SANTOSH DEVI MITTAL,MUMBAI vs. ACIT-25(3), MUMBAI

आदेश / ORDER

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER:

This appeal has been preferred by the Assessee against the order dated 22.02.2024, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short, “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short, “the Act”), for the A.Y. 2014-15.

(i) purchase invoice issued by Ekta Shares & Securities along with letter of delivery and ledger account, (ii) Copy of shareholding statement of the Assessee for the AY 2013-14 (iii) Copy of bank statement of the Assessee reflecting the sales transactions. (iv) Copy of sales contract notices issued by Nirmal Bang Securities Pvt. Ltd. (v) Copy of STT Certificate in case of the Assessee. (vi) Copy of ledger account of Bank Securities Pvt. Ltd. (vii) Articles of penny stock published by Economic Times. (viii) Copy of Bhav Copy showing value of shares of Turbo Tech Pvt. Ltd.

"14. With regard to Ground Nos. 3 and 4, Ld.AR of the assessee brought to our notice relevant facts relating to the case and filed its written submissions challenging the findings of the Ld. CIT(A), for the sake of clarity it is reproduced below: - "Re: Addition of sale value of shares of M/s. Turbotech Enginering Ltd (Ground No. 3 & 4 of Assessee Appeal of AY 2013-14 & AY 2014-15) i) Re: Contention of Id.AO 2. The brief background of the case is that the assessee had 3,50,000 shares of M/s. Turbotech Engineering Limited which were sold during AY 2013-14 and AY 2014-15. The long term capital gain earned on sale of such shares was claimed as exempt u/s 10(38) of the Act in the respective years. 3. A search and seizure action u/s 132 of the Act was carried out on Welspun group of companies at the premises of the assessee on 30.06.2017. In the assessment proceedings, AO relying on the finding of Kolkata Investigation Wing identified that the assessee has booked the said long term capital gain in penny scrip M/s. Turbotech Engineering Ltd listed on Bombay Stock Exchange which was not genuine. Further, The AO also relied on certain orders and investigations carried out by SEBI. 4. Further, the AO in the impugned assessment order made reference to some of the exit provider companies/ individuals who are mentioned to be indulged in manipulative trading. He accordingly treated the entire sale consideration as unexplained cash credit u/s 68 of the Act.

22.11.2011 75,000 2 1,50,000 19.04.2012 2,75,000 1 2,75,000 3,50,000 4,25,000

iii) Re: Dematerialization of Shares

iv) Re: Sale of Shares in Feb-March 2014

v) SEBI investigation relied upon by AO

a. Decision of Delhi Tribunal in the case of Swati Luthra v. ITO dated 28.06.2019 reported in 115 taxmann.com 167. (Page no 37- 46 of case law compilation) 6 "16. We further find that Ld. AO has also mentioned about some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the said order seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and 2013 and sold them in year 2014.It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. Thus, even otherwise, we find that the order of SEBI so relied by Id. AO and CIT (A) is not applicable for the transactions under consideration.

In any case as stated above, the SEBI in its subsequent decision has absolved most of the companies including the companies whose scrips are under suspicion, as they were nor found to be rigging the price. This fact alone vitiates the case of revenue."

b. Decision of Indore Tribunal in the case of Radheyshyam Khandelwal. V. ACIT vide ITA No. 7/Ind/2019 dated 25.06.2021. (Page no 86-117 of case law compilation) "20. We have further considered the judgement passed in the matter of Udit Kalra (Supra) as relied upon by the Ld. DR before us in support of the case made out by the Revenue. It appears that the challenges made in the appeal before the Hon'ble Delhi High Court in that case stood dismissed in limine; no question of law was found to be formulated. Apart from that the said judgment is distinguishable. In that particular case the scrips of the company were delisted on stock exchange, whereas, in the instant case suspension order in trading in securities of M/s Turbo Tech Engineering Ltd has ultimately been lifted by the adjudication order dated 25.11.2014 wherein SEBI has found no irregularities in the trading of such scrips; neither it has found its Directors involved in any price rigging. Such facts has categorically been mentioned in the judgement of Swati Luthra (supra). Therefore, both factually and materially it is distinguishable from the instant case before us. It is relevant to mention that the orders passed by the SEBI are only of the year 2015 and not during that material point of time i.e. the period between 22.11.2011 and 23.05.2013 when the appellant was holding the shares. Moreso, the subsequent orders passed by the SEBI absolving some companies including M/s Turbo Tech Engineering Pvt. Ltd. whose scribes were under suspicion in the absence of any finding of rigging of price diluted the issue."

