SH. MUKUT BEHARI AGARWAL,JAIPUR V. THE DCIT, CIRCLE 1, JAIPUR

ITA 1067/JPR/2024

AI Insights

The case involves Shri Mukut Behari Agarwal, who appealed against the reassessment order for the assessment year 2015-16, which included substantial additions under sections 69A and 148 of the Income Tax Act. The reassessment was initiated based on information from the Investigation Wing about fictitious profits from share trading and a ledger found during a search at Veto Group, allegedly linked to Agarwal. The Tribunal criticized the reassessment process for relying on unverified information and not conducting independent inquiries or providing a chance for cross-examination. The Tribunal's decision highlighted the importance of adhering to legal procedures and the rights of the assessee in the reassessment process.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 28491 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-10-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 16-08-2024
• Other Referred Cases: Hexaware Technologies Ltd. vs ACIT, Union of India & Ors. vs Ashish Agarwal, Sarthak Securities Co. Pvt. Ltd. Vs. ITO, PCIT vs. RMG Polyvinyl (I) Ltd, ITO vs Surender Dalal, Principal Commissioner of Income-tax (Central) v. Hitesh Ashok Vaswani, Sandipkumar Parsottambhai Patel v. Income-tax Officer, Bhaijee Commodities (P.) Ltd. v. ACIT, GTC Industries vs., ACIT, Maverick Commodity Brokers Pvt. Ltd. vs. ACIT, Jawaharbhai Atmaram Hathiwala v. ITO, CIT vs Odeon Builders Pvt. Ltd., Naren Premchand Nagda v ITO, ACIT vs. Prabhat Oil Mills, CIT vs. Mahabir Prasad Gupta, CIT vs. Daga Fibres Pvt. Ltd, Vishal Jhajharia Vs. Assessment Unit, Income-tax Department Faceless Assessment Centre, Ram Narayan Sah v. Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Assessee Lawyers: TARUN MITTAL
• Keywords: Set aside; Difference of opinion; Change of opinion; Reassessment proceedings; Question of law; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Bogus purchase; Period of limitation; Reopening of assessment; Principle of natural justice; Search and seizure; Accommodation entries; Loose papers; Assessment record; Transactions in derivatives; Reason to believe; Opportunity of cross examination; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 148; 144; 143(3); 195; 153A; 68; 13; 69A

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,l-lhrky{eh] U;kf;dlnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHA LAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihy la-@ITA No. 1067/JP/2024 fu/kZkj.ko\"kZ@AssessmentYear : 2015-16 Shri Mukut Behari Agarwal 211, Laxmi Complex, M.I.Road Jaipur 302 0001 cuke Vs. The DCIT Circle-1 Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABSPA 1121H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Tarun Mittal, CA jktLo dh vksjls@Revenue by : Ms. Alka Gautam CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 03/10/2024 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 28 /11/2024 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM: By way of present appeal the assessee challenges the finding of the National Faceless Appeal Centre(NFAC) [ for short ld. CIT(A) ] vide order dated 30.07.2024. The dispute relates to the assessment year 2015-16. That order of the ld. CIT(A) arise because the assessee challenged the order of the assessing officer passed u/s. 147 r.ws. 144 read with section 144B of the Act by National Faceless Assessment Unit. 2 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 2. The assessee assailed the present appeal on the following grounds : ‘’1. On the facts and in the circumstances of the case the Ld. CTT(A) has grossly erred in confirming the action of Id. AO in re opening the assessment u/s 147 arbitrarily. 1.1. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the action of Id. AO in reopening the assessment u/s 148 in the case of assessee solely on the basis of so-called information received from the Investigation Wing and without independent application of mind and without providing adequate opportunity. Thus, the action of the Ld. CIT(A) in confirming the reopening of the assessment u/s 148 and upholding the consequent reassessment order so passed deserves to be held bad in law. 1.2. That, the Ld. CIT(A) has further erred in confirming the action of ld. AO in reopening the assessment, beyond the 3 years despite of the fact that there was no income escaping assessment representing \"ASSET\" exceeding Rs. 50,00,000/- in accordance with explanation to Section 149 of the Act. Thus, the reassessment proceedings initiated is time barred and entire proceedings are void ab initio. 1.3. Without prejudice to above, the Ld. CIT(A) has further erred in confirming the action of Id. AO in reopening the assessment already completed u/s 143(3) r.w.s.153A whereas, in the reasons recorded for reopening, there is no allegation whatsoever against assessee, of not truly and fully disclosing the material necessary for assessment Thus, the reassessment initiated amounts to Change of Opinion, which proceedings are bad in law and void ab initio. 2. On the facts and in the circumstances of the case and in law, Id. CIT (A) has grossly erred in confirming the addition of Rs.5,12,17,312/- u/s 69A made by ld. AO by alleging the profit earned by assessee on trading of shares in normal course of business as fictitious profit and thereby holding the same as unexplained money. Appellant prays that the assessee is engaged in share trading business for past many years and the profit of Rs.5,12,17,312/- is fully explained and already offered by assessee for taxation and therefore addition made by Id.AO amounts to double taxation, which is not in accordance with law. 2.1. That the Id. CIT(A) grossly erred in confirming the action of ld. AO in invoking the provisions of sections 69A of the Act, even though all the transactions are duly recorded in the books of accounts of the assessee. Thus the addition confirmed by ld. AO u/s 69A of the Act is against the law and deserves to be deleted. 2.2. That, ld. CIT(A) has further erred in confirming the addition of Rs.5,12,17,312/- solely on the basis of information obtained during third party investigation and without even providing complete details of such information and also trades (alleged as fictitious), though specific request was made to provide complete details. 3 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 2.3. That, ld. CIT(A) has further erred in confirming addition of Rs.5,12,17,312/-by placing heavy reliance on the statements of third parties, recorded by some other official in some other proceedings and without even providing assessee with opportunity of cross examination even though specifically requested by assessee. Appellant prays that addition so made without providing opportunity of cross examination is against the principle of natural justice and deserves to be deleted. 3. On the facts and in the circumstances of the case and in law, Id. CIT(A) has grossly erred in confirming the addition of Rs.74,51,800/- made by ld. AO u/s 69A of the Income Tax Act, on allegation of Unexplained money, arbitrarily. 3.1. That, ld. CIT(A) has further erred in confirming the addition of Rs.74,51,800/- made by ld. AO on the basis of some ledger copy alleged to have been found during the course of search conducted in some other case namely Veto Group. Appellant prays that assessee is not associated with Veto Group in any manner, neither Id. CIT(A) nor ld. AO have established that \"M B Agrawal\" denotes \"Mukut Behari Agrawal, more particularly, when such ledger does not contain PAN, signature or any such details which proves that entries recorded in such ledger pertain to the assessee, thus addition so made is unjustified. 3.2. That, Id. CTT(A) has further erred in confirming addition of Rs.74,51,800/- made by ld. AO without even providing copies of statements of one Sh. Nandan Lal Alwani, relied upon for making such addition and further in denying opportunity of cross examination, which is against the principle of natural justice and addition so made deserves to be deleted. 3.3. That, Id. CIT(A) has erred in confirming addition of Rs.74,51,800/- made by ld. AO simply u/s 69A of the Act, whereas section 69A is not applicable on the alleged facts stated by the ld. AO. 2.1 As we note that the Ground No. 1 to 1.3 raised by the assessee deals that the ld. CIT(A) has erred in confirming the action of the AO in reopening the assessment u/s 147 of the Act solely on the basis of information received from Investigation Wing. 2.2 The Brief facts of the case are that assessee is an individual and during the year under consideration he was engaged in the business of trading in shares and derivatives. Return of income for the year under 4 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR consideration was filed by assessee on 30.01.2016 declaring total income at Rs. 2,18,24,480/- (APB 01-43). Pursuant to search and seizure action u/s 132 conducted in the case of Maverick Group on 22.07.2015, to which assessee belongs, assessment of assessee was completed u/s 143(3) r.w.s.153A of the Income tax Act after making certain additions/ disallowances. In this case, it is noted that assessment has been reopened on the basis of information received by AO from the Investigation Wing under the Project Falcon regarding claim of fictitious losses being generated through coordinated and premeditated trading in illiquid stock options, wherein it had been noticed by the department that there are several instances/internal alerts wherein a set of entities were consistently seen incurring trading loss by executing Reversal of Trades in options on individual stocks (‘stock options’) in Equity Derivative segment. On the basis of such information, it was alleged by AO that the assessee was one of the beneficiaries of the bogus transactions and had claimed a fictitious profit of the total amount of Rs. 5,12,17,312/- from such transactions. It was alleged that in the search conducted on Veto Group, a ledger of Shri M B Agarwal maintained in a tally file was found. Shri Nandlal Alwani, Accountant of the Veto Group and other key persons of Veto group stated that transactions in such ledger found were unaccounted transactions of 5 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Veto Group. As the entries appearing in the name of assessee in such ledger aggregated to Rs. 74,51,800/- it was alleged as unaccounted money of assessee. Thus, assessment was reopened on above two issues, i.e. on the basis of (i) Information from Investigation Wing that assessee is beneficiary to the entry of Rs.5,12,17,312/- and (ii) some ledger found in the case of search at Veto Group, wherein a ledger was found with the name “MB Agarwal”. Accordingly the assessment was re-opened by issue of notice and the assessment was completed. 