TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1544
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....o notice u/s 153A of the I.T.Act, 1961 the assessee filed the return of income on 5th January, 2015 declaring total income of Rs. 3,92,11,220/-. 3. During the course of assessment proceedings the AO asked the assessed to explain the huge capital gains from sale of shares amounting to Rs. 5,62,61,726/- which was claimed as exempt income. He referred to the statement of Shri Sundeep Gupta recorded during the course of search at his residence wherein he failed to give the details of these share profits and had stated that he has no idea about any shares bought or sold by them in the last 5 to 6 years. The assessee was not present in India during the search at his residence. The AO further noted that when the same questions were put to Shri Sundeep Gupta again during the course of search at the corporate office of his Group, his answers were quite different. He gave the details of the various shares which he and his family members have invested in last few years. He stated that these shares were bought by him and his family members through their common friend Mr. Vipin Jain on his recommendation. He also gave the address of Shri Vipin Jain. The assessee filed the details of long term....
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....on oath that he is an entry operator who arranges different types of accommodation entries such as bogus long term capital gains (LTCG), share capital/premium etc to various beneficiaries through various entry operators in order to help bring unaccounted money of different beneficiaries in their books in a manner that the beneficiaries don't have to pay any tax on such money, which they were otherwise legally obliged to pay. He noted that in the case of the assessee the transactions were carried out through DB (International) Stock Brokers Limited. As per the statement of Sh. R.K.Kedia recorded during the search operation, he had stated that -DB International is not doing any actual work but is being used for providing long term (LT) entries to various beneficiaries. The company arranges investment in the shares of various company on behalf of some of the beneficiaries who wanted to reap LTCG in future out of the funds received from them for the purpose. This company is controlled and managed by two entry operators Sh. S.N. Daga operating from Connaught Place, New Delhi and his nephew Sh. Natwarlal Daga operating from Mumbai having office at Andheri West Mumbai. 6. The AO further....
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....financials of M/s Clarus Finance & Securities Ltd. and M/s S. V. Electricals Ltd. have been very weak. As SEBI has observed in the case of First Financial, investment in a company having such poor and meager financial fundamentals cannot prima facie be termed as a rational investment behavior. Hence according to the AO it is clear that the assessee has failed to discharge his onus of proving the genuineness of exempt Long term capital gain. Further, no regular business activity is being carried out by M/s Clarus Finance & Securities Ltd. and M/s S. V. Electricals Ltd. The investment in the shares of these companies by the assessee was only with a view to earn bogus exempt long term capital gain. Also, Sh Vipin Jain did not provide any basis for his retraction on the question of arranging accommodation entry in long term capital gain to the assessee. Hence, the long term capital gain amounting to Rs. 5,62,61,726/- claimed as exempt income during the year was treated by the AO as bogus and he accordingly disallowed the claim. 7. Before CIT(A) it was submitted that during the course of search proceedings no incriminating material, whatsoever, was found which is evident from the Punc....
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....by the broker D.B. International Stock Broker Ltd. reflecting the details of transaction from 01/04/2010 to 3rd March 2011. The Copy of contract notes issued by DB International Stock Broker Ltd., Broker of the assessee, wherein each transaction executed by the broker on order of assessee at different dates and rates was provided. The assessee had also provided the copy of transaction statement issued by NSDL. It was submitted that these transaction of sale/purchase of shares is confirmed by the broker of the assessee vide email sent by the broker to the A.O. In the said email it was stated that the sale of shares was done in the normal course of business through recognised stock exchange. It was clarified that the transaction was executed at the exchange level and details of buyer who has purchased the shares sold by the assessee was not available with them. 8.1 So far as non-compliance to notice u/s 133(6) by S.V.Electricals Ltd. is concerned it was submitted that the said notice was duly served on that company. Therefore, the assessee can not persuade or force the 3rd party to co-operate in departmental inquiries. It was submitted that even if there was no compliance by the sa....
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....g of the 2nd Proviso to S.153A(1) of the Act. On perusal of the assessment order it is observed that the AO has made referred to the statements of Sh. Vipin Jain and Sh. R.K Kedia, the latter recorded during the search in the Kedia group separately on 13.06.2014, enquiries conducted u/s 133(6) of the Act and the findings of SEBI in another case, M/s First Financial Services Ltd. (FFSL), and has made addition on account of purchases of shares of SV Electricals Ltd.(SVEL) in AY 2011-12 and of Clarus Finance & Securities Ltd. (CFSL) in AY 2012-13 but there is no reference to any seized material found during the search in the group cases on 03.10.2013, least any incriminating material relevant to the purchases and sale of shares made by the appellant enquired by the AO. 4.3.3 As mentioned above, from the reassessment order it is observed that there is no reference of any seized material, least incriminating documents, in the reassessment order, and the additions made on account of the purchase and sale of shares in the orders u/s 153A of the Act were already disclosed in the original return of income and already available in the financial statements filed with the original return of....
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....ross-examine these persons was provided to the assessed. According to him the same is against the principle of natural justice. The relevant observation of Ld. CIT(A) at para 4.4 of the order reads as under : "4.4 In Ground no. 09 the appellant has contended that the statements of third party were not confronted to the appellant nor was opportunity to cross-examine these persons was provided to the appellant thus denying necessary opportunity against the principle of natural justice. It has been submitted that copies of the statements of Sh. Vipin Jain recorded u/s 131(1 A) of the Act during survey conducted bv the J3DIT(lnv.) Noida at his premises on 16.12.2013 & again by the AO on 14.03.2016, and that of Sh.R K. Kedia recorded on 13.06.2014 during the search on Kedia group conducted by the DDIT(lnv.) Unit-lll(3) New Delhi were not provided to the appellant and appellant was not provided opportunity to cross-examine these persons. From the assessment order it is observed that a questionnaire u/s 142(1) of the Act was issued on 12.10.2015 reference to survey u/s 133A of the Act at the premises of Sh. Vipin Jain and his statement has been made (ref. page-03 of assessment order) b....
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....d no. 08 in both the years relate to addition of Rs. 549,48,664/- and Rs. 9,54,62,250/- u/s 68 in the AYs 2011-12 and 2012-13 respectively on account of gain on sale of shares. The AO vide questionnaire u/s 142(1) of the Act dt. 12.10.2015 asked the appellant that in view of the divergence in the statement of Sh. Sundeep Gupta, brother of the appellant, during the search and the statement of Sh. Vipin Jian recorded during survey at his premise why the long term capital gain (LTCG) on the sale of shares of SV Electricals Ltd.(SVEL) in AY 2011-12 and of Clarus Finance & Securities Ltd. (CFSL) in AY 2012-13 be not held as accommodation entry. The appellant had purchased 3,00,000 shares of SVEL on 01.12.2009 and 7,00,000 shares of CFSL 05.12.2009 respectively for the acquisition cost of Rs. 30,00,000/- and Rs. 70,00,000/- respectively through preferential allotment payment for which was made through cheque nos. 706973 and cheque no.706969 respectively drawn on his bank account no. 02781930000250 with HDFC Bank New Delhi debited on 24.11.2009 and 02.12.2009 respectively. These shares are duly reflected in the transaction statement of NSDL for the year 2009-10, alongwith 38,000 shares of....
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....ey against the appellant group discernible from the assessment order. The appellant has submitted copies of the online contracts/bills of each transaction related to the shares' sale which were also submitted to the AO but the AO has not given any credence to these facts and documents and has completely ignored them. In fact the AO issued letter u/s133(6) to the Bombay Stock Exchange (BSE) on 15.02.2016 asking for the name, address, PAN and contact numbers of the persons who purchased the shares sold by the appellant, mentioned at para-4.4 of the assessment order. The appellant's AR in the WS has submitted that the BSE replied to the AO through e-mail in response to the e-mail sent by the AO from his mail Id [email protected] to Sh. Rajesh Dubey on the mail Id [email protected] on 22.03.2016, copies of the e-mails has been submitted at page-120-121 of PB. BSE duly replied to the AO on 23.03.2016 through the e-mail sent by Ms. Lipika Mahunta from mail id [email protected] alongwith copy marked also at "[email protected]" wherein they sent the tradelog data of the four entities (Sh. Sundeep Gupta, Smt. Anita Gupta, Sh. Sameer Gupta and Smt. Bha....
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.... High Court in CIT v. Victor Electrodes Ltd. [2012] 20 taxmann.com 680 (Delhi) wherein it has been held as under: "9. There was no legal obligation on the assessee to produce some director or other representative of the applicant-companies before the Assessing Officer. Therefore, failure of the assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wanted, could have summoned them for verification. No attempt was made by the Assessing Officer to summon the directors of the applicantcompanies. The addresses of these companies must be available on the share applications, memorandum and articles of association and their income-tax returns. If the Assessing Officer had any doubt about identity of the share applicants, he could have summoned the directors of the applicant-companies. No such attempt was, however, made by him. Therefore, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, in our view, were justified in holding that the identity of the share applicants and the genuineness of the transactions had....
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....ved at para-4.5 of the assessment order that Sh. Vipin Jain stated that he had not arranged any meeting with Sh. Sanjay Jhunjhunwala with a view to assist anybody in getting any kind of accommodation entry in the form of LTCG in shares. The AO has observed that Sh. Jain retracted from his earlier statement but, as mentioned above, I find that Sh. Jain had even earlier stated that he had not arranged any accommodation entry for the appellant/Jakson group nor that he had introduced Sh. Jhunjhunwala for this purpose? The AO has not mentioned the statement recorded by him in detail in the assessment order nor had he provided copy of the statement to the appellant, and therefore I am unable to see as to how and in what context he retracted from earlier statement, if at all. In any case, as mentioned earlier as well, copy of the statements were not provided to the appellant during the assessment stage nor opportunity to cross-examine Sh. Jain WAS allowed to the appellant, and therefore such deposition of any third party cannot be held as evidence against the appellant. 4.5.3.2 The AO has mentioned at paras-4.8 and 4.9 of the assessment order regarding the statement of Sh. R.K Kedia re....
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....ompanies, nor did the AO make any enquiry with SEBI, or for that matter from any other authority or source, to gather necessary information related to these two companies, if any. There is no information or any shred of evidence brought on record of such manipulation and rigging in the shares SVEL and CFSL and the AO's conclusion is at best presumptive sans any evidence. 4.5.3.4 The AO has also mentioned that letter u/s 133(6) of the Act were issued to SVEL and CFSL but that their replies were not received and that he got enquiry conducted and found that these companies were not existing at the given addresses. As mentioned above earlier in this order these companies are listed companies whose shares were traded at BSE which even BSE confirmed in reply to the AO. Even otherwise the enquiries were conducted at the back of the assessee and he was not confronted with such enquiry or its results as contended by the appellant's AR, and is therefore against the principle of natural justice. Such conclusion of the AO is presumptive without any basis and against facts available as mentioned earlier in this order. 4.5.4 On the conspectus of facts discussed herein above I find that the....
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....4). (ii) CIT vs. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015]374ITR 645/232 Taxman 270/58 taxmann. Com 78 (Bom.) (para 4), (iii) Principal CIT v. Kurele Paper Mills (P) Ltd. [2016] 380 ITR 571 (Delhi) (para 4), (iv) CIT v. Lancy Constructions [2016] 383 ITR 168/237 Taxman 728/66 taxmann. Com 264 (Kar.) (para 4) (v) CIT v. ST. Francies Clay Décor Tiles [2016] 240 Taxman 168/70 taxman.com 234 (Ker.) (para 5) and (vi) CIT v. Promy Kuriakose [2016] 386 ITR 597 (Ker.) (para 5)." 15. Referring to the decisions of Hon'ble Allahabad High Court in case of CIT vs. Raj Kumar Arora [2014] 52 reported in 367 ITR and in the case of CIT vs. Kesarwani Zarda Bhandar Sahson Alld. Vide ITA no. 270 of 2014, he submitted that the Hon'ble Allahabad High Court in the above decisions has held that assessing officer has power to reassess returns of assessee not only for the undisclosed income found during the search operation but also with regard to material available at time of original assessment. 16. So far as merit of the case is concerned, the ld. DR heavily relied on the order of the AO. He submitted that despite issue of notice u/s. 133(6), no reply was received....
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....es. Also purchase dated 19.10 on page no. 60 of this Annexure represented unaccounted and credited." 19. She accordingly submitted that the facts in the case of Smt. Dayawanti (Supra) is not applicable to the facts of the present case. So far as the various other decisions relied on by the Ld. DR are concerned she submitted that all those decisions are also distinguishable and not applicable to the facts of the present case. As regards the decision of Hon'ble Kerala High Court in the case of E.N. Gopakumar (Supra) is concerned, she submitted that in view of the decision of the Jurisdictional High Court in the case of Kabul Chawla (supra), the same is binding on the Tribunal at Delhi. She accordingly submitted that in absence of any incriminating material found during the course of search, no addition could have been in the hands of the assessee. 20. So far as the statement of various persons which have been relied on by the Ld. DR concerned, She submitted that the statements cannot be considered as incriminating material unearthed during the course of search. She submitted that the period of issue of notice u/s 143(2) had lapsed. The revenue was already having the information w....
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....considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case has filed his original return of income on 30th March, 2012 declaring total income of Rs. 3,92,11,220/-. In response to notice u/s. 153A of the IT Act, the assessee filed return in response to notice u/s 153A on 5th January, 2015 declaring the same income. The assessee in his return of income had claimed exemption of long term capital gain of Rs. 5,62,61,726/-. The assessment order was passed u/s 143(3) read with section 153A by making addition of the long term capital gain as bogus. From the order of the assessing officer, we find nowhere it is mentioned that any incriminating material was found during the course of search. The entire addition made by the AO is based on post search inquiries. There is also no ground by the revenue that any such incriminating material was found other than the statement of Shri Sundeep Gupta at the time of search. Under these circumstances, we have to adjudicate as to whether the CIT(A) has erred in....