4), Ahmedabad. Vs. Amit Madanlal Gupta, 1, Rivera, 30 Bunglows, Prahladnagar Garden, 100ft. Road, Satellite, Ahmedabad. PAN: ABZPG8925E (Applicant) (Respondent) Revenue by : Shri Vijay Kumar Jaiswal, CIT.D.R Assessee by : Shri Karan Shah, A.R सुनवाई की तारीख/Date of Hearing : 21/12/2022 घोषणा की तारीख /Date of Pronouncement : 07/03/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad dated 05/01/2021 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act"), relevant to the Assessment Year 2013-2014. 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that any addition during the assessment u/s 153A has to be confined to the incriminating material found during the course of search u/s 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec.153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period U/S.158BB was to be made en the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec.153A and sec.153Bl specifically states that the provisions of Chapter-XlV-B, under which sec.158BB falls, would not be applied where a search was initiated u/s.132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s.132 is conducted in the case of the assessee, and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. 5. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in ignoring the statement of Shri Satish R Shah, director of M/s Sawaca Business Machines Ltd. taken under oath as per provisions of section 132(4) of the Act wherein he had clearly accepted that the activities of the company are not genuine and the scrip of the company is rigged at BSE platform by market manipulators with a purpose to provide accommodation of bogus LTCG and as such the finding of the Ld. CIT(A) that there was no incriminating material found during the course of search is not correct, because statement u/s 132(4) of the Act is regarded as evidence. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,82,57,900/- made by the A.O. u/s 68 of the Act, disallowing the claim of LTCG u/s 10(38) of the Act treating the transaction in the shares of M/s Sawaca Business Machines Limited as bogus and sham transaction as the activities of the company are not genuine and the scrip of the company is rigged al BSE platform by market manipulators with a purpose to provide accommodation of bogus LTCG. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,65,160/- made on account of unexplained expenditure u/s 69C of the Act. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 9. It is, therefore, prayed that the order of the Ld, CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. The only effective interconnected issue raised by the Revenue is that the learned CIT(A) erred in holding the that the assessment/reassessment under section under section 153A is limited to the extent of incriminating materials found in the course of search operation under section 132 of the Act. Furthermore, the ld. CIT-A was also pleased to delete the addition on merit. 4. The facts in brief are that the assessee in the present case is an individual and deriving income from salary, house property and other sources. There was search action under section 132 of the Act dated 25-02-2016, carried out at the premises of “JP Iscon Group” including the residence of assessee being one of the director in group companies. As a result of search proceeding under section 153A of the Act, the assessee declared income at Rs. 73,03,820/- in the return filed under section 153A of the Act. The AO in the assessment framed under section 153A read with section 143(3) of the Act assessed the income of the assessee at Rs. 2,59,26,880/-after making disallowance of exempted capital gain of Rs. 1,82,57,900/- on sale of shares of M/s Sawaca Business Machine Limited being bogus accommodation entry and addition of Rs. 3,65,160/- being unexplained expenses incurred for taking such accommodation entry. However, on appeal the ld. CIT-A while adjudicating the ground of appeal raised by the assessee on merit has also observed that the addition under the proceedings of section 153A of the Act can be made only with respect to the incriminating documents found during the course of search operation under section 132 of the Act. The relevant extract of the order of the learned CIT-A is reproduced as under: 5.33 Through the A.Y. 2013-14 is an elapsed/unabated assessment year and as per various case laws including those of jurisdictional ITAT of Ahmedabad and jurisdictional High Court of Gujarat in Saumya Construction Pvt. Ltd. and host of other cases, no addition can be made in the re-assessment u/s.153A if there is no relevant incriminating material found during the search. However, the appellant has not challenged the legality of proceedings and the assessment u/s.153A on this ground. 5. Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us. 6. The learned DR before us vehemently argued that there is no provision under section 153A which restrict the assessment or reassessment in case of search to the extent of incriminating materials only. The learned DR before us vehemently supported the order of the AO 7. On the other hand, the learned AR before us submitted that there was no document of incriminating nature found during the course of search operation and therefore there cannot be any addition to the total income of the assessee being unabated assessment year. 8. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was search proceeding under section 132 of the Act dated 25 th February 2016 (i.e. during the financial year 2015-16 corresponding to A.Y. 2016-17), carried out in the case of “JP Iscon Group” and in consequence to the same, the proceedings under section 153A of the Act were initiated in case of respondent assessee for the AY 2013-14. The assessment under section 153A r.w.s. section 143(3) of the Act for the year under consideration i.e. A.Y. 2013-14 was framed after making addition of Rs. 1,82,57,900/- being bogus accommodation entry and addition of Rs. 3,65,160/- being unexplained expenses incurred for taking such accommodation entry. On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO on ground of merit of the addition and while deleting the addition on the ground of merit of the issue, the learned CIT(A) made an observation that there was no material of incriminating nature found in the course of the search with reference to year under consideration, therefore the year under consideration being unabated/completed assessment, year no addition should be made in the absence of incriminating material. 8.1 In this regard, we find that it has been settled by various Hon’ble Courts including Hon’ble Jurisdictional High Court that the unabated/completed assessment cannot be disturbed in the absence of any incriminating materials/ documents found during the search operation whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in section 153A of the Act is to relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to the completed assessment proceedings. The Hon’ble Gujarat High Court in the case of PCIT Vs. Saumya Construction 81 taxmann.com 292 has held that there cannot be any addition of regular items shown in the books of accounts until and unless certain materials of incriminating nature were found during the course of search operation. The word incriminating has not been defined under the Act but it refers to those materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case on hand, we note that there was no incriminating document relating to sale and purchase of the share of M/s Sawaca Business Machine Limited with reference to the year under consideration has been found during the search which would have made basis for the addition in the assessment. 8.2 At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Saumya Construction (P.) Ltd (supra) wherein it was held as under: Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, the earlier assessment would have to be reiterated. 8.3 In view of the above, we hold that there cannot be any addition to the total income of the assessee of the regular items of income shown in the books of accounts as made by the AO in the present case. As such, the assessee has duly disclosed the income under the capital gain on sale and purchase of the shares of the company namely M/s Sawaca Business Machine Limited. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence, we uphold the same. Thus the ground of appeal of the Revenue is hereby dismissed. 8.4 Without prejudice to finding given on technical ground, we proceed to adjudicate the issue raised by Revenue on merit vide ground Nos. 6 and 7 of its appeal. 9. The necessary facts in brief are that the assessee in the return filed under section 153A of the Act declared long term capital gain of Rs. 1,82,57,900/- on the sale of shares of M/s Swaca Business Machine Ltd. (hereafter SBML) which was claimed as exempted income under section 10(38) of the Act. The assessee in support of sale of shares furnished copy of physical share held by him, copy of statement from broker evidencing on line sale of shares through stock exchange and copy of bank statement showing payment received through banking channel after payment of Securities Transactions Tax. 9.1 However, the AO during the assessment proceedings found that evidences for purchase of shares of M/s SBML were not furnished by the assessee. The assessee simply stated that the shares were purchased beyond 7 years and furthermore the assessee is not liable to maintain the books of accounts. Therefore, the question of justifying the purchases based on the books of accounts is outside the jurisdiction. As per the AO, indeed it is the duty of the assessee to produce evidences to establish that the assets sold in question were purchased and owned by him. 9.2 The AO in this regard further found that during the search proceeding, the statements of various individuals of the group including the assessee were recorded but none of them was able to furnish the evidence with respect to investment in the shares of M/s SBML and likewise, none of them was aware how the shares of M/s SBML were acquired. As such, all the individuals of the group were shifting/ transferring the responsibility on one another. However, one of the key person of the group namely Shri Jayesh Kotak admitted that he does not remember the name of the broker through whom share were purchased and what was the mode of payment for the purchase of the shares as the shares were purchased by his father. 