TaxTMI 
TaxTMI 
2016 (5) TMI 1325
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.... in respect of three different assessees namely Dipak J. Panchal, Devangi Dipak Panchal & Dipak Panchal (HUF). 3. The ld. counsel furnished a comprehensive chart in respect of each assessee and stated that the underline facts in the issues contained are identical in respect of all the assessees to which ld. D.R. fairly conceded. On this agreement/concession, we heard the submissions made by the representatives of both side at length and dispose of all these appeals by this common order for the sake of convenience and brevity. The impugned disputes arose because of a search operation conducted on 10.02.2006 at the residential/business premises of the assessees. Notices u/s. 153A(a) of the Act were issued and served upon the assessee in lieu of which returns were filed and the assessments were made u/s. 153A r.w.s. 143(3) of the Act. 4. The impugned disputes can be summarized as under:- (i) Assessments for assessment year 2000-01 to 2004-05 could not be made u/s. 153A of the Act as no incriminating material was found at the time of search to re-open the completed assessments. (ii) In respect of assessments which were not completed at the date of search i.e. 2005-06 & 2006-07, a....
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....05-06 490 & 491/Ahd/2010 2006-07 Devangi Alias Rupa Dipak Panchal 138/Ahd/2011 2001-02 30/07/2001 143(1) 31/07/2002 139/Ahd/2011 2002-03 30/07/2002 143(1) 31/07/2006 140/Ahd/2011 2003-04 25/09/2003 143(1) 30/09/2004 141/Ahd/2011 2004-05 30/09/2004 143(1) 30/09/2005 492/Ahd/2010 2005-06 493/Ahd/2010 2006-07 768/Ahd/12 2007-08 Dipak J Panchal HUF 341/Ahd/2011 2004-05 30/09/2004 143(1) 30/09/2005 342 & 347/Ahd/2011 2005-06 767/Ahd/2012 2007-08 8. A perusal of the chart shows that prior to the date of search, the aforementioned assessments stood completed and, therefore, if no incriminating material is found then the concluded assessments could not be reopened. This view is now settled in favour of the assessee and against the revenue by the judgment of Hon'ble Bombay High Court in the case of Continental Warehousing Corporation 374 ITR 645 which reads as under:- "Once it is held that the assessm....
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....e time period for issuing notice u/s 143(2) of the IT Act for selecting case for security expired on 31.12.2004. The first search was conducted on the premises of assessee on 22.9.2005 and the 2nd search was conducted on 25.8.2006 and in both the searches, no incriminating material, document, unaccounted assets and bogus of accounts were found and seized relating to land development expenses debited in profit and loss account for the year. The both searches on assessee did not yield any incriminating material on the basis of which it can be said that assessee was indulgent in debiting bogus land development expenses in its books of account. There is no reference of any material found in the search for making assessment u/s 153A of the Act. Thus the basic controversy before us remains about the scope of assessment u/s 153(A) when the return has been accepted u/s 143(1)(a) and time period for issuing notice u/s 143(2) has elapsed. 8. In our considered view, there is no dispute with regard to the proposition that A.O has the jurisdiction u/s 153A of the Act to initiate assessment/reassessment proceedings for all the six years to compute the total income of the assessee including the....
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....e has to club the two safe of incomes, the returned income and the unearthed income and arrive at the total income. 10. In the case of Kabul Chawla 380 ITR 573, the Hon'ble High Court has summarized the legal position as under:- 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(l) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words....
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....ng notice under Section 147 of the Act and re-assessment orders were passed under Section 147 read with Section 143(3) of the Act. During both the aforementioned proceedings the question whether the gold and silver utensils were the capital assets or personal effects of the Assessee was examined. They were held not to be the personal effects. 7. It has been noticed by the ITAT in the impugned order that for the A.Ys in question no incriminating material qua the Assessee was found. 8. In that view of the matter, and in light of the decision of this Court in CIT vs. Kabul Chawla (2016) 380 ITR 573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for determination. 12. Now, let us examine the aforementioned ratios laid down by the Hon'ble High Courts in the light of the documents found at the time of search which were considered as incriminating for making the impugned assessments. 13. During the course of the search proceedings, it came to the notice of the revenue that in October 2005, SEBI noticed large scale off market transactions of shares of Yes Bank Ltd. It also came to the lig....
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....bul Chawla [2016] 380 ITR 573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers from no legal infirmity and no substantial question of law arises for determination. 9. The appeals are dismissed. 15. Respectfully following the decisions of the Hon'ble High Courts mentioned elsewhere, we direct the A.O to delete the impugned additions made u/s. 153A of the Act for assessment years 2000-01 to 2004-05. The first issue is decided in favour of the assessee and against the revenue. 16. Before parting with this issue, another allegation made was in respect of several gift deeds found at the time of search. Can this be construed as incriminating material? The answer is found in the decision of the Co-ordinate Bench of the Tribunal in the case of Vijaykumar D. Agrawal & Ors. IT(SS)A Nos. 153 to 156/Ahd/2012 & Ors. wherein the Tribunal has considered the following facts and held accordingly:- 16. In the present case, as already noted above, the AO had proceeded on the basis of gift deeds and copies of return of income of the donors and the post search inquiries to conclude that the gifts received by the assessee are bogus gifts. Before us, Revenue has not plac....
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....an High Court in CIT vs. Elegant Homes (P.) Ltd. [2003] 259 ITR 232 that in Chapter XIV-B of the Act, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, if some undisclosed income is found on the basis of the material seized, that should be treated as undisclosed income. As per the scheme of special assessment under Chapter XIV-B, the assessment has to be based on incriminating material found in the course of the search. In the present case, all that was found were the gin deeds and the affidavits and there was no incriminating material found in the course of search to suggest that the gifts were bogus. In Vishal Agarwal's case (supra) the Tribunal in a similar situation had returned the finding that there was nothing in the assessment order to show that any evidence was found during the search to suggest that the gifts were bogus. The gifts having been declared in the returns of income, fell outside the purview of Chapter XIV-B of the Income-tax Act, 1961. In such a similar situation, this Court in Vishal Aggarwal's case (supra), did not interfere with the findings and conclusion....
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.... of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2000-01 0 3 3 500 0.60 2001-02 5 14 19 500 3.80 2002-03 2 3 5 500 1.00 2003-04 1 14 15 500 3.00 2004-05 0 9 9 500 1.80 DIPAK J PANCHAL Calculation of % of No. of Days Transacted in Stock Exchange to Total No. of Working Days A.Y. No. of Days of Market Purchase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2005-06 0 12 12 500 2.40 2006-07 0 10 10 500 2.00 (2) (iv) Charts showing percentage of scripts traded during year. DEVANGI D PANCHAL % OF SCRIPS TRADED DURING YEAR TO TOTAL SCRIPS A.Y. No. of Scrips at opening of year No. of new Scrips purchased Total No. of Scrips No. of Scrips transacted during the year No. of Scrips not transacted during the year 2000-01 82 18 100 10 90 2001-02 97 5 102 6 96 2002-03 98 7 105 9 96 2003-04 103 6 109 37 72 2004-05 84 10 94 14 80 Total ....
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....006-07 77 4 81 28 53 2007-08 47 0 47 1 46 Total 217 9 226 58 168 (iv) Chart showing percentage of No. of days transacted in stock exchange with total no. of working days of stock exchange. DIPAK J PANCHAL HUF Calculation of % of No. of Days Transacted in Stock Exchange to Total No. of Working Days A.Y. No. of Days of Market Purchase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2000-01 0 0 0 500 0.00 2001-02 0 0 0 500 0.00 2002-03 1 4 5 500 1.00 2003-04 1 7 8 500 1.60 2004-05 4 25 29 500 5.80 DIPAK J PANCHAL HUF Calculation of % of No. of Days Transacted in Stock Exchange to Total No. of Working Days A.Y. No. of Days of Market Purchase No. of Days of Market sale Total No. of Transacted Days Minimum Working Days on BSE & NSE % of Transacted Days to Working Days 2005-06 0 5 5 500 1.00 2006-07 1 16 17 500 3.40 2007-08 0 1 1 500 0.20 20. The dispute is....
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....ferent parameters to distinguish the shares held as investments from the shares held as stock-in trade. The Central Board of Direct Taxes ('CBDT') has also, through Instruction No. 1827, dated August 31, 1989 and Circular No. 4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations. 3. Disputes, however, continue to exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business....
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.... The Coordinate Bench in the case of Seer Finlease Pvt. Ltd. in ITA Nos. 3326, 3440/Ahd/2009 had the occasion to consider a similar issue wherein the assessee had acquired shares from Smt. Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. (which are also relevant in the case of the assessees under consideration) and the Tribunal observed that how it affects the investment of the assessee. It would be pertinent to refer to the relevant observations of the Co-ordinate Bench and which reads as under:- "The CIT(A) has recorded a finding that the assessee-company has financed more than Rs. 29 crores to Smt.Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. group with intention that this group would make multiple application in the IPOs of certain companies. The second reason assigned by the CIT(A) is that the assessee did not take any kind of security from these persons. We confronted the Id. DR to show any material possessed by the AO for buttressing this reasoning. We failed to find out the basis of recording this finding. If during the investigation carried out by the SEBI or the Income Tax Department it emerges out that there is a conspiracy between th....
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....orrowings of fund. This issue is also decided in favour of the assessee and against the revenue by the Co-ordinate Bench of the Tribunal in the case of Smruti Shreyans Shah in ITA Nos. 3214, 3180, 3295 & 3296/Ahd.2009 wherein the Tribunal has followed the decision of the Hon'ble Jurisdictional High Court in the case of Niraj A. Surti 347 ITR 149. The relevant findings of the Tribunal read as under:- 10. We have heard both the parties and gone through the case file. The CIT(A) has treated holding period of one month and usage of borrowed funds in the impugned share transaction as bench marks for partly confirming the Assessing Officer's action. A co-ordinate bench in ITA 2818/Ahd/2011 Kalpesh C. Shah Vs. ACIT has already disagreed with the former bench marking. Thc hon'ble jurisdictional high court in (2012) 347 ITR 149 CIT vs. Niraj A. Surti holds that usage of borrowed funds in share transaction does not give the resultant profits colour of business income. The CIT(A) twin reasoning stands overruled accordingly. The short question that arises for our independent adjudication in these appeals is as to whether the assessee's income derived from sale of shares/mutual fu....
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....venue both assessment year. The Assessing Officer is directed to treat her income from sale of shares and mutual funds in the two assessment years as short term capital gains and pass a consequential order. The assessee's grounds succeed in her two appeals and that of the Revenue fail. 26. At this point, the ratio laid down by the Hon'ble Supreme Court in the case of Rameshwar Prasad Bangla 87 ITR 421 becomes relevant wherein the Hon'ble Supreme Court has held that the volume of the shares purchased and sold cannot be the reason for treating the transaction as an adventure in the nature of trade. To sum up, we do not find any substance in the findings of the A.O as mentioned hereinabove, neither the frequency nor the borrowings nor the allegation of shares involved in the IPO scam hold any water. In the light of the judicial discussion hereinabove, considering the totality of the facts, in the light of the judicial decisions, we direct the A.O to treat the gains arising out of the sale of shares under the head capital gains be it short terms or long term as the case may be. 27. The third issue relates to the denial of the set off of losses on sale of shares. We are taking the....
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.... carried out in ordinary course of business because of the following reasons: (i) The purchase and sales bills are issued by M/s. Grace Investment which is a group concern of the assessee and therefore, the same are not verifiable in the sense that it is not known from whom the shares have been purchased and to whom the shares have been sold. (ii) The sales are made to Shri Deepak J. Panchal HUF of which the assessee is one of the coparceners. (iii) The transactions are off market transactions and therefore, the purchase and sale price are not verifiable. (iv) The dates of purchase and sale as mentioned in the books of accounts are not in conformity with the debit and credit entries made in the respective demat accounts. It proves that the delivery of shares has not been made on the date of pay-in and pay-out as fixed by the stock exchange. (v) The assessee is not able to prove that she has paid the purchase cost and/or received the sale proceeds immediately after the dates of pay-in and pay-out. (vi) Since the purchase and sale bills are prepared by the group concern, they are the self-serving documents and hence have no evidentiary value in the absence of any other co....
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.... were with related party would not make the transaction sham or bogus. We find that the accounts of M/s. Grace Investment are audited and even if the transactions are off market transactions, the purchase and sale price are easily verifiable from the stock market. Since the assessee is having a running account with Grace Investment, it is not necessary to make payments for every purchases and receive consideration for every sale. It is customary of such type of transaction to have a running account with the principal broker/intermediary and settle the accounts, debit or credit, at the end of a certain period. 30. Most importantly in similar transactions wherever there was gains, the A.O has accepted such gains as it is, therefore, we do not find any logic/reason in discarding the losses made by the assessee on sale of shares. The revenue cannot blow hot and cold in the same breath for similar transactions. 31. In our considered opinion, the losses on sale of shares deserve to be set off and we direct the A.O accordingly. 32. In the result, all these appeals of the Assessee relating to the assessment are allowed and those of the Revenue are dismissed. 33. Now coming to the appea....