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TMI Blog2019 (4) TMI 1737X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15/2016-17/Kol, affirming Assessing Officer s identical action treating their business loss(es) of ₹2.93.720/- and ₹3,33,500/- followed by commission disallowance in former case to the tune of ₹14,686/- @ 5%; respectively involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the learned representative(s) reiterating their respective stands against and in support of the impugned identical business lossdisallowance(s) / addition(s). Case file(s) perused. 2. It transpires during the course of hearing that the CIT(A) s identical discussion in lead case ITA No.1254/Kol/2018 affirming the impugned addition of bogus los arising from sale of shares held in M/s Nikki Global Finance Ltd. reads as under:- 13. FINDINGS DECISION 1. I have carefully considered the action of the Ld. AO in treating the claim of loss of ₹ 2,93,720/- as bogus, and adding the same as an unexplained cash credit u/s 68 of the Income Tax Act, 1961. After an exhaustive discussions and elaborating the factual and legal matrix, I find that thee Ld. AO has held that the claim of Short Term Capital Loss was to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by way of bank cheque and was paid through the process of banking transactions was not by itself of any consequences. The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabilities held as under: in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Similarly in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), their Lordships held as under: In view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assesses of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case, there is prima facie, evidence against the assessee viz. the receipt of mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required. The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required. The verification and investigation should be one with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored but they cannot become the bedrock or substratum of the conclusion. The provisions of Evidence Act are not applicable, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. The plain reading of section 142 and 143 clearly suggests that the assessing officer may also act on the material gathered by him. The ward 'material' clearly shows that the assessing officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law. 6. The Hon'ble Supreme Court in CIT v. Durga Prasad More[1971] 82 ITR 540 at pages 545-547 made a reference to the test of human probabilities in the following fact situation: - ..... It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favor then the door will be left wide-open to evade tax. A little probing was sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of suspicious and dubious transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win ChadhaVs CIT (International Taxation) in ITA No.3088 3107/Del/200S, the Hon'ble Delhi ITAT B -Bench has observed, on 31.12.2010 as under: SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEAL T WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are - (1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that everyone of the links must appear on the surface of the evidence adduced; some of these links may have to be inferred from the proved facts; (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5) The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO, are devoid of any merit and are rejected outright 9. When the impossible is projected as possible through a plethora of well arranged documents, it would be very reasonable to reject the documents outright as make believe and self serving. In the Case of Usha Chandresh Shah Vs ITO, Ward- 19(1}{2), Mumbai, the Hon'ble ITAT- F -Bench Mumbai by their Order for A.Y 2006-07 dated 26th September, 2014 have, in the operational portion adjudicated as under: [Quote] 9. We have heard the rival contentions and perused the record. The pertinent points are that the assessee has claimed to have purchased the impugned shares through Off market transaction. The purchase price was not paid by cheque, but it was claimed to have been adjusted against the speculation profit claimed to have been made by the assessee. The small difference of ₹ 324/- was claimed to have been paid by way of cash. It is also pertinent to note that the alleged Speculation transaction carried out earlier to the purchase of shares of Prime Capital Markets Ltd was also claimed to have been carried in off market transaction. Another important point is that the assessee did not po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the share prices of M/s Prime Capital Markets Ltd went from ₹ 5.17 (May, 2004) to ₹ 279.50 (Sep., 2005). The assessee could not furnish any reasons or atleast stock market news to support the abnormal increase in the prices of the above said shares. The financial statements of the above said company were also not produced. Though M/s Prime Capital Markets Ltd has confirmed the entries in its books of account with regard to the purchases made by the assessee, it could not identify the name of purchaser to whom the shares were sold by the assessee. 12. We have already seen that the tax authorities have applied the test of human probabilities explained by the Hon'ble Supreme Court in the cases of Sumati Dayal and Durga Prasad More (supra) to disbelieve the claim of Long term Capital gains put forth by the assessee. We notice that the test of human probabilities was not applied by the co-ordinate benches of Tribunal in the case of Shri Avinash Kantilal Jain (supra) and Mr. Shyam R Pawar (supra). Hence, in our view, the assessee cannot take support from the above said decisions. We further notice that the Id CIT(A) has placed reliance on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. 15. We notice that the Mumbai D bench has considered an identical issue in the case of Shri Ramesh Kumar D Jain in ITA No.3192/Mum/2010 relating to assessment year 2006-07. The Tribunal, vide its order dated 15-06-2011, rejected the claim of making speculation gains on the reasoning that speculation transactions could not have been entered into by the assessee therein without paying margin money to the broker. Accordingly, the claim of purchase of shares was rejected by the Tribunal and consequently the claim of sale of shares was also rejected. It is pertinent to note that, in the decisions relied upon by the assessee, the claim of speculation profits was not considered by the Tribunal. In yet another case of Shri Araving M Kariya considered by A bench of Mumbai ITAT, the test of human probabilities was applied to reject the claim of profit realized on sale of penny stocks. There should not be any dispute that the onus to produce necessary evidences to convincingly show that the shares were purchased and sold at the prices claimed always lies upon the assessee. Our view finds support from the decision rendered by Hon'ble Guwahati High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rokers from whom shares were purchased and sold and statements were recorded. The AO also analyzed the balance sheet of- M/s Ankur International Ltd. To justify as to how the share price of a company can go up from a mere ₹ 3 to ₹ 55 in a short span of six to seven months' time. The AO made detailed and extraneous exercise of finding the fundamental of the share of the company by different methods and concluded that these shares were not genuine and transactions were so arranged so as to cover up the loss incurred on account of sale of jewellery only. The AO also recorded the finding that transactions were done at Ludhiana where also the share price of the company is quoted but maximum value of the share quoted was ₹ 17 but that was only in July, 1997, i.e. long before the shares were sold by the assessee to M/s S.K. Sharma Co. in the months of February and March, 1998. The AO also recorded the finding that although the shares were transferred in the name of the assessee, they were still lying in the name of assessee much after the sale to M/s S.K. Sharma Co. The learned CIT(A) deleted the addition on the ground that both the brokers from whom the shares h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Exchange and were quoted on the relevant date of sale at the same price on which shares were sold to M/s S.K. Sharma Co. However, the learned Departmental Representative controverted his argument by saying that volume of transactions on the relevant dates is only 600 shares on 9th Feb., 1998 and 1000 shares on 23'd March, 1998 whereas number of shares involved in the transactions with S.K, Sharma Co. are 45000 shares. 6. After hearing the rival submissions, going through the orders of authorities below and paper book, we find that M/s Ankur International Ltd., although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange at, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s S.K. Sharma Co, Factual matrix of the case from start of the purchase of shares at the rate of ₹ 3 to the sale of shares at ₹ 55 in a short span of time and shares being not, quoted at Ludhiana Stock Exchange and the way in which different, instalment payments have been received from the brokers and non-availability of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be non-genuine, it is highly improbable that share price of a worthless company can go from ₹ 3 to ₹ 55 In a short span of time. Mere payment by cheque and receipt by cheque does not. Render a transaction genuine. Capital gain tax was created to operate in a real world and not that of make belief. Facts of the case only lead to the inference that these transactions are not genuine and make believe only to off set the loss incurred on the sale of jewellery declared under VDIS. In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified In deleting the impugned addition. We, accordingly set aside the order of the CIT(A) and restore that of the AO. 8. In the result, the appeal of the Revenue is allowed. [Unquote] 11. Moreover, all the judgments relied upon by the appellant fall flat in the face of the facts the case, and the preponderance of probability against the assessee. In a decision of Hon'ble Bombay High Court in the case of Sanjay Blmalchand Jain Vs 'Pr.CIT by their order dated 10' April, 2017 have upheld the orders of the Hon'ble ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an addition of ₹ 14686 on account of undisclosed expenditure u/s 69 of the I T Act 1961. We have made submission before your goodself hereinabove to delete the addition of ₹ 293720 and on relief being allowed as prayed addition of ₹ 14686 will automatically gets deleted as made in consequence to addition of ₹ 293720. 16. FINDINGS DECISION: 1. I have already upheld the ,action of the Ld AO in treating the claim of business loss of ₹ 2,93,720/- as bogus. As a natural corollary, the addition of ₹ 14,686/- being 5% of ₹ 2,93,720/- which had been added back by the Ld AO as undisclosed expenditure within the meaning of section 69C of the Income-tax Act, 1961 is upheld. 2. As a result, this ground of appeal stands dismissed. 3. I have given my thoughtful consideration to rival contentions. Former assessee s detailed paper book comprising of Assessing Officer show-cause letter dated 02.12.2016 regarding loss in trading of shares trading reply dated 02.12.2016, show-cause letter dated 30.11.2016 with respect to commodity loss, details of share trading loss, copy of contract notes, demat statement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for investment. It appears, such action had been taken for any other reason which assessee preferred not to disclose. Following issues deserves proper consideration :- 4. In the instant case, the assessee has entered into sale and purchase of shares of Nikki Global Finance Ltd (NGFL). It is found from the submission that the assessee has bought 4300 shares of NGFL for 9,13,5511- on 07/03/2014 and sold 4300 shares of the same scripts on 21103/2014 for ₹ 6,19,8311- and the assessee has incurred alleged business loss of ₹ 2,93,7201- on the sale of those shares. The A.O. then made a deeper study of the price movement and share market behaviour of the entities involving in trade, of the script as the share price moment and the profit earned by the beneficiaries were beyond human probability and the A.O. stated that there is nothing worthwhile to mention on the front of assets and net worth of the company as well, to conclude that it could command such high premiums. The company merely forwarded the share capital received through preferential placement of shares towards loans and advances. It was also found that during the period of astronomical rise of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed these transactions as:- The Transaction involves three legs. (i) Purchase of share by the beneficiary. In this the beneficiary is sold a fixed number of shares at a nominal rate. The price and the number of shares to be purchased are decided on the basis of the booking taken and the value up to which price would be rigged. This leg of the transaction mostly is off-line. This is done to save on STT using the loophole in Section 10(38) of the IT act which places restriction of trading by payment of STT on sale of shares and not on purchase. (ii) Price rigging. After the shares have been purchased by the beneficiaries, the syndicate members starts rigging the price gradually through the brokers. In these transactions the volume is almost negligible. Two fixed brokers who are in league with the Syndicate buy shares at a fixed time and at a fixed price. These low volume transactions are managed through paper companies of entry operators. (iii) Final sale by the beneficiary. This is done after beneficiary held the share for required period. The period of holding may be a little more to match the amount of booking with the final rate. The benefic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares belonging to the beneficiary in a particular lot size on a particular date and time. The los that is incurred by the Beneficiary Company is returned back to the company in cash. In this way the beneficiary companies desirous of booking a loss their books of account get an entry of bogus STCL which is set-off against the regular profit of the company. The fact is evidenced with the speaking documentary materials available on assessment records of the present case. In this case all those persons including the assessee, who were allotted shares on preferential placement basis as discussed above were the Beneficiaries. The modus operandi mentioned above is based on facts and has been deduced by various investigation wings of the income tax department, SEBI and other government agencies. SEBI in its order in a number of cases has spelt out this modus operandi and successfully established that entities involved in such schemes are manipulating the market to generate loss. He, therefore, on consideration of the circumstantial evidences, natural human conduct and preponderance of probabilities reached a conclusion that the apparent in this case was not real and that these finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as three was no economic or financial basis as to how a share worth ₹ 5/- to ₹ 485/-. The findings recorded by the authorities are pure findings on facts based on a proper appreciation of the material on record. While recording the said findings, the authorities have followed the tests laid down by the Hon'ble Supreme Court and this Court in several decisions. The findings do not give rise to any substantial question of law. The judgments reported in (2012) 20 Taxman. Com 529 (Bombay) (CIT Versus Jamnadevi Agrawal) (1957) 31 ITR 294 (Bombay) (Puranmal Radhakishan Versus en), (1970) 77 ITR 253 (SC) (Raja Bahadur Versus ern, (1970) 77 ITR 253 (se) (Raja Bahadur Vers Cl'I] and (2015 235 Taxman 1 (Bom) [Cl T Versus Smt. Datta M. Shah) and relied on by the learned counsel for the assessee are distinguishable on facts and cannot be applied to the case in hand. Since no substantial question of law arises in this appeal, the appeal is dismissed with no order as to costs. 8. In the case of Smt. M.K. Rajeshwari Vs. ITO, Ward-3, Raich ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act by rejecting the Assessees's claim of exemption u/s 10(38) of the Act on Long Term Capital Gains earned out of purchase and sale of equity shares of the company M/s. SRK industries Ltd. by holding that the transaction are sham and tailored to bring unaccounted money as the legitimated gain in the guise of Long Term Capital Gain which is exempt. U/s 10(38) of the Act. 11. On such issues views of different courts are clearly against Tax avoidance. In the case of CIT vs Sakarial Balabbai (1968) 69 ITR 186 (Guj.), the court clarified the meaning of Avoidance of Tax are not colorless words. They are strong and compelling words connoting a positive volition, a deliberate intention on the part of the assessee to a id tax - Transaction must be mala fide. 12. Justice Rangnath Misra of Supreme Court while speaking in the case of Mc Do Ltd. - vs - CTO (1983) 154 ITR 148, observed: Tax planning may be provided it is within the framework of law. Colourable devices cannot be part of tax planning . And it is wrong to encourage or entertain the benefit that it is colourable to avoid payment of tax by resorting to dubious methods. 13. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer is required to be formed objectively with reference to the material available on re ord. Application of mind is the sine qua non for forming the opinion. In this case the SC reversed the decision of the Hon'ble Madras High Court and upheld the finding of the lower authorities regarding transaction of gift received by assessee even though through banking channel but considered not be real one. What is apparent may not be real : Apex court in the case of Sumati Dayal-Vs- CIT [214 ITR 80] held that the true nature of a transaction has to be ascertained in the light of surrounding circumstances. It is now well settled that Tax Authorities are entitled to look into surrounding circumstances to find out the reality of a transaction by applying the test of human probability. Documentary evidences, in the face of unusual events, as prevailing in the instant case, and without any corroborative or circumstantial evidence/s, cannot be regarded as conclusive. The preponderance of probabilities only denotes the simultaneous existence of several 'facts', each probable in itself, albeit low, so as to cast a serious doubt on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The ld DR drew our attention to a voluminous exercise undertaken by the ld AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. The ld DR argued that the assessee had made investment in shares of the aforesaid companies not having any sound financial position or business activity so as to justify the long term capital gains to this extent. The cases of Sumati Dayal vs. CIT 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR (SC) were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus long term capital gains in issue. There is no dispute that assessee having derived the Long Term Capital Gains (LTCG in short) on transfer of shares held in Nikki Global Finance Ltd and S R K Industries Ltd. The ld DR did not controvert the findings given by the co-ordinate bench decision of this tribunal in assessee s favour in the case of Smt Madhu Killa vs ACIT in ITA No. 834/Kol/2018 for Asst Year 2014-15 dated 2.11.2018 in respect of shares of Nikki Global Finance Ltd, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had made the purchase of M/s. NFGL not through Stock Exchange but it was an off market transaction. We find that the assessee had purchased the shares of M/s. NFGL through registered broker M/s. M. Prasad Co. which was a registered stock broker of the Bombay Stock Exchange and on 13.06.2012 assessee purchased 25000 shares at ₹ 128.25 per share on which STT was paid and the total transaction of ₹ 32,21,213.10 was paid through account payee cheque to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) The following other documents were also filed before the authorities below: i) Copy of balance sheet of the assessee as on 31.03.2013 (FY 2012-13 corresponding to AY 2013-14) along with details of investments (page nos. 4 and 5 of paper book) wherein 25000 shares of M/s. NFGL of value of ₹ 32,21,269.18 is reflected and we note that the assessee had made investment in 30 no. of different shares including that of L T, Reliance, TISCO, Infosys, ICICI, Infotech etc. and had investments altogether of ₹ 87,44,010.73 which has been duly reflected in page 4 of the paper book which is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on report concerned the assessee and/or the shares sold by the assessee. The ld AR submitted that the AO on pages 6-9 of the assessment order had merely stated that the Investigation Wing and SEBI conducted some inquiries in respect of some other Companies and as per the report prepared by them, certain patterns and features were identified by them and as per the AO such patterns and features were emerging in the case related to the shares of the Company (i.e. M/s. NFGL) which the assessee dealt with. However save and except making a passing remark or mere reference to so called patterns, there is nothing in the assessment order from which it can be found that the Assessee or the Company (M/s. NFGL) or the Brokers were adversely named/commented upon in the report of investigation. According to ld AR, the AO identified 10-11 adverse features on page 6-7 of the Assessment order, however he wondered as to how these features were relating to the Company (M/s. NFGL) in the case of assessee was not at all demonstrated. Thus according to ld AR, there was no material whatsoever to hold that the Company (M/s. NFGL) dealt by the assessee was having such pattern or features. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al) (vii) CIT vs. Jamna Devi Agrawal [2012] 20 taxmann.com 529 (Bom HC) 6. The ld AR submitted that all the observations, conclusions and findings of the lower authorities are based on suspicion, surmises and hearsay. According to ld AR, it is trite law that the suspicion howsoever strong, cannot partake the character of legal evidence. Reference was made to the judgement of Hon ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC, , Umacharan Shaw 37 ITR 271 and Omar Salay Mohamed Sait 37 ITR 151. The ld AR submitted that the entire case of the revenue is based upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion howsoever strong it may be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. The ld AR referred to the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT [2017] 164 ITD 1 (Mumbai-Trib.)(SB) The Tribunal observed as under: 46. ......... Ultimately the entire case of Revenue hing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase and sale of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. The ld AR referred to the following judgments of Jurisdictional High Court:- (i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate Trading Co. Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not recorded thereat. He therefore held that the transactions were bogus. The Hon ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions 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. 9. The ld AR submitted before us that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks. (i) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF ITYA No. 32/Agr/2007 (Agra ITAT) 11. The ld AR further submitted that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in BSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evidence on record to disbelieve that the assessee sold shares through registered share and stock broker with Bombay Stock Exchange. The assessee produced all evidences to explain the source of the amounts received by the assessee from the broker, therefore according to ld AR, the AO was not justified in assessing the sale proceeds of shares as unexplained cash credit under section 68 of the Act. 14. The ld AR submitted that there is no direct evidence against the assessee brought on record by AO to hold that the assessee introduced his own unaccounted money by way of bogus LTCG. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee and/or the brokers and/or the Company in which the assessee dealt with to adversely hold that the assessee was a beneficiary to the modus operandi adopted by different entities / brokers / entry operators. The ld AR submitted that, in view of the aforesaid judgement of Special Bench of Mumbai Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the registered broker and the shares were deposited in the demat account (D. P. Stock HLDG Corp of India Ltd.) 16. The sale of M/s. NFGL shares took place through the same registered stock broker of Bombay Stock Exchange from 05.08.2013 to 30.12.2013 for sale price ranging from ₹ 820/- to ₹ 921/- per scrip (see contract note placed from pages 7 17 of paper book). We note from perusal of pages 18-19 of paper book, which reveals that the payment for purchase of shares were made through Axis Bank of assessee and payment has been made on 14.06.2012 vide cheque no. 138919 for an amount of ₹ 32,21,213.10 to the recognized stock broker of Bombay Stock Exchange M. Prasad Co. We also note from perusal of pages 20-23 of paper book which is the extract of pass book of assessee in Punjab National Bank wherein we note that assessee had received sale consideration through bank transaction and we verified the contract note of sale placed at pages 7 to 17 and tallied the entries of sale consideration received by the assessee in her bank account and find it to be correct. We on perusal of page 24, which is the transaction cum holding statement of Stock Holding C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which comes to ₹ 10,82,460/- against the assessee Thus we note that the assessee had furnished all primary evidences in the form of bills, contract notes, de Mat statements and bank accounts to prove the genuineness of the transaction relating to purchase and sale of shares resulting in LTCG. By adducing these evidences, the assessee had discharged the onus on her to prove the genuineness of the transaction which yielded her LTCG. Once the assessee had discharged her onus, then the onus shifted to the shoulders of AO then the AO has to examine the veracity of the documents produced by the assessee and if it is found to be correct and valid then in all fairness the AO should accept the claim of LTCG. In case if the AO on verification finds that the documents produced by the assessee is false or fabricated, then the AO should bring his adverse findings to the notice of the assessee and confront her with the adverse material/findings. Then again the onus will shift to the assessee to prove the genuineness of the transaction. Here, in the present case is concerned, the AO after going through the documents, failed to return a finding that documents produced by assessee to substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of such report which directly accuses the assessee in any wrongful actions. The AO has merely carved out certain features/modus operandi of companies indulging in practices not sanctioned by law and as mentioned in such report. We note that neither any investigation were carried out against the assessee, nor against the brokers to whom the assessee dealt with or the companies in which the assessee dealt with the purchase and sale of shares in question were done by the AO. The transaction in question and the fact that the shares in question were quoted and transaction happened on the floor of the stock exchange in public view which action has not been interdicted by the securities watchdog SEBI. In such a scenario, to paint the entire share transaction of M/s. NFGL which yielded high capital gain as bogus is not correct without materials to support such an adverse finding. We note in the light of the aforesaid relevant evidences, the action of the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances and human conduct and preponderance of probability against the assessee. For that we rely on the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scripts of this company was executed by a broker and the broker was suspended for some time. It is the assessee s contention that even though there are allegations against the broker, and for that reason the assessee cannot be held liable on this point, the tribunal held that As a matter of fact the AO doubted the integrity of the broker and the broker firm and also AO observed that the assessee had not furnished any explanation in respect of any discussion of trading of shares. The AO relied the loss of ₹ 25,30,396/- only on the basis of information submitted by stock as fictitious. The AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO s observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed. We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 20. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We note that though the department was aware that the assessee had purchased the 25000 shares of M/s. NFGL in AY 2013- 14, for ₹ 32,21,269/- has not reduced the same from the total sale consideration of ₹ 2.16 cr. It is elementary that income can be computed only after defraying the cost. So the action of AO to add the entire sale consideration of ₹ 2.16 cr. itself is arbitrary exercise of power and cannot be sustained. Therefore, the action of the Ld. CIT(A) in confirming the addition of entire sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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