TaxTMI 
TaxTMI 
2018 (2) TMI 300
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....aring and are being disposed off by this composite order. For the purpose of recording the facts as well as analyzing the facts and evidences the appeal in ITA No. 268/JP/2017 is taken as lead case wherein the assessee has raised the following grounds:- "1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the addition of Rs. 2,64,04,191/- made in the assessment completed u/s 143(3) by the AO by treating the long term capital gain income claimed exempt u/s 10(38), as unexplained income u/s 69 of the I .T .Act 1961, without any basis and with the sole purpose to make additions vvithout brining on record any corroborative material found during the course of assessment proceedings, and also by completely ignoring the well established law that no addition can be made solely on the basis of statements recorded on oath during the course of survey conducted just on the basis of information received from Investigation Wing of Income Tax, Kolkota communicated to AO through DGIT ( Inv. ), Jaipur, without making its own independent enquiry and efforts. Thus, the additions made solely on the basis of such retracted statements deserve to b....
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....d. CIT(A) has grossly erred in disallowing the sum of Rs. 12,500/- claimed by the assessee on account of legal expenditure, without providing any opportunity to give explanation and justification for. claiming the expenditure . Also no opportunity given to produce the evidence of claiming the expenditure. Thus the additions made without providing any opportunity to give justification and produce the evidence of claiming the expenditure is bad in law and deserves to be deleted. 5. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of haring of appeal." 2. Ground Nos. 1 and 2 are regarding capital gain declared by the assessee was treated as unexplained income. The assessee is an individual and Director of ARL Infratech Limited and filed its return of income on 20.09.2013 declaring total income of Rs. 1,58,70,180/- which includes the income from salary, house property & income from other sources. During the scrutiny assessment the Assessing Officer noticed that the assessee has earned income from long term capital gain from sale share of M/s Luminaire Technologies Ltd. and M/s Oasis Cine Communica....
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.... between the assessee and these companies at the time of purchase of shares and subsequent allotment of shares and resolution of the Board of Directors as well as the documents which were filed before the ROC in respect of change of name, shares certificate, transfer of shares, the order of Hon'ble Kolkata High Court and Bombay High Court approving amalgamation and merging of the companies and dematerialization of the shares in the demat account and thereafter sale of the shares. The Assessing Officer has not disputed the dematerialized of shares as per the demat account record as well as subsequent sale of the shares by the assessee however, the AO doubted that the assessee has earned extraordinary profit/ gain on these transactions which are apparently not genuine. The AO analyzed the face value and prevailing market price of the shares at the time when the assessee allegedly purchased and then steep hike in the share price of the shares when the assessee sold the same. Since, the shares were purchased from the companies belonging to Shri Deepak Patwari, therefore, the AO held that the transactions are not genuine and consequently the capital gain declared by the assessee was tre....
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....h Ltd. w.e.f. 14.08.2012 as per the certificate at page No. 112 of the paper books. Accordingly, the shares appearing in the dematerialized account before that date was of M/s Oasis Cine Communication Ltd. and thereafter of M/s Ecowave Infotech Ltd. Out of these shares the assessee sold 18,000 equity shares in the month of July, 2012 as per the contract a note at page No. 106-110 of the P.B. The shares sold were consequently debited in the demat account of the assessee and the remaining 17,200 equity shares are still held by the assessee as reflected in the demat account and the balance sheet as on 31.03.2016. 4. Similarly the assessee purchased 50,000 shares of the M/s Paridhi Properties Ltd. having face value of Rs. 10/- each on 26.03.2011. The share application of money of Rs. 5,00,000/- was paid and debited in the bank account of the assesse on 28.03.2011. The ld. AR has referred to the share application at page No. 113 of the paper books and the bank statement of the assessee at page 114 of the P.B. The shares were allotted to the assessee on31.03.2011 which were subsequently dematerialized and credited in the demant account of the assesse on 21.10.2011. Thereafter M/s Pari....
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....has pointed out that the date mentioned in the order of the Hon'ble Kolkata High Court is a typographical mistake as the fresh certificate of incorporation was dully issued by the ROC on 05.02.2011 and a copy of which was duly placed before the authorities below as well as at page No. 46 of the paper book. Therefore, the said discrepancy in the date mentioned by the High Court has no relevancy to the genuineness of the transfer of the shares when the assessee purchased the shares of M/s Gravity Barter Ltd. prior to the fresh certificate by the ROC. Reliance is placed by the AO on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata is unwarranted and not sustainable when the assessee was not given an opportunity to cross examine to Shri Deepak Patwari. In support of his contention, he has relied upon the decision of Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE 127 DTR 241 wherein the Hon'ble Supreme Court has held that the denial of opportunity to the assessee to cross examine the witness whose statements were made the sole basis of assessment is a serious flaw rendering the order a nullity in as much as it amounts to violation of....
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....ry Mart P. Ltd. vs. DCIT. 5. On the other hand ld. DR has relied upon the authorities below and submitted that during the investigation carried out by the Kolkata Investigation Wing, Shri Deepak Patwari has admitted operating as an entry provider in respect of the penny stock of various companies. M/s Luminaire Technologies Ltd. is one of such company as admitted by him and clearly mentioned in the statement recorded by the Investigation wing Kolkata and the assessee has failed to prove the genuineness of the transactions. The AO asked the assessee to produce the principal Officers M/s Gravity Barter Ltd. as well as M/s paridhi Properties Ltd but the assessee failed to comply with the notices issued by the AO. The AO has clearly made out the fact that the assessee has shown the shares certificate whereby the assessee purchase the share of M/s Gravity Barter Ltd. on 25.01.2011 and 03.02.2011 whereas the Hon'ble High Court has stated in the order that the date of certificate of corroboration after the name change is 18.04.2011. Thus, how could the assessee purchase the shares of a public limited company prior to 18.04.2011. The Assessing Officer has made the analysis of the facts ....
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....amalgamation took place between M/s Gravity Barter Ltd. and M/s Oasis Cine Communication Ltd. and subsequent to amalgamation the assessee was allotted shares of M/s Oasis Cine Communication Ltd. on 04.02.2012. Hence, the allotment of 35,200 equity shares of M/s Oasis Cine Communication Ltd. cannot be doubted or disputed as these shares were issued post amalgamation and by a listed company. It is also not in dispute that these shares of M/s Oasis Cine Communication Ltd. were issued in exchange of the shares held by the assessee of M/s Gravity Barter Ltd. Therefore, once the shares issued by M/s Oasis Cine Communication Ltd. cannot be doubted then the holding of the shares of the M/s Gravity Barter Ltd. by the assessee correspondingly cannot be doubted because of the reasons that the shares of M/s Oasis Cine Communication Ltd. could be allotted only in exchange of shares of M/s Gravity Barter Ltd. The holding the shares of M/s Gravity Barter Ltd. and the allotment of shares M/s Oasis Cine Communication Ltd. are directly interconnected. In the absence of holding of shares M/s Gravity Barter Ltd. the shares of the M/s Oasis Cine Communication Ltd. could not be issued or allotted to the....
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....use of some internal information available to the assessee. 7. In case of equity shares M/s Paridhi Properties Ltd. the assessee purchase 50,000 equity share on 26.03.2011 by paying share application money of Rs. 5 lacs which is duly reflected in the bank account of the assessee as paid on 28.03.2011. Therefore, the payment of share application money has been duly established by the assessee through his bank account for allotment of shares of 50,000 equity shares of M/s Paridhi Properties Ltd. The share allotted in private placement as per of Rs. 10/- cannot be termed as penny stock. The AO doubted that the entire process of application and allotment of shares as it have been completed within a short duration of 5 days, which in the opinion of the AO is not possible in ordinary course. However, when the assessee has produced the record including the share application, payment of share application money, allotment of share then merely because of a short period of time will not be a sufficient reason to hold that the transaction is bogus. The shares allotted to the assessee vide share certificate dated 31.03.2011 were dematerialized on 21.10.2011, therefore, on the date of demater....
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....any official personally in the whole process, so the assessee is not in position to produce any one for cross examination before your good self. Since your good self has got the authority, we humbly request you to kindly issue the notice u/s 131 of the Income tax Act 1961 to the concerned individual persons or company officials for cross examination. Please note that the assessee is ready to bear the cost of their travelling in this regards. 4. As regard your opportunity given to us to read the recorded statement of Shri Deepak Patwari and to produce him from the cross examination before your good self, we have to submit that from the reading of the statements of Shri Deepak Patwari it is clear that he has never taken the name of the assessee, nor the assessee is aware of any Shri Deepak Patwari neither he has made any transaction with him, so in what capacity he can call him for cross examination before your good self. Since your good self has got the authority, we humbly request youto kindly issue the notice u/s 131 of the income Tax act 1961 to him also for cross examination. We also request your good self to kingly provide us the copy of statements of Shri Deepak Patwa....
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....ot even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to w....
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....of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be th....
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....e 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 A....