SANDEEP MADHOGARIA, HUF,HOWRAH vs. ITO, WARD - 48(4), KOLKATA , KOLKATA

आदेश /O R D E R This set of forty one appeal(s) filed by the various assessees for assessment year(s) 2014-15, 2015-16, 2013-14 & 2009-10 arise against the Commissioner of Income-tax (Appeals) separate order(s) upholding the Assessing Officer(s) identical Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 15 action treating their respective Long Term Capital Gains (LTCG) / Long Term Capital Loss (LTCL) appeal-wise in seriatim to be bogus unexplained cash credits u/s 68, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Relevant details of the impugned addition(s) sums; appeal-wise/assessment year-wise details are as follows: Sl ITA No. A.Y LTCG/LTCG No. (Rs) 1 2260/K/18 14-15 14,54,268 2 2087/K/18 -do- 21,05,504 3 2078/K/18 -do- 19,99,153 4 1878/K/18 -do- 6,59,336 5 2256/K/18 -do- 29,77,082 6 2077/K/18 15-16 35,65,575 7 1858/K/18 -do- 5,29,136 8 1629/K/18 14-15 9,79,512 9 1630/K/18 -do- 8,38,500 10 1639/K/18 -do- 12,26,734 11 1374/K/18 -do- 21,76,266 12 1800/K/18 -do- 5,75,920 13 2266/K/18 -do- 14,88,171 14 2263/K/18 -do- 11,16,602 15 1375/K/18 -do- 9,15,030 16 1376/K/18 -do- 9,13,505 17 1859/K/18 -do- 14,91,456 18 2271/K/18 13-14 11,63,904 19 2272/K/18 -do- 12,19,648 20 1451/K/18 09-10 17,35,719 21 1452/K/18 -do- 14,46,370 22 2109/K/18 15-16 32,19,787 23 2121/K/18 -do- 30,92,316 24 2053/K/18 13-14 15,74,684 25 1770/K/18 14-15 15,27,338 Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 16 26 1771/K/18 -do- 15,25,739 27 1649/K/18 -do- 13,92,100 28 2107/K/18 15-16 15,50,354 29 2048/K/18 14-15 24,30,000 30 2117/K/18 -do- 25,81,174 31 2289/K/18 15-16 15,62,840 32 2296/K/18 14-15 15,65,722 33 2299/K/18 -do- 15,29,373 34 1737/K/18 -do- 19,96,727 35 2298/K/18 -do- 25,38,152 36 2300/K/18 -do- 18,81,518 37 2301/K/18 -do- 41,40,121 38 2132/K/18 15-16 17,78,760 39 2002/K/18 14-15 5,80,298 40 2124/K/18 -do- 9,45,682 41 2297/K/18 15-16 32,19,787

1.

2. I also find that the submissions made by the appellant during the course of the appeal point towards the elaborate documentation, meaning thereby that the appellant has produced papers relating to application for the shares, the allotment of the shares, the share certificates payments by cheque and the necessary papers filed before the Registrar of companies, where the name of the assessee has been reflected as a shareholder. The appellant has also filed proof of amalgamation of the companies wherein the shareholding has changed hands. It is also the contention of the appellant that it has provided copies of the bank statement, bank contract notes and delivery instructions to the broker by way of proof that an these transactions were genuine. However, In my view of the matter, it is precisely this elaborate paperwork that strengthens the matter relating to the bogus benefit of the LTCG, which clearly has been schemed, pre-planned and executed with mala fide intelligence and precision. Therefore all these papers are mere documents and not any evidence. The whole gamut of transactions are unnatural and highly suspicious, and therefore the rules of SUSPICIOUS TRRNSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below, None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains,. In my considered view banking documents are mere self serving recitals. The lawit1 the matter of self-serving recitals has been long established by the Hon'ble apex Court. In the case of CIT vs P Mohankala 291 ITR 278, the Hon'ble Supreme Court held that the money came by way of bank cheque and was paid Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 18 through the process of banking transactions Was not by itself Of any consequences. 1/ The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature, In the case of CIT Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: "in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to Find out the reality such recitals. " Similarly in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), their Lordships held as under: "In view of section 68 of the Act, where any sum is found credited in the books of the assessee tor any previous veer, the same may be charged to income tax as the income of the assesses of' that previous veer if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer not satisfactory. In such a case, there is prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature.”In the case of Sajjan Das & Sons vs. CIT (2003) 264 ITR 435 (Delhi), their Lordships of the High Court of Delhi, while considering a case in which gifts were received by the assessee through banking channels laid importance on the capacity of the donor for making the gift and his identity as well as importance of relationship between the donor and done in determination of genuineness of gift held as under: “That a mere identification of the donor and showing the movement of the gift amount through banking channels was not sufficient to prove the genuineness of the gift. Since the claim of the gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the door.”In my considered view wherever documents are relied upon they should pass the test of normal behaviour of the assessee in the curse of business viz., human conduct, preponderance of probability and surrounding circumstances. In my considered view, even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then addition justified. Reliance on such matters is placed on the case of Smt. Phoolwati Devi 314 ITR (AT) 1 (Del).

4. In this connection, I also wish to refer to the decision of the Hon'ble ITAT Bombay Bench ‘B’ ITA(No.614/Bom/87 A.Y. 1983-84) in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., which was upheld by the Hon'ble Supreme Court. The Hori'ble Tribunal herd that the word 'evidence' as used in sec. 143(3) covered circumstantial evidence also. The word 'evidence' as used in sec. 143 (3) obviously could not be confined to direct evidence. The word 'evidence' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the word 'evidence' had much wider connotations. While the word 'evidence' might recall the oral and documentary evidence as may be admissible under the Indian evidence Act the use of word 'material' in Sec.143(3) Snowed that the assessing officer, not being a court could rely upon material, which might not be evidence admissible under the Indian Evidence Act for the purpose of making an order' of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' dearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law.

5. The Hon'bte Supreme Court in CIT v, Durga Prasad More[1971] 82 ITR 540 at pages 545- 547 made a reference to the test of human probabilities in the following fact situation :. “... ... It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the re4al. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality9 of the recitals made in those documents....

6. It is well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. IT needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the investigation report. Further, the Hon'ble Supreme Court, in the case of Chuhar Mal Vs CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 20 principle, since the AO is not fettered, by technical rules evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mel V CIT (supra) held that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act,1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was 'to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings.

unreasonably and that the findings that the said amounts were income of the appellant from, other sources was not based on evidence.” CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13 It would, at this stages, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the truth of the principle fact. It is evidence of various are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are – (1) the circumstances alleged must be established by such evidence, as in the case of other evidence. (2) the circumstances proved m9uste be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced; some of these links may have to inferred from the proved facts; (4) in drawing those inferences or presumptions, the Authorities must have regarded to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5) The circumstantial evidence can, with equal facility, be restored to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth.” 6.14 It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstances in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee’s technical contentions about admissibility and reliance on material available on the AO’s record are in the nature of contentions challenging criminal or civil liabilities in a court of law. We are dealing with a process of adjudication of assessees tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court in the case of S.S. Gadgil (supra) no ‘lis” is involved in adjudication of tax liability. The Assessee’s contention that there was no new material before the AO after the CIT(A)’s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, even a single clue or revelation can be of great importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee’s pleas in this behalf. The Assessee’s contentions and objections in this behalf that the material Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 22 available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright.....”

8. When the impossible is projected as possible through a plethora of well arranged documents, It would be very reasonable to reject the documents outright as make believe and self serving. In the Case of Usha Chandresh Shah Vs ITO, Ward-19(1)(2), Mumbai, the Hon'ble ITAT-“F"- Bench Mumbai by their Order for A.Y 2006-07 dated 26th September, 2014 have, in the operational portion adjudicated as under: [ Quote] 9. We have heard the rival contentions and perused the record. The pertinent points are that me assessee has claimed to have purchased the impugned shares through Off market transaction. The purchase price was not paid by Cheque, but it was claimed to have been adjusted against the speculation profit claimed to have been made by the assessee. The small difference of Rs.324/- was claimed to have been paid by way of cash. It is .,(so pertinent to note that the alleged Speculation transaction carried out earlier to the purchase of shares of Prime Capital Markets Ltd was also claimed to have been carried in off market transaction. Another important point is that the assessee did not possess copies of Share certificates or copies of Share transfer forms. The , broker M/s Khandelwal & Co., has expressed its inability to furnish copies of contract notes available with it and also failed to furnish its books of account to substantiate the transactions of purch85e of shares by the assessee. Since the impugned transaction was an off market transaction, the purchase transaction could not be confirmed by the Kolkata Stock exchange. The seta shares were earlier held by M/s Brightsun Merchants (P) Ltd .and the assessee had purchased the shares from them. The notice issued to M/s Brightsun Merchants (P) Ltd was returned unserved by the postal authorities with the remark "unknown". In this regard the assessee had replied that the name of the company was wrongly mentioned by the AO as M/s Brightsuns (P)Ltd and hence the notice got returned. But there is not comment about the address, meaning thereby, the AO had issued notice to the correct address only and hence the slight variation in the name of the company would not normally make any difference. Hence the fact that the notice was returned back only shows that the seller of the shares could not be identified. All these discussions would show that the purchase transaction could not be cross verified by the assessing officer.

10. One more point to be noted here is that the speculation transactions can be entered only payment of margin money. But the details of said payment are not available. With regard to the query raised by the AO relation to Margin money, the broker M/s D,K. KhandeJwal & Co has replied In the context of purchase of shares of M/s Prime Capital Markets Ltd and not in the context of speculation transactions. Thus, It is seen that the question of keeping margin money for speculation transactions remains unanswered both by the assessee as well as by the Share broker cited above. Further the speculation transaction is also claimed to be an off market transaction, which further casts shadow of doubt over the claim put forth by the assessee.

15. We notice that the M9umbai D bench has considered an identical issue in the case of Shri Ramesh Kumar D Jain in relating to assessment year 2006-07. The Tribunal vide its order dated 15-06-2011, rejected the claim of making speculation gains on the reasoning that speculation transactions could not haves been entered into by the assessee therein without paying margin money to the broker. Accordingly, the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected. It is pertinent to note that, in the decisions relied upon by the assessee, the claim of speculation profits was not considered by the Tribunal. In yet another case of Shri Araving M Kariya considered by “A” bench of Mumbai ITAT, the test of human probabilities was applied to reject the claim of profit realized on sale of penny stocks. There should not be any dispute that the onus to produce necessary evidences to convincingly show that the shares were purchased and sold at the prices claimed always lies upon the assessee. Our view finds support from the decision rendered by Hon'ble Guwahati High Court in the case of CIT vs. Smt. Jasvinder Kaur (357 ITR 638) 16. In view of the foregoing discussions, we are of the view that the decisions relied upon by the assessee cannot be taken support of by the assessee for the reasons discussed supra. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the order of the assessing officer by applying the test of human probabilities.

9. Reliance is also placed In the case of Somnath Maini Vs ITO (226) 100 TTJ 917 wherein the Hon'ble Chandigarh bench of ITAT held that if facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have to be held to be non genuine. 3. The relevant facts briefly stated are that during the course of assessment proceedings, the AO observed that assessee had incurred a long term capital loss on account of sale of gold jewellery declared under the VDIS, 1997, amounting to Rs.19,87,705 and also there was a short-term capital gain near to this amount of long- term capital loss amounting to Rs.20,36,700 resulting into net capital gain of Rs.48,995. The AO on perusal of record further observed that in the case of a family member of the same assessee Shri D.C. Maini, in the same assessment year, similar exercise has been done by the assessee wherein a long-term capital loss of Rs.11,59,066 had been incurred on account of sale of gold jewellery declared under the VDIS and short-term capital gain of Rsw.11,75,100 resulting into a net gain of Rs.16,034. On going through the nature of transactions, the AO doubted the genuineness of the short-term capital gain in the case of the assessee and he made further inquiry that during the year assessee had purchased 45,000 shares of M/s Ankur International Ltd. At varying rates from Rs.2,06 to Rs.3.1 per share and sold them within a short span of six-seven months at the rate varying from Rs.47.75 to Rs.55. These shares were purchased through a broker Munish Arora & Co. And sold through another broker M/s S.K. Sharma & Co. The AO took by surprise the astronomical rise in shares price of a company from Rs.3 to Rs.55 and started further inquiry. The AO issued notice under Section 131 to both the brokers from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of M/s Ankur International Ltd. To justify as to how the share price of a company can go up from a mere Rs.3 to Rs.55 in a short span of six to seven months’ time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewellery only. the AO also recorded the finding that transactions were done at Ludhiana where also the share price of the company is quoted but maximum value of the share quoted was Rs.17 but that was only in July, 1997, i.e. long before the shares were sold by the assessee to M/s S/.K. Sharma & Co. In the months of February and March, 1998. The AO also recorded the finding that although the shares were transferred in the name of the assessee, they were still lying in the name of assessee much after the sale to M/s S.K. Sharma & Co. The learned CIT(A) deleted the addition on the ground that both the brokers from whom the shares have been purchased and sold were called under Section 31 by the AO. Both have confirmed the sale and purchase of said shares. Other aspect of the facts and circumstances raised by the AO was not discussed by the CIT(A) in his order. 4. In appeal before us, the learned Departmental Representative contended that it is highly improbable that shares of a company go up so high in few months’ time. The learned Departmental Representative took us through various pages of the assessment order and the paper book wherein sale bill of the shares with the said M/s S.K. Sharma & Co. were also filed. The learned Departmental Representative pointed out that shares have been sold at Ludhiana when actually stock exchange was not functional – a fact which is also recorded by the AO. The learned Departmental Representative also pointed out that shares have been sold to M/s S.K. Sharma & Co. On 9th Feb., 1998 and 23rd March, 1998, whereas from the statement of account of M/s S.K. Sharma & Co. Payments have been received by the assessee from 31st March, 1988 to 27th July, 1998, meaning thereby that had the transactions been genuine, payment could have been received in one go by S./K. Sharma & Co. The learned Departmental Representative pointed out that any such type of transactions relating to these types of company operating on stock exchanges payments are Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 25 received in piecemeal whereas in normal market share transactions, contract notes are issued by the broker and payments are received in one go. The learned Departmental Representative also argued that as per the statement of S.K. Sharma & Co. Recorded at the time of inquiry, he did not produce any books of account and identity of persons to whom the shares have been sold. Ordinarily, when brokers are enquired about share transactions, they keep proper books of account form, whom shares have been purchased and sold. However, in this case, S.K. Sharma & Co. failed to provide the names of purchases of the shares and identity of the purchasers.

5. On the other hand, the leaned Authorised Representative contended that in the share market, share price does not move according to the fundamentals of a company. They go up and down as per sentiments prevailing at that time. To controvert, the argument of the learned Departmental Representative, he argued that share prices are quoted at Jaipur Stock Exchange and were quoted on the relevant date of sale at the same price on which shares were sold to M/s S.K. Sharma & Co. However, the learned Departmental Representative controverted his argument by saying that volume of transactions on the relevant dates is only 600 shares on 9th Feb., 1998 and 1000 shares on 23rd March, 1998 whereas number of shares involved in the transactions with S.K. Sharma & Co. are 45000 shares.

6. After hearing the rival submissions, going through the orders of authorities below and paper book, we find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange ate, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s S.K. Sharma & Co. Factual matrix of the case from start of the purchase of shares at the rate of Rs.3 to the sale of shares at Rs.55 in a short span of time and shares being not, quoted at Ludhiana Stock Exchange and the way in which different, installment payments have been received from the brokers and non-availability of the records of the brokers and the shares remaining in the name of assessee even long after the sale of the shares does not stand the test of probabilities. As rightly pointed out by the learned Departmental Representative, these types of companies function in the capital market whose sale price is manipulated to astronomical height only to create the artificial transaction in the form of capital gain. Surrounding circumstances differ from the normal share market transactions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More held as under: It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. It is surprising that the High Court has found fault with the ITO for not examining the wife and the father-in-law of the assessee for proving the Department’s case. All that we can say is that the High Court has ignored the facts of life. It is unfortunate that, the High Court has taken a superficial view of the onus that lay on the Department.

7. The learned CIT(A) only got swayed by the issuance of notice by the AO under Section 131 to both the brokers from whom shares were purchased and sold and came to the conclusion that share transactions were genuine overlooking the material gathered by the AO from the statements recorded of broker M/s S.K. Sharma & Co. and the other facts and circumstances that volume of transactions of Jaipur Stock Exchange is only 600 shares and 1000 shares. Payments have been received from the brokers only in installments over a period of 6-7 months. It is true that when transactions are through cheques, it looks like real transaction but authorities are permitted to look behind the transactions and find out the Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 26 motive behind transactions. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine, it is highly improbable that share price of a worthless company can go from Rs.3 to Rs.55 in a short span of time. Mere payment by cheque and receipt by cheque does not. Render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to offset the loss incurred on the sale of jewellery declared under VDIS. In considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set aside order of the CIT(A) and restore that of the AO.

4. This leads all these assessees agreed. I have given my thoughtful consideration to rival contention. There can hardly be any dispute that assessee have placed on record their identical paper book(s) comprising of relevant purchased bills of shares, allotment, certified copies, contract notes, brokerage details etc. I put up a specific query as to whether any of entry operators searched or survey has quoted these assessees names or not before the Departmental Authorities. There is no such material in the case file indicating search as statement. I find that this co-ordinate bench’s decision in in Smt. Sangita Jhunjhunwala vs. ITO decided on 04.01.2019 has deleted similar bogus LTCG vide following detailed discussion in para 3 to 5 as under:- “3. I have given my thoughtful consideration to rival contentions. Identical paper book(s) comprising of relevant purchase bills of shares, allotments certificates, contract notes, brokerages details ledger, demat statement etc., stand perused. Mr. Bhattacherjya vehemently contends during the course of hearing that all these assessees have acted in collusion with various entry operators for availing the impugned LTCG entries claimed to be exempt s.

Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 27 10(38)of the Act. He strongly supports both the lower authorities’ action seriously doubting genuineness of the impugned capital gains more particularly as analysized in assessment order as per scrip price movement in stock exchange, profit and loss account, balance-sheet and business activities. Mr. Bhattacherjya’s case is that the impugned LTCG derived from sale of contract scrip which has not seen any profitable business activity during the relevant holding period which defies all commercial prudence which has been rightly treated as non- genuine both in assessment as well as lower appellate proceedings. He quotes case law of Sumati Dayal vs. CIT (1995) 80 Taxmann. 89/214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) various tribunal decisions as well as hon'ble high court’s judgments adding similar sums to be unexplained cash credits are also cited in support.

1. 1. I state that I had purchased 100 equity shares of Pinnacle Vintrade Ltd. on 20.01.2012 from Uniglory Developers Pvt. Ltd. Pinnacle Vintrade Ltd. was merged with Unno Industries Ltd. and there was change of management and control of Unno Industries ltd. pursuant to scheme of arrangement sanctioned by the Hon’ble High Court at Bombay.

2. Payment for the purchase of aforesaid 100 equity of Pinnacle Vintrade Ltd. was made by Account Payee Tamilnad Mercantile Ltd. Bank Cheque no. 736027.

3. Bank statement of Tamilnad Mercantile Ltd. Bank reflecting payment (cheque no. 736027) for purchase of the said investment in equity shares of Pinnacle Vintrade Ltd. is enclosed (highlighting the said entry). Annexure-I.

4. The equity shares of Unno Industries Ltd. were allotted pursuant upon merger of Pinnacle Vintrade Ltd. with Unno Industries Ltd. pursuant to sanction of scheme of arrangement by the Hon’ble High Court at Bombay, I was issued 91000 equity shares of Unno Industries ltd. in lieu of my shareholding in Pinnacle Vintrade Ltd. The relevant gist of the scheme of arrangement sanctioned by the Hon’ble High Court was communicated by the company to the Bombay Stock Exchange vide letter dated 12th February, 2013. A copy of the said letter downloaded from BSE website is enclosed for your ready reference. I also enclose Unno Industries Ltd. letter dated 12th February, 2013 and 7th March, 2013 communicating the issuance of shares in lieu shares of Pinnacle Vintrade Ltd. upon sanction of scheme of arrangement by the Hon’ble Court. Annexure II Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 28

5. As the equity shares of Pinnacle Vintrade ltd. purchased were not listed, hence no Contract Notes were issued. However, copy of bill indicating purchase of said equity shares is enclosed. Annexure III 6. Equity shares of Pinnacle Vintrade Ltd., were directly purchased from Uniglory Developers Pvt. Ltd. 209, Vireshwar Chambers, M.G. Road, Nera Shan Talkies Vile Parle (E), Mumbai, Maharashtra-400057. 7. Equity shares of Pinnacle Vintrade Ltd. were purchased in Physical Form. 8. I have three Demat Accounts as follows- a) Name of DP- Ashika Stock Broking Ltd. (DP ID No. 12034500) Demat account No. 1203450000003128 Address of DP-Trinity, 7th Floor, 226/1, A.J.C. Bose Road, Kolkata-700020. DP Account opened on-31.08.2004 b) Name of DP- Guiness Securities Ltd. (DP ID No. IN302898) Demat account No. 10350406 Address of DP-Guiness House, 18, Deshpriya Park Road, Kolkata-700026. DP A/c opened on-25.05.2013 c) Name of DP- Tamilnad Mercantile Bank ltd. (DP ID No. IN303069) Demat account No. 10051996 Address of DP-Pearl Towers DPS Cell, AC 16, III Floor, II Avenue, Anna Nagar West, Chennai-600040. 9. Demat Statements of M/s Ashika Stock Broking Ltd. and Guiness Securities Ltd. for f.y. 2013-14 and 2014-15 in respect of long term capital gains are enclosed. Annexure IV. 10. The Equity Shares of M/s Unno Industries Ltd. were submitted for dematerialization on 01.04.2013 and credited to my Demat A/c No. 1203450000003128 with M/s Ashika Stock Broking Ltd. (DP ID No. 12034500) on 12.04.2013 (91000 shares). Details of Sale of Share for Long Term Capital Gain financial year 2013-14(A.Y.2014- 15):

1. 1. The equity shares of M/s Unno Industries Ltd. are listed at Bombay Stock Exchange (BSE), a recognized Stock Exchange of India since last so many years and even during the time of sale by me. The security code of the said equity shares at BSE is 519273 and ISIN No. is INE 142N0 1023.

2. Equity shares of Unno Industries Ltd. were sold on Bombay Stock Exchange through SEBI registered stock broker Ashika Stock Broking Ltd. and Guiness Securities Ltd. whose details are as under: a) Name: Ashika Stock Broking Ltd. Address: Trinity, 7th Floor, 226/1, A.J.C. Bose Road, Kolkata-700020. Contact No. 033 22839952. b) Name: Guiness Securities Ltd. Address: Guiness House, 18, Deshpriya Park Road, Kolkata-700026 Contact No. 033 30015555.

3. Contract Notes issued regarding sale of equity shares of Unno Industries Ltd. on Bombay Stock Exchange by SEBI registered brokers- Ashika Stock Broking Ltd. and Guiness Securities ltd. are enclosed. Annexure V.

4. The relevant Demat Account statements of Ashika Stock Broking Ltd. and Guiness Securities Ltd. reflecting the debit of shares of Unno Industries Ltd. upon sale are enclosed. (entries highlighted). Annexure VI.

Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 29

5. The Ledger of the brokers of Ashika Stock Broking Ltd. and Guiness Securities Ltd. for the financial year 2013-14 are enclosed. Annexure VII.

6. Tamilnad Mercantile Ltd. bank Statement reflecting the receipts of sale consideration from the SEBI registered stock brokers (highlighting the said entries) is enclosed. Annexure VIII. 7. Out of sale consideration money of Rs. 3151423.00 from Unno Industries Ltd. a sum of Rs. 3150000.00 has been invested in equity shares of Glow Diam Designs Pvt. Ltd. All the evidences were attached as annexures as stated above. 6. The Assessing Officer in his order did not refer to any of these evidences. Instead at para 6 and 7 he concluded held as follows: “6. The details of purchase and sale of this particular scrip i.e. ‘Unno Industries Ltd.’ (hereinafter referred as The Scrip) were examined in which shares were sold in June/August, 2013 at the price of Rs. 31,62,379/- and purchased Rs. 1,00,000/- i.e. a humongous rise of over 3100% over a very short period of just 24 months. These facts demanded a deeper study of the price movements and share market behavior of the entities involved in trade, of the scrip as the share price movements and the profit earned by the beneficiaries were beyond human probabilities. Thus a deeper study was needed to ascertain whether the transactions were genuine investment transaction of sham ones and colorable device only to convert the unaccounted cash into tax exempt. 7. Apart from this, the directorate of income tax, Kolkata various enquiries have been made on project basis, which has resulted into the unearthing of huge syndicate of entry operators, share brokers and money lender involved in providing bogus accommodation entries of Long Term Capital gain and short term capital loss. It has come to the light that large scale manipulation has been done in market price of shown of certain companies listed in the BSE by certain beneficiary is utilized to purchase shares of such company at a very high artificially inflated market price. Some of the listed companies directly or in directly owned by operators and whose shares price have been apparently manipulated by the syndicate of operators. Out of the above enquiry made by DIT(Inv.), Kolkata has established that one of the main manipulated company which you had availed is also under this syndicate. Hence, it is crystal clear that Sharp Trading Company is one of the main manipulated company (Penny listed) to convert unaccounted cash of beneficiary through long term capital gain with claim a certain percentage of commission.” 7. Thereafter the AO made an addition under 68 of the Act. Aggrieved the assessee carried the matter an appeal. The ld. First appellate authority confirmed the action of the AO on the ground that, the transaction in question comes within the ambit of ‘Suspicious Transaction’ and therefore, the rules of ‘Suspicious Transaction’ would apply to the case. He further stated that the payments through bank of processing of transaction through stock exchange and other such features are only apparent features and that the real feature are the manipulation and abnormal price raise and the sudden dip thereafter. Based on surrounding circumstances and circumstantial evidence and the order of the Tribunal in the case of “Bhag Chand Chabra (HUF) vs. ITO”, in 3107/2007 dated 31.12.2010, the addition made by the AO was confirmed. Aggrieved the assessee is in appeal before us. 8. A perusal of the order of the AO demonstrates that this addition was made merely on “suspicion” and in a routine and mechanical manner. This is clear from the fact that the AO refers to some ‘Sharp Trading Company as one of the main ,manipulated company and whereas the assessee sold scrips in Unno Industries Ltd. The AO refers to various enquiries Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 30 made by “The Directors of Income Tax”, Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so-called project and the evidence collected by the DIT (Inv.), Kolkata etc have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AO and the addition is made based on such generalizations. The assessee has not been confronted with any of the evidence collected in the investigation done by the DIT(Inv.), Kolkata. Evidence collected from third parties cannot be used against the assessee without giving a copy of the same to the assessee and thereafter giving him an opportunity to rebut the same.

9. The AO further relies on the shop increase of 31000% of the value of shares over the period of 2 years. Though this is highly suspicious, it cannot take the place of evidence. The Hon'ble Supreme Court has stated that suspicion however strong cannot be the basis for making an addition. The evidence produced by the assessee listed above proves his case and the AO could not controvert the same by bringing on record any evidence. The evidence said to have been collected by the DIT (INV.), Kolkata and the report is not produced before this Bench.

at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) – In this case the Hon’ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. (iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) – In this case the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this tribunal , wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO’s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in of 2009 dated 29.4.2009] – In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon’ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 32 LTCG is exempted u/s 10(38) of the Act. For coming to such a conclusion we rely on the decision of the Hon’ble Calcutta High Court in the case of M/s. Alipine Investments in of 2008 dated 26th August, 2008 wherein the High Court held as follows : “It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed.” 8.5. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition.

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(11) On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee’s contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held – “As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs.25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO’s observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed.” We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. 9.3. We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bona fide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. We also find that the ld CITA rightly relied on the decision of the Hon’ble High Court at Calcutta in the case of ALPINE INVESTMENTS in of 2008 dated 26th August 2008 wherein the Hon’ble Court held as follows: “It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 34 transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being of 2008 is dismissed.” 9.4. We also find that the various other case laws of Hon’ble Jurisdictional High Court and other case laws also relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of SOICL as undisclosed income of the assessee u/s 68 of the Act and therefore we uphold the order of the ld CITA and dismiss the appeal of the revenue. Accordingly the grounds raised by the revenue are dismissed.” Applying the proposition of law laid down in all the above referred cases, the facts of this case, I find force in the submission of the assessee and there are backed by evidence. I also find that the revenue has not based its finding on in any evidence. In view of the above discussion the addition made u/s 68 of the Act is hereby deleted.”

6. Learned Departmental Representative vehemently contends at this stage that the DIT(Inv) has carried out a detailed investigation in various entry operators cases. They have been found to have rigged such kind scrip’s prices rise. There is not even a single material during the course of hearing which could suggest the assessee to have engaged in any kind of foul play. This tribunal’s another co-ordinate bench decision in ITA No.2281/Kol/2017 Navneet Agarwal vs. ITO decided on 20.07.2018 has rejected Revenue’s all these arguments as follows:

9. The ld. DR on the other hand, relied on the order of the assessing officer and reiterated the findings made therein and submitted that the same be upheld. He vehemently argued that merely because the assessee has produced all the evidences required to prove his claim, the same cannot be accepted as these are organized and managed transactions. He took this bench through the modus operandi mentioned by the AO and submitted that in all cases where the shares of these companies are purchased and sold, additions have to be made, irrespective of the evidence produced as there are cases where manipulation has taken place. He reiterated each and every observation and finding of the ld. AO as well as the Ld. CIT(A) and prayed that the same be upheld.

10. After careful consideration of the rival submissions, perusal of the papers on record and order of the lowers authorities below, as well as case law cited, we hold as follows.

11. The assessee in this case has stated the following facts and produced the following documents as evidences:

1. The assessee had made an application for allotment of 50000 equity shares of “Smart champs IT and Infra Ltd.” and she was allotted the share on 3rd December 2011 (copy of Application form, intimation of allotment and share certificate Paper Book at page 8 to 10).

2. The payment for the allotment of shares was made through an account payee cheque (copy of the bank statement evidencing the source of money and payment made to “Smart Champs IT & Infra Ltd.” for such shares allotted is placed in the Paper Book at page no. 11).

3. Annual return no. 20B was filed with Registrar of companies by “Smart Champs IT & Infra Ltd” showing the assessee’s name as shareholder (copy of annual return no. 20B filed with Registrar of companies by “Smart Champs IT & Infra Ltd. “is placed in the Paper Book at page no. 12 to 18.)

4. The assessee lodged the said shares with the Depository M/s. Eureka Stock & Share Broking Services Ltd. with a Demat request on 11th February, 2012. The said shares were dematerialized on 31st March, 2012 (copy of demat request slip along with the transaction statement is placed in the paper book at page no. 19 to 21).

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5. On 24.01.2013, the Hon’ble Bombay High Court approved the scheme of amalgamation of “Smart Champs IT and Infra Ltd.” with “Cressanda Solutions Ltd.” In accordance with the said scheme of amalgamation, the assessee was allotted 50000 equity shares of “M/s. Cressanda Solutions Ltd.” The demat shares are reflected in the transaction statement of the period from 1st November 2011 to 31st December, 2013 (A copy of the scheme of amalgamation alongwith copy of order of the Hon’ble Bombay High Court and a copy of the letter to this effect submitted by “Cressanda Solutions Ltd”. to Bombay Stock Exchange is placed in the Paper Book at page no 22 to 43.) 6. The assessee sold 50000 shares costing Rs. 500000/- through her broker “SKP Stock Broking Pvt. Ltd” which was a SEBI registered broker and earned a Long Term Capital Gain of Rs. 2,18,13,072/-. (Copy of the bank statement, brokers contract note together with the delivery instructions given to the DP and broker’s confirmation is also placed in the paper book at page no 44 to 65). 7. Copy of Form No. 10DB issued by the broker, in support of charging of S.T.T. in respect of the transactions appearing in the ledger is placed in the paper book at page no. 66. 8. The holding period of the said scrip is more than one year (above 500 days) through in order to get the benefit of claim of Long Term Capital Gain the holding period is required to be 365 days. 12.The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to “Modus Operandi” of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence collected from third parties is confronted to the assesses. No opportunity of cross- examination of persons, on whose statements the revenue relies to make the addition, is provided to the assessee. The addition is made based on a report from the investigation wing. 13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee’s action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation’s office by way of statements recorded etc. has to also be brought on recording each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the AO relies only on a report as the basis for the addition. The evidence based on which the DDIT report is prepared is not brought on record by the AO nor is it put before the assessee. The submission of the assessee that she is just an investor and as Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 36 she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the revenue with evidence. When a person claims that she has done these transactions in a bona fide and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal import laid down by the Courts of law.

17. The Hon’ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon’ble Court held:

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Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. The cancellation of the food grain licence at Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the offence with which it had been charged and its licence also was restored. The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,--- this also was a pure conjecture or surmise on the part of the Income-tax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches the Income-tax Officer indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against which it showed a net loss of about Rs. 45,000. The Income-tax Officer indicated the probable source or sources from which the appellant could have earned a large amount in the sum of Rs. 2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs.1,000 each . The observations of the Hon’ble Apex Court are equally applicable to the case of the assessee. In our view, the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee.

7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.”

interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed.” b) The JAIPURITAT in the case of VIVEKAGARWAL[ITA No.292/JP/2017]order dated 06.04.2018 held as under vide Page 9 Para 3: “We hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the Assessing Officer has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account.” c) The Hon’ble Punjab and Haryana High Court in the case of PREMPAL GANDHI[ITA-95-2017(O&M)] dated18.01.2018 at vide Page 3 Para 4 held as under: “….. The Assessing Officer in both the cases added the appreciation to the assessee’s’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee’s’ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner.” The Court also held the following vide Page 3 Para 5 the following: “Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises.” d) The BENCH “D”OF KOLKATAITAT in the case of GAUTAM PINCHA [ITA No.569/Kol/2017]order dated 15.11.2017 held as under vide Page 12 Para 8.1: “In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered gamut of unfounded/unwarranted allegations leveled by the Assessing Officer against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders of the AO/CIT (A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the ld. CIT (A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 41 in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act.” Further in Page 15 Para 8.5 of the judgment, it held: “We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition.” e) The BENCH “D” OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: “…….. We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. It further held as follows: “We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition.” f) The BENCH “A”OF KOLKATAITAT in the case of SHALEENKHEMANI [ITA No.1945/Kol/2014]order dated 18.10.2017 held as under vide Page 24 Para 9.3: “We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 42 evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bona fide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act.” g) The BENCH “H” OF MUMBAI ITAT in the case of ARVINDKUMAR JAINHUF [ITA No.4682/Mum/2014] order dated 18.09.2017 held as under vide Page 6 Para 8: “……We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transactions in M/s Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT (A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT (A) at para 3 to 5 has not been controverted by the department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT (A).” h)The Hon’ble Punjab and Haryana High Court in the case of VIVEK MEHTA [ITA No. 894 OF2010] order dated 14.11.2011 vide Page 2 Para 3 held as under: “On the basis of the documents produced by the assessee in appeal, the Commissioner of Income Tax (Appeal) recorded a finding of fact that there was a genuine transaction of purchase of shares by the assessee on 16.3.2001 and sale thereof on 21.3.2002. The transactions of sale and purchase were as per the valuation prevalent in the Stocks Exchange. Such finding of fact has been recorded on the basis of evidence produced on record. The Tribunal has affirmed such finding. Such finding of fact is sought to be disputed in the present appeal. We do not find that the finding of fact recorded by the Commissioner of Income Tax in appeal, gives give rise to any question(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed.” i) The Hon’ble Jurisdictional Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in dated 29.04.2009 at para 2 held as follows: “The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax (Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank.”

Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 43 j) The Hon’ble Supreme Court in the case of PCIT vs. Teju Rohit kumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon’ble Gujarat High Court as under: “ It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises.”

7. We adopt all this reasoning mutatis mutandis to conclude in this factual backdrop that both the lower authorities have erred in treating assessee’s LTCG to be bogus. The impugned addition(s) of ₹93,19,895/- and ₹4,65,995/1- are deleted.”

5. Coming to Revenue’s arguments that department had searched / surveyed various entry operators alleged to have engaged in giving bogus LTCG regarding very scrip, I put a specific question to Mr. Bhattacherjee as to whether any of the said entry operators had ever quoted assessee’s name or not. The replies is received in negative. Coupled with this, there is no substance in Revenue’s argument that similar addition(s) stand affirmed in various judicial precedents (supra) for the reason that sec. 68 addition is a factual issue requiring the taxpayer to prove the identity, genuineness and creditworthiness of the relevant sum credited. I make it clear that all these assessees have placed sufficient materials on record indicating them to have derived the impugned LTCG form sale of shares held in M/s Unno Industries Ltd. only. I therefore delete the impugned addition(s) respectively. Brokerage commission disallowance, if any, thereupon shall automatic stood as a necessary corollary.”

5. Coupled with this, I find that hon'ble jurisdictional high court’s various decisions in PCIT vs Bib Cables and Conductors ITAT No. 78 of 2017, GA No.747/2017 decided on 19.06.2018, M/s Classic Growers vs. CIT CIT vs. Lakshmangarh Estate and Trading Co. Ltd. (2013) 40 taxmann.

Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 44 Commission 439 (Cal), CIT vs. Shreyashi Ganguli (ITA No. 196 of 2012 & CIT vs. Reengla Properties ITA 105 of 2016 (supra) , have already declined Revenue’s very stand doubting genuineness of share purchased / sales transactions resulting in LTCG and losses based as mere suspicious circumstances in absence of any evidence.

6. Mr. Singh at this stage has taken a lot of pains for filing the following written statement:- “The appeal in question has been filed by the assessee against orders passed by Ld CIT(A)-10, Kolkata upholding Assessing Officer's additions in respect of the appellant’s dealing in share trading in penny stock scrips, namely Global Infratech & Finance Ltd., wherein the profits thereon were disclosed as LTCG and duly derived the consequential tax benefits of exemption u/s 10(38). The AO, in the assessment orders u/s. 143(3), had treated the LTCG derived from share dealings in these scripts as bogus and added back the LTCG at Rs.17,78,760 u/s 68. It CIT(A)’s order be relied upon, which is self-speaking and explanatory. Alternatively, and without prejudice to the above plea, the appellant is seen to have raised the plea in SL No.7 and 8 of Grounds of Appeal

before Hon. ITAT that the AO arrived at his conclusions by flouting the principle of natural justice and without allowing opportunity of cross-examination. Next, before Ld. CIT(A), this plea was not agitated, so the Ld CIT(A) could not adjudicate upon this issue, Hence, the mater may be sent back to CIT(A) on this issue. N this connection, it is worthwhile mentioning that in respect of failure to follow the principles of natural justice, reliance may be placed on jurisdictional High Court’s judgment in the case of [1994] 210 ITR 103 (CAL), HIGH COURT OF CALCUTTA, Commissioner of Income-tax v. Eastern Commercial Enterprises, wherein matter was remanded back to the AO to redo the assessment after fully and properly following the principle of natural justice. Reliance is also placed on the following judgments which are on similar lines: 1. [1998]

65. ITD 380 (Bom) GTC Industries Ltd. V. Assistant Commissioner of Income-tax 2. [2015] 59 taxmann.com 212 (Delhi-Trib.) IN THE ITAT DELHI BENCH’E’ Nokia India (P) Ltd. v. Deputy Director of Income-tax, Circle-2(1), International Taxation, New Delhi 3. [2018] 96 taxmann.com 185 (Jaipur-Trib.) INI THE ITAT JAIAPUR BENCH P.R. Rolling Mills (P) Ltd. v. Deputy Commissioner of Income-tax, Circle-3, Jaipur It is also submitted that there is a group of judgments wherein the matter has been set aside to the AO along with direction to make available to the assessee the reports of investigation wing, relied on during assessment, as well as the statement(s) recorded from various persons/individuals/brokers before Investigation Wing. Reliance has been placed on, mostly by Chennai ITAT, on CIT vs. Sunita Dhadda (Supreme Court on June 6, 2018:

Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 45

Sl No. Case Law citation Penny stock in question 1 Income Tax Appellate Tribunal –Chennai Panchshul Marketing Ltd. Mahendra Kumar Bhandari, Chennai vs. (PML) ITO Non Corporate Ward 5(3), on 6 April, 2018 ‘C’ BENCH : CHENNAI Assessment Year : 2014-15 2 Arvind Kumar, Chennai vs The Income Tax Bakra Pratisthan Ltd Officer, on 8 November, 2018, ITAT SMT BENCH: CHENNAI 3 Mr. Vikram Dughar, Chennai vs. ITO, on 13 Essar (India) Limited November, 2018, IN THE INCOME TAX APPELLATE Tribunal, ‘A’BENCH: CHENNAI AY 2014-15. 4 Smt. Sdhana, Bangalore vs. Income Tax N/A Officer, Bangalore on 26 May, 2017 IN THE INCOME TAX APPELLATE Tribunal “SMT –B”BENCH : BANGALORE AY: 2008-09 It is also pointed out that some of the assessees had been confronted with their brokers for the propose of the cross-examination and a few cases involved concessions on part of the assessees in support of the impugned addition(s) before the Assessing Officer. I find no merit in either of Revenue’s contentions. It has come on record that the learned co-ordinate bench(es) have taken note of hon'ble jurisdictional high court’s decisions (supra) on the very issue declining Revenue’s appeal(s) preferred against the tribunal’s orders deleting identical addition(s) based on relevant documentary evidence supporting the share transactions in question.

7. Coming to brokers statement recorded in presence of the assessee (Pradeep Kumar Pansari HUF vs. ITO Ward-48(1) in for AY 2014-15, I find that the said broker nowhere supported the Revenue’s case alleging any cash component in the relevant transactions. So is the outcome of Revenue’s latter appeals alleging assessees’ concession in ITA No.1629, 1630 & 1639/Kol/2018 as the Assessing Officer took recourse to a detailed adjudication in support of the impugned addition(s). This tribunal’s co-ordinate bench’s decision in (2017) 60 ITR (Trib) 1 (Bang) Canara Bank vs. JCIT holds that the estopple principle does not apply in income tax proceedings. I therefore reject Revenue’s arguments in support of impugned addition(s). I take into account all the relevant facts and circumstances to adopt the learned co-ordinate bench’s detailed reasoning extracted in preceding Assessment Year(s) 2014-15 2015-16, 2013-14 & 2009-10 Page 46 paragraphs mutatis mutandis to delete the impugned addition(s) forming subject- matter of all the instant appeal(s). Commission expenditure disallowance; if any, shall automatically follow suit as a necessary corollary. No other argument has been raised before me during the course of hearing.

8. All these appeals are allowed in above terms. A copy of the instant common order be placed in the respective case file(s). Order pronounced in open court on 15/03/2019 Sd/- (S.S. Godara) Judicial Member Kolkata, *Dkp/Sr.PS �दनांकः- 15/03/2019 कोलकाता आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-Aditya Saraf(HUF), CF-265, Salt Lake City, Sector-I, Kolkata-91/ Rinki Agarwal, Flat No. 503, Ganga Apartment, Mangal Pandey Road, Siliguri, Darjeeling-734405/Rekha Agarwal, Central Plaza, Room No.5M, 5th Floor, 41, B.B.Ganguly Street, Kolkata-12/M/s M.P. Kedia HUF,29, R.N.Mukherjee Road, Windsor House, 2nd Floor, Room No.15, Kolkata-001/M/s Shrawan Kr. Agrawal HUF Level-3, Central Plaza, C-11, 41, B.B Ganguly Street, Kolkata-12/ P.K. Agarwal(HUF), Block-3, Flat 6C, Avani Oxford, 136, Jessore Road, Lake Town-Kolkata-55/ Smt. Uma Jaria, H.No.2482, Sri Sri Kutir, Sector-79, Mohali-160055/Jaya Madhogaria, Vivek Madhogaria, Sandeep Madhogharia (HUF) C/o S.L. Kochar, Advocate, 5, Ashutosh Chowdhury, Avenue, Kolkat-19/Surendra Sharma “Vikram Vihar”, Bunglow No.29/30, 3rd Fl, 493/B/61, G.T. Road, (South) Howrah-711102/Samir Baid, 3-B, Lal Bazar Street, 5th Floor, Kolkata-001/Smt. Payal Saraf, CF-265, Salt Lake City, Secdtoro-1, Kolkat-91/Smt. Rekha Patwari, 3rd Fl, R. No.190 Metal Market, 157, Neteaji Subhas Road, Burrabazar, Kolkata-001/ Shankar Lal Daruka (HUF), Sima Daruka 8, Peary Mohan Mukherjee Street, Bdelurmath, Howrah-711202/Effervescent Commercial Pvt. Ltd. C/o RSVPC & Co. 41A, A.J.C. Bose Rd. Suite No.613, 6th Fl. Kolkata-17/Shri Vineek Kanodia, Shri Vishal Kanodia, 2nd Fl, BD-76, Salt Lake, Kolkata-91/Shri Dilip Singha Roy, Smt. Sikha Singha Roy, Deepshikha, Khanro Sultanpur More, P.O. Memari, Burdwan-713146/Aloke Jain & Sunil Kr. Rander C/o Advocate Pradip Lakhotia, 2nd Fl, Metro Plaza, SF Rd., Siliguri-734005/ Sri Vikash Goel, C/o S.C Baid & Ors. 4, Raja Woodmunt St. 2nd Fl. Kol-001/ Ritu Gupta & Rashmi Gupta, C/o Subash Agarwal & Associates, Siddha Gibson Lane, Suite-213, 2nd Floor, Kolkata-69/Pradeep Kr. Pansari HUF, Sri Ganga Apartment, 23, Guha Park, 3rd Floor, Liluah, Howrah-711204/ Dilip Kr. Agarwal, C/o Raj Singhania, Cental Plaza, 41, B.B.Ganguly St.