DCIT, JAIPUR vs. VIGYAN LODHA, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 169/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2014-15 cuke The DCIT Shri Vigyan Lodha Vs. Circle-6 A-8, Mahaveer Nagar Jaipur Tonk Road, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACBPL 8633 R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rohan Sogani, CA & Shri Rajeev Sogani, CA jktLo dh vksj ls@ Revenue by: Shri P.R. Meena, CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 28/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20 /12/2022 vkns'k@ ORDER PER: SANDEEP GOSAIN, JM This appeal by the Revenue is directed against the order of the ld. CIT(A) dated 10-03-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2014-15 wherein the Revenue has raised the following grounds of appeal. ‘’1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in restricting the disallowance made u/s 14A read with Rule 8D to the extent of exempt income

2 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA earned of Rs.60,134/- without appreciating the fact that disallowance u/s 14A as per the provisions of Income Tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition made u/s 68 of the Act by the AO on account of bogus LTCG claimed by the assessee to the tune of Rs.4,65,83,341/-. 3. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition made of Rs.29,86,956/- u/s 69C of the Act by the AO on account of commission paid towards availing bogus LTCG Rs.4,65,83,341/-‘’

2.1 Brief facts of the case are that the assessee had filed his e-return of income on 30-09-2014 declaring total income at Rs.59,22,990/-. The case of the assessee was selected for scrutiny and Notice u/s 143(2) of the Act was issued on 31-08- 2015 and was duly served upon the assessee. Thereafter, notices 142(1) alongwith detailed questionnaire were issued from time to time. In compliance of the notices, Shri Rajeev Bafna, CA represented the case of the assessee and furnished desired details before the AO. In this case the AO noted that the assessee derives income from salary, House Property, share of profit from Partnership firms, capital gains, dividend and income from other sources. From the documents /paper submitted by the assessee, the AO found that the assessee during the year under consideration has shown Long Term Capital Gains of Rs.4,65,83,342/- and claimed exemption u/s 10(38) of the Act. The transaction of purchase/sale of shares leading to LTCG,

3 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA exempted u/s 10(38) is tabulated by the AO in his order whose details are as

under:-

Name of Scrip Date of Purchase Cost of Purchase Date of Sale Sale Proceeds Long Term Capital Gains MID-POLY 6.07.2011 to 10,49,267 10.05.2013 to 2,36,71,642 2,26,22,375 LTD 21.08.2011 07.01.2014 Centron 12.11.2012 22,00,000 06.02.2014 to 2,61,60,966 2,39,60,966 Industrial 26.03.2014 Alliance Ltd.

While examining the issue of Long Term Capital Gains, the AO noticed the

following facts.

‘’2.1 The assessee has shown to have invested in shares of M/s. Centron Industrial Alliance Ltd. and M/s. MID-POLY LTD on different dates between 06-07-2011 to 12-11-2012. Details with respect to these transactions were filed by the assessee during the course of assessment proceedings. Following observations have been made in relation to alleged LTCG from purchase / sale of shares M/s. Centron Industrial Alliance Ltd. and M/s. MID-POLY LTD (i) The assessee has shown purchase of 38000 shares of Midland Polymers Ltd. between 6-07-2011 to 22-08-2011 and 80000 shares of M/s. Centron Industrial Alliance Ltd. on 22-11-2012. (ii) Later on the company Midland Polymers Ltd. split its Rs.10 share to 10 Shares of Re.1/-. Also it issued bonus shares by ratio 1:1 on 18-06-2013. Similarly, M/s. Centron Industrial Alliance Ltd also split its share in the ratio 1:10l in Oct. 2013.

(iii) These sharers of M/s. Centron Industrial Alliance Ltd were dematerialized on 5-02-2014 i.e. after 15 months of the purchase. The assessee has not offered any explanation on this. (iv) The assessee allegedly earned Rs.4,65,83,342/- as Long Term Capital Gains on this transaction Besides above observations, the AO went through the reports of Investigation

Wing of New Delhi, Mumbai, Kolkata relating to the actions conducted by them in

4 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA cases of bogus LTCG/STCG/STCL/Loss entry providers and also in cases of beneficiaries of this arrangement. The AO at the time assessment proceedings noted that it was being noticed by the Department for a long time that certain share transactions in penny stock companies were fabricated one with a motive to launder the unaccounted money in form of bogus LTCG/STCG with nil taxes or taxes at nominal rates. There have also been cases of claims of huge bogus losses on account of trading in such penny stock companies. The AO noted from the reports of the Investigation Wings that Coordinated actions u/s 132(1) & 133 of the Act, 1961 were carried out by the Investigation Wing of Kolkata, Mumbai, New Delhi and other units of the country. Statements of certain individuals relating to such bogus entry providers/ beneficiaries were recorded u/s 132(4) and u/s 131 of the Act and thus Investigation Wing unearthed LTCG/STCG/STCL/Loss entry of over Rs.38,000 Crores. Thus the Investigation finally identified 84 of such penny stock companies which were involved in the pool of entry providers’ syndicate wherein M/s. Midland Polymers Ltd is found to be one of such penny stock companies. In view of the above information and credible evidences, a show cause letter dated 18-11-2016 was issued by the AO to the assessee giving detailed discussions at para 3.1( sub-para (2) to(8). For the sake of convenience and brevity of the issue, the sub-para 6 to 8 of AO’s order is reproduced as under:-

5 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA ‘’6. In view of the above detailed discussion in the light of credible evidences gathered during the course of survey actions on different entities, it has been conclusively established that the alleged long term capital gains shown by you on account of purchase/sale of shares of Midland Polylmers Limited is a bogus one and actually represents your unaccounted money routed back to you in the garb of Long Term Capital Gains. It is therefore proposed to treat the said amount of Rs.4,65,83,341/- as unexplained credit found in your books of account and proposed to be added u/s 68 to your total income for assessment year under reference. 7. During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the beneficiaries in lieu of providing bogus entries. I estimate an amount equivalent to 3% of the bogus Long Term Capital Gains earned by you which comes to Rs.13,97,500/- as commission paid by you in lieu of entry of bogus Long Term Capital Gain of Rs.4,65,83,341/-. Therefore, an addition of Rs.13,97,500/- on this count, is proposed to be added to your total income for the year under consideration. 8. In view of above, you are requested to show cause as to why exemption claimed u/s 10(38) towards Long Term Capital Gains of Rs.4,65,83,341/- be denied and why it should not be added u/s 68 to the total income. Further, explain as to why an amount of Rs.13,97,500/- be added u/s 69C to your total income being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains.’’ Further a show cause notice dated 28-11-2016 was issued on the assessee relating to commission paid by the assessee on arranging bogus Long Term Capital Gains entry mentioning therein as under:- This has reference to show cause notice in your case vide letter dated 18-11-2016. In continuation to the said letter, it is requested to read the following paras in place of para 7 & 8 of the said letter:

6 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 7. During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the beneficiaries in lieu of providing bogus entries. In fact one of the beneficiaries Shri Ajit Gupta of Delhi have categorically admitted in his statement recorded u/s 132(4) that he paid commission of 5-6% in cash in lieu of bogus entry of Long Term Capital Gains shown from artificial trading in penny stock bogus company. Looking to such credible evidence on this issue, I estimate an amount equivalent to 6% of the bogus Long Term Capital Gain entry, which comes to Rs.29,89,956/- (calculated on the sale proceeds shown at Rs.4,98,32,608/-) as commission paid by you in lieu of entry of bogus Long Term Capital Gain of Rs.4,65,83,341/-. Therefore, an addition of Rs.29,89,956/- on this count is proposed to be added to your total income for the year under consideration u/s 69C of the Income Tax Act, 1961 being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains. 8. In view of above, you are requested to show cause as to why exemption claimed u/s 10(38) towards Long Term Capital Gains of Rs.4,65,83,341/- be denied and why it should not be added u/s 68 to the total income. Further, explain as to why an amount of Rs.29,89,956/- be added u/s 69C to your total income being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains.

In response to the show cause letter and also the note sheet entry dated 30-11-2016, the assessee has submitted written reply before the AO which are mentioned at para 4.1 in the assessment order. ‘’4.1….Please find the reply of show cause notice in respect of Long Term Capital Gain in MIDLAND Polymers and Centron Industrial Alliance shares; the assessee submits as follows:-

7 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 1. The assessee has purchased the shares from Bombay Stock Exchange through authorized broker B. Lodha Securities Limited, Jaipur having SEBI Registration No. INB 011074730. 2. Assessee has paid to the Broker through its Bank and the shares are transferred to Demat Account after purchasing from it (Contract Note already submitted. 3. The shares are sold through the Registered Share Broker M/s. B. Lodha Securities Limite4d, Jaipur in the Bombay Stock Exchange (Contract note already submitted). 4. Assessessee has paid the Security transaction Tax, Service Tax, Stamp duty to the government as evident from the bills already submitted. 5. The value and source of the sum of Rs.5,52,13,277/- credited in the bank account of assessee has been satisfactorily explained, as the sum has been received Bombay Stock Exchange through the Broker B. Lodha Securities Ltd. aftere deduction of all the taxes and expenses. 6. The Company i.e. Midland Polymers and Centron Industrial Alliance Limited has independent address and complying various provisions of companies Act and not merely a paper of bogus company. 7. Assessee submits that share transactions are genuine transaction. The assessee purchases shares in different rates ranging from 18 to 29. The details of bills and contract note from broker has already been submitted in previous hearing. The assessee has shown the shares on Assets side of Balance Sheet under the head of Investment Share Investment" as on 31.03.2013 of Midland Polymers Rs. 11,68,027.30 and Centron Industrial Alliance Limited 23,37,500.00/- The Assessee has already furnished complete details of shares sold. The D-mat Account has also shown the shore of Midland Polymers held and which is already furnished.

8 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Assessee is a well qualified person holding degree of B.Tech and experienced businessman. The Investment in the shares of Midland Polymers Limited and Centron Industrial Alliance Limited by the assessee is made suo-moto on the following grounds 1. Advent of computer & internet in Indian economy marks information available for financial market and of any companies easily. 2. The activities and administration of a registered limited company is governed by the companies act in India. All the annual accounts, director report, change in management and directors are filed on registered portal of MCA-21. 3. The MIDLAND Polymers was incorporated financial details of Midlan Polymers and plant and reasons for buying this share has already have been explained exhaustively in previous hearing in writing. 8. The Show cause notice is heavily relied upon the investigation by the I.T. Department in Delhi, Kolkata & Mumbai acting in tandem to manipulate the price of share of certain companies, and how share prices are rigged. On Page 5 of the show cause notice, it is mentioned that statement of three entities has been recorded viz 01. Shri Manoj Kumar Agarwal Kolkatta 02. Shri Pawan Kumar Kayan Kolkatta 03. Shri Harshvardhan Kayan Kolkatta

Which admitted that shares of Midland Polymers are rigged and show cause notice also mentioned that SEBI, passed some orders on the issue of manipulation of shares pursuing LTCG/STCG.

The statement of above named person on which show cause notice is heavily relied, never mentioned the name of assessee. Further the assessee has sold the entire shares in Jaipur and not in

9 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Kolkatta. The Assessee did not know the identity of any of these above named people. Further, even the SEBI in its investigation report on MIDLAND Polymers never made any comment/observations on assessee or even bothered to enquire on assessee; whether the LTCG occurred to assessee is Bogus one. It is always possible for parties to gain from stock market if there is movement in share price due to any reason. The Show cause notice is merely a Guess work. The statement made by the person is on their personal capacity and know where linked to the Assessee. The generalized presumption that the share price of Midland Polymers is rigged by the operators not known to the assessee and assessee has hugely benefitted from it; is merely presumption and guess work and based on surmises and conjecture. Under the circumstances of the case, no addition u/s 68 is warranted as assessee has strong documentary evidence to support sale and purchase of shares in the form of bills of broker, contract note, D-Mat Status Etc. 9. The addition of Rs. 2,88,076/- which is further enhanced to Rs. 6,02,543/-vide show cause notice dated 25.11.2016; is consequential in nature and needs to be dropped as no addition whatsoever is warranted on account of LTCG as mentioned above. The veracity of all the transactions and details of LTCG supported by pressure of evidence given in early hearing found to the genuine as there is no mention of such documentary evidence to the non genuine in the show cause notice.

The AO thus noted the rebuttal of the assessee’s reply at para 5 as under:-

10 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA

(ii) transactions were executed through banking channel.

Reply of the assessee has been considered, however not found acceptable. The assessee has tried, though unsuccessfully, to pose as if the share transaction leading to exempted LTCG was a genuine one. The assessee is trying to shy away from the credible evidences in shape of admission by Entry Operators, Promoters/Directors of the penny stock companies, Share Brokers etc., who were involved in the scam etc. The assessee was supplied with the plenty of material, including gist of statements of certain individuals recorded under oath by the Investigation wing of the department, with the show cause notice. However, the assessee failed to point out any flaw in the statements of these persons admitting the truth that share trading in scrip M/s Midland Polymers Limited was used for providing bogus LTCG/Short Term Capital Gains/Loss entries to certain beneficiaries. And also no comments have been offered on observations made on Centron Industrial Alliance Limited/

The AO at para 5.2 of his order noted that the transaction was just a cover to launder assessee’s money and it is elaborately mentioned as under:-

‘’5.2 Moreover, following observations have also been made which prove that the transaction was just a cover to launder assessee's money, to give it a colour of genuineness.

(i) the assessee has shown purchase of just 38000 shares of M/s Midland Polymers Limited and there were sub division in 1:10 ratio and bonus in 1:1 ratio. It has also shown purchase of 80000 shares of Centron Industrial Alliance Limited which were also sub-divided in 1:10 ratio.

(ii) The assessee has pleaded that the share transaction was done through registered broker M/s Bhargava Lodha Securities Limited. It is worthwhile to mention here that this concern is assessee's group concern and it was an easy job for the assessee to mould the things as per his desire in respect of such type of transaction.

(iii) The assessee in his reply dated 11.11.2016 (received on 15.11.2016) has submitted that the assessee purchased the shares on Midland Polymers Limited's offer of fully paid equity shares for 29.25 per

11 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA share. Then in his reply in response to notices dated 18.11.2016 & 28.11.2016, he claimed that he purchased the shares on BSE and on different rates ranging, between 25 to 27 per share. As per details filed during the course of assessment proceedings, the assessee purchased shares of Midland Polymers Limited on 06.07.2011, whereas as per stock sheet issued by Bhargava Lodha Stock Brokers Pvt. Ltd., transaction of purchase took place on 29.07.2011, 05.08.2011 and 15.09.2011. If It was so, rate of share of Midland Polymers Limited was over 30 on 15.09.2011. Interestingly, on 5.8.2011 & 15.9.2011, there was not a single trade in the scrip of this company on BSE, as per details available of historical share price on BSE website.

(iv) as per details relating to Dmat account, shares of Centron Industrial Alliance Limited were dematerialized after a gap of 15 months. The assessee has not offered any explanation for this.

(v) The assessee has failed to tell the name and address of the person on whose recommendation he invested in an unknown unlisted company.

(vi) the assessee has vehemently argued that the persons whose statements were recorded on oath by the investigation wing of the department are not related to the assessee. For this argument, it may be pointed out here that in his statements on oath, Sh. Manoj Kumar Agarwal, Sh. Pawan Kumar Kayan and Sh. Harshvardhan Kayan specifically admitted about involvement of Midland Polymers Limited being penny stock company in the bogus entries of LTCG/STCG/Loss. They all elaborately stated about the entire modus operandi about how the bogus entry racket runs. They further admitted about how the share broking firms they were running, involved in the arrangement of bogus entries of LTCG/STCG/Loss. They also admitted that they facilitate some entities in getting bogus LTCG/STCG/Loss entries of paper/shell penny stock companies by providing their terminal in lieu of commission. The case of Centron Industrial Alliance Limited is similar to that of M/s Midland Polymers Limited and that is why similar treatment is being given to this penny stock also. In this company also, shares were sub-divided, share price was rigged without any visible reason, very poor financial affairs of the company etc. (vii) Here it is reiterated that the bogus entry operator chooses one of such penny stocks for implementation of this scheme, which does not pose a

12 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA good picture of its financial affairs before general investor. That is why its shares are closely held and are not traded among public in general. The promoters/directors of such penny stock company are paid cash commission and in return they allow the operator to manage the affairs of the company. The operator then shows issue of shares of these penny stock companies to the beneficiaries through the route of preferential allotment (Private Placement). Exactly it has happened in the case of Centron Industrial Alliance Limited. More analysis on its financial affairs is made in Para-7 below. The AO at para 5.3 of his order observed that SEBI vide its order dated 27-02- 2015 had suspended trading in Midland Polymers Ltd. and relevant para is reproduced as under”-

‘’5.3 The irregularities committed by such penny stock companies and their apparent involvement in the Long Term Capital Gains/STCG/Loss scam, were not remained unnoticed, for long, by the SEBI. The SEBI vide its order dated 27.02.2015 has suspended trading in Midland Polymers Limited. The order is reproduced hereunder. "To All Trading Members of the Exchange Sub: Suspension in trading of securities Trading members are hereby informed that based on the parameters provided by SEBI and under provisions of Rules, Bye-laws and Regulation of the Exchange, as an interim preventive and remedial measure and to maintain orderly development in the securities market, trading in the securities of the following companies will be suspended with effect from Wednesday March 4, 2015 until further notice: Sr. No. Scrip Code Name of the Company 1. 531775 CISTRO tradelink Ld. 2. 512017 Exdon Trading Company Ltd. 3. 517391 Gamma Infoway Exalt Ltd. 4. 512129 Jayan Mercantile Company Ltd. 5. 531960 Jindal Online. Com Ltd. 6. 524103 Linear Polymers Ltd. 7. 531597 Midland Polymers Ltd.

13 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 8. 511016 Premier Capital Services Ltd. 9. 512097 Saianand Commercial Ltd. 10. 504s345 Sam Leaseco Ltd. 11. 522042 SM Energy Teknik & Electronics Ltd. 12. 502893 United Interactive Ltd.

From the assessment order at para 5.3.1 it is noted that the company Midland Polymers Limited, announced a public Offer of Rs.29/- per share for application of 7,86,500 equity shares which was published in print media on 19-10-2011 which has been elaborately discussed by the AO in the assessment order from pages 19 to 62 in his order. It is not imperative repeat the facts as noted by the AO in his assessment order but summarily the AO made following additions/

14 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA provisions of Rule 8D of the I.T. Rules and CBDT ‘s clarificatory Circular No.5 dated 11-02-2014. Hence the disallowance worked out as per the provisions of Rule 8D(2) of the I.T. Rules amounting to Rs.9,12,493/- is treated das expenditure incurred in relation to exempt income which has been disallowed u/s 14A of the Act by the AO by adding to the t5otal income of the assessee.

15 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Rs.29,89,956/- i.e. equal to 6% of the amount of sale proceeds of bogus share transactions and the assessee has not offered any explanation about the source of the same. Thus the AO treated the sum of Rs.29,89,956/- as unexplained expenditure u/s 69C of the Act and added the same to the total income of the assessee.

2.2 Aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who has observed as under:-

As regards ground No. 1 of the Department: ‘’2.1 Disallowance u/s 14A: AO has disallowed an amount of Rs 9,12,493/- since the assessee has made investment and has claimed Rs 83,81,772/- as interest. Appellant has contested that the AO has not established that the investment were

16 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA made out of loan funds. Assessee had sufficient own capital to make investment. I have gone through the assessment order and submission of the assessee. Assessee had own funds of Rs 4.23 cr as on 31.3.2013 and Rs 9.47 cr as on 31.3.2014. Investment was made out of own interest free fund. AO has not made out the case that investment had been made out of loans. In case of Maruti Udyog Ltd 92 ITD 119 (ITAT Delhi) it has been held that nexus "between borrowed funds and investment can be said to be established only where it is shown that interest free funds are not available with the assessee. In the case of ACIT Vs Dhampur Sugar Mill Pvt Ltd ITA 220 of 2014 Hon'ble Allahabad High Court has ruled that once it was duly established that no borrowed funds of which interest was paid had been invested for earning tax free income, no disallowance was permissible u/s 14A. In the case of CIT Vs HDFC Bank ITA No.330 of 2012 Hon'ble Bombay High Court has held that no disallowance u/s 14A can be made in respect of interest paid on borrowing if assessee's own funds and non interest bearing funds exceeds investment in tax free securities. Further if there are no exempt income during the year, no disallowance can be made as held in the case of CIT vs Holcim India Pvt Ltd 90CCH 081 (2014). Further the disallowance u/s 14A cannot exceed the amount of exempt income as held by the Delhi High Court in Joint Investment PV LR. Vs CIT, vide its judgment dated 25.2.2015 If there is no income, there cannot be any disallowance. In view of these facts it is seen that the investment had been made out of funds and no disallowance is warranted in the present case since assessee has earned dividend of Rs.60,134/-, the disallowance is restricted to this figure – Relief : 8,52,359/-.’’

As regards Ground No. 2 & 3 of the Department: ‘’ 3.3 I have gone through the submission of the assessee and perused the assessment order. The issue is regarding treatment of LTCG earned by the appellant as income of the assessee. Appellant has taken technical ground that that reasons were recorded by AO of Circle -6 Jaipur whereas order was passed by AO of Circle 5. However for reasons of equitable work distribution, cases are assigned by PCIT to various AOs of his charge. So long as they have had jurisdiction over the case, it is immaterial that one officer records the reasons whereas

17 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA another officer passes the assessment order. This cannot be a reason for objection. The objection is dismissed. Coming to the merit of the addition, as per above facts the AO has treated LTCG earned by assessee in two companies M/s Midland Polymers Ltd and Centron Industrial Alliance Ltd as unexplained. He has also presumed that assessee has obtained services of certain persons and has paid them commission @6% LTCG amounting to Rs 29,89,956/-. The AO's decision was made on the basis of investigation carried out by investigation wing Kolkata. As per report of the Investigation wing, it has been found that certain companies, M/s Midland Polymers Ld being one of them were used to jack up stock prices to inable interested persons to earn capital gains, AO has referred the audited accounts of the two companies to show that these have very little networth. He has also noted that there is an abrupt rise in the share price of these companies, called penny stock. There is systematic modus operandi being followed. Assessee has vehemently opposed the decision of AO It has been contended that there is no evidence on the basis of which AO has arived at this conclusion. There is also no evidence that assesee has paid any commission to any person and AO has also presumed the figure of 6% as commission paid by the assessee. From these facts it is seen that there is no material on record on the basis of which the AO has come to this conclusion that assessee is linked. Even then while it is likely that M/s Midland may have been used for the purpose of proving buying and selling avenues to interested persons and earning artificial capital gains, but how the assessee is connected with this company has not been explained. In online trading. any persons can buy a share at the time of his choosing and sell it when he wishes. It is not that while buying or selling the assessee has been found colluding with any of operators in the share M/s Midland. It is also not that the assessee has been found to be exchanging cash to transfer the commission to be paid to operators. In online share trading, funds move from bank account to bank account. Unless direct evidence is found to link the assessee with M/s Midland or some of the operator controlling the share price, the transactions made by the assessee cannot be doubted and the capital gains cannot be treated as unexplained. Statement of Pawan Kumar Kayan was recorded during investigation and he has accepted having executed LTCG entries through his firms. Similar statement has also been given by Harshawardhan Kayan. Another person Manoj Kumar Agrawal has stated

18 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA involvement of his company Destiny securities Ltd and also Midland Polymers Ltd. There is no doubt that financial of M/s Midland suggest that it is a company having no worth and if its price has rised In stock market the rise is not due to genuine increase in the worth of the company. To the show cause issue by the AO, the appellant has replied that he has purchased shares in stock market and made payment from his bank account. The AO has heavily relied on the report of investigation wing No independent facts have been brought to link the assessee with the modus operandi indicated by above name persons and nail the assessee. None of these persons have taken name of the appellant as a beneficiary of their operation. AO has also alluded assessee's fault due to the transactions of buy sale having carried through the registered broker M/s Bhargava Lodha Securities Ltd belonging to assessee's group. Assessee has stated that it is fact that the brokerage business is in house business. That cannot be basis to draw adverse finding when no adverse facts have been found in the buy and sale of shares by the broker. It is an established position of law that addition cannot be made only on the basis of suspicion or surmises and without controverting the voluminous evidences by bringing any cogent material on record. Assessee regularly invests in shares. In AY 2012-13 he bought 75000 shares for Rs 13,08,612/- and another 75000 shares in AY 2013-14 for Rs 16,24,733. He earned LTCG of Rs 13,05,000/- AY 12-13. In AY 13-14 he earned LTCG of Rs 1,96,191/- and STCG of Rs 1,19,941/- . Another issue is providing of opportunity to cross examine the persons whose statements are being used against a person. Here the assessee has objected that while statements of several persons have been used in the assessment order to draw adverse inference against the assessee, but he has not been provided opportunity to cross examine these persons. On the basis of statements of entry operator, director of certain companies, as discussed above the AO has concluded that assessee has colluded with these persons to earned bogus long term capital gains. Neither the AO has shown any link of the assessee with any of these persons..not he has allowed opportunity to them to cross examine and contradict them. In the case of Andaman Timbers Industries (Civil Appeal 4228/2006) honorable SC has held that not allowing The assessee to cross examine witness were made the basis of impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice. In the case of Ashwini Gupta 322 ITR 396 addition made on the

19 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA basis of statement of third was deleted by honourable Delhi HC as assessee was not allowed opportunity to cross examine. On similar facts, in the case of Manish Kumar Baid vs ACIT, Cir-35, Kolkata ITA No.1236/Kol/2017 honouable ITAT held that the enquiry by the Investigation Wing and / or the statements of several persons recorded by the Investigation Wing in connection with the alleged trasnsactions in the shares of KAFL also did not implicate the assessee and/or his bnroker. It is also a matter of record that the assessee fu9rnished all the evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchse 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 evidence in support of the assessee’s case clearly support the claim of the assesee and 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. Various courts have held the above view. The addition has been made without bringing on record assessee’s involvement in earning the capital gains by the active collusion in the process of manipulating prices of companies in stock market. In view of the above, the addition of Rs.29,89,956/- as presumed commission payment is hereby deleted and ground of the assessee is allowed.’’ 2.3 During the course of hearing, the ld. DR relied upon the order of the AO and also relied upon the following case laws alongwith Investigation Report .

20 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 2.4 On the other hand, the ld. AR of the assessee relied upon the order of the ld.CIT(A) and also filed the following written submission in its case praying therein that the Departmental appeal deserves to be dismissed..

‘’3. Submissions

3.1 The assessee, during the assessment proceedings, produced the following supporting, being third party evidences, in order to prove the genuineness of the share transactions undertaken by him: For transaction in the scrip of CIAL: S.No Particulars PB a. Copy of Application for allotment of Warrants convertible into Shares of Centron 9 Industrial Alliance Limited. b. Copy of Warrant Allotment letter and Warrant Certificate evidencing purchase of 10- 1,60,000 warrants (jointly with PoorviLodha) of Centron Industrial Alliance 12 Limited on 21.09.12 c. Copy of Bank Statement for the period 01.04.12 to 22.12.12 evidencing purchase 13 of 1,60,000 warrants of Centron Industrial Alliance Limited via banking channel. d. Copy ofConversion Statement evidencing conversion of warrants into equivalent 14 equity shares. e. Copy of extract of Statement of Transaction of Hem Securities Ltd. from 01.01.00 15 to 05.08.15. f. Copy of Joint Statement of Transaction of VigyanLodha and PoorviLodha of 17- B.Lodha Securities Ltd from 26.07.12 to 24.08.16 18 g. Copy of Statement of Transaction of B.Lodha Securities Ltd from 01.04.11 to 19- 31.03.14 of assesse. 27 h. Copy of Sale Bills issued byB.Lodha Securities Ltd evidencing sale of 8,00,000 28- shares of CentronIndustrial Alliance Limited made between 07.02.14 to 26.0314. 36 i. Copy of Contract Notes issued by B.Lodha Securities Ltd evidencing sale of 37- 8,00,000 shares of Centron Industrial Alliance Limited made between 07.02.14 to 60 26.0314. j. Copy of Bank Statement of Oriental Bank of Commerce for the period 01.04.13 to 62- 66 31.03.14 evidencing receipt of sale proceeds of shares of Centron Industrial

21 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Alliance Limited through banking channel.

For transaction in the scrip of MPL: a. Copy of Purchase Bills issued by B.Lodha Securities Ltdevidencing purchase of 67-73 39,000 shares of M/s Midland Polymers Limited between 06.07.11 and 22.08.11. Copy of Contract Notes issued of B.Lodha Securities Ltd evidencing purchase of 74-77 39,000 shares of M/S Midland Polymers Limited between 06.07.11 and 22.08.11. Copy of Bank Statement of Oriental Bank of Commerce for the period 01.04.11 to 17.03.12 evidencing purchase of shares of M/s Midland Polymers Limited via 79-81 banking channel. Copy of Sale Bills issued by B.Lodha Securities Ltd evidencing sale of 1,800 and 700 82-83 shares of M/s Midland Polymers Limited on 10.05.13 and 11.05.13 respectively. Copy of Contract Notes issued by B.Lodha Securities Ltd evidencing sale of 1,800 and 700 shares of M/S Midland Polymers Limited on 11.05.13 and 13.05.13 84-85 respectively. Copy of Sale Bills issued by B.Lodha Securities Ltd evidencing sale of 3,65,000 146- shares of M/S Midland Polymers Limited from 03.07.13 to 07.01.14. 154 Copy of Contract Notes issued by B.Lodha Securities Ltd evidencing sale of 3,65,000 155- shares of M/S Midland Polymers Limited from 03.07.13 to 07.01.14. 167 Copy of Bank Statement of Oriental Bank of Commerce for the period 01.04.13 to 31.03.14 evidencing receipt of sale proceeds of shares of Midland Polymers Limited 62-66 through banking channel.

3.2 From the above documentary evidences, which are independently verifiable, following facts cannot be doubted: i. Assessee was the owner of the shares as the same were appearing in his Demat A/c ii. The purchase consideration was paid through banking channel iii. The transaction of sale was undertaken through recognized stock exchange iv. The shares were sold at prices prevailing in the Stock Exchange on the date of sale v. The sale consideration was received through banking channel 3.3 Neither any defect was pointed out in such evidences nor was any contrary evidence brought on record. Still addition was made by the ld. AO. Thus, the addition was based on suspicion and surmises without any tangible material to show that unaccounted money has been routed back in the shape of LTCG.

22 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 3.4 In the appeal before ld. CIT(A), in addition to what was submitted before the ld. AO, following broad submissions were made:

i. The then Hon’ble Finance Minister Mr. P Chidambaram explained to the Parliament that working of stock exchanges has become transparent and reliable. Therefore, consequential amendments were proposed in IT Act, 1961 (CIT(A) Page 16).

ii. The faceless functioning of stock exchanges do not leave any scope for any pre-arranged transactions (CIT(A) Page 16).

iii. Ld. AO has not made any enquiry which he was duty bound to do in the present case (CIT(A) Page 17).

iv. The allegation of rigging of prices is made yet there is no finding of involvement of the assessee in alleged rigging (CIT(A) Page 18).

v. Allegation of brokers issuing fake contract notes remained unsubstantiated(CIT(A) Page 18).

vi. AO admitted assessee being regular investor of shares (CIT(A) Page 19).

vii. At the time of transactions undertaken by the assessee appellant, no enquiry was undertaken against these companies nor any report was available in public domain (CIT(A) Page 19).

viii. The entire action of ld. AO is based on statements of certain persons without any reference to any documentary evidence or material. Under these circumstances such statements cannot be used against the assessee unless opportunity of cross examination is provided. Reliance was placed on the decision of Hon’ble Supreme Court in the case of Andaman Timber Industries (supra)(CIT(A) Page 20) [CLC 182-185].

ix. Various judgments of Jurisdictional High Court, Other High Courts, Jaipur ITAT, Other ITAT were relied upon wherein the addition, under identical facts and circumstances, was held to be illegal and, therefore, deleted (CIT(A) Page 22).

23 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA x. Entire arguments were summarized (CIT(A) Page 23-24).

3.5 Factual inconsistencies alleged by AO at Page 16-17 of his order were clarified by the assessee before ld. CIT(A) (CIT(A) Page 21-22). Ld. CIT(A) found the explanation of the assessee to be justified.

3.6 Detailed submissions filed before ld. CIT(A) [PB 213-249]and findings of CIT(A) [CIT(A) Pages 25-27]may please be considered.

3.7 It is submitted that the assessee is a regular investor as also observed by ld. CIT(A) (CIT(A) Page 26). Further, assessee’s family concern M/s B Lodha Securities Ltd is in share broking business. The assessee is director of the said company which is registered with SEBI and is member of NSE and BSE. Thus, due to the dealing in shares on brokerage basis the assessee is having vast experience in share business, therefore, the investment in shares in question were made by the assessee due to his knowledge and information about the market. 3.8 It is submitted that the basic principles of law as have been consistently adopted by the courts are: a. The person who alleges should prove b. All adverse material is required to be supplied to the person against whom the allegation is made c. No findings can be recorded on surmises and conjectures d. Adverse action can be initiated only based on evidence

3.9 As against the aforementioned principles of law, in the present case, the transaction of the assessee is held bogus only and only on the basis of general reports of the Investigation Wings.The reportswere prepared only on the basis of statements of various persons without referring to any underlying documents. From the extract of report, as appearing in the assessment order, it can be seen that the name of the assessee or his broker or his transaction has not been discussed.Thus, no link with the case of the assessee has been established, no direct evidence is found against the assessee.Chain of flow of cash has also not be established. Except oral testimony, which also remains uncorroborated, as there is no reference of any material found, nothing was brought on record by ld. AO. The evidences submitted by the assessee have not been found to be false or forged. Documentary evidences shall prevail when weighed against the oral evidences.

3.10 Reports of Investigation Wings have not been confronted to the assessee. The assessee has not been provided with the opportunity to cross examine the persons whose statements have been relied upon.The assessee has also not been provided opportunity to cross examine the persons who have prepared the said report. It is submitted that if the information is gathered behind the back of the assessee and the same is acted upon then, as per the principles of natural

24 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA justice,the assessee should be provided with such information and should be allowed opportunity of cross examination. 3.11 In the following decisions, under identical circumstances, various courts decided the matter in the favour of the assessee: Hon’ble Supreme Court

a. PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) [CLC 166-169] SLP filed against the decision of Hon’ble Gujarat High Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 176 (Gujarat) was dismissed. Hon’ble Gujarat High Court held that there was no substantial question of law and upheld the finding of the Tribunal (in Para 4). Hon’ble Tribunal heldthat in a case where assessee produced all the evidences and addition was made on the basis of statements recorded by Investigation Wing, which were neither confronted nor the assessee was allowed opportunity to cross examine, such addition could not be sustained (Para 2): "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

b. CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) [CLC 170- 171] Hon’ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided moreso when assessee placed on records all the evidences. The relevant findings are as under:

25 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]

Hon’ble Jurisdictional Rajasthan High Court a. PCIT vs Sanjay Chhabra D.B. ITA No. 22/2021 [CLC 142-145] It was submitted before the Hon’ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon’ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon’ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: “..The Tribunal by impugned order has categorically held that the material information received by the Assessing Officer from the investigation wing alongwith certain statements recorded by DBIT Investigation, Calcutta could not be taken into consideration as that material was not disclosed nor an opportunity was accorded for cross-examination of the Assessee. This finding recorded by the Tribunal cannot be said to be perverse or suffering from any patent illegality. Learned counsel for the Revenue could not satisfy us with reference to any judgment on this aspect that even without disclosing any material to the Assessee and without allowing him proper cross-examination, such undisclosed and unverified material could be taken into consideration for the purposes of addition…”…

26 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA “..Learned counsel for the Revenue relying upon the judgment passed by the Supreme Court in the case of SumatiDayal Versus Commissioner of Income Tax, Bangalore reported in AIR 1995 SC 2109 would submit that the Tribunal has not examined the case on the touchstone of human probability…” “..In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed…”

b. Pooja Agarwal, ITA 385/2011 [CLC 146-151], In the said caseit was held that no addition can be made if the following conditions are satisfied:

i. There is no trail which could substantiate that the cash has flown back to the assessee. ii. The transactions is supported by documents appear to be genuine transaction. iii. The statements recorded do not have a clear and a distinct remark about the assessee so as to challenge the genuineness of the transaction.

c. PCIT vs Pramod Jain, DB ITA No. 209/2018 [CLC 152-158] The decision in case of Pooja Agarwal was followed

d. CIT vs Sumitra Devi [2014] 49 taxmann.com 37 (Rajasthan) [CLC 159-163] Hon’ble Rajasthan High Court has held that in the said there were several suspicious circumstances as indicated by AO, however, the findings of AO were more on presumption rather than on cogent proof. Further, AO failed to show that documents placed on record by the assessee were false, fabricated or fictitious.

e. CIT vs Pushpa Malpani [2012] 20 taxmann.com 597 (Rajasthan) [CLC 164-165] “…3. Upon hearing learned counsel for Revenue and perusing impugned order, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat

27 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law…”

Other High Court a. PCIT vs Krishna Devi [2021] 126 taxmann.com 80 (Delhi) [CLC 172- 181] Hon’ble Delhi High Court categorically noted that the Court has to decide the issue on the basis of evidence and proof and not suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the assessee. If the revenue has failed to bring evidence on record that money changed hands and there was agreement to convert unaccounted money mere reliance on the report of investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: “…11…The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and

28 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and SumatiDayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of SumatiDayal (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order…”[Emphasis Supplied] Hon’ble Jurisdictional ITAT a. The case of the assessee is squarely covered in his favour by the decision of Hon’ble Coordinate Jaipur Bench in case of Kota Dal Mills vs DCIT ITA No. 997 to 1002/JP/2018 & 1119/JP/2018. Under identical circumstance, where it was observed that addition was confirmed based on the report of DDIT (Inv) Kolkata, the

29 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA addition was held to be not sustainable as the same was based merely on suspicion. Hon’ble ITAT observed the following:

 There was no direct allegation or admission of the person, whose statements were recorded, of providing accommodation entry to the assessee.  The chain of transaction and flow of money from one entity to another entity and finally to the assessee was not established.  Assessee produced all relevant evidences. No link was found in the documents produced by the assessee and paper  companies. Except statements of persons AO has not brought on record any other  material to controvert or disprove the evidences produced by the assessee.  No documentary evidence was either gathered or referred in these reports. Even if the reports are taken into consideration then they are nothing but narration of the statements of various persons during investigation. CBDT issued Circular and directed the department to concentrate and focus  on collecting documentary evidences disclosing undisclosed income instead of obtaining the statement and then support their claim merely on the basis of statement.  Statement recorded by Investigation Wing are not based on any documentary evidence so as to have an evidentiary value for sustaining addition.  All the proceedings conducted by Investigation Wing were at the back of the assessee and hence statements which is the foundation of the report of Investigation Wing as well as the assessment order cannot be accepted in absence of giving opportunity of cross examination to the assessee.

b. DCIT vs Prateek Kothari – ITA No. 159/JP/2016 [CLC 649-670] In the said case assessment was completed by the AO relying solely on the information of Investigation Wing. Such information was not provided to the assessee and opportunity of cross examination was also not provided. The addition was held to be unjustified and it was held that the principles of natural justice were violated. Hon’ble Jurisdictional ITAT – Alleged Penny Stock cases a. Shri Manohar Lal Chugh, ITA No. 312/JP/2021, Jaipur ITAT [Dated 31.08.2022] [CLC 1-31] b. Smt. Saroj Parwal, ITA No. 753/JP/2019, Jaipur ITAT [24.02.2022] [CLC 32-141] c. Late Shri Satpal Singh vs ACIT – ITA No. 289/JP/2020 dated 14.10.2021 [CLC 186-229] d. Nilesh Agarwal HUF vs ITO – ITA No. 223/JP/2020 dated 09.02.2021 [CLC 452-498]

30 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA e. Ashok Agarwal vs ACIT – ITA No. 124/JP/2020 dated 18.11.2020 [CLC 230-295] f. DCIT vs Sanjay Chhabra – ITA No. 47 to 51/JP/2020 dated 19.08.2020 [CLC 499-648] g. DCIT vs Saurabh Mittal – ITA No. 16/JP/2018 dated 29.08.2018 [CLC 296-336] ITO vs Kapil Mittal – ITA No. 17/JP/2018 dated 29.08.2018 i. Om Prakash Modi vs DCIT – ITA No. 402&203/JP/2017 dated 24.08.2018 [CLC 337-381] j. JVS Foods Pvt vs DCIT – ITA No. 133/JP/2016 dated 16.07.2018 [CLC 382-397] k. Vivek Agarwal vs ITO – ITA No. 292/JP/2017 dated 06.04.2018 [CLC 398-411] l. Purushotam Soni vs ITO – ITA No. 288/JP/2017 dated 06.04.2018 [CLC 412-437] m. Meghraj Singh Shekhawat vs DCIT – ITA No. 443&444/JP/2017 dated 07.03.2018 [CLC 438-451] In view of above the departmental appeal deserves to be dismissed.’’

2.5 Besides above, the ld. AR of the assessee also filed the distinguishing note as to the decision relied upon by the ld. DR in the case of Swati Bajaj (supra) which is reproduced as under:

‘’DISTINGUISHING NOTE The reliance on the judgment of Hon’ble Calcutta High Court in the case of Swati Bajaj IA NO. GA/2/2022 IN ITAT/6/2022 is misplaced for the following legal and factual reasons: 1. The assessee is based in Rajasthan. All the Courts/Tribunals within the jurisdiction of Hon’ble Rajasthan High Court are bound by the decision of Hon’ble Rajasthan High Court.

31 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA Court that Tribunal did not examine the case on touchstone of human probability. However, Hon’ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: “..The Tribunal by impugned order has categorically held that the material information received by the Assessing Officer from the investigation wing alongwith certain statements recorded by DBIT Investigation, Calcutta could not be taken into consideration as that material was not disclosed nor an opportunity was accorded for cross-examination of the Assessee. This finding recorded by the Tribunal cannot be said to be perverse or suffering from any patent illegality. Learned counsel for the Revenue could not satisfy us with reference to any judgment on this aspect that even without disclosing any material to the Assessee and without allowing him proper cross-examination, such undisclosed and unverified material could be taken into consideration for the purposes of addition…” … “..Learned counsel for the Revenue relying upon the judgment passed by the Supreme Court in the case of Sumati Dayal Versus Commissioner of Income Tax, Bangalore reported in AIR 1995 SC 2109 would submit that the Tribunal has not examined the case on the touchstone of human probability…” “..In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed…”

3.1 Pooja Agarwal, ITA 385/2011 [CLC 146-151], In the said case it was held that no addition can be made if the following conditions are satisfied:

i. There is no trail which could substantiate that the cash has flown back to the assessee. ii. The transactions is supported by documents appear to be genuine transaction. iii. The statements recorded do not have a clear and a distinct remark about the assessee so as to challenge the genuineness of the transaction.

3.2 PCIT vs Pramod Jain, DB ITA No. 209/2018 [CLC 152-158] The decision in case of Pooja Agarwal was followed

32 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA 3.3 CIT vs Sumitra Devi [2014] 49 taxmann.com 37 (Rajasthan) [CLC 159-163] Hon’ble Rajasthan High Court has held that in the said there were several suspicious circumstances as indicated by AO, however, the findings of AO were more on presumption rather than on cogent proof. Further, AO failed to show that documents placed on record by the assessee were false, fabricated or fictitious.

3.4 CIT vs Pushpa Malpani [2012] 20 taxmann.com 597 (Rajasthan) [CLC 164-165] “…3. Upon hearing learned counsel for Revenue and perusing impugned order, we find that whether or not sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI at the time of transaction and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. In our view, present appeal does not raise any question of law, much less any substantial question of law…”

33 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA

6.1 Hon’ble Supreme Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) [CLC 166-169] dismissed the SLP filed against the decision of Hon’ble Gujarat High Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 176 (Gujarat). Hon’ble Gujarat High Court held that there was no substantial question of law and upheld the finding of the Tribunal (in Para 4). Hon’ble Tribunal held that in a case where assessee produced all the evidences and addition was made on the basis of statements recorded by Investigation Wing, which were neither confronted nor the assessee was allowed opportunity to cross examine, such addition could not be sustained (Para 2): "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

6.2 CIT vs Odeon Builders (P.) Ltd [2019] 110 taxmann.com 64 (SC) [CLC 170- 171] Hon’ble Supreme Court held that if the addition was based on third party information gathered by Investigation wing then addition cannot be made unless such information is provided to the assessee and opportunity of cross examination is provided moreso when assessee placed on record all the evidences. The relevant findings are as under: Headnote: Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Bogus purchase) - Certain portion of purchases made by assessee was disallowed - Commissioner (Appeals) found that entire disallowance was based on third party information gathered by Investigation Wing of Department, which had not been independently subjected to further verification by Assessing Officer and he had not provided copy of such statements to appellant, thus, denying opportunity of cross examination to appellant, who on other hand, had prima facie discharged initial burden of substantiating purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted

34 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]

6.3 Sunita Dhadda, order dated 28.03.2018, SPECIAL LEAVE PETITION (403 ITR 183) The ratio laid down by Hon’ble Rajasthan High Court and also Hon’ble ITAT, Jaipur Bench as below was upheld: “Their Lordships ADARSH KUMAR GOEL and ROHINTON FALL NARIMAN Ji.- dismissed the Department's special leave petition against judgment dated July 31, 2017, of the Jaipur Bench of the Rajasthan High Court in D.-B,L_TA. No. 197 of 2012 whereby the High Court held that the Tribunal was justified in deleting the addition of Rs. 4,07,00,000 of "on money" said to have been received with respect to subject land of the assessee holding that the question what was the price of the land at the relevant time, was a pure question of fact and that unless it was established on record by the Department, that as a matter of fact, the consideration did pass to the seller from the purchaser, the Department had no right to make any additions, especially since none of the witnesses were examined before the Assessing Officer, and the assessee did not have any opportunity to cross-examine them” [Emphasis Supplied]

6.4 Andaman Timber Industries (CIVIL APPEAL NO. 4228 OF 2006) [CLC 182-185] “…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”

35 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA investigation without further corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: “…11…The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying

36 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order…” [Emphasis Supplied]

2.6 Apropos Ground No. 1 of the Department, we have heard both the parties and perused the materials available on record. In the present case, it is noted that AO had disallowed amount of Rs.9,12,493 under Section 14A by invoking Rule 8D. It is noted by us that assessee had sufficient owned fund, as at the start and end

37 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA of relevant previous year, for making investment for earning exempt income. Moreover, assessee, during the year under consideration, received dividend income only to the extent of Rs.60,134 . Considering the factual position, the ld. CIT(A), NFAC restricted disallowance to the extent of dividend income of Rs. 60,134 earned by the assessee. The ld. CIT(A), NFAC has relied on number of decisions for the proposition that no disallowed under Section 14A can be made if the own fund of assessee are more than the investment made to earn exempt income. Also, ld. CIT(A), NFAC has relied on the decisions for the proposition that disallowance under Section 14A cannot be more than the exempt income earned by assessee. After going through the factual and legal position put forth before us, we feel that ld. CIT(A), NFAC has correctly restricted disallowance of Rs.60,134/- to the extent of exempt income earned by assessee. Accordingly, we do not find any reason to interfere with the decision of ld. CIT(A), NFAC. Hence, ground of appeal taken by department is dismissed.

2.7 Apropos Ground No. 2 of the Department, we have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. During the year under consideration, the assessee has earned Long Term Capital Gain on sale of two scrips, namely ‘Midland Polymers Limited‘ and ‘Centron Industrial Alliance Limited’. Such LTCG has been considered by AO to be bogus. The AO has primarily based his allegation on the

38 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA information received from the Investigation Wing. The AO has relied on the report of the Investigation Wing, which contained reference of the statements recorded. As per the AO, information was received that racket of generating bogus entries in LTCG in penny stocks had been unearthed. As a result of investigation carried out throughout the country wherein certain persons were found indulging in providing accommodation entries, inter alia, bogus LTCG which is claimed as exemption under Section 10(38) of the Income Tax Act by the beneficiary in order to convert black money into white, without payment of tax. The AO has narrated modus operandi of various entry provider, which is a general statement so far, as the indulgence of certain person in providing accommodation entries of bogus LTCG as well as other transactions. It has been noted by us that the entire transaction of purchase and sale undertaken by the assessee has been fully substituted by the assessee through legally acceptable third party evidences, which have been placed as a part of the paper book before us as well as before the lower authorities. In the narration of modus operandi, as made by AO in his order, there is nothing against a particular transaction of purchase and sale of shares undertaken by the assessee. Once the assessee has produced all the supporting evidences which includes purchase bill, bank statement, Demat account, sale of shares through recognised stock exchange, receipt of entire consideration from bank account then in the absence of any contrary, material or evidences on record by AO, the transaction of

39 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA purchase and sale of shares in question cannot be held to be bogus, merely on the basis information investigation wing. The AO has not made any adverse comment on the evidences, supporting the transactions furnished by the assesse before him during the course of assessment proceedings. The observations of AO for transaction to be bogus, is solely dependent on the report of the Investigation Wing, with no specific reference of the assessee's transactions in such report. The observation of AO, in the assessment order, cannot be substituted of any tangible material or evidence to show that, transaction of assessee is bogus being an accommodation entry. It is also noted by us that the investigation wing report, which has been made sole basis for making additions by AO, was not made available to the assessee at any point of time during the assessment proceedings. The AO, in the Show Cause Notice, referred to statement of directors/ entry providers who have operated as entry provider brokers. However, neither any documentary reference is made in the Show Cause Notice nor any such references are made in findings of AO while holding transaction as bogus by availing accommodation entries of LTCG. The AO in entire order has either discussed modus operandi of entry provider or judgement on the issues but has not made reference of material or documentary evidences specifically in relation to assessee which could reveal that the assessee was engaged in availing of accommodation entry of bogus LTCG. The AO has not made any enquiries from any of the parties

40 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA in spite of the fact that complete names and addresses of the third party of whose evidences were submitted by assessee were available on records with him during assessment proceedings. The AO, other than making generic observations, has not examined any of the brokers. Even no opportunity of cross examination was provided by the AO to the assessee during the assessment proceedings. The AO, in the entire assessment order has not made any reference to any single documentary evidence which can be said to be incriminating against the aseessee. Therefore, the mere suspicion cannot be a ground for treating transaction bogus in absence of any evidence or material on record by the AO. The assessee, by submitting evidences supporting the entire trail of transaction undertaken, has discharged the primary onus to substantiate his claim. However, AO has not produced any contrary evidences to controvert any of the evidences produced by the assessee. Moreover, these evidences, as submitted by assessee, are third party evidences which cannot be said to have been manipulated. Once the evidences produced by assessee was not prepared or beyond of manipulation then assessee is said to have discharged his onus to prove the transaction of purchase and sale of shares and consequential capital gain. It is noted that nowhere does the AO mention that cash from assessee was received and the cash was routed back to the assessee through the bank account. Considering about documentary evidences, it clearly outways the so called general evidences relied upon by AO. On the additions made by AO,

41 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA assessee preferred appeal before The ld. CIT(A), NFAC who decided the appeal in favor of the assessee. The ld. CIT(A), NFAC noted the fact that there are no direct or even indirect substantial evidences for holding transactions to be bogus. It has been categorically held by ld. CIT(A), NFAC that additions on basis of suspicion cannot be made without converting the voluminous of evidences placed on record by the assessee. Before us the ld. AR relied upon the number of decisions of ITAT, Jaipur Bench, of the Hon'ble Rajasthan High Court and of other different Hon'ble High Courts (supra). During the course of hearing before us, ld. DR relied upon the decisions of Hon'ble Calcutta High Court in the case of Swati Bajaj and submitted that such case under identical legal position was decided against the assessee. Controverting the submissions, in this regard, Ld.AR before us placed on record a distinguishing note to distinguish legal and factual position of the present case with that of Swati Bajaj before on Hon'ble Calcutta High Court (supra). In the present case, the entire addition has been made by the AO on the basis of report of investigation wing and report of certain persons. No opportunity of cross verification was provided to the assessee. Under such circumstances, no addition can be made to the income of assessee, specifically when entire basis of addition is investigation report, which was never confronted to assessee, and statement of persons, who were neither examined by the AO nor opportunity of cross examination provided to assessee. It is a settled proposition laid down by different

42 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA High Courts and by the Hon'ble Apex Court, as set out in the distinguishing note placed on record by the Ld.AR of assessee, as also set out hereinbefore. Hon'ble Calcutta High Court, in case of Swati Bajaj, served that the assessee did not mention regarding report to be furnished or statement to be provided during assessment proceeding before AO. However, in the present case, specified request was made for the copy of report as well as copies of statements of different persons stated by the assessee. Accordingly, we feel that the decision of Hon'ble Calcutta High Court in case of Swati Bajaj is not applicable in the present case of assessee in view of submission made by ld. AR, hereinabove. Thus, in view of the above discussion and taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon'ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal (supra) as well as in case of PCIT vs. Pramod Jain & Others (supra), we allow the claim of exemption under section 10(38) of the Act and accordingly delete the addition made by the AO. Hence, the order of ld. CIT (A) is upheld.

2.8 Apropos Ground No. 3 of the Department which relates to commission paid for the accommodation entries is consequential to the issue involved in Ground No. 2. Therefore, when we have given a finding that the transaction of purchase and sale of shares and consequential Long Term Capital Gain cannot be treated as

43 ITA169/JP/2022 DCIT, CENTRALL CIRCLE -6, JAIPUR VS SHRI VIGYAN LODHA bogus then the addition made by the AO on account of notional commission paid treating the same as undisclosed expenditure under Section 69C will not be sustainable being consequential. Hence the order of the ld. CIT(A), NFAC is upheld.

3.0 In the result, the appeal of the Department is dismissed.. Order pronounced in the open court on 20 /12/2022

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20 /12/2022 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- The DCIT, Circle-6, Jaipur 2. izR;FkhZ@ The Respondent- Shri Vigyan Lodha, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 169/JP/2022) vkns'kkuqlkj@ By order,

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