SRI SUBRATA BANERJEE ,KOLKATA vs. ACIT, CIRCLE - 51(1) , KOLKATA

आयकर अपील"य अधीकरण, "यायपीठ – “A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “A” KOLKATA Before Shri S.S.Godara, Judicial Member and Shri, M. Balaganesh, Accountant Member ITA No.2275/Kol/2018 & ITA No.1495-1496/Kol/2017 Assessment Years :2014-15, 2013- 14 & 2014-15 Sri Subrata Banerjee V/s. ACIT, Circle-51(1), 20, Cape Tower, C-1, DS-2 & 3, Maniktalla Civic Hiland park, Kolkata-107 Centre, Uttarapan, Kolkata- [PAN No. ADRPB 6866 B] 54 _____________________ ____________________ Income Tax Officer, Ward- V/s. M/s Tribute Trading And 4(1), 8th Floor, Aayakar Finance Ltd., 2nd Floor, 3, Bhawan, P-7, Bentick Street, Kolkata- Chowringhee Square, 700001 Kolkata-700 001 [PAN No.AAACT 53329 A] .. अपीलाथ" /Appellant ""यथ"/Respondent(s) Shri Manish Tiwari, FCA आवेदक क" ओर से/By Assessee Shri Pradip Majumdar, Addl. CIT-Sr-DR राज"व क" ओर से/By Revenue 26-12-2018 सुनवाई क" तार"ख/Date of Hearing 31-12-2018 घोषणा क" तार"ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This batch of three cases pertains to two assessees Shri Subrata Banerjee and M/s Tribute Trading & Finance Ltd.. The former assessee’s appeal ITA No.2275/Kol/2018 for assessment year has arisen from the CIT(A)-15 Kolkata’s order dated 04.10.2018 passed in case No 278/CIT(A)- 4/16-17/Cir.51(1)/Kol affirming the Assessing Officer’s action treating his Long Term Capital Gains (LTCG) of ₹ 3,26,63,032/- from sale proceed of shares held in M/s NCL Research & Financial Services Ltd. to be income from undisclosed sources followed by commission disallowance to the tune of ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 2 ₹6,53,260/- made in the course of assessment framed on 29.12.2016. The Revenue’s two appeal(s) ITA No.1495-1496/Kol/2017 is latter M/s Tribute Trading & Finance Ltd’s cases are directed against CIT(A), please very appeal No. 423-544/CIT(A)-2/16-17 the CIT(A)-2 Kolkata’s separate orders both dated 21.04.2017, in case reversing the Assessing Officer’s action treating Short Term Capital Loss(es) of ₹78,25,188/- in assessment year 2013-14 and ₹1,44,20,606/- in assessment year 2014-15 respectively as unexplained. Relevant proceedings in all three cases are u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the learned representatives. Case file(s) perused. 2. We notice at the outset that although the sole substantive identical issue involved in all these three appeal(s) is that of genuineness of the assessee’s long term capital gains & losses hereinabove, the Assessing Officer in assessments framed in both assessees cases had treated the respective capital gains arising from sale of shares in M/s NCL Research & Financial Services in former as well as losses in latter cases (supra) to be lacking genuineness. Both the learned representatives are ad idem during the course of hearing that the Assessing Officer reasoning in very much identical. We thus treat the CIT(A)’s order in former assessee Shri Subrata Banerjee ITA No.2275/Kol/2018 as the “lead” case. Learned representatives at this stage takes us to CIT(A)’s detailed findings in above “lead” case upholding Assessing Officer’s action treating assessee’s capital gains of ₹3,26,63,032/- to be income from undisclosed source as follows:- “Grounds of Appeal: Aggrieved by the order passed by the A.O., ACIT,Cir-51(l) Kolkata dated 29.12.2016 the appellant has preferred this appeal with the following grounds of appeal. 2.1 (a) That on the facts and in the circumstances of the case, Ld. A.a. has erred to holding purchase and sale of investment in shares of NCL Research & Financial Services Ltd as bogus and/ or colourable by referring to report of Directorate of Investigation. (b) That on the facts and in the circumstances of the case, Ld. A.O. is wrong and unjustified in considering purchase and sale of shares of NCL Research & Financial Services Pvt. Ltd. as bogus and/or colourable without making any enquiry of his own. (c) That on the facts and in the circumstances of the case, Ld. A.O. is wrong and unjustified in denying exemption D/s. 10(38) of IT. Act, 1961 and thereby making addition of Rs. 3,26,63,032/- as unexplained cash credit u/ s. 68 of IT. Act, 1961. .

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 3 2.2 That on the facts and in the circumstances of the case, the action of Ld. A.O. to make addition of Rs. 6,53,260/ - as Commission paid to share broker is erroneous and unfounded since the provisions of Section 69C of LT. Act, 1961 is intended for addition on the basis of actual expenses. 2.3 That on the facts and in the circumstances of the case, Ld. A.O. is wrong and unjustified in making ad-hoc disallowance of Rs. 5,00,000/- out of Trip Expenses and Repairs & Maintenance expenses without finding any defect on verification of sample Bills. 2.4 That the appellant craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal. 3. ASSERTION OF THE ASSESSING OFFICER: During the course of assessment it is noticed that the assessee has claimed Long Term Capital Gains of Rs. 3,26,63,032/-. In view of the above, the assessee was asked to submit particulars of transactions in shares. On scrutiny of details it revealed that the entire Long Term Capital Gains claim of Rs. 3,26,63,032/- has been made out of sale of shares of M/s NCL, Research and Financial Services Ltd. "From the details filed by the assessee it is noticed that the assessee purchased 29,000 units of shares of M/s. NCL Research and Financial Services Ltd. for a total consideration of Rs. 79,75,000/·. Subsequently, these shares were credited to his demat account. The assessee sold all these shares of M/s. NCL Research and Financial Services Ltd. for Rs. 4,06,38,032/·(net) making a profit of Rs.3,26,63,032/· through the broker M/s. Kotak Securities Limited after adjustment of all charges. In the case of CIT vs L.N. Dalmia (1994) 207 ITR 89, the Hon'ble Calcutta High Court held the device adopted by the assessee to reduce the tax liability to be colour and sham. In this case the Court observed as follows:- "As discussed, the assessee affected a transaction of sale of shares held by him to the companies formed by himself holding the major part of the shares of such companies along with the nephew and the wife, who held only the smaller part therein and are shown to have suffered a loss by the sale which would be a cushion against future tax liability for gains either under the revenue head or under the capital head. We have observed that as far as the exercise of control of the company (Punalur Paper Mills Ltd.) there has been no change whatsoever. He continued to exercise the same control over Punalur Paper Mills Ltd. as before. This special aspect cannot be overlooked by any appellate authority dealing with tax matters. When there was no real change whatsoever, the apparent change being the transfer on the surface of shares from the individual to the company a handmaid of the transferring individual, cannot be overlooked and we are in complete agreement with the view of the taxing authority that there was no real change and transfer claimed was sham transfer." It was further observed therein.- In context of determining whether a transaction is a sham or illusory or a device or a ruse. The income tax authorities are entitled to penetrate the veil covering it and ascertain the truth. The taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into te surrounding circumstances to find out the reality of the receipts made in the documents. It is the duty of the Court in every case, where ingenuity is expended to avoid taxing and welfare legislations, to get behind the smokes ere en and discover the true stat of affairs. The Court is not to be satisfied with the form and leave alone the substance of the transactions." Further, in the case of CIT Vs Shekhawati Rajputana Trading Co. (P) Ltd. (1999) 236 ITR 590, .the Hon'ble Jurisdictional Calcutta High Court held that the Tribunal mainly based its findings on the ground that the consideration was received through cheque

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 4 and was duly credited in the bank account of the assessee. The Tribunal did not appreciate properly the fact that the transaction was between the company and its chairman and there was no substantial credit of the parties in the bank, at the time when the cheques were issue by the assessee as well as by its chairman all upon the same bank. It has been submitted that all transactions themselves make the transaction genuine. The transaction in the instant case is between the assessee company and the chairman. The onus lies heavily on the assessee to prove that the transaction is genuine which was not discharged by the assessee in the instant case, cheques were issued simultaneously by the parties in favour of each other for purchase and repurchase on the same day without both the parties having sufficient funds in the bank. That itself goes to show that the transaction was not genuine. This aspect, however, could not be explained by the assessee. Regarding sale of shares of three companies particularly J. Ltd. no evidence was produced on behalf of the assessee that there was no other buyer of the shares except its chairman, although those shares were quoted in the stock exchange. The fact that though the sale through broker of listed shares is essential under the Securities Contracts) Regulation) Act, 1956, it was not done in the instant case was also ignored by the Tribunal. The Tribunal failed to take note of the fact that the assessee company and K tried to claim loss in their respective assessment for tax avoidance by factious transactions. Considering the totality of the facts and in the circumstances of the case, the Tribunal was not correct in law in directing the Assessing Officer the share of loss of to the assessee company. 4. Submission of the Assessee: Relevant extracts of the appellants' submission are as under: 1. Addition in respect of LTCG of Rs. 3,26,63,032/- claimed as exempt U/s. 10(38) During the year under consideration the appellant sold 29000 shares of M/s. NCL Research & Financial Services Ltd in the Bombay Stock Exchange at a consideration of Rs.4,06,38,032/- on different dates which were purchased in earlier year at a cost of Rs.79,75,000/-. In the process, the appellant derived Long Term Capital Gain of Rs. 3,26,63,032/- which was claimed as exempt U/s. 10(38) of the I.T. Act, 1961. The transactions regarding purchase was related to earlier years and sale of shares were effected in the relevant F.Y. through assessees share broker M/s. Kotak Securities Ltd. Particulars of sales and purchase as well as copy of Demat A/c, Ledger A/c of share broker etc were also furnished. A.O. by referring to report of Directorate of Investigations, Kolkata as well as SEBIs clarifications etc has held such L TCG as bogus and/or colourable one. There has been no application of mind to the facts of the case or any enquiry by A.O. himself to prove that the LTCG earned by the a was bogus. Therefore the denial of exemption U/s, 10(38) and addition of Rs.3,26,63,0 32/- to the returned income is not sustainable in law. Addition on account of payment of Commission to Broker for accommodation of LTCG Rs. 6,53,260/- Consequent upon treating LTCG as bogus, A.D. has proceeded to make addition @ 2% of LTCG as commission paid to broker as unexplained expenditure. The provisions of Section 69C which deals with unexplained expenditure speaks for addition where the A.C. is in possession of document in support of actual expenditure. It is submitted that Section 69C cannot be applied for hypothetical figure. Hence, addition is not valid. 3. Disallowance out of Trip expenses & Repair & Maintenance Rs.5,00.000/- P&L A/c was debited by Rs.10,47,18,665/- as Trip expenses and Rs.4,36,63,996/- as repair & maintenance expenses. The query raised on this point was explained. It was stated that around 80 tankers are engaged in transportation of LPG to cater supply to customers of IDC having pumps at Uttar Pradesh, Bihar, Jharkhand and throughout

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 5 West Bengal Therefore, bills are supported to be high, AD. also examined bills/vouchers on sample basis without finding any defect. Adhoc disallowance of Rs. 5,00,000/- has been made on pure suspicion and conjecture as evident from his finding that there is a chance of leakage of revenue and to plug possible loss of revenue such disallowance is made. In the background of above facts, we make detailed submission on various grounds as under:- Ground Nos. 1(a) to 1(c) These grounds have been preferred against AO.'s action to consider L TCG on sale of shares of NCL Research & Financial Services Ltd. amounting to Rs. 3,26,63,032/- as unexplained cash credit U/s 68 by denying exemption U/s 10(38). 1. The return filed was selected for scrutiny and the Assessee complied with all statutory notices issued from time to time by furnishing all relevant details, evidences and explained the return by producing the books of accounts etc. 2. The appellant purchased 29000 shares of NCL Research & Financial Services Ltd. at a consideration of Rs.79,75,000 @ Rs. 275/share. The said shares were credited in the demat account of the Appellant Assessee on 25.07.2012 maintained with Stock Holding Corporation of India Limited. During the previous year relevant to the Assessment Year 2014-15 the Appellant sold 29000 shares of NCL Research & Investment Limited (NCL), listed security at Bombay Stock Exchange (BSE) at a net consideration of Rs. 4,06,38,032/-. The investment in the shares having been held for more than 12 months the appellant claimed that Long term Capital Gains of Rs. 3,26,63,032/- as exempt under section 10(38) of the Income Tax Act, 1961. 3. The Assessee was allotted 29000 shares of NCL Research & Investment Limited through preferential allotment at the rate of Rs. 275 per share. The purchase consideration was paid by account payee cheque and the transaction was reflected in the books of accounts of the assessee for the previous year ending 31.03.2013. The return of income filed by the assessee for the Assessment Year 2013-14 was accepted by the Assessing Officer. Hence, genuineness of the investment of Rs. 79,75,000/- in shares of NCL Research and Financial Services Ltd. is beyond any controversy. In support of the aforesaid contentions the Assessee produced and furnished the following documents before the Assessing Officer. (i) Copy of the Demat account statement for the relevant Assessment Year. (ii) List of purchase & sale of shares (iii) Details of investment made by the assessee along with supporting evidence for such investment. (iv) Details of capital gains along with contract notes (v) Copy of transaction cum holding statement of the assessee for FY 2012- 13 & 2013-14 (vi) Copy of share application form submitted by the assessee to the company (vii) Copy of allotment advice issued by the company. (viii) Source of fund for acquiring the shares from the company. 4. The Appellant Assessee sold 29,000 shares of NCL through a registered share broker namely "Kotak Securities Ltd." on different dates during the Financial Year 2013-14. The sale transactions suffered Securities Transaction Tax as is reflected in respective Contract Notes issued by the abovementioned share broker. The delivery of shares of NCL sold is reflected in the Demat Statement of the Assessee. The net consideration of Rs. 4,06,38,032/- was received by Appellant Assessee on different dates through proper banking channels and the same was credited in assessee's savings bank account. The aforesaid 29,000 shares of NCL were sold on line at BSE at market rates prevailing on the respective dates of sale, as evidenced by the quotations given by the Bombay Stock Exchange.

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 6 The following documents were produced by the assessee before the Assessing Officer in support of the aforesaid transactions of sale of shares of NCL (i) Contract Notes for sale of shares of NCL. (ii) Ledger/Demat Statement issued by Depository Participant viz. Kotak Securities Ltd. showing delivery of shares of NCL on sale of shares. (iii) Bank Statement / Pass Book showing receipt of sale consideration through banking channels. (iv) Market rate quotations . (v)Books of accounts produced. 5. It appears from the observations made in the assessment order that Ld. A.O. has heavily relied upon the report: of Directorate of Investigation, Kolkata while carrying out investigation to unearth the racket of generating bogus entries of Long Term Capital Gains (L TCG) which is exempt from tax and the modus operandi adopted by the operators to make the beneficiary by shares of pre- determined Penny Stock controlled by them. After discussing the investigation report in a general view A.O. concluded as under. - (i) Individuals who have taken bogus entries of LTCG amounted to several Crores from 2010 to 2014. (ii) The result of enquiry was also shared with SEBI who after investigating cases found the allegation to be correct. The balance cases are still under investigation by SEBI. (iii) Almost all the 25 top groups have accepted having taken entries on receipt of commission and have voluntarily surrendered and offered for taxation. (iv) This particular script Le. NCL Research and Financial Services Ltd. finds mention in the list of bogus long term / short term capital loss as per information and data provided by Income Tax Investigation Wing, Kolkata 6. Ld. AO. has also relied upon the financial results and graph showing increase and subsequent fall of price of share of NCL Research & Financial Services Ltd. in holding that transaction regarding purchase of 29000 shares of NCL Research & Financial Services was an arranged affair. 7. Moreover, the mere fact that the shares were sold at a high price cannot be termed as conclusive proof or ground for an allegation that the appellant assessee converted some unaccounted money through accommodation entries, as had been alleged by the Assessing Officer. In fact, any suspicion, however so ever strong, that the Department may have, cannot take place of proof as clearly laid down by the Hon'ble Supreme Court in the case of Umacharan Shah & Bros. vs. CIT [1959] 37 ITR 271. 8. The allegations of the Assessing Officer made in his impugned Assessment Order were all based on mere surmise, conjectures and suspicions. The Assessing Officer had allowed his vision to be coloured by extraneous circumstances and events which had no bearing and role in deciding the genuineness or otherwise of the transactions of sale of shares of NCL. In fact the Assessing Officer had not dealt with the specific facts of the case. Merely making certain observations on the basis of baseless assumptions and drawing an adverse inference thereon, without any evidence on record, is bad in law. Reliance in this connection is placed on the celebrated decision of the Hon'ble Supreme Court in Lalchand Bhagat Amblca Ram vs. err [1959) 37 ITR 288 (SC) wherein the Hon'ble Apex Court had relied on its earlier judgement rendered in the case of Omar Salay Mohamed Sait [1959] 37 ITR 151 (SC) and had held that: “It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a View of the facts which could not reasonably

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 7 be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and this court is entitled to interfere. It is most respectfully submitted that not allowing opportunity of cross-examination of the witness is a serious flaw which makes the order nullity. Please refer to the following judgements on this issue: (i) Andaman Timber Industries vs. Commissioner of Central Excise [2015J 62 taxmann.com 3 (sq]. In this case the Adjudicating authority had passed an order against the assessee relying on the statements of third parties by observing that there was no need to provide opportunity of cross examination. However, the Hon'ble Supreme Court laid down that not allowing an opportunity to cross examination is a serious flaw which renders the order a nullity 9. That the facts of the present appellant and the facts of the case relied upon in the judgement of IT AT 'A' Bench Kolkata dated 18.08.2017 are same and identical will be evident from the following: - Facts of the present appellant Facts in the referred case The appellant purchased 29000 shares of The brief facts of the first issues as has been NCL Research & Financial Services Ltd. at a recorded by the ld. A.O. in the assessment consideration of Rs.79,7S,000 @ Rs. order are that the assessee claimed long 275/share. The said shares were credited in term capital gains from transactions in the Demat account of the Appellant shares of Kailash Auto Assessee on 25.07.2012 maintained with Finance Ltd. (KAFl. The Ld. A.O. found that Stock Holding Corporation of India Limited. the assessee on 20.12.2011 purchased During the previous year relevant 240000 shares of the face value of Rs. 1/- to the Assessment Year 2014-15 the each in Careful Projects Advisory Ltd. Appellant sold 29000 shares of NCL (CPAL) through off market Research & Investment Limited (NCL), listed from M/s. Brijdhara Mercantile Private security at Bombay Stock Exchange (BSE) Limited (name changed to M/s. Tremendous at a net consideration of Rs. 4,06,38,032/-. Mercantile Pvt. Ltd.) for a consideration of The investment in the shares having been Rs. 2,40,000/-. The Ld A.O. also found that held for more than 12 months the appellant CAPL was amalgamated with KFAL by virtue claimed that Long term Capital Gains of Rs. of an order of Hon'ble Allahabad High Court 3,26,63,032/- as exempt under section and in pursuance to such amalgamation, the 10(38) of the Income Tax Act, 1961. assessee was allotted 240000 shares of KFAL of the face value of Rs. 1/- each the Ld. AO. also noted that another company named Panchsul Marketing Ltd. (PML) also merged with the said KAFL. However, in the present case we are not concerned with the merger of PML with KAFL. The assessee sold these 240000 shares through M/s. Ashika Stock Broking Ltd., a registered share broker of BSE. The said shares were sold through the online medium of stock exchange on different dates falling within the previous year 2013-14 corresponding to the assessment year 2014- 15. The aforesaid transactions resulted in Long term Capital gains and the assessee claimed exemption u/s 10(38) of the Act. The aforesaid transactions for purchase and In course of hearing of the case, the Ld. AR

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 8 sale of shares resulted in Long Term Capital referred to various documentary evidences Gains of Rs. 3,26,63,032/- which the furnished in the paper book in support of the assessee claimed to be exempt' under claim of the assessee to prove the section 10(38) of the Act. During the course genuineness of the transactions relating to of assessment proceedings the LTCG on sale of share of KAFL. The assessee submitted following details documentary evidences included the documents and evidences in relation to such following: - transactions of purchase and sale of shares. (i) Purchase bill for purchase of 240000 (i) Demat Account statement showing shares of CAPL from M/s. Brijdhara credit of 29000 shares of NCL Mercantile Pvt. Ltd. On 20.12.2011 (ii) Balance Sheet as on 31.03.2011, falling in the previous year relevant 31.03.2012 & 31.03.2013 and also the to the assessment year 2012-13 details of investment in shares to show (ii) Bank statement showing payment of that the shares purchased by assessee the purchase consideration of shares at different times did appear in the of CAPL to Brijdhara. books of accounts of the assessee and (iii) Balance Sheet of the assessee for the were reflected in his Balance Sheet. F.Y. 2011-12 to 2012-13 to show that There were other investments in the investment in the shares of CPAL shares and those were also reflected in was duly disclosed. the Balance Sheet. The assessment for (iv) Demat statement with United Bank of A.Y. 2013-14 in which investment in India, a depository participant (DP) shares of NCL was made was showing the aforesaid shares of CAPL completed U/s 143(3). in the account of the assessee. (SEBI approved Depository Participant) (v) The Letter dated 8th June 2013 of (iv) Fifteen Contract Notes in respect of KAFL informing the assessee that the shares of NCL sold by assessee on different CPAL was merged with KAFL by virtue dates during the Financial Year 2013·14. of Court order and the assessee was allotted (v) Bank statement showing payments shares of KAFL as against the received by account payee cheques on shares of CPAL in the ratio 1:1. different dates for such sale of shares (vi) The Demat statement of the assessee of NCL with United Bank of India showing receipt of shares of KAFL on amalgamation as aforesaid. (vii) Contract notes of Ashika Stock Broking Ltd., share broker through whom the assessee sold shares of KAFL in the F.Y. 2013·14 relevant to the AY. 2014-15. (viii) Bank statement showing receipt of sale consideration from m/so Ashika Stock Broking Ltd. By account payee cheques. (ix) Demat statement showing delivery of shares of KAFL on sale of shares. It appears from the observations made in the The ld. AR also brought our attention to the assessment order that Ld. A.O. has heavily enquiry report made by Pr. Director of relied upon the report of Directorate of Income Tax (Investigation, Kolkata in the Investigation, Kolkata while carrying out matter of transactions of KAFL. The ld. AO investigation to unearth the racket of relied on the statements of different persons generating bogus entries of Long Term including Sri Sunil Kumar Dokania recorded Capital Gains (LTCG) which is exempt from by the Investigation Wing of Kolkata who tax and the modus operandi adopted by the explained the modus operandi of providing operators to make the beneficiary by shares accommodation entries of LTCG and Short of pre-determined Penny Stock controlled by Term Capital Loss (STCL). These persons them. After discussing the also provided the lists of beneficiaries to who investigation report in a general view A.O. they provided accommodation entries. The ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 9 concluded as under: - ld. A/R has shown that the list of (i) Individuals who have taken bogus beneficiaries provided by these persons also entries of L TCG amounted to several did not contain the name of assessee and / Crores from 2010 to 2014. or the name of the share broker viz. Ashika (ii) The result of enquiry was also shared Stock Braking Ltd. with SEBI who after investigating cases found the allegation to be correct. The balance cases are still 'under investigation by SEBI. (iii) Almost all the 25 top groups have accepted having taken entries on receipt of commission and have voluntarily surrendered and offered for taxation. (iv) The particular script Le. NCL Research and Financial Services Ltd. finds mention in the list of bogus Long term / short term capital loss as per information and data provided by Income Tax Investigation Wing, Kolkata It is reiterated that the AO has not made any The Ld. AR submitted that there is no direct independent enquiry and also there is no evidence against the assessee brought on corroborating evidence to support the record by Ld. A.O. to hold that the assessee allegations of the AO. It is submitted that introduced its own unaccounted money by parties whose statements were recorded by way of bogus LTCG. The direct evidence as the Investigation wing of the Kolkata, has not alleged by the Ld. AO to be the SEBl's been examined by the AO. Further, the orders is no evidence against the assessee assessee was not given an opportunity to for the reasons stated earlier. The Ld. AR cross-examine them. Hence adverse submitted that although various inference drawn is not sustainable. investigations were carried out by different agencies, there is no evidence against the assessee to hold that the assessee was a beneficiary to the modus operandi adopted by different entities / brokers / entry operators. The Ld. AR submitted that, in view of the aforesaid judgement of Special Bench of Hon'ble Mumbai Tribunal, various judgements relied on by the Ld. AO against the assessee are irrelevant in as much as the said judgements are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record. The facts of the appellant's case and the above 'mentioned case are identical and similar. Hon'ble Kolkata IT AT has also adopted the same view in the following cases which are equally and forcefully applicable to the appellants case. 1.) Kiran Kothari (HUF) Vs. Ito, Wd-3S(3), Kolkata, ITA No. 443/KoV2017 dated 15.11.2017 2.) Sri Dolarrai Hemani Vs. ITO, Wd-34(3), Kolkata, ITA No. 19/Kol/2014 dated 02.12.2016 3.) Gautam Kr. Pincha Vs. ITO, Wd-34(4), Kolkata, ITA No. 569/Kol/2017 dated 15.11.2017 4.) ITO, Wd-32(3), Kotkata Vs. Kumari Tanvi Kejriwal, ITA No. 1849/KoV2017 dated 20.12.2017

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 10 5) Prakash Chand Bhutoria Vs. ITO, Wd-3S(1), Kolkata, IT A No. 2394/KoV2017 dated 27.06.2018 Navneet Agarwal Legal Heir of Late Kiran Agarwal Vs. ITO, Wd-35(3), Kolkata, ITA No. 2281/KoV2017 dated 20.07.2018 Ground No. 2 This ground refers to addition of Rs. 6,S3,260/~ for unexplained expenditure within the meaning of section 69C of Income Tax Act, 1961. The addition is not sustainable in law as explained below: - 1. The provisions of section 69C is reproduced for the sake of convenience as under: - “Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not in the opinion of the Assessing Officer satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. “ 2. It is implied from the language used that assessee must have incurred expenditure and the assessee has either failed to offer any explanation regarding source from which expenditure was incurred or such explanation is in the opinion of A.O. is not satisfactory. 3. The observations and findings recorded at para 5 of assessment order do not suggest any clue that the assessee had incurred expenditure. The observations that various brokers and operators giving entries of bogus L TCG as per report of Investigation Wing admitted. that beneficiaries have to pay commission @ 2% of total transaction cannot be utilised in assessee's case since the name of share broker Kotak Securities Ltd. is not found in the Investigation report. 4. Moreover, A.O.'s observations do not suggest that the assessee was given an opportunity to explain the source of incurring commission expense. Therefore provisions of section 69C cannot have application. 5. Without prejudice to the above, this ground may be said as interrelated with ground No. 1. If ground No. 1 is decided in favour of the appellant there arises no question for so-called addition as per Ground No. 2. Ground No. 3 This ground has been preferred against estimated disallowance of Rs. 5,00,000/- out of Trip expenses and Repair / Maintenance. 1. It appears from A.O.'s observations at para 3 of order that he is fully aware of the business activities and mode of operation. 2. It further appears from observations at para 6 that documents in support claim for Trip Expenses as well as repair / maintenance were furnished and duly examined. 3. It is also an admitted fact that A.O. examined Bills & Vouchers in support of such expenses on a test check basis and no irregularities were found. 4. Inspite of above admitted fact Ld. A.O. has made a disallowance of Rs. 5,00,000/- on the ground that there is a chance of leakage of revenue. The disallowance has been made to plug possible revenue loss which is not permitted in law. Such action may be considered as arbitrary and erroneous. 5. Observation and Decision: Ground of appeal No. 1 & 2.:- The A.O. has passed a detailed order and to avoid repetition the findings of the AO are not reproduced. AO has discussed in details that the entire process has been adopted to get the accommodation entry by the assessee. It would be relevant to refer to the following case laws:- Cash Credit (Sec.68) (i) Kale Khan Mohammad Hamif vs. CIT 50 ITR 1 (SC) :- "Whether the burden of proving the source of the cash credits is on the assessee?" It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 11 the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax it is for him to show either the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO is entitled to treat it as taxable income. (ii) Sumati Dayal vs CIT 214 ITR 801 (SC) :- As laid down by this Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. In this case, it is observed that suddenly within one year the prices of these shares jumped. No business activity and profit of the company has been reported. No reason has been adduced to explain how the company's share suddenly rose to this level. Merely transacting through banking channel will not make the appellant entitled for exemption u/s. 10(38). The appellant entered into an adventure in the nature of trade and therefore the income is taxable as business profit and not as LTCG. Reliance is placed on the order of the judgment of Hon'ble ITAT in the case of Sanjay Bimalchand Jain LIH Shantidevi Bimalchand Jain Income Tax Appellate Tribunal Nagpur Bench Nagpur ITA No. 61/Nag/2013. "The facts of the case clearly indicate that the assessee has indulged in penny stock transaction. The assessee is a senior citizen. On purported advice of an Income Tax Consultant, she purchased shares of two penny stock Calcutta based companies at Rs. 5.50 per share and Rs.4/- per share respectively in (J()3. Both the companies had no standing and the AO found their existence of dubious characters. Both purportedly merged with other company, namely, Khoobsurat Ltd. and the assessee received shares in Khoobsurat Ltd. in lieu of her shares in earlier companies. The assessee was able to sell the shares at the price of Rs.486.55 and Rs.485.65 respectively in 2005. The purchase by the assessee of shares of two unknown companies whose details were not at all known by the assessee can by no stretch of imagination be said to be an investment transaction. The company whose shares rose from Rs. 5/- to Rs.485/- within short span has no worthwhile position and balance sheet and is not at all dividend paying company. The broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessees. In these circumstances it is a clear case where the assessee had indulged in bogus and dubious share transaction meant to account for the bogus and undisclosed income in the garb of long term capital gain. " In this regard I may gainfully refer to the decision of Hon 'ble jurisdictional High Court in the case of Major Metals Ltd. vs Union of India and others in w.P. No.397 of 2011 vide order dated 22.02.2012 where it was held that a company cannot command disproportionate and huge share premium and such receipt of bogus share application money even though through banking channel can be held to be assessee's undisclosed income received in the garb of unjustified share application money. In the present case I find that there is no justification whatsoever that the shares of an unknown company of Rs. 51- can be sold within two years time of Rs.485/- without there being any reason on record. This unexplained spurt in the value of unknown company shares is beyond preponderance of probability. It has been held by Hon'ble Apex Court in the case of Durga Prasad More and Sumati Dayal that the test of human probabilities have also to be applied by the authorities below. In the case of Sumati Dayal 214 ITR 801. it was held that during the year

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 12 1970-71 (pertaining to the assessment year 1971-72) between April 6, 1970, and March 20, 1971 the appellant claims to have won in horse race a total amount of Rs.3, 11, 831/- on 13 occasions out of which ten winnings were from jackpots and three were from treble events. Similarly in the year 1971-72, the appellant won races on two occasions and both times the winning were from a jackpot. These receipts were tested on the touch stone of human probability and it was found that apparent was not real. That it was contrary to statistical theory and experience of the frequencies and probabilities. The exceptional luck enjoyed by the assessee was held to be beyond preponderance of probability. Hence the Hon'ble Apex Court has affirmed the view that it would not be unreasonable to infer that the appellant .had not really participated in any of the races except to the extent of purchasing the winning tickets after the events presumably with unaccounted funds. When the present case is examined on the touch stone of above case law, it is clear that these transactions of the assessee can by no stretch of imagination be considered as investment transactions. They are only make believe transaction. Hence I do not find any infirmity in the revenue taxing the receipt in this regard. The entire amount of the so called receipt of share sales could well also be treated as unexplained credit u/s. 68 of the I. T. Act as it has all the ingredients of atracting the rigours of the said section. Section 68 of the I.T. Act provides that where any sum is found credited in the books of the assessee maintained for any previous year and the assessee offers no explanation about the nature and source there of or the explanation offered by him is not in the opinion of the AD satisfactory, the sum so credited may be charged to income tax as income of the assessee of that year. In the present case the assessee's explanation that the said receipt is on account of investment in shares whereby share of Rs. 5/- of unknown company has jumped to Rs. 485/- in no time has been totally rejected by the authorities below. The assessee has not at all been able to adduce cogent evidences in this regard. There is no economic or financial justification for the sale price of these shares. The so called purchaser of these shares has not been identified despite efforts of the AO. The broker company through which shares were sold did not respond to queries in this regard. Hence the fantastic sale price realization is not at all humanly probably as there is no economic or financial basis, that a share of little known company would jump from Rs. 5/- to 485/-, In these circumstances, I do not find any infirmity in the orders of the authorities below Accordingly I affirm the same and decide the issue against the assessee. The above judgment of the Honble ITAT squarely covers the case of the appellant The Hon'ble High Court of Mumbai in the above case Income Tax Appeal No. 18/2017 in the case of Sanjay Blmalchand Jain L/H Shanti Devi Bimalchand Join vs The Pr. CIT Nagpur & Another has held as under;- By referring to the aforesaid facts, which are narrated in the earlier part of this order, the authorities found that the assessee had made investment in two unknown companies of which the details were not known to her. It was held that the transaction of sale and purchase of shares of two penny stock companies, the merger of the two companies with another company viz Khoobsurat Limited did not qualify an investment and rather it was an investment made by the assessee was not to derive income but to earn profit. Both the brokers i.e. the broker through whom the assessee purchased the shares and the broker through whom the shares were sold were located at Ko. d the assessee did not have an inkling as to what was going on in the whole transaction except paying a sum of Rs.65,000/- in cash for the purchase of shares of the two penny stock companies. The authorities found that though the shares were purchased by the assessee at Rs. 5,50 Ps. Per

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 13 share and Rs. 4/- per share from the two companies in the year 2003, the assessee was able to sell the shares just within a years time at Rs.486.55 Ps and Rs. 485.65 ps per share. The broker through whom the shares were sold by the assessee did not respond to the assessing officer's letter seeking the names, addresses and the bank accounts of the persons that had purchased the shares sold by the assessee. The authorities have recorded a clear finding of fact that the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. While so observing, the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs. 5/- had jumped to Rs. 485/- in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs. 5/- of a little known company would jump from Rs. 5/- to 485. The findings recorded by the authorities are pure findings of facts based on a proper appreciation of the material on record. While recording the said findings. the authorities have followed the tests laid down by the Hon'ble Supreme Court and this Court in several decisions. The findings do not give rise to any substantial question of law. The judgments reported in (2012) 20 Taxman.com 259 (Bombay)(CIT Versus Jamnadevi Agarwal), (1957) 31 ITR 294(Bombay) (uranmal Radhakrishan versus CIT), (1970)77ITR 253 (SC)(Raja Bahadur Versus CIT and (2015) 235 Taxman 1 (Bom) (CIT versus Smt Datta M. Shah) and relied on by the learned counsel for the assessee are distinguishable on facts and cannot be applied to the case in hand. Since no substantial question of law arises in this appeal, the appeal is dismissed with no order as to costs. Respectfully following the above judgments, the order of the A.O. making an addition of Rs. 3,26,63,032/- is confirmed and the addition of Rs.6,53,2601- as Commission paid to share broker is also confirmed. As result, the grounds of appeal No. 1 & 2 are dismissed.” 3. We have given our thoughtful consideration to rival contentions. Relevant paper book comprising of assessee’s allotment advice alongwith share application from in M/s NCL Research & Financial Services, copy of ledger accounts of M/s Kotak Securities Ltd. in its books, reconciliation of sale value as per broker contract notes, demat account statement, LTCG details & bank statement stands perused. The assessee vehemently contends during the course of hearing that he had successfully proved both before the Assessing Officer as well as CIT(A) to have in fact actually derived LTCG from sale of shares held in M/s NCL Research & Financial Services. The Revenue’s case on the other hand is that both the lower authorities’ have rightly treated assessee’s capital gains a income from undisclosed sources after examining all relevant particulars of the scrip in issue as well artificial rigging in its prices throughout the relevant holding period. It strongly

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 14 emphasises that assessee had declared impugned LTCG in collusion with various entry operators engaged in raising prices of the relevant scrip’s prices. Its case therefore is that the impugned exorbitant price-rise of the above scrip is a stage managed show not liable to be accepted as genuine as per hon'ble apex court’s decisions in Sumati Dayal vs. CIT (1995) 80Taxmann 89 / 214 ITR 801(SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC). We find no merit in Revenue’s above arguments. The fact remains that the assessee has successfully demonstrated throughout with the help of evidence on record to have made the impugned sale purchase transactions in the relevant scrip for prescribed mode as per its voluminous documentary evidence (supra). The Revenue fails to pin point even a single material during the course of hearing indicating any of the alleged entry operator taking the assessee’s name for providing accommodation entry its by way of the long terms capital gains. We notice in this backdrop of the fact that this tribunal’s co-ordinate bench’s decision in ITO vs. Shri Surersh Chand Gupta ITA No.1730/Kol/2017 decided on 26.122018 has reversed the identical addition of LTCG treated as unexplained cash credits for lack of evidence as follows:- “3. Learned CIT-DR vehemently contends during the course of hearing that the Assessing Officer had rightly added assessee’s alleged LTCG to be bogus in nature after rejecting genuineness / creditworthiness of its explanation. He quotes hon'ble apex court’s landmark decisions in Sumati Dayal vs. CIT (1995) 80 Taxmann 89/214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) that any explanation submitted in income tax proceedings has to be appreciated in the light of human probabilities than on mechanical aspects. His further case is that assessee has availed entries from entry operators regarding the impugned LTCG. These entry operators are stated to have deposed in their search statements that they had rigged prices of M/s NCL Research and Financial Services Ltd. followed by impugned entries on sale of shares therein. We find no merit in Revenue’s instant arguments. This tribunal’s decision in ITA No.1551/Kol/2018 in D.D. Agarwal (HUF) vs. ITO decided on 16.11.2018 has already declined the Revenue’s similar arguments qua the very scrip quoting a catena of case law as follows:- “2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s NCL Research & Financial Services Ltd. The AO based on a general report and modus operandi adopted generally in these cases and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the share as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transaction was rejected.

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 15 3. The assessee carried the matter in appeal and the ld. CIT(A), Kolkata, had upheld the addition. The ld. CIT(A) has in his order relied upon “circumstantial evidence” and “human probabilities” to uphold the findings of the AO. He also relied on the so called “rules of suspicious transaction”. No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, assessee based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. 4. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. Some of the cases were detailed finding have been given on this issue are listed below:- Sl.No ITA No.s Name of the assessee Date of order / judgment 1 1236-1237/K/17 Manish Kumar Baid & Others vs ACIT 18.08.2017 ITAT-Kolkata 2 443/Kol/2017 Kiran Kothari (HUF) vs.ITO 15.11.2017 3 22 of 2009 CIT, Kolkata-III vs. Bhagwati Prasad 29.04.2009 Calcutta High Agarwal Court 4 456 of 2007 CIT vs Shri Mukhesh Ratilal Marolia 07.09.2011 Bombay High Court 5 18 of 2017 Punjab Pr. CIT(Central) Ludhiana vs Sh. Hitesh 16.02.2017 and Haryana High Gandhi Court 6 95 of 2017 Punjab Pr. CIT vs. Prem Pal Gandhi 18.01.2018 and Haryana High Court 7 2281/Kol/2017 Navneet Agarwal, Legal Heir of Late 20.07.2018 ITAT-Kolkata Kiran Agarwala vs ITO, Ward-35(3), Calcutta 5. We are bound by the proposition of law laid down in these case law by the jurisdictional High Court as well as by the ITAT Kolkata. They are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon'ble High Courts and the ITAT.”

This tribunal’s yet another decision in ITA No.838/Kol/2017 Smt. Nalini Bothra vs. ITO decided on 16.11.2018 qua the very scrip reads as follows:- “5. We are given our thoughtful consideration to rival contention. We first of all find that this tribunal’s co-ordinate bench’s order in Neeraj Gupta vs. ITO in ITA No.863/Kol/2018 rejects Revenue’s identical arguments regarding the said assessee’s LTCG derived from sale of shares held in M/s NCL Research Finance Services Ltd. as follows:- “2. The sole issue that arises for my adjudication is whether the Assessing Officer was right in rejecting the claim of the assessee that he had earned Long Term Capital Gains on purchase and sale of the shares of M/s UNNO Industries Limited and M/s

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 16 NCL Research & Financial Services Ltd. The AO based on a general report and modus operandi adopted generally in these cases and on general observations has concluded that the assessee has claimed bogus long term capital gain. He made an addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) of the Act. The evidence produced by the assessee in support of the genuineness of the transactions was rejected. 3.The assessee carried the matter in appeal and the ld. CIT(A), had upheld the addition. The ld. CIT(A) has in his order relied upon “circumstantial evidence” and “human probabilities” to uphold the findings of the AO. He also relied on the so called “rules of suspicious transaction”. No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. In other words, the overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entre conclusions drawn by the revenue authorities, are based on a common report of the Director o Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. 4. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisaton, human probabilities, suspicion, conjectures an surmises. We have in all cases deleted such additions. Some of the cases were detailed finding which are listed below:- Sl. No. ITA Nos. Name of the Assessee Date of order / judgment 1. 1236-1237/K/17 Manish Kumar Baid & Others vs. ACIT 18.08.2017 2. ITA – Kolkata 2443/Kol/2017 Kiran Kothari (HUF) vs. ITO 15.11.2017 3. 22 of 2009 CIT, Kolkata-III vs Bhagwati Prasad Agarwal 29.04.2009 Calcutta High Court 4. 456 of 2007 CIT vs. Shri Mukesh Ratilal Marolia 07.09.2011 Bombay High Court 5. 18 of 2017 Punjab PR. CIT (Central) Ludhiana vs Sh. Hitesh 16.02.2017 and Haryana High Gandhi, Court 6. 95 of 2017 Pr. CIT vs. Prem Pal Gandhi 18.01.2018 Punjab and Haryana High Court 7. 2281/Kol/2017 Navneet Agarwal, Legal Heir of Late Kiran 20.07.2018 ITAT – Kolkata Agarwal vs ITO, Ward-35(3), Calcutta ITA No. 863/Kol/2018 Assessment Year: 2014-15 Neerj Gupta. 5. I am bound by the proposition of law laid down in these case law. They are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon'ble High Courts and the ITAT. 6. The ld. Departmental Representative filed detailed written submissions and relied on the judgment of the Hon'ble Supreme Court in the case of Securities and Exchange Board of India vs Rakhi Trading Private Ltd in Civil Appeal No.1969 of 2011 with Civil Appeal Nos. 3174-3177 of 2001 and Civil Appeal No.3180 of 2011. The ld. Counsel for the assessee submits that there is no surviving order of SEBI against the assessee or the company, the script of which was purchased and sold by the assessee. When there is no surviving adverse order of SEBI, against the claim of the assessee, the judgment of the Hon'ble Supreme Court cannot be applied to the facts of this case. 7. In view of the above discussion the addition in question is deleted and the appeal of the assessee is allowed.” It also emerges that this tribunal’s yet another co-ordinate bench’s decision in Navneet Agarwal vs. ITO in ITA No.2281/Kol/2017 decided on 20.07.2018 has rejected Revenue’s similar arguments going by suspicious circumstances than based on evidence as follows:- “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 ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 17 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 record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the 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 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. 15.In our view, just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. In this connection we refer to the general view on the topic of conveyance of immovable properties. The rates/sale price are at variance with the circle rates fixed by the Registration authorities of the Government in most cases and the general impression is that cash would have changed hands. The courts have laid down that judicial notice of such notorious facts cannot be taken based on generalisations. Courts of law are bound to go by evidence. 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However,

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 18 we do not find that the assessing officer as well as the Ld. CIT(A), have brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the assessing officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. We, however, find that the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 17. The Hon’ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon’ble Court held: “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

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 19 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. 18. We now consider the various propositions of law laid down by the Courts of law. That cross-examination is one part of the principles of natural justice has been laid down in the following judgments: a) AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors. “23. A Constitution Bench of this Court in State of M.P .v. Chintaman Sadashiva Vaishampayan AIR 1961 SC1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross- examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas TeaEstate v. Workmen, AIR 1963 SC 1719; M/s. KesoramCotton Mills Ltd. v. Gangadhar and Ors. ,AIR 1964 SC708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448;Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v.Saroj Kumar Sinha AIR 2010 SC 3131). 24. In Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, this Court, while dealing with a case under the Central Excise Act, 1944,considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alterampartem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross- examination.

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 20 29. In Rajiv Arora v. Union of India and Ors. AIR 2009SC 1100, this Court held: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review. 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross- examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice.” b) Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II wherein it was held that: “4. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the Assessee, and Mr. K.Radhakrishnan, learned senior counsel who appeared for the Revenue. 5. According to us, not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them. 6. As mentioned above, the Appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005[2005 (187) E.L.T. A33 (S.C.)] was passed

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 21 remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 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.” 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTAHIGH COURT in the case of BLB CABLES &CONDUCTORS[ITA No. 78 of2017] dated19.06.2018. The High Court held vide Para 4.1: “…………we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee’s appeal.” [quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us who would negate the Tribunal’s finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of 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 JAIPUR ITAT in the case of VIVEK AGARWAL[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 AO 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 ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 22 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 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 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 assesse/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

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 23 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 KOLKATA ITAT in the case of SHALEEN KHEMANI[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 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 MUMBAIITAT 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 ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 24 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 I.T.A. No. 22/Kol/2009 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.” 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 Gujrat 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.” 20. Applying the proposition of law as laid down in the above-mentioned judgments to the facts of this case we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question is a bona fide Long Term Capital Gain arising from the sale of shares and hence exempt from income tax. 21.Under the circumstances and in view of the above discussion, we uphold the contentions of the assessee and delete the addition in question.” 6. We afforded sufficient opportunity to the Revenue for indicating any material on record indicating the assessee’s nexus with the alleged share price rigging or her name having specifically mentioned in any search statement. There is no such material forthcoming from the case file. We therefore adopt the above detailed reasoning mutatis mutandis to delete the impugned addition of unexplained LTCG.”

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 25 4. We adopt the above detailed reasoning mutatis mutandis to delete the impugned addition of ₹3,26,63,032/- made in assessment order as affirmed in lower appellate proceedings. The former assessee succeeds in appeal ITA No.2275/Kol/2018. 5. Coming to latter two appeal(s) filed at the Revenue’s behest (supra), there is no dispute that the Assessing Officer had adopted identical reasoning in disallowing the losses in issue to the tune of ₹78,25,188/- and ₹1,44,20,606/-; respectively after alleging holding same to be bogus entries. The CIT(A)’s findings reversing the said identical addition read as follows: “I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The facts of the case are that the AO in treating the share trading loss of sum of Rs78,25,188/- as bogus in nature. The appellant is a public limited company engaged in the business of Non-Banking Financial activities. The appellant for the year under consideration filed its return of income declaring income of Rs 30,26,790/-. The said income was declared after claiming loss on purchase and sale of equity shares of Rs 78,25,188/-. The said loss was incurred for 17,000 equity shares of Blue Circle Service Ltd of Rs 9,60,171/- and for 48,550 equity shares of Tuni Textiles Ltd of Rs 68,65,017/-. The AO in the assessment order alleges that, he has received some information from the investigation wing, Kolkata about the appellant that it has claimed bogus/fictitious loss by trading in scripts namely 'Blue Circle Services Ltd' & 'Tuni Textile Ltd'. Finally, the AO relying entirely upon the information of the investigation wing, Kolkata held that loss incurred by appellant company by trading in scripts of Blue Circle Services Limited amounting to Rs9,60,171/- and Tuni Textile Mills Ltd amounting to Rs 68,65,017/- are fictitious loss. The AR has submitted that during the course of scrutiny assessment proceedings the assessee's letter dated 15.03.2016 and 18.03.2016 filed in the office of AO and the said letters included complete details of purchase, sale, payments, movement of shares, Contract Notices received from respective Stock Exchange loss/ gains etc. in respect each and every shares which were traded by the appellant during the relevant year, The documents, evidences filed by the appellant were not found to be bogus or false, There was no irregularity or discrepancy pointed out by the AO in respect of details filed by the appellant during the relevant claim that the share loss is a genuine loss. The AR further has submitted that in the assessment order; besides relying upon the general report of the investigation wing, Kolkata. the AO has not brought on record any cogent, relevant evidences and facts which can prove that in reality there was no purchase & sale of shares by the appellant or the loss incurred by the appellant was a bogus loss, The AR has further submitted that the appellants being a registered NBFC, its main income is only from share trading and interest income, Purchase and sale of shares is the regular business activity of the appellant It is not that the appellant has only dealt in shares of these two companies, The appellant has traded in number of scripts which has resulted in profits as well as losses also, So, it's a regular business activity of the appellant company, The appellant filed complete details of entire share transaction including those mentioned herein above before the AO, Such details included Statement of quantity of shares

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 26 purchased and sold of each scrip, scrip wise profit and loss earned during the relevant year, details of purchase and sale of Tuni Textile Mills Ltd and Blue Circle Services Ltd along with Contract Notes received from respective Stock Exchange including settlement number, demat statement (issued by the Depository participant) showing inward and outward .movement in such scripts, Copies of bank statements were also furnished to substantiate the payments made and payments received in respect of trading of shares of these scripts and an explanation was also filed vide letter dated 15,03,2016 explaining as to why no disallowance of share loss should be made by the AO, The AR further submitted that the scripts were not suspended by SEBI either at the time of transaction entered by the appellant or thereafter. There is no denial of any of the transaction of either purchase or sale by the stock exchanges where the transactions were entered upon. The shares were purchased and sold at prevailing market rate through the stock exchange and the entire transactions were routed through proper Banking channel. The shares were duly reflected in the demat account of the appellant company. The AR of the appellate also placed his reliance on various judgements as mentioned above in his submissions, I have gone through the submissions along with document as filed by the AR during the appellate proceeding. I find that all the transactions were executed in the relevant year, the purchase and sale of shares were made through online trading system. I find from the perusal of paper book filed along with written submissions that the Contract Notes were received from respective Stock Exchange in support of purchase and sale of such shares, Similarly the demat account and bank statement of the appellant company placed in the paper book reflect all the transactions of the appellant. I find that from the materials available in paper book, it can safeIy be concluded that the transactions were complete in terms of documentation and there was no defect in the papers submitted by the appellant in support of the transactions. The appellant has proved the transaction on the basis of documents and therefore the general report of the investigation wing without considering the positive evidences as well as without establishing any nexus with any of the operator with the appellant company should be held to be invalid. No investigation has been carried out by the AO or by the investigation wing to bring on record any material to disbelieve the claim of the appellant. The AO or the investigation wing has made academic discussion regarding the probability of the appellant having entered into transactions in collusion with operator of scripts with a view to claim loss in share trading business and thereby reducing the taxable income and tax liability. In fact there is no evidence that the prices of the scripts have been deflated by the appellate to take advantage to avoid tax. The AO has not doubted the purchase or sale price prevailing at the material point of time. It is a settled law by now that no addition or disallowance should be made or sustained on conjectures, speculation and suspicion, how high or strong they may be, because suspicion and surmises without any evidence cannot take the place of proof. I find that the AO did not discharge the burden which had shifted on him and had just mechanically adhered to disallow the loss on the basis of general report of the investigation wing, claimed by the appellant without rebutting any of the submissions of the appellant. The Assessing Officer had not dealt with the specific facts of the case. Merely making certain observations on the basis of assumptions and drawing an adverse inference thereon, without any acceptable evidence on record. I find that in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, is entitled to sustain. I find that the AO disallowed the loss of Rs.78,25,188/- suffered by the assessee company solely on the basis of the information of the Investigation wing without

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 27 making any independent enquiry in respect of the assessee company's transactions of purchase and sale of shares of the two companies viz. Blue Circle and Tuni Textiles. The AO disregarded the submissions of the assessee company and all legal evidences produced / furnished by it in relation to the aforesaid loss in the transactions of purchase and sale of the shares of the two companies. The Assessing Officer did not bring on record any legal evidence or material on record to hold that the appellant's transactions relating to purchase and sale of shares of the aforesaid two companies were manipulated/prices rigged/bogus. I find that the appellant had discharged its onus of by furnishing all evidences but the AO has not discharged his onus by making fresh enquiry and proving that the documents / evidences as filed by the appellate are proved to be false or bogus. It is difficult, if not impossible, to hold that the transaction of buying and selling of shares was a colourable transaction or was resorted to with any ulterior motive of reducing the tax payable. The assessee produced the contract notes, details of his DEMT account and, also, produced documents showing that all payments were received by the assessee through bank. It cannot be said by any stretch of imagination that any loss was generated. The opinion that the assessee generated a sizable amount of los:, out of pre-arranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the Assessing Officer, but he miserably failed to substantiate that Loss might have been suffered. If the loss was suffered. then appropriate deduction has to be made and there is no reason why the Assessing Officer should have refused to do so. The transactions were carried out at the prevailing price. Therefore, the question of generating loss could not have arisen. The suspicion entertained by the Assessing Officer was misplaced or in any event not substantiated. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through d-mat format. The assessee, however, clarified that he had carried out all the transactions of purchase and sale of those shares through registered share brokers and that they had issued the contract notes which had been duly submitted. It was also pointed out that the consideration for purchase and sale of those shares have been paid or received through banking channels and copies of bank statements have also been submitted. It further appeared that on purchase of these shares the delivery was taken in Demat account and similarly when the shares were sold, the delivery to the respective brokers have also been given through Demat account. The copy of the Dernat account was also submitted during the assessment proceeding and the same has also been filed during the appellate proceeding (PB page-267 to 270). The Assessing Officer had not brought anything on record to prove that there was any connivance between the assessee and the share brokers. The Assessing Officer himself had not brought anything on record to prove that the transactions of purchase and sale of the shares in which the assessee had suffered the loss were not genuine transactions. The appellate had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. The AR of the appellate also placed his reliance in various judgement including of jurisdiction High court and ITAT as mentioned above in is submission. Keeping in view of above, I am of the view that the appellate had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. The AO has made the addition simply on the basis of general report of the investigation wing. Accordingly, the AO is directed to delete the addition and this ground of appeal is allowed.”

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 28 There is no dispute that the CIT(A) had adopted the very reasoning in Revenue’s latter appeal ITA No.1496/Kol/2017 for assessment year 2014-15 s well.

ITA No.2275/Kol/2018, 1495-1496/Kol/2017 A.Ys. 14-15, 13-14 & 14-15 Sh S Banerjee Vs.ACIT, Cir-51(1), Kol. & ITO Wd.4(1) Kol. Vs. M/s Tribute Trading & Finance Ltd Page 29

आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:- 1. आवेदक /Assessee -Sri Subrata Banerjee, 20, Cape Tower, C-1, Hiland Park,Kol-107 M/s Tribute Trading & Finance Ltd. 2nd Fl,3, Bentick St, Kolkata-001 2. राज"व /Revenue-ACIT, Cir-51(1), DS-2&3, Maniktalla Civic Centre, Uttarapana, Kol-54 ITO Ward-4(1) 8th Fl, Ayakar Bhawan, P-7, Chowringhee Sq., Kolk-69 3. संबं4धत आयकर आयु5त / Concerned CIT Kolkata 4. आयकर आयु5त- अपील / CIT (A) Kolkata 5. 8वभागीय "(त(न4ध, आयकर अपील"य अ4धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड= फाइल / Guard file. By order/आदेश से, // उप/सहायक पंजीकार आयकर अपील"य अ4धकरण, कोलकाता ।