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TMI Blog2019 (1) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... st discuses the facts and proceedings in case of Mr. Brij Bhushan Singal in his three appeals. Facts in case of other two assesses are similar. All these three appeals of Shri Brij Bhushan Singal also involved similar additions and the learned authorized representative of the assessee and the departmental representative also put their arguments collectively with respect to other appeals also, therefore, all these three appeals of Shri Brij Bhushan Singal and other two assesses are disposed of by this common order. 3. In case of Shri Brij Bhushan Singal following grounds of appeal in ITA No. 1415/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- on account of Long Term Capital Gains and claimed as exempt u/s. 10(38) of the Income-tax Act, 1961 by unjustifiably and arbitrarily holding the same to be allegedly the result of a sham transaction and a bogus accommodation entry without comprehending the facts of the case, underlying nature of transaction, position of law and the extant circumstances thereto. 3. That the assessment order dated 30-12-2016 passed u/s. 153A r.w.s. 143(3) of the Income-tax Act, by the Ld. Asstt. Commissioner of Income Tax, Central Circle 3, New Delhi is against law and facts on the file in as much as he was not justified to make an addition of Rs. 5,05,32,888/- on account of alleged unaccounted Commission expenses @ 6% on the Long Term Capital Gains on sheer presumptive basis when there is no evidence of any form whatsoever to support such an action. 4. That the Ld. Asstt. Commissioner of Income Tax, Central Circle 3, New Delhi gravely erred 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, making the assessment bad in law." 5. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his original return of income on 31/7/2013 declaring income of INR 2741440/-. Search and seizure proceedings under section 132 of The Income Tax Act were conducted in case of the Bhushan Steel Limited group concerns on 13/6/2014. Case of the assessee was covered in the said operation. As on the date of search, the assessment proceedings were pending for the Assessment Year 2013-14, the assessment proceedings were abated. Therefore, notice under section 153A of The Income Tax Act was issued on 8/9/2014. In response to that assessee furnished his return of income on 7/7/2016, at the same income, which was shown in the original return of income. Subsequently, the statutory notices were issued and the case was scrutinized. 7. During assessment proceedings, the learned assessing officer noted that assessee is part of Bushan steel Ltd. group. That Group is indulging in suppression of the taxable profits on a large scale. Unaccounted income generated has been introduced in the books of family members and promoters of the group in the form of tax exempt bogus long-term capital gains of crores of rupees by prearranged trading in shares of some non-descript listed companies. Further duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee are among the beneficiaries of the bogus long-term capital gain obtained by prearranged trading in shares of many non-descript listed companies through Shri R.K. Kedia. The record of seized material was maintained by Shree Manish Arrora who is an employee of Shri Raj Kumar Kedia. Therefore, the learned assessing officer noted that these transactions, which are recorded in the NP Ledger's matches with the traded transactions details, obtained from BSE. In the Ledger, transactions recorded were encoded language and a dot (.) has been put after two zeros (00) while recording the transactions. The AO gave an instance that on 23/4/2014; Sri Brij Bhushan single sold 15,000 shares of M/s. Parag Shilpa at the rate of INR 557.46. Thus, the total amount of transactions would be INR 8361917, which was recorded as INR 83619.17. Thereafter the learned assessing officer referred data found from the premises of Sri Ankur Agarwal in form of ABCD. XLS wherein the sale details of shares were contained. Thereafter, the assessing officer prepared a comparative chart showing the details of shares recovered from the data of Mr. Ankur Agarwal and compared it with the data of Raj Kumar Kedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash of the family members of Bhushan steel group through multi layering. Further, the AO issued notice under section 133 (6) to the various companies who provided exit to the several persons. Many notices received back un-served or no reply was received. The learned AO further stated that many of the stockbrokers did not maintain proper Know Your Customer (KYC) data. Further, many of the beneficiaries of the long-term capital gain have owned that these are bogus long-term capital gains and paid tax thereon. The assessing officer further stated that the Securities and Exchange Board of India (SEBI) has also carried out investigation in few listed companies based on common trading pattern, identical developments like stock splits, preferential allotments, insignificant economic activity, and exorbitantly high stock prices with respect to the 18 companies out of that some of the companies were also in which the assessee and his family members have been benefited by long-term capital gain. The learned assessing officer further referred to the order of The Securities and Exchange Board of India (SEBI) in case of Redford Global ltd. and First financial services ltd, wherein, interim or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries. Therefore, he taxed the total long-term capital gain from unexplained source of INR 141495635/-and 6% of net again towards commission expenses from unexplained sources and made an addition of INR 149985373/-as unexplained income of the assessee. Accordingly, against the returned income of INR 2741440/-assessee was assessed at INR 152726813/-. 9. Aggrieved with the order of the learned AO, assessee preferred appeal before the learned Commissioner of Income Tax (Appeals)-23, New Delhi. The CIT(A) passed the Consolidated order along with 4 other assessee being family members of assessee and M/s. Bhushan steel Ltd. on 29/12/2017 for 5 years, starting from assessment year 2010-11 to 2015-16 in case of various assessee. In case of the assessee, appellate order was for 5 years. With respect to the long-term capital gain, the assessee submitted that it has not paid any cash to either Shri R.K. Kedia or any of his associate and assessee does not know any person by the name of Shri Manish Arora, nor does he have any dealing with him. The learned CIT _A rejected this contention and stated that assessee knows Mr. R K Kedia and Manish Arrora, through Mr. Ankur Agarwal. With respect to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons and the learned assessing officer has refused to do so. Since the assessing officer is not recorded the statements, the argument that cross-examination opportunity was not given is having no legal force. With respect to the contention of the assessee, that the shares were sold on the online platform of the Bombay stock exchange, where assessee does not have any awareness about the ultimate purchaser of the share, the learned CIT (A) rejected the same stating that there is overwhelming evidence to prove that the transactions were stage-managed. With respect to the argument of the assessee that no cash has ever been paid by the appellant to the various parties, either directly or through an intermediary, he held that shares of the companies from whom long-term capital gain has been earned are allotted to the appellant by way of a preferential allotment and assessee does not have any connection with those companies who purchased the shares. The learned Commissioner of income tax appeals rejected the argument of the assessee stating that these are the stage-managed affairs. The assessee also contested that the parties to move notices under section 133 (6) were issued summons we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these are abated AYs. He submitted that if the coordinate bench in those cases held that the evidences relied up on by AO are not incriminating will result in to deletion of Addition for those years However, those finding will equally apply to these Assessment years' cases. If it decides otherwise, then the arguments made hereunder once again may be considered afresh. He stated that identical arguments are made in those appeals, which would be made in these appeals also. 11. The Ld CIT DR agreed with the arguments of the assessee and stated that if in those cases the evidences are held to be not incriminating, then his arguments placed may also be considered afresh. 12. At the time of the passing of these orders, the coordinate bench has passed the orders in case of these assessee for AY 2010-11 to 2012-1393 AYs on 31-10-2018 in ITA Nos. 1412 to 1414/del/2018, ITA No 1476 to 1478/del/2018, ITA No. 1482/del/2018 and ITA No 1485 to 1487/Del/2018 on 31/10/2018 It held that there are no incriminating materials unearthed during the course of search by which the additions can be made in the hands of the assessee. The coordinate bench has also given its finding on the issue of cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the shares of the companies were allotted to the Assesses by way of preferential allotment does not signify any connection of the Assesses with the companies. In terms of the applicable provisions of the Companies Act, a preferential allottee of shares is not required to attend any Board meetings, there being a complete divergence between the management and ownership, a company being a body corporate, having a separate legal entity. The process of preferential allotment which is invariably spread by the word of mouth, the possibility of personal contact between the promoters/management and preferential allottees is miniscule. iv. Various statutory/regulatory bodies such as S.E.B.I., the Stock Exchanges etc. are involved in the process of preferential allotment of shares as well as the follow up of public issue. The entire process involves a multi-stage, rigorous, coordinated and time bound process involving comprehensive due-diligence, vetting of documents, background check of 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 approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in no way sell the shares to a particular entity/individual & vice versa; where the trade is executed when the bid price offered by the buyer matches with the offer price of the seller and vice versa; and the entire transaction is a demand and supply game over which neither the buyer nor the seller has any control. The transactions carried out by the Assesses stand fully documented and evidenced by contract notes/bills of the relevant brokers issued in the form and manner as prescribed by the regulatory authorities' copies of which are duly enclosed in Paper Books filed. vii. It is earnestly submitted that the Assesses 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. The Assesses herein did not have any kind of relationship or control over the said companies save as that of passive 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... testimony cannot be utilized against the assessee. If this procedure is not followed, then there would be a case of denial of natural justice to the assessee and the addition on the basis of such statements/material cannot stand. x. The Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise 281 CTR 241 (SC) (pages 271-274 of PB-5) has held as under: "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him." xii. A Constitution Bench of the Supreme Court in State of M.P. v. Chintaman Sadashiva Waishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cross-examine witnesses, would violate the principles of natural justice. (See also: Union of India v. T.R. Varma, AIR 1957 SC 882; Meenglas Tea Estate v. Workmen, AIR 1963 SC 1719; M/s. Kesoram 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 Lawr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the following cases: * CIT Vs. SMC Share Brokers Ltd., (2007) 288 ITR 345 (Del) (pages 291-293 of PB-5): Held as under: "Search & seizure-Block assessment-Computation of undisclosed income-Block assessment completed u/s. 158BD against the assessee on the basis of documents discovered in the premises of M and the statements made by him-Despite several requests by the assessee, M was not made available for cross examination-Though statement of M had evidentiary value, weight could not be given to it in proceedings against the assessee without testing it under cross-examination-Therefore, in the absence of M being made available for cross-examination, his statement could not be relied upon to the detriment of the assessee-Tribunal was justified in setting aside block assessment-No substantial question of law arises." * Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] (pages 294-299 of PB-5) at page-111: Held as under: "Cross-examination 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (Guj) 138: Held as under: "Addition made u/s. 68 placing heavy reliance on the statement of one R to the effect that the promissory note in the sum of Rs. 8,78,358/- recovered during his search represented amount advanced by assessee to one K without referring to the said statement in the assessment order nor giving copy thereof to the assessee nor affording opportunity to assessee to cross-examine R was liable to be set aside for violation of principles of natural justice." * CIT Vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del): Held as under: "Initiation of reassessment proceedings on the basis of deposition of a third party without affording opportunity of cross-examination of the said party to the assessee despite specific demand was not valid." * CIT Vs. Dharam Pal Prem Chand Ltd. (2007) 295 ITR 105 (Del): Held as under: "A.O. not having given an opportunity to assessee to cross-examine the analyst on whose 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Best Infrastructure (India) Pvt. Ltd. & Others in ITA Nos. 11/2017 to 22/2017 (pages 151-171 of PB-5) wherein it was emphatically held that the onus of ensuring presence of the witness for cross-examination is on the Revenue and that such onus cannot be shifted to the Assessee. It was further held that failure on the part of the Revenue to produce the witness for cross-examination would be sufficient to discard the statement. The relevant excerpt of the order is reproduced hereunder to facilitate ready reference: "37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also evident from reply of Sri Neeraj Singal to Question Nos. 34 to 36 of his statement recorded in course of search u/s. 132(4) wherein he fervently denied having any linkage/dealings with R.K. Kedia or the alleged entry operators. Further, the fact that no credence can be placed on the statements of Sri R.K. Kedia would also be evident from a review of the post-search investigations/assessment proceedings wherein Sri R.K. Kedia has been taking contradictory stands. The statement recorded u/s. 132(4) on 13.06.2014 was later on retracted by Sri R.K. Kedia in course of post search investigation proceedings on 14.10.2014 and which retraction was further re-retracted by him again on 26.03.2015 during post search investigation proceedings (page 85 of the CIT(A)'s order). Given the shifting stands and inconsistencies displayed by Sri R.K. Kedia, no degree of reliance can be placed on his statement. Copy 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 Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of statement (i.e. retraction of statement followed by re-retraction of the statement confirming the original) undermines its credibility and invalidates such statement ab-initio. The Hon'ble Delhi ITAT in the said case confirmed the following order of the CIT(A) therein as under: "6.4 The appellant had alleged that the addition has been made merely on the basis of the statements of Shri Mehta who had retracted his own statement subsequently. Accordingly, a letter was sent to the A.O. to clarify the issue. Even on a request made by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. and the one during cross examination before the A.O. Under these circumstances one has to see the evidentiary value of a person making double speaking. We find the Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises (supra) has held that a man indulging in double speaking cannot be said by any means a truthful man at any stage and no Court can decide on which occasion he was truthful. We find the co-ordinate bench of the Tribunal in the case of Mrs. Uttara S. Shorewala (supra) (in which one of us-the Accountant Member is a party) following the decision of Hon'ble Calcutta High Court upheld the order of the Id. CIT(A) in holding that the A.O. cannot make any addition in the assessee's hands despite the assessee not having made any payment to the entities mentioned by Shri Choksi, whose statement is being relied upon by him. The CIT (A) also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing found in course of search at the premises of the Assessees herein. Therefore, apart from the fact that these statements do not directly incriminate the assessee, such statements recorded u/s. 133A as per the decisions cited earlier do not have evidentiary value and cannot on a standalone basis be used to draw adverse inference against the Assessees herein in their assessments u/s. 153A of the Act unless corroborated by incriminating materials seized in course of search in the Assessees' case. xxv. Further, the A.O. has also heavily relied upon the statement of Sri Ankur Agarwal, an employee of BSL, recorded in course of search at his premises under extreme pressure and undue stress allegedly stating that the Assessees herein had obtained bogus LTCG by pre-arranged trading in shares of certain non-descript listed companies. The said statement was however, later on retracted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash borrowing by the assessee is brought on record by the Revenue." xxvii. Drawing inference from the above cited cases, in the case at hand, admittedly, Sri Ankur Agarwal was the witness of the Department, who in his original statement had deposed against the Assessees and whose statement was intended to be used against the Assessees by the Department. The said witness, suo moto retracted from his original statement, thereby reducing his original statement to a nullity (copy of retraction of Ankur Agarwal is placed at page 190 of PB-6). His retraction obviated the need for the Assessees herein to seek his cross-examination. In other words, since the witness of the Department himself retracted from his original statement, the same ceased to have any referral value insofar as the Assessees were 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. 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T. Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion." Therefore, the proposition that assessments 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 thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessment Order (of NS for A.Y. 2015-16) and also at pages 166-167 of the CIT(A) order. As clearly evident therefrom, the same only substantiates the share transactions carried out by the Assessees herein in conformity with the statement of Sri Neeraj Singal. b. As regards the Job. xls sheet and Comm. xls extracted from the pen drive as reproduced at pages 37-39 of the Assessment Order (of NS for A.Y. 2015-16) and at pages 169-172 of the CIT(A) order, it is submitted that these do not relate to the Assessees herein. The Ld. CIT(A) at page 172 of the appellate order has alleged that the said Job. xls sheet & Comm. xls sheet in the pen drive of Sri Ankur Agarwal contains names of certain entry providers. A bare perusal of the said notings in Job. xls sheet & Comm. xls sheet would clearly reveal that these have nothing to do with the share transactions carried 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y unaccounted commission by the Assessees. Insofar as the entries extracted by the Ld. CIT(A) in his appellate order from the data allegedly seized from R.K. Kedia are concerned, the same merely depict the regular purchase and sale of shares carried out by the Assessees herein and do not indicate any unaccounted exchange of cash between the Assessees and the said party. The Assessees herein are neither concerned nor have any control over the data maintained by Third parties who are totally unconnected with the Assessees. Moreover, it should not be lost sight of that the Assessees herein were not allowed an opportunity of cross-examination of author of the said data and accordingly such data does not have any referral value insofar as the cases of the present Assessees are concerned. iii. It is well settled by a plethora of judgments that addition cannot 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 dia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/signatures appearing against/below some of those entries 53. Even if we are to accept the above contentions of Mr. Altaf Ahmed the entries, [which are statements' as held by this Court in Bhogilal Chunilal, (supra) and hereinafter will be so referred to], being 'admissions'-and not 'confession'-cannot be used as against Shri Advani or Shri Shukla." iv. Attention is also drawn to the celebrated case of ACIT v. Ms. Lata Mangeshkar, [1974] 97 ITR 696 (Bom) (pages 375-378 of PB-5) wherein it was has held that mere entries in the accounts of third party regarding payment to the assessee was not sufficient as there was no guarantee that the entries were genuine in absence of any corroborative evidence. The Hon'ble Bombay H.C. held as under: "As regards the evidence of the two witnesses on which reliance was placed by 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 thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 292C against the assessee is not available. As per the principles of natural justice the AO has to provide the evidence to the assessee and grant opportunity of cross-examination. Secondary evidences cannot be relied on as neither the person who prepared the documents nor the witnesses are produced. The violation of natural justice renders the assessment void. The Department cannot be given a second chance. While rendering the said judgment, the Hon'ble Supreme Court considered the following judgments relied upon by the respondents: 1. CIT VS. Dinesh Kumar Sharma, ITA No. 14/2005 decided on 24.04.2017.. 2. CIT Jaipur vs. Vijendra Kumar Kankaria, ITA No. 175/2010 decided on 29.05.2017 observing as under 3. Common Cause (A Registered Society) and Ors. vs. Union of India (UOI) and Ors. 4. Bhandari Construction Company 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the assessee from the very beginning has denied to have received any such payment from M/s. Dhariwal group through Mr. Sohan Raj Mehta and since no incriminating material was found from the residence of the assessee during the course of search and since the assessee is not dealing with M/s. Dhariwal group in his individual capacity, therefore, respectfully following the decisions cited above and in view of our reasonings given earlier, we are of the considered opinion no addition in the hands of the assessee can be made." viii. Further, in the case of Ganeshmull Bijay Sing Baid (HUF) & Ors. Vs. DCIT & Ors. (2015) 45 CCH 306 (Kol Trib) (pages 433-443 of PB-5), the Hon'ble Kolkata ITAT, under similar facts & circumstances as in case of the Assessees herein, held as under: "This is a case 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessees. Thus the allegation that the assesses had laundered their cash for conversion into cheque by raising bogus long term capital gains does not hold water in the facts and circumstances of the case. No evidence is brought on record that the entire transactions had been carried out with some kind of connivance with the registered stock brokers for the introduction of unaccounted money and hence we hold that no addition could be made in these circumstances." (Para 2.5.7) "We find that the action u/s. 68 of the Act has been taken merely on the basis of the statement of the third party. We find that the assessees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus on the part of the Assessees to disprove the genuineness of the recitals in the aforesaid seized books. Further, no incriminating material was found in course of the search operations at the premises of the Assessees herein to prove that they had any dealings with the alleged entry or exit providers or to corroborate the entries allegedly recorded in documents seized from premises of third parties. Accordingly, in the absence of any corroborative evidence found during search at the premises of the Assessees, no adverse inference can be drawn against the Assessees merely on the basis of the seized documents found and seized from the premises of third party. As has been held in a number of judicial pronouncements, presumption u/s. 132(4A)/292C is available only in the case 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer in the appellant's case. It is well settled in law that the loose papers, diaries and documents cannot possible be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case just on the loose papers and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon'ble Supreme Court in the case of Central Bureau of Investigation vs. V.C. Shukla (1988) 8 SSC 410 and Chuharmal vs. Commissioner of Income Tax 138 Taxman 190 (SC)." xi. Thus, no books of accounts belonging to the Assessees were found and seized in the 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd from his possession are correct. However, while utilising those documents in the case of any other person (i.e. the person other than Mr. Niranjan J. Shah), there cannot be any presumption about the correctness of such books or documents. The Hon'ble apex Court has considered this matter in the case of CBI vs. V.C. Shukla (supra). In that case, 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. The Hon'ble apex Court held that the entries in those diaries/loose papers 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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has not brought on record any evidence to suggest that Dhariwal Group has admitted that the amounts were paid to the assessee. Hence, simply because the name of the assessee is noted on the seized papers does not mean that the addition could be made in the hands of the assessee. Since no evidence was found relating to the existence of any transaction between the assessee and Dhariwal Group and in the absence of any corroborative evidence to suggest that the assessee had actually received the said amount, no addition could be made merely on the basis of noting in loose papers found during the search proceedings in the case of Dhariwal Group against the name of the assessee. 5.4 The presumption u/s. 132(4A) is available only in respect of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. (6) ACIT Vs. Kishore Lal Balwani Rai (2007) 17 SOT 380 (Chd.): Held that though the diary seized enabled the revenue to presume that its contents are true, such presumption is available only against the person to whom it belongs and this is a rebuttable presumption. (7) ACIT Vs. Prabhat Oil Mills (1995) 52 TTJ 533 (Ahd.): It was held that mere entries in the accounts of a third party were not sufficient to prove that the assessee indulged in such transactions. (8) Sheth Akshay Pushpavadan Vs. DCIT (2010) 130 TTJ 42 (Ahd. UO): Held that presumption u/s. 132(4A) is not available when the seized papers are recovered from third party and not from the assessee. (9) Jai Kumar Jain Vs. ACIT (2006) 99 TTJ 744 (Jaipur): 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nference that contents of said papers reflected unaccounted transactions of assessee. Relevant excerpts are as below: "11.1 The Assessing Officer has made an addition of Rs. 30.00 lacs on the basis of a loose paper being page 13 of Annexure A-4 seized from the residence of one Mr. Bharat G. Shah, an employee of the assessee. The Assessing Officer notes that in the course of search, said Mr. Bharat G. Shah stated that such loose papers were given to him by the assessee to be kept with him. As per the Assessing Officer, the contents of the relevant seized material, which has been reproduced in para-13 of the assessment order, indicates that one Mr. Suresh Agarwal paid the assessee Rs. 30,00,000/- in March, 2006 in two instalments of Rs. 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 Rs. 30,00,000/- as unaccounted income of the assessee. 11.2 Before the CIT(A), assessee reiterated that the paper was found and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n otherwise, we do not find any infirmity in the conclusion of the CIT(A) that there is no material to connect the assessee with such loose papers. Therefore, under these circumstances, we find no reasons to interfere with the conclusion of the CIT(A) in deleting the impugned addition. The order of CIT(A) is hereby affirmed and accordingly Revenue fails on Grounds of appeal Nos. 9 & 10 also." xiv. In the instant case, as discussed supra, the pen-drive seized from the residential premises of employee of BSL, Sri Ankur Agarwal, does not contain anything incriminating against the Assessees herein. The pen-drive only goes to substantiate the regular purchase and sale transactions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctness of contents of books of account etc. cannot be raised against the third party. Presumption under section 132(4A) is only against the person in whose possession the search material is found and not against any other person. It is further held that the presumption is rebuttable and not conclusive and it cannot be applied in the absence of corroborative evidence. Straptex India P. Ltd. vs. Dy. CIT [2003] 84 ITR 320 (Mum). In the case of Rama Traders vs. First ITO [1998] 25 ITD 599 (Pat.) (TM) it was held that no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment having failed to bring on record any material or evidence to corroborate allegations regarding receipt of money, then the presumption on the basis of the documents could not be raised. In ACIT v/s. Prabhat Oil Mills (1995) 52 TTJ (Ahd) it has been held that mere entries in the account to third parties were not sufficient to prove that the assessee indulged in such transactions. 6.4 The appellant had alleged that the addition has been made merely on the basis of the statements of Shri Mehta who had retracted his own statement subsequently. Accordingly, a letter was sent to the A.O. to clarify the issue. Even on a request made by the 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 retra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the assessment proceedings, the assessee specifically requested for allowing opportunity to cross-examine Shri Sohan Raj Mehta also and requested the Assessing Officer to supply the copy of retraction of his statement. 8. . It is only in the remand report he has mentioned that Shri Sohan Raj Mehta has retracted his retraction also. Considering the totality of above facts, we entirely agree with the learned CIT(A) that the statement of Shri Sohan Raj Mehta cannot be used against the assessee and, similarly, the chits found from the third party, with which the assessee has no dealing, cannot be used against the assessee in the absence 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (*) Statements of third parties (R.K. Kedia, Manish Arora, alleged entry & exit providers, directors of companies etc.) recorded u/s. 132(4)/133A cannot be used against the Assessees since opportunity of cross examination was not allowed to the Assessees, which makes the order so passed a nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessees were adversely affected. (*) Frequent retraction of statement by Sri R.K. Kedia (retraction followed by re-retraction) undermines the credibility of its genuineness and neutralizes his value as a witness. No reliance can 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same source i.e. Singal family. The S.E.B.I. also observed that these members of Singal family have been preferential allottees in such type of companies which have a history similar to that of First Financial Services Ltd., implying thereby that these Singal Family members have been regularly investing in companies for namesake and the money invested by them in these companies were being returned to them, indirectly." ii. Vide the said orders, the S.E.B.I. retrained the Assesses herein from trading in stock exchange stating as under: "In order to protect the interest of the investors and the integrity 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only to prevent and put a check over the manipulation and rigging of the Market when it has been noticed that in the course of trading activity of the share fraudulent or manipulative practices have been adopted. 18. The very nature of the orders passed by the S.E.B.I., which were impugned by the respondents before the learned single Judge, shows that the orders were of interim nature, no finality is attached to the action taken by S.E.B.I. at this stage and hence it cannot be said to be a case in which the money stood impounded or forfeited finally. In this view of the matter, the orders cannot 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 findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12,2015, March 18, 2016 and August 26, 2016 are liable to be revoked. 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, 1992 read with Sections 11, 11(4) and 11B of the S.E.B.I Act, 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. 19th Dec 2014 Para 24, page 18 of the Exparte Order: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought out that the fund transfer by FFSL was equity investment and not otherwise. In view of this, I find that none of these entities can be proceeded against, namely, Brij Bhushan Singal, Uma Singal, Neeraj Singal, Marsh Steel Ltd. and Vision Steel Ltd.‖ Paras 90 & 91, pages 83 & 84: ―90. In the ultimate analysis, I am driven 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amongst the debarred entities, funds used for the price manipulation of the scrip of Mishka etc., so as to ascertain the violation of securities laws. 7. Upon completion of investigation by S.E.B.I, it is noted that there are no adverse findings against the 104 entities mentioned at nce Ltd.) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Insider Trading) Regulations, 1992 and S.E.B.I (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 warranting Adjudication Proceedings. Therefore directions issued against them vide interim order dated April 17, 2015 which were subsequently confirmed are also liable to be revoked.‖ 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 Rs. 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ad interim ex-parte order dated May 08, 2015 (hereinafter referred to as ―interim order‖) and restrained 178 entities including PAL and its Promoters and Directors from accessing the securities market and further prohibited them from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e its functions and duties. One such power of S.E.B.I. is that it has the power to regulate insider trading. There is separation of powers between Government and S.E.B.I. and there is nil or very little interference by the Parliament in the regulations implemented by the S.E.B.I. In the case of S.E.B.I., the Government retains the power 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating Officer. Unless facts and circumstances set out in an order passed by Adjudicating Officer are materially different from the facts and circumstances of the case in hand, it would be just and proper for the Adjudicating Officer to follow the earlier order so that there is uniformity in the quasi judicial orders passed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exchanges in which the seller can in no way sell the shares to a particular entity/individual & vice versa; where the trade is executed when the bid price offered by the buyer matches with the offer price of the seller and vice versa; and the entire transaction is a demand and supply game over which neither the buyer 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 prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for getting benefit of LTCG as alleged. Reference in this connection is further craved to the following case laws: a) This Baijnath Agarwalla v. ACIT (2010) 40 SOT 475 (Agra Third Member (pages 505-534 of PB-5): Held as under: "In the stock exchange when the transaction is entered into, the assessee is not aware 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Smt. Kusumlata (2006) 105 TTJ (Jd) 265 approved; CIT vs. Daulatram Rawatmull 1972 : 1972 CTR (SC) 411: (1973) 87 ITR 349 (SC) applied." (Paras 15 & 18) b) Ganeshmull Bijay Singh Baid HUF v. Dy. CIT, ITA No. 544/Kol/13, dt. 4-12-2015 (Kolkata Tribunal) (2015) 45 CCH 306 (Kol) (pages 433-443 of PB-5): The Hon'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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal 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/H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of search and seizure operations u/s. 132(1) at the premises of the Assessees. The Assesses herein, being independent and having absolutely no relationship or interconnection with the alleged beneficiaries or Sri R.K. Kedia, should be considered in isolation without any reference to results 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roof, with the totality of evidence presented by each side resting on the respective trays on either side of the scale. If the scale tips ever so slightly to one side or the other, the weightier side will prevail. If the scale does not tip toward the side of the party bearing the burden of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be exercised when the mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable." (para 14) "It is a well-settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does 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 aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no ground whatsoever to doubt the direct and factual evidences furnished by the Assessees herein and accordingly, the question of relying upon circumstantial evidence and theory of preponderance of probability does not arise moreso when assessments were originally completed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra) for this proposition. The various facets of the arguments of the learned Authorised Representative supra. With regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated 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 unw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B-5) held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character 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 br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dences without any material evidence on record. xi. The Assessees herein have furnished all documentary evidences in support of the LTCG earned on the impugned transactions in shares. The purchases of shares had been accepted by the A.O. in years of their 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relying on theory of preponderance of probabilities and suspicion unless proved to be so by concrete evidence on record. Reference in this connection is craved to the following case laws: (i) ITO Vs. Aarti Mittal (2013) 37 CCH 227 HydTrib, 149 ITD 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demat account. (iii) ITO Vs. Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum Trib) (Annexure 5 of the Paper Book on case-laws on penny stock): The gist of the facts of the said case and judgment rendered by the Hon'ble Mumbai ITAT is as under: 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 Rs. 3.12 per share and sold same at Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual and legal matrix of the case, as discussed above, ITAT find that the addition of Rs. 95,12,812/- under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore direct the AO to delete the said addition and accept the LTCG income of Rs. 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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of addition was confirmed was that the assessee had not tendered cogent evidence with regard to share transaction, however, in the present the case assessee has submitted all the documents/evidences, therefore, the case 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Omar Salav Mohamed Sait reported in 1959 : (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and source of the amount so found credited is on the assessee. However, once the assessee proves the identity of credits by either furnishing Permanent Account Numbers or copies of 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 Allahaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respective dates--Thus, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions--Tribunal has arrived 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 manipulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of purchase and sale of shares-- Substantial documentary evidence placed on record by assessee, which as matter of fact supported the entire chain of events of purchase and 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 transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubted the transaction since the selling broker was subjected to SEBIs action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the facts which were peculiar to the case of Sumati Dayal (supra) which led the Hon'ble Apex Court to apply the theory of preponderance 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 clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s Executors [1926] AC 395 at 412 (HL): "My Lords, the highest authorities have always recognised that the subject is entitled so to arrange 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove, by bringing on record some cogent evidence that the impugned transactions were sham or make believe. The Assessees, on the 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sh. Raj Kumar Kedia related to BSL group and from premises of Sh. Ankur Agarwal, an employee of BSL group. The material found 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 247 (Del.) xv. Smt. Dayawanti Vs. CIT 2016 : (2017) 390 ITR 496 (Del.) xvi. M/s. Pebble Investment 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 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 of search in the case of the Assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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 establish any link/nexus of the alleged cash trail with the Assesses herein. No cash tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rive '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 at which shares were purchased/sold was not verifiable. The shares in question were those of Public limited companies duly listed on the Stock Exchange-thus shares were purchased/sold at prices prevailing on the Stock Exchange. In the referenced case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anyuSoin 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 carried out by the Assesses herein at prices prevailing on the stock exchange. Thus, the genuineness of the share transactions stands validated. A definite finding of fact was recorded that the assessee therein had under collusion with the stock broker managed to show transaction, whereas as per contract note received from broker the dates of transaction were different which showed that the transaction had been managed after a later date. The peculiar facts and circumstances leading to suspicion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 as a device for conducting fishing and roving enquiries and reassessing completed assessments on a mere change of opinion relying on the theory of preponderance of probabilities and human conduct ignoring conclusive documentary evidences filed by the Assesses in support of the transactions in shares carried out by them. Thus, the present case stands on completely dissimilar set of facts vis-`-vis the case of Chandan Gupta. Accordingly, the judgment rendered in the referenced case is not applicable to the facts of the instant case. 3. 4. BalbirChandMaini Vs. CIT MANU/PH/3586/2011 : (2011) 12taxmann.com276 (P&HH.C) The referenced case is once again widely incongruent from the facts of the present case and thus reliance placed by the Ld. DR on the said case is misplaced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspicion in the case of UshaChandresh Shah are clearly absent in the present case. The shares in the instant case were either allotted through preferential allotment or purchased over recognized stock exchange and payments were made via regular banking channels. Thus, unlike the referenced case where purchases were not routed through the stock exchange and could not be cross verified, the Assessee(s) in the instant case have furnished conclusive documentary evidences establishing the genuineness of purchase/sale of shares. 4. 6. Ratnakar M Pujari Vs. ITO MANU/IU/0726/2016 : (2016-TIOLp1746-ITAT-Mum) (ITAT Mumbai) The Ld. DR has himself highlighted the distinguishing facts in the case of Ratnakar M Pujari in the following words: "where Hon'bleITAT Mumbai held that a transaction of 'off market purchase of shares' for which payments were made in cash and the brokers had issued pre dated contract notes, is liable to be treated as bogus transaction, and hence such cash receipts are liable to be treated as unexplained cash receipts." [emphasis supplied] Clearly the suspicious facts & circumstances viz. off market purchases, payments in cash, pre-dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te that the above quoted excerpts apparently do not feature in the judgment rendered by the Hon'bleITAT in ITANo. 7024/Mum/2010. In the case of Arvind M Kariya (ITANo. 7024/Mum/2010), the issue was restored to the file of the A.O. by the Hon'bleITAT with the following observation: "12. Therefore, we also deem it appropriate to restore the issue to the file of the AO to avoid the conflicting assessment order in respect of the same AY and direct the AO to verify and examine the actual date of purchase in both the cases and thereby determine the short term capital gains or long term capital gains, or it may be added in income of the assessee u/s. 68 on the basis of the alleged incriminating material found during the search as the case may be, and pass fresh assessment order after giving opportunity of being heard to the assessee and decide the same in accordance with law." Therefore, unlike the extract quoted by the Ld. DR, in the case of Arvind M Kariya, the Hon'ble Tribunal did not give any conclusive finding wrt the issue under consideration but restored the same to the file of the A.O. The issue under consideration in the said case primarily related to ascertainment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garwal Vs. ITO, Kolkata in ITATNo. 2281/Kol/2017 (ii) Manish Kumar Baid &Anr. Vs. ACIT, ITANo. 1236, 1237 dated 18.08.2017 reported in MANU/IK/0265/2017 : 2017TaxPub(DT) 4463 (Kol-Tri) (iii) CIT Vs. UditNarainAgarwal, IT Appeal No. 560 of 2009 (All HC) (iv) CIT Vs. SumitraDevi (2014) 49taxmann.Com37 (Raj HC) (v) CIT Vs. Smt. PushpaMalpani MANU/RH/1034/2010 : (2012) 20taxmann.com597 (Raj HC) (vi) MeenuGoel Vs. ITO, Ward-31(1), ITANo. 6235/Del/2017 (Del ITAT) (vii) ITO Vs. AartiMittal MANU/IH/0378/2013 : (2013) 37CCH227HydTrib, 149ITD728 (viii) VishalSuryakant Shah & Ors Vs. ITO & Ors (2017) 49CCH106 (AhdTrib) (ix) ITO Vs. Arvind Kumar Jain HUF (2017) 51CCH281 (Mum Trib) (x) Farrah Marker Vs. Income Tax Officer MANU/IU/0390/2016 : (2016) 46CCH535 Mum Trib The A.O., in the instant case, thus erred in basing his assessment on the theory of preponderance of probabilities, human conduct and lack of prudent investor behavior in investing in shares of penny stock companies without bringing on record any legal evidence against the Assessee(s) to controvert the documentary evidences filed by the Assessee(s). 1.'s (S.C.) emanating from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements, when there is an absence of incriminating material unearthed from the premises of the Assessee(s), would not be permissible as per Law. 3. CIT v. M.S. Aggarwal, MANU/DE/1529/2018 : [2018] 93taxmann.com (Delhi H.C) The said judgment can be clearly distinguished on facts, and thus inapplicable to the case of the Assesee(s) herein. The main points of distinction can be tabulated in the manner hereunder. CIT v. M.S. Aggarwal Present Case Search and seizure operations under Section 132 of the Act were conducted onto the Assessee and the BSL Group. During the course of search, several incriminating documents and material were found and seized showing that the respondent/assessee was carrying on benami business which were not accounted for and reflected in the books of accounts. The Respondent/assessee in his statement recorded under Section 132(4) of the Act admitted that the gifts given to him were not genuine. This admission and confession was made in two statements after a time gap of nearly forty days. In light of the same, the Court held that oral statements should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial for the purpose of assessment u/s. 153A of the Act. Thus the law stands settled in favour of the Assessee in view of the explicit judgment of the Hon'ble Jurisdictional H.C on the said issue. 4. M/s. Dayawanti v. CIT, MANU/DE/2937/2016 : [2016] 75taxmann.com308 (Delhi H.C) That the said judgment of M/s. Dayawanti is no longer good Law, for although the decision of the H.C. has held that statements recorded during search operations could be relied upon to make addition to assessee's income, wrt153A proceedings, rather than relying on incriminating material-the same cannot be applicable in light of the fact that a stay stands granted by the Hon'ble S.C. in (C) Appeal No. 20559/2017, against the said decision of the Delhi H.C. Thus, the Law that sole reliance on statements recorded u/s. 132(4) for the purposes of making additions in the Assessments u/s. 153A in the Assessee(s) case(s) cannot be done, shall hold good, since the same cannot by themselves constitute incriminating material, in the absence of a live nexus to the incriminating documents/BOA's etc. found in the premises of the Assessee(s). Further, it is also settled Law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the lessee/Appellant Co. was upheld by holding that "the statement made under Section 133A of the Act is not bereft of any evidentiary value. The same may not be conclusive but in the absence of any contrary evidence or explanation as to why the statement made under Section 133A of the Act is not credible, it can be acted upon." As against the same, in the present case-there has been able and sufficient evidence shown and provided on record wrt the investments/transactions made in the respective listed companies, thereby fulfilling the conditions u/s. 68 of the Act. The said transactions, in such listed securities, were carried out by the Assesee(s) in good faith, as against the stance of the Revenue that there has been an irregular availment of LTCGs. Further the Assessee(s) herein have strongly refuted the reliance placed on certain third party statements, and documents found in the 3rd party premises-when no such incriminating material stands found from the premises of the Assessee(s) and when no such statement(s) of the Assesses divulges any mention of having irregularly availed LTCGs. Thus, unlike the factual scenario in Pebble Investment, where the director of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, reliance so placed on third party statements u/s. 132(4) cannot by themselves constitute incriminating material, especially when there is no incriminating material that stands seized from the premises of the Assessee(s). Further, unlike this case, retraction by witness of the Department (AnkurAgarwal) was on record-meaning that their recorded statements are now rendered to nullity since it is settled Law that retracted statements cannot subsequently be made the sole basis for computation u/s. 153A of the Act. 7. Raj Hans Towers (P) Ltd. v. CIT, MANU/DE/0260/2015 : 56taxmann.com67 (Delhi H.C.) That this judgment is also distinguishable on facts, in the following manner: Raj Hans Towers (P) Ltd. v. CIT Present Case The assessee was engaged in real estate and constructions activities. During the course of survey, the statement of one of its directors was recorded, wherein he voluntarily disclosed that a sum ofRs. 15crores was an additional income outside the regular books of account and furnished details in this regard. The assessee had not disclosed this income in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the H.C. was as follows . "Did the ITAT fall into error in holding that the surrender made by the assessee in the course of the survey and confirmed two months later in writing, was deserved to be deleted in the circumstances of the case for lack of any corroborative material"-And on the basis of the same, the court opined that after making a voluntary disclosure before the Revenue, the retraction after a period of two years was unjustified. As already iterated above, in the case of the Assessee(s), statements under Sec. 132(4) stood recorded under oath, and no such voluntary disclosure has been made by any of the Assessee(s)-and thus, any reliance on third party evidence/statements, sans incriminating material found in the course of the 153A proceedings, of the Assessee(s) indicating any undisclosed income-would be bad in Law. That the Ld. DR has relied 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.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the 2003 and 2014 Circulars, both of which are applicable to the case at hand-where the focus ought to be on collection of evidence of undisclosed income in search cases. 3. B Kishore Kumar v. DCIT, Civil Appeals 9153-9159/2017 (SC), emanating from the Madras H.C. judgment so cited as 52taxmann.com499 That the Revenue has once again, placed reliance on a case on the basis that "since the assessee himself stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied without scrutinizing documents" That the said judgment, can also stand to be distinguished on facts in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 132(4A) and 292C of the IT Act. At the outset it is important to understand the scope and ambit of Sec. 132(4A) & Sec. 292C, that has been elucidated vide the CBDT Circular No. 3 of 2008 : MANU/DTCR/0006/2008 dated 12.03.2008 In the following manner: " 69.1 The provisions of sub-section (4A) of section 132 provides that the books of account, money, bullion, jewellery or other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment was rendered in a specific factual situation where documents were seized in the residential premises of one of the partners of the Assessee firm, and in that regard, the H.C. opined that the decision of the Tribunal 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 filed the returns for the block period disclosing undisclosed income ofRs. 6.51Lakhs. The Assessing Officer completed the assessment and assessed the undisclosed income atR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 section 132(4A) was available only in regard to the proceedings for search and seizure under section 132, and that such presumption was not available for framing the regular assessment-it was held, "that in view of the introduction of section 158BH, sub-section (4) and sub-section (4A) of section 132 are applicable in the matter of conducting the assessment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, 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 phrase "the presumption u/s. 132(4A) is also on the assessee" the nature of the Order passed by the A.O. under Sec. 147 will not change, since the uncooperative conduct of the Assessee and the evidence recovered from the premises of the father would show that the Assessing Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Assessing Officer or to disclose fully and truly all material facts necessary for his assessment for that year, inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable 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 limited companies via on-line trading platform of recognized stock exchange wherein that the Assessee(s) have furnished conclusively documentary evidences establishing the genuineness of the impugned transactions and satisfying the ingredients of section 68. The Revenue Authorities in the instant case, apart from relying on uncorroborated third party documentation and third party statements recorded behind the back of the Assessee without affording an opportunity of cross examination, have failed to bring on record cogent evidence to dislodge the genuineness of the evidences produced by the Assessee(s). Further, completed assessments have been reopened u/s. 153A without any incriminating materials being found in course of search as against the law laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pened 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 persons investing in the shares of the company to certify the genuineness of the transaction as far back in the year 2001 when there was no suspicion or inquiry/investigation in contemplation even in the Department. The Hon'ble Delhi HC found it strange that the Assesseealongwith share application money would obtain affidavits from the investors to confirm genuineness of the transaction. The Hon'ble HC opined that in a normal business transaction, no such certificate/affidavit would be obtained by any company from persons investing in its share capital. The fact that the Assessee felt the necessity of obtaining such affidavits raised a suspicion on the genuineness of the very transaction Given the peculiar set of facts, the Hon'ble High Court held that the Assessee had attempted to camouflage the accommodation entries and tried to give it a colour of purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 explaining the nature and source of the impugned transactions in due compliance with the ingredients of section 68 and exorbitant liability has been illegally fastened upon the Assessee(s) in assessments completed u/s. 153A sans incriminating materials being found in course of search primarily relying on third party statements and uncorroborated third party documentation. The Assessee(s) having discharged primary onus cast upon them u/s. 68 of the Act, it was for the Revenue to dislodge the same by bringing on record cogent evidence to the contrary, which clearly the Revenue Authorities have failed to do in the instant case. 2. CIT Vs. Navodaya Castle Pvt. Ltd. MANU/DE/1980/2014 : (2014) 367ITR306 (>Delhi H.C) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els 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 by the assessee. In support of the aforesaid, reliance is craved to the following judgments:- (i) NavneetAgarwal, Legal Heir of Late KiranAgarwal Vs. ITO, Kolkata in ITATNo. 2281/Kol/2017 (ii) Manish Kumar Baid & Anr. Vs. ACIT, ITANo. 1236, 1237 dated 18.08.2017 reported in MANU/IK/0265/2017 : 2017TaxPub(DT) 4463 (Kol-Tri) (iii) CIT Vs. AnirudhNarayanAgrawal (2013) 84CCH28 (All) (iv) CIT Vs. Smt. JamnadeviAgarwal & Ors MANU/MH/1685/2010 : (2010) 328ITR656 (Mum) (v) CIT Vs. Smt. SumitraDevi MANU/RH/0465/2014 : (2014) 268CTR351 (Raj) (vi) Kamala Devi S. Doshi & Ors Vs. ITO & Ors (2017) 50CCH53 Mum Trib (vii) Smt. Smita P. Patil & Ors. Vs. ACIT MANU/IP/0216/2013 : (2014) 159TTJ182 (Pune) (viii) ACIT Vs. Kamal Kumar S. Agarwal (Indl.) & Ors: (2010) 113TTJ818 (Nag Trib) (ix) DolarraiHemani Vs. ITO (2016) 48CCH286, KolTrib (x) CIT v. ShreevashiGanguli (ITANo. 196 of 2012) (Cal HC) (xi) CIT v. Bhagwati Prasad Agarwal in (No. 22 of 2009, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a regular legal channels. The said case may be clearly distinguished from the present case in the manner as follows: Konark Structural Engineering (P) Ltd. Vs. DCIT MANU/MH/4394/2017 : (2018) 90taxmann.com56 (Bombay) Present Case The said judgment was rendered in the following fact specific scenario: The appellant therein was a private limited company carrying on business as builders and developers. The AO noticed that the share capital of the appellant had increased by an amount ofRs. 19,98,000/- and the general reserve had increased on addition of share capital by an amount ofRs. 76,08,000/-. After being called upon, the appellant submitted a list of 23 parties who had allegedly subscribed to its share capital and the numbers of shares allotted to them. The AO recorded a finding of fact that almost all parties were new assessees in the sense that they had filed returns for the first time. Secondly, it was found that most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y documentation and statements of unconnected parties who were not produced before the Assessee(s) for cross-examination-in complete violation of law enunciated by the Hon'ble Supreme Court in the cases of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) and Central Bureau of Investigation Vs. V.C. Shukla & Ors (1998) AIR 1406 (SC). Further, unlike the referred case wherein the Assessee failed to discharge the onus cast upon it to prove the ingredients of section 68 in respect of the share application money received from the specified parties, in the instant case, the Assessee(s) have filed conclusive documentation establishing the genuineness of transactions in shares carried out by them which the Revenue Authorities have failed to controvert. Further, in the said case since the Assessee, being private limited company, claimed that it had received share application monies from 23 parties, the assessee was required to prove the identity and creditworthiness of the said subscribers and the genuineness of the transactions which the assessee clearly failed to do. The Hon'ble High Court in the said case has recorded categorical findings w.r.t. the conduct o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be made by the AO; summons u/s. 131 were issued on 14.09.2007 to the companies from whom the share capital was stated to be received and they were returned unserved with the remarks "no such company"; the inspector sent to the addresses for verification confirmed the fact. Under the given facts, the Hon'ble Delhi High Court while distinguishing the issue of shares by a private limited company vis-`-vis public limited company, opined as under: "The assessee here is a private limited company. It cannot issue shares in the same manner in which a public limited company does. It has to generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once the monies are received and shares are issued, it is not as if the share-subscribers and the assessee-company lose touch with each other and become incommunicado. Calls due on the shares have to be paid; if dividends are declared, the warrants have to be sent to the shareholders. It is a continuing relationship, even granting that it may not be of the same degree in which it exists between a debtor and creditor." The Hon'ble HC further observed that the share-subscribers ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad taken accommodation entries from the alleged share subscribers in the guise of share application money. The Hon'bleH.C. in the said case categorically distinguished the modus operandi involved in issue of shares by private limited companies vis-`-vis public limited companies. W.r.t. the onus u/s. 68 in respect of share applications monies received by private limited companies, the Hon'ble HC opined as under: "In the case of private limited companies, it could not be denied 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." Thus, clearly the impugned judgment was rendered in context of share application monies received by private limited companies as distinguished from public limited companies listed on the stock exchange where such proximate contact and relationship with the share holders does not exist. In the said case, since the assessee therein, being a private limited company claimed that it had received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. & Others in ITA Nos. 11/2017 to 22/2017 (supra) that the onus of ensuring presence of the witness for cross-examination is on the Revenue and that such onus cannot be shifted to the Assessee. It is trite that an Assessee cannot be required to prove the negative. The apparent is required to be taken as real unless proved otherwise. The onus of proving what was apparent is not real is on the party who claims it to be so-as held by the Hon'ble Supreme Court in CIT Vs. Daulat Ram Rawat Mull MANU/SC/0290/1972 : (1973) 87ITR349. Thus, in the instant case, the onus to prove what is apparent is not real is on the Revenue. The Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise MANU/SC/1250/2015 : (2015) 281CTR241 (SC) has ordained that "not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected." Thus, unlike the case of Nipun Builders, where the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the earlier statements recorded from them by the investigation wing were given under pressure. The A.O. however refused to take the said Affidavits into consideration, and made the respective additions. The same were however overturned by the CIT(A) and the Tribunal, after which the Revenue sought an appeal, before the H.C. Before the H.C., in this peculiar fact situation, it was opined by the A.O. that there was enough material on record to show that the companies named above were mere entry providers for consideration and that the transactions were not genuine, though documentary evidence was adduced by the assessee to show to the contrary. The case of the assessee on the other hand is that the documentary evidence was adequate to establish all the three ingredients required to be established by the assessee under Section 68. The Court however opined that the evidence adduced by the assessee has to be examined not superficially but in depth and having regard to the test of human probabilities and normal course of human conduct. Thus, the H.C. opined that the fact that both the CIT(A) and the Tribunal committed an error in finding fault with the Assessing Officer for not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed: "In such a case it cannot be said that the affidavits can be rejected only after cross examination. In the present case, there is enough material on record to negate the claim of genuineness of the transactions and in the light of over-whelming material, the plea that the Assessing Officer should not have rejected the affidavits without cross-examination of the deponents has no force ....... The Assessing Officer, as we have already noted, issued summons to them as well as the directors of the companies which allegedly advanced the share subscription monies to the assessee, but they were either returned or remained uncompliedwith ........ When they did not appear before the Assessing Officer in response to the summons, it would be unfair to expect the Assessing Officer to offer them for cross examination to the assessee." Thus, the Court went on to opine that it was however noteworthy to know that the Assessee was able to obtain affidavits from them, when the Revenue had no luck in contacting them, and that it was rather odd for the Assessee to rely on the said affidavits. Thus the Court opined that "The statements of Mukesh Gupta and RajanJassal, the entry providers, explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons, but could not produce the said persons before the Revenue was held by the Court to be doubtful and questionable. And thus, (as also held in the case of Nipun Builders (supra))-the onus of producing the share applicants before the A.O. was on the assessee. However in the present case, the Assessee(s) herein cannot be burdened with the onus of producing such 3rd parties that the Revenue is seeking to rely on. Thus, when the Assessee herein has filed the 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 genuineness of which the Revenue has failed to dislodge, then the fact that the Revenue is seeking to place reliance on uncorroborated third party documentation and statements recorded behind the back of the Assessee(s)-would mean that the onus to produce such 3rd parties for cross examining shall lie with the Revenue, as against the Assessee, thereby rendering the ratio of Nova Promoters to be inapplicable. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir sales were effected through registered brokers on the NSE/BSE. It is thus clear that the Assessee(s) herein 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. Further, in the case of the Assessee(s) there has been a denial on their part of having any such connection with R.K. Kedia, Manish Arotra, the alleged entry and exit operators, or the alleged directors of the Cos. in question, and thus, without granting an opportunity to cross examine the said parties, their statements can be of no reliance. 13. 7. CIT v. Frostair (P) Ltd., MANU/DE/4004/2012 : (26taxmann.com11) (Delhi H.C.) That the said judgment is again distinguishable on facts, done in the following manner: CIT v. Frostair (P) Ltd. Present Case &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is factually not applicable to the case of the Assessee(s) herein. In the present case, there is no such overwhelming evidence on record, apart from the statements of R.K. Kedia, Manish Arora, the alleged entry/exit operators and the alleged directors of the said Cos.-that the Revenue is seeking to place reliance on. That as already stated above, the said statements cannot be relied on without affording the Assesee(s) herein the opportunity to cross examine. Further, unlike the facts of the case in Frostair (P) Ltd-there is no such instance of the Assessee(s) accepting share capital at inflated rates from Cos. that engage in providing such bogus entries. The Assesee(s) herein have been allotted the shares of the Cos. that are listed and traded on the stock exchange. These shares were then credited into the DMAT account of the Assessee(s) where after a period of 12 months, their sales were affected vide registered brokers on the NSE/BSE, as per the prescribed rules/procedures so applicable. Since the entire sale of shares stood affected through a web based platform, there can be no scope of bogus transactions having been undertaken by the Assessee(s) herein. Further, unlike the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s PAN particulars, or bank account statement, surely its relationship is closer than arm's length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be re-opening of such investor's proceedings." That from the facts, it becomes clear that in this case, the share broker, refused to cooperate, was in possession of the details of the share applicants, but could not produce the said share applicants despite the Revenue's attempts at locating them. Meaning that, the adverse Order in this factual scenario, is different from that of the Assessee(s) herein, where, as already shown from above, the Assessees(s) only play a passive role in these arm's length transactions, where all the shares allotted were listed and traded on the stock exchange. Thus, as has been quoted in this judgment as well, the Assessee(s) have no connection and cannot control the sale of shares, which were in the case at hand sold at the prevailing market rate through the BOLT platform. All the transactions stand documented for and provided beforeha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformal collusion in their sale. 24. We have carefully considered the rival contentions and persued the orders of the lower authorities. The brief facts of the case is that assessee has shown the long term capital gain on sale of Shares for the impugned AY 2013-14 as under:- Sr No Name of the company Date of acquisition, Mode and Amount , Price Date of sales mode and Amount , Price Undiputed Holding period and held in 1 Hingur Rampur Coal Company Limited , Name Changed to 13/12/2011 Preferential allotment 22 & 25/2/2013 On stock exchange 1 year 3 months held in Demat Dhenu Buildcon Limited Rs. 33,00,000/- Rs. 6/- platform Rs. 82296074/- Rs. 149 & 150 account, Dematerialsied on 2/2/2012 on Dhanu Buildcon Limited on name change 2 First Financial Services Limited 8/12/2011 Preferential allotment RS 4500000/- 19/ to 26/03/2013 On stcok exchange platform Rs. 65600320 1 year 4 months held physical form on allotment copy of share certificates filed, Alottment letter dated 14/12/2011 and held in Demat accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppointed dates, none of the parties turned up though Assesses were duly present on the specified dates through their Authorised Representative. The learned assessing officer vide para number 4.11 of his assessment order has discussed this issue. It was stated that the opportunity to cross-examine Mr. Rajkumar Kedia and Sri Manish Arrora was granted to the assessee by issuing summons under section 131 of the act directing these parties to appear on 06/12/2016 but both of them did not appear. The assessee vide letter dated 19/12/2016 once again requested that if any adverse inference against the assessee is drawn on the basis of the statement of these persons, an opportunity to cross-examine them may kindly be provided. The learned AO issued summons to 15 other parties under section 131 of the act to appear on 26/12/2016, however, none appeared on the appointed date. Therefore, the learned assessing officer stated that finding in this case is not merely based on the oral statements given by these entry operators, but it is also based on documentary evidences recovered during the course of search in form of electronic data. It was further held by him that these statements corroborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edia subsequently retracted his statement. This issue has been decided by the coordinate bench in assessee's own case vide order dated 31/10/2018, wherein it has been held that material found during search cannot be incriminating material as statements recorded by the revenue of Mr. Rajkumar Kedia, Manish Arora and others were used by revenue without granting cross opportunity. The issue of the cross-examination was dealt with by the coordinate bench as under:- "107. We, therefore, by respectfully following the aforesaid referred to order of the Co-ordinate Bench are of the confirmed view that the assessment for the assessment year 2012-13 although was not framed u/s. 143(3) of the Act, however, the time to issue the notice u/s. 143(2) of the Act had already expired before the search took place on 13.06.2014. Therefore, for the purpose of Section 153A of the Act, processing of the return of income u/s. 143(1) of the Act was also an assessment. As such the assessment for the assessment year 2012-13 was also unabated. It is well settled that the addition u/s. 153A of the Act can only be made on the basis of incriminating material found during the course of search. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the order as under:- "113. In the present case, the opportunity to the assessee to cross-examine the person whose statements were relied upon by the AO was required to be given, on the date fixed by the AO, the assessee presented himself through his Authorized Representative but the concerned person did not turn up, so it cannot be said that the opportunity to cross-examination was provided to the assessee, although the statements of third parties were used against the assessee. In the instant case, it is an admitted fact that the persons whose statements were recorded at the time of search, later on retracted from their statements and one person, namely, Sh. Raj Kumar Kedia first retracted on 14.10.2014 and thereafter withdrew the retraction vide letter dated 31.03.2015. Therefore, no reliance can be placed on the testimony of the said person who was indulging in double speaking and taking contrary stands." In the above paragraph, the coordinate bench has already given a finding that the persons whose statements were recorded at the times of search, later on retracted from the statement and thereafter further withdrew the retraction. Therefore, no Reliance can be placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court thereafter, referring to the another decision of the Hon'ble Supreme Court held that the importance of giving an opportunity to the public officer to defend himself by cross-examining witness produced against him is necessary for following the rules of natural justice. Further, the decision of the Hon'ble Supreme Court in case of Anadaman Timber industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also tested by the changing stands frequently. It is also not for the assessing officer to decide that no opportunity is necessary because he is not aware what could be the purpose for the cross-examination asked by the assessee. Therefore not granting of opportunity of the cross-examination of the brokers Sri RK Kedia, Manish Arora, Ankur Agarwal, directors of the companies who have purchased shares from the assessee through electronic platform of the Bombay stock exchange/NSE and various other people as were mentioned in the assessment order is fatal to the assessment made by the assessing officer. We are also conscious of the decision of the Hon'ble Supreme Court in case of M. Pirai Choodi vs. ITO /2010 : 334 ITR 262, wherein the Hon'ble Supreme Court while considering the decision of the Hon'ble MP High Court in 2008 : 302 ITR 40 has held that not granting an opportunity of cross-examination to the assessee is merely an regularity and therefore the High Court was not correct in cancelling the order of the adjudicating authority. Therefore, Hon'ble Supreme Court thought it fit to set aside the matter to the adjudicating authority with a direction to grant opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not seized from possession and control of assessee and they are not shown to have been belonging to assessee. Therefore, the presumption under section 132 (4A) and section 292C is not available with revenue. Therefore, the legal validity and even the evidentiary value are under challenge. The contention of the assessee is that from the computer file named, as ABCD. xls is merely the record of purchase of shares, which is also recorded in the books of accounts of the assessee. Therefore, even otherwise, that does not give any occasion to make any adjustment to the total income. As the shares were purchased through a broker, Mr. Rajkumar kedia naturally he might have also maintained such records for purchase of shares. Therefore, there is no infirmity in these two statements. Further, another two excel sheets found from Mr. Agarwal by the name of Job. xls and Comm. xls does not show the name of the assessee. Therefore, there is no linkage available with those documents with the assessee. Further, the argument of the assessee also find support that it was found from Mr. Agarwal therefore, it is owned by him and belongs to him. Therefore, it is for him to explain who owns this Pen driv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the entries in the documents seized from third party's premises would not be sufficient to prove that the assessee was indulged in such transactions. In the present case, the pen drive of Sh. Ankur Agarwal corroborated/substantiated, the share transactions carried out by the assessee, which was duly found recorded in the regular books of the assessee, and the said pen drive did not contain anything incriminating against the assessee. Therefore, merely based on the statement of Sh. Ankur Agarwal, the addition made u/s. 153A of the Act was also not justified, particularly when Sh. Ankur Agarwal retracted his statement later on. In the instant case, the AO also failed to establish any link/nexus of the alleged cash trail. We, therefore, by considering the totality of the facts and the various judicial pronouncement discussed in the former part of this order are of the view that the additions made by the AO and sustained by the ld. CIT (A) u/s. 153A of the Act in the absence of any incriminating material found during the course of search u/s. 132(1) of the Act in respect of unabated assessment years i.e. the assessment years 2010-11 to 2012-13 were not justified. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Kedia and Shri Ankur Agarwal cannot be used for addition in the hands of the assessee. The assessee has also referred to several other judicial precedents canvassing the above proposition. 29. In view of our above findings, findings of the coordinate bench in assessee's own case for earlier years, and based on the various judicial precedent relied upon, we do not agree that document seized from third-party can be used for making addition in the hands of the assessee without assessee being granted an opportunity of cross-examination of those parties. 30. Further, the assessing officer has heavily relied upon the various orders passed by The Securities and Exchange Board Of India in various companies in which the assessee has earned the long-term capital gain as well as in case of the assessee. First Such order relied upon is interim ex parte orders dated 19/12/2014 passed in case of M/s. First financial services Ltd. and M/s. Redford global Ltd. The learned CIT-A was also heavily harping upon the orders of the SEBI for confirming the addition. In interim order in Redford global Ltd., dated 19/12/2014 assessee was restricted to access the securities market till further direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar of Companies. Similarly, with respect to the amount of Rs. 50 lakh received by Vision Steel Limited from FFSL on September 16, 2011, it has been submitted that the amount was towards capital contribution in the company and the company allotted 20,000 equity shares on December 13, 2011 to FFSL. Requisite filings in this regard were made with RoC. It has been also stated that funds received by them were invested in Bhushan Power and Steel Ltd. 72. Brij Bhushan Singal, Neeraj Singal, Uma Singal have submitted that these was a festering family dispute between Brij Bhushan Singal and Niraj Singal (younger son) on the one side and Sanjay Singal (elder son) and his family members on the other side. In this connection litigations before various courts were filed in the years 2006 and 2007. These disputes were finally settled by way of a compromise in November 14, 2011 and terms of settlement were fully implemented by February 2012. Appropriate disclosures in this regard were also made to the exchanges at that time. Post settlement, the complaints and litigations filed before various forums were withdrawn. It has been also stated that owing to the family dispute, Brij Bhushan S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. during 15 May, 2012 to 8th February 2013), to acquire 58.08 percent of paid-up share capital of FFSL. It has been brought out in the investigation that FFSL got its trading suspension on BSE (that was operating for a period between June, 2000 to July, 2011) revoked on 8th July, 2011. It traded for just two days on July 8, 2011 and November 16, 2011. In the meanwhile, the company made two tranches of preferential issue-one in December 2011 and the other in April, 2012. Soon after the expiry of the lock-in period, the preferential allottees started trading and exiting taking advantage of the huge price rise that was prevailing then and made gains. The investigation was done at the behest of letters received from Director General of Income Tax (Inv.), as the background of this order states. 90. In the ultimate analysis, I am driven 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 thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch action, as deemed appropriate at their end." 31. Almost similar orders were passed in all the companies wherever the income tax department asked the SEBI to enquire. The assessee has placed all these orders at page number 302-419 of the paper book. Furthermore, the para number 96 of the above order clearly shows that the intimation is also given to The Director General Of Income Tax Investigation, New Delhi and The Principal Director Of Income Tax Investigation Kolkata and Chandigarh for necessary action. From this, it is apparent that reliance on the interim order of securities exchange control Board of India by the revenue authorities is misplaced as in each of these companies in which the income tax department requested SEBI to investigate has given a clean chit to the assessee and his family. Therefore, reliance on SEBI interim order was misplaced and even otherwise now do not survive in view of subsequent final orders of SEBI. 32. The learned AO also heavily relied upon the cash trail of the bank accounts of the purchaser companies. He stated that cash was deposited in several bank accounts and after 3-7 layers same reaches the bank account of the companies. From such cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies who have purchased the shares are having their Permanent Account Numbers. Naturally, to trade on BSE/NSE platforms, those companies have their client registration with the stock exchanges also according to the established KYC Norms. According to trading regulations the securities have been transferred in their demat accounts. For the purposes of holding of shares in demat accounts, those companies are also required to have their KYC with the depositories. Further the companies are required to file their return of income compulsorily, they hold the PAN, AO should have enquired with the AO of those companies. There is no finding that what happened to the shares purchased by those companies, no inquiry of their demat holding is also made. Further, there is no finding that prior to purchases of those shares whether throe companies have deposited margins also as per Stock exchange and SEBI Norms. There is nothing placed on record to show that those companies are debarred from trading in securities or not. All these investigations/finding of ld AO have many loopholes, which remains unanswered. In the statement of the director of the penny stock company stated that the prefere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld Assessing Officer of providing exit to the assessee by Dream light Exim Pvt. Ltd. and Duari Marketing Pvt. Ltd. only the stock exchange trading sales detail of the assessee are maintained which are undisputed as assessee has recorded them in the books of accounts but time and date stamp of the buyers were not matched. This is also merely an allegation. Further, those directors, real owners of those companies have not been cross-examined by the assessee despite requested by assessee. Therefore, in these circumstances, it cannot be proved that these are the dummy companies, especially when they are having PAN, KYC with stock exchanges, DEMAT Accounts, assessed by income tax Departments etc. For receipt of money through various layers, they should have been responsible in their own cases to show the genuineness of those funds. Assessee cannot be compelled to show the same. In view of this, the allegation of the cash trail of the buyers of those shares remains unproved and merely an allegation. 33. Next, claim of the assessing officer that many beneficiaries of the bogus long-term capital gains have disclosed the above sum as their undisclosed income. According to us, If some othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al conditions. None of investments, losses has been incurred by them. All the transactions of the sale of shares have resulted into huge abnormal profits, which is not possible in normal course of investment. However, evidence-indicating sham transactions by all the investors were not found by the Department, but r, the pattern of investment, the modus operandi adopted is largely same for 100% of investors. The rates of return, pattern of movement of funds were glaring, nonexistence of genuine business activities of such investors etc. Safely lead to conclusion that long-term capital gain received from these penny stock company is bogus and taxable. The learned assessing officer relied upon the decision of the Hon'ble Supreme Court in case of some of Sumati Dayal vs. CIT, 1995 : 125 CTR 124. The learned authorized representative vehemently opposed the same and stated that long-term capital gain were originally disclosed by the assessee in his return of income for earlier assessment years for assessment year 2010-11 and 2011-12, which were assessed under section 143 (3) of the income tax act. Therefore, it is not the case of the revenue that there are no positive evidences produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income. The probable factors could have gone against the assessee, only if, i. there would have been some evidence found from searches conducted by the department that Assessee was the person who at the time of purchase of the shares has issued the cheques to the companies for purchase of shares and has received cash back and at the time of sale of those shares have paid cash to the alleged by or their associates, and then only has received the cheques towards sale of those shares. ii. Such evidences found were duly corroborated with the statements of the parties. iii. Cross examination of those parties afforded to the assessee iv. Opportunity to the assessee to confront and rebut the materials gathered. Firstly, No such evidences were found during the course of search and all those evidences which are relied upon by the learned revenue authorities have been held by the coordinate bench in assessee's own case to not to be an incriminating material which can impact the taxable income of the assessee and his family members. Even the investigation made by the Securities and Exchange Commission of India has also held that assessee is not at all involved in the manipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown purchase consideration paid by the cheque and recorded in its books of accounts and accepted by the revenue in earlier years under the scrutiny assessment. The prices at which the shares have been sold are traded prices on a stock exchange on which assessee does not have any control. The regulatory authority i.e. securities and exchange board of India, stock exchange authorities has not questioned the conduct of the assessee and broker selling the shares, on price variation in the shares of the companies in which assessee has made investment. The assessee has also paid securities transaction tax on the sale of shares and the sale consideration has been received from the SEBI registered broker against which there is no allegation. In view of this, it is apparent that assessee has produced overwhelming evidences that were not found to be false. In view of this, the reliance by the learned AO on the decision of the honourable Supreme Court is misplaced. Therefore In view of this we do not subscribe to the opinion of the learned assessing officer that on the preponderance of the probabilities the income should have been taxed in the hands of the assessee. 35. The ld AR has sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 taxmann.com 402 dated 3/1/2013 Allahabad high court 11 CT V Anupam Kapoor 299 ITR 0179 Punjab & Haryana High court 12 CIT V arunkumar Agrwal HUF 26 taxmann.com 113 Jharkhand High court 13 CIT V Shyam R Pawar 54 taxmann.com 108 229 TAXMAN 0256 Bombay High court 14 PRINCIPAL COMMISSIONER OF INCOME TAX-5 VERSUS DIPALI MAHENDRA SHAH 2018 (3) TMI 1084 - GUJ GUJARAT HIGH COURT 15 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 Ahmedabad ITAT 23 DCIT central circle V PRB Securities P Ltd 5/12/2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of honourable Bombay High Court in case of Sanjay Bimalchand Jain vs. Principal Commissioner Of Income Tax reported at 2017 : 89 taxman.com 196. We have also perused the decision of the coordinate bench dated 18/07/2016 in that case, which was upheld by the honourable High Court. Issue before the coordinate bench was that whether, on sale of shares profit earned by the assessee can be charged to tax as capital gain or business income. In that particular case, the payments were made in cash for purchase of shares. The addresses of the companies who shares are purchased and address of brokers are also the same. Brokers who sold the shares did not respond to the inquiries of the learned assessing officer. Therefore, on the appreciation of the facts, coordinate bench held that the income has been correctly taxed by the AO as business income of the assessee whereas the assessee 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-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a specific allegation which was proved that there is a circular transactions entered into by the assessee's brokers for the scrip and further there was no evidence that how a Calcutta-based broker from Ludhiana-based assessee has received in cash for purchase of the shares on three different dates. Apparently, the fact of payment of cash to purchase of shares to the broker situated at Kolkata became Primordial. Further, the assessee was in United States from 2009-2012 and the case was pertaining to assessment year 2011-12, where the assessee has made a payment to one of the representative, whose name could not be recollected for sending money to the broker when it was the first deal with the broker. Further, the shares were also not transacted through any recognized exchange as apparently the shares were traded of a petty private limited company. In addition, the assessee could not prove 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer and such sales continued to be registered in the name of the assessee. Therefore, there was no transfer of share at all in that particular case. On these facts, the addition under section 69 was confirmed. On comparison of facts of that, case with the facts of the present case clearly shows that such facts do not exist before us. 42. The learned CIT DR also relied upon several other decisions where for several reasons, the addition on sale of shares shown as a long-term capital gain is confirmed in the hands of the assessee. However, in most of the decisions cited before us, There was an off market purchase by the assessee and the assessee could not substantiate with documentary evidences the transaction of purchase and sale of the shares. In many of the cases cited there were predated contract note issued by the broker and the payment for purchase of the shares is made in cash and that too off market., In some of the cases, there was no payment by cheque for acquisition of the shares but there was an adjustment of profits earned by the assessee through those brokers, who generated profits in cash in the name of the assessee and purchase price of the shares adjusted by the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 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 as a natural corollary, we also delete the addition of 6 % unaccounted commission expenditure also. Accordingly, ground number 2 and 3 of all the 3 appeals for 3 assessment years in case of the assessee are allowed. 45. In view of our above finding ground number 1 and 4 of the appeal, which are general in nature, does not require any adjudication and therefore they are treated as dismissed. 46. Accordingly, all three appeals of the assessee in ITA No. 1415 to 1417/Del/2018 for Assessment Year: 2013-14 to 2015-16 are partly allowed. 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) 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 Rs. 73,89,99,462/- 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 the addition of Rs. 4,43,39,968/- on account 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1479/Del/2018, Ground No. 1, 2 and 3 in ITA No. 1480/Del/2018 for AY 2014-15 and Ground No. 1 to 3 in ITA No. 1481/Del/2018 for AY 2015-16. 53. Ground No. 1 in ITA No. 1479/Del/2018 for AY 2013-14 is general in nature and therefore it is dismissed. 54. Accordingly, ITA No. 1479/Del/2018 for AY 2013-14 is partly allowed and ITA No. 1480 and 1481/Del/2018 for AY 2014-15 and 2015-16 is allowed. 55. Now we come to the appeals in case of Ms. Uma Singal in ITA No. 1483/Del/2018 for AY 2013-14 and 1484/Del/2018 for AY 2014-15. 56. The respective grounds of appeal are as under:- 57. The assessee raised the following ground of appeal in ITA No. 1483/Del/2018 for AY 2013-14:- "1. That the order dated 29.12.2017 passed u/s. 250 of the Income Tax Act, 1961 (herein after called the Act) by the 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 incriminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,42,91,082/- 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 (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 the statements of various persons and data without affording the appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication." 59. Both the parties agreed that facts of this case is similar to the case of shri Brij Bhushan Singal for all these years, therefore their sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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