AI Drafter 
TaxTMI 
TaxTMI 
2018 (10) TMI 1635
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..../2018 for the assessment year 2010-11 relating to the assessee Sh. Neeraj Singal. Following grounds have been raised in this appeal: "(1) That the order dated 29-12-2017 passed u/s 250 of the Income-tax Act, 1961 (hereinafter called "the Act") by the Ld Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in passing the order u/s 153A of the Act without appreciating the fact that the order passed by Assessing Officer is without jurisdiction and bad in law as the jurisdiction u/s 153A of the Act is vitiated since no incriminating material pertaining to A/Y 2010-11 had been found during the course of search. (2) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld Assessing Officer in making an addition of Rs. 20,05,651/- on account of Long Term Capital Gains which was exempt u/s 10(38) of the Act by treating it as an allegedly unexplained cash credit u/s 68 of the Act and unjustifi....
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.... Mg Director) was allegedly involved in planned and deliberate activities thereby resulting in alleged under reporting (because of alleged siphoning off) of profits of the Bhushan Steel Limited and alleged non-declaration of true and accurate state of affairs before the Income-tax Department. (7) That the order dated 29-12-2017 passed u/s 250 of the Act by the Ld. Commissioner of Income-tax (Appeals) 23, New Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Assessing Officer in framing the assessment by ignoring the basic principles of natural justice by relying on statements of various persons and data without affording the Appellant any opportunity to cross examine such persons, thus, making the assessment bad in law by considering the same as a general ground, not requiring any separate adjudication." 4. The assessee also moved an application dated 14.07.2018 for admission of the following additional grounds: "1. That the Ld. C.I.T.(A) acted beyond jurisdiction in enhancing income of Sri Neeraj Singal u/s 251(1)(a) of the Income-tax Act, 1961 (the 'Act') by assessing new sources of income beyond....
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....9 ITR 383 (supra) held as under: "Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal." It has been further held as under: "Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee." 9. So, respectfully following the ratio laid down by the Hon'ble Apex Court in the aforesaid referred to case, the legal grounds raised by the assessee are admitted. 10. Vide these legal ground, the assessee challenged jurisdiction of the ld. C....
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....al transaction between the two parties where one party enters the financial transaction in its books to accommodate the other party. These transactions are accommodated mostly in lieu of cash of equal amount and commission charged over and above at certain fixed percentage for providing such accommodation entry. These accommodation entries are taken by various beneficiaries for introducing their unaccounted cash into their books of accounts without paying the due taxes. ii) Entry operator: It is the person who is in the business of giving accommodation entries in lieu of cash/cheque of equal amount after charging certain percentage of commission in cash. iii) Long Term Capital Gain on shares: It is defined by the value of such shares, which are shares of a stock exchange listed company, held by assesses for more than a year. Needless to add, it is exempt from tax under section 10(38) of the Act. iv) Penny Stock: is a stock that trades at a relatively low price and market capitalization. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and l....
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....eneficiaries subscribe for their shares through private placement is in itself a suspicious thing. No genuine person in the right state of mind would invest in these penny stock companies. The shares are subscribed only for the purpose of claiming LTCG at a later stage. The promoters/directors of the companies work hand in glove with the operator to implement this scheme of availing bogus LTCG. ii) The Brokers: They are registered brokers through whom shares are traded both online and off-line. They are fully aware of the nature of transactions and get paid a commission over and above their normal brokerage. Some of the big broking houses are also indulging in such transactions mostly through subbrokers. The brokers often compromise on KYC norms of the clients to help the Syndicate Members. As per the guidelines of SEBI and the stock exchanges, the brokers are supposed to comply with stringent KYC norms before registering any entity as their client. They are supposed to perform detailed background checks of their clients. However, it is seen that these share brokers have done trading for various paper/bogus companies. These paper/bogus entities have no bu....
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....at a fixed time and at a fixed price. These low volume transactions are managed through paper companies of entry operators. iii) Splitting of the shares: It is the most effective way to camouflage the price of shares. The shareholder does not get affected by any of such proceeding adopted by the company except the effect of Corporate Action of NSDL/CDSL thereby releasing old shares and getting the spitted shares in Demat Account. After split of shares the price of shares on the exchange goes down automatically in proportion with the ratio of split and one doesn't see anything adverse happening in the scrip. iv) Final sale by the beneficiary: This is done after the beneficiary has already held the share for one year. The period of holding may be a little more to match the amount of booking with the final rate. The beneficiary is contacted either by the Syndicate member or the Broker (Middle man) through whom the initial booking was done. The beneficiary provides the required amount of cash which is route through some of the paper companies of the entry operator and is finally parked in one company which will buy the share from the beneficiary. The paper company....
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.... was confronted with Sh. Raj Kumar Kedia during the search when his statement was recorded. In his statement he had confirmed that Sh. Mainish Arora was his employee and the statement given by him was correct. The AO reproduced the relevant portion at page nos. 12 to 15 of the assessment order which read as under: "Q.11 Please state about your interest, stakes, business involvement and any other relation with the following companies? 1. Rander Corporation Ltd. 2. Mishka Finance & Trading ltd. 3. MatraKaushal Enterprises Ltd. 4. Vishjyoti Trading Ltd. 5. P.S. Infrastructure & Services Ltd. 6. Pine Animation Ltd. 7. Global Infratech& Finance Ltd. 8. First Financial Services Ltd. 9. Splash Media Infra Ltd. 10. Anukaran Commercial Enterprises Ltd. 11. DB (International) Stock Brokers 12. Ms Unisys Software & Holding Industries Ltd. 13. Blue Circle Services Limited. 14. M/s Action Financial Services 15. Fact Enterprises Ltd. 16. Grandma Trading Agencies Ltd. 17. Parikh Herbal Ltd. 18. Premier Capital Services ....
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.... of me and my family members in my reply to question no 4. In my reply to question no4, I forgot to mention at that time about my one more business activity of giving accommodation entries to various beneficiaries. The commission income earned in cash from the activities of giving accommodation entries has also not been told by me earlier. Therefore, I stand corrected now and I am accepting that I am indulging in the business of providing accommodation entries and earning commission income in cash. Q. 17. Kindly provide details of some persons who used to provide cash on behalf of major beneficiaries & who used to collect cash from you. Ans. Some persons who provide cash on behalf of major beneficiaries are: a) Pankaj Tewari for Bhushan Steel Ltd. b) Suresh Gupta in Delhi, Alkesh Sharma in Kolkata for Bhushan Power and steel limited c) G D Gupta for Dhanuka Agritech Ltd d) Akash Jain for Ajit Industries e) Harinder Singh for Master Trust Group some persons who generally collected cash were: a) Shivam for Jagdish Purohit b) Other transfers of cash were generally through angadiya Q. 18 Who were ....
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....of my business of providing accommodation entries since last 7 years. I used to pay him salary by cheque till March, 2013 but, he is getting salary of Rs. 25,000/- p.m. and brokerage and commission of Rs. 25.000/- p.m. -which has now been increased to Rs. 60,000/- p.m. in total. The entire salary is paid to him in cash. Ques.30. During the course of search at this premise i.e. back side of D-45, Ground Floor, Saraswati Garden, New Delhi, your books of accounts related to the business of providing accommodation entries have been found maintained in 3external hard discs, 14 pen drives and some loose papers which have been annexerised from Sl. No. 1 to 38 of Annexure-A of Panchnama dated 15.6.2014. These hard disks, pen drives and loose papers (Annexure A) were in the custody of Sh. Manish Arora which were kept in an almirah and were seized. I am showing you the loose papers from Sl. 1 to 26, Sl. No. 31 to 35 and Sl. 37 to 38 of the said annexure, please go through every annexure and confirm that these annexures are related to your business and transactions entered on these documents pertains to your business of providing accommodation entries. (One hour break given forgoing ....
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.... This account refers to account of Sh. Nitin Johari who is an employee (CFO) of Bhushan Steel group. He has made some payment on 26.05.2014 to Shrim Investment Solutions Private Limited of Sh. R. K. Kedia, the purpose and accounting of which shall be furnished within two days. Further on 02.06.2014 he invested in the shares of Action Financial Services for reaping bogus LTCG in future. • Pankaj Tiwari - This account refers to Sh. Pankaj Tiwan (phone no. 9560180124) an employee of Bhushan Steel group. This account is also an adjustment account just as account of NP_Ankur where mostly cash payments at the end or immediate beginning of the month are temporarily entered. These entries are finally adjusted with and are reflected in main account of Bhushan Steel group i.e. "NP". • Pankaj Tiwari_Loan - This account refers to Sh. Pankaj Tiwari, an employee of Bhushan Steel group. The entries related to this account are known to Sh. R. K. Kedia only since I used to punch entries in this account on the instructions of Sh. R. K. Kedia only. On 03.05.2014 RTGS payment of Rs. 8 lakhs has been received from Smt. Seema Tiwari by Shrim Software Private Limited, the accoun....
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....e cost of repetition, the same is not reproduced herein. The AO also observed that Sh. Suresh Jojodia was an operator of M/s Anukaran Commercial Enterprises Ltd. and his statement was recorded on 10.06.2015 during the course of survey on M/s Anukaran Commercial Enterprises Ltd. The relevant portion of his statement has been reproduced at page nos. 29 to 32 of the assessment order, for the cost of repetition, the same is not reproduced herein. 17. The AO on the basis of statement of Sh. Raj Kumar Kedia, directors of companies and accommodation entry providers, was of the view that pre-arranged trading in shares companies had been done in which the family members of promoters of BSL group obtained bogus Long Term Capital Gain and that the accommodation entry providers themselves admitted that shares of their respective companies were artificially traded to provide bogus Long Term Capital Gain to various beneficiaries and BSL group was one of the beneficiary of bogus Long Term Capital Gain from those scripts. The AO observed that during the course of search on Kedia group of cases, a number of incriminating evidences, loose documents/PAN drives/HDDs were found and seized, which str....
