DCIT(CC)-8(3) , MUMBAI vs. SANTOSH VIMLESH MEHTA, MUMBAI

3 Santosh Vimlesh Mehta through which shares were allegedly purchased at inflated prices through which shares were allegedly purchased at inflated prices through which shares were allegedly purchased at inflated prices have been described as “exit providers” in the have been described as “exit providers” in the information information. 2.2 On the basis of the aforesaid information and upon On the basis of the aforesaid information and upon On the basis of the aforesaid information and upon examination of the assessment records, the A examination of the assessment records, the Assessing Officer ssessing Officer recorded reasons to believe that income chargeable to tax had recorded reasons to believe that income chargeable to tax had recorded reasons to believe that income chargeable to tax had escaped assessment and accordingly issued notice under section escaped assessment and accordingly issued notice under section escaped assessment and accordingly issued notice under section 148 of the Act on 28.03.2019. In response, the assessee filed a 148 of the Act on 28.03.2019. In response, the assessee filed a 148 of the Act on 28.03.2019. In response, the assessee filed a return of income on 03.06.2019, reiterating the in return of income on 03.06.2019, reiterating the income originally come originally declared in the return filed on 21.12.2012. The Assessing Officer declared in the return filed on 21.12.2012. The Assessing Officer declared in the return filed on 21.12.2012. The Assessing Officer thereafter furnished a copy of the reasons recorded for reopening, thereafter furnished a copy of the reasons recorded for reopening, thereafter furnished a copy of the reasons recorded for reopening, to which the assessee filed objections. The said objections were to which the assessee filed objections. The said objections were to which the assessee filed objections. The said objections were disposed of by the Assessing Officer by an disposed of by the Assessing Officer by an order dated 27.11.2019. 2.3 Aggrieved by the disposal of objections, the assessee Aggrieved by the disposal of objections, the assessee Aggrieved by the disposal of objections, the assessee approached the Hon’ble Bombay High Court by way of a writ approached the Hon’ble Bombay High Court by way of a writ approached the Hon’ble Bombay High Court by way of a writ petition. The writ petition was disposed of by order dated petition. The writ petition was disposed of by order dated petition. The writ petition was disposed of by order dated 22.02.2022, with a direction to the Assessing Officer to 22.02.2022, with a direction to the Assessing Officer to 22.02.2022, with a direction to the Assessing Officer to pass a fresh order disposing of the objections. In compliance with the fresh order disposing of the objections. In compliance with the fresh order disposing of the objections. In compliance with the said directions, the Assessing Officer passed a speaking order said directions, the Assessing Officer passed a speaking order said directions, the Assessing Officer passed a speaking order dated 05.04.2022, rejecting the objections of the assessee. dated 05.04.2022, rejecting the objections of the assessee. dated 05.04.2022, rejecting the objections of the assessee. Thereafter, notices under sections 143(2) and 142(1) of the A Thereafter, notices under sections 143(2) and 142(1) of the A Thereafter, notices under sections 143(2) and 142(1) of the Act were issued, calling upon the assessee to explain the Long were issued, calling upon the assessee to explain the Long were issued, calling upon the assessee to explain the Long-Term Capital Gain declared on the sale of shares of M/s Banas Finance Capital Gain declared on the sale of shares of M/s Banas Finance Capital Gain declared on the sale of shares of M/s Banas Finance Ltd.

4 Santosh Vimlesh Mehta 2.4 In response, the assessee explained the manner of In response, the assessee explained the manner of In response, the assessee explained the manner of acquisition and sale of the shares. It was submitted that all acquisition and sale of the shares. It was submitted that all acquisition and sale of the shares. It was submitted that all investment decisions were managed by her late husband. vestment decisions were managed by her late husband. vestment decisions were managed by her late husband. According to the assessee, her husband was approached by M/s According to the assessee, her husband was approached by M/s According to the assessee, her husband was approached by M/s Banas Finance Ltd. for preferential allotment of shares, pursuant Banas Finance Ltd. for preferential allotment of shares, pursuant Banas Finance Ltd. for preferential allotment of shares, pursuant to which an investment of to which an investment of ₹20,00,000/- was made on her behalf. was made on her behalf. The said funds were stated to have been sourced through s were stated to have been sourced through s were stated to have been sourced through withdrawal of capital from M/s Mehta Emporium, a partnership withdrawal of capital from M/s Mehta Emporium, a partnership withdrawal of capital from M/s Mehta Emporium, a partnership firm in which the assessee was a partner, and the payment was firm in which the assessee was a partner, and the payment was firm in which the assessee was a partner, and the payment was made through normal banking channels. It was further made through normal banking channels. It was further made through normal banking channels. It was further submitted that against the investment submitted that against the investment of ₹20 lakh, the assessee 20 lakh, the assessee was allotted 1,00,000 equity shares of face value was allotted 1,00,000 equity shares of face value ₹ ₹10 each at a premium of ₹10 per share. The assessee furnished copies of the 10 per share. The assessee furnished copies of the 10 per share. The assessee furnished copies of the relevant bank statements and the preferential allotment letter relevant bank statements and the preferential allotment letter relevant bank statements and the preferential allotment letter issued by M/s Banas Finance Ltd. It was issued by M/s Banas Finance Ltd. It was also stated that the also stated that the shares were subsequently dematerialised during the financial shares were subsequently dematerialised during the financial shares were subsequently dematerialised during the financial year 2010-11. Thereafter, the shares of the company were split in 11. Thereafter, the shares of the company were split in 11. Thereafter, the shares of the company were split in the ratio of 1:10 on 12.09.2011, as a result of which the the ratio of 1:10 on 12.09.2011, as a result of which the the ratio of 1:10 on 12.09.2011, as a result of which the assessee’s shareholding increased from 1,00,000 s assessee’s shareholding increased from 1,00,000 s assessee’s shareholding increased from 1,00,000 shares to 10,00,000 shares.

2.5 In financial year 2012 n financial year 2012-13, the assessee sold all the shares in 13, the assessee sold all the shares in the month of February and March 2013 in following manner: the month of February and March 2013 in following manner: the month of February and March 2013 in following manner: Date Name of Scrip Name of Scrip Amount Quantity Quantity Holding Period (Days) 01-02-2012 Banas Finance Ltd Banas Finance Ltd 128700.46 127000 127000 396 06-02-2012 Banas Finance Ltd Banas Finance Ltd 7057200 23000 23000 401 21-02-2012 Banas Finance Ltd Banas Finance Ltd 6940502.01 150000 150000 No. 3725/Mum/2025 5 Santosh Vimlesh Mehta 22-02-2012 Banas Finance Ltd Banas Finance Ltd 6629674.52 150000 150000 417 24-02-2012 Banas Finance Ltd Banas Finance Ltd 6068923.33 150000 150000 419 28-02-2012 Banas Finance Ltd Banas Finance Ltd 5817063.1 150000 150000 423 29-02-2012 Banas Finance Ltd Banas Finance Ltd 2210735.46 110522 110522 424 01-03-2012 Banas Finance Ltd Banas Finance Ltd 3612841.7 64478 64478 425 06-03-2012 Banas Finance Ltd Banas Finance Ltd 2219489.16 75000 75000 430 Total 40685129.74 10,00,000 10,00,000 2.6 The assessee assailed the findings of the Assessing Officer The assessee assailed the findings of the Assessing Officer The assessee assailed the findings of the Assessing Officer and contended that the transactions relating to purchase and and contended that the transactions relating to purchase and and contended that the transactions relating to purchase and sale of shares were genuine and not sham. In support of this sale of shares were genuine and not sham. In support of this sale of shares were genuine and not sham. In support of this contention, the assessee made the following submissions: contention, the assessee made the following submissions: contention, the assessee made the following submissions: (i) The shares were acquired pursuant to a valid share The shares were acquired pursuant to a valid share The shares were acquired pursuant to a valid share application made to the company, and the consideration application made to the company, and the consideration application made to the company, and the consideration for such allotment was paid through an account for such allotment was paid through an account for such allotment was paid through an account-payee cheque. (ii) The sale of shares was carried out through a recognised The sale of shares was carried out through a recognised The sale of shares was carried out through a recognised stock exchange by a broker duly stock exchange by a broker duly registered with the registered with the Securities and Exchange Board of India (SEBI), and the Securities and Exchange Board of India (SEBI), and the Securities and Exchange Board of India (SEBI), and the sale consideration was received through normal banking sale consideration was received through normal banking sale consideration was received through normal banking channels, channels, channels, as as as evidenced evidenced evidenced by by by the the the assessee’s assessee’s assessee’s bank bank bank statements. (iii) Security Transaction Tax (STT) was duly charged and Security Transaction Tax (STT) was duly charged and Security Transaction Tax (STT) was duly charged and paid on the sale paid on the sale transactions, which was clearly reflected transactions, which was clearly reflected in the contract notes issued by the broker. in the contract notes issued by the broker.. (iv) The trading of shares on the stock exchange is a fully The trading of shares on the stock exchange is a fully The trading of shares on the stock exchange is a fully automated, system automated, system-driven process, leaving no scope for driven process, leaving no scope for personal interaction, negotiation, or collusion between personal interaction, negotiation, or collusion between personal interaction, negotiation, or collusion between the buyer and the seller. he buyer and the seller.

6 Santosh Vimlesh Mehta (v) No material was brought on record by the Assessing No material was brought on record by the Assessing No material was brought on record by the Assessing Officer to establish any nexus or connection whatsoever Officer to establish any nexus or connection whatsoever Officer to establish any nexus or connection whatsoever between the assessee and the alleged exit providers. between the assessee and the alleged exit providers. between the assessee and the alleged exit providers. (vi) Even in the statements of the alleged entry operators Even in the statements of the alleged entry operators Even in the statements of the alleged entry operators relied upon by th relied upon by the Department, there was no reference to e Department, there was no reference to the assessee, nor any admission that accommodation the assessee, nor any admission that accommodation the assessee, nor any admission that accommodation entries were provided to her. entries were provided to her. (vii) The investment in the shares was made by the assessee’s The investment in the shares was made by the assessee’s The investment in the shares was made by the assessee’s late husband in good faith considering to be the right late husband in good faith considering to be the right late husband in good faith considering to be the right time to invest in the sh time to invest in the shares of the company, based on his ares of the company, based on his bona fide assessment of the future prospects of the bona fide assessment of the future prospects of the bona fide assessment of the future prospects of the company, and without any mala fide intention and company, and without any mala fide intention and company, and without any mala fide intention and 2.7 The assessee also sought copies of the material allegedly The assessee also sought copies of the material allegedly The assessee also sought copies of the material allegedly indicating indicating indicating her her her involvement involvement involvement in in in accommodation accommodation accommodation entry entry entry transactions and requested an opportunity to cross ions and requested an opportunity to cross ions and requested an opportunity to cross-examine the third parties whose statements were relied upon by the the third parties whose statements were relied upon by the the third parties whose statements were relied upon by the Department, contending that denial of such opportunity Department, contending that denial of such opportunity Department, contending that denial of such opportunity violated the principles of natural justice. violated the principles of natural justice. 2.8 The Assessing Officer, however, was not pe The Assessing Officer, however, was not persuaded by the rsuaded by the explanation furnished by the assessee. He noted that the explanation furnished by the assessee. He noted that the explanation furnished by the assessee. He noted that the company in question was originally incorporated as Pioneer company in question was originally incorporated as Pioneer company in question was originally incorporated as Pioneer Leasing Co. Leasing Co. Leasing Co. Ltd. on 06.06.1983, and its Ltd. on 06.06.1983, and its Ltd. on 06.06.1983, and its name was name was name was subsequently changed to Banas Finance Ltd. on 28.08.1986. subsequently changed to Banas Finance Ltd. on 28.08.1986. subsequently changed to Banas Finance Ltd. on 28.08.1986. The The company obtain company obtained registration ed registration as as a Non a Non-Banking Financial Company (NBFC) from the Reserve Bank of India on Financial Company (NBFC) from the Reserve Bank of India on Financial Company (NBFC) from the Reserve Bank of India on 24.01.1999. 24.01.1999. 24.01.1999. In In In the the the assessment assessment assessment order, order, order, particularly particularly particularly in in in No. 3725/Mum/2025 7 Santosh Vimlesh Mehta paragraphs 5.3 to 5.7, the Assessing Officer described the paragraphs 5.3 to 5.7, the Assessing Officer described the paragraphs 5.3 to 5.7, the Assessing Officer described the general modus operandi allegedly adopted for generat general modus operandi allegedly adopted for generat general modus operandi allegedly adopted for generating bogus long-term capital gains through penny stock companies. He term capital gains through penny stock companies. He term capital gains through penny stock companies. He explained how beneficiaries possessing unaccounted money explained how beneficiaries possessing unaccounted money explained how beneficiaries possessing unaccounted money allegedly approached operators managing such scrips, how the allegedly approached operators managing such scrips, how the allegedly approached operators managing such scrips, how the share prices were artificially rigged, and how exit providers share prices were artificially rigged, and how exit providers share prices were artificially rigged, and how exit providers were used to enable the beneficiaries to book exempt capital d to enable the beneficiaries to book exempt capital d to enable the beneficiaries to book exempt capital gains through stock exchange transactions. The Assessing gains through stock exchange transactions. The Assessing gains through stock exchange transactions. The Assessing Officer also referred to the typical bell Officer also referred to the typical bell-shaped pattern observed shaped pattern observed in the price movement of such penny stocks. in the price movement of such penny stocks. 2.9 Applying the said general modus Applying the said general modus operandi to the facts operandi to the facts of the present case, the Assessing Officer analysed the price of the present case, the Assessing Officer analysed the price of the present case, the Assessing Officer analysed the price movement of the shares of Banas Finance Ltd. He noted that movement of the shares of Banas Finance Ltd. He noted that movement of the shares of Banas Finance Ltd. He noted that the company issued preferential allotment of 99,00,000 equity the company issued preferential allotment of 99,00,000 equity the company issued preferential allotment of 99,00,000 equity shares of ₹10 each at a premium of 10 each at a premium of ₹10 per share o 10 per share on 30.12.2010, followed by a stock split in the ratio of 1:10. 30.12.2010, followed by a stock split in the ratio of 1:10. 30.12.2010, followed by a stock split in the ratio of 1:10. Subsequently, on 26.03.2013, another preferential allotment Subsequently, on 26.03.2013, another preferential allotment Subsequently, on 26.03.2013, another preferential allotment was made whereby 1,17,60,000 equity shares of face value was made whereby 1,17,60,000 equity shares of face value was made whereby 1,17,60,000 equity shares of face value ₹1 each were issued at a premium of each were issued at a premium of ₹16 per share to non 16 per share to non- promoters. The Asses promoters. The Assessing Officer observed that the share price sing Officer observed that the share price on the Bombay Stock Exchange rose from on the Bombay Stock Exchange rose from on the Bombay Stock Exchange rose from ₹9.40 on 27.01.2011 to ₹562 on 01.02.2012, thereafter declined to 562 on 01.02.2012, thereafter declined to 562 on 01.02.2012, thereafter declined to ₹99.50 on 28.05.2012, again increased to 99.50 on 28.05.2012, again increased to ₹682 on 29.10.2013, 682 on 29.10.2013, and finally fell sharply to and finally fell sharply to ₹13.30 on 22.12.2015. 2.10 According to the Assessing Officer, the increase in share According to the Assessing Officer, the increase in share According to the Assessing Officer, the increase in share price was accompanied by extremely low trading volumes price was accompanied by extremely low trading volumes price was accompanied by extremely low trading volumes ITA No.

8 Santosh Vimlesh Mehta during the period of price rise, while a sudden spike in volume during the period of price rise, while a sudden spike in volume during the period of price rise, while a sudden spike in volume was noticed upon expiry of the lock was noticed upon expiry of the lock-in period of shares in period of shares allotted preferntialy, which, according to him, coincided with the exit , which, according to him, coincided with the exit , which, according to him, coincided with the exit taken by beneficiaries claiming exempt long taken by beneficiaries claiming exempt long-term capital gains. term capital gains. He further observed that such astronomical rise in share price He further observed that such astronomical rise in share price He further observed that such astronomical rise in share price after preferential allotment after preferential allotment was not supported by the financial was not supported by the financial fundamentals of the company. ntals of the company.

2.11 The Assessing Officer further analysed the trade data The Assessing Officer further analysed the trade data The Assessing Officer further analysed the trade data and concluded that the price movement of the scrip was and concluded that the price movement of the scrip was and concluded that the price movement of the scrip was artificially manipulated with a mala fide intent. artificially manipulated with a mala fide intent. The Assessing The Assessing Officer noted that price of the stock moved from Officer noted that price of the stock moved from Officer noted that price of the stock moved from ₹ 9.40 on 27/01/2011 (before preferential allotment) to 27/01/2011 (before preferential allotment) to 27/01/2011 (before preferential allotment) to ₹ 682 (after preferential allotment) on 19/10/2013 and then suddenly fell preferential allotment) on 19/10/2013 and then suddenly fell preferential allotment) on 19/10/2013 and then suddenly fell back to prices of ₹ 13.30 on 22/12/2015. He noted that during He noted that during the period from 04.02.2011 to 07.09.2011, covering 138 the period from 04.02.2011 to 07.09.2011, covering 138 the period from 04.02.2011 to 07.09.2011, covering 138 trading days, only 158 trades were executed, with most days ys, only 158 trades were executed, with most days ys, only 158 trades were executed, with most days recording merely a single trade involving a minimal quantity of recording merely a single trade involving a minimal quantity of recording merely a single trade involving a minimal quantity of shares. The price during this period increased steadily from shares. The price during this period increased steadily from shares. The price during this period increased steadily from ₹9.82 to ₹281.30. The Assessing Officer observed that on 281.30. The Assessing Officer observed that on 281.30. The Assessing Officer observed that on several days the price i several days the price increase hovered just below the circuit ncrease hovered just below the circuit limits prescribed by the stock exchange, thereby enabling limits prescribed by the stock exchange, thereby enabling limits prescribed by the stock exchange, thereby enabling maximum maximum maximum appreciation appreciation appreciation without without without triggering triggering triggering regulatory regulatory regulatory intervention. Graphs depicting the number of trades and intervention. Graphs depicting the number of trades and intervention. Graphs depicting the number of trades and trading volumes were reproduced in the assessment or trading volumes were reproduced in the assessment or trading volumes were reproduced in the assessment order to support this inference. support this inference.

9 Santosh Vimlesh Mehta 2.12 The Assessing Officer also noted that there were no The Assessing Officer also noted that there were no The Assessing Officer also noted that there were no corporate corporate corporate announcements, announcements, announcements, improvement improvement improvement in in in financial financial financial performance, or changes in business fundamentals of the performance, or changes in business fundamentals of the performance, or changes in business fundamentals of the company that could justify such a steep rise in share price. company that could justify such a steep rise in share price. company that could justify such a steep rise in share price. He further observed that the movement of the share price bore no further observed that the movement of the share price bore no further observed that the movement of the share price bore no correlation with the general market indices, which remained correlation with the general market indices, which remained correlation with the general market indices, which remained relatively stable during the relevant period as against relatively stable during the relevant period as against relatively stable during the relevant period as against abnormal movement in the price of shares of BFL. On these abnormal movement in the price of shares of BFL. On these abnormal movement in the price of shares of BFL. On these premises, the Ass premises, the Assessing Officer concluded that the price rise essing Officer concluded that the price rise was the result of systematic and artificial rigging carried out was the result of systematic and artificial rigging carried out was the result of systematic and artificial rigging carried out through controlled and low through controlled and low-volume trades. 2.13 Further, the Assessing Officer, referred to statements the Assessing Officer, referred to statements the Assessing Officer, referred to statements of persons who colloborated colloborated in manipulating share price of hare price of BFL, including Sh GK Agrwal, promoter and director of Banas , including Sh GK Agrwal, promoter and director of Banas , including Sh GK Agrwal, promoter and director of Banas Finance limited and few exit providers, Finance limited and few exit providers, viz, sh Chandra Kant Chandra Kant Mohite (Thene), sh sh Prashant Shashikant Sawant , Prashant Shashikant Sawant , sh Shyam Laxman Pedamkar, Laxman Pedamkar, Ms. Shweta Shyam Pedamkar, Sh Pardeep Shweta Shyam Pedamkar, Sh Pardeep Dhanuka etc. It was revealed that shri Pradeep Dhanuka was . It was revealed that shri Pradeep Dhanuka was . It was revealed that shri Pradeep Dhanuka was the key person in the chain who introduced various bogus exit the key person in the chain who introduced various bogus exit the key person in the chain who introduced various bogus exit providers. In the statement recorded, Sh Pradeep Dhanuka as providers. In the statement recorded, Sh Pradeep Dhanuka as providers. In the statement recorded, Sh Pradeep Dhanuka as well as various exit providers have admitted that they had well as various exit providers have admitted that they had well as various exit providers have admitted that they had nothing to do with th nothing to do with the concerned companies, wherein they e concerned companies, wherein they were directors. Sh Pradeep Dhanuka admitted that on the were directors. Sh Pradeep Dhanuka admitted that on the were directors. Sh Pradeep Dhanuka admitted that on the instruction of Sri Giriraj Kishore Agrawal , one of the instruction of Sri Giriraj Kishore Agrawal , one of the instruction of Sri Giriraj Kishore Agrawal , one of the promoters of Banas finance Ltd, he had indulged in promoters of Banas finance Ltd, he had indulged in promoters of Banas finance Ltd, he had indulged in No. 3725/Mum/2025 10 Santosh Vimlesh Mehta manipulating the scrip. The relevant part of assessment o manipulating the scrip. The relevant part of assessment o manipulating the scrip. The relevant part of assessment order is reproduced as under: is reproduced as under:

“5.19 Further, Statements of few exit providers were recorded. In the 5.19 Further, Statements of few exit providers were recorded. In the 5.19 Further, Statements of few exit providers were recorded. In the sworn statement, the EPs (Exit Providers) have confirmed that their sworn statement, the EPs (Exit Providers) have confirmed that their sworn statement, the EPs (Exit Providers) have confirmed that their accounts like bank account, DMAT account were misused by certain accounts like bank account, DMAT account were misused by certain accounts like bank account, DMAT account were misused by certain operators. The EPs are operators. The EPs are generally individuals of low income group. generally individuals of low income group. This is the typical pattern where a group of exit providers are This is the typical pattern where a group of exit providers are This is the typical pattern where a group of exit providers are identified by the operator of the scheme and their identity is used by identified by the operator of the scheme and their identity is used by identified by the operator of the scheme and their identity is used by the operator to carry out bogus trades in order to provide bogus the operator to carry out bogus trades in order to provide bogus the operator to carry out bogus trades in order to provide bogus accommodation entry to beneficiaries of bogus Long Term Capital entry to beneficiaries of bogus Long Term Capital entry to beneficiaries of bogus Long Term Capital Gains. Few of the exit providens have confirmed that Shri Pradeep Gains. Few of the exit providens have confirmed that Shri Pradeep Gains. Few of the exit providens have confirmed that Shri Pradeep Dhanuka has misused their credentials by promising them Rs. 2000 Dhanuka has misused their credentials by promising them Rs. 2000 Dhanuka has misused their credentials by promising them Rs. 2000 to Rs. 3000 per month. Statement of Shri Pradeep Dhanuka was to Rs. 3000 per month. Statement of Shri Pradeep Dhanuka was to Rs. 3000 per month. Statement of Shri Pradeep Dhanuka was recorded u/s 131 of the IT Act where he has confirmed of the wrong 131 of the IT Act where he has confirmed of the wrong 131 of the IT Act where he has confirmed of the wrong doings and has stated that on the instruction of Shri GK Agarwal he doings and has stated that on the instruction of Shri GK Agarwal he doings and has stated that on the instruction of Shri GK Agarwal he had obtained credentials of various exit providers and has traded in had obtained credentials of various exit providers and has traded in had obtained credentials of various exit providers and has traded in their accounts. Shri G K Agarwal is one of the promoter and direc their accounts. Shri G K Agarwal is one of the promoter and direc their accounts. Shri G K Agarwal is one of the promoter and director of M/s Banas Finance Ltd. of M/s Banas Finance Ltd.  The relevant portion of the statement is reproduced as under. The relevant portion of the statement is reproduced as under. The relevant portion of the statement is reproduced as under. Statement of Chandra Kant Mohite (Exit Provider of Banas) Chandra Kant Mohite (Exit Provider of Banas) Chandra Kant Mohite (Exit Provider of Banas) recorded u/s 131 of IT Act dated 16.10.2017). recorded u/s 131 of IT Act dated 16.10.2017). Q.6 What is your sources of income and annual income from Q.6 What is your sources of income and annual income from Q.6 What is your sources of income and annual income from all your sources of income? all your sources of income? Ans. I am working as watchman in society Shanti Garden, sector 3, Ans. I am working as watchman in society Shanti Garden, sector 3, Ans. I am working as watchman in society Shanti Garden, sector 3, Mira Road, Thane. I get Rs. 9000 per month since one and half year. Mira Road, Thane. I get Rs. 9000 per month since one and half year. Mira Road, Thane. I get Rs. 9000 per month since one and half year. Before that I used to supply tiffen to customer and ea Before that I used to supply tiffen to customer and earn rn Rs. 1000 per month. Q.9 From the trading transaction records it is seen that you rading transaction records it is seen that you rading transaction records it is seen that you have made various share transactions from FY 09 have made various share transactions from FY 09 have made various share transactions from FY 09-10 till FY 12-13.

11 Santosh Vimlesh Mehta name and he requested me to provide my blank cheques with the name and he requested me to provide my blank cheques with the name and he requested me to provide my blank cheques with the signature. And whenever he signature. And whenever he required my signatures hè called me to required my signatures hè called me to his office and took my signature wherever required on various forms. his office and took my signature wherever required on various forms. his office and took my signature wherever required on various forms. After he opened my bank account and demat account he might have After he opened my bank account and demat account he might have After he opened my bank account and demat account he might have traded in shares.  Statement of Prashant Shashikant Sawant (Exit provider of Prashant Shashikant Sawant (Exit provider of Prashant Shashikant Sawant (Exit provider of Banas) recorded u/s 131 of 1 T Act dated 16.1 recorded u/s 131 of 1 T Act dated 16.10.2017). 0.2017). Q.10 From the trading transaction records it is seen that you Q.10 From the trading transaction records it is seen that you Q.10 From the trading transaction records it is seen that you have made various share transactions. Please furnish the have made various share transactions. Please furnish the have made various share transactions. Please furnish the source of investment and transaction details in brief? source of investment and transaction details in brief? source of investment and transaction details in brief? Ans. Sir, I don't have any knowledge on shares and I never invested Ans. Sir, I don't have any knowledge on shares and I never invested Ans. Sir, I don't have any knowledge on shares and I never invested a single rupee in shares. I met Shri Pradeep Dhanuka in party office single rupee in shares. I met Shri Pradeep Dhanuka in party office single rupee in shares. I met Shri Pradeep Dhanuka in party office of Maharashtra Nava Nirmana of Maharashtra Nava Nirmana Sena at Mira Bhayandar Office in the Sena at Mira Bhayandar Office in the year 2009. At that time and he asked about my personal details. I year 2009. At that time and he asked about my personal details. I year 2009. At that time and he asked about my personal details. I said I was jobless and also said I have been facing financ said I was jobless and also said I have been facing financ said I was jobless and also said I have been facing financial problems. So he suggested me that he will do some business in my problems. So he suggested me that he will do some business in my problems. So he suggested me that he will do some business in my name and whatever he was doing was through cheques and RTGS name and whatever he was doing was through cheques and RTGS name and whatever he was doing was through cheques and RTGS only and I will get some money. So I accepted for his proposal in the only and I will get some money. So I accepted for his proposal in the only and I will get some money. So I accepted for his proposal in the year 2010 and gave my PAN card Xerox copy and photo and s year 2010 and gave my PAN card Xerox copy and photo and s year 2010 and gave my PAN card Xerox copy and photo and signed on various application forms. on various application forms.  Statement of ShyamLaxman Pedamkar (Exit Provider of Banas ShyamLaxman Pedamkar (Exit Provider of Banas ShyamLaxman Pedamkar (Exit Provider of Banas recorded u/s 131 of 1 T Act dated 16.10.2017. recorded u/s 131 of 1 T Act dated 16.10.2017. Q.9 From the trading transaction records it is seen that you Q.9 From the trading transaction records it is seen that you Q.9 From the trading transaction records it is seen that you have made various share transactions from FY 10 have made various share transactions from FY 10 have made various share transactions from FY 10-11 till FY 13-14. 14.

14. Please Please Please furnish furnish furnish the the the source source source of of of investment investment investment and and and transaction details in brief? transaction details in brief? Ans. Sir, I don't have any knowledge on shares and I never invested Ans. Sir, I don't have any knowledge on shares and I never invested Ans. Sir, I don't have any knowledge on shares and I never invested in shares. In the circumstances of financial problems, I have visited in shares. In the circumstances of financial problems, I have visited in shares. In the circumstances of financial problems, I have visited Shri Pradeep Dhanuka year in t Shri Pradeep Dhanuka year in the year 2010-2011 who is the 2011 who is the Chairman of Lions Club of Bhyandar and pleaded for help in paying Chairman of Lions Club of Bhyandar and pleaded for help in paying Chairman of Lions Club of Bhyandar and pleaded for help in paying school fees of my elder daughter. He has given cheque of around school fees of my elder daughter. He has given cheque of around school fees of my elder daughter. He has given cheque of around Rs.20,000/-in the name of my elder daughter to her school, Royal in the name of my elder daughter to her school, Royal in the name of my elder daughter to her school, Royal Girls High School, Mira Road Eas Girls High School, Mira Road East as school fees in the year 2010 or t as school fees in the year 2010 or 2011. After six months Shri Pradeep Dhanuka called me to his 2011. After six months Shri Pradeep Dhanuka called me to his 2011. After six months Shri Pradeep Dhanuka called me to his Bhayander office and said that as I was in financial problem, he Bhayander office and said that as I was in financial problem, he Bhayander office and said that as I was in financial problem, he would provide regular income of Rs.2,000/ would provide regular income of Rs.2,000/- to Rs.3,000/ to Rs.3,000/-, for which he asked my PAN Xerox and he asked my PAN Xerox and further explained he will open bank further explained he will open bank account and Demat account in my name and he requested me to account and Demat account in my name and he requested me to account and Demat account in my name and he requested me to provide my blank cheques with the signature. And whenever provide my blank cheques with the signature. And whenever provide my blank cheques with the signature. And whenever required my signatures he called me to his office and required my signatures he called me to his office and required my signatures he called me to his office and took my ITA No.

12 Santosh Vimlesh Mehta signature wherever required on various signature wherever required on various forms. After he opened my forms. After he opened my bank account and demat account he might have traded in the above bank account and demat account he might have traded in the above bank account and demat account he might have traded in the above mentioned shares, In this process I received share trading messages mentioned shares, In this process I received share trading messages mentioned shares, In this process I received share trading messages on my mobile. I asked Shri Pradeep Dhanuka about the messages, on my mobile. I asked Shri Pradeep Dhanuka about the messages, on my mobile. I asked Shri Pradeep Dhanuka about the messages, he explained that whatever he was he explained that whatever he was doing was through cheques only doing was through cheques only and there was no need to panic. and there was no need to panic.  Statement of Shweta Shyam Pedamkar(Exit Provider of BANAS) Shweta Shyam Pedamkar(Exit Provider of BANAS) Shweta Shyam Pedamkar(Exit Provider of BANAS) recorded u/s 131 of IT Act dated 16.10.2017. recorded u/s 131 of IT Act dated 16.10.2017. Q.6 What are your sources of income and annual income from Q.6 What are your sources of income and annual income from Q.6 What are your sources of income and annual income from all your sources of income? all your sources of income? Ans. Sir I am house wife and donot have any earnings. Ans. Sir I am house wife and donot have any earnings. Ans. Sir I am house wife and donot have any earnings. Q.7 Have you ever invested in shares/mutual funds? If yes, Q.7 Have you ever invested in shares/mutual funds? If yes, Q.7 Have you ever invested in shares/mutual funds? If yes, please give details. please give details. Ans. Sir, I never traded in shares. Ans. Sir, I never traded in shares. Q8 From the trading transaction records it is seen that you Q8 From the trading transaction records it is seen that you Q8 From the trading transaction records it is seen that you have made various shar have made various share transactions from FY 10 e transactions from FY 10-11 till FY 13-14. 14.

13 Santosh Vimlesh Mehta ask spreads, small capitalization and limited following and ask spreads, small capitalization and limited following and ask spreads, small capitalization and limited following and disclosure. Sometimes, there are a number of intermediaries who work for the Sometimes, there are a number of intermediaries who work for the Sometimes, there are a number of intermediaries who work for the operator. These intermediarias introduce the beneficiaries to the operator. These intermediarias introduce the beneficiaries to the operator. These intermediarias introduce the beneficiaries to the ses these intermediaries become sub operator or in many ca operator or in many cases these intermediaries become agents/operator agents/operator of the operator and deal with the beneficiaries on of the operator and deal with the beneficiaries on their own."  Statement of Pradeep Dhanuka (Exit Provider and sub Pradeep Dhanuka (Exit Provider and sub Pradeep Dhanuka (Exit Provider and sub-operator of Banas) director of VRP Financial Services Pvt Limited, Rupak director of VRP Financial Services Pvt Limited, Rupak director of VRP Financial Services Pvt Limited, Rupak Developers Pvt Ltd and Romy Realty Pvt ltd recorded u/s 131 of 1 T Developers Pvt Ltd and Romy Realty Pvt ltd recorded u/s 131 of 1 T Developers Pvt Ltd and Romy Realty Pvt ltd recorded u/s 131 of 1 T Act dated 24.10.2017. Act dated 24.10.2017. Q.8 Please state the list of companies/firms in which you or Q.8 Please state the list of companies/firms in which you or Q.8 Please state the list of companies/firms in which you or your family members are/were directors/partners your family members are/were directors/partners Ans. Sir, I and my wife were directors in companies as below. ns. Sir, I and my wife were directors in companies as below. ns. Sir, I and my wife were directors in companies as below. 1 V R P Financial services Pvt. Lid both me and my wife are directors P Financial services Pvt. Lid both me and my wife are directors P Financial services Pvt. Lid both me and my wife are directors in this company 2 Rupak Developers Put Ltd 2 Rupak Developers Put Ltd- I was director in this company but I was director in this company but resigned 3 years ago. resigned 3 years ago. 3 ROMY REALTY PRIVATE 3 ROMY REALTY PRIVATE LIMITED- my wife was director in this my wife was director in this company but resigned 3 years ago, company but resigned 3 years ago, Q.9 Please provide details of business activities of the Q.9 Please provide details of business activities of the Q.9 Please provide details of business activities of the companies as mentioned by you in your reply to question no.8 companies as mentioned by you in your reply to question no.8 companies as mentioned by you in your reply to question no.8 in which you or your wife are directors. in which you or your wife are directors. Ans. Sir, I am unaware Ans. Sir, I am unaware of the activities of VRP Financial services Pvt. of the activities of VRP Financial services Pvt. Ltd, Rupak Developers Put Ltd, ROMY REALTY PRIVATE LIMITED. Ltd, Rupak Developers Put Ltd, ROMY REALTY PRIVATE LIMITED. Ltd, Rupak Developers Put Ltd, ROMY REALTY PRIVATE LIMITED. Q.10 In your reply to my question no.9 you have mentioned Q.10 In your reply to my question no.9 you have mentioned Q.10 In your reply to my question no.9 you have mentioned that you do not know the business activities of the companies that you do not know the business activities of the companies that you do not know the business activities of the companies in which you or your wife in which you or your wife are directors. Please confirm the are directors. Please confirm the same and tell me how you do not know the activities of the same and tell me how you do not know the activities of the same and tell me how you do not know the activities of the companies when you or your wife hold the position of director companies when you or your wife hold the position of director companies when you or your wife hold the position of director in these companies. in these companies. Ans. Sir, I and my wife Smt Nidhi Dhanuka are just dummy directors Ans. Sir, I and my wife Smt Nidhi Dhanuka are just dummy directors Ans. Sir, I and my wife Smt Nidhi Dhanuka are just dummy directors in the companies mentioned in my reply to your question no.8 VRP nies mentioned in my reply to your question no.8 VRP nies mentioned in my reply to your question no.8 VRP Financial services Put.Ltd, Rupak Developers Put Ltd, ROMY Financial services Put.Ltd, Rupak Developers Put Ltd, ROMY Financial services Put.Ltd, Rupak Developers Put Ltd, ROMY REALTY PRIVATE LIMITED. I was approached by Shri G K Agrawal REALTY PRIVATE LIMITED. I was approached by Shri G K Agrawal REALTY PRIVATE LIMITED. I was approached by Shri G K Agrawal No. 3725/Mum/2025 14 Santosh Vimlesh Mehta who told me to provide my details like PAN card copy, Address who told me to provide my details like PAN card copy, Address who told me to provide my details like PAN card copy, Address proof, and signed var proof, and signed various documents as suggested by Shri G K ious documents as suggested by Shri G K Agrawal. All the activities of these companies are controlled by Shri Agrawal. All the activities of these companies are controlled by Shri Agrawal. All the activities of these companies are controlled by Shri GK Agrawal. Q.13 From the trading transaction records of VRP Financial Q.13 From the trading transaction records of VRP Financial Q.13 From the trading transaction records of VRP Financial services Pvt. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY services Pvt. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY services Pvt. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY PRIVATE LIMITED i PRIVATE LIMITED it is seen that various share transactions t is seen that various share transactions are made. Please furnish the source of investment and are made. Please furnish the source of investment and are made. Please furnish the source of investment and transaction details in brief? transaction details in brief? Ans. Sir I am not aware of any of the activities of the Ans. Sir I am not aware of any of the activities of the Ans. Sir I am not aware of any of the activities of the abovementioned companies. All activities are controlled by Shri GK abovementioned companies. All activities are controlled by Shri GK abovementioned companies. All activities are controlled by Shri GK Agrawal Q.14 Please tell me who used to file the return of income of Q.14 Please tell me who used to file the return of income of Q.14 Please tell me who used to file the return of income of VRP Financial services Pvt. Ltd, Rupak Developers Pvt Ltd, VRP Financial services Pvt. Ltd, Rupak Developers Pvt Ltd, VRP Financial services Pvt. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY PRIVATE LIMITED. ROMY REALTY PRIVATE LIMITED. Ans. Sir, Shri GK Agrawal used to file the return of income of all the Ans. Sir, Shri GK Agrawal used to file the return of income of all the Ans. Sir, Shri GK Agrawal used to file the return of income of all the above mentioned companies. above mentioned companies. Q.15 I am showing you the statement recorded on oath u/s I am showing you the statement recorded on oath u/s I am showing you the statement recorded on oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Mohite on 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, Mohite on 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, Mohite on 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI BALLARD ESTATE, MUMBAI-400038. Please confirm the 400038. Please confirm the same. Ans. Yes Sir I confirm that I have seen the statement recorded on Ans. Yes Sir I confirm that I have seen the statement recorded on Ans. Yes Sir I confirm that I have seen the statement recorded on oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Mohite on Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Mohite on Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Mohite on 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI ESTATE, MUMBAI-400038. Q.16 Please confirm if you agree with the statement recorded Q.16 Please confirm if you agree with the statement recorded Q.16 Please confirm if you agree with the statement recorded on oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam on oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam on oath u/s 131 of PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta Shyam Pedamkar, Chandrakant Laxman Pedamkar, Shweta Shyam Pedamkar, Chandrakant Laxman Pedamkar, Shweta Shyam Pedamkar, Chandrakant Babu Mohite on 15.10.2017 at 2ND FLOOR, 231, SCINDIA Babu Mohite on 15.10.2017 at 2ND FLOOR, 231, SCINDIA Babu Mohite on 15.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUM HOUSE, BALLARD ESTATE, MUMBAI-400038. Ans. Sir, I agree that whatever has been recorded in the above Ans. Sir, I agree that whatever has been recorded in the above Ans. Sir, I agree that whatever has been recorded in the above mentioned statements is true. mentioned statements is true. Q.17 Please tell me why you have used the names of Q.17 Please tell me why you have used the names of Q.17 Please tell me why you have used the names of PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta Shgam Pedamkar, Chandrakant Babu Mohite Shweta Shgam Pedamkar, Chandrakant Babu Mohite Shweta Shgam Pedamkar, Chandrakant Babu Mohite by ITA No.

15 Santosh Vimlesh Mehta creating bank accounts, DEMAT gecount and done share creating bank accounts, DEMAT gecount and done share creating bank accounts, DEMAT gecount and done share transactions in their name. transactions in their name. Ans. Sir, I was approached by Shri GK Agrawal who told me to Ans. Sir, I was approached by Shri GK Agrawal who told me to Ans. Sir, I was approached by Shri GK Agrawal who told me to arrange few persons whose bank and DEMAT account can be used arrange few persons whose bank and DEMAT account can be used arrange few persons whose bank and DEMAT account can be used for share transaction. Shri GK Agrawal promised t for share transaction. Shri GK Agrawal promised to pay me Rs. o pay me Rs. 2,500 every month for each such person who provides their details. 2,500 every month for each such person who provides their details. 2,500 every month for each such person who provides their details. Out of this Rs. 2,500 I used to retain Rs.500 with me and give Rs. Out of this Rs. 2,500 I used to retain Rs.500 with me and give Rs. Out of this Rs. 2,500 I used to retain Rs.500 with me and give Rs. 2000 to each such person. 2000 to each such person. Q.18 Please provide me list of persons whose details you have Q.18 Please provide me list of persons whose details you have Q.18 Please provide me list of persons whose details you have collected for conduc collected for conducting share transaction. Ans. Sir, the following are the list of persons whose details like PAN, Ans. Sir, the following are the list of persons whose details like PAN, Ans. Sir, the following are the list of persons whose details like PAN, Address proof I have collected to conduct share transaction. have collected to conduct share transaction. have collected to conduct share transaction. SL No Name Name PAN 1 Yogeeta Kadam Yogeeta Kadam AHUPK9485E AHUPK9485E 2 Tisha Rane Tisha Rane AHRPK8922D AHRPK8922D 3 Chandrakant BabuMohite Chandrakant BabuMohite ΑΝΚΡΜ2741H ΑΝΚΡΜ2741H 4 Sandesh Pawar Sandesh Pawar AXGPP3868C AXGPP3868C 5 KashiramKadam KashiramKadam AHUPK9461E AHUPK9461E 6 Shyam Pedamkar Shyam Pedamkar AGGPP8468 AGGPP8468F 7 Shweta Pedamkar Shweta Pedamkar BGZPP3221L BGZPP3221L 8 Ghanshyam Kachhawa Ghanshyam Kachhawa ARYPK8621 ARYPK8621Q 9 Bhawarpuri Goswami Bhawarpuri Goswami AJCPG3474B AJCPG3474B 10 Sandesh Mhabdi Sandesh Mhabdi AMZPM1605 AMZPM1605Q 11 Rajesh Dambre Rajesh Dambre AHAPD8240L AHAPD8240L 12 Reshma Dambre Reshma Dambre ARNPD4171D ARNPD4171D 13 Prashant Sawant Prashant Sawant APMPS4035A APMPS4035A 14 Mangesh Dhotre Mangesh Dhotre AJPPD8297E AJPPD8297E 15 MansiDhotre MansiDhotre BFZPQ6082A BFZPQ6082A 16 Himmat Bhatt Himmat Bhatt AGAPB6742 AGAPB6742Q 17 Tushar Rane Tushar Rane AJCPR9314H AJCPR9314H 18 Sharwan Kumar Agarwal Sharwan Kumar Agarwal ΑΝΕΡΑ8313M ΑΝΕΡΑ8313M Further, once gain statement of Pradeep Dhanuka Further, once gain statement of Pradeep Dhanuka (Exit provider and (Exit provider and sub operator of Banas) has been recorded on oath in conformity with sub operator of Banas) has been recorded on oath in conformity with sub operator of Banas) has been recorded on oath in conformity with the arrangement of the scheme of providing Bogus LTCO, STCL or the arrangement of the scheme of providing Bogus LTCO, STCL or the arrangement of the scheme of providing Bogus LTCO, STCL or Trading loss using the scrip of Banas Finance Ltd. Trading loss using the scrip of Banas Finance Ltd.  Statement of Pradeep Dhanuka (Exit Provider and sub Pradeep Dhanuka (Exit Provider and sub Pradeep Dhanuka (Exit Provider and sub Operator of Banas) director of VRP Financial Services Pvt Limited, Rupak director of VRP Financial Services Pvt Limited, Rupak director of VRP Financial Services Pvt Limited, Rupak Developers Pvt Ltd and Romy Realty Pvt ltd was recorded u/s 131 of Developers Pvt Ltd and Romy Realty Pvt ltd was recorded u/s 131 of Developers Pvt Ltd and Romy Realty Pvt ltd was recorded u/s 131 of the IT Act, 1961 10.01.2019. the IT Act, 1961 10.01.2019.

16 Santosh Vimlesh Mehta Q.7 Please state the list of companies/firms in which you or Q.7 Please state the list of companies/firms in which you or Q.7 Please state the list of companies/firms in which you or your family members are/w your family members are/were directors/partners. ere directors/partners. Ans. Sir, I and my wife were directors in companies as below. Ans. Sir, I and my wife were directors in companies as below. Ans. Sir, I and my wife were directors in companies as below. M/s VRP Financial services Pvt Ltd M/s VRP Financial services Pvt Ltd-both me and my wife were both me and my wife were directors in this company, directors in this company, M/s Rupak Developers Pvt Ltd M/s Rupak Developers Pvt Ltd-I was director in this company. I was director in this company. M/s ROMY REALTY PR M/s ROMY REALTY PRIVATE LIMITED- my wife was director in this my wife was director in this company. Q.8 Please provide details of business activities of the Q.8 Please provide details of business activities of the Q.8 Please provide details of business activities of the companies, as mentioned by you above, in. which you were companies, as mentioned by you above, in. which you were companies, as mentioned by you above, in. which you were director. Ars Sir, I am unaware of the business activities of M/s VRP Ars Sir, I am unaware of the business activities of M/s VRP Ars Sir, I am unaware of the business activities of M/s VRP Financial services s Pvt ltd and M/s Rupak Developers Put Ltd. ltd and M/s Rupak Developers Put Ltd. Q.9 Please state how come you were not aware of business Q.9 Please state how come you were not aware of business Q.9 Please state how come you were not aware of business activities of the companies in which you were a director. activities of the companies in which you were a director. activities of the companies in which you were a director. Ans. Sir, I was just a dummy director in the companies mentioned Ans. Sir, I was just a dummy director in the companies mentioned Ans. Sir, I was just a dummy director in the companies mentioned above. I was approached by above. I was approached by Shri G K Agrawal who told me to Shri G K Agrawal who told me to provide details such as PAN card copy, address proof etc. I used to provide details such as PAN card copy, address proof etc. I used to provide details such as PAN card copy, address proof etc. I used to just sign documents as suggested/instructed by Shri G K Agrawal. just sign documents as suggested/instructed by Shri G K Agrawal. just sign documents as suggested/instructed by Shri G K Agrawal. All the activities of these companies were controlled by Shri G K All the activities of these companies were controlled by Shri G K All the activities of these companies were controlled by Shri G K Agrawal Q.10 Please provide contact address and phone number of provide contact address and phone number of provide contact address and phone number of Shri GK Agrawal Shri GK Agrawal Ans. Sir, Office address of Shri G K Agrawal is E Ans. Sir, Office address of Shri G K Agrawal is E-109, Crystal Plaza, 109, Crystal Plaza, New Link Road, Andheri West, Mumbai His mobile number is New Link Road, Andheri West, Mumbai His mobile number is New Link Road, Andheri West, Mumbai His mobile number is 9930522633. Q.11 Please state how do you know Shri G Q.11 Please state how do you know Shri G K Agrawal K Agrawal Ans. Sir, I know Shri G K Agrawal since last many years. I used to . Sir, I know Shri G K Agrawal since last many years. I used to . Sir, I know Shri G K Agrawal since last many years. I used to work under him at M/s Shreeji Analytical Lab Limited. work under him at M/s Shreeji Analytical Lab Limited. Q.12 I am showing you the statement, recorded on oath u/s Q.12 I am showing you the statement, recorded on oath u/s Q.12 I am showing you the statement, recorded on oath u/s 131 of Income Tax Act, 1961, of PRASHANT SHASHIKANT 131 of Income Tax Act, 1961, of PRASHANT SHASHIKANT 131 of Income Tax Act, 1961, of PRASHANT SHASHIKANT SAWANT, SAWANT, Shyam Shyam Laxman Laxman Pedamk Pedamkar, ar, Shweta Shweta Shyam Shyam Pedamkar, ChandrakantBabuMohite on 16.10.2017 at 2ND Pedamkar, ChandrakantBabuMohite on 16.10.2017 at 2ND Pedamkar, ChandrakantBabuMohite on 16.10.2017 at 2ND No. 3725/Mum/2025 17 Santosh Vimlesh Mehta FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAI- 400038. Please comment. 400038. Please comment. Ans. Sir I agree with whatever has been stated by PRASHANT Ans. Sir I agree with whatever has been stated by PRASHANT Ans. Sir I agree with whatever has been stated by PRASHANT SHASHIKANT SAWANT, Shyam Laxonan Pedamkar, Shweta S SHASHIKANT SAWANT, Shyam Laxonan Pedamkar, Shweta S SHASHIKANT SAWANT, Shyam Laxonan Pedamkar, Shweta Shyam Pedamkar and Chandrakant Babu Mohite in their statements Pedamkar and Chandrakant Babu Mohite in their statements Pedamkar and Chandrakant Babu Mohite in their statements recorded on oath u/s 131 of Income Tax Act, 1961, on 16.10.2017 at recorded on oath u/s 131 of Income Tax Act, 1961, on 16.10.2017 at recorded on oath u/s 131 of Income Tax Act, 1961, on 16.10.2017 at 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAF 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAF 2ND FLOOR, 231, SCINDIA HOUSE, BALLARD ESTATE, MUMBAF 400038. All share transactions in name of these people were done 400038. All share transactions in name of these people were done 400038. All share transactions in name of these people were done by me on instructions of Mr GK Agrawal Sometimes, the transactions instructions of Mr GK Agrawal Sometimes, the transactions instructions of Mr GK Agrawal Sometimes, the transactions were done by Mr GK Agrawal also. were done by Mr GK Agrawal also. Q.13 Please state why you have used the names of PRASHANT Q.13 Please state why you have used the names of PRASHANT Q.13 Please state why you have used the names of PRASHANT SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta SHASHIKANT SAWANT, Shyam Laxman Pedamkar, Shweta Shyam Pedamkar and Chandrakant Babu Mohite to create Shyam Pedamkar and Chandrakant Babu Mohite to create Shyam Pedamkar and Chandrakant Babu Mohite to create bank /demat accounts for the purpose of share transactions. k /demat accounts for the purpose of share transactions. k /demat accounts for the purpose of share transactions. Ans. Sir, I was approached by Shri G K Agrawal who told me to Ans. Sir, I was approached by Shri G K Agrawal who told me to Ans. Sir, I was approached by Shri G K Agrawal who told me to arrange few persons whose bank and DEMAT account could be used arrange few persons whose bank and DEMAT account could be used arrange few persons whose bank and DEMAT account could be used for share transactions. Shri GK Agrawal promised to pay me Rs. for share transactions. Shri GK Agrawal promised to pay me Rs. for share transactions. Shri GK Agrawal promised to pay me Rs. 3,000 (in cash) every month for each such person who provided cash) every month for each such person who provided cash) every month for each such person who provided his/her details. Out of this Rs. 3,000 I used to retain Rs. 1,000 with his/her details. Out of this Rs. 3,000 I used to retain Rs. 1,000 with his/her details. Out of this Rs. 3,000 I used to retain Rs. 1,000 with me and give Rs. 2000/ me and give Rs. 2000/- to each such person. Q.14 Please state the name of persons whose details you have Q.14 Please state the name of persons whose details you have Q.14 Please state the name of persons whose details you have collected for conducting sh collected for conducting share transaction as mentioned are transaction as mentioned above Ans. Sir, following are the name of the persons whose details like Ans. Sir, following are the name of the persons whose details like Ans. Sir, following are the name of the persons whose details like PAN, address proof, signature etc. were misused to conduct share PAN, address proof, signature etc. were misused to conduct share PAN, address proof, signature etc. were misused to conduct share transactions: SL No Name Name PAN 1 Yogeeta Kadam Yogeeta Kadam AHUPK9485E AHUPK9485E 2 Tisha Rane Tisha Rane AHRPK8922D AHRPK8922D 3 Chandrakant BabuMohite Chandrakant BabuMohite ΑΝΚΡΜ2741H ΑΝΚΡΜ2741H 4 Sandesh Pawar Sandesh Pawar AXGPP3868C AXGPP3868C 5 KashiramKadam KashiramKadam AHUPK9461E AHUPK9461E 6 Shyam Pedamkar Shyam Pedamkar AGGPP8468 AGGPP8468F 7 Shweta Pedamkar Shweta Pedamkar BGZPP3221L BGZPP3221L 8 Ghanshyam Kachhawa Ghanshyam Kachhawa ARYPK8621 ARYPK8621Q 9 Bhawarpuri Goswami Bhawarpuri Goswami AJCPG3474B AJCPG3474B 10 Sandesh Mhabdi Sandesh Mhabdi AMZPM1605 AMZPM1605Q 11 Rajesh Rajesh Dambre AHAPD8240L AHAPD8240L 12 Reshma Dambre Reshma Dambre ARNPD4171D ARNPD4171D 13 Prashant Sawant Prashant Sawant APMPS4035A APMPS4035A ITA No.

18 Santosh Vimlesh Mehta 14 Mangesh Dhotre Mangesh Dhotre AJPPD8297E AJPPD8297E 15 MansiDhotre MansiDhotre BFZPQ6082A BFZPQ6082A 16 Himmat Bhatt Himmat Bhatt AGAPB6742 AGAPB6742Q 17 Tushar Rane Tushar Rane AJCPR9314H AJCPR9314H 18 Sharwan Kumar Agarwal Sharwan Kumar Agarwal ΑΝΕΡΑ8313M ΑΝΕΡΑ8313M Q.15 Please state what Q.15 Please state what business activity was done by Shri GK business activity was done by Shri GK Agrawal by using the bank/demat accounts of various persons Agrawal by using the bank/demat accounts of various persons Agrawal by using the bank/demat accounts of various persons as mentioned by you above. as mentioned by you above. Ans. Sir, Shri G K Agrawal used to instruct me on phone to purchase Ans. Sir, Shri G K Agrawal used to instruct me on phone to purchase Ans. Sir, Shri G K Agrawal used to instruct me on phone to purchase and sell shares in the name of persons as mentioned above. and sell shares in the name of persons as mentioned above. and sell shares in the name of persons as mentioned above. Q.16 Q.16 Q.16 Please Please Please state state state the the the name name name of of of shares shares shares which which which you you you purchased/sold, on instruction of Mr GK Agrawal, in the name purchased/sold, on instruction of Mr GK Agrawal, in the name purchased/sold, on instruction of Mr GK Agrawal, in the name of various persons as mentioned above. of various persons as mentioned above. Ans. Sir I have done share transaction in various scrips in the names Ans. Sir I have done share transaction in various scrips in the names Ans. Sir I have done share transaction in various scrips in the names of persons as mentioned above. One scr of persons as mentioned above. One scrip which I remember right ip which I remember right now is M/s Banas Finance Ltd. now is M/s Banas Finance Ltd. Q.17 Please state why did you follow the instruction of Shri Q.17 Please state why did you follow the instruction of Shri Q.17 Please state why did you follow the instruction of Shri GK Agrawal and did share transactions in names of various GK Agrawal and did share transactions in names of various GK Agrawal and did share transactions in names of various persons as mentioned above. persons as mentioned above. Ans. Sir my financial condition was weak. In such a Ans. Sir my financial condition was weak. In such a situation, when situation, when Mr G K Agrawal promised to pay me Rs. 3,000 per month per person Mr G K Agrawal promised to pay me Rs. 3,000 per month per person Mr G K Agrawal promised to pay me Rs. 3,000 per month per person for opening of bank/demat accounts for share transactions, I bank/demat accounts for share transactions, I bank/demat accounts for share transactions, I accepted his proposal and started working for him. accepted his proposal and started working for him. Q.18 Please state how funds were arranged to indulge in Q.18 Please state how funds were arranged to indulge in Q.18 Please state how funds were arranged to indulge in share transactions in name of various persons as mentioned transactions in name of various persons as mentioned transactions in name of various persons as mentioned above. Ans. Sir, Shri G K Agrawal used to arrange funds. He can only Ans. Sir, Shri G K Agrawal used to arrange funds. He can only Ans. Sir, Shri G K Agrawal used to arrange funds. He can only answer in this regard. answer in this regard.  Tusar Ramchandra Rane Tusar Ramchandra Rane (Past director of Banas Finance when (Past director of Banas Finance when accommodation entr accommodation entry given by selling scrip) of Ba y given by selling scrip) of Banas Finarice Limited was also recorded where he was no idea that he was Limited was also recorded where he was no idea that he was Limited was also recorded where he was no idea that he was director of Banas Finance Limited. The relevant portion of the director of Banas Finance Limited. The relevant portion of the director of Banas Finance Limited. The relevant portion of the statement is reproduced below for ready reference: statement is reproduced below for ready reference: Q.10 Please name all the Companies/Firms/Concerns in which Q.10 Please name all the Companies/Firms/Concerns in which Q.10 Please name all the Companies/Firms/Concerns in which you are a Director/Partner/Proprietor? Director/Partner/Proprietor? Ans, Sir, I do No know about this, Ans, Sir, I do No know about this, No. 3725/Mum/2025 19 Santosh Vimlesh Mehta Q.11 As per details form MCA it is seen that you were director Q.11 As per details form MCA it is seen that you were director Q.11 As per details form MCA it is seen that you were director of M/s Banas Finance Limited. Please comment on the same. of M/s Banas Finance Limited. Please comment on the same. of M/s Banas Finance Limited. Please comment on the same. Ans. Sir, I do not know anything about this, I had provided copy of Ans. Sir, I do not know anything about this, I had provided copy of Ans. Sir, I do not know anything about this, I had provided copy of my PAN card, signed some forms and my address proof, signed my PAN card, signed some forms and my address proof, signed my PAN card, signed some forms and my address proof, signed blank cheque to Shri Pradeep Dhanuka, who might have me Director blank cheque to Shri Pradeep Dhanuka, who might have me Director blank cheque to Shri Pradeep Dhanuka, who might have me Director of this company and also filed my return of Income. of this company and also filed my return of Income. During the search action statement of Girraf Kishor Agrawal Girraf Kishor Agrawal and During the search action statement of Tanu Agarwal the promoters and directors of the Banas Finance the promoters and directors of the Banas Finance the promoters and directors of the Banas Finance was taken on 10.01.2019. The relevant portion of the statement is was taken on 10.01.2019. The relevant portion of the statement is was taken on 10.01.2019. The relevant portion of the statement is reproduced as below: reproduced as below: > Statement of Tanu Agrawal recorded on oath during the search > Statement of Tanu Agrawal recorded on oath during the search > Statement of Tanu Agrawal recorded on oath during the search action on 10.01.2019 action on 10.01.2019 Q.10 Please provide details of bu Q.10 Please provide details of business activities of the siness activities of the companies an mentioned by you above, in which you are companies an mentioned by you above, in which you are companies an mentioned by you above, in which you are director. Ans. Sir, above mentioned entities are in the business of dealing in Ans. Sir, above mentioned entities are in the business of dealing in Ans. Sir, above mentioned entities are in the business of dealing in commodities, securities and financial services. commodities, securities and financial services. Q.12 From data available with public domain it i Q.12 From data available with public domain it i Q.12 From data available with public domain it is seen that the share price of BFL (Face Value 10) has risen from below the share price of BFL (Face Value 10) has risen from below the share price of BFL (Face Value 10) has risen from below Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then to Rs. 709.5 in December 2013. to Rs. 709.5 in December 2013. In this regard Please explain the reason for astronomical rise In this regard Please explain the reason for astronomical rise In this regard Please explain the reason for astronomical rise in the price of the scrip BFL in the price of the scrip BFL during the F.Y. 2012 during the F.Y. 2012-13 to 2013- 14. Please substantiate your reply with documentary evidence 14. Please substantiate your reply with documentary evidence 14. Please substantiate your reply with documentary evidence which would bring forth the financial health/prospects of the which would bring forth the financial health/prospects of the which would bring forth the financial health/prospects of the company.

20 Santosh Vimlesh Mehta Ans: Sir, I don't know anything about it. Ans: Sir, I don't know anything about it. Q.13 Please state how come you were not Q.13 Please state how come you were not Q.13 Please state how come you were not aware of astronomical share price fluctuation of company in which astronomical share price fluctuation of company in which astronomical share price fluctuation of company in which you are director. you are director. Ans: Sir, I would like to say that I was made director in BFL and Ans: Sir, I would like to say that I was made director in BFL and Ans: Sir, I would like to say that I was made director in BFL and other entities by my husband Shri Girraj Kishor Agrawal and all other entities by my husband Shri Girraj Kishor Agrawal and all other entities by my husband Shri Girraj Kishor Agrawal and all affairs related to company are looked aft affairs related to company are looked after by my husband. In this er by my husband. In this regard he is right person who can answer your queries. regard he is right person who can answer your queries. regard he is right person who can answer your queries.  Statement of Girraj Kishor Agrawal recorded on oath during the Statement of Girraj Kishor Agrawal recorded on oath during the Statement of Girraj Kishor Agrawal recorded on oath during the search action on 10.01.2019 search action on 10.01.2019 Q.13 From data available with public domain it is seen that Q.13 From data available with public domain it is seen that Q.13 From data available with public domain it is seen that the share price of BFL the share price of BFL (Face Value 10) has risen from below (Face Value 10) has risen from below Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then Rs. 10 in Feb 2011 to above Rs.550 in January 2012 and then to Rs. 709.5 in December 2013. In this regard please explain to Rs. 709.5 in December 2013. In this regard please explain to Rs. 709.5 in December 2013. In this regard please explain the reason for astronomical rise in the price of the scrip BFL the reason for astronomical rise in the price of the scrip BFL the reason for astronomical rise in the price of the scrip BFL during the F.Y. 2012 during the F.Y. 2012-13 to 2013-14. Please substantiate your . Please substantiate your reply with documentary evidence which would bring forth the reply with documentary evidence which would bring forth the reply with documentary evidence which would bring forth the financial health/prospects of the company. financial health/prospects of the company.

21 Santosh Vimlesh Mehta Ans: Sir, I would not know the specific reason for rise and fall in the Ans: Sir, I would not know the specific reason for rise and fall in the Ans: Sir, I would not know the specific reason for rise and fall in the price of the Share of BFL price of the Share of BFL Q.14 Please explain why Q.14 Please explain why the scrip price of BFL has risen the scrip price of BFL has risen during 2012-13 and 2013 13 and 2013-14 without any matching financial 14 without any matching financial condition/prospects of the company. condition/prospects of the company. Ans. Sir, as stated earlier! don't know the specific reason for rise Ans. Sir, as stated earlier! don't know the specific reason for rise Ans. Sir, as stated earlier! don't know the specific reason for rise and fall of share prices of BFL and fall of share prices of BFL Q.15 On perusal of trade Q.15 On perusal of trade data of BFL it is seen that most of data of BFL it is seen that most of the entities which are purchasing the scrip of BFL (Exit the entities which are purchasing the scrip of BFL (Exit the entities which are purchasing the scrip of BFL (Exit Providers) are persons who do not have any financial Providers) are persons who do not have any financial Providers) are persons who do not have any financial credentials. Below is the list of some of such persons along credentials. Below is the list of some of such persons along credentials. Below is the list of some of such persons along with their income and amount invested in BFL. with their income and amount invested in BFL. S.N. Name Name PAN Amount Comments Invested 1 Chandrakant Chandrakant AΝΚΡΜ274Η 19.4 Cr Night Mohite Mohite Watchman by Profession 2 Prashant Prashant APMPS403A 5.5 Person is of Sawant Sawant Low means No. 3725/Mum/2025 22 Santosh Vimlesh Mehta living in chawl 3 Shaweta Shaweta BGZPP3221L 3.7.Cr Person odd Padamakar Padamakar jobs and living in 1 RK 4 Shyam Shyam AGGPP8468F 4.4 Cr Person does Padamkar Padamkar odd jobs and Lakshman Lakshman living in 1 RK 5 Tushar Rane Tushar Rane AJCPR9314H Taxi driver and earn income 1 to 1.5 Lac per annum 6 Rupak Rupak 14.09 Cr the The Developers Developers entity does Private Private not exist at Limited Limited registered address 7 Romy Realty Romy Realty 10.3 Cr The entity Private Private does not Limited Limited exist at the registered address 8 VRP 13.7Cr The entity Financial Put Financial Put does not Ltd exist at the registered address Now I am showing you the statement recorded on oath u/s Now I am showing you the statement recorded on oath u/s Now I am showing you the statement recorded on oath u/s 131 on 16/10/2017 of Shri Chandrakant Mohite, Prashant 16/10/2017 of Shri Chandrakant Mohite, Prashant 16/10/2017 of Shri Chandrakant Mohite, Prashant Sawant, Shaweta Padamakar, Shyam Lakshman Padamkar, Sawant, Shaweta Padamakar, Shyam Lakshman Padamkar, Sawant, Shaweta Padamakar, Shyam Lakshman Padamkar, Tushar Rane Please offer your comments as to how entities Tushar Rane Please offer your comments as to how entities Tushar Rane Please offer your comments as to how entities without any creditworthiness are able to invest huge finds by without any creditworthiness are able to invest huge finds by without any creditworthiness are able to invest huge finds by way of providing exit to various ben way of providing exit to various beneficiaries. Ans. Sir, I confirm that I have been shown the statements of Shri Ans. Sir, I confirm that I have been shown the statements of Shri Ans. Sir, I confirm that I have been shown the statements of Shri Chandrakant on Mohite, Prashant Sawant, Shaweta Padamakar, Chandrakant on Mohite, Prashant Sawant, Shaweta Padamakar, Chandrakant on Mohite, Prashant Sawant, Shaweta Padamakar, Shyam Lakshman Padamkar, Tushar Rane but I have no idea why Shyam Lakshman Padamkar, Tushar Rane but I have no idea why Shyam Lakshman Padamkar, Tushar Rane but I have no idea why are they saying this. I just want to say please produce are they saying this. I just want to say please produce are they saying this. I just want to say please produce any evidence which shows any wrong doing from my side. which shows any wrong doing from my side. Q.16 Statement on oath u/s 131 of the IT Act on 10.01.2019 Statement on oath u/s 131 of the IT Act on 10.01.2019 Statement on oath u/s 131 of the IT Act on 10.01.2019 of directors of few Exit Providers in the scrip M/s BFL were of directors of few Exit Providers in the scrip M/s BFL were of directors of few Exit Providers in the scrip M/s BFL were ITA No.

23 Santosh Vimlesh Mehta recorded. Shri Pradeep Dhanuka is director of such Bogus recorded. Shri Pradeep Dhanuka is director of such Bogus recorded. Shri Pradeep Dhanuka is director of such Bogus Exit Provider companies Exit Provider companies. Now I am showing you the statement . Now I am showing you the statement recorded on oath u/s 131 on 10/01/2019 of Bhrt Pradeep recorded on oath u/s 131 on 10/01/2019 of Bhrt Pradeep recorded on oath u/s 131 on 10/01/2019 of Bhrt Pradeep Dhanuka, Director of Rupak Developers Private Limited, Romy Dhanuka, Director of Rupak Developers Private Limited, Romy Dhanuka, Director of Rupak Developers Private Limited, Romy Realty Private Limited, V R P Financial Pvt Ltd, please go Realty Private Limited, V R P Financial Pvt Ltd, please go Realty Private Limited, V R P Financial Pvt Ltd, please go through the same and confirm that you have un through the same and confirm that you have un through the same and confirm that you have understood the contents of the same. contents of the same. Ans: Yes Sir, I have read the contents but I am not concerned with Ans: Yes Sir, I have read the contents but I am not concerned with Ans: Yes Sir, I have read the contents but I am not concerned with that. Q.17 In the statement of Shri Pradeep Dhanuka shown to you Q.17 In the statement of Shri Pradeep Dhanuka shown to you Q.17 In the statement of Shri Pradeep Dhanuka shown to you above in reply to question no: 8 he has mentioned as below. above in reply to question no: 8 he has mentioned as below. above in reply to question no: 8 he has mentioned as below. Q.8 Please provide details Q.8 Please provide details of business activities of the of business activities of the companies as mentioned by you above, in which you are companies as mentioned by you above, in which you are companies as mentioned by you above, in which you are director. Ans. Sir, I am unaware of the activities of VRP Financial services Pvt. Ans. Sir, I am unaware of the activities of VRP Financial services Pvt. Ans. Sir, I am unaware of the activities of VRP Financial services Pvt. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY PRIVATE LIMITED. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY PRIVATE LIMITED. Ltd, Rupak Developers Pvt Ltd, ROMY REALTY PRIVATE LIMITED. Q.9 Please state how come y Q.9 Please state how come you were not aware of business ou were not aware of business activities of the companies in which you are director activities of the companies in which you are director activities of the companies in which you are director Ans: Sir, I was just a dummy directors in the companies mentioned Ans: Sir, I was just a dummy directors in the companies mentioned Ans: Sir, I was just a dummy directors in the companies mentioned abovel was approached by Shri GK Agrawal who told me to provide abovel was approached by Shri GK Agrawal who told me to provide abovel was approached by Shri GK Agrawal who told me to provide my details such as PAN card copy, Address my details such as PAN card copy, Address proof etc. I used to just proof etc. I used to just sign documents as suggested/instructed by Shri G. K. Agrawal. All sign documents as suggested/instructed by Shri G. K. Agrawal. All sign documents as suggested/instructed by Shri G. K. Agrawal. All the activities of these companies were controlled by Shri G.K. the activities of these companies were controlled by Shri G.K. the activities of these companies were controlled by Shri G.K. Agrawal. Please offer your comment Please offer your comment Ans: Sir, I have no idea why he is saying like this. Please ask Ans: Sir, I have no idea why he is saying like this. Please ask Ans: Sir, I have no idea why he is saying like this. Please ask him to produce evidences of my involvement produce evidences of my involvement Q.19 It is seen that the company BFL has issued preferential Q.19 It is seen that the company BFL has issued preferential Q.19 It is seen that the company BFL has issued preferential shares at several occasions to many allottees. Please provide shares at several occasions to many allottees. Please provide shares at several occasions to many allottees. Please provide documentary evidence/details regarding the same. documentary evidence/details regarding the same. documentary evidence/details regarding the same. Ans. Sir, BFL issued preferential shar Ans. Sir, BFL issued preferential shares two times in F.Y 2010 es two times in F.Y 2010-11 & F.Y. 2012-13 (as per my memory) but at present I don't have any 13 (as per my memory) but at present I don't have any 13 (as per my memory) but at present I don't have any details with me. Q.20. Please provide copy of offer of invitation of preferential Q.20. Please provide copy of offer of invitation of preferential Q.20. Please provide copy of offer of invitation of preferential allotment of shares done on above two occasions. shares done on above two occasions.

21. Please provide copy of resolution of shareholder Q.

21. Please provide copy of resolution of shareholder Q.

25 Santosh Vimlesh Mehta Limited the Securities and Exchange of India (SEBI) passed an Securities and Exchange of India (SEBI) passed an Securities and Exchange of India (SEBI) passed an Penalty order dated 27 April 2018 Penalty order dated 27 April 2018 for irregularity in the for irregularity in the trading in the shares and violation of the provisions of the Securities and in the shares and violation of the provisions of the Securities and in the shares and violation of the provisions of the Securities and Exchange Board of India Act 1992. The remarks of the A.O. of SEBI Exchange Board of India Act 1992. The remarks of the A.O. of SEBI Exchange Board of India Act 1992. The remarks of the A.O. of SEBI during investigation procedures are as under: "M/s. Handful during investigation procedures are as under: "M/s. Handful during investigation procedures are as under: "M/s. Handful Investrade P. Ltd. (Noticce 1) had acquired more than Investrade P. Ltd. (Noticce 1) had acquired more than Investrade P. Ltd. (Noticce 1) had acquired more than 5% of share capital; it was required to make disclosure to the company and the capital; it was required to make disclosure to the company and the capital; it was required to make disclosure to the company and the BSE under Regulation 7(1) of SAST Regulations 1997 and under BSE under Regulation 7(1) of SAST Regulations 1997 and under BSE under Regulation 7(1) of SAST Regulations 1997 and under Regulation 13(1) of PIT Regulations, 1992 by January 03, 2011. It Regulation 13(1) of PIT Regulations, 1992 by January 03, 2011. It Regulation 13(1) of PIT Regulations, 1992 by January 03, 2011. It was observed that Noticee 1 did not make disclosur was observed that Noticee 1 did not make disclosure to the stock was observed that Noticee 1 did not make disclosure to the stock exchange under Regulation 7(1) of SAST Regulations, 1997. It was exchange under Regulation 7(1) of SAST Regulations, 1997. It was exchange under Regulation 7(1) of SAST Regulations, 1997. It was also observed that Noticee 2. did not disclose to stock exchanges also observed that Noticee 2. did not disclose to stock exchanges also observed that Noticee 2. did not disclose to stock exchanges under Regulation 13(6) of PIT Regulation 1992. BFL failed to make under Regulation 13(6) of PIT Regulation 1992. BFL failed to make under Regulation 13(6) of PIT Regulation 1992. BFL failed to make the disclosures received from M/s. Handful I the disclosures received from M/s. Handful Investrade P. Ltd. to nvestrade P. Ltd. to stock exchange. Therefore it was alleged that BFL (Notioce 2) stock exchange. Therefore it was alleged that BFL (Notioce 2) stock exchange. Therefore it was alleged that BFL (Notioce 2) violated Regulations 7(3), 8(3) of SAST Regulations, 1997 and violated Regulations 7(3), 8(3) of SAST Regulations, 1997 and violated Regulations 7(3), 8(3) of SAST Regulations, 1997 and Regulation 13(6) of SEBI (PIT) Regulations, 1992. Regulation 13(6) of SEBI (PIT) Regulations, 1992. Noticee 1 & 2 vide letters dated March 26, 2018 submitted th Noticee 1 & 2 vide letters dated March 26, 2018 submitted th Noticee 1 & 2 vide letters dated March 26, 2018 submitted that they made the disclosures to BSE as require under Regulation 7(3), 8(3) of made the disclosures to BSE as require under Regulation 7(3), 8(3) of made the disclosures to BSE as require under Regulation 7(3), 8(3) of SAST Regulations, 1997 and Regulation 13(6) of PIT Regulations SAST Regulations, 1997 and Regulation 13(6) of PIT Regulations SAST Regulations, 1997 and Regulation 13(6) of PIT Regulations 1992 and the acknowledgement of the same from the BSE was 1992 and the acknowledgement of the same from the BSE was 1992 and the acknowledgement of the same from the BSE was submitted in support of their submitted in support of their claim that they complied wi aim that they complied with the disclosure requirement. disclosure requirement. Noticee 1 submitted copy of its letter Noticee 1 submitted copy of its letter dated December 30, 2010 addressed to BSE, which had the dated December 30, 2010 addressed to BSE, which had the dated December 30, 2010 addressed to BSE, which had the acknowledgement seal of BSE dated December 30, 2010. acknowledgement seal of BSE dated December 30, 2010. acknowledgement seal of BSE dated December 30, 2010. Noticee 2 submitted copy of its letter dated January 2, 2011 Noticee 2 submitted copy of its letter dated January 2, 2011 Noticee 2 submitted copy of its letter dated January 2, 2011 addressed to BSE addressed to BSE, which had the acknowledgement seal of , which had the acknowledgement seal of BSE dated December 30, 2010. I note that letter dated BSE dated December 30, 2010. I note that letter dated BSE dated December 30, 2010. I note that letter dated January 2, 2011 January 2, 2011 was signed by Giraj Kishore Agrawal, signed by Giraj Kishore Agrawal, promoter director of BFL. I pursed the documents submitted promoter director of BFL. I pursed the documents submitted promoter director of BFL. I pursed the documents submitted by by by the the the Noticee Noticee Noticee 2 2 2 and and and note note note that that that there there there is is is apparent apparent apparent contradiction on the face of record. I note that copy of the ontradiction on the face of record. I note that copy of the ontradiction on the face of record. I note that copy of the letter dated January 2, 2011, addressed to BSE regarding letter dated January 2, 2011, addressed to BSE regarding letter dated January 2, 2011, addressed to BSE regarding disclosure was acknowledged by BSE on December 31, 2010. disclosure was acknowledged by BSE on December 31, 2010. disclosure was acknowledged by BSE on December 31, 2010. It is not possible to acknowledge the future dated document It is not possible to acknowledge the future dated document It is not possible to acknowledge the future dated document on prior date. This cl on prior date. This clearly establishes that Noticee 2 had early establishes that Noticee 2 had fabricated the document as an afterthought to create fabricated the document as an afterthought to create fabricated the document as an afterthought to create documentary evidence to demonstrate that they made documentary evidence to demonstrate that they made documentary evidence to demonstrate that they made submission within the prescribed timelines. submission within the prescribed timelines. Given that both Given that both the disclosures relate to same event and considering the the disclosures relate to same event and considering the the disclosures relate to same event and considering the apparent fabrication of documents, I have taken serious view apparent fabrication of documents, I have taken serious view apparent fabrication of documents, I have taken serious view of the manipulative intent of Noticees' to cover the wrong of the manipulative intent of Noticees' to cover the wrong of the manipulative intent of Noticees' to cover the wrong deeds and deliberately mislead me. Therefore, I do not give deeds and deliberately mislead me. Therefore, I do not give deeds and deliberately mislead me. Therefore, I do not give any credence to the evidences submitted by Noticees' and credence to the evidences submitted by Noticees' and credence to the evidences submitted by Noticees' and consider the evidence on record (confirmation by BSE) that no consider the evidence on record (confirmation by BSE) that no consider the evidence on record (confirmation by BSE) that no No. 3725/Mum/2025 26 Santosh Vimlesh Mehta disclosures were made by Noticees as required and thus disclosures were made by Noticees as required and thus disclosures were made by Noticees as required and thus conclude Noticee 1 and 2 failed to make any disclosure to conclude Noticee 1 and 2 failed to make any disclosure to conclude Noticee 1 and 2 failed to make any disclosure to BSE I note that Noticee 1 I note that Noticee 1 was included in the promoter category of BFL was included in the promoter category of BFL pursuant to acquisition of 14, 50,000 shares through preferential pursuant to acquisition of 14, 50,000 shares through preferential pursuant to acquisition of 14, 50,000 shares through preferential allotment at the rate of Rs 20 each including premium of Rs 10 each. allotment at the rate of Rs 20 each including premium of Rs 10 each. allotment at the rate of Rs 20 each including premium of Rs 10 each. This information is material for investors and therefore should be This information is material for investors and therefore should be This information is material for investors and therefore should be promptly to investors. Further, Noticee did not seem to have any to investors. Further, Noticee did not seem to have any to investors. Further, Noticee did not seem to have any interest to follow up with BSE to ensure such material information interest to follow up with BSE to ensure such material information interest to follow up with BSE to ensure such material information was available in public domain. There are various modes of was available in public domain. There are various modes of was available in public domain. There are various modes of communication through which it could inform BSE. I note from the communication through which it could inform BSE. I note from the communication through which it could inform BSE. I note from the letter head of Noticees that they had fax number and email id. The ad of Noticees that they had fax number and email id. The ad of Noticees that they had fax number and email id. The responsibility of Noticees will not rest with mere submission of responsibility of Noticees will not rest with mere submission of responsibility of Noticees will not rest with mere submission of documents at BSE. Being listed company, it is also its responsibility documents at BSE. Being listed company, it is also its responsibility documents at BSE. Being listed company, it is also its responsibility to ensure prompt to ensure prompt disclosure and cannot Adjudication Order in th disclosure and cannot Adjudication Order in the matter of Banas Finance Limited Page 15 of 43 wash of its matter of Banas Finance Limited Page 15 of 43 wash of its matter of Banas Finance Limited Page 15 of 43 wash of its responsibility by merely submissions documents at BSE. I also take responsibility by merely submissions documents at BSE. I also take responsibility by merely submissions documents at BSE. I also take note trading of Noticee 2 was suspended due to non note trading of Noticee 2 was suspended due to non- -compliance of listing agreement. listing agreement. In view of above, I conclude that Noticee 1 & In view of above, I conclude that Noticee 1 & 2 failed to disclose 2 failed to disclose under under under SAST SAST SAST Regulations Regulations Regulations 1997 1997 1997 and and and PIT PIT PIT Regulations Regulations Regulations 1992 1992 1992 respectively. Therefore I conclude that the allegation against M/s. respectively. Therefore I conclude that the allegation against M/s. respectively. Therefore I conclude that the allegation against M/s. Handful Investrade P. Ltd for violation of Regulation 7(1) of SAST Handful Investrade P. Ltd for violation of Regulation 7(1) of SAST Handful Investrade P. Ltd for violation of Regulation 7(1) of SAST Regulations, 1997 and against Noticee 2 for Regulations, 1997 and against Noticee 2 for Regulations, 1997 and against Noticee 2 for violation of Regulations 7(3), 8(3) of SAST Regulations, 1997 and Regulations 7(3), 8(3) of SAST Regulations, 1997 and Regulations 7(3), 8(3) of SAST Regulations, 1997 and Regulation 13(6) of PIT Regulations, 1992 stand established." Regulation 13(6) of PIT Regulations, 1992 stand established." Regulation 13(6) of PIT Regulations, 1992 stand established." 5.20. As no satisfying logical explanation has been given by either 5.20. As no satisfying logical explanation has been given by either 5.20. As no satisfying logical explanation has been given by either the exit providers or the directors to justify that the trans the exit providers or the directors to justify that the trans the exit providers or the directors to justify that the transactions were genuine without malicious intent and the same has been were genuine without malicious intent and the same has been were genuine without malicious intent and the same has been established in the order of the SEBI dated 27.04.2018, it is established in the order of the SEBI dated 27.04.2018, it is established in the order of the SEBI dated 27.04.2018, it is established that the scrip M/s Banas Finance Limited has been established that the scrip M/s Banas Finance Limited has been established that the scrip M/s Banas Finance Limited has been used to provide bogus Long Term Capital Gains to various used to provide bogus Long Term Capital Gains to various used to provide bogus Long Term Capital Gains to various beneficiaries.” 2.14 The Assessing Officer also took note of the findings of The Assessing Officer also took note of the findings of The Assessing Officer also took note of the findings of the Securities and Exchange Board of India (SEBI) in relation the Securities and Exchange Board of India (SEBI) in relation the Securities and Exchange Board of India (SEBI) in relation to the trading in the shares of M/s Banas Finance Ltd. and to the trading in the shares of M/s Banas Finance Ltd. and to the trading in the shares of M/s Banas Finance Ltd. and supplied said report to the assessee. It was observed that supplied said report to the assessee. It was observed that supplied said report to the assessee. It was observed that SEBI, after conduct SEBI, after conducting investigation in some cases involving ing investigation in some cases involving ITA No.

27 Santosh Vimlesh Mehta investors in the said scrip, found the allegations of price investors in the said scrip, found the allegations of price investors in the said scrip, found the allegations of price manipulation to be substantiated. manipulation to be substantiated. 2.15 Having regard to the material gathered by the Having regard to the material gathered by the Having regard to the material gathered by the Investigation Wing, the statements of the alleged exit Investigation Wing, the statements of the alleged exit Investigation Wing, the statements of the alleged exit providers, the trading pattern observed on the stock exchange, e trading pattern observed on the stock exchange, e trading pattern observed on the stock exchange, and the findings recorded in the SEBI investigation, the and the findings recorded in the SEBI investigation, the and the findings recorded in the SEBI investigation, the Assessing Officer concluded that, when examined on the Assessing Officer concluded that, when examined on the Assessing Officer concluded that, when examined on the touchstone touchstone touchstone of of of human human human probabilities, probabilities, probabilities, the the the transactions transactions transactions undertaken by the assessee in respect of s undertaken by the assessee in respect of sale of shares of M/s ale of shares of M/s Banas Finance Ltd. did not represent genuine market Banas Finance Ltd. did not represent genuine market Banas Finance Ltd. did not represent genuine market transactions. transactions. transactions. According According According to to to the the the Assessing Assessing Assessing Officer, Officer, Officer, the the the transactions were structured and orchestrated with the object transactions were structured and orchestrated with the object transactions were structured and orchestrated with the object of availing tax-exempt long exempt long-term capital gains through term capital gains through accommodation entries. n entries. 2.16 Accordingly, Accordingly, Accordingly, by by by the the the assessment assessment assessment order order order dated dated dated 22.04.2022 passed under section 147 read with section 143(3) 22.04.2022 passed under section 147 read with section 143(3) 22.04.2022 passed under section 147 read with section 143(3) of the Income-tax Act, 1961, the Assessing Officer rejected the tax Act, 1961, the Assessing Officer rejected the tax Act, 1961, the Assessing Officer rejected the assessee’s claim of long assessee’s claim of long-term capital gain amounting to term capital gain amounting to ₹3,98,43,430/- and treated the said amount as undisclosed nd treated the said amount as undisclosed nd treated the said amount as undisclosed income of the assessee. income of the assessee.

28 Santosh Vimlesh Mehta shares of M/s Banas Finance Ltd. were genuine and carried shares of M/s Banas Finance Ltd. were genuine and carried shares of M/s Banas Finance Ltd. were genuine and carried out in the normal course of business. out in the normal course of business. 3.1 It was contended that the statutory conditions It was contended that the statutory conditions It was contended that the statutory conditions prescribed for claiming exemption under section 10(38) of the prescribed for claiming exemption under section 10(38) of the prescribed for claiming exemption under section 10(38) of the Act had been duly satisfie Act had been duly satisfied, namely, that the shares were held d, namely, that the shares were held for a period exceeding one year, that they were listed and sold for a period exceeding one year, that they were listed and sold for a period exceeding one year, that they were listed and sold through a recognised stock exchange, and that security through a recognised stock exchange, and that security through a recognised stock exchange, and that security transaction tax (STT) was duly paid on such sale transactions. transaction tax (STT) was duly paid on such sale transactions. transaction tax (STT) was duly paid on such sale transactions. 3.2 The assessee further relied upon The assessee further relied upon various judicial various judicial precedents and submitted that the genuineness of the long precedents and submitted that the genuineness of the long precedents and submitted that the genuineness of the long- term capital gain stood established by documentary and term capital gain stood established by documentary and term capital gain stood established by documentary and circumstantial circumstantial circumstantial evidence, evidence, evidence, including including including transactions transactions transactions routed routed routed through banking channels, trading on a recognised stock through banking channels, trading on a recognised stock through banking channels, trading on a recognised stock exchange, contemporaneous documentation, absence of any emporaneous documentation, absence of any emporaneous documentation, absence of any unaccounted cash transactions, and the failure of the unaccounted cash transactions, and the failure of the unaccounted cash transactions, and the failure of the Assessing Officer to afford an opportunity of cross Assessing Officer to afford an opportunity of cross Assessing Officer to afford an opportunity of cross-examination of third parties whose statements were relied upon. It was also of third parties whose statements were relied upon. It was also of third parties whose statements were relied upon. It was also emphasised that no material evid emphasised that no material evidence had been brought on ence had been brought on record to demonstrate manipulation of the scrip by the record to demonstrate manipulation of the scrip by the record to demonstrate manipulation of the scrip by the assessee. 3.3 The assessee further submitted that in the case of M/s The assessee further submitted that in the case of M/s The assessee further submitted that in the case of M/s Banas Finance Ltd., the Assessing Officer had made additions Banas Finance Ltd., the Assessing Officer had made additions Banas Finance Ltd., the Assessing Officer had made additions under section 68 of the Act in respect of amou under section 68 of the Act in respect of amou under section 68 of the Act in respect of amounts received through preferential allotment; however, the Tribunal, in ITA through preferential allotment; however, the Tribunal, in ITA through preferential allotment; however, the Tribunal, in had deleted the said additions, thereby No. 1096/Mum/2016, had deleted the said additions, thereby No. 1096/Mum/2016, had deleted the said additions, thereby ITA No.

29 Santosh Vimlesh Mehta holding the preferential allotment transactions to be genuine. holding the preferential allotment transactions to be genuine. holding the preferential allotment transactions to be genuine. It was contended that once the investment itself had been It was contended that once the investment itself had been It was contended that once the investment itself had been judicially accepted as genuine, the consequential sale thereof udicially accepted as genuine, the consequential sale thereof udicially accepted as genuine, the consequential sale thereof could not be treated as bogus. could not be treated as bogus. 3.4 It was also pointed out that the investigation It was also pointed out that the investigation It was also pointed out that the investigation conducted by SEBI covered the period from November 2010 to conducted by SEBI covered the period from November 2010 to conducted by SEBI covered the period from November 2010 to September 2011, whereas the assessee’s sale transacti September 2011, whereas the assessee’s sale transacti September 2011, whereas the assessee’s sale transactions took place in February and March 2012, which was outside the place in February and March 2012, which was outside the place in February and March 2012, which was outside the period of investigation. The assessee further submitted that period of investigation. The assessee further submitted that period of investigation. The assessee further submitted that her sales occurred after the share prices had already declined her sales occurred after the share prices had already declined her sales occurred after the share prices had already declined substantially from their peak, and therefore, the timing and substantially from their peak, and therefore, the timing and substantially from their peak, and therefore, the timing and pattern of sale did not conform to the alleged modus operandi n of sale did not conform to the alleged modus operandi n of sale did not conform to the alleged modus operandi of price manipulators, who ordinarily exit at peak prices to of price manipulators, who ordinarily exit at peak prices to of price manipulators, who ordinarily exit at peak prices to maximise gains. 3.5 The assessee further submitted that the SEBI The assessee further submitted that the SEBI The assessee further submitted that the SEBI adjudication order, which penalised certain entities for alleged adjudication order, which penalised certain entities for alleged adjudication order, which penalised certain entities for alleged price manipulation in the scrip of Banas Finance Ltd., did not ipulation in the scrip of Banas Finance Ltd., did not ipulation in the scrip of Banas Finance Ltd., did not name or implicate the assessee in any manner. It was name or implicate the assessee in any manner. It was name or implicate the assessee in any manner. It was contended that the Assessing Officer had erroneously extended contended that the Assessing Officer had erroneously extended contended that the Assessing Officer had erroneously extended the findings of the SEBI order to the assessee without any the findings of the SEBI order to the assessee without any the findings of the SEBI order to the assessee without any factual foundation. It was a factual foundation. It was also highlighted that the continued lso highlighted that the continued listing of the company on a regulated exchange such as the listing of the company on a regulated exchange such as the listing of the company on a regulated exchange such as the Bombay Stock Exchange, and the absence of any regulatory Bombay Stock Exchange, and the absence of any regulatory Bombay Stock Exchange, and the absence of any regulatory action against the company itself for price rigging, supported action against the company itself for price rigging, supported action against the company itself for price rigging, supported the legitimacy of its operations and the t the legitimacy of its operations and the transparency of trading ransparency of trading in its shares.

30 Santosh Vimlesh Mehta 3.6 It was also reiterated that despite specific requests, no It was also reiterated that despite specific requests, no It was also reiterated that despite specific requests, no opportunity of cross opportunity of cross-examination of the persons whose examination of the persons whose statements were relied upon by the Assessing Officer was statements were relied upon by the Assessing Officer was statements were relied upon by the Assessing Officer was granted, in violation of the principles of n granted, in violation of the principles of natural justice. atural justice. 3.7 After considering the submissions of the assessee and After considering the submissions of the assessee and After considering the submissions of the assessee and the material placed on record, the learned CIT(A) accepted the the material placed on record, the learned CIT(A) accepted the the material placed on record, the learned CIT(A) accepted the assessee’s contentions. The learned CIT(A) held that the rise in assessee’s contentions. The learned CIT(A) held that the rise in assessee’s contentions. The learned CIT(A) held that the rise in the share price of the company was supported by its f the share price of the company was supported by its f the share price of the company was supported by its financial fundamentals. In this regard, the learned CIT(A) noted that the fundamentals. In this regard, the learned CIT(A) noted that the fundamentals. In this regard, the learned CIT(A) noted that the company’s company’s turnover turnover had had increased increased from from ₹ ₹2 lakhs in Assessment Year 2010 Assessment Year 2010–11 to ₹7 crores in Assessment Years 7 crores in Assessment Years 2011–12 and 2012 12 and 2012–13, reflecting substantial revenue growth, 13, reflecting substantial revenue growth, which could reas which could reasonably enhance investor confidence and onably enhance investor confidence and influence market price. It was observed that share price influence market price. It was observed that share price influence market price. It was observed that share price movements are driven by multiple factors, including investor movements are driven by multiple factors, including investor movements are driven by multiple factors, including investor sentiment, and that the growth in revenue and future sentiment, and that the growth in revenue and future sentiment, and that the growth in revenue and future prospects of the company could not be disregar prospects of the company could not be disregar prospects of the company could not be disregarded. The learned CIT(A) also took note of the fact that the company learned CIT(A) also took note of the fact that the company learned CIT(A) also took note of the fact that the company continued to remain listed on the Bombay Stock Exchange and continued to remain listed on the Bombay Stock Exchange and continued to remain listed on the Bombay Stock Exchange and had even acquired another listed entity, thereby lending had even acquired another listed entity, thereby lending had even acquired another listed entity, thereby lending credence to its commercial legitimacy. credence to its commercial legitimacy. The relevant fi The relevant finding of the Ld. CIT(A) is reproduced as under: CIT(A) is reproduced as under: “11. Now, coming to the observations of the Ld.AO that the price 11. Now, coming to the observations of the Ld.AO that the price 11. Now, coming to the observations of the Ld.AO that the price of the shares is not supported by the fundamentals of the of the shares is not supported by the fundamentals of the of the shares is not supported by the fundamentals of the company. The appellant has submitted the financials of this company. The appellant has submitted the financials of this company. The appellant has submitted the financials of this company and has contended that when this c company and has contended that when this company started ompany started its operation in A.Y 2010 its operation in A.Y 2010-11, the turnover was only Rs. 2 lakhs 11, the turnover was only Rs. 2 lakhs which has increased to Rs. 7 crores in the AY 2011 which has increased to Rs. 7 crores in the AY 2011 which has increased to Rs. 7 crores in the AY 2011-12 and No. 3725/Mum/2025 31 Santosh Vimlesh Mehta 2012-13 showing revenue growth at 350 times. This growth in 13 showing revenue growth at 350 times. This growth in 13 showing revenue growth at 350 times. This growth in revenue has increased investor confidence which led to the revenue has increased investor confidence which led to the revenue has increased investor confidence which led to the rise in the price of these shares. The price rise on the stock in the price of these shares. The price rise on the stock in the price of these shares. The price rise on the stock exchange depends on multiple factors and mostly it is driven by exchange depends on multiple factors and mostly it is driven by exchange depends on multiple factors and mostly it is driven by the investors' sentiment. In this case, the substantial rise in the investors' sentiment. In this case, the substantial rise in the investors' sentiment. In this case, the substantial rise in revenue along with future prospects of the company has revenue along with future prospects of the company has revenue along with future prospects of the company has contributed to the rise in price of this alleged share. Regarding d to the rise in price of this alleged share. Regarding d to the rise in price of this alleged share. Regarding the authenticity of Banas Finance, the appellant has submitted the authenticity of Banas Finance, the appellant has submitted the authenticity of Banas Finance, the appellant has submitted that this company is still listed on BSE and is regularly traded. that this company is still listed on BSE and is regularly traded. that this company is still listed on BSE and is regularly traded. Further, recently it has acquired another listed company, Further, recently it has acquired another listed company, Further, recently it has acquired another listed company, Proaim Enterprises Ltd. From the details submitted by the rises Ltd. From the details submitted by the rises Ltd. From the details submitted by the appellant, I find that there is substantial force in the appellant's appellant, I find that there is substantial force in the appellant's appellant, I find that there is substantial force in the appellant's contention and hence the same cannot be brushed aside.” contention and hence the same cannot be brushed aside.” contention and hence the same cannot be brushed aside.” 3.8 The learned CIT(A) further placed reliance on the order The learned CIT(A) further placed reliance on the order The learned CIT(A) further placed reliance on the order of the Tribunal dated of the Tribunal dated 02.01.2019 in the case of M/s Banas 02.01.2019 in the case of M/s Banas Finance Ltd. in for Assessment Year Finance Ltd. in for Assessment Year Finance Ltd. in for Assessment Year 2011–12, wherein the preferential allotment made by the 12, wherein the preferential allotment made by the 12, wherein the preferential allotment made by the company was held to be genuine. company was held to be genuine. 3.9 The learned CIT(A) also concurred with the assessee’s The learned CIT(A) also concurred with the assessee’s The learned CIT(A) also concurred with the assessee’s submission that her name did not figure in the SEBI order her name did not figure in the SEBI order her name did not figure in the SEBI order dated 27.04.2018, nor was there any reference to her therein. dated 27.04.2018, nor was there any reference to her therein. dated 27.04.2018, nor was there any reference to her therein. It was further observed that the period considered by SEBI for It was further observed that the period considered by SEBI for It was further observed that the period considered by SEBI for investigation did not coincide with the period during which the investigation did not coincide with the period during which the investigation did not coincide with the period during which the assessee had sold the sha assessee had sold the shares. 3.10 Further, the Ld. CIT(A) refer the Ld. CIT(A) refered to the statement of the to the statement of the assessee which was rec assessee which was recorded under section 131 of the A orded under section 131 of the Act on 11/01/2019 as part of a survey conducted under 11/01/2019 as part of a survey conducted under section 133A of the Act on 10/01/2019 on M/s Mehta Sawant Raj Hanwant ct on 10/01/2019 on M/s Mehta Sawant Raj Hanwant ct on 10/01/2019 on M/s Mehta Sawant Raj Hanwant Raj and observed that in said statement the assessee stated ved that in said statement the assessee stated ved that in said statement the assessee stated that investment was made by her late husband Sh that investment was made by her late husband Sh that investment was made by her late husband Shri Vimlesh Kumar Mehta. It was noted that there was no admission or It was noted that there was no admission or It was noted that there was no admission or ITA No.

32 Santosh Vimlesh Mehta material in the said statement to suggest that the transactions material in the said statement to suggest that the transactions material in the said statement to suggest that the transactions were non-genuine, and therefo genuine, and therefore, no adverse inference could re, no adverse inference could be drawn against the assessee. be drawn against the assessee. 3.11 Relying upon various judicial precedents and upon an Relying upon various judicial precedents and upon an Relying upon various judicial precedents and upon an overall appreciation of facts and evidence, the learned CIT(A) overall appreciation of facts and evidence, the learned CIT(A) overall appreciation of facts and evidence, the learned CIT(A) concluded that the transactions of purchase and sale of shares concluded that the transactions of purchase and sale of shares concluded that the transactions of purchase and sale of shares of M/s Banas Finance Ltd. could not be characterised as Banas Finance Ltd. could not be characterised as Banas Finance Ltd. could not be characterised as bogus accommodation entry transactions, and accordingly bogus accommodation entry transactions, and accordingly bogus accommodation entry transactions, and accordingly deleted the addition made by the Assessing Officer. deleted the addition made by the Assessing Officer. deleted the addition made by the Assessing Officer.

33 Santosh Vimlesh Mehta The assessee has primarily relied upon documentary evidences The assessee has primarily relied upon documentary evidences The assessee has primarily relied upon documentary evidences such like share application dated 11/12/2010 to the M/s like share application dated 11/12/2010 to the M/s like share application dated 11/12/2010 to the M/s Banas Finance Ltd for allotment of preferential share, Banas Finance Ltd for allotment of preferential share, Banas Finance Ltd for allotment of preferential share, payment for investment payment for investment in preferential allotment by way of in preferential allotment by way of banking channel, copy of preferential allotment letter dated banking channel, copy of preferential allotment letter dated banking channel, copy of preferential allotment letter dated 01/01/2011 issued by the company, Copy of De 01/01/2011 issued by the company, Copy of De- -mat account, copy of broker’s note issued by the RBK Share Broking Ltd , copy of broker’s note issued by the RBK Share Broking Ltd , copy of broker’s note issued by the RBK Share Broking Ltd , Copy of Bank statement in which sale am Copy of Bank statement in which sale amount was received ount was received etc., to establish the genuineness of the transactions. to establish the genuineness of the transactions. to establish the genuineness of the transactions. The Ld. CIT(A) also concurred with assessee and observed that the CIT(A) also concurred with assessee and observed that the CIT(A) also concurred with assessee and observed that the assessee had furnished all the documentary evidences to assessee had furnished all the documentary evidences to assessee had furnished all the documentary evidences to substantiate the transactions and the Assessing Officer has substantiate the transactions and the Assessing Officer has substantiate the transactions and the Assessing Officer has not pointed out any discrepancy in the document furnished by not pointed out any discrepancy in the document furnished by not pointed out any discrepancy in the document furnished by the assessee. However we do not agree with the above finding the assessee. However we do not agree with the above finding the assessee. However we do not agree with the above finding of the Ld. CIT(A). Tho of the Ld. CIT(A). Those documents merely constitute a paper se documents merely constitute a paper trail generated in the ordinary course of such transactions trail generated in the ordinary course of such transactions trail generated in the ordinary course of such transactions and, by themselves, do not conclusively establish the mselves, do not conclusively establish the mselves, do not conclusively establish the genuineness of the claim. It is well settled that transactions genuineness of the claim. It is well settled that transactions genuineness of the claim. It is well settled that transactions routed through banking channels or supported by statutory routed through banking channels or supported by statutory routed through banking channels or supported by statutory documentation are not sacrosanct and must still withstand documentation are not sacrosanct and must still withstand documentation are not sacrosanct and must still withstand the the test test of of surrounding surrounding circumstan circumstances ces and and human human The Hon’ble Supreme Court in the case of M/s. probabilities. The Hon’ble Supreme Court in the case of The Hon’ble Supreme Court in the case of Kachwala Gems, Jaipur vs Joint Commissioner of Income Kachwala Gems, Jaipur vs Joint Commissioner of Income Kachwala Gems, Jaipur vs Joint Commissioner of Income Tax, Jaipur is 288 ITR 10 (SC) 288 ITR 10 (SC) has held that has held that making payment through banking channel is itself is not a sacrosanct payment through banking channel is itself is not a sacrosanct payment through banking channel is itself is not a sacrosanct to establish the genuineness of the transaction. the genuineness of the transaction. Similarly copy Similarly copy No. 3725/Mum/2025 34 Santosh Vimlesh Mehta of the De-mat account or copy of the broker’s note do not mat account or copy of the broker’s note do not mat account or copy of the broker’s note do not establish that transaction was genuine as a same are issued establish that transaction was genuine as a same are issued establish that transaction was genuine as a same are issued as part of paper trail of transactions. Accordingly as part of paper trail of transactions. Accordingly, , we reject the contention of the a contention of the assessee that above mentioned documents above mentioned documents substantiate the genuineness of the transaction. substantiate the genuineness of the transaction. 4.2 The next contention of the assessee that there is no The next contention of the assessee that there is no The next contention of the assessee that there is no mention of the assessee in SEBI investigation and period of the mention of the assessee in SEBI investigation and period of the mention of the assessee in SEBI investigation and period of the such investigation is not same to the period of sale of shares such investigation is not same to the period of sale of shares such investigation is not same to the period of sale of shares by the assessee. 4.3 Before us ld department representative has filed a cop Before us ld department representative has filed a cop Before us ld department representative has filed a copy of adjudication order issued by the SEBI, which has been held of adjudication order issued by the SEBI, which has been held of adjudication order issued by the SEBI, which has been held by the Ld. CIT(A) by the Ld. CIT(A) as not related to the assessee. In this 43 not related to the assessee. In this 43 pages order, the SEBI has mentioned that based on the pages order, the SEBI has mentioned that based on the pages order, the SEBI has mentioned that based on the internal alert investigation was carried out in the irregularities internal alert investigation was carried out in the irregularities internal alert investigation was carried out in the irregularities in the trading in the shares of Bannas finance Ltd on following ding in the shares of Bannas finance Ltd on following ding in the shares of Bannas finance Ltd on following entities: 1. Handful Investrade P Ltd (PAN: AAACH2018Q) 1. Handful Investrade P Ltd (PAN: AAACH2018Q) 2. Banas Finance Ltd(PAN: AAACB2236J) 2. Banas Finance Ltd(PAN: AAACB2236J) 3. Ms. Sarita Chandak (PAN:ACEPL0255A) 3. Ms. Sarita Chandak (PAN:ACEPL0255A) 4. Rajat Share Broking Pvt. Ltd(PAN: AAACR2695B) 4. Rajat Share Broking Pvt. Ltd(PAN: AAACR2695B) 5. Gurudev Inve 5. Gurudev Investment HUF (Prop Jayesh Narendra Kesharia) stment HUF (Prop Jayesh Narendra Kesharia) (PAN:AAEHJ1610D) (PAN:AAEHJ1610D) 6. Rahul Kumar Agarwal (PAN:AFNPA4015R) 6. Rahul Kumar Agarwal (PAN:AFNPA4015R) 7. Bhanwarlal Bahulal Suthar (PAN: ANVPS7451B) 7. Bhanwarlal Bahulal Suthar (PAN: ANVPS7451B) 8. Hetal Nilesh Gor (PAN: ALDPG9625M) 8. Hetal Nilesh Gor (PAN: ALDPG9625M)

35 Santosh Vimlesh Mehta 9 9 9 Anmol Anmol Anmol Finance Finance Finance Company Company Company (Rajesh (Rajesh (Rajesh Tukaram Tukaram Tukaram Dambre) Dambre) Dambre) (PAN:AHAPD8240L) (PAN:AHAPD8240L) 4.4 The report, further notes that company The report, further notes that company The report, further notes that company M/s Banas Finance Ltd allotted 99 lakhs equity shares at a price of allotted 99 lakhs equity shares at a price of allotted 99 lakhs equity shares at a price of ₹ 20 per share on preferential basis to 49 entities. The per share on preferential basis to 49 entities. The per share on preferential basis to 49 entities. The assessee is also one of the person who was allotted shares on preference also one of the person who was allotted shares on preference also one of the person who was allotted shares on preference basis at the rate of Rs.20 per share. For ready reference, the basis at the rate of Rs.20 per share. For ready reference, the basis at the rate of Rs.20 per share. For ready reference, the relevant observation of the SEBI adjudicator is reproduced as relevant observation of the SEBI adjudicator is reproduced as relevant observation of the SEBI adjudicator is reproduced as under: “16. Before proceeding with the charges against Noticees, it i 16. Before proceeding with the charges against Noticees, it i 16. Before proceeding with the charges against Noticees, it is relevant to note that during the period November 03, 2010 to relevant to note that during the period November 03, 2010 to relevant to note that during the period November 03, 2010 to September 09, 2011 (IP) the price of the scrip increased from September 09, 2011 (IP) the price of the scrip increased from September 09, 2011 (IP) the price of the scrip increased from Rs. 9.37 to high of Rs. 292.60 (hitting circuit filter limit on all Rs. 9.37 to high of Rs. 292.60 (hitting circuit filter limit on all Rs. 9.37 to high of Rs. 292.60 (hitting circuit filter limit on all trading days) registering an increase of Rs.283.23. (i.e. trading days) registering an increase of Rs.283.23. (i.e. trading days) registering an increase of Rs.283.23. (i.e. 3,022.73%). During the same period, BSE Sensex declined from .73%). During the same period, BSE Sensex declined from .73%). During the same period, BSE Sensex declined from 20,465.74 to 16,866.97 registering a decrease of 3,598.77 20,465.74 to 16,866.97 registering a decrease of 3,598.77 20,465.74 to 16,866.97 registering a decrease of 3,598.77 points (i.e. 17.58%). I also note that there was no trading prior points (i.e. 17.58%). I also note that there was no trading prior points (i.e. 17.58%). I also note that there was no trading prior to November 3, 2010. The first trading day was on November 3, to November 3, 2010. The first trading day was on November 3, to November 3, 2010. The first trading day was on November 3, 2010 for 50 sh 2010 for 50 shares at a price of Rs 9.37. The next trading day ares at a price of Rs 9.37. The next trading day was on February 4, 2011 i.e. after a gap of 3 months. was on February 4, 2011 i.e. after a gap of 3 months. was on February 4, 2011 i.e. after a gap of 3 months. Thereafter, the price of the scrip touched upper circuit limit on Thereafter, the price of the scrip touched upper circuit limit on Thereafter, the price of the scrip touched upper circuit limit on 85 consecutive trading days till June 13, 2011 with only one 85 consecutive trading days till June 13, 2011 with only one 85 consecutive trading days till June 13, 2011 with only one trade for 50 shares on eac trade for 50 shares on each day. There were 5 trades on June h day. There were 5 trades on June 14, 2011 and scrip touched upper circuit limit for next 56 14, 2011 and scrip touched upper circuit limit for next 56 14, 2011 and scrip touched upper circuit limit for next 56 consecutive trading days till September 7, 2011 with only consecutive trading days till September 7, 2011 with only consecutive trading days till September 7, 2011 with only single trades for shares ranging from 1 share to 50 shares. single trades for shares ranging from 1 share to 50 shares. single trades for shares ranging from 1 share to 50 shares. Thus, it is evident that the scrip is highly Thus, it is evident that the scrip is highly illiquid scrip. The price illiquid scrip. The price of the scrip from February 4, 2011 was Rs 9.83 and increased of the scrip from February 4, 2011 was Rs 9.83 and increased of the scrip from February 4, 2011 was Rs 9.83 and increased to Rs 281. 3 on September 7, 2011. Thus, I note that there were to Rs 281. 3 on September 7, 2011. Thus, I note that there were to Rs 281. 3 on September 7, 2011. Thus, I note that there were trading on June 14, 2011, September 8 and 9, 2011 where in trading on June 14, 2011, September 8 and 9, 2011 where in trading on June 14, 2011, September 8 and 9, 2011 where in 17 trades, 7 trades and 25 trades for 1050 sh 17 trades, 7 trades and 25 trades for 1050 shares, 754 shares, ares, 754 shares, 1506 shares respectively.” 1506 shares respectively.” 4.5 The report observed that shares of The report observed that shares of Bannas Bannas finance Ltd were manipulated by M/s Anmol Finance through connivance were manipulated by M/s Anmol Finance through connivance were manipulated by M/s Anmol Finance through connivance of sh Pradeep Dhanuka and sh Giriral Agrwal. The relevant of sh Pradeep Dhanuka and sh Giriral Agrwal. The relevant of sh Pradeep Dhanuka and sh Giriral Agrwal. The relevant No. 3725/Mum/2025 36 Santosh Vimlesh Mehta observations in the report in the report are reproduced for ready reference uced for ready reference as under: “70. It is noted during the investigation period that, only 20 sellers 70. It is noted during the investigation period that, only 20 sellers 70. It is noted during the investigation period that, only 20 sellers sold entire traded quantity of 9,595 shares, during the sold entire traded quantity of 9,595 shares, during the sold entire traded quantity of 9,595 shares, during the investigation period. Noticee No. investigation period. Noticee No.-9, M/s Anmol Finance Company 9, M/s Anmol Finance Company (herein after referred as 'Anmo (herein after referred as 'Anmol Finance') was the top seller with Finance') was the top seller with sale quantity of 6,490 shares. sale quantity of 6,490 shares.

73. Anmol Finance Company is a sole proprietary firm and Shri.

74. It is noted that Anmol was trading through JRG Securities P.

74. It is noted that Anmol was trading through JRG Securities P.

38 Santosh Vimlesh Mehta company had over the shareholders. Such an inference is company had over the shareholders. Such an inference is company had over the shareholders. Such an inference is apparent due to the direct involvement of promoter in controlled apparent due to the direct involvement of promoter in controlled apparent due to the direct involvement of promoter in controlled supply of shares and devising a deceptive scheme with full supply of shares and devising a deceptive scheme with full supply of shares and devising a deceptive scheme with full knowledge of the list of shareholders available and acc knowledge of the list of shareholders available and acc knowledge of the list of shareholders available and accessible to them. Further, many of the investors were also holding shares in them. Further, many of the investors were also holding shares in them. Further, many of the investors were also holding shares in physical form which further facilitated company to increase its physical form which further facilitated company to increase its physical form which further facilitated company to increase its price effortless without active involvement or connivance with any price effortless without active involvement or connivance with any price effortless without active involvement or connivance with any buyers. The positive corporate news in public dom buyers. The positive corporate news in public domain will create ain will create sufficient buying pressure from gullible investors who would crave sufficient buying pressure from gullible investors who would crave sufficient buying pressure from gullible investors who would crave for shares to participate in the price rally. participate in the price rally. The details of the total The details of the total ………………………… sell transactions are as follows sell transactions are as follows ………………………… 4.6 The report finally concluded that price of the shares of report finally concluded that price of the shares of report finally concluded that price of the shares of company were manipulated manipulated. The relevant finding is reproduced . The relevant finding is reproduced as under: “79. In view of above, I conclude that the price manipulation was In view of above, I conclude that the price manipulation was In view of above, I conclude that the price manipulation was planned and executed by Anmol (promoter's related entities) planned and executed by Anmol (promoter's related entities) planned and executed by Anmol (promoter's related entities) through complete control over the supply of shares which h complete control over the supply of shares which h complete control over the supply of shares which smoothly facilitated sustenance of consecutively hit upper circuit smoothly facilitated sustenance of consecutively hit upper circuit smoothly facilitated sustenance of consecutively hit upper circuit limit for 116 trading sessions. Thus, I conclude that the limit for 116 trading sessions. Thus, I conclude that the limit for 116 trading sessions. Thus, I conclude that the allegations against Noticee no. allegations against Noticee no.-9, Anmol Finance Company for 9, Anmol Finance Company for manipulating the sc manipulating the scrip price and contributed to LTP & NHP rip price and contributed to LTP & NHP through controlled sale orders (in minimum market lot) at upper through controlled sale orders (in minimum market lot) at upper through controlled sale orders (in minimum market lot) at upper circuit price, for registering trades on 116 trading days at BSE in circuit price, for registering trades on 116 trading days at BSE in circuit price, for registering trades on 116 trading days at BSE in violation of Regulation 3 (a), (b), (c), (d), 4 (1), 4 (2) (b) & (e) of violation of Regulation 3 (a), (b), (c), (d), 4 (1), 4 (2) (b) & (e) of violation of Regulation 3 (a), (b), (c), (d), 4 (1), 4 (2) (b) & (e) of PFUTP read wi PFUTP read with section 12A (a), (b) and (c) of SEBI Act, 1992 th section 12A (a), (b) and (c) of SEBI Act, 1992 stand established. stand established.” 4.7 The investigation conducted by SEBI has conclusively The investigation conducted by SEBI has conclusively The investigation conducted by SEBI has conclusively demonstrated that the price rise in the shares of M/s Banas demonstrated that the price rise in the shares of M/s Banas demonstrated that the price rise in the shares of M/s Banas Finance Ltd. during the relevant period was not a result of Finance Ltd. during the relevant period was not a result of Finance Ltd. during the relevant period was not a result of genuine market forces but was the outcome of systematic and market forces but was the outcome of systematic and market forces but was the outcome of systematic and deliberate deliberate deliberate price price price manipulation manipulation manipulation orchestrated orchestrated orchestrated by by by entities entities entities connected with the promoters of the company. Although the connected with the promoters of the company. Although the connected with the promoters of the company. Although the assessee is not specifically named in the SEBI adjudication assessee is not specifically named in the SEBI adjudication assessee is not specifically named in the SEBI adjudication order, the report categorically order, the report categorically holds that the prevailing market holds that the prevailing market price during the investigation period was artificial and price during the investigation period was artificial and price during the investigation period was artificial and No. 3725/Mum/2025 39 Santosh Vimlesh Mehta manipulated. The assessee, having acquired shares by way of manipulated. The assessee, having acquired shares by way of manipulated. The assessee, having acquired shares by way of preferential allotment from the promoter himself, was required preferential allotment from the promoter himself, was required preferential allotment from the promoter himself, was required to satisfactorily explain the commercial r to satisfactorily explain the commercial rationale for such ationale for such investment and the extraordinary appreciation in share value. investment and the extraordinary appreciation in share value. investment and the extraordinary appreciation in share value. The assessee has failed to discharge this onus. The assessee has failed to discharge this onus.

4.8 The company recorded net profit of Rs. 0.30 lakhs, Rs. The company recorded net profit of Rs. 0.30 lakhs, Rs. The company recorded net profit of Rs. 0.30 lakhs, Rs. 8.1 lakhs and Rs. 2 lakhs for financial year ended on March, 8.1 lakhs and Rs. 2 lakhs for financial year ended on March, 8.1 lakhs and Rs. 2 lakhs for financial year ended on March, 2010, March, 2011 and March , 2012. The assessee explained arch, 2011 and March , 2012. The assessee explained arch, 2011 and March , 2012. The assessee explained that price rise in share of Bannas Finance ltd was due to that price rise in share of Bannas Finance ltd was due to that price rise in share of Bannas Finance ltd was due to increase in profit of the company. This explanation of assessee increase in profit of the company. This explanation of assessee increase in profit of the company. This explanation of assessee is not acceptable particularly for the reason that price rise in is not acceptable particularly for the reason that price rise in is not acceptable particularly for the reason that price rise in the shares of Bannas Finanacial Ltd is attributable nnas Finanacial Ltd is attributable nnas Finanacial Ltd is attributable to the manipulation of the prices. In the subsequent period of manipulation of the prices. In the subsequent period of manipulation of the prices. In the subsequent period of financial year ending March 2012 also the decrease in the financial year ending March 2012 also the decrease in the financial year ending March 2012 also the decrease in the profit as compared to profit in financial year ending March profit as compared to profit in financial year ending March profit as compared to profit in financial year ending March 2011 and therefore price rise in shares 2011 and therefore price rise in shares during the financial during the financial year 2011-12 is also not attributable to the financials of the 12 is also not attributable to the financials of the 12 is also not attributable to the financials of the company. The explanation advanced by the assessee that the The explanation advanced by the assessee that the The explanation advanced by the assessee that the price rise was supported by the financial performance of the price rise was supported by the financial performance of the price rise was supported by the financial performance of the company is not borne out from the record. The finan company is not borne out from the record. The finan company is not borne out from the record. The financial results of the company do not justify the phenomenal increase results of the company do not justify the phenomenal increase results of the company do not justify the phenomenal increase in share price, either during the investigation period or in share price, either during the investigation period or in share price, either during the investigation period or thereafter. In such a situation the explanation of the assessee In such a situation the explanation of the assessee In such a situation the explanation of the assessee that price rise was attributable to the financial of the company that price rise was attributable to the financial of the company that price rise was attributable to the financial of the company is rejected.

40 Santosh Vimlesh Mehta 4.9 Further, we note that the Securities and Exchange Further, we note that the Securities and Exchange Further, we note that the Securities and Exchange Board of India (SEBI) has specifically recorded findings regarding Board of India (SEBI) has specifically recorded findings regarding Board of India (SEBI) has specifically recorded findings regarding the role of the promoter of M/s Banas Finance Ltd., Shri Giriraj the role of the promoter of M/s Banas Finance Ltd., Shri Giriraj the role of the promoter of M/s Banas Finance Ltd., Shri Giriraj Agrawal, in the manipulation of the share prices of the Agrawal, in the manipulation of the share prices of the Agrawal, in the manipulation of the share prices of the said company. It is an admitted position that the assessee acquired company. It is an admitted position that the assessee acquired company. It is an admitted position that the assessee acquired the shares through preferential allotment directly from the said the shares through preferential allotment directly from the said the shares through preferential allotment directly from the said promoter in a private arrangement. In these circumstances, the promoter in a private arrangement. In these circumstances, the promoter in a private arrangement. In these circumstances, the burden squarely lay upon the assessee to satisfactorily esta burden squarely lay upon the assessee to satisfactorily esta burden squarely lay upon the assessee to satisfactorily establish the genuineness of the preferential allotment by producing the the genuineness of the preferential allotment by producing the the genuineness of the preferential allotment by producing the said promoter or by otherwise substantiating the commercial said promoter or by otherwise substantiating the commercial said promoter or by otherwise substantiating the commercial bona fides of the transaction. The assessee has failed to bona fides of the transaction. The assessee has failed to bona fides of the transaction. The assessee has failed to discharge this onus.

4.10 This failure, when viewed in conjunction wi This failure, when viewed in conjunction wi This failure, when viewed in conjunction with the statements of Shri Giriraj Agrawal, Shri Pradeep Dhanuka, and statements of Shri Giriraj Agrawal, Shri Pradeep Dhanuka, and statements of Shri Giriraj Agrawal, Shri Pradeep Dhanuka, and other identified exit providers, leads to a reasonable inference other identified exit providers, leads to a reasonable inference other identified exit providers, leads to a reasonable inference that the assessee acquired the shares under a pre that the assessee acquired the shares under a pre that the assessee acquired the shares under a pre-arranged understanding with the expectation of earning tax understanding with the expectation of earning tax- -exempt long- term capital gains at artificially manipulated prices. erm capital gains at artificially manipulated prices.

4.11 The reliance placed by the assessee on the decision of the The reliance placed by the assessee on the decision of the The reliance placed by the assessee on the decision of the Tribunal in the case of M/s Banas Finance Ltd. (supra), wherein Tribunal in the case of M/s Banas Finance Ltd. (supra), wherein Tribunal in the case of M/s Banas Finance Ltd. (supra), wherein the addition made under section 68 of the Act was deleted, is the addition made under section 68 of the Act was deleted, is the addition made under section 68 of the Act was deleted, is misconceived. In the said decision, the Tribunal examined the . In the said decision, the Tribunal examined the . In the said decision, the Tribunal examined the receipt in the hands of the company and held that the amount receipt in the hands of the company and held that the amount receipt in the hands of the company and held that the amount could not be treated as unexplained cash credit of the company, could not be treated as unexplained cash credit of the company, could not be treated as unexplained cash credit of the company, as it represented funds received from the assessee. However, the as it represented funds received from the assessee. However, the as it represented funds received from the assessee. However, the Santosh Vimlesh Mehta Tribunal did not adjudicate upon the issue whether the payment adjudicate upon the issue whether the payment adjudicate upon the issue whether the payment made by the assessee was part of an arrangement designed to made by the assessee was part of an arrangement designed to made by the assessee was part of an arrangement designed to generate bogus long- -term capital gains. Further, the statements term capital gains. Further, the statements of the promoters and other connected persons, which form the of the promoters and other connected persons, which form the of the promoters and other connected persons, which form the foundation of the presen foundation of the present addition, were neither in issue nor t addition, were neither in issue nor examined in the said proceedings. examined in the said proceedings.

4.12 Accordingly, the said decision does not advance the Accordingly, the said decision does not advance the Accordingly, the said decision does not advance the assessee’s case and cannot be construed as a judicial assessee’s case and cannot be construed as a judicial assessee’s case and cannot be construed as a judicial endorsement of the genuineness of the impugned transactions in endorsement of the genuineness of the impugned transactions in endorsement of the genuineness of the impugned transactions in the hands of the assessee. of the assessee.

4.13 The plea that the transactions were executed on a The plea that the transactions were executed on a The plea that the transactions were executed on a recognised stock exchange through an anonymous, screen recognised stock exchange through an anonymous, screen recognised stock exchange through an anonymous, screen-based system also does not advance the assessee’s case, as regulatory system also does not advance the assessee’s case, as regulatory system also does not advance the assessee’s case, as regulatory authorities themselves have found that such platforms can authorities themselves have found that such platforms can authorities themselves have found that such platforms can be and were misused for manipulation. and were misused for manipulation.

4.14 The learned counsel for the assessee placed reliance on the The learned counsel for the assessee placed reliance on the The learned counsel for the assessee placed reliance on the decision of the co-ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of ordinate Bench of the Tribunal in the case of Nakchhatra Vimlesh Kumar Mehta in and in and Nakchhatra Vimlesh Kumar Mehta 3777/Mum/2025. However, we are of th 3777/Mum/2025. However, we are of the considered view that e considered view that the said decision does not advance the assessee’s case, as each the said decision does not advance the assessee’s case, as each the said decision does not advance the assessee’s case, as each case must necessarily turn on its own facts and attendant case must necessarily turn on its own facts and attendant case must necessarily turn on its own facts and attendant circumstances.

4.15 .The decision of the Hon’ble Calcutta High Court in PCIT vs .The decision of the Hon’ble Calcutta High Court in PCIT vs .The decision of the Hon’ble Calcutta High Court in PCIT vs Swati Bajaj (2022) 139 taxmann. Swati Bajaj (2022) 139 taxmann.com 352 constitutes a leading com 352 constitutes a leading Santosh Vimlesh Mehta authority on the tax treatment of alleged Long Term Capital authority on the tax treatment of alleged Long Term Capital authority on the tax treatment of alleged Long Term Capital Gains (LTCG) arising from transactions in penny stocks and on Gains (LTCG) arising from transactions in penny stocks and on Gains (LTCG) arising from transactions in penny stocks and on the scope of enquiry under section 68 of the Income the scope of enquiry under section 68 of the Income the scope of enquiry under section 68 of the Income-tax Act, 1961. The judgment firmly reiterates that 1961. The judgment firmly reiterates that form cannot prevail orm cannot prevail over substance and that tax authorities are entitled and that tax authorities are entitled and that tax authorities are entitled—and indeed duty-bound—to pierce the apparent legality of documents where to pierce the apparent legality of documents where to pierce the apparent legality of documents where surrounding circumstances indicate a colourable device. surrounding circumstances indicate a colourable device. surrounding circumstances indicate a colourable device.

4.16 At the heart of the ruling is the principle that At the heart of the ruling is the principle that At the heart of the ruling is the principle that mere documentary compliance is not conclusive. The Hon’ble High documentary compliance is not conclusive The Hon’ble High Court held that production of contract notes, demat statements, Court held that production of contract notes, demat statements, Court held that production of contract notes, demat statements, bank entries, STT payment details, and proof of transactions bank entries, STT payment details, and proof of transactions bank entries, STT payment details, and proof of transactions through recognised stock exchanges does not automatically through recognised stock exchanges does not automatically through recognised stock exchanges does not automatically establish genuineness. Such documents only show the establish genuineness. Such documents only show the establish genuineness. Such documents only show the apparent nature of transactions. Where shares of obscure or financially nature of transactions. Where shares of obscure or financially nature of transactions. Where shares of obscure or financially weak companies exhibit weak companies exhibit astronomical price rise within a short astronomical price rise within a short span, uncorrelated uncorrelated uncorrelated with with with market market market trends trends trends or or or company company company fundamentals, the assessee must offer a fundamentals, the assessee must offer a credible, commercially credible, commercially rational explanation. . In the absence of such explanation, the In the absence of such explanation, the statutory burden under section 68 remains undischarged. statutory burden under section 68 remains undischarged. statutory burden under section 68 remains undischarged.

4.17 The Hon’ble High Court reaffirmed the continuing vitality of The Hon’ble High Court reaffirmed the continuing vitality of The Hon’ble High Court reaffirmed the continuing vitality of the doctrines laid down in the doctrines laid down in CIT v. Durga Prasad More CIT v. Durga Prasad More and Sumati Dayal v. CIT, holding t , holding that human conduct, normal business human conduct, normal business behaviour, and preponderance of probabilities behaviour, and preponderance of probabilities are decisive tools are decisive tools in tax adjudication. Direct evidence of collusion or price in tax adjudication. Direct evidence of collusion or price in tax adjudication. Direct evidence of collusion or price manipulation is rarely available in such cases. Therefore, tax manipulation is rarely available in such cases. Therefore, tax manipulation is rarely available in such cases. Therefore, tax Santosh Vimlesh Mehta authorities and courts are entitle authorities and courts are entitled to draw reasonable inferences d to draw reasonable inferences from circumstantial evidence, including trading patterns, volume from circumstantial evidence, including trading patterns, volume from circumstantial evidence, including trading patterns, volume behaviour, timing of price rise and fall, lack of economic behaviour, timing of price rise and fall, lack of economic behaviour, timing of price rise and fall, lack of economic justification, and the assessee’s financial profile. justification, and the assessee’s financial profile.

4.18 A significant aspect of the judgment is it A significant aspect of the judgment is its approval of the s approval of the “working backwards” investigation methodology “working backwards” investigation methodology adopted by the adopted by the Department. The Hon’ble High Court rejected the contention that Department. The Hon’ble High Court rejected the contention that Department. The Hon’ble High Court rejected the contention that investigation must begin with the assessee. It held that, given the investigation must begin with the assessee. It held that, given the investigation must begin with the assessee. It held that, given the scale and organised nature of accommodation e scale and organised nature of accommodation entry operations, ntry operations, the Department was justified in first identifying penny stock the Department was justified in first identifying penny stock the Department was justified in first identifying penny stock companies, entry operators, brokers, and the modus operandi, companies, entry operators, brokers, and the modus operandi, companies, entry operators, brokers, and the modus operandi, and thereafter examining individual beneficiaries. Such an and thereafter examining individual beneficiaries. Such an and thereafter examining individual beneficiaries. Such an approach was described as pragmatic, proportionate, and approach was described as pragmatic, proportionate, and approach was described as pragmatic, proportionate, and consistent with the objective of uncovering large onsistent with the objective of uncovering large onsistent with the objective of uncovering large-scale tax evasion.

4.19 On procedural fairness, the Hon’ble High Court clarified On procedural fairness, the Hon’ble High Court clarified On procedural fairness, the Hon’ble High Court clarified that non-furnishing of the investigation report or denial of cross furnishing of the investigation report or denial of cross furnishing of the investigation report or denial of cross- examination does not ipso facto vitiate the assessment. The does not ipso facto vitiate the assessment. The does not ipso facto vitiate the assessment. The prejudice. Where the assessee is not specifically decisive test is prejudice Where the assessee is not specifically named in third-party statements and additions are not based party statements and additions are not based party statements and additions are not based solely on such statements but on independent analysis of facts solely on such statements but on independent analysis of facts solely on such statements but on independent analysis of facts and circumstances, the absence of cross and circumstances, the absence of cross-examination is, at best, examination is, at best, a curable irregularity. Natural justice, the Court emphasised, is a curable irregularity. Natural justice, the Court emphasised, is a curable irregularity. Natural justice, the Court emphasised, is flexible and cannot be stretched to paralyse legitimate tax flexible and cannot be stretched to paralyse legitimate tax flexible and cannot be stretched to paralyse legitimate tax Santosh Vimlesh Mehta enquiries, especially in matters involving public revenue and enquiries, especially in matters involving public revenue and enquiries, especially in matters involving public revenue and systemic abuse.

4.20 Finally, the judgment of Hon’ble High Court cla Finally, the judgment of Hon’ble High Court cla Finally, the judgment of Hon’ble High Court clarifies that claims of being a “small investor,” reliance on broker advice, or claims of being a “small investor,” reliance on broker advice, or claims of being a “small investor,” reliance on broker advice, or absence of SEBI action do not dilute the assessee’s statutory absence of SEBI action do not dilute the assessee’s statutory absence of SEBI action do not dilute the assessee’s statutory burden. Investment decisions in high burden. Investment decisions in high-risk penny stocks demand risk penny stocks demand explanation grounded in commercial logic. Where such l explanation grounded in commercial logic. Where such l explanation grounded in commercial logic. Where such logic is absent and gains appear fantastical, the inference of a sham absent and gains appear fantastical, the inference of a sham absent and gains appear fantastical, the inference of a sham transaction is legally sustainable. transaction is legally sustainable.

4.21 The disallowance made by the Assessing Officer The disallowance made by the Assessing Officer The disallowance made by the Assessing Officer in present case is not founded merely on statements of third parties but is is not founded merely on statements of third parties but is is not founded merely on statements of third parties but is based on a cumulative c based on a cumulative consideration of the investigation findings, onsideration of the investigation findings, abnormal price movements, illiquid trading patterns, financial abnormal price movements, illiquid trading patterns, financial abnormal price movements, illiquid trading patterns, financial fundamentals of the company and the failure of the assessee to fundamentals of the company and the failure of the assessee to fundamentals of the company and the failure of the assessee to offer a credible explanation consistent with ordinary human offer a credible explanation consistent with ordinary human offer a credible explanation consistent with ordinary human conduct. conduct. Applying Applying the the well well-settled settled doctrine doctrine of of human human probabilities and preponderance of probabilities, we are probabilities and preponderance of probabilities, we are probabilities and preponderance of probabilities, we are of prime- facie view that the transactions in question do not represent that the transactions in question do not represent that the transactions in question do not represent genuine investment activity. genuine investment activity.

4.22 In the present case, the assessee has failed to satisfactorily In the present case, the assessee has failed to satisfactorily In the present case, the assessee has failed to satisfactorily explain the role of the promoter of the company in the process of explain the role of the promoter of the company in the process of explain the role of the promoter of the company in the process of price manipulation, as well as the commercial justification for price manipulation, as well as the commercial justification for price manipulation, as well as the commercial justification for acquiring the shares through preferential allotment by way of a acquiring the shares through preferential allotment by way of a acquiring the shares through preferential allotment by way of a private arrangement. No credible explanation has been offered as private arrangement. No credible explanation has been offered as private arrangement. No credible explanation has been offered as to how the assessee identified the scrip as a potential investment to how the assessee identified the scrip as a potential investment to how the assessee identified the scrip as a potential investment Santosh Vimlesh Mehta opportunity in the absence of any cogent financial fundamentals opportunity in the absence of any cogent financial fundamentals opportunity in the absence of any cogent financial fundamentals of the company. Unlike certain technology of the company. Unlike certain technology-driven or start driven or start-up enterprises, where elevated valuations may be supported by enterprises, where elevated valuations may be supported by enterprises, where elevated valuations may be supported by identifiable growth drivers or future prospects, no such identifiable growth drivers or future prospects, no such identifiable growth drivers or future prospects, no such justification has been demonstrated in the case of M/s Banas justification has been demonstrated in the case of M/s Banas justification has been demonstrated in the case of M/s Banas Finance Ltd.

4.23 In the facts and circumstances of the case, prayer of the In the facts and circumstances of the case, prayer of the In the facts and circumstances of the case, prayer of the assessee and in the interest of justice, we feel it appropriate to ssessee and in the interest of justice, we feel it appropriate to ssessee and in the interest of justice, we feel it appropriate to restore the mater back to the file of the AO for providing one restore the mater back to the file of the AO for providing one restore the mater back to the file of the AO for providing one more opportunity to the assessee to produce the promoter(s) of more opportunity to the assessee to produce the promoter(s) of more opportunity to the assessee to produce the promoter(s) of the BFL including Shri Giriraj Agrawal or including Shri Giriraj Agrawal or Shri Pradeep Dhanuka Shri Pradeep Dhanuka, through whom the assessee purchased share through whom the assessee purchased share under under preferential allotment route, for justification of i for justification of its claim of genuineness of the ts claim of genuineness of the purchase transaction. The ld AO is at liberty to carry out enquiry ransaction. The ld AO is at liberty to carry out enquiry ransaction. The ld AO is at liberty to carry out enquiry form the exit providers in the case of assessee but in cas form the exit providers in the case of assessee but in cas form the exit providers in the case of assessee but in case of any observation adverse to the assessee, then assessee shall be observation adverse to the assessee, then assessee shall be observation adverse to the assessee, then assessee shall be provided due opportunity to rebut those observations. provided due opportunity to rebut those observations. provided due opportunity to rebut those observations. The Assessing officer shall decide the issue in dispute in accordance Assessing officer shall decide the issue in dispute in accordance Assessing officer shall decide the issue in dispute in accordance with.

Order pronounced in the open Court on nounced in the open Court on 09/01/2026. /01/2026.