DCIT CC 8(1), MUMBAI vs. M/S JAINAM INVESTMENTS, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. Nos. 4286 & 4474/Mum/2019 (निर्धारण वर्ा / Assessment Years: 2011-12 & 2016-17) DCIT, CC-8(1) बिधम/ M/s. Jainam Investments 11A, 5th Floor, Rockside Aayakar Bhavan, M. K. Vs. Road, Mumbai-400020. Apartment, A Wing, Walkeshwar Road, Mumbai- 400009. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAHFJ1230A (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. Revenue by: Shri Rahul Raman (DR) Assessee by: Shri Suchek Anchaliya (AR) सुनवाई की तारीख / Date of Hearing: 16/02/2021 घोषणा की तारीख /Date of Pronouncement: 25/02/2021 आदेश / O R D E R PER AMARJIT SINGH, JM: The above mentioned appeals have been filed by the revenue against the different order passed by the Commissioner of Income Tax (Appeals)- 50, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2011-12 & 2016-17.

ITA. NO.4286/Mum/2019:- 2. The revenue has filed the present appeal against the order dated 09.04.2019 passed by the Commissioner of Income Tax (Appeals)-50, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011- 12.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 3. The revenue has raised the following grounds: - “1 Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs.24.35 Crore made under section 68 of the Income Tax Act without appreciating the finding that Shri Bhanwarlal Jain is engaged in the business of accommodation entries and hence AO was correct in concluding that the assessee was a beneficiary of the accommodation loans. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.” 4. The brief facts of the case are that the assessee filed its return of income on 12.09.2011 declaring total income to the tune of Rs. Nil for the A.Y. 2011-12. The return was processed u/s 143(1) of the I. T. Act, 1961. Thereafter, the case of the assessee was reopened u/s 148 of the Act. The reasons for reopening of the assessment was given to the assessee. The assessee received the accommodation entry in form of bogus unsecured loans from Bhanwarlal Jain Group run entities during the previous year in consideration. The assessee filed the objection vide letter dated 17.05.2018. The AO rejected the objections by virtue of order dated 01.06.2018. The AO completed the assessment by making an addition of Rs.24.35 crores u/s 68 of the Act treating the loans received by the appellant as bogus thereby assessing the total income of the appellant at Rs.9,24,88,940/- vide order dated 13.12.2018. Thereafter, the assessee was not satisfied and filed an appeal before CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

ISSUE NO.1

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17

“13.0 I have considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order and the other materials available on record on this issue. 13.1 I have noted that this is not a new issue in the case of the Appellant and for the subsequent assessment years in the Appellant's own case, the matter relating to the loan entries from the Bhanwarlal Jain Group of entities had travelled up-to the Hon‟ble ITAT, Mumbai based on the same facts and circumstances. 13.2 I have gone through the assessment order passed by the AO and noted sat the AO had relied upon the same material and advanced similar was sent as had been in the latter assessment years. The AO had not brought on record any new material, argument, contention or fact in the present assessment order, under challenge. 13.3 It is a material fact on record that relevant to the A.Y. 2012-13, an addition of Rs. 24.75 crores was made by the AO u/s.68 of the Act for loans received by the Appellant from various parties belonging to the Bhanwarlal Jain Group. The Appellant preferred an Appeal before CIT(A), who had vide order No. CIT(A)-30/19(2)/559/15-16 deleted the addition made u/s.68 of the Act on account of loan entries taken from the various concerns of Shri Bhanwarlal Jain and other related additions. The Department preferred an Appeal before the Hon'ble ITAT and the Hon‟ble ITAT, Mumbai, „G‟ Bench, had vide its order dated 10.08.2018 in I.T.A. No.6099/Mum/2016 dismissed the Appeal of the Department and upheld the order of CIT(A), which had deleted the addition made by the AO u/s 68 of the Act.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17

13.4 For the A.Y. 2013-14, an addition of Rs.34.35 crores was made by the AO u/s. 68 of the Act for loans received by the Appellant from various parties belonging to the Bhanwarlal Jain group. The Appellant preferred an Appeal before CIT(A), who had vide order No. CIT(A)- 47/E10046/2012-13 deleted the addition made u/s.68 of the Act and other connected additions. The Department preferred an Appeal before the Hon‟ble ITAT and the Hon‟ble ITAT, Mumbai, „F‟ Bench, vide its order dated 16.01.2019 in ITA No.5637/Mum/2017 dismissed the Appeal of the Department and upheld the order of CIT(A) deleting the addition made by the AO. In this judgment, the Hon‟ble ITAT had discussed the order of the Hon‟ble ITAT in the case of the Appellant for the A.Y. 2012- 13 and had also referred to the order passed by the Ld. CIT(A). The relevant portion of the said judgment of Hon'ble ITAT Mumbai being comprehensive and detailed the same is reproduced, as under: “we have heard both the parties and we have also perused the Ss well as the orders passed by revenue placed on record as by the Coordinate Bench of Hon'ble ITAT in ITA No. 6099/Mum/16 for AY 2012-13 in assessee's own case. The operative portion of the order of Hon'ble ITAT passed in ITA No. 6099/Mum/16 for AY 2012-13 contained in para no. 2 to 27, which are reproduced below: 2. The assessee is engaged in the business of share trading. During the year under consideration, the assessee has taken loan of Rs. 24.75 crores from various persons. The Revenue carried out search and seizure operations in the case of Mr. Bhanwarlal Jain and his group concerns on 3.10.2013 and the said search revealed that they are engaged in providing accommodation entries in the form of unsecured loans, bogus sale bills etc., to the interested parties. It was noticed that the assessee has taken the above said loan of Rs. 24.75 crores from the following persons belonging to Mr. Bhanwarlal Jain group. Sr.No. Name of the hawala parties Bill amount 1. Aastha Impex 30000000 2. Balaji Impex 10000000 3. Impex Gems 5000000 4, Mayur Exports 15000000 5. Malhar Exports 5000000 6. Marvin Enterprises 10000000 7. Mehul Gems Pvt Ltd 20000000 8. Minal Gems 5000000 9. Manas Gems Pvt Ltd 10000000 10. Mother Exports 5000000 11. Mouli Gems 5000000 12. Mohit Enterprises 37500000 13. | Navakar Diamonds 5000000 14. Prime Star 2000000 15. - Roshan Gems Pvt Ltd 20000000 16. Sonam Gems Pvt Ltd - 50000000 17. Navkar Diamond 10000000 Total 247500000 Hence the revenue carried out Survey operation in the hands of the essee on 16-10-2014. Subsequently, the return of income filed by the, assessee was taken up for scrutiny. Since Bhanwarlal Jain had that he and his group of companies are providing only accommodation entries, the AO

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 took the view that the assessee has introduced its unaccounted cash through the bogus loans stated above. submitted that the lender companies belonged to Bhanwarial Jain Group and the directors themselves have confirmed that the transactions entered by their group are bogus. These concerns have adopted Circulatory method to transfer funds through many layers with the objective to give colour of genuineness to the transactions. He submitted that the modus operandi adopted by this group has been Cleary established by the revenue and the same methodology has been adopted by all the lenders. K was also proved that the directors of various companies are only employees of Shri Bhanwarial Jain. This group ensured that the transactions are arranged in a perfect manner in order to avoid even slightest of doubt. He submitted that the search team has, however, unearthed the bogus nature of all transactions, which has also been confirmed by Shri Bhanwarial jain and other persons. 6. The Ld D.R submitted that the appellate authorities are also duty bound to conduct necessary enquiries, if there ts any deficiency in the enquiry conducted by the AO, as held by Hon'ble Delhi High Court in the case of jansampark Advertising @ Marketing (P) Lid (ITA §25/2014 dated 11-03-2015). He further submitted that the Hon'ble Delht High Court has highlighted in the case of Pr. CIT Vs. Bikram Singh (ITA 55/2017 dated 25-08.2017) there is constant use of deception of loan entries to bring unaccounted money into banking channels and the device of loan entries continues to plague the legitimate economy of our Country. The Hon'ble Delhi High Court found in the above said case that the loan transactions did not inspire confidence as being genuine and are shrouded in mystery and accordingly confirmed the addition made by the AO u/s 68 of the Act. 7, The Ld D.R further submitted that the discharge of initial onus by the assessee alone will not disentitle the AO to make additions u/s 68 of the Act. He can make further verification to satisfy himself that the transactions are genuine. For this proposition, the Ld DR placed reliance on the decision rendered by Hon'ble Punjab & Haryana High Court in the case of CIT vs. Bhan and sons (2005) 273 ITR 206). The Ld DR submitted that the findings of search officials conclusively prove that the loan transactions are bogus. Accordingly, he submitted that mere furnishing of particulars is not enough in the peculiar facts of the present case. Accordingly, he submitted that the Ld CIT(A) not have brushed aside the findings of search officials. In this if appeal the Ld D.R placed reliance on the decision rendered by Hon‟ble Calcutta High Court in the case of CIT vs. Precision Finance Ltd(1994) (208 ITR 465). He submitted that the tax authorities are entitled to look into the surrounding circumstances and human probabilities in order to ascertain the genuineness of transactions. He further submitted that they

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 are also entitled to look into the substance by overlooking the form. For these propositions, the Ld CIT-DR relied upon the decisions rendered by Hon'ble Supreme Court in the case of Sumati Dayal (214 ITR 80) (SC) and Durga Prasad More (82 ITR 540 (SC). 8 The Ld CIT-DR then took us through the financial statements relating to various lenders in order to show that they shared common addresses. He also took us through the copies of bank statements relating to the lenders in order to show to us that the moneys were transferred to the bank account of the lenders from some other account immediately before lending the same to the assessee. He submitted that all the lenders have followed same methodology of getting funds from some other accounts and then lending the same to the assessee. All the lenders have shared common addresses. The search officials have also shown that the directors of various companies are employees of Shri Bhanwarlal Jain, meaning thereby all the lender companies are filled with dummy directors. All these factors strengthen the admission made by Shri Bhanwarlal Jain that he and his group of companies are engaged in _ providing accommodation entries only. 9. Accordingly the Ld D.R submitted that the order passed by Ld CIT(A) should be reversed. Alternatively, he suggested that the matter may be restored to the file of the AO for examining it afresh by conducting further enquiries. 10. The Ld A.R submitted that the assessing officer has made the addition u s 68 of the Act. He submitted that the assessee is required to discharge the initial onus placed upon it u/s 68 of the Act. He submitted that the assessee has furnished all the documents in order to prove the identity and creditworthiness of the creditors. All the transactions have been routed through the banking channels ana hence genuineness of the creditors is also proved. The ld A.R submitted „the revenue did not find any incriminating material during the real of survey operations conducted in the hands of the assessee that the assessee, vide its letter dated 03-03-2015, has all the documents relating to the loan creditors, viz., copy of their ITR, their financial statements and bank statements, loan confirmation letters obtained from them and thus the assessee has discharged the initial onus placed upon it u/s 68 of the Act. He submitted that the onus to disprove the claim of the assessee was accordingly shifted to the assessing officer in view of furnishing of all the details. However, the assessing officer has failed to conduct any further enquiries to disprove the claim of the assessee. 11. He submitted that the legal principles settled by various Courts have been reiterated in the decisions rendered in the case of Bhan & sons (supra) and Precision Finance Company (supra), which were relied upon by the Ld CIT-DR. However the facts prevailing in those cases are

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 different and hence those decisions are not applicable to the facts of the present case. He submitted that, in those cases, either the assessee did not discharge initial onus placed upon him or the assessing officer has not disproved the claim of the assessee. The Ld A.R submitted that, in the instant case, the assessee has discharged the initial onus by proving the three main ingredients, viz., the identity of the creditor, the creditworthiness of the creditor and genuineness of transactions by furnishing all the materials. He submitted that the assessing officer has not found fault with these materials and further did not conduct any further enquiries to disprove the various evidences furnished by the assessee. The Ld A.R further submitted that the Survey officials have recorded a statement from Shri Hemal Jhaveri, a key person of the assessee, during the course of survey. He was specifically asked on the admission made by Shri Bhanwarlal Jain. However, Shri Hemal Jhaveri has specifically stated that the admission made by Shri Bhanwarlal Jain do not indicate that the loans taken by the assessee are not genuine. The Ld A.R further submitted that Shri Bhanwarlal Jain and his group of companies are engaged in diamond trading business and existence of common address in diamond trade is not uncommon and hence adverse inference should not have been drawn _on those facts. He submitted that it is quite common to induct trusted employees as directors of the company and the said fact should not militate against the assessee. Accordingly, he submitted that the Ld CIT(A) was justified in deleting the addition made by the AO u/s 68 of the Act and also the consequential additions. The Ld A.R submitted that the assessing officer has mainly placed on the report given by the search officials, who conducted the salt EB ales the hands of Shri Bhanwarlal Jain. which consisted of certain documents and sworn statements recorded from him and the, employees. The assessing officer, however, did not confront those materials and sworn statements with the assessee. He submitted that the assessee, vide its letter dated 13-03-2015 (copy placed at page 89 of the paper book), has requested the AO to furnish copies of information, statements, reports or any document on which the AO has placed reliance. Further the assessee has also requested the AO to allow reasonable opportunity to give submissions and explanations on those materials. The assessee has also specifically asked for an opportunity to confront and cross examine the parties who gave the Statements. The assessee again made similar request in its letter dated 19-03-2015. The Ld A.R submitted that the AO, however, did not furnish the copies of documents and also did not allow the opportunity to cross examine the parties who gave adverse statements. 13. The La A.R submitted that the assessing officer is not entitled to rely upon the documents collected behind the back of the assessee. In this regard, the Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of KishinchandChellaram vs. CIT (1980125 ITR 713). He further submitted that the assessing officer has

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 not provided opportunity to cross examine the parties who gave adverse statements. He submitted that the Hon'ble Supreme Court has held in the case of Andaman Timber Industries vs. CIT (Civil Appeal No.4228 of 2006 dated 02-09-2015) that, not allowing cross examination of witnesses by the adjudicating authority will result in violation of natural justice, when the said authority is placing reliance on those statement of the witnesses. Accordingly, the Hon'ble Supreme court held that the order passed by the authority nullity. The relevant observations made by Hon'ble Supreme Court are extracted below: "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 in as much 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 aforesaid two SSCS..." AR further submitted that the assessee, vide its letter dated 115 (Placed at pages 90 -93 of paper book) has specifically requested the AO to issue summons to the loan creditors. The relevant submissions made by the assessee are extracted below: "11. As informed earlier, all the loan creditors have been examined by _ the Investigation wing of the Income tax department and they have confirmed the transactions with our client. Ideally the appearance of the creditors before the Investigation wing and confirming the - transactions should conclude the matter beyond anyone's doubt. If, however, you wish to make independent inquiries, we request you to issue summons to the loan creditors and call for their confirmations so as to once again establish the case of our client.”

However, the AO did not make any further enquiries at all nor did he issue summons to the loan creditors. Accordingly he submitted that the AO was not entitled to make addition u/s 68 of the Act under these facts as held by Hon'ble Supreme Court in the case of Orissa Corporation (P) Ltd (159 ITR 78)(SC). 15. The Ld A.R submitted that the assessee has repaid most of the loans and the same has been noted down by the Ld CIT(A) in paragraph 6.3.32 of his order. The Ld A.R further submitted the statements given by Shri Bhanwarlal Jain has been claimed to have been retracted. He submitted that the co-ordinate bench of the Tribunal has rendered its decision in the case of M/s Vama International (ITA No.7315, 7316 & 7317/Mum/2016 dated 15-022018), wherein the issue was related to the disallowance of purchases made from M/s Bhanwarlal Jain Group. In

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 the said decision, the Tribunal has recorded that the statements have been retracted by them subsequently. The co-ordinate bench has further held that the purchases could not be treated as bogus simply relying on the statements given in the case of Bhanwarlal Group. Accordingly the La | A.R submitted that the AO could not have placed reliance on the statements given by Shri Bhanwarlal Jain and others. 16. We have heard rival contentions and perused the record. We also notice that the Ld CIT(A) has deleted the additions by making detailed observations. For the sake of convenience, we extract below the operative portion of the order passed by Ld CIT(A):

he "ty have carefully considered the issues brought out by the AO in the impugned assessment order and also the submissions made by the AR of the appellant. From the material, the AO has brought out in the body of the assessment order, his case against the appellant, which is summarized as under: a. Shri Bhanwarlal Jain, in whose case a search action was conducteq in 2013 by the Investigation Wing, had been found to be running q hawala racket through a clutch of benami concerns, run with the help of dummy Directors / Partners /Proprietors, who were simply employees of the said Shri Jain and were paid nominal salaries. b, Through the said benami concerns, hawala of two types were being given - (1) hawala for purchase of diamonds; and (2) hawala for unsecured loans. c. Hawala entries were provided against unaccounted cash provided by the beneficiaries. d. For the hawala services, so rendered by him, Shri Bhanwarlal Jain used to charge from the beneficiaries a certain percentage as commission. e. In his statement, made under section 132(4), Shri Bhanwarlal Jain had admitted to the said hawala racket and also the existence of dummy/benami entities, through which the said racket was being run. f. Dummy Directors / Partners / Proprietors had also admitted to being part of the hawala racket run by Shri Bhanwarlal Jain. g. Names of entities, from whom the impugned loans of Rs. 24.75 crore were shown to have been obtained by the appellant, figured in the data base of entities and entries compiled by the Investigation Wing, therefore, these loans, the appellant had shown fh in its s books of account, were suspect.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 h. Though the appellant had provided confirmations and other supporting evidence in respect of the impugned credits; in view of the findings of the Investigation Wing, the impugned loans were treated as non-genuine and the loan amounts were added u/s 68 to the computation of total income of the appellant 6.3.1 The above being the basic thrust of the case against the appellant, the impugned ay assessment order needs to be examined to figure out the quality specific evidence if any available. A search for such an addition leads to the following questions: a. What is the nature of evidence that has been brought on record to show that the lender parties, who advanced the impugned loans to the appellant, were benamis of Shri Bhanwarlal Jain? b. Is there any material that has been brought out by the Assessing Officer to show that the loans in question are paper entries purchased against payment of unaccounted cash? c. Has the Assessing Officer brought any material on record to show that commission was paid to Shri Bhanwarlal Jain? 6.3.2 First of all, it would be worthwhile to examine the impugned assessment order with regard to material that shows that the hawala racket was run through benami entities of Shri Bhanwarlai Jain, In this regard it may be mentioned that: a. In sub-paragraph 4.18 of the. assessment order, the Assessing Officer claims that in their respective statements, recorded u/s 132(4) all Directors/ Proprietors/Partners of the alleged benami entities run by Shri Bhanwarlal Jain have admitted to being dummies, business in whose names was actually being run by Shri Bhanwarlal Jain. b. In the very next sub-paragraph 4.19, the Assessing Officer goes on to name 13 individuals (LunkaranParasmal Kothari, Anil Khicha, Rajesh Chopra, RiteshSiroya, Rohit Birawat, Basant D Jain, Shreyansh L Jain, Bharat Omprakash Jain, Mahavir Mangalchand Jain, RamnivasChoyal, Gautam Kumot, Rajesh Chopra and Atul Ladda). - According to the Assessing Officer, these. persons were dummy Directors/Partners/Proprietors, used by Shri Bhanwarlal Jain in running his hawala racket. However, no details of the evidence, if any collected from these persons regarding their role in the alleged hawala racket, has been mentioned.

c. When it comes to detailing the adverse material, if any, the Assessing Officer, in sub-paragraph 4.23 of the impugned assessment order, refers to statements made by only three individuals (LunkaranParasmal Kothari, Anil Khicha and RiteshSiroya), who had reportedly admitted to

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 being dummy Proprietors/Partners/Directors in benami concerns of the said Shri Bhanwarlal Jain. However, FIR, and mentioned anywhere in the assessment order whether these names are the there in the 17 parties from whom n the appellant has taken the loans, which are treated as non-genuine borrowings by the my, AO. 6.3.3 Certain conclusions are obvious. One, the Assessing Officer himself is not so clear about facts and has referred to mostly the material facts which are not relevant to the case. Two, the Assessing Officer has not referred to any adverse material in the cases of loan creditors that are being dubbed by him to be benamis of Shri Bhanwarlal Jain. 6.3.4 Hence, it is to be inferred that the quality of evidence, specific to the appellant is but poor and not fully relied upon. This flaw is further magnified as the adverse material if any (report of the Investigation Wing and alleged confessional statements of Shri Bhanwarlal Jain and others) have never been brought on record by making them available to the appellant From the impugned assessment order it is seen that though the Assessing Officer appears to have taken the view that the impugned loan creditors are mere entry providers and that the impugned loan entries have been obtained by the appellant against payments made to the said entry providers in cash, no specific material has been brought on record to show that creditors, from whom the impugned loans of @ 24.75 crore were taken are entry providers and that entries for the loans in question have actually been obtained against payments made by the appellant in cash outside regular books of account. There is no evidence brought on record for payment of any commission or fee having been made by the appellant to the alleged hawala givers. All this goes to support the contentions of the appellant that Assessing Officer has. passed the order on the basis of mere conjectures and surmises, without bothering to bring any concrete material on record. 6.3.5 Survey Action u/s 133A of the Act at the appellant premises: Material, brought on record by the appellant before the Assessing Officer in the course of assessment proceedings clearly shows that about a year after search action of 2013 in the case of Shri Bhanwarlal Jain, the appellant was surveyed by the Investigation Wing on 16-10-2014. The survey party found that the impugned loans of * 24.75 crore from the aforesaid 17 entities were incorporated in the Pare 6 of account of the appellant. Statement on oath of Shri Hemal Jhaveri, Key Person, was recorded on the 16th, the 17th and the 18th of October, 2014. Shri Hemal Jhaveri maintained that these loans were genuine and were not part of any hawala. He claimed that no commission whatsoever had been paid to Shri Bhanwarlal Jain; that interest had been paid to the creditors; and, that TDS had regularly been deducted and paid into the Government Treasury. The officers conducting the survey showed Shri Jhaveri an alleged confessional statement of 09-10-2013 made by Shri

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 Bhanwartal Jain, admitting hawala operations through benami entities. Shri Hemal Jhaveri did not dispute the said statement of a third party but he asserted that the statement in question had been retracted by Shri Bhanwarlal Jain; and, the same could not be used against him. Relevant portions from the statement of Shri Hemal Jhaveri are reproduced as below: Q. No. 28 In answer to Q No. 16 Shri. Bhanwar Lal Jain has accepted and reaffirmed the modus operandi of activities of all the concerns managed and controlled by him. From his reply it is apparent that all the concerns operated and managed by him are indulged in providing accommodation entries. It has further been accepted by you that unsecured loans in M/s Jainam Investment has also come from same concerns of M s Bhanwar Lal Jain. In view of same please explain as to why transaction between M s Jainam Investments and these concerns of Shri. Bhanwar Lal Jain should not be treated as merely accommodation entry. Ans. I cannot comment on modus operandi as stated by Mr. Bhanwarlal Jain in answer to question .16 in. the said statement. But, it is observed from the question and answer that the issue covered therein is about goods and payments for those goods. It does not refer to any loans given by them. You had shown me earlier statement of Shri. Bhanwarlal Jain wherein he has admitted that he has given loans to some builders. These loans are not considered to be accommodation entries. There is no base for any adverse inference for treating loans received by Ms. Jainam Investments as not genuine. Q.29 It is important to emphasize that in his statement he has explained how entries are given to parties in addition to diamond traders and how the whole chain of transaction is completed. Further it has been accepted by him that all the transactions done by his concerns follow the same modus operandi which amounts to only accommodation entries. In view of same, please explain as to why transaction between M s Jainam Investments and these concerns of Sh. Bhanwar Lal Jain should not be treated as merely accommodation Ans. As stated by me in reply to earlier question, there ts no base for that presumption to treat loans received by M/S. Jainam Investment ay merely accommodation entry. Q.30 As it has been stated by Shri. Bhanwar Lal Jain that all trading activity done by his concerns are nothing but only accommodation entries. It simply clarifies the fact that there is no real trading activity going on in these concerns. It simply explains that balance sheet which explains source of loan doesn't prove credit worthiness of concerns. In view of this please explain why the unsecured loan taken by M/s Jainam Investments from the group concerns of Shri Bhanwarlal Jain should not

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 be treated as just accommodation entry? Ans. In view of my reply to earlier question I can't comment on this.

Q.31 Please go through the Q. No 29 to 34 of Shri. Bhanwar Lal Jain. In this statement Shri. Bhanwar Lal Jain has admitted that concerns operated by him has certain transactions which are not recorded in regular books of accounts. These transactions had not been routed through banks but through angdiya account in cash. Shri. Bhanwar Lal Jain had also admitted that he used to record these transactions in separate parallel books in electric form as well as and in physical form. During the course of search u/s 132 on 03.10.2013 these parallel books of accounts were seized and Shri Bhanwar Lal Jain has also explained in detail the codes under which these accounts were maintained. In post search investigation, these accounts were deciphered wherein your name against transactions through angadiya channel were also recorded. During the course of survey in your premise in the books of accounts of M/s Jainam Investments same entries have been found. In view of above, please, explain as to why transaction between M/ s Jainam Investments and these Ans. I have gone through the content. I reaffirm that my loan transactions with various entities of Shri Bhanwar Lal Jain are not accommodation entries. Q.32 Please furnish logical argument to contravene the statement of Shri. Bhanwar Lal Jain who is operator of the loan giving concern and who himself has accepted that all transactions done by concerns are merely accommodation entries. In view of my reply to earlier questions I can't comment on this.

Q.34 In view of the above questions and your reply to the same, why the amount of Rs.116,16,00,000/ -should not be treated as your undisclosed income in various financial years as below? F. Yrs. Amount 2010-11 22,35,00,000 2011-12 25,75,00,000 2012-13 55,51,00,000 2013-14 12,55,00,000 Total 116,16,00,000

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 Ans. Loan received by M/ s. Jainam Investments are not accommodation entries and it is also not so admitted by Shri Bhanwar Lal Jain. Hence no adverse inference should be drawn as suggested by you. Q.37 In view of the discussion in Q.No. 25 to 33 above why the unsecured loans taken from parties mentioned in your reply to Q.No.35 above should not be considered as only accommodation entries.

Ans. There is nothing to suggest even from the statement of Shri Bhanwarlal Jain that loans transactions by the above parties are accommodation entries. As such, no inference should be drawn in absence of any evidence, that these loans are accommodation entries. 6.3.6 As is obvious, Shri Hemal Jhaveri stuck to his contention that even from the statement of Shri Bhanwarlal Jain, it was not possible to draw an adverse inference of hawala regarding the Impugned loans. The appellant, subsequently furnished to the Investigation Wing various details regarding the lenders - their names, PAN, constitution, names of Proprietor/Partner/Director. Further, the appellant provided confirmatory letters issued by the lenders, copies of acknowledgement income tax returns, Balance Sheets, and relevant Bank pits of all the lenders. Obviously, other than a general case of Shri Bhanwarlal Jain that had reportedly retracted specific material to suggest the loans: are hawala entries. There was nothing to show that there was any actual exchange of cash between the appellant and the alleged hawala giver, before the impugned loans were incorporated in the books of account of the appellant. Also, there was no material to show that any commission for arranging the hawala had been paid by the appellant to the said Shri Bhanwarlal Jain. The situation retrained unaltered in the course of the assessment proceedings and the Assessing Officer did not in any manner improve upon what had been done by the investigation Wing. 6.3.7 Non-observance of Principle of Natural Justice: Not making available material used against the appellant & denying opportunity to cross-examine witnesses: In the grounds of appeal, first six grounds raised by the appellant are dealing with the issue of AO not observing the principles of natural justice and the material relied upon is not made available to the appellant and denying the opportunity of cross examination of witnesses. The record shows that through various letters filed before the Assessing Officer in the course of assessment proceedings, the appellant had on more than one occasion specifically asked the Assessing Officer to make

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 available to it the adverse material, if there was any in the possession of the Assessing Officer (The letters addressed to the AO by the appellant are discussed in detail in para6.2 above). Still, at no point of time in the course of assessment proceedings, did the Assessing Officer make available to the appellant any of the details sought by the appellant. 6.3.8 On the above facts, it is obvious that the Assessing Officer, while supposedly acting on a report of the Investigation Wing and some alleged third party evidence, never made the said report and evidence available to the appellant. Thus, the appellant was denied a chance to rebut the evidence by cross-examining those, who had allegedly given statements that could incriminate the appellant. All this is a clear violation of the principles of natural justice, a fundamental point to the validity of the proceedings, before the Assessing Officer.

6.3.9 The facts of the appellant's case are identical to those of in the case of Mehta, decided by the Bombay High Court through an order sted 30.06.2016 in INCOME TAX APPEAL NO.58 OF 2001. In that « the assessee had adduced evidence by way of bank record to that loan had been received from a creditor through banking channels. The creditor was not physically traceable, as much time had elapsed and his address had changed. The assessment had been reopened on the basis of third party evidence collected in a search action in the case of a charitable trust. Despite specific request in this regard, the Assessing Officer concerned did not provide to H R Mehta a copy of the appraisal report& third party statement etc. and proceeded to treat the loan as unexplained. The Hon'ble High Court struck down the order of reassessment by observing that revenue was not justified in making the addition without having first given the assessee an opportunity to cross examine the deponents on the statements relied upon by the ACIT. The relevant discussion, contained in paragraphs 16 and 17 of the High Court's order, is reproduced below: "16: In the instant case although the appellant assessee has called upon us to draw an inference that the burden shifted to the revere in the present case once it was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various Issues raised and the decisions cited by Mr. Tralshawalla and finding that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the A CIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conduct that the loan was a bogus transaction.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 17. In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CTT(A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against apart from being permitting him to cross examine the deponents. {ya "FS, Be vide the request dated 15th February, 1996 seeking an opportunity cross-examine the deponent and furnish the assessee with copies of statement and disclose material, these were denied to him. In this View, of the matter we are inclined to allow the appeal on this very issue." 6.3.10 Opportunity of cross-examination of witnesses Is an essential ingredient of the principle of natural justice. This has been affirmed by the Hon'ble Supreme Court in the case of Andaman Timber Industries (Civil Appeal No. 4228 of 2006, Date of Pronouncement September 02, 2015]. In that case, the Hon'ble Supreme Court held that not allowing assessee the opportunity to cross-examine witnesses, whose statement were made the basis of a demand, is a serious flaw which makes order a nullity, as it amounts to violation of principles of natural justice. 6.3.11 In the case of Kishinchand Chellaram Vs. Commissioner of Income-Tax, Bombay City-II [1980] 125 ITR 713 (SC) It has been held by the Apex Court that in Income Tax proceedings when an evidence is to be used against the assessee and if it is not shown to the assessee and if no opportunity to controvert is given to the assessee, that evidence is not admissible. It further held the department ought to have called upon the manager to produce the documents and papers on the basis of which he made the statements and confronted the assessee with those documents and papers. Before the Income tax authorities could rely upon the evidence, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 6.3.12 On Principles of Natural Justice it has been held by the Apex Court in the case of Swadeshi Cotton Mills vs Union of India in 1981 AIR 818 that phrase "Natural justice" is not capable of a static and precise definition." "Two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as preeminently necessary to ensure that law is applied impartially objectively and fairly. These twin Principles are (i) audialterm pattern and (ii) nemo judex in re-sua. Audi alterm partem is a

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act healthy check on the abuse or misuse of power." “The maxim pattern has many facets. Two of there are (a) notice of met and (b) opportunity to explain. "In facts and 6% genuineness of a particular case when non-alliance with the implied requirements of the audialterm partem, rule of natural justice at decisional stage, the impugned order can be struck down as invalid on that score atone" 6.3.13 It has also been held by the Apex Court in the case of Delhi Transport Corporation vs DTC Mazdoor Congress, in 1991 AIR 101, that the audialterm partem rule which in essence enforces the equality clause of Article 14 of the Constitution and is applicable not only to quasi-judicial orders but to administrative orders -affecting prejudicially the party in question. 6.3.14 A similar matter came up before the Hon'ble Supreme Court in the case of M/s Gira Enterprises & Another (Civil Appeal Nos. 433-434 of 2006); Dated: 21-08-2014. In that case, it was alleged that prices declared for import purposes had been suppressed. The case was based on evidence contained in a computer printout, reportedly prepared on the basis of import data, allegedly collected from Mumbai Port. This print out showed import prices, higher than those declared by the assessee. This printout was not made available to the assessee in the course of adjudication proceedings. After hearing the matter, the Hon'ble Supreme Court went on to set aside the order with below extracted observations: "22. assesse the respondent (revenue) did not supply the information (alleged computer printout} which formed the basis of the conclusion that the appellants herein undervalued the goods imported. In such a situation, the appellants obviously cannot and did not have any opportunity of establishing that the claim of the revenue is unsustainable in law. If the information, which formed the basis for the Revenue to reject the appellant's valuation is supplied to the appellants, the appellants perhaps will have the opportunity to dispute the comparability of the import transactions allegedly contained in the computer printout on various counts may not be possible to catalogue. 23. In the absence of any material produced by the Revenue in proof of the alleged comparable imports at a higher value, the impugned order which eventually confirmed the original order of assessment assessee cannot be sustained for two reasons - (1) the mere existence of an alleged computer printout is not proof of the existence of comparable imports, (2) assuming such a printout exists and the contents thereof are true question still remains whether the transaction evidenced by the said computer printout are comparable for the transaction of the appellant,

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 The appellant will have to be reasonable opportunity to establish (if he can) that the transactions are not comparable." 6.3.15 Going by the discussion contained above, it is obvious that the inference drawn by the Assessing Officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statements etc.) used against it. Secondly, by withholding the said material, the Assessing Officer has denied to the appellant an opportunity to rebut the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.3.16 The case law relied by the assessee of Rushabh Enterprises vs. Asst CIT WRIT Petition No. 167 of 2015 is not applicable to the present case as in that case the assessee filed petition against the reopening u/s 148 of the Act and in present the assessment is made u/s 143(3) of the Act. 6.3.17 Absence of material to show that the Loan Entries are Unexplained: From the forgoing, it is obvious that there is no scope for arriving at a conclusion that the appellant had taken hawala entries to incorporate the impugned loans in its books of account. Hence, the only issue that remains to be seen is whether on the basis of facts brought on record the impugned loans could be treated as unexplained within the fore corners of section 68 of the Act. At the outset, it will necessary to look at some legal precedents with regard to the intent and application of section 68. It needs no elaboration that through a catena of decisions the Courts have laid down the following three fundamental tests which have to be established to discharge the burden under section 68 of the Act: Identity of the creditor - Creditworthiness of the creditor, and Genuineness of the transaction, 6.3.18 The Hon'ble Supreme Court in case of CIT y. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 held that the expression “assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee. It further held that the opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory ts required to be based on proper appreciation of material & other attending circumstances available on record. The opinion of the AO ts required to be formed objectively with

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 reference to the material available on record. Application of mind is the sine qua non for forming the opinion. 6.3.19. The law Is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him and where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source [Roshan Di Haiti v. CIT [1977] 107 ITR 938 (SC). 6.3.20 The initial burden to prove the genuineness of cash credit lies on the taxpayer. If the assessee fails to prove satisfactorily the source and nature of amounts of cash received and creditworthiness of the creditor, the AO is entitled to draw inference that the receipts are of an assessable nature [GovindarajuluMudaliar vs. CIT [1958]34 ITR 807 (SC)]. 6.3.21 In the case of Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 /2S Taxman 80F (SC), the assessee gave the names and addresses of the creditors. It was in the knowledge of the Revenue that the creditors were income-tax assessees. The revenue apart from issuing notices under section 131 did not pursue the matter further. It aid not examine the source of income of the alleged creditors to find out whether they were creditworthy. Therefore, it was held that in these circumstances, assessee could not do any further and it had discharged the burden laid on it.

In the case of Rohini Builders [2002] 256 ITR 360 [2003] 127 taxman 523 (Guj) it was held that if the identity of the creditors is Proved and the amounts are received by account-payee cheques, the initial burden of proving credit is discharged and the source of credits need not be proved. 6.3.23 In the case of CIT vs. Smt. Sushiladevi Khadaria [2009] 319 ITR (Bom), Hon. Bombay HC held that when loans were taken „by account payee cheques and the record indicated that there was no cash payment in the account of the borrower prior to the issuance of such cheques, the loans and interest paid on such loans were not includible in the total income of the assessee u/s.68 of the Act. 6.3.24 In the case of IT O v. Anant Shelters (P) Ltd, [2012] 051 SOT 0234, the Hon'ble TTAT (Mumbai) held that in matters regarding cash credit the onus of proof was not a static one. As per the provisions of the section 68, the initial burden of proof lies on assessee. Amount appearing in books of accounts of the assessee was considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 transaction could be proved by showing that money was received by an account payee cheque or by draft. Credit worthiness of the lender could be established by attending circumstances. Once assessee produces evidences about identity, genuineness and credit worthiness of the lender, onus of proof shifts to revenue. Therefore, it was held that assessee had furnished all the details regarding genuineness of cash credit, i.e., he had discharged his burden of proof. AO did not make any attempt to discharge his burden of proof to rebut the evidences produced by assessee. No addition u/s.68 can be sustained. 6.3.25 In the case of CIT v Varinder Rawlley [2014] 366 ITR 232 (P & H), it was held by the Punjab & Haryana High Court that Section 68 of the Income-tax Act, 1961, provides for charging of income of the assessee to tax, if, in the opinion of the Assessing Officer, the assessee failed to render any explanation or the explanation offered by the assessee about the nature and source of any sum found credited in the books of the assessee maintained for the previous year, is unsatisfactory. In other words, it is for the assessee to prove the genuineness of the transaction by identifying creditor and his capacity to advance money. The onus lies upon the assessee to the explain the credit entry but it shifts upon the Assessing Officer under certain circumstances. Where the assessee shows that the entries regarding third party's account were in fact received from the third are genuine, he discharges the onus. In that case the sum cannot be charged as the assessee's income in the absence of any material to indicate that it belongs to the assessee. It was further held by the Hon'ble Court that when assessee sufficiently discharged the burden and when burden clearly shifted to the Department to prove to the contrary and when AO failed to invoke the provisions of section 131 of the Act to prove the contrary, it was sufficient reason to delete the addition. 6.3.26 In the case of CIT v. Jal Kumar Bakliwal [2014] 366 ITR 217 (Raj), it was held by the Rajasthan High Court that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under section 131 of the Income-tax Act,.1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to non but the assessee. The addition of Rs.17,27,250 under section 68 was not justified. 6.3.27 In the case of CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del), it was held by the Delhi High Court that the assessee had discharged that initial onus. The assessee was not required thereafter to

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 prove the genuineness of the transactions as between its creditors and the creditors' source of income, i.e. the sub creditors. 6.3.28 In a recent decision given by the Delhi High Court in case of CIT v. Samtel Color Ltd. 64 DTR 46, it was held that by bringing on record every possible information regarding the depositors included in the application form which included particulars of applicant/depositor, telephone No., particulars of demand draft/cheque through which the deposit was made, tax status of applicant and other deposits with the assessee, if any, assessee had discharged the initial onus laid on it under section 68 and addition could not be made merely for the reason that no confirmation letters were filed in respect of some of the depositors. 6.3.29 The question whether an assessee is required to prove the source of source also has been answered by the Hon'ble Gauhati High‟ (in case of Nemi Chand Kothari v. CIT [2004] 136 Taxman 213. Court held that the assessee's burden is confined to proving Be it worthiness of creditor with reference to transaction between assessee and creditor and it is not the business of the assessee to find out the source of money of his creditor or of genuineness 9g transaction which took place between the creditor and sub-creditor, and/or the creditworthiness of the sub- creditors. 6.3.30 Hence, it is to be inferred that in a case where the assesse hag supplied all possible information to the Assessing Officer to explain the credit transaction, he has satisfactorily discharged the burden cast on him and it would be for the revenue to prove that the transaction not satisfactorily explained and provisions of section 68 of the Act are applicable. 6.3.31 In the case before me, the record also shows that to prove the genuineness of the impugned loan entries from the 17 creditors, the appellant has furnished to the Assessing Officer the following details copies of which were also furnished in the present proceedings: [PAN details of creditors i. Constitution and address of the creditors I. Particulars of income-tax returns filed by the

creditors [These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant.] IV. Confirmatory letters given by the creditors " V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.] VII. Details of interest paid to the creditors VIII. Details of TDS deducted and paid 6.3.32 As such, in so far as the appellant is concerned, it has provided all possible documentary evidence to prove identity of the creditors from whom the impugned loans of * 24,75,00,000 were obtained. This case also proves creditworthiness of the creditors and the ness of the transactions. Moreover all the loans were repaid its bank, in the same year or in the subsequent year and those proceedings which was reproduced as under: Name Date MODE LOAN RECIVED LOAN REPAID AASTHA IMPEX 02-06-2011 RTGS 50,00,000 AASTHA IMPEX 27-06- 2011 RTGS §0,00,000 AASTHA IMPEX 20-03-2012 RTGS 1,00,00,000 AASTHA IMPEX 20-03-2012. RTGS 1,00,00,000 AASTHA IMPEX 05- 03-2012 RTGS 50,00,000 AASTHA IMPEX 24-08-2012 RTGS - 40,00,000 AASTHA IMPEX 12-10-2012 RTGS 10,00,000 AASTHA IMPEX —-:16-10-2012_ RTGS. 1,00,00,000 AASTHA IMPEX 16-10- 2012 RTGS 50,00,000 AASTHA IMPEX 24-11-2012 RTGS —50,00,000 BALAJI IMPEX 04-05-2011 RTGS. 1,00,00,000 BALAJIIMPEX 13-06- 2012 RTGS ——_1,00,00,000 IMPEX GEMS 23-06-2011 RTGS‟ _ 50,00,000 IMPEX GEMS 17-03-2012 RIGS 50,00,000 MAYUR EXPORTS ——16-05-2011 | RTGS 50,00,060 MAYUR EXPORTS 25-06- 2011 RTGS 1,00,00,000 22-11-2012 RTGS 1,50,00,000 22-07-2011 RTGS 50,00,000 MALHAR EXPORTS 06-02-2012 RTGS 50,00,000 MARVIN ENTERPRISES 20-03-2012 RTGS 1,00,00, 000 MARVIN ENTERPRISES 09-10-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MEHUL GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000. MEHUL GEMS. PVT. LTD. 1307-2012 RTGS 1,50,00,000 MEHUL GEMS PVI. LTD. 08-11- 2012 RTGS 50,00,000 MINAL GEMS 23-06-2011 RTGS 50,00,000 MINAL GEMS 1703-2012 RTGS 50,00,000 MANAS GEMS PVT. LTD. 29-02-2012 RTGS 1,00,00,000 MANAS GEMS PVT. LTD. 08-11-2012 RTGS 1,00,00,000 | MOTHER EXPORTS 25-06-2011 RTGS 50,00,000 MOTHER EXPORTS 17-03-2012 RTGS 50,00,000 MOULI GEMS 25- 06-2011 RTGS 50,00,000 MOULI GEMS 19-10-2011 RTGS 10,00,000 MOULI GEMS 17-03-2012 RTGS 40,00,000 MOHIT ENTERPRISES 27- 06-2011 RTGS 2,75,00,000 MOHIT ENTERPRISES 20-03-2012 RTGS °1,00,00,000 MOHIT ENTERPRISES 21-10-2011 RTGS 80,00,000 MOHIT ENTERPRISES 2210-2011 RTGS 20,00,000 MOHIT ENTERPRISES 09-11-2012 RTGS - 1,75,00,000 MOHIT ENTERPRISES 10-11-2012 RTGS 1,00,00,000 NAVKAR DIAMOND 27-06-2011 RTGS

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 50,00,000 NAVKAR DIAMOND 04-12-2012 RTGS 50,00,000 NAVKAR DIAMONDS. 20-03-2012 RTGS 1,00,00,000 NAVKAR DIAMONDS. 22- 11-2012 RTGS 1,00,00,000 PRIME STAR 18-05-2011-RTGS 50,00,000 PRIME STAR. 06-12-2012 RTGS 50,00,000 ROSHAN GEMS PVT. LTD. 29-02-2012 RTGS 2,00,00,000 ROSHAN GEMS PVT. LTD. 08-11-2012 RTGS 2,00,00,000 SONAM GEMS PVT. LTD. 29-02-2012 RTGS 1,50,00,000 SONAM GEMS PVT. LTD. 29-02-2012 RTGS 1,50,00,000 SONAM GEMS PVT. LTD. Q103-2012 RTGS 2,00,00,000 SONAM GEMS PVT. LTD. 09-11-2012 RTGS 5,00,00,000 24,75,00,000 24,75,00,000 6.3.33 Thus, it has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. In these circumstances, the onus had shifted to the Assessing Officer. If the Assessing Officer was still not satisfied, he had the option of making inquiries from the lenders by summoning them. However, as seen from the order, he did not do any such thing. Further, if the Assess, g Officer was not satisfied with what had been given to him by appellant, he was duty bound to specify what more material he wanted the appellant to furnish. The Assessing Officer never asked for any further material, though time and again the appellant asked in their submissions. This leads to the inescapable conclusion that the Assessing Officer could not think of any further material to ask for and proceeded to reject the appellant's claims, relying upon the information/material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion that all the three ingredients having been satisfied, the impugned loans of Rs.24.75 crore have to be treated as explained satisfactorily and the Assessing Officer was wrong in having disregarded overwhelmingly supportive evidence. No cogent material was adduced by him to show that loans were unexplained. Therefore, the impugned addition of Rs.24,75,00,000/- , made in the Assessment Order, fails on several counts - (1) reliance on evidence that is totally inadequate; (2) failure to make available incriminating material (reports, statements etc.) forming basis for action by the Assessing Officer; (3) failure to give due opportunity to the appellant to cross-examine witnesses, whose statement might have been relied upon; and, (4) failure to recognize the satisfactory nature of the explanation/evidence tendered by the appellant to explain identity of creditors, creditworthiness of the creditors and the genuineness of the loan transactions. Hence, the impugned addition of Rs.24.75 crore is hereby deleted." 17. There should not be any dispute that the initial burden to prove the cash credits is placed upon the shoulders of the assessee. It has been held by Honourable Courts that the initial burden shall be discharged, if the assessee proves three main ingredients, viz. the identity of the creditor, the creditworthiness of the creditor and genuineness of the

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 transactions. If the assessee has discharged the initial onus, then the onus to disprove the same is shifted to the shoulders of the assessing officer. These legal principles have been reiterated in the cases of Bhan & sons (supra) and M/s Precision Finance P Ltd (supra), which were referred to by La CIT-DR. In the instant case, there is no dispute that the assessee has discharged the initial burden of proof placed upon it by furnishing all the materials to prove the three main ingredients, referred above. Hence the burden has shifted to the shoulders of the assessing officer to disprove the evidence furnished by the assessee. We notice that the assessing Off.” in the instant case, did not conduct further enquiries or bring material on record to discharge the burden shifted upon his shoulders. Instead, we notice that the assessing officer‟ has simply placed reliance on the alleged incriminating materials found in thean course of search conducted in the hands of Shri Bhanwarlal Jain ang his group and also upon the sworn statements given by them. 18. The Ld CIT-DR, by placing reliance on the decision rendered by Hon'ble Delhi High Courts in the cases of Jansampark Advertisement and marketing (supra) and Bikram Singh (supra), contended that the appellate authorities are duty bound to conduct further enquiries, if there is deficiency in the enquiry conducted by the AO. However, in the instant case, we notice that the addition has been made u/s 68 of the Act and the assessee has discharged the onus placed upon him under that section. On the contrary, the assessing officer did not bring any material on record to show that the various evidences furnished by the assessee are not reliable and instead rested fully upon the Sworn Statements and the alleged incriminating materials. Hence, in our view, the question of deficiency in the enquiry of the AO does not arise in the instant case. 19. The Ld DR also placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Sumati Dayal (supra) and Durgaprasad More (supra) to contend that the surrounding circumstances and human probabilities should also be taken into consideration by the tax authorities. He contended that these loan transactions are deceptive transactions. There should not be any doubt with this proposition of law. In the instant case, the Ld CIT(A), as well as the Tribunal in the case of Vama International (supra) has observed that the sworn statements given by Shri Bhanwarlal Jain and others have been retracted. The question whether the revenue is entitled to place reliance on the retracted statements remains unanswered. Further, the assessing officer has placed reliance on the various observations made by the search officials like, sharing of common address by various concerns, inducting employees as directors etc., to come to the conclusion that these transactions are bogus in nature. We notice that the search officials have only drawn adverse inferences on the basis of information gathered by them and it is the duty of the assessing officer to substantiate those

