Case Law Details

Case Name : Sejalben N. Vora Vs ITO (ITAT Ahmedabad)
Appeal Number : I.T.A. No. 329/Ahd/2018
Date of Judgement/Order : 29/11/2023
Related Assessment Year : 2014-15

Sejalben N. Vora Vs ITO (ITAT Ahmedabad)

ITAT Ahmedabad held that addition u/s. 68 of the Income Tax Act towards long term capital gain treating sale of scrip as bogus on the basis of report unearthed in case of third party without any cogent material brought against assessee is unsustainable in the eye of law.

Facts- During the year under consideration, the appellant claimed substantial long term capital gain, exempt u/s. 10(38) of the Act on sale of script of M/s. Comfort Fincap Ltd. to the tune of Rs.1,65,74,716/-. On the basis of the investigation report issued by the Investigating Wing, Kolkata available with the Revenue, a show cause notice was issued to the assessee dated 09.10.2016 as to why LTCG earned to the tune of Rs.1,65,74,716/- from the sale of share of M/s. Comfort Fincap Ltd. should not be treated as bogus and the addition u/s. 68 of the Act should not be made by treating the same as unexplained cash credit.

Commissioner (A) confirmed the addition. Being aggrieved, the present appeal is filed.

Conclusion- Held that the addition treating the long term capital gain earned by the assessee out of the sale of impugned shares of the company namely M/s. Comfort Fincap Ltd. on the basis of report unearthed by any third party in the absence of any cogent material brought against the assessee is not sustainable in the eye of law. Therefore, respectfully, relying upon the same, we delete the addition made by the Revenue.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

The instant three appeals filed at the behest of three different assessees are directed against the orders all dated 12.12.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad (in short ‘CIT(A)’) arising out of the orders all dated 23.12.2016 passed by the ITO, Ward-1(1), Bhavnagar under Section 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Year 2014-15.

2. Since all three the appeals filed by the assessee relate to similar issue, these are heard analogously and are being disposed of by a common order for the sake of convenience. We take ITA No.329/Ahd/2018 in case of Sejalben N. Vora as a lead case.

ITA No.329/Ahd/2018 (Sejalben N. Vora)

3. The addition to the tune of Rs.1,65,74,720/- on account of long term capital gains on sale of share is the subject matter before us.

4. The brief facts leading to this case is this that on verification of computation of income it was found that the appellant claimed substantial long term capital gain, exempt under Section 10(38) of the Act on sale of script of M/s. Comfort Fincap Ltd. to the tune of Rs.1,65,74,716/-. The details of sale on purchase of these share were called for and it was found that the said shares were purchased off market and it was preferential allotment. The financials of M/s. Comfort Fincap Ltd. (earlier known as Parasnath Textile Ltd.) alongwith the price movement was In fact, the assessee purchased 55000 shares of the said Parasnath Textile Ltd. at Rs.18/- having face value of Rs.10/- dated 14.03.2011 and the Company allotted share of M/s. Comfort Fincap Ltd. on 04.06.2011. Initially, the said company was not listed on BSE or NSE but subsequently got listed at BSE w.e.f. 25.03.20 13 at the price of Rs.387/- per share. The assessee stated to the department of not having any knowledge of the fundamentals of the company, namely, M/s. Comfort Fincap Ltd. but purchased shares. On the basis of the investigation report issued by the Investigating Wing, Kolkata available with the Revenue, a show cause notice was issued to the assessee dated 09.10.2016 as to why LTCG earned to the tune of Rs.1,65,74,716/- from the sale of share of M/s. Comfort Fincap Ltd. should not be treated as bogus and the addition under Section 68 of the Act should not be made by treating the same as unexplained cash credit.

5. The case of the assessee before the Revenue is this that the assessee was dealing in investment of shares and securities of different companies since long and in the normal course of affairs she invested in the shares of impugned companies in March 2011 through offline transaction. However, the payment was made through banking channel. The share was subsequently de­materialized and the shares were further held by the assessee for more than one year and finally sold through stock exchange. STT was duly paid off at applicable rates. The Ld. AR drew our attention to the details of different shares purchased by the assessee appearing at Page Nos. 66 & 67 of paper book filed before us at the time of hearing of the matter. The main allegation in respect of the price of the share without having any financials supports of the company being not engaged in any major business activity is, therefore, having no bearing with the scrip purchased by the assessee and finally sold off and consequently, proposed addition is also not called for treating the long term capital gain out of sale to these scrip as bogus is not tenable in the eye of law as of the main contention made out by the assessee before the Revenue which has also been reiterated before us. However, such explanation rendered by the assessee was not found to be acceptable and the addition was, therefore, made which was, in turn, confirmed by the First Appellate Authority. Hence, the instant appeal before us.

6. Ld. Counsel appearing for the assessee submitted before us that the issue of treating the long term capital gain out of the sale of scrip of the impugned company, namely, M/s. Comfort Fincap Ltd. has already been decided by the Co-ordinate Bench to the case of Alpa Udaykumar Shah vs. ITO in ITA No.391/Ahd/2018 for A.Y. 2014-15 & Sanjay Prataplal Mehta vs. DCIT in ITA No.509/Ahd/2018 for A.Y. 2014-15, a copy of each of the judgment has been annexed with the paper book filed before us by the assessee. It was further submitted by Ld. Counsel appearing for the assessee that evidences in respect of purchase of shares being the letter of allotment of shares, share certificate, delivery register is duly filed before us by annexing the same in the paper book. Evidences in regard to sale of shares, namely, bank statement, ledger in the books of Comfort Securities, ledger of Comfort Securities in assessee’s books, statement of gain/loss on shares, closing stock statement and contract notes are also part of the paper book. It was further contended that the assessee cannot be said to be involved either rigging of share prices or any other sort of wrong doings as alleged by the Revenue. The assessee further submitted before us as follows:

“Assuming without admitting that script in question was used by accommodation entry providers for providing entries in the form of bogus LTCG, then also LTCG earned by the assessee cannot be treated as the bogus in view of the following vital aspects emanating from the orders of lower authorities:

> There is no evidence to prove that there is any live nexus between the “assessee” & “entry provider” or “company in question or its directors”

> There is nothing on record to even remotely demonstrate that assessee has “paid any cash” to the buyer, broker or any other entry provider for taking entry in form of LTCG;

> “General information” with AO w.r.t. accommodation entries in relation to the scrip in question can, at best, be the “starting point of investigation” so as to find out whether assessee has actually earned genuine LTCG or has availed accommodation entries. However, such “general information” (which, this case, has also not been parted with the assessee) can never take place of “evidence” to hold that assessee has earned bogus LTCG.

> Unless “AO” carries out “independent inquiry” and brings on record any “cogent material” to “link assessee with any entry providers” and also demonstrate “exchange of cash” for availing accommodation entry in the form of LTCG, AO cannot presume that dealings of the assessee in view of the scrip in question are bogus merely based on “general information”.

> “Suspicion”, howsoever strong, can never take place of “evidence” in view of the settled legal position.

> In this case, “AO” has not carried out any “independent inquiry” so as to “bridge the gap” between “assessee” and “information received w.r.t. accommodation entries in relation to scrip in question”. Without bridging such gap, AO could not have treated LTCG in question as bogus.

> In any case, “AO has taxed only LTCG” which implies “40” has allowed deduction of “cost of from the total “sale consideration” of shares (Pg.19-20 of Asst. Order r.w. Pgs.65 & 159 of P/B). Thus, it is implied that purchase of shares has been admitted to be “genuine transaction” by “AO”. this stage, following aspects may be appreciated:

> Transactions of purchase and sale of shares go hand to hand. There could not be any sale of shares without actually purchasing shares.

> Once purchase has been found to be genuine, then corresponding sales of shares cannot be doubted unless and until some adverse material has been brought on record, the same is provided to assessee and opportunity has been granted to the assessee to furnish response in relation to the same.

> In this case, AO took contradictory stand i.c, on one hand, AO treated the entire transaction as a sham transaction and on the other hand, AO has allowed cost of acquisition of the shares while computing LTCG. Thus, blown hot and cold simultaneously. Such an approach is not permissible in the eye of law

  • Various trivial objections raised by lower authorities can also not justify the impugned addition in view of the following:

> As regards “off market purchase transaction”, –

  • Off-market transactions are very much permissible in the eye of law i.e. the same are not prohibited by the statute.
  • If some investment is made in shares of company, which at the relevant time was not well known in public domain or through private placement, it does not mean that such investment is not genuine or pre­arranged unless some adverse material is on record.

> As regards “sharp rise in price” of the scrip in question, –

* Sharp rise in the price cannot be sole factor for concluding that prices of shares were rigged in order to generate LTCG.

* Share prices are market driven and there are large number of factors affecting share prices traded on floor of recognized stock exchange.

* Shares in question were, at one point of time, traded at per share (Pg.10 of Asst. Order) as against which, assessee sold shares at average price of Rs.320/- (Rs. 1,75,64,716/55,000). Had it been the case that, assessee had indulged into pre­arranged transaction, he would have preferred selling the shares at highest price (ie., Rs.448) rather than selling it at a substantially lower price.

> As regards “suspension of trading” in scrip vide order dated 19.12.14, –

* It is post facto event i.c., such event is occurred after the end of year in question (ie., FY 13-14/AY 14-15).

* During the year under consideration (i.e. FY 13-14/AY 14-15), the transactions in scrip were very much permissible. assessee traded on the floor of stock exchange and earned the LTCG in question.

* If, for some reason, trading in scrip in question is suspended subsequently, assessee cannot be penalized on the ground that the assessee also must have been benefitted in the form of bogus LTCG in relation to scrip in question.

* In any case, trading in the scrip was permitted subsequently, as is evident from Pg.4 of CIT(A)’s order.

> As regards “investigation report” as well as “statements” of various persons referred to and relied upon by AO,-

* Investigation Report has not been provided to the assessee;

* Assessee has not been afforded opportunity of cross-

* Hence, such material cannot be made the basis for making

* In view of the above, LTCG in question is absolutely genuine. Reliance is placed on followings:

> Alpa Udaykumar Shah vs. ITO – ITA 391/Ahd/2018;

> Sanjay P. Mehta vs. DCIT-ITA 509/Ahd/2018;

> PCIT vs. Smt. Krishna Devi -(2021) 431 ITR 361 (Del);

> CIT vs. Smt. Sumitra Devi – (2014) 229 Taxman 67 (Rajasthan);

> CIT vs. Udit Narain Agarwal (2013) 213 Taxman 178 (Allhabad);

> CIT vs Anirudh N. Agarwal – (2013) 219 Taxman 126 (Allhabad);

Assessee was never confronted with the “report of Investigation Wing” i.e. material used against the assessee for making the impugned addition:

*  AO has extensively relied upon Contents of report of “Investigation Wing” but assessee was never confronted with such material which has been used behind the back of assessee for making the addition.

* If any material is not confronted to an assessee, it would not constitute as an “admissible evidence” and hence, addition made based on such evidence is to be deleted. Reliance is placed on “Kishinchand Chellaram – 125 ITR 713 (SC)”.

Opportunity of “cross-examination” has not been afforded:

  • An opportunity of cross-examination has also not been afforded to the assessee. It is a settled law that in absence of cross-examination, no addition could have been made based on such statement. Reliance is placed on:

> PCIT vs Chartered Speed P. Ltd. – Tax Appeal No.126 & 126 of 2015;

> Andaman Timber Industries vs CCE-(2015) 62 com 3 (SC);

  • Under such facts and circumstances, impugned addition deserves to be deleted.”

7. The crux of the submission made by the assessee that the assessee is not having any involvement in rigging of share prices of M/s. Comfort Fincap Ltd. and further the same has already been decided by the Co-ordinate Bench, could not have been controverted by the Ld. DR in its proper perspective.

8. We have also perused the order passed by the Co-ordinate Bench in the case of Alpa Udaykumar Shah vs. ITO (supra), wherefrom it appears that the fact is identically similar. The capital gain earned by the assessee as ultimately held bogus on the basis of report unearthed in case of third party/parties has been quashed by the Co-ordinate Bench as it appears from the judgment relied upon by the Ld. Counsel appearing for the assessee. While dealing with the issue, the Ld. Bench was pleased to observe as follows:

“3.1 The AO found that the company M/s Comfort Fincap Ltd was previously known as Parasnath Textile Limited and changed its name w. e.f. 4th June 2011. The assessee purchased 55000 share of M/s Comfort Fincap Ltd as on 27th June 2011 in preferential allotment @ 18 per share. Subsequently, the share of M/s Comfort Fincap Ltd. got listed at BSE in direct listing norm w.e.f. 25th March 2013 at a price of Rs. 387 per share which was very high considering the financial strength and the fact that the company was not involved in any major business activity and was showing nominal income. The assessee also in a statement recorded under section 131(1) of the Act stated that she is not knowing the fundamentals of the company M/s Comfort Fincap Ltd and their director despite the fact that she has purchased shares in private placement. Therefore, the AO show caused the assessee proposing to treat the impugned long term capital gain as bogus and represents the unexplained cash credit under section 68 of the Act.

3.2 In response to the show cause notice, the assessee submitted that she has been dealing in investment in shares and securities of different companies since many years and also acting as sub-broker for Kunverji Finstock Private Limited Ahmedabad. She, in the normal course, invested in the shares of M/s Comfort Fincap Ltd in the month of June 2011 in offline transaction which was supported by the share application form and KYC document. Likewise, the payment was made through banking channel. The shares were dematerialized with M/s Kunverji Finstock Private Limited and kept in demat account till the same were transferred in the year under consideration through BSE platform during the month of October 2013 to February 2014 at different price which was supported by demat account, the contract note, STT and payment received in bank through ECS. Therefore, as per the provision of section 10(38) of the Act, the assessee is eligible for exemption of long term capital gain.

 3.3 The allegation that the company M/s Comfort Fincap Ltd was not engaged in major business activity and change of its name of the company suggests that the company was not doing good is devoid of merit. As the M/s Comfort Fincap Ltd formerly known as Parasnath Textile Ltd (PTL) was incorporated as on 12-11-1982 and also got registered with RBI dated 15-09-1998 as NBFC. In the year 2010 PTL acquired by Lahuraka Sales & Services Limited which prompted in change in the name of the company w. e.f. 04-06- 2011. Further on perusal of financial statement of the company, it can be seen that the company has shown income form operation regularly which is in crores. The next allegation, that the share were purchased offline, is again of no adverse inference as there is no prohibition to purchase shares in off market and that does not mean that the transaction is not real.

 3.4 The rise in market price of the share especially on stock exchange is not governed by the financial fundamental of the company. As such, the same is affected by several other factors. Further, the listing of shares at stock exchange and their transaction at exchange is strictly monitored by the stock exchange authority as well by the SEBI. Therefore no adverse inference can be drawn for rise in price of share which is allegedly not supported by the financial of the company. Similarly, no adverse inference can be drawn for the fact that price of share sharply increased in the year under consideration and sharply decreased in subsequent year as the stock market is free market where investor does not have any control over the price as the same is governed by market equilibrium. Further, the book value of share of the company for the related parties was of Rs. 220 per share in March 2013 which increased to 246 in March 2014 which can be verified from the annual report of company available at BSE. The shares of the company on exchange were regularly traded. Thus, it is established that the company was in some concrete business and not a paper or bogus company.

 3.5 However, the AO disagreed with the submission of the assessee and held the assessee failed to produce the KYC document filed at the time of purchase of shares along with share application form. The company at the time of investment was relatively unknown, still the assesse made investment at Rs. 9.9 lakh without any basis which suggest the scheme of pre-arrangement. It is true that the price of shares at stock market is governed by several different factors but there is some consistency and basis whereas in the case of impugned company within the period of a year, the price of the share sharply increased as high as Rs. 448 per share and thereafter started falling and reached to Rs. 14 per share and after that no price movement noted. The DDIT(Inv.) carried out countrywide search and survey at different entry operator, stock broker and others. In the process several stock broker has accepted that they have provided bogus long term capital gain in scrip of M/s Comfort Fincap Ltd to the beneficiaries. The CEO of the company and key person of the comfort group Shri Anil Aggarwal also accepted the same. The SEBI vide order dated 19-12-2014 and 02-06-2016 also restricted the M/s Comfort Fincap Ltd and M/s Comfort Securities Ltd from access to the market in any manner.

3.6 Based on the above, the AO concluded that like thousands of the beneficiaries of modus operandi of penny stock, the assessee is also one of the beneficiary. Therefore the amount credited in the bank of account of the assesse needs to be taxed under section 68 of the Act. Further the burden of proof with regard to certain income not taxable lies on the assessee and the assessee failed to prove the same. The AO in conclusion also considered the concept surrounding circumstantial evidences in the light of judgment of Hon ’ble Supreme court in case of Sumati Dayal vs CIT (244 ITR 801) and Durga Prasad More (82 ITR 540).

3.7 Thus the AO in view of the above treated the long term capital gain of Rs. 1,15,49,320/-claimed by the assessee as bogus and added to the total income of the assessee as unexplained cash credit under section 68 of the Act.

4. Aggrieved assessee preferred an appeal to the learned CIT(A) and besides reiterating its submission made before the AO contended that the purchase of share in the year of acquisition has been accepted by the Revenue. Therefore, the sale of the same should also be accepted. Likewise, the entry operators or stock broker who provided accommodation entry in the scrip of the impugned company nowhere in their statement stated that they have provided accommodation entry to the assessee on hand. Further their statements were not provided for rebuttal and cross examination.

5. The learned CIT(A) after considering the facts in totality confirmed the order of the AO by observing as under:

“It is a settled position of taw that section 68 of the Act puts onus of proof on the taxpayer. If an amount has been credited in the books of the appellant, the onus is on the taxpayer to prove the nature and source of the same to the satisfaction of the AO, Section 68 reads as follows :

 6.8 Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium of any such amount by whatever name called any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-

(a) the person being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited: and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory.

(emphasis added).

Thus the is on the taxpayer to explain to the satisfaction of the AO the nature and source of any sum credited in his/her books, In this case, the AO on information in his possession had reason to believe that the transaction of shares was bogus., hence the onus was on the appellant to rebut this presumption which she has failed to do miserably. Further there is no substance in the contention of the appellant that statement of Anil Agarwal, who had accepted before Department authorities that he had provided accommodation entries for LTCG in the scrip of Comfort Fincap, was not provided to her. The appellant had 55,000 shares of Comfort Fincap and Anii Agarwal is the main behind Comfort Fincap. The appellant could have produced Anil Agarwal before the AO to deny the allegations of. rigging In this share. The appellant did not do so. Thus the appellant failed to discharge the onus on her to prove the presumption of AO wrong. Thus there is no substance in various contentions of the appellant.

Further, there are several other peculiarly aspects/facts in respect of transaction by the appellant of this scrip which cast a huge shadow of doubt over the genuineness of this transaction. Some of these facts/aspects are detailed below :

(i) The appellant is a resident of Bhavnagar, Gujarat, From here the appellant invests in a Mumbai based company., In the normal course this would not raise any But here it is a totally non-descript company with hardly any business activity and any significant performance. So it raises suspicion as to why would the appellant invest a huge amount in such a company.

(ii) The timing of the transaction is perfect. The scrip is purchased on 15,03,2011 and sold in October, 13 to March, 14 just outside of twelve (12) months to make the appellant eligible to claim the profit on this transaction as exempt u/s 10(38} of the Act. Also when the share is bought, it is not listed on stock exchange. The scrip is listed only in March,2013.

(iii) During the period of holding of share by the appellant, the price of the share rises very high. So much so that it reaches Rs.448/- per share on 2,05,2013. Once the shares have been sold, the price starts falling and reaches the price of 14/- per share in F. Y. 2014-1 5. After this there is practically no movement in the share price. Ail this is mentioned by the AO in the assessment order. It is clear that both the rise and fall in share price are sudden and abnormal.

(iv) Financials of the company as detailed by the AO in Para 3 of the assessment order were not such that It would attract any investor to invest in the In previous years ending from March 20.11 to March 2014, the company had turnover of 2.6 crores, 39.50 crores, 9.99 crores and 2,80 crores respectively. Thus the company had minuscule business activity, In previous years ending from March 2011 to March 2014, the company had profit of 0.01 crores, 0.59 crores, 0.99 crores and 0.62 crores respectively. Thus the company had either negligible profit showing that the company was not having a substantial business activity. It defies logic as to why a person would invest in such a company with such poor financial. This is more so since as per appellant’s own submission she has been a regular investor.

Also such poor financials do not warrant any spectacular rise in share price especially in the absence of any corporate announcements regarding big deals etc.

(v) The financial of the company as detailed above do not warrant price of Rs,367/- on opening for trading when the company is listed on the stock-exchange.

(vi) Key person of Comfort Fincap admitted during search conducted by the Investigation Wing of the Income Tax Department, Mumbai that they provided accommodation entry for LTCG in the scrip of Comfort Securities.

(vii) Vide order dated 12/19/2014 and 2/06/2016, SEBI had restrained Comfort Fincap Ltd. and Comfort Securities Ltd. from accessing the securities market and buying and selling of securities.

All the above aspects/facts mentioned above lead to the conclusion that transaction in question was rigged in order to garner huge LTC Gland claim the same as exempt, Hon’bie Supreme Court in Sumati Dayal v, Commissioner of Income-tax [1995] 80 TAXMAN 89 (SC) held as follows ;

“4. it is no doubt true that in all cases in which a receipt is sough! to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee Parimisetti Seetharamemma ’s case (supra) at p. 536. But, in view of section 68 of the Act., where any sum is found credited in the books of the assessee for any previous year the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of any income nature. While considering the explanation of the assessee the department cannot, however, act unreasonably – Sreelekha Banerjee ’s case (supra) at p. 120.

12. The matter has to be considered in the light of human probabilities…. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appoint as disclosed in her sworn stament as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant’s claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence.”

(Emphasis added)

Thus as laid down by the hon’ble Apex Court the matter has to be considered in the light of human probabilities and after considering surrounding circumstances. In the present case, preponderance; of probabilities casts serious doubts on the contention of the appellant and points towards the transaction being bogus.

Hon’ble Bombay High Court, Nagpur Bench in Income Tax Appeal No. 18/2017 in the case of Sanjay Bimalchand Jain L/H Shantidevi Bimlchand Jain vs Pr. CIT-I, Nagpur &. Another has confirmed addition on account of LTCG on penny stock shares, Hon’ble Court has held as follows ;

“The assessee had on the advice of an income tax Consultant purchased shares of two penny stock Kolkata companies i.e., 8000 shares at the rate of Rs. 5,50 per on OS. 08.2003 and 4000 shares at the rate of Rs. 4/~ per share On – 05.08.2003 from Syncom Marketing Pvt Ltd. and of Skyzoom Distributors Pvt. Ltd. the payments were made by the assessee In cash for acquisition of shares of both the companies. The address of both the companies was interestingly, the same. The authorized signatory of both the companies was also the same person. The purchase of shares of both the companies was done by the assessee through Global Stock and Securities Ltd and the address of the said broke” was incidental the address of the two companies, Both the companies intimated the ass essee on 07,04,2004 regarding the merger of the companies with another company, viz. Khoobsurat Limited, Kolkata and the assessee received the shares of the new company in the ratio of 1:4 of the number of shares of the previous two companies held by the assessee. The assessee sold 2200 shares at an exorbitant rate of R3, 486,55 per share on 07,06.2005 and 800 shares on 20.06.7005 at the rate of Rs. 485,65. The shares were sold through another broker, viz, Ashish Stock Broking Private Limited. The proceeds from the aforesaid sale transaction were directly credited by the broker in the Savings Bank Account of the assessee in the Union Bank of India, The assessing officer did not accept the case of the assessee that she was entitled to exemption under Section 10(38) of the Income Tax Act. The assessing officer held that the aforesaid transactions of purchase of” two penny stock shares for Rs. 60,000/. the merger of the companies with a new company and the sale of the shares for Rs. 11,58,930/- fell within the ambit of adventure in the nature of trade and the assessee had profited by Rs. 13,98,930/-. The assessing officer, therefore, brought the aforesaid amount to tax under the head ‘business income’. Being aggrieved by the order of the assessing officer;, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The appeal filed by the assessee was dismissed and so was the subsequent appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) before the income Tax Appellate Tribunal. On hearing the learned counsel for the assessee and on a perusal of the orders of the income tax authorities, it appears that there is no scope for interference with the said orders in this appeal. By referring to the aforesaid facts, which are narrated in the earlier part of this order, the authorities found that the assessee had made investment in two unknown companies of which the details were not known to her. It was held that the transaction of sale and purchase of shares of two penny stock companies, the merge” of the two companies with another company, viz. Khoobsurat Limited did not qualify an investment and rather it was an adventure in the nature of trade. It was held by all the authorities that the motive of the investment made by the assessee was not to derive income but to earn profit. Both the brokers, i.e. the broker through whom the assessee purchased the shares and the broker through whom the shares were sold, were located at Kolkata and the assessee did not have an inkling as to what was going on in the whole transaction except paying a sum of Rs. 65,000/- in cash for the purchase of shares of the two penny stock companies. The authorities found that though the shares were purchased by the assessee at Rs. 5.50 Ps. Per share and Rs.4/- per share from the two companies in the year 2003, the assessee was able to sell the shares just within a years time at Rs. 486.55 Ps and Rs. 485.65 Ps per share. The broker through whom the shares were sold by the assessee did not respond to the assessing officer’s letter seeking the names, addresses and the bank accounts of the persons that had purchased the shares sold by the ass essee. The authorities have recorded a clear finding of fact that the ass essee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. While so observing, the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs.5/- had jumped to Rs.485/- in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs. 5/- of a little known company would jump from Rs. 5/- to Rs. 485/-. The findings recorded by the authorities are pure findings of facts based on a proper appreciation of the material on record. While recording the said findings, the authorities have followed the tests laid down by the Hon ‘ble Supreme Court and this Court in several decisions. The findings do not give rise to any substantial question of law. The judgments reported in (2012) 20 Taxman.com 529 (Bombay) (CIT Versus Jamnadevi Agrawal), (1957) 31 ITR 294 (Bombay) (Puranmal Radhakishan Versus CIT), (1970) 77 ITR 253 (SC) (Raja Bahadur Versus CIT) and (2015) 235 Taxman 1 (Bom) (CIT(A) Versus Smt.Datta M. Shah) and relied on by the learned counsel for the assessee are distinguishable on facts and cannot be applied to the case in hand. Since no substantial question of law arises in this appeal, the appeal is dismissed with no order as to costs.

Facts in the present case are identical to the facts of the above case. Hence ratio of decision in the above case is squarely applicable to the present case.

Further, hon ‘ble ITAT, Mumbai in CIT vs Shamim M, Bharwani m ITA No. 4906/Mum/2011 (A. Y.2006-07) in order dated 27.03.2015 has held identical transactions as bogus and confirmed action of the AO in treating these as unexplained and adding the same u/s 68 of the Act. Ratio of the above judgment is fully applicable to the present case.

Further, hon ‘ble Guwahati High Court in CIT vs. Sanghamitra Bharati (361 UR 481) has held similar transactions to be bogus and sham.

Case laws relied on by the appellant are not applicable to the present case as the same are distinguished on facts.

In view of discussion above and relying on the above cited judgments, I uphold the action of the AO In holding the transaction in shares of Comfort Fincap Ltd. as bogus and adding the amount of Rs. 1,l5,, 49,320/-to the income of the appellant u/s 68 of the Act, Accordingly, addition of Rs., I, l5f49, 320/-is upheld, This ground of appeal is dismissed.”

6. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before

6.1 The learned AR before filed a paper running from pages 1 to 141 and contended that the ass essee was never supplied the investigation report or any other document suggesting that the script of impugned was manipulated. There was no action by the SEBI against the impugned company. According to the ld. AR, the script of the impugned company was never delisted from the stock exchange and remained active all over. The learned AR also reiterated the contentions raised before the lower authorities.

6.2 On the other hand, the learned DR contended that shares were purchased off market which were de-materialized later before sale of shares. According to the learned DR, there is no human probability for rise in the share price of non-working company. The learned DR vehemently supported the order of the Authorities below by reiterating his findings contained in their respective orders.

7. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the long term capital gain declared by the assessee on sale of shares of M/s Comfort Fincap Ltd for 1,15,49,320/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph which has been also confirmed by the learned CIT(A).

7.1 The 1st observation of the AO for holding the impugned capital gain as bogus was that the at the time of investment by the assessee the company, was not known in public domain and share were purchased in offline. In this regard firstly we note that the offline purchase of share is not prohibited under the statute. Secondly, if some investment in the shares of a company is made, which at the relevant time was not known in public domain or in private placement does not mean that the investment is not genuine or pre-arranged unless some adverse materials are available on record.

7.2 It was also alleged that the price of the share of M/s Comfort Fincap Ltd. was increased manifolds in a short period of time which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. However, in the given case, the impugned company was engaged in the business activity and likewise, it was regularly showing income from operation and also declaring dividend and having registered in RBI as NBFC. Further, in our considered view, the sharp rise in the price of scrip cannot be a sole criteria for reaching to the conclusion that the price were rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. But in the case on hand, there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s Comfort Fincap Ltd. either by the assessee or his broker. Similarly, there was no complaint filed by any of the party either to the SEBI or the stock exchange about the assessee or brokers impleading that they were involved in the activity of rigging up the price of the shares. Similarly, the AO has not conducted an enquiry from the SEBI or BSE about the assessee whether he was engaged in the frivolous activities as alleged. The AO alleged that the SEBI has prohibited the impugned company to enter into transaction at stock market. However, we note that the SEBI has not taken any action against the scrip of the impugned company as the action was taken against the director promoter and the company from accessing to share market.

 7.3 Further, the price of a share at stock exchange cannot be linked to the financial strength of the company, as such the same is governed by several market driven factors. The assessee is also a regular investor and have made investment in the scrip of other companies. We also note that the ass essee has acquired 55000 shares of impugned company whereas the shares were transferred only 34400 in numbers during the period of October 2013 to February 2014 and remaining shares are still held by the assessee. We also note the price of the impugned share also reached as high as Rs. 448 per share whereas the highest price at which, the assessee transferred was of Rs. 395 per share and lowest was of Rs. 187 per share. Thus in our considered view had the assessee indulged in pre-arrange transaction for taking accommodation entries then he should have transferred the entire holding and that too at the highest possible price.

 7.4 The AO alleged that the CEO of Comfort Fin Securities and key person of the comfort group in the statement recorded before the DDIT Kolakata admitted to have provided accommodation entry in the scrip of M/s Comfort Fincap Ltd. Similar admission was also made by the other stock broker during the search and survey proceeding conducted by the DDIT Kolkata in the matter of penny stock. However their statements were not provided to the assessee for the rebuttal and cross examination. It was also not brought on record that any of the person whose statement was recorded have taken the name of the assessee or his broker. We also note that there was no allegation against the broker through whom the assessee has purchased and sold the impugned script. What has been adopted by the AO for making the addition was the modus of operandi as highlighted by the investigation wing of Kolkata. To our understanding, the mere modus of operandi cannot the basis of making the addition or treating the capital gain as bogus until and unless it is supported by other corroborative material documents.

 7.5 On further analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, sale is not possible without having the purchases. Thus, once purchases has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he’s allowing the benefit of the cost of acquisition for the shares while determining the bogus long-term capital gain.

 7.6 The alleged scam might have taken place on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee ’s action that he was involved in such rigging up of share price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by way of long term capital gain by way of cheque through banking channels. This allegation that cash had changed hands, has not been brought on record by the Revenue and there is also no such whisper in the order of the AO. There was no information brought on record suggesting that there was exchange of cash against the long-term capital gain shown by the assessee. Likewise we also note that the assessee has discharged the onus imposed under section 68 of the Act by furnishing the necessary documentary evidence in support of the identity, genuineness of transaction and creditworthiness of the parties. Therefore the same cannot be made subject to tax under the provisions of section 68 of the Act.

7.7 We also note that there was no dispute raised by the Revenue with respect to the following facts:

1. Purchase consideration of share was made through cheque

2. Share was duly dematerialized in demat account

3. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers.

4. The payment were received through ECS through demat account

5. Inflow of shares are reflected in demat account. Shares are transferred through demat account and buyers do not know the assessee.

6. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer.

7. The assessee has no nexus or any relation with company, its director or entry

8. The assessee may have got only incidental benefit of price rise.

9. The opportunity of cross examination has not been extended to the assessee despite having the request from the assessee.

 7.8 From the above, conduct of the assessee suggests that he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was SEBI enquiry conducted and found guilty of wrong practices but it is not so in the case on hand.

 7.9 In our view, the income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation.

 7.10 Now the controversy also arises whether a person who genuinely purchases the shares at a low price and sold at high price, therefore, he enjoyed the windfall from such scripts, can he be disallowed the benefit of tax exemption provided under section 10(38) of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties. The Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s Comfort Fincap Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith.

7.11 In holding so we draw support and guidance from the judgment of Hon ’ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under:

11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITA T after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITA T to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent.

7.12 Respectfully, following the judgment of Hon ’ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long term capital gain earned on sale of share of M/s Comfort Fincap Ltd. is concern.

7.13 We also note that this Tribunal in the case of Parasben Kasturchand Kochar Mehta Lodha & Co. Chartered Accountant vs. ITO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under:

“7. We have gone through the relevant record and impugned order and heard both the parties. Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities.

8. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles.

9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain.

10. Ld. A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.

11. In support of its contention, ld. A.R. also cited an order of Co-ordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polybag Pvt. Ltd. vs. ITO wherein ITA T has held that A. O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the ld. A. O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee. “

7.14 At this juncture we also feel pertinent to refer the order of coordinate bench of Indore in case of Shivnarayan Sharma & Ors bearing ITA Nos. 889/In d/2018, 474,206,60, 987/Ind/2019, where in identical fact and circumstances, it was held as under:

“16. Since we are adjudicating the above stated common issue on the basis of above assessee namely Shri Shivnarayan Sharma, we note that the assessee purchased 6000 equity shares of Conart Traders Ltd on 22.10.2011 at a cost of Rs. 1,50, 000/- . There is no restriction under the law to purchase equity shares on off line mode. Vide order dated 22.3.2013 of the Hon ’ble Mumbai High Court M/s Conart Traders Limited was merged with M/s SAL and in lieu there of 6000 shares of M/s SAL were received by the assessee in its demat account. After holding the equity shares for more than 12 months since purchased on 22.1 0.2011, assessee sold the shares of M/s SAL during the period April 2014 to June 2014 through a registered broker and all the transactions of sale of shares took place on the recognised stock exchange. Sale consideration was received in the bank account attached with the Demat account. The detail of the persons purchasing the shares is not provided on the portal of SEBI and all the transactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee.

17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A. O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A. O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee.

18. We observe that all the above stated facts and the issue of genuineness of LTCG and failure of the Ld. A. O to provide opportunity to cross examination by the assessee with regard to the addition made u/s 68 of the Act for the sale consideration received from sale of equity shares of M/s SAL and addition for estimated brokerage expenses has been dealt by the Co-ordinate Bench of Mumbai Tribunal in the case of Dipesh Ramesh Vardhan V/s DCIT (supra) and the same is squarely applicable on the instant appeals.

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23. We therefore in the light of above judgments which are squarely applicable in the issues raised in the instant appeals are of the considered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The ass essee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon’ble Apex Court in the case of Andaman Timber Industries vs. CCE 281 CTR 241 (SC) that “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”.

24. We accordingly in view of our above discussions, facts and circumstances of the case and respectfully following judicial precedents and the decisions of Co­ordinate benches squarely applicable on the instant cases, are of the considered view that in the case of the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF), the claim of exempt income u/s 10(38) of the Act of Long Term Capital Gain from sale of equity shares deserves to be allowed and no addition is called for the estimated brokerage expenses made in the hands of the assessee(s). Thus finding of Ld. CIT(A) is set aside and the Grounds raised by the assessee(s) in ITA 889/Ind/2018, 474/Ind/2019, 206/Ind/2019, 60/In d/2019, 61/Ind/2019 and 987/Ind/2019 are allowed.”

7.15 In view of the above discussion we hold that the capital gain earned by the assessee cannot be held as bogus merely on the basis of some report unearthed in case of third party/parties unless cogent material is brought against particular ass essee on record. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of assessee ’s appeal are allowed.”

9. We have further considered the judgment passed by the Co­ordinate Bench in ITA No.509/Ahd/2018 for A.Y. 2014-15, while dealing with the issue, the Co-ordinate bench observed as follows:

“12. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the long-term capital gain declared by the assessee on sale of shares of M/s Comfort Fincap Ltd for 5,51,09,170/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph which has also been confirmed by the learned CIT(A).

12.1 The 1st observation of the AO for holding the impugned capital gain as bogus was that the at the time of investment by the assessee the company was not known in public domain and shares were purchased in offline mode. In this regard, firstly we note that the offline purchase of share is not prohibited under the statute, secondly if someone invests in the shares of a company which at that time was not known in public domain or made investment in private placement does not mean that the investment is not genuine or prearranged unless some adverse material is available on record.

12.2 It was also alleged that the price of the share of M/s Comfort Fincap Ltd. was increased manifolds in a short period of time which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to doubt about such an increase in the price. However, in the given case, the impugned company was engaged in business activity, and it was regularly showing income from operation, and having registration with RBI as NBFC. Further in our considered view, the sharp rise in the price of script cannot be a sole criterion for reaching to the conclusion that the price was rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides a reason to investigate the matter in detail and the same cannot take the place of the evidence. But in the case in hand, there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of the share price of M/s Comfort Fincap Ltd. by the assessee or his broker. As such the assessee carried out the transaction through ICICI Securities Ltd. In this regard the submission of the assessee before the learned CIT(A) reads as under:

With regards to the second objection of learned AO that, Entry Operator referred at point no (1) to (iv) of Para 3.7.7 have accepted that they have provided accommodation entry in the script “M/s Comfort Fincap Ltd”. In this connection, the appellant most respectfully submits that the appellant has not routed its transaction through any of the brokers/ firms. Please refer to the DEMAT account statement referred at page no 33 of the P/b where Your honours can appreciate that the appellant has infact traded through ICICI securities. Accordingly, the objection of learned AO that the appellant has traded through the brokerage firm of Shri Anuj Agrawal and Shri Anil Agrawal I.e M/s. Comfort Securities Ltd is factually incorrect.

12.2.1 Similarly, there was no complaint filed by any of the parties either to SEBI or the stock exchange about the assessee or his brokers impleading that they were involved in the activity of rigging up the price of the shares. Similarly, the AO has not conducted any enquiry from the SEBI or BSE about the assessee whether he was engaged in frivolous activities as alleged. The AO alleged that SEBI has prohibited the impugned company from entering a transaction at stock market. However, we note that SEBI has not taken any action against the script of the impugned company as the action was taken against the director promoter and the company from accessing to share market.

12.3 Further, the price of a share listed on the stock exchange is not linked to the financial strength of the company. As such the same is governed by several market driven factors. The assessee has also made an investment in the scripts of other companies. We also note that the price of the impugned scrip reached as high as Rs. 448 per share, however, the highest price at which the assessee transferred was Rs. 280 to 303 per share. Thus, in our considered view, had the assessee indulged in prearranging transaction for taking accommodation entries, then he should have transferred entire holding at the highest possible price.

12.4 The AO further alleged that the CEO of Comfort Fin Securities and key person of the comfort group in the statement recorded before the DDIT Kolkata admitted having provided accommodation entry in the script of M/s Comfort Fincap Ltd. Similar, admission was also made by the other stockbroker during the search and survey proceeding conducted by the DDIT Kolkata in the matter of penny stock. However, their statements were not provided to the assessee for the rebuttal and cross examination. It was also not brought on record that any of the person whose statement was recorded has taken the name of the assessee or his broker. We also note that there was no allegation against the broker i.e. ICICI securities through whom the assessee sold the impugned scrip. What has been adopted by the AO for making the addition was the modus of operandi highlighted by the investigation wing of Kolkata. To our understanding, the mere modus of operandi cannot be the basis of making the addition or treating the capital gain as bogus until and unless it is supported by the material documents. On analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, a sale is not possible without having the purchases. Thus, once purchases have been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he’s allowing the benefit of the cost of acquisition for the shares while determining the bogus long-term capital gain.

12.5 The alleged scam might have taken place on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee ’s action that he was involved in such rigging up of share price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by way of long-term capital gain by way of cheque through banking channels. This allegation that cash had changed hands has to be brought on record by the Revenue, but we find that there is no such whisper in the order of the AO. There was no information brought on record suggesting that there was an exchange of cash against the long-term capital gain shown by the ass essee. Here we pertinent to refer the order of the co-ordinate bench of Mumbai Tribunal in case of ITO vs. Indravadan Jain HUF in ITA No. 4861/Mum/2014. In the said case the assessee Indravadan Jain HUF purchased share of M/s Ramakrishna Fincap Ltd in the year 2003 for Rs. 3.12 per share at the floor of Kolkata stock exchange through the broker namely M/s Basant Periwal & Co. The assessee Indrvadan Jain HUF sold the impugned share in the year 2005 at Rs. 155.04 per share at the floor of Kolkata stock exchange through the broker namely M/s Basant Periwal & Co and claimed exempted long-term capital as per the provision of section 10(38) of the Act. Subsequently the AO received an information that an investigation carried out by the SEBI wherein it was found that broker namely M/s Basant Periwal & Co was indulged in price manipulation through synchronized and cross deal in scrip of Ramkrishna Fincap Ltd. The assessee sold his holding in Ramkrishna Fincap Ltd during the same period when the broker namely M/s Basant Periwal & Co. was found to be indulged in manipulation of the price of script of Ramkrishna Fincap Ltd. Thus, the case of the ass essee was reopened and finally the exempted long-term capital claimed by the assessee was held as bogus by the AO and added to total income in accordance with provision of section 68 of the Act. In this backdrop the coordinate bench adjudicated the issue in the favor of the assessee by observing as under:

“8. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that the AO has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of Ramkrishna Fincap Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s Basant Periwal and Co. on the floor of stock exchange was more than 83%. We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) at para 3 to 5 has not been controverted by the department by brining any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also covered by the decision of jurisdictional High Court in the case of Shyam R. Pawar (supra), wherein under similar facts and circumstances, transactions in shares were held to be genuine and addition made by AO was deleted. Respectfully following the same vis-à-vis findings recorded by CIT(A) which are as per material on record, we do not find any reason to interfere in the order of CIT(A).

12.6 The above finding of the Mumbai Tribunal came to affirmed by the Hon ’ble Bombay High Court vide order dated 12th July 2023 on instance of further appeal preferred by the Revenue in Income Tax Appeal No. 454 of 2018. Considering the facts involved in above mentioned case viz-a-viz facts involved in the case of the present assessee, we find that the case of the present assessee is better placed.

12.7 Likewise, we also note that the assessee has discharged the onus imposed under section 68 of the Act by furnishing the necessary documentary evidence in support of the nature of transaction and sources thereof. The necessary details furnished by the assessee stand as under:

1. Purchase consideration of shares was paid through cheque.

2. Share was duly dematerialized in demat account.

3. Shares were sold through the stock exchange after the payment of STT. The transactions have been confirmed by brokers.

4. The payments are received through ECS through demat account.

5. Inflow of shares are reflected in demat account. Shares are transferred through demat account and buyer are not known to the assessee.

6. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer.

7. The assessee has no nexus or any relation with the company, its director or entry

8. The assessee may have got only incidental benefit of price rise.

9. The opportunity of cross examination has not been extended to the assessee despite having the request from the assessee.

12.8 From the above, the conduct of the assessee suggests that he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was SEBI enquiry conducted and found guilty of wrong practices, but it is not so in the case on hand.

12.9 In our view, the income generated by the assessee cannot be held bogus only based on the modus operandi, generalisation, and preponderance of human probabilities. To hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the ass essee was involved in the collusion with the entry operator/ stockbrokers for such an arrangement. In absence of such finding, it is not justifiable to link the fact with the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are regarding the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. As such, the AO has highlighted various suspicious circumstances, but no addition can be made merely on the basis of suspicious circumstances or presumption unless some cogent material evidence brought on record. In this regard, we draw support and guidance from the judgment of Hon ’ble Rajasthan High Court in the case of CIT vs. Sumitra Devi reported 49 taxmann.com 37 wherein it was held as under:

7. True it is that several suspicious circumstances were indicated by the AO but then, the findings as ultimately recorded by him had been based more on presumptions rather than on cogent proof. As found concurrently by the CIT(A) and the Tribunal, the AO had failed to show that the material documents placed on record by the assessee like broker’s note, contract note, relevant extract of cash book, copies of share certificate, de-mat statement etc. were false, fabricated or fictitious. The appellate authorities have rightly observed that the facts as noticed by the AO, like the notice under s, 133(6) to the company having been returned unserved, delayed payment to the brokers, and dematerialisation of shares just before the sale would lead to suspicion and call for detailed examination and verification but then, for these facts alone, the transaction could not be rejected altogether, particularly in absence of any cogent evidence to the contrary.

12.10 The controversy also arises whether a person who genuinely purchases the shares at a low price and sold at high price, therefore, he enjoyed the windfall from such scripts, can he be disallowed the benefit of tax exemption provided under section 10(38) of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties. Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometimes we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished, and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties.In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s Comfort Fincap Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good faith. Furthermore, the shares were held by the assessee for almost 3 years. As such the assessee purchased the impugned shares on 15th March 2011 and sold the same during the period 2 7th January to 6th February 2014. Thus, it was not possible for the assessee to foresee the price of the script in future.

12.11 In holding so, we draw support and guidance from the judgment of Hon ’ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under:

11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent.

12.12 Respectfully following the judgment of Hon ’ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long-term capital gain earned on sale of share of M/s Comfort Fincap Ltd is concern.

12.13 We also note that this Tribunal in the case of Parasben Kasturchand Kochar Mehta Lodha & Co. Chartered Accountant vs. ITO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under:

7. We have gone through the relevant record and impugned order and heard both the Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities.

8. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles.

9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain.

10. Ld. A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.

11. In support of its contention, ld. A.R. also cited an order of Co-ordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. vs. ITO wherein ITAT has held that A. O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the ld. A. O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee.

12.14 At this juncture, we also feel pertinent to refer the order of coordinate bench of Indore Tribunal in case of Shivnarayan Sharma & Ors bearing ITA Nos. 889/Ind/2018, 474,206,60, 987/Ind/2019, where in identical fact and circumstances held as under:

16. Since we are adjudicating the above stated common issue on the basis of above ass essee namely Shri Shivnarayan Sharma, we note that the assessee purchased 6000 equity shares of Conart Traders Ltd on 22.10.2011 at a cost of Rs. 1,50,000/- . There is no restriction under the law to purchase equity shares on off line mode. Vide order dated 22.3 .2013 of the Hon ’ble Mumbai High Court M/s Conart Traders Limited was merged with M/s SAL and in lieu there of 6000 shares of M/s SAL were received by the assessee in its demat account. After holding the equity shares for more than 12 months since purchased on 22.10.2011, assessee sold the shares of M/s SAL during the period April 2014 to June 2014 through a registered broker and all the transactions of sale of shares took place on the recognised stock exchange. Sale consideration was received in the bank account attached with the Demat account. The detail of the persons purchasing the shares is not provided on the portal of SEBI and all the transactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee.

17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A. O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the A. O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of addition is primarily on the statement of third party as well as the information gathered from other sources. Perusal of the records shows that the assessee has not been provided any access to such report nor any opportunity was provided to cross examine those persons who accepted to have provided accommodation entries for the bogus LTCG, to the assessee.

18. We observe that all the above stated facts and the issue of genuineness of LTCG and failure of the Ld. A. O to provide opportunity to cross examination by the assessee with regard to the addition made u/s 68 of the Act for the sale consideration received from sale of equity shares of M/s SAL and addition for estimated brokerage expenses has been dealt by the Co-ordinate Bench of Mumbai Tribunal in the case of Dipesh Ramesh Vardhan V/s DCIT (supra) and the same is squarely applicable on the instant appeals.

*******************

23. We therefore in the light of above judgments which are squarely applicable in the issues raised in the instant appeals are of the considered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the ass essee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The assessee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon ‘ble Apex Court in the case of Andaman Timber Industries vs. CCE 281 CTR 241 (SC) that “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”.

24. We accordingly in view of our above discussions, facts and circumstances of the case and respectfully following judicial precedents and the decisions of Co-ordinate benches squarely applicable on the instant cases, are of the considered view that in the case of the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF), the claim of exempt income u/s 10(38) of the Act of Long Term Capital Gain from sale of equity shares deserves to be allowed and no addition is called for the estimated brokerage expenses made in the hands of the assessee(s). Thus finding of Ld. CIT(A) is set aside and the Grounds raised by the assessee(s) in ITA Nos.889/Ind/2018, 474/Ind/2019, 206/Ind/2019, 60/In d/2019, 61/Ind/2019 and 987/Ind/2019 are allowed.

12.15 It is also important to note that the addition was made by the AO based on the statements/information received from the 3rd party, but no opportunity was afforded by the revenue for the cross-examination which is against the principles of natural justice as held by the Hon ’ble Apex Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006. Likewise, the Hon ’ble Apex court in the case of Kishinchand Chellaram reported in 125 ITR 713 held that the income tax authorities before relying upon any material are required to provide such material to the assessee for rebuttable. The relevant observation of the Hon ’ble Apex Court is extracted as under:

It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him.

12.16 In the case on hand, the revenue authorities to hold the transaction carried out by the assessee as sham transaction referred and relied on material and statements of various broker or entry operator recorded or collected by the DDIT Kolkata and Mumbai. However, any material/ statement was neither provided to the assessee for his rebuttable nor any independent cogent material brought on record suggesting any live link between the material received from the DDIT and transaction caried out by the assessee on hand. Therefore, no adverse inference can be drawn against the present assessee based on such material which do not constitute admissible evidence in the light of judgment of Hon ’ble Apex court.

12.17 It is also important to highlight that it is not the case that the assessee has entered into sole transaction of sale and purchase of shares in the impugned scrip of M/s Comfort Fincap Ltd only and earned exempted long-term capital. As such the assessee has made investment in shares of various private and public company which are detailed as under:

private and public company

12.18 Before parting it is also important to highlight that the learned DR at time of hearing vehemently relied upon the recent judgment of Hon ’ble Calcutta High Court in the case of PCIT vs. Swati Bajaj & others reported in [2022] 446 ITR 56. However, we find that in the identical facts and circumstances Hon ’ble Delhi High Court and Bombay High Court (supra) has decided the issue in favour of the assessee. Moreover, the Hon ’ble Gujarat High Court in the case of PCIT Vs. Champalal Gopiram Agarwal in tax appeal No. 366 of 2023, involving identical facts and circumstances has dismissed the appeal of the Revenue at the admission stage, meaning thereby the order of the Tribunal was upheld. Thus, in view of the above discussion, we hold that the capital gain earned by the assessee cannot be held bogus merely based on some report/ finding unearthed in case of third party/parties in the given facts and circumstances unless cogent material is brought against particular assessee on record. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of assessee ’s appeal are allowed.”

10. After considering the judgment cited above, we find that as the main contention of the Revenue revolves in rigging up of scrip prices of M/s. Comfort Fincap Ltd. in that case is identical to that of the fact available before us. We do not find any reason to deviate from the stand taken by the Coordinate Bench in holding that the addition treating the long term capital gain earned by the assessee out of the sale of impugned shares of the company namely M/s. Comfort Fincap Ltd. on the basis of report unearthed by any third party in the absence of any cogent material brought against the assessee is not sustainable in the eye of law. Therefore, respectfully, relying upon the same, we delete the addition made by the Revenue.

11. In the result, appeal preferred by the assessee is allowed.

12. The decision in ITA No. 329/Ahd/2018 in case of Sejalben B. Vora shall also apply mutatis mutandis in ITA Nos. 330/Ahd/2018 & 331/Ahd/2018.

13. In the result, all three appeals preferred by three different assessees are allowed.

This Order pronounced on 29/11/2023

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