PRINCIPAL COMMISSIONER OF INCOME TAX FIVE, KOLKATA v. SWATI BAJAJ

#5. In the background of all these investigations, the case of the assessee was discussed by the assessing officer pursuant to the show cause notice dated 29.11.2016. The assessee sent reply through her advocate stating that she fails to understand the nature of investigation carried out by DIT against Surabhi Chemicals and the nature of specific information which is received so as to contemplate a genuine transaction as a sham transaction. The assessee further stated that there is no mention of any specific information against or the company and the letter is general in nature. Therefore, the assessee requested to give specific details of manipulations or connivance carried out by either of the concerned persons directly related to the equity shares of the company in which the assessee had traded. Thus, the assessee’s case was, based on suspicion the transaction cannot be termed as in-genuine. The assessee further stated LTCG arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiated an enquiry with regard to the company as well as the brokers as the shares have been purchased by her from the stock exchange and payment was made by cheque and delivery of shares have also been taken. Further it was stated that merely because a small amount was invested in penny stocks and it gave rise to huge capital gains in a short period does not mean that the transaction is bogus. Further it was stated that the assessee’s share broker is M/s Horizon Financial Consultant Private Limited who are a very reputed equity brokerage house and by making a general allegation the transaction done by the assessee cannot be termed to be a sham transaction. Further the assessee stated that in case ITAT NO. 06 OF 2022 AND ETC. BATCH there was any specific incident of any admission by any such person which points out to the assessee, request was made to produce the said person for cross examination. The assessee has also placed reliance on the annual report of Surabhi Chemicals to justify her stand that the company was very much in business in the year of purchase, in the year of sale and also in the succeeding years. Further it was stated that the company has earned a profit before tax of Rs. 117.06 lakhs and paid tax of Rs. 34.24 lakhs in the year 2012-2013 when the assessee purchased the shares and in the year of sale the company reported profit before tax of Rs. 118.47 lakhs and paid tax of Rs.

38.44 lakhs. Therefore, it was submitted that the company has sufficient business and financial assets and the allegations made by the department is unfounded. Further it was stated that the assessee is a regular investor in mutual funds and equity shares of various quoted companies listed on BSE and NSE and she has been earning capital gains both short term and long term and they have been accordingly taxed as per provisions of the Act. Further the assessee stated that she fails to understand as to on what basis the department has classified the share as a penny stock though the assessee received bonus from the said company, dividend from the said company and prominent share analyst and research company M/s. Abrams Consultancy Services Private Limited made a “buy” call on shares of the said company and since the assessee is a regular investor in equity shares she made investment in the shares of the company based on the reports. The assessee stated that she bought 500 equity shares of Surabhi Chemicals which was quoted on the BSE on 16.03.2012 at Rs. 200/- per equity share and such cost price came to Rs. 1,00,000/- and the payment was made through account payee cheque. ITAT NO. 06 OF 2022 AND ETC. BATCH The assessee to show that she is a regular trader and investor in equity share for several years, produced the details of the investment made by her. Further, it was stated that the 500 equity shares were transferred in the name of the assessee on 18.07.2012 and were sent for D-Mat on 14.12.2012 and dematerialised on 29.12.2012. The assessee is stated to have allotted bonus share from the company on 14.08.2012 in the ratio of 9 shares for every 1 share held and since she had purchased 500 equity shares she received 4500 further equity shares as bonus which were also transferred to D-Mat account. Further it was stated that the equity shares of the company were sub-divided i.e for every one share having nominal value of Rs. 10, the equity holders got 10 shares of Rs. 1 and the assessee got 45,000 equity shares thus, totally holding 50,000 equity shares in the said company. The assessee placed reliance on the various decisions of the tribunal as well as the High Courts for the proposition that when purchase of shares was found to be genuine and were sold through proper banking channel no adverse inference can be drawn against the assessee and the addition made under Section 68 of the Act was to be deleted. With the above submissions, the assessee stated that since there is no specific or material findings against her so as to alleged the gain as an unexplained cash credit and that the assessee has fully and truly disclosed all facts with all supporting evidence and the entire transaction having been done through proper banking channel and supported by proper bills and contract notes, it stand fully explained and the entire transaction is verifiable with agencies to prove that assessee has transacted and therefore the question of invoking Section 68 of the Act does not arise.

#6. The assessing officer after taking into consideration the submissions ITAT NO. 06 OF 2022 AND ETC. BATCH made by the assessee and the documents produced by the assessee noted that from the contract notes, it was seen that the assessee purchased 50,000 shares in Surabhi Chemicals of Rs. 1,00,000/- on 16.03.2012 and

14.08.2012 and just after completion of one year and few months, when the investment in shares become eligible for LTCG, it was sold for Rs. 29,23,500/- and total LTCG was computed for Rs. 28,23,500/- and in that process, the assessee has managed an increase of almost 2823 % in a short span of 17 to 21 months. The assessing officer then referred to the communication received from the Directorate of Investigation and took note of the fact that in the list of companies which have been mentioned in the report of the Directorate of Investigation includes M/s. Surabhi Chemicals and it has been ascertained that the share prices have been artificially rigged to provide bogus LTCG. The assessing officer also noted the trade pattern of the shares which followed a “bell” shape. After noting the above, the assessing officer points out that the facts and circumstances leading to the transactions done by the assessee seen in a larger frame reveals accommodation entry scam as reported by the Directorate of Investigation more particularly when the investment by the assessee was in a company having no financial worth and such investment does not confirm to normal behaviour of an investor. The assessing officer relied on the decision of the Hon’ble Supreme Court in CIT Versus Durga Prasad More 1 wherein the Hon’ble Supreme Court pointed out that the taxing authorities are entitled to look into the surrounding 1 (1971) 82 ITR 540 ITAT NO. 06 OF 2022 AND ETC. BATCH circumstances to find out the reality and the matter has to be considered by applying the test of human probability.

#7. For the same proposition, the Assessing Officer also referred to the decision of the Hon’ble Supreme Court in Sumati Dayal Versus CIT 2. Taking note of the said legal principle, the Assessing Officer points out that considering the surrounding circumstances and applying the test of human probabilities coupled with the report of the Directorate of Investigation which was discussed in the assessment order, it was held that the assessee had been a party to a pre-designed mode of transaction and invested in the shares of M/s. Surabhi Chemicals to convert unaccounted cash under the guise of LTCG amounting to Rs. 28,23,500/- and therefore, the said amount is considered as income from undisclosed sources denying the claim of exemption as LTCG. Further, the assessing Officer stated that the share brokers/ entry operators charged Rs. 10/- to Rs. 540/- per Rs. 100/- of cheque amount and calculated the unexplained expenditure commission charged by the operators and worked out the sum of Rs. 14,118/- and the total addition was computed at Rs. 28,37,618/-. The assessee was informed that penalty proceedings under Section 271(1)(c) of the Act is to be initiated separately. With the above finding, the assessment was completed by Order dated 22.12.2016.

#8. The assessee preferred appeal before the CIT(A) reiterating the stand taken before the Assessing Officer. Before the CIT(A) it was contended that the Assessing Officer never pointed out any discrepancy in any of the documents submitted and nothing adverse was mentioned about the 2 (1995) 214 ITR 801 (SC) ITAT NO. 06 OF 2022 AND ETC. BATCH assessee. Further, it was contended that the assessee has discharged the burden of proving the genuinity of the transaction and the burden of proving the contrary stand shifted to the department which has completely failed to discharge such burden and the assessment having been based on suspicion and surmises is illegal. Further in spite of the assessee having demanded for copy of any specific information pertaining to the assessee covered in the report of the Directorate of Investigation and to make available the share broker/ Director of the company for cross-examination, the Assessing Officer did not reply to such request made by the assessee which goes to show that there is no specific information or material adverse to the assessee. It was submitted that the assessee having proved the identity, genuineness of the transaction cannot be denied the claim for the LTCG. The assessee relied on various decisions of the Tribunals and the High Courts most of which were also placed before the Assessing Officer.

#9. The CIT(A) after considering the entire facts and the papers and documents produced by the assessee holds that they are merely papers and documents and not evidence of genuine transaction and the whole gamut of the transactions are unnatural and suspicious transaction and therefore, the rules of suspicious transaction shall apply in the assessee’s case. Further, the CIT(A) holds that there is grave doubt on the story proposed by the assessee before the Assessing Officer are enough to justify the humongous accruing to the assessee by way of capital gains. Further, with regard to the bank documents, the CIT(A) states that they are mere self-certifying recitals and cannot save the assessee. To support of such contention, reliance was ITAT NO. 06 OF 2022 AND ETC. BATCH placed on the decision of Hon’ble Supreme Court in P. Mohanakala3 as well as the decision in Durga Prasad More and Sumati Dayal. The CIT(A) referred to the decision of the High Court of Delhi in Sajan Dass & Sons Versus CIT 4, wherein it was held that a mere identification of the donor and showing the memo of the gift amount through bank channel was not sufficient to prove the genuineness of the gift and the claim of gift having been made by the assessee the onus is placed on the assessee to establish the identity of the persons making the gift and also his capacity to make a gift and that it has actually be received as gift from the donor. The CIT(A) referred to a decision of the Bombay Bench of the ITAT in the case of M/s. Mont Blane Properties and Industries Pvt. Ltd., ITA No. 614/Bom/87 A.Y. 1983-84 wherein the Tribunal held that the word “evidence” as used under Section 143(3) covered circumstantial evidence also and cannot be confined to direct evidence and in tax jurisprudence the word “evidence” had much wider connotations. Further, the use of the word “material” in Section 143(3) showed that the Assessing Officer not being a Court could rely upon material which might not strictly be evidence admissible under the Indian Evidence Act, for the purpose of making an order of assessment. Further, the CIT(A) held that the payment through bank, performance through the stock exchange and other features are apparent features and the real features are the manipulated and abnormal price of offload and a sudden peak thereafter and therefore, the CIT(A) concludes that the transactions fall in the realm of suspicious and dubious transactions. The CIT(A) referred to the decision of 3 291 ITR278 (SC) 4 264 ITR 435 (Del.) ITAT NO. 06 OF 2022 AND ETC. BATCH the High Court of Bombay in Sanjay Bimalchand Jain Versus Pr.CIT dated 10th April, 2017 upholding the order of Nagpur Bench of the Tribunal holding that on the facts emergent in the case and the preponderance of probabilities, the entire capital gains claim were to be treated as fictitious and bogus. Finally, the CIT(A) concludes by observing that the fantastic sale price was not at all possible as there was no economic or financial basis to justify the price-rise, the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the guise of LTCG. With the above finding, the appeal filed by the assessee was dismissed.

#10. The assessee preferred appeal before the learned Tribunal. The learned Tribunal commences its order stating that the sole and identical issue raised in the batch of appeals (90), is the genuineness of the assessee’s claim of LTCG/LTCI of the capital loss derived from sale of shares and since the issues are identical, the case pertaining to the assessee Swati Bajaj is taken as the lead case. In Paragraph 3 of the impugned order, the learned Tribunal extracts the order passed by the CIT(A) in its entirety, after which in paragraph 4 the Tribunal holds that there is no merit in the argument of the revenue as the assessee has placed on record the relevant contract notes proper documentary evidence undertaking purchase/ sale of the shares through registered brokers by banking channels, D-Mat statement etc. and there is nothing to pinpoint anything against the assessees. The learned Tribunal referred to decision of the Coordinate Bench in Mahavir Jhanwar, Kolkata Versus I.T.O., ITA N0. 2474/Kol/2018 dated 01.02.2019, where the Tribunal allowed the assessee’s appeal on the ground that decision in all cases should be based on evidence and not on generalization, human ITAT NO. 06 OF 2022 AND ETC. BATCH probabilities, suspicion, conjectures and surmises. Reference was made to the decision of this Court in CIT Versus Carbo Industrial Holdings Ltd.5, CIT Versus Emerald Commercial Ltd. 6 and the decision of the High Court of Bombay in CIT Versus Shri Mukesh Ratilal Marolia7. Ultimately, the learned Tribunal concludes by stating that it adopts the reasoning given by the Coordinate Bench of the Tribunal and allows the appeal in the lead case namely, that of the assessee Mrs. Swati Bajaj. With regard to remaining 89 appeals the learned Tribunal states that the same order will apply to the remaining 89 appeals in the absence of any distinction pointed out by the revenue. Aggrieved by such order, the revenue has preferred this appeal before this Court.

#11. Mr. Aryak Dutta, learned Senior Standing Counsel appearing for the revenue in the lead case submitted that the learned Tribunal ignored the direct and circumstantial evidence brought on record by the Assessing Officer to establish that the share price of Surabhi Chemicals have been manipulated leading to fictitious LTCG of Rs. 28,23,500/- which the assessee has claimed to be exempt from taxation. It is submitted that the order passed by the learned Tribunal suffers from perversity as it ignored the facts brought on record establishing manipulation of share prices of Surabhi Chemicals as part of device to generate fictitious LTCG. Further, the learned Tribunal overlooked the fact that the entire transaction was stage-managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious LTCG. The learned Standing Counsel has referred to the 5 214 ITR 244 Calcutta High Court 6 (2001) 250 ITR 539 7 ITA No. 456 of 2007 Bombay High Court ITAT NO. 06 OF 2022 AND ETC. BATCH findings recorded by the Assessing Officer, CIT(A) and pointed out that the learned Tribunal without even noting the intricate factual details allowed the appeal filed by the assessee. The learned Tribunal has not rendered any finding on the modus operandi adopted in the entire transaction. It is further submitted that the learned Tribunal ought to have seen that the investigation is directed against penny stock companies and it has been established that the share prices were rigging and therefore, the question of conduct of investigation on the assessee is not necessary. More particularly, owing to the admitted fact Surabhi Chemicals is a penny stock company. Learned Standing counsel has referred to the relevant portions of the investigation report submitted by the DIT. In support of his contention the learned Senior Standing Counsel referred to decisions in Durga Prasad More and Sumati Dayal rendered by the Hon’ble Supreme Court, where under it was held that the Court and the Tribunals have to judge the evidence before it by applying the test of human probabilities, the surrounding circumstances which exercise had been done by the Assessing Officer and affirmed by the CIT(A). Reliance was placed on the decision of the High Court of Madras in CIT Versus Manish D. Jain 8and it is submitted that in the said decision all the decisions rendered have been referred to and the modus operandi which has been adopted was also examined and the appeal filed by the revenue was allowed, and the decision was followed in PCIT Versus Prabha Jain 9. Reliance was placed on the decision in Tharakumari Versus ITO 10 in which case the Court noting the nature of transaction of Shell Company as sham, 8 (2020) SCC Online Mad 5876 9 (2021) 439 ITR 304 (Mad.)(HC) 10 (2019) SCC Online Mad 9523 ITAT NO. 06 OF 2022 AND ETC. BATCH dismissed the appeal filed by the assessee. Reference was made in the decision of the Tribunal in Abhinav Agarwal Versus DCIT, Meerut 11 wherein the facts were considered by the Tribunal and the transaction done by the assessee therein was held to be not genuine. Reliance was placed on the decision in CIT Versus N.R. Portfolio Pvt. Ltd.12 which decision was approved by the Hon’ble Supreme Court as reported in (2019) 15 SCC 529. This decision is pressed into service to explain as to the manner and mode of conducting assessment proceedings, the application of the principle of preponderance of probabilities as to how the entire material would be germane for completing the assessment and that certificate of incorporation of a company, payment by banking channels etc. cannot in all cases tantamount to satisfactory discharge of the onus on the assessee to prove the genuineness of the transaction. To explain as to how the expression “when the assessee offers no explanation” occurring in Section 68 has to be interpreted, reliance was placed on the decision in CIT Versus P. Mohanakala13 With regard to the burden of proof/ onus of proof reliance was placed and decision of the Hon’ble Supreme Court in Roshan Di Hatti Versus CIT 14. For the same proposition reliance was placed on the decision of the Hon’ble Supreme Court in Kale Khan Mohammad Hanif Versus Commissioner of Income Tax15. Reliance was placed on the decision of the High Court at Bombay in Sanjay Bimalchand Jain L/H/Shantidevi Bimalchand Jain Versus the Principal Commissioner of Income Tax, 11 2022 SCC Online ITAT 28 12 (2012) SCC Online (Del.) 6466 13 2007 6 SCC 21 14 1977 2 SCC 378 15 1963 50 ITR 1 SC ITAT NO. 06 OF 2022 AND ETC. BATCH Nagpur & Anr., Income Tax Appeal No. 18 of 2017 dated 10.4.2017 wherein the Court upheld the order passed by the learned Tribunal which had held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs. 5 of a little known company would jump from Rs. 5 to Rs. 485. The learned Senior Standing Counsel distinguished the decision in Carbo Industrial Holdings, Mahavir Jhanwar and Emerald Commercial Ltd. which were referred to by the Tribunal on the ground the facts and circumstances were entirely different.

#12. Mr. Vipul Kundalia, learned Senior Standing Counsel appearing for the revenue in the other appeals referred to the decision in Principle Commissioner of Income Tax, Delhi Versus NDR Promoters Pvt. Ltd. 16 wherein the Court relies on the decision of the Tribunal after noting that the transactions done by the assessee was clearly sham and make believe and the excellent paper work to camouflage the bogus nature. It is submitted by Mr. Vipul Kundalia that the Court has to consider the totality of the circumstances as to how the action was initiated to prevent black-money being converted and the seed was sown by constituting a special investigating team pursuant to the directions of the Hon’ble Supreme Court in Ram Jethmalani & Ors. Versus Union of India & Ors.17 The learned Standing Counsel has elaborately referred to the various paragraphs of the decision to explain as to how the modus operandi adopted in these cases are very complex and pursuant to the directions issued by the Hon’ble Supreme Court special investigating team was constituted and this exercise was done 16 2019 SCC Online (Del.) 6599 17 (2011) 8 SCC 1 ITAT NO. 06 OF 2022 AND ETC. BATCH by various departments and the present investigation done by the Income Tax department is a follow up of the investigation which had commenced in the country since 2011. Therefore, it is submitted that the Assessing Officer and the CIT(A) rightly construed the surrounding circumstances and denied the claim of LTCG as being bogus. The learned standing Counsel has taken us through relevant portions of the investigation report to explain the machinery which was adopted, how the beneficiaries were identified as to how companies like Surabhi Chemicals have been found to be penny stock companies and their names find place in the investigation report. Specific reference was made to the pictorial representation to explain the nature of transaction as to be “bell” shaped and how the share prices steeply fall after the expiry of the eligibility period for claiming LTCG. Therefore, it is submitted that the profit earned is clearly due to manipulation done in the stock market and the onus is on the assessees to prove the transactions to be genuine which has not been discharged by them and the Tribunal erroneously reversed the order passed by the Assessing Officer as confirmed by the CIT(A). Reliance was placed on the decision in Sanjay Kaul Versus Principal Commissioner of Income Tax, Delhi-818 wherein an identical test was considered, a view taken by the Assessing Officer while referring to the surrounding circumstances, the human conduct and preponderance probabilities and lack of financial logic coupled with the modus operandi was approved by the Court by dismissing the appeal filed by the assessee. In the said decision, the decision of the Hon’ble Supreme Court in Suman 18 MANU/DE/1506/2020 ITAT NO. 06 OF 2022 AND ETC. BATCH Poddar Versus ITO19 has been extensively relied upon. Reliance was placed on the decision in the Udit Kalra Versus ITO 20 where the Court affirmed the order passed by the learned Tribunal which rejected the case of the assessee in more or less similar factual circumstances after noting the decision of the Hon’ble Supreme Court in McDowell and Co. Ltd. Versus CTO 21 wherein it was held that the tax planning should be legitimate, provided, it is within the framework of law and any colourable device cannot be part of tax planning and it is linked to encourage or entertain the people that it is honourable to avoid the payment of tax by dubious methods.

#13. Mr. Samarjit Roy Chowdhury, learned Senior Standing Counsel appearing for the Revenue in other appeals referred to an office memorandum issued by the Central Board dated 16th September, 2009 by which exemption was withdrawn in respect of appeals to be filed in penny stock cases, regardless of the monetary limit fixed in the earlier circular. It is submitted that this office memorandum carves out an exception from the applicability of the circular issued by the Board fixing monetary limits for filing appeals before the Courts. The learned Standing Counsel explained as to what is “penny stock” in the American concept and submitted that when the share price is less than one dollar it is referred to as a penny stock. So far as the Indian concept, “penny stocks” are shares which are traded at very low prices such as less than Rs. 100 per share. The learned Standing Counsel has drawn our attention to the assessment order passed in the case of the assessee, Dinesh Kumar Banshal which is the subject matter of ITAT 19 (2019) 112 Taxmann.com 330 (SC) 20 MANU/DE/1507/2019 21 (1985) 154 ITR 148 ITAT NO. 06 OF 2022 AND ETC. BATCH No. 31 of 2020 and submitted that it is one of the well-drafted assessment orders dealing with all issues elaborately. The learned Standing Counsel has drawn our attention to the relevant paragraphs in the assessment order to emphasize this submission that the Assessing Officer has clearly brought out the machinations of fraudulent, manipulative and deceptive dealings by misusing the stock exchange system to generate bogus LTCG. It is pointed out that the stock brokers as well as the Director of M/s. Kailash Auto Finance Limited were examined on oath and they have accepted that rigging of prices of the shares have been done. Further, our attention has been drawn to the report of the special investigating team which has been extensively referred by the Assessing Officer. Further, the Assessing Officer has listed out the companies in which the stock brokers have made manipulative and deceptive dealings and Kailash Auto Finance Limited is one such company. The Assessing Officer has also elaborately discussed the various decisions and ultimately, completed the assessment and denied the claim for LTCG. The said order was affirmed by the CIT(A). However, the Tribunal by a common order in 9 appeals, allowed the appeals following the decision in Mahavir Jhanwar, the correctness of which decision has been canvassed in the other appeals before this Court. It is further submitted that none of the findings recorded by the Assessing Officer or the CIT(A) had been controverted by the learned Tribunal. In support of this contention, the learned Standing Counsel referred to the decision of the High Court of Delhi in CIT Versus Nipun Buliders & Developers Pvt. Ltd.22 dated 07.01.2013. This decision was pressed into service to explain the concept of burden of 22 ITA NO. 120 of 2012 ITAT NO. 06 OF 2022 AND ETC. BATCH proof and upon whom the burden lay qua Section 68 of the Act. In the cases on hand, the assessee has not discharged the burden which has been cast upon them which was rightly noted by the Assessing Officer as well as the CIT(A) but erroneously reversed by the Tribunal. Reliance was placed on the decision of the Hon’ble Supreme Court in CIT, Bihar Versus S.P. Jain 23 for the proposition that if no cogent reasons has been given by the Tribunal, for rejecting the findings of the Assessing Officer and if the Tribunal failed to take into account the relevant materials on record and has based its findings on mere conjecture and surmises, the order of the Tribunal has to be interfered.

#14. Mr. Soumen Bhattacharya, learned Junior Standing Counsel appearing for the Revenue referred to the budget speech of the Hon’ble Minister of Finance on February 1, 2018 wherein it was pointed out that the total amount of exempted capital gains from listed share and units is around Rs. 3,67,000 crores as per the returns filed for the assessment year 2017-18 and major part of this gain has accrued to corporates and LLPs and this has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets. Further, the return on investment in equity is already called attractive even without exemption and there is therefore a strong case for bringing long terms capital gains from listed equities in the tax net. Reference was made to the speech of the Hon’ble Minister of Finance during the Budget 2022-23 wherein the Hon’ble Minister had referred to “Mahabharat” and the duty of the tax payer for voluntary compliance of the tax liability. Reliance was placed on the decision 23 AIR 1973 SC 977 ITAT NO. 06 OF 2022 AND ETC. BATCH of the Hon’ble Supreme Court in McDowell and Co. Ltd. Versus CTO 24 wherein the Hon’ble Supreme Court held that tax planning may be legitimate provided its within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage and entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods and it is the obligation of every citizen to pay the tax honestly without resorting to subterfuges. Commenting upon the order passed by the Tribunal, it is submitted that the order of the Tribunal directly and substantially interferes with the interest of the revenue and the findings are not based on the evidence brought on record by the Assessing Officer, the order suffers from material irregularities without independent reasons and the Tribunal has glossed over the relevant facts and therefore, the order of the Tribunal suffers from perversity. In support of such contention, reliance was placed on the decision of the High Court at Madras in PCIT Versus Rakesh Sarin 25.

#15. Mr. Om Narayan Rai, Learned Senior Standing Counsel appearing for the other appellant submitted that the case of the assessee from the inception is that the revenue has acted on generalized report of the investigation done by the department and there is nothing specific relatable to the assessee. Secondly, it was contended that copy of such investigation report was not furnished to the assessee. Learned Counsel submitted that circumstantial evidence can be the sole basis for taking the decision in the matter. In this regard, reliance was placed on the decision of the Hon’ble 24 AIR 1986 SC 649 25 TCA NO. 1060 of 2019 ITAT NO. 06 OF 2022 AND ETC. BATCH Supreme Court in SEBI Versus Kishore R. Ajmera 26wherein the Court has pointed out as to the important aspect with regard to the proximity of time between the buy and sell orders, prior meeting of minds, unnatural rise in the prices of the scripts and how the conclusion can be gathered from the various circumstances coupled with preponderance of probabilities. Therefore, it is submitted that absence of direct evidence is immaterial. Reliance was placed on the decision of the Hon’ble Supreme Court in Commissioner of Customs Versus Dilip Kumar and Company 27 for the proposition that exemption notification should be interpreted strictly, as the burden of proof, admittedly would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. It is submitted that Section 10 (38) of the Income Tax Act is a provision where exemption is being claimed by the assessee and the burden is on the assessee to prove that he is entitled to the claim for exemption which the assessees before this Court have failed to establish. With regard to the arguments of the assessee that the investigation report is general and not assessee specific, it is submitted that the assessee has not pleaded any prejudice on account of non-supply of the investigation report. Therefore mere non-furnishing of the report will not vitiate the proceedings. Without noting these legal principles, the Learned Tribunal had posed a wrong question to itself which has resulted in a wrong answer. The correct question that the learned Tribunal should have asked itself is whether the assessee was prejudiced on account of non-supply of the investigation