ITO vs Arti Arora

(a)

“On the facts and in the circumstances of the case whether the Id. CIT(A) erred in deleting the addition of Rs. 1,56,86,090/- made by the AO as unaccounted money u/s 69A of the Act.

(b)

Whether on the facts & under the circumstances of the case, the Id. CIT(A) is justified in holding that the evidence collected by the AO during the assessment proceedings were merely conjecture and surmise without appreciating that the AO had concrete evidence to prove that the transaction reflected in the accounts of the assessee is unexplained during the period.

(c)

The appellant reserves right to add, alter or amend the grounds of appeal on or before the date of disposal of appeal.”

5.2.5.

“As against this, the appellant submitted that all the requisite documentary evidences were submitted during the course of re-assessment. The appellant vide written submissions has contended that the assessing officer had made up his mind that the stock of M/s Lifeline Drugs & Pharma Ltd is a penny stock and just based on that conclusion derived by investigation report made the addition u/s 69A of the Income Tax Act, 1961.

5.2.6

The appellant has submitted that the shares were duly purchased through broker M/s Fairwell Securities Ltd on 08.04.2013 and the share certificates duly transferred on 18.04.2013. Further the shares were sold through M/s SMC Global Securities Ltd vide demat account and all the payment was received through account payee cheque/RTGS. The appellant has further submitted that details like debt note issued by the broker for purchase of shares, copy of share certificate, copy of share certificate confirming sub division of share, demat statement issued by broker M/s SMC Global Securities Ltd, bank statements for receipt of money etc were filed before the AO during the course of assessment proceedings.

5.2.7.

The appellant has further submitted that she had discharged her onus through all the documentary evidences of purchase of the script as well as the sale of the script and the assessing officer has not pointed out any single omission in the same during assessment proceedings or the impugned assessment order. The appellant has further alleged that the addition made in assessment on the basis of assumption, surmise and circumstantial evidence is seriously unjustified. The appellant had discharged his primary onus, however assessing officer had not discharged the heavy onus cast upon him since had not brought any cogent material and credible evidence to disprove the transaction. There is not an iota of evidence and/or contrary material brought on record by assessing officer to disprove the bonafide claim of the appellant.

5.2.8

The appellant has further stated that the AO violated all the principles of natural justice and passed the assessment order in a hurry without taking cognizance of the details filed by the appellant which prove that all the transactions were genuine and bonafide.

5.2.9

The appellant has further placed reliance on the following judicial pronouncements regarding the cardinal principle of natural justice:

i.

Vodafone India Ltd. vs. UOI [2013] 40 Taxmann.com 545 (Bom.) ii. Dipak Natwarlal Dholakiya vs. Additional/Joint/Deputy/Assistant Commissioner of Income-tax [2013] 149 Taxmann.com 151 (Gujarat) iii. Idea Cellular Ltd. vs. CIT [2016] 65 Taxmann.com 116 (Pune – Trib.) iv. Dineshkumar Chhaganbhai Nandani Vs ITO [R/Special Civil Application No. 7864 of 2022 dated June 19, 2023],

v.

Lamba Techno Flooring Solutions (P. ) Ltd. V. National Faceless Assessment Centre, Delhi [2021] 131 taxmann.com 172

vi.

Uday Desai HUF V. National Faceless Assessment Centre, Delhi, [2021] 132 taxmann.com 117 (Bombay)

vii.

Dhakeshwari Cotton Mills Ltd. Vs Commissioner of Income Tax [1955] AIR 6 [SC]

viii.

Hon'ble Madras High Court in Smt. Ritu Devi V. CIT (2004) 141 Taxman 559 (Mad.)

5.2.10

The appellant has submitted that there is not even an iota of evidence brought on assessment record to disprove the bonafide transaction and copy of alleged contrary material had not been provided to the appellant for confrontation and rebuttal. The appellant had relied upon the following judicial decisions for contending that the statements of 3rd parties cannot be held as an admissible evidence unless an opportunity of cross examination is provided to the suffering party.

i.

Smt. Veena Chaturvedi Vs. DCIT (CC)-2 (3)

ii.

CIT vs. Odeon Builders Pvt. Ltd. [2019] 110 Taxmann.com 64 (SC)

iii.

Supreme Court in Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 / [2015] 281 CTR 241 (SC)

iv.

Bhatia Diamonds Pvt. Ltd. vs. ITO (ITAT No. 2821/del/2018) (ITAT-DelhiSMC)

v.

Smt. Jyoti Gupta vs. ITO (ITA No. 3510/Del/2018) (ITAT-Delhi-SMC)

5.2.11

The appellant has alleged that the AO has failed to contravene the details and documents furnished by the appellant regarding purchase and sale of the shares. The appellant has further contended that the AO has wrongly made the addition u/s 69A. In this regard the appellant has placed reliance on following judicial pronouncements:

i.

ITO Ward 2(2) Vs Ram Kishan ITA No. 1909/Del/2020

ii.

CIT vs. Century Plyboards India Ltd. [2019] 103 Taxmann.com 179 (SC)

iii.

Arun I Keshwarni V. Income tax officer, [2023] 151 taxmann.com 355 (Mumbai-Trib.)

5.2.12

The AO has relied upon the following judicial pronouncements to drive the point that the assessments done without application of mind by the AO do not stand on judicial scrutiny:

i.

Principal Commissioner of Income Tax-5 Vs Shodiman Investments Ltd. [2018] 93 taxmann.com 153 (Bombay) ii. ITO Ward 2(2) Vs Ram Kishan ITA No.1909/Del/2020 iii. CIT vs. Century Plyboards India Ltd. [2019] 103 Taxmann.com 179 (SC) iv. Commissioner of Income Tax, Central V. Rama Educational Society [2018] 99 taxmann.com 282 (SC)

5.2.13

The appellant has submitted that the AO has not issued a notice u/s 143(2) and therefore the assessment order is invalid and deserves to be quashed. She has placed reliance on the following decisions:

i.

Geno Pharmaceuticals Ltd Vs Assistant Commissioner of Income-tax, Circle 2(1), [2013] 32 taxmann.com 162 (Bombay) ii. Major Suresh Yadav Vs Income-tax Officer [2023] 153 taxmann.com 159 (Delhi - Trib.) iii. Hon'ble Madras High Court in case of Amec Foster Wheeler Iberia SLU – India Project Office Vs. Deputy Commissioner of Income-tax, [2023] 148 taxmann.com 124 (Madras) iv. S.G. Portfolio (P.) Ltd Vs. Principal Commissioner of Income-tax, [2023] 151 taxmann.com 307 (Delhi),

5.2.14

The appellant has further submitted that the company M/s Lifeline Drug & Pharma Ltd is not a paper company or a shell company as in F.Y. 2013-14 the revenue from operations was at Rs.40,85,02,313/-. Further the appellant has submitted that the Hon'ble ITAT Delhi A Bench in the case of Anoop Jain Vs ACIT ITA No.6703/DEL/2019 in the order dated 10.01.2020 has held for the same script that the long term capital gains were genuine.

5.2.15

I have considered the submissions of the appellant. The assessing officer while making the addition has relied upon the report of the investigation unit regarding manipulation of script M/s Lifeline Drug & Pharma Ltd to hold that the appellant has generated bogus capital gain. On the other hand, the appellant in his submissions has argued that the assessing officer has not made independent application of mind to the facts of the case and ignored all the documentary evidences to hold that the appellant has not provided complete details to put the nature of transaction beyond doubt.

5.2.16

It is noted that the assessing officer is not bound to establish the escapement of income at the time of issuance of notice u/s 148 but he should have sufficient reasons to believe that income has escaped as per the provision of the Income Tax Act, 1961. Nevertheless, the assessing officer is required to investigate, analyze, infer and conclude on the basis of the evidences gathered while framing the assessment. In the instant case, it appears the assessing officer has not done any investigation during the assessment proceedings and has just relied upon the report of the investigation wing while holding the script in question as a penny stock. The appellant has apparently submitted evidences during the course of assessment proceedings as well as the appellate proceedings in respect of both the transactions i.e. purchase of the script in April, 2013 and sale of the script in November, 2014.

'27. Section 68 requires the Assessing Officer to satisfy itself of the source of the credit and if during the course of enquiry undertaken, the entries are found to be not genuine then the sum represented by such credit entry is to be added as income of the assessee. The satisfaction of the Assessing Officer thus forms the basis for invocation of the provisions of section 68. The satisfaction in this regard, however, must not be illusory or imaginary but is required to be based on the facts and the evidence and on the basis of a proper enquiry of the material before the Assessing Officer. The enquiry envisaged under the provision is to be reasonable and just.

28.

Under section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and where the assessee fails to prove to the satisfaction of the Assessing Officer, the source and nature of the amount of cash credits an inference may be drawn that the credit entries represent income taxable in the hands of the assessee. This does not however absolve the responsibility of the Assessing Officer to prove that the cash credits constitute the income of the assessee. The onus on the assessee has to be understood with reference to the facts of each case and if the prima facie inference on the basis of facts is that the assessee's explanation is probable, the onus shifts to the Revenue"

“A deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69-A of the Act. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions.”

“4.

The CIT(A) examined the matter and the comments of the Assessing Officer in the remand report. It has been recorded by the CIT(A) that the purchase of shares in the financial year 2006-07 for an amount of 11 lakhs had been physically transferred in favour of the assessee in the books of the company namely GeeFCee Finance Limited. Further, the said shares were dematerialized and credited in the assessee’s account maintained with depository participant i.e. HDFC on 16.10.2006. The dividend amount of 1,50,000/- had been received with regard to aforementioned holding of shares on 23.10.2007. The said amount had been disclosed by the assessee in his return of income and exemption was claimed accordingly. Thus, the addition being without any logical basis was directed to be deleted. The relevant findings recorded by the CIT(A) in this regard read thus:-

“I have considered the facts of the case, the basis of addition made by the Assessing Officer, the arguments of the AR during 3 of 7 the assessment as well as appellate proceedings and the comments of the Assessing Officer in the remand report. It is seen that the impugned purchase of shares allegedly effected in the financial year 2006-07 for an amount of 11 lakhs and the said shares had been physically transferred in favour of the appellant in the books of the listed company namely GeeFCee Finance Limited. Further the said shares got dematerialized and were, credited in the assessee’s account maintained with depository participant i.e. HDFC on 16.10.2006. Further, dividend amounting to 1,50,000/- has been declared and received with respect to aforementioned holding of shares on 23.10.2007 and the said dividend had been disclosed by the assessee in the return of income and claimed exempt accordingly. It is also to be noted that the said dividend had been accepted as exempt by the Assessing Officer for the year under consideration. The only logical conclusion that can be made from the sequential perusal of the above detailed facts is that the impugned shares were actually purchased by the assessee on given dates as these stand reflected in D’MAT account maintained with HDFC bank. The dividend declared on the same has been received and credited in assessee’s bank account which is further found recorded in the Income Tax Return and allowed as exempt by the Assessing Officer. As against this clear documentary evidence in favour of the appellant, the Assessing Officer has merely rejected the contention of purchase on the basis of suspicion arising out of reckless/casual replies given to various questions raised by the Assessing Officer in the assessment proceedings. It is important to appreciate here that the assessee had been subjected to search and seizure proceedings under Section 132 of the Income Tax Act, 1961 and the search proceedings did not lead to recovery of any incriminating evidence to show that the transaction of purchase of share was arranged as suspected by the Assessing Officer. It is also seen that no post search enquiries on the issue had been conducted in the form of recording the statement of broker so as to bring on record any evidence of the said 4 of 7 transaction being an accommodation entry. This is to mean that just because assessee has been found to be earning huge amounts of long term capital gain on sale of shares, the same has been held to be sham transaction merely on the ground of same being unlikely in the given circumstances. The Assessing Officer, in the remand report has not been able to contradict any of the facts regarding purchase of shares highlighted above or regarding the sale of shares and has not progressed beyond the stage of suspicion. It is further seen that the shares had been sold for an amount of ` 2,91,32,850/- and has been debited to assessee's D'MAT account maintained with D/P, HDFC. It is also seen that STT has been paid on the sale of shares and said shares had been sold through National Stock Exchange. It is also seen that the Assessing Officer while working out the addition has allowed indexation on the cost of purchase of shares till the date of sale and has in fact worked out the capital gain only to make the impugned addition. I am of the view that there is no evidence on record, gathering during the course of search proceedings or during the course of post search investigation or assessment proceedings to hold the view that the entire transaction of purchase/sale of shares effected over a period of two years was a sham transaction. The addition being without any logical basis is directed to be deleted."

5.

On appeal by the revenue, the Tribunal upheld the findings recorded by the CIT(A). It was categorically recorded by the Tribunal that as noticed by the CIT(A), in the remand report the Assessing Officer was not able to contradict the facts regarding purchase of shares and sale thereof. Further, it was recorded that the assessee had sold shares through MTL shares and Stock Broker limited which is a SEBI registered Stock Broker. The payment for sale of shares was received through banking channels. All the documentary evidence being in favour of assessee, the deletion of the 5 of 7 addition made by the CIT(A) was upheld by the Tribunal. The relevant findings recorded by the Tribunal read thus:-

"We have heard the rival parties and have gone through the material placed on record. We find that the assessee had purchased shares in the month of April/May, 2006 as noted by the learned CIT(A) in his order at page-4. The shares were purchased in Assessment year 2006-07. Further the shares were got dematerialized and the same were created in the account of assessee maintained with HDFC bank. The assessee also received dividend on such shares on 23.10.2007 and such dividend was claimed as exempt and Assessing Officer did not raise any objection against the claim of such dividend. The learned CIT(A) has noted in his order that in the remand report Assessing Officer was not able to contradict any of the facts regarding purchase of shares and regarding sale of shares. It is further observed that assessee had paid STT on the sale of such shares and this fact has been noted by learned CIT(A) in his order. Further, we find that while making out the addition on account of capital gain the Assessing Officer himself gave credit to assessee for indexed cost of acquisition to the extent of 11,67,821/- taking the purchase price at 11,00,000/-. Further, we find that assessee had sold shares through MTL shares and Stock Brokers Limited as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking channels. All these documentary evidences in favour of the assessee were rejected by Assessing Officer merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same."

6.

The findings recorded by the CIT (A) and the Tribunal are pure findings of fact which have not been shown to be illegal, erroneous or 6 of 7 perverse by the learned counsel for the appellant. He has also not been able to produce any material on record to controvert the said findings. Thus, no substantial question of law arises. Consequently, finding no merit in the appeal, the same is hereby dismissed."

"11.

On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee's contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held -

"As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs. 25,30, 396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore, on such basis no disallowance can be made and accordingly we find no infirmity in the order of Id. CIT (A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed."

We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. The appeal is accordingly dismissed."

"10.

After considering the entire factual matrix the Assessing Officer held that the assessee had arranged the said accommodation entries from entry providers for converting its undisclosed money into white money and thus the amount of Rs.98,56,872/- was treated as undisclosed income of the assessee.

11.

Counsel for appellant has taken us to the order of AO.

12.

However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:-

"Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P.K. Agarwal & co. share broker, company's master details from registrar of companies, Kolkata were filed. (5 of 6) [ ITA-385/2011] Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all thematerial facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant."

13.

The same was confirmed by CIT appeal, in view of this we are of the opinion that the view taken by the Tribunal as well as CIT is correct.

14.

In that view of the matter, the issues are answered in favour of the assessee and against the department.

15.

The appeals stand dismissed"

"25.

Not only the impugned assessments are barred by limitation but are also lawfully not sustainable for other reasons also, as contended by Shri Santhana Krishnan. It was the contention of Shri Santhana Krishna that the AO did not act independently in making the enquiries and in framing the impugned assessments but was greatly influenced and carried away by the directions/instructions issued by the Dy. Director of Inspection (Inv.) as contained in his appraisal report dt. 14th November, 1995 and therefore the impugned assessments are vitiated in law being illegal and liable to be struck down. We find considerable force and merit in such an argument advanced by Sri Santhana Krishnan.

26.

The enquiries by the AO for making the assessment of income are quasi-judicial proceedings and the act of framing the assessment is quasi-judicial act. It is a trite law that a judicial or quasi-judicial authority should act independently and that there shall not be any interference, nor any advice, opinion, instructions, directions can be given to any IT authority in such proceedings, etc., by any stranger/outsider even if such stranger/outsider is higher or highest authority in the hierarchy of the Department. If an order is passed or a decision is rendered by an IT authority in such quasi-judicial proceeding at the behest of or upon the directions or instructions, of any superior officer or authority then such an order/decision is illegal and a nullity in law because it shall be deemed in law that such an order/decision is not of that quasi-judicial authority but of some other authority who directed or issued orders/instructions to the lower authority to act and thereafter pass an order/decision in a particular manner. Though there are several decided case law on the subject we would only refer to and discuss few decisions in this regard as below :

(i)

The Hon'ble Supreme Court in the case of M. Chockalingam & M. Meyyappan vs. CIT (1963) 48 ITR 34 (SC) at p. 40 have laid down as under :

"The authorities acting under the Indian IT Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him."

(ii)

As far back as in August, 1967, the Hon'ble Andhra Pradesh High Court in the well known case of Raja V. V. V. R. K. Yachendra Kumara Rajah of Venkatagiri vs. ITO (1968) 70 ITR 772 (AP) have laid down as under :

"It is now well settled that the assessment proceedings before the ITO are quasi-judicial in nature and while making assessments the ITO has solely to be guided by the provisions of law. He cannot avail of any instruction or direction given by his higher authorities including the Central Board of Direct Taxes for making a particular assessment. While passing assessment orders he is only bound by what has been decided by the appellate authorities mentioned in the IT Act and the opinion expressed by the High Court or the Supreme Court. It is also now well settled that, as far as the income-tax is concerned, the principle of res judicata is not applicable and the ITO is not bound by the decisions rendered by him in an earlier order in regard to the same assessee. When these principles are kept in view, it becomes clear that the orders, instructions or directions that can be issued under s. 119(1) are administrative directions which cannot in any manner fetter the discretion of the ITO in making the assessment. This becomes more clear from the proviso to sub-s. (1) of s. 119 which says that no orders, instructions or directions shall be given by the Board so as to interfere with the discretion of the AAC in the exercise of his appellate function. The AAC's functions are not executive. They are only judicial and this proviso has been enacted to make it clear that the orders, instructions or directions of the Board will not interfere with the judicial or quasi-judicial functions."

(iii)

The Hon'ble Supreme Court again in the case of Sirpur Paper Mill Ltd. vs. CWT (1970) 77 ITR 6 (SC) have clearly stated as under :

"The power conferred by s. 25 is not administrative : it is quasi-judicial. The expression 'may make such inquiry and pass such order thereon' does not confer any absolute discretion on the CIT. In exercise of the power the CIT must bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved party, and decide the dispute according to procedure consistent with the principles of natural justice : he, cannot permit his judgment to be influenced by matters not disclosed to the assessee, nor by dictation of another authority. Sec. 13 of the WT Act provides that all officers and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board. These instructions may control the exercise of the power of officers of the Department in matters administrative but not quasi-judicial."

27.

In the instant cases there is no denial that the DDI had given directions/instructions to the AO in his appraisal report to make enquiries in a particular manner and frame the block period assessments. The case of the assessee's counsel is that had there been no directions/instructions from the D.D.I. to the AO the impugned assessments would have been totally different and perhaps beneficial to the appellants. But since the mind of the AO was controlled by the directions/instructions of the D.D.I. as contained in the appraisal report, the AO had no other option or choice left except to make enquiries as dictated by the D.D.I. and frame assessments as per the wishes and desire of the D.D.I. as contained in the appraisal report. The written refusal by the Senior Departmental Representative to furnish us a copy of the questioned appraisal report or at least to place the said appraisal report for our perusal and study compel us to accept the arguments of the assessees' counsel that the impugned assessments are vitiated and illegal. It is well-established principles of law of evidence that if a particular document is not filed or produced or withheld deliberately by a party to a proceeding who is having the possession and custody of such document, then, the Court will be perfectly justified in presuming and drawing an inference that the contents of such a withheld document are favourable to the opposite side and adverse to the party possessing such document and refusing to part with it or file before the Court for the purpose of determination of the lis. In the instant case such a situation prevails. The Departmental authorities are in custody and possession of the appraisal report of the D.D.I which according to the appellants are adverse to their interest inasmuch as the AO has been influenced, dictated and directed to act not on his own independently but as directed and dictated by the superior officer in a particular document, namely, in the instant case the appraisal report of the D.D.I. It is on account of this conduct and attitude of the Departmental authorities in withholding the appraisal report which compels us to draw an inference that what the assessees' counsel Sri Santhana Krishnan submitted is true and correct and, therefore, we believe the same to be true, correct and acceptable. It is on the account of these reasons that the impugned assessments, as contended by Sri Santhana Krishnan, are vitiated and are not sustainable in law requiring vacation."

'2. It was the case of Revenue before the ITAT that the CIT[A] was wrong in deleting the addition made by the Assessing Officer (A.O.) in respect of long term capital gain treated by A.O. as unexplained cash credit under Section 68 of the Act.

3.

Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was reopened under Section 148 of the Act.

4.

The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.

5.

We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises.

6.

Appeal dismissed."

'16. Other than the statement recorded from Shri Radheshyam Singhania, the AO has not relied upon any other evidence, however, the assessee has produced substantial evidence in the form of the first allotment of the shares in AAR Infrastructure Ltd., the merger of AAR Infrastructure with CCL International Ltd., the sale of shares through ISE Security & Services Ltd., a SEBI authorised broker, the proof of payment of STT as also the fact that these shares were in the Demat form. Other than the statement of the assessee showing that he is willing to pay tax on the transaction, there is no shred of evidence available with the AO to presume that the transaction done by the assessee in the purchase of AAR Infrastructure shares, merger of AAR Infrastructure with CCL International Ltd. shares was a colourable device or an attempt at evading tax by using the unscrupulous methods of tax planning bordering on side of tax evasion.

17.

The revenue has not relied upon the report of the investigation authorities from the brokers for the purpose of making the assessment. The reliance on the statement of the broker Shri Sanjay Bohra and the investigation report has been made only in the annexures to the ground of appeal filed before the Tribunal. These are clearly evidences produced by the revenue to support its stand in respect of probability and possibility of assessee having indulged in colourable device of tax evasion, fringing of the area of tax evasion. In the present case, as the addition has been made by the AO solely on the basis of the statement of the assessee, the question of cross examination does not arise. The assessee having retracted his statement in principle and in fact in holding on to its claim of exemption u/s.10(38) of the Act as it was supported by proper and adequate evidence cannot be found fault with.

18.

A perusal of the order of the Id. CIT(A) also shows that he has considered the fact that the transaction conducted by the assessee fell within the four corners of the requirements for claiming exemption u/s.10(38) of the Act."

'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 misuse 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 Id. 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 harboured 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 (supra). As a result of this order dated 8-1-2019 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 in flux 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 v. Sun Engineering Works (P.) Ltd. [1992] 64 Taxman 442/198 ITR 297 (SC) 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 Ltd. v. State of Haryana [1991] 188 ITR 402; 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". In fact the Hon'ble Apex Court in CWT v. Dr. Karan Singh[1993] 67 Taxman 3/200 ITR 614; 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 Padmasundara Rao v. State of Tamil Nadu [2002] 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 over-emphasized 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 (supra), we find that there are many orders of Co-ordinate Benches qua M/s CCL International Ltd. relied upon by the Id. 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 (supra) was Director Shri Jai Kishan Poddar of M/s Consortium Capital Pvt. Ltd. were not connected. These entry providers/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 Id. PCIT and has not been rebutted or shown to be incorrect in the present proceedings. Consequently judicial finding that all brokers who have made bona fide 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 preposterous 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, in fact 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 up to becoming the multibaggers. 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 doubt-sayers 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. 3411/-, 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 (supra) 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 multibagger 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 bona fide 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 Id. 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 Id. 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 bona fide 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 Id. 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 Id. CIT-DR has relied upon the extract from the Business Standard site stated to be most reliable and the Id. AR has tried to support his claim through Money Control and ultimately through the Bombay Stock Exchange official site. The Id. 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 mismanagement. 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 bona fide 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 bona fide 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 Id. 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."

"What is evident is that the AO went by only the report received and did not make the necessary further enquiries - such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO."

"However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the ld. CIT(A) allowed the appeal of the assessee stating:

"Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted."

4.

The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.

5.

In these circumstances, the Review Petitions are dismissed."

"6.

This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the assessing officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the assessing officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of Section 68."