TaxTMI 
TaxTMI 
2017 (8) TMI 1501
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....assed u/s 143(3) of the Act and another in pursuance to the order passed u/s 153A of the Act. For AY 2005-06 there is only one appeal in pursuance to the order passed u/s 153A of the Act. Since all the aforesaid five appeals pertain to the same assessee and all the five appeals involve consideration of some common issues as such, for the sake of convenience, all these appeals were heard together and are being disposed off by this consolidated order. 02 The grounds on the basis of which assessee has challenged the first appellate order are reproduced hereunder: a) In ITA No. 3176/Del/2014 for the AY 2006-07, assessee has raised following grounds of appeal: 1. That the learned Commissioner of Income Tax (Appeals) - XXXII, New Delhi has grossly erred both in law and on facts in dismissing the appeal filed by assessee against the order of assessment dated 29.12.2008 u/s 143(3) of the Act. 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there is no concept of abatement of a pending appeal under second proviso to section 153A of the Act and as such erroneous legal misconception of the assessee could not be a valid grou....
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....mmissioner of Income Tax (Appeals) has erred both in law and, on facts in upholding disallowance of a sum of Rs. 3,06,421/- by incorrectly invoking section 14A of the Act read with Rule 8D of the Income Tax Rules' 1962 3. That both the aforesaid additions has been sustained by the learned Commissioner of Income Tax (Appeals) on complete misconception of facts and, misinterpretation of of provisions of law and as such the same are untenable. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of internet of Rs. 10,304/- under section 234B of the Act and Rs. 34,378/- under section 234C of the Act which are not leviable on the facts and circumstances of the case of the appellant. It is therefore prayed that, it be held that, the dismissal of the appeal by the learned Commissioner of Income Tax (Appeals) was not in accordance with law and furthermore disallowance made by learned Assessing officer and, sustained by the learned Commissioner of Income Tax (Appeals) along with interest levied may kindly be deleted and appeal of the appellant company be allowed. c) In ITA No. 1342/Del/2013 for ....
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....he case the ld. CIT (A) erred in not deleting the interest u/s 234A and 234B of the Act. 5. That the appellant craves leave to add, alter, amend and/or rescind any of the ground of appeal. e) In ITA No. 2004/Del/2013 for the AY 2007-08, assessee has raised following grounds of appeal: 1. The Ld. CIT(A) erred on facts and in law to dismiss Appellant's ground that the order passed by Assessing Officer u/s 153A/143(3) of the Income-tax Act, 1961 is bad both on facts and in law 2. The Ld. CIT(A) erred on fcats and in law to dismiss Appellant's ground that the assessment order having been passed in violation of the principal of natural justice and without giving adequate time and opportunity to the appellant to represent its case and to file its replies and clarification, is bad in the eyes of law and liable to be quashed. 3. The ld. CIT (A) erred on facts in law in confirming addition of Rs. 3.06.421/- u/s. 14A of the Act read with Rule 8D of the IT Rules; 4. The ld. CIT (A) erred on facts and in law to dismiss Appellant's ground against the charging of interest u/s 234A and 234B of the Act. 5. That the appellant craves lea....
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....estor Services Ltd. with whom assessee has maintained it's demat account, and from the stock exchange in respect of the purchase of the shares through the stockbrokers. M/s IKM Investor Services Ltd. provided the demat account confirming the transaction and stock exchange confirmed that such shares have not been purchased through online trading of the stock exchange. Ld AO held that the aforesaid capital gain is not long term capital gain but is a short term capital gain since payment of STT has not been confirmed and date of entry and exit from demat account is taken as the time period for which shares were actually held by the assessee company. On similar basis short term capital gain declared by the assessee was taxed as speculative income and therefore income was computed at Rs. 37,36,26,040/-. 07 Against the order of assessment dated 29.12.2008, assessee filed appeal before the ld. CIT (Appeals) within the due date of filing of the appeal. Pending the appeal before the ld. CIT (Appeals), assessee sent letter to the stock broker M/s PK Aggarwal & Co requiring him to clarify certain issues as required by the AO and in reply the stock broker in its letter dated 31.08.2009 conf....
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.... (Appeals) sent to the ld. Assessing Officer was also brought on record. In reply to the aforesaid communication ld. Assessing Officer sent his fourth remand report dated 29.09.2010 wherein he merely reiterated his finding recorded in the order of assessment. AY 2007-08: ITA No. 3177/Del/2014 & 2004/Del/2013 11 The assessee filed return of income on 03.11.2007 at an income of Rs. 1,00,71,620/-. Assessment was framed u/s 143(3) of the Act on 12.10.2009 when ld. Assessing Officer made a disallowance of Rs. 3,06,421/- u/s 14A of the I. T. Act r.w.r. 8D of the Income Tax Rules. Against this order, assessee filed appeal before ld. CIT (Appeals) within the period of limitation. Search u/s 132(1) of the Act : 12 A search u/s 132(1) of the Act was conducted at the premises of the assessee on 26.03.2010, and on account of the aforesaid search, proceedings u/s 153A of the Act was undertaken for the aforesaid assessment years and assessment orders u/s. 153A of the Act were framed on 30.12.2011, wherein again additions made in the orders of assessment made u/s 143(3) of the Act was repeated. Against the aforesaid orders passed u/s. 153A of the Act, assessee filed appeal befor....
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....reunder, as such, it is prayed that delay in filing of the instant appeal may kindly be condoned. 3. It is submitted that for the year under consideration, appellant has filed its return of income on 29.11.2006 declaring an income of Rs. 67,68,900/-. That aforesaid return of income of the appellant was taken up for scrutiny by issuing of notice u/s 143(2) of the Act which culminated in the assessment made u/s 143(3) of the Act on 29.12.2008 wherein learned Assessing Officer determined the income of the appellant at Rs. 37,36,26,036/- by making following additions /disallowances : i. Income from short term capital gain Rs. 36,72,01,649/- ii. Speculation income Rs. 50,36,977/- 4. Against the additions made in the aforesaid order of the assessment, assessee duly filed an appeal before the learned CIT (Appeals) within the period of limitation on 28.01.2009. 5. It is submitted that during the course of the appellate proceedings, appellant on 12.01.2010 also filed an application u/r. 46 of the Income Tax Rules along with additional evidences and also filed its written submissions in support of the grounds of appeal raised before the lear....
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.... filed on the advise of Shri. Sikandar Khan Advocate, who represented the assessee before learned CIT (Appeals) against the order of assessment dated 30.12.2011 passed u/s. 153A of the Act. It is submitted that though the appeal was advised to be filed against the order of ld. CIT (Appeals) dated 28.12.2012, however, assessee was not advised to file appeal against the order of ld. CIT (Appeals) dated 14.05.2012. 9. It is submitted that subsequent to filing of the aforesaid appeal in respect of assessment made u/s 153A of the Act, when assessee consulted his friend Shri. S.C. Jain, Chartered Accountant, assessee was advised that appeal filed against the regular assessment would not abate, and it is only the assessment pending on the date of search would abate and hence, immediately thereafter present appeal bearing ITA No. 3176/D/2014 was filed and that is how the delay of 676 days occurred. 10. Thus, since the circumstances stated above constitute sufficient cause, the appellant prays that delay in filing of appeal be condoned u/s. 253(5) of the Act. The submission of the appellant is that technical considerations cannot and should not act as bar to the cause of s....
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....ultant effect of the order it is going to pass upon the parties either way. " [Emphasis Supplied] 11. It is the submission of the appellant that in case the appeal is not heard on merits, it would cause enormous loss and, irreparable injury, particularly since disallowance made and demand raised is unsustainable in law. 12. It is therefore prayed that since the delay in filing the present appeal was as a result of bonafide belief / circumstances as explained above and it is therefore prayed that the delay may please be condoned and appeal may please be admitted and heard on merits." 14 That the assessee has also filed an affidavit of Shri. S. C. Jain, Chartered Account, who advised it for filing of the appeal before the Tribunal. 15 The Learned CIT [DR], on the other hand, submitted that assessee himself has withdrew its appeal before the ld. CIT (Appeals) on the ground that the appeal has been abated in view of the search u/s 132(1) of the Act, and there is an inordinate delay of 676 days in filing of the appeal, as such, delay in filing of the appeal should not be condoned. 16 We are of the opinion that it is not of much material how inordinate delay is....
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....de u/s 153A, assessee duly filed appeals before the Tribunal against the orders of ld. CIT (Appeals). As such, it is clear that assessee was seriously contesting the additions made in the orders of assessment and such additions were not accepted by it. However when it was advised by Shri. S. C. Jain, Chartered Accountant, who has also filed his affidavit before us, assessee immediately filed appeals before the Tribunal and filed application-explaining reasons for the condonation of delay duly supported by the affidavit of the assessee. Hon Supreme court in Collector of Land Acquisitions Vs MST Katiji & Ors 167 ITR 141 has held that :- "And such a liberal approach is adopted on principle as it is realized that : 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. --------------------------------------------------------------------------- 1." Any a....
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....s. The courts, therefore, have to be informed of the spirit and philosophy of the provision in the course of the interpretation of the expression " sufficient cause ". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even-handed justice on merits in preference to the approach which scuttles a decision on merits. Turning to the facts of the matter giving rise to the present appeal, we are satisfied that sufficient cause exists for the delay. The order of the High Court dismissing the appeal before it as time-barred, is therefore, set aside. Delay is condoned. And the matter is remitted to the High Court. The High Court will now Page No : 0474 dispose of the appeal on merits after affording reasonable opportunity of hearing to both the sides. " [Extracted from ITR online True pages] In the aforesaid circumstances, we are of the considered opinion that delay in filing of the appeals has occasioned only on account of the sufficient cause and the action of the assessee cannot be imputed with negligence, inaction or lack of bona fides, as assessee was seriously contesting additions made in the orders of....
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....e are that in the present case, search u/s 132(1) of the Act was conducted at the premises of the appellant on 26/27.03.2010. Simultaneously search was also conducted at various other group companies and at the residential premises of the managing director of the assessee company. On account of the search conducted at the premises of the assessee, no incriminating material was neither found nor referred to by the ld. Assessing Officer in the order of assessment passed u/s 153A of the Act in relation to the additions made by him during these years. In fact, in all these years, assessments were already made u/s 143(3) of the Act. In AY 2006-07 & 2007-08, identical additions were repeated by the Assessing Officer in the assessments made u/s 153A of the Act. In AY 2005-06, return was accepted after examination of the investment for which return was taken for scrutiny as per CBDT guidelines. In assessment years 2005-06 and 2006-07, the Assessing Officer though not referred to any incriminating material found as a result of search, but relied upon the statement of Shri IC Jindal, Managing Director of the assessee company recorded u/s 132(4) of the Act for making the additions. In the app....
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....ent of Shri. Ishwar Chand Jindal and statement of Shri. Aseem Kumar Gupta (without providing an opportunity of cross examination). It is submitted that neither the statement of Shri. Ishwar Chand Jindal nor the statement of Shri. Aseem Kumar Gupta can be held to be incriminating material found as a result of search for the reasons stated hereunder: 6.3 In fact, along with the search on the assessee, search was also conducted on 26.03.2010 at the residential premises of Shri. Ishwar Chand Jindal, MD of the appellant company. The search commenced around 8.00AM in the morning of 26.03.2010, and in the evening of 26.03.2010 from 8.40 PM, investigation wing continued to record the statement of Shri. Jindal placed at pages 118 - 135 of PB 2 which recording of the statement continued till whole night, and whole night he was pressurized to surrender and in the early morning when Shri. Jindal was fully exhausted and was not in the proper state of mind, he was confronted with Shri. Aseem Kumar Gupta, who in his statement has alleged as under: " I have given Rs. 2 crores from M/s Moderate Credit Corporation Ltd. to M/s Magnum Steel Limited and another Rs. 80 lakhs through Ra....
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.... the same date also met with ACIT (Inv) and stating the aforesaid facts, requested to return the cheques, which cheques were though not returned, however, because of the aforesaid retraction, the cheques given by the assessee in respect of the tax liability on account of surrendered sum was never deposited. 6.6 It is relevant to state hereitself that the allegation of Shri. Aseem Kumar Gupta that he has given Rs. 2 crores from M/s Moderate Credit Corporation Ltd. and Rs. 80 Lacs from M/s Ravnet Solutions Pvt. Ltd. in lieu of cash to M/s Magnum Steel Ltd. is factually incorrect as M/s Magnum Steel Ltd has not received any sum from M/s Moderate Credit Corporation Ltd. and further only a sum of Rs. 71 lakhs has been received from M/s Ravnet Solutions Pvt. Ltd. as share application money and no amount of cash has been paid to any person, and share capital received by such company is genuine. 6.7 That when the proceedings u/s 153A of the Act was initiated by issuance of notice u/s 153A of the Act dated 20.04.2011, appellant filed a reply dated 15.09.2011 (see page 115-117 of PB-2), wherein it was submitted as under: "........The recording of statement was star....
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.... view on the basis of forced surrender made by me as well as forced statement taken from Shri Aseem Gupta as neither any money transacted between Shri Somnath my employee and Shri Aseem Gupta nor any dealings of shares were made through Shri Aseem Gupta. In fact, Aseem Gupta already denied having any relationship with P.K. Aggarwal & Co. during the course of statement recorded during search. The shares were purchased and sold only through broker P.K. Aggarwal & Co., Kolkata......" 6.8 ..... 6.9 Again during the course of the assessment proceedings, in response to the show cause notice dated 15.12.2011, appellant filed its reply on 19.12.2011 (see page 151-159 of PB-1), and at page 157, it was again reiterated that statement made during the course of search was not voluntary and such statement was obtained under pressure. It was also stated that statement of Shri. Aseem Gupta is also incorrect. It is further submitted that before the learned CIT(A), appellant filed its written submission wherein again it was stated that statement made by the Shri. Jindal has immediately been retracted. Aforesaid submission of the appellant has also been extracted by the le....
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....r as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under section 132(4) of the Act at mid night. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in a statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months. ------ ----- 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours ....
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....ssessee, recorded patently under Section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle." 6.14 Further in respect of the Mr. Assem Kumar Gupta, it is submitted that his statement on the first place is factually incorrect and secondly his statement was also recorded in the forced circumstances and thirdly despite the specific requested he has not been confronted for the cross examination. In fact, in his statement he has alleged that Shri. Som Nath on behalf of the assessee has given cash to him, and same has specifically been denied by the assessee vide its reply dated 15.10.2011 and infact assessee has requested the learned AO to record the statement of Shri. Som Nath, which statement has not been recorded by the learned AO. Further, in the statement he has alleged that he has arranged alleged accommodation entry of capital gain through Santos....
