TMI Blog2019 (1) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... see to prove that the long-term capital gain is genuine. AO should have first put the burden to put prima facie case in respect of cash credit on assessee as to how it was introduced in the books of the assessee. However, from the first paragraph of the assessment order itself the AO alleged that assessee has entered into a scam and they by walked into the trap of section 110 of the evidence act on him to prove that the long-term capital gain earned by the assessee is bogus. AO after that could not substantiate his allegations by granting cross-examination to the assessee of various persons. It is fatal to the case, as the assessment strategy adopted by the AO could not prove his allegation. Therefore, in view of overwhelming decisions of the various high courts and coordinate benches produced before us and which came to our knowledge. Even on the merit, we hold that the long-term capital gain earned by the assessee cannot be charged to tax under section 68 of the act. Therefore, we reverse the finding of the lower authorities and direct the AO to grant the benefit of section 10 (38) of the act on the long-term capital gain earned by the assessee on sale of shares. Accordingly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search. (2) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of ₹ 14,14,95,635/- on account of Long Term Capital Gains which was exempt u/s. 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s. 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long-term capital gain are, allegedly, sham. (3) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making addition of ₹ 84,89,738/- on account of alleged unaccounted Commission expenses@ 6% on the Long Term Capital Gains on sheer presumptive basis. (4) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment bad in law. 5. He raised following grounds of appeal in ITA No. 1417/Del/2018 for the 2015-16:- (1) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of ₹ 28,67,89,706/- on account of Long Term Capital Gains which was exempt u/s. 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s. 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long-term capital gain are, allegedly, sham. (2) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making addition of ₹ 1,72,07,382/- on account of alleged unaccounted Commission expenses@ 6% on the Long Term Capital Gains on sheer presumptive basis. (3) Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in shares of some non-descript listed companies. Further during the pre-search enquiries, it was noted that with the help of an accommodation entry provider Shri R.K. Kedia, assessee has introduced long-term capital gain in the books of family members for investing in the shares of the Bhushan steel Ltd. Therefore, search was conducted on Bhushan group and Sri Raj Kumar Kedia simultaneously on 13/6/2014. The learned assessing officer noted modus operandi holding it to be a scam vide para number 4.2 of his order. As per AO, during the course of search, investigation team collected oral evidence and documentary evidences, which proved that bogus long-term capital gain was provided to the beneficiaries, i.e. Assessees. The oral evidences are the statement of Shri Manish Arora, who is an employee of Shri Raj Kumar Kedia, statement of Sri Raj Kumar Kedia, Mr. Ankur Agarwal, employee of Bhushan steel Ltd., statement of director of Rander Corp Ltd. Shri Amarchand Ratanlal Rander, statement of director of M/s. PSIT infrastructure and finance Ltd., statement of director of M/s. Anukaran Commercial Enterprises Ltd. Shri Kushal Praveen Shah, statement of Shri Jagadish Purohit, statement of Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ankur Agarwal and compared it with the data of Raj Kumar Kedia, which matched. Further, during assessment proceedings, summons under section 131 was also issued to Shri Ankur Agarwal on 16/12/2016 to appear before the assessing officer on 22/12/2016 against which he filed his retraction on 20/12/2016 from his statement recorded during the course of search. He did not appear on the dates given under section 131 of the act. The assessee was directed to produce this person. However, assessee could not. The learned assessing officer noted that there is no logical reason given by Mr. Ankur Agarwal for retracting the statement recorded during the course of search and such retraction was without adducing or leading evidence in support of retraction from admission and without establishing that the statement was obtained under pressure or Coercion. Therefore, the learned assessing officer rejected his retraction. Thereafter, the learned assessing officer analyzed the financials and the trade data of the companies in which the assessee has dealt with and earned capital gain stating that they have been abused for generating illicit long-term capital gain. He analyzed their financial stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obal ltd. and First financial services ltd, wherein, interim order dated 19/12/2014 was passed by the SEBI and assessee along with many other assessees were restrained from trading on securities. Therefore, the detailed show cause notice on 30/9/2016 was issued. Assessee submitted his reply on 15/11/2016. The learned AO rejected the same rebutting the submission of the assessee. Thereafter discussing several judicial precedents and placing strong reliance on the interim orders of SEBI dated 19/12/2014 held that assessee has obtained bogus long-term capital gain. Regarding cross-examination of Exit providers, summonses were issued to 15 parties on 19/12/2016 but none appeared. With respect to cross-examination of Shri R K Kedia, Shri Manish Arora, Shri Ankur Agarwal etc the learned AO stated that cross-examination is required only where there are no documentary evidences and where the whole addition is made purely based on the statement of third person. According to the AO in this case, solid evidences were found and the statement corroborates the evidences found. Ld AO further stated that during the post-search proceedings Shri Neeraj singal, main person of Bhushan steel group, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Manish Arrora, through Mr. Ankur Agarwal. With respect to the soft data seized from Sri Raj Kumar Kedia and Shri Manish Arora, assessee submitted that appellant is neither aware nor can be expected to be aware of how any third party has come into possession of certain information. The learned CIT-A rejected the above contentions and stated that there are direct as well as circumstantial evidences where Mr. Ankur Agarwal was in touch of Mr. R.K. Kedia whose data also matched with the data of Mr. Ankur. The assessee also stated that no credence could be placed on the statement of Mr. R.K. Kedia, who is changing his statement consistently in taking contradictory stands. The learned CIT A rejected the same and stated that Shri R.K. Kedia confirmed contents of statement of Shri Manish Arora. He stated statement is also backed by the relevant data. He further stated that during the course of search in statement recorded on 25/4/2015. Shri Neeraj Singal was provided opportunity to cross-examine Shri R.K. Kedia, Sri Manish Arora, and Sri Ankur Agarwal, which he refused. Now assessee cannot be aggrieved. With respect to the retraction of statement of Shri Ankur Agarwal, he stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to move notices under section 133 (6) were issued summons were issued under section 131 of the act does not prejudice to any degree or any manner affect the appellant. Since the issue of complying with the notices by those parties is a matter of that person's individual discretion over which any third person or the appellant cannot be expected to have any controlled, the learned CIT (A) held that these are the stage-managed affair. With respect to the claim of the assessee that R.K. Kedia and Manish Arora are not connected persons, changing their stands and additions are made on that basis, opportunity to cross-examine them was not given. The learned CIT (A) stated that were originally Mr. Neeraj Singal was granted an opportunity of cross-examination, but he declined therefore, now the assessee could not claim that no cross of examination was granted. There are also certain unsold shares of some companies lying with the family members of the assessee and based on that the learned Commissioner of income tax appeals held that it proves that these companies are not worth sale in the market and therefore those remained unsold. Accordingly, he upheld the addition of long-term c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The coordinate bench has also given its finding on the issue of cross examination of witnesses and use of third party data. That order binds us on the principles of judicial discipline. Therefore while deciding the issues in these appeals, we are duty bound to consider and follow it, wherever found appropriate and relevant. 13. Commencing his arguments on the various issues, The learned authorized representative has also placed on record the detailed combined written submission with respect to four individual assessees involved in the order of the learned CIT (A). The major arguments are as under:- i. Complete documentary evidences conclusively establishing the genuineness of the purchase and sales of aforesaid shares in the cases of all the four Assesses are enclosed in the following Paper Books (PB) filed: Assessee s Name Assessment Year Paper Book No . Sri Brij Bhusan Singal 2013-14 to 2015-16 PB-1B ii. In making the aforesaid additions, the Ld. A.O. predominantly relied on statements of various persons such as Sri Ankur Agarwal (employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promoters, compliance with well-laid out guidelines and parameters etc. A company intending to go in for a public issue can allot shares by way of preferential allotment only after getting the approval of S.E.B.I. In the entire process, S.E.B.I. also approves the list of persons/entities to which shares are to be allotted on preferential basis, also incorporating therein the terms and conditions including, lock in, if any subject to which the shares are to be issued. In the given backdrop, the Assesses herein cannot be faulted for relying on a commercial proposition, which was duly compliant with law, including approval of S.E.B.I. To disregard the activities conducted by a Company as dummy when almost its entire spectrum of activities has been pre-scrutinized and approved by various agencies, including the capital market regulator S.E.B.I. would be disregarding the functioning of bodies operating under a law enacted by the Parliament of India. v. The shares allotted by the companies were listed and traded on the stock exchange. These shares were subsequently credited to the respective DEMAT Accounts of the Assesses herein. After being held by the Assesses for a period of more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assive investor and were not involved in the management thereof at any point of time. The Assesses had no role whatsoever in the capital market operations of the scripts or influencing to any degree or extent their stock market prices. The transactions were entered into by the Assesses in the capacity of stock market investor on the basis of market gossip, information and feedback received from various professionals, friends, relatives other acquaintances who were actively involved and had adequate knowledge of securities market, the Assesses' perception and anticipation as to future price movements etc. with a view to earn profits from the appreciation, whether long term/short term in the prices of the underlying shares. In order to evidence said transactions, all relevant documentary evidences in the form of share purchase documents, DEMAT Accounts, Share certificates, contract notes and bank statements evidencing the relevant entries regarding receipts against sale of shares etc. were duly filed before the Revenue Authorities. The same are also placed in PB-1A, PB-1B, PB-2A, PB-2B, PB-3A, PB-3B PB-4 filed before the Hon'ble Bench. viii. Regarding Third party state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material, which would not be in possession of the appellants themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soram Cotton Mills Ltd. v. Gangadhar and Ors., AIR 1964 SC 708; New India Assurance Co. Ltd. v. Nusli Neville Wadia and Anr. AIR 2008 SC 876; Rachpal Singh and Ors. v. Gurmit Singh and Ors. AIR 2009 SC 2448; Biecco Lawrie and Anr. v. State of West Bengal and Anr. AIR 2010 SC 142; and State of Uttar Pradesh v. Saroj Kumar Sinha AIR 2010 SC 3131). xiii. In Lakshman Exports Ltd. v. Collector of Central Excise 2002 : (2005) 10 SCC 634 (page 285 of PB-5), the Hon'ble Apex Court, while dealing with a case under the Central Excise Act, 1944, considered a similar issue i.e. permission with respect to the cross-examination of a witness. In the said case, the Assessee had specifically asked to be allowed to cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem. xiv. Further in Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100 (pages 286-290 of PB-5), the Hon'ble S.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him. * Prakash Chand Nahta Vs. CIT, (2008) 301 ITR 134 (MP): Held as under: .....it was obligatory on the part of the A.O. to allow the prayer of the assessee for cross-examination of M-A.O. having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee-Therefore, the assessment is vitiated. * Bangodaya Cotton Mills Ltd. vs. CIT 2009 : [2009] 21 DTR 200 (Cal): Held as under: A.O. having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross-examination, the order passed by the Tribunal upholding the addition is set aside and the matter is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose report the assessment was based despite several requests, assessment was rightly set aside by the C.I.T.(A) and Tribunal for violation of principles of natural justice and no substantial question of law arose. * CIT Vs. A.N. Dyaneswaran (2008) 297 ITR 135 (Mad): Held as under: In the absence of any corroborative evidence, statement obtained from 23 mining licensees out of 994 licensees could not be relied upon by the A.O. to come to the conclusion that the assessee has received illegal money from all the applicants for granting mining licenses, further the assessee was not allowed to cross-examine the said deponents and no further enquiry was made and therefore assessment suffers from procedural irregularities, defects and infirmities, matter is remanded to the A.O. for fresh consideration. * P.S. Abdul Majeed, (Kerala) [ (1994) 209 ITR 821]: Held as under: He had also prayed for an opportunity to cross-examine the auctioneers. When such a request was made it was incumbent on the officer to afford opportunity to the assessee to cross-examine the authors of those books. The petitioner had been denied the reasonable opportunity which was due in law, in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross-examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). xvii. In the case at hand, as evident from the stated facts, the A.O. has placed strong reliance on statements of third parties recorded u/s. 132(4)/133A in course of search/survey action in their cases. The Assessees herein have from the very inception consistently denied any relationship/linkage/dealings with Sri R.K. Kedia or Sri Manish Arora or any of the alleged entry operators/exit providers or directors of penny stock companies. As noted in para 4.11, page 102-103 of the assessment order in the case of Sri Neeraj Singal for A.Y. 2015-16 (taken as the base case-identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of retraction and re-retraction/withdrawal of retraction filed by Sri R.K. Kedia is enclosed at pages 446-451 and pages 452-455 respectively of PB-6. xix. Reference in this connection is craved to the judgment of the Hon'ble Kolkata High Court in the case of CIT Vs. Eastern Commercial Enterprises (1994) 201 ITR 103 (pages 294-299 of PB-5) wherein under similar circumstances, the Hon'ble High Court held that no reliance can be placed on the testimony of a person indulging in double speaking and taking contradictory stands on different occasions and that such conduct neutralizes his value as a witness. Held as under: 4. We have considered the contesting contentions of the parties. It is true that Shri Sukla has proved to be a shifty person as a witness. At the earlier stages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds for re-retraction was that the obligations and the sum of money offered by RMD Group to Shri Mehta were not honoured. Since the same was not paid to him, he had chosen to withdraw his retraction. To this the appellant's A.R. has vehemently stated that frequent retractions of statement by Shri Mehta undermines the credibility of its genuineness and such doubtful statement given and retracted and again withdrawn on flimsy grounds of money not been paid by RMD Group invalidates such statement ab-initio. I agree with the appellant that keeping in mind the principles of natural justice the A.O. should have at least provided the Retraction of the original statement to the appellant at the assessment stage for rebuttal. Frequent retraction has definitely undermined the credibility of statement and appears motivated. xxi. Similarly in the case of Smt. Smita P. Patil Vs. ACIT, (2014) 159 TTJ 182 (pages 316-336 of PB-5), the Hon'ble ITAT, Pune Bench w.r.t. evidentiary value of witness indulging in double speaking and taking vacillating stands referring to the order of Hon'ble Mumbai ITAT in Jafferali K Rattonsey Vs. DCIT Mumbai ITA No. 5068/M/2009 dt. 25.01.2012 hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that Mr. Mukesh Choksi has been vacillating right through and has given different versions at different stages of the proceedings and therefore his evidence was unreliable. 9.6. In view of the above judicial decisions the statement of Mr. Mukesh Choksi cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee especially when all other supporting evidences filed by the assesee were neither proved to be false or untrue. We further find merit in the submission of the Id. counsel for the assessee that the dematerialization of shares from physical holding is a lengthy process and takes considerable time. Therefore, when there is no dispute to the dematerialization of shares before the date of sale, therefore, the shares were purchased much prior to the date of sale. xxii. It may thus be concluded in light of the aforesaid judgments that in the instant case, no reliance can be placed on the statement of Sri R.K. Kedia who has been vacillating and taking contradictory stands before the A.O. and his statements cannot be taken as deciding factor for rejecting the genuineness of the transactions in the impugned shares carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted by the maker of the statement i.e. Sri Ankur Agarwal on 20.12.2016 before the Ld. A.O. Such retracted statement cannot be held as evidence/reliable material so as to fasten exorbitant liability on the Assessees herein. It is earnestly submitted that the said statement was made by an employee of BSL, who is a third person insofar as the Assessees are concerned. The said statement was admittedly not in the nature of an 'admission' or 'confession' made by the Assessees herein u/s. 132(4) but an adverse statement or allegation made against the Assessees by a third person. Their Lordship in the case of L.K. Advani Vs. Central Bureau of Investigation on 1st April, (1997 IIIAD Delhi 53, 1997 CriLJ 2559, 1997 (4) Crimes 1, 66 (1997) DLT 618, 1997 (41) DRJ 274, (1997) 116 PLR 1, 1997 RLR 292) held at para 89 that I am tempted here to cite a few lines from Murphy on Evidence, page 180 At common law, an admission made by one party is evidence against the maker of the statement, but not against any other person implicated by it. . Thus, an 'admission' made by a person u/s. 132(4) can only be used as evidence against the person who makes it. However, insofar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement, it was duty bound to allow the Assessees an opportunity of cross examining the said witness before using his original statement against the Assessees. As discussed supra, the onus of ensuring the presence of a witness hostile to the assessee for cross examination was on the Revenue in case his statement was intended to be used against the assessee (Principal CIT, Delhi 2 Vs. Best Infrastructure (India) Pvt. Ltd. Others supra) failing which his statement was liable to be discarded. xxviii. It is pertinent to note that even the C.B.D.T., the apex body of the Department vide Circular No. F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 has advised the Revenue Authorities to focus and concentrate on collection of evidence of undisclosed income in search cases and abstain from laying undue emphasis on recorded statements or obtaining confession. The relevant excerpt of the said Circular is reproduced hereunder: Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search seizure and survey operations. Such confessions, if not based upon credible evidence, are later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments made pursuant to search operations are required to be based on incriminating materials discovered as a result of search operation in the case of the assessee and not on recorded statements has been spelt out in unerring terms by the Hon'ble CBDT. xxx. In conclusion, it is submitted that statements of third parties which have not been subjected to cross-examination by the Assessees or which have been subsequently retracted by the maker do not have any referral/evidentiary value insofar as the Assessees are concerned and cannot, in the absence of corroborative evidence, form the basis of making additions in the assessments of the Assessees u/s. 153A of the Act. 14. Regarding Third party statements/statement of employee of BSL recorded u/s. 133A/132(4) it was submitted that they could not to be used without cross-examination for following reasons. i. The A.O. has also placed strong reliance on hard/soft data seized from premises of Sri R.K. Kedia and pen drive seized from residential premises of Sri Ankur Agarwal in course of search operations carried out in their cases. However, admittedly, such data was not corroborated by any incriminating materials/documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out by the Assessees. The names of the Assessees are nowhere mentioned in the said Job xls sheet and Comm. xls sheet. The A.O. the Ld. CIT(A), apart from alleging that the persons named in the said xls. sheets are entry providers, have failed to establish any nexus, linkage or correlation of the said entries with the transactions carried out by the Assessees herein. c. Admittedly, the said pen drive was seized from the residential premises of Sri Ankur Agarwal. Sir Ankur Agarwal, apart from dealing in shares on behalf of the Assessees herein (entries w.r.t. which were found recorded in ABCD xls. sheet) may have been involved in several other activities and transactions in his personal capacity and/or on behalf of third parties totally unconnected with the Assessees and may have, at his free will, made notings with respect thereto in his pen drive (as allegedly contained in Job. xls. sheet and Comm. xls. sheet). Since the said pen drive was maintained by Sri Ankur Agarwal and was seized from his possession and control, the Assessees had no control over the entries recorded therein. In the absence of clear mention in the pen-drive or establishment of a definite link thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made in the hands of an assessee on the basis of entries in books of third parties in the absence of any corroborative evidence. Attention in this regard is craved to the judgment of the Hon'ble Supreme Court in Central Bureau of Investigation Vs. V.C. Shukla Ors. AIR 1406 (SC) (pages 353-374 of PB-5), wherein certain diaries, small note book and various loose papers were found and seized from the premises of Mr. S.K. Jain of New Delhi. In those diaries/loose papers, the names of V.C. Shukla and L.K. Advani were found recorded. The CBI charge-sheeted those persons, namely, Shri Shukla and Shri Advani under the Prevention of Corruption Act, 1988. Under the given facts, the Hon'ble Apex Court held that the entries in those diaries/loose papers could not be used against Shri Advani or Shri Shukla but could only be used against Shri Jain and may be proved as admission by him. This in other words means that the addition cannot be made in the hands of the assessee on the basis of entries in the books of account of third parties in absence of any corroborative evidence. The relevant excerpts of the S.C. Judgment in this regard, are as follows: 44. A conspectus of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department, the Tribunal has pointed out that so far as N. Vasudev Menon was concerned, he had no personal knowledge of the actual payments made to the assessee and, therefore, his evidence could not carry the case of the department any further and so far as the Bombay manager, C.S. Kumar, was concerned it came to the conclusion that though he purported to say that he had made the payments in black to the assessee--payments corresponding to the entries to be found in the ledger-- his evidence suffered from serious infirmities, which have been pointed out by the Tribunal in its reasons. But even with regard to this reason which has been given by the Tribunal, though it may be contended that since the entries in the ledger pertained to the payments in black no corresponding entries could be found in the day-book which was meant to be produced before the income-tax authorities, still the fact remained that the day-book from out of the other set of books (not intended to be produced) which must have contained the corresponding entries was not available and, in the absence of that, mere production of ledger entries would be of no avail, as there would be no guarantee about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y vs. Narayan Gopal Upadhye 5. Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors. 6. Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II 7. Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel 8. CIT v. Devendra Kumar Singhal 9. Commissioner of Income Tax-V vs. Indrajit Singh Suri 10. CIT vs. Supertech Diamond Tools Pvt. Ltd., 74 of 2012 11. Commissioner of Income Tax vs. Ashwani Gupta 12. ACIT vs. Govindbhai N. Patel 13. CIT Kanpur vs. Shadiram Others, 14. Commissioner of Income Tax vs. Bhanwarlal Murwatiya and Ors. 15. CIT vs. Dhrampal Premchand Ltd. 16. CIT vs. S.M. Aggarwal 17. Paramjit Singh vs. ITO, IT Appeal No. 401 of 2009 18. CIT-13 Vs. M/s. Ashish International (ITA No. 4299 of 2009; dated, 22.02.2011) 19. Commissioner of Income Tax vs. Anil Khandelwal (21.04.2015-DELHC) 20. Commissioner vs. Motabhai Iron and Steel Industries (03.09.2014-GUJHC) 21. CIT vs. S.C. Sethi, D.B.I.T. Appeal No. 78 of 2005, 10.03.2006 It was thus held that no reliance can be placed on third party evidence unless the person who prepared the documents or the witness are produced before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the revenue had completely shifted its focus on the different persons (i.e. the assesses herein) instead of proceeding in the hands of Shri Narendra Kumar Shyamsukha in whose premises the entire seized documents were found. We find lot of force in the arguments of the Learned AR that since the seized documents were not found in the premises of the assesses, there is no onus on them to disprove the claim of Shri Narendra Kumar Shyamsukha that the transactions of long term capital gains listed in the seized documents are bogus. (para 2.5.2) We find that the presumption u/s. 292C of the Act would have to be applied only in the hands of Shri Narendra Kumar Shyamsukha in the facts and circumstances of this case. Strangely ITAT find that no addition has been made in the hands of Shri Narendra Kumar Shyamsukha with regard to the subject mentioned capital gains as unexplained cash credit and the assessments have been completed in his hands by just accepting the commission income offered by him on all these transactions. The Presumption contemplated u/s. 292C of the Act is not available against the third parties (i.e. the assesses herein). We place reliance on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have duly proved the identity, creditworthiness and genuineness of the broker from whom the sale proceeds of shares were received by the assesses and hence the resultant long term capital gains thereon cannot be doubted with. Hence there is no scope for making any addition u/s. 68 of the Act in the facts and circumstances of the case. (para 2.5.8) This issue is squarely covered by the coordinate bench decision of this tribunal in the case of Ashok Kumar Gupta and Mrs. Amita Gupta vs. DCIT in ITA Nos. 500-502/Kol/2013 dated 2.6.2015. The relevant operative portion of the said order is reproduced herein below:- 6. ...... The presumption available u/s. 292C of the Act relied on by the ld. DR are available against the person in whose possession the books of account other documents etc., were found. The presumption is not available against the third party and transactions are through Demat account. The assessee filed all the documents and these purchases were made by the assessee through account payee cheque have not been doubted by the Revenue. The action u/s. 68 of the Act has been taken on the basis of the statement of the third party. During the course of search at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the person from whose possession and control the documents are found and it is not available in respect of a third party. Even in the case of such a person from whose possession and control any incriminating document is found, the presumption u/s. 132(4A)/292C is a rebuttable one. (see para 5: 2.3.1 in CIT Vs. Anil Khandelwal, (2015) 93 CCH 42 (Del HC)) (pages 444-449 of PB-5). x. It is earnestly submitted that the documents found at the premises of Ankur Agarwal (which only goes to substantiate the genuineness of the share transactions carried out by the Assessees and does not contain anything incriminating against the Assessees) and Mr. R.K. Kedia, cannot on a standalone basis be considered sufficient evidence to implicate the Assessees involved. And in this regard, attention is once again directed to the judgment of the Delhi H.C. in Anil Khandelwal (supra) wherein it was opined (at para 5) as under: It is quite evident that what materially persuaded the AO to make the addition were the extracts from documents-in the form of handwritten ledger entries seized from Shri S.K. Gupta. These mentioned Shri Khandelwal's name as against which certain amounts were indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises of the third parties. What was found and relied upon by the Revenue from third party premises in the case at hand, only partook the nature of a document or books of a third party and such documents/books cannot be said to be the books of accounts/documents belonging to the Assessees and cannot, in the absence of corroborative evidence be relied upon to make additions in the hands of the Assessees. As held by the Hon'ble Courts, presumption u/s. 132(4A)/292C would be operable only in the case of the persons from whose possession and control the impugned documents were found i.e. Mr. Ankur Agarwal R.K. Kedia and in the absence of any corroborative evidence being found during the search at the premises of the Assessees, no adverse inference can be drawn against the Assessees merely on the basis of documents found and seized from premises of third parties. xii. That having elucidated the settled law with respect to documents found in the premises of a third party, further elaboration is required onto the Law of possession and control u/s. 132(4A)/292C, although the same has been established and clarified in the judgments above as well. Various Courts have time and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be used against Shri Advani or Shri Shukla but can be used against Shri Jain and may be proved as admission by him. The learned Departmental Representative had contended that the above decision of Hon'ble apex Court was not applicable to income-tax proceedings because the above decision was based upon the interpretation of s. 34 of the Evidence Act, 1872. He contended that Evidence Act is not applicable to income-tax proceedings. However, we are unable to accept the above contention of the learned Departmental Representative in view of the decision of Hon'ble apex Court in the case of Chuharmal vs. CIT 70 CTR (SC) 88: (1988) 172 ITR 250 (SC). In that case, Their Lordships held as under: ..... dismissing the petition and affirming the decision of the High Court, (i) that what was meant by saying that the Evidence Act did not apply to proceedings under the IT Act, 1961, was that the rigour of the rules of evidence contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so. We find that simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person from whom the paper is seized. It could not be applied against a third party and hence, no addition could be made on the basis of the evidence found with third party. The presumption u/s. 132(4A) could be used only against the person from whose premises the documents are found and not against the person whose name appears in the seized papers. 5.5 In this case, the addition has been made on the basis of the documents found with Dhariwal Group and thus, the presumption u/s. 132(4A) could not be used against the assessee since no incriminating documents were found with it. In the case of Addl. CIT v. Miss Lata Mangeshkar [1974] 97 ITR 696 (Bom), the addition was made in the hands of the assessee on the basis of the entries in the books of third persons. Hon'ble Bombay High Court held that such addition could not be made only on the basis of the notings in the books of third persons. The facts of the present case are covered by the decision of Miss Lata Mangeshkar (supra). It is a settled legal position that the decision of jurisdictional High Court is binding on all authorities below it. Thus, the reliance placed by the Assessing Officer on the loose papers is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur): Held as under: Addition in the instant case was made on the basis of the papers found from 'A' (Third Party). In search these papers were not confronted to the assessee. From the assessment order it was not borne out whether 'A' (Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s. 132(4A) in respect of paper not recovered from him. No addition can be made on the basis of documents found from third party in the absence of corroborative evidence. Therefore, the Assessing Officer as well as the Commissioner of Income Tax (A) erred in making the addition on the basis of said papers in the hands of the assessee. Hence, the entire addition made on the basis of papers found from 'A' (Third Party) was to be deleted. (10) Amarjit Singh Bakshi (HUF) Vs. ACIT (2003) 86 ITD 13 (Del): Held that where document in question was not recovered from assessee's possession but was recovered from N's possession, and assessee was not allowed any opportunity of cross-examination and further N's testimony was not found credible at all, it could not be said that there was any iota of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2006 in two instalments of ₹ 15,00,000/- each. It is further noticed by the Assessing Officer that though there was an account of Mr. Suresh Agarwal in the account books of assessee's proprietary concern, M/s. Gupta Steel Corporation, but the aforesaid amount was not accounted for. For the said reasons, the Assessing Officer treated the sum of ₹ 30,00,000/- as unaccounted income of the assessee. 11.2 Before the CIT(A), assessee reiterated that the paper was found and seized from Mr. Bharat G. Shah and not from the assessee. Further, there was no material to say that such seized material related to the assessee for any of his activities. The assessee also pointed out that such loose papers were printed account papers and on top of it is written Trial Data and that assessee had no knowledge as to who has written or printed the same. 11.3 The CIT(A) has considered the submissions put forth by the assessee and found that there was no material brought on record to establish that the seized papers belonged to the assessee. The CIT(A) also found that the seized documents do not indicate who is the recipient of the amounts mentioned and in what connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in shares of the Assessees herein for a period of 2.5 months. The same does not contain any entry pertaining to receipt/payment of cash/commission by the Assessees to prove that the transactions in shares were bogus/sham. Further, with regard to the names of the alleged entry providers mentioned therein, as stated earlier, since the said pen drive belongs to Sri Ankur Agarwal and was seized from his possession control, presumption u/s. 132(4A)/292C is operable only against Sri Ankur Agarwal. The Assessees herein are neither aware of the reason why names of the alleged entry operators feature in the said pen-drive nor are they concerned with the entries recorded therein. Further, the alleged statement made against the Assessees by Sri Ankur Agarwal was retracted by him, which as per decisions cited earlier, neutralizes his value as a witness. xv. Reference is further craved to the decision of the Hon'ble Delhi Tribunal in DCIT v. Bhola Nath Radha Krishna (ITA No. 5149/Del/2012) (pages 309-315 of PB-5) wherein the coordinate Bench of the Tribunal has opined as under: 3. At the time of hearing before us, it was stated by the learned CIT-DR that during the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, certain figures were found showing the purchase made by the assessee. In Asst. CIT v. Kishore Lal Balwani Rai [2007] 17 SOT 380 (Chd.), it has been held that though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable presumption. Presumption u/s. 132(4A) is not available, when the seized papers is recovered from third party and not from the assessee. Sheth Akshay Pushpavadan v. Dy. CIT [2010] 130 TTJ 42 (Ahd. UO) 6.2 The provisions of section 132(4A) provide a legal presumption that it is incumbent on the person to explain the documents, albeit loose papers in this case, seized from his possession and control. This presumption squarely applies to the persons concerned and addition can certainly be made in his case. However, based upon the incriminating material found at the premises of a third party but not belonging or signed by the appellant the presumption provided u/s. 132(4A) will not be applicable until and unless corroborated by other evidence. In other words it is now a well settled law that presumptions regarding the correctness of pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant (as is evident from the assessment order) a copy thereof was not provided to the appellant and this matter (of retraction) was not brought on record. The A.O. has sent here reply stating and admitting the fact that original statement of Shri Mehta was retracted by him but subsequently re-retracted the statement confirming the original. The grounds for re-retraction was that the obligations and the sum of money offered by RMD Group to Shri Mehta were not honoured. Since the same was not paid to him, he had chosen to withdraw his retraction. To this the appellant's A.R. has vehemently stated that frequent retractions of statement by Shri Mehta undermines the credibility of its genuineness and such doubtful statement given and retracted and again withdrawn on flimsy grounds of money not been paid by RMD Group invalidates such statement ab-initio. I agree with the appellant that keeping in mind the principles of natural justice the A.O. should have at least provided the Retraction of the original statement to the appellant at the assessment stage for rebuttal. Frequent retraction has definitely undermined the credibility of statement and appears motivated. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of any corroborative evidence. That merely because some excess stock was found in the survey for which separate addition has already been made, it cannot be further presumed that the assessee made sales outside the books, specially when the survey was followed by the search and neither during the course of survey nor during the course of search, any evidence of sale outside the books was found. In view of the totality of above facts, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained. [emphasis supplied] Similar view was taken by the Hon'ble ITAT, Delhi in the case of Yash Pal Narendra Kumar, New Delhi Vs. Department of Income Tax, ITA Nos. 5340, 5341 5342/D/2012 (ITAT, New Delhi). xvi. That, the principles enunciated in the aforesaid cases may thus be summarized as under: (*) Mere entries in the accounts of third parties are not sufficient to prove that the assessee indulged in such transactions. (*) Presumption available under section 132(4A)/292C can be drawn against the person from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be placed on the testimony of such a person indulging in double speaking and taking contradictory stands. (*) Statement of Sri Ankur Agarwal which was subsequently retracted does not have any evidentiary/referral value insofar as the Assessees are concerned. In case the Department still intended to rely on such retracted statement, it was duty bound to allow the Assessees an opportunity of cross examining the said witness before using his original statement against the Assessees, which in the present case was clearly not done. 15. Regarding heavy reliance placed by the learned assessing officer on Interim orders passed by SEBI in respect of few scripts vis-`-vis the Assesses herein, he submitted that same are not evidence against the assessee but in favour of the assessee where the assessee has been given a clean chit as under:- i. In making the impugned additions in the hands of the Assesses, the A.O. has also sought to seek support from the investigations carried out by S.E.B.I. in a few listed companies on the basis of common trading pattern and identical developments like stock splits, preferential allotments, insignificant economic activity and high stock prices. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the securities market, I, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11(4) and section 11B of S.E.B.I. Act, 1992, pending inquiry/investigation and passing of final order in the matter, hereby restrain the following persons/entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions. The list includes Sri Brij Bhushan Singal, Sri Neeraj Singal and Uma Singal. iii. In this connection, it may be noted that similar Ad-Interim Ex-parte Orders were passed by the S.E.B.I. in respect of the scripts of Mishka Finance Trading Ltd. (formerly known as Pyramid Trading and Finance Ltd.) dated 17.04.2015 and Pine Animation Ltd. dated 08.05.2015. However, the said orders were only in the nature of interim orders based on preliminary investigations carried out by the S.E.B.I. pending inquiry/investigation and passing of final order by the S.E.B.I. The Hon'ble Gujarat High Court in the case of S.E.B.I. v. Alka Synthetics, [1999] 19 SCL 460 (GUJ.) (at paras 16 18) (pages 481-501 of PB-5) has opined on the nature of Ad Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be said to be the orders so as to take away any earned benefit for all times to come or an action to the prejudice of any party entailing any penal consequences for all times to come. iv. The logic/view advanced by the Hon'ble High Court in the aforesaid judgment further stands endorsed by the fact that in the instant case, the S.E.B.I. after conducting a detailed investigation into the entire scheme alleged in the cases of the aforesaid four scrips, connection amongst the debarred entities, funds used for manipulation of prices etc. came to a conclusion that no adverse findings against the entities as specified in the said orders (including the four Assessees herein) were found and accordingly, the Interim Orders/Confirmatory orders against the said entities were revoked. Therefore, pursuant to the interim orders, the S.E.B.I. after conducting a detailed investigation into the respective scrips came to a definite conclusion that the Assessees herein were not involved in the alleged scam w.r.t. the impugned scrips and gave a clean chit to the Assessees by passing Final Orders in favour of the Assessees by revoking the Interim Orders. The allegations in the Interim Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, hereby revoke the Confirmatory Orders dated October 12,2015, March 18, 2016 and August 26, 2016 qua aforesaid 82 entities (paragraph 9 above) with immediate effect.‖ for making illegal gains to convert ill-gotten gains into genuine one. 4. Accordingly, S.E.B.I passed Ad interim ex-parte orders dt. December 19, 2014 November 9, 2015 (interim orders) and restrained 108 and 15 entities respectively from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions. First Fina ncia l Serv ices Ltd. 19 th Dec 2014 Para 24, page 18 of the Exparte Order: ―24. From the fund statement analysis it is observed that funds received as proceeds of preferential allotment were immediately transferred to various entities on the same day or next day and was never retained by the company for expansion of its business or execute its future plans as envisaged in the special resolutions passed under section 81(1A) of the Companies Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that such fraudulent schemes are conceived and executed by a set of core entities which are connected and which are bound by the common objective of making wrongful gains by manipulating the market and undermining its integrity. In this process, certain entities are lured into the artifice with the promise of quick returns but their roles do not extend to price manipulation or facilitating such manipulations by means of fund transfers or any other activity of abetment. The whole scenario covering various entities with different motives makes it imperative for the regulator to step in and secure the market place by weeding out those entities which have misused the securities market and meting out deterrent penalties on such entities. 91. The limitations in an investigation of this magnitude was realized and the S.E.B.I Board had decided in December 2016 to restrict its scope of actions to those entities that are connected to the company involved in the price manipulation i.e. LTP contributors and the company and its directors if connection or relationship is established with the market manipulation. Keeping this background in mind, on a review of the entire proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compulsory lock-in period of 1 year, the Preferential Allottees and the Promoter related entities were provided exit at a high price by certain entities allegedly related/connected amongst themselves and with Mishka (―Exit Providers‖); c) By virtue of the same, it was alleged that the company and persons in charge of its affairs created preferential allotment of shares as a mode to provide fictitious long term capital gains (―LTCG‖) to its Preferential Allotttees and Promoter related entities so as to convert their unaccounted income into accounted one; its Promoters/Directors Exit Providers, Preferential Allottees and the Promoter related entities artificially increased the volume and price of the scrip and misused market system for making illegal gains and to convert ill-gotten gains into genuine one to avail LTCG. 3. ..S.E.B.I passed Ad interim ex-parte order dated April 17, 2015 (interim order) and restrained the following 129 entities including Mishka and its Promoters and Directors from accessing the securities market and further prohibited them from buying, selling or dealing in securities, either directly or indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pine Ani mati on Ltd. 8th May 2015 As summarized in paras 2 3 of the Final Order: ―2. Upon preliminary 19 th Se p 20 Paras 8, 9, 10, pages 7 to 11 of final order: ―8. Pursuant to the interim inquiry, S.E.B.I prima facie observed the following: PAL made preferential issue of equity shares of around ₹ 24.7 crores to 92 entities during 2012-13. These shares were locked-in for a period of one year; After the release of compulsory lock-in- period, the Preferential Allottees and the Promoter related entities (i.e. entities to whom PAL s Promoters transferred their shares in physical form) were provided exit at a high price by the entities alleged related /connected amongst themselves and with PAL (―Exit Providers‖). By virtue of the same, it was alleged that the company and persons in charge of its affairs created preferential allotment of shares as a mode to provide fictitious long term capital gains (―LTCG‖) to its Preferential Allottees and Promoter related entities so as to convert their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further directions.‖ (name of Brij Bhushan Singal included in the list) which were confirmed vide Orders dated June 02, 2016, July 05, 2016, August 22, 2016, and June 02, 2017 need not be continued. 11. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1922 read with Sections 11, 11(4) and 11B of the S.E.B.I Act, hereby revoke the Confirmatory Orders dated June 02, 2016, July 05, 2016, August 22, 2016, and June 02, 2017 qua aforesaid 114 entities (paragraph 9 above) with immediate effect. v. Copies of the Final Orders passed by the S.E.B.I. in connection with the aforesaid four scrips are enclosed at pages 302-419 of PB-6. Therefore, although the S.E.B.I. found that the prices of the aforesaid scrips were manipulated for providing fictitious long term capital gains ( LTCG ) to Preferential Allottees and Promoter related entities in certain cases so as to convert their unaccounted income into accounted one, the S.E.B.I. after conducting a detailed investigation into the entire scheme employed in the respective scrips came to a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to decide the organizational structure (to appoint the top management of S.E.B.I.) and the regulation is operationalised within S.E.B.I.'s power. With the help of Regulations, Circulars and Guidelines, S.E.B.I. has wide powers and freedom to decide how the regulation is to be operationalised effectively. vii. In order to enforce the regulations with proper powers, there must be broad enabling legislation(s). The legislation gives the regulator powers to issue regulations and directions for the sector, and to supervise based on the regulations. Further, the regulator must be empowered to conduct investigation into misdemeanors, adjudicate and have the authority to impose fines and other penalties if wrong-doing is established. Finally, the credibility of the regulatory process of the regulator is enforced when there are in place provisions for appeals, speedy processes by Courts that have specialized domain knowledge which can review regulatory actions, as in the case of S.E.B.I., we have the SAT. viii. Coming to the facts of the case, the final orders passed by the S.E.B.I. in the favour of the Assessees-are both binding onto the Assessees and shall hold precedential v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Adjudicating Officers' of S.E.B.I. ix. Thus, although the Hon'ble I.T.A.T. operates as a separate Tribunal dealing within the purview of Taxation Laws, the fact that S.E.B.I. (which defines and drafts its own regulatory mechanism)-has provided the Assessees with a clean chit w.r.t. certain scrips vide its Orders u/s. 11 and 11B of the Act (r/w. the respective Rules), would if not binding, hold immense persuasive value onto the Assessees' case before the ITAT. This is because, although, no comparison can be made between a fiscal statute like the Income Tax Act, that is penal in nature, and the S.E.B.I. Act that is regulatory in nature, the fact that the Order(s) so passed u/the S.E.B.I. Act-are of a far more specialized in nature, since the said Act functions as a comprehensive legislation which was enacted to give effect to the reformed economic policy, by vesting S.E.B.I. with the statutory powers to regulate the securities market with the object of ensuring investors' protection, and the orderly and healthy growth of the said securities market (See para 15 of S.E.B.I. v. Alka Synthetics, [1999] 19 SCL 460 (GUJ.)). Accordingly, the final orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor the seller has any control. The transactions carried out by the Assessees stand documented and evidenced by contract notes/bills of the relevant brokers issued in the form and manner as prescribed by the regulatory authorities. ii. It is earnestly submitted that the Assessees herein were neither aware nor could be aware of the persons/entities buying the shares sold by them. There was no way formal, informal or even collusive whereby they could control the sales of shares to ensure their sales to a particular person/entity. In such a situation, in the absence of any conclusive evidence, it cannot be presumed that there was any transfer of cash between the Assessees and the alleged buyers to convert the unaccounted monies of the Assessees into LTCG as alleged by the A.O. The dissection of the transactions to discover cash deposits at earlier layers cannot prejudicially effect or be used against the Assessees herein since they do not have any control over the successive levels of parties who deal with each other independently. Even if for the sake of argument it is presumed that there was any price manipulation by any entity, the Assessees not being a part of the same and bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the buyer of the shares. He enters into transaction only through a share broker. Therefore, the observation of the AO that the assessee could not identify the buyer cannot be the basis of regarding the transaction to be non-genuine one. The Revenue has also been influenced with the fact that the assessee has delivered the blank transfer share certificates to the broker when the delivery of the shares was given. Since the deal has to take place between the brokers, the assessee has to give only blank transfer share certificate to the broker without mentioning the name of the buyer. There is nothing wrong and this is a usual practice in the business. Shares were sold at the prices quoted at the stock exchange at the relevant time. The payment of sale consideration had also flown from the bank account of the broker but the broker has deposited the cash in his account as per the revenue. One cannot take any adverse view about the genuineness of the transaction on the basis that the broker A Co. has deposited the cash in his bank account before issuing the draft for the sale consideration to the assessee. There is no evidence on record that broker was a relative or associate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Kolkata ITAT held as under: We hold that as long as the assesses had purchased and sold the shares through known and accepted procedure, the brokers' misdealing with others should not be a criterion to suspect the assessees' genuine share transactions and capital gains thereon. Similarly we hold that the assesses have no control over Shri Narendra Kumar Shyamsukha nor is it a matter of their concern in what manner he had maintained his documents and what he records in these documents. (Para 2.5.6) Assesses had carried out all their transactions through a recognized medium i.e. through a registered share broker and Calcutta Stock Exchange, wherein the price of shares are determined by the market forces and assesses have bought the shares when the price was low through their Demat accounts and duly accounted for it in their respective books and when they found a hike in the price of these shares, they sold them to make a gain and transaction was again done through their Demat account. We don't find any abnormality or improbability in such a procedure adopted by the assesses. Thus the allegation that the assesses had laundered their cash for conversion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal. --Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) Ors. (2010) 41 DTR (Nag)(Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 80 Taxman 89 (SC) distinguished. (paras 11 to 14 16) d) Similar view was taken in the following cases: * Malti Ghanshyambhai Patodia v. ITO ITA No. 3400/Ahd/2015. (Ahmedabad Tribunal) * Pratik Suryakant Shah v. ITO in (ITA Nos. 810 to 815 922 to 926 (Ahd.) of 2015 (Assessment years 2006-07 to 2009-10), dt. 21-10-2016) * Podduchari Jeevan Prashant v. ITO ITA No. 452/HYD./2015 (Hyderabad Tribunal) * Anil Nand Kishore Goyal v. ACIT-ITA Nos. 1256/PN/2012 (Pune Tribunal) v. In view of the above, it is submitted that the Assessees herein having adduced conclusive documentary evidences to show that shares were purchased and sold via legal channels in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sults of the proceedings in the latter's case. iii. In the case of Ganeshmull Bijay Sing Baid (HUF) Ors. Vs. DCIT Ors. (2015) 45 CCH 306 (Kol Trib) (supra), the Hon'ble Kolkata ITAT held at para 2.5.6 of the order held that the brokers' misdealing with others could not be held as a criterion to suspect the assessee's genuine shares transactions and capital gains thereon. Held at para 2.5.6 of the order as under: We hold that as long as the assesses had purchased and sold the shares through known and accepted procedure, the brokers' misdealing with others should not be a criterion to suspect the assessees' genuine share transactions and capital gains thereon. Similarly we hold that the assesses have no control over Shri Narendra Kumar Shyamsukha nor is it a matter of their concern in what manner he had maintained his documents and what he records in these documents. (Para 2.5.6) It was further held that since the books and documents relied upon by the Department were not found from the premises of the assessee, there would be no onus on the part of the assessee to disprove the genuineness of recitals in the said seized books. Held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof, that party cannot prevail. ii. The A.O. has gone on to state the so-called evidences resting on the tray of the Department viz. factum of investments made by Assessees in penny stock companies which were not doing any meaningful business, lack of prudent investor behavior in investing in companies which did not have sound financial conditions, abnormal profits earned on shares, similar modus operandi adopted by all investors etc. leading to the conclusion that LTCG received from penny stock companies were allegedly bogus. In support of the said theory, the A.O. has relied on the judgment of the Hon'ble Supreme Court in Sumati Dayal Vs. CIT (1995) 125 CTR (SC) 124. The Ld. CIT(A) has upheld the observations of the A.O. and relied on few more judgments on similar lines in support of theory of preponderance of probabilities, surrounding circumstances and human conduct. iii. In regard to the above, firstly, it is submitted that the Long Term Capital Gains (LTCG) earned by the Assessees in the respective scrips were declared by the Assessees in their returns of income filed for the respective years. The same were analysed by the Department and accepted as such in asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment. (para 15) An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. (para 23) v. Further reference is also invited to the judgment of the Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. Vs. ITO (1977) 106 ITR 1 (SC) wherein the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted by the A.O. u/s. 143(3) accepting the LTCG offered by the Assessees. The so-called evidences relied upon by the Revenue Authorities viz. statement of third parties, lack of prudent investor behavior in investing in penny stock companies, abnormal profits earned on shares etc. are not admissible as evidence in making assessments u/s. 153A of the Act as held in host of decisions cited earlier. On similar facts as in the case of the Assessees herein, the Hon'ble Kolkata ITAT in the case of Manish Kumar Baid Anr. Vs. ACIT, ITA No. 1236, 1237 dated 18.08.2017 reported in 2017 TaxPub (DT) 4463 (Kol-Tri) (pages 540-554 of PB-5) held that the A.O. was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee to controvert the documentary evidences filed by the assessee. In the said case, the concerned assessee purchased 2.4 lacs shares of face value of Re. 1 each of Careful Projects Advisory Ltd. (CPAL) through off market transaction for a consideration of ₹ 2.4 lacs. The said CPAL was amalgamated with Kailas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated for the sake of brevity. The principles laid down in various case laws relied upon by the learned Authorised Representative are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Honble High Court. The learned assessing officer ought not to have questioned the validity of the amalgamation scheme approved by the Honble High Court in May 2013 merely based on the statement given by a third party which has not been subject to cross-examination. Moreover, it is also pertinent to note that the assessee and/or the stock broker Ashita Stock Broking Ltd. name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transaction of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations levelled by the learned assessing officer against the assessee, which in out considered opinion, has no legs to stand in the eyes of law. We find that the learned Departmental Representative could not controvert the arguments of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Honble Apex Court held that it is not enough to show circumstances might create suspicion because the Court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence (see para 26). ix. It is trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference in this connection is craved to the judgment of Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram v. CIT (1959) 37 ITR 288 (SC). The entire case of the Revenue hinges upon the presumption that the Assessees herein have ploughed back their own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how strong it may appear to be true needs to be corroborated by some concrete evidence to establish a link that the Assessees had brought back their unaccounted income in the form of LTCG. Kind attention is invited to the judgment of Special Bench of Hon'ble Mumbai ITAT in the case of GTC industries Ltd. v. ACIT (2017) 164 ITD 1 (Mumbai Trib.) (SB) (pages 570-612 of PB-5) wherein the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir acquisition. The sales and LTCG earned on the said shares were also accepted by the A.O. and assessments u/s. 143(3) were completed accepting the claims of the Assessees until search operations were carried out u/s. 132(1) at the premises of the Assessees herein. Even in course of search operations at the premises of the Assessees, nothing incriminating in respect of such transactions was found. The transactions were through account payee cheques and reflected in the books of accounts. The acquisition/purchase of shares and the sale shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. No concrete evidence to disprove the genuineness of the evidences furnished by the Assessees herein have been brought on record by the A.O. apart from placing reliance on uncorroborated third party evidences, third party statements which were not subjected to cross-examination, cash trail in bank accounts of exit providers having no nexus with the accounts of the Assessees, interim orders of SEBI w.r.t. the Assessees which were subsequently reversed/revoked by the SEBI in the final orders, seemingly irrational decision to invest in penny stocks not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 728 (pages 613-629 of PB-5): The Hon'ble ITAT, Hyderabad Bench has at para 23 of the order observed as under: The most crucial aspect which could be considered as incriminating in such transactions may relate to a case where compensatory payments are made by the seller to the buyer. No evidence has been brought on record that the assessee's of this group have made any such compensatory payment to the buyer of the stocks. In the absence of any such observation, as submitted by the assessee's, the CIT(A) was correct in holding the view that the sale transactions cannot be doubted on suspicion the CIT(A) is further correct in holding that notwithstanding the observations of the AO that the purchases and sales of shares were made with reference to penny stocks which were purchased at a nominal price and sold at a very high price, since all the sale transactions were made through stock exchanges there is hardly any scopes for price manipulation. It is all the more so, since the assessee has paid STT. Even with regard to the observation of the assessing officer that the assessee before purchasing the shares the assessees did not take into account the financial standing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reassessment--Issue of notice of reassessment--Addition on unexplained cash credit--Deletion--Assessee filed its return of income for AY declaring total income--AO received information from Deputy Director of Income Tax that assessee had shown sale proceeds of shares in scrip company as LTCG and claimed exemption--Assessee had claimed to had purchased that scrip at ₹ 3.12 per share and sold same at ₹ 165.83 per share, those scrips were penny-stock and capital gain declared was only accommodation entries--Broker through whom transactions were effected had appeared as 'DRI probing evasion who indulged in market manipulation and price manipulation through synchronized and cross deal in scrip of company--SEBI had passed order regarding irregularities and synchronized trades carried out in scrip of company by broker--AO reopened assessment by issuing notice u/s. 148--AO brought to tax LTCG shown by assessee as unexplained cash credit u/s. 68--CIT(A) having gone through copy of bank pass book, broker's bills for purchase and sale of shares, contract note, demat account, statement of STT, held that AO did not had any material on record to show that sale of shares we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the said addition and accept the LTCG income of ₹ 93,00,012/- shown as exempt under section 10(38) of the Act. (v) CIT Vs. Smt. Pushpa Malpani (2012) 20 taxmann.com 597 (Raj HC) (Annexure 2 of the Paper Book on Case Laws on Penny Stock): In this case, the Commissioner (Appeals) directed the Assessing Officer to treat sale consideration of shares as long-term capital gain instead of treating it as income from other sources. The Tribunal upheld the order of the Commissioner (Appeals). Held that the Commissioner (Appeals) and Tribunal both had given reasons in support of their findings and had found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31-3-2003, sale bill, bank account, demat account and official report and quotations of Calcutta Stock Exchange Association Ltd. on 23-7-2003. No substantial question of law arose. (vi) Meenu Goel Vs. ITO, Ward 31(1), ITA No. 6235/Del/2017 (Del ITAT) (Annexure 6 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se laws relied by the Ld. DR are based on distinguished facts and circumstances, hence, the said case laws are not applicable in the present case. However, in my considered opinion, the issue in dispute is squarely covered by the various decisions of the ITAT and the Hon'ble High Courts including the recent decision dated 18.1.2018 of the Hon'ble High Court i.e. Hon'ble High Court of Punjab Haryana in the case of PCIT (Central), Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017 . (vii) Navneet Agarwal Vs. ITO, Ward 35(3), Kolkata, I.T.A. No. 2281/Kol/2017 (Kol Trib) (Annexure 7 of Case Laws on Penny Stock): Held as under: 13. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee's action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Kolkata vs. Daulat Ram Rawatmull reported in 1972 : 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah Bros. Vs. CIT 1959 : 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. . 16. We find that the assessing officer as well as the Ld. CIT(A) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions.. 17. The Hon'ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. .The observations of the Hon'ble Apex Court are equally applicable to the case of the assessee. In our view, the assessing officer having failed to bring o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank accounts and shows the genuineness of the transaction by showing that money in the banks is by account payee cheques or by draft, etc., then the onus to disprove the same would shift to the Revenue (as held by the Hon'ble S.C. in CIT Vs. Orissa Corporation (P) Ltd. (1986)159 ITR 78 (SC)). xv. Kind attention is invited to the following case laws wherein it was held that burden cast on the assessee u/s. 68 would stand discharged where the assessee furnishes relevant documentary evidences to prove that the genuineness of the transactions i.e. the transactions in shares were carried out through regular banking channels via a registered share broker in a recognized stock exchange at prevalent market rates; no liability can be fastened on the assessee u/s. 68 unless the AO brings on record cogent evidence to dislodge the authenticity of the evidences filed by the assessee: (i) CIT Vs. Anirudh Narayan Agrawal (2013) 84 CCH 28 (All) (pages 639-643 of PB-5): The ruling of the Hon'ble Allahabad High Court may be summarized as under: Income--Cash credits--Addition--Sustainability--Assessee's case was selected for scrutiny and income from LTCG on sale of shares throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at a finding of fact that the transactions were genuine--Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence--Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees--Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. (iii) CIT Vs. Smt. Sumitra Devi (2014) 268 CTR 351 (Raj): The facts of the said case and the judgment rendered by the Hon'ble Rajasthan High Court may be summarized as under: Cash Credit--Share transaction--Assessee had shown LTCG from the sale of shares and same was claimed as exempt u/s. 10(38)--AO observed that companies, whose shares were allegedly dealt with, were not very well known and it was entirely unlikely that there was a huge rise in prices of their shares in a very short span of time--AO treated huge rise in price as manipulation by stock broker and made additions in income of assessee towards transactions of purchase and sale of shares and undisclosed commission paid in cash--CIT(A) observed that sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sale of shares by assessee, was however never rebutted by A.O. on basis of any concrete and irrebutable evidence which could go to inescapably disprove genuineness of said documents which were brought on record by assessee--Tribunal neither able to persuade to subscribe to adverse inferences drawn by lower authorities in respect of share transactions of assessee by referring to stand alone statement of person, as same, suffer from serious infirmities, and as such could not be summarily accepted, nor able to dislodge genuineness of purchase and sale of shares of shares which had been duly substantiated by assessee on basis of material made available on record, which had not been dislodged by lower authorities--Tribunal set aside order of CIT(A), and deleted both additions--Assessee's Appeal allowed (v) Smt. Smita P. Patil Ors. Vs. ACIT (2014) 159 TTJ 182 (Pune): In the said case, the Hon'ble Pune ITAT held that the A.O. had failed to establish clear case against the assessee that share transactions, on which LTCG had been declared were a sham and a camouflage. There was heavy burden on the AO to destroy the claim of the assessee but except going on general philosophy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. There is not iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (ix) CIT v. Bhagwati Prasad Agarwal in (No. 22 of 2009, dt. 29-4-2009) (Cal HC): In this case Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transaction were bogus. The Hon'ble Calcutta High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transaction entered into by the assessee have been proved accounted for documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. (x) CIT v. Lakshmangarh Estate Trading Co. Limited in (ITA No. 270 of 1999, dt. 7-10-2013)--In this case the Hon'ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance of probabilities are absent in the instant case. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidences filed by the Assessees herein prove beyond doubt that the transactions were carried out at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the Assessees. The decision relied upon by the Revenue is thus wholly distinguishable on facts (as also held by the Hon'ble Bombay High Court in the case of CIT Vs. Smt. Jamnadevi Agarwal Ors. (supra) at para 15). xviii. It may also be submitted here that there are various judicial precedents to the effect that the act of questioning the very basis of a transaction and to brand it as illegitimate or sham has to be based on substantial, concrete and cogent evidence wherein the proof of wrong-doing is clear and irrefutable. Attention in this connection is invited to the judgment of the Hon'ble Supreme Court in the case of Union of India V. Azadi Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e his affairs as not to attract taxes imposed by the Crown, so far as he can do so within the law, and that he may legitimately claim the advantage of any expressed terms or of any omissions that he can find in his favour in taxing Acts. In so doing, he neither comes under liability nor incurs blame. (iii) Lord Tomlin in IRC v. Duke of Westminster [1936] AC 1 (HL); 19 TC 490, 520 (HL) which reflected the prevalent attitude towards tax avoidance: Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax. xx. Attention is further invited to the following cases rendered in the light of decision pronounced in the case of Azadi Bachao Andolan (supra): (i) CIT Vs. George Williamson (Assam) Ltd. (2004) 265: Held as under: It is open for assessees to arrange their affairs in such a manner that it would not attract the tax liabilities, so far it can be managed within the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand have submitted conclusive documentary evidences in support of their claim which the A.O. has desperately failed to controvert. 19. Finally, in view of the aforesaid discussions, he urged, most respectfully that the additions made by the A.O. u/s. 68 on account of alleged bogus LTCG and alleged unaccounted commission expenses and upheld as such by the Ld. CIT(A) de-hors/sans any concrete evidence on record deserve to be deleted. 20. The learned departmental representative heavily relied upon the order of the learned assessing officer as well as the learned Commissioner of income tax appeals. He reiterated the observations made by the authorities below and strongly supported the impugned order. It was further submitted that the statements recorded on oath u/s. 132(4) of the Act during the course of search was oral evidence. The ld. CIT DR referred to page no. 9 of the assessment order and submitted that during the course of search, statement of Sh. Manish Arora was recorded who is an employee of Sh. Raj Kumar Kedia and in his statement he admitted that seized document so found pertained to the records of cash receipt from various beneficiaries to whom bogus Long Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and seized from the premises of Sh. Raj Kumar Kedia contained ledgers of one NP (acronym for 'Nehru Place', referring to Bhushan Steel Group since earlier, the corporate office of Bhushan Steel group was at Nehru Place). Therefore, it could not be said that no incriminating material was found during the course of search. It was further submitted that during the course of assessment proceedings, summons u/s. 131 of the Act was issued to Sh. Ankur Agarwal on 16.12.2016 to appear on 22.12.2016. However, he filed his retraction on 20.12.2016 from his statement recorded during the course of search and did not appear on the date given u/s. 131 of the Act. It was further submitted that during the course of survey, the Investigation Wing detected that the activities of the companies who provided LTCG entries were not real and it was found that there were no substantial business transactions taken place in the companies who traded in shares and manipulated for providing profitable exist to various beneficiaries by availing bogus LTCG. A reference was made to page nos. 43 44 of the assessment order. It was also submitted that many of the entities, provided profitable exist to ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and Finance Ltd. Vs. ITO (2017-TIOL-238-SC-IT) xvii. Greenview Restaurant Vs. ACIT (2003) 263 ITR 169 (Gau.) xviii. Raj Hans Towers (P.) Ltd. Vs. CIT 2015 : 373 ITR 9 (Del.) xix. PCIT Vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Del.) xx. M/s. Punjab Sind Dairy Products Pvt. Ltd. Vs. DCIT (2017-TIOL-83-SC-IT) xxi. CIT Sonal Construction (2012-TIOL-851-HC-DEL-IT) xxii. CIT Vs. Naresh Kumar Aggarwala (2011) 331 ITR 510 (Del.) xxiii. Mahabir Prasad Rungta Vs. CIT (2014) 43 Taxmann.com 328 (Jharkhand) xxiv. Bhagheeratha Engineering Ltd. Vs. ACIT (2015) 379 ITR 244 (Ker.) xxv. Ashok Kumar Vs. CIT (2016) 386 ITR 342 (Patna) xxvi. Baldev Raj Vs. CIT (2010) Taxmann.com 335 (P H) xxvii. CIT Vs. MAF Academy (P.) Ltd. 2013 : 361 ITR 258 (Del.) xxviii. CIT Vs. Navodaya Castle Pvt. Ltd. 2014 : (2014) 367 ITR 306 (Del.) xxix. Konark Structural Engineering (P.) Ltd. Vs. DCIT (2018) 90 Taxmann.com 56 (Bom.) xxx. CIT Vs. Nipun Builders Developers (P.) Ltd. 2013 : 350 ITR 407 (Del.) xxxi. CIT Vs. Nova Promoters Finlease (P) Ltd. 2012 : 342 ITR 169 (Del.) xxxii. CIT Vs. Ultra Modern Exports (P.) Ltd. 2012 : 40 Taxmann.com 458 (Del.) xxxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012-13 cannot be reopened/re-agitated u/s. 153A merely on the basis of third party statements and uncorroborated third party evidences-Reliance placed on the decisions of the Hon'ble Jurisdictional High Court in the cases of CIT (C)-III Vs. Kabul Chawla (Delhi) MANU/DE/2482/2015 : [2015] 234 Taxman 300, Principal CIT Ors, Vs. MeetaGutgutia Prop. Ferns 'N' Petals Ors MANU/DE/1478/2017 : (2017) 395ITR526, (2017) (Delhi) and host of other decisions cited in the detailed written submissions filed earlier. 2. That the Hon'bleITAT, Delhi Bench in the cases of ACIT Vs. M/s. Gee Ispat Pvt. Ltd. in ITA Nos. 5424, 5425, 5474 5475 and Granite Gate Properties Pvt. Ltd. Vs. ACIT in ITA Nos. 7022 to 7024 held that in the absence of incriminating material being found in course of search, no addition could be made in respect of unabated assessment years. 3. That statements of third parties recorded u/s. 132(4)/133A of the Act and third party evidences/documentation do not constitute 'incriminating material' within the meaning of section 153A and cannot be used as evidence unless they have live nexus with 'incriminating material' found in course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal, MANU/DE/1326/2015 : (2015) 93CCH42 (Del HC) and several other decisions cited in the written submissions. 7. That there is no independent evidence to link the seized documents found in the premises of third parties with any incriminating material found in course of search operations at the premises of the Assessee(s). Hence, entries in documents seized from third party premises would not be sufficient to prove that the Assessee(s) indulged in such transactions. 8. That the entries found recorded in ABCDxls sheet of the seized pen-drive of Sri AnkurAgarwal corroborate/substantiate the share transactions carried out by the Assessee(s) herein as duly found recorded in the regular books of the Assessee(s). The pen-drive does not contain anything incriminating against the Assessee(s). The entries in Job. xls sheet allegedly containing names of few alleged entry/exit operators do not relate to the Assessee(s) herein and have nothing to do with the share transactions carried out by them. 9. That the alleged cash trails from bank accounts of the alleged exit providers have no significance insofar as the present Assesses are concerned. The A.O. has failed to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock companies by the assessee therein did not qualify as an 'Investment' but rather it was an 'Adventure in the nature of trade'. It was held that the motive of the investment made by the assessee was not to derive 'Income' but to earn Profit' and thus was required to be taxed as 'Business income' and accordingly, exemption claimed u/s. 10(38) was not available. It was not a case where addition was sought to be made u/s. 68 of the Act. In the instant case, the nature of share transactions viz. 'Investments' vs. 'Business Income' was never an issue for consideration before the Revenue Authorities. The instant case is that of assessments completed u/s. 153A pursuant to search seizure operation u/s. 132(1) wherein nothing incriminating was found in course of search operations in the case of the Assessee (s)' and additions u/s. 68 were made in respect of alleged bogus LTCG relying on third party statements and third party data. The shares in question were those of Private Ltd. companies-thus not listed or traded in the Stock Exchange-meaning thereby that the prices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es did not arise since in an on-line trading platform, the buyers and sellers of shares are not known to each other. The Assesses herein filed conclusive documentary evidences in support of the genuineness of the transactions in shares carried out by them which the Revenue Authorities failed to controvert. 2. 2. AbhimanyuSoin Vs. ACIT 2018-TIOL 733-ITAT-CHD (ITAT Chandigarh In the case of AbhimanyuSoni, the A.O. treated the LTCG offered by the assessee therein as unexplained cash credit u/s. 68 in a fact specific scenario which is clearly distinguishable from the facts of the present case in the manner as follows: AbhimanyuSoin Vs. ACIT 2018-TIOL-733-ITAT-CHD Present Case The shares in question were of unlisted company-thus purchase/sale price of shares could not be conclusively authenticated. The shares in question were duly listed and traded on recognized stock exchange. The transactions in shares were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded in that case that the assessee had not done any share business before F.Y. 2003-04 and after F.Y. 2004-05. The assessee had only filed copy of sale and purchase bill and showed inability to produce the broker. Under the specific set of facts, the Tribunal held that the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares. As distinguished from the referenced case, in the present case, the Assesses had offered similar LTCG in earlier years. The A.O. after conducting detailed scrutiny of accounts of the Assesses accepted the LTCG offered by the Assesses for A.Y. 2010-11 2011-12 in assessments completed u/s. 143(3) of the Act. However, pursuant to search action u/s. 132(1) on 13.06.2014, although no incriminating materials were found in course of search in the cases of the Assesses herein, the A.O. sought to reopen completed Assessments of A.Y. 2010-11 2011-12 on a mere change of opinion and reassess/assess LTCG offered by the Assesses as unexplained cash credit u/s. 68 for A.Ys. 2010-11 to 2015-16 in the guise of search assessment u/s. 153A. Therefore, the search operation in the case of the Assesses herein was used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyers and sellers of shares are not known to each other. Therefore, the judgment in the case of BalbirChandMaini was rendered in a fact specific scenario which completely varies from the facts of the present case. 3. 5. UshaChandresh Shah Vs. ITO (2014-TIOL-1459-ITAT-Mum) (ITAT Mumbai) The judgment in the case of Usha Revenue was rendered on a widely clearly inapplicable to the facts of distinction are as follows: Chandresh Shah referred to by the dissimilar set of facts and thus is the present case. The main points UshaChandresh Shah Vs. ITO MANU/IU/1046/2014 : (2014-TIOL-1459-ITAT-Mum) Present Case The shares were purchased in off-market transactions in physical form. The assessee could not produce copies of Share certificates or copies of share transfer forms. The transaction of purchase was claimed to have been paid through speculation profit, meaning thereby that the purchases were not routed through bank. The circumstances leading to suspicion in the case of Ush ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities have rightly concluded that the assessee's claim about the long term capital gains from sale of shares is not genuine. Clearly as evident from the above excerpt as quoted by the Ld. DR, the issue for consideration before the Hon'bleITAT was whether the assessee had backdated the purchases of shares to give it a colourof Long Term Capital Gain by showing the period of holding for more than 12 months. Further, from the above quoted excerpt, it is also patent that the assessee therein had admitted to the above state of affairs in his statement u/s. 132(4) of the Act. The case of the instant Assessee(s) on the other hand stands on a completely different footing inasmuch as the search actions in the case of the Assessee(s) herein have not resulted in discovery of any incriminating materials w.r.t. the impugned scrips and the Assessee(s) have not made any admission/confession of any wrongdoing w.r.t. the impugned investments in the statements recorded u/s. 132(4) of the Act. The period of holding of shares, the back dating of purchases etc. are not issues for consideration before the Hon'bleITAT in the instant case. Thus, the judgment rendered in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguishable on facts and thus inconsequential to the present case. The main points of distinction as are follows: Shamin M Bharwani MANU/IU/0493/2015 : (2016) (69Taxmann.com65) Present Case The purchase of shares was off market purchase not reported in the stock exchange. The Hon'bleITAT recorded a finding of fact that the purchase was through a back dated contract note in cash and there was no trail. Under the given facts, the Hon'bleITAT found the transaction suspicious and added the amount in question to the taxable income of the assessee u/s. 68 The facts leading to suspicion in the case of Shamin M Bharwani are clearly absent in the instant case. The Assessee(s) in the instant case have furnished conclusive documentary evidence in support of the LTCG claimed by them and all the impugned transactions in shares were through banking channel. At this juncture, it may be pertinent to note that the Hon'ble Courts and Tribunals have in a plethora of cases ordained that the mere fact that sales were made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself in his sworn statement about his undisclosed income during search and seizure. In the instant case, no such disclosure was made by the Assessee(s) herein. Therefore, the said judgment is inconsequential to the case of the Assessee(s) herein. 2. BhagirathAgarwal Vs. CIT MANU/DE/0276/2013 : (31taxmann.com274, 215 Taxman 229, 351ITR143) (Delhi H.C) That the Revenue has relied on this judgment, to hold that the statements recorded during the search operation cannot be deleted without proving the statements to be incorrect. The said judgment stands distinguished in the manner below: BhaigiratAgarwal v. CIT Present Case The ratio of the judgment of the Delhi H.C. pertained to the case of an admission/voluntary surrender so made by the assessee therein, i.e. it was a case of where the appellant/assessee admitted and surrendered a sum ofRs. 1.75crore as his undisclosed income. The Court in this regard, held that if the assessee wanted to hold that the said admission was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . in CIT v. Hotel Meriya-where after referring to Section 3 of the Finance Act and Section 131 of the Act. Oral evidence, it was observed, would be admissible for the purpose of block assessment also. Thus, in light of the seemingly conflicting opinions, The Court referred the said matter to the Larger bench to examine the aforesaid issue and question and accordingly placed the same before the Acting Chief Justice. That the Revenue has erroneously relied on the said judgment where a clear admission/confession by the Assessee has been made therein-as against the case of the Assessee(s) herein where there is no such admission on record, showing an irregular availment of LTCGs. Secondly the said judgment has been rendered in light of Sec. 158BB, i.e. Block Assessment proceedings-as against the 153A proceedings of the case herein, where the Law wrt Sec. 153A stands well settled on the vital requirement of incriminating material having to be found in the premises of the Assessee(s), before reference can be craved to the statements u/s. 132(4) for corroborative purposes. That it has already been submitted that statements recorded u/s. 132(4) of the Act do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra or the alleged entry/exit operators or the alleged directors of the penny stock companies. 5. M/s. Pebble Investment Finance Ltd. v. ITO (Civil) Appeal 11784/2017 b (SC) emanating from the decision of the Bombay H.C. in 2017TIOL188 HC-MUM-IT That the Revenue has relied on the said judgment of the Bombay H.C. and the consequent Order dt. 5.07.2017 of the S.C., dismissing the SLP against the Order of the Bombay H.C.-on the basis that the Bombay H.C. has opined that statement made u/s. 133A could be relied upon for the purposes of assessment, in absence of any contrary evidence or explanation as to why such statement made was not credible In Rebuttal, the same is distinguishable from the present case on facts, in the manner as below: M/s Pebble Investment v. ITO Present Case The question before the H.C. was whether the Tribunal was correct in deleting the claim for depreciation on Flameless Furnace as the purchase and lease was as sham on the basis of a statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fallacious, since such statements don't hold any evidentiary value. 6. Green View Restaurant V. ACIT, [2003] 133 Taxman 432 (Delhi H.C) That the Revenue has placed reliance on the said decision wrt the Law on retraction, but the same is also distinguishable from the facts the facts of the present case, in the manner as below: Green View Restaurant v. ACIT Present case The appellant was a partnership firm carrying on the business of running a restaurant. A search was conducted in its premises and in the course of which the books of account of the appellant were seized, and the appellant's partner had made his statements suomotu under section 132(4) of the Act. The case of the appellant-firm was that the said partner was not a literate person and the income-tax authorities used force and coercion to compel him to sign the said statements which the said person did out of fear and compulsion. However, the court opined that in such instances of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished details in this regard. The assessee had not disclosed this income in its returns, but declared it at the time of survey. The Court held that since all that was available was the voluntary disclosure of the Assessee-reliance was placed onto the statement of the Director of the Assessee. Further the Court also opined, that since the date of Retraction was not on record, this itself casts doubt as to whether the retraction was in fact made or was claimed as an afterthought. This case pertains to a survey, unlike the Sec. 153A proceedings, dealing with the case of the Assessee(s) herein, where the prerequisite of incriminating material unearthed from the premises of the Assessee, cannot be done away with. Further, here, unlike the case of the Assessee(s)-the reliance placed on the statement of the director of the Assessee therein was because, there was a doubt if retraction had indeed been taken place or not. That the said judgment deals specifically with the presumption so created u/s. 133A (3) (iii)-where all that this provision enables the authority concerned to do-is to draw an adverse inference by relying upon materials which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon the following decisions wrt the validity of proceedings u/s. 153A The said judgment in Dayawanti is no longer good Law, as has already been dealt and iterated above. That the Revenue has erred in stating that the Hon'ble S.C. has in fact confirmed the Order of the Bombay H.C.-when in fact, the S.C. vide Order dt. 17.02.207, has simply disposed of the SLP filed against the judgment of the Bombay H.C. in a non speaking fashion Further, the said judgment can be distinguished on facts in the manner as below: M/s Punjab Sind Dairy Products Ltd. v. DCIT Present Case 1. Dayawanti v. CIT, MANU/DE/2937/2016 : [2016] 75taxmann.com308 (Delhi H.C.) 2. M/s. Punjab Sind Dairy Products Ltd. v. DCIT (Civil) Appeal No. 4468-4469/2017 (S.C.), emanating from the Bombay H.C. decision cited as 2016TIOL3116-HC-MUM-IT That upon a perusal of the judgment of the Bombay H.C., it becomes clear that the said case pertains to the issue of rejection of books of accounts and the question of upholding the addition of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following manner: B Kishore Kumar v. DCIT Present Case 1. That, upon a perusal of the facts of the judgment rendered by the Madras H.C. on 03.11.2014, it becomes clear that in that case-the H.C. has held that the case of the assessee was decided on the basis of his own sworn statements dated 29.8.2006 and 10.10.2006 and admitted documents. 2. And that when there has been a clear and categorical admission on the issue, then the Court opined that there was no further need to scrutinize documents. Moreover, in that case, the Assessee has also not made out a case that the admission made by him was incorrect or there is mistake. That the said is again, inapplicable to that of Assessee(s) herein, since unlike the facts of that case, there has been no clear and categorical admission by any of the Assessee(s) wrt any of the allegations so levied upon by the Revenue, and all that the Revenue is seeking to do, is pin the liability onto the Assessee(s) on the basis of retracted statements, third party statements and third party documentation-without fulfilling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r valuable article or thing found in the possession or control of any person in the course of a search under section 132 will be presumed to belong to the said person. It is further provided that it will be presumed that the contents of such books of account and other documents are true; and that the signature and every other part of such books of account and other documents which purport to be in handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that persons handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. 69. 2 A new section 292C has been inserted so as to clarify that presumptions provided in sub-section (4A) of section 132 can be made in any proceedings under this Act. Emphasis is drawn to the fact that the statutory presumption found u/s. 132(4A) and 292C shall apply to such persons in whose possession and control the respective books of account, money, bullion, jewellery or other valuable article or thing has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal that the presumption about the genuineness and truth of the contents of the documents seized, as provided in Section 132(4A), was not available to the Assessing Officer in the assessment proceedings, was erroneous in light of Sec. 292C that permit the Assessing Officer to invoke the presumption that the seized documents belonged to the person searched, subject to rebuttal by the assessee. In the case at hand, the applicability of Sonal Construction-is fallacious for, unlike Sonal Construction, it is eminent to understand that no such incriminating material has been unearthed from the premise of the Assessee(s) herein, for the presumption u/s. 132(4A) and 292C to apply. All that the Revenue is seeking to rely on, is material/documentation found in the residential/office premises of third parties, i.e. AnkurAgarawal and R.K. Kedia, who are individually in the possession and control of the respective material that the Revenue seeks to place reliance on, and would thus mean that the statutory presumption u/s. 132(4A) and 292C shall be applicable to them and not the Assessee(s)-especially when it is settled Law that third party evidence cannot be construed to be incrimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. However, as already dealt with the said presumption pertains to such person from whose premises the said incriminating material stands unearthed, and unlike the facts of the case in Naresh Kumar, there is no such incriminating material found from the premises of the Assessee(s)-to even the apply Sec. 132(4A) and Sec. 292C to the case of the Assessee(s). 3. Mahabir Prasad Rungta v. CIT, [2014] 43taxmann.com28 (JharkhandH.C) The said case can also be distinguished on facts, done in the manner below: Mahabir Prasad Rungta v. CIT Present Case Search and seizure operations were conducted at the premises of the assessee under section 132. In response to notice under section 158BC, the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of introduction of section 158BH, presumption under Section 132(4A) regarding ownership of seized assets was not limited to proceedings for search and seizure u/s. 132 and, was also available for framing regular assessment That the facts of the above said case, are distinguishable from the present case, in the manner as follows: Bhaghreetha Engineering Ltd. v. ACIT Present Case On receipt of information from the CBI that unaccounted cash was being delivered from the office premises of the assessee to one 'A'-search action under section 132 was conducted, at the premises of 'A', the office premises of the assessee, and the premises of the Vice-President of the assessee. By taking into consideration the sworn statements and the incriminating documents seized from the office premises of the assessee at New Delhi, and the explanations offered by the assessee, it was found that the assessee had made illegal payments to various officials of Government agencies. Before the H.C., on the contention of the assessee that presumption under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her responded to a questionnaire sent by the department. However, the assessee in the subsequent year pointed out that it was his father who used to take money from the company and used to return it back when required. The same was however not accepted by the A.O., and the assessment was framed thereafter under Section 147 of the Act. On an Appeal, the H.C. found that the appeal generated no substantial question of Law and held the following: Since the assessee has not filed return nor answered questionnaire, therefore, the assessment has been framed in terms of Section 147 of the Act as the loose sheet marked as KS-19 was found to be relevant to return a finding that the income of the assessee has escaped assessment. The expression used in the assessment order that the presumption u/s. 132(4A) is also on the assessee will not change the nature of the order passed by the Assessing Officer which was passed by invoking provision of Section 147 of the Act after issuing notice under Section 148 of the Act. The holding of the said case, is in a fact specific scenario, where the Ld. HC. held that even if the A.O. has erroneously used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That, unlike the said case, and as has already been iterated above, the presumption u/s. 132(4A), i.e., shall not be applicable in the case of the Assessee(s) since no incriminating material stands unearthed from the premises of the Assessee(s) in question. That the Ld. DR has relied upon the following judgments w.r.t. the addition made u/s. 68 1. CIT Vs. MAF Academy (P) Ltd. (MANU/DE/5077/2013 : 361ITR285) (Delhi H.C) It is submitted that none of the judgments, referred to by the Ld. DR advance the case of the Revenue inasmuch as the said judgments are based on specific factual matrix of the respective cases and are clearly inapplicable to the disparate facts of the present case. It is pertinent to note that all the judgments relied upon by the Ld. DR w.r.t. applicability of section 68 relate to the receipt of share application money by private limited companies under glaringly suspicious circumstances. The said judgments are not applicable to the case of the Assessee(s) herein which deals with long term capital gains arising on sale of shares of public li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y unrelated either to the Assessee or to any of its Directors. The Hon'ble HC observed that the respondent-assessee was a private limited company, closely held and there should be proximate relationship between the promoter directors and the shareholders. Closely held companies usually receive share capital subscriptions from friends, relatives and not from unrelated/unknown third parties/general public. There was no relationship or connection between the subscribers and the respondent-assessee, for subscribers to become investors. What the Hon'ble Delhi HC found surprising was that a person who had purchased shares at a premium ofRs. 100/- toRs. 200/- per share i.e. at a price ofRs. 200/- toRs. 300/- per share, sold the shares atRs. 35/- per share i.e. at a substantial loss. Another surprising factor was that the entire investment happened during a short span of time and re-transfer of the shares to the four Promoters/Directors of the company atRs. 35/- per share by different parties also happened during a short span of few days. The Hon'ble HC found it strange that the Assessee in the year 2001 felt the need of obtaining affidavits from the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments completed u/s. 143(3) for A.Ys. 2010-11 2011-12. Subsequently search seizure operations were conducted at the premises of the Assessee(s) on 13.06.2014 whereby nothing incriminating w.r.t. the impugned investments/transactions in shares were found. Completed assessments for A.Ys. 2010-11 to 2012-13 were however illegally reopened by the A.O. in guise of search assessments u/s. 153A on a mere change of opinion by treating the LTCG offered by the Assessees and accepted as such by the Department in original assessments, as bogus although nothing incriminating was found in course of search in the case of the Assessee(s)-being in complete contradiction to the law w.r.t. to search assessments u/s. 153A enunciated by the Jurisdictional High Court in the case of Kabul Chawla. Exorbitant additions were made on account of alleged bogus LTCG u/s. 68 primarily relying on third party statements and third party documentation in respect of which no opportunity of cross examination was allowed to the Assessee(s). Thus, the present case stands on a completely different footing inasmuch as the Assessee(s) in the present case have filed conclusively documentary evidences duly expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase/sale of shares via legal channels over the stock exchange at prices prevailing on the stock exchange through registered stock broker and settlement of consideration via regular banking channels would satisfy the ingredients of section 68 unless the same is shown to be false by bringing on record conclusive evidences. It has time and again been held in a plethora of cases that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., the same cannot be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. That the burden cast on the assessee u/s. 68 would stand discharged where the assessee furnishes relevant documentary evidences to prove that the genuineness of the transactions i.e. the transactions in shares were carried out through regular banking channels via registered share broker over a recognized stock exchange at prevalent market rates; no liability can be fastened on the assessee u/s. 68 unless the AO brings on record cogent evidence to dislodge the authenticity of the evidences filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are Application Money received by private limited company under suspicious circumstances from unrelated parties is not applicable to the dissimilar facts of the present case. 3. Konark Structural Engineering (P) Ltd. Vs. DCIT (2018) 90taxmann.com56 (Bombay H.C.) 4. CIT Vs. Nipun Builders Developers (P) Ltd. (30taxmann.com292) (Delhi H.C) The judgment rendered in the case of Konark Structural Engineering Vs. DCIT once again deals with the issue of share application money received under suspicious circumstances by private limited companies under similar backdrop as in the case of MAF Academy (P) Ltd.(supra) Navodaya Castle Pvt. Ltd. (supra) and for reasons enunciated earlier, the same is not applicable to the facts of the present Assessee(s)'s case which deal with LTCG arising on sale of shares of listed public limited companies over a recognized stock exchange via regular legal channels. The said case may be clearly distinguished from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded that the cheque books issued to all the 23 persons were of the same series and first leaf was used by all of them for allegedly making payment of the subscription. Under the given glaringly suspicious facts and circumstances of the case, the Hon'ble HC held that appellant-assessee had failed to establish the creditworthiness of the subscribers and even genuineness of the transactions. Accordingly, the amounts received as share application money was added as unexplained cash credit u/s. 68 of the Act. As clearly evident from the facts of the referred case, the judgment in the said case was passed taking into consideration the specific findings in the said case and the glaringly suspicious circumstances which clearly pointed out at the factum of irregular transactions and collusion between the assessee and the alleged share applicants. The said judgment being rendered under the stated fact specific scenario is not applicable to the dissimilar facts of the present case. Further, in the present case, there is no such overwhelming adverse evidence on record. Exorbitant additions have been made by the AO relying on uncorroborated third party docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search assessment u/s. 153A although nothing incriminating was found in course of search. The said judgment is once again clearly distinguishable from the facts of the present case in the manner as follows: CIT Vs. Nipun Builders Developers (P) Ltd. (30taxmann.com292) Present Case The factual matrix leading to the adverse judgment in the said case may be briefly adumbrated as under: The assessee therein was a private limited company On the basis of a report of the investigation wing of the income-tax department, the assessment was reopened u/s. 147 on the ground that income chargeable to tax had escaped assessment, in as much as the share capital shown to have been received by the company was alleged to represent mere accommodation entries. In the course of the reassessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nied that there was a continuing contact and relationship with the share holders and if the assessee was serious enough to establish its case, it ought to have produced the principal officers of the subscribing companies before the AO so that they could explain the sources from which the share subscription was made. That would also have taken care of the difficulty of the assessee in proving the creditworthiness of the subscriber companies. It was, therefore, in the assessee's own interest to have actively participated and cooperated in the assessment proceedings and complied with the direction of the AO to produce the principal officers of the subscribing companies. Instead, the assessee took an adamant, if we may use that expression, attitude and failed to comply with the direction of the AO. In the light of the conduct of the assessee and other surrounding circumstances, the Hon'ble HC held that the assessee had failed to discharged its onus under Section 68 From the discussions alongside, it is crystal clear that the judgment in the case of Nipun Builders was rendered in a completely fact specific situation wherein overwhelming evidences and glaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the form of contract notes, DMAT Accounts, share purchase documents, relevant bank statements etc. would suffice the ingredients of section 68 unless effectively controverted by the Revenue Authorities by bringing on record conclusive evidence. In the instant case, the Assessee(s) have discharged the primary onus cast upon them u/s. 68 by filing relevant documentation evidencing the nature and source of the impugned cash credit, being sale consideration of shares of public limited companies over recognized stock exchange. The Revenue Authorities have failed to dislodge the genuineness of the said evidences furnished by the Assessee(s). Instead, the Revenue Authorities have sought to place reliance on uncorroborated third party documentation and statements of third parties recorded behind the back of the Assessee(s). Since the Assessee(s) have duly discharged the onus u/s. 68 and the Revenue Authorities have claimed otherwise by placing reliance on adverse statements of third parties, the onus is on the Revenue to produce the alleged witnesses/deponents for cross-examination before the Assessees. The said onus cannot be shifted to the Assessee. It has been held by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation received from the investigation wing of the department about the existence of accommodation entry providers and their modus operandi (evidenced by the statements of RajanJassal and Mukesh, the printed contents of the CD received from the investigation wing containing the transactions made with various parties including the assessee, copies of the letters written by Mukesh Gupta and RajanJassal to the Additional CIT, Unit-1, New Delhi admitting various benami accounts maintained by them etc.) in which the assessee was also found to be involved. In order to examine the genuineness and the creditworthiness of the companies which gave the entries to the assessee, the Assessing Officer issued summons to Mukesh Gupta and RajanJassal. But Since there was no response to the summons which were served and some of them had been returned unserved, the Assessing Officer sent an Inspector of Income Tax to the addresses to which summons were issued. The Inspector reported that no such person or company was available or existing at the addresses to which summons were issued. Later on, the assessee filed a letter with the Assessing Officer along with the affidavits of Rajan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar, Pramod Kumar, Harish Kumar etc. In the remand report, the Assessing Officer stated that as per the directions of the CIT (Appeals), summons were issued to all the deponents of the affidavits on 24th April, 2009 but they remained uncomplied with and none of the persons attended before him ........ When the remand report was given to the assessee for rejoinder, it is rather surprising to note that the assessee had nothing to say as to why the deponents of the affidavits, which were all in its favour, could not present themselves before the Assessing Officer for being examined on the affidavits. The Court also opined, that the said Affidavits had not been Notarized and that further, the names of all the companies in which the deponents of the affidavits were Directors, figure in the letter written by Mukesh Gupta and RajanJassal jointly before the Additional CIT, Investigation Unit-1, New Delhi. Thus the link between the material gathered by the investigation wing and the assessee company stands not only established at the stage at which notice under Section 148 was issued, but also in the course of the reassessment proceedings. Thus the affidavits need not be accepted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication money by Pvt. Cos. as per the requirements of Sec. 68, and produce the respective parties. However, in the present case, the shares under consideration were those of public limited companies duly listed and traded on the recognized stock exchange over web-based platforms- where, the Assessee(s) herein duly discharged the primary onus cast upon them u/s. 68 by filing all relevant documentation in support of the impugned transactions which the Revenue Authorities failed to controvert. Further, in the present case, the Revenue is seeking to apply Sec. 68 onto the Assessee(s) by placing reliance on 3 rd party evidence, when in fact, the Assessee(s) could not be aware of the persons/entities buying the shares sold by them, nor could the Assessee(s) control in any formal/informal way, the sale of such shares to a particular person/entity-since the sale of the shares of these listed Cos. were at the prevailing market rate through the BOLT platform. Further, the ratio of Nova Promoters, as stated earlier, is applicable only in a fact specific scenario, where the plea towards not awarding the Assessee an opportunity to cross examine, was held to be insufficient t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as bank account particulars-and in such circumstances the H.C. held that, the Assessing Officer was justified in drawing adverse inference and adding the amount in question to assessee's taxable income under section 68 by stating as follows: In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging betweenRs. 90-190 per share and was able to garner a colossal amount ofRs. 4.34Crores, this Court is of the opinion that the CIT (Appeals) and the ITAT fell into error in holding that AO could not have added back the said amount under Section 68 That unlike the said case, the present case, does not deal with a situation where the Assessee(s) have procured the documentation from such share applicants that are untraceable by the Revenue. Thus the facts of the said case, are inappli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants-only 9 could be served; none actually responded through their authorized or principal officer. Even during remand, 16 of the 18 share applicants could not be served. The AO also examined the bank accounts (of the share applicants) from which the share application amounts were subscribed. He noticed regularity, a pattern, in the methodology of infusing cash into the accounts, and within a short while afterwards, withdrawing sums to pay for the shares ..... The PAN/GIR numbers of the share applicants furnished by the assessee were not found to be correct, upon verification from the concerned Income Tax officers of the ward(s) in question. The assessee was given opportunity to produce the share applicants' principal officers, but did not do so. The share applicants' addresses too were incorrect ...... If we may say so, in exhaustive detail, after a painstaking examination of the records after two or three layers of scrutiny-all the materials and held that the claim that the amounts claimed to be received on account of share applications were not based on genuine transactions. The CIT (A) upheld that order, after calling for a remand report. In these circumstances, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, the assessee claimed that it receivedRs. 35lakhs from seven share applicants. Its assessment was reopened. The assessee did not attend the reassessment proceedings, and summons under Section 131 was sent to the seven parties whose particulars had been furnished but all of them were received back un-served-resulting in an adverse order. On its moving an appeal, the Commissioner sought a remand report. The remand report, an exhaustive 41 page document, discusses threadbare the opportunities granted to the assessee, to establish the identity and creditworthiness of the share applicants. In light of the said facts, the H.C. opined that This court is conscious of a view taken in some of the previous decisions that the assessee cannot be faulted if the share applicants do not respond to summons, and that the state or revenue authorities have the wherewithal to compel anyone to attend legal proceedings. However, that is merely one aspect. An assessee's duty to establish that the amounts which the AO proposes to add back, under Section 68 are properly sourced, does not cease by merely furnishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is a case where the AO an addition to assessee's income under section 68 in respect of loan taken from various parties, since the assessee failed to prove that any of those creditors had financial strength to lend such huge sums of money to assessee, that too without any collateral security, without interest and without a loan agreement. The H.C. thus opined that The mere establishing of their identity and the fact that the amounts have been transferred through cheque payments, does not by itself mean that the transactions are genuine. The AO and the CIT (A) have rightly held that the identity, creditworthiness and the genuineness are all in doubt. Moreover, the Court notes that that these amounts have been advanced to the Assessee without any explanation as to their relationship with the Assessee, the reason for the payment of such huge amounts, as also whether any repayments have, in fact, been made That the case of Bikram Singh, varies factually from that of the Assessee(s) herein, whereas has already been reiterated, the Assessee(s) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in dispute that assessee has furnished all the details such as purchase bills, allotment details, demat accounts, bank statements, details of payments by cheques and sale on BSE electronic platform, proof of payment of Securities Transaction tax and receipt of payment through Cheque by an independent broker, sale bills etc which is not doubted by the revenue. The facts have already narrated by us in earlier paras, which are undisputed by both the parties. only following issues are to be decided in this appeal:- i. Whether AO can use the statements of third parties without granting cross-examination of those parties. ii. Whether without providing the copies of the statements as well as the cross examination of alleged exit providers, such evidences can be used against the assessee for making addition. iii. Whether the interim orders of The SEBI relied up on by the ld AO implicate the assessee for making addition u/s. 68 of the act on alleged bogus long-term capital gains. iv. Whether Cash Trails of The buyers of the securities as stated by the ld AO makes the long-term capital gain of the assessee bogus. v. Whether the disclosure of some other persons as their un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer further stated that cross-examination cannot be right and it is not required by law. For this proposition, he relied upon the decision of the Hon'ble Allahabad High Court in Moti Lal Padmapat Udyog Limited vs. CIT, 160 Taxman 233 and the decision of the Hon'ble Bombay High Court in satellite engineering Ltd. vs. Union of India, 1983 : 1983 ELT 2177 Bombay. He further relied upon the decision of the Hon'ble Delhi High Court in CIT vs. Nova promoters and Fin lease private limited 2012 : 342 ITR 169 where in para number 27 where non-provision of opportunity to cross-examination of certain persons were not found fatal to the assessment. Against this, the assessee has also put his case that non-provision of cross-examination opportunity is fatal to the assessment. In this background, whether the assessee has been granted the opportunity of the cross-examination or not is required to be seen. The fact, which has not been denied by the learned authorised representative that Mr. Neeraj Singal in his statement dated 24/4/2015 was offered an opportunity to cross-examine Mr. Rajkumar Kedia. However, in answer to question number 25, he refused and stated that he does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchanama are placed at page nos. 1 to 58 of the assessee's compilation. From a bare perusal of the Panchanama of the assessee, it may be seen that nothing incriminating was found in the course of search. It is also apparent from the search document that no incriminating material in the form of undisclosed, document, unaccounted money, bullion, jewellery etc. indicating the factum of undisclosed income were found or seized in the course of search operation u/s. 132(1) of the Act for any of the assessment years under consideration. In the instant case, the AO relied upon the statement of Sh. Raj Kumar Kedia his employee Sh. Manish Arora, Sh. Ankur Agarwal, an employee of BSL and Sh. Chandrakant Mahadev Jadhav. However, Sh. Raj Kumar Kedia retracted his statement on 14.10.2014 (copy of which is placed at page nos. 446 to 451 of the assessee's compilation). Thereafter, he filed letter dated 31.03.3015 withdrawing his retraction, copy of which is placed at page nos. 452 to 455 of the assessee's compilation. Therefore, he was changing his stand as such his statement cannot be considered to be reliable. Similarly, Sh. Ankur Agarwal also retracted his statement vide letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tta High Court in the case of CIT Vs. Eastern Commercial Enterprises 1993 : (1994) 210 ITR 103 and circular issued by the central board of direct taxes and further held in para number 117 of the decision as under:- '117. From the aforesaid Circulars, it is clear that the assessments made pursuant to search operation are required to be based on incriminating materials discovered as a result of search operation in the case of the assessee and not on the recorded statement. In the instant case, the persons who gave the statements retracted the same and even the opportunity to cross-examine was not afforded to the assessee Thus, it is apparent that the assessee has not been granted an opportunity of the cross-examination of Sri R.K. Kedia and Shri Manish Arora. The learned authorised representative has relied upon the decision of the Hon'ble Supreme Court where in relying on case of state of Madhya Pradesh vs. Chintaman sadashiv Waishampayan AIR 1961 SC 1623 wherein in para number 11, It has been held referring another decision in Union of India vs. TR Varma stating it broadly and without intending it to be exhaustive, it may be observed that the rules of natural just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at cross-examination of the said dealers could not have brought out any material, which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of making the addition under section 68 of the act or to annul the assessment order itself. On careful perusal of the decision of the Hon'ble Supreme Court, it is noted that such direction were given by the Hon'ble Supreme Court in the case of writ petition filed by the assessee before the Hon'ble High Court and therefore Supreme Court held that the assessee could have gone before the Commissioner Appeals to agitate this issue of cross-examination and therefore the opportunity was available to the assessee at that particular point of proceedings. In the present case, assessee has also raised the same issue before the learned CIT A that cross-examination has not been provided to the assessee despite asking for the same. The learned CIT A has also brushed aside the above argument of the assessee without giving any plausible reason. Therefore, when the assessee has not exhausted all the judicial process before reaching to the higher forum, but has bypassed them by invoking the different rights, then in such circumstances, the violation of the principles of natural justice, such as not granting of opportunity of the cross-examination, becomes any regularity and not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Raj Kumar Kedia in his statement. Based on these findings, the learned AO reached at the conclusion that Bush and steels Ltd. family has taken accommodation entry of long-term capital gain from Raj Kumar Kedia and other entry operators. Firstly, in that particular file, there is no reference of any name of the family of the assessee. All these entries are pertaining to a single's day that is 21/05/2014. The assessing officer has not correlated with any of the transactions on that date or nearby that date to show that assessee has incurred this expenditure. Further, the data allegedly seized from the search of Shri Raj Kumar Kedia cannot be used against the assessee, unless the assessee is given an opportunity of cross-examination of the men with respect to the documents found relating to the assessee or where the names of the assessee are mentioned. On this issue also the coordinate bench in assessee's own case, has held that such material found from third-party who was not allowed to be cross-examined by the assessee cannot be relied upon:- 121. In the present case also, the AO made the additions on the basis of the statements of third parties recorded u/s. 132(4)/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losing the material or giving an opportunity to cross-examine the person whose statement had been used by the Department against the interest of the assessee. There was violation of the principles of natural justice. 123. Similarly, the Hon'ble Delhi High Court in the case of CIT Vs. Dharam Pal Prem Chand Ltd. 2007 : (2007) 295 ITR 106 (supra) held as under: That the Assessing Officer had based his assessment order on the report obtained from the research institute. The correctness of that report itself having been under challenge by the assessee who had not only filed objections thereto but also sought permission on several occasions to cross-examine the analyst even agreeing to pay the necessary expenses, the report could not automatically have been accepted. Since the Assessing Officer did not permit the correctness or otherwise of the report to be tested, there was a clear violation of the principles of natural justice by him in relying upon it to the detriment of the assessee. Even if the strict rules of evidence may not apply to assessment proceedings, the basic principles of natural justice would apply to the facts of the case. 124. On a similar issue, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it revoked the original order passed on 19/12/2014. Similarly, in case of first, financial services Ltd; the learned assessing officer took note of interim order passed on 19/12/2014. SEBI passed t final order on 02/04/2018. Vide para number 74 and 90 of that order[WTM/GM/EFD/1/2018-19], SEBI has given a clean chit to the assessee and his family members as under:- Singal Group 70. Brij Bhushan Singal, Neeraj Singal, Uma Singal, Marsh Steel Trading Ltd. and Vision Steel Trading 70. Brij Bhushan Singal, Neeraj Singal, Uma Singal, Marsh Steel Trading Ltd. and Vision Steel Trading Ltd.: The SCN mentions that Brij Bhushan Singal, Neeraj Singal and Uma Singal were preferential allottees. FFSL transferred ₹ 1 crore and ₹ 50 lakh to Marsh Steel Trading Ltd. and Vision Steel Ltd. respectively by way of investments in these companies on September 19, 2011. One entity named Aarti Singal, a relative of Brij Bhushan Singal, Neeraj Singal, Uma Singal and Ritu Singal (hereinafter referred to as 'the Singals') was a director in Marsh Steel Trading Ltd. and Vision Steel Ltd. during the relevant period. It has been mentioned in the SCN that as per the disclosures m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not be alleged that the funds received from FFSL by Marsh Steel Trading Limited and Vision Steel Limited, which are controlled by Mr. Sanjay Singal and his family members, came to Brij Bhushan Singal group. 73. With regard to the fund transaction between Neeraj Singal and Pine Animation Ltd., it has been submitted that ₹ 80,00,000/- was paid as consideration amount for allotment of 8,00,000 preference shares on December 12, 2012 and ₹ 40,00,000/- towards subscription of 4,00,000 preference shares on March 15, 2013. With regard to the query as to why they purchased the shares of FFSL, it ha of s been stated that they relied on the information and feedback received from various professionals, friends and other persons who are actively involved and having adequate knowledge of the securities market. 74. I find that during the course of proceedings, Marsh and Vision were represented jointly and Brij Bhushan Singal, Uma Singal and Neeraj Singal were jointly represented, as part of two factions of the family. It is seen from the SCN that these entities have been implicated because of receipt of funds by Marsh and Vision from FFSL and Aarti Singal's association as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd secure the market place by weeding out those entities which have misused the securities market and meting out deterrent penalties on such entities. 91. The limitations in an investigation of this magnitude was realized and the SEBI Board had decided in December 2016 to restrict its scope of actions to those entities that are connected to the company involved in the price manipulation, i.e. LTP contributors and the company and its directors if connection or relationship is established with the market manipulation. Keeping this background in mind, on a review of the entire proceedings beginning from the SCN, the replies and submissions of the entities and the stage at which the entities stand today, I am inclined to continue with the debarment and restraint orders against certain entities, including the company and its noticee directors, and certain other entities who are observed to be liable in the relevant parts of this order, based on their connection with the company; or market manipulation; or their role as conduits in fund transfer to the market manipulators. Accordingly, I am inclined to pass orders against various noticees as shown under the head 'Directions' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fered along with quantity is shown. Anybody who bids for purchase or sale of those shares can enter in to trading. It is an electronic trading platform whenever an assessee buys or sales the share, in either case identity of the other party, i.e. buyer or seller nor the timing at which the shares are purchased or sold by the other party are known beforehand unless it is a synchronized trading. No such allegation is made by the ld AO nor has SEBI found it so. Assessee has sold all the shares through the recognized share broker registered with the SEBI on online trading platform of the Bombay stock exchange after the payment of the securities transaction tax, payments are settled by the settlement mechanism of the stock exchange to the broker, and in turn the broker makes payment to the seller, the assessee. Money comes in to the bank account of the broker through settlement mechanism of stock exchange. As it is apparent from the order of the securities and Exchange Board of India, No such transactions entered into by the assessee are not at all the synchronized transactions. There is no involvement alleged of the selling broker of the assessee involved in such synchronized trades. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Q No. 13. Further, the claim of the ld AO is that the companies whose shares are purchased are not carrying on any business whereas, in answer to Q No. 32 Shri Kushal Praveen Shah Director of Anukaran Commercial Enterprise Ltd. has given the detailed description of the business been carried out by that company. He has stated that out of 15 crores the ₹ 1.5 crore was for acquisition of the shares and further ₹ 13.5 crores were deposited to BMC to carry out some infrastructure project. Further, in the statement of Shri Ram Kumar Kedia the reference was made of Mr. Jagdish Purohit (such statement was retracted and then once again confirmed). However, in the statement of Shri Jagdish Purohit there is no reference of any work carried out with Shri Raj Kumar Kedia. The ld AO has merely stated that as Mr. Jagdish Purohit is an accommodation entry provider and as Mr. Raj Kumar Kedia has named Mr. Jagdish Purohit, without corroborating has linked assessee's case with Jagdish Purohit. The ld AO has also stated by the statement of Shri Devesh Upadhaya noted that one Mr. Bikash Surekha was involved in trading of many scripts and also held that Mr. Sanjoy Dey was operating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain, but it does not lead that assessee is also sailing into the same boat. Even otherwise, there are thousands of entities who have earned the long-term capital gain in those scripts, which are challenged by the ld AO who are also exonerated by the SEBI by various orders, along with the orders passed in case of the assessee and his family members or individual orders. Hence, cases are also that in those persons case their claim of LTCG is not challenged. Interestingly the ld AR also referred to the news item in Moneylife.in dated 10/4/2018 where in internal Memo of SEBI dated 29/12/2016 is discussed. It shows that SEBI issued an elaborate interim order in respect of 12 entities connected with LTCG booking. These are First Financial Service Ltd., Kailash Auto Finance Ltd., Kamalakshi Finance Corp Ltd., Kelvin Fincap Ltd., Mishka Finance and Trading Ltd., Moryo Industries Ltd., Pine Animation Ltd., Radford Global Ltd., Eco Friendly Food Processing Park Ltd., Esteem Bio Organic Food Processing Ltd., Channel Nine Entertainment Ltd. and HPC Biosciences Ltd. However, in none of these interim orders the assessee was found to be involved in any of the wrong doings. Such orders of SEBI a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing period of those shares in the balance sheet of the assessee's which were accepted by the revenue for all those years. He therefore submitted that the theory of preponderance of probabilities invoked by the learned assessing officer is merely a conjecture and surmises. He further stated that when the originally the assessees are assessed under section 143 (3) of the act, long-term capital gain were accepted after detailed enquiries, now it cannot be said that the capital gain earned by the assessee is to be taxed u/s. 68 of the act on the principles of preponderance of the probabilities. He further submitted that it was argued before the bench in appeal from earlier years that no incriminating evidences were found during the course of search. The order is awaited. He further stated that the preponderance of probabilities would come into play only when the basic test of direct and factual evidences fails. He stated that in the present case the complete evidences have been placed by the assessee before the revenue authorities, they are not found to be false but only allegation has been made that transactions are sham. He further stated that the decision relied upon by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns fraudulently for the assessee. At least something would have been unearthed from such high-level investigation by two Central Government authorities. Further whatever evidences were found by the revenue; they were not confronted to the assessee for rebutting the same. Statements recorded of several persons by revenue were not allowed to be cross-examined by the assessee. In this situations, only on the theory of preponderance of probabilities addition cannot be sustained. The theory of preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn based on certain admitted facts and materials and not based on presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. The reliance placed by the learned AO on the decision of the honourable Supreme Court is clearly distinguishable. So far as the facts of that case with the case on hand before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that all these decisions are also rendered on similar facts where the broker was tainted; cross-examination was not afforded, changing statements of broker, Allegation of accommodation entry provider etc. He further submitted that almost all the authorities have held that either the assessment is invalid on account of violation of principles of natural justice or on the complete documentation furnished or on the basis of changing statements of broker or on inadequate evidences or the facts that such evidences are not reliable as in the case of the assessee same are held to be not incriminating material on which addition can be made. We also have found that the facts of the issue before us are also similar to the facts dealt with by those judicial authorities. 36. As the issue involved before us is of chargeability of long term capital gain as undisclosed income of the assessee u/s. 68 of the act, we have also conducted some research and found that now many high courts and coordinate benches have held in favour of the assessee. In one of the cases, SLP filed by the revenue against the order of the Honourable Bombay high court has also been dismissed by Honourabel Supreme Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE COMMISSIONER OF INCOME TAX VERSUS SHRI MUKESH RATILAL MAROLIA. 2011 (9) TMI 919 Bombay High court SLP Dismissed by Hon SC on 27/1/2015 Special Leave to Appeal (Civil) No(s).20146/2012 16 Principal Commissioner of Income Tax-5 v. Dhwani Mahendra Shah Tax Appeal No.674 of 2017 Gujarat high Court 17 COMMISSIONER OF INCOME TAX VERSUS PUSHPA MALPANI IT Appeal No. 50 of 2010 2010 (11) TMI 799 Rajasthan High court 18 Smt. Bharti Arvind Jain vs. ITO 6102/Mum/2016) Mumbai ITAT 19 ITO vs. M/s Indravadan Jain HUF 4861/Mum/2014 Mumbai ITAT 20 Swati Mall V ITO Ward 36(2) 7/12/2018 Kolakatta ITAT 21 Vaishal Suryakant Shah V ITO 9 CCH 106 Ahmedabad ITAT 22 Sunita Jain V ITO 49 CCH 330 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO 26/9/2018 Kolkata ITAT 43 Shobhit Goel V ITO 25/9/2018 Delhi ITAT 44 Kaushlaya devi V ITO 19/9/2108 Hyderabad ITAT 45 Amit Shah V ITO 26/9/2018 Kolkatta ITAT 46 Deepak Bhattad HUF V ITO 19/9/2018 Chennai ITAT 47 Arunkumar Bhaiyya V ITO 30/8/2018 Delhi ITAT 48 ITO V Kapil Mittal 29/8/2018 Jaipur ITAT 49 DCIT V Saurabh Mittal 29/8/2018 Jaipur ITAT 50 Sikha Dhawan V ITO 27/6/2018 Delhi ITAT 51 Meghrajsingh Sehawat V DCIT 7/3/2018 Jaipur ITAT 52 DCIT V Vimleshkumar Singh 15/1/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed it to be a long-term capital gain. The assessee challenged the case before the honourable High Court and it was held that there is no substantial question of law arising. Firstly speaking the case before us is not of chargeability of long-term capital gain as business income or as a long-term capital gain. Nevertheless, the issue is whether the sale of shares resulting into profits in the hands of the assessee, which are held for more than 12 months, is chargeable to tax as long-term capital gain or as undisclosed income of the assessee. The case of the assessee is supported by the purchase bills, payment by cheques and sale by assessee on recognized stock exchange through a registered broker receiving the sale consideration through the settlement mechanism of the exchange by cheque. There is no doubt on the brokers who purchased shares and on the brokers who sold the shares. In the case before the honourable Bombay High Court, addition was on account of absence of any information coming from the broker who sold the shares when enquired by the AO. In the present case, the AO did not raise any question to the broker who sold the shares. It is in fact, the broker who sold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the requisite source of investment during the relevant period of investment. The facts of the case before the coordinate bench are clearly distinguishable and do not apply to the facts of the case before us. In view of this, reliance on this decision by revenue is also misplaced. 39. The third decision relied upon by the learned departmental representative is of Bangalore bench SMC where the shares were purchased off market by the assessee despite having the shares of the company listed on the stock exchange. Therefore, the facts of this case are also clearly distinguishable from the facts before us. 40. The fourth decision relied upon is in case of Chandan Gupta vs. CIT, 2013 : 229 taxman 173 (Punjab and Haryana). In that, particular case the assessee expressed its inability to produce the broker and the AO conducted inquiries on his own. The quotations were also from a Gujarati diary the prices could not be substantiated by the assessee. In the present case, the assessee has produced all the evidences before the assessing officer and the learned AO did not press upon the assessee to produce anybody instead of that he went by the standard modus operandi as understood by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash and that too off market., In some of the cases, there was no payment by cheque for acquisition of the shares but there was an adjustment of profits earned by the assessee through those brokers, who generated profits in cash in the name of the assessee and purchase price of the shares adjusted by the broker against that payment to be made to those assessees. In such circumstances, the additions have been confirmed by the coordinate benches. Therefore, the facts of those cases are clearly distinguishable. 43. The four parties we like to state that despite searches carried out on the assessee based on pre search inquiries coupled with the search on Mr. Raj Kumar Kedia and recording statements of so many persons the ld AO knowing fully well that failure to grant cross examine will make all these enquiries fruitless. Further, there are loopholes in the evidence relied upon by the revenue of not referring the issue of synchronized trading to the SEBI. Certain times the conviction under the SEBI Act would have been more stringent then the liability under the Tax laws. Further, though the AO was having reasonable evidences but has unnecessarily took the burden on him of proving tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 47. Now we come to the appeals of Ritu Singal in ITA No. 1479/Del/2018 to 1481/Del/2018 for AY 2013-14 to 2015-16. The grounds of appeal raised for all these respective years are under:- 48. The following grounds of appeal in ITA No. 1479/Del/2018 for the 2013-14:- (1) That the order dated 29-12-2017 passed u/s. 250 of the Income-tax Act, 1961 (hereinafter called the Act ) by the Ld Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in passing the order u/s. 153A of the Act without appreciating the fact that the order passed by Assessing Officer is without jurisdiction and bad in law as the jurisdiction u/s. 153A of the Act is vitiated since no incriminating material pertaining to A/Y 2013-14 had been found during the course of search. (2) That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of ₹ 13,32,99,698/- on account of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of alleged unaccounted commission expenses @6% on the long term capital gains on sheer presumptive basis. 3. That the order dated 29-12-2017 passed u/s. 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without affording the Appellant any opportunity to cross examine such persons, thus, kiang the assessment bad in law by considering the same as a general ground, no acquiring any separate adjudication. 50. The following grounds of appeal in ITA No. 1481/Del/2018 for the 2015-16:- 1. That the assessment order dated 23-12-2017 passed u/s. 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making an addition of ₹ 28,57,68,797/- on account of Long term capital gains which was exempt u/s. 10(38) of the Act by treating it as an allegedly unexplai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in passing the order u/s. 153A of the Act without appreciating the fact that the order passed by Assessing Officer is without jurisdiction and bad in law as the jurisdiction u/s. 153A of the Act is vitiated since no incriminating material pertaining to AY 2013-14 had been found during the course of search. 2. That the order dated 29.12.2017 passed u/s. 250 of the Act by the ld Commissioner of Income Tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the ld Assessing Officer in making an addition of ₹ 3,58,46,721/- on account of Long term Capital gains which was exempt u/s. 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s. 68 of the Act and unjustifiably and independently holding that the purported transactions of acquisition and sale of shares of certain companies which have resulted in the impugned long term capital gain are, allegedly sham. 3. That the order dated 29.12.2017 passed u/s. 250 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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