GAURAV SALHOTRA,GHAZIABAD vs. ITO, WARD- 1(2), GHAZIABAD

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.7455/DEL/2018 (Assessment Year: 2015-16) Gaurav Salhotra, vs. ITO, Ward 1 (2), C/o M/s. RRA Taxindia, Ghaziabad. D-28, South Extension Part 1, New Delhi – 110 049. (PAN :BRVPS3455G) (APPELLANT) (RESPONDENT) ASSESSEE BY : Dr. Rakesh Gupta, Advocate Shri Somil Agarwal, Advocate Shri Deepesh Garg, Advocate Ms. Shilpa Gupta, Advocate REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 06.04.2026 Date of Pronouncement : 24.06.2026 ORDER PER S. RIFAUR RAHMAN,AM: 1. The assessee has filed appeal against the order of the Learned Commissioner of Income-tax (Appeals), Ghaziabad [“Ld. CIT(A)”, for short]dated28.09.2018for the Assessment Year 2015-16. 2. Brief facts of the case are, assessee filed his return of income for AY 2015-16 on 20.09.2015 declaring an income of Rs.9,94,900/-. The case was selected for scrutiny through CASS and notices under section 143(2) and 142(1) of the

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Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. In response, ld. AR of the assessee attended and submitted relevant information. 3. The assessee derives income from business of timber wood and plywood etc. The AO observed from the financial statement, audited report and observed that assessee has declared addition in capital account at Rs.43,50,000/- besides loans and deposits from following persons :- AMOUNT NAME OF THE LENDER Remark 22,50,000 In Capital Account By sale of shares on which LTCG was claimed exempt u/s 10(38) of IT Act 15,00,000 Loan from Praveen Salhotra - 06,00,000 Loan from Kamal Kishore - 43,50,000 - 38,38,000 Loan from Arun Salhotra - 26,00,000 Loan from Kamal Kishore - 05,40,000 Loan from Karan Salhotra - 23,90,000 Loan from Praveen Kumar - 03,95,000 Loan from Praveen Kumar HUF - 08,00,000 Loan from Rajat Salhotra - 26,50,000 Loan from Rakesh Kumar - 34,25,000 Loan from Subhash Kumar - 01,25,000 Loan from Mansi Salhotra - 17,50,000 Loan from Nisha Salhotra - 4. In order to verify the genuineness and creditworthiness of the lenders and additions made in the capital account, the AO proceeded to verify the source of funds. The AO observed that assessee has purchased 25,000 shares of Surabhi Chemicals and Investments Ltd. for Rs.50,000/-. The average purchase price of each share comes to Rs.2 per share while thefacevalue of each share was Rs.1 only. These 25,000 shares were claimed to have been sold on 15.09.2014 and 16.09.2014 for Rs.22,79,000/- at an average price of Rs.91.16 per share. He observed that assessee has claimed the same as exempt u/s 10(38) of the

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Act. Further in order to verify the abovesaid transactions, show-cause notice was issued to the assessee to submit the details of purchase and sale of shares. Vide reply dated 01.11.2017, it was submitted that these shares were purchased on 17.06.2013 and the same was dematerialized with MotilalOswalSecurities Ltd. on 25.08.2014. He observed that these shares were purchased off-line and delivery was taken in physical mode and the mode of payment was cash. He further observed that every family member of the assessee were also claimed such gain on sale of shares as exempt under section 10 (38). With regard to sale of shares, it was submitted that the assessee has sold through SEBI approved Bombay Stock Exchange Limited i.e. Motilal Oswal Securities Ltd., the assessee also filed copy of dematerialized and the shares were transferred in the name of the assessee in the Demat account which was maintained and operated by MotilalOswal Securities Ltd.. He also observed that assessee has paid relevant STT tax and also submitted copies of contract notes, sale bills etc. and statement of account maintained by the broker. After observing the above transactions and relevant material on record, the AO observed that the scrip dealt with by the assessee is penny stock and he heavily relied on the findings of the Investigation Wing, Kolkatta and reproduced the modus operandi in the case of penny stock in his order. After giving opportunity of hearing to the assessee and as information gathered from the ld. AR of the assessee, he came to the conclusion that huge capital gains earned by the assessee within the very short period of time in penny stock whose fundamentals have no support from

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the premium which it commanded neither from the result of co-existence or not a genuine investment activity but were created through well-planned and executed scheme in which the company, brokers and sellers of the scrip work in tandem to achieve the determined objectives. Accordingly, he relied on the SEBI Report and proceeded to make addition as unexplained money u/s 69 of the Act to the extent of Rs.22,79,000/-. 5. Further he observed that assessee has received loans plus deposits during the year from various parties to the extent of Rs.2,16,00,000/- and the details are given at page 28 of the assessment order. In order to verify the same, based on the order sheet notings on various dates, the ld. AR of the assessee was directed to prove the creditworthiness of the lenders. On 03.11.2017, ld. AR of the assessee submitted details with regard to genuineness of the loans. On perusal of the details, he observed that lenders were advanced money to assessee out of alleged long term capital gains on sale of shares of a company whose genuineness also has not been established in the case of assessee as well. The AO observed that the lenders have transferred the money from their respective bank account out of sale proceeds of shares whose genuineness has not been established in the case of the assessee. After considering the submissions of the assessee, AO found it not acceptable and observed that genuineness of credits is not established, addition can only be made in the case where such amounts have been found credited though these lenders/persons are separately assessed to tax but the source of credits by them are very such bogus sale of

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shares of the penny stock through rigging price of shares through circular trading. In view of the above observation, he proceeded to make the addition u/s 68 of the Act to the extent of Rs.1,81,59,500/- which includes interest of Rs.3,46,000/-. 6. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A), Ghaziabad and filed detailed submissions. After considering the detailed submissions, ld. CIT (A) sustained the additions made by the AO. 7. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1. That having regard to the facts and circumstances of the case, Ld. CITA) has erred in law and on facts in confirming the action of Ld. AO in not allowing the exemption of Rs.22,79,000- claimed by assessee u/s 10(38) on long term capital gain on sale of Shares and further erred in making the impugned addition u/s 69 r.w.s. 115BBE and that too by recording incorrect facts and findings and without granting the opportunity of cross examination and without observing the principles of natural justice. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the exemption of Rs.22.79,000/- claimed by assessee us 10(38) on long term capital gain and making the impugned addition u/s 69 r.w.s. 115BBE, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.1,81,59,500/- (Rs.1,78,13,000(loan) + Rs.3,46,500 (Interest)) on account of loan received from various parties as mentioned on page 29-30 of assessment order and disallowance on interest paid thereon us 68 r.w.s. 115BBE more so when addition has already been made in the hands of lenders which led to double addition and impugned addition has been made by recording incorrect facts and findings and without observing the principle of natural justice, 4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making aggregate addition of Rs.1,81,59,500/- on account of loan and disallowance of interest paid thereon u/s 68 of the Act is bad in law and against the facts and circumstances of the case.

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trading and received the sale consideration after deducting security transaction tax and enclosing therewith contract notes, sales bills, statement of account of the assessee with the broker. PB 106 is the copy of shares certificate. PB 107 is the request for dematerialization. PB 48-49 ITAT ORDER – shares certificate & transfer memorandum PB 49 – CIT (A) accepts existence of shares PB 108 is the copy of demat account PB 109-111 is the copy contract notes for the sale of these shares. PB 112 is the copy of statement of account of the assessee in the books of the broker. PB 116-117 is the copy of bank statement of the assessee showing the receipt of the sale consideration of the shares. PB 505-512 are the submissions before Ld. CIT(A) submitting the purchase and sale of shares and that allegations of Ld. A.O. are not supported by any evidence and appellant is not related to the company/promoters/directors and relying upon several decisions. Therefore, it is submitted that assessee has proved purchase of shares made in the earlier year and existence of shares and sale of shares and therefore in view of the following judicial decisions, the amount in question could not be added as unexplained income of the assessee. Following judicial decisions are relied upon for the proposition that in view of the above-mentioned facts and evidences, addition could not be made:  CIT vs. Alpine Investments, ITA No. 620 of 2008 order dated 26.08.2008, High Court of Calcutta  CIT vs. Pooja Agarwal, ITA no. 385/2011 dated 11.09.2017, High Court of Rajasthan  Prakash Chand Bhutoria vs. ITO, ITA No. 2394/Kol/2017 (ITAT, Kolkata), dated 27.06.2018  NidhiGoel vs. ITO, ITA No. 6882 of 2017 (ITAT, Delhi), dated 12.03.2018  MeenuGoel vs. ITO, ITA No. 6235 of 2017 (ITAT, Delhi), dated 19.03.2018

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 Chander Prakash vs. ITO,ITA No. 6880 of 2017 (ITAT, Delhi), dated 12- 03-2018  PCIT vs. Prem Pal Gandhi, ITA No. ITA No. 95 of 2017 (O&M) (Punjab & Haryana), dated 18.01.2018  PCIT vs. Sh. Hitesh Gandhi, ITA No. ITA No. 18 of 2017 (O&M) (Punjab & Haryana), dated 16.02.2017  Shri Pramod Jain vs. DCIT in ITA No. 368/JP/2017, dated 31.01.2018 (ITAT, Jaipur Bench)  CIT v. Mahesh Chandra G. Vakil 40 taxmann.com 326 (Guj)  CIT v. Shyam R. Pawar 54 taxmann.com 108 (Bom), (2015)229 taxmann.com 256  Smt. Smita P. Patil v. ACIT 55 taxmann.com 346 (Pune)  ITO v. Smt. Aarti Mittal 41 taxmann.com 118 (Hyd)  (CIT v. Anupam Kapoor 166 Taxman 178 (P&H)1  CIT v. UditNarain Agrawal 31 taxmann.com 76 (All)  CIT v. Vs. Ver Aar Leasingh & Finance Company Ltd. 45 taxmann.com 420 (All)  Ramesh Kumar Jain (HUF) v. DCIT 36 taxmann.com 524 (Jodh.)  CIT v. Vishal Holding & Capital (P.) Ltd. 12 taxmann.com 150 (Del)  CIT vs. Smt. Sumitra Devi 49 taxmann.com 37 (Rajasthan)  Meena Devi N. Gupta v. ACIT 35 taxmann.com 211 (Ahd.-Trib.) Adverse Observations made by Ld. A.O. and Ld. CIT (A) are met as under : - 1. Ld. A.O. has mentionedatpage-6 onwards of the assessment order about some investigation carried out by the department regarding some scheme of accommodation entry of bogus LTCG through manipulation of stock market and has given modus operandi. No adverse information about Surbhi shares. In reply, it is respectfully submittedthat at no stage, the fact of

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anyinvestigation or any report of investigation was ever made known or confronted to the assessee and therefore no reliance can be placed by revenue on such alleged investigation. Similarly, the alleged modus operandi is also without any basis, material or evidence in so far as the appellant is concerned. Therefore, the observations of Ld. A.O. regarding the alleged investigation or the alleged modus operandi do not serve any purpose, in so far as the present assessment is concerned.

ITO vs. M/s lndravadan Jain HUF, ITA No.4861/Mum/2014, dated 27/05/2016 (ITAT, Mumbai) "3.....Factsinbriefarethattheassesseehadshownsaleproceedsofshares in the scrip "Ramkrishna Fincap Ltd." as Long Term Capital Gain and claimed exemption under the Act. Further the assessee had claimed to have purchased this script at Rs.3.12 per share in the year 2003 and sold the same in the year 2005 for Rs.155.04 per share. Considering the above discussed facts and having regard to the investigationso done, these scripswere found to be penny stock and the capital gain declared was held to be only accommodation entries. Further, the broker M/s. Basamt Periwal and Co. through whom the transactions were effected had appeared as "DRI probing evasion by firms via jama kharchi" who was indulged in price manipulation through synchronized and cross deal in scrip of RamkrishnaFincapP.ltd. Furthermore, it was also communicated that SEBI has passed an order dated9.7.2009 regarding the irregularities and synchronized trades carried out in scrip of Ramkrishna Fincap Ltd. by the broker M/s. Basant Periwal & Co.....

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broker. Nowhere the Assessing Officer has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of thestockexchangeare ingenuineormereaccommodationentries.The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) at para 3to 5 has not been controverted by the department by brining any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also covered by the decision of jurisdictional High Court in the case of Shyam R. Pawar (supra), wherein under similar facts and circumstances ,transactions in shares were held to be genuine and addition made by Assessing Officer was deleted. Respectfully following the same vis-à-vis findings recorded by CIT(A) which are as per material on record, we do not find any reason to interfere in the order of CIT(A)."

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Industries Ltd. The AO refers to various enquiries made by "The Directors of Income Tax", Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so- called project and the evidence collected by the DIT (Inv.), Kolkata etc. have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AOand the addition is made based on such generalizations. The assessee has not been confronted with any of the evidence collected in the investigation done by the DIT(Inv.), Kolkata. Evidence collected from third parties cannot be used against the assessee without giving a copy of the same to the assessee and thereafter giving him an opportunity to rebut the same. Meenu Goel vs ITO, ITA NO. 6235/Del/2017 dated 19.03.2018 (ITAT, Delhi) I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in the purview of the same without bringing any material on record and proving that the assessee was directly involved in the so called bogus transaction. I further note that the addition in dispute made by the AO and upheld by the Ld.CIT(A)u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the source identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68 of the Act, hence, the same deserve to be deleted.

Nidhi Goel vs ITO, ITA NO. 6882/Del/2017 dated 12.03.2018 (ITAT, Delhi) I further note that lower authorities relied upon the statement recorded by Investigation Wing, Kolkatta which has no nexus to the assessee's case. It is also noted that lower authorities made the addition u/s 68 as unexplained credit instead of long termcapital gain as claimed by the assessee, however, the source identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68.

Chander Prakash vs. ITO, ITA No.6880/Del/2017 dated 12.03.2018 (ITAT, Delhi)- held that lower authorities relied upon the statement recorded by Investigation Wing, Kolkatta which has no nexus to the assessee's case. It is also noted that lower authorities made the addition u/s. 68 as unexplained credit instead of long term capital gains claimed by the assessee, however, the source identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s68.

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In reply, it is submitted that all these objections of Ld.CIT(A) are without any basis, material or evidence. Share of face value of Rs.l, if purchased at the rate of Rs.2 per share, it is quite usual and not something which was abnormal. Direct and documentary evidences clearly establish that shares were with the assessee, which were sold through recognized broker and payment having been received through broker. Regarding any other report etc., since these were never confronted to the assessee, these cannot be relied upon. GROUND NO.3-4 Ld.A.O. has made addition of Rs.1,81,59,500/- being the amount of loan received from various parties and interest on the ground that assessee has not been able to prove the genuineness of the transaction. Ld.A.O. has discussed this issue from page 28-31 of the assessment order and Ld. CIT(A) has discussed this issue at page-56 of the appeal order. Following pleadings and evidences would prove and established that these were the loans received from various family members on which interest were also paid and amount were received through banking channel from these depositors who were assessed to tax. PB 1-2 is letter to Ld. A.O. submitting the details of unsecured loans, confirmations of the lenders along with their income tax returns and bank statements. PB 3-6 are the details of loans taken showing names and addresses of the lenders, amounts of loans already outstanding upto A.Y. 2014-15 loan taken during A.Y. 2015-16, loan repaid, interest paid, TDS deducted. PB 9-14 are the copies of evidences of Sh. ArunSalhotra, confirmation, income tax return, Bank Statement of establishing the identity, capacity and

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the genuineness of the transaction and which shows that an aggregateof Rs.38,38,000/-werereceived in different tranches through banking channel and the same amount was refunded back in the impugned year. PB 17-20 are the copies of evidences of Sh. Kamal Kishore, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.26,00,000/-were received in different tranches through banking channel and Rs. 3,40,000 was refunded back in the year under appeal. PB 21-24 are the copies of evidencesof Sh. Karan Salhotra, confirmation. income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.540,000/-were received in different tranches through banking channel PB 25-29 are the copies of evidences of Sh. Praveen Kumar, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.23,90,000/-were received in different tranches through banking channel and the said amount was refunded back in the impugned year. PB 30-33 are the copies of evidences of Sh. PraveenKumar (HUF).confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.3,95,000/- were received in different tranches through banking channel and the said amount was refunded back in the impugned year. PB 34-40 are the copies of evidences of Sh. Rajat Salbotra, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.8,00,000/-were received in different tranches through banking channel and the same was refunded back in the impugned year. PB 41-45 are the copies of evidences of Sh. RakeshKumar, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.26,50,000/-were received in different tranches through banking channel and Rs. 5,00,000/- was refunded back in the impugned year. PB 48-54are the copies of evidencesof Sh. Subhash Kumar, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.34,25,000/-were received in different tranches through banking channel. PB 59-62 are the copies of evidences of Smt. Mansi Salhotra, confirmation, income tax return, Bank Statement of establishing the identity, capacity and the genuineness of the transaction and which shows that an aggregate of Rs.1,25,000/-were received in different tranches through banking channel. PB 65-69 are the copies of evidencesof Smt. Nisha Salhotra, confirmation, income tax return, Bank Statement of establishing the identity, capacity and

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the genuineness of the transaction and which shows that an aggregate of Rs.17,50,000/- were received in different tranches through banking channel. PB 72-73 is further submissions to Ld A.O. submitting hat unsecured loans were taken through banking channel from identifiable persons having sufficient funds in their bank accounts and that the depositors are close relatives of the assessee and are assessed to tax. PB 126-504 are the assessment orders of the following persons in whose hands the additions have already been made:- PB 126-177 is copy of AssessmentOrder for A.Y. 2015-16 dated 28-12-2017, u/s 143(3) of Sh. ArunSalhotra PB 178-180 is copy of AssessmentOrder for A.Y. 2015-16 dated22-11-2017, u/s 143(3) of Sh. Kamal Kishore. PB 181-242 is copy of Assessment Order for A.Y. 2015-16 dated 26-12-2017, u/s 143(3) of Sh. Praveen Kumar Salhotra. PB 243-308 is copy of Assessment Order for A.Y. 2015-16dated27-12-2017, u/s 143(3) of Sh. Rakesh Kumar. PB 309-373 is copy of Assessment Order for A.Y. 2015-16dated27-12-2017, u/s 143(3) of Sh. Subhash Kumar. PB 374-439 is copy of AssessmentOrder for A.Y. 2015-16 dated 27-12-2017, u/s 143(3) of Smt. Nisha Salhotra. PB 440-504 is copy of Assessment Order for A.Y. 2015-16dated 26-12-2017, u/s 143(3) of Sh. Rajat Salhotra. PB 512-519 are further submissions to Ld. CIT(A) submitting that addition cannot be made in the hands of the assessee in any case these amounts have already been added in the hands of the respective depositors. Moreover, a chart has been prepared by us to show that substantial amount has been given by these persons out of their own source and not from the sale proceed of the shares. In view of the following judicial decisions addition made may please be deleted. • Mangilal Agarwal (Late) vs. ACIT 300 /TR372 (Raj): In this connection, the reference may be made to section68 of the Income TaxAct, 1961, which is couched, in relation to credit entries found in the books of the assessee in the relevant previous year. It ordains that where the assessee offers no explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Considering these provisions, the High Courts have explained that the assessee cannot be presumed to have special knowledge about the source of source or origin of origin. Once the assessee points out a

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deposit or from whom he has received money and if the deposit or owns the advancement of money to the assessee, the further enquiry into the source of source or failure to explain source of source cannot result in invoking the provisions of section 68 unless the existence of the person in whose name the credit entry is found is not proved or hedisowns. • LabhChandBohravs.ITO,(Raj)(HC),219CTR571

"Income cash credit– Burden of Proof – Identity of creditors D and V has been established and they have confirmed the credits by making statements on oath- this also satisfies the requirement of discharge of burden on the part of the assessee to prove the genuineness of the transactions- capacity of the lender to advance money to the assessee to prove the genuineness of the transactions- capacity of the lender to advance money to the assessee was not a matter which the assessee could be required to establish the source of the source- therefore, additions in respect of the entries in the names of said creditors cannot be sustained. Conclusions:- identity of the creditors having been established who have confirmed the credits by making statements on oath and the amounts having been advanced by account payee cheques, impugned additions in respect of the entries in the name of the creditors can not be sustained,· assessee not required to establish the capacity of the lender to advance money." • AravaliTradingCo.vs.I.T.O220CTR622(Raj)

"Income – Cash credit – Burden of proof – Once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee's onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquiredthemoneydepositedwithhim eitherintermsof s.68 or on general principle-Merely because the depositors' explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by if the creditors' explanation about the source of deposits is not found to be acceptable, the investment owned by such persons may be subjected to proceedings for inclusion of the amounts as their income from undisclosed sources, or if they are found benami, the real owner can be brought to tax the creditors is money belonging to assessee itself- In the absence of anything to establish that the sources of the creditors' deposits flew from the assessee, the cash credits cannot be treated as unexplained income of the assessee." • CIT vs. Metachem Industries 245 ITR 160 (MP)

"Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income- tax payer or not and where he had brought this money from, is not the responsibility of the firm.

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The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income tax." • Tolaram DagaV/s Commissioner of Income Tax 59 ITR 632(Assam)

"But the position is different in regard to a sum which is shown in the assessee's books in the name of a third party. In such a case, the onus of proof is not upon the assessee to show the source or nature of amount of the cash credit; on the other hand, the onus shifts to the department to show by some material that the amount standing in the name of the third party does not belong to that third party but belongs to the assessee. That is the principle laid down by the division Bench of this court in S.N. Ganguly's case. There is a decision to a similar effect in an earlier case, Ramkinkar Banerji vs. Commissioner of Income Tax. All that could be said to follow from this decision is that once the assessee explains the credit entry and brings in evidence to show that the entry related to a third party and that credit was that of that third party. The burden would shift to the Income Tax Officer in such a case to establish that the entry was not real but was pseudonymous. " • CIT vs. Shri Ram Narain Goel 224 ITR 180 (Pun. & Har.)

"The finding of fact given by the Tribunal is based on the material on record. The Tribunal correctly took the view that the assessee was not supposed to prove the source of the loans. Suspicion, howsoever strong, cannot take the place of evidence or proof" • Nemi Chand Kothari vs. CIT & another 264 ITR 254 (Gauhati)

"A person may have funds from any source and an assessee, on such information received, may take a loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditors has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep it in the bank, the said amount cannot be treated as income of the assessee from undisclosed sources. " • PR. CIT vs Rakam Money Matters (P) Ltd., ITA No.778/2015 (High Court of Delhi), Date of order 13.10.2015. • CIT vs. Vrindavan Farms (P) Ltd., ITA No.71/2015 (High Court of Delhi),

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Date of order 12.08.2015. • Commissioner of Income Tax vs. Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR 0010 (Delhi) Unexplained Income- Genuineness of transaction proved by assessee-No investigation made by Assessing Officer – Addition – Sustainability – Assessment order indicated assessee explained that several entries had been taken into account twice, removing those share application money amounted to only Rs. 55.5 lacs-Assessee had furnished various documentation in support of share application money received-AO found explanations to be unacceptable and made addition of same-CIT(A) deleted addition-Held, share application money was received through ale payee cheques, detail of which had been filed by assessee by filing copy of bank ale of share applicants-Thus where ROI was filed by creditors of assessee and was accepted by AO, and payments were through a/c payee cheques genuineness of transaction cannot be doubted-Revenue could not prove that money received' by assessee in form of share application has come from its own sources-It was held that where complete particulars of share applicants are furnished to AO and AO has not conducted any enquiry into same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in hands of company u/s 68-Appeal dismissed Adverse observations made by Ld. A.O. and Ld. CIT(A) are met as under:- 1. Ld. A.O. has mentioned that the lender has given these loans out of the LTCG earned by the depositors. In reply, it is submitted that when these amounts have been found to have been given out ofsums, which have already been treated as income in the hands of the respective depositors. There cannot be any double addition in the hands of the assessee.

Therefore, there is no adverse evidence against the assessee much less any adverse evidence confronted to the assessee and the sale and purchase transaction having been adequately evidence with documentary evidence, it is submitted that the addition made may please be deleted.

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under VSVS and copies of the same are filed on record. In this regard, he

submitted a chart as under :-

S. No. Particulars Opening Loan Taken Loan Interest TDS Closing Relation Evidences Assessment status Remarks Balance (In Rs.) Repaid (In Rs.) (In Rs.) Balance with the of the lenders (In Rs.) (In Rs.) (In Rs.) assessee 1. Smt. - 38,38,000 38,00,000 54,331 5,433 86,898 Aunt PB 9: Addition of Rs. Out of the total amount, Rs. ArunSalhot (Taiji) Confirmation of 23,59,149/- made 13,48,000/- was from the ra account of lender. in order u/s 143(3) sale of shares, while the PB 10: ITR of and the lender balance was from income, lender. settled the same encashment of NSC, and PB 11-14: Bank under VSVS vide loan repayment received statement of Form 5 dated from another party in the lender. 08.12.2020. hands of the lender and the PB 126-177: assessee has substantially Assessment order repaid the loan during the dated 28.12.2017 impugned year. of lender. 2. Sh. Kamal 58,09,967 26,00,000 3,40,000 5,52,289 55,229 85,67,027 Uncle PB 17: The AO No part of the amount was Kishore (Tauji) Confirmation of completed the from the sale of shares; the account of lender. assessment in the amount represents income, PB 18:ITR of case of Sh. Kamal encashment of NSC, and lender. Kishore by loan repayment received PB 19-20: Bank accepting the from another entity, in the statement of income returned hands of the lender. lender. by the assessee PB 178-180: vide assessment Assessment order order dated dated 22.11.2017. 22.11.2017. 3. Sh. Karan 11,82,735 5,40,000, out of - 1,45,420 14,542 18,53,613 Cousin PB 21: - No part of the amount was Salhotra which an Confirmation of from the sale of shares. The addition of account of lender. Ld. AO has partly accepted principal loan PB 22: ITR of loan taken. Even the amount of lender. income of the lender for 4,60,000 was PB 23-24: Bank impugned year is Rs. made. statement of 10,25,090/-, as evident lender. from PB 22, which is more than the loan given by him. 4. Sh. Praveen 16,04,810 23,90,000 out 39,90,000 1,79,410 17,941 1,66,279 Father PB 25: Addition of Rs. Ld. AO has partly accepted Kumar of which an Confirmation of 24,88,985/- made the loan taken. Rs. Salhotra addition of account of lender. in order u/s 143(3) 22,40,000/- was from sale principal loan PB 26: ITR of and the lender of shares and amount of Rs. amount of lender. settled the same 24,88,985/- has already 22,40,000 was PB 27-29: Bank under VSVS vide been added in the hands of made. statement of Form 5 dated the lender and therefore, lender. 03.12.2020. the impugned addition would lead to double PB 181-242: Assessment order taxation. Furthermore, the dated 26.12.2017 assessee has substantially of lender. repaid the loan during the impugned year. 5. Sh. Praveen 32,08,302 3,95,000 35,95,000 2,80,811 28,081 2,61,032 Father PB 30: - No amount was from sale Kumar (HUF) Confirmation of of shares and therefore, (HUF) account of lender. impugned addition is PB 31: ITR of without any basis, material lender. or evidence. Furthermore, PB 32-33: Bank the assessee has statement of substantially repaid the lender. loan during the impugned year. 6. Sh. 8,75,680 8,00,000 16,75,680 86,695 8,670 78,025 Cousin PB 34: Addition of Rs. Rs. 8,00,000/- was from RajatSalhot Confirmation of 25,01,339/- made sale of shares and amount ra account of lender. in order u/s 143(3) of Rs. 25,01,339/- has PB 35: ITR of and the lender already been added in the lender. settled the same hands of the lender and PB 36-40: Bank under VSVS vide therefore, the impugned statement of Form 5 dated addition would lead to lender. 13.01.2021. double taxation. PB 440-504: Furthermore, the assessee Assessment order has substantially repaid the dated 26.12.2017 loan during the impugned of lender. year. 7. Sh. Rakesh 6,55,150 26,50,000 out 5,00,000 1,03,828 10,383 28,98,595 Uncle PB 41: Addition of Rs. Ld. AO has partly accepted Kumar of which an (Tauji) Confirmation of 23,04,543/- made the loan taken and made addition of account of lender. in order u/s 143(3) addition of Rs. 23,00,000/- principal loan PB 42:ITR of and the lender and amount of Rs. amount of lender. settled the same 23,04,543/- has already 23,00,000 was PB 43-45: Bank under VSVS vide been added in the hands of made. statement of Form 5 dated the lender and therefore, lender. 03.12.2020. impugned addition would lead to double taxation. PB 243- 308:Assessment order dated

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27.12.2017 of lender. 8. Sh. Subhash 14,24,298 34,25,000 - 2,09,816 20,982 50,38,132 Uncle PB 48: Addition of Rs. Out of the total amount, Rs. Kumar (Tauji) Confirmation of 23,15,723/- made 20,00,000/- was from the account of lender. in order u/s 143(3) sale of shares, while the PB 49: ITR of and the lender balance was from loan lender. settled the same repayment received from PB 50-54: Bank under VSVS vide another party in the hands statement of Form 5 dated of the lender and Ld. AO lender. 12.01.2021. has no other material to PB 309-373: doubt the loan. Assessment order dated 27.12.2017 of lender. 9. Smt. 2,52,959 17,50,000 - 41,617 4,162 20,40,414 Aunt PB 65: Addition of Rs. Out of the total amount, Rs. NishaSalhot (Chachi) Confirmation of 18,77,935/- made 6,00,000/- was from the ra account of lender. in order u/s 143(3) sale of shares and amount PB 66:ITR of and the lender of Rs. 18,77,935/- has lender. settled the same already been added in the PB 67-69: Bank under VSVS vide hands of the lender and statement of Form 5 dated therefore, the impugned lender. 22.01.2021. addition would lead to double taxation. PB 374-439: Assessment order dated 27.12.2017 of lender.

authorities and heavily relied on the decision of Hon’ble Calcutta High Court in

the case of PCIT vs. Swati Bajaj (2022) 139 taxmann.com 352 (Calcutta) dated

14.06.2022. With regard to loan transactions, other parties have settled the

issue under VSVS, it clearly shows that transaction is not genuine. He also

relied heavily on the findings of the lower authorities.

that the assessee along with other family members invested in the shares of

Surabhi Chemicals and Investments in off market and later dematerialized the

shares with the broker and sold the same in the stock exchange. The AO

observed that the assessee had made huge profit in the short term and the scrip

does not command such increase in the share prices, hence, relying on the

detailed finding of the Kolkatta investigation wing report, he came to the

conclusion that the scrip is bogus and held that the same needs to be added u/s

68 of the Act. He proceeded to make the addition on the basis ofearning ofhuge

20 ITA No.7455/DEL/2018

profit and on the basis of investigation report, he has not brought on record any specific finding that the assessee and his family members have indulged directly or with the assistance of entry or exit providers to earn such profit. Without making independent findingand also not given any opportunity to the assessee, he has came to the conclusion that the assessee had indulged in such bogus transactions. We observed that the hon’ble High Court of Bombay 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, 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.

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22 ITA No.7455/DEL/2018

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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 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.” 11. In the present case, there is no findings by the AO that the assessee had any connection with the exit or entry providers neither himself or family have indulged any of the scrupulous activities, Therefore respectfully, following the

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above decision and case law relied by the Ld DR are distinguishable to the facts in the present case, we are inclined to allow the claim of the assessee and also allow the grounds raised by the assessee in this regard. 12. With regard to loan/deposits received by the assessee from the family members, we observed that the relatives namely, Arun Salhotra, Praveen Kumar Salhotra, Rajat Salhotra, Rakesh Kumar, Subhash Kumar and Nisha Salhotra had already declared the disputed amount under VSV Scheme and assessee had filed the relevant Form 5 declaration under scheme in the form of paper book. After considering the same, we noticed that the AO had made the addition on the basis of treating the transaction as bogus and the same was declared by them under VSVS and paid the relevant taxes. Since, the respective parties have sold the shares and the same was the source of loans, once they have paid the due tax and sources of receipt of cash was already established, the same cannot be treated as unexplained, hence, we are inclined to allow the same as the assessee had established the identity, credit worthiness and genuineness of the receipt of loans from the family members. 13. With regard to Kamal Kishore, who is the uncle of the assessee, we observed that income declared by him was accepted in his case and there is no connection with the sales transaction, it was claimed that the above amount out of encashment of NSC, however, we noticed that the assessee had received Rs. 26 lakhs during the year but this alone needs verification. Since the AO had made the addition grossly with the observation that the assessee had received

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the loan out of disputed share transaction, as we noticed that there is no connection with the same, but the assessee had to establish independently the genuineness of this transaction, we are inclined to remit this issue alone to the file of AO to verify the same and allow as per law after giving proper opportunity of being heard to the assessee. 14. With regard to receipt of loan from Shri Karan Salhotra, we observed that he has declared sufficient income during the year and matches with the loan received during the year. The loan taken from him has no connection with the penny / disputed transaction, therefore, we are inclined to delete the same as genuine transaction. 15. With regard to Shri Praveen Kumar (HUF), we observed that the assessee had taken loan of Rs. 395,000/- only during the year and substantial amount was paid towards old outstanding loan and part amount towards the new loan taken during the year under consideration, therefore this addition also deleted on the basis of genuine transaction. 16. With the above observations, we are inclined to partly allow the grounds raised by the assessee relating to the disallowance u/s 68 of the Act. 17. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 24th day of June, 2026 Sd/- sd/- (SUDHIR KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24.06.2026 TS

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