2.3 Being aggrieved by the order of the assessment, the assessee carried the matter before the ld. CIT(A) who has confirmed the action of the AO as to initiation of proceedings by mentioning in his order that ‘’Ground of appeal is not allowed. The relevant observation as made by the ld.CIT(A) at para 7.4 of his order is reproduced as under:- ‘’7.4 For the aforementioned reasons, it is held that there was no infirmity in the initiation of proceedings u/s 147 and issue of notice of the Act by the Assessing Officer and there was sufficient material on record for him to form a prima facie belief that income had escaped assessment. Accordingly, the Ground of appeal is not allowed.’’ 2.4 Now against the order of the ld. CIT(A), the assessee has filed the present appeal before us challenging the action of the AO as to initiation of 6 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR proceedings u/s 147 of the Act and prayed to quash the order u/s 147 of the Act with following submissions : 1. Time limit for issuance of notice u/s 148A for the year under consideration has already been expired on 31.3.2022 2. Reopening solely on the basis of information from Investigation Wing; 3. Reopening by jurisdictional Assessing officer and by Faceless Assessing Officer, which is contrary to the specific provisions of section 151A 4. Notice u/s 148 being issued without mentioning DIN 5. There was no reason to believe in respect of transactions alleged to have escaped assessment on the basis of ledger found during search in the case of Veto Group, at the time of issuing initial notice u/s 148 dated 13.5.2021. The ld. AR of the assessee further submitted with regards to expiry of time limit for issuance of notice u/s 148A for the year under consideration, at the outset, provisions of section 149 of the Income tax Act, 1961 as substituted by the Finance Act, 2021, are reproduced hereunder for the sake of ready reference; “Time limit for notice 149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of subsection (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that……………….. Provided also that ……………… Provided also that ……………… 7 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Explanation.—For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of subsection (1) as to the issue of notice shall be subject to the provisions of section 151.” To drive home to the contentions so raised the ld. AR of the assessee relied upon the decision of Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. vs ACIT [2024] 162 taxmann.com 225 (Bom.) (APB 151-208), after threadbare analysis of section 149 has held that: Section 149, read with section 148A, of the Income-tax Act, 1961 - Income escaping assessment -Time limit for issuance of notice(Illustration)- Assessment years 2013-14 to2015-16 - Assessee, engaged in information technology consulting, software development and business process services, filed its return of income - Same was accepted and assessment was completed under section 143(3) - Assessing Officer issued a reopening notice dated 25-5-2022 on several grounds - Whether time limit to issue notice under section148 had already expired on 1-4-2021 for assessment years 2013-2014 and 2014-2015, when section 149 was amended, therefore, reopening for assessment years 2013- 2014 and 2014-2015 had already been barred by limitation on 1st April, 2021 - Held, yes - Whether, accordingly, extended period of ten years as provided in section 149(1)(b) would not have been applicable to assessment years 2013- 2014 and 2014-2015, de hors proviso - Held, yes -Whether, further, for assessment year 2015-2016, erstwhile time limit of six years expired on31- 3-2022, and therefore, impugned notice under section 148 issued on 27-8- 2022 was barred by restriction of first proviso to section 149 - Held, yes [Paras 24 and 26] [In favour assessee] Para 26 of above decision reads as under: “26. The purpose of the first proviso to Section 149 of the Act is consistent with the stated object of the government to make prospective amendments in the Act. Accordingly, the proviso provides that up to Assessment Year 2021-2022 (period before the amendment), the period of limitation as prescribed in the erstwhile provisions of Section 149(1)(b) of the Act would be applicable and only from Assessment Year2022-2023, the period of ten years as provided in Section 149(1)(b) of the Act, would be applicable. The submission of the Revenue to interpret the first proviso to Section 149 of the Act to be applicable only for Assessment Years 2013-2014 and 2014-2015, i.e., for assessment years where the period of limitation had already expired on 1st April 2021 is not sustainable. The interpretation canvassed by the Revenue is clearly contrary to the plain language of the proviso. When the language in the statute is clear, it has to be so 8 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR interpreted and there is no scope for interpreting the provision on any other basis. The taxing statue should be strictly construed. [Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2017] 81 taxmann.com 111/247 Taxman361/394 ITR 449 (SC)” It is also noteworthy to mention that the ld. AR of the assessee vide his letter dated 04-10-2024 has filed a comparative facts of assessee’s case vis a vis Hon’ble Bombay High Court decision in the case of Hexaware Technologies Ltd. in Writ Petition No. 1778 of 2023 dated 03-05-2024 and relevant observation of Hon’ble Supreme Court of India in the case of Union of India & Ors. vs Ashish Agarwal in Civil Appeal No. 3005/2022 dated 05-04-2022. ‘’Comparative Facts of assessee case vis a vis to Hexaware Technologies Ltd. Details Hexaware Technologies Ltd Mukut Behari Agarwal (Assessee) Particulars H.C. Order Page A.Y. 2015-16 03 2015-16 Date of notice u/s 148 08-04-2021 03 13-05-2021 Date of notice u/s 148A(d) 26-06-2022 11 30-07-2022 Date of notice u/s 148 of the Act after passing order u/s 148A(d) 27-08-2022 47 30-07-2022 Time barring date as per Section 149 of the Act (considering the relevant rules) 31-03-2022 47 31-03-2022 DIN on Notice u/s 148 No 56-57 No Notice u/s 148 issued by Ld. JAO 63 (last line) Ld. AO 9 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Relevant observations of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal & Others dated 04.05.2022 in Civil Appeal No. 3005/2022. Observations in para 8 page 28 of the onder (i) The respective impugned section 148 notices issued to the respective assesees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be showcase notices in terms of section 1484(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees con reply to the notices within two weeks thereafter. (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(b) be disperard with as a onetime measure vis-à-vis those notices which have been issued under Section 148 of the un- amended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees. (iv) All the defences which may be available to the assessee uuder section 149 and or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act. 2021 are kept open and/or shall continue to be available’’ The ld. AR thus submitted that reopening of assessment in present case is barred by limitation and reassessment order so passed deserves to be quashed. 2.5 During the course of hearing, the ld. DR supported the order of the ld. CIT(A) and further submitted that the initiation of proceedings u/s 147 of the Act by the AO is established as the AO had sufficient material on record to form a prima facie belief that income had escaped assessment. 10 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 2.6 We have heard both the parties and perused the materials available on record. In this case it is noted that the re-assessment proceedings were initiated solely on the basis of some information stated to have been received from I & CI Wing emanated as a result of Project Falcon and consequent order passed by SEBI. It is pertinent to note here that even order passed by SEBI does not establish charges against the assessee. It revolves around presumption that since certain transactions were reversed immediately, the same were non genuine. In fact, no enquiries whatsoever were conducted by AO to cross verify these facts and in that case even the SEBI order did not do so. It was therefore submitted by the assessee before the AO that initiation of reopening solely on the basis of SEBI order was not correct; however plea of assessee was brushed aside. The Bench feels that if case is reopened on the basis of information received then the AO is duty bound to conduct direct enquiries even from the other party, with whom assessee is alleged to have reversed the transactions, for which he had vital powers u/s 133(6)/131 of the Income Tax Act before issue of notice u/s 148. In the absence of such verification by AO, even the fact as to how the assessee was related to counter party and how they were benefitted with such transactions remained unproved. It is further noted that all the F & O Trading transactions entered into by the assessee are in 11 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR relation to BSE 500 companies and no evidence has been brought on record to establish that if any action was taken against any of such companies by SEBI or under Income Tax Act. It is noted that assessee traded through online portal of Stock Exchange, where assessee is not aware of counter party and prices are also determined by market forces and one can only predict the future variation and take advantage of the same. In fact, SEBI order is also passed on presumption basis and does not even precisely quantify the advantage alleged to have been taken by assessee as a result of trade reversal as alleged. In this scenario, it appears that action of AO in reopening of assessment is solely on the basis of SEBI order and without independently verifying the matter contained therein which is against the specific provisions of section 147 of the Income Tax Act and it requires AO to record satisfaction independently. Hence, in view of above, it is evident that the only basis of reopening of assessment and for making huge addition of