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2016 (5) TMI 1457
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....03-04 Gurvinder Singh Bhatia IT(SS)A No.117/ A 2004-05 IT(SS) A No.26 & 17/ A & D 2002-03 Surendra Singh Bhatia IT(SS)A No.27 & 18/ A & D 2003-04 CO & IT(SS)A No.14 & 19/ A & D 2004-05 IT(SS) A No.104/ A 2002-03 Bhatia International Ltd. IT(SS)A No.105/ A 2003-04 IT(SS)A No.106/ A 2004-05 IT(SS) A No.120/ A 2002-03 Manjit Singh Bhatia IT(SS)A No.121/ A 2003-04 IT(SS)A No.122/ A 2004-05 IT(SS)A No.15/ D 2005-06 BCC Finance Ltd. 2. Short facts of the case are that the assessee is an individual, presently aged nearly 35 years. The assessee is regularly assessed to Income-Tax for the last many years. The assessee furnished his Original Return of Income, pertaining to the assessment year under review, u/s. 139 of the Income-Tax Act, 1961, on 25-01-2003 vide Ack. No. 43630 with the then JCIT, Range-4, Indore, declaring an income of Rs. 63,500/- [kindly refer PB Page no. 20 to 24]. In response to the Return of Income, furnished by the assessee u/s. 139 of the Income-Tax Act, 1961, no....
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.... dated 23-06-2009, 09-11-2009, 09- 12-2009 along with necessary documentary evidences. Xerox copies of such written submissions are filed by the assessee in the paper book at Page No. 54 to 76. Finally, the Assessing Officer framed the assessment on 18-12-2009, u/s. 143(3) read with section 153A of the Income-Tax Act, 1961, determining the income of the assessee at Rs. 70,93,470/- as against the returned income of Rs. 63,500/- thereby making additions of Rs. 70,29,970/-, as per details given below: S. No. Particulars Amount (Rs.) 1 Addition on account of gift in form of Resurgent Bonds [On Protective Basis] 70,29,000 2 Addition on account of Dividend under Rule 8D r.w.s. 14A 970 TOTAL ADDITIONS 70,29,970 3. So far as the issue of incriminating material is concerned, the AO has not given any specific finding on the issue. However, the AO at page no. 2 of the Assessment Order, has stated that during the course of the assessment proceeding he had ascertained from the P&L Account and Balance Sheet of the assessee that the assessee had received certain gift from various persons. 4. Matter carried to learned CIT(A....
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..... 2.01 That, during the course of search and seizure operations, no incriminating material or undisclosed asset pertaining to the assessment year under consideration was either found or seized. 3.00 That, during the course of the entire assessment proceedings carried out under s. 153A of the Income-Tax Act, 1961, the AO did not raise any query on any of the materials or findings relating to the search carried out under s. 132. It is submitted that the Assessing Officer made the addition only on the routine items such as gift received in form Resurgent Bonds and disallowance under Rule 8D. r.w.s. 14A of the Income-Tax Act, 1961. However, none of the additions was based on any loose paper/ document/ other incriminating material/ asset found and/ or seized during the course of the search. 3.01 The assessment year-wise details of assessments framed by the AO are given as under: S. No A.Y. Income Returned u/s. 153A Addition on account of Gift in form of RIB Bonds Addition by holding share transactions as non-genuine Others Total Additions Assessed Income Remarks 1 2002-03 63,500 70,29,000 - 970 70,29,970 ....
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....ee. As said in the preceding para, the AO has made the addition in the returned income of the assessee without having any recourse to any incriminating material or document or valuable article or thing found during the course of the search proceedings. Such an act of the learned AO is patently wrong, unjustified, unwarranted and bad in law in view of the facts and circumstances of the case and legal position as discussed in the ensuing paras. 4.02 The provisions of section 153A, 153B and 153C enjoining scheme for assessment in case of search or requisition have been brought to the statute by the Finance Act, 2003 w.e.f. 01-06-2003. On a plain reading of the provisions of section 153A it becomes abundantly clear that such provisions are meant to carry the operation of search under s. 132 or the operation of requisition under s. 132A to its logical end by way of framing an assessment or reassessment of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. In this context, before proceeding further, it shall be useful to reproduce the provisions of section 153A as under: "153A.....
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.... proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation - For the removal of doubts, it is hereby declared that - (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 4.03 On a plain reading of the provisions of section 153A, one may note that these provisions can be set into motion only in the case of a person where a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A. Even, the caption of the provision is read as 'assessment in case of search or requisition'. Thus, there remains no doubt to the proposition that the section 153A cannot be invoked in each and any case but it can be invoked only for ....
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....e specific knowledge or domain of the revenue. It shall thus be appreciated that the provisions of section 132 are not meant for verifying the transactions which are already recorded in the regular books of account of an assessee. For such verification, the powers of assessment or reassessment are duly vested with the AO under the provisions of section 143/ 147 of the Act. As a natural corollary it thus follows that very purpose of initiating action under s. 132 is to unearth or discover any undisclosed income or undisclosed asset of an assessee and its objective is not at all to verify the veracity of the transactions already recorded in the regular books of account or in respect of which assessments have already attained finality. Since, the provisions of section 153A have the sole objective of framing the assessment/ reassessment in the case of a person in whose case search under s. 132 is initiated or requisition under s. 132 is made, it has to be necessarily concluded that the scope of the assessment/ reassessment under the provisions of section 153A is limited and restricted only to the undisclosed income based upon the incriminating material/ undisclosed assets found during ....
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.... in respect of which proceedings have attained finality at the AO stage and those assessment years where the assessment proceeding have not so attained the finality at AO stage. It is submitted that while making the assessment under s. 153A, an AO has to make a specific distinction for non-abated assessment years with that of the abated assessment years. 5.00 It is submitted that the issue relating to scope of assessment under s. 153A/153C is not res integra. The various controversies and intricacies involved in the issue has finally been set at rest by Hon'ble ITAT, Mumbai Special Bench, in the case of All Cargo Global Logistics Ltd. & Ors. vs. DCIT (2012) 74 DTR (Mumbai) (SB) (Trib) 89 in its landmark decision pronounced on 06-07-2012. It is submitted that the Hon'ble Special Bench at para (58) of its Order, was pleased to lay down the ratio as under: "58. Thus, question NO.1 before us is answered as under: (a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cas....
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.... (Del) iv) Shri Yamuna Proteins, Dahod vs. ACIT [Appeal No. IT(SS) Nos. 227 to 232/Ahd/2010 Order dated 18-10-2012] v) Vee Gee Industrial Enterprises New Delhi vs. ACIT [ITA No. 1/Del/2011 Order dated 12-07-2013] vi) Marigold Merchandise (P) Ltd. vs. DCIT (2014) 104 DTR (Del)(Trib) 113 vii) ACIT vs. M/s. Prithvi Sound Products Co. Pvt. Ltd. [ITA No.3422 to 3426/Del/2011 Order dated 17-04-2014] viii) ACIT vs. M/s. KS. Food Products [ITA No.519/Agra/2012 & C.O. No.10/Agra/2013 Order dated 17-05-2013] ix) Smt. Sunita Bai vs. DCIT (2015) 68 SOT 0098 (Panaji) (URO) x) DCIT vs. Reliance Granite P Ltd. (2015) 43 CCH 0028 (Hy. Trib.) 6.00 In the instant case, undisputedly, the assessee had voluntarily furnished his return of income under the provisions of s.139 of the Act on 25- 02-2003 and, as per the law then prevailing, the time limit for issuance of notice under s.143(2), in response to the return so filed, had also got expired by 29-02-2004 i.e. much prior to the date of initiation of search on 25-09-2007. In such circumstances, it has to be necessarily held that as on the date of search, the assessment of the assessee ....
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....m To 20 22 Copy of Original Return filed under s.139 Establishing that the assessee had filed his original return. 23 24 Copy of Capital Account and Statement of Affairs filed with original return Establishing that in the capital account filed with the original return itself, the assessee had disclosed the factum of receipt of Resurgent India Bonds of worth of Rs. 70,29,000/- during the year under consideration. 30 32 Abstract of written submissions filed before CIT(A) Establishing that even before the CIT(A) it was submitted that the additions are not based upon any incriminating material. Such assertion was not rebutted by the CIT(A) in his Order. 52 52 Copy of showcause notice dated 07-12- 2009 issued by AO Establishing that no incriminating material was found during the course of search in respect of RIB/NRI gifts as is evident from para 1 of the show-cause notice. " 6. On the other hand, Ld. DR has relied on the orders of the Revenue Authorities and submitted as under: "Issue has been dealt by CIT(A) in para 4 on page 46 in case of shri Amandeep Singh Bhatia fo....
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....elied upon to draw inference that there can be similar transactions throughout period of six years covered by section 153A-Held, yes (In favour of revenue). Madugula Venu v/s DIT (2013) 29 taxman.com 200 (Delhi):- held "Section 153A is couched in mandatory language which implies that once there is a search the assessing Officer has no option but no callapon the assessee to file the returns of the income for the earlier six assessment years. It is not merely the undisclosed income that well be brought to tax in such assessment but the total income of the assessee including both the income earlier disclosed and income found consequent to the search, would be through to tax" Canara Housing Development Co. v/s DIT (2014) 49 taxmann.com 98 (Karnataka):- held "Under section 153A however the Assessing Officer has been given the power to asses or reassess the total income of the six assessment years in question in separate assessment orders The Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income if any unearthed during the search. He has been entrusted with the duty of bringing to tax the total inc....
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....d hence, assessment order passed by the AO u/s 153A is completely a legal order without any perversity. Thus, assessee's grounds in this regards may kindly be rejected." 7. We have heard rival contentions of both the parties. In nutshell, the contention of the ld. Counsel for the assessee is that for the years 2002- 03, 2003-04 & 2005-06, assessment orders are bad in law since no incriminating documents were found during the course of search. Upto the assessment year 2005-06, the assessments are not abated and the time limit for issuance of notice u/s 143(2)/142(1) had already expired. The assessee had already filed the returns for various years in time and submitted all the details in TAR. For and upto the assessment year 2005-06, without finding any incriminating material during the course of search, no additions can be made on the basis of entries in the books of account which were already recorded and incorporated in the balancesheet. In the present appeals, we find that the Assessing Officer has made additions by invoking provisions of sec. 68 of the Act on the basis of P & L account, capital account and balance-sheet, which were already on record of the Department h....
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....isition shall not abate..........." Accordingly, as far as completed assessments are concerned, they do not abate. The AO cannot proceed to make the same addition in the block assessment without any incriminating material found in the course of search. The said view prevents the AO to undo what has already been completed and has become final in the original assessment proceedings. 9. We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/s 132 of the Act or a requisition has been made u/s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/s 153A of the Act. Once notices are issued u/s 153A of the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no....
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....r of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particular issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectfully following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly." 9. We, following the above order of this Bench, allow the appeals filed by the assessees on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein we have already held that in absence of any incriminating documents found and seized during the course of search, the Assessing Officer is not justified in making the additions in nonabated assessment orders while passing the orders u/s 153A r.w.s. 143(3) of the Act. Thus, we quash the non-abated assessment orders for the A.Ys. 2002-03, 2003-04 & 2005-06. Accordingly, this issue of incriminating material involved in the assessee's appeals IT(SS)A Nos.112 to 114/Ind/2011 is allowed. However, since the assessment for ....
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....imed to have received certain Resurgent Bonds from NRIs as gifts. Such bonds got matured during the previous year relevant to A.Y. 2004-05 for a sum of Rs. 1,00,44,384/-. It was therefore, the AO made an addition of Rs. 1,00,44,384/- in A.Y. 2004-05 on substantive basis. The assessee preferred the appeals against the assessment orders passed for both the assessment years i.e. A.Y. 2002-03 and A.Y. 2004-05. 1.02 During the course of the appellate proceedings, the assessee made a detailed explanation before the CIT(A) by contending that at any rate, the addition of Rs. 1,00,44,384/- could not have been made for the assessment year 2004-05 being the assessment year in which the bonds, received in the form of gift in earlier years, got matured. 2.00 The CIT(A) concurred with the view of the assessee that addition on account of gift in form of RIB Bonds cannot be made in the year in which such bonds got matured. Accordingly, the CIT(A) rightly directed to delete the entire addition made on account of RIB Bonds, on substantive basis, in the assessee's income for A.Y. 2004-05. 3.00 However, the CIT(A) enhanced the addition of Rs. 70,29,000/- made by the AO in th....
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....y shifted addition made in one assessment year to another assessment year and therefore, there was no specific need for issuance of any notice u/s 251(2) of the Act. Thus, these addition grounds taken by the assessee are having no merit and the same are dismissed in the respective appeals of the assessee. GROUND NOS. 3.1 & 3.2 in IT(SS)A Nos.112/Ind/2011 (A.Y. 2002-03) and GROUND NOS. 3 in IT(SS)A Nos.113/Ind/2011 (A.Y. 2003-04) Issue of gifts in form of Resurgent India Bonds (RIB) 15. In A.Y. 2002-03, these grounds of the appeals of the assessee are directed against the CIT(A)'s action of confirming and rather enhancing addition of Rs. 70,29,000/- made by the AO under s.68 of the Act on account of Resurgent Bonds. The AO had made the addition of Rs. 70,29,000/-, being the face value of RIB bonds claimed to be received as gifts, on protective basis, whereas the CIT(A) has enhanced the addition to Rs. 1,00,44,384/-, being the maturity value of RIB Bonds. Whereas, in the A.Y. 2003-04, this ground is directed against the CIT(A)'s action of confirming the addition to the extent of Rs. 1,41,97,107/- out of the addition of Rs. 1,47,00,000/- made by the AO under s.68 of the Act on prot....
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....ding that such donors have not given any further gift thereafter. The CIT(A) also held that the gifts were not given on any special occasion. The CIT(A) has further given the finding that creditworthiness of the donors of the bonds is not in question but according to the CIT(A), the Bhatia Group had paid their unaccounted money to NRIs for acquiring RIBs. Finally, the CIT(A), relying upon the decision of Hon'ble Supreme Court in the case of P. Mohankala & Others 291 ITR 278 (SC) and some other decisions, upheld the decision of the AO in making addition in the hands of various recipients of Bhatia family on account of RIBs as their unaccounted income. However, the CIT(A) held that such addition is to be made in the year of receipt of RIBs and not in the year of maturity thereof as according to CIT(A), the assessee and Bhatia Group members had paid their unaccounted money for purchase of RIBs. Accordingly, for the assessment year under consideration, the CIT(A) confirmed (enhanced) addition to the extent of Rs. 1,00,44,384/- in the assessee's income on account of RIBs on substantive basis. 18. The Ld. AR for the assessee has made oral as well as written submission as under: ....
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....d addition is liable to be deleted on this legal ground alone. 5.00 Without prejudice to the above, it is submitted that even on merits, the addition so made by the AO and confirmed by the CIT(A) is not sustainable in the facts and circumstances of the case and submissions made in the ensuing paras. 6.01 That, during the relevant previous year, as on 05-05-2001, the assessee had received three Resurgent India Bonds Certificate [in short, 'RIBs'], of face value of 50,000 USD each, issued by State Bank of India, in form of gift from two persons of USA namely Shekhar Jayantilal Bhansali and Meera Samir Bhansali. The face value of such RIBs in Indian Rupees was to the extent of Rs. 70,29,000/-. The complete details of RIBs are given at Page No. 77 of the Paper Book. 6.02 The donors had purchased such RIBs out of their own NRI funds and relevant certificates were issued in their respective names. Copies of Certificates issued to them by the Bank are placed at Page No. 79 to 81 of the Compilation. 6.03 That, the subject RIBs were issued by the Apex Bank of India i.e. the State Bank of India to Non-Resident Indians, in the year 1998, for five years matu....
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.... per the materials placed on record. The findings so recoded by the ld. CIT (A) has not been controverted by the ld. Senior DR by bringing any positive material on record. Accordingly, we do not find any infirmity in the order of CIT (A)." 6.07 This Hon'ble Bench, in the case of DCIT vs. Darpan Anand in ITA No. 218/Ind/2009 dated 30-06-2010, relying upon the decision of the Hon'ble Allahabad High Court in the case of Kanchan Singh vs. CIT (2009) 221 CTR 456 (All.) has held that gifts of RIBs received by an assessee from one NRI who is not his relative, cannot be treated as the income of the assessee. In the case of Kanchan Singh supra, the Hon'ble Allahabad High Court has held that unless and until, the AO brings on record some cogent evidence to establish that some equivalent amount had been passed on to the donor, no addition on account of gift of bonds can be made in the hands of the assessee. 7.00 It has been held in the case of DCIT vs. Ramdev Kumar Chitlangia (2004) 89 TTJ (Jd) 346 that blood relationship is no condition precedent for making a valid gift. The same view was expressed by the Hon. Chandigarh Bench of ITAT in the case of R.K. Syal vs. ACIT as re....
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....elf. " 19. On the other hand, ld. DRs relied on the orders of the Revenue Authorities and submitted as under: " AO has made the addition on account of bogus RIB gifts taken by the assessee from NRI. CIT(A) has confirmed the same. In appeal before ITAT, assessee contented that investment in those bonds were made by the NRIs out of the foreign exchange and thus sources of investment are fully explained but issue involved is different i.e. genuineness of gifts means the fact of natural love and affection with specific occasion has to be proved by the assessee. These gifts were taken by four family member of Bhatia group i.e. Shri S.S. Bhatia, Shri G.S. Bhatia, Shri Amandeep Bhatia, & Shri Manjeet Bhatia Whose statements were recorded by the AO. From their statement it is clearly established that they have not any close relationship with those NIRs and gifts were taken without any occasion. AO is also noted that no gifts were taken from those NRIs either later or earlier. Thus, huge amount of gifts taken by Bhatia Family are not appearing genuine gifts while actually they have converted their unaccounted money into white through those RIB gifts from N....
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....s the order of CIT(A) on the issue may kindly be confirmed." 20. We have heard rival contentions of both the parties and perused the material available on record. Looking to the facts and circumstances, we find that assessee has filed original return of income u/s 139 of the I.T. Act, 1961 on 25.1.2003. Along with the return, the assessee has furnished the copy of capital account, F.Y. ended on 31.3.2002 in which the receipt of RIB of value at Rs. 70,29,000 was clearly reflected in the statement of affairs filed along with the original return. Assessee has shown such RIB bond of Rs. 70,29,000/-. We find that Assessing Officer has made the addition by invoking provisions of sec. 68 of the Act which says that addition is based on entries found in regular books of accounts. The Assessing Officer did not refer any seized material or any incriminating material while making this addition. While making the addition u/s 153A, the addition can be made in respect of non-abated assessments only if any seized material is found during the course of search. The addition is based only on the material which was submitted by the assessee during the original assessment order. Therefore, no additi....
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....assessment year 2006-07, these grounds are directed against the CIT(A)'s finding of upholding AO's action of treating the short-term capital gain and long-term capital gain, respectively of Rs. 2,72,30,004/- and Rs. 9,91,440/-, as unaccounted cash credits under s.68 of the Act. Since identical issue is involved in both the present appeals, we are taking facts from the case of A.Y. 2006-07 being lead case. This issue is involved in the following group appeals: S.No. A.Y. A/D Appeal No. Name of the assessee 1 2005-06 A IT(SS)A No.114/ Amandeep Singh Bhatia 2 2006-07 A IT(SS)A No.115/ 3 2004-05 A IT(SS)A No.117/ Gurvinder Singh Bhatia 4 2005-06 A IT(SS)A No.118/ 5 2006-07 A IT(SS)A No.119/ 6 2002-03 A IT(SS)A No.26/ Surendra Singh Bhatia 7 2003-04 A IT(SS)A No.27/ 8 2005-06 A IT(SS)A No.28/ 9 2005-06 D IT(SS)A No.20/ 10 2006-07 A IT(SS)A No.29/ 11 2006-07 D IT(SS)A No.21/ 12 2007-08 D IT(SS)A No.22/ 13 2004-05 A I....
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.... show-cause that (i) why the STCG/LTCG shown in the returns should not be treated as accommodation entries without any real profit under s.68; (ii) why these transactions should not be treated as trading in the nature of business considering the magnitude of the share dealings; and (iii) to explain on what basis, shares were purchased and sold by the assessee of certain companies which according to the AO were not worth investing. In response to show-cause notice dated 07-12-2009, the assessee, through his letter dated 09-12-2009 (PB Page no. 45 to 73), furnished a detailed written submission before the AO in respect of each and every query raised by the AO in the aforesaid show-cause notice. Finally, the AO discarded the entire explanation of the assessee and by developing his own whimsical story of money laundering and further, relying upon the decision of the Hon'ble Supreme Court in the case of Mcdowell & Company Ltd., held the capital gain as unexplained cash credit of the assessee under s.68 of the Act. Alternatively, the AO also held that considering the magnitude of transactions, the entire gain should be taxed as business income of the assessee. The AO has dealt with the s....
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....of shares cannot be regarded as trade in the nature. In the Appellate Order, the CIT(A) has reproduced the written submission of the assessee made on this issue at page no. 9 to 79 of his Order. The CIT(A) has dealt with the issue at para 4.2, page no. 79 to para 4.2.7, page no. 93 of the Order. The CIT(A) has summed-up his findings at para 4.2.6 from page no. 92 to 93 of his Order. According to the CIT(A), no adverse findings were there in the SEBI's website in respect of some of the companies as tabulated at Page No. 83 to 85 of the Order. However, in respect of the other companies, tabulated at Page no. 86 to 88, the CIT(A) has given a finding that the SEBI had penalized such companies and their brokers for being involved in manipulating artificial abnormal rise in the price of the shares with a view to enable them to provide accommodation entries to book capital gain to one set of needy persons. On this basis, the CIT(A) confirmed the addition. 25. The ld. AR has made oral and written submissions as under: "1.00 The entire addition has been made by the learned AO merely on guess work, conjectures and surmises. The addition is not based upon any document found dur....
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....n evidence of sales of shares to the assessee. The shares were sold through recognized stock exchanges only. The entire sales proceeds were received by the assessee through account payee cheques only and the same got credited in the bank accounts of the assessee. Upon sales of the shares, the delivery was made through the demat account only. The transactions of purchases and sales were made at the market prices prevailing at the relevant time. 2.02 During the course of the assessment proceedings, in order to establish the genuineness of the transactions, the assessee had furnished following documentary evidences: (i) Statement showing complete details of Long-Term Capital Gain of Rs. 9,91,440/- and Short-Term Capital Gain of Rs. 2,72,39,741/- derived by the assessee during the relevant previous year. In such statement, the assessee had given the complete details as regard to the name of the company, number of shares purchased, date of purchases, amount of purchases, date on which shares were deposited in Demat Account, number of shares sold, date of sale of shares, sales price of shares, date on which shares were issued from the Demat Account and the amount of cap....
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....vy hike in the price of the shares of some companies from which the assessee derived capital gain. It is submitted that it is not the case of the SEBI or the AO that the assessee himself had manipulated the prices. In such circumstances, merely for the reason that the broker of the assessee while carrying out the transactions for some other persons was found to be manipulating the prices of shares cannot be a ground for holding the entire transactions carried out by the assessee as sham. 4.03 Your Honours, in the similar circumstances, the Hon'ble High Court of Jharkhand in the case of CIT vs. Arun Kumar Agrawal (HUF) (2012) 8 TMI 398 (Jhar.) has held that even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, the transactions carried out by a person who himself was not so indulged cannot be regarded as sham transactions. The Hon'ble High Court, at para 10, has observed as under : "10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enqiury report which ma....
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....re of such transactions. It is very important to note that no incriminating material has been found during the course of search which could have cast doubt on the genuineness of the transactions or could have indicated that it was a case of assessee's own undisclosed money utilized in the execution of such transactions. In the assessment order as well as at the first appellate stage and also before us, the focus of the Department is on the quantum of transactions entered into by the group as a whole and, therefore, we find substantial merit in the view of the learned CIT(A) that it is this fact which has resulted into such action of the AO. We have also noted that voluminous documentary evidences have been filed by the assessee to prove its claim which support the genuineness of the transaction. However, the AO has utilized the statements of the persons who were not cross-examined by the assessee. Hence, as per the settled judicial principle, such statements cannot be given any weightage. We are further of the view that when there arises a question of appreciation of documentary evidences, then, a holistic view has to be taken and in the present case majority of the brokers have su....
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....f the SEBI relied on by the Revenue is mainly on the aspect of price rigging in such manner. Hence, in our view, the same cannot be of any assistance to the cause of the Revenue. Thus, on the basis of appreciation of facts and circumstances of the case as a whole and considering the documentary evidences on record, we are of the view that the share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed under s. 68 of the Act." 4.06 Further, this Hon'ble Bench in the case of Smt. Arzoo Anand vs. JCIT (2010) 14 ITJ 604 (Trib-Indore), has also held that if any violation of the provisions of SEBI (Intermediaries) Regulations, 2008 or SEBI Act, 1992 have been committed, the same is fault of the SEBI brokers and for which the assessee cannot be penalized. It is submitted that against the decision of the Hon'ble ITAT, the revenue had preferred an appeal before the Hon'ble High Court of Madhya Pradesh under s. 260A of the Act. It is further submitted that the Hon'ble Bench vide its Order delivered on 06-01-2012 has dismissed the appeal of the revenue. The Hon'ble M.P. High Court at para 7....
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....AO could not have added income, which was rightly deleted by the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof, as has been held by Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. vs. CIT (1959) 37 ITR 271 (SC)." 5.03 The Hon'ble ITAT Bench of Pune, in the case of Smt. Smita P. Patil & Ors. vs. ACIT (2014) 159 TTJ 0182 (Pune) has held as under : "24. We find that in all these cases, no incriminating material has been seized except the broker notes. We have also find that these assessees have already shown the share transactions in their balance sheet and the share transactions are duly recorded in the regular books of account. The case of the department is that even if the sales are made through the demat account, all these are arranged transactions and hence, the entire money received on the sale of these shares (even though the sale is made through the demat account and through the Stock Exchanges), to be treated as undisclosed income of these assessees. It is something strange that the charge made by the Assessing Officer that the brokers are located at different locations lik....
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.... of the Jodhpur Bench in the case of ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265, wherein it has been held that for making an addition under s. 69, the Department is required to prove to the hilt that the impugned transactions are bogus." 5.05 The Hon'ble ITAT Bench of Agra in the case of Baijnath Agrawal Vs. ACIT (2010) 133 TTJ 0129 (TM) has held as under : "It was the duty of the AO to bring on record sufficient evidences and material to prove that the documents filed by the assessee were bogus, false or fabricated and the long-term capital gain shown by him was actually his income from undisclosed sources. The only material to support such conclusion of the lower authorities is either the findings of the DDI in general investigations or the observation that the assessee could not prove the transaction to be genuine one. While making addition as income from undisclosed sources burden on the Department is very heavy to establish that the alleged receipt was actually income of the assessee from the undisclosed sources. Therefore, the CIT(A) has erred on facts as well as in law in upholding the order of the AO treating the income under the head long-ter....
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....fore ld. CIT (A) also. They were not appreciated by the Assessing Officer but were appreciated by ld. CIT (A) and then only the ld. CIT (A) found that all the transactions of purchase and sale of shares are genuine. It was also not the case of the department that assessee repaid the sale consideration in hand. There is no such evidence on record. Therefore, inference drawn by Assessing Officer, in our considered view was not correct by holding that the share transaction are bogus. The ld. CT (A) was justified in holding that share transactions were genuine. Accordingly we confirm the finding of ld. CIT (A) as they are finding of fact and remained uncontroverted." 5.07 In the case of Smt. Memo Devi vs. ACIT (2008) 7 DTR (Agra) (Trib.) 158, the Hon'ble Bench observed as under: "7. .............. The assessee submitted all the evidence which was within her capacity and power. The broker M/s. H.B. Relan & Co. through whom the shares had been sold confirmed twice - first upon request of the assessee and again in response to the summon of the AO - sale of shares with distinctive numbers and having paid the sale proceeds to the assessee. During appellate proceedings ....
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....nature. As a matter of fact the entire approach and finding of the lower authorities are based on suspicion, surmises and conjectures and badly affected by various other cases, which have no application to the assessee's case. 8. In our view, the action of the Revenue authorities in concluding that the sale value of shares is income of the assessee from undisclosed sources cannot be accepted. In view of the above, the income declared by the assessee under the head long-term capital gain is directed to be assessed as such." 5.08 Reliance is placed on following judicial pronouncements: i. Smt. Arzoo Anand vs. JCIT (2010) 14 ITJ 604 (Trib-Indore) ii. Mukesh R. Marolia vs. Addl. CIT (2006) 6 SOT 247 (Mum.) iii. Smt. Snehlata Maheshwari vs. ACIT-2(1), Indore (2014) 24 ITJ 293 (Indore Trib.) iv. ITO vs. Navin Gupta 5 SOT 94 (Del.) v. ITO vs. Smt. Neelam Chawla 6 DTR 141 (Del.) vi. Shripal Singh Gulati vs. ITO 9 DTR 564 (Agra) vii. ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265 viii. ACIT vs. Ajay Nawandar (2010) 33 DTR (Mum) (Trib) 452 ix. Income-Tax Officer vs. Rajiv Aggarwal (20....
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.... and sale of shares during the block period. The AO noted that major capital gain had been shown to be from the scrips of companies such as Nageshwar Investment Ltd., G.R. Industries and Finance Ltd. Oasis Cine Communications Ltd., Sangotri Constructions Ltd., Limtex Invt. Ltd., Stenley Credit Capital Ltd., Mega Corporation Ltd. Baffin Engineering Ltd. etc., whose shares were manipulated by some of the brokers and their associated clients in Calcutta Stock Exchange with a view to provide accommodation entries for booking profit reflecting huge capital gains to one set of the interested parties and also the corresponding losses to the other set of interested parties. Accordingly AO treated the capital gain shown by the assessee as their income from other sources. This led to the levy of tax on such gain/income at normal rate as against the concessional rates applicable to the short term capital gain. CIT appeal has confirmed the same with the detailed findings given in para 4.2 on page 79 onwards of his order in case of Shri Amandeep Singh Bhatia on which I relied upon and order of CIT(A) may kindly be confirmed." 27. We have heard rival contentions of both the parties a....
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....in, respectively, of Rs. 12,18,40,398/- and Rs. 8,79,77,250/- in various assessment years from sale of shares. Assessee had taken short term capital gain from six cos. The Assessing Officer found that there was sudden increase in price of these cos. and as such increase in price was abnormal and not based on fundamentals. Assessing Officer found that SEBI has conducted an inquiry as regards to hike in prices of shares and Assessing Officer found that assessee has brought unaccounted cash in system through sham and illusory transaction to avoid tax on whole unaccounted money. During the course of assessment proceedings, we find that there was no incriminating documents or loose papers or any other evidence was found or seized from the assessee that the transaction of long term capital gain or short term capital gain is not genuine. 29. The assessee had made entire transaction of purchase and sales in shares of these cos. which are duly regd. with SEBI and various recognised exchanges. Assessee has carried out these transactions with SEBI regd. Brokers after payment of due security transaction tax. We find that entire purchase and sales of shares have taken place through account p....
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.... lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he shows his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular co. in collusion with others or in the manner of unfair trade practices against the norms of SEBI and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that co. through such broker then only by mere assumption such transactions cannot be held to be a shame transaction.............." 30. The co-ordinate Bench of ITAT, Nagpur in the case of ACIT vs. Kamal Kumar Agrawal (Indl.) and others (2010) 133 TTJ 818 (Nag.) has also held that the orders of the SEBI cannot be a ground for adjudging the genuineness of share transactions. The Bench has observed as under: "8. We have considered the submissions made by both the sides, material on record and the orders of the authorities below. It is noted that the assessee is a part of ....
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....are not off market transactions, hence, the AO's approach to pick and choose the only such instances which are favourable to him cannot justify such addition. The learned CIT Departmental Representative has also argued that there were differences in the information as per contract notes and as per information received from Calcutta Stock Exchange which fact is also not material because when some off market transactions have not been reported to the stock exchange, how such contract notes can be matched with the records of stock exchange. We are further of the view that economic consequences as a result of off market transactions or otherwise have taken place and, therefore, such transactions cannot be treated as sham merely for some discrepancies or for the view of the AO in regard to genuineness of these transactions. The Revenue has also relied on the decisions of SEBI involving some scrips. In this regard, we are of the view that role of SEBI is different and the orders passed by them have different objectives such as orderly conduct of share markets and investor protection and, therefore, such order cannot be conclusive as regard to the genuineness of the transactions. In this ....
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....usion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures. The Tribunal rightly relied on C. Vasantlal & Co. v. CIT , M.O. Thomakutty v. CIT and Mukand Singh v. Sales Tax Tribunal (1998) 107 STC 300 (Punjab). It was for the AO, who has reopened the assessment to have sought some evidence on record, to substantiate his formulation of consideration that the assessee has not filed a return bona fide. The Tribunal also took into consideration that it was only on the basis of a presumption that the AO concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO. Therefore, the AO could not have added income, which was rightly deleted by the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof, as has been held by Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. v. C....
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....essee has placed reliance upon the decision of Mumbai Tribunal in the case of Mukesh R. Marolia vs. Addl. CIT (2006) 6 SOT 247 (Mumbai), wherein it has been held that the purchase and sale of shares outside floor of stock exchange is not an unlawful activity and the off-market transactions are not illegal. As regards the AO's observation that there is exorbitant rise in the sale price of the shares which created a doubt about the genuineness of the transaction, the assessee has placed reliance upon the decision of the Agra Bench of the Tribunal in the case of Smt. Memo Devi vs. Asstt. CIT (2008) 7 DTR (Agra)(Trib) 158, wherein it has been held that increase in share price by more than 25 times cannot be the basis to assume that the transaction was bogus as abnormal increase in the share price is a normal phenomena. The learned counsel for the assessee placed reliance upon the decision of the Jodhpur Bench in the case of ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265, wherein it has been held that for making an addition under s. 69, the Department is required to prove to the hilt that the impugned transactions are bogus." 35. The ITAT, Agra Bench in the case of Baijnath AGrawal v....
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..... The ld. CIT(A) was justified in holding that share transactions were genuine. Accordingly we confirm the finding of ld. CIT (A) as they are finding of fact and remained uncontroverted." 37. In the case of Smt. Memo Devi vs. ACIT (2008) 7 DTR (Agra Trib.) 158, the Agra Bench has observed as under: "........The assessee submitted all the evidence which was within her capacity and power. The broker M/s H.B. Relan & Co. through whom the shares had been sold confirmed twice-first upon request of the appellant and again in response to the summon of the AO-sale of shares with distinctive numbers and having paid the sale proceeds to the appellant. During appellate proceedings assessee also submitted documents to show that the company was a genuine company with substantial capital base and was not a small company. This also shows that the assessee was all through keen to co-operate and discharge her onus to the maximum as could be possible within her capacity and power. The assessee has no relation with the directors of the company and was in no way in the capacity of affecting the market price of the shares. The increase in share prices by more than 25 times too cannot be the....
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....ed to be assessed as such." 38. In view of the above facts and circumstances of the case, various documentary evidences placed on record and in the light of the various judicial pronouncements, we are of the considered view that there was absolutely no justification for both the authorities below in disbelieving the genuineness of the long term capital gain and short term capital gain shown by the assessee in his return of income, merely on guesswork, conjectures and surmises. Accordingly, these additions are directed to be deleted. Consequently, ground nos. 3.1 to 3.3 on the issue of genuineness of long term capital gain/short term capital gain are allowed. Since common issue on similar set of facts and circumstances are involved in the assessment year 2005-06, we, following our above decision given in the assessment year 2006-07, allow the ground nos.3.1 & 3.2 on the issue of long term capital gain/short term capital gain for the assessment year 2005-06 too in assessee's appeal IT(SS)A No.114/Ind/2014. GROUND NO. 4 39. This ground of appeals of the assessee is directed against charging of interest under s. 234A and 234B. Charging of interest is consequential in nature, t....