Income Tax Appellate Tribunal – Kolkata
Sangita Khemka , Kolkata vs Ito, Ward – 45(2) , Kolkata on 17 July, 2019 1 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 आयकर अपील य अधीकरण, यायपीठ – “C” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA (सम ) ी ऐ. ट . वक , यायीक सद य एवं डॉ. अजन ु$ लाल सैनी, लेखा सद य) [Before Shri A. T. Varkey, JM & Dr. A. L. Saini, AM] I.T.A. No. 2661/Kol/2018 Assessment Year: 2014-15 Sangita Khemka Vs. Income-tax Officer, Wd-45(2), Kolkata
(PAN: AFNPK5390R)
Applicant Respondent Date of Hearing 13.06.2019 Date of Pronouncement 17.07.2019 For the Applicant Shri Miraj D. Shah, AR For the Respondent Shri Sankar Halder, JCIT, Sr. DR ORDER
Per Shri A.T.Varkey, JM This appeal preferred by the assessee is against the order of the Ld. CIT(A)-13,
Kolkata dated 04.09.2018 for AY 2014-15.
2. The sole issue involved in this appeal of assessee is as to whether on the facts and
circumstances of the case, the Ld. CIT(A) was justified in upholding the addition made by
the AO u/s 68 of the Act in respect of sale proceeds of shares of M/s Kailash Auto Finance
Limited (KAFL) 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 u/s. 10(38) of
the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

3. The brief facts as has been recorded by the AO in the Assessment Order are that the
assessee claimed long term capital gains from sale of shares of M/s. KAFL to the tune of
Rs.73,69,727/- as exempt from income tax. The AO noted that the assessee had acquired
2,00,000 shares of M/s. Panchshul Marketing Ltd. at a face value of Rs. 1 each for a total
consideration of Rs. Rs.2,00,000/-, which company later got amalgamated with M/s. KAFL
by virtue of an order of Hon’ble Allahabad High Court and in pursuance to such
amalgamation, the assessee was allotted 2,00,000 shares of M/s. KAFL of the face value of
2 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 Rs. 1 each. The said shares were later sold on Bombay Stock Exchange [BSE] through a
broker named M/s. Kotak Securities on different dates falling within the previous year
2013-14 corresponding to the Asst Year 2014-15 at a price of Rs.75,69,727/-., which
according to assessee, resulted in Long Term Capital Gains and so the assessee claimed
exemption u/s 10(38) of the Act of Rs.73,69,727/-.
4. However, the AO did not agree with the assessee’s claim of LTCG and exemption
thereof claimed by the assessee. According to AO, it is unbelievable that the assessee can
make such a huge gain in a span of 18 months of holding these scrips. According to AO,
thus, a deeper study was needed to ascertain whether the transactions were genuine
investment transactions or sham/colourable device only to convert the unaccounted cash
into tax exempt income. In short, according to AO, it was to be ascertained whether the
apparent was real. Thereafter, the AO took note of the financials of the company and
observed that there is nothing worthwhile to mention on the front of assets and net worth of
the company as well, to conclude that it could command such high premiums. According to
AO, the company merely forwarded the share capital received through preferential
placement of shares towards loan and advances. It was also found that during the period of
astronomical rise of shares price of the scrip there was no corporate announcement or big
order or any such news or any extraordinary situation which could result into such frenzy in
the steep rise of scrip price. According to AO, the price of scrip in the secondary market
mainly depends upon the EPS, the business health of a company or some new development
in the company which promises bright future for the shareholders. According to AO, in this
case no such factors are present. According to AO, the price movement of the scrip in the
span of 18 months raised doubts in his mind and that profit earned by the assessee were
beyond human probabilities. The AO noticed that the probable reasons were with a view to
provide large amount of LTCG in the hands of beneficiaries after amalgamating the said
company with KAFL. The AO concluded that M/s. Panchshul Marketing Ltd. (M/s. PML)
was incorporated with a dubious plan and premeditated arrangement and artifice to increase
number of shares therein through sham and non genuine transactions of its shares which
resulted in fetching exorbitant and unrealistic considerations by the scheme of
3 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 amalgamation. The AO referred to the statement of Shri Sunil Dokania recorded u/s 131 of
the Act by the Investigation wing on 12.06.2015, wherein, Shri Dokania has explained the
modus operandi of providing of LTCG in the scrip of KAFL. He stated that by way of
amalgamation of M/s. PML with KAFL, the beneficiaries of LTCG got higher number of
shares of KAFL as against shares of M/s. PML. Mr. Dokania, in the aforesaid statement,
stated before the investigation wing that he had got equal amount of cash from the
beneficiaries, deposited the same to various undisclosed proprietorship concerns, and finally
transferred the same to bogus/shell companies, by layering through various accounts, which
had ultimately purchased the shares sold by the beneficiaries. The AO has also relied upon
statement of Shri Sunil Dokania recorded u/s 131 by the Investigation wing, in the case of
Rashmi Group of Kolkata ; Statement of Shri Dipan Jesingbhai Patel recorded on
20.5.2015; Statement of some beneficiaries who had corroborated the modus operandi as
revealed by Shri Dokania. The aforesaid statements were referred to in the Assessment
Order to come to a conclusion that the assessee was one of the beneficiaries of the
transactions in shares of KAFL which resulted in bogus claim of exempt LTCG.
5. The AO, on the basis of movement of price of KAFL quoted in Bombay Stock
Exchange during the period of September, 2013 to January, 2014 (the period of sale of
shares of KAFL by the assessee), found that the price of shares had increased by 267%. The
AO concluded that while Sensex showed almost no progress, price of shares of KAFL
moved phenomenally. The AO also referred to the financials of KAFL during the Financial
years 2011-12 to 2015-16 and concluded that Earnings per share (EPS) during that period
was either nil or negative but the value of shares was highly inflated. The AO observed that
the prices of shares of KAFL were rigged by the entities connected to KAFL.
6. The AO referred to three separate orders passed by SEBI dated 29th March, 2016,
15th June, 2016 and 31st October, 2016 in support of his adverse conclusions drawn against
the assessee that several entities related/connected to KAFL rigged the prices by 230%
during the period of January, 2013 to June, 2013 (Patch-1), created artificial demand and
thereafter provided exit to the beneficiaries during the period of July 2013 to November,
4 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 2014 (Patch-2). The said orders passed by SEBI contained list of related/connected parties
of KAFL and also the list of beneficiaries. Some of these were restrained from accessing the
securities market and buying, selling or dealing in securities. The AO concluded that the in
depth analysis done by SEBI in the three orders is direct evidence against the assessee to
hold that the prices of KAFL were manipulated and artificially hiked to create non-genuine
LTCG in the transactions of KAFL. The AO further concluded that confessions given on
oath by the promoters/brokers/operators are the circumstantial evidence against the assessee
that the LTCG was arranged one. The AO was of the opinion that the SEBI reports and
statements, strengthens the suspicions over the genuineness of the buyers of shares and
further suspected that the unaccounted cash of the assessee was layered into the bank
account of the exit providers.
7. The AO relying on the various decisions viz. Hersh Win Chaddha v. DCIT [ITA
Nos.3088 to 3098 & 3104/Del/2005], Sumati Dayal v. CIT 214 ITR 801 (SC), Durga Prasad
More v. CIT, Mcdowell & Co. V. CTO, CIT v. P. Mohankala] observed that tax liabilities
can be assessed by revenue authorities on consideration of material available on record,
surrounding circumstances, human conduct, preponderance of probabilities and nature of
incriminating information/evidence available on record. The AO ultimately concluded that
in such clandestine operations and transactions, it is impossible to have direct evidence or
demonstrative proof of every move.
8. The AO concluded that the assessee’s transactions resulting in LTCG on sale of
shares of KAFL were bogus and that the assessee ploughed back his unaccounted money in
the books of accounts which is assessable under section 68 of the Act.
9. 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 us.
5
ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 10. We have heard rival submissions and gone through the facts and circumstances of the
case. At the time of hearing it was brought to our notice by the Ld. AR that this Tribunal in
the following cases have decided that the scrips of M/s KAFL were not bogus and held that
the LTCG claim of the assessee need to be allowed:
i) Manish Kumar Baid Vs. ACIT, ITA Nos. 1236& 1237/Kol/2017 dated 18.08.2017
ii) Rukmini Devi Manpria Vs. DCIT, ITA No.1724/Kol/2017 dated 24.10.2018
iii) Jagmohan Agarwal Vs. ACIT, ITA No.604/Kol/2018 dated 05.09.2018.
11. Per Contra 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 that scrips
of M/s. KAFL 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 and so he does not
want us to interfere with the impugned order . Ld. DR further submitted that in this case no
document apparently being furnished to AO to show the date of transfer of such share
certificate in the name of the assessee. This company has been merged with the listed
company M/s. KAFL and assessee started selling of such shares from 24.07.2013. Without
proving the date of transfer of share at the point of purchase assessee cannot claim holding
such share for more than 12 months to claim such gain as long term capital gain. He also
argued that this question needs to be decided whether purchase of shares of an obscure
company M/s. PML off-market from an unknown entity was an investment decision at all or
not. He also stated that it is relevant to mention that, one of the promoter and entry operator
of Kailash Auto and Careful projects , Sri Sunil Dukania, a CA, in his statement given
before the DDIT (Inv.) of income tax u/s 131(1) of the Act on 12.06.2015 admitted that
these are paper companies having no real business and both are controlled by entry
operators. Directors are only dummy persons there. In view of such fact it is very clear that
the submission of the assesses regarding the reason for purchase of share of that was not an
investment decision but a move to get an entry for LTCG income. The Ld. DR also
submitted that there is report of SEBI confirming that Kailash Auto stock was grossly
manipulated on the Stock exchange platform to generate bogus capital gain income for
6 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 beneficiaries to evade payment of tax. Thus, according to Ld. DR, it is evident that
assessee’s purchase of that sock was not an investment decision but only an entry point to
come to the listed company Kailas Auto in order to generate bogus LTCG income , and
thus, assessee was a part of such scheme of things as its beneficiary. He also stated that on
the issue of demanding cross-examination of the director the company and other person who
admitted the issue of providing entry, it is to submit that those statement / admission are
subordinate material used only to support the main issue and no way a direct evidence. In
the instant case the admission of the third party before the investigation wing can only be
considered as circumstantial evidence and not a direct evidence. In support of his
submission he referred to the following case laws:
i) GTC Industries Ltd. Vs. ACIT (1998) 65 ITD 380 (Bom),
ii) Sanjay Bimalchand Jain Vs. CIT-1, Nagpur (Three Members Nagpur Bench decision),
iii) Smt. M. K. Rajeshwari Vs. ITO, Ward-3, Raichur, ITAT SMC-C Bench, Bangalore,
iv) Usha Chandresh Shah Vs. ITO (ITA No. 6858/Mum/2011),
v) ITA Nos. 1413 to 1420/CHNY/2018 dated 06.12.2018,
vi) Mc. Dowell & Co. Ltd. Vs. CTO (1983) 154 ITR 148,
vii)Harsh Win Chaddha Vs. DCIT (ITA No. 3088 to 3038 & 3107/Del/2005,
viii)Sumati Dayal Vs. CIT 214 ITR 801,
ix) M/s. Durga Prasad More 82 ITR 540 12. He also submitted the alternate ground for addition that purchase of this stock was
not an investment decision but an adventure in the nature of trade. He lastly submitted
before the bench that assessee’s dealing with this stock may be considered as an adventure
in the nature of trade and so, profit derives from such activity may kindly be considered as
income from business or other sources.

13. We 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 scrips of M/s.
KAFL has held 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
7 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 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 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.”
8
ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 14. Coming back to the facts of the instant case before us, we note that the assessee had
purchased 2,00,000 Equity shares of M/s. PML on 12.07.2011 from M/s. Brijdhara
Mercantile P. Ltd. which was reflected through bank statement available at paper book
pages 3 to 5. The assessee had made payment for purchase of above shares through savings
bank A/c. No. 172010100115186 vide cheque dated 07.07.2011 drawn on Axis Bank,
account (page 3 PB). The shares were purchased from M/s. Brijdhara Mercantile Private
Limited, off market. Later M/s. PML was amalgamated with M/s. Kailash Auto Finance
Limited by an order dated 21.05.2013 u/s. 391, 394 of the Companies Act, 1956 of Hon’ble
Allahabad High Court. By virtue of this amalgamation, the assessee was allotted 2,00,000
equity shares of M/s. Kailash Auto Finance Limited in lieu of 2,00,000 equity shares of M/s.
PML, as per order of the Hon’ble High Court (allotment of shares on merger is available at
page 37 to 45 of paper book). In view of this order, shares of M/s. PML got extinguished
and shares of M/s. Kailash Auto Finance Limited were allotted and were credited to
assessee’s account. Copy of their share bill dated 12.07.2011 is seen placed in the paper
book page 2. We note that shares of M/s. Kailash Auto Finance were listed at BSE.
15 We note that the assessee had filed the following documents to support his claim of
LT CG on sale of shares of M/s. KAFL.
1. Copy of Purchase Bill dated 12.07.2011 reflecting the purchase of shares of M/s. PML through M/s. Brijdhara Mercantile Pvt. Ltd. (paper book page 2).

2. Copy of Bank Statement reflecting the debit transaction of the amount of Rs.2,00,000/- paid to M/s. Brijdhara Mercantile Pvt. Ltd. for the purchase of shares via RTGS on 07 .07.2011. (Paper book page 4).

3. Copy of allotment of shares on merger (Demat) available at pages 37 – 45 of paper book.

4 Copy of contract note for sale of 2,00,000 shares sold on various dates on BSE through broker Kotak Securities available at pages 46-53 of the paper book 5 Copy of bank statement reflecting the sale receipt available page paper book pages 54 o 58.

6. Copy of the order approving the Scheme of Amalgamation passed by the Hon’ble Allahabad High Court in relation to the merger of Kailash Auto Finance Ltd. and M/s. PML.

7. Copy of demat statement with Kotak Securities Ltd. showing credit of 200000 shares of M/s. PML.

8. Copy of assessee’s demat Account No. 13439871 with Kotak Securities Ltd. showing receipt of 200000 shares of KAFL on 22.07.2013.
9
ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 9. Merger order passed by Allahabad High Court in Company Petition No. 11 of 2013 (paper book pages 6 to 36).
16. Thus we find from the perusal of the documents that the assessee had purchased
200000 shares of M/s. PML on 12.07.2011 which is evident from paper book page 2. We
also find that payment of the purchase of shares was through cheque which is evident from
bank statement available at paper book page 3 to 5. Thereafter the said M/s. PML merged
with M/s. KAFL by virtue of the order of Hon’ble Allahabad High Court and the assessee
was allotted 2,00,000 equity shares of M/s. Kailash Auto Finance Limited in lieu of
2,00,000 equity shares of M/s. PML. After holding the shares of M/s. PML for more than
18 months the assessee had sold the 200000 shares of M/s. KAFL on various dates in the
year 2013 on BSE through broker M/s. Kotak Securities Ltd. which is evident from paper
book pages 46 to 53. We also find that the assessee had purchased the shares through
banking channel and sale consideration was received by A/c payee cheque, which facts are
duly reflected in Bank statement which is placed at paper book page 1 – 2. Our attention
was also drawn to the Contract notes of SEBI regd. Broker M/s. Kotak Securities Ltd. for
sale of equity shares of M/s. KAFL which is found placed at paper book pages 46-53. Thus,
we find that the assessee got the shares of M/s. KAFL dematerialized the same and after
holding it for more than 18 months had sold it through different transactions in the SEBI
recognized Bombay Stock Exchange and the purchase and sale consideration were through
bank accounts. Thus assessee has produced the documents to substantiate the claim of
LTCG on sale of scrips of M/s. KAFL and having satisfied the condition precedent as
prescribed u/s. 10(38) of the Act has rightly claimed the exemption of tax on the LTCG.
17. Thus, we note that shares of M/s. KAFL were sold by assessee through recognized
broker in a recognized Bombay Stock Exchange. The details of such sale and contract note
have been submitted before AO/Ld. CIT(A). We 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. According to our knowledge, the shares are sold and
bought in an electronic mode on the computers by the brokers and there is also no direct
contact at any level even between the brokers. We note that as and when any shares are
10 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 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 the purchasing broker is. This is how the SEBI
keeps a strict control over the transactions taking place in recognized stock exchanges.
Unless there is a evidence to show that there is a breach in the aforesaid process which fact
has been unearthed by meticulous investigation, we are of the opinion that the unscrupulous
actions of few players exploiting the loopholes of the Stock Exchange cannot be the basis to
paint the entire sale/purchase of a scrip like that of M/s. KAFL as bogus without bringing
out adverse material specifically against the assessee.
18. The fact of holding the shares of M/s. KAFL in the D-mat account cannot be
disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat
account and shares credited in the D-mat account of the assessee. Therefore, once, the
holding of shares is D-mat account cannot be disputed 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 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
statement of Shri Sunil Dokani, and few others recorded by the 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.

19. The assessee has requested the cross examination of Shri Sunil Dokani, which was
not provided to the assessee by the AO. Thus, in view of the decision of Hon’ble Supreme
Court in case of CCE vs. AndamanTimber Industries 127 DTR 241(SC) the assessment
based on statement without giving an opportunity to assessee to cross examine the maker of
the adverse statements relied on by the AO, is not sustainable in law. We find that the
statement cannot be used by the AO without giving an opportunity to cross examination of
Shri Sunil Dokani, and others. Therefore, the statement of third party cannot be sole basis of
11 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 the assessment without given an opportunity of cross examination and consequently it is a
serious flaw which renders the order a nullity. The Mumbai Special 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 so collected. 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 aseessee. 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 Assessee- Company 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 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.”

20. Since, 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 dated 11-09-2017in case of CIT vs. Smt. Pooja
12 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 Agrawal [ ITA no 385/2011 ] 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 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. Pawan Purohit 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. Pawan Purohit 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. Pawan Purohit. 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]
13 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 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.”

In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account.”
21. We note that the sale of shares of M/s. KAFL which was dematerlized in Demat
account has taken place through recognized 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 15 (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. We 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.

22. 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 is brought on record
by the AO.
23. There is also nothing on record which could suggest that the assessee gave his own
cash and got cheque from the alleged brokers/buyers. The assessment is based upon some
14 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 third parties statements recorded behind the back of the assessee and the assessee has not
been allowed to cross examine those persons, so the statements even if adverse against the
assessee cannot be relied upon by the AO to draw adverse inference against the assessee in
the light of the documents to substantiate the claim of LTCG, which has not been found
fault with by the AO.
24. Let us look at certain judicial decisions on similar facts:-
25. 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; Sumati Dayal 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. Pushpa Malpani – 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
15 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 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 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.”
26. 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”
27. The Co-ordinate Bench of Ahmedabad in ITA Nos. 501 & 502/Ahd/2016 had the
occasion to consider a similar issue which was wherein the assessment was framed on the
strength of the statement of a broker. The relevant part reads as under:-

“14. The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee nor any opportunity of cross-examination was given by the Assessing Officer/CIT(A). The Hon’ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:-
“6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and
16 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders.”
15. The Hon’ble Apex Court held as under:-

“According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross- examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause.

We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”
16. On the strength of the aforementioned decision of the Hon’ble Supreme Court, the
assessment order has to be quashed.

17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is
no denying that consideration was paid when the shares were purchased. The shares were
17 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn.

18. In the light of the decisions of the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account.

19. Accordingly, we direct the A.O. to treat the gains arising out of the sale of shares under the head capital gains- “Short Term” or “Long Term” as the case may be. The other grievance of the assessee becomes infructuous.”
28. The assessee has furnished all evidences in support of the claim of the assessee that it
earned LTCG on transactions of his investment in shares. The purchase of shares had been
accepted by the AO in the year of its acquisition and thereafter until the same were sold.
The off market transaction for purchase of shares is not illegal as was held by the decision of
Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO in ITA No.
19/Kol/2014 dated 2.12.2016 and the decision by Hon’ble Calcutta High court in PCIT Vs.
BLB Cables & Conductors Pvt. Ltd. in ITAT No. 78 of 2017 dated 19.06.2018 wherein all
the transactions took place off market and the loss on commodity exchange was allowed in
favour of assessee. The transactions were all through account payee cheques and reflected
in the books of accounts. The purchase of shares and the sale of shares were also reflected in
Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and
circumstances of the case, it cannot be held that the transactions were bogus. The following
judgments of Hon’ble Jurisdictional High Court:-

(i) The Hon’ble Calcutta High Court in the case of Principal Commissioner Of Income
vs M/S. Blb Cables And Conductors; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19
June, 2018, had upheld the order of the Tribunal by observing as follows:-
18
ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 “4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled.

There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase & sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities.

4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence.”
ii) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) – In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon’ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated.
iii)CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) – In this case the Hon’ble Calcutta High Court held that on the basis of a suspicion 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 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.
19
ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 iv) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) – In this case the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed.
v) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) – In
this case the Hon’ble Calcutta High Court affirmed the decision of this tribunal , wherein,
the tribunal allowed the appeal of the assessee where the AO did not accept the explanation
of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that
the AO disallowed the loss on trading of penny stock on the basis of some information
received by him. However, it was also found that the AO did not doubt the genuineness of
the documents submitted by the assessee. The Tribunal held that the AO’s conclusions are
merely based on the information received by him. The appeal filed by the revenue was
dismissed.
vi) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) –
In this case the Hon’ble Calcutta High Court affirmed the decision of this Tribunal wherein
the loss suffered by the Assessee was allowed since the AO failed to bring on record any
evidence to suggest that the sale of shares by the Assessee were not genuine.
vii) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of
2009 dated 29.4.2009] – In this case the Assessee claimed exemption of income from Long
Term Capital Gains. However, the AO, based on the information received by him from
Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore
held that the transactions were bogus. The Hon’ble Jurisdictional High Court, affirmed the
decision of the Tribunal wherein it was found that the chain of transactions entered into by
the assessee have been proved, accounted for, documented and supported by evidence. It
20 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 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.
29. We note that since the purchase and sale transactions are supported and evidenced by
Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions
of purchase of shares were accepted by the ld AO in earlier years, the same could not be
treated as bogus simply on the basis of some reports of the Investigation Wing and/or the
orders of SEBI and/or the statements of third parties. In support of the aforesaid
submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on
the following cases:-
(i) Baijnath Agarwal vs. ACIT – [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. Sudeep Goenka – [2013] 29 taxmann.com 402 (Allahabad HC)
(xi) CIT vs. Udit Narain Agarwal – [2013] 29 taxmann.com 76 (Allahabad HC)
(xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC)
(xiii) CIT vs. Himani M. Vakil – [2014] 41 taxmann.com 425 (Gujarat HC)
(xiv) CIT vs. Maheshchandra G. Vakil – [2013] 40 taxmann.com 326 (Gujarat HC)
(xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT – ITA Nos. 544/Kol/2013 (Kolkata ITAT)
21 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 (xvii) Meena Devi Gupta & Others 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) 30. The ld AR also brought to our notice that once the assessee has furnished all
evidences in support of the genuineness of the transactions, the onus to disprove the same is
on revenue. He referred to the judgement of Hon’ble Supreme Court in the case of
Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this
case the Hon’ble Apex Court held that the burden of showing that a particular transaction is
benami and the appellant owner is not the real owner always rests on the person asserting it
to be so and the burden has to be strictly discharged by adducing evidence of a definite
character which would directly prove the fact of benami or establish circumstances
unerringly and reasonably raising inference of that fact. The Hon’ble Apex Court further
held that it is not enough to show circumstances which might create suspicion because the
court cannot decide on the basis of suspicion. It has to act on legal grounds established by
evidence. The ld AR submitted that similar view has been taken in the following judgments
while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged
Penny Socks.
(i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT)
(ii) ACIT vs. J. C. Agarwal HUF – ITYA No. 32/Agr/2007 (Agra ITAT) 31. Moreover it was submitted before us by ld AR that the AO was not justified in taking
an adverse view against the assessee on the ground of abnormal price rise of the shares and
alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or
the enquiry report of the Investigation Wing to the effect that the assessee, the Companies
dealt in and/or his broker was a party to the price rigging or manipulation of price in CSE.
The ld AR referred to the following judgments in support of this contention wherein under
similar facts of the case it was held that the AO was not justified in refusing to allow the
benefit under section 10(38) of the Act and to assess the sale proceeds of shares as
undisclosed income of the assessee under section 68 of the Act :-
(i) ITO vs. Ashok Kumar Bansal – ITA No. 289/Agr/2009 (Agra ITAT)
22 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 (ii) ACIT vs. Amita Agarwal & Others – ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT)
(iii) Lalit Mohan Jalan (HUF) vs. ACIT – ITA No. 693/Kol/2009 (Kol ITAT)
(iv)Mukesh R. Marolia vs. Addl. CIT – [2006] 6 SOT 247 (Mum) 32. We note that the ld. D.R. had heavily relied upon the decision of the Hon’ble
Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note
that in the case relied upon by the ld. D.R, we find that the facts are different from the facts
of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for
acquisition of shares of companies and the purchase of shares of the companies was 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 was not
accepted by the A.O. and the gains were treated as business profit of the assessee by treating
the sales 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.

33. It is clear from the above that the facts of the case of the assessee are identical with
the facts in the cases wherein the co-ordinate bench of the Tribunal has deleted the addition
and allowed the claim of LTCG on sale of shares of M/s KAFL. We, therefore, respectfully
following the same, set aside the order of Ld. CIT(A) and direct the AO not to treat the long
term capital as bogus and delete the consequential addition.

34. The next ground of appeal of assessee in respect of confirming the interest u/s. 234A,
234B and 234C of the Act is consequential in nature.
35. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 17th July, 2019.

Sd/- Sd/-
(Dr. A. L. Saini) (Aby. T. Varkey)
Accountant Member Judicial Member Dated : 17th July, 2019 Jd.(Sr.P.S.)
23 ITA No. 2661/Kol/2018 Sangita Khemka, AY- 2014-15 Copy of the order forwarded to: 1. Appellant – Smt. Sangita Khemka, 22/25, Manohar Pukur Road, Kokata-
700 029. .

2 Respondent – ITO, Ward-45(2), Kolkata 3. CIT(A)-13, Kolkata (sent through e-mail) 4. CIT-, , Kolkata. 5. DR, ITAT, Kolkata. (sent through e-mail) /True Copy, By order, Assistant Registrar

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