HARISH SHARMA HUF,B-1, PATODIYA MARG, SHASTRI NAGAR, JAIPUR vs. ITO, WARD-5(3), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’A’ JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 318/JP/2022 fu/kZkj.k o"kZ@Assessment Year :2014-15 cuke Harish Sharma HUF ITO, Vs. B-1, Patodiya Marg, Ward-5(3), Shastri Nagar, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEHH 0008 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal (CA) jktLo dh vksj ls@ Revenue by : Shri Chanchal Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 20/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 11/11/2022 vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 30/06/2022 [here in after (NFAC/ld. CIT(A)] for assessment year 2014-15 which in turn arise from the order of the Income Tax Officer, Ward-5(3), Jaipur dated 06.12.2016 passed under section 143(3) of the Income Tax Act, 1961 [ here in after referred as Act ].

2 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 2. The assessee has marched this appeal on following grounds

of appeal;

“1. The Ld. CIT(A), NFAC has erred on facts and in law in upholding the action of AO in treating the long-term capital gain on sale of shares of M/s Cressanda Solutions Ltd. claimed exempt u/s 10(38) as bogus and thereby confirming the addition of Rs.1,39,78,925/- u/s 68 of IT Act, 1961. 2. The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs. 8,38,735/- u/s 69C of IT Act, 1961 on account of alleged commission paid for obtaining the accommodation entry. 3. The appellant craves to alter, amend and modify any ground of appeal. 4. Necessary cost be awarded to the assessee.”

is a Hindu Undivided Family and has filed its return of income on

02.06.2014 declaring total income of Rs.3,92,520/- in that status.

The case was selected for Complete scrutiny though CASS.

Accordingly, notice u/s. 143(2) of the Act was issued from time to

time. The assessee derives interest income from bank as well as

from the parties to whom loan has been given. During the year

assessee has shown long term capital gain of Rs.1,35,90,569/- on

sale of shares of Cressanda Solutions Limited (Smart Champ IT &

Infra Ltd. used interchangeably herein after as this company

merged into Cressanda Solutions Limited) which was claimed

exempt u/s 10(38). The ld. AO observed that Investigation Wing of

Kolkata have informed that it has carried out search on many entry

3 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur operators. The investigation of the Kolkata wing finally identified 84

of such penny stock companies out of which Cressanda Solutions

Ltd. was found to be one. The scrip of Smart Champs IT & Infra

Ltd. was surveyed u/s 133A of the Act and in the sworn

depositions by Chairman, Managing Directors & other Directors

they have confirmed on oath that they have provided and

accommodated bogus long term capital gains. Accordingly, a show

cause letter dt. 09.11.21016 (reproduced at pages 4-5 of the

assessment order) was issued to the assessee to justify the LTCG

claimed as exempt u/s 10(38) as the offline purchase of share

were made by the assessee from this company. In response to

same assessee filed his reply on 21.11.2016 which is reproduced

at Page 5 of the assessment order in which it was stated that

Smart Champs IT & Infra Ltd. was amalgamated into Cressanda

Solutions Ltd. and in scheme of amalgamation assessee got

30000 shares in exchange of 30000 shares of new company. The

AO, however, at Para 4.1 observed that as per the communication

received from DDIT(Inv.), Kolkata dt. 28.03.2016, assessee has

not availed the opportunity to cross examine Sanjay Vohra and

Narendra Bilasia, Directors of Anand Rathi Share & Stock Broker

Ltd./ SMC Global Securities Ltd. Further assessee purchased the

4 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur shares physically on 19.11.20211 but evidence of payment is not

filed. The shares were dematerialized just 2 to 2 ½ months prior to

the date of sale. Thereafter by making various observations made

in Para 7 about the general modus operandi, the AO made specific

comments at Para 7.1 as to how the transaction of sale of share of

Cressanda Solutions Ltd. is not genuine and thus treated the sale

proceeds of shares for an amount Rs.1,39,78,925/- as unexplained

income of the assessee u/s 68 of IT Act, 1961 and made addition

for the same. He further observed that the assessee has paid

commission @ 6% of sale value of shares amounting to

Rs.8,38,735/- and accordingly made addition of the same by

treating such amount as unexplained expenditure u/s 69C of the

Act.

preferred an appeal before the ld. CIT(A). The ld. CIT(A) has

dismissed the appeal of the assessee and relevant findings of the

ld. CIT(A) is recorded at para 5 to 8 which is reiterated here in

below :-

“5. The appellant has contended that the AO has erred in adding Rs 1,39,78,925/- under section 68 of the Income Tax Act, 1961 in-spite of providing all the documents and information relating to the transaction. The AO noted that the assessee has purchased 30,000 shares of M/s Smart Champs IT & Infra Ltd on 19 11-2011 physically through Hem

5 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur Securities Ltd which has been sold in FY 2013-14 for a consideration of Rs 1,39,78,925/- thereby showing LTCG of Rs 1,35,90,569/ Apparently, the increase in share price was not as per any commercial principles and market factors. The AO has elaborated following modus operandi which is unravelled by a countrywide investigation by the Directorate of Investigation, Kolkata 2.1 The Directorate of Investigation, Kolkata carried out a country-wide investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gains (LTCG) which is exempt from tax. The modus operandi adopted by the operators was to make the beneficiary buy some shares of a pre-determined Penny stock company controlled by them. These shares are transferred to the beneficiary at a very nominal price mostly off-line through preferential allotment or off line sale to save STT The beneficiary (an Individual) holds the share for one year, the statutory period after which LTCG is exempt under section 10(38) of the Income tax Act, 1961. In the meantime the operators rig the price of the stock and gradually rise its price many times, often 500 to 1000 times. This is done through low volume transaction indulged in by the dummies of the operator at a pre- determined price. When the price reaches the desire level the beneficiary who bought the shares at a minimal price, is made to see it to a dummy paper company of the operator. For this, unaccounted cash is provided by the beneficiary which is routed through a few layers of paper companies by the operator and finally is parked with the dummy paper company that will buy the shares. 2.2 Further, it may be mentioned here that the price of the shares of the penny stock companies are rigged and are raised through circular trading. This is managed by the "operator" of the scrip. An "Operator" is a person who is managing the overall affairs of the scheme and he is the one who contacts the entities who wish to take entry of bogus LTCG/STCL in their books and arranges the same through the scrips of penny stock companies. The Operator manages many paper/bogus companies and used them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on exchange, are always closely handle and are controlled by the promoter of the Penny Stock Company and the Operator who is arranging for the bogus LTCG/Loss. This is due to the fact that the general public is not interest in these shares as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares.

2.3 If the beneficiary say, 'B' bought 10.000 shares 'P@Rs. 1/- per share sold it @Rs. 1000/-per share, he would make on paper capital gain of Rs.49,90,000/- In his bank account there would be a cheque deposit of Rs. 50,00,000/- paid by the paper company that buys the share. The receipt is prima facie exempt from tax under section 10(38) of the Income tax Act, 1961. The Directorate of Investigation, Kolkata investigated transactions in 84 such penny stock shares quoted on BSE and examined on oath a large number of brokers, directors of

6 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur companies that finally purchase the shares, the promoters of Penny stock companies, the entry operator who managed the dummy companies involved in price rigging. The money trail of the transactions was also examined and, in a large number of transactions trail right from cash deposit account to the beneficiaries account was unearthed. As a result of investigation individuals who have taken such entry of bogus LTCG amounting to several crores have been identified. The result of the investigation in brief is as under

i) Individuals throughout the country identified who have taken such bogus entries of LTCG amounting to several crores from 2010 to 2014.

ii) The result of the enquiry was also shared with SEBI and the SEBI after investigating 11 cases have found the allegation to be correct. The balance cases are still being investigated by SEBI.

iii) The TOP 2 groups under each investigation directorate of the country were

confronted in course of further investigation. Almost all of them barring a few have accepted having taken the entries for a commission. A sum of crores have been voluntarily surrendered by such assessees.

iv) In Kolkata, where this investigation was stated some of the beneficiaries who had taken entries of nearly Rs. 40 crores have voluntarily surrendered it for taxation without any further enquiry.

v) Several assessees have filed revised retum since the enquiry and have taken back their cliam of exemption.

5.1 The modus describedabove for availing accommodation entries to show exempted LTCG for converting unaccounted money to white money is very apparent.

The AO has also mentioned that following the investigation by the IT department and also on basis of inputs from its own surveillance, the SEBI has taken appropriate actions in the cases of suspect scrips. The scrip CRESSANDA in which the assessee traded has also been put under surveillance measure

7 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur During survey u/s 133A carried out in M/s Smart Champs IT & Infra Ltd, the Chairman and MD and other Directors have confirmed in their sworn statements that they have provided bogus LTCG which is nothing but accommodation entries only. The AO has also mentioned (para 4.1) that the assessee has not availed the opportunity to cross examine Shri Sanjay Vora and Shri Narendra Belasia, Directors of Anand Rathi Share and Stock Brokers Ltd/ SMC Global Securities Ltd through whom the assessee has sold his shares.

6.1 The arguments of the appellant are also not sustainable for the reason that it has been judicially held that if the appellant fails to offer an explanation of the source of particular receipt/credit appearing in the books/account or if the explanation given by the assessee is found to be not satisfactory by the A.O and if during the enquiry. he is satisfied that the entries are not genuine, then he has every right to add the said sum represented by such credit entry as income of the assessee. Therefore, prima facie onus is always on the assessee to prove the genuineness of such credit appearing in its books. In land mark cases like Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 ITR 938 (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the Assessing Officer to hold that it is the income of the appellant and no further burden is on the AO to show that the income is from any particular source. Recently, the Hon'ble SC in a similar case involving bogus share capital has held in the case of NAR Iron and Steel P. Ltd [2019] 103 taxmann.com 48 (SC) that merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish credit worthiness of investor companies stood discharged. The Hon'ble Apex Court observed on the issue of bogus share capital as under: 13 The lower appellate authorities appear to have ignored the detailed findings of the AD from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company-Assessee had filed all the primary evidence, the onus on the Assessee stood discharged

The lower appellate authonties failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assessee Company -Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility

The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent and the onus to establish the

8 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur identity of the investor companies, was not discharged by the assessee.

14 The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income.

6.2 Dealing a similar Penny Stock case where LTCG was shown by the assessee, the ITAT Nagpur in the case of Shri Sanjay Bimalchand Jain I.T.A. No. 61/Nag/2013 vide order dated 18-07-2016 has held as under:

"9. The entire amount of the so called receipt of share sales could well also be treated as unexplained credit u/s 68 of the I.T. Act as it has all the ingredients of attracting the rigours of the said section. Section 68 of the I.T. Act provides that where any sum is found credited in the books of the assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO satisfactory, the sum so credited may be charged to income tax as income of the assessee of that year. In the present case the assessee's explanation that the said receipt is on account of investment in shares whereby share of Rs.5/- of unknown company has jumped to Rs 485/- in no time has been totally rejected by the authorities below. The assessee has not at all been able to adduce cogent evidences in this regard. There is no economic or financial justification for the sale price of these shares. The so called purchaser of these shares has not been identified despite efforts of the AQ. The broker company through which shares were sold did not respond to queries in this regard. Hence the fantastic sale price realisation is not at all humanly probably, as there is no economic or financial basis, that a share of little known company would jump from Rs 5- to 485- In these circumstances, I do not find any infirmity in the orders of the authorities below. Accordingly I affirm the same and decide the issue against the assessee

9 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur

6.3 Dealing with a penny stock case, the Hon'ble Delhi HC in the case of Udit Kalra vide order dated 08-03-2019 has held as under:

"It is intriguing that the company had meagre resources and reported consistent losses. The astronomical growth of the value of company's shares naturally excited the suspicions of the revenue. The company was even directed to be delisted from the stock exchange. The assessee's argument that he was denied the right to cross examining the individuals whose statements led to the enquiry and ultimate disallowance of the long term capital gain claim is not relevant in the wake of findings of fact"

In the case of Shamim Imtiaz Hingora, the ITAT, Pune has held that though the AO did not find any mistake in the documentation furnished by the assessee, there is need for finding of fact on (i) the nature of the shares transaction, (II) make believe nature of paper work (iii) camouflage the bogus nature and (iv) the relevance of human probabilities etc....... ……….. There is no doubt that the capital gain was manipulated and bogus transaction was done only to claim exemption u/s 10(38). Once the entire transaction is viewed from the perspective of human probabilities, it definitely fails on all counts. The same ITAT dealing with the issue of penny stock in the case of Rajkumar B. Agarwal has observed that mere furnishing of contract notes etc does not inspire any confidence in the light of facts. Test of human probability should be applied and apparent should be ignored to unearth the harsh reality. The ITAT cited the land mark decisions of Hon'ble SC in the case of Sumati Dayal 214 ITR 801 and Durga Prasad More 82 ITR 540 to arrive at the above conclusion.

10 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 6.4 The Hon'ble ITAT, Bangalore in the case of Smt. M.K. Rajeshwari [2018] 99 taxmann.com 339 (Bangalore Trib) has held that where assessee claimed exemption under section 10(38) in respect of capital gain arising from sale of shares, in view of fact that financial worth of said company was meager and, moreover, there was abnormal rise in price of shares, it could be concluded that assessee introduced her own unaccounted money in garb of long term capital gain and, thus, claim raised by her was to be rejected. In the case of Pankaj Agarwal and Sons (HUF), the ITAT. Chennai vide order dated 06-12-2018 has held that plea that opportunity to cross examine the witness was not given and investigation report was not furnished is not relevant if assessee is unable to successfully controvert findings of the AO. 6.5 In a most recent landmark decision involving penny stock cases, the Hon’ble Kolkata HC in ITA No 60 of 2022 and etc batch vide order dated 14-06-2022 has allowed the department's plea against a batch of 90 appeals against the entities that had allegedly misused capital gains provisions to evade thousands crores in taxes.

6.6 In view of above, the contention of the appellant as regards addition of Rs 1,35,90,569/- u/s 68 of the Act cannot be accepted. The action of the AO to add this amount is confirmed.

7.1 As regards the contentions of the appellant against addition of commission u/s 69C of the Act, it is observed that the AO has discussed the basis for holding that commission at 3% to 6% of LTCG/STCG has been charged from the clients but the assessee has not accounted for this expenses. Therefore, after considering the submission of the assessee and on the basis of evidence and statement of the operators/ promoters of penny stock companies, the AO has concluded that the assessee has not disclosed the payment of above commission paid and hence has made the addition u/s 69C. As the addition has been made by the AO on justifiable reasons, the same is upheld and the ground of appeal of the Appellant is dismissed. 8. In the result, the appeal of the appellant is dismissed.”

CIT(A)/NFAC the assessee has preferred an appeal before this

11 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur tribunal on the grounds raised here in above. The ld. AR appearing

on behalf of the assessee has placed his written submission in

respect of the various grounds raised by the assessee, the same is

reiterated here in below;

12 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur further observation in Para 4.1 that DDIT (Inv.), Kolkata has provided the opportunity to cross examine is also factually incorrect and without any evidence. (iv) The assessee sold these shares on various dates in the month of May & June 2013 for Rs.1,38,90,569/- through broker Hem Securities Ltd. on which STT was paid. Bank account statement showing receipts from sale of shares is at PB 27-28. Sale bills of broker was furnished by the assessee during the course of assessment proceedings vide letter dt. 28.11.2016 (PB 40 & 52-59). It is not the case of lower authorities that assessee has paid cash against receipt of sale proceeds of shares by cheque. Hence, only on assumption, presumption, surmises and conjectures and by assuming incorrect facts, the sale of shares cannot be treated as bogus or non-genuine.

13 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee company or the assessee company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion how so ever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ‘preponderance of probability’ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee.

In the assessee’s case also, no evidence whatsoever, direct or indirect is brought on record by the AO to prove that assessee introduced his own unaccounted money by way of sale of shares. Therefore, in view of the above judgment of Special Bench, the various judgments relied upon by the lower authorities are irrelevant in as much as the said judgments are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record.

PCIT Vs. Sh. Sanjay Chhabra DBITA No.22/2021 order dt. 06.04.2022 (Raj.) (HC) (Case laws compilation PB 1-4)

14 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur PCIT Vs. Sh. Prakash Chand Sharma DBITA No.1/2021 order dt. 12.05.2022 (Raj.) (HC) (Case laws compilation PB 5-7) PCIT Vs. Smt. Kalawati Sharma DBITA No.57/2021 order dt. 17.05.2022 (Raj.) (HC) (Case laws compilation PB 8-10)

In all these cases the Hon’ble Rajasthan High Court where the addition on account of alleged non genuine sale of penny stock shares was deleted by Hon’ble ITAT, confirmed the finding of ITAT by dismissing the appeal filed by the revenue.

PCIT Vs. Smt. Krishna Devi (2021) 279 Taxman 148 (Del.) (HC) (Case laws compilation PB 11-16) The findings of Hon’ble High Court at Para 11 & 12 reads as under:-

15 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned Tribunal to interfere with the findings of the lower tax authorities. The learned Tribunal after considering the entire conspectus of case and the evidence brought on record, held that the respondent had successfully discharged the initial onus cast upon it under the provisions of s. 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from demat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the respondent and any other party, prevailed upon the Tribunal to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the appellant, the additions cannot be sustained.

16 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur Late Sh. Satpal Singh Vs. ACIT ITA No.289/JP/20 order dt. 14.10.2021 (Jaipur) (Trib.) (Case laws compilation PB 17-37) Where assessee has satisfied all the conditions for claiming exemption u/s 10(38) of the Act and has furnished all the required evidence for purchase as well as sale of shares which include copies of bills for purchase of share, contract notes for sale of share, Demat account and bank statement evidencing payments for purchase of shares & receipts against sale of shares by account payee cheques, long term capital gain declared by the assessee cannot be treated as bogus.

DCIT Vs. Saurabh Mittal (2018) 172 DTR 291 (Jaipur) (Trib.) (Case laws compilation PB 38-59) Assessee having produced all relevant evidence to substantiate the purchase of shares of two companies by producing his bank statement, dematerialization of the shares and sale of said shares from the D-mat account at the prevailing price after payment of STT, it cannot be held that the transactions were bogus and that the assessee has introduced his own unaccounted income in the shape of long-term capital gain. General statements of three brokers recorded by the Investigation Wing wherein they have admitted their involvement in providing accommodation entries of bogus capital gains without naming the assessee could not be made the basis of addition under sec. 68 more so when cross examination was not allowed to the assessee.

Nishant Kantilal Patel Vs. ITO (2022) 214 DTR 209 (Surat) (Trib.) (Case laws compilation PB 60-84) Assessee having produced the contract notes issued by the broker, date of sale of shares, price at which the sale was negotiated, brokerage charged, STT paid by assessee, BSE transaction charges, stamp duty and other charges deducted from the sale consideration and the AO having not brought any evidence on record to show that cash was recycled back to the assessee, the transactions of purchase and sale of shares by the assessee are acceptable as genuine transactions and therefore, the impugned addition made u/s 68 by treating the long-term capital gain as accommodation entry is not sustainable.

Sandipkumar Parsottambhai Patel Vs. ITO (2022) 214 DTR 251 (Surat) (Trib.) (Case laws compilation PB 85-98) Assessee having furnished all relevant evidences in the form of bills, contract notes, demat statement and bank account to prove the genuineness of transactions of purchase and sale of shares and there being no evidence that the assessee has paid cash in return of the receipt through cheques, it has to be accepted that the share transactions which were carried out by the assessee through recognized stock exchange were genuine and therefore, sale proceeds of the shares cannot be treated as undisclosed income of the assessee u/s 68.

17 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 4. It may be noted that Hon’ble Calcutta High Court in case of PCIT Vs. Swati Bajaj vide order dt. 14.06.2022 in bunch of cases involving 90 cases where the Tribunal in a single order allowed the appeal of assessee with reference to the order of CIT(A)/ order of CIT u/s 263, has approved the finding of CIT(A)/ CIT u/s 263 but in this decision it only discussed the fact of Mrs. Swati Bajaj where AO noted that in a short span of 17-21 months assessee managed to sale shares with impugned value of about 2823% that too when the general market rate was recessive and based on its decision on the investigation report dt. 27.04.2015 by PCIT(Inv.), Kolkata in respect of bogus LTCG. However, the facts of individual cases were not discussed. Thus, this decision cannot override the decision of Rajasthan High Court referred supra.

In view of above, addition confirmed by Ld. CIT(A) be directed to be deleted.

submission, has filed a detailed paper book wherein photocopy of

the various submission and documents relied upon by the

assessee to support the grounds raised by him, index of the paper

book is extracted here in below :

S. No. Particulars Pg No. Filed before AO/CIT(A) 1 Copy of submission filed before Ld. CIT(A) 1-22 CIT(A)

2 Copy of Index of Paper Book filed before 23 CIT(A) Ld. CIT(A) 3 Copy of acknowledgment of return along 24-26 Both with computation of total income

Both 4 Copy of bank statement 27-28

18 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 5 Copy of demat account of assessee 29-31 Both Both 6 Copy of assessee's account in Hem 32-39 Securities 7 Copy of reply dt. 28.11.2016 filed before AO 40 Both Both 8 Copy of ledger account of shares in 41 assessee's books of accounts

9 Copy of allotment letter dt. 19.11.2011 of 42 Both shares of Smart Champs IT & Infra Ltd. 10 Copy of share certificate dt. 19.11.2011 43 Both 11 Papers relating to opening of Demat 44-48 Both Account with CBSI on 14.11.2011 12 Letter dt. 09.03.2013 for issue of equity 49 Both shares of Cressanda Solutions Ltd. in pursuance of amalgamation of Smart Champs IT & Infra ltd. approved by Bombay High Court vide court dt. 24.01.2013 13 Copy of acknowledgement of return for A.Y 50-51 Both 2012-13 & Balance Sheet as on 31.03.2012 14 Copy of contract note of Hem Securities Ltd. 52-59 Both for sale of shares of Cressanda Solutions Ltd.

6.1. To support the contentions raised by the ld. AR he has also

relied upon the following judicial decisions: -

S. No. Particulars Pg No. 1 Copy of decision of Hon'ble Rajasthan High Court in case of 1-4 PCIT Vs. Sh. Sanjay Chhabra DBITA No.22/2021 order dt. 06.04.2022 2 Copy of decision of Hon'ble Rajasthan High Court in case of 5-7 PCIT Vs. Sh. Prakash Chand Sharma DBITA No.1/2021 order dt. 12.05.2022 3 Copy of decision of Hon'ble Rajasthan High Court in case of 8-10 PCIT Vs. Smt. Kalawati Sharma DBITA No.57/2021 order dt. 17.05.2022 4 Copy of decision of Hon'ble Delhi High Court in case of PCIT Vs. 11-16 Smt. Krishna Devi (2021) 279 Taxman 148 5 Copy of decision of Hon'ble ITAT, Jaipur Bench in case of Late 17-37 Sh. Satpal Singh Vs. ACIT ITA No.289/JP/20 order dt. 14.10.2021

19 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 6 Copy of decision of Hon'ble ITAT, Jaipur Bench in case of DCIT 38-59 Vs. Saurabh Mittal (2018) 172 DTR 291 7 Copy of decision of Hon'ble ITAT, Surat Bench in case of Nishant 60-84 Kantilal Patel Vs. ITO (2022) 214 DTR 209 8 Copy of decision of Hon'ble ITAT, Surat Bench in case of 85-98 Sandipkumar Parsottambhai Patel Vs. ITO (2022) 214 DTR 251

submission relying on the paper book submitted that the assessee

has applied the shares in question and the same has been directly

allotted by the company on payment of an account payee cheque.

There is no contrary finding rejecting this primary evidence

submitted by the assessee. The finding recorded at para 4.1 that

the assessee has not availed the opportunity provided to cross

examination of Sanjay Vora and Shri Narendra Belasia is incorrect.

The finding recorded by the ld. AO at para 5 that the shares were

purchased from Hem Securities Ltd is incorrect. The ld. AO has not

proved that the assessee has paid cash in consideration of gain

recorded in his bank account. The ld. AO has not commented

about the credential and the financial of the company and without

that how he can arrive at a conclusion that the gain is bogus. The

ld. AR of the assessee submitted that the findings recorded in para

6 and its sub paras recorded by the assessing officer are not

20 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur correct and the same have been recorded without considering the

submission of the assessee made in the proceedings before him.

The ld. AO as well as the ld. CIT(A) has not applied the

independent mind while arriving at the findings given in the orders

of the lower authorities. Nothing adverse against the assessee is

recorded in the report of the investigation wing and in the

assessment order against the evidences submitted by the

assessee. To drive home to his contentions the ld. AR of the

assessee has relied upon the various decision including the

jurisdictional high court on cross examination and submission and

addition made merely on the basis of the investigation report. The

ld. AR in short submitted that the assessee has done the genuine

transaction and is supported on the evidences submitted.

the lower authorities and vehemently argued that the entire scheme

is unearthed in the investigation done by the department and

thereby established that the paper work is managed in an

organized manner so as to show the real which is in fact is not real.

In this case assessee has managed the paper work with the help of

the broker and shown the long-term capital gain which is not

21 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur genuine. The ld. DR further contended that the production of bills,

allotment of shares or payments by an account payee have been

made by the account payee cheque again by itself shows that the

commission agents managed this transaction. However, mere

payment by account payee cheque is not sacrosanct and it will not

make otherwise non-genuine transaction genuine one. The ld. DR

relying on the detailed finding of the ld. AO given in para 7.1 (i) to

(vii) that the transaction is fabricated and not real as the investment

of 3 lakh only has resulted a gain of Rs. 1,39,78,925/- which is

unrealistic and fabricated. The ld. DR relying on the letter of the

Principal Director of Income Tax (investigation) Kolkata vide letter

number F.No 75A /2015-16/257-273 dated: 27-04-2015 forwarded

the report of the investigation wing report and the same was

available on the online and it became public and the order of the

assessing officer is passed much after on 06.12.2016 and thus the

assessee cannot take a shelter that the report of the investigation

wing is not made available to him and his contention is not

maintainable. The ld. DR further drawn our attention to the findings

recorded at para 4 of the assessment order wherein the finding is

recorded that the company who has allotted the shares to the

assessee themselves has agreed in a survey conducted by the

22 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur department that they are engaged in providing bogus

accommodation entry of LTCG. The statement of the directors was

recorded at the time of survey wherein they have confirmed on

oath that they provided and accommodation entry in the form of

short term or long term capital gains. In the report of the

investigation wing listed penny stocks companies were indentified

which were used for generating bogus LTCG and in this list name

of the company is appearing at Sr. No. 69. The ld. DR further

based on that report submitted that in the script CRESSANDA

SOLUTIONS LTD total trade of Rs. 12,73,18,95,395/- have been

done and the companies involved in the purchase and sale for

making this much transactions are all jamakharchi companies to

accommodate the long term gain transactions. This allegation has

not been controverted by the assessee. The ld. AR of the assessee

submitted that they have not been given the copy of the relied upon

report and an opportunity to cross examine the witness relied upon.

To counter these contentions of the assessee the ld. DR relied

upon the arguments advanced by the revenue in the case of Swati

Bajaj recorded by the Calcutta High Court in the judgement the

relevant arguments as recorded and relied upon is as under :

23 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur investigation done by the department and there is nothing specific relatable to the assessee. Secondly, it was contended that copy of such investigation report was not furnished to the assessee. Learned Counsel submitted that circumstantial evidence can be the sole basis for taking the decision in the matter. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in SEBI Versus Kishore R. Ajmera, (2016) 6 SCC 368 wherein the Court has pointed out as to the important aspect with regard to the proximity of time between the buy and sell orders, prior meeting of minds, unnatural rise in the prices of the scripts and how the conclusion can be gathered from the various circumstances coupled with preponderance of probabilities. Therefore, it is submitted that absence of direct evidence is immaterial. Reliance was placed on the decision of the Hon'ble Supreme Court in Commissioner of Customs Versus Dilip Kumar and Company, (2018) 9 SCC 1 for the proposition that exemption notification should be interpreted strictly, as the burden of proof, admittedly would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. It is submitted that Section 10 (38) of the Income Tax Act is a provision where exemption is being claimed by the assessee and the burden is on the assessee to prove that he is entitled to the claim for exemption which the assessees before this Court have failed to establish. With regard to the arguments of the assessee that the investigation report is general and not assessee specific, it is submitted that the assessee has not pleaded any prejudice on account of non-supply of the investigation report. Therefore mere non-furnishing of the report will not vitiate the proceedings. Without noting these legal principles, the Learned Tribunal had posed a wrong question to itself which has resulted in a wrong answer. The correct question that the learned Tribunal should have asked itself is whether the assessee was prejudiced on account of non-supply of the investigation report. To explain the test of prejudice or the test of fair hearing. Reliance was placed on the decision of the Hon'ble Supreme Court in SBI Versus S K Sharma, (1996) 3 SCC 364. Reliance was also placed on the decision of the Hon'ble Supreme Court in SBI Versus M.J. James for the same proposition that prejudice should exist as a matter of fact or to be based upon the definite inference of likelihood of prejudice flowing through non-observance of natural justice. It is submitted that none of the assessees have pleaded any prejudice caused to them and merely by stating that the report has not furnished to them nor the Director of the company was not been made available for cross examination would not suffice. Reliance was placed on the decision of the Hon'ble Division Bench of this Court in Kishanlal Agarwalla Versus Collector of Land Customs, AIR 1967 Cal 80. This decision was pressed into service that as long as the party charged has a fair and reasonable opportunity to see, comment and criticize the evidence, statement or record on which the charge is being made against him, the demands and the test of natural justice are satisfied and cross examination in that sense is not a technical cross examination in a Court of Law. For the same proposition

24 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur reliance was placed on the decision of the Hon'ble Supreme Court in State of J&K Versus Bakshi Ghulam Mohammad & Another, AIR 1967 SC 122 wherein it was held that a right of hearing cannot include a right of cross examination and the right must depend on the circumstance of each case and must also depend on the statute under which the allegations are being enquired into. Thus, by referring to the above decisions, it is submitted when the statements recorded during the investigation were not against the assessee, they are not entitled to claim any right of cross examination. The next submission of Mr. Rai is on the powers of the Appellate Tribunal under Section 254 of the Act. It is submitted that the nature of the powers were interpreted by the Hon'ble Supreme Court in Hukum Chand Mills Limited Versus CIT, AIR 1967 (SC) 455 wherein the Court held that the tribunal had jurisdiction to frame the question raised for the first time. It is submitted that on a reading of Section 254 (1) and Section 255 (6) of the Act clearly shows the power exercisable by the Tribunal and they are akin and equal to that of the power exercisable by the assessing authority and in the case on hand the tribunal ought to have exercised such power and or its failure renders the order as perverse. For the same proposition, reliance was placed on the decision of the High Court of Bombay in New India Assurance Limited Versus CIT, AIR 1958 Bombay 143. It is submitted that the said decision was approved by the Hon'ble Supreme Court in Ajay Gandhi and Another Versus B. Singh and Others, (2004) 2 SCC 120 wherein it was pointed out that the Income Tax Appellate Tribunal exercised judicial function and has trappings of a Court and that it is the ultimate fact finding authority under the Act. The Learned Standing Counsel referred to Section 107 and Order 41 CPC to explain the powers to the Appellate Court and as to how this Court can exercise the jurisdiction in the matter. The Learned Counsel referred to Section 260 A (7) of the Act as also Section 103 and Order 41 Rule 33 CPC to explain the powers of this Court. Further to explain the powers of the Court, reliance was placed on the decision of the Hon'ble Division Bench of this Court in C.C.A.P. Limited Versus Commissioner of Income Tax, (2004) 270 ITR 248.

cross examination. The relevant finding relied upon is reiterated

here in below:

At this juncture it would be relevant to take note of the decision of the High Court of Delhi in Suman Poddar Versus Income Tax Officer (ITO) which was affirmed by the Hon'ble Supreme Court in (2019) 112 taxman.com 330:-

25 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur The first, issue which has been raised by the assessee that it has not been confronted with the statements of various parties relied upon by the Assessing Officer. The assessee has also contended that opportunity of cross-examining those parties/persons was not provided to the assessee. According to the assessee, this resulted in the violation of the principles of natural justice and thus assessment should be held void ab intio. However, in our opinion, not providing opportunity of cross- examination may be in the nature of irregularity which is curable but not an illegality leading to annulling of the assessment. Further, the ld. CIT(A) in para 4.1 of the impugned order has held that addition has not been made solely on the basis of the statement of those persons/parties. The relevant part of the order of Ld. CIT(A) is reproduced as under:

I have considered the submission of the appellant and observation of the AO made in the assessment order on the issue. The appellant has stated that it has not been allowed cross-examination of parties on the basis of whose statement, the addition has been made. On this issue it is observed from the assessment record that the AO has made the addition on the strength of independent analysis of the documents to arrive at the conclusion that the appellant has failed to prove genuineness of the transaction in respect of STCL as discussed above.

Statements and other material found in the course of investigation has been used by him as a corroborative material to strengthen his findings. As per the requirements of Section 68 of the Act, the AO has shifted the onus back on the appellant by confronting the adverse findings. Therefore, the appellant has failed to discharge the onus cast upon it u/s. 68 of the Act to explain the transaction. The Investigation Wing has conducted detailed enquiries, made analysis of the seized/impounded documents and made analysis of beneficiaries. The report prepared contains details of complete modus operandi, commission charge against accommodation entries, list of conduit companies, list of their bank accounts in the name of conduits. The said list contains names of companies in which the appellant dealt. Therefore, the findings in the case of Investigation Wing corroborate the independent findings of the AO. Therefore, the AO was not required to allow the appellant the opportunity to cross-examine.

The Tribunal in the case of Ram Nilwas Gupta, Dehradun vs. DCIT, Dehradun on 6th February, 2019 in ITA No. 4881 to 4883/Del/2016 (Assessment Years: 2010-11, 2012-13 and 2013-14), after considering various decisions of the Hon'ble

26 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur Supreme Court, including the decision in the case Andaman Timbers Industries vs. Commissioner of Central Excise, Kolkata- II reported in MANU/SC/1250/2015: 2015 (324) E.L.T. 641 (SC), 2017 (50) S.T.R. 93 (SC), 2016 (15) SCC 785 has held as under:

In our opinion right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the dictum, "audi alteram partem". The principles of natural justice do not require formal cross- examination Formal cross- examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court, It is a part of legal and statutory justice therefore it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross- examination.

However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination

Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature.

We find that the Assessing Officer in the assessment order has referred to the general modus operandi of the bogus accommodation entry and thereafter, he has further referred to statement of the parties who has provided accommodation entry through managing and controlling the shares of the companies, in which the assessee has also transacted. The Assessing Officer thereafter asked the assessee to justify the rationale behind investment in these penny stock companies not having financial worth, however, the assessee failed to justify the same. The Assessing Officer provided as why the investment in the shares transacted by the assessee was not justified in view of the comparison of the other shares available. The Assessing Officer also pointed out the price fluctuation in the shares of the companies over a period, dividend history and other financial parameters to substantiate that there was no term capital loss against receipt of cash money. The Ld. Assessing Officer accordingly concluded that the addition was made on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities.

27 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur In view of the above facts and circumstances and in law, we find that in instant case addition in dispute is not solely on the basis of the statement of persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surround circumstances and preponderance of probability. We accordingly uphold the finding of the CIT(A) on that issue in dispute. The relevant grounds of the appeal of the assessee are accordingly rejected..

After describing the general modus operandi of accommodation entry by way of bogus capital gain/loss, the Assessing Officer has highlighted the statement of the persons who claimed to have provided bogus capital gain/loss entries. The assessee was then asked to justify the investment in the relevant shares. The Assessing Officer has pointed out that these companies are not having any significant/real business as seen from the financial statement of those companies. The price movement of the shares was also found to be unrealistic by him. The Assessing Officer has particularly pointed out that price movement of the relevant transacted by the assessee, were not matching with movement of the share market in general and movement of the other scrips in the same line of the business. The Assessing Officer also pointed out that volume transacted in those companies. The ld. Assessing Officer has pointed out that the assessee could not explain, why it invested in such script without knowing the financial performance of the company. The relevant analysis has been reproduced by the Assessing Officer in Para 3.4 (page 1 J.) of the assessment order. The conclusion of AO has already been reproduced by us in brief facts of the case.

The Hon'ble Delhi High Court in the case of Suman Poddar (supra), observed that shares of Cressanda Solutions Ltd. Have been identified by the Bombay Stock Exchange as penny stock used for obtaining bogus Long Term Capital Gain and no evidence of actual sale except contract notes issued by the share broker were produced by the assessee. The Hon'ble High Court accordingly dismissed the appeal of the assessee as no substantial question of law involved.

Thus, Tribunal has in depth analyzed balance sheets and profit and loss accounts of Cressanda Solution is Ltd. Which shows that astronomical increase in share price of said company which led to returns of 491 % for Appellant, was completely unjustified. Pertinently, EPS of said company was Rs. 0.01/- as in March 2016, it was Rs. 0.01/- as in March 2015 and -0.48/- as in March 2014. Similarly other financial parameters of said company cannot justify price in excess of Rs. 500/ - at which Appellant

28 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur claims to have sold said shares to obtain Long Term Capital Gains. It is not explained as to why anyone would purchase said shares at such high price.

Tribunal goes on to observe in impugned order as follows:

With such financials an affairs of business, purchase of share of face value Rs. 10/- at rate of Rs. 491/- by any person and assessee's contention that such transaction is genuine and credible and arguing to accept such contention would only make decision of judicial authorities fallacy.

Evidences put forth by Revenue regarding entry operation fairly leads to conclusion that assessee is one of beneficiaries of accommodation entry receipts in form of long term capital gains assessee has failed to prove that share transactions are genuine and http://itatorilin.orQ could not furnish evidences regarding sale of shares except copies of ITA 841/2019 Page 7 of 10 contract notes, cheques received against overwhelming evidences collected by Revenue regarding operation of entire affairs of assessee. This cannot be case of intelligent investment or simple and straight case of tax planning to gain benefit of long term capital gains earnings @ 491% over period of 5 months is beyond human probability and defies business logic of any business enterprises dealing with share transactions net worth of company is not known to assesses. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio laid down by Hon'ble Supreme Court in case of Sumati Dayal vs. CIT case. Though assessee has received amounts by way of account payee cheques, transactions cannot be treated as genuine in presence of overwhelming evidences put forward by Revenue fact that in spite of earning such steep profits assessee never ventured to involve himself in any other transaction which broker cannot be mere coincidence of lack of interest. Reliance is place on judgment in case of Nipun Builders and Developers Pvt. Ltd.. (supra) where it was held that it is duty of Tribunal to scratch surface and probe documentary evidence in depth, in light of conduct of assessee and other surrounding circumstances in order to see whether assessee is liable to provisions of section 68 or not in case of NR Portfolio, obtrusive. Similarly bank statements provided by assessee to prove genuineness of transaction cannot be considered in view of judgment of Hon'ble Court in case of Pratham Telecom India Pvt. Ltd. Wherein it was stated that bank statement is not sufficient enough to discharge burden. Regarding failure to accord opportunity of cross examination, we rely on judgment of Prem Castings Pvt. Ltd. Similarly tribunal in case of Udit Kalra ITA No. 6717/Del/2017 for

29 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur assessment year 2014-15 has categorically held that when there was specific confirmation with Revenue that assessee has indulged in ITA 841/2019 page 8 of 10 non-genuine and bogus capital gains obtained from transactions of purchase and sale of shares, it can be good reason to treat transactions as bogus difference of case of Udit Kalra attempted by Ld. AR does not add any credence to justify transactions. Investigation Wing has also conducted enquires which proved that assessee is also one of beneficiaries of transactions and entries provided,, Even BSE listed this company as being used for generating bogus LTCG. On facts of case and judicial pronouncements will give rise to only conclusion that entire activities of assessee is colourable device to obtain bogus capital gains. Hon'ble High Court of Delhi in case of Udit Kalra ITA No. 220/2009 held that company had meagre resources and astronomical growth of value of company's shares only excited suspicion of Revenue and hence, treated receipts of sale of shares to be bogus. Hon'ble High Court has also dealt with arguments of assessee that he was denied right of cross examination of individuals whose statements led to enquiry. Ld. AR arguments that no question of law has been framed in case of Udit Kalra also does not make any tangible difference to decision of this Case, Since additions have been confirmed based on enquiries by Revenue, taking into consideration ratio laid down by various High Courts and Hon'ble Supreme Court, our decision is equally applicable to receipts obtained from all three entities. Further, reliance is also placed on orders of various Courts and Tribunals listed below. MK Rajeshwari vs. ITO in ITA No. 17231Bang/2018, order dated 12.10.2018. Abhimanyu Soin vs. Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 591 Nag/2015, order dated 24.08.2016. Ratnakar M Pujari vs. ITO in IT no. 995/Mum/2012, order dated 03.08.2016. ITA 841/2019 page 9 of 10 Disha N. Lalwani vs. ITO in ITA No. 6389/Mum/2012, order dated 22.03.2017. ITO vs. Shamin M. Bharwani MANU/1U/0493/2015: [2016] 69 taxmann.com 65. Usha Chandresh Shah vs. ITO in ITA No. 6858/Mum/2011, order {dated 26.09.2014, CIT vs. Smt. Jasvinder Kaur MANU/GH/0241/2013: 357 ITR 638

Facts as well as rationale given by Hon'ble High Court are squarely applicable to case before us. Hence, keeping in view overall facts and circumstances of case that profits earned by assessee are part of major scheme of accommodation entries and keeping in view ratio of judgments quoted above, we, hereby decline to interfere in order of ld. CIT(A).

30 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur 10. Based on the detailed arguments, the ld. DR further argued

that the plea of the ld. AR nomadic only on report not submitted,

cross examination not allowed, shares have been allotted and not

purchased from any broker and the payment has been by an

account payee cheque. Against this arguments of the assessee

the ld. DR submitted that report was made public in 2015 and the

assessment order is passed in December 2016 so when the report

is available in public it will not make difference to the assessee. For

cross examination he relied upon the finding given in the case of

Swati Bajaj where in court held that since the statement is general

to explain the modus operandi the cross examination is not

required. The share are allotted to the assessee itself proves that

the assessee is part of the scam along with the commission agents

engaged in such activity and therefore, merely the evidence which

are manipulated and denied by the party in survey proceedings and

submitted that they have provided accommodation transaction and

are bogus. The assessee cannot take shelter merely on the

evidences and mere payment by account payee cheque is not

sacrosanct and it will not make otherwise non-genuine transaction

genuine as held by the Hon'ble Calcutta High Court in the case of

CIT Vs. Precision Finance Pvt. Ltd. (194) 208 ITR 465 (Cal). Based

31 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur on these detailed arguments and the ld. DR supported the order of

the lower authorities.

orders of lower authorities and the material available on record,

arguments advanced by both the parties and also gone through the

judicial decision relied upon by the parties. The bench noted that in

the report of the investigation wing the department has identified 84

penny stock companies out of that list one of the companies found

is Cressanda Solutions Limited and the assessee has claimed the

long term capital gain as exempt for an amount of Rs.

1,39,78,925/-. In the case of this company the survey was

conducted as per provision of section 133A of the Act at the

premises of the company and sworn depositions of the Chairman

and Managing Director and other directors have been recorded. In

that proceedings they have confirmed on oath that they have

provided and accommodated bogus long term capital gains. The

assessee purchased shares on 19.11.2011 and the same was

dematerialized by assessee just before 2 to 2/12 month of sales. In

this company SEBI has also taken action for the alleged violation of

SEBI laws. The SEBI has put the script Cressanda under

32 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur surveillance measure and levied the penalty for the breach done by

the said Cressanda. The ld. AR of the assessee has merely stated

his claim is supported by evidence for allotment of shares made by

the company and the payment were paid and received by normal

banking channel. Merely the payment were received by cheque

will not help the assessee as the director of the company have

already confirmed in the sworn statement that they were engaged

in the accommodation entry of STCL/LTCG. As regard the claim of

the assessee that the investigation report was not made available

to him the ld. DR demonstrated that the report was available in

public domain in 2015 and the order in the case of the assessee

was made in December 2016. Thus, the plea of the assessee that

the report was not made available to him by the AO will also not

help. The statement of the person who’s surrendered made is

general statement based on the other circumstantial evidences

relied upon by the revenue and in the recent decision in the case of

Swasti Bajaj case the court held that right to cross-examine the

witness who made adverse report is not an invariable attribute of

the requirement of the dictum, "audi alteram partem". The

principles of natural justice do not require formal cross-examination

Formal cross- examination is a part of procedural justice. It is

33 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur governed by the rules of evidence, and is the creation of Court, it is

a part of legal and statutory justice therefore, it cannot be laid down

as a general proposition of law that the revenue cannot rely on any

evidence which has not been subjected to cross- examination. We

find that the Assessing Officer in the assessment order has

referred to the detailed investigation and reasoning recorded in his

order vide para 7 (i) to (xiii) including the modus operandi of the

bogus accommodation entry, thereafter, concluded that the

assessee has managed his Long Term Capital Gain based on that

reasoning. The ld. AO further referred to statement of the parties

who are at the helms of the affairs of the company where in was

categorically confirmed that they have provided accommodation

entry through managing and controlling the shares of the

companies, in which the assessee has also transacted. The

Assessing Officer thereafter asked the assessee to justify the

rationale behind investment in this penny stock company not

having financial worth. The price of the shares of the company is

abrupt, unrealistic and without any strong parameters. The history

of the investment made by the assessee also reveals that

assessee does not deal in shares on regular basis. The purchases

were made off market as managed by the brokers and directors to

34 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur suits the needs of the assessee. The shares were dematerialized

only just 2 to 2/1/2 month of the sale made. The directors of the

company categorically confirmed that they have involved in

providing accommodation entries regarding sale and purchase of

shares through this company. The purchase and sales are not

genuine in the light of the fact that the there are no real buyer and

seller of this company’s share and the same is managed by the

brokers and entry operators. The evidentiary value of payment of

security transaction tax (STT) cannot make a non-genuine

transaction, a genuine one. The scrip is purchased at very low

price which was over a period time ramped up by operators. The

purchases are off market and not reported to the exchange. The

purchases even though made earlier the same were dematerialized

only close to the date of sale. We find from the facts and

arguments advanced by both the parties that the decision of

jurisdictional high court in the case of Sanjay Chhabra hold a view

that prejudice is caused to the assessee when material used

against him is not provided and opportunity of cross examination is

not provided. In this regard the Hon'ble Supreme Court, including

the decision in the case Andaman Timbers Industries vs.

Commissioner of Central Excise, Kolkata-II reported in

35 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur MANU/SC/1250/2015: 2015 (324) E.L.T. 641 (SC), 2017 (50)

S.T.R. 93 (SC), 2016 (15) SCC 785 held as under:

In our opinion right to cross-examine the witness who made adverse report is not an invariable attribute of the requirement of the dictum, "audi alteram partem". The principles of natural justice do not require formal cross-examination Formal cross- examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of Court, It is a part of legal and statutory justice therefore it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross- examination.

on a detailed investigation supported by the statement of the

person who are at the helm of the affairs of the company

confirming that they were engaged in the accommodation entry

business. The claim of the huge long capital gain shown by the

assessee is not genuine and it is managed with the papers. The

assessee claimed as exempt this gain under section 10(38) of the

Act. This entire edifice was absolutely a colourable device to give

the colour of genuineness of these transactions to which assessee

was successful in bringing back their own unaccounted money in

banking system without the need to pay any taxes. Hon'ble

Supreme Court in the case of McDowell & Co. Ltd. Vs. CTO (1985)

154 ITR 148 (SC) has given a strong verdict against any such

arrangements by stating that "Colourable devices cannot be part of

36 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur tax planning and it is wrong to encourage or entertain the belief that

it is honourable to avoid the payment of tax by resorting to dubious

methods. It is the obligation of every citizen to pay the taxes

honestly without resorting to subterfuges." In view of Hon'ble Apex

Court verdict, this entire arrangement was held as a mere

colourable device devised with the aforementioned objectives. The

share price of Cressanda Solutions Limited was not backed up by

any fundamentals and these were merely rigged. Further, we find

the Hon'ble Calcutta High Court in a recent judgment delivered on

14-06-2022 in the case of Pr. CIT Vs. Swati Bajaj and others in

ITAT No. 06 of 2022 came heavily upon fraudulent transactions

being carried out in the form of shell companies and has strongly

held against the assessee and in favour of the revenue observing

that this modus operandi in taking undue advantage of the legal

procedure and provisions of the Act should not be permitted in the

greater interest of the country as a whole. The Hon'ble Calcutta

High court on analysing the facts on the issue regarding the entire

process adopted by these assessees in order to fraudulently gain

and take advantage and for non-payment of due taxes has been

specifically held to be unwarranted, illegal and bad in law by the

Hon'ble High court. The Court after going through the detailed

37 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur finding in that case held that the action of the assessee is nothing

but pre-motivated and deliberate conduct done for converting the

unaccounted money of the assessee under the guise of long term

share transaction and that too without paying requisite tax on the

same. This clearly amounts to tax evasion. In the present case

also, it was beyond preponderance of probabilities that the fantastic

sale price of a little known shares i.e. Cressanda Solution Limited

without any economic or financial basis to increase exponentially.

Based on these reasoned finding we are of the considered view

that the long term capital gain claimed by the assessee under

section 10(38) of the Act as exempt from the tax is not real but the

same is bogus. Therefore, we do not find any infirmity in the

reasoned findings of the ld. CIT(A) in the instant case and

therefore, we confirm the order of the ld. CIT(A) and dismissed the

appeal of the assessee having no merits and thus ground no. 1 & 2

raised by the assessee is dismissed. Since, the assessee has not

altered or amended any grounds of appeal ground no 3 does not

require our adjudication and since we have dismissed the ground

no 1 & 2 of the assessee consequent to that the ground no. 4 is

also dismissed.

38 ITA No. 318/JP/2022 Harish Sharma HUF, Jaipur vs. ITO, Jaipur In the result the appeal of the assessee is dismissed.

Order pronounced in the open Court on 11/11/2022.

Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/11/2022 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Harish Sharma HUF, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward-5(3), Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 318/JP/2022} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत