SHRI UDIT AGARWAL,KOLKATA vs. DCIT(IT)-2(1), KOLKATA, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri S.S.Godara, Judicial Member and Shri, M. Balaganesh, Accountant Member ITA No.1839/Kol/2017 Assessment Year :2014-15 Shri Udit Agarwal V/s. DCIT (IT)-2(1), 110, 3, Madan Mohan Burman Shanti Pally, Kolkata- Street, Kolkataa-007 107 [PAN No.AHUPA 0424 B] .. अपीलाथ� /Appellant ��यथ�/Respondent Shri Subash Agarwal, Advocate अपीलाथ� क� ओर से/By Appellant Shri Robin Choudhury, Addl. CIT-DR ��यथ� क� ओर से/By Respondent 03-12-2018 सुनवाई क� तार�ख/Date of Hearing 26-12-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-22,Kolkata’s order dated 10.05.2017 passed in case No.71/CIT(A)/22/Kol/14-15/16-17 involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the learned representatives. Case file perused. 2. The assessee’s sole substantive ground challenges correctness of both the lower authorities’ action treating its Long Term Capital Gains (LTCG) of ₹64,99,391/- to be unexplained cash credits u/s 68 of the Act. The CIT(A)’s detailed discussion to this effect reads as under:- ”06. DECISION: 1. I have carefully considered the action of the Ld. AO in treating the amount of Rs.67,24,391/- being claimed by the appellant to be proceeds of shares sold to be LTCG and claimed as exempt. The findings of the Ld. AO are based on the information being supplied by the Investigation wing of the Department at Kolkata. I have also carefully examined the submissions of the appellant, wherein

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 2 he has cited several cases wherein the claim has been made that the decisions are in his favour. I have also carefully examined the submissions filed by the appellant assessee before the Ld. AO during the course of the scrutiny assessment. On perusal o the sub mission filed by the assessee, report received from DGIT(Inv.),Kolkata and available records, the following noteworthy features of the transactions have surfaced as disclosed hereunder: Tunl Textile Mills Stand alone balance sheet …. In Rs Cr…. Equities and liabilities Mar 15 Mar 14 Mar 13 Mar 12 Mar 11 shareholders fund Equities share capital 13.18 13.18 13.18 13.18 13.18 Total share capital 13.18 13.18 13.18 13.18 13.18 Reserves and surplus -0.85 -0.92 -1.17 -1.17 -1.47 Total Reserve and surplus -0.85 -0.92 -1.17 -1.27 -1.47 Total shareholders funds 12.33 12.36 12.01 11.91 11.71 Non current liabilities Long Term Borrowings 0.45 0.59 0.97 0.58 1.59 Long Term provisions 0.14 0.09 0.06 0.04 0.03 Total Non current liabilities 0.59 0.68 1.02 1.63 1.62 Current Liabilities Short term borrowings 4.02 3.93 3.87 3.11 2.49 Trade payables 2.64 4.71 6.33 3.72 4.78 Other current liabilities 0.50 1.03 0.90 1.06 1.16 Short term provision 0.06 0.09 0.11 0.10 0.13 Total capital & liabilities 20.14 22.71 24.25 21.52 21.89 ASSETS Non current assets Tangible Assets 3.68 4.25 4.80 5.16 4.19 Capital work in progress 0.00 0.26 0.12 0.00 0.00 Fixed assets 3.68 5.51 4.92 5.``6 4.19 Non Current investments 0.11 0.11 0.10 0.10 0.10 Deferred tax assets (Net) 0.72 0.71 0.67 0.75 0.84 Long term loan & advances 0.07 0.07 2.03 3.90 4.87 Other non-current assets 0.40 0.40 0.35 0.29 0.23 Total Non current assets 4.99 5.79 8.87 10.19 10.23 CURRENT ASSETS Inventories 9.41 110.39 9.07 6.98 6.00 Trade receivables 4.91 5.66 6.12 3.87 5.26 Cash and cash equivalents 0.14 0.16 0.10 0.07 0.06 Short term loan & advances 0.66 0.68 0.86 0.33 0.28 Other current assets 0.03 0.03 0.03 0.08 0.06 Total current assets 153.15 16.92 16.18 11.33 11.66 Total assets 20.14 `22.71 24.25 21.52 21.89 Tuni Textile Mills Previous Year Standalone Profit & loss account …..in Rs. Cr…. Mqar’15 Mar’14 Mar’13 Mar’12 Mar’11 Income Sales Turnover 29.76 24.52 19.32 22.01 18.30 Net sales 29.76 24.52 19.32 22.01 18.30 Other income 0.20 0.22 0.07 0.07 0.12 Stock adjustments -1.35 1.05 1.17 0.71 0.08 Total income 28.61 25.79 20.76 22.79 19.50 Expenditure Raw materials 23.75 20.57 16.03 18.82 16.39 Power & fuel cost 0.50 0.89 0.68 0.51 0.33 Employee cost 1.27 1.34 0.91 0.83 0.78 Other manufacturing expenses 0.74 1.15 0.81 0.52 0.37 Miscellaneous expenses 0.57 0.12 0.71 0.50 0.51 Total expenses 26.83 24.07 19.14 21.18 18.38 Operating profit 1.58 1.50 1.35 1.54 1.00

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 3 PBDT 1.78 1.72 1.62 1.61 1.12 Interest 0.93 0.96 0.91 0.84 PBDT 0.85 0.76 0.71 0.77 0.50 Depreciation 0.82 0.54 0.54 0.48 0.62 Profit before tax 0.03 0.22 0.17 0.29 PBT(Post Extra-odd items) 0.33 0.22 0.17 0.29 0.30 Tax -0.02 -0.03 0.08 0.09 0.32 Reported net profit 0.05 0.25 0.10 0.20 0.32 Total value addition 3.08 3.50 3.11 2.35 0.10 0.10 0.23 1.99 Per share data (annualized) Shares in issue (lakhs) 1,306.3 1,306.31 1,306.31 1,306.31 1320.63 Earning per share (Rs) 0.00 0.02 0.01 0.02 0.18 Book value (Rs) 0.94 0.94 0.92 0.91 8.96 d. It is also noteworthy that the operating profit and Reported net profit were infinitesimally small all through the period. The EPS of the company (which reflects the financial health of a company) was absolutely negligible throughout the period. e. During the period, no material corporate announcement was made by Tuni Textile which could suppsort such price rise in its scrip. Thus, the sharp rise in the price of the scrip of Tuni Textile during the period was not supported by its fundamentals or any other genuine factor. Strangely, in spite of such trifling fundamentals the share price rose to abnormally high level. Investment in a company having such poor and meager fundamentals cannot prima facie be termed as a rational investment behavior. Since period to the trading in its scrip during the Examination Period, financial standing in the securities market and the only way it could have increased its share value is by way in market manipulation. Similar upswing of prices of shares have been observed in case of some other companies, whose fundamentals are not justifying the northern movement of the stocks. The SEBI has suspended trading in 26 Scrips of such penny stocks. f. On investigation and analysis of the trend, it is deducted by the SEBI that circular trading and price rigging by the operators were responsible for such momentous price rise of a stock, defeating the fundamentals of the stock market. The SEBI also analyzed the data to infer that all the persons involved in this unscrupulous trading activity “misused the stock exchange mechanism to provide exit to allottee at a higher price in order to generate fictitious Long Term Capital Gain (LTCG)’. It is observed that the assessee offloaded the shares at the absurdly high price [almost 5 times the purchases price]. The relevant data of some of the transactions have been analyzed. On analysis it is seen that paper companies floated by various operators purchased those shares of extremely high price, which normally did not have any business prudence. It is also highly significant that the price of the shares fell very sharply after the shares of LTCG beneficiaries were off loaded through the pre-arranged tan on the Stock Exchange floor/portal to the Short Term Loss seekers or dummy paper entities. g. The statement of Narendra Probu Dayal (Promoter of Tuni Textile Mills Limited, as forwarded by the Investigation Wing) was recorded on 022.06.2015. The relevant extracts are as under follows. [quote] Statement on oath recoded of Shri Narendra Prabhudayal Sureka, aged 61 years S/o Late Prabhudayal C. Sureka, on 02/.06.2015 u/s 131 of the Income Tax Act, 1961., during the course of Survey proceedings u/s. 133A of the IT Act, 1961 in the case of M/s Tuni Textile Mills Limited, Room No.53/54, 3rd Floor,63/71 Dadiseth Aglary Lane, Kalbaadevi Road, Mumbai-400002.

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 4 OATH ADMINISTERED Ï swear in the name of God that I shall speak truth, only the truth and nothing but the truth”. BEFORE ME Sd/- Sd/- Mantu Kumar Das Narendra Prabhudayal Surreka DDIT(Inv.)U-5(4), Mumbai DEPONENT Q.1 Please identify yourself and confirm that Oath has been administered on you and you were made aware of giving false statement under oath, before a public authority? Ans. I am Narendra Praphudayal Sureka, aged 61 years, S/o Shri Prabhudayal Surekha, residing at Ashray, 78, Hatkesh Society, 9th Road, JVPD Scheme, Vile Parle West, Mumbaii-54, I confirm that the oath has been administered to me and I have been made aware of the consequences of giving a false statement on oath before a public authority. Q-2 Please give your Educational Qualification? Also, please confirm that you can read, write and understand English language completely? Ans. My educational qualification is B.Com. I further confirm that I can read, write and understand English language and I shall be comfortable, if any statement is recorded in English. Q.3 Please state your PAN? Also state with whom you are assessed to tax and up to which year you have filed your return of Income? Please provide the copy of Income Tax return from AY 2015-16. Also, state your source of Income? Ans. My PAN is AACPP8853C. I do not know my exact Ward office. I have filed return of income till date i.e. upto A.Y 2014-15. I am providing you a copy of my PAN. Sir, my source of income is remuneration as a Director of M/s Tuni Textile Mills Ltd. and income fro other sources. Q.4 Please give the details of your family members residing with you and their occupation? Ans. The following members are residing with me. Sl.No. Name Relationship Occupation 1 Smt Urmila N Sureka Wife Directo of M/s Tuni Textile Ltd 2 Shri Pradeep P Sureka Brother Director of M/s Tuni Textile Mills Ltd. and promoter/shareholder of M/s Yeshmank Infn. Pvt Ltd. 3 Smt. Annapurna P Sureka Sister-in-law Housewife 4 Smt. Geetadevi P Sureka Mother Housewife 5 Shri Archit P Sureka Brother’s son Student Q.5 Please give the details of movable and immovable properties owned by you and your family members? Ans. Sir, the house at Ashray,a 78 Hatkesh Society, 9th Road, JVPD scheme, Vile Parie West, Mumbai-49 is udner “pagdri” system , and I have no other immovable property. My brother Shri Pradeep P Sureka has flat in his name in Pune. This office premise at Room No.53/54, 3rd floor, 63/71. Dadiseth Agiary Lane, Kalbadevi Road, Mumbai-400002 is in the name of the company M/s Tuni Textile Mills Ltd and the name of my father, Late Shri Prabhudayal Sureka. The factory premise at B-4/5, MIDC Murbad, hane is in the name of the company. Q.6 Please give the details of companies or Firms in which you are Director, Partner or Proprietor along with your share holding or share in the company and partnership firm respectively. Please also state your e-mail IDs and your passwords? Ans. I am Managing Director in M/s Tuni Textile Mills Ltd. My share holdings in this company are approximate 40 lakh shares. Other than the above company I

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 5 am not a director or partner or proprietor in any other companies/firm. My official email-ID is iinfo@tunitextxiles.com and the password is tunitextile 1234. Q.7 Please state from where the company M/s Tuni Textile Mills Ltd run from, Also state what is the business of the companies? Please also state where the books of account of the company are maintained? Ans. The Company is in the business of manu9facturing of cloths from Yam. The company is registered in Mumbai and the registered address is Room No.53/54, 3rd floor, 63/71, Dadiseth Aglary Lane, Kalabadevi Road,Mumbai-400002. The company also has a factory premise at B-4/5, MIDC Murabad, Thane. All the books of account are maintained in this Mumbai Office only and in no other office. Other than these two, no any other address are there of the company. Q8. Please confirm that the books of account of M/s Tuni Textile Mills Ltd are kept only at this office premises at Room No.53/54, 3rd Floor, 63/71, Dadiseth Aglary Lane, Kalbadevi Road, Mumbai-400002 and at no other premises. Sir, the books are maintained in tally software since FY 2014-15 and in “Foxpro” based customized software since FY 2011-12 to FY 2013-14. Q.9 Please state since when you are in the Director/Managing Director of M/s Tuni Textile Mills Ltd. Also state your role as Managing Director in M/s Tuni Textile Mills Ltd. Also state in which year the company was listed with BSE. Ans. Sir, I am Managing Director in this company since 06.07.1987 i.e. since incorporation of the company. Sir, as a Managing Dire tor I look after all the affairs of the Company. I am the final authority in respect of entire business activity and all financial matters. To the best of my knowledge the company was listed with the BSE in 1996. Q.10 Please state the name of the other directors of the company M/s Tuni Textile Mills Ltd and also state who appointed them. Ans. Sir, the details of the other directors of the company are as follows: Sr. Name DIN Date of Place of No. appointment residence 1 Kumar Pramod Prasad 01438374 01.02.2005 Mumbai Kashi Bajaj 2 Pradeep P Sureka 01632706 06.07.1987 Mumbai 3 Urmila Sureka 02344028 23.03.2015 Mumbai 4 Kamalji W Dixit 06952563 13.02.2015 Thane 5 Aditdya Proshottam Khaitan 07009083 13.02.2015 Thane Sir, the directors who have joined after me have been appointed by me as a I am the Managing Director and Chairman of the company. Q.11 Please explain the role and responsibilities of these directors and tell the nature of work done by these directors in M/s Tuni Textile Mills Ltd. Ans. Sir, I only look after the do day to day activities of the company. Shri Pradeep P Sureka looks after the marketing division of the company. the other directors have no participation in day to day affairs of the company. I brief them on a regular basis about the day to day affairs of the company and any other activity. Q.12 Please state whether the company M/s Tuni Textile Mills Ltd has issued shares on preferential basis? If so, please provide a list of all the entries/individu9als which have purchased the shares of M/s Tuni Textile Mills Ltd on a preferential basis? Ans. Sir, I am submitting the list of preferential allotees as Annaexutre-1 to this statement. A share capital of Rs.7,50,00,000/- was raise by issuing Rs.75,00,000/- at (Rs.10 face value) to 47 HUFs/individuals on 25.01.2010. Q.13 Please provide the original copy of the application form of preferential allottees as listed in Annexure-1 to this statement? Ans. Sir, I do not have any of the documents.

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 6 Q.14. Please explain the measures that were taken by you for raising money through preferential allotment? Ans. Sir, I have not taken any measure to raise money through preferential allotment. Q.15. Please produce the offer document that was issued by M/s Tuni Textile Mills Ltd. for raising money through share prescription? Ans. Sir, no offer document was issued. Q.16 Were any advertisements issued to let the public know about the preferential offer of M/s Tuni Textile Mills Ltd? Ans. No. Sir, no advertisements were issued in this regard. Q. 17. Please state whether M/s Tuni Textile Mills Ltd. Textile has declared dividend to the shareholders since FY 2008-09 to till date? Ans. Sir, I do not know anything about the HUFs/individuals which have purchased the shares of M/s Tuni Textile Mills Ltd. on preferential basis. Q.18 Please tell what you know about the HUFs/individuals which have purchased shares of M/s Tuni Textile Mills Ltd. at a premium? Ans. Sir, I do not know anything about the HUFs/individuals which have purchased the shares of M/.s Tuni Textile Mills Ltd. on preferential basis. Q.19. You have stated on oath that you do not know about any of the entitles/individuals which have purchased the shares of M/s Tuni Textile Mill Ltd on preferential basis. Please explain as to how these HUFs/individuals invested in the shares of M/s Tuni Textile Mills Ltd. How were these HUFs/individuals approached and where did you meet them? Ans. Sir, I know one Shri Manish Baid his Mob. No.9820051103 (having his office at 8th Floor. Reheja Tower ,Noriman Point, Mumbai in the name of GCM Securities) trough a common friend, Sir the company M/s Tuni Textile Miss Ltd was delisted due to non-compliance with the statutory requirements of BSE. Thereafter, due to change in govt. policy and economic scenario, the company M/s Tuni Textile Mills Ltd incurred losses. Then we applied with BIFR in the year 2000. This unit was declared sick unit on 16.04.20002. Thereon, the company wanted to revive, however, no financial institution was forthcoming to finance the company. In pursuance of finance for the company, i came in contract with Shri Manish Baid, Shri Manish Baid suggested me the route of preferential shares to raise capital. He brought all the parties who have invested in the company through preferential share allotment. I have never met these parties and I have no knowledge about their business activities. Q.20. You have stated that you do not know anything about any of the HUFs/individuals which have subscribed the share of M/s Tuni Textile Mills Ltd on preferential basis and you have never met any of them. You have also stated that these HUFs/Individuals invested in shares of M/s Tuni Textile Mills Ltd through Shri Manish Baid. Please confirm. Ans. Sir,I confirm that I do no t know the details of the HUFs/individuals which have invested in shares of M/s Tuni Textile Mills Ltd and I have never met any of them. I once again confirm that all the parties wre introduced to the company by Shri Manish Baid. Few of the investors including Shri Manish Baid (Sl.No.17,18,37,39 and 40 of Annaexure-1) though the route preferential shares allotment are the family members of Shri Manisih Baid. Q.21. Please produce the details of the AGMs that were held during last 6 years i.e. from FY 2009-10 in the case of M/s Tuni Textile Ltd, and please produce the minutes and attendance registers for the same. Please tell where these AGDMs were held? Ans. Sir, the AGMs were held as follows: Date of AGM Place of AGM Time of AGM 63/71, Dadiseth Aglary Lane, 3rd Floor, Kalbadevi 30.09.2010 12.30 AM FY 2009-10 Road,Mumbai-2

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 7 30.09.2011 Rame Guest Line Hotel, 462,AB Nair Road, Opp.Sun- 11.30 AM Financial N-Sand Hotel, Juhu Vile Parle (West), Mumbai year.2011-12 28.09.2012 Rame Guest Line Hotel, 462, AB Nair Road, Opp.Sun- 11.30 AM FY 2011-12 N-Sand Hotel, Juhu Vile Parie West),Mumbai 2012-13 Rame Guest Line Hotel, 462, AB Nair Road, Opp.Sun- 11,30 AM N-Sand Hotel, Juhu Vile Parie (West), Mumbai 26.09.2014 Rame Guest Line Hotel, 462, AB Nair Road, Opp.Sun- 11.30 AM FINANCIAL N-Sand Hotel,Juhu Vile Parle (West), Mumbai YEAR 2013-14 Sir, I am producing the AGM file contains the minutes of the above. AGMs, I am also providing you the attendance registers for FY 2011-12, fy 201-213 and FY 2013-14. In respect of the attendance register for FY 2009-10 and FY 2010-11 are not available at present. Q.22 Please provide the copy of the notices sent to the shareholders list in Annexure-1 to this statement? Ans. Sir, I am not able to provide you the same. Q.23 Please confirm that the registers of the AGMs for the FY 2011- 12(Annexure-A3 page no.1 to page no.4) FY 2012-13 (Annexure-A4, page no.1 to page no.2) and FY 2013-14 (Annexure-A2, page no.1 to page no.2) is provide by you. Please confirm that the same is impounded. It is observed from the minutes of the meeting of AGM and attendance register of AGM provide by you., one of the shareholders ass listed in Annexure-1 to this statement have attended the meetings of the AGM. Pease Comment? Ans. Sir, I do confirm that the registers marked as Annexure-A2, A3, and A4 are impounded from this premises at 63/71, Dadiseth Aglari Lane, 3rd Floor, Kalbadevi Road, Mumbai-2, Further, as stated above these parties are not known to me as they were brought by Shri Manish Baid. None of them have ever attended the AGMs of the company, M/sTuni Textile Mills Ltd. Q.24 What was the share price of the shares at the time of preferential allotment of the shares? Ans. Sir, the company was again listed with the BSE on 13.03.2009. As per available records the price of the shares on 10.05.2010 was Rs.0.65/-. Q.25. It is seen that the price of the shares of M/s Tuni Textile Mills Ltd have risen from Rs.065/- on 10.05.2010 to Rs.284.90 on 05.11.2012. This is a rise of 17806% within a span of two years. During this period there has been no corporate announcement by M/s Tuni Textile Mills Ltd which suggests that the company is undertaking any substantial development activity. Further there is no significant increase in turnover of the company. It is also seen from the trading details of M/s Tuni Textiles Mills Learned.” Textile Mills Ltd that all the preferential allottees have sold their shares during the period when the price of the shares were hovering around its peak Le Rs.284.90 on 05.11.2012. Once the preferential allottees sold their shares the price of the shares of M/s. Tuni Textiles Mills Ltd took a dip and the current price of shares as on today Le 02.06.2015 is Rs.0.47/-. In light of these facts kindly explain the phenomenal rise In the price of the shares of M/s. Tuni Textiles Mills Ltd? Ans. Sir, M/s Tunl Textile Mills Ltd Is a penny stock company and the shares of the company have been used to provide entry of bogus Long Term Capital Gain to the preferential allottees. The entire scheme has been managed and controlled by Shrl Manlsh Baid. As stated earlier, Shri Manish Bald has brought the preferential share allottees as investor and entire transaction process related to the parties listed In Annexure-l to the statement have been managed by Shri Manlsh Bald. Q.26. Please explain in detail the modus operandi of providing bogus Long Term Capital Gain in the scrip of M/s. Tuni Textile Mills Ltd?

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 8 Ans. Sir, all these affairs have been entirely managed by Shrl Manlsh Bald. The shares of M/s. Tuni Textile Mills limited were issued to the beneficiaries of bogus Long Term Capital Gain by Shrl Manish Baid. These shares were allotted on preferential basis through the route of private placement. Thereafter, the shares of M/s. Tuni Textile Mills Limited were rigged by way of circular trading and the price of the shares was jacked up. Once a period of one year was over after the issue of preferential shares (pre-requisite for claiming exemption on LTCC), the beneficiaries were asked to deposit cash to Shri Manish Baid and sell their shares on the stock exchange. The shares of the beneficiaries were purchased by bogus/paper entities managed and controlled by Shrl Manish Baid and these bogus/paper companies used the cash provided by the beneficiaries to purchase the shares of the beneficiaries. In this way the unaccounted cash of the beneficiaries were routed to the books of the beneficiaries as entry of Long Term Capital Gain through the route of stock exchange. In this process some entities have also been given entry of Short Term Capital Loss/business loss by way of purchasing the shares at high prices and selling them when the prices have gone down. Q.27. Please state, whether there have been any split of the shares of M/s Tuni Textile Mills Ltd. Also state the requirement to do such an act of split of the shares of M/s. Tunl Textile Mills Ltd.? Ans. Sir, the split of the shares of M/s.Tuni Textile Mills Ltd was carried out on 07.04.2011. The split was earned out as per suggestion of Shri Manish Baid. I have no Idea for the reason/purpose for which such split of the shares of Tuni Textile Mills Ltd. was required. Q.28. Please state, whether any bonus shares were issued In the shareholders of M/s. Tuni Textile Mills Ltd. Also state the requirement to do such an act of issue of bonus shares of M/s. Tunl Textile Mills Ltd? Ans. Sir, no bonus shares were Issued ,to any shareholders of M/s. Tuni Textile Mills Ltd till date. Q.29. I am showing you the statements of as follows: • Shrl Sanjay Vora of Anand Rathi Share Broker • Shrl Blkash sureke/subrata Halder of BSAS Securities Pvt. Ltd. • Shrl Abhlsek Kayan of Dynamic Equities Services Ltd. • Shri Praveen Agarwal of Gateway Financial Services Ltd. • Shri Ashok Kayan of Kayan Securities Pvt. Ltd. • • Pradeep lain of Nkamlchi Securities Ltd. • Pawan K. Kayan of PKC Commodities Ltd & Subh Stock Broking Pvt. Ltd. • Shrl Narendra Belasia of StllC Global Securities Ltd. • Shri Sunil Kumar Kayan of Sunll Kumar Kayan & Co. • Shri Anll Agarwal of M/s Comfort Securities Ltd. The above mentioned parties In the statement within the provisions of Income - Tax Act,1961, under oath have stated that the scrip of M/s.Tuni Textile Mills Ltd. has been used to provide bogus Long Term Capital Gain and Short Term Capital l.oss. Further, the operators Shri Anil Khemka, Arun Kumar Khemka, Jagdish Purohit, Devesh Upadhyaya, Narendra Kr. lain, Navneet Slnghania, Prltam Berla, Praveen Agarwal and others in their swom statement within the provisions of the Income Tax Act,1961 under oath have accepted that they have used their paper companies for accommodation entries In Bogus Long Term Capital Gain & Short Term Capital Loss In the scrip of M/s Tuni Textile Mills Ltd. Please Comment? Ans. Sir, I have stated already that t-M/s Tuni Textile Mills Limited is a penny stock company and the shares of the company have been used to provide entry

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 9 of bogus Long Term Capital Gain and Short Term Capital Loss. These entire affairs have been managed by Shri Manish Baid and only he will be able to explain the same. Q.30. I am once again reminding you that the statement Is being given by you on oath and you are bound by law to speak truth and not to hide any fact. I request you to please go through the responses given by you to the above questions and kindly confirm that you have understood the content of the questions posed to you and you are stating the truth. Ans. Sir, I confirm that I am speaking the truth and I am aware of the consequences of giving false statement on oath. Q.31. Please state, how the amount of Rs. 7,50,00,000/- was treated in the books of M/s Tuni Textile Mills Ltd. Please substantiate the same documentary evidences. Ans. Sir, the amount received as Investment through preference share allotment was utilized for the business affairs of the business activities of M/s Tunl Textile Mills Ltd in the form of Capital Investment. A separate bank account was created for this. Q.32. Please provide the details of the bank account Into which the amount of Rs 7,50,00,000/- which was received from the Investors In lieu of the preference share allotment was deposited. Ans. Sir, for this purpose a separate bank account was opened with Indian Overseas Bank, Nariman Point. The A/c no is 062502000006714. Q.33. Please provide the details of the Capital Investment from 01/04/2009 to till date along with copy of bills/vouchers. Ans. Sir, at present I am unable to provide the same. Q.34. Please provides the details of the bank A/c are maintained by M/s Tuni Textiles Mills Ltd since 01/04/2009. Ans. Sir, I am providing you the details of the bank Alc as Annexure-2 to this statement. No other bank A/c was operational in this period. Q.38. As per the books of account, the cash expenses have been booked till 08/05/2015 and the cash In hand as on 08/05/2015 was Rs.23,96,019/- In such a scenario what was the need to withdraw further cash of Rs.2,00,000/- on 09.05.2015, Rs.8,00,000 on 11.05.2015 and Rs.2,00,OOO/- on 30.05.2015? Please comment. Ans. Sir, there are certain expenses paid to the workers which are yet to be entered in the books. As stated above, I will reconcile the same and provide you the details In due course. Q.35. It is seen from the trial balance (Annexure-3 to this statement) provided by you as on 02/06/2015, the cash In hand is Rs 35,96,019.36/-. However during the course of this survey action at this premise at 63/71, 3rd Floor, Dadiseth Aglary Lane, Kalbadevi Road, Mumbal-2, no physical cash has been found. Please explain the same. Please state, who is the authorized person in M/s Tuni Textile Mills Ltd to withdraw cash from the bank. Ans. Sir, we make salary and wages payments In cash. Salary and wages payments have been made to employees and factory labours, and the same has not been entered into the books in the tally system. I will reconcile the same Is provide the reconciled statement In due course. Sir, I am the authorized person In M/s Tuni Textile Mills Ltd to withdraw cash from the bank. Q.36. Please provide the month- wise cash book since 01/04/2014 to 31/03/2015 and daily cash book since 01/04/2015 to till date. Ans. Sir, I am providing you the same as Annexure-4 to this statement. Q.37. What Is the monthly quantum of these cash expenses? Ans. Sir, the average monthly cash expenses are around Rs. 10 Lac to Rs. 12 Lacs. Q.39 I am once again reminding you that this statement Is being given by you on oath and you are bound by law to speak truth and not to hide any fact. I request you to please go through the responses given by you to the above questions and kindly

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 10 confirm that you have understood the content of the questions posed to you and you are stating the truth? Ans. Sir, I confirm that I am speaking truth and I am aware of the consequences of giving false statement on oath. Q.40 Please confirm that during the survey proceeding, the data backup as per Annexure-A1 In 16GB pen drive has been taken from this premise at 63/71, 3rd Floor, Dadiseth Aglary Lane, Kalbadevi Road, Mumbal-400002 has been Impounded. Ans. Sir, I confirm the same. Q.41 Do you have to say anything else? Ans. No. Sir. I have read the statement recorded and I understand it. Whatever stated above Is true to the best of my belief and knowledge and has been correctly recorded. I have given this statement in sound state of mind without any threat, coercion, and compulsion or under any undue pressure. I shall abide by my statement. Further, I would like to state that his statement has been given between 3.00 pm to 10.00 pm with regular interval of breaks in between. (signed) (signed) [unquote] 2. The above features and statement of the promoter clearly indicate that the entire transactions were merely accommodation entries taken for the purpose of such bogus Long Term Capital Gain made by the assessee during the previous year. It is apparent that, in the grab of alleged LTCG, the assessee earned exempt income of Rs.67,24,391/- and huge amounts were brought into the books without payment of any taxes. I find it pertinent to mention here that In CIT Vs NR Portfolio Pvt Ltd on 22 November, 2013, the Hon'ble Delhi High court has held ..... "The Assessing Officer is both an investigator and an adjudicator. When a fact is alleged and stated before the Assessing Officer by an assessee, he must and should examine and verify, when in doubt or when the assertion Is debatable. Normally a factual assertion made should be accepted by the Assessing Officer unless for justification and reasons the assessing officer feels that he needs/requires a deeper and detailed verification of the facts alleged. The assessee in such circumstances should cooperate and furnish papers, details and particulars. This may entail Issue of notices to third parties to furnish and supply Information or confirm facts or even attend as witnesses. The Assessing Officer can also refer to Incriminating materials or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts Is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required. The verification and Investigation should be one with the least amount of Intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take Into consideration the entire material, which Is germane and which should not be ignored and exclude that which Is Irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the assessing officer being a quasi judicial authority, must take care and caution to ensure that the decision is reasonable and satisfies the canons of equity, fairness and justice. The evidence should be Impartially and

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 11 objectively analyzed to ensure that the adverse findings against the assessee when recorded are adequately and duly supported by material and evidence and can withstand the challenge In appellate proceedings. Principle of preponderance of probabilities applies. What is stated and the said standard, equally apply to the Tribunal and indeed this Court. The reasoning and the grounds given in any decision or pronouncement while dealing with the contentions and issues should reflect application of mind on the relevant aspects. When an assessee does not produce evidence or tries to avoid appearance before the Assessing Officer, it necessarily creates difficulties and prevents ascertainment of true and correct facts as the Assessing Officer Is denied advantage of the contention or factual assertion by the assessee before him. In case an assessee deliberately and intentionally falls to produce evidence before the Assessing Officer with the desire to prevent Inquiry or Investigation, an adverse view should be taken". 3. In this connection, reliance is also placed on the decision of ITAT Bombay Bench 'B' (ITA No.614/Bom/87 A.Y. 1983-84) In the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., which was upheld by the Hon'ble Supreme Court. The Hon'ble Tribunal held that the word 'evidence' as used in sec. 143(3) covered circumstantial evidence also. The word 'evidence' as used in sec.143(3) obviously could not be confined to direct evidence. The word 'evidence' was comprehensive enough to cover the circumstantial evidence also. Under the tax jurisprudence, the word 'evidence' had much wider connotations. While the word 'evidence' might recall the oral and documentary evidence as may be admissible under the Indian Evidence Act the use of word 'material' in Sec.143(3) showed that the assessing officer, not being a court could rely upon material, which might not strictly be evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Court often took judicial notice of certain facts which need not be proved before them. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 4. The Hon'ble Supreme Court in CIT v. Durga Prasad More[1971] 82 ITR 540 at pages 545-547 made a reference to the test of human probabilities In the following fact situation : “… … It Is true that an apparent must be considered real until It is shown that there are reasons to believe that the apparent Is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make sett- serving statements In documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax Is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide-open to evade tax. A little probing was sufficient In the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look Into the surrounding circumstances to find out the reality of the recitals made In those documents . 5. It Is well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs.CIT (214 ITR 801)(SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 12 determination of matters under taxing statutes. In the present case, it is clear that apparent Is not the real as evidence from the Investigation report. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be Ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) held that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act,1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, In proceedings before them, they were prevented from doing so. It was further held buy the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 6. After examining all the issue, I find myself in agreement with the Ld. AO that the transactions relating to the claim of LTCG as made by the Ld. AO come within the ambit of "suspicious transactions", and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of "suspicious" and "dubious" transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win Chadha Vs CIT (International Taxation) in ITA No.3088 & 3107/Del/2005, the Hon'ble Delhi ITAT "B"-Bench has observed, on 31.12.2010 as under: "SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of Incriminating Information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious circumstances, by following observations: “.... It is, no doubt, true that In all cases in which a receipt is sought to be taxed as Income, the burden lies on the department to prove that it is within the taxing provision and if a receipt Is In the nature of Income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But In view of section 68, where any sum Is found credited In the books of the assessee for any previous year, the same may be charged to Income- tax as the Income of the assessee of that previous veer if the explanation offered by the assessee about the nature and source thereof Is, In the opinion of the Assessing Officer, not satisfactory. In such case there Is prima facie evidence against the assessee, viz.,

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 13 the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably . .......... HavIng regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an Inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were Income of the appellant from other sources was not based on evidence.'" CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as Inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact In Issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are - (1) the circumstances alleged must be established by such evidence, as In the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally Inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet It is not essential that every one of the links must appear on the surface of the evidence adduced i some of these links may have to be Inferred from the proved facts; (4) In drawing those Inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5)The circumstantial evidence can, with equal facility, be resorted to In proof of a fact in issue which arises In proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of In order to prove or disprove a fact alleged or In Issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth. " 6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance In the Income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 14 is contradictory, drawing of suitable Inferences and estimation of facts is Inevitable. Courts generally will not interfere with such estimate of facts, unless the Inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AO's record are In the nature of contentions challenging criminal or civil liabilities In a court of law. We are dealing with a process of adjudication of assesses tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court In the case of S.S. Gadgil (supra) no 'lis' is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AD after the CIT(A)'s setting aside order cannot be accepted. New information and material did Indeed come on record. In our view, in a sensitive matter like this, even a single clue or revelation can be of great Importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the Importance of Reports of Investigation agencies like CBI, DRI, ED whose were in the Offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright " In view of the above discussion, I find no infirmity in the orders of the Ld. AO, confirm the same. Grounds 1 to 3 taken by the appellant stand dismissed.

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 15 arguments. The fact that remains right from assessment till date is that no such entry operator has named the assessee in any of his such statement nor the Revenue has filed any such evidence to this effect. We find in these facts and circumstances that this tribunal’s order in ITA No.1650/Kol/2018 Aditya Vikram Sureka (HUF) vs. ITO decided on 28.11.2018 has rejected Revenue’s similar arguments for lack of any cogent evidence as follows:- 5. We have heard the rival submissions. It emerges at the outset that both the lower authorities have adopted identical line of reasoning in treating the sale consideration received on transfer of shares in aforesaid companies to be bogus thereby treating the same as unexplained cash credits u/s 68 of the Act. The ld DR drew our attention to a voluminous exercise undertaken by the ld AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. The ld DR argued that the assessee had made investment in shares of the aforesaid companies not having any sound financial position or business activity so as to justify the long term capital gains to this extent. The cases of Sumati Dayal vs. CIT 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR (SC) were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus long term capital gains in issue. There is no dispute that assessee having derived the Long Term Capital Gains (LTCG in short) on transfer of shares held in Nikki Global Finance Ltd and S R K Industries Ltd. The ld DR did not controvert the findings given by the co-ordinate bench decision of this tribunal in assessee’s favour in the case of Smt Madhu Killa vs ACIT in ITA No. 834/Kol/2018 for Asst Year 2014-15 dated 2.11.2018 in respect of shares of Nikki Global Finance Ltd, wherein it was held as under:- “3. Before us the Ld. AR submitted that the addition made by the AO and upheld by the Ld. CIT(A) was based on presumption and suspicion alone and, therefore, “perverse in the eyes of law. In the course of hearing of the case, the Ld. AR referred to various documentary evidences furnished in the paper book in support of the claim of the assessee to prove the genuineness of the transactions relating to LTCG on sale of shares. The Ld. AR drew our attention to the order of the AO wherein the AO has erroneously recorded at para 3.1 that the assessee had purchased the shares of M/s. NFGL off market (not through established stock exchange) whereas the assessee had purchased the shares of M/s. NFGL through M/s. M. Prasad & Co. Ltd. which is a recognized stock broker of Bombay Stock Exchange (BSE), through whom the assessee had made several investments in various scrips/shares and drew our attention to page 5 of paper book wherein the details of investment made by the assessee for the previous AY 2013-14 is given which shows that assessee has dealt with 30 nos. of different shares of companies including Reliance, Infosys, L & T etc. and it was thus contended that this transaction with M/s. NFGL was not the single investment which assessee carried out through this broker. Thus, according to Ld. AR, the AO erred in finding that the assessee had purchased shares of M/s. NFGL in off market and not through

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 16 established stock exchange. The Ld. AR drew our attention to page no. 6 of the paper book wherein we note that the assessee had purchased on 13.06.2012, 25000 shares at cost price of Rs.128.25 of M/s. NFGL wherein the assessee had remitted STT of Rs.4007.81 and that the transaction has happened through M/s. M. Prasad & Co. Ltd. which is a registered member of the Bombay Stock Exchange. The Ld. AR drew our attention to page 18 of the paper book which shows that the amount in question i.e. Rs.32,21,216/- has been transferred on 14.06.2012 from assessee’s account to the registered broker’s account i.e. of M/s. M. Prasad & Co.. The Ld. AR drew our attention to page 26 of the paper book which is the de mat transaction statement wherein we note that on 15th June, 2012 this 25000 shares have been deposited of M/s. NFGL by inter depository transaction (CBS). Thus, we find that the AO erred in recording a finding of fact that the assessee had made the purchase of M/s. NFGL not through Stock Exchange but it was an off market transaction. We find that the assessee had purchased the shares of M/s. NFGL through registered broker M/s. M. Prasad & Co. which was a registered stock broker of the Bombay Stock Exchange and on 13.06.2012 assessee purchased 25000 shares at Rs.128.25 per share on which STT was paid and the total transaction of Rs.32,21,213.10 was paid through account payee cheque to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) The following other documents were also filed before the authorities below: i) Copy of balance sheet of the assessee as on 31.03.2013 (FY 2012-13 corresponding to AY 2013-14) along with details of investments (page nos. 4 and 5 of paper book) wherein 25000 shares of M/s. NFGL of value of Rs.32,21,269.18 is reflected and we note that the assessee had made investment in 30 no. of different shares including that of L&T, Reliance, TISCO, Infosys, ICICI, Infotech etc. and had investments altogether of Rs.87,44,010.73 which has been duly reflected in page 4 of the paper book which is the Balance Sheet as on 31.03.2013 wherein the share investment of Rs.87,44,010.73 has duly been reflected and is tallying. ii) Contract Note for purchase of shares of M/s. NFGL is found placed at page 6 of the paper book. iii) Copy of the bank statement highlighted the payment of purchase of shares through bank (paper book page 18 & 19). iv) Copy of de mat holding statement and transaction statement highlighting the movement of shares from page 25 to 33 of the paper book. v) Copy of ledger of assessee in the books of the share broker pages 34 to 36 of the paper book. Following documents were filed before the authorities below in support of the sale of the shares: i) copy of contract note for sale of shares of M/s. NFGL page 7 to 17 of the paper book. ii) Copy of bank statement highlighting the receipt of sale consideration pages 20to 23 of paper book. iii) Copy of de mat holding statement and transaction of the statement which highlighting the movement of shares pages 24 to 33 of the paper book.

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 17 4. It was also pointed out by the Ld. AR that purchase of shares of M/s. NFGL in FY 2012-13 was duly recorded in the balance sheet and the return was processed by the department u/s. 143(1) of the Act thereby the department has accepted the purchase of shares of M/s. NFGL, however, when sales of the same scrips happened it was not accepted by the AO which action of the AO, according to Ld. AR, was unjustified and need to be set right. The Ld. AR further pointed out that the AO in his eagerness to somehow hold that transaction of M/s. NFGL bogus has erroneously made a factual finding that purchases of these shares happened off market when the fact was that the purchase of M/s. NFGL shares were made through Bombay Stock Exchange. The Ld. AR pointed out that the evidence and documents furnished by the assessee before the authorities below were neither found to be false nor fabricated. The Ld. AR submitted that the AO doubted the genuineness of the sale transaction on the basis of some purported orders of the SEBI and/or the Investigation wing. However, the AO has merely mentioned the date of letter issued by the Director of Investigation. Save and except the date of the letter, according to Ld. AR, there is nothing brought on record by the AO as to how the investigation report concerned the assessee and/or the shares sold by the assessee. The ld AR submitted that the AO on pages 6-9 of the assessment order had merely stated that the Investigation Wing and SEBI conducted some inquiries in respect of some other Companies and as per the report prepared by them, certain patterns and features were identified by them and as per the AO such patterns and features were emerging in the case related to the shares of the Company (i.e. M/s. NFGL) which the assessee dealt with. However save and except making a passing remark or mere reference to so called patterns, there is nothing in the assessment order from which it can be found that the Assessee or the Company (M/s. NFGL) or the Brokers were adversely named/commented upon in the report of investigation. According to ld AR, the AO identified 10-11 adverse features on page 6-7 of the Assessment order, however he wondered as to how these features were relating to the Company (M/s. NFGL) in the case of assessee was not at all demonstrated. Thus according to ld AR, there was no material whatsoever to hold that the Company (M/s. NFGL) dealt by the assessee was having such pattern or features. It was submitted that the AO disallowed the assessee’s claim of LTCG on sale of shares on surmises, suspicion and presumptions alone. It was submitted that the lower authorities have not brought any material or evidence on record to falsify the claim of the assessee or to hold that the share transactions were bogus. 5. The ld AR drew our attention to the fact that the purchase and sale of shares was made on the online platform of the stock exchange; therefore according to ld AR, the assessee did not know the names of the buyers and has no connection and/or relations with any such persons. The transactions of sale of shares were online trading system through his broker from whom he received the sale consideration. The broker also received payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as that of their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation according to ld AR, it cannot be presumed that there could be any transfer of cash between the buyers and sellers to convert their unaccounted money of the beneficiaries as alleged by the AO. The ld AR referred to the judgement of Hon’ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83 taxmann.com 161 (Bom) to contend that there was no evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 18 getting benefit of LTCG as alleged. In the said case, the Hon’ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from one side to another, addition cannot be sustained. Similar view, according to Ld. AR, was taken in the following cases:- (i) Baijnath Agarwalla vs. ACIT [2010] 40 SOT 475 (Agra Third Member) (ii) Ganeshmull Biijay Singh Baid HUF vs. DCIT – ITA No. 544/Kol/13 dated 4.12.2015 (Kolkata Tribunal) (iii) Malti Ghanshyambhai Patodia vs. ITO – ITA No. 3400/Ahd/2015 (Ahmedabad Tribunal) (iv) Pratik Suryakant Shah vs. ITO –[ 2017] 77 taxmann.com 260 (Ahmedabad Tribunal) (v) Padduchari Jeevan Prashant vs. ITO – ITA No. 452/Hyd/2015 (Hyderabad Tribunal) (vi) Anil Nand Kishore Goyal vs.ACIT – ITA Nos. 1256/PN/2012 (Pune Tribunal) (vii) CIT vs. Jamna Devi Agrawal – [2012] 20 taxmann.com 529 (Bom HC)

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 19 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 Mumbai Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record and cannot be applied in the case in hand because assessee has discharged the burden of proof by producing relevant legally admissible evidence, which the AO could not find fault with. 8. The ld AR vehemently submitted that the assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase and sale of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. The ld AR referred to the following judgments of Jurisdictional High Court:- (i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) – In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon’ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated.

(ii) CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) – In this case the Hon’ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. (iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) – In this case the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this tribunal , wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 20 submitted by the assessee. The Tribunal held that the AO’s conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) – In this case the Hon’ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] – In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon’ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. 9. The ld AR submitted before us that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT – [2010] 40 SOT 475 (Agra (TM) (ii) ITO vs. Bibi Rani Bansal – [2011] 44 SOT 500 (Agra) (TM) (iii) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agra/2009 (Agra ITAT) (iv) ACIT vs. Amita Agarwal & Others – ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (v) Rita Devi & Others vs. DCIT – IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vi) Surya Prakash Toshniwal vs. ITO – ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain vs. ITO – ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker vs. ITO – ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal vs. ACIT – ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT vs. Sudeep Goenka – [2013] 29 taxmann.com 402 (Allahabad HC) (xi) CIT vs. Udit Narain Agarwal – [2013] 29 taxmann.com 76 (Allahabad HC) (xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xiii) CIT vs. Himani M. Vakil – [2014] 41 taxmann.com 425 (Gujarat HC) (xiv) CIT vs. Maheshchandra G. Vakil – [2013] 40 taxmann.com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others vs. ACIT – ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT)

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 21 (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 10. The ld AR further submitted before us that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon’ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon’ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon’ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks. (i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF – ITYA No. 32/Agr/2007 (Agra ITAT) 11. The ld AR further submitted that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in BSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT – ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT – [2006] 6 SOT 247 (Mum) 12. The ld AR also submitted that the AO was not justified in disallowing the assessee’s claim of exemption under section 10(38) of the Act by concluding that the transactions of the assessee resulting in LTCG on sale of shares were bogus relying on the statements of various unknown persons recorded by Investigation Wing wherein these persons accepted to have provided accommodation entries of various natures including LTCG to different persons. The ld AR submitted that in the statement of third parties, the name of the assessee was not implicated. Even otherwise, no adverse inference could be taken against the assessee on the basis of untested statements without allowing opportunity of cross- examination. The ld AR referred to and relied on the following judgements in support of the aforesaid submissions:- (i) Andman Timber Industries vs. CCE – [2015] 62 taxmann.com 3 (SC) (ii) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT) (iii) ACIT vs. Amita Agarwal & Others – ITA No. 247/(Kol) of 2011 (Kol ITAT) (iv) ITO vs. Bijaya Ganguly - ITA Nos. 624 & 625/Kol/2011 (Kol ITAT)

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 22 (v) Ganeshmull Bijay Singh Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT) (vi) Rita Devi & Others vs. DCIT – IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vii) Malti Ghanshyambhai Patadia vs. ITO - ITA No.3400/Ahd/2015 (Ahmedabad ITAT) (viii) Pratik Suryakant Shah vs. ITO – [2017] 77 taxmann.com 260 (Ahmedabad ITAT) (ix) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (x) Atul Kumar Khandelwal vs. DCIT – ITA No. 874/Del/2016 (Delhi ITAT) (xi) Farah Marker vs. ITO – ITA No. 3801/Mum/2011 (Mumbai ITAT) 13. The ld AR also submitted that the AO was not justified in invoking the provisions of section 68 of the Act to hold that the sale proceeds of shares are unexplained cash credits in the hands of the assessee. According to him, there is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker with Bombay Stock Exchange. The assessee produced all evidences to explain the source of the amounts received by the assessee from the broker, therefore according to ld AR, the AO was not justified in assessing the sale proceeds of shares as unexplained cash credit under section 68 of the Act. 14. The ld AR submitted that there is no direct evidence against the assessee brought on record by AO to hold that the assessee introduced his own unaccounted money by way of bogus LTCG. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee and/or the brokers and/or the Company in which the assessee dealt with to adversely 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 Mumbai Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record and cannot be applied in the case in hand because assessee has discharged the burden of proof by producing relevant legally admissible evidence, which the AO could not find fault with. On the other hand, the Ld. DR vehemently supported the impugned order of Ld. CIT(A)/AO and does not want us to interfere in the impugned order. 15. We have heard both the parties and perused the records. It was brought to our notice by the Ld. AR in the assessment order at para 3.13 the AO has stated in sub-para ‘c’ that “the assessee purchased shares at Rs.865.97 per share ……”. It was pointed out by the Ld. AR that the assessee has purchased share of M/s. NFLG for Rs.128.25 per share which is reflected in page 6 of the paper book which is the contract note. According to Ld. AR this is nothing but cut paste of some other case and has nothing to do with the assessee’s case and it exposes non-application of mind of the AO. We find that the AO has stated that the assessee has purchased the share at Rs.865 per share whereas the assessee had purchased the shares at Rs.128.25, therefore, we note that the AO erred in making the erroneous finding of the purchase value of the shares. We note that in this case the assessee was investing in different shares of the companies (30 different shares of companies ) as evident from perusal of page 5 of paper book and the purchase and sale of shares in M/s. NFGL is one among the 30 odd shares the assessee dealt with as an investment through a registered stock broker of Bombay Stock Exchange “M. Prasad & Co. Ltd.” The assessee had purchased 25000 shares of M/s. NFGL on 13.06.2012 at a cost price of Rs.128.25 per share and remitted Security Transaction Tax (STT) of

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 23 Rs.4007.81 and at a total cost price of Rs.32,16,000/- (see contract note placed at page 6 of paper book). Thus we find that the AO erred in finding that the assessee had made the purchase not through Stock Exchange but it was an off market transaction. We find that the assessee had purchased through registered broker M/s. M. Prasad & Co. who was registered stock broker of the Bombay Stock Exchange and on 13.06.2012 assessee purchased 25000 shares at Rs.28.25 per share on which STT was paid and the total transaction of Rs.32,21,213.10 was paid through account payee cheque to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) 16. The sale of M/s. NFGL shares took place through the same registered stock broker of Bombay Stock Exchange from 05.08.2013 to 30.12.2013 for sale price ranging from Rs.820/- to Rs.921/- per scrip (see contract note placed from pages 7 – 17 of paper book). We note from perusal of pages 18-19 of paper book, which reveals that the payment for purchase of shares were made through Axis Bank of assessee and payment has been made on 14.06.2012 vide cheque no. 138919 for an amount of Rs.32,21,213.10 to the recognized stock broker of Bombay Stock Exchange M. Prasad & Co. We also note from perusal of pages 20-23 of paper book which is the extract of pass book of assessee in Punjab National Bank wherein we note that assessee had received sale consideration through bank transaction and we verified the contract note of sale placed at pages 7 to 17 and tallied the entries of sale consideration received by the assessee in her bank account and find it to be correct. We on perusal of page 24, which is the transaction cum holding statement of Stock Holding Corporation of India Ltd. find that the share of M/s. NFGL was held in De-mat account. We note from a perusal of page 26, which is the transaction statement of Demat account shows that M/s. NFGL’s shares of Rs.25,000/- by inter depositing transfer on 15.06.2012. A perusal of page 30 of paper book, which is the transactional statement of Demat account corroborate the sale of scrips of M/s. NFGL (from 07.08.2013 – 30.10.2013). A perusal of pages 34-36 of paper book, which is the ledger of assessee in the books of share broker (01.04.2014 to 31.03.2014) corroborates the sale transaction of scrips of M/s. NFGL. 17. The assessee had sold the shares on 05.08.2013 5000 shares at the value of Rs.820/- per share and paid STT and received a consideration of Rs.40,82,079/- which the assessee received by account payee cheque which is reflected in page 21 of the paper book received on 24.08.2013. Like wise, the other sale transactions are reflected from pages 8 to 17 of the paper book for different rates from Rs. 845/- per share, Rs.865/- per share, Rs.920/- per share, Rs.921/- per share etc. and the assessee has received the said consideration through account payee cheque. It was pointed out by the Ld. AR that when a show cause notice was given by the AO on 09.12.2016 wherein the assessee was asked to explain why the sale consideration of Rs.2,16,49,202/- shall not be added back u/s. 68 of the Act as well as Rs.10,82,460/- being 5% of the said sum be added u/s. 69C of the Act, the assessee promptly replied to it. The AO acknowledges that the assessee had replied vide letter dated 22.12.2016 which the AO has stated to have been placed on record. However, it was brought to our notice that the AO has not made any adverse finding in respect to the submissions made by the assessee in justifying the LTCG claim. It was brought to our notice that no attempt has been made by the AO to issue summons u/s. 131 or 133(6) of the Act to any of the parties involved in all these transactions to record any adverse inference against the assessee, and without doing so, the AO has simply concluded on the basis of the presumption and assumption and circumstantial evidence and on preponderance of probabilities has debunked the entire evidence

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 24 submitted before the AO to saddle the entire sale consideration and to allege commission given @ 5% which comes to Rs.10,82,460/- against the assessee Thus we note that the assessee had furnished all primary evidences in the form of bills, contract notes, de Mat statements and bank accounts to prove the genuineness of the transaction relating to purchase and sale of shares resulting in LTCG. By adducing these evidences, the assessee had discharged the onus on her to prove the genuineness of the transaction which yielded her LTCG. Once the assessee had discharged her onus, then the onus shifted to the shoulders of AO then the AO has to examine the veracity of the documents produced by the assessee and if it is found to be correct and valid then in all fairness the AO should accept the claim of LTCG. In case if the AO on verification finds that the documents produced by the assessee is false or fabricated, then the AO should bring his adverse findings to the notice of the assessee and confront her with the adverse material/findings. Then again the onus will shift to the assessee to prove the genuineness of the transaction. Here, in the present case is concerned, the AO after going through the documents, failed to return a finding that documents produced by assessee to substantiate the yield of LTCG was false or fabricated. The facts of the case as discussed, and the evidence adduced by the assessee, support that the transaction made by the assessee through registered stock broker through Bombay Stock Exchange, after remitting STT and all payments were transacted through bank and the shares were held in De mat account, has to be accepted in the absence of any other material to suggest an adverse view. The AO/Ld. CIT(A) erred in rejecting legally admissible evidence and wrongly took adverse view against the claim of assessee based on surmises, suspicion and conjecture. This action of AO/Ld. CIT(A) is akin to convert “Proof into no proof.” We note that AO while describing the modus operandi adopted by unscrupulous elements in the financial markets has made a vague statement that some accommodation entry provider has admitted that M/s. NFGL also indulged in wrong practices, however, we sought the Ld. DR’s help to throw some light on this specific allegation made by the AO. However, other than the bald statement, nothing adverse could be found against the shares of M/s. NFGL. Even if for argument sake if there was such an adverse admission made by an accommodation provider against M/s. NFGL, then the AO in all fairness had to confront the assessee with the adverse material and given an opportunity to the assessee to meet it and the assessee should have been given an opportunity to explain it; and in case the assessee desires, she should have been allowed to cross examine the accommodation provider or else the adverse material cannot be acted upon to draw adverse inference against the assessee as held by the Hon’ble Apex Court in Andaman Timber Industries Vs. Commissioner of Central Excise 62 Taxman.com 3. It should be kept in mind that assessee cannot be kept in dark as to the material against her and it has to be given to the assessee if AO proposes to use it against the assessee and these are the basic natural justice principles the AO has to keep in mind while framing an assessment. Though AO/Ld. CIT(A) have been swayed by the report of SEBI/Investigation Wing of the department, both the authorities could not point out what was the role of the assessee in any wrong doing which is prohibited by law. We note that neither the purported adverse reports relied on by the AO has been brought on record nor is there any reference to any finding of such report which directly accuses the assessee in any wrongful actions. The AO has merely carved out certain features/modus-operandi of companies indulging in practices not sanctioned by law and as mentioned in such report. We note that neither any investigation were carried out against the assessee, nor against the brokers to whom the assessee dealt with or the companies in which the assessee dealt with the purchase and sale of shares in question were done by the AO. The transaction in question and the fact that the shares in question were quoted and transaction happened

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 25 on the floor of the stock exchange in public view which action has not been interdicted by the securities watchdog SEBI. In such a scenario, to paint the entire share transaction of M/s. NFGL which yielded high capital gain as bogus is not correct without materials to support such an adverse finding. We note in the light of the aforesaid relevant evidences, the action of the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances and human conduct and preponderance of probability against the assessee. For that we rely on the decision of the Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. Vs ACIT (supra) for this proposition. The various facets of the contention of the ld. AR(supra), to rope in the assessee and for drawing adverse inferences, which remain unproved based on the evidence available on record are not reiterated for the sake of brevity. 18. At the cost of repetitions, we find that the transactions of the sale of shares by the assessee was duly supported by relevant evidences including contract notes, demat statement, bank account reflecting the transactions, stock brokers have confirmed the transactions, the stock exchange have confirmed the transactions, the shares have been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/ evidence to prove that the assessee or any one on his behalf has rigged or manipulated the stock price. It should be noted that the stock exchange of SEBI are the statutory authority appointed by the Government of India to ensure that there is no stock rigging or manipulation. The AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation against the assessee or the brokers or the companies in question. In absence of any relevant evidences it cannot be said that merely because the stock price moved sharply, the assessee was to be blamed for bogus transactions. It is pertinent to note that the assessee has purchased the stocks through registered brokers and thereafter the assessee has sold the shares through the registered share/stock brokers with Calcutta Stock Exchange, and both have confirmed the transactions and have issued valid contract notes as per law; and the Hon’’ble Calcutta High Court in the case of Principal CIT vs Rungta Properties in ITA No.105 of 2016 dated 08 May, 2017 wherein it was held that “on the last point, the tribunal held that the AO had not brought relevant material to show that the transactions in shares of the company involved were false or fictitious. It is the finding of the AO that the scripts of this company was executed by a broker and the broker was suspended for some time. It is the assessee’s contention that even though there are allegations against the broker, and for that reason the assessee cannot be held liable on this point, the tribunal held that – “As a matter of fact the AO doubted the integrity of the broker and the broker firm and also AO observed that the assessee had not furnished any explanation in respect of any discussion of trading of shares. The AO relied the loss of Rs.25,30,396/- only on the basis of information submitted by stock as fictitious. The AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO’s observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed.” We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substantial question of law.

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 26 19. In the light of the documents furnished i.e. (i to v & i to iii) in Para 3(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered into any illegal actions/ modus-operand prohibited by law as alleged 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. For coming to such a conclusion we rely on the decision of the Hon’ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows : “It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed.” 20. 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 note that though the department was aware that the assessee had purchased the 25000 shares of M/s. NFGL in AY 2013-14, for Rs.32,21,269/- has not reduced the same from the total sale consideration of Rs.2.16 cr. It is elementary that income can be computed only after defraying the cost. So the action of AO to add the entire sale consideration of Rs.2.16 cr. itself is arbitrary exercise of power and cannot be sustained. Therefore, the action of the Ld. CIT(A) in confirming the addition of entire sale consideration of M/s. NFGL is perverse and is directed to be deleted. Consequently, the addition of 5% as commission to the tune of Rs.10,82,460/- cannot be also sustained and ordered to be deleted. The assessee’s appeal succeeds.”

ITA No.1839/Kol/2017 A.Y 2014-15 Sh. Udit Agarwal Vs. DCIT(IT)-2(1), Kol. Page 27 5.1. Similarly the ld DR could not controvert the similar findings recorded by the co-ordinate bench decision of this tribunal in the case of Shreyans Chopra vs ACIT in ITA No. 661/Kol/2018 dated 25.7.2018 for Asst Year 2014-15 in respect of shares of S R K Industries Ltd. 5.2. We hold that the revenue fails to indicate any specific evidence against the assessee in above terms qua the LTCG derived from transfer of shares in the aforesaid two companies. We therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition of Rs 96,17,065/- . Consequently the addition made towards unexplained expenditure on account of commission of Rs 48,085/- also stands automatically deleted.” 4. We adopt the above detailed reasoning mutatis mutandis to delete the impugned sec. 68 addition of bogus LTCG. 5. This assessee’s appeal is allowed accordingly. Order pronounced in the open court 26/12/2018 Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) (M.Balaganesh) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp, Sr.P.S (दनांकः- 26/12/2018 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Shri Udit Agarwal, 3 Madan Mohan Burman Street, Kolkata-007 2. ��यथ�/Respondent-DCIT(IT), 2(1), 110, Shanti Pally,Kolkata-107 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ3धकरण, कोलकाता ।