Rs.5,12,17,312/- merely on SEBI order, statements of brokers (not related with assessee) and information received from I & CI, which is very generalised and how could assessee be fastened with liability under Income Tax Act in respect of such ambiguous observations in SEBI order. It is observed that the AO has not conducted any independent enquiry and has not cross verified the information 12 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR received from I & CI, which is evident from order passed u/s 148A (APB 98-112). It is felt that the validity of initiation of reassessment proceedings has to be judged with regard to the material available with the AO and that too by framing the opinion strictly based on the documents and information in possession, that certain income has escaped assessment and not in a mechanical manner as has been done in the case in hand. The re-opening of the case based on the borrowed satisfaction on the information provided by some other official without carrying out independent verification of the information with reference to return of income and financial affairs of the assessee and without recording his own independent satisfaction deserves to be held illegal. To this effect, reliance was placed on the decision of Hon’ble Delhi High court in case of Sarthak Securities Co. Pvt. Ltd. Vs. ITO reported in 329 ITR 110 wherein it has been held as under: Reassessment – Notice – Condition precedent – Formation of belief that income escaped assessment – Assessing Officer treating share application money as bogus accommodation entries – Payments through banking channel and companies investing money genuine – No independent application of mind by Assessing Officer but acting under information from investigation wing – Notice to be quashed – Income Tax Act, 1961, ss. 147, 148. In case of PCIT vs. RMG Polyvinyl (I) Ltd [2017] reported in 83 taxmann.com 348 (Delhi) it is held by Hon’ble Delhi High court that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken 13 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR by Assessing Officer, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. The Hon’ble Delhi bench of ITAT in the case of ITO vs Surender Dalal ITA No.7490/Del/2019 in its decision dated 30.1.2024 has held that: “The ratio of the above decisions applies to the facts of the assessee's case. In the case on hand the AO is not disputing that the assessee filed return of income. If this is the fact, there is certainly a factual inconsistency in reopening the assessment that the assessee has not filed any return of income. Secondly, in the reasons stated the AO believed that the income escaped assessment only based on the report of the DDIT(Inv.) that the income had escaped more than 15 crores. However, we observe that what is the basis for 15 crores is not specified in the reasons. This is only a bald statement that the income of the assessee has escaped assessment for more than 15 crores without spelling out any details which is said to have been given in the DDIT report. Therefore, the reasons recorded in the present case at best can be treated to be a reason to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing the present case, there is no independent application of mind by the AO to tangible materials and reasons and the AO failed to demonstrate live link between tangible material and formation of reason to believe that income had escaped assessment. 15. In view of the above, we hold that the reassessment made in the section 143(3) read with section 147 of the Act is bad in law and the re- assessment order is quashed. As we have quashed the reassessment on the preliminary legal ground of jurisdiction, various other grounds raised by the assessee on merits are not decided as they become only academic at this stage. Ground nos. 1 to 5 are allowed.” Further we rely on the judgement of the Hon’ble High Court of Gujarat and Hon’ble ITAT in the Surat Bench in the following cases:- 1. Principal Commissioner of Income-tax (Central) v. Hitesh Ashok Vaswani [2023] 156 taxmann.com 200 (Gujarat) HELD: Where reasons to believe recorded by AO were mere conclusions and a reproduction of information received from Investigation Wing, reopening of assessment was not justifiable 14 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 2. Sandipkumar Parsottambhai Patel v. Income-tax Officer [2022] 137 taxmann.com 373 (Surat-Trib.) HELD: Where AO issued a reopening notice on ground that an information was received from Investigation Wing that shares sold by assessee was of penny stocks company utilised by stock brokers for providing bogus accommodation entries by artificially raising price of such shares, since AO issued said notice without forming an independent opinion on basis of certain tangible material that assessee's income had escaped assessment and mechanically relied upon information received from other source, impugned reopening notice was to be quashed. 3. Hon’ble Delhi ITAT in the case of ‘Bhaijee Commodities (P.) Ltd. v. ACIT [2023] 154 taxmann.com 292 (Delhi - Trib.)’ has held that where assessee had sufficiently demonstrated that there was no relevant material to make wide ranging allegations towards accommodation entry in form of share capital and earning fictitious profits and so called 'belief' formed by Assessing Officer towards escapement of chargeable income was without availability of relevant or tangible material and merely following opinion expressed by investigation wing, reassessment was bad in law and hence liable to be quashed. Thus from perusal of these judicial precedent cited, it could be concluded that the initiation of proceedings u/s 147 of the Act by placing sole reliance on the basis of information received from the Investigation wing in the absence of any documentary evidence proving for the reasons for escapement of income. Therefore, the reassessment proceedings against the assessee under the provisions of the s.147 of the Act could not be sustained and the same deserves to be set aside. 2.7 It is further noted that assessment in the present case has been reopened as well as completed without following provisions of section 151A, which provides procedure for “Faceless assessment of income escaping assessment” while issuing the notice u/s 148 of the Act. Our 15 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR attention was invited by the ld.AR to notification no.18/2022 dated 29.03.2022 issued by CBDT in terms of section 151A, para 3 of which provides that notices for assessment/re assessment/re-computation under Faceless Assessment Scheme shall be issued through “Automated Allocation , in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee.”, i.e. by FAO, whereas, in the case of assessee company notice u/s 148 as well as u/s 148A have been issued by ACIT Circle 1 Jaipur, i.e. Jurisdictional Assessing Officer (JAO). It is further noted that Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. v. ACIT, Circle 15(1)(2), Mumbai and others [2024] 162 taxmann.com 225 (Bombay), has held that there is no question of concurrent jurisdiction of JAO and FAO for issuance of reopening notice under section 148 or even for passing assessment or reassessment order and it is only FAO which could issue notice under section 148 and not JAO. Hon’ble Bombay High Court in the above case has held that when an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law 16 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income-tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. It is further noted that in some other cases wherein this position of law laid above, has been followed by the Hon’ble Bombay High Court are: 1. Ganesh Nivrutti Jagtap v. Assistant Commissioner of Income-tax [2024] 166 taxmann.com 168 (Bombay) Held: Where notice issued under section 148A (b) and section 148 in respect of returns filed by assessee was not issued by a Faceless Assessing Officer (FAO), as was required by provisions of section 151A, proceedings initiated under section 148 would not be sustainable 2. Dosch Pharmaceutical (P.) Ltd. v Income-tax Officer [2024] 166 taxmann.com 216 (Bombay) Held: Where Assessing Officer issued on 30-6-2021 a notice under section 148 in case of assessee-company for relevant assessment year 2015-16, since said notice was issued after expiry of six years from end of relevant assessment year, same was barred by limitation and, thus, it was to be quashed and set aside Held: Only Faceless Assessing Officer can issue notice under section 148 and not Jurisdictional Assessing Officer. 3. Singh Bhangu v. Union of India [2024] 165 taxmann.com 115 (Punjab & Haryana) 17 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Held: Scheme of faceless assessment applies from stage of show cause notice under section 148, and its object would be defeated if such notices are issued by Jurisdictional Assessing Officer. 4. Mettler Toledo India (P.) Ltd. v. Assistant Commissioner of Income- tax [2024] 165 taxmann.com 541 (Bombay) Held: Where reassessment notice was issued by jurisdictional Assessing Officer and not by faceless Assessing Officer, as was required by provisions of section 151A read with Notification No. 29/2022, dated 29-3-2022, since JAO had no jurisdiction to issue impugned notice, proceedings initiated under section 148 would were to be quashed 5. Navita S. Hetampuria v. Income-tax Officer [2024] 165 taxmann.com 424 (Bombay) Held: Where reassessment proceedings were initiated by jurisdictional Assessing Officer and not by Faceless Assessing Officer as required under section 151A, such proceedings were to be quashed. 6. Paras Mahendra Shah v. Union of India [2024] 165 taxmann.com 546 (Bombay) Held: For a notice to be validly issued for reassessment under section 148, jurisdictional Assessing Officer has no jurisdiction to issue impugned notice, same is to be issued by Faceless Assessing Officer as is required by provisions of section 151A 7. Pooja Vaibhav Shah v. Assistant Commissioner of Income-tax [2024] 165 taxmann.com 725 (Bombay) Held : Where re-assessment notice was issued by jurisdictional Assessing Officer and not by Faceless Assessing Officer as required by provisions of section 151A, impugned notice was to be quashed and set aside 8. Pravina Jagdish Patel v. Income-tax Officer [2024] 164 taxmann.com 659 (Bombay) Held: Where notice under section 148 was issued by Jurisdictional Assessing Officer (JAO) and not by a Faceless Assessing Officer (FAO), as is required by provisions of section 151A, impugned notice issued by JAO would be quashed 9. Reliance Jio Infocomm Ltd. v. Deputy Commissioner of Income-tax [2024] 165 taxmann.com 547 (Bombay) Held: As per provisions of section 151A under faceless assessment scheme notice under section 148 can be issued only by a Faceless Assessing Officer and not by a Jurisdictional Assessing Officer. 10. Sundaram Multi Pap Ltd. v. Assistant Commissioner of Income-tax [2024] 164 taxmann.com 608 (Bombay) 18 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Held: Where notice under section 148 and order under section 148A(d) was passed by Jurisdictional Assessing Officer (JAO) and not under mandatory faceless mechanism, reopening proceedings initiated under section 148 were to be quashed 11. Vidhyadhar Shetty v. Income-tax Officer [2024] 165 taxmann.com 265 (Bombay) Held: Where notice under section 148 was issued by jurisdictional Assessing Officer and not by a Faceless Assessing Officer, same was not in compliance with section 151A(2) and, thus, impugned notice was to be quashed and set aside. 12. Surya Cotspin Ltd. v. Principal Chief Commissioner of Income-tax [2024] 166 taxmann.com 265 (Punjab & Haryana) Held: Notice issued by JAO under section 148 and re-assessment proceedings initiated thereafter without conducting faceless assessment as envisaged under section 144B were contrary to provisions of law and same were to be quashed. 13. Ram Narayan Sah v. Union of India [2024] 163 taxmann.com 478 (Gauhati) Held: Where in notice under section 148 issued upon assessee, name of Income Tax Officer who was Assessing Officer had been reflected, impugned notice reflecting name of concerned Income Tax Officer was contrary to provisions of section 151A and schemes framed thereunder, whereby Income Tax Authority was required to undertake these proceedings in a ‘faceless’ manner, and accordingly, department was to be directed to withdraw impugned notice and issue fresh notices if permissible under law as per scheme read with section 151A. Hence, in view of abovementioned judgments, it is felt that in the present case, notice u/s 148 was issued by JAO, i.e. ACIT Circle 1 Jaipur and not through automated allocation as provided in Notification No. 18/2022, dated 29-3-2022 r.w.s. 151A, which is not in accordance with provisions of section 151A of the Act and the same deserves to be quashed and set aside. Thus in view of above, it is noted that initiation of reassessment proceedings is not in accordance with law as notices u/s 148A and 148 as well as order u/s 148A(d) have been passed by JAO instead of FAO, which 19 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR is not in accordance with specific provisions of statue. Thus order passed u/s 147 is bad in law and deserves to be quashed. It may be noted that the notice u/s 148 dated 30.07.2022 is invalid and bad in law as the same has been issued without a DIN. Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. is reproduced as under: Section 148, read with section 148A, of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for (Notice without DIN) - Assessment years 2013-14 to 2015-16 - Assessee, engaged in information technology consulting, software development and business process services, filed its return of income - Same was accepted and assessment was completed under section 143(3) - Subsequently, Assessing Officer issued a reopening notice under section 148 on several grounds - Whether since impugned reopening notice issued under section 148 was issued without a DIN, same was invalid and bad in law - Held, yes [Para 31] [In favour of assessee] Without prejudice to the above mentioned irregularities in the procedure established by law from the provisions of the Act for completion of assessment proceedings, it is worth noting that the AO has erred in reopening assessment proceedings against the assessee which had been already completed u/s 143(3) r.w.s. 153A of the Act without making an allegation of not truly and fully disclosing the material necessary for assessment. This absence of any specific allegation against the assessee, renders the initiation of reopening of assessment proceedings to be a mere change of opinion, which proceedings is bad in law and deserves to be set aside. In addition to this, the absence of any directly relating and explicit documentary evidence against the assessee for substantiating the alleged 20 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR escapement of income proves that the case of the assessee has been reopened on borrowed satisfaction from some other officials and without due verification. In this regard, it is already decided in favour of the assessee in the case ‘Harikishan Sunderlal Virmani v. Deputy Commissioner of Income Tax, Circle-2(1) [2017] 88 taxmann.com 548 (Gujarat)’ by the Hon’ble Gujarat High Court that reopening of assessment beyond four years on basis of information received from external source, viz., Principal Director of Income Tax (Investigation), was not justified when there was no allegation of assessee's failure to disclose truly and fully material facts necessary for assessment. As regards reopening of assessment in respect of entries worth Rs.74,51,800/- alleged to be unaccounted transactions on the basis of search conducted in the case of Veto Group is concerned, it is noted that that initial notice u/s 148 in this case was issued on 13.5.2021, whereas search in the case of Veto Group was conducted on 22.12.2021. It thus implies that at the time of issuing notice dated 13.05.2021, this reason of reopening did not exist and there was no reason to believe, on which assessment could be reopened. Subsequent notices issued u/s 148A in accordance with Apex Court decision in the case of Ashish Agrawal were merely to provide a leeway to the department to complete the proceedings in accordance with new 21 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR provisions and would have no impact whatsoever on the basic requirement that reasons had to be recorded prior to initiation of proceedings. As in present case, there was no reason recorded at the time of issuing original notice, the same could not be incorporated while issuing notice u/s 148A (b). In other words, information conveyed to assessee vide notice u/s 148A(b) dated 1/6/2022 was not available with AO himself at the time of issuing initial notice for reopening and was incorporated at a much later stage. It is therefore noted that reopening of assessment on the issue of entry of Rs. 74,51,800/- by alleging it as unaccounted transaction is not in accordance with law . Thus the Ground No. 1 to 1.3 deserves to be technically and legally quashed but the Ground No. 2 and 3 are being adjudicated on merit hereunder. 3.1 In Ground No. 2 to 2.3 the assessee has challenged the action of ld. CIT(A) in confirming the action of the AO in making the addition of Rs.5,12,17,312/- u/s 69A made by AO by alleging that the profit earned by assessee on trading of shares in normal course of business as fictitious profit and thereby holding the same as unexplained money. 3.2 Brief facts of the case are that the assessee has traded in the securities market during the captioned assessment year on which statutorily required levy i.e. securities transaction taxes as applicable were 22 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR paid besides the payment of other statutory charges and brokerage etc. which were all paid through prescribed banking channels and the net income so earned was duly offered for tax in the return of income filed, which stood processed by the department. Subsequently, case of assessee was re-opened and re-assessment order was passed u/s 147 r.w.s. 144B by making addition of Rs.5,12,17,312/- i.e. profit on certain filtered transactions by alleging the same as being on account of rapid reversal trades by flouting SEBI Rules and thus by treating the genuine profits of assessee as accommodation entry and unexplained money u/s 69A. The narration as made by the AO in his order is reproduced as under:- ‘’4…….From perusal of material available under Project Falcon on the ITBA and from perusal of statement of Sanjay Kumar Periwal and Shri Harshvardhan Kayan recorded u/s 131(1) of the Income Tax Act, 1961 during the course of search/ survey action and based on the analysis of trade data as present in this paragraph and comparing with Chief characteristics of reversal trades as discussed, it is seen that the assessee indulged in generating non-genuine loss amounting to Rs.5,12,17,312/- by trading in liquid stock options on the NSE during the period previous year 2014-15. 5. In view of the foregoing facts, it is sufficiently clear that the assessee has benefited from engaging in reversal trades in illiquid stock option on the BSE resulting in non-genuine profit amounting to Rs.5,12,17,312/- which has been set off against other income. The assessee has introduced his unaccounted income by booking bogus profit through reversal trading. Therefore, the same is hereby added as unexplained investment which assessee has introduced in business in the form of bogus profit earned through reversal trade….’’ 3.3 In first appeal, the ld. CIT(A) has not allowed the above ground of the assessee holding that the appellant has not discharged its onus either u/s 23 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 68 or u/s 69A of the Act and hence the additions made by the AO were confirmed by him. 3.4 During the course of hearing, the ld. AR of the assessee filed the written submission praying that that huge addition of Rs.5,12,17,312/- has been made by AO merely on conjectures and surmises and without rebutting the most specific and detailed submission made by assessee that addition u/s 69A cannot not be made since the entries pertaining to Rs. 5,12,17,312/- are appearing in the regular books of accounts which are duly audited and hence not covered within the provisions of section 69A of the Act and deserves to be deleted. 3.5 On the other hand, the ld.DR supported the orders of the lower authorities and submitted that no written submissions had been filed by the assessee and no evidence had been provided to support the ground of appeal and statement of facts which are not backed by any documentary evidence. The ld. DR further submitted that merely because the transactions were carried out through banking channel only shows documentation and is not a proof of the genuineness of the transactions. Thus the assessee has not discharged its onus either u/s 68 or 69A of the Act. 24 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 3.6 We have heard both the parties and perused the materials available on record. In this ground, it is noted that the AO made an addition of Rs.5,12,17,312/- observing that the assessee had benefitted from engaging in reversal trades in illiquid stock options on the BSE resulting in non- genuine profit amounting to Rs.5,12,17,312/- and it has been set off against other income. The assessee has introduced his unaccounted income by booking bogus profit through reversal trading. In first appeal, the ld.CIT(A) has confirmed the action of the AO holding that the assessee has not discharged its onus either u/s 68 or 69A of the Act. During the course of hearing, the ld.AR invited our attention to the fact that ld.AO himself has been changing his view on the nature of alleged accommodation entry obtained by the assessee. In his initial notice issued u/s 148A(b), at para 4 (PB Page 92-93) , it is alleged that assessee is beneficiary to the accommodation entry of Rs.4,68,75,013/- on bogus transactions incurred by reversal of trades as reported in Project Falcon. Going further, in the same notice, at para 5 (PB Page 95) it is alleged that there is information from I & CI Directorate Jaipur that assessee has taken fictitious profit of Rs.5,12,17,312/-. Thus, aggregate of both the amounts was considered to have escaped assessment. However, while passing order u/s 148A(d), there is no discussion of sum of Rs.4,68,75,013/- and assessee is alleged 25 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR to have taken fictitious profit of Rs.5,12,17,312/- and has concluded that such amount is liable to be added u/s 68/69. Thereafter, in the show cause notice (APB 138) at para 5, the AO has alleged that assessee has benefitted from engaging in reversal trades in illiquid stock options resulting in non genuine losses and proposed to add in unexplained cash credits. Finally, while concluding assessment order, the AO at page 17 of his order, has first observed that assessee has been indulged in generating non genuine losses and in the very next para has made addition u/s 69A by concluding as under: “5. In view of the foregoing facts, it is sufficiently clear that the assessee has benefitted from engaging in reversal trades in illiquid stock options on the BSE resulting in non-genuine profit amounting to Rs 5,12,17,312/- which has been set off against other incomes .The assessee has introduced his unaccounted income by booking bogus profit through reversal trading .Therefore, the same is hereby added as Unexplained investment which assess has introduced in business in the form of bogus profit earned through reversal trade. Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 have been also initiated for furnishing inaccurate particulars of his income.” From perusal of above, it is evident that in entire proceedings, stand of AO has been changing consistently as to nature of alleged accommodation entry and section under which the same needs to be added. This itself shows that the huge addition of Rs.5,12,17,312/- has been made by AO solely relying upon the information received and without examining the issue independently after due application of mind. It is further submitted that statements of some brokers namely, Sh. Sanjay Kumar Periwan and 26 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Sh. Harshwardhan Kayan have been heavily relied upon by AO. As stated in Assessment order that (Page 1 & 2) “ In reply to Q-26 of his statement, Shri Sanjay Kumar Periwal has stated that “ These transactions are either expired or reversed on the same day within few seconds to few hours”. Similarly, Shri Harshvardhan Kayan has stated in his reply to Q-26 of his statement that “These trades would expire on weekly options or reversed within a few seconds to match the trades with each other” , It is noted from records that copy of such statements was not provided to assessee. Moreover, there is no mention that these parties have stated name of assessee being beneficiary. Thus, whole assessment has been completed on very generalised information and confirmed by ld.CIT(A) also on the same basis. With this background, it is noted that AO has treated genuine F & O transactions as non-genuine on following allegations: 1. Execution of several non-genuine trade 2. Buying and selling option contracts with same counter party 3. Reversal of trade within minute 4. No reasonable and rational investors will keep on making losses (Version of Ld.AO as per Show cause notice and Assessment Order) 5. Further alleged that assessee has introduced his unaccounted income by booking bogus profits 3.7 In this regard, it is noted that so far as first three allegations are concerned, the same are solely based on SEBI order and without any enquiry by AO. The AO has not even brought any single evidence on 27 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR record as to how was assessee related with the counter party, with whom assessee is alleged to have entered into transactions, which stood reversed subsequently. There is no iota of evidence w.r.t. action taken by SEBI or the Income Tax Department in the case of such counter party and the underlying motive of those parties behind such reversal. With regards to the fourth allegation that assessee has introduced his own unaccounted income as fictitious profits, it is felt that such observation is merely on assumptions and has no basis. Further it is noted that the transactions relating to Future and Options Trade (F&O Segment), in which the assessee has traded, there is a standard procedure prescribed by the exchange / SEBI while executing the transactions which has been strictly followed by the assessee firm. The detailed note on this procedure is as under:- 1. That the assessee had a trading account opened with recognized and government approved brokers who are members of various stock exchanges and are closely regulated by SEBI / directly which in present case for filtered transactions is Bombay Stock Exchange (BSE) where, account is opened after due compliance of KYC norms. 2. That assessee has traded in future and option (F&O) Segment through aforesaid broker via online system and contract note is issued by broker for all transactions so executed which is generated with precise details of time at which transaction is executed. 3. That transactions so executed are at a price which is being reflected on BSE exchange online and is uncontrolled by assessee, as such exchanges are being operated by the government approved bodies and are on digital mode. 28 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 4. That, all the transactions entered into by assessee are subject to payment of Securities Transaction Tax. 5. That broker alongwith assessee has complied with all the necessary compliances as required under SEBI law for allowing a person to transact in stock exchange. 6. That transactions so executed on BSE are settled through online portal of stock exchange only and cannot be done directly with buyer or seller as they are unknown to each other. Similarly in the case of filtered transactions also payment are settled through exchange via broker only and no direct payment could be made / received. 7. Matching of transactions on the exchange is done by BSE / NSE and there is no role of assessee or its broker and in case transactions do not match, they are reversed by BSE and if in case any payment is not made or the payment made is not honoured by the bank then in such a case, payment is again made to BSE only and not to the seller of shares, as he or she is unknown to the buyer. 8. In case of future & options, the difference in bid and ask price is also uncontrolled and is reflected on the online portal of exchanges based on the demand and supply and such bid and ask price also varies with the strike rate of a particular script and is available online to all the traders without any control by assessee. 9. In case, any transaction of F&O is executed and the executant wishes to close it by squaring up, it can only be done at the prevailing price on the exchange and there is no other option except to opt offer price appearing on online system at that point. 10. As is the case of cash securities market there is no provision in F&O market of “buyer pack” or “seller freezing” and as a consequence the transaction has to be squared up at the offer price available and prevailing at that point of time on the online portal of exchange which is uncontrolled and at the end of every working day settlement of F&O transaction is carried out and difference is either paid / collected from the party. 11. It is also relevant to state that Exchange does not permit to enter into trade of F & O unless the party has sufficient margin money available and in case of failure to follow this, the broker as well as the party are penalized by Exchange. Hence, it is clear that transactions in F & O segment as carried out by assessee could never be controlled by the assessee or its broker as the 29 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR same are being entered into, at the online platform of recognized stock exchange and as per the Rule and Regulations of Stock Exchange and SEBI. In fact, no material or evidence whatsoever has been brought on record by AO which could prove that assessee knew the counter party and was hand in glove with such party for carrying out such transactions to incur loss. Thus, basically, AO made huge addition of Rs.5,12,17,312/-, solely on the basis of information received from I & CI Wing, emanated from the order passed by SEBI in the case of assessee wherein allegation was made on presumption basis. In this regard, it was submitted by the assessee (PB Page 88) before AO that SEBI, itself in its order dated 31.1.2020 has stated that “it is not possible from the material available on record to quantify the amount of disproportionate gain or unfair advantage resulting from the artificial trades between the counterparties or the consequent loss caused to investors as a result of the default.’’, However submission of the assessee was brushed aside. At this juncture, it is also relevant to state that the transactions under reference were carried out on BSE where selected scripts are being permitted for being traded on F&O Segment falling under the category of BSE-500 and lot size also is decided by the BSE. If any suspected transaction is noticed by the administration of BSE / SEBI it immediately 30 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR suspends the trading in such script and after making necessary verification / clarification of the suspected transactions, only the suspension is revoked. In assessee’s case no transaction is executed in any script which is suspended by the BSE / SEBI during the period under reference. Our attention is invited to the fact that since beginning of the proceedings, the department alleged that assessee is indulged into reversal trade in Illiquid stocks. During the course of assessment proceedings (APB 143-144), a detailed list of the companies in whose scripts F & O segment transactions are carried out by assessee, was filed and the same is as under: 1. POWER GRID CORP. LTD. 2. CENTURY TEXTILES LTD 3. AMTEK AUTO LTD. 4. APTECH LTD 5. AXIS BANK 6. CANRA BANK 7. CENTURY TEXTILES LTD 8. CESC LTD 9. HIND PETRO 10. NTPC 11. STATE BANK OF INDIA 12. DISH TV 13. NHPC 14. PTC INDIA LTD. 15. JAIN IRRIGATION SYSTEMS 16. JSW ENERGY LIMITED 17. KARNATAKA BANK 18. RELIANCE COMMUNICATIONS LIMITED 19. BANK OF BARODA BANK 20. INDIABULLS REAL EST. LTD 21. POWER GRID CORP. LTD. A bare perusal of above list reveals that none of the company could be classified as Illiquid stock and having daily volume of turnover in exchange 31 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR exceeding crores of rupees. Thus the basic allegation made by department of trading in Iliquid stock is beyond understanding. It is also relevant to state that Exchange permits trading in F & O segment to very specific companies and not to all the companies and such companies has large shareholding base with heavy volumes of trade in both BSE / NSE and thus it is practically impossible for any entity to effect any such company by entering into any kind of alleged reversal trade. It is also noted that in response to show cause notice issued by AO, the assessee furnished detailed reply dated 23.05.2023 (APB 140-150), wherein all the allegations of AO were duly controverted, which are summarised as under: 1. As is evident from the aforesaid list of companies in which assessee has traded, all of them are either BSE 500 companies or reputed companies and there cannot be any in-genuine trade in any of these listed companies. Hence, the first allegation does not hold good. 2. With respect to second allegation of buying and selling with the same counter party, it is submitted that in case of online trading in listed securities, there cannot be buying and selling with the same counter party for the sole reason that all the trades are executed through the online portal and even while sitting in a same room and trying to sell from one desktop and trying to purchase from the other is not possible as the stock exchange is running on the technology of micro- nano seconds wherein predetermining the buyer and seller for a trade is humanly not possible and if it is so, the department has to prove beyond doubt that the trade executed by the assessee is only with one single party, hence, the second allegation also does not hold good. 3. The third allegation of reversing the trade within minutes, it is submitted that the total volume of the transactions executed by the assessee is in crores wherein numerous transactions are executed through online portal and the perception of holding the trades for days require margin money as per exchange rules wherein huge amount of funds is required of which the opportunity cost of interest is being levied with every passing day and the assessee has ensured of 32 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR minimizing the requirement of margin money by executing the trade within a day itself to overcome the other riders of the brokers of keeping margin money etc., hence, the third allegation also does not hold good. 4. With respect to the fourth allegation of making in-genuine surplus, it is submitted that the assessee has not made a loss and has rather earned net total income of Rs. 2,18,24,480/- on which due taxes has been paid and return has been filed. It is a proved fact that any human who is trading in securities market can never earn only profits and no loss and same is the case with the assessee wherein it has earned surplus on certain trades and at the same time has suffered losses on other trades and the net in the case of assessee is a surplus which has to be accepted by the department and there cannot be a pick and choose theory of rejecting the losses suffered and accepting the profits earned for taxing the income, hence, the fourth and last allegation also does not hold good. Further, it is pertinent to take into consideration ADJUDICATION ORDER No. Order/PM/AB/2019-20/6688 passed by SEBI dated 31.01.2020 (APB 76-89) in the case of assessee which reads as under: Page 12 & 13 of the Order 23. While determining the quantum of penalty under Section 15HA of the SEBI Act, the following factors stipulated in Section 15J of the SEBI Act, have to be given due regard: a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as a result of the default; (c) the repetitive nature of the default. 24. As established in the preceding paragraphs, the trades carried out by the Noticee were non-genuine in nature and created a misleading appearance of trading. As brought out earlier, such trades were carried out by the Noticee in illiquid stock options contracts where there was negligible participation by the public. Investigation has shown amount of profit / loss of the counterparties to the trades as a result of such non-genuine trades. However, considering that the violation by the Noticee is creation of artificial trading volumes by trading between two counterparties and wider market is not involved in the trades, the trades are such that one of the counterparty books a profit while the other counterparty books a loss. Hence, it would be appropriate to consider the impact of these transactions between the two counterparties in totality. When the impact of artificial volumes created by the two counterparties is seen as a whole, it is not possible from the material available on record to quantify the amount of disproportionate gain or unfair advantage resulting from the artificial trades 33 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR between the counterparties or the consequent loss caused to investors as a result of the default. ‘’ From the perusal of above para, it is clear that SEBI itself is not in possession of the desired information to quantify the amount of advantage made by assessee, then how can genuine business profits of assessee be treated as fictitious in absence of such material. Hence, in the circumstances, allegations of AO are baseless in the scenario that no evidence of shifting the profit of the assessee firm to any other entity has been brought on record. Further, it is observed that trading in BSE or NSE is completely without intervention of human interface except for punching the trade and in such circumstances it cannot be said that transaction so executed is not as per rigid norms laid down by BSE or NSE more particularly when the department is not able to correlate its theory with the beneficiary and its association with the assessee. The Bench noted from the records AO passed assessment order and made huge addition to the tune of Rs.5,12,17,312/- without providing opportunity of cross examination of the parties whose statements were heavily relied upon for making addition. The Bench also rely upon following case laws: 1. Hon’ble Apex court in the case of CCE Vs. Andaman Timber Industries, (324) ELT 641 has that: ‘’6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses 34 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 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. 7. 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 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.” 2. Hon’ble Apex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under: S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. 3. Hon’ble Jaipur bench of ITAT in the case of Maverick Commodity Brokers Pvt. Ltd. ITA No. 27/JP/2020, while deciding the issue of disallowance of exemption u/s 10(38) on account of Long Term Capital Gain by assessing officer on allegation of Penny Stock has observed that: “14.6 ………………The ld. AO relied on the findings of the SIT report and SEBI report for that the ld. CIT(A) observed that these reports are pieces of information 35 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR and the AO was expected to convert it into evidence by further inquiry which would comprehensively prove that it is assessee’s cash which was routed and came back to the assessee in the form of Capital gain. The report of the SEBI Related to the stock market regulation and its order is not in assistance to the revenue based on these findings the CIT hold view that mere statement of third-party is not enough to make addition in the hands of the assessee and also vacated the findings of the ld. AO. The ld. CIT(A) reviewed the copies of the documents filed by the assessee wherein he is reviewed the contract notes, ledger account, bank statement, demat account, affidavit of Anil Agarwal etc. after going through this records he observed that no questions raised before the Anil Agarwal about the transaction entered by the assessee is under his knowledge not only that the Anil Agarwal retracted his statement so even on that count no addition can be made in the hands of the assessee. Then ld. CIT(A) extracted various decision that has been considered by him while considering the appeal of the assessee and the same were not reiterated here to avoid the duplication but he has mainly considered the various jurisdictional binding decision and based on those findings he allowed the appeal of the assessee. 4. Hon’ble ITAT, Mumbai, Special Bench in the case of GTC Industries vs., ACIT 164 ITD 1 (SB) has observed as under : \"46. \"Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money, It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence record. The theory of preponderance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favorable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out then nothing can be implicated against assessee.” 5. Hon’ble Gujrat High Court in the case of Sanjiv Dhireshbhai Shah v. Income-tax Officer [2024] 165 taxmann.com 179 (Gujarat) has held that where Assessing Officer issued on assessee a notice under section 148 seeking to reopen assessment for reasons that assessee had indulged in generating non genuine losses and profits by trading in illiquid stock options on Bombay Stock Exchange, since there was no allegation that assessee had earned any income which was not offered to tax, reasons recorded could not be used to form any reason to believe as to escapement of income for assuming jurisdiction to reopen assessment. Therefore, as the assessee having disclosed the all the details of the transactions carried out by him, the impugned assessment order containing 36 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR additions against the assessee by treatment of the trades as bogus transactions resulting in fictitious losses/profits could not be sustained. The Bench noted from the entire conspectus of the case that Assessment was reopened solely on the basis of information received from I & CI Wing after the order of SEBI, which itself is not clear about the quantification of unfair advantage alleged to have been taken as a result of illegal trade reversals. There is no mention in SEBI order regarding any action being taken in the case of any of the company, in whose equity Futures/Options transactions were alleged to be traded illegally. There is no finding of SEBI as to exactly HOW did assessee by pass the procedure being followed on ONLINE portal and how assessee knew the counter party (as the same is not practically possible). No direct enquiry was made by AO from third parties alleged to be counter parties with which trades were reversed nor were they cross examined by AO to verify if they have been benefitted from such trade reversal. No discrepancy whatsoever was pointed out in the details/information furnished by the assessee and the same remained uncontroverted. No opportunity of cross examination of witness or evidence in relation to the transactions attributable to the loss disallowed was provided. Assessee has been trading regularly in many blue chip companies, from which it has earned profit as well as suffered losses. It is 37 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR noted that trading has been through online portal, where the buyers and sellers are random parties and they do not know each other, therefore there cannot even be any presumption of contact with each other. All the transactions being incurred on online portal of BSE and are supported by Contract Notes and have been subjected to payment of STT. The Bench noted that even otherwise also the AO had issued show cause notice for making addition on account of unexplained cash credits (APB 138) and while passing the assessment order addition has been made u/s 69A on account of unexplained money. Reliance is placed on the case of Vishal Jhajharia Vs. Assessment Unit, Income-tax Department Faceless Assessment Centre reported in 164 taxmann.com 781 (Calcutta) wherein it has been held that “Where revenue issued a show cause notice to assessee for adding back amount in question as ‘unexplained cash credits’ u/s 68, it could not pass final order by adding said amount as ‘unexplained money’ u/s 69a without giving assessee an opportunity to explain.” At this juncture provisions of section 69A of the Act is reproduced as under for ready reference— Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the 38 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. On perusal of aforesaid provision it is clearly evident that the addition under section 69A could be made if the assessee is found to be the owner of money that is not recorded in the books of account and the assessee is not offering explanation about the source of money. However in the instant case assessee has duly recorded the F&O transactions in the books of accounts and has also offered the profit earned on such transactions for tax. Thus transaction under taken by assessee could not be treated as unexplained money u/s 9A of the Act and the addition made deserves to be deleted. Further reliance is being placed on the decision of Hon’ble Income Tax Appellate Tribunal, Mumbai Bench in the case of Ramchandra Kanu Mendadkar vs. CIT(Appeals) Mumbai in ITA No. 163/Mum/2023 dated 12.05.2023 wherein Hon’ble ITAT held as under— “10. On perusal ………………we look at the provisions of Section 69A is extracted as under:- “ Where in any financial year ………………………… of the assessee for such financial year.\" From the plain reading of the above provisions it is clear that the addition under section 69A could be made if the assessee is found to be the owner of money that is not recorded in the books of account and the assessee is not offering explanation about the source of money. In assessee’s case we notice that the assessee has recorded the impugned amount in the books of account and has also offered the same to tax by including the it as professional fees. In view of these discussions and considering the facts of the present case, we are of the view that the amount cannot be treated as unexplained and therefore we delete the addition u/s 69A of the Act.” 39 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Hence in the entirety of the facts, circumstances of the case and the case laws discussed hereinabove, the Bench is of the view that huge addition of Rs.5,12,17,312/- has been made by AO merely on conjectures and surmises and without rebutting submission made by assessee that addition u/s 69A cannot not be made since the entries pertaining to Rs. 5,12,17,312/- are appearing in the regular books of accounts which are duly audited and hence not covered within the provisions of section 69A of the Act and deserves to be deleted. Thus Ground No. 2 to 2.3 of the assessee are allowed. 4.1 In Ground No. 3 to 3.3, the assessee is aggrieved that that the ld. CIT(A) has grossly erred in confirming the addition of Rs.74,51,800/- made by AO u/s 69A of the Income Tax Act, on allegation of Unexplained money. 4.2 Brief facts pertaining to the grounds of appeal are that during the course of search action conducted in the case of Veto Group on 22.12.2021, a pen drive was found and seized from accountant of the group, Sh, Nand Lal Alwani, wherein a tally file namely “VIKAS” was found (PB Page 126). It has been alleged that a ledger in the name of “MB Agrawal” as found in such tally data pertained to the assessee. Since the accountant of Veto group in his statements had admitted that tally data 40 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR contained unaccounted transactions of Veto group, therefore , it was alleged that transactions in ledger of “MB Agrawal” were unaccounted transactions of the assessee. Assessee raised objections against this, in reply filed in response to notice u/s 148A as well as in response to show cause notice, however the same was brushed aside and addition was made of entire sum of Rs.74,51,800/- as appearing in ledger so found by alleging the same as Unexplained Money u/s 69A. 4.3 In first appeal the ld. CIT(A) has confirmed the action of the AO by holding that the assessee has not discharged its onus and the ground of appeal is not allowed. 4.4 During the course of hearing, the ld. AR of the assessee submitted that the department has failed to bring on record any adverse material which could prove that the assessee has paid an amount of Rs. 74,51,800/- to Vikas or to Shri Nandan Lal Alwani or to someone related to Veto Group wherein the handwriting of the assessee is found or the signatures of the assessee are found. Simply pasting a computerized file cannot make the assessee liable for answering the paper found from a third party more particularly when the department is not able to substantiate beyond doubt that the relevant notings belongs to the assessee. Thus the addition so confirmed by the ld,.CIT(A) deserves to be deleted. 41 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 4.5 On the other hand, the ld.DR supported the order of the ld. CIT(A) who submitted that with regard to unaccounted transactions of Rs.74,51,800/- recorded in the books of Veto Group, the same was accepted by the concerned persons of the said group. The ld. DR further submitted that during the assessment proceedings, the assessee was not able to provide any credible evidences that the transactions were genuine. 4.6 The Bench has heard both the parties and perused the materials available on record. It is noted that during the course of search action conducted in the case of Veto Group on 22-12-2021, a pen drive was found and seized from the accountant of the Group Shri Nand Lal Alwani wherein a tally file namely ‘’VIKAS’’ was found. The Department alleged that a ledger in the name of ‘’MB Agarwal’’ as found in such tally data pertained to the assessee. Conclusively, the AO made addition of Rs. 74,51,800/- as mentioned in the assessment order which has been confirmed by the ld.CIT(A). The Bench noted from ledger obtained during the search proceedings that the title contained ‘ M B Agarwal’ is without any form of identification through PAN, signature or any such details to establish that the ‘M B Agarwal’ denoted ‘Mukut Behari Agrawal’ and that the assessee is associated with the Veto group. The Bench takes into consideration the decision Supreme Court in the case of V.C. Shukla & and Others, AIR 42 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR (1998) Supreme Court 1406 wherein it has been held by the Hon’ble Apex Court that mere writing any transaction in one’s own record including on computer without the knowledge or supporting, signatures, handwriting etc. of other person and the writing of such transactions behind his / her (other person’s) back cannot make the other person liable for the transactions and also the consequential effect cannot be given against the other person and simultaneously it cannot bind / make liable to the other person from the entry / transaction (s). Further the Bench takes into consideration the decision of ITAT Delhi Bench in the case of DCIT vs Mahabir Prasad Gupta (ITA No. 713 & 714/DEL/2011 dated 23.11.2012) has held as under: 7. We have heard the rival contentions and gone through the record carefully. We find that similar issue was considered by the ITAT in a number of cases. The findings recoded in the case of Atul Gupta read as under: \"16. We have duly considered the rival contentions and gone through the record carefully. The issue for our adjudication is whether the narration found in the diary of Shri Brij Mohan Gupta recovered during the course of search carried out at his premises in 2004 is a conclusive evidence against the assessee to hold that assessee made investment in advancing the loan to certain parties through Shri Brij Mohan Gupta. The revenue in order to prove its case is harping upon the narrations available in the diary, statement of Shri Ram Avtar Singla and Shri Brij Mohan Gupta. We have perused the seized material available on page 46 of the assessee's paper book. On this page, there are various entries against the names of various persons, they are in abbreviated form or in a coded form. At the bottom of the page against \"Atul\", there are certain entries, namely, 4, 4, 2, 1 & 1.5 totalling to 12.50 are available. No doubt, this is a narration made by Shri Ram Avtar Singla in his handwritings. Shri Ram Avtar Singla has explained what for the latter mentioned in abbreviated form stands for e.g. HD means Hanuman Dass. KMF, Krishan Kumar Manoj Kumar, Karol Bagh, New Delhi. Learned Investigating Offifer at the time of recording the statement of Shri Ram Avtar Singhla almost put every abbreviated letter to Shri 43 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Ram Avtar Singhla. He was able to give the complete form but not the address. With regard to the assessee, no question was put. The revenue failed to establish a live link between the information noted in abbreviated form by Shri Ram Avtar Singhla and the assessee. The revenue could not establish that Atul noted in this diary is as Atul Kumar Gupta i.e. the assessee. Thus, neither the diary was found from the premises of the assessee nor it is in the handwriting of the assessee, any third person may right the name of any person at his sweet will then an assessee cannot be burdened with liability on the basis of such writing. That can be starting point of investigation but revenue has to establish that it is the assessee who has paid the money to certain concerns without recording them in the books of account. Learned First Appellate Authority has discussed this aspect while deleting the addition and we do not see any reason to interfere in his findings. The findings in all the other assessment years are almost similar except variation in the quantum of additions. Therefore, all the appeals of the revenue are de void of any merit and they are dismissed.\" 8. There is no disparity on facts. The revenue could only able to lay its hands on the diary of Shri Brij Mohan Gupta where names of persons were recorded in coded words e.f. 'HD' means Hamamm Dass, R.K. means Ram Kumar. The revenue could not establish that 'MPG' means Mahabir Prasad Gupta only i.e. 'assessee'. The revenue has not placed on record statements of Shri Brij Mohan Gupta or Ram Avtar Singal or Rajiv Gupta before us. Therefore, in our opinion, the issue in dispute is squarely covered in favour of the assessee by the orders of the ITAT passed in the case of other persons i.e. Ashok Prasad Gupta, Atul Gupta, Dev Dutt Prasad etc. 9. On due consideration of all these material, we do not find any merit in this appeal. It is dismissed.” It may be noted that above decision of Hon’ble ITAT has been affirmed by Hon’ble Delhi High Court in its decision dated 20.10.2015 in ITA No. 814 of 2015. Subsequently, following the above decision of Hon’ble High Court, issue was decided in favour of assessee in CIT vs Sant Lal Delhi HC (2020) 195 DTR (Del) 203, (headnote reproduced) ‘’Income from undisclosed sources-Addition under s.69A-Material discovered during search of third person-Tribunal found that the Revenue has placed on 44 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR record statement of BM and AS but still Revenue has failed to establish link between the information noted in abbreviated form and the assessee- Revenue has not been able to produce any cogent material which could fasten the liability on the assessee-CIT(A) has also examined the assessment record and has observed that the AO did not make any further inquiry/investigation on the information passed on by the Dy. CIT- No attempt or effort was made to gather or corroborate evidence in this relation- No substantial question of law arises for consideration- CIT vs. Mahabir Prasad Gupta (IT Appeal No. 814 of 2015, dt. 2020th Oct, 2015) followed.’’ Further reliance is placed on the following judicial pronouncements: 1. Naren Premchand Nagda v ITO (ITA No. 3265/Mum/2015) – In this case, search was conducted at the premises of builder. The statement of key person of the group was recorded who stated that the assessee had paid cash to the group. When the statement of the key person was put to the assessee, he denied of making any payment in cash. However, the department made addition by relying on the statement of key person of the group. The Hon'ble Tribunal relying on series of judicial pronouncements held that in absence of any evidence found against the assessee, no addition can be made on the basis of documents found from the premises of third party and the statements recorded during the course of search conducted in third party premises. It may be noted that in this case the transaction of purchase of property by the assessee from the builder has not been denied by the assessee. Further, the cheque payment was also reflected in the seized notings. Inspite of this, the addition made on the basis of notings in respect of cash transaction was not confirmed. 2. Jawaharbhai Atmaram Hathiwala v. ITO [128 TTJ 36 (Ahd)(UO)] – In this case, addition was made by relying on seized material and statement of third party without bringing any other evidence on record. The Hon'ble Tribunal deleted the addition. The relevant portion of the order of Hon'ble Tribunal is as under (Head Note) \"Held that no evidence could be brought on record by the Revenue to show that in fact the assessee had paid 'on money' to the developers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'on-money' was not justified 3. ACIT v. Prabhat Oil Mills [52 TTJ 533 (Ahd)] – In this case, the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made any sales outside the books of accounts. The Hon'ble Tribunal held that once the assessee denies the transaction, the onus was on the Assessing Officer to prove 45 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR with corroborative evidence that the entries in the seized diary represented sales outside books of accounts. The Hon'ble Tribunal further held that mere entries in the accounts of third party was not sufficient to prove that assessee had indulged in transaction outside books of accounts. Further, in para 9 of the order, the Hon'ble Tribunal also rejected the argument of the department that the matter should be set aside to the file of the Assessing Officer. 4. CIT v. M/s Daga Fibres Pvt. Ltd (Bombay High Court)- The Hon'ble Bombay High Court upheld the order of the Hon'ble Tribunal wherein the addition made by the Assessing Officer on the basis of loose paper found from the premises of third party was deleted since the assessee as well as third party had denied to have entered into any transaction. Further, no corroborative evidence was brought on record by the department to suggest that the transaction took place. In view of the same, the Hon'ble Bombay High Court, upholding the order of Hon'ble Tribunal, held that no addition can be made in the hands of assessee on the basis of loose papers found during the course of search at the premises of the third party. The Bench has taken note of the facts of the case and found that impugned addition was made solely on the basis of document obtained during the search conducted in case of a third party (Veto group). The entries found recorded in the ledger with one of the employee ‘Sh. Nandan Lal Alwani’ of Veto group was the only basis for making addition in the case of the assessee. Since the assessee had no connection with the said person, the assessee had specifically requested for cross examination of such person from whom the ledger was found (which was alleged to be pertaining to assessee). The request of assessee was brushed aside which is against the principle of natural justice. The Bench has taken into consideration the entire conspectus of the case from where it emerges out as under:- 46 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR 1. The assessee does not know Shri Nandan Lal Alwani and no opportunity of cross examination has been given to the assessee 2. The statements of Shri Nandan Lal Alwani never provided to the assessee till date wherein it is stated that he has accepted of these transactions with assessee namely Shri Mukut Behari Agarwal. 3. The fact that the impugned ledger found from Veto Group search, didn’t have any signature or PAN of the assessee, as well as lack of any document in support, which proves that the ledger namely “MB Agarwal” pertained to the assessee. 4. Assessment was completed on the basis of search conducted in the case of third party, without providing complete material/ statements of third parties relied upon for reopening assessment and for making addition. 5. Assessment was completed without affording assessee opportunity of cross examination of parties, whose statements were heavily relied upon for making addition. No independent enquiries have been conducted by AO nor any evidences has been brought on record in support of presumptions of .AO.The department has failed to prove the business connections between the assessee and Veto Group from where the inference can be drawn. Hence, it appears from the records that the department has failed to bring on record any adverse material which could prove that the assessee has paid an amount of Rs. 74,51,800/- to Vikas or to Shri Nandan Lal Alwani or to someone related to Veto Group wherein the handwriting of the assessee is found or the signatures of the assessee are found. In this view of the matter, the Ground Nos. 3 to 3.3 are allowed. 5. In the result, the appeals of the assessee is allowed as indicated hereinabove. 47 ITA NO.1067/JP/2024 SHRI MUKUT BEHARI AGARWAL VS DCIT,CIRCLE-1, JAIPUR Order pronounced in the open court on 28 /11/2024. Sd/- Sd/- ¼ MkWa-,l-lhrky{eh½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalashmi) (RATHOD KAMLESH JAYANT BHAI) U;kf;dlnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 28 /11/2024 *Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Mukut Behari Agarwal, Jaipur 2. izR;FkhZ@ The Respondent- The DCIT, Circle-1, Jaipur 3. vk;djvk;qDr@ The ld CIT 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File (ITA No. 1067/JP/2023) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar "