SHRI KRISHAN KUMAR JALAN,BANGALORE vs. ITO, W-1, SIRSA

आयकरअपीलीयअिधकरण,चǷीगढ़Ɋायपीठ“ए”, चǷीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH

HEARING THROUGH: HYBRID MODE

ŵी िवŢम िसंह यादव, लेखा सद˟ एवं ŵी परेश म. जोशी, Ɋाियक सद˟
BEFORE: SHRI. VIKRAM SINGH YADAV, AM &SHRI. PARESH M. JOSHI, JM

आयकरअपील सं./ ITA NO. 933/Chd/2019
िनधाŊरण वषŊ / Assessment Year : 2014-15

Shri Krishan Kumar Jalan
J-206, Purva Venezia Apartment,
2nd Floor, Mother Dairy Yelahanka,
Bangalore-560064
बनाम

The ITO
Ward-1, Sirsa
˕ायीलेखासं./PAN NO: AFKPK8520J
अपीलाथŎ/Appellant
ŮȑथŎ/Respondent

िनधाŊįरती की ओर से/Assessee by :

Shri P.K. Prasad, Advocate &

Ms. Sadhvi Himatsingka, Advocate
राजˢ की ओरसे/ Revenue by :

Dr. Vivek Vardhan, JCIT, Sr. DR

सुनवाई की तारीख/Date of Hearing :

22/10/2024
उदघोषणा की तारीख/Date of Pronouncement : 15/01/2025

आदेश/Order

PER PARESH M. JOSHI, J.M. :

This is an appeal filed by the Assessee under section 253 of the Income Tax Act, 1961 (hereinafter referred to as Act) as and by way second appeal before this Tribunal. The Assessee is aggrieved by the order dt. 29/03/2010 passed in First Appeal No. 111/HSR/2016-17 which pertains to the assessee. The order dt. 29/03/2010 is passed by Commissioner of Income Tax (Appeals) u/s250(6) of the Act which is hereinafter referred to as the “impugned order”. The relevant AY is 2014-15
and the corresponding previous year period is from 01/04/2013 to 31/03/2014. 2. Factual Matrix
Proceedings before AO

Rs. 8,58,360/-
Unexplained credit u/s 68

Rs. 1,04,06,762/-
Income assessed

Rs. 1,12,65,329/-

exempt under the provisions of Section 10(38) of the Income Tax Act,
1961. 2.13 In the meanwhile the operators rig the price of the stocks and gradually rise its price many times. This is done through low volume transaction indulged in by the dummies of the operator at a pre determined price. When the price reaches the desired level, the beneficiaries who bought the shares at a nominal price were made to sell the same to a dummy paper companies of the operator. For this, unaccounted cash was provided by the beneficiaries which was routed through a few layer of paper companies by the operator and finally parked with the dummy paper companies that would buy the shares.
2.14 Further it may be mentioned here that the prices of the shares of the penny stock companies were rigged and were raised through circular trading.
2.15 The circular trading was managed by the “operators” of the scrips.
An “operator” is a person who was managing the overall affairs of the scheme and he was the one who contacted the entities who wished to take entry of bogus LTCG / STCG in their books and arranged the same through the scrips of penny stock companies. The operator managed many paper / bogus companies and used them to do circular transactions to rig the price of the shares. The shares of these penny stock companies; although listed on exchange, were always closely held and were controlled by the promoter of the penny stock companies and the operators who were arranging for the bogus LTCG/LTC Loss. This was due to the fact that the general public was not interested in the shares of these companies as these companies had no credentials and this helped the operators to keep a control on the price movement of the shares.

No. of shares purchased
7000
Date of purchase
30-04-2012
Amount paid
Rs. 18,07,540/-
Broker through whom purchased M/s Geojit BNP Paribas Financial Services
Ltd. Banglore
No. of shares sold
7000
Date of sale (NSE) from 20-05-2013 to 13-09-2013
Amount received
Rs. 1,22,14,309/-
Broker through whom shares sold M/s Geojit BNP Paribas Financial Services
Ltd. Banglore
Long Term Capital Gains
Rs. 1,04,06,769/-

Master Road, 3 rd Floor, Fort, Mumhai-400023. During the course of survey proceedings, a sworn statement was recorded on 27.5.2015 from Mr. Vijay
Jaydeo Poddar, Chairman & ManagingDirectorof the said NCL Research and Finance Services Ltd. In the said sworn deposition, the following specific question was asked.

Q.56. It is seen from the trading details of NCL that all the preferential allottees have sold their shares during the period when the Price of the shares were hovering around Rs. 1800 to Rs. 2100. Once the preferential allottees sold their shares, the price of the shares of NCL took a dip and the current price of shares is around Rs. 14. The trading in the shares of NCL has been banned by BSE w.e.f. 1.1.2015. The whole scheme of event shows that NCL is a penny stock company and the prices of the shares have been manipulated. Please explain why it should not be considered that the shares of NCL have been used to provide entry of bogus Long
Term Capital Gain and Short Term Capital Loss."

In response to the above question the Chairman & Managing Director of NCL Research and Financial Services Ltd. Sri Vijay Jaydeo Poddar, deposed under oath that NCL is a penny stock company, and the shares of the company had been used to provide entry of bogus Long Term
Capital Gain to the preferential allottees. Further to this, Sri Viay Jaydeo
Poddar could not answer the following question posed during the course of survey.

Q.55. It is seen that the price of the shares of NCL have risen from Rs. 302
on 7.6.2012 to Rs. 2107 on 9.7.2013. This is a rise of 600% within a span of one year. During this period there has been no corporate announcement by NCL which suggests that the company is undertaking any substantial development activity. The primary source of income during these years has been only the interest income and during this period the company has incurred huge losses in trading of securities and commodities. In the light of these facts kindly explain the phenomenal rise in the price of shares of NCL."

As stated supra, the CMD did not give proper reply and stated that he was unable to explain.

Q.14 As per the Company A ct, 1956 statutory register of the companies are to be kept at its reregistered office. Please slae specifically what registers have been maintained and kept of the companies?

Ans. I am unable to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q.15 Did N. C.L. Research and Financial Services Ltd. issue any shares after public issue including preference shares?

Ans: I am unable lo explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q.16 To whom these preference shares were issued? Please furnish the details of all the preference share holders along with address, PAN. Bank
Accounts through which the transactions look place.
Ans: I am unable lo explain the same. Further Mr. Manish Baid is the person who can explain this. who has used the shares of N.C.L. Research and Financial Services Lid. for providing bogus Long Term Capital Gain.
Q.17 What was the rate at which the preferential shares allotted and how many preference shares were allotted?

Ans: I am unable to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.LResearch and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q.18 How were the preference shareholders/assessee known lo you?
What was the arrangement between M/s. N.C.L. Research and Financial
Services Ltd. and Share holders/assessee for such preferential issue?

Ans: I am unable to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L.Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q.19 What was the need for issuing preference shares? Please produce the detailed issue documents which were prepared for this preferential issue.

Ans: I am unable to explain ihe same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L. Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q.20 How much money was raised through preferential allotment?

Ans: I am unable lo explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N C.L. Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.
Q.21 How was the funds received through the preferential allotment utilized?
Ans: I am unable to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L. Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.

Q. 22 What was the market price of the shares when the shares were issued through preferential allotment?
Ans: I am unable to explain the same. Further Mr. Manish Baid is the person who eon explain this, who has used the shares of N.C.L Research and Financial Services Lid. for providing bogus Long Lerm Capilal Gain.

Q.23 What is the current market price of these shares?
Ans: lam unable to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L. Research and Financial Services Ltd. for providing bogus Long Term Capital Gain.
Q.24 How did the price of shares of M/s. N.C.L. Research and Financial
Services Ltd. rose phenomenally in a span of short period?
Ans:
I am unable, to explain the same. Further Mr. Manish Baid is the person who can explain this, who has used the shares of N.C.L. Research and Financial Services Ltd. for providing bogus Long Term Captal Gain.

As could be seen from the above. Sri Mahavir Prasad Saraswat. the Director of N.C.L. Research and Financial Services Ltd did not give any reply except deposing under oath that the shares of NCL Research and Financial Services Ltd. have been used for providing bogus Long Term
Capital Gain.
4. Sri Goutam Bose, one of the Directors of NCL Research & Financial
Services Ltd. in his sworn deposition recorded on 27.5.2015, deposed that cash is taken from the beneficiaries who wanted to book bogus Long
Term Capital Gain. It is stated that the cash so provided to Manish Baid and the same was routed through Shell/Jamakharchi companies controlled by Mr. Manish Baid and finally to such paper companies purchased shares from such individuals and get cheques of Long Term
Capital Gains. It also came to light that NCL Research and Finance
Services Lid. is suspended by BSE as part of surveillance measures for indulging in suspicious transactions of bogus Long Term Capital Gains.

(6) Regarding the proposal to treat the amount of Long term capital gain of Rs. 1.04,06,769/- as unexplained credit u/s. 68 of the Act. It is submitted that the assessee has purchased shares with account payee cheques, shares were, held under demat account after two years the shares were sold through stock exchange and the amount was received through
RTGS. The purchase bills, demat account copy and sale bills were furnished, hence it is requested that the proposal u/s. 68 to treat the LTCG claim as unexplained cash credit may please be dropped.

carried out to convert the black money into white. Credit in the bank account of the assessee cannot be treated as explained and is liable to be added under section 68 of the Act.
2.36 That the assessee had miserably failed to discharge the onus and therefore the only inescapable conclusion that like thousand other individuals the assessee has also taken entry of bogus LTCG by paying unaccounted income. The burden of proof within the meaning of Section 68 is not discharged by the assessee. The assessee has failed to discharge proof that claim of LTCG as exempt u/s 10(38)
2.37 The summation of facts are as under:
i)
That some unscrupulous operators in the capital market were running a scheme of providingentries of LTCG for a commission.

ii)
The financial result of the Penny Stocks used for the purpose clearly indicate that its quotedprice at the peak was the result of rigging.

iii) The above mentioned facts have been independently also been confirmed by SEBI.

iv)
That such schemes are prevalent for converting black money into white is common knowledge, independently confirmed by SEBI.
v)
That a large number of individuals availed of the benefits of the scheme and took entries of LTCG amounting to several crores.

vi)
Many such individuals have voluntarily without any enquiry by any authority have voluntarily withdrawn their claim and filed revised return.
vii) statements of brokers, operators, director of paper companies that has bought these shares, directors of Penny stock companies all confess to such a scheme with detailed modus operandi which tallies with actual transactions viii) The assessee is one such beneficiary who has taken entry of LTCG ix) As the trading in these shares are at a pre-determined time between pre-determined brokers at a pre-determined price: there is virtually no scope of any genuine trader in share to buy or sell these shares.

x)
Thus whoever has benefitted from transaction in these shares have transacted in accordance with the scheme and has admittedly converted his unaccounted cash equal to the sale proceeds of share in to white in the guise of exemption under section 10(38) of the Income Tax
Act, 1961. xi)
With so much of evidence against the assessee, the onus was on assessee to prove that his transactions were genuine and that he had not availed benefit of the aforementioned scheme to convert black money into white.

xii)
In Sumati Dayal vs. Commissioner of Income tax — the Supreme
Court observed as under:

“ It is no doubt true that in all cases in which a receipt is sought to be taxed as income the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee.
[See
Parimisetti
Seetharamamma (supra) at P. 5361. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut , the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably.”

(ii) The purchase of these shares were claimed to be through off market deals and not through Stock Exchange and the shares were not entered in D'mat account even upto one week before they were actually sold and the sale is through stock exchange. The assessee has furnished the account copy of the D'mat account wherein it was observed that the said shares were Dmaterialized only a few days before they were actually sold.

(iii) The apparent is true until and unless it is disproved. Here in the instant case, the Chairman and Managing Director and other Directors Sri Vijay
Jaydeo Poddar, Sri Goutam Bose and Sri Mahavir Prasad Saraswati on 27.5.2015 of NCL Research and Finance, had categorically stated that they were involved in providing accommodation entries regarding sale and purchase of shares through his companies. Therefore, human probabilities have also to be applied to comprehend the transactions and to see the real intention behind entering into these transactions. In the similar circumstances,- the Honourable Gauhati High Court of CTT Vs
Sanghamitra Bharali(361 ITR 481) had held that the capital gains are sham transactions entered only to give colour of genuineness and therefore, held that the capital gain arising out of these transactions cannot be believed as genuine and upheld taxing the said amount as unaccounted income brought into books in the guise of exempted capital gains.

(iv)
That even assuming the purchase as genuine, the sales, given the high rates for such penny stocks, with no real buyers, are bogus. The evidenciary value of payment of STT cannot make a non-genuine transaction, a genuine one.
(v)
The scrip is a penny stock, purchased at a low price, which is over a period of time ramped up by operators acting in benami names or name lenders. The purchases are off market purchases, and not reported on the exchange;

(1995) 214 ITR 801 (SC)
(ii) Durga Prasad More

82 ITR 540 (SC)
(iii) Mc. Dowell & Co. Ltd

154 ITR 148 (SC)
(iv) Asst. CIT V. Som Nath Mani

(2006) 100 TTJ 917 (Chd)
(v) Govinda Rajulu Mudaliar v. CIT

(1958) 34 ITR 807 (SC)
(vi) Sreelekha Banerjee & Othrs V. CIT

(1963) 49 ITR 112 (SC)
(vii) Kalekhan Mohammed Hanif v. CIT

(1963) 50 ITR 1 (SC)
(viii) CIT V. Biju Patnaik

(1986) 160 ITR 674 (SC)

(ix) CIT v. P. Mohanakala & Others

(2007) 291 ITR 278 (SC)

ii.
Action of Suspension of above-named Scrip by Securities and Exchange Board of India (SEBI): The information regarding rigging of prices of shares was shared with' the SEBIby the Investigation Wing and the SEBI, after considering the details and facts gathered through its own sources and surveillance system and from the Investigation Wing, passed some orders on the issue of manipulation of share market for providing accommodation entries of bogus LTCG and suspended the share transactions of a number of Companies including that of the above - named Company, The assessee was required to comment on the outcome of the investigation carried on by the Investigation Wing of the Department.

iii.
Admissions by the Chairpersons, Managing Directors and other
Directors of the Companies through their Statements on Oath recorded during the course of Survey Operations: During the course of Search &
Seizure and Survey operations on a large number of Companies, including the above named company, statement on oath were recorded,. the Chairpersons, Managing Directors and other Directors of the Companies through their Statements on Oath recorded during the course of Survey
Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term
Capital Gains. During the course of search/survey operations., the Chairman and Managing Director and other Directors, had categorically- stated that they were involved in providing accommodation entries regarding sale and purchase of shares through their companies.
Therefore, human probabilities have also to be applied to comprehend the transaction and to see the real intention behind entering into these transactions. In the similar circumstances, the Hon'able Gauhati High
Court of CIT Vs Sanghamitra Bharali (361 ITR 481) had held that the capital gains are sham transaction entered only to give colour of genuineness and therefore, held that the capital gain arising out of these transactions be believed as in-genuine and upheld taxing the said amount as unaccounted income brought into books in the guise of exempted capital gains. Many big brokers namely Sh. Deepak Patwari (PAN-
AKHPP3737A), Sh. Sunil Dokania (PAN- ADTPD8746N) and Sh. Alok Harlalka
(PAN- AASPH1425L), Sh. Anil Khemka, has accepted, on oath before the Investigation Wing of- Income Tax Department at Kolkata during enquiries that they have rigged the prices of NCL Research Ltd. and" provided accommodation entries to various clients of bogus LTCG on commission basis.

iv. Admissions by the Operators of the Companies through their
Statements on Oath recorded during the course of Survey Operations:
During the course of Search & Seizure and Survey operations on a large number of Companies, statements on oath were recorded, the Operators of the Companies through their Statements on Oath recorded during the course of Survey Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term Capital Gains. The assessee was required to comment on the outcome of the investigation carried on by the Investigation Wing of the Department. However, the assessee commented "that she has got nothing to do with this report since her name is nowhere in the report."

v. Admissions by the Brokers through their Statements on Oath recorded during the course of Survey Operations: During the course of Search &
Seizure and Survey operations on a large number of Brokers/ Partners
/Directors of the Broking Firms/Companies, statements on oath were recorded, the Operators of the Companies through their Statements on Oath recorded during the course of Survey Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term Capital Gains. The assessee was required to comment on die outcome of the investigation carried on by the Investigation Wing of the Department. However, the assessee commented "that she has got nothing to do with this report since her name is nowhere in the report."

vi.
Affirmation/Admission by Sh. Rahul Dev and others i.e. the laymen who were not the part of above-said gamut through their Statements on Oath recorded In the Investigation Wing: There emerged another evidence of rigging of shares from the appearance of Sh. Rahul Dev and others, who aecidently/by ignorance bought the shares of a penny stock company, who went to sell the shares of the company, when the prices were high. They were told that the shares could be sold on high prices by paying money in cash in advance and then only they shall be getting the sale consideration in the bank accounts. The statements of Sh. Rahul Dev and others were also recorded on oath.

vii.
Recorded Discussion on Black Berry Mobile between Sh. Ritesh Jain, a prominent Broker and Sh. Deepak Patwari, another prominent Broker establishing the modes Operandi of the sham Transactions: The discussion, found recorded between Sh. Ritesh Jain and Sh. Deepak Patwari.
prominent Brokers, confirming the modes operandi of rigging the prices by following the same in finalizalion of transactions of shares.

viii.
Disclosure/Admission of Identical Modes Operandi bv One and All:
Almost all, barring a few, have accepted the whole truth of scheme prevalent in the share market regarding rigging of shares for providing of Long Term
Capital Gains.

ix.
Abrupt. Unrealistic and not based upon any realistic parameters
Movement of the price of shares: The movement in the prices of shares are abrupt, unrealistic and not based on any realistic parameters, which clearly shows the practice of rigging of shares for providing of Long Terrn
Capital Gains.

x. Abnormal Trend of Rigging Diagram: The diagram of price rise shows the abnormal trend of rigging of prices of the shares of M/s NCL Research
Ltd.

xi.
Ignorance of the assessee regarding exact Nature of Business of the Companies involved in Rigging: The assessee has shown ignorance regarding exact nature of business of the Companies, M/s NCL Research and Financial Services Ltd.

xii. Low and Negative Financial Statistics of the Companies involved in Rigging: No Knowledge of Business; Negligible or Very Low Profits;
Investments; Assets; TheFinancial Statistics i.e. Profits, Investments. Assets,
Earning Per Share(EPS) of thecompanies are negative, very low, which affirm the suspicious activities of theCompany. How a person will buy the shares of a company, when there are negative or very low profits, HPS,
Assets. Investments.

xiii. No Prominent Name/Brand, Product or Innovation of the Company:
The company whose shares were purchased by the assessee was 'neither a name/Brand worth mentioning, nor any of the products was known to the assessee. The scrip Ms NCI, Research and Financial Services Ltd invested is merely Shell/Penny Stock Company with no business activities whatsoever. The shares are purchased at lower levels and sold at higher rates through the series of off-market transactions created by the broker with vested interest. The share prices are artificially rigged through off market transactions This hike is not supported by the fundamentals of the company. The M/s NCL Research and Financial Services Ltd. Scrip was rigged and misused for bogus LTCG (reference SEBI order in the above named company's case).

xiv. Low or Negligible Earning Per Share(FPS) of the Companies involved in Rigging: The EPS of the company is in negative from the date of purchase to the date of sale. The intention behind investment in purchase of shares of the company by the assessee and the rise in prices of shares of the company with EPS in negative also raise questions.

xv.
Voluntary Surrender of a number of persons who have shown and claimed Exemption of Income on a/c of Long Term Capital Gains on Transactions ofSuspicious Shares of the above said Company: There is a substantial number ofassesses all over the country, who have, for buying peace of mind and for avoiding any kind of litigation have surrendered the amounts of capital gains shown earlier as income either in the revised returns of income or disclosed in Income Declaration Scheme.

xvi. It is No Denying (hat Such Schemes arc Prevalent in the Market:

xvii. General Public not Interested in Buying these Shares: Moreover, these
.share were not within the reach of general public during the period of rigging: The shares purchased are such, in which general public are not interested. Thus, it is clear that M/s NCL Research and Financial Services
Lid., has negligible profit and unlisted company having nil business and no prudent person will invest Rs. 18,07,540- in such a Company, which has no earning itself. How the assessee can invest huge amount of Rs. 18,07,540/- in a company where no hope of returning of invested amounts in view of its financial status. It could happen due to the vested interest of "planning behind the curtain" only.

xviii
Every other Circumstantial facts indicates and supports that the shares ofthe Company M/s Cressanda Solutions Ltd. Were rigged to provide Long TermCapital Gains to the Beneficiaries.

xix
Tax planning may be legitimate provided it is within the framework of law.Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods.

= Rs. 8,58,360/-
Add: Unexplained Credit u/s 68

= Rs. 1,04,06,769/-
Income Assessed

Rs. 1,12,65,329/-

addition to income made on this account for unexplained credit under section 68 of the Income - Tax Act may kindly be deleted and cancelled.

Ground of Appeal No. 2
The Learned Commissioner of Income - "lax (Appeals) as well as the Learned Assessing Officer, in a bid to reach the premeditated conclusions, erred by inappropriately and disproportionately relying on the theory of 'Preponderance of ^Probability' with misplaced reliance on certain court judgments. This led to a feckless and injudicious consideration of facts, circumstances and evidence involved in the case and allowed conjectures, surmises, presumptions and roving and fishing inquiry to prevail over reason, objectivity and natural justice in the process of arriving at a conclusion in the involved in the respective Appellate and Assessment Proceedings. As such, the addition to income Act may kindly be deleted and cancelled.
Ground of Appeal No. 3
The Learned Commissioner of Income - lax (Appeals) as well as the Learned Assessing Officer erred in concluding that the Appellant was not entitled to the exemption under section 10(38) of the Income - Tax Act on the Long-Term Capital Gain determined on the purchase and sale of shares of the Company NCL Research and Financial Services Limited to the tune of Rs. 1,04,06,769/-. This conclusion was subjective with unilateral interpretation of downloaded financial statistics of the said Company from an unreliable and unproved source i.e. moneyconlrul.corn. As such, the addition to income made on this account for unexplained credit under section 68 of the Income - Tax Act ignoring the facts, evidence and cogent reasons may kindly be deleted and cancelled.

Ground of Appeal No. 4
The Commissioner of Income - lax (Appeals) erred in confirming the position taken by the Assessing Officer in invoking section 68 of the Income - Tax Act and treating the entire consideration on sale of shares amounting to Rs. 1,22,14,309/- as income as the same was the basis for claim of exemption on Long Term Capital Gains under section 10(38) of the Income - Tax Act. This confirmation of the Assessment Order was done by disregarding the facts, ^evidence and reasons and by giving credence to suspicion and presumptions in total defiance of natural justice in as much as neither the information and evidence collected behind the back of the Appellant were shared nor any cross-examination was allowed or facilitated. As such, the addition to income made on this account for unexplained credit under section 68 of the Income - Tax Act may kindly be deleted and cancelled.

Ground of Appeal No. 5

The teamed Commissioner of Income Tax (Appeals) erred in confirming the charging of interest under section 234B, 234C, 234D and in withdrawing interest under 244A of the Income - Tax Act.
Ground of Appeal No. 6
The Learned Commissioner of Income - Tax (Appeals) erred in confirming the initiation of Penalty under section ?71(l)(c) of the Income - Tax Act.

“NCL Research & Financial Services Ltd.” was put under survillance by SEBI on 07/01/2015 which pertains to the A.Y. 2015-16 and not for the A.Y. 2014-
15 which is under consideration, in present appeal. Hence Department contention that for aforesaid this reason the share transaction by the assessee was not in order is not tenable.
5.14 That the Ld. AR has contended before this Tribunal that the share transaction happened through the DEMAT Account, the bank account and through recognized brokers and that transaction are duly and properly accounted for.
5.15 It was contended by the Ld. AR that the Ld. AO used downloaded unverified audit report from website about “NCL Research and Financial
Services Ltd. basis that took a view that results of the company were not as such too command a higher price in the market. Hence both orders of lower authorities are bad in law and illegal. They are not proper. Claim cannot be denied under these circumstances of LTCG.
5.16 That Ld. AR has once again contended that though the Ld AO has tried to propound the theory of “preponderance of probability” in tax matters, he miserably failed to appreciate that such theory cannot stand before existing facts and circumstances of the case, evidences etc. The Ld. AO has failed to:-
(i) to recognize that the purchases and sales of equity shares of the “NCL
Research & Financials Services Ltd.” were duly undertaken through the recognized brokers, the DEMAT account, the bank account with due payment of securities transaction tax and duly accounted in the account of the assessee.

(ii) Ld. AO has failed to specifically point out as to how the share price of the said company “NCL Research and Financial Services Ltd.” was rigged through circular trading of shares and how the high share price was paid in cash by the Assessee which was routed through to his bank account in a circuitous way. It was once again emphasized that in this regard neither the assessee nor his broker is even questioned by Income Tax Department nor by SEBI.
5.17 The Ld. AR has brought to our notice that market price of shares are not decided by bland financials of the company but is determinative of various other factors including moods, sentiments, emotion of stock players in stock market, various other market factors on date of share transaction and that heavy rise and fall in share price is not uncommon to share market transactions.
5.18 The Assessing Officer as well as the Learned Commissioner of Income
Tax (Appeals) on the other hand has admitted that the Appellant had submitted copies of the Contract Notes for sale of shares and proved that both purchase and sale transactions of theequity shares under consideration were through banking c h a n n e l s and were genuine. It has been adequately recognised that the said genuine share transactions did suffer Securities "'Transaction Tax and Brokerage etc. and the same cannot be held as bogus. Having said that the learned Commissioner of Income - Tax (Appeals) ignored the fact that the Assessing Officer made the addition solely on the basis of the so-called unsubstantiated and non- specific Investigation Report of Kolkata Investigation Wing of the Income -
Tax Department. The Assessing Officer's observation that the said company NCL Research and Financial Services Ltd. was a Penny Stock
Assessee’s transactions is genuine and not bogus. It is through organized channel. The broker has good reputation in market. Broker of assessee is not implicated in any manner. Department has painted “NCL Research &
Financial Services Ltd.” as a non functional dummy company basis copy of its fiancials down loaded from website. Sources of download is “Moneycontrol.com” hence downloaded statistics are unconfirmed and cannot be relied upon. Information from company or MCA sites are not downloaded.
5.21 It was also contended that the Company “NCL Research &
Financial Services Ltd.” has its own website were all information are available. It was corporated in the year 1985. It got listed on BSE in the year 1994. The “NCL Research & Financials Services Ltd.” has been in business of “Textiles & Investment activities in Shares & Securities”. The 29

company is duly registered with RBI as NBFC, as it is in the business of Finance also. It’s website also depicts all it’s financials through annual reports. Therefore such company cannot be called a non entity, dummy and penny stock company. The Ld. AO has not appied his mind and so also first appellate Authority.
5.22 The Ld. AO has erroneously called share purchased and sold as “Preferential Shares” when admittedly the shares are not preferential.
5.23 Shri Manish Baid implicated by MD & Other Directors of “NCL
Reserarch & Financials Services Ltd.” is a lose end left open.
5.24 The orders of lower authorities i.e. Ld. AO and Ld. CIT(A) are not objective but are subjective. The Company is a proper legal entity with all Registration in place.
5.25 The Reasoning that other similarly situated person like assesee have surrendered claim of LTCG is ill founded.
5.26 The assessee is investor in security market. This is not an isolated transaction.
5.27 That other family members of assessee to have benefited is no argument.
5.28 It was finally prayed that impugned order should be set aside and addition of Rs. 1,04,05,769/ be deleted under section 68 of the Act.
5.29 Per contra the Ld. DR has gone by the orders of lower authorities i.e
Ld. AO & Ld. CIT(A).
6. Observations, Findings & Conclusions

The above financials speaks volumes about financial health of the company. The objection of the assessee on this table of downloaded version of Ld.
A is that it is from web page called“http//www.moneycontrol.com” which is not an authentic site. It is required to be noted and appreciated that material information so furnished in the table (supra) are not challenged at all further assesse has failed to demonstrate strong financial fundamentals miserably. We therefore hold that said company “NCL Research & Financial Services
Ltd.” have weak financial parameters which cannot command such a high price.Poor. Financial health perse has not been disputed by the Assessee in any manner and the rise in prices / astronomical price is just not explained and ignored, an appreoach wholly untenable in law. The assessee is not novice to the security market admittedly. He is an investor alongwith some family members as is recorded by Ld. AO hence it becomes a heavier burden on his part to explain how on paramountal consideration of financials of company, its price rose so much so that he made a “killing” in slightly more than a year’s time. The assessee throughout has failed to discharge this elementary onus or primary burden of proof. There is no whisper as to how price increased that too in a period of slightly more than a year. Mysterious are ways. The assessee save and accept security transaction related papers of buy and sell on flour of exchange have nothing to say how prices increased so much that he made a “Killing”. In our considered view it is incumbent upon the assessee who is an investor is security market transactions to establish at least perse how prices increased by 600% in short span of a year. The assessee has failed to discharge the initial burden of proof on price rise. In our considered view it is just incumbent upon the assessee by virtue of both section 10(38) as well as 68 to explain at least the nature of transaction of 34

sale particularly so when a whopping amount of more than a crore is claimed as LTCG that too in CASS opened scrutiny assessment under caption “suspicious sales and exempt long term capital gains shown in return (penny stock tab in ITS)”.
In our considered view merely submitting documentation of security related transaction is not proof enough as nature of transaction, its back ground needs to be explained to verify the credentials and that too in scrutiny related cases which are opened up against assessee on basis of credible information. Antecedents of company and and its scrip must be explained in a prudent way to claim LTCG, particularly so in penny stock which were in sleep mode. Revenue has a obligation casted upon them to ensure that taxes are paid according to law. In the process they are well within their rights to inquire into the nature of transactions and it becomes duty upon the assessee to answer about nature of transactions of purchases / sales in the securities market. The assessee in such a situation cannot turn around and say that beyond the security related papers and documents he has no other explanation to offer. Giving explanation about Registration with RBI as NBFC, under companies Act, date of incorporation, date of listing etc as is done are no explanation about rise in price of scrip. The explanation on fundamentals are required including financials.
6.11 We hold that had it been a genuine business transaction of purchase / sale of securities of a blue chip company the assessee as an investor in the security related transaction would have gone out of way to explain the nicety of sales and perhaps would have a given a lecture to Ld. AO how to earn money quickly in stocks and shares on floor of a exchange. In the instant case the assessee save and except to say that 35

table (supra)j is not downloaded from a good web site has evaded to offer any just explanation. The assessee has even failed to mention that he had a tip which made him buy and sell the “NCL Research and Financial
Services Ltd” scrip.
6.12 We are of the considered opinion basis inputs from investigation wing of the Income Tax Department; post purchase and sale of 7000
shares of “NCL Research and Financial Services Ltd.” which dates are 30/04/012 the date of purchase and 20/05/2013 to 30/09/2013 the dates of sales, a detailed investigation was carried out which kicked off with a survey operations under section 133A on 27/05/2015 on business premises of “NCL Research and Financial Services Ltd” whereby senior officials of “NCL Research and Financial Services Ltd” were questioned and that all the material details are provided in the Ld. AO assessment order dt.
31/12/2016 (para 4.1, page 6,7,8,&9 of Ld. AO order). It is also recorded at para 4.3 of Ld. AO order that copies of swon depositions of one and all were provided to the assessee to meet the case. We therefore hold that when the owners of NCL Research and Financial Services Ltd (Vijay
Poddar MD) have deposed that ‘NCL Research and Financial Services
Ltd’ is a penny stock company and has been used for providing bogus
LTCG which deposition is further corroborated by other directors of company including Gautam Bose Deposition recorded on 27/05/2015
stating and deposing that cash is taken from the beneficiaries who wanted to book bogus long term capital gain.Cash was provided to one
Manish Baid and same was routed through shell/Jama Kharchi companies controlled by Manish Baid and finally such paper companies purchased shares from such individuals and gave cheques of LTCG. We therefore have no hesitation in holding that NCL scrips were penny stocks and were 36

used by individuals including assessee to book LTCG. The transaction therefore is tainted one, disentitling the assessee to claim LTCG. The price was deliberately got sky rocketed despite weak financials, not having awesome profit, EBIDTA margin, bonus and dividend history. The Ld. AO has rightly applied circumstantial evidence and applied theory of preponderance / human probabilities” rightly. We therefore have no hesitagation in holding that scrip NCL Research and Financial Services Ltd was artificially hiked in pre planned manner to get undue benefits by misusing the exemption u/s 10 (38) of the Act and Ld. CIT(A) has rightly sustained the order of assessment.
6.13 We hold that Revenue cannot take care or accept such make believe transactions as presented by the Assessee. The assessee contention that no cross examination opportunity was provided does not hold water as sum and substance of accusation was provided to the assessee; they were informed and given all statements of MD and other
(Para 4.3 of Ld. AO order) Directors of NCL Research and Financial
Services Ltd and in which they have not established nor pleaded nature of prejudice caused to them for not giving opportunity to cross examine them. Thus, not giving cross examination opportunity would not vitiate the proceedings as whatever information was to be given was provided which was recorded in Para 4.3 of Ld. AO order dt. 31/12/2016. Before us issue of cross examination and failure to give reasonable opportunity by lower authority was not pressed hard nor any prejudice caused was pressed; by virtue of which ‘impugned order’ becomes vitiated including that of Ld. AO.
6.14 We are of the considered view that Ld. AR arguments that assesee is not impleaded in the investigation report holds no water as it is post

“Traded Transaction dated” investigation. Revenue in the present case has been able to secure “Evidence” of artificial rise in penny stocks of “NCL Research and Financial Services Ltd” both by Investigation Wing report of Income Tax Department; trading pattern of scrip, steps taken by SEBI, financials of “NCL Research and Financial Services Ltd” and above all statements on oath of key officials of “NCL Research & Financial
Services Ltd.” These material evidence coupled with peculiar facts and circumstances i.e trading pattern of scrip of “NCL Research & Financial
Services Ltd.”, its meteorological rise and falls on flour of exchange etc.
are not effectively rebutted, nor explained to demonstrate that both purchases and sale of “NCL Research & Financial Services Ltd.” scrips were a market related phenomenon caused by market forces and in the process they made “Killing”. While it is true that market sentiments cannot be gaged purely by financials of the scrip but at the same time it is proven fact well known in security market that scrips prices tends to go up due to “strong fundamentals” including financials. The assessee besides showing paper related transactions of buy and sale has completely failed to demonstrate both before lower authorities and before us any evidence, materials, factors, circumstances, trading pattern, graphs, etc explaining showing and demonstrating before us with help of stock exchange data or otherwise that prices after purchases went up by 600%. Approximately due to strong undercurrent and fundamentals of scrip “NCL Research &
Financial Services Ltd.”. The assessee fails on this score. We hold that mere showing papers of transactions of scrip NCL in form of contract notes, bills, invoices, payment of STT, D’MAT records, banking channel evidences per se does not explain and demonstrate genuineness of the share transactions unless and until assesee primafacie shows to the authorities particularly so when LTCG is claimed in return that rise in prices of scrip was a natural market related phenomenon which was driven by market related forces like strong financials of scrips, dividend history, bonus history, profitability, co/scrips securing large orders / projects, soundness of promoters, sudden spurt in demand of companies product or services etc. In the absence of any positive statement / explanation,on part of the assesse, we have no hesitation in holding that prices of scrip
“NCL Research & Financial Services Ltd.” were indeed rigged and assssee made a killing by dubious way as has been found by Department. We hold that in normal circumstances in ITR the assessee is only required to show computation of LTCG but in scrutiny assessment the authorities are well within their rights to question the genuineness of the transactions and it becomes incumbent upon the assessee to offer suitable explanation /
documents first in addition to papers of share transactions. The explanation / documents in such a situation should be on real time basis as to what triggered the rise in pries like strong under current in market and scrip, strong financials of scrip, profitability of scrip, dividend history of scrips, bonus history of scrips, splitting of scrips, strong background of promoters, bank and institutions supporting scrips, mutual funds supporting scrips, foreing institutions taking plunge in the scrips, ESOP announcements by scrip/company, CSR initiative by scrip/company the list is endless.
Unfortunately suffice to say assessee save and except producing papers /
documents of purchase / sale transactions of ‘NCL’ scrip has nothing positive to assert what factors genuinely made them to make “Killing” in stock market. Assesee fails on this score. Revenue is entitled in law to question such transactions and in a given case are also entitled in law to go behind the transactions to see real nature of transactions with a view to ascertain whether it is a real or sham / make believe or not. WE hold that very language of section 10(38) speaks of “any income arising from the 39

transfer of a long term capital asset being an equity share in a company”.
The concept of STT, stock exchange, international financial centre etc too finds mention in it. Therefore the very nature of transfer of a long term capital asset transaction being an equity share in a company is required in law to be ascertained and inquired into by tax authorities in order to determine whether the claim of the assessee is really genuine or bogus. If after such determination and inquiry if it is found that the transaction in equity is genuine and not a sham or make believe and upon proper explanation by the assessee which is plausible then as a matter of right the assessee in law is entitled to relief on claim made on LTCG. However if above parameters are not found to be satisfactory and transaction of equity is found to be tainted as has happened in the instant case then the assessee claim is liable to be rejected. For making a claim of LTCG in ROI it is upto assessee to make a claim basis sound foundation on real time basis. Mere submission of documents of share transaction, purchase and sale made through recognized stock broker whose track record are good, transactions through banking channels, issuance of contract notes, bills, invoices, payment of STT, transaction on floor of stock exchanges etc are in our considered view are only indication that income has arisen from “transfer of a long term capital asset” but whether such transfer basis transaction on floor of a exchange is real or sham/make believe can be looked into and have been rightly looked into and have been found to be sham on real time basis on basis of statement of very Chairman / MD and other Directors of “NCL Research & Financial Services Ltd.” coupled with detailed investigation done by Investigation Wing of Department of Income Tax, failure of part of assessee to offer a valid explanation on spurt in prices of “NCL Research & Financial Services Ltd.” basis strong financial fundamental which are key for rise in price of scrip in market). WE thus find no infirmity legal or otherwise in the ‘impugned order’. The assessee contention is more in nature of rebuttal of evidence found by Department but lacks on meritorious nature of transfer of share transaction. It is not a case of private nature of transaction which two individuals have entered into where autonomy of parties are inherent but it is a transaction on floor of exchange where shares are traded, prices of shares are determined on nano second basis on several factors (supra) and assessee owes a explanation to Revenue while claiming benefit of LTCG to at least primafacie say that transactions of transfer are at arm’s length, buyers and sellers are not related and price is sole criteria for transfer and that there is no mutuality of interest. Unfortunately no such explanation contention is canvassed in a positive way in support of claim made of LTCG. Per contra Department has proved that there was price rigging, accommodation entry provided, action taken by SEBI, weak financials, and finally the statements of MD and other Directors admitting that scrips prices were rigged and entry provided. We hold that merely because
Revenue could not get hold of ‘Manish Baid’ who was implicated as mastermind person who was brain behind the scam ip so facto does not means that prices were not rigged, there was no circular trading and accommodation entry were not provided for.
6.15 We are of the considered view after examining the material on record that transaction of share transfer right from purchase to sale is a colourable device deliberately created to give a colour of genuineness which is not permissible in law.We gainfully place reliance on the judgment of Hon’ble Supreme court of India in case of Mcdowell Ltd. Vs.
CTO reported in 154 ITR 148(SC) which though permits tax planning but 41

not colourable devices to evade taxes and to hood wink the tax authorities.
6.16 We hold that tax exemption claimed of LTCG is on basis of structured deals. The Ld. AO and Ld. CIT(A) have rightly made addition by denying the laim made and have rightly treated income as unexplained income within the meaning of section 68 of the Act. We do not agree with the contention of Ld. AR that additions have been made without any evidence and are based on assumptions, presumptions, conjectures and surmises. The material with Department are cogent and assesse has failed to rebut the same in a maner known to law. The addition is on cogent material which have been found post claim made; material is confronted to assessee, assessee has failed to give a plausible explanation about genuineness of core transactions. Investigation Wing has unraveled the truth behind the transactions where shares of insignificant company called “NCL Research & Financial Services Ltd.” were targeted by market manipulators in collusion and connivance with Chairman / MD and other
Directors of “NCL Research & Financial Services Ltd.” to give accommodation entries to various persons all over India to claim bogus exemptions u/s 10(38) of the Act. We hold that merely because assssee does not know ‘Manish Baid’ the key person who orchestrated the scam of price rigging and gave accommodation entry through manipulative ways through stock exchange deals;does not mean that transaction is real and not bogus. We further hold that merely because purchase and sale of shares is through broker on a stock exchange and consideration is paid through cheques does not mean that transfer transaction of shares
(both purchase and sale) is real and not bogus. We further hold that copies of contract notes relating to purchase and sale of shares on 42

various dates alongwith details of rate are not sufficient in law to make transaction real and genuine. We also hold that merely because transaction is recorded in books by assessee too cannot be criteria to determine nature of transaction of share transfer. We hold that in peculiar facts and circumstances of the present case what is relevant is genuineness of transaction of both purchase and sale. We find that assessee purchased shares of “NCL Research & Financial Services Ltd.”
and sold the same within a period of 14 to 15 months. 600% gain is claimed which in our considered view is peculiar and abnormal gain.
“NCL Research & Financial Services Ltd.” was admittedly a penny stock without financial fundamentals, was rigged, accommodation entries were provided to assessee amongst others. The buy and sale were structured deals no doubt on floor of the exchange. The documents of transactions both buy and sale are mere mask to hid the real nature of transactions.
We are of the considered view basis material on record that very initial investment into a unknow credential with weak financials and subsequent jump in the share price is not an accident or wind fall but because of manipulation in price of shares in a pre planned manner by Shri Manish
Baid, and Chairman / MD and other Directors of “NCL Research &
Financial Services Ltd.” scrip.
We hold that initial onus lies on assessee to prove how the shares of “NCL
Research & Financial Services Ltd.” rose so fast and so quick. What are its financial fundamentals, financial analysis of scrip from point of view of stock market depicted by graphs etc. The assessee has failed in this regard. Hence upon failure to give plausible explanation and discharging initial burden of proof the Ld. AO has rightly disapproved the documents of LTCG as not genuine in so far trade transaction which it covers. We therefore hold that price of scrip NCL went up multifold times within a short span without corresponding financials and profits and hence transaction is sham and make believe arrangement. We have no hesitation in holding that all documentary evidences in support of LTCG claim were created to show that claim is genuine based on genuine transaction. It is subturfuse, sham and make believe transaction clearly falling within the ambit of deliberate act, commissions with intend to evade tax as well as a novel idea to convert bad money into good money an approach wholly untenable in law.
We hold that while it may be true that the assessee has no direct or proximate relationship with perpetrators of scam but in securities market there are several intermediaries for purpose of converting bad money into good money and that too tax free in garb of LTCG. The money is finally brought into books and that too tax free and this whole process is certainly a colourable device. The action of the Department is proof in itself which has finally unravelled the truth. The financials of the “NCL
Research & Financial Services Ltd.” action taken by SEBI,coupled with the fact that assessee has himself failed to speak on financial fundamentals of the “NCL Research & Financial Services Ltd.” and has failed to give an plausible explanation on price spurt all throughout in proceedings before lower authorities are indicative of only one fact that penny stock was picked up by the operator’s, circular trading was done with a view to spurt the price so that all perpretator’s including assessee gains from it in an unlawful manner an approach wholly untenable in law.
6.17 We are of the considered opinion after carefully perusing the records of the case that orders of the lower authorities apart from report of Investigation Wing of Income Tax Department is also based on 44

independent analysis of material facts available on record. The Ld. AO and CIT(A) have put all facts and circumstances together and have applied their mind. Needless to repeat and reiterated that Investigation
Report of Department, SEBI Reports, Data collected from Moneycontrol website, BSE India.com; statements of Chairman and Managing Director of “NCL Research & Financial Services Ltd.” Shri Vijay Jaydeo Poddar, statement of Shri Mahavir Prasad Saraswat Director of “NCL Research &
Financial Services Ltd.”, statement of Goutam Bose Director of “NCL
Research & Financial Services Ltd.” all have been cumulatively taken into consideration to hold that claim of LTCG is bad in law owing to bogus nature of transaction by virtue of which prices were rigged and accommodation entry was indeed provided.
6.18 We hold that reply of the assessee during the course of the assessment proceedings are general in nature. The Department has unraveled the truth behind the transactions basis detailed investigation.
The general explanation about transaction that everything is through banking channels, DMAT, through broker, etc. ipsofacto does not prove genuineness of transaction. SEBI too after thorough Investigation has certified that such transactions were rigged and are carried out to convert black money into white. We therefore conquer with the findings of Ld. AO and same sustained by CIT(A) that credit in the bank account of the assessee cannot be treated as explained and is therefore liable to be added to income of assessment for tax under section 68 of the Act. In the instant case authorities have rightly followed the dictum of Hon’ble
Supreme Court of India that test of preponderance of human probability is required to be judged on the basis of surrounding circumstances. We conquer with the findings that there was indeed a scheme for which there is no doubtindeed and that the assessee is a beneficiary indeed also of such a scheme which fact is admitted only with a rider of general explanation on transfer of capital asset. That the onus was on assessee to prove two things:
1. That there was no such scheme. (Assessee is silent on this issue throughout)
2. That in so far as assessee is concerned the transaction is genuine basis strong fundamental financials of scrip/company i.e; “NCL Research &
Financial Services Ltd.”. However assessee has failed to establish any parameter of a sound and genuine share transaction basis any tangible material. Hence only inescapable conclusion we too drawn it is that assessee has failed to discharge onus. The claim of LTCG is incorrectly made. Unaccounted money has been given colour of good money. The lower authority have rightly placed reliance on Sumati Dayal Vs. CIT case of Hon’ble Supreme Court reported in (1995) 214 ITR 801 (SC).
6.19 We are in conformity with the findings of lower authorities in respect of following:
After going through the whole gamut of Purchase and Sale of Shares, it can safely be understood that the Transactions of Purchase and Sale of Shares and earning of Long Term Capital Gains are not Genuine on the following points:- i.
Investigation Report of the Investigation Wing of the Income Tax
Department: The Investigation Wing of the Department carried on a number of Search & Seizure and Survey operations on a large number of Companies including that on M/S NCL Research and Financial Services Ltd. whose shares were purchased by the assessee . It was clearly evident from the examination of the seized/ impounded documents that a number of shell/penny stock companies were involved in rigging the prices of shares. The assessee was required to comment on the outcome of the investigation carried on by the Investigation Wing of the Department. All the reports, including the statements recorded on oaih wore shown 10 the assessee, wherein the Chairperson.
Managing Director aiifl other Directors of the Company have admitted on oath that they were providing accommodation entries to the beneficiaries.

ii.
Action of Suspension of above-named Scrip by Securities and Exchange
Board of India (SEBI): The information regarding rigging of prices of shares was shared with' the SEBIby the Investigation Wing and the SEBI, after considering the details and facts gathered through its own sources and surveillance system and from the Investigation Wing, passed some orders on the issue of manipulation of share market for providing accommodation entries of bogus LTCG and suspended the share transactions of a number of Companies including that of the above -named Company, The assessee was required to comment on the outcome of the investigation carried on by the Investigation Wing of the Department.

iii.
Admissions by the Chairpersons, Managing Directors and other Directors of the Companies through their Statements on Oath recorded during the course of Survey Operations: During the course of Search & Seizure and Survey operations on a large number of Companies, including the above named company, statement on oath were recorded,. the Chairpersons, Managing
Directors and other Directors of the Companies through their Statements on Oath recorded during the course of Survey Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term Capital Gains. During the course of search/survey operations., the Chairman and Managing Director and other Directors, had categorically- stated that they were involved in providing accommodation entries regarding sale and purchase of shares through their companies. Therefore, human probabilities have also to be applied to comprehend the transaction and to see the real intention behind entering into these transactions. In the similar circumstances, the Hon'able Gauhati High Court of CIT Vs Sanghamitra Bharali
(361 ITR 481) had held that the capital gains are sham transaction entered only to give colour of genuineness and therefore, held that the capital gain arising out of these transactions be believed as in-genuine and upheld taxing the said amount as unaccounted income brought into books in the guise of exempted capital gains. Many big brokers namely Sh. Deepak Patwari (PAN- AKHPP3737A), Sh. Sunil
Dokania (PAN- ADTPD8746N) and Sh. Alok Harlalka (PAN- AASPH1425L), Sh. Anil
Khemka, has accepted, on oath before the Investigation Wing of- Income Tax
Department at Kolkata during enquiries that they have rigged the prices of NCL
Research Ltd. and" provided accommodation entries to various clients of bogus
LTCG on commission basis.

iv. Admissions by the Operators of the Companies through their Statements on Oath recorded during the course of Survey Operations: During the course of Search & Seizure and Survey operations on a large number of Companies, statements on oath were recorded, the Operators of the Companies through their Statements on Oath recorded during the course of Survey Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term Capital Gains. The assessee was required to comment on the outcome of the investigation carried on by the Investigation Wing of the Department. However, the assessee commented "that she has got nothing to do with this report since her name is nowhere in the report."

v. Admissions by the Brokers through their Statements on Oath recorded during the course of Survey Operations: During the course of Search & Seizure and Survey operations on a large number of Brokers/ Partners /Directors of the Broking
Firms/Companies, statements on oath were recorded, the Operators of the Companies through their Statements on Oath recorded during the course of 47

Survey Operations have admitted of the fact of rigging of prices of shares and act of providing of accommodation entries in the grab of Long Term Capital
Gains. The assessee was required to comment on die outcome of the investigation carried on by the Investigation Wing of the Department. However, the assessee commented "that she has got nothing to do with this report since her name is nowhere in the report."

vi.
Affirmation/Admission by Sh. Rahul Dev and others i.e. the laymen who were not the part of above-said gamut through their Statements on Oath recorded In the Investigation Wing: There emerged another evidence of rigging of shares from the appearance of Sh. Rahul Dev and others, who aecidently/by ignorance bought the shares of a penny stock company, who went to sell the shares of the company, when the prices were high. They were told that the shares could be sold on high prices by paying money in cash in advance and then only they shall be getting the sale consideration in the bank accounts. The statements of Sh. Rahul Dev and others were also recorded on oath.

vii.
Recorded Discussion on Black Berry Mobile between Sh. Ritesh Jain, a prominent Broker and Sh. Deepak Patwari, another prominent Broker establishing the modes Operandi of the sham Transactions: The discussion, found recorded between Sh. Ritesh Jain and Sh. Deepak Patwari. prominent Brokers, confirming the modes operandi of rigging the prices by following the same in finalization of transactions of shares.

viii.
Disclosure/Admission of Identical Modes Operandi by One and All:
Almostall, barring a few, have accepted the whole truth of scheme prevalent in the share market regarding rigging of shares for providing of Long Term Capital
Gains.

ix.
Abrupt. Unrealistic and not based upon any realistic parameters
Movement of the price of shares: The movement in the prices of shares are abrupt, unrealistic and not based on any realistic parameters, which clearly shows the practice of rigging of shares for providing of Long Terrn Capital Gains.

x. Abnormal Trend of Rigging Diagram: The diagram of price rise shows the abnormal trend of rigging of prices of the shares of M/s NCL Research Ltd.

xi.
Ignorance of the assessee regarding exact Nature of Business of the Companies involved in Rigging: The assessee has shown ignorance regarding exact nature of business of the Companies, M/s NCL Research and Financial
Services Ltd.

xii.
Low and Negative Financial Statistics of the Companies involved in Rigging:
No Knowledge of Business; Negligible or Very Low Profits; Investments; Assets;
TheFinancial Statistics i.e. Profits, Investments. Assets, Earning Per Share(EPS) of thecompanies are negative, very low, which affirm the suspicious activities of theCompany. How a person will buy the shares of a company, when there are negative or very low profits, HPS, Assets. Investments.

xiii. No Prominent Name/Brand, Product or Innovation of the Company: The company whose shares were purchased by the assessee was 'neither a name/Brand worth mentioning, nor any of the products was known to the 48

assessee. The scrip Ms NCI, Research and Financial Services Ltd invested is merely
Shell/Penny Stock Company with no business activities whatsoever. The shares are purchased at lower levels and sold at higher rates through the series of off-market transactions created by the broker with vested interest. The share prices are artificially rigged through off market transactions This hike is not supported by the fundamentals of the company. The M/s NCL Research and Financial Services Ltd.
Scrip was rigged and misused for bogus LTCG (reference SEBI order in the above named company's case).

xiv.
Low or Negligible Earning Per Share(FPS) of the Companies involved in Rigging: The EPS of the company is in negative from the date of purchase to the date of sale. The intention behind investment in purchase of shares of the company by the assessee and the rise in prices of shares of the company with EPS in negative also raise questions.

xv.
Voluntary Surrender of a number of persons who have shown and claimed
Exemption of Income on a/c of Long Term Capital Gains on Transactions ofSuspicious Shares of the above said Company: There is a substantial number ofassesses all over the country, who have, for buying peace of mind and for avoiding any kind of litigation have surrendered the amounts of capital gains shown earlier as income either in the revised returns of income or disclosed in Income Declaration Scheme.

xvi. It is No Denying (hat Such Schemes arc Prevalent in the Market:

xvii. General Public not Interested in Buying these Shares: Moreover, these .share were not within the reach of general public during the period of rigging: The shares purchased are such, in which general public are not interested. Thus, it is clear that M/s NCL Research and Financial Services Lid., has negligible profit and unlisted company having nil business and no prudent person will invest Rs.
18,07,540- in such a Company, which has no earning itself. How the assessee can invest huge amount of Rs. 18,07,540/- in a company where no hope of returning of invested amounts in view of its financial status. It could happen due to the vested interest of "planning behind the curtain" only.

xviii
Every other Circumstantial facts indicates and supports that the shares ofthe Company M/s Cressanda Solutions Ltd. Were rigged to provide Long
TermCapital Gains to the Beneficiaries.

xix
Tax planning may be legitimate provided it is within the framework of law.Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods.
6.20 We are in conquerence with finding of Ld. CIT(A) in the impugned order wherein following is recorded:
vi)
The Hon'ble Supreme Court in the case of Commissioner of Income
Tax.West vs. Durga parsad More 82 ITR 540 observed the often quoted followingrelevant observation:-

"It is true that an apparent must be considered real until it is shown that there are reason to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements indocuments either executed or taken b y a party and rely on those recitals. If allthat an assessee who wants to evade tax is to have some recitals made in adocument either executed by him or executed in his favour then the door will beleft wide open to evade tax. A little probing was sufficient in the present case toshow that the apparent was not the real The taxing authorities were not required to put on blinkers while looking at the documents produced before them. Theywere entitled to look into the surrounding circumstances to find out the reality ofthe recitals made in those documents. "

vii) That genuineness could validly be tested on the ground or principle of preponderance of human probabilities, which could thus form a valid ground or parameter for determining the genuineness, stands since settled by the apex court in Sumati Dayal v. CIT(1995)214 ITR 801 (SC) wherein the apex court, in declaring the transaction as non- genuine, discarded a host of documentary evidences filed or relied upon by the assessee - appellant. That documentary evidences are not by themselves conclusive, and the truth of the matter or the documents could be determined on the basis of or on the anvil of the surrounding facts and circumstances of the case is well settled, and reliance is placed on the decision in the case of Durga Prasad More 82 ITR 540(SC).

(i)
Sumati Dayal v. CIT -

(1995) 214 ITR 801 (SC)
(ii)
Durga Parsad More -

82 ITR 540 (SC)
(iii)
Mc. Dowell & Co. Ltd. -

154 ITR 148 (SC)
(iv)
Asst. CIT v. Som Nath Mani

(2006) 100 TTJ 917 (Chd)
(v)
Govinda Rajulu Mudaliar v.

(1958) 34 ITR 807 (SC) vi)
Sreelekha Banerjee & othrs. V. CIT
(1963) 49 ITR 112 (SC)
(vii)
Kalekhan Mohammed Hanif v. CIT
(1963) 50 ITR 1 (SC)
(viii)
CIT v. Biju Patnaik

(1986) 160 ITR 674 (SC)
(ix)
CIT v. P. Mohanakala & Others -
(2007) 291 ITR 278(SC)

genuineness. Unfortunately, the assessees are harping on the transactions done by them and by relying on the documents in their hands to contend that Department should prove the steep rise in the scrip is not genuine, which is incorrect.
Another argument forwarded by the assessee is that section 68 is not applicable to them because of the fact that transactions are done through bank, stock exchange, broker and reflected in books of account etc. The Hon'ble Kolkata
High Court rebutted these arguments by saying that one of the key element to be satisfied for non-applicability of section 68 is “genuineness of transactions”.
Here the genuineness of transaction was attacked by Revenue on many counts –
eg., statements of operators, astronomical rise of share price despite weak fundamentals of company, utilising 77 shell companies to route the transactions etc.
It was further held by Hon'ble Kolkata High Court in this regard as follows :-
“The assessee cannot escape from the burden cast upon him and unfortunately in these cases, the burden is heavy as facts establish that the shares which were traded had phenomenal and fanciful rise and short fall in price in short span, which led to LTCG/STCL. Therefore, until the assessee discharges his burden of proof, the addition made by the AO cannot be faulted .”
The Hon'ble Kolkata High Court has dealt with this issue of section 68 by relying on various decisions like N.R. Portfolio Pvt. Ltd., A Govindarajulu Mudaliar Vs. CIT 205
In this case of Swati Bajaj, Hon'ble Kolkata High Court has mentioned that several assessees who were involved in this penny stock scam all over the country availed Vivad Se Vishwas Scheme, paid taxes and withdrew their appeals pending at various stages at that time.
In this case of Swati Bajaj, the Ld. CIT(A) has confirmed the addition made by AO by holding that payments were made through bank, transactions were done through stock exchange and other features are only apparent features and the real feature were manipulated with abnormal price upwards and sudden dip thereafter and held that the transactions would fall within the realm of suspicious and dubious transaction. Thus, the Ld. CIT(A) concludes by holding that considering the facts of the assessee’s case and the preponderance of probabilities against the assessee, the entire capital gains demand has to be treated as fictitious and bogus more particularly when the assessee has not furnished cogent evidence to explain how the shares in an unknown company jumped up so fast and such fantastic sale price was not at all possible when there was no economic or financial basis to justify the price rise and therefore affirmed the order passed by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee filed appeal to ITAT, and then the matter travelled to High Court and Hon'ble Kolkata High Court delivered a landmark judgement on the lines mentioned above. As the contentions and issues are similar to that of our impugned assessee, reliance is placed on this decision.

transaction and utilised the statements of operators as corroborative evidence only .
6.31 Reliance is placed on the decision of Hon'ble Supreme Court in the case of SEBI Vs. Kishore R. Ajmera (2016) 66 taxman.com 288 for the proposition that direct evidence is not material, and it was held as follows:-
“Court has pointed as to the important aspect with regard to the proximity of time between the buy and sell orders, prior meeting of minds, unnatural rise in the prices of the scrips and how the conclusion can be gathered from various circumstances coupled with preponderance of probabilities . At para 26, Hon'ble
Supreme Court held “According to us, knowledge of who the 2nd party/client or the broker is not relevant at all. While the screen based trading system keeps the identity of parties anonymous, it will be too naive to rest the final conclusions on said basis which overlooks a meeting of minds elsewhere. Direct proof of such meeting of minds elsewhere wound rarely forthcoming. The test would be is one of preponderance of probabilities............
In this case, Hon'ble Supreme Court dealt with the circumstances of synchronous trade of illiquid scrips (as mentioned by the AO in the assessment order in our case on hand also) and confirmed the order of Securities Appellate Tribunal w.r.t imposition of monetary penalties on brokers. The ratio laid down by Hon'ble Apex
Court in this case is that, in similar circumstances, circumstantial evidence can be taken into account .”
6.32 Similarly, in the case of SEBI Vs. Mega Corporation Ltd. 136
taxman.com 333, while dealing with a case of income earned through price manipulations of share, held that right to cross-examination of a person who gave a complaint, was rejected by Hon'ble Supreme Court .
6.33 In the case of Udit Kalra ITA No. 220/2009, Hon'ble Delhi High Court held that the company had meagre resources at disposal, negligible profit, but there was unusual and very high growth in the share price which does not support the same, the transaction was held to be sham.
6.34 In the case of Sanat Kumar Vs. ACIT Delhi, Circle 36(1), Hon'ble ITAT
Delhi Bench has held that the so-called sale proceed of shares received and claimed as exempt u/s. 10(38) was held to be sham transaction because of huge price rise of shares at the time of sale despite the fact that company’s profits are negligible and did not support such price rise.
6.35 In the case of Satish Kishore Vs. ITO Delhi, ITA No. 1704 of 2019 dated
6.8.2019, Hon'ble ITAT Delhi has held that the transactions of penny stock are manipulated ones to get arranged benefits to claim false exemption u/s. 10(38) because there is a cartel of brokers involved in jacking up the scrip without corresponding profit/prospects of company. All the contentions of assessee that he was not given cross-examination opportunity, transactions were done through stock exchange and money received through banking channels were considered and then only the exemption u/s. 10(38) was denied because these affairs are all pre- conceived and arranged affairs which lack genuineness. The same decision was rendered in the case of Sandeep Bhargava Vs. ACIT Delhi,
109 taxman.com 174 (Delh-Trib).
6.36 Shamim M. Bharwani Mumbai Vs. ITO-19(3)(4), Mumbai ITA No.
4906/Mum/2011 (A.Y. 2006-07), Hon'ble Mumbai ITAT : In this case, it was held that, a penny stock company, Eltrol Ltd., exposing the modus operandi adopted by assessee, in the case of such stocks, the price, de- horse any fundamentals or other factor, of paper companies being raked up on the exchange, so as to yield “gain” and then again, equally, without basis, grounded to yield “loss”, both of which, i.e., “gain” and “loss” find ready customers or takers. The purpose is to evade tax. The Ld.
CIT(A) wrongly dismissed the Revenue’s case by glossing over the many attendant facts and incidents, the most vital, and on which we observe complete silence or absence of any explanation, is the absence of any credentials of investor company. It was further held that the documentary evidence in the face of unusual events, as prevailing in the instant case, and without any corroborative evidence, cannot be regarded as conclusive. For the scrip to trade 50 times its face value, in the absence of trail blazing performance or great business prospects in future, by all counts, it is a paper company and reverse the findings of first appellate authority and confirm the impugned sum u/s. 68 of the I.T. Act.
6.37 In the case of M.K. Rajeshwari Vs. ITO[2018] 99 taxmann.com 339
(Bangalore - Trib.) the coordinate bench of the Tribunal has held that while dealing the issue of long-term capital gain accrued to the assessee, one has to examine the financials of the company whose shares were inflated within a short period and after the sharp rise in the price of shares, it again comes down. It was held as follows :-
“In the light of the ratio decidendi of the cases cited above, the contention of the assessee that the transaction leading to long-term capital gains are supported by documents such as sale and purchase invoices, bank statement etc., cannot be accepted. In view of the facts and circumstances of the case brought on record by the Assessing Officer after proper examination of the material facts and taking into account corroborating evidences gathered by the Directorate of Income-tax (Investigation), Kolkata, involving a network of brokers and operators engaged in manipulation of market price of the shares of the HBC bioscience controlled and managed by such person with a purpose to provide accommodation entries in the form of long- term capital gains. The onus was on the assessee to prove the transaction leading to claim of long-term capital gain was a genuine transaction. The assessee failed to justify manifold increase in the prices of the share of 'HBC bioscience' despite weak financials of the company.
Initial investment in the company of unknown credential and subsequent jump in the share prices of such a company, cannot be an accident or windfall but could be possible, because of manipulation in the share prices in a preplanned manner, as brought on record by the Assessing Officer. In view of the failure on the part of the assessee to discharge his burden of proof and explain nature and source of the transaction, in our opinion, the Ld. CIT(A) has rightly confirmed the addition in dispute, which does not require any interference on our part. We accordingly, uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the grounds raised by the assessee on this issue.”
6.38 In the case of Rajkumar B. Agarwal vs. DCIT (ITAT Pune), Bench “B”
ITA Nos. 1648 & 1649/PUN/15, it was held as follows :-
“The assessee completed paper-trail by producing contract notes for purchase and sale of shares of PIL. Mere furnishing of contract notes etc.
does not inspire any confidence in the light of facts. Test of human probability should be applied and apparent should be ignored to unearth the harsh reality (Sumati Dayal 214 ITR 801 (SC) & Durga Prasad More 82
ITR 540 (SC) applied)”.
6.39 In the case of Pooja Ajmani Vs. ITO (ITAT Delhi) April 25, 2019 ITA No.
5714/Del/2018, it was held as follows :-
“10(38) Bogus Capital Gains From Penny Stocks : u/s. 101 of Evidence Act,
1972, the onus is on the assessee to prove that the LTCG is genuine. The assessee cannot on failure to establish a prima facie case, take advantage of the weakness in the AO’s case. The jump in the share price of a company of unknown credentials cannot be an accident or windfall but is possible because of manipulations in a pre-planned manner by interested broker and entry operators. The LTCG transactions are a sham”.

placing reliance on the decision of Hon’ble Supreme Court in the case of Durga Prasad More (2002) 3 BOMLR 747, 2003 (1) MhLj 420 has observed as under :-
"It is true that when transactions are through cheques, it looks like real transaction but authorities are permitted to look behind 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 from Rs. 3
to Rs. 55 in a short span of time. Mere payment 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 only to offset the loss incurred on the sale of jewellery declared under VDIS. In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified in deleting the impugned addition We accordingly set aside the order of the CIT(A)and restore that of the AO.”
6.43 Chennai
ITAT in the case of Rajnish
Agarwal in I.T.A.No.1419/CHNY/2018has held that the penny stock of SRK Industries
Ltd. is not having any financial strength of its own and the sale and purchase of these shares were held to be sham and LTCG u/s. 10(38) was denied to the assessee.
6.44 Similarly, in the cases decided by various Tribunals of the country as mentioned below also, have held that the penny stocks without financial fundaments to support the astronomical price rise of hundreds of times within short span of one to two years, are sham transactions and LTCG claim u/s. 10(38) was denied to them :
a) Usha Chandresh Shah ITA No. 6858/Mum/2011, Mumbai b) Zakrullah Chaudhary ITA No. 669/PN/2012, Pune c) Chandan Gupta ITA No. 7024/Mum/2010, Mumbai d) Chandan Gupta ITA No. 550/Chd/2008 dated 26.9.2013 Chandigarh e) Napar Drugs Ltd. 98 ITD 265, Delhi f) Dinesh Kumar Khandelwal HUF Vs. ITO ITA No. 58/Nag/2015 dated
24.8.2016 Ratnakar M. Pujari Vs. ITO 9951/Mum/2012 dted 3.8.2016
In the case of CIT(A) Vs. Jasvinder Kaur 357 ITR 638 also, Hon'ble Gauhati
High Court has held that price manipulations of penny stocks analysed by AO was on correct footing and held that assessee was not eligible for LTCG u/s. 10(38) of the Act.
6.45 We now intend to examine several case laws which are cited by the parties before this Tribunal, before we part with this adjudication and adjudgement of this second appeal. We make it very clear that several case laws are relied upon by the parties in PB, however we intend to confined ourselves with few relevant case laws only which are germane to the issue in hand.
(i)
PCIT Vs. Hitesh Gandhi (2018) 11 ITR-OL-206 (P&H)
In the above case Hon’ble Punjab & Haryana High Court in para 4, 5 & 6 have recorded as under:
“ 4. I have considered the facts of the case, the basis of addition made by the Assessing Officer, the arguments of the authorised represent- ative during the assessment as well as appellate proceedings and the comments of the Assessing
Officer in the remand report. It is seen that the impugned purchase of shares allegedly effected in the financial year 2006-07 for an amount of Rs. 11 lakhs and the said shares had been physically transferred in favour of the appellant in the books of the listed company, namely, GeeFCee Finance Limited. Further the said shares got dematerialized and were, credited in the assessee's account maintained with depository participant, i.e., HDFC on Octo- ber 16, 2006. Further, dividend amounting to Rs. 1,50,000 has been declared and received with respect to the aforementioned holding of shares on October 23, 2007 and the said dividend had been disclosed by the assessee in the return of income and claimed exemption accordingly. It is also to be noted that the said dividend had been accepted as exempt by the Assessing Officer for the year under consideration. The only logical conclusion that can be made from the sequential perusal of the above detailed facts is that the impugned shares were actually purchased by the assessee on given dates as these stand reflected in D’mat account maintained with the HDFC bank. The dividend declared on the same has been received and cre- dited in the assessee's bank account which is further found recorded in the Income-tax return and allowed as exempt by the Assessing
Officer. As against this clear documentary evidence in favour of the appellant, the Assessing Officer has merely rejected the contention of purchase on the basis of suspicion arising out of reckless/casual replies given to various questions raised by the Assessing Officer in the assessment proceedings. It is important to appreciate here that the assessee had been subjected to search and seizure proceedings under section 132 of the Income-tax Act, 1961 and the search proceedings did not lead to recovery of any incriminating evidence to show that the transaction of purchase of shares was arranged as suspected by the Assessing Officer. It is also seen that no post-search enquiries on the issue had been conducted in the form of recording the statement of broker so as to bring on record any evidence of the said transaction being an accommodation entry.
This is to mean that just because the assessee has been found to be earning huge amounts of long-term capital gains on sale of shares, the same has been held to be sham transaction merely on the ground of same being unlikely in the given circumstances. The Assessing Officer, in the remand report has not been able to contradict any of the facts regarding purchase of shares highlighted above or regarding the sale of shares and has not progressed beyond the stage of suspicion. It is further seen that the shares had been sold for an amount of Rs.
2,91,32,850 and has been debited to the assessee's D'mat account maintained with D/ P, HDFC. It is also seen that STT has been paid on the sale of shares and the said shares had been sold through National Stock Exchange. It is also seen that the Assessing Officer while working out the addition has allowed indexation on the cost of purchase of shares till the date of sale and has in fact worked out the capital gain only to make the impugned addition. I am of the view that there is no evidence on record, gathered during the course of search proceedings or during the course of post-search investigation or assessment proceedings to hold the view that the entire transaction of purchase/sale of shares effected over a period of two years was a sham transaction. The addition being without any logical basis is directed to be deleted.

Commissioner of Income-tax (Appeals) has passed a very reasoned and speaking order and we do not find any infirmity in the same.
6. The findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal are pure findings of fact which have not been shown to be illegal, erroneous or perverse by the learned counsel for the appellant. He has also not been able to produce any material on record to controvert the said findings.
Thus, no substantial question of law arises. Consequently finding no merit in the appeal, the same is hereby dismissed.”

The poor financial fundamentals of the scrip was not the issue involved in the above case as is in the instant case. The assesse in the instant case has failed to give any explanation about the poor financial health of the company / scrip called “NCL Research & Financial Services Ltd.”. The assessee has also failed to give suitable explanation with regard to other fundamentals of the scrip like background of the promoters, dividend history of the company, bonus if any and other factors in the security market including sentiments which lead to abnormal increase in price of the scrip in short span of time. The facts of the case in the above cited case law are different. In the instant case facts are that 7000 shares were purchased at the price of Rs. 257/- per share and were sold with in slightly more than a year @ Rs. 1745/- (Avg. rate) giving LTCG of whopping amount of Rs. 1,04,06,769/-. The sudden and abrupt rise in price was not based on any strong fundamental factors including financials of the company. Even otherwise other facts of the case are different, then that of above cited case law. In the present case price has been held to be a very high price for which no plausible explanation as prevalent in security market has been offered by the assessee basis profile of the company and its fundamentals including financials as per security market practices.
(ii)
PCIT Vs. Prem Pal Gandhi (2018) 401 ITR 253 (P&H)

In the above judgment Hon’ble Punjab & Haryana High Court has on para 3 has recorded as under:
3. The first three questions of law raised in this appeal are covered against the appellant by an order and judgement of a Division Bench of this Court dated
16.02.2017 in ITA-18-2017 titled as The Pr. CIT (Central) v. Hitesh Gandhi.
4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at Rs. 11/- and sold the same in the assessment year 2008-2009 at Rs. 400/- per share. In the above case, namely, Hitesh
Gandhi (supra) also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees' income from undisclosed sources. In Hitesh Gandhi's case (supra) 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.
5. In these circumstances, following the judgement in Hitesh Gandhi's case
(supra), it must be held that there is no substantial question of law in the present appeal.
6. 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.
7. In the circumstances, the appeal is dismissed.

The above facts are not present in the instant case which we have already stated in immediately above para (supra) while dealing with the case of Hitesh Gandhi(supra).
Hence respectfully we distinguish the case of two judgments of Punjab &
Haryana High Court (supra) on the grounds that the facts are different.
Consequently the ratio of above cases cannot be applied to the peculiar facts and circumstance of the instant case where apart from poor financials of the company “NCL Research & Financial Services Ltd.” the 64

very Directors and Chairman and Managing Director of “NCL Research &
Financial Services Ltd.” have given inculpatory statements about the accommodation entries, manipulation in prices of the scrip etc. In the above cases of Punjab & Haryana High Court suspicion about sham nature of transaction was there and there be no evidence about it. But in the instant case there is an elaborate discussion about sham and make belief nature of transaction of transfer of capital asset. There are evidences and the circumstances to go behind the transfer of capital asset document to see the reality or real nature of transaction. The applicability of Mcdowell case, Durga Prasad Case and Sumati Dayals case of Hon’ble Supreme Court are just not discussed. The courts in India decide upon each case basis facts of that particular case which defer from one another. The Supreme Court of India and various other High
Courts including juri ictional High Courts additionally decide upon the broad proposition of law which they lay down in a case which is required to be followed by one and all. The Hon’ble Punjab & Haryana High Court in above two cases have held that basis suspicion without their being any evidence LTCG cannot be disallowed.
Per contra in the instant case the authorities have taken into consideration the evidence in security market parlance and the circumstantial evidence surrounding the transaction including the financial, fundamentals and other fundamentals of the scrip as a ground to deny LTCG.
6.46 We have also perused the judgment of Hon’ble Bombay High Court in case of CIT Vs. Mukesh Rati Lal Marolia dt. 07/09/2011 in ITA No. 456 of 2007 and we are of the considered view that the facts therein are totally different which we reproduce as below:

1
Whether the ITAT was justified in deleting the amount of Rs.1,41,08,484/
received by the Assessee on sale of the shares asunexplained investment under section 69 of the Income Tax Act, 1961 is the question raised in this Appeal.

2
TheAssessmentYearinvolvedhereinisA.Y.20012002. 3. The Assessee was carrying on business of manufacturing handkerchiefs as the proprietor of Rumal Manufacturing Company. In the Assessment Year in question the Assessee claimed that he had sold the shares of four companies, namely, M/s Alang Industrial Gases Ltd., Mobile Telecommunication Ltd., M/s
Rashel Agrotech Ltd. and M/s. Sentil Agrotech Ltd, which were purchased during the year 19992000 and 20002001. The entire sale consideration amounting to Rs.1,41,08,484/
was utilised for the purchase of a flat at Colaba,Mumbaiandaccordinglybenefitofsection54E of the Income Tax Act, 1961
was claimed.

We therefore are of the view that the Ld. AR has placed reliance on a case law where the facts are materially different than that of instant case in hand.
6.47 We have also perused the judgment of Hon’ble Calcutta High Court in case of CIT Vs. Carbo Industrial Holding Ltd. reported in (2000) 244 ITR
422 (Cal) (page 63,64,65 & 66 of Paper Book Volume II) wherein too the facts are different from the facts of the present case. The core issue therein was that the broker had not appeared despite summons and it was held that mere non appearance by broker would not disentitle the assessee from claim of loss hence this case is distinguishable from the facts of the present case.
6.48 The assessee has placed reliance on the following case law in sequence:
(i) ITO 1(3) Vs. Smt. Renu Aggarwal (ITA No. 204/LKW/2020 for A.Y 2014-
15)(page 244 to 268 of Vol 3 Paper Book). We notice that the Hon’ble ITAT
SMC Lucknow Bench was examining the issue whether the sale of shares was a natural phenomena or was an arrangement of dubious design of providing accommodation entry of LTCG. The entire set of facts therein and material evidences are of different type than the peculiar facts and circumstances of the present case. This judgment further traveled to Hon’ble Allahabad High Court in ITA No. 44 of 2022 (page 243 of Vol 3
Paper Book) wherein following is recorded :
The above findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the Id. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to 67

various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The Id. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences filed by the assessee before Assessing Officer. I do not find any adversity in the order of Id. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of cases after relying on the judgment of Hon'ble
Delhi High Court in case of Krishna Devi and others had allowed relief to various assessee.

Basis above, the Hon’ble High Court held that no substantial question of law arises. In the present case it is clearly held by the authorties below that the investigation was targeted against those who had rigged the prices of the scrip, the Directors and Chairman and Managing Director of the scrip
/ company “NCL Research & Financial Services Ltd.”, Manish Baid and his
Associates etc. It was pan India phenomena. The beneficiaries like assessee who claimed the benefit of LTCG were not entitled in law for the same, upon deeper and indepth examination of document of transfer of capital assets which noticed a significant factor that the scrip of “NCL
Research & Financial Services Ltd.” was a penny stock which was rigged upon by the operators Manish Baid and his Associates who acted in collusion and in connivance with Directors and Chairman and Managing
Director of “NCL Research & Financial Services Ltd.” who converted large amount of black money by giving accommodation entry to several players in the market on pan India basis of “NCL Research & Financial
Services Ltd.” which had a very weak financial fundamentals to command such a high price. The financial fundamentals and other fundamental factors of the scrip, background of the promoters of the scrip, the corporate history and performance of the scrip / company were unraveled and Revenue realized that the exchequer was defrauded by way of LTCG exemption. The transfer of transaction of capital assets when opened must meet the basic parameters of high price due to strong fundamentals including financials, dividend history of the scrip, bonus, the performance of the scrip as a ‘corporate entity’ in terms of profitability, market sentiments etc as discussed above in preceding paragraphs. We therefore hold that the facts and circumstances of the present case are very peculiar where the Revenue has gone behind the transaction of capital assets to know the real picture of sudden volatility in the prices of the scrip. The present case is therefore required to be adjudge and adjudicated on the given set of facts and evidence. Many authorities have been given in the paper book and we have perused all of them minutely and we are of the considered opinion that in each and every case facts and circumstances are different. We do not intend to load our present decision more and more on this limited aspect that facts of each case are always different alongwith the evidences and that each judgement decides a set of given facts which cannot be blindly applied to other cases which look similar. In order to apply the precedent law of binding nature facts should be identical / parimateria and broad proposition of law laid down. We also observe that in paper book Vol-4 no documents of transfer of capital assets stricto senso like contract note of broker for buy of 7000 shares and so also contract note for sale of 7000
shares are placed on record. It is a mandatory document in law dealing with securities transaction. There is no invoice / bill of the broker either of buy or sale on record. We also do not notice the detailed D’mat statement of depository / depository participant showing credit and debit of 7000
shares of “NCL Research & Financial Services Ltd.” of beneficial owner.
7. In the premises impugned order is sustained and appeal of the Assessee is dismissed.

परेश म. जोशी
( VIKRAM SINGH YADAV)

(PARESH M. JOSHI)
लेखा सद˟/ ACCOUNTANT MEMBER

Ɋाियक सद˟ / JUDICIAL MEMBER

AG

आदेशकीŮितिलिपअŤेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायकपंजीकार/