Suspicions of department cannot be base for revisionary proceedings

Trivikram Singh Toor Vs PCIT (ITAT Chandigarh)

ITAT Chandigarh held that suspicions entertained by the Revenue cannot be the basis of unsettling the valid order and hence revisionary order proceeded entirely on presumptions, conjectures and surmises is liable to be quashed.

Facts-

The Assessing Officer in the facts of the present case made an addition of Rs.2,15,847/- to the returned income of the assessee vide order passed u/s 143(3) r.w. Section 147. The said addition was made by way of disallowing the loss from derivatives and adding it back to the income of the assessee.

This order was subjected to the Revisionary Powers of the PCIT u/s 263 by the order dated 21.03.2021.

The assessee is aggrieved by the order and is in appeal before ITAT.

Conclusion-

In the facts of the present case, there is no allegation of any Regulatory Authority to show that trading in this specific Stock was barred or the company was delisted. We find that suspicions entertained by the Revenue cannot be the basis of unsettling the valid order.
Accordingly, on a careful consideration of the entire facts, circumstances and position of law and considering the evidence which was filed before the AO and the PCIT, we find on facts that the Revisionary order in the peculiar facts and circumstances proceeds entirely on presumptions, conjectures and surmises.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

The present appeal has been filed by the assessee wherein the correctness of the order dated 2 1.03.2021 passed by ld. PCIT Panchkula pertaining to 2012-13 assessment year is assailed on the following grounds :

1 That the order passed by PI CIT Chandigarh setting aside the order of assessment passed by the AO under section 143(3)read with section 147 is bad in law and is against the judicial decisions in this behalf.

2. That the learned PL CIT Chandigarh has illegally initiated proceedings under section 263 although the order of the AO is neither erroneous nor prejudicial and thus needs to be set aside.

3 That the learned PL CIT Chandigarh has illegally initiated proceedings under section 263 on the basis of a decision of the ITAT Delhi Bench dated 8.01.2019 which relates to subsequent year 2015-2016 and was not in existence when the AO passed the assessment order on 27.11.2017 and thereby the order setting aside the assessment order is bad in law and needs to be set-aside.

4. That the order of the PI CIT Chandigarh setting aside the order of assessment which has been passed consequent upon the reassessment proceedings initiated by the AO to verify the genuineness of the claim of the appellant with regard to the long term capital gain from the sale of shares of CCL International is bad in law and needs to be set aside.

5. That the PL CIT Chandigarh has erred in law in setting aside the order passed by the AO wherein issue pertaining to purchase and sale of the shares in question has been thoroughly examined and thrashed after due application of mind by the AO is bad in law and needs to be set-aside.

6. That the appellant craves leave to add, amend, delete any of the grounds of appeal at any time before the appeal is finally heard and decided.”

2. The hearing in the present case took place on 4.07.2022 and 05.07.2022 and concluded on 07.07.2022.

3. However, before addressing the grievance of the assessee, it is first necessary to address the delay of one day pointed out by the Registry in the filing of the present appeal.

3.1 The ld. AR inviting attention to the Condonation of Delay application on record submitted that the delay of one day has occurred as the deposit of the appeal fee on 20.05.2021 while filing the appeal, inadvertently was made under the head 400 instead of 300 which was the correct head. Copy of the Challan filed in support of the submission was relied upon. This defect, it was submitted, could be removed by the assessee on 2 1.05.202 1. The assessee deposited the appeal fee on 21 .05.2021 under the correct head and then filed the appeal. Accordingly, it was submitted that on account of the inadvertent mistake in depositing the appeal fee under the incorrect head, 1 day’s delay has occurred. Considering the facts and circumstances, it was his prayer that the delay may be condoned.

3.2 The ld. CIT-DR considering the record and the submissions posed no objection to the prayer for condoning the delay of 1 day.

3.3. We have heard the rival submissions and perused the material available on record. Delay of one day pointed out by the Registry is condoned. It is seen that no advantage has been derived by the assessee by the deposit of appeal fee under the wrong head and no disadvantage is visited upon the Revenue in case the delay of one day in these peculiar facts and circumstances is condoned. Ordered accordingly.

4. Parties were, accordingly, directed to argue the appeal on merits.

5. The Assessing Officer in the facts of the present case made an addition of Rs.2,15,847/- to the returned income of the assessee vide order dated 21. 1 1.2017 passed u/s 143(3) r.w. Section 147. The said addition was made by way of disallowing the loss from derivatives and adding it back to the income of the assessee.

6. This order was subjected to the Revisionary Powers of the ld. PCIT u/s 263 by the order dated 21.03.2021.

6.1 The ld. PCIT addressing the facts considered the legal position thereon and set aside the order holding that in the facts and circumstances of the case, the failure of the Assessing Officer make enquiries/verification to arrive at the correct and complete facts and to apply the correct law makes the assessment order erroneous in so far as prejudicial-to the interest of revenue.

7. The assessee is aggrieved by the order and is in appeal before the ITAT.

8. The ld. AR Mr.M.R.Sharma appearing on behalf of the assessee submitted that the AO has passed a reasoned order after enquiring in detail on all these issues. Referring to the record, it was submitted that the AO was conscious of the scam in penny stock company cases and passed the order after making all possible enquiries from all sources on the issues and none of these evidences in the impugned order are shown to be incorrect. The case has been set aside by the ld. PCIT purely on suspicions relying on a case which has no applicability to the facts of the present case. The evidence on record considered by the AO, it was submitted, remains unrebutted. The ld. AR invited attention to the enquiries made by the AO in the course of hearing at the assessment stage. It was his submission that the AO in the order passed has extracted the reasons for resorting to proceedings u/s 147. On a reading of the reasons extracted, it was submitted that the AO was well and fully aware that Directorate of Investigation had unearthed a large scale scam of bogus Long Term Capital Gain in penny stocks sales/purchase. The assessee’s case was consequently looked into in detail so as to examine the claim of Long Term Capital Gain from the position of the possibility of it being a sham transaction. It was noticed that transaction regarding sale of share of CIL international Ltd, (Sale amount of Rs. 99089257/-) had not been initially disclosed in his ITR. The assessee was put to notice of this fact. The assessee, accordingly, rectified his return. It was argued that the AO recording the reasons for initiating proceedings u/s 147 in the assessment order itself at page 1 & 2 of his order examined the issue fully conscious of the Report of the Directorate of Investigation.

8.1 Reading from the reasons for re-opening recorded in the assessment order itself, it was his submission that the AO was very well conscious of what he was required to look into in the proceedings u/s 143(3) of the Act.

8.2 In the said backdrop attention was invited to the Paper Book filed. Inviting attention to the copy of the assessment order dated 27. 1 1 .2017 it was submitted that he would want to refer to the assessment order in the Paper Book filed as it also contains a Copy of the Office Note appended by the AO. It was clarified that the copy of the assessment order made available to him did not have the aforesaid Office Note. It was submitted that the assessee had obtained the copy of the assessment order dated 27. 1 1.2017 from the Department under RTI which contains the Office Note. Specific attention was invited to Paper Book page 164 to 168. It was submitted that in the detailed office note passed by the AO, the entire issue as sought to be considered by the ld. PCIT was fully taken into consideration and considered by the AO himself before the passing of the order. A perusal of the same would clearly bring out this fact. It was argued that the present proceedings without upsetting the evidence is an exercise based purely on suspicions alone. Referring to the record, it was submitted that all due enquiries stood made by the AO. The AO not only recorded the statement of the assessee but also corroborated from the Broker and the records. The evidences by way of documents showing transactions all carried out through the banks, it was submitted, were enquired into by the AO. The rates at which the assessee sold as prevalent from the Stock Exchange, all stood duly enquired into and examined by the AO. It was submitted that the AO also considered the position of law as available in the case of assessee’s mother Smt. Harjeet Kaur and assessee’s father Shri Kanwaljeet Singh Toor who were also assessed at Delhi. The assessee’s AO, it was submitted, enquired into the issue from the Assessing Officer at Delhi in the context of the findings of the DCIT (Investigation). The details of the purchase and sale rates, it was submitted, were all seen by the AO. This fact is evident from the office note available in the record of the Department itself.

8.3 It was clarified that ‘NSE’ inadvertently used by him while arguing and also recorded in the submissions etc. is an inadvertent mistake as it is not the case of the assessee that any transaction took place on the NSE. The shares, it was submitted, were traded only on the ‘BSE’ and the assessee whenever by mistake has used NSE means to say that it was traded on the Stock Exchange which is BSE. Thus, the inadvertent user of NSE may be understood to mean BSE the relevant Stock Exchange and not NSE. This mistake, it was submitted, has occurred many times where instead of ‘BSE’ reference is made to ‘NSE’. He agreed that the said share was never available for sale or purchase or any transaction at the NSE at any point of time and inadvertent mistake, it was submitted, may be ignored.

8.4 For the sake of completeness, the reasons recorded for re-opening heavily relied upon by the ld. AR are extracted from the assessment order :

In this case action U/s 147 was taken due to the following reason:-

” In this case information has been received from the Directorate of Income Tax ( Investigation) Kolkata that large scale tax evasion in the form of bogus long term capital gain claimed by various beneficiaries through the use of penny stocks being sold/purchases to facilitate these transaction.

It has come to notice that Sh. Trivikram Singh Toor har taken benefit of bogus long term capital gain by using scripts of penny stock name CCL International during F.Y. 2012-13 i.e. A.Y. 2013-14. The s sold 750000 shares of CCL international Ltd for an amount of Rs. 9,90,89,257/-. This was a sham transaction in which unaccounted cash was routed back via layers of broker and entry operators.

The assessee filed its return of income declaring income of Rs. 24,17,760/- on 02.08.2013. The assessee declared income from house property at Rs. 13,24,753/- and income from other sources at Rs. 12,03,000/-. Then the assessee filed a revised return declaring income of Rs. 1,47,00,760/-. In the revised return income from business has been shown at Rs. 1,22,82,998/-.

The transaction regarding sale of share of CIL international Ltd, (Sale amount of Rs. 99089257) has not been disclosed in his ITR and computation for A.Y. 2013-14.

The above mentioned facts prove reasonable doubt that this whole transaction carried out by the assessee regarding sale of shares of CGL and earning LTCG thereon was a sham transaction which was meant to launder the unaccounted income earned by the assessee into white money.

I have , therefore, reasons to believe that an income of Rs. 9, 90,89,257/-and any other income relating to any other issue which comes to knowledge during the assessment proceedings has escaped assessment for the A.Y. 2013.14.Therefore, after taking approval from the Addl. CIT, Range-5 Mohali, notice U/sl48 was issued on 20.09.2016 which was served through speed post”.

8.5 The Office Note made available to the assessee at Paper Book page 164 to 168 of the Paper Book also heavily relied upon by the ld. AR to canvass that the order was passed after due enquiries with full awareness of the seriousness of the issue is also extracted hereunder for completeness :

In this case information has been received from the Directorate of Income Tax ( Investigation) Kolkata that large scale tax evasion in the form of bogus long term capital gain claimed by various beneficiaries through the use of penny stocks being sold/purchases to facilitate these transaction.

It has come to notice that Sh. Trivikram Singh Toor has taken benefit of bogus long term capital gain by using scripts of penny stock name CCL International during F.Y. 2012-13 i.e. A.Y. 2013-14. The assessee has sold 750000 shares of CCL international Ltd for an amount of Rs. 9,90,89,257/-. This was a sham transaction in which unaccounted cash was routed back via layers of broker and entry operators.

The assessee declared income form house property at Rs. 13,24,753/- and income from other sources at Rs. 12,03,000/-. The assessee filed a revised return declaring income of Rs. 1,47,00,760/-. In the revised return income from business has been shown at Rs. 1,22,82,998/-.

The transaction regarding sale of share of CCL International Ltd, ( Sale amount of Rs. 99,089,257/-) has not been disclosed in this ITR and computation for A.Y. 2013-14.

The above mentioned facts prove reasonable doubt that this whole transaction carried out by the assessee regarding sale of shares of CCL and earning LTCG thereon was a sham transaction which was meant to launder the unaccounted income earned by the assessee into white money.

In the letter of ADIT, Mohali Camp at 3^rd floor, Aayakar Bhawan, Patiala dated 01.01.2016 forwarding final report regarding bogus Long Term Capital Gain in case of Sh. Trivikram Singh Toor, in last Pages of his report it has been stated that Sh. Trivikram Singh Toor, is -the son of Sh. Kanwaljit Singh Toor, and Smt. Harjit Kaur Toor. Further, it has been established that the modus operandi of taking accommodation enery( bogus long term capital gain in F.Y. 2012-13) is exactly the same in all the three cases.

As the cases of Sh. Kanwaljit Singh toor, and Smt. Harjit Kaur were assessed to tax in DCIT, Centre Circle-27, Delhi. Therefore, copy of the order passed by the DCIT, Central Cirlce-27, Delhi was obtained along with office note to ascertain the taxability of LTCG in the hands of father and mother of the assessee. The office note of the order of the DCTT, Central Circle-27, Delhi is reproduced below:-

1. “Since no incriminating documents pertaining to or belonging to the assessee for the current year were found or seized during the course of search, no adverse inference is drawn based on the search material.

2. In this case information has been received from the DDIT(Inv.), Patiala, vide letter dated 22.12.2015 in which it was alleged that the assessee has taken bogus Long Term Capital Gain of Rs. 32,25,000/-. Later on the in the AST Systems also the above information was available under the head of “Penny Stock”. The information provided by the Investigation Wing and the information available in the ITD Systems have been examined and independent field inquiries have also been conducted through the Inspector posted with this Circle. The Inspector went to Kolkata and met Sh. Devesh Upadhay, who is an entry operator and whose name was mentioned in the above report of the DDIt(Inv.), and recorded his statement. He also filed written submission. The report of the Inspector along with the copies of the Statement and written submission of Sh. Devesh Upadhay are placed on record. Sh. Devesh Upadhay denied knowing assessee but he admitted providing accommodation entries to M/s CCL International Ltd. through his following five concerns: –

i. Sinjan Infrastructure Ltd.

ii. Sinjan Food and Beverages Ltd.

iii. Sinjan Equities Pvt. Ltd.

iv. Sinjan Developers Pvt. Ltd.

v. Sinjan Realtors Pvt. Ltd.

He however denied knowing the assessee directly or indirectly. Name of all such buyers of the shares of M/s CCL International Ltd. who have been taken out from the ITD Systems. List is enclosed. None of the buyers of the shares of CCL International sold by the assessee is matching with the list of concerns mentioned by Sh. Devesh Upadhay through which he provided accommodation entries to CCL International.

Independent inquiries and submissions of the assessee have further revealed that M/s CCL International is a reputed company which is regularly traded on BSE since last so many years and thus it does not fall under the category of “Penny Stock”. Copy of summary of if financial, obtained internet, for last few years taken out from Internet are placed on record. It has further been observed that the assessee sold his shares of CCL International at an average price of Rs.131 per share during the period of June 2012 to November 2012 whereas the price of this share increased substantially afterwards even touching Rs.500 per share in January 2015. Copy of the chart depicting daily movement of shares from June 2012 to February 2016 is placed on record which established that its price moved up and down like a normal stock and unlike a Penny Stock. If there is any hint of manipulation it is at the time of amalgamation of M/s AAR Infrastructure with M/s CCL International wherein the assessee was allotted 750000 equity shares of M/s CCL International for Rs.2 per share in lieu of 3,00,000 shares of Rs.1O each of M/s AAR Infrastructure. Since, the above amalgamation has been effected vide order dated 09.02.2012 of the Hon’ble Delhi High Court hence now no adverse view can be taken by the AO in this regard. It has further been noted that no SLP against the above order of the Delhi High Court has been filed by any person or any agency like SEBI or Income Tax Department, thus, the above order, including the allocation of shares of M/s CCL International Ltd. to the assessee in  lieu of the shares of M/s AAR Infrastructure Ltd. , has attained finality and cannot be disturbed. No evidence of manipulation of the stock of M/s CCL International Ltd. is available on record. In fact, the stock is currently traded around Rs.96 per share where the entire stock market is in bearish phase. Keeping in view the current value of share of the above stock and considering the that the average sale price of above shares is Rs. 131 in the year 2012-13 it is apparent that there is no stock manipulation. No information of any inquiry conducted by SEBI regarding the manipulation of stock is available either on the website of SEBI or elsewhere on Internet. In fact M/s CCL International had declared dividend also during the above period and the assessee has also disclosed receipt of dividend of Rs.36000/-.

