TaxTMI 
TaxTMI 
2018 (9) TMI 1745
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....of cases on 08/03/2016, and thereafter, the assessee company was also searched and the Assessing Officer records that, books of accounts and other incriminating documents have been found and assessed during the course of search. The issue pertaining to which the addition was made and is agitated before us, is brought out at para 7 of the assessment order for the Assessment Year 2013-14, which is extracted for ready reference:- "7. During the course of search & seizure operation it was seen that the assessee has indulged in the purchase and sale of Penny stocks in a prearranged manner to book a loss in Trading to reduce the taxable income mainly from interest on loan. It is seen that as per the return filed the total income of the assessee is Rs. 10,66,490/- which include STCG without STT Rs. 8,37,289/-, STCG with STT Rs. 2,66,056/-, income from business and profession Rs (-) 36,858/- which is set off with STCG, total Income Rs. 10,66,490/-. It is also seen that the assessee's total revenue from operation is from sale of equity shares of Rs. 4,54,95,419/- and Other Income of Rs. 1,42,52,617/- which include interest Income of Rs. 1,26,04,670/-. Exempt Dividend Rs. 5,10,2....
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....ent of levies and duties like, brokerage, service tax, share transaction tax (STT), etc. b) The statement recorded during the course of survey u/s 133A of the Act, from third parties cannot be evidence, as the Assessing Officer has no power to record a statement u/s 133A of the Act. c) The assessee relied on an affidavit filed, wherein, the statement recorded in survey u/s 133A of the Act, was retracted. The Assessing Officer on the ground that the assessee could not produce documents, evidence, books of account etc. while making an affidavit of retraction of the statement recorded, held that the statement in question, has evidentiary value. He held that the assessee could not submit any explanation and the modus operandi of the assessee company to prove that the bogus loss is booked for reducing the taxable income with the sole motive to avoid tax. He further held that on analysis of the transactions reveal that they were made in a pre-arranged manner. Further at para 12 & 13 of his order, he held as follows:- "12. The quantity bought by the assessee company is 49835; 165; 49835; 25000; 165; 25080; 50000; total 2 lakhs. The rates are 41.05, 41.05, 41.....
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....First Financial Services Ltd at Rs. 39,70,289/- and sold the same at Rs. 14,11,967/- thereby incurring loss of Rs. 25,58,322/- and also have purchased 109835 shares of Rutron International Ltd at Rs. 48,79,686/- and sold them at Rs. 31,87,554/-. During the course of search and seizure operation different incriminating facts was found and the total modus operandi of the assessee company was revealed. The fact was confronted with the assessee and the statement was recorded u/s 132(4) of Sri Akhilesh Kr Jain, key person and Director as duly mentioned in the show-cause to the assessee company. On the basis of those facts and documents and post search investigation a show cause was made on 20/09/2017 as under where the assessee was asked to showcause why the loss claimed by the assessee on such transfer of penny stocks namely M/s First Financial and M/s Rutron International Ltd will not be treated as a bogus loss on colorable transaction. From the copies of the contract notes it was clear that the transactions are not normal. The show cause was as under. In the said show-cause by mistake Section 68 was mentioned. Later during the hearing before the undersigned the fact was discussed and....
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.... date of search, which is 08/03/2016. Reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla ITA 707/2014, ITA 709/2014, ITA 713/2014, Judgment dt. 28th August, 2015 and on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Shri Deepak Kumar Agarwal, Income Tax Appeal No. 1709 of 2014, and other case-law for the proposition that no addition can be made in an assessment made u/s 153A r.w.ss 143(3) of the Act, for the years where the assessment has not abated, unless any incriminating material relatable to that addition/disallowance is found during the course of search. Thus, he submits that on this ground, the addition for the Assessment Year 2013- 14, has to be deleted. c) For the Assessment Year 2014-15, he submits that the assessment has abated. He argued that the issue in question for both the Assessment Years 2013-14 as well as for 2014-15 is covered in the favour of the assessee and against the revenue, by a catena of judgment of the Hon'ble Jurisdictional High Court as well as that of other Hon'ble High Courts and orders of the ITAT. He submits that the assessee has produced all possible evidences in ....
