HEENA SURESH JAIN,MUMBAI vs. ITO 19 (1)(5), MUMBAI

O R D E R PER S. RIFAUR RAHMAN (AM)

2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in the case of Suresh M. Jain HUF in ITA.No. 6614/MUM/2019 for A.Y. 2014-15 as a lead appeal.

3 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others on the assessee. During the assessment proceedings, Assessing Officer observed that assessee has traded in the scrips of M/s. Shree Shalin Textiles Limited. The above said scrip is found to be stocks in which price manipulations were carried out and trading in the scrips was suspended on Bombay Stock Exchange and accordingly, Assessing Officer observed that assessee has purchased 49,925 scrips on 05.12.2012 and 16.04.2012 at the purchase value of ₹.9,700/- on 29.04.2013 and 11.07.2013 and registered an amount of ₹.29,55,210/ and the same was sold for ₹.29,64,910/- and Assessing Officer relied on the report of investigation wing and considered the above scrip as penny stock and accordingly, asked the assessee to file its objections.

5 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others b. Out of the total no of shares, 49,925 shares of M/s. Shree Shalin Textiles Ltd. were sold off from the month of May 2013 to June 2013 at the BSE at the average rate of Rs 59.15 approx to various entities for a total sale of Rs. 30.77,531/ C. Findings of Investigation wing: The findings of the Directorate of Investigation of Mumbai and Kolkata as discussed above have proved that the director of Shree Shalin textiles Ltd and associated brokers, entry operators and the assessee had worked out an arrangement in which the shares were acquired by the assessee, the share prices were rigged and then with the help of entry operators by routing the cash, shares were sold at high price to arrive at tax free capital gains. d. Analysis of transactions: Facts revealed that such trading transactions of purchase and sale of shares are not been effected, for commercial purpose but to create artificial gains, with a view to evade taxes. i Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. ii. The assessee resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not allowable. e. Failure of Assessee to discharge his onus: The assessee has not been able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. f. Ignorance of the assessee about shares and penny stock companies: Assessee has failed to show of having any knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock companies.

6 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others g. Financial analysis of the penny stock companies: The net worth of the penny stock company is negligible. Even though the net worth of the company………….. and the company is negligible the share prices have been artificially rigged to unusual high. h. Cash trail in the accounts of the entry providers: The investigations in the fund flow analysed in the accounts of the entry providers have established that the cash has been routed from various accounts to provide accommodations to assessee. i. Arranged transactions: The transactions entered by the assessee involve the series of preconceived steps, the performance of each of which is depending on the others being carried out. The true nature of such share transactions lacked commercial contents, being artificially structured transactions, entered into with the sole intent, to evade taxes.”

6. With the above observations, Assessing Officer held that the initial burden of proof is with the assessee and he also disallowed the 2% commission for arranging the alleged accommodation entries u/s. 69C of the Act.

7. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) dismissed the same with the following observations: - i) Impugned Shares were purchased by assessee in off market deal in cash at Rs.20/ per share on 05/12/2011 when its high/low quoted rate on BSE in December, 2011 was Rs.73.65 (para 5.5). No invoice for purchase of impugned shares were furnished. Letter of Purva Sharegistry India Pvt. Ltd. furnished for transfer of the impugned scrip is unsigned (para 5.7.2). ii) Huge price rise is not supported by Negligible financial of the impugned company”

7 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others 8. Aggrieved with the above order of the Ld.CIT(A), assessee preferred appeal before us and raised following grounds in its appeal: - “1. That on facts and circumstances of the case and in law the ld.C.I.T.(Appeals) has erred in upholding rejection of exemption claim of assessee appellant made u/s 10(38) and in confirming the addition made u/s 68 at Rs. 29,64,910/- by the Ld. A.O. treating the entire sale proceeds of listed equity shares as unexplained cash credit which was duly subjected to collection of STT, sold on recognized stock exchange at the prevailing quoted rate after holding the same for more than one year, without properly appreciating the facts of the case, law and supporting documentary evidences in respect of sale and purchase of the impugned LTCG shares furnished on assessment record. In view of the same appellant prays that exemption claim u/s. 10 (38) may kindly be allowed & addition made u/s. 10 (38) may be deleted.

2. That the Ld. C.I.T. (Appeals) has filed in not appreciating that the alleged denial of exemption claim u/s 10(38) and alleged addition made u/s 68 at Rs. 29,64,910/- by the Ld. A.O. was wrong on facts and bad in law since the copy of information and documents received from Investigation Directorate, Kolkata have been relied upon by the Id. A.O. without verification and adjudication thereof and assessee appellant has not been provided such material thus denying the opportunity of cross examination and or rebuttal of the same in gross violation of principal of natural justice.

3. That the Ld. C.I.T. (Appeals) has erred on facts and in law in confirming the disallowance made by the Ld.A.O. u/s 69C at Rs.59,298/- estimating the 2% commission payment to alleged entry providers on gross sale proceeds of LTCG shares of Rs. 29,64,910/- only on assumption basis without backing of any shred of evidence of such payment by the appellant.”

6. Legal Arguments: i) Vide Compilation of judgements Part-1 filed before hon'ble Tribunal, in the case of Mrs. Pratibha S. Mhatre by an order dated 11/06/2021 passed by hon'ble jurisdictional ITAT "C" Bench Mumbai in ITA No.695/Mum/2018 (Page No.13 to Page No.21) similar addition made on exactly identical facts as in the case of present appellant in respect of very same scrip, Shree Shaleen Textiles Ltd. has been deleted. ii) Vide Compilation of judgements Part-1 filed before hon'ble Tribunal, in the case of Smt. Krishna Devi & Others by an order dated 15/01/2021 passed the hon'ble High Court of Delhi in ITA 125/2020, 130/2020 & 131/2020 (Page No.3 to Page No.12) in para12 onwards has held that no addition can be made merely on the basis of weak 9 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others financial of alleged scrip not justifying the phenomenal rise in its quoted rate and on another basis of report of Investigation Wings and without further corroboration of allegation and bringing any contrary cogent material on record. iii) In a very recent case of Ziauddin A Siddique by an order dated 4th March, 2022 the hon'ble jurisdictional High Court of Bombay in Income Tax Appeal No. 2012 of 2017 (copy of judgement furnished in the course of hearing) in which case purchase of shares had also taken place in off market deal (please refer to question of law raised by revenue and cited in the judgement) has held that no addition can be made merely on the basis of weak financial of alleged scrip not justifying the phenomenal rise in its quoted rate and on another basis of report of Investigation Wings where transaction has taken place through stock exchange, payments have been made through banking channels and even Security Transaction Tax("STT") has also been paid. The hon'ble Court has further held that the Assessing Officer also has not criticized the documentation involving the sale and purchase of shares and 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 alleged penny scrip. iv) In another judgement rendered by hon'ble jurisdictional High Court of Bombay in the case of Shyam R. Pawar reported at (2015) 229 TAXMAN 0256 (Bombay) has held that no addition in respect of alleged penny scrip can legally be justified merely on the basis of allegation without bring any contrary adverse material on record. In support of our arguments urging to delete the impugned addition made in the hands of assessee we would like to invite the attention of your honors to number of other judgements including above referred binding judgements of jurisdictional High Court of Bombay and ITAT, Mumbai enclosed in the legal paper book (Compilation of Judgements Part-1 and Compilation of Judgements Part-2) filed before hon'ble Tribunal. In view of the above stated facts alleged addition made u/s 68 and also disallowance made u/s 69C being legally and factually incorrect therefore may kindly be deleted.

7. Particulars of other two appeals of family members of above assessee before hon'ble Tribunal heard together on 10/08/2022 in whose cases similar additions made are in respect of same alleged penny scrip, Shree Shaleen Textiles Ltd. for same A.Y.2014-15 and 10 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others for more or less exactly identical reasons except different amount are as under: Amount of Amount of No. of Addition Appellant ITA No. Addition Shares sold Made Made u/s.68 U/S.69C Heena Suresh Jain 6617/Mum/2019 50,000 31,21,781/- 62,435/- Ramesh Kumar M.Jain 315/Mum/2020 60,000 37,36,239/- 76,525/- Ramesh Kumar M. Jain 315/Mum/2020 300 Shares of 90,043/- Included in Jolly Plastic 76,525/- Industries Ltd. This scrip of Jolly Plastic Industries Ltd. was purchased by assessee way back in year 1994 and shown held by assessee in ITR filed by him for earlier assessment years. And because this scrip was categorized by Investigation Wing as Penny Stock, sale proceeds has been added u/s.68 without bringing any contrary evidence on record which single fact alone goes on to establish that below tax authorities have not applied their mind at all disregarding the holding of the said scrip by assessee for more than 20 years prior to its sale.”

13 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others The assessee had also categorically replied in response to Question No. 13 that the investment in shares of SRK Industries Ltd (Transcend Commerce Ltd prior to merger) was made based on the advice of her friend Shri Shivajirao Jondhale. The assessee in reply to Question No. 17 had also stated that she did not make any enquiry about the financial condition of the shares of SRK Industries Ltd but she was told by Shri Shivajirao Jondhale that the value of the shares would get appreciated. This was the sole basis of the assessee making the investment in shares of Transcend Commerce Ltd (Later merged with SRK Industries Ltd) which cannot be doubted at all. In our considered opinion, it cannot be said that all the investment decisions of the assessee would be prudent and would be done only after analyzing the entire fundamentals and financials of the investee company. It is in everybody’s knowledge, that an investor would try to take calculated risks by investing his money on an unknown scrip based on certain information from friends, relatives, or in some stock market related websites and take a chance. Since the scrip purchased by the assessee was showing considerable growth from the time of purchase, the assessee being a gullible investor continued to hold it for a period of 14 months and later sold it in open market in online platform at prevailing market prices. 7.5. We find that the ld AO had observed that the assessee had traded only in the shares of SRK Industries Ltd. This is factually incorrect statement of the ld AO. Moreover, the ld AO had during the course of examination of the assessee on oath u/s 131 of the Act had even posed a question vide Question No. 24 that assessee had purchased very few shares of well reputed companies during the year like Indus Ind Bank, Crompton Greaves, Larsen and Toubro etc. We find that the ld AO in para 13.4 of his order had observed that on examination of Shri Shivajirao Jondhale on oath u/s 131 of the Act, it was noticed that he had also invested in the shares of SRK Industries Ltd only based on an advice of his friend. Based on this, the ld AO had concluded that the whole basis of purchase of this share is a pre- knowledge of rigging of price and subsequently taking accommodation entry for Long term capital gains. We find from the demat statements for the period 1.4.2012 to 31.3.2013 and 1.4.2013 to 31.3.2014, the assessee had dealt in various reputed scrips and had duly dematted the same and all these transactions are duly reflected in the demat statements issued by the depository participant. 7.6. We find that the ld DR made general submissions with regard to the investigations carried out by Kolkata Income Tax Department after identifying 84 scrips to be penny stocks and the modus operandi adopted by those scrips with the connivance of various entry operators, brokers and stock exchange. We find that the ld DR was not specifically able to controvert the documentary evidences filed by the assessee for purchase and sale of shares and various other documents referred to in the Paper 14 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others Book. The ld DR also filed written submissions wherein he had reiterated the findings of the ld AO. 7.7. We find that the co-ordinate bench of Kolkata Tribunal in ITA No.661/Kol/ 2018 in Shreyans Chopra vs ACIT dated 25.7.2018 on similar set of facts and circumstances had held as follows:- “IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member) ITA No. 661/Kol/2018 Assessment Year: 2014-15 Shri Shreyans Chopra …….......…..…….…………………….......….. Appellant 3A, Mangoe Lane Kolkata – 700 001 [PAN : AAAFZ 1337 P] Assistant Commissioner of Income Tax, Circle-36, Kolkata.......Respondent Appearances by: Shri Miraj D. Shah A/R, appeared on behalf of the assessee. Shri Satyajit Mandal, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : June 28th, 2018 Date of pronouncing the order : July 25th, 2018 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-10, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 15/02/2018, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2014-15.

3. The Assessing Officer in his detailed order discussed the modus operandi as well as the other evidences available with him and, thereafter, at para 6 & 7, concluded as follows:- “6. Thus in view of the elaborate discussion made above, I hereby hold the amount of Rs.5,57,658/- introduced/credited by the assessee out of these purported share sale receipts during the Financial Year 2013-14 (AY 2014-15) in his capital account as his income being unexplained cash credit u/s 68 of the Income Tax Act (taxable at the rate of 30% as provided u/s 115BBE). Therefore, an amount of Rs.5,57,658/- is added back with the total income of the assessee u/s 68 of the I.T. Act as unexplained cash credit during the relevant year. [Addition: Rs.5,57,658/-] 16 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others 7. Under the circumstances, Rs.5,50,158/- is treated as bogus and also a sum of Rs.27,508/- being 5% of Rs.5,50,158/- is added as undisclosed expenditure within the meaning of section 69C of the Income-tax Act, 1961. [Addition of Rs.27,508/-]”

4. On appeal, the ld. First Appellate Authority, has classified these transactions as ‘suspicious’ and confirmed the order of the Assessing Officer.

5. Aggrieved, the assessee is in appeal before us.

6. I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:- 6.1. Recently, the Kolkata ‘C’ Bench of the Tribunal in the case of Navneet Agarwal,-vsITO, Ward-35(3), Kolkata; I.T.A. No. 2281/Kol/2017; Assessment Year: 2014-15, while dealing with identical issue of sale of shares decided the issue in favour of the assessee by relying upon a plethora of judgments of various Courts. It held as follows:- “12. The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to “Modus Operandi” of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence collected from third parties is confronted to the assesses. No opportunity of cross-examination of persons, on whose statements the revenue relies to make the addition, is provided to the assessee. The addition is made based on a report from the investigation wing.

13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in quesiton was part of this scam. The chain of events and the live link of the assesee’s action giving her involvement in the 17 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation’s office by way of statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assesee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department.

14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the revenue with evidence. When a person claims that she has done these transactions in a bona fide and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal import laid down by the Courts of law.

20 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others The observations of the Hon’ble Apex Court are equally applicable to the case of the assessee. In our view the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee.

21 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross-examination.

22 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others 5. According to us, not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them.

6. As mentioned above, the Appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.”

23 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTA HIGH COURT in the case of BLB CABLES & CONDUCTORS [ITA No. 78 of 2017] dated 19.06.2018. The High Court held vide Para 4.1: “…………we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee’s appeal.” [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal’s finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed.” b) The JAIPUR ITAT in the case of VIVEK AGARWAL [ITA No. 292/JP/2017] order dated 06.04.2018 held as under vide Page 9 Para 3: “We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account.”

24 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others c) The Hon’ble Punjab and Haryana High Court in the case of PREM PAL GANDHI [ITA95-2017 (O&M)] dated 18.01.2018 at vide Page 3 Para 4 held as under: “….. The Assessing Officer in both the cases added the appreciation to the assessee’s’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee’s’ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner.” The Court also held the following vide Page 3 Para 5 the following: “Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises.” d) The BENCH “D” OF KOLKATA ITAT in the case of GAUTAM PINCHA [ITA No.569/Kol/2017] order dated 15.11.2017 held as under vide Page 12 Para 8.1: “In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT (A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in 25 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others long term capital gain. These evidences were neither found by the AO nor by the ld. CIT (A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act.” Further in Page 15 Para 8.5 of the judgment, it held: “We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT (A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT (A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition.” e) The BENCH “D” OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: “…….. We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence.

26 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others It further held as follows: “We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition.” f) The BENCH “A” OF KOLKATA ITAT in the case of SHALEEN KHEMANI [ITA No. 1945/Kol/2014] order dated 18.10.2017 held as under vide Page 24 Para 9.3: “We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act.” g) The BENCH “H” OF MUMBAI ITAT in the case of ARVIND KUMAR JAIN HUF [ITA No.4682/Mum/2014] order dated 18.09.2017 held as under vide Page 6 Para 8: “……We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against 27 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transactions in M/s Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT (A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT (A) at para 3 to 5 has not been controverted by the department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT (A).” h) The Hon’ble Punjab and Haryana High Court in the case of VIVEK MEHTA [ITA No. 894 OF 2010] order dated 14.11.2011 vide Page 2 Para 3 held as under: “On the basis of the documents produced by the assessee in appeal, the Commissioner of Income Tax (Appeal) recorded a finding of fact that there was a genuine transaction of purchase of shares by the assessee on 16.3.2001 and sale thereof on 21.3.2002. The transactions of sale and purchase were as per the valuation prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed.” i) The Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: “The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, 28 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others produced documents showing that all payments were received by the assessee through bank.” j) The Hon’ble Supreme Court in the case of PCIT vs. Teju Rohitkumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon’ble Gujrat High Court as under: “It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises.”

7. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs 1,41,08,484/- represented unexplained 31 & 6617/MUM/2019 (A.Y. 2014-15) ITA NO.315/MUM/2020 (A.Y. 2014-15) Suresh M. Jain HUF & others investment under section 69 of the Income Tax Act, 1961 cannot be faulted.

by the assessee is allowed.

8. Both the parties before us agreed that the facts in ITA No. 694/Mum/2018 in the case of Shri Shashikant B Mhatre (HUF) are identical to that of Smt Geeta Khare supra except with variance in figures and name of the scrip that was dealt with. Both the parties before us stated that identical reasoning was given by both the lower authorities for denying the claim of exemption u/s 10(38) of the Act to the assessee. The decision rendered in the case of Smt Geeta Khare would apply with equal force for this assessee also and accordingly, the ground raised by the assessee in ITA No. 694/Mum/2018 is allowed.”

Order pronounced in the open court on 21st September, 2022.