In view of the above fact, in my opinion, no addition on account of bogus Long Term Capital Gain is warranted as the shares were sold through BSE after paying STT and no evidence of any manipulation in Stock is available with the Department.

All evidences suggest that the stock of M/s CCL International is not a “Penny Stock”. In fact, if we see the daily movement of the stock in 2012-13 then it is evident that there are no sharp peaks or volatility and daily prices are quite even. The term “Penny Stock” is used for those stocks where the value of stock is extremely low so that its prices can be manipulated by artificially raising its price for a short period. These companies are paper/shell Companies with no business. By no stretch of imagination M/s CCL International Ltd. can be clubbed in this category.

The above comments have also been forwarded to the DDIT (Inv.) vide letter dated 28.03.2016. Since no reply has been received till 31.03.2016 hence this order is being passed without drawing any adverse inference. However, if any adverse information is received in future then appropriate remedial measures may be taken. The option of taking remedial measures is kept open as no “clean chit” has been given to the assessee in the assessment order.

It has also been noted that the DDIT (Inv.), Patiala, has also recommended Search or Survey operation in case of M/s CCL International Ltd. vide his letter dated 22.12.2015. No such action has been taken by the Investigation Wing of New Delhi till date. If any such action is taken in future and evidences of stock manipulation are unearthed then remedial measures will be taken in the case of assessee as well.

The above issue has also been discussed with the Pr. CIT(C)-3, New Delhi.”

In view of the findings of the DCIT, Circle-27, New Delhi the suspected LTCG, has been treated as genuine in the case of assessee. The Mother of the assessee Smt. Harjeet Kaur has earned long term capital gain on sale of shares of Rs. 9,47,00,000/- . The father of the assessee Sh. Kanwaljeet Singh Toor, has earned long term capital gain on sale of shares of CCL International of Rs. 29,05,931/- which has been treated genuine by the assessing officer U/s 153 A read with u/s 143(3) of the I.T. Act on 31.03.2016. Information U/s 133(6) was also called for from M/s Master Capital Services Ltd, in the case of assessee Sh. Trivikram Singh which has been received on 06.11.2017 which tallies with the information already filed by the assessee through his counsel. Details of share trading in BSE of M/s CCL was also downloaded from internet rates as quoted by the assessee has been tallied. Information from the DDIT, (Inv) Mohali , Camp at Aayakar Bhawan, Patiala was also called for which has been received through email giving the name of 27 ” purchaser of the shares from sh. Trivikram Singh through BSE/NSE.

Information of share trading of CCL was also downloaded from internet from 02.01.2012 to 31.03.2013 which placed on records. Sale rate of shares by the assessee on the dates tallies with the figures appearing on internet. Therefore, keeping in view the facts of the case of the assessee it is held that case of the assessee is not of penny stock and held has genuine transaction of share trading.

The assessee has made investment of Rs. 30 Lac on 07.03.2011 in purchase of shares of JVtys AAR Infrastructure. The assessee has been allotted Rs. 3 lac shares of M/s AAR Infrastructure. Subsequently AAR Infrastructure was amalgamated with M/s CCL International Pvt Ltd on 09.02.2012 with the order of the Hon’ble Delhi High Court that order of Delhi High Court has not been objected by any of the competent authority. Thus the order of the Hon’ble Delhi High Court of amalgamation has attained finality. If, subsequently any adverse information is received in the case of trading of share of M/s CCL International then the case of the assessee can be reopened accordingly.

This case has been decided after discussion with the Addl.CIT, Range-6, Mohali from time to time.”

8.6 Heavily relying upon the office note which was obtained by the assessee under RTI it was submitted that the AO after carrying out due enquiries and looking at all the documents and evidences available on record passed the order conscious of the fact that there was a n allegation of the Directorate of Investigation, Calcutta that there was a scam of bogus Long Term Capital Gain indulged into by some parties in the sale of share of M/s CCL International Ltd.

8.7 It was submitted that not only the reasons recorded in the assessment order bring out this fact but the detailed office note further clarifies that the AO of the assessee followed up with the AO at Delhi wherein similar claims in regard to the father and mother of the present assessee i.e. Shri Kanwaljeet Singh Toor and Smt. Harjeet Kaur Toor for the very same assessment year on the very same allegation were being looked into. The AO at Delhi, DCIT, Central Circle-27, Delhi, it was submitted, also appended on office note to the cases of Shri Kanwaljeet Singh Toor and Smt. Harjeet Kaur Toor, the parents of the assessee. This Office Note had been considered and also been extracted in the office note of the present case wherein the allegation of the company traded in being a penny stock company was enquired into and Inspector had been sent to Calcutta by the AO at Delhi to meet Shri Devesh Upadhyaya who was the entry provider mentioned by the DDIT (Investigation). It was submitted that his statement had been recorded. The report of the Inspector was taken into consideration. As per the said Report Shri Devesh Upadhyay had claimed that he had provided accommodation entries in the trading of M/s CCL International Ltd. for 5 specific concerns. Shri Devesh Upadhyay categorically declined knowledge of these three assessees. Thus, it was argued by the ld. AR that Shri Devesh Upadhyay as per department’s Inspector’s Report named the five concerns wherein the present assessee was a total stranger. The AO had taken the names of all the buyers of M/s CCL International Ltd. from the ITD System and none of the buyers of the shares of M/s CCL International Ltd. sold by the assessee matched with the records of Shri Devesh Upadhyaya. The AO at Delhi, it was submitted, has recorded that M/s CCL International Ltd. was noticed to be a reputed company whose shares were regularly traded on the BSE for the last so many years and hence, it did not fall in the category of a penny stock company and necessary details in regard to finances for the last few years were taken into consideration and placed on record. It was also noticed that the assessees therein had sold the shares of M/s CCL International Ltd. at an average price of Rs. 131/- per share during the period of June,2012 to November,2012 and the share price afterwards even touched Rs. 500/- per share in January,2015. Daily movements from Jan.,2012 to Feb.,2016 were placed on record to establish that the movement of the share was as per normal ups and downs of any other stock unlike any stock.

8.8 Referring to the office note, it was submitted that the note takes into consideration that if there was any manipulation, it may have been at the time of amalgamation of M/s AAR Infrastructure and M/s CCL International Ltd. wherein the assessee was allotted 750000 equity shares at a certain price in lieu of certain trading shares valued at Rs. 10/- each of M/s AAR Infrastructure. The office note, it was submitted, takes note of the fact that the amalgamation had been effected vide order dated 09.02.20 12 of the Hon’ble Delhi High Court and no SLP against the said order of the Delhi High Court had been filed by any person or any agencies like SEBI or Income Tax Department. Accordingly, it was concluded that the issue had attained finality. It was emphasized that it has been noted that no evidence of the manipulation of stock of M/s CCL International Ltd. was available on record and even on the date of the office note, stock was being traded at Rs.96/- per share despite the fact that the entire stock market was in a bearish phase. Considering the price for the specific period, it was concluded that there is no stock manipulation and there was no information of any enquiry conducted by SEBI regarding manipulation of stock and infact M/s CCL International Ltd. had declared a dividend during the period and assessee had disclosed receipt of Rs.36000/-. Thus, on the basis of these facts considering the fact that the shares were also through BSE after paying ST and in the absence of any manipulation it was concluded that the evidence suggests that it is not a penny stock company. It was submitted that it had been noticed that there was no sharp peaks or vitality in daily price. None of these facts, it was argued are shown to be incorrect. Except for suspicions, it was argued there was nothing in the hands of the department. It was emphasized that the AO at Delhi in the office note had also observed that these comments had been forwarded to DDIT (Investigation) vide letter dated 28.03.2016 and no reply till 31.03.2016 had been received. Infact till date, there is no contrary evidence. Thus, reading from the office note, it was submitted, that the father of the assessee Shri Kanwaljeet Singh Toor has earned long term capital gain on sale of shares of CCL International of Rs. 29,05,931/- which has been treated genuine by the assessing officer U/s 153 A read with u/s 143(3) of the I.T. Act on 31.03.2016.

8.9 It was further submitted that in the case of the assessee the AO has specifically called for information u/s 133(6) from M/s Master Capital Services Ltd. who was the Broker for the assessee. The information had been received on 06. 1 1.2017. Reading from the page 167 of Paper Book it was further submitted that the AO had noticed in the office note itself that the information so received from the broker of the assessee i.e. M/s Master Capital Services tallies with the information already filed by the assessee through his counsel.

8.10 Reading from the said page, it was also submitted that the AO downloaded the details of the share trading of M/s CCL International Ltd. directly from the official BSE Site from internet and found that these tallied with the information made available by the assessee. It was argued that the information from DDIT (Investigation) Mohali was also called forth and compared. Reading from the said office note, specifically page 167 to 168, it was submitted that Information of share trading of CCL was also downloaded from internet from 02.01.2012 to 31.03.2013 which has been placed on records. Sale rate of shares by the assessee on the dates, it was submitted, tallied with the rates appearing on the BSE Site on internet. On the basis of these enquiries made by the AO, it was argued the AO conscious of the allegations of manipulation etc. in trading in penny stock company, the AO finally concluded that keeping in view the facts of the case of the assessee that case of the assessee is not of penny stock and held it to be a case of genuine transaction of share trading. Reading from the record, it was submitted, that accordingly, the facts were summed up by the AO in the office note as under :

“The assessee has made investment of Rs. 30 Lac on 07.03.2011 in purchase of shares of JVtys AAR Infrastructure. The assessee has been allotted Rs. 3 lac shares of M/s AAR Infrastructure. Subsequently AAR Infrastructure was amalgamated with M/s CCL International Pvt Ltd on 09.02.2012 with the order of the Hon’ble Delhi High Court that order of Delhi High Court has not been objected by any of the competent authority. Thus the order of the Hon’ble Delhi High Court of amalgamation has attained finality. If, subsequently any adverse information is received in the case of trading of share of M/s CCL International then the case of the assessee can be reopened accordingly.

This case has been decided after discussion with the Addl.CIT, Range-6, Mohali from time to time.”

9. In the said background, attention was invited to the impugned order specific para 2 wherein the Show Cause Notice issued to the assessee has been extracted. For ready reference, same is reproduced hereunder :

“From the perusal of the records, it is seen that Sh. Trivikram Singh Toor had sold 75000 shares of CCL International Ltd. for an amount of Rs. 9,90,89,257/-during F.Y. 2012-13 is. A.Y. 2013-14 and had taken benefit of bogus long term capital gain by using scripts of penny stock named CCL International Ltd. However, no addition was made during assessment proceedings u/s 143(3)7147 of the IT Act, whereas IT AT Delhi in the case of Sh. Anip Rastogi and Smt. Anju Rastogi in ITA No. 3809/DEU2018 & ITA No. 38107DEU2018 dated 08.01.2019 had upheld the addition made on account of Bogus LTCG and has also considered CCL International Ltd as bogus due to the following reasons:-

i) Firstly the financials of the scrip CCL International Ltd. were found to be unreliable and abrupt.

ii) No extraordinary increase in the profits shown by the Company CCL International Ltd., which would be commensurate with the increase in price of shares of M/s CCL International Ltd. International Ltd.

iii) Further, the most important fact is that; the statement of Sh. Jai KishanPoddar, Director of M/s Consortium Capital Pvt. Ltd. which is one of the entities utilized for providing entry of bogus long term capital of M/s CCL International Ltd., he himself had admitted that he was involved in scam of providing bogus long term capital gain through shares of M/s CCL International Ltd. and also further admitted that they were also involved in trading of these Jamakharchi Companies through which manipulative transactions in securities to either artificially raise or lower the market of the share are being done.

3. In view of the facts stated above, the assessment framed u/s 143(3)7147 of the IT Act on 27.11.2017 for A.Y. 2013-14 is erroneous in so far as prejudicial to the interest of the revenue in terms of provisions of section 263(1) of the Income Tax Act, 1961 read with Explanation 2 of the said section.

4. You are, therefore, requested to show cause as to why assessment framed vide assessment order dated 27.11.2017 u/s 143(3)1147 of the Income Tax Act, 1961 for A.Y. 2013-14 should not be cancelled by invoking the provisions of section 263 of the Income Tax Act, 1961.”

9.1 Reading from the said Show Cause Notice, it was submitted that 263 proceedings have been initiated on the basis of the order of the ITAT dated 08.01.2019 in the case of Shri Anip Rastogi and Smt. Anju Rastogi as clearly mentioned in the Show Cause Notice. Inviting attention to the assessment order dated 27. 1 1.2016 it was submitted, that the order of the ITAT in the case of Shri Anip Rastogi and others dated 08.01 .20 19 was not available to the AO and accordingly, since it was not part of the record of the AO, the exercise of Revisionary power u/s 263 by the ld. PCIT in the circumstances was contrary to law as while exercising the powers u/s 263, the ld. PCIT is to consider the record as available to the AO.

9.2 Addressing the aforesaid Show Cause Notice, it was submitted that the reasons set out in (i) and (ii) of the same were conjectures and surmises the facts more or less stood considered in the assessment order and these observations do not detract from the fact that allegation of penny stock already stood investigated, enquired into and considered in detail by the AO before the passing of the order. Thus, it was argued that this is another attempt of the department to re-look at the very same facts and is an attempt without any basis to come to a view contrary to the view taken by the AO. Such an exercise, it was argued is not permissible u/s 263 and is strongly opposed.

9.3 Inviting attention to (iii) of the aforesaid Show Cause Notice, it was submitted that therein the origin of the basis of the order passed by the ITAT apparently was the statement of Shri Jai Kishan Poddar, Director of M/s Consortium Capital Pvt. Ltd. who may have provided bogus Long Term Capital Gain in trading of M/s CCL International Ltd. to some parties. In the facts of the present case, it was his submission that Shri Jai Kishan Poddar is a stranger to the assessee. The assessee’s broker is not M/s Consortium Capital Pvt. Ltd. The assessee’s broker is M/s Master Capital Services Ltd and information from the assessee’s broker u/s 133(6) has been called forth by the AO and thus the inference by the ld. PCIT that the AO has blindly accepted claims of the assessee is an incorrect assertion of facts. It was vehemently argued that the AO has all along been conscious why it has been re-opened and hence the assessee’s case was being looked into from the perspective of being a bogus Long Term Capital Gain in a sham penny stock company. Consequently, he not only verified the rates from the independent sources in the public domain, the AO further verified the facts from the broker of the assessee M/s Master Capital Services. The Inspector’s Report of enquiry from Shri Dinesh Upadhyay was also considered. Thus, the reliance placed upon the case of Shri Anip Rastogi where facts were completely distinguishable was misplaced. The assessee’s broker it was re-iterated was not M/s Consortium Capital Pvt. Ltd. thus the statement relied upon in the case of Shri Anip Rastogi of Shri Jai Kishan Poddar had no relevance. The fact that Shri Poddar was involved in providing bogus Long Term Capital Gain to Mr. Anip Rastogi etc. in the facts of the assessee’s case, it was argued had no meaning and relevance.

9.4 With these arguments, attention was invited to the reply of the assessee extracted in the impugned order at pages 2 to 18. Reading therefrom, specific attention was invited to paras 1, 2 and 4 at page 3 which is more or less repetition of what has been argued before us. The ld. AR sought to emphasize that it has been argued that the Show Cause Notice is based entirely on surmises, conjectures and suspicions and no infirmity in the detailed information available on record has been pointed out. The sequence of dates in regard to the filing of the return and the notices issued; and the reasons for re-opening; the factum of DDIT (Investigation) Calcutta; allegations of Long Term Capital Gain on the sale of 750000 shares of M/s CCL International Ltd. were all addressed. Specific emphasis was laid on the detailed replies extracted in the order in para 5 sub-para (i) (ii) and (iii) reproduced as under :

5. That the assessee during their assessment proceedings vide his reply dated 20.09.2017submitted as under:-

That the perusal of the record would reveal that the above noted assessee paid an amount of Rs. 30,00,000!– vide Cheque No.281886 dated 07.03.2011 towards the purchase of 3,00,000 shares of company named and styled as AAR Infrastructure. The amount has been withdrawn from the Account No.00561000197723 with the HDFC Bank. A copy of the bank account has already been furnished.

2. That the perusal of the record would reveal that the company named and styled as M!s AAR Infrastructure was amalgamated with M!s CCL International Pvt. Ltd. vide an order dated 09.02.2012 of the Hon’ble Delhi High Court. A copy of the said order passed by the High Court is being enclosed for your perusal and record. The perusal of the said order would reveal that as a result of amalgamation the above noted assessee became entitle to 7,50,000 shares of the said amalgamated company. It is further verifiable from the said order that the face value of each share of the amalgamated company was fixed at Rs. 21-per share. Thus it is evident from the documents referred to above that the above noted assessee invested Rs. 30,00,000/- for the purchase of shares on 07.03.2011 and the value of 7,50,000 shares of the amalgamated company, which was equal to the 3,00,000 shares of the AAR Infrastructure Company. Thus the cost of acquisition of 7,50,000 shares of the amalgamated company for the assessee works out to Rs. 30,00,000/-. As regards the sale of the shares of the amalgamated company the same has taken place during the period from26.06.2012 to 17.11.2012. It is also evident from the perusal of the record that the sale of shares of the amalgamated company which were listed with the National Stock Exchange were sold by the above noted assessee through its brokers known as master capital services limited. The assessee has duly disclosed the long term capital gain arising from the sale of the said shares of the amalgamated company while filing the return of income for the year under consideration. I am also enclosing herewith a copy of the letter dated 24.03.2012 issued by the CCL International Ltd. the perusal of which would reveal and confirm the facts mentioned above. Thus it is clear that the investment for all intents and purposes was made by the assessee for the purchase of shares on 07.03.2011 which were sold after 26.06.2012 which is beyond the period of 12 months and thus the capital gain arising there from has been correctly returned as long term capital gain as per the provisions of section 48 of the Income Tax Act. This fact is further confirmed by the sales statement of the shares issued by the authorized broker of the shares who has duly charged the STT on the sale of the said shares. Since the sale of shares is subject to STT as such the capital gain arising to the assessee is eligible for exemption u/s 10(38) of the Income Tax Act. This claim has been made by the assessee by filing the return of income for the year under consideration. The perusal of the copy of account of the assessee with regard to the purchase and sale of shares would reveal that these shares were sold by the assessee through the Master Capital Services Ltd. with whom the above noted assessee was maintaining the purchase and sale account. A copy of the account for the period from -1.03.2011 to 31.03.2013 is being enclosed for your perusal and record. This contains the details with regard to the each sale is again being appended for your perusal and record along with the computation chart. The perusal of this would further reveal that sale bills for the sale of shares have duly been issued and STT has been charged in the said bills. It is also evident from the perusal of the said account that the shares which has been sold were sold at rates which were there on the BSE. I am also enclosing herewith following documents for your perusal/record and verification:-

(i) Copy of allotment letter dated 07.03.2011 issued by AAR Infrastructure Ltd. showing the total number of shares at 3,00,000 and having total value at Rs. 30,00,000/-. The certificate also shows that the Client ID No. 10910718 is held by the above noted assessee. The perusal of this would a/so reveal that the allotment of the shares has been made on the basis of approval accorded by the board of directors in its meeting held on 01.03.2011. The particulars with regard to the payment made by the assessee and the receipt thereof by the company duly stamped are also mentioned in the said letter of allotment.

(ii) Copy of the order of amalgamation passed by the Hon’ble Delhi High Court dated 09.02.2012. The perusal of this order would reveal that the proceeding for the amalgamation were started vide order dated 28.092011 and the appointed date for the amalgamation was 1.04.2011 and the order of amalgamation was passed on 9.02.2012. The date of issue of the shares of the original company was 7.03.2011. The law laid down various courts has held that in the case of amalgamation of the company as per the provision of the companies Act there is no transfer of the shares held in the original company and as such the period of acquisition of the shares do not change and thus remains at 7.03.2011.

(iii) A copy of the ledger account with Master Capital Services. A copy of the ledger account in the books of Master Capital Service Ltd. is being enclosed for your perusal and record. The perusal of this would reveal that on 24.03.2012 there was a converted balance of 750000!– shares of CCL against 3,00,000 shares of AAR Infrastructure Ltd. Further perusal of the same would reveal that against the said opening balance on the date of amalgamation i.e. 20.06:2012 the said shares were amalgamated and new shares numbering 7,50,000 of the CCL International Ltd. were shown as opening balance in the books of the Master Capital Services Ltd. Further perusal of the same would reveal that the first sale of 36331 shares took place on 26.06.2012 and the last sale of 43726 shares took places on 09.11.2012. A copy of the sale account maintain by M!s Master Capital. Services is being enclosed for your perusal and record.

3. That the perusal of the bank account of the above noted assessee as well as the de-mat account and sale account maintained with the master capital would reveal that all the sale proceeds of the shares has been credited to the bank account of the assessee arid no part of it has ever been paid in cash. Thus it is evident that all the sale proceeds of the shares v!ere credited to the account of the assessee with the Master Capital Services Ltd. A copy of which is being enclosed and the payments from the said account through 24 various cheques were made by the Master Capital Services to the above noted assessee during the period from 26.06.2012 to 09.11.2012. A copy of the said account maintained with the capital services as well as the copy of Saving Bank Account of the assessee with the HDFC Bank as per details in para-4 above is being enclosed for your perusal and record. Regarding the purchase and sales of shares during the period prior to the year under consideration it is submitted that no purchases or sales of shares were undertaken by the above noted assessee.

9.5 Specific attention was also invited to the arguments on facts as canvassed before the ld. PCIT extracted at page 8 and 9. Heavy reliance was placed on the arguments and evidences relied upon before the ld. PCIT and the AO to show that the Revisionary powers were wrongly exercised. For the sake of completeness, these are reproduced hereunder :

“I am also enclosing herewith a copy of letter dated 24.03.2012 with regard to the issue of 7,50,000 equity shares of M/s CCL International Ltd. under the amalgamation scheme.. The perusal of this would further reveal that the 250 shares of CCL International Ltd. has been issued in lieu of 100 shares of AAR Infrastructure Ltd. The value of each share of CCL International Ltd. was determined at Rs. 21- per share and thereby the cost of each share would worked out to Rs. 21- per share of the CCL International Ltd. and thus against the amount of Rs. 30,00,000/- paid by the above noted assessee for purchase of 3,00,000 shares the assessee has been allotted 7,50,000 shares and the cost of each share would work out to be Rs. 21- per share. I am also enclosing herewith copy of saving bank account No. 0056193100197723 maintained by the above noted assessee with the HDFC Bank during the financial year relevant to the assessment year 2011-12, 2012-13 and 2013-14.1 am also enclosing herewith a copy of the transaction statement issued by the Master Capital Services Ltd. in respect of the shares held and sold by the above noted assessee during the year under consideration from pages 67-68.1 am also enclosing herewith a copy of the statement of holding as on 31.03.2012 by the above noted assessee. It is also submitted that the perusal of the record would reveal that the assessee was holding shares of other companies also which fact is evident from the perusal of the de-mat account maintained by the above noted assessee.

That the assessee during the re-assessment proceedings in response to the query of the Assessing Officer vide letter dated 10.10.2017 submitted as under:-

1. That the perusal of the assessment records of the assessee during the year under consideration would reveal that the assessee during the year under consideration has rental income from the properties as per the details given in the computation chart a copy of which is being enclosed for your perusal record and ready reference. Besides the rental income the assessee during the year under consideration received commission income of Rs 980000!– after deducting the TDS the details of which are given in the computation chart. The assessee as is evident from the perusal of the computation chart for the year under consideration has also received interest income from the banks amounting to Rs797315/– the details of which is also given in the computation chart filed by the above noted assessee. As regards the rental income the details of the properties from where the rental income of Rs 1324753/- after deducting the expenses @30% towards the repair has been received by the above noted is given in the computation chart being enclosed herewith. The property at Pabhat was purchased through a sale deed dated 11-03-2008. A copy of the purchase deed is being enclosed. As regards the other property from where the rental income has been received by the assessee situated in Ambala the said property was purchased by the above noted assessee through a sale deed dated 22.08.2007. A copy of the sale deed is being enclosed for your perusal and record. The requisite details of the income as shown by the above noted assessee are appended in the computation chart. The difference in the original return filed and the return filed in response to the notice u/s 148 is due to non availability of the TDS and other details. With regard to the income of Rs 12282998/- the said income is from speculation business as shown in the computation chart filed by the above noted assessee. In view of the nature of the business of the no books of accounts are required to be maintained by the above noted assessee.

2. That requisite details are being enclosed for your perusal and record.

3. That the assessee at the relevant period was unmarried and was residing with his parents and their family.

4. That a copy of the d-mat account maintained by the above noted assessee is being thus there is no de-mate account except his own account.

5. That the copies of the sale-account maintained by the assessee is being enclosed.

6. That the details of the long term capital gain on shares for the year under consideration has been given in the computation chart.

7. That the requisite details are available in the D-mat account as well as computation chart.

8. That since the assessee is unmarried as such he was residing with his parents. Thus this para needs no reply,

9. That as mentioned in para 4 copy of the d-mat account has already been filed.

10. That a copy of the bank accounts maintained by the assessee is being enclosed for your perusal and record. Since there is no dependent of the assesses as such contents of the rest of the para are not applicable.

11. x     x     x       15.04.2009 and 17 kanal 10 marla at Ambala purchased on 22.08.2007 copy of the purchase deed enclosed. The assessee is also owner in possession of land 1 kanal and 17 marla in village khanpur Tehsil Saha purchased vide a sale deed dated 3.01.2011. As regards the moveable properties the assessee besides having d-mat account and the balance in the sale account of shares is maintaining bank account with HDFC Bank a copy of which is being enclosed for your perusal and record.

12. That the entries in the D-mat account stands explained as is evident from the perusal of the computation chart for the year under consideration.

13. That the income of Rs980000/- the assessee has received as commission from M/s Kapsons Agencies Pvt Ltd Chandigarh. The perusal of the details of the TDS would reveal that TDS amounting to Rs98000/- has also been deducted Out of the said payment. As regards the income from other source the income is on account of interest on the various bank deposits as per details given in the computation chart.

14. That a copy of the LIC receipt is being enclosed for your perusal and record.

15. A copy of the J form for the income is being enclosed for your perusal and record.

16. That details of the land holding and its purchase deeds have been filed in reply to para 11 above.

17. That with regard to the said long term, capital gain are given in the computation chart. The above noted assessee was allotted 300000 shares by M/s AAR Infrastructure Ltd vide its letter dated 7-03-2011. The face value of these shares was Rs. 10/- per share. The said price of the shares was paid at Rs30,00,000/- by the above noted assessee vide cheque vide Cheque No. 281886 dated 07.03.2011 and the proceeds of the said cheque were paid from the SB A/c No 00561000197723 with the HDFC Bank. A copy of the bank account is being enclosed for your perusal and record. The shares so allotted were existing in the D-MAT account IDL1083 maintained with Master Capital Services by the above noted assessee. A copy of account is also being enclosed for your perusal and record. It is submitted that the said company was amalgamated with another company named and styled as M/s CCL International as per the orders passed to that effect by the Hon’ble Delhi High Court. A copy of the order is being enclosed for your perusal and record. It is submitted that from the perusal of the D-Mat account maintained by the above noted assessee a copy of which has been filed that the assessee was allotted 750000 shares of M/s CCL International Ltd after amalgamation order passed by the Hon’ble Delhi High Court dated 9-02­2012. It is also submitted that as per the record the value of the said share was at Rs21- per share. The assessee has sold only 750000 shares during the period from 26.06.2012 to 09.11.2012 vide a sale bills issued by the Master Capital services. The perusal of the copy of the bills copies of which are being enclosed and the copy of the D-MAT account copies of which are also being filed clearly indicate that the shares has been sold @ applicable/ quoted at the NSE of each day of sale. The sale rate was the same as was the rate of the share on the said date as per NSE. The NSE showing the trading of the share of M/s CCL International Ltd. It is also correct that the said sale of the shares has dully been declared and claimed as exempt u/s 10 (38) of the Income tax under the head long term capital gain. The perusal of the bill issued would also reveal that requisite STT and service tax thereon besides ther charges have also been levied as applicable to such sales. The payment of the sale price has been made by the Master capital service to the above noted assessee through cheques which fact is evident from the perusal of the statement of account of the master capital services. A copy of the said account is also being enclosed for your perusal and record.”

(emphasis supplied)

9.6 Reading from page 12 of the impugned order, it was further submitted that the assessee need not further explain in the present proceedings the manner in which after the amalgamation, the shares had been allotted in the D-Mat Account of the assessee. The fact that these were received in the D-Mat account is not disputed by the Revenue. For the record, the details of these shares held by the assessee in the D-Mat account were also provided to ld. PCIT. The fact that his father and mother also stood examined by the AO at Delhi, it was submitted, was again brought to the notice of the PCIT. How the shares in M/s AAR Infrastructure were acquired by the assessee in the earlier years was also duly explained before the AO. Reference was made to form No. 26AS on which TDS stood deducted. Addressing the facts of the assessee’s case and the position of law as available in the public domain, it was submitted, was also brought to the notice of PCIT. Specific attention was invited to the reply extracted in the impugned order at page 15 para 9 on which heavy reliance was being placed in the present proceedings also. It is extracted hereunder for completeness :

“9. That I have already filed the details of the purchase of the shares along with the details with regard to amalgamation orders of the High Court as well as the conversion of the shares and entries in the D-mat account of the assessee the copies of which I have already filed during the earlier hearing. I have also filed copies of the sale bills and the copy of the bank account in which the sale proceeds of shares has been transferred. The perusal of the record would also reveal that there is no cash transaction either at the time of purchase or at the time of sale of the shares under consideration. The banking transaction when taken cannot in any manner be termed as penny stocks. It is submitted that the sales of shares has taken place a number of time and at various rates as per the prevailing rates at the NSE. I may also draw you kind attention to the Judgment of the Hon’ble Bombay High Court in the case of CIT Vs Mukesh Ratilal Marolia in appeal No 456/2007 decided on 7.09.2011 has confirmed the order of the IT AT with regard to the sale transaction of sale and purchase of shares. A copy of the judgment is being enclosed for your perusal and record. It is also to bring to your kind notice that the ITAT Mumbai Bench in the case of Farrah Marker Vs ITO is has been held that long term capital gain on sale of penny stocks cannot be treated as bogus and unexplained cash credit if the documentation is in order and there is no allegation of manipulation by the SEBI or the BSE. Further it has been held that when the shares are purchased through the banking channels from the stock broker registered with SEBI M/s Khambatta Securities Ltd which fact have been confirmed by the said stock broker in our considered view the assessee has discharged the onus required under section 68 of the Act as she has established the identity of the payer source of funds received on sale of the same shares and the genuineness of the transaction.”

9.7 It was submitted that the assessee went through the details of the movement in the share price of the said stock on the Stock Exchange during the specific period and tallied it alongwith the D-Mat Account available. It was conceded that assessee many a times has mistakenly used ‘NSE’ instead of ‘BSE’ but it is nobody’s case that the share was ever available for trade at the NSE. Referring to page 19 of the impugned order, it was submitted that the ld. PCIT thereafter issued another Show Cause Notice to the assessee which merely states that the case was next fixed for hearing on a different date. Reply of the assessee reiterating the same thing as already argued before the AO and the ld. PCIT was again submitted.

Position of law in support of the view argued has also been extracted from page 19 to 27 in the impugned order.

9.8 Referring to the impugned order, it was submitted that without caring to address the extracted reply, the ld. PCIT again makes an effort of calling for the record which was already available. Specific ordersheet entry dated 02.02.2021 extracted in para 3.1 at page 28 was referred to so as to argue that all these details were always available in the assessment records and these had been addressed by the assessee in the details already extracted in the earlier part of the impugned order. It was his submission that the ld. PCIT is trying to relook at the very same information and this is an effort to set aside a validly passed assessment order purely on conjectures and surmises. For ready reference, para 3.1 from page 28 is extracted hereunder to argue that all these details available to the AO made available to the ld. PCIT were again required to be filed:

3.1 In response vide order sheet entry dated 02-02-2021, the counsel of the Assessee was asked to produce the following document/information:-

i) Date of opening of DMA T account.

ii) Copy of bank account from where shares were purchased.

iii) How were the shares purchased, directly or through broker.

iv) Order of High Court

v) Share transaction entered into by the assessee before this date.

vi) Why is the name of the share not appearing in the DMAT account.

vii) Copies of invoices for purchase and sale.

The case was adjourned for 05/02/2021.”

9.9 The reply of the assessee in para 4 from page 28 to 30 again explaining the very same things was heavily relied upon. Referring to page 30 it was submitted that after going through the very same information, the ld. PCIT at page 39 para 7 records the fact that assessee purchased 300000 shares of M/s AAR Infrastructure by direct placement. The Directors of the company are named. The ld. PCIT further observe in para 8 that M/s AAR Infrastructure got amalgamated with another company M/s CCL International Ltd. on 19.02.2012 and Ms. Rama Gupta and Shri Akash Gupta were Directors of amalgamated company also and were noticed to be common in M/s AAR Infrastructure and M/s CCL International Ltd. On these facts, nothing turns. As per the Scheme of amalgamation, it was submitted that the assessee records that specific number of shares were allotted to the assessee and these were sold on the Stock Exchange at the prevalent price during the given period for the specific consideration which is also not disputed. The fact that M/s CCL International Ltd. incorporated in 1996 was formally known as Gupta Cements and had changed its name to Chidava Cements in 2008 were admitted facts on which nothing turns. It was his submission that these facts in no way detracts from the claim of the assessee. For ready reference, relevant para 8 at page 39 is extracted hereunder :

“8. The company M/s AAR Infrastructure Limited got amalgamated with another Company namely M/s CCL International Limited on 09.02.2012. Ms Rama Gupta and Sh. Akash Gupta were also directors of M/s CCL International Limited. As per the scheme of amalgamation the assessee Sh. Trivikram Singh Toor was allotted 7,50,000 shares of CCL International Limited in lieu of 3,00,000 shares held in AAR Infrastructure Limited, the assessee claims to have sold these shares during the period 26.08.2012 to 09.11.2012 for a sale consideration of Rs.9,90,89,257/-

9. It is seen that CCL International was incorporated in May 1996. The company Was formerly known as Gupta Cements. It changed its name to Chirawa Cements. Again in 2008, the name of the company was changed from Chirawa Cements to CCL International.

9. 10 Carrying the Bench through the replies on record of the AO and the ld. PCIT, it was submitted that the ld. PCIT notices the fact that the amalgamation was approved by Hon’ble High Court on 09.02.2012 at page 42 of her order. She goes on to observe that there was no reason to justify the steep rise in the share price of the company after amalgamation and speculates that share price was rigged. The said speculation and suspicion, it was argued has no evidence or basis and is purely whimsical. It was his submission that ld. PCIT also goes on to speculate that it is penny stock company, discusses the decisions in various cases which have no bearing on the facts of the present case. These decisions, it was submitted, are not similar to the facts of assessee’s case. Relying on decisions inapplicable to assessee’s case based on suspicions, it was submitted, does not justify that 263 action was warranted. The conclusion in para 22 that there was failure of the AO to make enquiries/verification to arrive at correct and complete facts and to apply the correct law and thus, this makes assessment order erroneous and prejudicial to the interests of the revenue was strongly assailed as being based purely on suspicions.

9.11 It was his vehement submission that the entire exercise is an exercise to relook at the very same information and apart from suspicions, no error has been pointed out by the ld. PCIT to justify the action. Supporting the assessment order, it was his submission that all the invoices supporting the transactions which had been made available to the AO were before the ld. PCIT also. These evidences, it was argued have not been upset by the ld. PCIT. The basis of the charts tabulated by her in the impugned order was questioned by the ld. AR. It was submitted that these are not from the BSE official site and what is the source of those charts, it was submitted, has been left unaddressed. These, it was submitted, were not confronted to the assessee and is another attempt to arouse suspicions with no basis.

10. Inviting attention to the Paper Book filed on behalf of the assessee, it was submitted that the documents mentioned at S.No. 1 to 9 have been obtained from the office of the AO. In the said background, inviting attention to Paper Book page 1 to 3, it was submitted that the ordersheet entries of the AO starting from Sept.,2016 to 17.1 1.2017 would show that the case was fixed for hearing on various different dates and on each of these dates, the assessee has been represented by his counsel and the information sought has been made available. The decisions of the ITAT and the High Court relied upon before the AO on 13. 10.2017 were again relied upon before ld. PCIT. Referring to the record, it was submitted that the AO on 17. 1 1.2017 issued summons to the assessee to be present personally before the AO on 21.11.2017. Letter to DDIT Mohali camp at Patiala referred to in respect of 27 parties who had purchased shares of M/s CCL International Ltd., were e-mailed and information was sought.

10.1 Referring to the record, it was submitted that on 22.11.2017, the assessee was present before the AO. His statement was recorded. Accordingly, it was his submission that the order has been passed after due enquiries wherein the AO as per the reasons recorded extracted in the order was always conscious that it was alleged as per record to be a sham transaction and the Long Term Capital Gain claim was bogus. He was aware of the statement made by some persons before the Directorate Investigation that Long Term Capital Gain claimed by various beneficiaries in the penny stock company was bogus. However, once he looked into the specific record of the assessee and looked at the transactions of the assessee which were at arms length, the suspicion/allegation was not borne out from the record. The requisite documents e-mailed and permission sought for initiating proceedings u/s 147 were all referred to.

10.2 Copy of the reply in response to the notice issued at pages 13 and 14 from pages 15 to 54 on 12.02.2017 and 16. 10.20 17 including the copy of questionnaire and its reply with enclosure referring to S.No. 3 were heavily relied upon. Inviting specific attention to the query raised by the AO on 16.08.2017 at pages 15 to 17, specific attention was invited to Sr.No. 4 which required the assessee to provide copy of D-Mat statements for the period 01 .04.2009 to 31.03.2013 in share trading done either by the assessee or any dependant family member.

10.3 Attention was invited to the query raised at Sr.No. 5 which required the assessee to provide list of share brokers through whom share trading for this share and during the specific period had been done. Attention was invited to question No.6 at page 16 to show that the assessee was required to provide the details of all the long term capital gain that has been earned by the assessee and his family members since 01 .04.2009. Attention was invited to question No.7 at page 16 to provide the list of all investments made in different shares over a period of last three years i.e. 31.03.2010, 31.03.201 1,3 1.03.2012 and 31.012013. Attention was invited to question No.8 at page 16 to give the details of assessee’s family members and their profession. Attention was invited to question No.9 at page 16 to give the details of D-Mat statements for the period 01.04.2009 to 31.03.2013. Attention was invited to question No. 10 at page 16 to give copy of bank statements maintained by the assessee and dependent family members for the year under consideration with narration of each debit/credit entry. Attention was invited to question No. 12 at page 16 to explain source of each credit in the D-Mat account during the year from which share trading had been carried out. Attention was invited to question No. 13 at page 16 to furnish the necessary evidence of the business carried out with profit and loss account, balance sheet, and date of commencement of the business. Income from other sources have been reduced to Rs. 7,97,315/-from Rs.l2,03,006/- shown in the original return. Attention was invited to question No. 17 at page 16 to justify the Long Term Capital Gain claim of Rs.9,55,27,1 13/- and to furnish details of companies from which LTCG earned.

10.4 Specific attention was invited to page 17 query 19, to justify increase in fixed assets in both the returns filed with documentary evidence.

10.5 Accordingly, it was his submission that the AO was always conscious as to what he was required to do in the 148 proceedings. Inviting attention to the reply filed by the assessee on 24.08.2017 which continues from page 18 to 21 it was specifically highlighted that all these details were made available including copies of the Sale Account, D-Mat Account as well as Computation Chart, Copies bank accounts of the assessee in support of the assessee’s stand were also made available. The entries in the D-Mat account read alongwith the computation chart were all relied upon. The background of how the assessee purchased the shares set out in para 17 supported with documents as argued before the AO at Paper Book page 20 was also specifically highlighted :

“17. That with regard to the said long term capital gain are given in the computation chart. The above noted assessee was allotted 300000 shares by M/s AAR Infrastructure Ltd vide its letter dated 7-03-2011. The face value of these shares was Rs. 10/- per share. The said price of the shares was paid at Rs.30,00,000/- by the above noted assessee vide cheque vide Cheque No. 281886 dated 07.03.2011 and the proceeds of the said cheque were paid from the SB A/c No 00561000197723 with the HDFC Bank. A copy of the bank account is being enclosed for your perusal and record. The shares so allotted were existing in the D-MAT account IDL1083 maintained with Master Capital Services by the above noted assessee. A copy of account is also being enclosed for your perusal and record. It is submitted that the said company was amalgamated with another company named and styled as M/s CCL International as per the orders passed to that effect by the Hon’ble Delhi High Court. A copy of the order is being enclosed for your perusal and record. It is submitted that from the perusal of the D-Mat account maintained by the above noted assessee a copy of which has been filed that the assessee was allotted 750000 shares of M/s CCL International Ltd after amalgamation order passed by the Hon’ble Delhi High Court dated 9-02-2012. It is also submitted that as per the record the value of the said share was at Rs.2/- per share. The assessee has sold only 750000 shares during the period from 26.06.2012 to 09.11.2012 vide a sale bills issued by the Master Capital services. The perusal of the copy of the bills copies of which are being enclosed and the copy of the D-MAT account copies of which are also being filed clearly indicate that the shares has been sold @ applicable/ quoted at the NSE of each day of sale. The sale rate was the same as was the rate of the share on the said date as per NSE. The NSE showing the trading of the share of Ms CCL International Ltd. It is also correct that the said sale of the shares has dully been declared and claimed as exempt u/s l0 (38) of the Income tax under the head long term capital gain, the perusal of the bill issued would also reveal that requisite STT and service tax thereon besides these charges have also been levied as applicable to such sales. The payment of the sale price has been made by the Master capital service to the above noted assessee through cheques which fact is evident from the perusal of the statement of account of the master capital services. A copy of the said account is also being enclosed for your perusal and record.

10.6 Attention was also invited to the reply dated 20.09.2017 made to the AO by the assessee’s counsel at Paper Book page 22 to 26. It was heavily relied upon in the present proceedings by the ld. AR. Again para 2 and 3 of the said reply further clarifying para 17 in the earlier reply, it was submitted, would address these issues. For ready reference, page 22 para 2 heavily relied upon from the impugned order is reproduced hereunder :

“2. That the perusal of the record would reveal that the company named and styled as M/s AAR Infrastructure was amalgamated with M/s CCL International Pvt. Ltd. vide an order dated 09.02.2012 of the Hon’ble Delhi High Court. A copy of the said order passed by the High Court is being enclosed for your perusal and record. The perusal of the said order would reveal that as a result of amalgamation the above noted assessee became entitle to 7,50,000 shares of the said amalgamated company. It is further verifiable from the said order that the face value of each share of the amalgamated company was fixed at Rs. 2/- per share. Thus it is evident from the documents referred to above that the abo.ve noted assessee invested Rs. 30,00,000/-for the purchase of shares on 07.03.2011 and the value of 7,50,000 shares of the amalgamated company, which was equal to the 3,00,000 shares of the AAR Infrastructure Company. Thus the cost of acquisition of 7,50,000 shares of the amalgamated company for the assessee works out to Rs. 30,00,000/-. As regards the sale of the shares of the amalgamated company the same has taken place during the period from 26.06.2012 to 17.11.2012. It is also evident from the perusal of the record that the sale of shares of the Amalgamated company which were listed with the National Stock Exchange were sold by the above noted assessee through its brokers known as master capital services limited. The assessee has duly disclosed the long term capital gain arising from the sale of the said shares of the amalgamated company while filing the return of income for the year under consideration. I am also enclosing herewith a copy of the letter dated 24.03.2012 issued by the CCL International Ltd. the perusal of which would reveal and confirm the facts mentioned above. Thus it is clear that the investment for all intents and purposes was made by the assessee for the purchase of shares on 07.03.2011 which were sold after 26.06.2012 which is beyond the period of 12 months and thus the capital gain arising there from has been correctly returned as long term capital gain as per the provisions of section 48 of the Income Tax Act. This fact is further confirmed by the sales statement of the shares issued by the authorized broker of the shares who has duly charged the STT on the sale of the said shares. Since the sale of shares is subject to STT as such the capital gain arising to the assessee is eligible for exemption u/s 10(38) of the Income Tax Act. This claim has been made by the assessee by filing the return of income for the year under consideration. The perusal of the copy of account of the assessee with regard to the purchase and sale of shares would reveal that these shares were sold by the assessee through the Master Capital Services Ltd. with whom the above noted assessee was maintaining the purchase and sale account. A copy of the account for the period from -1.03.2011 to 31.03.2013 is being enclosed for your perusal and record. This contains the details with regard to the each sale is again being appended for your perusal and record along with the computation chart. The perusal of this would further reveal that sale bills for the sale of shares have duly been issued and STT has been charged in the said bills. It is also evident from the perusal of the said account that the shares which has been sold were sold at rates which were there on the BSE. I am also enclosing herewith following documents for your perusal/record and verification:-

(i) Copy of allotment letter dated 07.03.2011 issued by AAR Infrastructure Ltd. showing the total number of shares at 3,00,000 and having total value at Rs. 30,00,000/-. The certificate also shows that the Client ID No. 10910718 is held by the above noted assessee. The perusal of this would also reveal that the allotment of the shares has been made on the basis of approval accorded by the board of directors in its meeting held on 01.03.2011. The particulars with regard to the payment made by the assessee and the receipt thereof by the company duly stamped are also mentioned in the said letter of allotment.

(ii) Copy of the order of amalgamation passed by the Hon’ble Delhi High Court dated 09.02.2012. The perusal of this order would reveal that the proceeding for the amalgamation were started vide order dated 28.09201 land the appointed date for the amalgamation was 1.04.2011 and the order of amalgamation was passed on 9.02.2012. The date of issue of the shares of the original company was 7.03.2011. The law laid down various courts has held that in the case of amalgamation of the company as per the provision of the companies Act there is no transfer of the shares held in the original company and as such the period of acquisition of the shares do not change and thus remains at 7.03.2011.

(iii) A copy of the ledger account with Master Capital Services. A copy of the ledger account in the books of Master Capital Service Ltd. is being enclosed for your perusal and record. The perusal of this would reveal that on 24.03.2012 there was a converted balance of 750000/- shares of CCL against 3,00,000 shares of M/s AAR Infrastructure Ltd. Further perusal of the same would reveal that against the said opening balance on the date of amalgamation i.e. 20.06.2012 the said shares were amalgamated and new shares numbering 7,50,000 of the CCL International Ltd. were shown as opening balance in the books of the Master Capital Services Ltd. Further perusal of the same would reveal that the first sale of 36331 shares took place on 26.06.2012 and the last sale of 43726 shares took places on 09.11.2012. A copy of the sale account maintain by M/s Master Capital Services is being enclosed for your perusal and record.

3. That the perusal of the bank account of the above noted assessee as well as the de-mat account and sale account maintained with the master capital would reveal that all the sale proceeds of the shares has been credited to the bank account of the assessee and no part of it has ever been paid in cash. Thus it is evident that all the sale proceeds of the shares were credited to the account of the assessee with the Master Capital Services Ltd. A copy of which is being enclosed and the payments from the said account through 24 various cheques were made by the Master Capital Services to the above noted assessee during the period from 26.06.2012 to 09.11.2012. A copy of the said account maintained with the capital services as well as the copy of Saving Bank Account of the assessee with the HDFC Bank as per details in para-4 above is being enclosed for your perusal and record. Regarding the purchase and sales of shares during the period prior to the year under consideration it is submitted that no purchases or sales of shares were undertaken by the above noted assessee.”

10.7 Accordingly, relying upon the definitions and the relevant provisions to address how manipulation has been defined u/s 2(1)(b) in para 4 and Section 47(vii) as how transfer is defined and Section 49 sub-clause (ii) which refers to certain modes of acquisition, it has been argued; “Thus as per these provisions as mentioned above the above noted assessee has received 7,50,000 shares of the CCL International Ltd. in lieu of 3,00,000 shares of AAR Infrastructures Ltd. which company was amalgamated. Thus in view of the provision as contained u/s 47(vii) the cost of 1,50,000 shares of CCL International Ltd. would be Rs. 30,00,000/- which was the original cost paid by the assessee towards the purchase of 3,00,000 shares of AAR Infrastructure Ltd. As regards the Long Term Capital Gain the same is to be regulated by the provision of section 10(38) of the Income Tax Act. Since as per the said provision for the purpose of availing the benefit of the said section the period of holding of the shares has to be 12 months. Since the shares have been purchased on 07.03.2011 by making the payment through cheque and the first sale of the shares has taken place on 26.06.2012 as is evident from the perusal of the sale account maintained by the assessee with Master Capital Services Ltd. is beyond the period of 12months and hence qualifies are exemption under the provision of section 10(38) of the Income Tax Act. As regards the cost of acquisition of the shares the same has been taken at Rs. 30,00,000/- only being the Cost of acquisition of the shares. Thus as per the provisions of the Income Tax Act as mentioned above the assessee is entitle to the exemption as has been claimed in the return of income filed. That I am enclosing herewith a copy of the computation chart of income for the year under consideration for your perusal and record. I am also enclosing herewith a copy of the financial statement for the year ended on 31.03.2013 issued by the Master Capital Services Ltd. indicating there in the sales of shares and the payment made to the above noted assessee. I am also enclosing herewith copy of details containing the sales of shares during the year under consideration issued by Master Capital Service Ltd. showing the global bills date wise and settlement thereof. I am also enclosing herewith the details of account code No. L-1084 held by the above noted assessee with Master Capital Services Ltd. for the year under consideration. I am also enclosing herewith a copy of the letter of allotment dated 07.03.2011 issued by AAR Infrastructure Ltd. vide which 3,00,000 shares for Rs. 30,00,000/- has been allotted in favour of the above noted assessee having DPID No. IN301143 and Client ID No. 10910718 and certificate No. 048 for your perusal and record. I am also enclosing herewith a copy of letter dated 24.03.2012 with regard to the issue of 7,50,000 equity shares of M/s CCL International Ltd. under the amalgamation scheme.. The perusal of this would further reveal that the 250 shares of CCL International Ltd. has been issued in lieu of 100 shares of AAR Infrastructure Ltd. The value of each share of CCL International Ltd. was determined at Rs. 21- per share and thereby the cost of each share would worked out to Rs. 21- per share of the CCL International Ltd. and thus against the amount of Rs. 30,00,000/- paid by the above noted assessee for purchase of 3,00,000 shares the assessee has been allotted 7,50,000 shares and the cost of each share would work out to be Rs. 21- per share. I am also enclosing herewith copy of saving bank account No. 0056193100197723 maintained by the above noted assessee with the HDFC Bank during the financial year relevant to the assessment year 2011-12, 2012-13 and 2013-14. I am also enclosing herewith a copy of the transaction statement issued by the Master Capital Services Ltd. in respect of the shares held and sold by the above noted assessee during the year under consideration from pages 67-68.1 am also enclosing herewith a copy of the statement of holding as on 31.03.2012 by the above noted assessee. It is also submitted that the perusal of the record would reveal that the assessee was holding shares of other companies also which fact is evident from the perusal of the de-mat account maintained by the above noted assessee.”

11. It was submitted that before the AO, the assessee had relied upon the decision of the Mumbai Bench of the ITAT in the case of Mukesh R. Marolia V ACIT (2006) 6 SOT 247 (Mum). Copy of the said decision as made available to the AO and relied upon in the present proceedings at page 27 to 34 was relied upon. He further drew attention to the decision of the Bombay High Court in the case of CIT Vs Shri Mukesh Ratilal Marolia (IT Appeal No.456 of 2007). Copy of the said decision is available at pages 35 to 38. It was his submission that before the AO, the assessee had also relied upon the decision of the Hon’ble Calcutta High Court in the case of CIT Vs Korlay Trading Co. Ltd. 232 ITR 820 (Cal), copy of the said decision, it was submitted, is placed at page 39 to 42. Inviting attention to pages 43-44, it was his submission that the assessee had placed reliance on these decisions with the covering letter dated 10. 10.2017. Contents of the said letter are heavily relied upon. For the sake of completeness, these are reproduced hereunder :

“Subject:- Assessment proceedings 148/143(3) of the Income Tax Act, 1961-Requisition of information u/s 142(1) of the Income Tax Act, 1961 regarding Trivikram Singh Kaur Toor, H. No. 2040, Phase-10, Mohali for the assessment year 2013-14. PAN-AIJPT2871K

Dear Sir,

Please refer to the personal discussions held in the above noted case at the time of last hearing held on 29.09.2017. In this connection it is submitted that I have already filed the details of the purchase of the shares along with the details with regard to amalgamation orders of the High Court as well as the conversion of the shares and entries in the D-mat account of the assessee the copies of which I have already filed during the earlier hearing. I have also filed copies of the sale bills and the copy of the bank account in which the sale proceeds of shares has been transferred. The perusal of the record would also reveal that there is no cash transaction either at the time of purchase or at the time of sale of the shares under consideration. The banking transactions when taken cannot in any manner be termed as panney stocks. It is submitted that the sales of shares has taken place a number of time and at various rates as per the prevailing rates at the NSE. I may also draw you kind attention to the Judgment of the Hon’ble Bombay High Court in the case of CIT Vs Mukesh Ratilal Marolia in appeal No 456/2007 decided on 7.09.2011 has confirmed the order of the ITAT with regard to the sale transaction of sale and purchase of shares. A copy of the judgment is being enclosed for your perusal and record. It is also to bring to your kind notice that the ITAT Mumbai Bench in the case of Farrah Marker Vs ITO is has been held that long term capital gain on sale of penny stocks cannot be treated as bogus and unexplained cash credit if the documentation is in order and there is no allegation of manipulation by the SEBI or the BSE. Further it has been held that when the shares are purchased through the banking channels from the stock broker registered with SEBI M/s Khambatta Securities Ltd which fact have been confirmed by the said stock broker in our considered view the assessee has discharged the onus required under section 68 of the Act as she has established the identity of the payer source of funds received on sale of the same shares and the genuineness of the transaction.

2 That the Hon’ble Calcutta High Court in the case of CIT Vs Korley Trading Co Ltd has held vide para 4 of the order that in case the has discharged his duties with regard to the purchase, sale and payments made and payments received towards the sale of the shares including the date of sale and date of purchase and no of shares contained in each transaction and the value of the shares and mode of payment thereof then no disallowance can be made for the claim of the assessee. A copy of the judgment enclosed.

3. That all the conditions with regard to the market including the rate and the regular bills issued by the broker and the market rate on each day which varied from day to day basis are fulfilled in this case and as such the claim of the assessee being genuine one and as per the provisions of the law as such the same needs to be allowed.

Thus in view of the Judgments above referred to the transaction of sale and purchase of shares is genuine and has rightly been claimed by the above noted assessee as long term capital gain from the sale of shares.

I hope that this will meet the requirements of the above noted case. In case any other information is required the same shall filed as and when called for.

Yours Faithfully,
Sd/-

(M.R.Sharma)
Advocate for the assessee.

11. 1 Inviting attention to pages 45 to 47, it was submitted, that again the assessee vide letter dated 16. 10.2017 had brought to the notice of the AO that prior to this year, the assessee has no income on account of Long Term Capital Gain from sale of shares. It is only in the year under consideration that the assessee and both his parents had made the transaction. The cases of the assessee’s father as well as the mother for similar reasons were under scrutiny before the AO on account of similar allegations. Copies of the orders passed by the AO at Delhi were relied upon and placed before the AO of the assessee. It was his submission that the Office Note of the AO at Delhi has been taken into consideration by the AO of the assessee and forms part of the Office Note and has already been referred to. Referring to page 46 of this reply to the AO, it was submitted that the assessee has made a prayer that similar claim of Long Term Capital Gain from sale of shares of the very same company has been returned by the father and the mother of the assessee. Similar reasons and facts and circumstances in the context of the similar allegation has been looked into by two different AOs at two different places and only then the assessments have been completed under scrutiny. Accordingly, a similar treatment on identical facts was prayed for. The detail of the Amalgamation Order of the Hon’ble Delhi High Court for conversion of shares and entries in the D-Mat Account of the assessee were again highlighted. Copies of the sale bills and copy of the bank account in which the sale proceeds of shares has been transferred was also relied upon. It was highlighted that there is no cash transaction either at the time of purchase or at the time of sale of shares. All transactions took place at the Stock Exchange. The sale of shares, it has been argued in the aforesaid letter dated 16. 10.2017, specific page 46 para 9, it was highlighted that the sale of shares has taken place during the times and on different dates as per prevailing rates at the Stock Exchange. In this context, reliance was placed on the decision of Hon’ble Bombay High Court in the case of CIT Vs Mukesh Rati Lal Marolia in appeal No.456/2007 decided on 07.09.201 1. Order of the ITAT Mumbai Bench in the case of Farrah Marker Vs ITO was also relied upon wherein the documentation supporting the transaction is available and there is no allegation of manipulation by the SEBI or the BSE. The decision of the Hon’ble Calcutta High Court in the case of CIT Vs Korlay Trading Co. Ltd. 232 ITR 820 (Cal) was also highlighted and the assessee’s case, it was canvassed, is duly covered by the said decision. Reliance was further placed as per para 12 of the aforesaid reply at Paper Book page 47 on another order of the Mumbai Bench of the Tribunal in the case of M/s Arvind Kumar Jain, HUF (ITA No.4862/Mum/2014) wherein various decisions of different Courts have been relied upon on near similar facts. Accordingly, it was submitted that the claim of the assessee deserves to be allowed. The copy of the order of the ITAT dated 18.09.20 17 in the case of CIT Vs M/s Arvind Kumar Jain, HUF at pages 48 to 54 relied upon before the AO, it was submitted, is available in the Paper Book and is heavily relied upon. The AO, it was submitted, recorded statement of the assessee, copy of which is available at pages 55 to 59 which again supports the case of the assessee.

11.2 Attention was invited to another reply made to the AO at pages 60 to 63 on 20.09.2017 wherein after explaining background in para-1, the specific details were made available in para 2, copy of the D-Mat account with the assessee’s broker M/s Master Capital Services showing balance of the shareholding as on 18. 1 1.2017 was shown to the AO. Inviting attention to Paper Book page 64, it was his submission that the assessee’s AO called forth information u/s 133(6) from the assessee’s broker M/s Master Capital Services on 16. 10.2017 requiring the broker to confirm as under :

“Sir/Madam,

Sub:- Calling for information u/s 133 (6) of l.T. Act in the case of Tiivikram Singh Toor, House No. 1026, Phase-10, Mohali for F.Y. 2012-13 relevant to ÀY. 2013-14, -regarding.

Kindly refer to the above subject.

The case of above said assessee is pending in scrutiny before the undersigned. In relation to the same you are requested to furnish the following:-

A) Copy of the D-Mat Account through which share trading has been done by the assessee.

B) Details of sale/ purchase share transactions made during the period 01-04-2012 to 31.3.2013 i.e. Copy of ledge: account maintained by you. Please intimate when the D-mat account was opened and initial credit deposited by the client including mode of deposited. The above assessee has furnished a copy of ledger account issued by your office for the period 26.06.2012 onwards showing sale of share of Chirawa Cements.

c) Details of all the persons who have purchased/sold shares of Chirawa Cements through you during the period 01.04.2012 to 31.03.2013 giving the date wise value of the shares of M/s Chirawa Cements.

Since it is the time barring matter, it is requested that information/ledger should be produced by duly authorized person in the office of undersigned on 24.10.2017 at 12.30 PM.. This may also be noted that the information is being called for u/s 133(6) of Income Tax Act, 3.961, failure to furnish information in time can result in imposition of penalty Rs.100/- for each day of default.

Yours Faithfully,
Sd/-

(Y.K.SAINI)
Income Tax Officer Ward-6(1), Mohali.

11.3 From pages 66 to 78, it was submitted, that the details of the assessee made available by the assessee’s Broker is appended in the Paper Book. Attention was invited to page 79 which is copy of the letter of the AO issued to DCIT (Inv) Mohali with enclosures upto page 83 including the reply from the said authority, a perusal of which shows that in none of the 27 companies mentioned therein, the assessee’s name is appearing either as a Director or a company wherein the assessee is interested as mentioned.

11.4 Accordingly, it was his submission that the AO passed the order with due care and attention. The enquiries, it was submitted, continue till page 101. Copy of the bank statements, Invoices and copies of the D-Mat account, it was submitted, were all made available which are filed in the present proceedings from Paper Book page 102 to 160. In this background, the AO passed the present assessment order, copy of the same inclusive of the Office Note, it was submitted, is available at Paper Book pages 161 to 168. Copy of the order of the ITAT in the case of Anip Rastogi which has been relied upon by the ld. PCIT is available at pages 169 to 182 of the Paper Book. Repeating his arguments that the said decision rendered on 08.01.2019 cannot be considered to be on record which the ld. PCIT is to consider as the said order was not available at the time the AO passed the order and thus, it cannot be said to be the basis of the proceedings u/s 263 as the AO cannot be faulted for not looking into something which was not available to him and the exercise of Revisionary Power on this ground, it was submitted, is not in accordance with law.

1 1.5 Even otherwise, on merits it was his submission that internal page 3 of the said order would show that the triggering factor was the statement of Shri Jai Kishan Poddar who was the Director of the brokering firm M/s Consortium Capital Pvt. Ltd. in the case of Shri Anip Rastogi. The assessee had sold shares of M/s CCL International Ltd. as per page 10 of the order through M/s Mansukh Securities & Finance Ltd. (internal page 10) Paper Book page 178. The connivance etc. if any of these two Brokers is not relevant as in the facts of the present case it is M/s Master Capital Services. In the facts of the said case before Single Member Bench, the assessee had the statement of Director Shri Jai Kishan Poddar and entries and transactions with M/s Mansukh Securities Finance Ltd. remained unaddressed. The statement that he was giving bogus entries was on record. In the facts of the present case, there is no such statement of M/s Master Capital Services. On the contrary, the Broker has supported by their independent documents linked with the information in public domain to show that these were genuine transactions. Referring to page 1 1, it was submitted that brokerage company therein was the M/s Consortium Capital Pvt. Ltd. (Paper Book page 179) which is not the situation in the present case. Inviting attention to page 12 of the impugned order Paper Book page 180 it was submitted that it was held that the reasons for rejecting the assessee’s claim therein were as under :

“………… I further note that Investigation Wing had recorded the statement of Sh. Jai Kishan Poddar who is one of the Director of M/s Consortium Capital Pvt. Ltd. which is one of the entities utilised for providing entry of bogus long term capital gain of M/s CCL International Ltd. who had admitted that he was involved in scam of providing bogus long term capital gains through shares of M/s CCL International Ltd. had also admitted that they were also involved in trading of these Jamakharchi Companies through which manipulative transactions in securities to either artificially raise or lower the market rate of the shares are being done…….. ”

11.6 In the said background considering the decision of the Apex Court in the case of McDowells & Company 154 ITR 148 Sumati Dayal 214 ITR 801, the assessee’s case was dismissed. These decisions, it was submitted, have no role or relevance in the facts of the present case.

11.7 Addressing the order of the ITAT in ITA 3809/Del/2018 dated 08.01.2019 in detail, it was further argued that the case of Anip Rastogi Vs ITO which was taken into consideration by the ld. PCIT to pass the impugned order, accordingly, was completely distinguishable on facts. It was his submission that maintaining the argument that the order was not available to the AO when he passed the order, it was also re-iterated that therein the broker was M/s Consortium Capital Pvt. Ltd. whose Director Shri Jai Kishan Poddar had given a statement and on those facts, the case of Anip Rastogi was decided against him. Inviting further attention to page 169 to 182 and page 183 and 184 of the Paper Book, it was submitted that the assessee therein had filed a M.A.No. 484/Del/2019 praying for rectification in that order dated 08.01.2019. Thus, it was argued that the order was not final as it had not been accepted by the assessee as its correctness was under challenge. However, in view of the fact that in the meantime ‘Vivad Se Vishwas Scheme’ 2020 was brought into play by the Finance Ministry. The assessee therein chose to settle the issue under the said Scheme and in those circumstances, the M.A. 484/Del/2019 filed immediately after the passing of the order in ITA 3809/Del/2018 was withdrawn subsequently. This fact, it was submitted, is evidenced from Paper Book page 183 & 184 which would show that the M.A. was withdrawn on 18.04.2022. Accordingly, it was his submission that no precedent can be sought to be laid down by the aforesaid decision. On the other hand reliance was placed upon decision dated 18.01.202 1 of the ITAT Lucknow Bench in the case of Smt. Sarita Gupta Vs ITO (ITA No.503/Lkw/2019), copy of which is available at pages 1 to 8 of the case-law Paper Book filed on 04.07.2022. Referring to the said decision, specific attention was invited to the fact that the Division Bench in ITA-503/Lkw/2019 considering the sale of M/s CCL International Ltd. and noting that the purchase and sale took place from the D-Mat Account, considering the Contract Note of the Broker M/s Edelwise Financial Advisors and relying upon decision of the ITAT in the case of Reeshu Goel considering identical facts as extracted in para 5 from the case of Reeshu Goel wherein para 16 of the aforesaid decision has been extracted. In the facts of Reeshu Goel, it was submitted the shares were acquired on account of amalgamation of original shares in M/s AAR Infrastructure Ltd. and thus, the shares in M/s CCL International Ltd. being sold through the Broker India Nivesh Securities Pvt. Ltd., considering the order, deleted the addition. Relevant extract in para 5 from the case of Reeshu Goel, para 16 to 18 were heavily relied upon. Accordingly, heavy reliance was placed upon the said decision. For ready reference, these paras are reproduced hereunder :

“16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as material referred to before us. As stated above, the assessee has applied for 50,000 shares of M/s. AAR Infrastructure Ltd. for face value of Rs.10 and paid consideration of Rs.5 lacs vide cheque no.169799 dated 13.01.2011. The said purchase has been recorded in the accounts of the earlier year and is also reflected from the copy of bank statement place at paper book at pages 25. The purchases made in the earlier years have been accepted as only net LTCG has been taxed by the Assessing Officer. The assessee was allotted shares of M/s. AAR Infrastructure Ltd. and immediately thereafter, the assessee had dematerialised the shares on 26.02.2011 which is evident from the copy of Demat account enclosed at pages 27 to 28 of the paper book. Later, M/s. AAR Infrastructure got amalgamated with M/s. CCL International Ltd. and according to amalgamation scheme, the assessee received 1,25,000 shares Of M/s. CCL International Ltd. in the proportion of 250 equity shares Rs.2 per share and Rs.100 equity share of Rs.10 per share. The shares which were allotted on 17.02.2011 have been sold after period of more than 18 to 20 months, i.e., on 29.08.2012 to 10.10.2012. The said shares have been I.T.A. N0.503/LICW/2019 Assessment Year: 20l5-16 sold through stock broker M/s. Indianivesh Securities Pvt. Ltd.

17. Before us the Id. counsel has in his brief note has stated that following documents and statements were filed before the authorities below:

(a) All the transactions were supported by proper Contracts Notes and delivery of shares was made through De-mat Account with stock broker, M/s Indianivesh Securities Pvt. Ltd. (who is the member of BSE and registered with SEBI). The shares were sold in the open market. The appellant has fulfilled all the condition u/s 10(38) of the Income Tax Act, 1961. The appellant has already filed National Security Depository Limited generated Demat Account and the broker statement relating to the sale of share in our paper book, also relevant demat statement highlighting the shares purchased has already been submitted before the Ld. AO.

(b) The appellant has earned long term capital gain through genuine purchase and sale of shares of the listed companies in normal course. There was no default on the part of the appellant. Moreover, the appellant has earned the income strictly following the norms and guidelines of SEBI. If M/s CCL International has been identified as BSE Listed penny stock, the appellant is not even remotely connected with these companies. She was not at all in a position to influence the purchase and sale prices of their shares. Hardship cannot be brought on the appellant, if default is made by company which is listed in the BSE.

c) In support of the genuineness of the transaction the appellant produced the following at the time of assessment proceeding:

a) Copy of allotment letter issued by M/s AAR Infrastructures Limited. (Page 25)

b) Copy of bank statement reflecting the payment made for the purchase of 50000 equity shares. (Page 26) I.T.A. No.503/Lkw/20i9 Assessment Year:2015-16

c) Copy of Demat Account of the appellant. (Page 27)

d) Copy of statement of broker reflecting the credit of 50000 equity share through preferential allotment. (Page 28)

e) Copy of order of Delhi High Court, dated 08.10.2011 in the matter of amalgamation of M/s AAR Infrastructure Limited into M/s CCL International Limited. (Page 29-44) f) Copy of Contacts notes reflecting the sale proceeds. (Page 45-50)

g) Copy of Transaction statement reflecting the increase in the number of shares. (Page 51)

h) Copy of Bank Statement of the appellant reflecting the amount received on sale of shares. (Page 54).

f) 18. The entire premise of the Assessing Officer for treating the entire transaction to be a bogus Long Term Capital Gain and making addition u/s. 68 is that, firstly, M/s. CCL International Ltd. did not have much financial worth to justify such a price rise; secondly, the SEBI had suspended the trade of the share for a brief period; thirdly, he has pointed out the history of price rise between 06.02.2010 to 25.11.2014 and then has drawn adverse inference that price of these shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties; and lastly, he has also referred to certain inquiry report of Investigation Wing Kolkata during the course of which certain brokers have admitted that they had provided accommodation entries in the scrip of M/s. CCL International. But nowhere in the entire assessment order, there is any reference to any material or evidence that assessee or assessee’s broker have been found to be indulged in any kind of accommodation entry in this scrip. No inquiry whatsoever has been made from the broker of the assessee. Further, during the period in which assessee had purchased the shares and had sold them whether the SEBI had suspended the trading has not been I.T.A. No.503/Lkw/2019 Assessment Year:2015-16 mentioned, in fact, Assessing Officer himself mentions that there was brief suspension in the year 2010, whereas the assessee has purchased shares in the year 2011 and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was between Rs. 55.25 crore to Rs. 79 crore. Thus, it cannot be held that it was mere a paper entity. From a bare perusal of the history of listing and trading of shares and the quote of Bombay Stock Exchange as quoted in the assessment order, it clearly reflects that as on 06.02.2010, the closing price was Rs. 50 and there was a steady increase and within the period of 4 years the price had reached up to Rs.609 on 25.11.2014. Nowhere, it has been pointed out that the rise was beyond the cap laid down by the SEBI, because the price of the scrip cannot rise beyond the cap prescribed by the SEBI. If the shares have been purchased and sold from the stock exchange on a quoted price with proper contract number, trade time and after paying STT, then it is very difficult to assume that the sale proceeds received from sale of such shares is bogus, especially when purchase of shares are not in dispute. This inter alia means assessee was in possession of shares which were also dematerialised. To prove that such a transaction was in the nature of bogus or colourable transaction, there has to be some inquiry or material to nail the assessee that she was some kind of a beneficiary in some accommodation entry operation. No defect has been pointed out in the documents submitted by the assessee nor has the broker of the assessee been inquired upon. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that all the transactions undertaken of the scrip M/s. CO International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of an material or evidence against the assessee, we do not find any reason as to why the claim of Lon Term Capital Gain from sale of such share should be denied.

I.T.A. No.503/Lkw/2019 Assessment Year.2015-16 Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer.”

6.2 The above findings of the Tribunal clearly demonstrate that the Tribunal has held the scrip of CCL International Ltd. to be a genuine scrip and has therefore, allowed the appeal of the assessee.”

11.8 Attention was also invited to the decision mentioned at Sr.No. 2 in the Case Law Paper Book (pages 9-20) in the case of Mukta Gupta Vs ITO (ITA No.2766/Del/2018) wherein considering near identical facts as would be evidenced from para 2 of the aforesaid decision which would show that in 2014-15 assessment year also, the purchase and sale of shares in M/s CCL International Ltd. was being considered. Referring to para 4 of the aforesaid decision (internal page 4) Paper Book page 12, it was submitted, that in the facts of the said case also, it had been noticed that M/s CCL International Ltd. had been found to be a penny stock by DIT(Investigation) Calcutta. Considering the facts as set out in para 5 which are fully applicable in the facts of the assessee’s case also except for the fact that therein the transaction was through the Broker Trust Line Securities and in the case of the assessee was through M/s Master Capital Services. In the facts of the said case also, the statement of assessees was recorded and it was noticed that all the details have correctly been given. In the said background, considering the fact that the purchase and sale was through the D-Mat Account, the rise and fall in the said scrip noticed from 06.02.2010 to 09. 12.2016 as noticed in para 9, it has been held that the increase and decrease in the share price was like normal scrip and the said shares were traded in all the years on the Stock Exchange. In the facts of the said case, assessment orders for 2013-14 and 2014-15 assessment year in the case of M/s CCL International Ltd. passed u/s 143 had also been filed to show that the said company is genuine and was regularly assessed to tax by the Department. Considering this fact, the addition was deleted. For ready reference, from Paper Book page 17 (internal page 9) of the said order, the relevant finding in para 10 is extracted hereunder :

“10. Nowhere the evidences filed by the assessee has been rebutted or any inquiry whatsoever has been conducted by the Assessing Officer or by the Id. CIT(A) to prove that assessee was involved in any clandestine manner for routing its own unaccounted money. If the assessee has filed the entire evidences relating to purchase which is mostly through cheque shown in the earlier years and also filed all the details of sale transactions and the shares which have been routed through Demat account and sold through stock exchange on a quoted price on that date, then onus shifts upon the Department to prove that all these evidences are only make believe documents and certain minimal inquiry is required to rebut all these evidences. As stated above, nowhere it has been found that assessee was in any manner found to be beneficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld. Accordingly, we hold that the money credited in the account of the assessee is from the sale of shares and accordingly benefit of Long Term Capital Gain on sale of such listed equity shares have to be given.”

11.9 Similar facts, it was submitted, was noticed in the case of Mukta Gupta by the ITAT in the order dated 26. 11.2018.

11. 10 Attention was also invited to the order of the ITAT dated 07.06.2019 in ITA 2381/Kol/2018 pertaining to 2015­16 assessment year in the case of Mool Chand Jagwayam Vs ITO. Inviting attention to page 22 of the Paper Book para 3 of the said order, it was highlighted that in the facts of the said case, the assessee having purchased scrip of M/s CCL International Ltd. sold it in 2015-16 assessment year which came to be questioned by the AO. The scrip was sold through M/s Vardhman Capital Pvt. Ltd. The sale and purchase was through D-Mat account. Copies of Contract Notice were made available. The AO denied relief relying upon DIT Wing, Kolkata wherein it had been alleged that it was a penny stock company. The Long Term Capital Gain claimed to be exempt u/s 10(38) was held to be fictitious. The ITAT relying upon decision of the Delhi Bench of the Tribunal in the case of Mukta Gupta and noticing that apart from the report of the DDIT(Investigation) there was no material or evidence with the Revenue to conclude that apparent was not real. Accordingly, it was his submission that the claim of the assessee as per the legal position available qua this very scrip deserves to be allowed.

11. 11 Attention was invited to the price movement of the scrip 531900 from 01.06.2012 to 31. 12.2012 as downloaded from the internet from the BSE site at pages 45-54 was relied upon so as to argue that when the day’s high and low prices are taken into consideration and looking at the number of shares and the trades being carried out of said scrip, it would show that it is a normal trading activity. On the other hand, attention was invited to Paper Book page 47 to show that on 04.07.20 12 the specific share was opening at Rs. 122.50 and the day’s high was Rs.126/-. Day’s low was Rs. 120/- and it closed at Rs.124.20. The number of shares which were traded at the BSE on that specific date was 221236 and the number of trades which took place was 305. The total turnover on the said date for this share on the BSE Stock Exchange was 27538688. Referring to the chart, it was submitted, that every day’s transaction would show that the number of trades and the number of shares every day’s price of the said scrip on the opening and closing of every day is showing a normal cycle as of every other scrip and there is no aberration.

11. 12 Attention was invited to Paper Book page 48 to 51 which would show the movement of the share/scrip from 31. 12.2012 to 01.06.2012. The rates noticed by the ld. PCIT from unstated sources possibly could be on account of not factoring the Corporate action. It was submitted that the shares listed on the BSE have been subjected to Corporate actions and this is an admitted fact and hence, the difference noticed in hindsight are not significant. The sale prices on the specific dates is as per the BSE Stock Exchange. These shares have gone out from the D-Mat account. Illustrating the Corporate action, it was submitted, Paper Book page 52 may be seen. Referring to it, the ld. AR submitted that there was corporate action on the said share on 17.08.201 1 wherein the old face value of the scrip was 10 and the new face value was 2. Again on 04. 12.2015 the old face value of the said scrip was 2 and the new face value was

10. This information, it was submitted, is as per the moneycontrol.com. Inviting attention to Paper Book page 54, it was submitted that the price of the said scrip on 05.01.2015 would show the value as 140.07 whereas on 04. 12.2 0 15 it was 27.06. Accordingly, this difference, it was submitted, can be explained from the change in face value of the share.

12. Inviting attention to Paper Book pages 55 to 59 it was submitted that in the facts of the present case, the AO has recorded the statement of the assessee. The invoices supporting the claims, the Brokers’ account, the D-Mat account maintained of the assessee, the bank statements etc. all have been seen. None of these are shown to be incorrect. Accordingly, it was his submission that on facts the assessee’s case cannot be said to be incorrectly considered by the AO. The order has been passed after due consideration of the facts available on record and the various orders of the ITAT relied upon fully support the view taken by the AO. The only decision of the ITA T i.e. Anip Rastogi on the basis of which 263 proceedings have been initiated and concluded in the order passed which is under challenge, it was submitted that therein the assessee had filed a Miscellaneous Application u/s 254 sub-section (2) praying for rectification in the order. However, since in the meantime the ‘Vivad Se Vishwas Scheme’ came into existence, the assessee chose to settle in the said Scheme. Accordingly, as opposed to the sole order of the ITAT wherein facts admittedly were different on account of the statement of the broker of the firm through which the assessee traded i.e. M/s Consortium Capital Pvt. Ltd. In all other cases considering the Long Term Capital Gain arising from sale of M/s CCL International Ltd. as referred to earlier, the ITAT has allowed relief on identical facts and circumstances. The trading in this very company has been repeatedly held to be genuine. The impugned order, accordingly, it was his prayer, maybe quashed.

13. The ld. CIT-DR on the other hand inviting attention to the impugned order submitted that in the facts of the present case, the ld. PCIT is fully justified to pass the order. Specific attention was invited to the Office Note of the AO where it was argued the AO himself has been careful to observe that in case in future something contrary or otherwise is found suitable action would be then taken. Referring to the order of the ITAT in the case of Anip Rastogi, it was his submission that the Revenue has noticed this order of the ITAT which has in very clear terms held that the transactions pertaining to M/s CCL International Ltd. were sham and bogus and pertained to a penny stock company, hence, the order passed by the AO cannot be said to be an order which is valid in the eyes of law as herein admittedly the AO has not carried out sufficient and due enquiries. It was argued that had these enquiries been made, the AO would have seen that the entire documentation trail relied upon by the assessee pertained to companies being a penny stock company and hence a façade. Accordingly, relying upon the Office Note of the AO himself, it was submitted that the order is in accordance with law and fully meets the statutory requirements as set out in Explanation 2 to Section 263 of the Act.

13.1 Referring to the reliance placed by the assessee before the AO, it was specifically highlighted that repeatedly the assessee has used and explained its arguments to be in a genuine company by referring to the evidences of the NSE. It was his vehement argument that at no point of time these shares have ever been treated at the National Stock Exchange and it is exclusively available at the Bombay Stock Exchange, hence frequent reference to NSE instead of BSE would show that the assessee in a very casual manner has proceeded to rely upon evidences to argue that these were valid evidences to claim that the transactions were genuine. The AO, it was submitted, without caring to even notice which Stock Exchange was being referred to, allowed the claim casually.

13.2 Inviting attention to the Show Cause Notice issued to the assessee and the reply of the assessee, it was submitted that the impugned order was fully justified on facts. Inviting specific attention to page 3 1 of the impugned order, it was submitted that the ld. PCIT has taken note of the fact that as per the details, the assessee has mentioned Chirava Cements and it has been noticed by the ld. PCIT that the Chirava Cement was changed to M/s CCL International Ltd. w.e.f. 1 1. 12.2008. Thus, the trading activity carried out for Chirava Cement, when the name of the company stood changed on 1 1. 12.2008 was questioned. Referring to page 32 of the impugned order, it was submitted that ld. PCIT has specifically referred to the fact that as per the assessee’s reply, the shares were sold at the NSE whereas the M/s CCL International Ltd. was not listed on the said Stock Exchange. The ld. PCIT, it was submitted, has also questioned the value of the share as on 15. 1 1.2012 which on the said date was noticed to be 664.75 and on 26.06.2012 as per the chart extracted in the order at page 32, it is shown to be Rs.547/-. Inviting attention to pages 33 onwards, it was submitted that the opening and closing of the said share as per BSE was in the range of 537 and infact continues to rise with some fall in September. However, from 20.09.2012 it repeatedly remained at Rs.724/- upto 12. 1 1.2012. Accordingly, the ld. PCIT has given a finding that it was never below Rs.505.25 during the period 26.06.2012 to 17. 12.20 12 at internal page 39 of her order. In the said backdrop, an opportunity was given to the assessee, however, no one appeared.

13.3 In paras 7 and 8, it was submitted, the ld. PCIT took note of the fact that in M/s AAR Infrastructure and in M/s CCL International Ltd. with which M/s AAR Infrastructure got amalgamated, Smt. Rama Gupta and Shri Akash Gupta were Directors. The assessee was allotted certain shares in the amalgamated company. The assessee was allotted 750000 shares in M/s CCL International Ltd. in lieu of 300000 shares held in M/s AAR Infrastructure which are claimed to have been sold during 26.08.2012 to 09. 1 1.2012 and for a total sale consideration of Rs.9,90,89,257/-. At page 40 of the impugned order, it was submitted the ld. PCIT took note of the fact that M/s CCL International Ltd. was amalgamated in May, 1996. Originally it was called Gupta Cements and it was changed to Chirava Cements and again in 2008, the name of Chirava Cements was changed to M/s CCL International Ltd. Inviting attention to the impugned order page 41, it was submitted that the net profit declared by the said company from 2008-09 financial year to 201 1-12 financial year was noticed to be in the range of 0. 19; 1. 11; 0.96 to 0.92. It was submitted that the ld. PCIT took note of the price changes of M/s CCL International Ltd. before amalgamation and again after the amalgamation noticing the fact that the amalgamation was under the supervision of the Hon’ble High Court, the ld. PCIT has noticed the sudden jump in the share in the range of Rs. 30 to Rs.40/-. It was submitted that the rise was questioned by the ld. PCIT and she has categorically observed that there was no justification for the steep rise in the share price except for the fact that it was rigged. Considering the modus operandi in penny stock which had been judicially noticed, ld. PCIT has held at page 49 that the AO not did not call for relevant documents nor examined the documents filed, nor considered the legal provisions, thus on account of failure to make proper enquiries/verification and considering the judicial position thereon, the assessment order was set aside holding as under :

“22. In the facts and circumstances of the case, the failure of the Assessing Officer make enquiries/verification to arrive at the correct and complete facts and to apply the correct law makes the assessment order erroneous in so far as prejudicial-to the interest of revenue. Hence, the said assessment order dated 27.11.2017 is held to be erroneous in so far as it is prejudicial to the interest of revenue for the reasons as discussed above in view of the provisions of section 263, inter-alia including Explanation 2(a) inserted w.e.f. 01.06.2015. Accordingly, the assessment order u/s 143(3) dated 27.11.2017 for the assessment year 2013-14 is cancelled with a direction to the Assessing Officer to pass an order afresh in accordance with law, after allowing opportunity of being heard to the assessee.”

13.4 Accordingly, she has drawn the conclusion on facts that had a proper investigation been carried out, the following points would have been emerged :

1. The assessee purchased shares of M/s AAR Infrastructure Limited through private placement on 07.03.2011. The shares are allotted on face value of Rs.10 per share.

2. The company applies for amalgamation with M/s CCL International Limited and the amalgamation was made effective 01.04.2011 by the order dated 09.02.2011 of Hon’ble Delhi High Court.

3. On 01.04.2011 i.e. before the amalgamation the share of M/s CCL International was being traded between Rs.8 and Rs.9 which was as per the financial position of the company.

4. Suddenly after amalgamation the share price starts rising and reaches peak and then starts declining. The assessee claims to have sold the share in this period.

13.5 Thus, the enquiries made by the AO, it was submitted, were meaningless. In the said backdrop the facts as emerged when the ITAT came to examine the case of Anip Rastogi, it was his submission that the fact that the assessment order was erroneous and prejudicial to the interests of the Revenue is clearly demonstrated. Heavily relying upon this order of the ITAT it was his submission that the impugned order may be upheld.

13.6 Reliance was also placed upon the decision of the Hon’ble Calcutta High Court dated 14.06.2022 in the case of PCIT Calcutta Vs Swati Bajaj & ors (copy filed running into 150 pages). It was submitted, that in the facts of the said case, 90 appeals filed against the common order dated 26.06.2019 by ITAT Calcutta (Single Member Bench) had come up for consideration before the Hon’ble Court. In the facts of the said case, the Hon’ble Court looking at near identical penny stock companies wherein Long Term Capital Gain by various people had been claimed. The façade of documents were available despite that considering the scams the appeals of the Revenue were allowed affirming the orders of the AO and the Hon’ble Court held that the Tribunal committed a serious error in setting aside the order of the CIT in interfering with the assumption of jurisdiction by Commissioner u/s 263. In the said order, it was submitted that the shares of M/s CCL International Ltd. at page 58 had also been referred to.

13.7 Accordingly, it was his prayer that the assessee’s appeal may be dismissed.

14. The ld. AR submitted that though he can make preliminary submissions on this decision, however, it being a lengthy order some time to address the said decision, it was requested may be given.

15. On the next date, ld. AR submitted that in the facts of the said case at internal page 1 1, it would be seen that the issue for consideration before the Hon’ble Court was manipulation of share price of Surabhi Chemicals and not M/s CCL International Ltd.

16. The ld. CIT-DR on the other hand submitted that in the lead case, facts referred may have been of Surabhi Chemicals, however, in the said decision, the shares of various other companies which were found to be penny stock bogus companies were also taken into consideration. Thus, the fact that in the question of law reproduced reference is made to only Surabhi Chemicals it was submitted, has no material significance.

17. The ld. AR maintaining his objection further objected to the argument that in the order reference had been made to M/s CCL International Ltd. specifically page 58 highlighted by the ld. CIT-DR. Reading from the order, it was argued that it is an argument by one of the parties that the sale/purchase in these companies was telecasted in the TV Channels and these penny stock companies are genuine. It was his submission that one of the assessee’s had taken the argument before the Hon’ble High Court that there are discussions on the reputed TV channels in regard to sale and purchase of shares in various companies. Thus, it was argued that these shares are legitimately traded on the Stock Exchange on the basis of advice available in the public domain and thus, the allegation that it was a bogus share was sought to be contested wherein the following specific argument has been raised :

“27……….. Further it is submitted that in one of the trading done by the assessee namely with regard to the shares of the CCL International, a reputed TV Channel, ZEE Bis.com had given a buy call widely published in the media and therefore to state that the transaction was bogus is unsustainable, more so when the assessees stock broker is a public sector undertaking. Further it is submitted that merely because there is escalation of the price of the shares, it cannot be stated that the transaction is bogus………. ”

17.1 Accordingly, it was his submission that before the Hon’ble Calcutta High Court, the occasion to consider whether the M/s CCL International Ltd. was a genuine or a bogus company never arose. Hence, it was his submission that the said decision is not applicable to the assessee.

18. Since the ld. CIT-DR was still on his leg advancing the case of the Revenue wherein reference had been made to the decision of the Calcutta High Court in the case of CIT Vs Swati Bajaj dated 14.06.2022 in Income Tax Act No.GA 2/22. The ld. CIT-DR reverting back to his submissions contended that the Hon’ble High Court considering the plethora of cases examining various arguments where entire paper documentation was intact considering the price movements in the penny stock companies set aside the order of the ITAT. The said decision, it was his submission, fully applies to the facts of the present case.

18.1 The ld. CIT-DR further relying upon the extract from the Business Standard submitted that during the period June,2012, specific share was trading in the range of 537 and on 18.09.20 12, it was trading at Rs.720/- to Rs.724/-. Accordingly, the fact that the assessee as per his own submissions has sold it at a lesser price, again becomes an issue for questioning. Accordingly, it was his submission that on facts the impugned order may be upheld.

19. The ld. AR submitted that the decision in the group cases in Swati Bajaj rendered by the Hon’ble Calcutta High Court is inapplicable to the facts of the present case. The order operates on facts peculiar to its own as the sale/purchase was not from the D-Mat accounts. Some of these were off the Stock Exchange private placements. The observations and findings qua the company therein has no applicability to assessee’s case. The company in the present case continues to operate on the Stock Exchange. The trades were made on the Stock Exchange. The supporting documents for a company which has not been de-listed and continues to operate, cannot be treated to be at par with the facts of Swati Bajaj’s case. Accordingly, it was his prayer that the impugned order may be quashed.

20. We have heard the rival submissions and perused the material available on record. The legal position as considered in the respective orders by the Tax Authorities and as argued before us by the parties have all been taken into consideration. On giving our thoughtful consideration to the claims and counter claims of the parties before us, we deem it appropriate to first cull out the facts necessary for adjudicating the issue before us namely; can the order passed by the ld. PCIT u/s 263 exercising the Revisionary Powers be said to be a valid order in the eyes of law on the basis of facts and evidences on record.

20.1 In order to examine the said question, we need to set out the relevant and necessary facts on the basis of which the answer to the said question can be determined.

20.2 The assessee in the facts of the present case has sold the shares of M/s CCL International Ltd. which were acquired as a result of amalgamation of M/s CCL International Ltd. with M/s AAR Infrastructure wherein the assessee had originally invested a certain amount. It is an accepted fact that the Amalgamation Scheme under the aegis of the Hon’ble Delhi High Court has attained finality. The number of shares received by the assessee as a result of the amalgamation is not the issue for determination in the present proceedings.

20.3 The next relevant fact is that these shares of M/s CCL International Ltd. were sold by the assessee at a specific price. The Assessing Officer as extracted in the order itself, we find was conscious of the report of DDIT (Investigation) Calcutta wherein it was highlighted that bogus Long Term Capital Gain claims etc. were being claimed by various parties. This scam unearthed was noticed to have been facilitated by various persons for the benefit of un-named functionaries wherein money was being laundered in order to evade tax by claiming bogus sales and purchase in penny stock companies. The AO considering the information noticed that the assessee had sold 750000 shares in M/s CCL International Ltd. and has not disclosed those in its return dated 02.08.2013. Considering the information after recording reasons and fulfilling the necessary formalities, he issued notice u/s 148. The assessee filed its return on 26.10.2016 disclosing the sale of transactions. The AO recording the reasons for re-opening the assessment in the impugned order dated 27. 11.2017 itself at pages 1 and 2 required the assessee to explain and justify its claim of Long Term Capital Gain claim made in the revised return in the backdrop of the information of scam in penny stock company. This order is set aside by the ld. PCIT u/s 263 of the Act.

20.4 A perusal of page 1 1 and 12 of the impugned order shows that the assessee had fully explained that these shares were allotted in the D-Mat Account “L 1083” maintained with the Broker. The purchase of shares in M/s AAR Infrastructure vide cheque; its amalgamation with M/s CCL International Ltd. and the allotment of shares after the order of the Hon’ble Delhi High Court are consistent facts repeatedly argued before the ld. PCIT. The various queries by the AO and the replies of the assessee are all a matter of record. We find that despite these repeated submissions extracted in the order various facile objections/observations are made by the ld. PCIT. As an illustration, the following observations have been made in para 31 of the impugned order :

Page 31 of the impugned order

…………………………..

3. When the information provided by you was analyzed, it was seen that in the Account detail the name of security sold has been mentioned as CHIRAWA CEMENTS. On verification it has been found that the name Chirawa Cement was changed to CCL International Limited w.e.f 11/12/2008. A company whose name was changed on 11/12/2008 could not have been traded under the name Chirawa Cement after almost 4 years i.e from 26/06/2012 to 09/11/2012 the period during which the shares were stated to have been traded. You are therefore requested to show cause as to why the transaction claimed in the name of a non-existing entity should not be treated as sham transaction.

20.4.1 The ld. PCIT again at page 31 also faults the assessee with the following observations:

Page 31 of the impugned order

4. ………………………….

In the answers given above you have given details of how the shares of M/s CCL International Ltd. International Ltd. were purchased. From the replies given during assessment proceedings it is seen that the share of CCL International Ltd. were never purchased by you. In fact these were issued to you as per the scheme of amalgamation. This itself shows that the transaction with regard to the shares of CCL International is not genuine.”

20.4.2 Similarly at page 43 vide para 13, the ld. PCIT again makes the following observations to discard the evidences available on record :

(Page 43 of the impugned order )

13. Coming back to the transaction declared by the assessee, apparently the shares were purchased by the assessee by making payment through banking channel. The company was amalgamated as per the order of Hon’ble Delhi High Court and the assessee got shares in the amalgamated company. These shares were claimed to have been sold through a broker and thus there appears nothing wrong in the transaction. However, if the issue is investigated in proper perspective the following points emerge:-

1. The assessee purchased shares of M/s AAR Infrastructure Limited through private placement on 07.03.2011. The shares are allotted on face value of Rs.10 per share.

2. The company applies for amalgamation with M/s CCL International Limited and the amalgamation was made effective 01.04.2011 by the order dated 09.02.2011 of Hon’ble Delhi High Court.

3. On 01.04.2011 i.e. before the amalgamation the share of M/s CCL International was being traded between Rs.8 and Rs.9 which was as per the financial position of the company:

4. Suddenly after amalgamation the share price starts rising and reaches peak and then starts declining. The assessee claims to have sold the share in this period.

20.5 In the facts of the present case, the allotment of shares in M/s CCL International Ltd. as a result of amalgamation of M/s CCL International Ltd. with M/s AAR Infrastructure as noticed earlier, is not the issue for consideration. This issue, as noticed earlier, had already attained finality as it has not been challenged further. The occasion to make the above assertions is only a vain attempt to arouse suspicion. The Revenue has not placed any evidence or argument to show that this issue was influx or that the order of the Hon’ble Delhi High Court was under challenge in any proceedings before any Court. We have seen the queries raised by the AO; responded to by the assessee; the information sought by the AO from the Broker of the assessee; its cross checking with the AO at Central Circle Delhi wherein also similar allegation of mis-use of exemption provisions in LTCG in penny stock companies for money laundering was being enquired into in the case of assessee’s parents also; the invoices; the documents showing STT, Service tax etc. deducted; the Brokers accounts and the sale of shares at the BSE supported by transactions recorded in the Bank including the accounts of the brokers etc. have all been seen and considered. These are not faulted with. In the said factual matrix on considering the queries raised and responded to by the assessee before the AO and again before the ld. PCIT we find that the suspicions of the Revenue that the assessee has indulged in participating in scheme of claiming bogus LTCG claim in order to evade tax is misplaced. In order to exercise the powers u/s 263, the order passed by the AO has to be shown to be erroneous and prejudicial to the interests of the Revenue. No case law need to be referred to for the said well settled legal proposition. In the facts of the present case, the suspicion harbored by the Revenue have not been translated into hard facts. In the facts of the present case, we have seen that all due and relevant enquiries have been made by the AO before the passing of the order u/s 143(3)/ 147. The arguments that scamsters have admitted to launder money by indulging in dubious manipulative practices of buying and selling shares in penny stock companies and making bogus Long Term Capital Gain claims is an issue of alarm and concern for all concerned. However, this general alarming information to act as a valid sword to set aside the assessment order has to be first shown to be based on relevant, material and specific facts relatable to the assessee. Subsequent to the passing of the assessment order some relevant specific information should be brought on record by the Revenue. What we have seen is only suspicions. We have seen the Office Note recorded by the AO in the facts of the present case wherein he has cross checked the factum of genuineness of the assessee’s claim from another AO at Delhi, Central Circle 27, Jhandewala Extn. The AO of the assessee’s parents at Delhi has also recorded that based on the facts as available M/s CCL International Ltd. is not seen to be a bogus penny stock company. On the other hand before us, nothing has been placed on record before us to show that the said penny stock company is a sham company. The entire case of the Revenue appears to be on the foundation the of SMC order in the case of Anip Rastogi. As a result of this order dated 08.01.2019 the Revenue got a second wind. This order admittedly was not available to the Assessing Officer while passing the order. Not-withstanding the arguments that the said order was distinguishable on facts as the Broker therein was apparently in concert or connected with M/s Consortium Capital Pvt. Ltd. whose Director Shri Jai Kishan Poddar had given a statement that he had indulged in bogus transactions in M/s CCL International Ltd. the fact remains that this order’s finality itself was influx as it was challenged by that assessee itself before the ITAT Delhi Benches u/s 254(2) of the Act for the presumed mistakes therein. The fact remains that ultimately the issue was settled under ‘Vivad Se Vishwas Scheme’ as a result thereof, the Miscellaneous Application filed by Shri Anip Rastogi therein was withdrawn. Thus, we find that the order relied upon by the Revenue admittedly cannot be said to be a final order laying down any precedent as it clearly was even not even accepted by the said assessee also as its correctness was in flux. Hence, its finality even for that assessee was under challenge. It cannot be over emphasized when considering precedents that an order/decision at best only decides what is agitated/argued and hence considered by the Court/Tribunal. Consequently, its precedent value is limited to these issues. Reference can also be made to the oft quoted decision of the Apex Court in the case of CIT Vs Sun Engineering Ltd. 198 ITR 197 wherein the Apex Court clearly cautions that; “Judgments must be read as a whole and observations in judgments should be considered in the context in which they are made and in the light of the questions that were before the court.” It would not be out of context to extract the sage advice given by their Lordships in the aforesaid decision, “It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision.” The Apex Court in very clear terms in Goodyear India v State 188 ITR 402 (SC) has held that “A precedent is an authority only for what it actually decides and not for what may remotely or even logically follow from it; and a decision on a question that has not been argued cannot be treated as a precedent”. The Courts have repeatedly castigated the rash approach of a casual and careless reading of the decisions. The Courts have repeatedly held; “To lift a sentence from a judgment, as if it is an independent provision in a statute and emphasise it as declaring the law, will result in unanticipated and unexpected consequences”. Infact the Hon’ble Apex Court in CWT v Karan Singh 200 ITR 614 (SC) has clearly held that; “if there is any doubt about the decision, the entire judgment has to be considered, and a stray sentence or a casual remark cannot be treated as a decision” It cannot be over-emphasized that not only the decision should be read fully but all relevant acts considered therein are required to be culled out. Even a single additional or different fact, may make a world of difference between conclusions drawn in two cases which otherwise apparently may appear to be two near similar cases. Reference may be made to Padmasundra Rao v State of TN 255 ITR 147 (SC). Thus, judicial sanction cannot be given to application of a decision wherein the Authority without even caring to discuss how the factual situation therein fits in with the factual situation of the decision on which reliance is placed. The said exercise repeatedly has been held to be a meaningless exercise. Hence, at the cost of repetition, it cannot be overemphasized that the Courts only decide the question before it or what is agitated before it and what was not argued or not considered, cannot be presumed to be considered therein. As opposed to the decision of Anip Rastogi, we find that there are many orders of Co-ordinate Benches qua M/s CCL International Ltd. relied upon by the ld. AR which have not been rebutted by the Department. The fact remains that the assessee has successfully pleaded before us and it is not a disputed fact that the broker of the assessee and the person whose statement was considered that he was facilitating dubious transactions in M/s CCL International Ltd. for various parties and concerns in the case of Anip Rastogi was Director Shri Jai Kishan Poddar of M/s Consortium Capital Pvt. Ltd. were not connected. These entry proividers/facilitators were strangers to the assessee. This is an undisputed fact. The assessee’s transactions have not taken place through the said Director. The said Director Shri Poddar of M/s Consortium is a stranger to the assessee. The assessee’s Broker is M/s Master Capital Services and the said Broker has confirmed the transaction of sale as genuine to the Assessing Officer. The evidence is available to the ld. PCIT and has not been rebutted or shown to be incorrect in the present proceedings. Consequently judicial finding that all brokers who have made bonafide sale and purchase in the stated company also manipulated the transactions cannot be given. The presumption cannot be drawn that merely because one Broker Shri Jai Kishan Poddar and some other somehow were so influential as per their claims hence could manipulate the Stock Exchange qua a specific company then all Brokers were similarly influential. This rash and irresponsible reasoning cannot be accepted. It would be a pre-postreous and impossible argument and cannot be accepted.

20.6 In the facts of the present case, the shares are held in the D-Mat account with the broker L 1083 we have seen the invoices and the supporting documents. They were sold on the Stock Exchange i.e. BSE; on specific dates at the rates as prevalent on the Stock Exchange. The rates, dates and amounts are corroborated from the bank accounts, the Broker’s account and the concerned BSE Stock Exchange. No contrary evidence has been filed by the Revenue. The suspicions and conjectures in the absence of any evidence have no relevance whatsoever. The argument that subsequently the share price rose and the fact that the assessee sold it at a lesser price on an earlier date is a suspicion which cannot be taken as an evidence that the share price was rigged. This fact in no way discredits the assessee’s claim, infact it only fortifies the fact that assessee had no apparent “insider’s knowledge” or clairvoyance that the share price would rise further. With hindsight most everyday rationale decisions may ultimately appear to be ill-advised actions, however none of us are clairvoyants and hence being incapable of seeing the future we act in the present. Decisions taken in the present are based on available input. What lies in the future is always an estimated guess.

20.7 The Revenue has also questioned the current financial health of the company so as to declare it a bogus sham penny stock company. The said insinuation is mischievous. There can be many reasons for the rise and fall in the fortunes of companies existing in dynamic ever changing business economic environments. Thus, even if the financial health of M/s CCL International Ltd. at the present time may not be very promising, however, this fact by itself cannot lead to the conclusion that its existence and functioning was a sham. The presumption that in future, the company is incapable of doing well has no rationale basis. The historical rise and fall of businesses is replete with stories of penny stock companies sometimes rising upto becoming the multi baggers. Investment in Penny Stock companies is risk ridden and the investment depends on the risk appetite or foolish optimism of the investor but the argument that necessarily these are sham companies is based on mere suspicions. It is a fact that many of penny stock companies may fall, however, this fact by itself does not lay down the law that trading in penny stock companies is banned. Many a penny stock company can become a big player if its strategies and economic environments align. Referring exclusively to the blue chip stocks for allaying the unsupported doubts and suspicions of the doubtsayers it may be highlighted that an impartial sturdy of the rise and fall of some well established companies today would show that these were possibly penny stock companies. Reference may be made to the scrip of Eicher Motors whose share price as on 31 August, 2022 is hovering at Rs. 341 1/-, it would be an eye opener to notice that in June, 1998 it was trading at Rs.9/-. Similarly, the share price of Kotak Mahindra Bank ranging currently in the range of Rs. 1902/-, was trading in September,2003 at Rs. 10/- and sometimes even going as low as Rs. 1.8. Similarly, Lupin, who is trading at Rs.660/- was trading at Rs.2/- about two decades ago. Bajaj Finance today trading at Rs.7181/- was ranging between Rs.34/- or so and for almost half a decade in early 2000 and infact going much lower. Titan another well established scrip trading today at Rs.2622/- in 2000 was trading at Rs.2.6 and this is talking only of blue chip companies (http://groww.in/blog/penny-stocks-that-became-multibagger-stocks) Thus, the presumption drawn by the Revenue that merely because a particular company at a particular point of time is not doing well and hence, it necessarily is a sham company is an argument without any basis. The fact remains that the said company is still listed on the Stock Exchange is a fact on record. The fact that after the sale, the price of the share rose substantially is not disputed. However, its relevance for deciding whether the company was bogus or the transactions of the assessee were sham is not established. The sale at the Stock Exchange is a fact not in dispute. In the facts of the case before the Hon’ble Kolkata High Court in the case of Swati Bajaj at page 17 of the decision it can be noticed that SEBI had initiated an enquiry in the actions of the said company/companies wherein there may be other companies apart from Surabhi Chemicals but M/s CCL International Ltd. was not involved. Moreover, the share was noticed to be thinly traded and some transactions therein were off the marked transactions. In the facts of the present case, there is no aspersion cast by SEBI on the functioning of M/s CCL International Ltd. Thus, the subsequent rise in its price is not relevant as it in no way establishes that the shares sold on the Stock Exchange on the specific dates was a bogus transaction. It goes without saying that with the benefit of a hind sight everyone can so arrange their affairs including financial affairs to ensure that the best and most suitable outcome desired is achieved. However, actions are always made in the present and it is impossible to have a clear picture of what consequences the actions made in the present will result in the future. The assessee having sold the shares on the dates in ignorance of the future possible rise in the share price of the said share which we now see at best can illustrate that ideally the assessee should have waited and by no stretch of imagination can be construed to be a case leading to the conclusion that the transaction was manipulated or bogus. No one is capable of predicting the future Market Sentiment. The sale of the shares made by the assessee through the Stock Exchange through the D-Mat account held with the Broker M/s Master Capital Services Ltd. who has confirmed the transactions; wherein banking transactions also reflect the same position, we find are facts which cannot be easily brushed aside on the basis of suspicions and statements of some broker who may have had his own reasons to dump his clients for unscrupulous criminal reasons. No doubt the banking transactions by itself, we agree, do not grant a legitimacy to the genuineness of the claim, however, the fact remains that these are events supported by sale of shares at the Stock Exchange through the D-Mat account coupled with the fact that there is no evidence on record that the company was ever barred from trading on the Stock Exchange or penalized for entering or entertaining shady transactions, the company even today continues to trade on the Stock Exchange. No violation by SEBI or under Company Law qua the said company has been brought on record by the Revenue. Thus, in the absence of any such fact or evidence, small cap companies/penny stock companies cannot by one stroke be painted to be companies whose share prices necessarily are capable of being manipulated. It would act as a death blow to the entrepreneurial spirit of the country. Every small cap company/penny stock company enters the business environment with the aspiration to become a multi bagger blue chip company someday. In the business world, the discussions on dreams and aspirations of penny stock companies rising up to become mid cap and large cap companies are galore. We find no good basis to entertain the unsubstantiated suspicion that all smallcap companies/penny stock companies are to be treated to be tainted pariahs and hence, the bonafide transactions entered into by the public on this count itself are to be treated as sham manipulated transactions leading to disallowance of their gains or losses. Such an action would amount to laying down the law that transactions only in Blue Chip, Large Cap companies only are to be accepted. The creation of such an environment by a judicial order where a headstart is given only to Blue Chip established companies cannot be done. This is not the legislative intent also. The business environment in the country is available and enabled for every entrepreneurial venture. The environment so enabled is not only for the benefit of the blue blooded pedigreed companies but also exists for rank and mature/beginners. These first time businessmen/women also have the right to participate in the economic activity of the country for Build India initiative. They may not be in a position to have access to huge capital but cannot be thrown out of the playing field causing loss to the economy by depriving itself of the fresh business acumen/intellect discounted solely on the count that they start their business ventures as penny stock companies. Their animal spirit to provide new blood to the economy cannot be dismissed by one stroke. The economy ensures a level playing field for all players whether penny stock, mid cap or large cap. No doubt the ventures are high risk. It is also fair to be cautioned by the fact that dubious players may also enter the field. We are aware of the manipulating strategies of ‘Pump and Dump” which are circulated by wily players where a dubious share is amped up in the business circles of print and media so that an incorrect sentiment of future rise in it is played out. Once the prices rise on account of trusting naïve Investors, the manipulators dump their shares thereby causing loss to the ignorant investors. Hence investment in penny stock companies is a risk. For addressing dubious manipulative actions we have Market Regulators like SEBI and Company Law Board. The Indian economy on the rise cannot be allowed to be tamped down by these suspicions of the Revenue. Robust evidence has to be brought on record to address the issue. In the facts of the present case, there is no allegation of any Regulatory Authority to show that trading in this specific Stock was barred or the company was delisted. We find that suspicions entertained by the Revenue cannot be the basis of unsettling the valid order.

20.8 We have also given our serious consideration to the arguments advanced on behalf of the Revenue namely that the assessee has frequently used National Stock Exchange (NSE) instead of BSE where the company was listed and traded. The ld. CIT-DR pointing from the replies of the assessee itself before the Tax Authorities has pointed out this frequent user. We have seen that the counsel also pointed out that the assessee has also used BSE (Bombay Stock Exchange) at many places. The argument has also been advanced on behalf of the assessee that the user of NSE instead of BSE at times was used by mistake and only to highlight the fact that sale was made through the requisite Stock Exchange. The ld. AR has candidly agreed that this share was never available on the National Stock Exchange and it has only been available on the Bombay Stock Exchange and the assessee has sold its shares on the specific dates on the Bombay Stock Exchange. Our attention has also been invited to the specific Contract Notes to show that the sale of the specific share was through the Bombay Stock Exchange. Accordingly, we find that on account of this repeated bonafide inadvertent repeated mistake of the assessee in referring to the transactions through the Stock Exchange i.e. Bombay Stock Exchange, the relevant facts are not eroded. The assessee inadvertently has used NSE multiple times. This mistake considering the fact that the share trading of the specific company is always on the Bombay Stock Exchange is supported by the Contract Notes made available before us, we find that nothing much turns on this.

20.9 We have further taken into consideration the fact that as per the extracts relied upon by the Revenue to show that the price of the specific stock was substantially different vis-à-vis the claim of the assessee. On the other hand the ld. AR has, as per extracts made from the Money Control site has shown that the sale on the specific dates was as per the price available on the BSE. The ld. CIT-DR has relied upon the extract from the Business Standard site stated to be most reliable and the ld. AR has tried to support his claim through Money Control and ultimately through the Bombay Stock Exchange official site. The ld. AR has also submitted that the difference in the share price vis-à-vis the Revenue’s record is possibly on account of the fact that there was corporate action on the specific date highlighted and thus, this difference which has occurred on account of corporate action where value of 10 shares was consolidated in two share as a result of which there has been a price variation. This fact, it has been submitted, has been noted judicially. We find that the suspicions so aroused have no basis. The non factoring of the Corporate Action to which the specific share has been subjected to is not rebutted by the Revenue. The fact remains that the shares have been sold on the Bombay Stock Exchange through the Broker who has confirmed the transactions. The Contract Notes are available. The funds available therefrom are reflected in the bank account. Thus, wherein the different sites are showing price of the specific share with or without corporate action and though it has been submitted that the BSE’s official site supports it, the fact remains that the explanation of the assessee on account of the so called confusion based on suspicions cannot be the basis of the Revisionary Powers.

21. It may also be relevant to pause and give a serious consideration to the consequences where a broker states that all transactions entered into by him were dubious. Serious consideration need be given to such a broker’s statement as all he stands to suffer from giving such a rash, irresponsible statement is a presumptive estimated addition at best on his trading activity. However, the rash statements would put in jeopardy the transactions of all the people who have engaged the services of the said broker have trusted his intelligence/financial acumen of such a broker to make serious investments. To allow all transactions entered into by the parties with such a broker would be a case of punishing the wrong person who has trusted the wily broker in good faith. The tax authorities must seriously examine such rash statements of the brokers and highlight in the order the fact that they have taken the issue to its logical conclusion for the civil and criminal acts of fraud, mismanagement and violations of law qua the clients and infarctions of law qua the Regulatory Authorities. There may be many reasons ranging from unscrupulous transactions contrary to the client or vis-à-vis the Stock Exchange which the broker would be keen to evade and avoid. Hence, by accepting an estimated addition the broker cleverly evades penal consequences of Detection and discovery of client fund mis-management. These statements of surrender by Brokers it cannot be over emphasized should be treated with utmost caution in the interests of the economic activity in the country and as a safeguard to the trusting citizens who engage and pay for the services of these Brokers. These surrenders consciously and unscrupulously made invite whimsical consequences for the bonafide investors. How and why the tax department should accept the words of such a manipulative fast thinking person and why the words of such a manipulative person be permitted to be given a precedence over the documents and evidences relied upon by a person relying in good faith on the bonafide of his Broker needs to be seriously introspected upon and addressed by the tax authorities. Permitting such criminal acts by carelessly accepting the statements/ surrenders made by unscrupulous brokers needs to be addressed consciously especially when applied to the clients of such brokers who may have trusted the financial acumen of these brokers. These innocent trusting lambs should not be carelessly allowed to be thrown at the wolves by the manipulative brokers. These surrender statements should be viewed with due care and caution. It is necessary for the tax authorities to examine whether the traded company has actually been barred from the Stock Exchange or was still continuing on the Stock Exchange. For the sake of removing doubts, it is being clarified that the observations are made to the transaction of buy/sale through the D-Mat account on the Stock Exchange in listed companies.

22. Accordingly, on a careful consideration of the entire facts, circumstances and position of law as discussed in detail in the earlier part of this order and considering the evidences which were filed before the AO and the ld. PCIT and even further elaborated before us by both the parties, we find on facts that the Revisionary order in the peculiar facts and circumstances proceeds entirely on presumptions, conjectures and surmises. The twin conditions as laid down by plethora of decisions of the Apex Court right from the case of Malabar Industries, we find are not met. Accordingly, for the reasons given hereinabove in detail, the impugned order is quashed.

23. In the result, the appeal of the assessee is allowed. Order pronounced on 21s ^t September,2022.