TMI Blog2021 (12) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, who has prima facie discharged the initial burden, the impugned addition made by the A.O. is not sustainable, thus is directed to be deleted. In the fact of the present case, save and except relying on the statement of so called entry operators, the Revenue could not bring on record any credible evidence which could show that, the Appellant has routed his unaccounted money in the form of bogus capital gain. The A.O. never examined any one of these persons, whose statement relied upon by him in the Assessment order nor did he grant an opportunity for cross-examination except the bald references to the recorded statement. The Revenue could not bring on record any material which could link the Assessee with any wrong doing. When the learned CIT(A) found that, the A.O. has not followed the due procedure of law as stated in the above paragraph, he rightly deleted the impugned additions. Assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 61,12,000/- M/s Lifeline Durgs Pharma Ltd. Sitansu Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 37,25,000/- M/s Lifeline Durgs Pharma Ltd. Anupama Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 62,58,250/- M/s Lifeline Durgs Pharma Ltd. Amruta Preetam Mohapatra 2014-15 59,99,250/- M/s Kailash Auto Finance Ltd. (KAFL) Mamta Mohapatra 2014-15 56,73,845/- M/s Kailash Auto Finance Ltd. (KAFL) Kishore Kumar Mohapatra 2014-15 38,82,500/- M/s Kailash Auto Finance Ltd. (KAFL) Parbati Mohapatra 2014-15 50,83,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sole motive to provide such accommodation entries to enable the beneficiary to convert his undisclosed income to tax free income. Ground No.4: On the facts and in the circumstances of the case, the Ld CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains (L TCG) on sales of shares on the specious ground that the assessee was not qranted an opportunity to cross-examine the persons making adverse statement against the assessee, when facts on record reveal that no such opportunity for cross examination was sought by the assessee before the AO. Moreover, in their statements recorded before the Investigation Wing, Kolkata, (i) Shri Pawan Kumar Kayan, , one of the brokers, (ii) Shri Praveen Kumar Agarwal (iii) Shri Anuj Agarwal, another broker had stated that the shares of Mis Kailash Auto Finance Ltd (KAFL) w~ rigged to generate bogus Long Term Cap~ Gains through accommodation entries. When those statements were confronted to the assessee, he had not been able to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstances of the case, the Ld.CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax by paying additional self-assessment tax. In spite of the same, the CIT(A) has erred in holding that the alleged transaction of shares of Mis Kailash Auto Finance Ltd (KAFL) are genuine, when the assessee had suo motto offered the entire alleged L TCG for taxation without claim of exemption u/s 10(38) of the I.T. Act, 1961 by filing revised return of income and paid self-assessment tax thereon after survey u/s 133A of the I.T. Act, 1961 was carried out in this group of cases by the Investigation Wing, Bhubaneswar, based upon the inputs of Investigation Wing, Kolkata. The above action of the CIT(A) violates the ratio of decision of Hon'ble Supreme Court in the case of CIT vs M/s Shelly Products And Another (2003) 261 ITR 367 (SC), wherein it is held that no refund of tax would be granted on the admitted returned income even though the assessment is annulled. Ground No.8. The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard. 6. The Revenue has raised the following grounds of appeal in ITANo. 43/CTK/2020:- Bogus Long Term Capital Gains Generated on Sale of Penny Stock of Rs.62,42,000/- Ground No.1: On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had stated that the shares of M/s. Lifeline Drugs Pharma Ltd. (LD DL) were rigged to generate bogus Long Term Cap~ Gains through accommodation entries. When those statements were confronted to the assessee, he had not been able to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstances of the case, the Ld.CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains(L TCG) on sale of shares of penny stocks of M/s. Lifeline Drugs Pharma Ltd. (LD DL)by merely relying upon a couple of decisions of ITAT Benches, ignoring the following judgments of various High Courts and Tribunals, which are rendered in favour of revenue on the same issue of Penny Stocks : (a) CIT vs Sanghamitra Bharali (2014) 361 ITR 481 (Gauhati) (b) Sanjay Bimalchand Jain vs. Pr.CIT (2018) 89 taxmann.com 196 (Bombay) (c) Purviben Snehalbhai Panchhigar vs. ACIT (2018) 409 ITR 124(Guj) (d) Udit Kalra vs. ITO, Ward-SO(1) [ITA No.220/2019 of Delhi High Court, date of order - 08.03.2019] (e) Ratnakar M Pujari vs. ITO, Ward-2S(3)(3), Mumbai [ITA No.99S/MUM/2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax would be granted on the admitted returned income even though the assessment is annulled. Ground No.8. The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard 7. Brief facts of the case pertaining to A.Y. 2014-15 are that the assessee is an individual earning income from various sources including income from truck plying, income from Long Term Capital Gains (LTCG) and income from other sources. The original return of income for A.Y. 2014-15 was filed on 29.07.2014 disclosing a total income of Rs.4,79,990/- and claimed exemption of LTCG u/s 10(38) of the Act. A survey operation u/s 133A was conducted on the business premises of Shri Kishore Kumar Mohapatra Group on 22.07.2015. During the course of this survey the assessee who is a family member of this group, was confronted with the statements of directors of certain Kolkata based companies whose shares bought and sold in the stock market by assessee. It appears that these Kolkata based companies were under the scanner of the I.T. Department for allegedly providing accommodation entries and had subsequently been subjected to search and seizure operations. A list of benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AO before Ld. CIT(A) of denying the benefit of exemption u/s 10(38) of the Act, and treating the claim of Long Term Capital Gain as bogus towards LTCG claimed at Rs.38,00,000/- and Rs.62, 42,000/- for A.Y. 2014-15 2015-15 from sale of equity shares of M/s Kailash Auto Finance Ltd (KAFL) M/s. Lifeline Drugs Pharma Ltd. (LD DL) respectively. 10. In the appellate proceedings it was submitted by the assessee that the purchase of equity shares in question was made through account payee cheque, shares were held in the Demat Account, equity shared were held for more than 12 months and sold through recognized stock exchange after payment of security of transaction tax. It was also submitted that Ld. AO erred in accepting the revised return for A.Y.201415 and also disregarding the claim of LTCG u/s 10(38) of the Act made for A.Y.2014-15 2015-16 during the assessment proceedings without bringing anything contrary on record to prove that the claim was bogus. It was also submitted that the ld. AO merely relied on an investigation report in case of 3rd party which was prepared much before the date of survey. Nothing incriminating material relating to the alleged transaction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and offering the LTCG for tax. During the assessment proceedings it was stated that the claim is genuine and revised return cannot be accepted since the original return was filed belatedly. Similar for A.Y. 2015-16 in the original return assessee did not claim the benefit of LTCG and paid tax on capital gain, but during the course of assessment proceedings revise computation was filed along with documentary evidences claiming that the assessee deserves the benefit of exemption u/s 10(38) of the Act. Reference was also made to CBDT circular No.286/98/2013 dated 09.01.2014 which strictly debars the Revenue Authorities from obtaining admission/statement during the course of survey rather, insisted on collecting evidences. To support this contention that claims not made in the return can be claimed at the time of assessment for assessing the correct income of the assessee, reliance placed on following decisions: 1. Hon ble Gujarat High Court in the case of Gopal Bhai Babu Bhai Parikh vs- Pr. CIT-4, reported in [2021], 127 taxman.com 245 (Guj 2. Hon ble Bambay High Court in the case of Sanchit Software Solutions (P.) Ltd. vs- Commissioner of Income Tax-8, (Bombay), repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) of accepting the assessee's claim of exempt long term capital gain from sale of equity shares u/s 10(38) of the Act by way of ignoring the revised return for A.Y.2014-15, by way of accepting revised computation of income for A.Y.201516 even when the assessee has already offered the alleged LTCG to tax and thirdly, for allowing the claim of assessee since no opportunity of cross examination was provided to confront the third party whose statements were used against the assessee. 18.1. We notice that during course of survey, assessee under compulsion and pressure has admitted and paid tax on the exempted LTCG by way of revising returns for Assessment year 2014-15 and declared the exempt capital gain as taxable gain, but subsequently, after examining the fact and law, found that, the admission of exempted income as taxable income and payment of tax on exempted income is wrong. The Assessee retracted from his own admission and vehemently objected before the A.O. that, the impugned admission as well as the tax paid on exempted capital gains is wrong. To justify his retraction, he submitted all necessary evidences and the learned A.O. could not dispute the evidences produce by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r scheme of early voluntary retirement as declared by bank and received a sum of certain amount - He filed his return of income without claiming benefit of exemption under section 10(10C) on said amount- Same was processed under section 143(3) and an Assessment order was passed - In meantime, Supreme Court in a case of another employee of same bank passed a dictum that he was entitled to exemption under section 10(10C) on amount received under early retirement scheme - On basis of same, Assessee filed an application before Commissioner seeking to claim exemption under section 10(10C) - Commissioner disallowed same on ground that Assessee had not claimed exemption during filing of return - Whether even if Assessee had not claimed exemption in his return of income, he could claim same later in point of time-Held, Yes - Whether thus Assessee was to be allowed exemption under section 10(10C) on such amount received from bank under early retirement scheme Held, Yes. 18.7 Hon'ble Bombay High Court in the case of Sanchit Software Solutions (P.) Ltd. vs- Commissioner of Income Tax8, (Bombay), reported in [2012], 25 taxman.com 123 (Bombay), in paragraph Nos.5, 6 7 of its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of a third party which were even not recorded by the survey team. Further, the learned A.O. relied on the statement of a third party which was recorded by another officer under a different circumstances and particularly when, the Respondent company has no financial relations with the director. 18.10 We also observe that, additions were made by the A.O. without adhering the principles of natural justice which constitutes bedrock in any quasi-judicial proceeding. A.O's reliance on the statement of so called entry operators to justify the additions U/s.68 and 69 of the Act was factually unsustainable, because the statement of entry operators were recorded on various dates connected with some other proceeding and not at all connected with the Appellant proceedings and it is also not known as to what was the condition in which the makers of the statement made the statement and in what context they made the statement. These statements were recorded much before the date of survey conducted upon the Appellant. Admittedly, these statements were recorded in absence/back of the Appellant, therefore, the Appellant did not have any means to determine the veracity or correctnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures, because while discharging the duties as an Assessing officer, he was expected to function both as on Investigator and Adjudicator. In his role as an investigator, he was duty bound to investigate fully and bring out all the facts on record and while discharging the duty as an Adjudicator, he was required to comply with the principles of natural justice. In the instant case, the A.O. failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process. 18.12 Our view is supported by the judgment of the Hon ble Apex Court in the case of CIT vs- Odeon Builders (P) Ltd. reported in 110 Taxman.com 64 (SC) involving similar facts as involved in the present case. In this decided case, the Revenue had disallowed the purchase made by the Assessee holding it to be bogus based on the statement given by a third party. On appeal, the learned CIT(A) deleted the addition holding that, on one hand, the Assessee has discharged his initial burden whereas, on the other hand, the Revenue had denied the opportunity of cross-examination to the Appellant. On the self same reasoning, the Hon'ble Tribunal and later the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.15 We, therefore, in view of our above discussion and settled judicial precedents that assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified. We, therefore, dismiss revenues common ground no.1,2,4 7 raised for A.Y.2014-15 2015-16 in the instant appeals. 19. Now we take up common ground no.3 6 raised on merits of the case. To keep the facts straight we notice that the assessee purchased the equity shares by making payment through banking channel. Subsequent to certain merger and split of equity shares assessee hold the equity shares of the limited company in question in the Demat Accunt and held them for more than 12 months and thereafter the same was sold through recognized stock exchange after paying security t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of the company dated.01.10.2013 the share of Rs.10/- face value were converted into Re.1 per share and thus the appellant's holding as on 05.12.2013 was as under: Kailash Auto Finance Ltd 100000 shares Lifeline Drugs Pharma Ltd. 25,000 shares Newever Tradewin 10,000 shares Shagun Trexin 1,000 shares 19.2 During the year under consideration the appellant sold the entire 25,000 shares of Lifeline Drugs and Pharma Ltd. as under: No. of shares date of sale value received 3000 17.07.2014 7,44,000 3,000 18.07.2014 7,56,000 2,000 21.07.2014 5,03,000 3,000 23.07.2014 7,53,000 3,000 07.08.2014 7,53,000 1,000 08.08.2014 2,49,000 7,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alient facts are absent in the body of the assessment order. It is also unclear whether the assessee was granted an opportunity to cross question the directors of the Kolkata based companies, the same being an unalienable right of the assessee as per the principles of natural justice. The appellant submitted that the shares had been held for more than twelve months and 'were transferred through a recognized stock exchange after duly paying securities transaction tax (STT). Therefore, the consideration received was in the nature of a long term capital gain (LTC G) held to be exempt u/s. 10(38) of the LT Act, 1961. From the submissions of the assessee, it is seen that the assessee purchased 1,00,000/- shares of M/s. Panchashul Marketing Ltd for Rs.1,00,000/-, each share Rs.1/-, on 21/11/2012. These shares were purchased through Jatadhari Marketing (P) Ltd. and the purchase amount was paid by cheque no. 510691 drawn against the assessee's savings bank account no. 30160100001797 with the Bank of Baroda, Bhadrak. The shares of Panchashul Marketing Ltd. were subsequently merged with that of M/s. Kailash Auto Finance Ltd. (KAFL). The assessee also purchased share of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTe actually had some 'kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of preponderance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might to against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee. The enquiry by the Investigation wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did bt implicate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of the shares are not doubted and sale has been made through Bombay Stock exchange routed through DMAT account then consideration received has to be treated from amount of sale of shares whether the price has been rigged of1 not. One factor which has weighed heavily oTl the authorities below in the present case is that share price has arisen to more than 37 times. Once the SEBf has held that there is no adverse evidence or material that there was any violation of regulations in respect of Kailasii Auto Finance Limited and restrain order on the trading has been revoked} then it follows that the share price of which has been sold for genuine quoted price and therefore} the sale proceeds has to be reckoned from sale of such shares and would be treated as explained credit or investment. Accordingly, on the facts and circumstances of the case) we hold that the long term capital gain shown by the assessee is genuine and consequently liable for exemption u/s. 10(38). Thus} appeal of the assessee is allowed. 11 In the light of the foregoing observations, it is held that the AO was not justified in rejecting the claim of exemption u/s. 10(38) in respect of LTCG arising on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement relied upon by the AD, is not sustainable in law. Also, the AO has not brought any material on record to show that the assessee paid any amount over and above the purchase consideration of the shares and therefore, it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gains. The Assessing Officer has repeatedly stressed in his assessment order that the Director of the assessee group had agreed in a written statement filed before the Income Tax investigation wing, Bhubaneswar to pay tax on long term capital gains without seeking an exemption u/s. 10(38) of the LT Act, 1961. A copy of the said letter dt. 09/10/2015 addressed to the Add. Director (Investigation), Bhubaneswar was produced in the main assessee company had agreed to pay tax on the long term capital gains during the course of the survey u/s. 133A that was conducted on the assessee's premises on 22/07/2015. On page 3 of his assessment order, the AO states that the assessee, Shri Himanshu Mohapatra in a recorded statement u/s. 133A given to the survey authorities, had admitted to the fact of taking accommodation entries from certain Kolkata based c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kailash Auto Finance Ltd. 1,00,000 Shares Lifeline Drugs Pharma Ltd. 25,000 Shares Newever Tradewin 10,000 Shares Shagun Trexin 1,000 Shares Out of the above, entire shares of Kailash Auto Finance Ltd. and 10000 Shares of Lifeline Drugs Pharma Ltd. were sold in Feb. 2014 and this was considered in the Assessment Year 2014-15. During the year under consideration the appellant sold the balance 15,000 Shares of Lifeline Drugs and Pharma Ltd. as under-: No. of Shares Date of Sale Value Received 4,000 02.06.2014 9,88,000 2,000 06.06.2014 4,96,000 9.000 08.08.2014 22,41,000 15.000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The theory of preponderance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might to against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee. The enquiry by the Investigation wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did bt implicate the assessee and/or his broker. It is alSlJ' a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demand statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AD to be false or fabricated. The facts of the case and the evidences in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or material that there was any violation of regulations in respect of Kailasii Auto Finance Limited and restrain order on the trading has been revoked} then it follows that the share price of which has been sold for genuine quoted price and therefore} the sale proceeds has to be reckoned from sale of such shares and would be treated as explained credit or investment. Accordingly, on the facts and circumstances of the case) we hold that the long term capital gain shown by the assessee is genuine and consequently liable for exemption u/s. 10(38). Thus} appeal of the assessee is allowed. 11 In the light of the foregoing observations, it is held that the AO was not justified in rejecting the claim of exemption u/s. 10(38) in respect of LTCG arising on the sale of shares of M/s. Lifeline Drugs. The consideration received by the assessee was out of the sale of shares effected on a recognized stock exchange. The shares had been held for a period of more than twelve months and securities transaction tax (STT) had been paid at the time of the transfer. Hence, the amount received by the assessee is undeniably in the nature of a long term capital gain (L TCG). The AO's action was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer has not brought any material on record to show that the assessee has paid over and above purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. Similar in the case in hand the assessee has produced the relevant record to show the allotment of shares by the company on payment of consideration by cheque and therefore, it is not a case of payment of consideration by in cash. But the transaction is established from the evidence and record which ITA No.1228/M/2018 Mr. Ramprasad Agarwal cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. Therefore, the holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. We find that the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al any price or volume manipulation by the assessee and these transactions are in the normal course through proper legal channels. Then the allegations of the IT Department fall flat and denial of deduction u/s 10(38) of the Act is arbitrary and addition of sale proceeds of shares of PAL u/s 68 is against the provisions of Act. In the case in hand, the Id. AO has referred to SEBI enquiry against M/s Sunrise Asian Ltd. However, we note that the said enquiry was regarding failure to comply with certain disclosure requirements and therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain and has no bearing in judging the genuineness of the transaction undertaken by the assessee or for that matter, the price and realization on sale of shares so undertaken by the assessee through the stock exchange. Further, it has been held in the aforesaid case that the findings of investigation modus operandi in other cases narrated by the AO and also CIT(A) nowhere prove any connection with the assessee nor the assessee's involvement or connection or collusion with the brokers, exit providers, accommodation providers or companies or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of M/s Sunrise Asian Ltd. The assessee has offered the speculation profit for income tax purposes in the immediately preceding year and It has been accepted. Further the assessee has shown the purchase of impugned shares as investment in the Balance Sheet. Hence the purchase of shares has been accepted. Further the shares have been received in the D-mat account of the assessee and they have been sold through the Dmat account only. Hence the delivery of shares a/so stand proved. The AO has not brought any material on record to show that the assessee was part of fraudulent price rigging. Accordingly, in the absence of any evidence to implicate the assessee or to prove that the transactions are bogus I am of the view that the capital gains declared by the assessee cannot be doubted with. In that View of the matter the addition made towards expenses is not also sustainable. 25. In light of above discussions and in the entirety of facts and circumstances of the case and following the decisions of the Hon'ble jurisdictional High Court and of that of the Coordinate Benches in cases referred supra, we are of the considered view that the assessee has discharged the necessary o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect therein. 13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s Esteem Bio and M/s Turbotech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and what 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 Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of exempt income u/s 10(38) of the Act of Long Term Capital Gain from sale of equity shares deserves to be allowed and no addition is called for the estimated brokerage expenses made in the hands of the assessee(s). Thus finding of Ld. CIT(A) is set aside and the Grounds raised by the assessee(s) in ITA Nos.889/Ind/2018, 474/Ind/2019, 206/Ind/2019, 60/Ind/2019, 61/Ind/2019 and 987/Ind/2019 are allowed. 19.8. Recently coordinate Bench Mumbai in the case Kamlesh Gupta vs. DCIT ITANo.1462/Mum/2020 dated 25.11.2021, the relevant finding of this case reads as follows: 11. We shall now advert to the documentary evidence/material that was placed on record by the assessee in order to drive home his claim of having carried out genuine transactions of purchase/sale of shares of JMD Telefilms Industries Ltd. As is discernible from the orders of the lower authorities, we find that the assessee had on 26.02.2009 by way of an off-market transaction purchased one lac equity shares of JMD Telefilms Industries Ltd. of a face value of Rs.10/- each at a premium of Rs. 7/- per share i.e for a total consideration of Rs. 17 lac by way of a preferential allotment in physical form. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he initial off-market purchase of one lac shares of JMD Telefims Industries Ltd. by the assessee, we may herein observe that an off-market transaction for purchase of shares is not illegal. As observed by us hereinabove, the purchase transaction of shares was carried out by the assessee vide account payee cheque and the sale of shares have suffered STT, service tax, total turnover tax, stamp duty charge etc. As is discernible from the orders of the lower authorities, we find that neither of them had dislodged the authenticity of the aforesaid documentary evidence that was filed by the assessee to support his claim of having carried out genuine transactions of purchase/sale of shares of JMD Telefilms Industries Ltd. 12. As stated by the ld. A.R, and rightly so, the observations of the A.O are found to be more or less backed by information received by him from the Directorate of Investigation, Kolkata and the unsubstantiated statements of third parties who are not connected with the assessee. Insofar the third party statements relied upon by the A.O are concerned, the same, as observed by us hereinabove, do not raise any allegation qua the authenticity of the transactions of pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction of purchase/sale of shares of JMD Telefilms Industries Ltd. by the assessee as a structured transaction with a purpose of facilitating tax evasion in the garb of a bogus claim of tax exempt capital gain u/s 10(38) of the Act and laundering of his ill-gotten money; was the fact that within a short span there was a steep rise in the price of shares of JMD Telefilms Industries Ltd., i.e by 19 times in 8 months i.e from Rs. 7.93 in October, 2008 to Rs. 145 in June, 2009, which trade pattern of the aforesaid company as per the A.O did not move along with the commercial principles and market factors; and the financials of the company also did not show any reason for the extraordinary performance of its stock. In our considered view, though the aforesaid data gathered by the A.O being based on the facts cannot be faulted on our part, but we are unable to persuade ourselves to concur with him that for the said reason the assessee is to be held to have evaded taxes and laundered his unaccounted money by booking a bogus claim of LTCG that is exempt u/s 10(38) of the Act. Although, the A.O had at length discussed in his order the information that was shared with him by the Investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained a bogus entry of LTCG, viz. that the assessee had only after a period of 2 years i.e in the year 2014 invested in shares of another company, i.e Justdial company; that the assessessee had not revealed the user of the sale proceeds of the shares of JMD Telefilms Industries Ltd; that the assessee did not derive such gain from purchase/sale of shares in the preceding/succeeding years; that why did the assessee not invest the surplus funds in the any of the companies in which he was a director and had invested the same in a company whose antecedents were not even known to him, are observations wherein the CIT(A) had tried to put himself in the arm chair of the assessee and indirectly had called for an explanation as to why the investments were not made by him or; if they were so made, then, why they were not made in a desired manner. At this stage, we may herein observe that the prudence of the assessee qua the manner of making of investments remains his sole prerogative and cannot be interfered with by the department. Insofar the invoking of the principle of preponderance of human probability is concerned, the same, in our considered view would come into play after disproving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice to prove that the share transactions were bogus or sham. 13. We, thus, in the backdrop of our aforesaid deliberations are of the considered view that de hors any cogent material made available on record by the department which would prove to the hilt that the assessee had not carried out any genuine transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. and, in the garb of bogus entry of a tax exempt LTCG u/s 10(38) of the Act, laundered his unaccounted money, the assessee ' s duly substantiated claim of having carried out genuine transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. which is duly supported by him on the basis of documentary evidence, could not have been dislodged. Accordingly, for the reasons discussed at length by hereinabove, not finding favour with the view taken by the lower authorities, we herein set-aside the orders of the lower authorities qua treating the transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. by the assessee as a bogus transaction and, consequently vacate the addition made by the A.O under Sec. 68 of Rs. 6,06,49,780/-. The Grounds of appeal Nos. 2 3 are allowed in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X
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