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 inferences by bringing corroborative materials. The Ld CIT-DR has reiterated these inferences as surrounding circumstances. However, the moot point that remains is by the assessee to prove the cash credits? The various furnished by the assessee, in fact, disprove the inferences drawn by the search officials. When the assessing officer could not disprove the material evidences furnished by the assessee, in our view, he is not entitled to place full reliance on the inferences drawn by the search officials, particularly the assessee could rebut those presumptions drawn by the search officials. Though the sworn statement given by Shri Bhanwarlal Jain may be a relevant piece of evidence, yet it is stated that the said statement has been retracted. Further the AO has not shown that the transactions entered by the assessee with the group of Shri Bhanwarlal Jain were examined by the search officials and he has deposed against the transactions entered between him and the assessee. On the contrary, the Ld CIT(A) has given a finding that the impugned loan transactions have not been specifically stated to be bogus in nature. The key person of the assessee has reiterated in his statement taken from him during the course of survey that the loan transactions are genuine. When it was pointed out that Shri Bhanwarlal Jain has admitted the bogus nature of transactions, the key person has specifically stated that the said admission related to the sale of diamonds and further specifically stated that the loan transactions are not covered in the statement. Hence the Ld CIT(A) was right in observing that the impugned loan transactions have not been specifically covered by the statement given by Shri Bhanwarlal Jain. Hence in our view, the theory of human probabilities and surrounding circumstances need not be applied in this case. 20. It is a fact that the revenue has conducted survey operations in the hands of the assessee and they did not find any incriminating material concerning these loan transactions at the time of survey. There is also no evidence to show that the cash equivalent to the loan transactions has been given by the assessee to various lenders. 21. The Ld A.R placed his reliance on the decision rendered by Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra) in order to contend that the AO could not have used the materials, which were not put to the assessee., In the instant case, we notice that the assessee has specifically requested the AO twice to give the materials that were relied upon by the assessing officer to take adverse view. Despite the request so made, the AO has not furnished copies of materials to the Hence, as per the decision rendered by Hon'ble Supreme in the above said case, the AO could not have placed his reliance on those materials, which were not confronted with the assessee. 22. The assessee has also asked for copies of sworn statements Given a by Shri Bhanwarlal Jain and others. The assessee also asked for an

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 opportunity to cross examine them. However, the AO has failed to furnish copies of sworn statements and also did not afford opportunity, to cross examine the deponents. Hence the decision rendered by Hon'ble Supreme Court in the case of Andaman Timer Industries (supra) goes in favour of the assessee and accordingly the Ld CIT(A) was justified in placing reliance on the same and holding that the impugned additions are not justified. 23. We notice that the assessee has specifically asked the AO to issue summons to the loan creditors, but the assessing officer has failed to do the same. It is pertinent to note that the assessee has so requested the AO, even after discharging the initial burden of proof by furnishing all the relevant details available with it. In the case of Orissa Corporation P Ltd (supra), the assessee furnished available details and then requested the AO to issue summons to the creditors, since it could not collect further details from them. The AO failed to do so and hence the Hon'ble Supreme Court held that the addition made u/s 68 is not justified. The assessee herein, in our view, stand on a stronger footing. The assessee has furnished all the relevant details, which has been summarized by the Ld CIT(A) in paragraph 6.3.31 of his order as under: "6.3.31 In the case before me, the record also shows that to prove the genuineness of the impugned loan entries from the 17 creditors, the appellant has furnished to the Assessing Officer the following details copies of which were also furnished in the present proceedings: I. PAN details of creditors I. Constitution and address of the creditors I. Particulars of income-tax returns filed by the creditors [These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant.] IV. Confirmatory letters given by the creditors. V. Audited financial accounts (including balance sheets) of the (after) tors [These show that the loans are duly reflected in the books of the creditors.] VI. Relevant bank statements of the creditors show that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.] VII. Details of interest paid to the creditors VIII. Details of TDS deducted and paid". Even though the assessing officer did not find any fault with these documents, still the assessee has requested the AO to issue summons to these parties. As stated earlier, the assessing officer did not issue summons and instead relied upon the inferences drawn by the search officials. Hence, in our view, the decision rendered by Hon'ble Supreme Court in the case of Orissa Corporation (P) Ltd (supra) will also come to the support of the assessee.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 24. We notice from the operative portion of the order passed by Ld CIT(A) that the first appellate authority has placed reliance on various other case laws also. In effect, the Ld CIT(A) has examined the documents furnished by the assessee and has held that the assessee has discharged the initial burden of proof placed upon it u/s 68 of the Act. He has also held that the non-furnishing of documents relied upon by the AO and non-providing of opportunity to cross examine the Shri Bhanwarlal Jain and others would make the addition to fail. Even in respect of documents relied upon by the AO, the Ld CIT(A) has found the same to be inadequate to warrant the additions made u/s 68 of the Act. Hence, we are of the view that the Ld CIT(A) has passed a reasoned order by considering the facts of the case, applicable case lawsand has taken a justifiable view in this matter. Hence we do not find any infirmity in the order passed by Ld CIT(A). Accordingly we confirm the order passed by Ld CIT(A) in deleting the addition of Rs.24.75 crores made u/s 68 of the Act. 25. Since we have confirmed the order of Ld CIT(A) in deleting the addition made u/s 68 of the Act, the interest disallowance is also liable to be deleted. Accordingly, we confirm the order passed by Ld CIT(A) in respect of interest disallowance also.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 The AO had primarily made the additions by believing and relying upon the admission of Bhawarlal Jain by ignoring the fact that nowhere in the statement of Bhawarlal Jain or any of his associates recorded u/s 132(4) of the Act had admitted that any of their concerns had ever given accommodation entries by way of unsecured loans to the assessee. From the documentary records, we also noticed that actually, the assessee had already discharged the onus caste upon him to prove the identity, creditworthiness and genuineness of transactions. Even Ld. CIT(A) had discussed in detail in para no. 4.3.3 of its order, the documents submitted by the assessee and their correlation with the onus, which stands discharged by the assessee. But on the contrary, the AO had not brought on record any evidence to controvert or rebut the claim of the assessee and even no findings were recorded by the AO to the effect that the evidences produced by the assessee were untrustworthy or lack credibility. Although it was claimed by the AO that during the course of search at the residence of Shri Bhanwarlal Jam, a pen drive (Sony 4 GB) was seized and as stated in para-5.1 on page-8 of the impugned order. It was also claimed that after decryption of the data stored in the said pen drive, a database containing details of loans advanced by all 70 benami concerns of Shri Bhanwarlal Jain and Shri Rajesh Bhanwarlal Jain from F.Y.2006-07 and onwards was prepared by the Investigation Wing, Mumbai. cat. areas on the repeated request made by the assessee to furnish of print outs of date of transactions pertaining to the assessee of relevant to A.Ys.2012-13 and 2013-14. Apart from that the AO was also asked to furnish any other evidence in his possession in regard to the unsecured loans procured by the assessee from various entities of Shri Bhanwarlal Jain Group. But the AO did not supply the same. 9. Apart from that the AO had also failed to provide copy of "partywise ledger account" of the assessee containing details of corresponding cash received against loans on vartous dates and commission charged by Bhanwarlal Jain thereon. Therefore, in such circumstances, the AO had no valid basis for treating the „unsecured loans‟ as „accommodation entries‟. There is nothing on the record to show that the assessee admitted at any point of time to have procured accommodation entries of loans. 10. We also found that the Hon'ble ITAT as mentioned above in assessee's own case, we find that the identical issue has already been decided by the Hon'ble ITAT in ITA No. 6099/Mum/16 for AY 2012-13 in assessee's own case. Therefore, on the basis of our above findings and also respectfully following the decision of the Coordinate Bench of Hon'ble ITAT and in order to maintain judicial consistency, we apply the same findings which are applicable mutatis mutandis in the present case. Resultantly, these grounds raised by the revenue stands dismissed.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 11. These grounds raised by the revenue are general in nature, thus requires no specific adjudication. 12. In the net result, the appeal filed by the revenue stands dismissed with no order as to cost.”

13.5 I have taken note of the fact that the Hon'ble ITAT as mentioned above, in the Appellant‟s own case, in I.T.A. No. 6099/Mum/16 for AY. 2012-13 and LT.A. No. 5637/Mum/2017 for A.Y.2013-14, based on the similar facts, circumstances and evidences had decided the issue in favour of the Appellant. In order to maintain judicial discipline, I apply the same findings, which are applicable mutatis mutandis in the present appeal at hand. “Hon‟ble Supreme Court in the case of Union of India and Others hi Finance Corporation AIR 1992 SC 711, 1994 (46) ECC 129, 1991 ECR 486 SC, has held that utmost regard should be paiq by the N adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities, which are binding on them. The principles of judicial discipline require that the orders of the higher authorities should be followed unreservedly by the subordinate authorities. If this healthy rule is hot followed, the result will only be undue harassment to the assessee and chaos in administration of tax laws. The relevant excerpts of Para 6 of the Said order are reproduced hereunder: “6. Assessee The High Court has, in our view, rightly criticized this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not “acceptable” to the department - in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws.”

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 13.7 In the case of Kamlakshi Finance, referred supra, the Hon'ble Apex Court has also brushed aside the plea of the department that it would lose revenue and would also have no remedy to have the matter rectified. The Hon'ble Apex Court has emphasized that the orders of the higher authorities shall be followed and if the Department is correct, finally it will get its due A aikes, though after some procedural delay. The relevant portion of the da t in this regard, is reproduced below:| “7. The impression or anxiety of the Assistant Collector that, if he accepted the assessee's contention, the department would lose revenue and would also have no remedy to have the matter rectified is also incorrect. Section 35-E confers adequate powers on the department in ' this regard. Under Sub-section (1), where the Central Board of Direct Taxes come across any order passed by the Collector of Central Excise with the legality or propriety of which it is not satisfied, it can direct the Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order. Under Sub-section (2) the Collector of Central Excise, when he comes across any order passed by an authority subordinate to him, if not satisfied with this legality or propriety, may direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order and there is a further right of appeal to the department. The position now, therefore, is that, if any order passed by an Assistant Collector or Collector is adverse to the interests of the Revenue, the immediately higher administrative authority has the power to have the matter satisfactorily resolved by taking up the issue to the Appellate Collector or the Appellate Tribunal as the case may be. In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken under Section.35-E (1) or (2) to keep the interests of the department. alive. If the officer's view is the correct one, it will no doubt be finally upheld and the Revenue will get the duty, though after some delay which such procedure would entail.”

13.8 Thus, the decision of higher authority needs to be followed in-the case of a quasi-judicial authority and, therefore, a lower officer is bound to follow the decision. of the higher authority. Unless, in Appeal the

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 order of the authority is stayed, it operates as a valid binding decision to the lower uh. not only in the case of the same assessee but also in other cases same law point is involved. In the present case at hand, no stay has been granted by any Court on the operation of the appellate orders * passed by the Hon'ble ITAT and hence, the same are binding on the undersigned. 13.9 The law on Judicial Precedents & Contempt of Court has been elucidated upon by the Hon'ble Supreme Court in the case of CIT vs. Ralson Industries Ltd. - (2007) 288 ITR 322(SC), wherein it has been held that when an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline. This aspect of the matter has been highlighted by the Hon‟ble Apex Court in the case of Bhopal Sugar Industries vs. Income Tax Officer, Bhopal [AIR 1961 SC 182] in the following terms:

« We think that the learned Judicial Commissioner was clearly in error in holding that no manifest injustice resulted from the order of the respondent conveyed in his letter dated March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly condemning the respondent for refusing to carry out the directions of the superior tribunal, yet held that no manifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent could not question it in any way. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of?‟ Tribunal was wrong and, therefore, there was no injustice in disregarding that order. As we have said earlier, such view is destructive of one of the basic principles of the administration of justice. In fairness to him it must be stated that learned counsel for the respondent did not attempt to support

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 the judgment of the Judicial Commissioner on the ground that no manifest injustice resulted from the refusal of the respondent to carry out the directions of a superior tribunal. He conceded that even if the order of the Tribunal was wrong, a subordinate and inferior. tribunal could not disregard the readily recognized the sanctity and importance of the basic principle that a subordinate tribunal. must carry out the directions of a superior tribunal. He argued, however, that the order of the Tribunal was unintelligible and the respondent did his best to understand it according to his light. This argument advanced on behalf of the respondent appears to us to be somewhat disingenuous. ........”

13.10 Further in the case of Tej International Private Limited Vs. DCIT (69 TTJ Del 650), the Hon‟ble Delhi High Court has held that in the hierarchical judicial system that we have in India, the wisdom of the court. below has to yield to the higher wisdom of the court above. The relevant excerpts of the judgment referred supra, are reproduced below:- “7. It may be mentioned that some Benches of the Tribunal have either taken independent view on the issue in this appeal or have later on followed Hon'ble Gauhati High Court, referred to above. However, with the latest judgment of Hon'ble Karnataka High Court in Kwality Biscuits Ltd.'s case (supra) the situation is materially different. In the hierarchical judicial system that we have, better wisdom of the court below has to yield to higher wisdom of the court above and, therefore, once an authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position as laid down by Hon'ble Bombay High Court in the matter of CIT v. Godavari Devi Saraf (1978) 113 ITR 589 (Bom). Therefore, we do not consider permissible to rely upon the earlier decisions of this Tribunal even if them is by a Special Bench. It will be wholly inappropriate for us views of one of the High Courts based on our perceptions reasonableness of the respective viewpoints, as such an exercise will de lacto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Hon'ble High Courts, adopt an objective criterion for deciding as to which of the Hon'ble High Court should be followed by us.” 13.11 Respectfully following the decisions of the Hon‟ble ITAT in the Appellant‟s own case for A.Y. 2012-13 and A.Y. 2013-14, referred supra, the addition made by the AO amounting to Rs.24.35 crores u/s.68 of the Act, is deleted. Accordingly, Ground Nos. 2, 3 & 4 of the present appeal are allowed."

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 6. On appraisal of the above mentioned finding, we noticed that the CIT(A) has relied upon the decision of the Hon’ble ITAT in the assessee’s own case bearing ITA. No.6099/Mum/2016 for the A.Y.2012-13 and ITA. No.5637/Mum/2017 for the A.Y.2013-14 respectively and the said orders have not been varied and changed till date. Moreover, no law contrary to the law relied by the CIT(A) has been produced before us, therefore, in the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.

In the result, the appeal filed by the revenue is hereby dismissed.

ITA. NO.4474/Mum/2019:- 7. The revenue has filed the present appeal against the order dated 10.04.2019 passed by the Commissioner of Income Tax (Appeals)-50, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2016- 17.

“1. Whether on the facts and circumstances of the case and in law the CIT(A) was right in deleting the disallowance of Rs.4,71,19,785/- on of sale shares of M/s. Mahavir Advanced Remedies without appreciating the fact that various operators in their statement had admitted of providing accommodation entries in the form of predetermined losses. 2. Whether on the facts and circumstances of the case and in law the CIT(A) failed to appreciate that the company was not financial sound as per the valuation of the company and did not have real business activity.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.” 9. The brief facts of the case are that the assessee filed its return of income on 27.08.2016 declaring total income to the tune of Rs.189,05,300/- for the A.Y.2016-17. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Act dated 07.07.2017 was issued and served upon the assessee. Assessment order u/s 143(3) of the Act was passed by the AO on 12.12.2018 determining total income of the assessee to the tune of Rs.6,60,25,090/- after making certain additions/disallowance. Aggrieved by the said order, the assessee has filed the appeal before CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

ISSUE NO.1 10. Under this issue the revenue has challenged the deletion of disallowance of Rs.4,71,19,785/- on of sale shares of M/s. Mahavir Advanced Remedies. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the disallowance of Rs.4,71,19,785/-, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:-

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 “7.0 I have considered the facts of the case, submissions of the Appellant, the observations of the AO contained in the assessment order and the other materials available on record on this issue. Summary of Grounds raised by the appellant 8.0 The Appellant had raised three substantive Grounds of Appeal and all of them had challenged the action of the AO in making an addition of Rs.4,71,19,785/ by disallowing the business loss on sale of shares of Mahavir Advanced Remedies, holding that the said share is a penny stock. The Appellant has assailed the legality and validity of the impugned order on account of gross violation of principles of natural justice, not appreciating the evidences submitted to prove the genuineness of business loss and non-application of mind in disallowing business loss, based on just conjectures, surmises and suspicions. Since, all these grounds pertain to the disallowance of loss of Rs.4,71,19,785/ on sale of shares of Mahavir Advanced Remedies, the same are being taken up together for adjudication. No misuse of an Exemption provision under the Act 9.0 In the assessment order, the AO had made an addition of Rs. 4,71,19,785/- by holding that the Appellant had claimed bogus Business Loss. At the outset, it is brought on record that the Appellant firm is engaged in the business of share trading. It had not claimed any exemption on its income under any of the provisions of the Act and had paid taxes on the net profit / loss of the firm from the business of share trading. Thus, in the present case at hand, there is no misuse of any of the provisions of exemption available under the Act. Total Lack of Specifics in the Assessment Order 10.0 I have gone through the entire assessment order framed by the AO, a substantial portion of which is already reproduced above and noted that the AO had disallowed the loss on the shares Mahavir Advanced Remedies Ltd., by only stating that it is a penny stock. 10.1 The Paras titled “Suspicion of Revenue”, “Findings of the Investigation Wing”, “Findings in the case of Assessee”, “Investigations in the case of Operators”, “Analysis of cash trail” etc. in the assessment order talks only of the general modus-operandi of the penny stock transaction. The AO had failed to bring any material on record, to show as to how the Appellant is connected to this general discussion made in the assessment order. Thus, the AO had failed to bring on record any specific evidence to corroborate it‟s finding that the impugned share loss was bogus.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 10.2 I have noted that the AO had stated in the assessment order that information was received from the Investigation Wing that M/s. Mahavir Advanced Remedies DM is a penny stock and it has been used for booking bogus LTCG/STCL and business loss. But the AO had failed to bring on record, as to what information was received from the Investigation Wing in relation to the Appellant on the basis of which it is held that the share loss was bogus. The Appellant had specifically stated that „there is no specific mention of the name of the Appellant in the information of Kolkata Inv. Wing. Further, the Appellant had stated that the material on record shows that the enquiry carried out by the Inv. Wing of Kolkata did not reflect the name of the Appellant as the beneficiary. I have noted that the AO is duty bound to at-least spell out in the assessment order, as to what adverse material had been received by him in relation to the appellant regarding the share loss claimed by the Appellant. 10.3 It is the AO‟s duty to establish with evidences that the facts stated by the Appellant are not correct, since the law of burden is canonized in common law doctrine "incumbitprobatio qui dicit non qui negat”, i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Nevertheless, the A.O. apart from raising share loss based on pure assumptions had not brought on record any material to justify such suspicions and assumptions. In the instant case, the A.O. did not carry any of his doubts to a logical conclusion by converting them into hard facts on the basis of evidences during the assessment proceedings. 10.4 I have noted that the AO had even in the concluding paragraphs of assessment order failed to give any categorical finding. In this regard reference may be made to excerpts of Para 11.2 of the assessment order, wherein it is stated as under: "11.2 The assessee‟s move to acquire the shares of M/s. Mahavir Advanced Remedies DM at a high price (Rs.317.6 per share) and then selling the scrip when its prices were almost touching the bottom (Rs.10 per share) appears a predetermined move which had sole aim of being an exit provider to the some persons who had to obtain artificial LTCG and also appears to be a move to reduce its tax liability. ....... ” 10.5 It had been held by the AO in the above paragraph that it appears that the Appellant had made a pre-determined move to act as an Exit Provider for some persons. However, the AO had failed to bring on record as to who are the persons on whose behalf the Appellant had acted as an exit provider. Thus, the AO had failed to place on record any evidence for holding the Appellant as an exit provider.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 10.6 In fact, the Exit Provider is one, who takes unaccounted cash from the Beneficiaries and routes the same through various concerns (layering of funds) and finally, pays the cheque amount to the Beneficiaries. Thus, the Exit Providers in general are Entry Operating Concerns / Shell Companies / Bogus Companies, which is not at all the case of the Appellant, who is genuinely into the business of share trading. It is pertinent to note here that the Appellant had provided the complete details of the source of funding in the impugned scrip, during the course of the assessment proceedings. The investment in the impugned scrip had been made through own funds and funds raised from Religare Finvest. Thus, the AO had imputed a grave charge of Exit Provider on the Appellant, without adducing any evidence to substantiate the same. No Enquiries conducted by the AO 11.0 It is pertinent to note that the Assessing Officer had wide powers to issue summons to parties u/s 131 of the Act or could have called for information u/s 133(6) of the Act. The AO should have enquired the details of purchase and sale, if there was any doubt in his mind about the authenticity of the plethora of documents filed by the Appellant to support the genuineness of his claim. Instead of doing these exercises, the AO had passed the order with a pre-determined mind set and disallowed the loss without making any enquiries.

11.1 The Hon. Supreme Court in the case of CIT v. Orissa Corporation P. Ltd. 159 ITR 78 had held, as under: “Held, that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices u s 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion can be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.”

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 11.2 The decision of Hon. Bombay High Court in the case of CIT v. Creative World Telefilm Ltd. - 333 ITR 100 (Bombay High Court) being relevant is reproduced here-under: “Held, dismissing the appeal of revenue that there was no dispute that the assessee had given the details of names and addresses of the shareholders, their PAN/GIR numbers and had also given the cheque numbers, name of the bankers. The assessing officer ought to have found out the details through PAN cards, bank account details or from their bankers so as to reach the shareholders. Thus, the view taken by Tribunal could not be faulted.” No Pre-arrangement evident from material on Record I have noted that in general the entities booking bogus loss take a single entry, which is not the case of the Appellant. I have noted that the Appellant had entered into several purchase transactions on each of the 13 different days starting from 26.08.2014 to 11.12.2014. During the proceedings, the Appellant had stated that average purchase price of the scrip for Aug 2014 to Oct 2014 was Rs. 354/per share and to bring the average cost down purchases were made in Nov 2014 and Dec 2014 at an average price of Rs. 285 per share. Thus, it had been contended that contrary to the charge of the AO, the Appellant as tried to reduce and hence, maximize his profit. 12.1 The Appellant had contended that before he could book profit by selling the shares, the scrip got suspended by SEBI in Jan 2015. I have note that the scrip got suspended abruptly, as even at the time of suspension on 06.01.2015, it was being traded at a price of Rs. 150.65 per share. The Appellant had contended that he had waited for re-listing of the stock for more than 10 months and in the end due to requirement of funds, he had to per-force sell the scrip off-line. I have noted that in view of the suspension of “the on-line trading of the stock, there was no option left with the Appellant but to sell the scrip off-line. Purchase & Sale of Shares is well documented 13.0 I have noted that the Appellant had filed all he possible documentation in relation to the purchase and sale of the impugned scrip, which had been challenged by the AO „he document copies of the contract notes, broker ledger, bank statements, source of payment for purchase, demat account, confirmations etc. 13.1 At the outset, it is clarified that the basic facts narrated by the AO in Para 5.1 of his assessment order viz. "... the scrip was purchased and sold » is an incorrect statement. It is clear from the records that the said shares were purchased by the Appellant in the last year and hence the finding given by the A.O. on this account is wrong.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 13.2 During the course of the appellate proceedings, the Appellant had contended that the AO had made the addition without appreciating the fact that the shares were purchased on the stock exchange on-line, as against the offline or preferential allotment. Further, it was stated that as the scrip got delisted, the Appellant had sold the shares off market and received the entire sale proceeds through the banking channels within a day of the sale. It is also the case of the Appellant that the AO had ignored the supporting documentary evidences furnished by the appellant, during the course of the assessment proceedings. The Appellant had contested that all the evidences of purchases and sales of shares were submitted on record of the AO and nothing was found to be forged, illegal or bogus. 13.3 It is a material fact on record that the Appellant had purchased shares of M/s. Mahavir Advanced Remedies Ltd. through the registered brokers on the floor of the recognised stock exchange on-line, in the ordinary course of its business in the last financial year i.e. F.-Y. 2014- 15, by making payment for purchases through normal banking channels and shares purchased were duly credited in the Demat account of the Appellant. After going through the evidences filed before the AO, I find that the transaction for the purchase of shares of Mahavir Advanced Remedies Ltd. is sufficiently documented and supported by a number of evidence in the form of Contract notes, Bank Statement reflecting payment for purchase of shares as well as the Demat statements in which the shares were credited and the Ledger account of the share broker. “13.4 It needs a special mention here that the case of the Appellant was picked up in scrutiny for the A.Y. 2015-16 on the ground of suspicious share transactions “Penny Stock tag in ITS”. During the course of the assessment proceedings for the A.Y. 2015-16, the Appellant had filed a detailed letter dated 07. 07.06. 2017 on the issue of penny stock and [| have noted that no adverse in inference was drawn by the AO in relation to the penny stock transactions M/s Mahavir Advanced Remedies » or M/s PS IT Infrra & Service Ltd. I have gone through the assessment order dated 21.06.2017 passed by the AO relevant to the A.Y. 2015-16 and noted that the adverse finding on the issue of penny stock. „Tt is pertinent to note that the entire purchase of the shares of M/s Mahavir Advanced Remedies Ltd. amounting to Rs. 4,86,51,534.50 was made in the previous ear relevant to the A.Y. 2015-16. 13.5 Thus, if as per the AO the said purchase of shares of M/s Mahavir Advanced Remedies Ltd. was just an accommodation entry, then the amount of Rs. 4,86,51,534.50 should have been taxed in the A.Y. 2015- 16. However, I have noted that the AO had after examination of the impugned penny stock transactions, accepted them and no adverse observation was made in the assessment order for A.Y. 2015-16.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 13.6 I have noted that the sale of shares is also evidenced by bank Statement showing receipt of consideration, Demat Statement showing delivery of shares and confirmation letter duly signed by buyer. None of these evidences were controverted by the AO in the assessment order. During the course of the Appellate proceeding, it has been contended that the Appellant had fulfilled all the requirements necessary for discharging its onus. 13.7 It is brought on record that where the purchase and sale transactions are supported and evidenced by bills, contract notes, demat statements, bank statements etc., the same could not be treated as bogus simply on the basis of some reports of the investigation Wing and/or the orders of the statements of third parties. In support of the aforesaid, reliance is placed on the following judgments: (i) Baijnath Agarwal v. ACIT (2010) 40 SOT 475 (Agra) (ii) ITO v. Bibi Rani Bansal (2011) 44 SOT 500 (Agra) (iii) ITO v. Ashok Kumar Banssal ITA No. 289/Agra /2009 (Agra ITAT) (iv) ACIT v. Amit Agarwal & Others ITA Nos. 247(Kol) of 2011 (Kol ITAT) (v) Rita Devi & Others v. Dy. CIT IT (SS) A Nos. 22-26/Kol/2011 (Kol ITAT) (vi) Surya Prakash Toshniwal v. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain v. ITO-ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker v. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal v. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT v. Sudeep Goenka (2014) 360 ITR 163 (Allahabad) (xi) CIT y. UditNarain Agarwal (2013) 255 CTR 102 (Allahabad) (xii) CIT v. Janmadevi Agarwal (2010) 328 ITR 656 (Bombay HC) (xiii) CIT v. Homani M. Vakil in (Tax Appeal No. 1502 of 2011, at. 25-9-2012) (xiv) CIT v. Sumitra Devi (2014) 268 CTR 3 1 (Rajasthan) (xv) Ganeshmull Bijay Singh Baid HUF y, Dy. CIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvi) Meena Devi Gupta & Others v. ACIT -ITA Nos, 4512 & 4513/Ahd/2007 (Ahmedabad ITAT)

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 13.8 In the case of CIT v. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat), the Hon'ble Gujarat High Court had held that where the assessee had proved the genuineness of share transactions by contract notes for sale and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange, the Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit. Manner in which business is conducted b Appellant can‟t be challenged by AO 14.0 I am of the considered opinion that the AO is not right in questioning the rationale of trading in the shares of Mahavir Advanced Remedies Ltd. by the Appellant. It may be noted that the provisions of the Act have to be implemented, administered and interpreted only with reference to its specific provisions and the Income-tax Authority is estopped from stepping into the shoes of any assessee so as to question its rationality, prudence or acceptability from a common sense point of view [S.A. Builders Ltd. v. CIT [2007] 288 ITR 1 (S.C); CIT Vs. Dhanraj Girji Raja Narasingherji (1973) 91 ITR 544 (SC); CIT Vs. Walchand and Co. (1967) 65 ITR 381 (SC)]}. 14.1 So long as the transaction meets the specific conditions laid down in the Act, an attempt to negate it or interpret it by applying the yardsticks of rationality, prudence etc., which in any case is highly subjective, would not meet the ends of justice and basic tenets of judicial interpretation or tax administration. Neither Sale nor Purchase linked with Entry Operators. 15.0 It is pertinent to note that there is no evidence on record, which directly links the Appellant with any of operators/intermediaries or proves that the Appellant was involved in any price rigging of the shares, or that they received any cash for getting the bogus loss. A perusal of the assessment order reveals that there is not even an tota of evidence had been brought on record to show that the counter parties in relation to the purchase and sale of the impugned penny stock are Entry Operators / Exit Providers / Shell company / Bogus Concerns. From, the assessment order passed by the AO, it is not at all clear as to what is the material evidence on the basis of which the purchase and sale of the shares had been held to be bogus by him. 15.1 In fact, the AO had failed to bring on record, the counter party m relation to the purchase of shares made by the Appellant. In the case of sale of shares, the counter party was made available by the Appellant, but the AO failed to make relevant enquiries. If there was any suspicion in the mind of the AO regarding the purchase / sale transactions, he was duty bound to conduct necessary enquiries by issuing summons u/s 131 or by calling for information u/s 133(6) of the Act.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 15.2 Be that may, it is to be noted that there is nothing on record to hold that that the counter parties to the purchase and sale are entry operators/ exit providers, I am of the considered opinion that the AO can‟t hold the transactions of purchase and sale as bogus, without carrying out any enquiry and without bringing on record any adverse material. Profit on Penn Stock scrips offered for taxation

16.0 It is an undisputed fact that the Appellant had been regularly trading in the equity market with high volumes of trades and the same is duly corroborated by the profit and loss account and Balance Sheet of the Appellant placed on record. It can be seen from the details on record that the Appellant had in the earlier years also earned profit by trading 15.0 It is pertinent to note that there is no evidence on record, which directly links the Appellant with any of operators/intermediaries or proves that the Appellant was involved in any price rigging of the shares, or that they received any cash for getting the bogus loss. A perusal of the assessment order reveals that there is not even an tota of evidence had been brought on record to show that the counter parties in relation to the purchase and sale of the impugned penny stock are Entry Operators / Exit Providers / Shell company / Bogus Concerns. From, the assessment order passed by the AO, it is not at all clear as to what is the material evidence on the basis of which the purchase and sale of the shares had been held to be bogus by him. 15.1 In fact, the AO had failed to bring on record, the counter party in relation to the purchase of shares made by the Appellant. In the case of sale of shares, the counter party was made available by the Appellant, but the AO failed to make relevant enquiries. If there was any suspicion in the mind of the AO regarding the purchase / sale transactions, he was duty bound to conduct necessary enquiries by issuing summons u/s 131 or by calling for information u/s 133(6) of the Act. 15.2 Be that may, it is to be noted that there is nothing on record to hold that that the counter parties to the purchase and sale are entry operators / exit providers. I am of the considered opinion that the AO can‟t hold the transactions of purchase and sale as bogus, without carrying out any enquiry and without bringing on record any adverse material. Profit on Penn Stock scrips offered for taxation: 16.0 It is an undisputed fact that the Appellant had been regularly trading in the equity market with high volumes of trades and the same is duly corroborated by the profit and loss account and Balance Sheet of

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 the Appellant placed on record. It can be seen from the details on record that the Appellant had in the earlier years also earned profit by trading 17.0 I have taken note of the fact that the assessment order of the A.O. itself starts with the heading “Suspicion of the Revenue”. The entire case of the AO is based on presumption that the Appellant had claimed bogus business loss by trading in penny stocks, though no evidence had been brought to substantiate the same. The presumption or suspicion however strong it may appear to be true, but needs to be corroborated by some evidence. In the present case at hand, there is no evidence that the Appellant had entered into sham transactions to claim bogus business loss. Thus, the AO had made the addition only on the basis of suspicion, conjecture and surmises. 17.1 Mere suspicion, however strong or probable it maybe, is no effective substitute for the legal proof required to substantiate a charge, which the AO has failed to furnish. There is a long mental distance between „may be true‟ and „must be true‟ and this basic and golden rule helps to maintain the vital distance between conjectures and sure conclusions to be arrived at, on the touchstone of a dispassionate judicial enquiry based upon a complete and comprehensive appreciation of all features of the case, as well as the quality and credibility of evidence brought on record. Reliance is placed on Ashish Batham v. State of MP, AIR 2002 SC 206. 17.2 Itis a trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference in this regard is made to the decision of Hon‟ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT [37 ITR 288 (SQ)]. 17.3 In this context, further reference be made to judgment of Hon'ble Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. v. ACIT [164 ITD I (Mum)(SB)j, wherein the Hon‟ble Tribunal observed as under: “Ultimately the entire case of revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish in actually had some kind of share in such secret money. It is quite trite suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of preponderance of probability is applied to weigh the evidence of either side and draw a conclusion in favour of party which has more favourable factors in his side. The conclusion have to be drawn on the basis of certain admitted facts and material and not on the basis of presumption of facts that might go against the assessee. Once nothing has been proved against the assessee

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 with the aid of any direct material especially when various round of investigation have been carried out, then nothing can be implicated against the assessee”. 17.4 Reliance is also placed on the decision of Hon‟ble Calcutta High Court in the case of M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012(Cal)]. In this case, the Assessing Officer found that the evidences produced by the Appellant to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon‟ble High Court held that the opinion of the Assessing Officer that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the Assessing Officer but he miserably failed to substantiate the same. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the Assessing Officer was misplaced and unsubstantiated. 17.5 Raising of presumption itself does not amount to proof. Presumption however strong, cannot take the place of evidence. Reliance is placed on the decisions of Pooja Bhatt 66 TTJ (Mum) 817& D. M. Kamani (HUF) 65 TTJ (Pat) 504.It is well settled by the Hon‟ble Supreme Court in more than one decision that courts have to be watchful and avoid the danger of suspicion to take place of legal proof for some time, unconsciously it may happen to be a short step between moral certainty and legal proof. In this regard, reference may also be made to the judgment in the case of Narendra Singh v. State of MP, 2004 SCC 1893. 17.6 It is well settled proposition of law that the court should safeguard itself against the danger of basing its conclusions on suspicions howsoever, we strong they may be. It is equally well settled that the Courts decision must rest not upon suspicion but upon Legal grounds established by legal testimony. Mere suspicion, however strong, cannot take the place of proof. Reliance is placed upon State v. Gulzart Lal Tandon AIR 1979 S.C. 1382 and J.A. Naidu v. State of Maharashtra AIR 1979 S.C. 1537, 17.7 The principles of the Indian Evidence Act are equally to the Income- tax proceedings. The Hon'ble Supreme Court in Chuharmal v. CIT [1988] 172ITR-250 stated, as under: „what was meant by saying that the Evidence Act did not apply to proceedings under the Income-tax Act, 1961, was that the rigour of the rules of evidence contained in the evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so."

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 17.8 The Hon'ble Supreme Court in Dhakeshwari Cotton Mills v. CIT {1954] 26 ITR 775 at 782 observed as under: "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income Tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab." 17.9 The Punjab & Haryana High Court in CIT v. Anupam Kapoor [2008] 299 ITR 179did not believe on the allegation and held as under: "A cheque had been taken by the beneficiary ie. by paying cash equivalent to the cheque amount and the premium thereon”. [he Hon'ble Court at page 182 observed: There wus no matenai before the Assessing Officer, which could have led to « conclusion that the transaction was, simpliciter a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the Assessing Officer, merely on surmises and conjectures". 17.10 The Hon'ble Supreme Court in Parimisetti Seetharamamma v. CIT [1965] 57-ITR-532 at 536-537 observed, as under: „By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases, in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. Where however a receipt is of the nature of income, the burden of proving that it is not taxable, because it falls within an exemption provided by the Act, lies upon the assessee'‟. 17.11 It is a settled law that suspicion, howsoever, strong cannot take the place of legal proof, as has been held by the Hon'ble Supreme Court in the case of Umacharan Shaw and Bros. v. CIT [1959] 37-ITR-271. 17.12 Further, reliance is also placed on the following judicial precedents:| e Krishnand vy. State of Madhya Pradesh: AIR 1977 SC 796 e Jayadayal Poddar v. Mst. Bibi Hazra: AIR 1974 SC 171 e CIT v. K Mahim Udma [2000] 158 CTR (Ker.) 100 : [2000] 242 ITR 133 (Ker.)

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) e Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) Asstt. CIT v. Jindal Saw Pipes Ltd. [2008] 118 TT] 228: [2008] 11 DTR (Delhi)(Trib.) 281. Dhiraj Lal Girdhari Lal Vs. CIT 26 ITR736 „° Lalehand Bhagat Ambika Ram Vs CIT 37ITR288 18.3 The Hon'ble Supreme Court in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 had held as under: “…….The very words "an undisclosed source” show that the disclosure must come from the assessee and not from the department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden when he proves the balance, and that it might reasonably have been kept in high denomination notes. Before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The department cannot by merely rejecting unreasonably a good explanation, convert good profit into no proof. It is within the range of these principles that such has have to be decided. We do not think that the Allahabad view put~ no burden upon the assessee and throws the entire burden on the department. The case itself does not bear this out. If it does, then, it is to the right view.” Claim based on Document. Evidences can‟t be denied unless Proved - Judicial View 19.0 It is a settled legal position that a claim which is supported by proper evidences cannot be denied by an Assessing Authority, unless and until some contrary evidence is brought on record. The claim made by the Appellant can be rejected by the AO, only after proving that the evidences filed by an assessee are false or fabricated or bogus. Reliance is placed on the following judgment of the Hon‟ble High Court‟ Tribunal‟s, in which similar disallowance made on identical facts have deleted:

a) CIT vs. Shri Mukesh Ratilal Marolia (Income Tax Appeal No.456 of 2007, order dtd. 07/09/2011, Bom HC) b) shyam R. Pawar (54 Taxmann.com 108, Bom HC) Manishkumar Baid and Mahendra kumar Baid vs. ACIT, Cir.35,

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 Kolkata (ITA No.1236 & 1237/Kol/2017, order dt. 18/08/2017, ITAT Kolkata) a) A.C.I.T., Circle-7, Ahmedabad vs. Vineet Sureschandra Agarwal (ILT.A. no.1442/Ahd/2013, order dt. 6/1/2017, ITAT Kolkata) e) A.C.LT. Circle Pali vs. Shri Pankaj Raj Shah (I.T.A. no.330/odh/2011, order dt. 28/06/2016, ITAT Jodhpur) f) Ms. Farrah Marker vs. I.T.O. 19(3)(1), Mumbai. I.T.A. no.3801/Mum/2011, order at. 27/04/2016, ITAT Mumbai) g) I.T.O. - 24(3)(1), Mumbai vs. Indravadan Jain HUF and A.C.LT. - 24(3), Mumbai vs. Indravadan Jain I.T.A. no.4861 & 5618/Mum/2014, order dat.27/05/2016, ITAT Mumbai) 19.1 In the case of CIT vs. Jamna Devi Agarwal-[2012] 2taxmann.com 529 (Bom HC), the Hon‟ble Bombay High Court had held that from the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares of the respective buyer was also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates, as was seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions could not be a ground to treat the transactions as sham transactions. 19.2 In the case of Commissioner of Income-tax, Agra Vs. Anirudh Narayan Agrawal [2013] 38 taxmann.com 367 (Allahabad), the Hon'ble Allahabad High Court had held that where assessee sold shares in ordinary course through stock exchange and received sale consideration by way of demand draft, in such circumstances merely because share broker could not any evidence in support of said transaction because same was already seized by Department, it could not be a basis of making addition under section 68 in respect of capital gain arising from sale of said shares. 19.3 In the case of Commissioner of Income-tax, Central-II, Calcutta VS. Lakshmangarh Estate & Trading Co. Ltd. [2013] 40 taxmann.com 438 (Calcutta), it was held that where none of grounds assigned by Tribunal to show genuineness of transaction, was even commented upon by revenue, transaction could not be suspected as colourable. The relevant excerpts of the said judgment are reproduced hereunder:

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 “5. Mr. Dutta, learned Advocate appearing for the appellant Revenue drew our attention to Page-51 of the paper book for the purpose of demonstrating that the assessee has earned substantial capital gain by selling shares of Ingersoll Rand (I) Ltd. and ABB Ltd. He submitted that from the chart appearing at Pge-51 of the paper book which forms the judgment of the Assessing Officer, it would appear that all the companies who profited from the sale of the shares of Ingersoll Rand (I) Ltd. and ABB Ltd. resorted to the same practice of entering into the transaction of buying and selling of shares of Hindustan Development Corporation Ltd. and, therefore, this is a pointer to show according to him that these transactions were deliberately entered into for the purpose of reducing the liability to pay capital gain tax. 6. On the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact, suspicion can never take the place of proof. What were the individual facts and circumstances in the case of other investors indicated in the chart appearing at Page-51 of the paper book are not known to us. In so far as the assessee is concerned, the facts and circumstances are before us which we have also tabulated. The finding arrived at by the Tribunal indicated above was not even alleged by Mr. Dutta to have not been based on evidence. In the teeth of the aforesaid findings made by the Tribunal on the basis of evidence, it is difficult, if not impossible, to hold that the transaction of buying and selling of shares of Hindustan Development Corporation Ltd. was a colourable transaction or was resorted to with any ulterior motive of reducing the tax payable for long term capital gain. The first ground of appeal is regarding perversity of the judgment of the learned Tribunal. Mr. Dutta did not cite one example to show that the judgment of the learned Tribunal is not based on evidence. 7. The second ground is no ground at all. If the finding of the learned Tribunal is factually correct, the Tribunal had no option but to the Assessing Officer to give the benefit of the losses suffered by the assessee, which he had disallowed.” 19.4 In the case of CIT v/s. Lavanya Land Private Limited (2017) 83 taxmann.com 161 (BOM) it was held that when there is no direct and clear evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit providers, no presumption can be drawn. In the said case, the Hon‟ble High Court had held that in absence of any tangible material to show that huge cash was transferred from one side to another, addition cannot be sustained. Similar view had been taken in the following cases:

i. Brijnath Agarwalla: vs. ACIT[2010] 40 SOT 475 (Agra Third Member)

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 ii Ganeshmull Biijay Singh Baid HUF vs. DCIT - ITA No.544/Kol/13 dated 04/12/2015 (Kol Tribunal) iii, Malti Ghanshyambhai Patodia Vs. ITO No.3400/Ahd Tribunal) iv. Pratik Suryakant Shah vs. ITO-[2017] 77 taxman.com 260 (Ahd Tribunal) v. Padduchari Jeevan Prashant VS. ITO-ITA No.452/Hyda/2015 (Hyd Tribunal) vi Anil Anand Kishor Goyal VS. ACIT-ITA Nos.1256/PN/2012(Pune Tribunal) Sham Transactions need to be proved with Cogent Material Evidence 20.0 It may also be submitted here that there are various judicial precedents to the effect that the act of questioning the very basis of a transaction and to brand it as illegitimate or sham has to be based on substantial, concrete and cogent evidence wherein the proof of wrong- doing is clear and irrefutable. Attention in this connection is invited to the judgment of the Hon„ble Supreme Court in the case of Union of India V. Azadi Bachao Andolan [2003] 263 ITR 0706 which to a very large extent had watarad down the ratio laid down by the Apex Court in erstwhile case of Dowell and Co, Ltd. V. Commercial Tax Officer [1985] 154 ITR 148, In the said case of UOI Vs. Azadi Bachao Andolan, the Hon'ble Supreme Court observed asunder: “In our judgment, from Westminster's case [1936] AC 1? (HL); 19 TC 490 to Bank of Chettinad"s case [1940] 8 [TR 522 (PC) to Mathura‟s case [1999] 8 SCC 667, despite the hiccups of McDowell's case [1985] 154 ITR 148 (SC), the law has remained the same. We are unable to agree with the submission that an act which Is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents.” 20.1 In Banyan and Berry v. Commissioner of Income-tax [1996] 222 ITR8&31 (Guj), it was held as under: “…The Court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act ; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell's case [1958] 154 ITR 148 (SC). The ratio of any decision has

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 to be understood in the context it has been made. The facts and circumstances which lead to McDowell‟s decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the frame work of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a sub huge clothed with apparent dignity.” Theory of Preponderance of probability not applicable in the Present Case 21.0 The A.O. had also failed to bring on record, as ta how the shares purchased a year before can be held to be a pre-arranged method employed by the Appellant in connivance with the operators to avoid taxes, Firstly, | have noted that the Appellant had started purchasing the shares of Mhavir &, advanced Remedies Ltd. on 26.08.2014 onwards. If it would have been a pre-arranged transaction, for booking of business loss, then the price of the scrip should have fallen. On the contrary, I have noted that the scrip had maintained a consistently high level till the end of Nov 2014. Thus, it is not the case of the AO that as soon as the Appellant had invested in the impugned: scrip, it had started going down.

It may be noted that for booking of the business loss in the scrip there is no stipulation that the Appellant need to hold the scrip for a particular period. The very fact that the Appellant had held the shares for a very long period of time i.e. more than a year, in it-self shows that the transactions of purchase and sale in the scrip are not arranged one. 21.2 It is also preposterous to hold that the Appellant was aware in August 2014 i.e. at the time of purchase, of the very fact that the trading in the scrip of Mahavir Advanced Remedies Ltd. will be suspended on BSE in Jan 2015. It is also unimaginable to hold that the Appellant in the year 2014 had pre arranged that he will sell the shares of the scrip off- line in 2015, in the scrip will be banned by SEBI in Jan 2015. One needs to understand that the transactions of purchase and sale for booking a business loss, ” they are pre-arranged, then the same are closed in a few days and doesn‟t linger on for more than a year. 21.3 Needless to emphasize here that if the transactions were premeditated with the entry operators, then the AO should have brought on record, the details of the entry operators linked with the said transactions of the Appellant. The very fact that the AO had failed to link the transactions of the Appellant with even a single entry operator shows

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 that the transactions of the Appellant are not pre-meditated or pre- arranged.

Genuine Share Transactions Judicial View 22.0 The Hon‟ble Bombay High Court in the case of CIT v. Shyam R. Pawar 54 taxman.com 108 (Bom) had held that where DMAT account and contract note showed details of share transaction, assessing Officer were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions, The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to, But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Suresh kumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.” 22.1 In the case of Mukesh Morolia v. Addl. CIT-6 SOT 247 (Mum), the addition on account of long term capital gain on sale of shares was deleted by holding it to be a genuine transaction. In the said case, the AO had held that the long term capital gain shown by the assessee was unexplained since in the said share broker had confirmed in a statement before the AO that he never sold any shares to the assessee. However, taking note of the evidence as available on record, the Hon‟ble Tribunal held that the AO had not disproved the genuineness of the transactions. The said decision of the Tribunal was later upheld by the Hon‟ble Bombay High Court in the case of CIT V. Mukesh Marolia - ITA 456 Of 2007 dated 07.09.2011. The SLP against the said decision filed by the Department has also been dismissed by the Hon‟bl Supreme Court in

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 SLP (Civil) No.20146/2012 dated 27 01.2014 Reliance is also placed on the decision of the Hon‟ble Mumbai Tribunal in the case of ITO v. Indravadan Jain (HUF) [ITA No.4861/Mum/2014] dated 27.05.2016. In the said case, the long term capital gains claimed by the assessee was denied by the AO and treated as unexplained cash credit u/s.68 of the Act on the basis of action taken by SEBI against the broker through whom the assessee had sold shares. The Hon‟ble Tribunal after taking into consideration the facts involved held that action taken against broker by SEBI cannot be a ground to treat the transaction of the assessee as non- genuine and upheld the action of Ld. CIT(A) in deleting the addition made by the AO. The relevant extract of the order is reproduced as under: “8. We have considered rival contentions and carefully gone through the orders of authorities before and found from the record that the AO has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of Ramkrishna Exports Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s. Basant Perival and Co. on the floor of stock exchange was more than 83%. 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 Perival and Co. Against 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 in genuine 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 Perival and Co. never stated any of the authority that transaction in M s. Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are in genuine 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 findings recorded by CIT (A) at para 3 to 5 has no 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). 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, wherein under similar facts and circumstances, transactions in shares were held to be genuine and addition made by AO was deleted. Respectfully following the same

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 vis-a-vis finding 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).” 22.3 In the case of Commissioner of Income-tax, Jamshedpur vs. Arun Kumar Agarwal (HUF) 210 Taxman 205 (Jharkhand High Court), the AO had i) on the basis of finding in the SEBI enquiry, consequent to which releven stock brokers & their trading were suspended by the Kolkata Stock Exchange from buying & selling the securities ii) investigation by the CIT(nv.) in the case where modus operandi adopted by the broker of the assessee was also identical with one adopted by M/s. Ahilya Commercial Pvt. Ltd. held that transaction of the purchase of the share and sale thereof is not genuine and is a sham transaction. The Hon‟ble Jharkhand High Court, while dismissing the appeal of Revenue held as under: “Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering an rising of , ~ share price, and any person, who himself is not involved in that type of transaction, if purchased the share from the broker innocently and bonafidely and if he shows his bona fide in the transaction by showing‟ relevant material, facts and circumstances & documents, then merely on the basis of the reasons that share broker was involved in dealing in share of a particular company in collusion with other or in the manner of unfair trade practice against the norms of SEBI and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such a transaction cannot be held to be a sham transaction.” 22.4 The Hon'ble Jharkhand High Court had further held, as under “It is not disputed by the revenue before us that the share of these already shown in the balance sheet submitted by the assessee, and therefore, in that situation, how the revenue condemn the transaction even on the ground of sleep rise in the share. If within a period of one year, the share price had risen from Rs.5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share price, then how can it be inferred that such transaction entered into a sham transaction few years ago and prepared for getting the benefit after few years when share will start rising steeply. In the present case even there was no reason for such suspicion when the shares purchased years before the unusual fluctuation in the share price. Hence, the appeal of department dismissed CIT(A) and ITAT while allowing the appeal held as under: It is also not in dispute that assessee disclosed the shares in their possession in earlier return and statement of accounts and they are duly entered into the books of the accounts of the assessee which was duly proved by the bank statement.”

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17

22.5 In CIT v Orchid Industries Ltd. (ITA 1433 of 2014), vide order dated 5® July, 2017, while dealing with the documents filed, the Hon‟ble Bombay High Court had observed that the transaction was genuine as the assessee produced voluminous documentary evidence. 22.6 The Mumbai ITATF' Bench in its‟ decision in ITA No.3801/Mumbai/2011 in case of M/s. Farah Marker v/s. ITO dated 2704-2018 held as under : “3.4.8 From the appreciation of the facts of the case, the material evidence placed on record by the assessee and in the light of the discussion of the factual and legal matrix of the case as discussion from para 3.1. to 3.4.7 of this order (supra), we are of the considered opinion that the authorities below, i.e. AO/CIT(A) have made the addition under section 68 of the Act merely on presumptions, suspicion and surmise in respect of penny stocks, disregarding the direct evidence placed on record and furnished by the assessee in the form of brokers contract notes for purchase and sale of the “said shares” of M/s. Shukun Constructions copies of the physical share certificates and her D Mat account statement establishing the holding of le shares in her name prior to the sale thereof, confirmation of the transactions of buying and selling of the “said shares” by the respective stock brokers, receipt of sale proceeds through banking channels, etc. As observed earlier in this order, we are of the view that the statement recorded from Shri Niraj Sanghvi on 31/12/2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee‟s back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross examine the said person. We are also the view that the ratio and the factual matrix of the decision in the cited case, ie. Jatin Chandra (supra), Harkhchand K. Gada (HUF) & Others (supra) and Andaman Timber Industries (supra) would be applicable and support the case of the assessee since no adverse finding has been rendered in respect of the direct material evidence placed on record in respect of here transaction of purchase and sale of the “said shares” of M/s. Shukun Constructions Ltd. Which stand duly disclosed in her audited Balance Sheet filed with the return of income of assessment years 2004-05 and the current year under consideration. In this factual and legal matrix of the case, as discussed above, we find that the addition of Rs.95,12,812/under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore direct the AO to delete the said addition and accept the LTCG income of Rs.93,00,012/-

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17

shown as exempt under section 10(38) of the Act. Consequently, ground No.1 of the assessee‟s appeal is allowed.” 22.7 During the hearings, the A.R. of the Appellant had distinguished his case from the case of Sanjay Bimalchand Jain L/h Shantidevi B. Jain v. CIT of Mumbai High Court, Nagpur Bench in Income Tax Appeal No.18/2017.1n the said case the Hon'ble High Court and ITAT affirmed the action of the A.O. in treating the transaction of trading in shares as adventure in the nature of trade and brought to tax under the head business income. However, in the present case, the Appellant had declared income from trading in shares, as business income. Moreover in the case of Shri Sanjay Bimalchand (Supra) shares were purchased in cash. Thus, facts of the Appellant are totally different from the case of Shri Sanjay Bimalchand, referred supra. 23.0 Another plea raised by the Appellant is that the copy of documents & evidences received from Investigation Directorate, Kolkata relied upon by the AO were not provided to them and further, no opportunity to cross examination the witnesses were provided. Thus, it was claimed that there was was violation of the principles of natural justice. A perusal of the material on record shows that during the course of assessment proceedings, the Appellant had specifically asked the Assessing Officer to make available the adverse material constrained to note that at no point of time during the course of the assessment proceedings, did the Assessing Officer have provided the details sought by the appellant, Thus, the Appellant was denied rebut the evidence. Thus there is a clear violation of the principles of natural justice by the Assessing Officer in the present case at hand. 23.2 It may be noted that the principles of natural justice have an ancient ancestry. Law presumes that Man has an innate sense of goodness, of fairness, and of morality. Since certain principles are considered to be omnipresent in Nature, Man's conscience has been able to discover them. These principles are not part of the codified law, but they permeate the codified laws like ether. 23.3 Two main principles of natural justice are firstly „nemo judex in causa sua‟ or „nemo debet esse judex in propria causa‟ that is "no man shall be a judge in his own cause". The second rule is „audi alteram partem‟, that is, „hear the other side‟. A corollary has been deduced from the above two rules and particularly the „audi alteram partem‟ rule, namely „gui aliquidstatuerit, partein audita alteraacquumiicetdixerit, haudacquumfecerit' i.e. „he who shall decide anything without the other side having been heard, although he may have said what is right will to have done what is right' or in other words, as it is now expressed,

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 „justice should not only be done but should manifestly be seen to be done‟. 23.4 Till the beginning of 20th Century, the applicability of these principles was restricted to the judicial and quasi-judicial authorities. However, with the obscuring of the demarcation between the quasi- judicial and administrative functions, these principles were equally applied to the administrative functions. 23.5 In the case of State of Orissa v. Dr. (Mrs) Binapani Dei (AIR 1967 SC 1269), the Apex Court observed that „even an administrative order which involves civil consequences...must be made consistently with the rules of natural justice‟. In the case of Mohinder Singh Gill v. Chief Election Commissioner, New Delhi ([1978] 1 SCC 405], while defining the term „civil consequence‟, the Hon'ble Supreme Court said, „civil consequence‟ undoubtedly cover infraction of not merely property or personal rights but of civil liberties, material deprivations and non- pecuniary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence‟. The Apex Court has reiterated this view in the case of S.L. Kapoor v. Jagmohan & Ors ({1980] 4 SCC 379] and in Canara Bank &Ors. v. Debasis Das &Ors ([2003] 4 SCC 557) 23.6 In the case of Sahara India (Firm), Lucknow yv. Commissioner of Income Tax, CentralI & Anr. ({2008] 14 SCC 151], the Hon‟ble Apex Court underlined the aim of these principles, when it held as under: “The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. The aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it.” 23.7 The Full Bench of Hon‟ble Supreme Court in the case of State of erala s. K.T. Shaduli Yusuff [1977] 39 STC 478 held as under: „One of the rules which constitutes a part of the principles of natural Justice is the rule of audi alteram partum which requires that should be condemned unheard. It is indeed a requirement of the duty to act fairly, which lies on all judicial authorities, and this duty has been extended also the authorities holding administrative enquiries involving civil consequences or affecting rights of parties”. 23.8 The Hon'ble Supreme Court in Kishan Chand Chela Ram v. CIT reported in [1980] 125 ITR 713 held as under:

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 “The department ought to have called upon the manager to produce the documents and papers on the basis of which he made the statements and confronted the assessee with those documents and papers. It was true that proceedings under the income-tax law were not governed by the strict rules of evidence, and, therefore, it might be said that even without calling the manager of the bank in evidence to prove the letter dated February 18, 1955, it could be taken into account as evidence. But before the income tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him". 23.9 The Hon'ble Supreme Court in Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 set aside the order of the Tribunal as well as order in revision of High Court on the ground that the statements of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations. 23.10 The Hon'ble Rajasthan High Court in CTO v. Haryana Dal Mill [1993] 90 STC 519 dismissed the departmental revision petitions on the ground that the respondent not having been given opportunity to discredit the entries or cross examine the agent and the entries not having been proved nor the agent examined, the order of the Board of Revenue was not justified. 23.11 The Hon'ble Kerala High Court in P.S. Abdul Majeed v. Agricultural Income tax & Sales Tax Officer [1994] 209 ITR 821 in a writ petition by the Petitioner-Assessee held that there were two inspections of the Petitioner's -holdings on November 3, 1981, and on September 19, 1985, before and after the assessment year in question, when the inspecting authorities estimated the yield of cardamom from the petitioner's holdings at 180 Kgs. The order of reassessment was made without any reference to either of these records but merely on the strength of the entries in the auctioneers‟ records. Reliance on the auctioneers‟ records and treating them as if they were conclusive did violence to the principles of natural justice. The petitioner had denied the sales in toto. He had also prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross-examine the authors of those books. The petitioner had been denied the reasonable opportunity which was due in law, in relation to the assessment, and that was sufficient to vitiate the order. The order of reassessment was not valid and was liable to be quashed. 23.12 The Hon'ble Calcutta High Court in CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103 held as under:

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 "Cross examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross examine the witness". 23.13 The Income-tax Appellate Tribunal, Hyderabad Bench in Mahaveer Transport Co. v. ITO reported at [1987] Vol. 23 ITD 206 held as under: “further while finalizing the assessment even an opportunity to cross examine those lorry owners from whom the statements and sworn depositions were recorded was prayed for by the assessee. However, that request was not considered. It was against principles of natural Justice and the statements of the lorry owners could not be used for any purpose whatsoever in as much as no fair opportunity was given to the assessee to cross-examine these witnesses" 23.14 The Hon'ble ITAT, Delhi Bench in Sunil Agarwal v. ACIT [2002] 82 ITD 1 held that additions to income could not have been made by the AO without confronting the assessee with the statements of witness, which were adverse to assessee. 23.15 In Mahesh Gulab Raj Joshi v CIT (A) [2205] 95 ITR 300 (Mum.) on the basis of statement recorded of one V during Survey conducted of his proprietary concern, the AO treated sale of diamonds by assessee to 'D' as fictitious and made addition u/s. 68 in hands of assessee. No opportunity of cross examining V having been allowed to the assessee, statement of V could not be relied upon or made basis of addition.

23.16 The Hon'ble Apex Court in the case of Rajesh Kumar v. DCIT 287 ITR 91 held that principle of natural justice should be followed in the case where a person suffers civil consequences though the principle of natural justice is not impliedly mentioned. By passing of assessment order and creating a demand, there are civil consequences and the AO should have provided an opportunity. 23.17 A Constitution Bench of the Supreme Court in State of MP. y. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 to cross-examine witnesses, would violate the principles of natural justice. 23.18 In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, the Hon'ble Apex Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem. 23.19 Further, in Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, the Hon„ble SC at paras 13 & 14 had held, as under: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross- examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review.

23.20 In CIT Vs. SMC Share Brokers Ltd., (2007) 288 ITR 345 (Del), it was held as under: Search & seizure - Block assessment - Computation of undisclosed income - Block assessment completed u/s 158BD against the assessee on the basis of documents discovered in the premises of M and the statements made by him - Despite several requests by the assessee, M was not made available for cross examination - Though statement had evidentiary value, weight could not be given to it in proceedings against the assessee without testing it under cross-examination - Therefore, in the absence of M being made available for cross examination, his statement could not be relied upon to the detriment of the assessee - Tribunal was justified in setting aside block assessment - No substantial question of law arises.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 23.21 In Prakash Chand Nahta Vs. CIT, (2008) 301 ITR 134 (MP), it was held as under: “ ...1t was obligatory on the part of the A.O to allow the prayer of the assessee for cross-examination of M - A.O having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee - Therefore, the assessment is vitiated.”

23.22 In the case of Smt. Sunita Dhadda Vs. Deputy Commissioner of Income-tax [2013] 33 taxmann.com 639 (Jaipur Trib, the Hon'ble ITAT Jaipur has held that where A.O. made addition on account of 'on money‟ received by assessee on sale of land, relied upon statement director group and did not allow assessee to cross-examine, there was violation of principle of natural justice and addition could not be sustained. The said deletion has been upheld by the Hon'ble High Court & Supreme Court. 23.23 In Bangodaya Cotton Mills Ltd. vs. CIT [2009] 21 DTR 200 (Cab), it was held that the A.O having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross-examination, the order passed by the Tribunal upholding the addition is set aside and the matter is remanded back to the A.O to consider the matter afresh. 23.24 In CIT Vs. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H), it was held that the A.O having made certain addition on the basis of statements of four persons recorded at the back of the assessee without affording an opportunity to the assessee to cross-examine those persons before passing the assessment order, despite specific requests, the proceedings conducted by the A.O after recording the statement of aforesaid persons are set aside; it is open to the A.O to reinitiate the proceedings from the aforesaid stage. 23.25 In CIT & Anr. Vs. Land Development Corporation (2009) 316 ITR 328 (Kar), it was held that where despite specific request therefore, assessee was not given an opportunity to cross-examine witnesses whose incriminating statements had been made available to assessee, matter remanded to the A.O for affording an adequate and proper opportunity. 23.26 In CIT Vs. Rajesh Kumar (2008) 306 ITR 27 (Del), it was held thatthe Revenue having collected material behind the back of the assessee and used the same against him without disclosing the material to the assessee or giving an opportunity to him to cross-examine the person whose statement has been used against the assessee for making

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 the impugned addition, there is clear Violation of principles of natural justice justifying deletion of addition. 27 In Heirs & LRs of Late Laxmanbhai S. Patel Vs. CIT (2009) 222 CTR (Guj) 138, it was held that addition made u/s 68 placing heavy reliance on the statement of one R to the effect that the promissory note in the sum of Rs. 8,78,358/- recovered during his search represented amount advanced by assessee to one K without referring to the said statement in the assessment order nor giving copy thereof to the assessee nor affording opportunity to assessee to cross-examine R was liable to be set aside for violation of principles of natural justice. 23.28 In CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del), it was held that initiation of reassessment proceedings on the basis of deposition of a third party without affording opportunity of cross- examination of the said party to the assessee despite specific demand was not valid. 23.29 In CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del, it was held that the A.O not having given an opportunity to assessee to cross-examine the analyst on whose report the assessment was based despite several requests, assessment was rightly set aside by the CIT(A) and Tribunal for violation of principles of natural justice and no substantial question of law arose. 23.30 In CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad), it was held as under: “In the absence of any corroborative evidence, statement obtained from 23 mining licensees out of 994 licensees could not be relied upon by the A.O to come to the conclusion that the assessee has received illegal money from all the applicants for granting mining licenses, further the assessee was not allowed to cross-examine the said deponents and no further enquiry was made and therefore assessment suffers from procedural irregularities, defects and infirmities, matter is remanded to the A.O for fresh consideration.” 31 In CIT Vs. $M Aggarwal 292 ITP 43, it was held that statement made the assessee„s daughter cannot be said to be relevant or admissible against assessee, since the assessee was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessee and represents his undisclosed income. 23.32 As regards the onus of ensuring the presence of the witness, kind attention is drawn towards the judgment of the Hon„ble Jurisdictional Delhi High Court in Principal CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. &Others in ITA Nos. 11/2017 to 22/2017, wherein it was

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 held that the onus of ensuring presence of the witness for cross- examination is on the Revenue and that such onus cannot be shifted to the Assessee. It was further held that failure on the part of the Revenue to produce the witness for cross-examination would be sufficient to discard the statement. The relevant excerpt of the order is reproduced hereunder to facilitate ready reference: “37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessee. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the assessee, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the assessee clearly stated that they did not know, could not have been shifted to the assessee. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross-examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra).” 3.33 The aforesaid discussion makes it clear that, not only should the opportunity of cross-examination be made available, but it should be one of active cross examination, so as to meet the requirement of the principles natural justice. In the absence of such an opportunity, it cannot be held. the matter has been decided in accordance with law, across nation is an integral part and parcel of the principles of natural justice. No Presumptions can be drawn in -e case of Third Part deny 24.0 The various Courts have time and again held that presumption u/s 132(4A)/292C of the Act is available only inrespect of the person from whose possession the documents/ papers are seized. It cannot be applied against a third party and hence, no addition can be made on the basis of the evidence found with a third party. 24.1 In Straptex India (P) Ltd. v. DCIT, [2003] 84 ITD 320 (Mum), there was a search at the premises of Shri Niranjan Shah, in which a computer floppy was found. On the basis of the contents of the above floppy, the Revenue held that the assessee had borrowed the money in cash which was denied by the assessee. In support of its contention, the Revenue has relied upon. 132(4A). Under the given facts, the Hon'ble Mumbai ITAT held asunder-

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 “7. Coming to the merits of the penalty levied, the main basis for levy of the penalty is the computer floppy found from the residence of Shri Niranjan J. Shah. The print-out of the above computer floppy showed several transactions between Shri Shah and the assessee-company. The above transactions included some transactions by cheque and some by cash. The assessee had admitted the transactions by cheque but had denied the transactions which were in cash. The Department, in support of its contention, has heavily relied upon the presumption provided under Section 132(4A) of the IT Act, while the assessee disputed the applicability of Section 132(4A) to the present proceedings on the following grounds :

(i) that the presumption under Section 132(4A) is limited only to the proceedings under Section 132(5) and not in respect of other proceedings; (ii) that the presumption under Section 132(4A) is only against the person from whom the document was found and not against third parties; (iii) that the presumption under Section 132(4A) is not conclusive and cannot be applied in the absence of corroborative evidence. Let us examine the rival contentions regarding scope and application of Section 132(4A) Whether Section 132(4A)is applicable only for the limitation purpose of Section 132(5)and not for the assessment/penalty proceedings. Section 132(4A) raises certain presumptions and provides that where any books of account or other documents are found in the possession or control of any person in the course of a search, {t may be presumed that such books of account or documents belong to such person and their contents are true. From a reading of Section 132(4A), we do not find any justification to support the contention of the learned counsel for the assesses that the presumption under Section 132(4A) is valid only for the purpose of Section 132(5). Section 132(5)is amended by the Finance Act, 1995, to provide that order under Section 132(5) is required to be passed only in respect of search initiated before 1st July, 1995. Therefore, Section 132(5) has been made inoperative in respect of search initiated after Ist July, 1995. However, no such restriction has been provided in Section 132(4A). The presumption under Section 132(4A) continues to be applicable even in respect of search after 1st July, 1995. This clearly proves that the contention of the learned counsel for the assessee that the presumption under Section 132(4A)is intended by the legislature to be made applicable to order under Section 132(5) only is untenable.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 (ii) Whether presumption under Section 132(4A)is only against the person from whom the document is found and not against third party - As per Section 132(4A), where any book of account or document is found in the possession and control of any person in the course of search, it is presumed that they belong to such persons. Thus, clearly, the presumption is in respect of the person from whom they were found. The use of the words "to such person" in the said section mean the person from whom the books of account of documents were found. Clause (ii) of Section 132(4A) provides that the contents of such books of account or documents are true. In our opinion, this presumption can also be applied only against the person from whose possession the books of account or the documents were found. Therefore, so far as the case of Mr. Niranjan J. Shah is concerned, the Revenue authorities may presume that the books of account or documents found from his possession are correct. However, while utilizing those documents in the case of any other person (i.e. the person other than Mr. Niranjan J. Shah), there cannot be any presumption about the correctness of such books or documents. The Hon'ble apex Court has considered this matter in the case of CBI v V.C. Shukla (supra). In that case, certain diaries, small note book and various loose papers were found and seized from the premises of Mr. S.K. Jain of New Delhi. In those diaries/loose papers, the names of V.C. Shukla and L.K. Advani were found recorded. The CBI charge-sheeted those persons, namely, Shri Shukla and Shri Advani under the Prevention of Corruption Act, 1988. The Hon'ble apex Court held that the entries in those diaries/loose papers cannot be used against Shri Advani or Shukla but can be used against Shri Jain and may be proved as admission by him. The learned Departmental Representative had contended that the above decision of Hon'ble apex Court was not applicable to income-tax proceedings because the above decision was based upon the interpretation of u/s. 34 of the Evidence Act, 1872. He contended that Evidence Act is not applicable to income-tax proceedings. However, we are unable to accept the above contention of the learned Departmental Representative in view of the decision of Hon'ble apex Court in the case of Chuharmal y. CIT (1988) 172 ITR 250 (SC). In that case, Their Lordships held as under : "...dismissing the petition and affirming the decision of the High Court, () that what was meant by saying that the Evidence Act did not apply to proceedings under the IT Act, 1961, was that the rigour of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so."

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 We find that similar view was taken by the Tribunal, Ahmedabad Bench 'C', in the case of Prarthana Construction (P) Ltd. (supra) wherein it was held: "The presumption under the provisions of Section 132(4A) would in any case not be applicable to a third party from whose possession such papers and documents have not been found by the Revenue". In view of above, we have no hesitation to hold that the presumption under Section 132{4A) is applicable only against the person from whose possession books of account or other documents were found and not against any other person. (iii) Whether the presumption under Section 132(4A) is conclusive In our opinion, the presumption under Section 132{4A) is a rebuttable presumption and not a conclusive one. Certainly, the burden to rebut the presumption is upon the person against whom the presumption is applicable. While taking the above view, we derive support from the decision of Hon'ble Kerala High Court in the case of ITO y. T. Abdul Majid (1988) 169 ITR 440 (Ker), wherein at p 444, Their Lordships held as under: "It is true that Section 132(4A) of the Act enables the Court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the Court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is "may be presumed" as is used in Section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the Court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the Court from doing so." Similar view was expressed by Their Lordships of Rajasthan High Court in the case of CIT v. S.M.S. Investment Corpn. (P) Ltd. (1994) 207 ITR 364 (Raj) where it was held that the presumption under Section 132(4A) is rebuttable. In view of above, we hold that the presumption under Section 132(4A) is only a rebuttable presumption and not a conclusive one. The learned Departmental Representative has relied upon various decisions. However, all of them are on altogether different facts. The dispute before the Hon'ble Kerala High Court in the cases of CIT v. K. Mahim (supra) and CED v. Smt Sarala Nair and Ors.

_ (supra) was whether the purchase of property was Benami or not, while the issue in the case under appeal before us is altogether different. Similarly, the facts in the case of CIT v. Durga Prasad More (supra) are altogether different. There also, the dispute was whether the house

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 property purchased in the name of assessee's wife belonged to her or to the assessee. In view of above, we hold that the various decisions relied upon by the learned Departmental - Representative will not be applicable to the case under appeal before us.” 24.2 In Prarthana Construction (P) Ltd. [2001] 70 TTJ 122(AhdTrib), it was held that the presumption under the provisions of section 132(4A) would in any case not be applicable to a third party from whose possession such papers and documents have not been found by the Revenue. In that case, the Revenue had further relied upon statements of Sri Sureshbhai and Sri Deepak Meha partners of M/s. Gokul Corporation. The Bench opined that it found merit in the contention of the Ld. Counsel that such statements recorded at the back of the assessee would not ipso facto include the case against the assessee particularly when the maker of the statements have not been lowed to be interrogated by the assessee company. Adverse Finding against the Appellant in the Show-cause

25.0 The A.R. of the Appellant had stated that the Appellant‟s name is nowhere appearing in any of the investigations carried out by SEBI in the case of Mahavir Advanced Remedies Ltd. I have gone through the show-cause issued by SEBI in the case of Mahavir Advanced Remedies Ltd. and noted that the « » aepellant‟s name is not appearing in the said show-cause notice, which are under for ready reference: Emerald Commercial Ltd. [2002] 120 Taxman 282 (Calcutta), the relevant excerpts of which are reproduced hereunder: “2. In pursuance of our direction the Tribunal has referred the above said questions for our opinion. The assessee during the assessment year 1985-86 suffered loss of Rs. 1,31,735 and Rs. 2,03,405, respectively, in share dealings in respect of shares in investment companies. The loss was disallowed by the ITO on account of failure of the assessee to produce the share brokers for. verification of the transaction. The ITO disallowed the loss claimed in the share transaction. The Commissioner (Appeals) has also confirmed the above. In appeal before the Tribunal, the Tribunal has allowed the claim of loss of both the assessee and concluded its judgment in para 6 of his order which reads as under: "I have examined the assessment orders as well as the order of the Commissioner of Income-tax (Appeals). The loss incurred in share dealings is disallowed by the Income-tax Officer and confirmed by the Commissioner of Income-tax (Appeals) on the presumption that no prudent businessman would undergo loss and investments are always made to earn income by banks and (sic). This concept does not appear proper. To make investment in share dealings is also made for earning income. While doing so, if any loss is incurred, it cannot be said that the

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 loss is incurred to divert the income or it is stage-managed. The appellants found that at the end of the financial year the value of the shares was going down and the assessee thought it proper to fetch whatever was possible by selling the shares at that time at a lower rate. That act does not mean that the loss is stage-managed." 3. It is also brought to our notice that on almost similar facts this Court has considered the similar issue in the case of CIT v. Carbo Industrial Holdings Ltd. [2000] 244 ITR 422 and answered the question in favour of the assessee. 4. The admitted facts in this case are that the details of purchase and sale of shares are furnished. The payment and receipt are by account payee cheques. The identity of seller and purchaser is not in dispute. The disallowance is basically made on the ground that the assessee failed to produce the brokers for verification of the transaction. Following our view in the earlier case referred to above non-production of the share broker by the assessee does not disentitle the assessee for claim of loss in a genuine transaction of shares face the aforesaid facts and our view expressed in the case industrial Holdings Ltd. (supra), we answer question No. whether the finding of the Tribunal is based on material, in the affirmative and whether this finding of the Tribunal is perverse, we answer in the negative, ie., in favour of the assessee and against the revenue‟ Conclusion. 27.0 I have noted that the AO had failed to bring on record any evidence or cogent material to prove that the business loss in the impugned scrip is bogus. The entire assessment order is based on presumptions surmises and conjectures only. The AO had only reproduced in the assessment order a general modus-operandi and failed to link the same with the Appellant. 27.1 The AO had also not stated as to what adverse information had been received by him: either from the Inv. Wing of Kolkata or Inv. Wing of Mumbai, against the Appellant in relation to the share loss claimed by the Appellant. There is nothing on record to hold that the Appellant‟s name is appearing in any of the SEBI investigations in the impugned scrip. No material exists on record to hold that the Appellant had connived with any entry operator r for executing the share transaction. 27.2 On the other hand, the Appellant had furnished all the necessary documents relating to the share transaction and the AO had failed to disprove them. It had also been noted stand by taxing the profit on the penny stock but had disallowed the loss on similar penny stock transactions.

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 27.3 It is also obvious that the inference drawn by the AO against the Appellant is also not sustainable in law for the simple reason that the principles of natural justice have been followed. First and foremost, the appellant had not been given any access to the adverse material (reports, statements etc.), if any. Secondly, by withholding the said material, the AO denied the Appellant an opportunity to rebut the evidence by cross- examining the witnesses, statements etc. have noted that on both counts, impugned assessment order fails, squarely. 27.8 In view of the above facts and circumstances, as also the binging decisions of the Hon‟ble Courts, I am of the considered opinion that the disallowance of loss amounting to Rs. 4,71,19,785/- made by the AO is unsustainable in law and is therefore, deleted. Accordingly, Ground of Appeal No. 1 to 3 raised by the Appellant are allowed.” 11. On appraisal of the above mentioned finding, we noticed that the CIT(A) has relied upon the decision of the Hon’ble Calcutta High Court in the case of M/s. Classic Growers Ltd. Vs. CIT (ITA. No. 129 of 2012 (Calcutta), and the decision of the Hon’ble Supreme Court in the case of Chuharmal Vs. CIT (1998) 172 ITR 250, CIT Vs. Emerald Commercial Ltd. (2002) 120 taxman 282 (Calcutta) and in the case of Dhaeshwari Cotton Mills Vs. CIT (1954) 26 ITR 775 and in the case of CIT Vs. Anirudh Narayan Agrawal (2013) 38 taxmann.com 367 (All) and various decision of the Hon’ble Courts mentioned above. Moreover, no law contrary to the law relied by the CIT(A) has been produced before us. There is no cogent and convincing evidence on record to hold this fact that the business loss in the impugned scrip is bogus. It is also not apparent on record that the appellants name was appearing in any of the SEBI investigation in the impugned scrip. No evidence on record to which it can be assumed that the appellant had connived with any entry operator for executing the share transaction. What adverse information was received from the wing of Calcutta/investigation wing Mumbai against the assessee is not apparent on record. The evidence adduced by the assessee was not

ITA. Nos.4286 & 4474/Mum/2019 A.Ys. 2011-12 & 2016-17 rebutted by the AO. AO also took the contradictory stand by taxing the profit on the penny stock but disallowed the loss. No proper opportunity was given to the assessee to cross-examination of the witness as well as to rebut the other evidence on record. Taking into account of all the facts and circumstances mentioned above, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.

Order pronounced in the open court on 25/02/2021 Sd/- Sd/-/- (RAJESH KUMAR) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai ददनांक Dated : 25/02/2021 Vijay Pal Singh (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधिक िंजीकधर /(Dy./Asstt. Registrar) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai