ACIT, CC-4, , JAIPUR vs. SHRI ANSHUL JAIN, JAIPUR

PER BENCH: All these appeals have been filed by the department in the case of respective assessee against the respective orders of the learned Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as ld.CIT(A)’]. Since the issues involved are common, all these revenue appeals were heard together and are being disposed off by this consolidated order. Against the department appeal there are cross

objections filed by the respective assessee.

3 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 27/JPR/2020 may be taken as a lead case for discussions as the issues

involved in the lead case are common and inextricably interlinked or in fact

interwoven and the facts and circumstances of other cases are exactly

identical. The ld. DR did not raise any specific objection against taking the

case of M/s. Marverick Commodity Brokers Private Limited as a lead case.

Therefore, for the purpose of the present discussions, the case of M/s.

Marverick Commodity Brokers Private Limited is taken as a lead case.

appeals grounds are similar, facts are similar and arguments were similar

and were heard together we consider the facts and ground taken in ITA No.

27/JPR/2020 for A. Y. 2014-15 and considering the said case as lead case.

following grounds :

1.Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition on account of unexplained credit u/s 68 of IT Act of Rs. 6,25,76,221/- made by the AO. 2. Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in not applying section 115BBE of the IT Act, 1961 regarding the addition u/s 69C of IT Act of Rs. 37,57,573/- made by the AO.

4 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 5. The brief facts of the case as culled out from the records is that a

search and seizure actions u/s. 132 of the Act and/or survey action u/s.

133A of the Act was carried out by the Income Tax Department on the

members of the Marverick Group, Jaipur on 22.07.2015 of which the

assessee is one of the members. During the course of the above referred

actions, cash jewellery, valuables, stock-in-trade, documents, books of

account and / or loose papers found and/or seized from the premises of the

member of the Maverick Group Jaipur of which one such member happens

to be the assessee. In this case original return of income was filed on

30.09.2014 for the A.Y. 2014-15 declaring total income at Rs. 28,00,880/-.

On account of search jurisdiction over the cases was assigned to Central

Circle -4, Jaipur vide order u/s. 127 of the Act. In compliance to the notice

u/s. 153A of the Act, return of income e-filed on 23.11.2015 for the

assessment years 2014-15 declaring total income at Rs. 28,00,880/-. After

filling return u/s. 153A, the notices u/s. 143(2) were issued from time to

time and the assessee has response to the notice filed the details required

in the assessment proceeding. The assessee was engaged in the business

of commodity broking and derivatives, custodial services, depository

services and delivery services and earned income from house property,

5 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others business or profession and other sources during the year under

consideration.

assessment proceedings is in relation to the alleged long term capital gain

added u/s 68 of the Act and commission paid for acquiring such long-term

capital gain added u/s 69C of the Act. The relevant findings were recorded

in details by the AO and the brief of the findings of the Assessing Officer is

briefly discussed here in below so as to understand the contentions and

based upon the findings the addition was made:-

“9 Main issues involved: Searches have been conducted by the Investigation Wing of the Department at various places throughout the country. During the searches & as per the information made public by the SEBI, it is discovered that various syndicates have arranged accommodation entry of bogus LTCG, Bogus STCG, Bogus Long/short term Capital Loss through trading of shares of Penny Stocks. The modus operandi found is that the investors/beneficiaries hold these shares for one year or so and then sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operators/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the. I.T. Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) are a penny stock listed company. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) is also available at ITD Data/AIR. Further on examination of the financials of the company for last few years it is noticed that the very nature of the business of the companies is dubious.

6 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others However, what is astonishing in this case is that this company has not earned any income from operations and still commanded such premium valuations. Clearly there is nothing worthwhile to mention on the front of assets and net worth of the company as well, to conclude that it could commend such high premiums. It was also found that during the period of astronomical rise of shares price of the scrip there was no corporate announcement or big or der or any such news which could result into such frenzy in the script price. The price of scrip in the secondary market mainly depends upon the EPS, the business health of a company or some new development in the company which promises bright future for the shareholders. In the instant case where were no such factors.

The relied upon statement of Shri Harshvardhan Kayan by DDIT, Investigation, Kolkatta extracted in page 3 to 18 of the assessment order. This statement was recorded on 28-01-2015. The ld. AO stated that Shri Harshvardhan Kayan confirmed the involvement of M/s. Midland Polymers Ltd. and M/s. Sulabh Engineering in the bogus LTCG entries. The AO relied on the statement of Shri Manoj Kumar Agarwal recorded by DDIT(Inv) Kolkatta on 30.09.2015 who has admitted about the complete procedure o pre-arranged LTCG entries and also about his involvement though his brokerage company M/s. Destiny Securities Limited. He in his statement at Q 25 confirmed about the involvement of penny stock company M/s. Midland Polymers Limited [ scrip code 531597] in such arrangement and then he has extracted his statement at page 19 to 24. Based on these two statement the AO alleged that the huge capital gains earned by the assessee with a very short period of time by investing in a penny stock i.e. M/s. Midland Polymers and M/s. Sulabh Engineering whose fundamentals had no support for the premium it commanded, was neither the result of a coincidence nor of a genuine investment activity but were created though well planned and executed scheme in which the company, the brokers and the buyers and sellers of the scrip worked in tandem to achieve predetermined objectives. The ld. AO from page 25 to 27 discussed the modus oprendi in such type of transactions and on page 27-28 he mentioned the report of the special investigation team (SIT) headed by the Hon’ble Justice M. B. Shah about the misuse of exemption on LTCG. Based on these findings the ld. AO issued a detailed show cause notice to the assessee on the points mentioned from page 28 to 38 asking the assessee that it is proposed to treat amount of Rs. 6,25,76,221/- as unexplained credit found in the books of the assessee u/s. 68 of the act. He also propose to add 6 % as of the gain as an unexplained expenditure u/s. 69C of the Act.

In response the assessee submitted their reply stating that short term capital gain of Rs. 3,05,14,396/- on sale of share of M/s. Midland Poly and Rs. 3,20,61,825/- on sale of shares of M/s. Sulabh Engineering. Both these scrips were purchased on line and sold online through registered share broker by various contract notes. Due STT was also paid by at purchase and sale transactions. The consideration has routed through the normal banking

7 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others account through RTGS. The assessee has furnished copy of bank statement showing payment so received, assessee’s ledger account in the books of account placed on record, related contract notes through which the purchase and sales were made showing unique settlement code and transaction executed along with date of transactions. The ld AR of the assessee contended various allegation made by the AO which is reiterated at page 39 to 51. The ld. AO then also mentioned the statement recorded at the time of search/survey and admission of the director about this LTCG/STCG as bogus and extracted relevant part of the statements. The ld. AO then also discussed the retraction made is why not valid retraction from the page 56 to 60, wherein AO relied on various judicial decision on the issue. Then he added the STCG of 6,25,76,221/- u/s. 68 and 6 % commission the said amount u/s. 69C.

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

CIT(A) has deleted the addition of short/long term capital gain made u/s

68 of the Act and also deleted the disallowance of addition of commission

u/s 69C of the Act. Against the said relief granted by the CIT(A) to the

assessee, the revenue has preferred an appeal before us on the grounds

as mentioned here in above paras.

relevant findings of the ld. CIT(A) and the same reiterated here in below:-

“5. I have perused the written submissions submitted by the Ld. AR and the order of AO I have also gone through various judgements cited by the ld. AR and those contained in the order of the AO. I have also gone through the APB pages 1 to 133. The Ld. AO has disallowed the claim of STCG of 5,85,77,667/- on two scripts namely Midland polymer & Sulabh engineering (herein after the 'script') on the basis of following evidences in his possession:

8 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others

5.2 The AO, thus, has disallowed claim of STCG on the basis of statement made u/s 132(4) and subsequent affidavits. The AO referred & relied on the statements the entry operators. The AO also referred to the report of SEBI, and the report of expert committee.

In the detailed submission made by the assessee it has vehemently argued that the settled position of law is that addition cannot be made simply on the basis of statement of the assessee alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statement of the assessee.

5.3 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purposes of making addition for assessment completed u/s 153A / 143(3). It has been held in many judgments that mere statement u/s 132(4) or u/s 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to material by subsequenty inquiry/investigation. Hon’ble High Court of Rajasthan in the case of Mantry Share Brokers Pvt. ltd. (96 taxmann.com 279) have held as under: Section 69B of the Income-tax Act, 1961- undisclosed investments (Burden of proof)- whether where except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document or in any other form to conclude that statement

9 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others made was supported by some documentary evidence, said sum could not be added in hands of assessee as undisclosed investments - Held, yes [Paras 10-11] 1In favour of assessee]

Para 10 & 11 of the order is as under:

It would not be out of place to mention that this order of Hon'ble Rajasthan High Court has been confirmed by Hon'ble Supreme Court also.

5.4 Further, Hon'ble Delhi High Court in case of Harjeev Agarwal (70 Taxmann.com 95) held thus:

Harjeev Aggarwal 12016] 70 taxmann.com 95 (Delhi)

"...A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB (1) read with Section 1588 (b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a

10 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded...."

Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the Act, the same was also applied in respect of assessment u/s 153A by Delhi High Court in case of Best Infrastructure (84 Taxmann.com 287) when it was held thus:

Some of the more decisions laying down ration that more statement is not enough to make addition are as under:-

Smt. S.Jayalakshmi Ammal [2016] 74 taxmann.com 35 (Madras)

"...While adverting to the above, we are of the considered view that, for deciding any issue, against the assessee, the Authorities under the Income Tax Act, 1961 have to consider,. as to whether there is any corroborative material evidence. If there is no corroborating documentary evidence, then statement recorded under Section 132(4) of the Income Tax Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the Income Tax Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred...."

"...If the assessee makes a statement under Section 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under Section 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterized as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement

11 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others without there being any corroborative evidence should not be treated as conclusive evidence against the maker of the statement..."

Naresh Kumar Agarwal [2015] 53 taxmann.com 306 (Andhra Pradesh)

"...it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under Section 132(4) of the Act, does not have any evidentiary value. This provision embedded in subsection (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement.."

5.5 Hon'ble Gujarat High Court, vide its order dated 14.07.2016, in the case of CHETNABEN J SHAH LEGAL HEIR OFJAGDISHCHANDRA K. SHAH, in TAX APPEAL NO. 1437 of 2007, laid down the ratio that no additions can be made in the hands of the assessee merely on the basis of statements recorded, during the course of search, under section 132(4). Hon'ble High Court in the above mentioned case relied on its earlier order in the case of Kailashben Manharlal Chokshi [2008] 174 Taxman 466 (Guj.),wherein a similar ratio was laid down. Further, in the case of Narendra Garg & Ashok Garg (AOP) [2016] 72 taxmann.com 355 (Gujarat), Hon'ble Gujarat High Court held that "....It is required to be borne in mind that the revenue ought to have collected enough evidence during the search in support of the disclosure statement. It is a settled position of law that if an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities are required to assist him and ensure that only legitimate taxes are collected. The Assessing Officer cannot proceed on presumption u/s 134(2) of the Act and there must be something more than bare suspicion to support the assessment or addition. In the present case, though the revenue's case is based on disclosure of the assessee stated to have been made during the search u/s 132(4) of the Act, there is no reference to any undisclosed cash, jewellery, bullion, valuable article or documents containing any undisclosed income having been found during the search..."

5.6 Close perusal of the assessment order shows that there is no incriminating seized material found during the course of search u/s 132(1) which shows that

12 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others LTCG claimed as exempt u/s 10(38) of the Act is bogus or non-genuine. The factum of non-existence of incriminating material is confirmed by the Ld. AO in his remand report dated 10-08-2018 which was specifically called for vide this office letter dated 27-07-2018. The remand report is reproduced below:

Kindly refer to yours officer letter No. 410 dated on 27.7.2018 the subject cited above. In this regard the requisite information is as under No such material found seized or impounded. I. The assessee in his statement dated 22/07/2015 has admitted that II. he had managed LTCG out of the sale of penny stock and surrendered the same for taxation, copy of admission statement of Sh. Mukut Bihari Agarwal dated 22.7.2015 and dt. 23.7.2015 and dt. 27.7.2015 is being enclosed herewith. Copy of the statement, of Sh. Harshvardhan Kayan dt. 28.1.2015 III. enclosed herewith wherein he has stated that the price of script sold by the assessee was managed by him in stock market. Any enquiry report of SEBI or other government agency is not IV. available on record. No such information found on record. V. In the above context it is submitted that the all the above statement have been made as part of assessment order by the Assessing Officer (Emphasis added)

Thus, statement of entry operator, dubious financial of the penny stock company , report of the SEBI & SIT are pieces of information and the AO was expected to convert it into evidences by further inquiry which would

13 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others comprehensively prove that its appellant cash which was routed and came back to appellant in the form of LTCG. In my view mere statement of 3rd party is not enough to make addition in the hand of appellant. It would not be out of place to mention that mere statement of appellant recorded during the course of search u/s 132(4), as already pointed out, is not sufficient to make addition has been discussed above.

6.2 The appellant on the other hand has submitted all the necessary documentary evidences related to earning of LTCG for the said script. The evidences filed are in the APB and briefly are as follows Details filed APB pages Copies of contract notes 58-59 Copies of ledger account 90-92 Copies of bank account reflecting purchase and sale 93-108 Copy of D-mat statement 109-126 Affidavit of Anil Agarwal, retracting statement given 127-132

6.3 I have carefully considered the relevant facts, arguments advanced and case laws cited. It is clear that AO has based denial of claim of STCG of the Act on the basis of statement of the appellant, and information received from the investigation wing in the form of statement of entry operator. However, in the statement of entry operator no question was ever put to the Anuj Agarwal regarding transaction through the companied, through which alleged cash of appellant was routed. On one hand the AO has oral statements made by appellant & entry operator, the appellant has retracted the statement by filing documentary evidences listed above. It is a settled law that documentary evidences will always carry more weight than the oral statements. After the oral statement were available to the AO the appellant proved the oral statement to be incorrect by filing documentary evidences. Thereafter the AO did not prove the documentary evidence to be untrue/ bogus/ non genuine. The AO never confronted the documentary evidence to the person whose oral statement was recorded in this case the Shri Anuj Agarwal, the entry operator. Therefore, the oral statement losses their evidentiary value in light of the documentary evidence placed by appellant. Even the oral statement is general and does not pin point or mention appellant name anywhere. Nor does it mention anywhere that cash from appellant was received & it was same cash which was routed back to the appellant bank account. Considering the above documentary evidences clearly out weight the oral evidences relied upon.

6.4 Further the AO has discussed the abnormal rise I the share price of the penny stock without any under lying fundamentals. Recently Hon'ble ITAT Delhi in the case of Mukta Gupta Vs. ITO, ITA 2766/ DEL/2018 order dated 26-11-2018 have held that Capital gains cannot be treated as bogus solely

14 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others on the basis that the price of the shares has risen manifold and the reason for astronomical rise is not related to any fundamentals of market. If the transactions are duly proved by trading from stock exchange and the documentation is proper, the gains cannot be assessed as unexplained credit or as unexplained money. It was further observed by the Hon'ble ITAT Jaipur Delhi that nowhere it has been found that assessee was in any manner found to be beneficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld.

6.5 Further, the ld. AR has also taken a legal plea that no cross examination of the person, whose statement was relied upon, was granted despite specific request made to the AO. The aspect of not granting cross examination has specifically been answered by the Hon'ble ITAT Jaipur in the case of Shri Pramod Jain. The relevant extract on the issue is as under:

"As regard the non grant of opportunity to cross examine, the Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held in para 5 to 8 as under:-

"5. We have heard Mr.KavinGulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnana, learned senor counsel who appeared for the revenue.

6.According to us, not allowing the assessee to cross-examine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner as based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he as specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which could not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was no for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealer and what extraction the appellant wanted from them.

15 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross —examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and made the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000 , order dated 17.2.2005 was passed remitting the case back the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

Therefore, the statement of witness cannot be sole basis of the assessment without given an opportunity of cross examination and consequently it is a serious flaw which renders the order a nullity. The Mumbai Special of the Tribunal in case of GTC Industries vs. ACIT (supra) had the occasion to consider the addition made by the AO on the basis of suspicion and surmises and observed in para 46 as under:-

“46.In situations like this case, one may fall into realm of 'preponderance of probability' where there are many probable factors, some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed on material facts so collected. Here in this case the material facts strongly indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expense and it was their liability as per their mutual understanding with the assessee. Another very strong probable factor is that the entire scheme of 'twin branding' and collection of premium was so designed that assessee- company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI of by the department that Assessee- company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a

16 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. NirmlalaSundaram, 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 howsoever 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." Judgment of jurisdictional High Court and Hon’ble ITAT Jaipur 6.6 From the above it can be noted that the assessee has furnished all the evidences in support of the transaction in the shares of penny stock share on which he earned long term capital gain. The transactions are through banking channel and are supported by the contract note of the broker to whom brokerage is paid. The statement referred in the assessment order has no relevance as there is no name of the assessee. Therefore in the absence of any adverse material to prove the documentary evidences furnished by the appellant otherwise, the income earned by the assessee on sale of these shares can't be treated as bogus. Various Courts in situation like this, including Hon'ble High Court of Rajasthan have ruled in favour of assessee. Some of the lead judgments directly on the issue of penny stock and consequent capital gain thereafter are as under:- • PCIT v. Pramod Jain & Otheres DB Appeal No. 209/2018 dated 24.07.2018 (Raj) • CIT vs. Smt. Pooja Agarwal DBIT Appeal No. 385/2011 dated 11.09.2017 ( Raj HC) • CIT Vs. Smt. Sumitra Devi (2014) 102 DTR 0342 (Raj.)

17 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others • MINU GUPTA vs. ITO (2018) 54 CCH 0343 KolTrib ITA No. 731/Ko1/2018 dated 12.12.2018 • Shri Meghraj Singh Shekhawat vs. DCIT (2017) 443 and 444/JP/2017 dated 07.03.2018 • Shri Vivek Agarwal vs. ITO (2017) 292/JP/2017 (ITAT Jaipur) dated 06.04.2018 • Shri Purushotam Sani vs. ITO (2017) 288/JP/2017 (ITAT Jaipur dated 6/4/18 • Mahesh Kumar Baid vs. ACIT , ITA No. 1236/Kol/2017 dated 18.08.2017 (Cal. Trib.) • Ramprasad Aggarwal vs. ITO 2(3)(2), Mumbai (2018) 100 taxmann.com 172 • Smt. Madhu Killa vs. Asst. CIT (2018) 100 taxmann.com 264 • Neeraj Gupta vs. ITO (2018) 54 CCH 0238 • Jignesh Desai vs. ITO (2018) 54 CCH 0045 • Navneet Agarwal vs. ITO (2018) 97 taxmann.com 76 • Arun Kumar and Ors. vs. Asst CIT (2018) 54 CCH 0183 • Anubhav Jain vs. ITO (2018) 54 CCH 0273 • DCIT vs. Saurabh Mittal ITA No. 16/JP/2018 dated 29.08.2018 • Amar Nath Goenka & Ors. vs. Assistant Commissioner of Income Tax & Ors. (2018) 54 CCH 0344 • UDIT Agarwal vs. Dy. CIT (IT) (2018) 54 CCH 0424. Summation 6.7.1 To sum up in the present case the appellant as subjected to search and seizure action u/s 132(1) of the Act and during the course of search no incriminating material was found which may indicate that the appellant has taken LTCG on penny stock which is alleged bogus. A statement was recorded u/s 132(4) of the Act which was later retracted by the appellant. 6.7.2 The Ld. AO had information in the form of statements recorded during search and survey action on various entry operators. This information inter alia contains statements of entry operators recorded by investigation directorates, mainly Kolkatta. The Ld. AO issued a SCN to the appellant. The Ld. AO did not allow cross examination of the entry operator for the reasons enumerated in his order. 6.7.3 In response to the SCN appellant filed all the documentary evidences in his possession before the Ld. AO which were kept as it is & were not rebutted by virtue of any inquiry/ investigation. In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and afterwards. Noticeably the Ld. AO did not have SEBI report which specifically indicted either the appellant or the 'penny stock' script.

18 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 6.7.4 The Ld. AO proceeded to treat the STCL as bogus and made an addition. In nutshell the external information & retracted statement was formed whole & sole basis to treat the STCL claim as bogus. Thus, the crucial question that it was appellant money (unaccounted cash) which came back to appellant in the form STCL was not evident from the information so received, nor investigated nor is answered by the whole exercise.

All the decision of Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur on LTCG earned on Penny stock are in favour of assessee's. To put it other way round, not a single decision is against assessee's. Thus these decisions have binding precedence. The decisions are:

1 POT Vs. Pramod lain & Ors (appeal no. 209/2018 dated 24-07-2018- (Rajasthan High Court) 2 CIT Vs. Pooja Agarwal ( appeal no. 385/2011 dated 11-09-2017 ( Raj High Court ) 3 CIT Vs. Sumitra Devi 102 DTR 342 ( Raj High Court ) 4 JVS Food Private Limited Vs. DOT 2018(11)TMI 1088 5 Kapil Mittal Vs. ITO 20171(11) TMI 988 6 Om Prakash Modi Vs. DCIT ITA no. 402 & 403 /JP/2017 7 MeghRaj Singh Shekhawat Vs. DOT 443 & 444/ JP/2017 8 DCIT Vs. Saurabh Mittal ITA no. 16/JP/2016 9 Vivek Agarwal Vs. ITO 292/JP/2017 (Jaipur) 10 Purushottam Son! Vs. ITO 288/ JP/2017(Jaipur)

6.7.5 Recently Hon'ble Supreme court in its order dated 21-08-2019 in the case of Odeon Builders Private Limited Vs. CIT-7, New Delhi (civil appeal no. 9604-9605/2019) has held that no addition can be sustained if it is done purely on the basis of information received from Investigation Wing without giving an opportunity of cross examination to the assessee. The keys observation by the Hon'ble Court reads as under:

"Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima fade discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted.

19 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others

6.8 Thus, considering the above factual & legal position especially by the Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur, I am of the view that the AO action of denying the claim of STCG is not tenable. The Ld. AO is directed to allow the claim of STCG and tax it as per the law. Since the STCG is treated as genuine the consequent disallowance of commission of 37,54,573/- is also to be disallowed. The Ld. AO is further directed to not to apply section 115BBE of the Act.”

of the assessee has submitted following written submission:-

“May it please your honours,

Brief facts are that a search action was carried out u/s 132 of the Income Tax Act, 1961 on 22.07.2015 in case of Maverick group to which these all persons assessee belong. In response to notice issued u/s 153A, returns of Income by all the persons declaring same income as declared in the return filed u/s 139(1) of the Act. The assessment was completed u/s 143(3) r.w.s. 153A of the Act wherein various additions were made which include the addition of treating the long term capital gains/ short term capital gains / loss from certain equities by holding the same as bogus.Appeals were field before ld. CIT(A) against such additions, which were decided substantial relief was allowed by ld. CIT(A) in all the cases and the capital gains / loss declared was held as genuine. Against the said orders of ld. CIT(A), all these appeals are filed by the department challenging the deletion of addition made and the assessee preferred cross objections wherein the additions confirmed are challenged by the assessee.

With the above background, submission on the department appeals is as under: Long Term Capital Gain/Short term capital loss alleged as bogus and from Penny Stock companies and Commission paid thereon: In the grounds of appeal raised in respect of this issue, department has challenged the order passed by ld.CIT(A) wherein the Long Term capital gain earned/short term capital loss on sharesis held as genuine.The details of addition made in respect of each individual assessee and the respective ground of appeal taken by the department is tabulated as under:

Assessee A.Y. Departmental DGOA LTCG/STCG Commission Appeal No. No (Rs.) (Rs.) MukutBehari 2015-16 155/JPR/2020 1 & 2 21,38,983/- 1,29,933/- Agarwal Sunita Agarwal 2014-15 157/JPR/2020 1 & 2 2,49,43,122/- 14,96,587/- Sunita Agarwal 2015-16 158/JPR/2020 1 & 2 11,77,629/- 70,658/- Anshul Jain 2014-15 163/JPR/2020 1 & 2 1,35,94,856/- 8,15,691/-

20 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others

Before we begin with submission on merits, it is submitted that assessments in respect of all the assessees were completed u/s 153A as a result of search conducted on 22.07.2015. On the date of search, due date of issuing notice u/s 143(2) had expired in respect of A.Y. 2010-11 to 2013-14 and notice could be issued only in respect of A.Y. 2014-15 and onwards. In other words, assessment proceedings upto A.Y. 2013-14 were completed and therefore scope of additions to be made in such assessment years was restricted to incriminating documents only which were found/seized during the course of search. A detailed submission in this regard was made before the ld. CIT(A), who sought remand repost from assessing officer as to whether any incriminating document was found during the course of search in respect of addition made. Ld.AO vide remand report[reproduced in CIT(A) order itself]admitted that no incriminating document was found in this regard. After appreciating such facts, ld.CIT(A) accepted the contention of the assessee and held that no addition could be made as no incriminating material was found with respect to the Long Term capital gain/ Short Term capital loss by alleging the same as non genuine.Details of such appeals, detailed submission furnished in this regard before ld.CIT(A) and relevant page numbers where remand report is reproduced and observations of the ld. CIT(A) in this regard are tabulated hereunder for sake of convenience:

CIT(A) page where CIT(A) Name of Assessee Assessment CIT(A) Remand decision para Year WS APB report is and page no. reproduced 2010-11 74-104 Para 12 to Ramesh Kumar 27 13.4 pages Mantri 2011-12 108-139 27-33 MukutBehari 2010-11 91-119 10 to 10.5 26 Agrawal pages 28-32 2011-12 172-201 Asha Jain 2011-12 94-124 2010-11 69-99 Para 11 to Mukesh Jain 29 11.5 pages 2011-12 118-149 30-34 Para 11 to SangeetaMantri 2011-12 98-128 29 11.5 pages 32-36 11 to 11.6 Sunita Agrawal 2011-12 66-93 29-30 pages 32-36

From the perusal of the grounds of appeal taken by the department, it appears that the department has not challenged the findings of ld. CIT(A) given on the legal issue raised that if no incriminating material was found as a result of search,

21 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others no addition could be made more particularly when no proceedings were pending as on the date of search.

It is thus submitted that on legal aspect department has accepted the order of ld. CIT(A) and accordingly undisputedly when no incriminating material was found suggesting Long Term Capital gain/ Short term capital loss being non genuine, no addition could be made on this account in the orders passed u/s 153Aof the Act.

With regards to appeals for the remaining assessment years, i.e. wherein due date of issuing notice u/s 143(2) had not expired, there also additions were made solely on the basis of confessional statements of directors/assessees recorded u/s 132(4) during the course of search, which were not supported with any other documentary evidences found as a result of search/otherwise. Detailed submission in this regard was submitted before ld.CIT(A), wherein it was explained the statements wherein surrender as obtained from all the persons regarding Long term capital gain/Short term capital loss were not voluntary and rather recorded under undue pressure. Moreover, such statements were retracted by filing affidavits as soon as copy thereof was supplied to assessee. Ld.CIT(A) after considering submission of assessees, allowed relief on legal ground.

From the perusal of the grounds of appeal taken by the department in these appeals also, it appears that the department has not challenged the findings of ld. CIT(A) given on the legal issue raised by the assessee that, no addition could be made solely on the basis of confessional statements recorded during the course of search unless the same are corroborated with documentary evidences/material more particularly when statements were retracted. It is submitted that very recently Hon’ble Rajasthan High Court in the case of PCIT vs Shri Sanjay Chhabra in Income Tax Appeal No. 22/2021 has held that addition based solely on statement later on retracted, without anything more, could not be justified in law and thus had not admitted the appeal filed by the department.

It is thus submitted that on legal aspect department has accepted the order of ld. CIT(A) and accordingly undisputedly no addition could be made solely on the basis of statements recorded during the course of search when the same are not corroborated with any incriminating material/documents suggesting Long Term Capital gain/ Short term capital loss being non genuine.

Details of such appeals, detailed submission furnished in this regard before ld.CIT(A), relevant page numbers where Retraction affidavits are available and observations of the ld. CIT(A) in this regard are tabulated hereunder for sake of convenience:

22 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others

Retraction Name of Assessment CIT(A) CIT(A) para no. Affidavit Assessee Year WS APB and page no. APB Mukut Behari 2015-16 87-109 40-42 para 8.3 page 25 Agrawal Para 10.2 & 10.3 Anshul Jain 2014-15 57-81 25-26 page 31 Para 10.2 page 2014-15 129-152 23-24 29 Sunita Agrawal Para 17.2 page 2015-16 48-71 25-26 42

So far as merits of the case are concerned, it is submitted that the above stated appellants had earned LTCG [claimed as exempt u/s 10(38)]/STCL on the sale of shares, part of which was disallowed on the basis of alleged enquiries/investigation conducted in the case of third parties. Also, it was presumed that all the assessee would have paid commission on such accommodation entries and therefore addition on that account was made u/s 69C of the Act. In this regard, at the outset, it is submitted that all the share transactions were absolutely genuine as: - Shares were purchased online through recognized stock exchange in all the cases; - Payment pf purchases consideration towards shares purchased was made through banking channel; - Shares were got dematerialized soon after they got purchased; - Shares were sold online through recognized stock exchange; - Sale consideration was received through banking channels.

It would not be out of place to mention here that all the appellantshave been engaged in share trading on regular basis and the transactions in respect of which exemption u/s 10(38) is denied/Short term capital loss is added back were not the solitary transactions in shares. At this juncture, total LTCG/STCL earned by them, disallowance made and total portfolioas on the last date of balance sheet is tabulated in Annexure attached with this written submission for the sake of convenience.From the perusal of the chart annexed, it is evident that all the assessees have been regularly dealing in shares and hold shares of various companies other than alleged as penny stock companies also.

Facts leading to the conclusion thatLong Term capital gain/Short term capital loss was non genuine based on the information received by the ld. AO where various searches were conducted by Income Tax department, during which statements were recorded u/s 132(4) of various persons (hereinafter referred to as “entry operators”), who have been alleged to have accepted to be involved in providing accommodation entries in the shape of Long Term Capital Gain/Short Term capital

23 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others loss/ unsecured loans etc. for commission, through a racket of various paper companies. As per ld. AO the long term capital gain / short term capital loss declared by these appellants also include the transactions from these companies and thus concluded that LTCG/STCL earned by all these assessee on shares of such companies was not genuine.

In this regard, it is submitted that in none of the case, name of any of the assessee as beneficiary of bogus LTCG/STCL was mentioned as alleged by the ld. AO. Thus the modus operandi narrated by the ld.AO based on the statements of various entry operators (third parties) is merely borrowed from the answers given in reply to specific questions put forth in case of some other scripts and not the scripts involved in the case of the assessee. Moreover, apart from the so called information received from Investigation Wing, Kolkatta containing statements of entry operators, there was no material available with the Ld. AO or referred to by him in the assessment order found as a result or gathered during the course of assessment proceedings in support of the impugned additions made by him.

As submitted above, in the statements, such entry operators have merely / generally stated the modus operandi of their so called companies through which they have admitted to be engaged in providing accommodation entries in respect of LTCG. At this juncture attention of your honours is invited to the fact that the assessees of Maverick group had neither made transactions of purchases and nor any transaction of sale of the impugned shares through the companies of such entry operators. On the other hand the assessee had made transaction of purchase (in most cases) and also sale of impugned shares on the on-line portal of BSE through his regular broker MSBPL i.e. the broker with whom he had made all his transactions of purchases and sale of scripts and derivatives in past and in future period. Since transactions of purchase or sale of impugned shares by assessee has not been done through the companies managed by entry operators, therefore their statements for so called manipulation through their companies cannot at all be applied in the case of the assessee.

Moreover, during the course of assessment proceedings a specific request was made for cross examination of such entry operators, however such request was turned down by Ld. AO in summary manner, though before relying upon the same against the assessee opportunity of cross examination should have been allowed in the interest of natural justice.

In fact, oneof the persons named and whose statement was relied upon by the ld.AO is Shri Raj Kumar Kedia. Perusal of the his statement reproduced in the assessment order reveals that at one place Shri Raj Kumar Kedia has accepted to have done pre-arranged booking of LTCG from a number of companies including the names of scripts involved in this case, and immediately in the next para (as appearing in the Assessment order of Sh. MukutBehari Agrawalfor AY 2011-12 page49 last para) he has himself observed as under:

24 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others “From the above listed shares of companies like Fact Enterprises ltd, Splash Media Ltd,………………did not pick up & no LTCG was done through them”

Thus Shri Raj Kumar Kedia has in fact very clearly stated that no bogus LTCG was booked through them in the impugned two scripts involved in all the cases, which further proves the transactions as genuine. Further in the statement, Shri Kedia has given complete list of beneficiaries who had taken accommodation entries through him which does not contain the name of the assessee or the broker through whom the assessee had transacted in these shares. Also all the other names mentioned by Shri Raj Kumar Kedia, who had allegedly assisted him in carrying out the entire transaction has no mention of either any of the assessee or the broking house through which they had transacted the genuine sale of shares. Moreover no any reference of any of the assessee was made in any manner in any of the statements, that any of them has approached him for providing accommodation entry. Further none of the broker had stated the name of the broker M/s MSBPL as allegedly involved in providing bogus LTCG through whom they sold shares. It is a matter of fact that the broking firm MSBPL is never found involved in any such type of activity by any authority like SEBI etc. However, relying upon the uncorroborated statements of third parties, that too recorded in some other case, by some other authority and behind the back of all theseassessees, Ld. AO incorrectly presumed that long term capital gain and Short term loss earned/incurred was merely an accommodation entry (even though none of them has neither purchased nor sold the shares of these companies through broking firm of such third parties.

Apart from the so called information received from Investigation Wing, Kolkatta containing the statements of such third parties, there was no material available with the Ld. AO or referred to by him in the assessment order found as a result or gathered during the course of assessment proceedings in support of the impugned addition made by him. The Ld. AO further relied upon the conclusion drawn by SEBI in respect of these transactions where the SEBI had made enquiries in respect of unexpected fluctuations / gains in the price of shares of few companies. The ld.AO has also referred to the interim order of SEBI. Firstly it submitted that this order is passed in the case of M/s First Financial Services Ltd which has no relation with any of the assessee. Secondly this report says that the Comfort group/ Comfort Securities had played role for providing accommodation entries of LTCG. It is pertinent to note here that such order has no bearing in the present cases, as purchase and sale was not done through the Comfort group/ Comfort Securities.

After considering the facts as narrated above and detailed submission made in this regard, ld.CIT(A) deleted the additions made on merits also, primarily on following grounds: - Addition was made solely on the basis of statements recorded of during search and surveys on various entry operators, - The Ld. AO did not allow cross examination of the entry operators;

25 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others - appellant filed all the documentary evidences in his possession before the Ld. AO which were not rebutted by virtue of any inquiry/investigation; - In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and afterwards; - Ld. AO did not have SEBI report which specifically indicted either the appellants or the 'penny stock' script; - Thus, external information & retracted statement was formed whole & sole basis to treat the LTCG/STCL claim as bogus; - That, documentary evidences carry more weight than oral statements; - Thus, it was not evident from the information so received, nor investigated nor is answered by the whole exercise as to how was unaccounted cash routed through such entries; - All the decision of Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur on LTCG earned on Penny stock are in favour of assessee's; - The judgment given in the case of Suma Poddar423 ITR 480, has already been distinguish by hon’ble Delhi high court in the case of PCT Vs. Krishna Devi in ITA No. 125/2020 by the hon’ble Delhi court itself and the same decision is followed by the hon’ble bench in case of ACIT Vs. SarojPorwal in ITA No. 753/JP/2019 vide orders dt. 24.02.2021. In view of above, it is prayed that transactions of assessee in shares are completely genuine, therefore CIT(A) has rightly deleted the addition so made, which order may please be upheld.

reiterated the contentions of the affidavits stating the circumstances under

which the alleged disclosure was obtained. The assessee and its

associates are dealing in shares and securities and it is not only these

scripts where in the they have earned the capital gain but various other

shares and securities are hold by the members of the group. The allegation

is merely on the investigation done by the investigation wing of the

department. The report is not placed before the assessee. No where

department proved that the contentions raised in the various investigation

26 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others made by the department the assessee and its group concerns are involved

in alleged bogus entry operations. No noting of any such evidence found in

the course of search proceedings merely the statement forcefully obtained

the genuine transactions entered by the assessee by paying the STT

cannot be considered as bogus. To prove the transaction sufficient

documentary evidence were placed on record and the same is not proved

to be incorrect and the ld. CIT(A) after taking into note of all the aspect of

the case given his detailed findings which may please be considered. The

ld. AR of the assessee further submitted that in the case of assessee, no

material was found which could support the allegation of the Ld. AO that

assessee has converted his undisclosed money in the guise of LTCG.

Therefore, in the circumstances, it is humbly submitted that the assessee

had entered into a genuine transaction of purchases and sales of shares

routed through the recognized stock exchange and the funds have been

transacted through banking channels and the shares were kept by the

assessee in D-mat account and the sales were subject to STT. Thus all the

conditions enumerated in section 10(38) for holding the profit from the sale

of shares as exempt have duly been fulfilled by the assessee, thus in no

circumstances it could be held as bogus or sham transaction more

particularly when no corroborative evidence was brought on record by the

27 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others department to hold that assessee had introduced his undisclosed income in

the garb of long term capital gain and the statements of third party relied

upon by the department stood retracted by such person himself which fact

had not been considered at all by the assessing officer.

shown a huge long/short term capital gain within a short period of time from

the sale of shares and therefore, as per the rule of preponderance of

human probability the transaction of the assessee cannot be accepted as

genuine and the onus is on the assessee to prove the same as how there

is a spike in the price of the shares within such short duration. The

surrounding circumstances clearly lead to only one possible conclusion that

the assessee has manipulated the entire record and availed the bogus

transaction of long term capital gain to convert his unaccounted income to

avoid tax through long term capital gain. The ld. DR further submitted that

the observations of the CIT(A) in the impugned order that there was no

incriminating material "in respect of the LTCG” but a statement of the

assessee recorded during the proceeding u/s. 132(4) is piece of evidence

recorded at the time of search although the same has been retracted will

not make the fact corrected that there was no incriminating material.

28 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Therefore, the addition was justified and supported the order of the ld. AO

on this issue. As regards the contention of the ld. AR of the assessee that

the report of the Investigation wing of Kolkatta were sent to all directorate

and in that AO being the central charges not possible to have the copy he may have missed while reporting in the remand proceedings. The ld. DR

challenged the various finding of the ld. CIT(A). He has submitted that even

though the SLP is admitted in the Supreme Court challenged by the

department in the case of Continental Warehousing and Best

Infrastructure. He has further relied on the recent decision of Calcutta High

Court in the case of PCIT Vs. Swati Bajaj where in the issue is decided in

favour of the revenue. He has reiterated the findings recorded by the ld. AO

in his order and the investigation carried out by the Investigation Wing of

the department. He has read the statement of the persons whose

statements are relied upon. He has stated that the fact that the SEBI and

Investigation Wing of the department has given so much of the material on

the issue of bogus long term capital gain including the report of the SIT

report he had relied upon. He has heavily relied on the statement recorded

u/s. 132(4) of the Act wherein the director of the assessee company has

accepted the amount as not genuine transactions and therefore, the same

may be viewed in accordance with the confession made by the assessee.

29 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others The statement is recorded in the presence of the two witness and based on

the confession the investigation was stopped and now the assessee cannot

say that the statement is not correct. The ld. CIT(A) has not discussed the

merits of the case and decided the appeal of the assessee merely on the

technical ground. Even the ld. AO while reporting to the ld. CIT(A) in

remand has ignored the report of the Investigation Wing available with him

but AO may not know to mention that in the remand report. In addition, the

ld. DR also filed a written submission in respect of the grounds raised by

the revenue. The same is extracted here in below :

A Search and seizure action under section 132 (1) of the Income Tax Act was carried out by the Income Tax Department on the persons/ members of the Maverick group, Jaipur on 22nd July 2015. In this group, in some cases department as well is assessee’s are in appeal against the order of CIT (A). The main grounds of appeals have been briefly mentioned in the table above. The CIT (A) has deleted the addition on the ground that additions are not based on incriminating evidences seized during the search. Without verifying the facts, Ld. CIT appeal has deleted additions on legal ground based on various judgements. It is to be noted here that during the search, assesses have accepted that they have taken accommodation entries by way of bogus entries share transactions through penny stocks and claiming long term capital gain through various brokers on payment of commission. In some cases assessee routed unsecured loan in it's books through jamakharchi companies who's creditworthiness, identity and transactions are not genuine. The assessing officer has discussed the issues in great length in the assessment order. I hereby rely on the reasons mentioned an assessment order for such additions. Further, I would like to submit following as under: 1.1 The language of section 153A makes it very clear that there is no explicit or intended requirement of seizure of any incriminating material during the search under section 132(1) before issuing the notice under section 153A. The jurisdiction of section 153A is automatic from the moment a search is initiated. There is no requirement of examination of seized material or recording any satisfaction with respect to availability of seized material before issue of notice under section 153A. The intention of legislature in allowing so could be that the

30 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others initiation of search itself is subject to recording of satisfaction under section 132(1) by the PDIT(Inv.) on grounds that: (i) upon issue of summons under section 131(1) the assessee has failed to produce or would not produce the books of accounts or other documents so requisitioned or (ii) the assessee is in possession of money, bullion, jewellery, article or thing which represents wholly or partly income has not been or would not be disclosed for the purpose of the act. Hence a conjoint reading of section 153A and 132(1) would clearly imply that a satisfaction to issue notice under section 153A is already deemed to be imported from the satisfaction recorded by PDIT(Inv) at the time of issuing warrants under section 132(1). The existence of satisfaction recorded by PDIT(Inv) is liable to be challenged before courts. Hence, until such satisfaction for issue of warrants under section 132(1) are held invalid by any court, the satisfaction recorded by PDIT(Inv) continued to hold the fort for purpose of 153A also and it is for this reason there is no further requirement of recording any belief of satisfaction by AO for issue of notice under section 153A. As may be noted from the conditions of recording the satisfaction of PDIT(Inv), one of the conditions is regarding books or other documents which were not produced or would not have been produced on issue of summons. Thereby implying that post search, while the AO is making assessment, it has to examine the correctness of income disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDIT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(Inv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is disclosed in books or audited accounts, the AO is mandated to examine whether such income / entry was disclosed fully or partly and/ or represents its real nature and source for the purposes of the Act. This inter alia would mean that even the entries disclosed in accounts which might represent income fully or partly would in itself be an incriminating material for which a search was initiated. When the non-production of books or other documents can give rise to a belief for initiating search u/s 132(1), then it may be counterproductive to conclude that the power of AO is restricted to assessment based only on incriminating material found in search, irrespective of any other item of income which might have remained fully or partly undisclosed for the purposes of the Act, based upon the entries already appearing in such books, if any. 1.2 It is the 'assessment of total income' which is required to be made under section 153A. The total income is defined under section 2(45) would be the total income computed as per section 5 of the act. The word 'assessment' cannot have a different meaning for different purposes under the same act unless

31 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others restricted by specific provisions. The process of assessment for the purposes of the act is wide enough to include every kind of enquiry/ examination for discovery, quantification and assessment of the income wholly or partly for the purposes of the act. Hence, the process of' assessment of total income' u/s 153A can neither be restrictive nor have a different connotation for assessment under section 153Avisa-vis143(3) or 147. As per the scheme under the Act, the satisfaction recorded u/s132(1) and the results of search are intended to be brought to a logical conclusion by initiating the proceedings u/s153A without any further act of the AO. Hence it is in the scheme of the Act that after issuance of notice u/s153A, the next action of the AO must follow the examination of all aspects for which a search has been initiated. Hence, it cannot be said that the AO u/s 153A cannot proceed to examine the books of accounts or documents, entries which were produced before him subsequently, wherein might also represent income wholly or partly, which has not been disclosed for the purposes of the Act. Hence, it may be contrary to the scheme of the provisions of 132(1) r/w 153A, if it were to be held that power of AO is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also. The expression ‘total income' would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed items as well as income emanating from undisclosed items. U/s153A, no distinction is made for assessment of total income in the cases which were earlier completed u/s 143(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s2(45) needs to be assessed for all the 6AYs for which the AO is mandated to issue notice u/s153A. 1.3 Further u/s153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s153Awhether or not any evidences were found for that year. It is also implicit that u/s 153A, the items of total income which could be assessed u/s153A in abated proceedings cannot be different for the cases which could not be abated such as: i)where no proceedings were pending; or ii)where earlier assessments were completed u/s 143(3)/147; or iii) where earlier assessments were not made at all. The only caveat could be that before making any addition to the total income, the AO must bring on the record how such items are falling in to the category of total income for the purposes of the Act. Thus, if it were to be held that no addition can be made without any incriminating material in respect of the years covered by section 153A, then it would lead to an absurd consequence whereby the powers granted to issue notices u/s 153A would be rendered otiose in cases which got abated for any particular AY. In the absence of any seized material, AO may not be able to proceed to make any assessment of any other item of total income implying that the process of making assessment of total income as envisaged in

32 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others section153A fails in abated cases. However, a statute can never be interpreted in a manner to make it redundant. 1.4 Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of search, or on the basis of any other post-search material or information available with the AO though such assessment cannot be arbitrary. The provisions of section 147 and section 153A, though have different conditions to assume jurisdiction but both operate to make the assessment of total income only. The Memorandum explaining the provisions of Finance(No.2) Bill of 2009 while inserting explanation 3 to section 147 reads as under: "Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent. Therefore to articulate the legislative intent clearly, explanation 3 has been inserted in section 147 to provide that assessing officer may examine, assess or reassess any issue relevant to income which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue has not been included in the reasons recorded under subsection(2)ofsection148”. Hence, even in absence of any explanation u/s 153A also similar to the explanation 3 u/s 147, the intention of the legislature and the scheme of the Act for making assessment u/s 153A where search u/s 132 is initiated, is same i.e. in order to make assessment of total income, after having assumed the jurisdiction to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. 1.5 There is divergence of judicial opinion on the question of whether assessment u/s153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a view based on something which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the conflicting opinions expressed in judicial verdicts are as under: (a) Allahabad High Court in Raj Kumar Arora 367 ITR 517 has held that there is no requirement of incriminating material for invoking provisions of 153A. (b) The Delhi High Court in Kabul Chawla 380 ITR 573(Del) held that assessment u/s 153A on an issue could not have been made unless backed by some incriminating material found during the search. The department has not accepted the decision in case of Kabul Chawla and the SLP was filed was subsequently withdrawn due to low tax effect. (c) However, the same Delhi High Court in case of Dayawanti Gupta Vs CIT 390 ITR 496(Del) in para16 has observed that:

33 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others “Section 153A, which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 with effect from 1-6-2003, does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier section 158BB which is not applicable in case of a search conducted after 31-5-2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are related to the materials found. Section 153A(1)(b) requires assessment or reassessment of total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under section153A can be arbitrary or made without any relevance or nexus with the seized material…..”. Filatex India Ltd Vs CIT-IV 229 Taxman 555(Delhi) Whether during assessment under section153A, additions need not be restricted or limited to incriminating material found during course of search and, hence, argument of assessee that addition under section115JB was not justified in order under section 153A as no incriminating material was found concerning said addition had to be rejected -Held, yes. Sunny Jacob jewellers and wedding center Vs DCIT3 62 ITR 664(Ker) Whether there is no requirement under provisions of Act requiring department to collect information and evidence for each and every year for six previous years in order to initiate proceedings under section 153A–Held, yes. CIT Vs Anil Kumar Bhatia 352 ITR 493(Delhi) Whether even if assessment order had already been passed in respect of all or any of those six assessment years, either under section143(1)(a) or section143(3) prior to initiation of search/ requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search- Held, yes CIT-II Vs continental warehousing corporation 235 Taxman 568(SC) The High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding - Whether Special Leave Petition filed against impugned order was to be granted- Held, yes Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) Ltd. 256 Taxman 63(SC) High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent

34 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others additions made by Assessing Officer on said basis were not justified-Whether SLP against said impugned order was to be allowed- Held, yes. The dismissal of SLP by supreme court in case of PCIT vs Meeta Gutgutia wherein also the same views were expressed as in Kabul Chawla, would also not lead to conclusion that the question decided by Delhi High court against the revenue in Meeta Gutgutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continental warehousing, Best Infrastructure(supra). Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there was incriminating material is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prior to1/4/2005. 1.6 The sum and substance of all the decisions above could only indicate that the question of whether the AO has powers u/s 153A to assess total income as defined u/s2(45) dehors the incriminating material also, has not at all become final and the same is yet pending final adjudication before the SC in SLPs admitted. 2. Incriminating material: (i) The incriminating material for the purpose of making an assessment of total income u/s153A? (ii)Whether the mere fact that an entry has been considered in any earlier proceedings or that the entry/ income is recorded in accounts in the manner which is later found to be different from its true nature and source could take away its character of being incriminating for the purpose of making an assessment u/s153A? 2.1 The 'incriminating material' can be in any form such as evidence in the nature of i) a document, content of any document; ii)an entry in books of account; iii) an asset; iv)a statement given on oath; v) absence of any fact claimed earlier but coming to notice during search; vi) absence of books being found during search; or vii) absence of the office /business premises as claimed during returns filed or any other documents, etc. In short, any fact/ evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/ make belief based on non-existent facts or suppressed /mis represented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under: High Court by impugned order held that since assessee him self had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents -Whether

35 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Special Leave Petition filed against impugned order was to be dismissed-Held, yes Hence even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s153A. 2.2 Since the proceedings under the Act are civil in nature, even the circumstantial evidences based on preponderance of probability will constitute incriminating material enough to make an assessment of income and fasten the tax liability as held by in Sumati Dayal Vs CIT 214 ITR 801(SC). It will therefore include any circumstantial material also, which directly or indirectly ,proves that the earlier evidence submitted was only a make belief and such new material has a bearing on the assessment of total income of any assessee, even if such income was earlier admitted as correct in absence of any such adverse facts available at the time of earlier assessment. The requirement of incriminating material is not specifically mentioned in the Act. However, w.e.f. 1/4/2005 the provisions of section 153C have been amended so as to allow the invocation of proceedings u/s153C if any document, an entry or an asset is found in relation or pertaining to a person other than the searched person, which has a bearing on the assessment of total income as per the provisions of the I T Act. Hence the word “incriminating”, as used by the courts in context of section 153C, needs to be applied in the context of section 153A also which has to be seen as something which can have a bearing on the assessment of correct total income u/s2(45) as per provisions of the Act. 2.3 The expression 'have a bearing on determination' as used u/s 153C also has a wide connotation which implies that the nexus of the seized documents/ assets to income should only be a logical nexus to the ultimate process of determination of total income and that such evidence need not be in the nature of direct hard evidence. Applying the same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not a hard evidence. The use of the expression 'books of accounts' u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also par take the character of incriminating material, if the same has a bearing on the determination of income which has not beena lready disclosed in the return filed, ifa ny. Hence, the entries in the regular books of accounts would also trigger the assessment u/s 153A /C, if there is some prima-facie evidence that the entry recorded there in is camouflaged, or incorrect, wholly or partially, and such entries have a bearing on determination of total income of such person. The definition under clause(ii)of 271AAB(c) also defines undisclosed income as “any income based on entry in books of accounts wholly or partly false and would not have been found to be so, had the search not been conducted”. This clearly implies that any entry even recorded in the books, which is found to be wholly or partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. Further, recently introduced section 270A, which is also applicable to search assessments for AYs other than specified years, mandates to levy

36 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others penalty even in cases where the expenses had been claimed in the books without any evidence or where the entries recorded in the books were found to be false. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. The same principle will also hold good for the documents submitted earlier in relation to entries recorded in the books but later found that the documents were not genuine or manipulated or camouflaged. Supreme Court in Sinhgad Tech Edu Society or Delhi High Court in Kabul Chawla never considered the implication of section 270A and 271AAB as explained above while considering as to what material would constitute incriminating for the purposes of assessment of total income under section153A /C.

2.4 The provisions of section 153A/153C are not the normal assessment provisions like 143(3); rather they are curative provisions to plug the mischief of evasion of taxable income based on evidences found in pursuance to search. Hence, if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries /earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Hence applying the Hayden's rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest other wise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550(Cal). The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently in CIT Chennai vs Aji S Kumar 93 Taxman.com 294(SC), the court in the context of section158BB has upheld the use of information collected in a survey in case of connected person carried along with search in other person for the purpose of making assessment u/s158BB. Provisions of 158BB are Pari Materia to section153A. The Delhi High court in PCIT Vs Kabul Chawla in para37(iv)observed as under: “iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post- search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or

37 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material." The Delhi High court has thus explained the underlying principle that though the assessment may not be based on seized evidence only but the addition cannot be arbitrary. There can be no dispute on this proposition. It has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found. Thus, any entry already recorded in the books which is not true in its nature or source and any information even coming to the AO post search shall constitute incriminating material for the purpose of making an assessment u/s153A.

38 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.Papayya Sastry and Others Vs. Govt.Of Andhra Pradesh and others reported in (2007) 4 Supreme CourtCases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-estand nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) ByLrs reported in (2008) 8 Supreme Court Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is anullity in the eye of law. Section 44 of the Evidence Act also enables a party other wise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud. Thus, the above propositions of law abundantly make clear that the AO also being a quasi-judicial authority, while functioning under the Act, shall also be bound by similar principles of jurisprudence. Hence, for the purposes of assessment of total income u/s 153A also, any findings given in respect of any claim /relief in earlier proceedings shall stand vacated by operation of legal principles (as held byth eApex court above), where it is found that in earlier proceedings the AO has been misled by suppression or misrepresentation of material factsor by producing only make belief documents, which were not found to be genuine subsequently based on emergence of new facts during enquiries. Hence the view that the AO cannot rescind from accepting the documents admitted earlier is not a gospel truth which can be applied in each and every circumstance. 3.2 Further the Apex court in ITO Vs. Techspan India (P.) Ltd. 92 taxmann.com 361(SC) observed as under: Whether before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion no matter which is basis of alleged escapement of income that was taxable; if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings- Held, yes -Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion

39 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings- Held, yes In view of the above, applying the same principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/ evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/ entries disclosed in the return of income already filed prior to the search. The judicial view is very clear where in it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. Hence, if any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s153A. In view of the above, I is clear that if there is some material noticed subsequently whether found during search or otherwise, the findings of earlier assessments can be dislodged, irrespective of whether such earlier assessmentwasunder143(1)or143(3)/147. 4. It is worthwhile to mention here that in the case of Suman Poddar Vs ITO in ITA No. 841/2019 vide judgement dated 17.09.2019, it has been held by the Hon’ble High Court of Delhi that:

“7. Thus, the Tribunal has in depth analyzed the balance sheets and the profit and loss accounts of Cressanda Solutions Ltd. which shows that the astronomical increase in the share price of the said company which led to returns of 491% for the Appellant, was completely unjustified. Pertinently, the EPS of the 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, the other financials parameters of the said company cannot justify the price in excess of Rs. 500/- at which the Appellant claims to have sold the said shares to obtain the Long Terms Capital Gains. It is not explained as to why anyone would purchase the said shares at such high price. The Tribunal goes on to observe in the impugned order as follows:

“10. With such financials and affairs of business, the purchase of share of face value Rs. 10/- at the rate of Rs.491/- by any person and the assessee's contention that such transaction is genuine and credible and arguing to accept such contention would only make the decision of the judicial authorities a fallacy. 11. The evidences put forth by the Revenue regarding the entry operation fairly leads to a conclusion that the assessee is one of the beneficiaries of the accommodation entry receipts in the form of long-term capital gains. The assessee has failed to prove that the share transactions are genuine and could not furnish evidences regarding the sale of shares except the copies

40 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others of the contract notes, cheques received against the overwhelming evidences collected by the Revenue regarding the operation of the entire affairs of the assessee. This cannot be a case of intelligent investment or a simple and straight case of tax planning to gain benefit of long-term capital gains. The earnings @ 491% over a period of 5 months is beyond human probability and defies business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assessee. Even the brokers who coordinated the transactions were also unknown to the assessee. All these facts give credence to the unreliability of the entire transaction of shares giving rise to such capital gains. The ratio laid down by the Hon'ble Supreme Court in the case of SumatiDayal vs. CIT, 214 ITR 801 is squarely applicable to the case. Though the assessee has received the amounts by way of account payee cheques, the transactions cannot be treated as genume in the presence of the overwhelming evidences put forward by the Revenue. The fact that in spite of earning such steep profits, the assessee never ventured to involve himself in any other transaction with the broker cannot be a mere coincidence of lack of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd. (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. In the case of NR Portfolio, it was held that the genuineness and credibility are deeper and obtrusive. Similarly, the bank statements provided by the assessee to prove the genuineness of the transactions cannot be considered in view of the judgment of Hon'ble court in the case of Pratham Telecom India Pvt. Ltd., wherein, it was stated that bank statement is not sufficient enough to discharge the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. Similarly, the Tribunal in the case of Udit Kalra, ITA No. 6717/Del/2017 for the assessment year 2014-15 has categorically held that when there was specific confirmation with the Revenue that the assessee has indulged in non-genuine and bogus capital gains obtained from the transactions of purchase and sale of shares, it can be a good reason to treat the transactions as bogus. The differences of the case of Udit kalra attempted by the Ld. AR does not add any credence to justify the transactions. The Investigation Wing has also conducted enquiries which proved that the assessee is also one of the beneficiaries of the transactions entered by the Companies through multiple layering of transactions and entries provided. Even the BSE listed this company as being used for generating bogus LTCG. On the facts of the case and judicial pronouncements will give rise to only conclusion that the entire activities of the assesseeis a colourable device to obtain bogus capital gains. The Hon'ble High Court of Delhi in the case of Udit Kalra, ITA No. 220/2009 held that the company had meager resources and astronomical growth of the value of the company's shares

41 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others only excited the suspicion of the Revenue and hence, treated the receipts of the sale of shares to be bogus. Hon'ble High Court has also dealt with the arguments of the assessee that he was denied the right of cross examination of the individuals whose statements led to the enquiry. The ld. AR argument that no question of law has been framed in the case of Udit Kalra also does not make any tangible difference to the decision of this case. Since the additions have been confirmed based on the enquiries by the Revenue, taking into consideration ratio laid down by the various High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals listed below. � MK. Rajeshwari vs. ITO in ITA No.17231Bangl2018, order dated 12.10.2018. � Abhimanyu Soin vs. ACIT in ITA No. 9511Chdl2016, order dated 18.04.2018. � Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196. � Dinesh Kumar Khandelwal, HUF vs. ITO in ITA No. 58 & 591Nagl2015, order dated 24.08.2016. � Ratnakar M Pujari vs. ITO in IT A No. 9951Muml2012, order dated 03.08.2016. � Disha N. Lalwani vs. ITO in ITA No. 6398 I Mum I 2012, order dated 22.03.2017. � ITO vs. Shamim. M Bharwoni [20 16] 69 taxmann.com 65. � Usha Chandresh Shah Vs ITO in ITA No. 6858 I Mum I 2011, order dated 26.09.2014. � CIT vs. Smt. Jasvinder Kaur 357 ITR 638. 12. The facts as well as rationale given by the Hon 'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, we, hereby decline to interfere in the order of the Ld. CIT(A).” 8. From the above extract, it would be seen that the Cressanda Solutions Ltd. was in fact identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus Long Term Capital Gain. No evidence of actual sale except the contract notes issued by the share broker were produced by the assessee. No question of law, therefore arises in the present case and the consistent finding of fact returned against the Appellant are based on evidence on record. 9. In the aforesaid facts and circumstances, we do not find any merit in the present appeal and the same is dismissed.”

42 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others It may be mentioned that in the above referred case, the Hon’ble High Court has given due cognizance to the circumstantial evidences and the human probability over the evidences filed by the assesee. It is further submitted that the SLP filed by the assessee in the above case was dismissed by the Hon’ble Apex Court vide its order dated 22.11.2019 SLP (C) No. 26864/2019.

The Hon’ble Rajasthan High Court in the case of CIT vs Ravi Mathur held that the statement recorded u/s. 132(4) of the Act have great evidentiary value and it can not be discarded in a summary and cryptic manner, by simply observing that the assessee retracted from his statement. In the case of Bannalal Jat Construction (P.) Ltd vs ACIT (2019) 106 Taxmann.com 128 (SC) where high court upheld addition made by authorities below relying uppn statement made in course of search proceedings by director of assessee company, since assessee failed to discharge its burdon that admission made by director in his statement was wrong and said statement was recorded under duress and coercion, SLP filed against of High Court was to be dismissed. In the present group cases admission made by assessee’s under 132(4) of the Act are squarely covered with the judgement. 6. In the appellant cases the penny stock script for accommodation entry traded was “SPLASH MEDIA” MIDLAND POLYMERS LIMITED, SULABH ENGINEERING, FIRST FINANCIAL SERVICES LIMITED, EINS EDUTEC LIMITED FACT ENTERPRISE for LTCG is the main script which has been identified as penny stock by the Investigation Report prepared by Directorate of Investigation, Kolkata dated 27.4.2015. In the recent judgement of Kolkata High Court in the case of PCIT vs. Swati Bajaj & others, Hon’ble High Court has accepted the Investigation report and based on which the bogus LTCG claimed by various persons have been rejected and judgement made in favour of Revenue. In appeals of the Mevrick group cases main penny stock where accommodation entries were through brokers obtained was “Splash Media”. These assessees have claimed bogus LTCG in the same script where Kolkata High Court has treated the script as penny stock on the basis of Investigation report. During search assessees has also accepted in their statement recorded u/s.132(4) of Act that they earned bogus LTCG by accommodation entry in script “Splash Media “. The copy of Kolkata High Court judgment and “Investigation report” is submitted for kind consideration.”

Bajaj case which was in favour of revenue. The ld. AR has filed a note

43 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others showing as to why the said judgment is not relevant in the present set of

cases. The same is reiterated here in below :

Distinguishing Note

The reliance on the judgment of Hon’ble Calcutta High Court in the case of Swati Bajaj is misplaced for the following legal and factual reasons:

It was submitted before the Hon’ble Court that the Tribunal erred in holding that the information and statements recorded by Investigation Wing could not be taken into consideration while making assessment as such material was not disclosed nor an opportunity was accorded for cross-examination of the assessee. It was submitted before the Hon’ble Court that Tribunal did not examine the case on touchstone of human probability. However, Hon’ble High Court upheld the order of the Tribunal. It was considered that prejudice was caused to the assessee as he should

44 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others have been allowed an opportunity of being heard and of rebutting the evidences against him. It was also impliedly held that direct evidences weigh more than circumstantial evidences and human probabilities. The relevant extract of order is as under: “..The Tribunal by impugned order has categorically held that the material information received by the Assessing Officer from the investigation wing alongwith certain statements recorded by DBIT Investigation, Calcutta could not be taken into consideration as that material was not disclosed nor an opportunity was accorded for cross-examination of the Assessee. This finding recorded by the Tribunal cannot be said to be perverse or suffering from any patent illegality. Learned counsel for the Revenue could not satisfy us with reference to any judgment on this aspect that even without disclosing any material to the Assessee and without allowing him proper cross-examination, such undisclosed and unverified material could be taken into consideration for the purposes of addition…” …

“..Learned counsel for the Revenue relying upon the judgment passed by the Supreme Court in the case of Sumati Dayal Versus Commissioner of Income Tax, Bangalore reported in AIR 1995 SC 2109 would submit that the Tribunal has not examined the case on the touchstone of human probability…”

“..In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed…”

4.1 Pooja Agarwal, ITA 385/2011, In the said case it was held that no addition can be made if the following conditions are satisfied: i. There is no trail which could substantiate that the cash has flown back to the assessee. ii. The transactions is supported by documents appear to be genuine transaction. iii. The statements recorded do not have a clear and a distinct remark about the assessee so as to challenge the genuineness of the transaction.

4.2 PCIT vs Pramod Jain, DB ITA No. 209/2018 The decision in case of Pooja Agarwal was followed 4.3 CIT vs Sumitra Devi [2014] 49 taxmann.com 37 (Rajasthan)

45 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Hon’ble Rajasthan High Court has held that in the said there were several suspicious circumstances as indicated by AO, however, the findings of AO were more on presumption rather than on cogent proof. Further, AO failed to show that documents placed on record by the assessee were false, fabricated or fictitious.

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

46 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 7.1 Hon’ble Supreme Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) dismissed the SLP filed against the decision of Hon’ble Gujarat High Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 176 (Gujarat). Hon’ble Gujarat High Court held that there was no substantial question of law and upheld the finding of the Tribunal (in Para 4). Hon’ble Tribunal held that in a case where assessee produced all the evidences and addition was made on the basis of statements recorded by Investigation Wing, which were neither confronted nor the assessee was allowed opportunity to cross examine, such addition could not be sustained (Para 2): "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

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

47 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee]

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

7.4 Andaman Timber Industries (CIVIL APPEAL NO. 4228 OF 2006) “…not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected”

48 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others corroboration does not justify the conclusion that the assessee obtained an accommodation entry. Relevant extract is as under: “11. ………The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In

49 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

50 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others In the instant case specific request was made for copy of report as well as copies of statements recorded of different persons. 10. In respect of the circumstantial evidences the Hon’ble Calcutta High Court has not disturbed the settled position of law that circumstantial evidences can be looked into only when direct evidences are not available (Para 69 page 108). In the instant case direct irrefutable evidences were made available to the ld. AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even in reference to the decision of Hon’ble Calcutta High Court.

available on record and also gone through the findings of the lower

authorities recorded in their respective orders. We have also gone through

the various judicial ruling placed before us by both the parties to drive home

to their contentions. For the year under consideration the assessee has

offered short term capital gain of Rs. 3,05,14,396/- on sale of share of M/s.

Midland Poly and Rs. 3,20,61,825/- on sale of shares of M/s. Sulabh

Engineering. Both these scrips were purchased on line and sold online

through registered share broker by various contract notes. Due security

transaction tax(STT) was also paid by the assessee at the time of purchase

and sale transactions. The consideration routed through normal banking

account through RTGS. The assessee has furnished copy of bank

statement showing payment so received, assessee’s ledger account in the

books of account placed on record, related contract notes through which

the purchase and sales were made showing unique settlement code and

51 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others transaction executed along with date of transactions. All these transactions

were very well placed on record before the assessing officer. He remains

silent on the evidence filed and not uttered a single statement as to why the

same are not correct or reliable. All these transactions were real time

transaction entered into the portal and there are no efforts to see the

correctness of these documents by any of the authority i.e. BSE/NSE. The

ld. AO merely reiterated the inquiry conducted by the investigation wing of

Kolkatta unit. The department did not controvert the repeated argument of

the ld. AR that no incriminating documents found related to these

transactions. These facts are even confirmed by the AO in his remand

report, so the revenue did not take a plea that the AO was not given a fair

chance by ld. CIT(A). The ld. AO make the addition u/s. 68 & 69C only

based on the statement recorded u/s. 132(4) which was duly retracted and

the investigation information received by the AO in the form of statement

recorded of the person. The ld. AR also placed on record the retraction

affidavit of a person whose statement is relied upon while making the

addition.

52 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others 14.1 The ld. AR of the assessee by filling various records as listed here in

below in his paper book explained the circumstance under which the

disclosure was obtained by the department.

Sl. Particulars Page Nos. 5. Copy of Statement of Penalty Charges levied by National Securities Clearing 48-50 Corporation Limited for the month of July 2015. 6. Copy of Details of Login into the NSE Derivative Market Segment dated 51 23.07.2015. 7. Copy of Details of Login into the NSE Derivative Market Segment dated 52 21.07.2015. 8. Copy of Details of Login into the NSE Capital Market Segment dated 53-54 21.07.2015. 9 Copy of Details of Login into the NSE Capital Market Segment dated 55 23.07.2015. 8. Copy of Details of Login into the NSE FO Segment dated 22.07.2015. 56 9. Copy of Details of Login into the NSE Cash Segment dated 22.07.2015. 57 10. Copy of Contract notes pertaining to Sale of Shares of M/s Midland Polymers 58-59 Ltd. and M/s Sulabh Engineering 11. Copy of Ledger from 01.04.2013 to 31.03.2014 90-92 12. Copy of Invoice and bank statements reflecting payment on purchase and 93-108 sale of shares of M/s Midland Polymers Ltd. and M/s Sulabh Engineering 13 Copy of D-Mat Statements pertaining to M/s Midland Polymers Ltd. And M/s 109-126 Sulabh Engineering 14 Affidavit of Sh. Anil Agarwal retracting Statements given during Search 127-132 conducted by Investigation Wing, Kolkata

14.2 The ld. AR of the assessee submitted that even though all the

transactions are correctly recorded and no cash trail or any other

documents to prove that the transactions entered by the assessee are not

genuine transactions or are in the nature of accommodative entries. We

found from the evidence placed by the assessee that the department has

taken the benefit of the pressure under which the assessee was passing, as

department did not allow to do stock exchange operations and banking

transaction too. This circumstance forced the assessee to sign the

53 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others statement as per will and wishes of the department and ultimately the

statements made were retracted by filling a detailed affidavit.

14.3 The ld. AO has not applied his mind independently to check the

veracity of these documents and has, merely on the third-party statement

made the addition. The statement of the person relied upon has also

retracted their statement, so the reliability of these evidence without

allowing the cross examination cannot be used against the assessee. Even

the assessee has submitted the copy of the affidavit of the person whose

statement relied upon has retracted from his statement. The ld. AO has not

raised single questions on the evidences and its correctness. Even the

assessee has submitted that Shri Anil Agarwal whose statement is heavily

relied upon has retracted his statement. Further, the purchase transaction

has been done with the recognised stock broker and consideration has also

been paid through cheque, their broker’s name is not spelled out in the

investigation done by the Kolkatta investigation wing. Therefore, even if the

purchase consideration is found to be very less in comparison to the sale

consideration at the time of sale of shares, in the absence of any material or

other facts detected or brought on record by the AO that the assessee has

brought back his own unaccounted money in the shape of short/long term

54 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others capital gain and has used the same as a device to avoid tax and route their

unaccounted income. The purchase and sales consideration paid and

received by the assessee using independent banking channel and broker’s

online platform cannot be doubted in absence of any corroborating

evidence found in the course of search. No cash trail or any incriminating

material suggesting such transaction as accommodation entry is found by

the search team.

14.4 During the assessment proceeding the cross examination of the

witness were requested by the assessee because the same were relied

upon against the assessee. The assessee has submitted that in the

statement relied upon there is no such reference of the broker of the

assessee and any cash trail established by the person whose statement is

relied upon. Therefore, assessee requested the ld. AO for cross

examination in the assessment proceedings. However, the ld. AO did not

offer the opportunity of cross examination even though the assessee has

sought specifically. Thus, as observed in various judgment specifically the

famous decision of apex court in the case of CCE vs. Andaman Timber

Industries 127 DTR 241 the assessment based on statement without giving

an opportunity is not sustainable in law. We further note that the assessee

55 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others produced copy of affidavit of Shri Anil Agarwal who has retracted his

statement, however without going into controversy of the retraction of the

statement, the fact remains that the statement of a third party cannot be

used by the AO without giving an opportunity of cross examination to the

assessee. A similar issue has come up before this Bench in case of Shri

Pramod Jain and others vs. DCIT (ITA No. 368/JP/2017 dated 31.01.2018)

where in the coordinate bench held that the statement of witness cannot be

sole basis of the assessment without given an opportunity of cross

examination and consequently it is a serious flaw which renders the order a

nullity. Being consistent we also feel that when the additions were purely

based on the statement of a person and said person has filed a retraction

affidavit and before using the said statement against the assessee the AO

cannot put a side such request of the assessee for cross examination and

the addition made purely on the statement is not valid and is against the

principles of nature justice.

14.5 We have seen from the records that the Assessing Officer has not

brought any material on record to show that the assessee has paid over

and above the purchase consideration as claimed and evident from the

bank account then, in the absence of any evidence it cannot be held that

56 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others the assessee has introduced his own unaccounted money by way of bogus

long/short term capital gain. Not only that he has not verified the records

related the transaction on hand with that of the agencies under the power

vested upon him to cross verify the evidence filed by the assesse. Thus,

now on both the side ld. AO cannot act against the assessee the he did not

verify the documents and did not allow cross examination and even though

he make the addition. There is not single evidence found in the search

operation that the transaction recorded in the books of the assessee are not

genuine. Thus, even on facts placed on record by the assessee the

transaction cannot be considered as bogus and no addition can be called

for under section 68 of the Act.

14.6 The bench has also analysed the decision findings of the ld. CIT(A).

He has analysed that merely based on the statement u/s. 132(4) without

any corroborative evidence no addition can be made. A statement made

must be relatable to incriminating material found during the course of

search or the statement must be made relatable to material by subsequent

inquiry / investigation. To drive home to this contention he relied upon the

decision the finding of Rajasthan High Court in the case of Mantri Share

Brokers Private Limited [ 96 taxmann.com 279 ]. Based on the decision of

57 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Harjeev Agarwal and Best Infrastructure the ld. CIT(A) further noted that

statement recorded u/s. 132(4) of the Act do not themselves constitute

incriminating material on this aspect he has also relied upon various

judgement. The ld. CIT(A) also quoted the judgment of Gujarat High Court

in the case of CHETNABEN J SHAH LEGAL HEIR OF

JAGDISHCHANDRA K SHAH where in the Hon’ble High Court hold a view

that no addition can be made in the hands of the assessee merely on the

basis of statements recorded during the course of search. He also

discussed other case laws in his order and hold a view that without

corroborative evidence no addition can be made in the hands of the

assessee. He also recorded a finding that it is settled position of law that if

an assessee, under a mistake, misconception or on not being properly

instructed is over assessed, the authorities are required to assist him and

ensure that only legitimate taxes are collected. The ld CIT(A) further noted

that on close perusal of the assessment order shows that there is no

incriminating seized material found during the course of search u/s. 132(1)

which shows that STCG/LTCG claimed is bogus or non-genuine. For this

he relied upon the remand report which is extracted in his order at page 24

where in that remand proceeding AO confirmed this fact. The ld. CIT(A)

discussed the statement of entry operators, he also called for copies of the

58 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others statement from the ld. AO and have gone through the entire statement then

he recorded his findings that yet nowhere in the statement the entry

operators given specifically name of the appellant nor he deal with the fact

that in the case of appellant equal and amount of cash was given which

was routed through the capital gain in the form of LTCG. He further

recorded his finding that after the oral statements were available by the AO

the appellant proved the oral statement to be incorrect by filling

documentary evidence. The ld. CIT(A) further observed that after the filling

of this information the ld. AO did not prove the documentary evidence to be

untrue / bogus / non genuine. Therefore, the oral statement losses their

evidentiary value in the light of the documentary evidence placed by the

appellant. Even the oral statement is general and does not pin point or

mention appellant name anywhere. Neither does it mention anywhere that

cash from assessee was received & it was same cash which was routed

back to the assessee. Based on these finding he vacated the reliance of

AO on these statements. The ld. AO relied on the findings of the SIT report

and SEBI report for that the ld. CIT(A) observed that these reports are

pieces of information and the AO was expected to convert it into evidence

by further inquiry which would comprehensively prove that it is assessee

cash which was routed and came back to the assessee in the form of

59 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others capital gain. The report of the SEBI Related to the stock market regulation

and its order is not in assistance to the revenue based on these findings

the CIT hold view that mere statement of third-party is not enough to make

addition in the hands of the assessee and also vacated the findings of the

ld. AO. The ld. CIT(A) reviewed the copies of the documents filed by the

assessee wherein he is reviewed the contract notes, ledger account, bank

statement, demat account, affidavit of Anil Agarwal etc. after going through

this records he observed that no questions raised before the Anil Agarwal

about the transaction entered by the assessee is under his knowledge not

only that the Anil Agarwal retracted his statement so even on that count no

addition can be made in the hands of the assessee. Then ld. CIT(A)

extracted various decision that has been considered by him while

considering the appeal of the assessee and the same were not reiterated

here to avoid the duplication but he has mainly considered the various

jurisdictional binding decision and based on those findings he allowed the

appeal of the assessee. The ld. DR reiterated the findings recorded by the

AO and submitted that the ld.CIT(A) has deleted the addition merely on

technical ground and no merits of the case is discussed. We find that ld.

CIT(A) has dealt all the aspects that the ld. AO has raised and given his

finding on each one every issue in detailed and has also called for the

60 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others remand report, now the revenue cannot take a plea on the issue again.

Thus, we do not find any reason to deviate from the findings recorded by

the ld. CIT(A) in his order and we do not find any mistake of facts as well as

in law in the detailed and reasoned findings of the ld. CIT(A). In view of the

above facts and circumstances of the case, we are of the considered

opinion that the addition made by the AO is based on mere suspicion and

surmises without any cogent material to show that the assessee has

brought back his unaccounted income in the shape of long/short term

capital gain. On the other hand, the assessee has brought all the relevant

material to substantiate its claim that transactions of the purchase and sale

of shares are genuine. Accordingly, we do not find any reasons to deviate

from the detailed and reasoned finding of the ld. CIT(A) and thus we

dismiss the ground no 1 of the revenue.

made by the AO on account of notional commission of Rs. 37,57,573/- u/s

69C of the Act which is consequential to the issue of treatment of long/short

term capital gain as bogus. Once, we have confirmed the finding of the

CIT(A) on the issue of treatment of long/short term capital gain as not

bogus then, the consequent addition made by the AO rightly deleted by the

61 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others CIT(A) and accordingly ground no. 2 raised by the revenue is also

dismissed.

assessment year 2014-15 in the case of M/s. Maverick Commodity Brokers

Private Limited are similar to the issues in the case of Shri Mukut Bihari

Agarwal for Assessment Year 2015-16, in the case of Anshul Jain,

Assessment Year 2014-15, and in the case of Smt. Sunita Agarwal for

assessment year 2014-15 & 2015-16 also wherein the order of the ld.

CIT(A) has been sustained. Therefore, the decision taken by this bench in

the appeal of the Department for the assessment year 2014-15 in the case of M/s. Maverick Commodity Brokers Private Limited shall apply mutatis

mutandis to the appeal of the Department in the case of Shri Mukut Bihari

Agarwal for Assessment Year 2015-16, in the case of Anshul Jain,

Assessment Year 2014-15, and in the case of Smt. Sunita Agarwal for

assessment year 2014-15 & 2015-16 also.

In the result appeals of the revenue are dismissed

Order pronounced in the open court on 26/09/2022.

Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member

62 ITA No. 27/JP/2020 & others M/S Maverick Commodity Brokers Pvt. Ltd.& others Tk;iqj@Jaipur fnukad@Dated:- 26/09/2022 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- ACIT, Central Circle-4, Jaipur. 1. 2. izR;FkhZ@ The Respondent- M/s Maverick Brokers Pvt. Ltd., Jaipur Sh. Mukut Bihari Agarwal, Jaipur Sh. Anshul Jain, Jaipur Smt. Sunita Agarwal, Jaipur 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA Nos. 27, 155, 163, 157 & 158 /JP/2020) 6. vkns'kkuqlkj@ By order,

सहायकपंजीकार@Aेेजज. त्महपेजतंत