9.3 Furthermore, if the statement of Shri Jayesh Kotak is assumed to be true then the shares held by the father, constitutes more than 1% of total paid up shares of the company M/s SBML, therefore as per listing rule name of his father should have been mentioned in the records of MCA/ BSE but no such detail was found. Further, the ledger submitted by the group for their investment in different scripts did not contain the information of the investment in the shares of M/s SBML. Likewise, the search proceeding under section 132 of the Act 09-02-2005 was also carried out at the assessee group but no document or material with respect to investment in shares M/s SBML made during F.Y. 2001-02 or 2002-03 was found. Accordingly, the AO was of the view that no share of M/s SBML in true sense was acquired by the assessee and its group. Consequently, the AO opined that until and unless ownership and holding of the share is proved, the question of earning profit on occasion of sale of such assets is not allowable as exempted under section 10(38) of the Act. 9.4 The AO further found that there was survey proceeding carried out at the premises of M/s SBML dated 25 th February 2016 where it was found that the M/s SBML was not engaged in any actual business activity. As such, there was huge sum of money credited in the books of the company i.e. M/s SBML from entry provider Namely M/s Jalaram Finserve Limited. There was not any record available of shareholding register being maintained by the company i.e. M/s SBML. The financial of the company (M/s SBML) was very week. Likewise, during the survey proceedings, the statement of the director of the M/s SBML namely Shri Satish Ramanlal Shah was also recorded who categorically accepted that the shares of the company were utilized for providing bogus long term capital gain. 9.5 Likewise, the AO was of the view that it very unlikely that the assessee and its group acquired the share of M/s SBML during the march 2002 and kept the same till 2012. Suddenly, the shares were dematerialized and within a period of 3 to 7 months, were sold at BSE platform. 9.6 Thus, the AO in view of the above finding held that the long term capital gain for Rs. 1,82,57,900/- earned by the assessee on the sale of share of M/s SBML are not genuine. Hence, the AO added the same to total income of the assessee by treating the same as income from unexplained sources. The AO also added an amount of Rs. 3,65,160/- being unaccounted commission expenses for taking such accommodation entry to the total income of the assessee. 10. Aggrieved assessee preferred to appeal before learned CIT-A who deleted the addition made by the AO. The relevant finding of the learned CIT(A) in this regard is running from page 132 to 149 vide para 5.10 to 5.33 of his order. 11. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 12. The learned DR contended that the assessee failed to discharge the onus to demonstrate the purchases of the shares in dispute. Once the genuineness of the purchase has not been established, the subsequent sales of such shares can also not be believed to be true. It was also pointed out by the learned DR that the assessee immediately after the dematerialization of the shares has sold the same which strongly evidences that the price at which the shares were sold were manipulated. The learned DR accordingly contended that the entire transaction of the purchase and sale of the shares represents the penny stock and relied on the judgement of Hon’ble Calcutta High Court in the case of Swati Bajaj reported in 139 taxmann.com 352. The learned DR vehemently supported the order of the AO. 13. On the other hand, the learned AR before us submitted that the shares were purchased in the year 2001/2002 which can be verified from the annual report filed by the company. The learned AR further contended that the Tribunal in the group case of the assessee has decided the issue in favour of the assessee. The learned AR has also filed a chart demonstrating that the principles laid down by the Hon’ble Calcutta High Court in the case of Swati Bajaj reported in 139 taxmann.com 352 are not applicable to it which are available on record. The learned AR vehemently supported the order of the learned CIT-A. 14. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the identical issue was there before this Tribunal in the group of case of assessee bearing IT(SS) No. 193/Ahd/2019, 43/Ahd/2020 and 32/Ahd/2021 where the coordinate bench of this tribunal vide common order dated 24-06-2022 decided the issue in favour of the assessee. The relevant finding of the coordinate bench in the cases cited above reads as under: 12. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the long term capital gain declared by the assessee on sale shares M/s SBML for ₹ 1,53,02,199/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. Subsequently, the learned CIT (A) deleted the addition made by the AO for the reasons elaborated in the preceding paragraph. The facts of the case are not in dispute and therefore we are not inclined to repeat the same for the sake of brevity and convenience. 12.1 The first controversy arises for our adjudication whether the assessee has ownership of the shares of the company namely M/s SBML. In this connection, we note one undisputed fact that the name of the assessee was very much appearing in the shareholder list of the company namely M/s SBML. This fact can be verified from the annual report of the assessee right from the assessment year 2002-03 till the shares are disposed of by the assessee. In other words the name of the assessee as shareholder was very much appearing in the annual report of the company. These annual reports of the company of different assessment years are placed on pages 191 to 969 of the paper book. This fact carries a lot of weight and therefore the same cannot be ignored merely on the basis that the assessee did not record such investment in the books of accounts. Admittedly, in the absence of the relevant entry in the books of accounts of the assessee, certainly, it creates suspicion but this suspicion cannot supersede the annual report of the company namely M/s SBML which is a piece of evidence filed with the government authorities. Furthermore, the revenue has not carried out necessary examination from the company namely M/s SBML with respect to the shareholding of the assessee. Thus we are of the view that there cannot be any doubt on the ownership of the shares of the assessee. 12.2 It is equally important to note that the shares were dematerialized in the year of April 2002 as evident from the DEMAT account of the assessee placed on pages 77 of the paper book. Had the assessee not been the owner of the shares, then it was not possible for the assessee to dematerialize the shares in her name. Likewise, the assessee has also submitted the share certificate dated 25th of March 2002 placed on page 75 of the paper book. Thus all these cumulative information cannot give rise to draw any inference against the assessee until and unless it is not based on any tangible materials. 12.3 Coming to next allegation of the revenue that the capital gain on the sale of share of M/s SBML was not genuine and representing bogus accommodation entry. The AO alleged that there was survey proceeding under section 133A of the Act carried out at the premises of the company M/s SBML and it was found that its activity was not genuine as the company was showing bogus turnover and director of the company M/s SBML admitted to have manipulated the price of the share and provided accommodation entry in form of LTCG. In this regard we note that the bogus turnover shown by the company or the company carried out transaction with entry provider have nothing to do with share held and sold by the assessee on BSE. As the assessee was holding less than 1 % share of the company and having no control over the business of the company. Coming to the admission by the director, on careful perusal of the statement of the director reproduced by the AO in his order, we find that the director stated that promoter of the company wanted to sale the company therefore in order to get suitable price, they manipulated the price of the share in the process of providing accommodation entry in the form of LTCG. Nowhere the director in his statement stated that he has provided accommodation entry to the assessee on hand. No evidence either brought by the AO to establish that the assessee was involved in price manipulation or was the beneficiary of accommodation entry. The AO referred the investigation carried out by the SEBI for alleged involvement of promoter of the company M/s SBML in market manipulation and SEBI barred the promoters form entry in the market. Again, it was directors and promoters of the company M/s SBML who were alleged to be involved in wrong doing and nowhere it is alleged by the SEBI that the assessee was involved in any rigging up the price of share or the capital gain earned by the assessee was not genuine. Further, the statement may appear to be very relevant to dig out the truth but the same cannot be used to draw any inference against the assessee after giving the opportunity of a hearing to the other party. In other words the statement taken during the survey proceedings cannot be taken as the basis of treating the longterm capital gain of the assessee as unexplained credit under threat 68 of the Act. In simple words it is mandatory to provide the opportunity of cross-examination if the revenue wishes to believe the statement of the director of the company until and unless some clinching evidences are found to draw an inference against the assessee. In holding so we draw support and guidance from the judgment of Hon’ble Supreme court in case of Andaman Timber Industries vs. CIT reported in 62 taxmann.com 3 the relevant observation is extracted here as under: Not allowing the assessee to cross-examine the witnesses by the AdjudicatingAuthoritythough the statements of thosewitnesseswere 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. 12.4 It also important to highlight that the statement of the director of the M/s SBML was recorded on the survey proceeding and it settled position of law that the statement furnished during survey does not carry evidentiary value. 12.5 The AO based on the statement furnished by the director alleged that the company M/s SBML was not maintaining such as shareholder register, share transfer record etc. In this regard we are of the view that record not maintained by the company cannot be basis for doubting the genuineness of the capital gain earned by the assessee as it was not the duty of the assessee. Further, it is important to highlight that the company M/s SBML is a listed company which has to comply with several requirement under different laws and regulation for which it necessary to maintain such records. Indeed the assessee on hand submitted the copy of the annual report of the company filed with ministry of corporate affairs where shareholder register was duly submitted. Thus, it appears that the AO’s observation was based on wrong assumption of facts. 12.6 The next observation of the AO was that in search proceeding at one of the entry provider based in Mumbai namely Shri Shrish Chandrakan Shah, where evidences with regard to purchase of shares of M/s SBML at exorbitant price by the paper company floated by the Shri Shrish Chandrakant Shah was found. Again, there was no direct evidence brought by the AO which stands against the assessee. There was no evidence on record establishing any linkage of assessee with the company floated by the alleged entry provider Shri Shirish chandrakant Shah. There was no information available on record whether the name of the assessee was appearing in the document or paper found in search carried out at Shri Shrish Chandrakant Shah. It was also not brought any material that those broker or entry provider have taken the name of the assessee or provided their services either to the assessee or assessee broker. 12.7 The alleged scam might have taken place in Kolkata on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee’s action that he was involved in such rigging up the price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by of long term capital gain by way of cheque through banking channels. This allegation that cash had exchanged hands, has to be proved with evidence, by the Revenue. Likewise there cannot be any adverse inference against the assessee based on the statement materials discovered from the premises of the party namely Shri Shirish Chandrakant Shah until and unless the same are provided to the assessee for rebuttal. The documents on which the AO has placed reliance was not provided to the assessee and therefore no adverse inference against the assessee can be drawn. 12.8 It is also important to note that the assessee was holding 72,200 shares M/s SBML and same was hold for more than 10 year in physical form. Thus the conduct of the assessee suggests that she was not involved in rigging up the price or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far that there was SEBI enquiry conducted and found guilty of wrong practices but it is not so in the case on hand. 12.9 In our view, the income generated by the assessee cannot be held bogus only one basis the modus operandi, generalisation, and surmise and conjecture. In order to hold income earned by the assessee is bogus, specific evidence has to be brought on record by the revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In the absence of such finding, it is not justifiable to link the fact or finding unearthed in the case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to test of human probabilities which may be of greater impact but the same cannot used blindly to dispose of the evidence forwarded by the assessee especially without bringing any evidences from independent enquiry to corroborate the allegation. In holding so we draw support and guidance from the judgment of Hon’ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 12.10 Respectfully following the judgment of Hon’ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee, the assessee cannot be held to be guilty or linked to the wrong acts of the promoters as far as long term capital earned on sale of share of M/s SBML is concern. In view of the above discussion we hold that the capital gain earned by the assessee cannot held bogus merely on the basis of some report finding unearth in case of third party/parties unless cogent materials are brought against particular assessee. Once the addition made by the AO on account of bogus long term capital gain is deleted, the addition of corresponding expenses of Rs. 3,06,043.00 is not sustainable. Therefore, we do not find any reason to interfere in the finding of the learned CIT(A). Hence the grounds of revenue appeal is hereby dismissed. 14.1 Regarding the contention of the learned DR that the impugned amount of income represents the bogus long-term capital gain in view of the judgement of Hon’ble Calcutta High Court in the case of Swati Bajaj reported in 139 taxmann.com 352, in this connection we note that the facts of the case on hand are distinguishable with the facts of the case of the Hon’ble Calcutta High Court. The distinguishing features were duly highlighted by the learned counsel for the assessee which are reproduced as under: Sr.No. Facts of the case of Kolkata High Court in case of Principal Commissioner of Income Tax, vs. Swati Bajaj [2022] 139 taxmann.com 352 Facts of the assessee’s case 1. The script of which LTCG exemption was claimed u/s 10(38) of the Act was ‘Surabhi’ Chemicals and Investment Ltd. The script on which LTCG exemption is claimed u/s.10(38) of the Act earned in ‘Sawaca Business Machines Ltd.’ 2. The script Surabhi Chemicals and Investment Ltd is covered under the list of 84 penny script list issued by BSE The script Sawaca Business Machines Ltd is NOT covered under the list of 84 penny scrip list issued by BSE. 3. Period of holding was 17 to 21 months Period of holding is 10 years 4. The broking firm through which transaction are conducted is M/s Horizon Financial Consultant Pvt Ltd. The broking firm through which transactions are conducted is M/s. Monarch Research & Brokerage Pvt. Ltd. 5. The company Surabhi Chemicals and Investment Ltd is a Kolkata based company The company Sawaca Business Machines Ltd is not Kolkata based company rather it is situated in Ahmedabad having registered address at 45, Chinubhai Tower, opp. Handloom House Ashram Road Ahmedabad 6. The documents in form of contract notes of purchase and sale of shares, Dmat, Bank Statement were placed on record The documents in form of shareholding list (part of Annual Report), contract notes for purchase and sale of shares, Demat, Bank Statement were placed on record. 7. The company Surabhi chemicals and Investment Ltd. matched all the features of the companies proving bogus LTCG. In the case of assessee, nothing is brought on record to prove that Sawaca Business Machines Ltd is engaged in providing bogus LTCG. 8. Investigation Report specifically named that Surabhi Chemicals and Investment Ltd is a penny scrip company. No investigation report is brought on record wherein any specific findings are mentioned for the company Sawaca Business Machines Ltd. 9. The findings are based on investigation report submitted by Kolkata DIT That the company is not a Kolkata based company and so the findings of investigation report submitted by Kolkata DIT has no applicability in case of the assessee. 10. In the report of investigation wing it is held that the company Surabhi Chemicals and Investment Limited in a penny stock company which is used for providing entries for bogus LTCG. Allegation of AO are based on survey action conducted in case of Sawaca on 25.02.2016 and on the basis of statement recorded of director of Sawaca, Mr. Satish Shah. The director Satish Shah has no where stated in his statement that Sawaca in penny scrip and involved in providing bogus LTCG. Whereas, search was conducted in case of assessee on 25.02.2016 and no incriminating materials is recovered from assessee’s premises relating to same. 11. The company in the present case is suspended on the Stock Exchange. No trades The company in the present case continues to operate on the Stock are made on the Stock Exchange. Exchange. The trades are made on the Stock Exchange and is not de-listed. 12. It is stated that Surabhi chemicals and Investment Limited is a penny stock company Ld.AO in the assessment order has not alleged that Sawaca is penny scrip company. 14.2 The above distinguishing features highlighted by the learned AR were not controverted by the learned DR at the time of hearing. Accordingly, we are not impressed with the argument of the learned DR for the revenue in the given facts and circumstances. 14.3 Moving further, we also note that the Mumbai Tribunal in the case of Shri Dilip B. Jiwrajka bearing ITA No. 2349, 2326, 2350 & 2354 /Mum/2021 vide order dated 29-11-2022 has distinguished the judgement of Hon’ble Calcutta High Court. The relevant extract of the order of the ITAT is reproduced as under: 51. Apart from the above, we have also taken suo-motto judicial notice of the judgment rendered by the Hon'ble Calcutta High Court in the case of Pr. CIT Vs Swati Bajaj (288 Taxman 403). Having carefully perused the same, it is noted that peculiar facts were involved before the Hon'ble Court wherein eighty-nine different appeals of different assessee's were disposed off by the Tribunal in a single consolidated order without taking cognizance of the specific facts involved in each case (appeals preferred by different assessee's). The relevant observations made by the Hon'ble High Court is as follows: "40. Before we examine the contentions, we are tempted to point out that the exercise done by the tribunal was a bit perfunctory. There is absolutely no discussion of the factual position in any of the 89 appeals, the exception is in paragraph 4 with regard to the certain facts of the assessees case (SwafiBajaj). We are not very appreciative of the manner in which the bunch of appeals have been disposed of. The cardinal principles which courts and tribunal have followed consistently is that each assessment year is an individual unit and unless and until it is shown that there are distinguishing feature in a particular assessment year, the decision taken for the earlier years are to be followed to ensure consistency. While doing so the Courts/Tribunals are required to examine the facts and render a finding as to why the decision in the earlier assessment years should be adopted or not. " 52. Apart from the above, the Hon'ble Court noted that the assessee had never mentioned before the AO that, he wanted the copy of investigation report or the statements of the brokers/entry operators and therefore the assessee's plea regarding non-avail ability of relevant material or denial of cross-examination claimed was rejected. The relevant observation of the Hon'ble High Court is as under: "...Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not i'i a position to lake part in the enquiry which is being conducted by the assessing officer in scrutiny assessment under Section 143(3) of the Act. " 53. In the instant case, a specific request was made for a copy of investigation report as well as copies of statements recorded of different persons. The assessee is noted to have rebutted whatever details were provided by the AO and had sought cross-examination as well. Hence, the facts involved in the present case are noted to be distinguishable from the above case. Further, in respect of the circumstantial evidences the Hon n ble Calcutta High Court has not disturbed the settled position of law that circumstantial evidences can be looked into on!y when direct evidences are not available (Para 69). In the instant case, direct irrefutable evidences were made available to the AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even if one refers to the decision of Hon'ble Calcutta High Court. Moreover, as noted by us earlier, this issue at hand is squarely covered by the binding judgments of the Hon'ble jurisdictional High Court, in favour of the assessee, and, therefore following the judicial discipline, the order of the Ld. CIT(A) does not require any interference since we have the benefit of guidance on this subject by the Hon"ble jurisdictional High Court, which is binding upon us. 14.4 In view of the above facts and circumstances and after considering the relevant arguments of both sides, we do not find any infirmity in the order of the learned CIT(A). Hence, the ground of appeal of the revenue is hereby dismissed. 15. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the Court on 07/03/2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 07/03/2023 Manish