TaxTMI 
TaxTMI 
2019 (1) TMI 687
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.... Act') in Agarwal/Malu group of cases on 20-07-2005. The assessee is a member of the Agarwal group. During the course of search, certain loose papers were found, which, inter alia, included page nos. 2 and 3 of the Executive Diary in Bundle no.3 having notings of investment in jewellery. Certain price/value was mentioned against some of the items of jewellery on these pages, while other items had only the description of jewellery without there being any figure depicting price/value. Total of the figures mentioned against the items of jewellery on pages 2 and 3 came at Rs. 40,15,263/-. This total is exclusive of the items of jewellery against which no amount was given. During the course of investigation, the assessee stated that the items of jewellery against which no price was written, were not purchased by him or his family. The total value of jewellery items on seized page No.2 came at Rs. 13,55,263/-, which the assessee admitted to have purchased from undisclosed sources and equal sum was offered for taxation. Regarding the entries on page no.3, the assessee stated that except for last two items, namely, gold biscuit and one diamond ring, the other items of jewellery were ....
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.... 8441.63 gms 87.68 kg 84.37 Excess/(Deficit) found (82.63) gms 7.99 kg Deficit (10.05) Carats Deficit 4.3 The assessee disclosed an additional income of Rs. 79,600/- in his return for the A.Y. 2006-07 in respect of excess silver jewellery found in the immediately above table and also offered for taxation a sum of Rs. 40,515/- in respect of certain gold jewellery, which position has not been disputed by the ld. DR. A close scrutiny of the above tables transpires that the total gold jewellery found at the time of search belonging to the entire family was 8359.00 grams as against which the assessee had already declared gold jewellery 8304.84 grams in the Wealth-tax returns/VDIS declarations of self and his family. The differential amount was also offered for taxation in his return for the A.Y. 2006-07. Similar is the position qua the diamond and silver jewellery. Under these circumstances, a question arises as to whether an addition can be made simply on the ground that the jewellery items mentioned on page nos. 2 and 3 of seized documents did not tally with the description of jewellery given in Wealth-tax returns/VDIS declaration notwithstanding the fact ....
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....addition. 7. Having heard both the sides and perused the relevant material on record, it is seen that the assessee made a claim before the AO that Mr. Om Prakash Agarwal shared half of marriage expenses. The Revenue took up the proceedings u/s.153C in the hands of Mr. Om Prakash Agarwal. In the assessment completed on 30-12-2008 in the hands of Om Prakash Agarwal, a copy of which has been placed on record, the AO accepted that sum of Rs. 17,50,000/- was withdrawn by Mr. Om Prakash Agarwal from his bank account, which was given to the assessee as his share of marriage expenses. Since the explanation of Mr. Om Prakash Agarwal has been accepted in his assessment completed u/s.153C, there can be no rationale in sustaining the addition of Rs. 17,50,000/- on protective basis in the hands of the assessee. We, therefore, order to delete the addition. 8. The last ground against the confirmation of addition of Rs. 17,800/- was not pressed by the ld. AR, which is hereby dismissed as not pressed. 9. In the result, the appeal is partly allowed. Rajkumar B. Agarwal - A.Y. 2006-07 10. The first issue raised in this appeal through Ground nos. 1 to 4 is against the confirmation....
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....y the assessee, the AO held that there was no proof of having received the shares of PIL immediately after the alleged date of purchase. The AO further observed that the family members of the assessee also claimed to have earned huge short term capital gain by trading in shares of PIL during the same period. In this backdrop of facts, he came to hold that the share prices of PIL were manipulated with an intention to provide short term tax free capital gain to the persons like the assessee and also simultaneously providing artificial loss to certain persons intending to evade tax by setting off the said artificial loss against other taxable actual profits. He treated the entire transaction as sham by holding that the short term capital gain brought into books/accounts was nothing but income of the assessee from undisclosed other sources. He, therefore, did not accept the genuineness of the accommodation entries in respect of penny stocks of PIL and charged to tax the sale proceeds of Rs. 22,77,943/- as undisclosed income. He further held that no broker would give accommodation entries to the assessee without any commission. He estimated commission @ 6% on sale proceeds of 1,50,000 s....
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....ansactions from 29-06-2005 to 30-06-2005 and 04-07- 2005 to 07-07-2005. The entire position which thus emerges is that PIL is a penny stock company, which fact got established from enquiries conducted by BSE and SEBI. Not only the DSP shares and Securities Ltd. and Galaxy Broking Ltd. were fined for manipulating the prices of shares of PIL, even the broker from whom the assessee allegedly purchased the shares was suspended and debarred from acting as a broker by SEBI and further the broker to whom such shares were sold, was also warned by SEBI for manipulating the prices of different shares during the relevant period. There is doubt that the assessee completed paper-trail by producing contract notes for the purchase and sale of shares of PIL. In our considered opinion, mere furnishing of contract notes etc. and more specifically when seen in the background of the above noted facts, does not inspire any confidence and cannot be a ground to delete an addition, which is otherwise made on the solid bedrock of detailed enquiries. 13. At this juncture, it will not be out of place to refer to the judgment of the Hon'ble Supreme Court in CIT vs. Durga Prasad More (1971) 82 ITR 54....
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....of human probabilities'. This shows that a decision based on the attending circumstances and human probabilities does not get vitiated if there are compelling reasons to reject the frontage of a transaction based on the socalled evidence, which is nothing more than a mere paper work. 15. It is further pertinent to note that it was not only the assessee who booked short term capital gain on the sale of shares of PIL to the above extent, but his family members were also not left behind. They also indulged in the similar paper transactions by allegedly purchasing and selling shares of PIL from the same brokers and showing huge amounts of short term capital gains, for which addition of Rs. 18,71,906/- has been made in the hands of his son Sh. Bharat Rajkumar Agarwal and Rs. 20,21,001/- in the hands of his wife Ameeta Rajkumar Agarwal for the same assessment year, the appeals of which are being disposed off through this batch of cases. 16. In view of the factual and legal position discussed above, it is crystal clear that PIL is a penny stock company and the assessee obtained only accommodation entries in the garb of short term gain from transfer of shares of PIL, for which an ....
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.... 81,49,829/-. In the absence of the assessee having charged interest on such interest free advances, the AO disallowed the interest paid amounting to Rs. 23,98,330/- to Bombay Woollen House and Rs. 4,37,817/- to Bansilal Cloth Market. The ld. CIT(A) sustained the additions. 22. We have considered the rival submissions and gone through the relevant material on record. The AO has drawn a table on pages 5 and 6 of the assessment order which is reproduced as under : Asst. Year Name of party Rate of Interest Amount O/s at the end of the year Interest to be charged but not charged 2006-07 Ami Sharad Agarwal (HUF) 15% 3,000.00 112.50 H.N. Balkawde 15% 2,700,000.00 405,000.00 Property at Deoghar 15% 4,940,857.00 741,128.50 Advance for Sathe Property 15% 8,151,330.00 1,222,699.50 Sun & Hill Financial Services P.L. 15% 800,000,00 120,000.00 Veer Industries 15% 2,100,000.00 315,000.00 BRA Textiles Pvt. Ltd., 15% 29,627.00 4,444.05 Western Cements Products PL. 15% 17,200.00 2,580.00 Western India ....
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....h addition to 2% instead of 6%. 28. The only other ground which survives in this appeal is against confirmation of disallowance of interest of Rs. 62,651/- on the ground that the assessee diverted interest bearing funds for non-business purposes. 29. The facts of this ground are also admittedly similar to those of Rajkumar Bansilal Agarwal for the A.Y. 2006-07. Following the precedent, we direct the AO to carry out investigation in the terms as stated above. 30. In the result, the appeal is partly allowed for statistical purposes. Bharat Rajkumar Agarwal - A.Y. 2004-05 -: 31. The only issue raised in this appeal is against the confirmation of addition of Rs. 4 lakhs made by the AO u/s.68 of the Act. 32. Succinctly, the facts of the case, are that the assessee claimed to have received gifts of Rs. 4 lakhs from Sharad Raj Mathur (Rs.1,50,000/-), Rashmi Mathur (Rs.1,50,000/-) and Ravi Vaid (Rs.1,00,000/-). The AO required the assessee to furnish various details including the copies of the bank account of the donors wherefrom the amount of gifts were transferred to the assessee's bank account, balance sheet of the donors and other necessary material. The assessee furn....
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..... 18,71,906/- made by the AO by treating sale proceeds on transfer of shares of PIL as income from other sources. 36. Both the sides are in agreement that the facts and circumstances of these grounds are mutatis mutandis similar to those in the case of Rajkumar Bansilal Agarwal for the A.Y. 2006- 07. Following the view taken hereinabove, we uphold the addition of Rs. 18,71,906/-. 37. Ground nos. 5 & 6 raised by the assessee are against the confirmation of addition of Rs. 1,112,314/- on account of commission paid. 38. We have already adjudicated similar ground in the case of Rajkumar Bansilal Agarwal for the A.Y. 2006-07 and ordered to restrict such addition to 2% instead of 6% as ordered by the authorities below. The same view is followed here as well and the grounds are partly allowed accordingly. 39. Ground No.7 is against the confirmation of addition on account of excess stock of Rs. 2,87,941/- and additional excess stock of Rs. 1,17,466/-. 40. The facts relating to this issue are that the assessee was subjected to survey at his business premises. Excess stock of Rs. 2,87,941/- was determined, which was calculated by valuing the stock physically found at Rs. 20,18....