SANJAY SINGAL,CHANDIGARH vs. DEPUTY COMMISSIONER OF INCOME TAX, CC-1, CHANDIGARH

PER A.D.JAIN, VICE PRESIDENT

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.

1. That the order dated 26.09.2023 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter called the "Act") by the ld. Commissioner of income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much as he has not justified in holding the action of the Ld. Assessing Officer that transactions in shares carried out by the Appellant leading to income from Long Term Capital Gains of Rs. 18,31,36.042/- are allegedly, sham entered into, allegedly, for the purpose of evading tax.

2. That the order dated 26.09.2023 passed u/s 250(6) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as-much he has acted beyond the purview of the powers vested in him by the Act and ignored the facts and circumstances of the case by unjustifiedly holding that the said amount of Rs. 18.31,36,042/- is to be added back u/s 69A instead of Section 68 of the Act as done by the Ld Assessing Officer. 3 That the order dated 26.09.2023 passed u/s 250(6) of the Income -tax Act, 1961 by the Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much he was not justified to uphold the action of the Ld. Assessing Officer in making an addition of Rs. 1,19,03,842/- u/s 69C on account of alleged unaccounted commission paid @ 6 5% for the purpose of earning Long Term Capital Gains.”

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.

4. On appeal, the ld. CIT(A) has held as follows, vide the 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.

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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.

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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.

5. Aggrieved, the assessee is in appeal before us.

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.

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 :

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 :

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.

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 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.

s 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. 710, 71 l/Chd/2018; 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) 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.

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.

(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

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.

Concerning the so-called suspicious share trading activity

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.

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.

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

- 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.

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.)]

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

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.

−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.

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.

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.

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.

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.

“………….

- 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.

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: 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.)

“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.”

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.

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).

(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

Order pronounced on 08.10.2024.