c. Decision of Delhi Tribunal in the case of Smt. Simi Verma V. ITO vide ITA No. 3387/Del/2018 dated 06.11.2018. (Page no 118-123 of case law compilation)

"7. I have carefully perused the orders of the authorities below and relevant documentary evidences brought on record. Purchase and sale of shares are documented and exhibited at pages 1 to 8 of the paper book. Sale of shares are carried out in BSE at the prices prevailing in the market which are duly supported by contract notes issued by the broker. The entire transactions have been discarded by the Revenue authorities because the BSE has suspended trading in shares of Turbotech Engineering Pvt Ltd in January 2015. The undisputed fact is that the assessee had sold the shares in the month of July and September 2013, therefore, any action taken in 2015 would not affect the transactions done in 2013. Moreover, neither the SEBI nor the BSE has nullified the transactions done in 2013 in the scrip of Turbotech Engineering Pvt Ltd. Merely because some market players were doing clandestine activities in some scrips in the stock market would not make genuine transactions bogus. Merely because in the report of investigation wing, Kolkata name of Turbotech Engineering Pvt Ltd is mentioned would not make genuine transaction bogus. There is no direct evidence to demonstrate that the assessee was one of the direct beneficiaries of the accommodation entries provided by the company. Considering the facts of the case in totality in the light of supporting documentary evidences, I do not find any merit in the impugned additions. I, accordingly, direct the Assessing Officer to allow claim of long term capital gain exemption u/s 10(38) of the Act and delete the additions made u/s 69C of the Act." 18. In view of the aforementioned facts and judicial pronouncements, it is stated that the action of the AO in relying on the suspension order of SEBI without taking into consideration the fact that the shares were sold by the appellant before such order was passed is not tenable in law.

vi) Doubt on exit providers/promoters

"..... The claim of the assessee for sale of shares has been supported by the documentary evidences which have not been rebutted by the authorities below. Whatever inquiry was conducted in the cases of other parties and statement recorded of several persons namely Sh. Anil Khemka, Sh. Sanjay Vohra and Sh. Bidyoot Sarkar as referred in the assessment order and the report of the Investigation Wing were not confronted to the assessee and above statements were also not subject to cross- examination on behalf of the assessee. Therefore, such evidences cannot be read in evidence against the assessee. The order of the SEBI was also not confronted to the assessee. AO did not mention any such fact in assessment order. More so in those reports and statements, the name of the assessee has not been referred to. Ld. Counsel for the assessee, therefore, rightly contended that the twin conditions of section 10(38) of the Act have been satisfied in the case of the assessee....."

a. Bombay High Court in the case of CIT v. Shri Mukesh Ratilal Marolia vide ITA No. 456 OF 2007 dated 07.09.2011 and confirmed by Hon'ble Supreme Court in order dated 27.01.2014 vide SLP NO. 20146/2012 (Page no 1-13)

b. Bombay High Court in the case of CIT v. Shyam R. Pawar dated 10.12.2014 reported in 54 taxmann.com 108 (Page no 14-15) c. Bombay High Court in the case of PCIT v. Ziauddin A Siddique bearing IT Appeal No. 2012 OF 2017 dated 04.03.2022 (Page no 16-18)

d. Gujarat High Court in the case of PCIT v. Parasben Kasturchand Kochar dated 17.09.2020 reported in 130 taxmann.com 176 and confirmed by Hon'ble Supreme Court vide order dated 02.08.2021 reported in 130 taxmann.com 177 (Page no 19-21)

e. Delhi High Court in the case of PCIT v. Smt. Krishna Devi dated 15.04.2021 reported in 126 taxmann.com 80 (Page no 22-26)

f. Punjab and Haryana High Court in the case of PCIT v. Hitesh Gandhi bearing IT Appeal No. 18 OF 2017 (O & M) dated 16.02.2017 (Page no 27-33)

g. Rajasthan High Court in the case of CIT v. Smt. Pooja Agarwal dated 11.09.2017 reported in 99 taxmann.com 451 (Page no 34-36) 26. In view of the above mentioned facts and judicial decisions, we request Your Honour to delete the addition made in the case of the assessee." 15. Further, Ld.AR of the assessee has submitted various documentary evidences in support of the above said transaction and he brought to our notice contract notes of sales of shares, details of cheque issued by stock broker of the assessee towards sales, bank statements in support of the realisation of the sale proceeds and he submitted that the Long Term Capital Gain earned by the assessee is genuine and not an arranged one as alleged by the tax authorities. 16. Further, he submitted that Assessing Officer and Ld. CIT(A) 10 have not pointed out any discrepancies in the documentary evidences submitted by the assessee. Ld.AR of the assessee submitted that without pointing out any discrepancies in the documentary evidences submitted by the assessee the Assessing Officer has heavily relied on the investigations carried out by the Directorate of Investigation. The predetermined action with specific intention is one of the circumstances evidences leading to the conclusion that the Long Term Capital Gain earned is not genuine. Further, assessee has not declared any Short Term Capital Gain or business income or exempt income of share transactions in the previous assessment years. 17. Further he brought to our notice that the assessee is a regular investor and having huge investment portfolio and submitted that the same is filed in the paper book at page 3. 18. On the other hand, Ld. DR objected to the submissions of the Ld.AR of the assessee. Ld. DR submitted that Shares were purchased in offline mode, in physical form, in cash, at a meagre price of ₹.2/- in 2011 and Shares were sold by assessee in 2013 @ ₹.420/- (210 times). The Net worth of company, M/s Turbotech, whose shares purchased were Negligible and company shows Nil Income in all the 5 years. Further, Ld. DR submitted that the whole family earned LTCG although non-traded regularly in sale/purchase of shares. In fact, Assessee has not traded in other scrips. As such assessee had No experience in explained. Further, Ld. DR submitted that SEBI suspended the trading of this scrip vide order dated. 01.01.15 and Survey action could not be identifying scrips. How they zeroed in on this scrip has not been executed on the 4 EXIT PROVIDERS as they were not found operating from their registered premises. SEBI order dated 14.05.19 established that the exit providers in the case of assessee are same as those involved in manipulating the scrip. Further, Ld. DR submitted that Exit providers have admitted to have provided accommodation entry in the penny scrip M/s Turbotech during search action. Assessing Officer has also made 3rd party enquiries and field enquiries by issuing 133(6) notices during the course of assessment. Investigation wing report-which identified Turbotech as an entity used for providing bogus accommodation entry. Thus, Assessing Officer has rightly concluded that the LTCG claimed is nothing but a sham transaction effected with the help of entry operators through synchronized trading. 19. Further, Ld. DR relied on the following case law in support of his contentions: -: i) Hon'ble ITAT decision in the case of Sh Hitendra C Ghadia vs DCIT, CC-1(1) dated 20.03.23 in ITA No. 621/Mum/2021 and other ITAS ii) Hon'ble SC decision in the case of Suman Poddar vs ITO 11 (2019)-112 taxmann.com 330 SC iii) DCIT vs Lotus logistics & Developers Ltd. (2022) – 136 taxmann.com 110 Mumbai Tribunal A bench iv) ITO 19 (3)(4) Mumbai vs Shamin M Bharwani - (2016) - 69 taxmann.com 65 Mumbai Tribunal E bench v) Sanat Kumar vs ACIT, Circle 14(1) Delhi (2020) 122 taxmann.com 75 (Delhi Tribunal E bench) vi) Satish Kishore v ITO ward 47(2) New Delhi (2019) 110 taxmann.com 307 (Delhi Tribunal G bench) 20. Considered the rival submissions and material placed on record, we observe that the assessee is a regular investor as brought to our notice by the Ld AR at page 3 of the paper book, as per the Balance Sheet of the assessee as on 31.03.2013, assessee held shares and Debentures worth of Rs. 26,23,89,205/-. It shows that the assessee is a regular investor and had also made the investment in the scrip under consideration. The AO observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock. We cannot agree to the above observation, merely because of huge profit, it does not make the script a penny stock. Further, it is fact on record that the financials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares from open market, D-mated the scrips and subsequently sold the same in the stock exchange. It clearly raises several doubt on the purchase and sales transactions recorded in this case. However, there is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee except in the latest SEBI report of 2020, there is only restriction on trading of this script but there is no reference to assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. We observe that the Hon'ble Bombay High Court in the case of Pr. CIT v. Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 held as under: - "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, 12 ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs." 21. Further, the Hon'ble Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: - "8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and 13 analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded 14 on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters Page 10 of 10 on its own specific facts. The 15 above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed." 22. Even otherwise, the Coordinate Benches of the Tribunal in the cases of Swati Luthra v. Ito [115 taxmann.com 167] and Radheyshyam Khandelwal v. ACIT in ITA No. 7/IND/2019 dated 25.06.2021 dealt with identical scrip wherein the assessees have also earned Long Term Capital Gain at the high volume and the Tribunal ultimately decided the issue in favour of assessee. For ready reference, the conclusion drawn by the ITAT Delhi Bench in the case of Swati Luthra v. ITO (supra) is reproduced below: - "13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s Esteem Bio and M/s. Turbotech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Thus, under these circumstances, atleast some inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference is drawn, then it cannot be primary evidence or material to nail the assessee and simply based on the statement no addition can be made. This has been held so by various courts, and also by Hon'ble Apex Court in the case of M/s Andaman Tiimber Industries vs. CCE (SC) reported in 127 DTR 16 241 has held as follows: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross- examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what 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. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 14. That the ld DR during the course of hearing placed heavy reliance on judgment of Hon'ble High Court of Delhi in the case of 17 Udit Kalra vs ITO in ITA No. 220/2019. Relevant extracts of said judgment are extracted as below: "The assessee is aggrieved by the concurrent findings of the tax authorities-including the lower appellate authorities rejecting its claim for a long term capital gain reported by it, to the tune of Rs. 13,33,956/- and Rs. 14,34,501/- in respect of 4,000 shares of M/s Kappac Pharma Ltd. The assessee held those shares for approximately 19 months; the acquisition price was Rs.12/- per share whereas the market price of the shares at the time of their sale, was Rs.720/-. It is contended that the assessee was not granted fair opportunity. Mr. Rajesh Mahna, learned counsel appearing for the assessee relied upon the orders of the co-ordinate Bench of the tribunal, in respect of the same company i. e. M/s Kappac Pharma Ltd., andpointed out that the tax authority's approach in this case was entirely erroneous and inconsistent. The main thrust of the assessee's argument is that he was denied the right to cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent - A.O., CIT(A) and the ITAT have all consistently rendered adverse findings what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company's shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed. 15. On going through the aforesaid judgment, we find that no question of law was formulated by Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon'ble High Court found that the issue involved is a question of fact as held by Hon'ble Apex Court in Kunhayyammed vs State of Kerala reported in 245 ITR 360 and also in CIT vs. Rashtradoot (HUF) reported in 412 ITR 17. Even on merits and facts, the said judgment in the case of Udit Kalra vs ITO (supra) is distinguishable as in that case the scrips of the company were delisted on stock exchange, whereas, in the instant case, the interim order of SEBI in the cases of M/s Esteem Bio and M/s Turbotech have been cooled down by subsequent order of SEBI placed by assessees in its paper book. Thus, the case of Udit 18 Kalra vs ITO relied by Id. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs ITO so relied by Id DR. 16. We further find that Ld. AO has also mentioned about some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the said order seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and 2013 and sold them in year 2014. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. Thus, even otherwise, we find that the order of SEBI so relied by Id. AO and CIT (A) is not applicable for the transactions under consideration. In any case as stated above, the SEBI in its subsequent decision has absolved most of the companies including the companies whose scrips are under suspicion, as they were nor found to be rigging the price. This fact alone vitiates the case of revenue. 17. We also find that the Ld. AO has raised objection regarding the cash purchase of shares and that shares were dematerialized few days back only from the date of sale. There is no law which prohibits the purchase of shares in cash, however in the present case, assessee had filed copies of bills of purchase, copy of share certificates and transfer forms etc. before Ld. AO and no adverse inference could be drawn only because the shares were purchased in cash. Regarding Demat of shares, we hold that it is the option of the buyer of shares to keep the shares either in Demat form or in paper form. Merely because the shares were dematted at a later stage, no adverse inference could be drawn. The Learned Counsel for the Assessee has taken us through various documents filed in the paper book as referred to above which specifically prove the purchase of shares made by assessee genuinely which were also sold genuinely. The transactions were carried through Demat account and banking channel on which STT has been paid by assessee. The report of the SEBI was not adverse in nature against Vineet Mittal the assessee because name of the assessee did not appear therein for conducting dubious transaction. The report of the Investigation Wing and other material was neither confronted to assessee nor there was any inquiry from where it transpired that assessee was beneficiary of any bogus long-term capital gain; therefore, the same cannot be read in evidence against the assessee. A specific material against the assessee should have been brought on record to put assessee under liability. However, in the present case, the entire documentary evidence on record has not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No other adverse materials have been brought on record against the assessee. Further, no proper enquiry has been conducted by the A.O. on the documentary evidences filed by assessee. Whatever statements have been referred to in the order was general in nature with whom assessee did not have any transaction. Considering the totality of the facts and circumstances of the case, we hold that assessee has entered into genuine transaction of sale and purchase of 19 shares and therefore, satisfied the conditions of Section 10(38) of the I.T. Act. The assessee is entitled for exemption under the same provision. We accordingly, set aside the orders of the authorities below and delete the addition of Rs. 41,85,762/-. Appeal of assessee is allowed." 23. Therefore, we respectfully follow the ratio of the above decisions and inclined to allow the grounds raised by the assessee. Accordingly the grounds raised by the assessee is allowed. The case laws relied by the Ld. DR are distinguishable to the facts of the case. 24. As far as Ld. DR submission that this scrip transaction is suspended by the SEBI and he brought to our notice the SEBI order, however, there is no specific findings against the script under consideration or on the assessee. It was also brought to our notice that this script is still traded in the stock exchange. 25. With regard to Ground No. 5 and 6 relating to addition on account of commission paid on alleged bogus share transaction. Ld.AR of the assessee submitted that the above grounds are consequential to the ground no 3 & 4 as stated above. Thus, once the share transaction is held genuine and explained, the said addition shall also be deleted. He Further, submitted that the addition has been made by Assessing Officer merely on surmises without any evidence on record and thus may kindly be deleted. On the other hand, Ld DR objected to the above submissions and prayed that both the bogus LTCG and commissions paid on the same may be sustained. 26. Considered the rival submissions and material placed on record, we already held that the transaction involving the LTCG is genuine and in favour of the assessee, the consequential addition relating to the above transaction is also deleted. Accordingly, we direct the Assessing Officer to delete the above addition made u/s 69 of the Act.”

Order pronounced in the open court on 01.09.2026

Sd/- Sd/- RAKESH KUMAR LODHA NARENDER KUMAR CHOUDHRY ACCOUNTANT MEMBER JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.