MRS. NISHA ASHISH GUPTA,MUMBAI vs. ITO-31(2) (4), MUMBAI

O R D E R

PER ABY T. VARKEY, JM:

2 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 3. Brief facts are that the assessee is an individual and had filed her return of income on 24.07.2014 for AY. 2014-15 declaring total income of Rs.17,51,980/-. Later on, the case of the assessee was reopened u/s 147 of the Act; and the AO noted during the assessment proceeding that assessee has received Rs.98,81,550/- from sale of shares of M/s. Sunrise and claimed long term capital gain (LTCG) on sale of shares at Rs.93,25,870/- which assessee claimed as exempt u/s 10(38) of the Act. The AO called for the details of the transaction and pursuant to which the assessee brought to AO’s notice that she has purchased off-market 20,000 shares of M/s. Santoshima Trade Links Ltd. (hereinafter “M/s. Santoshima”) @ Rs.25/- per share on 17.11.2011 through broker M/s. P Saji Textiles Ltd for a consideration of Rs.5,00,000/-. And thereafter, on 26.06.2013 M/s. Santoshima got amalgamated with M/s. Sunrise Asian Ltd. And as per the scheme of amalgamation ordered by the Hon’ble High Court, the assessee received 20,000 shares of M/s. Sunrise which shares have been sold in the Bombay Stock Exchange (BSE) by assessee during the year under consideration. The total sale consideration was to the tune of Rs.98,81,550/- and she claimed LTCG of Rs.93,25,870/-. The assessee produced evidence before AO that purchase as well as the sale consideration has passed through the banking channel and that the shares were demated and the shares were sold through BSE/recognized stock broker M/s. Hem Securities Ltd. However, the AO taking note of the report of the Investigation Wing (Kolkata) that the scrip of M/s. Sunrise was one of the eighty four (84) penny stock which were used 3 A.Y. 2014-15 Mrs. Nisha Ashish Gupta by entry operators for converting unaccounted money of beneficiaries like assessee in the garb of LTCG/loss, disbelieved the genuinity of the transaction. The AO in the assessment order explained the modus operandi followed by the entry operators for providing accommodation entries to beneficiaries like assessee in the garb of LTCG/loss; and he wondered as to how the price of a share of M/s. Sunrise purchased at Rs.25/- would command upto Rs.496/- per share in span of two years and disbelieved the claim of assessee making a gain of Rs.93,25,870/-. The AO noted that assessee had purchased the shares of M/s. Santoshima which is an entity controlled by one Shri Vipul Bhatt (through dummy directors), who also controls M/s Sunrise, which fact according to AO has been admitted by him before the department. According to AO, the exit providers who bought back the shares from the assessee [through different companies as shown by the AO from page no. 5 to 7 (chart)] was also controlled by Shri Vipul Bhatt. Thereafter, the AO noted the financials of M/s. Sunrise and was of the opinion that the price of shares of M/s. Sunrise was rigged from Rs.25 per shares to Rs.500 for giving accommodation entries to beneficiaries in the form of LTCG which amount is exempt u/s 10(38) of the Act. Thereafter, he took note of the investigation report of the investigation wing of the Department wherein the statement of Shri Vipul Bhatt was recorded on 09.02.2015 u/s 132(4) of the Act wherein he accepted that he was an entry operator and was providing bogus accommodation entry to various persons in lieu of commission. According to the AO, Shri Vipul Bhatt has explained the modus 4 A.Y. 2014-15 Mrs. Nisha Ashish Gupta operandi adopted by him wherein shares of entities controlled by him were sold through synchronized trading in stock exchange in active collusion by his own other entities/exit providers. The AO took note of the financial of M/s Sunrise and the Investigation report to opine that M/s. Sunrise was a penny stock which was used by unscrupulous entry operators for providing bogus LTCG to assessee. Thereafter, he discussed about search conducted in the case of Shri Anuj Agarwal (director of M/s. Korp Securities Ltd. and two other LLP). According to the AO, Shri Anuj Agarwal was an entry operator who played key role in the manipulation of share price of M/s. Sunrise; and according to AO, Shri Anuj had helped various persons in obtaining accommodation entries in the form of LTCG/STCL, and in his statement recorded, he has furnished the name of shares which were used for providing bogus LTCG/STCG, which AO notes at para no. 15.2 of assessment order. According to the AO, he had issued notice u/s 133(6) of the Act to the broker who sold the shares of assessee through Bombay Stock Exchange (i.e. M/s. Hem Securities Ltd.) and directed it to file the details of sale of shares of M/s. Sunrise. However, according to the AO, no satisfactory reply was received from them. Thereafter, the AO discussed at Para no. 16 of his order, the cash trail (in general) i.e. modus operandi carried out by entry-operators for the benefit of beneficiaries who wants to get their unaccounted money laundered as white and that too without paying tax. Thereafter, he noted that the SEBI has restricted the aforesaid persons from trading in the market. And thereafter, he issued summons u/s 131 of the Act to 5 A.Y. 2014-15 Mrs. Nisha Ashish Gupta assessee and recorded her statement which is reproduced from page no. 22 to 29 of the assessment order. And thereafter, he was of the opinion that entire purchase/sale transaction of shares of M/s. Sunrise was not for commercial purpose but to create artificial gain by manipulating the share market which was pre-planned and pre-fixed through syndicate of un-scrupulous entry providers discussed (supra). And he also noted that SEBI had suspended the transaction of this scrip for some time and revoked the suspension on 16.08.2011. But according to the AO no trading is taking place of this scrip as per online search conducted by him. Thereafter, he disallowed the assessee’s claim of LTCG as well as exemption claimed on it u/s 10(38) of the Act and added the entire sale consideration of Rs.98,81,550/- u/s 68 of the Act; and further, was of the opinion that assessee in order to arrange the aforesaid accommodation entry, ought to have spent commission @ 2% to the broker/entry providers which he computed at Rs.1,97,631/- which was also added as unexplained expenditure u/s 69C of the Act. And thus AO made an addition of Rs.98,81,550/- + Rs.1,97,631/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the appeal of the assessee. Aggrieved, the assessee is before us.

5. The main plea of the assessee is that impugned additions are not legally sustainable in the light of the fact that assessee has discharged the burden of proving the genuineness of her claim regarding LTCG on sale of shares of M/s. Sunrise by submitting primary documents to substantiate the claim of LTCG. The assessee in order to prove the transaction which led her to claim the LTCG/ exemption u/s 10 (38) of the Act had proved the events of purchase of shares, dematerialization of the shares, merger of entities ordered by the Hon’ble High Courts order; and thereafter, allotment of share of M/s. Sunrise and transfer of shares to demat account, and the sale happening through Bombay Stock Exchange Electronic platform after remitting STT. Therefore, according to Ld. AR, AO could not have drawn adverse view against the LTCG claim made by assessee without first finding any infirmity in the primary documents filed by the assessee, which in this case has been undisputed of AO/Ld. CIT(A) and they have not leveled any allegation/infirmity about the veracity of the relevant documents. In such a scenario, according to Ld. AR, the AO was duty bound to show from the incriminating evidences which he relies upon in the 9 A.Y. 2014-15 Mrs. Nisha Ashish Gupta assessment order (like report of investigation wing, SEBI order, statement of director/entry providers, etc) that assessee was participant in the modus operandi to convert her purported black money in active connivance with these statement-makers (Shri Vipul Vidur Bhatt, Shri Anuj Agarwal). According to Ld. AR, unless AO is able to point out from the report/statement of the so called entry operators and spell out the role of assessee/broker as a wrong doer or participant in the modus- operandi (as stated in the report of the investigation wing), the impugned action of AO/Ld CIT(A), in the light of un-impeached primary documents has to fail.

6. We find that AO during assessment proceedings had asked the assessee to prove the claim of LTCG of Rs.98,81,550/- from sale of shares of M/s. Sunrise. And pursuant to such a direction, the assessee had filed the primary documents as discussed (supra) to prove the claim, which documents have not been found by AO to suffer from any infirmity. As noted the assessee has placed evidence to prove the purchases of shares of M/s. Santoshima and allotment of physical share certificate no. 437 under register Folio No. 224 a copy of which is seen from perusal of reverse of Page no. 41 of PB. Further, AO has not even disputed the existence of D-mat/Depository account of assessee maintained with HDFC Bank, which shows that shares purchased were credited in the Depository/D-mat account of the assessee. Therefore, once the holding of shares in D-mat account cannot be disputed, then the purchase & holding of shares cannot be held as bogus. And further, we note that assessee has purchased the 10 A.Y. 2014-15 Mrs. Nisha Ashish Gupta shares of M/s. Santoshima from M/s. P Saji Textiles by cheque through Canara Bank vide Cheque No.583658 dated 08.08.2011 for Rs.5 Lakhs. It is further noted that M/s. Santoshima got merged with M/s. Sunrise vide scheme approved by Hon’ble High Court on 27.07.2012. And by virtue of amalgamation, the assessee got allotted the equity shares of M/s. Sunrise as per swap ratio (1:1) as approved in the scheme and consequently, assessee was allotted 20,000 equity shares of M/s. Sunrise. Since the amalgamation order was passed by the Hon’ble High Court after notice to Income Tax Department, ROC, SEBI etc, the shares of M/s. Sunrise per-se cannot be held to be bogus shares. And consequent to merger, the shares of M/s. Sunrise (allotted to assessee) was deposited in demat account (refer page no. 61 to 63 PB) and later sold between 06th Nov, 2013 to 20th Nov, 2013 in Bombay Stock Exchange through broker M/s. Hem Securities and consideration have passed through banking channel (refer page no. 70- 71 of PB) and STT paid on the sale transaction; thus sale of shares cannot be held as bogus; and once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record, the same cannot be held as bogus transaction merely on the basis of a general investigation report (of Investigation Wing of Kolkata) wherein there is no mention of any wrong doing by assessee or of his broker, or assessee’s involvement in modus-operandi as stated in the Report of Investigation Wing or SEBI. Unless there is anything incriminating qua assessee or her broker mentioned in the 11 A.Y. 2014-15 Mrs. Nisha Ashish Gupta Kolkata Investigation Wing Report (referred at para 9.1 to 9.6) and SEBI Report (mentioned at Para 17 of assessment order) to be part of modus-operandi to do any illegal acts, the ibid reports cannot be used against the assessee. Further, in this regard, we note that AO at Page no. 32 at Para 20(h) of his order, have also cited the SEBI order suspending trading of shares of M/s. Sunrise and later on revoking the same on 16.08.2011 which according to him, supports his view that share transaction was in-genuine/bogus. However, the Ld. AR, brought to our notice that observation of AO is erroneous and the order of the SEBI dated Feb, 2016 suspending the trading of this scrip was only for twenty one (21) days and also for non-compliance of prevailing listing agreements, and not for any manipulation of share prices. Even before us, the revenue failed to bring on record any material or evidence to show that the SEBI has proceeded against M/s. Sunrise for manipulating the share market any report or material to suggest any role of assessee in illegal acts.

7. As noted (supra), AO/Ld. CIT(A) has been influenced by the investigation report submitted by the Investigation Wing of the 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, loans etc. But the discussion of lower authorities, we find 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 no 12 A.Y. 2014-15 Mrs. Nisha Ashish Gupta evidence incriminating assessee in the investigation report of being part of the nefarious conspiracy or abetment, 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.

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4. The ld. AO had relied on the findings of the investigation wing of Kolkata which are outlined in para 6 of his assessment order. The main grievance of the ld. AO is that rise in share price of Sunrise Asian Ltd is devoid of commercial principle or market factors; that transactions are based on mutual connivance on part of assessee and operators; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide; that SEBI also 18 A.Y. 2014-15 Mrs. Nisha Ashish Gupta passed an order holding that share prices were determined artificially by manipulations; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge his onus cast on him ; that net worth of Sunrise Asian Ltd is negligible and that its share prices were artificially rigged; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the sale proceeds of the shares as unexplained cash credit u/s 68 of the Act. Since the receipt of sale proceeds was treated as bogus, the ld. AO also proceeded to add estimated commission @ 2% for arranging the said bogus transaction as unexplained expenditure u/s 69C of the Act.

5. We find that each and every averment of the ld. AO were duly met by the assessee before the ld. CIT(A) in his written submissions filed before the ld. CIT(A). The ld. CIT(A) upheld the action of the ld. AO.

6. At the outset, we find that the documentary evidences submitted by the assessee were found to be genuine and no adverse inferences were drawn by the revenue on the same. The transactions were carried out by the assessee in the secondary market through a registered share broker at the prevailing market prices. Payments were received by the assessee by account payee cheques from the stock exchange through the registered broker. Amounts received on sale of shares were duly subjected to levy of Securities Transaction Tax (STT) at the applicable rates.

19 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 6.1. We find that no enquiries were carried out by the revenue either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The revenue had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report.

6.2. We find that the revenue had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators, promoters of Sunrise Asian Ltd and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators.

6.3. It is not in dispute that the assessee had made purchase of shares in offmarket. Now the next issue that arises for our consideration is as to whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham. In our considered opinion, the transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so, when there is no dispute regarding the purchase price and sale price of shares. Our view 20 A.Y. 2014-15 Mrs. Nisha Ashish Gupta is further fortified by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom).

6.4. We find that independent enquiries were conducted by Securities and Exchange Board of India (SEBI in short) and SEBI had passed a separate order in respect of the said scrip in which assessee had dealt. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries. The assessee’s name or the broker through whom the assessee bought and sold the shares does not figure in the said list in the order of SEBI. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices.

6.5.We find that the assessee had held the shares in the instant case for more than two years and then sold the shares in the open market at prevailing market prices. The assessee bought the shares on 18/03/2011, which was prior to the investigation period carried out by SEBI as admittedly SEBI carried out investigation of this scrip for the period 16/10/2012 to 30/09/2015. Infact on perusal of the order of SEBI dated 06/09/2021, we find that the assessee had sold the shares during the period 16/10/2012 to 28/06/2013 wherein the average closing price of shares of Sunrise Asian Ltd was Rs 502.45 per share. Thereafter, the same shares had gone upwards to Rs 603.25 per share and later came down to Rs 88.80 per share. These facts are reflected in page 4 of SEBI order dated 06/09/2021. We further find that from page 40 of the SEBI 21 A.Y. 2014-15 Mrs. Nisha Ashish Gupta order, there is a categorical finding that 46 persons were involved in price manipulation and the relevant findings of SEBI order are reproduced hereunder:-

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6.6. From the above order of SEBI , it is very clear that SEBI, based on its investigations and replies given by various parties, had ordered either to take action against certain parties or had discharged certain parties on the ground that they are not involved in the price manipulation. In any case, the assessee’s name or the broker, through whom assessee transacted had not figured in the said list either in the restraint list or in the discharged list. Hence it could be safely concluded that the assessee herein is merely a gullible investor, who had resorted to make investment in the shares of Sunrise Asian Limited based on market information and had sold the shares in the secondary market in prevailing market prices. It is not the case of the revenue that assessee herein had directly sold the shares in the secondary market with clear knowledge of the name of the person to whom the said shares were sold. In secondary market transactions, the buyer and seller are not supposed to know each other unless it is a case of ‘block deals’. Same is the case of the assessee herein. Admittedly, the assessee’s case does not fall under the category of ‘block deals’.

6.7. Hence the entire addition has been made merely by placing reliance on the Kolkata Investigation Wing report which are more general in nature and does not implicate the assessee herein in any manner whatsoever. We are unable to persuade ourselves to accept to the contentions of the ld. DR that Kolkata 22 A.Y. 2014-15 Mrs. Nisha Ashish Gupta Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus.

6.8. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO. merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our 23 A.Y. 2014-15 Mrs. Nisha Ashish Gupta considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon’ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in dated 14/03/2017. It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record cogent material to sustain the addition. No evidence has been brought on record to establish any link between the assessee herein and the directors of Sunrise Asian Limited or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case.

6.9. We find that the Co-ordinate Bench of this Tribunal in the case of Mukesh Ratilal Marolia vs Additional CIT reported in 6 SOT 247 (Mum ITAT) dated 15/12/2005 had held that personal knowledge and excitement on events should not lead the ld. AO to a state of affairs where salient evidences are overlooked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench 24 A.Y. 2014-15 Mrs. Nisha Ashish Gupta chose to delete the impugned additions. We find that this tribunal decision was approved by the Hon’ble Jurisdictional High Court in of 2007 dated 07/09/2011. It is pertinent to note that the Special Leave Petition preferred by the Revenue against this decision before the Hon’ble Supreme Court has been dismissed vide SLP No. 20146 of 2012 dated 27/01/2014. 6.10. Further we find that the Hon’ble Jurisdictional High Court in the case of CIT vs Shyam S Pawar reported in 54 taxmann.com 108 (Bom), it was held that where Demat account and contract note showed details of share transaction and the ld.AO had not proved the said transaction as bogus, the long term capital gain earned on said transaction could not be treated as unaccounted income u/s 68 of the Act. The relevant operative portion of the said judgement is reproduced below:-

6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what 26 A.Y. 2014-15 Mrs. Nisha Ashish Gupta consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either.

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.

27 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law.

6.11. Considering the totality of the facts and circumstances of the instant case and respectfully following the judicial precedents relied upon hereinabove, we are not inclined to accept to the stand of the ld. CIT(A) in sustaining the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 2% against the same. Accordingly, the grounds raised by the assessee are allowed.”

31 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 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 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 32 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 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 33 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 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 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 34 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 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 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.

35 A.Y. 2014-15 Mrs. Nisha Ashish Gupta 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.”

13. On further appeal, it is noted that the Hon’ble Bombay High Court in their order in of 2007 dated 07-09-2011 has affirmed the order of this Tribunal.

14. The Ld. AR of the appellant has rightly relied on another judgment of the Hon’ble Bombay High Court in the case of CIT Vs Jamna Devi Agarwal (328 ITR 656). In the decided case, also the Revenue had disputed the genuineness of the long-term capital gains derived by the assessee on sale of shares of listed companies for similar reasons as cited in the present case. On appeal, the Hon’ble High Court upheld the decision of this Tribunal deleting the additions by observing as under:

36 A.Y. 2014-15 Mrs. Nisha Ashish Gupta “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.

37 A.Y. 2014-15 Mrs. Nisha Ashish Gupta

15. Reliance placed by the counsel for the Revenue on the decision of the apex court in the case of Sumati Dayal [1995] 214 ITR 801 is wholly misplaced. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts.

“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.

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.

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 39 A.Y. 2014-15 Mrs. Nisha Ashish Gupta decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.”

16. For the various reasons discussed in the foregoing and following the judgments cited above, more particularly of the binding jurisdictional High Court in the cases of Shyam Pawar (supra), Ziauddin A Siddique (supra), Mukesh R Marolia (supra) & Jamna Devi Agarwal (supra), we hold that, the Ld. CIT(A) had erred both on facts and in law in upholding the AO’s action of making addition u/s 68 of the Act, in relation to the proceeds derived on sale of shares of M/s Sunrise Asian Technologies Ltd alleging it to be bogus. We therefore direct the AO to delete the addition made u/s 68 of the Act and therefore the addition made of Rs 1,97,631/-as commission also does not survive. So, it is also directed to be deleted.