ADITYA BAHETI,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 562/JPR/2023 fu/kZkj.k o"kZ@Assessment Years : 2014-15 Aditya Baheti cuke Income Tax Officer, G-7, Kabir Marg, Bani Park, Vs. Jaipur. Jaipur. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFFPB5970A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Ms. Nupur Khandelwal, C.A ( V.H.) jktLo dh vksjls@Revenue by: Smt. Monisha Choudhary (Addl. CIT) lquokbZ dh rkjh[k@Date of Hearing :28/08/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 23/09/2024 vkns'k@ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the assessee is directed against the order of the Ld. CIT(A) dated 30.06.2023, National Faceless Appeal Centre, Delhi[herein after referred to as “CIT(A)/(NFAC)”] for the assessment year 2014-15. 2. The assessee has raised the following grounds of appeal:- “1.The Ld. Assessing Officer has grossly erred in making addition amounting to Rs. 23,89,107/- in the total income of Rs. 14,36,073/- as declared by the assessee for the A.Y. 2014-15. The contention of the Ld. AO is that the investment made in the company Tarbo

2 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO Tech Ltd. And expenditure incurred in earning the LTCG u/s 10(38) is bogus, is not acceptable. 2. The Ld. Assessing Officer has also erred in adding Rs. 48,790/- in the income of the assessee as commission paid by the assessee from his unexplained income for earning above income on the assumptions and personal imagination of transaction. 3. The ld. CIT Appeal has not considered our reply submitted on the Income Tax Portal on 09.06.2023 vide response to notice ID 100063149108 and the same has been marked as “no response submitted” in the order issued by the CIT(A) dated 30.06.2023.

3 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO exemption of Rs. Rs.23,89,107/- under sec. 10 (38) of the Income Tax Act, 1961 on sale of shares of M/s Tarbo Tech Ltd. The assessment was completed by treating the LTCG as income from other sources and also commission for acquiring accommodation entry. The Total Income of the assessee was assessed at Rs.38,73,970/-.

“6. During the course of appellate proceedings, various notices were issued and served upon the appellant the details of which are tabulated hereunder for reference:- Sr. No. Date of issue of notice and type of notice Date of Reply of compliance appellant 1. Notice dated 28.12.2020 seeking 06.01.2021 No Reply documents in support of appeal memo 2. Notice dated 23.03.2022 seeking 28.03.2022 No Reply documents in support of appeal memo 3. Notice dated 06.04.2022 seeking 08.04.2022 No Reply documents in support of appeal memo 4. Notice dated 18.10.2022 seeking 27.10.2022 No Reply documents in support of appeal memo 5. Notice dated 21.11.2022 seeking 28.11.2022 No Reply documents in support of appeal memo 6. Notice dated 02.12.2022 seeking 09.12.2022 No Reply documents in support of appeal memo 7. Notice dated 22.12.2022 seeking 30.12.2022 No Reply documents in support of appeal memo 8. Notice dated 02.01.2023 seeking 09.01.2023 No Reply

4 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO documents in support of appeal memo 9. Notice dated 01.02.2023 seeking 09.02.2023 No Reply documents in support of appeal memo 10. Notice dated 21.04.2023 seeking 28.04.2023 No Reply documents in support of appeal memo 11. Notice dated 03.05.2023 seeking 10.05.2023 No Reply documents in support of appeal memo 12. Final show cause notice dated 01.06.2023 09.06.2023 No Reply seeking document in support of Appeal memo

6.1 It is clear from the above that the appellant has been granted several opportunities to represent its case in the appellate proceedings but has failed to make any submissions in support of the grounds of appeal filed by it. This shows that the appellant is not interested in prosecuting the appeal filed by it. In the appellate proceedings, burden of proof lies on the appellant to prove that the facts and the findings of the Assessing Officer are incorrect. Since the appellant has chosen not to submit any details in support of grounds of appeal, it is not possible to decide appeal on merit.

6.2 As mentioned in paragraph 6 of this appeal order, this office has issued several letters to file written submission, however, neither any adjournment was sought for nor was any written submission filed. The letters were issued through ITBA System at the mail ID provided by the appellant. It is verified that all the mails sent through the ITBA are delivered to his email ID, however, no reply is submitted in support of the grounds of appeal filed.

From the above conduct of the appellant, it is evident that the appellant is no more interested in pursuing the appeal. Hon'ble Supreme Court in the case of CIT Vs B.N. Bhattacharjee and others [1979] 10 CTR 354 (SC) observed that preferring an appeal, means effectively pursuing it. Hon'ble M.P. High Court in the case of Estate of Late TukojiraoHolkar Vs CWT [1979] 223 ITR 480 (M.P.) dismissed the reference filed at the instance of the assessee for default and for not taking necessary steps. Considering the conduct of the assessee in the present circumstance, I am of the view that the assessee is not interested in pursuing the appeal. This view has been affirmed by Hon'ble ITAT Ahmedabad in case of Amitkumar H. Shah Vs. ACIT in ITA No. 2985/Ahd/2010 vide their order dated 31.12.2013, wherein following the order of ITAT Delhi Bench in the case of CIT Vs Multiplan India Pvt. Ltd., [1991] 38 ITD 320 (Del), ITAT

5 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO has dismissed the appeal filed by the assessee for want of persuasion. Under these circumstances, the current appeal of the appellant is dismissed. 7. In result, the appeal of the appellant is dismissed.”

“Brief Facts of the case-

During the AY 2014-15, assessee has filed return of income declaring total income of Rs.14,36,070/- on 31.03.2015.

During the year under scrutiny, the assessee has made investment in Share of Tarbo Tech Ltd and Claimed exemption of Rs. 23,89,107 u/s 10(38) of the Income Tax Act,1961 on sale of these shares. The Ld. Assessing officer has denied the exemption u/s 10(38) of the Income Tax Act, 1961 to the assessee on considering the company as penny stock companies as per their and SEBI Investigation. The Ld. Assessing officer disallowed the exemption claimed by the assessee and added back Rs.2389107/- in the income of the assessee treating as bogus LTCG exemption U/s.111A of the Income Tax Act. The Ld assessing officer also added Rs.48790/- in the income of the assessee as commission paid for acquiring such accommodation entry.

Aggrieved by the assessment order passed u/s 148/143(3) of the Income Tax Act,1961 dated 08.12.2017, assessee preferred an appeal before the CIT(A) wherein the same was dismissed by the CIT(A) on the grounds not acceptable by the assessee.

Appeal on following points-

a) Adding back of genuine Long term capital gain u/s10(38) claimed by the assesse amounting to Rs.23,89,107/- b) Adding commission paid on above transaction on baseless assumptions amounting to Rs.48970/-

6 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO c) Non consideration of reply furnished by the assesse and declaring no response received from assesse and passing of order u/s 250 by the CIT(A)-1, Jaipur.

I. Our Submission-

Ground No.1-

During the assessment proceedings on verification of records, the A.O. noted that the assessee appellant had claimed exempt income on Long Term Capital Gain of Rs. 23,89,107.00/- on sale of shares of Tarbo Tech Ltd. As per ITS data, assessee had sold shares of Tarbo Tech Ltd of Rs. 24,39,453.00/- during the year under consideration. It was also detected that M/s. Tarbo Tech Ltd. is a penny stock listed company with a small capital base but huge market capitalization. Information in respect of trading of penny stock i.e. M/s. Tarbo Tech Ltd. is available in ITS data/AIR. Accordingly, a show cause notice was issued to the assessee vide letter dated 01.11.2017 asking the assesse tofurnishexplanationonorbefore06.11.2017 failing which it was proposed that the whole scheme would be treated as an attempt to introduce undisclosed income and LTCG amounting to Rs. 23,89,107/- was proposed to be added on account of undisclosed income.

The assessee vide reply dated 30.11.2017 enclosed relevant documents and submitted as under : 1) Purchase was made through registered broker. 2) Shares were allotted aft r paying STT 3) It is a genuine transaction.

4) Copy of share purchase bill, share sale bills etc. were filed. 5) 5000 equity shares were purchased through Durga Prasad & Co. (registered on NSE) vide bill dated 10.04.2012 for Rs. 50,345/- inclusive of STT, Stamp duty etc.

6) Shares were deposited in Demat account. 7) 5000 shares were sold in FY 2013-14 for Rs. 24,39,453/- which was credited in bank account on 05.07.2013.

7 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO The AO considered the above submissions of the assessee but did not accept the contentions of the assessee. The AO concluded that the alleged LTCG shown by the appellant on account of sale/purchase of shares of Tarbo Tech Ltd. is a bogus transaction and it actually represents unaccounted money routed back to appellant in the garb of LTCG. The AO also contended that beneficiaries have paid commission @ 1-2% in cash in lieu of bogus LTCG entry shown from artificial trading in penny stock. Thus, the AO added Rs. 23,89,107/- to total income of assessee under section 68 of the Act and commission paid @ 2% to the tune of Rs.48790/-was added to the total income of the assessee under section 69C of the Act. Thus the AO completed the assessment at the total income of Rs. 38,73,970/-.Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT(A).The ld. CIT (A) after detailed discussion and considering various judicial pronouncements, sustained the additions of Rs. 23,89,107/- under section 68 on account of sale of shares claiming exempt LTCG under section 10(38) and Rs. 48790/- under section 69C on account of commission. Theassesseesubmissesasunder:

“ That during the assessment year under appeal, he had sold listed equity shares of ‘Tarbo Tech Limited’ through recognized stock exchange, the shares which were sold were held by the appellant as Investments in the Books of Accounts. It is relevant to mention that the shares held were Long Term Capital Asset within the meaning of the section 2(29A) of the Income Tax Act, 1961 On sale of the shares, the appellant had earned long term capital gain of Rs.23,89,107/-and had claimed exemption of this amount, which is strictly in conformity of section 10(38) of the Income Tax Act, 1961 and as per the norms of SEBI Rules. During the assessment Proceedings, the Ld. AO has questioned the exemption of Rs.23,89,107/-claimed by the Appellant based on surmises and suspicion, despite detailed submissions along with corroborative evidences as well as legal documents by the Appellant. Transaction of Purchase of the shares is genuine: In this connection, the Appellant hereby submits that the transaction of Purchase of equity shares is proved and established by independent, contemporaneous documentary evidences during the assessment proceedings. The payment for purchase of shares was made through legal channel and the shares were kept as an Investment in the books of accounts. The Appellant has purchased the shares through Durga Prasad & Co. These shares were deposited in Demat A/c with Maverick Share Brokers Ltd, Jaipur Appellant has already furnished following

8 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO documents during the course of Scrutiny Proceedings vide letter dt.:- 24/10/2017 to justify the transaction of purchase of equity shares; -Copy of Contract note issued by the Broker.(See Pg. No.20) Itisrelevanttomentiontheappellanthadpurchased5000equitysharesof the Company on 10/04/2012 in DEMAT format, as itis evident from the contract note. The broker is listed on Recognised Stock Exchange and the company is also listed on Recongnised Stock Exchange. This information is very vital and proves the fact that the Appellant had in fact purchased the equity shares of Tarbo Tech Ltd. Under these circumstances, there isabsolutely no basis for the AO to presume that the transaction forpurchase thereof was not genuine. . Further, the AO has not proved that the cash emanated from the coffers of the appellant. In simple words the AO has not proved the cash by the assessee was paid to whom and when? In the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus longterm capital gain. Transaction of Sale of the shares is genuine:

In view of the favourable market conditions, appellant has sold the equity sharesthroughRecognizedstockexchangeduringtheyearunderappeal.The sale consideration was received in the in theBankaccount of the Appellant. It is relevant to mention here that the appellant has paid the Security Transaction Tax (STT) on the sale of such shares. Appellant has already furnished the following document before Assessing Officer vide letter dt.:- 24/10/2017 to support the genuineness of the Sale transaction;

-ContractnoteoftheBrokerthroughwhomthesharesweresold (See Pg. No.21)

Despite furnishing of contemporaneous documentary evidence, Ld. AO has alleged that the transaction of sale of shares as non genuine without any cogent material in support of non genuine nor he has mentioned that purchases and sale transactions are bogus. Ld. AO is not justified in taking contraryviewwithregardtotransaction ofsaleofshares.Showcausenotices issued by the Assessing officer taking contrary view were merely on the basis of suspicion which should not be sustained in the eyes of law. As held many casesbyApexcourtthatsuspicionhowso- everstrong,cannottakethe place of proof.

9 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO Ld. AO has not brought any conclusive material on record to support his contentions. Further, Appellant has duly discharged its onus to prove the genuineness of the transaction of sale of shares.

Ld.AOcannotmakeadditionjustbecausethereishighdifferenceinpurchase price and sale price of the shares. Ld. AO has made unjustified allegation that by taking the support of unusually high sale price compared to purchase price which is on the basis of mere suspicion. Appellant hereby emphasizes that he has no control over the sentiments of secondary market. Appellant is independent from the price movement of the scrip on the recognized stock exchange. As a prudent share holder would standstatic when the market is in upswing, appellant has sold the sharesthrough recognized stock exchange on the basis of financially suitable market conditions.

Further, the Apellant hereby respectfully submits that the Ld. AO has not properly appreciated the Modus Operandi followed in connection to transactions of shares. The assesee has purchased 5000 equity shares of the company on 10/04/2012 in DEMAT Account. These 5000 shares had been sold on 03/07/2013forRs.24,39,453/-andallegedlyearnedLTCGofRs.23,89,107/-

Asregardssale,thesharesweresoldthroughrecognizedstockexchanges through reputed brokers. The appellant maintained account with Maverick ShareBrokers(P)Ltd. STTwaspaidinallthe transactions.Themomentsaleswere effected, the demat accounts were debited. It is submitted for kindconsiderationthatsalethrougharecognizedstockexchangewhichwere electronically operated cannot be manipulated. So also debit and creditentriesintheDematAccountwhichweremaintainedbyreputedand independent DPs. The process involved is automatic transmission of the informationthroughelectronicdeviceregardingsaleofshares.Thesaleproceeds were then received by account payee cheques/drafts from the brokers where the appellants maintained trading account. These werecredited in the bank accounts and recorded in regular books of the appellant in regular course. The bank accounts of the Appellant evidence receipt of sale consideration by account payee cheque/draft. The resultant gains were reflected in the books of accounts and shown in the returns filed in the regular course. Hence there is no scope for disbelieving transactions as bogus. It is respectfully submitted that there is no material evidence on record against the Appellant except some vague, confusing enquiries sought by the Ld. AO to draw the conclusion which adversely affects the Appellant.

10 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO The Ld. AO has not appreciated the fact that there cannot be a sale without a purchase.Therewasnoscopeforsuspectingthesetransactions.Therefore, assessment made by Ld. AO and confirmed by Ld. CIT(A)which ispredominantlyinfluencedbysuspicionisliabletosetaside. Relevant decided cases- Reliance is placed on the 1). The Bench has taken into consideration that similar type of issue had arisen in thecase of Shri Manohar Lal Chugh vs ITO, Ward 6(1), Jaipur (ITA No. 312/JP/2021dated31-08-2022) . We have heard the rival contentions, perused the material availableon record and gone through the orders of the lower authorities. The AO hasdoubted the transactions of purchase and sale of shares by the assessee of M/s.NouveaMultiMediaLtd.onthebasisofinformationreceivedfromtheDirectorate of Investigation that an organized racket ofgenerating bogus entriesofLTCGinpennystockhasbeenunearthedasaresultofinvestigationcarriedout through-out the country, wherein certain persons were found indulged inprovidingaccommodationentries,inter- aliabogusLongTermCapitalGainswhichisclaimedasexemptundersection10(38)oftheIT Actbythebeneficiaries in order to facilitate the beneficiaries to convert their black moneyinto white without paying Income-tax.The AO has narrated the modus operandiofvariousentryproviderswhichisageneralstatementsofarastheindulgenceofcerta in personsinprovidingtheaccommodationentryof bogus longtermcapital gains as well as other transactions.However, in the said narration ofmodusoperandithere is nothing againsttheparticular transaction of purchaseandsaleofsharesbytheassessee.TheAO hasspecificallymentionedthatduring the course of enquiry in certain cases it has come to light that large scalemanipulation has been done in the market price of shares of certain companieslisted on Stock Exchange by a group of persons working as a syndicate for thepurpose of providing entry of tax exempt bogus long term capital gains to largenumber of beneficiaries in lieu of unaccounted cash. These observations of theAOintheassessmentordercannotconstituteanytangiblematerialorevidenceto show that the transaction of the assessee is bogus being an accommodationentry. The AO in the show cause notice though referredthe statements ofDirectors/entryoperators,whohaveoperatedasentryproviders/brokers,however,neither anydocumentaryreferenceismadeintheshowcausenoticeoranysuchreferenceismadeinthe findingoftheAOwhileholdingthetransaction as bogus by availing the accommodation entry of long term capitalgain.The AO has either discussed the modus operandi of

11 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO entry providers or thejudgments on the issue but has not made any reference of any material ordocumentaryevidencewhichrevealsthattheassesseehasindulgedinavailingthe accommodation entry of bogus long term capital gain. There is no disputethat once the assessee has claimed the long term capital gain from purchase andsaleofshareswhichisexemptundersection10(38)oftheAct,theprimaryonusisontheass esseetosubstantiatehisclaimbyproducingthesupportingevidence.We find that the assessee is a regular investor in shares. We also findthat in the case in hand the assessee purchased 20,000 equity shares of M/s.NouveaMultiMediaLtd.throughMawerickShareBrokerPvtLtd.whoisregisteredin BSE fora sum of Rs.6,33,124/- which includesSTT, StampDutyetc. vide Bill No. 546 dated 09.01.2008 and 0036 dated 15.01.2008. The shareswere deposited in DMAT A/c with M/s. Alankit Assignment Ltd., Jaipur and thequantities of 20000 shares werecreditedon 24.01.2008.M/s. Nouvea MultiMedia Ltd. was listed in stock exchange and the shares were purchased at therates prevailing on the date of purchase in BSE.The assessee received 40000RightSharesissuedbythecompanylateron.Wefindthattheassesseehasduly reflected all these shares in the Books of accounts as an Investment and onsaleofshares,theassesseehasclaimedexemptLTCGinthereturnofincomefor the assessment year 2010-11. Thus it is clear that 20,000 shares acquired bythe assessee on 15.01.2008 in Demat format as it is evident from the DematAccountandreflectedintheBooksofaccountfortheyearunderconsideration.We further note that the assessee produced the copy of purchase bills of thesesharesalongwiththebankstatementshowingthepurchaseconsiderationpaidbytheass esseethroughchequealongwithcopyofTransactionstatement/Demat account, Contract note issued by the broker, copy of ledgeraccount.The shares acquired by the assessee are duly reflected in the Demataccount of the assessee.Once the shares are dematerialized and credited in theDemat account of the assessee, the holding of the shares by the assessee cannotbedisputed.Itisalsonotindisputethatassesseesold20,000sharesheldintheDematacc ountoftheassesseeduringtheyearunderappealforaconsideration of Rs. 20,03,929/- which was credited in Bank on 22.03.2010.TheAOhastreatedthetransactionofsaleof20,000sharesasbogusbeingaccom modation entry but has not doubted the holding of the shares by theassessee to thetune of 20,000 shares in the Demat account ofthe assessee.Oncetheassesseehasproducedallthesupportingevidenceswhichincludepurchase bill, bank statement showing the payment of purchase consideration,Demataccount, holding of shares in the Demat account, sale ofthe sharesthrough Stock Exchange which are also reflected in the Demat account of theassesseeandreceiptofthesaleconsiderationinthebankaccountoftheassesseeasitisevide ntfromthebankaccount,statementoftheassessee,thenin theabsence ofany contrary

12 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO material or evidence brought on record by the AO, the transaction of purchase and sale of the shares in question cannotbeheldasbogusmerelyonthebasisoftheinvestigationcarriedoutbytheDepartment in some other cases where some persons were found indulged in providing accommodation entry. The AO in the entire assessment order has not made reference to single documentary evidence which can be said to be an incriminating material against the assessee to show that the assessee has availed accommodation entry of bogus Long Term Capital Gain. Therefore, the meresuspicioncannotbeagroundfortreatingthetransactionasbogusintheabsenceofanyevi denceormaterialonrecordbytheAO.Inthecaseinhand the assessee produced all the relevant documentary evidence to establish the genuineness of the transaction. Even if the AO doubted the transaction, then toestablishthatthetransactionisbogus,theAOisrequiredtoproducethecontrary material evidence so that the evidence produced by the assessee can be controverted. In the absence of such contrary material or evidence brought onrecordbytheAOandtheevidenceproducedbytheassesseeisotherwiseindependently verifiable being the documents in the shape of bank statement,Demataccount,booksofaccountandbillsforwhichtheassesseehasnocontrolor say, therefore, the said evidence cannot be manipulatedby the assessee.Oncetheevidence producedby theassesseeisnotpreparedorbeyondthescope of any manipulation by the assessee, then the assessee has discharged hisonus to prove the transaction of purchase and sale of shares and consequentialcapital gain.TheLd. A/Rhas filed allthe possibledocumentaryevidencerelatingtopurchaseandsaleofthestockonwhichtheLTCGw asearned.Allthe details are filed in assessee’s Paper Book and the same were filed before the Ld. AO. The details file dare as under: S.No. Particulars Paper Book PageNo. 1. Copy of Contract note of the Broker through whom 102 the shares were sold. 2. Copy of Ledger Account maintained by him with 103-105 the Broker 3. Copy of transaction statement with Prabhat 106 Financial Services Ltd. 4. Copy of Bank statement of the assessee 107-109

In short, aftertheAOconfrontedtheappellant withcircumstantial evidencesthe Ld. A/R filed all possible documentary evidences in his possession. It is clearthat AO has

13 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO based his addition u/s 68 of the Act on the basis of statement of theentry operatorandinformation receivedfrom theInvestigationWingoftheDepartment. However in the statement of entry operator noquestion was everput to the entry operator regarding transaction through the companies, throughwhich alleged cash of appellantwas routed. On one hand the AO has oralstatements/oral evidences in the form of statement of entry operator (neverconfronted to the appellant); the appellant has rebutted these oral evidences byfiling documentary evidences listed above.It is a settled law that documentaryevidences willalwayscarry more weightthan the oralstatements.AftertheoralstatementswereavailabletotheAO,theappellantprovedtheor alstatementstobeincorrectbyfilingdocumentaryevidences.ThereaftertheAOdidnotprov ethedocumentaryevidencetobeuntrue/bogus/nongenuine.The AO never confronted the documentary evidence to the person whose oralstatementwasrecorded&reliedupon.Thereforetheoralstatementlossestheirevidentia ryvalueinlightofthedocumentaryevidencesplacedbyappellant.Eventheoralstatementisg eneralanddoesnotpinpointormention appellant name anywhere. Neither does it mention anywhere that cashfrom appellant was received & it was same cash which was routed back to theappellantthrough bank account. Consideringthe above documentary evidences,it clearly outweightthe oralevidencesreliedupon. 6.1. It is settled position of law that addition cannot be made simply on thebasis of statement alone. The same has to be substantiated and corroboratedeither by enquiries or by linking it with tangible material/ evidence. It is a settledlawthatstatement,thattooof3rdperson,alonecannotbetreatedasincriminatingmater ialforthepurposesofmakingadditionforassessmentcompletedu/s143(3).Ithasbeenheldin manyjudgmentsthatmerestatementu/s132(4)oru/s131isnotsufficienttomakeanaddition. Astatementmademustberelatabletosomeincriminatingmaterialorthestatementmustbem aderelatabletomaterialbysubsequentinquiry/investigations. 2). Judgement of ITAT Hydrebad in the case of Santosh Kumar Goyal (ITA No. 168/Hyd/2011) which was reported on November6,2013.Theratioofthesaidjudgementistotheeffectthat-

“ having been followed by the assesse from the stage of purchase till the shares areDemattedthereishardlyanyroomtodoubtorsuspectthatthetransactions in purchase are not genuine.” “observations of the AO that the purchases and sales of shares were made with reference to penny stocks which were purchased at a nominal price and sold ata very high price, since all the sale transactions were made through stock

14 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO exchangesthereisharldyanyscopeforpricemanipulation.Itisallthemoreso, since the assesse has paid STT.” “It is not possible to take any adverse view on the basis of mere suspicion that SEBI has initiated some action.” “ considering the absence of any positive corroborative evidence brought on record by the assessing officer to substantiate his allegation of the assessing officerastothenongenuinenatureofthetransactions,concludedthattheconclusions of the assessing officer are based on mere suspicion, surmises and conjectures and consequently, his orders cannot be sustained.” 3) Hon’ableRajasthanHighCourtinthecaseofCITv.SumitraDevi(Raj.)268 CTR 0351 has held:- (See P.B. of Judgements Pg. No.9-13) Findings as ultimately recorded by AO had been based more on presumptions rather than on cogent proof. As found concurrently by the CIT(A) and the ITAT, the AO had failed to show that the material documents placed onrecord by the assessee like broker’s note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious. The appellate authorities have rightly observed thatthe facts as noticed by the AO, like the notice under Section 136 to the company having been returned unserved; delayed payment to the brokers; and de-materialisation of shares just before the sale would lead to suspicion and call for detailed examination and verification but then, for these facts alone,thetransaction couldnotberejectedaltogether,particularlyinabsence of any cogent evidence to the contrary.(Para7) In an overall view of the matter, the finding as recorded by the appellate authorities after a thorough consideration of the material on record that the transaction of purchase and sale of shares could not be treated as non- genuine, remains a justified finding on facts; and we are unable to find any substantial question of law worth consideration in this case.(para 8) In an overall analysis, thefindings asconcurrently recorded by the CIT(A) andthe ITAT,that additionunder Section 68 of the Act was not sustainable, remainessentiallyintherealmofappreciationofevidence.TheAppellate Authoritieshave returned the finding of fact in favour of the assessee after due appreciationof evidence on record, on relevant considerations, and on sound reasonings. Thefindingneitherappearssufferingfromanyperversitynorisofsuchnaturethatcannot be reached at all. Hence, no substantial question of law is involved in thisappeal.(Para10)

15 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO Where shares were sold by assessee for consideration through named stock broker and appellant furnished all the evidence to establish genuineness of transactions, AO was not justified in making addition u/s 68. 4) Hon’ble ITAT, Jodhpur Bench in ACIT v. Pankaj Raj Shah (ITA330/Jod/2011 dated 28.06.2013) has held:- (See P.B. of JudgementsPg. No.53-63)

“We have considered the submissions of both the parties andcarefully gonethrough the material available on record . In the present case, it appears that the assesseepurchasedthesharesofM/sShreeNidhiTradingCo.Ltd.frommarket atthepriceprevailingatthattimeandthoseshareswereputintoDEMAT account. The assessee purchased the shares on 26-06-2004 and acquired thoseshares before 17- 06-2005 through Stock Exchange. Those shares were reflected in the balancesheet of theassessee for the year ended on 31-03-2005 and31-03-2006. Theholdingoftheshareswasmorethanoneyearassharesweresoldbetween the period 25-08-2006 to 21-09-2006 at Rs. 15,11,870/-. The assessee also incurred theexpensesintheformofBrokerage,SecuritiesTransferTax,ServiceTax, Stamps etc., those expenses were not doubted by the Assessing Officer. Theassessee also furnished the Bank receipt note, Statement of Security Transaction Note,ContractNoteetc.Therefore,thetransactionwasgenuineandtheLong Term Capital Gain on the sales of shares of M/s Shree Nidhi Trading Co. Ltd., amountingtoRs.14,59,240/-wasrightlyclaimedasexemptu/s10(38)ofthe Actbecausetheassesseefulfilledboththeconditionsforclaimingexemption u/s 10(38) of the Act. The first condition was that transaction of those shares wasto be entered into on or after the date on which Chapter VII of the Finance (No.2) Act, 2004 came into force i.e. 01-10-2004 and the transaction was chargeable to Securities Transaction Tax under this Chapter. In the present case, shares were acquired by the assessee on 17-06-2005 through Stock Exchange and put into DEMATaccount.Whenthosesharesweresold,theassesseeincurredthe expenses of Rs. 1891/- on account of Securities Transaction Tax and those share were held for more than one year. Therefore, the profit earned on the sale of the shares was Long Term Capital Gain which was exempt u/s 10(38) of the Act. We therefore,consideringthetotalityofthefactsofthecaseasdiscussed hereinaboveareoftheviewthattheld.CIT(A)rightlydeletedtheadditionmade bytheAssessingOfficer.Inthatviewofthematter,wedonotseeanymeritin this appeal of the Department. Intheresult,theappealfiledbytheRevenueis dismissed.”

16 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO 5) Hon’bleBombayHighCourtinCITv.ShyamR.Pawar(2015)54taxmann.com 108 on a similar issue has held:

“Assessee declared capital gain in sale of shares of two companies-Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held such transaction as bogus and having been done to convert unaccounted money of assesse to accounted income and therefore, made addition u/s 68- On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to dischargebasic onus-Whetheronfacts,transactions inshares wererightlyheld to be genuine and addition made by Assessing Officer was rightly deleted-Held- yes.” 6) Hon’able Gujarat High Court in PCIT v. Ramniwas Ramjivan Kasat (2017)82 taxmann, com 458 (Gujarat) on a similar issue has held:

Section68oftheIncome-taxAct,1961-Cashcredits(Shares)-A.Y.2006-07- During relevant year, assessee sold certain shares owned by him-Assessing Officeropinedthatpurchaseofsharesinquestionitselfwasbogusand,thus, there was no question of sale of same-He thus added amount of sale proceeds of shares to assessee’s taxable income-Tribunal noted that shares hadbeenpurchasedinpreviousassessmentyear-Itwasfurtherfoundthatassesseement forpreviousassessmentyearhadbeentakeninscrutinyandinassessment orderpurchaseofshareshadbeenacceptedasgenuine-Tribunalthus concludedthatnoadditioncouldbemadewithaidofsection68whensuch sharesweresoldinrelevantassessmentyear-Whetheronfacts,impunged orderpassedbyTribunaldidnotrequiredanyintereference-Held,yes. 7) Hon’able ITAT, Kolkata Bench in Dolarrai Hemani v. ITO (ITA 19/Kol/2014dated 02.12.2016 on a similar issue has held: “We find that the similar issue had been adjudicated by the co-ordinate bench of this tribunal in the case of DCIT vs Sunita Khemka in ITA Nos. 714 to 718/Kol/2011 dated 28.10.2015 and in the case of ITO vs Rajkumar Agarwal in ITA No. 1330 (Kol) of 2007 dated 10.8.2007 wherein it was held that when purchaseandsaleofsharesweresupportedbypropercontractnotes,deliveries of shares were received through demat accounts. ITA No.19/Kol/2014 Dolarrai Hemani, AY 2005-06 maintained with various agencies,theshareswerepurchasedandsoldthroughrecognizedbrokerandthe sale

17 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO considerations were received by account payee cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. We find that in the instant case, the addition has been made only on the basis ofthe suspicion that the difference in purchase and sale price of these shares isunusually high. The revenue had not brought any material on record to supportits finding that there has been collusion / connivance between the broker andthe assessee for the introduction of its unaccounted money. 2.9.6.In view of the aforesaid facts and findings and the judicial precedents relied upon , we have no hesitation in directing the ld AO to accept the claim of exemption of LTCG of the assessee arising out of sale of shares of G.K.Consultants Ltd and accordingly allow the ground raised by the assessee in this regard.” 8) Hon’ableITAT,AhmedabadBenchinPratikSuryakantShah&Otherv.ITO (ITA 810/Ahd/2015 dated 21.10.2016) on a similar issue has held:

“For the sake of the completeness of the adjudication, even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. ITA Nos. 810 to 815, 922 to 926/Ahd/2015 Shri Pratik Suryakant Shah & others – Total 11 Appls AYs 200607 & 2008-09 9 18. In thelightofthedecisionsoftheHon’bleSupremeCourtinthecaseofAndamanTimber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account.”

18 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO 9) Hon’ableAllahabadHighCourtinCITv.UditNarainAgrawal[2013]31taxmann.com 76(All.):

In this case, it was contented by assessee’s counsel that after the allotment of shares, the same were transferred to Demat A/c, remained in demat account during the period of holding and transferred to the demat account of the buyer, itself proves the genuineness of the purchase/sale transaction of shares having regard to the relevant provisions contained in the Depository Act. The transaction made through demat account is in itself an evidence to prove the genuineness of share transaction. Merely because the sale of shares fetched a handsome price, which price is supported by official quotation issued byMagadh Stock Exchange, therefore, there can not be any reason to doubt the genuineness of the sale transaction of the shares. It is settled position of law by the decisions reported in 26 ITR 776(SC), 37 ITR 288(SC), 63 ITR 449(SC) and 1 SOT90(Mum)(supra)tosupportthatsuspicionevenstrongenoughcannottake the character of evidence. Consideringthefactthattheshareswereallottedtotheassessewhichwerekept in demat account, the decision was made in favour of assesse. The AO has doubted the transactions of purchase and sale of shares by the assessee of M/s. Tarbo Tech Ltd. on the basis of information received from the Directorate of Investigation that an organized racket of generating bogus entries of LTCG in penny stock has been unearthed as a result of investigation carried out through-out the country, whereincertainpersonswerefoundindulgedinprovidingaccommodationentries,inter-alia bogus Long Term Capital Gains which is claimed as exempt under section 10(38) of the IT Act by the beneficiaries in order to facilitate the beneficiaries to convert their black money into white without paying Income-tax.The AO has narrated themodusoperandiofvariousentryproviderswhichisageneralstatement so far as the indulgence of certain persons in providing the accommodation entry of bogus long term capital gains as well as other transactions.However, in the said narration of modus operandi there is nothing against the particular transaction of purchase and sale ofshares by the assessee.The AOhas specifically mentioned that during the course of enquiry in certain cases it has come to light that large scale manipulationhasbeendoneinthemarketpriceofsharesofcertaincompanieslisted on Stock Exchange by a group of persons working as a syndicate for the purpose of providing entry of tax exempt bogus long term capital gains to large number of beneficiaries in lieu of unaccounted cash.These observations of the AO in the assessment order cannot constitute any tangible material or evidence to show that the transaction of the assessee is bogus being an accommodation entry. The AO in the show cause notice though referredthe statements of Directors/entry operators, who have operated as entry providers/brokers, however, neither any documentary reference is made in

19 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO the show cause notice or any such reference is made in the finding of the AO while holding the transaction as bogus by availing the accommodation entry of long term capital gain.The AO has either discussed the modus operandi of entry providers or the judgments on the issue but has not made any reference of any material or documentary evidence which reveals that the assessee has indulged in availing the accommodation entry of bogus long term capital gain.There is no dispute that once the assessee has claimed the long termcapital gain from purchase and sale of shares which is exempt under section 10(38) of the Act, the primary onus is on the assessee to substantiate his claim by producing the supporting evidence.The assessee is a regular investorin shares and had discharged his part of providing genuine and true documents. Ground No. 2relates to commission paid for the accommodation entries is consequential to the issue involved in ground no. 1, therefore, when we have givena finding that the transaction of purchase and sale of shares and consequential Long Term Capital Gain cannot be treated as bogus, then the addition made by the AO onaccount of notional commission paid treating the same as undisclosed expenditure under section 69C will not be sustainable being consequential hence the same should also be deleted. The contention of the department through its investigation report that such company is a penny stock company and was formed only for the purpose of giving accommodation entries might be correct, assessee does not dare to challenge the investigation report of the department, but only requests the department to consider the fact that the assessee was not indulged in such dubious entry system and had purchased and sold shares of the respective company under good intention in order to earn profit, since it is the very basic condition for one’s existence is that one always craves to earn profit and avoid losses. Assessee was unaware of the activities going inside the said company and has invested in the company after coming to know through somebody that investing in TarboTech Ltd may yield good profits. Since the assessee has always been a loyal citizen and would not indulge in any activity or practice that would expose him towards legal implications, assessee invested in good faith in the company and as soon as the assessee saw the rise in the price of the shares, the assessee decided to sell it off and book capital gains thereon.

In the entire chain of activity, assessee was not aware of the inner intention and core basis of formation of such company, had the assessee been known to the fact, he would have not been entered into such transaction.

Ground No.3-

The Ld, assessing officer passed assessment order on 08.12.2017 u/s 148/143(3) of the Income Tax Act,1961 adding back the LTCG claimed by the assesse considering this as bogus entries.

20 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO

Aggreived by this, assessee filed an appeal before the CIT(A)-1, Jaipur and the same was instituted on 11.01.2018 against the assessement order dated 08.12.2017 passed u/s 143(3) of the Income Tax Act,1961 as issued by the Income Tax officer, ward-3(2), Jaipur for AY 2014-15.

Therein after order u/s 250 of the Income Tax Act,1961 was passed on 30.06.2023 against the assesse stating that the LTCG claimed by the assesse is not tenable and also that information called by the assesse through issuance of various notices were not complied by the assesse which in entirety is not true. Assessee accepts and acknowledges that there might be several occasions when information was called by the department but not supplied by the assessee, but the assessee also wants to state that none of these non submissions were deliberate but only due to some technical glitch of email ids relating to assessee. Assessee had no intention to surpass the authority calling for information when the assessee is in possession of all the documents that might be required for finalizing the assessment.

Also, notice served on 01.06.2023 naming final show cause notice seeking documents in support of appeal memo was duly replied on 06.06.2023 although the due date of the same was 09.06.2023 but the same has not been considered by the CIT(A)-1, Jaipur and the order u/s 250 states that the no reply was filed by the assesse due to which it seemed to them that assesse in no longer interested in the case and hence not preferring to reply over the same which is incorrect.

The assesse has genuine and core intentions to align with the judicial system of the country and nowhere expects to surpass them in any case what so ever. Assessee has duly filed the reply for final show cause notice which should have been taken into consideration.

Moreover, it appears to the assesse that although the assesse might be in default for non reply of several notices but it also appears that CIT(A)-1 was also in a hurry to pass order u/s 250 without even considering the assessee’s reply and dismissing the case of the assessee in a hap hazard manner.

Assessee pleads before the Hon’ble judge to consider the fact of the assessee’s non involvement in such entry system and allow the exemption claimed by the assessee u/s 10(38) and also deduction of expense claimed for earning such income.

Further, contention of the department that no reply was submitted by the assessee even after calling for multiple times is also not correct, as reply to final show cause notice dated 01.06.2023 seeking documents in support of Appeal was submitted in 06.06.2023 which was not at all considered by the department and assessment order was passed citing that no response has been submitted by the assessee for final show cause notice.

21 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO

Copy of the reply and order u/s 250 has been enclosed.( Pg No.22-39) Assessee has good faith in the judicial system of the country and believes that the above mentioned case shall be decided only after considering the facts presented by the assessee.”

22 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO of the assessee prayed that he may be granted one chance to represent the facts before the ld. CIT(A). The object of the Bench is to provide justice. Considering the overall facts of the case and looking to the facts /grievance of the assessee as raised hereinabove, the Bench feels that one more chance should be given to the assessee to contest the case before the ld. CITA) and submit the necessary reply to resolve the issue raised in the appeal before him. Thus the appeal of the asseessee is restored to the file of the ld. CIT(A) for afresh adjudication of the case but after providing sufficient opportunity of being heard to the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 23/09/2024.

Sd/- Sd/- ¼jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 23/09/2024

23 ITA No. 562/JPR/2023 Aditya Baheti vs. ITO *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Aditya Baheti, Jaipur. 1. 2. izR;FkhZ@ The Respondent- ITO, Jaipur. 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZQkbZy@ Guard File ITA No. 562/JPR/2023) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेजज. त्महपेजतंत