RITU SINGAL,NEW DELHI vs. ACIT, CENTRAL CIRCLE- 3, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ―G‖: NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 1415 to 1417/Del/2018 (Assessment Year: 2013-14 to 2015-16) Shri Brij Bhushan Singal, Vs. ACIT, W-29, Greater Kailash Part-II, Central Circle-3, New Delhi New Delhi (Appellant) (Respondent)

ITA No. 1483 & 1484/Del/2018 (Assessment Year: 2013-14, and 2014-15) Mrs. Uma Singal, Vs. ACIT, W-29, Greater Kailash Part-II, Central Circle-3, New Delhi New Delhi (Appellant) (Respondent) ITA No. 1479 to 1481/Del/2018 (Assessment Year: 2013-14 to 2015-16) Mrs. Ritu Singal, Vs. ACIT, W-29, Greater Kailash Part-II, Central Circle-3, New Delhi New Delhi (Appellant) (Respondent)

Assessee by : Shri S. K. Tulsiyan, Adv Revenue by: Shri S S Rana CIT DR & Shri S. L. Anuragi, Sr. DR Date of Hearing 23/10/2018 Date of pronouncement 07/12/2018

O R D E R PER BENCH 1. These are the bunch of eight appeals filed by the three assesses against the consolidated order of The Commissioner of Income Tax (Appeals) – 23, New Delhi [ the ld CIT (A) ] dated 29/12/2017 passed in case of five assesses. The orders of The ld CIT (A) was in appeal preferred against the order of The Asst Commissioner of Income Tax, Central Circle – 3, New Delhi (The Learned AO) passed under section 153A read with section 143 (3) of The Income Tax Act, 1961 (The Act) on 30/12/2016 for three Assessment Years in case of two assessee and two assessment Page | 1

years in case of Third assessee. These assesses have also raised identical grounds in all these eight appeals. 2. We first discuses the facts and proceedings in case of Mr. Brij Bhushan Singal in his three appeals. Facts in case of other two assesses are similar. All these three appeals of Shri Brij Bhushan Singal also involved similar additions and the learned authorized representative of the assessee and the departmental representative also put their arguments collectively with respect to other appeals also, therefore, all these three appeals of Shri Brij Bhushan Singal and other two assesses are disposed of by this common order. 3. In case of Shri Brij Bhushan Singal following grounds of appeal in ITA No. 1415/Del/2018 for the 2013-14:- “(1) That the order dated 29-12-2017 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called “the Act”) by the Ld Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in passing the order u/s 153A of the Act without appreciating the fact that the order passed by Assessing Officer is without jurisdiction and bad in law as the jurisdiction u/s 153A of the Act is vitiated since no incriminating material pertaining to A/Y 2013-14 had been found during the course of search. (2) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of Rs. 14,14,95,635/- on account of Long Term Capital Gains which was exempt u/s 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long-term capital gain are, allegedly, sham. (3) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making addition of Rs.84,89,738/- on account of alleged unaccounted Commission expenses@ 6% on the Long Term Capital Gains on sheer presumptive basis. (4) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without affording the Appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication.”

has gravely erred in computing total income at Rs. 89,42,84,983/- as against returned income of Rs. 15,37,290/-. 2. That the assessment order dated 30-12-2016 passed u/s 153A r.w.s 143(3) of the Income-tax Act, by the Ld. Asstt Commissioner of Income Tax, Central Circle 3, New Delhi is against law and facts on the file in as much as he was not justified to make an addition of Rs. 84,22,14,805/- on account of Long Term Capital Gains and claimed as exempt u/s 10(38) of the Income-tax Act, 1961 by unjustifiably and arbitrarily holding the same to be allegedly the result of a sham transaction and a bogus accommodation entry without comprehending the facts of the case, underlying nature of transaction, position of law and the extant circumstances thereto. 3. That the assessment order dated 30-12-2016 passed u/s 153A r.w.s 143(3) of the Income-tax Act, by the Ld. Asstt Commissioner of Income Tax, Central Circle 3, New Delhi is against law and facts on the file in as much as he was not justified to make an addition of Rs. 5,05,32,888/- on account of alleged unaccounted Commission expenses @ 6% on the Long Term Capital Gains on sheer presumptive basis when there is no evidence of any form whatsoever to support such an action. 4. That the Ld. Asstt Commissioner of Income Tax, Central Circle 3, New Delhi gravely erred in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without affording the appellant any opportunity to cross examine such persons, thus, making the assessment bad in law.” 5. He raised following grounds of appeal in ITA No. 1417/Del/2018 for the 2015-16:- “(1) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of Rs. 28,67,89,706/- on account of Long Term Capital Gains which was exempt u/s 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long-term capital gain are, allegedly, sham. (2) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making addition of Rs. 1,72,07,382/- on account of alleged unaccounted Commission expenses@ 6% on the Long Term Capital Gains on sheer presumptive basis. (3) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in making an addition of Rs. 68,01,000/- on account of alleged unexplained gifts by ignoring the detailed written submissions made on behalf of the Appellant and the fact that even a cursory glance at the said documents would reveal that the same was only a working and did not disclose any “actual” expenditure. (4) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without Page | 3

affording the Appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication.”

term capital gain. These accommodation entry providers themselves admitted that shares of their respective companies were artificially traded to provide bogus long- term capital gain to various beneficiaries and Bhushan steel group is one of the beneficiaries of bogus long-term capital gain from these scripts. 8. The documentary evidences gathered during the course of search is seized documents containing investment details of family members of Bhushan steel group in various companies along with payment made to Shri Raj Kumar Kedia and transactions of their long-term capital gain earned with his help. Such documentary evidences listed such are the Annexure-E and Annexure -A. The learned assessing officer noted that material found and seized from the premises of Shri R.K. Kedia contains a ledger of one NP (acronym for ―Nehru Place‖ referring to Bhushan steel group, since earlier the corporate office of Bhushan steel group was at Nehru Place). AO alleged that family members of the assessee are among the beneficiaries of the bogus long-term capital gain obtained by prearranged trading in shares of many non- descript listed companies through Shri R.K. Kedia. The record of seized material was maintained by Shree Manish Arrora who is an employee of Shri Raj Kumar Kedia. Therefore, the learned assessing officer noted that these transactions, which are recorded in the NP Ledger‘s matches with the traded transactions details, obtained from BSE. In the Ledger, transactions recorded were encoded language and a dot (.) has been put after two zeros (00) while recording the transactions. The AO gave an instance that on 23/4/2014; Sri Brij Bhushan single sold 15,000 shares of M/s. Parag Shilpa at the rate of INR 557.46. Thus, the total amount of transactions would be INR 8361917, which was recorded as INR 83619.17. Thereafter the learned assessing officer referred data found from the premises of Sri Ankur Agarwal in form of ABCD.XLS wherein the sale details of shares were contained. Thereafter, the assessing officer prepared a comparative chart showing the details of shares recovered from the data of Mr. Ankur Agarwal and compared it with the data of Raj Kumar Kedia, which matched. Further, during assessment proceedings, summons under section 131 was also issued to Shri Ankur Agarwal on 16/12/2016 to appear before the assessing officer on 22/12/2016 against which he filed his retraction on 20/12/2016 from his statement recorded during the course of search. He did not appear on the dates given under section 131 of the act. The assessee was directed to produce this person. However, assessee could not. The learned assessing officer noted that there is no logical reason given by Mr. Ankur Agarwal for retracting the statement recorded during the course of search and such retraction was without adducing or leading evidence in support of retraction from admission and without establishing that the statement was obtained under pressure or Coercion. Therefore, the learned assessing officer rejected his retraction. Thereafter, the learned assessing Page | 5

officer analyzed the financials and the trade data of the companies in which the assessee has dealt with and earned capital gain stating that they have been abused for generating illicit long-term capital gain. He analyzed their financial statements to show that they are not worth the amount at which they are sold. The learned AO further examined details of the exit providers (who have purchased the shares sold from the assessee and his family member on the stock exchange) and stated that the exit providers are companies operated by the entry providers. The learned AO referred to the statement of Shri Devesh Upadhyay recorded on 30/12/2014. Thereafter the learned assessing officer also noted that the companies who purchased shares on the stock exchange platform, which were sold by assessee and his family members, in their bank statement there are back-to-back transactions regularly. He noted that there are 3 to 7 layers used to introduce money in their bank account. The assessing officer was of the view that cash is deposited in many bank accounts of different entities and from that, it has been subsequently transferred to many other bank accounts which reached to the bank account of the exit provider by three to seven layers by banking channels. From these funds, shares were purchased. Therefore, the AO was of the opinion that bogus paper entities controlled by the entry operator are providing profitable exit to members of the assessee and his family by way of introducing unaccounted cash of the family members of Bhushan steel group through multi layering. Further, the AO issued notice under section 133 (6) to the various companies who provided exit to the several persons. Many notices received back un-served or no reply was received. The learned AO further stated that many of the stockbrokers did not maintain proper Know Your Customer (KYC) data. Further, many of the beneficiaries of the long-term capital gain have owned that these are bogus long-term capital gains and paid tax thereon. The assessing officer further stated that the Securities and Exchange Board of India (SEBI) has also carried out investigation in few listed companies based on common trading pattern, identical developments like stock splits, preferential allotments, insignificant economic activity, and exorbitantly high stock prices with respect to the 18 companies out of that some of the companies were also in which the assessee and his family members have been benefited by long-term capital gain. The learned assessing officer further referred to the order of The Securities and Exchange Board of India (SEBI) in case of Redford Global ltd and First financial services ltd, wherein, interim order dated 19/12/2014 was passed by the SEBI and assessee along with many other assessees were restrained from trading on securities. Therefore, the detailed show cause notice on 30/9/2016 was issued. Assessee submitted his reply on 15/11/2016. The learned AO rejected the same rebutting the submission of the assessee. Thereafter discussing several judicial Page | 6

precedents and placing strong reliance on the interim orders of SEBI dated 19/12/2014 held that assessee has obtained bogus long-term capital gain. Regarding cross-examination of Exit providers, summonses were issued to 15 parties on 19/12/2016 but none appeared. With respect to cross-examination of Shri R K Kedia, Shri Manish Arora, Shri Ankur Agarwal etc the learned AO stated that cross- examination is required only where there are no documentary evidences and where the whole addition is made purely based on the statement of third person. According to the AO in this case, solid evidences were found and the statement corroborates the evidences found. Ld AO further stated that during the post-search proceedings Shri Neeraj singal, main person of Bhushan steel group, was specifically asked to cross-examine Sri Raj Kumar Kedia, but he straightway refused in his statement dated 24/4/2015. He therefore held that cross-examination is not the right of the person. He further stated that natural justice is mistress and not the master of justice. It can never be used to defeat the cause of justice and it is used to support the cause of justice. Therefore, he held that cross-examination is not relevant and not necessary for the finalization of the assessment. He further referred to the application of the principle of preponderance of probabilities and made addition to the total income shown by the assessee as long-term capital gain as exempt income as income from unexplained sources considering detailed discussion made in the different chapters of assessment order. He stated that it has been established that the assessee indulged in sham transactions to receive back his unaccounted income in the garb of exempt long-term capital gain. Therefore, the total long-term capital gain of the assessee against this bogus/sham transactions have to be treated as unexplained income of the assessee along with unaccounted commission expenditure at the rate of 6% of the total long-term capital gain of the year for arranging these entries. Therefore, he taxed the total long-term capital gain from unexplained source of INR 141495635/– and 6% of net again towards commission expenses from unexplained sources and made an addition of INR 149985373/– as unexplained income of the assessee. Accordingly, against the returned income of INR 2741440/– assessee was assessed at INR 1 52726813/–. 9. Aggrieved with the order of the learned AO, assessee preferred appeal before the learned Commissioner of Income Tax (Appeals) – 23, New Delhi. The CIT(A) passed the Consolidated order along with 4 other assessee being family members of assessee and M/s Bhushan steel Ltd on 29/12/2017 for 5 years, starting from assessment year 2010 – 11 to 2015 – 16 in case of various assessee. In case of the assessee, appellate order was for 5 years. With respect to the long-term capital gain, the assessee submitted that it has not paid any cash to either Shri R.K. Kedia or any of his associate and assessee does not know any person by the name of Shri Manish Page | 7

Arora, nor does he have any dealing with him. The learned CIT _A rejected this contention and stated that assessee knows Mr. R K Kedia and Manish Arrora, through Mr. Ankur Agarwal. With respect to the soft data seized from Sri Raj Kumar Kedia and Shri Manish Arora, assessee submitted that appellant is neither aware nor can be expected to be aware of how any third party has come into possession of certain information. The learned CIT – A rejected the above contentions and stated that there are direct as well as circumstantial evidences where Mr. Ankur Agarwal was in touch of Mr. R. K. Kedia whose data also matched with the data of Mr. Ankur. The assessee also stated that no credence could be placed on the statement of Mr. R. K. Kedia, who is changing his statement consistently in taking contradictory stands. The learned CIT A rejected the same and stated that Shri R. K. Kedia confirmed contents of statement of Shri Manish Arora. He stated statement is also backed by the relevant data. He further stated that during the course of search in statement recorded on 25/4/2015. Shri Neeraj Singal was provided opportunity to cross- examine Shri R. K. Kedia, Sri Manish Arora, and Sri Ankur Agarwal, which he refused. Now assessee cannot be aggrieved. With respect to the retraction of statement of Shri Ankur Agarwal, he stated that assessee did not produce him and further with the retraction he has not produced any evidence of retraction. The assessee also stated that Shri Ankur in his submission stated that the pen drive did not belong to him, but to Mr. R. K. Kedia, the learned C IT A rejected the above contention. The assessee also stated that investment made by the various family members of the assessee and assessee himself was under the preferential allotment and many people invested in those companies with respect to the expectation of future growth. The learned CIT (A) rejected stating that preferential allotment is merely a stage-managed affair. With respect to the directors various companies who were not aware about the activities or composition of Board of Directors of investor companies for, giving the copies of the statement of those persons along with the cross-examination, the learned CIT (A) stated that the statements were recorded by the officer of the income tax department during the course of their duties and there is no contemplation of providing cross-examination. Therefore, the statement said to be taken on the face value. He further stated that it is not the case of the appellant that appellant requested the assessing officer to issue summons to these persons and the learned assessing officer has refused to do so. Since the assessing officer is not recorded the statements, the argument that cross-examination opportunity was not given is having no legal force. With respect to the contention of the assessee, that the shares were sold on the online platform of the Bombay stock exchange, where assessee does not have any awareness about the ultimate purchaser of the share, the learned CIT (A) rejected the same stating that there is overwhelming evidence to Page | 8

prove that the transactions were stage-managed. With respect to the argument of the assessee that no cash has ever been paid by the appellant to the various parties, either directly or through an intermediary, he held that shares of the companies from whom long-term capital gain has been earned are allotted to the appellant by way of a preferential allotment and assessee does not have any connection with those companies who purchased the shares. The learned Commissioner of income tax appeals rejected the argument of the assessee stating that these are the stage- managed affairs. The assessee also contested that the parties to move notices under section 133 (6) were issued summons were issued under section 131 of the act does not prejudice to any degree or any manner affect the appellant. Since the issue of complying with the notices by those parties is a matter of that person‘s individual discretion over which any third person or the appellant cannot be expected to have any controlled, the learned CIT (A) held that these are the stage-managed affair. With respect to the claim of the assessee that R. K. Kedia and Manish Arora are not connected persons, changing their stands and additions are made on that basis, opportunity to cross-examine them was not given. The learned CIT (A) stated that were originally Mr. Neeraj Singal was granted an opportunity of cross-examination, but he declined therefore, now the assessee could not claim that no cross of examination was granted. There are also certain unsold shares of some companies lying with the family members of the assessee and based on that the learned Commissioner of income tax appeals held that it proves that these companies are not worth sale in the market and therefore those remained unsold. Accordingly, he upheld the addition of long-term capital gain claim by the assessee as bogus and sham. He further upheld the addition under section 68 of the above sum confirming assessment order passed by the learned assessing officer. Several judicial precedents were relied up on. Decision of the Hon‘ble Bombay High Court, Nagpur bench in case of Sanjay Bimal Chand Jain dated 10/4/2017 was relied upon heavily. He further upheld the addition of 6% because of payment of commission in cash for obtaining the above stated long-term capital gain in various companies. Accordingly, he dismissed the appeals of the assessee. The appeal with respect to the appellant are dealt with at page number 458- 477 of the appellate order vide para number 148 – 165 of the order. Therefore, assessee aggrieved with the order of the learned CIT- A has preferred an appeal before us. 10. Before commencing his arguments Ld AR vehemently stated that at present the appeals of all the assessee are pertaining to AY 2013-14 onwards and appeals for AY 2010-11 to 2012-13 have already been heard by G bench on 2/8/2018. Detailed arguments with respect to all the issues involved in this appeal are heard by the bench. He further stated that facts and issues are common for all these six years Page | 9

except that those were unabated AYs and these are abated AYs. He submitted that if the coordinate bench in those cases held that the evidences relied up on by AO are not incriminating will result in to deletion of Addition for those years However , those finding will equally apply to these Assessment years‘ cases. If it decides otherwise, then the arguments made hereunder once again may be considered afresh. He stated that identical arguments are made in those appeals, which would be made in these appeals also. 11. The Ld CIT DR agreed with the arguments of the assessee and stated that if in those cases the evidences are held to be not incriminating, then his arguments placed may also be considered afresh. 12. At the time of the passing of these orders, the coordinate bench has passed the orders in case of these assessee for AY 2010-11 to 2012-13 9 3 AYs on 31-10-2018 in ITA Nos. 1412 to 1414 / del/ 2018, ITA No 1476 to 1478/del/2018, ITA No. 1482/del/2018 and ITA No 1485 to 1487/Del/2018 on 31/10/2018 It held that there are no incriminating materials unearthed during the course of search by which the additions can be made in the hands of the assessee. The coordinate bench has also given its finding on the issue of cross examination of witnesses and use of third party data. That order binds us on the principles of judicial discipline. Therefore while deciding the issues in these appeals, we are duty bound to consider and follow it, wherever found appropriate and relevant. 13. Commencing his arguments on the various issues, The learned authorized representative has also placed on record the detailed combined written submission with respect to four individual assessees involved in the order of the learned CIT (A). The major arguments are as under:- i. Complete documentary evidences conclusively establishing the genuineness of the purchase and sales of aforesaid shares in the cases of all the four Assesses are enclosed in the following Paper Books (PB) filed: Assessee‘s Name Assessment Year Paper Book No. Sri Brij Bhusan Singal 2013-14 to 2015-16 PB-1B

ii. In making the aforesaid additions, the Ld. A.O predominantly relied on statements of various persons such as Sri Ankur Agarwal (employee of BSL), Sri R.K. Kedia (alleged entry provider), Manish Arora (employee of Sri R.K. Kedia), alleged entry and exit operators, directors of penny stock companies etc. recorded by various officers of the Department. The Assesses made a categorical request for allowing an opportunity to cross-examine the persons whose statements were intended to be used against them by the Ld. A.O; Page | 10

however, no such opportunity was provided to the Assesses. The Assesses were directed to appear on certain dates to cross-examine such persons but on the appointed dates, none of the parties were made available to the Assesses for cross-examination although the Assesses were duly present on the specified dates for cross-examination through their AR. iii. It is submitted that most of the shares of the companies on which LTCG has been earned were allotted to the Assesses by way of preferential allotment. One of the grounds taken by the ld. A.O. in doubting the transactions carried out by the Assesses herein and alleging personal connection between the Assesses and the promoters of the said companies/ entry providers is that the shares of the said companies were allotted by way of preferential allotment. In this regard, it is submitted that the issuance of shares on preferential basis was in consonance with applicable S.E.B.I regulations and Listing Agreement norms. It is clarified here that the fact that the shares of the companies were allotted to the Assesses by way of preferential allotment does not signify any connection of the Assesses with the companies. In terms of the applicable provisions of the Companies Act, a preferential allottee of shares is not required to attend any Board meetings, there being a complete divergence between the management and ownership, a company being a body corporate, having a separate legal entity. The process of preferential allotment which is invariably spread by the word of mouth, the possibility of personal contact between the promoters/management and preferential allottees is miniscule. iv. Various statutory/regulatory bodies such as S.E.B.I, the Stock Exchanges etc. are involved in the process of preferential allotment of shares as well as the follow up of public issue. The entire process involves a multi-stage, rigorous, coordinated and time bound process involving comprehensive due-diligence, vetting of documents, background check of promoters, compliance with well- laid out guidelines and parameters etc. A company intending to go in for a public issue can allot shares by way of preferential allotment only after getting the approval of S.E.B.I. In the entire process, S.E.B.I also approves the list of persons/ entities to which shares are to be allotted on preferential basis, also incorporating therein the terms and conditions including, lock in, if any subject to which the shares are to be issued. In the given backdrop, the Assesses herein cannot be faulted for relying on a commercial proposition, which was duly compliant with law, including approval of S.E.B.I. To disregard the activities conducted by a Company as dummy when almost its entire spectrum of activities has been pre-scrutinized and approved by various Page | 11

agencies, including the capital market regulator S.E.B.I would be disregarding the functioning of bodies operating under a law enacted by the Parliament of India. v. The shares allotted by the companies were listed and traded on the stock exchange. These shares were subsequently credited to the respective DEMAT Accounts of the Assesses herein. After being held by the Assesses for a period of more than 12 months, their sales were affected through registered brokers on the NSE/BSE in accordance with prescribed regulatory procedures, rules, and applicable laws whereby both the limbs of the transaction viz. purchase and sale of shares were duly authenticated. The sale proceeds for the sale of shares were received through normal and regular banking channels from the stock broker through whom the shares had been sold, who, in turn received the same from the Stock Exchange through its designated payout mechanism and stood duly credited to the respective Assesses‘ bank accounts. vi. The shares in question were of listed companies and were sold at prevailing market rates through the Bombay Stock Exchange Online Trading (BOLT) platform of the Bombay Stock Exchange and all the payments against the same were received through account payee cheques/RTGS from the stock broker. It may be mentioned that under the online web-based trading platforms of the relevant exchanges as per the prevalent procedures, the broker only acts as the intermediary. There is no physical interaction between the parties and accordingly, the identities of the counter-party (whether buyer or seller) is not available thereby eliminating the possibility of any collusion between the parties. The entire sales of shares were effected through web- based platforms of the relevant exchanges in which the seller can in no way sell the shares to a particular entity/individual & vice versa; where the trade is executed when the bid price offered by the buyer matches with the offer price of the seller and vice versa; and the entire transaction is a demand and supply game over which neither the buyer nor the seller has any control. The transactions carried out by the Assesses stand fully documented and evidenced by contract notes/ bills of the relevant brokers issued in the form and manner as prescribed by the regulatory authorities‘ copies of which are duly enclosed in Paper Books filed.

vii. It is earnestly submitted that the Assesses herein were neither aware nor could be aware of the persons/ entities buying the shares sold by them. There was no way formal, informal, or even collusive whereby they could control the sales of shares to ensure their sales to a particular person/entity. The Page | 12

Assesses herein did not have any kind of relationship or control over the said companies save as that of passive investor and were not involved in the management thereof at any point of time. The Assesses had no role whatsoever in the capital market operations of the scripts or influencing to any degree or extent their stock market prices. The transactions were entered into by the Assesses in the capacity of stock market investor on the basis of market gossip, information and feedback received from various professionals, friends, relatives & other acquaintances who were actively involved and had adequate knowledge of securities market, the Assesses‘ perception and anticipation as to future price movements etc. with a view to earn profits from the appreciation, whether long term/ short term in the prices of the underlying shares. In order to evidence said transactions, all relevant documentary evidences in the form of share purchase documents, DEMAT Accounts, Share certificates, contract notes and bank statements evidencing the relevant entries regarding receipts against sale of shares etc. were duly filed before the Revenue Authorities. The same are also placed in PB-1A, PB- 1B, PB-2A, PB-2B, PB-3A, PB-3B & PB-4 filed before the Hon‘ble Bench viii. Regarding Third party statements/ statement of employee of BSL recorded u/s 133A/132(4) AR submitted that As discussed earlier, in making the impugned additions, the A.O has predominantly relied on statements of various persons such as Sri R.K. Kedia (alleged entry provider), Manish Arora (employee of Sri R.K. Kedia), alleged entry and exit operators, directors of penny stock companies etc. recorded by various officers of the Department. The Assesses herein made a categorical request for allowing them an opportunity to cross-examine the persons whose statements were intended to be used against them by the Ld. A.O; however, no such opportunity was provided to the Assesses. The Assesses were directed to appear on certain dates to cross-examine such persons but on the appointed dates, none of the parties were made available to the Assesses for cross-examination although the Assesses were duly present on the specified dates for cross-examination through their Authorised Representative. Copies of letters requesting cross- examination are enclosed at pages 434-445 of PB-6. Thus, the impugned assessments for A.Ys 2013-14 to 2015-16 in the Assesses‘ case were framed by the Ld. A.O in gross violation of principles of natural justice.

ix. It is trite law that if an Authority is relying on the testimony of a witness, the assessee is required to be afforded an opportunity to cross-examine him Page | 13

failing which the testimony cannot be utilized against the assessee. If this procedure is not followed, then there would be a case of denial of natural justice to the assessee and the addition on the basis of such statements/ material cannot stand. x. The Hon‘ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) (pages 271-274 of PB-5) has held as under:

―6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material, which would not be in possession of the appellants themselves to explain as to why their ex- factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.‖ xi. Therefore, as per clear dictum of the Hon‘ble Apex Court, failure on the part of the A.O to allow cross-examination of witnesses whose statements were relied upon for making impugned assessment is a serious flaw, which makes the assessment, order a nullity. In the case of Kishinchand Chellaram (AIR 1980 Page | 14

SC 2117) (pages 275-284 of PB-5), the Hon‘ble SC on the aspect of cross examination held as follows: ―6.It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him.‖ xii. A Constitution Bench of the Supreme Court in State of M.P. v. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram Cotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors.AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131). xiii. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634 (page 285 of PB-5), the Hon‘ble Apex Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem.

xiv. Further in Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100 (pages 286-290 of PB-5), the Hon‘ble S.C at paras 13 & 14 held: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as Page | 15

also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review. xv. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice. The aforesaid judicial principle w.r.t cross-examination was also upheld by various High Courts/ Tribunals across the Country in the following cases:  CIT Vs. SMC Share Brokers Ltd., (2007) 288 ITR 345 (Del) (pages 291- 293 of PB-5): Held as under: ―Search & seizure – Block assessment – Computation of undisclosed income – Block assessment completed u/s 158BD against the assessee on the basis of documents discovered in the premises of M and the statements made by him – Despite several requests by the assessee, M was not made available for cross examination – Though statement of M had evidentiary value, weight could not be given to it in proceedings against the assessee without testing it under cross-examination – Therefore, in the absence of M being made available for cross- examination, his statement could not be relied upon to the detriment of the assessee – Tribunal was justified in setting aside block assessment – No substantial question of law arises.‖  Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] (pages 294- 299 of PB-5) at page-111: Held as under: ―Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him.‖  Prakash Chand Nahta Vs. CIT, (2008) 301 ITR 134 (MP): Held as under: ―…..it was obligatory on the part of the A.O to allow the prayer of the assessee for cross-examination of M – A.O having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee – Therefore, the assessment is vitiated."  Bangodaya Cotton Mills Ltd. vs. CIT [2009] 21 DTR 200 (Cal): Held as under:

―A.O having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross-examination, the order passed by the Tribunal upholding the addition is set aside and the matter is remanded back to the A.O to consider the matter afresh.‖  CIT Vs. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H) : Held as under: ―A.O having made certain addition on the basis of statements of four persons recorded at the back of the assessee without affording an opportunity to the assessee to cross-examine those persons before passing the assessment order, despite specific requests, the proceedings conducted by the A.O after recording the statement of aforesaid persons are set aside; it is open to the A.O to reinitiate the proceedings from the aforesaid stage.‖  CIT & Anr. Vs. Land Development Corporation (2009) 316 ITR 328 (Kar): Held as under: ―Where despite specific request therefore, assessee was not given an opportunity to cross-examine witnesses whose incriminating statements had been made available to assessee, matter remanded to the A.O for affording an adequate and proper opportunity.‖  CIT Vs. Rajesh Kumar (2008) 306 ITR 27 (Del): Held as under: ―Revenue having collected material behind the back of the assessee and used the same against him without disclosing the material to the assessee or giving an opportunity to him to cross-examine the person whose statement has been used against the assessee for making the impugned addition, there is clear violation of principles of natural justice justifying deletion of addition.‖  Heirs & LRs of Late Laxmanbhai S. Patel Vs. CIT (2009) 222 CTR (Guj) 138: Held as under: ―Addition made u/s 68 placing heavy reliance on the statement of one R to the effect that the promissory note in the sum of Rs. 8,78,358/- recovered during his search represented amount advanced by assessee to one K without referring to the said statement in the assessment order nor giving copy thereof to the assessee nor affording opportunity to assessee to cross-examine R was liable to be set aside for violation of principles of natural justice.‖  CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del): Held as under: ―Initiation of reassessment proceedings on the basis of deposition of a third party without affording opportunity of cross-examination of the said party to the assessee despite specific demand was not valid.‖  CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del): Held as under: ―A.O not having given an opportunity to assessee to cross-examine the analyst on whose report the assessment was based despite several requests, assessment was rightly set aside by the C.I.T.(A) and Tribunal for violation of principles of natural justice and no substantial question of law arose.‖  CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad): Held as under:

―In the absence of any corroborative evidence, statement obtained from 23 mining licensees out of 994 licensees could not be relied upon by the A.O to come to the conclusion that the assessee has received illegal money from all the applicants for granting mining licenses, further the assessee was not allowed to cross-examine the said deponents and no further enquiry was made and therefore assessment suffers from procedural irregularities, defects and infirmities, matter is remanded to the A.O for fresh consideration.‖  P. S. Abdul Majeed, (Kerala) (1994) [209 ITR 821]: Held as under: ―…He had also prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross-examine the authors of those books. The petitioner had been denied the reasonable opportunity which was due in law, in relation to the assessment, and that was sufficient to vitiate the order. The order of reassessment was not valid and was liable to be quashed.‖  Prarthana Construction (P) Ltd. [2001] 70 TTJ 122(Ahd Trib) (pages 300- 308 of PB-5): Held that the presumption under the provisions of section 132(4A) would in any case not be applicable to a third party from whose possession such papers and documents have not been found by the Revenue. In that case, the Revenue had further relied upon statements of Sri Sureshbhai and Sri Deepak Meha partners of M/s. Gokul Corporation. The Bench opined that it found merit in the contention of the Ld. Counsel that such statements recorded at the back of the assessee would not ipso facto include the case against the assessee particularly when the maker of the statements have not been allowed to be interrogated by the assessee company (para 12).  CIT Vs. S.M Aggarwal 292 ITR 43: Held that statement made by the assessee‘s daughter cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her and even from the statement, no conclusion can be drawn that the entries made on the relevant page belongs to the assessee and represents his undisclosed income.

xvi. As regards the onus of ensuring the presence of the witness, kind attention is craved to the judgment of the Hon‘ble Jurisdictional Delhi High Court in Principal CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. & Others in ITA Nos. 11/2017 to 22/2017 (pages 151-171 of PB-5) wherein it was emphatically held that the onus of ensuring presence of the witness for cross- examination is on the Revenue and that such onus cannot be shifted to the Assessee. It was further held that failure on the part of the Revenue to produce the witness for cross-examination would be sufficient to discard the statement. The relevant excerpt of the order is reproduced hereunder to facilitate ready reference: ―37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report Page | 18

of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross- examination is sufficient to discard his statement.‖ ―38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra).‖

xvii. In the case at hand, as evident from the stated facts, the A.O has placed strong reliance on statements of third parties recorded u/s 132(4)/ 133A in course of search/ survey action in their cases. The Assessees herein have from the very inception consistently denied any relationship/ linkage/ dealings with Sri R.K. Kedia or Sri Manish Arora or any of the alleged entry operators/exit providers or directors of penny stock companies. As noted in para 4.11, page 102-103 of the assessment order in the case of Sri Neeraj Singal for A.Y 2015-16 (taken as the base case – identical in case of the other Assessees), summons u/s 131 of the Act were issued to R.K. Kedia and Sri Manish Arora to appear before the A.O on 06.12.2016 for allowing cross- examination to the Assessees herein. However, they did not appear. Further, the AR of the Assessees herein vide letter dated 19.12.2016 requested that if any adverse inference against the Assessees is drawn on the basis of the statements of persons, an opportunity to cross examine the said persons may be provided. Copies of the letters requesting cross-examination are enclosed at pages 434-445 of PB-6. In this regard, as evident from the assessment order, summons u/s 131 were issued to 15 persons but none of them responded to the summons. Thus, in effect no opportunity of cross examination was allowed to the Assessees despite categorical request. Since the onus of ensuring presence of the witness for cross-examination was on the A.O and the A.O failed to discharge such onus, as per clear dictum of the Hon‘ble Jurisdictional High court, such statements ought to be discarded and could not be relied upon for making additions u/s 153A of the Act in the Assessees‘ case.

xviii. Further, as far as statements of Sri R.K. Kedia (alleged entry operator through whom the assessee had allegedly carried out the impugned transactions) and his employee Sri Manish Arora is concerned, the Assessees vehemently Page | 19

submitted before the Ld. A.O that they had no dealings with the said persons. The same is also evident from reply of Sri Neeraj Singal to Question Nos. 34 to 36 of his statement recorded in course of search u/s 132(4) wherein he fervently denied having any linkage/ dealings with R.K. Kedia or the alleged entry operators. Further, the fact that no credence can be placed on the statements of Sri R.K. Kedia would also be evident from a review of the post- search investigations/ assessment proceedings wherein Sri R.K. Kedia has been taking contradictory stands. The statement recorded u/s 132(4) on 13.06.2014 was later on retracted by Sri R.K. Kedia in course of post search investigation proceedings on 14.10.2014 and which retraction was further re- retracted by him again on 26.03.2015 during post search investigation proceedings (page 85 of the CIT(A)‘s order). Given the shifting stands and inconsistencies displayed by Sri R.K. Kedia, no degree of reliance can be placed on his statement. Copy of retraction and re-retraction/withdrawal of retraction filed by Sri R.K. Kedia is enclosed at pages 446-451 and pages 452- 455 respectively of PB-6.

xix. Reference in this connection is craved to the judgment of the Hon‘ble Kolkata High Court in the case of CIT Vs. Eastern Commercial Enterprises (1994) 201 ITR 103 (pages 294-299 of PB-5) wherein under similar circumstances, the Hon‘ble High Court held that no reliance can be placed on the testimony of a person indulging in double speaking and taking contradictory stands on different occasions and that such conduct neutralizes his value as a witness. Held as under:

―4. We have considered the contesting contentions of the parties. It is true that Shri Sukla has proved to be a shifty person as a witness. At the earlier stages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double-speaking cannot be said by any means a truthful man at any stage and no Court can decide on which occasion he was truthful. If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc. But, we would observe here that which way lies the truth in Shri Sukla's depositions, could have been revealed only if he was subjected to a cross-examination by the assessee. As a matter of fact, the right to cross-examine a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the corner-stones of natural justice. Here Shri Sukla is the witness of the Department. Therefore, the Department cannot cut short the process of taking oral evidence by merely having the Page | 20

examination-in-chief. It is the necessary requirement of the process of taking evidence that the examination-in-chief is followed by cross- examination and re-examination, if necessary. It is not just a question of form or a question of giving an adverse party its privilege but a necessity of the process of testing the truth of oral evidence of a witness. Without the truth being tested, no oral evidence can be admissible evidence and could not form the basis of any inference against the adverse parties.‖ xx. On similar facts, the Hon‘ble Delhi Tribunal in DCIT v. Bhola Nath Radha Krishna (ITA No.5149/Del/2012) (pages 309-315 of PB-5) held that frequent retraction of statement (i.e. retraction of statement followed by re-retraction of the statement confirming the original) undermines its credibility and invalidates such statement ab-initio. The Hon‘ble Delhi ITAT in the said case confirmed the following order of the CIT(A) therein as under: ―6.4 The appellant had alleged that the addition has been made merely on the basis of the statements of Shri Mehta who had retracted his own statement subsequently. Accordingly, a letter was sent to the A.O. to clarify the issue. Even on a request made by the appellant (as is evident from the assessment order) a copy thereof was not provided to the appellant and this matter (of retraction) was not brought on record. The A.O. has sent here reply stating and admitting the fact that original statement of Shri Mehta was retracted by him but subsequently re- retracted the statement confirming the original. The grounds for re- retraction was that the obligations and the sum of money offered by RMD Group to Shri Mehta were not honoured. Since the same was not paid to him, he had chosen to withdraw his retraction. To this the appellant‘s A.R. has vehemently stated that frequent retractions of statement by Shri Mehta undermines the credibility of its genuineness and such doubtful statement given and retracted and again withdrawn on flimsy grounds of money not been paid by RMD Group invalidates such statement ab-initio. I agree with the appellant that keeping in mind the principles of natural justice the A.O. should have at least provided the Retraction of the original statement to the appellant at the assessment stage for rebuttal. Frequent retraction has definitely undermined the credibility of statement and appears motivated….‖

xxi. Similarly in the case of Smt. Smita P. Patil Vs. ACIT, (2014) 159 TTJ 182 (pages 316-336 of PB-5), the Hon‘ble ITAT, Pune Bench w.r.t evidentiary value of witness indulging in double speaking and taking vacillating stands referring to the order of Hon‘ble Mumbai ITAT in Jafferali K Rattonsey Vs. DCIT Mumbai ITA No. 5068/M/2009 dt. 25.01.2012 held as under:

―27. In the case of Jafferali K Rattonsey (supra), the identical issue has been considered by the ITAT, Mumbai. In the said case also the assesse declared the Long Term Capital Gain to the extent of Rs.4,94,51,910/- in respect of the sale of the shares of six companies (one of the company is Pranneta Page | 21

Industries Ltd.). The broker involved in the said case was M/s. Mahasagar Pvt. Ltd. There were enquiries also made by the NSE and BSE in respect of the contract notes furnished by the said assessees. The NSE informed that the brokers M/s. Mahasagar Pvt. Ltd. is neither having registered trading member nor a sub-broker affiliated to any registered trading member of the Stock Exchanges. It was also informed that the shares of Pranneta Industries Ltd. not listed on the Exchange. In the said case statement of Shri Mukesh Choksi, Director of Mahasagar Securities was recorded by issuing the summons u/s. 131 in which Shri Mukesh Choksi specifically denied having purchase any shares for the said assessee. In the said case also the charge of the department against the assessee was identical as in the case of these present assessees. After considering the entire evidence the Tribunal rejected the case of the Assessing Officer that the Capital Gain declared by the assessee was arranged transactions. The operative part of the Tribunal order is as under: 9.5. From the above, it is clear that Mr. Mukesh Choksi is double 'speaking in his statements i.e. one given before the A.O. and the one during cross examination before the A.O. Under these circumstances one has to see the evidentiary value of a person making double speaking. We find the Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises (supra) has held that a man indulging in double speaking cannot be said by any means a truthful man at any stage and no Court can decide on which occasion he was truthful. We find the co-ordinate bench of the Tribunal in the case of Mrs. Uttara S. Shorewala (supra) (in which one of us - the Accountant Member is a party) following the decision of Hon'ble Calcutta High Court upheld the order of the Id. CIT(A) in holding that the A.O. cannot make any addition in the assessee's hands despite the assessee not having made any payment to the entities mentioned by Shri Choksi, whose statement is being relied upon by him. The CIT (A) also noted that Mr. Mukesh Choksi has been vacillating right through and has given different versions at different stages of the proceedings and therefore his evidence was unreliable. 9.6. In view of the above judicial decisions the statement of Mr. Mukesh Choksi cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee especially when all other supporting evidences filed by the assesee were neither proved to be false or untrue. We further find merit in the submission of the Id. counsel for the assesse that the dematerialization of shares from physical holding is a lengthy process and takes considerable time. Therefore, when there is no dispute to the dematerialization of shares before the date of sale, therefore, the shares were purchased much prior to the date of sale.‖

xxii. It may thus be concluded in light of the aforesaid judgments that in the instant case, no reliance can be placed on the statement of Sri R.K. Kedia who has been vacillating and taking contradictory stands before the A.O and his statements cannot be taken as deciding factor for rejecting the genuineness of the transactions in the impugned shares carried out by the Assessees herein especially when all other supporting evidences filed by the Assessees have not be proved to be false or untrue by the Revenue Authorities.

xxiii. Further, as far as statements of Directors of alleged penny stock companies, alleged entry and exit providers (other than R.K. Kedia and Manish Arora) are concerned, apart from the fact that these persons were not made available to the Assessees for cross-examination, it is submitted that these do not directly implicate/incriminate/name the Assessees herein as illegal beneficiaries to alleged bogus LTCG in the shares of the said companies. The said statements only explain the general modus operandi with respect to the shares of the said companies being allegedly utilized for the purpose of providing accommodation entries in certain cases. No concrete evidence has been unearthed in course of search in the cases of the Assessees herein to conclusively establish that the Assessees herein had booked bogus LTCG or that their own unaccounted money was routed through transactions in shares of the said scrips or that they had made any compensatory payments to the buyers of the said scrips.

xxiv. Further, the said statements of the Directors of Penny Stock Companies viz. M/s. Anukaran Commercial Enterprises Ltd., Rander Corporation Ltd. & PSIT Infrastructure & Finance Ltd. and few alleged entry and exit providers were recorded in course of survey u/s 133A of the Act. These statements do not have any nexus to anything incriminating found in course of search at the premises of the Assessees herein. Therefore, apart from the fact that these statements do not directly incriminate the assessee, such statements recorded u/s 133A as per the decisions cited earlier do not have evidentiary value and cannot on a standalone basis be used to draw adverse inference against the Assessees herein in their assessments u/s 153A of the Act unless corroborated by incriminating materials seized in course of search in the Assessees‘ case.

xxv. Further, the A.O has also heavily relied upon the statement of Sri Ankur Agarwal, an employee of BSL, recorded in course of search at his premises under extreme pressure and undue stress allegedly stating that the Assessees herein had obtained bogus LTCG by pre-arranged trading in shares of certain non-descript listed companies. The said statement was however, later on retracted by the maker of the statement i.e. Sri Ankur Agarwal on 20.12.2016 before the Ld. A.O. Such retracted statement cannot be held as evidence/reliable material so as to fasten exorbitant liability on the Assessees herein. It is earnestly submitted that the said statement was made by an Page | 23

employee of BSL, who is a third person insofar as the Assessees are concerned. The said statement was admittedly not in the nature of an ‗admission‘ or ‗confession‘ made by the Assessees herein u/s 132(4) but an adverse statement or allegation made against the Assessees by a third person. Their Lordship in the case of L.K. Advani Vs. Central Bureau of Investigation on 1st April, 1997 (1997 IIIAD Delhi 53, 1997 CriLJ 2559, 1997 (4) Crimes 1, 66 (1997) DLT 618, 1997 (41) DRJ 274, (1997) 116 PLR 1, 1997 RLR 292) held at para 89 that ―I am tempted here to cite a few lines from Murphy on Evidence, page 180 ―At common law, an admission made by one party is evidence against the maker of the statement, but not against any other person implicated by it.‖ .‖ Thus, an ‗admission‘ made by a person u/s 132(4) can only be used as evidence against the person who makes it. However, insofar as adverse statements of third persons/ parties are concerned, as clearly held by the Hon‘ble Apex Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) (supra) and host of other decisions of the Hon‘ble High Courts cited earlier, such statements can only be relied upon by the Department in drawing adverse inference against the assessee after allowing the assessee an opportunity of cross-examining the said person.

xxvi. Reference is craved to the judgment of the Hon‘ble Mumbai ITAT in the case of Straptex India (P) Ltd. Vs. DCIT [2003] 84 ITD 320 (Mum) (pages 337 to 352 of PB-5) wherein the Hon‘ble ITAT opined on the need for providing the opportunity of cross examination by the A.O in the manner as follows: ―8. It is a settled law that the statement of any person cannot be utilised against the other person unless the other person is given an opportunity to cross-examine the witness. In the case before us, not only Shri Shah was not allowed to be cross-examined by the assessee but Shri Shah himself in the subsequent statement before the AO has denied whatever was stated at the time of search. Further, Shri Shah in a declaration dt. 23rd Sept., 1994, before the Notary Public has retracted his statement given at the time of search. In view of above, in our opinion, the statement of Mr. Shah given at the time of search cannot be utilised as an evidence against the assessee. No other corroborative evidence in support of cash borrowing by the assessee is brought on record by the Revenue.‖ xxvii. Drawing inference from the above cited cases, in the case at hand, admittedly, Sri Ankur Agarwal was the witness of the Department, who in his original statement had deposed against the Assessees and whose statement was intended to be used against the Assessees by the Department. The said

witness, suo moto retracted from his original statement, thereby reducing his original statement to a nullity (copy of retraction of Ankur Agarwal is placed at page 190 of PB-6 ). His retraction obviated the need for the Assessees herein to seek his cross-examination. In other words, since the witness of the Department himself retracted from his original statement, the same ceased to have any referral value insofar as the Assessees were concerned. In case the Department still intended to rely on such retracted statement, it was duty bound to allow the Assessees an opportunity of cross examining the said witness before using his original statement against the Assessees. As discussed supra, the onus of ensuring the presence of a witness hostile to the assessee for cross examination was on the Revenue in case his statement was intended to be used against the assessee (Principal CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. & Others supra) failing which his statement was liable to be discarded.

xxviii. It is pertinent to note that even the C.B.D.T, the apex body of the Department vide Circular No. F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 has advised the Revenue Authorities to focus and concentrate on collection of evidence of undisclosed income in search cases and abstain from laying undue emphasis on recorded statements or obtaining confession. The relevant excerpt of the said Circular is reproduced hereunder: ―Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.‖

xxix. The aforesaid directions were once again reiterated by the CBDT vide Circular No. F. No. 286/98/2013-IT dt. 18.12.2014. The same is reproduced hereunder: Page | 25

―Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T. Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion .‖ Therefore, the proposition that assessments made pursuant to search operations are required to be based on incriminating materials discovered as a result of search operation in the case of the assessee and not on recorded statements has been spelt out in unerring terms by the Hon‘ble CBDT.

xxx. In conclusion, it is submitted that statements of third parties which have not been subjected to cross-examination by the Assessees or which have been subsequently retracted by the maker do not have any referral/ evidentiary value insofar as the Assessees are concerned and cannot, in the absence of corroborative evidence, form the basis of making additions in the assessments of the Assessees u/s 153A of the Act. 14. Regarding Third party statements/ statement of employee of BSL recorded u/s 133A/132(4) it was submitted that they could not to be used without cross- examination for following reasons.

i. The A.O has also placed strong reliance on hard/soft data seized from premises of Sri R.K. Kedia and pen drive seized from residential premises of Sri Ankur Agarwal in course of search operations carried out in their cases. However, admittedly, such data was not corroborated by any incriminating materials/ documents found in course of search actions at the premises of the Assesses herein. At the outset, it is clarified that these hard/soft data/ pen-drive were not seized from the possession and control of the Assesses Page | 26

and have not been shown to belong to the Assesses herein. Accordingly, presumption u/s 132(4A)/ 292C w.r.t these seized materials is not applicable to the Assesses herein.

ii. That, before going into the legal connotation w.r.t the evidentiary value of documents seized from premises of third parties, the following factual scenario pertaining to the nature of data seized from premises of Sri Ankur Agarwal & Sri R.K. Kedia need to be emphasized: a. As noted by the A.O at page 17 of the Assessment Order (in the case of Neeraj Singal for A.Y. 2015-16 – similar in case of all the Assessees), Sri Neeraj Singal, in reply to question no. 25 of his statement recorded u/s 132(4) stated that Mr. Ankur Agarwal dealt with purchase and sale of shares on his behalf. The said fact is corroborated by entries in ABCD.xls. sheet recorded in the pen drive seized from the residential premises of Sri Ankur Agarwal, wherein details of purchase and sale of shares of the Assesses for a period of 2.5 months were found recorded. All such entries were duly accounted for in the regular records of the Assessees. Clearly, the said pen-drive does not contain anything incriminating against the Assessees herein. The said entries as found recorded in ABCD.xls sheet of the pen drive have also been extracted at pages 35-37 of the Assessment Order (of NS for A.Y. 2015-16) and also at pages 166-167 of the CIT(A) order. As clearly evident therefrom, the same only substantiates the share transactions carried out by the Assessees herein in conformity with the statement of Sri Neeraj Singal. b. As regards the Job.xls sheet and Comm.xls extracted from the pen drive as reproduced at pages 37-39 of the Assessment Order (of NS for A.Y. 2015-16) and at pages 169-172 of the CIT(A) order, it is submitted that these do not relate to the Assessees herein. The Ld. CIT(A) at page 172 of the appellate order has alleged that the said Job.xls sheet & Comm.xls sheet in the pen drive of Sri Ankur Agarwal contains names of certain entry providers. A bare perusal of the said notings in Job. xls sheet & Comm. xls sheet would clearly reveal that these have nothing to do with the share transactions carried out by the Assessees. The names of the Assessees are nowhere mentioned in the said Job xls sheet and Comm. xls sheet. The A.O & the Ld. CIT(A), apart from alleging that the persons named in the said xls. sheets are entry providers, have failed to establish any nexus, linkage or correlation of the said entries with the transactions carried out by the Assessees herein. Page | 27

c. Admittedly, the said pen drive was seized from the residential premises of Sri Ankur Agarwal. Sir Ankur Agarwal, apart from dealing in shares on behalf of the Assessees herein (entries w.r.t which were found recorded in ABCD xls. sheet) may have been involved in several other activities and transactions in his personal capacity and/or on behalf of third parties totally unconnected with the Assessees and may have, at his free will, made notings with respect thereto in his pen drive (as allegedly contained in Job.xls. sheet and Comm.xls. sheet). Since the said pen drive was maintained by Sri Ankur Agarwal and was seized from his possession and control, the Assessees had no control over the entries recorded therein. In the absence of clear mention in the pen- drive or establishment of a definite link thereof with the transactions carried out by the Assessees herein, it cannot be blandly presumed or alleged that all the entries in the said pendrive relate to the Assessees. d. Without prejudice to the above, it is further submitted that since the said pen drive was not found or seized from the possession and control of the Assessees in course of search in their cases, the presumption u/s 132(4A)/ 292C regarding the ownership and correctness of the contents thereof is not applicable to the Assessees herein. The Assessees are not aware of the reason why the names of few alleged entry operators or the notings against their names appeared in the said pen-drive. Clearly, these entries do not relate to the Assessees. Since the said pen drive belongs to Ankur Agarwal and was seized from his possession & control in course of search at his residential premises, presumption u/s 132(4A)/292C would be operable only against Sri Ankur Agarwal and not against the Assessees herein. e. The Ld. CIT(A) has also at pages 167-169 of the appellate order extracted certain data allegedly seized from the premises of Sri R.K. Kedia (‗NP Ledger‘) and tried to correlate the same with the entries found recorded in ABCD xls. sheet extracted from the pen-drive of Sri Ankur Agarwal. In this regard, it is worthwhile to mention that the said entries extracted by the Ld. CIT(A) do not in any manner reveal/prove any unwarranted dealings in shares of the impugned companies or indicate the exchange of unaccounted cash or payment of any unaccounted commission by the Assessees. Insofar as the entries extracted by the Ld. CIT(A) in his appellate order from the data allegedly seized from R.K. Kedia are concerned, the same merely depict the regular purchase and

sale of shares carried out by the Assessees herein and do not indicate any unaccounted exchange of cash between the Assessees and the said party. The Assessees herein are neither concerned nor have any control over the data data maintained by Third parties who are totally unconnected with the Assessees. Moreover, it should not be lost sight of that the Assessees herein were not allowed an opportunity of cross- examination of author of the said data and accordingly such data does not have any referral value insofar as the cases of the present Assessees are concerned.

iii. It is well settled by a plethora of judgments that addition cannot be made in the hands of an assessee on the basis of entries in books of third parties in the absence of any corroborative evidence. Attention in this regard is craved to the judgment of the Hon‘ble Supreme Court in Central Bureau of Investigation Vs. V.C. Shukla & Ors (1998) AIR 1406 (SC) (pages 353-374 of PB-5), wherein certain diaries, small note book and various loose papers were found and seized from the premises of Mr. S.K. Jain of New Delhi. In those diaries/loose papers, the names of V.C. Shukla and L.K. Advani were found recorded. The CBI charge-sheeted those persons, namely, Shri Shukla and Shri Advani under the Prevention of Corruption Act, 1988. Under the given facts, the Hon'ble Apex Court held that the entries in those diaries/loose papers could not be used against Shri Advani or Shri Shukla but could only be used against Shri Jain and may be proved as admission by him. This in other words means that the addition cannot be made in the hands of the assessee on the basis of entries in the books of account of third parties in absence of any corroborative evidence. The relevant excerpts of the S.C. Judgment in this regard, are as follows: ―44. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the other books and loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under Section 9 of the Act to support an inference about the formers' correctness still those entries would not be sufficient to charge Shri Advani and Shri Shukla with the accusations leveled against them for there is not an iota of independent evidence in support thereof............................................ Suffice it to say that the statements of the four witnesses, who have admitted receipts of the payments as shown against them in MR 71/91, can at best be proof of reliability of the entries so far they are concerned and not others.

arguments canvassed by Shri Altaf Ahmed in this regard. Mr. Altaf Ahmed urged that it being a settled principle of law that statements in account books of a person are 'admissions' and can be used against him even though those statements were never communicated to any other person, the entries would be admissible as admission of J.K. Jain, who made them that apart, he contended, they would be admissible against Jain brothers also as they were made under their authority as would be evident from their endorsements/signatures appearing against/below some of those entries 53. Even if we are to accept the above contentions of Mr. Altaf Ahmed the entries, [which are statements' as held by this Court in Bhogilal Chunilal, (supra) and hereinafter will be so referred to], being 'admissions' - and not 'confession' - cannot be used as against Shri Advani or Shri Shukla.‖

iv. Attention is also drawn to the celebrated case of ACIT v. Ms. Lata Mangeshkar, [1974] 97 ITR 696 (Bom) (pages 375-378 of PB-5) wherein it was has held that mere entries in the accounts of third party regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. The Hon‘ble Bombay H.C. held as under: ―As regards the evidence of the two witnesses on which reliance was placed by the department, the Tribunal has pointed out that so far as N. Vasudev Menon was concerned, he had no personal knowledge of the actual payments made to the assessee and, therefore, his evidence could not carry the case of the department any further and so far as the Bombay manager, C.S. Kumar, was concerned it came to the conclusion that though he purported to say that he had made the payments in "black" to the assessee— payments corresponding to the entries to be found in the ledger— his evidence suffered from serious infirmities, which have been pointed out by the Tribunal in its reasons. But even with regard to this reason which has been given by the Tribunal, though it may be contended that since the entries in the ledger pertained to the payments in "black" no corresponding entries could be found in the day-book which was meant to be produced before the income-tax authorities, still the fact remained that the day-book from out of the other set of books (not intended to be produced) which must have contained the corresponding entries was not available and, in the absence of that, mere production of ledger entries would be of no avail, as there would be no guarantee about the truthfulness or genuineness of the entries in the ledger. Moreover, entries in books of account— whether in day-book or in the ledger—are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of C.S. Kumar and the evidence of that witness was found to be thoroughly unreliable by the Tribunal. After all, the entries in the day-book or the ledger would be a corroborative piece of evidence Page | 30

and once the direct evidence of the person who is said to have made payments in "black" to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the day-book even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence.‖

v. It was thus held in the aforesaid cases that additions cannot be sustained merely on the basis of documents/books seized from premises of third parties in course of search/survey actions in their cases unless corroborated by independent evidence to link the seized documents found in the third party premises with that of the Assessee.

vi. The Hon‘ble Supreme Court in the case of CIT Vs. Sunita Dhadda (pages 379-393 of PB-5), vide order dated 28.03.2018 held that if the A.O wants to rely upon documents found with third parties, the presumption u/s 292C against the assessee is not available. As per the principles of natural justice the AO has to provide the evidence to the assessee and grant opportunity of cross-examination. Secondary evidences cannot be relied on as neither the person who prepared the documents nor the witnesses are produced. The violation of natural justice renders the assessment void. The Department cannot be given a second chance. While rendering the said judgment, the Hon‘ble Supreme Court considered the following judgments relied upon by the respondents: 1. CIT VS. Dinesh Kumar Sharma, ITA No.14/2005 decided on 24.04.2017.. 2. CIT Jaipur vs. Vijendra Kumar Kankaria , ITA No. 175/2010 decided on 29.05.2017 observing as under 3. Common Cause (A Registered Society) and Ors. vs. Union of India (UOI) and Ors. 4. Bhandari Construction Company vs. Narayan Gopal Upadhye 5. Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors. 6. Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II 7. Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel 8. CIT v. Devendra Kumar Singhal 9. Commissioner of Income Tax-V vs. Indrajit Singh Suri 10. CIT vs. Supertech Diamond Tools Pvt. Ltd., 74 of 2012 11. Commissioner of Income Tax vs. Ashwani Gupta 12. ACIT vs. Govindbhai N. Patel 13. CIT Kanpur vs. Shadiram & Others, 14. Commissioner of Income Tax vs. Bhanwarlal Murwatiya and Ors. 15. CIT vs. Dhrampal Premchand Ltd 16. CIT vs. S.M.Aggarwal Page | 31

viii. Further, in the case of Ganeshmull Bijay Sing Baid (HUF) & Ors Vs. DCIT & Ors (2015) 45 CCH 306 (Kol Trib) (pages 433-443 of PB-5), the Hon‘ble Page | 32

Kolkata ITAT, under similar facts & circumstances as in case of the Assessees herein, held as under:

―This is a case wherein the revenue had completely shifted its focus on the different persons ( i.e the assesses herein) instead of proceeding in the hands of Shri Narendra Kumar Shyamsukha in whose premises the entire seized documents were found. We find lot of force in the arguments of the Learned AR that since the seized documents were not found in the premises of the assesses, there is no onus on them to disprove the claim of Shri Narendra Kumar Shyamsukha that the transactions of long term capital gains listed in the seized documents are bogus.‖(para 2.5.2) ―We find that the presumption u/s 292C of the Act would have to be applied only in the hands of Shri Narendra Kumar Shyamsukha in the facts and circumstances of this case. Strangely ITAT find that no addition has been made in the hands of Shri Narendra Kumar Shyamsukha with regard to the subject mentioned capital gains as unexplained cash credit and the assessments have been completed in his hands by just accepting the commission income offered by him on all these transactions. The Presumption contemplated u/s 292C of the Act is not available against the third parties (ie the assesses herein). We place reliance on the decision of the coordinate bench of this tribunal in the case of Niranjan Kumar Agarwal vs ACIT in ITA No. 558 / Kol /1998 wherein it was held that : ―the books and documents on which the department relied upon solely were not found from the premises of the assessee. No involvement of the assessee with such books has been established in any way like the assessee himself writing the books etc. therefore, there would be no onus on the part of the assessee to disprove the genuineness of recitals in the aforesaid seized books. Burden of proving lies fully with the department to show beyond doubt that the receipts of the two amounts under consideration were actually made by the assessee.‖‖(Para2.5.3) ―We hold that as long as the assesses had purchased and sold the shares through known and accepted procedure, the brokers‘ misdealing with others should not be a criterion to suspect the assessees‘ genuine share transactions and capital gains thereon. Similarly we hold that the assesses have no control over Shri Narendra Kumar Shyamsukha nor is it a matter of their concern in what manner he had maintained his documents and what he records in these documents.‖ (Para 2.5.6) ―Assesses had carried out all their transactions through a recognized medium i.e through a registered share broker and Calcutta Stock Exchange, wherein the price of shares are determined by the market forces and assesses have bought the shares when the price was low through their Demat accounts and duly accounted for it in their respective books and when they found a hike in the price of these shares, they sold them to make a gain and transaction was again done through their Demat account. We don‘t find any abnormality or improbability in such a procedure adopted by the assessees. Thus the allegation that the assesses had Page | 33

laundered their cash for conversion into cheque by raising bogus long term capital gains does not hold water in the facts and circumstances of the case. No evidence is brought on record that the entire transactions had been carried out with some kind of connivance with the registered stock brokers for the introduction of unaccounted money and hence we hold that no addition could be made in these circumstances.‖(Para2.5.7) ―We find that the action u/s 68 of the Act has been taken merely on the basis of the statement of the third party. We find that the assessees have duly proved the identity, creditworthiness and genuineness of the broker from whom the sale proceeds of shares were received by the assesses and hence the resultant long term capital gains thereon cannot be doubted with. Hence there is no scope for making any addition u/s 68 of the Act in the facts and circumstances of the case.‖ (para 2.5.8) ―This issue is squarely covered by the coordinate bench decision of this tribunal in the case of Ashok Kumar Gupta and Mrs Amita Gupta vs DCIT in ITA Nos. 500-502 / Kol / 2013 dated 2.6.2015. The relevant operative portion of the said order is reproduced herein below:- ―6......The presumption available u/s. 292C of the Act relied on by the ld.DR are available against the person in whose possession the books of account other documents etc., were found. The presumption is not available against the third party and transactions are through Demat account. The assessee filed all the documents and these purchases were made by the assessee through account payee cheque have not been doubted by the Revenue. The action u/s. 68 of the Act has been taken on the basis of the statement of the third party. During the course of search at the premises of Shri Narendra Kumar Shyamsukha no iota of evidence was found which could prove/lead to any inference that assessee had paid cash to Shyamsukha or the cheque has been received or paid to the broker in lieu of cash except a statement which is not in the handwriting of the assessee and which contains numerous details. No action has been taken by the Revenue in treating the purchase to be the bogus. Under these facts and circumstances, I am of the view that it is not the case where the addition u/s. 68 of the Act could be made. The assessee duly proved the identity, creditworthiness and genuineness of the broker as well as that assessee received the consideration on the sale of the shares from the broker. I accordingly set aside the order of CIT(A).‖ (para 2.5.9) ―In view of the aforesaid facts and circumstances and respectfully following the aforesaid judicial precedents relied upon, we have no hesitation in directing the Learned AO to delete the addition made u/s 68 of the Act. Accordingly, the grounds raised by all the assesses in this regard are allowed.‖(para 2.5.10) ix. Drawing analogy from the above-cited cases, in the case at hand, the Assessees herein have from the very beginning denied having any nexus/ business connections with R.K. Kedia or Manish Arora or any of the alleged Page | 34

entry or exit providers. The documents relied upon by the Department were not found from the premises of the Assessees. No involvement of the Assessees with such documents/books has been established in any way like the Assessee himself writing the books etc. therefore, there would be no onus on the part of the Assessees to disprove the genuineness of the recitals in the aforesaid seized books. Further, no incriminating material was found in course of the search operations at the premises of the Assessees herein to prove that they had any dealings with the alleged entry or exit providers or to corroborate the entries allegedly recorded in documents seized from premises of third parties. Accordingly, in the absence of any corroborative evidence found during search at the premises of the Assessees, no adverse inference can be drawn against the Assessees merely on the basis of the seized documents found and seized from the premises of third party. As has been held in a number of judicial pronouncements, presumption u/s 132(4A)/292C is available only in the case of the person from whose possession and control the documents are found and it is not available in respect of a third party. Even in the case of such a person from whose possession and control any incriminating document is found, the presumption u/s 132(4A)/292C is a rebuttable one. (see para 5: 2.3.1 in CIT Vs. Anil Khandelwal, (2015) 93 CCH 42 (Del HC): MANU/DE/1326/2015) (pages 444-449 of PB-5).

x. It is earnestly submitted that the documents found at the premises of Ankur Agarwal (which only goes to substantiate the genuineness of the share transactions carried out by the Assessees and does not contain anything incriminating against the Assessees) and Mr. R.K. Kedia, cannot on a standalone basis be considered sufficient evidence to implicate the Assessees involved. And in this regard, attention is once again directed to the judgment of the Delhi H.C. in Anil Khandelwal (supra) wherein it was opined (at para 5) as under:

―It is quite evident that what materially persuaded the AO to make the addition were the extracts from documents - in the form of handwritten ledger entries seized from Shri S.K. Gupta. These mentioned Shri Khandelwal‘s name as against which certain amounts were indicated. The other material was the statement of Shri S.K. Gupta recorded on 13.12.2006. Shri S.K. Gupta was further examined on 5.4.2011. The AO took recourse to the presumption permissible under Section 132 (4A) on the basis of these two statements. It is a matter of the record - duly noted by the CIT (A) as well as ITAT that the three companies or business Page | 35

concerns whose monies were supposed to have been reflected in the handwritten ledgers (Bondwell Insurance Brokers, E-Synergy Infosystems Pvt. Ltd. and Paradigm Advertising) were all concerns in which the assessee‘s family members or relatives were alleged to have been interested. CIT (A) held that in the absence of any corroborative evidence found during the search at the premises of the appellant, no adverse inference can be drawn against the appellant merely on the basis of the seized documents as found and seized from the premises of the third party. As has been held in a number of judicial pronouncements relied on by the appellant and extracted in para 2.2.2 hereinabove, presumption u/s 134(4A)/292C is available only in the case of the person from whose possession and control the documents are found and it is not available in respect of a third party. Even in the case of such a person from whose possession and control any incriminating document is found, the presumption u/s 132(4A)/292C is a rebuttable one. Since in the case of the appellant, no corroborative documents or evidence has been found from the control or possession of the appellant, the legal presumption as incorporated u/s 132(4A)/292C will not be available to the Assessing Officer in the appellant's case. It is well settled in law that the loose papers, diaries and documents cannot possible be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case just on the loose papers and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon'ble Supreme Court in the case of Central Bureau of Investigation vs. V.C.Shukla (1988) 8 SSC 410 and Chuharmal vs. Commissioner of Income Tax (1988) 172 250/138 Taxman 190 (SC).‖

xi. Thus, no books of accounts belonging to the Assessees were found and seized in the premises of the third parties. What was found and relied upon by the Revenue from third party premises in the case at hand, only partook the nature of a document or books of a third party and such documents/books cannot be said to be the books of accounts/documents belonging to the Assessees and cannot, in the absence of corroborative evidence be relied upon to make additions in the hands of the Assessees. As held by the Hon‘ble Courts, presumption u/s 132(4A)/292C would be operable only in the case of the persons from whose possession and control the impugned documents were found i.e. Mr. Ankur Agarwal & R.K. Kedia and in the absence of any corroborative evidence being found during the search at the premises of the Assessees, no adverse inference can be drawn against the Assessees merely on the basis of documents found and seized from premises of third parties.

xii. That having elucidated the settled law with respect to documents found in the premises of a third party, further elaboration is required onto the Law of Page | 36

possession and control u/s 132(4A)/292C, although the same has been established and clarified in the judgments above as well. Various Courts have time and again held that presumption u/s 132(4A)/292C is available only in respect of the person from whose possession the documents/ papers are seized. It cannot be applied against a third party and hence, no addition can be made on the basis of the evidence found with a third party. In this regard, kindly consider the following decisions:

(1) Straptex India (P) Ltd. v.DCIT, [2003] 84 ITD 320 (Mum) (pages 337- 352 of PB-5): In this case there was search at the premises of Shri Niranjan Shah, in which a computer floppy was found. On the basis of the contents of the above floppy, the Revenue held that the assessee had borrowed the money in cash which was denied by the assessee. In support of its contention, the Revenue has relied upon s. 132(4A). Under the given facts, the Hon‘ble Mumbai ITAT held as under (para 7):

―As per s. 132(4A), where any book of account or document is found in the possession and control of any person in the course of search, it is presumed that they belong to such persons. Thus, clearly, the presumption is in respect of the person from whom they were found. The use of the words "to such person" in the said section mean the person from whom the books of account of documents were found. Clause (ii) of s. 132(4A) provides that the contents of such books of account or documents are true. In our opinion, this presumption can also be applied only against the person from whose possession the books of account or the documents were found. Therefore, so far as the case of Mr. Niranjan J. Shah is concerned, the Revenue authorities may presume that the books of account or documents found from his possession are correct. However, while utilising those documents in the case of any other person (i.e. the person other than Mr. Niranjan J. Shah), there cannot be any presumption about the correctness of such books or documents. The Hon‘ble apex Court has considered this matter in the case of CBI vs. V.C. Shukla (supra). In that case, certain diaries, small note book and various loose papers were found and seized from the premises of Mr. S.K. Jain of New Delhi. In those diaries/loose papers, the names of V.C. Shukla and L.K. Advani were found recorded. The CBI charge-sheeted those persons, namely, Shri Shukla and Shri Advani under the Prevention of Corruption Act, 1988. The Hon‘ble apex Court held that the entries in those diaries/loose papers cannot be used against Shri Advani or Shri Shukla but can be used against Shri Jain and may be proved as admission by him. The learned Departmental Representative had contended that the above decision of Hon‘ble apex Court was not applicable to income-tax proceedings because the above decision was based upon the interpretation of s. 34 of the Evidence Act, 1872. He contended that Evidence Act is not applicable to income-tax proceedings. However, Page | 37

we are unable to accept the above contention of the learned Departmental Representative in view of the decision of Hon‘ble apex Court in the case of Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC). In that case, Their Lordships held as under : ".....dismissing the petition and affirming the decision of the High Court, (i) that what was meant by saying that the Evidence Act did not apply to proceedings under the IT Act, 1961, was that the rigour of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so." We find that similar view was taken by the Tribunal, Ahmedabad Bench 'C‘, in the case of Prarthana Construction (P) Ltd. (supra) wherein it was held : "The presumption under the provisions of s. 132(4A) would in any case not be applicable to a third party from whose possession such papers and documents have not been found by the Revenue". In view of above, we have no hesitation to hold that the presumption under s. 132(4A) is applicable only against the person from whose possession books of account or other documents were found and not against any other person. (iii) Whether the presumption under s. 132(4A) is conclusive: In our opinion, the presumption under s. 132(4A) is a rebuttable presumption and not a conclusive one. Certainly, the burden to rebut the presumption is upon the person against whom the presumption is applicable. While taking the above view, we derive support from the decision of Hon‘ble Kerala High Court in the case of ITO vs. T. Abdul Majid (1987) 64 CTR (Ker) 266 : (1988) 169 ITR 440 (Ker).‖ (2) Pradeep Amrut Lal Runwal v. Tax Recovery Officer, [2014] 47 taxmann.com 293 (Pune - Trib.) – wherein it was held:

―5.3: It has been the consistent stand of the assessee that there may be many persons of the name Pradeep Runwal in Pune and there was no specific evidence to suggest that the said notings pertained to the assessee. Hence, it was not justified as to how, in the absence of any other corroborative details, the Assessing Officer has assumed that the amounts reflected the income of the assessee himself, while the assessee has no business dealings of his with Dhariwal Group. The Assessing Officer has not brought on record any evidence to suggest that Dhariwal Group has admitted that the amounts were paid to the assessee. Hence, simply because the name of the assessee is noted on the seized papers does not mean that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence of any transaction between the assessee and Dhariwal Group and in the absence of any corroborative evidence to suggest that the assessee had actually received the said amount, no addition could be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee.

5.4 The presumption u/s 132(4A) is available only in respect of the person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not against the person whose name appears in the seized papers. 5.5 In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Miss Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not justified at all. Therefore, the question of making any addition is not justified in the absence of other corroborative evidence to that effect. (3) ACIT v. Amit D Irshid [IT Appeal No.988 (PN) of 2011, dated 22-4- 2013]: The ITAT, Pune Bench held that presumption u/s. 134(4A) is available only against the person from whose possession the document is found and not against the third person. In the absence of clinching evidence against the third person as stated above, no action could be taken against him. In such a situation, the Assessing Officer was not justified to make addition in question in assessee's case. In view of above, we are of the view that the addition made by the Assessing Officer is not justified and the same is directed to be deleted.‖ (4) Prarthana Construction (P.) Ltd., Vs. DCIT [2001] 118 TAXMAN 112 (AHD.) (MAG.): Held that loose papers and documents seized from premises of third parties and statement recorded at the back of assessee without it being afforded opportunity to interrogate the said documents and without bringing on record any supporting evidence, could not be made the basis for addition undisclosed income in hands of the assessee. The presumption under the provisions of section 132(4A) would not be applicable to a third party from whose possession such papers and documents have not been found by the Revenue. (5) Rama Traders Vs. First ITO (1998) 25 ITO 599 (Pat.) (TM): It was held that no addition could be made on the presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchases made by the assessee. (6) ACIT Vs. Kishore Lal Balwani Rai (2007) 17 SOT 380 (Chd.): Held that though the diary seized enabled the revenue to presume that its contents are true, such presumption is available only against the person to whom it belongs and this is a rebuttable presumption.

(7) ACIT Vs. Prabhat Oil Mills (1995) 52 TTJ 533 (Ahd.): It was held that mere entries in the accounts of a third party were not sufficient to prove that the assessee indulged in such transactions. (8) Sheth Akshay Pushpavadan Vs. DCIT (2010) 130 TTJ 42 (Ahd. UO): Held that presumption u/s 132(4A) is not available when the seized papers are recovered from third party and not from the assessee. (9) Jai Kumar Jain Vs. ACIT (2006) 99 TTJ 744 (Jaipur): Held as under: ―Addition in the instant case was made on the basis of the papers found from ‗A‘ (Third Party). In search these papers were not confronted to the assessee. From the assessment order it was not borne out whether ‗A‘ (Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s 132(4A) in respect of paper not recovered from him. No addition can be made on the basis of documents found from third party in the absence of corroborative evidence. Therefore, the Assessing Officer as well as the Commissioner of Income Tax (A) erred in making the addition on the basis of said papers in the hands of the assessee. Hence, the entire addition made on the basis of papers found from ‗A‘ (Third Party) was to be deleted.‖ (10) Amarjit Singh Bakshi (HUF) Vs. ACIT (2003) 86 ITD 13 (Del): Held that where document in question was not recovered from assessee‘s possession but was recovered from N‘s possession, and assessee was not allowed any opportunity of cross-examination and further N‘s testimony was not found credible at all, it could not be said that there was any iota of evidence to support revenue‘s case that a huge figure over and above figure booked in records and accounts changed hands between parties and therefore, no addition could be made based on such document in hands of the assessee. (11) Sri Suresh Nanda Vs. ACIT, New Delhi (2012) 31 CCH 494 (Del Trib): Held as under: ―ITAT are of the view that the addition based on documents found from third parties cannot be made without confronting the material and allowing the opportunity of cross examination to the assessee. This proposition has been repeatedly laid down by all the Courts. Besides, there is a presumption in law that the person from whom the document is found is the owner of the document. The Department should discharge their burden before seeking to tax the assessee on the basis of documents found from Dr. M.V. Rao or shri Mohan sambhaji Jagtap. Since the assessee has not been provided necessary material including their statements, opportunity of cross examination and hearing based thereon, interest of justice will be served if the issues about income from commission/ business of dealings in arms are decided afresh by AO in the light of these observations. These grounds raised by the assessee in A.Yrs. 2002- 03 & 2003-04 are allowed for statistical purposes.‖ (para 11) xiii. Attention is further craved to the judgment of the Hon‘ble Mumbai ITAT in Anil Mahavir Gupta v. ACIT, Cent Cir, 45 Mumbai, [2017] 82 taxmann.com 122 (Mumbai - Trib.) (pages 450-480 of PB-5) wherein it was held that there Page | 40

being no material to connect the assessee with the loose papers found from premises of assessee's employee, no addition could be made on mere inference that contents of said papers reflected unaccounted transactions of assessee. Relevant excerpts are as below: ―11.1 The Assessing Officer has made an addition of Rs.30.00 lacs on the basis of a loose paper being page 13 of Annexure A-4 seized from the residence of one Mr. Bharat G. Shah, an employee of the assessee. The Assessing Officer notes that in the course of search, said Mr. Bharat G. Shah stated that such loose papers were given to him by the assessee to be kept with him. As per the Assessing Officer, the contents of the relevant seized material, which has been reproduced in para-13 of the assessment order, indicates that one Mr. Suresh Agarwal paid the assessee Rs.30,00,000/- in March, 2006 in two instalments of Rs.15,00,000/- each. It is further noticed by the Assessing Officer that though there was an account of Mr. Suresh Agarwal in the account books of asessee's proprietary concern, M/s. Gupta Steel Corporation, but the aforesaid amount was not accounted for. For the said reasons, the Assessing Officer treated the sum of Rs.30,00,000/- as unaccounted income of the assessee. 11.2 Before the CIT(A), assessee reiterated that the paper was found and seized from Mr. Bharat G. Shah and not from the assessee. Further, there was no material to say that such seized material related to the assessee for any of his activities. The assessee also pointed out that such loose papers were printed account papers and on top of it is written "Trial Data" and that assessee had no knowledge as to who has written or printed the same. 11.3 The CIT(A) has considered the submissions put forth by the assessee and found that there was no material brought on record to establish that the seized papers belonged to the assessee. The CIT(A) also found that the seized documents do not indicate who is the recipient of the amounts mentioned and in what connection the money was paid. According to the CIT(A), merely because there is an account appearing in the account books of the assessee in the name of Mr. Suresh Agarwal, it would not lead to an assumption that the seized document reflect transactions between assessee and Mr. Suresh Agarwal. In fact, the CIT(A) infers that the document reflects transaction between Mr. Bharat G. Shah and Mr. Suresh Agarwal, as the document was found in the possession of Bharat G. Shah. Under these circumstances, CIT(A) has deleted the addition in the hands of the assessee. 11.4 Before us, the ld. Departmental Representative pointed out that the employee from whom the impugned loose papers were found is a trusted employee of the assessee and the notings in the seized paper showed that it pertain to the assessee. It was, therefore, contended that the addition has been wrongly deleted by the CIT(A). 11.5 On the other hand, the ld. Representative for the assessee pointed out that the CIT(A) was justified in deleting the addition as there was no material to link the said seized document with the transactions undertaken by the assessee with Mr. Suresh Agarwal; which were duly accounted for in the account books. Page | 41

11.6 We have carefully considered the rival submissions. Quite clearly the seized paper in question was found from the premises of Mr. Bharat G. Shah, who is an employee of the assessee. Therefore, the primary onus was on Mr. Bharat G. Shah to explain the contents of the document so as to justify the inference of the Assessing Officer that it reflected unaccounted transactions of the assessee, and, such an onus does not appear to have been discharged, having regard to the material on record. Even otherwise, we do not find any infirmity in the conclusion of the CIT(A) that there is no material to connect the assessee with such loose papers. Therefore, under these circumstances, we find no reasons to interfere with the conclusion of the CIT(A) in deleting the impugned addition. The order of CIT(A) is hereby affirmed and accordingly Revenue fails on Grounds of appeal Nos.9 & 10 also.‖

xiv. In the instant case, as discussed supra, the pen-drive seized from the residential premises of employee of BSL, Sri Ankur Agarwal, does not contain anything incriminating against the Assessees herein. The pen-drive only goes to substantiate the regular purchase and sale transactions in shares of the Assessees herein for a period of 2.5 months. The same does not contain any entry pertaining to receipt/payment of cash/ commission by the Assessees to prove that the transactions in shares were bogus/ sham. Further, with regard to the names of the alleged entry providers mentioned therein, as stated earlier, since the said pen drive belongs to Sri Ankur Agarwal and was seized from his possession & control, presumption u/s 132(4A)/292C is operable only against Sri Ankur Agarwal. The Assessees herein are neither aware of the reason why names of the alleged entry operators feature in the said pen-drive nor are they concerned with the entries recorded therein. Further, the alleged statement made against the Assessees by Sri Ankur Agarwal was retracted by him, which as per decisions cited earlier, neutralizes his value as a witness.

xv. Reference is further craved to the decision of the Hon‘ble Delhi Tribunal in DCIT v. Bhola Nath Radha Krishna (ITA No.5149/Del/2012) (pages 309-315 of PB-5) wherein the coordinate Bench of the Tribunal has opined as under: 3. At the time of hearing before us, it was stated by the learned CIT-DR that during the course of search at the premises of Shri Sohan Raj Mehta, who is a carry and forward agent of RMD Group of Pan Masala and Gutkha products, certain chits were found. From those chits, it was ascertained that Shri Sohan Raj Mehta made cash payment to the extent of `9 crores to the assessee firm for and on behalf of RMD Group. That the assessee is a regular supplier of Supari to RMD Group and Shri Sohan Raj Mehta was the C&F agent for Karnataka region of the RMD Group. Shri Sohan Raj Mehta, in his statement recorded during the course of search at his premises, admitted to have made cash payment to the assessee for and on behalf of RMD Group. …….. Page | 42

documents are found in the course of search but not against a THIRD PARTY. …….. No corroborative evidence was found while conducting a consequential search on the appellant‘s premises. 6.3 The alleged transactions noted on the loose slips were not handwritten by the appellant nor have his initials or signatures so as to suggest his involvement in the same. Moreover, the A.O. while using the statements of the third party should have allowed the appellant to cross examine such third party in order to use the same as evidence. This was not done despite request from appellant for cross examination. As has been held in the case of Kishin Chand Chela Ram (supra) by the Hon‘ble Apex Court that any addition made on the basis of statement by a Third Party without affording an opportunity for rebuttal or cross examination to the assessee is perverse. It was therefore the obligation of the A.O. to allow the appellant to cross examine Sh. Sohan Raj Mehta and head of RMD Group in the interest of natural justice before embarking on a final view in this matter. In Elite Developers Vs. DCIT (2000) 73 ITR 379 (Nag) it was held that where the seized documents evidencing receipt of money by the assessee were not speaking documents as they were ambiguous and did not contain any narration or description about different figures noted thereon and the department having failed to bring on record any material or evidence to corroborate allegations regarding receipt of money, then the presumption on the basis of the documents could not be raised. In ACIT v/s Prabhat Oil Mills (1995) 52 TTJ (Ahd) it has been held that mere entries in the account to third parties were not sufficient to prove that the assessee indulged in such transactions. 6.4 The appellant had alleged that the addition has been made merely on the basis of the statements of Shri Mehta who had retracted his own statement subsequently. Accordingly, a letter was sent to the A.O. to clarify the issue. Even on a request made by the appellant (as is evident from the assessment order) a copy thereof was not provided to the appellant and this matter (of retraction) was not brought on record. The A.O. has sent here reply stating and admitting the fact that original statement of Shri Mehta was retracted by him but subsequently re- retracted the statement confirming the original. The grounds for re- retraction was that the obligations and the sum of money offered by RMD Group to Shri Mehta were not honoured. Since the same was not paid to him, he had chosen to withdraw his retraction. To this the appellant‘s A.R. has vehemently stated that frequent retractions of statement by Shri Mehta undermines the credibility of its genuineness and such doubtful statement given and retracted and again withdrawn on flimsy grounds of money not been paid by RMD Group invalidates such statement ab-initio. I agree with the appellant that keeping in mind the principles of natural justice the A.O. should have at least provided the Retraction of the original statement to the appellant at the assessment stage for rebuttal. Frequent retraction has definitely undermined the credibility of statement and appears motivated….‖ 7. After considering the arguments of both the sides and the facts of the case, we do not find any infirmity in the above order of learned Page | 44

CIT(A). The addition has been made on the basis of certain chits found from Shri Sohan Raj Mehta and his statement. Admittedly, the assessee has no dealing with Shri Sohan Raj Mehta. The assessee is supplying goods (Supari) to RMD Group who are manufacturing Gutkha. Shri Sohan Raj Mehta is C&F agent for Karnataka region of RMD Group. The search had taken place at the assessee‘s business premises as well as at the business premises of RMD Group. No evidence of any unrecorded sale by the assessee or unrecorded purchase by RMD Group was found. Thus, when, despite search at the premises of seller and buyer, no evidence of any unrecorded sale or purchase is found, in our opinion, merely because in the chits found at the premises of some third party with whom the assessee has no business dealing, it cannot be presumed that the assessee is making sales outside books. Moreover, as per chits found from Shri Sohan Raj Mehta, the payment made to the assessee is only `9 lakhs and not `9 crores. The department has also relied upon the statement of Shri Sohan Raj Mehta. It was pointed out by the learned counsel that Shri Sohan Raj Mehta retracted his statement. However, as per Revenue, Shri Sohan Raj Mehta has retracted his retraction affirming the original statement. On these facts, the learned CIT(A) has come to the conclusion that the statement of Shri Sohan Raj Mehta cannot be relied upon because he is frequently retracting his statement. Moreover, a statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. Now, we find that during the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. 8……. It is only in the remand report he has mentioned that Shri Sohan Raj Mehta has retracted his retraction also. Considering the totality of above facts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained.‖ [emphasis supplied] Similar view was taken by the Hon‘ble ITAT, Delhi in the case of Yash Pal Narendra Kumar, New Delhi Vs. Department of Income Tax, ITA Nos. 5340, 5341 & 5342/D/2012 (ITAT, New Delhi). xvi. That, the principles enunciated in the aforesaid cases may thus be summarized as under:  Mere entries in the accounts of third parties are not sufficient to prove that the assessee indulged in such transactions. Presumption available under section 132(4A)/292C can be drawn  against the person from whose possession or control books of Page | 45

account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against a third party. The presumption u/s. 132(4A)/292C can be used only against the  person from whose premises the documents are found and not against the person whose name appears in the seized papers.  Based on the incriminating material found from third party search but not belonging to the assessee, this presumption will not be applicable unless corroborated by other evidence  Statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. Any addition made on the basis of statement by a Third Party  without affording an opportunity for rebuttal or cross examination to the assessee is perverse. Frequent retractions of statement (i.e. retraction following by re-  retraction) by the deponent undermines the credibility of its genuineness.

xvii. In conclusion, applying the above enunciated principles to the facts of the present case it submitted that:  Mere seizure of documents/hard soft data/ pen-drive from the premises of third party (Sri. R.K. Kedia) / personal residence of employee of BSL (Sri Ankur Agarwal) would not conclude the issue against the Assessees herein since presumption u/s 132(4A)/292C would be operable only against the persons from whose premises the said documents/pen-drive were seized and not against the Assessees. There is no independent evidence to link the seized documents found  in third party premises with any incriminating material found in course of search operations at the premises of the Assessees. Hence, entries in documents seized from third party premises would not be sufficient to prove that the Assessee indulged in such transactions.  Statements of third parties (R.K. Kedia, Manish Arora, alleged entry & exit providers, directors of companies etc.) recorded u/s 132(4)/133A cannot be used against the Assessees since opportunity of cross examination was not allowed to the Assessees, which makes the order so passed a nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessees were adversely affected.  Frequent retraction of statement by Sri R.K. Kedia (retraction followed by re-retraction) undermines the credibility of its genuineness and neutralizes his value as a witness. No reliance can

be placed on the testimony of such a person indulging in double speaking and taking contradictory stands. Statement of Sri Ankur Agarwal which was subsequently retracted  does not have any evidentiary/referral value insofar as the Assessees are concerned. In case the Department still intended to rely on such retracted statement, it was duty bound to allow the Assessees an opportunity of cross examining the said witness before using his original statement against the Assessees, which in the present case was clearly not done.

i. In making the impugned additions in the hands of the Assesses, the A.O has also sought to seek support from the investigations carried out by S.E.B.I in a few listed companies on the basis of common trading pattern and identical developments like stock splits, preferential allotments, insignificant economic activity and high stock prices. In this connection, the A.O has primarily relied upon the Ad Interim Ex Parte Orders dated 19.12.2014 passed by the S.E.B.I in the cases of M/s. First Financial Services Ltd. & M/s. Radford Global Ltd. and alleged as under: ―….that S.E.B.I in the said two cases had found that there had been manipulative trading in shares of these two scripts. Based on huge rise in traded price and volume of these two scripts, compared to the financials of these two companies, preliminary investigations of S.E.B.I have revealed that there were certain parties related to these entities who helped in consistent rigging in the shares of these two scripts and many related parties with no creditworthiness have helped many preferential allottees (beneficiaries) reaping bogus LTCG to help them evading their tax liabilities by purchasing shares from them at manipulatively elevated price and providing them profitable exit. The S.E.B.I, in its orders, has specifically mentioned the names of Singal family members viz. Sri Neeraj Singal, Sh B.B. Singal, Smt. Uma Singal and Smt. Ritu Singal and observed that these persons have been beneficiaries of dubious trading in shares of these scripts such that after preferential allotment of shares of these companies to them, the Singal family members have been provided profitable exit once the prices of these shares rose suspiciously beyond a threshold. In the order of First Financial Services Ltd., it was also highlighted by S.E.B.I that after preferential allotment, these Singal family members indirectly received the funds back from First Financial Services Ltd. in the name of investment by First Financial Services Ltd. or otherwise, which prima Page | 47

facie indicates that money received through preferential allotment was again routed to the same source i.e. Singal family. The S.E.B.I also observed that these members of Singal family have been preferential allottees in such type of companies which have a history similar to that of First Financial Services Ltd., implying thereby that these Singal Family members have been regularly investing in companies for namesake and the money invested by them in these companies were being returned to them, indirectly.‖ ii. Vide the said orders, the S.E.B.I retrained the Assesses herein from trading in stock exchange stating as under: ―In order to protect the interest of the investors and the integrity of the securities market, I, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11(4) and section 11B of S.E.B.I Act, 1992, pending inquiry/investigation and passing of final order in the matter, hereby restrain the following persons/entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions.‖ The list includes Sri Brij Bhushan Singal, Sri Neeraj Singal and Uma Singal. iii. In this connection, it may be noted that similar Ad-Interim Ex-parte Orders were passed by the S.E.B.I in respect of the scripts of Mishka Finance & Trading Ltd. (formerly known as Pyramid Trading and Finance Ltd.) dated 17.04.2015 and Pine Animation Ltd. dated 08.05.2015. However, the said orders were only in the nature of interim orders based on preliminary investigations carried out by the S.E.B.I pending inquiry/investigation and passing of final order by the S.E.B.I. The Hon‘ble Gujarat High Court in the case of S.E.B.I v. Alka Synthetics, [1999] 19 SCL 460 (GUJ.) (at paras 16 & 18) (pages 481-501 of PB-5) has opined on the nature of Ad Interim Ex-parte Orders, being merely preventive checks that are placed on certain assessees upon a mere prima facie opinion pending final decision of S.E.B.I: ―16. In our considered opinion, there is no question of any punishment or penalty involved in the measures as has been decided to be taken by S.E.B.I, for the simple reason that the tenor of the order clearly shows that it is only an interim measure to preserve the main subject-matter. In absence of such measures, if the sale proceeds are allowed to be taken away by the concerned parties despite the manipulation and rigging found as a result of investigation, S.E.B.I will simply be rendered to be a helpless spectator later on. In our opinion, the measures taken by the S.E.B.I neither entail any penal consequence as such or a punishment nor it can be said to be a forfeiture of the money. It is only a case of withholding money for certain period till the final decision is taken. Withholding of such money temporarily for certain period or to transfer any amount in the Investors Protection Fund, as proposed and decided by S.E.B.I, cannot be said to be the penalty as such. May be Page | 48

that, earning windfall profit is not prohibited under any law and as observed by the learned single Judge, even a treasure finder is entitled to retain the same or share with the occupier of sits from where it is recovered for himself and further that even if the State wants to acquire the same, it has to acquire the same as per the provisions of Treasure Trove Act, but that does not mean that any profit, which is earned by the manipulators of the Market, should be allowed to be taken away during the pendency of an inquiry as to whether it was a case of manipulation or rigging of the Market or not. On the contrary, we find that it is only to prevent and put a check over the manipulation and rigging of the Market when it has been noticed that in the course of trading activity of the share fraudulent or manipulative practices have been adopted. 18.The very nature of the orders passed by the S.E.B.I, which were impugned by the respondents before the learned single Judge, shows that the orders were of interim nature, no finality is attached to the action taken by S.E.B.I at this stage and hence it cannot be said to be a case in which the money stood impounded or forfeited finally. In this view of the matter, the orders cannot be said to be the orders so as to take away any earned benefit for all times to come or an action to the prejudice of any party entailing any penal consequences for all times to come.‖ iv. The logic/view advanced by the Hon‘ble High Court in the aforesaid judgment further stands endorsed by the fact that in the instant case, the S.E.B.I after conducting a detailed investigation into the entire scheme alleged in the cases of the aforesaid four scrips, connection amongst the debarred entities, funds used for manipulation of prices etc. came to a conclusion that no adverse findings against the entities as specified in the said orders (including the four Assessees herein) were found and accordingly, the Interim Orders/ Confirmatory orders against the said entities were revoked. Therefore, pursuant to the interim orders, the S.E.B.I after conducting a detailed investigation into the respective scrips came to a definite conclusion that the Assessees herein were not involved in the alleged scam w.r.t the impugned scrips and gave a clean chit to the Assessees by passing Final Orders in favour of the Assessees by revoking the Interim Orders. The allegations in the Interim Orders vis-à-vis the findings in the Final Orders passed by the S.E.B.I w.r.t the impugned scrips may be tabulated as under: Table 27: Nam Ex-parte Interim Order of S.E.B.I Final Order of S.E.B.I e of Date Allegations Da Findings Scri of te p Orde of r Or de Page | 49

r Radf 19th As summarized in paras 2, 20 Para 10, 11, page 10 of ord Dec 3 &4 of the Final Order dt. th Final Order: Glob 20.09.2017: Se 2014 ―10. Considering the fact al p ―2. Upon preliminary that there are no adverse Ltd. 20 inquiry, S.E.B.I prima facie findings against the 17 observed the following: aforementioned 82 entities (which includes the  Firstly, shares were assessees herein) with allotted on preferential respect to their role in the basis to entities manipulation of the scrip of connected/ related Radford, I am of the directly or indirectly to considered view that the Radford.  Then, just prior to directions issued against expiry of lock-in of them vide interim orders shares issued on dated December 19, 2014 preferential basis, and November 9, 2015 Radford announced a which were confirmed vide stock-split to make a Orders dated October passage for preferential 12,2015, March 18, 2016 allottees to exit on expiry of the lock-in and August 26, 2016 are since the stock split liable to be revoked. would reduce the per share price and 11. In view of the foregoing, increase liquidity. I, in exercise of the powers  After the expiry of lock- conferred upon me under in, it was noted that Section 19 of the Securities after the stock split, the and Exchange Board of preferential allottees India, Act, 1992 read with sold the shares to entities connected/ Sections 11, 11(4) and 11B related, directly, to of the S.E.B.I Act, hereby Radford revoke the Confirmatory Group/Suspected Orders dated October Entities, thereby raking 12,2015, March 18, 2016 in huge profits. and August 26, 2016 qua  It was also noted that aforesaid 82 entities the price movement in the scrip was not (paragraph 9 above) with backed by immediate effect.‖ fundamentals of the company and its financials. 3. It was prima facie found that Radford Group & Suspected Entities and allottees used the securities market system to artificially increase volume and price of scrip Page | 50

for making illegal gains to convert ill-gotten gains into genuine one. 4. Accordingly, S.E.B.I passed Ad interim ex-parte orders dt. December 19, 2014 & November 9, 2015 (interim orders) and restrained 108 and 15 entities respectively from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions.

First 19th Para 24, page 18 of the Ex- 2nd Final order: Fina Dec parte Order: Ap Para 74, page 74: ncia 2014 ril ―24. From the fund l 20 ―74. I find that during the statement analysis it is Serv 18 course of proceedings, observed that funds ices Marsh and Vision were received as proceeds of Ltd. represented jointly and Brij preferential allotment were Bhushan Singal, Uma immediately transferred to Singal and Neeraj Singal various entities on the were jointly represented, as same day or next day and part of two factions of the was never retained by the family. It is seen from the company for expansion of SCN that these entities its business or execute its have been implicated future plans as envisaged because of receipt of funds in the special resolutions by Marsh and Vision from passed under section FFSL and Aarti Singal‘s 81(1A) of the Companies association as director in Act, 1956. The whole Bhushan Power and Steel system of fund transfer Ltd. which transferred Rs. looks as if the transferor 6.50 crores in March 2012 and transferee are pre- to Ranisati Dealers, which determined and funds are was a major buyer or exit being routed through provider to the preferential various channels before allottees. The preferential reading the end users who allottees have adequately are basically the buyers in explained as to how they Patch-2 that provided exit are unconnected to to the preferential Ranisati and how there was allottees. It is also Page | 51

pertinent to mention that a settlement family-wise several preferential with respect to Bhushan allottees such as those Power & Steel Ltd. belonging to the Singal Likewise, with respect to family, namely Brij Marsh and Vision, it has Bhushan Singal, Neeraj been brought out that the Singal, Ritu Singal and fund transfer by FFSL was Uma Singal (who were equity investment and not allotted 7,50,000 shares otherwise. In view of this, I by First Financial at a cost find that none of these price of Rs. 1.5 crore) entities can be proceeded indirectly received the against, namely, Brij funds back from First Bhushan Singal, Uma Financial in the name of Singal, Neeraj Singal, investment by First Marsh Steel Ltd. and Vision Financial or otherwise. Steel Ltd.‖ One such instance (mentioned in the above Table) is where Rs. 1.5 Paras 90 & 91, pages 83 & crore have been 84: transferred to Marsh Steel Trading Ltd. and Vision ―90. In the ultimate Steel Ltd for the purpose of analysis, I am driven to the investment as indicated in conclusion that such Annual Report of F.Y. fraudulent schemes are 2011-12 whose promoters conceived and executed by are Singal family. Thus the a set of core entities which above events prima facie are connected and which indicate that money are bound by the common received through objective of making preferential allotment were wrongful gains by again routed to the same manipulating the market source i.e. Singal family…‖ and undermining its integrity. In this process, certain entities are lured into the artifice with the promise of quick returns but their roles do not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. The whole scenario covering various entities with different motives makes it imperative for the regulator to step in and secure the market Page | 52

place by weeding out those entities which have misused the securities market and meting out deterrent penalties on such entities. 91. The limitations in an investigation of this magnitude was realized and the S.E.B.I Board had decided in December 2016 to restrict its scope of actions to those entities that are connected to the company involved in the price manipulation i.e. LTP contributors and the company and its directors if connection or relationship is established with the market manipulation. Keeping this background in mind, on a review of the entire proceedings beginning from the SCN, the replies and submissions of the entities and the stage at which the entities stand today, I am inclined to continue with the debarment and restraint orders against certain entities, including the company and its noticee directors and certain other entities who are observed to be liable in relevant parts of this order, based on their connection with the company; or market manipulations; or their role as conduits in fund transfer to the market manipulators. Accordingly, I am inclined to pass orders against various notices as shown under the head

‗Directions‘.‖ The said list includes names of 19 Noticees but does not include the names of the Assessees herein.

Further, at Para 93, page 86: ―93. As against the remaining noticees, the interim directions issued vide interim orders dated December 19, 2014 and August 11, 2015 and confirmed vide confirmatory orders dated April 20, 2015, June 2, 2016, June 14, 2016 and August 25, 2016 shall stand revoked with immediate effect.‖ (this includes the names of the Bansal Family Members)

Mis 17th As summarised in paras 2 5th Paras 6 & 7 of the Final hka April & 3 of the final order: Oc Order: Fina 2015 t ―2. Upon preliminary ―6. Pursuant to the interim nce 20 inquiry, S.E.B.I prima facie order, S.E.B.I conducted a and 17 observed the following: detailed investigation of the Trad entire scheme employed in ing a) Mishka made a the instant matter, Ltd. preferential allotment of connection amongst the (for 7,93700 shares of Rs. debarred entities, funds 10 each at a premium of merl used for the price Rs. 75 per share to 46 y manipulation of the scrip of entities during 2012-13. kno Once the shares were Mishka etc., so as to wn allotted/transferred to ascertain the violation of as the preferential securities laws. Pyra allottees/promoter mid related group, certain 7. Upon completion of entities started moving Trad investigation by S.E.B.I, it the price of the scrip ing is noted that there are no upwards by trading in & adverse findings against the very low volumes. Fina 104 entities mentioned at b) After the release of Page | 54

nce compulsory lock-in S. No. 1-104 in Table No. 2 period of 1 year, the Ltd.) with respect to their role in Preferential Allottees the price manipulation/ and the Promoter prima facie violation for related entities were which Interim Order dated provided exit at a high April 17, 2015 was passed price by certain entities and subsequently allegedly related/connected confirmed in the scrips of amongst themselves and Mishka, warranting with Mishka (―Exit continuation of action Providers‖); under Sections 11B and c) By virtue of the same, it 11(4) of the S.E.B.I Act for was alleged that the the violation of provisions company and persons in of S.E.B.I Act and PFUTP charge of its affairs created preferential Regulations etc. Further allotment of shares as a with respect to 9 entities at mode to provide S. No. 105 to 113 in Table fictitious long term 2, no adverse material was capital gains (―LTCG‖) to found in the Investigation its Preferential Allotttees Report with respect to and Promoter related entities so as to convert prima facie violations found their unaccounted against them in Interim income into accounted Order dated April 17, 2015 one; its (which was subsequently Promoters/Directors confirmed) but the Exit Providers, Investigation Report has Preferential Allottees brought out violation and the Promoter related entities relating to disclosure under artificially increased the S.E.B.I (Prohibition of volume and price of the Insider Trading) scrip and misused Regulations, 1992 and market system for S.E.B.I (Substantial making illegal gains and Acquisition of Shares and to convert ill-gotten Takeovers) Regulations, gains into genuine one to avail LTCG. 2011 warranting 3. …..S.E.B.I passed Ad Adjudication Proceedings. interim ex-parte order 8. Considering the fact that dated April 17, 2015 there are no adverse (interim order) and findings against the 104 restrained the following entities mentioned at S. No. 129 entities including 1-104 in Table No. 2 with Mishka and its Promoters respect to their role in the and Directors from price manipulation/ prima accessing the securities facie violations for which market and further Interim Order dated April prohibited them from 17, 2015 was passed and buying, selling or dealing subsequently confirmed in in securities, either the scrip of Mishka directly or indirectly, in Page | 55

any manner whatsoever, warranting continuation of till further directions.‖ action under Sections 11B and 11(4) of the S.E.B.I Act, I am of the considered view that the directions issued against them vide interim order dated April 17, 2015 which were confirmed vide Orders dated October 12,2015, April 13, 2016, July 05, 2016 and August 26, 2016 are liable to be revoked. Further with regard to 9 entities at S. No. 105-113 in Table No. 2, no adverse material was found in the Investigation Report with respect to prima facie violations found against them in Interim Order dated April 17, 2015 (which was subsequently confirmed) but the Investigation Report has brought out violation relating to disclosure under S.E.B.I (Prohibition of Insider Trading) Regulations, 1992 and S.E.B.I (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 warranting Adjudication Proceedings. Therefore directions issued against them vide interim order dated April 17, 2015 which were subsequently confirmed are also liable to be revoked.‖

Pine 8th As summarized in paras 19 Paras 8, 9, 10, pages 7 to Ani May 2& 3 of the Final Order: th 11 of final order: mati 2015 Se on p Ltd. 20 ―2. Upon preliminary ―8. Pursuant to the interim Page | 56

inquiry, S.E.B.I prima facie 17 order, S.E.B.I conducted a observed the following: detailed investigation of the entire scheme employed in  PAL made preferential the instant matter, issue of equity shares connection amongst the of around Rs. 24.7 debarred entities, funds crores to 92 entities used for the price during 2012-13. These manipulation of the scrip of shares were locked-in for a period of one PAL, etc. so as to ascertain year; the violation of securities  After the release of laws. compulsory lock-in- period, the Preferential 9. Upon completion of Allottees and the investigation by S.E.B.I, the Promoter related following are noted as entities (i.e. entities to regards 114 entities who whom PAL‘s Promoters were identified as transferred their shares in physical Preferential Allottees, Exit form) were provided Providers and LTP exit at a high price by Contributors vide the the entities alleged interim order: related /connected amongst themselves  S.E.B.I‘s investigation did and with PAL (―Exit not find any adverse Providers‖). evidence against them to  By virtue of the same, show any connection/ it was alleged that the nexus with PAL or its company and persons Promoters/Directors or in charge of its affairs Promoter related entities created preferential or any role in price allotment of shares as manipulation volume a mode to provide manipulation in the scrip fictitious long term of PAL. Hence, violation capital gains (―LTCG‖) of provisions of S.E.B.I to its Preferential Act, SCRA, PFUTP Allottees and Promoter Regulations, etc. was not related entities so as to observed in respect of the convert their following 114 entities. unaccounted income (name of Brij Bhushan into accounted one; its Singal included in this Promoters/Directors list Exit Providers, 10. Considering the fact that Preferential Allottees there are no adverse and the Promoter findings against the related entities aforementioned 114 artificially increased entities with respect to the volume and price their role in the of scrip and misused manipulation of the securities market scrip of PAL, I am of the system for making considered view that the illegal gains and to directions issued against convert ill-gotten gains them vide interim order into genuine one to dated May 08, 2015 avail LTCG. Page | 57

v. Copies of the Final Orders passed by the S.E.B.I in connection with the aforesaid four scrips are enclosed at pages 302-419 of PB-6. Therefore, although the S.E.B.I found that the prices of the aforesaid scrips were manipulated for providing fictitious long term capital gains (―LTCG‖) to Preferential Allottees and Promoter related entities in certain cases so as to Page | 58

convert their unaccounted income into accounted one, the S.E.B.I after conducting a detailed investigation into the entire scheme employed in the respective scrips came to a conclusion that the Assessees herein along with certain other noticees, despite being preferential allottees in the shares of the said companies, neither had any connection/ nexus with the said companies or their Promoters/Directors or Promoter related entities nor had any role in price manipulation volume manipulation in the scrips of the said companies. The S.E.B.I categorically observed that such fraudulent schemes are conceived and executed by a set of core entities which are connected and which are bound by the common objective of making wrongful gains by manipulating the market and undermining its integrity. In this process, certain entities are lured into the artifice with the promise of quick returns but their roles do not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. Clearly, after detailed investigation by the S.E.B.I, the Assessees herein (i.e. the Bansal Family members) were not found to be part of any such fraudulent scheme in the shares of the said companies and accordingly, the interim orders passed against them were subsequently revoked by the S.E.B.I. The said final orders passed by the S.E.B.I in favour of the Assessees herein buttress/reinforce their contention with respect to the genuineness of the impugned transaction carried out by them and hold immense persuasive value onto the Assessees‘ case before this Hon‘ble ITAT. The said argument is further fortified by the fact that the Revenue Authorities have themselves placed strong reliance on the prima facie allegations made in the Interim Orders of the S.E.B.I.

vi. In this connection, it is pertinent to note that the S.E.B.I Act of 1992 was enacted to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. The said Act, also gives S.E.B.I power to draft regulations in order to regulate the market and discharge its functions and duties. One such power of S.E.B.I is that it has the power to regulate insider trading. There is separation of powers between Government and S.E.B.I and there is nil or very little interference by the Parliament in the regulations implemented by the S.E.B.I. In the case of S.E.B.I, the Government retains the power to decide the organizational structure (to appoint the top management of S.E.B.I) and the

regulation is operationalised within S.E.B.I's power. With the help of Regulations, Circulars and Guidelines, S.E.B.I has wide powers and freedom to decide how the regulation is to be operationalised effectively.

vii. In order to enforce the regulations with proper powers, there must be broad enabling legislation(s). The legislation gives the regulator powers to issue regulations and directions for the sector, and to supervise based on the regulations. Further, the regulator must be empowered to conduct investigation into misdemeanors, adjudicate and have the authority to impose fines and other penalties if wrong-doing is established. Finally, the credibility of the regulatory process of the regulator is enforced when there are in place provisions for appeals, speedy processes by Courts that have specialized domain knowledge which can review regulatory actions, as in the case of S.E.B.I, we have the SAT.

viii. Coming to the facts of the case, the final orders passed by the S.E.B.I in the favour of the Assessees – are both binding onto the Assessees and shall hold precedential value, for the said Orders passed by the Adjudicating Officers' of S.E.B.I are quasi judicial orders where the adjudicating authority is required to consider the rights and obligations of charged persons and impose penalty, if found guilty - See Para 4 of RM Shares Trading v. S.E.B.I, [2014] 49 taxmann.com 369 (SAT - Mumbai) (pages 502-504 of PB-5) wherein the said case has also opined on precedential nature of the said Orders in the manner as follows: ―4. In our opinion, refusal on the part of the Adjudicating Officer to consider decision of another Adjudicating Officer of S.E.B.I is highly improper............. Object of conferring penal powers upon the Adjudicating Officer is to ensure that the market players who violate the provisions of S.E.B.I Act and the Rules and Regulations made there-under are brought to book and punished if found guilty, so that the order acts as a deterrent to other market players and carry on their trades in securities market in accordance with law. In an Adjudication proceedings, if a party relies on adjudication order passed in an another case, then, judicial discipline demands that the Adjudicating Officer considers that order and thereafter passes an order either to follow or distinguish the earlier order or disagree with the order by recording reasons as to how that order is erroneous and ought not to be followed. In the present case, the Adjudicating Officer has flatly declined to consider the order passed by another Adjudicating Officer on ground that such an order does not have binding effect and that he would prefer to Page | 60

form an independent view. If every Adjudicating Officer of S.E.B.I passes independent order without bothering to consider decision taken by another Adjudicating Officer of S.E.B.I in similar set of circumstances, then there would be complete chaos and total lawlessness. S.E.B.I being market regulator of the securities market, Adjudicating Officers' of S.E.B.I cannot afford to pass adjudication orders in each case depending upon the whims and fancies of each Adjudicating Officer. Unless facts and circumstances set out in an order passed by Adjudicating Officer are materially different from the facts and circumstances of the case in hand, it would be just and proper for the Adjudicating Officer to follow the earlier order so that there is uniformity in the quasi judicial orders passed by the Adjudicating Officers' of S.E.B.I.‖

ix. Thus, although the Hon‘ble I.T.A.T operates as a separate Tribunal dealing within the purview of Taxation Laws, the fact that S.E.B.I (which defines and drafts its own regulatory mechanism) – has provided the Assessees with a clean chit w.r.t certain scrips vide its Orders u/s 11 and 11B of the Act (r/w the respective Rules), would if not binding, hold immense persuasive value onto the Assessees‘ case before the ITAT. This is because, although, no comparison can be made between a fiscal statute like the Income Tax Act, that is penal in nature, and the S.E.B.I Act that is regulatory in nature, the fact that the Order(s) so passed u/the S.E.B.I Act – are of a far more specialized in nature, since the said Act functions as a comprehensive legislation which was enacted to give effect to the reformed economic policy, by vesting S.E.B.I with the statutory powers to regulate the securities market with the object of ensuring investors' protection, and the orderly and healthy growth of the said securities market (See para 15 of S.E.B.I v. Alka Synthetics, [1999] 19 SCL 460 (GUJ.)). Accordingly, the final orders of the S.E.B.I with respect to the impugned scrips in favour of the Assessees herein reinforce the Assessees‘ contention regarding the genuineness of the transactions in shares carried out during the years under consideration

of bank accounts was allegedly suggestive of providing bogus accommodation LTCG entries. In this regard, it is submitted that the A.O was not justified in drawing any adverse inference against the Assesses herein on the basis of enquiry as to the names of buyers who ultimately bought the shares sold by the Assesses. The Assessees were neither aware of the identities of the buyers would bought the shares sold by them through their brokers nor did they have any connection with them. As stated earlier, the shares in question were of listed companies and were sold at prevailing market rates through the Bombay Stock Exchange Online Trading (BOLT) platform of the Bombay Stock Exchange and all the payments against the same were received through account payee cheques/RTGS from the stock broker. Under the online web-based trading platforms of the relevant exchanges as per the prevalent procedures, the broker only acts the intermediary. There is no physical interaction between the parties and accordingly, the identities of the counter-party (whether buyer or seller) is not available thereby eliminating the possibility of any collusion b such etween the parties. The entire sales of shares were effected through web-based platforms of the relevant exchanges in which the seller can in no way sell the shares to a particular entity/individual & vice versa; where the trade is executed when the bid price offered by the buyer matches with the offer price of the seller and vice versa; and the entire transaction is a demand and supply game over which neither the buyer nor the seller has any control. The transactions carried out by the Assessees stand documented and evidenced by contract notes/ bills of the relevant brokers issued in the form and manner as prescribed by the regulatory authorities.

ii. It is earnestly submitted that the Assessees herein were neither aware nor could be aware of the persons/ entities buying the shares sold by them. There was no way formal, informal or even collusive whereby they could control the sales of shares to ensure their sales to a particular person/entity. In such a situation, in the absence of any conclusive evidence, it cannot be presumed that there was any transfer of cash between the Assessees and the alleged buyers to convert the unaccounted monies of the Assessees into LTCG as alleged by the A.O. The dissection of the transactions to discover cash deposits at earlier layers cannot prejudicially effect or be used against Page | 62

the Assessees herein since they do not have any control over the successive levels of parties who deal with each other independently. Even if for the sake of argument it is presumed that there was any price manipulation by any entity, the Assessees not being a part of the same and being completely unaware of such prevalent activities could not be penalized for any such action on the part of such entity.

iii. As discussed in the preceding paragraphs, the S.E.B.I, after conducting detailed investigation into the entire scheme employed in the respective scrips, came to a conclusion that although prices of the said scrips had been manipulated for providing fictitious long term capital gains (―LTCG‖) to Preferential Allottees and Promoter related entities in certain cases, the Assessees herein, despite being preferential allottees in the shares of the said companies, neither had any connection/ nexus with the said companies or their Promoters/Directors or Promoter related entities nor had any role in price manipulation or volume manipulation in the scrips of the said companies nor were involved in any such alleged scam. As noted by the S.E.B.I, the Assessees, being innocent genuine investors, were lured into the artifice with the promise of quick returns but their roles did not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. It is pertinent to note that in the instant case, no cash trail evidencing conversion of alleged unaccounted money into bogus LTCG for the years under appeal has been prepared in the cases of the Assessees herein. The A.O, in the instant case has failed to establish any flow of unaccounted cash/income of the Assessees through this channel by bringing on record conclusive evidence.

iv. Attention in this regard is directed to the judgment of the Hon‘ble Mumbai High Court in the case of CIT Vs. Lavanya Land (P) Ltd. 397 ITR 246 (Bom) wherein at para 21, it was observed that in the absence of any material to show that huge cash was transferred from one side to another, addition could not be sustained. In the instant case there is no evidence whatsoever to allege that money changed hands between the Assessees and the brokers or any other persons including the alleged exit providers whatsoever to convert

unaccounted money for getting benefit of LTCG as alleged. Reference in this connection is further craved to the following case laws:

a) This Baijnath Agarwalla v. ACIT (2010) 40 SOT 475 (Agra Third Member (pages 505-534 of PB-5): Held as under:

―In the stock exchange when the transaction is entered into, the assessee is not aware of the buyer of the shares. He enters into transaction only through a share broker. Therefore, the observation of the AO that the assessee could not identify the buyer cannot be the basis of regarding the transaction to be non-genuine one. The Revenue has also been influenced with the fact that the assessee has delivered the blank transfer share certificates to the broker when the delivery of the shares was given. Since the deal has to take place between the brokers, the assessee has to give only blank transfer share certificate to the broker without mentioning the name of the buyer. There is nothing wrong and this is a usual practice in the business. Shares were sold at the prices quoted at the stock exchange at the relevant time. The payment of sale consideration had also flown from the bank account of the broker but the broker has deposited the cash in his account as per the revenue. One cannot take any adverse view about the genuineness of the transaction on the basis that the broker A & Co. has deposited the cash in his bank account before issuing the draft for the sale consideration to the assessee. There is no evidence on record that broker was a relative or associate of the assessee. The assessee does not have any control on the bank account of the broker where the fund came through clearing, not in cash. The decisions of the lower authorities are influenced by the general observation of the Investigation Wing that created a suspicion in the minds of the authorities that everybody who has sold the shares at a high price has converted his unaccounted money through accommodation entries. This approach does not have any leg to stand. AO has failed to establish that the assessee has introduced his own unaccounted money in the shape of alleged sale proceeds of shares.‖— Umacharan Shaw & Bros. vs. CIT (1959) 37 ITR 271 (SC) and Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC) applied; Ashok Kumar Agarwal vs. Asstt. CIT (ITA No. 129/Agra/2004) and ITO vs. Naveen Gupta (2006) 5 SOT 94 (Del) approved. (Paras 12 & 13) ―It was the duty of the AO to bring on record sufficient evidences and material to prove that the documents filed by the assessee were bogus, false or fabricated and the long-term capital gain shown by him was actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the observation that the assessee could not prove the transaction to be genuine one. While making addition as income from undisclosed sources burden on the Department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources. Therefore, the CIT(A) has erred on facts as well as in law in upholding the order of the AO treating the income under the head long-term Page | 64

capital gain as sham and bogus and taxing the same under the head income from other sources. The income disclosed by the assessee is chargeable to tax as long-term capital gain and cannot be treated as income from any undisclosed sources.— Smt. Sunita Oberoi vs. ITO (2009) 30 DTR (Agra)(TM)(Trib) 474 followed; Ashok Kumar Lavania (ITA No. 112/Agra/2004, dt. 30th May, 2008) and ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265 approved; CIT vs. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) applied.‖ (Paras 15 & 18) b) Ganeshmull Bijay Singh Baid HUF v. Dy. CIT, ITA No. 544/Kol/13, dt. 4-12-2015 (Kolkata Tribunal) (2015) 45 CCH 306 (Kol) (pages 433-443 of PB-5): The Hon‘ble Kolkata ITAT held as under: ―We hold that as long as the assesses had purchased and sold the shares through known and accepted procedure, the brokers‘ misdealing with others should not be a criterion to suspect the assessees‘ genuine share transactions and capital gains thereon. Similarly we hold that the assesses have no control over Shri Narendra Kumar Shyamsukha nor is it a matter of their concern in what manner he had maintained his documents and what he records in these documents.‖ (Para 2.5.6) ―Assesses had carried out all their transactions through a recognized medium i.e through a registered share broker and Calcutta Stock Exchange, wherein the price of shares are determined by the market forces and assesses have bought the shares when the price was low through their Demat accounts and duly accounted for it in their respective books and when they found a hike in the price of these shares, they sold them to make a gain and transaction was again done through their Demat account. We don‘t find any abnormality or improbability in such a procedure adopted by the assesses. Thus the allegation that the assesses had laundered their cash for conversion into cheque by raising bogus long term capital gains does not hold water in the facts and circumstances of the case. No evidence is brought on record that the entire transactions had been carried out with some kind of connivance with the registered stock brokers for the introduction of unaccounted money and hence we hold that no addition could be made in these circumstances.‖(Para2.5.7)

c) CIT v. Jamna Devi Agarwal (2010) 328 ITR 656 (Bom HC) (pages 535-539 of PB-5): The Hon‘ble Bombay High Court held as under: ―The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the Page | 65

company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.‖—Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag)(Trib) 105 : (2010) 133 TTJ (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 80 Taxman 89 (SC) distinguished. (paras 11 to 14 & 16) d) Similar view was taken in the following cases:  Malti Ghanshyambhai Patodia v. ITO ITA No. 3400/Ahd/2015. (Ahmedabad Tribunal)  Pratik Suryakant Shah v. ITO in (ITA Nos. 810 to 815 & 922 to 926 (Ahd.) of 2015 (Assessment years 2006-07 to 2009-10), dt. 21-10-2016)  Podduchari Jeevan Prashant v. ITO ITA No. 452/HYD/2015 (Hyderabad Tribunal)  Anil Nand Kishore Goyal v. ACIT-ITA Nos. 1256/PN/2012 (Pune Tribunal) v. In view of the above, it is submitted that the Assessees herein having adduced conclusive documentary evidences to show that shares were purchased and sold via legal channels in conformity with market prices and no evidences having been brought on record by the Revenue Authorities to prove that the transactions had been carried out with some kind of connivance with brokers/entry operators for

introduction of unaccounted money or any unaccounted monies of the Assessees herein had been routed by the said channel, no addition can be made in the hands of the Assessees u/s 68 in the facts and circumstances of the instant case. 17. With respect to the disclosure of the other beneficiaries of the bogus long term capital gain, he submitted that it does not have any impact on the assessment of the assessee. He stated that there might be 1001 reasons for other persons to do that but how it impacts the assessee. He stated that :- i. The A.O has also relied upon the fact that various beneficiary groups (who allegedly obtained accommodation entries from Sri R.K. Kedia) on whom search/survey actions were conducted by the Investigation Wing of Delhi on different dates, when confronted with the evidences gathered by the Department in course of search in the premises of R.K. Kedia, surrendered additional income. On the basis of disclosures made by the said parties, the A.O alleged that the Assessees herein were also involved in obtaining accommodation entries/ bogus LTCG from Sri R.K Kedia.

ii. In this regard, it is submitted that the circumstances & facts of each person/group is different by disparate factors and cannot be extrapolated. The Assessees in the instant case are neither aware nor concerned with the nature of transactions carried out by the said parties or their nexus/dealings with Sri R.K. Kedia. As far as the Assessees are concerned, they have from the very inception, consistently denied having any nexus with R.K. Kedia or any of the alleged entry or exit providers. Even the Department has failed to unearth any incriminating material whatsoever to establish any link of the Assessees herein with Sri R.K Kedia or the factum of obtaining any accommodation entries through him despite using the longest arm of the Revenue against the Assessees herein in the form of search and seizure operations u/s 132(1) at the premises of the Assessees. The Assesses herein, being independent and having absolutely no relationship or interconnection with the alleged beneficiaries or Sri R.K. Kedia, should be considered in isolation without any reference to results of the proceedings in the latter‘s case.

iii. In the case of Ganeshmull Bijay Sing Baid (HUF) & Ors Vs. DCIT & Ors (2015) 45 CCH 306 (Kol Trib) (supra), the Hon‘ble Kolkata ITAT held at para 2.5.6 of the order held that the brokers‘ misdealing with others could not be

held as a criterion to suspect the assessee‘s genuine shares transactions and capital gains thereon. Held at para 2.5.6 of the order as under: “We hold that as long as the assesses had purchased and sold the shares through known and accepted procedure, the brokers‟ misdealing with others should not be a criterion to suspect the assessees‟ genuine share transactions and capital gains thereon. Similarly we hold that the assesses have no control over Shri Narendra Kumar Shyamsukha nor is it a matter of their concern in what manner he had maintained his documents and what he records in these documents.” (Para 2.5.6) It was further held that since the books and documents relied upon by the Department were not found from the premises of the assessee, there would be no onus on the part of the assessee to disprove the genuineness of recitals in the said seized books. Held as under: “the books and documents on which the department relied upon solely were not found from the premises of the assessee. No involvement of the assessee with such books has been established in any way like the assessee himself writing the books etc. therefore, there would be no onus on the part of the assessee to disprove the genuineness of recitals in the aforesaid seized books. Burden of proving lies fully with the department to show beyond doubt that the receipts of the two amounts under consideration were actually made by the assessee.””(Para2.5.3) iv. In the instant case also, the documents relied upon by the Department were not found from the premises of the Assessees herein but were seized from the premises of Sri R.K Kedia in course of search action carried out in his case. As such, there would be no onus on the part of the Assessees herein to disprove the genuineness of the recitals in the aforesaid seized documents. The Assessees herein have no control over Sri R.K. Kedia or the recordings made by him in his books/records. Presumption u/s 292C in respect of documents seized from the premises of Sri R.K Kedia would be operable only in the hands of Sri R.K. Kedia and not against the Assessees herein. Further, any misdealing of Sri R.K. Kedia with others (i.e. the impugned beneficiaries) cannot be a criterion to suspect the genuineness of the Assessees‘ shares transactions carried out through registered stock broker and duly supported by documentary evidences.

preponderance of probabilities are in favour of the assessee. His arguments were as under:- i. The A.O has also relied upon the principle of ―Preponderance of Probabilities‖ in support of the impugned additions made by him u/s 68 of the Act. As per the A.O, ―the concept of “preponderance of the evidence” can be visualized as a scale representing the burden of proof, with the totality of evidence presented by each side resting on the respective trays on either side of the scale. If the scale tips ever so slightly to one side or the other, the weightier side will prevail. If the scale does not tip toward the side of the party bearing the burden of proof, that party cannot prevail.”

ii. The A.O has gone on to state the so-called evidences resting on the tray of the Department viz. factum of investments made by Assessees in penny stock companies which were not doing any meaningful business, lack of prudent investor behavior in investing in companies which did not have sound financial conditions, abnormal profits earned on shares, similar modus operandi adopted by all investors etc. leading to the conclusion that LTCG received from penny stock companies were allegedly bogus. In support of the said theory, the A.O has relied on the judgment of the Hon‘ble Supreme Court in Sumati Dayal Vs. CIT (1995) 125 CTR (SC) 124. The Ld. CIT(A) has upheld the observations of the A.O and relied on few more judgments on similar lines in support of theory of preponderance of probabilities, surrounding circumstances and human conduct.

iii. In regard to the above, firstly, it is submitted that the Long Term Capital Gains (LTCG) earned by the Assessees in the respective scrips were declared by the Assessees in their returns of income filed for the respective years. The same were anlaysed by the Department and accepted as such in assessments completed u/s 143(3) for A.Ys 2010-11 & 2011-12. Copies of orders passed u/s 143(3) accepting the LTCG offered by the Assessees herein for A.Ys 2010-11 & 2011-12 are enclosed at pages 59-94 of PB-6. The alleged theory of surrounding circumstances, preponderance of probabilities, human conduct, alleged lack of prudent investor behavior in investing in shares of penny stock companies, alleged abnormal profits on such shares etc. were, if at all, equally applicable at the time assessments were originally completed by the A.O u/s 143(3) of the Act. In the orginal assessments u/s 143(3), the A.O after application of mind and detailed scrutiny of accounts under identical circumstances had accepted the Page | 69

LTCG offered by the Assessees as genuine. However, later on while framing assessments u/s 153A, under identical circumstances vis-à-vis the past, the A.O opined that investment in penny stock was against prudent investor behavior and profits earned thereon were abnormal and hence against human probabilities/ conduct. Thus, the impugned additions u/s 68 were made by the A.O u/s 143(3) r.w.s 153A merely on the basis of change of opinion in guise of search assessment. Needless to repeat, no incriminating material proving that the LTCG offered by the Assessees herein were bogus was found in course of search in the case of the Assessees.

iv. At this juncture, it would also be very relevant to quote from the order of the Hon‘ble Delhi High Court in the case of Kelvinator of India Ltd. (Del) (FB) reported in [2002] 256 ITR 1 which although rendered in context of section 147 is also applicable to the facts of the present case in context of the principles enunciated by the Hon‘ble Court: “It is not in dispute that the Assessing Officer does not have any jurisdiction to review his own order. His jurisdiction is confined only to rectification of mistakes as contained in section 154 of the Income-tax Act, 1961. The power of rectification of mistakes conferred upon the Income- tax Officer is circumscribed by the provisions of section 154 of the Act. The said power can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable.” (para 14) “It is a well-settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment.” (para 15) “An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong.” (para 23)

v. Further reference is also invited to the judgment of the Hon‘ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. Vs. ITO (1977) 106 ITR 1 (SC) wherein the Hon‘ble Apex Court very succinctly recalled the fundamental policy of law that there must be point of finality to all legal proceedings. Given below are the relevant extracts from that case: Page | 70

“…At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity. ..” vi. In view of the above, it is submitted that when the search action in the case of the assessee u/s 132(1), being the longest arm of the Revenue, has not yielded anything whatsoever which would indicate existence of concealed income for one or more of the six assessment years in question, there will be no scope even for raising any stale issues. It is accordingly submitted that the policy of law recalled by the Supreme Court in the above decision must all the more be upheld vis-à-vis such of the six assessment years in question in respect of which the search actions in the case of the Assessees have not yielded anything. Thus, reopening of completed assessments u/s 153A on the basis of mere circumstance that the Assessees were subjected to search and ignoring the fact that the search operation had not yielded anything for the said years would lead to serious injustice, absurdity and anomaly. This is exactly what has happened in the present case. The search actions in the case of the Assessees herein have been used by the AO as a device to conduct fishing and roving enquiries and review completed assessments of the past years relying on the theory of preponderance of probabilities and in making additions merely on the basis of change of opinion even though nothing incriminating was found in course of search in respect of those years.

vii. In so far as the question of placing reliance on preponderance of probabilities is concerned, the same would come into play only when the basic test of direct and factual evidence fails. In the instant case, there is no ground whatsoever to doubt the direct and factual evidences furnished by the Assessees herein and accordingly, the question of relying upon circumstantial evidence and theory of preponderance of probability does not arise moreso when assessments were originally completed by the A.O u/s 143(3) accepting the LTCG offered by the Assessees. The so-called evidences relied upon by the Revenue Authorities viz. statement of third parties, lack of prudent investor behavior in investing in penny stock companies, abnormal profits earned on shares etc. are not admissible as evidence in making assessments u/s 153A of the Act as held in host of decisions cited earlier. On similar facts as in the case of the Assessees herein, the Hon‘ble Kolkata ITAT in the case of Manish Kumar Baid & Anr Page | 71

Vs. ACIT, ITA No. 1236, 1237 dated 18.08.2017 reported in 2017 TaxPub(DT) 4463 (Kol-Tri) (pages 540-554 of PB-5) held that the A.O was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee to controvert the documentary evidences filed by the assessee. In the said case, the concerned assessee purchased 2.4 lacs shares of face value of Re. 1 each of Careful Projects Advisory Ltd. (CPAL) through off market transaction for a consideration of Rs. 2.4 lacs. The said CPAL was amalgamated with Kailash Auto Finance Ltd. (KAFL) pursuant to order of the Hon‘ble Allahabad High Court and in pursuance to such amalgamation, the assessee therein was allotted 2.4 lacs shares of KAFL of face value of Re. 1 each. The assessee therein sold 2.4 lacs shares through M/s. Ashika Stock Broking, a registered share broker of BSE during P.Y. 2013-14. The LTCG arising on the said transaction was claimed as exempt u/s 10(38) of the Act. The A.O in the said case observed that the assessee therein had made gain of almost 3805% in a span of 24 months. The A.O therein opined that the price movement of the scrip of KAFL in a span of 24 months and the profit earned by the assessee therein were beyond human probabilities. Just as in case of the Assessees herein, the A.O in the aforesaid case relied on the statements of several brokers/operators/promoters and the orders of SEBI in support of his adverse conclusion that prices of KAFL were rigged to create non-genuine LTCG in the transactions of KAFL for several beneficiaries. Relying on the said logic, the A.O therein treated the sale proceeds of shares of KAFL as income from undisclosed sources of the assessee therein u/s 68 of the Act. On first appeal, the Ld. CIT(A) therein dismissed the grounds raised by the assessee and confirmed the additions made by the A.O u/s 68 of the Act. Being aggrieved with the orders of the lower authorities, the assessee therein filed further appeal before the Hon‘ble Kolkata Tribunal. The Hon‘ble ITAT, Kolkata, after taking into consideration the rival submissions and materials on record, held as under:

“6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the learned Authorised Representative that the learned assessing officer was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgment of Special Bench Page | 72

of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the learned Authorised Representative supra. With regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the learned Authorised Representative are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Honble High Court. The learned assessing officer ought not to have questioned the validity of the amalgamation scheme approved by the Honble High Court in May 2013 merely based on the statement given by a third party which has not been subject to cross -examination. Moreover, it is also pertinent to note that the assessee and/or the stock broker Ashita Stock Broking Ltd. name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transaction of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations levelled by the learned assessing officer against the assessee, which in out considered opinion, has no legs to stand in the eyes of law. We find that the learned Departmental Representative could not controvert the arguments of the learned Authorised Representative with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBIS interim order supra....... Thus we hold that the said orders of SEBI is not evidence against the assessee. Much less to speak of direct evidence. The enquiry by the Investigation wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the from of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the learned to be false or fabricated. The facts of the case and the evidences in support of the assessees case clearly support the claim of the assessee that the transactions of the assessee were bona fide and genuine and therefore the learned assessing officer was not justified in rejecting the asessees claim of exemption under section 10(38) of the Act. We also find that the various case laws of Honble jurisdictional High Court relied upon by the learned Authorised Representative and findings given thereon would apply to the facts of the instant case. The learned Departmental Representative was not able to furnish any contrary cases of this effect. Hence we hold that the learned assessing officer was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee under section 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee.” (emphasis supplied) viii. It is submitted that once the assessee has furnished all evidence in support of the genuineness of the transactions, the onus to disprove the same is on revenue. The Hon‘ble Supreme Court in the case of

Krishnanand v. the State of Madhya Pradesh (1977) 1 SCC 816 (SC) (pages 555-569 of PB-5) held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Honble Apex Court held that it is not enough to show circumstances might create suspicion because the Court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence (see para 26).

ix. It is trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference in this connection is craved to the judgment of Hon‘ble Supreme Court in the case of Lalchand Bhagat Ambica Ram v. CIT (1959) 37 ITR 288 (SC). The entire case of the Revenue hinges upon the presumption that the Assessees herein have ploughed back their own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how strong it may appear to be true needs to be corroborated by some concrete evidence to establish a link that the Assessees had brought back their unaccounted income in the form of LTCG. Kind attention is invited to the judgment of Special Bench of Hon‘ble Mumbai ITAT in the case of GTC industries Ltd. v. ACIT (2017) 164 ITD 1 (Mumbai Trib.) (SB) (pages 570-612 of PB-5) wherein the Tribunal observed as under:

“46. Ultimately the entire case of Revenue upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money, It is quite a trade law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of preponderance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favorable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against assessee.” x. It is vehemently submitted that no direct evidence has been brought on record by the A.O to prove that the Assessees herein had introduced their Page | 74

own unaccounted monies by way of bogus LTCG. The direct evidences as alleged by the A.O. in the form of third party statements, third party evidences, Interim Orders passed by the S.E.B.I, alleged cash trail in bank accounts of alleged exit providers, investment in penny stocks etc. are not evidences against the Assessees for the reasons discussed earlier. It is reiterated that the S.E.B.I, after conducting a detailed investigation into the schemes adopted in respective scrips came to the definite conclusion that the Assessees herein were not involved in the alleged LTCG scam. In view of the aforesaid judgment of Special Bench of Hon‘ble Mumbai Tribunal in the case cited supra, it is submitted that Revenue Authorities in the instant case were not justified in drawing adverse inference against the Assessees herein on the basis of so-called circumstantial evidences without any material evidence on record.

xi. The Assessees herein have furnished all documentary evidences in support of the LTCG earned on the impugned transactions in shares. The purchases of shares had been accepted by the A.O in years of their acquisition. The sales and LTCG earned on the said shares were also accepted by the A.O and assessments u/s 143(3) were completed accepting the claims of the Assessees until search operations were carried out u/s 132(1) at the premises of the Assessees herein. Even in course of search operations at the premises of the Assessees, nothing incriminating in respect of such transactions was found. The transactions were through account payee cheques and reflected in the books of accounts. The acquisition/ purchase of shares and the sale shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. No concrete evidence to disprove the genuineness of the evidences furnished by the Assessees herein have been brought on record by the A.O apart from placing reliance on uncorroborated third party evidences, third party statements which were not subjected to cross-examination, cash trail in bank accounts of exit providers having no nexus with the accounts of the Assessees, interim orders of SEBI w.r.t. the Assessees which were subsequently reversed/revoked by the SEBI in the final orders, seemingly irrational decision to invest in penny stocks not having sound financial records etc. Under the given facts, the so-called materials or circumstantial evidences do not constitute Evidences which can be used for drawing adverse inference against the Assessees in assessments u/s 153A of the Act. Page | 75

xii. In the facts and circumstances of the case, it cannot be held that the transactions were bogus merely by relying on theory of preponderance of probabilities, human conduct and circumstantial evidences. A large part of the arguments advanced by the A.O is based on seemingly irrational decision of the Assessees to invest in ‗penny stocks‘ and apparently unrealistic high rate of returns and supernormal profits earned by the Assessees thereon. In this regard, it is submitted that it is a common practice among investors to look for suitable stocks (including penny stocks) where possibility of earning higher returns with a comparatively lower investment is very high. Such investment behaviour, although somewhat risky, is not unusual or unheard of and does not carry the taint of illegality or wrong doing in any manner. The provisions of the Act have to be implemented, administered and interpreted only with reference to its specific provisions and the Income-tax Authority is estopped from stepping into the shoes of any assessee so as to question its rationality, prudence or acceptability from a common sense point of view [see S.A. Builders Ltd. v. CIT [2007] 288 ITR 1 (S.C); CIT Vs. Dhanraj Girji Raja Narasingherji (1973) 91 ITR 544 (SC); CIT Vs. Walchand and Co. (1967) 65 ITR 381 (SC)]. So long as the transaction meets the specific conditions laid down in the Act, an attempt to negate it or interpret it by applying the yardsticks of rationality, prudence etc., which in any case is highly subjective, would not meet the ends of justice and basic tenets of judicial interpretation or tax administration.

xiii. The Hon‘ble Courts and Tribunals have in a plethora of cases ordained that the mere fact that sales were made in penny stock would not result in any adverse influence to hold the transactions therein as non-genuine and justify addition u/s 68 merely relying on theory of preponderance of probabilities and suspicion unless proved to be so by concrete evidence on record. Reference in this connection is craved to the following case laws:

(i) ITO Vs. Aarti Mittal (2013) 37 CCH 227 HydTrib, 149 ITD 728 (pages 613-629 of PB-5): The Hon‘ble ITAT, Hyderabad Bench has at para 23 of the order observed as under: “…The most crucial aspect which could be considered as incriminating in such transactions may relate to a case where compensatory payments are made by the seller to the buyer. No evidence has been brought on record that the assessee‟s of this group have made any such compensatory payment to the buyer of the stocks. In the Page | 76

absence of any such observation, as submitted by the assessee‟s, the CIT(A) was correct in holding the view that the sale transactions cannot be doubted on suspicion …the CIT(A) is further correct in holding that notwithstanding the observations of the AO that the purchases and sales of shares were made with reference to penny stocks which were purchased at a nominal price and sold at a very high price, since all the sale transactions were made through stock exchanges there is hardly any scopes for price manipulation. It is all the more so, since the assessee has paid STT. Even with regard to the observation of the assessing officer that the assessee before purchasing the shares the assessees did not take into account the financial standing of the companies, the CIT(A) was correct is observing that the share market is generally sentiment driven and the assessees cannot remain static. Even the absence of experience of the assessees in transaction of the shares except dealing in these penny stocks, does not clinch the issue against the assessee. This may at the most lead to a suspicion but the same cannot be treated as conclusive to draw any adverse inference against the assessees to the effect that the transactions are not genuine…… In course of hearing, the assessee‟s had produced its books, there is no finding in the assessment order that payments were not made to the brokers similarly there is no observation in the order that the sales were arranged between the assessee‟s and the buyer. In the absence of any cogent finding by the AO the observation merely raises some suspicion but this suspicion cannot take the place of proof. Even with regard to the enquiry got conducted by the assessing officer through the DClT Calcutta, which revealed that most of the brokers and the companies were not traceable, the CIT(A) is correct in concluding that mere failure to trace the brokers and companies cannot be held as fatal to the transaction of both purchase and sale, when the details of which have been duly explained by the assessees. The assessee, in our considered opinion, has duly discharged the onus that lies on it, in establishing the genuineness of the transactions, and that being so, it is for the revenue to disprove the claim of the assessee, by bringing on record the evidence to the contrary, as held by the Hon‟ble Madras High Court in the case of CIT vs Gobi Textiles Ltd (294 ITR 663). (ii) Vishal Suryakant Shah & Ors Vs. ITO & Ors (2017) 49 CCH 106 (Ahd Trib): The Honble Ahmedabad Tribunal held that the claim of the assessee therein could not be denied on the basis of presumption and surmises in respect of penny stock by disregarding direct evidences on record relating to sale/ purchase transactions in shares supported by broker‘s contract notes, confirmation of receipt of sale proceeds through regular banking channels and demat account. (iii) ITO Vs. Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum Trib) (Annexure 5 of the Paper Book on case-laws on penny stock): The gist of the facts of the said case and judgment rendered by the Hon‘ble Mumbai ITAT is as under: Reassessment—Issue of notice of reassessment—Addition on unexplained cash credit—Deletion—Assessee filed its return of income for AY declaring total income—AO received information from Deputy Director of Income Tax that assessee had shown sale Page | 77

proceeds of shares in scrip company as LTCG and claimed exemption—Assessee had claimed to had purchased that scrip at Rs.3.12 per share and sold same at Rs.165.83 per share, those scrips were penny-stock and capital gain declared was only accommodation entries—Broker through whom transactions were effected had appeared as „DRI probing evasion who indulged in market manipulation and price manipulation through synchronized and cross deal in scrip of company—SEBI had passed order regarding irregularities and synchronized trades carried out in scrip of company by broker—AO reopened assessment by issuing notice u/s 148—AO brought to tax LTCG shown by assessee as unexplained cash credit u/s 68—CIT(A) having gone through copy of bank pass book, broker's bills for purchase and sale of shares, contract note, demat account, statement of STT , held that AO did not had any material on record to show that sale of shares were bogus and deleted addition made by AO—Held, in Shyam R. Pawar, it had been held that where DMAT account and contract note showed details of share transaction, and AO had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income u/s 68--In case of Arun Kumar Agarwal (HUF) it had held that where assessee's broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assessee's share transactions bogus—Ratio of above decisions was applicable to instant case—Tribunal followed order of Co-ordinate Bench in M/s Indravadan Jain HUF and uphold order of CIT(A)— Revenue‟s appeal dismissed (iv) Farrah Marker Vs. Income Tax Officer (2016) 46 CCH 535 Mum Trib (pages 630-638 of PB-5): The Hon‘ble ITAT, Mumbai Bench at para 3.4.8 of the order has held as under: “…. the authorities below, i.e. AO/CIT(A) have made the addition under section 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sales of the „said shares‟ of M/s. Shukun Constructions Ltd., copies of the physical share certificates and her D-MAT account statement establishing the holding of the shares in her name prior to the sale thereof; confirmation of the transactions of buying and selling of the „said shares‟ by the respective stock brokers, receipt of sale proceeds through banking channels, etc. As observed earlier in this order, ITAT are of the view that the statement recorded from Shri Niraj Sanghvi on 31.12.2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee‟s back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross-examine the said person. In this factual and legal matrix of the case, as discussed above, ITAT find that the addition of Rs.95,12,812/- under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore direct the AO to delete the said

addition and accept the LTCG income of Rs.93,00,012/- shown as exempt under section 10(38) of the Act. (v) CIT Vs. Smt. Pushpa Malpani (2012) 20 taxmann.com 597 (Raj HC) (Annexure 2 of the Paper Book on Case Laws on Penny Stock): In this case, the Commissioner (Appeals) directed the Assessing Officer to treat sale consideration of shares as long-term capital gain instead of treating it as income from other sources. The Tribunal upheld the order of the Commissioner (Appeals). Held that the Commissioner (Appeals) and Tribunal both had given reasons in support of their findings and had found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31-3-2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23-7-2003. No substantial question of law arose. (vi) Meenu Goel Vs. ITO, Ward 31(1), ITA No. 6235/Del/2017 (Del ITAT) (Annexure 6 of the Paper Book on Case-Laws on Penny Stock): Held at para 6 of the order as under: “6. ….. I note that assessee has earned Long Term Capital Gain amounting to Rs. 18,46,600/- during the financial year 2013-14 and the same has been claimed exempt under Section 10(38) of Income Tax Act, 1961…… All the transaction were made through account payee cheque / banking channel and assessee had purchased share in financial year 2009-10 and sold the same in the financial year 2013-14 resulting in Long Term Capital Gain. The assessee has submitted various documentary evidences to prove the genuineness of the transaction of sale and purchase of shares which includes a copy of purchase bill dated 22.02.2010; a copy of share transfer form in the favour of the assessee; Copy of bank statement highlighting the payment made against the share purchased; Transaction statement of the stock broker i.e. Pace Stock Broking Services (P) Ltd., account; copy of bank statement in which sale proceed from the sale of shares received; copy of calculation of long term capital gain, which was not faulted by the AO. However, the lower authorities have not considered the aforesaid documents and rejected all the claims made by the assessee by relying on the report of the Investigation Wing and thereby made the addition, which is not sustainable in the eyes of law. I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in the purview of the same without bringing any material on record and proving that the assesssee was directly involved in the so called bogus transaction. I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the source identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68 of the Act, hence, the same deserve to be deleted. I note that in most of the case laws of the Hon‟ble High Courts referred by the Ld.DR the reason Page | 79

on the basis of addition was confirmed was that the assessee had not tendered cogent evidence with regard to share transaction, however, in the present the case assessee has submitted all the documents / evidences, therefore, the case laws relied by the Ld. DR are based on distinguished facts and circumstances, hence, the said case laws are not applicable in the present case. However, in my considered opinion, the issue in dispute is squarely covered by the various decisions of the ITAT and the Hon‟ble High Courts including the recent decision dated 18.1.2018 of the Hon‟ble High Court i.e. Hon‟ble High Court of Punjab & Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017”. (vii) Navneet Agarwal Vs. ITO, Ward 35(3), Kolkata, I.T.A. No. 2281/Kol/2017 (Kol Trib) (Annexure 7 of Case Laws on Penny Stock): Held as under: “13. …An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee‟s action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation‟s office by way of statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assesee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not partyto the scam etc., has to be controverted by the revenue with evidence. When a person claims that she has done these transactions in a bona fide and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal import laid down by the Courts of law. 15. In our view, just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for Page | 80

rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. …. 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions….. 17. The Hon‟ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. ….The observations of the Hon‟ble Apex Court are equally applicable to the case of the assessee. In our view, the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee. 18. We now consider the various propositions of law laid down by the Courts of law. That cross-examination is one part of the principles of natural justice has been laid down in the following judgments: a) AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors….. b) Andaman Timber Industries vs.Commissioner of C. Ex., Kolkata-II …… 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows:…………. 20. Applying the proposition of law as laid down in the above- mentioned judgments to the facts of this case we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question isa bona fideLong Term Capital Gainarising from the sale of shares and hence exempt from income tax.

xv. Kind attention is invited to the following case laws wherein it was held that burden cast on the assessee u/s 68 would stand discharged where the assessee furnishes relevant documentary evidences to prove that the genuineness of the transactions i.e. the transactions in shares were carried out through regular banking channels via a registered share broker in a recognized stock exchange at prevalent market rates; no liability can be fastened on the assessee u/s 68 unless the AO brings on record cogent evidence to dislodge the authenticity of the evidences filed by the assessee:

(i) CIT Vs. Anirudh Narayan Agrawal (2013) 84 CCH 28 (All) (pages 639-643 of PB-5): The ruling of the Hon‘ble Allahabad High Court may be summarized as under: Income—Cash credits—Addition—Sustainability—Assessee‟s case was selected for scrutiny and income from LTCG on sale of shares through broker was investigated—AO disallowed plea of LTCG on ground that broker had not given details and furnished documents transaction appeared to be fake—Therefore, added differential amount as income from other sources—CIT (A) deleted addition— Held, there was no evidence on record or in assessment order to prove that proceeds received against sale of shares represented assessee's undisclosed income—Burden was on Department to prove that money belonged to assessee by bringing proper evidence on record and assessee could not be expected to call concerned person in evidence to help Department to discharge burden that lay upon it—Assessee was in possession of shares in question and had Page | 82

sold shares as ordinary transaction at stock exchange—If broker did not file any evidence since same was seized by Revenue Department, there was no fault of assessee—Shares were allotted to assessee in public issue which were held in demat a/c and sale consideration was received by demand draft—Therefore, transaction could not be said to be fake—Order of CIT (A) upheld— Appeal dismissed (ii) CIT Vs. Smt. Jamnadevi Agarwal & Ors (2010) 328 ITR 656 (Mum) (pages 535-539 of PB-5): The Hon‘ble Mumbai High Court held as under: Income—Cash credit—Genuineness of share transactions— Assessees offered long-term capital gains arising from sale of shares—On the basis of material seized during the search in the case of various assessees who belong to H group, AO did not accept the capital gains and treated the entire sale proceeds of the shares as income from undisclosed sources under s. 68—Not justified— Fact that the assessees in the group have purchased and sold shares of the same companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence has been produced to establish the genuineness of the sale—Company has confirmed that it has handed over the shares purchased by the assessees—Similarly, the sale of shares to the respective buyers is also established by producing documentary evidence—Purchase and sale price of the shares declared by the assessees is in conformity with the market rates prevailing on the respective dates—Thus, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions—Tribunal has arrived at a finding of fact that the transactions were genuine—Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence—Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers‟ bank accounts cannot be attributed to the assessees—Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. (iii) CIT Vs. Smt. Sumitra Devi (2014) 268 CTR 351 (Raj): The facts of the said case and the judgment rendered by the Hon‘ble Rajasthan High Court may be summarized as under: Cash Credit—Share transaction—Assessee had shown LTCG from the sale of shares and same was claimed as exempt u/s 10(38)—AO observed that companies, whose shares were allegedly dealt with, were not very well known and it was entirely unlikely that there was a huge rise in prices of their shares in a very short span of time—AO treated huge rise in price as manipulation by stock broker and made additions in income of assessee towards transactions of purchase and sale of shares and undisclosed commission paid in cash—CIT(A) observed that shares were sold by assessee for consideration through named stock broker and appellant furnished all the evidence to establish genuineness of transactions—That AO failed to bring any evidence in rebuttal nor was it proved that documents produced by Assessee were false, fabricated or fictitious—ITAT upheld Order of CIT(A) that AO proceeded only on Page | 83

presumptions and was not justified in making additions under Section 68 of the Act—Held, findings of AO were based on presumptions rather than on cogent proof—CIT(A) and ITAT found that AO failed to show material documents placed on record by Assessee were false, fabricated or fictitious—Appellate authorities rightly observed that transaction could not be rejected altogether on basis of facts noticed by AO, particularly in absence of any cogent evidence to contrary—Finding recorded by appellate authorities, after thorough consideration of material on record, that transaction of purchase and sale of shares could not be treated as non-genuine was justified—No substantial question of law worth consideration in present case—Addition under Section 68 of the Act was not sustainable after due appreciation of evidence on record, on relevant considerations, and on sound reasoning—Finding of Appellate Authorities did not suffer from any perversity—No substantial question of law was involved in Appeal—Assessee‟s appeal dismissed (iv) Kamala Devi S. Doshi & Ors Vs. ITO & Ors (2017) 50 CCH 53 Mum Trib: Held as under: Held, claim of assessee in respect of LTCG on sale of shares as stands reflected in her return of income, after carrying out conjoint perusal of facts borne from record—Assessee who claimed generation of income under „LTCG‟ on sale of scrips of in her return of income, thus remained under statutory obligation to substantiate said claim—On basis of material which was furnished by assessee before lower authorities, Tribunal concluded that assessee had duly discharged onus as stood cast upon her to prove factum of generation of income under head LTCG, as claimed by her in return of income for year under consideration—Assessee had placed on record substantial documentary evidence to substantiate genuineness and veracity of purchase and sale of shares— Substantial documentary evidence placed on record by assessee, which as matter of fact supported the entire chain of events of purchase and sale of shares by assessee, was however never rebutted by A.O on basis of any concrete and irrebutable evidence which could go to inescapably disprove genuineness of said documents which were brought on record by assessee—Tribunal neither able to persuade to subscribe to adverse inferences drawn by lower authorities in respect of share transactions of assessee by referring to stand alone statement of person , as same, suffer from serious infirmities, and as such could not be summarily accepted, nor able to dislodge genuineness of purchase and sale of shares of shares which had been duly substantiated by assessee on basis of material made available on record, which had not been dislodged by lower authorities—Tribunal set aside order of CIT(A), and deleted both additions—Assessee‟s Appeal allowed

(v) Smt. Smita P. Patil & Ors. Vs. ACIT (2014) 159 TTJ 182 (Pune): In the said case, the Hon‘ble Pune ITAT held that the A.O had failed to establish clear case against the assessee that share transactions, on which LTCG had been declared were a sham and a camouflage. There was heavy burden on the AO to destroy the claim of the assessee but except going on general philosophy, Page | 84

nothing had been made out by the AO to show that claim of the assessee in respect of sale of shares was not correct. The authorities below were not justified in holding that entire sale proceeds shown by the assessee were out of sham and bogus arranged share transaction.

(vi) ACIT Vs. Kamal Kumar S. Agarwal (Indl) & Ors: (2010) 113 TTJ 818 (Nag Trib): The Hon‘ble Nagpur ITAT held that the assessee having disclosed all shares transactions in the returns of the relevant years in the normal course and the Department having accepted the same, these transactions cannot be treated as non- genuine or sham and the sale proceeds of shares cannot be taxed under s. 68 in the proceedings under s. 153A as no incriminating material was found during the course of search which could cast doubt on the genuineness of such transactions. (vii) Dolarrai Hemani Vs. ITO (2016) 48 CCH 286, Kol Trib: In the said case, the AO had concluded that the transaction in shares as a sham and colourful transaction whereby assessee entered his undisclosed income in regular channels taking benefit of false LTCG in collusion and with broker who with the help of other agents, by circular and artificial and false trading, issued contract notes for transactions which never happened. Given the said facts, the Hon‘ble Kolkata ITAT held that when purchase and sale of shares were supported by proper contract notes, deliveries of shares were received through demat accounts, shares were purchased and sold through recognized broker and sale considerations were received by account payee cheques, transactions could not be treated as bogus and income so disclosed was assessable as LTCG. Held that the addition had been made only on the basis of suspicion that the difference in purchase and sale price of these shares was unusually high. The Revenue had not brought any material on record to support its finding that there had been collusion/ connivance between broker and assessee for introduction of its unaccounted money. Accordingly, the ground raised by the assessee in this regard was allowed. (viii) CIT v. Shreevashi Ganguli (ITA No. 196 of 2012) (Cal HC)--In this case the Hon‘ble Calcutta High Court held that the A.O doubted the transaction since the selling broker was subjected to SEBIs action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is not iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (ix) CIT v. Bhagwati Prasad Agarwal in (No. 22 of 2009, dt. 29-4-2009) (Cal HC): In this case Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transaction were bogus. The Hon‘ble Calcutta High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transaction entered into by the assessee have been proved accounted for documented and supported by evidence. It Page | 85

was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. (x) CIT v. Lakshmangarh Estate & Trading Co. Limited in (ITA No. 270 of 1999, dt. 7-10-2013)--In this case the Hon‘ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact, As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence of record, it is difficult it not impossible, to hold that the transactions of buying or selling of shares ware colorable transactions or were resorted to with ulterior motive. xvi. It is humbly submitted that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes. Demat statements and bank statements etc., the transactions of purchase of shares were accepted by the learned assessing officer in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and /or the statements of third parties. In support of the aforesaid, reliance is placed on the following judgments:- (i) Baijnath Agarwal v. ACIT (2010) 40 SOT 475 (Agra) (ii) ITO v. Bibi Rani Bansal (2011) 44 SOT 500 (Agra) (iii) ITO v. Ashok Kumar Banssal ITA No. 289/Agra /2009 (Agra ITAT) (iv) ACIT v. Amit Agarwal & Others ITA Nos. 247(Kol) of 2011 (Kol ITAT) (v) Rita Devi & Others v. Dy. CIT IT (SS) A Nos. 22-26/Kol/2011 (Kol ITAT) (vi) Surya Prakash Toshniwal v. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain v. ITO-ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker v. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal v. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT v. Sudeep Goenka (2014) 360 ITR 163 (Allahabad) (xi) CIT v. Udit Narain Agarwal (2013) 255 CTR 102 (Allahabad) (xii) CIT v. Janmadevi Agarwal (2010) 328 ITR 656 (Bombay HC) (xiii) CIT v. Homani M. Vakil in (Tax Appeal No. 1502 of 2011, dt. 25- 9-2012) (xiv) CIT v. Maheshchandra G. Vakil in (Tax Appeal No. 1503 of 2011, dt. 25-9-2012) (xv) CIT v. Sumitra Devi (2014) 268 CTR 351 (Rajasthan) (xvi) Ganeshmull Bijay Singh Baid HUF v. Dy. CIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others v. ACIT -ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT)

xvii. As regards the reliance placed by the Revenue Authorities on the decision of the Hon‘ble Supreme Court in the case of Sumati Dayal (supra), it is submitted that the facts which were peculiar to the case of Sumati Dayal (supra) which led the Hon‘ble Apex Court to apply the theory of preponderance of probabilities are absent in the instant case. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidences filed by the Assessees herein prove beyond doubt that the transactions were carried out at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the Assessees. The decision relied upon by the Revenue is thus wholly distinguishable on facts (as also held by the Hon‘ble Bombay High Court in the case of CIT Vs. Smt. Jamnadevi Agarwal & Ors (supra) at para 15).

xviii. It may also be submitted here that there are various judicial precedents to the effect that the act of questioning the very basis of a transaction and to brand it as illegitimate or sham has to be based on substantial, concrete and cogent evidence wherein the proof of wrong-doing is clear and irrefutable. Attention in this connection is invited to the judgment of the Hon‘ble Supreme Court in the case of Union of India V. Azadi Bachao Andolan [2003] 263 ITR 0706 which to a very large extent watered down the ratio laid down by the Apex Court in erstwhile case of Mc. Dowell and Co. Ltd. V. Commercial Tax Officer [1985] 154 ITR 148. In the said case of UOI Vs. Azadi Bachao Andolan, the Hon‘ble Supreme Court observed as under: “In our judgment, from Westminster‟s case [1936] AC 1 (HL) ; 19 TC 490 to Bank of Chettinad‟s case [1940] 8 ITR 522 (PC) to Mathuram‟s case [1999] 8 SCC 667, despite the hiccups of McDowell‟s case [1985] 154 ITR 148 (SC), the law has remained the same. We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents.” xix. While pronouncing the aforesaid judgment in the case of UOI Vs. Azadi Bachao Andolan (supra), the Hon‘ble Supreme Court referred to the judgments rendered in the following cases:

(i) Banyan and Berry v. Commissioner of Income-tax [1996] 222 ITR 831 (Guj): Held as under: ―The court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act ; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell‟s case [1958] 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell‟s decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.” (ii) Lord Sumner in IRC v. Fisher‘s Executors [1926] AC 395 at 412 (HL): “My Lords, the highest authorities have always recognised that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown, so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed terms or of any omissions that he can find in his favour in taxing Acts. In so doing, he neither comes under liability nor incurs blame.” (iii) Lord Tomlin in IRC v. Duke of Westminster [1936] AC 1 (HL) ; 19 TC 490, 520 (HL) which reflected the prevalent attitude towards tax avoidance: “Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax.” xx. Attention is further invited to the following cases rendered in the light of decision pronounced in the case of Azadi Bachao Andolan (supra): (i) CIT Vs. George Williamson (Assam) Ltd. (2004) 265 : Held as under: “It is open for assessees to arrange their affairs in such a manner that it would not attract the tax liabilities, so far it can be managed within the permissible limit of law. The assessees can very well manage their tax affairs so that the tax attracted in the transaction is less and would not fall outside the four corners of law applicable at the relevant time. The tax management is permissible if the law authorizes so.” (ii) Industrial Development Corporation of Orissa Ltd. Vs. CIT (2004) 268 ITR 130 (Ori): Held as under: “An act which is otherwise valid in law cannot be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest. In other words, if a transaction is otherwise valid in law and results in reduction of tax to an assessee, the same cannot be brushed aside on the ground that the underlying motive of entering into the transaction by the assessee was to reduce its tax liability to the state.”

(iii) CIT Vs. Mrs Sarita P. Shirke & Anr. (2006) 281 ITR 373 (Bom): Held as under: “In any case, even otherwise, if a person is entitled to an exemption in law and accordingly makes a plan to avoid the tax liability which is otherwise legally entitled to it would not amount to tax evasion.” xxi. Thus, the Hon‘ble Supreme Court in the case of UOI Vs. Azadi Bachao Andolan (supra) held in explicit terms that a valid act cannot be treated as non-est simply because it results in loss of Revenue to the State or some tax advantage to the assessee. An assessee is entitled to arrange his affairs in a manner that it would attract lower taxes provided he can do the same within the four corners of law. Such valid acts, although attracting lower taxes are not always required to be viewed with suspicion or to be treated as a device for avoidance of tax. In the instant case also, the impugned transactions were carried out by the Assessees within the four corners of law. The A.O, apart from relying on uncorroborated pieces of third party evidences, third party statements which were not subjected to cross- examination by the Assessees herein, interim orders of SEBI which were subsequently reversed by the SEBI in final orders, theory of preponderance of probabilities and human conduct, has nothing concrete whatsoever to establish a case against the Assessees. He has desperately failed to prove, by bringing on record some cogent evidence that the impugned transactions were sham or make believe. The Assessees, on the other hand have submitted conclusive documentary evidences in support of their claim which the A.O has desperately failed to controvert.

Sh. Manish Arora also accepted that Sh. Raj Kumar Kedia was an accommodation entry provider, took cash from various persons in order to provide accommodation entry of bogus LTCG. He referred to question no. 13 asked to Sh. Manish Arora to provide details of some persons who used to provide cash on behalf of major beneficiaries who used to collect cash from him. It was pointed out that in his answer Sh. Manish Arora said that Sh. Pankaj Tiwari an employee of M/s Bhushan Steel Ltd. provided cash and some other persons who generally collected cash from Sh. Shivam for Jagdish Purohit and that other transfers of cash were generally through angadiya. He further stated that vide answer to question no. 3, it was stated that LT entries, OT entries, unsecured loan entries, ST entries etc. given to various beneficiaries were arranged from various entry operators for different beneficiaries after charging fixed percentage of commission and that he helped BSL group company and their promoters. It was further submitted that the statement of the assessee was also recorded on oath on 13.06.2014 u/s 132(4) of the Act wherein in reply to question no. 15, it was stated that on directions of promoters of M/s Bhushan Steel Ltd. and discussion with Sh. Pankaj Agarwal, one time investment was made in the shares of some non-descript listed company and once higher market share price was attained through artificial rigging, the shares of are sold to book huge Long Term Capital Gain which was also exempt from Income-tax u/s 10(38) of the Act and substantial portion of such money was utilized for purchasing shares of group companies at higher premium. He further submitted that the statement of Directors of the penny stock companies during the course of search on Sh. Raj Kumar Kedia group of cases were recorded, in the said statements also, it was stated that share prices of the companies were manipulated to convert black money of the persons into white by availing Long Term Capital Gains and that certain percentage of commission was received in lieu of that. He also referred to page no. 33 of the assessment order and stated that the incriminating materials were found from the premises of Sh. Raj Kumar Kedia related to BSL group and from premises of Sh. Ankur Agarwal, an employee of BSL group. The material found and seized from the premises of Sh. Raj Kumar Kedia contained ledgers of one NP (acronym for ‗Nehru Place‘, referring to Bhushan Steel Group since earlier, the corporate office of Bhushan Steel group was at Nehru Place). Therefore, it could not be said that no incriminating material was found during the course of search. It was further submitted that during the course of assessment proceedings, summons u/s 131 of the Act was issued to Sh. Ankur Agarwal on 16.12.2016 to appear on 22.12.2016. However, he filed his retraction on 20.12.2016 from his statement recorded during the course of search and did not appear on the date given u/s 131 of the Act. It was further submitted that during the course of survey, the Page | 90

Investigation Wing detected that the activities of the companies who provided LTCG entries were not real and it was found that there were no substantial business transactions taken place in the companies who traded in shares and manipulated for providing profitable exist to various beneficiaries by availing bogus LTCG. A reference was made to page nos. 43 & 44 of the assessment order. It was also submitted that many of the entities, provided profitable exist to initial preferential allottees in the scripts, which were under the control of some accommodation entry providers who admit to have been controlling those companies. A reference was made to para 4.5.2 of the assessment order. It was further stated that the notices were issued to check the identity and creditworthiness of the purchaser who purchased the shares of the assessee at a very high price and provided profitable exist, on test check basis on the addresses provided by BSL. However, most of those notices either returned back or incomplete reply was received and even the investigation carried out by SEBI in few of listed companies on the basis of common trading pattern and identical developments like stock splits, preferential allotments, insignificant economic activity and exorbitantly high stock price clearly established that the assessee manipulated the trading in the scripts and had taken undue benefit out of the same by reaping Long Term Capital Gain by manipulative trading in shares of those scripts. He further submitted that incriminating material seized from Sh. Raj Kumar Kedia and Sh. Ankur Agarwal who were connecting persons, clearly established that the material so seized from that person was related to the assessee as such it was an incriminating material. 21. The reliance was placed on the following case laws: i. Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain Vs PCIT- 1, Nagpur (2018) 89 Taxmann.com 196 (Bom.) ii. Abhimanyu Soin Vs ACIT (2018-TIOL-733-ITAT-CHD) iii. Chandan Gupta Vs CIT (2015) 54 Taxmann.com 10 (P&H) iv. Balbir Chand Maini Vs CIT (2012) 340 ITR 161 (P&H) v. Usha Chandresh Shah Vs ITO (2014-TIOL-1459-ITAT-Mum) vi. Ratnakar M Pujari Vs ITO (2016-TIOL-1746-ITAT-Mum) vii. Arvind M Kariya Vs ACIT in ITA No. 7024/Mum/2010 viii. ITO Vs Shamim M Bharwani (2016) 69 Taxmann.com 65 (Mum) ix. CIT Vs Mukundray K. Shah (2007) 290 ITR 433 (SC) x. CIT Vs S. Ajit Kumar (2018) 93 taxmann.com 294 (SC) xi. Vinod Kumar Gupta Vs DCIT in ITA No. 1003 of 2017, order dated 12.03.2018 (Del. HC) xii. Kishore Kumar Vs CIT 62 Taxmann.com 215 (SC) xiii. Bhagirath Aggarwal Vs CIT 351 ITR 143 (Del.) Page | 91

xiv. CIT Vs M. S. Aggarwal (2018) 93 taxmann.com 247 (Del.) xv. Smt. Dayawanti Vs CIT (2017) 390 ITR 496 (Del.) xvi. M/s Pebble Investment and Finance Ltd. Vs ITO (2017-TIOL238- SC-IT) xvii. Greenview Restaurant Vs ACIT (2003) 263 ITR 169 (Gau.) xviii. Raj Hans Towers (P.) Ltd. Vs CIT 373 ITR 9 (Del.) xix. PCIT Vs Avinash Kumar Setia (2017) 81 taxmann.com 476 (Del.) xx. M/s Punjab Sind Dairy Products Pvt. Ltd. Vs DCIT (2017- TIOL- 83-SC-IT) xxi. CIT Sonal Construction (2012-TIOL-851-HC-DEL-IT) xxii. CIT Vs Naresh Kumar Aggarwala (2011) 331 ITR 510 (Del.) xxiii. Mahabir Prasad Rungta Vs CIT (2014) 43 Taxmann.com 328 (Jharkhand) xxiv. Bhagheeratha Engineering Ltd. Vs ACIT (2015) 379 ITR 244 (Ker.) xxv. Ashok Kumar Vs CIT (2016) 386 ITR 342 (Patna) xxvi. Baldev Raj Vs CIT (2010) Taxmann.com 335 (P&H) xxvii. CIT Vs MAF Academy (P.) Ltd. 361 ITR 258 (Del.) xxviii. CIT Vs Navodaya Castle Pvt. Ltd. (2014) 367 ITR 306 (Del.) xxix. Konark Structural Engineering (P.) Ltd. Vs DCIT (2018) 90 Taxmann.com 56 (Bom.) xxx. CIT Vs Nipun Builders & Developers (P.) Ltd. 350 ITR 407 (Del.) xxxi. CIT Vs Nova Promoters & Finlease (P) Ltd. 342 ITR 169 (Del.) xxxii. CIT Vs Ultra Modern Exports (P.) Ltd. 40 Taxmann.com 458 (Del.) xxxiii. CIT Vs Frostair (P.) Ltd. 26 Taxmann.com 11 (Del.) xxxiv. CIT N R Portfolio Pvt. Ltd. (2013) 29 Taxmann.com 291 (Del.) xxxv. PCIT Vs Bikram Singh in ITA No. 55/2017 (Del.) 102. 22. The ld. CIT DR reiterated the observations made by the ld. CIT(A) in para 5.6.1 & 5.7.1 at page nos. 164 to 166 and stated that the material seized during the course of search at the premises of Sh. Raj Kumar Kedia and Sh. Ankur Agarwal constitute the documentary evidences as the same was related to the assessee. The Ld. DR has listed the so-called evidences relied upon by the Ld. A.O. and the Ld. CIT.(A) against the Assessee(s) viz. statements of Sri Manish Arora, R.K. Kedia, Neeraj Singal, Ankur Agarwal, statements of directors of alleged penny stock companies, statements of alleged entry operators & alleged exit operators, alleged documentary evidences found from the premises of Ankur Agarwal, alleged cash trail from bank accounts of alleged exit providers, notices issued u/s 133(6) to parties who had allegedly purchased shares of the Assesses and investigations carried out by SEBI in various listed securities. Page | 92

Pag CIT(DR)‘s Assessee‘s submissions in rejoinder e submissions Nos. 1 The Ld. DR The Assesses herein have already furnished detailed written has listed the submissions in counter to the allegations made by the Revenue so-called Authorities, the sum and substance of which may be discussed as evidences under: relied upon by 1. That no incriminating materials being found in course of search the Ld. A.O. actions u/s 132(1) in the case of the Assessee(s) herein, unabated and the Ld. assessments for A.Ys 2010-11 to 2012-13 cannot be reopened/re- CIT.(A) against agitated u/s 153A merely on the basis of third party statements the Assessee(s) and uncorroborated third party evidences – Reliance placed on the viz. decisions of the Hon‘ble Jurisdictional High Court in the cases of CIT (C)-III Vs. Kabul Chawla (Delhi) [2015] 234 Taxman 300, statements of Principal CIT & Ors, Vs. Meeta Gutgutia Prop. Ferns ‗N‘ Petals & Sri Manish Ors (2017) 395 ITR 526, (2017) (Delhi) and host of other decisions Arora, R.K. cited in the detailed written submissions filed earlier. Kedia, Neeraj 2. That the Hon‘ble ITAT, Delhi Bench in the cases of ACIT Vs. Singal, Ankur M/s. Gee Ispat Pvt. Ltd. in ITA Nos. 5424, 5425, 5474 & 5475 and Agarwal, Granite Gate Properties Pvt. Ltd. Vs. ACIT in ITA Nos. 7022 to 7024 held that in the absence of incriminating material being found in statements of course of search, no addition could be made in respect of unabated directors of assessment years. alleged penny 3. That statements of third parties recorded u/s 132(4)/133A of stock the Act and third party evidences/ documentation do not companies, constitute ‗incriminating material‘ within the meaning of section statements of 153A and cannot be used as evidence unless they have live nexus alleged entry with ‗incriminating material‘ found in course of search in the case of the Assessee for the purpose of framing assessment u/s 153A of operators & the Act. In the instant case, no incriminating material whatsoever alleged exit was found in course of search in the case of the Assessee(s) herein operators, – reliance placed on the judgments of the Hon‘ble Jurisdictional alleged High Court in CIT Vs. Harjeev Agarwal (2016) 290 CTR 263 (Del) documentary and Pr CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. & evidences Others in ITA Nos. 11/2017 to 22/2017 and plethora of other found from the cases cited in the written submissions. 4. That adverse statements of third parties recorded behind the back premises of of the Assessee cannot be used against the Assessee unless the Ankur Assessee has been allowed an opportunity of cross examination of Agarwal, such parties. Failure on the part of the A.O to allow cross- alleged cash examination of witnesses whose statements were relied upon for trail from making the impugned assessment is a serious flaw which makes bank accounts the assessment order a nullity. Since the Assesses herein were not allowed any opportunity of cross examination of the said persons, of alleged exit Assessments framed u/s 153A primarily relying on such adverse providers, statements deserve to be quashed – Reliance placed on the Hon‘ble notices issued Apex Court‘s decision in the case of Andaman Timber Industries u/s 133(6) to Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) and parties who host of other decisions cited in the written submissions filed on Page | 93

had allegedly behalf of the Assesses. 5. That no addition can be made in the hands of an assessee on the purchased basis of entries in the books of third parties in the absence of any shares of the corroborative evidence – Reliance placed on the judgment of the Assesses and Hon‘ble Supreme Court in Central Bureau of Investigation Vs. V.C. investigations Shukla & Ors (1998) AIR 1406 (SC) and several other cases cited in carried out by the written submissions. SEBI in 6. That presumption u/s 132(4A)/292C is available only in the case of the person from whose possession and control the documents various listed are found and it is not available in respect of a third party. securities. Accordingly, in the absence of any corroborative evidence found during the search operations at the premises of the Assessee(s), no adverse inference can be drawn against the Assessee(s) merely on the basis of the seized documents found and seized from the premises of third parties – reliance placed on the decision of the Jurisdictional High Court in the case of CIT Vs. Anil Khandelwal, (2015) 93 CCH 42 (Del HC) and several other decisions cited in the written submissions. 7. That there is no independent evidence to link the seized documents found in the premises of third parties with any incriminating material found in course of search operations at the premises of the Assessee(s). Hence, entries in documents seized from third party premises would not be sufficient to prove that the Assessee(s) indulged in such transactions. 8. That the entries found recorded in ABCD xls sheet of the seized pen-drive of Sri Ankur Agarwal corroborate/ substantiate the share transactions carried out by the Assessee(s) herein as duly found recorded in the regular books of the Assessee(s). The pen-drive does not contain anything incriminating against the Assessee(s). The entries in Job.xls sheet allegedly containing names of few alleged entry/exit operators do not relate to the Assessee(s) herein and have nothing to do with the share transactions carried out by them. 9. That the alleged cash trails from bank accounts of the alleged exit providers have no significance insofar as the present Assesses are concerned. The A.O has failed to establish any link/ nexus of the alleged cash trail with the Assesses herein. No cash trail evidencing conversion of alleged unaccounted money into bogus LTCG for the years under appeal has been prepared in the case of the Assessee(s) herein. The A.O, in the instant case has failed to establish any flow of unaccounted cash/income of the Assessee(s) through this channel by bringing on record conclusive evidence. 10. That the S.E.B.I, after conducting detailed investigation into the entire scheme employed in the respective scrips, came to a conclusion that although prices of the said scrips had been manipulated for providing fictitious long term capital gains (―LTCG‖) to Preferential Allottees and Promoter related entities in certain cases, the Assesses herein, despite being preferential allottees in the shares of the said companies, neither had any connection/ nexus with the said companies or their Promoters/Directors or Promoter related entities nor had any role in price manipulation or volume manipulation in the scrips of the said companies nor were involved in any such alleged scam. As noted by the S.E.B.I, the Assesses, being innocent genuine investors, were lured into the artifice with the promise of quick returns but their roles did not extend to price manipulation or Page | 94

facilitating such manipulations by means of fund transfers or any other activity of abetment. Accordingly, the Ex-parte Interim Orders passed against the Assesses were subsequently revoked by the SEBI vide final orders in favour of the Assesses. 2 The Ld. DR The referenced judgment being clearly distinguishable on facts is has relied inapplicable to the facts of the present case. The main points of upon the distinction may be tabulated as under: following decisions w.r.t addition made Sanjay Bimalchand Jain L/H Present Case u/s 68: Shantidevi Bimalchand Jain Vs. PCIT 1. Sri Sanjay The primary allegation of the In the instant case, the nature of Bimalchand Revenue Authorities in the share transactions viz. Jain L/H Shantidevi referenced case was that the ‗Investments‘ vs. ‗Business Bimalchand transaction of sale and Income‘ was never an issue for Jain Vs. purchase of shares of two consideration before the PCIT (ITA No. penny stock companies by the Revenue Authorities. The instant 18/2017 assessee therein did not qualify case is that of assessments (Bombay as an ‗Investment‘ but rather it completed u/s 153A pursuant to High Court – was an ‗Adventure in the search & seizure operation u/s Nagpur nature of trade‘. It was held 132(1) wherein nothing Bench) that the motive of the incriminating was found in investment made by the course of search operations in assessee was not to derive the case of the Assessee(s)‘ and ‗Income‘ but to earn ‗Profit‘ and additions u/s 68 were made in thus was required to be taxed respect of alleged bogus LTCG as ‗Business income‘ and relying on third party statements accordingly, exemption claimed and third party data. u/s 10(38) was not available. It was not a case where addition was sought to be made u/s 68 of the Act.

The shares in question were The shares in question were those of Private Ltd. companies those of Public limited – thus not listed or traded in companies duly listed on the the Stock Exchange – meaning Stock Exchange – thus shares thereby that the prices at which were purchased/ sold at prices shares were purchased/ sold prevailing on the Stock was not verifiable. Exchange.

In the referenced case, The peculiar circumstances Page | 95

payments were made in ‗cash‘ leading to suspicion as in the for acquisition of shares of two referenced case are absent in the penny stock companies, having present case. The shares in the the same address and same instant case were allotted to the authorized signatory. The Assesses via preferential purchase of both the shares allotment and payments were was done by the assessee made through regular banking through the same broker, GSSL channels. The shares were listed and the address of the said and traded on recognized stock broker was incidentally the exchange, the shares were address of the two companies. transferred to the Assessee(s)‘ Given the suspicious Demat Account and sold over circumstances, the A.O held BOLT platform (on-line trading that the transactions of platform of the stock exchange) purchase of two penny stock through registered stock brokers shares for lesser amount, the at the prices prevailing on the merger of the companies with a stock exchange. Thus, the issue new company and sale of the whether the said transactions shares for higher amount fell were ‗adventure in the nature of within the ambit of ‗adventure trade‘ or in the nature of in the nature of trade‘ and the ‗investment‘ never arose for assessee had ‗profited‘ from consideration before the such transaction. The A.O thus Revenue Authorities in the brought the impugned amount instant case. to tax under the head ‗business income‘.

The broker through whom the Unlike the referenced case, since shares were sold by the the shares in the instant case assessee did not respond to the were sold over on-line trading A.O‘s letter seeking the name, platform of the stock exchange, addresses and bank accounts the question of giving details of of the persons who had the ultimate purchaser of shares purchased the shares sold by did not arise since in an on-line the assessee. Thus, the trading platform, the buyers and assessee failed to substantiate sellers of shares are not known the transactions in shares to each other. The Assesses herein filed conclusive carried out by it. documentary evidences in support of the genuineness of the transactions in shares carried out by them which the Revenue Authorities failed to controvert. 2. Abhimanyu 2. Soin Vs. ACIT In the case of Abhimanyu Soni, the A.O treated the LTCG offered by 2018-TIOL- Page | 96

733-ITAT-CHD the assessee therein as unexplained cash credit u/s 68 in a fact (ITAT specific scenario which is clearly distinguishable from the facts of Chandigarh) the present case in the manner as follows:

Abhimanyu Soin Vs. ACIT 2018- Present Case TIOL-733-ITAT-CHD The shares in question were of The shares in question unlisted company – thus were duly listed and purchase/sale price of shares could traded on recognized stock not be conclusively authenticated. exchange. The transactions in shares were carried out by the Assesses herein at prices prevailing on the stock exchange. Thus, the genuineness of the share transactions stands validated.

A definite finding of fact was The peculiar facts and recorded that the assessee therein circumstances leading to had under collusion with the stock suspicion in the referenced broker managed to show case are absent in the transaction, whereas as per present case. contract note received from broker the dates of transaction were different which showed that the transaction had been managed after a later date.

The assessee was out when the No such adverse finding transactions took place. The exists in the instant case. assessee did not have requisite Payments for investments source of investment during the were made through regular relevant period of investment. banking channels. The Assesses had adequate funds during the relevant period of investment.

The investments were made on the No such findings exist in advice of renowned investment the present case. The advising company like Edelweiss Assesses furnished

for which the assessee did not pay conclusive documentary any consultation fees leading to the evidences proving the conclusion that the entire authenticity of impugned transaction was synchronized and transactions in shares carefully planned only to defeat the carried out by them. Thus, purpose of revenue. the judgment rendered in the case of Abhimanyu Soni under the given set of facts is not applicable to the case at hand.

3 3. Chanda The judgment in the referenced case was passed on completely n Gupta Vs. disparate set of facts and as such is not applicable to the facts of the CIT (2015) present case: 54 taxmann.co m 10 (P&H H.C) Chandan Gupta Vs. CIT Present Case (2015) 54 taxmann.com 10 (P&H) The referenced case As distinguished from the referenced pertains to F.Y. 2004- case, in the present case, the Assesses 05 wherein the had offered similar LTCG in earlier assessee had offered years. The A.O after conducting LTCG of Rs. 51 lacs. A detailed scrutiny of accounts of the finding of fact was Assesses accepted the LTCG offered by recorded in that case the Assesses for A.Y. 2010-11& 2011- that the assessee had 12 in assessments completed u/s not done any share 143(3) of the Act. However, pursuant business before F.Y. to search action u/s 132(1) on 2003-04 and after F.Y. 13.06.2014, although no incriminating 2004-05. The assessee materials were found in course of had only filed copy of search in the cases of the Assesses sale and purchase bill herein, the A.O sought to reopen and showed inability to completed Assessments of A.Y. 2010- produce the broker. 11 & 2011-12 on a mere change of Under the specific set opinion and reassess/ assess LTCG of facts, the Tribunal offered by the Assesses as held that the assessee unexplained cash credit u/s 68 for had failed to prove the A.Ys 2010-11 to 2015-16 in the guise genuineness of the of search assessment u/s 153A. transaction of sale and Therefore, the search operation in the purchase of shares. case of the Assesses herein was used as a device for conducting fishing and Page | 98

roving enquiries and reassessing completed assessments on a mere change of opinion relying on the theory of preponderance of probabilities and human conduct ignoring conclusive documentary evidences filed by the Assesses in support of the transactions in shares carried out by them. Thus, the present case stands on completely dissimilar set of facts vis-à-vis the case of Chandan Gupta. Accordingly, the judgment rendered in the referenced case is not applicable to the facts of the instant case.

The sale of shares in the The shares in the present case referenced case had not taken were sold through a registered place through any stock stock broker over recognized exchange – thus the purchase stock exchange after due and sale of shares could not be payment of STT at the prices conclusively verified. prevailing on the stock exchange and conclusive documentary evidences proving authenticity of all the transactions were filed by the Assessee(s).

The broker could not give No such adverse finding exists details of purchaser of shares. in the present case. The Shares claimed to have been impugned shares were duly sold through broker had not transferred in the names of the been transferred even at the Assesses. Shares were sold time of making enquiry by the over BOLT platform at prices Page | 99

AO and the same continued to prevailing on the stock be registered in the name of the exchange and consideration assessee. from sales were received through regular banking channels. Since the shares were sold over on-line trading platform of the stock exchange, the question of giving details of purchaser of shares did not arise since in an on-line trading platform, the ultimate buyers and sellers of shares are not known to each other. Therefore, the judgment in the case of Balbir Chand Maini was rendered in a fact specific scenario which completely varies from the facts of the present case. 3. 5. Usha Chandresh The judgment in the case of Usha Chandresh Shah referred to by the Shah Vs. ITO (2014- Revenue was rendered on a widely dissimilar set of facts and thus is TIOL-1459- clearly inapplicable to the facts of the present case. The main points ITAT-Mum) of distinction are as follows: (ITAT Mumbai) Usha Chandresh Shah Vs. ITO Present Case (2014-TIOL-1459-ITAT-Mum)

The shares were purchased in The circumstances leading to off-market transactions in suspicion in the case of Usha physical form. The assessee Chandresh Shah are clearly could not produce copies of absent in the present case. The Share certificates or copies of shares in the instant case were share transfer forms. The either allotted through transaction of purchase was preferential allotment or claimed to have been paid purchased over recognized through speculation profit, stock exchange and payments meaning thereby that the were made via regular banking purchases were not routed channels. Thus, unlike the through bank. referenced case where purchases were not routed through the stock exchange and could not be cross verified, the Assessee(s) in the instant Page | 100

case have furnished conclusive documentary evidences establishing the genuineness of purchase/sale of shares.

Clearly the suspicious facts & circumstances viz. off market purchases, payments in cash, pre-dated contract notes etc. leading to addition in the case of Ratnakar M Pujari are absent in the case of the present Assessee(s) and accordingly, the judgment rendered in the said case in the given fact specific scenario is not applicable to the incongruent facts of the present case.

4 7. Arvind The Ld. DR has quoted from the order of the Hon‘ble ITAT in ITAT M Kariya No. 7024/Mum/2010 in the manner so follows: Vs. ACIT (ITA No. “having regard to the circumstances and the conduct of the assessee 7024/Mum as disclosed in his statement u/s 132(4) of the Act as well as other /2010) material on record, inference could be reasonably drawn that the (ITAT shares purchased by the assessee have been backdated to give it a Mumbai) colour of Long Term Capital gain by showing the period of holding for more than 12 months. Needless to say that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities, therefore applying the test of preponderance of probabilities and considering the entire sequence of events, the Revenue Authorities have rightly concluded that the assessee‟s claim about the long term capital gains from sale of shares is not genuine.”

Clearly as evident from the above excerpt as quoted by the Ld. DR, the issue for consideration before the Hon‘ble ITAT was whether the assessee had backdated the purchases of shares to give it a colour of Page | 101

Long Term Capital Gain by showing the period of holding for more than 12 months. Further, from the above quoted excerpt, it is also patent that the assessee therein had admitted to the above state of affairs in his statement u/s 132(4) of the Act. The case of the instant Assessee(s) on the other hand stands on a completely different footing inasmuch as the search actions in the case of the Assessee(s) herein have not resulted in discovery of any incriminating materials w.r.t the impugned scrips and the Assessee(s) have not made any admission/confession of any wrongdoing w.r.t the impugned investments in the statements recorded u/s 132(4) of the Act. The period of holding of shares, the back dating of purchases etc. are not issues for consideration before the Hon‘ble ITAT in the instant case. Thus, the judgment rendered in the referenced case is not applicable to the facts of the present Assessee(s)‘ case.

It is pertinent to note that the above quoted excerpts apparently do not feature in the judgment rendered by the Hon‘ble ITAT in ITA No. 7024/Mum/2010. In the case of Arvind M Kariya (ITA No. 7024/Mum/2010), the issue was restored to the file of the A.O by the Hon‘ble ITAT with the following observation: “12. Therefore, we also deem it appropriate to restore the issue to the file of the AO to avoid the conflicting assessment order in respect of the same AY and direct the AO to verify and examine the actual date of purchase in both the cases and thereby determine the short term capital gains or long term capital gains, or it may be added in income of the assessee u/s 68 on the basis of the alleged incriminating material found during the search as the case may be, and pass fresh assessment order after giving opportunity of being heard to the assessee and decide the same in accordance with law.” Therefore, unlike the extract quoted by the Ld. DR, in the case of Arvind M Kariya, the Hon‘ble Tribunal did not give any conclusive finding wrt the issue under consideration but restored the same to the file of the A.O. The issue under consideration in the said case primarily related to ascertainment of actual date of purchase of shares in order to determine whether the resultant gain was in the nature of short term capital gains or long term capital gains. The Tribunal further directed the A.O to check whether the resultant gains could be added to the income of the assessee u/s 68 on the basis of alleged incriminating material found during the search – thus highlighting the stance of the ITAT that search assessments u/s 153A are required to be based on incriminating materials found in course of search in the case of the assessee. Thus, unlike the case of the present Assessee(s) where nothing incriminating was found in course of search, in the case of Arvind M Kariya certain Page | 102

incriminating materials wrt the purchase and sale of impugned shares were found and statement of the assessee was recorded u/s 132(4) offering the capital gains. 4 8. ITO v. The referenced judgment is once again completely distinguishable on Shamin M facts and thus inconsequential to the present case. The main points Bharwani of distinction as are follows: (2016) (69 Taxmann.co m 65) (ITAT Mumbai) Shamin M Bharwani (2016) (69 Present Case Taxmann.com 65)

The purchase of shares was off The facts leading to market purchase not reported in suspicion in the case of the stock exchange. The Hon‘ble Shamin M Bharwani are ITAT recorded a finding of fact that clearly absent in the the purchase was through a back instant case. The dated contract note in cash and Assessee(s) in the instant there was no trail. Under the given case have furnished facts, the Hon‘ble ITAT found the conclusive documentary transaction suspicious and added evidence in support of the the amount in question to the LTCG claimed by them and taxable income of the assessee u/s all the impugned 68 transactions in shares were through banking channel.

At this juncture, it may be pertinent to note that the Hon‘ble Courts and Tribunals have in a plethora of cases ordained that the mere fact that sales were made in penny stock would not result in any adverse inference to hold the transactions therein as non-genuine merely relying on theory of preponderance of probabilities and suspicion unless proved to be so by concrete evidence on record:

(i) Navneet Agarwal, Legal Heir of Late Kiran Agarwal Vs. ITO, Kolkata in ITAT No. 2281/Kol/2017 (ii) Manish Kumar Baid &Anr Vs. ACIT, ITA No. 1236, 1237 dated 18.08.2017 reported in 2017 TaxPub(DT) 4463 (Kol-Tri) (iii) CIT Vs. Udit Narain Agarwal, IT Appeal No. 560 of 2009 (All HC) (iv) CIT Vs. Sumitra Devi (2014) 49 taxmann. Com 37 (Raj HC) (v) CIT Vs. Smt. Pushpa Malpani (2012) 20 taxmann.com 597 (Raj HC) (vi) Meenu Goel Vs. ITO, Ward -31(1), ITA No. 6235/Del/2017 (Del ITAT) (vii) ITO Vs. Aarti Mittal (2013) 37 CCH 227 HydTrib, 149 ITD 728 Page | 103

(viii) Vishal Suryakant Shah & Ors Vs. ITO & Ors (2017) 49 CCH 106 (Ahd Trib) (ix) ITO Vs. Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum Trib) (x) Farrah Marker Vs. Income Tax Officer (2016) 46 CCH 535 Mum Trib

The A.O, in the instant case, thus erred in basing his assessment on the theory of preponderance of probabilities, human conduct and lack of prudent investor behavior in investing in shares of penny stock companies without bringing on record any legal evidence against the Assessee(s) to controvert the documentary evidences filed by the Assessee(s).

4 1. ‗s (S.C.) emanating The Ld. DR has himself highlighted the distinguishing feature of the from the decision of said judgment in the case of Kishore Kumar Vs. CIT which renders the Madras the same inapplicable to the facts of the present Assessee(s)‘ case in H.C. in (52 the manner so follows: taxmann.co m 449). “where the Hon‟ble Supreme Court dismissed SLP against High Court‟s order where it was held that since the assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents.”

Therefore, as clearly evident from the above quoted excerpt, the primary reason which led to the impugned addition in the case of Kishore Kumar was the disclosure/confession made by the assessee himself in his sworn statement about his undisclosed income during search and seizure. In the instant case, no such disclosure was made by the Assessee(s) herein. Therefore, the said judgment is inconsequential to the case of the Assessee(s) herein.

an admission/voluntary surrender so Bhaigarat Agarwal, for made by the assessee therein, i.e. it unlike the latter, in the was a case of where the present case the appellant/assessee admitted and Assessee(s) have not made surrendered a sum of Rs. 1.75 crore any clear admission/ as his undisclosed income. voluntarily disclosure on record, and the reliance so The Court in this regard, held that if placed on 3rd party the assessee wanted to hold that the statements, when there is said admission was incorrect, then an absence of he ought to have brought material to incriminating material show that the said admissions made unearthed from the by him (via two declarations) were premises of the incorrect. Assessee(s), would not be permissible as per Law. Thus, the Court opined that in the case of an admission, the reliance onto the CBDT Circular, 2003 in the case of a voluntarily surrender would not be applicable.

5 3. CIT v. The said judgment can be clearly distinguished on facts, and thus M.S inapplicable to the case of the Assesee(s) herein. The main points of Aggarwal, distinction can be tabulated in the manner hereunder. [2018] 93 taxmann.co m (Delhi H.C) CIT v. M.S. Aggarwal Present Case Search and seizure operations That the Revenue has under Section 132 of the Act were erroneously relied on the said conducted onto the Assessee and judgment where a clear admission/confession by the the BSL Group. Assessee has been made therein – as against the case of the Assesseee(s) herein During the course of search, several where there is no such incriminating documents and admission on record, showing material were found and seized an irregular availment of showing that the respondent LTCGs. /assessee was carrying on benami business which were not accounted for and reflected in the books of accounts. Secondly the said judgment has been rendered in light of Sec.158BB, i.e. Block Assessment proceedings - as The Respondent/assessee in his against the 153A proceedings statement recorded under Section of the case herein, where the 132(4) of the Act admitted that the Law wrt Sec.153A stands well gifts given to him were not genuine. settled on the vital This admission and confession was Page | 105

made in two statements after a time requirement of incriminating gap of nearly forty days. material having to be found in the premises of the Assessee(s), before reference can be craved to the In light of the same, the Court held statements u/s 132(4) for that oral statements should not corroborative purposes. be/cannot be relied on in isolation, by relying on the view so taken by the jurisdictional H.C. in Harjeev Agarwal - that held in the context That it has already been of Sec.158BB that oral testimonies submitted that statements recorded under Section 132(4) recorded u/s 132(4) of the cannot be relied on, on a Act do not by themselves standalone basis/cannot by itself constitute incriminating constitute incriminating evidence, material. without reference to other material discovered during the course of search and seizure operations. Further the holding of the said judgment that the Revenue seeks to place However, at the same time the reliance on - can at best be Court has also specified the considered as obiter wrt contrary view taken by the Kerala voluntary admissions, as the H.C. in CIT v. Hotel Meriya – where said issue stands referred after referring to Section 3 of the and pending before a Larger Finance Act and Section 131 of the Bench, meaning that the Act. Oral evidence, it was observed, decision of the jurisdictional would be admissible for the H.C. in Harjeev Agarwal, still purpose of block assessment also. holds good. It is pertinent to note that the Hon‘ble Jurisdictional Delhi Thus, in light of the seemingly High Court in Principal CIT, conflicting opinions, The Court Delhi 2 Vs. Best referred the said matter to the Infrastructure (India) Pvt. Larger bench to examine the Ltd. & Others in ITA Nos. aforesaid issue and question and 11/2017 to 22/2017 vide accordingly placed the same before order dated 01.08.2017 has the Acting Chief Justice. relied on its judgment in the case of Harjeev Agarwal (supra) to hold that statements recorded u/s 132(4) do not by themselves constitute incriminating material for the purpose of assessment u/s 153A of the Act. Thus the law stands settled in favour of the Page | 106

Assessee in view of the explicit judgment of the Hon‘ble Jurisdictional H.C on the said issue. 5 4. M/s That the said judgment of M/s Dayawanti is no longer good Law, for Dayawanti v. although the decision of the H.C. has held that statements recorded CIT, [2016] during search operations could be relied upon to make addition to 75 assessee's income, wrt 153A proceedings, rather than relying on taxmann.co incriminating material – the same cannot be applicable in light of the m 308 (Delhi fact that a stay stands granted by the Hon‘ble S.C. in (C) Appeal No. H.C) 20559/2017, against the said decision of the Delhi H.C.

Thus, the Law that sole reliance on statements recorded u/s 132(4) for the purposes of making additions in the Assessments u/s 153A in the Assessee(s) case(s) cannot be done, shall hold good, since the same cannot by themselves constitute incriminating material, in the absence of a live nexus to the incriminating documents/BOA‘s etc. found in the premises of the Assessee(s).

Further, it is also settled Law that statements which are retracted subsequently, do not form the sole basis of computing the undisclosed income of the Assessee.

Thus, it becomes clear that the Revenue‘s attempt at placing strong reliance on 3rd party statements so recorded u/s 132(4) and 133A, cannot hold good – especially when the Assessee(s) have constantly denied any linkage/dealings with R.K. Kedia or Manish Arora or the alleged entry/exit operators or the alleged directors of the penny stock companies.

5 5. M/s That the Revenue has relied on the said judgment of the Bombay Pebble H.C. and the consequent Order dt.5.07.2017 of the S.C, dismissing Investment & the SLP against the Order of the Bombay H.C. – on the basis that the Finance Ltd. Bombay H.C. has opined that ―statement made u/s 133A could be v. ITO (Civil) relied upon for the purposes of assessment, in absence of any Appeal contrary evidence or explanation as to why such statement made was 11784/2017 not credible‖ b (SC) emanating In Rebuttal, the same is distinguishable from the present case on from the facts, in the manner as below: decision of the Bomba M/s Pebble Investment v. ITO Present Case H.C. in 2017 TIOL 188 The question before the H.C. was As against the same, in the Page | 107

HC- MUM-IT whether the Tribunal was correct in present case - there has deleting the claim for depreciation been able and sufficient on Flameless Furnace as the evidence shown and purchase and lease was as sham on provided on record wrt the the basis of a statement of the investments/transactions Director of the lessee/Appellant Co. made in the respective listed u/s. 133 of the Act (who stated that companies, thereby fulfilling no such furnace was taken on lease the conditions u/s 68 of the by the lessee/Appellant Co.) - and Act. upon ignoring the various The said transactions, in documents like the tripartite such listed securities, were Agreement, lease Agreement, carried out by the Assesee(s) invoices of the supplier, delivery in good faith, as against the challan of the supplier, copies of stance of the Revenue that the Bank statements? there has been an irregular That the Court upheld the decision availment of LTCGs. of the Tribunal, on the basis that Further the Assessee(s) the statement made by director of herein have strongly refuted the lessee/Appellant Co. u/s 133A the reliance placed on (stating that the lessee/Appellant certain third party Co. therein has not purchased the statements, and documents said machinery from the Lessor), found in the 3rd party was made available by to the premises - when no such Appellant Co., and was not incriminating material disputed by the Appellant Co. at a stands found from the later stage. premises of the Assessee(s) Further, the said judgment stands and when no such rendered in a fact specific scenario statement(s) of the Assesses where the Lessee/Appellant Co. divulges any mention of was unaware of the whereabouts of having irregularly availed the furnace in question, nor could LTCGs. provide for the lease documents, Thus, unlike the factual and thus the reliance on the said scenario in Pebble statement u/s 133A of the Director Investment, where the of the lessee/Appellant Co. was director of the said Co. had upheld by holding that ―the admitted on record, that the statement made under Section 133A Appellant Co. had not of the Act is not bereft of any leased the Furnace - the evidentiary value. The same may attempt of the Revenue of not be conclusive but in the absence seeking to place reliance of any contrary evidence or solely on Sec. 133A and explanation as to why the statement 132(4) statements to whom made under Section 133A of the Act the Assessee(s) have no is not credible, it can be acted nexus with - is fallacious, upon.‖ since such statements don‘t hold any evidentiary value.

5 6. Green That the Revenue has placed reliance on the said decision wrt the View Law on retraction, but the same is also distinguishable from the facts Restaurant the facts of the present case, in the manner as below: V. ACIT, [2003] 133 Green View Restaurant v. ACIT Present case Taxman 432 The appellant was a partnership firm Unlike the same, in (Delhi H.C) carrying on the business of running a the case at hand, restaurant. A search was conducted in its there has been no premises and in the course of which the such voluntary books of account of the appellant were admission/ suo seized, and the appellant's partner had motu statement made his statements suo motu under made by the any of section 132(4) of the Act. the Assessee(s) indicating in the The case of the appellant-firm was that the irregular availment said partner was not a literate person and of LTCGs. the income-tax authorities used force and coercion to compel him to sign the said Further, as already statements which the said person did out discussed above, of fear and compulsion. reliance so placed on third party However, the court opined that in such statements u/s instances of voluntary/ suo motu 132(4) cannot by confessions, when the attention of this themselves Court has not been drawn to any material constitute on record to establish that any attempt was incriminating made on behalf of the appellant to prove material, especially the allegation of inducement threat or when there is no coercion (through witnesses), - then such a incriminating confessional statement cannot be set aside. material that stands seized from Further, here, the Court observed that the premises of the there is nothing to indicated/reference in Assessee(s). the orders, that in fact a retraction had even been made. Further, unlike this case, retraction by However, in the said judgment, the Court witness of the has also opined that a statement u/s Department (Ankur 132(4) cannot be the sole basis for making Agarwal) was on an assessment, and that the Assessee firm record – meaning had in fact not been given an opportunity that their recorded of explaining the disclosures made in the statements are now statement of its partner – and thus the rendered to nullity Guhati H.C. has infact held against the since it is settled Revenue, by remanding the matter back to Law that retracted the A.O. to strictly confirm with the norms statements cannot so laid down for an assessment subsequently be u/Sec.143(3). made the sole basis Page | 109

for computation u/s 153A of the Act.

6 7. Raj That this judgment is also distinguishable on facts, in the following Hans Towers manner: (P) Ltd. v. Raj Hans Towers (P) Present Case CIT, 56 taxmann.co Ltd. v. CIT m 67 (Delhi The assessee was engaged This case pertains to a survey, H.C) in real estate and unlike the Sec.153A proceedings, constructions activities. dealing with the case of the Assessee(s) herein, where the During the course of survey, prerequisite of incriminating the statement of one of its material unearthed from the directors was recorded, premises of the Assessee, cannot be wherein he voluntarily done away with. disclosed that a sum of Rs.15 crores was an Further, here, unlike the case of the additional income outside Assessee(s) – the reliance placed on the regular books of account the statement of the director of the and furnished details in this Assessee therein was because, there regard. was a doubt if retraction had indeed been taken place or not. The assessee had not disclosed this income in its That the said judgment deals returns, but declared it at specifically with the presumption so the time of survey. created u/s 133A (3) (iii) – where all that this provision enables the The Court held that since all authority concerned to do - is to that was available was the draw an adverse inference by relying voluntary disclosure of the upon materials which are seized, or Assessee – reliance was dealt with in the course of the placed onto the statement of survey. the Director of the Assesseee. Further in the case at hand, the Assesses have already placed on Further the Court also record, sufficient material to show opined, that since the date that the investments in the of Retraction was not on respective listed companies were record, this itself casts genuine and bon fide (thereby doubt as to whether the meeting the requirements of Sec.68) retraction was in fact made - and thus, any reliance placed on or was claimed as an Sec.132(4) statements, so taken afterthought. under oath sans incriminating material found at the premises of the Assessee(s) would be illegal. Further, since no such incriminating Page | 110

material was found in the premises of the Assesses‘ the presumption u/s 132(4A)/292C would also be inapplicable to the case of the Assessee(s) herein. 6 8. PCIT v. The said case, has been referred by the Revenue by quoting that “ Avinash where the Hon‟ble Delhi H.C. held that where the assessee Kumar Setia, surrendered certain income by way of declaration, and withdrew the [2017] 81 same after two years without any satisfactory explanation, it could not taxmann.co be tread as bona fide and, hence, addition would sustain” m 476 (Delhi H.C) The said judgment is however distinguishable on facts, as shown in the manner below: PCIT v. Avinash Kumar Setia Present Case 1. That the facts of this case, again deal As already iterated with a survey where the question before above, in the case of the H.C. was as follows the Assesseee(s), 2. ―Did the ITAT fall into error in holding that statements under the surrender made by the assessee in the Sec.132(4) stood course of the survey and confirmed two recorded under oath, months later in writing, was deserved to and no such be deleted in the circumstances of the case for lack of any corroborative material‖ - voluntary disclosure And on the basis of the same, the court has been made by opined that after making a voluntary any of the Assessee(s) disclosure before the Revenue, the – and thus, any retraction after a period of two years was reliance on third unjustified. party evidence/statements, sans incriminating material found in the course of the 153A proceedings, of the Assessee(s) indicating any undisclosed income - would be bad in Law. 6 That the The said judgment in Dayawanti is no longer good Law, as has Ld.DR has already been dealt and iterated above. relied upon the following decisions wrt That the Revenue has erred in stating that the Hon‘ble S.C. has in the validity of fact confirmed the Order of the Bombay H.C. – when in fact, the S.C. proceedings vide Order dt.17.02.207, has simply disposed of the SLP filed against u/s 153A the judgment of the Bombay H.C. in a non speaking fashion Further, the said judgment can be distinguished on facts in the manner as below: Page | 111

(SC), in the following manner: emanating B Kishore Kumar v. DCIT Present Case from the Madras H.C. 1. That, upon a perusal of the That the said is again, judgment so facts of the judgment inapplicable to that of cited as 52 rendered by the Madras H.C. Assessee(s) herein, since taxmann.co on 03.11.2014, it becomes m 499 unlike the facts of that case, clear that in that case – the there has been no clear and H.C. has held that the case of categorical admission by any the assessee was decided on of the Assessee(s) wrt any of the basis of his own sworn statements dated 29.8.2006 the allegations so levied and 10.10.2006 and admitted upon by the Revenue, and documents. all that the Revenue is 2. And that when there has seeking to do, is pin the been a clear and categorical liability onto the Assessee(s) admission on the issue, then on the basis of retracted the Court opined that there was no further need to statements, third party scrutinize documents. statements and third party Moreover, in that case, the documentation – without Assessee has also not made fulfilling the basic out a case that the admission requirement of Sec.153A, made by him was incorrect or i.e., the need for there is mistake. incriminating material found at the premises of the Assessee(s). 7 4. Bhaigir That the Revenue has relied on this judgment, to hold that the at Agarwal v. statements recorded during the search operation cannot be deleted CIT, 31 without proving the statements to be incorrect taxmann.co m 274 (Delhi The said judgment stands distinguished in the manner below: H.C) Bhaigirat Agarwal v. CIT Present Case The ratio of the judgment of the Delhi The facts of the present H.C. pertained to the case of an case, vary from that of admission/voluntary surrender so Bhaigarat Agarwal, for made by the assessee therein, i.e. it unlike the latter, in the was a case of where the present case the appellant/assessee admitted and Assessee(s) have not surrendered a sum of Rs. 1.75 crore made any clear as his undisclosed income. admission/ voluntarily disclosure on record, The Court in this regard, held that if and the reliance so the assessee wanted to hold that the placed on 3rd party said admission was incorrect, then he statements, when there ought to have brought material to is an absence of show that the said admissions made incriminating material by him (via two declarations) were unearthed from the incorrect. premises of the Page | 113

Thus, the Court opined that in the Assessee(s), would not case of an admission, the reliance be permissible as per onto the CBDT Circular, 2003 in the Law (as has been dealt case of a voluntarily surrender would with above). not be applicable. 7 That the At the outset it is important to understand the scope and ambit Ld.D.R. has of Sec.132(4A) & Sec.292C, that has been elucidated vide the referred to CBDT Circular No. 3 of 2008 dated 12.03.2008 the following In the following manner: case Laws w.r.t the “ 69.1The provisions of sub-section (4A) of section 132 provides that presumption the books of account, money, bullion, jewellery or other valuable of the entries article or thing found in the possession or control of any person in the found course of a search under section 132 will be presumed to belong to the recorded in said person. It is further provided that it will be presumed that the contents of such books of account and other documents are true; and the books of that the signature and every other part of such books of account and account other documents which purport to be in handwriting of any particular seized during person or which may reasonably be assumed to have been signed by, serach as per or to be in the handwriting of, any particular person, are in that Sec.132(4A) persons handwriting, and in the case of a document stamped, and 292C of executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed the IT Act. or attested. 69.2 A new section 292C has been inserted so as to clarify that presumptions provided in sub-section (4A) of section 132 can be made in any proceedings under this Act.” Emphasis is drawn to the fact that the statutory presumption found u.s 132(4A) and 292C shall apply to such persons in whose possession and control the respective books of account, money, bullion, jewellery or other valuable article or thing has been found in the course of a search u/s 132. And it is in this light that the following judgments so relied upon by the Revenue shall be tackled:

7 1. CIT v. That the said judgment of the Delhi H.C. can be factually Sonal distinguished from the present case, in the manner as follows: Constructio n, [2012- CIT v. Sonal Construction Present Case TIOL-851- There was a search of the That, it is clear that the said HC-DEL-IT] premises of the assessee (a judgment was rendered in a (Delhi H.C) partnership firm) under section specific factual situation where 132, and on the basis of the documents were seized in the seized materials found from residential premises of one of the residential premises of one the partners of the Assessee of the partners; notice under firm, and in that regard, the Section 158 BC of the Act was H.C. opined that the decision of issued. the Tribunal that the presumption about the genuineness and truth of the According to the assessee, the contents of the documents undisclosed income was Page | 114

computed by the Assessing seized, as provided in Section Officer by merely looking into 132(4A), was not available to the the documents and the entries Assessing Officer in the therein on selective basis and assessment proceedings, was by ignoring those entries which erroneous in light of Sec.292C were in favour of the assessee, that permit the Assessing Officer and on the basis of the same, to invoke the presumption that the Tribunal held that the the seized documents belonged seized documents alone were to the person searched, subject not sufficient to draw any to rebuttal by the assessee. definite conclusion regarding the existence of undisclosed In the case at hand, the income. applicability of Sonal Construction – is fallacious for, On appeal before the H.C., the unlike Sonal Construction, it is Delhi H.C. held that ―we do not eminent to understand that no find any merit in the conclusion such incriminating material has of the Tribunal that the been unearthed from the correlation between the seized premise of the Assessee(s) material and the books of herein, for the presumption u/s account, on which reliance was 132(4A) and 292C to apply. placed by the Assessing Officer, was not sufficient for the All that the Revenue is seeking purpose of making the to rely on, is additions. V.K. Narang, from material/documentation found whose possession the in the residential/office documents were recovered, premises of third parties, i.e. was a partner of the assessee - Ankur Agarawal and R.K. Kedia, firm and the Tribunal itself who are individually in the observes in paragraph 22 of its possession and control of the order that "it is no doubt true respective material that the that recovery of document Revenue seeks to place reliance pertaining to the firm from the on, and would thus mean that possession of the partner of a the statutory presumption u/s firm is a vital piece of evidence 132(4A) and 292C shall be against the firm.‖‖ applicable to them and not the Assessee(s) – especially when it The H.C., then went on to hold is settled Law that third party that in the light of these two evidence cannot be construed to observations it was for the be incriminating material for the assessee to firmly rebut the purposes of Sec.153A. seized material with acceptable or credible evidence on an Thus the Presumption u/s application of Sec.132(4A) and 132(4A) and 292C regarding Sec.292C. ownership and correctness of the contents of third party material – cannot apply to the case of the Assessee(s). 9 2. CIT v. The said judgment is also distinguishable on facts, so done in the Naresh following manner: Kumar Aggarwala, CIT v. Naresh Kumar Aggarwala Present Case [2011] 9 A search operation was conducted at the Again, the Madras taxmann.co assessee's premises resulting in the H.C. has enunciated m 249 (Delhi H.C) Page | 115

recovery and seizure of some documents. the principle of Law One of such documents was a fax governing message dated 24-2-1992. Sec.132(4A), i.e. the said Section enables During the assessment proceedings, it a searching was found from the books maintained by authority to raise a the assessee that he had made payment rebuttable of Rs. 13,40,630 during the period 1990- presumption that 91 and 1991-92 for the purchase of a such books of property. account, money, bullion etc. belonged However, as per the details mentioned in to such person; that the aforesaid fax message, the Assessing the contents of such Officer calculated the cost of that books of account property at Rs. 22,55,900 as against the and other declared payment of Rs. 13,40,630 and documents are true, treated the difference as unaccounted and, that the investment made by the assessee in that signatures and every property. other part of such The assessee contended that the books of account aforesaid fax message had to be read with and other letter dated 25-2-1992, received from the documents are same person, viz., R who had issued the signed by such fax and from that letter it was clear that person or are in the earlier he had wrongly mentioned the handwriting of that prices without verifying the facts. particular person. The H.C. while deciding the matter, held However, as already that in light of Sec.132(4A) –―Once there dealt with the said was a presumption raised on the seizure presumption of the fax message, it was upon the pertains to such assessee to rebut the presumption by person from whose offering plausible explanation. As we have premises the said noted above, mere production of letter incriminating dated 25-2-1992 purported to have been material stands written by R. Balaji would not be enough unearthed, and to rebut the presumption.” unlike the facts of the case in Naresh Kumar, there is no such incriminating material found from the premises of the Assessee(s) – to even the apply Sec.132(4A) and Sec.292C to the case of the Assessee(s). 9 3. Mahabi The said case can also be distinguished on facts, done in the r Prasad manner below: Page | 116

Rungta v. Mahabir Prasad Rungta v. CIT Present Case CIT, [2014] Search and seizure operations That at the outset, it is vital 43 taxmann.co were conducted at the premises of to note that the said m 28 the assessee under section 132. In judgment of Mahabir Prasad (Jharkhand response to notice under section was rendered in the context H.C) 158BC, the assessee filed the of Block Assessment, where returns for the block period the H.C has itself stated that disclosing undisclosed income of ―It must be mentioned that Rs.6.51 Lakhs. The Assessing since loose-sheets seized are Officer completed the assessment documents within the and assessed the undisclosed meaning of section 158B(b), income at Rs.40.76 Lakhs. The there is presumption raised same was upheld by the Tribunal. under section 132(4A) regarding the documents Here, on an appeal before the H.C., seized.‖Thus, the it was held that ―15. Often entries presumption u/s 132(4A) are made by businessmen in stood applicable in the case chits/loose sheets. During search, if of the Assessee therein. such chits/loose sheets are found, such chits/loose sheets may be However unlike the same, in regarded as "documents" within the the present case, the Law meaning of section 158B(b). The u/s 153A requires the need loose sheets seized during the for incriminating material search sometimes contain valuable unearthed from the premises information and those loose sheets of the Assessee(s) before are to be regarded as "documents".” Sec.132(4A)/ 292C can be made applicable. And on the basis of the same, the H.C further opined that the rebuttal And as stated above, since no presumption u/s 132(4A) shall such evidence, stood apply to the Assessee where the recovered, and the fact that assessee ought to have produced the present case does not other documents to disprove the pertain to a block entries made in the loose sheets – assessment, the said but since the assessee had not judgment of Mahabir Prasad produced any such evidence in shall be inapplicable. rebuttal of the said presumption, Further, the fact that this the said additions were upheld. judgment has made a finding in the specific light of Sec.158B(b) would mean, that wrt Sec.153A proceedings, the Law as laid down by the Hon‘ble S.C. in V.C. Shukla, etc. shall hold good. 9 4. Bhaghe That the Revenue has relied on this judgment in the following ertha manner: ―where Hon‘ble Kerala H.C. held in view of introduction of Engineering section 158BH, presumption under Section 132(4A) regarding Page | 117

Ltd. v. ACIT ownership of seized assets was not limited to proceedings for search [2017] 79 and seizure u/s 132 and, was also available for framing regular taxmann.co assessment‖ m 325 (Kerala H.C) That the facts of the above said case, are distinguishable from the present case, in the manner as follows: Bhaghreetha Engineering Ltd v. ACIT Present Case On receipt of information from the CBI that That unlike the unaccounted cash was being delivered from said case, the the office premises of the assessee to one 'A' present case also - search action under section 132 was does not deal with a conducted, at the premises of 'A', the office block assessment, premises of the assessee, and the premises or the applicability of the Vice-President of the assessee. of Sec.158BH. By taking into consideration the sworn That in the present statements and the incriminating case, the documents seized from the office premises Assessee(s) has of the assessee at New Delhi, and the maintained its explanations offered by the assessee, it was stance that the found that the assessee had made illegal statutory payments to various officials of Government presumption u/s agencies. 132(4A) and 292C are not applicable Before the H.C., on the contention of the in their cases, for assessee that presumption under section the basic 132(4A) was available only in regard to the requirement of proceedings for search and seizure under Sec.153A, i.e., the section 132, and that such presumption need for having was not available for framing the regular incriminating assessment – it was held, material unearthed from the premises “that in view of the introduction of section of the Assessee(s) 158BH, sub-section (4) and sub-section (4A) has not been of section 132 are applicable in the matter of fulfilled. conducting the assessment by the Assessing Officer and, therefore, there was no illegality Thus any reliance, or infirmity on the part of the Assessing placed on third Officer to have taken into account the sworn party statements / statements of the witnesses taken on oath.” material collected from third party premises can only be made use of by the Revenue on a corroborative basis, and not on a standalone basis. Thus any statutory Page | 118

presumption so raised u/s 132(4A) and 292C shall be applicable to the 3rd person in whose possession and control the said material is found, and not against the Assessee(s) herein. 9 5. Ashok The said judgment is also distinguishable on facts, in the manner kumar v. as follows: CIT [2016] Ashok Kumar v. CIT Present Case 69 taxmann.co It is peculiar fact situation, where a The holding of the said m 129 search was conducted in the premises case, is in a fact specific (Patna H.C) of the father of the assessee on 11th scenario, where the Ld. February, 1988. HC. held that even if the A.O. has erroneously The assessment officer took into used the phrase ―the consideration a loose sheet marked presumption u/s 132(4A) KS-19 taken in possession from the is also on the assessee‖ house of the father of the appellant. the nature of the Order Which was account in the name of the passed by the A.O. under assessee maintained by M/s Bhagwati Sec.147 will not change, Cold Storage (P) Ltd. of which the since the uncooperative father of the assessee is the Managing conduct of the Assessee Director and the assessee is a share and the evidence holder. recovered from the premises of the father A notice was sent to the assessee would show that the under section 148 to file return. The Assessing Officer has assessee did not file return and reason to believe that, by neither responded to a questionnaire reason of the omission or sent by the department. failure on the part of an However, the assessee in the assessee to make a subsequent year pointed out that it return under section 139 was his father who used to take for any assessment year money from the company and used to to the Assessing Officer return it back when required. or to disclose fully and truly all material facts The same was however not accepted necessary for his by the A.O., and the assessment was assessment for that year, framed thereafter under Section 147 of income chargeable to tax the Act. can be said to have On an Appeal, the H.C. found that the escaped assessment for appeal generated no substantial that year. question of Law and held the Page | 119

following: However, in the present case, the said judgment ―Since the assessee has not filed return of Ashok Kumar shall be nor answered questionnaire, therefore, inapplicable, for here, the assessment has been framed in the presumption u/s terms of Section 147 of the Act as the 132(4A)/292C shall not loose sheet marked as KS-19 was be applicable to the case found to be relevant to return a finding of the Assessee(s) due to that the income of the assessee has the lack of incriminating escaped assessment. The expression material unearthed from used in the assessment order that "the their premises. Thus presumption u/s 132(4A) is also on the when there is no such assessee" will not change the nature of incriminating material the order passed by the Assessing found in the possession Officer which was passed by invoking and control of the provision of Section 147 of the Act after Assessee(s) herein, the issuing notice under Section 148 of the said statutory Act.‖ presumption shall not be applicable in the case at hand. 6. Baldev The said case, merely enunciates the well settled principle of Law 9 Raj v. CIT wer 132(4A) and is distinguishable from the present case, in the [2010] manner as below: taxmann.co m 335 (P&H Baldev Raj v. CIT Present Case H.C) In this case, the holding of the Tribunal That, unlike the said that the addition based on unexplained case, and as has cash entered in the pass book of the already been iterated daughter of the assessee (found during above, the the search and seizure operations presumption u/s conducted at the premises of the Asessee) 132(4A), i.e., shall not was justified, in light of the presumption be applicable in the created u/s 132(4A), i.e., ―that a case of the document, found in possession of any Assesseee(s) since no person in the process of search, belongs to incriminating material such person.‖ stands unearthed from the premises of And since the Assessee could not rebut the Assessee(s) in the said presumption by offering a valid question. explanation of the source of the source of deposit in the name of the unmarried daughter, The H.C. upheld the finding of the Tribunal , on the basis that with the failure on the part of the Assessee to rebut the presumption, which is purely a question of fact, the petition before the H.C. is dismissed, since no substantial question of Law stands arisen. Page | 120

10 That the Ld. It is submitted that none of the judgments, referred to by the Ld. DR has relied DR advance the case of the Revenue inasmuch as the said upon the judgments are based on specific factual matrix of the respective following cases and are clearly inapplicable to the disparate facts of the judgments present case. It is pertinent to note that all the judgments relied w.r.t the upon by the Ld. DR w.r.t applicability of section 68 relate to the addition receipt of share application money by private limited companies made u/s 68 under glaringly suspicious circumstances. The said judgments are not applicable to the case of the Assessee(s) herein which deals with long term capital gains arising on sale of shares of public limited companies via on-line trading platform of recognized stock exchange wherein that the Assessee(s) have furnished conclusively documentary evidences establishing the genuineness of the impugned transactions and satisfying the ingredients of section 68. The Revenue Authorities in the instant case, apart from relying on uncorroborated third party documentation and third party statements recorded behind the back of the Assessee without affording an opportunity of cross examination, have failed to bring on record cogent evidence to dislodge the genuineness of the evidences produced by the Assessee(s). Further, completed assessments have been reopened u/s 153A without any incriminating materials being found in course of search as against the law laid down by the Hon‘ble Jurisdictional High Court in the cases of Kabul Chawla & Meeta Gutgutia and host of other cases cited in the written submission filed on behalf of the Assessee(s). In the aforesaid backdrop, the judgments relied upon by the Ld. DR are individually distinguished in the manner as follows:

The decision of Hon‘ble Delhi HC in the case of MAF Academy is clearly distinguishable as it proceeds on its own facts. The said case is that of share application money wherein the assessee desperately failed to establish the ingredients of section 68 unlike the present case wherein the Assessee(s) furnished documentary evidences conclusively establishing the nature and source of the impugned sums credited in his books viz. sale proceeds of shares resulting in LTCG for the Assessee(s). 1. CIT Vs. MAF The distinguishing facts leading to the judgment in the said case Academy rendering the same inapplicable to the present case may be (P) Ltd. elucidated as under: (361 ITR 285) CIT Vs. MAF Academy (P) Ltd. Present Case (Delhi (361 ITR 285) H.C) The said judgment was rendered in It is thus evident that the the following fact specific scenario: judgment in MAF Academy was rendered on  That the assessee company was a completely incongruent private limited company and had set of facts having no not come out with any public Page | 121

issue nor made any similarity/likeness to the advertisement for issuance of present case. Unlike the share capital. case of MAF Academy  However, in one year there was wherein glaringly peculiar infusion of share capital facts & circumstances including premium of leading to suspicion Rs.4,35,00,000/-, out of which existed, viz. receipt of only Rs.92,00,000/- was infused from the Directors/family share application money members of the Directors. The by a private limited remaining share capital had been company at exorbitant infused from parties which were premium from completely completely unrelated either to the unrelated persons etc., in Assessee or to any of its the case at hand, no such Directors. unusual/peculiar  The Hon‘ble HC observed that the respondent-assessee was a circumstances exist. The private limited company, closely impugned transactions in held and there should be the instant case were proximate relationship between carried out in shares of the promoter directors and the public limited companies shareholders. Closely held duly listed on the stock companies usually receive share exchange at prices capital subscriptions from friends, relatives and not from prevailing on the unrelated/ unknown third exchange via regular parties/ general public. There banking channels as per was no relationship or connection normal mechanism between the subscribers and the prevalent on the Stock respondent-assessee, for Exchange. Complete subscribers to become investors. documentary evidences  What the Hon‘ble Delhi HC found surprising was that a person who satisfying all the had purchased shares at a ingredients of section 68 premium of Rs.100/- to Rs.200/- were filed by the per share i.e. at a price of Assessee(s) which Rs.200/- to Rs.300/- per share, remained uncontroverted sold the shares at Rs.35/- per by the Department. Thus, share i.e at a substantial loss. the Assessee(s) duly  Another surprising factor was that the entire investment discharged the primary happened during a short span of onus u/s 68 which the time and re-transfer of the shares Revenue Authorities to the four Promoters/Directors failed to controvert. of the company at Rs.35/- per share by different parties also Another distinguishing happened during a short span of feature is that in the few days. instant case, the  The Hon‘ble HC found it strange impugned investments/ that the Assessee in the year transactions in shares 2001 felt the need of obtaining affidavits from the persons were scrutinized by the investing in the shares of the A.O in the past years and company to certify the found to be perfectly in genuineness of the transaction as order in assessments far back in the year 2001 when Page | 122

there was no suspicion or completed u/s 143(3) for inquiry/investigation in A.Ys 2010-11 & 2011-12. contemplation even in the Subsequently search & Department. seizure operations were  The Hon‘ble Delhi HC found it conducted at the strange that the Assessee premises of the alongwith share application Assessee(s) on money would obtain affidavits from the investors to confirm 13.06.2014 whereby genuineness of the transaction. nothing incriminating The Hon‘ble HC opined that in a w.r.t the impugned normal business transaction, no investments/ such certificate/affidavit would transactions in shares be obtained by any company from were found. Completed persons investing in its share assessments for A.Ys capital. The fact that the Assessee felt the necessity of 2010-11 to 2012-13 were obtaining such affidavits raised a however illegally reopened suspicion on the genuineness of by the A.O in guise of the very transaction search assessments u/s  Given the peculiar set of facts, 153A on a mere change of the Hon‘ble High Court held that opinion by treating the the Assessee had attempted to LTCG offered by the camouflage the accommodation entries and tried to give it a Assessees and accepted colour of purchase of share as such by the capital and then sale of the same Department in original at a loss. Thus the Assessee's assessments, as bogus capital increased or was although nothing enhanced by a substantial figure incriminating was found through these dubious in course of search in the transactions.  It was thus held that the case of the Assessee(s) – Assessee had not discharged being in complete onus satisfactorily and additions contradiction to the law made by AO u/s 68 were w.r.t to search sustained assessments u/s 153A enunciated by the Jurisdictional High Court in the case of Kabul Chawla. Exorbitant additions were made on account of alleged bogus LTCG u/s 68 primarily relying on third party statements and third party documentation in respect of which no opportunity of cross examination was allowed to the Assessee(s). Thus, the present case Page | 123

stands on a completely different footing inasmuch as the Assessee(s) in the present case have filed conclusively documentary evidences duly explaining the nature and source of the impugned transactions in due compliance with the ingredients of section 68 and exorbitant liability has been illegally fastened upon the Assessee(s) in assessments completed u/s 153A sans incriminating materials being found in course of search primarily relying on third party statements and uncorroborated third party documentation. The Assessee(s) having discharged primary onus cast upon them u/s 68 of the Act, it was for the Revenue to dislodge the same by bringing on record cogent evidence to the contrary, which clearly the Revenue Authorities have failed to do in the instant case.

10 2. CIT Vs. The said judgment once again relates to the issue of Share Navodaya Application money received by a private limited company under Castle Pvt. suspicious circumstances. The Hon‘ble Delhi HC has remitted the Ltd. (2014) matter to the Tribunal for fresh adjudication in view of the 367 ITR 306 judgment rendered in the case of MAF Academy P Ltd. (supra). The (Delhi H.C) inapplicability of the said judgment relating to the issue of Share Application Money rendered in a fact specific scenario to the present case has already been elucidated above. Further to the above, it may be noted that in the case of Navodaya Castle, a specific finding of fact was recorded that the Assessee therein had failed to produce directors and principal officers of the six shareholder companies and also as per the information and details collected from the AO from the concerned bank, there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. The said facts coupled with the suspicious circumstances led to the setting aside of the matter for fresh adjudication by the Tribunal. The present case however relates to transactions in shares of listed public limited companies undertaken over on-line trading platform via registered stock broker whereby the seller and ultimate buyers of shares are not known to each other, therefore the question of producing the ultimate buyers by the Assessee does not arise. Thus, filing of documentary evidences establishing the purchase/sale of shares via legal channels over the stock exchange at prices prevailing on the stock exchange through registered stock broker and settlement of consideration via regular banking channels would satisfy the ingredients of section 68 unless the same is shown to be false by bringing on record conclusive evidences. It has time and again been held in a plethora of cases that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., the same cannot be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and /or the statements of third parties. That the burden cast on the assessee u/s 68 would stand discharged where the assessee furnishes relevant documentary evidences to prove that the genuineness of the transactions i.e. the transactions in shares were carried out through regular banking channels via registered share broker over a recognized stock exchange at prevalent market rates; no liability can Page | 125

be fastened on the assessee u/s 68 unless the AO brings on record cogent evidence to dislodge the authenticity of the evidences filed by the assessee. In support of the aforesaid, reliance is craved to the following judgments:- (i) Navneet Agarwal, Legal Heir of Late Kiran Agarwal Vs. ITO, Kolkata in ITAT No. 2281/Kol/2017 (ii) Manish Kumar Baid &Anr Vs. ACIT, ITA No. 1236, 1237 dated 18.08.2017 reported in 2017 TaxPub(DT) 4463 (Kol- Tri) (iii) CIT Vs. Anirudh Narayan Agrawal (2013) 84 CCH 28 (All) (iv) CIT Vs. Smt. Jamnadevi Agarwal & Ors (2010) 328 ITR 656 (Mum) (v) CIT Vs. Smt. Sumitra Devi (2014) 268 CTR 351 (Raj) (vi) Kamala Devi S. Doshi & Ors Vs. ITO & Ors (2017) 50 CCH 53 Mum Trib (vii) Smt. Smita P. Patil & Ors. Vs. ACIT (2014) 159 TTJ 182 (Pune) (viii) ACIT Vs. Kamal Kumar S. Agarwal (Indl) & Ors: (2010) 113 TTJ 818 (Nag Trib) (ix) Dolarrai Hemani Vs. ITO (2016) 48 CCH 286, Kol Trib (x) CIT v. Shreevashi Ganguli (ITA No. 196 of 2012) (Cal HC) (xi) CIT v. Bhagwati Prasad Agarwal in (No. 22 of 2009, dt. 29-4- 2009) (Cal HC) (xii) CIT v. Lakshmangarh Estate & Trading Co. Limited in (ITA No. 270 of 1999, dt. 7-10-2013)-- (xiii) Baijnath Agarwal v. ACIT (2010) 40 SOT 475 (Agra) (xiv) ITO v. Bibi Rani Bansal (2011) 44 SOT 500 (Agra) (xv) ITO v. Ashok Kumar Banssal ITA No. 289/Agra /2009 (Agra ITAT) (xvi) ACIT v. Amit Agarwal & Others ITA Nos. 247(Kol) of 2011 (Kol ITAT) (xvii) Rita Devi & Others v. Dy. CIT IT (SS) A Nos. 22- 26/Kol/2011 (Kol ITAT) (xviii) Surya Prakash Toshniwal v. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (xix) Sunita Jain v. ITO-ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (xx) Ms. Farrah Marker v. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (xxi) Anil Nandkishore Goyal v. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (xxii) CIT v. Sudeep Goenka (2014) 360 ITR 163 (Allahabad) (xxiii) CIT v. Udit Narain Agarwal (2013) 255 CTR 102 (Allahabad) (xxiv) IT v. Homani M. Vakil in (Tax Appeal No. 1502 of 2011, dt. 25-9-2012) (xxv) CIT v. Maheshchandra G. Vakil in (Tax Appeal No. 1503 of 2011, dt. 25-9-2012) (xxvi) Ganeshmull Bijay Singh Baid HUF v. Dy. CIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xxvii) Meena Devi Gupta & Others v. ACIT -ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) Thus, the judgment rendered in the case of CIT Vs. Navodaya Castle Pvt. Ltd on the issue of Share Application Money received by private Page | 126

limited company under suspicious circumstances from unrelated parties is not applicable to the dissimilar facts of the present case. 11 3. Konark The judgment rendered in the case of Konark Structural Structural Engineering Vs. DCIT once again deals with the issue of share Engineering application money received under suspicious circumstances by (P) Ltd. Vs. private limited companies under similar backdrop as in the case of DCIT (2018) MAF Academy (P) Ltd.(supra) & Navodaya Castle Pvt. Ltd. (supra) 90 and for reasons enunciated earlier, the same is not applicable to taxmann.co the facts of the present Assessee(s)‘s case which deal with LTCG m 56 (Bombay arising on sale of shares of listed public limited companies over a H.C) recognized stock exchange via regular legal channels. The said case may be clearly distinguished from the present case in the manner as follows: Konark Structural Engineering Present Case (P) Ltd. Vs. DCIT (2018) 90 taxmann.com 56 (Bombay) The said judgment was rendered in As clearly evident from the following fact specific scenario: the facts of the referred case, the judgment in the  The appellant therein was a said case was passed private limited company carrying taking into consideration on business as builders and the specific findings in developers. the said case and the  The AO noticed that the share capital of the appellant had glaringly suspicious increased by an amount of Rs. circumstances which 19,98,000/- and the general clearly pointed out at the reserve had increased on addition factum of irregular of share capital by an amount of transactions and Rs. 76,08,000/-. After being collusion between the called upon, the appellant assessee and the alleged submitted a list of 23 parties who had allegedly subscribed to its share applicants. The share capital and the numbers of said judgment being shares allotted to them. rendered under the  The AO recorded a finding of fact stated fact specific that almost all parties were new scenario is not applicable assessees in the sense that they to the dissimilar facts of had filed returns for the first the present case. time.  Secondly, it was found that most Further, in the present of them had an income of Rs. case, there is no such 1.25 lakhs and none of them had overwhelming adverse income above Rs. 3 lakhs  It was noted that the evidence on record. notice/summons under Section Exorbitant additions have 131 of the Act were issued to 23 been made by the AO parties. It was pointed out that relying on uncorroborated the summons in case of 22 cases third party were unserved with the remark documentation and that the addressee was Page | 127

unavailable statements of  The assessee therein filed copies unconnected parties who of affidavits/declarations of the were not produced before share subscribers. It was noted the Assessee(s) for cross- that the declarants were residing examination – in complete at various places in Mumbai violation of law Suburban District, Mira enunciated by the Hon‘ble Bhayandar in Thane District and Vasai in Palghar District. Supreme Court in the  The Hon‘ble HC found it peculiar cases of Andaman that all the Timber Industries Vs. affidavits/declarations had been Commissioner of Central affirmed before the same notary Excise (2015) and Central public Shri Deepak Malkani Bureau of Investigation having office at Malad (West), Vs. V.C. Shukla & Ors Mumbai  The Hon‘ble HC further observed (1998) AIR 1406 (SC). that almost all the declarants had been identified by the same Advocate Mr. Ashok M. Pandya. Further, unlike the More importantly, the registration referred case wherein the number of the said declarations Assessee failed to in the notorial register maintained by the notary public discharge the onus cast has not been mentioned on the upon it to prove the declarations/affidavits ingredients of section 68  The dates of cheques mentioned in respect of the share in all affidavits were 23rd August, application money 2006 and cheques had been received from the drawn on Vijaya Bank, Borivali specified parties, in the branch. The last digit of cheque numbers was 1 and accordingly, instant case, the a finding was recorded that the Assessee(s) have filed cheque books issued to all the 23 conclusive documentation persons were of the same series establishing the and first leaf was used by all of genuineness of them for allegedly making transactions in shares payment of the subscription.  Under carried out by them the given glaringly suspicious facts and which the Revenue circumstances of the case, the Authorities have failed to Hon‘ble HC held that appellant - controvert. assessee had failed to establish the creditworthiness of the Further, in the said case subscribers and even since the Assessee, being genuineness of the transactions. private limited company, Accordingly, the amounts claimed that it had received as share application received share application money was added as unexplained monies from 23 parties, cash credit u/s 68 of the Act. the assessee was required to prove the identity and creditworthiness of the said subscribers and the genuineness of the Page | 128

transactions which the assessee clearly failed to do. The Hon‘ble High Court in the said case has recorded categorical findings w.r.t the conduct of the alleged share applicants which unerringly proved the irregular availment of accommodation entries in the guise of share application money. The instant case however stands on a different footing altogether. In the instant case, since the shares have been transacted on web based platforms at prices prevailing on the stock exchange where the sellers and ultimate buyers are not known to each other, there can be no scope of bogus transactions having been undertaken by the Assessee(s). Further, the Assessee(s) herein were merely passive investors who were neither be aware of the persons or entities buying the shares sold by them, nor could they control in any manner, formal or informal, the sale of such shares to a particular person or entity. The Assesese(s) herein have already placed on record, all relevant documentary evidences in the form of share purchase documents, contract notes, DEMAT accounts, share certificates, Page | 129

contract notes, bank statements etc. which the Revenue Authorities have failed to controvert. The search and seizure operations in the case of the Assessee(s) have been used by the Revenue Authorities as a device to review completed assessments in the guise of search assessment u/s 153A although nothing incriminating was found in course of search. 4. CIT Vs. The said judgment is once again clearly distinguishable from the Nipun facts of the present case in the manner as follows: Builders & CIT Vs. Nipun Builders & Present Case Developers (P) Ltd. (30 Developers (P) Ltd. (30 taxmann.co taxmann.com 292) m 292) (Delhi H.C) The factual matrix leading to the From the discussions adverse judgment in the said alongside, it is crystal clear case may be briefly adumbrated that the judgment in the case as under: of Nipun Builders was rendered in a completely fact  The assessee therein was a specific situation wherein private limited company overwhelming evidences and  On the basis of a report of glaringly suspicious the investigation wing of the circumstances patently income- tax department, the assessment was reopened proved that the assessee had u/s.147 on the ground that taken accommodation entries income chargeable to tax had from the alleged share escaped assessment, in as subscribers in the guise of much as the share capital share application money. shown to have been received by the company was alleged The Hon‘ble H.C. in the said to represent mere case categorically accommodation entries. distinguished the modus  In the course of the operandi involved in issue of reassessment proceedings, shares by private limited enquiries were sought to be made by the AO; summons companies vis-à-vis public u/s. 131 were issued on limited companies. W.r.t the 14.09.2007 to the companies onus u/s 68 in respect of from whom the share capital share applications monies was stated to be received and received by private limited they were returned unserved companies, the Hon‘ble HC with the remarks "no such company"; the inspector sent opined as under: Page | 130

to the addresses for “In the case of private limited verification confirmed the companies, it could not be fact. denied that there was a  Under the given facts, the continuing contact and Hon‘ble Delhi High Court relationship with the share while distinguishing the holders and if the assessee issue of shares by a private was serious enough to limited company vis-à-vis public limited company, establish its case, it ought to opined as under: have produced the principal officers of the subscribing “The assessee here is a companies before the AO so private limited company. It that they could explain the cannot issue shares in the sources from which the share same manner in which a subscription was made.” public limited company does. It has to generally depend on Thus, clearly the impugned persons known to its judgment was rendered in directors or shareholders context of share application directly or indirectly to buy monies received by private its shares. Once the monies limited companies as are received and shares are distinguished from public issued, it is not as if the limited companies listed on share-subscribers and the the stock exchange where assessee-company lose touch such proximate contact and with each other and become relationship with the share incommunicado. Calls due on holders does not exist. the shares have to be paid; if In the said case, since the dividends are declared, the assessee therein, being a warrants have to be sent to private limited company the shareholders. It is a claimed that it had received continuing relationship, even certain share application granting that it may not be of monies from specified parties, the same degree in which it the primary onus u/s 68 was exists between a debtor and on the assessee to prove the creditor.” identity, creditworthiness of  The Hon‘ble HC further the share applicants and the observed that the share- genuineness of the subscribers had each transactions, which the invested substantial amounts assessee therein failed to in the assessee‘s shares. establish. Most of them, barring two or three, were themselves The instant case, however, is private limited companies. It clearly distinguishable could not therefore be inasmuch as the shares contended that if the summons issued u/s. 131 to under consideration were the subscribing companies at those of public limited the addresses furnished by companies duly listed and the assessee returned traded over web-based unserved, the AO was duty- platform of recognized stock bound to enforce their Page | 131

attendance with all the exchange. The Assessee(s) powers vested in him. The herein duly discharged the assessee-company received primary onus cast upon them the share monies; it even u/s 68 by filing all relevant says that the documentation in support of communications sent by it at the impugned transactions the addresses did not return which the Revenue unserved, yet when the AO requested it - that too only Authorities failed to after trying to serve the controvert. summons unsuccessfully - to produce the principal officer Unlike the issue of shares by of the subscribing a private limited company, companies, the assessee since in an online trading developed cold feet and said platform of the stock it could not help if those exchange, the sellers and companies did not appear ultimate buyers are not and that it was for the AO to known to each other, it was a enforce their attendance. It was further observed that the virtual impossibility for the AO did not merely stop with Assessee(s) to identify or issuing summons; he produce the ultimate buyers followed it up with a visit by of shares. As held in plethora the inspector who confirmed of cases cited earlier, in the that no such companies case of shares transacted on functioned from the web-based platforms of the addresses furnished by the assessee. stock exchange, adducing of  The Hon‘ble HC further evidences in the form of opined that in the case of contract notes, DMAT private limited companies, it Accounts, share purchase could not be denied that documents, relevant bank there was a continuing statements etc. would suffice contact and relationship with the ingredients of section 68 the share holders and if the assessee was serious enough unless effectively controverted to establish its case, it ought by the Revenue Authorities by to have produced the bringing on record conclusive principal officers of the evidence. subscribing companies before the AO so that they could In the instant case, the explain the sources from Assessee(s) have discharged which the share subscription the primary onus cast upon was made. That would also them u/s 68 by filing relevant have taken care of the documentation evidencing the difficulty of the assessee in proving the creditworthiness nature and source of the of the subscriber companies. impugned cash credit, being It was, therefore, in the sale consideration of shares of assessee‘s own interest to public limited companies over have actively participated recognized stock exchange. and cooperated in the The Revenue Authorities have assessment proceedings and failed to dislodge the complied with the direction of the AO to produce the genuineness of the said principal officers of the Page | 132

subscribing companies. evidences furnished by the Instead, the assessee took an Assessee(s). Instead, the adamant, if we may use that Revenue Authorities have expression, attitude and sought to place reliance on failed to comply with the uncorroborated third party direction of the AO. documentation and  In the light of the conduct of statements of third parties the assessee and other surrounding circumstances, recorded behind the back of the Hon‘ble HC held that the the Assessee(s). Since the assessee had failed to Assessee(s) have duly discharged its onus under discharged the onus u/s 68 Section 68 and the Revenue Authorities have claimed otherwise by placing reliance on adverse statements of third parties, the onus is on the Revenue to produce the alleged witnesses/deponents for cross-examination before the Assessees. The said onus cannot be shifted to the Assessee. It has been held by the Hon‘ble Jurisdictional HC in the case of Principal CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. & Others in ITA Nos. 11/2017 to 22/2017 (supra) that the onus of ensuring presence of the witness for cross- examination is on the Revenue and that such onus cannot be shifted to the Assessee. It is trite that an Assessee cannot be required to prove the negative. The apparent is required to be taken as real unless proved otherwise. The onus of proving what was apparent is not real is on the party who claims it to be so – as held by the Hon‘ble Supreme Court in CIT Vs. Daulat Ram Rawat Mull (1973) 87 ITR 349. Thus, in the instant case, the onus to prove what is apparent is not Page | 133

real is on the Revenue. The Hon‘ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has ordained that “not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.‖ Thus, unlike the case of Nipun Builders, where the onus of producing the share applicants before the A.O was on the assessee, in the instant case, the onus of producing the alleged witnesses of the Department for cross-examination before the Assessee is on the Department. 11 5. CIT V. Nova That the said case stands distinguishable on facts, so done in the Promoters & Finlease (P) following manner: Ltd. (18 taxmann.co CIT v. Nova Promoters Present Case m 217) (Delhi H.C) In the present case - the assessment Nova Promoters was reopened on the basis of pertains to a case of information received from the reopening of investigation wing of the department assessment based on about the existence of accommodation information received entry providers and their "modus from the investigation operandi" (evidenced by the statements wing which stated that of Rajan Jassal and Mukesh, the the the Assessee therein, printed contents of the CD received being a Pvt Ltd.Co. had Page | 134

from the investigation wing containing obtained the transactions made with various accommodation entries parties including the assessee, copies via certain operators, of the letters written by Mukesh Gupta so evidenced by various and Rajan Jassal to the Additional CIT, admissions/documents Unit-1, New Delhi admitting various on record offered by the benami accounts maintained by them respective operators. etc.) in which the assessee was also found to be involved. That, in Nova Promoters, the Court In order to examine the genuineness (in a very fact specific and the creditworthiness of the scenario) held, that companies which gave the entries to since the A.O. had the assessee, the Assessing Officer done his best in issued summons to Mukesh Gupta and summoning the Rajan Jassal. But Since there was no respective parties, but response to the summons which were since their where- served and some of them had been about(s) were returned unserved, the Assessing untraceable, the Officer sent an Inspector of Income Tax Appellant, who had all to the addresses to which summons of a sudden produced were issued. The Inspector reported the retraction affidavits that no such person or company was of the concerned available or existing at the addresses to parties, could not now which summons were issued. take the plea of lack of opportunity for cross examination – and thus, the primary onus Later on, the assessee filed a letter lay with the Assessee with the Assessing Officer along with therein to satisfy the the affidavits of Rajan Jassal and receipt of the share Mukesh Gupta in which both of them application money by had stated that the transactions with Pvt Cos. as per the the assessee were genuine and the requirements of Sec.68, earlier statements recorded from them and produce the by the investigation wing were given respective parties. under pressure.

However, in the present The A.O. however refused to take the case, the shares under said Affidavits into consideration, and consideration were made the respective additions. The those of public limited same were however overturned by the companies duly listed CIT(A) and the Tribunal, after which and traded on the the Revenue sought an appeal, before recognized stock the H.C. exchange over web- based platforms – Page | 135

where, the Assessee(s) herein duly discharged Before the H.C., in this peculiar fact the primary onus cast situation, it was opined by the A.O. upon them u/s 68 by that there was enough material on filing all relevant record to show that the companies documentation in named above were mere entry support of the providers for consideration and that impugned transactions the transactions were not genuine, which the Revenue though documentary evidence was Authorities failed to adduced by the assessee to show to the controvert. contrary. The case of the assessee on the other hand is that the documentary evidence was adequate to Further, in the present establish all the three ingredients case, the Revenue is required to be established by the seeking to apply Sec.68 assessee under Section 68. onto the Assessee(s) by placing reliance on 3rd party evidence, when in The Court however opined that the fact, the Assesseee(s) evidence adduced by the assessee has could not be aware of to be examined not superficially but in the persons/entities depth and having regard to the test of buying the shares sold human probabilities and normal by them, nor could the course of human conduct. Thus, the Assessee(s) control in H.C. opined that the fact that both the any formal/informal CIT(A) and the Tribunal committed an way, the sale of such error in finding fault with the shares to a particular Assessing Officer for not accepting the person/entity – since above affidavits of Mukesh Gupta and the sale of the shares of Rajesh Jassal, who proceeded to state these listed Cos. were that their earlier admissions, were at the prevailing recorded under pressure and coercion market rate through and absolutely against their wishes – the BOLT platform. because

―The affidavits were presented before Further, the ratio of the Assessing Officer in the course of Nova Promoters, as the assessment proceedings on 4th stated earlier, is December, 2007. In the appeal filed applicable only in a fact before the CIT (Appeals) he called for a specific scenario, where remand report from the Assessing the plea towards not Officer. In doing so, he directed the awarding the Assessee Assessing Officer to examine the an opportunity to cross contents of the affidavits and verify the examine, was held to genuineness of the averments made be insufficient to set therein. The Assessing Officer aside the additions of submitted a remand report dated 30th the A.O., because, in Page | 136

April, 2009. In this report he stated that that case, when the despite repeated opportunities the Revenue was unable to deponents of the affidavits were not trace the said persons, produced before him for examination. It the fact that the may be noted at this juncture that the Assessee therein could assessee filed affidavits not only from produce affidavits of Mukesh Gupta and Rajesh Jassal but the said persons, but also from several other persons who could not produce the were in charge of some of the said persons before the companies which had subscribed to the Revenue was held by shares of the assessee company. Their the Court to be names are Raj Kumar, Pramod Kumar, doubtful and Harish Kumar etc. In the remand report, questionable. And the Assessing Officer stated that as per thus, (as also held in the directions of the CIT (Appeals), the case of Nipun summons were issued to all the Builders (supra)) - the deponents of the affidavits on 24th onus of producing the April, 2009 but they remained share applicants before uncomplied with and none of the the A.O was on the persons attended before him........When assessee. the remand report was given to the assessee for rejoinder, it is rather surprising to note that the assessee had However in the present nothing to say as to why the deponents case, the Assesese(s) of the affidavits, which were all in its herein cannot be favour, could not present themselves burdened with the before the Assessing Officer for being onus of producing such examined on the affidavits.” 3rd parties that the Revenue is seeking to rely on. Thus, when the The Court also opined, that the said Assessee herein has Affidavits had not been Notarized and filed the relevant that further, the names of all the documentation companies in which the deponents of evidencing the nature the affidavits were Directors, figure in and source of the the letter written by Mukesh Gupta impugned cash credit, and Rajan Jassal jointly before the being sale Additional CIT, Investigation Unit-1, consideration of shares New Delhi. Thus the link between the of public limited material gathered by the investigation companies over wing and the assessee company stands recognized stock not only established at the stage at exchange – the which notice under Section 148 was genuineness of which issued, but also in the course of the the Revenue has failed reassessment proceedings. Thus the to dislodge, then the affidavits need not be accepted as fact that the Revenue is reliable when there is enough material seeking to place on record to doubt the veracity of the reliance on Page | 137

uncorroborated third transaction. party documentation Further wrt Cross examination, the and statements Court opined: “In such a case it cannot recorded behind the be said that the affidavits can be back of the Assessee(s) rejected only after cross examination. In – would mean that the the present case, there is enough onus to produce such material on record to negate the claim of 3rd parties for cross genuineness of the transactions and in examining shall lie with the light of over-whelming material, the the Revenue, as against plea that the Assessing Officer should the Assesse, thereby not have rejected the affidavits without rendering the ratio of cross-examination of the deponents has Nova Promoters to be no force.......The Assessing Officer, as inapplicable. we have already noted, issued summons to them as well as the directors of the companies which allegedly advanced the share subscription monies to the assessee, but they were either returned or remained uncomplied with........When they did not appear before the Assessing Officer in response to the summons, it would be unfair to expect the Assessing Officer to offer them for cross examination to the assessee.” Thus, the Court went on to opine that it was however noteworthy to know that the Assessee was able to obtain affidavits from them, when the Revenue had no luck in contacting them, and that it was rather odd for the Assesese to rely on the said affidavits. Thus the Court opined that “The statements of Mukesh Gupta and Rajan Jassal, the entry providers, explaining their modus operandi to help assessee's having unaccounted monies convert the same into accounted monies affords sufficient material on the basis of which the Assessing Officer can be said to have discharged the duty.” 12 6. CIT v. Ultra That the said judgment can also stand to be distinguished on facts, Modern Exports (P) in the manner as follows: Page | 138

Ltd. (40 CIT v. Ultra Modern Exports (P) Ltd. Present Case taxmann.co m 458) (Delhi H.C) That in this case, The AO held that the That unlike the said assessee had received Rs.4,34,00,000/- case, the present case, as unexplained credit in the form of does not deal with a share application money from 9 situation where the applicants, And in order to ascertain Assessee(s) have genuineness of assessee's claim relating procured the to receipt of share application money, documentation from the Assessing Officer sent notices to the such share applicants share applicants which returned that are untraceable by unserved. the Revenue.

However, the assessee still managed to Thus the facts of the secure documents such as their income said case, are tax returns as well as bank account inapplicable to the that particulars – and in such circumstances of the Assessee(s) who the H.C. held that, the Assessing Officer have been allotted was justified in drawing adverse shares on a preferential inference and adding the amount in basis in those Cos. that question to assessee's taxable income are listed and traded in under section 68 by stating as follows: the stock exchange. These shares were subsequently credited in the DMAT Accounts of ―In the backdrop of this circumstance, the the Assessee(s), and assessee's ability to secure documents their sales were effected such as income tax returns of the share through registered applicants as well as bank account brokers on the particulars would itself give rise to a NSE/BSE. circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its It is thus clear that the business and immediately sought to Assessee(s) herein could infuse share capital at a premium ranging not be aware of the between Rs. 90-190 per share and was persons /entities buying able to garner a colossal amount of Rs. the shares sold by 4.34 Crores, this Court is of the opinion them, nor could the that the CIT (Appeals) and the ITAT fell Assessee(s) control in into error in holding that AO could not any formal/informal have added back the said amount under way, the sale of such Section 68‖ shares to a particular person/entity.

Further, in the case of the Assessee(s) there has been a denial on their part of having any such connection with R.K. Kedia, Manish Arotra, the alleged entry and exit operators, or the alleged directors of the Cos. in question, and thus, without granting an opportunity to cross examine the said parties, their statements can be of no reliance. 13. 7. CIT v. Frostair (P) That the said judgment is again distinguishable on facts, done in the Ltd., (26 following manner: taxmann.com 11) (Delhi H.C) CIT v. Frostair (P) Ltd. Present Case

That in this case, The Revenue received That the Revenue has information alleging that assessee had sought to place accepted share capital from companies reliance on the said engaged in providing bogus entries in judgment that is the form of loan and share application factually not money to interested parties. applicable to the case of the Assessee(s) herein. The AO felt that the nature of the assessee‘s company and its business was not such as to attract a premium In the present case, of Rs. 900/- per share. He also was of there is no such the opinion that the share applicants overwhelming were not known to the assessee or its evidence on record, management and investment of Rs. 5 apart from the Lakh by each of them except M/s statements of R.K. Kanpur Properties and Finance Ltd. - Kedia, Manish Arora, which had invested Rs. 10 Lakhs was the alleged entry/exit improbable. operators and the alleged directors of the said Cos. – that the Revenue is seeking to The H.C. upheld the stance of the by place reliance on. the A.O. on the basis that:

“The Assessing Officer went into great lengths to verify the genuineness of That as already stated these transactions. He issued summons above, the said to the share applicants- only 9 could be statements cannot be served; none actually responded relied on without through their authorized or principal affording the officer. Even during remand, 16 of the Assesee(s) herein the 18 share applicants could not be opportunity to cross served. The AO also examined the bank examine. accounts (of the share applicants) from which the share application amounts were subscribed. He noticed regularity, a pattern, in the methodology of infusing Further, unlike the cash into the accounts, and within a facts of the case in short while afterwards, withdrawing Frostair (P) Ltd – there sums to pay for the shares.....The is no such instance of PAN/GIR numbers of the share the Assesesee(s) applicants furnished by the assessee accepting share were not found to be correct, upon capital at inflated verification from the concerned Income rates from Cos. that Tax officers of the ward(s) in question. engage in providing The assessee was given opportunity to such bogus entries. produce the share applicants' principal The Assesee(s) herein officers, but did not do so. The share have been allotted the applicants' addresses too were shares of the Cos. that incorrect......If we may say so, in are listed and traded exhaustive detail, after a painstaking on the stock exchange. examination of the records after two or These shares were three layers of scrutiny- all the then credited into the materials and held that the claim that DMAT account of the the amounts claimed to be received on Assesese(s) where account of share applications were not after a period of 12 based on genuine transactions. The CIT months, their sales (A) upheld that order, after calling for a were affected vide remand report. In these circumstances, registered brokers on the conclusion of the Tribunal, that the the NSE/BSE, as per assessee had discharged its onus, the prescribed rules/ appears to be based on a superficial procedures so understanding of the law, and an applicable. uninformed one about the overall facts and circumstances of the case.” Since the entire sale of shares stood affected through a web based platform, there can be no scope of bogus transactions having been undertaken by Page | 141

the Assessee(s) herein.

Further, unlike the case of Frostair (P) Ltd, the transactions carried on by the Assesesee(s) stand fully documented and evidenced, and have been duly enclosed beforehand, meaning that the applicability of Sec.68 in the case of the Assesese(s) is misplaced.

13 8. CIT v. NR That the said judgment can also stand to be distinguished on facts, Portfolio Pvt in the manner as follows: Ltd., [2013] 29 taxmann.com 291. (Delhi H.C)

CIT v. NR Portfolio Present Case In the present case, the assessee claimed That from the facts, it that it received Rs. 35 lakhs from seven becomes clear that in share applicants. Its assessment was this case, the share reopened. The assessee did not attend the broker, refused to reassessment proceedings, and summons cooperate, was in under Section 131 was sent to the seven possession of the parties whose particulars had been details of the share furnished but all of them were received applicants, but could back un-served – resulting in an adverse not produce the said order. share applicants despite the Revenue‘s attempts at locating them. On its moving an appeal, the Commissioner sought a remand report. The remand Meaning that, the report, an exhaustive 41 page document, adverse Order in this discusses threadbare the opportunities factual scenario, is granted to the assessee, to establish the different from that of identity and creditworthiness of the share the Assessee(s) herein, applicants. where, as already shown from above, the In light of the said facts, the H.C. opined Assessees(s) only play that ―This court is conscious of a view taken a passive role in these in some of the previous decisions that the arm‘s length assessee cannot be faulted if the share transactions, where applicants do not respond to summons, and all the shares allotted that the state or revenue authorities have were listed and traded the wherewithal to compel anyone to attend on the stock exchange. legal proceedings. However, that is merely one aspect. An assessee's duty to establish Thus, as has been that the amounts which the AO proposes to quoted in this add back, under Section 68 are properly judgment as well, the sourced, does not cease by merely Assessee(s) have no furnishing the names, addresses and PAN connection and cannot particulars, or relying on entries in a control the sale of Registrar of Companies website. One must shares, which were in remember that in all such cases, more often the case at hand sold than not, the company is a private one, and at the prevailing share applicants are known to it, since they market rate through are issued on private placement, or even the BOLT platform. All request basis. If the assessee has access to the transactions stand the share applicant's PAN particulars, or documented for and bank account statement, surely its provided beforehand, relationship is closer than arm's length. Its meaning that the request to such concerns to participate in applicability of Sec.68 income tax proceedings, would, viewed from to the case of the a pragmatic perspective, be quite strong, Assessee(s) is bad in because the next possible step for the tax Law, especially since administrators could well be re-opening of the said assumption of such investor's proceedings.‖ irregular availment is based on mere reliance on various statements of Page | 143 unconnected parties, who the Assessee(s) were not given an opportunity to cross examine.

13 9. PCIT v. Bikram That the said case can also be distinguished on facts, in the manner Singh, ITA No.55/201 as below: 7 (D‘s elhi H.C) PCIT v. Bikram Singh Present Case This is a case where the AO an That the case of Bikram addition to assessee's income under Singh, varies factually section 68 in respect of loan taken from that of the from various parties, since the Assessee(s) herein, assessee failed to prove that any of whereas has already been those creditors had financial strength reiterated, the Assessee(s) to lend such huge sums of money to herein have already placed assessee, that too without any on record, all relevant collateral security, without interest documentary evidences in and without a loan agreement. the form of share purchase documents, DEMAT accounts, share certificates, contract notes, The H.C. thus opined that ―The mere bank statements etc. establishing of their identity and the fact that the amounts have been transferred through cheque payments, does not by itself mean that the Further, unlike the case of transactions are genuine. The AO and Bikram Singh, there is no the CIT (A) have rightly held that the such ‗loan taken from identity, creditworthiness and the various parties‘ – for here, genuineness are all in doubt. Moreover, the trading of the shares the Court notes that that these in question, was effected amounts have been advanced to the through a web based Assessee without any explanation as platform, where there to their relationship with the Assessee, cannot be any formal the reason for the payment of such /informal collusion in huge amounts, as also whether any their sale. repayments have, in fact, been made”

Dhenu Buildcon Rs 33,00,000/- platform account, Limited Rs 6/- Rs 82296074/- Dematerialsied Rs 149 & 150 on 2/2/2012 on Dhanu Buildcon Limited on name change First Financial 8/12/2011 19/ to 1 year 4 2 Services Limited Preferential 26/03/2013 months held allotment On stcok physical form RS 4500000/- exchange on allotment platform copy of share Rs. 65600320 certificates filed, Alottment letter dated 14/12/2011 and held in Demat account dematerialsed on 13/12/2012 Sequent Scietific 22/6/2007 to 4/7/2012 5 years in 3 Limited 10/7/2007 On stock Demat By market Exchange account on Purchase Platform 5/7/2007 Rs 3176824 Rs.4576065

Of the above transaction there is a SEBI enquiry conducted in First Financial services Limited (Sr. No 2) with which we deal later on at appropriate place. 25. It is not in dispute that assessee has furnished all the details such as purchase bills, allotment details, demat accounts, bank statements , details of payments by cheques and sale on BSE electronic platform, proof of payment of Securities Transaction tax and receipt of payment through Cheque by an independent broker, sale bills etc which is not doubted by the revenue. The facts have already narrated by us in earlier paras, which are undisputed by both the parties. only following issues are to be decided in this appeal:- i. Whether AO can use the statements of third parties without granting cross- examination of those parties. ii. Whether without providing the copies of the statements as well as the cross examination of alleged exit providers, such evidences can be used against the assessee for making addition.

iii. Whether the interim orders of The SEBI relied up on by the ld AO implicate the assessee for making addition u/s 68 of the act on alleged bogus long- term capital gains. iv. Whether Cash Trails of The buyers of the securities as stated by the ld AO makes the long-term capital gain of the assessee bogus. v. Whether the disclosure of some other persons as their undisclosed income of Long-term capital gain affects the case of the assessee also. vi. Whether de hors all the above facts addition in the hands of the assessee u/s 68 of long term capital gain can be made 26. On the first issue of Cross-examination, it is apparent that ld AO has made addition based on the statement of Shri R.K. Kedia (alleged entry provider), Manish Arora (employee of Sri R.K. Kedia), alleged exit operators, directors of penny stock companies etc. recorded by various officers of the Department. The Assesses herein made a categorical request for allowing an opportunity to cross-examine the persons whose statements were intended to be used against them; however, no such opportunity was provided to the Assesses. The Assesses was directed to appear on certain dates to cross-examine such persons but on the appointed dates, none of the parties turned up though Assesses were duly present on the specified dates through their Authorised Representative. The learned assessing officer vide para number 4.11 of his assessment order has discussed this issue. It was stated that the opportunity to cross-examine Mr. Rajkumar Kedia and Sri Manish Arrora was granted to the assessee by issuing summons under section 131 of the act directing these parties to appear on 06/12/2016 but both of them did not appear. The assessee vide letter dated 19/12/2016 once again requested that if any adverse inference against the assessee is drawn on the basis of the statement of these persons, an opportunity to cross-examine them may kindly be provided. The learned AO issued summons to 15 other parties under section 131 of the act to appear on 26/12/2016, however, none appeared on the appointed date. Therefore, the learned assessing officer stated that finding in this case is not merely based on the oral statements given by these entry operators, but it is also based on documentary evidences recovered during the course of search in form of electronic data. It was further held by him that these statements corroborate the evidences found. Then he stated that the main person of the group Mr. Neeraj singal during the course of his statement recorded on 24/4/2015 was asked to cross-examine Shri Raj Kumar Kedia however, in answer to question number 25 he stated that he does not want to cross-examine Mr. Rajkumar Kedia, Shri Manish Arora or Shri Ankur Agarwal. The learned assessing officer further stated that cross-examination cannot be right and it is not required by law. For this proposition, he relied upon the decision of the Page | 146

Hon‘ble Allahabad High Court in Moti Lal Padmapat Udyog Limited vs. CIT, 160 Taxman 233 and the decision of the Hon‘ble Bombay High Court in satellite engineering Ltd vs. Union of India, 1983 ELT 2177 Bombay. He further relied upon the decision of the Hon‘ble Delhi High Court in CIT vs. Nova promoters and Fin lease private limited 342 ITR 169 where in para number 27 where non-provision of opportunity to cross-examination of certain persons were not found fatal to the assessment. Against this, the assessee has also put his case that non-provision of cross-examination opportunity is fatal to the assessment. In this background, whether the assessee has been granted the opportunity of the cross-examination or not is required to be seen. The fact, which has not been denied by the learned authorised representative that Mr. Neeraj Singal in his statement dated 24/4/2015 was offered an opportunity to cross-examine Mr. Rajkumar Kedia. However, in answer to question number 25, he refused and stated that he does not want to cross-examine Sri R. K. Kedia or Shri Manish Aurora or Shri Ankur Agarwal. Apparently, the search took place on 13/06/2014 and first notice was issued under section 153A on 8/9/2014. The first notice under section 143 (2) and 142 (1) was issued on 25/7/2016. Therefore, at the time when the statement of Sri Neeraj single was recorded on 24/4/2015, It was not known whether the statement of Mr. Rajkumar Kedia, Manish Aurora, et cetera would be used against him or not. Therefore, apparently at that particular time assessee did not thought it fit to cross- examine them. Hence, apparently such opportunity cannot be said to be an opportunity of cross-examination granted to the assessee with respect to the addition. The opportunity of cross-examination in present case is also important because of the reason that Mr. Rajkumar Kedia subsequently retracted his statement. This issue has been decided by the coordinate bench in assessee‘s own case vide order dated 31/10/2018, wherein it has been held that material found during search cannot be incriminating material as statements recorded by the revenue of Mr. Rajkumar Kedia, Manish Arora and others were used by revenue without granting cross opportunity. The issue of the cross-examination was dealt with by the coordinate bench as under:- ―107. We, therefore, by respectfully following the aforesaid referred to order of the Co-ordinate Bench are of the confirmed view that the assessment for the assessment year 2012-13 although was not framed u/s 143(3) of the Act, however, the time to issue the notice u/s 143(2) of the Act had already expired before the search took place on 13.06.2014. Therefore, for the purpose of Section 153A of the Act, processing of the return of income u/s 143(1) of the Act was also an assessment. As such the assessment for the assessment year 2012-13 was also unabated. It is well settled that the addition u/s 153A of the Act can only be made on the basis of incriminating material found during the course of search. In the present case, no incriminating material/document was found during Page | 147

the course of search. The AO made the additions on the basis of the statement of the third parties recorded u/s 132(4) of the Act on the basis of alleged entry in hard/soft data seized from premises of third parties in the course of search action in their cases. In the present case, copies of the Panchanama are placed at page nos. 1 to 58 of the assessee‟s compilation. From a bare perusal of the Panchanama of the assessee, it may be seen that nothing incriminating was found in the course of search. It is also apparent from the search document that no incriminating material in the form of undisclosed, document, unaccounted money, bullion, jewellery etc. indicating the factum of undisclosed income were found or seized in the course of search operation u/s 132(1) of the Act for any of the assessment years under consideration. In the instant case, the AO relied upon the statement of Sh. Raj Kumar Kedia his employee Sh. Manish Arora, Sh. Ankur Agarwal, an employee of BSL and Sh. Chandrakant Mahadev Jadhav. However, Sh. Raj Kumar Kedia retracted his statement on 14.10.2014 (copy of which is placed at page nos. 446 to 451 of the assessee‟s compilation). Thereafter, he filed letter dated 31.03.3015 withdrawing his retraction, copy of which is placed at page nos. 452 to 455 of the assessee‟s compilation. Therefore, he was changing his stand as such his statement cannot be considered to be reliable. Similarly, Sh. Ankur Agarwal also retracted his statement vide letter dated 20.12.2016 which is placed at page no. 190 of the assessee‟s compilation. Similar was the position with regard to the statement of Sh. Chandrakant Mahadev Jadhav recorded on 13.06.2014, the said statement was also retracted vide letter dated 24.11.2016. Now question arises as to whether the addition can be made u/s 153A of the Act in the absence of any incriminating material emanating from search u/s 132(1) of the Act, only on the basis of the statement recorded u/s 132(4) of the Act, particularly, when the opportunity to cross-examination of the witness whose statement were relied, was not given to the assessee.‖ The coordinate bench further relied upon the decision of Hon'ble Supreme Court in case of Andaman Timber Industries ( Supra) and several other judicial precedents and thereafter noted in para number 113 of the order as under:- ―113. In the present case, the opportunity to the assessee to cross- examine the person whose statements were relied upon by the AO was required to be given, on the date fixed by the AO, the assessee presented himself through his Authorized Representative but the concerned person did not turn up, so it cannot be said that the opportunity to cross-examination was provided to the assessee, although the statements of third parties were used against the assessee. In the instant case, it is an admitted fact that the persons whose statements were recorded at the time of search, later on retracted from their statements and one person, namely, Sh. Raj Kumar Kedia first retracted on 14.10.2014 and thereafter withdrew the retraction vide letter dated 31.03.2015. Therefore, no reliance can be

placed on the testimony of the said person who was indulging in double speaking and taking contrary stands.‖ In the above paragraph, the coordinate bench has already given a finding that the persons whose statements were recorded at the times of search, later on retracted from the statement and thereafter further withdrew the retraction. Therefore, no Reliance can be placed on the testimony of the said persons who are taking contrary stands. It was further held that on the appointed date, it could not be said that the opportunity to cross-examination was provided to the assessee although; the statements of third parties were used against the assessee. The coordinate bench thereafter referred the decision of Hon‘ble Calcutta High Court in the case of CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 and circular issued by the central board of direct taxes and further held in para number 117 of the decision as under:- ‗117. From the aforesaid Circulars, it is clear that the assessments made pursuant to search operation are required to be based on incriminating materials discovered as a result of search operation in the case of the assessee and not on the recorded statement. In the instant case, the persons who gave the statements retracted the same and even the opportunity to cross-examine was not afforded to the assessee…‖ Thus, it is apparent that the assessee has not been granted an opportunity of the cross-examination of Sri R. K. Kedia and Shri Manish Arora. The learned authorised representative has relied upon the decision of the Hon‘ble Supreme Court where in relying on case of state of Madhya Pradesh vs. Chintaman sadashiv Waishampayan AIR 1961 SC 1623 wherein in para number 11, It has been held referring another decision in Union of India vs. TR Varma ―stating it broadly and without intending it to be exhaustive, it may be observed that the rules of natural justice require that the party should have the opportunity of producing all relevant evidence on which he relies, that the evidences of the appellant should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no material should be relied on against him without he is being given an opportunity of explaining them.‖ It was further stated that it is hardly necessary to emphasize that the right to cross-examine the witnesses who give evidences against him is a very valuable right, and if it appears that effective exercise of this right has been prevented by the enquiry officer by not giving to officer relevant documents, to which he is entitled, that inevitably would be that the enquiry had not been held in accordance with the rules of natural justice. Page | 149

The Hon‘ble Supreme Court thereafter, referring to the another decision of the Hon‘ble Supreme Court held that the importance of giving an opportunity to the public officer to defend himself by cross-examining witness produced against him is necessary for following the rules of natural justice. Further, the decision of the Hon‘ble Supreme Court in case of Anadaman Timber industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has held as under :- ―According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material, which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the Page | 150

said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause notice.‖ In the present case, also the assessee sought opportunity of cross-examination of the witnesses whose statements are used by the learned assessing officer against the assessee for making the addition. The assessee has contested the truthfulness of the statement of the witnesses recorded by the assessing officer. The truthfulness is also tested by the changing stands frequently. It is also not for the assessing officer to decide that no opportunity is necessary because he is not aware what could be the purpose for the cross-examination asked by the assessee. Therefore not granting of opportunity of the cross-examination of the brokers Sri RK Kedia, Manish Arora, Ankur Agarwal, directors of the companies who have purchased shares from the assessee through electronic platform of the Bombay stock exchange/ NSE and various other people as were mentioned in the assessment order is fatal to the assessment made by the assessing officer. We are also conscious of the decision of the Hon‘ble Supreme Court in case of M. Pirai Choodi vs. ITO 334 ITR 262, wherein the Hon‘ble Supreme Court while considering the decision of the Hon‘ble MP High Court in 302 ITR 40 has held that not granting an opportunity of cross-examination to the assessee is merely an regularity and therefore the High Court was not correct in cancelling the order of the adjudicating authority. Therefore, Hon‘ble Supreme Court thought it fit to set aside the matter to the adjudicating authority with a direction to grant opportunity of cross-examination to the assessee. Before us, an issue arises that whether the matter should be set aside to the file of the learned assessing officer to grant assessee an opportunity of cross-examination of all the witnesses whose statements Page | 151

have been used by the learned assessing officer in the assessment order for the purpose of making the addition under section 68 of the act or to annul the assessment order itself. On careful perusal of the decision of the Hon‘ble Supreme Court, it is noted that such direction were given by the Hon‘ble Supreme Court in the case of writ petition filed by the assessee before the Hon‘ble High Court and therefore Supreme Court held that the assessee could have gone before the Commissioner Appeals to agitate this issue of cross-examination and therefore the opportunity was available to the assessee at that particular point of proceedings. In the present case, assessee has also raised the same issue before the learned CIT A that cross-examination has not been provided to the assessee despite asking for the same. The learned CIT A has also brushed aside the above argument of the assessee without giving any plausible reason. Therefore, when the assessee has not exhausted all the judicial process before reaching to the higher forum, but has bypassed them by invoking the different rights, then in such circumstances, the violation of the principles of natural justice, such as not granting of opportunity of the cross- examination, becomes any regularity and not an illegality. However, when the assessee has exhausted all the remedies available to him by exercising his right of the judicial process, then in such circumstances violation of the principle of natural justice, such as not granting an opportunity of cross-examination of the witness becomes an illegality. Therefore, in such circumstances, the order/addition made based on the statement of third parties and no opportunity has been granted to the assessee for their cross-examination despite repeated requests, addition deserves to be deleted. 27. The second issue relates to the evidence and data seized from the premises of the Raj Kumar Kedia and pen drive seized from the residential premises of Shri Ankur Agarwal in the search operations, whether can be used against the assessee. The first contention of the assessee is that these documents or evidences are not seized from possession and control of assessee and they are not shown to have been belonging to assessee. Therefore, the presumption under section 132 (4A) and section 292C is not available with revenue. Therefore, the legal validity and even the evidentiary value are under challenge. The contention of the assessee is that from the computer file named, as ABCD.xls is merely the record of purchase of shares, which is also recorded in the books of accounts of the assessee. Therefore, even otherwise, that does not give any occasion to make any adjustment to the total income. As the shares were purchased through a broker, Mr. Rajkumar kedia naturally he might have also maintained such records for purchase of shares. Therefore, there is no infirmity in these two statements. Further, another two excel Page | 152

sheets found from Mr. Agarwal by the name of Job.xls and Comm.xls does not show the name of the assessee. Therefore, there is no linkage available with those documents with the assessee. Further, the argument of the assessee also find support that it was found from Mr. Agarwal therefore, it is owned by him and belongs to him. Therefore, it is for him to explain who owns this Pen drive. Further, those documents do not show any unaccounted income flowing from the assessee to anybody. In the second file Comm. xls, the learned assessing officer has noted that names of the person such as R. K. Kedia HUF and others are mentioned. According to the AO All, these persons are accommodation entry providers as stated by Shri Raj Kumar Kedia in his statement. Based on these findings, the learned AO reached at the conclusion that Bush and steels Ltd family has taken accommodation entry of long-term capital gain from Raj Kumar Kedia and other entry operators. Firstly, in that particular file, there is no reference of any name of the family of the assessee. All these entries are pertaining to a single‘s day that is 21/05/2014. The assessing officer has not correlated with any of the transactions on that date or nearby that date to show that assessee has incurred this expenditure. Further, the data allegedly seized from the search of Shri Raj Kumar Kedia cannot be used against the assessee, unless the assessee is given an opportunity of cross-examination of the men with respect to the documents found relating to the assessee or where the names of the assessee are mentioned. On this issue also the coordinate bench in assessee‘s own case, has held that such material found from third-party who was not allowed to be cross-examined by the assessee cannot be relied upon:- ―121. In the present case also, the AO made the additions on the basis of the statements of third parties recorded u/s 132(4)/133A of the Act and third parties evidences/documentation. However, no live nexus with the incriminating material found in the course of search in the case of the assessee was established. The statements of the third parties were recorded behind the back of the assessee but the opportunity of cross-examination of such parties was not allowed to the assessee, even the statements were retracted later on. It is well settled that the presumption u/s 132(4A)/292C of the Act, is available only in the case of the person in whose possession and control, the documents are found but it is not available in respect of the third parties. In the present case, there was no independent evidence to link the seized documents found in the premises of the third party with any incriminating material found in the course of search operation at the premises of the assessee. Therefore, the entries in the documents seized from third party‘s premises would not be sufficient to prove that the assessee was indulged in such transactions. In the Page | 153

present case, the pen drive of Sh. Ankur Agarwal corroborated/substantiated, the share transactions carried out by the assessee, which was duly found recorded in the regular books of the assessee, and the said pen drive did not contain anything incriminating against the assessee. Therefore, merely based on the statement of Sh. Ankur Agarwal, the addition made u/s 153A of the Act was also not justified, particularly when Sh. Ankur Agarwal retracted his statement later on. In the instant case, the AO also failed to establish any link/nexus of the alleged cash trail. We, therefore, by considering the totality of the facts and the various judicial pronouncement discussed in the former part of this order are of the view that the additions made by the AO and sustained by the ld. CIT (A) u/s 153A of the Act in the absence of any incriminating material found during the course of search u/s 132(1) of the Act in respect of unabated assessment years i.e. the assessment years 2010-11 to 2012-13 were not justified. Accordingly, the same are deleted.

request made under section 131 of the Act, the evidence of R could not have been used against the assessee and in the absence of affording a reasonable opportunity of being heard by summoning the said witness the assessment order was vitiated.‖

Marsh Steel Trading Ltd. and Vision Steel Trading Ltd.: The SCN mentions that Brij Bhushan Singal, Neeraj Singal and Uma Singal were preferential allottees. FFSL transferred Rs 1 crore and Rs. 50 lakh to Marsh Steel Trading Ltd and Vision Steel Ltd respectively by way of investments in these companies on September 19, 2011. One entity named Aarti Singal, a relative of Brij Bhushan Singal, Neeraj Singal, Uma Singal and Ritu Singal (hereinafter referred to as „the Singals‟) was a director in Marsh Steel Trading Ltd and Vision Steel Ltd during the relevant period. It has been mentioned in the SCN that as per the disclosures made on BSE, Aarti Singal was a promoter in Bhushan Steel Ltd till quarter ending September 30, 2011 along with Sanjay Singal, Brij Bhushan Singal, Neeraj Singal, Uma Singal and Ritu Singal. Therefore, it was alleged that these entities are connected among themselves and the aforesaid transfer of Rs 1.50 crore out of the allotment proceeds towards investments in Marsh Steel Trading Ltd. and Vision Steel Ltd resulted in an indirect transfer of allotment proceeds to the Singal group allottees. 71. Marsh Steel Trading Ltd. and Vision Steel Trading Ltd. have submitted that the amount of Rs.100 lakh received by Marsh Steel Trading Ltd. from FFSL on September 16, 2011 and December 14, 2011 was towards capital contribution in the company. The company had allotted 40,000 equity shares to FFSL on December 31, 2011 and requisite filings with regard to the allotment was also made with the Registrar of Companies. Similarly, with respect to the amountof Rs.50 lakh received by Vision Steel Limited from FFSL on September 16, 2011, it has been submitted that the amount was towards capital contribution in the company and the company allotted 20,000 equity shares on December 13, 2011 to FFSL. Requisite filings in ths regard were made with RoC. It has been also stated that funds received by them were invested in Bhushan Power and Steel Ltd. 72. Brij Bhushan Singal, Neeraj Singal, Uma Singal have submitted that these was a festering family dispute between Brij Bhushan Singal and Niraj Singal (younger son) on the one side and Sanjay Singal (elder son) and his family members on the other side. In this connection litigations before various courts were filed in the years 2006 and 2007. These disputes were finally settled by way of a compromise in November 14, 2011 and terms of settlement were fully implemented by February 2012. Appropriate disclosures in this regard were also made to the exchanges at that time. Post settlement, the complaints and litigations filed before various forums were withdrawn. It has been also stated that owing to the family dispute, Brij Bhushan Singal, Uma Singal, Niraj Singal and Ritu Singal had no role to play in the affairs of Marsh Steel Trading Ltd. Page | 156

and Vision Steel Ltd. in which Aarti Singal (wife of Sanjay Singal) was a director. It has been submitted that since material disputes existed during the relevant period, it can not be alleged that the funds received from FFSL by Marsh Steel Trading Limited and Vision Steel Limited, which are controlled by Mr. Sanjay Singal and his family members, came to Brij Bhushan Singal group. 73. With regard to the fund transaction between Neeraj Singal and Pine Animation Ltd., it has been submitted that Rs.80,00,000/- was paid as consideration amount for allotment of 8,00,000 preference shares on December 12, 2012 and Rs.40,00,000/- towards subscription of 4,00,000 preference shares on March 15, 2013. With regard to the query as to why they purchased the shares of FFSL, it ha of s been stated that they relied on the information and feedback received from various professionals, friends and other persons who are actively involved and having adequate knowledge of the securities market. 74. I find that during the course of proceedings, Marsh and Vision were represented jointly and Brij Bhushan Singal, Uma Singal and Neeraj Singal were jointly represented, as part of two factions of the family. It is seen from the SCN that these entities have been implicated becauseof receipt of funds by Marsh and Vision from FFSL and Aarti Singal‟s association as a director in Bhushan Power and Steel Ltd. which transferred Rs.6.50 crore to in March 2012 to Ranisati Dealers, which was a major buyer or exit provider to the preferential allottees. The preferential allotttes have adequately explained as to how they are unconnected to Ranisati and how there was a settlement family- wise with respect to Bhushan Power & Steel Ltd. Likewise, with respect to Marsh and Vision, it has been brought out that the fund transfer by FFSL was equity investment and not otherwise. In view of this, I find that that none of these entities can be proceeded against, namely, Brij Bhusan Singal, Uma Singal, Neeraj Singal, Marsh Steel Ltd. and Vision Steel Ltd.” CONCLUSION 89. As regards FFSL, the sequence of events is that one of its directors, Natarajan, Noticee No. 4 entered into an MoU on 27th May, 2010 with BP Jhunjhunwala, Noticee No.6 (who consciously manipulated the scrip price later, i.e. during 15 May, 2012 to 8th February 2013), to acquire 58.08 percent of paid-up share capital of FFSL. It has been brought out in the investigation that FFSL got its trading suspension on BSE (that was operating for a period between June, 2000 to July, 2011) revoked on 8th July, 2011. It traded for just two days on July 8, 2011 and November 16, 2011. In the meanwhile, the company made two tranches of preferential issue – one in Page | 157

December 2011 and the other in April, 2012. Soon after the expiry of the lock- in period, the preferential allottees started trading and exiting taking advantage of the huge price rise that was prevailing then and made gains. The investigation was done at the behest of letters received from Director General of Income Tax (Inv.), as the background of this order states. 90. In the ultimate analysis, I am driven to the conclusion that such fraudulent schemes are conceived and executed by a set of core entities which are connected and which are bound by the common objective of making wrongful gains by manipulating the market and undermining its integrity. In this process, certain entities are lured into the artifice with the promise of quick returns but their roles do not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. The whole scenario covering various entities with different motives makes it imperative for the regulator to step in and secure the market place by weeding out those entities which have misused the securities market and meting out deterrent penalties on such entities. 91. The limitations in an investigation of this magnitude was realized and the SEBI Board had decided in December 2016 to restrict its scope of actions to those entities that are connected to the company involved in the price manipulation, i.e. LTP contributors and the company and its directors if connection or relationship is established with the market manipulation. Keeping this background in mind, on a review of the entire proceedings beginning from the SCN, the replies and submissions of the entities and the stage at which the entities stand today, I am inclined to continue with the debarment and restraint orders against certain entities, including the company and its noticee directors, and certain other entities who are observed to be liable in the relevant parts of this order, based on their connection with the company; or market manipulation; or their role as conduits in fund transfer to the market manipulators. Accordingly, I am inclined to pass orders against various noticees as shown under the head ‗Directions‘. ………… 93. As against the remaining noticees, the interim directions issued vide interim orders dated December 19, 2014 and August 11, 2015 and confirmed vide confirmatory orders dated April 20, 2015, June 02, 2016, June 14, 2016 and August 25, 2016 shall stand revoked, with immediate effect. …… 95. The Hon‘ble SAT had directed SEBI to pass final orders in the instant matter on or before 31st of March, 2018. However, due to intervening holidays Page | 158

from 29th of March to 1st of April, 2018, the same is being passed on the 2nd April, 2018, in due deference with the orders of the Hon‘ble Tribunal. It is relevant to bring on record that the hearing for all entities got concluded on 22nd of March, 2018 and the last submissions were received on 26th of March, 2018. 96. A copy of this order shall be served on the Director General of Income Tax (Inv.), Delhi and the Principal Directors of Income Tax (Inv.) Kolkata and Chandigarh, for such action, as deemed appropriate at their end.‖

Exchange Board of India, No such transactions entered into by the assessee are not at all the synchronized transactions .There is no involvement alleged of the selling broker of the assessee involved in such synchronized trades. of on the Bombay stock exchange. There is no such finding given by the securities and exchange Board of India or Bombay stock exchange / National Stock exchanges as per its surveillance scheme and mechanism. Further, there is no evidence gathered by the assessing officer that the cash deposited in the bank account of the multiple companies is given by assessee. There is no funding pattern available, wherein the name of the assessee appears. Furthermore the notices issued by the assessing officer under section 133 (6) were either remained unserved or not responded by those companies, for which no fault can be found with the assessee. In fact, when the learned assessing officer has relied up on statements of the real owners or operators of those companies, then the learned assessing officer should have asked them to provide the information which AO has sought under section 133 (6) from those companies. As mentioned in the order of the ld AO, that the companies who have purchased the shares are having their Permanent Account Numbers. Naturally, to trade on BSE / NSE platforms, those companies have their client registration with the stock exchanges also according to the established KYC Norms. According to trading regulations the securities have been transferred in their demat accounts. For the purposes of holding of shares in demat accounts, those companies are also required to have their KYC with the depositories. Further the companies are required to file their return of income compulsorily, they hold the PAN, AO should have enquired with the AO of those companies. There is no finding that what happened to the shares purchased by those companies, no inquiry of their demat holding is also made. Further, there is no finding that prior to purchases of those shares whether throe companies have deposited margins also as per Stock exchange and SEBI Norms. There is nothing placed on record to show that those companies are debarred from trading in securities or not. All these investigations / finding of ld AO have many loopholes, which remains unanswered. In the statement of the director of the penny stock company stated that the preferential allottees are involved in market manipulation of the prices of the script, however, it is contrary to the order of the securities and exchange board of India. Such references available in the statement of Director of Rander Corporation at Q No. 13. Further, the claim of the ld AO is that the companies whose shares are purchased are not carrying on any business whereas, in answer to Q No. 32 Shri Kushal Praveen Shah Director of Anukaran Commercial Enterprise Ltd has given the detailed description of the business been carried out by that company. He has stated that out of 15 crores the Rs. 1.5 crore was for acquisition of the shares and further Rs. 13.5 crores were Page | 160

deposited to BMC to carry out some infrastructure project. Further, in the statement of Shri Ram Kumar Kedia the reference was made of Mr. Jagdish Purohit (such statement was retracted and then once again confirmed). However, in the statement of Shri Jagdish Purohit there is no reference of any work carried out with Shri Raj Kumar Kedia. The ld AO has merely stated that as Mr. Jagdish Purohit is an accommodation entry provider and as Mr. Raj Kumar Kedia has named Mr. Jagdish Purohit, without corroborating has linked assessee‘s case with Jagdish Purohit. The ld AO has also stated by the statement of Shri Devesh Upadhaya noted that one Mr. Bikash Surekha was involved in trading of many scripts and also held that Mr. Sanjoy Dey was operating the terminal and then entering into synchronize trading. However, none of these persons was examined to ascertain that how they have entered into synchronized trading. Necessarily such synchronized trading has to be with the broker of the assessee. No such link was established. Furthermore, merely because of the matching of the transaction with stock exchange the ld AO reached at the conclusion that there is a synchronized transaction. Surprisingly, no such synchronized trading was referred to SEBI. On this issue on synchronized trade no orders of SEBI were placed before us under SEBI (prohibition of fraudulent and unfair trade practices relating to securities market) Regulations 2003, and against the broker for violating provisions of SEBI (Stock Brokers and Sub Brokers) Regulations 1992. Merely an action under the Income Tax Act, 1961 against those brokers it is not proved that actually synchronized trade has taken place. Further, the allegation of the ld Assessing Officer of providing exit to the assessee by Dream light Exim Pvt. Ltd and Duari Marketing Pvt. Ltd only the stock exchange trading sales detail of the assessee are maintained which are undisputed as assessee has recorded them in the books of accounts but time and date stamp of the buyers were not matched. This is also merely an allegation. Further, those directors, real owners of those companies have not been cross-examined by the assessee despite requested by assessee. Therefore, in these circumstances, it cannot be proved that these are the dummy companies, especially when they are having PAN, KYC with stock exchanges, DEMAT Accounts, assessed by income tax Departments etc . For receipt of money through various layers, they should have been responsible in their own cases to show the genuineness of those funds. Assessee cannot be compelled to show the same. In view of this, the allegation of the cash trail of the buyers of those shares remains unproved and merely an allegation. 33. Next, claim of the assessing officer that many beneficiaries of the bogus long-term capital gains have disclosed the above sum as their undisclosed income. According to us, If some other parties have obtained the bogus long-term capital gain in their own case, in some of the case even the SEBI, while exonerated the assessee and his Page | 161

family, has implicated some of the parties who obtained the bogus long-term capital gain, but it does not lead that assessee is also sailing into the same boat. Even otherwise, there are thousands of entities who have earned the long-term capital gain in those scripts, which are challenged by the ld AO who are also exonerated by the SEBI by various orders, along with the orders passed in case of the assessee and his family members or individual orders. Hence, cases are also that in those persons case their claim of LTCG is not challenged. Interestingly the ld AR also referred to the news item in Moneylife.in dated 10/4/2018 where in internal Memo of SEBI dated 29/12/2016 is discussed. It shows that SEBI issued an elaborate interim order in respect of 12 entities connected with LTCG booking. These are First Financial Service Ltd, Kailash Auto Finance Ltd, Kamalakshi Finance Corp Ltd, Kelvin Fincap Ltd, Mishka Finance and Trading Ltd, Moryo Industries Ltd, Pine Animation Ltd, Radford Global Ltd, Eco Friendly Food Processing Park Ltd, Esteem Bio Organic Food Processing Ltd, Channel Nine Entertainment Ltd and HPC Biosciences Ltd. However, in none of these interim orders the assessee was found to be involved in any of the wrong doings. Such orders of SEBI are also elaborately discussed in this order itself. Therefore, merely because some of the persons have disclosed the LTCG earned by them as dubious, does not improve or hamper the case of the assessee and his family members. 34. The next issue discussed by the learned assessing officer was with respect to the preponderance of the probabilities in para number 4.12 of the assessment order. The learned assessing officer noted that in the instant case, there are many statements duly supported by the evidences that the individuals of Bhushan steel Ltd group has received bogus long-term capital gain entities s from various companies managed and controlled by entry operators. Further, the assessee has invested in shares of various penny stock companies, which were not doing any meaningful business, and even the earning was minimal. No prudent investor will ever invest huge sums in a company, which does not have history of declaring dividends and sound financial conditions. None of investments, losses has been incurred by them. All the transactions of the sale of shares have resulted into huge abnormal profits, which is not possible in normal course of investment. However, evidence-indicating sham transactions by all the investors were not found by the Department, but r, the pattern of investment, the modus operandi adopted is largely same for 100% of investors. The rates of return, pattern of movement of funds were glaring, nonexistence of genuine business activities of such investors etc. Safely lead to conclusion that long-term capital gain received from these penny stock company is bogus and taxable. The learned assessing officer relied upon the decision of the Hon‘ble Supreme Court in case of some of Sumati Dayal vs. CIT, 125 CTR 124. The Page | 162

learned authorized representative vehemently opposed the same and stated that long-term capital gain were originally disclosed by the assessee in his return of income for earlier assessment years for assessment year 2010 – 11 and 2011 – 12, which were assessed under section 143 (3) of the income tax act. Therefore, it is not the case of the revenue that there are no positive evidences produced by the assessee. Even in those cases, the assessee has produced the complete details of the purchase, share applications, payment by cheque, sale on a stock exchange, receipt of sale consideration and most importantly the holding period of those shares in the balance sheet of the assessee‘s which were accepted by the revenue for all those years. He therefore submitted that the theory of preponderance of probabilities invoked by the learned assessing officer is merely a conjecture and surmises. He further stated that when the originally the assessees are assessed under section 143 (3) of the act, long-term capital gain were accepted after detailed enquiries, now it cannot be said that the capital gain earned by the assessee is to be taxed u/s 68 of the act on the principles of preponderance of the probabilities. He further submitted that it was argued before the bench in appeal from earlier years that no incriminating evidences were found during the course of search. The order is awaited. He further stated that the preponderance of probabilities would come into play only when the basic test of direct and factual evidences fails. He stated that in the present case the complete evidences have been placed by the assessee before the revenue authorities, they are not found to be false but only allegation has been made that transactions are sham. He further stated that the decision relied upon by the learned AO of honourable Supreme Court is quite distinct on its fact. On careful analysis of the evidences placed before us, findings rendered by the lower authorities, we proceed to consider the taxability of the long-term capital gain earned by the assessee under section 68 of the income tax act whether in situations like this, one may fall into realm of ―preponderance of probability‖ where there are many probable factors, some in favour of the assessee and some may go against the assessee. However, the probable factors have to be weighed on material facts so collected. Here, in this case, material facts strongly indicate a probability supported by the evidences produced by the assessee that assessee has earned long-term capital gain on sale of the shares. The another very strong probability arises is that assessee has introduced its unaccounted money in the guise of profit on sale of shares holding it is a long term capital gain and showing it is a tax exempt income. The probable factors could have gone against the assessee, only if, i. there would have been some evidence found from searches conducted by the department that Assessee was the person who at the time of purchase of the shares has issued the cheques to the companies for purchase of shares and Page | 163

has received cash back and at the time of sale of those shares have paid cash to the alleged by or their associates, and then only has received the cheques towards sale of those shares. ii. Such evidences found were duly corroborated with the statements of the parties iii. Cross examination of those parties afforded to the assessee iv. Opportunity to the assessee to confront and rebut the materials gathered. Firstly, No such evidences were found during the course of search and all those evidences which are relied upon by the learned revenue authorities have been held by the coordinate bench in assessee‘s own case to not to be an incriminating material which can impact the taxable income of the assessee and his family members. Even the investigation made by the Securities and Exchange Commission of India has also held that assessee is not at all involved in the manipulation of the prices of those scripts. The revenue has also not shown us any security and exchange Board of India‘s order which even implicated the share broker, which is alleged to have arranged these long-term capital gains fraudulently for the assessee. At least something would have been unearthed from such high-level investigation by two Central Government authorities. Further whatever evidences were found by the revenue; they were not confronted to the assessee for rebutting the same. Statements recorded of several persons by revenue were not allowed to be cross- examined by the assessee. In this situations, only on the theory of preponderance of probabilities addition cannot be sustained. The theory of ―preponderance of probability‟ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn based on certain admitted facts and materials and not based on presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. The reliance placed by the learned AO on the decision of the honourable Supreme Court is clearly distinguishable. So far as the facts of that case with the case on hand before u are compared, in that particular situation before the honourable Supreme Court where the assessee was constantly earning money from the jackpot, further was not having any losses, it was confessed before the settlement commission that the expenditure incurred or the losses suffered by the assessee have been adjusted against the unaccounted income of the assessee, books of the assessee did not show in that particular case any drawings for purchase of tickets and incurring travel expenditure to 3 different cities prior to the date of Page | 164

winning of the jackpot races. The assessee has given up the winning from the jackpots immediately on same becoming taxable due to the amendment in the income tax act. Contradistinction to the above facts in the present case, assessee is consistently an investor in the shares. The holding period of the shares is also quite long. The assessee is also a shareholder in various companies of the Bhushan steel group limited. The assessee has shown purchase consideration paid by the cheque and recorded in its books of accounts and accepted by the revenue in earlier years under the scrutiny assessment. The prices at which the shares have been sold are traded prices on a stock exchange on which assessee does not have any control. The regulatory authority i.e. securities and exchange board of India, stock exchange authorities has not questioned the conduct of the assessee and broker selling the shares , on price variation in the shares of the companies in which assessee has made investment. The assessee has also paid securities transaction tax on the sale of shares and the sale consideration has been received from the SEBI registered broker against which there is no allegation. In view of this, it is apparent that assessee has produced overwhelming evidences that were not found to be false. In view of this, the reliance by the learned AO on the decision of the honourable Supreme Court is misplaced. Therefore In view of this we do not subscribe to the opinion of the learned assessing officer that on the preponderance of the probabilities the income should have been taxed in the hands of the assessee. 35. The ld AR has submitted the plethora of judicial precedents where in it has been held that in such circumstances, addition u/s 68 of the act cannot be made and such income is chargeable to tax as a long-term capital gain only. He submitted that all these decisions are also rendered on similar facts where the broker was tainted; cross-examination was not afforded, changing statements of broker, Allegation of accommodation entry provider etc. He further submitted that almost all the authorities have held that either the assessment is invalid on account of violation of principles of natural justice or on the complete documentation furnished or on the basis of changing statements of broker or on inadequate evidences or the facts that such evidences are not reliable as in the case of the assessee same are held to be not incriminating material on which addition can be made. We also have found that the facts of the issue before us are also similar to the facts dealt with by those judicial authorities. 36. As the issue involved before us is of chargeability of long term capital gain as undisclosed income of the assessee u/s 68 of the act, we have also conducted some research and found that now many high courts and coordinate benches have held in favour of the assessee. In one of the cases, SLP filed by the revenue against the Page | 165

order of the Honourable Bombay high court has also been dismissedby Honourabel Supreme Court. Many of the decision of the coordinate benches have also discussed the facts similar to the issue before us. Such recent cases are listed here under:- serial Title of the case Appeal number/ authority rendering number date of decision that decision CIT V Shreyashi Ganguli ITA 196 of 2012 Cal High court 1 Classic Growers Ltd V CIT ITA 129 of 2012 Cal High court 2 CIT V Lakshamangarh 40 taxmann.com 439 Cal high court 3 Estate & Trading co Limited CIT V Rungta Properties ITA No 105 of 2016 Cal High court 4 Limited CIT V Bhagwati Prasad 2009 TMI 34378 Cal high court 5 Agarwal THE COMMISSIONER OF INCOME TAX Bombay High court 6 INCOME TAX-16. VERSUS APPEAL NO. 300 OF MRS. KESAR A. GADA 2013 CIT V Prempal Gandhi ITA 95 of 2017 401 Punjab & Haryana 7 ITR 253 Hihcourt PCIT V Hitesh Gandhi Ita 18 of 2017 Punjab & hryana 8 High court CIT V Pooja Agarwal Ita No 385 of 2011 Rajasthan High 9 court CIT V sudeep Goenka 29 taxmann.com 402 Allahabad high 10 dated 3/1/2013 court CT V Anupam Kapoor 299 ITR 0179 Punjab & Haryana 11 High court CIT V arunkumar Agrwal 26 taxmann.com 113 Jharkhand High 12 HUF court CIT V Shyam R Pawar 54 taxmann.com 108 Bombay High court 13 229 TAXMAN 0256 PRINCIPAL 2018 (3) TMI 1084 - GUJARAT HIGH 14 COMMISSIONER OF GUJ COURT INCOME TAX-5 VERSUS DIPALI MAHENDRA SHAH THE COMMISSIONER OF 2011 (9) TMI 919 Bombay High court 15 INCOME TAX VERSUS SHRI SLP Dismissed by MUKESH RATILAL Hon SC on MAROLIA. 27/1/2015 Special Leave to Appeal (Civil) No(s).20146/2012 Principal Commissioner of Tax Appeal No.674 of Gujarat high Court 16 Income Tax-5 v. Dhwani 2017 Mahendra Shah COMMISSIONER OF IT Appeal No. 50 of Rajasthan High 17 INCOME TAX VERSUS 2010 court PUSHPA MALPANI 2010 (11) TMI 799 Smt. Bharti Arvind Jain vs. 6102/Mum/2016) Mumbai ITAT 18 ITO Page | 166

ITO vs. M/s Indravadan Jain 4861/Mum/2014 Mumbai ITAT 19 HUF Swati Mall V ITO Ward 7/12/2018 Kolakatta ITAT 20 36(2) Vaishal Suryakant Shah V 9 CCH 106 Ahmedabad ITAT 21 ITO Sunita Jain V ITO 49 CCH 330 Ahmedabad ITAT 22 DCIT central circle V PRB 5/12/2018 Kolakata ITAT 23 Securities P Ltd Prakashchand BhutoriaV 53 CCH 275 Kolkata ITAT 24 ITO Ramprasad Agarwal V ITO 30/11/2018 Mumbai ITAT 25 Aditya Vikram Sureka HUF 28/11/2018 Kolakat ITAT 26 V ITO Kolkatta Rashmi maheshwari V ITO 28/11/2018 Delhi ITAT 27 Mohanlal Agarwal HUF V 26/11/2018 Delhi ITAT 28 ITO Jaishree Bamboly V ITO 8/11/2018 Chennai ITAT 29 Simi Verma V ITO 6/11/2018 Delhi ITAT 30 Manojkumar Gupta V ITO 5/11/2018 Delhi ITAT 31 Madhu Killa V ACIT 2/11/2018 Kolkata ITAT 32 Kanthilal Kamla Bai V ITO 29/10/2018 Chennai ITAT 33 K Praveenkumar HUF V 29/10/218 Chennai ITAT 34 ITO RukmaniDevi Manpuria V 24/10/2108 Kolkatta ITAT 35 DCIT Bishwanath AGarwal V ITO 16/10/2018 Kolkata ITAT 36 Bhanshali Finacom P Ltd V 10/10/2018 Kolkatta ITAT 37 DCIT Sanjay Mehta V ACIT 28/9/2018 Kolkatta ITAT 38 Mina Mehta V ITO 28/9/2018 Kolkatta ITAT 39 Vikas Jhawar V ITO 26/9/2018 Kolkatta ITAT 40 Neelam Agarwal V ITO 26/9/2018 Kolkatta ITAT 41 Rajkumar Goenka V ITO 26/9/2018 Kolkata ITAT 42 Shobhit Goel V ITO 25/9/2018 Delhi ITAT 43 Kaushlaya devi V ITO 19/9/2108 Hyderabad ITAT 44 Amit Shah V ITO 26/9/2018 Kolkatta ITAT 45 Deepak Bhattad HUF V ITO 19/9/2018 Chennai ITAT 46 Arunkumar Bhaiyya V ITO 30/8/2018 Delhi ITAT 47 ITO V Kapil Mittal 29/8/2018 Jaipur ITAT 48 DCIT V Saurabh Mittal 29/8/2018 Jaipur ITAT 49 Sikha Dhawan V ITO 27/6/2018 Delhi ITAT 50 Meghrajsingh Sehawat V 7/3/2018 Jaipur ITAT 51 DCIT Page | 167

DCIT V Vimleshkumar 15/1/2018 Raipur ITAT 52 Singh ACIT V Pratiksha Shah 03/10/217 Mumbai ITAT 53 Ketulkumar D Jaiswal V 2017 (10) TMI 168 - Ahmedabad ITAT 54 ITO ITAT AHMEDABAD ITO V Arvindkumar jain 18/9/2017 Mumbai ITAT 55 HUF Bharti navin Cheda V ITO 11/9/2017 Mumbai ITAT 56 Kamladevi S Doshi V ITO 22/5/2017 Mumbai ITAT 57 Bhavesh Sambhulal ITA Ahmedabad ITAT 58 SOmani V ITO No.2263/Ahd/2015 20/3/2017 Rachna Sachin jain V ITO 501 & Ahmedabad ITAT 59 502/AHD/2016 7/3/2017 Malti Ghanshyambhai V ITO 6/2/2017 Ahmedabad ITAT 60 Rajendrkumar ratilal 1753/ahd/2012 Ahmedabad ITAT 61 Jariwala V ITO 29/2/2016 ITO V Arvindkumar Jain 51 CCH 281 Mumbai ITAT 62 HUF

exchange through a registered broker receiving the sale consideration through the settlement mechanism of the exchange by cheque. There is no doubt on the brokers who purchased shares and on the brokers who sold the shares. In the case before the honourable Bombay High Court, addition was on account of absence of any information coming from the broker who sold the shares when enquired by the AO. In the present case, the AO did not raise any question to the broker who sold the shares. It is in fact, the broker who sold the shares logged in to his terminal and sold the shares on electronic online platform of the exchange. It is not the case of the assessee that the shares have not been sold by the assessee on the stock exchange. Here, the learned assessing officer is challenging the whole cycle of the transaction, starting from purchase of the shares by the assessee from the market or on preferential allotment of shares of some of the companies and subsequently holding it and selling it on stock exchange at prevailing prices as sham transaction as an attempt to convert the unaccounted money of the assessee in the form of non- taxable long-term capital gain. Further, in the case before the honourable Bombay High Court the simple issue was that there was an unusual rise in the price of the share and no enquiry was conducted by the any regulatory authority. In the case before us, the securities and exchange Board of India has conducted a detailed enquiry and has held that assessee is not involved in manipulation of prices of any scripts. Therefore, it was held by the SEBI that the transaction, as far as purchase and sale of the shares on Bombay stock exchange is concerned, was untainted. Therefore, the facts of the case before the honourable Bombay High Court and facts before us are clearly distinguishable. 38. The 2nd decision relied upon by the learned CIT DR is in case of Shri Abhimanyu Soin vs. Assistant Commissioner of Income Tax [2018 – TIOL – 733 – ITAT – CHD]. In that particular case, there was a specific allegation which was proved that there is a circular transactions entered into by the assessee‘s brokers for the scrip and further there was no evidence that how a Calcutta-based broker from Ludhiana- based assessee has received in cash for purchase of the shares on three different dates. Apparently, the fact of payment of cash to purchase of shares to the broker situated at Kolkata became Primordial. Further, the assessee was in United States from 2009 – 2012 and the case was pertaining to assessment year 2011 – 12, where the assessee has made a payment to one of the representative, whose name could not be recollected for sending money to the broker when it was the first deal with the broker. Further, the shares were also not transacted through any recognized exchange as apparently the shares were traded of a petty private limited company. In addition, the assessee could not prove the requisite source of investment during the relevant period of investment. The facts of the case before the coordinate bench are Page | 169

clearly distinguishable and do not apply to the facts of the case before us. In view of this, reliance on this decision by revenue is also misplaced. 39. The third decision relied upon by the learned departmental representative is of Bangalore bench SMC where the shares were purchased off market by the assessee despite having the shares of the company listed on the stock exchange. Therefore, the facts of this case are also clearly distinguishable from the facts before us. 40. The fourth decision relied upon is in case of Chandan Gupta vs. CIT, 229 taxman 173 (Punjab and Haryana). In that, particular case the assessee expressed its inability to produce the broker and the AO conducted inquiries on his own. The quotations were also from a Gujarati diary the prices could not be substantiated by the assessee. In the present case, the assessee has produced all the evidences before the assessing officer and the learned AO did not press upon the assessee to produce anybody instead of that he went by the standard modus operandi as understood by him. Even in the present case before us whether the modus operandi is the thinking of the learned AO or has he been directed by somebody is not known. The prices at which the transactions of sale of shares have taken are market rate and there is no allegation as the shares were listed on stock exchange. Therefore, the facts of the case cited by the learned departmental representative are clearly distinguishable. 41. The 5th decision relied upon by the learned CIT DR is with respect Balbir Chand maini vs. CIT [340 ITR 161]. In that particular case, on examination of the broker the books of accounts of the broker could not be produced by him to show that he has purchased the shares from the assessee and the sale of shares has also not taken place through any stock exchange. There were cash deposits in the bank account of the broker prior to issue of cheques in the name of the assessee for purchase of shares claimed to be the sale proceeds of the shares is received in advance. The broker also could not give the details of the name of the purchase of the shares. Further, it was also found by the AO that the shares sold by the assessee were not quoted on the stock exchange and there was no trading of those shares on the exchange. The AO further noted that it was a closed circuit transaction between some persons. The AO further found that the shares claimed to have been sold through the broker had not been transferred even at the time of making the enquiry by the assessing officer and such sales continued to be registered in the name of the assessee. Therefore, there was no transfer of share at all in that particular case. On these facts, the addition under section 69 was confirmed. On comparison of facts of that, case with the facts of the present case clearly shows that such facts do not exist before us. 42. The learned CIT DR also relied upon several other decisions where for several reasons, the addition on sale of shares shown as a long-term capital gain is Page | 170

confirmed in the hands of the assessee. However, in most of the decisions cited before us, There was an off market purchase by the assessee and the assessee could not substantiate with documentary evidences the transaction of purchase and sale of the shares. In many of the cases cited there were predated contract note issued by the broker and the payment for purchase of the shares is made in cash and that too off market. , In some of the cases, there was no payment by cheque for acquisition of the shares but there was an adjustment of profits earned by the assessee through those brokers, who generated profits in cash in the name of the assessee and purchase price of the shares adjusted by the broker against that payment to be made to those assessees. In such circumstances, the additions have been confirmed by the coordinate benches. Therefore, the facts of those cases are clearly distinguishable. 43. The four parties we like to state that despite searches carried out on the assessee based on pre search inquiries coupled with the search on Mr. Raj Kumar Kedia and recording statements of so many persons the ld AO knowing fully well that failure to grant cross examine will make all these enquiries fruitless. Further, there are loopholes in the evidence relied upon by the revenue of not referring the issue of synchronized trading to the SEBI. Certain times the conviction under the SEBI Act would have been more stringent then the liability under the Tax laws. Further, though the AO was having reasonable evidences but has unnecessarily took the burden on him of proving that long term capital gain earned by the assessee is bogus instead of first asking assessee to prove that the above income is exempt u/s 10(38) of the Act. After granting full opportunity to the assessee to adduce as many evidence as assessee could have produce and then should have carried out vast powers bestowed upon him under the Income Tax Act, 1961 of examining the details furnished by the assessee. The ld AO could have also asked the assessee to produce all the persons whose statement AO was relying upon. However, the ld AO has unnecessarily taken the onus of proving long-term capital gain as bogus instead of first asking assessee to prove that the long-term capital gain is genuine. The ld AO should have first put the burden to put prima facie case in respect of cash credit on assessee as to how it was introduced in the books of the assessee. However, from the first paragraph of the assessment order itself the ld AO alleged that assessee has entered into a scam and they by walked into the trap of section 110 of the evidence act on him to prove that the long-term capital gain earned by the assessee is bogus. The ld AO after that could not substantiate his allegations by granting cross- examination to the assessee of various persons. It is fatal to the case, as the assessment strategy adopted by the ld AO could not prove his allegation.

natural justice by relying on statements of various persons and data without affording the Appellant any opportunity to cross examine such persons, thus, kiang the assessment bad in law by considering the same as a general ground, no acquiring any separate adjudication.” 49. The following grounds of appeal in ITA No. 1480/Del/2018 for the 2014-15:- “1. That the assessment order dated 23-12-2017 passed u/s 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making an addition of Rs. 73,89,99,462/- on account of Long term capital gains which was exempt u/s 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long term capital gain are, allegedly, sham. 2. That the order dated 29.12.2017 passed u/s 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delh is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making the addition of Rs. 4,43,39,968/- on account of alleged unaccounted commission expenses @6% on the long term capital gains on sheer presumptive basis. 3. That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without affording the Appellant any opportunity to cross examine such persons, thus, kiang the assessment bad in law by considering the same as a general ground, no acquiring any separate adjudication.”

kiang the assessment bad in law by considering the same as a general ground, no acquiring any separate adjudication.”

affording the appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication.” 58. The assessee raised the following ground of appeal in ITA No. 1484/Del/2018 for AY 2014-15:- ―1. That the order dated 29.12.2017 passed u/s 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making an addition of Rs. 23,81,84,705/- on account of Long term Capital gains which was exempt u/s 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long term capital gain are, allegedly sham. 3. That the order dated 29.12.2017 passed u/s 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making addition of Rs. 1,42,91,082/- on account of alleged unaccounted commission expenses @6% on the long term capital gains on sheer presumptive basis. 4. That the order dated 29.12.2017 passed u/s 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying o the statements of various persons and data without affording the appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication.”