VINOD L. GADHIYA,MUMBAI vs. DCIT CC5(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B”, BENCH MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER

ITA Nos.2785 to 2788/Mum/2019 (Assessment Years: 2011-12,2012-13,2014-15 & 2016-17) Shri Vinod L. Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AASPP8898F (Appellant) .. (Respondent)

ITA Nos.2797 to 2799/Mum/2019 (Assessment Years: 2011-12,2012-13 & 2015-16) Smt. Bhavna V.Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AGPPG6724L (Appellant) .. (Respondent)

ITA No.2804/Mum/2019 (Assessment Year: 2015-16) Shri Divyesh V.Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.BECPG4917B (Appellant) .. (Respondent)

ITA No.2780/Mum/2019 (Assessment Year: 2014-15) Shri Vinod L. Gadhiya HUF Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AAGHV9719P (Appellant) .. (Respondent)

2 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. ITA Nos.2793 to 2796/Mum/2019 (Assessment Year: 2011-12,2012-13,2014-15&2015-16)

Shri Bharat L. Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AAKPG0296J (Appellant) .. (Respondent)

ITA Nos.2813 to 2816/Mum/2019 (Assessment Year: 2011-12,2012-13,2014-15 & 2015-16) Shri Bipin L.Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AAKPG0295M (Appellant) .. (Respondent)

ITA Nos.2805 to 2808/Mum/2019 (Assessment Year: 2011-12,2012-13,2014-15 &2015-16) Smt. Nayana B.Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AGPPG6729H (Appellant) .. (Respondent)

ITA Nos.2783 & 2784/Mum/2019 (Assessment Years: 2014-15 & 2015-16) Shri Bharat L. Gadhiya HUF Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AAHHB7833B (Appellant) .. (Respondent)

3 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. ITA Nos.2800 to 2803/Mum/2019 (Assessment Years: 2011-12,2012-13,2014-15 & 2015-16)

Shri Arun L Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AAKPG0294L (Appellant) .. (Respondent)

ITA Nos.2781 & 2782/Mum/2019 (Assessment Years: 2014-15 & 2015-16)

Shri Arun L Gadhiya HUF Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AALHA4260P (Appellant) .. (Respondent)

ITA Nos.2809 to 2812/Mum/2019 (Assessment Years: 2011-12, 2012-13, 2014-15 & 2015-16) Smt. Rita B. Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AGDPG0884H (Appellant) .. (Respondent)

ITA Nos.2789 to 2792/Mum/2019 (Assessment Year: 2011-12,2012-13, 2014-15 & 2015-16) Smt. Sangita A.Gadhiya Vs. DCIT,CC-5(3) 701, Millennium apt, Room No.1906 Lallubhai Park, Extn.road Air India Building Vile Parle(W) Nariman Point Mumbai-400 056 Mumbai-400 021

PAN/GIR No.AGDPG0897L (Appellant) .. (Respondent)

4 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors.

Assessee by Shri Sanjay N. Kapadia,AR Revenue by Shri Pratap Singh, DR

Date of Hearing 23/12/2020 Date of Pronouncement 29/01/2021 आदेश आदेश / O R D E R आदेश आदेश PER RAJESH KUMAR (A.M):

The present appeals by different assessees have been preferred against the order dated 22.02.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2011-12,2012- 13,2014-15 & 2016-17.

ITA No.2787/M/2019 A.Y. 2014-15

GROUND NO.2

Without prejudice to ground nos.1 above, the learned CIT(A) erred, under the facts and circumstances of the case and the applicable provisions of the Act, in upholding the assessment order u/s 153A r.w.s. 143(3) of the Act, since the same was passed in violation of the principles of natural justice and it must thus be declared invalid.

GROUND NO.3

Without prejudice to ground nos.1 and 2 above, the learned CIT(A) erred in upholding the addition Rs.16,82,26,728/- to the appellant’s total income, under

5 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. the provisions of section 68 of the Act and the same must be deleted being contrary to the facts of the case and the applicable provisions of the Act.”

6 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. assessee is an individual and is a regular investors in the stock market and carries out purchases and sales of shares on stock exchange through registered brokers on the recognised stock exchange. The main findings of the search team was that Gadhiya group has been indulging in tax evasion on a large scale over the years by generating unaccounted money from various businesses such as construction and development of real estate business and diamond tradings etc. and such unaccounted money so generated was brought back in the books of Gadhiya family in the form of long term capital gain through the alleged bogus transactions of purchase and sales of shares arranged by Gadhiya family through registered brokers/ exit providers to the tune of Rs.74,58,40,840/-. Consequent to the search all the cases were centralized under section 127(2) of the Act with DCIT CC-5(3), Mumbai vide centralization order No.Pr. CIT-25/HQrs/127(2)/2016-17 dated 12.07.2016 for coordinated investigation. A notice under section 153A of the Act was issued on 26.12.2016 which was duly served upon the assessee and complied with by the assessee by submitting the return of income declaring total income of Rs.6,07,760/- on 26.01.2017. According to the AO, the assessee has routed the cash generated from its business of real estate, construction & development of real estates and trading of diamonds by way of bogus long term capital gain which were generated through the purchase and sale of shares of M/s. Global Infra Tech and Finance Pvt. Ltd. The assessee and his family evaded the tax on the said bogus gain by claiming as exempt under section 10(38) of the Act. The assessee purchased 2,25,000 equity shares of M/s. Global

7 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Infra Tech and Finance Pvt. Ltd. in the preferential allotment on 19.01.2012 at Rs.35,35,885/-. Thereafter the shares of Global Infra. & Finance Ltd were listed on stock exchange. The shares prices went up in a phenomenal pattern. Thereafter the shares were split and subdivided in the ratio of 1:10 shares meaning thereby that share of Rs. 10/- was split into 10 shares of the face value of Rs.1/- each. This was followed by a bonus issue in the ratio of 10:1. The assessee sold 225000 shares after holding more than 12 months during a period ranging between 28.5.2013 and 18.07.2013 for a total consideration of Rs.16,82,26,728/- at an average price of Rs. 74.77/-thereby generating a long term capital gain of Rs.16,46,90,843/- which was claimed as exempt under section 10(38) of the Act. The details of all sales transactions made by the assessee are given in the table in para 9.3.4. in the assessment order. According to the AO the said capital gain was generated by the assessee through accommodation entries taken from various brokers/intermediaries/exit providers who were allegedly engaged in providing various types of accommodation entries including bogus long term capital gain to various beneficiaries against the receipt of unaccounted cash in consideration of commission charged. According to the assessee since the shares were purchased on preferential allotment from the company and sold in the Bombay Stock Exchange through a registered brokers, there is no question of bogus transactions in shares. The AO recorded a detailed findings on how this long term capital gain was realized and modus operandi through accommodation entries provided by the entry provider in para 5 & 6 of the assessment order. The AO also noted that M/s.

8 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Global Infra & Finance Pvt. Ltd. raised Rs.30,53,25,000/- by way of preferential allotment of 2,03,55,000 shares to preferential allottees/subscribers in two rounds of allotment. In the first round 1,05,05,000 shares were allotted on 19.01.2012 at a value of Rs.15 per share of face value of Rs.10/- each at a premium of Rs.5/-. These shares were listed on stock exchange on 28.02.2012. In the 2nd round of preferential allotment 98,50,000 shares were allotted on 12.06.2012 at a value of Rs.15/- comprising Rs.10/- as face value and Rs.5 as premium of share. These shares were listed in the stock exchange on 24.07.2012. The AO noted that the price of the shares witnessed phenomenal upward swing immediately after the preferential allotment. Thereafter, the existing shares were split and sub divided in the ratio of 1:10 on 13.12.2012 thereby split at share of face value of Rs.10 into 10 equity shares of face value of Rs.1 each. Thereafter bonus issue in the ratio of 10:1 whereby for every share held by shareholder they were allotted more share of M/s. Global Infra Tech and Finance Pvt. Ltd. including to the assessee. In para 9.3.4 the AO appended a table demonstrating how the assessee has sold the share at a price when it was at the peak from para 9.3.5 to para 9.3.13, the AO discussed the movement of shares, quantity traded and total value of share trading. The AO also discussed how the entry providers arranged the sale of shares on Bombay Stock Exchange. The AO also referred and reproduced the statements recorded of Shri Sajan Damodar Prasad Gadhiya, chairman and director of PSIT Infrastructure and Services Ltd. and his admission that M/s. Global Infra.and Finance Pvt. Ltd. and PSIT Infra and Service Ltd. were both

9 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. managed and manipulated by entry provider Shri Jagdish Purohit and bogus entries of long term capital gain are arranged through these scrips by Shri Jagdish Purohit. The statement is reproduced in para 11.1 of the assessment order. The AO also referred to the statement of Shri Manoj Kumar Aggarwal whose statement was recorded under section 131 during the course of survey operation under section 133A of the Act who is the director of M/s. Destiny Commodities Pvt. Ltd., M/s. Destiny Securities Ltd., M/s. Destiny Safal Dealers Pvt. Ltd., M/s. Destiny Power Merchants Pvt. Ltd. and M/s. Honeybee Agencies Pvt. Ltd. The AO also reproduced the statement of Shri Vinod L. Gadhiya the assessee recorded during the course of search in para 12.1 when he was confronted with the incriminating observations of the search tean and also of various individual as stated above. The assessee maintained that the shares of M/s. Global Infra. and Finance Pvt. Ltd. were obtained through preferential allotment on the recommendation of Shri Vijaybhai Jain. The assessee in his different statements, during search and post search denied to have taken any accommodation entries of long term capital gain. The AO also referred to the SEBI order passed against certain entities who were engaged in manipulating the shares in para 13.1 to 13.6 and also various entities related colluding in affecting all these transactions and thus a complete modus operandi in general has been discussed. Finally, the AO came to conclusion that M/s. Global Infra. and Finance Pvt. Ltd. was nothing but a pre-arranged and well organized system of providing accommodation entries and re-routing the unaccounted money. In this ground, finally, the AO issued a

10 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. show cause notice dated 16.10.2017 calling upon the assessee to prove the genuineness of the long term capital gain of Rs. 16,46,90,843/- under section 10(38) of the Act. The assessee was also confronted the various evidences and sequence of events gathered during the course of search and post such period the assessee was also provided copies of statements of Shri Sajan Damodar Prasad Gadhiya, Shri Manoj Kumar Aggarwal, Shri Sanjay Dey, Shri Raj Kumar Gadhiya and Shri Souman Choudhary wherein these persons have admitted to have rigged the prices of M/s. Global Infra Tech and Finance Pvt. Ltd. to facilitate and realize the long term capital gain in the hands of the assessee. The said show cause notice was responded by the assessee vide written submission dated 14.11.2017 which has been reproduced by the AO in para 18.1 from page No.95 to 110. The assessee produced the following corroborating evidences before the AO in support of its claim of exemption under section 10(38) on long term capital gain on sale of shares: i. Evidence of purchase of shares – Application of shares, allotment of shares, share certificates ii. Evidence of payment for purchase of shares made by account payee cheques, copy of bank statements iii. Copy of Demat statement reflecting purchase iv. Copy of Demat statement showing sale of shares v. Copies of contract note of sales of shares vi. Copy of bank statement reflecting sales receipt vii. Copy of brokers ledger.

Finally, the AO, after rejecting the various contentions and submissions of the assessee and in a detailed finding in recorded in para 20 of the assessment order, came to the conclusion that the assessee has allegedly obtained long term capital gain by pre-arranged and well organized trading in the

11 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. shares of M/s. Global Infra Tech and Finance Pvt. Ltd. on the Bombay Stock Exchange and accordingly rejected the claim of the assessee under section 10(38) of the Act resulting into an addition of Rs.16,82,26,728/- to the income of the assessee in assessment framed under section 143(3) read with section 153A of the Act, 1961 dated 20.12.2017.

12 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. or of the companies under the same management/industry, etc., to exhibit its credentials in any manner. No such evidence is filed by the appellant. Returns ranging from 700% to 36000% is amazing by any standard and which has not been explained in any manner. There is again no whisper and, consequently, no information on record of the particular industry/s in which, if any, the said company operates, or its financials, much less future prospects, the information on all of which gets factored into and captured in what is called 'price', representing an equilibrium of the supply and demand forces. Who, one may ask, are the purchasers of such shares, i.e., in a nondescript company at such high prices; no information qua which stands furnished at any stage, even as it is they who have apparently brought the shares, supplying the credit to the assessee, which is being questioned and examined as to its genuineness u/s. 68 of the Act. All this definitely casts serious doubts on the genuineness of the sale price and, thus, the ensuing gain. This, in fact, is a classical feature of a penny stock, the price zooming for no apparent, economic or even technical, reasons. One could understand where the same is in sympathy with the market sentiment or some industry-wise favourable development, or some significant breakthrough in business activity of the company. In fact the price of the scrips fell back to its low levels after the beneficiaries booked their LTCG.

7.16. This by itself shows that the gains are not genuine. However in this case there is painstaking extensive investigation of key players involved such as brokers, operators, directors of penny stock companies, financials and price movements of shares of these penny stock companies that have been highlighted in this appellate order.

7.17.The preponderance of probabilities only denotes the simultaneous existence of several facts', each probable in itself, albeit low, so as to cast a serious doubt on the truth of the reported facts', which together make up for a bizarre statement, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible and independent evidences. For a scrip to trade at nearly 350times its' face value, only implies, if not price manipulation, trail blazing performance and/or great business prospects (with of course proven management record, so as to be able to translate that into reality), while even as much as the company's business or industry or future program (all of which would be in public domain), is conspicuous by its absence, i.e., even years after the transaction/s. The company is, by all counts, a paper company, and its share transactions, managed.

13 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors.

7.18. The Hon'ble Supreme Court in the case of CfTv. Durga Prasad More [1971] 82 ITR 540 held as under :

“It is a story that does not accord with human probabilities, ft is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money.

It is surprising that the High Court has found fault with the /TO/or not examining the wife and the father-in-law of the assessee for proving the Department's case. All that we can say is that the High Court has ignored the facts of life. R is unfortunate that the High Court has taken a superficial view of the onus that lay on the Department."

7.19. It is true that when transactions are through cheques, transacted through Stock Exchange, it looks like real transaction but authorities are permitted to look behind the transactions and find out the motive behind transactions. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine. It is highly improbable that share price of a worthless company can go by 2800% in one year. Mere payment by cheque and receipt by cheque does not render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe for bringing in unaccounted income as tax exempt LTCG.

7.20. The assessee/appellant and other members of Gadhiya Group do not regularly deal in shares nor had the experience or expertise of investing in share market. No other worthwhile investment in equity shares in any other company yielding similar income has been disclosed in any of the case of Gadhiya Group. Various assesses of the Gadhiya Group as noted by AO have simultaneously traded in the same scrip at the same time resulting in similar capital gain in various cases. The appellant has miserably failed to rebut that various contentions and findings recorded by AO about serious discrepancies, causing serious doubts on the genuineness of these transactions.

7.21. Reliance can be placed on the three authoritative decisions of Hon'ble Supreme Court in this behalf laying down preposition that without appreciating the genuineness of transaction sole reliance cannot be placed on documents and the same are to be examined in the light of surrounding circumstances and human probabilities.

(i) C1T vs. Durga Prasad More, 82 ITR 540 (SC) (ii) Sumati Dayal. vs. CIT, 214 ITR 801 (SC) (iii) CIT vs. P, Mohankala, (2007) 291 ITR 278 (SC)

14 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Here it will be pertinent to note the observation of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT, 214 ITR 801 (SC) made in the context of sale and purchase transactions of prize winning lottery tickets which are very much applicable to the facts of the case. The same are as extracted here under:

"The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasised that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that "fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972 whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc. was withdrawn. Similarly the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning, ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event.

We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not, based on evidence."

So also, reference can be made to the observation of the Hon'ble Supreme Court in the case of CIT vs.Durga Prasad More, 82 ITR 540 (SC) to the effect that the contents in the documents cannot be given undue importance and, the reality and substance of the transaction is to be considered.

7.22. It has to be appreciated that the revenue authorities are functioning in a democratic set-up and are not discharging their duties in a police state, whereby they can force the assessee/appellant and co-conspirators to admit the truth of the transactions though the same appears to be obvious and apparent and it is usual on the part of the appellant/assessee and there are co-conspirators/abettor

15 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. and then for the AR to claim and contend that there is no direct evidence. In the present case in the course of search there is extensive admissions by various operators.

7.23. Firstly, these transactions which are normally well-documented and are secretly negotiated are scrutinized by the AO after a sufficient gap of time i. e. nearly two years from the end of the relevant F. Y. and then when the appellant/ assessee and the other persons abetting the assessee in such manipulation are confronted by the AO, there is usual tendency to evade the replies or in the least to delay the replies. The AO again has to finalize the proceedings within the statutory limitation involved and then he cannot devote the entire time available at his disposal to a particular case.

7.24. Further judicial notice in the aforesaid facts is required to be taken of prevailing malpractice in the field of manipulation of stock prices of such dubious companies by the operator and manipulators with or without the active help and assistance of management to spread rumours or highly exaggerated growth/profit prospects of such companies leading to such phenomenal pricerise. Reference can be made to the following decisions:

(a) CWT v. Rohtas Industries Ltd., 67 ITR 283(SC), wherein it was held that:

"In the absence of any direct evidence, a Judicial or quasi-Judicial Tribunal can base its conclusion on the basis of what are known as notorious facts bearing in mind the principles of section 144 of the Evidence Act."

(b) Attar Singh Gunnukh Singh v. ITO 191 ITR 667 (SC)wherein, while interpreting the provisions of section 40A(3), it was held that

"In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country."

In the case on hand also the scrips were of unknown or lesser known company, sale price was fantastic, there was no economic or financial basis to justify the price rise (poor financial® as analysed by AO), share transactions were dubious (as held by various departments including SEBI investigation wing etc.), the company did not qualify for investment, the assessee was able to sell the shares at an abnormally high price as compared to purchase price and that too within a short period and the fantastic sale price was not at all possible as there was no economic or financial basis.

7.25. It is noted from the price quoted on the stock exchange that there was abnormal price rise in these scrips as compared with the overall percentage increase in sensex during the same period. There is absolutely nothing to justify dizzying rise of prices of the pennv stocks, which have moved in absolute disregard to the general market sentiments. Analysis of data showed that that the price of these shares have seen phenomenal rise and have been constantly traded near the circuit limit so as to avail maximum price rise without hitting and1 triggering the circuit limit, and thereby avoid surveillance by the Stock Exchange

16 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Regulator. This continuous price rise has been achieved over a very thin volume and almost a single trade per day.During this period of price rise, no corporate announcement has been made which would have made a positive impact on the shares and which could support this phenomenal increase in price.

7.26. The AO has also examined the SEBI's findings about the accommodation entry providers obtained on the basis of various investigations and has brought out sufficient material on record to demonstrate that the transactions axe not genuine and he accordingly concluded that the long term capital gain booked are not genuine.

7.27. It is noted that SEBI not finding direct evidence that the appellant was a co- conspirator in price manipulation in no way detracts from the appellant being a beneficiary of such systematic operations of Operators who has purchased such service. The SEBI is not directly concerned with tax evasion by beneficiaries and is more concerned with its rules and guidelines applicable to listed entities and trading in those scrips. Further as mentioned earlier, when there are customers for both bogus losses and gains, cash is not required to enter the system explicitly and hence it is futile to seek such evidence.

7.28.The appellant has tried to distinguish the jurisdictional High Court decision in the case of Sanjay B Jain on facts but in my view the essential rationale and observations are clearly applicable to the case at hand. The appellant has also made a reference to other listed shares where there were significant increase in prices to suggest that it is not abnormal to have large gains. However, here again the appellant has not furnished the corporate announcements, significant improvement in working and other developments that could have led to such increase in price. It could as well be the case that some of those shares were also used for manipulation. What must not be lost sight of is that the appellant has absolutely nothing to explain his timing and the humungous returns claimed on his investments. Further, extensive investigations have showr these scrips to be penny stock used to generate bogus LTCG by operators, which cannot be ignored.

7.29. The appellant has argued that it was just lucky and took advantage of sharp unprecedent appreciation in price of the shares. I find the argument specious and lacking credibility. Firstly, shares were acquired through private placement. This by itself means that the purchaser has reason to believe that prices will go up and there are good reasons for the same. The appellant has not furnished an iota of material to support such belief. In fact it has not even bothered to follow the financials of the investee companies, as seen from the answers to questions in this regard in the statements recorded. It is further to be noted that preferential allotment means that shares allotted cannot be sold for one year. Thus it cannot be the case that someone purchased shares and sold it shortly, taking a free ride. Secondly, it is again not credible that shares were sold at near peak just before the prices fell. Such timing is again out of ordinary. Thirdly, to sell the shares there must be corresponding buyers. The trades are matched with precision. A person not in the know and without prior understanding will not be able to offload such large number of shares, as is the case of the appellant. Fourthly, such phenomenal price rise is in scrips with no intrinsic worth and performance to speak of. lastly, it

17 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. is unbelievable that this superlative gains were achieved not in just one scrip, but several scrips without fail. Hence this contention of the appellant is rejected.

7.30. There is judicial consensus that strict rules of evidence do not apply and Income Tax proceedings are civil proceedings where preponderance of probabilities is adequate to conclude as to the existence of facts unlike criminal proceedings where the facts have to proved beyond any doubt.

7.31. Reliance is placed on the following judicial decisions where on similar facts additions in respect of penny stocks was confirmed.

i) Sanjay Bimalchand Jain v Principal Commissioner of Income-tax- 1, Nagpur [2018] 89 taxmann.com 196 (Bombay)

ii) SHRI ABHIMANYU SOIN v ASSTT COMMISSIONER OF INCOME TAX CIRCLE- VII , LUDHIANA- 2018-TIOL-733-ITAT-CHD ITA No.951/Chd/2016

iii) Chandan Gupta v Commissioner of Income-tax, Ludhiana- [2015] 54 taxmann.com 10 (Punjab & Haryana)

iv) I.T.A. No.4906/Mum/2011 ITO-19(3)(4) v Shamim M. Bharwani Noor-E- Rehmant, v) ACIT v Som Nath Maini -[2006] 7 SOT 202 (CHD.) vi) I.T(SS).A.Nos. 95 & 96/Ind/20Il and I.T(SS).A.Nos. 98 to 101/Ind/2011 ACIT v Shri Neeraj Panjwani, vii) ITA No.1723/Bang/2018 Smt M. K. Rajeshwari, v The Income-tax Officer, Ward-3, Raichur viii) I.T.A. No. 1413/CHNY/2018 M/s. Pankaj Aganval A Sons (HUF),v The Income Tax Officer, Non-Corporate Ward - 10(3), Chennai ix) I.T.A. No. 1648 sb 1649/PUN/2015 Rajkumar B. Aganval vs DCIT Central Circle 1(2).