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....e other material found during the course of search. 6.1. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- The assessee, in this case has supported these transactions by submitting copies of contract notes for purchase and sale of shares, daily market quotations on the date of purchase, bank statements showing payments of consideration for purchase of shares, copy of Demat Accounts etc. These evidences, have not been controverted or found to be false by the Assessing Officer. In fact no contrary evidence to prove that these documents have no evidentiary value has been collected by the Assessing Officer. The entire addition has been made on the basis that the prices of shares have been rigged by certain individuals. No evidence is brought on record to connect the assessee with the alleged rigging of prices of shares. No evidence is brought on record to demonstrate that the assessee was involved in the rigging of shares in the stock market or was closely involved with the persons who are allegedly connected in riggi....
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....does not appear, for that reason, the claim of the assessee should not be denied, specially in cases when the existence of the broker is not in dispute nor the payment is in dispute. Merely because some broker failed to appear, the assessee should not be punished for the default of a broker and we are in full agreement with the Tribunal that on mere suspicion the claim of the assessee should not be denied. 10. In the result, we answer the question in the affirmative, i.e., in favour of the assessee and against the revenue." Recently, the Kolkata 'C' Bench of the Tribunal in the case of Navneet Agarwal,-vs- ITO, Ward-35(3), Kolkata; I.T.A. No. 2281/Kol/2017; Assessment Year: 2014-15, held as follows:- "12. The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to "Modus Operandi" of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence coll....
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....e the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the revenue with evidence. When a person claims that she has done these transactions in a bona fide and genuine manner and was benefitted, one cannot reject this submission based on surmises and conjectures. As the report of investigation wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal import laid down by the Courts of law. 15. In our view modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, su....
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....llusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. We, however, find that the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 17. The Hon'ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon'ble Court held: "Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulgin....
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....on of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessee. 18. We now consider the various propositions of law laid down by the Courts of law. That cross-examination is one part of the principles of natural justice has been laid down in the following judgments: a) Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors. "23. A Constitution Bench of this Court in State of M.P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623, held that the rules of natural justice, require that a party must be given the opportunity to adduce all relevant evidence upon which he relies, and further that, the evidence of the opposite party should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party. Not providing the said opportunity to cr....
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....ural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the Appellant by such non-examination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review. 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective crossexamination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice." b) Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata-II wherein it was held that: "4. We have heard Mr. Kavin Gulati, learned senior counsel....
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....his Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice." 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTA HIGH COURT in the case of BLB CABLES & CONDUCTORS [ITA No. 78 of 2017] dated 19.06.2018. The High Court held vide Para 4.1: "............we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive eviden....
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....f the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner." The Court also held the following vide Page 3 Para 5 the following: "Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises." d) The BENCH "D" OF KOLKATA ITAT in the case of GAUTAM PINCHA [ITA No.569/Kol/2017] order dated 15.11.2017 held as under vide Page 12 Para 8.1: "In the light of the documents stated i.e. (....
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....ion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character o....
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....hat assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transactions in M/s Ramkrishna Fincap Pvt. Ltd. On the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT (A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded....
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.... accepted by the Revenue, no question of law arises." 7. Applying the proposition of law laid down in the above judgments to the facts of this case, on merits it has to be concluded that the addition made, cannot be sustained for both the impugned Assessment Years. Be it as it may, we find that no such addition has been made in the orders passed u/s 153A r.w.s. 143(3) of the Act, on 30/12/2017 in the case of Shri Akhilesh Kumar Jain, for the Assessment Years 2010-11 to 2017-18, though the revenue relies mainly on the statements recorded from Shri Akhilesh Kumar Jain, the assessee therein, for the addition. 8. Coming to the specific arguments raised for the Assessment Year 2013-14, we find from para 5 of the assessment order that the original return of income was filed u/s 139 of the Act on 26/09/2013, by the assessee for the Assessment Year 2013-14 and no notice u/s 143(2) of the Act, was issued. Hence, the assessment in this case has not abated. The Kolkata Bench of the Tribunal in the case of ACIT vs. M/s. Sethia Agrotech Ltd., I.T(SS)A No. 91/Kol/2017 & C.O. No. 85/Kol/2017, order dt. 01/12/2017, had considered the matter and after considering various judgments of th....
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.... - (i) assessment years where assessments are already completed u/s. 143(1) and time limit for issuance of notice u/s. 143(2) of the Act has expired or; (ii) assessment years where assessments are already completed u/s. 143(3) of the Act ; unless they are reopened u/s. 147 of the Act for some other purpose in both the scenarios stated above. 6.4.2 The scheme of assessment proceedings contemplated u/s. 153A of the Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:- 'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ; 'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect ....