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TMI Blog2024 (6) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... ht forward losses. Even assuming but without admitting, the loss in dispute is bogus in nature, yet there was sufficient brought forward losses capable of absorbing impugned loss without inviting any extra tax burden on the assessee. Had the assessee been involved in manipulating the prices, then there would not have been declared any profit in the script in the given facts and circumstances. Thus, the conduct of the assessee suggests that he was not involved in manipulating the trading in the script of the company. It is difficult to register in mind that a person maintaining such a portfolio shall enter any bogus transactions to bring down the profit so as to avoid the tax liability in a situation where he has sufficient brought forward losses. As such, considering the magnitude of the business of the assessee, the loss in dispute is miniscule and no prudent person will enter into such bogus transactions. As alleged by the revenue that the assessee has carried out the transactions in the script of M/s Prraneta Industries in connivance with SCS. The basis for holding so was that it was discovered during the search proceedings at the premises of SCS and M/s Prraneta Industries that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human probabilities which may be of greater impact but the same cannot be used blindly without disposing off the evidence forwarded by the assessee especially without bringing any evidence from independent enquiry corroborating the allegation. As SMT. KRISHNA DEVI, HARDEV SAHAI GUPTA (GARG) , SMT. BINDU GARG [ 2021 (1) TMI 1008 - DELHI HIGH COURT] we hold that in absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as trading loss claimed by the assessee in the scripts of M/s Prraneta Industries. Hence the ground of appeal of the assessee is hereby allowed. - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms. MADHUMITA ROY, JUDICIAL MEMBER For the Assessee : Shri Deepak R Shah, A.R For the Revenue : Shri Atul Pandey, C.I.T DR ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeals have been filed at the instance of the different Assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of share capital and unsecured loan since 1996. As per him, the entire affairs of the company were arranged and managed by Shri Chandrakant Shah. 3.6 It was also found that SCS was also providing the accommodation entries in the script of M/s Prraneta Industries Ltd., M/s Shri Ganesh spinners Ltd and M/s Chandni Textile Engineering Industries Ltd. 3.7 The AO in view of the above opined that the assessee has claimed the trading loss in the script of M/s Prraneta Industries Ltd amounting to Rs. 42,14,344.00 which the AO proposed to be bogus and accordingly sought an explanation from the assessee. 3.8 The assessee in response to such notice made detailed replies which is narrated below: i. The list of the counterparties involved in the script of the company M/s Prraneta Industries Ltd, while carrying out the purchase and sale transactions, should have been provided so as to carry out the necessary verification. ii. There was no evidence brought on record by the AO alleging that the price and the value of the shares of M/s Prraneat Industries Ltd were managed and controlled by SCS. iii. The opportunity of cross-examination of the parties alleged to be engaged in providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a of cross-examination of the other parties to the assessee as the disallowance of the loss is not based merely on the statements but there are other documents seized during the search and survey operation which have been used against the assessee. As such the excel sheets were recovered containing the information about the transaction of cash payment and receipt of cheques between SCS and the assessee. According to the AO, no prudent businessman will deal in the shares of a company which is based on papers only. Thus, the entire loss claimed by the assessee was manipulated/ bogus and accordingly, the same was disallowed by the AO by adding to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the Ld. CIT-A and besides reiterating the contentions made during the assessment proceedings further submitted that SCS in his statement has not admitted that the transaction carried out in the script of M/s Prraneta Industries by the assessee is bogus. Likewise, there is also no allegation in the statement of SCS which is detrimental to the assessee. Similarly, there is no whisper from the seized documents suggesting that the assessee has acquired/incurred the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandrakant Shah in 'Cash Sheet' as well as in various account maintained in the name of intermediaries who had introduced clients to Shri Shirish Chandrakant Shah. On perusal of these sheets and the statement of Shri Shirish Chandrakant Shah and his employees established that the main intermediary through whom clients of Ahmedabad availed accommodation entries from Shri Shirish Chandrakant Shah was Shri Rajesh N. Jhaveri (key person of Rajesh Jhaveri Group). It was also established that in the cash sheets seized from Shri Shirish Chandrakant Shah, entries against the name rajesh Jhaveri , n navkar , R JHAVERI , RAJESH JHAVERI and N NAVKAR (sawaca) related to Shri Rajesh Jhaveri. (iii) The directors of various companies managed by Mr. Shirish Shah were dummy directors which are accepted to be true by such directors in affidavits filed at various stages including before Investigation Department. (iv) During the course of search at the premises of Mr. Shirish Shah, various incriminating material including cash sheets were found which prove that they have provided various types of accommodative entries against cheques and vice versa. The sample copies of such loose papers are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /ICD taken by the appellant is genuine, whereas in case before Hon'ble Madhya Pradesh High Court, all the investor companies and directors have confirmed their transactions against notices us 133(6) of the Act. In the present case during the course of assessment proceedings, the AO had asked to the appellant to produce the directors of the companies from whom transaction related to shares/loan/ICD were made/taken but of directors remained present it is observed that Jurisdictional High Court in the case of Amrapali Fincap Limited (supra) has upheld the Order of Hon'ble Settlement Commission in connection with entries taken from Mr. Shirish Shah and Group (x) A holistic approach is required to be made, test of preponderance of probability has to be applied and while deciding these facts, the evidences discussed herein above against Mr. Shirish Shah cannot be ignored. (xi) Various judicial pronouncements discussed in preceding paras clearly prove that loan/ICD taken by Appellant is non-genuine. The decision referred herein above includes the decision of Jurisdictional High Court in the case of Mr. Pavan Sanghvi, one of the main persons of Mr. Shirish Shah Group, decision of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a prudent investor/traders like appellant group to purchase the shares of these paper companies in huge quantity and incur loss. Thus, it can be concluded that the purchase and sale of shares of above scrip namely M/s Prraneta Industries Ltd. was clearly made as a part of accommodation entry business of Shri Shirish C. Shah 25.1 It is further observed from the assessment order that the findings of the search on Shri Shirish C. Shah clearly established that Shri Rajesh N. Jhaveri was one of the key associates of Shri Shirish C. Shah and he had introduced various clients of accommodation entries to Shri Shirish C. Shah. Shri Rajesh N. Jhaveri along with his associates (including appellant) has also helped Shri Shirish C. Shah in keeping the scrip active on the bourses and in synchronized trading, by trading on the script. This facts got strengthened from the fact that the counterparties to the trades of the appellant in the scrip of M/s. Prraneta Industries Ltd. were mainly the entities controlled and managed by Shri Shirish C. Shah Since, the Scrip M/s. Prraneta Industries Ltd. was managed and controlled by Shri Shirish Shah and also in view of detailed discussion made in para 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year before us. Whatever, the assessee has shown purchases for the script i.e. M/s Prraneta Industries were sold out in the year under consideration. In most of the transaction, there was profit shown by the assessee barring few transactions and that too at the fag end of the assessment, the assessee has incurred losses in the short span of time. In other words, the bottom result of the various transaction carried out by the assessee in the script of M/s Prraneta Industries was loss after adjusting the profit amounting to Rs. 42,14,344.00. There were various reasons pointed out by the Revenue for treating such loss as bogus in nature which have been elaborated in the preceding paragraph. 9.2 It is the admitted position that the core business of the assessee was dealing in shares. The assessee during the year under consideration has shown total purchases of different scripts at a value of Rs. 80,78,04,800.00 against the gross sales of ₹ 93,19,71,306.00. The assessee has also shown the closing inventory at ₹ 5,67,62,457.00. Likewise, the assessee has filed the return of income under section 139(1) of the Act declaring an income of Rs. 8,33,83,875.00 before adjusting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation carried out by the investigation wing of Kolkata/ Mumbai, it was unearthed that there were numerous companies involved generating bogus long-term capital gain, eligible for exemption under section 10(38) of the Act. However, there was no information available on record whether the name of the company i.e. M/s Prraneta Industries was appearing in the investigation carried out by the investigation wing of Kolkata/ Mumbai or any other investigation carried out by the income tax department. 9.7 An alleged scam might have taken place in the trading of the script M/s Prraneta Industries. 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 assessee s action giving his/her involvement in the scam should be established. 9.8 The allegation implies that cash was paid by the assessee and in return the assessee received STCL, which was set off against income. This allegation that cash had changed hands, has nowhere been pointed out by the revenue. But no such fact has been brought on record even based on circumstantial evidence. There is no dispute raised by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 9.10 Respectfully following the judgment of Hon ble Delhi High Court, we hold that in absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as trading loss claimed by the assessee in the scripts of M/s Prraneta Industries. Hence the ground of appeal of the assessee is hereby allowed. 10. In the result, the appeal of the assessee is allowed. Coming to the ITA No. 427/AHD/2023 Asst. Year 2011-12 11. The only issue raised by the assessee is that ld. CIT-A erred in confirming the order of the AO by sustaining the disallowance of trading loss of Rs. 2,44,62,330.00 treating the same as bogus loss. 12. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2011-12 is identical to the issue raised by the assessee in IT(SS)A No. 426/AHD/2023 for the assessment year 2010-11 except the change of the scripts i.e. Chandni Textile Engineering Industries Limited. Therefore, the findings given in IT(SS)A No. 426/A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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