Income Tax Appellate Tribunal – Kolkata
Aghor Kumar Dudhwewala, Kolkata vs Ito, Ward – 22(4) , Kolkata on 9 August, 2019 1 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 आयकर अपील य अधीकरण, यायपीठ – “SMC” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH: KOLKATA (सम ) ी ऐ. ट . वक , यायीक सद य) [Before Shri A. T. Varkey, JM] I.T.A. No. 2605/Kol/2018 Assessment Year: 2015-16 Aghor Kumar Dudhwewala Vs. ITO, Ward – 22(4), Kolkata
(PAN: ADCPA 9872 H)
Appellant Respondent Date of Hearing 01.07.2019 Date of Pronouncement 09.08.2019 For the Appellant Shri Akkal Dudhwewala, ACA For the Respondent Shri Sankar Halder. JCIT, Sr. DR ORDER

This is an appeal preferred by the assessee against the order of Ld. CIT(A) – 6,
Kolkata dated 19.11.2018 for Assessment Year 2015-16.

2. The main grievance of the appellant in this appeal is as to whether on the facts and
circumstances of the case, the LdCIT(A) was justified in upholding the addition made by
the AO u/s 68 of the Act in respect of gain derived on sale of shares of M/s Raj Lakshmi
Industries Limited (‘RLIL’) treating the same as income from undisclosed sources after
rejecting the assessee’s claim of Long Term Capital Gains (LTCG) on sale of those shares.

3. The brief facts of the issue as has been recorded by the AO in the Assessment Order
are that the assessee had purchased 5000 shares of M/s Raj Lakshmi Industries Limited. Out
of these, the assessee had sold 2530 shares during the FY 2014-15 resulting in long term
capital gain of Rs.4,52,257/-. The AO vide his requisition dated 14.09.2017 required the
assessee to furnish the complete details of the purchase & sale of shares of M/s Raj Lakshmi
Industries Limited. After going through the submissions of the assessee, the AO issued a
2 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 show cause letter dated 06.12.2017. The AO relying on the project report of the
Investigation Wing, Kolkata alleged that the claim of assessee of exempt income (LTCG)
was bogus in nature. Thereafter, the AO treated the same as cash credit u/s 68 of the Act and
added the entire LTCG to the income of the assessee as unexplained income. On first
appeal, the Ld. CIT(A) dismissed the grounds raised by the assessee against his claim of
exemption u/s 10(38) of the Act and he also confirmed the additions made by the AO under
section 68 of the Act. Aggrieved, the assessee is in appeal before this Tribunal.

4. I have heard rival submissions and gone through the facts and circumstances of the
case. Assailing the order of the AO, the Ld. AR of the appellant took me through the
sequence of events which occurred in the facts of the instant case. It was submitted that the
appellant individual was engaged in profession and was investing his surplus monies in the
form of investment in shares & securities. The ld. AR drew my attention to the fact that
before the AO the appellant had furnished complete details & evidences to substantiate his
transaction in the shares of RLIL. It was pointed out that the AO had made general
assertions and allegations in his show cause as well as the impugned order without pointing
out any specific detail or infirmity in the documents furnished before him. He invited my
attention to the letter dated 18.12.2017 wherein the appellant had specifically sought the AO
to provide the copy of the so called report of Investigation Wing based on which allegations
were being levelled against him. It was submitted that there was no project report or any
other credible evidence obtained from the Investigation Wing by the AO which would in
any manner suggest that the gain derived by the appellant on sale of shares of RLIL was
bogus. In absence of any direct or indirect evidence against the appellant, it was claimed
that the lower authorities erred in denying the benefit of exemption claimed u/s 10(38) in
respect of sale of shares of RLIL by the appellant. He further brought to my attention that
this Tribunal in the following cases,on similar set of facts and circumstances, has held 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 general reports of the Investigation Wing and/or the statements
3 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 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 – [2010] 40 SOT 475 (Agra (TM)
(ii)ITO vs. Bibi Rani Bansal – [2011] 44 SOT 500 (Agra) (TM)
(iii) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agra/2009 (Agra ITAT)
(iv) ACIT vs. Amita Agarwal & Others – ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT)
(v) Rita Devi & Others vs. DCIT – IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT)
(vi) Surya Prakash Toshniwal vs. ITO – ITA No. 1213/Kol/2016 (Kol ITAT)
(vii) Sunita Jain vs. ITO – ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT)
(viii) Ms. Farrah Marker vs. ITO – ITA No. 3801/Mum/2011 (Mumbai ITAT)
(ix) Anil Nandkishore Goyal vs. ACIT – ITA Nos. 1256/PN/2012 (Pune ITAT)
(x) CIT vs. SudeepGoenka – [2013] 29 402 (Allahabad HC)
(xi) CIT vs. UditNarain Agarwal – [2013] 29 76 (Allahabad HC)
(xii) CIT vs. Jamnadevi Agarwal [2012] 20 529 (Bombay HC)
(xiii) CIT vs. Himani M. Vakil – [2014] 41 425 (Gujarat HC)
(xiv) CIT vs. Maheshchandra G. Vakil – [2013] 40 326 (Gujarat HC)
(xv) CIT vs. Sumitra Devi [2014] 49 37 (Rajasthan HC)
(xvi) GaneshmullBijay S Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT)
(xvii) Meena Devi Gupta vs. ACIT – ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT)
(xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT)
(xx) Lalit Mohan Jalan (HUF) vs. ACIT – ITA No. 693/Kol/2009 (Kol ITAT) 5. On the other hand, the Ld. DR for the Revenue vehemently opposed the contentions
of the assessee and took us through the AO’s order and Ld. CIT(A) order and submitted
thatthe scrips of M/s. RLIL was artificially rigged to provide LTCG to the assessee which
cannot be allowed and supported the impugned order and relied on the order of Hon’ble
Bombay High Court in the case of Binod Chand Jain in Tax Appeal No.18 of 2017.

6. Coming to the facts of instant case, it is noted by me that the assessee had purchased
5000 shares @ Rs.20/- each of M/s. Raj Lakshmi Industries Limited for a consideration of
Rs.1,00,000/- from Mr.DilipNaskar in an off market transaction. It is clarified that off
market transaction has not been prohibited and if carried out legally cannot be held to be
bogus only on this count. It is further noted that out of 5000 shares, the appellant later sold
2530 shares at a price of Rs.5,02,857/- in the Stock Exchange of Bombay, which according
to assessee, resulted in Long Term Capital Gains after remitting STT and so the assessee
4 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 claimed exemption u/s 10(38) of the Act of Rs.4,52,257/-. It is noted that the purchase bill
of Mr. DilipNaskar and details of payment made for purchase of shares found are placed at
pages 14 to 16 of paper book. The aforesaid 5,000 shares of M/s. Raj Lakshmi Industries
Limited were received in the DEMAT (page 17 of paper book). The assessee sold the said
shares during the previous year relevant to assessment year under consideration and such
sale was made in the Bombay Stock Exchange through M/s. Ortem Securities Ltd., a
registered share and stock broker (contract notes placed at pages 52-58 of Paper Book) after
duly paying the Security Transaction Tax (STT). The sale consideration the assessee
received by account payee cheque in its IndusInd Bank account which is evident from the
bank statement filed before us at pages37-44 of the paper book. Therefore, the long term
capital earned in the process has been claimed as exempt income under section 10(38) of the
Act. I also note that in support of the assessee’s contention various documents had been
filed during the course of assessment proceedings i.e. copies of purchase bills, copy of Bank
statements showing payments made for purchase of shares, demat account with East India
Securities Limited, transaction statement from BSE, copies of contract notes in respect of
sale of shares, extracts of transactional data in respect of the trades conducted in the shares
of RLIL, copy of bank statements showing receipts against sale of shares, all of which is
available at pages 14-59 of paper book.

7. I note that shares of M/s. RLIL were sold by assessee through recognized broker in a
recognized Stock Exchange. The details of such sale and contract note have been submitted
before AO/Ld. CIT(A). I take note that when the transactions happened in the Stock
Exchange, the seller who sells his shares on the stock exchange does not know who
purchases shares. It is noted that the shares are sold and bought in an electronic mode on the
computers on-line by the brokers and there is also no direct contact at any level even
between the brokers. It is noted that as and when any shares are offered for sale in the stock
exchange platform, any one of the thousands of brokers registered with the stock exchange
is at liberty to purchase it. As far as our understanding the selling broker does not even
know who is the purchasing broker. This is how the SEBI keeps a strict control over the
transactions taken place in recognized stock exchanges. Unless there is an evidence to show
5 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 that there is a breach in the aforesaid process which in fact has been unearthed by
meticulous investigation, I am of the opinion that the unscrupulous actions of few players
exploiting the loopholes of the Stock Exchange, if any, cannot be the basis to paint the
entire sale/purchase of a scrip like that of M/s. RLIL as bogus without bringing out adverse
material specifically against the assessee.

8. The Ld. CIT(A) in his order has observed that the Mr. Naskar from whom the
assessee had purchased the shares in the off market transaction had in turn purchased the
shares from M/s Hede Consultancy Company Pvt. Ltd. which was based out of Goa.
According to Ld. CIT(A) the fact that Mr. Naskar had purchased shares just three days prior
to selling the same shares to the appellant showed that this act of investing privately was
against financial prudence. This observation however appears to be irrelevant. It is well
accepted that the Revenue is not empowered to sit in judgement with regard to the
reasonableness or necessity of incurring expenditure or for that matter earning any income
and determine its reasonableness and expediency. In other words the Revenue cannot
decide or dictate as to how an assessee should conduct his business. Hence merely because
the seller who sold the shares to the appellant had purchased it three days ago cannot be held
against the appellant. It is further noted that there is no denying the fact that the appellant
had obtained physical delivery of share certificates which were later on handed over to the
depository participant for being held in dematerialized form. From the copy of the demat
request form filed by the appellant with M/s East India Securities Limited it is noted that the
share folio number, distinctive numbers of the share certificates handed over etc. were set
out in detail. On these facts therefore the Ld. CIT(A)’s observation doubting the
genuineness of the purchase of shares is found to be unsustainable.

9. I further note that the fact of holding the shares in the Demat account has not
been disputed. Therefore, once, the holding of shares is Demat account stands proved,
then the transaction cannot be held as bogus. The AO has not disputed the sale of
shares from the D-mat account of the assessee and the sale consideration was directly
credited to the bank account of the assessee, therefore, once the assessee produced all
6 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 relevant evidence to substantiate the transaction of purchase, dematerialization and
sale of shares then, in the absence of any contrary material brought on record the same
cannot be held as bogus transaction merely on the basis of report of Investigation
Wing, Kolkata wherein there is a general statement of providing bogus long term
capital gain transaction to the clients without stating anything about the transaction of
allotment of shares by the company to the assessee.

10. I note that the AO has made reference to a general report of Investigation Wing
of the Income Tax Department. Nowhere the AO or the Ld. CIT(A) has brought on
record the specific contents of the general report of Investigation Wing nor is there any
material to suggest that the assessee has indulged in anynefarious activities or his
broker has carried out any stage managed/pre-determined sale of the shares as
contended by the AO. I thus note that there is no specificevidence which have been
collected by the AO in coming to a conclusion that the saleconsideration from the sale
of shares of M/s. RLIL is bogus. It is notedthat this Tribunal hadan occasion to
examine the claim of an assessee on another scrip namely, M/s. GIFL andhas allowed
the claim of the assessee in ITA No. 711/Kol/2018 Kanwarlal Agarwal (HUF) Vs. ITO
for AY2014-15 by order dated 01.02.2019. In the instant case this Tribunal has taken
into consideration the Ld. AR’s submissionand reliance placed by the Ld. DR on the
decision of the Hon’ble Bombay High Court decision in Sanjay Bimalchand JainVs.
Pr. CIT 89 196, wherein the Tribunal vide para 6 and 7 has observed

“6. Regarding the case laws relied upon by the Id. Departmental Representative, I find that, inthe case of M/s. Pankaj Agarwal & Sons (HUF)(supra), the issue was decided against theassessee for the reason that, the assessee could not justify his claim as genuine by producingevidence and was only arguing for the matter to be set aside to the lower authorities on theground of natural justice. As similar arguments were not raised before the lower authoritiesby the assessee, the ITAT rejected these arguments. In the case on hand, all evidences wereproduced by the assessee. In the case of Sanjay Bimolchand Jain, legal heir of Santi DeviBimalchand Jain, the Hon’ble High Court upheld the stand of the Revenue that the transactionin question is an adventure in nature of trade and the profit of
7 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 the transactions is assessableunder the head of ‘Business Income’. In the case on hand, the Ld. Assessing Officer has notassessed this amount as ‘Business Income’. In any event, I am bound to follow the judgment ofthe Jurisdictional High Court in this matter. I find that the assessee has filed all necessaryevidences in support of the transactions. Some of these evidences are (a) evidence of purchaseof shares, (b) evidence of payment for purchase of shares made, by way of account payeecheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy ofdemat statement reflecting purchase, (e) copy of merger order passed by the High Court, (f)copy of allotment of shares on merger, (g) evidence of sale of shares through the stockexchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statementreflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. 7. The proposition of law laid down in these case laws by the Jurisdictional High Court aswell as by the ITAT, Kolkata on these issues are in favour of the assessee. These are squarelyapplicable to the facts of the case. The Ld. Departmental Representative, though not leavinghis ground, could not controvert the claim of the Ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon’ble Jurisdictional Calcutta Highcourt and the ITAT. I am bound to follow the same.”

11. The Mumbai Special Bench of the Tribunal in case of GTC Industries vs. ACIT
(supra) had the occasion to consider the addition made by the AO on the basis of
suspicion and surmises and observed in par 46 as under:-

“46. In situations like this case, one may fall into realm of ‘preponderance of probability’ where there are many probable factors, some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed on material facts socollected. Here in this case the material facts strongly indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expenses and it was their liability as per their mutual understanding with the assessee. Another very strong probable factor is that the entire scheme of ‘twin branding’ and collection of premium was so designed that assessee company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that AssesseeCompany was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the
8 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ‘preponderance of probability’ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee.”

12. Therefore, when the Assessing Officer has not brought any material on record to
show that the assessee has paid over and above the purchase consideration as claimed and
evident from the bank account, then in the absence of any evidence it cannot be held that the
assessee has introduced his own unaccounted money by way of bogus long term capital
gain. The Hon’ble Rajasthan High Court in case of CIT vs. Smt. Pooja Agrawal (supra) has
upheld the finding of the Tribunal on this issue in para 12 as under:-
“12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:-

“Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note
9 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee’s account with P.K. Agarwal & co. share broker, company’s master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants’s account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant’s case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. PawanPurohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. PawanPurohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all the material facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. PawanPurohit. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non- genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant.”
13. Gainful reference in this regard may also be made to the decision of the jurisdictional
Hon’ble Calcutta High Court in the case of CIT V. Lakshmangarh Estate & Trading Co.
Limited [2013] 40 439 wherein it was held that on the basis of a suspicion
10 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 howsoever strong, it is not possible to record any finding of fact. As a matter of fact
suspicion can never take the place of proof. It was further held that in the absence of any
evidence on record, it is difficult if not impossible, to hold that the transactions of buying or
selling of shares were colourable transactions or were resorted to with ulterior motive.
14. I note that the sale of shares of M/s. RLIL which was dematerlized in Demat account
has taken place through recognised stock exchange and assessee received money through
banking channel. So, assessee has explained the nature and source of the money with
supporting documents and thus has discharged the onus casted upon him by producing the
relevant documents mentioned in para 6 (supra), accordingly, the question of treating the
said gain as unexplained cash credit under section 68 of the Act cannot arise unless the AO
is able to find fault/infirmity with the same. I note that the source of the receipt of the
amount has been explained and the transaction in respect of which the said amount has been
received by assessee has not been cancelled by the stock exchange/SEBI. So, it is difficult to
countenance the action of AO/Ld. CIT(A) in the aforesaid facts and circumstances
explained above.
15. Even assuming that the brokers may have done some manipulation then also the
assessee cannot be held liable for the illegal action of the brokers when the entire
transactions have been carried out through banking channels, duly recorded in the Demat
accounts with a Government depository and traded on the stock exchange unless specific
evidence emerges that the assessee was in hand in gloves with the broker for committing the
unscrupulous activity to launder his own money in the guise of LTCG. There is also nothing
on record which could suggest that the assessee gave his own cash and got cheque from the
alleged brokers/buyers.
16. Let us look at certain judicial decisions on similar facts:-
ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 17. The case of the assessee’s is similar to the decision of Hon’ble Bombay High Court,
Nagpur Bench in CIT vs. Smt. Jamnadevi Agrawal &Ors. dated 23rd September, 2010
reported in (2010) 328 ITR 656 wherein it was held that:
“The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary ITA Nos. 93 to 99/RPR/2014 & C.O. Nos. 12 to 18/RPR/2014 . A.Y. 2004-05 10 produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the,bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, yn the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers’ bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.–Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) &Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; SumatiDayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished.” 12. The Hon’ble High Court of Rajasthan in CIT vs. Smt. PushpaMalpani – reported in (2011) 242 CTR (Raj.) 559; (2011) 49 DTR 312 dismissed the appeal of department observing ‘Whether or not there was sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and
12 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 quotations, of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, ‘the prese/itdppeal does not raise any question of law, much less any substantial question of law.”

18. The Hon’ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299
ITR 0179 has held as under:-

“The Tribunal on the basis of the material on record, held that purchase contract note, contract note for sates, distinctive numbers of shares purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus but a genuine transaction. The purchase of shares was made on 28th April, 1993 i.e.. asst. yr. 1993-94 and that assessment was accepted by the Department and there was no challenge to the purchase of shares in that year. It was also placed before the relevant AO as well as before the Tribunal that the sale proceeds have been accounted for in the accounts of the assessee and were received through account payee cheque. The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO merely on surmises and conjectures. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO. –Therefore, the AO could not have added income, which was rightly deleted by the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof. Consequently, no question of law, much less a substantial question of law, arises for adjudication.– C. Vasantlal& Co. vs. CIT (1962) 45 ITR 206 (SC), M.O. Thomakutty vs. CIT (.1958) 34 ITR 501 (Ker)) and Mukand Singh vs. Sales Tax Tribunal (1998) 107 STC 300 (Punjab) relied on; Umacharan Shaw &Bros. vs. CIT (1959) 37 ITR 271 (SC) Applied; Jaspal Singh vs. CIT (2006) 205 CTR (P & H) 624 distinguished”
19. In the case before the Hon’ble Calcutta High Court in the case of CIT V. Bhagwati
Prasad Agarwal in ITA No. 22 of 2009dated 29.4.2009, the assessee had claimed exemption
of income from Long Term Capital Gains. However, the AO, based on the information
received by him from Calcutta Stock Exchange found that the transactions were not
recorded thereat. He therefore held that the transactions were bogus. The Hon’ble
13 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found thatthe
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 20. As far as the Ld. DR’s reliance on the decision of the Hon’ble Bombay High Court in
the case of Bimalchand Jain in Tax Appeal No. 18 of 2017 is concerned, I find that the facts
are different from the facts of the case in hand. In that case, the purchases made by the
assessee of shares of companies were done through the broker and the address of the broker
was incidentally the address of the company. The profit earned by the assessee was shown
as capital gains which were not accepted by the A.O. and the gains were treated as business
profit of the assessee by treating the sale of the shares within the ambit of adventure in
nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the
dispute was whether the profit earned on sale of shares was capital gains or business profit.
21. Instead I note that similar issue arose in Manish Kumar Baid, (supra) wherein, the
Tribunal allowed the claim of assessee in respect of LTCG from sale of shares of M/s.
KAFL(a different scrip) by observing as under:

“6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the ld AR that the ld AO was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the ld AR supra, with regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon’ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon’ble High Court in May 2013 merely based on a statement given by a third party which has not
14 ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 been subject to cross -examination. Moroever, it is also pertinent to note that the
assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned
in the said statement as a person who had allegedly dealt with suspicious transactions
nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we
hold that there is absolutely no adverse material to implicate the assessee to the entire
gamut of unwarranted allegations leveled by the ld AO against the assessee, which in
our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR
could not controvert the arguments of the ld AR with contrary material evidences on
record and merely relied on the orders of the lower authorities apart from placing the
copy of SEBI’s interim order supra. We find that the SEBI’s orders relied on by the ld
AO and referred to him as direct evidence against the assessee did not contain the name
of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the
assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries
provided by the related entities / promoters / brokers / entry operators. In the instant
case, the shares of CPAL were purchased by the assessee way back on 20.12.2011 and
pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of
shares in KAFL, which was sold by the assessee by exiting at the most opportune
moment by making good profits in roder to have a good return on his investment. We
find that the assessee and / or the broker Ashita Stock Broking Ltd was not the primary
allottees of shares either in CPAL or in KAFL as could be evident from the SEBI’s
order. We find that the SEBI order did mention the list of 246 beneficiaries of persons
trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd’s
name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock
Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that
even the SEBI’s order heavily relied upon by the ld AO clearly states that the company
KAFL had performed very well during the year under appeal and the P/E ratio had
increased substantially. Thus we hold that the said orders of SEBI is no evidence
against the assessee, much less to speak of direct evidence.

The enquiry by the Investigation Wing and/or the statements of several persons
recorded by the Investigation Wing in connection with the alleged bogus transactions in
the shares of KAFL also did not implicate the assessee and/or his broker. It is also a
matter of record that the assessee furnished all evidences in the form of bills, contract
notes,demat statements and the bank accounts to prove the genuineness of the
transactions relating to purchase and sale of shares resulting in LTCG. These evidences
were neither found by the ld AO to be false or fabricated. The facts of the case and the
evidences in support of the assessee’s case clearly support the claim of the assessee that
the transactions of the assessee were bonafide and genuine and therefore the ld AO was
not justified in rejecting the assessee’s claim of exemption under section 10(38) of the
Act. We also find that the various case laws of Hon’ble Jurisdictional High Court relied
upon by the ld AR and findings given thereon would apply to the facts of the instant
case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold
that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as
undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the
reframed question no. 1 raised hereinabove is decided in the negative and in favour of
the assessee.”
ITA No. 2605/Kol/2018 Aghor Kumar Dudhwewala, AY 2015-16 22. So, respectfully following the decisions cited above especially taking into
consideration the facts narrated above, I hold that the lower authorities erred in holding the
assessee’s claim on LTCG from the sale of shares of M/s. RLIL as bogus. Therefore, we are
inclined to allow the assessee’s LTCG claim and direct the AO not to treat the long term
capital on sale of shares of M/s RLIL as bogus and delete the consequential addition.
23. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 9th August, 2019 Sd/- (A. T. Varkey) Judicial Member Dated: 9th August, 2019 Biswajit (Sr. PS) Copy of the order forwarded to: 1 Appellant -Aghor Kumar Dudhwewala, AD-6A, 1st Floor, Sector-I, Salt Lake, Kolkata
– 700 064.
2 Respondent – ITO, Ward-22(4), Kolkata.
3 CIT(A) – 6, Kolkata.

4 CIT , Kolkata 5 DR, Kolkata Benches, Kolkata /True Copy, By order, Assistant Registrar/H.O.O. ITAT, Kolkata Benches

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