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....therefore advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before Income Tax Departments. Similarly, while statement during the course of search & seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further in respect of pending assessment proceedings also, assessing officer should be rely upon the evidences/material gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders." 6.16 In fact, CBDT in instruction no. F.No. 286/98/2013-IT (Inv.II) dated 18.12.2014 has again stated as under :- " Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during search/surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such action defeat the very purpose of search/surv....
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....yalakshmi Ammal reported in [2016] 74 taxmann.com 35 (Madras), Hon'ble High Court has held as under: " 20. In the case on hand, statement recorded on 29.12.1999 from the son of the assessee under Section 132(4) of the Act is not corroborated by any material document. Admittedly, Revenue has also not confronted the assessee, with the said statement of his son. If that be the case, it can be safely concluded that, there was no material documentary evidence, to substantiate and corroborate the statement of Mr. Natarajan, son of the assessee. If the assessee makes a statement under Section 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under Section 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the s....
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....year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. " ....
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....cently Hon'ble Delhi High Court on 25-05-2017 held in ITA No. 306 to 310 of 2017 in the case of Pr.CIT V. Meeta Gutgutia Prop. Ferns N Petals, again analyzed all the aspects and the decisions laid down and held at para 71 that "invocation of section 153A by the revenue for AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs". 6.20 In view of the aforesaid, it is submitted that since while making the additions in the orders of assessment for the AY 2005-06, 2006-07 and 2007-08, no incriminating material which can be said to be found from the premises of the appellant has even been referred to as such, addition made is outside the scope of section 153A of the Act as such, additions made are liable to be deleted." 20 Learned CIT [DR], on the other hand, placed reliance on the orders of the ld AO and CIT (A) and reiterated vehemently the content of these orders. The learned CIT [DR] has also filed synopsis of arguments which are on jurisdictional ground as well as on merits of the case are as under :- "1. JURISDICTIONAL GROUND i) Before the Hon'ble ITAT, the Ld. AR has filed copy of letter dat....
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....nd issuance of notice u/s 133(6) to those share applicants and their non compliance shows \ further steps taken by A.O. on the issue of additions account of share capital. Issuance of commission to Calcutta Stock exchange and investigation wing leading to addition on account of LTCG support statement u/s 132(4). Addition is not merely on statement but also on records such as books of account containing entry of share application money and LTCG. c) Books of account found during search containing incriminating entry of share capital and LTCG constitute incriminating material found as a result of search. d) Therefore, the reliance of Ld. AR on various judicial authority such as Kabul Chawla and other cases will not apply to the facts of the case. e) I rely on decision Anil Bhatia of Hon*ble High Court of Delhi 352 ITR 493 (Del) that if incrementing document is found for any assessment year, then AO has authority to assess total income reference pare 19, 20, 21 & 22 of the order. MERITS a) SHARE CAPITAL: i) AO has relied on the statement u/s 132(4) of the IT Act of MD of the company namely Sh. I. C. Jindal & statement of Sh....
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....d., M/s Courage Financial Services P. Ltd. & M/s N.R. Sponge Pvt. Ltd. Therefore, as order is yet to declared I pray for consolidation of these cases before taking final decision. Delay in filing synopsis is on account of calling of case records of the appellant, to verify the genuineness of letter dated 15.09.2011 filed by the Ld. AR during the hearing." 21 The main argument raised by him was that the statement of Shri IC Jindal is an incriminating material even if it is retracted on 15.09.2011, because the retraction was filed after one and half years after the date of recording of statement and reference of retraction made before DGIT on 29.03.2010 is not borne out from record. It was argued by him that even if retraction was made, it was not shown that how the pressure and coercion was applied. He also referred that one Shri. Aseem Gupta has accepted that in lieu of cash, M/s Moderate Credit Corporation Ltd and M/s Ravnet Solutions Pvt. Ltd. have made investment in the assessee company and books of account of assessee itself constitute incriminating material. However, no other material or document was referred to by him which was found as a result of search constitu....
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....ADIT due to which no action was taken to encash the cheques taken towards the demand of tax in respect of surrender made in the statement recorded during the search. That the learned CIT DR made no reply or rebut the aforesaid factual position which clearly establish that the aforesaid fact is true and correct. 2.2 Further in so far as the letter dated 15.09.2011 filed by the assessee retracting the statement dated 26/27-03-2010 is concerned, it is submitted that this letter was filed after the receipt of the notice u/s 153 A of the Act and before filing of any return in response to the aforesaid notice and was merely a reiteration of the aforesaid retraction which was already made immediately after the search. It is submitted this was the first occasion to bring on record the retraction of the assessee before the assessing officer who initiated the assessment proceedings by issuing notice u/s 153A of the Act. It is thus submitted that retraction was made on the first working date after the search before the investigation authorities and on the first available opportunity before the assessing officer that too before filing of the return of income u/s 153 A of the Act. ....
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.... as noticed by learned CIT DR. this clearly proves that retraction was made on 29.03.2010 which was taken note by the revenue authorities by not encashing the cheques or taking any action against the assessee after the search. 2.6 It is therefore submitted all the aforesaid facts clearly establish that retraction was immediately after the search and also brought into the notice of the AO during the course of the assessment proceedings. 2.7 It is submitted that statement was recorded in the late evening and completed at late morning on the next date, clearly establish that statement was not recorded when Shri. 1C Jindal was not in fit state of mind as he was physically and mentally exhausted and was in half sleep. Further whole night department kept pressuring to Shri. 1C. Jindal to surrender and he succumb to the pressure. This fact was also brought during the assessment proceeding vide letter dated 15.09.2011 and 19.12.2011 (in para 4 at page 157 of PB-1). Further in so far as the statement of Shri. Aseem Kumar Gupta is concerned, it is submitted that his statement is contrary to the admitted facts and despite request of the assessee vide its letter dated 15.09.2....
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....s made in the letter dated 15.09.2011, is mere recording of what has been happened prior to the assessment, and it is not so that retraction was made first time on 15.09.2011, as retraction was made on the next date of search i.e. 29.03.2010. It is submitted that since the proceedings u/s 153A of the Act was initiated, as such on the first available occasion, appellant narrated the complete facts and also requested to verify the transaction and record the statement of Shri. Aseem Kumar Gupta and Shri. Somnath in its presence. In such circumstances, the contention of the revenue that the retraction-is not bonafide is wholly misconceived and legally unsustainable. At this stage, reliance is placed on the judgment of the Hon'ble High Court of Gujarat in the case of Kailashben Manharlal Chokshi vs. CIT reported in [2010] 328 ITR 411 (Gujarat), 3. It is submitted that at si no. (a) to (e) thrust upon to treat the statement recorded as incriminating evidences and also referred to the money trail as well to treat books of account as incriminating material as such, it has been contended that Judgment of Kabul Chawla is not applicable. It is submitted that the learned CIT DR ha....
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....id not bring any corroborative evidence in support of the so called story brought by him either of the money trail or of Shri. Aseem Kumar Gupta, as such, aforesaid judgment is inapplicable. 5. It is submitted that in respect of the merits of the additions, the learned CIT DR has merely repeated the finding AO/CIT(A), which was also argued during the course of hearing and all the issues raised by him has been dealt by the assessee in its synopsis as such for the sake of brevity same is not repeated here. However, in brief, in rejoinder to the same, it is submitted as under: 5.1 It is submitted in para (a)(i) to (a)(iii), the learned CIT DR merely repeated on the statement recorded of Shri. 1C Jindal and statement of Shri. Aseem Gupta. It is submitted that as already submitted earlier, the statement of Shri. 1C Jindal was under forced circumstances which was immediately retracted and nothing was accepted even in the statement during the course of search, and income surrendered was immediately retracted on the first available opportunity. Further, as has already been submitted, AO did not bring any corroborative evidence and CBDT in its instruction no. F.No. 286/98/....
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.... various actions of the SEBI against companies in which assessee has invested and against the broker. Except at si. No. (x), all the other enquiries relate to year 2009-2010 which has no relation with the transaction made by the assessee company. At si. No. (i), a reference of one of the order dated 31.05.2006 was made which was also much after the last transaction made by the assessee for the sale of the shares. At si. No. (x), reference of M/s P.K. Agarwal & Co. was made and order dated 29.09.2005 which restricted him to buy sell of the securities in any manner. It is submitted that copy of the order dated 11.08.2008 is hereby is enclosed giving complete description of the restrictions imposed on M/s P.K. Agarwal & Co.. it would be seen that in para 2, investigation was made by the SEBI in respect of six companies, and none of the companies in which assessee invested was referred to. In this para, interim order of SEBI dated 29.09.2005 (also referred by the AO), restriction was imposed on the 11 stock brokers, in which name of M/s P.K. Agarwal & Co was not mentioned at all. It is incorrect observation made by the AO in the assessment order, which has been casually been referred b....
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....cular no. 768 dated 24.06.1998 and 704 dated 28.04.1995 were already placed on the record alongwith the synopsis. 7. It is submitted that frivolous request was made after the completion of the hearing after a long time to consolidate the appeal with the other cases. It is submitted that the aforesaid request is against the settled principles of the judicial norms that after the hearing is concluded, no such request can be entertained." 23 Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 24 From the facts emanating from record and submissions of the parties, it is seen that in the present case, for all these three assessment years, assessments were already made u/s 143(3) of the Act when Assessing Officer had examined investment and transactions made by the assessee and duly disclosed in the return of income. In fact, in assessment year 2005-06, as per CBDT guidelines the assessment was taken under CASS on the basis of AIR information specifically to examine the investments of share capital. In this year, seven companies made investments and shares were al....
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....n (1), in consequence of information in their possession and they have reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing which has not been or would not be disclosed (referred to as undisclosed income or property). Thus, the crux of the matter here is that the assessing officer is empowered to make assessment u/s 153A of the Act only when there is an undisclosed income or property. Thus, the purpose of section 132 is fulfilled once undisclosed income is found which is assessed u/s. 153A of the Act in order to recover tax on such undisclosed income. The intention of the legislature is clearly mandated by mentioning initiation of search under section 132 in section 153A so that no assessee should be left un-assessed for such undisclosed income or property, which otherwise would not have assessed being not disclosed by him. 27 It is necessary to state here that legislature has introduced the second proviso to section 153A, which specifically provide that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of search ....
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....mpleted assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 29 Accordingly, in respect of pending assessments the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall b....
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....our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assesse....
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....ome and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts." 31 Similarly, the present case is also distinguishable on the identical facts for the reason that in the present case assessee is maintaining regular books of accounts, no other material was found which suggest that assessee is in a habitual concealment of income or books of accounts of the assessee are not fund to be reliable. No other incriminating material except the retracted statement is made the basis of the addition. Hence reliance placed by revenue on the decision of the Ms Dyawanti (supra) ....
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....isallowance of LTCG by treating them as STCG and addition of Rs. 36,72,01,641/- was made. In the assessment made u/s 153A of the Act, the AO has treated the same figure that was already added during the 143(3) assessment as undisclosed income. It is not understood the income already disclosed, how can be treated as undisclosed. Here again Revenue has failed to refer to any material unearthed during the search which could led ld. Assessing Officer to such conclusion. This assessment can only be disturbed as we discussed in the preceding paragraphs above, if any incriminating material is found during the course of search, but not otherwise. 36 In AY 2007-08, originally the Assessing Officer framed assessment also u/s 143(3) of the Act by making a disallowance of Rs. 3,06,421/- u/s 14A of the Act r/w Rule 8D. in the assessment u/s 153A AO has merely repeated the disallowance without referring to any incriminating material unearthed during the search. 37 In making assessment u/s 153A of the Act, the AO has to bring an incriminating material, which is contrary to declaration made by the assessee. The reliance in making assessment for the AY 2005- 06 and 2006-07 was made on the sur....
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....ere asked till midnight on the investment of properties and also investment in shares of various companies. Question no. 7 was in relation to details of various immovable properties as per details furnished by Smt. Shashi Prabha Jindal, wife of Shri. IC Jindal to income tax department who assessee claimed, had strained relationship with Shri. IC Jindal as she had filed civil and criminal cases against him. Other few questions were asked in the night till morning, as date was mentioned 27.03.2010 thereafter. Shri. Aseem Gupta was called in the morning of 27.03.2010 when he stated that he has given Rs. 2 crores from M/s Moderate Credit Corporation Ltd. and Rs. 80 Lacs from M/s Ravnet Solutions Pvt. Ltd. in lieu of cash to the assessee. He further stated that he has received Rs. 20 crores in cash for arranging capital gain. He stated cash was received by him from Shri Somnath, employee of the assessee company. It was stated by him that cash was paid to Shri. Santosh Shah who arranged capital gain through stock broker M/s P.K. Aggarwal & Co. On cross examination by Shri. Jindal, he confirmed that he had not received any cash from him. He also confirmed that he had never introduced M/s ....
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....es the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what....
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....ve aside on time. All these cumulative factors go strongly in favour of the assessee about its timely retraction of the admission. 44 We find that the statement was recorded at odd hours and nothing concrete related to any other evidence in support arrived at. The figures of investment made by the companies were not matching with the statement of Shri. Aseem Gupta as assessee has not received any sum from M/s Moderate Credit Corporation Ltd. and further only a sum of Rs. 71 lakhs as against Rs. 80 lakhs (stated by Shri. Aseem Gupta) has been received from M/s Ravnet Solutions Pvt. Ltd. as share application money. Despite referring name of Shri. Somnath and Shri. Santosh Shah and the broker Shri. P.K. Aggarwal & Co. in the statement, nobody was ever examined by the revenue despite time and again Shri P.K. Aggarwal confirming the transactions. The revenue cannot make allegation unless prove them by brining tangible material on record. The statement, which was recorded in mid night, cannot be said to be voluntary as recording of statement in the midnight itself shows that the statement was recorded when the person was not in a fit state of mind and would be fully exhausted. From th....
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....re was no statement of the assessee recorded during the survey under section 133A of the Act. As observed by the Commissioner of Income-tax (Appeals), the assessee voluntarily made a declaration two months after the survey. There was absolutely no compulsion on the assessee to make such a declaration. The assessee waited for two years to resile from the said declaration. The submission of learned counsel for the assessee that since he had filed a return on September 26, 2009 without disclosing the sum of Rs. 1.25 crores, he should be deemed to have resiled from the said declaration cannot be accepted. The retraction in writing happened only on December 16, 2010. It was much too delayed to be taken to be bona fide. The circumstances under which the retraction was made has also not been explained. The court finds that the above retraction, without any explanation whatsoever, and without mentioning the offer of surrender of Rs. 1.25 crores made earlier on December 18, 2008 is not a retraction at all in the eyes of law. The above decision of this court, therefore, does not come to the assistance of the assessee. 12. Learned counsel for the assessee next relied upon the decisio....
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....n can be made in the absence of incriminating material and our view was further strengthened by the Hon'ble jurisdictional High Court in the case of CIT v. Kabul Chawla reported in 380 ITR 573 (Del.) which was further followed in subsequent decisions. All these decisions propounded the law that no additions can be made in absences of incriminating material for each of the years and on that basis, addition u/s 153A by the revenue for AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. We therefore hold that additions made u/s 153A of the Act, in the absence of incriminating material found as a result of search is outside the scope of section 153A of the Act and the additions in all these three assessments framed u/s. 153A of the Act i.e. ITA No. 1342/Del/2013, 1343/Del/2013 & 2004/Del/2013, do not stand and directed to be deleted. In result, appeals are allowed. B. Second issue pertains to the Addition made u/s 68 of the Act in respect of the share capital received by the assessee from seven corporate entities : 50 This issue is involved only in ITA No. 1342/Del/2013 for the assessment year 2005-06. After examining the ....
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....s P.K. Agarwal & Co. for the period of 01.04.2003 to 31.03.2005, account of S.K. Financial Services Pvt. Ltd. in respect of purchase of shares, the investment account as on 31.03.2004, audited balance sheet as on 31.03.2004, Proof of payment of STT etc. It was submitted that the AO had also made enquiry from the all the three brokers i.e. M/s P.K. Agarwal & Co., M/s S.B. Bhutra & Co. and S.K. Khemka, Calcutta Stock Exchange and also from the depository M/s IKM Investor Services Ltd. The brokers have confirmed the transactions made through them and purchases were made off market and physical delivery was taken and after dematerialization the shares were credited in the demat account of the assessee from where shares were subsequently sold through stock exchange and STT was paid. The Calcutta Stock exchange to whom notice was sent u/s 133(6) through email, was also replied and furnished the details confirming that the price of the shares purchased off market is also matching with the price traded on the stock exchange. Further, in response to the enquiry, depository M/s IKM Investor Services Ltd also filed the necessary details which confirm the details filed by the assessee. It w....
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.... ii) Number of companies whose shares are sold during the year 3 9 iii) Date of purchase of Shares 09.04.2003 to 24.06.2003 06.04.2004 to 23.06.2004 iv) iv) Contract note and purchase bill 289-299 24-66 v) Purchase consideration Rs. 43,25,800/- Rs. 1,78,46,275/- vi) Details of sales of shares made during the year Page 285 Page 67-69 vii) Date of sale of shares 06.01.2005 to 17.03.2005 06.07.2005 to 29.11.2005 viii) Contract notes and sale Bill 318-377 118-284 ix) Gross amount of sale Consideration Rs. 7,02,90,273/- Rs. 38,54,73,308/- x) STT paid on the sale of such shares as reflected in the contract notes Rs. 52,772/- Rs. 3,84,277/- xi) Service Tax paid on the sale of such shares as reflected in the contract notes Rs. 7,319/- Rs. 41,224/- xii) Net Sale Consideration Rs. 7,02,30,182/- Rs. 38,50,47,806/- xiii) Long Term Capital Gain which has been claimed as exempt u/s 10(38) of the Act Rs. 6,59,04,382/- Rs. 36,72,01,531/- 9.3 It is submitted that during the course of the assessment, evidences furnished by the appellant in respect o....
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....ent in shares.  Copy of the relevant bank statement showing the payment made for purchase of shares. 4) Reply dated 27.11.2008 (Pg. 34 of PB- 2): Copy of the bank statement. 5) Reply dated 01.12.2008 (Pg. 35-38 of PB-2) 6) Reply dated 18.12.2008 (Pg. 39-45 of PB-2). 9.4 It is relevant to state here that in the course of the regular assessment for the assessment year 2006-07, learned AO to verify the sale and purchase of the shares has made following enquiries :- S.No. Nature of enquiry Outcome Enquiries made by the AO in the original assessment proceedings: i. 05.11.2008 (Pg 18-20 of PB-2): Notice u/s 133(6) of the Act was sent to the Calcutta Stock Exchange to verify the contract notes for the purchase of the shares through following stock brokers:  M/s P.K. Agarwal & Co.  M/s S.B. Bhutra & Co.  S.K. Khemka 14.11.2008 (Pg 21 of PB- 2): Reply was received from the stock exchange wherein none of the contract notes were held to be not genuine. It was also stated by the stock exchange that shares were not traded in the online trading system of the stock exchange, which has also been stat....
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....s is important. In respect of payment of purchase consideration, it has also been admitted that payment have been made, when learned AO in his remand report has stated that "In the matter of payments the assessee has furnished the account of these brokers in its books and has claimed that the running account show that payments have duly been made, however the account of the assessee in the books of the brokers have been called for." B. 25.03.2010 (Pg 67 of PB-2): Learned AO sent his second remand report alongwith the replies of the two stock brokers i.e. M/s S.B. Bhutra & Co. and S.K. Khemka. C. 29.09.2010 (Pg 78-80 of PB-2): In this remand report, learned AO did not dispute that all the share brokers has filed their replies (as is noticed by the learned CIT(A) in his letter date 20.09.2010 placed at page 77 of PB-2), however he merely relied upon the order of assessment passed by the learned AO. It is further submitted that from the detailed enquiry conducted by the stock exchanges, stock brokers and also from the depository, the genuineness of the transaction was not disputed, and as per the learned AO only dispute was whether the gain was short term or long ter....
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....dit appearing in the books of the assessee cannot be held to be unexplained. 9.9 Without prejudice to the aforesaid, it is further submitted that shares purchased by the assessee in AY 2004-05 and AY 2005-06 has duly been reflected in its books of account and books of account of the assessee is duly audited and in the regular books of account maintained by the assessee, no discrepancy has been noted, and same has been accepted as true and correct. It is submitted that shares sold in the AY 2005-06 were purchased between 09.04.2003 to 24.06.2003 whereas shares sold in the AY 2006-07 were purchased between 06.04.2004 to 23.06.2004, i.e. all the shares were purchased till June, 2004. It is submitted that since the shares were purchased off line and were purchased before 1st October, 2004, as such in respect of purchase of shares, STT has not been paid as at that time STT was not applicable, which became applicable only w.e.f. 01.10.2004. 9.10 It is submitted that such shares were purchased in the physical form and same has also been confirmed by each of the stock broker. However, assessee instead of taking the possession of the shares in physical form instructed the ....
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....was provided to the assessee.  Even if he has been debarred from assessing the market, but for the period in which transaction of the assessee was undertaken, there was no such direction.  Even stock exchange in its reply dated 14.11.2008 and 09.12.2011 has not adversely commented in respect of the trading through M/s P.K. Agarwal.  As such, this contention of the learned AO is wholly misconceived. 4. Assessee has submitted the copies of the contract notes which do not have mention of STT.  This is factually incorrect.  Since at the time of purchase, STT was not applicable as such only on the purchase STT has not been paid.  In respect of sale of shares, STT has been paid and is also duly reflected in the contract notes. 5. At the time of assessment, assessee failed to produce any proof of payment of STT and in the contract notes there was no mention of STT.  This is factually incorrect, as assessee has submitted the copy of the contract notes for the purchase as well as sale and only in respect of contract notes for purchase, STT has not been mentioned, whereas in respect of sale, STT has been....
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....are transactions by contract notes for sale and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange, Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit. b) High Court of Gujarat in case of Commissioner of Income-tax-I Vs. Himani M Vakil [2013]10 taxmann.com 326 (Gujarat) held that where assessee duly proved genuineness of share transactions by bringing on record contract notes for sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. c) Tribunal at Kolkata in case of DCIT vs Sunita Khema in ITA nos 714 to 718/ kol/2011 has held that :- The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and....
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....llusion / connivance between the broker and the assessee for the introduction of its unaccounted money. 2.9.6. In view of the aforesaid facts and findings and the judicial precedents relied upon , we have no hesitation in directing the ld AO to accept the claim of exemption of LTCG of the assessee arising out of sale of shares of G.K.Consultants Ltd and accordingly allow the ground raised by the assessee in this regard. " e) Tribunal at Mumbai in case of Tekchand Rambhiya HUF in ITA nos 930/Mum/2012 has held that the Hon'ble High Court, in the case of CIT vs. Jamnadevi (328 ITR 656) has observed in paragraphs 11 & 12 as under: "11. We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dat....
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....BI against the share broker. It is further submitted that it is not in dispute the such share broker is registered with the stock exchange and was trading in shares on behalf of the clients. In the instant case, learned AO has also not doubted the sale of the shares to the independent parties. It is therefore submitted that because the share broker is allegedly involved in price manipulation and cross trading, same would not affect the genuineness of the purchase and sale of the shares. 9.16 The Calcutta High Court in the case of CIT vs. Korlay Trading Co. Ltd. reported in 232 ITR 820 (Cal) has held that "Once the assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money, etc. The assessee had discharged its initial burden and if the broker did not maintain any accounts, the transaction could not be doubted for no fault of the assessee. Once the assessee had discharged its initial burden, no investigation or proper steps had been taken by the ITO to bring on record the materials to controvert the claim of the assessee." 9.17 It is settled law that no addition can be made on the basis of....
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....cially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and the Court is entitled to interfere. 10 Lastly it is submitted in the instant cases, in the assessment passed u/s 143(3) of the Act, AO has held that gain is short term, as date of purchase was treated as date when the shares were transferred in the demat account of the assessee, however since such finding was recorded without making enquiry from the share brokers as such, same is misconceived. It is respectfully submitted that each of the share broker has confirmed the fact of purchase of shares on the date stated in the contract notes, and in respect of transfer of shares in the demat account of the assessee it has been stated by the broker that such shares have been transferred after dematerialization, as such, finding of the learned AO in the order of assessment passed u/s 143(3) deserves to be rejected. 11 Further in respect of finding of the learned AO in the order passed u/s 153A of the Act and upheld by the learned CIT(A), it is respectfully submitted that despite the detailed enquiry from the stock broker, stock exchange and also from th....
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....d a copy of the order of the SEBI and submitted that restriction was imposed on the broker on 30.11.2005 that too in respect of scripts of Nageswar Investment Ltd. but not in any of the scripts sold by the assessee. It is also submitted that it is an admitted fact that the shares were purchased off market and delivery of scripts were taken in physical form which was duly confirmed by the brokers in their respective reply given to the AO in response to the notices u/s 131/133(6) and subsequently the shares were dematerialized and credited in the demat account of the assessee and only thereafter the shares were sold through stock exchange. It was also submitted that CBDT in its Circular Nos. 768 dated 24.06.1998 and 704 dated 28.04.1995 has provided that date mentioned in the contract note should be taken as the date of purchase of the shares and date of transfer in the demat account is not relevant for the determination of the holding period for the computation of the capital gain. The date of purchase mentioned in the contract note should be taken to determine the holding period of the shares in order to compute the LTCG. Assessee further relied on several decisions on this count. ....
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...., it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for nonprosecution as is evident from the provision....
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....rior to that date. STT has been paid in the contract for the sales made stock exchange. 59 After examining all the documents, confirmation by the stock brokers and necessary replies filed by the related parties, we do not hesitate in holding that both the lower authorities have not correctly examined the facts and circumstances in accordance with law. The AO has treated long term capital gain declared by the assessee as short term by observing as under: " In the light of what has been written above, Rs. 36,72,01,649/- is treated as short term capital gain [on which Security Transaction Tax (STT) is not paid] under the IT Act, 1961 since payment of STT too has not been confirmed (it has been allegedly paid by the broker on behalf of the assessee but no documentary proof has been furnished) and the date of entry and exit from demat account is taken as the time period for which shares are actually held by the assessee company." 60 We find that contract notes issued by the brokers for the purchase of the shares have duly been confirmed by them directly to AO in response to notices u/s 133(6) submitted by him in the remand report before the ld. CIT (Appeals). The brokers ....
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.... was suspended for some time. It is assessee's contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held - "As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs. 25,30, 396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT (A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed." We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order.....
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....sion of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. Howev....
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....s were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. 18. In the light of the decisions of the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and s....
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.... in appeal before the CIT(Appeals). Learned CIT(Appeals) noted that the assessee did not have any demat account at the point of time when shares were purchased and it was duly on 05.03.2004 that the assessee opened a de-mat account, which explains that the date of purchases by the assessee cannot be taken as date of purchases. After noting this and other arguments of the assessee rather elaborately, the CIT(Appeals) concluded as follows :- "4. After examining the A.O's order, profit and loss account and documents it is noticed that the assessee had purchased 1050 shares of M/s. Sangotri Construction Ltd. on 09.01.2003 through share broker M/s. Bubna Stock Broking Services Ltd. At that time assessee was not having Demat A/c. was subsequently opened on 05.03.2004 and shares were sold on 23.04.2004 resulting in capital gain of Rs. 10,48,950/- which was invested in bonds of REC on 19.10.2004. The purchase transaction is supported by the contract note from the broker and also reflected in the balance sheet as on 31.03.2003. The legal representative of deceased assessee has placed reliance on Circular No. 704 dt. 28.04.1995 in the above written submission. In support of his ....
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....nd contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68 [2015] 54 taxmann.com 108 (Bombay) Commissioner of Income-tax-13 v. Shyam R. Pawar has held that :- "2. Mr.Sureshkumar would submit that the Tribunal seriously erred and in law in reversing the finding of fact by the Commissioner and the Assessing Officer. That was based on a report of the Investigation Branch of the Department, Bhuvaneshwar. That revealed and as the Commissioner noted that there was an erroneous client head mentioned. That would prove that the Department did not proceed merely on suspicion but on cogent and satisfactory evidence with it. The Tribunal should not have reversed this concurrent finding and by relying upon some of the conclusions in the report. The Tribunal should have adverted to this specific finding of the Commissioner. In para 21 of the Commissioner's order, in an Appeal pertaining to 2003-04, he has observed that the Department is having material to show that the Directors of a company namely Bolton Properties Ltd. have ....
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....alf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true....
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....ey were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be....
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....alcutta Stock Exchange (CSE) regarding the purchases of the impugned sales and on the basis of the report of the CSE the AO came to a conclusion that no purchase took place through the floors of CSE. Having received a confirmation from CSE the AO came to a conclusion that the purchases are non-genuine. (iii) Since on the basis of the report of CSE the purchases were treated as non genuine the AO came a to a conclusion that the sales are also non genuine. (iv) The AO also referred the matter to SEBI . On the basis of the reply received from SEBI that actions we, initiated in the names of the brokers through whom the purchase transactions took place, the AO suspected the entire transaction of purchase and sales as non genuine. (v) The AO observed that the purchase and sale of shares relate to penny stocks. The prices of these stocks were very nominal whereas the sale prices were quiet high. (vi) The AO also observed that the assessee failed to take into account the financial standing of the companies whose shares were purchased and sold. (vii) It was observed in the order that the assessee only transacted in penny stocks and never had an e....
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....have been physically presented to M/s. Karvy & Co. for the purpose of D-MAT and that the said agency which is a reputed and independent agency has issued D-MAT certificates to the assessee. It clearly shows that the assessee was the owner of the shares in the year 2004 itself by which time the D-MAT process was completed. It is submitted that a fact which is apparent from third party records, about the ownership of the shares of the assessee is deemed to be correct unless the contrary is proved. The AO has no material on record to disbelieve the above certificate of ownership of the shares in favour of the assessee issued by an independent third party agency. 4.4 It is prayed that the impugned Addition of Long Term Capital Gains treated as 'income from other sources' be reclassified and assessed as 'capital gain' and the exemption u/s.10(38) of the IT Act, be granted to the assessee as the requirements of the said section including payment of SIT are fulfilled". 5. It was further pleaded before the CIT(A) that the assessee had been engaged in carrying out transactions during the earlier years also and during the year 2003-04 the shares of Offshore ....
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....accuracy with regard to the holder that the DP credited the amounts to the Demat Account. Shares were then ready for trading in electronic platform of stock exchanges. Thus, the moment these shares were demated after following the due procedure, all the previous steps starting from purchase culminating in demat, form stood validated as otherwise demat could not have been possible. 7. As regards sale of demated shares, the sales were made in electronic plat forms of recognized stock exchanges through reputed brokers with whom various assessee; of the group were maintaining trading account. The appellant maintained account with Karvy Stok broking Ltd Hyderabab. STT was paid in all the transactions. The moment sales were effected, the demat accounts were debited. It is submitted for kind consideration that c: sale through a recognized stock exchange which were electronically made cannot be manipulated. So also debit and credit entries in the Demat account which were maintained by reputed DPs. The process involved is automatic transmission of the information through electronic device regarding sale of shares. The sale proceeds were then received by account payee cheques/drafts....
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.....R. submitted before the CIT(A) that action initiated/taken by any another authority Administering a statute cannot be used against the assessee to which he was not party. The so called order of SEBI, which was not made available to the assessee's, may have impact on the persons who are parties to the proceeding but certainly not on the assessees. It is an established position of law, as stated by the Hon'ble Supreme Court in Chhatrasinhji Kesarisinhji Thakore v. CIT [1966] 59 ITR 562, that the Income-tax Officer is, within the limits assigned to him under the Act, a Tribunal of exclusive jurisdiction for purposes of assessment and he has, under the Act, to decide whether a particular receipt is "income" and it is not, necessary that he must make some person or body other than the assessee, a party to the proceedings before he decides the question; and as between the State and the assessee, it is his function alone to determine whether the receipt is income and is taxable. It is equally beyond doubt that a statutory authority is bound to hold statutory inquiry and perform statutory duties to determine liability under the statute they act and the same cannot be abdicated in ....
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.... make a pure guess and make an assessment without reference to any evidence and material at all. There must be something more than suspicion to support the assessment. (Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC). The same principle is also reiterated in the case of Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC). It was held that a suspicion however, strong may not take the place of proof. The conclusions which are based on surmises and conjectures, cannot take the place of proof. Therefore the assessment made by the AO which is predominantly influenced by suspicion is liable to set aside." 11.1 It is submitted that entries in books of accounts regularly kept are presumed to be correct unless proved otherwise. In the case of the assesee's, all the transactions in shares were recorded in the books of account. This was further evidenced by filing of returns. Sale of shares basing on these books. These returns were accepted under section 143(1). No serious challenge was ever made about their genuineness or that they were kept regularly in the course of business. That being the case, the accounts are relevant and afford prima facie proof of the entries....
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....eceived from CSE are of no probative value to draw an adverse conclusion against the assessees. The CIT(A) concluded that in all these cases involving similar facts, in the absence of any positive evidence, and merely on the basis of mere suspicion the transactions cannot be held to be not genuine. 13. Aggrieved, department is in appeal before us. The learned Counsel for the assessee reiterated the submissions before the CIT(A). 14. The learned D.R. besides relying upon the Order of the A.O. submitted before the Tribunal as follows : (a) It has been verified from the website of SEBI (www.sebi.gov.in) that certain brokers of Calcutta Stock Exchange including the brokers with whom the assessee has purportedly dealt or has made purported transactions were indicted by SEBI for unethical practices of creating a artificial marked jacking up prices of shares. It is also worthwhile to note that SEBI's various adjudication orders had clearly established that the said brokers had a active role in manipulating the prices of shares for which they are penalized as per the SEBI rules and some of them also were suspended for a particular period during the investigat....
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....order of the SEBI are enclosed for kind perusal of the Hon'ble Tribunal. (d) In this connection, it is humbly submitted that the share transactions of M/s. N.M. Lohia and Co-represented by its proprietor Sri Nethmal Lohia has been indicated severely by the Adjudicating Officer by levying penalties. (e) Similarly, the other broker, which the present group has purportedly dealt with is Sri Rajendra Prasad Shah, through whom shares of M/s. Sangotri Constructions Ltd. M/s. Scintilla Commercial and Credit Ltd. and M/s. Offshore Finvest Ltd. were purported to have been acquired by the assessee's. Certificate of Registration of Sri Rajendra Prasad Shah, Member, Calcutta Stock Exchange was suspended for 2 ½ months and also fined on several occasions as per list enclosed for indulging in fraudulent and unfair trade practices carried out during the investigation period when the shares were shown to have been acquired by the assessee's of this group. (f) Sri Rajendra Prasad Shah was also penalized by Rs. 9.5 lakhs and 3 lakhs for fraudulent and unfair trade practices in the case of Sangotri Constructions Ltd. and Scindia Commercial and Credit Ltd.....
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.... purchase is against the evidence available on record. Further, the said transactions in the F.Y.2003-04 do not appear in the transaction list quoted in the assessment order (Page No.l5 of the paper book). This shows that the assessee has simply shown bogus purchases depicting with a imaginary Trade No. Similarly, all other purchases of the individuals of the group where the assessee claimed it to be off market purchase but the broker note depicts the Trade No. of Calcutta Stock Exchange. (l) The assesses of this group have allegedly purchased the shares of M/s. Navketan Merchants Ltd. This company is a stock broking firm in OTCEI (Over The Counter Exchange of India). Due to unethical practices, M/s. Navketan Merchants Ltd was expelled w.e.f. 22.12.2003 and ceased to be member of the OTCEI, as a consequence, SEBI also cancelled certificate of registration granted to M/s. Navketan Merchants Ltd. w.e.f. 22.06.2004. The Order of the SEBI in the case of M/s. Navketan Merchants Ltd. is placed on record as annexure-IV for perusal of the Hon'ble Tribunal. (m) It is surprising to note that M/s. Navketan Merchants Ltd., which has been blacklisted is quoting much higher....
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....of teh Learned Departmental Representative, supported the orders of the CIT(A), and submitted that the assessing officer, without bringing any positive evidence on record, could not have concluded that the transactions in question are not genuine. He submitted that since prescribed procedure has been followed from the stage of purchase till the ultimate stage of shares being D-MATTED, there is hardly any room to doubt or suspect that the transactions in purchase are not genuine. In order to hold so, it is submitted by the learned counsel, that the assessing officer is required to bring in cogent evidence to prove that the purchases were not genuine. No such cogent evidence has been brought on record except mere surmise and suspicion that the purchase transactions are bogus. Referring to the second objection of the assessing officer that the enquiry with CSE revealed that no purchase has taken place through CSE, it is explained by the learned counsel for the assessees that since the transactions were in physical form and done through off market, the question of the same being routed through the floor of a recognized stock exchange does not arise. 17. As regards the next obs....
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.... the enquiry initiated by SEBI and specific shares purchased by the assessees in the course of course of making investment. Therefore, it is not possible to take any adverse view on the basis of mere suspicion that SEBI had initiated some action and found the brokers violating the rules of SEBI. 19. As regards the next allegation that purchases and sales of shares were made with reference to penny stocks which were purchased at a nominal price and sold at a very high price, it is submitted by the learned counsel for the assessee that all the sale transactions were made through stock exchanges, and as such there is hardly any scopes for price manipulation. More over, it is submitted that these are the transactions on which STT was paid. As a common knowledge no prudent share holder would stand static when the market is in upswing. Taking all these factors into account and as the AO has failed to prove any nexus between the assessees and the purchasers with any cogent evidence, the mere fact that sales were made in penny stocks would not result in any adverse inference that these transactions as non genuine. 20. Referring to the observation of the AO that before pur....
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....n Shaw & Bros v. CIT [1959] 37 ITR 271, it is submitted that a suspicion however strong may not take the place of proof. The conclusions which are based on surmises and conjectures cannot take the place of proof therefore the assessment made by the AO which is predominately influenced by suspicion is liable to be set aside. These principles enunciated by the Apex Court have been followed by various Tribunals. In this regard the notable cases are DN Kamani (HUF) v. Dy.CIT [1999] 70 ITD 77 (TM), Pooja Bhat v. Asstt. CIT [2000] 73 ITD 205 (Mum.) and Mrs. Aishwarya K. Rai v. Dy. CIT [2007] 104 ITD 166 (Mum.) (TM). 22. In support of his contentions, the learned counsel for the assessees also placed reliance on the following decisions- i. Smt. Memo Devi v. Asstt. CIT [I.T. Appeal No. 396 (Agra.) of dated 14-3-2008] ii. Smt. Neelam Chawla case (supra) iii. Shripal Singh Gulati case (supra) iv. Kamal Kumar S. Agrawal (Indl.) case (supra) v. Meena Devi N. Gupta v. Asstt. CIT [2013] 35 taxman.com 211 (Ahd. - Trib.). vi. Manojkumar Sarawagi (HUF) (ITAT 'A' Bench, Ahmedabad Order dated 16.3.2012 in ITA No. 3233 & 3156/Ahd/2....
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.... bogus. Even though enquiry with CSE revealed that no purchase has taken place through CSE, since the transactions were in physical form and done through off market, the question of the same being routed through the floor of a recognized stock exchange does not arise. Further, on an overall appreciation of facts and when there is no dispute with regard to off market transactions, the CIT(A) was correct in observing that reliance placed by the AO on the replies received from CSE are of no probative value to draw an adverse conclusion against the assessee. In consonance with the fundamental principle that there cannot be a sale without a purchase, if the purchase of shares by the assessees is disbelieved, there cannot be consequent sale of the said shares by the assessee. Therefore, the fact of the purchases cannot be doubted, since the same ultimately resulted in conversion of shares into electronic form and credit of the same in the D-MAT account. Once it is credited to the D-MAT account the sales are effected through the floor of the stock exchange. The AO has not brought out anything to even remotely suggest that the sale transactions were arranged by the assessee. There is no me....
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....financial standing of the companies, the CIT(A) was correct is observing that the share market is generally sentiment driven and the assessees cannot remain static. Even the absence of experience of the assessees in transaction of the shares except dealing in these penny stocks, does not clinch the issue against the assessee. This may at the most lead to a suspicion but the same cannot be treated as conclusive to draw any adverse inference against the assessees to the effect that the transactions are not genuine. Similarly, even the opening of D-MAT accounts at Calcutta, a remote place may give rise to a suspicion, but the same cannot lead to any adverse inference against the assessee. In course of hearing, the assessee's had produced its books, there is no finding in the assessment order that payments were not made to the brokers similarly there is no observation in the order that the sales were arranged between the assessee's and the buyer. In the absence of any cogent finding by the AO the observation merely raises some suspicion but this suspicion cannot take the place of proof. Even with regard to the enquiry got conducted by the assessing officer through the DClT Calc....
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....e, 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. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from Rs. 5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share, then how it can be inferred that such person entered into sham transaction few years ago and prepared for getting the benefit Tax Appeal No.4 of 2011 with analogous case aft....
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....hemicals were duly demated and thereupon the sales were made through banking transactions. The Demat account maintained with ICICI bank has revealed the shares numbers, etc. From the side of the assessee, it is vehemently contested that there was a reason of denial of transaction by those share-brokers because they have not intimated the transaction to the SEBI and that one of them has also made the purchase transaction in cash which was against the SEBI guidelines. Apartment from these evidences, our attention has also been drawn on a certificate issued by "share transfer agent" that the transfer of those shares in the name of the assessee was duly approved. The assessee has expressed to hold those shares in "dematerialized form" therefore the assessee was asked to fill up the "dematerialization request form". This information is very vital and proves the fact that the assessee had in fact purchased the shares of Sarang Chemicals Ltd. It is also difficult to ignore an another factual position that the assessee is in the past assessment year had duly disclosed in the balance-sheet the purchase of those shares. Although, it was an off market transaction but it was properly ....
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....ity in the impugned orders of the CIT(A). The same are accordingly confirmed and the grounds of the Revenue in these appeals are rejected." 68 Further identical question of share purchase and sales was also considered by Hon Delhi High court ITA Nos. 43/2016 & 44/2016 PR. COMMISSIONER OF INCOME TAX - 5 JATIN INVESTMENT PVT. LTD. Dated 18/1/2017 where the findings of the CIT (A) and ITAT were upheld that unless the revenue establishes that the money has gone for profits on shares from the coffers of the unaccounted income of the assessee, in view of exhaustive evidences produced by the assessee, which were not further probed and proved false. 69 The assessee has supported the transactions with overwhelming documentary evidences which were not proved to be false as well as prices at which transaction took places was also not held by ld AO to be false or inflated and ld AO himself taxing it as short term capital gain or speculation income, We are of the opinion that in the absence of any material contrary found by the AO during the enquiry made in the assessment and later in the remand proceedings, the exemption claimed by the assessee u/s 10(38) cannot be denied. The purchases ....