KOMAL AGARWAL,MUMBAI vs. DY CIT -CC-7(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No. 645/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2014-15) Komal Agarwal बिधम / DCIT, Central Circle 7(3) 203, Ugam, N.S Road No.9, Room No 655, 6th Floor, Vs. JVPD Scheme, Juhu, Ville Ayakar Bhavan, M.K. Parle (W), Mumbai-400097 Road, Churchgate, Mumbai-400020 स्थधयी लेखध सं/.जीआइआर सं/.PAN/GIR No. : AHWPR9295B (अपीलार्थी / Appellant) (प्रत्यर्थी / Respondent) ..

Assessee by: Shri Harion Tulsiyan Revenue by: Shri P. D. Chougule सुनवाई की तारीख / Date of Hearing: 17/01/2024 घोषणा की तारीख /Date of Pronouncement: 02/02/2024 आदेश / O R D E R PER ABY T VARKEY, J.M:

2 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . also being a part of the Lotus group], the assessee’s case was also centralized and the DCIT, Central Circle-7(3), Mumbai framed the assessment.

3 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . them to claim LTCG, the price of these shares (of penny stock) were rigged and artificially escalated to facilitate huge LTCG to beneficiaries for converting their unaccounted income (black) into white. Thereafter, the AO also observed that the SEBI had passed interim directions suspending the trade etc. of this kind of scrips. The AO also discussed circumstantial evidences against the claim of LTCG which according to him was not genuine which he discussed at para 7 wherein he took note of the financials of M/s Global. Thereafter, the AO at Para 7.7 discussed about information available with the department about the sale of shares of M/s Global between 18.11.2011 to 01.01.2015 and noted that 18 entities had purchased the shares, which entities according to the AO were paper companies and they were into providing accommodation entries. Thereafter, the AO recorded the statement of the assessee from Para 9.1 (refer page 12-13 of assessment order). Thereafter, the AO observed from the report made by the investigation wing of Kolkata (regarding penny-stock) and the assessee’s statement (recorded by AO) that she didn’t knew about the financials/Head Quarter of company i.e M/s. Global (and on advice of her husband Shri Abhishek Kumar Aggarwal she had invested in shares of M/s. Global refer question 15 and reply to it reproduced at para 12 of assessment order), the AO was of the opinion that assessee was not a genuine investor. And by relying on the circumstantial evidence and applying the theory of preponderance of probability, the AO held the assessee to be in-genuine investor; and taking note that assessee’s relatives have also invested in this share and made similar claim, he rejected the LTCG claim of assessee and made an addition of Rs.6,81,72,321/- as undisclosed income. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to confirm the order of AO. Aggrieved, the assessee is before us.

4 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . from other sources” and had filed her Return of Income for AY 2014-15 u/s 139(4) of the Act on 20.10.2014 declaring total income of Rs. 7,72,910. Subsequently, a search and seizure action u/s 132 of the Act was carried out in the case of Lotus Group and their associates and also at the residences of the directors of the Group including that of the appellant. During the year under consideration, the appellant had inter-alia claimed LTCG on sale of 75,000 shares of M/s. Global Infratech & Finance ltd. (Earlier known as ‘Asianlak Capital and Finance Ltd.’) having a face value of Rs. 10 at Rs. 15 each i.e for a total consideration of Rs. 11,25,000/-. The application for purchase of the said shares was made on 29.12.2011 and the share certificate was issued by the company on 19.01.2012 [copy of share application form and share certificate is found placed at page No. 19 and 20 respectively of the Paper book (PB)]. The purchase consideration of shares was made by the appellant through A/c Payee cheque of her account held with HDFC bank Ld. (Copy of A/c Payee cheque and Extract of Bank statement is found at page Nos. 23 & 24 of the PB filed on 22.11.2021). Subsequently, on 13.12.2012, these shares were split into 10 shares of Rs. 1 each and accordingly total number of shares held by the appellant increased to 7,50,000. The appellant dematerialized the shares, which fact is discernible from perusal of page 21 of PB and copy of holding statement of these shares in the name of assessee with HDFC Bank reflecting that 7,50,000/- shares were dematerialized with it (refer page no. 22 of PB). The appellant thereafter sold all these shares in the Bombay Stock Exchange (BSE) between August 2013 to December 2013 at an average price of Rs. 90.89 (approx..) i.e, for a total sale consideration of Rs. 6,81,72,229/-. The resulting Capital Gain of Rs. 6,70,47,229/- was claimed as exempt by the appellant under the provisions of Section 10(38) of the Act in her return of income; and when AO called upon assessee to produce the details of purchase of shares of M/s. Asianlak Capital & Finance Ltd [later on re-named as M/s. Global], the assessee produced

5 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . inter-alia the following primary documents to prove the purchase and holding of shares: -

Sr. Particulars Page No. of the No. Paper Book

5 Copy of Account Payee cheque and extract of Bank Statement 23-24 highlighting the payment made by the appellant for purchase of shares

Sr. Particulars Page No. of the PB No 1 Copy of broker ledger of HDFC Securities Ltd and 25-76 contract notes evidencing the sale of shares 2 Copy of broker ledger of Vogue Commercial 77-87 Company Ltd. And contract notes evidencing the sale of shares 3 Copy of Bank Statement highlighting the sale 88-93 proceeds received on sale of shares

6 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . highlighting the sales consideration and STT has been remitted on sales. Thus assessee has filed the primary/relevant documents to prove the purchase and holding of shares for the statutory period by dematerializing it and sale of shares through BSE in the electronic platform through the recognized broker M/s. Vogue Commercial Company Ltd. And that the consideration for purchase/sale of shares happened through banking channel and STT has been remitted on sales. Thus, we note that assessee has fulfilled the conditions necessary for making the claim of LTCG as exempt u/s 10(38) of the Act and it is not the case of AO/Ld. CIT(A) that there is any infirmity/deficiencies in the relevant/primary documents filed by the assessee as noted (supra). Thus, we find that assessee has discharged her burden to prove the LTCG claim on sale of shares of M/s. Global and the AO has failed to rebut/produce contrary material/evidence to counter/question the veracity of the primary documents produced by assessee to prove her claim.

7 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . company before investing, and that she was not aware of the management of the company or recollected the net profit and dividend given by the company in the last three years. The ignorance of assessee on these facts, according to AO proves that the investment of assessee in the shares of M/s Luminare Technologies Ltd was not made by assessee (please note that the AO erroneously found that assessee purchased the shares of M/s. Luminare Technologies at page 13 at para 9.2 of assessment order). The AO also taking note that assessee and her relatives have invested in shares of M/s. Global and M/s. Luminare, applying the test of human probabilities and in the light of investigation wing (Kolkata) report held the claim of LTCG/exempt income on sale of shares of M/s. Global as in-genuine.

8 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . was participant/recipient in the organized racket of generating bogus entries of LTCG and involved herself in the ‘modus operandi’ as discussed by him at para 6.1 to 6.4 of the assessment order. According to Ld. AR, unless the AO is able to point out from the investigation report/statement of assessee and spell out the role of assessee/broker as a wrong-doer or participant in the racket (as stated in the report of investigation wing) the impugned action of AO/Ld. CIT(A), in the light of the un-impeached primary documents has to fail.

9 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . investigation report (report of investigation wing Kolkata) wherein there is no whisper of any wrong doing by assessee or her broker or assessee’s involvement in modus-operandi as stated therein the investigation report of Kolkata or SEBI report, no adverse view is legally unsustainable. We find that Kolkata Investigation Report discussed by AO at para 6.1 to 6.3 and SEBI report mentioned at para 6.4 of assessment order in no way can be said to incriminate assessee being part of modus-operandi to do any illegal acts. As noted, the AO/Ld. CIT(A) has been influenced by the investigation report submitted by the Investigation Wing of Department functioning at Kolkata. It is true that some unscrupulous entry operators had devised methods/modus-operandi to beneficiaries to facilitate laundering their black money to white through pre-planned receipt in the form of bogus LTCG, loan etc. But from perusal of the discussion of AO/Ld. CIT(A), we find it to be general in nature and there is nothing in the discussion to link/connect the assessee somehow with the modus-operandi of the Investigation Wing or Report. Since there is neither any evidence/material to incriminate the assessee in the investigation report nor any material to suggest assessee/broker being part of the nefarious conspiracy or abatement, such a report of investigation wing cannot be of any aid to the revenue and both the authorities erred in placing reliance on such report to draw adverse inference against assessee.

10 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . husband (Shri Abhishek Kumar Aggarwal). The Ld. AR also brought to our notice that assessee’s husband was a successful business person and was a regular investor in shares of different companies including Blue Chip companies, and filed statement of holding of shares in companies viz M/s. Adani Port’s, M/s. Bajaj Hindustan Sugar Ltd; M/s. Bellay Stech & Alloys Ltd; M/s. GMR Airports; M/s. HDFC Bank, M/s. Hindustan, M/s. ICICI Ltd. M/s. L & T; M/s. Reliance Industry Ltd and other Reliance shares as well as M/s. Global & M/s. Luminare etc. Thus, we find that assessee had invested in shares of M/s Global on advice of her husband, who is a regular investor. Therefore, the action of AO to draw adverse view on the basis that assessee had no knowledge about the management of M/s. Global is misplaced and is irrelevant in the facts and circumstances discussed (supra).

FY Share Capital Gross Turnover Expenses Profit After Tax 2010-11 3.5 0.00 0.02 0.07 2011-12 14.01 1.68 1.80 0.08 2012-13 23.86 13.15 13.56 1.05 2013-14 23.86 24.82 22.54 1.61 2014-15 26.24 38.20 37.25 0.76

11 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . According to Ld. AR, from perusal the above table, it is evident that from FY. 2011-12 i.e. the year in which the appellant had made investment in the share of the company, the sales and profit after tax of the company had shown a constant year on year growth i.e. from a small turnover of Rs. 1.68 Cr. the company recorded a turn-over of Rs. 24.82 Crores in less than 2 years which is a substantial growth i.e. approximately 1477% in the business of a company which is alleged to be a penny stock. The Profit after tax also grew from Rs. 0.08 Cr. in F.Y. 2011-12 to Rs. 1.61 Cr. i.e, a growth of approximately 2012% in F.Y. 2013-14. This according to assessee goes on to show that the company was engaged in genuine business activities which also justifies the substantial rise in prices of the shares of the company. From the above analysis according to assessee, the only conclusion which can be drawn is that rise in price of shares of the company was duly supported by its growing business which further grew in F.Y, 2014-15 i.e. even after the shares were sold by the appellant. Therefore, based on above facts/data according to Ld. AR, even it cannot be said that the company is a penny stock when there are such strong financials to support the increase in share price. The Ld. AR pointed out that, the assessee, like any other investor, took advantage of the bullish run in the share prices of M/s. Global during the period when the prices were rising and sold it in lots across the year. From the discussion supra, it is noted that improved financials of M/s. Global reflected the movement in share prices. Having regard to the increased business activities, turnover, profitability, etc, we find considerable force in the Ld. AR’s explanation that the increase in price of M/s. Global was supported by its fundamentals as well. Rather, we note that the averments made by the lower authorities lacked objective reasoning. Although the AO had extracted the financials and price charts of M/s. Global, but he failed to properly analyse the same. We note that the lower authorities simply cited price

12 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . manipulation in the scrip leading to inflated prices, in complete disregard to the financial of M/s. Global which we have taken note of (supra).

54.3. We also gainfully refer to the decision rendered in the case of Shri. Mukesh B Sharma Vs. ITO (ITA No. 6249/Mum/2018) dated 29.05.2019. In the decided case also the AO had relied upon statements of certain brokers/entry operators recorded in unconnected proceedings to hold that the transactions conducted by the assessee in the shares of M/s Global Infratech & Finance Ltd ('GIFL') (formerly known as M/s. Asianlak Capital) was bogus. Like in the present case, the AO had denied the exemption claimed by the assessee u/s 10(38) of the Act and assessed the sale proceeds to tax u/s 68 of the Act. On appeal the Tribunal noted that, upon completion of investigation initiated by the SEBI, vide their order dated 08-01-2018, it had found that neither the assessee therein nor the brokers were guilty of price manipulation or artificial rigging of its prices. It was therefore held that when the watchdog, SEBI did not find the assessee or its brokers to be guilty of any wrong doing, it was incorrect on the AO's part to doubt the genuineness of the transactions carried out by the assessee in the shares of GIFL in open market on electronic platform. The Tribunal also examined the financials of this scrip and found that the AO's allegation that the company did not have any value to justify the rise in prices was factually untenable. It was further noted that the assessee had furnished all contemporaneous evidences in support of his transaction in shares of GIFL and therefore there was no reason to doubt its correctness. This Tribunal also held that, the statements of the persons referred to by the AO, was never subjected to cross- examination, despite the assessee's

13 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . request for the same. This Tribunal accordingly deleted the addition by holding as under: "6. We have heard the rival submissions. The primary facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The assessee submitted the following details with regard to purchase of shares:- a) Copy of relevant extract of bank statement reflecting the payment of Rs 30 lacs made by the assessee by account payee cheque to the company directly and source thereof along with allotment letter issued by the said company (i.e GIFL) and copy of share certificate issued by GIFL to the assessee on 12.6.2012. These documents are enclosed in pages 71 to 73 of Paper Book b) Demat account held with NKGSB Co-operative Bank Limited reflecting credit of shares purchased (enclosed in page 154 of Paper Book). c) Copy of approval letter from GIFL d) Copy of allotment letter from GIFL for shares allotted to the assessee. e) Copy of share certificate issued by GIFL. f) Various events reported by GIFL to BSE. 6.1. The assessee submitted the following details with regard to sale of shares:- a) Copy of demat statement reflecting the sale of shares. b) Copies of Contract Notes issued by both the brokers for sale of shares. c) Copy of Holding Statement for financial years 2012-13 and 2013- 14. d) Price chart of GIFL from the date of purchase of shares till the recent period. e) Copy of relevant extract of bank statement of the assessee reflecting the sale proceeds received from the broker and credited to the bank account.

6.2. We find that the assessee pleaded that in an online platform, there would be no nexus between the purchasers and the seller and the delivery of shares and payments would be made through their respective stock brokers. Hence the ld AO ought to have summoned the assessee's brokers to examine

14 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . the authenticity of the sale of shares of GIFL and the amount received on sale of shares. We find that the Id AR also placed evidences on record to prove that the said company GIFL is still listed in the stock exchange and shares of this company are being traded and SEBI had not passed any adverse order against the said company. We find that the details of revenue and profits of GIFL for various years are as under:

6.3. We find that the Id AO had placed reliance on certain statements recorded by the Investigation wing of Kolkata Income Tax Department during some survey proceedings conducted in third party cases. We find that in none of those statements, the name of the assessee or the name of the brokers through whom assessee had transacted were mentioned. We also find that there is no mention of any connivance on the part of the assessee with the share broker and stock exchange to launder the unaccounted monies of the assessee and bring it back in the form of sale proceeds of shares and claim exemption u/s 10(38) of the Act for the long term capital gains derived thereon. None of the parties on whom survey actions were conducted in Kolkata were related to assessee or the brokers in any manner whatsoever. We find that the various purchase and sale details together with the supporting evidences were not controverted by the revenue before us. Even the cross examination of the parties mentioned in the show cause notice issued to the assessee by the Id AO were sought by the assessee and the same were refused by the Id AO. We find that the Id AO had also placed reliance on the order passed by SEBI while concluding that the transactions carried out by the assessee in the form of sale of shares as sham and bogus. From the perusal of the SEBI order dated 25.8.2016 in the case of First Financial Services Ltd, we find that from the extracts thereon, that it was stated that M/s GIFL was involved in providing exit to the sellers of equity shares of First Financial Services Ltd and no where stated that this company was involved in providing accommodation entries in the form of capital gains by transacting its own shares through the alleged bogus operators. We also find that the SEBI had passed on order dated 8.1.2018 in the case of

15 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . GIFL, wherein it was found that the name of the assessee herein or the brokers through whom the assessee transacted were not even included in the said order as parties against whom any adverse inference / findings were found in respect of violation of provisions of SEBI. We find that SEBI had issued a show cause notice vide Reference SEBI/EAD 12/SM/EE/693/25/2018 dated 8.1.2018 which are enclosed in pages 252 to 266 of the paper book. In pages 257 and 258 of the Paper Book, the list of parties to whom show cause notices were issued by SEBI is listed out. In the entire list, neither the name of the assessee nor his brokers were included. Later there another show cause notice vide Reference EFD/DRA3/OW/NB/6663/2018 dated 1.3.2018 was issued by Enforcement Department of SEBI mentioning the list of parties to whom show cause notices were issued. Even in this list, the name of the assessee or his broker was not included by SEBI. Hence it could be safely concluded that SEBI did not allege any wrong doing on the part of the assessee or his brokers with regard to carrying out transactions in sale of shares of GIFL in open market in online platform. In this subsequent show cause notice dated 1.3.2018, the SEBI also takes records the fact of issuance of shares on preferential allotment basis on 12.6.2012 by GIFL to various parties (which includes the assessee also though not named in the SEBI show cause notice). In this show cause notice also, the SEBI only accused Notice No. 1 to 7 listed in the said notice which admittedly does not include the assessee or his brokers, to have engaged in manipulation of price of the scrip of GIFL. The said show cause notice dated 1.3.2018 also stated that Notice Nos. 13 to 46 listed in the said notice which admittedly does not include the assessee or his brokers, to have sold the shares at inflated price and booked substantial profit. The said show cause notice dated 1.3.2018 also stated Notices Nos. 8 to 12 (which admittedly does not include the assessee or his brokers) were part of the manipulative scheme to make preferential allotment and manipulate the price, through, entities connected to company and promoter, to benefit promoter, promoter related entities and connected preferential allottees. It is not the case of the revenue that the assessee or his brokers

16 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . were either the promoters of GIFL, or promoter related entities of GIFL or related to connected preferential allottees thereon. Hence it could be safely concluded that the SEBI had not found any adverse findings with regard to the assessee or his registered share brokers vis a vis GIFL. Hence there is absolutely no iota of evidence linking the assessee or the registered brokers to even remotely allege that they were involved in artificial rigging of price of scrips which were dealt by the assessee herein.

6.4. We find that the Id AO had stated that GIFL is a company of no value. The revenue stream and the profitability chart reproduced hereinabove does not support the case of the Id AO. Moreover, the status reported by the Id AO about GIFL was in AY 2008-09 which is neither the year of purchase of shares by the assessee nor the year of sale of shares in open market. Hence those findings are totally irrelevant for adjudication of the issue before us. 6.7. We find that the Id AO had furnished certain list of parties who were alleged purchasers of shares from the assessee when it was sold in the open market by the assessee. The assessee had pleaded that since the shares were sold in the open market in online platform, he is not aware of the name of the parties as to who had bought the same in the open market. The Id AO sought to issue summons to those alleged purchasers of shares u/s 131 of the Act, which remain uncomplied by those parties. Based on this, the Id AO had drawn an adverse inference against the assessee disregarding the entire documentary evidences on record and the prevailing market practices with regard to purchase and sale of shares in the open market in online platform. It is not in dispute that the assessee had received the sale proceeds of shares from the registered broker through the stock exchange only and not from the alleged purchasers of shares directly. Moreover, the Id AO states that the assessee had sold the shares at Rs 211.76 per share whereas the average sale price of the assessee was only Rs 89 per share.

6.8. We find that the Id DR made general submissions with regard to the investigations carried out by Kolkata Income Tax Department after identifying 84 scrips to be penny stocks and the modus operandi adopted by

17 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . those scrips with the connivance of various entry operators, brokers and stock exchange. We find that the ld DR was not specifically able to controvert the documentary evidences filed by the assessee for purchase and sale of shares and various other documents referred to in the Paper Book more particularly the SEBI show cause notice as detailed hereinabove, except stating that SEBI show cause notice was issued in the name of GIFL, the scrip in which assessee dealt. The Id DR also sought permission from the Bench to grant time for filing his written submissions with regard to the entire appeal. No such written submission was filed by the Id DR till the date of dictation of this order. The Id DR drew our attention to the statement recorded from the assessee by the Id AO during the course of assessment proceedings on 19.12.2016, the gist of which is mentioned in page 31 of Assessment Order. We have gone through the same and we find that the assessee had stated before the Id AO that he had made investment in shares of GIFL without looking into the fundamentals of the said company and based on information given by a family friend.

We have already seen the documentary evidences available on record wherein the assessee in response to an invitation letter issued by GIFL for making investment in preferential allotment basis, had issued account payee cheques and got the shares allotted in his name on preferential allotment basis. These facts have also been noted by SEBI in the second show cause notice dated 1.3.2018 which has been discussed hereinabove. Merely because the assessee himself is engaged in independent manufacturing business, it cannot be said that all his investment decisions would be prudent and would be done only after analyzing the entire fundamentals and financials of the investee company. It is in everybody's knowledge, that an investor would try to take calculated risks by investing his money on an unknown scrip based on certain information from friends, relatives, or in some stock market related websites and take a chance. Since the scrip purchased by the assessee was showing considerable growth from the time of purchase, the assessee being a gullible investor, continued to hold it for a

18 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . period of 26 months and later sold it in open market in online platform at prevailing market prices.

6.10. It would be pertinent to address the case law relied upon by the ld DR before us on the decision of Hon'ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr.CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash; (iii) The address of both the companies were interestingly the same ; (iv) The authorized signatory of both the companies were also the same person; (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon'ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the decision of Hon'ble Bombay High Court supra is factually distinguishable.

6.11. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Mukesh Ratilal Marolia in ITA No. 456 of 2007 dated 7.9.2011 had held as under:- 5. On further appeal, the ITAT by the impugned order allowed the claim of the assessee by recording that the purchase of shares during the year 1999-2000 and 2000-2001 were duly recorded in the books maintained by the Assessee. The ITAT has recoded a finding that the source of funds for acquisition of the shares was the agricultural income which was duly offered and assessed to tax in those Assessment Years. The Assessee has produced certificates from the aforesaid four companies to the effect that the shares were in-fact transferred to the name of the Assessee. In these

19 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . circumstances, the decision of the ITAT in holding that the Assessee had purchased shares out of the funds duly disclosed by the Assessee cannot be faulted. 6. Similarly, the sale of the said shaers for Rs 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt Ltd and M/s Scorpio Management Consultants Pvt Ltd cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assesse nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s Richmand Securities Pvt Ltd regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s Richmand Securities Pvt Ltd held that the sale transaction was genuine. 7. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the Assessing Officer was not justified in holding that the amount of Rs 1,41,08,484/- represented unexplained investment under section 69 of the Income Tax Act, 1961 cannot be faulted. 8. In the result, we see no merit in this Appeal and the same is dismissed with no order as to costs.

6.12. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove, we hold that the ld CITA was not justified in upholding the action of the ld AO in bringing the sale proceeds of shares of GIFL in the sum of Rs 7,88,77,854/- as unexplained income of the assessee treating the same as just an accommodation entry. Consequentially, the addition made towards commission on such accommodation entry at the rate of 5% in the sum of Rs 39,43,898/- is also hereby directed to be deleted. Accordingly, the grounds raised by the assessee are allowed"

20 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . 15. Now coming to the other judgments cited before us, it is clarified that we have carefully perused the plethora of judgments relied upon by both the parties and but only those judgments which are found to be relevant to the case in-hand, have been discussed in the ensuing paragraphs. 16. It is noted that the Ld. AR had rightly relied upon the judgment of the Hon’ble jurisdictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri Jagdish Purohit, and one of them was the Director of M/s. Bolton Properties Ltd. who had purportedly admitted to have manipulated the share price of M/s. Bolton Properties Ltd. Mr. Jagdish also reportedly floated several investment companies which were aggressively used in the entire deal with the broker M/s. Prakash Nahata & Co. According to AO, the shares offloaded by the beneficiaries through M/s. Prakash Nahata & Co., were ultimately purchased by the investment companies controlled by Shri Purohit. The name of the assessee figured during the course of the investigation. The AO noted that these entities/ companies, whose shares were traded by the assessee, were not having sufficient business activities justifying the increase in their shares prices. Therefore, the AO concluded that certain operators and brokers devised a scheme to accommodate the unaccounted monies of the assessee in guise of capital gains. The AO accordingly added the capital gains derived by the assessee under Section 68 of the Act. On appeal, the Hon’ble jurisdictional High Court upheld the Tribunal order deleting the addition, by observing as under: “..It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers

21 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme.

22 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.”

“10. We heard both sides in detail and perused rival contentions in the light of the records of the case and the paper book filed by the assessee. In the return of income filed by the assessee for the year under appeal, the purchase of flat at Colaba for a consideration of Rs. 2,06,72,904 was reflected. The assessee’s contribution in the purchase of the flat was @ 70 per cent for which the investment amounted to Rs. 1,44,71,033. The source of investment was, among other things, the sale proceeds of shares of Rs. 1,41,08,484. This amount has been questioned by the revenue authorities.

10.1 The assessee has purchased the shares of four companies viz., Allan Industrial Gases Ltd., Mobile Telecom, Rashee Agrotech and Centil Agrotech, during the previous years relevant to the assessment years 1999-2000 and 2000-01. The books of account maintained by the assessee for both the years clearly reflected the purchase of those shares. The shares are reflected in the balance sheets filed by the assessee along with the returns of income for the assessment years 1999-2000 and 2000-01. Therefore, it is seen that as a prima facie evidence, the purchases of shares have been contemporaneously entered into the books of account of the assessee.

10.2 The assessee has been declaring agricultural income in his returns of income for the assessment years from 1990-91 to 2001-02. The total agricultural income returned by the assessee up to the assessment year 1999-2000 was at Rs. 7,57,883. The amount invested in the purchase of shares as on 31-3-1999 was Rs. 4,48,160. The cash available with the assessee by way of agricultural income was much higher than the investment made by the assessee in the purchase of shares as on 31-3-1999. After making the investments in the shares, the assessee had a surplus cash balance of Rs. 3,09,000 as on 1-4-1999. Thereafter, the assessee has further returned an agricultural income of Rs. 66,000 for the assessment

23 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . year 2000-01. The amount invested in the purchase of shares in the year ending on 31-3- 2000 was Rs. 2,57,020. Again the assessee had a cash balance thereof of Rs. 1,18,771. Therefore, it is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999-2000 and 2000-01 was supported by cash generated out of agricultural income. The above agricultural income have been considered in the respective assessments. Therefore, the contention of the assessing authority that the assessee had no sufficient resourcefulness to make investments in the shares is unfounded.

10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off- market transactions.

10.4 When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee.

10.5 The next set of evidences relied on by the assessing authority are the statements obtained from various parties. When certain persons like Radha Ashok and Sandeep D. Shah made negative statements against the assessee, persons like Satish Mandovara and Mangesh Chokshi had given positive statements in support of the contention of the assessee. But, the assessing authority sought to pick and choose the statements given by various parties. While accepting and rejecting such statements given by the parties, the Assessing Officer has made

24 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . a mistake of accepting irrelevant statements and rejecting relevant statements. During the relevant period in which the assessee transacted in shares, persons like Radha Ashok and Sandeep D. Shah were not carrying on their business of brokers as in the manner they carried on the business in the past. Even their Stock Exchange Memberships were cancelled. It was Shri Satish Mandovara who was carrying on the business mainly for and on behalf of Shri Mangesh Chokshi, Director of M/s. Richmond Securities Pvt. Ltd. Those two persons have categorically admitted before the assessing authority that they had dealings with the assessee in respect of the share transactions. They have confirmed the transactions stated by the assessee that he had with them. These positive statements made before the assessing authority supported the case of the assessee. There is no force in the action of the assessing authority in relying on the negative statements of the other parties whose role during the relevant period was either irrelevant or insignificant. Therefore, in the facts and circumstances of the case, it is, our considered view that certain statements relied on by the assessing authority do not dilute the probative value of the statements given by other persons in favour of the assessee confirming the share transactions entered into by the assessee.

10.6 The above circumstances have made out a clear case in support of the book entries reflecting the purchase and sale of shares and ultimately supporting the money received on sale of shares and finally investing the same in the purchase of flat. The chain of transactions entered into by the assessee have been properly accounted, documented and supported by evidences.

10.7 Therefore, we find that the explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999- 2000 and 2000-01 have grown into a very sizable amount ultimately yielding a fabulous sum of Rs. 1,41,08,484 which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences

25 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares. 10.8 For a moment, even if all the above evidences are ignored, one cannot overlook the pressure of the evidence coming out of the survey carried out by the department in the business premises of the assessee. There was a survey carried out by the department in the business premises of the assessee. In the course of survey, contract notes for sale of shares, copies of bills thereof, photocopies of share certificates etc., were found. The purchase and sale of shares were also found recorded in the books of account. The department has no case that the survey was a staged enactment. A survey is always unexpected. So, it is not possible to presume that the assessee had collected certain fabricated documents and kept at his business premises so as to hoodwink the survey party to lead them to believe that the assessee had entered into share transactions. Atleast such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee.” 18. On further appeal, it is noted that the Hon’ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 has affirmed the order of this Tribunal.

26 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . “12. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions.

27 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . 20. The Ld. AR also brought to our notice the recent judgment rendered by the Hon’ble jurisdictional Bombay High Court in the case of PCIT v. Ziauddin A Siddique (ITA No. 2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case. In the decided case, the issue before the Hon’ble High Court was whether this Tribunal was right in law in deleting the addition made u/s 68 of the ACT in relation to LTCG derived on sale of shares, ignoring the fact that the shares were purchased from off-market sources and that the sharp rise in prices were not supported by financials. Answering the question raised by the Revenue in the negative, the Hon’ble High Court held that there was a finding of fact that the purchase & sale of shares occured on the platform of stock exchang, upon payment of STT and were supported by documentary ecidences and therefore there was no perversity in the order of this Tribunal. The Court further noted that there was no allegation against the assessee that he had participated in price rigging in the market and therefore dismissed the appeal of the Revenue. The relevant findings of the Hon’ble High Court which is binding upon us, are as follows :-

“2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (“RFL”) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (“STT”) has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.1 but that does not help the revenue in as much as the facts in that case were entirely different.

28 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.”

''(I) Whether on the facts and in the circumstances of the case, the Learned ITAT was justified in deleting the addition of Rs. 7593444/- made on account of unexplained credit u/s 68 of the Act when the assessee was unable to justify equity trading by picking the shares of specific companies with poor net worth?

(II) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in deleting the addition of Rs. 7593444/- by holding the transaction as genuine because transaction is through Stock Exchange and payment is by cheque, completely ignoring the fact that such masquerade is used methodically to provide accommodation entries in order to show the sham transaction as genuine?

(III) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in deleting the addition of Rs. 151869/- being commission paid to acquire such accommodation entry?

(IV) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in rejecting the Revenue's appeal without considering the case on merit where the additions were made by the AO on the basis of corroborative information received from Investigation Wing, Kolkata given that the case fails under exception as per para 10(e) of CBDT circular no. 03/2018 dated 20-08-2018.

29 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . “..Learned ITAT has specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court in CIT v. Smt. Pooja Agarwal, [2018] 99 taxmann.com 451 (Raj.) wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue.” 23. As far as the reliance the reliance placed by the Ld. CIT, DR on the decision of SEBI Vs Rakhi Trading Pvt Ltd (supra) is concerned, it is noted that the said decision was rendered in the context of synchronized trading conducted by the said assessee in the F&O Segment of the Stock Exchange and therefore the facts involved therein are clearly distinguishable from the facts of the present case.

30 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . that the theory of human behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the assessee. The relevant findings of the Hon’ble High Court are as follows :-

"12...Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue." 25. We thus note that the later judgment of Hon’ble Delhi High Court in the case of Krishna Devi (supra) is relevant to the facts of the present case, whereas the decision of Suman Poddar (supra) cited by the Revenue, is found to be factually distinguishable in light of the facts involved in the present case, as discussed above.

31 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . factually distinguishable as well. For instance, in the case of ITO v. Shamim M. Bharwani (supra), the addition was confirmed since the source of purchase of shares remained unproved. In the decided case, the assessee had claimed to have purchased the shares in cash but was unable to provide the necessary trail. The Tribunal also noted the assessee to be an inactive investor having meagre investment portfolio and therefore doubted the genuineness of the purchase of such unknown shares in cash. In the present case however, both the lower authorities have not doubted the contemporaneous evidences furnished by the appellant in support of purchase of shares, which took place through proper banking channel. Also, as noted earlier, the appellant was an active investor having portfolio holding in excess of Rs.900 lacs and thus cannot be said to have purchased the shares of TTL out of the blue. Hence, this decision cited by the Revenue is found to be distinguishable. 28. Likewise, in the case of Satish Kishore v ITO (supra) also, the act of purchase of shares in question were doubted, as the assessee could not substantiate the same with relevant documentary evidences, which is not the case before us. Further, unlike the appellant, in the decided case, the assessee was unable to corroborate the increase in the prices of the shares with the financials of the company. Similarly, the decision rendered in the case of Sanat Kumar Vs ACIT (supra), is also found to be on completely different footing wherein the assessee was not able to produce the relevant details to justify its claim. Hence, both these decisions are found to be distinguishable. 29. Apart from the above, the Revenue has also relied upon several judgments rendered in the context of the genuineness of share subscription monies raised by closely held companies, which were held to be in the nature of unexplained cash credit u/s 68 of the Act by the judicial forums. Having perused those judgments, it

32 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . is noted that, the question as to whether the assessee had satisfied the three ingredients set out in Section 68 of the Act is essentially a fact finding exercise. We note that the facts involved in each of them was qua share application monies whose facts & features were distinguishable to the issue involved in present case i.e. genuineness of capital gains derived on sale of shares. Since these judgments were noted to be not relevant to the present case, we do not deem it fit to discuss each of them separately.

“17. That on going through the aforesaid judgment, we find that no question of law was formulated by Hon’ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon’ble High Court found that the issue involved is a question of fact. Thus, the judgment of the Hon’ble High Court has to be seen if similar facts are permeating in the present appeal also and if there is difference on facts, then the judgment cannot be applied. In the judgment of Hon’ble Apex Court in Kunhayyammed vs State of Kerala reported in 245 ITR 360 and also in CIT vs. Rashtradoot (HUF) reported in 412 ITR 17, the Hon’ble Apex Court have held that if the High Court has not admitted the question of law, and has dismissed the appeal, then it is a case of dismissal in liminie. Even on merits and facts, the judgment of Udit Kalra vs ITO (supra) is distinguishable as in that case the company was into consistent losses, whereas, the scrip in which assessee has dealt is a growing and high turnover company and dividend paying company. As TTL was having turnovers of

33 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . Rs. 117.39 crores (AY 2014-15); Rs.150.59 crores (AY 2015-16); Rs 154.88 crores (AY 2016-17); and Rs. 146. 23 crores (AY 2017-18). The financial statements of said company are available in public domain, which have also been placed at Pages 325 to 370 of PB– II by assessee. That further, the interim order of SEBI in the case of TTL banning trading has been uplifted and cooled down by subsequent order of SEBI vide order dated 31.10.2018 placed before us at Pages 305 to 324 of PB– II by assessee. Thus, the growth in prices of TTL was backed by sound financials and as such, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs ITO so relied by ld. DR.

34 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . Assessing Officer on account of alleged commission is consequential and is also liable to be deleted and accordingly, the same is also hereby deleted.” 31. We also gainfully refer to the decision of the coordinate Benches at Jaipur and Delhi in the cases of DCIT Vs. Shri Ghanshyam Agarwal (ITA. No.532/JP/2019) and Jyoti Gupta Vs. ITO (ITA No. 3510/Del/2018) respectively, wherein also similar addition on account of LTCG derived on sale of shares of TTL by relying on statements of Mr. Kayan / purported exit providers, was deleted by this Tribunal. The relevant findings rendered by this Tribunal in both cases are taken note of as under:-

(A) DCIT Vs. Shri Ghanshyam Agarwal (supra)

“6. We have considered the rival submissions as well as the relevant material on record. The assessee purchased 20,000 shares of M/s. Trinity Tradelink Ltd. @ Rs. 10/- each for a total consideration of Rs. 2,00,000/-. The assessee has produced the share certificate of the shares whereby the shares were initially issued in the name of M/s. Amarkantak Procon Pvt. Ltd. and were transferred in the name of the assessee vide endorsement dated 31st October, 2012. As per the sale bill dated 07.10.2012 the payment of purchase consideration has been acknowledged by the seller. Even otherwise, the said payment was reflected in the bank account of the assessee through clearance of cheque no. 788048 on 31st October, 2012. This payment of Rs. 2,00,000/- paid to M/s. Amarkantak Procon Pvt. Ltd. is duly reflected in the bank account of the assessee and, therefore, the said evidence which can be independently verified cannot be disputed in the absence of any material brought on record to show that the payment was not in respect of purchase of shares but for some other transaction. The assessee has produced the sale bill, certificate of transfer of shares in the name of the assessee. These documents along with the bank statement of the assessee clearly established the fact that the assessee has made the payment of purchase consideration through banking channel on 31st October, 2012. Once the payment of consideration is not in dispute and shares were transferred in the name of the assessee as reflected in the Demat Account of the assessee, then the assessee has established the purchase of the shares and holding in the Demat Account since 31st October, 2012. The assessee is having Demat Account with IDBI Bank and on perusal of the Demat Account it revealed that the assessee has been a regular trader/investor in the shares of various companies including various public sector

35 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . undertakings. Thus it is not an isolated transaction but it is one of the hundreds of transactions in the Demat Account of the assessee. Out of these 20,000 shares, the assessee has sold 15,500 shares after one year whereas the balance 4500 shares were sold prior to one year and offered short term capital gain to tax which has not been disputed by the AO. Thus out of a lot of 20,000 shares of M/s. Trinity Tradelink Ltd., the shares sold by the assessee prior to one year were not disputed by the AO as the short term capital gain was offered to tax by the assessee. The AO has disputed the transaction of purchase and sale only to the extent of the shares which were sold after one year and thereby the assessee claimed long term capital gain as exempt under section 10(38) of the IT Act. We further note that the AO has given the details of the prevailing price of shares of M/s. Trinity Tradelink Ltd. at Stock Exchange in the years 2012, 2013 and 2014. However, it is pertinent to note that the assessee purchased the shares of M/s. Trinity Tradelink Ltd. which was not listed in the Stock Exchange in the year 2012 but only after amalgamation of the said company with M/s. Omnitech Petroleum Ltd. (formerly known as Sharp Trading & Finance Ltd.) as per the approval of amalgamation by the Hon'ble Bombay High Court vide decision dated 10th January, 2014, the amalgamated company shares got listed by virtue of amalgamation. At the time of amalgamation, M/s. Trinity Tradelink Ltd. amalgamated in M/s. Omnitech Petroleum Ltd. but subsequently the said company also changed its name to M/s. Trinity Tradelink Ltd., which has resulted this confusion of prevailing share price in the Stock Exchange in the years 2012 to 2014. Thus, we find that the said comparison of the AO of the prevailing price in the year 2012 with the price of the shares of amalgamated company in the year 2014 is misconceived. The AO has not conducted any independent enquiry or investigation to verify the genuineness of the transaction but has referred the investigation conducted by the department and a report received by the AO. It is pertinent to note that the said report as referred by the AO and reproduced in the assessment order is nothing but a narration of modus operandi of the various entry operators involved in providing the bogus accommodation entries of long term capital gain, etc. The statement as referred by the AO of Shri Vikrant Kayan recorded under section 133A on 09.06.2014 is subsequent to the sale of shares by the assessee and, therefore the said statement does not refer to the transaction of shares of M/s. Trinity Tradelink Ltd. prior to its amalgamation and listing. The said statement at the most can relate to the transaction after the amalgamation of the unlisted company with M/s. Omnitech Petroleum Ltd. and subsequently changing the same to M/s. Trinity Tradelink Ltd. as a listed company. Therefore, the transaction of alleged accommodation entry stated by Shri Vikrant Kayan prima facie relates to the company after the amalgamation and change of name which is a listed company whereas the assessee has

36 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . purchased the shares of an unlisted company, namely M/s. Trinity Tradelink Ltd. Further, the question no. 8 was very specific and in answer to the said question, Shri Vikrant Kayan has stated as reproduced by the AO at page 8 of the assessment order as under :-

" Q.8. Please tell the name of the parties to whom you have provided bogus billing ?

Ans. Sir, I have provided accommodation entry in the form of bogus billing to many companies, some of them are Binani Cement Ltd., Binani Zinc Ltd., Merit Plaza Pvt. Ltd., Vansudhara Infra Developers Pvt. Ltd., Swis Mercantile Pvt. Ltd., Consumer Marketing India Pvt. Ltd., PAESS Industrial Engineers Ltd., Darashaw & Co. Pvt. Ltd. and Voltas Ltd."

Thus in response to the question to tell the names of the parties to whom he provided bogus billing, he replied the names of various parties and, therefore, there is no allegation against the assessee or the assessee's partnership firm by Shri Vikrant Kayan. The AO based on the report of investigation and the statement has treated the transaction as bogus whereas the assessee produced all the relevant direct evidences to establish the purchase of shares by paying the purchase consideration through banking channel. The evidence produced by the assessee is independently verifiable as the bank account wherein the payment is reflected cannot be manipulated by the assessee. Further, the shares were dematerialized and holding of the shares in the Demat Account is also independently verifiable and cannot be disputed in the absence of any contrary material to show that the Demat Account produced by the assessee itself is bogus. We further note that this is not a case of purchase of penny stock of a company and within a short period there is an unprecedented hike in the sale price of the shares, but in case the assessee purchased the shares of unlisted company which was subsequently amalgamated with a listed company and, therefore, the value of the amalgamated entity is certainly very higher than the value of share of unlisted company though there can be a question about the sweep ratio of the shares. However, the same has not been doubted by any authority and the scheme of amalgamation was duly approved by the Hon'ble High Court. Thus there is an extraordinary event in this case of amalgamation of unlisted company with a listed company and consequently there is a sudden increase in the price of the shares of amalgamated entity…”

(B) Jyoti Gupta Vs. ITO (supra)

“11. I have carefully perused the orders of the authorities below and relevant documentary evidences brought on record. Allotment of Equity Shares of M/s Trinity Tradelink Ltd is at

37 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . page 7 of the paper book. Payment has been made through ING Vysya bank and the bank statement is at page 8 of the paper book. Share certificate and demat statement are at pages 9 to 11 of the paper book. The sale transactions are documented at pages 14 and 15 of the paper book. Payment has been received through banking channel, which is evident from the bank statement at page 13 of the paper book. 12. These direct clinching evidences cannot be ignored. The transactions have been done by BSE through proper banking channels evidenced by supporting documentary evidences. Moreover, securities transactions tax has also been paid. 13. Merely on the strength of statement of third party i.e. Shri Vikrant Kayan cannot justify the impugned additions. More so, when specific request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross-examination. This is in gross violation of the principles of natural justice and against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT Civil Appeal No. 4228 OF 2006…

38 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . these given facts, the Hon’ble High Court upheld the order of lower authorities deleting the addition made in relation to LTCG derived on sale of shares. The relevant findings of the Hon’ble High Court are as follows :-

“After detailed discussion, the ITAT has recorded the following findings of fact : "The above findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The ld. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences filed by the assessee before Assessing Officer. I do not find any adversity in the order of ld. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of cases after relying on the judgment of Hon'ble Delhi High Court in the case of Krishna Devi and others had allowed relief to various assessees."

39 ITA No. 645/Mum/2021 AY 2014-15 Komal Agarwal . Infratech & Finance Ltd alleging it to be bogus. We therefore direct the AO to delete the addition of Rs.6,81,72,321/- made as undisclosed income. Accordingly, Ground Nos. 1 is allowed. Therefore ground no 2 which is in the alternative to ground no 1 is infructuous and does not require any adjudication. Therefore, appeal of assessee is allowed

Order pronounced in the open court on 02/02/2024. Sd/- Sd/- )S RIFUAR RAHMAN) (ABY T VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, दिनांक/Dated: 02/02/2024 Aniket Singh Rajput, (Steno)

Copy of the Order forwarded to : अपीलार्थी/The Appellant , 1. प्रदतवािी/ The Respondent. 2. 3. आयकर आयुक्त CIT 4. दवभागीय प्रदतदनदि, आय.अपी.अदि., मुबंई/DR, ITAT, Mumbai 5. गार्ड फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai