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2024 (11) TMI 809

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..... me. Merely on the basis of report received from Investigation Wing conducting certain enquiries, the assessing officer cannot treat the share transactions as sham on the basis of suspicion. No adverse inference can be drawn against the appellant merely on the basis of ex-parte statements of the third party(ies) which were not confronted to the assessee. The principle of law thus is that the AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. AO has to bring material on record tangible material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by contract notes and demat statements and account payee cheques cannot be treated as bogus. In the case of the appellant, shares were acquired by way of preferential allotment directly by the Company and not from any broker. Payment was made through banking channels. Deliveries were taken in the DEMAT account, where shares remained for more than one year. Contract notes were issued and shares were also sold on a recognized stock exchange. The SEBI has nowhere .....

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..... ssessee : Shri Ashwani Kumar, CA, Ms. Muskan Garg, CA And Ms. Deepali Aggarwal, CA For the Revenue : Smt. Kusum Bansal, CIT, DR ORDER PER A.D.JAIN, VICE PRESIDENT These are two appeals filed by the assessee s against the separate order of ld. CIT(A)-3 Gurgaon dated 26.09.2023 and 30.08.2023 respectively, pertaining to assessment year 2015-16. Both the appeals were heard together and are being disposed of by a common order, for the sake of convenience. ITA No. 655/CHD/2023 2. In this appeal, the assessee has raised the following grounds of appeal : 1. That the order dated 26.09.2023 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter called the Act ) by the ld. Commissioner of income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much as he has not justified in holding the action of the Ld. Assessing Officer that transactions in shares carried out by the Appellant leading to income from Long Term Capital Gains of Rs. 18,31,36.042/- are allegedly, sham entered into, allegedly, for the purpose of evading tax. 2. That the order dated 26.09.2023 passed u/s 250(6) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals)-3, Gurgaon is against law .....

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..... work, but were being used to provide LTCG to various beneficiaries through such accommodation entries. The AO reproduced the statement of Shri R.K. Kedia from page 4-6 of the assessment order, for reference. In the said statement, he explained the modus operandi in which the names of the appellant and his family members were specifically mentioned as having taken accommodation entry through him. He also revealed the names of various accommodation entry providers used for this purpose. It was explained by him that shares of such paper companies were purchased, which were managed and controlled by such entry operators, so that benefit of exempt LTCG through such listed companies floated by them could be taken in future. He also mentioned the names of some of such paper companies. He further disclosed the modus operandi in detail, wherein, it was explained how the rates of such scrips were rigged in the stock exchange by entry operators in the desired manner, through synchronized trading. When the price of such listed scrips was artificially jacked-up to the desired level, at that stage, unaccounted cash was taken from the beneficiaries, transferred by the entry operators to such acc .....

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..... the shares of M/s Maa Jagdambe was artificially made to rise gradually by using dummy entities, by trading in such shares in small volumes; that M/s Maa Jagdambe was having no assets/no business activities, however, the share price of M/s Maa Jagdambe was rising from Rs. 10/- to Rs. 100-105/- by October-November, 2014, without having any business rationale; that at this stage, the assessee off loaded these shares and earned huge bogus LTCG by selling the shares at a very high price. The AO further collected trade data in respect of counter parties who had bought such shares of M/s Maa Jagdambe from the assessee and it was found that such buyers were dummy entities having no worth. Further, the AO brought on record details of certain broking concerns (namely, M/s SMC Global Securities Ltd., M/s Religare Securities Ltd., M/s Kayan Securities Pvt. Ltd.) which had been found providing LTCG through accommodation entries in the shares of M/s Maa Jagdambe. The AO further mentioned that the Securities Exchange Board of India (SEBI) had made investigation in the case of M/s Maa Jagdambe and the assessee and his family members were found having indulged in manipulation of trading in shares o .....

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..... eased the last traded price of the shares after each of such small lot trades. Such modus \n the case of Maa Jagdambe has been discussed in detail in the finding of the SEBI vide its report dated 06.11.2020 / 29.07.2020, as relied by the AO in the remand report (supra). Once the price was raised through manipulation to a pre-determined level, the shareholders (such as appellant) started booking profits and claimed exempt Long Term Capital Gain in their ITRs. It is relevant to mention here that during this period, P/B (price to book value) ratio of Maa Jagdambe rose to 480500 during this period, price to earning P/E ratio was around 1390, which was very unusual keeping in mind financial profile of Maa Jagdambe. During this period there was no major expansion in the assets/business of the company and it reported meager profits as discussed vide para 6.3 of this order. There is no merit in the argument of the appellant that the price index of capital market is not governed by revenue / profits of a company but it is driven by complex and diverse set of factors. There has to be some reason to justify such abnormal rise in the share price of Maa Jagdambe. It may be some tangible or inta .....

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..... as registering with ROC but having only postal addresses with no real office or employees. It is observed that merely because the company was registered with ROC, having PAN/bank account, the same doesn't establish its identity as it has been found existing on papers. 6.4.1 In the rejoinder dated 04.07.2023 the appellant explained that the orders of the SEBI dated 29.07.2020 and 06.11.2020 relied by the AO in the remand report were passed in 2020, almost after period of 3 years from the date of assessment order and, therefore, reliance placed upon such orders of the SEBI during the appellant proceedings goes beyond the material upon which assessment order was framed; further, such orders of the SEBI have been passed against certain identified individuals and not against the appellant. Therefore such orders of the SEBI are applicable only in the cases of such specific individuals; therefore, it does not imply that the appellant has indulged into similar activities of manipulation whereas the appellant or his family members no role to play in the share price moment of such company and no such allegation has been made by SEBI in the investigation reports against the appellant. 6.4 .....

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..... ellant, it is found that such objections are without any merit. Though such investigation report of the SEBI has been completed after passing the assessment order by the AO, however, the same provides very vital facts and important findings for the relevant period under consideration which are crucial in order to determine / examine genuineness of claim of exempt huge LTCG shown by the appellant in the ITR in the scrips of Maa Jagdambe, which has been held as bogus by the AO. The report of the SEBI goes to the roots of the issue involved. Such report of the Statutory Authority cannot be discarded as it has examined the relevant facts very minutely which are relevant to the facts of the case under consideration. Principle of natural justice has been adhered by sharing the copy of the report with the appellant during the appellant proceedings. Such order of the SEBI though has not been passed in the case of the appellant, however when considered in the totality; the said order alongwith the earlier adverse findings in the present case as discussed above vide para 6.2 onwards such as meager financials and abnormal rise in the price of shares of M/s Maa Jagdambe against all fundamental .....

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..... ility that the appellant alongwith his other family members chose to make investments in penny stock of Maa Jagdambe through offline mode during FY 2012-13 when the company was not having any tangible activity/assets, just existing on papers and having no worth. It is relevant to mention here that appellant along with Smt. Aarti Singal, Shri Aniket Singal and M/s Sanjay Singal HUF have purchased 3,75,000 each, thus holding 10% shareholding of Maa Jagdambe as on March, 2013. It is not an isolated case that the appellant and his family members traded in the penny stock of Maa Jagdambe and earned huge Long Term Capital Gain (exempt income). There are large numbers of such penny stocks from where the appellant and his family members traded and earned huge Long Term Capital Gain (exempt income) of Rs. 971.85 (approx.) from AYs 2011-12 to 2017-18. All such companies were not having any tangible activity/assets, just existing on papers and having no worth. The modus adopted in all such cases is similar where the price of such shares exhibited abnormal rise during short period of time against their fundamentals and meager Financials. The details of such transactions are as under:- I. Shri .....

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..... entering into transactions of penny stocks and earning huge Long Term Capital Gain which were not genuine on the face itself. 6.6 The appellant has claimed that it has sold shares of Maa Jagdambe through recognized stock exchange, duly supported with contract notes and shares proceeds were received through banking channel after payment of STT and thus has claimed genuine exempt LTCG as disclosed in the ITR. However, the onus was upon the appellant to substantiate genuineness of such transactions as it has claimed exempt income in the ITR. The appellant has furnished above documents in order to discharge his initial onus. However once the AO has brought on record and confronted such adverse findings / observations to the appellant regarding lack of genuineness of such sale transactions, onus has shifted back upon the appellant. Further onus was upon the appellant to bring on record satisfactory material to substantiate the genuineness of sale price of shares of Maa Jagdambe justifying its abnormal rise in the light of above observations. Even during appellant proceedings the appellant has relied upon the same documents / explanation furnished during assessment proceedings. At this s .....

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..... ns made in the earlier years have been deleted by Hon'ble ITAT Chandigarh/Delhi and the appeals were decided in favour of the appellant. Ongoing through the decision of Hon'ble ITAT (supra), it is noted that facts of the case relied upon are different from the facts of the present case. In the said decision, the Hon'ble ITAT has allowed the appeals mainly on the ground that the AO has not allowed cross examination of the persons (accommodation entry providers) on whose statements the assessment order has been relied upon. Therefore, the ratio of the said decision is not applicable to the facts of the present case. In the present case, the AO has not relied upon statement of any person on the basis of which additions have been made for the year under consideration. 6.8.1 It was further argued by the appellant that each year being an independent and separate assessment year; therefore reliance on adverse findings and investigation made in earlier years cannot come to the rescue or aid of the Revenue in any manner. Whereas the appellant has furnished all the evidences in support of genuineness of transactions therefore further onus to dispute the same lies upon the Revenue .....

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..... of the material facts and adverse findings by the SEBI. A genuine transaction must be proved to be genuine in all respect. The onus was on the appellant to prove that the transactions leading to claim exempt LTCG was distinctly genuine transaction and not bogus premeditated transaction arranged with a view to evade taxes by the appellant. The onus was on the appellant to contradict the findings that Maa Jagdambe was a company whose scrips were capable of being traded at high price as it was the appellant who had traded in the shares of the this company which resulted into claim of long term capital gains exempted under section 10 (38). Once the appellant was made aware of the result of investigation made by the SEBI which proved that trading of shares leading to LTCG was not genuine, the onus was on the appellant to prove that it has earned genuine LTCG as it is the appellant who is asserting a claim that it was engaged in genuine share transactions. It is relevant to note here that Hon'ble Supreme Court in the case of Shri Charan Singh versus Chandra Bhan Singh AIR 1988 SC 637 has clarified that the burden of proof relies on the party who substantially asserts the affirmative .....

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..... pt long term gain u/s 10(38) of the Act. There is no justifiable indicator such as some significant business transaction in the case of Maa Jagdambe to substantiate such abnormal rise in its scrips during the period under consideration. The onus was on the appellant to explain the source and nature of the amount credited in his bank account on this account. The appellant however could not discharge the onus as the explanation furnished by him has been found to be unsatisfactory. The AO has confronted the adverse findings/material to the appellant as discussed above. 8.2. In view of the above discussion, I am of the considered view that share transactions leading to LTCG by the appellant are sham transaction entered into for the purpose of evading tax. Accordingly, it is held that the AO has rightly disallowed the claim and added the said amount of Rs. 18,31,36,042/- as income of the appellant; the same is hereby confirmed. 8.3 The above addition has been made by the AO u/s 68 of the Act. However provision of section 68 is applicable only when there are cash credits in the books of account of an assessee. The bank account of the appellant wherein such credits have been made cannot b .....

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..... ars, there was no employee's cost, or administrative expenses, or depreciation, etc.; that from the balance sheet of Maa Jagdambe, it was observed that it has no assets; that it is beyond human probability that shares of such a company, with such poor financials and no operational activity could rise from Rs. 2.60 to Rs. 100 in such a short span of time; that there was nothing on record to justify such kind of exceptional rise in the share price of M/s Maa Jagdambe for the period from June, 2013 to March,2015; that it also beyond human prudence to accept that a company having no establishment, no business activity or assets was fetching a share price of around Rs. 100/-, beyond all its fundamentals; that though it is registered with ROC, having PAN, but in fact is just existing on papers; that the company has been incorporated by taking care of all the technical formalities, such as registering with ROC, but it is having only postal addresses, with no real office or employees; and that the same doesn't establish its identity, as it had been found existing only on paper. 4.2 The ld. CIT(A) further held that the SEBI, in its order dated 29.07.2020 / November 6, 2020 (relied o .....

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..... al; that the SEBI, in its report/order had specifically mentioned the names of the members of the Singal family and had observed that such persons were the beneficiaries out of dubious trading in shares; that from a composite perusal of assessment orders for AY 2011-12 to 2014-15 in the cases of Shri Sanjay Singal, Smt. Aarti Singal, Shri Aniket Singal, Shri Sanjay Singal (HUF) and other family members, it was found that there was a similar pattern, wherein, they had been regularly investing in shares of various penny stock companies having no fundamentals and had been making exit by having huge exempt LTCG within a short period of time; that the appellant, alongwith his other family members, chose to make investment in penny stock of Maa Jagdambe through offline mode during FY 2012-13, when the company was not having any tangible activity/assets, and was existing merely on papers and was having no actual worth; that the appellant, Smt. Aarti Singal, Shri Aniket Singal and M/s Sanjay Singal HUF, had purchased 3,75,000 shares each, and they were having 10% shareholding of Maa Jagdambe as on March, 2013; that it was not an isolated case and that the appellant and his family members t .....

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..... at the appellant had admitted the incriminating nature of such bogus LTCG in the statement recorded u/s 132(4) of the Act during the search proceedings carried out in his case, on 21.02.2014; that though the findings of such search proceedings carried out in the case of the appellant / Shri R.K. Kedia and Shri Shrish Chandrakant Shah might not have been directly applicable to the facts of the present case for the year under consideration, the findings of such search proceedings substantiated the findings of the AO, made for the current AY; that certain share brokers, such as M/s SMC Global Securities Ltd., M/s Religare Securities Ltd. and M/s Kayan Securities Pvt. Ltd. had been found to be involved in providing accommodation entries in various scrips, including those of M/s Maa Jagdambe and they had accepted their involvement in the manipulation in this respect; that the appellant had argued that the AO has not made any independent inquiry for the year under consideration and had merely has made reference to the findings as per the earlier assessment proceedings (AYs 2011-12 to 2014-15), where certain additions on account of LTCG were made in the hands of the appellant/his family m .....

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..... ments submitted to prove the genuineness of transaction were themselves found to serve as a smoke screen to cover up the true nature of the transactions, as it was revealed that the purchase and sale of shares were transactions arranged to create bogus profit in the garb of tax exempt LTCG; that the onus was on the appellant to explain the source and nature of the amount credited in his bank account on this regard ; that however, the appellant could not discharge the onus, as the explanation furnished by him had been found to be unsatisfactory; that the share transactions leading to the LTCG were sham transaction entered into for the purpose of evading tax; that the AO had rightly disallowed the claim and added the amount of Rs. 18,31,36,042/- as income of the appellant; that however, the provisions of section 68 of the Act are applicable only where there are cash credits in the books of account of an assessee; that the bank account of the appellant cannot be considered as the books of account of the appellant; that the provision of section 69A were squarely applicable to the facts of the case; that the appellant had been found to be the owner of the money lying in his bank account .....

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..... SSESSEE'S CONTENTIONS 7.3 The submission of the assessee in this regard is that M/s Maa Jagdambe Tradelinks Ltd. was having total revenue of Rs. 1.24 Cr for Financial Year 2012-13, of Rs. 28.20 Cr for Financial Year 2013-14 and of Rs. 122.65 Cr, for Financial Year 2014-15, and that it had earned a loss of Rs. 16,618/- for Financial Year 2012-13, a profit of Rs. 59,08,431/- for Financial Year 2013-14 and a profit of Rs. 76,33,588/- for Financial Year 2014-15. The ld. Counsel for the assessee has contended that further, the issued share capital of M/s Maa Jagdambe Tradelinks Ltd. increased from that of Rs. 1.96 Cr in Financial Year 2011-12 to Rs. 15.69 Cr in Financial Year 2013-14. It has been submitted that from this, there comes out a clear indication that the future growth prospects of the said company were positive. It has been submitted that evidently, therefore, there was a positive growth in its operating results of M/s Maa Jagdambe Tradelinks Ltd., as had been anticipated by the assessee. It has been submitted that it was this positive growth in the operating results which led to positive trading results of M/s Maa Jagdambe Tradelinks Ltd. It has been submitted that this .....

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..... by the ld. CIT(A), the assessee has shown the shares to have been allotted by way of preferential allotment off market; that the assessee earned Long Term Capital Gain of Rs. 18,31,36,042/- from the sale of these shares during the year under consideration; that the AO has correctly held, by analyzing the financial data of M/s Maa Jagdambe Tradelinks Ltd., that this company was having nil fixed assets and had disclosed nil profits over the years. It has been contended that in view of these facts, it has rightly been held that the Long Term Capital Gain earned by the assessee from the sale of shares of M/s Maa Jagdambe Tradelinks Ltd. was not genuine. 8.1 It has been contended by the ld. DR that from the share price of M/s Maa Jagdambe for the period between 2013-2015, it was observed by the AO that the share price of such shares was around Rs. 10/- per share during October,2013 (the period when such shares were allotted to the appellant through preferential allotment via offline mode); and that thereafter, the share price of M/s Maa Jagdambe was artificially made to rise gradually by using dummy entries by trading in such shares in small volumes. 8.2 It has been contended by the ld .....

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..... er relied on by the AO as well, which order has rightly also been relied on by the ld. CIT(A). 8.9 It has been contended by the ld. DR that during this period, the price to book value (P/B) ratio of M/s Maa Jagdambe rose to 480-500, and that during this period, the price to earning (P/E) ratio was around 1390, which was very unusual, keeping in mind the financial profile of M/s Maa Jagdambe. 8.10 It has been contended by the ld. DR that there has to be some reason to justify such abnormal rise in the share price of M/s Maa Jagdambe, however, in this case, there is no material to justify such abnormal increase in the share price of M/s Maa Jagdambe, despite the company having meager financials. 9. It has been contended that the Ld. CIT(A) has rightly held that the share price of M/s Maa Jagdambe has substantially increased from Rs. 2.60 in June 2013 to Rs. 99.95 per share in June 2014, without any significant increase in assets/business volumes, revenues, etc., of the entity; that further, it was held that share price of M/s Maa Jagdambe has been artificially manipulated and there was no tangible or intangible material to justify such abnormal increase in the share price of M/s Maa .....

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..... ince the appellant expected growth in the share price, the shares were held for a substantial period of more than 18 months. The Company announced a share-split in the ratio of 10:5, which resulted in the assessee's increase in holding to 18,75,000. The appellant thereafter sold the shares in tranches, at an average price of Rs. 99.67 per share, during the period from September 2014 to March 2015. The shares of the said company were traded for as high as Rs. 102.63 per share in February 2015, as is evident from the analysis of share price trend, as discussed. It is thus evident, as rightly contended, that the appellant made investment in the aforesaid Company as a prudent investor at a reasonable price, which investment was held for a substantial period, i.e., for around 18 months and thereafter, it was sold on recognized stock exchange. 11. As submitted, the share transaction undertaken by the appellant was genuine and the exemption claimed under section 10(38) on gain arising from sale of listed shares was fully in conformity with the provisions of the Act. 12. In the previous year relevant to the assessment year 2015-16, the appellant filed return declaring income of Rs. 1,1 .....

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..... count of split by the said company, the number of shares increased which resulted in gains to the appellant. M/s Maa Jagdambe Tradelinks Limited is engaged in the business of textiles. The total revenue of the said company for the financial years 2012-13, 2013-14 and 2014-15 aggregated to Rs. 1.24 crores, Rs. 28.20 crores and Rs. 122.65 crores, respectively, and profit/(loss) during the said periods was (Rs.16,618/-), Rs. 59,08,431/-and Rs. 76,33,588/-, respectively. Further, its issued share capital increased from Rs. 1.96 crores in FY 2011-12 to Rs. 15.69 crores in FY 2013-14, which only indicated that the future growth prospects of the company were positive. There was positive growth in the operating results of the company, as anticipated by the appellant, which led to positive trading results. The shares of the said company were traded for as high as Rs. 102.63 per share in February 2015. The assessee thus indeed made investment in the aforesaid Company as a prudent investor at a reasonable price, which was held for a substantial period, i.e. for around 18 months and was thereafter, sold on a recognized stock exchange duly supported by the following contemporaneous/ unrebutted .....

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..... as under: 81 ..................... The judgment relied upon by the Revenue does not take forward the arguments of the ld.counsel for the Revenue that there is no need to provide opportunity to cross examine all those persons whose statements have been recorded by the Investigating Agency during the course of search at their residential premises, and more so these judgments cannot be given preference over the judgment of Hon'ble Supreme Court in the case of (Andaman Timber Industries) (supra) which has been considered by the Co-ordinate Bench. Similarly, other large number of orders have been placed on record. They are distinguishable on facts; they have their own facts which are not applicable in the instant cases. By referring each order, we will be unnecessarily making this order more lengthy and bulky, because Co-ordinate Bench has considered more than hundred of decisions cited by both the sides, and thereafter the Bench has researched and referred sixty two orders on this point of law. Bench thereafter decided the appeals. After going through well reasoned order in the light of material brought to our notice, we are of the view that issue in(dispute in all these appeals i .....

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..... the shares was adjusted by the broker against that payment to be made to those assessee s. It is in such circumstances, the additions have been confirmed by the coordinate benches. Therefore, the facts of those cases are clearly distinguishable. 14.1 The issue thus stands squarely covered by the order of the Tribunal in the appellant s own case for the preceding assessment year(s), wherein, a similar addition made on account of alleged bogus long term capital gain on the basis of the very same material/statements (not confronted to the assessee, as acknowledged by the assessing officer himself), has been deleted by the Tribunal, by holding such ex-parte material/statements to be unreliable. 15. In the assessment order, the assessing officer has proceeded to draw adverse inference and has made addition on account of alleged bogus long term capital gains primarily on the following two grounds: (a) Relying mainly upon statement of Sh. R.K.Kedia, the assessing officer held that the transaction is bogus; and (b) Alleged that the investee company i.e., M/s Maa Jagdambe Trade Link Limited is merely a paper company and not doing any meaningful business and the trading activity appears to .....

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..... orrectly noted at para 6.11 of the order that However, from the record, it is found that the AO has not relied upon the statement of any person for the year under consideration in order to draw adverse inference against the appellant , without appreciating that the entire case of the assessing officer was based on the statement of Sh.R.K.Kedia. The fact that no opportunity was afforded to cross examine Sh. R.K.Kedia has also been observed by the Tribunal in the order(s) passed for the preceding assessment year(s). Thus, since the statement was not subjected to cross-examination, it must be completely excluded from consideration. Once the said ex-parte statement is excluded, there is nothing on record to doubt/suspect, much less establish, the transaction of long term capital gains. The sole basis of entire adverse inference is the statement of Sh. R.K.Kedia, which was explained/ retracted on 14.10.2014 and thereafter, he 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 speak and was taking intrinsically mutually contrary stands. He was an unreliable witness. In this regard, it .....

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..... as it is patent on record that only one notice u/s 142(1) of the Act was issued by the AO, on 13.10.2017 (APB-250 to 251) in response to which, the appellant furnished a detailed reply dated 17.11.2017 (APB-252 to 253). No further query was ever raised, nor any opportunity was provided for cross examination. Concerning the so-called suspicious share trading activity 23. The Assessing Officer has referred to the so-called circumstantial evidences to draw the inference that the share transactions undertaken by the appellant were sham and a colourable device to evade taxes and introduce unaccounted money in his books. The Assessing Officer has alleged that the appellant had purchased shares in M/s Maa Jagdambe Trade Link Limited, the price of which skyrocketed even when the said company had no proven results, and that the preponderance of probability and normal human conduct establishes that the transaction undertaken by the appellant was not genuine. 24. The allegation of the assessing officer that the appellant had purchased shares of M/s Maa Jagdambe Trade Link Limited in huge quantities, even when the said company had incurred consistent losses or negligible profits, is factually .....

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..... share prices had increased manifold, is totally unfounded and without any valid basis. 26. Then, the Assessing Officer also failed to appreciate that the increase in price of the said shares was spread over a span of almost two years. Moreover, the market price of the shares has grown consistently over a period of time and not abnormally, as alleged. 27. As regards the observation of the Assessing Officer that the appellant was unable to establish the identity of the said company, there is no basis for doubting the existence of the entity, more particularly having regard to the facts that the investee company is duly registered with the Registrar of Companies; as per the information available even today in the public domain, the investee-company is an operating company, having dynamic and operational websites; the investee company is listed on a recognized stock exchange; the existence of the company is not even doubted by any of the regulatory authorities, including SEBI. Concerning Preponderance of probability 28. The entire case of the Assessing Officer is based on the preponderance of probabilities and the normal human conduct to allege that the transaction undertaken by the ap .....

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..... assumptions/presumptions [refer J.J. Enterprises vs. CIT 254 ITR 216 (SC), Assam Tea Co. vs. ITO: 92 ITD 85 (Asr.) (SB), Faqir Chand Chaman Lal vs. ACIT: (2004) 1 SOT 914 (Asr.) (Appeal dismissed by P H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR), CIT vs. Paras Cotton Co.: 288 ITR 211 (Raj.)] 33. In the present case, the entire case of the Assessing Officer is based on merely conjectures and surmises, without any tangible material being brought on record to controvert the cogent documentary, contemporaneous material/ evidences placed on record by the appellant. The Assessing Officer has proceeded solely on assumptions and presumptions, and has neither controverted the comprehensive direct / corroborative documentary evidence filed in support of the genuineness of the transaction, nor has attempted to bring on record any independent corroborative material/ evidence to establish that the transactions were bogus. SEBI ORDER/REPORT 34. Reliance has also been placed by the AO and the Ld. CIT(A) on the order passed by SEBI dated 29.07.2020. The Ld. CIT(A) has placed strong reliance on the order and has held that the report provides important findings which are essential .....

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..... eedings which mentions the name of the appellant by SEBI. Otherwise too, there is nothing on record as to the fate of the said order, whether it still survives, or it has been reversed. Therefore also, the aforesaid order of the SEBI cannot be considered as conclusive and it cannot form the basis to draw any adverse inference against the appellant. In view of the above, no adverse inference can be drawn on the basis of the order passed by the SEBI, which has no correlation whatsoever with the assessee, moreso, when as on date, there is no proceeding pending against the appellant before the SEBI with respect to the transaction of shares undertaken by the appellant in respect of the shares of M/s Maa Jagdambe Trade Links Limited. 35. The assessee discharged his initial onus by placing necessary documents on record. The ld. CIT(A) has observed that where AO brought on record and confronted adverse findings to the Appellant, the initial onus again shifted back upon the appellant. However, the appellant again relied upon the same documents/explanation furnished during the assessment proceedings. 36. The shares in M/s Maa Jagdambe Trade Link Limited were sold by the appellant on a recogn .....

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..... inly on the ground that the AO has not allowed any opportunity of cross-examination, but in the present case, the ratio of the said decisions is not applicable, as the AO has clearly relied on the statement of Shri R.K. Kedia, on the basis of which statement, additions have been made. 40. Now, undeniably, the investigation made in earlier years cannot further the case of the Department. Then, the onus shifted to the Department on submission of all the evidence by the assessee. The ld. CIT(A) rejected these contentions by holding that various adverse findings had been brought on record and were also confronted to the assessee and that adequate opportunities of being heard were also provided to the assessee. Reliance was placed by the Ld. CIT(A) on the decision of the Hon ble Supreme Court in the case of CIT vs Durga Prasad More , 82 ITR 540 (S.C) wherein, it has been held that the apparent should be considered as real until it is shown that there are reasons to believe that the apparent is not real. 41. In the case of Pr. CIT vs. Prem Pal Gandhi : ITA No. 95 of 2017 (P H), the assessee purchased shares of a company during the assessment year 2006-2007 at Rs. 11 per share and sold th .....

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..... ied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises (emphasis supplied) 43. The Court upheld the finding of the Tribunal that mere appreciation in the value of shares did not justify the transactions to be treated as fictitious and the capital gains being assessed as undisclosed income if the following conditions stand satisfied viz.,: - the shares are traded on the Stock Exchange; - the payments and receipts are routed through bank; - there is no evidence to indicate it is a closely held company; and - the trading on Stock Exchange was not manipulated in any manner. 43.1 Thus, the claim of exemption in respect of long term capital gains cannot be denied merely on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences filed by the assessee in support of such transaction viz., broker's .....

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..... Kanpur Coal Syndicate ( 53 ITR 225) and Krishan Kumar (2019 265 taxmann 227), the ld. CIT(A) confirmed the additions u/s 69A of the Act. 46. The provisions of section 69A of the Act is as follows: Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 46.1 It is seen that the following two conditions need to be fulfilled before the provisions of section 69A of the Act can be invoked: The assessee should have been found to be owner of any money, bullion, jewellery or other valuable article; and The same should not be found recorded in the books of account, if .....

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..... the basis of details furnished by the assessee to establish that it had purchased and sold shares through a broker and had earned profit on the same. It was held as under: 6. We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet's. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained. 48. In the present case, the CIT(A) had directed to make addition under section 69A of the Act merely on the basis of the presumption that the assessee had redeployed his undisclosed income in the form of capital gains. In concluding so, the CIT(A) had not placed on record any independent tangible material or evidence to both establish that the assessee had undisclosed income a .....

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..... nd must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the Appellant, must be looked upon with disfavour. Though the Madras High Court had occasion to refer to the judgement of the privy Council in IRC v Challenge Corpn. Ltd [(1987) 2 WLR 24], and did not have the benefit of the House of Lords pronouncement in Craven s case (supra), the view taken by the Madras High Court appears to be correct and we are inclined to agree with it. (iv) If the Court finds that notwithstanding a series of legal steps taken by an Appellant, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to treat the intervening legal steps as nonest based upon some hypothetical assessment of the real motive of the Appellant. In our view, the court must deal with what is tangible in an objective manner and cannot afford to chase a will-o -the wisp. (v) We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive .....

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