M/S SANJAY SINGAL HUF,CHANDIGARH vs. DCIT, CC-1, CHANDIGARH

PER A.D.JAIN, VICE PRESIDENT

These are two appeals filed by the assessees against

the separate order of ld. CIT(A)-3 Gurgaon dated 26.09.2023

and 30.08.2023 respectively, pertaining to assessment year

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 2

2015-16. Both the appeals were heard together and are

being disposed of by a common order, for the sake of

convenience.

ITA No. 655/CHD/2023

grounds of appeal :

claimed exempt income in the form of Long Term Capital

Gain (LTCG) of Rs. 18,31,36,042/- from sale of shares of M/s

Maa Jagdambe Tradelink Ltd. From the assessment record

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 3 of the assessee and his other family members for AYs 2011-

12 to 2014-15, it was observed by the AO that the

appellant/his family members have indulged in taking

accommodation entries in the shape of LTCG against cash

consideration through accommodation entry providers.

3.1 Search and seizure proceedings under Section 132 of

the Income Tax Act were carried out in the case of the

appellant/his family members and group concerns on

21.02.2014. Separate search proceedings under Section 132

of the Act were also carried out in the case of Shri Shrish

Chandrakant Shah on 09.04.2013 by the Directorate of

Investigation, Ahmedabad, and in the case of Shri R.K. Kedia

and Shri Manish Arora on 13.06.2014 by the Directorate of

Income Tax (Investigation), Delhi. Shri Shrish Chandrakant

Shah, in his statement recorded under Section 132(4) of the

Act, admitted that he was engaged in providing

accommodation entries to various beneficiaries including the

assessee /his family members through Long Term Capital

Gain. Shri R.K. Kedia, in his statement recorded under oath

u/s 132(4) of the Act, on 13.06.2014, admitted that he had

arranged accommodation entries of the appellant and his

family members against commission in the shape of LTCG.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 4 He further admitted that such companies, through which

LTCG was arranged, were paper companies, controlled and

managed by various accommodation entry providers, and

such companies were not doing any actual work, but were

being used to provide LTCG to various beneficiaries

through such accommodation entries. The AO reproduced

the statement of Shri R.K. Kedia from page 4-6 of the

assessment order, for reference. In the said statement, he

explained the modus operandi in which the names of the

appellant and his family members were specifically

mentioned as having taken accommodation entry through

him. He also revealed the names of various accommodation

entry providers used for this purpose. It was explained by

him that shares of such paper companies were purchased,

which were managed and controlled by such entry operators,

so that benefit of exempt LTCG through such listed

companies floated by them could be taken in future. He also

mentioned the names of some of such paper companies. He

further disclosed the modus operandi in detail, wherein, it

was explained how the rates of such scrips were rigged in the

stock exchange by entry operators in the desired manner,

through synchronized trading. When the price of such

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 5 listed scrips was artificially jacked-up to the desired level, at

that stage, unaccounted cash was taken from the

beneficiaries, transferred by the entry operators to such

accommodation entry providers through the angadias (cash

carriers). Accordingly, the operators then routed the

unaccounted cash through the bank accounts of various

paper companies and floated dummy / bogus buyers for

buying the scrips at the artificially jacked-up share price of

such listed securities from the beneficiaries. At that time,

the beneficiary was informed to sell a specific number of

shares at a specific rate, through the platform of stock

exchange, at a specific time, on the directions of the

operators, through the recognized stock exchange. For this

purpose, commission at the rate of 5 to 6 % was taken from

the beneficiaries by such operators. Similarly, he explained

the modus operandi for entries given through bogus short

term capital gain and bogus share capital / share premium/

unsecured loan. Such statements under Section 132(4) of the

Act, by Shri Shrish Chandrakant Shah and Shri R.K. Kedia,

were supported by seizure of a large number of incriminating

documents, during the course of search proceedings carried

out in their cases, including cash books reflecting flow of

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 6 unaccounted cash from such beneficiaries, including the

appellant, to such accommodation entry provides. On similar

facts, accommodation entries taken by the appellant and his

family members for AY 2014-15 and earlier years have

been held as bogus credits taken into their bank accounts in

the garb of bogus long term capital gain from sale of listed

securities of the paper companies.

3.2 During the year under consideration, the assessee

had sold shares of M/s Maa Jagdambe between 29.09.2014

to 05.03.2015. Such shares were shown as purchased on

12.03.2013 through preferential allotment off-market and

the assessee claimed exempt LTCG of Rs. 18,31,36,042/-

earned from sale of such shares during the year under

consideration. The AO made analysis of the financial data of

M/s Maa Jagdambe and it was found that the said company

was having ‘Nil’ fixed assets and had disclosed ‘Nil’ profits

over the years. On such facts, the AO observed that such

capital gain earned by the appellant from sale of shares of

M/s Maa Jagdambe on such financial was not genuine. On

going through the movement of share price of M/s Maa

Jagdambe for the period between 2013 and 2015, it was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 7 observed by the AO that the price of such shares was around

Rs.10 per share during October, 2013; that thereafter, the

price of the shares of M/s Maa Jagdambe was artificially

made to rise gradually by using dummy entities, by trading

in such shares in small volumes; that M/s Maa Jagdambe

was having no assets/no business activities, however, the

share price of M/s Maa Jagdambe was rising from Rs.10/- to

Rs.100-105/- by October-November, 2014, without having

any business rationale; that at this stage, the assessee off

loaded these shares and earned huge bogus LTCG by selling

the shares at a very high price. The AO further collected

trade data in respect of counter parties who had bought such

shares of M/s Maa Jagdambe from the assessee and it was

found that such buyers were dummy entities having no

worth. Further, the AO brought on record details of certain

broking concerns (namely, M/s SMC Global Securities Ltd.,

M/s Religare Securities Ltd. , M/s Kayan Securities Pvt. Ltd.)

which had been found providing LTCG through

accommodation entries in the shares of M/s Maa Jagdambe.

The AO further mentioned that the Securities Exchange

Board of India (SEBI) had made investigation in the case of

M/s Maa Jagdambe and the assessee and his family

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 8

members were found having indulged in manipulation of

trading in shares of M/s Maa Jagdambe by manipulating its

share prices at the stock exchange.

3.3 On the basis of the above facts and after

confronting the assessee, the AO held the LTCG as bogus

and made addition of Rs.18,68,86,042/- on account of such

bogus credits introduced in his bank account u/s 68 of the

Act and a further amount of Rs. 1,19,03,842/- was added as

income of the assessee on account of commission

expenditure incurred from unaccounted sources, estimated

at the rate of 6.5% in order to obtain such accommodation

entries.

impugned order (relevant portion) ;

6.1 From the facts of the case and material on record, it is noted that the appellant has shown exempt Long Term Capital Gain of Rs. 18,68,86,042/-from the sale of shares of Maa Jagdambe during the year under consideration. Such shares have been shown as purchased on 12.03.2013 through preferential allotment offline @Rs.l0/-. Such shares have been sold during the year under consideration on various dates from 29.09.2014 to 05.03.2015 at various rates ranging from Rs. 99.75 to Rs.106/- through the platform of the BSE. The AO has discussed at length in the assessment order various adverse observations corroborating lack of genuineness regarding sale of shares of Maa Jagdambe as claimed by the appellant.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 9

6.2 On going through the price moment of shares of Maa Jagdambe in the stock exchange, it is found that the price has been increased substantially from Rs. 2.60 (June, 2013) to Rs. 99.95 per.share in June, 2014 i.e. rise of more than 3800% within one year. However, during this period there was no corresponding any significant business activity of Maa Jagdambe to justify such abnormal and astronomical rise in its share prices. There was no increase in its assets, business volumes or announcement of any new project / investment etc. leading to such sudden rise in its share price. It is relevant to mention here that during the period from June, 2013 to June, 2014 volume of shares of Maa Jagdambe traded in the stock exchange increased gradually as evident from the remand report of the AO. During this period small number of shares were traded every day to artificially jack up the price in the exchange through planned manipulation where buying order was placed at higher price than the last traded price and matching the same by placing sell order. This increased the last traded price of the shares after each of such small lot trades. Such modus \n the case of Maa Jagdambe has been discussed in detail in the finding of the SEBI vide its report dated 06.11.2020 / 29.07.2020, as relied by the AO in the remand report (supra). Once the price was raised through manipulation to a pre-determined level, the shareholders (such as appellant) started booking profits and claimed exempt Long Term Capital Gain in their ITRs. It is relevant to mention here that during this period, P/B (price to book value) ratio of Maa Jagdambe rose to 480- 500 during this period, price to earning P/E ratio was around 1390, which was very unusual keeping in mind financial profile of Maa Jagdambe. During this period there was no major expansion in the assets/business of the company and it reported meager profits as discussed vide para 6.3 of this order. There is no merit in the argument of the appellant that the price index of capital market is not governed by revenue / profits of a company but it is driven by complex and diverse set of factors. There has to be some reason to justify such abnormal rise in the share price of Maa Jagdambe. It may be some tangible or intangible information to justify such abrupt rise. However, in this case there was no material to justify for such abnormal increase in the share price of Maa Jagdambe despite having meager financials. Thus such rise in share price in

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 10

case of Maa Jagdambe was not due to its performance but was due to manipulation by camouflaging earnings of exempt income by booking Long Term Capital Gain by the beneficiaries including the appellant.

6.3.1 Ongoing through the financial data of M/s Maa Jagdambe, as reproduced by the AO in the assessment order, it is noted that the company is having Nil revenue for FYs 2009-10, 2010-11, 2011-12, 2012-13 and Rs. 27.87 crores(trading sales) for FY 2013-14. It has shown no operational activities from FY 2009-lOto FY 2012-13. Further, against trading sales of Rs. 27.87 crores for FY 2013-14, it has shown purchase of raw material of Rs. 27.42 crores. For all such years, net profit has been shown as Nil (for FY 2013-14 Rs. 59 lakhs). Moreover, for none of the years there is no employee's cost, administrative expenses, depreciation, etc. Ongoing through the balance sheet of Maa Jagdambe, it is observed that it has no assets. It is beyond human probability that shares of such a company with such poor financials and no operational activity could rise from Rs. 2.60 to Rs. 100 in such short span of time. It is true that movement of share in a capital market depends on complex interplay of many factors. However, such inter play is based upon certain parameters, certain projections, announcements, future projects, take over or future plans for any new investment, expansion, diversification, merger etc. in order to corroborate such unexceptional rise of more than 3800% during such short period of time of one year. In this case, there is nothing on record to justify such kind of exceptional rise in the share price of M/s Maa Jagdambe from the period June, 2013 to March,2015. It is also beyond human prudence to accept that a company having no establishment, no business activity or assets was fetching share price of around Rs. 100/- beyond all its fundamentals. From the observations made as above and the perusal of financial statement of Maa Jagdambe, it is evident that that though it is registered with ROC, having PAN but infact is just existing on papers. The company has been incorporated by taking care of all the technical formalities such as registering with ROC but having only postal addresses with no real office or employees. It is observed that merely because the company was registered with ROC, having PAN/bank

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 11

account, the same doesn't establish its identity as it has been found existing on papers. 6.4.1 In the rejoinder dated 04.07.2023 the appellant explained that the orders of the SEBI dated 29.07.2020 and 06.11.2020 relied by the AO in the remand report were passed in 2020, almost after period of 3 years from the date of assessment order and, therefore, reliance placed upon such orders of the SEBI during the appellant proceedings goes beyond the material upon which assessment order was framed; further, such orders of the SEBI have been passed against certain identified individuals and not against the appellant. Therefore such orders of the SEBI are applicable only in the cases of such specific individuals; therefore, it does not imply that the appellant has indulged into similar activities of manipulation whereas the appellant or his family members no role to play in the share price moment of such company and no such allegation has been made by SEBI in the investigation reports against the appellant. 6.4.2 Further, the SEBI in its order dated 29.07.2020 / November 6, 2020 (relied by the AO during the remand report) has found that trades executed in the scrips of M/s Maa Jagdambe Tradelink during the period May, 2013 - July, 2015 were manipulated and were fraudulent; were carried out only to create misleading appearance of genuine trade in the scrips and at the same time triggered an upward movement in the price of its scrips over period of short time. Whereas there had been no major corporate announcement made by Maa Jagdambe during the said period except for announcement of split of its shares yet price of scrip has witnessed abnormal rise during the said investigation period.Huge market capitalization of Maa Durga was not supported by fundamental of the company in terms of profits or sales.lt was found that price of scrip of Maa Jagdambe witnessed abnormally rise against its fundamental as such increase was not supported by any not worthy performance of Maa Jagdambe or any corporate announcement during the relevant period. On detail investigation by the SEBI, it was found that trading in period May, 2013 to July, 2015was manipulated by carrying out trades in small volumes by artificially hike

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 12

up its price. The SEBI has discussed in the said order detailed modus operandi adopted in order to hike the market price of scrip fraudulently through pre- conceived transactions. It was found that by executing manipulated trades, market price discovery mechanism has been distorted and thus created misleading picture in the scrip of Maa Jagdambe. On account of such unfair trading practices executed in the security market, it was inferred that the price of share of Maa Jagdambe has been manipulated fraudulently during the above mentioned period. On the basis of such facts SEBI imposed penalty of Rs. 5 lakh in the cases of 9 different persons. 6.4.3 The report of the SEBI relied upon the AO during the remand proceedings has been shared with the appellant. Though the appellant has stated that no reliance can be placed upon such report of the SEBI dated 29.07.2020 as it is beyond the date of assessment order (31.12.2017) and the same was not available before the AO during assessment proceedings and further such adverse findings have been made by the SEBI in respect of 9 persons whereas name of the appellant is not among them. On consideration of such objections of the appellant, it is found that such objections are without any merit. Though such investigation report of the SEBI has been completed after passing the assessment order by the AO, however, the same provides very vital facts and important findings for the relevant period under consideration which are crucial in order to determine / examine genuineness of claim of exempt huge LTCG shown by the appellant in the ITR in the scrips of Maa Jagdambe, which has been held as bogus by the AO. The report of the SEBI goes to the roots of the issue involved. Such report of the Statutory Authority cannot be discarded as it has examined the relevant facts very minutely which are relevant to the facts of the case under consideration. Principle of natural justice has been adhered by sharing the copy of the report with the appellant during the appellant proceedings. Such order of the SEBI though has not been passed in the case of the appellant, however when considered in the totality; the said order alongwith the earlier adverse findings in the present case as discussed above vide para 6.2 onwards such as meager financials and abnormal rise in the price of shares of M/s Maa Jagdambe against all fundamentals help to draw complete profile from where it is inferred that

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 13

exempt income shown in the ITR in the shape of exempt LTCG is not genuine. Therefore, the above report of the SEBI is an important evidence and is being considered for the adjudication of present appeal. The order of the SEBI substantiates modus operandi followed for the purpose of jacking up share price of Maa Jagdambe artificially in the exchange. From the perusal of facts of the case and report of the SEBI, it becomes clear that the claim of the appellant is not genuine. 6.4.4 On going through the assessment order vide page 15, it is observed that the AO has mentioned that the SEBI has carried out investigations in the scrips of M/s Maa Jagdambe Tradelink; wherein SEBI has investigated 17 scrips in which there was common trading pattern and identical facts such as offline preferential allotment, stock split, insignificant economic activities and abnormal rise in prices. Such rise in share prices was found by the SEBI as manipulated and not in consonance with the fundamental of such companies including M/s Maa Jagdambe. The SEBI in its order has specifically mentioned names of members of the Singal family and observed that such persons were the beneficiary out of dubious trading in shares of such scrips. Once preferential allotment of such shares was made to the members of the Singal family, price of rise of such shares was jacked up suspiciously beyond threshold so that appellant / his family members could make exit by having exempt huge LTCG. From the composite perusal of assessment orders for AY 2011-12 to 2014-15 in the cases of Shri Sanjay Singal, Smt. AartiSingal, ShriAniket Singal, Shri Sanjay Singal (HUF) and other family members, it is found that there is a similar pattern wherein they have been regularly investing in shares of various penny stock companies having no fundamentals and making exit by having huge exempt LTCG within a short period of time. These scrips have shown huge increase in price of the shares within very short period of time against all fundamentals. It was further, observed by the SEBI that such prices were sustainably jacked up through dubious transactions. The said order of the SEBI has been confronted to the appellant during the assessment proceedings for AY 2014-15 and again during the course of current assessment proceedings.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 14

6.5 It is also beyond human probability that the appellant alongwith his other family members chose to make investments in penny stock of Maa Jagdambe through offline mode during FY 2012-13 when the company was not having any tangible activity/assets, just existing on papers and having no worth. It is relevant to mention here that appellant along with Smt. Aarti Singal, Shri Aniket Singal and M/s Sanjay Singal HUF have purchased 3,75,000 each, thus holding 10% shareholding of Maa Jagdambe as on March, 2013. It is not an isolated case that the appellant and his family members traded in the penny stock of Maa Jagdambe and earned huge Long Term Capital Gain (exempt income). There are large numbers of such penny stocks from where the appellant and his family members traded and earned huge Long Term Capital Gain (exempt income) of Rs.971.85 (approx.) from AYs 2011-12 to 2017-18. All such companies were not having any tangible activity/assets, just existing on papers and having no worth. The modus adopted in all such cases is similar where the price of such shares exhibited abnormal rise during short period of time against their fundamentals and meager Financials. The details of such transactions are as under:- I Shri Sanjy Singal

AY scrip Amount 2016-17 M/s Grandma Trading and Agencies Ltd. M/s Ram Minerals 55.75 and Chemicals Ltd. (Formerly ICVL Chemicals Ltd.) M/S Goenka Business and Finance Ltd. M/s ShantanuSheoreyAquakult Ltd. 2015-16 M/s Maa Jagdambe Trade Link Ltd. 18.69 2014-15 58.65 M/s Global Infratech Ltd., M/sRutron International Ltd. 2013-14 M/s Unisys Software and Holding Industry Ltd. 8.48 2012-13 M/s Blue Circle Services Ltd., 60.48 M/s DB International Stock Broker Ltd. 2011-12 M/s Parinita Unisys Ltd. 54.36 Total 256.41 II Smt. Aarti Singal

AY Scrip Amount 2017-18 M/s Meenakshi Enterprises 27.13 M/s ShantanuSheorey M/s Sunstar Realty Development Ltd. 2016-17 M/s Grandma Trading and Agencies Ltd. 17.76

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 15

M/s P S Infrastructure & Services Ltd. Formerly M/s ParagShilpa Investments Ltd. M/S Goenka Business and Finance Ltd. M/s Green Crest Financial M/s Sunstar Realty Development Ltd. 2015-16 M/s Maa JagdambeTradelinks Ltd. 36.05 M/s Infrastructure & Services Ltd. (Formerly M/s ParagShilpa Investments Ltd. 2014-15 Global Infratech Ltd. Rutron International Ltd. 62.41 2013-14 Unisys Software and Holding Industry Ltd. 12.02 2012-13 Blue Circle Services Ltd., 54.29 DB International Stock Broker Ltd. 2011-12 Parinita Unisys Ltd. 80.80 Total 290.46 III Shri Aniket Singal

AY Name of the Scrip Amount

2016-17 M/s Grandma Trading & Agencies Ltd. 29.97 M/s Ram Minerals & Chemicals Ltd. (ICVL Limited) 2015-16 M/s Maa JagdambeTradelinks Ltd., 42.56 M/s P S Infrastructure & Services Ltd. Formerly M/s ParagShilpa Investments Ltd. M/s Surabhi Chemicals & Investment Ltd. M/s ICVL (M/s Ram Minerals & Chemicals Ltd. 2014-15 M/s Global Infratech Ltd., 113.33 MatraKaushalEnterprises Ltd., M/s Rutron International Ltd. 2013-14 Blue Circle Services Ltd. 46.08 Total 231.94 IV M/s Sanjay Singal HUF

AY Scrip Amount 2016-17 M/s Grandma Trading and Agencies Ltd. M/s Ram Minerals 30.76 and Chemicals Ltd. (Formerly ICVL Chemicals Ltd.) M/S Goenka Business and Finance Ltd. 2015-16 M/s Maa Jagdambe Trade Link Ltd. 18.29 2014-15 M/s Action Financial Services Ltd., M/s 56.8 Rutron International Ltd. 2013-14 M/s Unisys Software and Holding Industry Ltd. 9.51 2012-13 M/s Blue Circle Services Ltd., 56.03 M/s DB International Stock Broker Ltd. 2011-12 M/s Parinita Unisys Ltd. 21.65 Total 193.04

Thus the appellant alongwith his family members has followed the above modus operandi consistently for various AYs by entering into transactions of penny stocks

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 16

and earning huge Long Term Capital Gain which were not genuine on the face itself. 6.6 The appellant has claimed that it has sold shares of Maa Jagdambe through recognized stock exchange, duly supported with contract notes and shares proceeds were received through banking channel after payment of STT and thus has claimed genuine exempt LTCG as disclosed in the ITR. However, the onus was upon the appellant to substantiate genuineness of such transactions as it has claimed exempt income in the ITR. The appellant has furnished above documents in order to discharge his initial onus. However once the AO has brought on record and confronted such adverse findings / observations to the appellant regarding lack of genuineness of such sale transactions, onus has shifted back upon the appellant. Further onus was upon the appellant to bring on record satisfactory material to substantiate the genuineness of sale price of shares of Maa Jagdambe justifying its abnormal rise in the light of above observations. Even during appellant proceedings the appellant has relied upon the same documents / explanation furnished during assessment proceedings. At this stage, it is also relevant to refer to the past history of case where the appellant and his family members have been found taking huge accommodation entries through various accommodation entry providers such as Shri R.K. Kedia and Shri Shrish Chandrakant Shah during AYs 2011-12 to 2014-15 in the garb of exempt LTCG as discussed above vide para 6.5.A large no. of incriminating evidence have been found and seized during the course of search proceedings carried out in the cases of Shri R.K. Kedia and Shri Shrish Chandrakant Shah on 09.04.2013 and 13.06.2014 respectively where it was found that the appellant and his family members have taken huge accommodation entries in the garb of exempt LTCG through such entry providers by routing unaccounted cash by layering the transactions through many paper / shall companies with the involvement of such accommodation entry providers. The appellant has admitted incriminating nature of such bogus LTCG in the statement recorded u/s 132(4) of the Act during the course of search proceedings carried out in his case on 21.02.2014. Though the findings of such search proceedings carried out in the case of the appellant / Shri R.K. Kedia and Shri Shrish Chandrakant Shah may not be directly applicable to the facts of the present case for the year under consideration

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 17

but the findings of such search proceedings as discussed in detail in the assessment orders for AYs 2011-12 to 2014-15 substantiate the findings of the AO made for the current AY that the appellant / his family members have been consistently routing their unaccounted income and reflecting the same in the ITR in the garb of exempt LTCG through manipulation of share prices of paper companies/penny stocks. Further, as per assessment order certain share brokers such as M/s SMC Global Securities Ltd., M/s Religare Securities Ltd., M/s Kayan Securities Pvt. Ltd. have been found involved in providing accommodation entries in the various scrips including that of M/s Maa Jagdambe and have accepted their involvement in the manipulation in this respect. 6.7 The appellant has argued that the AO has not made any independent inquiry for the year under consideration and merely has made reference to the findings as per earlier assessment proceedings (AYs 2011-12 to 2014-15) where certain additions on account of LTCG were made in the hands of the appellant/his family members. Such additions made in the earlier years have been deleted by Hon'ble ITAT Chandigarh/Delhi and the appeals were decided in favour of the appellant. Ongoing through the decision of Hon'ble ITAT (supra), it is noted that facts of the case relied upon are different from the facts of the present case. In the said decision, the Hon'ble ITAT has allowed the appeals mainly on the ground that the AO has not allowed cross examination of the persons (accommodation entry providers) on whose statements the assessment order has been relied upon. Therefore, the ratio of the said decision is not applicable to the facts of the present case. In the present case, the AO has not relied upon statement of any person on the basis of which additions have been made for the year under consideration.

6.8.1 It was further argued by the appellant that each year being an independent and separate assessment year; therefore reliance on adverse findings and investigation made in earlier years cannot come to the rescue or aid of the Revenue in any manner. Whereas the appellant has furnished all the evidences in support of genuineness of transactions therefore further onus to dispute the same lies upon the Revenue and the entire case of AO rests upon presumptions. The suspicion however strong cannot take place of the proof and moreover addition cannot be made on the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 18

basis of presumption. In the given facts, the ratio of decision of Hon'ble Supreme Court in the case of Sumati Dayal, as relied by the AO in the remand report is not applicable to the facts of the present case. ……………………………. ……………………………

6.9 It is noticed that the appellant has submitted copies of the documents to substantiate the genuineness of transactions related to purchase and subsequent sale of shares leading to long-term capital gain claimed as exempt by the appellant. I find that these documents were also placed before A.O who after detailed examination and discussion and going beyond these documents has established that these documents are mere masks to hide the real nature of transactions. The AO has gone through the financial results of Maa Jagdambe Tradelink for various years as available in the public domain. By analyzing various facts, it is pointed out that the share price of this company was neither affected by the movement of Sensex nor the financials of the company justify such extraordinary jump in the price of its shares. It is noticed that analysis of the materials on record and analysis of information from various sources, the findings of the AO is also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the modus operandi adopted by the appellant which has come to surface as a result of deep investigation. Initial investment in a company of unknown credentials through preferential allotment, and subsequent jump in the share price of such a company cannot be an accident or windfall but as clearly brought on record by the AO, was possible because of manipulations in the price of shares in a pre-planned manner, as observed by the SEBI also. As a result of such investigations carried out, the modus operandi involved in generating bogus Long Term Capital Gains was unearthed by the AO.

6.10 The appellant's insistence that the transactions leading to long-term capital gains are supported by documents such as sale and purchase invoices, bank statements, brokers notes, transaction through Demat and stock exchange cannot be accepted in view of the fact and circumstances of the case brought on record by the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 19

A.O after proper examination of the material facts and adverse findings by the SEBI. A genuine transaction must be proved to be genuine in all respect. The onus was on the appellant to prove that the transactions leading to claim exempt LTCG was distinctly genuine transaction and not bogus premeditated transaction arranged with a view to evade taxes by the appellant. The onus was on the appellant to contradict the findings that Maa Jagdambe was a company whose scrips were capable of being traded at high price as it was the appellant who had traded in the shares of the this company which resulted into claim of long term capital gains exempted under section 10 (38). Once the appellant was made aware of the result of investigation made by the SEBI which proved that trading of shares leading to LTCG was not genuine, the onus was on the appellant to prove that it has earned genuine LTCG as it is the appellant who is asserting a claim that it was engaged in genuine share transactions. It is relevant to note here that Hon'ble Supreme Court in the case of Shri Charan Singh versus Chandra Bhan Singh AIR 1988 SC 637 has clarified that the burden of proof relies on the party who substantially asserts the affirmative of the issue. The party must succeed by the strength of her own right and the clearness of her own proof. Since in this case the appellant had made the claim that it had earned genuine exempt LTCG, all the facts were especially within his knowledge. Initial onus is on person who substantially asserts a claim. If the onus is discharged by it and a case is made out, the onus shifts on to deponent. In this case, once the evidence that appellant has claimed bogus LTCG was introduced, by the AO, the burden of evidence shifted to the appellant. During the assessment proceedings and even during the appellate proceedings , the appellant has failed to produce any evidence to prove that the Long Term Capital Gain claimed by it was genuine.

6.11 In the present case, I find that the appellant has failed to discharge its burden of proof and the AO, on the other hand, has proved that the claim of the appellant was not genuine. It has also been argued by the Ld. AR that no opportunity was provided to cross examine the persons/witness whose statements have been used against the appellant. However, from the record, it is found that the AO has not relied upon the statement of any person for the year under consideration in order to draw adverse inference against the appellant. Each case has got to be decided on the facts

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 20

and circumstances of that case. The relevant factors to be considered are surrounding circumstances, objective facts, evidences adduced, presumption of facts based on common human experience in life and reasonable conclusions. In the present case, as discussed above, there is overwhelming evidences as discussed in details in the order that the transactions on which adverse views have been taken are sham transactions. …………………………. …………………………. 8.1 In view of the above facts and circumstances borne out of the assessment order and legal precedents as discussed above, it is evident that that documents submitted as above to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt LTCG. It is relevant to mention here that the prices have increased many fold times (3800%) as soon as the period of one year has expired so as to avail the benefit of exempt long term gain u/s 10(38) of the Act. There is no justifiable indicator such as some significant business transaction in the case of Maa Jagdambe to substantiate such abnormal rise in its scrips during the period under consideration. The onus was on the appellant to explain the source and nature of the amount credited in his bank account on this account. The appellant however could not discharge the onus as the explanation furnished by him has been found to be unsatisfactory. The AO has confronted the adverse findings/material to the appellant as discussed above.

8.2. In view of the above discussion, I am of the considered view that share transactions leading to LTCG by the appellant are sham transaction entered into for the purpose of evading tax. Accordingly, it is held that the AO has rightly disallowed the claim and added the said amount of Rs. 18,31,36,042/- as income of the appellant; the same is hereby confirmed. 8.3 The above addition has been made by the AO u/s 68 of the Act. However provision of section 68 is applicable only when there are cash credits in the books of account of an assessee. The bank account of the appellant wherein such credits have been made cannot be considered as the books account of the appellant…………….”

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 21 ………………………….. ………………………….. 8.4 On consideration of the above reply of the appellant and facts of the case, it is noted that provision of section 69A are squarely applicable to the facts of the present case. The appellant has been found owner of money lying in his bank account, source and nature of which could not be explained satisfactorily. Further, it is hereby mentioned that power of the CIT (A) are co-terminus with the AO. It has been held by Hon'ble Supreme Court in the case of Kanpur Coal Syndicate 53 ITR 225 that the Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal, the scope of his power is conterminous with that of the income-tax Officer and he can do what the Income-tax Officer can do and also direct him to do what her has failed to do so. Therefore, following the provisions of the Act and facts of the case, and using the co-terminus powers, the above additions are confirmed u/s 69A of the Act. For this purpose, reliance is hereby placed upon the decision of Hon'ble Supreme Court in the case of Krishan Kumar vs. I TO (2019) 265 taxmann 227 (SC). Once, it is held that the appellant has taken accommodation in the garb of bogus LTCG through manipulation, the AO was justified in making further addition of Rs. 1,19,03,842/- on account of unaccounted commission paid, estimated @6.5% for the above purpose. The same is hereby confirmed u/s 69C of the Act. Thus grounds of appeal Nos. 1-5 are dismissed.”

4.1 Succinctly, thus, the ld. CIT(A) has held that there

was no material to justify such abnormal increase in the

share price of Maa Jagdambe, despite it having meager

financials; that thus, such rise in share price in the case of

Maa Jagdambe was not due to its performance, but it was

due to manipulation by camouflaging earnings of exempt

income by booking Long Term Capital Gain by the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 22 beneficiaries, including the appellant; that the company was

having Nil revenue for FYs 2009-10, 2010-11, 2011-12,

2012-13 and Rs. 27.87 crores(trading sales) for FY 2013-14;

that it had shown no operational activities from FY

2009-l0 to FY 2012-13; that further, against trading sales of

Rs. 27.87 crores for FY 2013-14, it had shown purchase of

raw material of Rs. 27.42 crores; that for all such years, net

profit had been shown as Nil (for FY 2013-14, Rs. 59 lakhs);

that moreover, for all these years, there was no employee's

cost, or administrative expenses, or depreciation, etc.; that

from the balance sheet of Maa Jagdambe, it was observed

that it has no assets; that it is beyond human probability

that shares of such a company, with such poor financials

and no operational activity could rise from Rs. 2.60 to Rs.

100 in such a short span of time; that there was nothing on

record to justify such kind of exceptional rise in the share

price of M/s Maa Jagdambe for the period from June, 2013

to March,2015; that it also beyond human prudence to

accept that a company having no establishment, no business

activity or assets was fetching a share price of around Rs.

100/-, beyond all its fundamentals; that though it is

registered with ROC, having PAN, but in fact is just existing

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 23 on papers; that the company has been incorporated by

taking care of all the technical formalities, such as

registering with ROC, but it is having only postal addresses,

with no real office or employees; and that the same doesn't

establish its identity, as it had been found existing only on

paper.

4.2 The ld. CIT(A) further held that the SEBI, in its order

dated 29.07.2020 / November 6, 2020 (relied on by the AO

during the remand report), has found that trades executed

in the scrips of M/s Maa Jagdambe Tradelink during the

period from May, 2013 to July, 2015 were manipulated and

were fraudulent; that it triggered an upward movement in

the price of its scrips over a short period of time, whereas

there had been no major corporate announcement made by

Maa Jagdambe during the said period, except for the

announcement of a split of its shares; that yet the price of

its scrip had witnessed an abnormal rise during the said

investigation period; that the trading during the period from

May, 2013 to July, 2015 was manipulated by carrying out

trades in small volumes, by artificially hiking up its price;

that the SEBI, in the said order had discussed in detail, the

modus operandi adopted in order to hike the market price of

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 24 the scrip fraudulently, through pre-conceived transactions;

that it was found that by executing manipulated trades, the

market price discovery mechanism had been distorted and

thus a misleading picture had been created in the scrip of

Maa Jagdambe; that on account of such unfair trading

practices executed in the security market, it was inferred

that the price of the shares of Maa Jagdambe had been

manipulated fraudulently during the period in question;

that it was on the basis of such facts, that the SEBI

imposed penalty of Rs. 5 lakh in the cases of 9 different

persons.

4.3 It was further held that though such investigation

report of the SEBI had been completed after that passing of

the assessment order in the assessee's case, the same

provided vital facts and important findings for the period

under consideration, which were crucial for determining/

examining the genuineness of the claim of exempt of huge

LTCG as shown by the appellant in the ITR, in the scrips of

Maa Jagdambe, which had been held as bogus by the AO;

that the report of the SEBI went to the root of the issue

involved; that it was a report of a Statutory Authority, which

could not be discarded, as it had examined the relevant

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 25 facts very minutely, which facts were relevant to the facts of

the case under consideration; that the principles of natural

justice had been adhered by sharing the copy of the report

with the appellant during the appellant proceedings; that

therefore, the report of the SEBI was an important evidence

and was being considered for the adjudication of the appeal;

that the SEBI, in its report/order had specifically mentioned

the names of the members of the Singal family and had

observed that such persons were the beneficiaries out of

dubious trading in shares; that from a composite perusal of

assessment orders for AY 2011-12 to 2014-15 in the cases

of Shri Sanjay Singal, Smt. Aarti Singal, Shri Aniket Singal,

Shri Sanjay Singal (HUF) and other family members, it was

found that there was a similar pattern, wherein, they had

been regularly investing in shares of various penny stock

companies having no fundamentals and had been making

exit by having huge exempt LTCG within a short period of

time; that the appellant, alongwith his other family

members, chose to make investment in penny stock of Maa

Jagdambe through offline mode during FY 2012-13, when

the company was not having any tangible activity/assets,

and was existing merely on papers and was having no actual

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 26 worth; that the appellant, Smt. Aarti Singal, Shri Aniket

Singal and M/s Sanjay Singal HUF, had purchased 3,75,000

shares each, and they were having 10% shareholding of Maa

Jagdambe as on March, 2013; that it was not an isolated

case and that the appellant and his family members traded

in the penny stock of Maa Jagdambe and earned huge Long

Term Capital Gain; that there were a large number of such

penny stock from where the appellant and his family

members traded and earned huge Long Term Capital Gain

(exempt income) of Rs.971.85 (approx.) from AYs 2011-12 to

2017-18; that all such companies were having no tangible

activity/assets; and that the modus adopted in all such

cases was similar, where the price of such shares exhibited

abnormal rise during a short period of time against their

fundamentals and meager Financials.

4.4 The ld. CIT(A) further held that the appellant,

alongwith his family members, had followed the above

modus operandi consistently for various AYs by entering

into transactions of penny stocks and earning huge Long

Term Capital Gain, which were not genuine on the face

itself; that the onus was on the appellant to substantiate

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 27 the genuineness of such transactions, as it has claimed

exempt income in the ITR; that the appellant had furnished

documents in order to discharge his initial onus; that

however, once the AO had brought on record and

confronted such adverse findings/observations to the

appellant regarding the lack of genuineness of such sale

transactions, the onus had shifted back on-to the appellant;

that further, it was for the appellant to bring on record

satisfactory material to substantiate the genuineness of the

sale price of the shares of Maa Jagdambe, justifying the

abnormal rise in its share price; that even during appellant

proceedings, the appellant had relied upon the same

documents/explanation as furnished during assessment

proceedings; that the appellant and his family members had

been found taking huge accommodation entries through

various accommodation entry providers, such as Shri R.K.

Kedia and Shri Shrish Chandrakant Shah, during AYs

2011-12 to 2014-15, in the garb of exempt LTCG; that

much incriminating evidence had been found and seized

during the search proceedings carried out in the cases of

Shri R.K. Kedia and Shri Shrish Chandrakant Shah on

09.04.2013 and 13.06.2014, respectively, where it was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 28 found that the appellant and his family members had taken

huge accommodation entries in the garb of exempt LTCG

through such entry providers, by routing unaccounted cash

by layering the transactions through many paper/shell

companies with the involvement of such accommodation

entry providers; that the appellant had admitted the

incriminating nature of such bogus LTCG in the statement

recorded u/s 132(4) of the Act during the search

proceedings carried out in his case, on 21.02.2014; that

though the findings of such search proceedings carried out

in the case of the appellant / Shri R.K. Kedia and Shri

Shrish Chandrakant Shah might not have been directly

applicable to the facts of the present case for the year under

consideration, the findings of such search proceedings

substantiated the findings of the AO, made for the current

AY; that certain share brokers, such as M/s SMC Global

Securities Ltd., M/s Religare Securities Ltd. and M/s Kayan

Securities Pvt. Ltd. had been found to be involved in

providing accommodation entries in various scrips,

including those of M/s Maa Jagdambe and they had

accepted their involvement in the manipulation in this

respect; that the appellant had argued that the AO has not

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 29 made any independent inquiry for the year under

consideration and had merely has made reference to the

findings as per the earlier assessment proceedings (AYs

2011-12 to 2014-15), where certain additions on account of

LTCG were made in the hands of the appellant/his family

members, but such additions made in the earlier years had

been deleted by the ITAT, Chandigarh/Delhi and the appeals

were decided in favour of the appellant; that it was noted

that the facts of the cases relied on by the assessee were

different from the facts of the assessee's case; that in those

cases, the ITAT had allowed the appeals mainly on the

ground that the AO had not allowed cross examination of

the persons (accommodation entry providers) on whose

statements the assessment order had been based; that

whereas in the present case, the AO had not relied on the

statement of any person, on the basis of which additions

had been made for the year under consideration; that the

appellant had submitted copies of the documents to

substantiate the genuineness of the transactions related to

the purchase and subsequent sale of shares leading to long-

term capital gain claimed as exempt by the appellant; that it

was found that these documents were also placed before

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 30 A.O., who, after detailed examination and discussion and on

going beyond these documents, had established that these

documents are mere masks to hide the real nature of the

transactions; that the AO had gone through the financial

results of Maa Jagdambe Tradelink for various years, as

available in the public domain; that the share price of this

company was neither affected by the movement of Sensex,

nor did the financials of the company justify such

extraordinary jump in the price of its shares; that the

findings of the AO were also based on strong surrounding

circumstances, the preponderance of probability and human

conduct in the light of the detailed analysis of the modus

operandi adopted by the appellant, which had come to

surface as a result of deep investigation; that once the

evidence that the appellant had claimed bogus LTCG was

introduced, by the AO, the burden of evidence shifted to the

appellant; that during the assessment proceedings and even

during the appellate proceedings, the appellant had failed to

produce any evidence to prove that the Long Term Capital

Gain claimed by it was genuine; that the appellant had

failed to discharge its burden of proof, whereas the AO had

proved that the claim of the appellant was not genuine; that

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 31 it had also been argued that no opportunity was provided to

cross examine the persons/witness whose statements had

been used against the appellant; that the documents

submitted to prove the genuineness of transaction were

themselves found to serve as a smoke screen to cover up the

true nature of the transactions, as it was revealed that the

purchase and sale of shares were transactions arranged to

create bogus profit in the garb of tax exempt LTCG; that the

onus was on the appellant to explain the source and nature

of the amount credited in his bank account on this regard ;

that however, the appellant could not discharge the onus, as

the explanation furnished by him had been found to be

unsatisfactory; that the share transactions leading to the

LTCG were sham transaction entered into for the purpose of

evading tax; that the AO had rightly disallowed the claim

and added the amount of Rs. 18,31,36,042/- as income of

the appellant; that however, the provisions of section 68 of

the Act are applicable only where there are cash credits in

the books of account of an assessee; that the bank account

of the appellant cannot be considered as the books of

account of the appellant; that the provision of section 69A

were squarely applicable to the facts of the case; that the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 32 appellant had been found to be the owner of the money lying

in his bank account, the source and nature of which could

not be explained satisfactorily; that once it was held that

the appellant had taken accommodation in the garb of bogus

LTCG through manipulation, the AO was justified in making

the further addition of Rs.1,19,03,842/- on account of

unaccounted commission paid, estimated at the rate of 6.5%

for the said purpose; and that the same was being confirmed

under Section 69C of the Act.

material on record. The issue is as to whether the ld. CIT(A)

is justified in holding, in concurrence with the AO, that the

transactions of the assessee, in shares, leading to Long Term

Capital Gain of Rs.18,31,36,042/- are sham transactions,

not requiring to be added back either under Section 69A of

the Income Tax Act, as held by the ld. CIT(A), or under

Section 68 thereof, as had been done by the AO; and that as

to whether the authorities below are not justified in making

addition of an amount of Rs.1,19,03,842/-, under Section

69C of the Act, on account of alleged unaccounted

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 33 commission paid by the assessee at the rate of 6.5% for the

purpose of earning the Long Term Capital Gain.

before us, is that the share price of M/s Maa Jagdambe

Tradelinks Ltd. had substantially increased from Rs.2.60 per

share in June,2013, to Rs.99.95 per share in June,2014,

without any significant increase in its assets/business

volumes, revenue, etc.

7.1 Further, it was held that the share price of M/s Maa

Jagdambe has been artificially manipulated and that there

was no tangible or intangible material to justify such

abnormal increase in the share price of M/s Maa Jagdambe.

7.2 It was further held that M/s Maa Jagdambe had ‘Nil’

revenues and operational activities from Financial Year

2009-10 to Financial Year 2012-13, however, during the

Financial Year 2013-14, trading sales of Rs.27.87 crores

had been shown, against which, raw material and

net profit had been shown at Rs.27.42 crores and

Rs.59 lakhs, respectively, and that further, there had been

no employee cost, administrative expenses, depreciation,

etc., during the relevant Financial Years. On these facts, the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 34 ld. CIT(A) held that M/s Maa Jagdambe existed merely on

paper, and there was no justification for such abnormal

increase in its share price.

ASSESSEE'S CONTENTIONS

7.3 The submission of the assessee in this regard is

that M/s Maa Jagdambe Tradelinks Ltd. was having total

revenue of Rs.1.24 Cr for Financial Year 2012-13, of

Rs.28.20 Cr for Financial Year 2013-14 and of Rs.122.65 Cr,

for Financial Year 2014-15, and that it had earned a loss of

Rs.16,618/- for Financial Year 2012-13, a profit of

Rs.59,08,431/- for Financial Year 2013-14 and a profit of

Rs. 76,33,588/- for Financial Year 2014-15. The ld. Counsel

for the assessee has contended that further, the issued share

capital of M/s Maa Jagdambe Tradelinks Ltd. increased from

that of Rs.1.96 Cr in Financial Year 2011-12 to Rs.15.69 Cr

in Financial Year 2013-14. It has been submitted that from

this, there comes out a clear indication that the future

growth prospects of the said company were positive. It has

been submitted that evidently, therefore, there was a positive

growth in its operating results of M/s Maa Jagdambe

Tradelinks Ltd., as had been anticipated by the assessee. It

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 35 has been submitted that it was this positive growth in the

operating results which led to positive trading results of

M/s Maa Jagdambe Tradelinks Ltd. It has been submitted

that this is evident from the share price trend of M/s Maa

Jagdambe Tradelinks Ltd., as available in the public domain.

It has been submitted that further, there has been a

significant trading volume of the shares of the company over

a prolonged period of time; that this demonstrates the

potential of the stock. It has been stated that the share

price of M/s Maa Jagdambe Tradelinks Ltd. showed an

upward trend in the previous year relevant to assessment

years 2013-14 and 2014-15. It has been submitted that the

assessee received an offer for preferential allotment of shares

by M/s Maa Jagdambe Tradelinks Ltd. and he opted to

purchase 3,75,000 shares of the company, at the rate of

Rs.10/- per share. It has been submitted that the assessee

had expected a growth in the share price of the shares of

M/s Maa Jagdambe Tradelinks Ltd. and that it was,

therefore, that the assessee held the shares of M/s Maa

Jagdambe Tradelinks Ltd. for a substantial period of more

than eighteen months. It has been submitted that in

December, 2013, a share-split in the ratio of 10:5 was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 36 announced by the company; that this resulted in increase in

the assessee's shares to 18,75,000; that thereafter, the

assessee sold the shares in tranches at an average price of

Rs.99.67 per share, during the period from September, 2014

to March, 2015. It has been submitted that the shares of

M/s Maa Jagdambe Tradelinks Ltd. were traded for as high

as Rs.102.63 per share in February, 2015. It has been

submitted that from these facts, which have wrongly not

been appreciated by either of the taxing authorities, based

on evidence placed on record, it was only as a prudent

investor that the assessee made investment in the shares of

M/s Maa Jagdambe Tradelinks Ltd. at a reasonable price,

which shares were held by the assessee for a substantial

period of more than eighteen months and, thereafter, the

shares were sold on a recognized Stock Exchange. It has

been submitted that both the authorities below have illegally

not taken into consideration the fact that the share

transactions undertaken by the assessee were genuine share

transactions, fully entitling the assessee to the exemption

claimed under the provisions of Section 10(38) of the Act on

the gain arising from the sale of the listed shares.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 37 DEPARTMENT’S SUBMISSIONS :

correctly held by the AO and confirmed by the ld. CIT(A), the

assessee has shown the shares to have been allotted by way

of preferential allotment off market; that the assessee earned

Long Term Capital Gain of Rs.18,31,36,042/- from the sale

of these shares during the year under consideration; that the

AO has correctly held, by analyzing the financial data of M/s

Maa Jagdambe Tradelinks Ltd., that this company was

having ‘nil’ fixed assets and had disclosed ‘nil’ profits over

the years. It has been contended that in view of these facts,

it has rightly been held that the Long Term Capital Gain

earned by the assessee from the sale of shares of M/s Maa

Jagdambe Tradelinks Ltd. was not genuine.

8.1 It has been contended by the ld. DR that from the

share price of M/s Maa Jagdambe for the period between

2013-2015, it was observed by the AO that the share price of

such shares was around Rs.10/- per share during

October,2013 (the period when such shares were allotted to

the appellant through preferential allotment via offline

mode); and that thereafter, the share price of M/s Maa

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 38 Jagdambe was artificially made to rise gradually by using

dummy entries by trading in such shares in small volumes.

8.2 It has been contended by the ld. DR that the

assessee has shown shares as preferential allotment through

off market and he earned an exempt LTCG of Rs

18,31,36,042 from the sale of such shares during the year

under consideration; that as per the analysis of AO from the

financial data of M/s Maa Jagdambe, it was found that the

said company was having ‘Nil’ fixed assets and has disclosed

Nil profits over the years; and that therefore, the capital

earned by the assessee from the sale of shares was not

genuine.

8.3 It has been also been contended by the ld. DR that

the AO collected trade data from the BSE in respect of

counter parties which had bought such shares of M/s Maa

Jagdambe from the appellant and it was found that such

buyers were dummy entries having no worth.

8.4 It has been further contended by the ld. DR that

certain broking concerns have also been found, who provide

LTCG through accommodation entries in the shares of M/s

Maa Jagdambe, such as :

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 39 i. M/s SMC Global Securities Ltd ii. M/s Religare Securities Ltd. iii. M/s Kayan Securities Pvt. Ltd.

8.5 It has been submitted by the ld. DR that

thereafter, SEBI had made an investigation in the case of

M/s Maa Jagdambe and the appellant and his family

members were found having indulged in manipulation of

trading in shares by manipulating its share prices in the

stock exchange.

8.6 It has been further contended by the ld. DR that on

going through the price movement of the shares of M/s Maa

Jagdambe at the stock exchange, it was found that the price

had been increased substantially from Rs.2.60 to Rs.99.95

per share, that this rise was of more than 3800% within one

year, and that however, during this period, there was no

corresponding significant business activity of M/s Maa

Jagdambe to justify such an abnormal and astronomical rise

in its share prices.

8.7 It has been further contended by the ld. DR that

during this period, a small number of shares were traded

every day to artificially jack-up the price at the exchange

through planned manipulation, where buying order was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 40 placed at a price higher than the last traded price and

matching the same by placing sell order, and that this has

eventually increased the last traded price of the shares after

each of such small lot trades.

8.8 It has been contended by the ld. DR that such

modus operandi in the case of M/s Maa Jagdambe has been

discussed in detail in the findings of SEBI, vide its order

relied on by the AO as well, which order has rightly also

been relied on by the ld. CIT(A).

8.9 It has been contended by the ld. DR that during

this period, the price to book value (P/B) ratio of M/s Maa

Jagdambe rose to 480-500, and that during this period, the

price to earning (P/E) ratio was around 1390, which was very

unusual, keeping in mind the financial profile of M/s Maa

Jagdambe.

8.10 It has been contended by the ld. DR that there has to

be some reason to justify such abnormal rise in the share

price of M/s Maa Jagdambe, however, in this case, there is

no material to justify such abnormal increase in the share

price of M/s Maa Jagdambe, despite the company having

meager financials.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 41 9. It has been contended that the Ld. CIT(A) has rightly

held that the share price of M/s Maa Jagdambe has

substantially increased from Rs. 2.60 in June 2013 to

Rs.99.95 per share in June 2014, without any significant

increase in assets/business volumes, revenues, etc., of the

entity; that further, it was held that share price of M/s Maa

Jagdambe has been artificially manipulated and there was no

tangible or intangible material to justify such abnormal

increase in the share price of M/s Maa Jagdambe; that it was

also held that M/s Maa Jagdambe had NIL revenues and

operational activities from FY 2009-10 to 2012-13, however,

during the FY 2013-14, trading sales of Rs. 27.87 crores

have been shown, against which, raw material and net profit

had been shown at Rs.27.42 crores and Rs. 59 lakhs,

respectively; that it was held that there had been no

employee cost, administrative expenses, depreciation, etc.,

during the relevant FYs and that it was on these facts, that

the ld. CIT(A) held and correctly so, that M/s Maa Jagdambe

existed merely on the paper, and there was no justification

for such abnormal increase in its share price.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 42 OUR OBSERVATIONS :

Tradelinks Limited (earlier known as Parasrampuria Credit &

Investments Limited) was, as per the available information in

the public domain, incorporated on 18th January,1985. The

company is engaged in the business of textiles. The total

revenue of the said company for the financial years 2012-13,

2013-14 and 2014-15 aggregated to Rs.1.24 crores, Rs.28.20

crores and Rs.122.65 crores, respectively, and profit/(loss)

during the said periods was (Rs.16,618), Rs.59,08,431 and

Rs.76,33,588 respectively. Further, its issued share capital

increased from Rs.1.96 crores in FY 2011-12 to Rs.15.69

crores in FY 2013-14, which only indicated that the future

growth prospects of the company were positive. From the

above, it is noted that there was positive growth in the

operating results of the company, as anticipated by the

appellant, which led to positive trading results. The share

price of the said company showed an upward trend in the

previous year relevant to the assessment years 2013-14 and

2014-15. The appellant, on receiving offer for preferential

allotment by the company, opted to purchase 3,75,000

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 43 shares of M/s Maa Jagdambe Trade Links Limited at the rate

of Rs.10 per share. This is evident from the analysis of the

share price trend of M/s Maa Jagdambe Trade Links Limited,

as available in the public domain. Further, the trading

volume of shares in the said company has also been

significant over a considerable period of time, which

demonstrates the potential of the stock.

10.1 It was on the basis of the above position, that the

appellant opted to purchase 3,75,000 shares in M/s Maa

Jagdambe Trade Links Limited on preferential allotment in

March, 2013. Since the appellant expected growth in the

share price, the shares were held for a substantial period of

more than 18 months. The Company announced a share-split

in the ratio of 10:5, which resulted in the assessee's increase

in holding to 18,75,000. The appellant thereafter sold the

shares in tranches, at an average price of Rs.99.67 per

share, during the period from September 2014 to March

2015. The shares of the said company were traded for as

high as Rs.102.63 per share in February 2015, as is evident

from the analysis of share price trend, as discussed. It is

thus evident, as rightly contended, that the appellant made

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 44

investment in the aforesaid Company as a prudent investor

at a reasonable price, which investment was held for a

substantial period, i.e., for around 18 months and

thereafter, it was sold on recognized stock exchange.

appellant was genuine and the exemption claimed under

section 10(38) on gain arising from sale of listed shares was

fully in conformity with the provisions of the Act.

2015-16, the appellant filed return declaring income of

Rs.1,12,33,250 after, inter-alia, claiming exemption of

Rs.l8,31,36,042 under section 10(38) of the Act in respect of

long-term capital gains earned on transfer of shares held in

M/s Maa Jagdambe Trade Link Limited, as under:

Name of No. of Purchase of shares Sale of shares Long term Share shares Date of Cost Price Date of Sale Price capital gain Sale purchase Maa 18.75.000 12.03.2013 Rs.37,50.000 Various Rs. 18.68.86.042 Rs. 18.31,36.042 Jagdambe Dates Trade Link [3,75,000 Limited shares [Sept' 14 (MJTLL) issued by to Mar (listed on way of '15] Bombay preferentia Stock allotment Exchange) and balance on account of split]

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 45 13. On perusal of the above, it is seen that the appellant

was allotted 3,75,000 shares of M/s Maa Jagdambe Trade

Link Limited by way of preferential allotment vide Certificate

dated 12.03.2013 on payment of consideration of

Rs.37,50,000. The details of the preferential allotment and

bank statement in support of the payment made have been is

enclosed at pages 29 to 30 and 238 respectively, of the Paper

Book filed by the assessee.

13.1 Subsequently, the company announced a split in the

ratio of 10:5 i.e., each existing equity share of nominal value

of Rs.10/- was sub-divided into five equity shares of nominal

value of Rs.2/- each, resulting in the appellant's

shareholding increasing to 18,75,000 shares [i.e., 3,75,000 x

5 = 18,75,000].

13.2 The aforesaid shares i.e., both the initial preferential

allotment as well as the split shares, were directly credited

to the demat account of the appellant, which were held in

demat form, for more than 1.5 years (18 months). Thereafter,

they were sold during the period from September 2014 to

March. 2015. The entire consideration for purchase of the

shares was paid through banking channels, vide RTGS from

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 46 Punjab National Bank, Chandigarh. The sale of shares was

also undertaken by the assessee on a recognized stock

exchange after due payment of Securities Transaction Tax

('STT'). The transaction was duly supported by contract notes

and confirmation from Bombay Stock Exchange (BSE).

Copies of all contract notes issued by M/s South Asian

Stocks Ltd. are placed at APB 33 to 237.

13.3 That fact that the shares of M/s Maa Jagdambe Trade

Link Limited were received by the assessee by way of

preferential allotment, in itself, substantiates the

genuineness of the transaction. It is noted that on account of

split by the said company, the number of shares increased

which resulted in gains to the appellant. M/s Maa Jagdambe

Tradelinks Limited is engaged in the business of textiles.

The total revenue of the said company for the financial

years 2012-13, 2013-14 and 2014-15 aggregated to Rs.1.24

crores, Rs.28.20 crores and Rs. 122.65 crores,

respectively, and profit/(loss) during the said periods

was (Rs.16,618/-), Rs.59,08,431/-and Rs.76,33,588/-,

respectively. Further, its issued share capital increased from

Rs.1.96 crores in FY 2011-12 to Rs. 15.69 crores in FY 2013-

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 47 14, which only indicated that the future growth prospects of

the company were positive. There was positive growth in the

operating results of the company, as anticipated by the

appellant, which led to positive trading results. The shares

of the said company were traded for as high as Rs.102.63 per

share in February 2015. The assessee thus indeed made

investment in the aforesaid Company as a prudent investor

at a reasonable price, which was held for a substantial

period, i.e. for around 18 months and was thereafter, sold on

a recognized stock exchange duly supported by the following

contemporaneous/ unrebutted documents/ material placed

on record:

- Shares were allotted by way of preferential allotment directly by the company and the shares were allotted and always held in demat form by the appellant; - Transaction of sale was undertaken through broker, who was a member of the recognized stock exchange; - Copies of documents in support of allotment of shares by way of preferential allotment directly by the company; - Copies of contract notes in support of sale of shares; - All transaction of purchase and sale of shares were made through normal banking channels.

13.4. The entire addition had been made by the Assessing

Officer solely on the basis of assessment order(s) passed in

the case of assessee for preceding assessment year 2014-15

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 48

and earlier years as is evident from the following

observations made in the assessment order [refer pg 15 & 16

of the assessment order]:

" ......... The evidence regarding additions made have been discussed in detail in the A Y 2014-15 and earlier years. In view of the considering detailed discussion in the assessment order for A Y 2014-15. it is established that the assessee indulged in "sham transaction" to receive hack his unaccounted money in the garb of exempt LTCG. Therefore, the total receipts credited in various bank accounts of the assessee against these bogus/sham transactions have to be treated as unexplained income of the assessee u/s 68 of the IT. Act, 1961 alongwith the unaccounted commission expenditure @ 6.5% of the total LTCG of the year for arranging these entries during the FY2014-15 relevant to AY 2015-16. "

13.5 It is noted that similar addition on account of

alleged bogus long term capital gains was made in the case

of the assessee and his family members in the preceding

assessment year 2014-15 and earlier years, on the basis of

certain documents/statements, which were never confronted

to the assessee, purportedly found during the course of

search in the case of one Sh. R.K. Kedia and Sh. Shrish

Chandrakant Shah, who are alleged to be engaged in rigging

prices of certain sham companies and providing

accommodation entries in the form of bogus long term

capital gains.

13.6 On appeal, the addition made by the Assessing Officer

was deleted by a Co-ordinate Chandigarh Bench of the

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 49

Tribunal in the case of Sh. Sanjay Singhal & Others (the

assessee) in ITA Nos. 708, 710, 711/Chd/2018 (AYs 2011-

12, 2013-14and 2014-15), by observing as under:

"81 ..................... The judgment relied upon by the Revenue does not take forward the arguments of the ld.counsel for the Revenue that there is no need to provide opportunity to cross examine all those persons whose statements have been recorded by the Investigating Agency during the course of search at their residential premises, and more so these judgments cannot be given preference over the judgment of Hon'ble Supreme Court in the case of (Andaman Timber Industries) (supra) which has been considered by the Co-ordinate Bench. Similarly, other large number of orders have been placed on record. They are distinguishable on facts; they have their own facts which are not applicable in the instant cases. By referring each order, we will be unnecessarily making this order more lengthy and bulky, because Co-ordinate Bench has considered more than hundred of decisions cited by both the sides, and thereafter the Bench has researched and referred sixty two orders on this point of law. Bench thereafter decided the appeals. After going through well reasoned order in the light of material brought to our notice, we are of the view that issue in(dispute in all these appeals is squarely covered) by order of the Co- ordinate Bench) in the case of Shri Brij Bhushan Singal and others (supra), and hold that the long term capital gain declared by the assessee and claimed as exempt under section 10(38) are to be treated as genuine and they are not to be assessed as unexplained cash credit under section 68 of the Act. 82. As discussed earlier, grounds of appeals in all the appeals are common. Therefore, in view of the above discussion, we allow all the grounds of appeals and delete addition made by the Id.AO and confirm by the Id.CIT(A) under section 68 of the Income Tax Act, 1961 on account of unexplained cash credit in each appeal i.e. ITA Nos. 708, 710, 71 l/Chd/2018; ITA No. 714, 716 and 717/Chd/2018; ITA No. 718 &719/Chd/2018; and 705/Chd/2018 83. Similarly, addition made by the AO by estimating the expenses on commission alleged to have been incurred by the assessee for arranging such long term capital gain and added under section 69C of the Act on account of unexplained commission expenses are also deleted in all these appeals as a consequence to the finding on main issue. " (emphasis supplied)

13.7 In the aforesaid decision, the Tribunal has followed

the earlier decision of the (Delhi Bench) of the Tribunal in

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 50 the case of ‘Brij Bhushan Singhal & Others’ (Brij Bhushan Singhal being the father of the assessee) ITA Nos.1415 to 1417/Del/2018) wherein too, the same material/statements,

which were not confronted to the assessee, were relied upon

to make addition on account of alleged bogus long term

capital gains.

decisions where, for several reasons, the addition on sale of

shares shown as a long-term capital gain is confirmed in the

hands of the assessee. However, in most of the decisions

cited before us, there was an off market purchase by the

assessee and the assessee could not substantiate, with

documentary evidence, the transaction of purchase and sale

of the shares. In many of the cases cited, there were

predated contract notes issued by the broker and the

payment for purchase of the shares was made in cash, and

that too, off market. In some of the cases, there was no

payment by cheque for acquisition of the shares, but there

was an adjustment of profits earned by the assessee through

those brokers, who generated profits in cash in the name of

the assessee and the purchase price of the shares was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 51 adjusted by the broker against that payment to be made to

those assessees. It is in such circumstances, the additions

have been confirmed by the coordinate benches. Therefore,

the facts of those cases are clearly distinguishable.

14.1 The issue thus stands squarely covered by the order

of the Tribunal in the appellant’s own case for the preceding

assessment year(s), wherein, a similar addition made on

account of alleged bogus long term capital gain on the basis

of the very same material/statements (not confronted to the

assessee, as acknowledged by the assessing officer himself),

has been deleted by the Tribunal, by holding such ex-parte

material/statements to be unreliable.

proceeded to draw adverse inference and has made addition

on account of alleged bogus long term capital gains primarily

on the following two grounds:

(a) Relying mainly upon statement of Sh. R.K.Kedia, the assessing officer held that the transaction is bogus; and

(b) Alleged that the investee company i.e., M/s Maa Jagdambe Trade Link Limited is merely a paper company and not doing any meaningful business and the trading activity appears to be suspicious.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 52 Apropos ex-parte Statement of Sh. R.K.Kedia

ex-parte statement of one Sh. R.K. Kedia, stated recorded on

13.06.2014, relevant extracts of which have been reproduced

in the assessment order at pages 4 to 6 thereof. In the said

statement, no copy of which was ever provided to the

appellant, Sh. R.K. Kedia has alleged that he provided

accommodation entries, inter-alia, in the form of bogus long

term capital gains through certain sham companies in lieu of

commission.

less form the basis of addition.

unconnected to the appellant insofar as no financial

transactions were undertaken with this party so much so,

the appellant does not have any financial relationship with

the said individual. Thus, the statement of Sh.R.K.Kedia,

who is completely unconnected with the impugned

transaction must be ignored from consideration. The search

and the statement dated 13.06.2014 of Sh. R.K.Kedia, was

recorded much before the shares were sold by the appellant

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 53 on the recognized stock exchange. It is a matter of record

that shares of M/s Maa Jagdambe Trade Link Limited were

transferred by the appellant during the period from

September, 2014 to March 2015, i.e., much after the search

operation and thus, the said statement/material cannot be

relied upon to draw any adverse inference in respect of the

genuine transaction entered into by the appellant in the

relevant assessment year 2015-16. No effective opportunity

of cross-examination was provided to the assessee, in so far

as despite specific requests made by the appellant, the

authorities did not afford any opportunity during the course

of assessment/appellate proceedings to cross-examine

Sh.R.K.Kedia. In the aforesaid circumstances, in absence of

the material/ documents/ statements relied on having been

made available/ confronted to the appellant and also in the

absence of cross- examination of person(s) whose statement

is being referred to, the document/statements, must, be

excluded from consideration altogether in accordance with

the settled principles of natural justice [Refer:Kishanchand

Chellaram vs. CIT: 125 ITR 713 and Andaman Timber

Industries v. CCE: 62 taxmann.com 3 (SC)];

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 54 19. The CIT(A) has, regarding the issue of cross-

examination, incorrectly noted at para 6.11 of the order that

“However, from the record, it is found that “the AO has not

relied upon the statement of any person for the year under

consideration in order to draw adverse inference against the

appellant”, without appreciating that the entire case of the

assessing officer was based on the statement of

Sh.R.K.Kedia. The fact that no opportunity was afforded to

cross examine Sh. R.K.Kedia has also been observed by the

Tribunal in the order(s) passed for the preceding assessment

year(s). Thus, since the statement was not subjected to

cross-examination, it must be completely excluded from

consideration. Once the said ex-parte statement is excluded,

there is nothing on record to doubt/suspect, much less

establish, the transaction of long term capital gains. The

sole basis of entire adverse inference is the statement of Sh.

R.K.Kedia, which was explained/ retracted on 14.10.2014

and thereafter, he withdrew the retraction vide letter dated

31.03.2015. Therefore, no reliance can be placed on the

testimony of the said person who was indulging in double

speak and was taking intrinsically mutually contrary stands.

He was an unreliable witness. In this regard, it is submitted

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 55 that it is settled law that once a statement is retracted, the

same cannot be relied by the assessing officer for making

additions/disallowance [refer: K.T. M. M. Mohd. V. UOI: 197

ITR 196 (SC) and Vinod Solanki vs. UOI Civil Appeal No.

7407 of 2008:SCC] That apart, it is trite law that even

admission of the assessee, though relevant, is not

conclusive. The entire purpose of assessment is to tax the

correct taxable income of the assessee under the provisions

of the Act. That being so, it is not at all permissible to make

any addition solely on the basis of any statement/allegation,

which is not backed by real/ tangible evidence, and that too,

a statement which is subsequently retracted by the said

party. [Refer CIT vs. Bansal High Carbons (P) Ltd.: 223 CTR

179 (Del) and CIT vs. Dhingra Metal Works: 328 ITR

384(Del)] In any case, statement of Sh.R.K.Kedia is not

reliable and self-contradictory and hence cannot be relied.

entered into a transaction of purchase of shares of a listed

company on a recognized stock exchange, some of which

resulted in gains on account of favorable market price. It is

not coming out from the orders of the taxing authorities as

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 56 to how and on what basis it is alleged that the above named

person is an entry operator and how the same is at all

relevant in the case of the appellant. The orders do not

make it clear as to how and on what basis it is alleged that

shares of M/s Maa Jagdambe Trade Link Limited are penny

stock, and wherefrom the said term has been derived. It is

not evincible as to what the relationship between the above

named person with the said company is and how such

relationship is at all relevant to the transaction of the

appellant. Then, it is also not discernible that how the

transactions of the appellant are bogus, even assuming the

above named persons to be entry operators.

someone is alleged to be an entry-provider, this cannot lead

to a conclusion that the transaction of the appellant is not

genuine, when there is nothing on record to even establish

the link between the so-called entry provider and the

transaction of the appellant.

opportunity of being heard was provided to the appellant

during the process of assessment proceedings, whereas it is

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 57 patent on record that only one notice u/s 142(1) of the Act

was issued by the AO, on 13.10.2017 (APB-250 to 251) in

response to which, the appellant furnished a detailed reply

dated 17.11.2017 (APB-252 to 253). No further query was

ever raised, nor any opportunity was provided for cross

examination.

Concerning the so-called suspicious share trading activity

circumstantial evidences to draw the inference that the share

transactions undertaken by the appellant were sham and a

colourable device to evade taxes and introduce unaccounted

money in his books. The Assessing Officer has alleged that

the appellant had purchased shares in M/s Maa Jagdambe

Trade Link Limited, the price of which skyrocketed even

when the said company had no proven results, and that the

preponderance of probability and normal human conduct

establishes that the transaction undertaken by the appellant

was not genuine.

had purchased shares of M/s Maa Jagdambe Trade Link

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 58 Limited in huge quantities, even when the said company had

incurred consistent losses or negligible profits, is factually

incorrect, which is evident from the fact that the appellant

was allotted, by way of preferential allotment, merely

3,75,000 shares of M/s Maa Jagdambe Trade Link Limited at

the rate of Rs.10 per share, for a total consideration of

Rs.37,50,000 during the previous year relevant to

assessment year 2013-14. Therefore, the appellant had not

purchased huge quantities of shares in the said company,

but had made investment as a prudent person, as discussed,

exercising the requisite due diligence. It was only on account

of the split of shares announced by the said company that

the number of shares increased.

Officer that the financial results of the aforesaid company

were weak, the Assessing Officer has, as rightly submitted,

simply reproduced certain data extracted from the public

domain, without properly analyzing the same. On perusal of

the analysis of financial results of the investee company, it

is seen that the total revenue of the said company for the

financial years 2012-13, 2013-14 and 2014-15 aggregated to

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 59 Rs.1.24 crores, Rs.28.20 crores and Rs.122.65 crores,

respectively, and its profit/(loss) during the said periods was

if (Rs.16,618), Rs.59,08,431/- and Rs.76,33,588/-,

respectively. Further, its issued share capital increased from

Rs.1.96 crores in FY 2011-12 to Rs.15.69 crores in FY 2013-

14, which only indicated that the future growth prospects of

the company were positive.

25.1 In the aforesaid facts, it is incomprehensible as to

how and on what basis the aforesaid investee company is

alleged to be a company without any proven track record.

25.2 Further, the Assessing Officer also failed to

appreciate that the market price of any share/ scrip on the

stock exchange is not simply based on the financial results

in any particular year(s), rather, it is based on numerous

complex factors, like the nature of business and the product

dealt in, the prevailing competitive environment, the future

potential of the sector in which the company operates, the

positioning of the company in the sector it operates,

Government and statutory regulations, international markets

and sentiment, the future potential of investment by PE/

Investment funds, the perception in the market, the future

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 60 expected cash flows, etc. Thus, the adverse inference drawn

by the Assessing Officer on the ill-founded assumption that

the share prices had increased manifold, is totally

unfounded and without any valid basis.

that the increase in price of the said shares was spread over

a span of almost two years. Moreover, the market price of

the shares has grown consistently over a period of time and

not abnormally, as alleged.

the appellant was unable to establish the identity of the said

company, there is no basis for doubting the existence of the

entity, more particularly having regard to the facts that the

investee company is duly registered with the Registrar of

Companies; as per the information available even today in

the public domain, the investee-company is an operating

company, having dynamic and operational websites; the

investee company is listed on a recognized stock exchange;

the existence of the company is not even doubted by any of

the regulatory authorities, including SEBI.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 61 Concerning Preponderance of probability

preponderance of probabilities and the normal human

conduct to allege that the transaction undertaken by the

appellant was not genuine.

that the apparent is not real is on the person who alleges it

to be so. It is not open to the Revenue to simply allege that

the apparent is not real in a given case, as the one at hand,

without bringing on record any tangible material to establish

the same.

decisions:

- In CIT vs. Daulat Ram Rawatmull: 87 ITR 349 (SC), the Court held if FD in the names of sons of partners are utilized as security by the Firm, then, the onus of proving that Firm was owner of the FD was on the Revenue. - In Jaydayal Poddar vs. Bibi Hazra: AIR 1974 SC 171, the Court held that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner is on the person asserting it to be so. - It has similarly been held in the case of CIT vs. Bedi & Co. (P) Ltd: 230 ITR 580 (SC).

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 62 31. It is not possible to comprehend as to how the

transactions under consideration can be said to be against

human conduct. As a matter of fact, it is quite normal for an

investor to invest in shares and exit after holding the shares

for considerable period, as and when favourable market

conditions exist. In fact, the movement in the share market

is totally outside the control of the assessee/ investor and

therefore, it is not possible for the investor/ appellant to

plan the exit price.

to how and on what basis the shares of an investee company

are categorized as “penny stock”. In fact the investee

company herein is an existing company and, therefore, there

is no warrant to doubt the transaction undertaken by the

appellant.

32.1 The concept of preponderance of probabilities does

not connote that the decision itself can be based thereupon,

without bringing on record any material/ evidence in support

of such allegation. Any assessment of income in the hands

of the assessee has to be made on the basis of material/

evidence and not merely on basis of mere suspicions and

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 63 surmises [refer: Lalchand Bhagat Ambica Ram vs. CIT: 37

ITR 288 (SC); Dhakeshwari Cotton: 26 ITR 775 (SC)]

32.2 It is also settled law that suspicion, howsoever

strong, cannot take the place of hard proof and that

assessment under the Act has to be made on the basis of

mere material/evidence and not on the basis of

assumptions/presumptions [refer J.J. Enterprises vs. CIT

254 ITR 216 (SC), Assam Tea Co. vs. ITO: 92 ITD 85 (Asr.)

(SB), Faqir Chand Chaman Lal vs. ACIT: (2004) 1 SOT 914

(Asr.) (Appeal dismissed by P&H High Court in 262 ITR 295

and SLP dismissed by SC in 268 ITR), CIT vs. Paras Cotton

Co.: 288 ITR 211 (Raj.)]

Officer is based on merely conjectures and surmises, without

any tangible material being brought on record to controvert

the cogent documentary, contemporaneous material/

evidences placed on record by the appellant. The Assessing

Officer has proceeded solely on assumptions and

presumptions, and has neither controverted the

comprehensive direct / corroborative documentary evidence

filed in support of the genuineness of the transaction, nor

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 64 has attempted to bring on record any independent

corroborative material/ evidence to establish that the

transactions were bogus.

SEBI ORDER/REPORT

CIT(A) on the order passed by SEBI dated 29.07.2020. The

Ld. CIT(A) has placed strong reliance on the order and has

held that the report provides important findings which are

essential to determine the genuineness of exempt LTCG

claimed by the assessee. It has also been stated that the

said order prescribes the modus operandi followed for

artificially jacking up the share price. On these facts, the

Ld. CIT(A) has rejected the appellant’s contentions that the

SEBI’s order was passed much after the conclusion of the

assessment proceedings and that the assessee's name was

also not mentioned in the said order. Placing further reliance

on the SEBI’s order, the ld. CIT(A) held that the appellant,

along with his family members, was regularly engaged in

investing in shares of various penny stock companies having

no underlying fundamentals; that the share prices of these

companies were sustainably jacked up to claim exempt LTCG

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 65 within a short period of time; that a similar modus operandi

has been adopted by the appellant and his family members

in claiming exempt LTCG from A.Y. 2011-12 to A.Y. 2017-18

to the tune of Rs. 971.85 crores approximately, which is

non-genuine. (Paras 6.4.4, 6.5). The CIT(A) has further

referred to an order passed by SEBI, provided to the assessee

by the Assessing Officer during remand proceedings,

supposedly restraining certain investors from buying, selling

or dealing in the securities market, vide order No.

WTM/SM/IVD/ID6/8384/ 2020-21, dated July 29, 2020. It

is on the basis of the aforesaid fundamental premise and

based on certain presumptions and suspicion that the

ld.CIT(A) has concluded that the share transactions

undertaken by the appellant were bogus, for the purpose of

evading taxes. In this regard, it is seen that the aforesaid

order has been passed vis-à-vis certain identified

entities/individuals referred to therein specifically and it is

applicable to only such entities/individuals as have been

restrained, in their individual capacity, from undertaking

trading in any shares on the stock exchange. However, there

is no restriction regarding trading in shares of M/s Maa

Jagdambe Trade Links Limited. Further, there is no mention

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 66 about any transaction having been undertaken by the

appellant or of the appellant being engaged in fraudulent

price-rigging of the shares of M/s Maa Jagdambe Trade Links

Limited in the order passed by SEBI. Hence, the reliance

placed on the said order is without any basis. Moreover, no

document has been provided to the appellant during the

assessment proceedings or the appellate proceedings which

mentions the name of the appellant by SEBI. Otherwise too,

there is nothing on record as to the fate of the said order,

whether it still survives, or it has been reversed. Therefore

also, the aforesaid order of the SEBI cannot be considered as

conclusive and it cannot form the basis to draw any adverse

inference against the appellant. In view of the above, no

adverse inference can be drawn on the basis of the order

passed by the SEBI, which has no correlation whatsoever

with the assessee, moreso, when as on date, there is no

proceeding pending against the appellant before the SEBI

with respect to the transaction of shares undertaken by the

appellant in respect of the shares of M/s Maa Jagdambe

Trade Links Limited.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 67 35. The assessee discharged his initial onus by placing

necessary documents on record. The ld. CIT(A) has observed

that where AO brought on record and confronted adverse

findings to the Appellant, the initial onus again shifted back

upon the appellant. However, the appellant again relied

upon the same documents/explanation furnished during the

assessment proceedings.

were sold by the appellant on a recognized stock exchange,

which is duly supported by the following contemporaneous/

unrebutted documents/material placed on record:

−Shares were allotted by way of preferential allotment directly by the company and the shares were allotted and always held in demat form by the appellant; − Transaction of sale was undertaken through broker, who was member of the recognized stock exchange;

− Copies of documents in support of allotment of shares by way of preferential allotment directly by the company;

− Copies of contract notes in support of sale of shares;

− All transaction of purchase and sale of shares were made through normal banking channels.

on record and confronted adverse findings to the assessee

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 68 and thus, the onus again shifted back upon the assessee. In

fact, there was only one Show Cause Notice dated

13.10.2017, which was issued by the Assessing Officer. A

detailed reply was filed by the assessee on 17.11.2017 and,

thereafter, no further enquiry was made by the Assessing

Officer. In the said reply, the assessee had specifically

requested the Assessing Officer to summon the Directors of

the Company and the assessee had gone on to state that he

was ready to deposit the diet money for the purpose.

uncorroborated allegation in the assessment order, based on

mere conjectures and surmise, that the share transactions

represents bogus LTCG, is patently erroneous, based on

mere presumptions, which have been are specifically

rebutted, which rebuttal has not been successfully

controverted by the Department.

case and has made reference to incriminating material

seized during the search proceedings carried out at the

premises of Sh. R.K. Kedia and Shri Shrish Chandrakant

Shah, on 09.04.2013 and 13.06.2014, respectively. It was

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 69 held by the CIT(A) that the findings of these search

proceedings are squarely applicable in the facts of the case

for the year under consideration, and they also substantiate

with the findings of the AO made in the current year w.r.t.

manipulation of share prices of paper companies.

39.1 The ld. CIT(A) has rejected the assessee's contentions

of placing reliance on the findings of the ITAT Benches in

the earlier assessment years. He has held that the ITAT has

allowed the appeals mainly on the ground that the AO has

not allowed any opportunity of cross-examination, but in the

present case, the ratio of the said decisions is not

applicable, as the AO has clearly relied on the statement of

Shri R.K. Kedia, on the basis of which statement, additions

have been made.

years cannot further the case of the Department. Then, the

onus shifted to the Department on submission of all the

evidence by the assessee. The ld. CIT(A) rejected these

contentions by holding that various adverse findings had

been brought on record and were also confronted to the

assessee and that adequate opportunities of being heard

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 70 were also provided to the assessee. Reliance was placed by

the Ld. CIT(A) on the decision of the Hon’ble Supreme Court

in the case of ‘CIT vs Durga Prasad More’, 82 ITR 540 (S.C)

wherein, it has been held that the apparent should be

considered as real until it is shown that there are reasons to

believe that the apparent is not real.

of 2017 (P&H), the assessee purchased shares of a company

during the assessment year 2006-2007 at Rs.11 per share

and sold the same in the assessment year 2008-2009 at

Rs.400 per share. The Assessing Officer added the

appreciation to the assessees’ income on the suspicion that

these were fictitious transactions and that the appreciation

actually represented the assessees’ income from undisclosed

sources. On appeal, the CIT (Appeals) and the Tribunal,

while deleting the addition, held that the Assessing Officer

had not produced any evidence whatsoever in support of the

suspicion; on the other hand, it was noticed that the shares

were traded on the National Stock Exchange; the payments

and receipts were routed through the bank; there was no

evidence that the investee company was a closely held

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 71

company; and that the trading on the National Stock

Exchange was manipulated in any manner to result in high

appreciation in price.

Tribunal, the Hon’ble Punjab & Haryana High Court

dismissed the appeal as not giving rise to any substantial

question of law. The relevant findings of the Court are re-

produced as under:

“…………. 4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at Rs.11/- and sold the same in the assessment year 2008-2009 at Rs.400/- per share. In the above case, namely, ITA-18-2017 also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees’ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In these circumstances, following the judgement in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal 6. Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 72 was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises” (emphasis supplied) 43. The Court upheld the finding of the Tribunal that

mere appreciation in the value of shares did not justify the

transactions to be treated as fictitious and the capital gains

being assessed as undisclosed income if the following

conditions stand satisfied viz.,:

- the shares are traded on the Stock Exchange; - the payments and receipts are routed through bank; - there is no evidence to indicate it is a closely held company; and - the trading on Stock Exchange was not manipulated in any manner.

43.1 Thus, the claim of exemption in respect of long term

capital gains cannot be denied merely on the basis of

presumption and surmises in respect of penny stock by

disregarding the direct evidences filed by the assessee in

support of such transaction viz., broker's contract notes,

confirmation of receipt of sale proceeds through regular

banking channels, payment of STT and the demat account.

The assessing officer is required to bring on record cogent

corroborative material to establish that the appellant had

unaccounted income which was routed back into the books

and payments have actually been made to the brokers –

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 73 suspicion cannot take the place of proof. Mere appreciation

in the value of shares cannot justify the transactions being

treated as fictitious and the capital gains being assessed as

undisclosed income. Merely on the basis of report received

from Investigation Wing conducting certain enquiries, the

assessing officer cannot treat the share transactions as

sham on the basis of suspicion. No adverse inference can be

drawn against the appellant merely on the basis of ex-parte

statements of the third party(ies) which were not confronted

to the assessee.

cannot treat a transaction as bogus only on the basis of

suspicion or surmise. The Assessing Officer has to bring

material on record tangible material to support his finding

that there has been collusion or connivance between the

broker and the assessee for the introduction of its

unaccounted money. A transaction of purchase and sale of

shares, supported by contract notes and demat statements

and account payee cheques cannot be treated as bogus.

44.1 In the case of the appellant, shares were acquired by

way of preferential allotment directly by the Company and

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 74 not from any broker. Payment was made through banking

channels. Deliveries were taken in the DEMAT account,

where shares remained for more than one year. Contract

notes were issued and shares were also sold on a recognized

stock exchange. The SEBI has nowhere held the investee

company to be a bogus or sham company.

additions u/s 69A instead of section 68 of the Act, as

applied by the AO, holding that section 68 is only

applicable in case when there are credits in the books of

account of the appellant and that the bank statement of the

appellant cannot be considered as books of account. He

further held that the appellant is the owner of monies lying

in his bank account, the source and nature of which could

not be explained. Placing reliance on the judgements of the

Hon’ble Supreme Court in the case of ‘Kanpur Coal

Syndicate’ ( 53 ITR 225) and ‘Krishan Kumar’ (2019 265

taxmann 227), the ld. CIT(A) confirmed the additions u/s

69A of the Act.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 75 “Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

46.1 It is seen that the following two conditions need to

be fulfilled before the provisions of section 69A of the Act

can be invoked:

The assessee should have been found to be owner of any money, bullion, jewellery or other valuable article; and

The same should not be found recorded in the books of account, if any, maintained by him.

46.2 It is not the case of the Department that the capital

gains arising on the sale of shares of M/s Maa Jagdambe

Trade Links Limited made during the year was not recorded

in the books of account. The entire proceeds were

undisputedly credited to the bank account and were duly

recorded in the books of the appellant. That being the case,

the addition under section 69A of the Act cannot be

sustained.

46.3 In the following decisions, it has been held that

addition under section 69A of the Act cannot be made qua

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 76

those monies or assets or articles or things which have

been duly recorded in the books of account of the assessee:

i) CIT vs. Ravi Kumar: 168 Taxman 150 (P&H HC) ii) CIT v. Anoop Jain: 112 taxmann.com 355 (Delhi HC) iii) DCIT vs. Karthik Construction Co. [ITA No. 2292 (Mum.) of 2016] iv) Smt. TeenaBethala vs. ITO [ITA No. 1383 & 1384 (Bang.) of 2019] v) ITO vs. Shri Parvez Mohammed Hussain Ghaswala: ITA No.3318/ Mum/ 2013 (Mum)

46.4 Otherwise too, since the appellant had duly

discharged its primary onus by explaining the nature and

source of the deposits on account of sale proceeds on

transfer of shares, no addition under section 69A of the Act

could have been made.

46.5 It stands well settled that once the primary onus cast

on the assessee is discharged, it shifts to the Revenue. A

heavy burden is placed on the Assessing Officer to invoke

the provisions of section 69A of the Act and apply the

deeming fiction. It is settled law that the apparent is the

real unless the contrary is proved and the onus to prove the

contrary is on the person who alleges so [refer CIT vs.

Daulat Ram Rawatmull: 87 ITR 349 (SC)]. If the Department

fails to discharge such burden, no addition can be made

invoking the provisions of section 69A of the Act.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 77

46.6 In this regard, in the following decisions, it has been

held that no addition can be made under section 69 of the

Act in the absence of authenticated evidence/documents:

i) CIT vs. Dolphin Builders (P.) Ltd.: 35 taxmann.com 3 (MP) ii) CIT vs. Smt. Suraj Devi: 328 ITR 604 (Del) iii) CIT vs. Atam Valves (P.) Ltd.: 184 Taxman 6 (P&H) iv) ITO vs. Satish Kumar: 51 taxmann.com 537 (Jodh.)

v. Vishal Holding & Capital (P.) Ltd.’ : [2011] 200 Taxman

186 (Delhi), addition under section 69A of the Act in respect

of sale of shares was deleted by the Court on the basis of

details furnished by the assessee to establish that it had

purchased and sold shares through a broker and had earned

profit on the same. It was held as under:

“6. We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet's. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained.”

addition under section 69A of the Act merely on the basis of

the presumption that the assessee had redeployed his

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 78 ‘undisclosed income’ in the form of capital gains. In

concluding so, the CIT(A) had not placed on record any

independent tangible material or evidence to both establish

that the assessee had undisclosed income and further, that

the share transactions undertaken by the assessee were

bogus.

duly accounted for and recorded in the books of the assessee

and there is no doubt whatsoever as to disclosure of the

transaction. All the relevant documentary evidence qua sale

of shares, viz., contract notes, copy of demat account, bank

statements, etc., was duly furnished. Thus, section 69A of

the Act was not at all applicable and the addition made

deserves to be deleted.

confirmed an addition of Rs. 1,19,03,842/- at the rate of

6.5%, being unaccounted commission paid under Section

69C of the Act. The Assessing Officer presumed that the

assessee had paid 6.5% commission amounting to

Rs.1,19,03,842, to unidentified brokers, for providing

accommodation entries in order to introduce the aforesaid

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 79 bogus capital gains in the books of the assessee. The

addition had been made merely on the basis of assumption,

surmises and conjectures and accordingly calls for being

deleted on this ground alone. Further, even otherwise, the

addition made by the Assessing Officer, merely on the basis

of presumption, without any corroborative evidence to

substantiate that such payments were actually made, is

wholly unjustified and calls for being deleted in view of the

legal position, as discussed. The ld. CIT(A) has relied on the

Hon’ble Supreme Court’s Judgement in the case of McDowell

& Co Ltd. 154 ITR 148 (S.C.). In this regard, it has been

held that the act of questioning the very basis of a

transaction and branding it as illegitimate or a camouflage

has to be based on substantial, concrete and cogent

evidence, wherein the proof of wrong-doing has to be clear

and succinct. In this connection, reference may be made to

the observations of the Hon’ble Supreme Court in the case

of ‘Union of India vs Azadi Bachao Andolan’, [(2003) 132

Taxmann 373 (SC)], wherein, while referring to their

judgement in the case of ‘McDowell & Co’ (supra), the

Supreme Court had made the following pertinent topical

observations:-

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 80 “ (iii) We may in this connection usefully refer to the judgement of the Madras High Court in M.V Valliappan v. CIT [(1988) 170 ITR 238] which has rightly concluded that the decision in McDowell & Co Ltd’s case (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the Appellant, must be looked upon with disfavour. Though the Madras High Court had occasion to refer to the judgement of the privy Council in IRC v Challenge Corpn. Ltd [(1987) 2 WLR 24], and did not have the benefit of the House of Lords pronouncement in Craven’s case (supra), the view taken by the Madras High Court appears to be correct and we are inclined to agree with it. (iv) If the Court finds that notwithstanding a series of legal steps taken by an Appellant, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intervening legal steps as non- est based upon some hypothetical assessment of the ‘real motive’ of the Appellant. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o’-the wisp.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 81 (v) We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic determent or prejudice to the national interest, as perceived by the respondents.

50.1 in this connection, reference can be had to the

decision of the Hon’ble Supreme Court in the case of

‘Vodafone International Holdings B.V. v Union of India’,

(2012) 341 ITR 1 (SC).

assessee are accepted and the order under appeal is

reversed. We hold that ;

(a) The ld. CIT(A) erred in confirming the action of the AO in holding that the transactions in shares, undertaken by the assessee, leading to Long Term Capital Gains of Rs.18,31,36,042/-, were sham, entered into for evading tax. (b) The ld. CIT(A) erred in holding that the said LTCG was to be added back under Section 69A. (c) The ld. CIT(A) erred in upholding the addition of Rs.1,19,03,842/- under Section 69C of the Act, on account of alleged unaccounted commission paid at the rate of 6.5% for the purpose of earning Long Term Capital Gain.

ITA 655/CHD/2023 & ITA 610/CHD/2023 A.Y. 2015-16 82

ITA NO. 610/CHD/2023

assessee, HUF are, mutatis-mutandis, the same as those

present in ITA No.655/CHD/2023, in the case of the

assessee ‘Individual’. Accordingly, our above observations

and findings, made in ITA No. 655/CHD/2023 shall,

mutatis-mutandis, apply in this appeal also.

raised are accepted and the order under appeal is reversed.

Order pronounced on 08.10.2024.

Sd/- Sd/-

(KRINWANT SAHAY) (A.D.JAIN ) VICE PRESIDENT ACCOUNTANT MEMBER “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, Assistant Registrar