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.... to BSL group including its promoter family members were among the beneficiaries of bogus Long Term Capital Gains obtained by pre-arranged trading in shares of many non-descript listed companies through Sh. Raj Kumar Kedia. He also observed that the record of the aforesaid seized material was maintained by Sh. Manish Arora who is an employee of Sh. Raj Kumar Kedia whose statement was recorded on oath, in all the statements he admitted that the documents so found and seized pertained to the records of cash received from various beneficiaries to whom such accommodation entries of bogus Long Term Capital Gains were arranged by Sh. Raj Kumar Kedia who also identified many of the beneficiaries in such records, one of which was BSL group. The AO held that these transactions which recorded in the "NP" ledger matched with the trade transactions obtained from BSE and the transactions recorded, were in coded language and a dot (.) had been put after two zero (00) while recording the transactions. Thus, the total amount of transaction would be Rs. 83,61,917/- which was recorded as Rs. 83,619.17. Thereafter, the AO discussed the analysis of seized data found from the premise of Sh. Ankur Aggar....
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.... Ø Thiru John Vs Returning Officer AIR (1977) SC 1724, 1726 19. The AO was of the view that the retraction of Sh. Ankur Aggarwal was baseless which was filed to save the assessee from using the evidences recovered from his premise. Therefore, the retraction filed by Sh. Ankur Aggarwal was not accepted. The AO in paras 4.4 to 4.4.6 discussed the analysis of financials and trade data to establish that penny stock companies had been abused for generating illicit Long Term Capital Gains, he observed that the manipulation in the market price of the shares of the company was evident from the graphical presentation which he had discussed at page no. 43 the assessment order. He also observed that in the investigation report, "Project bogus Long Term Capital Gain/Short Term Capital Loss through penny stock companies" of Kolkata Directorate of Investigation, had analyzed 84 scripts in which manipulative trading had been done and the company M/s Prraneta Industries Ltd. was part of that report which strengthen that manipulative trading had been done in those scrips. The AO also made the analysis of exit providers in paras 4.5 to 4.5.2 of the assessment order and observed th....
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....amely M/s Duari Marketing Pvt. Ltd. and M/s Dreamlight Exim Pvt. Ltd. also called for analysis by the Investigation Wing and cash trail was prepared which revealed that there were regular back to back transactions of the same amount, i.e. credit and debit of the amount and same date(s)/following date (s) with no other deposits and transactions which was typical of entry providing companies, funds through whose bank accounts were utilized to provide accommodation entries to various beneficiaries, as confirmed by the director in those companies, namely, Sh. Sanjoy Dey & Sh. Devesh Upadhyay. The AO mentioned some instances of contents of bank statements, where such frequent fund had taken place which are tabulated at page nos. 59 to 76 of the assessment order, for the cost of repetition, the same is not reproduced herein. On the basis of those tables, the AO was of the view that the exit providers were not genuine as there was no proper compliance to the notices issued u/s 133(6) of the Act and that from trade data obtained from BSE, it had been observed that some companies controlled by Sh. Raj Kumar Kedia such as M/s Esha Securities Ltd., Sh. Gauri Buildtech Pvt. Ltd., Shrigauri Rea....
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.... identical developments like stock splits, preferential allotments, insignificant economic activity and exorbitantly high stock prices, some of those companies investigated by the SEBI were as under: Sr. No. Name of the Company 1. M/s Radford Global Ltd. 2. M/s Maa Jagdambe Tradelinks Ltd (MJTL) 3. M/s Mishka Finance and Trading Ltd(MFTL) 4. M/s Parag Shilpa Investments Ltd (PCSL) 5. M/s Surabhi Chemicals & Investment Ltd (SCIL) 6. M/s Premier Capital Services Ltd. (PCSL) 7. M/s Global Infratech & Finance Ltd (GIFL) 8. M/s Dhenu Buildocn Infra Ltd. 9. M/s First Financial Services Ltd. 10. M/s DB (International) Stock Broker Ltd. 11. M/s Dhanleela Investments Trading Company Ltd. 12. M/s Grandma Trading & Agencies Ltd. 13. M/s Matra Kaushal Enterprises Ltd. 14. M/s Pine Animation Ltd. 15. M/s Rajlaxmi Corporation Ltd. 16. M/s Rander Corporation Ltd. 17. M/s Action Financial Ltd. 18. M/s Prraneta Industries Ltd 23. The AO pointed out that out of the above said 18 companies, BSL family and group had taken bogus Long Term Capital Gain, accommodation entries by trading sh....
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....e persons were found to be connected to the broking houses through which they have traded in the respective scrips. He also pointed out that the SEBI noted in its order that the selection of scrips for trading, the trading pattern and connectivity with brokers cast doubt on the intent of those entities trading in the securities market and that the sheer number of scrips with such dubious price-rise track record in which the said entities and their connected brokers were involved also cast doubts on their conduct in the securities market. He also pointed out that on the basis of its inquiries, the SEBI noted that those persons were instrumental in contributing to the price rise to other stocks as well. The AO observed that the SEBI in its interim order dated 19.12.2014 in the case of M/s Action Financial and M/s Radford Global Ltd. restrained the members of Bhushan Group from trading in stock exchange stating as under: "In order to protect the interest of the investors and the integrity of the securities market, I, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11(4) and section 11B of SEBI Act, 1992, pending inquiry/inve....
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....mphasized here that in terms of the applicable, recognized and prevalent procedures and practices, the broker acts as the intermediary on the online market place where the identity of the counter-party (whether buyer or seller) is not disclosed/available and is consequently also not known to the party entering into the transaction. The entire transaction duly and emphatically stand documented and evidenced by contract notes/bills of the relevant brokers (Copies of which have already been filed before Your Honour) • Since the Assessee was not/could not be aware of the person/entity buying the shares there was no way formal, informal or even collusive, what to talk of legal whereby he could have any control to ensure that the shares could be sold to a particular person/entity. The entire trading, is based on an online, a system of matching bids and offers wherein the deal is executed when the bid price offered by the buyer matches with the offer price of the seller or vice versa. In such a regulated and formalized scenario the possibility of rigged trading to generate allegedly bogus LTCG accommodation through a syndicate of accommodation entry operators through dummy en....
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....agement of the subject companies or any degree of control thereon, it cannot and does not have any role in the movement of prices of the said companies. Moreover in such a situation the Assessee cannot be a part of any wrong doing/'non-compliance including price manipulation or insider trading to which the company or any its promoters may be a part. It should be noted that in a freemarket environment fluctuation in share price is a natural phenomena and cannot be made the basis for doubting any transaction for the purchase/sale of shares. • By virtue of the impugned notice an attempt has also been made to arrive at a co-relation between the gross-revenue/net profit of the companies relative to the movement in the price of the underlying shares. In this connection as discussed above it may be submitted by way of a rebuttal that movement of prices of any shares is the result of the complex interplay of diverse even competing factors of which sale/gross revenue/ is just one solitary factor. Without prejudice to the arguments listed out above if is also submitted that the movement of prices on the stock exchange and even the various underlying indices do not function o....
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.... shares of penny stock companies as sham transactions undertaken through a syndicate of entry providers mere filing of Demat account, bank account, contract notes, bills etc is not adequate to discharge the heavy onus cast on it. To prove his claim it was required to prove that the brokers through whom transactions were undertaken in stock exchange are genuine, the penny stock companies are doing real business and price rise of these companies is based on the performance and financial data of these companies and the counter parties who purchased the shares are genuine had have creditworthiness to purchase the shares on a such high price. Hence, the LTCG earn by the assessee is a SHAM transaction with the accommodation entry providers which is taxable." The reliance was placed on the following case laws: Ø CIT Vs N. R. Portfolio Pvt. Ltd. in ITA Nos. 1018, 1019/2100, order dated 22.11.2013 Ø CIT Vs Nova Prompters and Finlease (P) Ltd. 342 ITR 169 (Del.) Ø CIT Vs Krishnaveni Ammal 158 ITR 826 (Mad.) Ø Madathi Brothers Vs DCIT 30 ITR 345 (Mad.) The AO also observed as under: "ii. Further, in his reply, asse....
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.... be just a coincidence particularly when sellers by virtue of being allotees and prima facie connected / have nexus with Radford and its promoters/ directors and buyers are the entities connected with Radford and its observed that the shares of Radford were not in demand by the general investors of the market and saw very low volume on most of the trading days and hence could not have commanded the price as observed in Patch 1. In any market, a sudden supply, if not matched by similar demand, leads to price fall Considering the same, any rational investor would not have dumped a large number of shares -without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. In this peculiar case, the entities of Radford Group & Suspected Entities created the demand against the supply from the preferential allotters. In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the Radford Group & Suspected Entities provided a hugely profitable exit to the allottees. This could be only possible if the allottees, Radford Group & Suspected Entities and R....
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....onfronted with the evidences gathered and he confirmed that he is an accommodation entry provider and also confirmed all the sworn statements given earlier. It is to be noted here that the strength of the present case is not only sworn statement but the incriminating evidence found & seized from the premises of Shri Raj Kumar Kedia & Shri Ankur Aggarwal and other corroborative evidences gathered from agencies such as Bombay Stock Exchange & Orders of SEBI and disclosure made by the various beneficiaries who have taken accommodation entries of LTCG from Shri Raj Kumar Kedia. The statements only corroborate and support the primary evidence. 4.10.6 Further, it was noticed that in the submission dated 14.12.2016 the assessee did not make any comment on the contents of "NP" ledger, vide order sheet entry dated 13.12.2016 & 14.12.2016 assessee was provided other relevant seized material recovered from the premises of Shri Raj Kumar Kedia and statements of various entry provider and directors of penny stock companies to the assessee. It has been elaborated in chapter analysis of seized material above and in the show cause notice that the documents seized from possession of these ....
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....y based on the oral statements given by the entry operators but also based on the various evidences in the form of electronic data and documents found independently on various dates from various locations during the course of search on Sh. Raj Kumar Kedia and other entry operators and that in their statements various entry operators and their key employees had explained the modus operandi and had explained the interpretation of the coded entries recorded in the data/evidences found and seized, those statements corroborated the evidences found. According to the AO, the cross examination was required only where there were no documentary evidence and where the addition was made merely on the basis of statement of a third person and that in this case, solid evidences were found and the statement corroborated the evidences found. According to him, the assessee was specifically asked to cross examine Sh. Raj Kumar Kedia during the post search proceedings but he had straightaway refused. The AO reproduced relevant part of statement of the assessee recorded on 24.04.2015 which read as under: "25. In view of your consistent denial of the observations that you and your family member....
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.... the entry providers and beneficiaries. It is not to be forgotten here that for the "service of providing accommodation entries for evading tax" hefty commission was charged from the beneficiaries by the entry providers which has been disclosed by Shri Raj Kumar Kedia and offered to tax. Once service is provided for money, a contractual nexus is created between the service providers and beneficiary which cannot be easily broken. Honesty in the dishonest business is the key element here. Request for cross-examination and non compliance of summons exposes the unnatural bonding between the assessee and entry operators, which is being used by the assessee to thwart income tax proceedings in the name of natural justice. ii. Further, the Assessing Officer must place before the assessee all evidence gathered from private sources but he is not duty bound by law to give to the assessee the right to cross-examine the parties from whom the evidence was gathered. In fact, he need not even disclose the names of the parties because in that event confidentiality of the names of the parties would not be maintained." The reliance was placed on the following case laws: Ø ....
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....ements duly supported by evidences that the individuals of BSL group, received bogus LTCG entries from various companies managed & controlled by entry operators. Further, the investments were made by the individuals of BSL Group in shares of various penny stock companies which were not doing any meaningful business and even the earning per share was minimal. No prudent investor will ever invest huge sums in a company which has no history of declaring dividends and do not have sound financial condition.lt is pertinent to mention here that in none of the investment by any person of the BSL group, losses have been incurred by them, in fact in all the transactions of sale of shares of these penny stock companies huge abnormal profits has been earned, which is not possible in normal course of investment. More so, in the various investigations most of such companies were found to be managed and controlled by various entry operators. The entry operators were in the habit of deleting the old records so as to leave no trace/trail in case of stern action by the department. As a result, evidence indicating sham transaction by all the investors were not founded by the department, but the patte....
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....f purchases of the diamond jewellery from M/a Kriya Impex Pvt. Ltd. (Company controlled by Rajender Jain Group). Accordingly, the income was assessed at Rs. 126,44,98,755/- as against the income declared by the assessee at Rs. 125,90,39,860/-. 32. Being aggrieved the assessee carried the matter to the ld. CIT(A) who passed the common order dated 29.12.2017 in the case of all the assessees under consideration. The assessee challenged the validity of assumption of jurisdiction de horse incriminating material found during the course of search and that the jurisdiction u/s 153A of the Act was vitiated since no incriminating document pertaining to the year under consideration had been found during the course of search. It was stated that on the date of search i.e. 13.06.2014, assessment proceedings for the assessment year under consideration i.e. assessment years 2010-11 to 2012-13 had already been completed u/s 143(3) of the Act and no incriminating material had been found during the course of search with respect to those years. It was further submitted that as per the provisions contained u/s 153A of the Act, where an assessment order had already been passed for a year within the r....
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....rfered with and accordingly the assessment order was bad in law void and infructuous. The reliance was placed on the following case laws: Ø CIT Vs Anil Kumar Bhatia (2012) 24 taxmann.com 98 (Del.) Ø CIT Vs Chetan Das Lachman Das (2012) 25 taxmann.com 227 (Del.) Ø Sanjay Aggarwal Vs DCIT, Central Circel-5, New Delhi (2014) 47 taxmann.com 210 (Del.-Trib.) Ø Smt. Rashmi Wadhwa Vs DCIT, Central Circle-8, New Delhi in ITA No. 5184/Del/2014, order dated 18.01.2016 Ø M/s Siriago Pharma (P) Ltd. Vs DCIT, Central Circle-3, Jaipur in ITA No. 1010/JPI/2013, order dated 13.01.2016 Ø DCIT, Central Circle-23 Vs Sh. Himanshu B. Kanakia in ITA No. 3187/Mum/2014, order dated 18.01.2016 34. As regards to the addition of Rs. 20,05,651/- on account of disallowance of Long Term Capital Gains earned by the assessee and the commission of Rs. 1,20,339/-, it was submitted that the action of the AO was based on various arguments/evidences/investigations as discussed in the body of the assessment order including results of search/survey actions carried out on various alleged entry operators, the statements of t....
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....nt and their sale (undisputedly after being held by the assessee for a period of more than twelve months) was effected through a broker registered on a recognized Stock Exchange and that the Securities Transaction Tax was duly paid on the transaction, the sale proceeds from the sale of shares were received through normal banking channels from the stock broker through whom the shares had been sold and stood duly credited to the assessee's Bank Accounts. In support of the aforesaid contention, the assessee furnished copies of the share purchase documents, DEMAT account, share certificates, contract notes and bank statements highlighting the relevant entries, regarding receipts against sale of the shares, were furnished before the ld. CIT(A) and it was claimed that the same were furnished to the AO. It was stated that the provisions of Section 10(38) of the Act provides that any Long Term Capital Gain arising from the transfer of equity shares shall not form part of the total income provided the twin conditions viz. the transaction having been entered into on or after 1st October, 2004 and Securities Transactions Tax having been duly paid thereon, were cumulatively satisfied. It was c....
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....usion between the parties. Therefore, in such a regulated and formalized scenario the possibility of rigged trading to generate allegedly bogus LTCG accommodation through a syndicate of accommodation entry operators through dummy entities was not only negligible but well-nigh impossible. Moreover, the assessee did not have any kind of degree of relationship or control with/over the said companies and neither was he involved in the management thereof at any point of time what to talk of its capital market operations or influencing to any degree or extent its stock market prices. It was stated that purchase of shares was through a preferential allotment which was subsequently duly credited to his DEMAT account, stood duly and comprehensively documented and that the sales of the securities took place through a registered broker on the NSE/BSE in accordance with the prescribed regulatory procedure, rules and applicable laws, whereby both the limbs of the transaction viz. purchase and sale of shares got duly authenticated and the transaction concluded through regular banking channels, the said facts though not relevant from the point of view of determining the taxability or otherwise we....
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....rwal needs to be viewed in this context, overcome as he was by the sudden turn of events whereby he lost his mental balance and made certain statements, admittedly under oath, which did not convey the factual situation and ground realities. It was only later, when the assessment proceedings were taken up in the earnest and of which he was an integral part, was the impact of the statement made by him realized and its ramifications and implications came to fore, that he had to retract therefrom since it did not convey the factual position which also delayed in filing of retraction. It was stated that there could be no bar to a retraction where there was no concrete materials / evidences /circumstances to corroborate the contents of statement made earlier and in the instant case, there was no such evidences on record to corroborate the statement of Sh. Ankur Aggarwal made during the course of search u/s 132 of the Act and accordingly, there was no ground whatsoever to reject the retraction made by him. It was also stated that a statement recorded u/s 132(4) of the Act while passing the evidentiary value is not conclusive proof and can always be retracted. The reliance was placed on th....
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....sessee were summarized by the ld. CIT(A) as under: "(i) No so called accommodation entries were obtained from Sh. R K Kedia or any of his associates and no cash was paid to him either by the Appellant or any of his representative. Moreover there is no concrete evidence to even suggest, let alone prove any cash payment having been made to Sh. R K Kedia or any of his employees, directly or through intermediaries; (ii) No reliance can be placed on the statement of Sh. R K Kedia/Manish Arora (an employee of Sh. R K Kedia) in view of their contradictory behavior and frequently shifting stands. (iii) The Appellant does not know nor can be expected to be in the know off how any information came into the possession of Sh. R K Kedia. (iv) The statement of Sh. Ankur Aggarwal needs to be viewed in the context of the retraction filed by him. The statements needs to be viewed in tandem with any additional evidence that may corroborate the situation conveyed by the statements (of which here is none) and not in isolation. Moreover there is no ground for ignoring, on any ground/for any reason whatsoever the retraction filed by him. (v) Unilateral relian....
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....ions of the Act have to be implemented, administered and interpreted only with reference to its specific provisions and any Income-tax authority is stopped from stepping into the shoes of any assessee so as to question its rationality, prudence or acceptability from a common sense point of view. It was further contended that the assessee only transacted in the shares of the said companies to the limited extent as an investor with a view to be benefited from the long term appreciation in the price of underlying shares with absolutely no control (decisive, persuasive, minuscule or even a notional) or say in the management thereof, what to say in its share market price or capital market operations. It was stated that the AO had not disputed any part of the transaction relating to the purchase of shares in any manner - whether payment, allotment, conversion or any other aspect/limb related thereto and his entire case almost solely rests on the procedure for sale and the alleged, somewhat conjectural, manipulation in the sale thereof and other circumstantial/third party evidence, the entire gamut of which was negated. Therefore, any action based and conclusion drawn on a partial view of....
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....on plans of the company would not materialize. It was also stated that the company was existing on the records of jurisdictional Registrar of Companies, listed on the stock exchange and regularly & diligently complying with all the onerous formalities as required by various applicable statues would only be a misrepresentation of facts and a travesty of justice. 41. As regards to the statements of entry/exist providers and the investigation by DIT(Inv.), Kolkata and Mumbai, it was submitted that the AO relied to a large extent on the search and survey operations carried out by the department on some entities. The assessee submitted that while there was no statutory/accepted definition of the term penny stocks, the said findings/investigations/recommendations could not ipso-facto and unilaterally be extrapolated to apply to the assessee since there was no evidence of any degree or form whatsoever that the assessee was a part of any organized system whereby artificial Long Term Capital Gains were created through manipulated means and moreover, no specific case had been made out against the assessee by the AO and that there was not an iota of evidence to suggest that the assessee wa....
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.... markets, the assessee neither did deal with them directly nor was in the knowledge at that point of time of the actual purchaser of the shares nor did he had any relationship or control over them. In such a situation, the manner in which they managed their activities or run their operations could not have been used to the assessee. It was stated that the entire charge of price manipulation/rigging through a perceived arrangement between various parties/brokers and individuals was based merely on presumptions and without any evidence in this regard with no credence of the assessee's complicity or involvement therein. 42. As regards to the observations of the AO that the various beneficiary groups who allegedly obtained accommodation entries from Sh. Raj Kumar Kedia as detailed in extract E-23 and E-24 of Annexure A-28 found and seized from the business premises of Sh. Raj Kumar Kedia at D-45, Saraswati Garden, Delhi, on the basis of which the AO had sought to unjustifiably concluded that since Sh. Raj Kumar Kedia was an entry operator and he was arranging bogus LTCG entries for various beneficiaries including M/s BSL group (since the records found at his premises also contained ....
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....) Ltd., Fort Share Broking (P) Ltd., and RNA Capital Markets Ltd." 43. As regards to the statements of Sh. Raj Kumar Kedia/Sh. Manish Arora, it was stated that those were unilaterally and critically used to the prejudice of and to the detriment of the assessee but the opportunity to cross-examine the said persons was also crucially, denied to him and that the failure of the appointed persons to appear for cross-examination on the appointed date had prompted the AO to again rather unfairly and unjustly conjure up an imaginary unnatural nexus between the assessee and the alleged entry provider, with absolutely no evidence to back up his conclusion. It was also stated that the positive intent and desire to comply with the laws and cooperate with the department was evident from the presence of the assessee through his authorized representative on the day appointed for this purpose and even at all stages of the assessment proceedings. Therefore, a conclusion of far reaching consequence had been proposed and drawn on the basis of statements made/records seized from a third party and it was incumbent on the department to provide the assessee an opportunity to cross-examine the said per....
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....TD 85 (Asr.) Ø Jhantala Investments Ltd. Vs ACIT (2000) 73 ITD 123 (Mum.) Ø Sumati Dayal Vs CIT 214 ITR 801 (SC) Ø Union of India Vs Azadi Bachao Andolan (2003) 132 Taxman 373 (SC) 46. As regards to the investigation by SEBI of the listed paper scrips viz-a-viz family members of BSL group and orders passed, it was stated that since the Income Tax Act is a separate fiscal statute operating on an independent edifice, its interpretation and administration should be governed by the provisions embodied therein and not by extrapolating inward the provisions/finding of any other Act. Moreover, the provisions of other laws and the findings of any regulatory bodies/institutions/administrative mechanism creates/operates thereunder cannot be ipso-facto on as is where basis applied while administering the provisions of the Act and that the each statutory enactment operates and functions within a defined framework/apparatus and had been enacted by the Parliament with defined objectives, accordingly the findings under the irrespective Acts should not be transported as such to any other Act and that in the instant case while no doubt SEBI, the bo....
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.... Ø ITO Vs Smt. Neelam Chawla in ITA No. 5335/Del/2004 (Del.) Ø ITO Vs Smt. Bibi Rani Bansal (2011) 44 SOT 500 (Agra) 47. It was submitted that the charge that the impugned Long Term Capital Gains arising on the ales of shares of various companies were bogus, was wrong both factually and legally. Therefore, the additions being based on faulty premises, suspect logic and an unsustainable interpretation /implementation of legal provisions coupled with serious procedural lacunae deserves to be deleted. 48. As regards to the commission expenses @6% on the Long Term Capital Gains, it was stated that the same was on sheer presumptive basis and there was no evidence of any form whatsoever available with the department that the assessee had incurred any expenditure in this regard, as such the addition made being unjustified deserves to be deleted. 49. As regards to the addition of Rs. 33,32,905/- made by the AO on account of alleged bogus purchase of jewellery from M/s Kriya Impex Pvt. Ltd. It was submitted that the said jewellery was purchased vide bill no. KYPL/PD/DEC/12/2009-10 dated 08.12.2009 and the payment was made vide Ch. No. 688566 drawn on asse....
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....es of natural justice which involved reasonable application of prescribed procedures with a view to promote natural justice and prevent its miscarriage had been derailed and sabotaged. Accordingly, the entire exercise made in gross violation of principles of natural justice, was void ab-initio and the corresponding conclusions drawn need to be negated to prevent further miscarriage of justice. The reliance was placed on the following case laws: Ø Bagsu Devi Bafna Vs CIT (1966) 62 ITR 506 (Cal.) Ø Kishinchand Chellaram Vs CIT, Bombay City-II (1980) 4 Taxman 29 (SC) Ø The North Wales Police Vs Evans (1982) 1 WLR 1155 Ø R.B. Shreeram Durga Prasad and Fatechand Nursing Das Vs Settlement Commission (IT and WT) and another (1989) 49 Taxman 34 (SC) Ø Rajesh Kumar Vs DCIT (2006) 157 Taxman 168 (SC) Ø C.B. Gautam Vs Union of India (1992) 65 Taxman 440 (SC) Ø CIT, Delhi-IV, New Delhi Vs Dharam Pal Prem Chand Ltd. (2008) 167 Taxman 168 (Del.) Ø Prakash Chand Nahta Vs CIT (2008) 170 Taxman 520 (MP) 51. The ld. CIT(A) also issued notice for enhancement of income and....
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.... officers during the course of investigation, Sh. Pankaj Tiwari accepted that the assessee availed input CENVAT credit on zinc ingot which was diverted to other destinations and not used by the assessee in the manufacturing of final products. The ld. CIT(A) observed that Sh. Tiwari categorically admitted that the said practice of diversion of zinc sale of the diverted zinc in cash outside the books and wrong claim of CENVAT was in the knowledge of Executive Vice President (Commerce), Sh. Batra and that the assessee i.e. Sh. Neeraj Singal. The ld. CIT(A) referred to the relevant question at page nos. 124 to 126, for the cost of repetition, the same is not reproduced herein. The ld. CIT(A) pointed out that the investigations conducted by the Central Excise Authorities revealed that during the period from 16.08.2008 to 20.03.3013, the total quantity of zinc ingots supplied from Haridwar plant was in 758 consignment which involved central excise duty amounting to Rs. 24,17,42,090/- and that Sh. Vijay Kumar Aggarwal, proprietor of M/s Aggarwal Cargo Movers in his statement, interITA alia confirmed that the vehicles of their transport company were engaged in the transportation of zinc in....
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.... which was never declared (earlier) for taxation purposes. He offered the same for taxation in the FY 2009-10 (AY 2010-11). ii) Page no. 5 of Annexure-A3 evidencing cash advances to seven persons amoutnign to (total) Rs. 69.00 crores. These amounts were outstanding as on 31.01.2010. On questioning Sh. Neeraj Singal, VC & MD of the Bhushan Steel Ltd. replied that it was out of his income from undisclosed sources. He offered the same for taxation in the FY 2009-10 (AY 2010-11). iii) Page no. 4 of Annexure-A3 evidencing cash advances on 09.06.2009 amounting to Rs. 3.00 crores. On questioning Sh. Neeraj Singal, VC & MD of the Bhushan Steel Ltd. replied that it was advance given for a property at Q-1-A, Hauz Khas Enclave, New Delhi he further stated that it was out of his income from undisclosed sources. He offered the same for taxation in the FY 2009-10 (AY 2010-11). iv) Sh. Neeraj Singal disclosed amount of Rs. 90.00 crores in FY 2009-10 (AY 2010-11) on account of above said page nos. 4, 5 and 6." 52. The ld. CIT(A) also quoted the relevant portion of the statement of the assessee taken at the relevant time at page nos. 239 to 240 and 242 to 245 of the im....
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...., indirect, circumstantial or even suggestive to abet a conclusion that the amount, if any generated from the impugned activities went into the personal coffers of the Appellant which conclusion, can at best be only termed as superficial and conjectural. (d) Before going on to deal with the issue of the extent to which reliance can be placed on the statement of Sh Chander Kant Jadhav, (which, in any case, he has subsequently retracted), wherein he has allegedly deposed that he receives cash payments for the sale of scrap at the Khopoli Plant and which has not been accounted for in the books, it needs to be noted that whatever scrap is generated in the manufacturing process of BSL stands duly recorded in the books of accounts maintained. It may also be mentioned that the said Company, being subject to the rigors of Excise laws, maintains complete stock records as prescribed by the relevant rules and also files periodical returns wherein the amount of scrap generated and its sale is duly recorded. The Appellant Company is also not aware of the circumstances and basis in which the said statement was made by Sh Chander Kant Jadhav. (e) Furthermore, it may also be subm....
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....d. The decision to approach the Settlement Commission was motivated only by a desire to obviate litigation which would have been time consuming and expensive and conserve energy and resources for the operations of the Appellant Company to ensure its sustained growth and progress. (h) To sum up the proposed enhancement on account of various issues, including alleged sale of scrap and zinc in cash by BSL, in the hands of the Appellant is not justified in view of the following facts and reasons: - (i) There is a clear-cut dichotomy and divergence between the activities carried out and decisions made by the appellant in an official capacity and personal capacity with no cause for any intermixing of the two. (ii) The basis on which the proposed action is being resorted to is itself being vehemently disputed by BSL in separate appellate proceedings based, as it is, on conflicting evidences and questionable surmises. (iii) There is no evidence of any form, nature or quality to even suggest that the money, if at all, generated by BSL went into enriching the coffers of the Appellant. (iv) The very basis on which the action is proposed to be made ....
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....been purchased for consumption in the manufacturing process by the assessee with the help of other associates and that the claim of CENVAT credit was bogus and it was a deliberate and planned exercise. Therefore, the cash generated through this activity in the form of loans and advances detacted as a result of search on 03.03.2010 and bogus Long Term Capital Gains through accommodation entry showing dealing in penny stocks as a result of search on 13.06.2014. Particularly when, the assessee was not able to deny the contents of the statement of Sh. Pankaj Tiwari and was also not able to deny any other corroborative material. 54. The ld. CIT(A) rejected the books of accounts and enhanced the income by observing as under: "8.1 During the appellate proceedings, the undersigned was neither satisfied about the correctness of the accounts of the appellant, nor (the undersigned was satisfied) about the completeness of the accounts of the appellant because the following was observed (the same has also been discussed above): i) Sh. Neeraj Singal, VC & MD of the appellant, with the help of employees of the appellant, (important role played by Sh. Pankaj Tiwari, Assistant ....
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....s it was found that Sh. Singal and his family members were involved in obtaining accommodation entries in form of pre-arranged and bogus transactions showing Long Term Capital Gains in penny stocks and claiming such (bogus) Long Term Capital Gains in penny stocks to be exempt from levy of Income Tax. Apparently, the unaccounted cash generated through the above stated clandestine and outside the books(of account) activities, was being laundered through accommodation entries. vii) The act of obtaining accommodation entries by Sh. Singal and his family members was also corroborated by the evidences found/ gathered during the search & seizure operation on 13.06.2014 and post search investigation in case of Sh. R.K. Kedia (the search was conducted on the same date as in case of appellant and Sh. Neeraj Singal). It was also evidenced that Sh. Pankaj Tiwari, Asstt Vice President of the appellant company ( who sold diverted zinc ingots purchased from M/s Hindustan Zinc Ltd., Haridwar in cash and handed over the cash so received to Sh. Neeraj Singal through the cashier, Sh. D.B Gupta. handed over cash to Sh. R.K. Kedia in lieu of providing accommodation entries to Sh. Neeraj Singal....
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....f Zinc from M/s HZL, Haridwar and payment to M/s Mewar Transport Co.: A.Y. Addition on account of purchase expenses for clandestinely diverted zinc (Rs. in crs.) Addition on account of Transport Expenses for clandestinely diverted zinc (Rs. in crs.) Total (Rs. in crs.) 2009-10 13.59 0.41 14.00 2010-11 61.23 1.29 62.52 2011-12 86.80 1.73 88.53 2012-13 48.74 0.96 49.70 2013-14 47.96 0.86 48.82 Total 263.57 58. The ld. CIT(A) compared the GP rate and NP rate of M/s Tata Steel Ltd. with assessees and made the comments as under: "GP/NP of M/s Tata Steel Ltd. cannot be compared because Tata Steel Ltd. is having integrated operations starting from mining. Comments: i) No doubt, as such no two cases would be identical. There is bound to be some difference. Idea is to have best available method to estimate the profit. Undisputedly, the M/s Tata Steel Ltd. is in the same business (of steel). The year wise chart of the GP/NP of M/s Tata Steel Ltd. as compared to that of appellant is tabulated as under: AY M/s Tata Steel Ltd. Company's GP ratio (%) ....
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....rial was used in the assessment proceedings imitated under section 153A only under the genuine impression about the position of law that once proceedings under section 153A are initiated, the material gathered or received from any source would be used in the same assessment proceedings. In case, this information was received at a time when proceedings under section 153A were not there, AO was obliged to examine it from the angle of reopening the assessment under section 147/148 and in case the AO was satisfied that conditions mentioned under section 147/148 were fulfilled, a notice under section 148 would have been issued. Since, it has been held above that the proceedings under section 153A was not legal because qua this assessment year, there was no incriminating material unearthed during the search conducted on 13.06.2014 under section 132 of the I.T, Act, 1961, therefore, the A.O. is directed under section 150(1) to examine the case under section 147/148, independently and in case the conditions under relevant sections are found to be satisfied, the proceedings may be initiated notwithstanding anything contained in section 149 subject to provisions of section 150(2). 1....
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....inted out that during the course of assessment proceedings summons u/s 131 of the Act was issued to Sh. Ankur Aggarwal on 16.12.2016 to appear before the AO on 22.12.2016. However, Sh. Ankur Aggarwal filed a letter of retraction on 20.12.2016 and did not appear on the date fixed by the summons u/s 131 of the Act and the assessee did not produce Sh. Ankur Aggarwal. Therefore, the retraction made by Sh. Ankur Aggarwal was not bonafide. The reliance was placed on the following case laws: Ø Pr. CIT(C)-2, New Delhi Vs Avinash Kumar Setia (2017) 81 Taxmann.com 476 (Del.) Ø Gurdev Agro Engineers, Bhawanigarh Vs CIT, Patiala (2016- TIOL-2689-HC-P&H-IT) Ø CIT, Kozhikode Vs O. Abdul Razak (2012) 20 Taxmann.com 48 (Ker.) 62. The ld. CIT(A) also observed that an irrefutable link had been established between the assessee and his family members on one hand and Sh. Raj Kumar Kedia and his activities of providing accommodation entries on the other hand and that the assessee was provided opportunity to cross-examine Sh. Raj Kumar Kedia, Sh. Manish Arora and Sh. Ankur Aggarwal, however, he declined such opportunity. He also observed that since the s....
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.... order, as above. To recap, the important ones are mentioned below. i) The unaccounted cash generation by way of clandestine diversion and sale (in cash) of raw material shown to have been purchased for consumption in the manufacturing process, and payments for (bogus) transportation of this material, consistently for five years by/on behalf of Sh. Neeraj Singal (VC & MD of M/s Bhushan Steel Ltd.) and payment of the cash generated due to such clandestine and organized process to Sh. Neeraj Singal has been proved, especially by way of statement of Sh. Pankaj Tiwari before Excise Authorities. The order of the Settlement Commission is at Annexure-1 to this order and the statement of Sh. Pankaj Tiwari made before Excise Authorities is at Annexure-2 to this order. ii) Generation of cash through unaccounted sale of scrap and payment of the same as per instruction of Sh. Neeraj Singal has been proved, specially by way of statement of Sh. Chandrakant Ma hade v Jadhav. iii) Evidence of cash generation and application was found during earlier search (dated 03.03.2010) in form of incriminating documents leading to surrender of heavy amount as undisclosed income by t....
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.... which has been disclosed by Sh. Ankur Aggarwal as per his statement dated 13.06.2004 (recorded during the search). xiv) Incriminating statements by the Directors of these penny stock companies to the effect that they were only dummy Directors and share prices were being manipulated by the entry operators. xv) Incriminating report of Directorates of Income Tax(lnv.) Mumbai and Kolkota recording statements of entry operators to the effect that they were controlling shares of the penny stock companies in which LTCG has been reaped. xvi) Identical incriminating material recovered during the search at the residence of Sh. Ankur Aggarwal (employee of Bhushan Steel Ltd.) and premises of Sh. R. K. Kedia (admitted entry operator). xvii) Incriminating statement of one of the exit (accommodation entry) provider. xviii) Evidence of Cash Trail leading to funds in the account of accommodation (entry) providers. xix) Investigation by SEBI implicating appellant and his family members regarding malpractices in trading of the shares of the same non-descript companies where the appellant and his family member have reaped LTCG. xx) Admiss....
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....was grey market purchase is negated by this fact of non-finding of these diamonds during the above said two occasions of searches. Since, it is the stand of the appellant that these items were actually purchased, therefore, without going into the controversy whether such purchase was bogus or not, AR was asked to explain as to why non-finding of the said items during the subsequent two searches should not lead to the conclusion that these were sold before the first search(on 03.03.2010) and reasonable profit must have been made due to the said out of books sale. The AR had no reply, therefore, the addition to the extent of Rs. 3,32,906/- (being 10% profit) is confirmed and rest of the addition is deleted. Thus, the ground (No. 5) is partly allowed." 53.5 In view of the above, a finding of facts has been returned(independently) by this office that the transactions under consideration were stage managed and accommodation entries, obtained by payment of unaccounted cash of equal amount plus commission." 68. As regards to the enhancement of the income, the ld. CIT(A) observed as under: " i) clandestine diversion and sale in cash of raw material shown to have been p....
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....ortation charges are for personal benefit of Sh. Neeraj Singal. In view of the said material, the onus is upon the appellant to prove that the cash generated due to sale under consideration and corresponding (bogus) transportation charges is not income of Sh. Neeraj Singal but the appellant has miserably failed to discharge the onus." 70. The ld. CIT(A) enhanced the income and held as under: "56.13 In view of the above discussion, it is held that income generated in form of cash due to a) clandestine diversion and sale of raw material (shown to have been purchased for consumption in the manufacturing process)& payment of corresponding (bogus) transportation charges and b) sale of scrap is indeed the income of Sh. Neeraj Singal. The activity of such sale is likely to have some profit margin. However, there would be certain expenses, also. Therefore, it is reasonable and fair to assume that the income would be equal to the value of clandestinely diverted raw material, payments for (bogus) 'transportation1 charges up to factory and sale of scrap as reflected by the (coded) entries in the diary of Sh. Jadhav and (as) such entries explained by Sh. Jadhav by way of record....
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....tted that M/s Prraneta Industries Ltd. is under control and management of Sh. Sirish Chandrakant Shah and he is in the (same) business of providing accommodation entries. Sh. R.K. Kedia further stated that booking for bogus & pre-arranged LTCG, via transactions in shares of this company, was done through Sh. R.K. Kedia. 57.3.4 Vide Question no. 41 of statement of Sh. Neeraj Singal, recorded during the search, the officer recording the statement specifically stated that he had learnt that transactions with M/s Prraneta Industries Ltd. were managed through the help of Sh. R. K. Kedia (ref. para 52.2.1, above). Moreover, vide Question no. 32 of statement of Sh. Brij Bhushan Singal, recorded during the search, the officer recording the statement specifically asked Sh. Brij Bhushan Singal as to whether he had heard or transacted in the past six years in certain scrips mentioned therein. Name of M/s Prraneta Industries Ltd. was specifically mentioned in the said question (ref. para 52.2.2, above). The above stated two references clearly show that the search team was having information about manipulation in the shares of M/s Prraneta Industries Ltd. and the search operation was m....
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.... the same which indicate that purchase is not genuine. 57.5.2 The question is whether the material gathered during the search which beyond doubt shows manipulations and coloured transactions, in general, and specifically in penny stocks has implications for the above stated scrips (M/s. G-tech Info Ltd. and M/s. Prraneta Industries Ltd.) ?The answer to question is in affirmative in the light of ratio of Hon'ble Delhi High Court laid down while delivering judgment in case of CIT Vs. Chetan Das Lachman Das[2012] 25 taxmann.com 227 (Delhi). The Hon'ble Court ruled that transaction can be presumed for whole period on basis of seized material and seized material can also be relied upon to draw inference-that there can be similar transactions throughout period of six years covered by section." 72. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that a search & seizure operation on M/s Bhushan Steel Ltd. (BSL) group of cases including premises of the assessee was carried out on 13.06.2014. However, no incriminating material whatsoever indicating any undisclosed income or ....
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....tute incriminating material found in the course of search deserves to be deleted. The reliance was placed on the following case laws: Ø All Cargo Logistics Ltd. Vs DCIT (2012) 18 ITR 106 (SB) Ø CIT(C)-III Vs Kabul Chawla (2015) 61 Taxmann.com 412 (Del.) Ø Jai Steel (India), Jodhpur Vs ACIT (2013) 259 CTR 281 (Raj.) Ø Pr. CIT & Ors. Vs Meeta Gutgutia Prop. Ferns 'N' Petals & Ors (2017) 395 ITR 526 Ø Pr. CIT Vs Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj.) Ø Pr. CIT-1 Vs Devangi Alias Rupa (2017-TIOL-319-HC-AHM-IT) Ø CIT Vs IBC Knowledge Park Pvt. Ltd. (2016) 385 ITR 346 (Kar.) Ø Pr. CIT-2 Vs Salasar Stock Broking Ltd. (2016-TIOL-2099-HCKOL- IT) Ø CIT Vs Gurinder Singh Bawa (2016) 386 ITR 483 (Bom.) Ø CIT Vs Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) Ø Pr. CIT, Delhi-2 Vs Best Infrastructure (India) Pvt. Ltd. & Ors. in ITA Nos. 11/2017 to 22/2017 Ø Dharampal Satyapal Ltd. Vs DCIT in ITA Nos. 3310, 3717, 3718, 3719, 3737, 3877 to 3881/Del/2016, order dated 17.05.2018 ....
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.... Section only for the purpose of seized material" meaning that use of the phrase "seized" material i.e. incriminating in nature is a mandatory requirement that cannot be done away u/s 153A/153C of the Act with respect to unabated assessment years. Therefore, the ld. CIT(A) had erroneously worked on the assumption that this pre-condition had been made for the assessees with respect to the respective scrips for which material had allegedly been found in the possession and premises of third parties (and not that of the assessees). It was submitted that the third party statements recorded i.e. Sh. Raj Kumar Kedia and his employee Sh. Manish Arora alleged entry operators/exit providers, Directors of alleged penny stock companies, Sh. Ankur Agarwal, an employee of BSL but those statements did not constitute incriminating material unless they have live nexus with books of account, documents found in the course of search but not produced in the course of original assessment for undisclosed income or property discovered in the course of search in the assessee's case. It was further submitted that the pen-drive seized from Sh. Ankur Agarwal was having nothing incriminating against the assess....
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....nst the assessee was to be drawn on the basis of the statements of the persons, an opportunity to cross-examine the said persons may be provided. It was stated that in this regard, summons u/s 131 of the Act were issued to 15 persons but none of them responded to the summons and since the onus of ensuring the presence of the deponents for cross-examination was on the AO who failed to discharge such onus. Therefore, as per the clear dictum of the Hon'ble Jurisdictional High Court, such statements ought to be discarded and could not be relied upon for making additions u/s 153A of the Act. It was stated that for the assessment years under consideration i.e. assessment years 2010-11 to 2012-13 in the cases of all the four assessees under consideration, the assessment were not pending as on the date of search and as such there would be no abatement of any proceedings for the said years. In other words, at the time of search i.e. on 13.06.2014, the assessments for the assessment years 2010-11 to 2012-13 in the cases of the assessees were completed/not pending and therefore, the same have to be reckoned as unabated assessment in terms of second proviso to Section 153A of the Act and that ....
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....ses of Sh. Ankur Agarwal and Sh. Raj Kumar Kedia did not contain any entries/data whether incriminating or otherwise with respect to transactions in shares of the aforesaid scrips for the unabated assessment years i.e. assessment years 2010-11 to 2012- 13. Accordingly, assessments for unabated years cannot be reopened on the basis of such materials. As regards to the "NP" ledger seized from the premises of Sh. Raj Kumar Kedia relied upon by the AO, it was stated that the ledger contained entries for a period of 13 months from 01.04.2013 to 09.06.2014 which did not constitute incriminating material for the unabated assessment years i.e. assessment years 2010-11 to 2012-13. It was reiterated that the assessee had from the very inception consistently denied any relationship/linkage/dealings with Sh. Raj Kumar Kedia or Sh. Manish Arora or any of the alleged entry operators/exit providers or directors of penny stock companies. It was further submitted that the pen-drive seized from the premises of Sh. Ankur Agarwal did not contain anything incriminating against the assessees, it merely recorded the regular transactions in purchase and sale of shares of the assessees for a period of 2.5 ....
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....sessee filed the returns of income for the years under consideration and earned the Long Term Capital Gains in various scrips on which Securities Transaction Tax (STT) had been duly paid and having complied with all the requisite conditions, the LTCG was rightly claimed exempt u/s 10(38) of the Act but the AO by ignoring the specific provisions of law proceeded to tax the entire LTCG to the income of the assessees for the relevant years relying on various arguments/so-called evidences as discussed in the body of the assessment orders. However, the socalled evidences used by the AO in making the impugned additions were highly unreliable and did not conclusively prove that the LTCG earned by the assesses were not genuine or sham. It was stated that most of the shares of the companies on which LTCG had been earned were allotted to the assessees by way of preferential allotment and that one of the grounds taken by the AO in doubting the transactions carried out by the assessees and alleging personal connection between the assessees and the promoters of the said companies/entry providers was that the shares of the said companies were allotted by way of preferential allotment. It was sta....
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....ade to paper books 1A, 1B, 2A, 2B, 3A, 3B & 4. The reliance was placed on the following case laws: Ø Andaman Timber Industries Vs Commissioner of Central Excise (2015) 281 CTR 241 (SC) Ø Kishinchand Chellaram (AIR 1980 SC 2117) Ø State of M.P. Vs Chintaman Sadashiva Waishampayan (AIR 1961 SC 1623) Ø Lakshman Exports Ltd. Vs Collector of Central Excise (2005) 10 SCC 634 Ø Rajiv Arora Vs Union of India and Ors. (AIR 2009 SC 1100) Ø CIT Vs SMC Share Brokers Ltd. (2007) 288 ITR 345 (Del.) Ø Eastern Commercial Enterprise (1994) 210 ITR 103 (Cal.) Ø Prakash Chand Nahta Vs CIT (2008) 301 ITR 134 (MP) Ø Bangodaya Cotton Mills Ltd. Vs CIT (2009) 21 DTR 200 (Cal.) Ø CIT Vs Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H) Ø CIT & Anr. Vs Land Development Corporation (2009) 316 ITR 328 (Kar.) Ø CIT Vs Rajesh Kumar (2008)_ 306 ITR 27 (Del.) Ø Heirs & LRs of Late Laxmanbhai S. Patel Vs CIT (2009) 222 CTR 138 (Guj.) Ø CIT Vs Pradeep Kumar Gupta (2008) 303 ITR 95 (Del.) &Os....
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....el/2012 (Del.) Ø Smt. Smita P. Patil Vs ACIT (2014) 159 TTJ 182 (Pune) Ø CIT Vs Eastern Commercial Enterprises (1994) 201 ITR 103 (Cal.) 80. It was further submitted that the statements of the Directors of penny stock companies, alleged entry and exit providers only explained the general modus operandi with respect to the shares of the said companies being allegedly utilized for the purpose of providing accommodation entries in certain cases but no concrete evidence had been unearthed in the course of search of the assessee to conclusively establish that the assessee had booked bogus LTCG or that his own unaccounted money was routed through transactions in shares of said scrips or that he had made any compensatory payments to the buyers of the said scrips. It was further submitted that the statements of the Directors of penny stock companies recorded in the course of survey u/s 133A of the Act did not have any nexus to anything incriminating found in the course of search at the premises of the assessee. Therefore, those statements did not have any evidentiary value and could not on a standalone basis be used to draw adverse inference against the a....
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....rma, ITA No.14/2005 decided on 24.04.2017. Ø CIT Jaipur vs. Vijendra Kumar Kankaria, ITA No. 175/2010 decided on 29.05.2017 Ø Common Cause (A Registered Society) and Ors. vs. Union of India (UOI) and Ors. Ø Bhandari Construction Company vs. Narayan Gopal Upadhye Ø Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors. Ø Andaman Timber Industries vs. Commissioner of C. Ex., Kolkata- II Ø Principal Commissioner of Income Tax Ahmedabad and Ors. vs. Kanubhai Maganlal Patel Ø CIT v. Devendra Kumar Singhal Ø Commissioner of Income Tax-V vs. Indrajit Singh Suri Ø CIT vs. Supertech Diamond Tools Pvt. Ltd., 74 of 2012 Ø Commissioner of Income Tax vs. Ashwani Gupta Ø ACIT vs. Govindbhai N. Patel Ø CIT Kanpur vs. Shadiram & Others Ø Commissioner of Income Tax vs. Bhanwarlal Murwatiya and Ors. Ø CIT vs. Dhrampal Premchand Ltd Ø CIT vs. S.M.Agganval Ø Paramjit Singh vs. 1TO, IT Appeal No. 401 of 2009 Ø CIT-13 Vs. M/s.....
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....erson from whose premises the documents are found and not against the person whose name appears in the seized papers. • Based on the incriminating material found from third party search but not belonging to the assessee, this presumption will not be applicable unless corroborated by other evidence. • Statement of a third party cannot be used against the assessee unless the assessee is allowed an opportunity to cross-examine him. • Any addition made on the basis of statement by a Third Party without affording an opportunity for rebuttal or cross examination to the assessee is perverse. • Frequent retractions of statement (i.e. retraction following by reretraction) by the deponent undermines the credibility of its genuineness." 84. The ld. Counsel for the assessee in his conclusion enunciated the principles to the facts of the assessee's case as under: • "Mere seizure of documents/hard soft data/ pen-drive from the premises of third party (Sri. R.K. Kedia) / personal residence of employee of BSL (Sri Ankur Agarwal) would not conclude the issue against the Assessees herein since presumption u/s 132(4A)/292C would be o....
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....t, I, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11(4) and section 11B of SEBI Act, 1992, pending inquiry/investigation and passing of final order in the matter, hereby restrain the following persons/entities from assessing the securities market and buying selling or dealing in securities, either directly or indirectly, in any manner, till further directions." 86. It was contended that the similar Ad Interim Ex-parte Orders were passed by the SEBI in respect of the scrips of M/s Mishka Finance & Trading Ltd. (formerly known as M/s Pyramid Trading and Finance Ltd.) dated 17.04.2015 and M/s Pine Animation Ltd. dated 08.05.2015. However, the said orders were only in the nature of interim orders based on the preliminary investigations carried out by the SEBI pending inquiry/investigation and passing of final orders by the SEBI. It was contended that the Hon'ble Gujarat High Court in the case of SEBI Vs Alka Synthetics (1999) 19 SCL 460 (Guj.) had opined on the nature of Ad Interim Ex-parte Orders, being merely preventive checks that are placed on certain assessees upon a mere prima facie opinion pending final decision of the S....
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....detailed investigation by the SEBI, the assessees (i.e. the Bansal Family members) were not found part of any such fraudulent schemes in the shares of the said companies and accordingly, the interim orders passed against them were subsequently revoked by the SEBI and that the said final orders passed by the SEBI in favour of the assessees buttress/reinforce their contention with respect to the genuineness of the impugned transaction carried out by them and held immense persuasive value onto the assessee's case. The reliance was placed on the following case laws: Ø RM Shares Trading Vs SEBI (2014) 49 Taxmann.com 369 (SAT - Mumbai) Ø SEBI Vs Alka Synthetics (1999) 19 SCL 460 (Guj.) 88. As regards to the cash trail in bank accounts of purchaser companies, the ld. Counsel for the assessee submitted that the AO was not justified in drawing any adverse inference against the assessee on the basis of enquiry as to the names of buyers who ultimately bought shares sold by the assessee because the assessees were neither aware of the identity of the buyers who bought the shares sold by them through brokers nor did they had any connection with them and that th....
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....lusive documentary evidences to show that shares were purchased and sold via legal channels in conformity with market prices and no evidences having been brought on record by the Revenue Authorities to prove that the transactions had been carried out with some kind of connivance with brokers/entry operators for introduction of unaccounted money or any unaccounted monies of the assessee had been routed by the said channel, no addition could have been made u/s 68 of the Act. 90. As regards to the disclosure by beneficiaries to bogus LTCG, it was stated that the circumstances and facts of each person/group were different by disparate factors and could not have been extrapolated, particularly when, the assessee was neither aware nor concerned with the nature of transactions carried out by the said parties or their nexus/dealings with Sh. Raj Kumar Kedia, even the department had failed to unearthed any incriminating material whatsoever to establish any link of the assessee with Sh. Raj Kumar Kedia or factum of obtaining any accommodation entries through him despite using the longest arm of the revenue against the assessees in the form of search and seizure operations u/s 132(1) of th....
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.... Bhagat Ambica Ram Vs CIT (1959) 37 ITR 288 (SC) Ø GTC Industries Ltd. Vs ACIT (2017) 164 ITD 1 (Mum. Trib.) Ø S.A. Builders Ltd. Vs CIT (2007) 288 ITR 1 (SC) Ø CIT Vs Dhanraj Girji Raja Narasingherji (1973) 91 ITR 544 (SC) Ø CIT Vs Walchand and CO. (1967) 65 ITR 381 (SC) Ø ITO Vs Aarti Mittal (2013) 37 CCH 227 (Hyd Trib.) Ø Vishal Suryakant Shah & Ors Vs ITO & Ors (2017) 49 CCH 106 (Ahd Trib.) Ø ITO Vs Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum Trib.) Ø Farrah Marker Vs ITO (2016) 46 CCH 535 (Mum. Trib.) Ø CIT Vs Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) Ø CIT Vs Anirudh Narayan Agrawal (2013) 84 CCH 28 (All.) Ø CIT Smt. Kannadevi Agarwal & Ors. (2010) 328 ITR 656 (Mum) Ø Kamala Devi S. Doshi & Ors. Vs ITO (2017) 50 CCH 53 (Mum) Ø ACIT Vs Kamal Kumar S. Agarwal (Indl.) & Ors. (2010) 113 TTJ 818 (Nag. Trib.) Ø Dolarrai Hemani Vs ITO (2016) 48 CCH 286 (Kol. Trib.) Ø CIT Shreevashi Ganguli in ITA NO. 196 of 2012 (Cal. HC) &Oslas....
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....2125900 69.00 69.2125900 Nil 2011-12 88.5300 39.0761585 - 39.0761585 49.4538415 2012-13 49.7000 18.7473666 - 18.7473666 30.9526334 2013-14 48.8200 15.7886180 - 15.7886180 33.0313820 2014-15 1.5964 98.6345526 - 98.6345526 Nil 2015-16 1.9475 34.4751867 - 34.4751867 Nil 94. It was contended that the taxability of the aforesaid alleged incomes had not been considered at all by the AO in the assessment orders u/s 153A/143(3) of the Act dated 30.12.2016 for the assessment years 2010-11 to 2015-16 and the said alleged incomes did not constitute the subject matter of the assessment i.e. the same had neither been offered by the assessee in his return of income nor was their any whisper regarding taxability or otherwise of alleged source of income in the assessment orders passed by the AO u/s 153A of the Act for the years under consideration. Therefore, the ld. CIT(A) had no power to enhance the assessment by assessing new sources of income outside the subject matter of assessment appealed. The reliance was placed on the following case laws: Ø CIT Vs Shapoorji Pallonji (1962)....
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....4 i.e. much before the order of the Settlement Commission and that as per the ld. CIT(A)'s own observations, the information in respect of the aforesaid issues were received through TEP after issuance of notice u/s 153A of the Act which did not constitute incriminating material unearthed during the Income-tax search conducted on 13.06.2014 for the purpose of making assessment u/s 153A of the Act. Therefore, the same logic should have been applied in assessee's case and the ld. CIT(A) was not justified in enhancing the income of the assessee on the identical issue which was considered by him in the case of M/s Bhushan Steel Ltd. It was further submitted that the ld. CIT(A) also enhanced the income of the assessee on account of alleged unaccounted sale of scrap generated in the manufacturing process of BSL for the assessment years 2014-15 & 2015-16, despite the fact that identical additions on the said counts for the said years were already made by the AO in the hands of M/s Bhushan Steel Ltd., thereby resulting double addition of the same income in the hands of two different assessees. It was further submitted that even if for the argument's sake, it was to be assumed without conced....
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.... market purchase. It was contended that the diamonds were purchased through regular banking channels and duly disclosed in the respective wealth tax returns for the assessment year 2010-11 and onwards which had been accepted as such in the Wealth Tax Assessments of the assessee. It was further submitted that the diamonds amounting to Rs. 33,32,906/- were purchased by the assessee vide Bill No. KYPL/PD/DEC/12/2009-10 dated 08.12.2009 for which payment was made vide cheque no. 688566 drawn on the assessee's bank account maintained with Punjab National Bank, Tropical Building, New Delhi. A reference was made to page nos. 420 to 433 of the assessee's paper book which are the copies of aforesaid bill, bank statement, Wealth Tax Return along with computation, assessment order passed u/s 16(3) of the Wealth Tax Act. It was submitted that since the purchase of impugned diamonds was duly supported by documentary evidences on record and the AO had failed to bring on record any concrete evidence in support of the alleged receipt back of cash from the parties from whom diamonds had been purchased by the assessee or alleged grey market purchases of the impugned diamonds by the assessee as alleg....
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....nish Arora was recorded who is an employee of Sh. Raj Kumar Kedia and in his statement he admitted that seized document so found pertained to the records of cash receipt from various beneficiaries to whom bogus Long Term Capital Gain was arranged by Sh. Raj Kumar Kedia and in his statement Sh. Manish Arora also accepted that Sh. Raj Kumar Kedia was an accommodation entry provider, took cash from various persons in order to provide accommodation entry of bogus LTCG. He referred to question no. 13 asked to Sh. Manish Arora to provide details of some persons who used to provide cash on behalf of major beneficiaries who used to collect cash from him. It was pointed out that in his answer Sh. Manish Arora said that Sh. Pankaj Tiwari an employee of M/s Bhushan Steel Ltd. provided cash and some other persons who generally collected cash from Sh. Shivam for Jagdish Purohit and that other transfers of cash were generally through angadiya. He further stated that vide answer to question no. 3, it was stated that LT entries, OT entries, unsecured loan entries, ST entries etc. given to various beneficiaries were arranged from various entry operators for different beneficiaries after charging fi....
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.... exist to various beneficiaries by availing bogus LTCG. A reference was made to page nos. 43 & 44 of the assessment order. It was also submitted that many of the entities, provided profitable exist to initial preferential allottees in the scrips, which were under the control of some accommodation entry providers who admit to have been controlling those companies. A reference was made to para 4.5.2 of the assessment order. It was further stated that the notices were issued to check the identity and creditworthiness of the purchaser who purchased the shares of the assessee at a very high price and provided profitable exist, on test check basis on the addresses provided by BSL. However, most of those notices either returned back or incomplete reply was received and even the investigation carried out by SEBI in few of listed companies on the basis of common trading pattern and identical developments like stock splits, preferential allotments, insignificant economic activity and exorbitantly high stock price clearly established that the assessee manipulated the trading in the scrips and had taken undue benefit out of the same by reaping Long Term Capital Gain by manipulative trading in ....
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..... Ltd. (2014) 367 ITR 306 (Del.) Ø Konark Structural Engineering (P.) Ltd. Vs DCIT (2018) 90 Taxmann.com 56 (Bom.) Ø CIT Vs Nipun Builders & Developers (P.) Ltd. 350 ITR 407 (Del.) Ø CIT Vs Nova Promoters & Finlease (P) Ltd. 342 ITR 169 (Del.) Ø CIT Vs Ultra Modern Exports (P.) Ltd. 40 Taxmann.com 458 (Del.) Ø CIT Vs Frostair (P.) Ltd. 26 Taxmann.com 11 (Del.) Ø CIT N R Portfolio Pvt. Ltd. (2013) 29 Taxmann.com 291 (Del.) Ø PCIT Vs Bikram Singh in ITA No. 55/2017 (Del.) 102. The ld. CIT DR reiterated the observations made by the ld. CIT(A) in para 5.6.1 & 5.7.1 at page nos. 164 to 166 and stated that the material seized during the course of search at the premises of Sh. Raj Kumar Kedia and Sh. Ankur Agarwal constitute the incriminating material as the same was related to the assessee. It was further submitted that the ld. CIT(A) rightly made the enhancement on the basis of material which was already available on record. Therefore, the enhancement was rightly made by the ld. CIT(A). It was further submitted that the proceedings initiated u/s 153A of the Act were valid a....
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....umar direct incriminating evidence pertaining to unaccounted cash payment made to M/s ECIL in respect of block period was found. However, in the instant case, no incriminating material conclusively establishing any irregular availment of bogus LTCG by the assessee have either been found in the course of search at the premises of the assessee or even for that matter from the premises of unconnected third party. Therefore, the said judgment of the Hon'ble Supreme Court was distinguishable from the facts of the assessee's case. The ld. Counsel for the assessee submitted that similar was the position with regard to other case laws relied by the ld. CIT DR, those cases are also distinguishable on facts from the assessee's case. 104. We have considered the submissions of both the parties and perused the material available on the record. In the present case, the assessee had raised the legal issue in the additional ground as well as the main ground no. 1 by challenging the jurisdiction of the AO and the ld. CIT(A) in making the additions/enhancement u/s 153A of the Act in the absence of incriminating material pertaining to the years under consideration found during the course of search....
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....e notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made." (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the [Principal Commissioner or] Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be charg....
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....rd. In the present case, it is an admitted fact that the assessee filed the original return of income for the year under consideration on 30.09.2009 which was processed u/s 143(1) of the Act on 05.09.2010 and the time period to issue the notice u/s 143(2) of the Act had already expired before the search took place on 29.10.2013. During the course of search, no incriminating material was found relating to the FCCDs which were already shown by the assessee in its regular books of accounts. The AO/TPO made the addition on account of differential interest on FCCDs undertaken with the AE, in our opinion, no such adjustment could have been made to the income which was already assessed prior to the date of search. 19. On a similar issue, the Hon'ble Karnataka High Court in the case of CIT & Anr. Vs IBC Knowledge Park P. Ltd. (2016) 385 ITR 346 (supra) held as under: "A search was conducted on Y, Z and IBC on June 17, 2008. One of the offices of the assessee was in the same premises where the search took place. Certain documents belonging to the assessee were seized and the Assessing Officer of the persons in whose cases search was conducted transferred the documents to t....
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....fore, for the purpose of Section 153A of the Act, processing of the return of income u/s 143(1) of the Act was also an assessment. As such the assessment for the assessment year 2012-13 was also unabated. It is well settled that the addition u/s 153A of the Act can only be made on the basis of incriminating material found during the course of search. In the present case, no incriminating material/document was found during the course of search. The AO made the additions on the basis of the statement of the third parties recorded u/s 132(4) of the Act on the basis of alleged entry in hard/soft data seized from premises of third parties in the course of search action in their cases. In the present case, copies of the Panchanama are placed at page nos. 1 to 58 of the assessee's compilation. From a bare perusal of the Panchanama of the assessee, it may be seen that nothing incriminating was found in the course of search. It is also apparent from the search document that no incriminating material in the form of undisclosed, document, unaccounted money, bullion, jewellery etc. indicating the factum of undisclosed income were found or seized in the course of search operation u/s 132(1) of ....
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....16) 386 ITR 483 (Bom). Inr Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) the entire gamut of the case law had been analysed and the legal position was reiterated that unless there is incriminating material qua each of the AYs in which additions are sought to be made, pursuant to search and seizure operation, the assumption of jurisdiction under Section 153A of the Act would be vitiated in law. This is one more occasion for the Court to reiterate that legal position. 36. Turning to the facts of the present case, it requires to be noted that the statements of Mr. Ami Aggarwal, portions of which have been extracted hereinbefore, make it plain that the surrender of the sum of Rs. 8 crores was only for the AY in question and not for each of the six AYs preceding the year of search. Secondly, when Mr. Anu Aggarwal was confronted with A-1, A-4 and A-n he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of the preceding AYs, 37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under ....
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....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 extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witne....
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.... so as to have personal knowledge as to who remitted the amount of Rs. 1,07,350, The Revenue authorities ought to have called upon the Manager of the Bank to produce the documents and papers on the basis of which he made the statements contained in his letter and confronted the assessee with those documents and papers but instead of doing so, the Revenue authorities chose to rely merely on the statements contained in the letter and that too, without showing the Letter to the assessee." 111. A similar view has been expressed by the Hon'ble Jurisdictional High Court in the case of CIT Vs SMC Share Brokers Ltd. (supra) wherein it has been held as under: "6. We are of the opinion that the Tribunal was right in its view that in the absence of Manoj Aggarwal being made available for cross-examination, despite repeated requests by the assessee, his statement could not be relied upon to his detriment." 112. Similarly, the ITAT Mumbai 'B' Bench in the case of Straptex (India) (P) Ltd. Vs DCIT 84 ITD 320 (supra) held as under: "Presumption under Section 132(4A) is not limited only to the proceedings under Section 132(5); presumption under Section 132(4A) is applicable....
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....In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording 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 Officers should rely upon the evidences/materials gathered during the course, of search/survey operations or thereafter while framing the relevant assessment orders." 116. The aforesaid directions were once again reiterated by the CBDT vide Circular No. 286/98/2013-IT dated 18.12.2014 which read 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 Searches/Surveys conducted by the Department. It is also seen that man....
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....d 29.05.2018 (supra) wherein one of us (Accountant Member) is the author and it has been held vide paras 23 to 26 as under: "23. On an identical issue, the Hon'ble Jurisdictional High Court in the case of CIT Vs Kabul Chawla (2016) 380 ITR 573 (supra) held as under: "The legal position that emerges on a perusal of section 153A and section 132 of the Income-tax Act, 1961, is as under : (i) Once a search takes place under section 132 of the Act, notice under section 153A will have to be mandatorily issued to the person in respect of whom search was conducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise, (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the six year....
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....7) 395 ITR 252 (supra) observed as under: "The Commissioner of Income-tax (Appeals), after considering the record, was of the opinion that the additions could not be justified, and accordingly granted relief, holding that no incriminating material was recovered during the search. The Revenue's appeal was rejected. The Income-tax Appellate Tribunal held as follows: "10. As per the paper book filed by the learned authorized representative showing the Panchnama from where learned Departmental representative could not point out any material found during the course of search which could give even remote possibilities of altering the income of the assessee based on any incriminating documents. Admittedly both the assessment years in these appeals are completed assessments in case of the assessee. The reliance placed upon by the learned authorized representative on the decision of the Hon'ble Delhi High Court in the case of C/T v. Kabul Chawla [2016] 380 ITR 573 (Delhi) where original assessment have been made under section 143(1) of the Act is apt and squarely covers issue in favour of the assessee. The Hon'ble High Court in paragraph No. 37 of that....
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....ating material found during the course of search was not justified." 119. A similar view has also been taken by the ITAT Delhi Bench "C", New Delhi in ITA Nos. 4256 to 4259/Del/2014 in the case of ACIT, Central Circle- 5, New Delhi Vs M/s Gee Ispat Pvt. Ltd. (supra) (wherein one of us i.e. Accountant Member is the Author) vide order dated 31.05.2018 wherein the relevant findings have been given in paras 23 to 27 as under: "23. On a similar issue, the Hon'ble Gujarat High Court in the case of Pr. CIT Vs Dipak Jashvantlal Panchal (2017) 397 ITR 153 (supra) held as under: "Section 153A of the Income-tax Act, 1961, bears the heading "assessment in case of search or requisition". The heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of the section, the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goe....
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....able with the Assessing Officer 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 the seized material, (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to completed assessment proceedings, (vi) In so far 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 assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer, (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of d....
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....lly following the decision of the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla (supra) we confirm the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeal of the Revenue." The Revenue urges that the non obstante clause in section 153A together with section 158BD removes the barrier visa- vis restriction upon search assessments being confined to "undisclosed income". In other words, it is stated that none of the provisions confine the enquiry of the Assessing Officer to evaluating incriminating materials. This aspect, in the opinion of the court, was extensively dealt with in CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) which has, by now, been followed consistently in several appeals. The non obstante clause, in the opinion of the court, was necessary, given that there is a departure from the preexisting provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the Assessing Officer during block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an ov....
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....es place under section 132 of the Act, notice under Section 153A (1) will have to be mandatory issued to the person searched requiring him to file returns for 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. Obvi....
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....parties evidences/documentation. However, no live nexus with the incriminating material found in the course of search in the case of the assessee was established. The statements of the third parties were recorded behind the back of the assessee but the opportunity of cross-examination of such parties was not allowed to the assessee, even the statements were retracted later on. It is well settled that the presumption u/s 132(4A)/292C of the Act, is available only in the case of the person in whose possession and control, the documents are found but it is not available in respect of the third parties. In the present case, there was no independent evidence to link the seized documents found in the premises of the third party with any incriminating material found in the course of search operation at the premises of the assessee. Therefore, the entries in the documents seized from third party's premises would not be sufficient to prove that the assessee was indulged in such transactions. In the present case, the pen drive of Sh. Ankur Agarwal corroborated/substantiated, the share transactions carried out by the assessee which were duly found recorded in the regular books of the assessee....
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....ase of Prakash Chand Nahta Vs CIT (2008) 301 ITR 134 (supra) held as under: "That as the Assessing Officer had not summoned R in spite of the request made under section 131 of the Act, the evidence of R could not have been used against the assessee and in the absence of affording a reasonable opportunity of being heard by summoning the said witness the assessment order was vitiated." 125. As regards to the enhancement of income by the ld. CIT(A) is concerned. It is noticed that the ld. CIT(A) considered new sources of the income which were outside the subject matter of assessment framed by the AO, therefore, the ld. CIT(A) acted beyond jurisdiction u/s 251 of the Act. It is also noticed that the ld. CIT(A) relied upon the order dated 27.05.2015 of Settlement Commission and the statements of the persons recorded by DGCEI in search on 20.02.2013 in the case of BSL group. However, the same cannot be categorized as incriminating material found in the course of search at the premises of the assessee for unabated assessment years 2010-11 to 2012-13. It is also relevant to point out that the then ld. CIT(A) deleted the additions on account of diversion of raw material and alle....
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....ces of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection." 128. Similarly, the Hon'ble Jurisdictional High Court in the case of CIT Vs Union Tyres (1999) 240 ITR 556 (supra) held as under: "The first appellate authority is invested with very wide powers under section 251(1)(a) of the Income-tax Act, 1961, and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance but ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered....
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....the AO or the grounds agitated by the assessee in its appeal before the ld. CIT(A). Therefore, the enhancement made u/s 153A r.w.s. 251 of the Act was not justified and accordingly the same is deleted. 131. Facts for the another assessment years 2011-12 and 2012-13 are similar to the facts involved in the year under consideration i.e. 2010-11, therefore, our findings given in the former part of this order shall apply mutatis mutandis. 132. Before parting, it is also relevant to point out that the case laws relied by the ld. CIT DR are distinguishable on facts, since in the case of M/s Chetan Das and Lakshman Das (supra), certain documents were found in the premises of the assessee therein, which as per the AO had shown gross under valuation of sales and suppression of production/yield/hinge but in the present case no incriminating material was found during the course of search. In the case of CIT Vs S. Ajit Kumar also direct relationship and nexus was established between the two parties and the assessee and the amount of Rs. 95.16 lacs paid to M/s ECIL in cash was not accounted for. However, in the present case, there is no such nexus and no incriminating material was found d....