7.32. In light of the facts of this case and reasons elaborated above, grounds of appeal no 4 is dismissed. The addition made of Rs. 16,82,26,7287- is upheld.”

18 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. details of year wise investments and activity of investments carried out by the appellant followed by transaction statements of investment activities which are filed in paper book page no. 158 to 197. The ld AR submits that this statements depicts and proves that the assessee holds investments in more than 65 scripts and has regularly been investing in stock market. Similarly the other family members also make investment in stock market as per support and guidance of Shri Vinod L Gadhiya and the statements of investments in the case of all the other family members are also placed in the paper books of respective appellants along with relevant transaction statements. The ld AR emphasized that at this stage it is essential to note that no incrementing documents whatsoever were found, seized or impounded pertaining in respect of claim of exemption u/s 10(38) of the Act on long term capital gain claimed by the assessee and his family members during the search proceedings. The appellant and his family members made investments in equity shares of some of the listed companies during the relevant financial year as per their regular practice in preferential allotment of shares by subscribing through account payee cheques from regular banking account and accordingly allotted shares of listed public limited companies and also purchased shares online in the process of screen based trading activity from the open market. The ld AR submits that every listed public limited company has to carry out and comply all necessary procedures, compliances laid down under the SEBI regulations and the listing agreement of stock exchange before allotment of shares in favor of applicants under preferential allotment. All the

19 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. conditions for claiming exemption u/s 10(38) of the Act are fully satisfied by the assessee and all his family members from time to time while claiming the exemption in the income tax returns for the relevant assessment years under appeal. The dates of purchase/allotment of equity shares, mode of payment of purchase being by account payee cheques only, period of holding, dates of sales of equity shares through the online screen based trading on the BOLT platform of stock exchange, identifications and details of SEBI and stock exchange registered reputed brokers through whom sales of shares were made namely India Advantage Securities Limited, Anand Rathi shares and stock broker Ltd, transaction related expenses such as brokerage, service tax, STT, stamp duty, exchange and SEBI turnover charges etc are already on records of the revenue and also forms part of assessment order and CIT(A)’s order in case of respective appellants of Gadhiya family. The ld AR submits that the Ld. AO in the impugned assessment orders has rejected the claim of exemption u/s 10(38) of the Act and made additions of the entire sale proceeds of shares as unexplained credit u/s 68 of the Act, alleging that the appellant has arranged bogus LTCG by trading in penny stock companies in his name and in the name of his family members based on following i) investigation report of directorate of investigation wing, Kolkata; ii) alleged bogus LTCG resulting from steep movement of share prices etc detailed in the assessment order.; iii) statements recorded by the directorate of investigation wing, Kolkata of various parties namely Sajjan Damodar Prasad Kedia, Jagdish Purohit, Manoj Kumar Agarwal, Rajkumar Kedia and Soumen Choudhury etc; iv) alleged parties related to Red

20 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Ford Global Limited, depositing of cash in some of the bank accounts, listing them as exit providers etc.. The ld AR submits that in essence the entire addition is based on preponderance of possibilities, circumstantial evidences and not based on justifiable/clinching evidences, human conduct in general and not specific findings or allegations on the assessee and his family members. There are several judicial pronouncements of jurisdictional ITAT and High Courts wherein it has been categorically held that addition based on such general hypothesis cannot be made. The ld AR submits that during the course of investigation proceedings that statements of appellants and his family members were recorded by the investigation department which are extracted in the relevant assessment order on page 46 to 58 and page 111 to 118 and none of the family members of the assessee and he himself have made any confession, acceptance or affirmations in their respective statements which can result into denial of claim of exemption u/s 10(38).

7.1. The ld AR also contended that during the course of assessment proceedings and appellate proceedings before CIT(A), the appellant filed all documents for establishing bonafide and genuineness of claim of exemption u/s 10(38) of the Act. Besides all the other family members of the assessee have accepted the averments made in the statement of the assessee. The ld AR submits that on going through the statement of the appellant and his family members, it can be appreciated beyond doubt that the complete trail of preferential allotment based investments and/or online purchase of shares

21 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. on screen based trading activity of the Bombay stock exchange, documents related to purchases, proofs and source of money for purchase of shares by account payee cheques, splitting of shares into lower denomination, receipt of bonus shares in some of the cases, earning of dividend income, sale of shares, name of brokers through whom shares were sold in the open market paying STT on screen based trading activity of the stock exchange etc at length. All this documentary evidences in case of the appellant and all his family members for the respective assessment year are on record before the authorities below. Therefore, the denial of claim of exemption made by the Ld. AO ignoring the relevant and factual documentary evidences filed by the appellant is absolutely improper and against the principle of natural justice and equity.

7.2. The ld AR, while referring to the assessment order, submits that none of the descriptions, allegations, observations, findings, statements reproduced etc in the impugned AO as mentioned in para 9, 10 and 11 page no. 9 to 45 and para 13, page no. 64 to 94 of the impugned assessment order are relevant or having any cogent, collaborative, identifiable or clinching to the LTCG realized by the appellant and his family members in the regularly carried out investment activities of shares and securities during the relevant assessment years under the appeal. The ld AR submits that the appellant had never transacted with any operator or such intermediary in the process of carrying out investments and further that the alleged operators and their records do not in any manner mention any connection with appellant and his

22 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. family members. The ld AR submits that the shares were duly allotted to the appellant and were recorded into the demat account upon such purchase/allotment. Shares were sold on BSE through regular registered brokers of assessee under screen based trading where the seller and buyer of shares are wholly unaware of the identity of the other person. STTs were paid at the time of sale of shares and proceeds were received into bank accounts of the assessee only through proper banking channel. The ld AR also explained the functioning of the stock exchange by referring to an explanatory note on functioning of stock exchange activity on page no. 156 of paper book so as to explain how the purchase and sale activity on online platform of stock exchange is carried out through clearing system.

7.3. The ld AR submits that based on inquiry and investigation of Wing, the AO has surmised that assessee and his family members routed his black money without establishing any money trail. The ld AR argued that the Ld. AO has hopelessly failed to establish that the appellant or his family members has paid any unaccounted money to any of the parties referred by the Ld. AO in the impugned AO. None of the replies to the questions of such parties indicates that they have received any unaccounted money from the assessee or his family members at the time of selling of these equity shares by the assessee. The findings of the Investigation Wing of the Revenue are general in nature and it is basically a study report and not specifically mentioning which cases are investigated. The ld AR argues that nowhere in the assessment order, the AO has established

23 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. any linkage between the reports of the investigation wing and assessee's transactions. Moreover the assessee was not confronted with the investigation report which was relied by the AO. The AR strongly argued that this is a fatal and incurable mistake on the part of the AO and can not be rectified as reliance on such investigation report, without confronting the assessee with the same, renders the assessment framed as bad in law. The Investigation in assessee's case by way of search did not reveal any connection with the findings or evidences as referred to in such reports. The ld AR in defense of his arguments relied on the decision of the Hon’ble Supreme Court in the case of Adamine Construction Pvt. Ltd. 99 Taxmann 45 wherein while dismissing the appeal, the Hon’be court has referred to observations of Delhi HC that what is evident is that the AO went by only the report received and did not make the necessary further enquiries such as into the bank accounts or other particulars available with him but rather based the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO.

7.4. The ld AR submits that the Ld. AO placed reliance on statements of several third parties without providing opportunities for cross examination which is contrary to the decision of Hon’ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses

24 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. by the adjudicating authority whereas the statement 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 amounts to violation of principal of natural justice because of which the assessee was adversely affected. The whole basis of making the addition is third party statement without there being any tangible material. The ld. AR submits that it is trite law that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law as held by Hon’ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151). The suspicion however strong could not partake the character of legal evidence as held by Hon’ble Supreme Court in Umacharan Shaw & Bros. V/s CIT (1959 37 ITR 271).

7.5. The ld AR submits that the Ld. AO has not made any allegation of commission payment and hence no addition u/s 69C of the Act was made. The ld AR submits that the assessee also in reply to question no. 44, page 51 of the AO has stated that no commission payment was made by him which is not disputed by the Investigation Wing and the Ld. AO. Since appellant and his family members are purchasing and selling shares online through screen based platform so there is no relationship with buyer or seller of the shares. There is no mention of any name of appellant or his family members in the evidences gathered by the department and unproven hypothesis elaborately discussed by the AO in the impugned assessment order.

25 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. 7.6. The ld AR submits that none of the alleged parties such as brokers, operators, directors, exit providers etc whose statements were recorded by the investigation wing Kolkata mentions name of the appellant and/or any of his family members. Reference to SEBI order in the impugned assessment order is of no consequences to the income tax proceedings which is different code in itself and none of the orders of SEBI refers to name of the appellant and any of his brokerage house. SEBI orders are intended to protect the interest of the investors and they are not the determining factor for establishing the tax consequences of any transaction of purchase and sales. Allotment and/or online purchase of shares of various companies has never been objected or disputed by SEBI/ROC/SE in the given case of appellant and his family members.

7.7. The ld AR submits that movement in prices of shares is governed by several factors without there being any nexus to the projects, projection etc and this fact gets clearly established if one refers to the present movement in shares of several companies. The Ld. AO has failed to establish any link to the process of rigging and manipulating of prices of shares in connivance with parties whose names are mentioned in the impugned assessment orders.

7.8. The ld AR also argues that the provisions of section 68 of the income tax Act, 1961 deals with a case, where any sum found credited in the books of accounts of an assessee in any financial year and assessee offers no explanation about the nature and source or explanation offered by the assessee is not

26 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. satisfactory in the opinion of the AO, then sum credited may be charged to tax for that assessment year u/s 68 of the Act which is not the case of the assessee. The assessee has received consideration from sale of shares on which he has made LTCG and furnished all evidences before the authorities below as has been held by the coordinate bench in the case of Shri Kunal Dedhia ITA no. 3893/Mum/2019. The ld AR relied on the following decisions: a. Shri Vijayrattan Balkrishan Mittal Vs DCIT (ITA No. 3429/Mum/2019) (Mumbai ITAT) b. Shri Kunal Dedhia Vs DCIT (ITA No. 3893/Mum/2019) (Mumbai ITAT) c. Mukesh B Sharma Vs ITO (ITA No. 6249/Mum/2018) (Mumbai ITAT) d. Dipesh Ramesh Vardhan Vs DCIT (ITA No. 7648/Mum/2019) (Mumbai ITAT) e. CIT Vs Shyam R. Pawar (2015) 54 Taxmann.com 108 (Bombay High Court) f. CIT Vs Shri Mukesh Ratilal Marolia (ITA No.456 of 2007) (Bombay High Court) g. CIT Vs Smt. Jamnadevi Agrawal (2012) 20 Taxmann.com 529 (Bombay High Court) h. Gateway Leasing Pvt. Ltd. Vs ACIT Writ Petition No.2518 of 2019 (Bombay High Court) i. ITO Vs M/s Arvind Kumar Jain HUF ITA No.4862/M/2014 (Mum-Trib.) j. Shri Sunil Prakash Vs ACIT ITA No.6494/M/2014 (Mumbai ITAT) k. ITO Vs Mrs. Rasila N Gada ITA No.1773/M/2010 & ors (Mumbai ITAT) l. ACIT Vs Smt. Pooja Arora ITA No.2788/M/2009 & ors. (Mumbai ITAT) m. Smt Anjli Pandit Vs ACIT ITA No.3028 to 3032/M/2011 & ors. (Mumbai ITAT) n. ACIT Vs Shri L. Jaipal Reddy ITA No.3607 & 3608/M/2009 (Mumbai ITAT) o. Ms. Farrah Marker Vs ITO ITA No.3801/M/2011 (Mumbai ITAT) p. Mayur M. Shah (HUF) Vs ITO ITA No.2390/M/2013 (Mumbai ITAT) q. Mr. Arvind Asmal Mehta Vs ITO ITA No.2799/M/2015 (Mumbai ITAT) r. ITO Vs M/s Indravadan Jain HUF ITA No.4861/M/2014 (Mumbai ITAT) s. Mr. Ramprasad Agarwal Vs ITO ITA No.4843/M/2018 & ors. (Mumbai ITAT) t. Shri Mukesh B Sharma vs. ITO ITA No.6249/M/2018 (Mumbai ITAT)

7.9. The ld AR also distinguished the decision relied upon by the Ld. AO and Ld. CIT(A) as follows:

i) Ld. AO has placed reliance on the judicial pronouncement of Hersh Win Chadha Vs DCIT (Delhi ITAT) and has resorted to

27 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. preponderance of possibilities by making additions. The said judgment is in context of Bofors deal in which several government agencies such as CBI, IB, R&AW, National defense etc produced variety of evidences where as in the given case of the appellant except the unproven hypothesis the Ld. AO has failed to establish the allegations made with regard to LTCG being bogus with any corroborative, justifiable and clinching evidences against the appellant.

ii) The Learned AO has also placed reliance on the judgment of Sumati Dayal on human probabilities. It is essential to note that the said judgment pertains to the source of income with regard to Horse racing activity before nearly 40 years for the A.Y. 1972-1973 when the system based electronically backed online documentary evidences were not available. Therefore, the concept of human probabilities was laid down. In the present time system based evidences are available and therefore these judgments are not relevant when the system based third party evidences are readily available regulated by the government authorities. This judgment with due respect has lost its relevance in the present time with evaluation of technology and availability of documents from regulatory authorities in the given case stock exchange, SEBI etc.

iii) In similar manners, in the case of Durga Prasad More which is pertaining to A.Y. 1958-59 pertaining to conveyance of documents, house property income, in whose name income should be taxed etc when evidence of online recording of documents were not available and accordingly with due respect

28 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. this judgment has also lost its relevance in the present time of technological evaluation.

iv) The judgment of CIT vs P Mohankaka is in the context of scope of section 68 of the act. The Hon’ble Mumbai ITAT in case of Kunal Dedhia (supra) in para 22 of the said judgment has categorically held that section 68 is not applicable in context of denial of claim of exemption u/s 10(38) of the act.

v) The facts and merits in the case of Usha Chnadresh Shah ITA No. 6858/Mum/2011 are completely distinguishable with that of the case of appellant. In the case of Usha Chandresh Shah the assessee could not produce the copies of share certificates and copies of share transfer forms. The transaction of purchase of shares could not be cross verified. The shares of M/s Prime Capital Markets Ltd was declared as “Penny Stock” by SEBI and the broker Sanju Kabra, through whom the shares were sold by the assessee was indicted for manipulating the prices of penny stock shares. Therefore, this judgment is not relevant in the context of present appeals.

vi) Arvind M Kariya Vs ACIT ITA no. 7027/Mum/2010 is direction for set aside matter for afresh review by the assessing officer and there are no conclusive findings of the Hon’ble court and therefore, it is not relevant.

vii) In the case of Somanth Mani Vs ITO the proposition of human probabilities is advanced. However, as explained in the preceding paragraph when documentary evidences are available

29 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. in abundance duly verified by third party the concept of human probabilities loses its significance.

viii) The judgment of Sanjay Bimalchand Jain (Bombay HC) is also distinguishable on facts and also not relevant as (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash (iii) The address of both the companies were interestingly the same (iv) The authorized signatory at both the companies were also the same person (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. This judgment was also distinguished by the Hon’ble Mumbai ITAT in case of Vijayrattan Balkrishan Mittal (supra) in para 30 page 67.

ix) The facts in the case of DIsha Lalwani vs ITO, ITA no. 6398/mum/2012 is in a different context of subscription to share application money and therefore not relevant in the present appeals.

x) Shri. Abhimanyu Soin Vs ACIT ITA No. 951/Chd/2016 is not applicable as in that case though the assessee has received the amounts by the way of account payee cheques, the assessee could nowhere prove the purchase of shares as claimed to have been made on 02/12/2008 in cash and it was also not proved about the availability of the funds with the

30 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. assessee as on the date of purchase of shares. The assessee was not in India as per the passport details available as per the record. This, coupled with the fact that the transfer of money in cash from Ludhiana to Delhi and a person representing the broker operating at Kolkata has collected the money at Delhi cannot be accepted.

xi) Chnadan Gupta Vs CIT is also not applicable as in this case it was held that no sale or purchase of the shares was done by the assessee but only entries of the capital gains were given to the assessee on receipt of cash payment. It was recorded that since the assessee had only filed copy of sale and purchase bill and showed inability to produce the broker, the Assessing Officer was right in conducting the enquiries on his own. Further, the bogus capital gains have been generated by the assessee and, therefore, the quotations in a diary was of no help to the assessee. From a perusal of questions and answers, it appeared that the assessee had not done any share business before financial year 2003-04 and after financial year 2004-05 in which he had earned capital gains of Rs. 51 lakhs. These are not the facts of the present appeal.

xii) Further facts in Shamim M. Bharwani Noor-E-Rehmant, ITA 4906/Mum/2011 is also completely distinguishable as the assessee was not a registered client of the broker. The purchase was in cash, so that it was not verifiable. The said transaction was not through the stock exchange. The shares were in a nondescript company, with no financial and/or physical assets of value or reported earnings.

31 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. xiii) ACIT Vs Shri Neeraj Panjwani case related to acceptance of miscellaneous application and therefore is not relevant in the resent context.

xiv) Similarly M/s Pankaj Agarwal & Sons Vs ITO is not applicable to the facts of appellant case since in that case plea for cross examination of witnesses and furnishing of investigation report was made and which were never made below lower authorities.

xiv) In case of Rajkumar B. Agarwal Vs DCIT the Broker was suspected in illegal trading by SEBI. Complete details including Demat statement were not given by the assessee. Therefore, the proposition of human probabilities is advanced. However, as explained in the preceding paragraph when documentary evidences are available in abundance duly verified by third party the concept of human probabilities loses its significance.

7.10. Finally, the ld AR prayed before the bench that in view of the facts and merits and decisions as discussed above the , the ground no. 3 may kindly be allowed.

32 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. business and during the course of search and seizure action evidences of receipt of on money were found. The main reason for carrying out the search action was that the assessee and his family members had received, pre arranged and pre conceived bogus Long Term Capital Gains by dealing in scrips of penny stock companies. It was gathered that the assessee group had invested nearly a sum of Rs. 3.86 crores, in the shares of very small companies, through preferential route (and not normal stock exchange operation) and had earned Long Term Capital Gains of over Rs. 74 crores, in A.Y. 2014-15 and other years, which is exempted from tax. The ld AR stated that the AO in para 2.1 of the assessment order has clearly mentioned that cash funds generated from construction and real estate business and diamond trading, which were entered in the books of accounts of Gadhiya group through bogus Long Term Capital Gains by selling these penny stock. The ld DR argued that during the course of search & seizure action, plethora of evidences have been gathered against cash deposits in the bank accounts of entry operators, which facilitated bogus Long Term Capital Gains to the assessee, purchase of shares by the assessee and his family members at very low price through preferential route and not through normal stock exchange operation and evidences of gradual rigging of prices of these selected 7-8 companies through circular trading and through low volume transactions. It has been found that the value of scrip was gradually raised substantially within a period

33 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. of about one year and the shares were sold through a set of exit providers who manipulated and booked huge losses. It is gathered that initially nationwide searches were carried out by Investigation Wing, Kolkata of the Income Tax Department in December 2014, during the course of which it was found that various persons had received entries of Long Term Capital Gains through rigging of shares of small listed companies and the name of the present assessee and his family members prominently appeared therein. During the course of search it was accepted by the stock brokers that relevant companies were bogus companies (Jama Kharchi companies) and that they were being used only for providing accommodation entries. Statements of various entry operators, directors of companies were also recorded wherein they had accepted that these companies were being used for providing bogus Long Term Capital Gains. These facts have been elaborately discussed by the CIT(A), and also by the AO, which are the subject matter of the present appeal.

8.1. The ld DR submits that subsequently investigation were carried out by the SEBI and it banned trading in shares of these companies vide order dated 19.12.2014 and banned the relevant stock brokers also vide order dated 02.06.2016. SEBI in its order dated 02.06.2016 very clearly held that trading in the relevant scrips (8 companies) namely Comfort Fincap Ltd., Global Infratech & Finance Ltd., Pine Animation Ltd., Sunrise Asian Ltd., PSIT Infra and

34 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. services Ltd., Scan Infra Ltd., Nageshwar Inv. Ltd., and Splash Media & Infra Ltd. (Page 9 of the CIT(A) order), was unusual and suspicious. Thereafter the Mumbai Wing of Investigation carried out search & seizure action on the premises of the assessee on 06.01.2016, as they were major beneficiaries of Long Term Capital Gains received from dealing in shares of the companies based at Kolkata. In fact the transactions of the assessee and his family members were part of a huge scam of bogus Long Term Capital Gains unearthed by Kolkata Wing and Mumbai Wing of Investigation their findings were fortified by the investigations carried out by SEBI also.

8.2. The ld DR referred to the detailed modus operandi of this bogus Long Term Capital Gains has been discussed by the AO in para 6 to 6.5 of the assessment order on page 5 to 8 of the assessment order, where the findings of Kolkata wing of Investigation and SEBI investigations have also been briefly mentioned. It is relevant to mention over here that the CIT(A) in first 96 pages of his order dated 22.02.2019 has discussed various evidences found during the course of search, which proves beyond doubt that these Long Term Capital Gains received by the assessee and his family members was actually pre conceived and pre arranged and was therefore bogus in nature. The ld DR referred to the findings of the ld CIT(A) to the effect that huge cash deposits amounting to Rs. 5.37 crores during F.Y. 2012-13 and Rs. 8.36 crores during F.Y. 2011-12 were made in the bank accounts of M/s. Ashok Commercial

35 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. enterprises (PAN- AAAFA9227F) maintained with State Bank of India, bank account no. 530506952250. From this account money was channelized in the account of M/ s Jai Bhagwati Impex Pvt. Ltd. which purchase the share of bogus scrip of Global Infra from the present assessee. Thus the exit providers or the parties who purchase the share from the assessee group had no funds to buy such shares and therefore fund infusion was arranged. These details have been discussed in detail by the CIT(A) at page no. 93 to 95 of the appellate order dated 22.02.2019, which is the subject matter of this appeal and he has discussed in details the money trail also. Page 12 of the CIT(A) order discusses statement of Shri Bharat Gadhiya brother of the assessee, which was one of the beneficiaries of bogus Long Term Capital Gains and he has very clearly accepted that he was not aware of his demat account etc and did not have any knowledge of share market and mentioned that entire thing was being done by his brother Shri Vinod Gadhiya. Similar statement was given by Rita Gadhiya and Vipin Gadhiya whose statements are recorded on page 15, 16 and 17 of the appellate order. In these statements they have completely expressed ignorance about the share activities and demat accounts etc. Similarly statement have been given by Sangeeta Gadhiya (page 23 of CIT(A)'s order), Arun Gadhiya (page 25 and 26 of CfJ'(A)'s order), Parth Gadhiya (page 37 and 38 of CIT(A)'s order). Shri Vinod Gadhiya's statement is reproduced on 38 to 49 of CIT(A)'s order), wherein in response to question no. 29 he mentioned that he did not

36 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. know the exact details of preferential allotment of shares to him and his family members. In question no. 30 he mentioned that he did these transactions on advice of one Shri Vinay Jain but in response to question no. 31 he expressed his inability in telling his mobile no. or address or details of his office or business activities. The assessee also could not tell as to who introduced Vinay Jain to him. Then in question no. 40 he was asked whether any due diligence was done or not and he replied in negative. In question 45 he was asked whether he know anything about the company Comfort Fincap Ltd., he replied that he did not know anything about the business activities of this company and he further said that he made investment on the advice of one Shri Bharat Shiroya but when he was asked further, he could not give any satisfactory reply about Shri Bharat Shiroya. Similarly he also could not tell even simple details about the companies PSIT Infrastructure and industries Ltd. and Sunrise Asian Ltd. The CIT(A) has summed up his findings on page 49 and 50 of the appellate order and held that these transactions were accommodation entries.

8.3. The ld DR submits that the CIT(A) has further discussed statement of one Shri Mukesh P. Chouhan on page no. 50 to 60 of the appellate order in respect of BLC trading and agencies pvt. Ltd. one of the exit providers to Gadhiya group. Shri Mukesh Chouhan had clearly mentioned that he was working only as a tempo driver and his income was only Rs. 2 lakh p.a and that he was only

37 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. th standard and that entire work of BLC educated till 5 trading was looked after by one Pradeep Choudhary and Ranu Bheem Sariya. Thus he was only a director for the name sake and entire company was being controlled by the entry providers. On page 61, the CIT(A) has discussed statement of Shri Sajjan Kedia, Chairman of PSIT Infrastructure and services Ltd. In the said statement Shri Sajjan Kedia dearly mentioned that activities of this companies along with activities of Global Infra and Finance Ltd. were dearly managed by one Shri Jagdish Purohit. In response to question no. 15 he is saying that Shri Jagdish Purohit used to convert the black money into Long Term Capital Gains for various persons. Similarly statements have been given by Shri Anuj Sushil Kumar Agarwal (page 64 of the appellate order) wherein he has mentioned that these transactions were bogus in nature.

8.4. The ld DR further informed the bench that during the course of investigation statement of one Shri Raj kumar Kedia, New Delhi has also been recorded on 13.06.2014. Shri Rajkumar Kedia is a Delhi based entry provider. In his statement in response to question no. 11 he has very clearly mentioned that these Long Term Capital Gains received by the assessee and others were bogus in nature. Similar statement has been given by Shri Anil Kumar a Kolkata based entry operator during the course of survey u/s 133A, which is mentioned on page 82 to 86 of the CIT(A) order and confirmed that they were simply working for commission to provide accommodation entries. Shri Soman Choudhary in

38 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. respect of Gateway Financial Pvt. Ltd. Kolkata has clearly mentioned that various companies from which assessee received huge Long Term Capital Gains were only jamakharchi companies, namely paper companies without actually doing any business. In response to question no. 15 (page no. 90 of the CIT(A) order) he mentioned that cash was received from the operators/managers and the cash was deposited in different bank accounts and then funds were generated through different accounts and ultimately leading to purchase/sale of shares. The CIT(A) has also examined the movement in the price of various scripts which are part of the Annexure of CIT(A)'s order which clearly shows that prices were moved many fold in a short span of about one year and then these shares were sold by Gadhiya family to exit providers to obtain bogus Long Term Capital Gain. The CIT'(A) has also relied upon various decisions of Hon'ble Supreme Court and High Courts namely Hon’ble Supreme Court decision in the case of CIT vs. Durga Prasad More. 82 ITR Sumati Dayal vs. CIT, 214 ITR 801 (SC). CIT vs. P. Mohankala, (2007) 291 ITR 278 (SC), as also Attar Singh Gunmukh Singh vs. ITO 191 ITR 667 on which are also relied upon with prayers to confirm the order of the CIT(A) by dismissing the appeal of the assessee.

39 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. shares were allotted to the assessee two times i.e. first on 19.01.2012 and thereafter on 12.06.2012. Both the times the assessee was allotted shares at Rs.15 comprising face value of Rs.10 and premium of Rs.5. These shares were listed on the recognized stock exchange and thereafter the prices of the shares went up spirally manifold. These shares were thereafter split and sub divided in the ratio of 1:10 on 13.12.2012 meaning thereby that per one share of Rs.10 each the assessee was allotted 10 shares of Rs.1 each. This was followed by issue of bonus shares in the ratio of 10:1 on 14.11.2014. We note that the assessee has invested in these shares by making a payment through account payee cheques from the regular bank account of the assessee and were held in D-Mat account and after being held for more than 12 months these shares were sold through the recognized stock exchange through the registered brokers on different dates starting from 28.05.2013 till 13.07.2013 at a total sale consideration of Rs.16,82,26,728/- thereby making a long term capital gain of Rs.16,46,90,843/-. Now the issue before us is whether the claim of the assessee under section 10(38) of the Act is correct or not. This is undisputed fact that assessee is a regular investor into stock and share as is apparent from the facts on record as the assessee is holding more than 65 scrips during the year. We also note that the company M/s. Global Infra Tech and Finance Pvt. Ltd. in which the assessee invested money and earned long term capital gain of Rs.16,46,90,843/- is a listed company on the stock exchange and subjected to various rules and regulations and compliances which has to be complied with before making any allotment to the applicant

40 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. under preferential allotment process. We also note that Shri Vinod L. Gadhiya the assessee throughout the search proceedings and assessment proceedings maintained that he was not part of any organized activity or being beneficial of accommodation entries to earn the long term capital gain from the sale of shares held in M/s. Global Infra Tech and Finance Pvt. Ltd. We have also examined the various documents filed by the assessee in the paper book regarding date of purchase, allotment of equity shares, mode of payment of shares through account payee cheque, period of holding and sales of these shares through online screen based trading on Bolt platform of stock exchange through registered brokers M/s. India Advantage Securities Ltd., M/s. Anand Rathi Shares and Stock Brokers Ltd. and also the proof of expenses incurred by the assessee by way of brokerage, service tax, STT, stamp duty, Exchange and SEBI turnover charges etc. The assessee has filed all these proofs before the AO as well as the Ld. CIT(A) as has been stated hereinabove and are being reproduced for the sake of convenience. i. Evidence of purchase of shares – Application of shares, allotment of shares, share certificates ii. Evidence of payment for purchase of shares made by account payee cheques, copy of bank statements iii. Copy of Demat statement reflecting purchase iv. Copy of Demat statement showing sale of shares v. Copies of contract note of sales of shares vi. Copy of bank statement reflecting sales receipt vii. Copy of brokers ledger.

The AO has rejected the claim of the assessee by disbelieving all the above documents which are a third party documents and treated the sale of shares as unexplained cash credit under section 68 of the Act on the ground that assessee

41 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. has earned this long term capital gain by trading in penny stock company and relied heavily on the investigation report of Directorate of Investigation Wing, Kolkata, upward movement of share prices, statements recorded by the Directorate of Investigation Wing, Kolkata of various parties such as Shri Sajan Damodar Prasad Kedia, Shri Jagdish Purohit, Shri Manoj Kumar Aggarwal, Shri Sanjay Dey, Shri Raj Kumar Kedia and Shri Souman Choudhary etc. and the fact that these parties were related to Red Ford Global Ltd. who were of exit providers. Thus we note that AO has relied mainly on the statement of third parties and circumstantial evidences and no substantive and specific material was brought on record to prove these allegations and similarly Ld. CIT(A) has reproduced the entire order of AO and upheld the same by holding that assessee was beneficiary of accommodation racket and doubted only the manifold increase in the share price by rejecting the facts on record and various evidencing and corroborating those facts. It is pertinent to mention that none of the family members or the assessee has ever confessed either during the search proceedings or during the assessment proceedings the allegation as labeled by the AO or by the search party. There are no findings in the AO’s order about any incriminating material/document found during the search pertaining to the earning of long term capital gain by the assessee. The assessee has furnished various documents as stated hereinabove to corroborate the claim under section 10(38) of the Act. We note that assessee has furnished all the details qua bank accounts, D Mat and trading account, process of preferential allotment and the person to whom the investments were made and also

42 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. the contract note qua the sale of shares on the recognized stock exchange through registered stock brokers. We also note that in the investigation carried out by the Directorate of Investigation Wing, Kolkata and also in the statements recorded of various individuals as stated hereinabove. We find that nowhere the assessee’s name figured and no evidences were found during the course of search and the entire allegations were based upon the surmises and conjunctures. The shares were duly allotted to the assessee and were recorded in the D-Mat account and thereafter were sold on the Bombay Stock Exchange through the registered broker and screen based trading where the buyer and seller of the shares are not aware of each other and the fact that the consideration was paid and received through banking channels. Moreover, the authorities below have failed to establish the money trail involved in the transaction and has only guessed that assessee might have paid his own money to route the same into books of accounts which were generated through the real estate development and diamond trading. Thus we note that the finding of the AO in discussing the modus operandi of the scam and dismissing the various statements of the exit providers is only general in nature which nowhere states the name of the assessee. The AO has also failed to establish a link among these reports, statements and the investment made by the assessee and therefore the addition made can not be sustained. The case of the assessee finds support from the decision of the Hon’ble Apex Court in the case of Adamine Construction Pvt. Ltd. 99 taxman 45 wherein while dismissing the appeal of the

43 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. Revenue has referred to the following observation of the Hon’ble Delhi High Court. “What is evident is that the AO went by only the report received and did not make the necessary further enquiries - such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO.”

9.1. Further, we note that the AO has relied on the statement of his third parties without affording any reasonable opportunity to the assessee to cross examine those parties which is in violation of principle of natural justice as has been held by the Hon’ble Apex Court in the case of Andaman Timber Industries vs. CCE (CA) No.4228 of 2006 wherein it was held that not allowing assessee to cross examine the witness by adjudicating authority though the statements of 6 witnesses were made the basis of the impugned order is nullity in as much as which amounts to violation of principles of natural justice because of which the assessee was adversely affected. Besides the addition merely on the basis of suspension, conjuncture and surmises can not be sustained. The case of the assessee finds support from the decision of Hon’ble Apex court in the case of Omar Salay Mohamed Sait V/s CIT (1959) 37 ITR 151. The Hon’ble Apex Court in the case of Umacharan Shaw & Bros. vs CIT (1959 37 ITR 271) has held that suspicion how so far strong could not take the character of legal evidence.

9.2. We further note that the AO has not made any allegation of commission payment on the alleged accommodation entries and no addition has been made under section 69C of the Act.

44 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. The assessee has categorically stated in reply to question No.44 at page No.51 of the assessment order that no commission was paid by him which is not disputed by the investigation wing or by the AO. Further, we also note that there is no relationship of the assessee/his family members with those persons from whom the shares were purchased or sold and no such mention of the name of the assessee or his family member was there in the evidences gathered by the Department. Thus we note that none of the parties alleged by the Revenue such as broker, operator, directors, exit providers etc. whose statements were recorded by the Directorate of Investigation Wing, Kolkata stated the name of the appellant/his family member. The case of the assessee is supported by a series of decisions as has been relied upon by the Ld. Counsel of the assessee during the appellate proceedings before us as under:

(a) In the case of Kunal Dedhia vs. DCIT ITA No.3893/M/2019 A.Y. 2014-15 & ors. order dated 31.07.2020 the Bench observed as under:

“22. The provisions of section 68 of the Income Tax Act, 1961 deals with a case, where any sum found credited in the books of accounts of an assessee in any financial year and assessee offers no explanation about nature and source or explanation offered by the assessee is not satisfactory in the opinion of the AC, then sum credited may be charged to tax for that assessment year. In case, any sum found credited in any financial year, the assessee is required to prove, the identity, genuineness of transaction and credit worthiness of the creditor. In this case, although the AO has brought sum received towards sale of shares as unexplained credit, but the same-needs to be examined with reference to first two aspects of section 68 of the Act, being the identity and genuineness of the transaction and the other aspect being credit worthiness is strictly not necessary, because the sum received towards sale of shares is neither a loan nor a credit. Therefore, the transaction is required to be tested under first two limbs, i.e. the identity and the genuineness of the transaction. To prove identity of sum received towards sale of shares, the assessee has filed complete details of amount received from the broker who facilitate transfer of

45 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. shares including, contract note issued by the broker for sale of shares in BSE, ledger polio signed by the broker, confirmation from the broker. In fact, there is no dispute with regard to identity of the broker, because the broker who sold shares for the assessee was a registered broker with BSE/NSE, In so far as genuineness of transaction, transfer of shares is made through demat format in BSE platform. There is no link or nexus between the buyer of shares and the assessee. Although, the AO, linked sale of shares to so called exit providers from whom the assessee had initially purchased shares, but said transaction was done almost two year later. The assesses has paid STT on transfer of shares. The shares have been transferred to the buyer after payment of applicable stamp- duty and the share transfer agent endorsed the sale. The sale proceeds have been paid thorough bank. The sale has been made on the prevailing quoted rate in stock exchange on the date of sale. As regards allegation of the AO regarding jacking of shares price through group of persons involved in the alleged scam, we find that although SEBI has suspended trading particular Script in BSE/NSE pending enquiry, but after enquiry suspension was revoked and only after the script, was again starts trading in exchanges, the assessee has purchased shares. From the above, it is very clear that the observations of the AO in his assessment order on the basis of report of investigation wing, Kolkata is a general observation of modus operandi of certain brokers may be involved in alleged scam of LTCG, but it cannot be a conclusive evidence to draw an adverse inference against the assessee of having benefited from so called alleged scarn. No doubt, an alleged scam may have taken place. But, it has to be seen whether the assessee is part of an alleged scam and he had any direct or indirect role in alleged scam. Unless, the evidences in the possession of the AO directly or indirectly linked to the assessee, it is difficult to implicate the assessee in the alleged scam. This is because, suspicion however strong, cannot take place of evidence as held by the Hon'ble Supreme Court in the case of Umacharan Shaw & Bros vs. CIT(1959) 37 ITR 271(SC). In our considered view, on the basis suspicion, modus operand!, preponderance of human probabilities, the claim of assessee cannot be discarded, unless specific evidences are brought on record to controvert voluminous evidences filed by the assessee. This view is fortified by the decision of Hon'ble Supreme Court in the case of Oman Salay Mohamed Sait vs. CIT (1959) 37 ITR 151(SC> where it was held that no addition can be made on the basis of suspicion and conjectures. In the case of CIT vs. Daulat Ram Rawatmuil (1973) 87 ITR 349 (SC) it was held that the onus to prove that apparent is not real is on the person who claims it to be so.”

(b) In the case of Vijayrattan Balkrishan Mittal vs. DCIT ITA No.3429/M/2019 & ors. order dated 01.10.2019, the co- ordinate Bench has held under similar facts by following various decisions of the Apex Court and Hon’ble Bombay High Court that addition made while rejecting the claim of the

46 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. assessee under section 10(38) of the Act be deleted vide para No.30 to 37 of the said decision.

(c) In the case of Mukesh B. Sharma vs. ITO ITA No.6249/M/2018 A.Y. 2014-15 order dated 29.05.2019 the scip involved was of the same company and the addition was deleted by the co-ordinate Bench by observing and holding as under: “6. We have heard the rival submissions. The primary facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The assessee submitted the following details with regard to purchase of shares :-

a) Copy of relevant extract of bank statement reflecting the payment of Rs 30 lacs made by the assessee by account payee cheque to the company directly and source thereof along with allotment letter issued by the said company (i.e GIFL) and copy of share certificate issued by GIFL to the assessee on 12.6.2012. These documents are enclosed in pages 71 to 73 of Paper Book. b) Demat account held with NKGSB Co-operative Bank Limited reflecting credit of shares purchased (enclosed in page 154 of Paper Book). c) Copy of approval letter from GIFL. d) Copy of allotment letter from GIFL for shares allotted to the assessee. e) Copy of share certificate issued by GIFL. f) Various events reported by GIFL to BSE.

6.1. The assessee submitted the following details with regard to sale of shares:- a) Copy of demat statement reflecting the sale of shares. b) Copies of Contract Notes issued by both the brokers for sale of shares. c) Copy of Holding Statement for financial years 2012-13 and 2013-14. d) Price chart of GIFL from the date of purchase of shares till the recent period. e) Copy of relevant extract of bank statement of the assessee reflecting the sale proceeds received from the broker and credited to the bank account.

6.2 We find that the assessee pleaded that in an online platform, there would be no nexus between the purchasers and the seller and the delivery of shares and payments would be made through their respective stock brokers. Hence the ld AO ought to have summoned the assessee’s brokers to examine the authenticity of the sale of shares of GIFL and the amount received on sale of shares. We find that the ld

47 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. AR also placed evidences on record to prove that the said company GIFL is still listed in the stock exchange and shares of this company are being traded and SEBI had not passed any adverse order against the said company. We find that the details of revenue and profits of GIFL for various years are as under:- Financial Year ending Revenue Profit

31.3.2012 191 lacs 7.97 lacs 31.3.2013 1515.58 lacs 105.13 lacs 31.3.2014 2487 lacs 161 lacs 31.3.2015 3836 lacs 76 acs

6.3. We find that the ld AO had placed reliance on certain statements recorded by the Investigation wing of Kolkata Income Tax Department during some survey proceedings conducted in third party cases. We find that in none of those statements, the name of the assessee or the name of the brokers through whom assessee had transacted were mentioned. We also find that there is no mention of any connivance on the part of the assessee with the share broker and stock exchange to launder the unaccounted monies of the assessee and bring it back in the form of sale proceeds of shares and claim exemption u/s 10(38) of the Act for the long term capital gains derived thereon. None of the parties on whom survey actions were conducted in Kolkata were related to assessee or the brokers in any manner whatsoever. We find that the various purchase and sale details together with the supporting evidences were not controverted by the revenue before us. Even the cross examination of the parties mentioned in the show cause notice issued to the assessee by the ld AO were sought by the assessee and the same were refused by the ld AO . We find that the ld AO had also placed reliance on the order passed by SEBI while concluding that the transactions carried out by the assessee in the form of sale of shares as sham and bogus. From the perusal of the SEBI order dated 25.8.2016 in the case of First Financial Services Ltd, we find that from the extracts thereon, that it was stated that M/s GIFL was involved in providing exit to the sellers of equity shares of First Financial Services Ltd and no where stated that this company was involved in providing accommodation entries in the form of capital gains by transacting its own shares through the alleged bogus operators. We also find that the SEBI had passed on order dated 8.1.2018 in the case of GIFL, wherein it was found that the name of the assessee herein or the brokers through whom the assessee transacted were not even included in the said order as parties against whom any adverse inference / findings were found in respect of violation of provisions of SEBI. We find that SEBI had issued a show cause notice vide Reference SEBI/EAD- 12/SM/EE/693/25/2018 dated 8.1.2018 which are enclosed in pages 252 to 266 of the paper book. In pages 257 and 258 of the Paper Book, the list of parties to whom show cause notices were issued by SEBI is listed out. In the entire list, neither the name of the assessee nor his lbrokers were included. Later there was another show

48 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. cause notice vide Reference EFD/DRA3/OW/NB/6663/2018 dated 1.3.2018 was issued by Enforcement Department of SEBI mentioning the list of parties to whom show cause notices were issued. Even in this list, the name of the assessee or his broker was not included by SEBI. Hence it could be safely concluded that SEBI did not allege any wrong doing on the part of the assessee or his brokers with regard to carrying out transactions in sale of shares of GIFL in open market in online platform. In this subsequent show cause notice dated 1.3.2018, the SEBI also takes records the fact of issuance of shares on preferential allotment basis on 12.6.2012 by GIFL to various parties (which includes the assessee also though not named in the SEBI show cause notice). In this show cause notice also, the SEBI only accused Notice No. 1 to 7 listed in the said notice which admittedly does not include the assessee or his brokers, to have engaged in manipulation of price of the scrip of GIFL. The said show cause notice dated 1.3.2018 also stated that Notice Nos. 13 to 46 listed in the said notice which admittedly does not include the assessee or his brokers, to have sold the shares at inflated price and booked substantial profit. The said show cause notice dated 1.3.2018 also stated Notices Nos. 8 to 12 (which admittedly does not include the assessee or his brokers) were part of the manipulative scheme to make preferential allotment and manipulate the price, through, entities connected to company and promoter, to benefit promoter, promoter related entities and connected preferential allottees. It is not the case of the revenue that the assessee or his brokers were either the promoters of GIFL, or promoter related entities of GIFL or related to connected preferential allottees thereon. Hence it could be safely concluded that the SEBI had not found any adverse findings with regard to the assessee or his registered share brokers vis a vis GIFL. Hence there is absolutely no iota of evidence linking the assessee or the registered brokers to even remotely allege that they were involved in artificial rigging of price of scrips which were dealt by the assessee herein.

6.4 We find that the ld AO had stated that GIFL is a company of no value. The revenue stream and the profitability chart reproduced hereinabove does not support the case of the ld AO. Moreover, the status reported by the ld AO about GIFL was in Asst Year 2008-09 which is neither the year of purchase of shares by the assessee nor the year of sale of shares in open market. Hence those findings are totally irrelevant for adjudication of the issue before us. 6.5. We find that the revenue had merely disbelieved the entire documentary evidences on record and alleged the share sale transactions made in the open market as bogus based on the statements recorded during survey, which does not have any evidentiary value. Reliance in this regard is placed on the decision of Hon’ble Madras High Court in the case of S.Khader Khan (2008) 300 ITR 157 (MAD) assumes significance, wherein it was held that :- “An admission is an extremely important piece of evidence , but it cannot be said that it is conclusive and it is open to the person , who made it, to show it has

49 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. incorrectly been made and the person, making the statement should be given proper opportunity to show that it does not show the correct state of facts.” The materials found in the course of survey could not be the basis for making any addition in the assessment. The word “may” used in section 133A(3)(iii) makes it clear that the material collected and statement recorded during the survey u/s 133A of the Act are not conclusive piece of evidences by itself. The aforesaid decision was affirmed by the Honourable Supreme Court in CIT , Salem vs S.Khader Khan in Civil Appeal No. 13224 of 2008 & 6747 of 2012 dated 20.9.2012, wherein their Lordships of Supreme Court held as under:- CIT vs S Khader Khan Son reported in (2012) 25 taxmann.com 413 (SC) / 210 Taxman 248 (SC) and 254 CTR 228 (SC)

“Heard Counsel on both the sides. Leave granted. The civil appeal filed by the department pertains to Assessment Year 2001- 02. In view of the concurrent findings of fact, this civil appeal is dismissed. ” In any case, we find that these statements were never subjected to any cross examination by the assessee despite the request made by the assessee in this regard, which has been summarily rejected by the ld AO. This fact is also recorded by the ld AO in his assessment order. Hence in these circumstances, we hold that no addition could be made merely based on the statements recorded during survey. 6.6. One more excruciating factor which goes in favour of the assessee is that the assessee had sold only 883000 shares out of 2000000 shares held by him and the remaining shares were retained by the assessee. Hence the allegations leveled on the assessee that assessee had converted his unaccounted money in the form of long term capital gains claimed as exempt does not hold water . Even these 883000 shares were sold after holding the same for a substantial minimum period of 26 months by the assessee from the date of its purchase. Moreover, when the purchase of shares made by the assessee has been accepted as genuine which was done in Asst Year 2013-14, the sale of the very same shares in part in Asst Year 2014-15 in open market at prevailing market prices after suffering STT should not be doubted . None of the documents filed by the assessee with regard to purchase and sale of shares have been found to be deficient in any manner whatsoever by the revenue. From the turnover chart stated hereinabove, it could be seen that the revenue of GIFL had increased from Rs 191 lacs as on 31.3.2012 to Rs 2487 lacs as on 31.3.2014. This goes to prove that the projections given by the said company in its invitation letter to the assessee requesting for making preferential application of shares had proved to be correct and cannot be doubted. 6.7. We find that the ld AO had furnished certain list of parties who were alleged purchasers of shares from the assessee when it was sold in the open market by the assessee. The assessee had pleaded that since the shares were sold in the open market in online platform, he is not aware of the name of the parties as to who had bought the same in the open market. The ld AO sought to issue summons to those alleged purchasers of shares u/s 131 of the Act, which remain uncomplied by those parties. Based on this, the ld AO had drawn an adverse inference against the assessee disregarding the entire documentary evidences on record and the prevailing market practices with regard to purchase and sale of shares in the open market in online platform. It is not in dispute that the assessee had received the sale proceeds of

50 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. shares from the registered broker through the stock exchange only and not from the alleged purchasers of shares directly. Moreover, the ld AO states that the assessee had sold the shares at Rs 211.76 per share whereas the average sale price of the assessee was only Rs 89 per share. 6.8. We find that the ld DR made general submissions with regard to the investigations carried out by Kolkata Income Tax Department after identifying 84 scrips to be penny stocks and the modus operandi adopted by those scrips with the connivance of various entry operators, brokers and stock exchange. We find that the ld DR was not specifically able to controvert the documentary evidences filed by the assessee for purchase and sale of shares and various other documents referred to in the Paper Book more particularly the SEBI show cause notice as detailed hereinabove, except stating that SEBI show cause notice was issued in the name of GIFL, the scrip in which assessee dealt. The ld DR also sought permission from the Bench to grant time for filing his written submissions with regard to the entire appeal. No such written submission was filed by the ld DR till the date of dictation of this order. The ld DR drew our attention to the statement recorded from the assessee by the ld AO during the course of assessment proceedings on 19.12.2016, the gist of which is mentioned in page 31 of Assessment Order. We have gone through the same and we find that the assessee had stated before the ld AO that he had made investment in shares of GIFL without looking into the fundamentals of the said company and based on information given by a family friend. We have already seen the documentary evidences available on record wherein the assessee in response to an invitation letter issued by GIFL for making investment in preferential allotment basis, had issued account payee cheques and got the shares allotted in his name on preferential allotment basis. These facts have also been noted by SEBI in the second show cause notice dated 1.3.2018 which has been discussed hereinabove. Merely because the assessee himself is engaged in independent manufacturing business , it cannot be said that all his investment decisions would be prudent and would be done only after analyzing the entire fundamentals and financials of the investee company. It is in everybody’s knowledge, that an investor would try to take calculated risks by investing his money on an unknown scrip based on certain information from friends, relatives, or in some stock market related websites and take a chance. Since the scrip purchased by the assessee was showing considerable growth from the time of purchase, the assessee being a gullible investor, continued to hold it for a period of 26 months and later sold it in open market in online platform at prevailing market prices. 6.9. We find that the co-ordinate bench of Kolkata Tribunal in ITA No.354/Kol/2018 in Sanjeev Goel (HUF) vs. ITO dated 24.08.2018 on similar set of facts and circumstances had held as follows:- “4. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 5. In identical cases, the submission of the assessee, findings of the Assessing Officer, findings of the ld. CIT(A) and the conclusion of the Tribunal have been brought out as under:- 6. The addition was made by the Assessing Officer by observing as under:- i. The initial allotment of shares to beneficiaries is generally done through preferential allotment.

51 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. ii. The market price of shares of these companies rise to very high level within a span of one year. iii. The trading volume of shares during the period, in which manipulations are done to raise the market price, is extremely thin. iv. Most of the purported investors are returned their initial investment amount in cash. Only small amount is retained by the operator as security. Thus, an enquiry would reveal that most of the capital receipts through preferential allotment or other means would have found their way out of system as cash. v. Most of these companies have no business at all. Few of the companies which have some business do not have the credentials to justify the sharp rise in Market Price of their shares. vi. The sharp rise in market price of the shares of these entities is not supported by fundamentals of the company or any other genuine factors. vii. An analysis in respect of persons involved in transactions apparently carried out in order to jack up the share prices has been done in respect of 84 companies. It has been noted that many common persons/entities were involved in trading in more than 1 LTCG companies during the period when the shares were made to rise which implies that they had contributed to such price rise. viii. Names of most of the LTCG companies are changed during the period of the scam. ix. Most of the companies split the face value of shares [this is probably done to avoid the eyes of market analysts]. x. The volume of trade jumps manifold immediately when the market prices of shares reach at optimum level so as to result in LTCG assured to the beneficiaries. This maximum is reached around the time when the initial allottees have held the shares for one year or little more and thus, their gain on sale of such shares would be eligible for exemption from Income Tax. xi. An analysis of share buyers of some of LTCG companies was done to see if there were common persons/entities involved in buying the bogus inflated shares. It was noted that there were many common buyers [which were paper companies]. xii. The prices of the shares fall very sharply after the shares of LTCG beneficiaries have been off loaded through the pre-arranged transactions on the Stock Exchange floor/portal to the Short Term Loss seekers or dummy paper entities. xiii. The shares of these companies are not available for buy/sell to any person outside the syndicate. This is generally ensured by way of synchronized trading by the operators amongst themselves and/or by utilizing the mechanism of upper/lower circuit of the Exchange.

52 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. b) There is direct evidence to clearly indicate that the entire transaction undertaken by the assessee was merely an accommodation taken for the purpose of bogus long term capital gains to claim exempt income. The authorities such as SEBI have after investigating such abnormal price increase of certain stocks, suspended certain scrips. c) The submissions of the assessee pointed out towards elaborate documentation such as : i) Application of shares. ii) Allotment of shares. iii) Share Certificates iv) Payment by cheques v) Filings before Registrar of Companies. vi) Proof of amalagamation of companies. vii) Copies of bank statement, viii) Bank contract notes. ix) Delivery instruction to the broker etc.

d) The elaborate paper book is filed to strengthen the matter relevant to bogus claim of LTCG, and this is clearly been schemed and pre-planned with malafide intention. Therefore, all these documents are not evidence. e) The transactions are unnatural and highly suspicious. There are grave doubts in the story propounded by the assessee before the authorities below. Banking documents are mere self-serving recitals.

53 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. The Hon’ble Jurisdictional High Court on similar facts, had in the following cases, upheld the claim of the assessee:- • CIT vs. Shreyashi Ganguli (ITA No. 196 of 2012) (Cal HC) 2012 (9) TMI 1113 • CIT vs. Rungta Properties Private Limited (ITA No. 105 of 2016) (Cal HC)dt. 08/05/2017 • CIT vs. Bhagwati Prasad Agarwal (2009 TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.04.2009

54 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. behavior by the department.

55 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the assessing officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. We, however, find that the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions.

“Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. The cancellation of the food grain licence at Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored. The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,--- this also was a pure conjecture or surmise on the part of the Income-tax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches the Income-tax Officer indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against which it showed a net loss of about Rs. 45,000. The Income-tax Officer indicated the probable source or sources from which the

56 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. appellant could have earned a large amount in the sum of Rs. 2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each”.

The observations of the Hon’ble Apex Court are equally applicable to the case of the assessee. In our view the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee.

a) Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors.

“23. A Constitution Bench of this Court in State of M.P. v. Chintaman Sadashiva Vaishampayan 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 to cross-examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131).

57 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this 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. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross-examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held: 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.

58 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors.

“4. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the Assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 5. According to us, not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them.

59 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. 7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.”

a) The CALCUTTA HIGH COURT in the case of BLB CABLES & CONDUCTORS [ITA No. 78 of 2017] dated 19.06.2018. The High Court held vide Para 4.1: “…………we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee’s appeal.” [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal’s finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed.”

b) The JAIPUR ITAT in the case of VIVEK AGARWAL [ITA No. 292/JP/2017] order dated 06.04.2018 held as under vide Page 9 Para 3: “We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the AO has also failed to establish that the assessee has brought back

60 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account.”

c) The Hon’ble Punjab and Haryana High Court in the case of PREM PAL GANDHI [ITA-95-2017 (O&M)] dated 18.01.2018 at vide Page 3 Para 4 held as under: “….. The Assessing Officer in both the cases added the appreciation to the assessee’s’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee’s’ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner.” The Court also held the following vide Page 3 Para 5 the following: “Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises.”

d) The BENCH “D” OF KOLKATA ITAT in the case of GAUTAM PINCHA [ITA No.569/Kol/2017] order dated 15.11.2017 held as under vide Page 12 Para 8.1: “In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT (A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT (A) to be false or

61 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act.”

Further in Page 15 Para 8.5 of the judgment, it held: “We note that the ld. AR cited plethora of the case laws to bolster is claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT (A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT (A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition.”

e) The BENCH “D” OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: “…….. We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. It further held as follows: “We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have

62 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition.”

f) The BENCH “A” OF KOLKATA ITAT in the case of SHALEEN KHEMANI [ITA No. 1945/Kol/2014] order dated 18.10.2017 held as under vide Page 24 Para 9.3:

“We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act.”

g) The BENCH “H” OF MUMBAI ITAT in the case of ARVIND KUMAR JAIN HUF [ITA No.4682/Mum/2014] order dated 18.09.2017 held as under vide Page 6 Para 8:

“……We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity

63 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transactions in M/s Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT (A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT (A) at para 3 to 5 has not been controverted by the department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT (A).”

h) The Hon’ble Punjab and Haryana High Court in the case of VIVEK MEHTA [ITA No. 894 OF 2010] order dated 14.11.2011 vide Page 2 Para 3 held as under: “On the basis of the documents produced by the assessee in appeal, the Commissioner of Income Tax (Appeal) recorded a finding of fact that there was a genuine transaction of purchase of shares by the assessee on 16.3.2001 and sale thereof on 21.3.2002. The transactions of sale and purchase were as per the valuation prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed.”

i) The Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: “The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank.”

j) The Hon’ble Supreme Court in the case of PCIT vs. Teju Rohitkumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon’ble Gujarat High Court as under: “It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly

64 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. supported by bills and payments were made by Account Payee cheque. Raj Impex also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises.”

6.10. It would be pertinent to address the case law relied upon by the ld DR before us on the decision of Hon’ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr.CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO’s letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee ; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash ; (iii) The address of both the companies were interestingly the same ; (iv) The authorized signatory of both the companies were also the same person ; (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon’ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the decision of Hon’ble Bombay High Court supra is factually distinguishable. 6.11. We find that the Hon’ble Jurisdictional High Court in the case of CIT vs Mukesh Ratilal Marolia in ITA No. 456 of 2007 dated 7.9.2011 had held as under:- 5. On further appeal, the ITAT by the impugned order allowed the claim of the assessee by recording that the purchase of shares during the year 1999- 2000 and 2000-2001 were duly recorded in the books maintained by the Assessee. The ITAT has recoded a finding that the source of funds for acquisition of the

65 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. shares was the agricultural income which was duly offered and assessed to tax in those Assessment Years. The Assessee has produced certificates from the aforesaid four companies to the effect that the shares were in-fact transferred to the name of the Assessee. In these circumstances, the decision of the ITAT in holding that the Assessee had purchased shares out of the funds duly disclosed by the Assessee cannot be faulted. 6. Similarly, the sale of the said shaers for Rs 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt Ltd and M/s Scorpio Management Consultants Pvt Ltd cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assesse nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s Richmand Securities Pvt Ltd regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s Richmand Securities Pvt Ltd held that the sale transaction was genuine. 7. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs 1,41,08,484/- represented unexplained investment under section 69 of the Income Tax Act, 1961 cannot be faulted. 8. In the result, we see no merit in this Appeal and the same is dismissed with no order as to costs. 6.12. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we hold that the ld CITA was not justified in upholding the action of the ld AO in bringing the sale proceeds of shares of GIFL in the sum of Rs 7,88,77,854/- as unexplained income of the assessee treating the same as just an accommodation entry. Consequentially, the addition made towards commission on such accommodation entry at the rate of 5% in the sum of Rs 39,43,898/- is also hereby directed to be deleted. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.” 7. (d) In the case of Dipesh Ramesh Vardhan vs. DCIT ITA No.7648/M/2019 A.Y. 2014-15 & ors. order dated 11.08.2020 the co-ordinate Bench has deleted the addition as made by the AO by rejecting the claim of the assessee under section 10(38) by observing and holding as under: “6. We have carefully heard the rival submissions and perused relevant material on record. So far as the factual matrix is concerned, there is no substantial dispute

66 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. regarding the same. The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee’s account during the month of March, 2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009-10 & 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon’ble Bombay High Court vide order dated 22/03/2013, a copy of which is on record. Consequently, the shares of M/s STL held by the assessee got swapped with the shares of M/s SAL and new shares were allotted to the assessee during June, 2013 pursuant to the approved scheme of amalgamation. M/s SAL is stated to be listed public company Group ‘A’ shares signifying high trades with high liquidity. The assessee has sold these shares through its stock broker namely M/s Unique Stockbro Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs.489/- to Rs.491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs.360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. 7. As against the assessee’s position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Shri Vipul Bhat or any of his group entities. However, nothing has been brought on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon’ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement 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 amounts to violation of principal of natural justice because

67 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. of which the assessee was adversely affected. The whole basis of making the addition is third party statement without there being any tangible material. It is trite law that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law as held by Hon’ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151). The suspicion however strong could not partake the character of legal evidence as held by Hon’ble Supreme Court in Umacharan Shaw & Bros. V/s CIT (1959 37 ITR 271). Therefore, we find that onus as caster upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and various entities of Shri Vipul Bhat. We find that the whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee’s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. 8. The allegations of Ld.AO that the assessee was part of the group which indulged in rigging or manipulation of prices of shares in connivance with Shri Vipul Bhat is not backed by any independent material. Firstly, there is nothing on record which establishes the fact that the assessee was acquainted with Shri Vipul Bhat or any of his entities and secondly, the onus casted upon assessee to prove the genuineness of the transactions was already discharged by the assessee. Shri Vipul Bhat, in his statement, stated that one Shri Sandeep Maroo acted as intermediary who introduced Vardhan family to him. However, no further investigations have been carried out to establish this vital link between the assessee and Shri Vipul Bhat. We do not find any independent investigations by Ld. AO to bring on record any tangible material to corroborate the same. There are no evident or even allegation of any cash exchange between the assessee and group entities of Shri Vipul Bhat. This is further evidenced by the fact that no substantial incriminating material / wealth of that magnitude has been found during the course of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is beyond doubt since it was a listed corporate entity and secondly, it was subject matter of scheme of amalgamation u/s 391 to 394. The scheme of amalgamation was duly been approved by Hon’ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. 10. The above conclusion is further fortified by the fact that in share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the adverse conclusion drawn by Ld. AO merely on the basis of the fact that the buyer of the shares were group entities of Shri Vipul Bhat, could not be sustained. The fact that there were independent buyers also would rebut the same and weaken the conclusion drawn by Ld. AO. 11. The Ld. AR has relied on plethora of judicial pronouncements in support of various submissions, which we have duly considered. These decisions would only support the conclusions drawn by us that once the assessee has discharged the

68 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. onus of proving the genuineness of the transactions, the onus would shift on the revenue to dislodge assessee’s claim and bring on record contrary evidences to rebut the same. Until and unless this exercise is carried out, the additions could not be sustained in the eyes of law. 12. To enumerate the few, the Hon’ble Bombay High Court in CIT V/s Shyam S.Pawar (54 Taxmann.com 108 10/12/2014) declined to admit revenue’s appeal since the revenue failed to carry forward the inquiry to discharge this basic onus. The co-ordinate bench of this Tribunal in Mukesh R.Marolia V/s Addl. CIT (6 SOT 247 15/12/2005) held that personal knowledge and excitement on events should not lead the Assessing Officer to a state of affairs where salient evidences are overlooked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this decision was firstly been approved by Hon’ble Bombay High Court vide ITA No. 456 of 2007 on 07/09/2011 and thereafter, special leave petition against the said decision has been dismissed by Hon’ble Supreme Court vide SLP No. 20146 of 2012 dated 27/01/2014 which is reported as 88 CCH 0027 SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) V/s ITO (ITA No. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to prove that the transactions were bogus, the Long-Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by the assessee on sale of same scrip i.e. M/s Sunrise Asian Ltd. 13. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. 14. The grounds relating to levy of interest as well as initiation of penalty, being consequential in nature, would not require any specific adjudication on our part. Finally, the appeal stands partly allowed in terms of our above order.”

(e) Similarly, in the case of CIT V/s Shyam S. Pawar (54 Taxmann.com 108 10/12/2014) the Hon’ble Jurisdictional High Court has upheld the order of Tribunal wherein the Tribunal has deleted the addition by observing that D-Mat account and contract note showed the credit/details of share transactions and that the Revenue had stopped enquiry at particular point and did not carry forward it to discharge its onus. In this case also the assessee has declared the capital gain on sale of shares of two companies which were done

69 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. through the brokers at Kolkata and performance of the concerned company was not such as would justify the increase in share prices and therefore the AO held the transaction as bogus and having been done to convert unaccounted money into accounted one and thus made the addition under section 68 the Hon’ble High Court dismissed the appeal of the Revenue on the ground that no subsidiary question of law arises. Similar ratio has been laid down by Hon’ble Bombay High Court in the case of CIT vs. Mukesh Ratilal Marolia ITA No.456 of 2007 and CIT vs. Jamnadevi Agarwal The ratio has been laid down by the Hon’ble Bombay (2012) 20 Taxman.com 529 (Bombay). We also note that the decision relied upon by the AO in the case of Hersh Win Chadha vs. DCIT (Delhi-ITAT) which was rendered in the context of Bofors deal wherein the several central agencies such as CBI, IB, RAW etc. were involved which produced authority of evidences. However, in the present case the AO has acted merely on the basis of surmises and conjunctures without bringing any corroborative clinching evidences to the effect that long term capital gain made by the assessee is bogus.

(f) Similarly, in the case of Sumati Dayal is on the human probabilities and deals with the source of income with regard to horse racing activity and relates back to as early as 40 years back for A.Y. 1772-73 when electronic system was not available and thus the concept of human probability was relied but in the present case everything is governed and managed electronically leaving a little scope for manipulation.

70 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. (g) In the case of Durgaprasad More the issue pertains to conveyance of documents, house property income and therefore not applicable.

(h) Similarly, the decision of CIT vs. P. Mohankala is in the context of scope and applicability of section 68. The Mumbai co-ordinate Bench in the case of Kunal Dedhia (supra) in para 22 has categorically reported a finding that section 68 can not be invoked to deny the claim of examination under section 10(38) of the Act. The facts and merits in the case of Disha Chandrani Shah ITA No.6858/M/2011 are completely distinguishable. In that case the assessee could not produce certificate and share transfer etc. and thus the transaction of share could not be verified and the penny stock company involved a prime capital gain limit was declared as penny stock by SEBI and the broker involved Mr. Sanjay Kabra who was also indicted for manipulating the share prices which is not the present case.

(j) Similarly, in the case of Arun M Karia vs. ACIT 707/M/2010 the matter was set aside for a fresh adjudication and there is no conclusive finding by the Hon’ble Court and therefore not relevant.

(k) The case of Sanjay Vimal Chand Jain of Jurisdictional High Court is also distinguishable on facts as the broker company through which the shares were sold did not respond to AO’s letter and the said decision of the Hon’ble Bombay High Court has been distinguished by the co-ordinate Bench in the

71 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. case of Vijayrattan Balkrishan Mittal (supra) in para 30 page 67.

(l) Similarly, likewise the case of Disha Lalwani vs. ITO in ITA No.6398/M/2012 is in a different contest of subscription of share application money and is not relevant to the present case.

72 ITA Nos.2785 to 2788/Mum/2019 & ors. Shri Vinod L. Gadhiya & ors. No.2787/M/2019 A.Y. 2014-15 (supra) with the difference that the shares purchased by the family members are of different companies and barring that all other facts are identical. We, therefore, hold that our finding in ITA No.2787/M/2019 A.Y. 2014-15 would mutatis mutandis apply to these appeals as well. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 68 of the Act and allow exemption under section 10(38) of the Act in respect of long term capital gain.

Order pronounced in the open court on this: 29/01/2021

Sd/- Sd/- (AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai; Dated: 29/01/2021

Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. BY ORDER, 6. Guard file. स�यािपत �ित //True Copy// (Asstt. Registrar) ITAT, Mumbai