SAFE INFRACON PVT. LTD.,JAIPUR vs. INCOME TAX OFFICER, WARD-6(2), JAIPUR, JAIPUR

3. That the Ld. CIT(A) has erred on facts and in law in upholding the issue of notice u/s 147, and reopening of the assessment without appreciating the fact that a) the information received was general and had no link with the assessee in question, b) there was no verification or enquiry to verify the reasons given for reopening of the assessment: c) Shri Praveen Kamar Jain has already owned up all the entries related to him and paid tax thereon, The reopening of the assessment was bad in law for these and other reasons, 4. The Ld. CTT(A) has erred on facts and in law in upholding the addition of Rs. 39,50,000/-on account of unexplained credit entries, and dismissing the appeal on this issue, 5. The Ld. CIT(A) has grossly erred on facts and in law in upholding the addition of Rs. 19,750/-on account of unexplained expenses under section 69C of the IT. Act, thus dismissing the appeal on this issue, 6. The Ld. CIT(A) has erred on facts and in law in upholding the 6 charging of interest u/s 245B of Rs. 11,40,831/- by the ITO, thus dismissing the Appeal on this issue.’’ 2.1 First of all, we take up the appeal of the assesee relating to Assessment year 2010-11 in for adjudication. 3.1 The brief facts as observed in the assessment order are that information available on record, it was gathered that the assessee had taken accommodation entry in the nature of bogus share application money/bogus unsecured loan/bogus sale and purchase. Therefore, proceedings u/s 147 was initiated after prior approval from Pr.CIT-2, Jaipur. Notice u/s 148 of the Act was issued on 03-03-2017. In response to the notice, the assessee filed its return of income for the A.Y. 2010-11 declaring total loss at Rs.45,532/-. Notice u/s 143(2) of the Act was issued to the assessee. Finally, the AO completed the assessment vide order dated 15-12-2017 at a total income of Rs.1,10,09,470/- holding following observation as under:- ‘’E. In view of abovementioned discussion it is clearly established that transaction made by the assessee with M/s. Olive Overseas Pvt. Ltd. not genuine one and is only bogus accommodation entry which was obtained in lieu of cash. During the year under consideration, the assessee has shown loan of Rs.30,00,000/- and share capital & share premium of Rs.80,00,000/- from the concern M/s. Olive Overseas P. Ltd. , the same are added to the total income of the assessee as unexplained cash credits within the meaning of provisions of Section 68 of I.T. Act, 1961. The assessee has furnished inaccurate particulars of income and concealed the facts. Therefore, penalty u/s 271(1)© is separately initiated. F. Further Shri Praveen Kumar Jain admitted that he charged @ 0.55% for arranging of accommodation entries. Therefore, the assesee has paid Rs.55,000/- (0.50%) of Rs.1,10,00,000/-) out of books which is unexplained expenses. Thus Rs.55,000/- is added back to the total income of the assessee u/s 69C. The assessee has furnished inaccurate particulars of income and concealed the facts. Therefore, penalty u/s 271(1)© is separately initiated.’’ 3.2 In first appeal, the ld.CIT(A) has passed an ex-parte order by dismissing the appeal of the assessee observing that no further response/ submission had been received from the assessee even after considerable time had elapsed. 3.2.1 It is pertinent to mention that as regards the issue of reopening of the assessment u/s 147, the Ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’(x) In the present case, it is to be noted that the AO had material before him for formation of reasonable belief of escapement which had live nexus with the material in his possession for assuming the valid jurisdiction for reopening u/s 147. In view of the above discussion ground Number 2 of appeal is hereby dismissed.’’ 3.2.2 As regards the issue of addition of Rs.1,10,00,000/- on account of unexplained cash credit and addition of Rs.55,000/- on account of unexplained expenses u/s 69 of the Act, the ld. CIT(A) has dismissed both the grounds by observing as under:- Page 47-48 …As there are several strong evidence is with the learned AO including the statements of the directors of the company itself from whom the loan was received by the appellant company and the fact that these companies were found to be non-existent at the given addresses and not having any genuine business and were only doing bogus entries in the books of accounts and that the loans were given to the appellant without any security and the appellant has not justified the same with any correspondence and valuation reports and agreements etc. the onus is on the appellant to prove that the evidences with the learned AO on wrong and for the onus is on the appellant to prove the identity, genuineness and creditworthiness in terms of section 68. The turnover, profitability etc. of lending/investing company Olive Overseas Pvt Ltd is extremely low and bank statements show that funds are coming and going. In the present case the appellant has merely produced the documents regarding the form of the transaction i.e. that the transaction was through banking channel and is recorded in the books of accounts of the loan given company and books of the appellant. These are only initial documents and do not prove the identity, genuineness and creditworthiness in terms of substance and reality. Appellant has not produced any evidence to prove the evidences with the learned AO as wrong. The appellant has also not produced the directors and shareholders of the company before the learned AO for examination or cross examination by the Id. AO from which the loans and share capital including huge share premium were received by the appellant company. The addition in the assessment order on account of commission is consequential in nature and the same has been from the statements made by various parties and as per the general business modus operandi of the accommodation entries. The appellant has miserably failed in discharging the onus cast on it in view of the above facts and circumstances and the explanation of the appellant is only primitive and does not at all prove the three ingredients of section 68. Accordingly the addition made by the learned AO in the assessment order is hereby upheld and these grounds (3 and 4) of appeal of the appellant are hereby dismissed’’ 3.2.3 As regards the issue of charging of interest of Rs.34,80,153/- u/s 234B of the Act, the ld.CIT(A) has disposed off this ground by stating that charging of interest is mandatory and consequential in nature and the AO is directed to give effect of the same on the income determined vide this appellate order. 3.3 During the course of hearing, the ld.AR of the assessee submitted that an opportunity to cross examine Shri Praveen Jain should have been provided to the assessee since his statement had been relied upon by the AO. He further submitted that M/s. Olive Overseas P. Ltd. had applied for equity shares in the company and the company had allotted 80,000 equity shares of Rs.10/- each @ premium of Rs.90/- to the aforesaid company. All the payments were received through banking channel whose details are as under:- S.N. Date Amount 1. 26-06-2009 10,00,000/- 2. 26-06-2009 20,00,000/- 3. 26-06-2009 15,00,000/- 4. 10-07-2009 5,00,000/- 5. 01-08-2009 30,00,000/- Total 80,00,000/- The ld. AR of the assessee further submitted that besides the above amount of Rs.80,00, 000/-, the assessee company had taken a loan of Rs.30,00,000/- from the same company and thus the total amount came to the tune of Rs.1,10,00,000/-. He further submitted following details / evidence in support of his claim before the AO. 1. Copies of application of share capital 2. Relevant record of Registrar of Companies 3. Copy of account of assessee appearing in the books of said parties.

4. Copy of bank statement of said parties 5. ITR copies, balance sheet and audited books of accounts for A.Y. 2010-11 of the said parties and share application request letter.

6. Master Data available with the Registrar of Companies related to the companies from whom loans had been taken during the year wherein the parties had confirmed the registered office, address of the company, nature of business, registration number of the company with Registrar of Companies, CIN and PAN. They also affirmed the fact of filing of return of income and loans granted to the assessee The ld.AR further submitted that the AO did not believe the documents and supporting evidence placed on record by the assesee and the AO relied upon the report of the Mumbai Investigation Wing of the Income Tax Department. He further submitted that on perusal of bank statements of the parties it can be seen that both the companies had sufficient bank balance to advance the loans and thus the identity, genuineness of the transactions and creditworthiness of the parties have been proved beyond doubt by the assessee and no material had been put on record to show that it was assessee’s unaccounted money that had been utilized to turn it into unaccounted money and thus the assessee cannot be held accountable for the source of the source. Conclusively, the ld. AR of the assessee submitted that ld. CIT(A) was not justified in confirming the action of the AO and the addition so confirmed needs to be deleted. It is also pertinent to mention that the ld. AR of the assessee has advanced the following written submission to counter the orders of the lower authorities.

‘’WRITTEN SUBMISSIONS 3.4 This is an appeal against the order of the Ld. CIT(A), Jaipur-04 dated 11.09.2024 for A.Y. 2010-11. A copy of the impugned order is enclosed as Annexure A.

The brief facts of the case are that ITO, Ward 6(2) ,Jaipur received information that the assessee had obtained accommodation entries from a company known as M/s Olive Overseas P. Ltd. (Realgold Trading Co. P. Ltd.) of Rs. 1,10,00,000/-. According to the information received from the Investigation Wing of the Income-Tax Department at Mumbai, these concerns were part of the Praveen Jain Group, Mumbai, which indulged in providing accommodation entries in lieu of cash obtained from beneficiaries and not doing any genuine business activities as divulged during search and survey operations carried out on the premises of Shri Praveen Jain.

On the basis of this information, the Assessing Officer issued a notice u/s 147/148 of the Income-Tax Act on 03.03.2017 after obtaining the approval of the PCIT-II, Jaipur. In response to the said notice, the assessee filed its return of income showing a loss of (-) Rs.45,532/-. In response to the show-cause notice u/s 143(2) of the Act, the assessee made the following submissions on 30.11.2017: “1.That an opportunity to cross-examine Shri Praveen Jain should be given to the assessee since his statement has been relied upon by the AO; 2.That M/s Olive Overseas P. Ltd. Had applied for equity shares in the company and the company had allotted 80,000/- equity shares of Rs. 10/- each @premium of Rs. 90/- to the aforesaid company. 3.All the payment was received through banking channel as per details given below:

S.No. Date Amount(in Rs.) 1 26.06.2009 10,00,000/- 2. 26.06.2009 20,00,000/- 3. 26.06.2009 15,00,000/- 4. 10.07.2009 5,00,000/- 5. 01.08.2009 30,00,000/- Total 80,00,000/- In addition thereto, the assessee company had also taken a loan of Rs. 30,00,000/- from the same company. Hence, the total amount involved was Rs. 1,10,00,000/-.

4. The assesee company submitted the following further evidence in support of their claim that, as far as they are concerned, the transaction was genuine: i)Copies of Application of Share Capital; ii)Relevant Records of Registrar of Companies; iii)Copy of account of assessee appearing in the books of said parties; iv)Copy of bank statements of the said parties; v)ITR Copies , balance-sheets and Audited books of account for A.Y. 2010-11 of the said parties, and Share Application request letter. vi)Master Data available with the Registrar of Companies related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with Registrar of Companies, CIN and PAN. They also affirmed the fact of filing of Return of Income and loans granted to the assessee. 16. on a perusal of the bank statements of the parties, it is seen that both the companies have sufficient balances to advance the loans. With the above documents , the identity , genuiness of the transaction and creditworthiness of the parties has been proved by the assessee by filing the necessary documents. It is further submitted that important aspect which has to be noted here is that the loans were borrowed by the assessee in F.Y. 2009-10 whereas the search and survey action on Praveen Jain and his associate companies was subsequent 01.10.2013.”

The Assessing Officer did not believe the documents and supporting evidence placed on record by the assessee, and relied on the report of the Mumbai Investigation Wing of the Income-Tax Department, referring to the following: i)report of the Mumbai Investigation Wing which stated that one Shri Praveen Jain had floated a number of bogus companies whose only business was to provide accommodation entries to other companies. One such company was M/s Olive Overseas Pvt. Ltd. Which had invested in the equity of the assessee company, and had also given it loan; ii)statements of the following persons recorded as a result of the search and survey operations: a. Shri Manish Jain, Director, Atharva Business Pvt. Ltd.and M/s Ansh Mercantile Pvt. Ltd. Who stated in his statement dated 21.10.2013 that both these companies were controlled and managed by his cousin Shri Pravin Jain, he was a Director only in namesake. These companies are not involved in any genuine business activity. b. Shri Nilesh Parmar , Prop. Of M/s Mohit International .who stated that he managed the accounts of about 30 odd concerns of the Praveen Jain Group. He stated that Shri Praveen Jain was a Director in only 4-5 of these concerns , in other his employees and outsiders were Directors.He admitted that he was managing the accounts of M/s Olive Overseas Pvt. Ltd. c. Shri Uttam C. Hinger, brother-in-law of Shri Praveen Jain and a Director in some of the shell companies. He stated, inter alia, that only Shri Pravin Jain may explain the exact nature of the business activities of these concerns. Since he is only a director on paper and accountant to Shri Jain, he admitted that none of the concerns with which he was associated was genuine. d. Shri Chandra Sekhar Goyal , a broker, who admitted that Shri Pravin jain was providing accommodation entries for commission, bogus purchases, bogus expenditure, bogus unsecured loans etc. e. Shri Dinesh Chaudhary, a broker, also confirmed the facts as stated above.

According to the report of the Mumbai Investigation Wing, the statement of Shri Pravin Jain was recorded on oath on 01.10.2023 and he admitted that he was providing accommodation entries and also explained the complete modus operandi of providing such entries.

The Assessing Officer relied on this report to come to the conclusion that the amount of Rs. 1,10,00,000/- received by the assessee company was actually the money of the assessee company. While passing the assessment order on he made the following additions:

1. On account of bogus share application money 80,00,000/- 2. On account of bogus loan 30,00,000/- 3. On account of commission paid to Shri Pravin Jain @ 0.5% of the amount 55,000/- ____________ Total 1,10,55,000/- A copy of the reply filed by the A/R of the assessee is annexed herewith and marked as Annexure B. A copy of the assessment order dated 15.12.2017 is enclosed herewith and marked as Annexure C. Aggrieved of the order of the Assessing Officer, the assessee preferred an appeal to the CIT(A)-04, Jaipur.

Order of CIT(A)-04, Jaipur:

The CIT(A) -04 , in his order, upheld the order of the Assessing Officer, and confirmed the additions made by the Assessing Officer. He specifically relied on the following decisions of the Mumbai Tribunal: i)1402-1407/Mum/2023 ,Olive Overseas Pvt. Ltd. The operative part of the said decision is: “8. In the present appeals, it is undisputed that the substantive addition has been made in the hands of Mr. Praveen Kumar Jain and similar additions , on a protective basis, is made in the hands of the assessee. Since the substantive addition has already been upheld by the coordinate Bench in the case of Praveen Kumar Jain (supra) , therefore, similar addition made on protective basis in the hands of the assessee becomes unsustainable and, therefore, is directed to be deleted in all the assessment years under consideration before us. We further direct the Assessing Officer that in case the addition made in the hands of Mr. Praveen Kumar Jain is deleted in further appellate proceedings, then the addition made in the hands of the assessee be revived. With the above limited directions, the impugned additions made in all the assessment years under consideration before us are directed to be deleted.” ii)ITA NO. 7191/Mum/2018 and Etc.-Praveen Kumar Jain V/s DCIT, A.Y. 2008-09 to 2014-15 ; Submissions :

Ground No. 1 &2: Ground no. 1 is general. Ground no. 2 deals with the contention of the CIT(A) that the assessee did not respond to the notices of hearing and did not file any details/written submissions. This contention of the CIT(A) is erroneous since he himself says in para 4.1 of his order that the assessee has reiterated the submissions during the appellate proceedings. Then, from page 4 to page 15, para 4.1 of the Appellate Order, he reproduces the submissions of the assessee. Ground No. 3 Ground no. 3 states that reopening of the assessment under section 147/148 of the I.T. Act is bad since the information received was general and had no link with the assessee in question. Moreover, the AO did not conduct any enquiry at his end. Further, Shri Praveen Jain had owned up the entries and paid tax thereon. The first part of this Ground of Appeal is that reopening of the assessment under section 147/148 was bad in law since the Assessing Officer did not undertake any independent verification of the information received by him from the Mumbai Investigation Wing. From a perusal of the Assessment order it appears that the facts mentioned in the assessment order forming reasons for reopening of the assessment are all taken ad verbatim from the report received from Mumbai. The AO has not independently verified any of the statements of various persons recorded during search, nor has he verified the identity, creditworthiness or genuineness of the impugned transactions . In the absence of any independent verification , accepting the information received from the Investigating Wing is not enough to form a reason to believe that income chargeable to tax has escaped assessment. It is borrowed satisfaction. Secondly, there is nothing on record to directly link the assessee to Shri Praveen Kumar Jain . Shri Jain or others whose statements have been referred to, have not mentioned the name of the assessee or specifically said that the transactions carried out by the assessee are sham or bogus, especially in the light of the evidence placed on record by it. Further, Shri Praveen Jain retracted his statement relied upon by the AO, which fact has been deliberately suppressed by him. The retraction is genuine, hence needs to be given full weightage.The AO has not brought on record any evidence to nullify the retraction. The second part of the Ground of Appeal is that neither a copy of the statement of Shri Praveen Kumar Jain was supplied nor was he produced for cross-examination by the assessee, despite specific request. Attention is drawn to para 17 of the Assessment Order wherein the assessee requested the following: “..it is requested you to give an opportunity to the assessee in the presence of the third party who is the author of the statements/document and also to cross-examine the author of such statements/document and elicit such necessary facts from him as to how these entries came to be made by him connecting the assessee in such statements/documents .” The Assessing Officer , however, did not pay any heed to this request of the assessee and he did not produce Shri Praveen Kumar Jain for cross-examination before the assessee. Hence, there is a clearcut violation of the principles of natural justice which renders the whole assessment proceedings, including the notice u/s 147/148 of the Act , unsustainable in law and liable to be quashed. In this regard, on all the issues raised above, reliance is placed on the following case laws:

1.Principal Commissioner of Income-Tax-5 v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153 (Bombay): Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT(Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled proposition in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.”

2.CIT V. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC):

Once the primary onus of establishing the genuineness of the transaction is done by the assessee by furnishing details like name, address, PAN confirmation, copy of tax return etc. it was the duty of the AO to verify the genuineness of these transactions by strictly enforcing the provisions of section 131 of the Act if at all the those creditors were required to be produced before him.

3.Principal Commissioner of Income-Tax v. N.S Software (Firm) [2018] 403 ITR 259 (Delhi): the assessing officer had not explained the steps taken by him to determine that seized material belonged to the assessee… 4.Principal Commissioner of income-Tax v. More Overseas [2018] 97 taxmann.com 657 (Calcutta):

Both the Commissioner and the Tribunal , however, found that no re-assessment proceedings could be initiated merely because of action taken by the Customs Department…..In our judgment, the reasoning of the Tribunal in the decision which we upheld is also almost identical to that in the present case, in relation to the order appealed against….. Under these circumstances, following our decision delivered in of 2016, we dismiss the appeal.

5.Harikishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Gujarat):

On the basis of information from another agency there cannot be any reassessment proceedings. However, after considering the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of material on record that the income has escaped assessment. Without forming such opinion , solely and mechanically relying upon information received from other source, there cannot be any reassessment for verification…. Held that from the reasons recorded, it appeared that the impugned reopening proceedings were on borrowed satisfaction, no independent opinion was formed……Under these circumstances, the assumption of jurisdiction to reopen assessment beyond the period of 4 years in exercise of powers under section 147 was bad in law.

6.CIT V. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com64 (SC) Wherein it was held that the information received from a third party was not subjected to any further scrutiny and that the assessee was not allowed opportunity to cross-examine the person whose statement was relied on. Thus the addition was rightly deleted by the lower Appellate Authorities, which order was confirmed by the High Court.”

7.Smt. Jyoti D. Shah, decided by Mumbai ITAT:

“Shri Mukesh Choksi had issued a general statement, and, therefore, a general statement given by Shri Mukesh Choksi cannot be applied to each and every case. The additions made were deleted as there was no direct evidence against the assessee. Neither the statement of Mukesh Choksi was provided to the assessee nor opportunity for cross-examination of Mukesh Choksi was provided.

20. It is further submitted that various Courts have held and reiterated the principles where an assessee is not granted an opportunity of cross-examination of the person whose statement has been relied upon during the course of assessment, which could have held the assessee to rebut the statements, the addition made basis the statement is not correct as there is violation of principles of natural justice. This principle has been settled time and again by the Higher Courts.” Now , we are placing on record two cases decided by the Income-Tax Appellate Tribunals which are specifically related to the case of Praveen Kumar Jain, as is the present case in appeal.

7.M/s Kamal Agrotech Pvt. Ltd. Vs. ITO Ward 2(1) , “ A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D.G. I(Investigation), Mumbai. No enquiries or investigation was carried out . No evidence to controvert the claim of the assessee was brought on record by the A.O. Even statement of Mr. Praveen Kumar was not supplied . …..The addition is made merely on surmises and conjectures.” In view of the above discussion, the Tribunal held that the addition made under section 68 of the Act is bad in law.”

8.M/s Choice Buildestate Pvt. Ltd. V. Income-Tax Officer, Ward 5(2), Jaipur.

Page 18 of the said order passed by the jurisdictional co-ordinate bench of the ITAT states as under: “The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of account and reasons for not accepting the explanation of the assessee . In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group.In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee……… We, therefore, agree with the contentions of the ld A/R that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of share transaction , those documents cannot be summarily rejected as has been done by the AO in the instant case……the fact remains that the assessee deserves an opportunity to cross-examine such persons as held by the Hon’ble Supreme Court in case of Andaman Timber Industries (supra)….In the light of above discussions, we don’t find any basis for making addition under section 68 of the Act.” In this case, reopening of assessment by issue of notice u/s 147/148 of the Act based on the statements and facts related to the Praveen Jain Group, has been quashed. It is settled law that one bench of the ITAT,Jaipur has to follow a decision of another bench of the ITAT, Jaipur as stated by the Hon’ble Supreme Court in the case of Shah Faisal v. UOI(AIR 2020 Supreme Court 3601). It is, therefore, requested that the Ld. ITAT may follow the decision of this very ITAT in the case of M/s Choice Buildestate Pvt. Ltd.v. ITO. On the issue of cross-examination, we rely on the decision of the following judicial pronouncements:

9.Aayubkhan Noorkhan Pathan v. State of Maharashtra & Ors., Civil Appeal No. 7728 of 2012, order dated 08.11.2012 “46.In view of the above discussion and considering the seriousness of the allegations, as the Scrutiny Committee has already conducted an inquiry in relation to this matter, and the only grievance of the appellant is that there has been non-compliance with the principles of natural justice…we direct that before the submission of any report by the Scrutiny Committee , his application for calling witnesses for corss-examination must be disposed off, and the appellant must be given a fair opportunity to cross-examine the witnesses…In case, the Scrutiny Committee has already taken a decision the same being violative of the principles of natural justice, would stand vitiated.”

10. New India Assurance Company Ltd. V. Nusli Neville Wadia & Anr., AIR 2008 SC 876:

If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness . This may not be provided in the statute , but it being a part of the principle of natural justice, should be held to be indefeasible right. In view of the above, we are of the considered opinion that the right of cross-examination is an integral part of the principles of natural justice.

11.M/s Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, Civil Appeal No. 4228 of 2005:

“As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination……Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above…. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” In view of the facts as mentioned above, and the position of law as expounded in the various judicial pronouncements cited above, the order passed by the ld. CIT(A) -04, Jaipur needs to be set-aside and the order passed by the Assessing Officer needs to be quashed . Ground No. 4&5: Ground no. 4 &5 deals with the addition of Rs. 1,10,00,000/- and of Rs. 55,000/- made by the Assessing Officer on account of the investment in equity shares and the commission paid thereon to M/s Olive Overseas Pvt. Ltd.. As already stated above, and in the written reply filed both before the CIT(A) and the Assessing Officer, the assessee had stated that the money received both on account of investment in equity shares (Rs. 80,00,000/-) and as loan (Rs. 30,00,000/-) was received through banking channels. In support of the genuineness of the transaction, the assessee had supplied, during the course of assessment proceedings, the following documents to support his claim: i)Copies of Application for share capital; ii)Registrar of Companies records; iii)Copy of account of assessee appearing in the books of the said parties; iv)Copy of bank statements of said parties; v)ITR copies and audited books of account for A.Y. 2010-11 of the said parties; vi) Master Data available on Registrar of Companies , related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with the Registrar of Companies, CIN and PAN. They also have affirmed about the filing of Return of Income and loans granted to the assessee. On a perusal of the bank statements of the parties, it is seen that both the companies have sufficient bank balance to advance the loans. With the above documents, the identity , genuineness of transaction and creditworthiness of the parties has been proved beyond doubt by the assessee. We would like to add here that ,as far as the assessee is concerned, he has received money from M/s Olive Overseas P. Ltd., Its creditworthiness, identity of the creditor and genuineness of transaction is proved by the assessee. No material has been put on record to show that it was the assessee’s unaccounted money that has been utilised to turn it into accounted money. The assesee cannot be held accountable for the source of the source.

The department, if it feels that cash has been introduced at any level, then it has to be taxed at that level, in those hands. The assessee cannot be held liable for the alleged unaccounted cash of a third person. We also want to add that a perusal of the order of the AO and the CIT(A) shows that all the amount involved has already been taxed in the hands of Shri Praveen Kumar Jain on a substantive basis. Then, the same money cannot be taxed in another hand. For all these reasons, the additions made by the Assessing Officer and confirmed by the CIT(A) in the hands of the assessee are not justified, unsustainable The additions made by the Assessing Officer and confirmed by the CIT(A) are not justified, they need to be deleted.’’ 3.5 On the other hand, the ld. DR supported the order of the lower authorities. He further submitted that the asseessee has not filed any confirmation of loan and thereby the identity, genuineness and creditworthiness is not confirmed. To support his contention, the ld. DR filed following detailed written submission in connection with both appeals.

‘’Subject: Written Submission along with case laws in the case of Safe Infracon Pvt. Ltd, Jaipur, PAN- AAMCS6346J, ( ) for the A.Y. 2011-12– reg – Ref: Kindly refer to this office Letter No. 1590 dated 26.03.2025 on the subject cited above.

1. In this regard, as desired by the Hon’ble Bench, the gist of case laws submitted on 26-03-2025 alongwith rebuttal of case laws filed by the the assessee is submitted herewith:- A. The Gist of case laws for reopening of the assessment u/s 147/148 relied by the department are as under: The Reasons for Reopening of the assessment 1. [1999] 236 ITR 34 (SC) SUPREME COURT OF The Hon’ble SC held that in determining whether INDIA Raymond Woollen Mills Ltd. v. commencement of reassessment was valid, it has only to be seen Income-tax Officer whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of material is not a thing to be decided at this stage.

2. [2023] 148 taxmann.com 446 (Delhi) HIGH Since no scrutiny assessment had taken place in instant case and COURT OF DELHI Saif II Mauritius there was prima facie material based on which reopening notice Company Ltd. v. Assistant Commissioner of was issued within four years, sufficiency or correctness of Income-tax material would not be considered at stage of issue of notice under section 148. 3. [1999] 103 TAXMAN 562 (PAT.) HIGH It is held that in writ petition arising out of notice under section COURT OF PATNA P.K. Haldar & Co. v. 148, Court is not supposed to go into sufficiency or otherwise or correctness of materials leading to notice, but merely to see Commissioner of Income-tax whether there is any material before Assessing Officer on basis of which he came to form reasonable belief that income had escaped assessment. 4. [2002] 123 Taxman 756 (Calcutta) HIGH It is held that Court will only find out whether there was any prima facie material to reopen case and sufficiency or correctness COURT OF CALCUTTA Ispat Industries Ltd. cannot be gone into by Court. v. Deputy Commissioner of Income-tax 5. [2023] 153 taxmann.com 25 (Gujarat) HIGH Where Assessing Officer had received information from COURT OF GUJARAT Akshat Pramodkumar Investigation wing that assessee received accommodation entry Chaudhary v. Deputy Commissioner of in penny scrip, which was bogus in nature and addition was Income-tax required to be made to total income of assessee and on basis of said material before it, he was satisfied to harbour reasons to believe that there was escapement of income and on such basis, he had exercised his powers under section 148, no fault could be found in such reassessment proceedings. 6. [2022] 139 taxmann.com 198 (Gujarat) HIGH Where pursuant to survey under section 133A conducted by Investigating Wing on BAS, he admitted on oath that he was engaged in COURT OF GUJARAT Amar Jewellers Ltd. business of providing accommodation entries to beneficiaries in lieu of v.Assistant Commissioner of Income-tax commission and had named applicant as one of recipients of accommodation entries and Assessing Officer after examining facts formed belief that income chargeable to tax had escaped assessment, proceedings of reassessment initiated in cases of applicant were justified. 7. [2018] 94 taxmann.com 393 (Gujarat) HIGH Where reassessment proceedings were initiated on basis of COURT OF GUJARAT Amit Polyprints (P.) information received from Investigation wing that assessee had Ltd.v.Deputy Commissioner of Income-tax received certain amount from shell companies working as an accommodation entry provider, reassessment could not be held unjustified. 8. [2018] 91 taxmann.com 119 (Gujarat) HIGH Where reassessment proceedings were initiated on basis of COURT OF GUJARAT Aradhna Estate (P.) information received from Investigation wing that assessee had Ltd.v.Deputy Commissioner of Income-tax, received certain amount from shell companies working as an Circle-1(1) accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified. 9. [2023] 152 taxmann.com 573 (SC) SUPREME SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was COURT OF INDIA Ajay Gupta v. Income-tax beneficiary of accommodation entry in form of long-term capital Officer gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase

of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified. 10. [2019] 101 taxmann.com 231 (Madhya Where Assessing Officer had specific information from DIT Pradesh) HIGH COURT OF MADHYA (Investigation) that assessee company was merely a dummy PRADESH Etiam Emedia Ltd.v. Income-tax concern of a person who allegedly used dummy companies for Officer-2(2) routing his unaccounted money and, further, assessee also had certain amount of bogus share application, it could be said that there was material on basis of which notice under section 148 could be issued. 11. [2020] 115 taxmann.com 338 (Delhi) HIGH Where reassessment notice was issued on basis of information COURT OF DELHI Experion Developers (P.) received from DIT (Investigation) that a parent company of Ltd. v.Assistant Commissioner of Income-tax assessee at Singapore had made an investment of huge amount in assessee company but said investing company did not appear to be carrying out any regular business activities and was floated to act as a conduit to funnel funds into Indian companies, impugned notice was justified. 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH Initiation of reassessment proceedings on basis of information COURT OF GUJARAT Jayant Security & received from Investigation wing that assessee had received Finance Ltd.v.Assistant Commissioner of certain amount as a loan from a company, working as entry Income-tax, officer Circle 1(1) operator and earning bogus funds to provide advances to various person, was justified. 13. [2012] 18 taxmann.com 83 (Delhi) IN THE Validity of reassessment where AO had received information ITAT DELHI BENCH Ms. Rainee Singh from investigation wing regarding a bogus claim of long-term v.Income-tax Officer capital gains. 14. [1995] 83 TAXMAN 194 (MAD.)HIGH The Hon’ble High Court held that on going through the materials COURT OF MADRAS Panchugurumurthy v. on record, produced by the department, it was clear that Commissioner of Income-tax sufficient reasons had been recorded by the competent authority and the statutory approval had been obtained from the appropriate authority. Consequently, the general and vague allegation of mala fides and want of sufficient basis for the proposed action under section 148 had no basis in law. Further, as held earlier, the action initiated under section 148 could not be said to be prima facie illegal to warrant the interference of the Court. 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH Where Assessing Officer had reopened assessee's assessment for COURT OF GUJARAT Peass Industrial assessment year 2012-13 for reasons that information was Engineers (P.) Ltd. v. Deputy Commissioner received from Competent Authority, Kolkata that one 'K' was of Income-tax very known entry operator and instant assessee was also a beneficiary of 'K' to extent of Rs. 183 lakhs pertaining to assessment year 2012-13, reasons were sufficient enough to reopen assessment. 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH Where evidence found during search in case of third party was COURT OF GUJARAT Purnima Komalkant sufficient to form belief that LTCG shown by assessee was in Sharma v. Deputy Commissioner of Income- nature of accommodation entries and income to that extent had tax, Circle 1 escaped assessment, issue of notice under section 148 was justified. 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH Where Assessing Officer had information in form of COURT OF GUJARAT Pushpa Uttamchand accounts/documents received from Investigation wing that 'U' Mehta v. Income-tax Officer was a company run, managed and operated by entry providers and it was a penny stock and assessee had entered into transaction with 'U' to claim bogus capital gains, it could not be said that Assessing Officer, on absolutely vague or unspecific information initiated proceedings of reassessment without taking pains to form his own belief in respect of such materials. 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) Where Assessing Officer found that assessee was beneficiary of IN THE ITAT KOLKATA BENCH 'A' bogus donation and was able to lay its hand on a large number of Tarasafe International (P.) Ltd. v.Deputy material and had recorded statements of founder and director of Commissioner of Income-tax said institution as well as other persons, who have deposed during survey and post-survey inquiries regarding bogus loan given by assessee to said institution, sufficient material was available with Assessing Officer for forming an opinion that income had escaped assessment. Re-assessment is based not on borrowed satisfaction 19. [2021] 128 taxmann.com 229 (Gujarat) HIGH Where AO issued reopening notice on ground that an COURT OF GUJARAT Bhanuben information was received from DIT (Investigation) that shares Mansukhlal Khimashia v.Income Tax Officer sold by assessee were of penny stock, thus, income on sale of said Ward 3(1) shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent enquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified. 20. [2021] 129 taxmann.com 48 (Gujarat) HIGH Where AO issued reopening notice against assessee on ground COURT OF GUJARAT Kaushaliya Sampatlal that an information was received from AIMS module that shares Dudani v.Income-tax Officer, Ward 1(3) sold by assessee were of penny stock, since such information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was justified. 21. [2021] 129 taxmann.com 119 (Gujarat) HIGH Where AO issued a reopening notice against assessee on ground COURT OF GUJARAT Nishant Vilaskumar that an information was received from AIMS module that shares Parekh v.Income-tax Officer, Ward 1(3) sold by assessee were of penny stock, since such information with regard to transactions of penny stock entered into by assessee was specific and AO had made independent enquiry and applied his mind to said information and upon due satisfaction, formed an opinion that LTCG on sale of penny stock shares had escaped assessment, impugned reopening notice was justified. 22. [2022] 138 taxmann.com 50 (Gujarat) HIGH Where assessee sold shares and claimed exemption under section COURT OF GUJARAT Nishant Vilaskumar 10(38) and Assessing Officer issued a reopening notice on ground Parekh v.Income-tax Officer that an information was received from AIMS module that shares sold by assessee were of penny stock, since said information was specific with regard to transactions of penny stock entered into by assessee and Assessing Officer made independent enquiries and applied his mind to information and upon due satisfaction and materials gathered during enquiries, finally formed a belief that income had escaped assessment, impugned reopening notice issued against assessee was justified. 23. [2021] 131 taxmann.com 42 (Gujarat) HIGH Where AO issued a reopening notice on ground that an information was received that shares sold by assessee were of COURT OF GUJARAT Sameer Gulabchand penny stock, thus, income on sale of said shares could not be Shah HUF v. Income-tax Officer, Ward 1(3) allowed as exempt under section 10(38), since such information was specific and AO made independent inquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified 24. [2021] 127 taxmann.com 679 (Gujarat) HIGH Where Assessing Officer issued reopening notice against assessee COURT OF GUJARAT Silverdale Inn (P.) Ltd. on ground that an information was received from NMS (Non v. Income Tax Officer filler monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. 25. [2021] 129 taxmann.com 68 (Gujarat) HIGH Where AO issued reopening notice on ground that an COURT OF GUJARAT Vilas Vrajlal Parekh information was received from AIMS module that shares sold by HUF v.Income-tax Officer, Ward(1)3 assessee were of penny stock, since information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to such information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was justified. 26. [2021] 133 taxmann.com 397 (Gujarat) HIGH Where Assessing Officer issued a reopening notice on ground COURT OF GUJARAT Zaveri & Company that an information was received from Deputy Director (P.) Ltd.v.Deputy Commissioner of Income- (Investigation) that assessee company had entered into tax transactions of trading in penny stocks of two companies which were used for providing accommodation entries in respect of bogus LTCG and contrived losses, impugned reopening notice issued on basis of such specific information outlining systematic evasion of tax by assessee and fresh material in hands of Assessing Officer was justified. 27. [1980] 4 Taxman 83 (Delhi) HIGH COURT OF The court held that action under section 147 is permissible even if Assessing Officer gathered his reasons to believe from very same DELHI Commissioner of Income-tax v. H.P. record as had been subject-matter of completed assessment Sharma S. RANGANATHAN AND D.R. proceedings. It was further held that principle that a mere change KHANNA, JJ

5. In [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj, after analyzing the SIT Report on black money and the report of Investigation Directorate, the Court held that it is seen that there is a discussion about the "modus operandi" adopted and the SIT opines that there is an urgent need for having an effective, preventive and punitive action in such matters to prevent recurrence of such instances. This is a relevant aspect to be borne in mind. Thus, the report submitted by the investigation department cannot be thrown out on the grounds urged on behalf of the assessees. The assesses have not been shown to be prejudiced on account of non- furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue, the statements do not indict the assessee. The Hon’ble Court noted that the assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. The Hon’ble Court also noted that the assessee were conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non-furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced before us by the learned standing counsel for the revenue, nothing prevented the assesses who are ably defended by Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case.

6. In [2022] 135 taxmann.com 252 (SC) SUPREME COURT OF INDIA T. Takano v. Securities and Exchange Board of India, the SEBI took a stand that the investigation report under Regulation 9 of the SEBI regulations could also include sensitive information about the business affairs of various entities and persons concerned and if disclosed it would affect their privacy and the competitive position of other entities. While considering the correctness of the submissions made on behalf of the SEBI, the Hon'ble Supreme Court held that if the disclosure of the report would affect third party rights the onus then shifts to the appellant to prove that the information is necessary to defend the case appropriately.

8. In the case of Mahendra N. Chatterjee v. Collector of Central Excise, The Hon'ble High Court of Calcutta held "right to cross examination is not necessarily part of reasonable opportunity"

9. The Hon’ble ITAT Mumbai Bench in the case of Soman Citi v. JCIT in that the right of cross-examination is not absolute. No prejudice is caused to the assessee by non granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking' channels is not sufficient if the other evidence is lacking.

10. In CIT Vs Metal Products of India (1984) 150 ITR 714 (P&H), it was held that the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same against the assessee, even if it does not, in all respects the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; “material” as distinguished from evidence, which includes direct and circumstantial evidence. (para 7.9.2 of the Assessment Order) 11. The Tribunal in the case of Ram Niwas Gupta, Dehradun v. DCIT, Dehradun on 6th February, 2019 in to 4883/Del/2016 (Assessment Years: 2010-11, 2012-13 and 2013-14), after considering various decisions of the Hon'ble Supreme Court, including the decision in the case Andaman Timbers Industries vs. Commissioner of Central Excise, Kolkata-II reported in MANU/SC/1250/2015: 2015 (324) E.L.T. 641 (SC), 2017 (50) S.T.R. 93 (SC), 2016 (15) SCC 785 has held as under: In our opinion right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the dictum, "audi alteram partem". The principles of natural justice do not require formal cross-examination. Formal cross- examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court, It is a part of legal and statutory justice therefore it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. 12. [2022] 136 taxmann.com 333 (SC) SUPREME COURT OF INDIA Securities and Exchange Board of India v. Mega Corporation Ltd: The Hon’ble Court held that: 35.As per the principles laid down in the above referred case, there is a right of disclosure of the relevant material. However, such a right is not absolute…. 37.We are also of the opinion that, there was no necessity for the Tribunal to lay down as an inviolable principle that there is a right of cross examination in all cases. In fact, the conclusion of the Tribunal based on evidence on record did not require such a finding.

13. The Hon’ble Delhi ITAT bench held in the case of Sh Satish Kishore Vs ITO and Naval Kishore Vs ITO (2019-TIOL-1760-ITAT-Del in 1705/Del/2019): 6.12 As far as contention of the learned counsel that no opportunity of cross- examination of the statement of share brokers relied upon by the Assessing Officer is concerned, we find that the authorities have not merely relied on the statement of the relevant brokers, but also has taken into account other, circumstantial evidences and the assessee was asked to justify the genuineness of the transactions, which the assessee has failed. In our opinion, the ratio in the case of M/s Andman Timber Industries (2015] 281 CTR 241 (SC) is not applicable over the facts of the instant case.

14. ITA No. 220/2019 CM No. 10774/2019 UDIT KALRA Vs INCOME TAX OFFICER: In this case, the main thrust of the assessee's argument is that he was denied the right to cross-examine the two individuals whose statements led to the inquiry and ultimate disallowance of the LTCG claim in the returns. The A.O., CIT(A) and the ITAT have all consistently rendered adverse findings. What is intriguing is that the company M/s Kappac Pharma Ltd. had meagre resources with consistent reported losses. The astronomical growth of the value of company’s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Since, the findings are entirely of fact, no substantial question of law arises in the present appeal. (B). PREPONDERANCE OF HUMAN PROBABILITIES VS DIRECT EVIDENCE VS CIRCUMSTANTIAL EVIDENCE AND ONUS: 1. [2016] 66 taxmann.com 288 (SC) SUPREME COURT OF INDIA Securities and Exchange Board of India v. Kishore R. Ajmera: The question of law which arose for consideration before the Hon'ble Supreme Court was as to what is the degree of proof required to hold brokers/sub-brokers liable for fraudulent/manipulative practices under the SEBI Regulations and for violating the code of conduct of the SEBI (Stocks brokers and Sub-brokers) Regulations. It was pointed out that it is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion. The judgement pointed towards the prior meeting of minds in case of screen based trade transactions of scrips also. It was argued that on a screen- based trading the identity of the second party to be a client or the broker is not known to the first party/client or broker. This argument was rejected as being

irrelevant. It was pointed out that the screen-based identity system keeps the identity of the parties anonymous and it will be too naïve to rests the final conclusions on said basis which overlooks a meeting of minds elsewhere. Further it was held that direct proof of such meeting of mind elsewhere would rarely be forth coming and therefore the test is one of the preponderance of probabilities so far as the adjudication of a civil liability arising out of violation of the Act or to the Regulations. Further it was held that the conclusion has to be gathered from various circumstances like that volume of trade effected; the period of persistence in trading in particular scrips; the particulars of the buy and sell orders, namely, the volume thereof; the proximity of time between the two and such other relevant factors. Thus, the legal principle which can be culled out from the above decision is that to prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted. 2. [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj: It is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the manipulative activities of price rigging and insider trading. We can draw a parallel in cases of adulteration of food stuff, more than often action is initiated under the relevant Act after the adulteration takes place, the users of adulterated products get affected etc. Therefore, a holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, we cannot loose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The Income-tax department was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assessees made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the companies and the persons who were involved in the trading of the shares of these companies which are all classified as penny stocks companies. 3. [1985] 22 Taxman 11 (SC) SUPREME COURT OF INDIA McDowell & Co. Ltd. v. Commercial tax Officer: It was held that the 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. It is the obligation of every citizen to pay taxes honestly without resorting to subterfuges. 4. [2022] 139 taxmann.com 352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Baja:j It was argued that unless there are foundational facts, circumstantial evidence cannot be relied on. This argument does not merit acceptance as wealth of information and facts were on record which is the outcome of the investigation on the companies, stock brokers, entry operators etc. Based on those foundational facts the department has adopted the concept of "working backward" leading to the assessees. While at that relevant stage the sounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over, were all taken into consideration to negative the claim for exception made by the assessee. Therefore, the department was fully justified in taking note of the prevailing circumstances to decide against the assessees.

means where the assessee offers no proper, reasonable and acceptable explanation as regard the sums found credited in the books maintained by the assessee. Further it was pointed out that in cases where the explanation offered by the assessee about the nature and source of sums found credited in the books is not satisfactory shows, prima facie evidence against the assessee namely, the receipt of money, the burden is on the assessee to rebut the sum and if he fails to rebut, it can be held against the assessee that it was a receipt of an income nature. Further, it was held that in the absence of satisfactory explanation of the assessee, the Income-tax Officer may assume that cash credit entries in the books represented income from undisclosed sources. In the said case also the Court took note of the fact that the Assessing Officer considered various surrounding circumstances before rejecting the explanation offered by the assessee which finding was approved by the Hon'ble Supreme Court as it was based on the material available on record and not on any conjectures and surmises.

investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprises dealing with share transactions net worth of company is not known to assesses. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal v. CIT case. Though assessee has received amounts by way of account payee cheques, transactions cannot be treated as genuine in presence of overwhelming evidences put forward by Revenue fact that in spite of earning such steep profits assessee never ventured to involve himself in any other transaction which broker cannot be mere coincidence of lack of interest. Reliance is place on judgment in case of Nipun Builders and Developers Pvt. Ltd. (supra) where it was held that it is duty of Tribunal to scratch surface and probe documentary evidence in depth, in light of conduct of assessee and other surrounding circumstances in order to see whether assessee is liable to provisions of section 68 or not in case of NR Portfolio, obtrusive. Similarly bank statements provided by assessee to prove genuineness of transaction cannot be considered in view of judgment of Hon'ble Court in case of Pratham Telecom India Pvt. Ltd. Wherein it was stated that bank statement is not sufficient enough to discharge burden. Regarding failure to accord opportunity of cross examination, we rely on judgment of Prem Castings Pvt. Ltd. Similarly tribunal in case of Udit Kalra for assessment year 2014-15 has categorically held that when there was specific confirmation with Revenue that assessee has indulged in ITA 841/2019 page 8 of 10 non-genuine and bogus capital gains obtained from transactions of purchase and sale of shares, it can be good reason to treat transactions as bogus difference of case of Udit Kalra attempted by Ld. AR does not add any credence to justify transactions. Investigation Wing has also conducted enquires which proved that assessee is also one of beneficiaries of transactions and entries provided, Even BSE listed this company as being used for generating bogus LTCG. On facts of case and judicial pronouncements will give rise to only conclusion that entire activities of assessee is colourable device to obtain bogus capital gains. Hon'ble High Court of Delhi in case of Udit Kalra held that company had meagre resources and astronomical growth of value of company's shares only excited suspicion of Revenue and hence, treated receipts of sale of shares to be bogus. Hon'ble High Court has also dealt with arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. Ld. AR arguments that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this Case,

Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK Rajeshwari v. ITO in Bang/2018, order dated 12-10-2018. Abhimanyu Soin v. Sanjay Bimalchand Jain v. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF v. ITO in & 591 Nag/2015, order dated 24-8-2016. Ratnakar M Pujari v. ITO in IT no. 995/Mum/2012, order dated 3-8-2016. ITA 841/2019 page 9 of 10 Disha N. Lalwani v. ITO in ITA No. 6389/Mum/2012, order dated 22-3-2017. ITO v. Shamin M. Bharwani MANU/IU/0493/2015: [2016] 69 taxmann.com 65. Usha Chandresh Shah v. ITO in ITA No. 6858/Mum/2011, order dated 26-9-2014, CIT v. Smt. Jasvinder Kaur MANU/GH/0241/2013: 357 ITR 638 19. In [2020] 114 taxmann.com 186/181 ITD 146 (Delhi - Trib.) UDIT KALRA v ITO, a similar case of investment in 4000 shares in a penny stock company which share prices increased astronomically within a period of approximately 19 months when the price of acquisition was Rs. 12/- per share, on the date of sale it was Rs. 720/-. The High Court of Delhi affirmed the order passed by the Tribunal and dismissed the appeal filed by the assessee. 20. the Hon'ble Supreme Court in Chuharmal v. CIT [1986] 38 Taxman 190/172 ITR 250 has affirmed the principle of human probability.

by the assessee on this issue. 24. [2023] 147 taxmann.com

21. (Indore - Trib.) IN THE ITAT INDORE BENCH Abhishek Gupta v. Income-tax Officer : The assessee has declared to have earned a whopping capital gain of Rs. 64,58,168/- on the basis of a meagre investment of Rs. 1,77,192/- and the relevant shares are claimed to have been purchased in cash and held in the pool account of broker for about 17 months. Thus, it was held that the assessee is not only declaring hefty gain but also claiming exemption u/s 10(38) in a period nearing 12 months, which is in consonance with the modus operandi observed by the Investigation Wing in the Investigation-Report. Had the assessee not claimed any exemption or other benefit, but declared the income as normal income or business income and paid legitimate tax at normal rate, perhaps there would not have been suspicion or question-mark on the income declared by the assessee but this is not so in the present case. 25. [2023] 149 taxmann.com

98. (Pune - Trib.) IN THE ITAT PUNE BENCH 'A' Dinesh

Kumar R. Tulsyan (HUF) v. Income-tax Officer: It was held that since the said company was a penny stock company and had financial and trading pattern of providing accommodation entry by alloting shares to beneficiaries through preferential allotment, splitting share, increasing market price through paper companies, action of assessee was nothing but pre-motivated and deliberate conduct done for converting his unaccounted money under guise of long-term share transaction without paying tax 26. [2022] 145 taxmann.com 315 (Kolkata - Trib.)IN THE ITAT KOLKATA BENCH 'A'Shyam Sunder Bajaj v.Income-tax Officer : It is another classical case of using a penny stock to convert black money into white as exempt LTCG. The Tribunal upheld the addition made u/s 68 and 69C placing eliance on Swati Bajaj case law. 27. [2023] 149 taxmann.com 104 (Ahmedabad - ITAT) IN THE ITAT AHMEDABAD BENCH 'SMC' Atmiben Alipitkumar Doshi v. Income-tax officer : It is a case of penny stock purchased @ Rs 20/- and sold @ Rs 675/- per share to claim exempt LTCG. Therefore, Assessing Officer made additions on account of such capital gains as unexplained income under section 68 thereby denying claim of exemption on same. The Hon’ble Tribunal noted that assessment order was not solely based on investigation but Assessing Officer had verified each aspect about increase in price of share. Further, purchase of share appeared bogus as scrip was purchased at price higher than market price and as an off-market transaction. It was held that merely submission of demat as well as transaction statements along with debit note and share certificate by assessee would not shun away aspect that assessee was very well aware about penny stock brokers and, hence, Assessing Officer was justified in denying exemption on LTCG and treating same as unexplained income under section 68 28. [2016] 69 taxmann.com 65 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH 'E'Income-tax Officer, 19(3)(4), Mumbai v. Shamim M. Bharwani : It was held that or a scrip to trade at nearly 50 times its' face value, only a few months after its issue, only implies, if not price manipulation, trail blazing performance and/or great business prospects (with of course proven management record, so as to be able to translate that into reality), while even as much as the company's business or industry or future program (all of which would be in public domain), is conspicuous by its absence, i.e., even years after the transaction/s. The company is, by all counts, a paper company, and its share transactions, managed. We, accordingly, reversing the findings of the first appellate authority, confirm the assessment of the impugned sum u/s.68 of the Act. 29. [2019] 106 taxmann.com 65 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'SMC' Pooja Ajmani v. Income-tax Officer, Ward 20(4), New Delhi: The Hon’ble Bench held that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smokescreen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt long-terra capital gain by well organised network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or commission. The share transactions leading to long-term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. 30. [2015] 54 taxmann.com 10 (Punjab & Haryana) HIGH COURT OF PUNJAB & HARYANA Chandan Gupta v.Commissioner of Income-tax, Ludhiana: It was held that once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee under Section 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained. 31. [2011] 12 taxmann.com 276 (Punjab & Haryana) HIGH COURT OF PUNJAB AND HARYANA Balbir Chand Maini v. Commissioner of Income-tax-III, Ludhiana: During assessment proceedings, Assessing Officer found that assessee had purchased certain shares of a company at rate between Rs. 2.50 and Rs. 3.40 per share in month of April, 1997 and part of those shares were sold through a broker at Rs. 55 per share. He came to opinion that value of said shares could not be as high as Rs. 55 per share. He recorded statement of broker who admitted to have purchased shares in question but failed to produce books of account and other relevant documents. The Assessing Officer held that transaction of sale of shares was an ingenuine transaction and made addition of alleged sale consideration to assessee's income as income from undisclosed sources. The addition was upheld by the Hon’ble Court. 32. [2013] 37 taxmann.com 286 (Gauhati) HIGH COURT OF GAUHATI Commissioner of Income-tax v. Smt. JasvinderKaur: Assessing Officer having noticed that capital gains shown by assessee on sale of shares were more than 57 times of purchase value in just 16 months of purchase. The Assessing Officer treated said income as income from undisclosed sources. The Tribunal allowed claim of assessee on ground that there was no material on record to show that what assessee had claimed as regards value of shares was factually incorrect. It was held that the Tribunal wrongly placed burden of proving correctness of return of income, which assessee had filed, on revenue, whereas it was for assessee to show, by placing all materials including profits of two companies that, if not arithmetically, there was, at least, reasonable possibility of value of shares having risen as high as had been shown by assessee . 33. [1991] 56 TAXMAN 304 (CAL) HIGH COURT OF CALCUTTA Commissioner of Income-tax v. United Commercial & Industrial Co. (P.) Ltd.: It was held that it is necessary for assessee to prove prima facie identity of his creditors, capacity of such creditors to advance money and lastly genuineness of transactions. It was also held that mere production of confirmation letters before ITO would not prove that loans have been obtained from those loan creditors or that they have creditworthiness. 34. [2023] 151 taxmann.com 119 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v Smt. Usha Devi Modi: Where assessee claimed long term capital gain on sale of shares of a company as exempt under section 10(38), since in related cases it was found that assessee had not proved genuineness of claim, creditworthiness of companies in which it had invested and identity of persons with whom sale transactions were done, said LTCG was not exempt under section 10(38) and accordingly, revision invoked by Pr. Commissioner on ground that script sold by assessee was of penny stock was justified. Reliance was placed on Swati Bajaj judgement. 35. [2022] 143 taxmann.com 402 (Calcutta) HIGH COURT OF CALCUTTAPrincipal Commissioner of Income-tax v. Nand Kishore Agarwala: It was held that the assessee had stage managed transactions of sale of shares with object to plough back his unaccounted income in form of fictitious long-term capital gains (LTCG) and claim bogus exemption under section 10(38), such exemption denied by Assessing Officer by way of treating bogus LTCG in penny stock under purview of unexplained cash under section 68 was justified 36. [2018] 99 Bangalore - Trib.) IN THE ITAT BANGALORE BENCH 'SMC-C' Smt. M.K. Rajeshwari v. Income Tax Officer, Ward-3, Raichur: It was held that where the assessee claimed exemption under section 10(38) in respect of capital gain arising from sale of shares, in view of fact that financial worth of said company was meagre and, moreover, there was abnormal rise in price of shares, it could be concluded that assessee introduced her own unaccounted money in garb of long term capital gain and, thus, claim raised by her was to be rejectedtaxmann.com 339 (

channels, and hence discharged initial onus under section 68 for establishing credibility and identity of shareholders. The Tribunal as well as High Court confirmed order passed by Commissioner(Appeals). However, it was found that Authorities below did not even advert to field enquiry conducted by Assessing Officer which revealed that in several cases investor companies were found to be non-existent, and onus to establish identity of investor companies, was not discharged by assessee. The entire transaction seemed bogus, and lacked credibility. It was held that merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish creditworthiness of investor companies stood discharged and the Assessing Officer was justified in passing assessment order making additions under section 68 for share capital/premium received by assessee company. 48. [2018] 90 taxmann.com 147 (SC) SUPREME COURT OF INDIA Securities & Exchange Board of India v. Rakhi Trading (P.) Ltd: In this case it was held that in the absence of direct proof of meeting of minds elsewhere in synchronized transactions, the test should be one of preponderance of probabilities as far as adjudication of civil liability arising out of the violation of the Act or the provision of the Regulations is concerned. 46.Considering the reversal transactions, quantity, price and time and sale, parties being persistent in number of such trade transactions with huge price variations, it will be too naïve to hold that the transactions are through screen-based trading and hence anonymous. Such conclusion would be overlooking the prior meeting of minds involving synchronization of buy and sell order and not negotiated deals as per the board's circular. The impugned transactions are manipulative/deceptive device to create a desired loss and/or profit. Such synchronized trading is violative of transparent norms of trading in securities. If the findings of SAT are to be sustained, it would have serious repercussions undermining the integrity of the market and the impugned order of SAT is liable to be set aside. On the above additional reasoning also, I agree with the conclusion allowing the appeal preferred by SEBI against the traders. I also agree with the conclusion dismissing the appeal preferred by the SEBI against the brokers. 49. [1980] 4 Taxman 525 (Delhi) HIGH COURT OF DELHI Yadu hari Dalmia v. Commissioner of Income-tax: It was held that there can be no difference between a case with direct proof of expenditure and a case where circumstances justify an inference that there must have been excess expenditure and the same can only be estimated for want of direct evidence. 50. [2020] 122 taxmann.com 180 (Madras) HIGH COURT OF MADRAS

Commissioner of Income Tax, Chennai v. Mrs. Manish D. Jain (HUF),Chennai: The Assessing Officer after verification found that transaction of purchase of shares by assessee was a sham transaction and that assessee could not discharge onus cast upon her to prove genuineness of transaction by producing documentary evidence and accordingly refused to entertain claim made by assessee under section 10(38) towards sale proceeds. The appeal against same was dismissed by Commissioner (Appeals). The action of the Tribunal, without finding an error in approach of Assessing Officer or Commissioner (Appeals) and without interfering with such finding, to remand the matter to Assessing Officer for a fresh consideration of claim made by assessee under section 10(38) – was not found to be justified. 51. [2013] 30 taxmann.com 292 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. Nipun Builders & Developers (P.) Ltd: It was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. 52. [1982] 134 ITR 119 (RAJ.)HIGH COURT OF RAJASTHAN Vimal Chandra Golecha v. Income-tax Officer: Natural Justice which is said to have been violated is not so rigid and inflexible a concept as to insist invariably that thus person concerned must be shown the original documents which are required to be explained by him. It is well settled that the requirements of natural justice depend on the circumstances of the case, the nature of the enquiry, the statute under which the Tribunal is acting and the subject matter to be dealt with. 53. [2018] 95 taxmann.com 327 (SC) SUPREME COURT OF INDIA Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company: It was held by the Hon’ble Apex Court that where there is an ambiguity on interpretation of tax exemption provisions/Notifications, as to its applicability with respect to entitlement of assessee or rate of tax to be applied, such exemption notification should be interpreted strictly, and burden of proving applicability would be on assessee to show that his case comes within parameters of exemption clause or exemption notification. Further, it was held that when there is ambiguity in exemption notification which is subject to strict interpretation, benefit of such ambiguity cannot be claimed by subject/assessee and it must be interpreted in favour of revenue/State.

TRIBUNALBENCH 'A' MUMBAI Year: 2004-05 SHRI ARVIND M KARIYAA Vs ASSTT COMMISSIONER OF INCOME TAXCENTRAL CIRCLE-12: In this case, Bogus LTCG u/s 10 (38) of the Act was denied by the AO and was upheld by the Hon’ble Tribunal based on the principle of preponderance of human probabilities.

Surana Enterprises vs ITO 34 4. & 5416/Del/2018 Surana Jewellers vs ITO 34 5. ITA No. 1049/Del/2018 SIL Gold, New Delhi vs ITO 53(4) New Delhi 37 6. [2024] 161 taxmann.com 668 (Calcutta) [23-04-2024] Principal 37 Commissioner of Income-tax vs. BST Infratech Ltd. 7. [2021] 128 taxmann.com 295 (Kolkata – Trib.) Sweet Sales P. Ltd vs. 45 Income Tax Officer, Ward 13(4), Kolkata 8. [2021] 130 taxmann.com 341 (Mumbai – Trib.) Deputy Commissioner 45 of Income-tax vs. Leena Power Tech Engineers P. Ltd.

D. Distinguishing Note for Case Laws relied by the assessee: 1402-1407/Mum./2023 in Olive Overseas Pvt. Ltd. and Praveen Kumar Jain:- In the case of Olive Overseas Pvt. Ltd. and Praveen Kumar Jain, the Hon’ble ITAT Mumbai has adjudicated that Praveen Kumar Jain was an entry provider and he used a web of more than 50 fictitious concerns including Olive Overseas Pvt. Ltd. to provide accommodation entries of share capital premium, unsecured loans to various beneficiaries in lieu of commission. Further, Olive Overseas Pvt. Ltd. has been adjudicated as a fictitious concern managed by Praveen Kumar Jain for providing accommodation entries only. These case laws have direct bearing on the case of assessee as he has allegedly received share premiums and unsecured loans from Olive Overseas Pvt. Ltd. The case laws cited by the assessee are distinguishable as they do not take into account these two case laws - 1402-1407/Mum./2023 in Olive Overseas Pvt. Ltd. and Praveen Kumar Jain.’’ 3.6 We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO while passing the assessment order made the following additions in the hands of the assessee.

1. On account of bogus share Rs.80,00,000/- application money 2. On account of bogus loan Rs.30,00,000/- 3. On account of commission paid to Rs. 55,000/- Shri Pravin Jain @ 0.5% of the amount Total Rs.1,10,55,000/- In first appeal, the ld. CIT(A) has passed ex-parte order by dismissing the appeal of the assessee and thus confirmed the action of the AO. It is noted from the records the assessee has not furnished any information / evidences to rebut the findings of the AO before the ld. CIT(A) who had provided various opportunities to substantiate the issue in question. It is observed by the ld. CIT(A) that in the present case the assessee had merely produced the documents regarding the form of the transaction i.e. that the transaction was through banking channel and is recorded in the books of accounts of the loan given company and the books of the assessee company. The ld. CIT(A) noted that these are initial documents and do not prove the identity, genuineness and creditworthiness in terms of substance and reality. Even during the course of hearing, the ld. AR was asked to confirm whether any confirmation was filed for the transactions. He on that issue stated that assessee had not filed any confirmation to that effect. It is noted by the ld. CIT(A) that the assessee has not produced the directors and shareholders of the company before the AO for examination or cross examination by the AO from which the loans and share capital including huge share premium were received by the assessee company alongwith loan. However, the ld. AR of the assessee submitted that the assessee company has filed all the documents before the AO concerning the issue in question (supra) except confirmation and the assessee had received the money from M/s. Olive Overseas P Ltd. Its creditworthiness, identity of the creditor and genuineness of the transaction is proved and no material has been put on record to show that it was the assessee’s unaccounted money that has been utilized to turn into accounted money. From the entire conspectus of the case, the Bench feels that since there was no proper opportunity to assessee before the ld. CIT(A), therefore in the interest of equity and justice the lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Hence, the matter is restored to the file of the ld. CIT(A) to decide it afresh by providing one more opportunity of hearing. The assessee is directed to advance all the documents before the ld. CIT(A) to settle the dispute in question. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings. Thus the appeal of the assessee is allowed for statistical purposes.

4.1 As regards the appeal of the assessee in for the assessment year 2011-12, the Bench noted that the issues as raised by the assessee in for the assessment year 2010-11 are similar and the ld. CIT(A) has passed ex-parte order in spite of providing various opportunities but the assessee failed to advance any submission to counter the assessment order. Hence, he dismissed the appeal of the assessee relating to assessment year 2011-12.

4.2 During the course of hearing, the ld. AR of the assessee has filed following written submission to counter the order of the lower authorities.

‘’WRITTEN SUBMISSIONS This is an appeal against the order of the Ld. CIT(A), Jaipur-04 dated 11.09.2024 for A.Y. 2011- 12. A copy of the impugned order is enclosed as Annexure A. The brief facts of the case are that ITO, Ward 6(2) ,Jaipur received information that the assessee had obtained unsecured loans from the following concerns of the Praveen Kumar Jain group: 1.M/s Olive Overseas P. Ltd. Rs. 18,00,000.00 2.M/s Aashritha Trading Company P. Ltd. Rs. 11,50,000.00 3.M/s Triangular Infracom Ltd. Rs. 10,00,000.00 ________________ Total 39,50,000.00 According to the information received from the Investigation Wing of the Income-Tax Department at Mumbai, these concerns were part of the Praveen Jain Group, Mumbai, which indulged in providing accommodation entries in lieu of cash obtained from beneficiaries and not doing any genuine business activities as divulged during search and survey operations carried out on the premises of Shri Praveen Jain. On the basis of this information, the Assessing Officer issued a notice u/s 147/148 of the Income-Tax Act on 27.03.2018 after obtaining the approval of the PCIT-II, Jaipur. In response to the said notice, the assessee filed its return of income on 28.04.2018 returning an income Rs.

“With reference to above, I request you to please find enclosed acknowledgment of return filed u/s 148 for A.Y. 2011-12. It is requested you to please provide reasons recorded under section 148 of the Income-Tax Act. Further ,we are submitting following documents: 1. Complete address and mobile no.of M/s Safe Infracon P.Ltd. situated at 92, Everest Vihar, Kings Road, Ajmer Road, Jaipur PAN-AAMCS6346J Mobile No. 7726940398; 2. Copy of balance-sheet of:- a. Aasthrita Trading Co. P. Ltd. Along with confirmation. b. Olive Overseas P. Ltd. Along with confirmation. c. Triangular Infracom Ltd. Along confirmation.

The Assessing Officer did not believe the documents and supporting evidence placed on record by the assessee, and relied on the report of the Mumbai Investigation Wing of the Income-Tax Department, referring to the following: i)report of the Mumbai Investigation Wing which stated that one Shri Praveen Jain had floated a number of bogus companies whose only business was to provide accommodation entries to other companies. One such company was M/s Olive Overseas Pvt. Ltd. Which had invested in the equity of the assessee company, and had also given it loan; ii)statements of the following persons recorded as a result of the search and survey operations: a. Shri Manish Jain, Director, Atharva Business Pvt. Ltd.and M/s Ansh Mercantile Pvt. Ltd. Who stated in his statement dated 21.10.2013 that both these companies were controlled and managed by his cousin Shri Pravin Jain, he was a Director only in namesake. These companies are not involved in any genuine business activity. b. Shri Nilesh Parmar , Prop. Of M/s Mohit International .who stated that he managed the accounts of about 30 odd concerns of the Praveen Jain Group. He stated that Shri Praveen Jain was a Director in only 4-5 of these concerns , in other his employees and outsiders were Directors. He admitted that he was managing the accounts of M/s Olive Overseas Pvt. Ltd. c. Shri Uttam C. Hinger, brother-in-law of Shri Praveen Jain and a Director in some of the shell companies. He stated, inter alia, that only Shri Pravin Jain may explain the exact nature of the business activities of these concerns. Since he is only a director on paper and accountant to Shri Jain, he admitted that none of the concerns with which he was associated was genuine. d. Shri Chandra Sekhar Goyal , a broker, who admitted that Shri Pravin jain was providing accommodation entries e. for commission, bogus purchases, bogus expenditure, bogus unsecured loans etc. f) Shri Dinesh Chaudhary, a broker, also confirmed the facts as stated above.

According to the report of the Mumbai Investigation Wing, the statement of Shri Pravin Jain was recorded on oath on 01.10.2023 and he admitted that he was providing accommodation entries and also explained the complete modus operandi of providing such entries. The Assessing Officer writes in the assessment order that: “it is clearly established that transaction made by the assessee with M/s Olive Overseas P. Ltd., M/s Aashritha Trading Co. Ltd. And M/s Triangular Infracom P. Ltd… are not genuine one and are only bogus accommodation entries which were obtained in lieu of cash. During the year under consideration, the assessee has shown unsecured loans of Rs. 39,50,000/- from the above concerns of Shri Praveen Kumar Jain and the same are added to the total income of the assessee as unexplained cash credits within the meaning of provisions of section 68 of the IT Act, 1961…..

F. Further, Sh. Praveen Kumar Jain admitted that he charged @0.50% for arranging of accommodation entries. Therefore, the assessee has paid Rs. 19.750/- (0.50% of Rs. 39,50,000/-) out of books which is unexplained expenses. Thus Rs. 19,750/- is added back to the total income of the assessee under section 69C……

Revised income of the assessee is computed as under: Total income declared by the assessee Rs. 0 Add: Addition u/s 68 as discussed above Rs. 39,50,000/- Add: Addition u/s 69C Rs. 19,750/-

______________ Total 39,69,75 A copy of the assessment order dated 15.12.2017 is enclosed herewith and marked as Annexure B. Aggrieved of the order of the Assessing Officer, the assessee preferred an appeal to the CIT(A)- 04, Jaipur.

Order of CIT(A)-04, Jaipur:

The CIT(A) -04 , in his order, upheld the order of the Assessing Officer, and confirmed the additions made by the Assessing Officer. He specifically relied on the following decisions of the Mumbai Tribunal: i)1402-1407/Mum/2023 ,Olive Overseas Pvt. Ltd. The operative part of the said decision is: “8. In the present appeals, it is undisputed that the substantive addition has been made in the hands of Mr. Praveen Kumar Jain and similar additions , on a protective basis, is made in the hands of the assessee. Since the substantive addition has already been upheld by the coordinate Bench in the case of Praveen Kumar Jain (supra) , therefore, similar addition made on protective basis in the hands of the assessee becomes unsustainable and, therefore, is directed to be deleted in all the assessment years under consideration before us. We further direct the Assessing Officer that in case the addition made in the hands of Mr. Praveen Kumar Jain is deleted in further appellate proceedings, then the addition made in the hands of the assessee be revived. With the above limited directions, the impugned additions made in all the assessment years under consideration before us are directed to be deleted.” ii)ITA NO. 7191/Mum/2018 and Etc.-Praveen Kumar Jain V/s DCIT, A.Y. 2008-09 to 2014-15 ; Submissions :

Ground No. 1 &2: Ground no. 1 is general. Ground no. 2 deals with the contention of the CIT(A) that the assessee did not respond to the notices of hearing and did not file any details/written submissions. This contention of the CIT(A) is erroneous since he himself says in para 4.1 of his order that the assessee has reiterated the submissions during the appellate proceedings. Then, from page 4 to page 15, para 4.1 of the Appellate Order, he reproduces the submissions of the assessee.

Ground No. 3 Ground no. 3 states that reopening of the assessment under section 147/148 of the I.T. Act is bad since the information received was general and had no link with the assessee in question. Moreover, the AO did not conduct any enquiry at his end. Further, Shri Praveen Jain had owned up the entries and paid tax thereon. The first part of this Ground of Appeal is that reopening of the assessment under section 147/148 was bad in law since the Assessing Officer did not undertake any independent verification of the information received by him from the Mumbai Investigation Wing. From a perusal of the Assessment order it appears that the facts mentioned in the assessment order forming reasons for reopening of the assessment are all taken ad verbatim from the report received from Mumbai. The AO has not independently verified any of the statements of various persons recorded during search, nor has he verified the identity, creditworthiness or genuineness of the impugned transactions . In the absence of any independent verification , accepting the information received from the Investigating Wing is not enough to form a reason to believe that income chargeable to tax has escaped assessment. It is borrowed satisfaction. Secondly, there is nothing on record to directly link the assessee to Shri Praveen Kumar Jain . Shri Jain or others whose statements have been referred to, have not mentioned the name of the assessee or specifically said that the transactions carried out by the assessee are sham or bogus, especially in the light of the evidence placed on record by it.

Further, Shri Praveen Jain retracted his statement relied upon by the AO, which fact has been deliberately suppressed by him. The retraction is genuine, hence needs to be given full weightage.The AO has not brought on record any evidence to nullify the retraction.

The second part of the Ground of Appeal is that neither a copy of the statement of Shri Praveen Kumar Jain was supplied nor was he produced for cross-examination by the assessee, despite specific request. Attention is drawn to para 17 of the Assessment Order wherein the assessee requested the following: “..it is requested you to give an opportunity to the assessee in the presence of the third party who is the author of the statements/document and also to cross-examine the author of such statements/document and elicit such necessary facts from him as to how these entries came to be made by him connecting the assessee in such statements/documents .”

The Assessing Officer , however, did not pay any heed to this request of the assessee and he did not produce Shri Praveen Kumar Jain for cross-examination before the assessee. Hence, there is a clearcut violation of the principles of natural justice which renders the whole assessment proceedings, including the notice u/s 147/148 of the Act , unsustainable in law and liable to be quashed. In this regard, on all the issues raised above, reliance is placed on the following case laws:

1.Principal Commissioner of Income-Tax-5 v. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153 (Bombay): Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT(Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled proposition in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.”

2.CIT V. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC):

Once the primary onus of establishing the genuineness of the transaction is done by the assessee by furnishing details like name, address, PAN confirmation, copy of tax return etc. it was the duty of the AO to verify the genuineness of these transactions by strictly enforcing the provisions of section 131 of the Act if at all the those creditors were required to be produced before him.

3.Principal Commissioner of Income-Tax v. N.S Software (Firm) [2018] 403 ITR 259 (Delhi): the assessing officer had not explained the steps taken by him to determine that seized material belonged to the assessee… 4.Principal Commissioner of income-Tax v. More Overseas [2018] 97 taxmann.com 657 (Calcutta):

Both the Commissioner and the Tribunal , however, found that no re-assessment proceedings could be initiated merely because of action taken by the Customs Department…..In our judgment, the reasoning of the Tribunal in the decision which we upheld is also almost identical to that in the present case, in relation to the order appealed against….. Under these circumstances, following our decision delivered in of 2016, we dismiss the appeal.

5.Harikishan Sunderlal Virmani v. Dy. CIT [2017] 394 ITR 146 (Gujarat):

On the basis of information from another agency there cannot be any reassessment proceedings. However, after considering the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of material on record that the income has escaped assessment. Without forming such opinion , solely and mechanically relying upon information received from other source, there cannot be any reassessment for verification…. Held that from the reasons recorded, it appeared that the impugned reopening proceedings were on borrowed satisfaction, no independent opinion was formed……Under these circumstances, the assumption of jurisdiction to reopen assessment beyond the period of 4 years in exercise of powers under section 147 was bad in law.

6.CIT V. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com64 (SC) Wherein it was held that the information received from a third party was not subjected to any further scrutiny and that the assessee was not allowed opportunity to cross-examine the person whose statement was relied on. Thus the addition was rightly deleted by the lower Appellate Authorities, which order was confirmed by the High Court.” 7.Smt. Jyoti D. Shah, decided by Mumbai ITAT:

“Shri Mukesh Choksi had issued a general statement, and, therefore, a general statement given by Shri Mukesh Choksi cannot be applied to each and every case. The additions made were deleted as there was no direct evidence against the assessee. Neither the statement of Mukesh Choksi was provided to the assessee nor opportunity for cross-examination of Mukesh Choksi was provided.

7.M/s Kamal Agrotech Pvt. Ltd. Vs. ITO Ward 2(1) , ITA No. 37/HD/2016:

A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D.G. I(Investigation), Mumbai. No enquiries or investigation was carried out . No evidence to controvert the claim of the assessee was brought on record by the A.O. Even statement of Mr. Praveen Kumar was not supplied . …..The addition is made merely on surmises and conjectures.

In view of the above discussion, the Tribunal held that the addition made under section 68 of the Act is bad in law.”

8.M/s Choice Buildestate Pvt. Ltd. V. Income-Tax Officer, Ward 5(2), Jaipur.

Page 18 of the said order passed by the jurisdictional co-ordinate bench of the ITAT states as under: “The order passed by the AO should be speaking one bringing on record all the facts, explanation furnished by the assessee in respect of nature and source of the credit in its books of account and reasons for not accepting the explanation of the assessee . In the instant case, we find that the AO has not taken any efforts to examine these documents so submitted by the assessee company during the course of assessment proceedings and has simply gone by his prima facie view formed at the time of assumption of jurisdiction u/s 147 and such a prima facie view without further examination/investigation cannot be a basis for forming a final view of making the addition in the hands of the assessee company. It is a case where the AO was in receipt of material information from the Investigation Wing, Mumbai that the assessee company has received accommodation entries in form of share application/investment from seven companies who are not doing genuine business activities as divulged during the course of search and seizure operations in case of Praveen Jain group.In these situations, the Courts have held that the Assessing Officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee……… We, therefore, agree with the contentions of the ld A/R that in absence of any falsity which have been found in the documents so submitted by the assessee company to prove the identity, creditworthiness and genuineness of share transaction , those documents cannot be summarily rejected as has been done by the AO in the instant case……the fact remains that the assessee deserves an opportunity to cross-examine such persons as held by the Hon’ble Supreme Court in case of Andaman Timber Industries (supra)….In the light of above discussions, we don’t find any basis for making addition under section 68 of the Act.”

In this case, reopening of assessment by issue of notice u/s 147/148 of the Act based on the statements and facts related to the Praveen Jain Group, has been quashed. It is settled law that one bench of the ITAT,Jaipur has to follow a decision of another bench of the ITAT, Jaipur as stated by the Hon’ble Supreme Court in the case of Shah Faisal v. UOI(AIR 2020 Supreme Court 3601). It is, therefore, requested that the Ld. ITAT may follow the decision of this very ITAT in the case of M/s Choice Buildestate Pvt. Ltd.v. ITO. On the issue of cross-examination, we rely on the decision of the following judicial pronouncements:

9.Aayubkhan Noorkhan Pathan v. State of Maharashtra & Ors., Civil Appeal No. 7728 of 2012, order dated 08.11.2012 “46.In view of the above discussion and considering the seriousness of the allegations, as the Scrutiny Committee has already conducted an inquiry in relation to this matter, and the only grievance of the appellant is that there has been non-compliance with the principles of natural justice…we direct that before the submission of any report by the Scrutiny Committee , his application for calling witnesses for corss-examination must be disposed off, and the appellant must be given a fair opportunity to cross-examine the witnesses…In case, the Scrutiny Committee has already taken a decision the same being violative of the principles of natural justice, would stand vitiated.”

10. New India Assurance Company Ltd. V. Nusli Neville Wadia & Anr., AIR 2008 SC 876:

If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness . This may not be provided in the statute , but it being a part of the principle of natural justice, should be held to be indefeasible right. In view of the above, we are of the considered opinion that the right of cross-examination is an integral part of the principles of natural justice.

11.M/s Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, Civil Appeal No. 4228 of 2005 “As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination……Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above…. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.” In view of the facts as mentioned above, and the position of law as expounded in the various judicial pronouncements cited above, the order passed by the ld. CIT(A) -04, Jaipur needs to be set-aside and the order passed by the Assessing officer needs to be quashed . Ground No. 4&5: Ground no. 4 &5 deals with the addition of Rs. 1,10,00,000/- and of Rs. 55,000/- made by the Assessing Officer on account of the investment in equity shares and the commission paid thereon to M/s Olive Overseas Pvt. Ltd.. As already stated above, and in the written reply filed both before the CIT(A) and the Assessing Officer, the assessee had stated that the money received both on account of investment in equity shares (Rs. 80,00,000/-) and as loan (Rs. 30,00,000/-) was received through banking channels. In support of the genuineness of the transaction, the assessee had supplied, during the course of assessment proceedings, the following documents to support his claim: i)Copies of Application for share capital; ii)Registrar of Companies records; iii)Copy of account of assessee appearing in the books of the said parties; iv)Copy of bank statements of said parties; v)ITR copies and audited books of account for A.Y. 2010-11 of the said parties; vi) Master Data available on Registrar of Companies , related to the companies from whom loans have been taken during the year wherein the parties have affirmed the registered office address of the company, nature of business, registration number of the company with the Registrar of Companies, CIN and PAN. They also have affirmed about the filing of Return of Income and loans granted to the assessee. On a perusal of the bank statements of the parties, it is seen that both the companies have sufficient bank balance to advance the loans. With the above documents, the identity , genuineness of transaction and creditworthiness of the parties has been proved beyond doubt by the assessee. We would like to add here that ,as far as the assessee is concerned, he has received money from M/s Olive Overseas P. Ltd., M/s Aashritha Trading Co. Ltd. And M/s Triangular Infracom P. Ltd. Their creditworthiness, identity and genuineness of transaction is proved by the assessee. No material has been put on record to show that it was the assessee’s unaccounted. The assesee cannot be held accountable for the source of the source. The department, if it feels that cash has been introduced at any level, then it has to be taxed at that level, in those hands. The assessee cannot be held liable for the alleged unaccounted cash of a third person. We also want to add that a perusal of the order of the AO and the CIT(A) shows that all the amount involved has already been taxed in the hands of Shri Praveen Kumar Jain on a substantive basis. Then, the same money cannot be taxed in another hand. For all these reasons, the additions made by the Assessing Officer and confirmed by the CIT(A) in the hands of the assessee are not justified, unsustainable in law and need to be deleted.’’ On the other hand, the ld. DR supported the order of the lower authorities 4.3 and submitted the written submission (supra).

4.4 We have heard both the parties and perused the materials available on record. It is pertinent to mention that the issue as raised by the assessee in for the assessment year 2011-12 are similar to appeal of the assessee in for the assessment year 2010-11 wherein the appeal of the assessee has been restored to the file of the ld. CIT(A) for afresh adjudication. Hence, the decision so taken by the Bench in appeal No 1134/JPR/2024 shall apply mutatis mutandis in appeal No. 1135/JPR/2024. Thus the appeal of the assessee is allowed for statistical purposes.

5.0 In the result, both the appeals of the assessee are allowed for statistical purposes.