SHANNO MOHAMMED YUSUF WARSI ,MUMBAI vs. INCOME TAX OFFICER-25(1)(3), MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 16/02/2023 passed by the learned Commissioner of Income- tax(Appeals)- National Faceless Appeal Centre (NFAC), Delhi [in short the Ld. ‘CIT(A)’] for assessment year 2013-14, raising following grounds:

Shanno Mohammed Yusuf Warsi. Sh 2 ITA No. 1306/M/2023

Rs 2,30,01,500/ Rs 2,30,01,500/- as unexplained cash credit u/s 68 of the Act and as unexplained cash credit u/s 68 of the Act and of Rs.5,75,037/ of Rs.5,75,037/- unexplained expenditure u/s 69C of Act. unexplained expenditure u/s 69C of Act. 3. Without prejudice to the generality of grounds of appeal no. 1 & 2 Without prejudice to the generality of grounds of appeal no. 1 & 2 Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on facts and circumstances of the case of the appellant and above, on facts and circumstances of the case of the appellant above, on facts and circumstances of the case of the appellant in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the addition of Rs 2,30,01,500/ addition of Rs 2,30,01,500/- as unexplained cash credit u/s 68 of as unexplained cash credit u/s 68 of the Act and of Rs.5,75,037/ the Act and of Rs.5,75,037/- unexplained expenditure u/s 69C of unexplained expenditure u/s 69C of Act is on existent facts. Act is on existent facts. 4. Without prejudice to the gen Without prejudice to the generality of grounds of appeal no. 1 & 2 erality of grounds of appeal no. 1 & 2 above, on facts and circumstances of the case of the appellant and above, on facts and circumstances of the case of the appellant and above, on facts and circumstances of the case of the appellant and in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the addition of Rs 2,30,01,500/ addition of Rs 2,30,01,500/- as unexplained cash credit u/s 68 of as unexplained cash credit u/s 68 of the Act and of R the Act and of Rs.5,75,037/- unexplained expenditure u/s 69C of unexplained expenditure u/s 69C of Act has been made by assessing officer without bringing on the Act has been made by assessing officer without bringing on the Act has been made by assessing officer without bringing on the appellants assessment records any material in support of facts appellants assessment records any material in support of facts appellants assessment records any material in support of facts alleged by him. alleged by him. 5. Without prejudice to the generality of grounds of appeal no. 1 & 2 Without prejudice to the generality of grounds of appeal no. 1 & 2 Without prejudice to the generality of grounds of appeal no. 1 & 2 above, on facts and circumstances of the case of the appellant and above, on facts and circumstances of the case of the appellant and above, on facts and circumstances of the case of the appellant and in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the in law learned CIT (Appeals) has erred in not appreciating that the addition of Rs 2,30,01,500/ addition of Rs 2,30,01,500/- as unexplained cash credit u/s 68 of as unexplained cash credit u/s 68 of the Act and of Rs.5,75,037/ the Act and of Rs.5,75,037/- unexplained expenditure u unexplained expenditure u/s 69C of Act has been made by assessing officer merely based on the some Act has been made by assessing officer merely based on the some Act has been made by assessing officer merely based on the some communication received by him without verifying the correctness of communication received by him without verifying the correctness of communication received by him without verifying the correctness of the same and without confronting the appellant with any material the same and without confronting the appellant with any material the same and without confronting the appellant with any material in relation thereto. in relation thereto. 6. That the order of learned CIT That the order of learned CIT (Appeals) being contrary to the facts (Appeals) being contrary to the facts of the case, evidence and material on record and law applicable of the case, evidence and material on record and law applicable of the case, evidence and material on record and law applicable thereto should be set aside, amended or modified in accordance thereto should be set aside, amended or modified in accordance thereto should be set aside, amended or modified in accordance with ground of appeal deduced above. with ground of appeal deduced above. 7. Each of the ground of appeal enumerated above are ind Each of the ground of appeal enumerated above are independent Each of the ground of appeal enumerated above are ind of and without prejudice to one another. of and without prejudice to one another. 8. That the appellant craves leave to reserve to herself the right to That the appellant craves leave to reserve to herself the right to That the appellant craves leave to reserve to herself the right to add to, alter or amend any of the aforesaid ground of rounds of add to, alter or amend any of the aforesaid ground of rounds of add to, alter or amend any of the aforesaid ground of rounds of appeal at or before the time of hearing and to produce such further appeal at or before the time of hearing and to produce such further appeal at or before the time of hearing and to produce such further evidence, documents, and papers in support of its claim as may be e, documents, and papers in support of its claim as may be e, documents, and papers in support of its claim as may be necessary. 2. Briefly stated facts of the case are that the assessee , an stated facts of the case are that the assessee , an stated facts of the case are that the assessee , an individual, filed its return of income for the year under individual, filed its return of income for the year under individual, filed its return of income for the year under consideration on 30/07/2013 declaring total income at ₹ 12, 72, consideration on 30/07/2013 declaring total income at consideration on 30/07/2013 declaring total income at 400/-. Subsequently, on receipt of information that assessee . Subsequently, on receipt of information that assessee . Subsequently, on receipt of information that assessee obtained accommodation entries of bogus long obtained accommodation entries of bogus long-term capital gain, term capital gain, the Assessing Officer recorded reasons to believe that income the Assessing Officer recorded reasons to believe that income the Assessing Officer recorded reasons to believe that income escaped assessment and issued notice under section 148 of the escaped assessment and issued notice under section 148 of the escaped assessment and issued notice under section 148 of the

Shanno Mohammed Yusuf Warsi. Sh 3 ITA No. 1306/M/2023

Income-tax Act, 1961 ( in short the Act) for reassessment under the ax Act, 1961 ( in short the Act) for reassessment under the ax Act, 1961 ( in short the Act) for reassessment under the provisions of section 147 of the A ovisions of section 147 of the Act.

2.1 During reassessment proceedings the Assessing Officer asked During reassessment proceedings the Assessing Officer asked During reassessment proceedings the Assessing Officer asked the assessee to justify sale consideration of ₹2,30,01, the assessee to justify sale consideration of 01,500/-received as genuine. The Assessing on sale of shares of on sale of shares of “Essar (India) Ltd’ as genuine. The Assessing Officer referred to the investigation carried out by Officer referred to the investigation carried out by the D the Directorate of of some of the Income-tax (Investigation Investigation), Kolkata, in the cases brokers, who were dealing in providing accommodation entry of who were dealing in providing accommodation entry of who were dealing in providing accommodation entry of long-term capital gain under section 10(38) of the A in under section 10(38) of the Act including in in under section 10(38) of the A he investigation revealed different the scrip of ‘Essar India Ltd Essar India Ltd’. The investigation revealed different steps of entire process of providing accommodation entry of long- steps of entire process of providing accommodation steps of entire process of providing accommodation The first step is of term capital gain/short /short-term capital loss. The first step stock company. The term ‘Penny’ acquiring of shares of ‘P acquiring of shares of ‘Penny’ stock company. The term ‘Penny’ stock has been referred in relation to the shares having very low stock has been referred in relation to the shares having very low stock has been referred in relation to the shares having very low price or negligible price. The shares of ‘penny’ stock companies price or negligible price. The shares of ‘penny’ stock compani price or negligible price. The shares of ‘penny’ stock compani were acquired by the beneficiaries of long were acquired by the beneficiaries of long-term capital gain at very term capital gain at very low prices mainly mainly through the route of preferential allotment through the route of preferential allotment market transactions. In another route , (private placement) or or off-market transactions. In another route , the beneficiaries of long of long-term capital gain were allott term capital gain were allotted shares of a private limited company, which was subsequently amalgamated private limited company, which was subsequently amalgamated private limited company, which was subsequently amalgamated /merged with a listed /merged with a listed ‘Penny’ stock company and the beneficia the beneficiaries received shares of listed ‘P received shares of listed ‘Penny’ stock in exchange of sh stock in exchange of shares of private limited company private limited company. In some cases, shares ac shares acquired through stock exchange were split and bonus shares were issued to increase were split and bonus shares were issued to increase were split and bonus shares were issued to increase

Shanno Mohammed Yusuf Warsi. Sh 4 ITA No. 1306/M/2023

the volume. Under the second step, the prices of the shares of the Under the second step, the prices of the shares of the Under the second step, the prices of the shares of the ‘Penny’ stock companies were rigged stock companies were rigged through circular trading. This circular trading. This process was managed by a group of operat process was managed by a group of operators for a period exceeding ors for a period exceeding one year. Under the third one year. Under the third step, when the shares prices had been the shares prices had been sufficiently rigged to a high level to a high level, the beneficiaries would sell their , the beneficiaries would sell their shares at the high/inflated price on the stock exchange, which will inflated price on the stock exchange, which will inflated price on the stock exchange, which will be purchased by a set of operators, named as exit providers. The be purchased by a set of operators, named as exit providers. be purchased by a set of operators, named as exit providers. sale would result an sale would result an exorbitant amount of capital gain in the hands amount of capital gain in the hands of beneficiaries, which was exempted from tax under section 10(38) , which was exempted from tax under section 10(38) , which was exempted from tax under section 10(38) of the Act. Under the fourth step, after Under the fourth step, after sale of shares by the sale of shares by the beneficiaries, prices of the penny stock companies prices of the penny stock companies would fall and prices of the penny stock companies the exit providers would sell the shares at loss and would claim the exit providers would sell the shares at loss and would claim the exit providers would sell the shares at loss and would claim short-term capital loss term capital loss, which would be utilised for adjustment be utilised for adjustment against capital gain. The Assessing Officer has also referred to the has also referred to the cash trail in such type of transactions revealed in the investigation rail in such type of transactions revealed in the investigation rail in such type of transactions revealed in the investigation carried out by the directorate of Income carried out by the directorate of Income-tax (investigation), tax (investigation), Kolkatta. For ready reference, relevant part of the assessment order Kolkatta. For ready reference, relevant part of the assessme Kolkatta. For ready reference, relevant part of the assessme is reproduced as under: is reproduced as under:

“14. Cash Trail by Investigation Wing, Kolkata: “14. Cash Trail by Investigation Wing, Kolkata: Investigation Wing, Kolkata has prepared a sample cash trail for showing Investigation Wing, Kolkata has prepared a sample cash trail for showing Investigation Wing, Kolkata has prepared a sample cash trail for showing that how the mechanism works for the syndicate of providing long term that how the mechanism works for the syndicate of providing long term that how the mechanism works for the syndicate of providing long term capital gain/ short term capital capital gain/ short term capital loss. For preparing this cash trail loss. For preparing this cash trail Investigation Wing, Kolkata has followed the money movement from Investigation Wing, Kolkata has followed the money movement from Investigation Wing, Kolkata has followed the money movement from undisclosed proprietorship accounts, where cash is being deposited undisclosed proprietorship accounts, where cash is being deposited undisclosed proprietorship accounts, where cash is being deposited mostly, to the Jamakharchi companies who are registered as clients with mostly, to the Jamakharchi companies who are registered as clients with mostly, to the Jamakharchi companies who are registered as clients with the share broke the share brokers. Undisclosed and unaccounted cash gets deposited to cash gets deposited to proprietorship accounts and then it gets transferred to client companies, proprietorship accounts and then it gets transferred to client companies, proprietorship accounts and then it gets transferred to client companies, who exist in paper only. From the Jamakharchi client company account, who exist in paper only. From the Jamakharchi client company account, who exist in paper only. From the Jamakharchi client company account, money gets transferred to Beneficiaries of Long Term Capi money gets transferred to Beneficiaries of Long Term Capi money gets transferred to Beneficiaries of Long Term Capital Gain via Share Broker's Account. On a sample basis, just to illustrate the modus Share Broker's Account. On a sample basis, just to illustrate the modus Share Broker's Account. On a sample basis, just to illustrate the modus

Shanno Mohammed Yusuf Warsi. Sh 5 ITA No. 1306/M/2023

operandi Investigation Wing, Kolkata has prepared cash tail of more than operandi Investigation Wing, Kolkata has prepared cash tail of more than operandi Investigation Wing, Kolkata has prepared cash tail of more than 1500 Crore Rupees. 1500 Crore Rupees. 14.2 To elaborate it more, when a person needs entry of LTCG, he 14.2 To elaborate it more, when a person needs entry of LTCG, he 14.2 To elaborate it more, when a person needs entry of LTCG, he approaches a s approaches a share broker or entry operator. Entry operator gets him hare broker or entry operator. Entry operator gets him registered with some share broker as a client. Then shares of a listed registered with some share broker as a client. Then shares of a listed registered with some share broker as a client. Then shares of a listed penny stock are provided to beneficiaries. penny stock are provided to beneficiaries. After a year, beneficiary After a year, beneficiary provides cash to entry operator for having equalling amount o provides cash to entry operator for having equalling amount o provides cash to entry operator for having equalling amount of entry of LTCG. Then entry operator or share broker gets such cash deposited to the LTCG. Then entry operator or share broker gets such cash deposited to the LTCG. Then entry operator or share broker gets such cash deposited to the various accounts and routes it to bogus client. various accounts and routes it to bogus client. Bogus client Bogus client purchases the penny stock shares from beneficiary on abnormally higher rate. penny stock shares from beneficiary on abnormally higher rate. penny stock shares from beneficiary on abnormally higher rate. Thus a beneficiary gets back his beneficiary gets back his unaccounted cash as cheques/RTGS for receipt unaccounted cash as cheques/RTGS for receipt against sale of shares. against sale of shares. 14.3 Almost all the proprietorship accounts, where cash is getting 14.3 Almost all the proprietorship accounts, where cash is getting 14.3 Almost all the proprietorship accounts, where cash is getting deposited never files Income Tax Returns. Moreover, they tend to close deposited never files Income Tax Returns. Moreover, they tend to close deposited never files Income Tax Returns. Moreover, they tend to close such accounts very often, so that they can evade such accounts very often, so that they can evade any STR/FIU/Income any STR/FIU/Income Tax issues. If one goes through the K/Cs of such proprietorship accounts, it Tax issues. If one goes through the K/Cs of such proprietorship accounts, it Tax issues. If one goes through the K/Cs of such proprietorship accounts, it can be seen that they are opened in the name of dummy persons, who are can be seen that they are opened in the name of dummy persons, who are can be seen that they are opened in the name of dummy persons, who are either employees or relatives of entry operators. either employees or relatives of entry operators. Investigation Wing, Investigation Wing, Kolkata has gone to Kolkata has gone to even the registered offices of many such cash even the registered offices of many such cash depositing firms, but as expected there was no existence found for any depositing firms, but as expected there was no existence found for any depositing firms, but as expected there was no existence found for any such persons/firms. Almost all such accounts were opened with fake such persons/firms. Almost all such accounts were opened with fake such persons/firms. Almost all such accounts were opened with fake addresses. Role of banking authorities is also highly questionable here addresses. Role of banking authorities is also highly questionable here addresses. Role of banking authorities is also highly questionable here. 14.4 Same is true, in the case of Paper/Jamakharchi/bogus Clients also. 14.4 Same is true, in the case of Paper/Jamakharchi/bogus Clients also. 14.4 Same is true, in the case of Paper/Jamakharchi/bogus Clients also. Though they are registered as a client with share brokers, and Brokers Though they are registered as a client with share brokers, and Brokers Though they are registered as a client with share brokers, and Brokers maintains KYC for such bogus clients also, but these clients does not exists maintains KYC for such bogus clients also, but these clients does not exists maintains KYC for such bogus clients also, but these clients does not exists at their given registered address. at their given registered address. In many cases it was found that such In many cases it was found that such client companies are missing, or existing nowhere. Even the person of client companies are missing, or existing nowhere. Even the person of client companies are missing, or existing nowhere. Even the person of share broker could not find its clients. When share brokers were share broker could not find its clients. When share brokers were share broker could not find its clients. When share brokers were confronted with this, they either accepted that such clients are bogus or confronted with this, they either accepted that such clients are bogus or confronted with this, they either accepted that such clients are bogus or they failed to make any reasonable explanation. ed to make any reasonable explanation.” 2.2 In the case, the assessee had purchase In the case, the assessee had purchased 45,000 shares through ‘preferential’ through ‘preferential’ allotment at ₹ 50 per share against payment 50 per share against payment of ₹22,50,000/- though though cheque dated 26/05/2011. The shares wer 26/05/2011. The shares were transferred into assessee transferred into assessee’s ‘D-mat’ account i.e. electronic account i.e. electronic account for keeping records of shares held by a person, for keeping records of shares held by a person, on 14/07/2011. on 14/07/2011. The shares were then split on 23/02/2012 into 4,50,000 shares of The shares were then split on 23/02/2012 into 4,50,000 shares of The shares were then split on 23/02/2012 into 4,50,000 shares of rupees one each. The rupees one each. The shares were then sold in month of September month of September 2012 on various dat 2012 on various dates on ‘stock exchange’ through through a broker for a

Shanno Mohammed Yusuf Warsi. Sh 6 ITA No. 1306/M/2023

total sale consideration of ₹2,30,01,500/-, on which the assessee total sale consideration of , on which the assessee term capital gain of ₹2,06,99,474/ computed long-term capital gain of 474/-, which was claimed as exempted from income tax purpose under the provisions claimed as exempted from income tax purpose under the provisions claimed as exempted from income tax purpose under the provisions of section 10(38) of the of the Act.

2.3 The Assessing Officer analysed financials of The Assessing Officer analysed financials of The Assessing Officer analysed financials of the company namely ‘Essar (India) ) Ltd’ and observed that it was neither engaged was neither engaged into any substantial activity nor having any future plans and the into any substantial activity nor having any future plan into any substantial activity nor having any future plan funds raised through preferential allotment had been not used for funds raised through preferential allotment had been not used for funds raised through preferential allotment had been not used for business expansion but had been further advanced as loans and business expansion but had been further advanced as loans and business expansion but had been further advanced as loans and investments. The Assessing Officer further investments. The Assessing Officer further observed a observed as how the share price of the company were rigged in the period subsequent to share price of the company were rigged in the period sub share price of the company were rigged in the period sub the purchase of shares by the assessee in preferential allotment. the purchase of shares by the assessee in preferential allotment. the purchase of shares by the assessee in preferential allotment. The relevant observations of the Assessing Officer are observations of the Assessing Officer are reproduced as observations of the Assessing Officer are under:

“11. Essar India (Scrip No.531502): Essar India (Scrip No.531502): This company was having market price of share at around Rs. 1.93 fo This company was having market price of share at around Rs. 1.93 fo This company was having market price of share at around Rs. 1.93 for the share having face value of Re 1 in May, 2011. Thereafter, the price was share having face value of Re 1 in May, 2011. Thereafter, the price was share having face value of Re 1 in May, 2011. Thereafter, the price was jacked up to Rs.24.74 from Rs 1.93 in 20 months that is till January, jacked up to Rs.24.74 from Rs 1.93 in 20 months that is till January, jacked up to Rs.24.74 from Rs 1.93 in 20 months that is till January, 2013. Thus, within in 20 months the price was jacked up nearly 13 times. 2013. Thus, within in 20 months the price was jacked up nearly 13 times. 2013. Thus, within in 20 months the price was jacked up nearly 13 times. After that the price was maintained After that the price was maintained in the range of Rs. 20 to Rs. 24. So in the range of Rs. 20 to Rs. 24. So that the interested beneficiaries were able to book the long term gains. that the interested beneficiaries were able to book the long term gains. that the interested beneficiaries were able to book the long term gains. After that the price was made to fall freely so that interested beneficiaries After that the price was made to fall freely so that interested beneficiaries After that the price was made to fall freely so that interested beneficiaries who had booked at high market price can avail bogus short Term Capi who had booked at high market price can avail bogus short Term Capi who had booked at high market price can avail bogus short Term Capital Loss. Thereafter the prices have gone down to merely Rs.5. The daily Loss. Thereafter the prices have gone down to merely Rs.5. The daily Loss. Thereafter the prices have gone down to merely Rs.5. The daily trading details in shares of the company are given below. The price & trading details in shares of the company are given below. The price & trading details in shares of the company are given below. The price & volume movement of the shares of the company from 01/01/2011 to volume movement of the shares of the company from 01/01/2011 to volume movement of the shares of the company from 01/01/2011 to 31,12.2014 is given below in a graphical from: 31,12.2014 is given below in a graphical from:

Shanno Mohammed Yusuf Warsi. Sh 7 ITA No. 1306/M/2023

11.2 In the curve above while LTCG is booked while the share price is 11.2 In the curve above while LTCG is booked while the share price is 11.2 In the curve above while LTCG is booked while the share price is going up, the downward journey is used by the operators for booking going up, the downward journey is used by the operators for booking going up, the downward journey is used by the operators for booking bogus losses. The LTCG beneficiary pays cash to exit entry provider or a bogus losses. The LTCG beneficiary pays cash to exit entry provider or a bogus losses. The LTCG beneficiary pays cash to exit entry provider or a person who wants to book a loss and in return person who wants to book a loss and in return gets the cheque. The gets the cheque. The operator deducts his commission from the cash. operator deducts his commission from the cash. As prices crash the loss As prices crash the loss taking beneficiary sells these shares bought at high value for small value taking beneficiary sells these shares bought at high value for small value taking beneficiary sells these shares bought at high value for small value resulting in artificial loss. resulting in artificial loss. 11.3 The financial health of the company is taken out fro 11.3 The financial health of the company is taken out fro 11.3 The financial health of the company is taken out from the data available in public domain and which is used by the investors is as available in public domain and which is used by the investors is as available in public domain and which is used by the investors is as follows: Share Share Gross Earnings Per Earnings Per FY capital capital Turnover Expenses PAT Share Share 2009-10 5.00 2.43 2.6 0.04. 0.08 2010-11 5.00 1.25 1.37 -0.07 -0.01 2011-12 8.18 3.06 3.01 0.03 0.00 2012-13 8.18 13.66 13.61 0.03 0.00 2013-14 8.18 15.72 15.72 -0.45 -0.06 2014-15 20.44 20.44 8.71 12.76 -4.05 -0.19 11.4 Thus, it is clear that the networth of the above company is Thus, it is clear that the networth of the above company is Thus, it is clear that the networth of the above company is negligible. Even though the networth negligible. Even though the networth of the company and the business of the company and the business activity of the company is negligible the share prices have been artificially activity of the company is negligible the share prices have been artificially activity of the company is negligible the share prices have been artificially rigged by the group of operators including Shri Anil Agarwal of Mumbai to rigged by the group of operators including Shri Anil Agarwal of Mumbai to rigged by the group of operators including Shri Anil Agarwal of Mumbai to accommodate beneficiaries seeking long accommodate beneficiaries seeking long term capital gain and losses. No term capital gain and losses. No prudent businessman and particularly trader or investorin stock will invest prudent businessman and particularly trader or investorin stock will invest prudent businessman and particularly trader or investorin stock will invest in such penny scrip which is defunct and inoperative. in such penny scrip which is defunct and inoperative.”

Shanno Mohammed Yusuf Warsi. Sh 8 ITA No. 1306/M/2023

2.4 For verification of the shares purchased by the exit providers, verification of the shares purchased by the exit providers, verification of the shares purchased by the exit providers, notices under section 133(6) of the A s under section 133(6) of the Act were issued on ct were issued on 16/12/2016, however, same remained non , same remained non-complied. The relevant fi complied. The relevant finding of the Assessing Officer is reproduced as under: Assessing Officer is reproduced as under:

“13.4 With a view to verify, their genuineness and cash trail, notices u/s 13.4 With a view to verify, their genuineness and cash trail, notices u/s 13.4 With a view to verify, their genuineness and cash trail, notices u/s 133(6) of the Act, dated 16.12.2016 were issued to the purchas 133(6) of the Act, dated 16.12.2016 were issued to the purchas 133(6) of the Act, dated 16.12.2016 were issued to the purchasers of the shares, calling for details of share sale/purchase with the assessee during shares, calling for details of share sale/purchase with the assessee during shares, calling for details of share sale/purchase with the assessee during the year, their financial statements and return of income and bank the year, their financial statements and return of income and bank the year, their financial statements and return of income and bank statements. However, no reply is received till date and the covers are statements. However, no reply is received till date and the covers are statements. However, no reply is received till date and the covers are returned back by the postal aut returned back by the postal authorites with the remark of "Left". These horites with the remark of "Left". These buyers are either the dummy persons for the purpose of providing entry or buyers are either the dummy persons for the purpose of providing entry or buyers are either the dummy persons for the purpose of providing entry or the persons who want to take an artificial LTCG/STCL. As per BSE data, the persons who want to take an artificial LTCG/STCL. As per BSE data, the persons who want to take an artificial LTCG/STCL. As per BSE data, the share prices of the scrip fell sharply thereafter. The volume of t the share prices of the scrip fell sharply thereafter. The volume of t the share prices of the scrip fell sharply thereafter. The volume of the transaction was also at the high during fall period. From the above facts transaction was also at the high during fall period. From the above facts transaction was also at the high during fall period. From the above facts and analysis it can be said that parties involved in purchasing from the and analysis it can be said that parties involved in purchasing from the and analysis it can be said that parties involved in purchasing from the assessee at the other end had no intention of a genuine investor and failed assessee at the other end had no intention of a genuine investor and failed assessee at the other end had no intention of a genuine investor and failed to act as per market sentiment to act as per market sentiments.” 2.5 The Assessing Officer also issued Assessing Officer also issued summon under section 131 under section 131 of the Act to the assessee to the assessee and recorded his statement. The and recorded his statement. The Assessing Officer has summarised statement of the assessee as Assessing Officer has summarised statement of the assessee as Assessing Officer has summarised statement of the assessee as under:

“16.2 The assessee Smt. Shanno Mohammed Yusuf Warsi, stated i 16.2 The assessee Smt. Shanno Mohammed Yusuf Warsi, stated i 16.2 The assessee Smt. Shanno Mohammed Yusuf Warsi, stated in her statement recorded on oath that she had traded / invested in shares in the statement recorded on oath that she had traded / invested in shares in the statement recorded on oath that she had traded / invested in shares in the year 2011 and after that she has never traded / invested. She further year 2011 and after that she has never traded / invested. She further year 2011 and after that she has never traded / invested. She further stated that she was suggested by the brother regarding the scrip of Esaar stated that she was suggested by the brother regarding the scrip of Esaar stated that she was suggested by the brother regarding the scrip of Esaar India Ltd. and accordingly she India Ltd. and accordingly she invested in the preferential allotment of the invested in the preferential allotment of the said shares. She stated to have no knowledge about financials of the said shares. She stated to have no knowledge about financials of the said shares. She stated to have no knowledge about financials of the company. The assessee has further stated that she has never invested / company. The assessee has further stated that she has never invested / company. The assessee has further stated that she has never invested / traded in shares after this particular scrip, on account of religious traded in shares after this particular scrip, on account of religious traded in shares after this particular scrip, on account of religious restrictions. She further stated to have not trading in shares and it was all restrictions. She further stated to have not trading in shares and it was all restrictions. She further stated to have not trading in shares and it was all due to religious restrictions. She is not able to show any knowledge of the due to religious restrictions. She is not able to show any knowledge of the due to religious restrictions. She is not able to show any knowledge of the penny stock company, its financial position or what are the activities of the penny stock company, its financial position or what are the activities of the penny stock company, its financial position or what are the activities of the company. Despite poor fu Despite poor fundamentals of companies why the assessee ndamentals of companies why the assessee bought this penny stock has not been explained. Every prudent bought this penny stock has not been explained. Every prudent bought this penny stock has not been explained. Every prudent businessman, while investing in share market will always find relevance businessman, while investing in share market will always find relevance businessman, while investing in share market will always find relevance in updating him/her about the basic financial fundamentals of company in updating him/her about the basic financial fundamentals of company in updating him/her about the basic financial fundamentals of company he/she wants to invest. s to invest.”

Shanno Mohammed Yusuf Warsi. Sh 9 ITA No. 1306/M/2023

2.6 For verification of the preferential allotment of shares to the verification of the preferential allotment of shares to the verification of the preferential allotment of shares to the assessee, the Assessing Officer issued noti assessee, the Assessing Officer issued notice under section 133(6) of ce under section 133(6) of the Act to the company M/s Essar ct to the company M/s Essar (India) Ltd , calling for details is Ltd , calling for details is provided in para 16.4 of the assessment order, however the notice 16.4 of the assessment order, however the notice 16.4 of the assessment order, however the notice returned back with the postal remark the ‘receiver refused’. returned back with the postal remark the ‘receiver refused’. returned back with the postal remark the ‘receiver refused’.

2.7 In background of the above facts n background of the above facts, the Assessing Officer issued , the Assessing Officer issued a final show cause notice to the assessee a w cause notice to the assessee as why the alleged sale s why the alleged sale consideration of shares of ‘Essar( ion of shares of ‘Essar(India) Ltd’ might not be treated as ’ might not be treated as unexplained cash credit nexplained cash credit in terms of section 68 of the A in terms of section 68 of the Act. After considering submission of the assessee considering submission of the assessee, the learned , the learned Assessing Officer concluded as under: Officer concluded as under:

16.6 All the indicators mentioned in Pa 16.6 All the indicators mentioned in Paras above, point to only one ras above, point to only one thing that the shares prices are being manipulated and they are not in thing that the shares prices are being manipulated and they are not in thing that the shares prices are being manipulated and they are not in response to normal market demand. response to normal market demand. Such type of companies and the Such type of companies and the trend of price movement is a classic example of manipulation of penny trend of price movement is a classic example of manipulation of penny trend of price movement is a classic example of manipulation of penny stock shares by accom stock shares by accommodation entry providers. How the share prices How the share prices are manipulated by hawala operators in case of such small companies are manipulated by hawala operators in case of such small companies are manipulated by hawala operators in case of such small companies is a fact well known and that need not be separately discussed here. is a fact well known and that need not be separately discussed here. is a fact well known and that need not be separately discussed here. It may be sufficient to point out that the financial results of company, It may be sufficient to point out that the financial results of company, It may be sufficient to point out that the financial results of company, the trends in price movement, purchase of the shares of unknown Co. the trends in price movement, purchase of the shares of unknown Co. the trends in price movement, purchase of the shares of unknown Co. listed in exchange, very small capital and shareholders base of Co., listed in exchange, very small capital and shareholders base of Co., listed in exchange, very small capital and shareholders base of Co., purchases by assessee of these shares without assigning any specific purchases by assessee of these shares without assigning any specific purchases by assessee of these shares without assigning any specific reasons for investing in such unknown Co; all ind reasons for investing in such unknown Co; all indicate to only one icate to only one thing that entire purchase of shares of M/s Esaar India Ltd was thing that entire purchase of shares of M/s Esaar India Ltd was thing that entire purchase of shares of M/s Esaar India Ltd was nothing but a part of hawala accommodation entry. The conclusion nothing but a part of hawala accommodation entry. The conclusion nothing but a part of hawala accommodation entry. The conclusion that the assessee has paid cash for obtaining accommodation is not that the assessee has paid cash for obtaining accommodation is not that the assessee has paid cash for obtaining accommodation is not based merely on a confessional statements based merely on a confessional statements of Mr Anuj Agarwal and of Mr Anuj Agarwal and Mr Sushil Kumar Agarwal Directors of M/s Korp Securities which is a Mr Sushil Kumar Agarwal Directors of M/s Korp Securities which is a Mr Sushil Kumar Agarwal Directors of M/s Korp Securities which is a Share Trading company and created mainly for the purpose of giving Share Trading company and created mainly for the purpose of giving Share Trading company and created mainly for the purpose of giving accommodation entry to various beneficiaries in the form of Long Term accommodation entry to various beneficiaries in the form of Long Term accommodation entry to various beneficiaries in the form of Long Term Capital gain. The specific n Capital gain. The specific names of beneficiaries have been culled out ames of beneficiaries have been culled out from the books of accounts maintained by the persons covered by the from the books of accounts maintained by the persons covered by the from the books of accounts maintained by the persons covered by the Investigation wing and it is only in these cases, information has been Investigation wing and it is only in these cases, information has been Investigation wing and it is only in these cases, information has been passed by the wing. The admission by Mr. Anuj Agarwal and Mr passed by the wing. The admission by Mr. Anuj Agarwal and Mr passed by the wing. The admission by Mr. Anuj Agarwal and Mr Sushil Kumar Agarwal, is not a bald statement. Most of the companies Agarwal, is not a bald statement. Most of the companies Agarwal, is not a bald statement. Most of the companies involved in providing accommodation entry to assessee were floated involved in providing accommodation entry to assessee were floated involved in providing accommodation entry to assessee were floated by them only. Therefore his statement cannot be brushed aside and by them only. Therefore his statement cannot be brushed aside and by them only. Therefore his statement cannot be brushed aside and his statement cannot be regarded as mere third party statement; his statement cannot be regarded as mere third party statement; his statement cannot be regarded as mere third party statement;

Shanno Mohammed Yusuf Warsi. Sh 10 ITA No. 1306/M/2023

rather he is one of the parties to the transaction of accommodation her he is one of the parties to the transaction of accommodation her he is one of the parties to the transaction of accommodation entry racket and therefore his statement has great evidentiary value. entry racket and therefore his statement has great evidentiary value. entry racket and therefore his statement has great evidentiary value. 17. Once the hawala operator has already admitted to be 17. Once the hawala operator has already admitted to be 17. Once the hawala operator has already admitted to be manipulating shares which is also proved by low financials of the manipulating shares which is also proved by low financials of the manipulating shares which is also proved by low financials of the company to fetch high price in market, the burden of proving a fact is company to fetch high price in market, the burden of proving a fact is company to fetch high price in market, the burden of proving a fact is said to be established under the Evidence Act and thereafter the onus said to be established under the Evidence Act and thereafter the onus said to be established under the Evidence Act and thereafter the onus of proving that such fact did not exist, shifts to the person denying the of proving that such fact did not exist, shifts to the person denying the of proving that such fact did not exist, shifts to the person denying the existence of such facts. Mere denial by existence of such facts. Mere denial by the assessee without evidence the assessee without evidence is only self-serving and does not discharge the onus of proof, unless serving and does not discharge the onus of proof, unless serving and does not discharge the onus of proof, unless he is able to prove with evidence that the statement given by Mr Anuj he is able to prove with evidence that the statement given by Mr Anuj he is able to prove with evidence that the statement given by Mr Anuj Agarwal and Mr Sushil Kumar Agarwal was unreliable. The denial by Agarwal and Mr Sushil Kumar Agarwal was unreliable. The denial by Agarwal and Mr Sushil Kumar Agarwal was unreliable. The denial by assessee, also does assessee, also does not lend any credibility, especially in the light of not lend any credibility, especially in the light of findings that the financial of the company did not command such high findings that the financial of the company did not command such high findings that the financial of the company did not command such high price at all. Thus, it is apparent that the assessee has not price at all. Thus, it is apparent that the assessee has not been able to been able to discharge the onus of proving that he has not given any mone discharge the onus of proving that he has not given any mone discharge the onus of proving that he has not given any money as cash loans or received back the cash loans with interest. cash loans or received back the cash loans with interest. 18. Findings and conclusion 18. Findings and conclusion The submissions made by the assessee and reply to show cause is The submissions made by the assessee and reply to show cause is The submissions made by the assessee and reply to show cause is considered. The facts of the case, investigations made by various considered. The facts of the case, investigations made by various considered. The facts of the case, investigations made by various directorates, statements recorded during the assessment proceedings directorates, statements recorded during the assessment proceedings directorates, statements recorded during the assessment proceedings are considered. From the discussion in the preceding paras are considered. From the discussion in the preceding paras are considered. From the discussion in the preceding paras, it is concluded that long term capital gains booked by assessee in her concluded that long term capital gains booked by assessee in her concluded that long term capital gains booked by assessee in her books were pre books were pre-arranged method to evade taxes and launder money. arranged method to evade taxes and launder money. Following are the findings and the reasons which substantiates the Following are the findings and the reasons which substantiates the Following are the findings and the reasons which substantiates the findings. a. Mode of acquisition of the shares: The a Mode of acquisition of the shares: The assessee has claimed to ssessee has claimed to have purchased the shares through preferential allotment. have purchased the shares through preferential allotment. have purchased the shares through preferential allotment. However, when letter was issued u/s. 133(6) of the Act, to Esaar However, when letter was issued u/s. 133(6) of the Act, to Esaar However, when letter was issued u/s. 133(6) of the Act, to Esaar India Ltd., calling for information regarding the assessee, the same India Ltd., calling for information regarding the assessee, the same India Ltd., calling for information regarding the assessee, the same was returned back by the postal authoriti was returned back by the postal authorities with the remark es with the remark "receiver refused". "receiver refused". b. Sale of shares and unusual rise in the price: Further the assessee Sale of shares and unusual rise in the price: Further the assessee Sale of shares and unusual rise in the price: Further the assessee has sold the 4,50,000 shares at the price of Rs 2,30,01,500/-, has sold the 4,50,000 shares at the price of Rs 2,30,01,500/ has sold the 4,50,000 shares at the price of Rs 2,30,01,500/ thus resulting the long term capital gain of Rs.2,06,99,474/-, thus resulting the long term capital gain of Rs.2,06,99,474/ thus resulting the long term capital gain of Rs.2,06,99,474/ which is 10 times the in which is 10 times the increase of the cost price, and as discussed crease of the cost price, and as discussed the rise in share prices is not holding to any commercial principles the rise in share prices is not holding to any commercial principles the rise in share prices is not holding to any commercial principles and market factors. and market factors. c. Findings of Investigation wing: The findings of the Directorate of Findings of Investigation wing: The findings of the Directorate of Findings of Investigation wing: The findings of the Directorate of Investigation of Mumbai and Kolkata as discussed above have Investigation of Mumbai and Kolkata as discussed above ha Investigation of Mumbai and Kolkata as discussed above ha proved various brokers as entry providers, the scrip of Essar India proved various brokers as entry providers, the scrip of Essar India proved various brokers as entry providers, the scrip of Essar India Ltd. used for providing Bogus LTCG and cash trail in the case of Ltd. used for providing Bogus LTCG and cash trail in the case of Ltd. used for providing Bogus LTCG and cash trail in the case of paper companies. It is proved that the assessee had worked out paper companies. It is proved that the assessee had worked out paper companies. It is proved that the assessee had worked out an arrangement in which the shares were acquired by the an arrangement in which the shares were acquired by the an arrangement in which the shares were acquired by the assessee, the share prices were rigged and then with the help of ssessee, the share prices were rigged and then with the help of ssessee, the share prices were rigged and then with the help of entry operators by routing the cash, shares were sold at high price entry operators by routing the cash, shares were sold at high price entry operators by routing the cash, shares were sold at high price to arrive at tax free capital gains. to arrive at tax free capital gains. d. d. Analysis of transactions: Facts revealed that such trading Analysis of transactions: Facts revealed that such trading Analysis of transactions: Facts revealed that such trading transactions of purchase transactions of purchase and sale of shares are not been effected, and sale of shares are not been effected,

Shanno Mohammed Yusuf Warsi. Sh 11 ITA No. 1306/M/2023

for commercial purpose but to create artificial gains, with a view to for commercial purpose but to create artificial gains, with a view to for commercial purpose but to create artificial gains, with a view to evade taxes evade taxes - i. Transactions of shares were not governed by market factors i. Transactions of shares were not governed by market factors i. Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of prevalent at relevant time in such trade, but same were product of prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. esign and mutual connivance on part of assessee and the operators. esign and mutual connivance on part of assessee and the operators. ii. The assessee resorted to a preconceived scheme to procure long The assessee resorted to a preconceived scheme to procure long- The assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in share transactions not term capital gains by way of price difference in share transactions not term capital gains by way of price difference in share transactions not supported by market factors. supported by market factors. iii. Cumulative iii. Cumulative events in such transactions of shares revealed that events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not same were devoid of any commercial nature and fell in realm of not same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not being bona fide and, hence, impugned long term capital gain is not being bona fide and, hence, impugned long term capital gain is not allowable. e. Failure of Assessee to discharge his onus: The assessee has Failure of Assessee to discharge his onus: The assessee has not Failure of Assessee to discharge his onus: The assessee has been able to prove the unusual rise and fall of share prices to be been able to prove the unusual rise and fall of share prices to be been able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such natural and based on the market forces. It is evident that such natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly share transactions were closed circuit transactions and clearly share transactions were closed circuit transactions and clearly structured one. structured one. f. Financial analysis of the penny stock co Financial analysis of the penny stock companies: The earning per mpanies: The earning per share and profits for the relevant period are negligible and in share and profits for the relevant period are negligible and in share and profits for the relevant period are negligible and in contrast with the price rise of the share of the company which contrast with the price rise of the share of the company which contrast with the price rise of the share of the company which unusually high as discussed above. unusually high as discussed above. g. Cash trail in the accounts of the entry providers: The Cash trail in the accounts of the entry providers: The Cash trail in the accounts of the entry providers: The investigations investigations in the fund flow analyzed in the accounts of the in the fund flow analyzed in the accounts of the entry providers have established that the cash has been routed entry providers have established that the cash has been routed entry providers have established that the cash has been routed from various accounts to provide accommodations to assessee. from various accounts to provide accommodations to assessee. from various accounts to provide accommodations to assessee. h. Arranged transactions: The transactions entered by the assessee Arranged transactions: The transactions entered by the assessee Arranged transactions: The transactions entered by the assessee involve the series involve the series of preconceived steps, the performance of each of of preconceived steps, the performance of each of which is depending on the others being carried out. The true which is depending on the others being carried out. The true which is depending on the others being carried out. The true nature of such share transactions lacked commercial contents, nature of such share transactions lacked commercial contents, nature of such share transactions lacked commercial contents, being artificially structured transactions, entered into with the sole being artificially structured transactions, entered into with the sole being artificially structured transactions, entered into with the sole intent, to evade taxes. evade taxes. i. i. The assessee has done merely one transaction and no other The assessee has done merely one transaction and no other The assessee has done merely one transaction and no other transactions in shares were done. The assessee is taking shelter transactions in shares were done. The assessee is taking shelter transactions in shares were done. The assessee is taking shelter under the garb of religious restrictions. If a person earns profit at under the garb of religious restrictions. If a person earns profit at under the garb of religious restrictions. If a person earns profit at such a high rate, it is quiet obvious that he w such a high rate, it is quiet obvious that he will always further ill always further invest in shares. invest in shares. 18.2 The facts and circumstances of the case, as recorded above, 18.2 The facts and circumstances of the case, as recorded above, 18.2 The facts and circumstances of the case, as recorded above, clearly suggest that the revenue cannot take or accept such make clearly suggest that the revenue cannot take or accept such make clearly suggest that the revenue cannot take or accept such make- believe transactions, as presented by the assessee. Truth or believe transactions, as presented by the assessee. Truth or believe transactions, as presented by the assessee. Truth or genuineness of such transact genuineness of such transactions must prevail over the smoke screen, ions must prevail over the smoke screen, created by way of pre created by way of pre-meditated series of steps taken by the meditated series of steps taken by the assessee, with a view to imparting a colour of genuineness and assessee, with a view to imparting a colour of genuineness and assessee, with a view to imparting a colour of genuineness and character of commercial nature, to such share transactions. Needless character of commercial nature, to such share transactions. Needless character of commercial nature, to such share transactions. Needless to say that one has to to say that one has to look at the whole transactions and a series of look at the whole transactions and a series of steps taken to accomplish such share transactions, in an integrated steps taken to accomplish such share transactions, in an integrated steps taken to accomplish such share transactions, in an integrated manner, with a view to ascertaining the true nature and character of manner, with a view to ascertaining the true nature and character of manner, with a view to ascertaining the true nature and character of such purchase and sale of shares. such purchase and sale of shares.

Shanno Mohammed Yusuf Warsi. Sh 12 ITA No. 1306/M/2023

18.3 Accordingly, the whole transacti 18.3 Accordingly, the whole transaction is executed through colorable on is executed through colorable device with a view to evade taxation. The reliance is placed on the device with a view to evade taxation. The reliance is placed on the device with a view to evade taxation. The reliance is placed on the decision of Hon'ble Supreme Court in the case of Mcdowell in which decision of Hon'ble Supreme Court in the case of Mcdowell in which decision of Hon'ble Supreme Court in the case of Mcdowell in which the following is held: the following is held: "Tax planning may be legitimate provided it is within the framewo "Tax planning may be legitimate provided it is within the framewo "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong Colourable devices cannot be part of tax planning and it is wrong Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honorable to avoid the to encourage or entertain the belief that it is honorable to avoid the to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods. It is the obligation of payment of tax by resorting to dubious methods. It is the obligation of payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes hones every citizen to pay the taxes honestly without resorting to tly without resorting to subterfuges. On this aspect one of us, Chinnappa Reddy J., has subterfuges. On this aspect one of us, Chinnappa Reddy J., has subterfuges. On this aspect one of us, Chinnappa Reddy J., has proposed a separate and detailed opinion with which we agree". proposed a separate and detailed opinion with which we agree". proposed a separate and detailed opinion with which we agree". 18.3.1 Further, as per the human probabilities also, the above 18.3.1 Further, as per the human probabilities also, the above 18.3.1 Further, as per the human probabilities also, the above transaction is not accepted. In this regar transaction is not accepted. In this regard, reliance is placed on the d, reliance is placed on the decision of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT decision of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT decision of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT 214 ITR 801 (SC). 214 ITR 801 (SC). 18.3.2 Further more in the decision of Hon'ble Supreme Court in the 18.3.2 Further more in the decision of Hon'ble Supreme Court in the 18.3.2 Further more in the decision of Hon'ble Supreme Court in the case of Durga Prasad More vs.CIT 82 ITR 540 (SC), it was held that case of Durga Prasad More vs.CIT 82 ITR 540 (SC), it was held that case of Durga Prasad More vs.CIT 82 ITR 540 (SC), it was held that the contents in the documents cannot be given undue importance and contents in the documents cannot be given undue importance and contents in the documents cannot be given undue importance and the reality and substance of the transaction is to considered. the reality and substance of the transaction is to considered. the reality and substance of the transaction is to considered. 18.4 Thus considering the findings of the search/ survey, inquiries 18.4 Thus considering the findings of the search/ survey, inquiries 18.4 Thus considering the findings of the search/ survey, inquiries conducted in the case of assessee, brokers, operators and the conducted in the case of assessee, brokers, operators and the conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee providers and the nature of transaction entered into by the assessee providers and the nature of transaction entered into by the assessee the claim of assessee of LTCG of Rs.2,06,99,474/ the claim of assessee of LTCG of Rs.2,06,99,474/- as exempt u/s as exempt u/s 10(38) of the act is hereby denied and the amount of Rs.2,30,01,500/ 10(38) of the act is hereby denied and the amount of Rs.2,30,01,500/ 10(38) of the act is hereby denied and the amount of Rs.2,30,01,500/- received back as sales proceeds on sale of shar received back as sales proceeds on sale of shares is hereby added in es is hereby added in the total income of the assessee as unexplained cash credit u/s.68 of the total income of the assessee as unexplained cash credit u/s.68 of the total income of the assessee as unexplained cash credit u/s.68 of the Act. Penalty proceeding u/s 271(1)(c) is initiated for furnishing the Act. Penalty proceeding u/s 271(1)(c) is initiated for furnishing the Act. Penalty proceeding u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income with a view to concealment of income. inaccurate particulars of income with a view to concealment of income. inaccurate particulars of income with a view to concealment of income. 18.5 18.5 Further, Further, Rs.5,75,037/-, Rs.5,75,0 , being being 2.5% 2.5% of of sale sale value value of of Rs.2,30,01,500/ Rs.2,30,01,500/-, is hereby added in the income of the assessee as , is hereby added in the income of the assessee as unexplained expenditure u/s.69C on account of commission paid for unexplained expenditure u/s.69C on account of commission paid for unexplained expenditure u/s.69C on account of commission paid for arranging the entire transaction of bogus LTCG. arranging the entire transaction of bogus LTCG. Penalty proceeding Penalty proceeding u/s 271(1)(c) is initi u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income ated for furnishing inaccurate particulars of income with a view to concealment of income. with a view to concealment of income.” 3. Before the Ld. CIT(A) Before the Ld. CIT(A) the assessee challenged validity of the challenged validity of the reassessment as well as merit of the addition. The Ld. CIT(A) reassessment as well as merit of the addition. The Ld. CIT(A) reassessment as well as merit of the addition. The Ld. CIT(A) rejected the objections challenging rejected the objections challenging validity of the reassessment validity of the reassessment observing as under:

“5. Ground No.1 relate to issue of notice u/s.148 of the Act without Ground No.1 relate to issue of notice u/s.148 of the Act without Ground No.1 relate to issue of notice u/s.148 of the Act without fresh tangible material, without independent application of mind and fresh tangible material, without independent application of mind and fresh tangible material, without independent application of mind and

Shanno Mohammed Yusuf Warsi. Sh 13 ITA No. 1306/M/2023

without having valid reason. It is to note that the AO got informatio without having valid reason. It is to note that the AO got informatio without having valid reason. It is to note that the AO got information which was vital about the bogus long term capital gain / long term which was vital about the bogus long term capital gain / long term which was vital about the bogus long term capital gain / long term capital loss and modus operandi of entry providers. The information capital loss and modus operandi of entry providers. The information capital loss and modus operandi of entry providers. The information was provided by the Pr.DIT(Investigations), Kolkata after thorough was provided by the Pr.DIT(Investigations), Kolkata after thorough was provided by the Pr.DIT(Investigations), Kolkata after thorough enquiries and investigations. enquiries and investigations. The AO during the course of assessment se of assessment proceedings the appellant was summoned u/s.131 of the Act wherein the appellant was summoned u/s.131 of the Act wherein the appellant was summoned u/s.131 of the Act wherein she was not able to show any knowledge of the penny stock company she was not able to show any knowledge of the penny stock company she was not able to show any knowledge of the penny stock company its financial position or what are the activities of the company. its financial position or what are the activities of the company. its financial position or what are the activities of the company. Assessing Officer sought to reopen assess Assessing Officer sought to reopen assessment in case of appellant on ment in case of appellant on ground that appellant, during relevant period had purchased shares in ground that appellant, during relevant period had purchased shares in ground that appellant, during relevant period had purchased shares in the company ESSAR India at very low price and after that, price of the company ESSAR India at very low price and after that, price of the company ESSAR India at very low price and after that, price of these shares had risen phenomenally and they were sold at high price these shares had risen phenomenally and they were sold at high price these shares had risen phenomenally and they were sold at high price and in process, appel and in process, appellant had claimed long term capital gains. The lant had claimed long term capital gains. The Assessing Officer based on the information arrived at the reason that Assessing Officer based on the information arrived at the reason that Assessing Officer based on the information arrived at the reason that there had been price rigging and manipulation in trading of there had been price rigging and manipulation in trading of there had been price rigging and manipulation in trading of scrip of ESSAR India and ESSAR India and appellant not being a regular investor, had had being a clear link between linorina by investing in this unknown comer anth ar link between linorina by investing in this unknown comer anth ar link between linorina by investing in this unknown comer anth ris earned bogus long term capital gains by investing in this unknown ris earned bogus long term capital gains by investing in this unknown ris earned bogus long term capital gains by investing in this unknown company. There formation of belief that income chargeable to tax had company. There formation of belief that income chargeable to tax had company. There formation of belief that income chargeable to tax had escaped assessment, reopening of assessment was just escaped assessment, reopening of assessment was justified. Reliance ified. Reliance is placed on the decision of High Court of Rajasthan in the case of is placed on the decision of High Court of Rajasthan in the case of is placed on the decision of High Court of Rajasthan in the case of Jawari Lal Lunia v. Union Of India [2022] 139 taxmann.com 406 Jawari Lal Lunia v. Union Of India [2022] 139 taxmann.com 406 Jawari Lal Lunia v. Union Of India [2022] 139 taxmann.com 406 (Rajasthan)(05- -02-2022] wherein it has been held in respect of valid 2022] wherein it has been held in respect of valid reason to believe that income had escaped reason to believe that income had escaped assessment is as follows: assessment is as follows:- "......7. In this context, if we peruse the detailed reasons "......7. In this context, if we peruse the detailed reasons "......7. In this context, if we peruse the detailed reasons recorded by the Assessing Officer, we find that he was having recorded by the Assessing Officer, we find that he was having recorded by the Assessing Officer, we find that he was having information information indicating that information indicating that certain indicating that certain certain operators, operators, operators, syndicate syndicate syndicate members members members and and and brokers brokers brokers were were were indulging indulging indulging in in in providing providing providing accommodation entries, often times creating penny stock accommodation entries, often times creating penny stock accommodation entries, often times creating penny stock companies and using them as conduit for converting untaxed companies and using them as conduit for converting untaxed companies and using them as conduit for converting untaxed income by bringing them on record by paying no tax claiming it income by bringing them on record by paying no tax claiming it income by bringing them on record by paying no tax claiming it to be long term capital gain, tax on sale of shares which was to be long term capital gain, tax on sale of shares which was to be long term capital gain, tax on sale of shares which was at the relevant at the relevant time exempted. One such company found to be time exempted. One such company found to be indulging in such activities was Life Line Drugs and Pharma indulging in such activities was Life Line Drugs and Pharma indulging in such activities was Life Line Drugs and Pharma Limited. The assessee, during the period relevant to the Limited. The assessee, during the period relevant to the Limited. The assessee, during the period relevant to the assessment year assessment year 2015-2016, had purchased shares in the 2016, had purchased shares in the said company at the very low price. Afte said company at the very low price. After that, the price of r that, the price of these shares had risen phenomenally and they were sold at these shares had risen phenomenally and they were sold at these shares had risen phenomenally and they were sold at high price. In the process, the assessee had claimed a long high price. In the process, the assessee had claimed a long high price. In the process, the assessee had claimed a long term capital gain of Rs. 2,47,99,000/ term capital gain of Rs. 2,47,99,000/- The Assessing Officer, The Assessing Officer, therefore, collected the available material with him an therefore, collected the available material with him an therefore, collected the available material with him and formed following belief: following belief: "Analysis of the financials of the company was also done and it was "Analysis of the financials of the company was also done and it was "Analysis of the financials of the company was also done and it was noticed that-  The financial of M/s Life Line Drugs & Pharma Limited were The financial of M/s Life Line Drugs & Pharma Limited were The financial of M/s Life Line Drugs & Pharma Limited were very poor during the sudden upsurge in the scrip price. very poor during the sudden upsurge in the scrip price. very poor during the sudden upsurge in the scrip price.  The business profile shows that The business profile shows that the company was not engaged the company was not engaged in any substantial activity. in any substantial activity.

Shanno Mohammed Yusuf Warsi. Sh 14 ITA No. 1306/M/2023

 The business profile shows that the company was not having The business profile shows that the company was not having The business profile shows that the company was not having strong fundamentals which could attract investors from all strong fundamentals which could attract investors from all strong fundamentals which could attract investors from all over India to invest in the company. over India to invest in the company. Thus, the assessee have earned a the (bogus) Thus, the assessee have earned a the (bogus) Long term capital Gain Long term capital Gain of Rs. 2,47,99,000/ in the following circumstance: 2,47,99,000/ in the following circumstance:  By investing in an unknown company By investing in an unknown company  By being fortunate that the price of the scrip decreased in the By being fortunate that the price of the scrip decreased in the By being fortunate that the price of the scrip decreased in the absolute absence of any financial fundamental absolute absence of any financial fundamental  * By selling his shares to entities * By selling his shares to entities which do not even exist and which do not even exist and are of no means and could not have bought the shares from are of no means and could not have bought the shares from are of no means and could not have bought the shares from their own funds their own funds  • Despite SEBI, the domain regulator finding that there was • Despite SEBI, the domain regulator finding that there was • Despite SEBI, the domain regulator finding that there was price rigging and manipulation in trading of the scrip price rigging and manipulation in trading of the scrip price rigging and manipulation in trading of the scrip  • Assessee investing in limited scrips • Assessee investing in limited scrips mentioned above whose mentioned above whose financials were not strong. financials were not strong.  • Assessee not being a regular investor in Market." • Assessee not being a regular investor in Market." 8. In our opinion, the Assessing Officer had sufficient material at his 8. In our opinion, the Assessing Officer had sufficient material at his 8. In our opinion, the Assessing Officer had sufficient material at his command to form a belief that the income chargeable to tax has command to form a belief that the income chargeable to tax has command to form a belief that the income chargeable to tax has escaped assessment. escaped assessment. There is a clear Officer and his link between the between the information available with the Assessing available with the Assessing formation of belief that the formation of belief that the income chargeable to tax has escaped assessment......." income chargeable to tax has escaped assessment......." 5.1 The decision of the Hon'ble High Court of Rajasthan is squarely 5.1 The decision of the Hon'ble High Court of Rajasthan is squarely 5.1 The decision of the Hon'ble High Court of Rajasthan is squarely applicable to the facts of the case under consideration. Further, to the facts of the case under consideration. Further, to the facts of the case under consideration. Further, reliance is also placed on the recent decision of Hon'ble High Court of reliance is also placed on the recent decision of Hon'ble High Court of reliance is also placed on the recent decision of Hon'ble High Court of Delhi in the case of Saroj Bhatia v. Principal Commissioner of Income Delhi in the case of Saroj Bhatia v. Principal Commissioner of Income Delhi in the case of Saroj Bhatia v. Principal Commissioner of Income- tax [2022] 145 taxmann.com 237 (Delhi). Respectfully, follo tax [2022] 145 taxmann.com 237 (Delhi). Respectfully, follo tax [2022] 145 taxmann.com 237 (Delhi). Respectfully, following the same, the Ground No. 1 is dismissed. same, the Ground No. 1 is dismissed.” 3.1 As regarding merit of the additio regarding merit of the addition, the assessee the assessee before the ld CIT(A), contended that all evidence contended that all evidences supporting to the transactions supporting to the transactions were filed before the Assessing Officer were filed before the Assessing Officer, however the Assessing however the Assessing Officer has neither rejected nor objected neither rejected nor objected genuineness of the genuineness of the documentary evidences. The assessee file documentary evidences. The assessee filed date wise events of date wise events of purchase and sale of shares of M/s Essar India Ltd. According to purchase and sale of shares of M/s Essar India Ltd. purchase and sale of shares of M/s Essar India Ltd. the assessee, long-term capital gain on transfer of equity shares of term capital gain on transfer of equity shares of term capital gain on transfer of equity shares of Essar (India) Ltd was was genuine in view of following observations: in view of following observations:

“5. Long term capital gain on transfer of equity shares of Essar (India) Long term capital gain on transfer of equity shares of Essar (India) Long term capital gain on transfer of equity shares of Essar (India) Ltd. is genuine based on the following factors: Ltd. is genuine based on the following factors:

Shanno Mohammed Yusuf Warsi. Sh 15 ITA No. 1306/M/2023

a) The shares have been transacted (sold) on the on SEBI recognized a) The shares have been transacted (sold) on the on SEBI recognized a) The shares have been transacted (sold) on the on SEBI recognized stock exchange. ge. b) Shares purchased are credited to demat account immediately on b) Shares purchased are credited to demat account immediately on b) Shares purchased are credited to demat account immediately on purchase without any delay. purchase without any delay. c) Shares have remained in the demat account for a period of more c) Shares have remained in the demat account for a period of more c) Shares have remained in the demat account for a period of more than one year. d) Purchase of shares is shown in my balance sheet for the year d) Purchase of shares is shown in my balance sheet for the year d) Purchase of shares is shown in my balance sheet for the year ended 31st Mar March 2012. e) Purchase cost is neither paid in cash nor is the purchase transaction e) Purchase cost is neither paid in cash nor is the purchase transaction e) Purchase cost is neither paid in cash nor is the purchase transaction back dated. (f) Consideration for sale of shares is received by an account payee ) Consideration for sale of shares is received by an account payee ) Consideration for sale of shares is received by an account payee cheque. g) Securities Transaction Tax (STT) has been paid on transactions of ) Securities Transaction Tax (STT) has been paid on transactions of ) Securities Transaction Tax (STT) has been paid on transactions of shares. h) Sale price of shares matches with the BSE quotations from the BSE price of shares matches with the BSE quotations from the BSE price of shares matches with the BSE quotations from the BSE website. i) There is no evidence that I have indulged in the manipulation of i) There is no evidence that I have indulged in the manipulation of i) There is no evidence that I have indulged in the manipulation of share price. j) I took a calculated risk at the time of purchase of shares without ) I took a calculated risk at the time of purchase of shares without ) I took a calculated risk at the time of purchase of shares without knowing how the share price would knowing how the share price would reflect after a year or so. I would reflect after a year or so. I would have made a loss if the share price had gone down. Therefore, merely have made a loss if the share price had gone down. Therefore, merely have made a loss if the share price had gone down. Therefore, merely because investigation wing has reported the scrip as penny stock and because investigation wing has reported the scrip as penny stock and because investigation wing has reported the scrip as penny stock and share price appreciated, it does not conclude that the profits are not share price appreciated, it does not conclude that the profits are not share price appreciated, it does not conclude that the profits are not genuine.” 3.2 It was submitted that there was no direct or circumstantial It was submitted that there was no direct or circumstantial It was submitted that there was no direct or circumstantial evidence against the assessee and entire premise the assessee and entire premise of the Assessing of the Assessing Officer was based on presumption and suspicion. The assessee Officer was based on presumption and suspicion. The assessee Officer was based on presumption and suspicion. The assessee further referred to statement of Sh Anil Khemka to statement of Sh Anil Khemka, director of M/s , director of M/s Devshayam Stockbroking Privately Stockbroking Privately, referred by the Assessing , referred by the Assessing Officer and submitted that the assessee had not executed any Officer and submitted that the assessee had not executed any Officer and submitted that the assessee had not executed any transaction with Mr. . Khemka. The assessee submitted submitted that he sold the shares through a registe the shares through a registered stock broker M/s B N stock broker M/s B N Rathi security on stock exchange platform and without any awareness of stock exchange platform and without any awareness of stock exchange platform and without any awareness of

Shanno Mohammed Yusuf Warsi. Sh 16 ITA No. 1306/M/2023

the corresponding buyer. It was further submitted that share price the corresponding buyer. It was further submitted that share price the corresponding buyer. It was further submitted that share price movement might be as a result of many factors including market movement might be as a result of many factors including market movement might be as a result of many factors including market sentiments, liquidity position of the marke sentiments, liquidity position of the market, general economic t, general economic scenario etc. along with the fundamentals of the compan along with the fundamentals of the company. The along with the fundamentals of the compan assessee also relied on n assessee also relied on no. of decisions, which have been o. of decisions, which have been reproduced by the Ld. CIT(A) reproduced by the Ld. CIT(A) in the impugned order. the impugned order.

The Ld. CIT(A) however, noted that firstly, the prices of the 3.3. The Ld. CIT(A) however, noted that , the prices of the stock of Essar (india stock of Essar (india) Ltd were nowhere linked to the financial of the company. Secondly Secondly, there had been price rigging and there had been price rigging and Essar (India) Ltd and thirdly manipulation in the trading of scrip of manipulation in the trading of scrip of Essar (India) Ltd and the assessee not being a regular investor and had earned long-term the assessee not being a regular investor and had earned long the assessee not being a regular investor and had earned long capital gain by investing investing in unknown company. The Ld. CIT(A) in unknown company. The Ld. CIT(A) relied on the decision of the the decision of the Hon’ble Calcutta High Court in the Hon’ble Calcutta High Court in the case of PCIT Vs Swati Bajaj (2022) 139 taxmann.com case of PCIT Vs Swati Bajaj (2022) 139 taxmann.com case of PCIT Vs Swati Bajaj (2022) 139 taxmann.com 352(Calcutta) and up and upheld the addition of ₹ 2,30,01, 2,30,01,500/-as unexplained cash credit under credit under section 68 of the Act and addition of ct and addition of ₹5,75,037/- for estimated commission at the rate of 2.5% of sale for estimated commission at the rate of 2.5% of sale for estimated commission at the rate of 2.5% of sale value of the shares of Essar (India) Ltd as unexplained expenditure value of the shares of Essar (India) Ltd as unexplained exp value of the shares of Essar (India) Ltd as unexplained exp in terms of section 69C of the 9C of the Act.

Shanno Mohammed Yusuf Warsi. Sh 17 ITA No. 1306/M/2023

with the assessee. In support of its contention, the learned counsel with the assessee. In support of its contention, the learned counsel with the assessee. In support of its contention, the learned counsel relied on the decision of Hon’ble Bombay High Court in the case of relied on the decision of Hon’ble Bombay High Court in the case of relied on the decision of Hon’ble Bombay High Court in the case of Anwar Mohammed Shaikh reported Anwar Mohammed Shaikh reported in (2023) 148 taxmann.com (2023) 148 taxmann.com 288 (Bombay). The . The Learned Departmental Representative l Representative on the other hand submitted that case law relied upon by the assessee are nd submitted that case law relied upon by the assessee are nd submitted that case law relied upon by the assessee are in relation to new in relation to new regime of reopening of assessment of assessment provided under section 148A of the under section 148A of the Act, whereas the case of the assessee case of the assessee pertains to old regime regime of reopening , therefore the case therefore the case law relied upon by the assessee upon by the assessee was distinguishable.

“Reasons for reopening: “Reasons for reopening: In this case, return of income was f In this case, return of income was filed on 31.07.2013 declaring total iled on 31.07.2013 declaring total income of Rs. 12,72,400/ income of Rs. 12,72,400/ - for the assessment year under consideration. for the assessment year under consideration. 2. Information has been received through ITD system of the department Information has been received through ITD system of the department Information has been received through ITD system of the department in respect of transactions in Penny Stock done by various assessees in respect of transactions in Penny Stock done by various assessees in respect of transactions in Penny Stock done by various assessees. It is further informed that the office of the Pr. DIT (Investigation), Kolkatta had further informed that the office of the Pr. DIT (Investigation), Kolkatta had further informed that the office of the Pr. DIT (Investigation), Kolkatta had made investigations regarding accommodation entries of bogus capital made investigations regarding accommodation entries of bogus capital made investigations regarding accommodation entries of bogus capital gain/loss through Penny Stock. gain/loss through Penny Stock. The enquiries have revealed that the The enquiries have revealed that the entire entry providing scam, comp entry providing scam, comprises of various levels of operators who rises of various levels of operators who introduced the unaccounted cash of beneficiaries in their accounts introduced the unaccounted cash of beneficiaries in their accounts introduced the unaccounted cash of beneficiaries in their accounts through a layer of transactions and utilize the said cash for purchase of through a layer of transactions and utilize the said cash for purchase of through a layer of transactions and utilize the said cash for purchase of shares at manipulated prices which ultimately results in payment of the shares at manipulated prices which ultimately results in payment of the shares at manipulated prices which ultimately results in payment of the amount back to the beneficiary in the guise of sale proceeds of shares ount back to the beneficiary in the guise of sale proceeds of shares ount back to the beneficiary in the guise of sale proceeds of shares ostensibly resulting in Long Term Capital Gain to the beneficiary. Reverse ostensibly resulting in Long Term Capital Gain to the beneficiary. Reverse ostensibly resulting in Long Term Capital Gain to the beneficiary. Reverse modus operandi is adopted in order to provide entry of bogus Short Term modus operandi is adopted in order to provide entry of bogus Short Term modus operandi is adopted in order to provide entry of bogus Short Term

Shanno Mohammed Yusuf Warsi. Sh 18 ITA No. 1306/M/2023

Capital Loss. The ultimate purpose of th Capital Loss. The ultimate purpose of the both is to reduce the tax liability e both is to reduce the tax liability of the assessee. of the assessee. 3. Assessee is one of the beneficiaries as per the information provided on 3. Assessee is one of the beneficiaries as per the information provided on 3. Assessee is one of the beneficiaries as per the information provided on ITD system. The assessee has entered in the transactions of shares and ITD system. The assessee has entered in the transactions of shares and ITD system. The assessee has entered in the transactions of shares and securities of Essar (India) Ltd. during F.Y. securities of Essar (India) Ltd. during F.Y. 2012-13 and earn bogus LTCG d earn bogus LTCG /STCL amounting to Rs.2,30,01,500/ /STCL amounting to Rs.2,30,01,500/- during the A.Y.2013 during the A.Y.2013-14. On perusal of the return of income, it is seen that the assessee has not perusal of the return of income, it is seen that the assessee has not perusal of the return of income, it is seen that the assessee has not offered the income related to the said transactions in his return of income offered the income related to the said transactions in his return of income offered the income related to the said transactions in his return of income for A.Y. 2013-14. 14. 5. In view of above, I have reason to believe that income chargeable to tax of above, I have reason to believe that income chargeable to tax of above, I have reason to believe that income chargeable to tax to the extent of Rs. 2,30,01,500/ to the extent of Rs. 2,30,01,500/- has escaped assessment for A. Y. has escaped assessment for A. Y. 2013-14 in the case of the assessee within the meaning of section 147 of 14 in the case of the assessee within the meaning of section 147 of 14 in the case of the assessee within the meaning of section 147 of the I. T. Act, 1961. the I. T. Act, 1961. 6. Therefore notice us.148 of 6. Therefore notice us.148 of the I.T. Act, 1961 may be issued if statutory the I.T. Act, 1961 may be issued if statutory approval by the Jt. Commissioner of Income Tax, approval by the Jt. Commissioner of Income Tax, -25(1), Mumbai is 25(1), Mumbai is accorded.” 5.1 Firstly, We find that We find that Hon’ble Supreme Court in Supreme Court in the case of ACIT vs Rajesh Jhaveri stock Rajesh Jhaveri stock brokers (p) ltd (2007) 161 Taxman ) ltd (2007) 161 Taxman 316(SC) has held that for reopening of the as as held that for reopening of the assessment sessment, there should be a relevant material be a relevant material, on which a reasonable person could make , on which a reasonable person could make requisite belief that income escaped assessment. O requisite belief that income escaped assessment. On perusal of the n perusal of the above reasons recorded above reasons recorded in the case of the assessee, we find th , we find that the Assessing Officer has relied on t Assessing Officer has relied on the information supplied by the he information supplied by the Principal Director of Income irector of Income-tax (investigation), Kolkatta, which was tax (investigation), Kolkatta, which was gathered during searches and surveys conducted on various gathered during searches and surveys conducted on various gathered during searches and surveys conducted on various persons, who were engaged engaged in providing accommodation in providing accommodation entries of long-term capital gain to beneficiaries and providing short term capital gain to beneficiaries and providing short term capital gain to beneficiaries and providing short-term capital loss to exit providers. The report sent by the investigation capital loss to exit providers. The report sent by the investigation capital loss to exit providers. The report sent by the investigation wing has referred to inquiries conducted on various operators who referred to inquiries conducted on various operators who referred to inquiries conducted on various operators who introduced unaccounted cash of beneficiaries unaccounted cash of beneficiaries in their accounts in their accounts through a layer of transactions and utilised the said cash for through a layer of transactions and utilised the through a layer of transactions and utilised the

Shanno Mohammed Yusuf Warsi. Sh 19 ITA No. 1306/M/2023

purchase of shares at manipulated purchase of shares at manipulated price and ultimately transferring and ultimately transferring the payment back to the beneficiaries in the guise of sale proceeds the payment back to the beneficiaries in the guise of sale proceeds the payment back to the beneficiaries in the guise of sale proceeds of shares. The assessee is one of the of shares. The assessee is one of the beneficiaries eneficiaries of the transactions of shares of ‘Essar( transactions of shares of ‘Essar(India) Ltd’ and therefore in our and therefore in our opinion the information supplied opinion the information supplied by the Director of irector of Income-tax (investigation) is relevant material for reopening of the case of the is relevant material for reopening of the case of the is relevant material for reopening of the case of the assessee. assessee. The information of The information of the the large scale larg e scale rigging and manipulation of shares ation of shares and admission by the various operators the various operators before the investigation wing that they were engaged in providing before the investigation wing that they were engaged in providing before the investigation wing that they were engaged in providing accommodation entries of long entries of long-term capital gain is a is a material for a reasonable person to believe reasonable person to believe that income escaped assessment escaped assessment. In such circumstances, the such circumstances, the contention of the learned counsel contention of the learned counsel of the assessee that there is no tangible material linked with assessee, is assessee that there is no tangible material linked with assessee assessee that there is no tangible material linked with assessee rejected. Secondly, r , regarding the contention that Assessing Officer egarding the contention that Assessing Officer has not carried out any invest has not carried out any investigation prior to record reasons and igation prior to record reasons and issue of notice under section 148 of the A otice under section 148 of the Act is concerned, we are of ct is concerned, we are of the opinion that prior to introduction o the opinion that prior to introduction of the section 148A of the A f the section 148A of the Act with effect from 1/4/2021, t 1/4/2021, the Assessing Officer was not he Assessing Officer was not authorised to carry authorised to carry out any enquiry, before issue issue of notice under section 148 of the A section 148 of the Act and therefore he was supposed to record ct and therefore he was supposed to record reasons on the basis of material available before him only. In the reasons on the basis of material available before him only. In the reasons on the basis of material available before him only. In the case of Anwar Mohammad Shaikh case of Anwar Mohammad Shaikh (supra), reopening notice was (supra), reopening notice was issued on the basis of high issued on the basis of high-value suspicious transactions with value suspicious transactions with fictitious profit based on the income tax department business fictitious profit based on the income tax department fictitious profit based on the income tax department application available in their database, which the Hon’ble High application available in their database, which the Hon’ble High application available in their database, which the Hon’ble High

Shanno Mohammed Yusuf Warsi. Sh 20 ITA No. 1306/M/2023

Court held that was on the basis of Court held that was on the basis of the pure suspicion that the the pure suspicion that the petitioner had entered into the fictitious transactions and without petitioner had entered into the fictitious transactions and without petitioner had entered into the fictitious transactions and without carrying carrying carrying out out out any any any further further further investigation investigation investigation or or or an an an independent independent independent assessment connecting the petitioner to the particular transaction assessment connecting the petitioner to the particular transaction assessment connecting the petitioner to the particular transaction specified in the information. But in specified in the information. But in the case in hand, the the case in hand, the assessment has been reopened on the basis of extensive assessment has been reopened on the basis of extensive assessment has been reopened on the basis of extensive investigation carried out by the Principal D vestigation carried out by the Principal Director of Income irector of Income-tax (investigation) having connection with the transaction carried out (investigation) having connection with the transaction carried out (investigation) having connection with the transaction carried out by the assessee. The learned CIT(A) has relie by the assessee. The learned CIT(A) has relied on the decision of d on the decision of Hon’ble High Court of Rajasthan in the case of Jawari lal Lunia Jawari lal Lunia Hon’ble High Court of Rajasthan in the case of (supra), (supra), (supra), wherein wherein wherein the the assessment the assessment assessment was was reopened was reopened in reopened in in similar similar similar circumstances. In view of above circumstances. In view of above, we do not find any infirmity , we do not find any infirmity in the order of the Ld. CIT(A) and accordingly we uph order of the Ld. CIT(A) and accordingly we uphold the finding of the old the finding of the Ld. CIT(A) on the issue in dispute. The ground No. one of the appeal Ld. CIT(A) on the issue in dispute. The ground No. one of the appeal Ld. CIT(A) on the issue in dispute. The ground No. one of the appeal of the assessee is accordingly rejected. of the assessee is accordingly rejected.

Shanno Mohammed Yusuf Warsi. Sh 21 ITA No. 1306/M/2023

ledger copy of share broker account etc. T are broker account etc. The learned he learned Counsel further submitted that additio ther submitted that addition made under section 68 of the A n made under section 68 of the Act for long-term capital term capital gain on sale of shares of Essar( gain on sale of shares of Essar(India) Ltd has been deleted by the C been deleted by the Coordinate bench of Bombay Tribunal oordinate bench of Bombay Tribunal in the case of Dheeraj Babulal Shah in ITA No. 4092 Dheeraj Babulal Shah in ITA No. 4092/Mum/2019. He /Mum/2019. He further relied on (i) the decis further relied on (i) the decision of coordinate bench of the T ion of coordinate bench of the Tribunal in the case of Jagmohan Agrawal in ITA No. 604/KOL/2018 , (ii) in the case of Jagmohan Agrawal in ITA No. 604/KOL/2018 , (ii) in the case of Jagmohan Agrawal in ITA No. 604/KOL/2018 , (ii) decision of Hon’ble Bombay High Court in the case of Shyam R decision of Hon’ble Bombay High Court in the case of Shyam R decision of Hon’ble Bombay High Court in the case of Shyam R Pawar reported in (2015) 54 taxmann.com 108 (Bombay) and (iii) Pawar reported in (2015) 54 taxmann.com 108 (Bombay) and (iii Pawar reported in (2015) 54 taxmann.com 108 (Bombay) and (iii decision of coordinate bench of T ecision of coordinate bench of Tribunal in the case of Mrs Pallavi ribunal in the case of Mrs Pallavi Mayur Gandhi in ITA No. 2251/Mum/2022. Mayur Gandhi in ITA No. 2251/Mum/2022.

Shanno Mohammed Yusuf Warsi. Sh 22 ITA No. 1306/M/2023

10(38) of the Act, the assessee was 10(38) of the Act, the assessee was required to sale shares on required to sale shares on platform of recognised stock exchange by way of paying security platform of recognised stock exchange by way of paying security platform of recognised stock exchange by way of paying security transaction tax (STT). But the condition of online transaction was transaction tax (STT). But the condition of online transaction was transaction tax (STT). But the condition of online transaction was mandatory for sale and not mandatory while purchase of shares. It mandatory for sale and not mandatory while purchase of shares. It mandatory for sale and not mandatory while purchase of shares. It is in this background, few unscrupulous tax payer, purchased the is in this background, few unscrupulous tax payer, purchased the is in this background, few unscrupulous tax payer, purchased the shares through offline mode or other than through stock exchange shares through offline mode or other than through stock ex shares through offline mode or other than through stock ex though some operators, who artificially rigged up the prices of those though some operators, who artificially rigged up the prices of those though some operators, who artificially rigged up the prices of those shares and after mandatory period of one year of long term capital shares and after mandatory period of one year of long term capital shares and after mandatory period of one year of long term capital gain u/s 10(38) of the Act gain u/s 10(38) of the Act, sold those shares at high prices on stock sold those shares at high prices on stock exchange, for which a set of persons arran exchange, for which a set of persons arranged by the operators were ged by the operators were available for purchase online available for purchase online. The term ‘Penny stocks’ The term ‘Penny stocks’ is prevalent in global security market market or western market, which refers to , which refers to shares of small public companies public companies that trade for less than one dollar that trade for less than one dollar per share, which further revised to , which further revised to include shares having value include shares having value upto 5 dollars. The Cambridge business dictionary has defined The Cambridge business dictionary has defined The Cambridge business dictionary has defined the penny penny stock stock as as a share with a very low value value because it is considered a high-risk risk investment, for example in a in a company that known, or not very successful. The Hon’ble High The Hon’ble High is small, little known Court of Calcutta in the case of Swati bajaj (supra) in para 100 Court of Calcutta in the case of Swati bajaj (supra) in para 100 Court of Calcutta in the case of Swati bajaj (supra) in para 100 has observed that ‘ has observed that ‘Penny’ stocks are shares that trade at a very that trade at a very low price, have very low market low price, have very low market capitalization, are mostly illiquid, , are mostly illiquid, and are usually listed on a smaller exchange. Penny stocks in the and are usually listed on a smaller exchange. Penny stocks in the and are usually listed on a smaller exchange. Penny stocks in the Indian stock market can have prices below Rs 10/- or sometimes Indian stock market can have prices below Rs 10/ Indian stock market can have prices below Rs 10/ even upto Rs. 20/-. Those stocks are . Those stocks are very speculative in nature and very speculative in nature and

Shanno Mohammed Yusuf Warsi. Sh 23 ITA No. 1306/M/2023

are considered highly risky because of lack of liquidity, smaller are considered highly risky because of lack of liquidity, smaller are considered highly risky because of lack of liquidity, smaller number of shareholders, and limited disclosure of information. number of shareholders, and limited disclosure of information number of shareholders, and limited disclosure of information

8.1 The investigation carried out by the Investigation wing of The investigation carried out by the Investigation wing of The investigation carried out by the Investigation wing of Income-tax Department, Kolkatta tax Department, Kolkatta has referred to has referred to large-scale involvement of beneficiaries involvement of beneficiaries, where shares having very small value having very small value were picked up by the by the operators, for providing benefit for providing benefit or say abuse of section 10(38), commonly commonly known as long term capital gain on known as long term capital gain on ‘penny’ stock transactions. In background of ‘penny’ stock transactions. In background of above facts of the case, facts of the case, we find that the assessee has we find that the assessee has also shown to have purchased also shown to have purchased 45,000/- shares of Essar (India) ltd on 7/05/2011 at a price of Rs. shares of Essar (India) ltd on 7/05/2011 at a price of Rs. shares of Essar (India) ltd on 7/05/2011 at a price of Rs. 50 per share through preferential allotment against payment of Rs. 50 per share through preferential allotment against paymen 50 per share through preferential allotment against paymen 22,50,000/- . The shares were than spilt from Rs. 10 per share to . The shares were than spilt from Rs. 10 per share to . The shares were than spilt from Rs. 10 per share to Rs. 1.00 per share and 4,50,0 Rs. 1.00 per share and 4,50,000/- shares were credited to D shares were credited to D-mat account of the assessee. The assessee then sold the shares on account of the assessee. The assessee then sold the shares on account of the assessee. The assessee then sold the shares on various dates as under: various dates as under:

Date of Sale Quantity sold Sale Consideration (Rs.) Consideration (Rs.) 03-09-2012 50,000 24,99,334 24,99,334 04-09-2012 60,000 29,87,231 29,87,231 05-09-2012 50,000 24,81,870 24,81,870 06-09-2012 40,000 19,95,474 19,95,474 10-09-2012 50,000 25,84,142 25,84,142 11-09-2012 50,000 26,44,007 26,44,007 12-09-2012 50,000 25,94,120 25,94,120 13-09-2012 50,000 25,69,176 25,69,176 14-09-2012 50,000 25,94,120 25,94,120 Total 4,50,000 2,29,49,474 2,29,49,474

Shanno Mohammed Yusuf Warsi. Sh 24 ITA No. 1306/M/2023

8.2 In support of the contention that transaction of long In support of the contention that transaction of long In support of the contention that transaction of long-term capital gain on sale of the shares of gain on sale of the shares of M/s Essar (India) Ltd is /s Essar (India) Ltd is genuine, the assessee , the assessee filed the documents to support the filed the documents to support the transaction of sale of sha sale of shares on stock exchange, like sale through like sale through broker M/s BN Rathi Securitie broker M/s BN Rathi Securities ltd, sale transactions on rec ltd, sale transactions on recognised stock exchange platform stock exchange platform, payment received through banking eceived through banking channel, the Dmat- -statement to prove delivery and control of delivery and control of shares, ledger account of share broker’s account of share broker’s. But those documents ut those documents are not crucial for determination for abuse of section 10(38) of the Act. not crucial for determination for abuse of section 10(38) of the Act. not crucial for determination for abuse of section 10(38) of the Act. What is crucial is establishing is crucial is establishing genuineness of the transaction of genuineness of the transaction of purchase of shares in question. purchase of shares in question. In support thereof the assessee filed In support thereof the assessee filed copy bank statement of HDFC bank statement through which copy bank statement of HDFC bank statement through which copy bank statement of HDFC bank statement through which ₹22,60,000/ payment of 60,000/- was was made made to to Essar(India)ltd Essar on 07/05/2011. On perusal perusal of bank statement available on bank statement available on paperbook 44, we find that there is a credit of ₹ 22, 50,000/ page-44, we find that there is a credit of 22, 50,000/- on 05/05/2011 i.e. just two days before ust two days before payment for purchase of payment for purchase of shares. On paper book page 45, the assessee has . On paper book page 45, the assessee has . On paper book page 45, the assessee has filed a copy of application for preferential allotment to the Company namely Essar application for preferential allotment to the Company application for preferential allotment to the Company (India) ltd but in in said application payment details details are not mentioned. Further the mentioned. Further the assessee has filed a copy of allotment of has filed a copy of allotment of shares in preferential issue by dated 26/05/2011. Regarding the shares in preferential issue by dated 26/05/2011. Regarding the shares in preferential issue by dated 26/05/2011. Regarding the person who advised for purchase of the shares, the assessee in a person who advised for purchase of the shares, the assessee in a person who advised for purchase of the shares, the assessee in a statement recorded before the Assessing Officer submitted that he statement recorded before the Assessing Officer submitted statement recorded before the Assessing Officer submitted came to know the shares through his came to know the shares through his brother. brother. The relevant statement, available on paperbook page 81, is reproduced as under: available on paperbook page 81, is reproduced as under: available on paperbook page 81, is reproduced as under:

Shanno Mohammed Yusuf Warsi. Sh 25 ITA No. 1306/M/2023

“Q.14 Did anyone give advice regarding sell/purchase of shares? If so, Q.14 Did anyone give advice regarding sell/purchase of shares? If so, Q.14 Did anyone give advice regarding sell/purchase of shares? If so, How do you decide on the advice? How do you decide on the advice? Ans. I don't trade in shares. I don't trade in shares. Q.15 Whom do you Q.15 Whom do you contact in case of any suggestions regarding contact in case of any suggestions regarding sell/purchase of shares? How do you know that person? What makes him sell/purchase of shares? How do you know that person? What makes him sell/purchase of shares? How do you know that person? What makes him qualified to advice you on the sell/purchase of these shares? qualified to advice you on the sell/purchase of these shares? qualified to advice you on the sell/purchase of these shares? Ans. On account of religious restrict On account of religious restrictions I don't purchase or sell shares ions I don't purchase or sell shares anymore. Q.16 How have you been allotted/purchased these shares? Q.16 How have you been allotted/purchased these shares? Q.16 How have you been allotted/purchased these shares? Ans. I purchased these shares through preferential allotment. Ans. I purchased these shares through preferential allotment. Ans. I purchased these shares through preferential allotment. Q.17 Please state what does it mean by preferential allotment? How did .17 Please state what does it mean by preferential allotment? How did .17 Please state what does it mean by preferential allotment? How did you come to know abou you come to know about this term and when? Ans. A think it is an approved mechanism of SEBI for purchasing shares. Ans. A think it is an approved mechanism of SEBI for purchasing shares. Ans. A think it is an approved mechanism of SEBI for purchasing shares. Q.18 Did somebody contact you for preferential allotment in the company Did somebody contact you for preferential allotment in the company Did somebody contact you for preferential allotment in the company ESAAR INDIA LTD ESAAR INDIA LTD Ans. I got to know about the shares through my brother. Ans. I got to know about the shares through my brother. Q.19 Did you do fu .19 Did you do fundamental analysis before considering investing? ndamental analysis before considering investing? Ans. It was spontaneous decision and my brother's advice. Ans. It was spontaneous decision and my brother's advice. Q.20 What were your expectations? What did your brother advice on this? Q.20 What were your expectations? What did your brother advice on this? Q.20 What were your expectations? What did your brother advice on this? Ans. Investment was done as it is generally done with intension of Ans. Investment was done as it is generally done with intension of Ans. Investment was done as it is generally done with intension of appreciation over long term. on over long term. Q.21 Did you communicate your expectations on the share allotment? Q.21 Did you communicate your expectations on the share allotment? Q.21 Did you communicate your expectations on the share allotment? What did you communicate? • What did you communicate? • Ans. NO. Q.22 Did the Director of the company inform you the price of preferential .22 Did the Director of the company inform you the price of preferential .22 Did the Director of the company inform you the price of preferential allotment beforehand? Did you agree to it or did you allotment beforehand? Did you agree to it or did you bargain? bargain? Ans. NO. Q.23 Did you meet again either directly or through an intermediary? If you Q.23 Did you meet again either directly or through an intermediary? If you Q.23 Did you meet again either directly or through an intermediary? If you met through intermediary, please provide his name, phone number and met through intermediary, please provide his name, phone number and met through intermediary, please provide his name, phone number and contact details? contact details? Ans. NO.

Shanno Mohammed Yusuf Warsi. Sh 26 ITA No. 1306/M/2023

Q.24 When did you commit subscribing to the shares allotment in writi Q.24 When did you commit subscribing to the shares allotment in writi Q.24 When did you commit subscribing to the shares allotment in writing? Please provide a copy of the same? Please provide a copy of the same? Ans. Yes, the application form along with necessary supporting has Yes, the application form along with necessary supporting has Yes, the application form along with necessary supporting has already been submitted to you during course of assessment proceedings. already been submitted to you during course of assessment proceedings. already been submitted to you during course of assessment proceedings. Q25 How did you pay the money? In what form? Do you have any Q25 How did you pay the money? In what form? Do you have any Q25 How did you pay the money? In what form? Do you have any documents to subst documents to substantiate the same? Ans. By cheque of my HDFC Bank account. The Bank statement which Ans. By cheque of my HDFC Bank account. The Bank statement which Ans. By cheque of my HDFC Bank account. The Bank statement which shows the debit to my account for purchase payment has already been shows the debit to my account for purchase payment has already been shows the debit to my account for purchase payment has already been submitted to you during course of assessment proceedings. submitted to you during course of assessment proceedings. Q.26 Did the director ask for any KYC documents? What did you give to the director ask for any KYC documents? What did you give to the director ask for any KYC documents? What did you give to him? In what format? If in softcopy, through what email, you dispatched him? In what format? If in softcopy, through what email, you dispatched him? In what format? If in softcopy, through what email, you dispatched them and to what email address? them and to what email address? Yes, the application form was submitted along with the required necessary Yes, the application form was submitted along with the required necessary Yes, the application form was submitted along with the required necessary documents like P documents like PAN card, Demat statement etc. Q.27 How did you monitor the commitments made by the Director? Did you Q.27 How did you monitor the commitments made by the Director? Did you Q.27 How did you monitor the commitments made by the Director? Did you make any correspondence with company on the same? make any correspondence with company on the same? Ans. Not applicable Ans. Not applicable Q.28 When did you see the shares credited into your Demat account? .28 When did you see the shares credited into your Demat account? .28 When did you see the shares credited into your Demat account? Ans. The shares wa The shares was credited on 14th July, 2011 in the Demat account s credited on 14th July, 2011 in the Demat account which I maintained with B.N RATHI SECURITIES LTD. which I maintained with B.N RATHI SECURITIES LTD. Q.29 Did the company perform well in the year under consideration? If no, Q.29 Did the company perform well in the year under consideration? If no, Q.29 Did the company perform well in the year under consideration? If no, what did you decide about your investment? Why did you not try to call what did you decide about your investment? Why did you not try to call what did you decide about your investment? Why did you not try to call the director or any other responsible person in the company for the same? or or any other responsible person in the company for the same? or or any other responsible person in the company for the same? Ans. I am not aware. The investment was done on advice of my brother. I I am not aware. The investment was done on advice of my brother. I I am not aware. The investment was done on advice of my brother. I did not make any attempt to contact company directors. did not make any attempt to contact company directors. Q.30 Did you receive quarterly performance statistics of the comp Q.30 Did you receive quarterly performance statistics of the comp Q.30 Did you receive quarterly performance statistics of the company from time to time? Ans. Yes, the post kept on coming. However, I never used to study them. Ans. Yes, the post kept on coming. However, I never used to study them. Ans. Yes, the post kept on coming. However, I never used to study them. Q.31 How often did you monitor the stock of the company in the time Q.31 How often did you monitor the stock of the company in the time Q.31 How often did you monitor the stock of the company in the time periods? Ans. No active monitoring was done. Ans. No active monitoring was done.” 8.3 We find that Hon’ble High Co find that Hon’ble High Court of Calcutta in the case of urt of Calcutta in the case of Sawti bajaj (supra) h has in para 99 of their order observed as in para 99 of their order observed that the

Shanno Mohammed Yusuf Warsi. Sh 27 ITA No. 1306/M/2023

assessee cannot be heard to say that they had blindly followed assessee cannot be heard to say that they had blindly followed assessee cannot be heard to say that they had blindly followed advice of third-party and made the investment whereas selection of party and made the investment whereas selection of party and made the investment whereas selection of the shares to be purchased the shares to be purchased is a very complex issue and it requires is a very complex issue and it requires personal knowledge and expertise as investment is not in a mutual personal knowledge and expertise as investment is not in a mutual personal knowledge and expertise as investment is not in a mutual fund. The Hon’ble High Court observed that in this background the fund. The Hon’ble High Court observed that in this background the fund. The Hon’ble High Court observed that in this background the human probability would assume significance. human probability would assume significance.

8.4 In the case in hand, also the asse In the case in hand, also the assessee invested in the shares of ssee invested in the shares of Essar (india) ltd for the first time without any knowledge of the Essar (india) ltd for the first time without any knowledge of the Essar (india) ltd for the first time without any knowledge of the share market. It is also not known how the assessee invested in a share market. It is also not known how the assessee invested in a share market. It is also not known how the assessee invested in a company situated at Kolkatta without carrying out any financial company situated at Kolkatta without carrying out any financial company situated at Kolkatta without carrying out any financial analysis of the company, wher company, whereas the assessee is based at Mumbai. assessee is based at Mumbai. The purchase through preferential allotment is an off market The purchase through preferential allotment is an off market The purchase through preferential allotment is an off market transactions and no prudent person shall enter into such a transactions and no prudent person shall enter into such transactions and no prudent person shall enter into such transaction without knowing or related to the promoters of said transaction without knowing or related to the promoters of said transaction without knowing or related to the promoters of said company. The assessee has also fail company. The assessee has also failed to establish its motive for ed to establish its motive for investment in such investment in such an unknown company without any financial unknown company without any financial rationale.

8.5 Further the Assessing Officer , pointed out the Assessing Officer , pointed out unusual unusual price rise in shares of the company for the period from Nov 2011 till 2015 and in shares of the company for the period from Nov 2011 till 2015 and in shares of the company for the period from Nov 2011 till 2015 and thereafter share price share price fell to low , i.e the price which was prevalent which was prevalent during purchase of the shares the shares by assessee. The Assessing Officer The Assessing Officer has also referred to the financial data of the company, which does has also referred to the financial data of the company, which does has also referred to the financial data of the company, which does not show any performance vis not show any performance vis-à-vis the price rise of the shares vis the price rise of the shares of the company. The assessee also could not explain such a high-rise the company. The assessee also could not explain such a high the company. The assessee also could not explain such a high

Shanno Mohammed Yusuf Warsi. Sh 28 ITA No. 1306/M/2023

in the shares of the company without any corresponding financial in the shares of the company without any corresponding financial in the shares of the company without any corresponding financial results.

8.6 In the light of investigation carried out by the investigation In the light of investigation carried out by the investigation In the light of investigation carried out by the investigation wing of income tax Department Kolkata, it is wing of income tax Department Kolkata, it is found that at the time found that at the time of the sale of the shares at high prices, a particular set of persons, of the sale of the shares at high prices, a particular set of persons, of the sale of the shares at high prices, a particular set of persons, which have been termed as exit provider, had only purchased the which have been termed as exit provider, had only purchased the which have been termed as exit provider, had only purchased the shares for the purpose of acquiring capital loss for further shares for the purpose of acquiring capital loss for further shares for the purpose of acquiring capital loss for further adjustment against capital gain. In t adjustment against capital gain. In the case of the assessee also the he case of the assessee also the Assessing Officer issued noti Assessing Officer issued notice under section 133(6) of the A ce under section 133(6) of the Act to the parties, who purchased shares from the assessee, but none of who purchased shares from the assessee, but none of who purchased shares from the assessee, but none of the parties could be located at their addresses and the notices sent the parties could be located at their addresses and the notices sent the parties could be located at their addresses and the notices sent returned un-served. The non verification of share purchase parties e non verification of share purchase parties also goes to support the outcome of the investigation goes to support the outcome of the investigation goes to support the outcome of the investigation, that the purchaser were in collusion with the operators of the entire scam of purchaser were in collusion with the operators of the entire scam of purchaser were in collusion with the operators of the entire scam of manipulation of shares of the company for benefiting by way of manipulation of shares of the company for benefiting by way of manipulation of shares of the company for benefiting by way of capital loss and to facilitate long d to facilitate long-term capital gain in the hand of term capital gain in the hand of seller of the shares.

8.7 Before us the learned counsel for the assessee relied on the Before us the learned counsel for the assessee relied on the Before us the learned counsel for the assessee relied on the decision of the coordinate bench of T ion of the coordinate bench of Tribunal in the case of in the case of Dheeraj Babulal Shahin ITA No. 4272/Mum/2018 and 4092/Mum/2019 ITA No. 4272/Mum/2018 and 4092/Mum/2019 ITA No. 4272/Mum/2018 and 4092/Mum/2019 but in the said case the assessee was one of the promoter of M/s but in the said case the assessee was one of the promoter of M/s but in the said case the assessee was one of the promoter of M/s Essar (India) Ltd, and therefore the transaction of purchase of the ar (India) Ltd, and therefore the transaction of purchase of the ar (India) Ltd, and therefore the transaction of purchase of the shares, not held to be doubtful or shares, not held to be doubtful or no genuine. But in the instant . But in the instant case the purchase through preferential allotment has not been e through preferential allotment has not been e through preferential allotment has not been

Shanno Mohammed Yusuf Warsi. Sh 29 ITA No. 1306/M/2023

established to be genuine one. In the case of PCIT Vs Ziauddin A established to be genuine one. In the case of PCIT Vs Ziauddin A established to be genuine one. In the case of PCIT Vs Ziauddin A siddique in ITA No. 2012 of 2017, siddique in ITA No. 2012 of 2017, decided by the Hon’ble Bombay by the Hon’ble Bombay High Court, the purchase of shares was on platform of stock High Court, the purchase of shares was on platform of stock High Court, the purchase of shares was on platform of stock exchange through reco recognized stockbrokers, but in the instant case stockbrokers, but in the instant case the purchase is through off the purchase is through off-line transactions of preferential line transactions of preferential allotment directly by the company and not through stock exchange. allotment directly by the company and not through stock exchange. allotment directly by the company and not through stock exchange. In the case of Shyam R Pawar (supra) also the purchase of the In the case of Shyam R Pawar (supra) also the purchase of the In the case of Shyam R Pawar (supra) also the purchase of the shares was done throu shares was done through online transactions, but in the instant gh online transactions, but in the instant case purchase is obviously through off case purchase is obviously through off-line transactions. line transactions. In view of the distinguishable facts, the decision the distinguishable facts, the decisions relied upon by the assessee relied upon by the assessee are not applicable over over the facts of the instant case. the facts of the instant case.

8.9 The Hon’ble Hig The Hon’ble High Court of Calcutta in the case of Swati bajaj h Court of Calcutta in the case of Swati bajaj (supra) in para 99 observed that the department established the (supra) in para 99 observed that the department established the (supra) in para 99 observed that the department established the artificial price rise of the shares by adopting artificial price rise of the shares by adopting manipulative manipulative practices and consequently whatever resultant benefits which accrued from and consequently whatever resultant benefits which accrue and consequently whatever resultant benefits which accrue such manipulative practices were to be treated as tainted. The practices were to be treated as tainted. The practices were to be treated as tainted. The Hon’ble High Court further observed that the assessee had Hon’ble High Court further observed that the assessee had Hon’ble High Court further observed that the assessee had opportunity to prove that there was no manipulation at the other opportunity to prove that there was no manipulation at the other opportunity to prove that there was no manipulation at the other end and whatever gains the assessee reaped was not tained, end and whatever gains the assessee reaped was not end and whatever gains the assessee reaped was not however the assessee however the assessee failed to prove or establish so, and therefore failed to prove or establish so, and therefore the Assessing Officer was justified in coming to a conclusion that the Assessing Officer was justified in coming to a conclusion that the Assessing Officer was justified in coming to a conclusion that so-called explanation offered by the assessee was not to their called explanation offered by the assessee was not to their called explanation offered by the assessee was not to their satisfaction and the assessee having not prove satisfaction and the assessee having not proved the genuineness of the genuineness of the claim, the creditworthiness of the companies in which they had he creditworthiness of the companies in which they had he creditworthiness of the companies in which they had

Shanno Mohammed Yusuf Warsi. Sh 30 ITA No. 1306/M/2023

invested and the identity of the person to the identity of the person to whom the transactions the transactions are done, have to necessarily fail. are done, have to necessarily fail.

8.10 In view of aforesaid discussion, 8.10 In view of aforesaid discussion, respectfully respectfully following the finding of the Hon’ble Calcutta High Court in of the Hon’ble Calcutta High Court in the case the case of Swati bajaj (supra), we uphold the finding of the Ld. CIT(A) on the issue in (supra), we uphold the finding of the Ld. CIT(A) on the issue in (supra), we uphold the finding of the Ld. CIT(A) on the issue in dispute. The grounds raised The grounds raised by the assessee on the merit of the by the assessee on the merit of the addition are therefore dismissed. addition are therefore dismissed.

Order pronounced in the open Court nounced in the open Court on 26/02/2024. /02/2024. Sd/ Sd/- Sd/- Sd/ (SANDEEP SINGH KARHAIL SANDEEP SINGH KARHAIL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 26/02/2024 Dragon Legal/Rahul Sharma, Sr. P.S. Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai