TaxTMI 
TaxTMI 
2016 (5) TMI 1457
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....bsp; 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 action was taken by the Assessing Officer and as such the assessment was deemed to have been completed u/s. 143(1)(a) of the Income-Tax Act, 1961. A search....
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.... 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), who upheld the validity of the assessment proceedings under s. 153A of the Act. The ld. CIT(A) also confirmed the addition made by the AO in the assessee's income, on protective basis, ....
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....ring 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 70,93,470 - 2 2003-04 63,500 1,47,00,000 - 300 1,47,00,300 1,47,63,800 - 3 2004-05 15,34,410 5,10,26,518 - 965 51027483 5,25,61,893 - 4 2005-06 2,67,25,030 2,32,34,318 3,175 3175 2,67,28,205 STCG treated as business in....
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....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. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153d, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall - (a) issue notice to such person requiring him to fur....
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....sessment 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 the purpose of making an assessment or reassessment in the case of a person in whose case either a search under s. 132 is initiated or a requisition under s. 132A is made. The sole purpose of the section 153A is to bring home the tax on the undisclosed income, unearthed during the course of action under s. 132/ 132A, to the kitty of the ex-chequer. It is submitted that the section 153A is not meant for assessing/ reassessing any income which in the opinion of revenue au....
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....arth 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 the course of search/ requisition. 4.05 It is submitted that the scheme of section 153A takes within its sweeps not only the assessment/ reassessment for those completed assessment years in respect of which either the assessments under s. 143(3) have already got completed previously or the time limit for issuance of notice under s. 143(2) have got expired but it also include those assessment years in respect of which either the assessment proceedings were pending or the ....
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....troversies 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 cases, in addition to the income that has already been assessed, the assessment under s. 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search." 5.01 The Hon'ble Special Bench of ITAT in the case of All Cargo (supra) at para (5) of the Order has ....
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....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 for the assessment year under consideration was not pending and the same had got completed. This being so, the assessment year under consideration cannot be termed to be a year in respect of which assessment proceedings got abated in terms of second proviso to sub-section (1) of section 153A of the Act. It shall be worthwhile to mention here that in many of the judicial authorities, as cited above, it has been held that if in respect of any assessment year, an assessee had filed a return under s.139 and the time limit for issuance of notice under s.143(2) in respect of such re....
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....ot 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 for A.Y. 2002-03 in which he counter every plea of assessee on the issue as well as he also distinguished all the decision as relied upon by the assessee including the decision of Honb'e this Bench in case of M/s S.K. Jain and also quoted various decision in favour of revenue on the issue. As per his findings given in para 4.1.7 and 4.1.8 on page 57 to 59 there is nothing in the provision of section 153A for making addition without incriminating material found during the search. I relied upon these findings of CIT(A). Besides this, I also relied upon some of the decisions of High Court/ITAT in which the similar view has been taken and copy ....
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....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 income of an assessee whose case is covered by section 153A by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under section 153A the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six assessment years. CIT v/s Anil Kumar Bhatia (2012) 24 t....
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....or 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 having been filed by the present assessees along with original returns of income u/s 68 of the Act. In other words, it is not the case of the Assessing Officer that any incriminating material was found by him during the course of assessment proceedings which could have been made a valid basis for making any addition. On the other hand, ld. DRs have defended the action of the Revenue Authorities as above but could not controvert the factual submission made by the ld. AR of the assessees. 8. On consideration of facts and submissions thereof, we find that the present issue with regard to absence of any incriminating material or documents seized during the course of search has been decided by this very Be....
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....A 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 warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized. No assessment proceedings were abated in these assessees. Thus assessments for these assessment years were completed on the date of search. The assessments were comp....
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....ents 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 the A.Y. 2006-07 is abated, the present issue in assessee's appeal IT(SS)A No.115/Ind/2011 for the A.Y. 2006-07 was not pressed by the assessee, therefore, same is dismissed for the A.Y. 2006-07 being not pressed. GROUND NO. 2 10. This Ground of the appeals of the assessee is directed against the CIT(A)'s finding of upholding AO's action of passing the assessment order arbitrarily without giving proper opportunity of being heard to the assessee. The CIT(A) has dealt with this ground at para 5.2 of page no. 68 of his Order. According to the CIT(A), the assessee was given due opportunity by the AO. However, before us, the ld. Counsel for the assessee did not press this ground. Thus, this ground is dismissed being not pressed in all....
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.... 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 the assessee's income, for the assessment year under consideration, to Rs. 1,00,44,384/- without giving any notice of enhancement which is a mandatory requirement under the provisions of section 251(2) of the Act. 4.00 The CIT(A) also changed the nature of addition made by the AO on protective basis to substantive basis thereby raising the liability for enforceable demand against the assessee. Before making such change in the nature of non-enforceable demand arisen from protective addition to enforceable demand consequent upon the substantive addition, the CIT(A) has not given any notice of enhancement to the assessee. 5.00 It is submitted that in absence of issuance of any notice under s.251(2) of the Act, the action of the CIT(A) in enhancing the addition and conver....
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.... 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 protective basis, on account of Resurgent Bonds. The AO had made the addition of Rs. 1,47,00,000/-, being the face value of RIB bonds claimed to be received as gifts, on protective basis, whereas the CIT(A) has confirmed the addition to the extent of Rs. 1,41,97,107/-, being the maturity value of RIB Bonds on substantive basis. Since identical issue is involved in both the present appeals, we are taking facts from the case of A.Y. 2002-03 being lead case. This issue is also involved in following group appeals: S.No. A.Y. Appeal No. Name of the assessee 1 2004-05 IT(SS)A No.19/Ind/2012 (D) Surendra Singh Bhatia 2 2003-04 IT(SS)A No.116/Ind/2011 (A) Gurvinder Singh Bhatia 3 2003-04 IT(SS)A No.121/Ind/2011 (A) Manjeet Singh Bhatia 16. Short facts of the case are that the AO has....
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....r 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: "1.00 At the outset, it is submitted that the assessee had disclosed the fact of receipt of RIB Bonds of the face value of Rs. 70,29,000/-, during the relevant assessment year, in his original return of income furnished under s.139 of the Income-Tax Act, 1961 on 25-02-2009 [Refer PB Page No. 20]. The assessee had furnished his copy of capital account for the financial year ended on 31-03-2002 [Refer PB Page No. 24] in which the receipt of Resurgent India Bonds of value of Rs. 70,29,000/- was clearly reflected. Even in the Statement of Affairs as of 31-03-2002 [PB Page No. 23] as filed along with the original return, the assessee had shown such Resurgent India Bonds at Rs. 4,42,29,000/- which inter alia includes the bonds of Rs. 70,29,000/- received by him during the relevant previous year. 1.01 In response to the return so filed under s.139, no action was....
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....es. 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 maturity, on 7.75% cumulative interest basis, with a stipulation that investment in these bonds were to be made only out of NRI funds. Thus, the sources of investment in purchase of such bonds by the original subscribers thereof, being the donors, stand established beyond all doubts. Even the CIT(A), overruling the doubt of the AO, has given a clear finding, at last few lines of page no. 65 of his Order, to the effect that source of purchase of RIBs by the NRI is not in doubt. 6.04 That, as per clause (4) of the terms of issue of the bonds, the NRIs were eligible to transfer the bonds to any Indian Residents by way of gifts. Accordingly, the original subscribers of the bonds, being the donors, transferred the subject bonds to the assessee by way of executing a letter of gift, on 05-05-2001, in favour of the assessee and addressed to the concerning officer of the State Bank of India. Copies of such letters are placed at Page....
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....ar 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 reported in (2000) 66 TTJ (Chd) 656. Reliance is also placed on the decision of Hon. ITAT Allahabad Bench in the case of ITO vs. Matadin Snehlata (HUF) as reported in (2003) 81 TTJ (All) 995. 8.00 It is submitted that neither during the course of the Search proceedings nor during the course of the assessment proceedings and furthermore, nor during the course of the appellate proceedings, any material much less of any cogent material has been brought on record to give any iota of evidence as regard to assessee having paid any sum to the donors against receipt of subject gifts. It is submitted that merely on the basis of guess work, surmises and conjectures, no addition can be made in the hands of the assessee. In view of the above facts and circumstances of the case, the entire addition/ enhancement so made/ confirmed/ enhanced by the AO/ CIT(A) deserves to be deleted. Relevant Documents filed in the Paper Book on which the assessee is placing reliance for these Grou....
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.... while actually they have converted their unaccounted money into white through those RIB gifts from NRIs. The findings on the issue has been given by CIT(A) in para 4.2 on page 16 onwords of his order in case of Shri Amandeep Singh Bhatia on which I relied upon. I also relied upon the decision of Honble Supreme Court reported in 291 ITR 278 in case of P. Mohankala which is exactly applicable on the facts of the assessee. In that decision it has been held- "Section 68 of the Income-tax Act, 1961-Cash credits- Assessment years 1993-94 to 1996- 97-Assessing Officer rejected explanation of assessee that amounts credited in their respective accounts were gifts from NRI and added said amount to income of assessee as income from undisclosed sources, on ground that so called gifts were not real and genuine-On appeal, Commissioner (Appeals) as well as Tribunal did not accept explanation of assessee and confirmed finding of Assessing Officer- High Court, however, reappreciated evidence available on record and substituted its own findings for that of Tribunal- High Court held that reasons assigned by Tribunal and other authorities were in realm of surmises, conjectures and suspicions- Whether....
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....uring the original assessment order. Therefore, no addition can be made in absence of any incriminating material as held by Hon'ble Delhi High Court in the case of Kabul Chawla (supra). 21. The assessee has furnished all the necessary documents such as, copy of RIB, copy of transfer letters, copy of letter issued by SBI showing transfer bond in favour of the assessee through mode of gift. We find that the only objection by the Revenue that the assessee has purchased this bond by his own money by paying cash to the donor. However, we find that during the course of search, no such documents or evidences establish any payment of cash by the assessee to the donor. We also find that on merit, this issue is covered by the decision of this bench in the case of ACIT vs. Phoolchand Agrawal in ITA No.381/Ind/2006 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 cannot be treated as income of the assessee. We also find substance in the contention of the ld. AR of the assessee that in view of the decision of the ITAT, Jodhpur Bench in the case of DCIT vs.....
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....; 23. Short facts of the case are that the assessee had duly disclosed the facts of deriving income from short term/long term capital gains in the original return furnished much prior to the date of search (PB Page No. 18 to 21). On a perusal of the statement of short-term capital gain and long-term capital gain, forming part of the computation of income itself, it is seen that while furnishing the original return, the assessee had given the complete details as regard to the short-term and long-term capital gains. The assessee had duly furnished the name of the companies, number of shares purchased and sold, amount of purchases and sales, date of purchases and sales and amount of short-term/ longterm capital gain. It was submitted that the original return under s.139 for the assessment year under consideration was filed by the assessee manually and along with the manual return, the assessee had not only furnished the details as aforesaid, but had also filed the necessary documentary evidences in support of deriving of such gains from sale of shares. During the course of the assessment proceedings, the AO vide enclosure to his notice under s.142(1) dated 14-10-2008 (PB Page No. 33)....
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....f the Order. The operative part of the AO's findings find place at Page No. 37 of the Order. The AO from the copies of the various capital accounts filed by the assessee and the group assessees, observed that the assessee and the group assessees had shown aggregate short-term capital gain and long-term capital gain, respectively of Rs. 12,18,40,398/- and Rs. 8,79,77,250/- in various assessment years from sale of shares. The AO noted that the assessee and group assessees had shown STCG from scrips of six companies only. The AO from making an analysis from Profit & Loss Account of these companies, found that there was sudden increase in the prices of shares of these companies. According to the AO, such increase in prices was abnormal and not based on fundamentals. According to the AO, no prudent person could have made investment in such companies. The AO also noticed that SEBI had conducted the enquiry as regard to the hike in the prices of the shares. Finally, the AO by expressing the theory of money laundering and relying upon the decision of the Hon'ble Supreme Court in the case of McDowell & Company Ltd., at operative para at page no. 37, held that the assessee had brought the un....
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....was found which could have raised any doubt on the genuineness of the share transactions. The addition of the AO is not based upon any incriminating document found during the course of the search but it is only based upon the entries regarding the sale of shares found recorded in the regular books of account maintained by the assessee [kindly refer PB Page No. 36]. The AO has made the addition merely by invoking the provisions of section 68 of the Act. It is submitted that in the search assessments, making of assessment without having recourse to any incriminating material was not warranted. 2.00 It is submitted that the assessee had genuinely derived long-term capital gain/ short-term capital gain from sale of equity shares through recognized stock exchanges after due payment of security transaction tax. Thus, the assessee had genuinely claimed exemption of income from longterm capital gain under s.10(38) of the Act. Likewise, the assessee had also rightly claimed concessional rate of income-tax on short-term capital gain from sale of shares in the listed securities. 2.01 It is submitted that the entire transactions were carried out by the assessee through the share brokers wh....
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....o. 83 to 92]; (iii) Xerox copies of the contract notes for purchases issued by the brokers in respect of purchases of shares [kindly refer PB Page No. 93 to 110]; (iv) Xerox copies of the contract notes for sales issued by the brokers in respect of sales of shares [kindly refer PB Page No. 111 to 125]; (v) Copy of ledger account of the share brokers in the books of assessee [PB Page No. 126 to 132]; (vi) Copy of ledger account of the assessee in the books of share brokers containing confirmation of share transactions [PB Page No. 133 to 140]; (vii) Copies of the relevant abstracts of bank accounts of the assessee for the relevant period reflecting the shares transactions of purchases [PB Page No. 141 to 145]; (viii) Copies of the relevant abstracts of the bank accounts of the assessee for the relevant period reflecting the sales proceeds of shares sold [PB Page No. 146 to 167]; (ix) Copies of quotations of relevant Stock Exchange highlighting the trading volume of shares and their prices on the relevant dates of transactions of purchases and sales [PB Page No. 168 to 268]; 3.00 During the course of the assessment proceedings of the group assessees, the AO issu....
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....r getting that enquiry report, the SEBI prima facie found involvement of some of the share brokers in unfair trade practices. 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, 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 show 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 company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction............... . " 4.04 The Hon'ble Hyderabad Bench of ITAT also relying upon the pronouncement of High Court of Jharkhand supra, in the case of ITO vs. Aarti Mittal (2014) 149 ITD 0728 (Hyd.) has held that merely on the basis that ....
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.... off market transactions, it is noted that neither these are illegal nor prohibited and only some of the compliances have to be made by the brokers. As regard the aspect of such compliances, we find that it is not the case that all the off market transactions have not been reported by the concerned brokers to the stock exchange as per rules and even otherwise, any failure on the part of the brokers in doing such compliance cannot make the contract between the assessee and the broker illegal or void as the broker may face the consequences for his default under relevant statute. It is also noted that all the transactions 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 th....
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....e deciding the matter proceeded on certain assumptions/ conjectures which were not borne out from material on record." 5.01 Your Honours, in the plethora of decisions, it has been held that where the shares have been purchased and sold through registered SEBI brokers, the deliveries have been made through demat accounts, the proceeds have been received through cheques, the transactions of sale and purchase of shares cannot be disbelieved merely on the ground that there was manifold increase in the prices of shares. 5.02 In the case of CIT vs. Anupam Kapoor (2008) 299 ITR 179 (P&H), the Hon'ble Punjab & Haryana High Court has held as under : "4. The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, ....
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....fficer is having no merit. The Assessing Officer has made the general comments without bringing on record any concrete evidence to indicate that these assessees were in league with the brokers in the transactions of the specific scrips. The Assessing Officer is referring and relying conveniently only on the three brokers whose names are noted in the assessment orders who allegedly deposed against these assessees but the fact remain that these assessees had purchased the shares of other companies i.e. Talent Info, Sangotri Construction and Niharika Industries from different brokers." 5.04 The Hon'ble ITAT Mumbai 'H' Bench in the case of ACIT vs. Ajay Nawandar (2010) 33 DTR 0452 (Mum. Trib.) has held as under : "6. Having heard both the parties and having considered their rival submissions, we find that the AO has doubted the purchase of shares by the assessee mainly because of the report received from the Addl. Director of IT (Inv.), Kolkotta, that the transaction of purchase of shares by the assessee is an off-market transaction as no evidence could be found from the Calcutta Stock Exchange. As regards the purchase of shares from off-market, the assessee has placed reliance upo....
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....04, dt. 30th May, 2008) and ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd) 265 approved; CIT vs. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) applied." 5.06 The Hon'ble ITAT Jodhpur Bench in the case of ACIT vs. Sumitra Gaur (2012) 145 TTJ 0026 (UO) has held as under : "13. After considering the submissions and perusing the material on record, we find no infirmity in the finding of ld. CIT (A). The ld. CIT (A) has examined the issue in thread bear and found that purchase of shares as well as sale of shares are genuine. The purchase of shares were made through Shri V.K. Singhania, Renu Poddar and Ballabh Das Daga. The shares were purchased in earlier years and were sold during the year under consideration. The shares were sold through another broker i.e. M/s. M. Bhiwantiwala & Co., M/s. Ahilya Commercial P. Ltd. All the purchase and sale of shares were dematized in regular course of transaction. Confirmation of purchase of shares through brokers were filed. All the shares are of listed companies. The shares were credited to demat account of the assessee and thereafter on sale of those shares the account of the assessee was debited through demat account. Therefore, ....
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....n the capacity of affecting the market price of the shares. The increase in share price by more than 25 times too cannot be the basis to assume that the transaction was bogus. Abnormal fluctuation in share prices is a normal phenomena. The learned counsel for the assessee filed a chart showing low and high price of some quoted shares during the 52 weeks as per Economic Times dt. 27th Feb., 2007 from which it can be seen that some shares increased by more than 100 times. The Departmental enquiries in the case of some other persons and statements of M/s. JRD Stock Broker or M/s Yadav & Co. in that enquiry too have no bearing on the assessee's case. The assessee has not dealt with any of them. The evidence submitted by the assessee are not proved to be bogus, false or incorrect. Assessee has no other source of income except rental income and share from partnership firm. The Revenue too has not brought on record any source from which the assessee could have earned this alleged undisclosed income and there is no material on record to establish or even suggest that cash actually flowed from the assessee to purchase the demand drafts as alleged by the Revenue. On the other hand the br....
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....ve. But, in contrast to that, the learned AO has not brought on record any single evidence for disregarding such transactions. It is a settled law that a suspicion howsoever strong it may be, cannot substitute a proof. The Hon'ble Apex Court in the case of Dhakeshwari Cotton Mills vs. CIT (1955) 27 ITR 126 (SC), has very emphatically laid down the following ratio: "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the argument ends; because it is equally clear that in making the assessment under sub-s. (3) of s.23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under s. 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT (supra). In this case we are of the opinion that t....
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....purpose of From To 78 82 Statement showing details of LTCG and STCG For giving the scrip-wise and date-wise details of LTCG & STCG 83 92 Copy of Demat Account Establishing the holding period of the shares 93 110 Contract notes issued by the brokers in respect of purchases of shares Establishing the purchases have been made through SEBI Registered brokers 111 125 Contract notes issued by the brokers in respect of sales of shares Establishing the sales have been made through SEBI Registered brokers 126 132 Ledger Account of the share broker in books of assessee Establishing the shares transactions 133 140 Ledger Account of the assessee in books of share broker containing confirmation of share transactions ---- do ---- 141 145 Abstracts of the bank account of the assessee showing payment for purchases Establishing that the payments against share purchases have been made through banking channels 146 167 Abstracts of the bank account of the assessee showing sales proceeds of shares Establishing that the receipts of sales proceeds have been through banking channels 168 268 Copies of quotations of relevant Stock ....
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....opies of contract notes and brokers' notes which are on page no.93 to 125 of the paper book. The assessee has also shown the prices of the shares prevailing on the dates of purchase and sales in the contract notes which is also found in the concerning quotation of concerning stock exchange in respect of related shares. We find that the Assessing Officer has made an inquiry but no adverse material was brought on record. We find that the Assessing Officer and learned CIT(A) have held that penalty is imposed upon broker or any co. in which the assessee has made investment, therefore, this transaction is not genuine. But, we are of the view that Hon'ble Jharkhand High Court has considered that while broker found in unfair trade practice and was involved in lowering and rising the share prices, the transactions carried out by the person himself not so indulged in that type practice cannot be regarded as sham transactions which is held in the case of CIT vs. Arun Kr. Agrawal HUF (2012) 8 TMI 398 (Jharkhand). The relevant portion of the observation of the Hon'ble High Court reads as under: "We have considered the submissions of the ld. Counsel for the parties and we are of the consi....
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....ment 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 supported the claims of the assessee and surprisingly some of them have not been approached by the AO at all. Thus, on appreciation of documentary evidences submitted by the assessee, the genuineness of the transactions appears to be established. As regards the aspect of off market transactions, it is noted that neither these are illeg....
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.... 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." 31. Further, this Bench in the case of Smt. Arzoo Anand vs. JCIT (2010) 14 ITJ 604 (Indore Tribunal) 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 penalised. Against the decision of this Bench, the Revenue had preferred an appeal before the Hon'ble Jurisdictional High Court of M.P. u/s 260A of the Act and the Hon'ble High Court, vide its order dated 06.1.2012, has dismissed the appeal of the Revenue. The Hon'ble M.P. High Court has observed as under: "..........While exercising jurisdiction under 260A, we cannot reverse the findings of the ITAT merely on the ground that on facts found by the Tribunal another view is possible. On the contrary we find that JCIT and the CIT(A) while deciding the matter proceeded on certain assumptions/conjectures which were not borne out from material on record." 32. In the case of CIT vs. Anupam Kapoor (2008) ....
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....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 like Ahmedabad and Kolkata but payments are routed from the Bombay. In our opinion, now a days it is common in the corebanking system to transfer the money from any location to another location and due to the electronic media even the trading can be done on-line on small Laptop. Hence, such statement of the Assessing Officer is having no merit. The Assessing Officer has made the general comments without bringing on record any concrete evidence to indicate that these assessees were in league with the brokers in the transactions of the specific scrips. The Assessing Officer is referring and relying conveniently only on the three brokers whose names are noted in the assessment orders who allegedly deposed against these assessees but the fact remain that these assessees had purchased the shares of other companies i.e. Talent Info, Sangotri Construction and Niharika Industries from dif erent brokers." 34. The ITAT, Mumbai Bench "H" in the case ....
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.... Co., M/s. Ahilya Commercial P. Ltd. All the purchase and sale of shares were dematized in regular course of transaction. Confirmation of purchase of shares through brokers were filed. All the shares are of listed companies. The shares were credited to demat account of the assessee and thereafter on sale of those shares the account of the assessee was debited through demat account. Therefore, there is no question of doubting the genuineness of transactions. There is no evidence that assessee has not purchased the shares in earlier year. They have been shown in the Balance Sheet and the Balance Sheet of earlier year has been accepted. The assessee has filed broker note, contract note, relevant extract of cash book, balance sheet as on 31.3.2005 and 31.3.2006, copy of share certificate etc. and all these details established that the was in possession of respective shares. The objection of the AO was that notice is sued under section 133(6) were returned back and payment to broker was delayed and there were certain discrepancies in the name of sellers as broker and as per endorsement in the share certificate. Clarification in respect of these deficiencies were filed before the Assessi....
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....of in come except rental income and share from partnership firm. The Revenue too has not brought on record any source from which the assessee could have earned this alleged undisclosed income and there is no material on record to establish or even suggest that cash actually flowed from the assessee to purchase the demand drafts as alleged by the Revenue. On the other hand the broker has categorically confirmed that he made the payment of sale proceeds. The judgements relied on by the AO or the CIT(A) are not at all applicable to the case of the assessee. There cannot be any dispute that the Department is fully empowered to lift the veil to establish the correct nature of transaction, but there was nothing hidden which required penetration. Further, after lifting the veil Department's enquiry should have gone to establish logically, from the records, that sale consideration was actually the money of the assessee converted under the guise of share transaction. Similarly, here there was no tax planning for which any colourable device or collusion could have been used. It was a simple transaction of sale of shares at the most opportune time which is perfectly in tune with the human nat....